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Court of Appeal:
Debt Collector Might Be Strictly Liable Under Rosenthal Act
By a MetNews Staff Writer
The First District Court of Appeal has held that two related companies that purchased a cause of action against an alleged debtor might be strictly liable for damages under the Rosenthal Fair Debt Collection Practices Act where they brought suit against the apparent obligor, then pursued efforts to collect on a default judgment against her, under circumstances where substitute service was, unbeknownst to it, defective.
Div. Four declared in an opinion filed on Friday that a woman made a prima facie showing that substitute service was not validly effected because she had not, since 2001, lived in her family’s home where papers were purportedly delivered in 2009, even though 2005 loan documents listed the address as her place of residence.
The opinion reinstates an action against debt collectors Midland Funding, LLC and Midland Credit Management, Inc., denominated in the opinion as “the Midland parties.” Those defendants in 2008 purchased the lender’s collection rights against borrower Kacie Lynn Young and obtained a default judgment against her in 2010—which, Young contends, she knew nothing about until 2019 when an attempt was made to garnish her wages.
While acknowledging “that Young failed to make a prima facie showing that the Midland parties knew at any time that Young was not served by substituted service and, therefore, failed to show that they made any knowing misrepresentations about service,” a published portion of the opinion by Justice Jon B. Streeter declares, the plaintiff will probably prevail on the merits.
That probability, he said, requires reversal of the striking of Young’s cause of action under the Rosenthal Act by San Mateo Superior Court Judge Nancy L. Fineman in response to the defendants’ anti-SLAPP motion pursuant to Code of Civil Procedure §425.16.
Strict Liability Statute
Addressing an issue of first impression, Streeter reasoned that Civil Code §1788.17, the portion of the Rosenthal Act under which Young sued, incorporates the federal Fair Debt Collection Practices Act (“FDCPA”) which imposes strict liability, thus rendering §1788.17, itself, a strict liability statute.
Another aspect of the opinion is that the proof of service of the summons and complaint in 2009 is defective because it does not say that substitute service was effected by handing the papers to a person “apparently in charge” of the residence.
Streeter hinted, however, that the purportedly Midland parties might be able to prevail, in the end, under a statute they have not invoked.
Streeter’s Opinion
The defendants relied on Civil Code §1788.15(a) which says:
“No debt collector shall collect or attempt to collect a consumer debt by means of judicial proceedings when the debt collector knows that service of process, where essential to jurisdiction over the debtor or his property, has not been legally effected.”
The word “knows,” they argued, establishes a requirement of scienter.
That’s not so, Streeter declared, because §1788.17 provides that “[n]ot withstanding any other provision of this title, every debt collector collecting or attempting to collect a consumer debt shall comply with the provisions” of specified federal statutes which, he said, do not require knowledge. The words in §1788.17 declaring it to prevail over contrary provisions, he said, means that §1788.15(a) is trumped “to the extent the two provisions might conflict.” He said that Young has not cited a California case, nor has his court located one that says that §1788.17, by incorporating the federal FDCPA, “prohibits a debt collector from unknowingly making or relying on a false representation about the legal status of a debt, a threat to take legal action that legally cannot be taken, or a false representation to collect or attempt to collect any debt of a consumer.” However, he added. “[n]umerous non-California courts have held that a debt collector is liable under the FDCPA for unknowingly making false representations.”
Valid Service Presumed
The defendants pointed to Evidence Code §647 which says:
“The return of a process server...establishes a presumption, affecting the burden of producing evidence, of the facts stated in the return.”
The presumption is overcome, Streeter said, because the address where service purportedly took place (which Young’s mother, stepfather and brother, who do reside there deny, in declarations, having occurred) was not Young’s place of residence. Too, he noted, Code of Civil Procedure §415.20(b) requires leaving papers with an adult who is “apparently in charge,” relating:
“[T]he process server attested that he served a person who was ‘a competent member of the household,’ not someone ‘apparently in charge.’ ”
Wording of Statute
Sec. 415.20 provides:
“If a copy of the summons and complaint cannot with reasonable diligence be personally delivered to the person to be served, as specified in [other sections], a summons may be served by leaving a copy of the summons and complaint at the person’s dwelling house, usual place of abode, usual place of business, or usual mailing address other than a United States Postal Service post office box, in the presence of a competent member of the household or a person apparently in charge of his or her office, place of business, or usual mailing address other than a United States Postal Service post office box, at least 18 years of age, who shall be informed of the contents thereof….”
The proof service indicated that the summons and complaint were left at an address in the City of Burlingame which was the address contained in loan documents. Streeter did not explain why that would not constitute Streeter’s “usual mailing address” in connection with the loan which underlies the collection effort.
He also did not explain why the words “competent member of the household” were to be disregarded. Streeter provided some advice to the defendants. He cited Civil Code §1788.30(e) which sets forth:
“A debt collector shall have no civil liability to which such debt collector might otherwise be subject for a violation of this title, if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted notwithstanding the maintenance of procedures reasonably adapted to avoid any such violation.”
He commented:
“The Midland parties did not invoke section 1788.30, subdivision (e), in the trial court and do not raise it on appeal. At this stage, therefore, we deal only with whether Young mounted a prima facie case of liability under section 1788.17. We do not address and express no view about whether, as the case proceeds, the Midland parties may successfully pursue a defense under section 1788.30, subdivision (e).”
Young’s equitable causes of action were deemed moot because the judgment was not renewed at the 10-year point.
The case is Young v. Midland Funding, 2022 S.O.S. 5215.
Copyright 2022, Metropolitan News Company