You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Madden v. Alaska Mortgage Group (8/30/2002) sp-5621
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, e-mail email@example.com. THE SUPREME COURT OF THE STATE OF ALASKA RODNEY S. MADDEN and ) MARILYN J. MADDEN, ) Supreme Court No. S-9428 ) Appellants, ) Superior Court No. ) 3AN-98-3171 CI v. ) ) ALASKA MORTGAGE GROUP, ) O P I N I O N an Alaska Limited Partnership, ) and FLOYD POLMATEER, ) [No. 5621 - August 30, 2002] ) Appellees. ) ) Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Dan A. Hensley, Judge. Appearances: Ralph B. Cushman, Law Offices of Ralph B. Cushman, P.C., Anchorage, for Appellants. Tonja Woelber, Anchorage, for Appellees. Before: Fabe, Chief Justice, Eastaugh, Bryner, and Carpeneti, Justices. [Matthews, Justice, not participating.] BRYNER, Justice. I. INTRODUCTION Alaska Mortgage Group sought to foreclose a deed of trust securing a promissory note from a debtor who had paid no installments for almost ten years and no longer owned any interest in the mortgaged property. Rodney and Marilyn Madden, who held a later mortgage on the same property, disputed the amount Alaska Mortgage claimed under its mortgage, contending that part of the debt was time-barred. Soon after this dispute arose, Alaska Mortgage received a new payment on its note. The superior court ruled that the payment restarted the statute of limitations and entitled Alaska Mortgage to recover through foreclosure the full amount owing on the underlying note. The court also awarded attorneys fees to Alaska Mortgage, finding the fees to be expenses reimburseable to the trustee under the terms of the trust deed. We affirm in part, holding that the new payment on the note extended Alaska Mortgages right to recover its entire debt through foreclosure, even though the debtor on its note had lost title to the property. But we reverse the order awarding attorneys fees, holding that fees Alaska Mortgage expended in suing to establish the amount of the debt were not expenses of foreclosure recoverable by the trustee under the terms of the deed. II. FACTS AND PROCEEDINGS In 1984 Floyd Polmateer gave a promissory note to Alaska Mortgage for $50,000, payable in monthly installments of $1,275 at twenty-seven percent annual interest. Polmateer secured the note by granting Alaska Mortgage a second deed of trust on two lots he owned near Lake Iliaska the Iliaska Subdivision. In April 1987 Polmateer defaulted on his first deed of trust and lost title to Iliaska Subdivision in a nonjudicial foreclosure sale. Alaska Travel Bureau purchased the property subject to Alaska Mortgages second deed of trust. A few months later Alaska Travel Bureau granted Rodney and Marilyn Madden a third deed of trust on the property to secure a $100,000 loan. About a year later in July 1988 Alaska Mortgage stopped receiving installments on its promissory note from Polmateer. After nine years elapsed without payments, Alaska Mortgage commenced foreclosure proceedings. The Maddens attempted to block the foreclosure sale, asserting that Alaska Mortgage had overstated the amount due on its deed of trust because a number of past-due installments on Polmateers promissory note were barred by the statute of limitations. Alaska Mortgage responded by filing a complaint in superior court, seeking to establish the amount owing under the second deed of trust, leave to foreclose, and a deficiency judgment against Polmateer for any part of the debt not recovered through foreclosure. Several months after Alaska Mortgage filed this action, Polmateer unexpectedly sent another payment on his promissory note. Alaska Mortgage moved for summary judgment, arguing that the new payment revived the previously time-barred portion of the total debt secured by the deed. The Maddens opposed this motion. Although they acknowledged that the new payment may have restarted the statute of limitations for an action to collect the full amount Polmateer owed on his promissory note, the Maddens insisted that his payment did not revive any time-barred payments for purposes of an action on Alaska Mortgages deed of trust. The superior court entered summary judgment in favor of Alaska Mortgage, ruling that Polmateers recent payment had revived all time-barred installments under both the promissory note and the deed of trust. The court also awarded full reasonable attorneys fees to Alaska Mortgage, ruling that the award was appropriate as a cost of foreclosure recoverable by the trustee under the express terms of the deed of trust. The Maddens appeal. III. DISCUSSION A. Summary Judgment The Maddens first argue that the superior court erred in granting Alaska Mortgages motion for summary judgment.1 The $50,000 promissory note that Polmateer gave to Alaska Mortgage in 1984 called for monthly installments starting in January 1985. Alaskas six-year statute of limitations applied to this note;2 because a separate cause of action accrues for each installment of an installment contract when it becomes due, this six-year limit ran individually on each unpaid installment.3 Under Alaska law, the six-year limit would ordinarily govern both an action on Polmateers promissory note and an action to foreclose the deed of trust securing his note.4 Here, Polmateer ceased paying installments on the note in July 1988 and missed almost ten years of monthly payments. Thus, by the time Alaska Mortgage initiated its foreclosure action in 1997, more than three years of Polmateers earliest missed installments fell outside the six-year statutory limit and were theoretically unrecoverable either through an action on the note or by foreclosure. But several months after Alaska Mortgage filed its action to determine the amount owed under its deed of trust, Polmateer made another payment. Under AS 09.10.210, [w]hen a past due payment of principal or interest is made upon any evidence of indebtedness, the running of the time within which an action may be commenced starts from the time the last payment is made. Relying on this statute, Alaska Mortgage moved for summary judgment, arguing that Polmateers recent payment revived the statute of limitations on the entire debt and correspondingly increased the amount needed to avert foreclosure. The superior court accepted Alaska Mortgages argument and granted summary judgment. The Maddens contend that the superior court erred by granting summary judgment. They do not dispute that, under AS 09.10.210, Polmateers new payment revived his liability on the underlying promissory note. They also acknowledge the rule that the same time limit usually governs a foreclosure and an action on the underlying note. But they argue that an exception should apply here. The Maddens posit that AS 09.10.210 simply codifies the common law rule that a part payment on a past due debt can extend or revive the statute of limitations.5 From this premise, the Maddens reason that we should recognize exceptions that existed to the common law rule. Specifically, the Maddens contend, the clear majority of common law cases hold that when a mortgagor like Polmateer loses title to mortgaged property before the underlying debt is repaid, a subsequent payment after the statute of limitations expires revives only the underlying debt and does not extend the time for foreclosure. Applying this exception, the Maddens argue that Polmateers May 1998 payment only revived his debt on the note and had no effect on the amount outstanding on Alaska Mortgages deed of trust.6 We find this argument unpersuasive. The common-law rule precluding an out-of-title mortgagor from reviving a time- barred mortgage is rooted in the notion that the mortgagor would lose all interest in the property when the statute of limitations expires: to such premises he is a stranger, and his power to revive mortgages does not exist[.]7 In other words, once the statute of limitations terminates an out-of-title mortgagors remaining property interest, the mortgagor should have no further power to encumber the property: He can revive the old mortgage just so far and so far only as he could give a new mortgage, and that is, to bind his own property.8 This rationale does not apply when the statute of limitations bars only part of an outstanding installment debt. Here, for example, Polmateer did not become a complete stranger to the trusted property: as the Maddens concede, the statute of limitations barred only part of his entire debt. Inasmuch as the mortgage secured the installments that were not time-barred, Polmateer maintained an interest in the mortgaged property. Notably, most cases decided under common law seem to permit an out-of-title mortgagor to extend the statute of limitations on a mortgage before it expires completely.9 These cases reason that a subsequent grantee who has notice of a valid and enforceable prior lien assumes the risk of an extension: If a junior lienholder had notice, actual or constructive, of a valid and enforceable prior lien, at the time he acquired his rights, he took the latter subject to a possible extension of the time of payment, and cannot complain thereof, as it is only an incident of the lien.10 Only a few courts have held that an out-of-title mortgagor cannot extend the statute of limitations on a mortgage,11 apparently assuming that the subsequent grantee has a right to assume that no extension will be granted without its consent.12 But these cases reflect a minority view and their reasoning is unpersuasive. In the present case, for example, we fail to see how the Maddens could reasonably believe that Polmateers mortgage was immune to extension: when they acquired their interest in the Iliaska Subdivision, the Maddens knew of Polmateers deed of trust and took their interest subject to his deed. As the Maddens concede, they did not bargain for the right to have part of the debt secured by the senior deed become time-barred. Indeed, as the superior court correctly noted, when the Maddens acquired their interest in Iliaska Subdivision, Polmateer was still in good standing on his promissory note, and Alaska Mortgages deed of trust was fully enforceable. Thus, allowing Polmateer to revive the time-barred installments merely returns the Maddens to their original situation. We conclude, then, that Polmateers late payment revived Alaska Mortgages right to recover the previously time-barred installments under the deed of trust to the same extent as it revived the right to recover on the underlying promissory note. Because the Maddens do not dispute that the late payment refreshed Polmateers liability on the note, we affirm the superior courts order granting Alaska Mortgages motion for summary judgment. B. Attorneys Fees The superior court ruled that, under the terms of the deed of trust, Alaska Mortgage was entitled to recover the full reasonable amount of the attorneys fees it incurred in litigating the amount that Polmateer owed on the deed. The Maddens challenge this ruling, arguing that Alaska Mortgages legal action falls outside the deeds provision allowing full reasonable fees. The attorneys fee provision of the deed of trust states: After deducting all costs, fees and expenses of Trustee[,] . . . including cost of evidence of title and reasonable counsel fees in connection with sale[,] Trustee shall apply the proceeds of sale to payment [as provided under the deed]. On its face, this provision would allow Alaska Mortgage to recover its attorneys fees only to the extent that those fees were incurred in connection with the expenses of [the] Trustee that is, only insofar as Alaska Mortgage performed duties that would ordinarily be required of the trustee.13 The narrow question presented, then, is whether Alaska Mortgages pursuit of a legal action to establish the amount Polmateer owed on the deed is a duty assigned to the trustee under the deed of trust. The Maddens point out that Alaska Mortgage was the beneficiary of the deed of trust, not the trustee, and they insist that it acted to further its interests as the beneficiary rather than to perform the duties of the trustee. Alaska Mortgage counters that it was acting on behalf of the trustee, arranging the foreclosure sale that the trustee would otherwise be required to conduct.14 But Alaska Mortgages argument begs critical questions: Did the trustee have any duty to pursue a legal action to establish the amount Polmateer owed under the deed? Or is the lawsuit more properly characterized as one that Alaska Mortgage pursued as the deeds beneficiary? Alaska Mortgage cites no provision of the deed illuminating these questions; nor does it cite any case law or other authority supporting the proposition that the trustees duty to conduct a foreclosure sale encompassed a duty to sue for a judgment resolving Alaska Mortgages dispute with the Maddens. We have found no such authority. To the contrary, existing authority strongly suggests that the duties of a trustee under a deed of trust are usually quite narrow: to conduct a fair sale in the event of the trustors default.15 In general, a trustees rights and duties with respect to a deed of trust derive from the deed itself or from applicable law governing foreclosure.16 Neither AS 34.20.070 the Alaska statute governing foreclosure sales nor Alaska Mortgages deed of trust requires or authorizes the trustee to pursue a legal action to determine the amount owed to the beneficiary.17 We thus hold that Alaska Mortgage would be entitled to collect full reasonable attorneys fees under the deed only to the extent that it incurred those fees on behalf of the trustee in connection with arranging the foreclosure sale itself; correspondingly, its right to recover fees incurred in connection with its suit to establish the amount owing on the deed of trust should be determined under Civil Rule 82s provisions allowing partial fees to prevailing parties. IV. CONCLUSION The superior courts order granting summary judgment in favor of Alaska Mortgage is AFFIRMED. The attorneys fee order is VACATED and REMANDED with instructions to reduce the award of full reasonable fees to reflect only the attorneys fees incurred in performing the actual foreclosure sale; the award for the balance of Alaska Mortgages fees should be governed by Civil Rule 82. _______________________________ 1 A superior courts grant of summary judgment is reviewed de novo; we will affirm an order granting 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. Osborne v. Buckman, 993 P.2d 409, 411 (Alaska 1999). 2 When Polmateer executed the promissory note and deed of trust in favor of Alaska Mortgage, AS 09.10.050(1) 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 reenacted with changes irrelevant here in 1997. See ch. 26, 3, SLA 1997. 3 See, e.g., White v. Moriarty, 19 Cal. Rptr. 2d 200, 205 (Cal. App. 1993) (quoting 3 Harkland & Lawrence Uniform Commercial Code Series (1989) 3 -122:02 (Art. 3) p. 257) (When an instrument is payable in installments, the cause of action on each installment accrues on the day following the date the installment is due.); In re Marriage of Kramer, 625 N.E.2d 808, 812 (Ill. App. 1993) (Where a money obligation is payable in installments, a separate cause of action accrues on, and the statute of limitations begins to run against, each installment as it becomes due.); Haberkorn v. Da Silva, 210 N.Y.S.2d 391, 395 (N.Y. Spec. Term 1960) (When a mortgage requires the payment of installments at fixed times the Statute of Limitations begins to run when the installment becomes due and it is not tolled or postponed to the maturity of the mortgage.); Gabriel v. Alhabbal, 618 S.W.2d 894, 897 (Tex. Civ. App. 1981) (When recovery is sought on a note or other obligation payable in installments the Statute of Limitations runs against each installment from the time it becomes due; that is from the time when action might be brought to recover it.). 4 Osborne, 993 P.2d at 412 (The statute of limitations for foreclosing a deed of trust is the same as that for the underlying debt.); see also Dworkin v. First Natl Bank of Fairbanks, 444 P.2d 777, 782 (Alaska 1968) ([I]n the absence of a controlling statute the foreclosure action is subject to the same period of limitations as the underlying debt.); but see Holta v. Certified Fin. Servs., 49 P.3d 1104, 1107-08 (Alaska 2002) (holding that statute of limitations for foreclosures governs when it results in a longer period than the statute of limitations on the underlying note). 5 See, e.g., Wadley v. Ward, 137 S.W. 808, 809 (Ark. 1911) (It is well settled that, against the debtor, partial payments made by him to his creditor will stop the running of the statute of limitations, and mark the time from which the statute then begins to run.); Johnson v. Johnson, 81 Mo. 331 (1884) (It has been decided that a part payment on a note, after the bar of the statute has become complete, will revive the cause of action upon it.); Hewlett v. Schenck, 82 N.C. 234 (1880) ([A] [p]artial payment . . . revives the liability because it is deemed a recognition of and an assumption anew of the balance due.); Kaiser v. Idleman, 108 P. 193, 195 (Or. 1910) (A partial payment upon a contract for the payment of money has always been held to toll the statute of limitations.); see also 51 Am. Jur. 2d Limitation of Actions 343 (2000). 6 The Maddens do not dispute that Polmateers May 1997 payment revived his liability under the promissory note for all previously unpaid, time-barred installments. To the contrary, they specifically concede that Polmateer could revive the statute [of limitations] as to his liability. Accordingly, this case presents no occasion to decide whether new installment payments should generally be deemed to revive claims as to unpaid installments that are already time-barred when the new payments are made. We note, however, that some courts considering installment contracts have held that new payments will not, standing alone, revive the debtors liability for time-barred installments, since [h]olding that tender of an installment payment when due restarts the running of the limitations period on payments due earlier would conflict with the rule that each installment has its own limitation period. Bradford v. Futrell, 171 A.2d 493, 500 (Md. 1961) (holding that payment of current child support installment did not suspend statute of limitations as to prior installments); Windschitl v. Windschitl, 579 N.W.2d 499, 502 (Minn. App. 1998); see also In re Estate of Philippe, 220 N.Y.S.2d 924, 929 (N.Y. Surrog. Ct. 1961) (holding that sporadic support payments did not toll statute of limitations on earlier past due support payments). Because the Maddens neither raise nor brief this point, we decline to consider it, and we accept for purposes of our decision the Maddens position that Polmateers payment revived his liability under the note for all previously time-barred installments. 7 Cook v. Prindle, 66 N.W. 781, 784 (Iowa 1896); see also McCarthy v. White, 21 Cal. 495, 499 (1863); Schwitzer v. Sier, 73 N.Y.S.2d 569, 570 (N.Y. Spec. Term 1947); Kaiser v. Idleman, 108 P. 193, 197 (Or. 1910); Damon v. Leque, 50 P. 485, 486 (Wash. 1897). 8 Schmucker v. Sibert, 18 Kan. 104 (1877). 9 See Wadley v. Ward, 137 S.W. 808, 811 (Ark. 1911); Stein v. Kaun, 91 N.E. 77, 80 (Ill. 1910); Gilman v. Heitman, 113 N.W. 932, 935 (Iowa 1907); Bank of Topeka v. Valk Mfg. Co., 195 P. 599, 599 (Kan. 1921); Schmucker, 18 Kan. at 104; Murdock v. Waterman, 39 N.E. 829, 832 (N.Y. 1895); Kaiser, 108 P. at 195. 10 Consolidated Natl Bank of Tucson v. Van Slyke, 234 P. 553, 555 (Ariz. 1925). 11 See Wood v. Goodfellow, 43 Cal. 185, 188 (Cal. 1872); Davis v. Savage, 168 P.2d 851, 857 (N.M. 1946); Boucofski v. Jacobsen, 104 P. 117, 123 (Utah 1909) (overruled on other grounds by State v. Hansen, 734 P.2d 421 (Utah 1986)); Hess v. State Bank of Goldendale, 226 P. 257, 257 (Wash. 1924). 12 Wood, 43 Cal. at 188; see also Boucofski, 104 P. at 123 ([A] subsequent claimant takes his interest subject to all the rights of the prior claimant as those rights existed when the subsequent interest was acquired.). 13 We have previously recognized that an attorneys fees provision in a contract controls the award of attorneys fees. See Johnson v. Olympic Liquidating Trust, 953 P.2d 494, 497 (Alaska 1998); see also Alaska R. Civ. P. 82(a) which provides: Except as otherwise provided by law or agreed to by the parties, the prevailing party in a civil case shall be awarded attorneys fees calculated under this rule. (Emphasis added.) Interpreting an attorneys fees clause presents a question of law, which we review using our independent judgment to determine whether a party is entitled to recover attorneys fees under the contract. Johnson, 953 P.2d at 497. 14 See, e.g., Hatch v. Collins, 275 Cal. Rptr. 476, 480 (Cal. App. 1990); Perry v. Virginia Mortg. & Inv. Co., 412 A.2d 1194, 1197 (D.C. 1980). 15 See McHugh v. Church, 583 P.2d 210, 214 (Alaska 1978) ([C]ourts have generally been reluctant to impose detailed requirements on the manner in which trustees perform their duties.); In re Bisbee, 754 P.2d 1135, 1138 (Ariz. 1988) (A trustee under a deed of trust has neither the legal powers nor the obligations of a trustee under traditional trust law.); Hatch, 275 Cal. Rptr. at 480 (His agency is a passive one, for the limited purpose of conducting a sale in the event of the trustors default or reconveying the property upon satisfaction of the debt.); Perry, 412 A.2d at 1197 (quoting S & G Inv. Inc. v. Home Fed. Sav. & Loan Assn, 505 F.2d 370, 377 n.21 (1974)) ( A trustee under a deed of trust with conventional provisions . . . is basically a trustee of a power to convey title under certain circumstances, and although the trustee must exercise such powers and duties with strict fidelity to ethical principles . . . his management responsibilities fall short of those conferred on trustees generally. ). 16 See Spires v. Edgar, 513 S.W.2d 372, 378 (Mo. 1974) (The duties and powers of a trustee are fixed by the terms of the contract, namely the deed of trust.); Peterson v. Black, 980 S.W.2d 818, 822 (Tex. App. 1998) ([T]he trustee has no duty to take affirmative actions beyond that required by statute or the deed of trust to ensure a fair sale.); First Funding Corp. v. Birge, 257 S.E.2d 861, 865 (Va. 1979) (A trustee in a deed of trust is authorized to act with reference to the trust property only in the manner which the deed either by express terms or by necessary implication provides.); Perry, 412 A.2d at 1197 ([A]s a general proposition, trustees of deeds have only those powers and duties imposed by the trust instrument itself, coupled with the applicable statute governing foreclosure sales[.]). 17 See AS 34.20.070.