Court Opinion

ID: 4205521
Source: CourtListenerOpinion
Date Created: 2017-09-22 17:02:26.723449+00
Date Added: 2024-06-11T13:26:02.730179
License: Public Domain

Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER. Readers are
requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska
99501, phone (907) 264-0608, fax (907) 264-0878, email corrections@akcourts.us.

                  THE SUPREME COURT OF THE STATE OF ALASKA

MARIAM BIBI, f/k/a                                 )
MARIAM RAJA,                                       )
                                                   )        Supreme Court No. S-15987
                 Appellant,                        )
        v.                                         )        Superior Court No. 3AN-14-05970 CI
                                                   )
                                                   )        OPINION
KEVIN ELFRINK, JAVED RAJA,                         )
and ANY OTHER OCCUPANTS,                           )
                                                   )        No. 7202 – September 22, 2017
                                                   )
                 Appellees.                        )
                                                   )

                 Appeal from the Superior Court of the State of Alaska, Third
                 Judicial District, Anchorage, Gregory Miller, Judge.

                 Appearances: Gail M. Ballou, Law Office of Gail M. Ballou,
                 Fairbanks, for Appellant. Theodora Accinelli, RCO Legal —
                 Alaska, Inc., Anchorage, for Appellee Kevin Elfrink. No
                 appearance by Appellee Javed Raja.

                 Before: Stowers, Chief Justice, Winfree, Maassen, Bolger,
                 and Carney, Justices.

                 STOWERS, Chief Justice.

I.      INTRODUCTION
                 Mariam Bibi and Javed Raja married and later bought a home in Anchorage
with loans from IndyMac Bank, F.S.B. (IndyMac). IndyMac’s loans were secured by
deeds of trust on their home. The couple later received an additional loan of around
$10,000 from Kevin Elfrink. The loan from Elfrink charged 10% interest but also
included a funding fee of $4,000 rolled into the rest of the loan for payment over time
rather than charged and paid at the outset. Over the course of six years, the couple made
irregular payments, increased the loan balance three times until it exceeded $25,000, and
eventually defaulted. Elfrink initiated foreclosure proceedings and then bought the house
at his own foreclosure sale by credit-bidding all money he asserted was due to him under
the modified promissory note, satisfying the couple’s debt to him.
              Following the foreclosure, Elfrink filed a complaint against Bibi and Raja
for forcible entry and detainer to remove them from the home. Bibi moved out of her
home but filed a counterclaim for usury, quiet title and possession, and surplus proceeds
from the foreclosure sale. Raja confessed judgment to his removal from the home. As
the lawsuit proceeded, IndyMac initiated a foreclosure on its senior deed of trust and
Elfrink bought the house for a second time at IndyMac’s foreclosure sale. The superior
court ultimately denied Bibi’s usury claim, determining that Bibi had no standing, her
claim was time barred, and in any event, the loan did not violate Alaska’s usury statute
because the funding fee was not interest and the usury statute did not apply once the
loan’s principal rose over $25,000.1 The superior court also denied Bibi’s claim for title,
ruling that the foreclosure statutes gave Elfrink clear title.
              Bibi appeals. We hold that (1) Bibi has standing; (2) it was error for the
superior court to deny Bibi’s usury claim because the funding fee was disguised interest
and violated the usury statute, which applied to at least the initial period of the loan’s
life; and (3) the superior court correctly denied Bibi’s claim for title and possession of
her prior home because IndyMac’s foreclosure extinguished her claim to the property.

       1
              AS 45.45.010(b) provides that “[a] contract or loan commitment in which
the principal amount exceeds $25,000 is exempt from the [interest cap].”

                                            -2-                                      7202
II. FACTS AND PROCEEDINGS
             Mariam Bibi married Javed Raja in Pakistan. The couple moved to Alaska
and had two children. They eventually bought a house in Anchorage in August 2006.
They financed the purchase of their home with two promissory notes to IndyMac for
$216,000 and $54,000. The notes were secured by first and second deeds of trust on the
couple’s home. Approximately seven months after they purchased their home, the
couple’s pizza business, Pizza Omega and Luigi’s Pizza, were struggling. They needed
money, and Raja went to Kevin Elfrink for help. Elfrink was a real estate broker who
had met Raja briefly when Elfrink was selling property near the couple’s pizza business.
             Elfrink started making loans in the 1990s and did a few per year, borrowing
money against his credit cards to finance them. Elfrink met with Raja and Bibi and they
executed a promissory note in the amount of $14,597, dated March 19, 2007, to be paid
back with 10% interest by March 15, 2009. But Raja and Bibi only received $10,597 at
the time: $9,950 plus money to pay for the $647 in closing costs. The extra $4,000 Raja
and Bibi were obligated to pay back was a “funding fee” Elfrink charged. Elfrink
testified that the fee was to compensate him for educating himself about the pizza
businesses, inventorying their equipment, making calls, and generally ensuring that he
was making a sound loan; he also testified that he only charges the fee when he decides
to extend a loan, not when he declines. The loan was secured by a security agreement
on the pizza businesses, as well as a third deed of trust on Bibi and Raja’s home. The
deed of trust contained language stating it was for the purpose of securing “[p]ayment
of the indebtedness evidenced by the promissory note . . . including all renewals,
extensions or modifications thereto.”
             The loan was escrowed at First National Bank Alaska (FNBA). Over the
next six years the couple made irregular payments and the account balance was increased
three times through amendments to the escrow instructions, though Bibi claims these

                                          -3-                                     7202

increases occurred without her knowledge. In September 2007 Raja and Elfrink signed
an amendment to the escrow instructions increasing the account balance by $7,061. The
amendment was not signed by Bibi. In February 2008 Raja and Elfrink increased the
account balance a second time by $4,532.90 through an amendment to the escrow
instructions. Again, Bibi did not sign the amendment. These two amendments together
brought the account balance up to $23,467.51.
             Meanwhile in May 2007, Raja had hired Elfrink to sell Pizza Omega for
$169,000 and signed a listing with a 10% commission. The pizza parlor later sold for
about $90,000, and for the commission Raja signed an escrow instruction form in March
2008 making a third and final increase of $12,153.49 to the loan balance. Bibi’s
signature is on this amendment form, but she testified that she did not sign the form, and
Raja testified he did not sign for her. Bibi testified that she knew nothing about these
three balance increases until her attorney sent her documents obtained from Elfrink
through discovery shortly before trial.
             With the loan increase in March 2008 the account balance rose to $35,621.
The interest rate was increased at that time to 12%, the maturity date was extended by
nine years, monthly payments were lowered to $500 per month, and Elfrink waived the
existing delinquency. Between May and December 2008 Bibi and Raja made eight
monthly payments of $500. In 2009 they made another five monthly payments of $500.
In 2010 they made three payments totaling $1,300. Bibi and Raja’s last two payments
on the debt were each for $500, one in 2011 and one in 2012. In addition, Bibi claimed
a $500 payment was made in June 2013, and Raja testified to making a $2,500 payment
outside of the FNBA escrow account sometime after mid-2013.
             In June 2013 Elfrink closed the escrow account. FNBA calculated that
interest had been paid only through July 2009 and that the principal balance was
$35,275.72. All in all, Raja and Bibi had paid Elfrink $13,419.32 or $13,919.32 through

                                           -4-                                      7202

the escrow account, depending on whether they are credited with the final June 2013
payment of $500.
              Elfrink commenced foreclosure proceedings in August 2013 and notice of
default was sent to Raja and Bibi. Alaska Trustee, LLC conducted a trustee’s sale in
November 2013. Based on audit figures from FNBA, the trustee calculated the amount
due under the deed of trust to be $56,629.65. This was the amount necessary to cover
$35,275.72 in unpaid principal, $18,486.41 in interest accruing since July 2009 — the
date Bibi and Raja had stopped paying on the interest — plus escrow fees, late fees, and
fees charged by the trustee for conducting the foreclosure sale. Elfrink purchased the
property at the foreclosure sale by offering this amount as an offset bid.2 He was not
required to pay any cash because he was entitled to the amount he bid as the beneficiary
of the deed of trust.3 Alaska Trustee issued a trustee’s deed to Elfrink that was recorded
in Anchorage in February 2014.
              While Elfrink was preparing to foreclose, Bibi filed for divorce. By the
time the superior court presiding over the divorce divided Bibi and Raja’s marital assets,
Elfrink had already conducted his foreclosure sale and recorded his trustee’s deed. In
March 2014 the superior court decided not to award the couple’s home to either party in
the divorce because it had been lost through foreclosure.
              That same month Elfrink served Bibi and Raja with a notice to surrender
possession of the premises. In April he filed a complaint for forcible entry and detainer,4

       2
              AS 34.20.080(b).
       3
              AS 34.20.080(f)(1).
       4
              “A suit for forcible detainer under Alaska statutes substitutes the authority
of the courts for private force to compel a citizen wrongfully in possession of real
                                                                       (continued...)

                                           -5-                                       7202

seeking possession of the property. A few days later, Bibi and her children removed
most of their personal property. They left to visit Pakistan and Elfrink took possession.
That same month Bibi filed counterclaims for usury, quiet title and possession, and
surplus proceeds from the foreclosure sale; her attorney subsequently recorded a lis
pendens against the property. For his part, Raja confessed judgment to his removal from
the property.
                While the lawsuit proceeded, IndyMac initiated foreclosure proceedings on
its first deed of trust. The foreclosure sale was held in March 2015. Elfrink made the
highest bid and bought the property a second time, paying $240,967.18. A trustee’s deed
conveying title to the property was recorded in April.
                The next month, a three-day non-jury trial was held before Superior Court
Judge Gregory Miller, after which the court entered findings of facts on the record. The
court found for Elfrink on his claim for title and possession and denied all of Bibi’s
counterclaims. Final judgment for quiet title, possession, and expungement of lis
pendens was entered in August 2015. Bibi appeals.
III.   STANDARD OF REVIEW
                “Whether a party has standing to sue is a question of law that we review de
novo.”5 Whether a fee is to be treated as an interest charge in computing an effective
interest rate for purposes of Alaska’s usury statute depends on a set of factual questions.6

       4
              (...continued)
property to surrender it to another with a superior claim.” Modrok v. Marshall, 523 P.2d
172, 173-74 (Alaska 1974) (footnote omitted); see also AS 09.45.070; AS 34.20.090(b).
       5
                Keller v. French, 205 P.3d 299, 302 (Alaska 2009).
       6
            See Fikes v. First Fed. Sav. & Loan Ass’n of Anchorage, 533 P.2d 251, 265
(Alaska 1975).

                                             -6-                                      7202

“A factual finding will be deemed clearly erroneous only if it leaves us ‘with a definite
and firm conviction on the entire record that a mistake has been made.’ ”7 But we review
a superior court’s application of the usury statute to these facts,8 as well as whether the
superior court applied the correct legal standard, de novo.9 “We review the interpretation
of a statute de novo, adopting the rule of law most persuasive in light of precedent,
reason, and policy.”10
              The interpretation of contractual language is a question of law that we
review de novo, but determining the intent of the parties when entering a contract is a
question of fact and we therefore review it for clear error.11
              The application of Alaska foreclosure statutes is a question of law, and we
apply our independent judgment in reviewing such decisions.12
IV.    DISCUSSION
       A.     It Was Error To Deny Bibi’s Usury Counterclaim.
              Alaska’s general usury statute applies to loans of $25,000 or less.13

       7
             Smith v. Weekley, 73 P.3d 1219, 1222 (Alaska 2003) (quoting Duffus v.
Duffus, 932 P.2d 777, 779 (Alaska 1997)).
       8
              See Rockstad v. Erikson, 113 P.3d 1215, 1219 (Alaska 2005). This
particular standard of review is the subject of debate between the parties and is addressed
in section IV.A.2 of this opinion.
       9
              Rego v. Rego, 259 P.3d 447, 452 (Alaska 2011).
       10
              L.D.G., Inc. v. Brown, 211 P.3d 1110, 1118 (Alaska 2009) (citing Alaskans
for Efficient Gov’t, Inc. v. Knowles, 91 P.3d 273, 275 (Alaska 2004)).
       11
              Rockstad, 113 P.3d at 1219.
       12
              Baskurt v. Beal, 101 P.3d 1041, 1043-44 (Alaska 2004).
       13
              AS 45.45.010(b).

                                            -7-                                      7202

The statute allows a borrower who has paid usurious interest to recover double the
amount of interest she pays in excess of the statute’s cap,14 but the borrower’s total
payments have to exceed the loan principal plus legal interest before she can recover.15
              Bibi argues she is entitled to recover under the usury statute. First, she
argues that Elfrink’s original loan was usurious because (1) when one treats the funding
fee as disguised interest its initial interest rate exceeded the usury statute’s cap and (2)
the third loan modification’s interest rate of 12% violated the usury statute on its face.
Second, she argues that the three modifications to the original loan were each separate
loans, so every loan was under $25,000 and thus subject to the interest cap. Third, she
argues that adding the escrow payments and the proceeds from Elfrink’s foreclosure sale,
she paid the principal amount plus interest — both usurious and legal — on each loan,
and at least one of these payments — the foreclosure sale proceeds — was within the
statute of limitations. Accordingly, Bibi contends she satisfies the requirements for
recovery under the usury statute and should prevail on her claim.
              While we do not agree with all of Bibi’s arguments, we conclude that Bibi
is entitled to recover under the usury statute based on the following: (1) it was error to
conclude that Bibi had no standing to bring her usury claim; (2) it was error to conclude
the funding fee was not disguised interest; (3) the superior court correctly determined
that the usury statute’s cap on interest did not apply to most of the loan period, but it did
apply before the loan’s balance exceeded $25,000; (4) a borrower must make payments
that exceed a usurious loan’s principal plus lawful interest before she can recover under
the usury statute; (5) it was error to conclude foreclosure sale proceeds do not constitute

       14
              AS 45.45.030.
       15
             McGalliard v. Liberty Leasing Co. of Alaska, 534 P.2d 528, 533 (Alaska
1975), overruled on other grounds by W. Enters., Inc. v. Arctic Office Machs., Inc., 667
P.2d 1232 (Alaska 1983).

                                            -8-                                        7202

a payment for purposes of the usury statute; and (6) in light of the foreclosure sale it was
error to conclude that Bibi’s usury claim was time barred. We hold that Bibi may
recover under the usury statute, and we provide instructions to guide the superior court
in calculating her award on remand.
              1.	    It was error to conclude that Bibi lacked standing to bring her
                     usury claim.
                     a.	    Bibi has standing.
              The superior court ruled that Bibi had no standing to bring her action. It
reasoned that because the loan from Elfrink was taken out to support Bibi and Raja’s
pizza business, and the pizza business was awarded to Raja in the couple’s divorce case,
Bibi had no standing to bring claims that derived from the loan. Elfrink endorses this
reasoning. He argues that Bibi lacks the adversity of interest required for standing and
that any usury claim that may have existed belonged to Raja, who confessed judgment.
              Bibi responds in her reply brief that she has standing because she was an
obligor on Elfrink’s original loan, the superior court found that she ratified three
additional debts to Elfrink, and she and her ex-husband had record title to the house on
which Elfrink foreclosed, among other reasons. She therefore argues she has “sufficient
stake in the house and related debts to make her a proper party to litigate issues relating
to them.”
              Standing is a “rule of judicial self-restraint based on the principle that courts
should not resolve abstract questions or issue advisory opinions.”16 “The fundamental
question raised by an objection to standing is whether the litigant is a proper party to

       16
              Ruckle v. Anchorage Sch. Dist., 85 P.3d 1030, 1034 (Alaska 2004) (quoting
Trs. for Alaska v. State, 736 P.2d 324, 327 (Alaska 1987)).

                                             -9-	                                        7202
seek adjudication of a particular issue.”17 “[A] basic requirement of standing is adversity
of interests.”18 One way to satisfy the adversity of interests requirement is to “have a
‘sufficient personal stake’ in the outcome of a controversy and an ‘interest which is
adversely affected by the complained-of-conduct.’ ”19
              Bibi has standing to sue for usury. Elfrink foreclosed on Bibi’s house to
satisfy debts arising from allegedly usurious loans pursuant to agreements Bibi signed
or later ratified. Bibi also made payments, along with her ex-husband, toward those
allegedly usurious loans. She stands to either permanently lose or regain payments she
made on allegedly usurious interest. She therefore has a “sufficient personal stake” in
the outcome of this controversy,20 and her interests have been adversely affected by
Elfrink’s allegedly unlawful and “complained-of-conduct.”21 The fact that the original
loan was intended to support and was secured in part by a pizza business that Bibi no
longer owns is irrelevant considering both that she paid on the debt and her home was
sold to satisfy the debt.
                     b.     Bibi did not waive her standing argument.
              Elfrink additionally argues that because Bibi failed to challenge the superior
court’s standing decision in her opening brief or list it in her statement of points on

       17
            Law Project for Psychiatric Rights, Inc. v. State, 239 P.3d 1252, 1255
(Alaska 2010) (citing Trs. for Alaska, 736 P.2d at 327).
       18
              Id. (citing Trs. for Alaska, 736 P.2d at 327).
       19
            (quoting Ruckle, 85 P.3d at 1040; then quoting Alaskans for a Common
Language, Inc. v. Kritz, 3 P.3d 906, 915 (Alaska 2000)). Keller v. French, 205 P.3d 299,
304 (Alaska 2009) (footnote omitted).
       20
              Id. (quoting Ruckle, 85 P.3d at 1040).
       21
              Id. (quoting Alaskans for a Common Language, Inc., 3 P.3d at 915).

                                           -10-                                       7202

appeal, she waived the argument. Normally, her failure to list standing in her points on
appeal would constitute abandonment,22 her failure to argue standing in her opening brief
would result in waiver,23 and her discussion of standing in her reply brief would not
resuscitate the issue.24 But we have occasionally chosen to review issues sua sponte that
were not raised on appeal,25 and we have at times made an exception to the general rule
that an issue omitted from an appellant’s statement of points on appeal will not be
considered. For example, in Mullen v. Christiansen we excused the omission of an issue
from the party’s points on appeal because the issue was raised at the trial level, was
adequately briefed, and opposing counsel was apprised of it.26 As with the issue in
Mullen, standing was raised at trial, was adequately briefed in Bibi’s reply, and Elfrink,
as the party arguing that Bibi lacks standing on appeal, is well apprised of the issue.27
Further, Bibi listed the usury statute on appeal and made arguments about the usury

         22
              Oels v. Anchorage Police Dep’t Emps. Ass’n, 279 P.3d 589, 599 (Alaska
2012).
         23
              Hymes v. DeRamus, 222 P.3d 874, 887 (Alaska 2010).
         24
              Oels, 279 P.3d at 599.
         25
               Keturi v. Keturi, 84 P.3d 408, 415 n.16 (Alaska 2004) (explaining that the
court had raised issue sua sponte at oral argument and allowed counsel to provide written
references to the record to support finding despite recognizing that party failed to raise
the “issue either in his objections [at trial] or in his appeal,” and stating that this court
does not usually “review issues not previously raised”). See McCarthy v. McCarthy, 753
P.2d 137, 140 (Alaska 1988) (Compton, J., dissenting) (“I note first that the correctness
of this jury instruction is not an issue in this appeal. The court sua sponte has decided
to review this instruction.”).
         26
            642 P.2d 1345, 1350 (Alaska 1982) (citing Hootch v. Alaska
State-Operated Sch. Sys., 536 P.2d 793, 808 n.58 (Alaska 1975)).
         27
              See id.

                                            -11-                                       7202

statute in her opening brief; standing must necessarily be addressed before the court
addresses substantive issues. In this context, we choose to review the superior court’s
conclusion and hold that it was error.
             2.	    It was error to conclude that Elfrink’s funding fee was not
                    interest.
             In March 2007, at the time of Elfrink’s initial loan to Bibi and Raja,
AS 45.45.010(b) established the maximum allowable interest rate for loans under
$25,000 at 11.25 %.28 Under AS 45.45.020, “[a] person may not, directly or indirectly,
receive in money, goods, or things in action, or in any other manner, a greater sum or
value for the loan or use of money . . . than is prescribed in AS 45.45.010.”
             The superior court found that Elfrink’s original loan to Bibi and Raja was
not usurious because the additional $4,000 fee Bibi was obligated to pay over the life of
the loan was a “service fee or funding fee” rather than disguised interest. It based its
decision on the fact that Elfrink told the couple that the fee was to pay for the work
necessary to make sure the loan was sound and that both parties testified they had a
conversation to this effect. The court also relied on an escrow instructions addendum
signed by Bibi stating that “the funding fee contained on the closing statement is to be
considered a service fee and is not to be considered interest.”

      28
              During the relevant period in this dispute, former AS 45.45.010(b) (2010)
provided that for loans under $25,000, interest may not “be charged by express
agreement of the parties in a contract or loan commitment that is more than five
percentage points above the annual rate charged member banks for advances by the 12th
Federal Reserve District on the day on which the contract or loan commitment is made.”
The federal reserve rate was 6.25% when Elfrink made the loan to Bibi and Raja, putting
the maximum allowable interest rate at 11.25%. FEDERAL RESERVE BANK OF SAN
F R A N C I S C O ,                    D I S C O U N T                   R A T E ,
http://www.frbsf.org/banking/discount-window/discount-rate/#2006 (last visited May 30,
2017).

                                          -12-	                                    7202

              Bibi argues Elfrink’s funding fee is simply interest in disguise. While she
concedes that the interest rate on the face of the deed of trust promissory note was 10%,
she argues that when one looks at the underlying transaction, the interest rate was
actually much higher. Her math is based on a principal of $10,597, the amount of money
Bibi and Raja actually received from Elfrink, rather than $14,597, the amount received
plus the $4,000 funding fee. Bibi argues that because she and Raja received $10,597 and
were obligated to pay back $14,597 plus 10% interest through 24 monthly payments of
$673.58, she paid over $16,000 ($673.58 x 24) for a $10,597 loan, which she argues
yields an effective interest rate far exceeding 11.25%, the maximum allowable interest
rate at the time.29
              Bibi contends that the escrow instructions addendum stating “the funding
fee on the closing statement is to be considered a service fee and is not to be considered
interest” merely signals that Elfrink knew he had a usury problem, noting that we have
previously explained that “[i]n usurious transactions the parties are usually trying to
disguise what they have done”30 and that “[a] court must look squarely at the real nature
of the transaction.”31 Bibi argues that regardless of the fee’s name, Elfrink’s loan to Bibi
and Raja violated the usury statute because Elfrink received almost 45% interest, an
amount above the allowable maximum, “for the loan or use of money.”32 Bibi also
argues that we should review the funding fee issue in this case de novo because she is
challenging the superior court’s application of law — AS 45.45.020 — to facts as the
superior court found them.

       29
              Former AS 45.45.010(b) (2010).
       30
              Metcalf v. Bartrand, 491 P.2d 747, 750 (Alaska 1971).
       31
              Id. (quoting Wilcox v. Moore, 93 N.W.2d 288, 291 (Mich. 1958)).
       32
              AS 45.45.020.

                                           -13-                                       7202

              Elfrink, on the other hand, characterizes the funding fee issue as a question
of fact and argues that we should give deference to the superior court’s factual finding
that the fee was not interest, but rather an earned service fee. In support of this argument
he, like Bibi, cites our previous statement that “[a] court must look squarely at the real
nature of the transaction,”33 as well as a Texas case holding that the question whether a
charge is merely a device to conceal usury is a question of fact.34 From this starting
point, Elfrink enumerates the various components of the record that provide support for
the superior court’s conclusion. They include Elfrink’s testimony about the various tasks
he performed to ensure the loan was sound before making it, the court’s finding that
Elfrink’s testimony was credible on this point, and the loan documents stating that the
fee was not interest. Elfrink also suggests that the court’s view of Raja’s and Bibi’s
credibility supports the court’s finding that the fee was not interest.
              Our precedent demonstrates that determining whether a fee is considered
interest under Alaska’s usury laws involves an application of law to fact that we review
de novo,35 though factual questions underlie the determination.36 We have previously
identified the set of factual questions germane to this determination. In Fikes v. First
Federal Savings & Loan Association of Anchorage we considered whether a loan fee of
one-and-a-half percent was actually interest for purposes of a previous version of
AS 45.45.010(b) that, like the version applicable here, prohibited interest rates exceeding

         33
              Metcalf, 491 P.2d at 750 (quoting Wilcox, 93 N.W.2d at 291).
         34
              Gonzales Cty. Sav. & Loan Ass’n v. Freeman, 534 S.W.2d 903, 906 (Tex.
1976).
         35
              See Rockstad v. Erikson, 113 P.3d 1215, 1219 (Alaska 2005).
         36
            See Fikes v. First Fed. Sav. & Loan Ass’n of Anchorage, 533 P.2d 251, 265
(Alaska 1975).

                                           -14-                                       7202

the federal lending rate plus a fixed percentage.37 The superior court had found that the
one-and-a-half percent service charge did not constitute interest within the meaning of
any relevant usury statute.38 We concluded “that the usury issue [was] incapable of
resolution without a more adequate factual basis”39 and remanded, stating:
              Among the factual questions which we think are germane are
              the following: what charges, if any, the loan fee is designed
              to defray; whether the loan fee is a one-time charge or
              assessed throughout the life of the loan; whether the amount
              of the loan fee is dependent on the amount of the loan or the
              risk of the enterprise being financed; whether the loan fee and
              interest rate are charged on the entire committed amount no
              matter what the size and period of the balances outstanding;
              and what difference, if any, there is between [the bank’s]
              internal accounting treatment of the loan fee and that of
              interest. The superior court should consider these matters in
              determining, in the first instance, whether there has been
              usury.[40]
We also explained that “[i]f the loan fee is either substantially similar to interest in all
material respects or unreasonably large, the loan fee, or a portion thereof, could well be
treated as an interest charge in computing the effective interest rate for purposes of
AS 45.45.010(b).”41
              Later in Metcalf v. Bartrand we reviewed a superior court’s finding that

       37
533 P.2d at 263; former AS 45.45.010 (1970).
       38
              Fikes, 533 P.2d at 264.
       39
              Id.
       40
              Id. at 265 (footnote omitted).
       41
              Id. (footnotes omitted).

                                           -15-                                       7202

a set of real estate transactions constituted a loan with usurious interest.42 We concluded
that in “[l]ooking not to the form but to the substance of the transactions, there [could]
be little doubt but that they [came] within the broad terms of the Alaska usury law.”43
              These decisions establish two principles. First, while a loan transaction
may facially comply with the cap on interest rates found in AS 45.45.010, it may
nevertheless be charging an effective interest rate in violation of that cap because of
disguised interest.44 Second, whether this is the case requires a court to determine if,
given the facts regarding the substance of a given transaction, the transaction “come[s]
within the broad terms of the Alaska usury law”45 or, stated alternatively, whether the
service fee is “treated as an interest charge in computing the effective interest rate for
purposes of AS 45.45.010(b).”46 This determination is an application of law to fact.
              Here the superior court failed to consider some of the “factual questions . . .
germane” to the funding fee issue we identified in Fikes.47 We find two questions
particularly relevant to the issue before us. First, the court did not consider whether the

       42
              491 P.2d 747, 750 (Alaska 1971).
       43
              Id. at 751.
       44
               See also Crissey v. Alaska USA Fed. Credit Union, 811 P.2d 1057, 1061
(Alaska 1991) (“[I]n Fikes we held that certain charges assessed against a borrower, such
as ‘service fees,’ might qualify as interest for purposes of a usury analysis.” (citing Fikes,
533 P.3d at 265 & n.27)).
       45
              Metcalf, 491 P.2d at 751.
       46
              Fikes, 533 P.2d at 265.
       47
              Id.

                                            -16-                                        7202

funding fee was “a one-time charge or assessed throughout the life of the loan.”48 The
fee was rolled into the rest of the loan for payment over time rather than charged and
paid at the outset. Thus it was assessed throughout the life of the loan, which favors
concluding that it was interest.49 Second, the court did not consider whether the funding
fee was unreasonably large.50 Elfrink claims his work investigating the pizza business
assets, meeting with Bibi and Raja, and making calls was worth $4,000, all to ensure that
a loan for around $10,000 was sound. But the funding fee was over 37% of the value of
the loan Bibi and Raja received. In comparison, the loan fee in Fikes was only one-and­
a-half percent, and we still required further inquiry into whether it was a vehicle for
disguised interest.51 This establishes that the funding fee was unreasonably large. Lastly,
given the language of AS 45.45.020, which defines interest as value “for the loan or use
of money,” Elfrink’s own testimony that his funding fee is charged only if the loan is
made, rather than regardless of whether it is made, places the funding fee squarely
“within the broad terms of the Alaska usury law”52 because it is charged “for the loan or

       48
              Id.
       49
             Id. at 265 n.27 (“[I]f the loan fee is assessed throughout the life of the loan,
the fee would more closely resemble interest.”).
       50
              Id. at 265; see also Altherr v. Wilshire Mortg. Corp., 448 P.2d 859, 863
(Ariz. 1968), cited in Fikes, 533 P.2d at 265 (“[I]f such a charge is unreasonable, and the
borrower is forced to accept the lender’s services at an unreasonable rate in order to get
the loan, then it may be said, fairly, that the excess of the fees over what would be
reasonable, is a charge for the loan, and hence is interest.”).
       51
              Fikes, 533 P.2d at 264.
       52
              Metcalf v. Bartrand, 491 P.2d 747, 751 (Alaska 1971).

                                            -17-                                       7202

use of money,” not for services.53
              While Elfrink argues that we should give the superior court’s determination
deference because it is consistent with how the loan documents characterized the fee and
the court was in the best position to evaluate the credibility of the parties on this point,
these arguments only go so far. Under Fikes and Metcalf, how a fee is characterized in
a loan document is but one factor in determining whether a fee constitutes usurious
interest, especially considering that parties to a usurious loan often attempt to disguise
it.54 And while the superior court gave considerable weight to Elfrink’s testimony
regarding the work he did to justify the funding fee, the court failed to consider the two
relevant Fikes factors discussed above that are largely divorced from the credibility of
the parties, factors that we believe would have led the court to apply the usury statute
correctly.55 In light of this analysis, we hold that Elfrink’s funding fee was disguised
interest for purposes of the usury statute and it was error to conclude otherwise.
              When this disguised interest is taken into account, it is clear that Elfrink’s
initial loan to Bibi was well above the maximum allowable interest rate of 11.25% at the
time; the disguised interest alone was over 37% of the loan’s principal.56 We conclude
that Elfrink’s initial loan to Bibi was usurious.
              3.	    The superior court did not err in finding that the loan balance
                     increases were modifications to a single loan that rendered the
                     usury statute inapplicable once the loan principal rose over
                     $25,000.
              The superior court found that the final interest rate of 12% established by

       53
              AS 45.45.020.
       54
              See Metcalf, 491 P.2d at 750.
       55
              See Fikes, 533 P.2d at 265.
       56
              Former AS 45.45.010(b) (2010).

                                            -18-	                                     7202

the March 2008 modification, while above the statutory maximum for loans under
$25,000 pursuant to AS 45.45.010, was not usurious because modifications to the
original loan had brought the loan principal over $25,000 and the usury statute no longer
applied.57
             Bibi argues that each modification constituted a separate loan under
$25,000 subject to the usury statute’s cap. According to Bibi, the four separate
transactions included the original loan in March 2007, a second loan in September 2007,
a third loan in February 2008, and the commission claimed in March 2008. Bibi also
argues that each transaction was a separate loan not only because each was separate in
time, but also because each was documented separately — the original loan with a
promissory note and other documents; the second and third loans with separate FNBA
forms for each; and the fourth (commission) transaction with a real estate listing.
             Bibi argues that each loan was usurious when viewed separately.
Specifically, she argues that the original March 2007 loan was usurious because the
funding fee raised its effective interest rate to near 45% — and was at least usurious by
March 2008 when Elfrink increased the stated interest rate from 10% to 12% because
AS 45.45.010 set the maximum rate at 7.5% at that time. She argues that the second and
third loans were not usurious when made but also became usurious when Elfrink
increased the interest rate to 12% in March 2008. Lastly, she asserts that the real estate
sales commission Elfrink charged in March 2008 bore interest at a usurious 12% from
the beginning.
             Bibi argues that our decision in Rockstad v. Erikson supports her view that

       57
             See former AS 45.45.010 (2010).

                                          -19-                                        7202
each balance increase was in fact a separate loan.58            In Rockstad we applied
AS 45.45.010 and held that one note with two simultaneous disbursements each below
$25,000 was just one loan in excess of $25,000.59 While this tends to undermine Bibi’s
position, she insists that in Rockstad we also suggested that when evidence demonstrates
that there are really two different loans, “such a reading would necessarily imply that the
note constitutes an unlawfully usurious contract.”60 But while Rockstad did contemplate
a scenario in which sufficient evidence can demonstrate the existence of multiple
usurious loans rather than a single larger loan with a legal interest rate, we found no such
evidence in that case.61 In Rockstad we relied in part on the language of the note, which
spoke of a singular loan for $26,000, to conclude that there was only one non-usurious
loan.62
               Elfrink argues that the superior court’s finding of one loan modified three
times is a factual finding that is supported by the record and thus not clearly erroneous.
We agree. “Although the interpretation of contractual language is a question of law and
reviewed de novo, ‘[t]he intent of the parties when entering a contract is a question of
fact and is thus reviewed under the clearly erroneous standard.’ ”63 “[A]nd we give ‘due

          58
               113 P.3d 1215 (Alaska 2005).
          59
               Id. at 1221-22.
          60
               Id. at 1222.
          61
               Id.
          62
               Id.
          63
             Id. at 1219 (alteration in original) (quoting K & K Recycling, Inc. v. Alaska
Gold Co., 80 P.3d 702, 712 (Alaska 2003)).

                                           -20-                                       7202

regard to the trial court’s opportunity to evaluate the credibility of witnesses.’ ”64
Relying in part on its view of the credibility of the parties, the superior court found that
Bibi signed or ratified all of the escrow amendments — a finding Bibi does not appeal.65
Based on this finding and the testimony of the parties, the superior court found that the
amendments to the escrow instructions evidenced the intent of the parties to modify the
principal amount of the original loan — a factual determination that we will not overturn
unless clearly erroneous.66
              While the escrow amendments did not reference the collateral or the
original loan, each one updated the loan balance by stating that “the principal is” an
amount reflecting the previous principal plus the present increase. In addition, FNBA
sent letters to Raja and Bibi to confirm these increases, and the superior court did not
find Raja’s assertions that he did not receive them credible. As Elfrink notes, the
borrowers received only one substitute 1098 tax form from the bank for 2007-2009 and
only one year-end statement for 2010-2012, suggesting the balance increases were
modifications to one loan. Unlike the actual and hypothetical scenarios we discussed in
Rockstad, the evidence here supports the superior court’s finding that the various
increases to the original loan amount were intended as modifications to the original

       64
Allen v. Vaughn, 161 P.3d 1209, 1212 (Alaska 2007) (quoting Horton v.
Hansen, 722 P.2d 211, 215 (Alaska 1986)).
       65
              The superior court found that Bibi’s signature on the third amendment was
her signature, that her assertion that she did not sign the document was not credible, and
that through her signature of the third modification, Bibi “thereby ratif[ed] . . . the first
two [escrow] modifications.” While Bibi criticizes these factual findings in passing, she
states in her briefs that she does not challenge them on appeal, and we express no
opinion with regard to them here.
       66
              Rockstad, 113 P.3d at 1219.

                                            -21-                                       7202

principal rather than new loans.67 Therefore, the superior court’s finding was not clearly
erroneous.68 Consequently, when the March 2008 modification brought the single loan’s
principal over $25,000, the interest rate cap no longer applied.69
              4.	    Bibi’s payments must exceed the loan’s principal amount plus
                     lawful interest before she can recover under AS 45.45.030.
              The parties next dispute whether Alaska law requires that a borrower’s
payments exceed a loan’s principal amount plus lawful interest before she can recover
under the usury statute. We reaffirm that it does. Alaska Statute 45.45.030 provides that
“[i]f interest greater than that prescribed in AS 45.45.010 and 45.45.020 is received or
collected, the person paying it may, by action brought within two years after the
payment, recover from the person receiving the payment double the amount of the
interest received or collected.”
              Elfrink argues that for Bibi to succeed on her usury claim, she had the
burden of proving that he “received or collected” a payment in excess of the principal
amount plus lawful interest. In support, he cites Werner v. Lorentzen, a 1907 federal
Alaska case interpreting the predecessor to AS 45.45.030 as requiring that “before an
action may be maintained under this provision of the Alaska Code, the debtor must have

       67	
              Id. at 1222.
       68
               Bibi also argues that there is no paperwork documenting that the three loan
modifications were secured by the collateral that Bibi and Raja gave Elfrink for the
original loan, namely her house and the pizza business. But the deed of trust offered as
collateral to the original loan states that it is for the purpose of securing “the principal
sum of $14,597, . . . including all renewals, extensions or modifications thereto.”
Because the escrow amendments reflect an intent to modify the principal of the original
loan, and the deed of trust’s plain language secures the principal amount and all
modifications thereto, it follows that Bibi’s former home secured the original loan and
all subsequent modifications.
       69
              See former AS 45.45.010(b) (2010).

                                           -22-	                                      7202

actually paid an amount in excess of the principal and legal interest.”70 Bibi argues that
we rejected this holding in 1975 with our decision in McGalliard v. Liberty Leasing
Company of Alaska.71 She misunderstands McGalliard.
             There are two separate claims available under the usury statute. The first,
under AS 45.45.030, is an action to recover “double the amount of the interest” paid.
The second, under AS 45.45.040, is typically brought by a creditor to recover the balance
on a contract that a court finds to be usurious. The creditor recoups his principal but
forfeits the entire interest on the debt.72 In McGalliard we explained the different
requirements for each:
             As early as 1907 the Alaska courts acknowledged that [AS
             45.45.030] permits a debtor to recover under this provision
             only when he has paid a sum greater [than] the principal plus
             lawful interest. Since the total sum paid to [plaintiff] does not
             exceed the principal borrowed plus lawful interest, the
             requirements for recovery under AS 45.45.030 have not been
             met in this case. AS 45.45.040 contains no such limitation.

      70
               3 Alaska 275, 279 (D. Alaska 1907). The Werner decision relied on the
Supreme Court’s decision in McBroom v. Scottish Mortg. & Land Inv. Co. of New
Mexico where it explained that “interest cannot be said to have been collected or received
in excess of what may be lawfully collected and received until the lender has, in fact,
after giving credit for all payments, collected or received more than the sum loaned, with
legal interest.” 153 U.S. 318, 328 (1894).
      71
              534 P.2d 528, 533 (Alaska 1975), overruled on other grounds by W.
Enters., Inc. v. Arctic Office Machs., Inc., 667 P.2d 1232 (Alaska 1983).
      72
             AS 45.45.040.

                                           -23-                                     7202

             Under AS 45.45.040 the entire interest is forfeited and the
             court shall give judgment for the plaintiff for the amount due,
             without interest, and in favor of the defendants for costs of
             the action.[73]
Bibi focuses on the portion of this paragraph explaining AS 45.45.040, but that provision
does not govern the issue before us today. While AS 45.45.040 worked a forfeiture of
the entire interest in McGalliard because the creditor-plaintiff brought suit against a
borrower to recover the balance of payments due under a usurious lease agreement,74 the
question Bibi presents on appeal is whether the superior court “err[ed] by failing to make
a lender pay back twice the usurious interest that he received.” And in her prayer for
relief, Bibi requests double the usurious interest paid. An “action for recovery of double
amount of usurious interest paid” under AS 45.45.030 is thus the vehicle for recovering
the payments Bibi seeks. As we made clear in McGalliard, a debtor may only recover
under AS 45.45.030 after she has paid a sum greater than the principal plus lawful
interest.75 As the next section will show, Bibi has satisfied this requirement and will
therefore be able to recover what she has requested on appeal — double the amount of
usurious interest paid.
             5.	    The value generated by Elfrink’s foreclosure sale constituted a
                    payment under AS 45.45.030 through which Bibi paid the entire
                    loan principal plus lawful and usurious interest.
             The parties dispute the exact amounts Bibi paid on the loan and the amount
of the principal. But regardless of the numbers chosen, Bibi did not pay a sum that
exceeded the principal, let alone legal interest, unless the value generated by the

      73
             McGalliard, 534 P.2d at 533 (footnote omitted).
      74
             Id. at 529, 533.
      75
             Id.

                                          -24-	                                     7202

foreclosure sale of her home is treated as a payment under the usury statute.76 On the
other hand, if the monetary value Elfrink received from his foreclosure sale of Bibi’s
home to satisfy the debt is considered a payment on the loan, then Bibi did pay an
amount above the principal amount plus legal interest and remains eligible for recovery
under the usury statute.77
              The superior court implicitly concluded that foreclosing on collateral to
enforce a secured debt does not count for usury purposes. This finding was implicit in
the court’s ruling that Bibi’s usury claim was time barred because Bibi brought her claim
just a few months after Elfrink’s foreclosure. Bibi argues that foreclosure on collateral
constitutes payment on the underlying secured debt for purposes of the usury statute.
After all, she argues, a lender requires collateral in order to have an alternate source of
payment if the borrower defaults.
              We agree. Alaska Trustee sold Bibi’s house to Elfrink, and according to
the Trustee’s Deed “[p]roceeds from the sale [were] applied to sums due under the Deed
of Trust executed by Javed Raja & Mariam [Bibi], husband and wife, Trustor(s), and
Kevin J. Elfrink, Beneficiary.” These proceeds from sale are a payment on a debt
capable of triggering recovery under the usury statute. This is especially clear here
where the beneficiary purchases the property and extinguishes the debt by making an
offset bid calculated to cover the loan principal, interest, and late fees.78
              Elrink argues that an offset bid does not result in the creditor’s receipt or

       76
              Elfrink and Bibi agree that when all of the FNBA escrow payments are
added up, they equal less than $14,000. Bibi argues for “more than $16,000” if Raja’s
alleged $2,500 cash payment to Elfrink outside of escrow is counted. The parties also
agree that the loan principal balance after modifications was over $34,000.
       77
              AS 45.45.030; McGalliard, 534 P.2d at 533.
       78
              AS 34.20.080(b), (f)(1); AS 34.20.100.

                                            -25-                                     7202

collection of any cash proceeds from the foreclosure sale and for this reason cannot
constitute a payment for purposes of the usury statute. But even if we characterized what
Elfrink received through his foreclosure sale as a house rather than money, both of which
are conceptually plausible, the broad language of AS 45.45.020 provides that a “person
may not, directly or indirectly, receive in . . . any . . . manner, a greater sum or value for
the loan or use of money . . . than is prescribed in AS 45.45.010 - 45.45.070.” (Emphasis
added.) This broad language clearly encompasses an offset bid, which is a manner of
receiving value, however characterized.79
              Elfrink further argues that payment of interest under AS 45.45.030 requires
a voluntary payment, not an offset bid by a secured creditor in an involuntary foreclosure
on collateral. He cites but does not discuss Henning v. Mainstreet Bank for support.80
Henning is an Eighth Circuit case interpreting the word “paid” in a contract; it is of little
help in interpreting the statutory provision here.81 In addition, Elfrink’s suggestion that
a payment has to be voluntary under AS 45.45.030 is unpersuasive. The usury statute
provides that usurious interest cannot be received in any manner in AS 45.45.020. It
would make little sense if its very next provision limited those who can recover
payments on usurious interest specifically to borrowers paying cash voluntarily. We
conclude that value generated by a foreclosure sale constitutes a payment for purposes

       79
              Elfrink also argues that to demonstrate he received cash proceeds from the
foreclosure sale, Bibi needed to show that there was net equity in the property at the time
of the sale and that Bibi was entitled to it. But Bibi brought a usury claim, not a claim
for surplus proceeds. The issue in a usury claim is whether a creditor received usurious
interest payments on a debt. AS 45.45.030. Elfrink’s offset bid was calculated to cover
the loan principal, interest, and late fees associated with his usurious loan to Bibi. A
showing that the foreclosure sale also generated surplus proceeds is not necessary.
       80
              538 F.3d 975, 978 (8th Cir. 2008).
       81
              Id.

                                            -26-                                        7202

of AS 45.45.030, and it was error not to treat it as such.
              6.	    It was error to conclude that Bibi’s usury claim was barred by
                     the statute of limitations set forth in AS 45.45.030.
              The superior court concluded that Bibi’s usury claim was barred by the
two-year statute of limitations under AS 45.45.030 because the only escrow payment
within the two-year limit, made in July 2012, was applied entirely to late fees, not to
interest. Because we hold that foreclosure proceeds are a payment for purposes of the
usury statute, and Bibi filed her usury claim only a few months after the foreclosure sale,
she filed well within the two-year time limit. Her claim therefore was not time barred.
Further, Bibi’s cause of action for usury only arose at the point when her payments
exceeded the loan principal, plus legal interest, as required by McGalliard.82
Consequently, Bibi could not have brought her usury claim prior to the foreclosure sale.
              7.	    Bibi is entitled to recover double the amount of usurious interest
                     paid.
              Through her payments of at least $13,419.32 to the escrow account and her
additional payment of $56,629.95 from Elfrink’s foreclosure sale, Bibi paid her entire
loan principal plus all interest, both legal and usurious, to Elfrink. She then filed a timely
usury claim. We hold that under AS 45.45.030, Bibi is entitled to double whatever
portion of these payments constituted usurious interest, that is, interest above the
statutory maximum at the time.83 We provide guidance consistent with this opinion’s
conclusions to aid the superior court in calculating Bibi’s usury award on remand.
              First, to determine how much Bibi and Raja paid on the loan the superior
court must decide whether to include Bibi’s disputed $500 payment made in June 2013
and Raja’s alleged $2,500 payment outside of escrow after mid-2013 to the loan

       82
534 P.2d at 533.
       83
              See AS 45.45.030.

                                            -27­                                        7202
payments of $13,419.32 from the escrow account. The court must then include the
additional payment from Elfrink’s foreclosure sale.
              Second, the superior court must calculate what amount of Bibi’s total
payments were applied toward usurious interest generated by the original loan and the
two modifications that preceded the principal’s rise over $25,000 in March 2008, the
point at which the usury statute ceased to apply.
              Third, while the loan’s post-March 2008 interest rate was lawful, the rate
was applied to a principal that would not have been as large if Elfrink had charged a legal
interest rate from the beginning. Thus, some of the interest generated even post-March
2008 can be attributed to the original usurious nature of the loan. Therefore, the post-
March 2008 principal and interest should be adjusted to reflect what they would have
been had a legal interest rate been charged pre-March 2008 to remove any effect the
original usurious interest rate had on post-March 2008 payments. This may mean
assuming that the maximum legal interest rate allowed before March 2008 was charged
rather than the usurious one actually used, applying payments to this hypothetical
interest, applying the rest to principal, and then adjusting the post-March 2008 principal
and accrued interest accordingly. This will allow the superior court to award Bibi not
only double whatever amount she paid on pre-March 2008 usurious interest, but also
double whatever amount she paid on interest in excess of the adjusted post-March 2008
amount. Lastly, applying a legal hypothetical interest rate from the beginning may push
the date at which the loan’s principal would have exceeded $25,000 past March 2008,
thereby extending the period to which the usury statute applied to the loan. If so, the
new date should be taken into account when calculating Bibi’s recovery. The superior
court may in its discretion take additional evidence to assist in its calculation of Bibi’s
usury recovery.
              Fourth, the superior court must decide whether to treat late fee payments

                                           -28-                                      7202

as interest payments for purposes of Bibi’s recovery. The superior court decided that late
fee payments do not count as interest payments for purposes of the statute of limitations.
This question is no longer relevant. But the question whether payments made toward late
fees count as interest payments does affect whether Bibi can recover them under
AS 45.45.030. Bibi argues that late fee payments are included as interest payments
because AS 45.45.020 does not differentiate between late fees and interest, but rather
applies to all compensation “for the loan and use of money” without regard to labels.84
Elfrink argues that most jurisdictions treat late charges as noninterest because they are
not payments to secure extension of credit, “but rather are penalty payments accruing
only because of action solely within the borrower’s control,” though he recognizes that
we have not decided this issue.85 Because the parties’ discussion of this issue was limited
and done solely in the context of the statute of limitations issue, we leave it to the
superior court to decide in the first instance whether late fees count as interest payments
when calculating Bibi’s recovery on remand.86
              Lastly, Bibi suggested at trial and on appeal that she is due surplus proceeds
from the foreclosure sale. But Bibi fails to discuss how a claim for surplus proceeds
interacts with her claim under the usury statute and its various provisions. Alaska
Statute 34.20.080(f) requires that money left over from a foreclosure sale after paying
off the beneficiary of the deed of trust being foreclosed and any subordinate interests be

       84
              AS 45.45.020
       85
            See Crissey v. Alaska USA Fed. Credit Union, 811 P.2d 1057, 1062 n.8
(Alaska 1991).
       86
             The same determination must be made on remand with respect to escrow
and foreclosure sale trustee fees.

                                           -29-                                       7202

distributed to the previous homeowner.87 The superior court, having determined that
Bibi legally owed everything she paid via the foreclosure sale, found she failed to prove
that any surplus proceeds were generated by the sale or that Bibi was entitled to them if
they did exist. But we have concluded that usurious interest was charged and, therefore,
that Bibi did not legally owe the entire debt paid via the foreclosure sale. We are
remanding to the superior court to determine a usury award based on this conclusion.
The superior court shall also determine on remand what surplus proceeds, if any, Bibi
is due from that sale.
       B.	     The Superior Court Did Not Err By Denying Bibi’s Counterclaim For
               Clear Title And Possession And Granting Elfrink Clear Title And
               Possession.
               Bibi argues that Elfrink’s foreclosure should be set aside and title
transferred from Elfrink back to Bibi. She argues that even though IndyMac’s
foreclosure sale would typically cut off the junior interest on which her claim is based,88
we should make an exception because the purchaser at Indymac’s foreclosure sale was
Elfrink. The parties also debate whether Bibi’s claim for title is barred by collateral
estoppel and laches and whether IndyMac is an indispensable party. We conclude that
the superior court correctly denied Bibi’s claim for title and possession because the court
correctly determined that IndyMac’s foreclosure extinguished Bibi’s claim and gave
clear title to Elfrink.
               The superior court concluded that under AS 34.20.080 and AS 34.20.090,
Bibi's interest in her former home had been extinguished and Elfrink was entitled to title
and possession. Bibi concedes that ordinarily a properly conducted non-judicial

       87
               See AS 34.20.080(f).
       88
            AS 34.20.090; Adams v. FedAlaska Fed. Credit Union, 757 P.2d 1040,
1042 (Alaska 1988).

                                           -30-	                                     7202

foreclosure sale extinguishes junior claims, so IndyMac’s foreclosure sale based on its
senior deed of trust would have normally cut off both Elfrink’s and Bibi’s junior interests
in the property. But she argues that we should deviate from this principle here because
the buyer at IndyMac’s foreclosure sale was not a regular third party buyer, but rather
Elfrink himself. Bibi argues that Elfrink “engineered” the foreclosure sale by collecting
rent money from tenants after he took over the property instead of using it to pay
IndyMac, which she refers to as “equity-skimming.” She asserts that this caused
IndyMac to foreclose and allowed Elfrink to bid on and buy the property a second time.
Bibi argues that Elfrink took these actions “presumably so that he could make the
argument that he’s making here,” namely that IndyMac’s foreclosure extinguished any
claim Bibi might have had to her prior home. While Bibi acknowledges there is no
dispositive case law on this issue in Alaska, she suggests that precedent “saying that we
don’t allow a wrongdoer to profit from his misdeeds” supports the exception she asks us
to make.89
              Elfrink responds that Bibi’s claim for title and possession is moot because
IndyMac’s foreclosure sale on its senior deed of trust intervened to extinguish any
interest in the property held by Bibi after the Elfrink foreclosure.90 He reasons that there

       89
              See, e.g., In re Estate of Blodgett, 147 P.3d 702, 705 (Alaska 2006)
(recognizing the common law no-profit principle); State Farm Mut. Auto. Ins. Co. v.
Raymer, 977 P.2d 706, 712 (1999) (recognizing the no-profit principle and discussing
constructive trust as a remedy).
       90
              For this proposition, Elfrink cites AS 34.20.090(a):

              The sale and conveyance transfers all title and interest that
              the party executing the deed of trust had in the property sold
              at the time of its execution, together with all title and interest
              that party may have acquired before the sale, and the party
                                                                                (continued...)

                                            -31-                                        7202

is therefore “no longer a present, live controversy, and the party bringing the action
would not be entitled to relief, even if [she] prevails.”91 He further argues that “[t]he
purchaser at the IndyMac foreclosure sale, whether it was Kevin Elfrink or some other
third party, acquired all title and interest in the property, regardless of whether or not the
earlier 2013 foreclosure sale on the Elfrink third deed of trust was void or voidable.”92
Lastly, Elfrink takes issue with Bibi’s claim that to collect rent instead of sending it to
IndyMac means that Elfrink was “equity-skimming” and “engineered” the second
foreclosure sale. Elfrink asserts that he was entitled to collect rent after he acquired title
until he received notice from IndyMac demanding payment of the rental income pursuant
to its deed of trust, citing Bevins v. Peoples Bank & Trust Co. for this proposition.93
               “Under Alaska foreclosure statutes, the trustee of a deed of trust may
foreclose and sell the property which has been pledged as security for an indebtedness
without first securing a decree of foreclosure from the court. Upon selling the property
the interests created subsequent to the deed, including those of junior lienholders, are cut
off.”94 In Adams v. FedAlaska Federal Credit Union we held that a bank lost its junior

         90	
               (...continued)

               executing the deed of trust or the heirs or assigns of that party

               have no right or privilege to redeem the property, unless the

               deed of trust so declares.

         91
            Fairbanks Fire Fighters Ass’n, Local 1324 v. City of Fairbanks, 48 P.3d
1165, 1167 (Alaska 2002) (citing Gerstein v. Axtell, 960 P.2d 599, 601 (Alaska 1998)).
         92
               See Waldock & Padgett Invs. v. C.B.S. Realty, 668 P.2d 819, 822 (Alaska
1983).
         93
               671 P.2d 875, 879 (Alaska 1983).
         94
             Adams v. FedAlaska Fed. Credit Union, 757 P.2d 1040, 1041-42 (Alaska
1988) (citation omitted) (first citing AS 34.20.070; then citing AS 34.20.090 and
                                                                     (continued...)

                                             -32-	                                      7202

security interest in property as a result of a foreclosure sale by another bank with a senior
interest even though the junior bank was the purchaser at that sale.95 We read
AS 34.20.090 strictly, concluding that its language demonstrated “that upon sale by the
senior lienholder, . . . the junior lienholder[] los[es] its security interest in the property”
and that “[t]he statutes contain no exception to this rule when the purchaser at a sale is
a junior lienholder.”96 While our strict reading was based in part on policy reasons
regarding Alaska’s anti-deficiency statute not applicable here, it was also based on the
text of the statute, and we adopt the same interpretation in this case.97 Any interest
Elfrink acquired from his foreclosure sale on the junior deed of trust was cut off by
IndyMac’s foreclosure sale on its senior deed of trust, despite the fact that the purchaser
at that sale was Elfrink, the junior interest holder.98 This means that Elfrink no longer
had any interest acquired under the junior deed of trust, and Bibi therefore had no claim
to a non-existent interest. This conclusion is consistent with our holding in Adams and
with the foreclosure statutes’ purpose “to protect the foreclosure sale purchaser.”99
              Bibi’s argument that Elfrink engineered the sale is unpersuasive. Our prior
decision in Bevins v. Peoples Bank & Trust Co. suggests that rental income did not have
to be distributed to IndyMac unless demanded, even if there was a rental income

       94
           (...continued)

Waldock & Padgett Invs., 668 P.2d at 822-23).

       95
              Id. at 1041-44.
       96
              Id. at 1042.
       97
              Id. at 1042-44.
       98
              Id. at 1044.
       99
              Bauman v. Day, 892 P.2d 817, 823 n.8 (Alaska 1995).

                                             -33-                                        7202

provision in its deed of trust.100 Bibi has not directed us to a rental income provision, a
demand from IndyMac, or relevant case law on this issue, nor has she argued that Elfrink
was responsible for the mortgage payments to IndyMac. In addition, while wrongful
behavior would be relevant under a no-profit principle,101 there is little evidence of such
behavior here, apart from Bibi’s passing allegation of equity skimming.102 Furthermore,
even if Elfrink’s intent was to extinguish his junior interest by purchasing Bibi’s prior
home at IndyMac’s foreclosure sale and thereby eliminate Bibi’s claim for title, he also
intended to resell the property and chose to risk over $240,000 to do so. This makes him
similar to many purchasers of senior interests that the foreclosure statutes are meant to
protect.103 We conclude the superior court did not err by determining that Bibi’s claim
to title and possession was extinguished under AS 34.20.090, and we decline to create
an exception in this context. Because we conclude the superior court correctly denied

       100
             See 671 P.2d 875, 879 (Alaska 1983) (holding that deed of trust rent clause
allowing beneficiary to collect rents upon default to satisfy secured debt does not
automatically assign rents to beneficiary because beneficiary must take some action to
acquire possession of property or rents before rent clause becomes operative).
       101
           See In re Estate of Blodgett, 147 P.3d 702, 705 (Alaska 2006) (recognizing
the common law no-profit principle).
       102
               Equity skimming is a narrowly defined federal crime requiring that a deed
of trust be insured or held by a federal agency, among other elements not met here. See
12 U.S.C. § 1709-2 (2012). More generally, the term can include a number of practices.
The common theme is that “the skimmer makes promises to help the owner or investor
but does not perform . . . , leaving the owner or investor with an unpaid mortgage . . . and
facing foreclosure, while the skimmer keeps any money acquired for his own personal
use.” Brad R. Jacobsen & Michael Barnhill, Drawing the Short Straw — Mortgage
Fraud and Straw Buyers, 21 Utah B.J. 9, 10 (2008). Here, Elfrink and Bibi never had
an agreement regarding mortgage payments to IndyMac after Elfrink’s foreclosure sale.
       103
            See Bauman, 892 P.2d at 824 n.8 (noting one of the main purposes of
AS 34.20.090 is “to protect the foreclosure sale purchaser”).

                                           -34-                                       7202

Bibi’s claim to title and possession, we do not address Elfrink’s collateral estoppel,
laches or indispensable party arguments.
       C.	    The Superior Court Shall Determine The Award Of Attorney’s Fees
              And Costs On Remand.
              Bibi makes a request at the final page of her brief, without argument, that
we direct the superior court to award her full costs and attorney’s fees, including for this
appeal, under AS 45.45.040. As discussed earlier, Bibi has brought a claim under
AS 45.45.030 seeking double the amount of usurious interest paid. Because she is not
a creditor suing a borrower to enforce a usurious contract, the scenario contemplated by
AS 45.45.040, any attorney’s fees provision in that statute does not apply here. The
superior court awarded attorney’s fees and costs to Elfrink “pursuant to the terms of the
deed of trust and promissory note, and/or Alaska Civil Rule 82” after granting him
forcible entry and detainer and denying Bibi’s counterclaims for usury, quiet title, and
surplus proceeds. Because we reverse the court’s denial of Bibi’s usury counterclaim on
appeal, we remand for a determination of prevailing party status and an award of
attorney’s fees and costs under Rule 82.
V.	    CONCLUSION
              We REVERSE the superior court’s denial of Bibi’s counterclaim for usury,
AFFIRM the superior court’s denial of Bibi’s counterclaim for title and possession, its
grant of forceful entry and detainer, and its expungement of the lis pendens on Elfrink’s
property, and REMAND for calculation of Bibi’s usury award, surplus proceeds, if any,
and attorney’s fees and costs in a manner consistent with this opinion.

                                           -35-	                                      7202