Lane Powell Shareholders Greg Fox and Ryan McBride authored an article in the Summer 2014 issue of Community Bankers of Washington’s Community Banker magazine titled “Washington Court of Appeals Confirms Lenders’ Right to Obtain Deficiency Judgments Against Guarantors Following Nonjudicial Foreclosure of Commonly Used Form of Deed of Trust.” In the article, Fox and McBride discussed the Deed of Trust Act, which generally bars a lender from seeking a deficiency judgement against a borrower following nonjudicial foreclosure of a deed of trust securing the borrower’s loan, and how it relates to Washington Federal v. Gentry and First Citizens Bank & Trust Co. v. Cornerstone Homes & Development, LLC.
In Washington Federal v. Gentry, 319 P.3d 823 (Wash. App. 2014), Division One of the Washington State Court of Appeals confirmed that a lender has a right to bring an action for a deficiency judgment against a guarantor even where the foreclosed deed of trust can be interpreted to secure both the borrower’s loan and the guarantor’s separate guaranty. Division One’s opinion in Gentry conflicts with First Citizens Bank & Trust Co. v. Cornerstone Homes & Development, LLC, 314 P.3d 420 (Wash. App. 2013), an earlier published opinion issued by Division Two of the Court of Appeals, in which Division Two reached the opposition conclusion on similar facts and loan documents.