Contesting Alaska Deed of Trust Foreclosures

[Deed of Trust Foreclosure Sales

 

Many attorney’s knee jerk response is that deed of trust foreclosure sales don’t get set aside.  This certainly is the general rule.  However, Alaska has a long history of setting aside deed of trust foreclosure sales, even if they are only rare occasions.  Alaska is particularly troubling in that the statute provides for redemption rights only to the extent provided for in the deed of trust.  Because the statute does not require redemption rights the banks don’t allow any redemption rights.  Accordingly, the courts have allowed sales to be set aside.  Due process violation allegations have been made, but the Alaska Supreme Court has not reached the question by finding other reasons to allow the sales to be set aside.  Accordingly, the issue remains open whether a due process claim could be successful.  The following are excerpts taken from various pleadings and briefs filed in cases in Alaska.  Rather than waiting to provide a more cohesive analysis on the topic, I thought I’d make these resources generally available to those that might either use them as a launching point or to engage in debate on the issues.

Alaska Courts set aside Trustee Foreclosure Sales

“Equity Abhors a forfeiture and will seize upon slight circumstances to relieve a party therefrom.” Rosenberg v. Smidt, 727 P.2d 778, 783 (Alaska 1986) citing, Jameson v. Wurtz, 396 P.2d 68 (Alaska 1974).  The remedy of setting aside the sale will be applied in cases which reach unjust extremes.  Rosenberg v. Smidt, 727 P.2d 778, 783 (Alaska 1986) citing Semlek v. National Bank of Alaska, 458 P.2d 1003, 1006 (Alaska 1969).  If the bidders are allowed to claim the property after paying only a small fraction of the value of the property the matter has reached an unjust extreme.   See, e.g., Rosenberg v. Smidt, 727 P.2d 778 (Alaska 1986).

 

The Alaska Supreme Court has stated that

“. . .defects in the mechanics of the trustee’s exercise of the power to foreclose may render the foreclosure sale voidable.  Generally, mere inadequacy of price is not sufficient by itself to require the inadequacy of the sale price is (1) “so gross as to shock the conscience and raise a presumption of fraud or unfairness,” or (2) is coupled with other irregularities in the sale procedures, then invalidation of the sale may be justified.

Gross inadequacy is measured by reference to the fair market value of the property at the time of the sale.  Fair market value for these purposes has been defined as not the fair “forced sale” value of the real estate, but the price which would result from negotiation and mutual agreement, after ample time to find a purchaser, between a vendor who is willing, but not compelled to sell, and a purchaser who is willing to buy, but not compelled to take a particular piece of real estate.  Baskurt v. Beal, 101 P.2d 1041, 1044 (Alaska 2004).

 

Furthermore, “. . .a trustee has a duty to take reasonable steps to act impartially and in such a way as “not to sacrifice the debtor’s property.”  Id at 1046.

Alaska Deed of Trust Bidders Do Not Earn BFP Status when on Inquiry Notice of Defenses to Sale or they are Bad Faith Purchasers.

Alaska Stat. 34.90.030 grants bona fide purchasers at a foreclosure sale a conclusive presumption that the provisions for a non-judicial sale were performed if the trustee recites the factual specifics of their compliance with statutory requirements.  The Alaska Supreme Court has applied the statute in Rosenberg v. Smidt, 727 P.2d 778, 784 (Alaska 1986).  In Rosenberg the court stated that to qualify as a BPF the purchasers must be good faith purchasers for value and without notice of any defect.  Id.  Furthermore, a bad faith purchaser or one on inquiry notice does not become a BFP due to the recitations in the Trustee’s deed. Semlek v. National Bank of Alaska, 458 P.2d 1003 (Alaska 1969).

1) Foreclosure Purchaser Inquiry Notice may Defeat BFP Status: 

In addressing the quality of the bidder’s “notice,” the property owner only must show the bidders were on inquiry notice of potential defects in the sale to deprive the Bidders of BPF status.  Modrok v. Marshall, 523 P.2d 172 (Alaska 1974).

“It is a settled rule of property that circumstances, which suggest outstanding equities in third parties, impose a duty upon the purchaser’s to make a reasonable investigation into the existence of a claim.  Given suspicious facts, the status of bona fide purchaser turns upon whether there was a prudent inquiry into their import.”  Modrok v. Marshall, 523 P.2d 172 at 174 (Alaska 1974).

 

Facts that put bidder on inquiry notice of Defects of sale include:

 

1)                  Insufficiency of the Sale Price in comparison to the fair market value of the property sold;

2)                  Absence of the Owner at the Sale along with insufficient Trustee recitation of facts regarding the owners actual notice of the sale date.

 

When the owner is absent from the sale and the trustee’s deed fails to recite factual details in the deed then a bidder is on inquiry notice and is deprived of BFP status.  The court explained that requiring factual recitals tends to assure the requirements of law concerning mailing and delivery are complied with.  In the present case the trustee’s deed identifies the notice of sale which contained a specific sale date which was different than the actual sale date.  The trustee’ deed is completely silent on why the sale was continued or whether any factual steps were taken to apprise the owner of the new sale date.  This lack of any facts addressing this absence of notice to the Owner placed the Bidders on inquiry notice and deprived them of their BFP status.

2) Bad Faith Purchaser Conduct Defeats BFP Status:

A bad faith purchaser or one on inquiry notice does not become a BFP due to the recitations in the Trustee’s deed. Semlek v. National Bank of Alaska, 458 P.2d 1003 (Alaska 1969).  The Plaintiff’s following conduct caused their conduct to be bad faith:

1)            They created a collusive buying group to chill the sale and lower the auction price.

2)            They failed to address make sufficient inquiry into the items in which they were on inquiry notice;

3)            They failed to notify the owner of the sale so that she could timely object to the sale during the free statutory sale cancellation procedure.

Bidders had a duty to not chill the sale and take deliberate steps to lower the auction sale price.  .” Cf. McHugh v. Church, 583 P.2d 210, 214 (Alaska 1978).  The trustee must take “reasonable appropriate steps to avoid sacrifice of the debtor’s property and his interest.  Id.  “The trustee under a deed of trust generally regarded as owing a fiduciary duty to both the trustor and the beneficiary and is required to perform his duties impartially.   McHugh v. Church, 583 P.2d 210, 214 (Alaska 1978).  The trustee must take “reasonable appropriate steps to avoid sacrifice of the debtor’s property and his interest.  Id.  The Bidders were on notice that the borrowers were occupying the house before bidding on the property.

3)                  Possible factual Allegations

  1. The Bidders were the only bidders present at the sale.
  2. The Bidders created a collusive group to prevent competitive bidding at the sale thereby defeating the objective and purpose of a public sale.
  3. The Deed of Trustee attempted sale fails to comply with the Alaska Statutory requirements.
  4. The Bidder’s failed to promptly notify the Owners of the sale until after the lapse of A.S. 34.20.080(g) trustee rescission thereby intentionally depriving the Owner or Seller  the opportunity to correct any sale deficiencies.
  5. The Bidders were on notice that the deed of trust itself did not include redemption rights.
  6. The U.S. Constitutional Rights of due process which include notice and opportunity to be heard as guaranteed under the 14th Amendment was a matter of public record.
  7. The Alaska Constitution Article 1, Section 7 which affords due process rights to Alaska citizens was a matter of public record.
  8. The lender and Trustee breached the duty to seasonably advise the obligor on request of the amount in default.  Hagberg v. Alaska Nat’l Bank, 585 P.2d 559 (Alaska 1978).
  9. The lender and Trustee converted the owner’s right of reinstatement or satisfaction of the debt by breaching its duty to seasonably advising her of the cure amount or the redemption amount.  Young v. Embley, 143 P3d 936 (Alaska 2006).
  10. The Deed of Trust Trustee and lender have a duty to timely communicate the reinstatement and satisfaction amount; and, to be reasonably willing and able to accept a reinstatement or satisfaction from the debtor.   Nystrom v. Buckhorn Homes, 778 P.2d 1115; Alaska 1989).
  11. Perhaps the lender and trustee also have a duty to inspect the property, the tax rolls and consider the fair market value of the premises to fulfill its obligation to not forfeit the owner’s equity in the property.  This duty arises under the trustee’s  duty to act impartially to the trustor and beneficiary of the trust by informing the beneficiary of the continued sale date but failing to announce the continuance to the trustor.  These rights arise from the duty to not to sacrifice the debtor’s property for an insufficient amount.  McHugh v. Church, 583 P.2d 210  (Alaska 1978).  I propose the lender and Trustee also has a  duty to notify the trustor of the sale results within the trustee’s ten day timeline to rescind the sale thereby not sacrifice the owner’s equitable rights of redemption.

ALASKA COMMERCIAL LEASE DEFINITIONS PRIMER

Alaska Commercial Lease Definitions
Commercial Space in Alaska

COMMERCIAL LEASE DEFINITIONS PRIMER

 Commercial leases contain terms that many people don’t know and definitions would help them.  Some commercial leases are the subject of complex, lengthy, and intense negotiations.  To be proficient at such negotiations, one must be familiar with certain basic concepts and be able to anticipate and protect one’s client from problems that may occur during the term of the lease.  This post addresses definitiions of some of the principal legal and financial terms applicable to commercial leases.  The most important legal and financial terms in commercial leases include the following:

Rent, including base rent, percentage rent, increases in rent, taxes, and operating expenses, and rent abatement;

  •             Renewals or extensions of the lease;
  •             Security deposits;
  •             Promotional funds;
  •             Uplift allowances;
  •             The condition of the premises;
  •             Lease term;
  •             Options to terminate;
  •             Options to purchase;
  •             Casualty and condemnation;
  •             Maintenance and repairs;
  •             Indemnities;
  •             Defaults (landlord as well as tenant);
  •             Attorneys’ fees;
  •             Guaranties of lease;
  •             Assignment and subleasing;
  •             Americans with Disabilities Act provisions;
  •             Entry by landlord;
  •             Environmental issues;
  •             Anticompetition clauses;
  •             Landlord limitation of liability;
  •             Substitution of premises;
  •             Mandatory remodeling;
  •             Rights to lease adjacent space;
  •             Landlord’s lien; and

Rules and regulations of landlord

  Continue reading “ALASKA COMMERCIAL LEASE DEFINITIONS PRIMER”

Alaska Applies Single Occurrence Clause

Friday, August !7, 2013

USAA v. Neary, 

Supreme Court Nos. S-14580/14600

The Backdrop

In a single occurrence, a child fired a single shot from a revolver belonging to his parents, killing a friend and seriously wounding another. The victims parents sued the child, his parents, and their insurance company.

The insurance policy provided a $300,000 limit for “Each Occurrence” of “Personal Liability.” The trial court multiplied the limits by the number of insured and ruled that the policy afforded $900,000 of coverage.   The trial court explained that the child and his parents were each entitled to a separate per-occurrence policy limit.

Continue reading “Alaska Applies Single Occurrence Clause”

Property Damage Lawyers Defeats Insurance Company Exclusion Claim

The Knowles owned rental property. Fidelity Co-operative Bank (Fidelity) owned the mortgage on the property.   Nova Casualty Company (Nova) insured the property. A 2008 tropical storm caused substantial damage to the building interior.   The Town  closed the building. The Knowles submitted a claim for reimbursement for the water damage with Nova, which denied the claim. Due to Nova’s denial of coverage the Knowles could not afford to repairs the building.  The building remained vacant and was vandalized. Nova also refused to cover the vandalism claim. The Knowles defaulted on their mortgage due to the lack of rent.  Rather than foreclosing In 2010, Fidelity, individually and as assignee of the Knowles, pursued the insurance claim against Nova for the property losses and the lost business income under the all-risk insurance policy. The trial court granted summary judgment for the insurer. The  Appeals Court reversed and ordered the parties to trial on the damage claims.

The full decision is  here.

If you are a lenderproperty owner, property manager or real estate agent with a client that has incurred property damage that you think an insurance policy should cover, give us a call at 907-375-9226 for an appointment to review the matter.

Clayton Walker, JD

Anchorage Business Attorney

Alaska Law Offices, Inc.

 

Real Property Lawyers win New Trial in Landlord “Bachelor Pad Ad” Case

Real Property Lawyers applied the Fair Housing Act’s section 3604(c)  to a Craigslist advertisement for a one-bedroom apartment. The Connor Group placed an ad on Craigslist for an apartment in Dayton, Ohio, advertising a “great bachelor pad for any single man looking to hook up.” The Miami Valley Fair Housing Center brought suit against the Connor Group for violating the Fair Housing Act. The case went to trial.  The jury found that the ad did not violate the act. Miami Valley appealed the district court’s denial of their  Rule 59 motion for a new trial. The Connor Group cross-appealed because after winning the trial they were denied a recovery of their attorney fees.   On appeal the court sent the parties back for a new trial.  The court ruled that the jury instructions improperly stated the law.  The full case can be found here.

If you are an Alaskan landlord, Alaskan property manager or Alaskan real estate agent and want to avoid Fair Housing Act violations call us at 907-375-9226 to review your advertisement policy.

Clayton Walker, JD

Anchorage Real Property Lawyer

 

 

Real Property Lawyer Wins Client a Right to Trial on HAMP Violation Claim

A real property lawyer filed a case to protect his client against a bank foreclosure action.  The homeowner lost the right to a trial on motion in the trial court.  The Real property lawyer appealed the case for the homeowner.

On August 8th, 2013, the 9th Circuit overturned the dismissal of a HAMP violation claim.  The court held that under the Home Affordable Modification Program (HAMP) the bank was contractually required to offer the homeowner a permanent mortgage modification after the homeowner complied with the banks Trial Period Plan (TPP).  The court held the homeowners complaint sufficient because they showed that the bank accepted and retained the payments demanded under the TPP, event though the bank failed to offer or notify the homeowner they were entitled to the modification as required by the TPP.

Corvello v. Wells Fargo Bank, NA doing business as America’s Servicing Company, Doing business as Wells Fargo Home Mortgage can be found here.

 

If you are an Alaskan homeowner, or a realtor with a homeowner listing, in default on a home mortgage or have recently received a notice of foreclosure and would like a Real Property Lawyer to help you consider your options give us a call at 907-375-9226 for an appointment.

Clayton Walker, JD