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       IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

CAROL SAUTER, as Personal                   )
Representative of the Estate of             )       DIVISION ONE
Michael J. Sauter,                          )
                                            )       No. 66809-9-I
                      Appellant,            )
                                            )       PUBLISHED OPINION
                    v.                      )
                                            )
HOUSTON CASUALTY COMPANY, a                 )
foreign, non-admitted insurer doing         )
business in Washington,                     )
                                            )
                      Respondent.           )       FILED: May 14, 2012
________________________________)

       Dwyer, J.  --  Where an insurance policy explicitly provides coverage for 

the personal liability of a corporate officer incurred for acts performed in his or 

her official capacity as such, the policy does not insure against losses incurred 

where the officer acts in his or her personal capacity.  Moreover, a guaranty 

executed by a corporate officer that secures the indebtedness of the corporation 

is not executed in the officer's official capacity.  Such a circumstance would 

result in the corporation itself guaranteeing its own indebtedness, thus negating  

No. 66809-9-I/2

the very purpose of the guaranty.  

       Here, Michael Sauter, the chief executive officer (CEO) and manager of 

S-J Management, LLC, contends that he executed such a guaranty in his official 

capacity and, hence, that the purported loss that he incurred related thereto was 

insured by a directors' and officers' liability policy issued to S-J Management by 

Houston Casualty Company.  However, because Sauter executed the guaranty 

in his personal capacity, the policy provides no such coverage.  Thus, the trial 

court did not err by ruling that the Houston Casualty policy does not provide 

coverage for Sauter's personal obligation pursuant to the guaranty.  Accordingly, 

we affirm the trial court's summary judgment dismissal of Sauter's declaratory 

judgment action against Houston Casualty.

                                            I

       In March 2008, S-J Management, LLC (SJM), a limited liability corporation 

engaged in rental property management, entered into a business loan 

agreement with The Commerce Bank of Washington, N.A. (Commerce Bank).  

Pursuant to that agreement, Commerce Bank extended a $3.5 million 

nonrevolving line of credit to SJM.  Michael Sauter, SJM's CEO and manager, 

signed the loan agreement and promissory note in his official capacity on behalf 

of SJM.  

       The loan agreement required SJM, prior to the disbursement of the loan 

proceeds, to furnish to Commerce Bank a guaranty of the loan executed by 

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No. 66809-9-I/3

Sauter in favor of the lender.  Accordingly, Sauter executed an agreement 

whereby he "guarantee[d] full and punctual payment and satisfaction" of SJM's 

indebtedness to Commerce Bank (the guaranty).  Sauter signed the guaranty as 

"Michael J. Sauter."  Seven deeds of trust on real property owned by Sauter and 

his wife, Carol Sauter, secured the guaranty.  

       SJM's line of credit matured on May 31, 2009, and SJM failed to pay its 

indebtedness to Commerce Bank.  Commerce Bank thereafter demanded 

payment in full on Sauter's "personal guaranty of the Indebtedness" of SJM, 

totaling over $2.8 million.  

       Subsequently, Sauter demanded indemnification from SJM for the amount 

that he was obligated to pay to Commerce Bank pursuant to the guaranty.  

Sauter asserted that he had "entered into the [guaranty] in [his] role as [SJM's] 

CEO and did so to ensure that [SJM] could obtain the line of credit with 

Commerce Bank."  He further asserted that he had "acted in good faith and 

placed [his] personal properties at risk to ensure that [SJM] would have funds 

available for operations from the line of credit."  SJM's members, of whom Sauter 

was one, unanimously agreed that SJM "shall indemnify Michael Sauter for the 

personal liability incurred by him in connection with [SJM's line of credit] with 

Commerce [Bank]."  Unsurprisingly, however, SJM was unable to indemnify 

Sauter for the same reason that it had been unable to pay its indebtedness to 

Commerce Bank -- it was insolvent.  

                                          - 3 - 

No. 66809-9-I/4

       Sauter failed to fulfill his obligation pursuant to the guaranty.  Accordingly, 

Commerce Bank sent multiple notices of default to the Sauters, informing them 

that failure to cure the default of the guaranty obligation could result in the sale 

of six encumbered real properties.  

       Counsel for SJM thereafter tendered to Houston Casualty Company the 

demand on Sauter's guaranty obligation from Commerce Bank, Sauter's letter 

demanding indemnification from SJM, and the notices of default on the Sauters'

personally-owned properties.  On September 24, 2009, Houston Casualty 

informed SJM that coverage was unavailable for "the Commerce Bank matter" 

pursuant to the Diversified Business Organization Policy -- a directors' and 

officers' (D & O) liability policy -- under which Houston Casualty insured SJM and 

its members and officers.  

                                           II

       The Houston Casualty policy pursuant to which Sauter sought coverage

contains multiple insuring agreements, one of which provides coverage for 

personal liability incurred by SJM's managers and members when acting in their 

official capacity on behalf of the company.  This insuring agreement, entitled 

"Coverage A," provides:  "The Insurer shall pay on behalf of the Insured Persons 

Loss resulting from any Claim first made against the Insured Persons during the 

Policy Period for a Wrongful Act."  

       The policy provides the following definitions for the terms employed in the 

                                          - 4 - 

No. 66809-9-I/5

insuring agreement:

       An "Insured Person" is any "natural person who was, is, or shall become a 

duly appointed or elected director, officer, general partner, manager, or 

equivalent executive of an Insured Organization."  
       "Loss means damages, settlements and Costs, Charges and Expenses[1]

incurred by any of the Insured Persons under Insuring Agreement Coverage 

A . . . but shall not include . . . matters deemed uninsurable under the law 

pursuant to which this Policy shall be construed."  

       A "Claim" includes "any written demand for monetary damages or non-

monetary relief against an Insured commenced by Insured's receipt of such 

demand."  

       "Wrongful Act," as relevant here, "means, as alleged in any Claim, any 

actual or alleged act, misstatement, error, omission, misleading statement, 

neglect, breach of duty or act by . . . any of the Insured Persons, while acting in 

their capacity as . . . such on behalf of the Insured Organization."  

                                           III

       Following Houston Casualty's denial of coverage, Sauter filed a complaint 

for declaratory relief and damages, asserting that the Houston Casualty policy 

"is properly construed as covering the claim asserted by Commerce Bank in its 

written demand upon Sauter."  Sauter sought 

       1 "Costs, Charges and Expenses mean reasonable and necessary legal fees and 
expenses (including expert fees) and cost of attachment or similar bonds incurred by the 
Insureds in defense of any Claim."  

                                          - 5 - 

No. 66809-9-I/6

       [a] judgment declaring that the Houston Insurance is properly 
       interpreted as providing full coverage for the cost of defending, 
       settling, and/or paying any loss incurred by and/or judgment 
       entered against Sauter as a result of the subject claim or resulting 
       litigation, and that accordingly Houston is obligated to pay 
       monetary damages equal to the full cost of defending, settling, 
       and/or paying any loss incurred by and/or judgment entered 
       against Sauter with respect to such claim or litigation.  

       On August 27, 2010, Sauter filed a motion for summary judgment, 

asserting that "Commerce's claim against Sauter is covered under Coverage A 

of the Houston Casualty Insurance."  Houston Casualty thereafter filed a cross 

motion for summary judgment, seeking a determination that it "does not owe a 

coverage obligation to Michael Sauter under the Houston Casualty insurance 

contract."  Houston Casualty contended that no coverage obligation existed 

because (1) no act by Sauter constituted a "Wrongful Act" pursuant to the policy 

and (2) Sauter suffered no "Loss" as defined by the policy.  

       On September 24, 2010, the trial court denied Sauter's motion for 

summary judgment and granted Houston Casualty's motion for summary 

judgment, concluding "that Houston Casualty does not owe a coverage 

obligation or a duty to indemnify Michael Sauter under Coverage A of the 

Houston Casualty policy at issue for the Commerce Bank claim against Sauter."  

The parties thereafter stipulated that the trial court's September 24 order 

resolved the only coverage issues in dispute in the action.  Accordingly, on 

February 11, 2011, the trial court entered final judgment.  
       Sauter appeals.2  

                                          - 6 - 

No. 66809-9-I/7

                                           IV

       Sauter contends that he was acting in his capacity as CEO and manager 

on behalf of SJM when he executed the guaranty and thereafter failed to fulfill 

his obligations pursuant to that guaranty.  Thus, he asserts, his conduct meets

the capacity requirement of a "Wrongful Act" pursuant to the Houston Casualty 
policy.3 We disagree.

       We review a summary judgment order de novo, performing the same 

inquiry as does the trial court.  Johnson v. Recreational Equip., Inc., 159 Wn. 

App. 939, 954, 247 P.3d 18, review denied, 172 Wn.2d 1007 (2011).  Similarly, 

the interpretation of an insurance contract is a question of law reviewed de novo.  

Bushnell v. Medico Ins. Co., 159 Wn. App. 874, 881, 246 P.3d 856 (2011).

       "Insurance policies are construed as a whole and 'given a fair, 

reasonable, and sensible construction.'"  Polygon Nw. Co. v. Am. Nat. Fire Ins. 

Co., 143 Wn. App. 753, 766, 189 P.3d 777 (2008) (quoting Kitsap County v. 

Allstate Ins. Co., 136 Wn.2d 567, 575, 964 P.2d 1173 (1998)).  "Courts 

determine coverage under the plain meaning of the policy."  Bushnell, 159 Wn. 

App. at 881.  Where a term is defined in the policy, we interpret the term in 

accordance with that policy definition.  Polygon Nw. Co., 143 Wn. App. at 767.  

       2 Following his appeal from the trial court's summary judgment order, Sauter passed 
away.  We thereafter granted a motion to substitute Sauter's estate as the appellant in this 
matter and to change the case caption accordingly. 
       3 Houston Casualty does not contest that Sauter is an "Insured Person" pursuant to the 
policy or that Commerce Bank's demand for payment constitutes a "Claim."  The only issues 
disputed by the parties, both in the trial court and on appeal, are whether Sauter committed a 
"Wrongful Act" and whether he thereby suffered a "Loss."

                                          - 7 - 

No. 66809-9-I/8

"Undefined terms in an insurance contract must be given their 'plain, ordinary, 

and popular' meaning."  Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wn.2d 869, 

877, 784 P.2d 507 (1990) (quoting Farmers Ins. Co. of Wash. v. Miller, 87 

Wn.2d 70, 73, 549 P.2d 9 (1976)).  This is because "[t]he language of insurance 

policies is to be interpreted in accordance with the way it would be understood 

by the average [person], rather than in a technical sense."  Dairyland Ins. Co. v. 

Ward, 83 Wn.2d 353, 358, 517 P.2d 966 (1974).

       The Houston Casualty policy provides that the insurer shall pay on behalf 

of an insured person loss resulting from a claim made against the insured 

person "for a Wrongful Act."  However, pursuant to the policy, an act by an 

"Insured Person" constitutes a "Wrongful Act" only when that person commits the 

act "while acting in [his or her] capacity as . . . such on behalf of the Insured 

Organization."  The policy defines "Insured Person" as a "person who . . . is . . . 

a duly appointed or elected director, officer, general partner, manager, or 

equivalent executive of an Insured Organization."  Thus, an "Insured Person"

"act[s] in [his or her] capacity as . . . such on behalf of the Insured Organization," 

as required in order to commit a "Wrongful Act," when that person commits the 

act in his or her official capacity as a "director, officer, general partner, manager, 

or equivalent executive" of the insured company.  

       Thus, no coverage is available pursuant to the Houston Casualty policy 

unless Sauter's purported loss resulted from a claim made against him for an act 

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No. 66809-9-I/9

that he committed "while acting in [his] capacity as [CEO and manager] on behalf 

of" SJM.  The common meaning of "capacity" is "legal qualification, competency, 

power, or fitness."  Webster's Third New International Dictionary 330 (2002).  

"Behalf" means "in the interest of," "as the representative of," or "for the benefit 

of."  Webster's Third New International Dictionary 198 (2002). Because the 

Houston Casualty policy requires both that the insured person performed the 

wrongful act in his or her official capacity and did so "on behalf of" the company, 

the plain meaning of the provision requires Sauter to have acted within his "legal 

qualification" as CEO and manager and "as a representative of" SJM.  

       The facts, however, do not support such a conclusion.  Rather, the facts 

demonstrate that Sauter was acting in his personal capacity when he executed 

the guaranty and thereafter defaulted on that guaranty.  The guaranty itself 

makes obvious that Sauter was acting in his personal capacity in executing the 

guaranty.  The agreement separately identifies the "Borrower" as "S-J 

MANAGEMENT, LLC" and the "Guarantor" as "MICHAEL J. SAUTER."  

Correspondingly, Sauter signed the guaranty as "Michael J. Sauter."  In contrast, 

he signed both the business loan agreement and the promissory note on behalf 

of SJM as "Michael J. Sauter, Manager of S-J Management, LLC."  Moreover,

the collateral securing the guaranty consists of seven deeds of trust for real 

property personally owned by the Sauters.  Accordingly, the notices of default 

sent by Commerce Bank upon Sauter's failure to fulfill his obligations pursuant to 

                                          - 9 - 

No. 66809-9-I/10

the guaranty were sent to the Sauters, the owners of the encumbered properties.  

       Furthermore, the very nature of the guaranty indicates that Sauter was 

acting in his personal capacity in executing the guaranty.  A guaranty "is 'a 

promise to answer for the debt, default, or miscarriage of another person.'"  

Wilson Court Ltd. P'ship v. Tony Maroni's, Inc., 134 Wn.2d 692, 707, 952 P.2d 

590 (1998) (quoting Robey v. Walton Lumber Co., 17 Wn.2d 242, 255, 135 P.2d 

95 (1943)). "'A contract of guaranty, being a collateral engagement for the 

performance of an undertaking of another, imports the existence of two different 

obligations, one being that of the principal debtor and the other that of the 

guarantor.'"  Wilson Court Ltd., 134 Wn.2d at 707 (quoting Robey, 17 Wn.2d at 

255).  Thus, as a matter of law, "an entity cannot be a guarantor of its own 

obligations."  Wilson Court Ltd., 134 Wn.2d at 707 (declining to interpret a 

guaranty executed by corporate president such that the corporation would be the 

guarantor of its own contract, where the corporate president contended that he 

had executed the guaranty in his official capacity and, thus, could not be 

personally liable). 

       Had Sauter acted in his official capacity on behalf of SJM when he 

executed the guaranty -- as he did when he signed the underlying business loan 

agreement -- SJM would be both the debtor and the guarantor with regard to the 

Commerce Bank loan.  Such cannot be the case.  See Wilson Court Ltd., 134 

Wn.2d at 707.  Were it so, the entire objective of the guaranty -- to guarantee 

                                         - 10 - 

No. 66809-9-I/11

SJM's indebtedness to Commerce Bank in the event that SJM could not pay the 

line of credit -- would be undermined.  Commerce Bank required the personal 

guaranty of Sauter as a condition for the loan agreement in order to secure 

SJM's indebtedness with property owned personally by Sauter.  In the event that 

SJM became insolvent, Commerce Bank could then execute upon collateral not 

owned by SJM -- but, rather, owned personally by Sauter -- in order to collect the 

debt.  Had Sauter executed the guaranty in his official capacity, only the property 

of SJM could have secured the debt, thus negating the purpose of the guaranty 

itself.

       Nevertheless, Sauter contends that he executed the guaranty in his 

capacity as SJM's CEO and manager.  This is so, he asserts, because he 

executed the guaranty "because he was SJM's CEO and Manager."  As 

evidence that he was acting in such a capacity, Sauter notes that SJM's 

members unanimously agreed that he had executed the guaranty in his role as 

SJM's manager and, thus, that he was entitled to be indemnified by SJM for the 
personal liability that he incurred by virtue of the guaranty.4 Sauter further 

asserts that the fact that the business loan agreement expressly required SJM to 

obtain a guaranty from Sauter demonstrates that Sauter was acting in his official 

capacity as CEO and manager when he executed that guarantee.  

       Thus, Sauter, in essence, contends that he was acting in his capacity as 

       4 Sauter fails to demonstrate that this conclusion reached by SJM's members has any 
bearing on our determination of whether Sauter was acting in his official capacity on behalf of 
SJM in executing the guaranty.

                                         - 11 - 

No. 66809-9-I/12

CEO and manager on behalf of SJM because he executed the guaranty in order 

to assist SJM in obtaining the line of credit.  Although this was obviously his 

purpose in executing the guaranty, it does not follow that Sauter, in so doing, 

was acting "in his capacity" as CEO and manager "on behalf of" SJM. Rather, 

the facts clearly demonstrate that Sauter was acting in his personal capacity 

when he executed the guaranty and thereafter failed to satisfy his obligation 
pursuant to that agreement.5  The fact that Sauter is an officer of SJM is not 

dispositive of the question presented here -- in what capacity did Sauter sign the 

guaranty and, thus, guarantee SJM's indebtedness to Commerce Bank.

       Moreover, Sauter fails to recognize that, even had he been acting in his 

official capacity in executing the guaranty, no coverage would be available for 

his obligation to Commerce Bank for precisely that reason.  Had Sauter signed 

the guaranty in his official capacity on behalf of SJM, the guaranty would bind 

SJM -- not Sauter -- and, thus, Sauter would not be personally liable for failure to 

satisfy any obligation pursuant to the guaranty.  See 18B Am. Jur. 2d

Corporations §1587 (2012) (noting that "an officer of a corporation is not 

personally liable on its contracts if he or she does not purport to bind himself or 

       5 Sauter misconstrues Houston Casualty's argument regarding the existence of a 
"Wrongful Act," implying that Houston Casualty denied coverage for his "Claim" because Sauter 
had incurred personal liability.  But Sauter confuses personal liability with actions taken in his 
personal capacity.  The purpose of D & O insurance, as Sauter notes, is to protect directors and 
officers from personal liability.  However, it protects directors and officers from such liability 
when that liability is incurred due to acts committed in a director's or officer's capacity as such.  
The fact that Sauter incurred personal liability is not the issue here.  Rather, the relevant point is 
that Sauter was acting in his personal capacity when he incurred such liability -- and that the 
policy does not provide coverage for acts performed in that capacity.

                                         - 12 - 

No. 66809-9-I/13

herself individually"); see also Inland-Ryerson Constr. Prods. Co. v. Brazier 

Constr. Co., 7 Wn. App. 558, 567, 500 P.2d 1015 (1972) (holding that, although 

a corporate officer is not presumed to be personally liable for corporate debts, 

the officer may expressly bind himself or herself to be answerable for such 

debts). Because Sauter could not thus incur personal liability, such liability 

could not be insured against by the Houston Casualty policy.  As recently 

explained by the California Court of Appeals in analyzing a similar claim made 

by a corporate officer in that state: "In his capacity as an officer, he cannot be 

held liable for breach of a corporate contract.  If he was acting in his individual 

capacity in breaching the contract, the D & O insurance did not cover any of his 

acts or omissions."  August Entm't, Inc. v. Philadelphia Indem. Ins. Co., 146 

Cal.App.4th 565, 582, 52 Cal.Rptr.3d 908 (2007).   

       Because Sauter was not acting in his official capacity when he executed 

the guaranty, Sauter committed no "Wrongful Act" as defined by the Houston 

Casualty policy.  Thus, the trial court correctly concluded that the policy does not 

provide coverage for Sauter's financial obligation to Commerce Bank.

                                           V

       Sauter additionally contends that his obligation to Commerce Bank 

pursuant to the guaranty constitutes a "Loss" for which the Houston Casualty 

policy provides coverage.  Conversely, Houston Casualty urges us to determine 

that the repayment of a loan does not constitute a "Loss" and that, more 

                                         - 13 - 

No. 66809-9-I/14

generally, liability insurance is not intended to insure against such an obligation.  

Here, however, the policy language itself resolves the issue of coverage, as it 

requires that any "Loss," in order to be insured against, must result from a claim 

for a wrongful act.  Because Sauter's obligation is the result of his promise to 

pay SJM's indebtedness -- not the result of any "Wrongful Act" -- the policy does 

not insure against his obligation.

       Washington courts have not previously addressed whether a voluntary 

contractual obligation, such as an obligation to repay a loan, constitutes a "Loss" 

that may be insured against.  However, courts in other states have.  The 

California Court of Appeals, in determining whether a D & O liability policy 

provided coverage for a breach of contract claim, determined that 

       the D & O policy did not cover the corporation's contractual debt or 
       the officer's liability for breaching a contract.  The breach of the 
       contractual obligation asserted in this case did not give rise to a 
       loss caused by a wrongful act within the meaning of the policy.  
       Rather, the corporation was simply being required to pay an 
       amount it voluntarily contracted to pay.

August Entm't,146 Cal.App.4th at 568-69.  The court explained that a 

determination to the contrary "would expand the scope of the insurer's liability 

enormously and unpredictably without corresponding compensation."  August 

Entm't, 146 Cal.App.4th at 582.  Moreover, the court noted that a determination 

that coverage existed for the insured's contractual obligations "would create a 

moral hazard problem, encouraging corporations to risk a breach of their 

contractual obligations, knowing that, in the event of a breach, the D & O insurer 

                                         - 14 - 

No. 66809-9-I/15

would ultimately be responsible for paying the debt."  August Entm't, 146 

Cal.App. 4th at 582.  Such considerations apply with equal force here.

       Nevertheless, we need not look beyond the explicit language of the 

Houston Casualty policy in order to determine that Sauter's purported "Loss" is 

not covered by that policy, regardless of whether his obligations pursuant to the 

guaranty constitute a "Loss" as defined therein.  This is because the policy 

provides that Houston Casualty will pay only "Loss resulting from any 

Claim . . . for a Wrongful Act."  (Emphasis added.)  Thus, coverage cannot be

available for Sauter's guaranty obligation if that obligation does not result from

Houston Casualty's demand for payment on the guaranty.  

       Faced with similar facts, the Supreme Court of Nevada held that an 

insurance policy did not provide coverage for liability arising from a contractual 

obligation under a merger agreement because such liability did not constitute "a 

'loss' that resulted from any 'wrongful act.'"  Am. Cas. Co. of Reading, Pa v. 

Hotel & Rest. Employees and Bartenders Int'l Union Welfare Fund, 113 Nev. 

764, 769, 942 P.2d 172 (1997).  There, the International Welfare Fund entered 

into a merger agreement with the Southern Nevada Local Welfare Fund wherein 

the International Fund agreed to indemnify the Local Fund for various losses 

and damages.  Am. Cas. Co. of Reading, 113 Nev. at 766-67.  The International 

Fund thereafter breached the indemnification agreement and settled with the 

Local Fund for $750,000.  Am. Cas. Co. of Reading, 113 Nev. at 767-68.  The 

                                         - 15 - 

No. 66809-9-I/16

International Fund subsequently sued American Casualty, seeking a declaration 

that it was entitled under its insurance policy to indemnification for the settlement 

costs.  Am. Cas. Co. of Reading, 113 Nev. at 768.  

       Noting that "loss" was defined very broadly in the policy "to include almost 

any amount awarded against the insureds," the court determined that the issue 

was not whether the damages constituted "loss" pursuant to the definition.  Am. 

Cas. Co. of Reading, 113 Nev. at 769.  Rather, the court determined, the issue 

was whether the judgment against the International Fund was "a 'loss' that 

resulted from any 'wrongful act'" of the insured.  Am. Cas. Co. of Reading, 113 

Nev. at 769.  The court concluded that the only "wrongful act" committed by the 

International Fund was its failure to defend the Local Fund as contemplated by 

the merger agreement -- and that any purported "loss" resulted not from that act 

but, rather, from the merger agreement itself:

              The international trustees were required to pay their 
       contractual obligation.  This contractual obligation did not result 
       from their wrongful act of refusing to satisfy it.  To hold otherwise 
       would allow an insured to turn all of its legal liabilities into insured 
       events by the intentional act of refusing to pay them.  The refusal 
       to pay an obligation simply is not the cause of the obligation, and 
       the international trustees' wrongful act in this case did not result in 
       their obligation to pay; their contract imposed on them the 
       obligation to pay.

Am. Cas. Co. of Reading, 113 Nev. at 770 (emphasis added). 

       Similarly, here, any purported "Loss" suffered by Sauter did not result 

from a "Claim" made against Sauter for a "Wrongful Act."  Rather, Sauter 

                                         - 16 - 

No. 66809-9-I/17

incurred the obligation to pay SJM's indebtedness by executing the 

guaranty -- not by failing to satisfy his obligation pursuant thereto.  In other 

words, his obligation to Commerce Bank was not the result of Commerce Bank's 

demand on the guaranty; instead, his obligation was the result of the guaranty 

itself.  Thus, regardless of whether Sauter's obligation constitutes a "Loss" as 

defined by the Houston Casualty policy, it is not a "Loss resulting from any Claim 

. . . for a Wrongful Act."  Thus, the policy does not provide coverage for Sauter's 

obligation to Commerce Bank.  

                                           VI

       Sauter's contention that the Houston Casualty policy provides coverage 

for his guaranty obligation to Commerce Bank is unavailing for several reasons.  

First, Sauter executed the guaranty in his personal capacity, as demonstrated by 

the manner in which he signed the guaranty, the fact that the Sauters' personally-

owned properties secured the guaranty, and, perhaps most significantly, the 

principle that a corporation cannot be the guarantor of its own obligations.  

Second, even had Sauter executed the guaranty in his official capacity, such 

execution would bind SJM -- not Sauter -- and, thus, Sauter could not thereby 

incur personal liability.  Finally, Sauter's obligation to Commerce Bank resulted 

from Sauter's execution of the guaranty, not from his failure to satisfy the 

consequent obligations.  Thus, the trial court did not err by determining that the 

                                         - 17 - 

No. 66809-9-I/18

Houston Casualty policy does not provide coverage for Sauter's guaranty 
obligation.6  

       Affirmed.

We concur:

       6 Sauter requests an award of attorney fees on appeal pursuant to Olympic S.S. Co. v. 
Centennial Ins. Co., 117 Wn.2d 37, 52-53, 811 P.2d 673 (1991), which provides for an award of 
such fees to an insured "in any legal action where the insurer compels the insured to assume the 
burden of legal action, to obtain the full benefit of his insurance contract."  Because Sauter is not 
entitled to the insurance benefits that he sought in this lawsuit, his request for an award of fees 
must be denied.

                                         - 18 -