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Taffe v. First National Bank of Alaska

Supreme Court of Alaska

September 27, 2019

THOMAS TAFFE and DEVONY LEHNER, Appellants,
v.
FIRST NATIONAL BANK OF ALASKA, Appellee.

          Appeal from the Superior Court of the State of Alaska, No. 3HO-13-00213 CI Third Judicial District, Homer, Anna Moran, Judge.

          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.

          OPINION

          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 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 reserved for conservation and outdoor activities.[1] 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 from First 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 release from First National's deed of trust security interest; First National's release terms included restrictions on Taffe and Lehner's use of the sale proceeds.

         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.

         Following motion practice and discovery, Taffe and Lehner suggested their fraud claim against First National was fraud in the execution, [2] rather than the fraud in the inducement alleged in their complaint. In July 2015, after Taffe and Lehner apparently abandoned their claim to 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 looks to 'the date on which the plaintiff incurs injury.' "[3] But under Alaska's discovery 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]

         Applying the discovery rule to the two-year statute of limitations for tort claims, [5] 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 and Taffe and Lehner's November 2013 complaint, First National contended that the statute of limitations barred the fraud in the inducement claim.

         Applying the discovery rule to the three-year statute of limitations for contract claims, [6] First National argued that Taffe and Lehner should have been prompted 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. Because more than three years elapsed between either occurrence and Taffe and 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.

         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 from First 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 and 79.[7]

         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.

         III. DISCUSSION

         A. The Superior Court Did Not Err Or. Violate Due Process Rights By Conducting A Pretrial Evidentiary Hearing.[8]

         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 whether a statute of limitations has run.[9] ...


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