Peterson v. Kitsap Cmty. Fed. Credit Union

171 Wash.App. 404

287 P.3d 27

Joanne PETERSON, on behalf of herself and others similarly situated, Respondent/Cross–Appellant,

v.KITSAP COMMUNITY FEDERAL CREDIT UNION, Appellant/Cross–Respondent.

No. 41741–3–II.

Court of Appeals of Washington, Division 2.

Oct. 23, 2012.

Frank Raymond Siderius, Siderius, Lonergan & Martin LLP, Seattle, WA, for Appellant/Cross–Respondent.

Guy William Beckett, Berry & Beckett, PLLP, Seattle, WA, Roblin John Williamson, Williamson & Williams, Bainbridge Island, WA, for Respondent/Cross–Appellant.

PART PUBLISHED OPINION

HUNT, J.

¶ 1 Kitsap Community Federal Credit Union (KCU) ¹ appeals the superior court's grant of summary judgment to Joanne Peterson on her Washington Consumer Protection Act (CPA) ² claim in her class action lawsuit for breach of contract, unjust enrichment, and violation of the CPA. Peterson's CPA claim was based on KCU's having charged her and 428 other plaintiffs an allegedly undisclosed $26 retained profit as part of an $85 “Release Fee (Reconveyance),” which encompassed three charges. Clerk's Papers (CP) at 204. KCU argues that (1) it did not commit an unfair or deceptive act or practice by charging Peterson this $85 “Release Fee (Reconveyance)” because her Deed of Trust included an express covenant that she would pay “recordation costs” and a “reconveyance fee” to KCU when she paid off her loan; and (2) the Federal Credit Union Act ³ and National Credit Union Administration regulations ⁴ preempt state-law CPA claims on this issue. CP at 489. Peterson cross-appeals the superior court's summary judgment dismissal of her breach of contract and unjust enrichment claims and its denial of a class representative incentive award.⁵

¶ 2 We cannot conclude as a matter of law that KCU committed an unfair or deceptive act or practice under the CPA without (1) knowing the scope or meaning of the undefined Deed of Trust term “reconveyance fee” and (2) then ascertaining whether KCU's payoff statement included non-secured fees with the fee obligations secured by Peterson's Deed of Trust. Therefore, we reverse the superior court's summary judgment for Peterson on her CPA claim because genuine issues of material fact remain about which portion of KCU's $85 “Release Fee (Reconveyance)” constituted the “reconveyance fee” specified in the Deed of Trust, and we remand for trial on this claim. We affirm the superior court's summary judgment dismissal of Peterson's breach of contract and unjust enrichment claims and its denial of a class representative incentive award.

FACTS

I. Secured Loan and Fees

A. Home Equity Loan, Credit Agreement, and Deed of Trust

¶ 3 In May 2004, Joanne Peterson obtained a $35,000 Home Equity Credit Line loan from KCU. She signed a preprinted promissory note (Credit Agreement) and a preprinted Deed of Trust; her residential property secured the loan. The Credit Agreement set forth the general terms of the loan and its repayment requirements. Section One provided that Peterson promised to pay KCU

all amounts [Peterson] borrow[ed] from [KCU] under [the Credit] Agreement, together with Finance Charges, Late Charges, Collection Costs or other charges described herein.

CP at 482. The Credit Agreement did not mention the words “release fee” or “reconveyance fee,” that such fees were security for Peterson's loan, or that such fees were a condition on repayment of her loan.

¶ 4 The Deed of Trust, however, gave KCU a security interest in Peterson's residential property and secured Peterson's repayment of all sums advanced under the Credit Agreement and her performance of all “covenants” and “agreements” set forth in the Deed of Trust and the Credit Agreement.⁶ CP at 485. Under the heading “Borrower Covenants,” the Deed of Trust also set forth 20 covenants that Peterson was responsible to fulfill. CP at 486. Covenant 18 of this section set forth the conditions under which Peterson's residential property would be “reconvey[ed]” to her:

18. Reconveyance. Upon payment of all sums secured by this [Deed of Trust] and termination of [Peterson's] ability to obtain further advances under the [Credit] Agreement, [KCU] shall request Trustee to reconvey [Peterson's residential property] and shall surrender this [Deed of Trust] and the [Credit] Agreement evidencing debt secured by this [Deed of Trust] to Trustee. Trustee shall reconvey [Peterson's residential property] without warranty to the person or persons legally entitled to it. Such person or persons shallpay anyrecordationcostsand, as permitted by law, shallpay to [KCU] areconveyancefee.

CP at 489 (emphasis added). The Deed of Trust did not define “recordation costs” or “reconveyance fee.”

B. Loan Payoff and Reconveyance of Property

¶ 5 In September 2006, Peterson refinanced her loan and sought to pay off her existing KCU loan secured by the Deed of Trust. Peterson completed a written “Authorization and Instructions to Close PLC” ⁷ document, which (1) instructed KCU to “accept payoff in full” of her credit line loan from her escrow agent, Land Title Escrow; (2) instructed KCU to close out her account; and (3) asked KCU to “forward the documents necessary for reconveyance to Land Title Escrow, along with any fees [KCU was] holding for the reconveyance.” CP at 206 (emphasis added). KCU reviewed Peterson's account information, computed her loan payoff, and “prepared” and “transmitted” her payoff statement to Land Title Escrow. CP at 190.

¶ 6 This payoff statement itemized three charges, totaling $34,162.49, which Peterson needed to pay KCU to satisfy her loan obligation and to obtain a “release” of the Deed of Trust on her residential property: $33,810.71 principal, $266.78 interest, and an $85.00 “Release Fee (Reconveyance).” ⁸ CP at 204. Although the payoff statement did not further itemize this latter $85 “Release Fee (Reconveyance),” this “Release Fee (Reconveyance)” comprised three separate charges: (1) $32 recording costs; (2) a $27 fee charged by Trustee Services, Inc., RCU's reconveyance processing agent; and (3) a $26 administrative fee that KCU retained as its “processing fee” for the reconveyance.⁹ CP at 541. Peterson paid the full payoff statement amount without challenging any of these charges.¹⁰

¶ 7 KCU provided Peterson's Deed of Trust information to Trustee Services, which processed the “reconveyance” of Peterson's residential property. CP at 190. Thereafter, KCU corresponded with Trustee Services to obtain a copy of the reconveyance, and KCU checked the county website to ensure that the reconveyance was promptly recorded. When this reconveyance was recorded, KCU released its security interest in Peterson's residential property.

II. Procedure

¶ 8 The following year, Peterson sued KCU, alleging breach of contract, unjust enrichment, and violation of Washington's CPA. She also sought class certification to bring her lawsuit on behalf of herself and similarly situated class members. She alleged that (1) KCU had breached its contract with her and with other class members by charging them a general “Release Fee (Reconveyance)” that was not specifically named or authorized in their Deeds of Trust ¹¹; (2) KCU had been unjustly enriched by receiving such fees; and (3) KCU's charging the “Release Fee (Reconveyance)' ” non-itemized $26 component (which KCU retained as a processing fee) at the time of loan payoff was an “unfair” and “deceptive” practice that violated the CPA.¹² CP at 79.

A. Summary Judgment Rulings

¶ 9 KCU moved for summary judgment dismissal of Peterson's claims, arguing that (1) federal law preempted her state law claims because KCU was a “[f]ederally[-c]hartered [c]redit [u]nion” under the Federal Credit Union Act and the National Credit Union Administration regulations; (2) KCU's $85 “Release Fee (Reconveyance),” which comprised the three charges, including the “reconveyance fee” specified in the Deed of Trust, was a “loan-related fee” authorized by these federal statutes and regulations; and (3) these federal statutes and regulations “expressly preempt” any state law purporting to limit or to affect federal credit union loan fees, which Petersen's lawsuit sought to affect. CP at 92, 93.

¶ 10 KCU further argued that, even if state law applied here, (1) Peterson's breach of contract claim still failed because the Deed of Trust expressly provided that she would pay KCU a “reconveyance fee”; (2) her unjust enrichment claim failed for the same reason and also because KCU provided reconveyance “service[s]” for this fee; and (3) her CPA claim failed because KCU did not engage in an unfair or deceptive act or practice under Washington's CPA. CP at 94. In support of this latter argument, KCU asserts that the Deed of Trust expressly allowed KCU to charge reconveyance fees, such fees are permitted by law, and Peterson had notice from the beginning of her loan transaction with KCU that a reconveyance fee was included in the total amount that the Deed of Trust secured.

¶ 11 Initially, the superior court granted KCU summary judgment on all of Peterson's claims, dismissing her breach of contract, unjust enrichment, and CPA claims. CP at 231. Later, however, the superior court granted Peterson's motion for reconsideration and reinstated her CPA claim as it related to “imposition ... of the $26 [processing fee] charge” when she paid off her loan. CP at 288. KCU again moved for summary judgment on Peterson's CPA claim. Again, the superior court concluded that federal law did not preempt Peterson's CPA claim, and it denied KCU's summary judgment motion a second time.

¶ 12 Peterson then moved for summary judgment on her reinstated CPA claim, arguing that KCU had violated the CPA by charging her a “marked-up ‘Release’ or ‘Reconveyance’ Fee, in excess of the actual expenses KCU incurred to obtain and [to] record the [r]econveyance, when she paid off [the] loan secured by [her] Deed of Trust.” CP at 463 (emphasis added). The superior court granted summary judgment on Peterson's CPA claim,¹³ granted her class...