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FILEDC OU R T OF APPEA

2013100 1 3 AM 1 1 :INTHE COURT OF APPEALS OF THE STATEOF W

DIVISION IIFIRST -CITIZENS BANK & TRUSTCOMPANY, successor in interest toVENTURE BANK,

Appellant,

V.

BRUCE A. REIKOW and SANDRA J.REIKOW, individually and the maritacommunity comprised thereof; KARL R.ZETTERBERG and JANE ZETTERBERG,individually and the marita communitycomprised thereof,

No. 43181 -5 - II

PUBLISHEDOPINION

WASHING

BJORGEN, J. First -Citizens Bank & Trust Company sued Bruce and Sandra Reikow fo ra de f ic iency judgm ent fol lowing a trustee' s a l e o f real property securing a commercial loan,then in default, which the Reikows had guaranteed. The trial court granted partial summaryjudgment to First -Citizens as to th e amount of th e deb t and th e Reikows' liability for anydeficiency, but ult imately dismissed the complaint after holding a n evidentiary hearing andfinding that t h e fair value o f t h e property e x c e e d e d th e amount owing on the loan.

First -Cit izens appeals, alleging that the tr ial court erred in deny ing it summary j udgmen ta s to a ll issues, and, in th e al te rnat ive , that the cour t abused its discret ion in de te rm in ing the fairvalue of the foreclosed property . Because the tr ial court proper ly dec l ined to de te rm ine theamount of deficiency on summary j udgmen t and because substantial evidence in the recordsupports the trial court' s fair value determination, we affirm.

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First - Cit izens submit ted the sole bid at the t rustee ' s sale, pu rchasing the proper ty for

5 , 215 , 000 .00 on July 9 , 2010. At the t ime of the sale, the amount due o n the note, inc ludinginterest, foreclosure c o s ts , c ha r ge s , a n d fe e s stood a t $ 7, 168, 710.74.

III. F IRST -C IT IZENS ' LAWSUIT AGAINST REIKOWS F O R DEFICIENCYFollowing the trustee ' s s a l e , First -Citizens s u e d the Reikows personally fo r a deficiency

judgment

in an a m ou nt to be proven at trial, represent ing the outstanding ba la nc e o n theNote ... less th e fair value of th e Property sold a t th e tru ste e ' s sale o r the pricepadatthe trustee' s sae ... plus [ costs and a t to rney fees].

CP at 4. The Reikows answered the compla int , admit t ing to the a m o un t d ue o n the promissorynote, to N B P ' s defaul t , and to thei r guarantee of the loan, but deny ing any rema in ing liability andrequest ing judicial determinat ion of the fair value of the property sold.

First -Cit izens the n m o v e d fo r summary j u dgmen t . In its m otion, F i rst -Cit izens arguedthat the Reikows ha d waived any r ight to request a fair va lue hea ring by virtue of the guaranties'waiver provisions, and therefore, the def ic iency amounted to the difference between theoutstanding debt an d the sale price a s a matter of law.

Bruce Reikow filed a dec la ra t ion in oppos i t ion to the s u m m a r y judgment motion,attaching a n Internal Revenue Se rvice ( IRS) form h e had received f rom Fi rs t -Citizens concerningth e t rustee ' s sale. The prepare r , a First - i t izens emp l oyee , ha d listed the fair marke t va lue oft h e property a s $ 7 , 8 2 0 , 0 0 0 o n t h e form. C P a t 1 5 0 . Reikow a l s o a t t a c h e d d o c u m e n t s from th ePierce County Assessor ' s off ice showing the 2 0 10 assessed va lue of the proper t y a s

7 , 5 2 1 , 0 0 0 . C P a t 1 5 4 -5 6 . In its reply, First -Citizens submitted a professional appraisal datedDecember 30, 2009 , giving a Prospective M a rke t Va lue a t Stabilization o f $7 , 82 0, 0 0 0 and a nAs -Is Market Value of $, 630, 000. CP at207 -09.

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At the hearing onFirst -Citizen' s summaryjudgment motion,he Reikows arguedpro

that the cour t should holdFirst - i t izens to its s ta temen t of fair marke t value on the IR S form.First-Citizens maintained that the Reikows had waived any right to d is p u te t he a m o u n t of th edeficiency a n d t h a t t h e court should not hold a fair value hearing o r c o n s i d e r t h e I R S form. T h ecour t entered an order grant ing part ia l summary j u dgmen t to F irst -Cit izens a s to the amoun t ofthe debt and the Reikows' l iability fo r any def ic iency, bu t decid ed to hold a hearing to de te rm inethe fair value of th e property.

At th e fair value hear ing , First-Ci t izens p resen ted the testimony of one of thep ro fess i ona ls who ha d p repa red th e D e c e m b e r 2 0 0 9 appra isa l . One ofFirst -Citizens' e m p l o y e e salso testified to th e bank' s opinion that the estimated as -is market value of th e property shortlybefore the trustee' s saestoodat $6,370,000. VerbatimReport ofProceedings ( VRP) (Feb. 21,2012) at 41.

Bruce Re ikow tes tif ied on the Reikows' behal f , descr ibing the difficulties he ha dobtaining a n d retaining t e n a n t s during t h e nonjudicial foreclosure, which h e attributed in part t othe conduct of First -Citizens. Reikow also discussed receiv ing the IR S form from First -Citizens,s t a t i n g his belief t h a t th e amount o n th e form w a s correct. T h e court admitted t h e form intoevdence.

The cou rt found the fair value of the property a s ofthe t rustee ' s sale to have been7 , 820, 000 . 00, a sum e xc e ed in g the a m o un t due on the note by $ 651, 289. 26, and therefore

d ismissed the compla in t . Based o n the fee -shifting prov is ion in t he guaran ties , the cour t entered

2 The Reikows' couns e l filed a notice of intent to withdraw on S e p t e m b e r 13, 2011 .4

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j u d g m e n t in f avor of the Reikows for reasonable costs and at torney fees i ncu r red in de fend i ngaga inst First -Citizens' deficiency suit. First-Ci t izens timely appea ls .

ANALYSIS

First -Cit izens ' claim that the trial cour t erred in holding a fair value hear ing, ifcorrect ,would dispose of the question ofwhether the court' s value determination amounted to an abuseofdiscretion. W e therefore first address the trial cour t ' s gran t ofpartial s u m m a r y judgment, thencons ide r the trial cour t ' s finding a s to the fair value of th e forec losed prope r t y

I. TRIAL COURT ' DECISION TO HOLD A FAIR VALUEHE A R I NGWe revewatriacourt' s denial ofsummary judgment de novo. Walston v . Boe ing Co.,

1 7 3 Wn. App. 2 7 1 , ' 2 7 9 , 2 9 4 P . 3 d 7 5 9 , review granted, 1 7 7 Wn.2 d 1 0 1 9 , 3 0 4 P . 3 d 1 1 5 ( 2 0 1 3 )citing Baker v. Schatz, 8 0 Wn. App. 775, 782, 912 P . 2d 5 0 1 ( 1 9 9 6 ) ) .

Summary j udgmen t should only be granted ifa fte r conside r ing a ll the pleadings,affidavts, depos i t i ons o r a dm ission s and all reasonable i n f e rences drawntherefrom in favor ofthe nonmoving party, it canbe sad ( 1 ) that there is nogenuneissue as to any materia fact, ( 2) that all reasonable persons could reachonly o n e conclusion, a n d ( 3 that t h e moving party is entitled to judgment [ s i c ] a sa matter oflaw.

Baker, 80 Wn. App. a t 782.Washington statutes al low de f ic iency j u dgmen ts against a borrower or guarantor

following nonjudicial foreclosure on a d e e d o f trust securing a commercial loan. RCW61. 24. 100( 3) . In actions against a guarantor for a deficiency,

the guaran to r may request the court o r o the r appropriate adjudicator to determine,or the court o r o the r a p pro p ria te adjudicator m ay in its discret ion determine, thefair value of the property sold at the sale and the def ic iency j u d gmen t agains t theguarantor shall be for an amount equal to the sum bf th e total amount owed to thebeneficiary b y t h e guarantor a s of t h e d a t e of t h e trustee' s s a l e , l e s s t h e fair valueofthe property sodat the trustee' s saeor the saepricepadat the trustee' s

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sale, whichever is greater, plus [ interest, cos ts , expenses , and f ees , to the extentprovided for in th e guaranty o r r e la ted contract].

RCW 61. 24.100( 5 ) ( emphassadded). The plain language ofthe statute thus limits the

deficiency judgment to the difference between the outstanding loan balance and the fair valueofthe colatera,puscolection -eatedcostsexplicitlyalowedby contract. As First - i t i zensproperly c o n c e d e s , t h e s t a t u t e a l s o e x p re s s ly g ra n ts c o u r t s discretion to determine the fair valueeven when the guarantor d o e s not request such a determination.

First -Citizens devotes considerable argument to its claim that the Reikows waived any

right they may h a v e h a d to request a judicial determination o f fair value. Nowhere, however,does First -Citizens expanhow this questionabeproposition,4 were it established, wouldentitle

3 Pro fessor Marjorie R o m b a u e r art iculates the rationale behind this rule as follows:A nonudcia foreclosure sae ( indeed, any foreclosure sae) awayscarries acertan danger o a wndfal to the beneficiary. When the debt owed thebeneficiary is large, and /or when a secondary l ienor i s a taxing agency also oweda signif icant sum, junior l ienors and un re l a ted b idde r s are m uc h less likely to beable to bid a suff ic ient a m o un t to preva i l at the sale, even when th ere is equity inthe property. A forec los ing benefic iary could choose to bid a large amount, butless than its loan balance. Should another bidder bid higher, the beneficiary canprotect its pos itio n by raising its bid to the amount owed it with n o a ctua l outlay.Should the beneficiary prevalonits lowball bid, arguably she will benef i t intwo ways. First, as the prevailing bidder she will have obtained a windfall -ownership o the property at less than its fair market vaue Second, as theforeclosing beneficiary sh e will have received less than the full amount owedher and can thus proceed to foreclosure on the other real property collateral.

27 WASHINGTON PRACTICE: CREDITORS' REMEDIES - DEBTORS' RELIEF, 3 . 3 7, at 177. In thecon tex t of co m m e r c i a l loans, a forec los ing l e nde r cou ld also, absent this rule, gain such awindfal l by obtaining a deficiency judgment against the debto r o r a guarantor.4 Wenotethat, underWashington law, a guaranty agreement shou ld rece i ve a fair andreasonable interpretation reflecting th e purpose of the a g re e m e n t and the right ofthe guarantornot to have his obigationenarged. O ld Na t ' l Bank ofWash. v. Seat tle Smashers Corp., 36Wn. App. 688, 691, 676 P.2d 1034 ( 1984) ( emphassadded). Our Supreme Court has showngreat reluctance to allow waiver of the statutory requireme nts governing nonjudic ial foreclosure.Schroeder vExcelsior Mgmt. Grp., LLC, 177 Wn.2d 94, 106- 07, 297 P.3d 677 ( 2013) ( statingthat [wwllnotalowwaverochaper61. 24 RCW' s] protectionslightly ' and citing

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the ba n k to a larger de f ic iency judgm en t than the statute allows. F irst -Cit izens mere ly assertsthat [ t] he only reason the re was a fair va lue hearing in this c a s e is because the Reikowsrequestedone Br.ofAppellant at 15.

The record d o e s not support First -Citizens' assertion. To begin with, First -Citizens'compla in t itself calls fo r a fair va lue hearing , a l though the Reikows also requested a jud icia ldetermination of fair va lue in their answe r to the complaint. At the h ea rin g o n First - i t izens'motion fo r summary judgment, however , the Reikows, then p roceed ing p ro s e , d id no t men t iontheir prior request for a fair value determination. Instead, they argued that the court shouldprohibit First -Citizens from asserting a value lower than that stated in the IRS form that the bankhad prepared.

The cour t on its own initiative exp re ssed the concern that, having a lr eady fo re c lo sed onthe colateraandobaneda settlementfroma different guarantor, First -Citizens might bedouble-dipping, part icularly a s it bid some hundreds o f thousands l e s s than the bank' sapprasa atthe trustee' s sae' VRP (Jan. 27, 2012) a t 4 -6. Indeed, th e record indicates that th e

cases) (quoting Bain vMetro. Mortg. Grp., 175 Wn.2d 83, 108, 285 P.3d 34 ( 2012)). A validwaiver , fur thermore, requi res i n ten t iona l abandonmen t o r re l inqu ishment of a known right, andin tent to waive mus t be shown by u nequ iv oca l acts or conduct which are inconsistent with anyintention otherthan to wave. Harmony at Mad r ona Park Owners Ass ' n v. Mad ison HarmonyDev., Inc., 143 Wn.App. 345, 361, 177 P. 3d 755 ( 2008), appeal after remand, 1 60 Wn. App.728 ( 2011). Thus, w e re we to find th e issue relevant to this d ispute , th e broad, boilerplate waiverin the guaranties ' fine print could hardly defeat the explicit and specific provisions o f RCW61. 24. 100( 5) , which plainly aim to protect guarantors from having their obligations enlarged.First -Cit izens' comp la in t also named Karl and Jane Zetterberg, the Reikows ' business par tners ,who had also guaran teed the loan a t issue here. First -Citizens voluntarily d i sm issed th eZetterbergs, apparently a s part o f a package sett lement involving multiple claims. Neither partyal leges that the dismissal has any bear ing on this dispute.In fact, First -Citizens bid $ , 415, 000 less a t the trustee' s sale than the As -Is Fair Market

Value gvenin the bank' s professionaapprasa,and $, 145,000 less than its own estimatedas -is marketvaue. CP at 18, 207 -09; VRP (Feb.21 , 2012) a t 4 1 .

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trial courtsetthe fair vauehear ing suasponte I' m going to d e n y the motion for a de f i c i encyjudgment. Ithnkwhaweneedto do is seta hearing for this. VRP ( Jan. 27, 2012) at 12emphassadded). -First -Citizens c o nc e d e s th e court had th e power to order such a hearing sua

sponte. Rep l y Br. ofAppellant at 14 - 15 ( arguing that enforc ing the waiver provision would n o tviolate public pol icy because the tr ial court could still sua sponte order a fair value hearing ) .VRP ( Jan. 27, 2012) a t 12. Even ifthe Reikows, arguendo, had waived their right to request afair va lue hea ring , the cour t r e ta in ed its authority to hold one.

The statute l imits a de f ic iency judgm en t following non jud ic ia l foreclosure based on thefair value of th e foreclosed collateral and g ives cour ts discretion to determine that value. Casesw he re th e fair va lue migh t exceed the price obta ined at the tr us tee ' s sale plainly call for suchjudicial determinat ion. Here , First -Ci tizens submit ted the o n ly b id at the t rustee ' s sale, a bidover $, 0 0 0 , 0 0 0 less than its ow n v a lu a tio n of the proper ty . The trial cour t ha d before it thecounty a s s e s s o r ' valuation and a ta x document prepared by First -Citizens i tself, both givingvalues substantially higher than that bid and wel l in excess of the outstanding loan balance.First - i t izens had , fu r the rmore , p resen ted two widely d i ve rgen t va lues. Thus, reasonable mindsplainly di f fered a s to the fair value of the property , a quest ion of fact d iapos it ive ofth e en tireaction

U n d e r these ci rcumstances First -Citizens' argume nt , that n o is su e ofmate r i a l factr ema ined and that reasonable persons could have conc luded on ly that the law ent i t led F irst -Cit izens to a specif ic sum ofmoney, has no merit. We hold that the tr ial court proper ly deniedsummary j udgment a s to t h e amount o f t h e deficiency a n d thus d id not err in holding a fair valuehearing.

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II. THE TRIAL COURT' s FAIR VALUE DETERMINATION

In an act ion fo r a de f ic iency judgm en t following a non jud ic ia l forec losure, the plaintiffbears the burden of establishing a de f ic iency between the debt and the value of the col la tera lsod See Sec. State BankvBurk, 100 Wn. App. 94, 101, 995 P . 2d 1272 ( 2000) ( interpreting ananaogousprovsionin the Uniform Commercial Code). The statute at issue here defines fair

vaue as

the value of the proper ty encumbered by a deed of t rus t tha t is so ld pu rsuan t to at rus tee ' sale. This v a lu e s ha ll be de t e rm i ned by th e cour t o r o the r appropr ia teadjudicator by reference to the most probable price, a s of the date of the trus tee ' ssale , which would be paid in cash o r o ther immediately a v a ila ble fu n d s , af terdeduction of prior liens an d encumbrances with interest to the da t e of the trustee' ss a l e , fo r which the property would se ll o n such date after reasonable exposure inth e market under conditions requisite to a fair sale , with the buyer a nd seller eachact ing prudent ly , knowledgeab ly , and for se lf -nterest , and assuming tha t ne it he ris under duress.

RCW 61. 24.005( 6).

Because this provis ion and R C W 6 1 . 24. 100 ( 5 ) by the i r te rm s g ra n t courts discret ion tode te rm ine fair va lue , we review such de te rm ina t ions u n d e r th e abuse -of- iscret ion standard. See,e.g., In reGuardianship ofMatthews, 156 Wn.App. 201, 214, 232 P. 3d 1140 ( 2010) ( noting thatwherea statuteexplicitly grantsthe superiorcourtdiscretion, we review for abuse of

discretion). Under this deferential standard, a n a bu se ofdiscretion occurs when a decision ismanifestly unreasonabe,orexercsedonuntenabegrounds,orfor untenabereasons. Mayer

v. Sto Indus., Inc., 156 Wn.2d 677, 684, 132 P. 3d 115 ( 2006) (quot ing Assoc. Mortg. Investors v .GP Kent Constr. Co., 15 Wn. App. 223, 229, 548 P.2d 558 ( 1976)). A discretionary dec i s ionrests on untenable grounds or is based on untenable r easons ifth e trial court relies onunsupported fa cts o r applie s the wrong legal standard; the court ' s decision is manifestlyunreasonable ifthe court, despite applying the correct lega l standard to the supported facts,

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ad op t s a view that no r easonab le person would take. Mayer, 1 5 6 Wn.2d a t 684. We defer to th etrial court regarding witness credibil ity and conflict ing testimony, viewing the ev idence in thelight mos favorable to the prevailing party: here, the Reikows. City of Walla Walla v .

401, 333 .44 , 164 Wn. Ap p . 236, 256, 262 P . 3d 1239 ( 2011 ) .F irst -Cit izens presented exper t te s t imony conce rn ing the professional appraisal it ha d

commissioned. The appraiser explained that the difference between the two values given, theas -is fair market value of $, 630,000 and the prospective market value at stabilization of7 , 820, 000 , resulted largely from the fact that he calculated the lat ter f igure assuming the

property were fully leased out, bu t based the fo rmer on the actual tenancy status at the t ime ofthe appraisal. VRP (Feb. 21, 2012) at 23 -25.

Fair value presumes reasonable exposure in the market under conditions requisite to afair sae, notapricebased onduress. RCW 61. 24.005( 6). Bruce Reikow testified that his

inability to obtain tenants fo r s o m e o f the vacant portions o f the property resulted from theactions of First -Citizens itself. the bank' s refusal to cooperate with NBP and the prospectivetenants' uncertainty about the foreclosure process. First -Cit izens d id no t present any contraryevdence

The Reikows also p r esen t ed a document p r epa r ed and submitted to the IR S by First-Citizens i tself, admit t ing that the fair market value of the property at issue exceeded the amountof th e debt . First -Citizens p resen ted opinion testimony that s omeone erroneously en te red thatf igure o n the IR S form, bu t the w itn e s s a d m i tte d that he did no t knowwho prepared the form o rwhether First -Citizens h ad is su e d a correction. The witness also admitted that, ha d a corrected

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form issued, the Reikows would have rece i ved a copy. Bruce Reikow d ispu ted th e claim ofmistake and testified that he had never received a correction.

Thus, the uncontroverted evidence showed that First -Citizens' appraisers based the lower

valuation on the then - urrent reduced tenancy status, which resulted in par t f rom the foreclosureprocess itself. The trial c o u rt c o u ld r e asonably have conc luded that this assumpt ion d id no tcompo r t with the s ta tuto ry r equir emen t of reasonable exposure in the marke t unde r condi t ionsrequsteto a fair sae, but instead reflectedaselerunder duress. RCW 61 . 24.005( 6).

Fur ther , th e resolut ion of th e conflicting testimony concern ing First Cit izens ' apparen t admiss ionon the IRS form lies in th e province of th e trial court. We hold that th e trial court' s fair valuedetermination was not an abuse ofdiscretion.

First -Citizens points out that the trial court did not discuss the unpaid taxes owed on the

property, which the statute requires the court to deduct in determining fair value. Because thevalue accepted by the court exceeded the outstanding debt by over $ 650, 000 . 00, and the unpaidtaxes amountedto only $1 3 3 , 358 . 14, th e court had no r eason to explicitly perform thiscalculation. The evidence and the findings offact thus support the trial court' s conclusion thatth e Re ikows had no remaining liability to First - i t izens.

First -Citizens' claim that the trial court abused its discretion fails. The evidence supportsthe trial court' s determination of the fair value of the property as of th e trustee' s sale , a sumexceeding the outstanding debt plus the unpaid taxes. The tr ial court ' s conclusions of la wproper l y fo llow ed fr om its f indings and required dismissal of the suit . For these reasons, weaffirm

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ATTORNEYFEES

Washing ton law r equ ir es cou rts to app ly one -way fee- shifting prov is ions bilaterally.RCW 4.84. 330 . The guarant ies a t is sue here conta in such one -way fee -shifting provisions.Having obta ined d ismissa l with pre jud ice of First -Cit izens' lawsuit against them, the Reikowspla in ly preva i led below. Thus, the trial court proper ly awarded the Reikows their costs, a s wel la s the a t to rney fees they incurred be fo re p ro c e e d in g p ro se.

Both parties request fees on appeal. When a contract provides for a fee award in the trial

court, the party prevai l ing before us m ay seek reasonable cos ts and attorney fees incurred onappea. RAP 18. 1 ; Reeves vMcClain, 56 Wn.App. 301, 311, 783 P.2d 606 ( 1989). TheReikows prevail here and have complied with applicable procedural requirements. We thereforeaward the Reikows the reasonable cos ts and attorney fees they incu rred in this appea l and denyFirst -Citizens' fee request.

Affirmed.

EJ; c G E N , JWe (=oncur: ,+

Y

I I 1 gHin P . J .

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