Beadle v. Haughey, et al. CV-04-272-SM 02/09/05 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Michael Robert Beadle and Vivian Claire Beadle, Plaintiffs

v. Civil No. 04-272-SM Opinion No.

Thomas M. Haughey; William Philpot, Jr.; Stephen J. Laurent; Charles W. Gallagher; Mark H. hamper; Warren F. Lake; and Haughey, Philpot and Laurent, P .A . , Defendants

O R D E R

This pro se suit is brought under the Fair Debt Collection

Practices Act ("FDCPA"),

, et seg. Specifically

Michael Robert Beadle and Vivian Claire Beadle assert that the

defendant attorneys: (1) published a foreclosure notice without

giving them prior notice, as reguired by 15 U.S.C. § 1692g(a);

(2) denied them their right to dispute the alleged debt under

§ 1692g(b); and (3) published a foreclosure notice that failed t

make disclosures reguired by §§ 1692e(10) and (11). Before the

court are plaintiffs' appeal of the Magistrate Judge's order

denying their motion to amend their complaint (document no. 41); Defendants' Motion to Dismiss or. Alternatively, Motion for

Summary Judgment (document no. 33), to which plaintiffs object;

and Plaintiffs' Motion for Partial Summary Judgment (document no.

49), to which defendants object. For the reasons given,

plaintiffs' motions are denied and defendants' motion is granted.

Appeal of the Magistrate Judge's Order

Plaintiffs have identified no grounds warranting reversal of

the Magistrate Judge's denial of their motion to amend the

complaint. The Magistrate Judge observed that he could not grant

plaintiffs an injunction against a foreclosure sale because they

had failed to name the foreclosing party as a defendant. But it

does not follow from that observation that justice reguires the

court to grant plaintiffs leave to amend the complaint, for a

second time, to add the foreclosing party, and others, as

defendants. First, plaintiffs have known the identity of the

foreclosing party since the inception of this suit and could have

moved in a timely manner. But, more to the point, adding

additional parties (Mortgage Electronic Registration Systems,

Inc., Countrywide Home Loans, Inc., and Aegis Lending

Corporation) would be futile at this point because plaintiffs'

2 only claimed legal basis for relief is the FDCPA. Mortgagees are

not "debt collectors" within the meaning of the FDCPA. See

Oldroyd v. Assocs. Consumer Discount Co.,

, 241-

42 (E.D. Pa. 1994) (citing 15 U.S.C. § 1692a(6)(A)). As

plaintiffs' proposed amendment would be futile, their appeal of

the Magistrate Judge's order (document no. 39) is denied.

Defendants' Motion for Summary Judgment

A. Summary Judgment Standard

Summary judgment is appropriate when the record reveals "no

genuine issue as to any material fact and . . . the moving party

is entitled to a judgment as a matter of law." F e d . R. C i v . P.

56(c). "The role of summary judgment is to pierce the

boilerplate of the pleadings and provide a means for prompt

disposition of cases in which no trial-worthy issue exists."

Quinn v. City of Boston,

(1st Cir. 2003) (citing

Suarez v. Pueblo Int'l, Inc.,

(1st Cir. 2000)).

"Once the movant has served a properly supported motion

asserting entitlement to summary judgment, the burden is on the

nonmoving party to present evidence showing the existence of a

3 trialworthy issue." Gulf Coast Bank & Trust Co. v. Reder,

(1st Cir. 2004) (citing Anderson, 477 U.S. at 248;

Garside v. Osco Drug, Inc.,

(1st Cir. 1990)). To

meet that burden the nonmoving party, may not rely on "bare

allegations in [his or her] unsworn pleadings or in a lawyer's

brief." Gulf Coast,

(citing Rogan v. City of

Boston,

(1st Cir. 2001); Maldonado-Denis v.

Castillo-Rodriguez,

(1st Cir. 1994)). When

ruling on a party's motion for summary judgment, the court must

view the facts in the light most favorable to the nonmoving party

and draw all reasonable inferences in that party's favor. See

Lee-Crespo v. Schering-Plough Del Caribe Inc.,

(1st Cir. 2003) (citing Rivera v. P.R. Agueduct & Sewers Auth.,

331 F .3d 183, 185 (1st Cir. 2003)).

B. Background

Defendant Thomas M. Haughey is an attorney with the law firm

of Haughey, Philpot & Laurent, P.A. The other five individual

defendants are also attorneys associated with Haughey, Philpot &

Laurent. Haughey was retained by Countrywide Home Loans, Inc. to

4 foreclose on a mortgage it was servicing on real property owned

by plaintiffs.

Haughey began the foreclosure process by sending plaintiffs

a letter dated June 14, 2004. He followed up with another letter

dated July 30, 2004. Both letters contained FDCPA warnings.

Haughey also placed one or more newspaper advertisements

announcing the foreclosure sale. The sale was originally

scheduled for August 2, 2004, but was rescheduled, and eventually

took place in the late fall of 2004.

Plaintiffs apparently refused to accept Haughey's June 14

and July 30 letters, as well as other correspondence from

Haughey, and others, on the rather spacious grounds that the

mailing addresses on the "undeliverable" letters used plaintiffs'

middle initials rather than their full middle names, or that

certain conventions concerning capitalization were not followed.

The premise of this suit is that plaintiffs are "consumers,"

as defined by 15 U.S.C. § 1692a(3), that defendants are "debt

collectors," as defined by § 1692a (6), and that defendants

5 violated plaintiffs' rights under the FDCPA by: (1) publishing a

notice of the August 2, 2004, foreclosure sale without any

initial debt collection communication (including a notice of

rights) as reguired by § 1692g(a); (2) denying plaintiffs their

right to dispute the debt, as reguired by § 1692g(b); (3)

publishing a foreclosure notice that failed to state that

plaintiffs owed the alleged mortgage money, making the notice

false or deceptive within the meaning of § 1692e(10); and (4)

publishing a foreclosure notice that failed to state that

defendants were debt collectors attempting to collect a debt, in

violation of § 1692e(ll).

C. Discussion

Defendants make three arguments: (1) that they are not "debt

collectors" within the meaning of the FDCPA; (2) that they fully

complied with the FDCPA's reguirements; and (3) that any failure

to comply with the FDCPA was unintentional and thus insufficient

to support liability, under 15 U.S.C. § 1692k(c).

To prevail on a claim under the FDCPA, plaintiffs must

establish that:

6 (1) [they] ha[ve] been the object of collection activity arising from a consumer debt; (2) the defendant attempting to collect the debt gualifies as a "debt collector" under the Act; and (3) the defendant has engaged in a prohibited act or has failed to perform a reguirement imposed by the FDCPA.

Russey v. Rankin,

(D.N.M. 1995) (citing

Kolker v. Duke City Collection Agency,

(D.N.M. 1990)) .

Defendants argue that they are not "debt collectors" within

the meaning of the FDCPA because the "principal purpose" of their

law firm is not debt collection, and because they do not

regularly collect or attempt to collect debts. See 15 U.S.C.

§ 1692a(6). While it is difficult to discern the precise

contours of plaintiffs' response, they appear to argue that

defendants must be debt collectors because the purpose of the

June 14 and July 30 letters was plainly to collect a debt.

The key guestion here is not whether defendants' law firm is

a "debt collector," but rather, whether defendants were engaged

in collecting a debt. They were not.

7 Nearly every court that has addressed the question has held

that foreclosing on a mortgage is not debt collection activity

for purposes of the FDCPA. "Security enforcement activities fall

outside the scope of the FDCPA because they aren't debt

collection practices." Rosado v. Taylor,

(N.D. Ind. 2004) (citing 15 U.S.C. § 1692a(6)).

The most frequently cited case attributes the different treatment of security interests and debts to the target's ability to comply with the request made of her. Jordan v. Kent Recovery Serv., Inc.,

(D. Del. 1990). One receiving debt collection letters may agonize that she [or he] cannot comply with them, hence she [or he] needs the Act's protection. One asked to comply with a security interest enforcement request, on the other hand, has the security that she [or he] can return (unless she [or he] has been a malefactor).

This distinction may wane in the context of real property, since turning over one's house is unlikely to ever be easy. Regardless, the law is rather clear that enforcing a security interest is not debt collection.

Rosado,

. In Rosado, the court observed

that the rule distinguishing debt collection from enforcement of

security interests has been applied most frequently in cases

involving personal property,

, but went on to explain

that "[n]o different rule applies in cases involving real

property; a smaller number of cases hold that a mortgage foreclosure is not a debt collection activity."

(citing

Bergs v. Hoover, Bax & Slovacek, L.L.P., No. Civ.A.3:01-CV-1572-

L,

, at *3-*6 (N.D. Tex. Sept. 24, 2003); Hulse

v. Ocwen Fed. Bank, FSB,

(D. Or.

2002); Heinemann v. Jim Walter Homes, Inc.,

(N.D. W. Va. 19 98)); see also Sweet v. Wachovia Bank & Trust

Co., N .A ., No. Civ.A. 3:03-CV-1212-R,

, at * (N.D

Tex. Feb. 26, 2004) ("this court finds Defendant's reasoning

persuasive on this issue and follows the court in Hulse in

finding that the FDCPA does not cover foreclosure as 'debt

collection'"). In short, it seems very well established that

foreclosing on a mortgage does not constitute debt-collecting

activity under the FDCPA.

There are several cases in which foreclosure has been held

to be debt collection, but those cases involve distinguishing

factual circumstances not present here. In McDaniel v. South &

Associates, P.C.,

(D. Kan. 2004), the court

distinguished Bergs, Hulse, and Heinemann on grounds that the

defendant law firm engaged in a broader scope of activity -

seeking judicial rather than non-judicial foreclosure, as well a a personal judgment against the property owner, which additional

activity gualified the law firm's activity as general debt

collection rather than focused action against the security.

; see also Flores v. Shapiro & Kreisman, 24

(E.D. Pa. 2002) (judicial foreclosure). Here, defendants

conducted a non-judicial foreclosure, and did not seek judgment

against plaintiffs personally. And in Sandlin v. Shapiro &

Fishman,

(M.D. Fla. 1996), the defendant law

firm sent the plaintiff mortgagors a letter that, inter alia,

instructed the mortgagors that they could avoid foreclosure by

paying the law firm, rather than the creditor.

.

Here, the June 14 letter did not indicate who plaintiffs were to

pay, and the July 30 letter directed plaintiffs to make payment

"in cash, bank or cashiers check, or bank certified check payable

to the above-mentioned current servicer. Countrywide Home Loans,

Inc." Finally, a section of the FDCPA does pertain to the

enforcement of security interests, 15 U.S.C. § 1692f(6), but

plaintiffs make no claim that defendants violated § 1692f (6) . In

any event, "except for purposes of § 1692f(6), an enforcer of a

security interest . . . does not meet the statutory definition of

10 a debt collector under the FDCPA," Montgomery v. Huntington Bank,

346 F .3d 693, 700-701 (6th Cir. 2003).

Plaintiffs are incorrect in suggesting that

(a)(1) either makes foreclosure a debt-collection activity

(Pis.' Obj. to Defs.' Mot. for Summ. J. (document no. 45) 5 5),

or prohibits non-judicial foreclosure sales (id. 5 6). To the

contrary, § 16921 is a venue provision that provides:

Any debt collector who brings any legal action on a debt against any consumer shall -

(1) in the case of an action to enforce an interest in real property securing the consumer's obligation, bring such action only in a judicial district or similar legal entity in which such real property is located . . .

(a)(1). Given that defendants have not brought

any legal action against plaintiffs, § 19621 is not applicable to

this case.

Because defendants were executing a non-judicial foreclosure

proceeding rather than collecting a debt, their activities are

not subject to the FDCPA provisions plaintiffs invoke. Thus,

there is no need to consider defendants' second and third

11 defenses, i.e., that they complied with the FDCPA and that they

were entitled to § 1692k(c) protection. Moreover, given that the

FDCPA is the sole basis for relief asserted by plaintiffs,

defendants are entitled to judgment as a matter of law.

Plaintiffs' Motion For Summary Judgment

Plaintiffs' motion for summary judgment consists almost

entirely of the same arguments raised in their objection to

defendants' motion for summary judgment. For the same reasons

that defendants are entitled to summary judgment, plaintiffs,

necessarily, are not. Accordingly, Plaintiffs' Motion for

Partial Summary Judgment is denied.

Conclusion

For the reasons given, plaintiffs' appeal of the Magistrate

Judge's order (document no. 41) and their motion for partial

summary judgment (document no. 49) are denied, and defendant's

motion for summary judgment (document no. 33) is granted. The

clerk of the court shall enter judgment in accordance with this

order and close the case.

12 SO ORDERED.

Steven J. McAuliffe Chief Judge

February 9, 2005

cc: Michael R. Beadle Vivian C. Beadle Jeffrey H. Karlin, Esq.

13