Publication
UPDATE: Washington Supreme Court Grants Reconsideration, Withdraws Opinion Broadly Impacting Nonjudicial Foreclosure of Deeds of Trust
Decision: Marquez Vargas v. RRA CP Opportunity Trust 1, No. 103735-0 (Wash. Apr. 30, 2026) — Opinion Withdrawn Sept. 4, 2026
Introduction
Our May 13, 2026 legal alert summarized the Washington Supreme Court’s April 30, 2026 opinion in Marquez Vargas v. RRA CP Opportunity Trust 1, No. 103735-0, holding that a Home Equity Line of Credit (HELOC) agreement is not a negotiable instrument under Article 3 of the Uniform Commercial Code (UCC) and that a putative beneficiary cannot satisfy Revised Code of Washington (RCW) 61.24.030(7)(a) by declaring itself the “holder” of a nonnegotiable HELOC. The ruling effectively barred lenders and assignees from pursuing trustee’s sales for such obligations and would require them instead to use judicial remedies such as judicial foreclosure or receivership in order to realize upon the collateral after default.
On September 4, 2026, the Court granted the lender’s motion for reconsideration and withdrew its April 30, 2026 opinion. The case will be reconsidered without oral argument based on existing briefing, and a new opinion will be issued in due course. This update summarizes the key arguments that led to reconsideration and what it means for lenders.
The Motion for Reconsideration
On May 20, 2026, the lender and respondent, RRA CP Opportunity Trust 1, filed a motion for reconsideration raising several arguments that the Court’s opinion conflicted with the plain language and structure of Washington’s Deed of Trust Act (DTA):
- The DTA is not limited to negotiable instruments. The motion argued that the DTA’s references to secured “obligations” and “other obligation” encompass nonnegotiable instruments, and that the opinion improperly read a negotiability requirement into the statute.
- Conflict with the DTA’s guaranty provision. The motion argued that RCW 61.24.100(6), which permits nonjudicial foreclosure of deeds of trust securing guaranties, is incompatible with a blanket negotiable-instrument requirement because guaranties are nonnegotiable.
- The 2018 amendment was not intended to restrict foreclosure. The motion argued that replacing “owner” with “holder” in RCW 61.24.030(7) was intended to include servicers and agents — not import the UCC Article 3 definition or narrow foreclosure rights.
- Sweeping practical consequences. The motion warned that the opinion could bar most commercial and residential nonjudicial foreclosures in Washington and disrupt decades of lending practice.
The Amicus Brief: Industry Policy Concerns
On May 28, 2026, banking-industry groups the Community Bankers of Washington, Washington Bankers Association, and GoWest Credit Union Association filed an amicus brief arguing that the Supreme Court’s decision was inconsistent with the language and intent of the DTA but also emphasizing the ruling’s broader policy consequences:
- Plain language of the DTA. The amici argued that the opinion imported narrow UCC definitions into the broader DTA scheme, despite the statute’s “other obligation” language, and that there is no evidence the legislature intented in the 2018 amendment to limit “holder” to negotiable instruments.
- Impact on all lending, not just HELOCs. The amici argued that the opinion threatens nonjudicial foreclosure for residential and commercial loans, including approximately 8,400 commercial construction loans totaling $14.2 billion in Washington in 2025.
- Harm to both borrowers and lenders. The amici argued that the DTA’s bargain — an efficient, lower-cost remedy in exchange for generally waiving deficiency claims — would be undermined if lenders were forced into costlier, slower judicial foreclosures or receiverships.
- Burden on Washington courts. The amici warned that the Court’s ruling could add thousands of judicial foreclosures, receiverships, and deficiency lawsuits to already overburdened courts.
The Court’s Order Granting Reconsideration
On September 4, 2026, the Washington Supreme Court granted reconsideration and withdrew its April 30, 2026 opinion. It will reconsider the case without oral argument based on the existing briefing; no further briefing will be accepted, and a new opinion will issue in due course.
What This Means for Lenders
The withdrawal is significant for lenders and the broader Washington lending industry. Key takeaways include:
- The original opinion is no longer binding. Withdrawing the April 30 opinion removed it as precedent, including its holdings that a HELOC is not a negotiable instrument and that the DTA’s “holder” requirement can be met only with a negotiable instrument.
- Nonjudicial foreclosure status pending. Until a new opinion issues, the availability of nonjudicial foreclosure for HELOC-secured deeds of trust and other nonnegotiable obligations remains unresolved; lenders should consult counsel before proceeding.
- Continue monitoring and preparing. Lenders should monitor the case, review potentially affected Washington loans, consider pairing new HELOCs or credit lines with separate negotiable promissory notes to avoid any potential future limitation on enforcement options, and evaluate foreclosure documentation and procedures. Industry groups should continue seeking legislative clarification.
About Snell & Wilmer
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