Bibi v. Elfrink, 408 P.3d 809

Background

Mariam Bibi and husband Javed Raja obtained a small private loan from Kevin Elfrink in 2007: promissory note showed $14,597 but the borrowers actually received $10,597 because Elfrink charged a $4,000 “funding fee” rolled into the loan; nominal interest was 10%.
The loan was secured by a third deed of trust on the couple’s Anchorage home; over six years the loan balance was increased by three escrow amendments and payments were irregular; the principal ultimately exceeded $25,000 after a March 2008 modification that raised the stated interest to 12%.
Elfrink foreclosed in November 2013 and acquired title by credit-bidding the amounts he claimed were due; later IndyMac (senior lender) foreclosed in March 2015 and Elfrink again bought the property at that sale.
Bibi filed counterclaims in the forcible entry and detainer action seeking recovery for usury, quiet title/possession, and surplus from the foreclosure; the superior court denied her usury claim (finding no standing, fee was not interest, and statute inapplicable after principal exceeded $25,000) and awarded Elfrink title and possession.
On appeal the Alaska Supreme Court held Bibi had standing; the $4,000 funding fee was disguised interest (rendering the original loan usurious while principal was under $25,000); foreclosure proceeds (including an offset credit bid) count as payments for usury purposes; and Bibi’s usury claim was timely. The court affirmed denial of her quiet-title claim because IndyMac’s senior foreclosure extinguished her interest.

Issues

Issue	Bibi's Argument	Elfrink's Argument	Held
Standing to sue for usury	Bibi was an obligor, paid on the debt, and lost her home — she has a personal stake	Loan injury belonged to Raja or to the business; Bibi lacks adversity	Bibi has standing; trial court erred to the contrary
Is the $4,000 funding fee interest (disguised)?	The fee was rolled into payments and raised the effective rate well above statutory cap — it is disguised interest	Characterization in documents and testimony show it was a service fee; fact question deserving deference	Fee was disguised interest; trial court erred in treating it as non-interest
Do successive escrow increases create separate loans (each <$25,000) or modifications to one loan (so usury cap ceases once principal > $25,000)?	Each amendment was a separate loan transaction subject to the cap	The amendments modified one original loan; factual finding supported by record	Court did not err: amendments were modifications to a single loan; usury cap ceased after principal exceeded $25,000
Do foreclosure proceeds / offset bid count as "payments" for purposes of AS 45.45.030 and toll the statute of limitations?	Foreclosure value applied to the debt is a payment that can push total payments over principal + lawful interest and triggers usury recovery; claim timely after foreclosure	An offset bid does not constitute receipt of cash/payment by lender; payment must be voluntary	Foreclosure proceeds (including offset bid) are payments under the usury statute; Bibi’s claim was timely and not barred

Key Cases Cited

Fikes v. First Fed. Sav. & Loan Ass’n of Anchorage, 533 P.2d 251 (Alaska 1975) (identifies factual factors to determine whether loan fees are disguised interest)
Metcalf v. Bartrand, 491 P.2d 747 (Alaska 1971) (look to substance over form to determine usury)
Rockstad v. Erikson, 113 P.3d 1215 (Alaska 2005) (single-note disbursements vs. separate loans analysis)
McGalliard v. Liberty Leasing Co. of Alaska, 534 P.2d 528 (Alaska 1975) (debtor may recover double usurious interest only after payments exceed principal plus lawful interest)
Adams v. FedAlaska Fed. Credit Union, 757 P.2d 1040 (Alaska 1988) (senior foreclosure sale cuts off junior interests even if junior is purchaser)
Crissey v. Alaska USA Fed. Credit Union, 811 P.2d 1057 (Alaska 1991) (fees characterized as service charges may nonetheless be treated as interest for usury analysis)