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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Thomas Taffe and Devony Lehner v. First National Bank of Alaska (9/27/2019) sp-7411
Notice: This opinion is subject to correction before publication in the P ACIFIC 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@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
THOMAS TAFFE and )
DEVONY LEHNER, ) Supreme Court No. S-16854
)
Appellants,
) Superior Court No. 3HO-13-00213 CI
)
v.
) O P I N I O N
)
FIRST NATIONAL BANK OF ) No. 7411 - September 27, 2019
ALASKA, )
)
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Homer, Anna Moran, Judge.
Appearances: Thomas Taffe and Devony Lehner, pro se,
Homer, Appellants. Bruce A. Moore and Andrew B.
Erickson, Landye Bennett Blumstein LLP, Anchorage, for
Appellee.
Before: Bolger, Chief Justice, Winfree, Stowers, Maassen,
and Carney, Justices.
WINFREE, Justice.
I. INTRODUCTION
Borrowers brought suit alleging that their lending bank had engaged in
fraudulent real estate lending practices. The bank responded that statutes of limitations
barred the borrowers' fraud claims. Following an evidentiary hearing to establish
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relevant dates for the statutes of limitations inquiry, the superior court entered judgment
and awarded attorney's fees in the bank's favor. The borrowers appeal, arguing that the
superior court erred in its factual and legal determinations and otherwise violated their
due process rights. Seeing no error or due process violation in the superior court's
rulings, we affirm its decisions.
II. FACTS AND PROCEEDINGS
Thomas Taffe and Devony Lehner borrowed money from First National
Bank of Alaska to develop a Homer planned community subdivision, with some tracts
1
reserved for conservation and outdoor activities.
This 2006 loan was secured by a deed
of trust covering the entire property. Taffe and Lehner first subdivided the land into a
group of lots with a single remainder tract. Once they recorded the subdivision plat, First
National recorded a new deed of trust covering only the subdivided lots, releasing its
security interest in the remainder tract.
In 2008 Taffe and Lehner obtained a second loan fromFirst National, using
it to retire the first loan and develop additional lots. They recorded a second plat
subdividing the remainder tract into additional lots and several new tracts. First National
recorded a deed of trust - signed by Taffe and Lehner - covering the entirety of the
subdivision except lots already sold.
By early 2009 Taffe and Lehner became concerned, expecting First
National to have released its security interest in the unsubdivided tracts as it had done in
the first transaction. Late in 2009 Taffe and Lehner wanted to sell one tract to raise
money for loan payments and other expenses. Taffe and Lehner had to negotiate the
tract's releasefromFirst National's deed oftrust securityinterest;First National's release
terms included restrictions on Taffe and Lehner's use of the sale proceeds.
1
See AS 34.08.030 (providing for planned community declaration).
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Taffe and Lehner struggled to meet the loan's repayment terms and
requested an extension, ultimately executing a change in terms agreement with First
National in February 2010; despite Taffe and Lehner's continued objection that First
National's deed of trust was not intended to cover the unsubdivided tracts, the collateral
expressly remained the same. Following an additional extension, in November 2012
First National sent a default notice stating its intent to foreclose on unsold subdivided
lots and two unsubdivided tracts. An amended foreclosure notice in January 2013 stated
that First National also intended to foreclose on the additional unsubdivided tracts still
covered by the 2008 deed of trust. When Taffe and Lehner ultimately were unable to
pay the loan, First National foreclosed and acquired the unsold land by offset bid at
auction in April 2013.
Taffe and Lehner - self-represented - subsequently contested the
foreclosure proceeding in superior court. They filed a complaint for declaratory relief
in November 2013, primarily seeking to set aside the foreclosure sale and subsequent
title transfers. In March 2014 they amended their complaint to add fraud claims,
including that First National fraudulently induced them to take the second loan. Taffe
and Lehner alleged that First National had promised to execute a new deed of trust
secured by only the unsold subdivision lots after they recorded the second plat and to
release the unsubdivided tracts as it had done when they recorded their first plat. Taffe
and Lehner alleged that the second loan's terms violated their reasonable expectations
and that the deed of trust was an ambiguous adhesion contract that should be interpreted
in their favor. Taffe and Lehner again amended their complaint in December 2014,
seeking additional declaratory relief and stating a variety of fraud claims.
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Following motionpracticeanddiscovery, TaffeandLehner suggestedtheir
2
fraud claim against First National was fraud in the execution,
rather than the fraud in the
inducement alleged in their complaint. In July 2015, after Taffe and Lehner apparently
abandoned their claimto set aside the foreclosure, the superior court dismissed Taffe and
Lehner's requests for declaratory relief regarding the foreclosure and ruled that their
remedies were limited to damages. In July 2016 the court granted First National
summary judgment on most of Taffe and Lehner's remaining claims. The court denied
summary judgment on the contractual ambiguity claim, ruling that there was a genuine
dispute whether the deed of trust was fully integrated, and on the fraud claim that First
National misrepresented the terms of the 2008 deed of trust.
First National subsequently sought to extinguish the remaining claims as
barred by statutes of limitations. "[T]he ordinary operation of the statute of limitations
3 But under Alaska's discovery
looks to 'the date on which the plaintiff incurs injury.' "
rule, the statute of limitations does not begin to run until "a reasonable person has
enough information to alert that person" to a potential cause of action or to "begin an
inquiry to protect his or her rights."4
2 Fraud in the execution refers to executing a legal instrument, based on the
fraudulent misrepresentation of another, wholly different from the instrument a person
was led to believe was being executed. 17A C.J.S. Contracts § 202 (2019).
3 Jarvill v. Porky's Equip., Inc., 189 P.3d 335, 338 (Alaska 2008) (quoting
Russell v. Municipality of Anchorage, 743 P.2d 372, 375 (Alaska 1987)).
4 Reasner v. State, Dep't of Health &Soc. Servs., Office of Children's Servs.,
394 P.3d 610, 614 (Alaska 2017) (quoting Mine Safety Appliances Co. v. Stiles, 756 P.2d
288, 291 (Alaska 1988)).
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Applying the discovery rule to the two-year statute of limitations for tort
5
claims,
First National argued that Taffe and Lehner should have been prompted to
inquire whether it intended to fulfill its alleged promise as early as August 2008, when
First National did not execute a new deed of trust after the second plat was recorded;
probably no later than February 2010, when they executed a change in terms agreement
that did not alter the collateral; and certainly by October 2011, when they sent First
National a memorandum apparently contending that it should release its liens to allow
them to sell unsubdivided tracts. Because more than two years elapsed between these
occurrences andTaffeand Lehner's November 2013complaint,FirstNationalcontended
that the statute of limitations barred the fraud in the inducement claim.
Applying the discovery rule to the three-year statute of limitations for
6 First National argued that Taffe and Lehner should have been prompted
contract claims,
to inquire about the terms of the 2008 deed of trust by late 2009, when they disputed the
need for a release from First National to sell a tract, and no later than February 2010,
when they executed a change in terms agreement that did not alter the collateral.
Becausemorethan threeyears elapsed between either occurrenceandTaffeand Lehner's
November 2013 complaint, First National contended that the statute of limitations barred
their fraud in the factum claim.
Taffe and Lehner opposed, arguing that no injury occurred until November
2012, when First National sent its foreclosure notice, and that they therefore brought
their claims within the statutes of limitations. Taffe and Lehner disputed several of First
National's assertions, but they presented no supporting evidence.
5 AS 09.10.070(a).
6 AS 09.10.053.
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Following an evidentiary hearing, the superior court ruled in First
National's favor on its statutes of limitations defenses. The court found that Taffe and
Lehner knew enough to pursue a claim in 2009, when they questioned the need for a
release fromFirst National, and no later than February 2010, when they executed the first
change in terms agreement with First National with no change in collateral. The court
specifically found that by early 2009, Taffe and Lehner should have realized that First
National "had a different view" of the agreement; they had questioned First National why
a new deed of trust had not been issued. The court discounted as unreasonable Taffe and
Lehner's arguments that they had no reason to believe First National did not intend to
reduce its collateral. The court found that Taffe and Lehner "had all the information they
needed to move forward with the [fraud] claim . . . [by] February [] 2010," and
concluded that their fraud claim was barred by both the two-year statute of limitation on
torts and the three-year statute of limitations on contracts.
The superior court entered final judgment in First National's favor and
awarded it attorney's fees and costs of roughly $54,000 under Alaska Civil Rules 82
7
and 79.
Taffe and Lehner appeal, arguing that the superior court erred in both its
substantive decisions and its attorney's fees award in First National's favor.
7 Alaska R. Civ. P. 82 (providing that "the prevailing party in a civil case
shall be awarded attorney's fees"); Alaska R. Civ. P. 79 (providing that "the prevailing
party is entitled to recover costs . . . necessarily incurred in the action").
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III. DISCUSSION
A. The Superior Court Did Not Err Or Violate Due Process Rights By
8
Conducting A Pretrial Evidentiary Hearing.
Taffe and Lehner argue that the superior court legally erred by resolving
at a pretrial evidentiary hearing the disputed facts about when the statute of limitations
for their claims began to run. But we have stated on numerous occasions that superior
courts should hold pretrial evidentiary hearings to resolve whetherastatuteoflimitations
9
has run. The superior court therefore did not err by resolving these factual disputes at
an evidentiary hearing.
Taffe and Lehner also contend that at the evidentiary hearing the superior
court violated their constitutional due process rights by limiting the proceeding's length,
assuming the role of fact finder, not determining incontrovertible facts, restricting the
hearing to the statutes of limitations, and denying their right to a jury trial. But Taffe and
Lehner offer no specific facts to suggest that the hearing's length violated their due
process rights, and their other arguments stand in direct opposition to our case law.
8 Whether a trial court follows the correct legal framework is a question of
law reviewed de novo. Bibi v. Elfrink , 408 P.3d 809, 815 (Alaska 2017). "We review
constitutional questions de novo, adopting the most persuasive rule of law in light of
precedent, reason, and policy." State v. Planned Parenthood of Alaska , 171 P.3d 577,
581 (Alaska 2007).
9 See, e.g., Reasner, 394 P.3d at 614; Gefre v. Davis Wright Tremaine, LLP,
306 P.3d 1264, 1278 (Alaska 2013); Catholic Bishop of N. Alaska v. Does 1-6, 141 P.3d
719, 725 (Alaska 2006); Cikan v. ARCO Alaska, Inc., 125 P.3d 335, 339 (Alaska 2005);
John's Heating Serv. v. Lamb, 46 P.3d 1024, 1033 (2002); Pedersen v. Zielski, 822 P.2d
903, 907 n.4 (Alaska 1991).
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The purpose of a pretrial evidentiary hearing on a statute of limitations
question is to resolve factual disputes about when a statute of limitations began to run. 10
An evidentiary hearing occurs before trial, and the superior court must act as the fact
11 Although considering a claim's substantive merits sometimes may be
finder.
necessary, the court generally should limit its determination to the facts underlying a
statute of limitations defense and not reach other issues.12 And as long as the hearing
reaches only the statute of limitations, the constitutional right to a jury trial is not
violated.13
We therefore reject Taffe and Lehner's claims of legal error and due
process violations.
10 Cikan, 125 P.3d at 342 ("[D]isputes concerning the statute of limitations
raise preliminary questions of fact that should ordinarily be decided by the court after
conducting an evidentiary hearing.").
11 Id. at 339 ("[T]he task of interpreting and applying a statute of limitations
traditionally falls within the province of the courts."); see also John's Heating Serv., 46
P.3d at 1033 n.28 (remanding for statute of limitations decision and noting "[t]he judge
becomes the factfinder for purposes of determining the applicability of the statute of
limitations" (quoting Decker v. Fink, 422 A.2d 389, 394 (Md. 1980))).
12 See Williams v. Williams, 129 P.3d 428, 431 (Alaska 2006) ("[W]e also
recognize that addressing the substantive merits of a case in such a preliminary hearing
can create considerable tension with the procedural rights to which parties are entitled,
including the right to a jury trial.").
13 Gefre, 306 P.3d at 1279 ("But to the extent the superior court does not
address the substantive merits of a case, the use of evidentiary hearings to decide
statutes-of-limitations issues is constitutional [regarding right to a jury trial].").
-8- 7411
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B. The Superior Court Did Not Err When Applying The Statutes Of
Limitations.14
Taffeand Lehner challengethesuperior court'sapplicationofthediscovery
rule on several grounds. They argue that they did not suffer an injury from First
15
that
National's fraud until they were threatened with foreclosure in November 2012,
the superior court did not determine the date their injury occurred, and that they made
reasonable but unproductive inquiries tolling the statutes of limitations until they
received actual notice in November 2012. These arguments lack merit.
1. Injury
As First National notes, Taffe and Lehner's claims proceed from their
contention that First National made misrepresentations when they signed the 2008 deed
of trust. But that raises the question of when Taffe and Lehner were injured by the
alleged misrepresentations. Our recent Brooks Range Petroleum Corp. v. Shearer
16
decision is instructive.
14 "When the superior court holds an evidentiary hearing to resolve factual
disputes about when a statute of limitations began to run, we review the resulting
findings of fact for clear error." Christianson v. Conrad-Houston Ins. , 318 P.3d 390, 396
(Alaska 2014). "[W]e review de novo the legal standard used to determine accrual dates,
and we review de novo questions regarding the applicable statute of limitations, the
interpretation of that statute, and whether that statute bars a claim." Gefre, 306 P.3d at
1271 (footnotes omitted).
15 SeeJarvill v. Porky's Equip., Inc., 189 P.3d 335, 338 (Alaska2008) ("[T]he
ordinary operation of the statute of limitations looks to 'the date on which the plaintiff
incurs injury.' " (quoting Russell v. Municipality of Anchorage, 743 P.2d 372, 375
(Alaska 1987))).
16 425 P.3d 65 (Alaska 2018).
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Brooks involved a venue dispute in a lawsuit for breach of an employment
17
contract, in part with respect to claims of negligent and intentional misrepresentation.
The critical issue was determining when the employee suffered actual harm, i.e., when
18 which we said "also arises in the context of statutes of
the tort was complete,
limitations."19 We then discussed two previous statutes of limitations decisions
concluding that a tort is complete when the plaintiff has "an appreciable injury" arising
from the tortious conduct20 and that the statute of limitations cannot begin to run until the
plaintiff suffers injury or harm.21 On the facts of Brooks, we concluded that the
employee's misrepresentation claim - that his employment agreement was represented
to be for at least ten years, but his employment was terminated after two and a half years
- did not become complete until the employee's termination, when the employee
22 We stated that until the employment termination,
actually suffered a pecuniary loss.
the employee had suffered no loss despite the alleged misrepresentation two and a half
years earlier.23
The fundamental questions in this case, then, are (1) when did Taffe and
Lehner suffer an appreciableinjury fromFirst National's alleged2008misrepresentation
17 Id. at 68, 72.
18 Id. at 72-73.
19 Id. at 73.
20 Id. (discussing and quoting Jones v. Westbrook, 379 P.3d 963, 967-69
(Alaska 2016)).
21 Id. (discussing Austin v. Fulton Ins. Co., 444 P.2d 536, 539-40 (Alaska
1968)).
22 Id.
23 Id.
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and (2) when did they have inquiry notice, i.e., when should they reasonably have
discovered, the appreciable injury sufficient to start the statutes of limitations? Although
the superior court's ruling was focused on the discovery and inquiry notice question, in
this case the appreciable injury and the discovery date are essentially the same.
The superior court found that in early 2009 Taffe and Lehner were aware
of and complaining to First National that the unsubdivided tracts had not been released
from the 2008 deed of trust. The failure to release the tracts meant that Taffe and
Lehner's title to the tracts was clouded, arguably an appreciable injury in and of itself.
But the injury became more appreciable later in 2009, when, as the superior court found,
Taffe and Lehner wanted to sell a tract and had to negotiate with First National for a
release of that tract from the deed of trust to effectuate the sale. As part of that
negotiation, Taffe and Lehner contended that the deed of trust was not supposed to cover
the tract, and First National responded: "[R]ead your Deed of Trust." First National
released the tract for sale after reaching an agreement with Taffe and Lehner on the
disposition of the sale proceeds, but it refused to release any other tracts from the deed
of trust. This meant that Taffe and Lehner's title to the tracts remained clouded. Finally,
as the court found, in February 2010 Taffe and Lehner were forced, under protest, to
negotiate a loan extension and change of terms agreement including leaving the
unsubdivided tracts covered by the deed of trust. The February 2010 agreement meant
that Taffe and Lehner's title to the unsubdivided tracts remained clouded and they would
be forced to negotiate any future tract sales with First National. This is an appreciable
injury.
Because Taffe and Lehner's misrepresentation claimwas complete no later
than February 2010 and by that same time Taffe and Lehner had notice of their alleged
injury - tracts that they contended were represented in 2008 to have clear title had
clouded title, and there were related restrictions on sale proceeds - the superior court
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correctly concluded that the applicable statutes of limitations for Taffe and Lehner's
fraud claims began to run no later than February 2010.
2. Exact date of injury
Taffe and Lehner assert that the superior court erred by not determining the
exact date their injury occurred. But it was unnecessary to establish an exact date
because the court found that Taffe and Lehner "had all the information they needed to
move forward with the claim from December 21, 2009 [when First National released a
tract] through February 2, 2010 [when the first change in terms agreement was entered]."
Taffe and Lehner point to no evidence that this finding was clearly erroneous, and there
was no reason for more specificity in light of the timing.
3. Inquiry
Taffeand Lehner contend that thesuperior court, despitedetermining when
areasonableperson should havebegun inquiring into thealleged fraud,never determined
whether they made such inquiries. But the court found that they started inquiring in early
2009 whether First National intended to execute a new deed of trust, when they
questioned why it had not been done.
4. Equitable tolling
Taffe and Lehner argue in the alternative that the superior court applied the
wrong standard when determining whether their inquiries were reasonable. They cite
cases discussing the doctrine of equitable estoppel tolling the statute of limitations.24
24 "[T]o establish equitable estoppel, 'a plaintiff must produce evidence of
fraudulent conduct upon which it reasonably relied when forbearing from the suit.' "
Waage v. Cutter Biological Div. of Miles Labs., Inc ., 926 P.2d 1145, 1149 (Alaska 1996)
(quoting Pedersen v. Zielski, 822 P.2d 903, 908-09 (Alaska 1991)). "[A] party should
be charged with knowledge of the fraudulent misrepresentation or concealment only
when it would be utterly unreasonable for the party not to be aware of the deception."
(continued...)
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First National responds that Taffe and Lehner failed to present any evidence that it
misrepresented or concealed the fraud claim's existence and that its responses to their
inquiries clearly indicated it did not intend to execute a new deed of trust.
Equitable estoppel does not apply if there is no misrepresentation or
concealment regarding a claim's existence. Taffe and Lehner point to no evidence of
concealment, and the superior court's finding regarding their discovery of the alleged
fraud by February 2010, at the latest, contradicts their assertion of further concealment.
C. The Superior Court Did Not Abuse Its Discretion By Not Ruling On
Taffe And Lehner's Declaratory Judgment Request. 25
Taffe and Lehner contend that the superior court erred by not granting their
petition for declaratory judgment and request for expedited consideration. First National
counters that Taffeand Lehner essentially waived the issues by incorporating thepetition
into an amended complaint and by not showing why expedited consideration was needed
and that the issues have since been mooted.
Under Alaska's Declaratory Judgment Act, in "an actual controversy in the
state, the superior court . . . may declare the rights and legal relations of an interested
26
party seeking the declaration, whether or not further relief is or could be sought."
There was no requirement that the court make a declaratory judgment ruling.
24 (...continued)
Id . (quoting Palmer v. Borg-Warner Corp., 838 P.2d 1243, 1251 (Alaska 1992)).
25 "We review a trial court's denial of . . . declaratory relief for abuse of
discretion . . . ." Smallwood v. Cent. Peninsula Gen. Hosp., 151 P.3d 319, 322 (Alaska
2006).
26 AS 22.10.020(g) (emphasis added); see also Brause v. State, Dep't of
Health & Soc. Servs., 21 P.3d 357, 358 (Alaska 2001) ("The language of the
[Declaratory Judgment Act] makes it explicit that whether to issue a declaration is a
discretionary decision committed to the superior court.").
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"[D]eclaratory relief is generally used to settle a controversy that has yet to 'ripen into
violations of law,' or 'to afford one threatened with liability an early adjudication
without waiting until an adversary should see fit to begin an action after the damage has
27 "[D]eclaratory judgments are rendered to clarify and settle legal relations,
accrued.' "
and to 'terminate and afford relief from the uncertainty, insecurity, and controversy
giving rise to the proceeding.' A court should decline to render declaratory relief when
neither of these results can be accomplished."28
Taffe and Lehner petitioned for declaratory judgment at the same time they
were litigating their fraud and contract claims. The issues raised in their petition
overlapped with - and in some part were identical to - the fraud and contract claims
stated in their complaint. The superior court ultimately dismissed the fraud and contract
claims, and we are affirming that dismissal. Taffe and Lehner have made no showing
that, absent a viable fraud or contract claim, their claims for declaratory relief raised
different issues that could be addressed. We therefore reject their argument; we cannot
conclude that the superior court abused its discretion, and there is no need to reach the
question whether expedited consideration should have been granted.
D. The Superior Court Did Not Abuse Its Discretion By Awarding
Attorney's Fees To First National.29
Taffeand Lehner assert that the superior court erred by awarding attorney's
fees to First National, based on arguments about the length of its various filings and
27 Lowell v. Hayes , 117 P.3d 745, 755-56 (Alaska 2005) (quoting C HARLES
ALAN WRIGHT ET AL., F ED. P RAC. & P ROC.: C IV. § 2751 (3d ed. 1998)).
28 Id. at 755 (quoting Jefferson v. Asplund , 458 P.2d 995, 997-98 (Alaska
1969)).
29 We review the amount of an attorney's fees award for abuse of discretion.
Williams v. GEICO Cas. Co., 301 P.3d 1220, 1225 (Alaska 2013).
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unspecified errors it made during litigation. First National sought final judgment and
attorney's fees of roughly $54,000, equal to 20% of its "reasonable and necessary
attorney's fees," under Alaska Civil Rule 82(b)(2), and the court granted First National's
motion. Because Taffe and Lehner point to no evidence whatsoever demonstrating that
the superior court abused its discretion by following Rule 82, we affirm the attorney's
fees award.
IV. CONCLUSION
The superior court's decision is AFFIRMED.
-15- 7411
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