FILED COURT OF APPEALS 2013100 13 AM 11: 14 IN THE COURT OF APPEALS OF THE STATE OF W DIVISION II FIRST -

CITIZENS BANK & TRUST COMPANY, successor in interest to VENTURE BANK, Appellant,

V. BRUCE A. REIKOW and SANDRA J. REIKOW, individually and the marital community comprised thereof; KARL R. ZETTERBERG and JANE ZETTERBERG, individually and the marital community comprised thereof, No. 43181 -5 -II

PUBLISHED OPINION WASHINGT0

BJORGEN, J. — First - Citizens Bank & 

### Trust Company sued Bruce and Sandra Reikowfor 

### adeficiencyjudgment following atrustee' s sale ofreal property securing a commercial loan, then in default, which the Reikows had guaranteed. The trial court granted partial summary judgment to First -

Citizens as to the amount ofthe debt and the Reikows' liability for any 

### deficiency, but ultimately dismissed the complaint after holding an evidentiary hearing and 

### finding thatthe fairvalue ofthe property exceeded the amount owing onthe loan. First - Citizens appeals, alleging thatthe trial court erred in denying it summaryjudgment as to all issues, and, in the alternative, that the court abused its discretion in determining the fair 

### value ofthe foreclosed property. Because the trial court properly declined to determine the 

### amount ofdeficiency on summaryjudgment and because substantial evidence in the record supports the trial court' s fair value determination, we affirm. TNo. 43181 -5 -II
FACTS I. THE COMMERCIAL LOAN AND ASSOCIATED GUARANTIES Venture Bank made a $6, 746, 803. 53 commercial construction loan to NBP LLC, an 

### entity in which the Reikows had a 50 percent interest and in which Bruce Reikow served as a 

### managing member. To secure the promissory note, NBP grantedthe bank a deed oftrust forthe property under development, known as Narrows Business Park. The Reikows also executed personal guaranties for the entire amount ofthe loan. These
guaranties include language by which the Reikows purported to waive, among other things, I 

### any and all rights or defenses arising by reason of ( A) any " one action" or " anti - 

### deficiency" law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, ... or ( F) any defenses given to guarantors at law or in equity other than actual payment and performance of the indebtedness. 

### Clerk' s Papers (CP) at 42, 45. The guaranties also required the Reikows to paythe lender' s costs and legal fees incurred in enforcing the loan obligation. II. NONJUDICIAL FORECLOSURE OF DEED OF TRUST The Washington State Department of Financial Institutions subsequently closed Venture 

### Bank and placed it in receivership. The receiver sold all ofthe failed bank' s assets, including the note and associated guaranties at issue here, to First - Citizens. After NBP began missing 

### scheduled loan payments, First - Citizens declared the promissory note in default and initiated nonjudicial foreclosure ofthe deed oftrust under chapter 61. 24 RCW.

1 The document states, for example, that "[ 

### e]xcept as prohibited by applicable law, Guarantor waives any right to require Lender ... 

### to commit any act or omission ofany kind, or at any time, with respect to any matter whatsoever." 2No. 43181 -5 -II



### First-Citizens submitted the sole bid at the trustee' s sale, purchasing the property for 

### 5,215,000.00 on July 9, 2010. Atthe time ofthe sale, the amount due on the note, including interest, foreclosure costs, charges, and fees stood at $7, 168, 710.74.

III. FIRST -

CITIZENS' LAWSUIT AGAINST REIKOWS FOR DEFICIENCY 

### Following the trustee's sale, First - Citizens sued the Reikows personally for adeficiency judgment 

### in an amount to be proven at trial, representing the outstanding balance on the Note ... less the fair value of the Property sold at the trustee' s sale or the price paid at the trustee' s sale ... plus [costs and attorney fees]. 

### CP at 4. The Reikows answered the complaint, admitting to the amount due on the promissory note,to NBP' s default, and to their guarantee ofthe loan, but denying any remaining liability and 

### requestingjudicial determination ofthe fair value ofthe property sold. First - Citizens then moved for summaryjudgment. In its motion, First - Citizens argued that the Reikows had waived any right to request a fairvalue hearing by virtue ofthe guaranties' 

### waiver provisions, and therefore, the deficiency amounted to the difference between the outstanding debt and the sale price as a matter oflaw. Bruce Reikow filed a declaration in opposition to the summaryjudgment motion, 

### attaching an Internal Revenue Service (IRS) form he had received from First - Citizens concerning the trustee' s sale. The preparer, a First - Citizens employee, had listed the " fair market value" of 

### the property as $7,820,000 on the form. CP at 150. Reikowalso attached documents from the Pierce County Assessor' s office showing the 2010 " assessed value" ofthe property as 

### 7,521, 000. CP at 154 -56. In its reply, First - Citizens submitted aprofessional appraisal dated December 30, 2009, giving a " Prospective Market Value at Stabilization" of $ 7,820,000 and an As - Is Market Value" of $ 6, 630, 000. CP at 207 - 09.No. 43181 -5 -II
At the hearing on First - Citizen' s summaryjudgment motion, the Reikows argued pro see that the court should hold First - Citizens to its statement offair market value on the IRS form. First-Citizens maintained that the Reikows had waived any right to dispute the amount ofthe 

### deficiency andthatthe court should notholdafairvalue hearing or considerthe IRS form. The court entered an order granting partial summaryjudgmentto First - Citizens as to the amount of 

### the debt and the Reikows' liability for any deficiency, but decided to hold a hearing to determine the fair value ofthe property. At the fair value hearing, First-Citizens presented the testimony ofone ofthe professionals who had prepared the December 2009 appraisal. One of First - Citizens' employees also testified to the bank' s opinion that the " estimated as -is market value" ofthe property shortly before the trustee' s sale stood at $6, 370, 000. Verbatim Report of Proceedings ( VRP) ( Feb. 21, 2012) at 41. 

### Bruce Reikowtestified on the Reikows' behalf,describing the difficulties he had 

### obtaining and retaining tenants duringthe nonjudicial foreclosure,which he attributed in partto the conduct of First -

Citizens. Reikow also discussed receiving the IRS form from First - Citizens, 

### stating his beliefthatthe amount onthe formwas correct. The court admitted the form into

evidence. 

### The court found the fair value ofthe property as ofthe trustee' s sale to have been 7,820,000.00, a sum exceeding the amount due on the note by $651,289.26, and therefore dismissed the complaint. Based on the fee - shifting provision in the guaranties, the court entered

2 The Reikows' counsel filed a notice of intent to withdraw on September 13, 2011. 4No. 43181 -5 -II



### judgment in favor ofthe Reikows for reasonable costs and attorney fees incurred in defending against First -

Citizens' deficiency suit. First-Citizens timely appeals. ANALYSIS 

### First - Citizens' claim that the trial court erred in holding a fairvalue hearing, ifcorrect, would dispose ofthe question ofwhether the court' s value determination amounted to an abuse ofdiscretion. We therefore first address the trial court' s grant ofpartial summaryjudgment,then 

### considerthe trial court' s finding as to the fairvalue ofthe foreclosed property

I. TRIAL COURT' S DECISION TO HOLD A FAIR VALUE HEARING We review a trial court' s denial of summary judgment de novo. Walston v. Boeing Co., 

### 173 Wn.App. 271,' 279, 294 P.3d 759, review granted, 177 Wn.2d 1019, 304 P.3d 115 (2013) citing Bakerv.Schatz, 80 Wn.App. 775, 782, 912 P.2d 501 ( 1996)). Summaryjudgment should only be granted if after considering all the pleadings, affidavits, depositions or admissions and all reasonable inferences drawn therefrom in favor of the nonmoving party, it can be said ( 1) that there is no genuine issue as to any material fact, ( 2) that all reasonable persons could reach 

### only one conclusion, and (3) thatthe moving party is entitledtojudgment [sic] as a matter of law. Baker, 80 Wn.App. at 782. 

### Washington statutes allow deficiencyjudgments against a borrower or guarantor 

### following nonjudicial foreclosure on adeed oftrust securing acommercial loan. RCW 61. 24. 100( 3). In actions against a guarantor for a deficiency, 

### the guarantor may request the court or other appropriate adjudicatorto determine, or the court or other appropriate adjudicator may in its discretion determine, the fair value ofthe property sold at the sale and the deficiencyjudgment against the guarantor shall befor an amount equal to the sum bfthe total amount owed to the 

### beneficiary by the guarantor as ofthe date ofthe trustee's sale, less thefairvalue of the property sold at the trustee' s sale or the sale price paid at the trustee' sNo. 43181 -5 -II sale, whichever is greater, plus [ interest, costs, expenses, and fees, to the extent provided for in the guaranty or related contract]. RCW 61. 24. 100( 5) ( emphasis added). The plain language ofthe statute thus limits the 

### deficiencyjudgmentto the difference between the outstanding loan balance andthe "fairvalue"

of the collateral, plus collection - related costs explicitly allowed by contract.3 As First - Citizens 

### properlyconcedes, the statute also expressly grants courts discretionto determine thefairvalue even when the guarantor does not request such a determination. First - Citizens devotes considerable argument to its claim that the Reikows waived any 

### right they mayhave had to request ajudicial determination offairvalue. Nowhere, however, does First -

Citizens explain how this questionable proposition,4 were it established, would entitle
3 Professor Marjorie Rombauer articulates the rationale behind this rule as follows:

A nonjudicial foreclosure sale ( indeed, any foreclosure sale) always carries a certain danger of a windfall to the beneficiary. When the debt owed the 

### beneficiary is large, and /

or when a secondary lienor is a taxing agency also owed a significant sum,junior lienors and unrelated bidders are much less likely to be able to bid a sufficient amount to prevail at the sale, even when there is equity in the property. 

### A foreclosing beneficiary could choose to bid a large amount, but less than its loan balance. Should another bidder bid higher, the beneficiary can 

### protect its position by raising its bid to the amount owed it with no actual outlay. Should the beneficiary prevail on its " 

### lowball" bid, arguably she will benefit in two ways. First, as the prevailing bidder — she will have obtained a windfall - ownership of the property at less than its fair market value. Second, as the foreclosing beneficiary — she will have received less than the full amount owed her and can thus proceed to foreclosure on the other real property collateral. 27 WASHINGTON PRACTICE: CREDITORS' REMEDIES - DEBTORS' RELIEF, § 3. 37, at 177. In the context ofcommercial loans, a foreclosing lender could also, absent this rule, gain such a 

### windfall by obtaining a deficiencyjudgment againstthe debtor or a guarantor. 4 We note that, under Washington law, "

### a guaranty agreement should receive a fair and reasonable interpretation reflecting the purpose ofthe agreement and the right ofthe guarantor not to have his obligation enlarged." 

### Old Nat'l Bank ofWash. v. Seattle Smashers Corp., 36 Wn. App. 688, 691, 676 P. 2d 1034 ( 1984) ( emphasis added). Our Supreme Court has shown 

### great reluctance to allow waiver ofthe statutory requirements governing nonjudicial foreclosure. Schroeder v. Excelsior Mgmt. Grp., LLC, 177 Wn.2d 94, 106- 07, 297 P. 3d 677 (2013) ( stating that "` [w]e will not allow waiver of [chapter 61. 24 RCW' s] protections lightly "' and citing 6No. 43181 -5 -II



### the bankto a larger deficiencyjudgment than the statute allows. First - Citizens merely asserts that "[

### t]he only reason there was afairvalue hearing in this case is because the Reikows
requested one." Br. ofAppellant at 15. The record does not support First - Citizens' assertion. To begin with, First - Citizens' 

### complaint itselfcalls for afairvalue hearing, although the Reikows also requested ajudicial determination offair value in their answer to the complaint. At the hearing on First - Citizens' 

### motion for summaryjudgment, however,the Reikows,then proceeding pro se, did not mention their prior request for a fair value determination. Instead, they argued that the court should 

### prohibit First -

Citizens from asserting avalue lowerthan that stated in the IRS form thatthe bank had prepared. 

### The court on its own initiative expressed the concern that, having already foreclosed on
the collateral and obtained a settlement from a different guarantor,5 First - Citizens might be double-dipping," 

### particularly as it bid "some hundreds ofthousands less than the bank's
appraisal" at the trustee' s sale.' VRP (Jan. 27, 2012) at 4 - 6. Indeed, the record indicates that the

cases) ( quoting Bain v. Metro. Mortg. Grp., 175 Wn.2d 83, 108, 285 P. 3d 34 ( 2012)). A valid 

### waiver, furthermore, requires " intentional abandonment or relinquishment ofa known right, and 

### intentto waive must be shown by unequivocal acts or conduct which are inconsistent with any intention other than to waive." 

### Harmony at Madrona ParkOwnersAss' n v. Madison Harmony Dev., Inc., 143 Wn.App. 345, 361, 177 P. 3d 755 ( 2008), appeal after remand, 160 Wn.App. 728 ( 2011). Thus, were we to find the issue relevant to this dispute, the broad, boilerplate waiver 

### in the guaranties' fine print could hardly defeatthe explicit and specific provisions of RCW 61. 24. 100( 5), 

### which plainly aim to protect guarantors from having their obligations enlarged. 5 First - Citizens' complaint also named Karl and Jane Zetterberg, the Reikows' business partners, who had also guaranteed the loan at issue here. First - Citizens voluntarily dismissed the 

### Zetterbergs, apparently as part ofapackage settlement involving multiple claims. Neither party alleges that the dismissal has any bearing on this dispute. In fact, First -

Citizens bid $1, 415, 000 less at the trustee' s sale than the "As - Is Fair Market Value" given in the bank' s professional appraisal, and $ 1, 145, 000 less than its own " estimated
as -is market value." CP at 18, 207 - 09; VRP (Feb.21, 2012) at 41.

7No. 43181 -5 -II

trial court set the fair value hearing sua sponte: " I' m going to deny the motion for a deficiency judgment. I think what we need to do is set a hearing for this." VRP (Jan. 27, 2012) at 12
emphasis added). -First - Citizens concedes the court had the power to order such a hearing sua 

### sponte. Reply Br. ofAppellant at 14 -15 (arguing that enforcing the waiver provision would not 

### violate public policy because "the trial court could still sua sponte order afairvalue hearing "). VRP (Jan. 27, 2012) at 12. Even ifthe Reikows, arguendo, had waived their right to request a 

### fairvalue hearing, the court retained its authority to hold one. 

### The statute limits a deficiencyjudgment following nonjudicial foreclosure based on the fairvalue ofthe foreclosed collateral and gives courts discretion to determine that value. Cases 

### where the fair value might exceed the price obtained at the trustee' s sale plainly call for such 

### judicial determination. Here, First - Citizens submitted the only bid atthe trustee' s sale, a bid
over $

### 1, 000,000 less than its own valuation ofthe property. The trial court had before itthe 

### county assessor' s valuation and atax document prepared by First - Citizens itself,both giving values substantially higherthan that bid and well in excess ofthe outstanding loan balance. First - Citizens had, furthermore, presented two widely divergent values. Thus, reasonable minds 

### plainly differed as to the fair value ofthe property, a question offact diapositive ofthe entire

action. 

### Under these circumstances First - Citizens' argument,that no issue ofmaterial fact remained and that reasonable persons could have concluded only thatthe law entitled First - 

### Citizens to a specific sum ofmoney, has no merit. We hold thatthe trial court properly denied 

### summaryjudgmentas to the amount ofthe deficiency andthus did not err in holding afairvalue hearing.No. 43181 -5 -II II. THE TRIAL COURT' s FAIR VALUE DETERMINATION



### In an action for a deficiencyjudgment following a nonjudicial foreclosure, the plaintiff bears the burden ofestablishing a deficiency between the debt and the value ofthe collateral

sold. See Sec. State Bank v. Burk, 100 Wn. App. 94, 101, 995 P. 2d 1272 ( 2000) ( interpreting an
analogous provision in the Uniform Commercial Code). The statute at issue here defines " fair

value" as 

### the value ofthe property encumbered by a deed oftrust that is sold pursuant to a trustee' s sale. This value shall be determined by the court or other appropriate 

### adjudicator by reference to the most probable price, as ofthe date ofthe trustee' s sale, which would be paid in cash or other immediately available funds, after deduction of prior liens and encumbrances with interest to the date ofthe trustee' s 

### sale, for which the property would sell on such date after reasonable exposure in the market under conditions requisite to a fair sale, with the buyer and seller each 

### acting prudently, knowledgeably, and for self - interest, and assuming that neither is under duress. RCW 61. 24.005( 6). 

### Because this provision and RCW 61.24. 100(5) bytheirterms grant courts discretion to determine fairvalue, we review such determinations underthe abuse -of- discretion standard. See,

e. g., In re Guardianship ofMatthews, 156 Wn.App. 201, 214, 232 P. 3d 1140 (20 10) ( noting that

where a " statute explicitly grants the superior court discretion," we review for abuse of discretion). Under this deferential standard, an abuse ofdiscretion occurs when a decision is manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons." Mayer

v. Sto Indus., Inc., 156 Wn.2d 677, 684, 132 P. 3d 115 ( 2006) (

### quoting Assoc. Mortg. Investors v. GP Kent Constr. Co., 15 Wn. App. 223, 229, 548 P. 2d 558 ( 1976)). A discretionary decision rests on untenable grounds or is based on untenable reasons ifthe trial court relies on 

### unsupported facts or applies the wrong legal standard; the court's decision is manifestly 

### unreasonable ifthe court, despite applying the correct legal standard to the supported facts, 9No. 43181 -5 -II

adopts a view that no reasonable person would take. Mayer, 156 Wn.2d at 684. We deferto the 

### trial court regarding witness credibility and conflicting testimony,viewing the evidence in the light most favorable to the prevailing party: here, the Reikows. City ofWalla Walla v. 

### 401,333.44, 164 Wn.App. 236, 256, 262 P.3d 1239 (2011). 

### First - Citizens presented expert testimony concerning the professional appraisal it had commissioned. The appraiser explained that the difference between the two values given, the
as -is fair market value" of $ 6,630,000 and the " prospective market value at stabilization" of 

### 7,820,000, resulted largely from the fact that he calculated the latter figure assuming the 

### property were fully leased out, but based the former on the actual tenancy status atthe time of the appraisal. VRP (Feb. 21, 2012) at 23 -25.

Fair value" presumes " reasonable exposure in the market under conditions requisite to a fair sale," not a price based on duress. RCW 61. 24.005( 6). Bruce Reikow testified that his 

### inabilityto obtain tenants for some ofthe vacantportions ofthe property resulted from the actions of First -

Citizens itself. the bank' s refusal to cooperate with NBP and the prospective 

### tenants' uncertainty about the foreclosure process. First - Citizens did not present any contrary

evidence. The Reikows also presented a document prepared and submitted to the IRS by First

### Citizens itself,admitting thatthe fair marketvalue ofthe property at issue exceeded the amount ofthe debt. First -

Citizens presented opinion testimony that someone erroneously entered that figure on the IRS form, but the witness admitted that he did not knowwho prepared the form or whether First -

Citizens had issued a correction. The witness also admitted that, had a corrected

10No. 43181 -5 -II

form issued, the Reikows would have received a copy. Bruce Reikow disputed the claim of mistake and testified that he had never received a correction. Thus, the uncontroverted evidence showed that First - Citizens' appraisers based the lower 

### valuation on the then -

current reduced tenancy status, which resulted in part from the foreclosure process itself. The trial court could reasonably have concluded that this assumption did not 

### comport with the statutory requirement of "reasonable exposure in the market under conditions
requisite to a fair sale," but instead reflected a seller under " duress." RCW 61. 24. 005( 6). Further, the resolution ofthe conflicting testimony concerning First Citizens' apparent admission on the IRS form lies in the province ofthe trial court. We hold that the trial court' s fair value determination was not an abuse of discretion. First - Citizens points out that the trial court did not discuss the unpaid taxes owed on the 

### property,which the statute requires the courtto deduct in determining fair value. Because the value accepted bythe court exceeded the outstanding debt by over $650,000.00, and the unpaid
taxes amounted to only $133, 358. 14, the court had no reason to explicitly perform this calculation. The evidence and the findings offact thus support the trial court' s conclusion that the Reikows had no remaining liability to First - Citizens. First - Citizens' claim that the trial court abused its discretion fails. The evidence supports the trial court' s determination ofthe fair value ofthe property as ofthe trustee' s sale, a sum 

### exceeding the outstanding debt plus the unpaid taxes. The trial court's conclusions oflaw properly followed from its findings and required dismissal ofthe suit. Forthese reasons, we
affirm.

11No. 43181 -5 -II
ATTORNEY FEES



### Washington law requires courts to apply one - way fee-shifting provisions bilaterally. RCW 4.84.330. The guaranties at issue here contain such one - way fee - shifting provisions. 

### Having obtained dismissal with prejudice of First - Citizens' lawsuit againstthem,the Reikows plainly prevailed below. Thus, the trial court properly awarded the Reikows their costs, as well as the attorney fees they incurred before proceeding pro se. Both parties request fees on appeal. When a contract provides for a fee award in the trial 

### court,the party prevailing before us may seek reasonable costs and attorney fees incurred on appeal. RAP 18. 1; Reeves v. McClain, 56 Wn.App. 301, 311, 783 P. 2d 606 ( 1989). The Reikows prevail here and have complied with applicable procedural requirements. We therefore 

### award the Reikows the reasonable costs and attorney fees they incurred in this appeal and deny First - Citizens' fee request. Affirmed.

EJ; cGEN, J We (=

oncur: ,+ ` r

Y 

## I I 1 g Hin• s P.J. —
PF ao• 

### i,

J. r

12