Introduced Version
House Bill 4563 History
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Key: Green = existing Code. Red = new code to be enacted
H. B. 4563
(By Delegates Webster, Proudfoot, DeLong, Fragale, Caputo,
Moore, Guthrie, Brown, Fleischauer, Mahan and Miley)
(Introduced February 14, 2008; referred to the
Committee on the Judiciary)
A Bill to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new section, designated §38-1-2a; to amend
and reenact §38-1-3 and §38-1-4 of said code; to amend and
reenact §38-1A-3
of said code; and to amend and reenact §44-
14-1 of said code, all relating to updating the foreclosure
process on trust deeds; including procedures for foreclosure
on bank and nonbank loans and right of reinstatement;
fiduciary duties of trustees owed to both parties; information
required to be on notice of sale; requiring all sales to be
under supervision of a resident of the state; substitute
trustees; and eligibility of trustees.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new section, designated §38-1-2a; that §38-1-3
and §38-1-4 of said code be amended an reenacted; that §38-1A-3 of said code be amended and reenacted; and that §44-14-1 of said code
be amended and reenacted, all to read as follows:
CHAPTER 38. LIENS.
ARTICLE 1. VENDOR'S AND TRUST LIENS.
§38-1-2a. Fiduciary duty of trustee.
The trustee under a deed of trust owes a fiduciary duty at
common law to both the grantee beneficiary and grantor borrower
under the deed of trust. The common law duties of the trustee
include, but are not limited to, (1) the duty to review and
determine whether documents submitted to the trustee for
foreclosure are on their face consistent with the terms of the deed
of trust and the law, (2) the duty to ensure that the reinstatement
amount and the accelerated amount due, when sought by the trustee
from the grantor, are accurate; (3) the duty of access by the
parties, including access by the grantor for explanation of amounts
provided by the trustee for and reinstatement and time and date of
the foreclosure sale, (4) the duty to act consistent with the trust
in accounting for all monies received, (5) the duty to act
impartially between the parties and to proceed only in accord with
law, and (6) the duty to await resolution by a court where a party
raises a significant issue as to the creditor's legal entitlement
to proceed with foreclosure; Provided, nothing in this section
requires that a trustee conduct an affirmative investigation unless
he or she has actual knowledge of anything which should legally prevent the foreclosure. In addition, all parties have the common
law duty of good faith and fair dealing in the performance of
duties and responsibilities under the deed of trust. An attorney
in an attorney client relationship to one party to a deed of trust
in the collection of debts may not also serve as a trustee or
substitute trustee under a deed of trust; Provided, a trustee may
send to the grantor a notice of right to cure default and
subsequent notice of sale consistent with this article.
§38-1-3. Sales Under Trust Deeds.
(a) Sale upon default. The trustee in any trust deed given as
security shall, whenever required by any creditor secured or any
surety indemnified by the deed, or the assignee or personal
representative of any such creditor or surety, after the debt due
to such creditor or for which such surety may be liable shall have
become payable and default shall have been made in the payment
thereof, or any part thereof, by the grantor or other person owing
such debt after (1) review of the original note and security
instrument, (2) ascertaining the reinstatement amount, and (3)
review of the creditor's estimated value of the security, after
default shall have been made in the payment thereof, or any part
thereof, by the grantor or other person owing such debt, and if all
other conditions precedent to sale by the trustee, as expressed in
the trust deed and in law, shall have happened, sell the property
conveyed by the deed, or so much thereof as may be necessary, at public auction, having fist given notice of such sale as prescribed
in the following section.
(b) Procedure for foreclosure sale. (1) Any creditor which
deems that the conditions for foreclosure sale have been met and
all reasonable alternatives to foreclosure have been explored may
deliver to the trustee the instrument upon which the debt is based,
the security instrument, a complete copy of the account record, and
all other evidence of its entitlement to proceed with foreclosure.
The trustee after ascertaining those to receive notice, shall
proceed with notice and sale as prescribed in sections four, five,
six and seven of this article. If in the course of said process
any party raises a significant issue about the amount due or the
legal entitlement to proceed with foreclosure that cannot be
resolved between the parties, sale shall await court resolution.
(2) In the case of a loan other than one originated by a
depository institution located in this state, if the trustee has
actual knowledge that (A) the market value of the security appears
to be substantially less than the principal of the loan at the time
of origination or (B) there is misconduct by the servicer of the
loan, the loan shall be referred for judicially sanctioned
foreclosure or a declaratory proceeding thereon.
(c) Right of reinstatement. In order to facilitate the right
of reinstatement, the trustee or designee shall be personally
accessible by telephone (without electronic mail or intervening voicemail) and in person during all regular business hours in the
ten business days prior to a foreclosure sale. The right of
reinstatement shall be available for a minimum forty-day period
from the time of estimated receipt of the notice of sale containing
an explanation of the right through the day of sale. No
restrictions shall be placed on the exercise of the right by the
trustee.
§ 38-1-4. Notice of sale.
(a)Publication. (1) Unless property is to be sold under a deed
of trust executed and delivered prior to the first day of July, one
thousand nine hundred eighty, which contains a provision waiving
the requirement of published notice, the trustee shall publish a
notice of a trustee's sale as a Class II legal advertisement in
compliance with the provisions of article three, chapter fifty-nine
of this code, and the publication area for such publication shall
be the county where the property is located: Provided, That any
notice of sale published since the first day of July, one thousand
nine hundred eighty, and prior to the effective date of this
section, shall be deemed to have met the requirements of the
section if such were published as Class II legal advertisements, in
compliance with the provisions of article three, chapter fifty-nine
of this code, in that by the enactment of the acts of the
Legislature, regular session, one thousand nine hundred eighty, the
Legislature intended that all notice of sales pursuant to trust deeds were to have been published as Class II legal advertisements.
(2) Except as expressly provided in this section, no trust
deed shall waive the requirements of publication of notice required
by this section. The notice personally served shall include a copy
of the full account record and a description of the right to
reinstate as contained in the security instrument and this section.
(b) Personal Service. (1) In all cases, a copy of such notice
shall be served on the grantor in such trust deed, or his agent or
personal representative, by certified mail, return receipt
requested, and regular United States mail, directed to the address
shown by the grantors on the deed of trust or such other address
given to the beneficiary of said trust deed or said beneficiary's
agent or assignee in writing by the said grantor subsequent to the
execution and delivery of the trust deed and notice shall be deemed
complete when such notice is mailed to the aforesaid address,
notwithstanding the fact that such mail may be returned as refused
or undeliverable and shall be served by certified mail, at least
twenty forty days prior to the sale, upon any subordinate
lienholder who has previously notified the primary lienholder by
certified mail of the existence of a subordinate lien. Every trust
deed shall state the address to which such notice shall be mailed.
If the return receipt from certified mail is not returned within
fifteen days of delivery, personal service in the manner prescribed
for civil actions shall be attempted on any grantor residing on the property, unless it is known that the property is vacant.
(c) Content of notice. Every notice of sale by a trustee under
a trust deed shall show the following particulars: (a) (1) The time
and place of sale; (b) (2) the names of the parties to the deed
under which it will be made; (c) (3) the date of the deed; (d) (4)
the office and book in which it is recorded; (e) (5) the quantity
and description of the land or other property or both conveyed
thereby; and (f) (6) the terms of sale.
(d) Notice by mail to subordinate lienholders. Notice to a
subordinate lienholder shall be complete when such notice is mailed
in accordance with the provisions of this section, directed to the
address of the subordinate lienholder as provided by such
subordinate lienholder in the notice of existence of a subordinate
lien.
(e) Other forms of notice. The provisions of this section
relating to the methods of serving notice are not exclusive. In
addition to, but not in lieu of, any service of notice required by
the provisions of this section, service of such notice may be also
made by any other method authorized for the service of original
process in the circuit courts of this state by statute or by the
rules of civil procedure for trial courts of record.
(f) Purchasers and notice to subordinate lienholders. An
individual who purchases property at a trustee's sale is under no
duty to ascertain whether notice was given to subordinate lienholders in accordance with the provisions of this section, and
such right, title and interest as the purchaser may acquire shall
not be affected by defects in such notice or the service thereof,
if the purchaser is otherwise a bona fide purchaser for value.
(g) Right to reinstate. All borrowers shall have a right to
reinstate under the terms set forth in the security instrument
prior to the time of the sale, by tendering the amount set forth in
the right to cure.
ARTICLE 1A. TRUSTEES OF SECURITY TRUSTS.
§ 38-1A-3. Validity of sales and titles conveyed by nonresident
trustees All sales under the direct supervision of a resident
trustee, and access thereto.
The nonresidency of a trustee shall not invalidate or cloud
the title passing under a security trust. Any conveyance made by a
nonresident trustee pursuant to foreclosure of a security trust
shall be as valid as though such trustee were a resident of this
State. From the inception of a foreclosure sale procedure by notice
to the grantor through filing of a report of sale and distribution
of proceeds, such sale shall be under the direct supervision of a
resident of this State, and if a corporation, the directing officer
of the corporation who is a resident of this State. Direct
supervision shall mean the person responsible for all actions
having to do with the sale, including review of the file and
conduct of the sale. Said trustee or designee shall be available by telephone (without electronic mail or intervening voice mail),
United States mail, and in person for discussion of issues during
all regular business hours in the ten business days prior to the
sale.
CHAPTER 44. ADMINISTRATION OF ESTATES AND TRUSTS.
ARTICLE 14. SUBSTITUTION OF TRUSTEES; POWERS OF SURVIVING OR
REMAINING TRUSTEES
.
§ 44-14-1. By circuit court or judge, for trustee in deed, will or
other writing; appointment of ancillary trustee under certain
circumstances; substitution of trustee by party secured by
trust deed.
(a) Substitute trustee appointment by circuit court. When the
trustee, or, if there is more than one trustee, one or more of the
trustees, in any will, deed or other writing, die or remove beyond
the limits of this state, or decline to accept the trust, or having
accepted, resign the same, or refuse to act as trustee, or be
unable due to physical or mental disability to perform his, her, or
their duties under the trust, the circuit court of the county in
which such will was admitted to probate, or such deed or other
writing is or may be recorded, may, on motion of any party
interested, and upon satisfactory evidence of such death, removal,
declination, resignation, refusal or inability, appoint a trustee
or trustees in the place of the trustee or trustees named in such
instrument and so dying, removing, declining, resigning or refusing, or being unable to perform his, her, or their duties
under the trust.
(b) Substitute trustee. As an alternative to the method of
substitution provided for in subsection (a) of this section, in the
case of a trust deed to secure a debt or obligation if the trust
deed does not by its terms prescribe a method for substitution, the
party secured by the trust deed, or any surety indemnified by the
deed, or the assignee or personal representative of any such
secured party or surety has the authority, in the event of such
death, removal, declination, resignation, refusal or inability as
is described in subsection (a), to substitute a trustee or trustees
in the place of the trustee or trustees named in such instrument,
independent of any court action otherwise required by the
provisions of subsection (a).
(c) Substitute trustee appointment for non-qualified
corporation. If any such trust, other than a security trust,
include real property situate in this state, and the trustee, or,
if there be more than one trustee, one or more of the trustees,
appointed by or under the will, deed or other writing creating such
trust and required under the provisions thereof to act in respect
of such real property, be a corporation or association chartered
under the laws of any other state or jurisdiction which is not
qualified under the laws of this state to hold property or transact
business in this state, and refuses or is unable to so qualify, such court may in like manner appoint an ancillary trustee of such
trust to act with respect to such real property situate in this
state pursuant to, and with all the powers and authorities granted
to the trustee or trustees of such trust by, the provision of the
will, deed or other writing creating such trust.
(d) Retaliatory substitution of trustee. Any lender or
beneficiary of a trust to secure a debt or obligation which
attempts to replace a trustee who has, on account of actions or
directives of the trustee acting in the trustee's belief of proper
exercise of the fiduciary duty of such trustee, shall be subject to
an action for actual and punitive damages therefor.
(e) Ineligibility for service as trustee or substitute
trustee. Any person, firm or corporation serving as a trustee or
substitute trustee which has been found to have acted in
substantial violation of the fiduciary duty as provided by section
two-a, article one, chapter thirty-eight of this code, may not
serve as trustee or substitute trustee in this state. The attorney
general on his own initiative may, or upon application of any
citizen shall, after a hearing thereon, determine whether a person,
firm or corporation is disqualified from serving as a trustee or
substitute trustee.
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