FYI: Cal App Ct Rejects Judicial Notice of Recorded Assignment, Finds Triable Issue of Fact

The Court of Appeal of the State of California, Third Appellate District,
recently held that a trial court improperly took judicial notice of an
assignment which purported to establish a bank's interest in the subject
property, and reversed the trial court's summary judgment order in favor
of the bank defending a foreclosure sale.

A copy of the opinion is available at:
http://www.courtinfo.ca.gov/opinions/documents/C065630.PDF

Plaintiffs lost their home in a California nonjudicial foreclosure sale,
and then brought suit to set aside the sale. Deutsche Bank National Trust
Company ("Deutsche Bank") and California Reconveyance Corporation ("CRC")
asserted that they were the beneficiary and trustee under a deed of trust
secured by the property.

Plaintiffs alleged among things that neither Deutsche Bank nor CRC had a
valid interest in the property. To support the validity of their
interests, Deutsche Bank and CRC asked the trial court to take judicial
notice of various recorded documents, including an Assignment of Deed of
Trust (the "assignment"). That document recited that Deutsche Bank was
assigned all interest in the deed of trust by an intermediate beneficiary,
and identified the original beneficiary to that deed of trust. They also
provided a declaration by an employee of CRC stating that recorded
documents indicated that Deutsche Bank had been assigned the Deed of
Trust.

Deutsche Bank and CRC moved for summary judgment, which the trial court
granted. Plaintiffs appealed.

As you may recall, California law provides that "[t]aking judicial notice
of a document is not the same as accepting the truth of its contents or
accepting a particular interpretation of its meaning." Joslin v. H.A.S.
Ins. Brokerage (1986) 184 Cal. App. 3d 369, 374. Further, although a
court may take judicial notice of a recorded deed, a court may not "take
judicial notice of factual matters stated therein." Love v. Wolf (1964)
226 Cal. App. 2d 378, 403.

Although the trial court took judicial notice of the assignment that
recited that Deutsche Bank was the beneficiary under a deed of trust, the
Court noted that "this fact is hearsay and disputed." Specifically, in
the appellate court's view, Deutsche Bank and CRC offered no evidence to
establish that the purported intermediate beneficiary in fact held the
beneficial interest.

Therefore, the Court held that the assignment was not a valid basis on
which to grant summary judgment.

The Court found the declaration of the CRC employee to be similarly
inadequate, as it did not "affirmatively show that [declarant could]
competently testify" that Deutsche Bank was the beneficiary. Further, the
Court noted that the employee's declaration merely concerned what the
recorded documents "indicated," as opposed to the accuracy of the factual
contents of those documents.

Because in the appellate court's view Deutsche Bank and CRC "failed to
present facts to establish that [Deutsche Bank] was beneficiary and CRC
was trustee" under the deed of trust, the Court held that triable issues
of material fact remained as to Plaintiffs' various causes of action.
Therefore, the Court reversed the lower court's order granting summary
judgment to Deutsche Bank.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com

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FYI: 3rd Cir Says Debt Collection Law Firm Violated FDCPA, Despite Written Disclaimer of Attorney Involvement

The U.S. Court of Appeals for the Third Circuit recently held that certain
debt-collection letters from a law firm violated the federal Fair Debt
Collection Practices Act ("FDCPA"), despite a disclaimer of attorney
involvement included in the letters, because the letters could lead the
recipient to believe that the law firm might take legal action to collect
the debt even though the law firm was not acting in its legal capacity
when it sent the letters.

A copy of the opinion is available at:
http://www.ca3.uscourts.gov/opinarch/103194p.pdf.

This appeal arose from two debt-collection letters sent by a law firm (the
"Law Firm") to a debtor, Darwin Lesher ("Lesher"), on behalf of a
third-party lender. The first letter was printed on the Law Firm's
letterhead and contained statements that the Law Firm was handling the
account and was authorized to settle the debt. The first letter also
included instructions to send all payments to the Law Firm and to "see
reverse side for important information."

On the reverse side, and among debt validation notice language, was a
disclaimer that "no attorney with this firm has personally reviewed the
particular circumstances of your account." Similarly, the second
debt-collection letter identified the Law firm as the sender, offered
Lesher the opportunity to settle the debt, and also instructed Lesher to
"see the reverse side for important information." The reverse side of
the second letter set forth disclosures and disclaimers identical to those
in the first letter.

In his complaint against the Law Firm, Lesher alleged that the letters
violated various provisions of the FDCPA by misleading him to believe that
an attorney was involved in collecting the debt and could take legal
action against him to collect on the debt. See 15 U.S.C. §1692e ("section
1692e"). The district court held that the letters violated section 1692e
because they implied that an attorney was involved in the collection
process and "implicitly threatened legal action." The Third Circuit
agreed.

After reviewing a series of court opinions that address debt-collection
letters sent by attorneys as well as non-attorneys, the Court noted that
the key to compliance with section 1692e on this issue is not to be
misleading about attorney involvement in the debt collection process.
Specifically, a disclaimer must "state clearly, prominently, and
conspicuously that although the letter is from a lawyer, the lawyer is
acting solely as a debt collector and not in any legal capacity when
sending the letter." Gonzalez v. Kay, 577 F.3d 600 (5th Cir.
2009)(attorney "[d]ebt collectors acting solely as debt collectors must
not send the message that a lawyer is involved").

In this case, the Third Circuit agreed with the district court that the
letters violated section 1692e's "general prohibition against 'false,
deceptive, or misleading' communications, because they falsely impl[ied]
that an attorney, acting as an attorney, [was] involved in collecting
Lesher's debt." The appellate court opined that "the least sophisticated
debtor, upon receiving these letters, may reasonably believe that an
attorney has reviewed his file and has determined that he is a candidate
for legal action."

Moreover, in the Court's view, the disclaimers on the back that no
attorney reviewed the account did not make clear that the Law Firm was
acting solely as a debt collector and not in any legal capacity in sending
the letters. The Court also pointed out that the disclaimers on the back
actually contradicted the "impression of potential legal action" given by
the front of the letters, and that the statutorily required statement that
the letters were "from a debt collector" did not change the impression
that the letters were from an attorney.

The Court limited its decision to the two specific letters in question,
and declined to address generally whether an attorney debt-collector who
sends a collection letter on attorney letterhead might comply with the
FDCPA by including language that makes clear that the attorney was not
acting in any legal capacity when the letter was sent.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com

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FYI: Cal App Reverses Judgment Against Bank in Negligent Check Processing Case

The Court of Appeal of the State of California, Fourth Appellate District,
recently reversed a lower court's decision to award damages against a bank
based on the bank's alleged negligence in processing a check, on the
grounds that the bank's customer was not made worse off by that
negligence.

A copy of the opinion is available at:
http://www.courtinfo.ca.gov/opinions/documents/G043874.PDF

FSI, Financial Solutions, Inc. ("FSI") received a check from Bay Capital
Corporation ("Bay Capital") for $90,000 (the "check"), and attempted to
deposit it with Wells Fargo Bank, N.A. ("Wells Fargo"). Wells Fargo
informed FSI that a hold had been placed on the check. When the hold
expired, FSI called a Wells Fargo employee, who confirmed that the funds
were available. FSI then transferred part of those funds to various
entities to which it owed money. At the time of the deposit, the account
on which Bay Capital's check was written had been closed.

In error, Wells Fargo made the funds available to FSI prior to forwarding
the check for presentment to the payor bank. When Wells Fargo did forward
the check for presentment, it was returned due to insufficient funds.

Wells Fargo then charged back the $90,000, resulting in FSI's account
having a negative balance. In addition, Wells Fargo charged FSI $748.00
for the return of several checks. Wells Fargo then sued FSI to recover
the funds. FSI counterclaimed, alleging violations of the California
Uniform Commercial Code ("UCC") section 4214, among other allegations.

The lower court awarded FSI: (1) the amount recovered by Wells Fargo from
FSI's account after the check was returned; (2) the $748 in penalties
imposed by Wells Fargo; and (3) attorney fees and costs. In addition, the
lower court ordered Wells Fargo to reverse the chargeback levied against
FSI's account. Wells Fargo appealed.

Based on its examination of the UCC and related case law, the appellate
court had little difficultly in determining that Wells Fargo had the right
to charge back or otherwise seek recovery of the $90,000.

The appellate court first concluded that, based on UCC provisions, the
"provisional settlements made through the chain of banks did not become
final." The Court noted that, under the UCC, where the settlement has not
become final, the right to charge back applies even where the customer has
already used the credit provided, or where the bank did not exercise
ordinary care in handling the check.

Next, the Court considered whether Wells Fargo's purported negligence or
misrepresentations were actionable by FSI.

As you may recall, section 4214 of the California UCC provides that banks
are "liable for any loss resulting from delay" in returning a check to a
customer or providing notice of dishonor. To determine the amount of
damages, courts must consider "the amount of the item reduced by an amount
that could not have been realized by the exercise of ordinary care."

The Court observed that "[h]ere, the item was entirely uncollectible by
the use of ordinary care," because Bay Capital's account had been closed
prior to FSI's deposit of the check. The Court acknowledged that FSI
might have suffered cognizable damages when Wells Fargo dishonored the
checks written by FSI (for example, FSI's credit score or relationship
with other vendors might have been damaged).

However, no evidence of such damages appeared in the record, apart from
the $748 in overdraft fees discussed above. Further, as FSI used the
funds from the check to pay various debts, it merely substituted that
indebtedness for a new indebtedness to Wells Fargo. Because "FSI was not
made worse off as a result of Wells Fargo's negligence and misstatements,"
the Court directed the lower court to enter a judgment in Wells Fargo's
favor.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com

NOTICE: We do not send unsolicited emails. If you received this email in
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Our updates are available on the internet, in searchable format, at:
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FYI: 6th Cir Says Inaccurate Amount of Debt in Response to Debtor Inquiry Does Not Violate FDCPA

The U.S. Court of Appeals for the Sixth Circuit recently held that a debt
collector who filed a motion for default judgment prior to the borrower's
actual default may have violated the Fair Debt Collection Practices Act
("FDCPA"). The Sixth Circuit also held that a debt collector who
inaccurately stated the amount of the outstanding debt, in response to a
debtor's inquiry and not as part of a demand for payment, did not violate
the FDCPA. A copy of the opinion is attached.

Plaintiff debtor ("Debtor") fell behind on his medical bill payments. The
account was assigned to a collections agency, which hired a debt
collection law firm Collector Ingber & Winters PC ("Collector") to collect
the debt. Collector sued Debtor for the outstanding amount of the debt,
and served the Debtor with a document entitled "Combined Affidavit of Open
Account and Motion for Default Judgment."

At the time the Debtor was served with that document, he had not missed
any deadline for answering Collector's complaint. The Debtor called
Collector to verify his account balance, and in response was provided
inaccurate information both over the phone and in writing.

The Debtor sued Collector in federal court, alleging that the false
statements regarding his account balance and the motion for default
judgment were both actionable under the FDCPA. The district court granted
Collector's motion for summary judgment, and the Debtor appealed.

As you may recall, the FDCPA prohibits a debt collector from using "any
false, deceptive, or misleading representation or means in connection with
the collection of any debt." 15 U.S.C. §1692(e). In considering claims
of FDCPA violations, courts consider "whether there is a reasonable
likelihood that an unsophisticated consumer who is willing to consider
carefully the contents of a communication might yet be misled by them."
Miller v. Javitch, Block & Rathbone, 561 F.3d 588, 592 (6th Cir. 2009). A
true statement may violate the FDCPA if it is misleading. Id. at 591-92.

The Court held that filing a motion for default prior to the actual
default could be construed by a jury to be misleading. In so doing, it
noted that "a motion's factual basis usually precedes the motion itself,"
and thus an unsophisticated consumer served with a motion for default
"might well think that he has somehow already defaulted." Therefore, the
Court reversed the lower court's decision with regard to the Collector's
preemptive motion for default, and remanded the case for further
proceedings consistent with its opinion.

Collector argued that its preemptive motion for default requesting
judgment only "upon default" made it clear that the Debtor had not already
defaulted. The Court rejected that contention, reasoning that the words
"upon default" "merely recite the necessary condition for relief, rather
than saying anything about whether the condition has already occurred."

Next, the Court considered whether Collector's provision of inaccurate
information to the Debtor in response to the Debtor's inquiry constituted
an attempt to collect a debt -- and therefore, whether those statements
were actionable under the FDCPA. The Court began its analysis by holding
that, to determine whether a communication is made in connection with the
collection of a debt, "an animating purpose of that communication must be
to induce payment by the debtor." Based on that standard, Collector's
communications to the Debtor "were merely a ministerial response to a
debtor inquiry, rather than part of a strategy to make payment more
likely." Therefore, the Court held that those communications did not
violate the FDCPA.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com

NOTICE: We do not send unsolicited emails. If you received this email in
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FYI: Fed Dist Ct Rules Largely in Favor of Borrowers in HELOC-Suspension MDL

Judge Pallmeyer in the U.S. District Court for the Northern District of
Illinois recently ruled in favor of the borrowers on a number of issues in
a multi-district litigation putative class action pending against JPMorgan
Chase Bank, N.A. ("Chase") relating to its suspensions and reductions of
HELOCs. The opinion also references rulings from other similar cases
against different lenders. A copy of the opinion is attached.

The putative class plaintiffs allege that Chase reduced or suspended their
HELOCs without a permissible reason for doing so, in alleged violation of
the federal Truth-in-Lending Act. The putative class plaintiffs also
allege that Chase's suspension or reduction of their HELOCs, and the
manner in which those reductions or suspensions were carried out,
constitute breach of contract, breach of the implied covenant of good
faith and fair dealing, unjust enrichment, and violations of California,
Illinois, and Minnesota consumer protection laws.

Chase moved to dismiss the complaint in its entirety, arguing that federal
law and relevant contractual provisions permit Chase to reduce or suspend
the subject HELOCs, and asserting other grounds.

The court concluded that the putative class plaintiffs adequately pleaded
a violation of TILA by alleging that Chase suspended or reduced HELOCs in
the absence of a significant decline in the value of the property securing
the HELOC. According to the court, although the alleged failure of Chase
to consider present available equity, the alleged use of "automated
valuation models," the alleged use of "unlawful triggering events," and
the alleged reduction or suspension absent a "sound factual basis" are not
independent bases for relief, the court held that those alleged practices
are, however, relevant in considering whether Chase reduced or suspended
HELOCs even though the properties securing them suffered no significant
decline in value.

The court denied Chase's motion to dismiss the claims for declaratory
relief, as according to the court such relief may be sought as an
alternative to the remedies provided for by TILA, and the statutory
damages available under TILA might not adequately compensate each putative
class member.

The court also held that the putative class plaintiffs' allegations that
Case reduced or suspended their HELOCs without adequate justification are
sufficient to state claims for breach of contract under Minnesota,
California, Texas and Delaware law.

In addition, the court held that the putative class plaintiffs properly
alleged unfair conduct claims under the California, Illinois and Minnesota
UDAP laws.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com

NOTICE: We do not send unsolicited emails. If you received this email in
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The information transmitted (including attachments) is covered by the Electronic Communications Privacy Act, 18 U.S.C. 2510-2521, is intended only for the person(s) or entity/entities to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient(s) is prohibited. If you received this in error, please contact the sender and delete the material from any computer.

Notice Under U.S. Treasury Department Circular 230: To the extent that this e-mail communication and the attachment(s) hereto, if any, may contain written advise concerning or relating to a Federal (U.S.) tax issue, United States Treasury Department Regulations (Circular 230) require that we (and we do hereby) advise and disclose to you that, unless we expressly state otherwise in writing, such tax advise is not written or intended to be used, and cannot be used by you (the addressee) or other person(s), for purposes of (1) avoiding penalties imposed under the United States Internal Revenue Code or (2) promoting, marketing or recommending to any other person(s) the (or any of the) transaction(s) or matter(s) addressed, discussed or referenced herein. Each taxpayer should seek advice from an independent tax advisor with respect to any Federal tax issue(s), transaction(s) or matter(s) addressed, discussed or referenced herein based upon his, her or its particular circumstances.