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First-Citizens Bank & Trust Co. v. Cornerstone Homes & Dev., LLC

Court of Appeals of Washington, Division 2

December 3, 2013

First-Citizens Bank & Trust Company, Respondent,
v.
Cornerstone Homes & Development, LLC, et al., Appellants

Appeal from Pierce County Superior Court. Docket No: 10-2-13379-3. Date filed: 05/24/2012. Judge signing: Honorable John Russell Hickman.

Margaret Y. Archer, for appellants.

Douglas N. Kiger (of Blado Kiger Bolan, PS ), for respondent.

Peter J. Mucklestone, Gregory R. Fox, Ryan P. McBride, Averil B. Rothrock, and Matthew Turetsky on behalf of Washington Federal, Union Bank NA, and Washington Bankers Association, amici curiae.

AUTHOR: J. Robin Hunt, J. We concur: Lisa Worswick, C.J., Jill M Johanson, J.

OPINION

Page 421

Hunt, J.

[178 Wn.App. 209] ¶ 1 Daniel L. and Jeanne Allison, guarantors of three commercial promissory notes issued by Cornerstone Homes & Development LLC, appeal the superior court's judgment on the pleadings, ordering them to pay a deficiency following a nonjudicial trustee's sale of Cornerstone's properties that secured the notes with construction deeds of trust. The Allisons argue that (1) these construction deeds of trust also secured their commercial guaranty obligations; and (2) the antideficiency provisions of the " Washington Deed of Trust Act" [1] prohibit a deficiency judgment against a guarantor when, as here, the underlying deeds of trust secured the guaranty. We agree. We hold that RCW 61.24.100(10) prohibited First-Citizens Bank & Trust Company from obtaining a deficiency judgment against the Allisons because the deeds of trust that First-Citizens nonjudicially foreclosed to satisfy Cornerstone's underlying debt also secured the Allisons' commercial guaranty [178 Wn.App. 210] under the express terms of the guaranty, promissory notes, and deeds of trust drafted by First-Citizens' predecessor. Accordingly, we reverse the superior court's deficiency judgment against the Allisons and its award of attorney fees to First-Citizens. We also grant attorney fees to the Allisons on appeal.

FACTS

¶ 2 In 2003, commercial developer Daniel L. Allison,[2] managing member of Cornerstone Homes & Development LLC, signed a commercial guaranty, prepared and presented by Venture Bank, for all subsequent loans from Venture Bank to Cornerstone. The language of this guaranty stated that it encompassed all other " related" documents " executed in connection with the indebtedness" then or in the future. Clerk's Papers (CP) at 33.

¶ 3 Three years later, from 2006 to 2007, Venture Bank made several commercial loans to Cornerstone, for which Cornerstone signed three promissory notes, prepared and presented by Venture Bank. As security for these promissory notes, Venture Bank took three separate construction deeds of trust, also prepared and presented by Venture Bank, for three Cornerstone properties. In 2009, Cornerstone defaulted on all three loans and ceased its business operations.

¶ 4 The Washington State Department of Financial Institutions closed Venture Bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC sold to First-Citizens most of Venture Bank's assets, including its loans to Cornerstone. On October 2 and November 20, 2009, First-Citizens nonjudicially foreclosed on the Cornerstone properties secured by the deeds of trust. Following these sales, there remained a $4,240,424.11 deficiency.

Page 422

[178 Wn.App. 211] ¶ 5 First-Citizens sued guarantors the Allisons for this deficiency [3] and moved for judgment on the pleadings. The superior court granted the motion and awarded judgment in favor of First-Citizens for the full deficiency amount and $31,370.00 in attorney fees. The Allisons appeal.

ANALYSIS

I. Guaranty & Deeds of Trust


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