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Alaska Supreme Court: Unfair Trade Practices Act Does Not Apply to Nonjudicial Foreclosures

Posted By USFN, Friday, August 29, 2014
Updated: Tuesday, October 13, 2015

August 29, 2014

 

by Richard Ullstrom
RCO Legal - Alaska, Inc. – USFN Member (Alaska, Oregon, Washington)

The Alaska Supreme Court recently issued a ruling concerning the reach of Alaska’s Unfair Trade Practices Act (UTPA). The court reaffirmed earlier decisions holding that the UTPA did not apply to real property transactions and that, despite recent amendments to the statute, this exclusion applies to nonjudicial deed of trust foreclosures on real property.

Alaska’s UTPA prohibits “unfair or deceptive acts or practices in the conduct of trade or commerce.” A person suffering damages from a violation may recover the greater of three times actual damages or $500. Even without damage, a plaintiff may obtain an injunction against the alleged violator. But probably most important, successful plaintiffs may recover their actual attorneys’ fees and costs incurred in bringing the action. This provision has created a strong incentive for plaintiff attorneys to bring UTPA claims in foreclosure challenges.

In Alaska Trustee, LLC v. Bachmeier, the plaintiff alleged that the foreclosure trustee had violated the UTPA by including in a reinstatement quote the fees and costs incurred in processing the foreclosure. Because the foreclosure statute referred only to “attorney fees and court costs” instead of “trustee fees” or “foreclosure costs,” the borrower asserted that the inclusion of the foreclosure expenses was not permitted and that doing so was a UTPA violation. The trial court agreed, and the trustee petitioned the Supreme Court for review.

On review, the court held that inclusion of the foreclosure expenses in the quote was proper and that, consistent with precedents holding that the UTPA did not apply to real property transactions, the UTPA did not apply to nonjudicial deed of trust foreclosures on real property. It rejected Bachmeier’s argument that two recent amendments had overturned this line of authority.

The 2007 Mortgage Lending Regulation Act brought certain mortgage lending practices within the UTPA but, as the foreclosure trustee did not originate mortgage loans, the amendment was inapplicable. The 2004 amendment defining “goods or services” to include those “provided in connection with … a transaction involving an indebtedness secured by a borrower’s residence” also did not help Bachmeier. The amendment’s language did not change the longstanding exclusion of real property transactions from the types of goods and services included in the UTPA. The legislative history supported this conclusion, showing that the bill including the amendment had been concerned only with telephonic solicitations. There was no suggestion that the legislature had intended to bring real estate transactions in general, or foreclosures in particular, within the UTPA.

By eliminating the ability of plaintiffs’ attorneys to recover full fees by claiming a UTPA violation, the Bachmeier decision should greatly reduce the number of frivolous foreclosure challenges in Alaska.

To view the court’s opinion, follow this link: http://www.courtrecords.alaska.gov/webdocs/opinions/ops/sp-6935.pdf.

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