Important Information about Foreclosure Law Changes

In February 2010, the Oregon legislature passed House Bill 3656 (“HB 3656”) amending ORS 86.770. The passage of HB 3556 brought clarity to the foreclosure laws. Specifically, ORS 86.770, as amended by HB 3656, makes clear when a deficiency judgment, which is a judgment against a debtor (i.e. borrower) for the unpaid balance of the debt when a foreclosure sale fails to yield the full amount of the debt due, can and cannot be sought following foreclosure. Here’s a quick guide to ORS 86.770.

The first question to ask is whether the trust deed is a residential or commercial trust deed. Under Oregon law, a residential trust deed is defined as a trust deed on property with four or fewer residential units1, one of which is occupied as the principal residence of the grantor (i.e. borrower), the grantor’s spouse, or the grantor’s minor or dependent child at the time foreclosure is commenced2. ORS 86.705(3). A trust deed not meeting the residential trust deed description is considered a commercial trust deed. Accordingly, trust deeds can change from residential to commercial (and vice versa) depending on the borrower’s use. For instance, a trust deed for a duplex that was originally a commercial trust deed could become a residential trust deed if the borrower resides in one of the units when the trust deed foreclosure is commenced.

Once you have determined the category of the trust deed, a review of ORS 86.770 provides the answer to whether a deficiency judgment against the grantor can be sought.

Let’s analyze what happens if a residential trust deed is foreclosed. There cannot be a deficiency judgment against the grantor, the grantor’s successor in interest, or any other person obligated on the promissory note, bond, or other obligation secured by a trust deed whether the residential trust deed is judicially foreclosed (i.e. through a court order) or non-judicially foreclosed (sometimes referred to advertisement and sale; foreclosure that occurs via a trustee’s sale).

Moreover, no action is allowed on any other note, bond, or other obligation secured by a residential trust deed (i.e. a second trust deed) on the property subject to the judicial or non-judicial foreclosure if: (1) the other debt obligation was created on the same day as, and used as part of the same purchase or repurchase transaction as, the debt secured by the foreclosed trust deed; and (2) the other debt is owed to or was originated by the same beneficiary (i.e. lender) or an affiliate of the beneficiary as the foreclosed trust deed.

Now, let’s examine what happens if foreclosure of a commercial trust deed takes place. If a commercial trust deed is foreclosed non-judicially, no deficiency action may be brought, nor judgment entered against, the grantor, the grantor’s successor in interest or another person obligated on the promissory note, bond, or other obligation secured by the trust deed that was subject to non-judicial foreclosure. However, the carve-out for other promissory notes, bonds, and other obligations executed the same day as part of the same purchase is not included for commercial trust deeds. Accordingly, a debtor would be liable for sums owing under the other debt. For commercial trust deeds, the practical reality is that if a trustee’s sale occurs with regard to one of several loans by the same lender, the lender could then seek a judgment against the borrower based on the other loan(s).

The borrower’s situation in a judicial foreclosure of a commercial loan is worse. If a commercial trust deed is foreclosed judicially, the borrower is completely exposed. Simply put, when a judicial foreclosure of a commercial trust deed occurs, the lender obtains a deficiency judgment against the debtor if the net sale proceeds are insufficient to satisfy the loan secured by the trust deed foreclosed.

What about the liability of guarantors of loans? While the rights of guarantors of residential loans against the borrower are limited (a guarantor of an obligation secured by a residential trust deed may not recover a deficiency judgment against the grantor or a successor in interest of the grantor), lenders have unlimited rights to pursue guarantors if trust deeds are judicially foreclosed (lenders can bring deficiency actions against guarantors of trust deeds after judicial foreclosure, including judicial foreclosures of residential trust deeds). ORS 86.770(5). Thus, guarantors of residential trust deeds are at risk for deficiency if the trust deed is judicially foreclosed. To make matters worse, the guarantor cannot pursue a claim against the residential trust deed debtor for any deficiency. On the commercial side, the guarantor will also be on the hook after judicial foreclosures but will at least be able to pursue the debtor.

The current economy dictates that attention be paid to the changes in foreclosure laws, whether you are an investor with rental property or a homeowner. It is important to realize that foreclosure law, like all law, is constantly evolving and undergoing revisions. Moreover, even without a change in the law, the foreclosure process continues to be in a state of flux. For example, on October 8, 2010, Bank of America announced that it was suspending all foreclosure actions in all 50 states as it investigates flaws in its foreclosures system (specifically, employees failing to properly review documents before the bank initiated foreclosure actions). J.P. Morgan Chase, Ally Financial (previously known as GMAC), and other banks may also announce similar moratoriums on foreclosures. If so, the recovery of housing prices will likely be stalled for some time.

Should you need any assistance in the foreclosure arena, please do not hesitate to contact us. We are here to help.

Betsy A. Cooper’s legal practice focuses on real estate law, in which she handles a variety of legal matters for clients. Named an Oregon Super Lawyers Rising Star in 2009 and 2010, she works with clients on issues relating to the sale and acquisition of real property, real estate foreclosures, general real property matters, commercial landlord tenant matters, and loan workouts. Contact Betsy directly at

Estate Planning and “Virtual Assets”

For many of us, our primary means of communication is email, often through multiple email accounts. We “tweet” about the latest happenings through our Twitter accounts. We keep in touch with friends and colleagues through social networking sites such as Facebook and LinkedIn. We also store family photos and other important information on a growing array of online sites. When it comes to our financial assets, such as bank accounts and brokerage accounts, we often access them using the internet. Many of us pay our bills electronically. And as business owners, we may own an internet domain name.

In the aggregate, these “virtual assets” have tremendous financial and aesthetic value. Yet, when we die or become incapacitated, what happens to these assets? Who can gain access to this “virtual existence” when we’re gone? The answer is very complex. Most of these virtual assets are controlled by a license agreement with the provider of the online access. Such license agreements vary from provider to provider. Without careful planning, chaos may reign. Here are some key recommendations to consider:

  1. Integrate Virtual Assets into Your Estate Plan. Wills, trusts, and powers of attorney have been around for centuries. In appointing an executor, trustee, or agent under a power of attorney, you are appointing a representative that you trust to take control of your assets and follow your legal instructions. Whether dealing with virtual assets or an office building, you should appoint individuals in these roles and who are both trustworthy and competent to carry out your instructions.
  2. Create a Virtual Asset Instruction Letter. A “Virtual Asset Instruction Letter” or “VAIL” will list all of your online accounts and assets, and will provide web addresses, user names, and passwords to give your designated representative the ability to identify and access these accounts. Place the VAIL in a safe location, such as a safe deposit box, that can only be accessed by your legal representative. In addition to a written list, you might consider saving the VAIL to a flash memory drive or CD which can make your representative’s access to these accounts more efficient. For assets such as email accounts, your VAIL may instruct your representative to delete the account after a period of time. Most such accounts will simply terminate after a certain period of inactivity.
  3. Consider Who Should Receive Your Virtual Assets. If a virtual asset is a bank or investment account, your will or trust should (presumably) control who will receive these assets at your death. However, what about access to family photos or genealogical information? One might want to specifically instruct the executor or trustee to replicate and distribute these items so that they pass to multiple intended beneficiaries.
  4. Use Caution in Using Commercial Services to Hold Your Virtual Assets. A new cottage industry has sprung up to provide a type of “online safe deposit box” to store your virtual assets and provide a means by which designated individuals can gain access to your virtual assets. A few words of caution are in order. First, be careful and make sure you’re dealing with a reputable company. Giving someone the keys to your digital existence would be a goldmine for someone bent on stealing your identity. Second, remember that giving someone access to information about an asset is not the same as giving that asset to that individual. Your will or trust — not an online service provider — should ultimately control who should inherit your assets. There may also be complex legal and tax issues that need to be taken into account in designating beneficiaries of virtual assets. For example, one online “safe deposit box” provider refers to use of an “electronic will.” In most states, a will requires certain formalities (typically a written instrument signed before two witnesses), and the absence of these formalities can render one’s good intentions legally invalid.
  5. For important assets, get professional advice. If an important asset, such as a substantial bank or investment account, has an existence that is completely online with periodic account statements being sent to the owner by email, this asset may be difficult for your personal representative or trustee to locate. This is where a VAIL may be a particularly helpful tool. In addition, for such important assets, it may be essential to get professional advice to ensure that one’s overall estate plan is consistent with an account agreement and/or license agreement that controls such asset.

Virtual assets present significant and unique challenges. However, with careful thought and planning, these assets can be effectively integrated into one’s overall estate planning process.

Michael D. Walker is a business, tax and estate planning attorney who has worked with individuals and small to medium-sized businesses for more than 20 years. Contact him directly at

Employment Law And The Wiretap Trap

Workplace electronic messages — text messages, email, voicemail and other electronically stored information — can be a trap for the unwary, as seen in the infamous Supreme Court “sexting” case involving Jeff Quon, who was an officer with the Ontario Police Department in Southern California.

The basic facts of the case are this: Quon used a handheld device provided by his employer to communicate with both his wife and his mistress. Those text messages might never have come to light but for the poor judgment of two police dispatchers, Sally and April. Sally learned that her boyfriend, a member of the Hell’s Angels motorcycle gang, was being followed by a narcotics agent, so she asked April to warn him. April then texted him on her employer-issued handheld device. Sally and April got caught by their employer, and in the subsequent investigation, Jeff Quon’s text messages were discovered, because, as luck would have it, April was his mistress. And, when, at the police department’s request, the service provider, Arch Wireless, turned over copies of all the text messages, it was all over for Jeff Quon. The district court observed that, “many of the text messages sent and/or received by Quon’s pager while he was on duty were, to say the least, sexually explicit in nature.”

Jeff Quon’s lawyer, apparently believing that the best defense is a good offense, sued the police department and the service provider, alleging that, in obtaining Quon’s text messages from the service provider, both the employer and the service provider violated federal wiretap laws. Ordinarily, an employer would not expect to be accused of wiretapping unless an employee’s phone was tapped. But, because of the language Congress used in the law, employers need to be careful about obtaining an employee’s electronically stored records, including transcripts of text messages and emails, even when those records are created using the employer’s own resources.

In 1986, Congress passed the Electronic Communications Privacy Act to afford privacy protection for electronic communications. As part of this package, Congress enacted the Stored Communications Act (“SCA”), which was designed to address access to stored wire and electronic communications and transactional records.

The SCA gave individuals (such as employees) the right to sue any person or entity (including an employer) for divulging the contents of stored electronic communications, such as text messages or emails. Quon filed suit in federal court against his employer and the service provider, Arch Wireless, for divulging his racy text messages. He didn’t get very far with the trial court; however, the Court of Appeals found in his favor, ruling that Arch Wireless was liable for violation of the SCA because it provided Quon’s text messages to his employer. And, it held that the employer was liable for unlawfully searching through Quon’s text messages.

Arch Wireless’ attempt to seek review was rejected by the U.S. Supreme Court, and they were found liable to Jeff Quon. The Supreme Court did, however, agree to review the employer’s liability for an illegal search. The Supreme Court agreed with the Court of Appeals that Quon had some expectation that his text messages were private, and not subject to review by his employer. The court observed that, “Cell phone and text message communications are so pervasive that some persons may consider them to be essential means or necessary instruments for self-expression, even self-identification.” And, perhaps more important, the Court also noted that, “… employer policies concerning communications will of course shape the reasonable expectations of their employees, especially to the extent that such policies are clearly communicated.”

After a careful review of the facts and the law surrounding Quon’s text messages, the Supreme Court concluded that the employer’s review of the text messages was reasonable because there was a legitimate reason for the review, and the review was not “excessively intrusive.”

The labor and employment attorneys at our firm have found that having a clear policy in place before a crisis is confronted is not only prudent, but essential. A specific policy addressing the use, storage, and privacy expectations regarding these communications should be clearly stated in the employer’s policy handbook.

Steven W. Seymour is an accomplished litigator with an emphasis on labor and employment law. As an expert in civil litigation, Steve focuses primarily on cases involving disability, and sexual discrimination, wrongful termination, and non-compete agreements. Contact Steven directly at

Oregon Employers are Not Required to Accommodate Medical Marijuana Use

Previous articles in the Fine Print have addressed the intersection of Oregon’s Medical Marijuana Act and the obligations on employers to accommodate persons with disabilities. For various procedural reasons, none of the previous cases before the Oregon Court of Appeals or Supreme Court addressed the specific issue of an employer’s obligation to accommodate an employee’s use of medical marijuana.

In this most recent case, the Supreme Court considered the case of an employee with a medical marijuana card, who was terminated by Emerald Steel Fabricators, where the employee worked as a temporary drill press operator. The employee had applied for a permanent position, and would have had to pass a drug test in order to be hired. He informed his supervisor that he had a “medical marijuana card” and used the marijuana to treat a debilitating medical condition. Understandably, Emerald Steel was not willing to make an exception for this employee in a safety-sensitive position, and terminated the employee rather than bringing him on full time.

The employee filed a complaint with the Oregon Bureau of Labor and Industries (“BOLI”) alleging that Emerald Steel has discriminated against him on account of his disability. Oregon law, much like the federal Americans With Disabilities Act, makes it an unlawful employment practice to discriminate against a qualified employee with a disability.

In April of this year, the Oregon Supreme Court, in a lengthy opinion, cleared up the issue. In a 5-2 ruling, the Court ruled that Oregon law does not require employers to accommodate an employee’s use of marijuana, even when that employee has a valid medical marijuana card.

Timothy J. Resch is a civil litigator with an impressive local and international history, helping employers and small businesses find success in federal and state court litigation matters. Contact Tim directly at