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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.
