Court Opinion

ID: 9548675
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:06:51.354834+00
Date Added: 2024-06-11T15:19:16.129935
License: Public Domain

*511Dore, J.
(dissenting) — I dissent.
For the second time this term, the court rescues a lender from its own mistake, at the expense of the Deeds of Trust Act (hereinafter the Act) and the borrowers it was intended to protect. See Donovick v. Seattle-First Nat'l Bank, 111 Wn.2d 413, 423, 757 P.2d 1378 (1988) (Dore, J., dissenting). This deed of trust contains an ambiguity which, when construed against the lender, leaves the lender undersecured. The majority dispenses with both our rules of contract interpretation and the requirement that we strictly construe the Act in its attempt to avoid that ambiguity. The result is that, once again, we have opened new opportunities for abuse and evasion of the Act by lenders.
The Deed of Trust Is Ambiguous
This deed of trust contains an ambiguity which should be construed against the drafter of the instrument, the lender. Rouse v. Glascam Builders, Inc., 101 Wn.2d 127, 135, 677 P.2d 125 (1984); Guy Stickney, Inc. v. Underwood, 67 Wn.2d 824, 827, 410 P.2d 7 (1966). On the one hand, the term in the deed of trust stating that the Snohomish County property was conveyed "as additional security only" creates a priority among the properties securing the obligation. The Snohomish County property was to be foreclosed on only if the Whatcom County property proved to be inadequate security. This is clear even from the brief words of the deed of trust, since, if the Whatcom County property would fully compensate the lender for his loss, selling the Snohomish County property would violate the trustee's fiduciary duty not to sacrifice the borrower's interests unnecessarily. Cox v. Helenius, 103 Wn.2d 383, 389, 693 P.2d 683 (1985). Therefore, the "additional security" clause in this deed of trust required the trustee to sell the What-com County property first and to sell it separately. Only then was the trustee to sell the Snohomish County property.
However, the lender apparently failed to recognize that the trustee has no power under the Deeds of Trust Act to *512proceed in this way. A second sale of the Snohomish County property under the same deed of trust is clearly prohibited by the Act.
As an integral part of the compromise of 1965 that led to the passage of the Deeds of Trust Act, lenders surrendered their right to a deficiency judgment in nonjudicial foreclosures of deeds of trust. See Donovick, at 418 (Dore, J., dissenting). RCW 61.24.100 provides:
Foreclosure, as in this chapter provided, shall satisfy the obligation secured by the deed of trust foreclosed, regardless of the sale price or fair value, and no deficiency decree or other judgment shall thereafter be obtained on such obligation.
The deed of trust involved in this case conflicts with this statute, since the sale of the Snohomish County property after the sale of the Whatcom County property would amount to obtaining a deficiency judgment.
The antideficiency statute is as much a part of this contract as if it were written into it. While the parties might have intended their "additional security" clause to override the prohibition on deficiencies, such a departure from existing law must be unambiguously expressed.
It is the general rule that parties are presumed to contract with reference to existing statutes, and a statute which affects the subject matter of a contract is incorporated into and becomes a part thereof. If the parties to a contract wish to provide for other legal principles to govern their contractual relationship, they must be expressly set forth in the contract. Absent a clear intent to the contrary disclosed by the contract, the general law will govern.
(Citations omitted.) Wagner v. Wagner, 95 Wn.2d 94, 98-99, 621 P.2d 1279 (1980). Since the parties did not explicitly set aside the antideficiency rule, that rule governs.
This makes the deed of trust ambiguous. According to the deed of trust, the sale of the Whatcom County property must occur prior to any action against the Snohomish County property. The sale of the Whatcom County property, however, would extinguish the obligation. A second *513sale of the Snohomish County property would be void under the antideficiency statute. RCW 61.24.100.
We can either give the lender its "additional security" in Snohomish County or we can enforce the Act's antide-ficiency statute. We cannot do both.
Where a contract is ambiguous and parol evidence is not available to resolve the ambiguity, the ambiguity is construed against the drafter of the contract. Rouse, at 135. Therefore, by drafting the deed of trust to provide for "additional security" which the Act would not permit it to execute upon, the lender left itself undersecured. It is not the job of this court to rescue the lender, and even if it were, distorting the plain meaning of the Deeds of Trust Act is a dangerous way to go about it.
The Deeds of Trust Act Should Be Strictly Construed
The majority gives effect to the term giving the lender "additional security" in the Snohomish County property. In doing so, it necessarily ignores the antideficiency statute, RCW 61.24.100. Having failed to construe the contract ambiguity properly and having refused to enforce the antideficiency statute, the majority is then forced to cope with the problem of where the two parcels ought to be sold. RCW 61.24.040(5) provides:
The place of sale shall be at any designated public place within the county where the property is located and if the property is in more than one county, the sale may be in any of the counties where the property is located.
Had the majority analyzed the deed of trust properly, it would be apparent that there really is no issue at all under this statute. The sale should have taken place in Whatcom County because only the Whatcom County property ought to have been up for sale. Having erroneously permitted the lender to foreclose on the Snohomish County property, the majority only compounds its error by broadly construing the place of sale restriction.
*514This leads me to the second reason why the majority's analysis of the case is wrong. The Deeds of Trust Act should always be construed strictly in the borrower's favor. By failing to enforce the antideficiency statute and then unnecessarily expanding the Act's place of sale requirement, the majority clearly violates that rule.
Washington's Act is similar to others around the country, and the rule that deeds of trust should be strictly construed for the benefit of borrowers has been widely recognized. An authority on general statutory construction writes:
Statutes allowing foreclosure under a power of sale contained within the trust deed or mortgage are strictly construed against the exercise of such power.
3A N. Singer, Statutory Construction § 69.04 (4th ed. 1986). The reason for this has been well stated by the Supreme Court of Arizona in construing its deed of trust statute.
Compared to mortgage requirements, the Deed of Trust procedures authorized by statute make it far easier for lenders to forfeit the borrower's interest in the real estate securing a loan, and also abrogate the right of redemption after sale guaranteed under a mortgage foreclosure. A mortgage generally may be foreclosed only by filing a civil action while, under a Deed of Trust, the trustee holds a power of sale permitting him to sell the property out of court with no necessity of judicial . . . protections available under a mortgage. Therefore, lenders must strictly comply with the Deed of Trust statutes, and the statutes and Deeds of Trust must be strictly construed in favor of the borrower.
(Citation omitted. Italics mine.) Patton v. First Federal Sav. & Loan Ass'n, 118 Ariz. 473, 477, 578 P.2d 152 (1978). Washington's Act also deprives the borrower of rights of redemption, RCW 61.24.050, and deprives the borrower of the right to an upset price, compare RCW 61.12.060, and the right to homestead. Felton v. Citizens Fed. Sav. & Loan Ass'n, 101 Wn.2d 416, 679 P.2d 928 (1984). As the Arizona court recognized, these losses should not be compounded by liberal construction for the benefit of lenders.
*515Another reason behind the rule of strict construction has been succinctly stated by a commentator on the Washington statute.
These foreclosure proceedings must conform exactly to the statute. They are "non-judicial."
1 V. Towne, Wash. Prac. § 605 (2d ed. 1976). Relatively unsophisticated borrowers used to be able to rely on the judiciary to prevent overreaching by lenders who make it their business to obtain every advantage from the foreclosure process. See RCW 61.12. Since the judiciary is not involved in deed of trust foreclosures under the Act, only the words of the Act itself stand between the borrower and the lender eager to foreclose. Unless we strictly construe the Act, that protection will quickly erode away to zero.
The majority's conclusion violates the rule of strict construction twice, first by permitting the lender to recover a deficiency in selling the Snohomish County property and second by permitting the sale of the Whatcom County property anywhere but Whatcom County. Since the rules of contract interpretation also dictate reading the deed of trust in the borrower's favor, the majority's result is clearly wrong. Given that the majority's reasoning is dictated by an apparent desire to save a lender from its own mistake, its result is intolerable.
Conclusion
If the Deeds of Trust Act would be served by the rule the majority adopts, there is no reason to expect that the Legislature would not be responsive to the combined efforts of borrowers and lenders to make such a change. We should not depart from our normal rule of strict construction of the Act. I would affirm the Court of Appeals.