Heritage Pacific
Financial v. Monroy



















Filed 3/29/13
Heritage Pacific Financial v. Monroy CA1/2

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>NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.





IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST
APPELLATE DISTRICT

DIVISION
TWO


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HERITAGE PACIFIC FINANCIAL, LLC, Plaintiff, Cross-defendant, and Appellant, v. MARIBEL MONROY, Defendant, Cross-complainant, and Respondent.

A135274, A136043 (Contra Costa County Super. Ct. No. C10-01607)

Maribel
Monroy executed two promissory notes with WMC Mortgage Corp. (WMC) when
purchasing a home in Richmond, California in 2006 (the Richmond property). After a foreclosure on the senior deed of
trust, Heritage Pacific Financial, LLC (Heritage) acquired Monroy’s second href="http://www.mcmillanlaw.com/">promissory note from WMC. Heritage sent Monroy a letter attached to a
complaint and summons advising her that Heritage had filed a lawsuit against
her alleging various fraud claims. The
letter admonished that any misinformation provided by Monroy on her original
loan application with WMC could result in civil liability and that Heritage
would proceed with a lawsuit if it were unable to resolve the matter with
Monroy. Monroy filed a cross-complaint
against Heritage, alleging violations of the Rosenthal Fair Debt Collection
Practices Act (Rosenthal Act) and the federal Fair Debt Collection Practices
Act (FDCPA or the Act).

After
permitting Heritage to amend its complaint three times, the trial court
sustained Monroy’s demurrer against Heritage’s pleading on the grounds that
Heritage had failed to provide or allege an assignment agreement with
sufficient particularity to demonstrate that the assignment of Monroy’s
promissory note included an intent to assign WMC’s tort claims against the
borrower. Thereafter, Monroy moved for
summary judgment or adjudication on her cross-complaint. The court denied her motion as to her claim
of a violation of the Rosenthal Act but granted the motion as to a violation of
the FDCPA, on the condition that Monroy agree to damages in the amount of one
dollar. Monroy agreed to the damage
award of one dollar and the court entered judgment in her favor. Subsequently, Monroy requested attorney fees
and costs under title 15 of the United States Code section 1692k(a)(3), and the
court found that Monroy was the prevailing party and entitled to attorney fees
and costs in the amount of $89,489.60.
The court concluded that the issues regarding the cross-complaint and
complaint were interrelated and could not be reasonably separated. Heritage separately appealed the judgment and
the award of attorney fees and we, on our own motion, consolidated the appeals.


On
appeal, Heritage argues that it sufficiently set forth allegations to support a
claim that the assignment from WMC included an intent to assign WMC’s tort
claims against Monroy and that the trial court improperly weighed the evidence
when sustaining the demurrer without leave to amend. It also contends that triable issues of fact
exist regarding Monroy’s FDCPA claim and therefore the trial court erred in
granting summary judgment. Finally, it
objects to the award and amount of attorney fees. We are not persuaded by Heritage’s argument,
and affirm the judgment and the award of attorney fees.

>BACKGROUND

Monroy
is Spanish speaking and works as a housekeeper.
On November 26, 2006, she purchased the Richmond property for
$425,000. Monroy executed two promissory
notes with WMC. She obtained a senior mortgage
loan for $340,000 and a junior mortgage loan for $85,000 (the note, the second
note, or the promissory note). Both
promissory notes were secured by a deed of trust on the property. The beneficiary of each deed of trust was
Mortgage Electronic Servicing Corporation.

Both the first and
second promissory notes provided in the first paragraph the following: “I understand that the Lender may transfer
this Note. The Lender or anyone who
takes this Note by transfer and who is entitled to receive payments under this
Note will be called the ‘Note holder.’ ”
Monroy signed a form stating that the information in the loan
application was true and correct and acknowledged that “any intentional or
negligent misrepresentation of this information . . . may result in civil
liability, including monetary damages.”

On her loan
application, Monroy claimed to make $9,200 per month as the owner of Maribel’s
Cleaning Services. Monroy signed a
certification that she did not have a family or business relationship with the
seller of the property.

The seller of the
Richmond property was Marvin E. Monroy, Monroy’s son. He received $53,258.49 as a result of the
sale. Monroy bought the house from her
son because he was not able to make the mortgage payments.

At this same time,
on November 20, 2006, property in Manteca (the Manteca property) was purchased
in Monroy’s name and a promissory note was executed for the amount of
$312,000. According to Monroy, the
Manteca property was purchased under her name as a result of identity
theft. She stated that in 2006 she was
unaware of this transaction. She averred
that she has never been to the Manteca Property. In 2008, Monroy submitted to the
credit-reporting agency a verified fraud statement. In this statement, she asserted that a
mortgage in Manteca was opened in her name as a result of the identity theft.

Monroy failed to
make her mortgage payments on the Richmond property, which resulted in a
foreclosure on the senior deed of trust on August 28, 2008.

On May 22, 2009,
Heritage acquired Monroy’s second promissory note as part of a “larger pool of
loans.” Heritage is a limited liability
company organized under the laws of the State of Texas and its principal place
of business is in Dallas County, Texas.
Heritage sent Monroy a letter stating that it had purchased her second
unpaid loan. Heritage was unsuccessful
in speaking with Monroy. In October
2009, Heritage sent by certified mail another notice of the transfer of the
ownership of the note. Heritage sent
Monroy a third notice in December 2009.
In this notice, it asserted that she was obligated to pay Heritage the
unpaid balance on the second promissory note.


Heritage did
further research and concluded that Monroy had misrepresented her income and
submitted false documentation regarding her income on her original loan
application. Heritage also discovered
that Monroy’s son was the seller of the Richmond property. Additionally, it uncovered the documents
related to the Manteca property.

On June 1, 2010,
Heritage filed a complaint against Monroy for intentional misrepresentation,
fraudulent concealment, promise without intent to perform, and negligent
misrepresentation based on her loan application with WMC. Heritage alleged that it was not barred from
pursuing its action by any antideficiency statute because it was not seeking a
deficiency judgment for the balance of a promissory note following foreclosure,
but was seeking a judgment for Monroy’s alleged fraud in connection with her
loan application. Heritage requested
actual damages in the amount of $85,000, the sum owed on the promissory note,
and also asked for punitive damages.

On June 27, 2010,
Monroy received a letter dated May 25, 2010, from Heritage that attached
Heritage’s summons and complaint against her.
The letter advised her about its civil action against her and stated in
bold type: “Should you wish to
voluntarily provide us with your federal tax return transcripts, a signed copy
of Form 4506-T (Request for Transcript of Tax Return) and/or your proof of
residency in the property made the subject of our Complaint, please contact us
at your earliest convenience . . . .” The letter directed: “If you notify us of your intent to
voluntarily provide us with this documentation, we may suspend actions to
provide you with an opportunity to provide us with copies of the same.” The letter told Monroy to notify Heritage if
she wanted to provide a copy of her promissory note as Heritage, “as assignee
of the promissory note, has the right to reverify the information contained
therein.” The letter admonished Monroy
that “any misinformation or misrepresentations provided in the [loan]
application are a violation of federal law and may result in ‘civil liability,
including monetary damages, to any person who may suffer any loss due to
reliance upon any misrepresentation’ for which Heritage . . . currently
seeks.” The letter warned that if
Heritage was unable to resolve the matter by the date Monroy’s answer to the
complaint was due, Heritage would “have no other option but to proceed with
litigation against” her. The letter
declared that it was “from a debt collector” and was “an attempt to collect a
debt.”

On July 28, 2010,
Monroy answered Heritage’s complaint and filed a cross-complaint alleging
violations of the Rosenthal Act (Civ. Code, § 1788 et seq.) and the FDCPA (15
U.S.C. § 1692 et seq.). A little more
than a month later, on September 2, Heritage demurred to the cross-complaint
and filed a motion to strike the pleading.
On November 16, 2010, Monroy filed a motion
for judgment on the pleadings on Heritage’s complaint.

On December 28,
2010, the trial court overruled Heritage’s demurrer to Monroy’s cross-complaint
and denied its motion to strike. On this
same date, the court granted with leave to amend Monroy’s motion for judgment
on Heritage’s complaint. The court
explained that Heritage had failed to allege that the lender had assigned its
fraud claims to it and Heritage had conceded that no California legal authority
held that the assignment of a promissory note automatically constituted an
assignment of a lender’s fraud claims.
The court added: “If [Heritage]
chooses to amend its complaint so as to specifically allege an assignment of
the lender’s fraud claims, [Heritage] shall make such allegations with the
particularity required of a fraud cause of action, and [Heritage] shall attach
as an exhibit to the amended complaint a full and legible copy of any written
assignment agreement.”

Heritage filed its
first amended complaint for the same four causes of action on December 23,
2010. Heritage attached Monroy’s second
promissory note for $85,000, and alleged in the pleading that the assignment
was recorded on the last page of the promissory note.

Monroy demurred to
the first amended complaint. On April 7,
2011, the trial court sustained Monroy’s demurrer “with one last opportunity”
for Heritage to amend. (Bold omitted.) The court explained that Heritage had “still
failed to adequately allege an assignment of the original lender’s tort claims,
as distinct from an assignment of the original lender’s contractual rights
under the subject promissory note.” The
court cited Sunburst Bank v. Executive
Life Ins. Co. (1994) 24 Cal.App.4th 1156, 1164. The court concluded that Heritage had “not
attached to its complaint a written assignment agreement, as specified in the
court’s ruling on the motion for judgment on the pleadings, and [Heritage]
ha[d] not alleged the formation of an oral assignment agreement.”

The trial court
noted in the order that Heritage had represented at oral argument that it would
amend the pleading to allege “the existence of either a written assignment of
the original lender’s tort claims, or an assignment agreement implied in fact
from circumstances other than the mere assignment of contractual rights.” The court admonished Heritage that its future
pleading must “allege with the particularity required of a fraud cause of
action all the circumstances showing the formation and terms” of an implied
agreement if Heritage was relying on an assignment implied in fact. The amended complaint also needed to allege
“whether the subject promissory note was assigned before or after foreclosure
of the first deed of trust and the corresponding extinguishment of the second
deed of trust securing the promissory note.”


On May 10, 2011,
Heritage filed its second amended complaint (the SAC). The SAC again set forth claims for
intentional misrepresentation, fraudulent concealment, promise without intent to
perform, and negligent misrepresentation.
Heritage alleged that after the foreclosure on the first deed of trust,
WMC sold Monroy’s promissory note secured by the second deed of trust on the
Richmond property and “assigned any and all rights WMC may have including but
not limited to any right to fraud claims against [Monroy]. Such assignment is evidenced by signature and
stamp of the secretary of WMC . . . on the last page of the note . . . .” Heritage further alleged: “In assigning [Monroy’s] loan, [Heritage] as
assignee of WMC obtained all rights, title and interest in and to the mortgage
loan by [Monroy]. The assignment to
[Heritage] included assignment of the original lender’s (WMC) tort claim. The assignment of tort claims is implied in
the language of the loan sell agreement to [Heritage] including but not limited
to language such as ‘Seller does hereby sell, assign and convey to Buyer, its
successors and assigns, all right, title and interest in the loan.’ The loan sell agreement also provided that
‘the Seller transfers assign, set-over, quitclaim and convey to Buyer all
right, title and interest of the Seller in the mortgage loan.’ ”

The SAC also added
the following language: “The assignment
of the tort claim is also implied by conduct of the parties in the secondary
mortgage market as it is custom and practice in the mortgage industry to assign
any and all rights and interests including any right to tort claim against the
borrower when selling mortgage loan.
[Heritage] alleges that based on the conduct of the parties and the
language included in the buy sell agreement of the loan, and the custom and
practice of lenders such as WMC, the assignment of [Monroy’s] loan by WMC
included assignment of any and all tort claims.” The SAC also asserted that the language of
the loan application signed by Monroy implied the assignment of tort claims.

Monroy demurred to
the SAC, and Heritage attached a declaration of Diane Taylor, a representative
for WMC Mortgage, LLC, to its “sur-reply in support” of its opposition to
Monroy’s demurrer. Taylor’s declaration
dated August 4, 2011, stated: “As
Assistant Secretary, I am authorized to speak on behalf of WMC Mortgage, LLC,
successor to WMC . . . .” She stated
that WMC relied on the information provided by the borrower applying for a loan
to determine the borrower’s “eligibility for the products offered.” She stated:
“When WMC sold its mortgage loans to third parties, WMC assigned >all of its legal rights (in tort as well
as contract), as the originating lender, to the buyer—including, but not
limited to, the right to recover against a borrower for fraud.” (Underline omitted.)

On August 15,
2011, the trial court filed its order sustaining without leave to amend
Monroy’s demurrer to Heritage’s SAC. The
court explained: “Despite being afforded
an opportunity to amend, [Heritage] has still failed to adequately allege an
assignment of the original lender’s tort claims, as distinct from an assignment
of the original lender’s contractual rights under the subject promissory
note. [Citation.] [Heritage] has not attached to its complaint
a written assignment agreement . . . , and [Heritage] has not adequately
alleged the formation of an oral assignment agreement.”

The trial court
stated that there was an independent ground for sustaining the demurrer without
leave to amend. The SAC stated that the
promissory note was assigned after foreclosure of the first deed of trust and
the corresponding extinguishment of the second deed of trust securing the
promissory note. The court found that
“there was no underlying property interest supporting an incidental assignment
of the original lender’s fraud claims.”

On November 18,
2011, Monroy filed a motion for summary judgment or summary adjudication on her
cross-complaint. Monroy asserted that
Heritage was involved in the business practice of filing invalid fraud claims
to avoid California’s antideficiency laws in order to collect on nonrecourse
debts or convert them into recourse default judgments. With regard to the claim of violating the
FDCPA, Monroy alleged that Heritage was a debt collector and was engaged in a
deceptive debt collections practice within the meaning of title 15, United
States Code sections1692d, 1692e, and 1692f.
Monroy cited the letter Heritage sent her after it had filed the lawsuit
against her. Monroy also asserted that
Heritage had violated provisions of the Rosenthal Act under Civil Code sections
1788.17 and 1788.13, subdivision (k).
Monroy claimed that she was entitled to $1,000 for Heritage’s violation
of the FDCPA and $1,000 for Heritage’s violation of the Rosenthal Act.

Heritage opposed
the motion for summary judgment and also requested a continuance to conduct
additional discovery. In its opposition
to Monroy’s motion for summary judgment, Heritage agreed that it was a debt
collector but disputed the contention that the FDCPA applied. Heritage argued that the FDCPA did not apply
because Monroy bought the Richmond property for her son and also purchased a
home in Manteca. It also disputed the
allegation that it engaged in deceptive debt collections practices within the
meaning of the FDCPA or that it violated the Rosenthal Act.

On February 21,
2012, the trial court issued its order granting in part and denying in part
Monroy’s motion for summary adjudication on her cross-complaint. The court granted Monroy’s motion as to her
claim that Heritage violated the FDCPA.
The court found that Heritage’s conduct in threatening Monroy with the
prosecution of legal claims that had no merit violated the FDCPA. The court noted that Heritage had made a
binding judicial admission that it received the assignment of Monroy’s note
after the foreclosure of the first deed of trust, and that event extinguished
the second deed of trust securing Monroy’s note. The court advised that it could not grant
summary adjudication on her cause of action for monetary damages because the
issue of the amount of damages remained unresolved; it thus awarded statutory
damages in the nominal amount of one dollar.
The court added: “If Monroy
insists on receiving a greater amount, then summary adjudication must be denied
and the matter must proceed to trial.”

The trial court
denied Monroy’s summary adjudication motion with regard to her claim that
Heritage violated the Rosenthal Act. The
court concluded there was a triable issue of fact as to Heritage’s statutory
“unclean hands” defense. The court also
sustained a number of Heritage’s objections to the declaration of Monroy’s
counsel.

The trial court
denied Heritage’s request for a continuance to conduct additional
discovery. Heritage’s four discovery
motions were set for a hearing 10 days after the scheduled trial date and thus
the court found that Heritage’s discovery requests were untimely. Further, the court found that there was no
good cause for granting a continuance.

On March 12, 2012,
the trial court filed its entry of judgment in favor of Monroy and against
Heritage and awarded Monroy nominal statutory damages of one dollar on her
cross-complaint, the maximum sum she could receive without a trial on her FDCPA
claim. The order stated that Monroy was
the “prevailing party.”

Heritage filed a
timely notice of appeal.

On March 23, 2012,
Monroy filed a memorandum of costs. On
May 10, 2012, Monroy filed her motion for attorney fees and costs under title
15 of the United States Code section 1692k(a)(3). Heritage filed its memorandum in opposition
on June 6, 2012.

The trial court
held a hearing on Monroy’s fee motion on June 19, 2012. At the conclusion of the hearing, the court
stated it was granting Monroy’s motion.
The court explained: “As the
judge in this case, I did go over the billings and I didn’t see anything that I
could say was unreasonable for hours spent on certain tasks. And I felt the hourly rate was within the
acceptable parameters for Bay Area attorneys.”

On July 10, 2012,
the court filed its order granting Monroy’s motion for an award of attorney
fees and expenses. The order stated that
Monroy was the prevailing party and entitled “to the full amount of her
attorney’s fees relating to the FDCPA claim as well as to Heritage’s
complaint.” The court added: “The issues are synonymous and interrelated
and cannot reasonably be separated.” The
court concluded that counsel’s hourly fee rate of $450 was “within acceptable
parameters for attorneys of [counsel’s] skill and experience practicing” in the
San Francisco Bay area, and that the time spent was 194.5 hours. The court denied the enhancement requested. The court awarded fees in the amount of
$87,525 ($450 x 194.5). The court
awarded litigation expenses in the amount of $1,964.60.

On this same date,
July 10, 2102, the trial court entered an amended judgment, stating that it had
sustained with prejudice Monroy’s demurrer to Heritage’s SAC, and had granted
Monroy’s motion for summary adjudication on her claim in her cross-complaint
for violations of the FDCPA. The court
repeated that Monroy shall take statutory damages of one dollar on her
cross-complaint, the maximum she could receive without a trial. The court stated that Monroy was the
prevailing party and awarded her $89,489.60 for attorney fees and litigation
costs and expenses ($87,525 + $1,964.60).
Thus, the total judgment in favor of Monroy and against Heritage was
$89,490.60 ($89,489.60 + $1.00 in damages).


Heritage filed a
timely notice of appeal from the order awarding attorney fees. This court on its own motion consolidated
both of Heritage’s appeals.

On November 8,
2012, Monroy filed a request for judicial notice of an order in a class
certification lawsuit against Heritage and of Heritage’s requests for default
judgments against other plaintiffs in a different lawsuit. Heritage opposed the request and argued that
Monroy is asking this court to take judicial notice of facts in documents and
these facts may not be true. On December
5, 2012, we issued an order that the opposed request for judicial notice would
be decided with the merits of the appeal.

“ ‘Taking judicial
notice of a document is not the
same as accepting the truth of its contents or accepting a particular
interpretation of its meaning.’
[Citation.] While courts take judicial notice of public records, they
do not take notice of the truth of matters stated therein. [Citation.]
‘When judicial notice is taken of a document, . . .
the truthfulness and proper interpretation of the document are
disputable.’ [Citation.]” (Herrera
v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366,
1375.) Accordingly, we take judicial
notice of the existence of these court documents (Evid. Code, §§ 452, subd.
(d), 459, subd. (a)), but do not take notice of the disputed facts in the
documents.

>DISCUSSION

>I. >The Demurrer against Heritage’s SAC

A. The
Standard of Review, The Pleading Requirements for Alleging Fraud, and the

Burden of Proof When Alleging an
Assignment

The trial court
sustained Monroy’s demurrer against Heritage’s SAC without leave to amend. The standard of reviewname="SR;1907">
governing an appeal from the judgment after the trial court sustains a demurrername="SR;1918"> without leave to amend is well established. “ ‘We treat the demurrer
as admitting all material facts properly pleaded, but not contentions,
deductions or conclusions of fact or law.
[Citation.] We also consider
matters which may be judicially noticed.’
[Citation.] Further, we give the
complaint a reasonable interpretation, reading it as a whole and its parts in
their context. [Citation.] When a demurrer
is sustained, we determine whether the complaint states facts sufficient to
constitute a cause of action.
[Citation.] And when it is
sustained without leave to amend, we decide whether there is a reasonable
possibility that the defect can be cured by amendment: if it can be, the trial court has abused its
discretion and we reverse; if not, there has been no abuse of discretion and we
affirm. [Citations.] The burden of proving such reasonable
possibility is squarely on the plaintiff.”
(Blank v. Kirwan (1985) 39
Cal.3d 311, 318.)

Here, Heritage alleged
that it had a right to pursue misrepresentations Monroy made in her loan
application to WMC based on a claim that WMC assigned its torts claims against
Monroy to it. “The burden
of proving an assignment falls upon the party asserting rights thereunder
[citations].” (Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 292.) An
assignment agreement “must describe the subject matter of the assignment with
sufficient particularity to identify the rights assigned.” (Mission
Valley East, Inc. v. County of Kern (1981) 120 Cal.App.3d 89, 97.) An assignment is “a manifestation to another
person by the owner of the right indicating his [or her] intention to transfer,
without further action or manifestation of intention, the right to such other
person, or to a third person.” (>Cockerel, at p. 291.) As with contracts generally, the nature of an
assignment is determined by ascertaining the intent of the parties. (Cambridge
Co. v. City of Elsinore (1922) 57 Cal.App. 245.)

Furthermore, the policy
of liberal construction of the pleadings does not apply to fraud causes of
action. “In California, fraud must be pled specifically;
general and conclusory allegations do not suffice.” (Lazar
v. Superior Court (1996) 12 Cal.4th 631, 645.) This requirement serves two purposes. First, it gives the defendant notice of the
definite charges to be met. Second, the
allegations “should be sufficiently specific that the court can weed out
nonmeritorious actions on the basis of the pleadings. Thus the pleading should be sufficient ‘ “to
enable the court to determine whether, on the facts pleaded, there is any
foundation, prima facie at least, for the charge of fraud.’ ” ” (Committee
on Children’s Television, Inc. v. General Goods Corp. (1983) 35 Cal.3d 197,
216-217, superseded by statute on another issue.)

B. The
Adequacy of the Fraud Allegations

Heritage argues that it
adequately alleged that WMC assigned its fraud claims against Monroy to
it. The trial court’s insistence that it
had to attach a document establishing the assignment shows, according to Heritage,
that the court improperly considered the sufficiency of the evidence when
ruling on the demurrer. For the reasons
discussed below, we disagree with Heritage’s contention.

Heritage cites various allegations in its SAC
where it asserted in a conclusory fashion that WMC assigned to Heritage its
tort claims when WMC transferred to Heritage its rights under Monroy’s
promissory note. In particular it cites
its allegations that WMC “sold the loan and assigned any and all rights WMC may
have including but not limited to any right to fraud claim” against
Monroy. It further alleged that this
assignment was “evidenced by signature and stamp of the secretary of WMC” on
the last page of the note. Heritage set
forth in its SAC that as the assignee of WMC, Heritage “obtained all rights,
title and interest in and to the mortgage loan by defendant[,]” including WMC’s
tort claim. Heritage claimed that
the assignment of tort claims was implied by the following language in the
agreement between Heritage and WMC: “
‘Seller does hereby sell, assign and convey to Buyer, its successors and
assigns, all right, title and interest in the loan.’ The loan sell agreement also provided that
‘the Seller transfers assign, set-over, quitclaim and convey to Buyer all
rights, title and interest of the Seller in the mortgage loan.’ ” The
SAC added that WMC acknowledged on May 9, 2011, that it assigned to Heritage
its tort claims.

Heritage contends
that its SAC also alleged assignment of the tort claims based on implied
conduct of the parties, as follows: “The
assignment of the tort claim is also implied by conduct of the parties in the
secondary mortgage market as it is custom and practice in the mortgage industry
to assign any and all rights and interests including any right to tort claim
against the borrower when selling mortgage loan. [Heritage] alleges that based on the conduct
of the parties and the language included in the buy sell agreement of the loan,
and the custom and practice of lenders such as WMC, the assignment of
[Monroy’s] loan by WMC included assignment of any and all tort claims.”

Heritage also maintains that the language in
Monroy’s loan implied an assignment, as Monroy acknowledged the following: “ ‘Each of the undersigned
specifically represents to Lender and to lender’s actual or potential agents,
brokers, processors, attorneys, insurers, servicers, successors and assigns and
agrees and acknowledges that: (1) the
information provided in this application is true and correct as of the date set
forth opposite my signature and that any intentional or negligent
misrepresentation of this information contained in this application may result
in civil liability, including monetary damages, to any person who may suffer
any loss due to reliance upon any misrepresentation that I have made on this
application. . . . (6) The Lender, its servicers, successors or
assigns may rely on this information contained in the
application. . . .’ ”
(Bold omitted.)

Heritage insists
that the foregoing language and the attached document, which was the written
indorsement containing the signature and stamp of the secretary of WMC on the
last page of the promissory note, were sufficient, and the trial court should
have overruled Monroy’s demurrer.

We agree that the allegations in Heritage’s SAC
and the attached indorsement showed an assignment of Monroy’s promissory
note. However, the assignment of this
contract right did not carry with it a transfer of WMC’s tort rights. While no particular form of assignment is
required, it is essential to the assignment of a right that the assignor
manifests an intention to transfer “the right.”
(Sunburst Bank v. Executive Life
Ins. Co., supra, 24 Cal.App.4th at p. 1164.)

An assignment
of a right generally carries with it an assignment
of other rights incident thereto. (Civ.
Code, § 1084.) The fraud claims
based on Monroy’s loan application with WMC are not “incidental to” the
transfer of the promissory note to Heritage.
“A suit for fraud obviously does not
involve an attempt to recover on a debt or note.” (Guild
Mortgage Co. v. Heller (1987) 193 Cal.App.3d 1505, 1512; see also >Millner v. Lankershim Packing Co. (1936)
13 Cal.App.2d 315, 319-320 [assignment of mortgage did not include assignment
of right to recover for injury to the mortgaged property]; Schauer v. Mandarin Gems of Cal., Inc. (2005) 125 Cal.App.4th 949,
956-957 [divorce agreement awarding diamond ring purchased by husband to wife
did not automatically transfer husband’s claim against jeweler for
fraud].) For example, in >Williams v. Galloway (1962) 211
Cal.App.2d 302, the corporation’s sale and transfer to a second corporation “
‘[a]ll personal property’ ” and all “ ‘property held on a leas[e]hold basis’ ”
did not transfer a claim for money the first corporation had against its former
lessor. (Id. at pp. 304-305.)

In the present
case, the indorsement and allegations established that WMC assigned the second
promissory note to Heritage. The
transfer of the promissory note provided Heritage with contract rights. Fraud rights are not, as a matter of law,
incidental to the transfer of the promissory note.href="#_ftn1" name="_ftnref1" title="">[1]

It is true that
incidental rights may include certain ancillary causes of action but the
assignment agreement “must describe the subject matter of the assignment with
sufficient particularity to identify the rights assigned.” (Mission
Valley East, Inc. v. County of Kern, supra, 120 Cal.App.3d at p. 97.) “[A] basic tenet of California contract law
dictates that when a particular right or set of rights is defined in an assignment, additional rights not similarly defined or named cannot be considered part of the
rights transferred.” (>DC3 Entertainment, LLC v. John Galt
Entertainment, Inc. (W.D. Wash. 2006) 412 F.Supp.2d 1125, 1144.)

Here, none of the
allegations regarding assignment in the SAC specified that the assignment was
transferring the ancillary right of a tort claim. The document attached by Heritage did not
support any claim of an assignment by WMC to Heritage of its fraud claims
against Monroy. This document was the
promissory note signed by Monroy, which, on the last page, contained the
signature and stamp of the secretary of WMC.
Directly under “Pay to the order of” was Heritage’s stamp. The transfer of the promissory note by
indorsement did not show a clear intent to assign WMC’s fraud claim. (See Comm. Code, § 3201 et seq.) The
conveyance of the promissory note to Heritage does not establish that WMC
assigned to Heritage its right to the performance of other, distinct
obligations owed by Monroy, such as the obligation to provide truthful
information. (See Cambridge Co. v. City of Elsinore, supra, 57 Cal.App. at pp.
249-250.)

Additionally, the
allegations did not show an assignment of the tort claims based on custom and
practice. “While no particular form of
assignment is necessary, the assignment, to be effectual, must be a
manifestation to another person by the owner of the right indicating his
intention to transfer, without further action or manifestation of intention,
the right to such other person, or to a third person. [Citation.]”
(Cockerell v. Title Ins. &
Trust Co., supra, 42 Cal.2d at p. 291.)
The parties’ intention is determined by considering their words and acts
as well as the subject matter of the contract.
(Lumsden v. Roth (1955) 138
Cal.App.2d 172, 175.) The assignment
agreement in the present case is completely silent regarding any tort claim and
nothing in the agreement suggests that the assignment included any rights other
than those rights incidental to the contract rights. Heritage cannot allege general custom and
practice to expand the assignment agreement to include ancillary rights not
specified.

Heritage claims
that the decision in National Reserve Co. v. Metropolitan Trust Co. (1941) 17 Cal.2d 827, 833 (National Reserve) supports its position that WMC’s tort
claims were assigned with the transfer of the note. Our Supreme Court in National Reserve stated that an unqualified assignment of a
contract vests in the assignee “all rights and remedies incidental
thereto.” (Id. at p. 833.) Heritage
then proceeds to cite portions of the following quote: “If
. . . an accrued cause of action cannot be asserted apart from the contract out
of which it arises or is essential to a complete and adequate enforcement of
the contract, it passes with an assignment of the contract as an incident
thereof. Thus, the assignment of a
contract passes from assignor to assignee an accrued cause of action for
rescission [citations], and a creditor’s assignee acquires the right to set
aside a prior fraudulent conveyance by the debtor. [Citations.]
As a corollary, if an assignor by express provision of a contract is
denied the right to assert an accrued cause of action after he has assigned
away his interest in the contract, the right to sue passes to his
assignee. There would otherwise be no
one to enforce the right.” (>Ibid.)


Heritage ignores the language in >National Reserve, supra, 17 Cal.2d 827,
which directly preceded the paragraph it quotes from the decision. In the preceding paragraph, the Supreme Court
noted that incidental rights may “include certain ancillary causes of
action arising out of the subject of the assignment and accruing before the
assignment is made.” (>Id. at p. 833.) However,
“[u]nless an assignment specifically or
impliedly designates them, accrued causes of action arising out of an assigned
contract, whether ex contractu or ex delicto, do not pass under
the assignment as incidental to the contract if they can be asserted by the
assignor independently of his continued ownership of the contract and are not
essential to a continued enforcement of the contract.” (Ibid.)


Applying the legal
principles set forth in National Reserve
to the present case, Heritage has failed to state a claim for a cause of action
for fraud based on Monroy’s loan application.
Neither the indorsement nor the other allegations in the SAC authorize
the assignment, specifically or impliedly, of WMC’s tort claims. As already stressed, fraud is an ancillary
cause of action to the promissory note.

Heritage maintains that it did not have to allege
details and could simply allege a clear statement of the ultimate facts
necessary to the cause of action. (See >Lyon v. Master Holding Corp. (1942) 50
Cal.App.2d 238, 241.) Heritage
claims that it was sufficient for it to plead the ultimate fact of ownership of
the property at the time it filed this action and cites a 1924 case, >Commercial Credit Co. v. Peak (1924) 195
Cal. 27, 32-33. This case does not help
Heritage. Commercial Credit involved recovering the value of personal
property or chattel. (>Id. at p. 29.) This case did not involve a promissory note;
it did not involve a claim based on the assignment of a tort; nor did it
involve claims based on fraud. Thus, >Commercial Credit has no application to
the present case. Heritage ignores that every element of a fraud
cause of action must be pleaded specifically.

Finally, Heritage
complains that the trial court was assessing the veracity of the allegations in
the SAC, and cites the court’s order instructing it to attach a writing to show
an assignment as proof that the court improperly assessed the weight of the
evidence. We disagree with Heritage’s
conclusion.

“A written
contract may be pleaded either by its terms––set out verbatim in the complaint
or a copy of the contract attached to the complaint and incorporated therein by
reference––or by its legal effect.
[Citation.] In order to plead a
contract by its legal effect, plaintiff must ‘allege the substance of its
relevant terms. This is more difficult,
for it requires a careful analysis of the instrument, comprehensiveness in
statement, and avoidance of legal conclusions.’
[Citation.]” (>McKell v. Washington Mutual, Inc. (2006)
142 Cal.App.4th 1457, 1489.) Since the
allegations in Heritage’s pleadings did not set forth with specificity any
assignment of the tort claims, the trial court properly instructed Heritage to
attach the written agreement that
evinced an intent to assign the tort claims.

Accordingly, we conclude that the trial court did
not err when it found that Heritage failed to state causes of action for fraud
based on assignment.href="#_ftn2"
name="_ftnref2" title="">[2]

C. Denying Heritage Leave to Amend its SAC

Heritage contends that the trial court abused its
discretion when it did not permit it to amend its SAC.

The court abuses its discretion in sustaining the
demurrer without leave to amend if the plaintiff can show a reasonable
possibility of curing the defect in the complaint by amendment. (Blank
v. Kirwan, supra, 39 Cal.3d at p. 318.)
Heritage has the burden of proving that an amendment would cure the
defect. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074,
1081.)

In support of its argument that it should have
been permitted to amend its pleading a third time, Heritage argues that its SAC
was sufficient and that it could have amended the pleading to indicate that WMC
intended to transfer its tort rights to Heritage. In the trial court, Heritage attached
a declaration of Taylor, a representative for WMC Mortgage, LLC. Taylor’s declaration dated August 24, 2011,
stated: “As Assistant Secretary, I am
authorized to speak on behalf of WMC Mortgage, LLC, successor to WMC . . .
.” She confirmed that WMC relied on the
information provided by the borrower applying for a loan to determine the
borrower’s “eligibility for the products offered.” She declared:
“When WMC sold its mortgage loans to third parties, WMC assigned >all of its legal rights (in tort as well
as contract), as the originating lender, to the buyer—including, but not
limited to, the right to recover against a borrower for fraud.” (Underline omitted.)

Taylor’s declaration on August 24, 2011, more
than two years after Heritage acquired Monroy’s unpaid note as part of a
“larger pool of loans,” does not shed any light on the parties’ intent at the
time of the assignment. The assignment
agreement contains absolutely no language indicating that WMC intended to
transfer any rights ancillary to the right to collect on the promissory note. Contract
“rights” do not exist as disembodied abstractions apart from a contract that
created them. More precisely, in
California, “the intention of the parties as expressed in the contract is the
source of contractual rights and duties.”
(Pacific Gas & E. >Co. v. G.W. Thomas Drayage etc. Co.
(1968) 69 Cal.2d 33, 38.) Thus, we
assess the intent at the time the agreement is formed, not years later.

The trial court
provided Heritage with ample opportunity to cure the defect in its pleading;
Heritage failed to demonstrate it could cure the defect. The trial court thus did not abuse its
discretion in sustaining the third demurrer against Heritage’s pleading without
leave to amend.

>II. >The Grant of Summary Adjudication on
Monroy’s Cross-Complaint

A. The
Trial Court’s Ruling

Monroy
alleged violations of the Rosenthal Act and the FDCPA in her
cross-complaint. She claimed that
Heritage violated the FDCPA by attempting to collect a debt not owed, by using
unconscionable, false, deceptive, and/or misleading means to seek to collect a
debt, and by threatening legal actions that could not be legally taken.

Monroy moved for
summary adjudication on her claims and the trial court denied the motion as to
her claim of violating the Rosenthal Act.
It granted her motion as to her claim that Heritage violated the FDCPA,
and awarded Monroy damages in the amount of one dollar. The court found that Heritage’s conduct in
threatening Monroy with the prosecution of legal claims that had no merit
violated the FDCPA.href="#_ftn3" name="_ftnref3"
title="">[3]


B. Standard of Review

To prevail on a summary adjudication
motion, a cross-complainant must
prove “each element of the cause of action entitling the party to judgment on
that cause of action. . . .” (Code Civ.
Proc., § 437c, subd. (p)(1).) Only if
the cross-complainant satisfies this burden will the burden shift to the
cross-defendant “to show that a triable issue of one or more material facts
exists as to that cause of action or a defense thereto.” (Ibid.) The cross-defendant “may not rely upon the
mere allegations or denials of its pleadings to show that a triable issue of
material fact exists but, instead, shall set forth the specific facts showing
that a triable issue of material fact exists as to that cause of action or a
defense thereto.” (Ibid.)

“In
reviewing whether these burdens have been met, we strictly scrutinize the
moving party’s papers and construe all facts and resolve all doubts in favor of
the party opposing the motion.
[Citations.]” (>Innovative Business Partnerships, Inc. v.
Inland Counties Regional Center, Inc. (2011) 194 Cal.App.4th 623,
628.) On appeal, the trial court’s
ruling is examined under a de novo standard
of review. (Brinton
v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 555.)

C. >The FDCPA

The
purpose of the FDCPA is “to eliminate abusive debt collection practices by debt
collectors, to insure that those debt collectors who refrain from using abusive
debt collection practices are not competitively disadvantaged, and to promote
consistent State action to protect consumers against debt collection abuses.” (15 U.S.C. § 1692(e).) “A basic tenet of the Act is that all
consumers, even those who have mismanaged their financial affairs resulting in
default on their debt, deserve ‘the right to be treated in a reasonable and
civil manner.’ ” (Bass v. Stopler, Koritzinsky, Brewster & Neider, S.C. (7th Cir.
1997) 111 F.3d 1322, 1324 (Bass).) Since the FDCPA is a remedial statute, “it
should be construed liberally in favor of the consumer.” (See, e.g., Johnson v. Riddle (10th Cir. 2002) 305 F.3d 1107, 1117.)

The word “ ‘creditor’ means
any person who offers or extends credit creating a debt or to whom a debt is
owed, but such term does not include any person to the extent that he receives
an assignment or transfer of a debt in default solely for the purpose of
facilitating collection of such debt for another.” (15 U.S.C. § 1692a(4).) “The term ‘debt’ means any obligation or
alleged obligation of a consumer to pay money arising out of a transaction in
which the money, property, insurance, or services which are the subject of the
transaction are primarily for personal, family, or household purposes, whether
or not such obligation has been reduced to judgment.” (15 U.S.C. § 1692a(5).)

The
FDCPA defines “ ‘debt collector’ ” as “any person who uses any instrumentality
of interstate commerce or the mails in any business the principal purpose of
which is the collection of any debts, or who regularly collects or attempts to
collect, directly or indirectly, debts owed or due or asserted to be owed or
due another. . . . [T]he term includes
any creditor who, in the process of collecting his own debts, uses any name
other than his own which would indicate that a third person is collecting or
attempting to collect such debts. . . .”
(15 U.S.C. § 1692a(6).)

Under
the FDCPA, “A debt collector may not use any false, deceptive, or misleading
representation or means in connection with the collection of any debt.” (15 U.S.C. § 1692e.) A violation of this section includes “[t]he
false representation of” “the character, amount, or legal status of any
debt[.]” (15 U.S.C. § 1692e(2)(A).) A violation also includes “[t]he threat to
take any action that cannot legally be taken . . . .” (15 U.S.C. § 1692e(5).) Additionally, a violation occurs if the debt
collector uses “any false representation or deceptive means to collect or
attempt to collect any debt or to obtain information concerning a consumer” (15
U.S.C. § 1692e(10)) or makes “[t]he false representation or implication that
accounts have been turned over to innocent purchasers for value” (15 U.S.C. §
1692e(12)).

State
courts have concurrent jurisdiction over claims under the FDCPA. (15 U.S.C. § 1692k(d).) The FDCPA will not impose any liability “to
any act done or omitted in good faith in conformity with any advisory opinion
of the Bureau, notwithstanding that after such act or omission has occurred,
such opinion is amended, rescinded, or determined by judicial or other
authority to be invalid for any reason.”
(15 U.S.C. § 1692k(e).)

D. Heritage
Violated the FDCPA

When alleging a claim under the FDCPA, a
plaintiff must establish that (1) the plaintiff is a consumer, as defined by
the FDCPA; (2) the debt arises
out of a transaction primarily for personal, family or household purposes; (3)
the defendant is a debt collector, as that phrase is defined by the FDCPA; and (4) the defendant violated
a provision of the Act. (15 U.S.C. §
1692e; Heintz v. Jenkins (1995) 514 U.S. 291, 294; Wallace v. Washington Mut. Bank, F.A. (6th Cir. 2012) 683 F.3d 323,
326.)

Monroy’s
claim was based on the collection letter dated May 25, 2010, sent to her by
Heritage. She received the letter on
June 28, 2010, and it was attached to the summons and complaint against
her. The letter advised that Heritage
had commenced a civil action against Monroy and admonished her that “any
misinformation or misrepresentations provided in the [loan] application are a
violation of federal law and may result in ‘civil liability, including monetary
damages, to any person who may suffer any loss due to reliance upon any
misrepresentation’ for which Heritage . . . currently seeks.” The letter warned that if Heritage was unable
to resolve the matter by the date Monroy’s answer was due, Heritage would “have
no other option but to proceed with litigation against” her. The letter declared that it was “from a debt
collector” and was “an attempt to collect a debt.” In the trial court, in Heritage’s separate statement of
disputed facts in support of its opposition to Monroy’s motion for summary
adjudication, Heritage admitted that it was a debt collector and that it was
attempting to collect an alleged debt against Monroy.

Thus, the undisputed facts
established that Heritage was a debt collector and attempting to collect a debt
from Monroy. Monroy’s obligation was to
pay for “personal, family, or household purposes” (15 U.S.C. § 1692a(5)), as
this was a debt incurred to purchase a home in which, according to Monroy’s
declaration, she intended to live. There
was evidence that a Manteca property was also purchased in Monroy’s
name, but there is no evidence that she ever lived in that home or intended to
live in that home. Indeed, the
unchallenged evidence was that Monroy was the victim of identity theft and that
she did not know anything about the Manteca property. Monroy stated that she lived at the Richmond
property and Heritage presented no evidence that she resided at another
location.

The evidence also
supported a finding that the letter Heritage sent to Monroy violated the
FDCPA. The letter attached to the
complaint and summons threatened
Monroy with a lawsuit for any misinformation she provided on her loan
application with WMC. Heritage asserted
that Monroy owed it the money for any fraud on her application because it was
now the owner of the promissory note. As
discussed extensively above, Heritage’s claims based on fraud had no
merit. Thus, Heritage violated
the FDCPA when it indicated in the letter that it had the right to sue Monroy
for any misinformation submitted on the promissory note and when it attempted
to induce her to settle with Heritage.

Additionally, according to
Ben Ganter, the director of client relations for Heritage, Heritage acquired
Monroy’s unpaid note as part of a larger pool of loans that included both
secured and unsecured mortgage loans. He
acknowledged that Heritage then “seeks to collect on the unpaid balances of the
notes it purchased” and that “Heritage’s business model is collecting on the
loans it purchases.” Heritage purchased
Monroy’s junior loan without any knowledge about the accuracy of the loan
application. Before Heritage discovered
the alleged fraud, it sent Monroy letters telling her that she was obligated to
pay Heritage “for the unpaid balance of the note . . . .” According to Ganter, a third notice of
Monroy’s obligation to pay [Heritage] for the unpaid balance on the Note was
sent via postal mail in December of 2009.
These notices
clearly violated the FDCPA because, as the trial court found, Heritage
had made a binding judicial admission that it received the assignment of
Monroy’s note after the foreclosure of the first deed of trust, and that event
extinguished the second deed of trust securing Monroy’s note under the
antideficiency statutes (see Code Civ. Proc., § 580b).

Heritage
complains that Monroy alleged that the complaint sent to her attached to the
letter violated the FDCPA and a legal action is not a communication covered by
the FDCPA. We need not address this
argument because Monroy’s claim was not based on a communication under the
FDCPA, but based on the debt collector’s using “false, deceptive, or misleading representation or
means in connection with the collection of any debt.” (15 U.S.C. § 1692e.)

Heritage
also argues that “debt,” as defined by the FDCPA, does not include tort
claims. As already noted, Heritage also
violated the FDCPA when it sent a notice demanding payment on the money owed on
the promissory note when that debt had been extinguished under the href="http://www.fearnotlaw.com/">antideficiency statutes. Furthermore, we disagree with Heritage’s
argument that tort claims are never debts under the FDCPA.

In support of its argument
that a “debt” does not include a tort claim, Heritage cites various cases that
have held that any obligation to pay damages arising from a tort claim, court
judgment, or criminal activity does not constitute a debt under the FDCPA. (See, e.g., Fleming v. Pickard (9th Cir. 2009) 581 F.3d 922, 925-926 [cause of
action for tortious conversion is not a debt under the FDCPA]; >Turner v. Cook (9th Cir. 2004) 362 F.3d
1219, 1227 [tort judgment resulting from business-related conduct not a debt
under the FDCPA because “ ‘when we speak of ‘transactions,’ we refer to
consensual or contractual arrangements, not damage obligations thrust upon one
as a result of no more than her own negligence’ ”]; Hawthorne v. Mac Adjustment, Inc. (11th Cir. 1998) 140 F.3d 1367,
1371 [holding that the obligation to pay arose from a tort, and not from a
consumer transaction, and therefore was not a debt under the FDCPA]; >Zimmerman v. HBO Affiliate Group (3d
Cir. 1987) 834 F.2d 1163, 1167-1169.)

In the cases cited by
Heritage, the obligations to pay were created by something other than a
consumer transaction and were not consensual.
(See, e.g., >Fleming v. Pickard, supra, 581 F.3d at
p. 925 [“ ‘at a minimum, a “transaction” under the FDCPA must involve some kind
of business dealing or other consensual obligation’ ”].) Thus, we agree that courts have consistently excluded
tort obligations or criminal activity from the FDCPA’s definition of “debt” >when the tort obligations do not arise
out of a consensual transaction. In >Zimmerman v. HBO Affiliate Group, supra, 834
F.2d 1163, for example, the Third Circuit held that the FDCPA did not apply to
attempts by cable television companies to collect money from people who
allegedly had stolen cable television signals by installing illegal
antennas. (Zimmerman, at pp. 1167-1169.)
There was no FDCPA “debt” in Zimmerman
because the obligations arose out of a theft rather than a
transaction. Neither the complaint nor
the demand letter included any assertion of an offer of extension of credit and
therefore no transaction had occurred. (>Zimmerman, at pp. 1167-1169.)

As already stressed, a debt
or obligation under the FDCPA must be based on a consumer consensual or
contractual arrangement, not a damage obligation. (See, e.g., Hawthorne v. Mac Adjustment, Inc., supra, 140 F.3d at p.
1372). Unlike the cases upon which
Heritage relies, the present case is not a situation in which Monroy never had
a contractual arrangement of any kind with WMC.
Rather, Monroy’s alleged debt to Heritage arose out of her transaction
with WMC to purchase the Richmond property.
The alleged fraud claims clearly arose out of a residential mortgage
transaction and Heritage cannot avoid the application of the FDCPA simply
because it alleged in its pleading that Monroy’s obligation to it was based on
the misrepresentations she made on her loan application rather than on a breach
of her obligations under the contract.

Heritage declares that the
present case is similar to Turner v.
Cook, supra, 362 F.3d 1219, but Turner
is clearly distinguishable from the present case. In Turner,
the appellees obtained a judgment against Stephen Turner and “the judgment
arose from allegations of various business interference torts” by Turner
against the appellees. (>Id. at pp. 1222-1223.) Subsequently, the appellees filed a claim
that Turner fraudulently conveyed his real and personal property to prevent the
appellees from collecting on the judgment.
(Id. at p. 1223.) Turner claimed that the appellees violated
the FDCPA when attempting to collect the judgment. (Turner,
at pp. 1223-1224.) When rejecting
the claim under FDCPA, the Ninth Circuit held that a tort judgment is not a
debt under the FDCPA. (>Turner, at p. 1227.) Turner had admitted that the judgment was
based on alleged business interference torts, not any consumer transaction, and
it was immaterial that the fraudulent conveyance action involved Turner’s home. (Id. at
p. 1228.)



In Turner v. Cook, supra, 362 F.3d 1219, the liability arose from tortious activity, not from a consensual
transaction. By contrast, here, Monroy
and WMC entered into a consensual loan agreement for the purchase of a
residential home.

Heritage argues that the present liability did
not arise out of a consensual transaction because WMC did not consent to
mortgage fraud. Heritage maintains that
the present transaction is the same as the theft of goods or services.

Heritage’s argument is contrary to the court
decisions that have held that there is no automatic fraud exception to the
FDCPA. (See, e.g., F.T.C. v. Check Investors, Inc. (3d Cir. 2007) 502 F.3d 159, 170; >Keele v. Wexler (7th Cir. 1998) 149 F.3d
589, 595.) “ ‘Absent an explicit showing that Congress intended
a fraud exception to the Act, the wrong occasioned by debtor fraud is more
appropriately redressed under the statutory and common law remedies already in
place, not by a judicially-created exception that selectively gives a green
light to the very abuses proscribed by the Act.’ ” (F.T.C.,> at p. 170.)

The breadth of the phrase
“any obligation or alleged obligation” is not limited to a particular set of
obligations. (Bass, supra, 111 F.3d at p. 1325.)
Thus, a replevin action, even though it is a tort claim, may be a debt
under the FDCPA. (Rawlinson v. Law Office of William M. Rudow, LLC (4th Cir. 2012) 460 Fed.Appx. 254, 257.) “[A] court should look beyond the label of
the debt collection practice to determine whether a ‘debt’ is being collected.” (Ibid.)

Here, WMC and Monroy
consented to the loan application. The
fraud action, even though it is a tort claim, arose from the consensual loan
transaction, and thus it is a debt under the FDCPA.

E. > No
Defense to the Application of the FDCPA

Heritage
contends that it has a defense, as a matter of law, to the application of the
FDCPA. It claims that it relied on an
advisory opinion by the Federal Trade Commission (FTC) that collecting on tort
damages is not a debt for purposes of the FDCPA.

The
FDCPA provides an affirmative defense for “ ‘any act done or omitted in good
faith in conformity with any [FTC] advisory opinion’ . . . .” (Jerman
v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA (2010) 599 U.S. 573,
___ [130 S.Ct. 1605, 1607] (Jerman),
quoting 15 U.S.C. § 1692k(e).) However,
“ignorance of the law will not excuse any person, either civilly or
criminally.” (Jerman, at p. ___ [p. 1611].)


The “advisory opinion”
relied upon by Heritage is a letter dated August 27, 1992, written to an attorney
in Florida.href="#_ftn4" name="_ftnref4"
title="">[4] The attorney wished to know if the claim for
civil damages against an alleged shoplifting offender would be covered under
the FDCPA. The letter stated that these
torts would not be debts as defined in the FDCPA and admonished that “[t]he
views expressed herin represent an informal staff opinion. As such, they are not binding on the [FTC]. .
. .”

This letter is an “informal
staff opinion” and not an advisory opinion.
Furthermore, the claim of damages arising from a theft, as was the subject
of the FTC’s letter, is clearly distinguishable from the present case. As already discussed, Heritage was not
collecting on tort damages, but on a claim of fraud arising out of a loan
contract.

Courts held as early as 1998
that there is no automatic fraud exception to
the FDCPA. (Keele v.
Wexler, supra, 149 F.3d at p. 595 [“neither the text nor underlying legislative history
of the FDCPA lends itself to the recognition of a fraud exception”].) Heritage’s ignorance of the law does not
provide it with an affirmative defense to the application of the FDCPA.

F. No
Triable Issue of Fact

> Heritage argues that the
trial court should not have granted the summary adjudication motion because
there was a triable issue of fact as to whether the tort claims had been
assigned. It complains that the court
refused to consider its evidence of assignment.


In support
of this argument, Heritage cites Cadlerock
Joint Venture, L.P. v. Lobel (2012) 206 Cal.App.4th 1531 (>Cadlerock). In Cadlerock,
a single lender provided a borrower with two non-purchase money