Klem v. Washington Mutual Bank
176 Wash. 2d 771
| Wash. | 2013Background
- Dorothy Halstien, an elderly dementia patient, owned a home encumbered by a WaMu deed of trust; a guardian was appointed in 2007 due to neglect concerns and high care costs.
- Quality Loan Service Corp., as trustee, foreclosed and sold the home for $83,087.67 after a falsely notarized notice of sale predating the signing date.
- Guardians planned to sell for $235,000 and sought to postpone the sale, but WaMu refused to authorize postponement; bank-directed inaction delayed the decision.
- Sale occurred on February 29, 2008; Puget Sound Guardians later sued Quality for negligence, CPA violations, and breach of contract; WaMu was not a party.
- Jury found negligence, CPA, and breach of contract against Quality; damages were $151,912.33; trial court denied injunctive relief; this Court reversed in part on CPA grounds and remanded for injunctive relief and attorney fees.
- Legislation changes after trial established a duty of good faith to both sides for trustees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| CPA: whether deferring to lender on postponement is unfair or deceptive | Halstien (guardians) | Quality/WaMu deferred to lender, not acting independently | Yes, unfair/deceptive under CPA |
| CPA: whether predating notarizations constitutes unfair or deceptive practice | Predating/notarization fraud harmed integrity of process | Notarization issue immaterial due to notice period | Yes, unfair/deceptive under CPA |
| CPA proof theory: per Hangman Ridge, per se, capacity to deceive, or public-interest impact may establish CPA claim | Plaintiff may rely on capacity to deceive or per se statute or public-interest impact | Defendant argues limitations on non-statutory bases | CPA may be predicated on any of these pathways (per se, capacity to deceive, or public-interest impact) |
| Injunction and equitable relief | Waiver or lack of injunction should not bar CPA relief | Injunction not warranted given post-sale remedy | Injunction appropriate; remand for equitable relief |
| Attorney fees on appeal for CPA claim | Plaintiff entitled to fees | Fees not recoverable on appeal | Affirmed award of CPA-related attorney fees on appeal |
Key Cases Cited
- Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778 (Wash. 1986) (establishes two paths to prove first two CPA elements and public-interest requirement)
- Panag v. Farmers Ins. Co. of Wash., 166 Wn.2d 27 (Wash. 2009) (discusses per se and non-statutory unfair practices; public-interest concept)
- Saunders v. Lloyd’s of London, 113 Wn.2d 330 (Wash. 1989) (per se and evolving definitions of unfair practices)
- Cox v. Helenius, 103 Wn.2d 383 (Wash. 1985) (trustee fiduciary duties; fairness in foreclosure sale)
- Albice v. Premier Mortg. Servs. of Wash., Inc., 174 Wn.2d 560 (Wash. 2012) (quieting title after trustee overstepped powers; independence of trustee)
- Udall v. T.D. Escrow Servs., Inc., 159 Wn.2d 903 (Wash. 2007) (trustee duties; impartiality pre-2008 amendments)
- State v. Reader’s Digest Ass’n, 81 Wn.2d 259 (Wash. 1972) (public policy/public-interest framework; later refined by Hangman Ridge)
- Bain v. Metro. Mortg. Grp., Inc., 175 Wn.2d 83 (Wash. 2012) (public-interest element in CPA claims; executive discussion)