Washington Code 61.24.100 – Deficiency judgments — Foreclosure — Trustee’s sale — Application of chapter
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(1) Except to the extent permitted in this section for deeds of trust securing commercial loans, a deficiency judgment shall not be obtained on the obligations secured by a deed of trust against any borrower, grantor, or guarantor after a trustee‘s sale under that deed of trust.
Terms Used In Washington Code 61.24.100
- Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Contract: A legal written agreement that becomes binding when signed.
- Deed: The legal instrument used to transfer title in real property from one person to another.
- Dismissal: The dropping of a case by the judge without further consideration or hearing. Source:
- Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. Source: OCC
- Grantor: The person who establishes a trust and places property into it.
- Guarantor: A party who agrees to be responsible for the payment of another party's debts should that party default. Source: OCC
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- person: may be construed to include the United States, this state, or any state or territory, or any public or private corporation or limited liability company, as well as an individual. See Washington Code 1.16.080
- Personal property: All property that is not real property.
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- Statute: A law passed by a legislature.
- Trustee: A person or institution holding and administering property in trust.
(2)(a) Nothing in this chapter precludes an action against any person liable on the obligations secured by a deed of trust or any guarantor prior to a notice of trustee’s sale being given pursuant to this chapter or after the discontinuance of the trustee’s sale.
(b) No action under (a) of this subsection precludes the beneficiary from commencing a judicial foreclosure or trustee’s sale under the deed of trust after the completion or dismissal of that action.
(3) This chapter does not preclude any one or more of the following after a trustee’s sale under a deed of trust securing a commercial loan executed after June 11, 1998:
(a)(i) To the extent the fair value of the property sold at the trustee’s sale to the beneficiary or an affiliate of the beneficiary is less than the unpaid obligation secured by the deed of trust immediately prior to the trustee’s sale, an action for a deficiency judgment against the borrower or grantor, if such person or persons was timely given the notices under RCW 61.24.040, for (A) any decrease in the fair value of the property caused by waste to the property committed by the borrower or grantor, respectively, after the deed of trust is granted, and (B) the wrongful retention of any rents, insurance proceeds, or condemnation awards by the borrower or grantor, respectively, that are otherwise owed to the beneficiary.
(ii) This subsection (3)(a) does not apply to any property that is occupied by the borrower as its principal residence as of the date of the trustee’s sale;
(b) Any judicial or nonjudicial foreclosures of any other deeds of trust, mortgages, security agreements, or other security interests or liens covering any real or personal property granted to secure the obligation that was secured by the deed of trust foreclosed; or
(c) Subject to this section, an action for a deficiency judgment against a guarantor if the guarantor is timely given the notices under RCW 61.24.042.
(4) Any action referred to in subsection (3)(a) and (c) of this section shall be commenced within one year after the date of the trustee’s sale, or a later date to which the liable party otherwise agrees in writing with the beneficiary after the notice of foreclosure is given, plus any period during which the action is prohibited by a bankruptcy, insolvency, moratorium, or other similar debtor protection statute. If there occurs more than one trustee’s sale under a deed of trust securing a commercial loan or if trustee’s sales are made pursuant to two or more deeds of trust securing the same commercial loan, the one-year limitation in this section begins on the date of the last of those trustee’s sales.
(5) In any action against a guarantor following a trustee’s sale under a deed of trust securing a commercial loan, the guarantor may request the court or other appropriate adjudicator to determine, or the court or other appropriate adjudicator may in its discretion determine, the fair value of the property sold at the sale and the deficiency judgment against the guarantor shall be for an amount equal to the sum of the total amount owed to the beneficiary by the guarantor as of the date of the trustee’s sale, less the fair value of the property sold at the trustee’s sale or the sale price paid at the trustee’s sale, whichever is greater, plus interest on the amount of the deficiency from the date of the trustee’s sale at the rate provided in the guaranty, the deed of trust, or in any other contracts evidencing the debt secured by the deed of trust, as applicable, and any costs, expenses, and fees that are provided for in any contract evidencing the guarantor’s liability for such a judgment. If any other security is sold to satisfy the same debt prior to the entry of a deficiency judgment against the guarantor, the fair value of that security, as calculated in the manner applicable to the property sold at the trustee’s sale, shall be added to the fair value of the property sold at the trustee’s sale as of the date that additional security is foreclosed. This section is in lieu of any right any guarantor would otherwise have to establish an upset price pursuant to RCW 61.12.060 prior to a trustee’s sale.
(6) A guarantor granting a deed of trust to secure its guaranty of a commercial loan shall be subject to a deficiency judgment following a trustee’s sale under that deed of trust only to the extent stated in subsection (3)(a)(i) of this section. If the deed of trust encumbers the guarantor’s principal residence, the guarantor shall be entitled to receive an amount up to $125,000, without regard to the effect of RCW 6.13.080(2), from the bid at the foreclosure or trustee’s sale accepted by the sheriff or trustee prior to the application of the bid to the guarantor’s obligation.
(7) A beneficiary’s acceptance of a deed in lieu of a trustee’s sale under a deed of trust securing a commercial loan exonerates the guarantor from any liability for the debt secured thereby except to the extent the guarantor otherwise agrees as part of the deed in lieu transaction.
(8) This chapter does not preclude a beneficiary from foreclosing a deed of trust in the same manner as a real property mortgage and this section does not apply to such a foreclosure.
(9) Any contract, note, deed of trust, or guaranty may, by its express language, prohibit the recovery of any portion or all of a deficiency after the property encumbered by the deed of trust securing a commercial loan is sold at a trustee’s sale.
(10) A trustee’s sale under a deed of trust securing a commercial loan does not preclude an action to collect or enforce any obligation of a borrower or guarantor if that obligation, or the substantial equivalent of that obligation, was not secured by the deed of trust.
(11) Unless the guarantor otherwise agrees, a trustee’s sale shall not impair any right or agreement of a guarantor to be reimbursed by a borrower or grantor for a deficiency judgment against the guarantor.
(12) Notwithstanding anything in this section to the contrary, the rights and obligations of any borrower, grantor, and guarantor following a trustee’s sale under a deed of trust securing a commercial loan or any guaranty of such a loan executed prior to June 11, 1998, shall be determined in accordance with the laws existing prior to June 11, 1998.
NOTES:
Findings—Effective date—2021 c 290: See notes following RCW 6.13.010.