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 Reikow for

a deficiency judgment following a trustee' s sale of real 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 that the fair value of the property exceeded the amount owing on the loan. 

First - Citizens appeals, alleging that the trial court erred in denying it summary judgment

as to all issues, and, in the alternative, that the court abused its discretion in determining the fair

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

amount of deficiency on summary judgment and because substantial evidence in the record

supports the trial court' s fair value determination, we affirm. 

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No. 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 granted the bank a deed of trust for the

property under development, known as Narrows Business Park. 

The Reikows also executed personal guaranties for the entire amount of the 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 pay the 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 of the 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 of the deed of trust 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 of any kind, or at any time, 

with respect to any matter whatsoever." 

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No. 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. At the time of the 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 a deficiency

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 of the loan, but denying any remaining liability and

requesting judicial determination of the fair value of the property sold. 

First - Citizens then moved for summary judgment. In its motion, First - Citizens argued

that the Reikows had waived any right to request a fair value 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 of law. 

Bruce Reikow filed a declaration in opposition to the summary judgment 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. Reikow also attached documents from the

Pierce County Assessor' s office showing the 2010 " assessed value" of the property as

7, 521, 000. CP at 154 -56. In its reply, First - Citizens submitted a professional 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 summary judgment motion, the Reikows argued pro

see

that the court should hold First - Citizens to its statement of fair market value on the IRS form. 

First- Citizens maintained that the Reikows had waived any right to dispute the amount of the

deficiency and that the court should not hold a fair value hearing or consider the IRS form. The

court entered an order granting partial summary judgment to 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 of the property. 

At the fair value hearing, First- Citizens presented the testimony of one of the

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" of the property shortly

before the trustee' s sale stood at $ 6, 370, 000. Verbatim Report ofProceedings ( VRP) (Feb. 21, 

2012) at 41. 

Bruce Reikow testified on the Reikows' behalf, describing the difficulties he had

obtaining and retaining tenants during the nonjudicial foreclosure, which he attributed in part to

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

stating his belief that the amount on the form was correct. The court admitted the form into

evidence. 

The court found the fair value of the 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. 

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No. 43181 -5 -II

judgment in favor of the 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 fair value hearing, if correct, 

would dispose ofthe question of whether the court' s value determination amounted to an abuse

of discretion. We therefore first address the trial court' s grant ofpartial summary judgment, then

consider the trial court' s finding as to the fair value 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 Baker v. Schatz, 80 Wn. App. 775, 782, 912 P. 2d 501 ( 1996)). 

Summary judgment 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) that the moving party is entitled to judgment [ sic] as

a matter of law. 

Baker, 80 Wn. App. at 782. 

Washington statutes allow deficiency judgments against a borrower or guarantor

following nonjudicial foreclosure on a deed of trust securing a commercial loan. RCW

61. 24. 100( 3). In actions against a guarantor for a deficiency, 

the guarantor may request the court or other appropriate adjudicator to determine, 

or the court or other appropriate adjudicator may in its discretion determine, the

fair value of the property sold at the sale and the deficiency judgment against the

guarantor shall be for an amount equal to the sum bfthe total amount owed to the

beneficiary by the guarantor as ofthe date ofthe trustee' s sale, less the fair value

of the property sold at the trustee' s sale or the sale price paid at the trustee' s
No. 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 of the statute thus limits the

deficiency judgment to the difference between the outstanding loan balance and the " fair value" 

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

properly concedes, the statute also expressly grants courts discretion to determine the fair value

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 may have had to request a judicial determination of fair value. 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. 3 7, at 177. In the

context of commercial loans, a foreclosing lender could also, absent this rule, gain such a

windfall by obtaining a deficiency judgment against the debtor or a guarantor. 

4 We note that, under Washington law, "a guaranty agreement should receive a fair and

reasonable interpretation reflecting the purpose of the agreement and the right ofthe guarantor

not to have his obligation enlarged." Old Nat' l Bank of Wash. 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 of the 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

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No. 43181 -5 -II

the bank to a larger deficiency judgment than the statute allows. First - Citizens merely asserts

that "[ t] he only reason there was a fair value hearing in this case is because the Reikows

requested one." Br. of Appellant at 15. 

The record does not support First - Citizens' assertion. To begin with, First - Citizens' 

complaint itself calls for a fair value hearing, although the Reikows also requested a judicial

determination of fair value in their answer to the complaint. At the hearing on First - Citizens' 

motion for summary judgment, 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 a value lower than that stated in the IRS form that the 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 of thousands 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 of a known right, and

intent to waive must be shown by unequivocal acts or conduct which are inconsistent with any

intention other than to waive." Harmony at Madrona Park Owners Ass' 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 defeat the 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 of a package 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. 

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No. 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. of Appellant at 14 -15 ( arguing that enforcing the waiver provision would not

violate public policy because " the trial court could still sua sponte order a fair value hearing "). 

VRP ( Jan. 27, 2012) at 12. Even ifthe Reikows, arguendo, had waived their right to request a

fair value hearing, the court retained its authority to hold one. 

The statute limits a deficiency judgment following nonjudicial foreclosure based on the

fair value of the 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 at the trustee' s sale, a bid

over $1, 000, 000 less than its own valuation of the property. The trial court had before it the

county assessor' s valuation and a tax document prepared by First - Citizens itself, both giving

values substantially higher than that bid and well in excess of the outstanding loan balance. 

First - Citizens had, furthermore, presented two widely divergent values. Thus, reasonable minds

plainly differed as to the fair value of the property, a question of fact diapositive ofthe entire

action. 

Under these circumstances First - Citizens' argument, that no issue of material fact

remained and that reasonable persons could have concluded only that the law entitled First - 

Citizens to a specific sum of money, has no merit. We hold that the trial court properly denied

summary judgment as to the amount of the deficiency and thus did not err in holding a fair value

hearing. 
No. 43181 -5 -II

II. THE TRIAL COURT' s FAIR VALUE DETERMINATION

In an action for a deficiency judgment following a nonjudicial foreclosure, the plaintiff

bears the burden of establishing a deficiency between the debt and the value of the 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 of the property encumbered by a deed of trust 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 of the date of the 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 of the 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) by their terms grant courts discretion to

determine fair value, we review such determinations under the 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 of discretion 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 if the 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, 

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No. 43181 -5 -II

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

inability to obtain tenants for some of the vacant portions of the 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 FirstCitizens itself, admitting that the fair market value of the property at issue exceeded the amount

of the debt. First - Citizens presented opinion testimony that someone erroneously entered that

figure on the IRS form, but the witness admitted that he did not know who prepared the form or

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

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No. 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 of the conflicting testimony concerning First Citizens' apparent admission

on the IRS form lies in the province of the 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 court to deduct in determining fair value. Because the

value accepted by the 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 of fact 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 of the property as of the trustee' s sale, a sum

exceeding the outstanding debt plus the unpaid taxes. The trial court' s conclusions of law

properly followed from its findings and required dismissal ofthe suit. For these reasons, we

affirm. 

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No. 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 against them, 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: ,+ ` 

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Hin• s P. J. — 

PF ao• i, J. r

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