Opinion Information Sheet

			

       IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 BOEING EMPLOYEES' CREDIT                      )          No. 66420-4-I
 UNION,                                        )
                                               )          DIVISION ONE
                       Appellant,              )
                                               )
                v.                             )
                                               )
 RUSS E. BURNS and SUZANNE K.                  )          PUBLISHED
 BURNS, husband and wife,                      )
                                               )          FILED: March 19, 2012
                       Respondents.            )
                                               )
                                               )

       Cox, J.  --  Entry of a judgment on a promissory note does not extinguish 
the lien of a security interest in real property that secures that note.1 And the 

homestead exemption is unavailable for debts secured by deeds of trust that 

have been executed and acknowledged by the owners of the encumbered
premises.2  

       Here, Boeing Employees' Credit Union (BECU) is the holder of a 

subordinate deed of trust for property sold at a trustee's sale at the direction of 

       1 Am. Fed. Sav. & Loan Ass'n of Tacoma v. McCaffrey, 107 Wn.2d 181, 
189, 728 P.2d 155 (1986); Hanna v. Kasson, 26 Wash. 568, 571-72, 67 P. 271 
(1901). 

       2 RCW 6.13.080(2). 

No. 66420-4-I/2

Wells Fargo Bank, the holder of a senior deed of trust.  The lien of the BECU 

deed of trust against the real property sold at this trustee's sale was transferred 

to and attached in first priority to the surplus funds deposited into the court 
registry.3 The homestead claimed by Russ and Suzanne Burns, husband and 

wife, is not available against the BECU obligation secured by that deed of trust.4  

Accordingly, BECU is entitled to the surplus sales funds that are sufficient to 
satisfy the Burnses' unpaid debt to BECU.5 We reverse and remand for further 

proceedings.

       In December 2004, the Burnses executed and delivered a promissory 

note in the face amount of $220,000.00 to Wells Fargo.  In order to secure 

payment of that note, the Burnses also executed and delivered to Wells Fargo a 

deed of trust dated December 7, 2004, that encumbered their residential 

property.  The deed of trust was recorded on December 13, 2004.

       In October 2005, the Burnses also executed and delivered to BECU a 

promissory note in the face amount of $85,000.00.  In order to secure payment 

of that note, the Burnses executed and delivered to BECU a deed of trust dated 

October 24, 2005, that also encumbered their residential property.  The deed of 

trust was recorded on November 3, 2005.  This deed of trust is subordinate in 

priority to the lien of the Wells Fargo deed of trust on the Burnses' residence.

       3 RCW 61.24.080(3).

       4 RCW 6.13.080(2).

       5 RCW 61.24.080(3); In re Upton, 102 Wn. App. 220, 224-25, 6 P.3d 1231 
(2000).

                                               2 

No. 66420-4-I/3

       The Burnses defaulted on the note to BECU.  Based on these defaults, 

the successor trustee for the deed of trust in favor of BECU recorded a notice of 
trustee's sale on December 5, 2008.6 Thereafter, on February 24, 2009, the 

successor trustee recorded a notice of discontinuance of this scheduled sale.7  

       BECU then commenced an action against the Burnses on the delinquent 

promissory note.  On April 14, 2009, the superior court entered its Order of 

Default and Default Judgment in favor of BECU against the Burnses for 
$81,986.52.8  

       BECU began garnishment proceedings against the Burnses.  Due to the 

Burnses' filing of a petition in bankruptcy, BECU ultimately failed to collect any 
payments to satisfy the Burnses' debt.9

       On November 20, 2008, the successor trustee for Wells Fargo's deed of 

trust recorded a notice of trustee's sale because of the Burnses' delinquencies 

under their promissory note to the bank.  The sale was originally scheduled for 

February 20, 2009. Following several continuances, the sale occurred on 
August 20, 2010.1 This sale generated net surplus sales funds in the amount of 

$100,648.42, which were deposited into the registry of the court.11

       6 Clerk's Papers at 51. 

       7 Id. at 56. 

       8 Id. at 69. 

       9 Report of Proceedings (Dec. 10, 2010) at 4. 

       1 Id. at 1. 

                                               3 

No. 66420-4-I/4

       Following the deposit of the surplus funds from the trustee's sale into the 

King County Superior Court Clerk's registry, BECU moved for an order directing 

payment of a portion of these funds to satisfy the Burnses' unpaid debt.  The 

Burnses also moved for disbursement of these funds, claiming that the BECU 

deed of trust was extinguished by entry of the default judgment.  According to 

the Burnses, the claimed extinguishment of BECU's deed of trust lien entitled 

them to the funds under the homestead provisions of state law.  In sum, each 

side claimed a superior right to the funds under RCW 61.24.080.  

       A court commissioner ruled that "BECU's deed of trust and promissory 
note merged when BECU obtained a judgment" on the promissory note.12  

Accordingly, the commissioner ruled that the Burnses were entitled to the 

surplus funds. 

       BECU moved for revision of the court commissioner's ruling. The 

superior court denied the motion. 

       BECU appeals. 

                              STANDARD OF REVIEW

       We review de novo questions of legal interpretation of the Deeds of Trust 
Act.13  A court's primary duty in interpreting any statute is to discern and 

implement the intent of the legislature.14 A court will look to the statute's plain 

       11 Id. at 2. 

       12 Clerk's Papers at 82.

       13 Beal Bank, SSB v. Sarich, 161 Wn.2d 544, 547, 167 P.3d 555 (2007).  

       14 State v. J.P., 149 Wn.2d 444, 450, 69 P.3d 318 (2003) (citing Nat'l 

                                               4 

No. 66420-4-I/5

language.15 If the statute is unambiguous, the inquiry ends.16 A statute is 

unambiguous when it is not susceptible to two or more reasonable 
interpretations.17

       Where the superior court has made a decision on a motion for revision, 

the appeal is from the superior court's decision, not from the commissioner's
decision.18

       Here, the dispositive question is whether BECU's deed of trust was 

extinguished by entry of judgment in its favor on the Burnses' promissory note.  If 

the deed of trust was not extinguished, then it is undisputed that the homestead 
exemption is not effective to defeat BECU's claim to the surplus funds.19  

Conversely, if the deed of trust was extinguished, the homestead exemption is 
effective with respect to BECU's judgment lien.2 We review de novo this 

question of law regarding interpretation of the deed of trust act.21

Elec. Contractors Ass'n v. Riveland, 138 Wn.2d 9, 19, 978 P.2d 481 (1999)).

       15 HomeStreet, Inc. v. Dep't of Revenue, 166 Wn.2d 444, 451, 210 P.3d 
297 (2009) (citing State v. Armendariz, 160 Wn.2d 106, 110, 156 P.3d 201 
(2007)). 

       16 State v. Bunker, 169 Wn.2d 571, 582-83, 238 P.3d 487 (2010) (quoting 
Armendariz, 160 Wn.2d at 110). 

       17 State v. Delgado, 148 Wn.2d 723, 726-27, 63 P.3d 792 (2003) (citing 
State v. McGee, 122 Wn.2d 783, 787, 864 P.2d 912 (1993)).

       18 State v. Ramer, 151 Wn.2d 106, 113, 86 P.3d 132 (2004). 

       19 Upton, 102 Wn. App. at 224-25. 

       2 Id. at 224.

       21 Beal Bank, 161 Wn.2d at 547-48. 

                                               5 

No. 66420-4-I/6

       The Burnses argue that we should review the lower court's decision for 

abuse of discretion.  They are mistaken.  
       They cite to our decision in Wilson v. Henkle.22  That case is 

distinguishable.  In Wilson, funds held in a court registry were awarded to the
plaintiffs in an unlawful detainer action.23  Prior to the actual disbursement of 

these funds, the defendant's attorney brought a separate action to garnish the 
same funds.24 A commissioner then signed an order vacating the prior judgment, 

based on the order requiring garnishment in the attorney's favor.25 Thus, in a 

case where there were two different and contradictory judgments and orders, we 

held that "[a] motion to vacate a judgment is addressed to the sound discretion 

of the trial court, whose judgment will be undisturbed absent a showing of a 
manifest abuse of discretion."26  

       Here, BECU has not moved to vacate the judgment.  It has appealed the 

superior court's decision.  Wilson is inapposite. 

                       TRUSTEE'S SALE SURPLUS FUNDS 

       BECU argues that its deed of trust was not extinguished by entry of 

judgment on the delinquent Burnses' promissory note.  It also argues that the 

       22 45 Wn. App. 162, 724 P.2d 1069 (1986). 

       23 Id. at 164. 

       24 Id. at 164-65. 

       25 Id. at 165. 

       26 Id. at 166. 

                                               6 

No. 66420-4-I/7

doctrine of merger does not defeat its claim to the surplus sales proceeds.  In 

sum, it claims that it has a right under RCW 61.24.080(3) to so much of the sales 

proceeds as are necessary to satisfy the Burnses' unpaid debt.  We agree. 

                 Washington Case Law and the Deeds of Trust Act

       Our examination of the questions before us begins with consideration of 

relevant Washington case law regarding mortgages.  First, the state supreme 
court has stated that a deed of trust is "in general a species of mortgage."27 This 

principle is expressly memorialized in the Deeds of Trust Act, which states 

"[e]xcept as provided in this [act], a deed of trust is subject to all laws relating 
to mortgages on real property."28  Thus, case law respecting mortgages 

generally can be useful in deciding issues regarding deeds of trust, except 

where the Deeds of Trust Act dictates otherwise.  

       Second, a note is a separate obligation than the deed of trust or mortgage 
that secures that note.29 Thus, entry of judgment on a note does not necessarily 

affect the rights or remedies provided for a deed of trust or mortgage securing

that note.
       Hanna v. Kasson,3 which the supreme court decided in 1901, is 

particularly instructive in applying these two principles.  There, Savage executed 

       27 Rustad Heating & Plumbing Co. v. Waldt, 91 Wn.2d 372, 376-77, 588 
P.2d 1153 (1979).

       28 RCW 61.24.020 (emphasis added).

       29 Metro. Mortg. & Sec. Co., Inc. v. Becker, 64 Wn. App. 626, 631, 825 
P.2d 360 (1992).

       3 26 Wash. 568, 67 P. 271 (1901). 

                                               7 

No. 66420-4-I/8

a note that was secured by a mortgage on property purchased in 1890.31  The 

note matured of its own terms, and the holder of the note and mortgage obtained 
a judgment solely on the note in superior court.32 Thereafter, Savage made 

partial payments on that debt.33  When no further payments were made, the 

mortgagee commenced a judicial action to foreclose the mortgage to collect the 
balance due.34 The mortgagee sought to establish "said [mortgage] lien as prior 

to any claim of respondents in [the] land."35  

       At issue was whether the suit on the note that led to the entry of a 

personal judgment against Savage affected the later foreclosure of the mortgage 
that secured that note.36 If so, foreclosure of the mortgage would not have been 

permitted. 

       The court held that entry of the judgment did not extinguish the lien of the 

mortgage:

       [N]otwithstanding the fact that a personal judgment only was taken 
       upon the note . . . still the right of action upon the mortgage as a 
       lien securing the debt remains. . . . [N]either the entry of the 
       judgment nor the subsequent proceedings were in any sense 
       a bar to the right to foreclose the mortgage lien for the portion 

       31 Id. at 570. 

       32 Id.

       33 Id. at 570-71. 

       34 Id. at 571. 

       35 Id.

       36 Id. at 571-72.

                                               8 

No. 66420-4-I/9

       of the original debt which is unpaid.[37]

       Most recently, in American Federal Savings & Loan v. McCaffrey38 the 

supreme court reiterated the rule of Hanna, citing that decision among others:  

              In transactions involving both notes and mortgages, the 
       notes represent the debts, the mortgages security for payment of 
       the debts.  Either may be the basis of an action.  The mortgagee 
       may sue and obtain a judgment upon the notes and enforce it 
       by levy upon any property of the debtor.  If the judgment is not 
       satisfied in this manner, the mortgagee still can foreclose on 
       the mortgaged property to collect the balance.[39]

       Thus, Washington case law makes clear that the entry of a judgment on a 

promissory note secured by a real property security interest does not extinguish 

the lien of that security interest in the collateral.  Specifically, the holder of the 

real property security interest has the option to sue on the note, obtain a 

judgment, and later foreclose the security interest to satisfy any unpaid

obligation of the borrower on the note.  

        Here, BECU directed the successor trustee for the Burnses' deed of trust 

to commence a nonjudicial foreclosure proceeding due to defaults under the 

Burnses' note. The recording of a notice of trustee's sale on December 5, 2008,

followed.  But the successor trustee recorded a notice of discontinuance of this 

scheduled sale on February 24, 2009, terminating this nonjudicial foreclosure 

proceeding.  

       Thereafter, BECU commenced an action on the delinquent promissory 

       37 Id. (emphasis added). 

       38 107 Wn.2d 181, 728 P.2d 155 (1986). 

       39 Id. at 189 (emphasis added) (internal citations omitted). 

                                               9 

No. 66420-4-I/10

note against the Burnses.  On April 14, 2009, the superior court entered a 

default judgment for $81,986.52 in favor of BECU against the Burnses.  

       The above-described procedure was entirely consistent with the mortgage 

law principle that, while simultaneous actions against one obligated on a note
are not permitted,4 successive actions are.41  The Burnses do not contest the 

continued validity of this mortgage law principle.

       There is no material distinction between this case and Hanna.  Both 

lenders held promissory notes secured by security interests in real property.  

Both sued on the notes and obtained judgments.  Both later claimed rights as 

secured creditors following entry of judgments on their respective notes.  In 

Hanna, the lender exercised the right to foreclose the mortgage to collect the 

unpaid debt.  Here, BECU asserts the lien of its deed of trust against surplus 

funds from the trustee's sale directed by Wells Fargo.  In neither case does the 

entry of judgment on the note bar the lender from later enforcing available 

remedies to obtain payment as a holder of an enforceable security interest for

the note.

       The next question is whether the principles articulated for mortgages in 

the case law that we have just discussed apply equally to deeds of trust.  We 

hold that they do.

       4 RCW 61.12.120 ("The plaintiff shall not proceed to foreclose his 
mortgage while he is prosecuting any other action for the same debt or matter 
which is secured by the mortgage . . . ."). 

       41 Seattle Sav. & Loan Ass'n v. Gardner J. Gwinn, Inc., 171 Wash. 695, 
698-99, 19 P.2d 111 (1933); Sullins v. Sullins, 65 Wn.2d 283, 285, 396 P.2d 886 
(1964). 

                                              10 

No. 66420-4-I/11

       BECU argues that RCW 61.24.100(2) permits it to sue on the Burnses'

note, recover a judgment, and later assert its claim under the deed of trust to the 

surplus funds from the Wells Fargo trustee's sale to satisfy the unpaid balance.  

We agree.

       As we previously stated, our task is to determine and implement the intent 
of the legislature.42 In doing so, we look first to the statute's plain language.43 If 

the statute is unambiguous, the inquiry ends.44  

       RCW 61.24.100(2) provides as follows:

       (a) Nothing in this chapter precludes an action against any 
       person liable on the obligations secured by a deed of trust or 
       any guarantor prior to a notice of trustee's sale being given 
       pursuant to this chapter or after the discontinuance of the 
       trustee's sale. 

       (b) No action under (a) of this subsection precludes the beneficiary 
       from commencing a judicial foreclosure or trustee's sale under the 
       deed of trust after the completion or dismissal of that action.[45]

       The plain language of RCW 61.24.100(2) codifies for deeds of trust the 

rule stated in Hanna and reiterated in American Federal.  Specifically, under 

subsection (a), commencing an action on a promissory note that is secured by a 

deed of trust either before a nonjudicial foreclosure or after the discontinuance 

of a trustee's sale of that deed of trust is permissible.  Moreover, under 

       42 J.P., 149 Wn.2d at 450 (citing Nat'l Elec. Contractors Ass'n, 138 Wn.2d 
at 19.

       43 HomeStreet, 166 Wn.2d at 451 (citing Armendariz, 160 Wn.2d at 110). 

       44 Bunker, 169 Wn.2d at 582-83 (quoting Armendariz, 160 Wn.2d at 110). 

       45 (Emphasis added.) 

                                              11 

No. 66420-4-I/12

subsection (b), such an action does not preclude either a judicial or nonjudicial 

foreclosure of the deed of trust after the completion or dismissal of such an 

action.

       BECU strictly followed this procedure.  It directed the successor trustee 

for the Burnses' deed of trust to discontinue the scheduled sale.  BECU then 

sued the Burnses on the note and recovered a judgment. The lien of its deed of 

trust was not extinguished by entry of judgment on the note.  The provisions of 

RCW 61.24.100(2) that permit a suit on the note, followed by a later foreclosure 

of a deed of trust securing that note, would have no meaning if entry of judgment 

extinguished the lien of the deed of trust.  Thus, under the plain words of this 

statute, BECU had the right to assert the rights and remedies of its deed of trust 

by foreclosure or otherwise.  

       The Burnses' arguments otherwise are unpersuasive.  First, they fail to 

cite any authority that holds that entry of judgment on a promissory note that is 

secured by a deed of trust merges the deed of trust into the judgment.  There is 

no such authority in this state.

       Second, the Burnses fail to persuade us that the doctrine of merger has 

any application to the facts of this case.  As this court stated in Caine & Weiner 

v.

                                              12 

No. 66420-4-I/13

Barker,46 there is little authority in Washington interpreting this doctrine.47 This 

court stated in that case:

              The merger rule is based in part upon the need to prevent 
       vexatious relitigation of matters that have already passed into 
       judgment as between the parties to the litigation and their 
       successors.  However, despite the general rule that underlying 
       rights and obligations are extinguished by the judgment, the 
       doctrine is designed to promote justice and should not be carried 
       further than that end requires.  Therefore, where the original 
       obligation provides for special rights or exemptions, in some 
       circumstances these may be preserved and recognized despite 
       merger.[48]

As we have already explained, RCW 61.24.100 expressly permits BECU to sue 

on the note and later assert its rights under the deed of trust securing that note.  

And BECU did so here in strict compliance with the statute.  Thus, there can be 

no valid claim in this case of "vexatious relitigation of matters" that the merger 

doctrine seeks to avoid.

       As for promoting justice, the Burnses fail to explain in any persuasive 

manner why it is unjust for BECU to assert its right to payment of the delinquent 

debt by claiming an interest in the trustee's sale surplus funds.  BECU has such

a right under the provisions of RCW 61.24.100(2).  We see no injustice here.

       The Burnses also argue that "[i]t is a well-established principle in 

Washington State that a suit on [a] promissory note waives the underlying 

       46 42 Wn. App. 835, 713 P.2d 1133 (1986).

       47 Id. at 836-37.

       48 Id. at 837 (internal citations and quotation marks omitted). 

                                              13 

No. 66420-4-I/14

security."49 As we explained earlier in this opinion, that is not the law.  Hanna, 

American Federal, and RCW 64.21.100(2) directly contradict this contention.  All 

establish that one may first sue on a note and later enforce rights and remedies 
under the security instrument securing that note.5

       The Burnses cite two cases to support their waiver argument: Bradley 
Engineering & Machinery Co. v. Muzzy51 and Sullins v. Sullins.52  Neither case 

supports their argument.  

       The Burnses' only citation to Bradley is the following out-of-context 

quotation:

       The commencement of an action for the recovery of a debt secured 
       by mortgage not asking a foreclosure of the mortgage and brought 
       before a foreclosure of the mortgage and sale thereunder, shall be, 
       and be deemed to be, a waiver of the mortgage security; and this 
       provision may not be waived or avoided by agreement contained in 
       the mortgage or otherwise.[53]

The above statement is a part of an 1899 statute regarding foreclosure of 

mortgages.  That waiver language no longer exists in the foreclosure statutes of 

Washington.  Thus, the quotation in the old opinion for a statute that no longer 

exists has no relevance to this case.

       49 Brief of Respondent(s) at 10.

       5 See Hanna, 26 Wash. at 571-72; American Federal, 107 Wn.2d at 189; 
RCW 64.21.100(2). 

       51 54 Wash. 227, 103 P. 37 (1909). 

       52 65 Wn.2d 283, 396 P.2d 886 (1964). 

       53 54 Wash. at 231. 

                                              14 

No. 66420-4-I/15

       More importantly, the Bradley court neither cites Hanna nor otherwise 

indicates any retreat from the legal principles stated in that case.  For both of 

these reasons, Bradley is not persuasive.

       The Burnses' reliance on Sullins is also unpersuasive.  In that case, the 

supreme court stated:

       We have held that a lien is an encumbrance upon the property as 
       security for the payment of a debt. 

       The waiver of the lien does not extinguish the debt.  He may elect 
       to abandon the security and sue upon the debt alone.[54]

       There is no dispute that a secured creditor may elect to abandon its 

security and sue on the note alone, as the Sullins court noted.  But this record 

shows no evidence of such an election.  Rather, as Hanna, American Federal,

and RCW 64.21.100(2) expressly permit, BECU sued on the note, maintaining 

its ability to later assert its rights under the Burnses' deed of trust.

       We also note that among the cases that the Sullins court cited to support 
its holding was Seattle Savings & Loan Ass'n v. Gardner J. Gwinn Inc..55 In that 

case, the supreme court stated: 

       In cases of notes and mortgages, the notes represent the debts; 
       the mortgages security for the payment of the debts. Either may be 
       the basis of an action and, while [Washington law] provides against 
       the maintenance of concurrent actions, we have held that a 
       judgment on notes secured by a mortgage would not constitute 
       such a judgment res adjudicata in a subsequent action for the 
       foreclosure of the mortgage lien, for the purpose of recovering that 

       54 Sullins, 65 Wn.2d at 285 (internal citations omitted). 

       55 171 Wash. 695, 19 P.2d 111 (1933). 

                                              15 

No. 66420-4-I/16

       portion of the debt which remained unpaid under the personal 
       judgment.[56]

This statement is entirely consistent with the rule stated in Hanna, American 

Federal, and RCW 64.21.100(2). It further undermines Burnses' argument. 

       The Burnses also argue that a judgment on the promissory note 

extinguishes the underlying note.  But that is not the dispositive question.  

Rather, the question is whether a judgment on the note extinguishes the deed of 

trust securing the note.

       The Burnses fail to cite any relevant authority holding that a deed of trust

itself, which is a separate obligation from the note, is extinguished by a judgment 
on the note secured by that deed of trust.  They do cite to, Petri v. Manny,57 but 

this case is inapplicable to their argument.  There, the supreme court stated that 

"[w]hen a judgment is obtained on a note or bill, the bill or note is thereby 
extinguished and merged in the judgment."58 Thus, a second action cannot be 

brought by the same plaintiff on the note.59  Nothing in the case addresses the 

question whether security for a note is extinguished by a judgment on the note.  
       Likewise, Woodcraft Construction Inc. v. Hamilton,6 the other case upon 

       56 Id. at 698-99.

       57 99 Wash. 601, 170 P. 127 (1918).

       58 Id. at 605 (internal citations and quotations omitted). 

       59 Id.

       6 56 Wn. App. 885, 786 P.2d 307 (1990).

                                              16 

No. 66420-4-I/17

which the Burnses relies, does not address this question.  In Woodcraft, the note 

contained a provision for attorney fees.  The court held that, when the judgment 

on the promissory note was entered, the attorney fee provision "merged into the 
judgment and ceased to exist."61  Nothing in the case addresses security for a 

note.

       The Burnses argue that RCW 61.24.100(2), which we previously 
discussed in this opinion, does not apply to lien holders who do not foreclose.62  

They rely solely on language in Beal Bank, SSB v. Sarich,63 but quote the case 

without context and reach an incorrect conclusion as to its holding.

       In Beal Bank, the holder of the first deed of trust on certain property 
directed a nonjudicial foreclosure of a deed of trust.64  At the time of the trustee's 

sale for that deed of trust, Beal was the holder of two promissory notes, each of 
which was secured by separate deeds of trust on the same property.65 Both 

deeds of trust were subordinate to that for which the trustee's sale was 
conducted.66

       Prior to the trustee's sale, Beal had commenced an action on the two 

       61 Id. at 888. 

       62 Brief of Respondent(s) at 13-14.

       63 161 Wn.2d 544, 548, 167 P.3d 555 (2007). 

       64 Id. at 546. 

       65 Id. at 546-47. 

       66 Id.

                                              17 

No. 66420-4-I/18

notes against the borrowers.67 It did not seek to foreclose its two deeds of trust 

as part of that action.68

       Following the trustee's sale for the first deed of trust, Beal moved for 
summary judgment on the notes against the delinquent borrowers.69 The court 

denied the motion.7 The borrowers then moved for summary judgment, claiming 

the trustee's sale barred the suit on the notes.71 The trial court granted this 

motion.72

       On appeal, the supreme court stated that the issue was whether the 

nonjudicial foreclosure by the senior deed of trust precluded Beal from pursuing 
its action on the notes.73 The court held that the nonjudicial foreclosure 

eliminated the junior lien.74 But the proceeding did not affect the action on the 

       67 Id.

       68 Id. at 546.

       69 Id. at 547. 

       7 Id.

       71 Id.

       72 Id.

       73 Id.

       74 Id. at 550.

                                              18 

No. 66420-4-I/19

notes.75 Accordingly, the supreme court reversed the trial court's grant of 

summary judgment to the obligors on the note.76

       The Burnses cite the following language from Beal Bank to support their

argument: "We turn to the plain language of the relevant portion of RCW 

61.24.100 and find the right of nonforeclosing junior lienholders and creditors is 
simply not implicated."77

       The Burnses quote this language out of context.  RCW 61.24.100, as we 

already explained, expressly authorizes the holder of a note that is secured by a 

deed of trust to sue on the note without affecting the lien of the deed of trust 

securing that note.  This statute is entirely consistent with Beal Bank's holding:  

Foreclosure by a senior lien holder eliminates the security of a junior lien holder, 
not the note held by the junior.78 We reject the Burnses' attempt to read the 

case to support their argument.  It does not.

       At oral argument, the Burnses claimed that permitting BECU to enforce its 

right to claim a portion of the surplus funds after entry of judgment on the note 

violates the anti-deficiency provisions of the Deeds of Trust Act.  They are

wrong.  

       75 Id.

       76 Id.

       77 Id. at 548.

       78 Id. at 549-50. 

                                              19 

No. 66420-4-I/20

       A deficiency judgment arises if the amount of a judgment in a judicial 
foreclosure exceeds the value of the security at the foreclosure sale.79

       RCW 61.24.100(1) 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
       deed of trust.[8]

But the plain language of RCW 61.24.100(1) prohibits such a judgment where 

there is "a trustee's sale under that deed of trust." The relevant deed of trust for 

purposes of this provision is that securing the obligation at issue.

       Here, there was never a trustee's sale under the deed of trust securing 

the note to BECU.  The only trustee's sale was that directed by Wells Fargo 

under its deed of trust.  Moreover, there will never be a trustee's sale under the 

BECU deed of trust.  That is because the trustee's sale directed by Wells Fargo 

eliminated the lien of the BECU deed of trust against the real property sold at 

sale.  The lien of the BECU deed of trust attached by operation of law to the 

surplus funds from the Wells Fargo trustee's sale.  In sum, there has not been 

and never will be any violation of the "anti-deficiency" provisions of RCW 

61.24.100(1) on which the Burnses rely to avoid BECU's claim to the surplus 

funds.

       79 See id. at 552 (Sanders, J, concurring).  "If a foreclosure sale satisfies 
the entire debt, there is no deficiency.  However when this is not the case, a 
lender may sue for a deficiency."

       8 (Emphasis added.)

                                              20 

No. 66420-4-I/21

       Homestead Unavailable Against Debt Secured By Deed of Trust

       BECU argues that the Burnses' homestead is ineffective to avoid its claim 

to surplus funds of the trustee's sale since the deed of trust was not 

extinguished.  We agree.

       RCW 61.24.080(3) provides in relevant part that surplus funds from a 

trustee's sale shall be deposited into the court's registry and that:

       Interests in, or liens or claims of liens against the property 
       eliminated by sale under this section shall attach to the surplus in 
       the order of priority that it had attached to the property. 

       Here, there is no dispute that the BECU deed of trust against the Burnses'

residence was eliminated by the trustee's sale directed by Wells Fargo.  

Likewise, BECU has a first priority lien against those surplus funds.

       The remaining question is whether the Burnses' homestead right is 

effective against the BECU deed of trust. We hold that it is not.

       RCW 6.13.080 states that:

       The homestead exemption is not available against . . . 
       . . . .

       (2) On debts secured . . . (b) by mortgages or deeds of trust on 
       the premises that have been executed and acknowledged by both 
       spouses or both domestic partners or by any claimant not married 
       or in a state registered domestic partnership.

       Here, the Burnses' homestead is not available against the BECU deed of 

trust, as the plain words of this statute make clear.  This result is consistent with 
the result in In re Upton.81

       81 102 Wn. App. 220, 6 P.3d 1231 (2000) (where there are excess 

                                              21 

No. 66420-4-I/22

       We reverse the order disbursing funds and remand for further 

proceedings that are consistent with this opinion.

WE CONCUR:

proceeds from a foreclosure sale, the homestead exemption is not available 
against debts secured by a second deed of trust).

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