HOUSE BILL REPORT

SB 6396

BYSenators Nelson, Talmadge and Newhouse

Revising the deed of trust act.

House Committe on Judiciary

Majority Report:  Do pass.  (18)

      Signed by Representatives Appelwick, Chair; Crane, Vice Chair; Padden, Ranking Republican Member; Belcher, Brough, Dellwo, Forner, Hargrove, Inslee, P. King, R. Meyers, Moyer, H. Myers, Schmidt, Scott, D. Sommers, Tate and Wineberry.

House Staff:Regina Jones (786-7191)

AS PASSED HOUSE MARCH 2, 1990

BACKGROUND:

Under current law, an obligation secured by a deed of trust is satisfied when the deed of trust is foreclosed by a nonjudicial trustee's sale.  Under this method of foreclosure, deficiency judgments are precluded.  Concurrent actions on the same debt are also prohibited in nonjudicial foreclosures.

Ambiguity exists in chapter 61.24 RCW regarding whether a creditor is precluded from satisfying a deficiency from other collateral securing the same obligation following a nonjudicial foreclosure. In interpreting chapter 61.24 RCW, the Washington State Supreme Court has held that creditors need not, in all cases, give up the right to realize upon additional collateral securing an obligation. A literal reading of the statute governing this issue may lead practitioners to a different conclusion.

A creditor is also required to complete a trustee's sale foreclosing a deed of trust prior to exercising his or her remedies against other collateral securing the obligation.  In the context of commercial loans securing assets located in more than one county or state, this provision may require a creditor to pursue lengthy consecutive actions against different assets securing the same debt.

SUMMARY:

An obligation incurred primarily for personal, family, or household purposes is not a commercial obligation. While an action foreclosing a deed of trust is pending, the beneficiary of a deed of trust securing a commercial obligation may exercise remedies against other collateral voluntarily granted to secure the same debt.

If a deed of trust is foreclosed to satisfy a commercial obligation, the foreclosure does not preclude the judicial or nonjudicial foreclosure of any other deeds of trust, mortgages, security agreement or personal property securing the same obligation.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    David Rockwell, Washington State Bar Association - Real Property/Probate/Trust Section.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    The bill makes technical corrections to the Deed of Trust Act in response to a court decision creating an ambiguity in the law.

House Committee - Testimony Against:      None.