[WSBARP] Faulty Deed of Trust

[Mark Anderson]

Dear All:
Here is the scenario:
Owner has a loan with Lender 1 evidenced by a Promissory Note and a Deed of Trust on Property A.  Owner also has a loan with Lender 2 evidenced by a Promissory Note (and a questionable Deed of Trust on Property A).  Property A is located in a community subject to continuing liens and assessments of an HOA.
Owner defaults on both loans.  Lender 1 initiates nonjudicial foreclosure proceedings and Property A is sold at a trustee sale.  Surplus proceeds from the sale are deposited with the Court.  Notice of the deposit is given to Owner and to 3 financial institutions, each arguably holding a security interest in Property A.  However, notice of the deposit is not given to the HOA that has a continuing lien on Property A with, of course, an outstanding balance due.
Lender 2 brings a motion before the Court to disburse funds to collect on its defaulted Promissory Note, declaring that it has a security interest in Property A by way of a 2nd position Deed of Trust.  The Court grants the motion and the balance of the surplus funds are disbursed to Lender 2.
Here is the problem:
The Deed of Trust for Lender 2 is faulty.  The Deed of Trust does contain the correct parcel number for Property A and references the correct street address.  However, both the abbreviated legal description on page 1 of the Deed of Trust and the full legal description on Exhibit A to the Deed of Trust describe some other real property located in Pierce County, Washington - neither of the legal descriptions describe Property A at all.
Here are my questions:

  1.  Are the improper legal descriptions fatal to the enforceability of Lender 2's Deed of Trust as against Property A?
  2.  Does Owner or the HOA have any recourse against Lender 2 to recover amounts that may have been improperly disbursed to Lender 2?
  3.  Is the applicable statute of limitation 3 years for bringing an action against Lender 2 to recover those amounts?  (The surplus funds were deposited in February 2022 and disbursed in March 2022)
In advance, thanks for your help in sorting this out.
Mark B. Anderson
ANDERSON LAW FIRM PLLC
821 Dock St  Ste 209  PMB 4-12
Tacoma, Washington 98402
+1 253-327-1750
+1 253-327-1751 (fax)
marka at mbaesq.com<mailto:marka at mbaesq.com>
www.mbaesq.com<http://www.mbaesq.com/>
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