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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Kuretich v. Alaska Trustee, LLC (9/14/2012) sp-6707
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, email
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
TIMOTHY KURETICH, SR., )
) Supreme Court No. S-14196
Appellant, )
) Superior Court No. 3AN-09-10371 CI
v. )
) O P I N I O N
)
ALASKA TRUSTEE, LLC, ) No. 6707 - September 14, 2012
STEPHEN ROUTH, and PHH )
MORTGAGE CORPORATION, )
)
Appellees. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Andrew Guidi, Judge.
Appearances: James J. Davis, Jr., Chelsea C. Hicks, and
Robert P. Lynch, Alaska Legal Services Corporation,
Anchorage, for Appellant. Richard Ullstrom, Routh Crabtree
Olsen, PS, Anchorage, for Appellees.
Before: Carpeneti, Chief Justice, Fabe, Winfree, and
Stowers, Justices. [Christen, Justice, not participating.]
CARPENETI, Chief Justice.
I. INTRODUCTION
A homeowner sought a declaratory judgment that foreclosure fees were not
properly included in the reinstatement amount necessary to halt foreclosure proceedings
----------------------- Page 2-----------------------
under Alaska law. The superior court concluded that the foreclosure fees were properly
included in the reinstatement amount. We agree and therefore affirm.
II. FACTS AND PROCEEDINGS
Timothy Kuretich purchased his home in 2001 and financed this purchase
through a promissory note and deed of trust with PHH Mortgage Corporation. In 2008,
Kuretich fell behind on his mortgage payments and PHH Mortgage authorized Alaska
Trustee, LLC to begin foreclosure. Kuretich paid the reinstatement amount provided by
Alaska Trustee, including foreclosure fees and expenses. In early 2009, Kuretich again
fell behind on his payments and Alaska Trustee again began the foreclosure process.
This time, Kuretich sought counsel before requesting a reinstatement amount. When
Alaska Trustee provided a reinstatement amount that contained its foreclosure fees and
costs, Kuretich refused to pay the full amount and brought this suit.
Kuretich alleged that Alaska Trustee had violated AS 34.20.070(b)
(Alaska's non-judicial foreclosure statute), federal regulations, and Alaska's Unfair Trade
Practices and Consumer Protection Act (UTPCPA) by including foreclosure fees and
costs in the reinstatement amount. The superior court granted a preliminary injunction
in September 2009, delaying the foreclosure sale. In October 2009, PHH Mortgage and
Kuretich entered into a loan modification agreement, which terminated foreclosure and
reinstated the mortgage. Kuretich continued the litigation to pursue a declaratory
judgment and the superior court granted summary judgment for Alaska Trustee in
December 2010. This appeal followed.
III. STANDARD OF REVIEW
We review a grant of summary judgment de novo, drawing all reasonable
inferences in favor of the party against whom summary judgment is granted.1 The grant
1 Kiernan v. Creech , 268 P.3d 312, 315 (Alaska 2012).
-2- 6707
----------------------- Page 3-----------------------
will be upheld if there is no genuine issue of material fact.2 We may affirm the grant of
summary judgment on any grounds discerned from the record, even grounds not asserted
by the trial court or parties.3
"We apply our independent judgment to questions of law, adopting the rule
of law most persuasive in light of precedent, reason, and policy."4 Statutory
interpretation is a question of law that requires our independent judgment.5 We will
interpret a statute "according to reason, practicality, and common sense, considering the
meaning of the statute's language, its legislative history, and its purpose."6
IV. DISCUSSION
Kuretich challenges the superior court's conclusion that Alaska Trustee
could add various fees and charges to Kuretich's reinstatement amount even though
those fees were not sums "in default" under Kuretich's reading of AS 34.20.070(b).
Alaska Trustee, arguing that Kuretich improperly changed his argument on appeal,
encourages us to affirm the superior court on two alternate grounds: (1) federal housing
regulations allowed for collection of the disputed fees, and because this loan was secured
by HUD, federal law preempted any contrary requirements under the state statute,
AS 34.20.070(b); and (2) the UTPCPA does not apply to non-judicial foreclosures and
Kuretich has no standing to sue for damages or injunctive relief under that statute.
2 Id.
3 Id . at 1039; Moore v. Allstate Ins. Co., 995 P.2d 231, 233 (Alaska 2000).
4
Jacob v. State, Dep't of Health & Soc. Servs., Office of Children's Servs. ,
177 P.3d 1181, 1184 (Alaska 2008) (internal citations omitted).
5 Parson v. State, Dep't of Revenue, Alaska Hous. Fin. Corp. , 189 P.3d 1032,
1036 (Alaska 2008).
6 Id.
-3- 6707
----------------------- Page 4-----------------------
Superior Court Judge Andrew Guidi concluded that "Alaska Trustee's
inclusion of foreclosure fees and costs in plaintiff's reinstatement quote, as permitted by
the parties' deed of trust, is consistent with Alaska's non-judicial foreclosure statute,
AS 34.20.070." We agree.
Alaska Statute 34.20.070(b) provides that a borrower can halt non-judicial
foreclosure and cure the default "by payment of the sum in default other than the
principal that would not then be due if no default had occurred, plus attorney fees or
court costs actually incurred by the trustee." The central dispute in this case concerns
what costs a lender, or its foreclosure beneficiary, may include in the reinstatement
amount as the "sum in default."
The only case in which we have considered this portion of the statute is
Hagberg v. Alaska National Bank.7 In that case, we held that an amendment to
AS 34.20.070 providing for reinstatement did not violate the contract clause of the
Constitution, even when applied to deeds of trust executed before the amendment's
effective date.8 In doing so, we reasoned that reinstatement affected only the lender's
ability to accelerate the loan, not the value of the right itself, because the function of
reinstatement is to place the lender and borrower in the same position as they were before
default.9 The Hagberg court noted that an obligor may halt non-judicial foreclosure by
"paying costs and by bringing his payments current," but did not specify which costs
could be included.10 In this case the superior court correctly noted, however, that "[o]nly
7 585 P.2d 559 (Alaska 1978).
8 Id. at 561.
9 Id. at 562.
10 Id.
-4- 6707
----------------------- Page 5-----------------------
by allowing recovery of these [foreclosure] fees will the value of the lender's rights be
preserved and the parties returned to their status quo prior to the default."
The superior court also interpreted AS 34.20.070 as deferring to the terms
and conditions contained in the deed of trust to govern the lender's and borrower's rights
upon foreclosure. The superior court noted that the deed of trust in this case "specifically
delineates the reinstatement amount as including costs of foreclosure not limited to
attorney fees." Thus, the costs incident to foreclosure were properly included within the
sum in default in this case by the express terms of the deed signed by the parties.
Because the court's decision correctly granted summary judgment for Alaska Trustee,
we adopt the superior court's decision, attached as an appendix.11
V. CONCLUSION
For the reasons stated above and in the attached opinion of the superior
court, we AFFIRM the grant of summary judgment for Alaska Trustee.
11 The only issue raised on appeal that was not addressed by the superior court
is whether Kuretich has impermissibly changed his argument on appeal thereby waiving
his claim that "the foreclosure expenses included in the reinstatement quote were not
actually 'in default' because no demand for payment of them had been made." We
believe that Kuretich did not change his argument on appeal, but rather maintained his
same argument throughout the entire course of proceedings, principally that forfeiture
fees are not properly included in the reinstatement amount under any section of
34.20.070(b). Accordingly, we reject Alaska Trustee's assertion.
Finally, having upheld the superior court's grant of summary judgment on
the grounds on which it was issued, we have no need to consider Alaska Trustee's
alternate bases for upholding the grant of summary judgment.
-5- 6707
----------------------- Page 6-----------------------
APPENDIX
IN THE SUPERIOR COURT FOR THE STATE OF ALASKA
THIRD JUDICIAL DISTRICT AT ANCHORAGE
TIMOTHY KURETICH, SR., )
)
Plaintiff, )
)
v. )
)
ALASKA TRUSTEE, LLC, )
STEPHEN ROUTH, and PHH )
MORTGAGE CORPORATION, )
)
Defendant. )
_______________________________ ) Case No. 3AN-09-10371 CI
ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT*
On June 4, 2010, plaintiff Timothy Kuretich, Sr., filed a motion for
summary judgment urging the Court to narrowly define the costs and fees included in the
reinstatement amount, or "sum in default", under AS 35.20.070, Alaska's non-judicial
foreclosure statute. Defendant Alaska Trustee opposed the motion and moved for
* This decision has been edited to conform to the technical rules of the
Alaska Supreme Court.
Appendix - Page 1 of 14 6707
----------------------- Page 7-----------------------
summary judgment as to Counts I and III of the plaintiff's Third Amended Complaint.1
The Court considers the motions and the parties' arguments here.
I. FACTUAL BACKGROUND
In June 2001, plaintiff Timothy Kuretich, Sr., executed a deed of trust with
Premier Mortgage in the amount of $111,122.00 to secure the balance due on a note for
purchase of the property at issue in this case. In March 2009, plaintiff defaulted on his
mortgage. As a result, PHH Mortgage accelerated the debt and authorized Alaska
Trustee to commence foreclosure proceedings as the trustee of the deed of trust.2 In June
2009, Alaska Trustee recorded a Notice of Default in Palmer, citing plaintiff's failure to
"pay the indebtedness due under the Deed of Trust, $115,495.88, plus interest, late
charges, costs, and any future advances" and setting September 28, 2009 as the date of
sale. Upon request by plaintiff's counsel, Alaska Trustee provided a reinstatement quote
totaling $11,479.28. The quote provided by Alaska Trustee reflects:
1. $8,845.27 in payments due to PHH Mortgage;
2. $146.44 in accrued late fees;
3. $200 for a broker's price opinion;
1 Count I of Plaintiff's Third Amended Complaint alleges violation of the
Unfair Trade Practices and Consumer Protection Act by including "unlawful fees" in the
reinstatement amount "that exceed those provided for in AS 34.20.070(b)." In Count III,
plaintiff seeks a declaration from this Court holding that under AS 34.20.070(b),
"attorney fees" and "court costs" do not include fees for inspections, appraisals, title
reports, recording, certified mailings, property posting, public posting, publication,
postponements, and other fees. Plaintiff also seeks injunctive relief and requests the
Court "declare void and set aside any and all non-judicial foreclosure sales that
defendants have conducted in the past two years, and may conduct in the future, where
they have told homeowners that they must first pay it[s] excessive or unlawful
reinstatement amounts in order to cure their mortgage default."
2 Alaska Trustee had been substituted as the trustee of the deed of trust
during a previous foreclosure in 200[8]. Plaintiff was able to cure the default and halt
foreclosure in 200[8].
Appendix - Page 2 of 14 6707
----------------------- Page 8-----------------------
4. $13.25 for drive-by inspections;
5. $26.50 for other fees incurred by PHH Mortgage;
6. Alaska Trustee's fee of $1250
7. $630 paid to First American Title for the trustee's sale guarantee;
8. $44 for recording documents in the real property records ($22 for
recording the Notice of Default, and $22 for recording the termination
notice should the loan reinstate and the foreclosure be terminated);
9. $72.02 for certified mail postage for mailing the Notice of Default;
10. $45 paid to the property poster for posting the Notice of Default
on the property;
and
11. $206.80 for publication of the foreclosure sale notice in the Alaska
Journal of Commerce.3
The sale date was subsequently postponed to November 18, 2009. However, as a result
of the completed loan modification, the sale was terminated by Alaska Trustee at PHH
Mortgage's request on October 29, 2009. The parties now seek a declaration from the
Court on the permissible costs and fees of reinstatement. The issue is capable of
reoccurrence between the parties.
Plaintiff asserts that he should be able to reinstate the terms of his mortgage
for the amount of mortgage payments missed plus late fees, i.e., $8,990.00, rather than
for the $ 11,479.28 reinstatement figure produced by Alaska Trustee. Plaintiff argues that
defendant Alaska Trustee should not be allowed to - in his words - "pad" a
reinstatement quote with fees and costs that are not "attorney fees or court costs" as
expressly authorized by statute. Alaska Trustee argues the costs of reinstatement were
actually and necessarily incurred, not padding, and the reinstatement quote it provided
to plaintiff properly identified the "sum in default" according to the terms of the note and
deed of trust. Both parties have moved for summary judgment on this point of law.
II. SUMMARY JUDGMENT STANDARD
3 Affidavit of Rose Santiago, June 25, 2010.
Appendix - Page 3 of 14 6707
----------------------- Page 9-----------------------
Summary judgment is appropriate if there are no genuine issues of material
fact and the movant is entitled to judgment as a matter of law.4 To prevail on his motion,
plaintiff bears the initial burden of proving the absence of a genuine factual dispute and
the legal right to a judgment.5 The "Court is not bound by the formal issues framed in
the pleadings when deciding a motion for summary judgment under Rule 56."6 Instead,
the Court "will examine the pleadings to ascertain what issues of fact they present and
then consider the affidavits, depositions, admissions, answers to interrogatories and
similar material to determine whether any of these issues are real and genuine and
whether any of the post-pleading material suggests the existence of any other triable
genuine issues of material fact."7
The relevant facts of this case are largely undisputed; the parties' dispute
instead is centered on the interpretation of Alaska's non judicial foreclosure statute.
Accordingly, the legal questions before the Court are appropriate for summary judgment.
III. LEGAL ARGUMENT
In Alaska, lenders have three choices of remedy when a borrower defaults on
a deed of trust: (1) judicial foreclosure; (2) suing on the note secured by the deed of trust;
or (3) non-judicial foreclosure. Judicial foreclosures are processed through the courts
and require the lender to file a complaint and record a notice of lis pendens. If the court
finds the debt valid, and in default, it will issue judgment for the total amount owed
4 Cikan v. ARCO Alaska, Inc., 125 P.3d 335, 339 (Alaska 2005).
5 Philbin v. Matanuska-Susitna Borough , 991 P.2d 1263, 1265 (Alaska
1999).
6 Prentzel v. State, Dep't of Pub. Safety , 169 P.3d 573, 582 (Alaska 2007).
7 Jennings v. State , 566 P.2d 1304, 1310 (Alaska 1977) (quoting 10 C.
WRIGHT , A. MILLER & M. KANE , FEDERAL PRACTICE AND PROCEDURE : CIVIL § 2721,
at 475-76 (1973)).
Appendix - Page 4 of 14 6707
----------------------- Page 10-----------------------
including the costs of the foreclosure process, and a court-ordered foreclosure sale will
follow. Upon sale of the foreclosed property, the lender can obtain a deficiency
judgment against the borrower for amounts still owed after the sale. 8 The defaulting
borrower has a right to redeem the property if within twelve (12) months after the
judicial foreclosure sale the borrower pays the sale price (plus 8% per annum) and costs
incurred in the sale.9
Lenders may also sue on the note secured by the deed of trust if it reserves the
right to do so in the note. If the lender, or beneficiary, pursues judicial foreclosure or
sues on the note and a court judgment is obtained, "the beneficiary may not exercise the
non-judicial remedies."10
Non-judicial foreclosures are processed without court intervention, and may
be pursued by the lender only if authorized by the deed of trust.11 Upon default, the
lender or its trustee must record a notice of default reflecting the nature of the default and
the sum of the obligation owed and deliver a copy of the notice to the borrower. The
borrower does not have the statutory right of redemption provided for in judicial
foreclosures, but has an equitable right to redeem the property and halt foreclosure by
curing the default.12 If the default is not cured, the lender holds a foreclosure sale.
Because Alaska prohibits the lender from pursuing a deficiency judgment after a non-
8 See Hull v. Alaska Fed. Sav. & Loan Ass'n, 658 P.2d 122 (Alaska 1983).
9 AS 09.35.250.
10 AS 34.20.070(a).
11 Id .
12 AS 34.20.070(b).
Appendix - Page 5 of 14 6707
----------------------- Page 11-----------------------
judicial foreclosure, the lender's remedy is limited to the value of the property at the
foreclosure sale.13
The language of the statute at issue in this case, AS 34.20.070(b), establishes
the procedure by which the borrower can halt non-judicial foreclosure:
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 that 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.
(Emphasis added). Plaintiff emphasizes that AS 34.20.070(b) allows the addition of only
"attorney fees or court costs" and argues these terms cannot plausibly include any costs
other than what their plain meaning delineates - attorney's fees and costs incurred in
a court proceeding or defined by the Civil Rules. Plaintiff does not argue that the fees
included in his reinstatement amount are excessive or unreasonable, nor does he argue
that the fees were not actually incurred. Instead, plaintiff simply argues the fees were not
explicitly authorized by statute and therefore cannot be demanded as a condition of
reinstatement under AS 34.20.070(b).
A. Statutory Interpretation Of AS 34.20.070
Plaintiff urges a strict statutory interpretation of Alaska's non-judicial
foreclosure statute. According to plaintiff, the only sums the lender can require as a
condition to reinstatement are (1) the "sum in default," (2) attorney's fees, and (3) court
costs. Plaintiff goes to great lengths to rationalize an interpretation which only allows
for recovery of attorney's fees and court costs in a non-judicial foreclosure. However,
after considering the parties' arguments the Court must interpret Alaska law "according
13 AS 34.20.100.
Appendix - Page 6 of 14
6707
----------------------- Page 12-----------------------
to reason, practicality, and common sense, taking into account the plain meaning and
purpose of the law as well as the intent of the drafters."14
1. Attorney's fees and court costs
Plaintiff argues that attorney's fees are available in a non-judicial foreclosure
only when attorneys are hired to perform the foreclosure, and "court costs" can also be
recovered if they are within the costs defined in Civil Rule 79(f). Plaintiff's
interpretation of "court costs" is supported by Judge Gleason's decision in Bachmeier
v. Alaska Trustee, LLC et al.15 On the record, Judge Gleason stated that "court costs" are
defined "more broadly than costs incurred in court" and "include costs that would be
recoverable under Rule 79."16 While Rule 79 allows for recovery of costs not normally
thought to be literally incurred in court, such as the costs of publishing notices and the
costs of copying, these costs are only obtained by the prevailing party in a court
proceeding. Even if the legislature intended to extend the costs defined in Rule 79 to a
non-judicial matter, the costs that commonly attend a non-judicial foreclosure - e.g.,
recording fees and the costs of title searches - would be excluded.
Plaintiff devotes a significant portion of [his] brief disputing the notion that
the lender's costs and fees in this case constitute "attorney fees or court costs" within the
meaning of the statute. Plaintiff's contention that attorneys' fees can only be recovered
in a non-judicial foreclosure if a foreclosing lender hires attorneys to perform the
foreclosure seems to the Court an arbitrary distinction. Alaska Trustee does not dispute
14 Young v. Embley, 143 P.3d 936, 939 (Alaska 2006) (quoting Native Vil.
of Elim v. State, 990 P.2d 1, 5 (Alaska 1999)).
15 No. 3AN-09-08695 CI (Alaska, Super., June 8, 2010).
16 Exhibit 6 to Certificate of Chelsea Hicks in Support of Plaintiff's Motion
for Partial Summary Judgment, pg. 46.
Appendix - Page 7 of 14 6707
----------------------- Page 13-----------------------
this point and agrees that the costs of reinstatement it sought from plaintiff are not within
the plain meaning of "attorney fees or court costs." Instead, Alaska Trustee argues its
costs or fees are recoverable as the "sum in default."
2. The "sum in default"
The central dispute in this case is what costs a lender, or its beneficiary, may
include in the reinstatement amount, or "sum in default." Plaintiff argues interpreting
"sum in default" so as to include foreclosure fees and costs incurred by the beneficiary
would render "wholly superfluous the two recoverable fees that the legislature
specifically enumerated."17 According to plaintiff, "[t]here would be no reason for the
Alaska Legislature to specifically allow for 'attorney fees' and 'court costs' to be
included in the reinstatement amount if such fees and costs already constituted part of the
'sum in default.' "18 Alaska Trustee does not argue that attorney fees and court costs are
part of the sum in default. Instead, Alaska Trustee argues the sum in default necessarily
includes the other costs of a non-judicial foreclosure incurred by the lender and its
beneficiary.
In Hagberg v. Alaska National Bank ,19 the Alaska Supreme Court considered
whether a recent amendment to AS 34.20.070 authorizing the right to reinstatement
violated the contract clause of the Constitution.20 Hagberg is the first and only reported
Alaska Supreme Court decision to analyze the portion of the non-judicial foreclosure
17 Memorandum in Support of Plaintiff's Motion for Summary Judgment at
7.
18 Id . at 8.
19 585 P.2d 559 (Alaska 1978).
20 The amendment to AS 34.20.070 considered in Hagberg added the right
of reinstatement to the non-judicial foreclosure statute as it reads today.
Appendix - Page 8 of 14 6707
----------------------- Page 14-----------------------
statute pertinent to the case at hand.21 The lender in Hagberg argued that it had no duty
to apply the amendment, i.e., the right to reinstatement, to a deed of trust executed before
the amendment's effective date because the amendment's impact upon a lender's contract
remedy of accelerating principal due upon a borrower's default violated the contract
clause. The Court held that the amendment did not violate the contract clause because
the change in the lender's contract remedy "[did] not unreasonably affect the value of the
right."22 The Court reasoned that because reinstatement only alters the ability to
accelerate the loan, it "does not reduce the value of a beneficiary's note or the security
ensuring payment in any perceptible way."23 Thus, the Court construed the function of
reinstatement as placing the lender and borrower in the same position as they were before
the default.
Consistent with this reasoning, the Court recognized the inclusion of
foreclosure costs in the "sum in default":
The right of an obligor to call a halt to a non-judicial foreclosure
by paying costs and by bringing his payments current carries
within it an implied duty on the part of the beneficiary to accept a
tender of the sum in default and to seasonably advise the obligor
on request the amount in default.24
21 In Young v. Embley, 143 P.3d 936 (Alaska 2006), the Supreme Court
interpreted AS 34.20.070(b) only in so far as it related to who (e.g. junior lienholder,
senior lienholder, etc.) has the right to cure a default on a deed of trust. In a brief
discussion of what the statutory right of cure entails, the Embley opinion stated that
according to the statute, "foreclosure may be forestalled by payment of arrearages, costs
and attorney's fees." Id . at 942.
22 Hagberg , 585 P.2d at 561.
23 Id . at 562.
24 Id . (emphasis added).
Appendix - Page 9 of 14 6707
----------------------- Page 15-----------------------
Again, the Court noted that the non-judicial foreclosure process stops "where the
overdue amount is brought current and costs are paid."25 The Hagberg opinion never
specified what constitutes "costs," but it appears the Court contemplated certain costs to
be a part of the "sum in default."
While legislative history on the relevant portion of the statute is sparse,26 the
Alaska Supreme Court has held that the common law "is an especially important tool"
in interpreting AS 34.20.070 as the right of cure is "analogous" to the equitable remedy
of redemption.27 The Hagberg opinion confirms that the addition of the right of
reinstatement to AS 34.20.070 "does no more than codify a form of relief from forfeiture
which courts have often exercised" at equity.28 At common law, the goal of the Court's
equitable discretion to prevent forfeiture was to "save the respective parties harmless
from loss or damage and, if just and equitable, place them in the status quo of their
contract so as to permit them as vendor and vendee to each have the benefit of their
respective bargains."29 Whether a lender proceeds judicially or non-judicially, a
25 Id . at 561-562.
26 Plaintiff contends that the legislative history shows the legislature intended
"sum in default" to only include "the amount behind" in mortgage payments. Plaintiff
cites the amendment's sponsor, Representative Sullivan, as stating the "bill gives a 30
day grace period, provides a cure of paying the amoun[t] behind plus court and attorney
fees." [R. 255 (Exhibit 1 to Plaintiff's Opening Brief in Support of Motion for a
Preliminary Injunction, Minutes of the House Judiciary Committee, May 19, 1975,
testimony of Representative Sullivan.)] The Court does not find this brief cite of
legislative history controlling or that persuasive.
27 Young, 143 P.3d at 945.
28 Hagberg , 585 P.2d at 562.
29 Moran v. Homan , 501 P.2d 769, 771 (Alaska 1972) (quoting Ward v.
(continued...)
Appendix - Page 10 of 14 6707
----------------------- Page 16-----------------------
borrower's default is not a cost-free occurrence to the lender. In order to restore the
parties, both lender and borrower, to their position before the default - as "if no default
had occurred" - the lender, and his beneficiary, must be reimbursed the costs of
preparing the property for foreclosure. Only by allowing recovery of these fees will the
value of the lender's rights be preserved and the parties returned to their status quo prior
to the default. All of this supports construing the term "sum in default" as including the
costs of non-judicial foreclosure, other than attorney's fees and court costs, in so far as
it is necessary to return the parties to their status quo ante.30 The parties' deed of trust
in this case further supports this outcome.
B. Terms Of The Promissory Note And Deed Of Trust
The note and deed of trust on plaintiff's mortgage govern the parties' interests
and obligations with respect to the property. By defaulting on his mortgage payments,
plaintiff failed to meet his agreed-upon obligations in the deed of trust. AS 34.20.070
refers to lenders' and borrowers' deed of trust as the source of the lenders' right to
pursue non-judicial foreclosure:
If a deed of trust is executed conveying real property located in the
state to a trustee as security for the payment of an indebtedness
and the deed provides that in case of default or noncompliance
with the terms of the trust, the trustee may sell the property for
condition broken, the trustee, in addition to the right of foreclosure
and sale, may execute the trust by sale of the property, upon the
conditions and in the manner set forth in the deed of trust. . . .[31]
29 (...continued)
Union Bond & Trust Co., 243 P.2d 476 (9th Cir. 1957)).
30 This does not exclude the possibility the parties may narrow their
recoverable costs by the terms of their contract, i.e., their deed of trust.
31 AS 34.20.070(a) (emphasis added).
Appendix - Page 11 of 14 6707
----------------------- Page 17-----------------------
The legislature also deferred the foreclosure sale to "the terms and conditions and in the
manner set out in the deed of trust."32
Plaintiff argues that the terms in its deed of trust are not controlling and cannot
"subvert or otherwise trump" state law, but fails to address the statute's deference to the
conditions in a deed of trust. While plaintiff cites a parallel superior court case,
Bachmeier , as persuasive authority, Judge Gleason did inquire into the effect of the terms
of the deed of trust in that case. From the hearing transcript, it appears the terms in the
deed of trust in Bachmeier were different than the deed of trust in this action, which
specifically delineates the reinstatement amount as including costs of foreclosure not
limited to attorney fees.33 According to this Court's interpretation of AS 34.20.070, the
conditions outlined in the deed of trust control non-judicial foreclosure.
Alaska Trustee argues that AS 34.20.070 permits reinstatement only upon
payment of the entire sum in default as determined by reference to the parties' contract.
The deed of trust plaintiff signed provides that where the lender elects to non-judicially
foreclose upon the deed, the "borrower has a right to be reinstated."34 Pursuant to the
note and deed of trust, plaintiff agreed that in order to reinstate the terms of his loan he
would "tender in a lump sum all amounts required to bring [his] account current,
including . . . foreclosure costs and reasonable and customary attorneys' fees and
expenses properly associated with the foreclosure proceeding."35 Plaintiff's deed of trust
32 AS 34.20.080(a). See Cook Schumann & Groseclose, Inc. v. Brown &
Root, Inc., 116 P.3d 592, 596 (2005).
33 Exhibit 6 to Certificate of Chelsea Hicks in Support of Plaintiff's Motion
for Partial Summary Judgment, pg. 33-35.
34 Deed of Trust, Attachment 2 to the Santiago Affidavit, ¶ 10.
35 Id .
Appendix - Page 12 of 14 6707
----------------------- Page 18-----------------------
further provides that lender "shall be entitled to collect all expenses incurred in pursuing
the remedies provided . . . including, but not limited to, reasonable attorney's fees and
costs of title evidence."36
By signing the note and deed of trust, lender and borrower agreed to the terms
of the deed of trust and evinced their clear intent to a right of reinstatement conditioned
on payment of the costs the lender or its beneficiary incurred pursuing non-judicial
foreclosure. Plaintiff contends that even if the note and deed of trust are controlling, the
terms of the note specifically limit[] the reinstatement fees to those "not prohibited by
applicable law,"37 including AS 34.20.070. However, the Court does not find that AS
34.20.070 strictly limits or prohibits costs that are not attorney fees and court costs, but
rather contemplates recovery of the costs incident to foreclosure within the sum in
default. The Court finds nothing in the statute to preclude enforcement of the parties'
agreement.
In the alternative, plaintiff contends that, at most, the terms in the deed of trust
amount to a contract right defendant can pursue in court after the non-judicial
foreclosure. The Court finds this argument unpersuasive. One purpose of non-judicial
foreclosure is to minimize or avoid the costs of litigation. In choosing non-judicial
foreclosure over judicial foreclosure, the lender forfeits its right to a deficiency judgment.
The only financial stake the lender is left with is the amount it can obtain from the
foreclosure sale. Interpreting the statute to require the lender or beneficiary to bring a
36 Id .
37 Defendant offers the affidavit of Terry Bryan, president of Alaska Land
Title Association, to show that in Alaska it is "the longstanding custom of requiring
payment of the foreclosure fees and costs as part of the reinstatement." Exhibit A to
Opposition to Motion for Temporary Restraining Order, filed Oct. 16. 2009. While
industry custom is not determinative, it is useful to interpreting the parties' reasonable
expectations under the deed of trust.
Appendix - Page 13 of 14 6707
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separate lawsuit or a second foreclosure to recover its foreclosure expenses would
unreasonably diminish the value of the right. In addition, AS 34.20.070(a) specifically
provides that if the lender sues on the note secured by the deed of trust, it may not also
exercise non-judicial remedies. Therefore, a separate suit to obtain foreclosure fees and
costs after a non-judicial foreclosure is probably not permissible.
C. [This section deleted because inapplicable to the points on appeal.]
IV. CONCLUSION
The position advocated by the plaintiff is inconsistent with the historical
equitable relief available for mortgage indebtedness recognized by the Alaska Supreme
Court's decision in Hagberg , which emphasized the restoration of the parties to their
status quo ante default. Plaintiff's position also undermines the utility of non-judicial
foreclosure, contrary to the interests of both lenders and borrowers, by incentivizing
lenders to pursue deficiency judgments. There has been no claim that any of the costs
or fees sought to be recovered by Alaska Trustee are fraudulent or even unreasonable.
In light of these considerations, the Court concludes Alaska Trustee's inclusion of
foreclosure fees and costs in plaintiff's reinstatement quote, as permitted by the parties'
deed of trust, is consistent with Alaska's non-judicial foreclosure statute, AS 34.20.070.
For the reasons set out, plaintiff's motion for summary judgment is DENIED,
and defendant Alaska Trustee's cross-motion for summary judgment is GRANTED,
dismissing Counts I and III of Plaintiff's Third Amended Complaint.
DATED: 12/13/10
/s/ Andrew Guidi
SUPERIOR COURT JUDGE
Appendix - Page 14 of 14 6707
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