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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

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 corrections@appellate.courts.state.ak.us.


            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.