Alaska’s New Security Interest Law

Security interest law concerns security interests in personal property rather than real property.  The law is generally known as UCC 9, or the Uniform Commercial Code section 9.  We find the statute at Alaska Statute 45.29.101-709.    Alaska recently adopted the 2010 changes to the security interest law.  The law is effective for security interests after July 1, 2013.

The law instituted significant changes between the old recording rules and the new rules.  The impact of not recording your security interests may mean that you can’t collect your debt if the debtor becomes bankrupt.

 

What you need to record a lien.

You must give value to a debtor.  The debtor must have rights in the collateral.  The Debtor must give an acknowledged security agreement to you.

Properly Recording Perfects the Lien.

Properly recording the security interest provides notice to the world of your rights and perfects your interest.  The new rule changes substantially change the recording rules.

Account Debtors Must Comply With Notice of Debt Assignment

The statute includes new provisions that need debtors to pay the assignee of a debt rather than the original creditor.  A debtor’s failure to pay the assignee after notice of an assignment leaves the debtor liable to pay twice.

Filing Financing Statements

You will still use form UCC-1 to file the financing statement.  In most circumstances you will only need to file a single document and not multiple documents in several jurisdictions.  You don’t need to get the debtor’s signature on the financing statement to file the document.  You also don’t need to have the organization’s ID or the form of their entity.  If the proper filing place is in Alaska you can file online here.

Foreclosure After Default

You can still engage in self-help repossession of property as long as you can go ahead without breaching the peace.  You can also start a judicial foreclosure.  There are also still the rights of proceeding with a strict foreclosure.

Substance over Form

The statute will apply to transactions, even if you word your agreement in a way to try and escape the statute.  The bankruptcy court is likely to consider whether there is an obligation and whether it is secured by collateral. For example, the sale of Accounts can still be considered simply a UCC 9 security agreement transaction.  The risks of not recording the financing statement are that someone else may claim priority over you or a bankruptcy judge could rule that you are not perfected and therefore not collateralized.  Similarly transactions where you keep title may be treated as a security interest, requiring perfection.  It also applies to consignments, sales of intangibles, sales of promissory notes and accounts.

The New Location Rules

Where you record the financing statement depends on the debtor.  The debtors place determines the choice of law and the place of filing.  Registered organizations must be recorded at the place where they are organized.  Alaska companies in Alaska.  Delaware companies in Delaware.  Individual debtors in the state of their residence.  Other entities at the chief executive office.

Foreign Debtors are recorded in their own country, if their laws are like our UCC9; otherwise, you will need to record in Washington DC.  For all Canadian provinces, except Quebec you would file in Canada.  For other countries you can take a look at Prof. Arnold S. Rosenberg’s work at Thomas Jefferson School of Law here.

Other Means of Perfection

There are other means of perfection such as control or automatic perfection.  The control generally concern accounts, such as deposits, investments, electronic chattel paper and letters of credit.

Recording your Financing Statements

The financing statement lasts for six years without a continuation.  When you search the state records you do not know whether the recorded documents were actually authorized.  They are based solely on the name of the debtor as typed by the submitting party.  All financing statement once recorded stay in the system, even if they have been terminated. If the financing statement has been wrongfully terminated your interest may be subject to the existing claims.  Accordingly, reviewing the state documents is merely the start of your due diligence.

Debtor Name Trap

Many people working for companies don’t actually know what the official name for their business is as recorded in the State’s records.  If you simply take your debtor’s word for the name of the enterprise, it is likely the name will be incorrect and that could leave you unsecured.  It is a best practice to get a copy of the record recorded with the state.  You want the name from the articles of incorporation.  When the debtor is an individual you want to use their name as typed on their current drivers license issued by the State of Alaska.

 

For more information on the changes to Alaska UCC 9 give us a call.

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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 Wrestles with Veil Piercing

In an Alaska Supreme Court opinion issued on Friday, August 17th, the court wrestled with corporate veil piercing issues and their interplay with bankruptcy law.  Only corporations are normally liable for their debts.  The officers, shareholders and directors aren’t liable for corporate debts.  This concept of limited corporate liability is referred to as a veil.  Veil piercing refers to a court’s decision to disregard the veil and hold people behind the veil liable.   In a split decision the court ruled that the jury award for damages against the officer, shareholder and directors would stand.

The Claim

An employee sued a  corporation and its president for back wages in superior court. The corporation filed for Chapter 11 bankruptcy the very next day. The bankruptcy court discharged the corporation’s debts.  The superior court dismissed the corporation, but  allowed the employee to proceed to trial  against the president on a veil-piercing theory. A jury found that the corporation was a mere instrumentality of the president, and that the president owed the former employee wages under a bonus agreement. Continue reading “Alaska Wrestles with Veil Piercing”

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

 

Arbitration — Be Careful What You Wish For

After undergoing major heart surgery in 2001, Dr. Zev Lagstein, a nuclear cardiologist, made a claim on a disability insurance policy he had purchased from Certain Underwriters at Lloyd’s of London. Lloyd’s pussyfooted for years only to eventually deny the claim, so Dr. Lagstein sued in the United States District Court for the District of Nevada. Lloyd’s moved to arbitrate pursuant to the policy, and the District Court granted the motion.

Illustrating the maxim “be careful what you wish for,” the arbitration was wildly successful for Dr. Lagstein, resulting in a total damages award of over $6 million against Lloyd’s, including $4 million in punitive damages. Lloyd’s, unhappy with the result of the arbitration it had demanded, successfully moved in the District Court to vacate the award.4 LAGSTEIN V. CERTAIN UNDERWRITERS

Dr. Lagstein appealed, and this court reversed and remanded with instructions to confirm the award. The District Court then confirmed the award but denied Dr. Lagstein’s request for interest and attorneys’ fees. Dr. Lagstein now appeals the District Court’s ruling on interest and attorneys’ fees, and Lloyd’s cross-appeals requesting return of an alleged overpayment to Dr. Lagstein from a fund which held the award in escrow pending the outcome of litigation. As discussed below, we REVERSE and REMAND on the issues of interest and attorney’s fees, and AFFIRM on the issue of overpayment.

Lagstein, M.D v. Certain Underwriters at Lloyd’s of London

Filed August 5, 2013

To discuss this or other litigation matters call for an appointment at 907-375-9226

 

If you don’t take care of details the first time — it may cost you more later.

Schaub v. Schaub

If you don’t take care of details the first time — it may cost you more later.

A couple divorced in 1992. The divorce decree did not divide the parties’ property. The man now receives military retirement benefits from over 22 years of service in the United States military. In October 2010 the woman filed a motion seeking a post­.  The man opposed, arguing that the woman’s claim was barred by (1) the statute of limitations; (2) laches; and (3) estoppel. The superior court concluded that the woman could properly bring her motion, that her motion was not barred by the statute of limitations, and that laches barred only the retrospective division of the man’s retirement benefits. The man appealed. The court affirmed the decision on the merits, although it remanded on other issues.  If you don’t get the Alaska court to issue a property decree when you divorce your spouse can return decades later and ask for more.

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Statutes of Limitations in Alaska

Petro Alaska v. Davis Wright Tremaine

Corporation’s shareholders brought a derivative suit against a shareholder-director and the corporation’s former attorneys for fiduciary fraud, fraudulent conveyance, legal malpractice, and civil conspiracy. After an evidentiary hearing, the superior court ruled all the claims were time-barred. The Alaska Supreme Court affirmed the dismissal of all claims accept two claims against the law firms.  Thirty five pages of information on statutes of limitations, tolling, discovery rule, and the distinction between attorney fee awards as damages versus costs.

Statutes of Limitations in Alaska

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Alaska Attorney Headed to Annual ABA Conference

ABA Conference on Construction Law
Clayton Walker, Jr.

PRESS RELEASE

Who:  Clayton Walker, Jr. of Alaska Law Offices, Inc., 240 E. Tudor Ste. 230, Anchorage, AK 99503  907-375-9277.

What:  The American Bar Association (ABA) Forum on the Construction  Annual Meeting:  Themed: Surfing the Next Wave: The Future of Construction Law.

When April 25-27

Where:  DanaPoint, Calif.

Why:  Building the Best Construction Lawyers.

The American Bar Association (ABA) Forum on the Construction Industry will hold its annual meeting, entitled “Surfing the Next Wave: The Future of Construction Law and Practice,” April 25-27 in Dana Point, Calif. The event will focus on technological advances for construction projects; the future of government regulation for preference programs and workforce issues; the future of construction insurance, bonding, and construction law practice; and the globalization of construction alternative dispute resolution.

 

 

  • THE LEGAL ISSUES ARISING FROM FUTURE ON-SITE CONSTRUCTION TECHNOLOGIES

The construction industry is finally focusing on its lack of productivity and efficiencies compared to other industries and is looking to advanced technology to change the paradigm. This session looks at the potential roles of emerging super hi-technology in construction, including robotics, modular construction, new contracting and administration techniques, and some key legal issues that may arise with the use of these new and emerging construction concepts, methods and materials.

 

  • PREFERENCE PROGRAMS IN PUBLIC PROJECTS: WILL THIS TREND CONTINUE?

This session is an opportunity to learn about future trends in federal, state and local government procurement, and particularly the expansion of programs to involve disadvantaged, small and local, disabled veteran-owned, minority-owned, and women-owned contractors, subcontractors, and suppliers, to require use of U.S. and local products and services (Buy America, ARRA and state/local initiatives) to protect particular industry sectors (anti-bid shopping laws), and to provide greater access to bonding

  •  THE FUTURE OF CONSTRUCTION INSURANCE AND BONDING

What is the future of construction insurance and bonding and the law that governs them? Will domestic and international underwriting standards, coverages, and policy language begin to merge? Will there continue to be coverage for construction defects? Will subcontractor default insurance continue to make inroads into the surety market and will law governing it develop? Will legislatures eliminate the statutory requirements for bonds?

 

  • THE CONSTRUCTION LAWYER’S TECHNOLOGY TOOLBOX

(Presented in conjunction with the ABA Law Practice Management Section)

The ABA Model Rules of Professional Conduct now state that a lawyer should keep abreast of changes in the law and its practice, “including the benefits and risks associated with relevant technology.” This session showcases both hardware and software beneficial to a construction lawyer’s practice, while both in and out of the office. These new practice management tools have the potential to enhance client service many-fold, and are likely integral to the new paradigm that is “practicing construction law” in the 21st Century.

 

  • LEGAL SERVICES ARISING FROM NEW PROCUREMENT AND PROJECT MANAGEMENT TECHNOLOGIES

New technologies are revolutionizing the way projects are bid, negotiated, memorialized, and managed. This session examines the legal services that will likely be spawned by future advances in procurement and back office project management, such as internet-based procurement, reverse online auctions, on-line real time simultaneous contract drafting and

 

  • FORECASTING CHANGE IN CONSTRUCTION LAW PRACTICE — IDENTIFYING THE TRENDS AND TOOLS FOR THRIVING IN A CHANGING MARKETPLACE

This session explores how the construction business is changing and where the practice of construction law is headed. Given the dramatic need for construction services in the developing world, how will this globalization of the industry impact U.S. construction lawyers? What effect will the emergence of the “non-firm” law firm, contract lawyers, and outsourcing of legal services have? How will growing pressure to control fees and costs drive law firms’ use of technology and the possible use of construction litigation funding? Future consumers of legal services will likely demand counsel with higher levels of specialization, so how can small firms and solo practice lawyers compete in a more segmented legal market?

 

  • THE FUTURE IS NOW — THE IMPACT OF GLOBALIZATION ON CONSTRUCTION DISPUTE RESOLUTION

The project may be in your backyard, but the architect is from Sweden, the general contractor is owned by a Spanish conglomerate, and the steel is from China. Your local project may use the FIDIC contract forms, not AIA; and the UN Convention on the International Sale of Goods, not the UCC; and the New York Convention, not the Federal Arbitration Act, may be the governing law. Dispute resolution is as likely to be under ICC, ICDR, LCIA, or UNCITRAL rules as AAA. International norms are revolutionizing construction contracting and will influence the dispute resolution process. This session will explore the impacts of globalization on the future of domestic dispute resolution.

 

For more information on the event click here:

http:://www.americanbar.org/groups/construction_industry.html.

 

For more information regarding this seminar, you can contact Mr. Walker at chwalker@q69.990.myftpupload.com or visit our website at www.aloinc.com.

Preprinted Court Divorce Forms Causes $600,000 Loss

Divorce Forms

 Divorce Forms Aren’t for Everyone

Camilla and Jerry were married for 13 years and had 3 children.  They decided to divorce and used preprinted court forms to work out their own settlement.  The Florida State Court forms that they used had provisions for the payment of alimony.  The form left two blanks to describe the amount, duration and limitations on the alimony payments.  They agreed to the payment of $10,000 a month until 2020 on one line.  On the other line they put until the earlier of the 18th birthday of the middle daughter or until Carmella remarried.  This was a five year difference and $600,000 hung in the balance.

The parties all moved to  Alaska.  They domesticated their order in Alaska and then had a dispute about whether the $10,000 a month stopped in 2015 or 2020.

The courts explored both the Florida and Alaska rules for resolving internal conflicts in the drafting of documents,   Rules of interpretation, Conflicts of law and other rules.  The trial court reached one result.  If the ruling was based on the evidence, the ruling could stand.  If the ruling was based on the applicable rule of law it could be reversed.   The Alaska Supreme Court applied the rules differently and reversed.    Read the decision to learn who won.

http://www.courts.alaska.gov/ops/sp-6768.pdf