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Assignee of Sold Out Junior Could Not Sue Borrower Upon Fraud Claim Not Specifically Assigned

In Heritage Pacific Financial, LLC v. Monroy, 2013 Westlaw 1779278 (Cal.App.), the buyer of a junior note secured by a mortgage that was extinguished by the foreclosure of a senior lien sued the borrower for fraud, alleging that her loan application falsely stated that her monthly income was $9,200.  The borrower demurred and brought a counterclaim alleging that the plaintiff's demand letter violated the Federal Fair Debt Collection Practices Act by attempting to collect an unenforceable  debt.  The trial court granted the borrower's demurrer, granted her summary judgment on her counterclaim and awarded her $90,000 in attorney's fees.  The appellate court affirmed, holding that the fraud claim was not transferred to the debt buyer; it was not "incidental" to the overall sale, and there was no specific transfer of the fraud claim.  This case is emblematic of recent hostility toward bulk buyers of consumer debt.

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