Davidson v. Seterus, Inc.
21 Cal. App. 5th 283
Cal. Ct. App. 5th2018Background
- Plaintiff Edward Davidson alleged that mortgage servicer Seterus (formerly an IBM subsidiary) made hundreds of harassing collection calls demanding mortgage payments during statutory/contractual grace periods, threatened credit reporting and foreclosure, and continued after notice to stop.\
- Seterus sent communications identifying itself as a "debt collector."\
- Davidson sued Seterus and IBM under the Rosenthal Fair Debt Collection Practices Act (Cal. Civ. Code § 1788 et seq.) and the UCL, alleging unlawful debt-collection practices and asking to proceed as a class action.\
- Defendants demurred, arguing mortgage servicers are not "debt collectors" under the Rosenthal Act and that IBM was not properly alleged to be liable for Seterus's conduct.\
- The trial court sustained the demurrer without leave to amend; Davidson appealed. The Court of Appeal reversed, holding the Rosenthal Act can cover mortgage servicers and that the complaint adequately alleged IBM's involvement.\
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a mortgage lender or servicer can be a "debt collector" under the Rosenthal Act | Rosenthal's definitions of "consumer credit transaction" and "consumer debt" encompass mortgage transactions obtained for personal, family, or household purposes; mortgage servicers who regularly collect such debts fall within §1788.2(c). | Mortgage loans/real-estate transactions are not the type of "consumer" credit the Act was meant to cover; federal FDCPA definitions (which exclude original creditors/servicers) should control interpretation. | The Rosenthal Act's language is broader than the FDCPA; it can include mortgage lenders/servicers who engage in debt-collection activity. Reversed trial court. |
| Whether plaintiff pleaded facts sufficient to hold IBM liable for Seterus's conduct | Complaint alleges IBM and Seterus acted jointly: agency, ratification, aiding-and-abetting; IBM was the corporate parent and engaged in the servicing business. | Allegations are conclusory and fail to show control or alter-ego relations; insufficient to pierce corporate veil or attribute Seterus acts to IBM. | On demurrer review, allegations that IBM participated, ratified, and aided-and-abetted were sufficient to survive demurrer; dismissal as to IBM reversed. |
Key Cases Cited
- People ex rel. Lungren v. Superior Court, 14 Cal.4th 294 (1996) (civil public-protection statutes are construed broadly)\
- Komarova v. National Credit Acceptance, Inc., 175 Cal.App.4th 324 (2009) (Rosenthal Act is remedial and should be broadly interpreted)\
- Alborzian v. JPMorgan Chase Bank, N.A., 235 Cal.App.4th 29 (2015) (treating mortgage debt within Rosenthal Act framework)\
- United States v. Bestfoods, 524 U.S. 51 (1998) (parent corporation generally not liable for subsidiary absent veil-piercing)\
- Mesler v. Bragg Management Co., 39 Cal.3d 290 (1985) (alter-ego test: unity of interest and inequitable result if treated separately)