A basic premise of debt collection law is that a creditor cannot collect a debt from someone whom does not owe that debt. However, what if one were to flip that premise? What if a person whom didn’t owe a debt filed suit under the FDCPA against a law firm which previously filed an “in rem” foreclosure action and named that person as a party in the foreclosure action?
A recent decision from the United States District Court in New Jersey held that a titleholder of real estate, whom inherited said real estate and was not a party/guarantor of the mortgage loan that secured the same, did not have standing to sue a law firm (or presumably a lender/mortgage servicer) under the FDCPA. Kraft v. Phelan Hallinan Diamond & Jones, PC et al., 2019 U.S. Dist. LEXIS 126323; 2019 WL 3423437.
In Kraft, the plaintiff heir sued the defendant foreclosure firm in federal district court for alleged violations of the FDCPA committed during the firm’s foreclosure case against real estate that Kraft owned via inheritance from his father. Kraft’s deceased father was the mortgagor in the mortgage loan that secured the subject real estate, which fell delinquent subsequent to his death. Thus, the firm filed an “in rem” foreclosure action (in which the firm did not seek any money judgment against Kraft) to seize said real estate, which obviously remained collateral for the mortgage loan despite the death of the mortgagor, Kraft’s father.
Kraft argued the fact that because he paid utility bills as homeowner of the real estate it entitled him to status as a consumer under the FDCPA. However, this desperate “Hail Mary” attempt to win the case fell many yards short, as the Court found absolutely no relation between a homeowner’s duty to pay utility bills and his or her contractual obligations under a promissory note, if any.
Kraft didn’t stand much of a chance in this case if you simply reverse the facts. It’s axiomatic that a law firm cannot sue for a money judgment (as opposed to an “in rem” action) in a foreclosure action against an heir whom was not a party to the mortgage loan contract. The law firm which tried that stunt would be severely sanctioned and laughed out of court. By the same token, the non-indebted heir cannot maintain a FDCPA suit against a foreclosure firm for filing an “in rem” action against said heir (again we can only presume the same stands as to a mortgage lender/servicer). The old adage “you can’t have your cake and eat it, too” still holds true.