IN THE SUPREME COURT OF THE STATE OF WASHINGTON
WASHINGTON FEDERAL, a federally chartered savings association, Respondent,

v. LANCE HARVEY, individually and the marital community comprised ofLANCE HARVEY and "JANE DOE" HARVEY, husband and wife, Petitioners. ) ) ) ) ) ) ) ) ) ) ) ) ) 

### --------------------------------------------------------) WASHINGTON FEDERAL, a federally chartered savings association, Respondent,

v. KENDALL GENTRY and NANCY GENTRY, and the marital community comprised thereof, Petitioners. ) ) ) ) ) ) ) ) ) ) ) ) )



## _____________________________

## ) No. 90078-7 (consol. w/No. 90085-0)

EnBanc

Filed 

### JAN 08 2015Wash. Fed. v. Harvey, No. 90078-7 GONZALEZ, I.-Washington's deeds oftrust act (DTA), chapter 61.24 RCW, balances the interests ofborrowers and lenders. Itprovides a comparatively inexpensive mechanism for lenders to foreclose onreal propertypledged to secure a debt through nonjudicial foreclosure, 1 making certain types ofloans easier for borrowers to obtain because lenders have faster recourse ifthe loan is not repaid. In exchange, generally, the act limits the recovery ofthose benefiting from a nonjudicial foreclosure to whatever is recouped from that foreclosure. It does not, generally, also allow the lender to pursue a deficiencyjudgment against the borrower; once the lender chooses nonjudicial foreclosure, it must be satisfied with what it gets. Today, in the consolidated cases before us, we must decide whether guarantors ofcommercial loans whose own property has not been foreclosed are protected from deficiencyjudgments

1"The Legislaturehas provided two methods offoreclosure for deeds oftrust:judicial foreclosure under chapter 61.12 RCW and nonjudicial foreclosure under chapter 61.24 RCW. There are substantial differences inthe respective rights oflenders and borrowers under each." Donovickv. Seattle-FirstNat'!Bank, 111 Wn.2d 413, 419, 757 P.2d 1378 (1988) (Dore, J., dissenting). Judicial foreclosure, on onehand, involves filing a lawsuit to obtain a court order of foreclosure. The ordermayprovide for anupsetprice, that is, a minimum price at which the property canbe sold which ensures an adequatereturn to the borrower. RCW 61.12.060. Property soldpursuant tojudicial foreclosure ordinarily mayberedeemed bythe borrowerwithin 1 year. RCW 6.23.020. Since sale under a decree offoreclosure is a forced sale, the state constitution requires that a certainportion ofthe value ofresidential propertybe preserved to theborrower as homestead. Const. art. 19, § 1. Thus,judicial foreclosure provides for a significant level ofprotection
... :theright to anupsetprice, the right to redeem and the right to homestead. !d. (Dore, J., dissenting). Nonjudicial foreclosure, on the otherhand, "is a quick and inexpensive alternative tojudicial foreclosure" that does notrequire a court order. !d. at 420 (Dore, J., dissenting). Nonjudicial foreclosure provides a "quidpro quo"; borrowers' "rights to redemption, upsetprice and homestead [are] surrendered" in exchange for protection from deficiencyjudgments. !d. at 420-21 (Dore, J., dissenting).
2Wash. Fed. v. Harvey, No. 90078-7 under the DTA after the borrower's property has been foreclosed. We find they are not. FACTS Wash. Fed. v. Harvey InNovember 2008, Kaydee Gardens 9 LLC borrowed approximately $2.6 million from Horizon Bank, evidenced by a promissory note and a loan agreement. The loan was secured by a deed oftrust encumbering property located in Everett, Washington, granted by Kaydee Gardens. Lance Harvey guaranteed the loan on behalfofhimselfand his marital community but did not grant a separate deed oftrust to secure the guaranty. In June 2011, the Federal Deposit Insurance Corporation assigned Horizon Banlc's interest in the loan, the deed oftrust, and the guaranty to Washington Federal. Bythat time, Kaydee Gardens had defaulted on the loan. Kaydee Gardens's defaults
were not cured by Kaydee Gardens, Harvey, or Harvey's marital community. Washington Federal initiated nonjudicial foreclosure proceedings and had the property in Everett sold by a trustee. Washington Federal was the successful purchaser at the sale. After the sale, a deficiency ofapproximately $1.2 million remained outstanding. Washington Federal sought the deficiency amount from the Harveys. The trial court granted the Harveys' motion for summaryjudgment. The Court ofAppeals reversed the trial court. Wash. Fed. v. Harvey, noted at 179 Wn.

3Wash. Fed. v. Harvey, No. 90078-7 App. 1033 (2014). We granted the Harveys' petition for review. Wash. Fed. v. Harvey, 180 Wn.2d 1021,328 P.3d 902 (2014). Wash. Fed. v. Gentry InDecember 2005, Blackburn Southeast LLC borrowed approximately $2.6 million from Horizon Bank (Loan 1 ), evidenced by a promissory note and a loan agreement. Loan 1 was secured by a deed oftrust encumbering a property located on Little Mountain Road in Mount Vernon, Washington, granted by Little Mountain East LLC (the Little Mountain Deed ofTrust). InApril2009, Landed Gentry Development Inc. borrowed approximately $3.6 million from Horizon Bank (Loan 2), evidenced by a promissory note and a loan agreement. Loan 2 was secured by the Little Mountain Deed ofTrust and ajunior deed oftrust encumbering a property located on East BlackburnRoad in Mount Vernon, Washington, granted by Blackburn Southeast, Little Mountain East, and BlackburnNorth LLC. In September 2010, Gentry Family Investments LLC borrowed approximately $1.1 million from Horizon Bank (Loan 3), evidenced by a promissory note and a loan agreement. Loan 3 was secured by the Little Mountain Deed ofTrust. Kendall Gentry and Nancy Gentry each guaranteed all three loans in their personal capacities, but neither ofthe Gentrys granted a separate deed oftrust to
secure any ofthe guaranties.

4Wash. Fed. v. Harvey, No. 90078-7 InApril 2010, the Federal Deposit Insurance Corporation assigned Horizon Bank's interest in the three loans, the deeds oftrust, and the guaranties to Washington Federal. By that time, the borrowers had defaulted on all three loans. Neither the borrowers nor the Gentrys cured all ofthe borrowers' defaults. Washington Federal initiated nonjudicial foreclosure proceedings and had the Little Mountain and Blackburnproperties sold by trustees. Washington Federal was the successful purchaser ofthe properties at the sales. After the sales, a deficiency of approximately $7.6 million remained outstanding. Washington Federal sought the deficiency amount from the Gentrys. The trial court granted the Gentrys' motion for summaryjudgment. The Court ofAppeals reversed the trial court. Wash. Fed. v. Gentry, 179 Wn. App. 470, 319 P.3d 823 (2014). We granted the Gentrys' petition for review. Wash. Fed. v. Gentry, 180 Wn.2d 1021, 328 P.3d 902 (2014). ANALYSIS A. Standard ofreview "The standard ofreview ofan order ofsummaryjudgment is de novo, and the appellate court performs the same inquiry as the trial court." Jones v. AllstateIns. Co., 146 Wn.2d 291, 300, 45 P.3d 1068 (2002) (citing Lybbert v. Grant County, 141 Wn.2d 29, 34, 1P.3d 1124 (2000)). "A court may grant summaryjudgment ifthe pleadings, affidavits, and depositions establish that there is no genuine issue as to any material fact and the moving party is entitled tojudgment as a matter oflaw."

5Wash. Fed. v. Harvey, No. 90078-7 

### Lybbert, 141 Wn.2d at 34 (citing

### Ruffv. King County, 125 Wn.2d 697, 703, 887 P.2d 886 (1995)). B. The DTA Does NotProtect the Guarantors from Deficiency Judgments Under the DTA, "a deficiencyjudgment shall not be obtained onthe obligations secured by a deed oftrust against any borrower, grantor, or guarantor after
a trustee's sale under that deed oftrust." RCW 61.24.100(1). The DTA, however, contains certain exceptions to that general rule in connection with commercial loans such as the loans at issue in these consolidated cases. Relevant to the cases at hand, RCW 61.24.100(3)(c) allows for a deficiencyjudgment against a guarantor ofa commercial loan "[s]ubjectto this section
... ifthe guarantor is timely given
... notices." "Subject to this section" in subsection (3)(c) refers to the entirety ofRCW 61.24.100 because "section" is not equivalent to "subsection," and"[w]here the language ofa statute is clear, legislative intent is derived from the language ofthe statute alone." 

### City of Spokane v. Rothwell, 166 Wn.2d 872, 876, 215 P.3d 162 (2009) (citing 

### State v. Wentz, 149 Wn.2d 342, 346, 68 P.3d 282 (2003)). Within RCW 61.24.100, subsection (6) states that "[a] guarantor granting a deed oftrust to
secure its guaranty ofa commercial loan shall be subject to a deficiencyjudgment following a trustee's sale under that deed oftrust only to the extent stated in subsection (3)(a)(i) ofthis section." RCW 61.24.100(6). Reading these provisions together, the DTA extends protection from deficiencyjudgments-with some exceptions-to a guarantor who grants a deed oftrust to secure its guaranty ofa

6Wash. Fed. v. Harvey, No. 90078-7 commercial loan when the property burdened by the guarantor's deed oftrust is
non judicially foreclosed. The DTA provides a trade-offinrelation to nonjudicial foreclosure ofsecured property; a guarantor ofa commercial loan must secure its guaranty by granting a deed oftrust in order to be protected from deficiency judgments when the property burdened by its deed oftrust is non judicially foreclosed. Here the guarantors did not secure their guaranties by granting deeds oftrust, and,
even ifthey had, the foreclosed properties were not the properties ofthe guarantors. Therefore, the guarantors are not protected from deficiencyjudgments under the DTA. Accordingly, Washington Federal may seek deficiencyjudgments against the guarantors. Given thatthe guarantors are not protected from deficiencyjudgments under the DT A, we decline to reach whether the borrowers' deeds oftrust secured the guaranties2 and whether the guarantors could waive DTA antideficiencyjudgment protection.

2 We note that RCW 61.24.100(10) provides that "[a] trustee's sale under a deed oftrust securing a commercial loan does not preclude an action to collect or enforce any obligation ofa borrower or guarantor ifthat obligation, or the substantial equivalent ofthat obligation, was not secured by the deed oftrust." Subsection (10) is clear; itprovides clarity about when a deficiencyjudgment may be brought, but does not protect a guarantor ofa commercial loan from deficiency judgments solely because the guarantor's guaranty is secured by a deed oftrust regardless of who granted such deed oftrust. Accordingly, here, even ifthe borrowers' deeds oftrust secured the guarantors' guaranties, subsection (10) would not preclude deficiencyjudgments against the guarantors because the guarantors did not grant such deeds oftrust. 7Wash. Fed. v. Harvey, No. 90078-7
CONCLUSION We affirm the Court ofAppeals and find that Washington Federal may bring deficiencyjudgments against the guarantors. We remand to the superior court for further proceedings consistent with this opinion.

8Wash. Fed. v. Harvey, No. 90078-7 (consol. w/No. 90085-0) 

# oVlzc{/ez

WE CONCUR:

# ~n&~.C

# -9
l

9