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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Osborne v. Buckman (12/3/99) sp-5213

Osborne v. Buckman (12/3/99) sp-5213

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.


JAMES W. and JANICE           )
L. OSBORNE,                   )    Supreme Court No. S-8466
             Appellants,      )
                              )    Superior Court No.
     v.                       )    3KN-96-00607 CI
CO., a partnership, KENAI     )
PROPERTIES, pursuant to Plat  )
No. 77-18 in the Kenai        )
Recording District, State     )
of Alaska,                    )
             Appellees.       )    [No. 5213 - December 3, 1999]

          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Kenai,
                     Jonathan H. Link, Judge.

          Appearances: Robert C. Erwin, Law Offices of
Robert C. Erwin, Anchorage, for Appellants.  Lawrence A. Pederson,
Paul J. Nangle & Associates, Anchorage, for Appellee Buckman.

          Before:   Matthews, Chief Justice, Eastaugh,
Fabe, Bryner, and Carpeneti, Justices.  

          MATTHEWS, Chief Justice.      

          James and Janice Osborne brought suit to quiet title to
property in Soldotna.  They later amended their complaint to
include a claim for judicial foreclosure of a deed of trust
covering the property.  Kevin Buckman answered, contending that the
statute of limitations barred the Osbornes' suit.  The superior
court granted Buckman's motion for summary judgment on
reconsideration, and the Osbornes appeal.  Because a bankruptcy
stay tolled the statute of limitations, the Osbornes' judicial
foreclosure suit is timely.  We therefore reverse the grant of
summary judgment and remand to the superior court.
     A.   Facts
          In 1978 Leonard and Fern Ballard conveyed the property to
Dennis and Diane Brindley and Bret Haering, who signed a note in
favor of the Ballards that was secured by a deed of trust ("the
First DOT").  In 1980 Haering sold his interest in the property to
Kevin Buckman.  In 1983 Buckman and the Brindleys sold the property
to Evergreen Realty Company which signed a note payable to Buckman
and the Brindleys that was secured by another deed of trust ("the
Second DOT").  Evergreen also assumed payment responsibility for
the note secured by the First DOT.  In 1985 Evergreen conveyed the
property to the Kenai Merit Inn Corporation ("Kenai").  Kenai
assumed responsibility for payments on both notes.  The Ballards
assigned the First DOT and the note it secured to the Osbornes; the
assignment was recorded on November 4, 1988.  In March 1989 the
Brindleys assigned their interest in the Second DOT and the note it
secured to Kevin Buckman.  In that assignment, Buckman assumed
payment responsibility for the note secured by the First DOT, which
was then payable to the Osbornes.  The Osbornes accepted the
assumption and released the Brindleys.
          Prior to this last assignment, on February 23, 1989,
Kenai filed for bankruptcy.  An automatic stay issued pursuant to
11 U.S.C. sec. 362.  On December 12, 1990, the bankruptcy court
granted relief from the stay on Buckman's motion. 
          The Osbornes received the last payment Kenai made on the
note secured by the First DOT in November of 1988.  The last
payment Kenai made on the note secured by the Second DOT was
received by Buckman on October 12, 1988.  Buckman continued to make
payments to the Osbornes on the First DOT through October 1989.
          No action was filed with respect to the property until
after it was abandoned by the bankruptcy trustee due to petroleum
contamination.  In 1996 Kevin Buckman initiated a non-judicial
foreclosure on the Second DOT and received title in a trustee's
deed in November of that year.
     B.   Proceedings
          The Osbornes filed this case on September 3, 1996,
initially requesting that title to the property be quieted to them.
Later they amended their complaint to request judicial foreclosure
on the First DOT.  Buckman answered, defending on statute of
limitations grounds.  Each party moved for summary judgment.
Eventually the superior court granted Buckman summary judgment
without explanation.  On December 4, 1997, the court entered final
judgment extinguishing the First DOT.  This appeal followed.
          This court reviews a grant of summary judgment de novo.
[Fn. 1]  "We will affirm a grant of summary judgment if the
evidence in the record presents no genuine issue of material fact
and the moving party is entitled to judgment as a matter of law."
[Fn. 2]
          Both parties agree that the six-year limitations period
set out in AS 09.10.050(a) applies to the enforcement of both the
note and the deed of trust. [Fn. 3]  Buckman argues that the six
years had expired on the Osbornes' foreclosure claim one week
before they filed their complaint.  Summarized, Buckman's argument
proceeds: Six years is 2190 days.  Kenai stopped making payments to
the Osbornes on November 9, 1988, and filed for bankruptcy on
February 23, 1989, at which time the automatic stay issued (time
elapsed: 105 days).  The stay was lifted on December 12, 1990, and
the complaint was filed on September 3, 1996 (time elapsed: 2092
days).  Total time elapsed from when Kenai made the last payment to
when the complaint was filed, excluding the time tolled by the
stay, was 2197 days.  Under Buckman's reasoning, the Osbornes would
therefore have missed the 2190-day deadline by seven days.
          The problem with Buckman's argument is that although
Kenai stopped making payments on the First DOT note in November
1988, Buckman himself continued to make the payments on the note
until October 1989.  Each payment started the limitations period
running anew. [Fn. 4]  Thus, the six-year period began to run at
the earliest in October of 1989.  The stay was then in effect.
          Alaska Statute 09.10.170 governs the effect of stays:
               When the commencement of an action is
stayed by injunction or a statutory prohibition, the time of the
continuance of the injunction or prohibition is not a part of the
time limited for the commencement of the action.

          The statute of limitations for foreclosing a deed of
trust is the same as that for the underlying debt. [Fn. 5]  Buckman
argues that a suit on the note against him was not stayed by
Kenai's bankruptcy, and that he could have been sued regardless of
the stay.  He contends that the six-year period of limitations
expired as to his obligation on the First DOT note in October of
1995, and therefore the period of limitations for foreclosing the
First DOT also expired then.
          We reject this argument.  Even though the Osbornes could
have filed suit on the note against Buckman regardless of the
bankruptcy stay, they were precluded from filing a foreclosure suit
until the bankruptcy stay was lifted.  In Moening v. Alaska Mutual
Bank, we held that the holder of a deed of trust note and deed of
trust may elect to proceed first with a suit on the note and then
with foreclosure or with a foreclosure suit in which a deficiency
judgment is sought. [Fn. 6]  In Conrad v. Counsellors Investment
Co., issued the same day as Moening, we explained that even though
both the suit on the note and the foreclosure suit arise out of the
same transaction, AS 09.45.200 permits a foreclosure action to
follow an action on the underlying debt. [Fn. 7]  We stated that
"this situation is best viewed as an express statutory exception to
the general principles of res judicata."[Fn. 8] 
          By this we referred to the principle that all claims
arising out of a single transaction must be brought in a single
suit, and those that are not become extinguished by the judgment in
the suit in which some of the claims were brought.  This principle
is sometimes referred to as the "rule prohibiting splitting a cause
of action."[Fn. 9]
          In our view, merely because there is a statutory
exception that permits a claim on the note to be separated from a
claim for foreclosure of the underlying deed of trust securing the
note does not mean that a holder of a note secured by a deed of
trust must sue separately when foreclosure is stayed but suit on
the note is not.
          Alaska Statute 09.10.170 provides that "[w]hen the
commencement of an action is stayed"the time of the stay is
suspended when calculating the limitations period.  We construe the
statutory phrase "an action"to encompass all of the Osbornes'
claims arising from the note and deed of trust, including their
right to judicially foreclose and seek a deficiency judgment.  That
the Osbornes might have permissibly "split"their cause of action
and sought a personal judgment against Buckman does not mean that
they had to do so.  Their foreclosure action taken as a whole was
stayed and they are entitled to the period of suspension required
by section .170.
          The statute of limitations began to run on the fore-

closure action in December 1990.  The Osbornes' complaint, filed in
September 1996, was within the six-year period and therefore
timely.  We REVERSE the superior court's grant of summary judgment
in favor of Buckman and REMAND for further proceedings consistent
with this opinion.


Footnote 1:

     See Davis v. Dykman, 938 P.2d 1002, 1006 (Alaska 1997).

Footnote 2:


Footnote 3:

     AS 09.10.050(1) formerly provided, in relevant part:

          Unless the action is commenced within six
years, a person may not bring an action 

               (1) upon a contract or liability, express
or implied, excepting those mentioned in AS 09.10.040[.]

The statute was repealed and reenacted in 1997.  See ch. 26, sec.
SLA 1997.  The amended version applies only to causes of action
accruing on or before August 7, 1997.  See ch. 26, sec. 55, SLA
Because this case arose before that date, it is governed by former
AS 09.10.050.

          See also Dworkin v. First Nat'l Bank of Fairbanks, 444
P.2d 777, 782 (Alaska 1968).

Footnote 4:

     See AS 09.10.210.

Footnote 5:

     Dworkin, 444 P.2d at 782. 

Footnote 6:

     751 P.2d 5, 8 (Alaska 1988).

Footnote 7:

     751 P.2d 10, 13 (Alaska 1988).

Footnote 8:


Footnote 9:

     Jackinsky v. Jackinsky, 894 P.2d 650, 656 (Alaska 1995).  See,
e.g., Tolstrup v. Miller, 726 P.2d 1304 (Alaska 1986).