                                                                                FILED 

                                                                             JULY 17,2014 

                                                                      In the Office of the Clerk of Court 

                                                                    W A State Court of Appeals, Division III 





~
I
I              IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

!                                 DIVISION THREE



I    KELLY J. MELLON and CYNTHIA L.
     MELLON, husband and wife,
                                                   )
                                                   )
                                                   )
                                                             No. 31570-3-111



I
.1
l
;1                 v.
                          Appellants,              )
                                                   )
                                                   )
                                                   )         PUBLISHED OPINION 

J    REGIONAL TRUSTEE SERVICES                     )

I    CORPORATION, Trustee; INDYMAC                 )

                                                   )
I    MORTGAGE SERVICES, A DIVISION
     OF ONE WEST BANK, FSB; and ONE                )

I    WEST BANK, FSB,                               )

                                                   )

I                         Respondents.             )

            BROWN, AC.J.-Kelly J. and Cynthia L. Mellon appeal the CR 12(b)(6) dismissal

1    of their suit against IndyMac Mortgage Services and its parent organization, OneWest

I
j
     Bank FSB (collectively IndyMac), for alleged wrongful conduct surrounding a



I    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
    No. 31570-3-111
    Mellon v. Reg'j Tr. Servs. Corp.

    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
J
           On October 25,2007, the Mellons borrowed $188,000 from IndyMac to buy

I   residential real property. The Mellons signed a promissory note, payable in monthly

I   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



I   during each relevant transaction.

           Due to unemployment-related financial difficulties beginning in May 2010, the

I   Mellons made no loan payments between August 2010 and January 2011. IndyMac

I   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.




                                                2

    No. 31570-3-111
    Mellon v. Reg'/ Tr. Servs. Corp.

           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. Mellons' unemployment status. Clerk's Papers (CP) at 6, 7.

    The Mellons further alleged IndyMac "failed to act in good faith and hard] a financial
1

I   gain not to cooperate and to foreclose the [deed of trust] as a foreclosure would

I   produce a higher financial gain." CP at 6.

           Based on these factual allegations, the Mellons sought six forms of relief. First,

    the Mellons 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 compellndyMac 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 Mellons 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 Mellons 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.

          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 Mellons pay to


                                                 3

No. 31570-3-111
Mel/on v. Reg'l Tr. Servs. Corp.

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.

      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.

      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

      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


                                              4

No. 31570-3-111
Mellon v. Reg'l Tr. Servs. Corp.

under RAP 18.8(a) and (b). See State v. Pilon, 23 Wn. 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 Wn.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

       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 Wn.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 Wn.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.

      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.




                                               5

1

I
i
J    No. 31570-3-111 

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


     State, 110 Wn.2d 415,421,755 P.2d 781 (1988). And, we review preemption issues de 


     novo. McCurry v. Chevy Chase Bank, FSB, 169 Wn.2d 96, 100,233 P.3d 861 (2010). 


            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

     Wn.2d 959, 961, 577 P.2d 580 (1978); see Barnum v. State, 72 Wn.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

     Wn.2d 673,674-75,574 P.2d 1190 (1978); Bravo v. Dolsen Cos., 125 Wn.2d 745, 750,

     888 P.2d 147 (1995).

            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 Wn.2d 778, 780, 719 P.2d 531




                                                   6

No. 31570-3-111
Mellon v. Reg'l Tr. Servs. Corp.

(1986); see RCW 19.86.020, .090. We focus on the first CPA element because the

Mellons sufficiently alleged the other four elements.

       A plaintiff may predicate the first CPA element on "a per se violation of statute,

an act or practice that has the capacity to deceive substantial portions of the public, or

an unfair or deceptive act or practice not regulated by statute but in violation of public

interest." Klem v. Wash. Mut. Bank, 176 Wn.2d 771, 787, 295 P.3d 1179 (2013)

(clarifying Hangman Ridge, 105 Wn.2d at 785-86). A defendant's act or practice is per

se unfair or deceptive if the plaintiff shows it violates a statute declaring the conduct to

be an unfair or deceptive act or practice in trade or commerce. See Hangman Ridge,

105 Wn.2d at 786. To state a claim for a per se CPA violation, the plaintiff must allege

"'the existence of a pertinent statute'" and "'its violation.'" Fid. Mort. Corp. v. Seattle

Times Co., 131 Wn. App. 462, 471, 128 P.3d 621 (2005) (quoting Keyes v. Bollinger, 31

Wn. App. 286, 290, 640 P .2d 1077 (1982»; see Dempsey v. Joe Pignataro Chevrolet,

Inc., 22 Wn. App. 384, 393, 589 P.2d 1265 (1979). The Mellons have not done so here.

       At the time the Mellons sued, FFA section 14 declared it an unfair or deceptive

act or practice in trade or commerce for an entity to violate its duty to mediate a deed of

trust foreclosure in good faith under former RCW 61.24.163(8) (2011), to fail to comply

with notice requirements under former RCW 61.24.031 (2011), or to violate its duty to

initiate contact and exercise due diligence under former RCW 61.24.174 (2011). See

RCW 61.24.135(2). But FFA section 14 took effect on July 22,2011, more than two

months after the Mellons sued and five months after Mr. Mellon signed the forbearance

agreement. LAws OF 2011, at ii; RCW 61.24.172 note; FINAL B. REP. on Second


                                               7

I
1
,
4
1



1    No. 31570-3-111

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


j
'I
     Substitute H.B. 1362, at 4, 62d Leg., Reg. Sess. (Wash. 2011). Because this provision

     is not retroactive, it does not govern here. 1 And, proposing a forbearance agreement

     that is unreasonable and impossible to perform does not fall squarely within the conduct

     prohibited by FFA section 14. Thus, IndyMac's act or practice is not per se unfair or

     deceptive.

            If a defendant's act or practice is not per se unfair or deceptive, the plaintiff must

     show the conduct is "unfair" or "deceptive" under a case-specific analysis of those

     terms. See Klem, 176 Wn.2d at 785-87. Because the CPA does not define those

     terms, their meaning evolves through a '''gradual process of judicial inclusion and

     exclusion.'" State v. Reader's Digest Ass'n, 81 Wn.2d 259, 275,501 P.2d 290 (1972)

     (quoting Fed. Trade Comm'n v. Raladam Co., 283 U.S. 643, 648, 51 S. Ct. 587, 75 L.

     Ed. 1324 (1931», modified by Hangman Ridge, 105 Wn.2d. at 786; see Saunders v.

     Lloyd's of London, 113 Wn.2d 330, 344, 779 P .2d 349 (1989). We focus on unfairness

     because the Mellons allege no facts supporting deceptiveness. 2


            1 Our legislature did not explicitly provide for FFA section 14 to apply
     retroactively and it is neither curative nor remedial where it creates a right of action for
     new per se CPA violations. See Densley v. Dep't of Ret. Sys., 162 Wn.2d 210, 223,
     173 P.3d 885 (2007); State v. T.K., 139 Wn.2d 320, 332, 987 P.2d 63 (1999); In re F.D.
     Processing, Inc., 119 Wn.2d 452, 460-63, 832 P.2d 1303 (1992); Johnston v. Beneficial
     Mgmt. Corp. of Am., 85 Wn.2d 637, 642, 538 P.2d 510 (1975).
            2 A defendant's act or practice is "deceptive" if it "has a capacity to deceive a
     substantial portion of the public." Hangman Ridge, 105 Wn.2d at 785; see Fisher v.
     World-Wide Trophy Outfitters, Ltd., 15 Wn. App. 742, 748,551 P.2d 1398 (1976). But a
     defendant's act or practice is not "deceptive" unless it involves '''a representation,
     omission or practice that is likely to mislead' a reasonable consumer." Panang v.
     Farmers Ins. Co., 166 Wn.2d 27,50,204 P.3d 885 (2009) (quoting Sw. Sunsites, Inc. v.
     Fed. Trade Comm'n, 785 F.2d 1431, 1435 (9th Cir. 1986». In their briefing to this court,
     the Mellons argue IndyMac engaged in a "deceptive practice" by "bundling ...
     attorneys' fees and inspection fees into 'loan-related fees and services' totaling

                                                   8
No. 31570-3-111
Mellon v. Reg'l Tr. Servs. Corp.

       We must liberally construe the CPA to serve its beneficial purposes and may look

to federal law for guidance in doing so. RCW 19.86.920. Our Supreme Court has

suggested a defendant's act or practice might be "unfair" if it '''causes or is likely to

cause substantial injury to consumers which is not reasonably avoidable by consumers

themselves and is not outweighed by countervailing benefits.'" Klem, 176 Wn.2d at 787

(quoting 15 U.S.C. § 45(n». Similarly, a defendant's act or practice might be "unfair" if it

"offends public policy as established 'by statutes [or] the common law,' or is 'unethical,

oppressive, or unscrupulous,' among other things." Id. at 786 (alteration in original)

(quoting Magney v. Lincoln Mut. Sav. Bank, 34 Wn. App. 45, 57, 659 P.2d 537 (1983)};

see Fed. Trade Comm'n v. Sperry & Hutchinson Co., 405 U.S. 233, 244 n.5, 92 S. Ct.

898, 31 L. Ed. 2d 170 (1972) (quoting Unfair or Deceptive Advertising and Labeling of

Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8355

(1964». For example, advancing a substantively or procedurally unconscionable

contract term is likely an "unfair" act or practice. See State v. Kaiser, 161 Wn. App. 705,

722, 254 P .3d 850 (2011 ) (citing State v. Ralph Williams' Nw. Chrysler Plymouth, Inc.,

87 Wn.2d 298,309,553 P.2d 423 (1976)}.

       Asserting bad faith, the Mellons argue that because IndyMac knew Mr. Mellon

was unemployed when he signed the forbearance agreement, it was "unconscionable"

for IndyMac to propose "higher payments than those originally defaulted upon, plus a

balloon payment of over $10,000." Appellants' Opening Br. at 18. The question


$53,295.46." Appellants' Opening Br. at 19. But this alleged bundling occurred after
the Mellons sued and cannot serve as a post hoc factual basis for their earlier claim of
deceptiveness.

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I

     No. 31570-3-111
     Mellon v. Reg'l Tr. Servs. Corp.

     becomes whether IndyMac, by proposing a bad faith forbearance agreement that was

     unreasonable and impossible to perform, advanced a substantively or procedurally

     unconscionable contract term in a manner amounting to an "unfair" act or practice. This

     is a summary judgment or trial question, not a CR 12(b)(6) question. 3 We hold this

     hypothetical situation, if proved, would justify CPA relief for the Mellons. Therefore, the

     trial court erroneously concluded the Mellons did not state a cognizable CPA claim.

            Next, we turn to the trial court's conclusion that federal regulation preempts state

     laws implicated in the Mellons' CPA claim. Under the preemption doctrine, a federal

     statute trumps state laws if the U.S. Congress expressly or impliedly intended that

     result, commanding it explicitly in the statutory language or implicitly in the statutory

     structure and purpose. 4 Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141,


            3 Regarding unconscionability, our Supreme Court has instructed:
            Substantive unconscionability involves those cases where a clause or
            term in the contract is alleged to be one-sided or overly harsh. Shocking
            to the conscience, monstrously harsh, and exceedingly calloused are
            terms sometimes used to define substantive unconscionability.
            Procedural unconscionability is the lack of meaningful choice, considering
            all the circumstances surrounding the transaction including the manner in
            which the contract was entered, whether each party had a reasonable
            opportunity to understand the terms of the contract, and whether the
            important terms were hidden in a maze of fine print. . .. [T]hese three
            factors should not be applied mechanically without regard to whether in
            truth a meaningful choice existed.

     Zuverv. Airtouch Commc'ns, Inc., 153 Wn.2d 293,303,103 P.3d 753 (2004) (citations
     omitted) (internal quotation marks omitted) (alterations omitted); accord Adler v. Fred
     Lind Manor. 153 Wn.2d 331, 344-45, 103 P.3d 773 (2004).
            4 The preemption doctrine derives from the Supremacy Clause, which provides,
     "This Constitution, and the laws of the United States which shall be made in pursuance
     thereof ... , shall be the supreme law of the land; and the judges in every state shall be
     bound thereby, anything in the Constitution or laws of any State to the contrary
     notwithstanding." U.S. CONST. art. VI, cl. 2.

                                                  10 

No. 31570-3-111
Mellon v. Reg'l Tr. Servs. Corp.

152-53, 102 S. Ct. 3014, 73 L. Ed. 2d 664 (1982) (quoting Jones v. Rath Packing Co.,

430 U.S. 519, 525, 97 S. Ct. 1305, 51 L. Ed. 2d 604 (1977)); Silvas v. E*Trade Mortg.

Corp., 514 F.3d 1001, 1004 (9th Cir. 2008); Bank of Am.       V.   CityofS.F., 309 F.3d 551,

557-58 (9th Cir. 2002). A federal administrative rule has no less preemptive effect than

a federal statute if the agency acted within its statutory mandate in promulgating the

rule. de la Cuesta, 458 U.S. at 153-54 (citing United States       V.   Shimer, 367 U.S. 374,

381-83, 81 S. Ct. 1554, 6 L. Ed. 2d 908 (1961)); Silvas, 514 F.3d at 1005; Bank of Am.,

309 F.3d at 560.

            We may infer preemptive intent where federal regulation is so pervasive as to

occupy the entire field on a subject matter, leaving no room for supplemental state

laws-a phenomenon called field preemption. 5 de la Cuesta, 458 U.S. at 153 (quoting

Rice   V.   Santa Fe Elevator Corp., 331 U.S. 218,230,67 S. Ct. 1146,91 L. Ed. 1447

(1947)); Silvas, 514 F.3d at 1004; Bank of Am., 309 F.3d at 558,560. Because

Congress has heavily regulated the banking field for almost 200 years, the usual

presumption against preemption does not apply here. See Silvas, 514 F.3d at 1004-05;

Bank of Am., 309 F.3d at 558-59.

            Congress enacted the Home Owners' Loan Act of 1933 (HOLA), Pub. L. No. 73­

43, 48 Stat. 128, during the Great Depression, when loan default was rampant and



       5 Alternatively, we may infer preemptive intent where state laws actually conflict
with federal regulation, making simultaneous compliance physically impossible or
interposing an obstacle to discernable federal objectives-a phenomenon called conflict
preemption. de la Cuesta, 458 U.S. at 153 (quoting Fla. Lime & Avocado Growers, Inc.
V. Paul, 373 U.S. 132, 142-43,83 S. Ct. 1210, 10 L. Ed. 2d 248 (1963); Hines V.
Oavidowitz, 312 U.S. 52,67,61 S. Ct. 399, 85 L. Ed. 581 (1941)); Silvas, 514 F.3d at

                                               11 

No. 31570-3-111
Mel/on v. Reg'f Tr. Servs. Corp.

credit was scarce. de fa Cuesta, 458 U.S. at 159-60. HOLA tried to ameliorate these

circumstances with "'a radical and comprehensive response to the inadequacies of the

existing state systems.'" fd. at 160 (quoting Conference of Fed. Sav. & Loan Ass'ns v.

Stein, 604 F.2d 1256, 1257 (9th Cir. 1979), aff'd mem., 445 U.S. 921,100 S. Ct. 1304,

63 L. Ed. 2d 754 (1980». Later HOLA amendments delegated to the Office of Thrift

Supervision (OTS) broad rulemaking authority over the lending operations of federal

savings associations. Compare HOLA §§ 4(a), 5(a), 48 Stat. at 129,132 (delegating

rulemaking authority to an OTS predecessor, the Federal Home Loan Bank Board), and

de fa Cuesta, 458 U.S. at 145,161-66 (discussing the breadth of the Board's

rulemaking authority), with Financial Institutions Reform, Recovery, and Enforcement

Act of 1989, Pub. L. No. 101-73, sec. 301, §§ 4(a), 5{a), 103 Stat. 183,280,282

(transferring the Board's rulemaking authority to the OTS).

       Acting within its statutory mandate, the OTS promulgated an administrative rule

establishing HOLA preemption by declaring "OTS hereby occupies the entire field of

lending regulation for federal savings associations." 12 C.F.R. § 560.2(a).

"Accordingly," the OTS confirmed, "federal savings associations may extend credit as

authorized under federal law, ... without regard to state laws purporting to regulate or

otherwise affect their credit activities." fd. The OTS listed illustrative examples of

preempted state laws, such as laws imposing new requirements on a federal savings

association's "terms of credit," "[IJoan-related fees," "[d]isclosure," and loan "servicing."

fd. § 560.2(b){4)-(5), (9)-(10). The OTS clarified it does not intend to preempt state laws


1004; Bank of Am., 309 F.3d at 558. We focus on field preemption because the parties

                                              12
No. 31570-3-111
Mellon v. Reg'l Tr. Servs. Corp.

concerning real property, contracts, and torts, among other topics, if those laws "only

incidentally affect the lending operations of Federal savings associations or are

otherwise consistent with the purposes of paragraph (a) of this section." Id. §

560.2(c)(1 )-(2), (4).

       The OTS explained how we should apply HOLA preemption standards:

       When analyzing the status of state laws under § 560.2, the first step will
       be to determine whether the type of law in question is listed in paragraph
       (b). If so, the analysis will end there; the law is preempted. If the law is
       not covered by paragraph (b), the next question is whether the law affects
       lending. If it does, then, in accordance with paragraph (a), the
       presumption arises that the law is preempted. This presumption can be
       reversed only if the law can clearly be shown to fit within the confines of
       paragraph (c). For these purposes, paragraph (c) is intended to be
       interpreted narrowly. Any doubt should be resolved in favor of
       preemption.

Lending and Investment, 61 Fed. Reg. 50,951, 50,966-67 (Sept. 30, 1996). The OTS's

interpretation of its own administrative rule controls our analysis. See Silvas, 514 F.3d

at 1005 n.1 (citing Auerv. Robbins, 519 U.S. 452,117 S. Ct. 905,137 L. Ed. 2d 79

(1997)); see also Bowles v. Seminole Rock Co., 325 U.S. 410, 413-14, 65 S. Ct. 1215,

89 L. Ed. 1700 (1945). But see McCurry, 169 Wn.2d at 105 (apparently disregarding

this rigid analytical framework to reach "the dispositive issue [of] whether the generally

applicable state law more than incidentally affects [lending]").

       Congress diminished HOLA preemption in enacting the Dodd-Frank Wall Street

Reform and Consumer Protection Act, 12 U.S.C. §§ 25b, 1465. An OTS successor, the

Office of the Comptroller of the Currency (OCC), soon promulgated an administrative



do not discuss conflict preemption.

                                             13
No. 31570-3-111
Mellon v. Reg'l Tr. Servs. Corp.

rule implementing Dodd-Frank preemption. 6 12 C.F.R. § 150.136. These statutes and

this administrative rule took effect on July 21,2011. 12 U.S.C. §§ 5481 (9),5551 note,

5582; Office of Thrift Supervision Integration Pursuant to the Dodd-Frank Wall Street

Reform and Consumer Protection Act, 76 Fed. Reg. 48,950, 48,953 (Aug. 9, 2011);

Designated Transfer Date, 75 Fed. Reg. 57,252, 57,252-53 (Sept. 20,2010). After

taking effect, those provisions "shall not be construed to alter or affect the applicability

of any regulation, order, guidance, or interpretation prescribed, issued, and established

by the [OCC] or the [OTS] regarding the applicability of State law under Federal banking

law to any contract entered into on or before July 21,2010." 12 U.S.C. § 5553.

       Mr. Mellon signed the forbearance agreement five months before Dodd-Frank

preemption standards took effect on July 21,2011. Because those provisions are not

retroactive, HOLA preemption standards govern here.7 See McCauley v. Home Loan

Inv. Bank, F.S.B., 710 F.3d 551, 554 n.2 (4th Cir. 2013); Molosky v. Wash. Mut., Inc.,

664 F.3d 109,113 n.1 (6th Cir. 2011); In   re Frykberg, 490 B.R. 652, 658 n.6 (B.A.P. 1st
Cir. 2013); Henning v. Wachovia Mortg., FSB, _        F. Supp. 2d _,2013 WL 5229837,

at *5 & n.7 (D. Mass. 2013); Davis v. World Sav. Bank, FSB, 806 F. Supp. 2d 159, 167

n.5 (D. D.C. 2011). In relating HOLA preemption standards to the Mellons' complaint,

we must consider what "functional effect" their suit would have on IndyMac's lending



       6 Dodd-Frank transferred the OTS's functions to the OCC on July 21,2011 and
abolished the OTS on October 19,2011. 12 U.S.C. §§ 5411,5412,5413.
       7 The loan origination date does not fully determine what law applies because
the forbearance agreement is a separate "contract" from the note and deed of trust. 12
U.S.C. § 5553. See generally Bailey v. Sec. Nat'! Servicing Corp., 154 F.3d 384, 388
(7th Cir. 1998) (explaining, in a different setting, that a forbearance agreement is distinct

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No. 31570-3-111
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operations, noting any "new requirements" imposed. Plastino v. Wells Fargo Bank, 873 


F. Supp. 2d 1179, 1185 (N.D. Cal. 2012); Appling v. Wachovia Mortg., FSB, 745 F.

Supp. 2d 961, 972 (N.D. Cal. 2010). This approach evaluates state laws solely "as

applied" to IndyMac by the Mellons' complaint. Silvas, 514 F.3d at 1006, 1008; In re

Menjivar, No. CC-12-1608-KuBaPa, 2014 WL 308912, at *6 (B.A.P. 9th Cir. Jan. 28,

2014).

         The Mellons do not complain IndyMac violated generally applicable state

foreclosure laws in exercising its rights under the forbearance agreement. And, they do

not allege IndyMac breached any contract or fraudulently misrepresented facts

concerning any contract. Cf. McCurry, 169 Wn.2d at 104-05, 109. Instead, they

complain IndyMac played hardball in negotiating the forbearance agreement, lamenting

their lack of bargaining power and inability to demand a better deal.

         A forbearance agreement is basically a temporary loan modification. See

generally RCW 19.146.010(20) (including a forbearance agreement or renegotiated

payment plan in the definition of a mortgage loan modification); RCW 31.04.015(22)

(same); RCW 61.24.050(2)(a)(ii) (equating a forbearance plan or loan modification with

a deed of trust loss mitigation agreement); Albice v. Premier Mortg. Servs. of Wash.,

Inc., 174 Wn.2d 560, 571, 276 P.3d 1277 (2012) (sirnilar). Many courts have

concluded, in a context unrelated to HOLA preemption standards, that negotiating a

loan modification is a "traditional money lending activity" intimately connected to a

lender's role because the process mirrors negotiations preceding loan origination. E.g.,


from and temporarily displaces a defaulted note by establishing a renegotiated payment

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


Flores v. EMC Mortg. Co., _      F. Supp. 2d _,2014 WL 641097, at *16 (E.D. Cal. 


2014); Khan v. CitiMortgage, Inc., _     F. Supp. 2d _,2013 WL 5486777, at *14 (E.D. 


Cal. 2013); Rockridge Trust v. Wells Fargo, N.A., _       F. Supp. 2d _,2013 WL 


5428722, at *35-36 (N.D. Cal. 2013); Casault v. Fed. Nat'l Mortg. Ass'n, 915 F. Supp. 


2d 1113, 1130-31 (C.D. Cal. 2012). 


       Still, the Mellons' suit would not have the functional effect of imposing new

requirements on IndyMac's lending operations. The Mellons' complaint alleged

IndyMac violated the CPA by proposing a bad faith forbearance agreement that was

unreasonable and impossible to perform, i.e., "unconscionable." Appellants' Opening

Br. at 18. The Mellons then sought treble damages and attorney fees for IndyMac's

unfair or deceptive act or practice. Generally applicable state contract law has long

provided remedies to victims of substantively or procedurally unconscionable contract

terms. See, e.g., Ward v. Buckley, 1 Wash. Terr. 279, 282 (1870); Gandee v. LDL

Freedom Enters., Inc., 176 Wn.2d 598, 603, 293 P.3d 1197 (2013). This contract law

properly escapes HOLA preemption. See Lending and Investment, 61 Fed. Reg. at 50,

966 (stating 12 C.F.R. § 560.2 "preserve[s] the traditional infrastructure of basic state

laws that undergird commercial transactions.").

       This contract law, as applied in the Mellons' claim, might arguably impact a

federal savings association's "terms of credit," "[I]oan-related fees," U[d]isclosure," or

loan "servicing." 12 C.F.R. § 560.2(b)(4)-(5), (9)-(10). But "[a]ny effect this [contract

law] has on [lndyMac's] lending operations is unintended, ancillary, and subordinate to


plan suspending a mortgage foreclosure).

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


the purpose of the contract law." McCurry, 169 Wn.2d at 108 (holding 12 C.F.R. § 


560.2 did not preempt the CPA, to the extent it relied on generally applicable state

contract law requiring adherence to contracts and prohibiting fraudulent

misrepresentation of facts concerning contracts, because any impact this contract law

has on a federal savings association's lending operations "is, by definition, incidental").

We hold this impact would "only incidentally affect [lndyMac's] lending operations." 12

C.F.R. § 560.2(c). Therefore, the trial court erroneously concluded federal regulation

preempts state laws implicated in the Mellons' CPA. In summary, the trial court

committed two errors in dismissing the Mellons' CPA claim under CR 12(b)(6).

                                     C. Undecided Motions

       The issue is whether the trial court erred by failing to expressly decide the

Mellons' motions to fix the total loan amount, fix the unpaid loan balance, and reinstate

the defaulted note and deed of trust. The Mellons contend we should remand to resolve

these motions.

       By granting the CR 12(b)(6) dismissal, the trial court implicitly decided the

Mellons' various motions against them because the law did not provide the remedies

they sought. The court did not err in this determination. These motions concerned

solely the Mellons' non-CPA claims. As discussed above, the Mellons essentially

concede the law does not support their non-CPA claims. Given this backdrop, we

conclude the trial court did not err by failing to expressly decide the Mellons' various

motions.




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

                                    D. Bond Release

      The issue is whether the trial court erred by releasing the injunction bond to

IndyMac. The Mellons contend the court should have either returned the bond to them

or instructed IndyMac to apply the bond solely to the loan principal.

      The Mellons asked to temporarily enjoin the trustee's sale under RCW

61.24.130. As a condition to receiving this remedy, the Mellons had to "pay to the clerk

of the court the sums that would be due on the obligation secured by the deed of trust if

the deed of trust was not being foreclosed." RCW 61.24.130(1). Specifically, this

injunction bond required the Mellons to tender "the periodic payment of principal,

interest, and reserves paid to the clerk of the court every thirty days." RCW

61.24.130(1 )(a). The bond exists to "protect good faith lenders." Bowcutt v. Delta N.

Star Corp., 95 Wn. App. 311, 321, 976 P.2d 643 (1999).

      RCW 61.24.130 does not specify what the trial court must do when it concludes a

trustee's sale party has been wrongfully enjoined. But the procedure is presumably the

same as with CR 65(c) and RCW 7.40.080. Thus, the court could use the bond to

compensate IndyMac for actual damages caused by the wrongful injunction. See Swiss

Baco Logging Co. v. Haliewicz, 14 Wn. App. 343, 345,541 P.2d 1014 (1975); Knappett

v. Locke, 92 Wn.2d 643, 646-47, 600 P.2d 1257 (1979); 1 GRANT S. NELSON & DALE A.

WHITMAN, REAL ESTATE FINANCE LAw § 7.22, at 690 (4th ed. 2002); Joseph L. Hoffman,

Comment, Court Actions Contesting the Nonjudicial Foreclosure of Deeds of Trust in

Washington, 59 WASH. L. REV. 323, 327-28, 333 (1984). The court released the bond to




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No. 31570-3-111
Mellon v. Reg'l Tr. Servs. Corp.

IndyMac for that very purpose following a 20-month delay in the deed of trust

foreclosure.

       First, the Mellons unpersuasively argue the bond release effectuated a forfeiture,

which equity abhors. See Stephen A. Spitz, Forfeitures, in 9 THOMPSON ON REAL

PROPERTY § 77.01, at 86 (David A. Thomas ed., 3d. Thomas ed. 2011) (defining a

"forfeiture" as the '''divestiture of property without compensation, in consequence of a

default or an offense'" (quoting 36 AM. JUR. 20 Forfeiture and Penalties § 1 (1968))).

The bond release functioned as compensation for IndyMac's actual losses rather than

an automatic forfeiture based on the Mellons' loan default. See Dan B. Dobbs, Should

Security Be Required as a Pre-Condition to Provisional Injunctive Relief?, 52 N.C. L.

REV. 1091, 1093-94, 1122 (1974). Second, the Mellons unpersuasively argue the bond

required additional restrictions on its use. Its use is already limited to the "principal,

interest, and reserves" that would be due on the note but for the deed of trust

foreclosure. RCW 61.24.130(1 )(a). Accordingly, we conclude the trial court did not err

by releasing the injunction bond to IndyMac.

                                E. Attorney Fees and Costs

       The parties seek appellate attorney fees and costs as the prevailing party under

the deed of trust, RCW 4.84.330, and RAP 18.1 (a). But considering our analysis, each

party prevails on a major issue and loses on others. Thus, no party stands as the clear

victor meriting such an award. See Am. Nursery Prods., Inc. v. Indian Wells Orchards,

115 Wn.2d 217,234,797 P.2d 477 (1990); Tallman v. Durussel, 44 Wn. App. 181, 189,

721 P.2d 985 (1986); Oneal v. Colton Consol. Sch. Dist. No. 306, 16 Wn. App. 488,


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No. 31570-3-111
Mellon v. Reg'l Tr. Servs. Corp.

493,557 P.2d 11 (1976). Additionally, the Mellons request an award of appellate

attorney fees and costs under RCW 19.148.030(3}. But we conclude the Mellons are

not entitled to such an award because they alleged no injury or actual damages

resulting from IndyMac's nondisclosure regarding the loan transfer. Therefore, we deny

each party's request.

      Affirmed in part. Reversed in part. Remanded for further proceedings.




                                                 Brown, A.C.J.
WE CONCUR: 





                                                   (Y\           (   J    )
                                                 Lawrence-Berrey, J.




                                          20 

