Washington Federal v. Harvey
340 P.3d 846
Wash.2015Background
- DTA (RCW 61.24) balances lender nonjudicial foreclosure ease with limits on deficiency recovery.
- Kaydee Gardens loan: ~$2.6M, deed of trust on Everett property, Lance Harvey guaranteed but did not grant a separate security deed.
- FDIC assigned Horizon Bank’s interest to Washington Federal in 2011 after default.
- Foreclosure sale occurred; a deficiency (~$1.2M) remained; Washington Federal sought it from the Harveys.
- In the Gentry cases, three Horizon Bank loans secured by Little Mountain/Blackburn Mountain properties; guarantors Kendall and Nancy Gentry guaranteed without separate security deeds.
- FDIC assigned those interests to Washington Federal in 2010; foreclosures and subsequent deficiency claims followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the DTA protect guarantors from deficiency judgments when their guaranty is not secured by a deed of trust and the foreclosed property is not theirs? | Guarantors protected if they secure the guaranty with a deed of trust. | Protection requires a deed of trust securing the guaranty and property burdened by it. | No protection; deficiency judgments allowed against guarantors. |
| Does RCW 61.24.100(10) preclude a deficiency action against guarantors where the borrower’s deed of trust did not secure the guaranty? | Subsection (10) precludes deficiency actions when not secured by the deed of trust. | Subsection (10) does not apply to guarantors who did not grant a deed of trust. | Subsection (10) does not preclude; deficiency actions permitted. |
| Does the interpretation of “subject to this section” in RCW 61.24.100(3)(c) affect guaranty protections? | Reading should align with the broader construct of protections in the section. | Textual reading supports extending protections only when conditions are met. | Court reads provisions to provide limited protections; guarantors not protected here. |
| Should the court address whether the borrowers’ deeds of trust secured the guaranties and waiver of antideficiency protections? | Not necessary if guarantors already unprotected. | Merits of whether deeds secured guaranties matter for defenses. | Not reached; affirming deficiency judgments against guarantors. |
Key Cases Cited
- Donovick v. Seattle-First Nat'l Bank, 111 Wn.2d 413 (1988) (dissent on foreclosure methods and borrower protections under statutes)
- City of Spokane v. Rothwell, 166 Wn.2d 872 (2009) (statutory interpretation; language controls legislative intent)
- State v. Wentz, 149 Wn.2d 342 (2003) (statutory interpretation; guidance on statutory language)
- Lybbert v. Grant County, 141 Wn.2d 29 (2000) (summary judgment standard in Washington; de novo review)
- Jones v. Allstate Ins. Co., 146 Wn.2d 291 (2002) (standard for summary judgment)