Alborzian v. JPMorgan Chase Bank, N.A.
185 Cal. Rptr. 3d 84
Cal. Ct. App.2015Background
- Plaintiffs Afsheen and Fabiola Alborzian obtained two purchase-money loans in 2005; Wells Fargo held the senior deed of trust and JPMorgan Chase (Chase) held the junior deed of trust. Wells Fargo later foreclosed and sale proceeds were insufficient to satisfy Chase’s junior loan.
- After foreclosure, Chase sent two letters and, through Professional Recovery Services (PRS), made collection calls representing that plaintiffs still “owe[d]” the loan balance and offering settlement windows and reduced payoff amounts.
- Plaintiffs sued Chase and PRS (TAC) alleging the junior lien was unenforceable against them under former Cal. Code Civ. Proc. § 580b and that defendants’ letters/calls misleadingly implied the debt remained enforceable.
- Causes of action asserted: violations of the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act), California Unfair Competition Law (UCL), Consumer Legal Remedies Act (CLRA), an FDCPA claim against PRS, and a request for declaratory relief.
- Trial court sustained demurrers without leave to amend; plaintiffs appealed.
- Court of Appeal affirmed dismissal of the CLRA claim but reversed as to FDCPA (against PRS), Rosenthal Act and UCL claims (against both defendants), and declaratory relief; remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether collection letters/calls seeking payment of a junior purchase-money loan after senior foreclosure are actionable when the debt is judicially unenforceable under § 580b | Chase’s letters/calls deceptively imply debt remains enforceable and therefore violate debt-collection laws | For pre-2013 loans § 580b does not bar attempts to obtain voluntary payment; letters were not misleading and defendants may attempt collection | Letters and calls can be actionable: plaintiffs adequately alleged deception under FDCPA (via PRS), Rosenthal Act, and UCL because letters could reasonably imply enforceability and calls amounted to harassment |
| Applicability of FDCPA / who is a “debt collector” and whether FDCPA standards control state claims | Plaintiffs: FDCPA standards (and Rosenthal incorporation) govern deceptive collection attempts on unenforceable debt | Chase: FDCPA may not apply to a creditor, and some circuits require threat of litigation to violate FDCPA | Court: FDCPA violations are actionable for deceptive collection practices; Rosenthal incorporates FDCPA so state claims may proceed regardless of FDCPA technical status of creditor |
| Whether plaintiffs have UCL standing absent out-of-pocket payments | Plaintiffs: alleged economic injuries — reduced credit score from false reporting and $200 attorney fee — suffice for UCL standing | Defendants: no payments were made so no economic injury | Court: alleged harms (credit reporting, attorney fee) suffice at pleading stage to confer standing for UCL claim |
| Whether CLRA applies to loan collection representations | Plaintiffs: CLRA prohibits misrepresentations about obligations in consumer transactions | Defendants: CLRA applies only to transactions involving goods or services, not pure loans | Court: CLRA does not apply to mortgage loan collection here; dismissal of CLRA claim affirmed |
Key Cases Cited
- Zelig v. County of Los Angeles, 27 Cal.4th 1112 (independent review of demurrer; accept alleged facts)
- Gonzales v. Arrow Fin. Servs., LLC, 660 F.3d 1055 (objectively judged “least sophisticated debtor” standard for deceptive dunning letters)
- In re Prestige Ltd. P’ship-Concord, 234 F.3d 1108 (section 580b bars junior lienholder from enforcing debt after senior foreclosure)
- Brown v. Jensen, 41 Cal.2d 193 (same principle that junior purchase-money lien cannot be personally enforced after foreclosure)
- Fairbanks v. Superior Court, 46 Cal.4th 56 (CLRA does not reach certain financial transactions/ancillary services)
- Meyer v. Sprint Spectrum L.P., 45 Cal.4th 634 (standards for review and dismissal of declaratory relief)
- Puentes v. Wells Fargo Home Mortgage, Inc., 160 Cal.App.4th 638 (UCL may borrow violations of other laws to create unlawful practice)