Can a creditor sue a guarantor before foreclosing the trust deed? Machock v. Fink Explained

In Machock v. Fink, the Utah Supreme Court addressed whether creditors must foreclose trust deeds before pursuing guarantors and what deficiency action requirements apply post-foreclosure.

Background and Facts
Machock loaned $125,000 to Harmer, secured by a junior trust deed on Harmer’s home. Fink signed an agreement to “unconditionally guarantee” Harmer’s obligations. When Harmer defaulted, Machock sued Fink on the guaranty in October 1999. Fink demanded foreclosure, which Machock pursued. At the February 2000 trustee’s sale, Machock was the sole bidder and took title subject to a first trust deed. After the superior lienholder foreclosed, Machock lost the property but continued pursuing Fink for the deficiency without filing a separate deficiency action.

Key Legal Issues
The court considered: (1) whether the one-action rule requires creditors to foreclose before suing guarantors; (2) whether foreclosure activates Utah Code section 57-1-32’s requirements; and (3) whether Machock’s original complaint satisfied the Utah Trust Deed Act’s deficiency action requirements.

Court’s Analysis and Holding
The court held that the one-action rule does not apply to guaranties of payment, distinguishing them from guaranties of collection. Creditors may proceed directly against guarantors without first foreclosing. However, once a creditor elects to foreclose, section 57-1-32 provides the exclusive post-foreclosure remedy. The court found Machock’s original complaint satisfied the statute’s purposes: (1) preventing double recovery through the fair market value offset; and (2) providing adequate notice to the guarantor of the deficiency claim.

Practice Implications
This decision preserves the distinction between guaranties of payment and collection, allowing creditors flexibility in recovery strategies. However, practitioners should ensure deficiency complaints include all facts required by section 57-1-32: the total indebtedness, sale amount, and property’s fair market value at sale. While procedural defects may not bar suit if notice and anti-windfall purposes are met, compliance remains preferable to avoid amendment requirements.