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Albice, et al. v. Premier Mortg. Servs. of Wash., et al.

                                         No. 85260-0

       Stephens, J. (concurring) -- Washington's deed of trust  act,  chapter 61.24 

RCW, reflects a legislative policy choice to create an efficient and inexpensive 

process for nonjudicial foreclosures.  It balances the interests of preventing wrongful 

foreclosures and promoting the stability of land titles.  In reaching for a remedy for 

the grantors in this case, the majority upsets this balance, broadly allowing postsale 

challenges to foreclosure sales and eroding the presumed validity of a standard-form 

deed of trust.  While this leads to a positive outcome for Bart and Karen Tecca, 

ultimately it will disserve the public by undermining confidence in the deed of trust 

system and discouraging its use.  

       I would resolve this case on narrow equitable grounds and leave the deed of 

trust system intact.  Washington courts recognize that a foreclosure sale may be set 

aside based on a grossly inadequate sales price coupled with unfair circumstances or 

procedural irregularities surrounding the sale.  Udall v. T.D. Escrow Servs., Inc., 

159 Wn.2d 903, 914, 154 P.3d 882 (2007).  While there is no firm benchmark for  

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when a sale price is inadequate, courts frequently set aside sales for less than 20

percent of property value, especially when the surrounding circumstances suggest 

that irregular procedures may have contributed to the low price.  Restatement 

(Third) of Property § 8.3 cmt. b (1997) ("Generally, however, a court is warranted 

in invalidating a sale where the price is less than 20 percent of fair market 

value . . . ."); Long Lake Lumber Co. v. Stewart, 198 Wash. 348, 352, 88 P.2d 414 

(1939) ("'But where there is a serious inadequacy in the price realized, the court 
will seize upon any incident of surprise, undue advantage, irregularity, or other 

equitable circumstance to grant relief . . . .'" (emphasis added) (quoting 26 Ruling 

Case Law § 1294)).

       The low sales price and unfair circumstances in this case provide equitable 

grounds to invalidate the sale despite the Teccas' failure to seek an injunction before 

the sale.  Like the majority, I find it significant that the string of sale continuances 

made it difficult for potential buyers to participate.  Four or five bidders appeared at 

the initial sale, but only Ron Dickinson and one other bidder were present at the 

eventual sale 161 days later.  Dickinson himself had to do a fair amount of legwork 

to determine if the sale was going to happen.  And, he paid far less than he was 

prepared to pay for the property.  For their part, the Teccas tendered the final 

payment under the forbearance agreement more than 11 days before the sale, 

supporting their argument that it should have been canceled or rescheduled with 

additional public notice.

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       Moreover, in light of the clear procedural irregularities and the low sale price, 

Dickinson cannot claim the status of a bona fide purchaser, though not for all the 
reasons the majority articulates. 1  "A bona fide purchaser for value is one who 

without notice of another's claim of right to, or equity in, the property prior to his 

acquisition of title, has paid the vendor a valuable consideration."                 Glaser v. 

Holdorf, 56 Wn.2d 204, 209, 352 P.2d 212 (1960).  Notice of another's claim can 

be imputed when the buyer has "such information as would excite apprehension in 

an ordinary mind and prompt a person of average prudence to make inquiry . . . ."

Id.  When such a circumstance would put a person of reasonable prudence on 

inquiry notice, however, that circumstance "is only notice of what a reasonable 

inquiry would reveal."     Id. (citing Paganalli v. Swendsen, 50 Wn.2d 304, 311 P.2d 

676 (1957)).  Here, Dickinson obtained the original notice of sale; he therefore had 

actual notice the sale had been continued for more than 120 days.  The procedural 

irregularities surrounding the sale, combined with the extremely low sale price, 

would put a person of reasonable prudence on inquiry notice.  A reasonable inquiry 

would have revealed the Teccas' efforts to cure.  

       1 Given the majority's conclusion that the sale is invalid because it was without 
statutory authority, majority at 8-9, it is unclear why the majority goes on to consider 
whether Dickinson was a bona fide purchaser, majority at 14-15.  While the majority 
does not use the term "void," it essentially concludes the sale was ultra vires and without 
legal force.  But a void deed cannot pass title; only where a transaction is voidable (that 
is, subject to avoidance by the original parties under common law or statutory law) can a 
bona fide purchaser take good title. See, e.g., State v. Mermis, 105 Wn. App. 738, 748 & 
nn.27, 28, 20 P.3d 1044 (2001).  Thus, if the transaction is truly invalid and of no legal 
effect, as the majority maintains, there is no need to consider whether Dickinson was a 
bona fide purchaser.

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       Accordingly, I would affirm the Court of Appeals based solely on the Teccas'

equitable argument arising from these facts.  I would not reach beyond these 

particular circumstances, however.  I am concerned that the majority's resolution of 

this case greatly unsettles reasonable expectations in the arena of nonjudicial 

foreclosures.  In particular, the majority declares that a trustee's violation of 

timelines in the act renders a foreclosure sale invalid, thereby allowing a grantor to 

set aside the sale after-the-fact, notwithstanding the grantor's failure to use the 

presale remedies under RCW 61.24.130.  Further, in concluding that Dickinson is 

not a bona fide purchaser, the majority creates new duties of inquiry that are in no 

way reasonable and make it impractical for potential buyers to rely on the recitals in 

a deed of trust.  I will address each of these concerns separately.
                                 Procedural Irregularities

       Initially, I disagree with the majority that a violation of statutory timelines by 

a trustee is a procedural irregularity that invalidates  a foreclosure sale.  The 

majority's reasoning all but eliminates the statutory requirement that a challenge to a 

foreclosure sale be brought before the sale takes place.  Until today, we have 

consistently held that the statutory procedure of seeking to enjoin the sale 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) (quoting Cox v. Helenius, 103 Wn.2d 383, 388, 693 P.2d 

683 (1985)).    Under the act, interest holders are notified that "[a]nyone having any 

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objection to the sale on any grounds whatsoever will be afforded an opportunity to 

be heard as to those objections if they bring a lawsuit to restrain the sale . . . ."

RCW 61.24.040(1)(f)(IX) (emphasis added).  Accordingly, courts deem the claims 

of interested parties waived where they failed to seek an injunction despite having 

had an opportunity to do so.  Plein, 149 Wn.2d at 227.  Courts thereby maintain the 

sanctity of land titles and ensure efficient resolution of defaulted loans secured by 

real property. 

       The majority erodes these protections for reasons that cannot withstand 

scrutiny.  First, the majority assumes that property owners such as the Teccas are 

not in a position to restrain a sale when they have acknowledged their default by 

entering into a forbearance agreement.  Majority at 12 ("Dickinson seemingly 

argues that [the owners'] presale remedies were triggered the moment they received 

notice of the trustee's sale.  Yet this argument assumes the borrower can challenge 

the underlying debt.").       But an owner can seek to enjoin the sale even while 

acknowledging the underlying debt.  See Steward v. Good, 51 Wn. App. 509, 514-

15, 754 P.2d 150 (1988) (noting owners in default waived right to contest a 

procedurally defective sale where they failed to enjoin the sale).  The second reason 

the majority declines to find waiver is that the owners had no opportunity to restrain 

the sale.  See majority at 13.  This contention is belied by the uncontested facts.  

The Teccas were given notice that their property was subject to a foreclosure sale 

unless they moved to enjoin.  Given that the trustee did not file a notice of 

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discontinuance or reinstate the deed of trust, see RCW 61.24.090(3), (6), it should 

have been clear to the owners that a motion to restrain the sale was in order.  27 

Marjorie Dick Rombauer,  Washington Practice: Creditors' Remedies -- Debtors'

Relief § 3.61, at 202-03 (1998) (noting "the dangers" in failing to enjoin the sale 

"are obvious").

       The majority makes much of the forbearance agreement, suggesting that the 

sale itself violated its terms and that the owners were therefore taken by surprise 

when the sale occurred in breach of contract.  See majority at 13-14.  A breach of 

contract, however, is not unforeseeable. The statutory means for grantors to protect 

themselves against the contingency of a scheduled, recorded judicial foreclosure 

sale going forward is by enjoining it.  RCW 61.24.040(1)(f)(IX).  Assuming the 

property was sold in violation of the forbearance agreement, the owners' remedy is 

to be found in a suit for breach of contract seeking money damages.  They should 

not be allowed to invalidate the sale when they had ample opportunity to obtain an 
injunction and raise these grounds in a presale lawsuit.2

       The majority claims this case is unlike Plein -- where the borrower had a 

       2 Amendments to the act postdating this case additionally authorize a claim for 
monetary damages against a trustee for, among other things, failure to materially comply 
with the act. RCW 61.24.127; Engrossed S.B. 5810, at 8-9, 61st Leg., Reg. Sess. (Wash. 
2009).    While  the  Teccas    argue these legislative changes support granting relief, 
significantly none of the relief they authorize includes invalidating a foreclosure sale.  
Nor do the amendments alter the strong statutory policy of requiring a motion to enjoin a 
sale before it occurs.  Indeed, the amendments to RCW 61.24.127 suggest that money 
damages against the trustee are warranted in part because the grantor cannot recover 
property sold to a bona fide purchaser.  See RCW 61.24.127(2)(c) (noting claims for 
money damages do "not affect in any way the validity or finality of the foreclosure sale or 
a subsequent transfer of the property").

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defense two months before the sale -- because here the owners supposedly had no 

knowledge of their alleged breach of the forbearance agreement in time to restrain 

the sale.  Again, this assertion is not borne out by the record.  To the extent that the 

owners' "defense" is that the sale occurred outside the 120 day limit, they were on 

notice that the timelines had passed and had sufficient time to move to enjoin any 
sale.3  To the extent the owners claim they had no written notice of the sale 

continuance in accordance with the forbearance requirement, they did receive the 

statutory notice their property was to be sold and could have sought an injunction to 

enforce the contract and restrain the sale.

       This court in Plein held that waiver applies when the borrower has notice of 

the right to enjoin the sale, knows the asserted defense before the sale, and fails to 

pursue presale remedies.  Plein, 149 Wn.2d at 229 (citing RCW 

61.24.040(1)(f)(IX)).  In contrast, the majority today holds that "courts must be able 

to review postsale challenges" promptly brought "to ensure trustees strictly comply 

with the requirements of the act."       Majority at 14.  In fact, the majority concludes 

that seeking an injunction is merely permissive.         Id. at 11 (noting use of the word 

"'may'").

       3 The sale occurred 161 days after originally scheduled.  Because the trustee must 
be given at least five days' notice, RCW 61.24.130(2), the owners had 36 days following 
the expiration of the 120 day period during which they could have sought to restrain an 
untimely sale.  At the time of the events in this case, the act permitted a continuance to be 
announced by public proclamation at the time and place fixed for sale.  Former RCW 
61.24.040(6) (2006).  The act was subsequently amended to require written notice for 
continuances beyond the date of sale. Substitute S.B. 5378, at 13, 60th Leg., Reg. Sess. 
(Wash. 2008).

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       This line of reasoning effectively ends the doctrine of waiver and overrules 

Plein.  The majority concludes that "[w]hen trustees strictly comply with their legal 

obligations under the act, interested parties will have no claim for postsale 

relief . . . ." Id. at 14. Of course, it is hard to imagine a claim for relief not based 

on a violation of some legal obligation.  Therefore, the majority's approach would 

actually permit postsale challenges to foreclosure sales as a general rule, at least 
where "the claims are promptly asserted."  Id. 4

       There may be some merit to creating a system that allows courts to broadly 

review procedural irregularities in foreclosure proceedings after a sale is complete, 

but this is not the system our legislature created in the act.  The legislature ranked 

finality of land sales over entertaining the postsale grievances of grantors.  This 

valuing of sale finality is evidenced by the conclusive presumption given to deed 

recitals showing statutory compliance when the buyer is a bona fide purchaser.

RCW 61.24.040(7).  It is also manifested by the statutory warning that failure to 

enjoin may result in waiver "of any proper grounds for invalidating the Trustee's 

       4 The act's procedural requirements are extensive.  While strict compliance is 
ideal, it is far from certain that failure to comply with every statutory mandate will 
prejudice the interest-holder.  Where the interest-holder believes noncompliance results in 
prejudice, an injunction should be sought.  Of course, some procedural violations cannot 
be enjoined before the sale because they occur at the sale.  For example, if the trustee 
accepted the third highest bid, instead of the first highest bid, a postsale challenge may be 
countenanced.     However, the challenger would still need to show prejudice.  Colo.
Structures, Inc. v. Blue Mountain Plaza, LLC, 159 Wn. App. 654, 666, 246 P.3d 835 
(2011) ("The same standard applies to defects occurring at or after the time of the 
sale -- absent actual prejudice from the error, a claim is waived if no action is taken to set 
aside the sale.").  Even then, the grantor would likely only have an action for money 
damages against the trustee, assuming the deed recitals were adequate under RCW 
61.24.040 and the buyer was a bona fide purchaser.

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sale."  RCW 61.24.040(1)(f)(IX) (emphasis added).  This rule makes sense.  Many 

interest-holders, especially grantors in default, may decide a challenge is not worth 

their while and will allow the sale to proceed.  Doing so is a gamble, the risk of 

which the act places squarely on the interest-holder. 

       The majority would undo this risk allocation. Its insistence that the goal of 

stable land titles is better met "[w]hen trustees strictly comply with their legal 

obligations under the act," majority at 14, misses the mark.  If a postsale challenge 

may be entertained, grantors aware of a procedural flaw will be well advised to keep 

mum until after the sale, especially when no cure of default is on the horizon.  After 

all, a presale challenge may not delay the sale at all; it may simply result in a court 

order requiring the sale conform to the act.  Waiting until the sale has occurred, 

however, may prove advantageous: under the majority's view, the sale is invalid and 

the beneficiary's only option may be to begin the notice and sale process all over 

again. By the time the property is finally renoticed for sale, the grantor may be able 

to cure and avoid the sale altogether.

       Although avoiding the sale may benefit the individual grantor,  allowing such 

postsale challenges will weaken the reliability of nonjudicial foreclosure sales to the 

detriment of landowners and purchasers alike.  Indeed, if a trustee's sale can be 

challenged after the fact, "'title insurers will not insure, secured lenders will not lend 

on, and buyers will not purchase real property with title tracing to a trustee's deed.'"

Plein, 149 Wn.2d at 228 n.5 (quoting amicus mem.). 

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                              Bona Fide Purchaser Doctrine

       I also disagree with the majority's analysis of the bona fide purchaser 

doctrine.  The breadth of circumstances the majority considers to conclude 

Dickinson was not a bona fide purchaser will make it very difficult for buyers at 

foreclosure sales to qualify for this status.

       Building on Dickinson's real estate experience, the majority finds significance 

in Dickinson's brief conversation with Karen Tecca, during which he offered to buy 

the property and she insisted the foreclosure sale would not happen.  From this 

exchange, which lasted about one minute, the majority draws the remarkable 

conclusion that Dickinson was on inquiry notice that the sale may have violated the 

forbearance agreement.  The majority's implicit reasoning goes like this: Tecca's 

refusal to sell would suggest to the reasonably prudent person that Tecca intended to 

cure her default; a reasonable person, learning the property had come up for sale, 

would contact Tecca again to see if she had tried to cure the default; this 

conversation would likely reveal the forbearance agreement and its terms; and a 

reasonable person would then discern the fact that the sale was not in accordance

with the agreement.

       Not only does this chain of reasoning pile inference upon inference, it 

promotes a duty of inquiry previously unknown in this area of the law.  Under the 

majority's view, a potential buyer must approach foreclosure proceedings with an 

inquisitiveness verging on the paranoid.  He is no longer entitled to rely on the 

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notice of sale as establishing default if the owner has said something that implies an 

intent to cure.  If such a verbal statement puts a potential buyer on notice that the 

owner may not actually be in default, what about the owner's written statement of 

intent to make payments?  After all, a trust deed grantor has promised to make 

timely payments to the beneficiary, so is the existence of a recorded trust deed a 

circumstance putting a reasonable person on notice to ask the grantor whether the 

default referred to in the notice of sale actually exists?  Apparently so, because the 

majority holds that Dickinson was not entitled to rely on the deed recitals here.

       As to the deed recitals, the majority acknowledges that a recital of statutory 

compliance constitutes prima facie evidence of such compliance, which is 

conclusive in favor of a bona fide purchaser.  Majority at 12 & n.5; see RCW 

61.24.040(7). However, the majority takes an unprecedented look at these recitals, 

questioning their adequacy in light of "conclusory language" stating that all legal 

requirements of the act are met.  Majority at 15 & n.9.  The majority insists the deed 

must set forth the "facts" supporting this statement, which apparently includes the 

existence of any forbearance agreement that might support an owner's claim that a 

default has been cured.     But we have never required such an exacting standard and 

have previously accepted nearly identical conclusory recitals.  See Glidden v. Mun.

Auth. of Tacoma, 111 Wn.2d 341, 345, 347, 758 P.2d 487, 764 P.2d 647 (1988) 

(giving conclusive presumption where deed inaccurately stated that notice had been 

"'transmitted by mail to all persons entitled thereto'"               and that "'[a]ll legal 

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requirements and all provisions of said Deed of Trust have been complied with, as 

to acts to be performed and notices to be given, as provided in Chapter 61.24 

RCW'" (quoting recitals)). 

       Moreover, the specific recitals in this deed follow the form set out in the real 

property desk book and undoubtedly repeated in countless deeds recorded in 

Washington.  4 Wash. State Bar Ass'n, Washington Real Property Deskbook § 

47.11(16), at 39-40 (3d ed. Supp. 2001).         There is no precedent for the majority's 

conclusion that the drafters of deeds of trust fail to "recite the facts showing 

[statutory compliance],"       RCW 61.24.040(7), when they use standard-form 

statements of statutory compliance.  Majority at 15 n.9.  The majority does not 

explain why conclusory recitals of fact are any less recitals of fact, and we have 

never before construed the statute in the way the majority would.  Moreover, the 

majority is really complaining that the recitals in the deed of trust were inaccurate.  

Id. (noting "the deed also misleadingly listed the sale date in the notice of trustee's 

sale as February 16, 2007, instead of the original sale date of September 8, 2006"

and that it "incorrectly states that the default was not cured").  Such looking behind 

the face of the deed's factual recitals is precisely what the presumptive validity of 

the deed precludes.  RCW 61.24.040(7).  I fear that the majority's new-found 

scrutiny of deeds of trust will greatly unsettle reasonable expectations in land titles.

       In sum, I depart from the majority's reasoning.  I would reject the argument 

that a trustee's failure to strictly comply with the procedural requirements of the act 

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invalidates a sale and opens the door to a postsale challenge.  I would also be more 

circumspect in considering when a buyer at a foreclosure sale may rely on the 

recitals in a trust deed to claim the status of a bona fide purchaser.  Instead, I would 

resolve this case on the narrow equitable ground that courts may invalidate an unfair 

foreclosure sale based on the combination of a grossly inadequate sale price and 

procedural irregularities.  The combination of these circumstances cannot be known 

before the sale, and so it is appropriate -- in exceptional circumstances -- for a court 

to grant relief even after the sale has occurred.  On this basis alone, I would affirm 

the Court of Appeals. 

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AUTHOR:
       Justice Debra L. Stephens

WE CONCUR:

       Justice Mary E. Fairhurst

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