§20.14 - Mortgage Foreclosures
Jurisdiction | Washington |
§20.14 MORTGAGE FORECLOSURES
A mortgage foreclosure is the judicial process by which the mortgagee/creditor forecloses its lien, eliminating the mortgagor/debtor's equity of redemption and causing the property secured by the lien to be sold to pay the debt owed by the mortgagor/debtor. In this state, the mortgage may be foreclosed only judicially. RCW 7.28.230. A mortgage foreclosure suit is a proceeding in rem. State ex rel. Biddle v. Superior Court, 63 Wash. 312, 115 P. 307 (1911).
(1) Statutory provisions
Chapter 61.12 RCW provides the statutory requirements for foreclosure of real estate mortgages. The right of foreclosure is limited by statute and by the contractual provisions in the mortgage. The mortgage usually provides as follows:
1. | Upon the default of a covenant in the mortgage, the mortgagee may proceed in the county in which the land or part of it is located, RCW 61.12.040, to foreclose the equity of redemption. |
2. | When there is no note or other express agreement for payment of money, the mortgagee's remedy is confined to the mortgaged property. RCW 61.12.050, .070; see e.g., Weikel v. Davis, 109 Wash. 97, 186 P. 323 (1919). |
3. | As a result of a foreclosure, the court issues an order of sale directing the sale of the property to satisfy the judgment. If there is an agreement to pay a specified sum and the property does not sell for that sum, there may be a deficiency judgment. The deficiency judgment is like any other judgment and may be enforced by execution. |
(2) Precomplaint preparation
All parties with an interest in the property that the foreclosing party seeks to eliminate are necessary parties to the action. If a party's interest in the property is to be eliminated, the party must be named. A mortgage foreclosure cannot affect a prior lien and the holder of the prior lien should be named despite the provisions of RCW 60.04.120. Note in this respect City Sash & Door Co. v. Bunn, 90 Wash. 669, 156 P. 854 (1916). Because a prior party who has a record interest is not affected by a lien foreclosure action to which it is not made a party, Davis v. Bartz, 65 Wash. 395, 118 P. 334 (1911), and because the naming of a prior party may not affect that lien, there is no reason to name a prior party whom the foreclosing party does not want to eliminate. Determination of the necessary parties is made in two ways:
1. | Title report. This identifies all individuals and entities having a record interest in the property. |
2. | Physical inspection of the property by attorney or client. This is necessary because occupation of the property gives actual notice to all parties of an interest in the property. E.g., Nichols v. De Britz, 178 Wash. 375, 35 P.2d 29 (1934) ("prudent and reasonable inquiry" test); see also Scott v. Farnam, 55 Wash 336, 104 P. 639 (1909); N.W. Mortgage Investors Corp. v. Slumkoski, 3 Wn.App. 971, 478 P.2d 748 (1970). The occupants are necessary parties who must be named if their interests are to be eliminated by the mortgage foreclosure. |
(3) Complaint
The complaint in a mortgage foreclosure action should contain the following allegations: (a) plaintiff's status, (b) execution of note, (c) execution of mortgage, (d) negotiation of note, (e) assignment of mortgage, (f) current ownership of note and mortgage, (g) default in payment and amount due, (h) military service, (i) marital status of defendants, (j) other suits and actions, (k) costs and attorney fees, (l) purchaser at sheriff's sale, (m) status of other defendants, and (n) deficiency judgment.
Lis pendens. RCW 4.28.320 provides for a lis pendens, which literally means "action pending." Pursuant to the terms of this statute, the recording of the lis pendens provides constructive notice to the world that the action is pending. To impart record notice, the lis pendens must be filed with the auditor/recorder of each county where the property is situated. Any purchaser or encumbrancer whose interest arises after the lis pendens is recorded is bound by the judgment rendered to the same extent as if he or she were actually a party to the action. Ellis v. McCoy, 99 Wash. 457, 169 P. 973 (1918). The lis pendens may not be filed before the filing of the complaint. Burwell v. Smith, 63 Wash. 1, 114 P. 876 (1911). The requirements as to content and timing of a lis pendens are specific and should be followed carefully. RCW 4.28.320.
Practice Tip: | It is good practice, after filing the summons and complaint and recording the lis pendens, to order a supplemental title report covering the period between the first title report and the actual recording of the lis pendens to be sure that there are no other parties of record that intervened between these dates. Check the property to find out if there is any actual possession between these dates. If there are people who have acquired a record interest or actual possession of the property between the dates of the first checking of the property and the preliminary title report and the recording of the lis pendens, the summons and complaint should be amended to include those individuals. |
(4) Service of process
The various modes of service of process are described below.
(a) Personal
RCW 4.28.080 sets forth the statutory modes for personal service of summons.
(b) Summons by publication
RCW 4.28.100 sets forth the conditions that authorize service of summons by publication. To serve unknown heirs, upon presentation to the court of an affidavit that such heirs are proper parties and that they cannot be located with reasonable diligence, the court may grant service of summons by publication pursuant to RCW 4.28.100 and .140. Service by publication also is permitted when the action is to include unknown claimants, although, in that case, no court order is required. RCW 4.28.150. Once there is proper service by publication, the unknown heirs or claimants are bound by a judgment to the same extent as other defendants served by publication, provided that plaintiff files a notice of lis pendens in each county where the real estate is located prior to commencing publication of the summons. RCW 4.28.160.
The form of affidavits for service by publication under RCW 4.28.100 was discussed in First Federal Savings & Loan Ass'n v. Ekanger, 22 Wn.App. 938, 593 P.2d 170 (1979), aff'd, 93 Wn.2d 772 (1980), a case involving an attempt to set aside a mortgage foreclosure on the basis of lack of jurisdiction due to defects in service. The court permitted amendment of the affidavit nunc pro tunc because it found substantial compliance with the statutory requirements for such publication service based on the following facts: Exhaustive efforts to reach the defendant, a resident of Washington, and serve her personally had failed. The only alternative available to the plaintiff was publication. The original affidavit filed in support of service by publication failed to state that (1) copies of the summons and complaint had been mailed to defendant and (2) the action concerned foreclosure on a mortgage or one of the other actions listed in the statute, both of which were required by RCW 4.28.100. However, plaintiff had in fact sent copies of the summons and complaint through the mail and the defendant was well aware of the foreclosure action because she had received the same notice as if the affidavit, usually filed only with the court, had met the statutory requirements. Despite the dissent's contention that the affidavit was jurisdictional, a majority of the Court of Appeals held that plaintiff's failure to recite compliance with all requirements for service by publication did not invalidate the jurisdiction of the court when the requirements were in fact met and the defects were of form, not substance. The majority found its ruling more in harmony with the purpose of the Rules of Civil Procedure to facilitate determination of actions on the merits and not by technical rules.
(5) Jurisdiction and venue
Jurisdiction and venue are laid in the county where the property or some part of it is located. RCW 61.12.040. See generally Shedden v. Sylvester, 88 Wash. 348, 153 P. 1 (1915); Citizens' Nat'l Bank v. Abbott, 72 Wash. 73, 129 P. 1085 (1913).
(6) Judgment
RCW 61.12.060 sets forth the statutory requirements for judgments of foreclosure.
(7) Execution
RCW 61.12.090 provides for the execution on the judgment foreclosing the mortgage. As a result of the mortgage foreclosure judgment, plaintiff's attorney should issue a praecipe for an order of sale to the clerk of the court. The clerk then issues an order of sale, which is in effect the execution. The execution runs to the sheriff. RCW 61.12.090. The sheriff then sells the property pursuant to the normal execution statutes found in Chapter 6.21 RCW.
(8) Sale
RCW 6.21.080 sets forth the statutory basis for the sale. It provides that sale of a real property estate of less than a leasehold of two years' unexpired term and sale of a vendor's interest in a real estate contract are final. All other property must be sold subject to redemption as provided for in Chapter 6.23 RCW.
The sheriff sells the property to the highest bidder. RCW 6.21.100. The lender may credit bid its judgment. State ex rel. Thompson v. Prince, 9 Wash. 107, 37 P. 291 (1894). All other bidders must "forthwith pay the money bid to the officer." RCW 6.21.100. "Forthwith" does not mean instantaneously, but rather as expeditiously as is reasonably possible under the existing circumstances. Williams v. Cont'l Sec. Corp., 22 Wn.2d 1, 153 P.2d 847 (1944).
The sheriff delivers to the purchaser a copy of the certificate of sale, and the original is delivered to the clerk of the court to be delivered to the purchaser upon confirmation of...
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