UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

VIEN-PHUONG THI HO,
Plaintiff-Appellant,

v.

RECONTRUST COMPANY, NA,
subsidiaries of Bank of
America, N.A.;
COUNTRYWIDE HOME LOANS
INC; BANK OF AMERICA, N.A.,
Defendants-Appellees.

SUMMARY**

Fair Debt Collection Practices Act
Affirming in part and vacating in part the district court’s
dismissal of an action for failure to state a claim, the panel
held that the trustee of a California deed of trust securing a
real estate loan was not a “debt collector” under the Fair Debt
Collection Practices Act.

Seeking damages under the FDCPA, the plaintiff alleged
that the trustee of the deed of trust on her property sent her a
notice of default and a notice of sale that misrepresented the
amount of debt she owed. The plaintiff also sought to rescind
her mortgage transaction under the Truth in Lending Act.

Disagreeing with the Fourth and Sixth Circuits, and
agreeing with the California Courts of Appeal, the panel held
that the trustee was not a “debt collector” subject to damages
under the FDCPA because the trustee was not attempting to
collect money from the plaintiff. The panel held that the
object of a non-judicial foreclosure in California is to retake
and resell the security on the loan. Thus, actions taken to
facilitate a non-judicial foreclosure, such as sending the
notice of default and notice of sale, are not attempts to collect
“debt” as that term is defined by the FDCPA. The panel
wrote that following a trustee’s sale, the trustee collects
money from the home’s purchaser, not the original borrower.
Because the money collected from a trustee’s sale is not
money owed by a consumer, it is not “debt.” Accordingly,
the foreclosure notices were an enforcement of a security
interest, rather than general debt collection under 15 U.S.C.
§ 1692a(6). Citing Sheriff v. Gillie, 136 S. Ct. 1594 (2016),
the panel declined to create a conflict with state foreclosure
law in its interpretation of the ambiguous term “debt
collector.” Accordingly, the panel affirmed the dismissal of
the FDCPA claim.

The panel held that even though the district court twice
dismissed the plaintiff’s TILA rescission claim and she did
not replead it in her third complaint, it was preserved for
appeal because the district court instructed her that she would
be required to allege the ability to repay the loan in order to
state a rescission claim. The panel held that under Merritt v.
Countrywide Fin. Corp., 759 F.3d 1023 (9th Cir. 2014),
decided after the district court’s dismissal, a mortgagor need
not allege the ability to repay in order to state a rescission
claim. Accordingly, the panel vacated the dismissal of the
TILA claim and remanded for consideration of the claim in
light of Merritt.

LINK TO OPINION BELOW:

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