Filed 3/12/15
                           CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                            SECOND APPELLATE DISTRICT

                                     DIVISION TWO


AFSHEEN ALBORZIAN et al.,                         B251625

        Plaintiffs and Appellants,                (Los Angeles County
                                                  Super. Ct. No. BC482047)
        v.

JPMORGAN CHASE BANK, N.A. et al.

        Defendants and Respondents.




        APPEAL from a judgment of the Superior Court of Los Angeles County. Elihu
M. Berle, Judge. Affirmed in part and reversed in part.
        Cohen McKeon, Michael L. Cohen and Heather M. McKeon; Law Offices of Neil
R. Anapol, Neil R. Anapol, for Plaintiffs and Appellants.
        Arthur D. Levy; Housing and Economic Rights Advocates, Elizabeth S. Letcher
and Noah Zinner, and Public Counsel as amici curiae on behalf of Plaintiffs and
Appellants.
        Arnold & Porter, Peter Obstler, Marjory Gentry and Ginamarie Caya, for
Defendant and Respondent JPMorgan Chase Bank, N.A.
        Ellis Law Group, Mark E. Ellis and Andrew M. Steinheimer, for Defendant and
Respondent Professional Recovery Services, Inc.


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       A lender who lends money used to purchase a parcel of property and who holds a
junior lien on that property cannot sue the borrower personally for the loan balance if the
senior lienholder who also contributed to the purchase of the property forecloses on the
property but does not collect enough from the foreclosure sale to pay off the junior
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lienholder. (Former Code Civ. Proc., § 580b, enacted by Stats. 1989, ch. 698, § 12.)
Can the borrower sue the junior lienholder for trying to collect the no-longer-enforceable
debt if the lienholder’s collection efforts inaccurately imply that the debt is still
enforceable? We conclude that the borrower may sue the debt collector under the Fair
Debt Collection Practices Act (FDCPA) (15 U.S.C. § 1692 et seq.); and may sue the
junior lienholder or its debt collector under the Rosenthal Fair Debt Collection Practices
Act (Rosenthal Act) (Civ. Code, § 1788 et seq.) and Unfair Competition Law (UCL)
(Bus. & Prof. Code, § 17200 et seq.). However, the borrower may not sue for violations
of the Consumer Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.). We
accordingly affirm in part and reverse in part the trial court’s order sustaining the
lienholder’s and debt collector’s demurrers.
                  FACTUAL AND PROCEDURAL BACKGROUND
       Afsheen and Fabiola Alborzian (plaintiffs) took out two loans to purchase their
home in 2005, each secured by a deed of trust on the home. Wells Fargo had the senior
lien, and defendant JPMorgan Chase Bank (Chase) had the junior lien. Wells Fargo
subsequently foreclosed on the property, but the proceeds from the sale were not enough
to pay off Chase’s loan.
       About a year after the foreclosure sale, Chase sent a letter to plaintiffs captioned
“Opportunity for Assistance.” The letter stated that plaintiffs still “owe[d]” $67,002.04
on their loan, and offered to accept $16,750.56 “as settlement for [their] loan balance.”
The letter purported to “offer[] a short ‘window of opportunity’ to allow [plaintiffs] to
resolve [their] delinquency before [their] debt is accelerated,” set a deadline beyond


1      All future statutory references are to the Code of Civil Procedure unless otherwise
indicated.

                                               2
which the offer was “null and void,” and warned that delay would leave plaintiffs “fewer
options.” In its final sentence, the letter disavowed being “an attempt to collect a debt or
to impose personal liability” “[t]o the extent [plaintiffs’] obligation was discharged . . .”
Chase also sent plaintiffs a second letter. This second letter was captioned “Let’s Settle,”
reaffirmed that $67,002.04 was “currently due,” and offered to accept $10,050.34 to
“close this debt once and for all” and to “stop” “all calls and efforts to collect the amount
owed.” During the same time frame as the letters, Chase and defendant Professional
Recovery Services, Inc. (PRS) also made debt collection calls to plaintiffs.
          In the operative Third Amended Complaint (TAC), plaintiffs sued Chase and PRS
(collectively, defendants) on behalf of themselves and a potential class. Plaintiffs alleged
that section 580b extinguished Chase’s right to enforce its loan against them personally,
such that defendants’ letters and calls were misleading for implying that the debt was still
      2
owed. Plaintiffs claimed that defendants’ misrepresentations violated (1) the Rosenthal
Act, (2) the UCL, and (3) the CLRA. Plaintiffs also sued PRS for violating the FDCPA
and sought a declaration that Chase could not collect on the unenforceable debt.
          Chase and PRS demurred, and the trial court sustained their demurrers to the TAC
without leave to amend. Plaintiffs timely appealed.
                                       DISCUSSION
          In reviewing an order sustaining a demurrer, we independently evaluate whether
the operative complaint states facts sufficient to state a cause of action. (Zelig v. County
of Los Angeles (2002) 27 Cal.4th 1112, 1126 (Zelig).) We must accept as true all facts
alleged in the complaint (ibid.), except when they are contradicted by exhibits attached to
the complaint (Holland v. Morse Diesel Internat., Inc. (2001) 86 Cal.App.4th 1443, 1454,
superseded by statute on other grounds by Bus. & Prof. Code, § 7031, subd. (b)
(Holland)) or matters subject to judicial notice (Zelig, at p. 1126). Our concern is with



2      Chase asks us to take judicial notice of a different lawsuit in which amici Housing
and Economic Rights Advocates and Public Counsel are participating. We decline to do
so because this other litigation is irrelevant.

                                              3
what is alleged, not whether the plaintiffs can adduce evidence to support their
allegations. (Parada v. City of Colton (1994) 24 Cal.App.4th 356, 362.)
I.     Actionable misrepresentation involving letters
       Chase first argues that it may not be sued for sending its two collection letters.
(Although plaintiffs also sue PRS for the letters in its alleged role as Chase’s co-
conspirator and agent, the letters themselves—which are attached as exhibits to the
TAC—come directly and solely from Chase and, without more, are not chargeable to
PRS. (Holland, supra, 86 Cal.App.4th at p. 1447 [facts in exhibits trump allegations in
             3
complaint].)) All of plaintiffs’ letter-based claims, except their request for declaratory
relief, turn on whether a junior lienholder’s attempts to collect on a foreclosed debt is
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actionable if the attempts inaccurately imply that the debt is still enforceable.
       There is no question that a junior lienholder whose loan is used to purchase a
parcel of property and is secured by that property has no legal right to enforce its debt
against the borrower personally if the sale price at a foreclosure on that property initiated
by any other lienholder who lent money for the purchase price is insufficient to pay off
the debt. (Former Code Civ. Proc., § 580b, subd. (a)(2), enacted by Stats. 1989, ch. 698,
§ 12 [“[N]o deficiency judgment shall lie in any event after a sale of real property . . .
under a deed of trust or mortgage given to the vendor to secure payment of the balance of
the purchase price of that real property . . .”] (amended 2013); In re Prestige Limited
Partnership-Concord (9th Cir. 2000) 234 F.3d 1108, 1117 [due to section 580b, junior
lienholder cannot enforce debt after senior lienholder forecloses]; Brown v. Jensen (1953)
41 Cal.2d 193, 195-198 [same]; cf. Roseleaf Corp. v Chierighino (1963) 59 Cal.2d 35, 41



3      Plaintiffs asserted for the first time at oral argument on appeal that the telephone
numbers contained in the letters were controlled by PRS. This allegation is nowhere in
any of the four complaints filed below; it cannot be made for the first time now.

4      Chase asserts that we may not consider this question because plaintiffs never
argued this theory below. We disagree. This theory was both alleged in the TAC, and
specifically rejected by the trial court in its written order.

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[§ 580b applies only to purchase money loans].) The lienholder can still seek recourse
from other security for the loan or from other guarantors. (E.g. Armsey v. Channel
Associates, Inc. (1986) 184 Cal.App.3d 833, 837 [recourse against other security];
Gottschalk v. Draper Companies (1972) 23 Cal.App.3d 828, 830 [recourse against
guarantors].) This bar on personal recovery serves two functions: It protects borrowers
from the potential of losing the property and still owing more (which is likely to be the
case during the economic downturns when foreclosures are more common); and it
protects the real estate market by encouraging lenders to properly value property (because
lenders will lose out if they make loans on overvalued property). (Cornelison v.
Kornbluth (1975) 15 Cal.3d 590, 603; DeBerard Properties v. Lim (1999) 20 Cal.4th 659,
663.)
        Whether plaintiffs’ claims in this case may go forward does not depend upon
whether Chase may enforce its loan (it may not), but rather on whether Chase may
attempt to collect on its loan. For loans executed on or after January 1, 2013, the answer
is an unequivocal “no” because section 580b was amended in 2013 to prohibit any
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“collect[ion]” of a legally unenforceable debt. (Stats. 2013, ch. 65, § 2.) However, for
loans executed before January 2013 (like plaintiffs’ loans), the lienholder is not
absolutely barred from trying to get a borrower to pay off the loan balance voluntarily;
the lienholder nevertheless remains liable for any other law it violates in the course of
doing so.




5      Plaintiffs alternatively cite section 580d for the proposition that Chase’s loan was
unenforceable against them personally, but that section bars deficiency judgments only
when there is a single loan or when multiple loans are made by the same lender.
(Cadlerock Joint Venture, L.P. v. Lobel (2012) 206 Cal.App.4th 1531, 1536.) This case
is accordingly outside of section 580d’s ambit.

6      We grant plaintiffs’ request to take judicial notice of the legislative history of
section 580b. (Evid. Code, § 452, subd. (c).)


                                              5
       As it turns out, the viability of most of plaintiffs’ letter-based claims against Chase
(other than the CLRA and declaratory relief claims) boils down to whether plaintiffs can
state a claim under the FDCPA. That is because the Rosenthal Act, among other things,
                                                  7
explicitly incorporates the FDCPA’s standards. (Civ. Code, § 1788.17.) So does the
UCL, which “‘“‘borrows’ violations of other laws and treats them as unlawful practices”
that the unfair competition law makes independently actionable.’” (Puentes v. Wells
Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 644 (Puentes), quoting Cel-
Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th
                                         8
163, 180; Bus. & Prof. Code, § 17200.)
       The FDCPA generally prohibits a “debt collector” from “us[ing] any false,
deceptive, or misleading representation or means in connection with the collection of any
debt” (15 U.S.C. § 1692e), and as is pertinent here, specifically prohibits “[t]he false
representation of . . . the character, amount or legal status of any debt” (§ 1692e, subd.
(2)(A)), “[t]he threat to take any action that cannot legally be taken or that is not intended
to be taken” (§ 1692e, subd. (5)), and “[t]he use of any . . . deceptive means to collect or
attempt to collect any debt . . .” (§ 1692e, subd. (10)). While the federal courts may be
divided on whether efforts to collect an unenforceable debt violate the FDCPA if
unaccompanied by a threat of litigation (compare McMahon v. LVNV Funding, LLC (7th
Cir. 2014) 744 F.3d 1010, 1020-21 (McMahon) [no threat of litigation required] with
Huertas v. Galaxy Asset Management (3d Cir. 2011) 641 F.3d 28, 32-33 [threat of
litigation required]; Freyermuth v. Credit Bureau Services, Inc. (8th Cir. 2001) 248 F.3d




7      The Rosenthal Act does not incorporate the FDCPA’s applicability only to “debt
collector[s],” so the Rosenthal Act applies to Chase whether or not it qualifies as a “debt
collector” under the FDCPA.

8      The UCL also covers “fraudulent” and “unfair” business practices (Bus. & Prof.
Code, § 17200; Puentes, supra, 160 Cal.App.4th at p. 644), but we need not reach these
other two prongs in light of our conclusion regarding the unlawfulness prong.

                                              6
767, 771 [same]), the courts are in agreement that deceptive collection efforts violating
the FDCPA are actionable.
       Whether a debt collection effort entails false representations, threats, or deception
is judged objectively from the perspective of the “‘least sophisticated debtor.’”
(Gonzales v. Arrow Fin. Servs., LLC (9th Cir. 2011) 660 F.3d 1055, 1061-1062
(Gonzales); accord, McMahon, supra, 744 F.3d at p. 1019.) This unsavvy consumer is
charged with a “‘basic level of understanding and willingness to read with care,’
[citation]” but is of “‘below average sophistication or intelligence,’” and is “‘uninformed
or naive.’” (Gonzales, at p. 1062.) He or she is “under no obligation to seek explanation
of conflicting or misleading language in debt collection letters.” (Ibid.) To this
consumer, “‘[a] debt collection letter’”—a so-called “dunning letter”—“‘is deceptive
where it can be reasonably read to have two or more different meanings, one of which is
inaccurate.’” (Ibid., quoting Brown v. Card Serv. Ctr.(3d Cir. 2006) 464 F.3d 450, 455.)
In this regard, what is implied is just as important as what is stated. (E.g., Turner v.
J.V.D.B. & Assocs. (7th Cir. 2006) 202 Fed.Appx. 123, 125; Gully v. Van Ru Credit
Corp. (N.D. Ill. 2005) 381 F.Supp.2d 766, 773.)
       Plaintiffs have sufficiently alleged that the dunning letters sent by Chase are
actionable under the FDCPA. The letters offer to “settle” a “debt” plaintiffs “owe” by
giving them two short “‘window[s] of opportunity’” that, if missed, leave them with
“fewer options” and subject them to “accelerat[ion]” of the loan and continued “calls and
efforts to collect the amount owed.” The unspoken but unmistakable premise of these
letters is that plaintiffs’ debt is still valid, due, and owing—in a word, enforceable.
       To be sure, the last sentence of Chase’s first letter tries to create some “wiggle
room” by stating that the letter “does not constitute an attempt to collect a debt or to
impose personal liability for such obligation” “[t]o the extent [the recipient’s] original
obligation was discharged” and by inviting the recipient to seek the advice of counsel.
But this language does not negate the otherwise clear implication of the letters that the
debt is enforceable because the recipient would have no idea that his or her “original
obligation was discharged” unless he or she happened to be familiar with section 580b.

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Few savvy consumers have such mastery of the Code of Civil Procedure, to say nothing
of their less savvy cousins. The letters are, at best, ambiguous. Chase could have
eliminated this ambiguity by disclosing that its debt was no longer enforceable against
the letter’s recipient and that Chase was merely seeking voluntary repayment of its
unenforceable debt. But such a disclosure would have substantially undermined the
likely effectiveness of Chase’s collection efforts. “When language in a debt collection
letter can reasonably be interpreted to imply that the debt collector will take action it has
no intention or ability to undertake, the debt collector that fails to clarify that ambiguity
does so at its own peril.” (Gonzales, supra, 660 F.3d at p. 1063.) Chase walked this
perilous path, and plaintiffs have accordingly alleged enough of a misrepresentation or
deception to get past a demurrer on an FDCPA claim, and hence their UCL and
Rosenthal Act claims as well.
II.    Actionable telephone calls
       Chase and PRS also argue that the debt collection calls plaintiffs alleged they
made are not actionable. Although the TAC does not allege that defendants’ calls were
ever answered and accordingly does not allege what was said, it does allege that they
were intentionally made “in a campaign of harassment.” The making of frequent calls
itself can constitute actionable harassment under the Rosenthal Act (Civ. Code,
§ 1788.11, subd. (e); Komarova v. National Credit Acceptance, Inc. (2009) 175
Cal.App.4th 324, 345 [repeated unanswered calls; sufficient to state a claim]) and the
FDCPA (15 U.S.C. § 1692d, subd. (5) [harassing calls “with intent to annoy, abuse or
harass” are actionable]; Green v. Creditor Iustus Remedium (E.D. Cal. Nov. 12, 2013,
No. 1:13-cv-01414-LJO-JLT) 2013 U.S.Dist. Lexis 161298, 9 [repeated unanswered
calls; sufficient to state a claim]), and thus is “unlawful” under the UCL (Bus. & Prof.
Code, § 17200).
III.   Remaining arguments
       Chase and PRS make a number of further arguments as to why plaintiffs’ claims
were properly dismissed.



                                               8
       A.     Standing
       Defendants argue that plaintiffs lack standing to assert a claim under the UCL
because they never made any payments on their loan and were consequently unharmed.
Plaintiffs may invoke the UCL only if they suffer (1) economic loss (that is, “a loss or
deprivation of money or property”), (2) caused by the unlawful business practice.
(Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322; Bus. & Prof. Code,
§ 17204.) Plaintiffs allege two economic harms: (1) a diminished credit score caused by
Chase “report[ing] false negative information to credit agencies”; and (2) the $200
plaintiffs paid an attorney to respond to Chase’s first letter. “‘[P]erpetration of [c]redit
[r]eports containing inaccurate erroneous information regarding “due and owing” debts is
a sufficient injury to grant [p]laintiffs standing’ under the UCL.” (Rex v. Chase Home
Fin. LLC (C.D. Cal. 2012) 905 F.Supp.2d 1111, 1147 (Rex), quoting White v. Trans
Union, LLC (C.D. Cal. 2006) 462 F.Supp.2d 1079, 1080, 1084; accord, Rubio v. Capital
One Bank (9th Cir. 2010) 613 F.3d 1195, 1204.) Thus, whether or not plaintiffs can
eventually prove that Chase was making false credit reports while trying to collect on its
loan, plaintiffs’ allegation that Chase has done so is enough to confer standing under the
                                9
UCL at this stage of litigation. (Cf. Wright v. GMAC (S.D. Cal., January 25, 2012, No.
09cv2666 JM AJB) 2012 U.S. Dist. Lexis 8977, 12-13 [granting summary judgment
because evidence did not establish causal link between credit reporting and damages].)
       B.      Preemption
       Defendants next contend that plaintiffs’ state law claims are preempted by the Fair
Credit Reporting Act (FCRA) (15 U.S.C. § 1681 et seq.) The FCRA generally regulates
the credit reporting industry (§ 1681, subd. (b)), and as pertinent to this case, the means
by which persons and companies furnish information to credit reporting agencies
(§ 1681s-2.) To assure uniformity, the FCRA preempts state laws that impose “a




9      We accordingly have no need to address the payment of attorney’s fees as an
alternative basis for standing.

                                               9
requirement or prohibition . . . relating to the responsibilities of persons who furnish
information to consumer reporting agencies.” (§ 1681t, subd. (b)(1)(F).)
       Plaintiffs allege that defendants furnished false information to credit reporting
agencies regarding the unenforceable debt, which thereby injured plaintiffs. These
allegations do not implicate the FCRA’s preemption clause. Although a FDCPA claim
based solely on allegations of false credit reporting may be preempted by the FCRA
(Miller v. Bank of America, N.A. (S.D. Cal. 2012) 858 F.Supp.2d 1118, 1124), plaintiffs’
claims are grounded in defendants’ deceptive efforts to collect Chase’s loan; plaintiffs’
allegations of false credit reporting go solely to the injury they claim to have suffered in
order to confer standing. In such cases, there is no preemption. (Rex, supra, 905
F.Supp.2d at pp. 1151-1154.)
       C.      CLRA
       Defendants next allege that plaintiffs cannot sue them for violating the CLRA
because their debt collection efforts do not involve “goods or services.” The CLRA
prohibits “unfair methods of competition and unfair or receptive acts or practices.” This
includes the inaccurate “represent[ation] that a transaction confers or involves rights,
remedies, or obligations which it does not have or involve . . .” (Civ. Code, § 1770, subd.
(a)(14).) However, this proscription only applies with respect to “transaction[s] intended
to result or which result[] in the sale or lease of goods or services to [a] consumer . . .”
(§ 1170, subd. (a)) The CLRA defines “goods” as “tangible chattels bought or leased for
use primarily for personal, family or household purposes” (§ 1761, subd. (a)), and
“services” as “work, labor, and services other than a commercial or business use,
including services furnished in connection with the sale or repair of goods” (§ 1761,
subd. (b)).
       Chase loaned plaintiffs money. A mortgage loan is not a “good” because it is not
a “tangible chattel;” it is not a “service” because it is not “work, labor, or services . . .
furnished in connection with the sale or repair of goods.” For some time, courts applying
California law divided over whether a lender’s provision of other, so-called “ancillary
services” (such as a providing insurance advice) could convert a non-“service” into a

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“service.” (Compare Berry v. American Express Publishing, Inc. (2007) 147 Cal.App.4th
224, 231 [CLRA does not apply to lender] with Hernandez v. Hilltop Fin. Mortg., Inc.
(N.D. Cal. 2007) 622 F.Supp.2d 842, 849-851 [CLRA applies to mortgage lenders
because lender offered ancillary services attendant to loan].) Our Supreme Court in
Fairbanks v. Superior Court (2009) 46 Cal.4th 56, 65 seemingly resolved this split by
holding that an insurer who sold life insurance along with ancillary services was not
covered by the CLRA. Fairbanks applies with equal force to lenders. (E.g., Sonada v.
Amerisave Mortg. Corp. (N.D. Cal. July 8, 2011, No. C-11-1803 EMC) 2011 U.S.Dist.
Lexis 73940, 4-6; but see Rex, supra, 905 F.Supp.2d at pp. 1155-1157.)
       D.     Declaratory relief
       Chase lastly argues that plaintiffs have not alleged a valid declaratory relief claim
because there is no actual controversy to resolve in light of Chase’s concession that
section 580b renders its loan judicially unenforceable. A plaintiff may seek a judicial
“declaration of his or her rights or duties with respect to another . . . in cases of actual
controversy relating to the legal rights and duties of the respective parties.” (§ 1060.)
Plaintiffs are seeking a declaration regarding Chase’s right to “collect[] [its] loan”—not
Chase’s right to judicially enforce that loan. Chase’s concession as to the latter does not
obviate the controversy as to the former. The trial court accordingly erred, and thus
abused its discretion, in sustaining the demurrer to this remedy as the cause of action was
legally sufficient. (See Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 647 [abuse
of discretion review for dismissal of declaratory relief action].)




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                                     DISPOSITION
       We accordingly affirm the trial court’s dismissal of plaintiffs’ CLRA claim, but
reverse and remand for further proceedings with respect to plaintiffs’ FDCPA, Rosenthal
Act, and UCL claims and on plaintiffs’ prayer for declaratory relief. Each party is to bear
its own costs on appeal.
       CERTIFIED FOR PUBLICATION.




                                           _______________________, J.
                                                   HOFFSTADT
We concur:




____________________________, P. J.
             BOREN


____________________________, J.
         ASHMANN-GERST




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