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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Cook v. Cook (4/22/2011) sp-6554

Cook v. Cook (4/22/2011) sp-6554, 249 P3d 1070

        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 

MICHAEL COOK,                                  ) 
                                               )       Supreme Court No. S-13550 
                  Appellant,                   ) 
                                               )       Superior Court No. 4FA-01-00527 CI 
        v.                                     ) 
                                               )       O P I N I O N 
REBECCA COOK,                                  ) 
                                               )       No. 6554 - April 22, 2011 
                  Appellee.                    ) 
                                               ) 

                Appeal from the Superior Court of the State of Alaska, Fourth 
                Judicial District, Fairbanks, Mark I. Wood, Judge. 

                Appearances:      Jason A. Weiner, Hall & Weiner, Fairbanks, 
                for Appellant.  No appearance by Appellee. 

                Before:   Carpeneti, Chief Justice, Fabe, Winfree, Christen, 
                and Stowers, Justices. 

                FABE, Justice. 

I.      INTRODUCTION 

                During their divorce proceedings in May 2002, Michael Cook and Rebecca 

Cook (n/k/a Rebecca Hamsley) divided stock in two corporations by entering into a 

partial settlement agreement (Agreement).  They agreed that Rebecca would give her 

share of the stock to Michael and that Michael would pay Rebecca for the stock over time 

according to the terms of the Agreement.          Michael fell behind on his payments, and in 

October 2008 Rebecca requested that the remaining amount under the Agreement be 

reduced to judgment.  Michael did not object to paying certain delinquent amounts, but 

----------------------- Page 2-----------------------

argued that he should not have to pay anything more because additional payments were 

contingent on the corporations' profitability.  Michael also asserted that the Agreement 

should be fully or partially dissolved or that the court should relieve him from having to 

make future payments. 

                Although      the  superior   court   agreed    that  some    payments     under   the 

Agreement were dependent on the corporations' profitability, it determined that Michael 

and   Rebecca   had   not   intended   a   $2,000   per   month   payment   to   be   contingent   on 

profitability.  The superior court thus found that Michael was responsible for the $2,000 

per month payment even though the corporations had not been profitable. The trial court 

also rejected Michael's contract defenses and declined to relieve him of his obligations 

under the Agreement.  Michael was ordered to pay $47,132.46 plus continuing interest, 

the amount owing under the Agreement as of January 31, 2009.                  Michael appeals the 
superior court's decision.1  Because we agree with the superior court's interpretation that 

the   $2,000   per   month   payment   did   not   depend   on   the   subject   corporations   being 

profitable and conclude that the superior court did not err in declining to relieve Michael 

in whole or in part from his obligations under the Agreement, we affirm the superior 

court's judgment. 

II.     FACTS AND PROCEEDINGS 

                Michael and Rebecca Cook married in 1975 and divorced in May 2002. 

Their primary marital assets were two corporations, Polar Environmental Technologies, 

Inc. and Springline Mining and Exploration, Inc.  At the time of their separation, Michael 

and Rebecca owned 255,000 shares of Polar stock and 55,000 shares Springline stock. 

        1       Rebecca did not file a responsive brief in this matter. 

                                                 - 2-                                             6554 

----------------------- Page 3-----------------------

        A.      The Divorce Trial And First Agreement 

                On January 7 and 8, 2002, Superior Court Judge Mary E. Greene presided 

over the parties' divorce trial.       At trial, Michael's and Rebecca's attorneys announced 

that the parties had come to an agreement for dividing the corporate stock and orally 

conveyed the terms of the agreement to Judge Greene.  Broadly, the parties agreed that 

Michael   would   get   all   of   the   stock   and   would   pay   Rebecca   for   her   interest   in   the 

corporations.   The   value   of   Rebecca's   share   of   the   stocks   was   initially   assessed   at 

$750,000 and made payable under a 20-year note. 

                Rebecca's   counsel   detailed   at   trial   that   Michael   would   pay   $1,000   per 

month for five years, with payments going first to child support and then toward paying 

the $750,000 debt.       After five years, the remaining principal would begin to bear eight 

percent per annum interest.         Also at five years, Michael's monthly payments would 

increase to $2,000 to be applied toward the remaining principal and accrued interest on 

the 20-year note.   Rebecca's counsel stated that Michael would have to pay the $2,000 
per month "regardless of what his income  is and regardless from what source."2                        In 

addition, the parties agreed that if Michael made more than $40,000 per year from the 

corporations he would pay half of any amount over that $40,000 toward any remaining 

debt. Michael's counsel stated that his main concern was that Michael would not "have 

to   go   out   and   get   three   jobs   and   try   to   pay   off   these   [$6,000]   or   $7,000   a   month 

payments."      Judge Greene asked if Michael and Rebecca agreed with the terms of the 

oral agreement; both stated that they did and on January 22, 2002, Judge Greene wrote 

that the parties had "reached an agreement announced in court on those two assets." 

        2       The superior court attributed this comment to Michael's attorney but the 

transcript shows Rebecca's attorney making the statement. 

                                                   - 3-                                               6554 

----------------------- Page 4-----------------------

        B.      The First Agreement Is Reduced To Writing And Disputed. 

                On March 15, 2002, Rebecca filed a proposed agreement that attempted to 

reduce the in-court oral agreement to writing.  The proposed agreement first stated that 

Michael   would   pay   Rebecca   $1,000   per   month   for   five   years,   applied   first   to   child 

support and then to "the $750,000 discussed below."                It then described that after five 

years any remaining principal would bear eight percent interest, and "Michael's monthly 

payments shall increase to $2,000, which shall be applied first to interest and then to 

principal." The draft added that if Michael's "after tax income (salary, wages, bonuses, 

and dividends) from the two corporations exceeded $40,000 a year, half of the excess" 

was to be paid toward the debt.         The proposed agreement dictated that Michael would 

pay Rebecca $2,000 per month and half of the excess over $40,000 income from the 

corporations until the entire debt, plus interest, was paid off. 

                Michael disputed Rebecca's proposed draft and filed a motion to correct the 

settlement terms.  Michael's primary contention was that his monthly payments should 

end after 20 years, even if the debt had not been paid off.            He reasoned that if the debt 

had not been satisfied after 20 years, it would be unfair for him to have to continue to pay 

Rebecca because an outstanding balance would "prove[] that the corporations either 

failed completely or were not worth enough to warrant paying Rebecca $750,000 for half 

interest in the parties' shares in them." 

                Rebecca   responded   that   she   never   intended   to   forgive   any   remaining 

principal after 20 years and that in fact according to the payment plan the $750,000 note 
would not necessarily be paid off during that time.3  She repeated that Michael had to pay 

        3       Rebecca noted that, if the debt was still the full $750,000 after five years, 

monthly payments of $6,273.68 would be required to amortize a 20-year, eight percent 
interest debt and the motivation behind the payment plan requiring only $2,000 per 
month was that Michael would not have to get multiple jobs to "try to pay off . . . $6,000 
                                                                                         (continued...) 

                                                  - 4-                                               6554 

----------------------- Page 5-----------------------

$2,000 per month plus half of his corporate income over $40,000 until the note was paid 

off. 

                After this dispute, on April 19, 2002, the superior court concluded that the 

parties   had   not   reached   a   settlement   "despite  their   assertions   to   the   contrary"   and 

reopened the proceedings to divide the marital estate and decide the disposition of the 

corporations. 

        C.      The Revised Agreement 

                On May 9, 2002, the divorce trial resumed.               Michael and Rebecca told 

Judge Greene they had settled the division of the stock and they filed a written, signed 

Partial   Settlement   Agreement   ("Agreement").            The   superior   court   entered   the   final 

divorce decree and the Agreement that day. 

                In relevant part, the Agreement states: 

                 1.      The   255,000   marital   shares   of  Polar   Environmental 
                Technologies, Inc. stock[] and the 55,000 marital shares of 
                Springline Mining and Exploration, Inc. stock[], shall go to 
                Michael.   Rebecca shall execute any documents necessary to 
                effect that. 

                2.      Michael shall pay Rebecca the following: 

                         a.      $1,000/month commencing on June 1, 2002, and 
                on the first of each month through May 1, 2007 (five years); 
                the   $1,000/month   shall   be   applied   first   to   child   support 
                (arrearage and current), and after all child support has been 
                paid,   the   $1,000/month   shall   be   applied   to   the   $675,000 
                discussed   below.       Payment   of   the   $60,000   (60   months   at 
                $1,000/month) is unconditional, i.e. Michael shall make these 
                payments regardless of the success or failure of the subject 
                corporations. 

        3       (...continued) 

or $7,000 a month." 

                                                   - 5-                                               6554 

----------------------- Page 6-----------------------

                        b.     After five years, a principal figure of $675,000 
                less any principal payments applied after child support shall 
                bear 8% per annum interest and be amortized for the next 15 
                years.   On May 1, 2007, Michael's monthly payments shall 
                increase to $2,000, which shall be applied first to interest and 
                then to principal.   Should Michael's after tax income (salary, 
                wages, bonuses, and dividends) from the two corporations 
                exceed $40,000 a year, half of the excess shall be paid to 
                Rebecca and applied first to interest and then to the principal. 
                By January 31st of each year, Michael shall give Rebecca 
                copies     of  W-2's,    K-1's    and    1099's    from    these   two 
                corporations.   If at the end of the 15-year period, interest and 
                principal are still owing, the principal shall continue to bear 
                8 % per annum interest, and the above described payments of 
                half of the excess over $40,000 income from the corporations 
                shall continue to be made by Michael to Rebecca until all the 
                principal and interest has been paid.  At the expiration of the 
                15 year period, the $2,000/month payments shall cease. 

The terms of the Agreement were different from the terms announced during the divorce 

trial in January 2002, and from those submitted by Rebecca in March.  Most notably, the 

principal value of Rebecca's portion of the stock was reduced from $750,000 to $675,000 

and the term of the $2,000 per month payments was expressly limited to 15 years. 

        D.      The Current Proceedings To Enforce The Agreement 

                In October 2008, six years after the parties entered into the Agreement, 

Rebecca moved to reduce the amount owed under the Agreement to judgment.  Rebecca 

alleged that Michael had made no payment for two years, had made only 16 of the next 

54 payments due under the Agreement, all of them late, and had not made any payments 

since May 2007. 

                Michael opposed Rebecca's motion and asked the superior court to excuse 

all or part of his obligations under the Agreement, or at least limit his obligation to the 

$60,000   owed   under   paragraph   2.a.      He   first   argued   that   the   Agreement   should   be 

dissolved     in  its  entirety  because    Rebecca's    conduct    toward    investors   constituted 

                                                 - 6-                                           6554
 

----------------------- Page 7-----------------------

interference with Michael's business and violated the covenant of good faith and fair 

dealing, and because Michael entered the agreement under duress. Alternatively, Michael 

asserted that the Agreement should be interpreted such that payments under paragraph 

2.b ($2,000 per month plus half of any of Michael's income from the corporations in 

excess of $40,000) were contingent on the profitability of the corporations so that "[i]f 

the income from the subject corporations does not allow payment of the $2,000/month 

. . . the $2,000/month need not be paid."  He also suggested that the Agreement should 

be   reformed   because   the   parties   made   a   mutual   mistake   of   fact   in   overvaluing   the 

corporations.      Finally, Michael asked the court to relieve him from future obligations 

under the Agreement pursuant to Alaska Civil Rule 60(b).  Rebecca objected to each of 

Michael's "contract affirmative defenses" and argued that Michael should not be relieved 

of his obligations under the Agreement. 

                The   superior   court   held   a   series   of   hearings   from   December   2008   to 

February 2009.        The court initially noted that there was ambiguity in the Agreement 

regarding Michael's obligations under paragraph 2.b and requested testimony regarding 

"what the parties reasonably believed were the terms of the agreement at the time that 

they entered into it." 
                Rebecca's divorce counsel testified on February 20, 2009.4  He stated that 

the $2,000 per month payment in paragraph 2.b of the Agreement was "not contingent 

on any notion of profitability or profits of the corporation" and had to be paid "by 

whatever      means    Mr.   Cook    had."    Rebecca's      testimony     confirmed     that  she  also 

        4       We refer to the attorneys who represented Michael and Rebecca during the 

divorce   trial   and   settlement   negotiations   in   2002   as   "divorce   counsel."   During   the 
proceedings on the motion to reduce the settlement agreement to judgment in 2008, 
Rebecca proceeded pro se and Michael was represented by counsel other than his divorce 
counsel. 

                                                  - 7-                                            6554
 

----------------------- Page 8-----------------------

understood   that   payments   under   paragraph  2.b   did   not   depend   on   the   corporations' 

profitability. 

                Michael's divorce counsel then presented his interpretation - that if the 

corporations didn't earn Michael an income of more than $40,000, Michael would not 

have to make any payments under paragraph 2.b of the Agreement.  He alleged that all 

payments in paragraph 2.b were conditioned on whether the corporations earned Michael 

over $40,000 per year.         Michael then testified that he understood that once his salary 

from the corporations reached $40,000 per year he would have to pay $2,000 per month. 

                On March 10, 2009, the superior court found that Rebecca was entitled to 

reduce     Michael's     delinquent    payments     under  paragraph      2.a  of  the   Agreement     to 

judgment.     The superior court entered a judgment against Michael for $13,359.16, the 
amount owed for arrearage and interest up to May 1, 2007.5 

                On May 15, 2009, the superior court issued a memorandum decision and 

order resolving the remaining issues.  The superior court explained that it had sought to 

"determin[e] the parties' reasonable expectations at the time of contract [in 2002]." After 

reviewing the structure of the Agreement, the negotiations between the parties, and the 

testimony presented at the hearing, the superior court found that under paragraph 2.b of 

the Agreement payments of income over $40,000 per year were contingent on corporate 

profitability (i.e., earning Michael an income exceeding $40,000 per year) but that the 

$2,000 per month payment was not.  The superior court explained: 

                It appears more likely that the parties intended on requiring 
                the $2,000/month during the existence of the corporations 
                during   the   formative   years,   and   would   not   increase   that 
                amount   until   the   corporations   got   to   the   point   of   earning 
                Michael more than a reasonable base salary (i.e. $40,000). . . . 
                 [Michael] is incorrect that 'success or failure' was intended 

        5       Michael satisfied that judgment on April 3, 2009. 

                                                   - 8-                                              6554 

----------------------- Page 9-----------------------

                by the parties to mean the corporation[s] [were] earning him 
                a profit as applied to the $2,000/month payments. 

The superior court concluded that "the intent of the parties at the time of the Agreement" 

was   that   Michael   would   have   to   pay   Rebecca   only   $2,000   per   month   "while   the 

corporations were developing" and would not have to pay additional amounts under 

paragraph 2.b "unless and until [the corporations] became profitable enough that Michael 

began earning more than $40,000/year from them."                Thus, the court held that Michael 

was responsible for the $2,000 per month payments from May 1, 2007 onward but not 

obligated to pay more than $2,000 per month (except for late fees and interest) "until the 

corporations earn him more than $40,000/year." 

                On June 15, 2009, the trial court entered judgment against Michael in the 

amount   of   $47,132.46,   plus   the   Agreement's   continuing   eight   percent   interest   from 

January 31, 2009, until paid, adding that "Michael's indebtedness obligation to Rebecca 

after January 2009 is governed by the terms of the Settlement Agreement, which remain 

in effect in all respects." 

                Michael appeals the superior court's judgment. 

III.    STANDARD OF REVIEW 

                We apply basic contract interpretation principles to interpret a property 
division agreement incorporated into a divorce decree.6   We treat the interpretation of 

contract language as a question of law and interpret the language de novo.7 

                We   review   orders   denying   Alaska   Civil   Rule   60(b)   relief   for   abuse   of 

        6       Burns v. Burns, 157 P.3d 1037, 1039 (Alaska 2007); see also Ford v. Ford, 

68 P.3d 1258, 1263 (Alaska 2003) ("We analyze a settlement agreement under traditional 
contract principles."). 

        7       Norton v. Herron, 677 P.2d 877, 880 (Alaska 1984). 

                                                  - 9-                                              6554 

----------------------- Page 10-----------------------

discretion.8   An abuse of discretion occurs when, after a review of the entire record, we 

are left with "a definite and firm conviction that the trial court has erred in its ruling."9 

IV.	    DISCUSSION 

                The central issue in this appeal is whether the superior court's interpretation 

of the Agreement was incorrect and resulted in an inflated judgment against Michael. 

We also address Michael's contention that the superior court improperly   refused   to 

excuse him from all or part of his obligations under the Agreement because: (1) the 

Agreement was the result of a mutual mistake of fact; (2) Rebecca's alleged interference 

with potential investors constituted unclean hands; and (3) the court did not let him fully 

argue   that   he   entered   the   Agreement   under   duress.   Finally,   we   consider   Michael's 

argument that the trial court should have granted him relief from prospective application 
of the Agreement pursuant to Alaska Civil Rule 60(b)(5) or (6).10 

        A.	     Michael's $2,000 Per Month Obligation Under Paragraph 2.b Of The 
                Agreement         Is   Not    Contingent      On     The    Profitability     Of    The 
                Corporations. 

                Michael's primary argument on appeal is that the superior court incorrectly 

interpreted the terms of the Agreement to require him to pay $2,000 per month even if 

the    corporations     were   not   profitable.    He     asserts   that  "[t]he   more    reasonable 

interpretation is that all payments in [paragraph 2.b] are dependent on the profitability 

        8       Morgan   v.   Morgan,   143   P.3d   975,   976   (Alaska   2006);  Princiotta   v. 

Municipality of Anchorage, 785 P.2d 559, 562 (Alaska 1990). 

        9	      Ford, 68 P.3d at 1263. 

        10      Michael's final point in his appellate brief is that the superior court should 

have considered his ability to satisfy his obligations under the Agreement. Michael cites 
no   legal   authority   for   this   position   and so   we   do   not   address   it. Wasserman   v. 
Bartholomew, 923 P.2d 806, 816 (Alaska 1996) (deeming an argument waived where the 
party cited no authority and failed to provide a legal theory for the party's argument on 
appeal). 

                                                 - 10-	                                           6554
 

----------------------- Page 11-----------------------

of the subject corporations." 
                 As stated above, we interpret contract language de novo.11                  Where the 

superior court considers extrinsic evidence in interpreting contract terms, however, we 

will review the superior court's factual determinations for clear error and inferences 
drawn from that extrinsic evidence for "support by substantial evidence."12  In addition, 

we have long maintained that "[i]t is the function of the trial court, not of this court, to 
judge witnesses' credibility and to weigh conflicting evidence."13 

                 In   interpreting   any   contract,   "[t]he  goal   .   .   .   is   to   give   effect   to   the 
reasonable expectations of the parties."14          This is accomplished "by looking first at the 

written agreement and also extrinsic evidence regarding the parties' intent at the time the 
contract was made."15        To construe a divorce property settlement agreement "[a] court 

must     resolve   any   ambiguity     in  contract    language    by   determining     the   reasonable 

expectations of the contracting parties in light of the language of any disputed provisions, 

other    provisions,     relevant    extrinsic   evidence,    and    case   law   interpreting    similar 
provisions."16 

        11      Norton, 677 P.2d at 880. 

        12      Burns v. Burns, 157 P.3d 1037, 1039 (Alaska 2007); see also Laughlin v. 

Laughlin, 229 P.3d 1002, 1004 (Alaska 2010). 

        13      Knutson v. Knutson, 973 P.2d 596, 599-600 (Alaska 1999). 

        14      Id. at 600. 

        15      Brotherton v. Warner, 240 P.3d 1225, 1229 (Alaska 2010). 

        16      Hartley v. Hartley, 205 P.3d 342, 347 (Alaska 2009) (internal quotation 

marks omitted); see also AAA Valley Gravel, Inc. v. Totaro, 219 P.3d 153, 160 (Alaska 
2009)   (explaining   that   where   contract   language   is   ambiguous   courts   should   look   to 
"[r]elevant extrinsic evidence" which includes "the parties' conduct, goals sought to be 
                                                                                          (continued...) 

                                                  - 11-                                               6554 

----------------------- Page 12-----------------------

                 The superior court initially determined that it was not appropriate to strictly 

construe   ambiguities   in   the   Agreement   in   favor   of  the   non-drafting   party   (Michael) 

because   "[i]n   reality,   both   sides   carefully   debated   the   provisions."       This   decision 

comports with our case law.  While the general rule is that an ambiguous contract will 
be construed against its drafter,17 we have cautioned that the rule is appropriate only "in 

the absence of other means of ascertaining the reasonable expectations of the parties."18 

Our   decisions   have   also   noted   that   a   contract   should   only   be   construed   against   the 

drafting party for "contracts of adhesion where the parties are of such disproportionate 

bargaining power" that one party "could not have negotiated for variations in the terms 
of the standard policy."19        It was thus appropriate for the superior court to decline to 

construe ambiguous terms strictly in favor of Michael. 

                   To   interpret   the   ambiguities   in   paragraph   2.b   of   the   Agreement,   the 

superior court considered the following: (1) words used in the Agreement; (2) the nature 

of the businesses when the Agreement was formed, which was that the corporations were 

        16       (...continued) 

accomplished, and surrounding circumstances at the time the contract was negotiated"). 

        17       See RESTATEMENT (SECOND) OF CONTRACTS  206 (1981) ("In choosing 

among   the   reasonable   meanings   of   a   promise   or   agreement   or   a   term   thereof,   that 
meaning is generally preferred which operates against the party who supplies the words 
or from whom a writing otherwise proceeds."). 

        18       Monzingo v. Alaska Air Group, Inc., 112 P.3d 655, 661 n.29 (Alaska 2005). 

        19       Little   Susitna   Const.   Co.   v.   Soil   Processing,   Inc.,   944   P.2d   20,   25   n.7 

(Alaska 1997) (internal quotation marks omitted) (finding that the jury was not required 
to construe ambiguity against the drafting party because the contract "was negotiated at 
arm's length between two equally situated parties"); see also RESTATEMENT (SECOND) 
OF CONTRACTS  206 cmt. a Reporter's Note (1981) (noting that the rule "has less force 
when the other party has taken an active role in the drafting process, or is particularly 
knowledgeable"). 

                                                   - 12-                                              6554
 

----------------------- Page 13-----------------------

"in their beginning, developing stages with the hope of future profitability"; (3) the 

parties' negotiations, which the trial court found favored Rebecca's interpretation; and 
(4)   the   three-tiered   structure   of   the   Agreement,20  which   reflected   that   "the   parties 

expected that after five years the business would be viable and ongoing, but that Michael 

may not yet be able to take much income from the business" and that "[a]s the business 

grew and became more profitable . . . the payments increased to include 50% of the 

income above that [$40,000] threshold."           The superior court concluded based on these 

factors that Michael was obligated to pay half of any excess personal income from the 

corporations over $40,000 per year to Rebecca only if the corporations earned him at 

least $40,000, but that he was responsible for the $2,000 per month payment even if the 

corporations were not earning a profit. 

                Michael contends that the trial court's interpretation of the Agreement is 

"unnecessarily convoluted and benefits Rebecca at [his] expense," and that the "more 

reasonable interpretation" that is "fair to both parties" is that "all payments in tier two 

are dependent on the profitability of the subject corporations."                Michael asserts that 

conditioning the $2,000 per month payments on the corporations' profitability is in line 

with Michael and Rebecca's negotiations and the testimony presented at the hearings on 
contract interpretation.21 

        20      The superior court described the Agreement as having three tiers: "Tier one 

was the five years of unconditional payments of $1000 per month towards child support, 
arrearages, and the principal value of the stock.  Tier two covered the next fifteen years 
after May 1, 2007, and had two payment possibilities: $2000 per month or $2000 per 
month plus one-half of the profits beyond $40,000 income to Michael.  Tier three began 
after the fifteen years of tier two ended.  No monthly payment of $2,000 was required, 
but Rebecca would be entitled to one-half of the corporation's income above $40,000 
until the obligation to her was paid." 

        21      Michael provides only hearing testimony from his divorce counsel and 

                                                                                        (continued...) 

                                                 - 13-                                              6554 

----------------------- Page 14-----------------------

                We agree with the superior court's interpretation that the $2,000 per month 

payment in paragraph 2.b of the Agreement is not contingent on the profitability of the 
subject  corporations.22        The   superior   court   properly   looked   to   extrinsic   evidence, 

including the nature of the business, the parties' negotiations, and the structure of the 

Agreement in interpreting the Agreement's terms. Record evidence supports interpreting 

the terms of the Agreement to mean that Michael is obligated to make the $2,000 per 

month payment even if the corporations are not providing him with over $40,000 in 

income (i.e., are not "profitable" by the parties' definition). 

                First, the language of the Agreement supports treating the $2,000 per month 

payment differently from the $40,000 threshold payment.                  The Agreement states that 

"[o]n May 1, 2007, Michael's monthly payments shall increase to $2,000" and in the next 

sentence adds that "[s]hould Michael's after tax income . . . from the two corporations 

exceed $40,000 a year, half of the excess shall be paid to Rebecca."                  This structure is 

inconsistent   with   applying   the   $40,000   in   income   trigger   to   the   $2,000   per   month 

payment.  The Agreement also separates the two payment types by expressly ending the 

        21      (...continued) 

himself as record evidence in support of his argument. This type of support is unavailing 
in light of our case law explaining that "to give effect to the intention of the parties, 
looking   to   their   testimony   as   to   their   subjective   intentions   or   understandings   will 
normally accomplish no more than a restatement of their conflicting positions.                    Thus, 
self-serving testimony is ordinarily not probative." Abood v. Abood, 119 P.3d 980, 986 
(Alaska 2005) (internal citations omitted). The superior court also specifically noted that 
the testimony from the parties at the hearing was not helpful, and that neither witness was 
particularly credible. 

        22      The superior court also determined that payments under paragraph 2.b of 

the Agreement were contingent on "success or failure" of the corporations.  We do not 
reach    the   question    whether    this  was    correct   because    the  record    shows    that   the 
corporations are not insolvent or bankrupt, so the relevant factual scenario is not before 
us. 

                                                  - 14-                                            6554
 

----------------------- Page 15-----------------------

$2,000 per month obligation after 15 years, but continuing payments triggered by a 

corporate income of over $40,000 until the entire principal amount plus interest is paid 

off. 

                Second, Michael's concern at the time the Agreement was made was clearly 

that he would not have to "go out and get three jobs and try to pay off these [$6,000]  or 

$7,000 a month payments." Construing the Agreement to require Michael to pay $2,000 

per month does not implicate that concern, nor did Michael or his counsel object to 

Michael's having to fulfill a $2,000 per month obligation. 

                In addition, Michael's arguments in his March 15, 2002 motion to correct 

the   settlement   agreement   terms   suggest   that   he   understood   the   $2,000   per   month 

obligation   as   distinct   from   payments   triggered   when   his   income   derived   from   the 

corporations reached $40,000. Michael described the parties' agreement as "that the only 

source of his payments, over the fixed monthly amounts, was to be half his income from 

the two corporations which exceeded $40,000." (Emphasis added.)  This statement also 

indicates that Michael contemplated that his "fixed monthly amounts" might come from 

sources other than corporate income, and statements in Michael's reply in support of his 

motion to correct the settlement agreement terms support this reading.                For example, 

Michael noted that "Rebecca agrees the $2,000/month payments will not amortize the 

$750,000 note if it is not paid off by the only possible source, half Michael's income 

from the two corporations over $40,000."           This statement suggests that the $2,000 per 

month   amount   would   be   paid   regardless  of   the   $40,000   in   income   threshold   being 

reached, and that a different "source" may fund the $2,000 per month installment. 

                Tellingly, nowhere in Michael's submissions in the trial court related to 

fixing the settlement terms did he contend that he would not owe the $2,000 per month 

amount if the corporations did not produce a significant profit. Moreover, while the final 

Agreement       submitted     in  May     2002    included    several   significant    changes    and 

                                                - 15-                                           6554
 

----------------------- Page 16-----------------------

clarifications, including limiting the $2,000 per month payments to 15 years, it did not 

change   the   structure   of   the   monthly   payments,   or   add   that   they   were   dependent   on 

profitability. 

                Finally, in his affidavit dated January 9, 2009, Michael stated that "[i]n 

May, 2007 I realized that it was going to be impossible for me to pay Rebecca $2,000 per 

month" and that he tried to "settle the case" with Rebecca.  Michael later stated that he 

believed that he had reached a settlement with Rebecca and that she would take back her 

shares in both corporations.   We have recognized that extrinsic evidence of a course of 

performance can aid contract interpretation because "[t]he parties to an agreement know 

best what they meant, and their action under it is often the strongest evidence of their 
meaning."23  Michael's affidavit statement is not dispositive of the Agreement's meaning, 

but does indicate that Michael thought he was obligated to pay the $2,000 per month 

starting in May 2007 even though the corporations were not earning him over $40,000 

in income.  There would be no reason for Michael to try to settle or to agree to transfer 

stock back to Rebecca if, as Michael claimed, he did not owe Rebecca anything under 

the Agreement because the corporations were not producing profits. 

                We affirm the superior court's interpretation of the Agreement based on our 

review of the record and conclude that Michael was obligated to begin paying $2,000 per 

month to Rebecca on May 1, 2007. 

        23      Estate of Polushkin ex rel. Polushkin v. Maw, 170 P.3d 162, 170-71 (Alaska 

2007)     (quoting   RESTATEMENT        (SECOND)   OF     CONTRACTS          202(4)   cmt.   g  (1981) 
(cautioning   that   course   of   performance  rule   "does   not   apply  to   action   on   a   single 
occasion or to action of one party only" but allowing that "in such cases the conduct of 
a party may be evidence against him that he had knowledge or reason to know of the 
other party's meaning")). 

                                                 - 16-                                            6554
 

----------------------- Page 17-----------------------

        B.	     The Superior Court Did Not Err In Enforcing The Agreement Against 
                Michael. 

                We have noted that "there is a strong public policy in favor of the settlement 

of disputes," such that private settlements are favored and "should not be lightly set 
aside."24   Still, settlement agreements must "meet minimal contractual requirements," 

including being entered into voluntarily and knowingly.25 

                Michael argues that the superior court should have relieved him from all or 

part of his obligations under the Agreement.          Specifically, Michael asserts that the trial 

court   committed   error   when   it:   (1)   found   no mutual   mistake   of   fact   that   warranted 

rescission or reformation of the Agreement; (2) failed to exonerate Michael from his 

obligations based on the doctrine of unclean hands; and (3) refused to hear Michael's 

evidence that he entered the Agreement under duress. We consider whether the superior 

court erroneously enforced the Agreement and rejected Michael's defenses. 

                1.	     The   superior   court   did   not   err   in   refusing   to   set   aside   the 
                        Agreement due to mutual mistake of fact. 

                Under Alaska law, "[w]hen the parties to an agreement share a mistaken 
belief about a material fact, the agreement may be voidable."26  We use a three-part test 

to determine whether there is mutual mistake of fact: (1) whether the mistake relates to 

a basic assumption on which the contract was made; (2) whether the mistake has a 

        24	     Mullins v. Oates, 179 P.3d 930, 937 (Alaska 2008). 

        25      Id. (citing Indus. Commercial Elec., Inc. v. McLees, 101 P.3d 593, 597 

(Alaska   2004)   (explaining   that   settlement   agreements   are   "susceptible   to   attack   for 
mistake, fraud, misrepresentation, and duress")). 

        26      Stormont v. Astoria Ltd., 889 P.2d 1059, 1061 (Alaska 1995); see also 

RESTATEMENT (SECOND) OF CONTRACTS  152 (1981) (explaining that a contract may 
be voidable where there was "a mistake of both parties at the time a contract was made 
as to a basic assumption on which the contract was made [which] has a material effect 
on the agreed exchange of performances"). 

                                                 - 17-	                                          6554
 

----------------------- Page 18-----------------------

material   effect   on   the   agreed   exchange   of   performances;   and   (3)   whether   the   party 
seeking relief does not bear the risk of the mistake.27 

                The superior court found that the Agreement was not premised on a mutual 

mistake of fact.  The court emphasized that "mistake as to value of the subject matter in 

a contract is generally not a defense to formation."  It added that the defense of mutual 

mistake of fact was not applicable because the "fact" of the value of the corporations was 

not a past or present fact, but rather a future prediction. 

                Michael reiterates on appeal that the Agreement is flawed and should have 

been set aside because he and Rebecca made a mutual mistake of fact in valuing the 
corporations.28     Specifically, Michael objects to the superior court's finding that the 

mistaken valuation of the corporations was not a "past or present" fact. 

                The superior court did not err in refusing to void the Agreement on grounds 

of mutual mistake.      Mistake as to value, like all incorrect predictions of a future event, 

is not a "mutual mistake" that warrants rescission.  As the Montana Supreme Court case 

cited by the superior court summarizes: 

                [T]he fact that both parties mistook the value of the subject 
                matter of the contract, so that one sold more of a thing or a 
                more valuable thing than he thought he was selling, and the 

        27      Wasser & Winters Co. v. Ritchie Bros. Auctioneers (Am.), 185 P.3d 73, 78 

(Alaska 2008) (internal quotation marks omitted). 

        28      We note that the situation here may be more accurately described as a 

unilateral mistake on Michael's part.           But this type of unilateral mistake would not 
relieve Michael from his obligations under the Agreement. See Voss v. Brooks, 907 P.2d 
465, 468 (Alaska 1995) (allowing contract reformation based on unilateral mistake only 
if there has been "fraudulent or inequitable" conduct by the other party). 

                                                 - 18-                                            6554
 

----------------------- Page 19-----------------------

                other received more than he expected to receive, is, according 
                to the weight of authority, immaterial to the case.[29] 

Following this explanation, the Montana court refused to rescind a contract on grounds 
that the parties mutually overvalued the purchased stock.30             Moreover, the Restatement 

(Second) of Contracts explains that a mistaken stock valuation is not a "mistake" that 

voids a contract.   Rather, "[a] party's prediction or judgment as to events to occur in the 
future, even if erroneous, is not a 'mistake.' "31         The Restatement gives this example: 

                A   contracts   to   sell   and   B   to   buy   stock   amounting   to   a 
                controlling interest in C Corporation. At the time of making 
                the contract, both A and B believe that C Corporation will 
                have earnings of $1,000,000 during the following fiscal year. 
                Because of a subsequent economic recession, C Corporation 
                earns less than $500,000 during that year.  Although B may 
                have shown poor judgment in making the contract, there was 
                no mistake of either A or B . . . .[32] 

        29      Knutson v. Bitterroot Int'l Sys., Inc., 5 P.3d 554, 559 (Mont. 2000) (citing 

17AC.J.S. Contracts  149). 

        30      Id. 

        31      RESTATEMENT (SECOND) OF CONTRACTS  151, cmt. a (1981). 

        32      Id. illus. 2 (emphasis added). 

                                                  - 19-                                            6554
 

----------------------- Page 20-----------------------

We have previously arrived at this same conclusion:  An error concerning a future event 
does   not   constitute   a   mistake   for   purposes   of   contract   rescission.33   Other   courts 

overwhelmingly agree.34 

                Here, Michael admitted that the value of the shares was "speculative." 

Michael and Rebecca's valuation was their agreed estimation of what the stock would 

be worth, for which they bore the risk that they might be incorrect.  It was not error for 

the superior court to decide that the Agreement should not have been set aside for mutual 

mistake of fact. 

        33      Stormont v. Astoria Ltd., 889 P.2d 1059, 1061 (Alaska 1995) (refusing to 

rescind a contract for mutual mistake of fact when parties believed that a building that 
was the subject of a commercial contract would not be demolished but it was) (citing 
Beals v. Tri-B Assocs., 644 P.2d 78, 80 (Colo. App. 1982) ("If the parties harbor only 
mistaken expectations as to the course of future events and their assumptions as to facts 
existing at the time of the contract are correct, rescission is not proper.")). 

        34      See Ryan v. Ryan, 640 S.E.2d 64, 68-69 (W. Va. 2006) (collecting federal 

and state cases) (denying request to reform a divorce agreement because of a "mistaken" 
mutual belief that the asset provisions of the agreement would result in investments 
which   would   generate   sufficient   income   to   support   ex-wife   because   "mistake"   was 
simply incorrect prediction of future event). 

                                                 - 20-                                           6554
 

----------------------- Page 21-----------------------

                2.	     It was not an abuse of discretion for the superior court to refuse 
                        to relieve Michael from his obligations under the doctrine of 
                        unclean hands. 

                The doctrine of unclean hands is an equitable defense that, in some cases, 
bars   a   plaintiff   from   claims   in   equity.35 To   successfully   raise   an   "unclean   hands" 

defense, a party must demonstrate: "(1) that the plaintiff perpetrated some wrongdoing; 
and (2) that the wrongful act related to the action being litigated."36   Under the second 

part of this test, the wrongful act must be "so closely related to the matter in litigation . . . 
as to affect the equitable relation of the parties to the suit."37  In addition, the doctrine of 

unclean hands will not apply if the party asserting unclean hands fails to show harm 
resulting from the alleged wrongful conduct.38 

                Michael   contends   that   the   trial   court   improperly   refused   to   apply   the 
doctrine of unclean hands to exonerate him from his obligations under the Agreement.39 

He asserts that he "presented evidence showing that Rebecca had acted to sabotage his 

        35      See 27A AM. JUR. 2D Equity  98.   Although Rebecca did not initially seek 

any equitable relief, she eventually conceded that she could not accelerate future amounts 
owed under the Agreement.  The superior court then awarded her legal relief in the form 
of monetary damages, as well as equitable relief in the form of an order that the terms of 
the Agreement remain in effect going forward. 

        36      Knaebel v. Heiner, 663 P.2d 551, 554 (Alaska 1983). 

        37      Id. 

        38      27A AM. JUR. 2D Equity  105. 

        39      Michael argued in the superior court that Rebecca's conduct amounted to 

intentional interference with contract and breach of the implied covenant of good faith 
and fair dealing.     The superior court found it "unnecessary to determine whether the 
conduct   would   sustain   these   separate   tort   claims"   because   "Michael's   argument   is 
essentially one for equitable relief under the doctrine commonly known as 'unclean 
hands.' " Michael then asserted "the right to obtain equitable relief based on the doctrine 
of 'unclean hands' " in his appellate brief. 

                                                  - 21-	                                           6554
 

----------------------- Page 22-----------------------

attempts   to   develop   the   corporations   by her   disparaging   remarks   to,   among   others, 

present and potential investors" and that this "interference . . . has contributed to [his] 

difficulty    in  attaining    the   level  of   profitability   necessary     to  avoid    accumulating 

arrearages." 

                 The superior court acknowledged that there was "evidence showing that 
Rebecca   has   made   disparaging   remarks."40           But   the   court   concluded   that   excusing 

Michael from his obligations under the Agreement was not "justified in equity" primarily 

because   there   was   "no   proof   of   the   actual   impact   of   Rebecca's   comments   on   the 

corporations." 

                 We will disturb a superior court's refusal to find unclean hands only if it is 
clearly erroneous41 - that is, if we are "left with a definite and firm conviction on the 

entire record that a mistake has been made."42  And we review a trial court's decision on 

equitable relief for abuse of discretion.43          The superior court did not find any record 

evidence showing that Rebecca's comments had any actual impact on current or potential 

investor's   decisions,   and   a   review   of   the   record   does   not   reveal   any   evidence   that 

demonstrates that the superior court was mistaken. Refusing to relieve Michael from his 

obligations pursuant to his unclean hands defense was not an abuse of discretion. 

                 3.	     The superior court did not prevent Michael from arguing his 
                         duress claim. 

        40       On March 11, 2009, the superior court issued a separate order granting 

Michael's motion for a protective order which stated that Rebecca "shall not contact 
anyone, including but not limited to current investors, potential investors, or any State 
or Federal Agency to discuss any businesses [Michael] is involved in." 

        41       Gurney v. Gurney, 80 P.3d 223, 224 n.2 (Alaska 2003). 

        42       Cartee v. Cartee, 239 P.3d 707, 712 (Alaska 2010). 

        43      In re Estate of Fields, 219 P.3d 995, 1002 (Alaska 2009). 

                                                   - 22-	                                            6554
 

----------------------- Page 23-----------------------

                 Michael contends that he tried to present evidence to the superior court 

showing that he entered the Agreement under duress but the superior court "refused to 

consider his arguments" and never permitted Michael to "fully argue the circumstances 

showing duress." But Michael devoted only a single paragraph to his duress claim in his 

motion to the superior court and did not provide any additional record support for his 

allegations.     In addition, it appears that Michael's counsel failed to pursue the duress 

defense     at  the  February     23,   2009   hearing.    The     superior    court,  albeit   somewhat 

skeptically,   asked   Michael's   counsel   if   he   intended   to   make   an   economic   duress 

argument, and then the follow exchange occurred: 

                 Counsel:      [N]o, I'm not, Your Honor. . . .         I'm not talking 
                 about economic duress.  I'm talking about the stress that you 
                 have as you're looking into an agreement and the importance 
                 of making an agreement. 

                 . . . . 

                 Court:   How does that affect what the agreement meant? 

                 Counsel:   I understand.   We can withdraw that. 

In short, nothing except perhaps Michael's counsel's decision not to develop this claim 

in his briefing or at the hearing prevented Michael from fully presenting his duress 

allegation to the superior court.  Thus, the superior court properly declined to exonerate 

Michael's obligations on this ground. 

         C.	     The Superior Court Did Not Abuse Its Discretion By Declining To 
                 Modify The Agreement Pursuant To Alaska Civil Rule 60(b)(5) Or 
                 60(b)(6). 

                 Alaska   Civil   Rule   60(b)(5)   permits   a  court   to   grant   relief   from   a   final 

judgment, order, or proceeding if "it is no longer equitable that the judgment should have 

                                                   - 23-	                                            6554
 

----------------------- Page 24-----------------------

prospective application."44      Rule 60(b)(6) provides that relief may be granted for "any 

other reason justifying relief from the operation of the judgment."45  Property divisions 

incorporated into divorce decrees are final judgments and are modifiable under Civil 
Rule 60(b) to the same extent as any final equitable decree of the court.46              Relief from 

final judgments requires more than mere lack of prejudice on the part of the opponent.47 

Because of the interest in finality, Rule 60(b) "is not a substitute for a party failing to file 

a timely appeal; nor does it allow relitigation of issues that have been resolved by the 
judgment."48 

                1.      Alaska Civil Rule 60(b)(5) 

                Rule   60(b)(5)   provides   for   relief   from   judgments   that   are   "no   longer 
equitable" going forward.49       The superior court determined that the Agreement was not 

unfair to Michael and so declined relief under Rule 60(b)(5).               We will reverse a trial 
court's denial of Rule 60(b)(5) relief only where the trial court has abused its discretion.50 

        44      Alaska R. Civ. P. 60(b)(5). 

        45      Alaska R. Civ. P. 60(b)(6). 

        46      See Cline v. Cline, 90 P.3d 147, 151 (Alaska 2004); see also Hatten v. 

Hatten, 917 P.2d 667, 670 n.3 (Alaska 1996) (noting that the rules governing relief from 
judgment on such grounds as mistake or fraud apply to property settlements incorporated 
into divorce decrees). 

        47      Dickerson v. Goodman, 161 P.3d 1205, 1208 (Alaska 2007). 

        48      Morris v. Morris, 908 P.2d 425, 429 (Alaska 1995). 

        49      Alaska R. Civ. P. 60(b)(5). 

        50      Princiotta v. Municipality of Anchorage, 785 P.2d 559, 562 (Alaska 1990); 

see also Hertz v. State, Dep't of Corr., 230 P.3d 663, 669 (Alaska 2010) ("Alaska Civil 
Rules 60(b)(5) and (6) give discretion to the trial court."). 

                                                 - 24-                                           6554
 

----------------------- Page 25-----------------------

                Michael does not advance any legal theory in support of his argument on 

appeal, and does not explain how applying the Agreement prospectively is inequitable 

besides   reiterating   that   "[t]he   parties   overvalued   the   worth   of   the   marital   corporate 
stocks." Michael has not adequately briefed this argument on appeal,51 and we detect no 

abuse of discretion in the superior court's finding that the parties' mistaken valuation did 

not warrant Rule 60(b)(5) relief. 

                2.      Alaska Civil Rule 60(b)(6) 

                Rule 60(b)(6) is a catch-all provision and should be liberally construed to 

enable courts to vacate judgments whenever such action is necessary to accomplish 
justice.52  But a party may only obtain Rule 60(b)(6) relief if no other Rule 60(b) clause 

applies and "extraordinary circumstances" exist.53            In the context of a property division 

pursuant   to   a   divorce,   four   "extraordinary   circumstances"   may   justify   relief   under 

Rule 60(b)(6): (1) the fundamental, underlying assumption of the dissolution agreement 

has been destroyed; (2) the parties' property division was poorly thought out; (3) the 

property division was reached without the benefit of counsel; and (4) the property in 
dispute was the parties' principal asset.54         Looking to these factors, we have affirmed 

grants of Rule 60(b)(6) relief from property divisions in situations where there was a 

post-judgment discovery that an ex-wife was not eligible by law for survivorship benefits 
in a civil service pension,55 a post-dissolution creation of a government program that 

        51      See supra note 10. 

        52      Juelfs v. Gough, 41 P.3d 593, 597 n.12 (Alaska 2002). 

        53      Id. at 597. 

        54      Powell v. Powell, 194 P.3d 364, 371 (Alaska 2008). 

        55       Williams v. Crawford, 982 P.2d 250, 255-56 (Alaska 1999). 

                                                  - 25-                                            6554
 

----------------------- Page 26-----------------------

distributed individual fishing quotas,56 and a dissolution decree that entirely failed to 

dispose of substantial items of marital property.57 

                Here, the superior court concluded that both Michael and Rebecca "took 

some   calculated   risks   regarding   their   marital   stock"   and   that   it   "surely   would   be 

inequitable to require no further payments from Michael when the corporations are still 

engaged in business and his payments are limited to $2,000/month."  Michael argues on 

appeal that the fundamental underlying assumption of the Agreement was that the stocks 

"were actually worth the value placed on them" so that the corporations "would produce 

enough income to allow Michael to pay off a principal amount of $675,000 without 

ruining himself and his corporations." 

                We conclude that the superior court did not abuse its discretion in denying 

Rule 60(b)(6) relief. Whether the fundamental underlying assumption of the Agreement 

had been destroyed was fully addressed and rejected by the superior court.                  Significant 

to the court was the fact that the $2,000 per month payment ended at 15 years, after 

which Michael would have to pay Rebecca only if the corporations were significantly 

profitable.    The   trial   court   reasoned   that   this   provision   indicated   that   Michael   and 

Rebecca "anticipated the chance the corporations would not be earning large profits after 

15 years."      Because the destruction of the alleged underlying assumption was in fact 

likely anticipated by the parties, these were not the kind of "extraordinary circumstances" 

that justify Rule 60(b)(6) relief, and the superior court did not err in denying Michael 

relief. 

        56      McGee v. McGee, 974 P.2d 983, 987-90 (Alaska 1999). 

        57      Lacher v. Lacher, 993 P.2d 413, 419-20 (Alaska 1999). 

                                                  - 26-                                              6554 

----------------------- Page 27-----------------------

V.      CONCLUSION 

               We AFFIRM the superior court's order and judgment against Michael in 

the amount of $47,132.46 plus continuing interest and AFFIRM that the $2,000 per 

month   payment   under   paragraph   2.b   of   the   Agreement   is   not   dependent   upon   the 

profitability of the corporations. 

                                              - 27-                                         6554
 
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