Asset Acceptance, LLC v. Hanson, 2d Civil No. B208548 (Cal. App. 4/1/2009)

• Decision Date: 01 April 2009
• Docket Number: 2d Civil No. B208548.
• Parties: ASSET ACCEPTANCE, LLC, Plaintiff and Respondent, v. LILIA HANSON, Defendant and Appellant.
• Court: California Court of Appeals

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ASSET ACCEPTANCE, LLC, Plaintiff and Respondent, v. LILIA HANSON, Defendant and Appellant.

2d Civil No. B208548.

Court of Appeal of California, Second Appellate District, Division Six

April 1, 2009.

Not to be Published in the Official Reports

Appeal from the Superior Court of Ventura County, No. CIV241995, Frederick Bysshe, Judge.

Law Offices of John H. Howard; John H. Howard and Gregory Phillips. Lowthorp, Richards, Mcillan Miller & Templeman, Alan R. Templeman and Darin Marx, for Appellant.

Carlson & Messer, David J. Kaminski and Stephen A. Watkins, for Respondent.

YEGAN, J.

Lilia Hanson appeals the dismissal of her class action claims after the trial court sustained, without leave to amend, respondent's, Asset Acceptance, LLC, demurrer to a third amended cross-complaint. Appellant filed the cross-complaint after she was sued on a $1,358.80 Discover Card debt. The third amended cross-complaint alleged that respondent was fraudulently collecting time-barred debt in violation of the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act; Civ. Code, § 1788 et seq)¹ and the California Unfair Competition Law (UCL; Bus. & Prof. Code, § 17200 et seq). The trial court sustained the demurrer finding that there was no well-defined community of interest among the purported class members. We affirm.

Reviving a Time-Barred Debt

The gist of the cross-complaint is that respondent purchases time-barred Discovery Card debt for pennies on the dollar and tricks debtors into making payments, which has the legal effect of reviving the debt. If a debtor acknowledges a debt in writing after the statute of limitations has run, "a new obligation is created, for which the original barred debt is said to be `consideration.' The cause of action is on the new obligation, and a new statutory period starts running as on any other written promise. [Citation.]" (3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 752, p. 982; see McCormick v. Brown (1868) 36 Cal. 180, 184-185; General Credit Corp. v. Pichel (1975) 44 Cal.App.3d 844, 849.)

The Rosenthal Act makes applicable, with few exceptions, the Federal Fair Debt Collection Practices Act (FDCPA; 15 U.S.C. §§ 1692-1992o; see Civ. Code, § 1788.17) and prohibits debt collectors from using threats, physical force, obscene language, annoying telephone calls, false representations, or falsely simulating a legal action. (§§ 1788.10, 1788.11, 1788.13, 1788.16.) It provides that a debt collector may not "[o]btain[] an affirmation from a debtor who has been adjudicated a bankrupt of a consumer debt which has been discharged in such bankruptcy, without clearly and conspicuously disclosing to the debtor, in writing, at the time such affirmation is sought, the fact that the debtor is not legally obligated to make such affirmation[.]" (§ 1788.14, subd. (a).)

The Rosenthal Act is silent on whether a debt collector must give a similar warning when attempting to collect a time-barred debt that has not been discharged in bankruptcy. Although there are no published state court opinions on the issue, federal courts interpret the FDCPA differently. Citing federal district court cases from other states, a California debt collection treatise states, with a question mark ("Collection of time-barred claims?"), that "[i]t may be `unconscionable' and unfair' to file a collection suit after the statute of limitations expires." (Ahart, Cal. Practice Guide (Rutter 2008) Enforcing Judgments and Debts, ¶2:120.2, pp. 2-73 to 2-74.) The treatise also cites a contrary federal case from Northern California: "There is also authority, however, supporting attempts to collect a potentially time-barred debt that is otherwise valid where there is no threatened or actual litigation. [See Abels v. JBC Legal Group, P.C. (ND CA 2005) 428 F.Supp.2d 1023, 1027-1029. . . ]." (Id., at p. 2-74.)

The third amended cross-complaint alleges that respondent, as a matter of custom and practice, failed to disclose the debts were time barred when contacting class members about payment on the Discover Card accounts. It seeks damages and injunctive relief for purported class members based on fraud, negligent misrepresentation, and violation of the Rosenthal Act (§ 1788 et seq) and the Unfair Competition Law (UCL). (Bus. & Prof. Code, § 17200 et seq).

The trial court sustained the demurrer because insufficient facts were alleged to establish a well-defined community of interest among the putative class members. (See e.g., Newell v. State Farm General Ins. Co. (2004) 118 Cal.App.4th 1094, 1102-1103; Carabini v. Superior Court (1994) 26 Cal.App.4th 239, 244.) On review, we treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions, or conclusions of fact or law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Well-Defined Community of Interest

Class actions are statutorily authorized "when the question is one of common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . ." (Code Civ. Proc., § 382.) It requires an ascertainable class and a well-defined community of interest among the class members. (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470.) "`Class actions will not be permitted . . . where there are diverse issues to be resolved, even though there may be many common questions of law.' [Citation.] `[A] class action cannot be maintained where each member's right to recover depends on facts peculiar to his case. . . .' [Citations.]" (Basurco v. 21st Century Ins. Co. (2003) 108 Cal.App.4th 110, 118.)

Appellant argues that a class action claim may not be decided on demurrer. Trial courts, however, routinely decide class certification on demurrer. (Alvarez v. May Dept. Stores, Co. (2006) 143 Cal.App.4th 1223, 1231; Silva v. Block (1996) 49 Cal.App.4th 345, 349.) "When class certification is challenged by demurrer, `the trial court must determine whether "there is a "reasonable possibility" plaintiffs can plead a prima facie community of interest among class members. . . ." [Citation.] "`The ultimate question in every case of this type is whether, given an ascertainable class, the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.' [Citations.] If the ability of each member of the class to recover clearly depends on a separate set of facts applicable only to him, then, all of the policy considerations which justify class actions equally compel the dismissal of such inappropriate actions at the pleading stage." [Citation.]' [Citations.]" (Newell v. State Farm General Ins. Co., supra, 118 Cal.App.4th at p. 1101.)

Appellant complains that she was not afforded discovery or an evidentiary hearing on class certification issues. The trial court stated that it was putting "an end to this repeated" pleading. There was no abuse of discretion. "[W]here the invalidity of the class allegation is revealed on the face of the [cross-]complaint, and/or by matters subject to judicial notice, the class issue may be properly disposed of by demurrer or motion to strike. [Citations.] In such circumstances, there is no need to incur the expense of an evidentiary hearing or class-related discovery." (Canon U.S.A. Inc. v. Superior Court (1998) 68 Cal.App.4th 1, 5.)

Unfair Debt Collection Practice

Appellant contends that a class action may be brought to challenge unfair and deceptive debt collection practices. (See e.g., Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1075 [class action alleging violation of Rosenthal Act].) But in Fireside Bank, the class members received a form letter stating that their repossessed vehicles would be sold. Each form letter overstated the amount due and violated the Rees-Levering Motor Vehicle Sales and Finance Act (§ 2981 et seq). (Id., at pp. 1075-1076.)

Unlike Fireside Bank, there is no allegation that respondent mailed the same form letter to all purported class members. The third amended cross-complaint states that payments were solicited by letter and phone, but the message was not always the same.

Appellant's case is atypical. Appellant believed that her ex-husband paid off the Discover Card debt six years earlier pursuant to a marital dissolution judgment. When respondent called on January 17, 2001, appellant refused to acknowledge the debt. Respondent followed up with more phone calls. To placate respondent, appellant orally agreed to pay $10 and made payments between March 2001 and September 2002. In May 2006, respondent filed suit to collect the balance due.

The third amended cross-complaint states that respondent acted "outrageously" and contacted appellant "approximately 102 times by telephone and letter at her home and work" causing appellant to suffer "great mental and emotional distress[,] anguish, sickness, illness, shock, anxiety, nervousness, worry, shame, humiliation. embarrassment, chagrin, frustration, anger and sleeplessness." There is no allegation that other purported class members suffered similar harassment or damages. The trial court ruled that the third amended cross-complaint alleged an individual violation of the Rosenthal Act but would require proof too particularized to allow a class action.²

We concur. A class action based on "telephone contracts may be the most troublesome if they differed from individual to individual." (Carabini v. Superior Court, supra, 26 Cal.App.4th at p. 244.) No facts are alleged that respondent's collection agents memorized a script and recited it each time it solicited a payment. (See e.g., Vasquez v. Superior Court (1971) 4 Cal.3d 800, 812 [scripted telemarketing statement recited by rote]; Joseph v.. J.J. Mac Intyre Companies, L.L.C. (N.D. Cal. 2003) 281 F.Supp.2d 1156, 1158-1159 [repeated, pre-recorded voice phone calls where...