Young v. Midland Funding, LLC
| Decision Date | 07 October 2022 |
| Docket Number | A161843, A162784 |
| Citation | 300 Cal.Rptr.3d 128 |
| Parties | Kacie Lynn YOUNG, Plaintiff and Appellant, v. MIDLAND FUNDING, LLC, et al., Defendants and Respondents. |
| Court | California Court of Appeals Court of Appeals |
Certified for Partial Publication.*
Consumer Law Center, Fred W. Schwinn, Raeon R. Roulston, Matthew C. Salmonsen, San Jose, CA, for Plaintiff and Appellant.
Solomon Ward Seidenwurm & Smith, Thomas F. Landers, Mei-Ying Imanaka, Owen M. Praskievicz, San Diego, for Defendants and Respondents.
Kacie Lynn Young filed a complaint alleging that Midland Funding, LLC (Midland Funding) and Midland Credit Management, Inc. (MCM) (collectively the Midland parties) improperly pursued a debt collection lawsuit and obtained a default judgment against her for a delinquent credit account of $8,529.93. Included in her complaint were equitable causes of action for vacatur of the default judgment and a cause of action for damages under the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act) ( Civ. Code,1 § 1788 et seq. ). Factually, the gist of all of her claims was that the Midland parties falsely and deceptively represented in the debt collection lawsuit that they effected substituted service of process on her, and then relied on this false representation to obtain the default judgment and attempt to collect on it.
Midland Funding and MCM each responded with a motion to strike all of Young's causes of action under Code of Civil Procedure section 425.16, commonly known as the anti-SLAPP statute. Through these motions, the Midland parties sought to strike all of Young's causes of action before discovery could be had, arguing variously that Young's equitable causes of action were moot; that MCM has no liability because it did not take any action against her in the previous lawsuit; that Young cannot prevail on her Rosenthal Act cause of action because substituted service was effected; that even if it turns out substituted service was not effected, neither of the Midland parties had any knowledge of the service defect, thereby defeating the Rosenthal Act cause of action because knowledge is a required element under section 1788.15, subdivision (a) ; and, finally, that Young's Rosenthal Act cause of action was time-barred.
The trial court granted the Midland parties’ anti-SLAPP motions on the ground Young did not show she would probably prevail on the merits of her claims, entered judgment in their favor and awarded them attorney fees and costs in an amount to be later determined. Young appeals from the judgment and from the trial court's later order staying a motion by the Midland parties for $78,635.14 in attorney fees and costs pending the outcome of our review. We have consolidated these two appeals.
In the published portion of this opinion, we conclude Young showed she would probably prevail on the merits of her Rosenthal Act cause of action. Contrary to the Midland parties’ contentions, she produced prima facie evidence that they falsely represented substituted service on her was effected in the debt collection lawsuit. Further, she was not required under section 1788.17 of the Rosenthal Act to show that the Midland parties knowingly made this false representation, and that provision controls over section 1788.15, subdivision (a) to the extent the two are inconsistent.
In the unpublished portions of the opinion, we conclude Young's equitable causes of action are moot and her Rosenthal Act cause of action was not time-barred. In line with our determination that Young made a showing of minimal merit on her Rosenthal Act cause of action, we also conclude the order staying decision on the Midland parties’ fee motion must be vacated, and, as a result, we need not address the various attorney fees issues the parties have briefed in connection with that stay order.
Young contended below her employer told her in November 2019 that it had received an earnings withholding order to garnish her wages (wage garnishment order). Upon learning this, Young claimed, she investigated and only then discovered the existence of a 2010 default judgment against her and in favor of Midland Funding for a purported account debt of $8,529.93 plus interest (2010 default judgment). Young further contended that she had never been served with process in the underlying lawsuit Midland Funding brought against her and had no knowledge of the lawsuit or the judgment before 2019.
In December 2019, Young, through her attorney, asked Midland Funding to stipulate to vacatur of the 2010 default judgment because she had never been served with process. Later that month, having received no response within the time she requested for a response, Young sued Midland Funding and MCM in San Mateo County Superior Court.
Young brought three equitable causes of action to set aside the 2010 default judgment and have it declared void based on extrinsic mistake or extrinsic fraud. She also brought a cause of action for actual and statutory damages, penalties, and reasonable attorney fees and costs under the Rosenthal Act. In support of alleged violations of several provisions of the Rosenthal Act, Young averred that the Midland parties were debt collectors of a consumer debt they claimed she owed, and that they engaged in various forms of false and deceptive conduct in attempting to collect that debt.2 Her allegations centered on her contention that she was never served with process in the lawsuit Midland Funding brought against her.
In their joint answer, Midland Funding and MCM denied Young's allegations and asserted numerous affirmative defenses.
Soon after, each filed an anti-SLAPP motion to strike all of Young's causes of action brought against it. Their motions were based on overlapping but not identical grounds. Each also sought attorney fees and costs under the anti-SLAPP statute.3
In their anti-SLAPP motions, the Midland parties contended, among other things, that Young's Rosenthal Act cause of action was time-barred; that there was no evidence that MCM had any role in bringing or pursuing the lawsuit against Young; and that Young failed to show that she or the Midland parties came within the respective definitions of a "debtor" of "consumer" debt or of a "debt collector."
To meet the requisite two-step test under the anti-SLAPP statute, the Midland parties contended, first, that Young's lawsuit was directed at constitutionally protected public activity, i.e., activities before a judicial proceeding. Second, they argued, Young could not meet her burden of showing she would probably prevail on the merits of any of her causes of action because Midland Funding had effected substituted service of process on her in its lawsuit against her and, even if service had not been legally effected, they never knew service had not been effected.
At the second step of the analysis, the Midland parties relied on proof of substituted service of process documents Midland Funding filed with the superior court in 2009. These documents indicate that in January 2009, a registered process server, after making reasonably diligent but unsuccessful efforts to personally serve Young at a particular address in Burlingame, California (Burlingame address), served the summons and complaint at that address on a man, described as "John Doe, A white male approx. 30–35 years of age 5'6?–5'8? in height weighing 140–160 lbs with black hair," who was "a competent member of the household ... at the dwelling house or usual place of abode of [Young]." The documents also indicate the process server later mailed the summons and complaint to the Burlingame address.
The Midland parties further contended that Midland Funding purchased Young's account from a third party lender's managing company in 2008, and that the account had an outstanding balance of $8,269.93. As part of this transaction, MCM received records from the managing company, including a loan repayment and security agreement that Young executed in 2005 (2005 loan agreement), which listed her address as the Burlingame address. Drawing from electronic records obtained from the managing company, MCM created a "seller data sheet" for Young's account. This data sheet listed the Burlingame address as Young's address. According to a declaration of an MCM senior project manager that the Midland parties filed in support of their anti-SLAPP motions and which we will discuss further post , "Midland relied on information for [Young] as reflected in the documents and information provided by [the lender's managing company], including the Loan Agreement and the Seller Data Sheet."
Young filed an opposition to the Midland parties’ anti-SLAPP motions. She did not contest that the Midland parties had satisfied their burden under the first step of anti-SLAPP test. Tracking the approach taken by the Midland parties, she focused her arguments on whether she showed she had a probability of prevailing on the merits of her causes of action. In a declaration, Young asserted she knew nothing of Midland Funding's lawsuit against her until 2019, had not resided at the Burlingame address since 2001, and had never received the summons and complaint that were allegedly served or delivered there. According to Young's mother, stepfather and brother, who also filed declarations, while they resided at the Burlingame address in 2009, Young did not live there and no documents relating to the lawsuit had been served or received at the residence.
Young argued the Midland parties had violated section 1788.17 by falsely representing that this substituted service had been effected. Because of this lack of service, she argued, the 2010 default judgment was void ab initio , not merely voidable, and the Midland parties had violated the Rosenthal Act by continuing to attempt to collect on that judgment despite actual knowledge that the judgment was void for lack of jurisdiction, an apparent reference to the notice her attorney gave to Midland Funding's counsel ...
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