Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_15-cv-00315/USCOURTS-azd-2_15-cv-00315-0/pdf.json

Parties Involved:
Allan Costa
Plaintiff
Maxwell & Morgan PC
Defendant

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA

Allan Costa, 

Plaintiff, 

v. 

Maxwell & Morgan PC, 

Defendant.

No. CV-15-00315-PHX-NVW

ORDER 

 Before the court is Defendant Maxwell & Morgan’s Motion to Dismiss (Doc. 10). 

For the following reasons, the court will grant the Motion in part and deny it in part. 

I. BACKGROUND 

 On August 3, 2004, Plaintiff Allan Costa purchased a condominium in Chandler, 

Arizona, that belonged to the Cambric Courts, Inc. Homeowners Association 

(“Association”). (Doc. 1 at 5.) Under the Declaration of Covenants, Conditions and 

Restrictions that Costa signed at the time of sale (“Declaration”), each owner was 

required to pay a “proportionate share of the expenses of the administration and operation 

of the Common Elements” of the Association. (Doc. 21-1 at 26-27.) Maxwell & Morgan 

asserts via exhibits to its Motion—and Costa does not dispute in his Response (Doc. 

16)—that the Declaration also provides, “If any Owner shall fail or refuse to make any 

payment for Common Expenses within thirty (30) days of the due date, the amount 

thereof, together with interest thereon at the rate of twelve percent (12%) per annum from 

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the due date of such payment, a reasonable late charge not exceeding twenty five percent 

(25%) of the amount of such payment as determined by the Board, costs and reasonable 

attorneys’ fees, shall constitute a lien on such Owner’s Unit and on any rents and 

proceeds therefrom.” (Doc. 10-1 at 8; see Doc. 16.) 

 On November 25, 2013, Maxwell & Morgan, a law firm acting on behalf of the 

Association, filed an action against Costa in the Maricopa County Justice Court. (Doc. 

21-1 at 2, 6.) That action sought $2,618.20 in unpaid assessments and an acceleration of 

Costa’s anticipated assessments for 2014, which totaled $1,862.40. (Id. at 6.) Costa did 

not appear, and on August 12, 2014, the Justice Court entered a default judgment 

(“Default Judgment”) awarding Maxwell & Morgan principal in the amount of 

$4,838.20, “[p]lus accruing assessments of $2,100.00 per annum, plus a $15.00 monthly 

late charge, plus fines, or such greater amount as the Association may assess in the future, 

commencing January 1, 2015, subject to the right to accelerate per statute, until all 

amounts due and owing under this Judgment are paid in full.” (Id. at 9-10.) This amount 

was to accrue interest at twelve percent, in accordance with the Declaration. (Id. at 10.) 

The Default Judgment also awarded $797.50 in attorneys’ fees and $332.48 in costs, as 

well as an unspecified amount for “costs and reasonable attorney fees incurred by [the 

Association] after submission of this judgment for entry by the Court in collecting the 

amounts listed in this Judgment.” (Id.) 

 In a letter dated September 9, 2014, Maxwell & Morgan informed Costa that 

“Judgment ha[d] been entered against [him] by the Highland Justice Court of the State of 

Arizona in the principal amount of $4,838.20, accruing at the rate of $2,100.00 per 

annum, plus fines, beginning January 1, 2015, interest, attorney fees of $797.50, costs of 

suit of $332.48, plus accruing attorney fees and costs.” (Id. at 13.) The letter announced 

that, pursuant to A.R.S. § 12-1598.03, it served as a demand for “payment of the amount 

due under the Judgment totaling $5,968.18, plus accruing interest, assessments, fines, 

costs and attorney fees.” (Id.) It gave Costa ten days to contact Maxwell & Morgan so 

he could agree to make payment. (Id.) “If you fail to respond to this correspondence,” 

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the letter warned, “the Association has instructed our firm to proceed to exhaust all of its 

judicial remedies in resolving this matter, including garnishment of your earnings or 

other sources of income, a debtor’s examination and/or Sheriff’s execution sale of your 

personal or real property.” (Id.) 

 Costa mailed Maxwell & Morgan a cashier’s check for $5,968.18 on November 6, 

2014, along with a request for a satisfaction of judgment and lien release. (Id. at 15-16.) 

Two weeks later, Maxwell & Morgan returned the check to Costa because it did not 

“represent payment in full as you indicate.” (Id. at 18.) Maxwell & Morgan’s letter also 

informed Costa that on October 10, 2014, the firm had filed a lien foreclosure suit against 

him after he “failed to make efforts . . . to resolve the delinquency” resulting from the 

Default Judgment. (Id.) The complaint in that Superior Court action alleged that as of 

October 10, 2014, Costa owed the Association a principal balance of $6,421.43, as 

secured by a lien on his property. (Id. at 21.) The Association requested a judgment 

against Costa as follows: 

c. Declaring that the Association’s lien is not subject to any homestead 

filing pursuant to the express language of A.R.S. § 33-1256(C); 

d. Foreclosing the interests of [Costa], and all persons claiming under 

them, and forever barring [Costa] from any or all right, title, claim, interest 

or lien in and to the Property or with respect thereto, except such rights of 

redemption as they may have by law; 

e. Declaring that the lien be foreclosed and a special execution be 

issued to the Sheriff of Maricopa County, Arizona, directing him to seize 

and sell the Property as under execution in partial satisfaction of all 

amounts due Plaintiff as aforesaid; 

f. Directing that at the sale it shall not be necessary that any personal 

property be present at the place of sale and that the Property, together with 

any and all personal property, be sold at public auction, either separately or 

as a unit, according to law, and that Plaintiff may be the purchaser at such 

sale; 

g. Declaring that the redemption period is thirty (30) days, in 

accordance with A.R.S. § 12-1282, as amended, if the Court determines 

that the Property is not now and has not been used at any time pertinent 

hereto primarily for agricultural or grazing purposes and has been 

abandoned; otherwise, for a determination that the redemption period is six 

(6) months[.] 

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(Id. at 23.) The November 21, 2014 letter did not state how much Costa owed Maxwell 

& Morgan as of that date. (See id. at 18.) Costa alleges that he “was unaware of the 

Superior Court action at the time he tendered the check for $5,968.18.” (Doc. 1 at 7.) 

 Costa filed suit in this court on February 19, 2015, seeking damages under the Fair 

Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., on behalf of himself 

and a class of similarly situated homeowners. Maxwell & Morgan now moves to dismiss 

Costa’s Complaint on the grounds that it fails to state a claim upon which relief can be 

granted. Fed. R. Civ. P. 12(b)(6). For purposes of this Motion, the court will consider 

Costa’s allegations only as they pertain to him personally. 

II. LEGAL STANDARD 

 When considering a motion to dismiss, a court evaluates the legal sufficiency of 

the plaintiff’s pleadings. Dismissal under Rule 12(b)(6) of the Federal Rules of Civil 

Procedure can be based on “the lack of a cognizable legal theory” or “the absence of 

sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police 

Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). To avoid dismissal, a complaint need include 

“only enough facts to state a claim for relief that is plausible on its face.” Bell Atlantic 

Corp. v. Twombly, 550 U.S. 544, 570 (2007). 

 On a motion to dismiss under Rule 12(b)(6), all allegations of material fact are 

assumed to be true and construed in the light most favorable to the non-moving party. 

Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, the principle that a 

court accepts as true all of the allegations in a complaint does not apply to legal 

conclusions or conclusory factual allegations. Ashcroft v. Iqbal, 566 U.S. 662, 678 

(2009). Further, “[t]hreadbare recitals of the elements of a cause of action, supported by 

mere conclusory statements, do not suffice.” Id. “A claim has facial plausibility when 

the plaintiff pleads factual content that allows the court to draw the reasonable inference 

that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is 

not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a 

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defendant has acted unlawfully.” Id. To show that the plaintiff is entitled to relief, the 

complaint must permit the court to infer more than the mere possibility of misconduct. 

Id. If the plaintiff’s pleadings fall short of this standard, dismissal is appropriate. 

III. ANALYSIS 

 A. Count 1 

 Costa’s first cause of action seeks relief under 15 U.S.C. § 1692g(a), which 

provides, “Within five days after the initial communication with a consumer in 

connection with the collection of any debt, a debt collector shall, unless the following 

information is contained in the initial communication or the consumer has paid the debt, 

send the consumer a written notice containing— (1) the amount of the debt[.]” 

According to Costa, Maxwell & Morgan’s “September 9 collection letter violates 15 

U.S.C. § 1692g because it fails to state the amount of the debt and alludes to the existence 

of additional amounts above the face amount of the judgment sought to be collected.” 

(Doc. 1 at 11.) 

 Maxwell & Morgan argues that the disclosure requirements of § 1692g(a) do not 

apply to the firm’s September 9, 2014 letter because that letter was not “the initial 

communication” with Costa regarding his debt. Attached to Maxwell & Morgan’s 

Motion is a copy of an October 9, 2013 letter the firm sent to Costa requesting a 

$2,012.62 payment for his “delinquent maintenance account.” (Doc. 10-1 at 2.) A 

“Notice” appended to that letter contains the disclosures mandated by § 1692g(a). (See 

id. at 3.) In his Response, Costa asserts he “never received” that letter. (Doc. 16 at 10.) 

If Maxwell & Morgan can prove that it sent the October 9, 2013 letter to Costa, then its 

subsequent communication of September 9, 2014, may not be subject to § 1692g(a). See 

Mahon v. Credit Bureau, Inc., 171 F.3d 1197, 1201 (9th Cir. 1999) (“We hold that 

section 1692g(a) requires only that a Notice be ‘sent’ by a debt collector. A debt collector 

need not establish actual receipt by the debtor.”). But such factual determinations are 

inappropriate on a motion to dismiss. The Complaint implies, if it does not directly 

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allege, that the September 9, 2014 letter was Maxwell & Morgan’s “initial 

communication” to Costa, and the first cause of action cannot be dismissed merely 

because Maxwell & Morgan disagrees with that factual assertion. 

 Even assuming the September 9, 2014 letter was the initial communication, 

Maxwell & Morgan asks the court to find that, as a matter of law, that letter “contain[s] 

. . . the amount of the debt,” with the result that Costa’s first cause of action fails to state 

a violation of § 1692g(a). In the Ninth Circuit, “the impact of language alleged to violate 

section 1692g is judged under the ‘least sophisticated debtor’ standard.” Swanson v. S. 

Or. Credit Serv., Inc., 869 F.2d 1222, 1225 (9th Cir. 1988). “The objective least 

sophisticated debtor standard is lower than simply examining whether particular language 

would deceive or mislead a reasonable debtor. Most courts agree that although the least 

sophisticated debtor may be uninformed, naive, and gullible, nonetheless her 

interpretation of a collection notice cannot be bizarre or unreasonable.” Evon v. Law 

Offices of Sidney Mickell, 688 F.3d 1015, 1027 (9th Cir. 2012) (citations and internal 

quotation marks omitted). 

 Here, the least sophisticated debtor—and perhaps some debtors quite a bit more 

sophisticated than that—would have difficulty determining from the September 9, 2014 

letter exactly how much money Maxwell & Morgan claimed to be owed. While the letter 

does make clear that Maxwell & Morgan is demanding “accruing attorney fees and 

costs,” it gives no indication of the size of those fees and costs. Thus even a debtor who 

wished to pay those fees and costs at the same time he discharged the principal would 

have no way of knowing what size check to write. The “amount of the debt” is a moving 

target—visible only to Maxwell & Morgan, which has withheld the information Costa 

would need to take a fair shot. Cf. Torrie v. Goodman Law Offices PC, No. CV-13-

02659-PHX-DGC, 2014 WL 5594452, at *5 (D. Ariz. Nov. 4, 2014) (finding debt 

collectors did not misrepresent amount of $3,755.36 default judgment where they sent “a 

letter stating that the amount of the debt was $3,810.36” but “clarified that the increase of 

$55 was due to a charge for sending the letter”). In addition, the letter fails to identify the 

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rate at which interest accrues. It is even unclear to what body of principal the unspecified 

interest rate applies: the letter’s second sentence suggests interest accrues on the entire 

$5,968.18 award, but the first sentence seems to say that interest will accrue only on “the 

principal amount of $4,838.20.” A “reasonable debtor” reading the September 9, 2014 

letter could quite easily be deceived or misled into believing that the “amount of the 

debt” differs from whatever amount Maxwell & Morgan believed was due. The 

Complaint states a claim for violation of § 1692g(a). 

B. Count 2 

 Costa alleges that Maxwell & Morgan has violated 15 U.S.C. § 1692e, which 

forbids debt collectors from “us[ing] any false, deceptive, or misleading representation or 

means in connection with the collection of any debt.” That provision contains an 

expressly non-exhaustive list of the types of conduct that may qualify as “false, 

deceptive, or misleading.” 15 U.S.C. § 1692e. Like § 1692g(a) claims, alleged 

violations of § 1692e are assessed under the “least sophisticated debtor” standard. 

Tourgeman v. Collins Fin. Servs., 755 F.3d 1109, 1119 (9th Cir. 2014). 

 Costa’s second cause of action alleges various violations of § 1692e, which the 

court will address in turn. 

 1. Amount of the debt 

 Costa alleges the September 9, 2014 letter is misleading because it “fails to specify 

the total amount due and/or increases the amount of the demand to include post-judgment 

attorneys fees and costs that have not been expressly awarded in a sum certain amount.” 

(Doc. 1 at 12.) This claim essentially restates Costa’s § 1692g(a) cause of action, 

although its validity does not depend on whether the September 9, 2014 letter was 

Maxwell & Morgan’s “initial communication.” As explained above, the September 9, 

2014 letter could easily have misled the least sophisticated debtor as to the amount of 

payment Maxwell & Morgan was demanding. This portion of Costa’s second cause of 

action therefore states a claim under § 1692e. 

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 2. Attorneys’ fees 

 According to the Complaint, Maxwell & Morgan violated § 1692e by “including 

language in default or uncontested judgments purporting to entitle them to recover 

reasonable attorneys’ fees and costs incurred after the entry of the judgment, unilaterally 

determining the amount of those post-judgment attorneys’ fees and costs that it is entitled 

to recover, and adding those amounts to the debts without any judicial oversight or 

involvement.” (Id.) Costa alleges that this conduct constitutes a violation of § 1692e(2), 

which provides that one example of “false, deceptive, or misleading” debt collection 

practices is the “false representation of— (A) the character, amount, or legal status of any 

debt.” To support this allegation, Costa asserts that “Arizona law does not authorize a 

judgment creditor to recover post-judgment fees and costs.” (Doc. 1 at 12.) 

 As Maxwell & Morgan points out, this misstates the law. “[I]t is well-settled in 

Arizona that ‘[c]ontracts for payment of attorneys’ fees are enforced in accordance with 

the terms of the contract.’” Bennett Blum, M.D., Inc. v. Cowan, 235 Ariz. 204, 206, 330 

P.3d 961, 963 (Ct. App. 2014) (alterations in original). When the “broad language” of a 

contractual attorneys’ fees provision gives no indication of an intent to exclude fees for 

work done after entry of judgment, those fees are generally recoverable. See id. at 207, 

330 P.3d at 964 (“In their Rule 60(c) motion, appellants sought relief from the underlying 

judgment, and, in their motion to stay, appellants sought to delay execution of that 

judgment. . . . The trial court therefore had no discretion to refuse to award [appellee] 

attorney fees for appellants’ Rule 60(c) motion and motion to stay under the contract.”). 

Like the contract in Bennett Blum, the parties’ Declaration in this case speaks only of 

“costs and reasonable attorneys’ fees” arising from unpaid assessments. (See id.; Doc. 

10-1 at 8.) Maxwell & Morgan’s request that the Justice Court award “accruing attorney 

fees and costs” (Doc. 21-1 at 6) under the Declaration is therefore not, by itself, “false, 

deceptive, or misleading.” 

 That the request to the court was not unlawful, however, does not mean that 

Maxwell & Morgan was free to obtain those fees in whatever manner it pleased. 

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Maxwell & Morgan appears to believe that the Declaration’s reference to “reasonable 

attorneys’ fees” empowers the firm, in its sole discretion, to decide what amount is 

reasonable and then seek that amount under the authority of a previously entered 

judgment. But Arizona law is clear that even when fees are awarded pursuant to an 

express contractual agreement, rather than statute, the prevailing party is not entitled to 

its fees unless a court has already determined that the specific amount that party seeks is 

reasonable. See Woliansky v. Miller, 146 Ariz. 170, 172, 704 P.2d 811, 813 (Ct. App. 

1985) (“[T]he contract contained a provision that ‘the prevailing party shall be entitled to 

reasonable attorneys fees . . . from the party adjudged against.’ The determination of the 

reasonable amount of attorney fees was peculiarly within the discretion of the trial court.” 

(ellipsis in original)); First Fed. Sav. & Loan Ass’n of Phx. v. Ram, 135 Ariz. 178, 181, 

659 P.2d 1323, 1326 (Ct. App. 1982) (“In the present case both the mortgage note with 

Catalina and the installment contract and deed of trust with First Federal contained 

contract clauses providing for an award of attorney’s fees. . . . We find the award of 

attorney’s fees to be justified and reasonable under the circumstances.”). A contractual 

attorneys’ fees provision does not permit a prevailing party to award itself fees of 

whatever size it desires based on nothing more than its own say-so. 

 Here, the Default Judgment awarded the Association a specific fee amount for 

Maxwell & Morgan’s work up until the date of judgment. Although it is not reflected on 

the face of the judgment, the Justice Court must have determined that the $797.50 it 

awarded was a reasonable sum. But the Justice Court made no such determination with 

respect to any specific amount of fees the Association might request in the future. 

Instead, the court merely announced that the Association would be entitled to 

compensation for any money it paid its attorneys for attempting to collect the amounts in 

the Default Judgment. Under well-established Arizona law, this latter portion of the 

Default Judgment was limited by an implicit, but obvious, proviso: the reasonableness of 

any award would have to be judicially blessed in advance. Judgment remedies are not 

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available for that future attorneys’ fees obligation until a future order of the court 

quantifies that obligation in a stated amount. 

 It is not clear whether, or in what amount, Maxwell & Morgan has sought 

attorneys’ fees from Costa based on work performed after entry of the Default Judgment. 

The firm’s November 21, 2014 letter does not explain why Costa’s $5,968.18 cashier’s 

check fails to provide “payment in full”; the deficiency might have resulted from unpaid 

attorneys’ fees, unpaid interest, or some other outstanding obligation. But in his 

Complaint, Costa alleges, “[u]pon information and belief,” that “the $453.25 difference 

between the amount of the Justice Court Judgment and the amount declared as the 

‘principal balance’ due in the Superior Court complaint was comprised of unadjudicated 

attorneys’ fees and costs incurred after [Maxwell & Morgan] submitted the Justice Court 

Judgment for the Court’s execution.” (Doc. 1 at 8.) If that allegation is correct, Maxwell 

& Morgan, by demanding attorneys’ fees not approved by a court, has made a “false 

representation” as to “the character, amount, or legal status of any debt.” Costa has stated 

a claim under § 1692e. 

 3. Foreclosure of personal property 

 Arizona law provides that certain forms of personal property are exempt from 

“execution, attachment, garnishment, replevin, sale or any final process issued from any 

court or any other judicial remedy provided for collection of debts.” A.R.S. § 33-

1121(2); see id. § 33-1122 et seq. The FDCPA bars “threat[s] to take any action that 

cannot legally be taken.” 15 U.S.C. § 1692e(5). In light of these provisions, Costa next 

alleges that Maxwell & Morgan engaged in “false, deceptive, and misleading 

representations” when it “threaten[ed] to satisfy a foreclosure judgment out of [his] 

personal property.” (Doc. 1 at 12.) The Complaint does not specify whether the “threat” 

in question was (1) the September 9, 2014 letter’s statement that if Costa did not provide 

payment, Maxwell & Morgan might seek a “Sheriff’s execution sale of [his] personal or 

real property” or (2) the Superior Court complaint’s prayer for relief, which asks the 

court to direct that at a sheriff’s sale of Costa’s property, “it shall not be necessary that 

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any personal property be present at the place of sale and that the Property, together with 

any and all personal property, be sold at public auction, either separately or as a unit, 

according to law, and that [the Association] may be the purchaser at such sale.” Maxwell 

& Morgan, however, moves to dismiss only on the grounds that the filing of its Superior 

Court complaint was not unlawful under the FDCPA. (See Doc. 10 at 12-13.) The court 

will therefore address only that basis for the pending Motion. 

 Maxwell & Morgan argues that Costa may not obtain relief for any activity 

relating to the firm’s lien foreclosure action because “strictly in rem relief is beyond the 

scope of the FDCPA.” (Doc. 10 at 5.) No case cited by Maxwell & Morgan establishes 

such a blanket FDCPA exemption for in rem actions, and the text of the statute cannot 

bear such an interpretation. 

 The FDCPA defines a “debt collector” as “any person who uses any 

instrumentality of interstate commerce or the mails in any business the principal purpose 

of which is the collection of any debts, or who regularly collects or attempts to collect, 

directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 

U.S.C. § 1692a(6). In addition, “[f]or the purpose of [15 U.S.C. § 1692f(6)],” the term 

“debt collector” “also includes any person who uses any instrumentality of interstate 

commerce or the mails in any business the principal purpose of which is the enforcement 

of security interests.” Id. The term “collection of any debts” is not defined in the statute, 

although the FDCPA provides that “debt” means “any obligation or alleged obligation of 

a consumer to pay money arising out of a transaction in which the money, property, 

insurance, or services which are the subject of the transaction are primarily for personal, 

family, or household purposes, whether or not such obligation has been reduced to 

judgment.” Id. § 1692a(5). 

 Several courts have held that security interests, such as deeds of trust, are not 

“debts” within the meaning of the FDCPA. On this view, “Payment of funds is not the 

object of the foreclosure action. Rather, the lender is foreclosing its interest in the 

property.” Hulse v. Ocwen Fed. Bank, FSB, 195 F. Supp. 2d 1188, 1204 (D. Or. 2002). 

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That is, “the trustee possesses the power the sale [sic] which may be exercised after a 

breach of the obligation for which the transfer in trust of the interest in real property is 

security. Foreclosure by the trustee is not the enforcement of the obligation because it is 

not an attempt to collect funds from the debtor.” Id. (citation omitted). Accordingly, 

attempts to foreclose on mortgages or deeds of trust do not qualify as “debt collection.” 

 The “legislative history of the FDCPA [supports] the proposition that mortgagees 

and their assignees, servicing companies, and trustee fiduciaries are not included in the 

definition of ‘debt collector.’” Mansour v. Cal-Western Reconveyance Corp., 618 F. 

Supp. 2d 1178, 1182 (D. Ariz. 2009). In the mortgage foreclosure context, therefore, the 

holding of Hulse may have some merit. See id. But its rationale elevates form over 

substance and is therefore sufficiently at odds with the “broad remedial purpose of the 

FDCPA,” Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1179 (9th 

Cir. 2006), that it cannot apply to security interests more broadly. While a foreclosure 

action may technically be concerned only with an “interest in the property” that serves as 

collateral, all such actions are fundamentally attempts to collect on a debt. The property 

interest grows out of and relies for its existence on the underlying debt. The holder of the 

security interest seeks to foreclose on it only because the debtor has failed to repay his 

debt. Cf. Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 461 (6th Cir. 2013) (“In 

fact, every mortgage foreclosure, judicial or otherwise, is undertaken for the very purpose 

of obtaining payment on the underlying debt, either by persuasion (i.e., forcing a 

settlement) or compulsion (i.e., obtaining a judgment of foreclosure, selling the home at 

auction, and applying the proceeds from the sale to pay down the outstanding debt).” 

(emphasis in original)). It would therefore make little sense to exclude Maxwell & 

Morgan’s lien from the FDCPA’s definition of a “debt.” 

 Nevertheless, some courts have interpreted § 1692a(6) to mean that if a business’ 

“principal purpose” is “the enforcement of security interests,” that business is subject 

only to § 1692f(6), and not to other provisions of the FDCPA. See, e.g., Jordan v. Kent 

Recovery Servs., Inc., 731 F. Supp. 652, 656-57 (D. Del. 1990). If that interpretation 

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were correct, and if Costa had alleged that Maxwell & Morgan’s principal purpose were 

enforcing security interests, all of Costa’s § 1692e claims would be legally deficient on 

their face. The court need not determine the validity of Jordan’s statutory construction, 

however, as the Complaint does not allege that Maxwell & Morgan principally enforces 

security interests—or that it principally collects debts, for that matter. It does allege that 

Maxwell & Morgan “files hundreds of collection actions every year and obtains 

judgments, many by default or stipulation, against Arizona consumers and routinely 

pursues the execution of those judgments after they are obtained” (Doc. 1 at 4), i.e., that 

the firm “regularly collects or attempts to collect, directly or indirectly, debts owed or 

due,” § 1692a(6). At oral argument, counsel for Costa asserted that Maxwell & 

Morgan’s principal purpose is collecting debts, not enforcing security interests. Counsel 

for Maxwell & Morgan denied the firm’s principal purpose is collecting debts and said 

she could not represent that the firm principally enforces security interests. At this stage 

of the proceedings, where a plaintiff’s allegations must be accepted as true, there is no 

basis for dismissing Costa’s claims on the basis that Maxwell & Morgan principally 

enforces security interests. For purposes of this Motion, Maxwell & Morgan is subject to 

all provisions of the FDCPA, and the court will therefore assess Costa’s allegations on 

the merits. 

 Maxwell & Morgan’s Superior Court complaint requests a judgment declaring that 

Costa’s condominium, “together with any and all personal property, be sold at public 

auction, either separately or as a unit, according to law, and that [the Association] may be 

the purchaser at such sale.” (Doc. 21-1 at 23.) Maxwell & Morgan does not contest that 

it was without power to seize and sell Costa’s personal property. Instead, it asserts that a 

“mere request for certain relief in pleadings filed with the court does not violate the 

FDCPA.” (Doc. 10 at 13.) Although “a statement in a pleading is supervised by the 

court and monitored by counsel,” Argentieri v. Fisher Landscapes, Inc., 15 F. Supp. 2d 

55, 62 (D. Mass. 1998), a prayer for relief can still, in some instances, be abusive for 

FDCPA purposes. The statute’s list of “false, deceptive, or misleading” practices 

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explicitly includes a “threat to take any action that cannot legally be taken or that is not 

intended to be taken.” § 1692e(5). Allowing debt collectors to inoculate themselves 

from liability by involving a court would hollow out this provision. The “least 

sophisticated debtor” could easily be misled by reading, in an official court document, 

that his personal property was at risk of execution. And the complaint’s vague request 

that the sale be “according to law” would do little to correct the least sophisticated 

debtor’s misapprehension. Costa has stated a claim under § 1692e. 

 4. Pursuing foreclosure after obtaining a prior judgment 

 Costa alleges Maxwell & Morgan further violated § 1692e by “filing foreclosure 

actions, obtaining default or uncontested foreclosure judgments, and executing or 

attempting to execute on default or uncontested foreclosure judgments where the unpaid 

principal balance of assessments includes amounts that were previously reduced to a 

money judgment and are secured by a judgment lien.” (Doc. 1 at 12-13.) In Arizona, a 

debt merges into a judgment obtained to collect the debt, and the party that obtained the 

judgment cannot subsequently sue a second time on the underlying debt. See C & J 

Travel, Inc. v. Shumway, 161 Ariz. 33, 36-37, 775 P.2d 1097, 1100-01 (Ct. App. 1989). 

Notwithstanding the doctrine of merger, Maxwell & Morgan argues that its Superior 

Court action was proper because while the Justice Court action sought payment of 

Costa’s assessments, i.e., a debt, the Superior Court complaint sought to enforce the 

interest that secured that debt. 

 Under Arizona’s “election statute” for mortgages, “If separate actions are brought 

on the debt and to foreclose the mortgage given to secure it, the plaintiff shall elect which 

to prosecute and the other shall be dismissed.” A.R.S. § 33-722. This statute, which 

“alters the traditional common law rule that a holder of a note secured by a mortgage has 

the right to sue on the note alone, to foreclose on the property, or to pursue both remedies 

at once,” is “intended to protect the debtor from multiple suits and at the same time grant 

the creditor the benefit of the security.” Mid Kan. Fed. Sav. & Loan Ass’n of Wichita v. 

Dynamic Dev. Corp., 167 Ariz. 122, 126, 804 P.2d 1310, 1314 (1991). “However, the 

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reach of the statute, as applied to most mortgages, is quite limited.” Id. Specifically, “the 

election statute does not preclude a subsequent foreclosure action after judgment on the 

debt.” Id. 

 Here, Maxwell & Morgan has not sued twice on the same underlying debt. The 

Justice Court complaint seeks relief for breach of the Declaration; the Superior Court 

complaint requests foreclosure of the lien created by the Declaration and A.R.S. § 33-

1256(A). The doctrine of merger is therefore inapplicable. In addition, Maxwell & 

Morgan did not file its Superior Court action until after the Justice Court had entered its 

Default Judgment. Under clearly established Arizona law, the election statute does not 

bar Maxwell & Morgan’s Superior Court action. See Torrie, 2014 WL 5594452, at *4. 

Dismissal of this part of Costa’s Complaint is appropriate. 

 5. Seeking foreclosure of a primary residence 

 Costa’s final § 1692e claim1

 is predicated on A.R.S. § 33-1101(A). That provision 

reads, “Any person the age of eighteen or over, married or single, who resides within the 

state may hold as a homestead exempt from attachment, execution and forced sale, not 

exceeding one hundred fifty thousand dollars in value, any one of the following: . . . 2. 

The person’s interest in one condominium or cooperative in which the person resides.” 

According to Costa, Maxwell & Morgan disregarded this “homestead exemption” when it 

sought, in its Superior Court action, to force the sale of his condominium. Certain liens, 

however, do not fall within the exemption and are therefore subject to execution and 

forced sale. A.R.S. § 33-1103(A). Among the exceptions to the exemption is a 

“consensual lien, including a mortgage or deed of trust, or contract of conveyance.” Id.

 

1

 In his Response, Costa also argues that by filing the Superior Court action, Maxwell & Morgan violated the portion of A.R.S. § 33-1256(A) that permits foreclosure of an assessment lien “only if the owner has been delinquent in the payment of monies secured by the lien, excluding reasonable collection fees, reasonable attorney fees and charges for late payment of and costs incurred with respect to those assessments, for a period of one year or in the amount of one thousand two hundred dollars or more, 

whichever occurs first.” (See Doc. 16 at 14.) But while it alleges Maxwell & Morgan “has undertaken an improper pattern and practice” of violating this provision, the Complaint’s second cause of action does not allege the firm did so with respect to Costa individually. (See Doc. 1 at 13-14.) Maxwell & Morgan therefore cannot move to dismiss such an allegation, and the court will not consider it here.

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§ 33-1103(A)(1). Nothing in the Complaint suggests Maxwell & Morgan’s lien was not 

“consensual.” Indeed, it is difficult to see how the lien could be other than consensual, as 

it is expressly provided for in the Declaration that Costa signed upon purchase of his 

condominium. Furthermore, liens created under A.R.S. § 33-1256, as Maxwell & 

Morgan’s was, are not subject to A.R.S. § 33-1101 et seq., and execution on Costa’s 

condominium was therefore not barred by statute.2

 See § 33-1256(C). This portion of 

Costa’s Complaint must be dismissed. 

C. Count 3 

 Costa’s final cause of action asserts numerous violations of 15 U.S.C. § 1692f, 

which forbids “unfair or unconscionable means to collect or attempt to collect any debt.” 

The court will consider each of those alleged violations under the “least sophisticated 

debtor” standard. See McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 

939, 952 (9th Cir. 2011) (applying “least sophisticated debtor” test to § 1692f claims). 

 1. Duplicative claims 

 Most of Costa’s § 1692f claims merely duplicate claims alleged in his § 1692g(a) 

and § 1692e causes of action. First, Costa alleges Maxwell & Morgan violated § 1692f 

by “sending judgment collection letters that fail to specify the amount owed” and sending 

“a letter payment of a debt ‘in full’ that deliberately obfuscates the specific amount owed 

in order to pay said debt ‘in full.’” (Doc. 1 at 14-15.) For the reasons explained above, 

see supra Part III.A, Maxwell & Morgan’s September 9, 2014 letter did not adequately 

inform Costa how much money he should submit in order to pay off his debt. Attempting 

to collect a debt without specifying the size of that debt is “unfair” within the meaning of 

§ 1692f. This claim must survive. 

 Second, Costa asserts the following conduct is prohibited by § 1692f: “increasing 

the amount due in judgment collection letters to include amounts that have not been 

 

2

 Accordingly, it is unnecessary to consider whether Maxwell & Morgan’s failure to notify Costa of the homestead exemption in its September 9, 2014 letter violated the 

FDCPA, as Costa insists it did in his Response. (See Doc. 16 at 12.) In any event, even if this omission did violate the FDCPA, Costa has not alleged as much in his Complaint. (See Doc. 1 at 12-14.) 

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lawfully incurred and that are otherwise not authorized or prohibited by Arizona law, 

including but not limited to A.R.S. 12-1598.07(E)”; “including language in default or 

uncontested judgments purporting to entitle them to recover reasonable attorneys’ fees 

and costs incurred after the entry of the judgment, unilaterally determining the amount of 

those post-judgment attorneys’ fees and costs that it is entitled to recover, and adding 

those amounts to the debts without any judicial oversight or involvement”; and 

“[u]nilaterally increas[ing] the amount of a judgment to add unadjudicated attorneys’ fees 

and costs that have not been awarded or determined by any court to be reasonable.” 

(Doc. 1 at 14-15.) As far as the court can tell, these separate allegations are duplicative 

both of one another and of Costa’s second § 1692e claim. The court has previously 

explained that Arizona law does not permit a judgment creditor to execute on a liability 

for future attorneys’ fees until the amount is adjudicated by the court. See supra Part 

III.B.2. Costa has therefore stated a claim under § 1692f. 

 Third, Maxwell & Morgan allegedly engaged in “unfair or unconscionable” debt 

collection practices by “filing foreclosure actions, obtaining default or uncontested 

foreclosure judgments, and executing or attempting to execute on default or uncontested 

foreclosure judgments where the unpaid principal balance of assessments includes 

amounts that were previously reduced to a money judgment and are secured by a 

judgment lien.” (Doc. 1 at 14.) This restates Costa’s fourth § 1692e claim. For the 

reasons explained above, these allegations do not state a claim under § 1692f and must 

therefore be dismissed. See supra Part III.B.4. 

 Fourth, Costa alleges Maxwell & Morgan “[t]hreaten[ed] to seize a debtor’s 

personal property as part of a foreclosure of the debtor’s residence.” (Doc. 1 at 15.) 

Notwithstanding court supervision, seeking to execute on Costa’s personal property 

without legal authority was improper. See supra Part III.B.3. This § 1692f claim cannot 

be dismissed. 

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 2. Failure to respond to inquiries 

 In addition, Costa seeks relief under § 1692f because Maxwell & Morgan 

allegedly failed “to inform the debtor [of] the amount owed when the debtor inquire[d] as 

to the true amount of the debt.” (Doc. 1 at 15.) Nowhere in the Complaint does Costa 

allege that he asked Maxwell & Morgan to clarify the true amount of his debt. The only 

communication the Complaint alleges from Costa to the firm is his November 6, 2014 

cashier’s check. The letter accompanying that check announces that the check constitutes 

payment in full; it does not seek information about any outstanding portion of the debt. 

Accordingly, this portion of Costa’s third cause of action must be dismissed. 

 3. Disregard of statutory limitations 

 Finally, Costa maintains Maxwell & Morgan’s Superior Court complaint was 

premature under that portion of A.R.S. § 33-1256(A) that permits foreclosure of an 

assessment lien “only if the owner has been delinquent in the payment of monies secured 

by the lien, excluding reasonable collection fees, reasonable attorney fees and charges for 

late payment of and costs incurred with respect to those assessments, for a period of one 

year or in the amount of one thousand two hundred dollars or more, whichever occurs 

first.” See supra note 1. According to Costa, at the time the Justice Court entered the 

Default Judgment, which awarded Maxwell & Morgan all unpaid assessments through 

the end of 2014, those debts merged into the Default Judgment. See C & J Travel, 161 

Ariz. at 36-37, 775 P.2d at 1100-01. Therefore, on Costa’s view, there was no 

“delinquent” debt at the time Maxwell & Morgan filed the Superior Court action in 

October 2014, with the result that neither the one-year nor the $1,200 threshold in § 33-

1256(A) had been satisfied. Because the Superior Court complaint was “patently 

frivolous” (Doc. 16 at 14), Costa believes it qualifies as an “unfair or unconscionable 

means to collect or attempt to collect any debt,” § 1692f. 

 This contention merely repackages Costa’s election-of-remedies argument, 

discussed and rejected above. See supra Part III.B.4. Although Maxwell & Morgan had 

already sued for and received a judgment on the underlying debt, the Superior Court 

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action sought to foreclose instead on Costa’s lien. It is therefore irrelevant that the debt 

itself may have merged into the Default Judgment. Merger or not, Costa was still 

“delinquent in the payment of monies secured by the lien.” That a debt has merged does 

not mean it is no longer delinquent; it merely means a creditor is unable to sue directly on 

that debt. This § 1692f claim fails as a matter of law and will be dismissed. 

 4. Redemption period 

 Costa alleges in his Response that Maxwell & Morgan violated § 1692e and 

§ 1692f by praying the Superior Court to reduce the statutory redemption period 

following the sale of his condominium. (See Doc. 16 at 15-16.) In fact, the Superior 

Court complaint requests a thirty-day redemption period only if “the Court determines 

that the Property is not now and has not been used at any time pertinent hereto primarily 

for agricultural or grazing purposes and has been abandoned.” (Doc. 21-1 at 23.) It 

expressly provides that unless those facts are present, “the redemption period is six (6) 

months.” (Id.) Such a request cannot be considered “unfair or unconscionable.” In any 

event, this allegation is not pled in the Complaint, and thus there is nothing for the court 

to dismiss. (See Doc. 1 at 11-15.) 

 It is clear from Costa’s First Amended Complaint (Doc. 21) that none of his 

deficient claims could be cured through an amended pleading, with the possible 

exception of his allegation that Maxwell & Morgan failed to respond to his inquiry 

regarding the true amount of his debt. See supra Part III.C.2. Accordingly, Costa will be 

granted leave to amend his First Amended Complaint by June 9, 2015, to plead sufficient 

facts on that cause of action. 

 IT IS THEREFORE ORDERED that Defendant Maxwell & Morgan’s Motion to 

Dismiss (Doc. 10) is granted to the extent that Costa has failed to state a claim (1) under 

§ 1692e or § 1692f for attempting to foreclose on assessments that were previously 

reduced to judgment, (2) under § 1692e for disregarding Arizona’s “homestead 

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exemption,” and (3) under § 1692f for (a) failing to respond to Costa’s inquiries 

regarding the amount of his debt or (b) ignoring A.R.S. § 33-1256(A)’s one-year and 

$1,200 thresholds. The Motion is otherwise denied.

 IT IS FURTHER ORDERED that Plaintiff Allan Costa is granted leave to amend 

his First Amended Complaint (Doc. 21) by June 9, 2015. If by that date Costa has not 

submitted a second amended complaint, Maxwell & Morgan shall file an answer to the 

First Amended Complaint no later than June 23, 2015. 

 Dated this 3rd day of June, 2015. 

Neil V. Wake

United States District Judge

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