Commercial Real Estate: Anti-deficiency statute rendered commercial guaranty unenforceable because the definition of the obligations secured by the Deed of Trust was too broad

It is standard practice in Washington for commercial lenders to take a separate guaranty from their borrower’s members/shareholders when they lend to the entity.  This way the lender may pursue a deficiency – if there is one – against the guarantor(s) after the nonjudicial foreclosure.  An exception to Washington’s anti-deficiency statute, RCW 61.24.100(10) allows this.  The Washington State Court of Appeals recently declined to enforce a guaranty under the anti-deficiency statute because the deed of trust secured obligations arising under “Related Documents” in addition to the payment of the note.  The deed of trust’s definition of “Related Documents” included “guaranties … whether no or hereafter existing, executed in connection with the indebtedness.”   The nonjudicial foreclosure extinguished the guaranty under the anti-deficiency statute because it was a “Related Document” secured by the deed of trust.  The case is First-Citizens Bank & Trust Company v. Cornerstone Homes & Development, LLC, et al., No 43619-1-II (Dec. 3, 2013).