McIntyre v. Ticor Title Ins. Co.

• Decision Date: 03 September 1986
• Docket Number: No. F85-015 Civil.,F85-015 Civil.
• Parties: Richard McINTYRE and Irene McIntyre, Plaintiffs, v. TICOR TITLE INSURANCE COMPANY, as successor by merger to Alaska Title Guaranty Company, Defendant and Third-Party Plaintiff, v. SMALL BUSINESS ADMINISTRATION, Third-Party Defendant.
• Court: U.S. District Court — District of Alaska

658 F. Supp. 944

Richard McINTYRE and Irene McIntyre, Plaintiffs, v. TICOR TITLE INSURANCE COMPANY, as successor by merger to Alaska Title Guaranty Company, Defendant and Third-Party Plaintiff, v. SMALL BUSINESS ADMINISTRATION, Third-Party Defendant.

No. F85-015 Civil.

United States District Court, D. Alaska.

September 3, 1986.

Joseph W. Sheehan, Fairbanks, Alaska, for plaintiffs.

Michael W. Price (Groh, Eggers, Price), Anchorage, Alaska, for Ticor.

James DeWitt, Fairbanks, Alaska, for SBA.

ORDER

(Rulings on Motions for Summary Judgment)

HOLLAND, District Judge.

The Court has before it three motions for summary judgment. In order of their filing:

Third-Party Defendant, the Small Business Administration (herein "SBA"), has moved for a summary determination that the lien of a deed of trust held by Plaintiffs had expired as a matter of law. The motion is opposed by Plaintiffs. Plaintiffs have moved for summary judgment in their favor as regards the validity of their deed of trust lien. Defendant/Third-Party Plaintiff Ticor Title Insurance Company, successor by merger to Alaska Title Guaranty Company, (herein "Ticor") opposes Plaintiffs' motion for summary judgment and in turn seeks summary judgment over against the SBA. To complete the circle, the SBA opposes Ticor's motion for summary judgment.

The Court has heard and considered the oral arguments of the parties.

Statement of Facts

The facts which are material to this litigation do not appear to be disputed in any respect pertinent to a disposition of the three motions for summary judgment now before the Court. The facts are as follows:

1. The property which is the subject of this litigation is described as:

Lots Ten (10) and Eleven (11), Block Three (3), Graehl Subdivision, Fairbanks Meridian, Fairbanks, Alaska.

2. On November 18, 1967, Robert A. and Mary K. Davenny, as trustors, executed a deed of trust in favor of Alaska Title Guaranty Company, trustee, for the benefit of the Small Business Administration. The deed of trust was given for the purpose of securing payment of indebtedness in the amount of $118,000.00. The deed of trust was recorded November 28, 1967. (This deed of trust is herein sometimes referred to as "the first deed of trust".)

3. On April 14, 1969, Plaintiffs purchased the subject property and assumed the first deed of trust. On September 1, 1974, Plaintiffs deeded the subject property to their son and daughter-in-law, Edward R. and Cathy McIntyre. The Edward McIntyres also assumed the deed of trust first above described in favor of the SBA.

4. In conjunction with their purchase of the subject property, the Edward McIntyres, as trustors, executed a deed of trust in favor of Alaska Title Guaranty Company, trustee, for the benefit of Plaintiffs. The deed of trust was given for the purpose of securing payment of indebtedness in the amount of $189,216.94. This deed of trust recites that it was "made this 1st day of September, 1974." This deed of trust was not acknowledged before a notary public until the 26th day of February, 1975, and was recorded on April 8, 1975. (This deed of trust is herein sometimes referred to as "the second deed of trust".)

5. The Edward McIntyres subsequently sold the property (which appears to have been part of an ongoing business known as "Frontier Supply Co., Inc.") to James R. Thompson, Carol M. Thompson, and Gunther E. Matschke. As part of the purchase price, Thompson et al. as trustors executed three deeds of trust to Fairbanks Title Agency, Inc., as trustee, for the benefit of Edward R. McIntyre, for the purpose of securing the payment of indebtedness in the principal amounts of $111,226.00, $151,774.00, and $208,478.00. These three deeds of trust were recorded on August 23, 1978.

6. Subsequently, Frontier Supply Co., Inc., separately or jointly with Thompson et al., obtained additional financing from the Alaska National Bank of the North and, as security therefor, executed further deeds of trust to Fairbanks Title Agency, Inc., trustee, for the benefit of Alaska National Bank of the North. Edward McIntyre agreed to subordinate his security interest in the subject property to that of Alaska National Bank of the North and the SBA. The subordination agreement was recorded on December 18, 1979. The bank's security interest was subsequently assigned (on February 8, 1984) to the SBA.

7. The Thompsons et al. ceased making payments to the SBA on the first deed of trust and the SBA issued a notice of default on that deed of trust on June 5, 1984. No default notice was given on the Alaska National Bank of the North deeds of trust which the SBA came to hold also.

8. The SBA beneficiary's affidavit in support of the notice of default avers that, as of May 31, 1984, there was then due and owing on the first deed of trust principal in the amount of $73,435.54 plus accrued interest of $2,364.87.

9. A non-judicial foreclosure sale was conducted on September 19, 1984, by employees of the SBA acting as agent for Ticor (successor in interest to Alaska Title Guaranty Company) as trustee. Bidding for the property opened at $100,000.00 and was ultimately raised to $130,000.00 by various third-party bidders. At this point, the SBA entered a "protective bid at $399,950." The SBA was declared the successful bidder.

10. In anticipation of this sale, Ticor's subsidiary, Alaska Title Guaranty Agency, Inc., issued a litigation report which, among other things, disclosed all of the foregoing transactions relative to liens upon the subject property.

11. On October 29, 1984, Ticor issued a trustee's deed for the subject property in favor of the SBA, reciting consideration for the deed to be "Ten Dollars ($10.00)". Ticor delivered this deed to the SBA without receiving from the SBA the sale proceeds in excess of the amount due on the first deed of trust which foreclosed.

12. As of the date of the foreclosure sale, there remained due and owing to Plaintiffs from the Edward McIntyres the sum of $49,975.13, which sum was secured by the second deed of trust above described.

13. The second deed of trust was never subordinated to the lien of any deed of trust held by the SBA on the subject property. SBA could have required such subordination as a condition of acquiring the two Thompson et al./Alaska National Bank of the North deeds of trust, but did not do so because of the fact that a title report procured at the time those deeds of trust were acquired by the SBA failed to disclose the existence of the second deed of trust.

14. Immediately after the sale, on September 21, 1984, Counsel for Plaintiffs requested that the SBA prepare appropriate releases which counsel proposed to have signed by Plaintiffs and which he further proposed to exchange for payment of the sum remaining due on the second deed of trust. Plaintiffs have not been paid the sum remaining due them, and this suit was commenced against Ticor for failure to collect the sums necessary to pay Plaintiffs in connection with the foreclosure proceedings.

15. Ticor brought the SBA into the case, which was then removed to this court by the SBA.

Viability of the Second Deed of Trust

The focal point and principal issue raised in the SBA motion for summary judgment as well as Plaintiffs' motion for summary judgment is the validity of the September 1, 1974,¹ second deed of trust from the Edward McIntyres to Plaintiffs. It is the SBA's contention that the lien of the second deed of trust lapsed on September 1, 1984, ten years subsequent to the transaction out of which the deed of trust arose. This contention is based upon the SBA's interpretation of AS 34.20.140 and AS 34.20.150(a).

Reduced to the terms which are essential to understanding the dispute between the SBA and Plaintiffs, AS 34.20.140 provides that when a note is secured by an instrument creating a lien upon real estate, payment upon the note does not extend the lien beyond its original period as against subsequent lien holders unless a memorandum of payment, acknowledged by the owner of the note, is recorded before the end of the statutory time for bringing an action upon the note. AS 34.20.150 provides that the maturity date of an instrument creating a lien upon real property, which does not by its terms include a maturity date, is ten years from the date of the instrument unless a memorandum of payment is recorded.

In this case the second deed of trust contained no maturity date. No instrument designating a maturity date was ever recorded, nor was a memorandum of payment recorded at any time. The SBA contends that the lien of Plaintiffs' second deed of trust lapsed pursuant to the foregoing provisions on September 1, 1984, ten years after the transaction which gave rise to the second deed of trust. Plaintiffs, on the other hand, contend that Section 150(a) merely specifies the date upon which as a matter of law the second deed of trust is considered to be due and owing for purposes of AS 34.20.140 which, as above-described, specifies a procedure for extending the duration of a lien which secures a note.

The Court concludes that Plaintiffs' construction of AS 34.20.140 and AS 34.20.150(a) is correct.

The substance of what is now AS 34.20.140 was originally enacted by the territorial legislature of Alaska in 1925. Sec. 1, Ch. 19, Alaska Sess. Laws (1925).² This law was codified as section 2860, Compiled Laws of Alaska (1933), and was recodified subsequently as section 22-3-46, Alaska Compiled Laws Annotated (1949). In 1955, the Alaska territorial legislature reenacted section 22-3-46 and amended it with the language which in substance appears today as AS 34.20.150. Sec. 1, Ch. 105, Alaska Sess. Laws (1955).³

In recodifying the laws of the State of Alaska in 1962, section 22-3-46, Alaska Compiled Laws Annotated (1949), as amended by section 1, chapter 105, Alaska Session Laws (1955), was restructured by the reviser so as to read as follows:

Sec. 34.20.140. Recording memorandum extending lien.

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