Vincent Howard and our Norco foreclosure defense attorneys recently wrote about a case in which foreclosure was ruled a type of debt collection that the Fair Debt Collection Practices Act may apply to. That's why we were interested to see another case in which the FDCPA was applied to a foreclosure, but not successfully. In Burnett v. MERS et al., Charlene Burnett sued MERS and a local attorney, James Woodall, for FDCPA violations and violations of a Utah consumer protection law. Burnett's Utah home fell into foreclosure the year after she bought it, and Woodall, as substituted trustee, began foreclosure. Woodall moved to dismiss for failure to state a claim and the district court granted this, dismissing with prejudice. The Tenth U.S. Circuit Court of Appeals affirmed.
Burnett bought her home in April of 2007, signing a deed of trust that provided that MERS could foreclose. She fell behind on payments in August of 2008, and that November, MERS substituted Woodall as trustee. Woodall filed a notice of default, which he declined to release despite Burnett's request. On the day of the trustee's sale, Burnett filed this lawsuit, including 50 unnamed and unknown individuals. She did not serve MERS or the 50 John Does. Woodall moved to dismiss for failure to state a claim, arguing that while he is a debt collector under the FDCPA's definition, Burnett did not properly allege a violation. The district court agreed, saying MERS was authorized to start foreclosure and appoint Woodall as a successor trustee. For the same reason, it found no breach of duty by Woodall. It also found that the Utah consumer protection law was not violated because it was preempted by Utah's trust deed statute. It dismissed the case with prejudice.
On appeal, Burnett argued that the FDCPA was violated because MERS had no ownership rights in the note, giving it no right to foreclose. The Tenth disagreed. MERS is not a beneficiary as defined by Utah law, it said, but it is nonetheless had the right to foreclose as nominee for the lender she used and any of its successors and assigns. An argument that securitization removed that right was foreclosed by an earlier Tenth Circuit decision, the court said. Burnett's other FDCPA claims were rejected because the other sections she cited use a definition of debt collector that doesn't apply to Woodall. Adopting an unpublished case, the Tenth ruled that a non-judicial foreclosure in Utah is not an attempt to collect debt under those sections. Other FDCPA allegations simply don't have enough factual support, the court said. It went on to find that the Utah consumer protection claims also don't have enough factual support. And her remaining claims fail because MERS and Woodall did have standing, the court repeated.
Vincent Howard and our Seal Beach foreclosure defense lawyers sympathize with defendants in this type of lawsuit. Burnett may have been attempting to stop her foreclosure sale by filing any case, just to delay things--but she also included arguments that have gotten traction in other cases and contexts. For example, she argued that MERS is unable to produce the original note. This is an argument that's slowed or stopped foreclosures in some cases--called "show me the note" cases by some--but when the challenge is to the foreclosing entity's right to foreclose. It was rejected here as support for a challenge to MERS's right to appoint Woodall. Vincent Howard and our Ontario foreclosure defense attorneys have extensive experience making these and other arguments against foreclosure--effectively.
If you're heading for a foreclosure that you believe could be avoided with cooperation from your lender or loan servicer, don't wait to call Howard Law, P.C. Call us toll-free at 1-800-872-5925 or send us a message online today.