                                                          STaTcGF WASKHiGTC;

                                                         20!^ FEB 18 AH 3-k




      IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON



WASHINGTON FEDERAL, a federally                      No. 70004-9-
chartered savings association,
                                                     DIVISION ONE
                    Appellant,

              v.



KENDALL GENTRY and NANCY                             PUBLISHED
GENTRY, individually and the marital
community comprised thereof,                         FILED: February 18, 2014

                    Respondents.




       Cox, J. — The Deeds of Trust Act generally prohibits an action for a

deficiency judgment against a guarantor of a loan following a trustee's sale under

a deed oftrust securing that loan.1 But exceptions to this general rule apply to a
guarantor of certain commercial loans.2
       In this action, Washington Federal seeks a deficiency judgment against

Kendall Gentry and Nancy Gentry. They executed guaranties of payment for

commercial loans to three borrowers that they control. Based on its reading of

RCW 61.24.100, the trial court granted the Gentrys' motion for summary


      1See RCW 61.24.100(1).
      2 Id.
No. 70004-9-1/2


judgment of dismissal of this action. Because the trial court erred both in its

interpretation of this statute and its application of the statute to relevant loan

documents, we reverse and remand for further proceedings.

       Kendall Gentry owned and/or managed three entities: Blackburn

Southeast LLC, Landed Gentry Development Inc., and Gentry Family

Investments LLC.3

       In 2005, Blackburn Southeast LLC obtained a commercial loan for

$2,550,000 from Horizon Bank. This loan was evidenced by a promissory note

that was secured by a May 1, 2006 deed of trust on property located on Little

Mountain Road in Mount Vernon (the "Little Mountain Deed of Trust").

       In April 2009, Landed Gentry Development Inc. obtained a commercial

loan for $3,574,847.74 from Horizon Bank. This loan was evidenced by a

promissory note that was also secured by the Little Mountain Deed of Trust and a

May 1, 2006 deed of trust on property located on East Blackburn Road in Mount

Vernon (the "Blackburn Road Deed of Trust").

       In September 2009, Gentry Family Investments LLC obtained a

commercial loan for $1,127,832.73 from Horizon Bank. This loan was evidenced

by a promissory note that was also secured by the Little Mountain Deed of Trust.




       3 Brief of Appellant at 4; Clerk's Papers at 525 (listing Kendall Gentry as
chairman of Landed Gentry Development, Inc.); Clerk's Papers at 530 (listing
Kendall Gentry as manager of Gentry Family Investments LLC); Clerk's Papers
at 534 (listing Kendall Gentry as manager of Gentry Family Investments LLC,
member of Blackburn Southeast LLC).
No. 70004-9-1/3


       In sum, the Little Mountain Deed of Trust secured all three commercial

loans. The Blackburn Road Deed of Trust secured only the Landed Gentry

Development Inc. commercial loan.

       Kendall and Nancy Gentry each executed commercial guaranties of

payment for all three loans.

       In January 2010, the three notes matured. The three borrowers failed to

pay these notes at maturity. Likewise, the Gentrys did not honor their guaranties.

       Horizon Bank failed. In April 2010, the Federal Deposit Insurance

Corporation, as receiver for Horizon, assigned that bank's interests in the three

notes, the deeds of trust, and the guaranties to Washington Federal.

       In April 2011, the trustees, under the deeds of trust then held by

Washington Federal, conducted sales based on the defaults by the three

borrowers. The bank was the successful bidder for both properties at these

sales. The bank did not credit bid the full amount of the debt at these sales.

Thus, a substantial deficiency allegedly remains.

       In March 2012, the bank commenced this action against the Gentrys to

enforce their guaranties and to obtain a deficiency judgment against them due to

the shortfall arising from the trustees' sales.

       The Gentrys moved for summary judgment. They argued that the Deeds

of Trust Act prohibited the bank from seeking a deficiency judgment against

them. The bank opposed the motion and also moved for summary judgment,

arguing that it was entitled to a deficiency judgment against the Gentrys.
No. 70004-9-1/4


      The trial court granted the Gentrys' motion for summary judgment, denied

the bank's motion, and dismissed this action with prejudice.

      The bank appeals.

                          THE DEEDS OF TRUST ACT

      The threshold issue is whether and how a beneficiary under a deed of

trust who elects not to foreclose the deed of trust as a mortgage may obtain a

deficiency judgment against guarantors under the Deeds of Trust Act.

      This court reviews de novo summary judgment orders and engages in the

same inquiry as the trial court.4 Summary judgment is appropriate when there is

no genuine issue of material fact, and the moving party is entitled to a judgment

as a matter of law.5

       Statutory construction is a question of law.6 This court's objective is to
determine the Legislature's intent.7 "Where the language of a statute is clear,
legislative intent is derived from the language of the statute alone."8 "The 'plain
meaning' of a statutory provision is to be discerned from the ordinary meaning of




       4 Cornish Coll. of the Arts v. 1000 Va. Ltd. P'ship, 158 Wn. App. 203, 215-
16, 242P.3d 1 (2010).

       5 CR 56(c).
       6 City of Spokane v. Rothwell, 166 Wn.2d 872, 876, 215 P.3d 162 (2009).

       7IU

       8 Id.
No. 70004-9-1/5


the language at issue, as well as from the context of the statute in which that

provision is found, the related provisions, and the statutory scheme as a whole."9
       RCW 61.24.100 addresses when actions for deficiency judgments may be

brought when a deed oftrust is not foreclosed as a mortgage.10 A"deficiency
judgment" exists where a money judgment for a debt exceeds the value of the

security for that debt at the foreclosure sale.11
                                        History

       In 1965, the Legislature enacted the Deeds of Trust Act, which permitted

nonjudicial foreclosure of deeds of trust when certain requirements were met.12
Citing an early law review article by a well-recognized authority on the act,

Division Three of this court observed that the Legislature designed this act "to

avoid time-consuming judicial foreclosure proceedings and to save substantial

time and money to both the buyer and the lender."13 The act was designed to
supplement the then existing foreclosure proceedings to better meet the needs of

modern real estate financing.14


       9|g\ at 876-77 (quoting State v. Jacobs, 154 Wn.2d 596, 600, 115 P.3d
281 (2005)).

       10 RCW 61.24.100(8).
       11 Boeing Emps.' Credit Union v. Burns, 167 Wn. App. 265, 282, 272 P.3d
908, review denied. 175 Wn.2d 1008 (2012).

       12 Laws of 1965, ch. 74.

       13 Peoples Nat. Bank of Wash, v. Ostrander, 6 Wn. App. 28, 31, 491 P.2d
1058 (1971) (citing John A. Gose, The Trust Deed Act in Washington, 41 Wash.
L Rev. 94(1966)).

       14 Id. (citing Gose, supra, at 96).
                                               5
No. 70004-9-1/6


       Our supreme court has explained that "[rjeading the entirety of [the act] in

the context of the mortgage laws and the history of deed of trust legislation, it is

apparent that there was contemplated a quid pro quo between lenders and

borrowers."15

       Specifically, borrowers relinquished the statutory right to redeem the

property up to one year after a foreclosure sale.16 The relinquishment ofthis
right allowed lenders to obtain title to the property sold at a trustee's sale more

quickly than in a judicial foreclosure.17 Lenders were then able to sell the
property and apply the sales proceeds to the debt.18
       In exchange for this advantage, lenders relinquished the right to seek

deficiency judgments following trustees' sales.19 Thus, the real property security
was the sole means for the lender to satisfy the debt.

       Notwithstanding these provisions, the act expressly provided that lenders

retained the right to foreclose deeds oftrust as mortgages.20 If lenders elected




       15 Donovick v. Seattle-First Nat'l Bank. 111 Wn.2d 413, 416, 757 P.2d
1378(1988).

       16 jd, (citing former RCW 61.24.050 (1965)); see also former RCW
6.24.140(1965).

       17 See Gose, supra, at 95-96; former RCW 6.24.220 (1965).

       18 See Gose, supra, at 95-96; former RCW 6.24.220 (1965).

       19 Donovick. 111 Wn.2d at 416 (citing former RCW 61.24.100 (1965)); see
also Gose, supra, at 96.

       20 Gose, supra, at 96.
No. 70004-9-1/7


that option, the provisions of the act did not apply.21
       The provision of the act governing deficiency judgments has been codified

at RCW 61.24.100 from the act's inception.22 When first enacted in 1965, this
provision banned any deficiency judgment on the obligation secured by the

foreclosed deed of trust:

              Foreclosure, as in this chapter provided, shall satisfy the
       obligation secured by the deed of trust foreclosed, regardless of the
       sale price or fair value, and no deficiency decree or other
       judgment shall thereafter be obtained on such obligation.[2Z]
       In 1990, the Legislature amended this provision by creating an exception

to the ban against any deficiency judgment on the obligation secured by the

foreclosed deed of trust. It did so by adding the following emphasized language

to the former version of the statute:

               Foreclosure, as in this chapter provided, shall satisfy the
       obligation secured by the deed of trust foreclosed, regardless of the
       sale price or fair value, and no deficiency decree or other judgment
       shall thereafter be obtained on such obligation, except that if such
       obligation was not incurred primarily for personal, family, or
       household purposes, such foreclosure shall not preclude any
       judicial or nonjudicial foreclosure of any other deeds of trust,
       mortgages, security agreements, or other security interests or
       liens covering any real or personal property granted to secure
       such obligation}2^
       In 1998, the Legislature again amended this provision. This time,

however, the revisions were more extensive. The Legislature rewrote the entire


       21 \±

       22 Former RCW 61.24.100 (1965).

       23 kL (emphasis added).
       24 Laws of 1990, ch. 111, § 2 (emphasis added).
No. 70004-9-1/8


statute, which was then codified into twelve subsections.25 Presumably, these
amendments were made to better meet the evolving needs of commercial

borrowers and lenders in real estate financing.26 As ofthis writing, there have
been no further amendments to this portion ofthe act.27
       In the current version of the act, the general bar against deficiency

judgments remains.28 But the Legislature created an exception for certain loans
that it described as "commercial."29 This term is a substitute for the former

"obligation ... not incurred primarily for personal, family, or household

purposes."30 That provision no longer appears in the act. Such "commercial
loans" are limited to those executed after June 11, 1998, the effective date of the

1998 amendments to this section.31

       This legislative history illustrates the evolution of this part of the act over

time. Deficiency judgments for deeds of trust that are not foreclosed as

mortgages have generally and consistently been prohibited since enactment of

the act in 1965. The Legislature enacted limited exceptions to this prohibition in




       25 See Laws of 1998, ch. 295, § 12; RCW 61.24.100.

       26 See Gose, supra, at 94, 96.

       27 RCW 61.24.100.

       28 RCW 61.24.100(1).

       29 Id,
       30 Compare Laws of 1998. ch. 295, § 12. with Laws of 1990. ch. 111, §2.

       31 Laws of 1998, ch. 295.

                                               8
No. 70004-9-1/9


1990 and 1998. Among the limited exceptions enacted in 1998 are those

applicable to guarantors of certain commercial loans.

                                  Current Statute


       RCW 61.24.100(1) states the current general rule regarding deficiency

judgments following trustees' sales under deeds of trust. For these nonjudicial

foreclosures, the rule states:

       Except to the extent permitted in this section for deeds of trust
       securing commercial loans, a deficiency judgment shall not be
       obtained on the obligations secured by a deed of trust against any
       borrower, grantor, or guarantor after a trustee's sale under that
       deedoftrust.[32]

       Further, RCW 61.24.100(3) states certain circumstances where deficiency

judgments against borrowers, grantors, and guarantors are allowed:

       This chapter does not preclude any one or more of the following
       after a trustee's sale under a deed of trust securing a commercial
       loan executed after June 11, 1998:

       (a) [provision addressing "waste to the property," "wrongful
       retention of any rents, insurance proceeds, or condemnation
       awards," etc.]

       (b) [provision regarding foreclosures of other deeds of trust, etc.]

       (c) Subject to this section, an action for a deficiency judgment
       against a guarantor ifthe guarantor is timely given the notices
       under RCW 61.24.042.[33]

       Subsection (3)(c) addresses deficiency judgments against guarantors of

certain commercial loans after trustees' sales under deeds of trust securing such

loans. Significantly, the first clause of RCW 61,24.100(3)(c) states this provision


       32 (Emphasis added.)
       33 (Emphasis added.)
No. 70004-9-1/10



is "[sjubject to this section." The word "subject" means that this provision is

dependent or conditioned on "this section." The 1998 session laws make clear

that "this section" means RCW 61.24.100 in its entirety.34

      Additionally, the text that follows this first clause makes clear that a further

requirement of this provision is that "notices under RCW 61.24.042" must be

given to the guarantor of the loan.35
       With this context in mind, we turn to the specific arguments before us.

The bank argues that the trial court misinterpreted RCW 61.24.100(3)(c) when it

"limitfed] the scope of a deficiency judgment against a guarantor to waste and

wrongful retention of rents."36 We agree.
       In the trial court's letter ruling, it stated in relevant part:

             RCW 61.24.100 clearly states deficiency judgments shall not
       be obtained against a guarantor when that guaranty is secured by a
       deed of trust which is nonjudicially foreclosed except for a few
       narrowly crafted exceptions.

              [The bank] argues that RCW 61.24.100(3)(c) creates an
       exception to seek unlimited deficiency judgments against any
       guarantor who is timely given notice under RCW 61.24.042 ([the
       Gentrys] received this notice). That interpretation requires the
       Court to ignore or give no meaning to the first four words of (3)(c)
       "Subject to this section."

              "This section" RCW 61.24.100 allows deficiency judgments:
       prior to a trustee's sale, in judicial foreclosures for obligations not
       secured by the same deed of trust, limited to a decrease in the
       fair value of property by waste or the wrongful retention of
       various funds.



       34 Laws of 1998, ch. 295, §12.

       35RCW61.24.100(3)(c).

       36BriefofAppellantat15.

                                                 10
No. 70004-9-1/11




              I interpret section (3)(c) as meaning that a deficiency
       judgment, against a guarantor whose guaranty was secured by the
       nonjudicially foreclosed deed of trust, can only be obtained for
       the decrease in fair value or wrongful retention, if the
       guarantor is given timely notice.

              The answer to the second issue is "no." [The bank] is only
       able to seek a deficiency judgment against [the Gentrys] for
       waste or wrongful retention.[ ]
       The trial court properly concluded that RCW 61.24.100(1) generally bars

deficiency judgments where deeds of trust are not foreclosed as mortgages,

except for narrowly crafted exceptions. The court also properly rejected the

bank's argument that RCW 61.24.100(3)(c) creates an unlimited exception that

permits a lender to seek a deficiency judgment against a guarantor of certain

commercial loans who is given timely statutory notices. As the trial court

correctly stated, that would require rewriting the subsection to ignore its first

clause: "Subject to this section."

       But the trial court misread the scope of RCW 61.24.100(3)(c).

Significantly, the words of the statute say "section," not "subsection." As we

stated earlier in this opinion, the 1998 session laws make clear that "section"

refers to RCW 61.24.100 in its entirety, not just subsections (3)(a) and (b). For

this reason, the trial court misread the statute to limit an action against a

guarantor for a deficiency judgment to "the decrease in fair value or wrongful

retention [of rents, insurance proceeds, or condemnation awards], if the




       37 Clerk's Papers at 775 (emphasis added).

                                              11
No. 70004-9-1/12


guarantor is given timely notice."38 These limitations are based on subsections
(3)(a) and (b) of the act. Thus, we conclude that the clause, "subject to this

section," of RCW 61.24.100(3)(c) requires consideration of RCW 61.24.100 in its

entirety, not just the limitations of subsections (3)(a) and (b).

       Given this conclusion, we must then consider the Gentrys' argument that

RCW 61.24.100(10) bars this action. Subsection (10) states:

             A trustee's sale under a deed of trust securing a commercial loan
       does not preclude an action to collect or enforce any obligation of a
       borrower or guarantor if that obligation, or the substantial equivalent of
       that obligation, was not secured by the deed oftrust.[39]
       Specifically, the Gentrys contend that the "clear language" of this

subsection states that "obligations under a guaranty secured by a deed of trust

are extinguished by the nonjudicial foreclosure of that deed of trust."40 They
assert that "subsection (10) prohibits a deficiency against a guarantor where a

deed oftrust secures it and has been foreclosed nonjudicially."41 We disagree.
       We first note that the Gentrys use the word "extinguished." Notably,

RCW 61.24.100(10) neither includes this word nor any synonym for it. We will

not read this word into the statute.

       Moreover, in our view, RCW 61.24.100(10) is not a prohibition. All it says

is, "[a] trustee's sale under a deed of trust securing a commercial loan does not


       38 hi

       39 RCW 61.24.100(10).
       40 Brief of Respondents Kendall and Nancy Gentry at 15 (emphasis
added).

       41 Id, at 19.

                                              12
No. 70004-9-1/13


preclude [an action for a deficiency judgment on a guaranty] if that obligation ...

was not secured by the deed of trust" that was foreclosed.

       For example, we can envision a situation where the Gentrys executed

another guaranty that had no relation to the commercial loans secured by any of

the deeds of trust foreclosed by nonjudicial means here. In that case, the

trustees' sales under these deeds of trust would have no effect on that other

guaranty.

       The problem with the Gentrys' interpretation is that it requires striking from

the statute the word "not," as indicated by the following revision:

             A trustee's sale under a deed of trust securing a commercial loan
       does not preclude an action to collect or enforce any obligation of a
       borrower or guarantor if that obligation, or the substantial equivalent of
       thatobligation, was not secured by the deed oftrust.'421
       But the plain language of RCW 61.24.100(10) is permissive. That is, it

states a permissive rule applicable to situations where the obligation of a

borrower or guarantor is not secured by the deed of trust that was foreclosed by

a trustee's sale. In that situation, the trustee's sale does not preclude the lender

from bringing an action to collect on or enforce a guaranty. Only by striking the

word "not" from the two places indicated above can the otherwise permissive

statement ofthe statute be read as a prohibition.43



       42
            (Emphasis and alterations added).

       43 See.e.g.. Glasebrook v. Mut. of Omaha Ins. Co.. 100 Wn. App. 538,
545, 997 P.2d 981 (2000) ("Generally, we do not infer a prohibition absent
specific language to that effect, unless the statute as a whole directs that
conclusion.").


                                             13
No. 70004-9-1/14


         The Gentrys offer no explanation why we should rewrite the words of the

statute under the guise of interpreting it to determine legislative intent. We

decline either to omit language that is in the statute or add language that is not

there.


         Moreover, the Gentry's interpretation of RCW 61.24.100(10) is the inverse

of what the plain language says. We also decline to add the inverse to the

statute when the Legislature did not expressly do so.

         In re Detention of Lewis contains an example of when the Legislature

expressly codified the inverse.44 There, the court stated:
                  Pertinent here, the State need not plead a recent overt act in
         its petition where "it appears that... [a] person who at any time
         previously has been convicted of a sexually violent offense is about
         to be released from total confinement." RCW 71.09.030(1).
         Conversely, the statute requires the State to allege a recent overt
         act where the offender is "a person who at any time previously has
         been convicted of a sexually violent offense and has since been
         released from total confinement." RCW 71.09.030(5). Similarly, at
         trial, the State must prove beyond a reasonable doubt that the
         offender committed a recent overt act "[i]f, on the date that the
         petition is filed, the person was living in the community after release
         from custody." Former RCW 71.09.060(1) (2001).[45]
          As the supreme court recognized in the above passage, the Legislature

first described a situation in which a recent overt act did not need to be

pleaded.46 But ratherthan expecting the reader to imply the truth ofthe inverse,
the Legislature went on to make an explicit rule for the inverse. The statute



         44 163 Wn.2d 188, 177 P.3d 708 (2008).

         45 Id, at 194 (alterations in original).

         46 Id.

                                                    14
No. 70004-9-1/15


explicitly defined both the situation in which a recent overt act does not need to

be pleaded, and the situation in which a recent overt act does need to be

pleaded.47

       Here, in contrast, the plain language of RCW 61.24.100 does not contain

an expression of the inverse. The Gentrys do not provide any argument why we

should imply the inverse. Moreover, we do not feel it appropriate to imply the

inverse under these circumstances.

       Additionally, the Gentrys' interpretation of subsection (10) is grounded in a

logical fallacy. "The proposition that 'A implies B' is not the equivalent of 'non-A

implies non-B,' and neither proposition follows logically from the other."48 State v.
Holland illustrates the problem of implying the inverse of a statute.49
       In Holland, the law at the time made it illegal for a pharmacist to sell grain

alcohol.50 A pharmacist could sell it for mechanical or chemical purposes, but
had to get the purchaser to sign his name in a record book and to keep a "true

and exact" record of such transactions.51 Holland, a pharmacist, sold some grain
alcohol to an informant.52 The informant signed the record book, but he testified


       47 Id,
       48 Crouse-Hinds Co. v. InterNorth. Inc.. 634 F.2d 690, 703 n.20 (2d Cir.
1980) (citing J. Cooley, A Primer of Formal Logic 7 (1942)).

       49 99 Wash. 645, 649-51, 170 P. 332 (1918).

       50 Id, at 649.
       51 id, at 649-50.

       52 id, at 647.

                                             15
No. 70004-9-1/16


that he told Holland he might be using it for purposes other than mechanical or

chemical.53 On the strength of that testimony, Holland was convicted.54
       Holland argued on appeal that his good faith was established as a matter

of law by the fact that the informant signed the record book.55 The court was not
persuaded.56 "Appellant's argument overlooks the fact that the permission
accorded to druggists ... is to sell alcohol for mechanical or chemical purposes

only. It is not a permission to sell to every person who signs a formal statement

to that effect."57

       The court then conducted a logical analysis of the statute and

demonstrated that Holland's argument was based on a fallacy.58 The first
proposition, which is true, is that when the buyer does not sign the record book,

the statute makes the seller guilty as a matter of law.59 But Holland's second
proposition is not true: when the buyer does sign the record book, he is not guilty

as a matter of law.60




        53 id.

        54 id. at 648.

        55 id. at 649-50.

        56 id. at 650.
        57 id.

        58 See id. at 651.

        59 id.

        60 Id. at 649-51.


                                            16
No. 70004-9-1/17


             Indeed it seems to us that the issue of good faith not only
       does arise, but can only arise when a formally sufficient record of
       the sale has been made. Without such a record there is no issuable
       fact; the sale is conclusively illegal without regard to the seller's
       good or bad faith. But the converse is not true. When the formal
       record has been made, the question of good faith is an issue. That
       question is then one offact for the jury upon the evidence.'611
       Putting aside terminology differences, like Holland, the Gentrys essentially

argue that the inverse of what is stated in the statute is necessarily true. That is

a logical fallacy. We cannot infer that the inverse of what the statute states is

true. Based on these cases and our analysis of the statute before us, we reject

the interpretation that the Gentrys assert.

       In further support of their "clear language" argument, the Gentrys rely on

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

recent Division Two case.62 We disagree with the reasoning and conclusion in
that case.


       There, a bank sued the guarantors of three commercial loans to

Cornerstone Homes & Development, LLC for a deficiency judgment following

nonjudicial foreclosures of the deeds of trust securing the loans.63 The superior
court entered judgment on the pleadings, ordering the guarantors to pay the

deficiency.64 Division Two reversed.65


       61 Id, at 651 (emphasis added).
       62_ Wn. App. _ , 314 P.3d 420 (2013).
       63 id, at 421-22.

       64 id, at 422.

       65 id, at 421.
                                              17
No. 70004-9-1/18


       One of the issues before the court was whether RCW 61.24.100(10)

created an exception to the general prohibition in RCW 61.24.100(1) against

deficiency judgments following a trustee's sale under a deed of trust securing

certain commercial loans.66 The court held that subsection (10) created such an

exception.67 In doing so, the court quoted, in part, the subsection, emphasizing
in its opinion the last words of the following quotation:

                A trustee's sale under a deed of trust securing a commercial
       loan does not preclude an action to . . . enforce any obligation of a .
       . . guarantor ifthat obligation . . . was not secured by the deed of
       trust.m]

       The court then went on to apply the statutory construction principle

expressio unius est exclusio alterius.69 Doing so, the court concluded that the
language of subsection (10):

       [I]mplies that (1) this express exception to the anti-deficiency
       judgment statute is the only exception under these circumstances;
       and (2) therefore, further implies that where a guaranty was
       secured by the foreclosed deed of trust (which also secured a
       commercial loan), the lending bank cannot sue the guarantor for
       any deficiency remaining after the trustee's sale of the secured
       property.1701
       First, Division Two utilized a principle of construction that we believe does

not control this case. The court concluded that subsection (10) is the "only



       66 id, at 424.

       67 id,

       68 id,

       69 id, at 424-25.
       70 id, at 425 (some emphasis added).

                                              18
No. 70004-9-1/19


exception under these circumstances."71 But subsection (10) is not the only
exception in RCW 61.24.100. This interpretation ignores other subsections

within the statute, particularly subsection (3)(c), which is at issue in this case.

       Second, we note that Division Two did not expressly address in its

analysis what we pointed out earlier in this opinion. The argument that

subsection (10) prohibits a deficiency judgment against guarantors requires the

following reading of the statute:

              A trustee's sale under a deed of trust securing a commercial
       loan does not preclude an action to collect or enforce any
       obligation of a borrower or guarantor ifthat obligation, or the
       substantial equivalent of that obligation, was not secured by the
       deedoftrust.[72]

       We will not read out the word "not" from this provision. But we believe

Division Two's reading implicitly does so. Moreover, as we explained earlier in

this opinion, that court's reading of subsection (10) implies the inverse of the

provision that is not true. We decline to do the same.

       For these reasons, we are not persuaded that First-Citizens properly

interprets the statute. Accordingly, we reject its reasoning and conclusion that

RCW 61.24.100(10) bars an action where a guaranty is secured by the deed of

trust foreclosed by a prior trustee's sale.

       Finally, during oral argument and by additional authority, the Gentrys

argue that the word "if in this statute should be construed to mean "only if." Like
Division Two, they cite the construction principle, expressio unius est exclusio


       71 id,
       72 RCW 61.24.100(10) (emphasis and alterations added).

                                               19
No. 70004-9-1/20


alterius, which means the "'[expression of one thing in a statute implies

exclusion of others, and this exclusion is presumed to be deliberate.'"73
      As we previously explained in this opinion, the essence of the Gentrys'

argument requires that we read RCW 61.24.100(10) to say more than it actually

says. This argument is that the bank may bring this action to enforce the

Gentrys' guaranties only if the guaranties were not secured by the nonjudicial^

foreclosed deeds of the trust securing the commercial loans. Notably, the statute

says "if," not "only if." We decline to rewrite the statute by adding the word "only"

into the analysis in order to conclude that the "if clause is an indispensable

condition precedent to bringing this action.

       Also, it appears that the Gentrys argue that "only" should be written into

the statute because subsection (10) is the "'only exception under these

circumstances.'"74 They again cite First-Citizens Bank to support this assertion.75
But, as we just discussed, subsection (10) is not the only exception in RCW

61.24.100.

       To summarize, we conclude that RCW 61.24.100(10) does not preclude

this action for a deficiency judgment against the guarantors of these commercial

loans. The trustees' sales under the deed of trust securing these loans do not




       73 First-Citizens Bank. 314 P.3d at 425 n.15 (quoting State v. Kellev. 168
Wn.2d 72, 83, 226 P.3d 773 (2010)).

       74 Respondents' Citation of Additional Authority at 1 (quoting First-Citizens
Bank, 314 P.3d at 425).

       75 id, (citing First-Citizens Bank. 314 P.3d at 425).

                                               20
No. 70004-9-1/21


bar this action. Moreover, this action is not barred by the limitations stated in

RCW 61.24.100(3)(a) and (b). The trial court erred by deciding otherwise.

                            THE LOAN DOCUMENTS

       Based on the incorrect premise that RCW 61.24.100(10) should be

interpreted as they argue, the Gentrys further argue that their guaranties are

secured by the various deeds of trust securing the loan. Accordingly, they claim

that the trustees' sales under these deeds of trust bar this action for a deficiency

judgment. Even if we agreed with their premise, we would still disagree with their

conclusion. We hold that these deeds of trust do not secure the Gentrys'

guaranties.

       This court reviews de novo a trial court's interpretation of the language of

a contract.76 "When interpreting a contract our primary goal is to discern the
intent of the parties, and such intent must be discovered from viewing the

contract as a whole."77

       Washington follows the "objective manifestation theory of contracts" to

determine the parties' intent.78 Courts focus on the "objective manifestations of
the agreement, rather than on the unexpressed subjective intent of the parties."79


       76 Knipschield v. C-J Recreation. Inc.. 74 Wn. App. 212, 215, 872 P.2d
1102(1994).

       77 Weyerhaeuser Co v. Commercial Union Ins. Co.. 142 Wn.2d 654, 669,
15P.3d 115(2000).

      78 Hearst Commc'ns. Inc. v. Seattle Times Co.. 154 Wn.2d 493, 503, 115
P.3d 262 (2005).

       79 id,

                                             21
No. 70004-9-1/22


"[W]hen interpreting contracts, the subjective intent of the parties is generally

irrelevant if the intent can be determined from the actual words used."80 This

court does not "interpret what was intended to be written butwhat was written."81
       Here, the deeds of trust at issue use identical language for the relevant

provisions.82 The first page of each deed of trust identifies the grantors under the
instruments. For the Little Mountain Deed of Trust, the "Grantor" is Little

Mountain East LLC.83 For the Blackburn Road Deed of Trust, the "Grantors" are

Blackburn Southeast LLC, Blackburn North LLC, and Little Mountain East LLC.84

Horizon Bank, the predecessor in interest to Washington Federal, is identified as

the "Grantee" or Beneficiary/Lender.85 The Gentrys are not parties to these
deeds of trust.

       At page two of each of the deeds of trust, the Grantors state what is

secured:


       THIS DEED OF TRUST, INCLUDING THE ASSIGNMENT OF
       RENTS AND THE SECURITY INTEREST IN THE RENTS AND
       PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT
       OF THE INDEBTEDNESS AND (B) PERFORMANCE OF ANY
       AND ALL OBLIGATIONS UNDER THE NOTE, THE RELATED
       DOCUMENTS, AND THIS DEED OF TRUST. THIS DEED OF




       80 id, at 503-04.

       81 id, at 504.
       82 Compare Clerk's Papers at 9-17, wjth Clerk's Papers at 23-31.

       83 id, at 23.

       84 id, at 9.
       85 id, at 9, 23.

                                             22
No. 70004-9-1/23


      TRUST IS GIVEN AND ACCEPTED ON THE FOLLOWING
      TERMS:[86]

Three paragraphs later, the Grantors state whose payment and performance

obligations are secured by the deeds of trust:

       PAYMENT AND PERFORMANCE. Except as otherwise provided
       in this Deed of trust, Borrower and Grantor shall pay to Lender all
       indebtedness secured by this Deed of Trust as it becomes due, and
       Borrower and Grantor shall strictly perform all their respective
       obligations under the Note, this Deed of Trust, and the Related
       Documents.1871

Reading these two paragraphs together, the deeds of trust must be read as

securing the payment and performance obligations of the Borrowers and

Grantors88 Here, Borrower and Grantor is the same entityfor each loan

secured by each deed of trust. There simply is no way to read these provisions

so that any deed of trust secures the payment and performance obligations of

anyone other than the Borrower and Grantor. The guarantors of the loans are

neither. Thus, none of these deeds of trust secure the guaranties of the Gentrys.

       Later in each deed of trust, another provision discusses full performance

of the secured obligations:

       FULL PERFORMANCE. If Borrower and Grantor pay all the
       Indebtedness when due, and Grantor otherwise performs all the
       obligations imposed upon Grantor under this Deed of Trust, Lender
       shall execute and deliver to Trustee a request for full reconveyance
       and shall execute and deliver to Grantor suitable statements of



       86 id, at 11, 25 (emphasis added).

       87 id, (second and third emphasis added).
       88 See Brief of Appellant at 25-26; Brief of Amici Curiae Washington
Bankers Association and Union Bank, N.A. at 12-15.


                                            23
No. 70004-9-1/24


      termination of any financing statement on the evidencing Lender's
      security interest in the Rents and the Personal Property?891
This language reinforces our conclusion. The exclusive focus is on the payment

and performance obligations of the Borrower and Grantor of the deed of trust.

There is simply no mention of such obligations of the guarantors.

       In sum, we conclude when we read each of these deeds of trust as a

whole, none secures the Gentrys' guaranties. Accordingly, the Gentrys'

argument that RCW 61.24.100(10) bars this action against them is wholly

unpersuasive for a second reason.

       In support of their argument that the guaranties are secured by various

deeds of trust, the Gentrys again rely on First-Citizens Bank, the recent Division

Two case we previously discussed in this opinion.90 They represent that the form
of the deed of trust in that case is the same as those here. But the complete

deeds of trust at issue in that case are not in this record on appeal.

Consequently, we will not speculate on whether the representation is correct.

       Nevertheless, we take this opportunity to address arguments made here

that were also clearly before that court.

       In First-Citizens Bank. Division Two focused on different provisions in the

deeds of trust before that court than those we just discussed. Specifically, the

court quoted the following language:

       GIVEN TO SECURE (A) PAYMENT OF THE INDEBTEDNESS
       AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS

       89 Clerk's Papers at 14, 28 (second and third emphasis added).

       90314P.3dat420.


                                             24
No. 70004-9-1/25


       UNDER THE NOTE, THE RELATED DOCUMENTS, AND [THE]
       DEED[S] OF TRUST.1911
Division Two concluded that this language included any guaranties of the loans

secured by the deeds of trust in that case.92 In so concluding, Division Two
looked to the definition of the term "Related Documents" in the deeds of trust,

which included any '"guaranties . .. whether now or hereafter existing,

executed in connection with indebtedness.'"93 As Division Two noted, this

definition plainly includes "guaranties."94
       The Gentrys make a similar argument here. They point to substantially

similar language in these deeds of trust that contain the term "Related

Documents" together with a similar definition.95
       But reading this definition to include all guaranties, regardless of who the

guarantor is, ignores the specifications in the "Payment and Performance"

provisions for the deeds of trust that are before us. As we discussed previously

in this opinion, this latter provision makes clear whose obligations for payment



       91 See First-Citizens Bank. 314 P.3d at 423 (alteration in original).

       92 Id.

       93 id,
       94 First-Citizens Bank. 314 P.3d at 423.

       95 See Clerk's Papers at 17, 31 ("The words 'Related Documents' mean
all promissory notes, credit agreements, loan agreements, guaranties, security
agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and
all other instruments, agreements and documents, whether now or hereafter
existing, executed in connection with the indebtedness, provided, that the
environmental indemnity agreements are not 'Related Documents' and are not
secured by this Deed of Trust.") (emphasis added).

                                              25
No. 70004-9-1/26


and performance are secured by the deeds of trust. And there can be no doubt

that such obligations are limited to the Borrower and Grantor of each

instrument, not guarantors of the loan. Accordingly, the scope of the definition of

"Related Document" does not include the guaranties of the Gentrys.

       To the extent that First-Citizens holds otherwise, we disagree with its

conclusion. That case does not control here.

       We note that the trial court in this case reached a conclusion similar to that

in First-Citizens. It concluded that "the guaranties executed by the Defendants

were related documents."96 It reached this conclusion by construing the deeds of

trust instrument against the bank, the drafter:

       Without repeating your respective positions, I find that the general
       principle of ambiguities being [construed] against the drafting party
       is the decisive factor.. . . The inconsistencies favor the Defendants
       and result in the conclusion that the guaranties were related
       documents and therefore secured by the foreclosed deeds of
       trust.1971

Construing the deeds of trust instruments against the drafter was also a rationale

that Division Two pointed to in a footnote.98
       The problem with this approach is that this principle applies only where an

instrument is ambiguous.99 As we discussed previously in this opinion, the deeds
of trust in this case are not ambiguous when read as a whole. The Grantor under


       96 Clerk's Papers at 774-75.

       97 id,

       98 First-Citizens Bank. 314 P.3d at 423 n.8.

      99 See, e.g.. Rouse v. Glascam Builders. Inc.. 101 Wn.2d 127, 135, 677
P.2d 125 (1984).


                                                26
No. 70004-9-1/27


each instrument expressly stated that the deed of trust secured the obligations of

the Borrower and Grantor. Each of these was the same entity for each loan.

And none of these entities included the Gentrys, the guarantors of the loan

obligations. Thus, this principle of interpretation does not apply in this case.

       Because of our resolution of the two issues in this opinion, we need not

reach the third question: whether the waiver of anti-deficiency defenses language

in the guaranties of payment is enforceable against the Gentrys. In order to

make clear that the trial court's decision on this question is not binding on these

parties, we vacate that portion of that court's decision.

       There is an outstanding issue that is not presently before us. The Gentrys

are entitled to a fair value hearing under RCW 61.24.100(5). That hearing has

not yet occurred because the trial court decided this matter on summary

judgment. Thus, remand for such a hearing is required.

                                 ATTORNEY FEES

       The Gentrys seek an award of attorney fees based on the contract

provision in their guaranties. The bank reserves the right to seek fees under the

same provision following remand and further proceedings. We deny an award of

fees at this time to any party because doing so is premature.

       Each of the guaranties in this case provides for payment of reasonable

attorney fees to the bank in connection with enforcement of the guaranties.100
RCW 4.84.330 makes this unilateral contractual provision bilateral, and further




       100 See Clerk's Papers at 119, 122, 125, 128, 131, 134.

                                             27
No. 70004-9-1/28


provides that the "prevailing party" is entitled to such an award. A prevailing

party is one in whose favor a final judgment is rendered.101
       Moreover, a trial court may include appellate attorney fees after

remand.102

       Because a prevailing party has not yet been determined and will not be

determined until after a fair value hearing under RCW 61.24.100(5) on remand,

we decline to award fees now. That determination may be made by the trial

court at such time as it makes an award of reasonable attorney fees.

       We reverse and remand for further proceedings. We also vacate that

portion of the trial court's decision concerning the enforceability of waiver of anti-

deficiency defenses. We also deny an award of attorney fees as premature.


                                                          6cKtJ.
WE CONCUR:




                                                   1>€ri<^1?;


       101
             Riss v. Angel. 131 Wn.2d 612, 633, 934 P.2d 669 (1997).

       102 See Stieneke v. Russi. 145 Wn. App. 544, 572, 190 P.3d 60 (2008)
("Because we remand this case, neither party is entitled to attorney fees. If the
trial court finds that the Stienekes met the required standard of proof, it should
award attorney fees for this appeal as well.").

                                              28
