Opinion ID: 1355632
Heading Depth: 2
Heading Rank: 2

Heading: Post-Foreclosure Rent Claim

Text: Interior contends that the trial court abused its discretion by entering judgment on the post-foreclosure rent claim, pursuant to Civil Rule 54(b). In Johnson v. State, 577 P.2d 706 (Alaska 1978), we stated that [t]he general rule governing appeals is that they may be taken only after the entire case is disposed of on all substantive issues. Id. at 709. While Civil Rule 54(b) was enacted to facilitate appeals involving multiple claims or multiple parties, id. at 710, that rule may not be invoked indiscriminately: There are two important limitations on the use of Rule 54(b). The first is that there must be a final decision on at least one claim or as to the entire interest of at least one party. The single judicial unit may be subdivided no further than that. Second, there must be a good reason for using Rule 54(b). Id. The judgment in this case satisfies both parts of the Johnson test. The judgment in this case disposes of the entire post-foreclosure rent claim. And, as this was the second Rule 54(b) certificate in this case, the policy against piecemeal appeals was not violated by this certificate. The question was rather whether it was better to require this portion of the case to remain with the pre-foreclosure rent claim, which was yet to be litigated, or to allow it to proceed on appeal, presumably (and as it turned out) consolidated with the appeal of the earlier judgment regarding ownership of the trade fixtures. There is a relationship between the trade fixture appeal and the present question, because if fair rental value is to be the measure, as Interior contends, that value will vary depending on the ownership of the trade fixtures. [8] Under these circumstances, the superior court did not abuse its discretion in entering the certificate.
The superior court granted partial summary judgment in favor of the Bank, holding that Interior owed rent at the rate provided in its leases with AREO for the period from the Bank's acquisition of the property on March 27, 1987 until Interior's eviction for failure to pay rent on June 2, 1987. The amount of the judgment is $45,712.25, plus interest. Interior contests this decision, arguing that it should owe only fair market rental value, not the rate provided in the leases. The effect on a leasehold interest of foreclosure of a deed of trust which antedates the leasehold interest is a question of first impression in Alaska. Alaska Statute 34.20.090(b) provides that a purchaser of property at a foreclosure sale is entitled to possession of the property as against the party who executed the deed of trust or any person claiming by, through or under that party. The logical effect of this right of possession, at least where the purchaser chooses to exercise his right, is to extinguish the existing leasehold interest. This approach is consistent with the approach taken in other jurisdictions. See, e.g., Reilly v. Firestone Tire & Rubber Co., 764 F.2d 167 (3d Cir.1985) (construing Pennsylvania law); People v. Little, 143 Cal. App.3d Supp. 14, 192 Cal. Rptr. 619 (1983); Silverstein v. Schak, 107 Ill. App.3d 641, 63 Ill.Dec. 370, 437 N.E.2d 1292 (1982). If, absent an agreement with the foreclosure purchaser, the lessee remains in possession after the sale, his status is as a tenant by sufferance. See Andreola v. Arizona Bank, 26 Ariz. App. 556, 550 P.2d 110, 112 (1976); First Fed. Sav. & Loan Ass'n of Atlanta v. Shepherd, 131 Ga. App. 692, 206 S.E.2d 571 (1974), aff'd, 232 Ga. 846, 209 S.E.2d 184 (1974). The Restatement of the Law of Property, § 22, at 53 (1936) states: An estate at sufferance is an interest in land which exists when a person who had a possessory interest in land by virtue of an effective conveyance, wrongfully continues in the possession of the land after the termination of such interest, but without asserting a claim to a superior title. As a tenant by sufferance, such a lessee would be liable to the purchaser not for contract rent, but for the fair rental value of the premises. Legler v. Legler, 149 Ind. App. 447, 273 N.E.2d 303 (1971); R. Schoshinski, The American Law of Landlord and Tenant § 2:21, at 69 (1980). The superior court held that Interior owed the Bank the rent specified in the leases, apparently based on our decision in Altman v. Alaska Truss & Mfg. Co., Inc., 677 P.2d 1215 (Alaska 1983). [9] In Altman we stated that a tenant who continues to use property after clear notice of the landlord's intent to charge rent without protesting the rental charge impliedly agrees to pay the demanded rent. Id. at 1227. The holding in Altman is premised on conduct by both the landlord and the tenant which amounts to an implied agreement to pay the demanded rent. In our view the record shows an implied agreement to pay the rent demanded. After the March 27, 1987 sale, the Bank on April 1, 1987 sent a certified letter to each of the AREO partners and to Vernon Frol, the manager of Interior, and the only shareholder of Interior who was not an AREO partner, which contained a demand that all rents due under rental agreements and or leases be transferred to the Bank. Thereafter, on April 9, 1987 another certified letter was sent by the Bank to Interior referring to the leases and demanding rent for April, as well as the rent for the four prior months. On appeal Interior argues that the letters of April 1 and 9 are insufficiently clear statements of the Bank's intent. This contention is without merit as to the April 9 letter. The lease to each of the tenant areas occupied by Interior is there explicitly referred to, and a total figure of rent due at lease rates is stated. Interior also argues that the facts do not clearly show implied acceptance of the proposed rental amount. Again, we disagree. Interior did not protest the letter of April 9 at any time during its continuing occupancy of the premises. In fact counsel for Interior, on May 5, 1987 at the initial hearing on the forcible entry and detainer aspect of this case, explicitly affirmed that Interior is in possession under a valid lease; that the lease is in effect, it's never been terminated. Counsel further stated that the lease would continue on regardless of any foreclosure action... . Interior also implicitly acknowledged that the leases would govern, in its answer to the initial complaint. Interior alleged that it was entitled to continued possession of the premises. Interior could only have had a right to continued possession of the premises under the leases, not as a tenant at sufferance.