Washington law generally permits deeds of trust to be foreclosed upon by non-judicial trustee’s sale. This provides secured creditors with a faster and generally less expensive alternative to judicial foreclosure.
Washington law affords debtors additional protections where a creditor elects to proceed with a trustee’s sale instead of judicial foreclosure. Most commonly, Washington law limits the extent to which a judgment creditor may obtain a deficiency judgment against a debtor. See RCW 61.24.100. In other words, by electing to proceed with a trustee’s sale instead of judicial foreclosure, the secured creditor may lose any recourse against the debtor in the event that the proceeds of the trustee’s sale are insufficient to satisfy the debt.
Washington law also affords a special protection to owners of land used primarily for agricultural purposes. Such land must be foreclosed upon judicially.
It shall be requisite to a trustee’s sale:
…That the deed of trust contains a statement that the real property conveyed is not used principally for agricultural purposes; provided, if the statement is false on the date the deed of trust was granted or amended to include that statement, and false on the date of the trustee’s sale, then the deed of trust must be foreclosed judicially. Real property is used for agricultural purposes if it is used in an operation that produces crops, livestock, or aquatic goods.
In Schroeder v. Excelsior Management Group, LLC, No. 86433-1 (2013), the Washington Supreme Court applied this statute and held that the statutory protections afforded to agricultural land cannot be waived by the debtor. There, the creditor brought a non-judicial foreclosure action against the debtor after the debtor defaulted by failing to make required payments. The creditor and debtor later settled the matter by stipulated order in which the debtor expressly waived any right to claim later that the property was agricultural or to contest any subsequent non-judicial foreclosure. The debtor then again defaulted, and the creditor foreclosed non-judicially by trustee’s sale. Both the trial court and appellate court affirmed the sale, holding that the debtor had waived any right to judicial foreclosure.
In Schroeder, the Washington Supreme Court reversed the trial court and appellate court, holding that the protections of the deed of trust statute, Chapter 61.24 RCW, may not be waived. As a result, the purported waiver by the debtor was ineffective, even though it was included in a prior order by the trial court. Since it appeared that the land at issue was used primarily for agriculture both at the time the deed of trust was entered and at the time of the trustee’s sale, the trustee’s sale was held invalid.