Search form

March 19, 2014
Washington Courts Split on Foreclosures and Guaranties
Practice Areas: 

For the past several years, debtors and creditors have disagreed over whether certain language contained in standard form loan documents supported the conclusion that a guarantor’s guaranty was secured by the borrower’s deed of trust. Specifically, debtors’ attorneys have argued that the “Payment and Performance” section and “Related Documents” definition in the most commonly-used standard form deed of trust operates to include the guaranty within the obligations the deed of trust secured.

This is important because Washington law provides that a nonjudicial trustee’s sale fully discharges all obligations the deed of trust secures. Debtors have argued that, once a lender non-judicially forecloses on the deed of trust, it has thereby discharged the guaranty and is prohibited from attempting to enforce the guaranty against a third-party guarantor to obtain a deficiency judgment.

In December 2013, Division II of the Washington Court of Appeals issued the first appellate decision on this matter First Citizens Bank v. Cornerstone Homes. Division II found that the guaranty fell within the deed of trust’s “Related Documents” definition and was therefore secured by the deed of trust.  According to the First Citizens court, the lender’s foreclosure sale discharged the guaranty and prohibited the lender from obtaining a deficiency judgment under the guaranty.

Just two months later, however, in February 2014, Division I of the Washington Court of Appeals issued a decision in Washington Federal v. Gentry which sharply disagreed with Division I.  The Washington Federal court held that the deed of trust secured only the obligations of the deed of trust’s grantor and did not security the third-party guaranty. Accordingly, the lender was free, even after the foreclosure sale, to obtain a deficiency judgment under the guaranty.

Because of this split between the courts of appeals, this issue is not finally decided in Washington.  A final decision is unlikely until the Washington Supreme Court takes up the issue sometime in the future.  In the meantime, Eisenhower encourages lenders to consult with experienced lender’s counsel to determine if their loan documents comply with Washington laws regarding deficiency judgments.


This advisory is a publication of Eisenhower Carlson PLLC. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Eisenhower Carlson PLLC © 2011  ||  Credits & Disclaimers

This website is for informational purposes only and is not legal advice.

No portion of this page or any content herein may be redistributed or republished without written permission from Eisenhower Carlson PLLC.The information you'll find here is our way of introducing you to Eisenhower Carlson PLLC. It contains no official legal opinions. No responsibility is assumed for the accuracy or timeliness of any information on this website. The information on this website is not intended as a substitute for legal counsel, and is not intended to create, and receipt of it does not constitute, a lawyer-client relationship.

We invite you to contact us by phone, fax or e-mail for a session with one of our lawyers.

For your own protection, we strongly suggest that you do not transmit confidential documents to us or anyone else via unsecured email.

If you have any questions or comments concerning this site, please send an email to Do not send confidential information via email.

Concept & Design: CAVLRY
Photography: CAVLRY
Drupal CMS Development: Praece Strategic Technolog Consulting