Vien-Phuong Thi Ho v. Recontrust Co.
2016 U.S. App. LEXIS 18836
| 9th Cir. | 2016Background
- Ho borrowed to buy a Long Beach house; loan secured by a California deed of trust; ReconTrust served as trustee and sent a notice of default and a notice of sale after Ho defaulted.
- Notices informed Ho of the amount alleged due, warned the property could be sold without court action, and explained rights (reinstatement/redemption); ReconTrust identified itself in the notice as a "debt collector attempting to collect a debt."
- Ho sued, alleging ReconTrust violated the FDCPA by misrepresenting the debt amount and sought TILA rescission for fraud; district court dismissed FDCPA and other claims and twice dismissed the TILA rescission claim without prejudice (Ho did not replead).
- Principal legal question: whether a trustee conducting a nonjudicial foreclosure under California law is a "debt collector" under the FDCPA's general definition (15 U.S.C. §1692a(6)).
- Ninth Circuit majority: ReconTrust is not a "debt collector" under the FDCPA’s broad definition for these foreclosure-related notices because nonjudicial foreclosure primarily enforces a security interest and does not, under California law, attempt to collect money from the borrower; remanded only the TILA rescission claim.
- Partial concurrence/dissent (Judge Korman): argues trustees pursuing foreclosure are debt collectors under the FDCPA (collecting or attempting to collect money, directly or indirectly), and that applying FDCPA protections does not unduly conflict with California foreclosure procedures.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trustee’s statutory foreclosure notices constitute FDCPA "debt collection" | Ho: Notices threatened sale unless she paid and thus were attempts to collect debt (indirectly or to induce payment) | ReconTrust: Nonjudicial foreclosure enforces a security interest and retakes/resells property; it does not collect money from the borrower under California law, so FDCPA does not apply | Held: Notices are enforcement of a security interest, not "debt collection" under FDCPA’s general definition; ReconTrust not a "debt collector" for purposes beyond §1692f(6) |
| Whether enforcement-of-security-interest language in FDCPA makes trustees subject to the entire FDCPA | Ho: Even if enforcement-of-security-interest is recognized, trustee activities here attempt to collect money indirectly and thus fall under the general definition | ReconTrust: The statute’s separate reference to security enforcers shows Congress did not intend all security-enforcement to be broad "debt collection" | Held: Court reads the statute to limit many foreclosure activities to security-enforcement context; ReconTrust qualifies only under narrow §1692f(6) scope, not the general definition |
| Whether applying FDCPA to trustees would conflict with California nonjudicial foreclosure scheme | Ho: FDCPA protections can coexist; many circuits treat foreclosure communications as debt collection without disrupting state schemes | ReconTrust: FDCPA would create direct conflicts (third-party communications, mailing deadlines, verification/dispute mechanics) and hinder statutory procedures | Held: Federalism concerns and avoiding conflict with state foreclosure law favor the interpretation that avoids imposing FDCPA burdens on trustees; potential statutory conflicts weigh against broad FDCPA coverage |
| Whether Ho’s TILA rescission claim was preserved despite not repleading after district-court conditioning | Ho: Dismissal with a court-imposed repleading condition she could not make preserved the claim on appeal; Merritt later clarified pleading standard | ReconTrust: Failure to replead means claim was not preserved | Held: Where a district court conditions repleading on allegations plaintiff is unwilling/unable to make, the claim is preserved for appeal; remanded for TILA rescission in light of Merritt |
Key Cases Cited
- Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919 (Cal. 2016) (explains California deed of trust mechanics and foreclosure consequences)
- Hulse v. Ocwen Fed. Bank, 195 F. Supp. 2d 1188 (D. Or. 2002) (held nonjudicial foreclosure is distinct from debt collection; treated as leading authority for non-collection view)
- Glazer v. Chase Home Fin., LLC, 704 F.3d 453 (6th Cir. 2013) (held foreclosure communications can be debt collection under FDCPA; disagreed with Hulse)
- Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006) (held foreclosure-related communications may constitute debt collection)
- Burnett v. Mortg. Elec. Registration Sys., Inc., 706 F.3d 1231 (10th Cir. 2013) (reasoned nonjudicial foreclosure does not itself collect a debt; relevant to circuits adopting non-collection view)
- Kaymark v. Bank of Am., N.A., 783 F.3d 168 (3d Cir. 2015) (holds foreclosure is debt collection under the FDCPA)
- Pfeifer v. Countrywide Home Loans, Inc., 211 Cal.App.4th 1250 (Cal. Ct. App. 2012) (California appellate decision holding statutorily required foreclosure notices are not FDCPA debt collection activity)
- Merritt v. Countrywide Fin. Corp., 759 F.3d 1023 (9th Cir. 2014) (clarified that pleading ability to repay is not required to state a TILA rescission claim)