Can Equitable Relief Be Obtained within Five Days of a Trustee Sale in Washington?
The legislature can limit the judiciary's equitable powers. The superior court has original jurisdiction in all cases in equity. Const. art. IV, sec. 6. Its inherent powers encompass all the powers of the English chancery court. Bowcutt v. Delta North Star Corp., 95 Wn. App. 311, 319, 976 P.2d 643 (1999) (citing with approval Blanchard v. Golden Age Brewing Co., 188 Wash. 396, 415, 63 P.2d 397 (1936)). However, the legislature can limit the judiciaries' power where it clearly indicates its intention to do so. Bowcutt v. Delta North Star Corp., 95 Wn. App. at 319; In re Marriage of Major, 71 Wn.App. 531, 534, 859 P.2d 1262 (1993). The Courts have interpreted the Deeds of Trust Act as controlling the procedure of trustee sales. Because the statute removes many of the protections borrowers have under a mortgage, courts must strictly construe the statutes in the borrowers favor. AMRESCO Independence Funding, Inc. v. SPS Properties, 129 Wn. App. 532, 536-37, 119 P.3d 884 (2005) (citing Koegel v. Prudential, 51 Wn. App. 108, 111, 752 P.2d 385 (1988). However, the procedure provided by the Deed of Trust Act ("DTA"), under which any enumerated entity may restrain a trustee's sale on any proper ground, is the only means by which a grantor may preclude a sale once foreclosure has begun with receipt of the notice of sale and foreclosure. See, e.g., Brown v. Household Realty Corp., 146 Wn. App. 157, 164, 189 P.3d 233, (2008) (this statutory procedure is "the only means by which a grantor may preclude a sale once foreclosure has begun with receipt of the notice of sale and foreclosure."); Plein v. Lackey, 149 Wn.2d 214, 226, 67 P.3d 1061 (2003); Vawter v. Quality Loan Service Corp., 2010 WL 1629355*4 (W.D. 2010). The DTA requires five days notice to trustee to restrain a sale. "No court may grant a restraining order or injunction to restrain a trustee's sale unless the person seeking the restraint gives five days notice to the trustee of the time when, place where, and the judge before whom the application for the restraining order or injunction is to be made." RCW ? 61.24.130(2) ; see, e.g., Plein v. Lackey, 149 Wn.2d at 226. The DTA does state that nothing in the Act will prevent restraint of sale based on proper legal or equitable grounds. "Nothing contained in this chapter shall prejudice the right of the borrower, grantor, any guarantor, or any person who has an interest in, lien, or claim of lien against the property or some part thereof, to restrain, on any proper legal or equitable ground, a trustee's sale." However, no precedent can be found that allows for a filing within the five day period under the DTA. Possible Equitable arguments that might be made within five days of the trustee sale. a. Where there is an allegation of fraud. Where there is an allegation of fraud, courts may issue an injunction or restraining order. Remedies involving fraud are within the exclusive equitable jurisdiction of the courts. Bowcutt v. Delta North Star Corp., 95 Wn. App. at 319-20. The court must establish the likelihood of the homeowners ultimately prevailing on the merits before it issues a preliminary injunction. Id. (citing Tyler Pipe Indus. v. Dept of Revenue, 96 Wn.2d 785, 793, 638 P.2d 1213 (1982); see generally RCW ? 7.40.080. Any controlling statute under which the fraud allegation is proceeding must also not limit the court's ability to issue equitable relief. But, if these elements are met, a court can act outside the requirements of the DTA. Bowcutt v. Delta North Star Corp., 95 Wn. App. at 319-20 (Fraud charge involving allegation of equity-skimming scheme under RCW ? 9A.82 permitted pre-sale equitable relief despite the requirements of the DTA). b. Where the debtor is not provided adequate opportunity to assert their rights. The DTA's first two goals are to provide an efficient and inexpensive nonjudicial foreclosure process while providing the debtor's an adequate opportunity to assert their rights arising out of any underlying obligation before the trustee's sale. Brown v. Household, 146 Wn. App. at 171. An equitable claim might be made in a case where the trustee refused to update the debtor as to when the trustee sale would take place and that action directly led to the petitioner being late in applying for a temporary restraining order. Those circumstances thus served to deny the Petitioner an opportunity to prevent the foreclosure in accordance with RCW ? 61.24.130. The Petitioner, with limited resources, did not know when the trustee sale would occur and thus lacked the critical information necessary to take timely action as required under that statute. This claim might be asserted prior to the trustee sale. c. Where Trustee violates their duty to act impartially. The trustee does not have a fiduciary duty or fiduciary obligation to the grantor or other persons having an interest in the property subject to the deed of trust. RCW ? 61.24.010(3). Rather, the Act provides that "[t]he trustee or successor trustee shall act impartially between the borrower, grantor, and beneficiary." RCW ? 61.24.010(4). In Bell v. F.D. I.C., 2010 WL 113995 *3 (W.D. 2010), the court held that, while the trustee did not owe a fiduciary duty to the debtor, the trustee did owe a duty of due diligence and to act with impartiality. See also Cox v. Helenius, 103 Wn.2d 383, 389, 693 P.2d 683 (1985)("Because the deed of trust foreclosure process is conducted without review or confirmation by a court, the fiduciary duty imposed upon the trustee is very high.. . the trustee is bound by his office to present the sale under every possible advantage to the debtor as well as to the creditor. He is bound to use not only good faith but also every requisite degree of diligence in conducting the sale and to attend equally to the interest of the debtor and creditor alike") ; see Blodgett v. Martsch, 590 P.2d 298, 302 (Utah 1978)("duty of the trustee under a trust sale is . . . to treat the trustor fairly and in accordance with a high punctilio of honor."). This argument might be asserted within the five day period, particularly if knowledge of the trustee's action was discovered at that time. d. Where there is unfairness in the sale resulting in prejudice to debtor. An equitable argument can be made where there has been "unfairness" attendant with a sale that has prejudiced the debtor. Pender v. Dowse, 1 Utah 2d 283, 288, 265 P.2d 644 (1954) ("It is well settled that equity will intervene and set aside an execution sale or cancel a sheriff's deed. . . where it appears that . . . the sale was attended by unfairness and fraud."); In re Worcester, 811 F.2d 1224, 1229 (9th Cir. 1987) (misdescription of parcel in Trustee's Deed and Notice of Sale amounted to unfair prejudice); AMRESCO Independence Funding, Inc. v. SPS Properties, 129 Wn. App. at 537 ("a plaintiff must show prejudice before a court will set aside a trustee sale."); cf Koegel v. Prudential, 51 Wn. App. at 887 (inaccurate description of property by trustee not sufficient to set aside sale as it was a technical, formal, nonprejudicial error); cf Steward v. Good, 51 Wn. App. 509, 515, 754 P.2d 150 (1988) (upholding sale even though trustee did not record the notice of sale 90 days prior). This argument has been used to set aside trustee sales, but theoretically could be made within the five day notice requirement were the debtor to discover the unfairness at that time.