Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-03033/USCOURTS-cand-3_09-cv-03033-12/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1441 Petition for Removal

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

DEMONFORT R. CARTER and

LEANDRA L. CARTER,

Plaintiff(s),

v.

DEUTSCHE BANK NATIONAL TRUST

COMPANY, AS TRUSTEE, et al.,

Defendant(s).

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No. C09-3033 BZ

ORDER GRANTING IN PART AND

DENYING IN PART REPUBLIC’S

MOTION TO DISMISS

Before the Court is defendant Old Republic Default

Management Services’ (“Republic”) motion to dismiss four

claims from plaintiffs’ second amended complaint. The parties

are well aware of the factual background of this litigation. 

See Doc. No. 49. Plaintiffs, whose home was sold at a

foreclosure sale, allege that defendants Deutsche Bank and Old

Republic wrongfully foreclosed on their property in violation

of several statutes. 

RESPA

Republic argues that it cannot be held liable under RESPA

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1 “The term ‘servicer’ means the person responsible for

servicing of a loan . . . . The term ‘servicing’ means

receiving any scheduled periodic payments from a borrower

pursuant to the terms of any loan, including amounts for escrow

accounts described in section 2609 of this title, and making

the payments of principal and interest and such other payments

with respect to the amounts received from the borrower as may

be required pursuant to the terms of the loan.” 12 U.S.C.A. §

2605(i)(2), (3).

2 Republic’s allegations that plaintiffs are

“fabricating its status as a sub servicer” are better addressed

on a motion for summary judgment. Many of Republic’s arguments

are factual in nature, which render them unsuitable for

disposition on a motion to dismiss. 

3 The Court takes judicial notice of the exhibits

submitted by Republic. However, plaintiffs are correct in

asserting that if the truth of the contents of the documents is

in dispute, then the Court should not presume their truth,

especially documents to which plaintiffs are not parties, such

as Exhibit C. 

2

because it is a foreclosure trustee, not a loan servicer.1

However, the complaint alleges that “Deutsche Bank was

servicing the loan and transferred at least some of these

servicing obligations to Old Republic.2

” Compl. ¶ 21. 

Republic has provided no authority which states that a

foreclosure trustee cannot also be a loan servicer under

RESPA. Plaintiffs’ factual allegations are presumed true for

this motion to dismiss and Republic has given no reason, by

judicial notice3 or otherwise, why it cannot be held liable

under RESPA as a matter of law. See Ashcraft v. Iqbal, 129

S.Ct. 1937, 1949 (2009). 

FDCPA

Republic next argues that the Fair Debt Collections

Practices Act (“the Act”) claim should be dismissed because

the Act does not apply to foreclosure trustees. The Act

applies to (1) “debt collectors” that (2) violate the statute. 

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3

Plaintiffs allege that Republic is a “debt collector” and that

its “principal business” is to “collect debts which are

secured by deeds of trust on real estate in California.” 

Compl. ¶ 24. Specific to this case, “Old Republic was hired

after this [plaintiffs’] default for the specific purpose of

collecting on the obligation.” Id. Republic disputes that it

is a debt collector but, once again, such a factual dispute

cannot be resolved on a motion to dismiss. 

Republic does not dispute that plaintiffs have adequately

alleged a violation of the Act and instead argues that the

FDCPA can never apply to foreclosure trustees. Republic

relies on cases such as Scott v. Wells Fargo Home Mortgage,

Inc., 326 F.2d 709, 718 (E.D.V 2003), which hold that someone

who acquires the right to foreclose on property before default

does not thereafter act as a debt collector when foreclosing. 

See 15 U.S.C. § 1692a(4). Here however plaintiff has

specifically alleged the “Republic was hired after this

default for the specific purpose of collecting on the

obligation.” (¶ 24). 

The bright line rule Republic asserts does not exist. 

There is no controlling Ninth Circuit authority on this issue. 

However, some district courts in this Circuit, and courts in

other circuits have held that a foreclosure trustee may be

sued under the Act. See e.g., Wilson v. Draper & Goldberg

PLLC, 443 F.3d 373 (4th Cir. 2006); Kaltenback v. Richards,

464 F.3d 524, 528-29 (5th Cir. 2006). For example, in Allen

v. United Financial Mortgage Corp., the court held that a

plaintiff adequately stated a debt collection claim against a

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foreclosure trustee. 2010 WL 1135787 (N.D.Cal. 2010); but see

Hulse v. Ocwen Fed. Bank, FSB, 195 F.Supp 2d 1188 (D.Or. 2002)

(holding that foreclosure is not debt collection under the

FDCPA). 

Inasmuch as the complaint will proceed toward trial, this

claim will not be dismissed. It will not greatly add to the

burden of litigating this case and the Ninth Circuit may yet

rule on whether the Act applies to foreclosure trustees.

WRONGFUL TRUSTEE SALE

The Court has already ruled on many of the arguments

raised against this cause of action by Order dated January 27,

2010. Doc. No. 49. As to the remaining arguments, Republic

misunderstands plaintiffs’ claim. Plaintiffs have not alleged

a procedural irregularity with the foreclosure sale; rather,

plaintiffs alleged that Republic (1) demanded excessive,

unwarranted amounts in the notice of default, (2) did not have

the legal right to conduct the sale, and (3) did so

collusively and fraudulently. As discussed at a hearing on

December 2, 2009 that Republic declined to attend, the Court

is unaware of any requirement, and Republic has cited to none,

that a plaintiff must tender if the complaint alleges fraud or

a substantive irregularity. While a tender may be required

when a plaintiff alleges a procedural irregularity, that is

not the theory that plaintiffs advance in their complaint. 

SECTION 17200

Republic’s motion to dismiss plaintiffs’ Section 17200

claims is GRANTED as unopposed. 

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CONCLUSION

IT IS ORDERED that Republic’s motion to dismiss

plaintiffs’ SIXTH cause of action is GRANTED. Republic’s 

motion to dismiss the remaining causes of action is DENIED. 

Republic SHALL file an answer by MAY 19, 2010.

Dated: May 7, 2010

 Bernard Zimmerman 

 United States Magistrate Judge

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