Mellon v. Reg'l Tr. Servs. Corp.

• Decision Date: 17 July 2014
• Docket Number: No. 31570–3–III.,31570–3–III.
• Citation: 182 Wash.App. 476,334 P.3d 1120
• Court: Washington Court of Appeals
• Parties: Kelly J. MELLON and Cynthia L. Mellon, husband and wife, Appellants, v. REGIONAL TRUSTEE SERVICES CORPORATION, Trustee; IndyMac Mortgage Services, A Division of One West Bank, FSB; and One West Bank, FSB, Respondents.

182 Wash.App. 476
334 P.3d 1120

Kelly J. MELLON and Cynthia L. Mellon, husband and wife, Appellants,
v.
REGIONAL TRUSTEE SERVICES CORPORATION, Trustee; IndyMac Mortgage Services, A Division of One West Bank, FSB; and One West Bank, FSB, Respondents.

No. 31570–3–III.

Court of Appeals of Washington,
Division 3.

July 17, 2014.

Affirmed in part; reversed in part; remanded.

[334 P.3d 1123]

Joseph Paul Delay, Delay Curran Thompson Pontarolo & Walker, Spokane, WA, for Appellant.

Robert W. Norman Jr., Houser & Allison APC, Long Beach, CA, Emilie Ka-aw Edling, Houser & Allison APC, Portland, OR, for Respondent.

Wesley Jude Werich, Robinson Tait P.S., Seattle, WA, Other Parties.

BROWN, A.C.J.

¶ 1 Kelly J. and Cynthia L. Mellon appeal the CR 12(b)(6) dismissal of their suit against IndyMac Mortgage Services and its parent organization, OneWest Bank FSB (collectively IndyMac), for alleged wrongful conduct surrounding a forbearance agreement on a defaulted note and deed of trust. The trial court concluded federal regulation preempted state laws implicated in the Mellons' claims, and regardless, those state laws did not support the Mellons' claims. The Mellons contend the trial court erred in both conclusions and by failing to expressly decide their various motions and releasing their injunction bond to IndyMac. We conclude the Mellons' state consumer protection claim is not federally preempted and that part of the CR 12(b)(6) dismissal was error. We affirm the remaining rulings, finding no error regarding the various motions or injunction bond. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.

FACTS

¶ 2 On October 25, 2007, the Mellons borrowed $188,000 from IndyMac to buy residential real property. The Mellons signed a promissory note, payable in monthly installments of $1,523.89, and secured by a deed of trust benefitting IndyMac. OneWest bought the loan in March 2009 as IndyMac transitioned from the role of lender to loan servicer. OneWest and IndyMac were federally chartered savings associations during each relevant transaction.

[334 P.3d 1124]

¶ 3 Due to unemployment-related financial difficulties beginning in May 2010, the Mellons made no loan payments between August 2010 and January 2011. IndyMac offered the Mellons three new payment options. On February 21, 2011, Mr. Mellon signed a forbearance agreement promising to pay $10,004.89 in February 2011 and $2,951.20 monthly from March to July 2011. IndyMac reserved the right to terminate the forbearance agreement and foreclose the deed of trust if the Mellons defaulted again. The Mellons made the first payment on time, made the second payment late, and did not make the third payment at all. On April 1, 2011, IndyMac returned the Mellons' untimely check and terminated the forbearance agreement. IndyMac then initiated foreclosure.

¶ 4 On May 5, 2011, the Mellons sued IndyMac under the deeds of trust act, chapter 61.24 RCW; the Foreclosure Fairness Act (FFA), Laws of 2011, chapter 58; the mortgage loan servicing act, chapter 19.148 RCW; and the Consumer Protection Act (CPA), chapter 19.86 RCW. The Mellons' alleged IndyMac “solicited ... a compromise of the default, which was impossible of performance” and “unreasonable and impossible to perform” considering Mr. Melions' unemployment status. Clerk's Papers (CP) at 6, 7. The Melions further alleged IndyMac “failed to act in good faith and ha[d] a financial gain not to cooperate and to foreclose the [deed of trust] as a foreclosure would produce a higher financial gain.” CP at 6.

¶ 5 Based on these factual allegations, the Melions sought six forms of relief. First, the Melions sought to either reinstate the defaulted note and deed of trust or fix an equitable payment of $1,582.89 monthly while requiring IndyMac to deal with them in good faith. Second, they sought to specifically compel IndyMac to deal with them in good faith by either removing their loan from default status or reducing their payments to $1,582.89 monthly. Third, the Melions sought a ruling that they timely made the first and second payments under the forbearance agreement and may tender the third payment to the court clerk. Fourth, they sought to temporarily and permanently enjoin IndyMac from foreclosing the deed of trust. Fifth, the Melions sought treble damages and attorney fees for IndyMac's unfair or deceptive act or practice. Finally, they sought attorney fees for IndyMac's nondisclosure regarding the loan transfer.

¶ 6 About two weeks later, the trial court temporarily enjoined the trustee's sale scheduled for May 27, 2011, on condition that every month until trial, the Melions pay to the court clerk the $1,523.80 in principal, interest, and reserves due under the note. The Mellons consistently made these payments over the next 12 months, raising the value of the injunction bond to $18,300.00.

¶ 7 The Mellons moved to fix the total loan amount, fix the unpaid loan balance, and reinstate the note and deed of trust. IndyMac moved to dismiss the Mellons' complaint with prejudice under CR 12(b)(6). The Mellons orally opposed IndyMac's motion in a manner sufficient to preserve the appeal issues. See RAP 2.5(a). In October 2012, the trial court implicitly denied the Mellons' motions by granting IndyMac's motion. The court concluded federal regulation preempted state laws implicated in the Mellons' claims, and regardless, those state laws did not support the Mellons' claims. The Mellons moved for reconsideration.

¶ 8 On January 30, 2013, after a two-month medical absence, the trial judge issued an order denying reconsideration and releasing the injunction bond to IndyMac. The Mellons were not notified of the ruling and, consequently, did not appeal in time. Once the Mellons discovered the ruling on March 8, 2013, they moved to vacate it for lack of service. The trial court denied the Mellons' motion and instead extended the time for them to appeal on March 25, 2013. The Mellons appealed two weeks later.

ANALYSIS A. Extending Time to Appeal

¶ 9 The parties aptly observe: (1) the trial court erred by extending the time for the Mellons to appeal because it lacked authority to waive RAP 5.2(a) and (e); and (2) the Mellons improperly filed an untimely appeal without requesting relief from this court under

[334 P.3d 1125]

RAP 18.8(a) and (b). See State v. Pilon, 23 Wash.App. 609, 612, 596 P.2d 664 (1979). We accept this appeal because “extraordinary circumstances”—namely the trial court's failure to serve the Mellons the order denying reconsideration and releasing the injunction bond to IndyMac—“prevent[ed] the filing of a timely document.” RAP 18.8 cmt., 86 Wash.2d 1271 (1976). Thus, “to prevent a gross miscarriage of justice,” we extend the time for the Mellons to appeal under RAP 18.8(a) and (b) and adopt the trial court's time extension ruling nunc pro tunc.

B. CR 12(b)(6) Dismissal

¶ 10 The issue is whether the trial court erred in dismissing the Mellons' complaint under CR 12(b)(6). The court based the CR 12(b)(6) dismissal on alternative grounds: (1) federal regulation preempted state laws implicated in the Mellons' claims; and (2) those state laws did not support the Mellons' claims. While the Mellons assigned error to both grounds, they abandoned their challenge to the second ground as it concerns their non-CPA claims. See Howell v. Spokane & Inland Empire Blood Bank, 117 Wash.2d 619, 624, 818 P.2d 1056 (1991) (an appellate court will not consider an error claim a party fails to support with legal argument in his or her opening brief); see also Fosbre v. State, 70 Wash.2d 578, 583, 424 P.2d 901 (1967); RAP 10.3(a)(6). The Mellons essentially concede the law does not support their non-CPA claims. Therefore, we affirm the CR 12(b)(6) dismissal except as it concerns the Mellons' CPA claim.

¶ 11 The Mellons contend they stated a CPA claim under the FFA and neither state statute is federally preempted. We review CR 12(b)(6) dismissals de novo. Hoffer v. State, 110 Wash.2d 415, 421, 755 P.2d 781 (1988). And, we review preemption issues de novo. McCurry v. Chevy Chase Bank, FSB, 169 Wash.2d 96, 100, 233 P.3d 861 (2010).

¶ 12 A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” CR 8(a)(1). Otherwise, a trial court may dismiss the complaint on motion for “failure to state a claim upon which relief can be granted.” CR 12(b)(6). Dismissal is appropriate if, accepting all factual allegations as true, “it appears beyond doubt that the plaintiff can prove no set of facts, consistent with the complaint, which would entitle the plaintiff to relief.” Corrigal v. Ball & Dodd Funeral Home, Inc., 89 Wash.2d 959, 961, 577 P.2d 580 (1978); see Barnum v. State, 72 Wash.2d 928, 929–30, 435 P.2d 678 (1967). Dismissal is not appropriate if the complaint conceivably alleges some hypothetical situation, including facts argued for the first time on appeal, that if proved would be legally sufficient to justify relief for the plaintiff. Halvorson v. Dahl, 89 Wash.2d 673, 674–75, 574 P.2d 1190 (1978); Bravo v. Dolsen Cos., 125 Wash.2d 745, 750, 888 P.2d 147 (1995).

¶ 13 We begin with the trial court's conclusion that the Mellons did not state a cognizable CPA claim. The Mellons' complaint alleged IndyMac violated the CPA by proposing a bad faith forbearance agreement that was unreasonable and impossible to perform. To prevail in a private CPA claim, a plaintiff must prove: “(1) unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury to plaintiff in his or her business or property; [and] (5) causation.” Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 780, 719 P.2d 531 (1986); see RCW 19.86.020, .090. We focus on the first CPA element because the Mellons sufficiently alleged the other four elements.

¶ 14 A plaintiff may predicate the first CPA element on “a per se violation of statute,...