WILLIAM C. COX, Appellant,
v.
ESTATE OF STEVE COOPER and DOROTHY COOPER, Appellees.
Appeal
from the Superior Court No. 3AN-15-10101 CI of the State of
Alaska, Third Judicial District, Anchorage, William F. Morse,
Judge.
Clayton H. Walker, Jr., and James L. Gaines, Alaska Law
Offices, Inc., Anchorage, for Appellant.
Chris
D. Gronning, Bankston Gronning O'Hara, P.C., Anchorage,
for Appellees.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and
Carney, Justices.
OPINION
STOWERS, CHIEF JUSTICE
I.
INTRODUCTION
This
case concerns the interpretation of Alaska's usury
statute, AS 45.45.010. The question on appeal is whether the
statute provides for a maximum interest rate on contract or
loan commitments in which the principal amount exceeds $25,
000. William C. Cox argues that the statute provides for a
maximum interest rate of 10.5% on all loans in which the
principal exceeds $25, 000. The Estate of Steve Cooper and
Dorothy Cooper (collectively "the
Coopers")[1] argue that parties may contract for any
interest rate if the principal of the contract or loan
commitment exceeds $25, 000.
The
superior court initially agreed with Cox that loans over $25,
000 had a maximum legal interest rate of 10.5%, but the
Coopers moved for reconsideration and provided the court with
statutory history. This statutory history convinced the court
that the Coopers were correct and that AS 45.45.010 did not
limit the interest rate for contract or loan commitments over
$25, 000. Cox appeals.
Cox
also challenges the superior court's decision to consider
statutory history when ruling on the Coopers' motion for
reconsideration and the superior court's decision to
grant the Coopers reasonable attorney's fees under Alaska
Civil Rule 82.
We
affirm the superior court's ruling in all respects.
II.
FACTS AND PROCEEDINGS
A.
Facts
The
material facts in this case are undisputed. In October 2008
the Coopers loaned Cox $325, 000. Cox executed a deed of
trust note with a 20% annual interest rate to be repaid by
April 2009. He provided his house as security for the note.
In June 2010 the Coopers lowered the interest rate to 8% and
extended the term to April 2011. In July 2015 the trustee
gave notice of default and sale and foreclosure, providing
for a public sale in October 2015. According to the notice,
Cox owed a principal sum of $315, 500 plus interest accrued
under the 20% rate of $98, 450.72 and under the 8% rate of
$46, 909.19.
B.
Proceedings
Three
days before the foreclosure sale was scheduled Cox filed a
complaint, alleging that the 20% interest rate was usurious
under AS 45.45.010 and seeking forfeiture of the remaining
interest owed pursuant to AS 45.45.040.[2] The next day Cox
recorded a notice of lis pendens, and the trustee postponed
the sale.[3]
The
Coopers moved to dismiss, and Cox moved for summary judgment.
The superior court ruled in favor of Cox on the usury issue,
concluding that the maximum legal interest rate on loans over
$25, 000 was 10.5%. The court therefore denied the
Coopers' motion to dismiss and granted Cox's motion
for summary judgment with respect to the usury issue.
The
Coopers sought reconsideration of the court's decision.
They contended that the superior court had misapplied AS
45.45.010 and our decisions in Riley v. Northern
Commercial Co.[4] and Rocks tad v. Erikson,
[5] as
well as overlooking the legislative history and the
longstanding practice of the lending industry. They explained
that "[i]n all candor, [the court's] decision was
completely unexpected." The Coopers asserted that
"[t]he significance of [the] Court's decision to the
lending industry [could not] be overstated" because
"[i]t mean[t], among other things, that all existing
loans made in Alaska . . . where the loan exceeded $25, 000
and the interest rate exceeded 10.5% [were] usurious."
They also said that "the legislative history presented
to [the court] ha[d] been incomplete, and in some cases
distorted" and that they "ha[d] undertaken a more
complete review of the legislative history."
In
support of their motion, the Coopers filed an affidavit of a
real-estate appraiser as to lending industry practice, 143
pages of photocopies of former statutes, and a listing and
graph of federal fund rates dating back to 1954. The superior
court invited Cox to respond and the Coopers to reply to that
response. In its order inviting further briefing the court
explained that it would "consider the new material about
legislative history" but would "not consider the
new evidence or argument about Alaska's lending
market." Cox responded to the Coopers' motion for
reconsideration and attached one interest-rate graph. The
Coopers replied, attaching 59 pages of statutory history.
The
superior court granted the motion for reconsideration. It
first reiterated that "while it would consider . . . new
material about legislative history, it would not consider the
proffered new evidence or argument about Alaska's lending
market." It then explained that the Coopers'
presentation of the statutory history convinced the court
that they were correct and that the statute applies only
where there is no rate set by contract or the loan does not
exceed $25, 000. It also noted that dicta in our case law
supported this result. The Coopers then moved for summary
judgment and the superior court granted the motion.
The
Coopers moved for an award of attorney's fees under
Alaska Civil Rule 82. Cox opposed, characterizing the
Coopers' request for attorney's fees as a request for
a deficiency judgment. He argued that the Coopers had elected
to sell the home through a non-judicial foreclosure sale and
that AS 34.20.070, the statute authorizing non-judicial
foreclosure sales, allows for recovery of attorney's
fees.[6] Since a separate statute allowed for
recovery of attorney's fees, Cox argued Rule 82 did not
apply. The Coopers replied, clarifying that they were not
requesting a deficiency judgment, that they were only
requesting attorney's fees incurred during their defense
of Cox's lawsuit, and that they were not requesting
attorney's fees incurred in conducting the foreclosure.
The superior court awarded the Coopers attorney's
fees.[7]
III.
STANDARD OF REVIEW
"The
interpretation of a statute is a legal question which we
review de novo. 'We interpret... Alaska law according 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.' "[8]
We
review the decision to grant a motion for reconsideration for
abuse of discretion.[9] "An abuse of discretion exists if we
are 'left with a definite and firm conviction on the
whole record that the trial judge has made a mistake.'
"[10]
"We
review an award of attorney's fees for abuse of
discretion, but 'the determination of which statute or
rule applies to an award of attorney's fees is a question
of law that we review de novo.'[11]
IV.
DISCUSSION
A.
The Interest Rate At Issue In This Case Was Not
Usurious.
Alaska
Statute 45.45.010 contains two subsections relevant to this
case. These provide:
(a) The rate of interest in the state is 10.5 percent a year
and no more on money after it is due except as provided in
(b) of this section.
(b) Interest may not be charged by express agreement of the
parties in a contract or loan commitment that is more than
the greater of 10 percent or five percentage points above the
annual rate charged member banks for advances by the 12th
Federal Reserve District on the day on which the contract or
loan commitment is made. A contract or loan commitment in
which the principal amount exceeds $25, 000 is exempt from
the limitation of this subsection.[12]
Cox
argues that subsection (a) provides the general interest rate
for all loans not covered by subsection (b). And he contends
that the second sentence of subsection (b) provides that
subsection (b) does not cover loans greater than $25, 000.
Thus, he argues, subsection (a) must apply to all loans in
which the principal exceeds $25, 000. The Coopers argue that
subsection (b) governs all loans where there has been a
contracted-for interest rate. They contend that if the
principal of the contract or loan commitment exceeds $25,
000, then the parties may contract for any interest rate.
Although
we have never directly addressed this question, our cases
strongly support the Coopers' interpretation of the usury
statute. In Crissey v. Alaska USA Federal Credit
Union we held that federal usury law, not state usury
law, applied to loans issued by federally chartered credit
unions.[13] But in two footnotes we expressed our
opinion that state usury law would not have covered the loan
agreement at issue even if it were not preempted by federal
law. In the first footnote we explained, "[I]n their
brief to this court the Crisseys cite AS 45.45.010. This
statute imposes a legal rate of interest for loans of $25,
000 or less ..., "[14] And in the second footnote we said:
Notably enough, since legislative amendment in July 1981, our
state usury statute has applied only to loans of $25, 000 or
less (and then only when no other statute preempts the
claim). Consequently, in November 1981, when the Crisseys
entered into their $50, 000 loan agreement with Alaska USA,
no state statute governed the interest rate.[15]
In
Rockstad v. Erikson we considered whether one
promissory note for $26, 000 that was accompanied by two
checks constituted one loan or two smaller loans for the
purposes of AS 45.45.010(b).[16] Erikson argued that there had
been one loan for over $25, 000, so the loan was outside the
reach of AS 45.45.010.[17] Rockstad argued that AS 45.45.010
applied because there were two separate loans, each under
$25, 000.[18] We concluded that there had only been
one loan for over $25, 000, which meant the loan was not
usurious.[19]
Finally,
in Bibi v. Elfrink we considered a loan that
originally was under $25, 000 but was modified multiple times
and rose above $25, 000.[20] We affirmed the superior court's
determination that there had only been one
loan.[21] "Consequently, when the March 2008
modification brought the single loan's principal over
$25, 000, the interest rate cap no longer
applied."[22] Because Bibi had "paid her entire
loan principal plus all interest, both legal and usurious,
... under AS 45.45.030, [she was] entitled to double whatever
portion of these payments constituted usurious interest, that
is, interest above the statutory maximum at the
time."[23] We explained that on remand the superior
court should "calculate what amount of Bibi's total
payments were applied toward usurious interest generated by
the original loan and the two modifications that preceded the
principal's rise over $25, 000 in March 2008, the
point at which the usury statute ceased to
apply."[24] But we cautioned that "applying a
legal hypothetical interest rate from the beginning may push
the date at which the loan's principal would have
exceeded $25, 000 past March 2008, thereby extending the
period to which the usury statute applied to the loan.
If so, the new date should be taken into account when
calculating Bibi's recovery."[25]
Thus,
while we have never been called on to decide whether the
usury statute contains a maximum interest rate for loans over
$25, 000, we have consistently assumed that it does not. A
close examination of the language of AS 45.45.010 and the
legislative history of the statute support our prior
statements on this issue: there is no maximum legal interest
rate under AS 45.45.010 for contract or loan commitments with
express interest rates in which the principal exceeds $25,
000.
"
'When we construe a statute, we look at both its plain
language and ... its legislative history.' We use a
sliding scale approach under which '[t]he plainer the
statutory language is, the more convincing the evidence of
contrary legislative purpose or intent must be.'
'[W]henever possible, we construe a statute in light of
its purpose.' "[26]
The
simplest interpretation of AS 45.45.010 is that subsection
(b) governs all contract or loan commitments with express
interest rates. By its plain text the first sentence of the
subsection applies to all contract or loan commitments with
express interest rates. The second sentence then exempts
certain contract or loan commitments, those with a principal
exceeding $25, 000, from the limitation in the first
sentence-that is, from the maximum interest rate. Thus
contract or loan commitments with principals over $25, 000
may contain any express interest rate. Cox's reading
requires taking the interest rate in subsection (a), which
provides the interest rate for money after it is due and
which contains no mention of contract or loan commitments,
and making it the maximum interest rate only for contract or
loan commitments over $25, 000, when contract or loan
commitments are otherwise governed exclusively by subsection
(b). The Coopers' reading is more persuasive.
The
statutory history of AS 45.45.010 confirms this reading. The
original statute from 1900 stated:
The rate of interest in the District shall be eight per
centum per annum, and no more, on all moneys after the same
become due; on judgments and decrees for the payment of
money; on money received to the use of another and retained
beyond a reasonable time without the owner's consent,
expressed or implied, or on money due upon the settlement of
matured accounts from the day the balance is ascertained; on
money due or to become due where there is a contract to pay
interest and no rate specified. But on contracts interest at
the rate of twelve per centum may be charged by express
agreement of the parties, and no more.[27]
Thus,
the statute consisted of two sentences, the first addressing
situations where there was no agreed-upon interest rate and
the second addressing contract or loan commitments where
there was an express interest rate. As the following
recitation will show, these two sentences would become
subsections (a) and (b), and this basic division still exists
in the current statute.
The
territorial legislature made minor changes to the statute in
1913, 1933, 1935, and 1939, but there were no relevant
changes to the structure of the statute.[28] The statute
first significantly changed in 1962 with the formal revision
of the Alaska Statutes.[29] The revised statute was divided into
subsections. The first sentence became subsection (a), and
the categories covered in the first sentence were numbered
(1) through (5). The second sentence became subsection (b)
and the organization of the sentence was changed slightly.
After the 1962 revision AS 45.45.010 read:
(a) The rate of interest in the state is six per cent a year
and no more on (1) money after it is due; (2) judgments and
decrees for the payment of money, except that a judgment or
decree founded on a contract in writing providing for the
payment of interest until paid at a specified rate exceeding
six per cent a year and not exceeding 10 per cent a year
bears interest at the rate specified in the contract if the
interest rate is set out in the judgment or decree; (3) money
received to the use of another and retained beyond a
reasonable time without the owner's express or implied
consent; (4) money due upon the settlement of matured
accounts from the day the balance is ascertained; or (5)
money due or to become due where there is a contract to pay
interest and no rate is specified.
(b) Interest at the rate of eight per cent may be charged by
express agreement of the parties in a contract.
But in
dividing the statute into subsections and modernizing the
language, there is no indication that the legislature
intended to make any substantive changes. The maximum
interest rate on contract or loan commitments where there was
an express interest rate was governed entirely by the new
subsection (b), while interest rates in other areas were
governed by subsection (a).
The
legislature made a minor change in 1968, [30] but then made
significant changes in 1969. In 1969 it first repealed
subsection (a)(2) dealing with "judgments and decrees
for the payment of money."[31] At the same time, it
amended AS 09.30.070 to cover interest on
judgments.[32] Second, the legislature significantly
rewrote subsection (b) and added a subsection (c) to the
statute.[33] For the first time, subsection (b) tied
the maximum contract interest rate to the Federal Reserve
rate, making it four percentage points higher than the
Federal Reserve discount rate for the 12th Federal Reserve
District, in effect until the end of 1970 when it would then
reset to eight percent.[34] The new subsection (c) for the first
time created an exception to the usury statute for large
loans, specifically for loans over $500, 000 processed
through certain financial institutions, in effect until the
end of 1970.[35] In 1970 the Legislature extended the
tie- in to the Federal Reserve rate in subsection (b) until
February 15, 1972 and removed the expiration provision from
subsection (c).[36]
In 1973
the legislature again significantly amended AS 45.45.010.
Subsection (b) of the 1973 version of the usury law provided
for an eight percent cap, except on loans made before April
15, 1975, for which the maximum rate was either four or four
and one-half percentage points above the Federal Reserve
rate.[37] The 1973 amendment repealed subsection
(c).[38] It also added subsections (d) through
(h), which are not directly relevant to this case, except
that subsection (e) affirmatively stated what subsection (b)
implied, that "[i]nterest at a rate not to exceed eight
per cent may be charged by express agreement of the parties
in a contract or loan commitment dated after April 14,
1975."[39]
In 1974
the legislature introduced the language at the core of this
case. The 1974 version of subsection (b) contained two
sentences.[40] The first made permanent the reference
to the Federal Reserve rate, setting the maximum interest
rate for all contract or loan commitments with express
interest rates at "four percentage points above the
annual rate charged member banks for advances by the 12th
Federal Reserve District that prevailed on the 25th day of
the month preceding the commencement of the calender quarter
during which the contract or loan commitment is
made."[41] The second provided, "A contract or
loan commitment in which the principal amount exceeds $100,
000 is exempt from the limitation of this
subsection."[42]
The
meaning of the second sentence of subsection (b) was clear
when it was introduced in 1974: for contract or loan
commitments exceeding $100, 000, the parties could agree to
any interest rate. As the Coopers explain, "The
legislature exempted large loans 'from the limitations of
this subsection' because subsection (b) was the only
subsection that applied to contracts which specified interest
rates. Subsection (a) did not apply to them." This is
because subsection (a) ...