Opinion
Supreme Court No. S-12155.
April 30, 2008.
Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Sharon Gleason, Judge, Superior Court No. 3AN-04-8529 CI.
Appearances: Robert W. Musser, pro se, Anchorage. Paul D. Kelly, Kelly Patterson, Anchorage, for Appellee Wells Fargo Home Mortgage, Inc.
Before: Fabe, Chief Justice, Matthews and Carpeneti, Justices. [Eastaugh, Justice, not participating.]
NOTICE
Memorandum decisions of this court do not create legal precedent. See Alaska Appellate Rule 214(d). Accordingly, this memorandum decision may not be cited for any proposition of law or as an example of the proper resolution of any issue.
MEMORANDUM OPINION AND JUDGMENT
Entered pursuant to Appellate Rule 214.
I. INTRODUCTION
After Robert Musser failed to pay his past-due property taxes, his deed of trust lender, Wells Fargo Home Mortgage, Inc. (Wells Fargo), paid the taxes on his behalf. Wells Fargo sought reimbursement for the property tax payment and established an escrow account for future property tax payments. Musser refused to pay the extra tax-related amount due on his loan payments. Wells Fargo instituted a non-judicial foreclosure action. Musser sued Wells Fargo claiming bad faith breach of contract. At trial, the jury found no breach of contract. Musser appeals.
II. FACTS AND PROCEEDINGS
In January 2002 Robert Musser signed a promissory note in favor of Wells Fargo secured by a deed of trust on his house. The deed of trust used a Fannie Mae/Freddie Mac form.
In May 2002 Musser filed for bankruptcy. During the bankruptcy proceedings, Wells Fargo asserted that Musser was in default on his loan. Musser alleges that Wells Fargo and Wells Fargo's collection attorneys, Routh Crabtree, knew that he was not in default; Wells Fargo alleges that Musser made the required loan payment almost simultaneously with the filing of Wells Fargo's claim of default. The bankruptcy court granted a joint motion from Wells Fargo and Musser to withdraw this issue from the bankruptcy proceedings.
Musser later fell behind on his Municipality of Anchorage real estate taxes and, on July 18, 2003, Wells Fargo notified Musser that it had received notice from the municipality of his deficiency. The notice informed Musser that the taxes were past due and contained an offer from Wells Fargo stating:
Wells Fargo waived the deed of trust's requirement that the borrower make tax payments to an escrow account, instead allowing Musser to make the tax payments directly to the Municipality of Anchorage. Section 3 of the deed of trust provided that Wells Fargo could revoke this waiver at any time after giving notice to Musser.
we can assist you by paying the full amount of the past due taxes, including all applicable interest/penalty due. An escrow account will be established on your behalf for the collection of the advance, as well as all future tax bills. Your monthly mortgage payment will increase to repay the advance and to collect for a monthly escrow deposit.
Wells Fargo sent Musser a second letter, stating that it had not yet received proof of payment of the taxes from Musser. Wells Fargo subsequently paid Musser's outstanding real estate taxes and penalties, totaling $1814.66. A September 8, 2003 letter from Wells Fargo to Musser explained:
Wells Fargo acted to protect its security interest in Musser's property pursuant to sections 3 and 9 of the deed of trust.
We have paid the delinquent real estate taxes and all applicable interest/penalty due.
An escrow account has been established on your behalf for the collection of the amount advanced to bring your taxes current, as well as to pay all future tax bills for the life of this loan. Your monthly mortgage payment will increase to repay the advance and to establish the escrow account.
Musser continued making monthly principal and interest payments, but he did not pay the additional amount due related to his property taxes. As a result Musser's payments were consistently short and triggered late charges. Musser asserted that Wells Fargo had no right to make the property tax payment on his behalf and, accordingly, that he did not owe any extra money for the tax payments.
On January 12, 2004, Wells Fargo declared that Musser's loan was in default and notified Musser of its intent to foreclose if Musser did not make timely payment of his arrearage. Soon after, Musser and Wells Fargo discussed various loan refinancing options that would resolve the default and remove the escrow requirement for future tax payments. No such refinancing occurred.
Wells Fargo filed its notice of default and election to sell on June 7, 2004. This action initiated a non-judicial foreclosure pursuant to the power of sale provisions of the deed of trust and AS 34.20.070. On July 4, 2004, Musser filed a pro se action asserting that his loan was current and that Wells Fargo had breached its contract in bad faith.
Musser's amended complaint stated two bad faith breaches. First he alleged that Wells Fargo, and Wells Fargo's collection attorneys Routh Crabtree, breached the contract by attempting to foreclose on his home during the bankruptcy proceedings in October 2002. Musser asserted that the defendants knew that his loan payments were current, but that they nonetheless claimed that he was in default. Second, he alleged that Wells Fargo paid the past-due property taxes without his consent and in lieu of approving an additional loan to Musser. He sought a preliminary injunction against the foreclosure sale and compensatory and punitive damages for breach of contract.
The superior court denied Musser's motion for a preliminary injunction against the foreclosure sale, determining that Musser did not show serious or substantial questions going to the merits of the case. The court also granted Wells Fargo summary judgment on two issues: that the deed of trust gave Wells Fargo the right to pay the past-due taxes on Musser's behalf and that Musser would be in default if he did not make the tax-related escrow payments.
During pre-trial proceedings, the superior court dismissed Musser's claims relating to the bankruptcy proceeding, determining that the claims should have been pursued in the bankruptcy court. On the first day of trial, Musser revealed his intention to argue that Wells Fargo and Routh Crabtree violated the Fair Debt Collection Practices Act (FDCPA). The superior court disallowed any attempt to raise this point at trial, stating that it was too late for Musser to add new claims to his case. The court explained that Musser's amended complaint stated claims for breach of contract. The court also noted that Musser's proposed jury instructions made no reference to the FDCPA. The court offered to continue the trial, at Musser's expense, if Musser wanted to pursue the claim. Musser eventually agreed to abandon his FDCPA claim.
15 U.S.C. § 1692 et seq. (1998).
Musser's initial complaint made one brief reference to the act, stating that "Wells Fargo and their attorneys have proceeded to foreclosure on his home in violation of the Fair Debt Collection Practices Act. . . ." The complaint also alleged that Wells Fargo violated "Federal" law. Musser's amended complaint did not refer to the Fair Debt Collection Practices Act or to federal law. The amended complaint stated that "[t]he plaintiff is seeking recovery for damages in two separate breaches of contract, breaches for contract in bad faith, and injunctive relief to stop the non-judicial contract foreclosure sale of his home scheduled for December 2, 2004."
Trial was held from August 2-4, 2005. The jury returned a verdict in favor of Wells Fargo, finding that Wells Fargo did not breach the covenant of good faith and fair dealing and that Musser was not entitled to recover under theories of equitable estoppel or waiver. The trial court awarded Wells Fargo all of its fees and costs.
Musser appeals.
III. STANDARD OF REVIEW
We review claims involving the interpretation of constitutional and statutory provisions de novo. We also use our independent judgment on matters of contract interpretation. A superior court's procedural decisions are reviewed under an abuse of discretion standard.
In re Adoption of A.F.M., 15 P.3d 258, 261 (Alaska 2001).
Rockstad v. Erikson, 113 P.3d 1215, 1219 (Alaska 2005).
Id. at 1219-20.
IV. DISCUSSION
A. Musser's Constitutional Rights Were Not Violated.
Musser argues that the deed of trust did not disclose that a non-judicial foreclosure could be conducted. He further argues that employment of the non-judicial foreclosure option violated his constitutional right to a jury trial.
Musser frames this as a violation of the Seventh Amendment to the United States Constitution. However, the Seventh Amendment has not been incorporated against the states. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 432 (1996). We interpret Musser's jury trial argument to state a claim under the corresponding provision of Alaska's constitution. Alaska Const. art. I, § 16.
Musser's contention that the deed of trust did not provide for a non-judicial foreclosure is plainly wrong. Clause 22 of the deed of trust contains power of sale provisions, authorizing the trustee of the deed of trust to sell the property at public auction after giving notice as specified in the deed of trust and in accordance with applicable law.
Musser lacks standing to bring a jury trial challenge because he had a jury trial. He filed suit seeking monetary and injunctive relief for breach of the deed of trust and received a trial by jury on all issues related to the foreclosure. He suffered no injury-in-fact from the mere potential that a non-judicial foreclosure could take place without a jury trial on contested issues. B. The Superior Court Properly Excluded Evidence Relating to Musser's Fair Debt Collection Practices Act Claim.
The trial court granted Wells Fargo summary judgment on issues regarding contract interpretation. Because we find that the trial court did not err in its grant of summary judgment, this grant did not violate Musser's right to a jury trial. See Christensen v. NCH Corp., 956 P.2d 468, 477 (Alaska 1998).
See Gilbert M. v. State, 139 P.3d 581, 586 (Alaska 2006) (noting that standing to bring a claim requires an adversely affected interest).
Musser argues that the superior court erred when it prevented him from presenting a claim related to the Fair Debt Collection Practices Act. He notes that his initial complaint mentioned the act, and claims that the superior court's decision violated his due process rights.
We agree with Wells Fargo that Musser waived his FDCPA claim. While Musser's initial complaint used the phrase "Fair Debt Collection Practices Act" and referred to "Federal" law, his amended complaint only alleged two claims for breach of contract and made no mention of the FDCPA or federal law. Because an amended complaint supersedes earlier pleadings, Musser's complaint did not state a claim under the FDCPA. Moreover, as the superior court noted, Musser's proposed jury instructions did not include any instructions related to the FDCPA. The court recognized the prejudice inherent in raising this issue on the first day of trial. The court gave Musser a reasonable choice: either drop the claim or take a continuance and pay the costs of the delay. Given Musser's dismissal of the claim, any evidence or discussion of the FDCPA was irrelevant to the breach of contract trial. The superior court properly prevented Musser from raising this issue at trial.
6 CHARLES ALAN WRIGHT, ARTHUR R. MILLER MARY KAY KANE, FEDERA L PRACTICE AND PROCEDURE § 1476 (2d ed. 1990).
Musser argues that this was still relevant to bad faith. Given that the jury found no breach of contract, a fortiori there could be no bad faith breach of contract. Moreover Musser's argument is an attempt to bootstrap the FDCPA into contract law.
C. The Superior Court Properly Allowed the Testimony of Dianna Hudgins.
Wells Fargo called Dianna Hudgins to testify regarding phone call logs of conversations between Musser and Wells Fargo, the process for refinancing a home loan, Musser's payment history, and how Wells Fargo responds to property tax deficiencies. Hudgins had no personal involvement in or knowledge of Musser's case. Musser argues that Hudgins's testimony was inadmissible because she was not testifying from her direct personal knowledge.
Wells Fargo correctly responds that Musser did not object to Hudgins's testimony or the admission of the documents on which it was based. Lacking a timely objection, w e only reverse the admission of evidence if the admission constituted a "plain error affecting substantial rights." No such error exists here. D. The Superior Court Properly Awarded Wells Fargo All of Its Attorney Fees.
Moreover, Wells Fargo is correct that Hudgins's testimony was within the scope of the business records exception to the rule against hearsay. Alaska R. Evid. 803(6).
Musser finally argues that the trial court erred when it awarded Wells Fargo all of its attorney fees. He first claims that the deed of trust did not provide for such an award. He next argues that Civil Rule 82 prevents an award of full fees. He finally argues that he is a public interest litigant under AS 09.60.010(c)(2) because he was raising constitutional claims and that, accordingly, he cannot be ordered to pay Wells Fargo's fees.
Wells Fargo correctly responds that Rule 82 does not apply if the deed of trust contains a fee-shifting provision. In this case, section 19 of the deed of trust provided for fee shifting.
Rockstad, 113 P.3d at 1224.
The public-interest-litigant rule is also inapplicable. For the rule to apply and prevent fee shifting three factors must be met: (1) the claimant asserting a constitutional claim must lose, (2) the constitutional claim must not have been frivolous, and (3) the claimant must not have had a sufficient economic incentive to bring the action regardless of the constitutional claims involved. Musser's claim fails on the third factor. Regardless of his constitutional claims, Musser's main action was for breach of contract. While Musser frames many of his claims in constitutional terms — commonly alleging due process violations — these constitutional claims are not independent from his other claims for relief. If Musser's public-interest-litigant argument was allowed to succeed, any litigant could similarly constitutionalize claims for relief and seek haven in the public-interest-litigant fee-shifting exception.
AS 09.60.010(c)(2).
See Fairbanks N. Star Borough v. Interior Cabaret, Hotel, Rest. Retailers Ass'n, 137 P.3d 289, 292 (Alaska 2006) (noting that this court examines a litigant's primary motivation for bringing suit).
V. CONCLUSION
We AFFIRM the judgment of the superior court.