Wash. Fed. v. Harvey

• Decision Date: 08 January 2015
• Docket Number: Nos. 90078–7,90085–0.,s. 90078–7
• Court: Washington Supreme Court
• Parties: WASHINGTON FEDERAL, a federally chartered savings association, Respondent, v. Lance HARVEY, individually and the marital community comprised of Lance 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.

182 Wash.2d 335
340 P.3d 846

WASHINGTON FEDERAL, a federally chartered savings association, Respondent
v.
Lance HARVEY, individually and the marital community comprised of Lance 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.

Nos. 90078–7
90085–0.

Supreme Court of Washington, En Banc.

Argued Nov. 18, 2014.
Decided Jan. 8, 2015.

340 P.3d 846

Dean Alan Messmer, Lasher Holzapfel Sperry & Ebberson PLLC, Christopher Ian Brain, Tousley Brain Stephens PLLC, Seattle, WA, for Petitioner.

Gregory R. Fox, Ryan P. McBride, Lane Powell PC, Seattle, WA, for Respondent.

Opinion

GONZÁLEZ, J.

182 Wash.2d 336

¶ 1 Washington's deeds of trust act (DTA), chapter 61.24 RCW, balances the interests of borrowers and lenders. It provides a comparatively inexpensive mechanism for lenders to foreclose on real property pledged to

182 Wash.2d 337

secure

340 P.3d 847

a debt through nonjudicial foreclosure,¹ making certain types of loans easier for borrowers to obtain because lenders have faster recourse if the loan is not repaid. In exchange, generally, the act limits the recovery of those benefiting from a nonjudicial foreclosure to whatever is recouped from that foreclosure. It does not, generally, also allow the lender to pursue a deficiency judgment 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 of commercial loans whose own property has not been foreclosed are protected from deficiency judgments under the DTA after the borrower's property has been foreclosed. We find they are not.

Facts

Wash. Fed, v. Harvey

¶ 2 In November 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

182 Wash.2d 338

secured by a deed of trust encumbering property located in Everett, Washington, granted by Kaydee Gardens. Lance Harvey guaranteed the loan on behalf of himself and his marital community but did not grant a separate deed of trust to secure the guaranty.

¶ 3 In June 2011, the Federal Deposit Insurance Corporation assigned Horizon Bank's interest in the loan, the deed of trust, and the guaranty to Washington Federal. By that time, Kaydee Gardens had defaulted on the loan. Kaydee Gardens's defaults were not cured by Kaydee Gardens, Harvey, or Harvey's marital community.

¶ 4 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 of approximately $1.2 million remained outstanding. Washington Federal sought the deficiency amount from the Harveys. The trial court granted the Harveys' motion for summary judgment. The Court of Appeals reversed the trial court. Wash. Fed. v. Harvey, noted at 179 Wash.App. 1033, 2014 WL 646746 (2014). We granted the Harveys' petition for review. Wash. Fed. v. Harvey, 180 Wash.2d 1021, 328 P.3d 902 (2014).

Wash. Fed. v. Gentry

¶ 5 In December 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 of trust encumbering a property located on Little Mountain Road in Mount Vernon, Washington, granted by Little Mountain East LLC (the Little Mountain Deed of Trust).

¶ 6 In April 2009, 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 of Trust and a junior deed of trust encumbering a property located on East Blackburn Road in Mount Vernon, Washington,

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granted by Blackburn Southeast, Little Mountain East, and Blackburn North LLC.

340 P.3d 848

¶ 7 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 of Trust.

¶ 8 Kendall Gentry and Nancy Gentry each guaranteed all three loans in their personal capacities, but neither of the Gentrys granted a separate deed of trust to secure any of the guaranties.

¶ 9 In April 2010, the Federal...