Judge: Douglas W. Stern, Case: BC720986, Date: 2022-08-24 Tentative Ruling

Case Number: BC720986    Hearing Date: August 24, 2022    Dept: 52

Tentative Ruling:

Order to Show Cause Regarding Striking Eighth Cause of Action Against Ladera Crest Homeowners Association

The court’s order to show cause issued on July 29, 2022, posed the following question: “Is Ladera HOA exempt from the federal FDCPA [Fair Debt Collection Practices Act] because it collected its own debts?”  (Order, p. 10.)

The federal FDCPA defines “debt collector” as one who regularly collects “debts owed or due or asserted to be owed or due another.”  (15 U.S.C. § 1692a(6).)  The federal FDCPA thus “does not apply to creditors seeking to collect their own debts; however, the Rosenthal Act does.”  (Best v. Ocwen Loan Servicing, LLC (2021) 64 Cal.App.5th 568, 279 Cal.Rptr.3d 69, 74; accord MacDermid v. Discover Financial Services (6th Cir. 2007) 488 F.3d 721, 734 [defendant “is clearly not a ‘debt collector’; rather, it is the very party to whom the debt is due”].)

Plaintiff Donnie Muldrow alleges Ladera Homeowners Association sought to collect homeowners’ association assessments.  He owed those assessments to Ladera—not someone else.  Based on these allegations, Ladera is exempt from the federal FDCPA (though not the Rosenthal FDCPA) because it was collecting its own debts.

Plaintiff’s response argues that Ladera is a “debt collector” under the federal FDCPA because, “[f]or purposes of section 1692f(6) of” the FDCPA, 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.”  (15 U.S.C. § 1692a.) 

Plaintiff does not allege facts showing Ladera is a “business the principal purpose of which is the enforcement of security interests.”  Plaintiff alleges it is a homeowners’ association under the Davis-Stirling Common Interest Development Act.    Its governing documents show it has many duties aside from enforcing security interests.  (5AC, Ex. A.) 

For example, Ladera has “[t]he power and duty to operate, control, maintain, repair, replace, or otherwise manage the Common Areas, and all facilities and Improvements thereupon, including, but not limited to the mini-park, greenbelt, parkways, including perimeter parkways, any private drainage or storm drain facilities, slopes, [and] signage.”  (5AC, Ex. A, Art. 3.9(b), p. 16.)  Ladera also imposes and enforces rules on pets, parking, signs, “outdoor clotheslines,” and where homeowners must keep their trash cans.  (Id., Art. 5, pp. 30-38.)  Enforcing security interests is no more than an incidental purpose of Ladera Crest Homeowners Association.

The court hereby strikes plaintiff Donnie Muldrow’s eighth cause of action as against defendant Ladera Crest Homeowners Association without leave to amend.

Defendant Pamela Abbott Moore’s Motion to Strike Fifth Amended Complaint; Order to Show Cause Regarding Striking Ninth Cause of Action Against Moore

Defendant Pamela Abbott Moore moves to strike portions of plaintiff Donnie Muldrow’s fifth amended complaint.  Courts may strike “any irrelevant, false, or improper matter” (CCP § 436(a)) including allegations that are “not essential to the statement of a claim or defense,” “neither pertinent to nor supported by an otherwise sufficient claim or defense,” or “[a] demand for judgment requesting relief not supported by the allegations” (CCP § 431.10(b)).

1. Pre-Lien Letter

Moore moves to strike portions of the fifth amended complaint referring to a “pre-lien notice” sent to plaintiff on October 26, 2016.  (5AC, ¶¶ 66-71.)  The pre-lien notice is not essential or pertinent to any claim in plaintiff’s fifth amended complaint. 

Plaintiff contends the letter supports his eighth cause of action for violation of the federal Fair Debt Collection Practices Act (FDCPA) and ninth cause of action for violation of the Rosenthal FDCPA.  Both causes of action have a statute of limitations of one year.  (15 U.S.C. § 1692k(d); Civ. Code, § 1788.30(f).)  Plaintiff filed this action on September 6, 2018, more than one year after the pre-lien notice was allegedly sent in 2016.  The statute of limitations bars any claim under the federal and Rosenthal FDCPA arising from the pre-lien notice.  The pre-lien notice therefore is not essential or pertinent to any claim.

2. Nonjudicial Foreclosure Proceedings as Debt Collection Under the FDCPA

            In her final brief, Moore requested that the court rule on this issue.  In her moving papers, she wrote, “Plaintiff alleges that the nonjudicial foreclosure action resulting in the sale of the Subject Property was wrongful and ‘…violated federal or state fair debt collection laws….’ 5AC, at ¶¶ 176-182.  The activity of nonjudicially foreclosing on a property pursuant to a security interest is not the collection of a debt under the FDCPA.”  (Motion, p. 5.) 

            That is a correct statement of the law.  As the court ruled on April 11, 2022, a “business engaged in nonjudicial foreclosure proceedings is not a ‘debt collector within the meaning of the [federal] FDCPA’ ”, but that nonjudicial foreclosure proceedings can constitute debt collection under the Rosenthal FDCPA. 

            But Moore fails to identify anything that should be stricken on this basis.  Her notice of motion does not “quote in full the portions sought to be stricken” and includes no “[s]pecifications,” which must be included and “numbered consecutively.”  (Cal. Rules of Court, rule 3.1322(a).)  This section of Moore’s motion refers only to paragraphs 176-182.  Those paragraphs comprise the fifth cause of action for wrongful foreclosure, which plaintiff alleges only against Ladera.

3. Ninth Cause of Action: Rosenthal Fair Debt Collection Practices Act

Plaintiff fails to allege sufficient facts for this cause of action for two reasons. 

First, plaintiff does not allege a “consumer credit transaction” as required for her to be liable under the Rosenthal FDCPA.   To be liable, Moore must be a “debt collector.”  (Civ. Code, § 1788.30.)  A “debt collector” is a person who “engages in debt collection.”  (Civ. Code, § 1788.2(c).)  “ ‘[D]ebt collection’ means any act or practice in connection with the collection of consumer debts.”  (Civ. Code, § 1788.2(b).)  “Consumer debts” applies to money or property due “by reason of a consumer credit transaction.”  (Civ. Code, § 1788.2(f).)  Finally, “consumer credit transaction” means a transaction “in which property, services, or money is acquired on credit.”  (Civ. Code, § 1788.2(e).)

The debt plaintiff alleges Moore attempted to collect was overdue homeowners’ association assessments.  Those assessments do not arise from any “consumer credit transaction” because Muldrow did not obtain anything “on credit.”  “[T]he phrase ‘on credit’ can be stated as obtaining something of value without immediate payment on the promise to make a payment or payments in the future.”  (Davidson v. Seterus, Inc. (2018) 21 Cal.App.5th 283, 296.)  Ladera Crest Homeowners Association’s governing document provides that regular assessments are made “to meet anticipated authorized expenditures of the Association.”  (5AC, Ex. A, § 4.4, p. 23.)  Thus, rather than plaintiff acquiring something on the promise to pay in the future, the assessments represent payments due in advance for services to be acquired later. 

Second, Moore is exempt from the applicable version of the Rosenthal FDCPA as an attorney.  The court raised this issue in its order to show cause.  Plaintiff filed this action in 2018.  Before 2020, the Rosenthal FDCPA explicitly provided that attorneys are not “debt collectors.”  (Former Civ. Code, § 1788.2(c) [“The term ‘debt collector’ … does not include an attorney or counselor at law.”]; see also Carney v. Rotkin, Schmerin & McIntyre (1988) 206 Cal.App.3d 1513, 1526 [the Act “specifically exempts attorneys from its coverage”].) 

In his response to the order to show cause, plaintiff argues only that Moore is not exempt because the Rosenthal Act’s attorney exemption does not apply to law firms.  Plaintiff relies on a United States District Court case, which held “the court finds that the ‘attorney’ exemption from the definition of ‘debt collector’ under the Rosenthal Act does not extend to ‘law firms.’ ”  (Davis v. Hollins Law (E.D. Cal. 2013) 942 F.Supp.2d 1004, 1011.)  A “law firm” “is a collection of multiple individuals (‘two or more lawyers,’ ‘more than one lawyer’).”  (Ibid.)

On August 10, 2022—nearly four years after he filed this action—plaintiff filed an amendment to the complaint to “correct” the name of defendant “Pamela Abbott Moore” to “Pamela Abbott Moore, doing business as Law Offices of Pamela Abbott Moore.”

Assuming this belated amendment is proper, it does not save this cause of action against Moore.  Plaintiff does not allege the “Law Offices of Pamela Abbott Moore” is a “law firm,” a collection of two or more lawyers operating as a distinct business entity.  Its allegations refer to only a single lawyer, Pamela Abbott Moore. 

Moreover, plaintiff’s amendment to the complaint does not name a distinct business entity.  It names defendant “Moore, doing business as Law Offices of Pamela Abbott Moore.”  An individual “doing business” under another name is not a legal entity—it is an individual using a fictitious business name.  “ ‘Use of a fictitious business name does not create a separate legal entity’ distinct from the person operating the business.  [Citation.]  ‘ “The business name is a fiction, and so too is any implication that the business is a legal entity separate from its owner.” ’ ”  (Ball v. Steadfast-BLK (2011) 196 Cal.App.4th 694, 701.)       

Disposition

Moore’s motion is granted in part without leave to amend as to the following portions of plaintiff’s fifth amended complaint: (1) paragraphs 66 to 71, and (2) the ninth cause of action against defendant Pamela Abbott Moore.