UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

        The final account of the Trustee duly came on for hearing before this court on July 30, 1990. The sole unsecured creditor of the estate is the Goldome Realty Credit Corporation. Goldome submitted an unsecured claim of approximately $50,000.00. Although there were no formal objections to the final report and proposed distribution, there is a substantial issue that should be addressed prior to the distribution of the funds.

        Goldome had both unsecured and secured claims as of the date of the filing of the petition on December 22, 1988. Goldome had a deed of trust which had a total amount due of approximately $133,000.00. After obtaining relief from the stay, Goldome foreclosed nonjudicially. The property sold for approximately $83,000.00. Goldome and the Trustee contend that it is entitled to an unsecured claim for the deficiency even though a deficiency judgment is specifically disallowed by Alaska statute. I agree.


A.S. 34.20.100 states:

When a sale is made by a trustee under a deed of trust, as authorized by AS 34.20.070 -- 34.20.130, no other or further action or proceeding may be taken nor judgment entered against the maker or the surety or guarantor of the maker, on the obligation secured by the deed of trust for a deficiency.


        1 ABR 48          The Alaska Supreme Court has interpreted this statute narrowly. In Hull v. Alaska Federal Savings and Loan Association of Juneau, 658 P.2d 122 (Alaska 1983), the Alaska Supreme Court found that the anti-deficiency statute did not bar retention of pledged savings accounts after nonjudicial foreclosure on the property. In Moening v. Alaska Mutual Bank, 751 P.2d 5 (Alaska 1988), the court ruled that a payee could sue on notes before foreclosing upon then as trust deeds. In Conrad v. Counsellors Investment Co., 751 P.2d 10 (Alaska 1988), the court found that the execution of a note and deed of trust was not an agreement to limit remedies to non-judicial foreclosure and that a judgment on a note was not res judicata on the foreclosure. None of these cases have found that execution of a trust indenture or deed of trust was, per se, a limitation upon the right to foreclose nonjudicially and obtain a deficiency judgment.

        Alaska's legislature has made utilization of these varied remedies somewhat more difficult. A.S. 34.20.160 contains certain notice requirements which must appear on notes executed after May 24, 1988. Here the note was executed on May 2, 1986 and thus those provisions do not apply.

11 U.S.C. § 502(b)(1) provides:

[E]xcept as provided in subsections (e)(2), (f), (g), (h) and (i) of this section, if such objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount, except to the extent that--
        1 ABR 49 
        (1) such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured. . .

The issue posed by the Alaska statutes as they interface with the Bankruptcy Code is whether the amount of the claim as of the date of the filing of the petition is unenforceable under Alaska law. As of the date of the filing of the petition, December 22, 1988, Goldome had an unsecured claim arising under Alaska law which was enforceable against the Debtor. Alaska allows deficiency judgments when a deed of trust is foreclosed as a mortgage. Hull v. Alaska Federal Savings and Loan Association of Juneau, supra. 11 U.S.C. § 506 then allows the claim to be split into secured and unsecured portions. Alaska law is consistent with such initial bifurcation.

        While it is indeed ironic that a secured creditor will receive more in bankruptcy than it would at state law, such a result is compelled by the language of the federal statutes. Even though there is explicit state authority forbidding a deficiency judgment after a foreclosure, and even though the creditor has non-judicially foreclosed post-petition, federal law controls the date of establishment of claims. Federal law supersedes any inconsistent provisions of state law pursuant to the supremacy clause of Art. 6, § 2 of the Constitution. The controlling date for determination of the amount of the unsecured claim is the date of the filing of the petition. The fact that the creditor later exercised its right to nonjudicial foreclosure is irrelevant.

        1 ABR 50 
        This result is consistent with the Ninth Circuit's ruling in In re Hougland, 886 F.2d 1182 (9th Cir. 1989). Hougland allowed the bifurcation of a deed of trust claim into secured and unsecured claims for Chapter 13 purposes. If a debtor can receive the benefit of bifurcation, he should also face any burden it may impose.

        Counsel should be cautious regarding this decision. Were a creditor to nonjudicially foreclose pre-petition, there would be no right to a deficiency claim in bankruptcy. This is a Chapter 7 case and 11 U.S.C. § 1111 does not apply. This issue was not briefed by the parties and there is a paucity of authority in the area. This holding could easily be overruled.

        The Trustee's final account is approved.

       DATED: August 1, 1990



Donald MacDonald IV
United States Bankruptcy Judge