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Tufco, Inc. v. Pacific Environmental Corporation (06/03/2005) sp-5904
Tufco, Inc. v. Pacific Environmental Corporation (06/03/2005) sp-5904
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,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
TUFCO, INC., )
) Supreme Court No. S-11132
Appellant, )
) Superior Court No.3AN-03-7088 CI
v. )
)
PACIFIC ENVIRONMENTAL ) O P I N I O N
CORPORATION, )
) [No. 5904 - June 3, 2005]
Appellee. )
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, John Suddock, Judge.
Appearances: Samuel W. Cason, Anchorage, for
Appellant. David M. Freeman, Holmes Weddle &
Barcott, Anchorage, for Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
BRYNER, Chief Justice.
I. INTRODUCTION
Tufco, Inc., leased property to Pacific Environmental
Corporation (Penco) for use in a business that cleans up
environmental contamination. As part of the agreement, Tufcos
owner, Todd Fisher, worked as a Penco employee. In the course of
his employment, Fisher helped arrange, and then actively
participated in, cleanup work that required storing hazardous
materials on Tufcos property. Later, acting on behalf of Tufco,
Fisher sued to evict Penco, claiming that it had breached a lease
provision that prohibited storing hazardous materials on Tufcos
property. The superior court held a trial and concluded that
Fishers conduct estopped Tufco from enforcing the hazardous-
materials provision. Tufco then moved to amend its complaint to
include a new claim an allegation that the lease had recently
been modified that Tufco contended the parties had actually
tried; the court denied this motion, finding that the new issue
had neither been raised nor tried. In entering judgment, the
court awarded Penco the full reasonable fees and costs it
incurred from the time it received Tufcos notice of default,
basing this ruling on a lease provision that allowed recovery of
prevailing-party costs and attorneys fees. Tufco challenges
these rulings. We affirm, concluding that the record supports
the superior courts finding of estoppel, that the court properly
declined to amend the complaint to include Tufcos post-trial
issue because the issue had not actually been tried, and that the
court correctly interpreted and applied the leases provision
allowing prevailing-party costs and fees.
II. FACTS AND PROCEEDINGS
Todd Fisher owned Jesco, an Alaska company that
specialized in tank inspections and tank cleanings. Jesco had
recently purchased a building in Anchorage when Penco, a Hawaii-
based corporation doing similar work, approached Fisher about
purchasing Jesco. The parties negotiated a lease/purchase
agreement. The terms of the agreement called upon Penco to
purchase the Jesco business for a sum of $400,000 and a share of
the businesss ongoing profits; in addition, Penco would lease
Jescos Anchorage building and property from Fisher for a
renewable five-year term. The agreement also required Penco to
employ Fisher and one of Jescos existing Anchorage employees,
George Shedlock, as Pencos Alaska representatives. To carry out
the agreement, Fisher formed a new company, Tufco, which acquired
Jescos assets, sold the Jesco business to Penco, and acted as the
lessor of the Anchorage building and property.
Jesco and Penco signed the sale and lease agreements in
March 1999. The building lease contained a provision prohibiting
Penco from storing hazardous materials on Tufcos premises. It
also included a provision that entitled either party to recover
prevailing-party costs and attorneys fees if the party needed to
retain counsel to enforce its rights under the lease.
In late summer, Penco negotiated a contract with a
company called Envirosolve that gave Penco ongoing responsibility
for recovering and storing hazardous chemicals seized by various
law enforcement agencies during raids on illicit methamphetamine
laboratories in Alaska. Penco designated Fisher and Shedlock to
lead teams of Penco employees in the hazardous-materials recovery
operations. The contract required Penco employees to go through
extensive training on handling hazardous materials and to be
fingerprinted by government agencies. It also required Penco to
build a storage facility for the hazardous materials on its
Anchorage property and to secure the storage facility with an
alarm and razor-wire fencing.
In September or October 2002 Envirosolve conducted a
seminar for Penco employees to demonstrate the procedures
involved in carrying out the contract. Fisher participated in
the seminar. Soon after, Fisher began acquiring the equipment
needed for Penco to build the new secure-storage facility. The
equipment included a connex storage trailer which Fisher
purchased from a company owned by his wife and razor wire for
the fence surrounding the trailer. Once the connex trailer was
placed on Tufcos Anchorage property, Fisher spent several nights
and weekends installing the razor-wire fence around the trailer.
In November Fisher participated in Pencos first meth-
lab cleanup job, storing the hazardous materials in the trailer
on Tufcos property. Later the same month, acting on behalf of
Tufco, Fisher sent Penco a notice of default, claiming that it
had breached the lease agreements hazardous-materials provision
by storing hazardous materials on Tufcos property. Penco
responded with a letter denying this claim, asserting that Fisher
had effectively consented to the use of Tufcos property for
storage of hazardous materials by helping Penco secure the
Envirosolve contract and by preparing the site for storage of
hazardous materials. In reply, Tufco notified Penco that its
breach of the hazardous-materials provision had terminated the
lease but that Tufco would be willing to allow Penco to remain on
the premises for a higher rent. Over the next several months the
parties discussed ways to resolve this conflict, including the
possibility of a new lease agreement expressly allowing Penco to
store the Envirosolve materials on Tufcos property. Meanwhile,
Penco continued to recover hazardous materials from meth labs and
store them on Tufcos property; and Fisher continued to
participate in this work.
The parties settlement efforts ultimately proved
unsuccessful. In May 2003 Tufco filed an action to evict Penco
from the property and for damages resulting from its breach of
the lease. At Tufcos request, the superior court held an
expedited trial; Fisher and Shedlock testified for Tufco, and
four Penco officers testified for Penco. The superior court ruled
in favor of Penco, finding that Tufco was estopped from invoking
the hazardous-materials provision because, by helping Penco
obtain the Envirosolve contract, purchasing materials, and
building the secure storage facility, Fisher had effectively led
Penco to believe that he had approved Pencos storage of these
hazardous materials on Tufcos property.1
Tufco moved for reconsideration, insisting that Fishers
conduct was not inconsistent with enforcing the lease, because he
had merely acted as a Penco employee and had adequately
communicated his opposition to Pencos hazardous-materials storage
by discussing the issue with Shedlock, who was then working as
Pencos Alaska area manager. Tufco separately moved under Alaska
Civil Rule 15(b) for leave to amend its pleadings to conform to
the evidence presented at trial. Tufco asserted that during the
parties settlement discussions before trial, Penco had agreed, as
a condition of remaining on the property, to purchase insurance
covering pollution damage; in Tufcos view, this agreement
amounted to a modification of the original lease. Tufco insisted
that the parties had actually litigated the lease-modification
issue at trial, so it requested that its complaint be amended to
conform to the issues actually tried by adding an allegation of
lease modification and a claim for declaration of the parties
obligations under the modified lease. At the same time, in its
motion for reconsideration, Tufco asked the court to enter
additional findings determining whether the lease had been
modified and whether Penco would be obligated to maintain its
coverage if it continued to occupy Tufcos premises under the
lease.
The superior court denied Tufcos motions and declined
to address the lease-modification issue, concluding that Penco
did not have notice of Tufcos intent to try this issue and that
the issue had not actually been tried. Because the superior
courts ruling on eviction disposed of all issues raised in Tufcos
complaint, the court entered judgment dismissing Tufcos action
with prejudice. In keeping with the leases provision on
prevailing-party costs and fees, the judgment included an award
to Penco of the full attorneys fees and costs it incurred after
Tufcos initial notice of default.
Tufco appeals.
III. DISCUSSION
A. Standard of Review
We review the superior courts factual findings on
estoppel under the clearly erroneous standard.2 A finding of
fact is clearly erroneous when our review of the entire record
leaves us with a definite and firm conviction that . . . a
mistake has been made, even though there may be some evidence to
support the finding.3 We review a trial courts rulings on
motions to amend the pleadings and on awards of attorneys fees
for abuse of discretion.4 The trial court abuses its discretion
when its decision is arbitrary, capricious, or manifestly
unreasonable.5
B. Sufficiency of Evidence on Estoppel
The superior court found that Tufco was equitably
estopped from enforcing the leases hazardous-materials provision
against Penco because Fisher spearheaded th[e] endeavor to obtain
the Envirosolve contract. It found that Fishers actions had
amounted to an assertion that Tufco did not object to hazardous-
materials storage on its property, that Penco detrimentally
relied on this assertion, and that Fishers subsequent claim of
breach was unconscionable. Tufco argues that the record does not
support the courts finding of estoppel.
A party claiming equitable estoppel must prove four
elements: (1) an assertion of a position by word or conduct; (2)
reasonable reliance on the assertion; (3) resulting prejudice;
and (4) the estoppel will be enforced only to the extent that
justice requires.6 Only the first two elements are disputed
here.
Tufco argues that Fisher did nothing that could be
construed as an assertion that Tufco would not enforce the lease
provision regarding hazardous-materials storage. Tufco insists
that Fishers conduct in securing, implementing, and performing
the Envirosolve contract cannot reasonably be viewed as an
assertion of approval by Tufco, since, in Tufcos view, Fisher was
merely doing his job as a Penco employee. Moreover, Tufco
argues, Penco could not have reasonably relied on any implied
approval given by Fisher, because Fisher notified Penco through
conversations with Shedlock that Tufco intended to enforce the
hazardous-materials provision.
Penco responds that not only did Fishers actions
reflect his acquiescence in the breach, they actually caused the
breach. Furthermore, Penco insists, even if Fisher discussed
his concerns with Shedlock, this conversation did not put Penco
officials on notice of Tufcos intent to enforce the hazardous-
materials provision, since the lease expressly required Fisher to
give Pencos Hawaii office written notice of any concerns about
Pencos compliance.
The superior court agreed with Penco, finding that
Fishers actions completely contradicted any conversations that
Fisher might have had with Shedlock, that Fishers and Shedlocks
testimony was not believable, and that Fisher took no steps
reasonably likely to inform Penco that hazardous materials
recovered under the Envirosolve contract could not be stored on
Tufcos property.
The question at issue, then, is whether the record
supports these findings. We hold that it does. The record shows
that Tufco, through Fisher, actively helped Penco secure the
Envirosolve contract. Fisher participated in a training session
put on by Envirosolve to demonstrate the process for recovering
and storing hazardous materials seized at the meth labs. After
this training session, Fisher spent several nights and weekends
putting up special razor-wire fencing around Tufcos premises as
required by the contract with Envirosolve. Fisher also purchased
the connex container for storing the hazardous materials on
Tufcos property. And there is evidence that Fisher was in charge
of Pencos employees in meth-lab cleanups during the winter;
Fisher acknowledged that he shared this leadership responsibility
with Shedlock, who was in charge of the cleanups during the
summer.
In essence, then, Fisher worked extensively to ensure
not only that Penco received the Envirosolve contract but also
that Penco would be able to store the hazardous materials on
Tufcos property, as the contract required. Fisher actively
participated in Pencos first cleanup and helped store the
materials on Tufcos property all before notifying Penco of the
breach. Both individually and collectively, these actions could
reasonably be construed as an implicit assertion that Tufco would
not enforce the hazardous-materials provision of the lease as to
materials stored in connection with the Envirosolve contract.
Tufco nonetheless argues that Fishers communications
with Shedlock barred Penco from claiming that it reasonably
relied on his actions. Although Penco does not dispute that the
alleged conversations between Fisher and Shedlock occurred, it
argues instead that they could not have provided notice of Tufcos
position, because the lease expressly stated that if Tufco had
complaints about Pencos lease compliance, the complaints would
have to be submitted in writing to Pencos Hawaii office. At
trial, Fisher expressly conceded that, despite being aware of the
leases written-notice requirement, and even though he had the
opportunity to comply with this requirement, he never relayed
any of his concerns to Pencos Hawaii office.
Because the record contains ample evidence supporting
the superior courts findings concerning Fishers implied
assertions that Tufco would not enforce the hazardous-materials
provision and Pencos reasonable reliance on those assertions, we
hold that the court did not clearly err in estopping Tufco from
enforcing the provision.
C. Denial of Tufcos Request To Amend Its Complaint
After the superior court ruled against Tufco on its
claims for eviction and damages, Tufco moved to amend its
complaint under Civil Rule 15(b) to conform to the evidence
presented at trial. As we have already described above, Tufco
claimed that the parties had litigated the issue of a pretrial
lease modification that, in Tufcos view, required Penco to
purchase insurance protecting the Anchorage property against
damages caused by pollution. Tufco sought to have its complaint
amended to reflect this claim. At the same time, it asked the
court to reconsider its original findings by entering additional
findings resolving this claim. The superior court denied Tufcos
motions, finding that the lease-modification issue had neither
been litigated nor raised. Tufco challenges this ruling.
Civil Rule 15(b) allows a party to amend its original
pleadings to include issues that the parties either expressly or
impliedly litigated at trial:
When issues not raised by the pleadings are
tried by express or implied consent of the
parties, they shall be treated in all respects
as if they had been raised in the pleadings.
Such amendment of the pleadings as may be
necessary to cause them to conform to the
evidence and to raise these issues may be made
upon motion of any party at any time, even
after judgment; but failure so to amend does
not affect the result of the trial of these
issues.[7]
We have interpreted this rule to apply when evidence supporting
the post-trial amendment was admitted at trial by consent of the
parties or with the courts approval despite the opposing partys
objection that the evidence addressed issues outside the
pleadings.8 Here, Tufcos original complaint alleged that Penco
had breached the lease and, based on this allegation, set out
claims for eviction and damages. The complaint did not allege
that the lease had been modified or seek a declaration of the
parties obligations under the modified lease.
During the course of the parties pretrial discussions to
resolve their dispute, Penco indicated that it would purchase an
insurance policy for Tufcos premises effective May 2003 if Tufco
allowed it to remain on the premises. Although Pencos agreement
to purchase insurance was mentioned at trial, the record fails to
support Tufcos contention that the issue of lease-modification was
litigated by express consent of the parties. To the contrary,
when Tufcos counsel asked a witness whether Penco had provided
Tufco with a certificate of insurance, Pencos attorney objected,
insisting that there is no issue that [Tufco] indicated with
regard to this hearing involving the . . . procurement or failure
to procure insurance. Its not part of the complaint. In response
to this objection, the trial court observed that it might be more
trouble than its worth to discuss the matter. Tufcos attorney
then simply indicated that he would move on.
Nor does the record support Tufcos contention that the
lease-modification issue was tried with the parties implied
consent. Implied consent . . . is . . . difficult to establish
and seems to depend on whether the parties recognized that an
issue not presented by the pleadings entered the case at trial.
If they do not, there is no consent and the amendment cannot be
allowed.9 Tufco notes that Penco introduced its new insurance
policy as an exhibit at trial. But as Penco correctly points
out, the record indicates that Penco introduced the exhibit
together with other transactional documents for a limited reason:
to present a complete picture of the parties pretrial
transactions so as to avoid any implication that Penco might have
admitted Tufcos allegations of breach. The record provides no
indication that either party went further by seeking to litigate
the substantive issue of whether Pencos agreement to purchase
insurance was intended to prospectively modify the parties
original lease. Clifford Dart, Pencos Chief Financial Officer
and Vice President, testified that Penco obtained the insurance
in the course of discussing a possible settlement only to satisfy
Tufcos demands that Penco immediately buy the insurance. Tufcos
attorney did not pursue the issue further, and the court admitted
the policy as a trial exhibit without objection or additional
explanation. Notably, during its closing arguments, Tufco did
not contend that the lease had been modified; to the contrary, it
expressly acknowledged that waiver and estoppel were the only
issue[s before the court].
Because the record provides abundant support for the
superior courts finding that the issue of lease modification was
not actually litigated, its denial of Tufcos motion to amend
under Rule 15(b) cannot fairly be characterized as arbitrary,
capricious, or manifestly unreasonable. It follows that the
superior court did not abuse its discretion in denying the
motion.
D. Award of Full Attorneys Fees and Costs
The lease in this case gave either party the right to
recover prevailing-party attorneys fees and costs any time the
party needed to hire counsel to enforce its rights under the
terms of th[e] agreement. Relying on this provision, the
superior court awarded Penco the full attorneys fees and costs it
incurred after Tufco sent Penco the original notice of default.10
Tufco separately challenges the amounts awarded for fees and for
costs.
1. Attorneys fees
In challenging the award of attorneys fees, Tufco does
not dispute that the lease allowed recovery of full reasonable
fees rather than the limited fees set out under Civil Rule 82.
But Tufco contends that some of the attorneys fees awarded
reflected charges for matters beyond the scope of the action at
issue. In Tufcos view, the superior court should only have
awarded fees for charges incurred in defending against Tufcos
complaint for eviction.11
Penco responds that Tufcos reading of the lease is
unduly narrow; because it was pursuing the enforcement of its
rights under the terms of the lease, Penco argues, it was
entitled to recover the fees it reasonably incurred in response
to Tufcos notice of default, before Tufco actually filed its
complaint for eviction.
We have previously recognized that a prevailing party
may recover its full reasonable attorneys fees when a contract
provides for prevailing-party fees.12 In Ursin Seafoods, Inc. v.
Keener Packing Co., Inc., for instance, we held that a contract
provision allowing a prevailing party to recover its reasonable
attorneys fees trumped Civil Rule 82s provision for partial fees
because the parties specifically contracted for the full-fee
provision.13
Here Tufco sent Penco a notice in November 2002
accusing Penco of breaching the lease by storing hazardous
materials on Tufcos property. After its initial discussions with
Tufco failed, Penco hired counsel in January 2003 to assist in
enforcing its rights under the lease. Pencos counsel responded
to Tufcos notice of default on January 22, 2003. On February 4,
2003, Tufcos attorney notified Penco that Tufco had terminated
Pencos lease as of January 31, 2003, but was willing to agree to
a new lease. Over the next four months, the parties counsel
continued to discuss the lease but ultimately failed to settle
the dispute. Tufco then filed its eviction action on May 2,
2003.
The superior court found that the parties should
reasonably have understood the leases fees-and-costs provision to
cover all attorneys fees incurred in enforcing their rights under
the contract, not just the fees incurred after a complaint was
actually filed. This decision finds strong support in the text of
the lease, which allows recovery of fees any time a prevailing
party has hired counsel to enforce its rights under the terms of
this agreement. Even Tufco appears to have read the provision
this way: Tufcos pre-complaint letter notifying Penco that it had
terminated the lease referred to the fees provision and demanded
that Penco pay $1,400 in fees and costs that Tufco had spent in
preparing its notice of default. Given these circumstances, we
hold that the superior court did not err in interpreting the
lease to cover costs and fees reasonably incurred before the
eviction action was formally filed and that the court did not
abuse its discretion in awarding Penco its full reasonable
attorneys fees from the date of Tufcos notice of default.
2. Costs
Tufco separately challenges the superior courts award
of costs, arguing that the award should have been limited to
costs allowed under Civil Rule 79(f). Penco responds that the
costs provision in the lease agreement is not limited by Rule
79(f), just as the attorneys fees provision was not limited by
Rule 82.
We agree. The lease provided that the prevailing party
shall be entitled to recover attorneys fees and costs incurred in
enforcing its rights. (Emphasis added.) As we concluded above,
the superior court correctly awarded Penco its full attorneys
fees even though Civil Rule 82 ordinarily allows prevailing
parties to be awarded only partial fees and even though Penco
incurred some of its fees before Tufco filed its eviction action.
We reach a similar conclusion as to costs. The language of the
lease does not limit prevailing-party costs to those awardable
under Civil Rule 79 or to costs incurred after a formal action
has been filed.
To be sure, the lease requires that incurred costs be
reasonable; yet the record discloses nothing unreasonable in the
costs actually awarded. The superior court awarded Penco its
costs for obtaining an expedited transcript of the first day of
trial and for copying documents at a rate modestly exceeding the
one allowed under Rule 79. But Pencos transcript costs appear
justified by the expedited nature of Tufcos eviction action. And
the fact that Pencos copying costs exceeded the amount allowed
under Rule 79(f) hardly compels the conclusion that those costs
were excessive. Having reviewed the record, we cannot say that
the superior courts decision to award these costs was arbitrary,
capricious, or manifestly unreasonable. We conclude that the
superior court did not abuse its discretion in awarding Penco its
full costs.
IV. CONCLUSION
For these reasons, we AFFIRM the superior courts
decision.
_______________________________
1 The court also found that Tufco impliedly waived the
hazardous-materials provision in the lease. Our decision on the
issue of estoppel makes it unnecessary to address the courts
alternative ruling on waiver.
2 Hubbard v. Hubbard, 44 P.3d 153, 155 (Alaska 2002).
3 Barrett v. Alguire, 35 P.3d 1, 5 (Alaska 2001) (quoting
Jenkins v. Handel, 10 P.3d 586, 589 (Alaska 2000).
4 Betz v. Chena Hot Springs Group, 742 P.2d 1346, 1348
(Alaska 1987) (motions to amend pleadings); Tenala, Ltd. v.
Fowler, 993 P.2d 447, 449 (Alaska 1999) (attorneys fees awards).
5 Tenala, Ltd., 993 P.2d at 449.
6 Ogar v. City of Haines, 51 P.3d 333, 335 (Alaska 2002);
Municipality of Anchorage v. Schneider, 685 P.2d 94, 97 (Alaska
1984).
7 Alaska R. Civ. P. 15(b).
8 Alderman v. Iditarod Properties, 32 P.3d 373, 396
(Alaska 2001).
9 6A Charles Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice and Procedure 1493 (2d ed. 1990).
10 Paragraph 28 of the lease between Tufco and Penco
provides in relevant part:
If, at any time, either party shall
employ counsel in connection with the
enforcement of its rights under the terms
of this agreement, the prevailing party
shall be entitled to recover attorneys fees
and costs incurred with respect to pursuing
such rights.
11 In addition, Tufco complains that some of the fees
were incurred by Penco in re-negotiating Fishers employment
contract; but as Penco correctly points out, the superior court
reduced the award of attorneys fees by deleting charges
incurred in negotiating Fishers employment contract.
12 See Jackson v. Barbero, 776 P.2d 786 (Alaska 1989);
see also Gamble v. Northstore Pship, 28 P.3d 286, 288 (Alaska
2001).
13 741 P.2d 1175, 1180-81 (Alaska 1987).
