In re the Estate of Jason L. Patton, 34590-4

Background

Decedent Jason Patton died intestate in 2014 owning a Union Gap residence subject to a recorded deed of trust held by Bank of America (successor to Countrywide) securing a home loan of about $115,000; the house had a lower fair market value (~$75,000).
The probate court opened administration, appointed a personal representative and guardian ad litem for the minor heir, and the Estate gave creditor notice and claimed insolvency.
Bank of America filed a creditor claim for the mortgage balance and the trustee scheduled a nonjudicial foreclosure sale.
The Estate sought a probate order (under RCW 11.76.110) directing that administration expenses (attorney and guardian ad litem fees) be paid first from any sale proceeds of the residence, effectively asserting a super-priority over the deed of trust.
The probate court granted the Estate priority; Bank of America appealed arguing the deed of trust and deed of trust act (RCW 61.24.080) control proceeds from a nonjudicial foreclosure and that the Estate has no statutory lien with super-priority.

Issues

Issue	Estate's Argument	Bank of America’s Argument	Held
Whether RCW 11.76.110 creates a lien or super-priority on proceeds of a nonjudicial deed of trust foreclosure	RCW 11.76.110 gives administration costs first priority against estate assets, so proceeds from the sale of the residence must pay administration costs before the secured creditor	RCW 11.40.135 and the deed of trust act allow a secured creditor to realize on its security independently; RCW 61.24.080 governs distribution of foreclosure proceeds and pays the secured debt first	The statute does not create a lien or super-priority; foreclosure proceeds pay the trustee’s/foreclosure costs and then the secured obligation under RCW 61.24.080 before any payment to the estate for administration costs
Whether probate distribution priorities displace deed of trust act distribution of foreclosure proceeds	Administration priority statute should govern distribution of decedent’s assets	Deed of trust act specifically governs distribution of nonjudicial sale proceeds and preserves secured creditor priority	Deed of trust statute governs nonjudicial sale proceeds; probate priority does not reach proceeds paid directly to secured creditor via foreclosure
Whether a secured creditor must present a claim in probate before foreclosing	Estate argued priorities apply in probate	Bank argued creditor need not present claim and can foreclose independent of probate (RCW 11.40.135)	Creditor may foreclose without filing a claim; probate distribution rules do not impede realization on security
Whether statutory construction requires express language to create liens in probate code	Estate inferred lien from payment priority language	Bank argued statutes must expressly create liens; absent express creation, no lien exists	Court held that statutes that create liens must do so expressly; RCW 11.76.110 does not expressly create a lien or super-priority

Key Cases Cited

Homann v. Huber, 38 Wn.2d 190 (general rule: first in time, first in right governs lien priority)
Dean v. McFarland, 81 Wn.2d 215 (statutory liens are strictly construed; courts will not extend lien statutes beyond their text)
Summerhill Village Homeowners Ass’n v. Roughley, 166 Wn. App. 625 (construing statute that expressly granted association lien super-priority)
In re Trustee’s Sale of Real Property of Whitmire, 134 Wn. App. 440 (probate statutes do not generally alter secured creditor’s interest in specific property)
In re Lundy Estate, 291 Mich. App. 347 (foreign authority rejecting probate priority over foreclosure proceeds)