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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Old Harbor Native Corp. et al v Afognak Joint Venture (09/07/2001) sp-5464

Old Harbor Native Corp. et al v Afognak Joint Venture (09/07/2001) sp-5464

     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.


and AKHIOK-KAGUYAK, INC.,     )    Supreme Court No. S-9484
               Appellants,    )    Superior Court No.
                              )    3AN-97-3380 CI
     v.                       )    
               Appellee.      )    [No. 5464 - September 7, 2001]

          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
                     Eric T. Sanders, Judge.

          Appearances:   Matthew D. Jamin, Jamin, Ebell,
          Schmitt & Mason, Kodiak, and Walter W. Mason,
          Jamin, Ebell, Schmitt & Mason, Seattle,
Washington for Appellant.  Robert J. Sato, Middleton & Timme, P.C.,
Anchorage, for Appellee.

          Before:  Fabe, Chief Justice, Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          BRYNER, Justice.


          Old Harbor and Akhiok-Kaguyak appeal from a grant of
summary judgment to Afognak Joint Venture on claims arising from
damages paid to the Joint Venture resulting from the EXXON VALDEZ
oil spill, and the contemporaneous withdrawal of Old Harbor and
Akhiok-Kaguyak from the Joint Venture.  Because there are issues of
material fact regarding Old Harbor's and Akhiok-Kaguyak's claims
and because the Joint Venture was not entitled to judgment as a
matter of law, we reverse the order granting summary judgment.
          Thirteen Alaska Native corporations, organized under
Alaska law pursuant to the Alaska Native Claims Settlement Act,
[Fn. 1] entered into a joint venture to receive a conveyance of
land from the federal government under the Alaska National Interest
Lands Conservation Act (ANILCA). [Fn. 2]  ANILCA required that the
corporations form a joint venture to receive the land. [Fn. 3]  The
corporations, including Old Harbor Native Corporation and Akhiok-
Kaguyak, Inc. (individually Old Harbor and Akhiok; collectively the
Corporations), formed the Afognak Joint Venture (Joint Venture) in
1982.  The detailed joint venture agreement (agreement) contained
provisions on the ownership structure of the Joint Venture,
management, and withdrawal procedures.  Under the terms of the
agreement, Old Harbor held a 12.38% interest and Akhiok held a
5.99% interest.
          On March 24, 1989, the oil tanker EXXON VALDEZ ran
aground in Prince William Sound.  During April and May of 1989 the
spill oiled portions of Afognak Island, including lands held by the
Joint Venture.  
          On April 21, 1989, Old Harbor gave the Joint Venture
notice of its withdrawal under Exhibit C to the agreement.  Akhiok
gave notice of its withdrawal on April 28, 1989.  Under the terms
of the agreement, the Corporations immediately relinquished
membership in the Joint Venture by serving their written notices of
          In July 1991 the Corporations and the Joint Venture
reached a partition agreement, and all parties executed a release
of claims arising from the agreement.  As a part of the settlement
agreement, Old Harbor paid the Joint Venture $128,941 and Akhiok
paid $62,429 as their shares of the Joint Venture's negative value.
[Fn. 4]
          The Joint Venture joined a tort lawsuit against Exxon and
other defendants for damages resulting from the 1989 spill (the
Exxon claim).  In September 1993 the Joint Venture asserted claims
on behalf of its members and included claims for the damage done to
the lands partitioned to the Corporations.
          The following month Exxon co-defendant Alyeska Pipeline
Service Company agreed to settle claims made against it in the
case; under the settlement, Alyeska paid $98 million to a fund
compensating Exxon plaintiffs in September 1994.  Exxon separately
established a claims program, which eventually paid approximately
$224 million to private plaintiffs.  Co-defendant Trans Alaska
Pipeline Liability Fund also paid about $41.7 million to
plaintiffs.  In addition, in September 1994 a federal jury awarded
plaintiffs $5 billion in punitive damages against Exxon.   In 1996
the Joint Venture valued its share of the combined Exxon claim,
including punitive damages, at about $22 million. 
          The Corporations brought suit against the Joint Venture
in September 1997, alleging multiple causes of action resulting
from the Joint Venture's refusal to partition the Exxon claim.  The
Joint Venture moved for summary judgment, and the Corporations
cross-moved for summary judgment.  The superior court granted the
Joint Venture's motion on all of the Corporations' causes of
action.  The Corporations appeal.
     A.   Standard of Review
          We review appeals from summary judgment de novo and will
uphold an order granting summary judgment when the record shows
that there are no genuine issues of material fact and the moving
party is entitled to judgment as a matter of law. [Fn. 5]  Contract
interpretation is a matter of law for which we use our independent
judgment. [Fn. 6]   
     B.   The Settlement Agreement and Release Do Not Bar the
Corporations' Claims.

          The Joint Venture and the Corporations executed an
agreement partitioning the Joint Venture's lands and a release
relinquishing all claims between the parties in July 1991. [Fn. 7] 
The Joint Venture asserts that the release, which covered all
claims arising from the agreement, bars all of the Corporations'
claims, including the Joint Venture's claims for oil spill damages. 
The Corporations respond that the settlement agreement did not
cover the Exxon claim, that the Joint Venture's breach of its
fiduciary duty of disclosure invalidates the release, or that the
release should be reformed.
          The superior court heavily relied upon the settlement
agreement and release in granting summary judgment to the Joint
Venture.  The court concluded:
               (1)  The settlement agreement and release
cover all claims arising out of the division of assets and land
upon withdrawal from the [Joint Venture].  The [Exxon] claim, like
any other asset, is covered by the settlement agreement and release
and the plaintiffs are not entitled to any portion of that claim.

               (2)  . . . [The Corporations] released
any breach of contract claim that may arise from the accounting
they were furnished.

          Although the superior court decision did not expressly
address what duty the Joint Venture owed to the Corporations after
their withdrawal but prior to the completion of the partitioning
and winding-up process, it assumed that the Joint Venture did not
owe a duty of disclosure regarding the Exxon claim.  The superior
court also found that the evidence did not support reformation of
the settlement agreement and release. 
          We have previously reviewed the effect of language
releasing contracting parties from all claims between those parties
in Martech Construction Co. v. Ogden Environmental Services, Inc.
[Fn. 8]  There, we stated that "[t]he broad language used [in the
release] implies that claims not specifically contemplated are
settled"and applied the release to Ogden's post-settlement
conduct. [Fn. 9]
          The Joint Venture cites Martech Construction for support
of its argument; and its reliance on Martech might be well-placed
if the legal issue were a question of interpreting the breadth of
the settlement agreement and release.  But that is not the relevant
inquiry here.  The Corporations allege that the settlement
agreement and release should be voided because the Joint Venture
breached a fiduciary duty of disclosure.  They argue alternatively
that the settlement agreement and release should be reformed
because of a mutual mistake of fact regarding the Exxon claim. 
These claims challenge the validity and effectiveness of the
release agreement, not its scope -- the issue that Martech
addresses.  Settlement agreements and releases are contracts; as
such, they are susceptible to attack under the legal theories of
mistake, [Fn. 10] fraud, [Fn. 11] and misrepresentation. [Fn. 12] 
Therefore, the effectiveness of the settlement agreement and
release must be analyzed in light of the Corporations' claims, even
if the Joint Venture correctly characterizes the scope that the
release would have if it were determined to be valid as originally
     C.   The Joint Venture Breached Its Fiduciary Duty to Disclose
the Status of the Exxon Claim During the Partitioning.

          The Corporations assert that the Joint Venture owed them
a fiduciary duty of disclosure regarding the Exxon oil spill claim
and that the Joint Venture's duty survived the Corporations'
withdrawal from the Joint Venture.  The Corporations' argument is
          Joint venturers owe each other a fiduciary duty during
the existence of the venture. [Fn. 13]  We have previously held
that a joint venturer may breach a duty it owed during the term of
the venture even after the venture has expired. [Fn. 14]  In Ahtna,
Inc. v. Ebasco Constructors, Inc., Ebasco argued that its fiduciary
duty to file a timely claim for compensation on Ahtna's behalf was
extinguished at the end of the business venture. [Fn. 15]  We
called that argument "misplaced,"holding that if the "obligation. . . 
arose during the term of the [joint venture], it matters not
that Ebasco's breach occurred after the [joint venture] expired."
[Fn. 16]
          We have not previously decided whether members of a
dissolving joint venture continue to owe each other a fiduciary's
duty of disclosure from the moment of dissolution through the time
when the venture finally winds up its affairs. [Fn. 17]  We hold
now that they do. 
          The process of ending a joint venture relationship only
begins with dissolution.  At that point, the parties no longer
pursue business interests as one entity.  But withdrawal of a
member or some other dissolution-triggering event does not end the
relationship among the joint venturers because the process of
winding up includes the accounting and division of the venture's
assets and debts.  During the winding up, joint venturers continue
to owe a fiduciary duty to each other until the process is
complete. [Fn. 18]  This duty is especially relevant with respect
to the disposition or management of joint venture assets. [Fn. 19]
          Here then, the Joint Venture owed the Corporations a duty
of disclosure during the period from the Corporations' withdrawal
in April 1989 until the settlement agreement and release were
executed in July 1991.  During that time, while the Joint Venture
and the Corporations were negotiating over the partitioning of land
to the Corporations, the Joint Venture stood in the position of a
trustee with respect to the venture's assets because the
Corporations were no longer members of the joint venture but were
joint owners of the assets.  The Corporations were entitled to an
accounting under the agreement, as the Joint Venture acknowledges;
but the Corporations were also entitled to disclosure of
significant events and management decisions affecting the
unpartitioned assets.  
          The facts of this case illustrate the need to hold joint
venturers to a fiduciary's duty of disclosure during the entire
dissolution process: here the process of accounting and
partitioning the land took over two years to complete.  To end the
Joint Venture's fiduciary obligation at the moment of dissolution
would invite complacency and sharp dealing during the process of
partitioning and accounting. [Fn. 20] 
          In sum, the Joint Venture owed the Corporations a
fiduciary's duty of disclosure regarding the status of Joint
Venture assets -- including the Exxon claim -- during the period
following the Corporations' withdrawal but prior to the completion
of the partitioning process.  Accordingly, unless the record
conclusively establishes that the Joint Venture discharged its
fiduciary duty, the Joint Venture was not entitled to summary
judgment on the Corporations' causes of action for
misrepresentation and unjust enrichment.
          The Corporations claim that the Joint Venture's silence
in the face of its affirmative duty to disclose the status of the
Exxon claim amounts to misrepresentation.  The superior court held
that there was no evidence that the Corporations justifiably relied
on the Joint Venture's "alleged representations (or silence)." But
the superior court's decision applied the wrong standard.  Where,
as here, one party has an affirmative duty to disclose information
material to a transaction, that party's silence will generally not
support summary judgment. [Fn. 21]
          The Corporations also claim that the Joint Venture was
unjustly enriched by its retention of the entire Exxon claim.  The
superior court held that because "unjust enrichment is not in and
of itself a theory of recovery"and the Corporations had "no viable
cause of action,"their unjust enrichment claim failed.  The
Corporations' challenge of this ruling has merit.
          We recently stated:
          The general principle of the doctrine of
          unjust enrichment is that "one person should
not be permitted unjustly to enrich himself at [the] expense of
another, but should be required to make restitution of or for
property or benefits received, retained or appropriated." As its
definition indicates, the doctrine of unjust enrichment is
predicated on the theory of restitution:  When a party unjustly
receives, retains, or appropriates property or a benefit, the party
should repay the source of the property or benefit.[ [Fn. 22]]

And we have also made it clear that we will "generally treat
actions brought upon the theories of unjust enrichment, quasi-
contract, contracts implied in law and quantum meruit as
essentially the same."[Fn. 23]
          Here, the Corporations claimed that they had superior
rights to their proportionate interests in the Exxon claim.  And by
presenting evidence that the Joint Venture received and retained
the Corporations' proportionate interests in the Exxon claim, that
the Joint Venture was aware of these interests, and that the Joint
Venture's retention of the interests could be considered unjust,
the Corporations raised a material issue of fact as to whether the
Joint Venture was unjustly enriched. [Fn. 24]  Given this factual
dispute, summary judgment should not have been granted to the Joint
Venture on the cause of action for unjust enrichment. [Fn. 25]
     D.   There Is a Genuine Issue of Material Fact as to Whether
the Parties Made a Mutual Mistake of Fact.

          The Corporations also assert that they presented evidence
establishing a material issue of fact as to whether both parties
made a mutual mistake regarding the Exxon claim's absence from the
settlement agreement.  A mutual mistake of this kind, according to
the Corporations, would have justified reformation of the
settlement agreement and release.  The Corporations' argument is
          In order to reform a contract because of a mutual
mistake, the party urging reformation must show: "(1) the mistake
relates to a 'basic assumption on which the contract was made,' (2)
the mistake has a material effect on the agreed exchange of
performances, and (3) the party seeking relief does not bear the
risk of the mistake."[Fn. 26]
          The first prong of this test requires that the mistake be
related to a basic assumption on which the contract was made.  In
Stormont v. Astoria, Ltd., we held that a mistake regarding
"assumptions . . . [that] went to the heart of the contract[]"
satisfied this requirement. [Fn. 27]  There, the issue was whether
acknowledged mistakes about the extent of a building's
deterioration were central to a sales contract between a commercial
seller and buyer.  Noting that the property "was listed as 'income
property,' and [the buyer] was interested in it for its rental
value"we held the mistake related to a basic assumption of the
contract. [Fn. 28]
          Here, the settlement agreement, by its own terms,
purported to "resolve all of the [Joint Venture] and [the
Corporations'] rights arising from [the Corporations'] withdrawal
from the [Joint Venture]"; yet it failed to mention the Exxon
claim.  The Joint Venture admits that "[t]he parties did not
address this issue in the Settlement Agreement or during settlement
discussions,"and that it "never specifically considered the effect
of the Settlement Agreement on the [Joint Venture's] [Exxon]
claim." By contrast, Old Harbor presented evidence that it
expected, as early as February 8, 1990, to receive its
approximately twelve percent interest of the Exxon claim.  And
Akhiok's attorney attested that "[a]t no time [during the
settlement negotiations] did anyone from the [Joint Venture] advise
us that the [Joint Venture] intended to claim and retain for
itself"the Exxon claim.
          The settlement agreement purported to settle all claims,
yet it failed to address or account for the allocation of a
significant Joint Venture asset.  This situation leads us to
conclude that the mistake that the Corporations allege as a basis
for reformation relates to a basic assumption of the settlement
          The second prong of the mutual mistake test requires that
the mistake be material to the transaction.  We discussed this
requirement in Diagnostic Imaging Center Associates v. H & P, where
we held that an undisclosed profit of $45,000 in a transaction
between partners "cannot be immaterial."[Fn. 29]  By comparison,
the Joint Venture stood to gain more than $22 million from the
partial settlement of the Exxon claim -- of which Old Harbor and
Akhiok claim 12.38% and 5.99%, respectively.  This amount is
certainly material to a transaction in which Akhiok paid $62,429
and Old Harbor paid $128,941 to the Joint Venture as their shares
of the Joint Venture's purported negative value.
          Finally, nothing in the settlement agreement transferred
the risk of a mutual mistake to the Corporations -- the third prong
of the mutual mistake test.  Therefore, the evidence, when viewed
in the light most favorable to the Corporations, supports the
contention that the Corporations and the Joint Venture made a
mutual mistake as to the effect the settlement agreement had on the
Exxon claim. [Fn. 30]
          The Joint Venture owed the Corporations a fiduciary duty
to disclose the status of the Exxon claim after the Corporations'
withdrawal from the Joint Venture.  Because the record fails to
establish that the Joint Venture met this duty, the superior court
erred in granting summary judgment to the Joint Venture. 
Additionally, there is an issue of material fact regarding whether
both parties made a mutual mistake of fact with respect to the
settlement agreement and release's failure to address the Exxon
claim.  We therefore REVERSE the order granting summary judgment to
the Joint Venture and REMAND for further proceedings. [Fn. 31]


Footnote 1:

     43 U.S.C. sec.sec. 1601-1629(a) (1971).

Footnote 2:

     Pub. L. No. 96-487 (1980) (codified in scattered sections of
16 U.S.C. and 43 U.S.C.).

Footnote 3:

     Pub. L. No. 96-487 sec. 1427(c) (1980).

Footnote 4:

     The valuation of the Joint Venture for purposes of withdrawal
excluded "commercial timber, land and value of improvements." The
values included here are without interest.

Footnote 5:

See Ellingstad v. State, Dep't of Natural Resources, 979 P.2d 1000,
1004 (Alaska 1999).

Footnote 6:

See Alaska Energy Auth. v. Fairmont Ins. Co., 845 P.2d 420, 421
(Alaska 1993).

Footnote 7:

     The release provided in relevant part:

               Section 2.  Release by [Akhiok]. 
[Akhiok] acknowledges that the execution and delivery by the [Joint
Venture] of the materials and documents listed . . . above
completely and satisfactorily fulfills all of [the Joint Venture's]
obligations to [Akhiok] contained in (i) the Settlement Agreement
and (ii) Exhibit C to the [Joint Venture] Agreement except those
obligations contained in Section 2 of the Settlement Agreement. 
[Akhiok] hereby releases and discharges the [Joint Venture], each
individual member of the [Joint Venture], its manager, and its
forester appointed pursuant to Exhibit C to the [Joint Venture]
Agreement, from any other or further obligation, claim or liability
("Claims") under (i) the [Joint Venture] Agreement, including but
not limited to Exhibit C thereof; [and] (ii) the Settlement
Agreement except Section 2; . . . whether such Claims are currently
known or subsequently discovered or are different in character or
extent than currently known. . . .  [Akhiok] acknowledges that it
is aware of and understands the rulings of the Alaska Supreme Court
regarding releases . . . , and it remains its intention to release
the above described Claims.

               Section 3.  Release by [Old Harbor]. 
[The release language is virtually identical to Section 2 with Old
Harbor replacing Akhiok].

Footnote 8:

     852 P.2d 1146, 1150-52 (Alaska 1993).

Footnote 9:

Id. at 1152.

Footnote 10:

See Witt v. Watkins, 579 P.2d 1065, 1067-68 (Alaska 1978).

Footnote 11:

See id.

Footnote 12:

See Diagnostic Imaging Ctr. Assocs. v. H & P, 815 P.2d 865, 867-68
(Alaska 1991).

Footnote 13:

See National Soil Servs., Inc. v. Hurst, 630 P.2d 3, 7 (Alaska

Footnote 14:

See Ahtna, Inc. v. Ebasco Constructors, Inc., 894 P.2d 657, 663
(Alaska 1995).

Footnote 15:

See id.

Footnote 16:


Footnote 17:

     The trial court did not make a finding of fact regarding the
date of accrual of the Exxon claim, therefore, it is impossible to
determine from the record presented on appeal whether a fiduciary
duty of disclosure arose during the term of the venture -- as was
the case in Ahtna.

Footnote 18:

See In re S & D Foods, Inc., 144 B.R. 121, 160 (D. Colo. 1992)
("fiduciary obligations continue after dissolution of a partnership
or joint venture and until all partnership or joint venture affairs
are completely wound-up"); Leff v. Gunter, 658 P.2d 740, 744 (Cal.
1983); Larry Karchmar, Ltd. v. Nevoral, 707 N.E.2d 223, 227 (Ill.
App. 1999) (holding joint venturer owes fiduciary duty to former
joint venturer until profits distributed); Greenberg v. Alter Co.,
124 N.W.2d 438, 440 (Iowa 1963) ("joint venturers like partners owe
the duty of finest loyalty and such loyalty continues throughout
the life of the venture and its dissolution"); accord Lavin v.
Ehrlich, 363 N.Y.S.2d 50, 52 (N.Y. App. 1974) (holding partner owes
fiduciary duty "in dealings effecting the winding up of the
partnership and the proper preservation of partnership assets
during that time").

Footnote 19:

See Karchmar, 707 N.E.2d at 227; Fravega v. Security Sav. & Loan
Ass'n, 469 A.2d 531, 536 (N.J. Super. Ch. Div. 1983).

Footnote 20:

See Wirum & Cash, Architects v. Cash, 837 P.2d 692, 701 (Alaska
1992) (fiduciaries owe duty of full disclosure).

Footnote 21:

See Turnbull v. LaRose, 702 P.2d 1331, 1334-35 (Alaska 1985).

Footnote 22:

Anderson v. Tuboscope Vetco, Inc., 9 P.3d 1013, 1019 (Alaska 2000)
(quoting Black's Law Dictionary 1535 (6th ed. 1990)).

Footnote 23:

Parliment v. Yukon Flats Sch. Dist., 760 P.2d 513, 518  n.15
(Alaska 1988).

Footnote 24:

See Alaska Sales & Serv., Inc. v. Millet, 735 P.2d 743, 746 (Alaska
1987); see generally IV George E. Palmer, The Law of Restitutionsec.
21.5 (1978).

Footnote 25:

     We note that the Corporations' cause of action for unjust
enrichment arguably should have survived summary judgment even
under the superior court's analysis because it is undisputed that
the Joint Venture's valuation of its land for purposes of
partitioning did not adjust the valuations for the partitioned
parcels due to the damage incurred as a result of the EXXON VALDEZ
spill. See Restatement of Restitution sec. 125(2) (1937). 

Footnote 26:

Stormont v. Astoria Ltd., 889 P.2d 1059, 1061 (Alaska 1995)
(quoting Restatement (Second) of Contracts sec. 152 cmt. a (1981)).

Footnote 27:


Footnote 28:


Footnote 29:

     815 P.2d 865, 867 (Alaska 1991).

Footnote 30:

     The Joint Venture's legal position on summary judgment is
untenable with regard to the Exxon claim: it alternatively argues
that the Exxon claim was an asset of the Joint Venture but that it
did not owe a duty of disclosure to the Corporations -- a theory we
dismissed above; or that the Exxon claim was not an asset of the
Joint Venture because the agreement set the date of accounting as
the last day of the month preceding withdrawal.  If we were to
accept the Joint Venture's logic, there would be a period of almost
a month during which the Corporations were members of the Joint
Venture and were responsible for the venture's debts, but not
entitled to share in the venture's assets.  Such an outcome is not
consonant with Alaska partnership law.  See AS 32.05.030; see
generally Winther v. Samuelson, 10 P.3d 1167, 1171 (Alaska 2000)
(recognizing that "partnership property is a type of ownership").

Footnote 31:

     The Joint Venture and the Corporations both claim to have
owned the Afognak Island land at the time the Exxon claim accrued:
the Corporations claim that they held as tenants in common with the
other joint venturers, and the Joint Venture claims that it held as
the sole title holder under ANILCA.  Both parties rely on their
asserted ownership interests as the keystone of their legal
arguments.  We find it unnecessary to reach these conflicting
claims of ownership in light of our holding in this case.