Financial Institutions Law Update
01/08/2015
Washington Supreme Court Affirms Washington Federal v. Gentry and Confirms Lenders’ Right
to Obtain Deficiency Judgments Against Guarantors Following Nonjudicial Foreclosure
The Washington Supreme Court issued an opinion today affirming the right of a lender to obtain a
deficiency judgment against a commercial guarantor following a nonjudicial foreclosure. Divisions One
and Two of the Washington State Court of Appeals had reached contrary holdings on whether a lender
could seek a deficiency judgment against a guarantor of a commercial loan following the nonjudicial
foreclosure of a widely used form of deed of trust. In Washington Federal v. Gentry, 179 Wn. App.
470, 319 P.3d 823 (2014), Division One held that a lender’s right to a deficiency judgment action
against a guarantor exists even where the foreclosed deed of trust secures both the borrower’s loan and
the guarantor’s guaranty. In First Citizens Bank & Trust Co. v. Cornerstone Homes & Development,
LLC, 178 Wn. App. 207, 314 P.3d 420 (2013), Division Two held the opposite.
The Washington Supreme Court, in a consolidated case argued by Lane Powell, unanimously held that
“guarantors of commercial loans whose own property has not been foreclosed” are not “protected from
deficiency judgments under the [Deed of Trust Act] after the borrower’s property has been foreclosed,”
even if the foreclosed deed of trust also secured the guarantors’ guarantees. Washington Federal v.
Harvey / Washington Federal v. Gentry, No. 90078-7 (consol. w/ No. 90085-0), Slip. Op. at 6-7 (Wash.
Sup. Ct. January 8, 2015). The Court noted the inapplicability of RCW 61.24.100(10) and relied on
RCW 61.24.100(3)(c) and (6), which establish a clear rule regarding a guarantor’s post-foreclosure
deficiency liability — i.e., a lender may obtain a deficiency judgment against a guarantor of a
commercial loan, unless the guarantor granted the foreclosed deed of trust on his or her own property to
secure the guaranty.
For more information, please contact the Financial Institutions Practice Group at
Lane Powell: lanepowellpc@lanepowell.com
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