HELOCs Are Nonnegotiable; DTA “Holder” Proof Requires a Negotiable-Note Holder for Nonjudicial Foreclosure
Marquez Vargas v. RRA CP Opportunity Trust 1 (Wash. Apr. 30, 2026)

1. Introduction

This certified-question decision addresses a recurring practical problem in Washington nonjudicial foreclosures: what “proof” a trustee must possess before recording and serving a notice of trustee’s sale, and whether that proof framework works when the secured debt is a revolving credit product rather than a conventional fixed-sum mortgage note.

Gabriel Marquez Vargas executed a subordinate home equity line of credit (HELOC) “Home Equity Credit Line Agreement and Disclosure Statement,” secured by a deed of trust. After default, the alleged beneficiary (RRA CP Opportunity Trust 1) instructed the trustee (North Star Trustee, LLC) to proceed nonjudicially. The servicer (Real Time Resolutions, Inc.) signed a declaration under penalty of perjury asserting that RRA was the “holder” of the HELOC agreement, tracking the language that RCW 61.24.030(7)(a) deems “sufficient proof.”

Vargas sued in federal court to stop the sale and raised two state-law questions Washington’s Supreme Court had not yet squarely resolved: (1) is a “typical HELOC” negotiable under UCC Article 3, and (2) can the DTA’s “holder” proof requirement be met by declaring “holder” status as to a nonnegotiable HELOC?

2. Summary of the Opinion

3. Analysis

3.1. The new rule / clarified doctrine

The decision establishes (and in part clarifies) a two-step gatekeeping framework for Washington nonjudicial foreclosures:

• Step 1 (UCC Article 3 threshold): Many HELOC agreements are nonnegotiable because the “fixed amount” requirement must be satisfied from the four corners of the instrument at issuance.
• Step 2 (DTA eligibility): RCW 61.24.030(7)(a)’s “proof that the beneficiary is the holder” requirement is satisfied only when the beneficiary can be an Article 3 “holder”—i.e., holder of a negotiable instrument—because only then does “holder” reliably denote the party with enforcement/modification authority contemplated by Washington’s DTA jurisprudence.

3.2. Precedents cited (and how they shaped the court’s decision)

A. Washington DTA/UCC integration and “beneficiary” identity

Bain v. Metro. Mortg. Grp., Inc., 175 Wn.2d 83 (2012)

Bain v. Metro. Mortg. Grp., Inc. is the doctrinal foundation. It rejected the idea that parties can contract around the DTA’s statutory definition of “beneficiary” (RCW 61.24.005(2)) and reaffirmed the principle that the “obligation and mortgage cannot be split.” Critically, it held that DTA interpretation should be “guided” by UCC concepts, quoting the UCC definition of “holder” and the UCC’s “person entitled to enforce” (PETE) framework.

In Marquez Vargas, Bain supplies the interpretive link: the DTA’s “beneficiary” is the “holder,” and “holder” is not free-floating—it is anchored in UCC Article 3 concepts to ensure that the foreclosing actor is the one with enforcement authority.

Lyons v. U.S. Bank National Association, 181 Wn.2d 775 (2014)

Lyons v. U.S. Bank National Association treated “holder” as a decisive status for DTA compliance. It invalidated a beneficiary declaration that ambiguously claimed either to be “the actual holder” or to have authority under RCW 62A.3-301. The court reasoned that “only a holder has the requisite authority to act as a beneficiary under Bain.”

In Marquez Vargas, Lyons supports the proposition that the DTA’s “holder” requirement is not satisfied by generic enforcement authority language; it is satisfied by “holder” status as Washington’s prior DTA cases have understood it—i.e., an Article 3 concept.

Trujillo v. Northwest Trustee Services., Inc., 183 Wn.2d 820 (2015)

Trujillo v. Northwest Trustee Services., Inc. reaffirmed Lyons, holding that ambiguity regarding whether an entity “actually held the note” can support a DTA violation claim. In Marquez Vargas, it reinforces that “holder” is a strict, status-based gatekeeper for nonjudicial foreclosure initiation.

Brown v. Dep't of Commerce, 184 Wn.2d 509 (2015)

Brown v. Dep't of Commerce is the key case for legislative purpose. It explained the difference between ownership and enforcement rights in mortgage notes, and concluded that RCW 61.24.030(7)(a) was meant to ensure “the party with the authority to enforce and modify the note is the party engaging in mediation and foreclosure.”

Marquez Vargas uses Brown as the lodestar for why the DTA’s “holder” must be an Article 3 “holder”: only that status reliably communicates “this is the PETE,” whereas possession of a nonnegotiable note is not a uniformly reliable proxy for enforcement authority under common law and Article 9 transfer rules.

B. Washington negotiability doctrine (four-corners; fixed at issuance)

Bucci v. Nw. Tr. Servs., Inc., 197 Wn. App. 318 (2016)

Bucci v. Nw. Tr. Servs., Inc. supplied the operational test: “Negotiability is determined from the face, the four corners, of the instrument at the time it is issued without reference to extrinsic facts.” Marquez Vargas deploys this to reject the argument that a HELOC becomes negotiable once the draw period closes and the balance becomes fixed.

21st Mortg. Corp. v. Nicholls, 25 Wn. App. 2d 795 (2023)

21st Mortg. Corp. v. Nicholls is cited for Article 3 mechanics (indorsements; bearer paper), helping frame why “holder” status is a possession-based, formal status for negotiable instruments.

Mar v. Wash. Mut. Sav. Bank, 64 Wn.2d 793 (1964) and Bank of Cal., NA v. Nat'l City Co., 141 Wash. 243 (1926)

These cases anchor Washington’s longstanding position that negotiability is “fixed at the time of execution” and cannot morph later: “an instrument is negotiable for all purposes or non-negotiable for all purposes.” They are essential to the court’s rejection of the Nevada approach in Wishengrad v. Carrington Mortgage Services.

C. Statutory interpretation canons and legislative acquiescence

Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1 (2002) and Swinomish Indian Tribal Cmty. v. Dep't of Ecology, 178 Wn.2d 571 (2013)

These provide the interpretive framework: plain meaning derived from text, context, related statutes, and the scheme as a whole. The court uses this to justify reading the DTA “holder” term in harmony with UCC Article 3.

In re Pers. Restraint of Johnson, 131 Wn.2d 558 (1997)

Cited for the proposition that once the court interprets a statute, that interpretation is treated as what the statute has meant since enactment—supporting the majority’s reliance on its own prior DTA jurisprudence when confronting a novel HELOC context.

Glass v. Stahl Specialty Co., 97 Wn.2d 880 (1982) and Antio, LLC v. Dep't of Revenue, 3 Wn.3d 882 (2024)

These underpin the court’s legislative-acquiescence analysis: the legislature is presumed aware of judicial interpretations; amendments are presumed consistent absent clear intent to abrogate. This supports the majority’s view that the 2018 amendment to RCW 61.24.030(7)(a) (removing “owner,” retaining “holder”) aligns with Brown and the court’s “holder” jurisprudence rather than repudiating it.

D. Persuasive authority on HELOC negotiability (majority approach; minority approach rejected)

Majority approach: HELOCs/credit lines are not negotiable

The court aligns with the bulk of jurisdictions that treat revolving credit obligations as nonnegotiable because the instrument does not state the amount actually advanced and requires reference to external facts/documents:

• Demakis v. SunTrust Bank, 312 So. 3d 1015 (Fla. Dist. Ct. App. 2021) (citing Third Fed. Sav. & Loan Ass'n v. Koulouvaris, 247 So. 3d 652 (Fla. Dist. Ct. App. 2018))
• SMS Fin. 30, LLC v. Frederick D. Harris, MD, Inc., 2018-Ohio-2064, 112 N.E.3d 395
• And numerous other cited decisions (e.g., OneWest Bank, NA v. FMCDH Realty, Inc., 165 A.D.3d 128)

Minority approach rejected: later “fixing” of balance creates negotiability

The court expressly rejects Wishengrad v. Carrington Mortgage Services, 139 Nev. 116, 529 P.3d 880 (2023), which treated a HELOC as negotiable once the draw period closed and the amount due became fixed. Washington’s “four corners at issuance” doctrine (from Bucci v. Nw. Tr. Servs., Inc. and earlier cases) makes later events irrelevant to negotiability.

The court also criticizes Wishengrad’s reliance on Webster Bank NA v. Mutka, 250 Ariz. 498 (Ct. App. 2021), as that case addressed a statute-of-limitations issue rather than negotiability under UCC Article 3.

3.3. Legal reasoning (how the court reached its decision)

A. Why the HELOC fails RCW 62A.3-104(a)

Under RCW 62A.3-104(a), a negotiable instrument must include “an unconditional promise or order to pay a fixed amount of money.” The HELOC, as described and as executed here, sets a credit limit and promises to lend “from time to time” upon the borrower’s request. The instrument itself does not state the amount actually advanced; that information appears, if at all, in separate draw documentation.

That structural feature is not incidental; it is the defining feature of a revolving credit line. Because the principal owed depends on a contingency (whether and how much the borrower draws), the HELOC cannot qualify as “fixed amount” paper on its face at issuance.

B. Why DTA “holder” is limited to an Article 3 holder (and why that matters for HELOCs)

The court’s second holding is less about formalism than about functional certainty under a nonjudicial regime. Nonjudicial foreclosure is powerful: it allows sale without judicial oversight. The DTA responds to that risk by requiring proof—before sale notice—that the beneficiary is the “holder” of the obligation secured. RCW 61.24.030(7)(a).

Drawing on Brown v. Dep't of Commerce, the court identifies the legislature’s purpose: ensure the party with authority to enforce and modify the note is the one conducting mediation and foreclosure. For negotiable instruments, that legislative purpose is served by “holder” status because:

• the Article 3 “holder” is (by definition) a “person entitled to enforce” under RCW 62A.3-301; and
• possession and endorsement rules provide a relatively clear, standardized signal of who can enforce.

For nonnegotiable instruments, however, the court concludes that “possession is not a reliable indicium” of enforcement rights. Common-law and Article 9 authorities—cited by the court, including Professor Whitman—recognize that enforcement rights in nonnegotiable notes can be transferred by written assignment without delivery, so the possessor of the paper may not be the true enforcing party. As a result, allowing a “holder” declaration for nonnegotiable obligations would undercut the DTA’s core disclosure-and-authority purpose.

C. The 2018 amendment to RCW 61.24.030(7)(a) as confirmation (not expansion)

The court treats the 2018 amendment (deleting “owner,” retaining “holder”) as harmonizing the statute with Brown’s owner-versus-holder analysis and as legislative acceptance of the court’s existing “holder” interpretation. The court rejects the dissent’s argument that changing “the” to “any” signals an intentional broadening to nonnegotiable notes, reasoning that the key change was removal of “owner,” and that “any” largely conforms wording across the sentences rather than abrogating the court’s established “holder” meaning.

D. The dissent’s competing frame

Justice Madsen’s dissent reads the DTA as a self-contained foreclosure framework not limited by UCC Article 3 and argues that importing Article 3’s definition of “holder” is textually and functionally mistaken. The dissent emphasizes:

• the DTA’s broad applicability to deeds of trust securing “an obligation” (RCW 61.24.020),
• the DTA’s use of “holder” in other contexts (e.g., RCW 61.24.040), and
• the practical role of a beneficiary declaration in situations where enforcement authority is not reducible to physical presentation of a negotiable note.

The majority, however, treats its own prior DTA cases as controlling the meaning of “holder” in this setting and views Article 3 “holder” status as the only sufficiently reliable proxy for the enforcement authority the legislature sought to ensure.

3.4. Impact (practical and doctrinal consequences)

A. Immediate foreclosure practice consequences

• Nonjudicial foreclosure unavailability for HELOCs like this: Beneficiaries seeking to foreclose deeds of trust securing typical HELOC agreements in Washington may be forced into judicial foreclosure (or other judicial remedies), rather than proceeding via trustee’s sale.
• Trustee “proof” compliance becomes instrument-type dependent: Trustees and servicers must assess whether the secured obligation is negotiable under RCW 62A.3-104(a) before relying on RCW 61.24.030(7)(a) declarations.
• Document engineering and product design pressure: Market participants may attempt to redraft HELOC documentation to approximate “fixed amount” notes (though revolving draw features inherently conflict with that requirement), or may restructure products to preserve nonjudicial foreclosure pathways.

B. Consumer-protection and litigation effects

• Sharper borrower defense: Borrowers facing nonjudicial foreclosure of HELOC-secured deeds of trust gain a strong threshold challenge: if the obligation is nonnegotiable, the foreclosing party cannot truthfully establish “holder” status in the DTA sense.
• More judicial oversight for revolving credit foreclosure: Channeling these cases to court proceedings may increase procedural safeguards but also may increase time and expense for all parties—an issue highlighted by the dissent’s policy discussion.

C. Doctrinal clarification: “holder” as a DTA term of art

The most durable doctrinal effect is that “holder” in RCW 61.24.030(7)(a) is now firmly a term of art tied to UCC Article 3—rather than a general synonym for “assignee,” “owner,” or “current creditor.” This further entrenches Washington’s DTA/UCC integration first articulated in Bain v. Metro. Mortg. Grp., Inc..

4. Complex Concepts Simplified

4.1. “Negotiable instrument” (RCW 62A.3-104(a))

A negotiable instrument is a special kind of payment promise designed to circulate. To qualify, the paper must state the essential payment terms on its face—especially an unconditional promise to pay a fixed amount. If you must consult other documents to know what amount was actually borrowed, negotiability usually fails.

4.2. “Holder” and “person entitled to enforce” (PETE)

For negotiable notes, a “holder” is generally the person in possession of the original note when it is payable to bearer (often via blank indorsement) or payable to that person. Under RCW 62A.3-301, the holder is a “person entitled to enforce” (PETE)—the party the borrower can safely pay to be discharged, and the party who can enforce the note (including through foreclosure remedies).

4.3. Article 9 “ownership” vs Article 3 “enforcement”

Washington recognizes that the owner of a mortgage note (the party entitled to the economics) and the enforcer of the note (the PETE) can differ, especially in securitized markets. Article 9 addresses sales/ownership transfers; Article 3 addresses enforcement rights—but only for negotiable instruments. For nonnegotiable notes, enforcement can depend on other law (contract/common law), and possession alone may not definitively identify the enforcer.

5. Conclusion

Marquez Vargas v. RRA CP Opportunity Trust 1 draws a clear boundary around Washington’s nonjudicial foreclosure mechanism: it is keyed to the DTA’s requirement that the beneficiary prove it is the “holder,” and “holder” means an Article 3 holder of a negotiable instrument. Because a typical HELOC agreement does not promise repayment of a fixed amount on its face at issuance, it is nonnegotiable; therefore, its beneficiary cannot satisfy RCW 61.24.030(7)(a) and cannot proceed by trustee’s sale. The opinion’s core significance is its insistence that, in a nonjudicial system, Washington will use UCC negotiability and holder-status formality to ensure that the party invoking foreclosure power is the party the law recognizes as having enforce-and-modify authority—while leaving creditors to judicial remedies when the secured obligation lacks that negotiable-instrument architecture.