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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Cook Schuhmann & Groseclose, Inc. v. Brown & Root, Inc. (06/18/2004) sp-5817
This has been WITHDRAWN - see Opinion # 5921
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
COOK SCHUHMANN & )
GROSECLOSE, INC., ) Supreme Court No. S-10922
)
Appellant, ) Superior Court No. 4FA-02-
1216 CI
)
v. ) O P I N I O N
)
BROWN & ROOT, INC., ) [No. 5817 - June 18, 2004]
)
Appellee. )
)
Appeal from the Superior Court of the State
of Alaska, Fourth Judicial District,
Fairbanks, Richard D. Savell, Judge.
Appearances: Robert B. Groseclose, Jo A.
Kuchle, and Peter M. LeBlanc, Cook Schuhmann
& Groseclose, Inc., Fairbanks, for Appellant.
James D. DeWitt and Aisha Tinker Bray, Guess
& Rudd P.C., Fairbanks, for Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
The beneficiary of a second deed of trust contends that
a nonjudicial foreclosure sale on the first deed of trust was not
fair and reasonable and violated the controlling statutes. The
trustee halted the sale and postponed it for four hours to give
two prospective bidders time to obtain cash or cashiers checks.
Because this procedure was not unfair or unreasonable under the
circumstances presented here, we affirm the summary judgment for
Brown & Root, Inc., whose offset bid was the only bid received at
the reconvened sale auction. We also affirm the Alaska Civil
Rule 68 award of attorneys fees to Brown & Root. Its offer of
judgment offering to reconduct the foreclosure sale was neither
premature (even though it was made before the parties exchanged
Alaska Civil Rule 26 disclosures) nor ambiguous.
II. FACTS AND PROCEEDINGS
Michelle Lisper and Linda Jean Ross held two parcels of
real property in Fairbanks subject to a first deed of trust
issued February 7, 1994 in favor of Brown & Root. The deed of
trust secured an obligation to make a payment of $200,000, plus
interest, on or before April 1, 1998. Yukon Title Agency was
named as trustee.1 In 1995 Lisper and Ross granted a second deed
of trust to appellant, Cook Schuhmann & Groseclose, Inc. (Cook),
to secure an indebtedness of $25,000. Both deeds of trust
provided for sale of the property upon default to the highest and
best bidder for cash in lawful money of the United States,
payable at time of sale.
When Lisper and Ross failed to make the payments due on
the first deed of trust, Brown & Root executed a Beneficiarys
Declaration of Default and instructed Yukon Title to initiate
foreclosure. The sale was noticed for January 14, 2002, but was
continued at the beneficiarys request to March 28, 2002 at 10
a.m. The Notice of Default and Sale stated that the property
would be sold for cash or cashiers check to the highest bidder at
public auction. The notice stated the sum owing on the
obligation, but not the amount of the anticipated offset bid.
On March 28, 2002 Catherine Floerchinger, vice-
president of Yukon Title, went to the Rabinowitz Courthouse to
conduct the foreclosure sale. Cooks representative, Jo Kuchle,
was among those present. Floerchinger asked if anyone planned to
bid at the sale. Terry Stahlman indicated a desire to bid.
Floerchinger took him aside and reviewed his funds to ascertain
whether he had sufficient funds to exceed Brown & Roots
anticipated offset bid of $302,957. Because Stahlman only had a
cashiers check for $300,000, Floerchinger told him he was not
qualified to bid at the sale.
Floerchinger began the foreclosure sale and entered the
beneficiarys offset bid. When she asked if there were any other
bidders, Cliff Everts attempted to bid $305,000. Floerchinger
asked why he had not identified himself earlier; Everts responded
that he was hard of hearing and had not heard her ask.
Floerchinger took him aside to determine whether he had
sufficient funds to bid. He had no cash or certified funds, but
told Floerchinger that he could obtain the money from his banker.
Having determined that no qualified bidders, apart from
the beneficiary, were present, but that two potential bidders
might become qualified, Floerchinger decided to postpone the
sale. She informed the group that the sale was postponed until 2
p.m. that day. Following Floerchingers announcement, Stahlman
told the group that he would have bid up to $350,000. Shortly
thereafter Stahlman and Everts discussed whether they would
attend the postponed sale. Stahlman told Everts that if Brown &
Root obtained title to the property, it would strip off the
junior liens, at which time one of them could purchase the
property for less money.
At 2 p.m. Floerchinger returned to the courthouse to
hold the sale. Stahlman and Everts were not present.
Floerchinger submitted Brown & Roots offset bid. No one else
bid, so Floerchinger sold the property to the beneficiary for the
offset bid. Yukon Title issued a trustees deed to Brown & Root
on April 9, 2002.
Cook filed a superior court complaint against Brown &
Root on May 21, 2002. It alleged that Brown & Root failed to
conduct a commercially reasonable sale, violated AS 34.20.080(e),
and tortiously interfered with Cooks second deed of trust. The
complaint requested that the court place an equitable lien on the
property, set aside the sale, enter a judgment against Brown &
Root for the amount of Cooks junior lien ($25,000 plus statutory
interest), enter a judgment against Brown & Root for all economic
and noneconomic damages and for attorneys fees and costs, and
provide such additional relief as the court deemed just and
equitable.
Brown & Root served a Rule 68 offer of judgment on Cook
on July 9, 2002. Among other things, the offer of judgment
offered to re-conduct the foreclosure sale and to cover the
expense of the notice and sale. On September 5, 2002 Brown &
Root moved for summary judgment. The superior court granted the
motion. Citing Rule 68(b)(1), Brown & Root then moved for an
award of seventy-five percent of its attorneys fees. The
superior court awarded fees in the amount Brown & Root requested.
The court entered final judgment on January 23, 2003.
Cook appeals.
III. DISCUSSION
A. Whether the Nonjudicial Deed of Trust Foreclosure Sale
Must Be Set Aside as Unfair or Unreasonable
1. Standard of review
A grant of summary judgment is reviewed de novo.2 We
review the facts presented in a light most favorable to the
non-movant to determine whether any genuine issues of material
fact exist and whether the movant is entitled to judgment as a
matter of law.3
2. Whether the nonjudicial deed of trust foreclosure sale was
unfair or unreasonable
Cook argues that Brown & Root violated Alaska law in
conducting a nonjudicial deed of trust foreclosure sale that was
unfair and unreasonable. It reasons that the notice of sale was
deficient because it failed to reveal the amount of the
anticipated offset bid. It also argues that the notice was
deficient because it failed to warn potential bidders that the
trustee would regard any bidder without enough cash or a large
enough cashiers check to match the trustees bid as unqualified to
bid on the property. Finally, it asserts that the trustee
violated Alaska law by postponing the sale after it had started.
We have stated our reluctance to set aside foreclosure
sales except in the most unusual circumstances.4 Even when the
sale fails to comply with the statutory provisions, we will set
it aside only in cases that reach unjust extremes.5
The statutory conditions were met here. Alaska law
does not require the trustee to give prospective bidders notice
of the amount of the anticipated offset bid or inform them that
the trustee may require them to demonstrate their ability to pay
their bids in cash or cashiers checks at the time of sale.
Alaska law only requires that the trustee record a notice of
default that specifies the name of the trustor, the book and page
where the trust deed is recorded, a description of the trust
property, a statement that a breach of the obligation for which
the deed of trust is security has occurred, the nature of the
breach, the sum of the obligation, the election by the trustee to
sell the property, and the date, time, and place of the sale.6
The statute requires notice of the amount of the obligation; it
does not require notice of the amount of the anticipated offset
bid.7 Nor does it require notice that the trustee may require
bidders to demonstrate their ability to satisfy the sale terms.8
Cook conceded at oral argument on appeal that nothing in the
statute precluded the procedure followed here.
No Alaska statutes or cases specify a procedure by
which the trustee must conduct a foreclosure sale. Alaska
Statute 34.20.080 only requires that the procedure comply with
the terms and conditions of the deed of trust. Here the deed of
trust required the buyer to pay cash at the time of sale. It
stated: Trustee . . . shall sell said property . . . at public
auction, to the highest and best bidder for cash in lawful money
of the United States, payable at time of sale. Per the deed of
trust, the trustee was to provide written notice of the default
and the sale. The notice of default announced that the property
would be sold for cash or cashiers check to the highest bidder at
public auction.
We next consider whether the procedure followed here
inherently rendered the sale unfair and unreasonable, requiring
that we set it aside. Potential bidders with advance notice of
the amount of the beneficiarys proposed offset bid might well be
better able to bid successfully at the auction. But we are not
convinced that the failure of a notice to state the amount of the
anticipated offset bid prevents potential bidders from either
independently calculating that amount or asking the trustee how
to calculate it.
We also agree that giving advance notice that the
trustee will require cash or a cash equivalent at the auction
would potentially benefit those who, like Cook, hold junior deeds
of trust.9 Holders of junior deeds of trust would also
potentially benefit from a procedure that would allow at least
some appropriate grace period between receipt of the high bid and
payment of the required cash or cashiers check.
But it is not necessary to decide in this case whether
a notice that fails to inform bidders that the trustee will
require immediate payment in cash or a cash equivalent
necessarily renders the foreclosure sale unfair and unreasonable.
Nor is it necessary to decide whether a foreclosure sale becomes
unfair and unreasonable if the trustee declines to give the
apparent high bidder a brief grace period in which to secure the
required cash or cashiers check. We do not have to decide those
questions because the postponement (the third procedural
deficiency alleged by Cook) actually remedied any other possible
procedural deficiencies. Neither AS 34.20.070 nor the deed of
trust precluded the trustee from postponing the sale when it
appeared that both prospective bidders other than the beneficiary
had insufficient cash (or its equivalent) to consummate a sale at
the scheduled time. The deed of trust gave the trustee authority
to postpone the sale. By giving two prospective bidders actual
knowledge of the amount of the offset bid and the need for cash
or its equivalent, postponement provided some of the advance
notice Cook advocates.
Also, neither Stahlman nor Everts was prepared to pay
in cash or by cashiers check at the close of the 10 a.m. sale.
Postponement therefore gave them an opportunity to cure their
inability to consummate a sale if one of them was the high
bidder; postponement potentially allowed them to submit
qualifying bids. As it turned out, they apparently conferred,
chose not to bid against each other, and elected not to return
when the trustee reconvened the auction at 2 p.m. But Cook has
directed us to no evidence that Brown & Root or the trustee
procured their absence or colluded with them, or otherwise
behaved in a way that was intended to disfavor Cook. The
postponement potentially benefitted Cook. Had the sale taken
place at 10 a.m., the only qualifying bid would have been Brown &
Roots offset bid; a sale that morning as scheduled would have
therefore inevitably erased Cooks second deed of trust.
Brown & Root also argues that Cook failed to preserve
any objection to the procedure or postponement. Given our ruling
on the merits of these issues, we do not need to consider whether
Cook waived or preserved the issue.
B. Whether Brown & Root Made a Valid Offer of Judgment by
Offering To Reconduct the Foreclosure Sale
1. Standard of review
The interpretation of Rule 68 is a question of law that
[this court] review[s] de novo, adopting the rule of law that is
most persuasive in light of precedent, policy and reason. 10 We
review awards of costs and attorneys fees for abuse of
discretion, which exists if an award is arbitrary, capricious,
manifestly unreasonable, or improperly motivated.11
2. Validity of the offer
Cook challenges the superior courts award of Rule 68
attorneys fees to Brown & Root. Rule 68 provides in part:
(b) If the judgment finally rendered by the
court is at least 5 percent less favorable to
the offeree than the offer . . . the offeree
. . . shall pay all costs as allowed under
the Civil Rules and shall pay reasonable
actual attorney fees incurred by the offeror
from the date the offer was made as follows:
(1) if the offer was served no later
than 60 days after both parties made the
disclosures required by Civil Rule 26,
the offeree shall pay 75 percent of the
offerors reasonable actual attorney
fees.
On January 3, 2003 the superior court awarded Brown & Root
seventy-five percent of its attorneys fees, in accordance with
Rule 68(b)(1). Cook challenges the award on several grounds.
Cook first argues that the offer was untimely because
it was made before the parties exchanged Alaska Civil Rule 26
disclosures. Cook reads Rule 68 to apply only to offers made
after Rule 26 disclosures are exchanged because, it reasons, this
ensures that the parties possess sufficient information to
evaluate the offer. Brown & Root argues that its offer, which
was served before Rule 26 disclosures were due, was not premature
under Rule 68(b)(1).
Because Rule 68 does not preclude pre-disclosure offers
of judgment, the offer of judgment here was timely. Rule 68 has
the purpose of encouraging settlements and avoiding protracted
litigation.12 If an offer is served no later than sixty days
after Rule 26 disclosures are made, the offeror recovers seventy-
five percent of its attorney fees.13 If the offer is served after
the sixty-day deadline but more than ninety days before trial,
the offeror recovers fifty percent of its attorney fees; it
recovers thirty percent if the offer is served ninety days or
less but more than ten days before trial.14 The rule therefore
penalizes parties for delay. But it does not say when in a civil
action a party may first make an offer of judgment. Rather, it
states only when a party may last make an offer of judgment:
either party may make an offer [a]t any time more than 10 days
before the trial begins.15 Because Brown & Root made its offer
before the sixty-day deadline contemplated by subpart (b)(1), its
offer was timely for purposes of awarding fees at the enhanced
rate.16
Cook next contends that the offer was ambiguous. Cook
argues, among other things, that the offer was invalid because it
failed to state a definite sum. We conclude that the offer was
valid. It unambiguously described exactly what relief Brown &
Root would provide if the offer were accepted. Although we held
in Farr v. Stepp that [a]n offer of judgment must specify a
definite sum and must be unconditional, our real concern in that
case related to the specificity of the offer rather than its
communication of a monetary amount.17 Rule 68 permits offers that
allow judgment for the money or property or to the effect
specified in the offer.18 Nonmonetary offers of judgment are
valid under the rule so long as they are unambiguous and
unconditional.
We recognize that this result could potentially raise
at least one additional question with respect to attorneys fees
awards: how are courts to quantify a nonmonetary offer in
determining whether it was five percent more favorable than the
judgment? We need not address that issue here, however, because
it was not squarely raised by Cook on appeal. Moreover, we think
there is no question that the judgment for Brown & Root was far
less favorable to Cook than the offer of judgment.
IV. CONCLUSION
For these reasons we AFFIRM the judgment below.
_______________________________
1 The company is also identified in the record as Yukon
Title Company.
2 Crosby v. Hummell, 63 P.3d 1022, 1027 (Alaska 2003).
3 Id.
4 McHugh v. Church, 583 P.2d 210, 216 (Alaska 1978).
5 Rosenberg v. Smidt, 727 P.2d 778, 783 (Alaska 1986);
see also McHugh, 583 P.2d at 216; Semlek v. Natl Bank of Alaska,
458 P.2d 1003, 1006 (Alaska 1969).
6 AS 34.20.070(b) states:
Not less than 30 days after the default and
not less than three months before the sale
the trustee shall record in the office of the
recorder of the recording district in which
the trust property is located a notice of
default setting out (1) the name of the
trustor, (2) the book and page where the
trust deed is recorded, (3) a description of
the trust property, including the propertys
street address if there is a street address
for the property, (4) a statement that a
breach of the obligation for which the deed
of trust is security has occurred, (5) the
nature of the breach, (6) the sum owing on
the obligation, (7) the election by the
trustee to sell the property to satisfy the
obligation, and (8) the date, time, and place
of the sale. An inaccuracy in the street
address may not be used to set aside a sale
if the legal description is correct. At any
time before the sale, if the default has
arisen by failure to make payments required
by the trust deed, the default may be cured
by payment of the sum in default other than
the principal which would not then be due if
no default had occurred, plus attorney fees
or court costs actually incurred by the
trustee due to the default. If under the
same trust deed notice of default under this
subsection has been recorded two or more
times previously and the default has been
cured under this subsection, the trustee may
elect to refuse payment and continue the
sale.
7 Id. The amount of the offset bid is the sum owing on
the obligation as of the time of publication of notice, plus
interest, costs, and expenses, including reasonable attorneys
fees, incurred by the beneficiary until the time of sale.
8 Id.
9 The parties dispute whether the deed of trust and
notice of default provided such notice. Cook argues that the
term time of sale did not necessarily refer to the auction. We
do not read the deed of trust and the notice to encourage
prospective bidders to think that they would not be required to
pay cash at the auction.
10 Mackie v. Chizmar, 965 P.2d 1202, 1204 (Alaska 1998)
(quoting Jaso v. McCarthy, 923 P.2d 795, 801 (Alaska 1996)).
11 Kellis v. Crites, 20 P.3d 1112, 1113 (Alaska 2001).
12 Fernandes v. Portwine, 56 P.3d 1, 8 (Alaska 2002).
13 Alaska R. Civ. P. 68(b)(1).
14 Alaska R. Civ. P. 68(b)(2)-(3).
15 Alaska R. Civ. P. 68(a) (emphasis added).
16 See Farr v. Stepp, 788 P.2d 35, 37 (Alaska 1990)
(holding that Rule 68 does not preclude making offer of judgment
while motion to amend pleading is pending).
17 Id.
18 Alaska R. Civ. P. 68(a) (emphasis added).