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Miller v. Fowler

Supreme Court of Alaska

June 29, 2018

CALVIN N. MILLER, Appellant,
v.
JUNE FOWLER and HOMESTEAD PROPERTY INVESTMENTS, INC., Appellees.

          Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Superior Court No. 3AN-13-08698 CI Paul E. Olson, Judge.

          William D. English, Law Office of William English, Anchorage, for Appellant.

          J.E. Wiederholt, Aglietti, Offret & Woofter, Anchorage, for Appellees.

          Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and Carney, Justices.

          OPINION

          BOLGER, JUSTICE.

         I. INTRODUCTION

         The purchaser of an apartment building filed suit to bar the seller's attempt to foreclose on the property after the purchaser stopped making payments. The purchaser also alleged that the seller had misrepresented the condition of the building's sewer lines at the time of sale. The superior court granted summary judgment in the seller's favor on all of the misrepresentation claims on the basis that they were barred by the statute of limitations. During the trial, the superior court denied the purchaser leave to amend his complaint. After a bench trial on the remaining claims, the superior court concluded that the seller did not wrongfully foreclose on the building because the purchaser was in default. The purchaser appeals these three decisions. We reverse the grant of summary judgment because the seller failed to establish an absence of material fact issues regarding when the purchaser's causes of action accrued. We vacate the order denying the wrongful foreclosure claim because the superior court erred when it found the purchaser in default. We affirm the denial of the purchaser's motion to amend.

         II. FACTS AND PROCEEDINGS

         A. Facts

         In 2009 Calvin Miller purchased from June Fowler by warranty deed an eight-unit, three-story apartment building located in Anchorage. Fowler is licensed by the Alaska Real Estate Commission and served as the listing licensee and listing brokerage on the sale. Miller and Fowler entered into a Purchase and Sale Agreement, and the sale was completed on September 2. Miller made a down payment of $20, 000 and financed the remaining balance with a promissory note to Fowler. The note provided that it would be repaid over a five-year term in monthly installments starting at $2, 000 and increasing to $2, 500 in October 2010. The note was secured by a deed of trust, which Fowler recorded on September 4.

         As part of the sale, Fowler provided the written property disclosure statement required under Alaska law.[1] In relevant part, Fowler disclosed defects in the building's private sewer line: "Sewage: has plugged up. 2006 correction to sewer pipe with excavation. All records of service calls at Alaska sewer and drain. Recent problems - very occassional [sic] caused by tenants mis-use." In addition to this written statement, Miller alleges that Fowler verbally told him at the time of the sale that any structural problems with the sewer line had been resolved and that any lingering issues were the result of tenant misuse. Miller claims that Fowler cited examples of tenants disposing of cat litter and dog waste in the toilet as the cause of any remaining drainage issues.

         Miller alleges that soon after his purchase of the building, the sewer line began posing significant issues. He claims that tenants complained of sewage backing up in the drains and overflowing from toilets, tubs, and sinks. According to Miller, at first he tried to address these issues himself. He and his wife, Vicky Powell, manually vacuumed the building's sewer line and transferred the waste to RV dump sites. Miller eventually hired plumbers to snake the sewer line and, after plumbing expenses started adding up, later bought his own snake. He claims that he sometimes snaked the line several times a week. As the back-ups and overflows recurred, Miller was forced to refurbish the bathrooms of several of the units.

         The sewer problems persisted and, in August 2012, Miller hired a plumber who used a camera to view the inside of the building's sewer pipe. The camera showed tree roots growing through the pipe and numerous breaks and buckles in the pipe. Miller claims that, after learning of the extent of the damage to the pipe, he began to investigate the building's history of sewer issues. Miller contacted a former owner of the building who had purchased it from Fowler shortly before Miller had. According to Miller, the former owner had owned the building for about six months and had experienced similar issues with the sewer line. The former owner exhausted his funds trying to fix the sewer issues and ultimately lost the building in foreclosure to Fowler, who in turn sold it to Miller. Miller also spoke to some of the building's tenants, many of whom were longtime residents. Several of them told Miller that the sewage issues had been ongoing for years, including during the time Fowler owned the building. In addition, Miller consulted Anchorage officials who told him they had received several complaints about the building's sewer line over the years, but had ultimately been informed that the issues were resolved.

         Miller decided to reroute the building's sewer line to connect it with a different segment of the public sewer. He claims that he secured a permit for the reroute and hired engineers to design it, a process that was complicated by the proximity of the new sewer line to Campbell Creek. He alleges he spent over $100, 000 on this process but ultimately exhausted his funds before the new line was constructed.

         To help Miller pay for the repairs, Fowler agreed to a series of modifications to the terms of the promissory note. First, in August 2012, Fowler agreed to a modification that deferred and reduced monthly payments and reduced the note balance. The note balance was reduced on the condition that Miller provide Fowler "Proof of Completed Repairs and Certification of Inspection by the Municipality of Anchorage of the Sewage System ... by December 20, 2012." Fowler agreed to a second modification to the terms in September that further reduced monthly payments and the note balance. Like the first modification, the note balance reduction was conditioned on Miller providing the same proof of repairs by December 20, 2012.

         Fowler agreed to a third and final modification on November 12, 2012. Only this modification is directly at issue in this appeal. Unlike the prior two modifications, which took the form of typed letters from Fowler to the escrow bank, the third modification is a handwritten one-page note from Fowler to Miller and Powell. The third modification provides for two additional changes: (1) "No payments of principal or interest on loan . . . until June 2013" and (2) "An additional credit of $80, 000 to be deducted from loan balance upon completion of certification of sewer upgrades."

         In February 2013 counsel for Fowler sent Miller a letter declaring that the modifications were "null and void" and stating that Miller would be offered no reductions to offset the expenditures on the sewer line. The letter instructed Miller to fully pay all past due amounts on the note by May 15 and provide proof of insurance for the building; it also requested copies of permits that he had secured for the repair project. After Miller apparently failed to comply, Fowler commenced nonjudicial foreclosure proceedings on the building in May 2013. The notice of default stated that Miller had breached the deed of trust by failing to make payments on the note since September 2012.

         B. Proceedings

         On August 7, 2013 Miller sued Fowler and her company, Homestead Properties Investment, Inc., to stop the foreclosure.[2] Miller's complaint raised several claims against Fowler: (1) wrongful foreclosure; (2) breach of contract; (3) breach of statutory and professional duties; (4) statutory and common law negligent misrepresentation; (5) willful misrepresentation; (6) common law intentional misrepresentation and fraud; (7) breach of the duty of good faith and fair dealing; (8) extinguishment of the loan under illusory promise and promissory estoppel; and (9) slander of title. Miller asked the court to enjoin the foreclosure, to enforce the modifications to the note, and to award damages. Fowler counterclaimed for a judgment of judicial foreclosure and for a judgment on the promissory note. The superior court issued a preliminary injunction enjoining nonjudicial foreclosure during the pendency of the suit.[3]

         In October 2013 Fowler moved for summary judgment on all of Miller's claims. Fowler argued that Miller's claims were barred by the statute of limitations, because they were based on misrepresentations that occurred four years prior, well beyond the two- and three-year statutes of limitations applicable to tort and contract claims, respectively.[4] Miller opposed summary judgment, urging that under the discovery rule his causes of action did not accrue until long after the sale date. In the alternative, he argued that Fowler was equitably estopped from pleading a statute-of-limitations defense.

         In April 2014 the superior court granted summary judgment in Fowler's favor on all of Miller's claims relating to the initial sale of the building in 2009: breach of statutory and professional duties, negligent misrepresentation, willful misrepresentation, intentional misrepresentation and fraud, and breach of the duty of good faith and fair dealing. The superior court concluded that the discovery rule did not delay the accrual of these claims because, given "the serious and systemic nature of the [building's sewage] problem and evidence that... Miller was aware of the problem soon after the sale, a reasonable person would have investigated further well before three years had passed." The superior court declined to grant summary judgment on Miller's claims relating to the nonjudicial foreclosure because they were based on recent events and thus were not barred by any statute of limitations.

         Miller's remaining claims against Fowler proceeded to a three-day bench trial beginning in September 2015. On the second day of the trial, Miller moved to amend his complaint to assert the defense of unilateral mistake to Fowler's counterclaim for foreclosure. This motion was made on the basis of testimony by Powell that the December 20, 2012 completion deadline had not been mentioned in any verbal discussions with Fowler and the date the parties had actually discussed was in 2013 rather than 2012. The superior court denied the motion, stating: "It is so untimely. It is so prejudicial now at the time of the second day of the trial. It's never been pled. It has never been the position of the plaintiffs since the beginning of this case. I find it overly prejudicial."

         In December 2015 the superior court issued an order concluding that Fowler did not wrongfully foreclose on the building. The court reasoned that the third modification, though on its face silent as to any deadline for completion of repairs, implicitly imposed a December 20, 2012 deadline. Accordingly, the court reasoned, "Miller defaulted on the agreement when he failed to complete the sewer repairs by December 20, 2012." It concluded that because Miller was in default and failed to cure, Fowler did not wrongfully foreclose on the building.

         Miller appeals three issues: the grant of summary judgment on the statute of limitations issue, the order concluding that Fowler did not wrongfully foreclose because Miller was in default, and the denial of his motion to amend the pleadings mid-trial to include an affirmative defense of unilateral mistake.

         III. STANDARD OF REVIEW

         "We review a grant of summary judgment de novo, 'affirming if the record presents no genuine issue of material fact and if the movant is entitled to judgment as a matter of law.' "[5] "We must determine 'whether any genuine issue of material fact exists,' and in so doing all factual inferences must be drawn in favor of- and the facts must be viewed in the light most favorable to - the party against whom summary judgment was granted."[6] The accrual date on which the statute of limitations begins to run is a question of fact.[7] For this reason, summary judgment is "[o]rdinarily ... an inappropriate means of ascertaining when a statute of limitations commences."[8] "Where, however, there exist uncontroverted facts that determine when a reasonable person should have been on inquiry notice, 'we can resolve the question as a matter of law.' "[9]Whether such uncontroverted facts exist is reviewed de novo, "adopting the rule that best reflects precedent, reason, and policy."[10] We similarly review the superior court's interpretation of contract language de novo.[11] Finally, we review the superior court's denial of a motion to amend the pleadings for abuse of discretion.[12] A superior court abuses its discretion when its denial "is manifestly unreasonable."[13]

         IV. ...


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