Damages in a Non-judicial Foreclosure of a Deed of Trust in Washington State

In Washington state, non-judicial foreclosures of deeds of trust are governed by statute, RCW Chapter 61.24.  The non-judicial foreclosure process involves a public trustee’s sale after giving notice to various interested parties.  The effect of the trustee’s sale is to deprive the grantor of the deed of trust and anyone claiming under them of all their interest in the real property.

Under prior law, the borrower or the grantor of the deed of trust, among others, could bring a lawsuit to restrain the trustee’s sale of the property.  However, if they failed to bring that action before the trustee’s sale and waited until after the trustee’s sale to try to seek some relief, they ran the risk that they would be found to have waived their right to contest the sale or seek other relief.

For owner-occupied residential real property, the law has changed.  RCW Chapter 61.24 was amended to provide that the failure of the borrower or the grantor of the deed of trust to bring a lawsuit to restrain, or enjoin, the trustee’s sale “may not be deemed a waiver of a claim for damages” for certain matters.  Those matters include, among other things, common law fraud or misrepresentation and the failure of the trustee under the deed of trust to “materially comply with the provisions of” RCW Chapter 61.24.  However, the claim must be asserted or brought within a limited period of time after the date of the trustee’s sale.  Consequently, the claim could be asserted or brought before the date of the trustee’s sale.  In addition, the claim may seek only monetary damages, no other relief, and the claim may not affect the validity or finality of the trustee’s sale or a subsequent transfer of the property.  This amendment does not apply to foreclosure of a deed of trust securing a commercial loan.

In Walker v. Quality Loan Service Corp. of Washington, et al., No. 65975-8-1, filed August 26, 2013, Division One of the Washington Court of Appeals noted that nothing in the amendment of the statute requires that the trustee’s violation of RCW Chapter 61.24 resulted in the wrongful sale of the property.  Rather, the important point is whether the trustee’s failure to comply with the statute leading up to the trustee’s sale caused damage to the borrower.  In that case, the borrower sued to restrain the trustee’s sale and for monetary damages for certain actions taken before the trustee’s sale.  The trustee’s sale did not occur.  The court held that a borrower has a claim against a trustee who, by acting without lawful authority or in material violation of the statute, injures the borrower, even if the trustee’s sale does not occur.  Although the amended statute refers to the trustee failing to materially comply with the statute, the court found that a deed of trust beneficiary could also be held liable for injury to the borrower if the beneficiary had sufficient control over the trustee such that the trustee was merely the agent of the beneficiary.

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