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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Alaska Fur Gallery, Inc. v. First National Bank Alaska (3/13/2015) sp-6986

Alaska Fur Gallery, Inc. v. First National Bank Alaska (3/13/2015) sp-6986

        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, email  

         corrections@akcourts.us.  



                  THE SUPREME COURT OF THE STATE OF ALASKA  



ALASKA FUR GALLERY, INC.,                             )  

HERNANDEZ and ASSOCIATES, LLC,    )                        Supreme Court No. S-14856/14875  

and THE INN AT WHITTIER, LLC,                          )  

                                                       )   Superior Court No. 3AN-06-06120 CI  

                         Appellants and               )  

                         Cross-Appellees,              )   O P I N I O N  

        v.                                             )  

                                                       )   No. 6986 - March 13, 2015  

FIRST NATIONAL BANK ALASKA                             )
  

(formerly First National Bank of                       )
  

Anchorage),                                            )
  

                                                       )
  

                         Appellee and               )
  

                         Cross-Appellant.              )
  



                 Appeal from the Superior Court of the State of Alaska, Third  

                 Judicial  District,  Anchorage,  Stephanie  E.  Joannides  and  

                 Patrick J. McKay, Judges.  



                 Appearances:  Don C. Bauermeister, Burke & Bauermeister,  

                                                                 

                 P.L.L.C., Bremerton, Washington, for Appellants and Cross- 

                 Appellees.   William   Grant   Callow,   II,   Anchorage,   and  

                 Stephen M. Dodge, Austin, Texas, for  Appellee and Cross- 

                                                                    

                 Appellant.  



                 Before:  Stowers and Bolger, Justices, and Eastaugh, Senior  

                                        

                 Justice.*  

                             [Fabe, Chief Justice, Winfree and Maassen, Justices,  

                 not participating.]  



                 BOLGER, Justice.  



         *       Sitting  by  assignment  made  under  article  IV,  section  11  of  the  Alaska  



Constitution and Alaska Administrative Rule 23(a).  


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

I.        INTRODUCTION  



                                                                               

                   A family of business owners obtained a bank loan to invest in a fledgling  



hotel  project.    The  family  later  sued  the  bank,  alleging  that  one  of  its  loan  officers  



                                          

fraudulently induced  them  to invest in the project.  This appeal concerns numerous  



                                                                             

aspects of the resulting superior court proceedings.  In particular, the family claims that  



                                                                                         

the bank committed a fraud upon the court through inaccurate and inconsistent portrayals  



                                                                      

of the loan officer's conduct.  We conclude that although some testimony offered by the  



                                                                                                     

bank may have been misleading, it was not sufficiently egregious as to constitute fraud  



upon the court.  We therefore affirm.  



II.       FACTS AND PROCEEDINGS  



                                                                                        

                   William McGrew, now deceased, was a loan officer and the senior vice  



                                                             

president for commercial lending at First National Bank Alaska (the Bank).  Among the  



Bank's corporate customers were Alaska Fur Gallery, Inc. and Hernandez & Associates,  



                                                                                              

LLC.  Both entities are owned and operated by members of the Hernandez family, and  



we  refer  to  these  entities  collectively  as  "the  Hernandezes"  unless  context  requires  



otherwise.  



                   The  Hernandezes  borrowed  money  from  the  Bank  to  invest  in  a  hotel  



                           

project, the Inn at Whittier, LLC (the Inn).  But according to the Hernandezes, McGrew  



                                           

used his position of trust to induce unwise investments in the Inn and, when trouble  



                                                                                          

arose, assured the Hernandezes that he would relieve them of their financial liability by  



finding replacement financing, which never came to fruition.  The Hernandezes filed suit,  

alleging both common law tort claims and Alaska Securities Act1 violations.  



                   The case was originally tried in 2008, but for reasons not relevant to this  

                                                                                                         



appeal, the superior court ordered a new trial.  This second trial, conducted in 2010,  



          1        AS 45.55.010-.55.995.  



                                                             -2-                                                          6986  


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

                                                                          

resulted in an award for the Hernandezes on their common law negligence claim only.  



                                                      

The jury found that the Hernandezes had suffered $675,000 in damages but determined  



                      

that the  Bank  was only partially at fault.  The jury concluded that another investor,  



Edward Cronick, also contributed to the Hernandezes' loss, and that the Hernandezes  



themselves were negligent and unreasonably failed to avoid damages.  The jury allocated  



45% of the fault to the Hernandezes, 41% to Cronick, and 14% to the Bank.  



                                                                 

                   Based on the jury's verdict, the superior court entered judgment against the  



                                   

Bank in the amount of $94,500 in damages, plus interest.  The court also awarded the  



Hernandezes attorney's fees and costs.  The Hernandezes' appeal and the Bank's cross- 



appeal  involve  multiple  rulings  at  various  stages  of  the  superior  court  proceedings.  



These specific rulings and the underlying facts are detailed in the discussion below.  



III.      STANDARD OF REVIEW  



                   A superior court's determination as to whether fraud upon the court has  

                                                                2  "In reviewing the denial of a motion for  

                                                                                                            

occurred is reviewed for abuse of discretion.  



directed  verdict  or  [judgment  notwithstanding  the  verdict  (JNOV)],  we  apply  an  

                                                                        



objective  test  to  determine  whether  the  evidence,  when  viewed  in  the  light  most  

                                                              



favorable to the non-moving party, is such that reasonable [persons] could not differ in  

                                                                                                             



                        3  

their judgment."   "We review  denial of a new trial under an abuse of discretion standard  

                                                                          



          2        Mallonee v. Grow , 502 P.2d 432, 439 (Alaska 1972) (citing Erick Rios  



Bridoux v. E. Air Lines , 214 F.2d 207, 207-10 (D.C. Cir. 1954)).  



          3         Turner v. Municipality of Anchorage                   , 171 P.3d 180, 185 (Alaska 2007)  



(quoting  Wal-Mart,  Inc.  v.  Stewart,  990  P.2d  626,  631-32   (Alaska  1999))  (internal  

quotation marks omitted).  



                                                             -3-                                                      6986
  


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

                                                                  

wherein we disturb the trial court's discretion only in the most exceptional circumstances  

to prevent a miscarriage of justice."4  



                   A superior court's decision to admit or exclude evidence is reviewed for  



                                                                     

abuse of discretion, and "will be upset only if we find there has been an error which  



                                                           5  

                                                              "We review jury instructions de novo when  

affected the substantial rights of a party." 

                                        6   Absent a timely objection, we review only for plain error.7  

                                                      

a timely objection is made." 

Whether equitable estoppel applies is a question of law that this court reviews de novo.8  

                                                                                            



                   "We review the decision to award attorney's fees for abuse of discretion  

                                                                                                     9  Here, the Bank  

and [will] overturn it only where the award is manifestly unreasonable." 



                                                                  

asks for de novo review of the Hernandezes' enhanced attorney's fees award since the  



                                

judge who made that award had not been present at the two trials.  The Bank argues that  



since the awarding judge did not have the benefit of observing the proceedings, the  

rationale for the more deferential standard of review does not apply.10  



          4        Id.  (second alteration in original) (quoting Bierria v. Dickinson Mfg. Co. ,  



36 P.3d 654, 656 (Alaska 2001)) (internal quotation marks omitted).  



          5         Cartee  v.  Cartee,  239  P.3d  707,  712  (Alaska  2010)  (citing  Dobos  v.  

                                                              

Ingersoll , 9 P.3d 1020, 1023 (Alaska 2000)).  



          6         Cummins, Inc. v. Nelson, 115 P.3d 536, 541 (Alaska 2005) (citing Reich  



v. Cominco Alaska, Inc., 56 P.3d 18, 25 (Alaska 2002)).  



          7        Id. (citing Manes v. Coats , 941 P.2d 120, 125 (Alaska 1997)).  



          8  

                                

                    Ogar v. City of Haines, 51 P.3d 333, 335 (Alaska 2002) (citing Hubbard  

v. Hubbard , 44 P.3d 153, 155 (Alaska 2002)).  



          9         Williams v. GEICO Cas. Co., 301 P.3d 1220, 1225 (Alaska 2013) (citing  



DeNardo v. Cutler , 167 P.3d 674, 677-78 (Alaska 2007)).  



          10       See, e.g.,  Valdez Fisheries Dev. Ass'n, Inc. v. Froines, 217 P.3d 830, 833  

                                                                                                   

                                                                                                         (continued...)  



                                                            -4-                                                      6986
  


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

                   We have never reviewed an award of attorney's fees with less deference  



                                                                              

where a new superior court judge has been assigned to a case, and we decline to do so  



          

here.  Alaska Civil Rule 82(b)(3) gives the superior court significant discretion to "vary  



an attorney's fee award" based on the consideration of various factors, and makes no  



                                                                                         

distinction between a judge sitting at trial versus a judge later assigned to a matter.  Even  



                                                                                                    

a superior court judge who did not preside over the trial in a case may have a more  



current perspective through which to evaluate some of the Rule 82(b)(3) factors, such  



                                                                                                     

as "the reasonableness of the attorneys' hourly rates and the number of hours expended";  



                                                           

"the  reasonableness  of  the  number  of  attorneys  used";  or  an  attorney's  "efforts  to  

                       11   We therefore review the award of enhanced attorney's fees to the  

                                                                                                              

minimize fees."  



Hernandezes for abuse of discretion. 



                    A superior court's prevailing party determination for purposes of attorney's  



                                                                           12  

                                                                                 Whether  an  offer  of  judgment  

fees  is  similarly  reviewed  for  abuse  of  discretion. 



complies with Alaska Civil Rule 68, however, is a question of law to which we apply  

               



          10       (...continued)  



(Alaska 2009) ("The purpose of conferring discretion on the trial court to determine  

reasonable actual attorney's fees is to allow it to use its greater familiarity with the details  

of the case to perform an objective inquiry into these questions [of reasonable litigation  

                                                                                                 

expenses] and their like." (internal quotation marks omitted)).  



          11       Alaska R. Civ. Pr. 82(b)(3)(C)-(E).  



          12       Progressive Corp. v. Peter ex rel. Peter , 195 P.3d 1083, 1092 (Alaska  



2008)  (citing  Interior  Cabaret,  Hotel,  Rest.  &  Retailers  Ass'n  v.  Fairbanks  N.  Star  

                                                                                                   

Borough , 135 P.3d 1000, 1002 (Alaska 2006)).  



                                                             -5-                                                      6986
  


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

                                  13	                                                                  14 

                                                                        

independent judgment.                Similarly, we interpret the civil rules de novo,                      and apply our  

independent judgment to the interpretation of contracts.15  



IV.	      DISCUSSION  



                                                                                                       

          A.	      Although  The  Bank's  Litigation  Conduct  Supports  The  Award  Of  

                                                       

                    Enhanced Attorney's Fees For The First Trial, The Superior Court  

                    Did Not Err By Finding No Fraud Upon The Court.  



                                                           

                    Before the second trial in this case commenced, the Hernandezes filed a  



                                                         

motion seeking to establish the Bank's liability on the grounds that the Bank perpetrated  



                                                                     16  

a "fraud upon the court" during the first trial.     The Hernandezes argued that Bank  



officers, despite their knowledge that McGrew had in fact violated bank policy and may  



                      

have  violated  federal  or  state  laws,  presented  testimony  and  "directed  a  litigation  



                                                                               

defense" based on the claim that McGrew had never committed any wrongdoing.  As  



evidence,  the  Hernandezes  pointed  to  alleged  inconsistencies  between  the  Bank's  



                                                       

testimony in their case (AFG ) and a separate case involving McGrew's conduct with  

respect to a different Bank client, Todd Christianson (Christianson).17  



          13       Anderson v. Alyeska Pipeline Serv. Co. , 234 P.3d 1282, 1286 (Alaska 2010)  



(citing Ellison v. Plumbers & Steam Fitters Union Local 375 , 118 P.3d 1070, 1073-74  

                                                                                            

(Alaska 2005)).  



          14	      Ford v. Municipality of Anchorage , 813 P.2d 654, 655 (Alaska 1991).  



          15  

                                  

                    Casey v. Semco Energy, Inc., 92 P.3d 379, 382 (Alaska 2004) (citing Old  

Harbor Native Corp. v. Afognak Joint Venture , 30 P.3d 101, 104 (Alaska 2001)).  



          16        The Hernandezes' motion sought a finding of "Contempt Upon This Court  



                                                                                            

(Similar To Fraud Upon the Court)," which the superior court analyzed under Alaska's  

"fraud  upon  the  court"  law.    The  Hernandezes  do  not  appear  to  dispute  this  

interpretation.  



          17  

                                                                                                       

                   See Christianson v. First Nat'l Bank Alaska, Mem. Op. & J. No. 1445, 2012  

WL 6062124 (Alaska Dec. 5, 2012).  



                                                             -6-	                                                      6986
  


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

                                                  

                     The superior court concluded that the Hernandezes "failed to demonstrate,  



                                                                                          

by clear and convincing evidence, conduct by [the Bank] egregious enough to support  



a finding of fraud upon the court."  The court also noted that the verdict from the first  



                                                                                   

trial had already been vacated; thus the Hernandezes would have an opportunity at the  



                                                                                                   

second trial to "examine the bank officers about their knowledge of McGrew's conduct."  



                                                                                                      

Finally,  the  order  made  clear  that  the  Hernandezes  could  later  seek  attorney's  fees  



                                                                                   

incurred  during  the  first  trial  if  they  could  "show  new  evidence  elucidated  at  the  



                                            

upcoming trial that [would] justify a finding of misconduct by [the Bank] or fraud upon  



the court."  



                    Upon conclusion of the second trial, the Hernandezes filed a renewed fraud  



                                                                                                 

upon the court motion, which was similarly denied.  However, the superior court noted  



                              

it would "consider the actions of the defense and their witnesses in conjunction with the  



                   

anticipated   motion   for   attorney's   fees,"   and   the   court   ultimately   awarded   the  



                                                                                            

Hernandezes enhanced fees for hours spent on the first trial and on the motion for a new  



                                                            

trial.  The court found that the Bank's "litigation conduct prior to the first trial was not  



undertaken in good faith and, at times, was unreasonable" and that "testimony given in  



                                                  

the  Christianson matter was at odds with testimony presented in this litigation."  But  



                                                              

with regard to the second trial, the court found that the Hernandezes were able to present  



                                                                                                                

"whatever evidence [they] deemed relevant and probative" and that no enhanced fees  



were warranted.  The Bank appeals the award of enhanced attorney's fees for the first  

trial,18 and the Hernandezes contend that enhanced fees should have been awarded for  



both trials.  



          18  

                                                                                         

                     The Bank raises additional issues regarding attorney's fees and costs that  

                                                         

are unrelated to its alleged litigation conduct.  These are addressed separately in subpart  

IV.G.  



                                                                -7-                                                              6986  


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

                    The  Hernandezes  also  appeal  the  denial  of  their  fraud  upon  the  court  



                                                                                                                   

motions and further contend the Bank has committed a fraud upon this court.  A typical  



                                                                                                                    19 

                                                                                                                        Here,  

remedy for fraud upon the court is to vacate the fraudulently obtained judgment. 



however, the Hernandezes seek an alternative remedy, which is for this court to direct  



judgment in their favor and remand solely for determination of damages.  



                                                                 

                    1.	       Fraud upon the court may only be found in the most egregious  

                              circumstances involving the corruption of the judicial process.  



                    "Fraud upon the court" is an equitable doctrine that allows a court to set  



                                                                                        20  

                                                                                             It is an exception to the  

aside a judgment obtained as a result of fraudulent conduct. 



                                                               

general rule that courts "[will] not alter or set aside their judgments after the expiration  



                                                                                     21  

                                                                                          In Alaska, the doctrine is  

of the term at which the judgments were finally entered."                                      



codified  in  Alaska  Civil  Rule  60(b),  whereby  a  court  has  the  power  "to  set  aside  a  

                                                                                                                



                                                     22  

judgment for fraud upon the court."                      "[T]he party claiming a fraud on the court bears  

                                      

the burden of proving the claim by clear and convincing evidence."23  



          19        See Alaska R. Civ. P. 60(b); see also Higgins v. Municipality of Anchorage ,  



810 P.2d 149, 154 (Alaska 1991) (concluding that this court's prior judgment "should  

                             

be set aside for fraud upon the court"); Mallonee v. Grow , 502 P.2d 432, 440 (Alaska  

                                                                                        

 1972) (affirming a superior court's decision to set aside its prior order based on a finding  

                                                                                                      

of fraud upon the court).  



          20  

                                                                                           

                    Murray v. Ledbetter , 144 P.3d 492, 497 (Alaska 2006) (citing Hazel-Atlas  

 Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 244-45 (1944)).  



          21        Hazel-Atlas Glass Co. , 322 U.S. at 244.  



          22        See Murray, 144 P.3d at 497.  



          23        Id. at 498.  



                                                              -8-	                                                      6986
  


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

                   We have noted that "specific attempts to define fraud on the court are not  

particularly helpful,"24 but "have nevertheless consistently recognized that [a] fraud upon  



                                                                        

the court may only be found in the most egregious circumstances involving a corruption  



                                          25  

                                              Similarly, we have adopted the view that the drafters of  

of the judicial process itself."                                                                               



Rule 60(b) viewed fraud upon the court as referring "to very unusual cases involving far  

more than an injury to a single litigant."26  



                   On the other hand, we have "declined to hold that an intent to defraud must  

                                                                                               



invariably be proved to establish a fraud on the court" and have found recklessness to be  



              27  

                                                                      

sufficient.        In Mallonee v. Grow , for example, a party filed for a writ of execution that  



                                                                                                            

"grossly overstated" the amount a judgment debtor owed him, used the writ to levy upon  



property that the debtor did not actually own, and failed to serve legally required notice  



                                                               28  

                                                                   Although we recognized that neither the  

of the motion to confirm the property's sale. 



                                                               

party nor his attorney had "an actual intent to defraud," we nonetheless concluded that  



                                                                                                                 

"the court has the same duty to rectify the wrong" "[w]hether the deprivation of a party's  



                                                                                  

rights . . . [is] attributable to a willful intent to defraud or a reckless disregard of rules or  

statutory provisions."29  



          24       Id. at 499 (quoting Allen v. Bussell , 558 P.2d 496, 500 (Alaska 1976))  



(internal quotation marks omitted).  



          25       Id. (alteration in original) (quoting Lowe v. Lowe , 817 P.2d 453, 457 n.9  



(Alaska 1991)) (internal quotation marks omitted).  



          26       Id. (quoting Allen , 558 P.2d at 500) (internal quotation marks omitted).  



          27       Id. (citing Mallonee v. Grow , 502 P.2d 432, 438-39 (Alaska 1972); Higgins  



v. Municipality of Anchorage , 810 P.2d 149, 154 (Alaska 1991)).  



          28       502 P.2d at 438-39.  



          29       Id.  



                                                            -9-                                                      6986
  


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

                   Finally, fraud upon the court may be found even in the absence of trial  

                                                                     



counsel's involvement.  In Pumphrey v. K.W. Thompson Tool Co. , the Ninth Circuit  

                                                                                                       



Court of Appeals held that a gun manufacturer's in-house counsel perpetrated a fraud  



upon  the  court  when  he  failed  to  present  evidence  of  a  video-recorded  test  he  had  

                                                                                        30  The in-house counsel  

observed during which a gun fired when dropped on the ground. 



also neglected to raise the issue when the person who had conducted the experiment  



                                                                                              31  

                                                                                                  Although the in- 

testified that the gun had never fired when dropped during testing. 



                            

house counsel did  not represent the gun manufacturer at trial, the court nonetheless  



                                                                         32  

                                                                             Nevertheless, the general rule is  

concluded that he "engaged in a scheme to defraud." 



that a witness's perjury, if "unassisted by the party in interest or by counsel, . . . does not  



                                              33  

amount to fraud upon the court."                  



                   2.	      The trial court did not err in denying the Hernandezes' original  

                            fraud upon the court motion.  



                                                                                     

                   As the superior court noted, the Hernandezes' fraud upon the court claim  



                                                                                                

requires "a factual inquiry into whether [Bank officers] were aware of any wrongdoing  



      

by McGrew, if so, when they became aware of it, and if their testimony and pretrial  



discovery square with those factual findings."  We review the outcome of that inquiry  



                                34  

for abuse of discretion.             



         30        62 F.3d 1128, 1129-31 (9th Cir. 1995).
  



         31        Id. at 1132.
  



         32
       Id. at 1131-32.  



         33        State  v.  Alaska  Cont'l  Dev.  Corp.,   630   P.2d  977,  991  (Alaska  1980)  



(internal quotation marks omitted).  



         34        Mallonee v. Grow , 502 P.2d 432, 439 (Alaska 1972).  



                                                          -10-	                                                   6986
  


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

                                      a.           The Bank's alleged knowledge of McGrew's wrongdoing     



                         As evidence that the Bank already knew of McGrew's wrongdoing during                                    



the first AFG  trial in June 2008, the Hernandezes presented testimony given by Bank  



officials during the Christianson litigation.  Although these statements were not made  



until after the conclusion of the first AFG  trial, they nonetheless shed light on knowledge  



the Bank may have gained about McGrew's lending practices before the first AFG  trial.  



                         Most notably, the Hernandezes highlighted deposition testimony from Bank  



                                                                                                           

senior vice president and general counsel David Lawer suggesting that Lawer knew of  



                                                                                                                                             

McGrew's improper practices as early as 2005.  When Lawer was asked when he had  



                                                           

discovered that McGrew "had violated the bank's rules," he answered, "With - within  



                                                                                                               

the year 2005."  Lawer also described his conclusion that McGrew was "making loans  



                                              

[and] renewing loans at maturity to avoid identification of a borrower or borrowers who  



                                                                                                                              

were unable to pay prior credit obligations and who currently were not creditworthy and  



                                   

. . . not worthy of further loans."  Lawer stated that he reached this conclusion based on  



                                            

a review of numerous loan files - a process that may have been completed before the  

                           35   The Bank admits that repeated loan extensions to a borrower who is not  

first AFG  trial.                                                         



creditworthy would, "absent some justification," violate bank policy.  



                         The  Hernandezes  also  highlighted  the  statements  of  Bank  senior  vice  



president David Stringer, who learned about some of McGrew's loan practices after  

                                                                            



McGrew's death in December 2004.  Stringer testified that he received multiple reports  

                                                                                                         



from some of McGrew's former customers, who claimed they had been given loans "for  

                           



the purposes of the proceeds being distributed for [someone else's] benefit."  Such loans,  

                                                                                       



which have their proceeds distributed to a third party rather than to the borrower, are  



             35          Lawer testified on March 31, 2009, that he had completed his review of  



McGrew's loans  before "the last year or so."  The first AFG trial took place in June  

2008.  



                                                                              -11-                                                                               6986  


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

sometimes referred to as "nominee loans," and McGrew's former customers told Stringer  



                                                                                                

he should look to the third-party beneficiaries for repayment.  Stringer testified that he  



                                                                                  

"probably" received these reports between 2005 and 2007 and that he relayed them to  



Bank president Dan Cuddy as they arose.  



                     Stringer also testified about information he and Cuddy acquired regarding  



                                                                                                       

McGrew's dealings with a particular Bank client, Kaylen LeBaron, who appeared to be  



receiving the proceeds from some of these nominee loans.  Stringer testified that after  



                                                                                            36  

                                                                                               According to Stringer's  

McGrew's death, LeBaron requested a meeting with Cuddy. 



testimony, LeBaron admitted at the meeting that he was the beneficiary of numerous  



loans taken out on his behalf.  



                              b.         The Bank's testimony and pre-trial disclosures  



                                                 

                    The Hernandezes argue that the Bank's testimony in Christianson reveals  



      

its representations during the first AFG  trial to be fraudulent.  But the superior court  



                                                                              

could reasonably conclude that the Bank's alleged misrepresentations, when viewed in  



                                                                                              

context, did not constitute "the most egregious circumstances involving a corruption of  

the judicial process itself."37  



                    We  turn  first  to  what  is  arguably  the  Hernandezes'  most  persuasive  



evidence of fraudulent conduct:  direct discrepancies between Lawer's testimony in the  



AFG  and Christianson cases. During a 2007 deposition before the AFG  trial, Lawer was  

                                                                                     



asked whether, "as the bank compliance officer, [he] believe[d] [McGrew] did his job  



                              

relative to lending within the parameters of federal, [s]tate, and bank rules[.]"  Lawer  



          36        Although the Hernandezes did not attribute an exact date to this meeting,                



LeBaron  testified  that  he  received  a  loan  resulting  from  this  meeting  "four  or  five"  

months following McGrew's death in December 2004.  



          37        See Murray v. Ledbetter, 144 P.3d 492, 499 (Alaska 2006) (quoting Lowe  



v. Lowe, 817 P.2d 453, 457 n.9 (Alaska 1991)) (internal quotation marks omitted).  



                                                               -12-                                                        6986
  


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

                                                        

answered, "Yes, as far as I know."   Yet Lawer later testified in  Christianson that he  



acquired knowledge about McGrew's bank rule violations in 2005.  



                    Nevertheless,  we  agree  with  the  superior  court  that  Lawer's  2007  



deposition  testimony,  while  misleading  and  potentially  false,  was  not  sufficiently  



                                                                        

egregious to find fraud upon the court. We have expressed caution in finding fraud upon  



                                                                                                   38  

                                                                                                       And although the  

the court based purely on the after-discovered perjury of a witness. 



Ninth Circuit has found fraud upon the court based solely on the conduct of a party's  



                                                          

general counsel, Lawer's conduct was distinguishable from the concealment of pivotal  

                                             39  Even if Lawer misrepresented McGrew's general track  

                                                                       

evidence at issue in Pumphrey .  



record at the Bank, the misrepresentation did not directly relate to McGrew's transactions  



                                      

with  the  Hernandezes.              The  superior  court  could  reasonably  conclude  that  Lawer's  

testimony did not constitute a corruption of the judicial process itself.40  



                                                        

                    The  Hernandezes  also  argued  that  Bank  officials'  in-court  testimony  



misrepresented McGrew's history at the Bank.  For instance, Cuddy testified that he  



                                                                               

could not think of any reason why the Hernandezes should not have trusted McGrew.  



                                                                              

Cuddy also answered affirmatively when asked if, as far as he knew, "McGrew's conduct  



                                                                                                    

[was] lawful in all respects."  Cuddy went on to state that McGrew "was well respected  



                                                                       

in [the] bank and . . . [had] done a good job for . . . 25 years."  Lawer testified at trial that  



          38        See Alaska Cont'l Dev. Corp., 630 P.2d at 991 ("While perjury by a witness       



is always a cause for concern, we do not believe, even if we were to accept the state's  

argument that [the opposing party's witness] committed perjury, that in this case it would  

                                                                                                                     

rise to the level of 'the most egregious conduct involving a corruption of the judicial  

process itself,' that we have required for a finding of 'fraud upon  the court' in past  

                                                                                                      

cases." (quoting Allen v. Bussell , 558 P.2d 496, 500 (Alaska 1976))).  



          39        See 62 F.3d 1128, 1129-31 (9th Cir. 1995).  



          40        See Murray, 144 P.3d at 499.  



                                                             -13-                                                        6986
  


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

he thought Cuddy had testified accurately, with the exception of one unrelated issue, and   



further characterized McGrew as a "very successful" Bank employee.  



                    The   Hernandezes   contrast   Cuddy's  AFG   testimony   with   Stringer's  



                                                                                            

statements in Christianson that Cuddy knew about McGrew's nominee loans as early as  



2005,  when  Cuddy  began  receiving  Stringer's  reports  and  met  with  LeBaron.    The  



Hernandezes argue that McGrew's use of nominee loans violated both bank policy and  



federal law, contradicting Cuddy's characterization of McGrew's conduct as lawful.  



                 

However,  the Bank contends that nominee loans are "not uncommon" and are only  



illegal if done in a way that deceives a bank or its examiners.  Because of this dispute  



                                                                                       

over the legality of nominee loans, it is possible that at the time of the first AFG  trial the  



Bank still lacked reason to believe that McGrew's lending practices were illegal.  



                                                                                                   

                    Moreover, there were other reasons to discount the Hernandezes' fraud  



                                                                                                                

upon the court claim.  Even if Cuddy's answer that McGrew's conduct was lawful in all  



                                                                                               

respects was misleading, its impact on the court was lessened by Cuddy's disclaimer that  



he  had  not  familiarized  himself  with  the  Hernandezes'  case.    Likewise,  the  Bank's  



                               

general defenses of McGrew's character were largely subjective and likely had little  



                                   

impact.    And  because  the  superior  court  had  vacated  the  first  jury  verdict  on  other  



                                                                                                

grounds, the Hernandezes had already received the presumptive remedy for fraud upon  



                                              41 

                                                                              

the court:  relief from judgment.                 The superior court correctly noted that the second trial  



                                                                                                      

would provide the Hernandezes with "the opportunity to examine the bank officers about  



their knowledge of McGrew's conduct."  



          41        See Alaska R. Civ. P. 60(b) (noting the "power of a court to entertain an  



independent action to relieve a party from a judgment, order or proceeding . . . or to set  

aside a judgment for fraud upon the court").  



                                                             -14-                                                           6986  


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

                    For the reasons above, the court could reasonably conclude that the alleged  



                                                                              

inconsistencies in the Bank's testimony did not rise to "clear and convincing" evidence  



of fraud upon the court.  



                                               

                    3.	       The  trial  court  did  not  err  in  awarding  the  Hernandezes  

                              enhanced attorney's fees.  



                    While the Bank's conduct during the first AFG  trial may not have been  



sufficiently  egregious  to  constitute  fraud  upon  the  court,  the  superior  court  could  



                                                                                                           

reasonably conclude that testimony from the Bank's corporate officers was a bad faith  



                                                                                                   

attempt to minimize McGrew's misconduct, warranting enhanced attorney's fees.  This  



                                                                                                                  

court reviews "the decision to award attorney's fees for abuse of discretion and [will]  

overturn it only where the award is manifestly unreasonable."42 



                                                                                                                    

                     In particular, Lawer's 2007 deposition testimony that McGrew had done  



                              

his job "within the parameters" of Bank rules may have prevented the plaintiffs from  



                                                                                    

discovering the extent of McGrew's wrongdoing.  And it is difficult to reconcile Lawer's  



                                                                                                         

2007 testimony with his later statement that "within the year 2005" he came to "know"  



that McGrew had violated those rules.  



                                                                 

                    As the superior court noted,  "It is clear from Lawer's testimony in his  



                                                                 

Christianson deposition that he found out sometime in 2005 from Stringer that bank  



customers were making allegations against McGrew regarding nominee loans . . . ."  



                                                                                                           

Lawer countered in an affidavit that merely hearing "allegations by a few defaulting  



                                                       

debtors" was insufficient to support a "reasonable belief" that McGrew had committed  



                                                     

wrongdoing.  While this reasoning may, standing alone, be sensible, it does not explain  



Lawer's  testimony  in  Christianson  that  he  came  to  "know"  in  2005  that  McGrew  



violated Bank rules.  



          42  

                                                                 

                    Williams v. GEICO Cas. Co., 301 P.3d 1220, 1225 (Alaska 2013) (citing  

DeNardo v. Cutler , 167 P.3d 674, 677-78 (Alaska 2007)).  



                                                             -15-	                                                          6986  


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

                   The  Bank argues that in awarding the Hernandezes enhanced attorney's  

fees, the superior court did not sufficiently "specify its reasons in the record."43                                    We  



disagree. The court specifically found that "testimony given in the Christianson matter  



                                                         

was at odds with testimony presented in this litigation."  The court could reasonably  



                                               

conclude that the Bank had not adequately explained this inconsistency.  Accordingly,  



                                                                                                        

the court did not abuse its discretion in awarding the plaintiffs their full fees for the first  



trial.  



                   Nor did the court abuse its discretion in restricting its award of enhanced  



                           

fees  to  those  the  Hernandezes  incurred  for  the  first  trial.    The  superior  court  could  



reasonably conclude that the second trial offered the Hernandezes an opportunity to  



                                          

"present whatever evidence [they] deemed relevant and probative" regarding the Bank  



                                                                                     

officers' testimony in prior proceedings.  Accordingly, the Hernandezes had a chance to  



                    

remedy  any  obfuscation  resulting  from  the  Bank's  testimony  in  the  first  trial.    As  



discussed below, moreover, the evidence that the Bank engaged in fraudulent or even  



misleading conduct is less compelling with respect to the second trial.  



                                            

                   4.	       The trial court did not err in denying the Hernandezes' renewed  

                             motion for fraud upon the court.  



                   The inconsistencies the Hernandezes  rely on from the second trial are much  



less  serious  than  those  alleged  in  their  original  fraud  upon  the  court  motion.  These  



inconsistencies did not require the superior court to direct judgment in their favor.  



                   In their renewed motion, the Hernandezes highlighted the Bank's alleged  



knowledge of McGrew's wrongdoing by the time the second AFG  trial commenced in  



          43       See Taylor Constr. Servs., Inc. v. URS Co., 758 P.2d 99, 102-03 (Alaska  



1988) (2-2 decision) (opinion of Rabinowitz, C.J.) ("We have repeatedly recognized the  

                                                                                          

trial court's broad discretion in awarding attorney's fees.  We have required only that the  

                                                                                                

trial court specify its reasons in the record when it departs from the fee schedule of Rule  

                                                                                                                    

82(a)." (citations omitted)).  



                                                            -16-	                                                     6986
  


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

                                                 

November 2010.  They pointed first to a report the Bank commissioned for its defense  



in the Christianson litigation, authored by Burton McCullough (the McCullough Report).  



                                                     

The report is dated June 2009, and opines that McGrew issued illegal "nominee loans"  



for Christianson's benefit.  The Bank intimated during the second AFG trial that it did  



not consider the report credible.  



                                                                                                             

                    The  Hernandezes  next  pointed  to  a  superior  court  order  issued  in  the  



Christianson case, finding that McGrew "had established a practice of using one bank  



customer to help the troubled loans and financial problems of other bank customers."  



                                                                                                                       

The order also found,  "Much of this lending was granted to customers who did not  



                                                                                                         

qualify  for  the  loans  and  whose  ability  to  pay  was  questionable."  However,  these  



findings did not relate to McGrew's interactions with the Hernandezes, nor did they  



specifically determine that McGrew acted in contravention of law or bank policy.  This  



order may illustrate the Bank's knowledge of McGrew's misconduct with respect to  



                              

Christianson by the time of the second AFG trial, but the superior court could reasonably  



conclude  that  such  knowledge  was  tangential  to  the  question  of  whether  there  was  



wrongdoing with respect to the Hernandezes.  



                                                                               

                    The Hernandezes argue that the Bank's defense in the second AFG  trial was  



                                                  

nonetheless inconsistent with its admission of McGrew's wrongdoing in Christianson.  



                      

For example, the Hernandezes cited the Bank's opening statement in AFG , purportedly  



                                                                                                           

describing "McGrew's unwillingness to engage in fraudulent conduct."  Yet in this same  



                                                                                           

opening  statement,  the  Bank  admitted  McGrew  "ben[t]"  the  Bank's  policies  and  



                                                                                  

procedures in order "to give a borrower a break."  This kind of admission is inconsistent  

with conduct "involving a corruption of the judicial process itself."44  



          44        See Murray, 144 P.3d at 499 (quoting                   Lowe v. Lowe , 817 P.2d 453, 457 n.9     



(Alaska 1991)) (internal quotation marks omitted).  



                                                             -17-                                                            6986  


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

                   The Hernandezes also highlighted Stringer's testimony during the second  



AFG  trial.  In particular, Stringer testified that he had "never been aware of [Bank]  



policies that . . . Mr. McGrew was violating," and he opined that McGrew would not  

                                                                                                               



have told customers that they were not required to pay back "nominee loans" for which  

                                                         



they  were  the  named  beneficiaries.    These  claims  were  arguably  inconsistent  with  



                                                                                             

Stringer's testimony in Christianson that, beginning in 2005, he began receiving reports  



from customers claiming that McGrew had given them nominee loans and assured them  



                                                                                     

they would not be responsible for repayment.  Yet even if Stringer's statements during  



the second AFG trial were inaccurate, his misrepresentations about whether he personally  



                                                                                                            

believed McGrew engaged in prohibited practices were not sufficiently  egregious to  



compel a finding of fraud upon the court.  



                   Nor did Lawer's in-court testimony during the second AFG  trial warrant  



                                                                                              

such a finding.  Lawer denied having personal knowledge that McGrew contravened  



legal rules or Bank policies in his dealings with the Hernandezes, but conceded that  



                                                                

McGrew might have violated Bank policies with respect to Christianson.  Lawer testified  



                                                                       

that giving illegal nominee loans would be "out of character" for McGrew, but offered  



                                                                                      

only equivocal statements as to whether McGrew may have engaged in criminal activity.  



                   Unlike  the  Bank  officers'  testimony  during  the  first  AFG   trial,  these  



                                                                                      

statements largely avoided sweeping pronouncements that McGrew had a blemish-free  



record at the Bank.  And when Bank officers did testify about McGrew's general track  



record, they entertained the possibility that McGrew's lending practices might have  



violated  the  law  or  Bank  policy.    Accordingly,  the  superior  court  could  reasonably  



                                                           

conclude that the Bank did not commit a fraud upon the court during the second AFG  



trial.  



                                                            -18-                                                      6986
  


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

                    5.        The Bank has not committed a fraud upon this court.  



                    The Hernandezes argue that the Bank's "misrepresentations of McGrew's  



                     

conduct and presentation of false evidence" constitutes a fraud upon  this court.  The  



                                                                     

Hernandezes point out that the Bank asserted in its Christianson appellate briefing that  



                                                                                                                  

McGrew had  engaged in  criminal conduct, contradicting the Bank's prior  denials of  



                                                                                            

McGrew's wrongdoing.  But the Bank has not asserted to this court that McGrew never  



                     

committed a crime, and the Hernandezes do not point to particular statements in the  



Bank's  briefing  that  are  fraudulent.    Accordingly,  we  conclude  the  Bank  has  not  



committed a fraud upon this court.  



                                                                                   

          B.        The  Superior  Court  Did  Not  Err  In  Denying  The  Hernandezes'  

                                                                             

                    Motions For Directed Verdict And JNOV On The Issue Of Whether  

                    McGrew Acted Solely As A "Finder."  



                                                                                              

                    Among the determinations the jury was asked to make in the underlying  



                                                                                                 

case  was  whether  McGrew  had  acted  solely  as  a  "finder"  with  respect  to  the  



Hernandezes' investments in the Inn.  As the jury instructions provided, "A national  



                                                                                                             

bank that acts as a finder may identify potential parties, make inquiries as to interest,  



introduce or arrange contacts or meetings of interested parties, act as an intermediary  



                                                                                                     

between interested parties, and otherwise bring parties together for a transaction that the  



                                                                          45  

parties  themselves  negotiate  and  consummate."                               The  instruction  also  listed  five  



illustrative examples of what a finder could not engage in:  



                              1)        Be an agent of one party or another;  



                                                                                                      

                                   

                              2)       Broker a deal while representing only one party;  



                                                                                                      

                              3)       Make false representations as to the value or the  

                                       quality of the investment;  



          45        See 12 C.F.R.  7.1002 (2014).  



                                                              -19-                                                          6986  


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

                             4)        Make false recommendations as to the amount  

                                       that should be invested;  



                                                        

                             5)        Make false representations about the success of  

                                       the investment.  



Finally, the instructions advised the jurors that if they found the Bank or McGrew to  



                                                                                                                           46  

                                                                

have acted only as a "finder," they must find for the Bank on all of the securities claims. 



At the conclusion of trial, the Hernandezes moved for a directed verdict that McGrew  



                                                   

had engaged in activities that were forbidden for a "finder"; the superior court denied the  



directed verdict motion.  



                                                                                              

                   In reviewing this issue, "we apply an objective test to determine 'whether  



                                                                                                                    

the evidence, when viewed in the light most favorable to the non-moving party, is such  



                                                                                        47 

                                                                                            The Hernandezes assert  

that reasonable [persons] could not differ in their judgment.' " 



                                            

that the "uncontested record" illustrates that McGrew engaged in activities forbidden for  



a finder.  Specifically, they point to statements made by various witnesses that, in their  



view, tend to show McGrew made false representations as to the quality of the Inn as an  



                                                          

investment  opportunity.    But  even  if  these  statements  were  uncontradicted,  as  the  



          46       The Hernandezes' securities claims were based on the Alaska Securities  



Act.  Federal regulations expressly permit a national bank to act as a finder, and state law  

                                                                            

may not "prevent[] or significantly interfere[] with the national bank's exercise of its  

powers."    Gutierrez  v.  Wells  Fargo  Bank,  NA,  704  F.3d  712,  722  (9th  Cir.  2012)  

(quoting Barnett Bank of Marion Cnty., N.A. v. Nelson , 517 U.S. 25, 33 (1996)) (internal  

                                                                                

quotation marks omitted); 12 C.F.R.  7.1002(a) ("It is part of the business of banking  

under 12 U.S.C. 24(Seventh) for a national bank to act as a finder, bringing together  

interested parties to a transaction."); see also Rose v. Chase Bank USA, N.A., 513 F.3d  

                                                                   

1032, 1037 (9th Cir. 2008) ("[T]he usual presumption against federal preemption of state  

law is inapplicable to federal banking regulation." (citations and internal quotation marks  

omitted)).  



          47  

                                                       

                   Turner v. Municipality of Anchorage, 171 P.3d 180, 185 (Alaska 2007)  

(alteration in original) (quoting Wal-Mart, Inc. v. Stewart, 990 P.2d 626, 631-32 (Alaska  

1999)).  



                                                            -20-                                                      6986
  


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

Hernandezes assert, the jurors were nonetheless free to disbelieve such testimony48  or  



conclude  that  the  alleged  conduct  fell  within  the  parameters  of  permitted  "finder"  



activities.  



                                                                                                           

                    Moreover, there was substantial testimony suggesting that McGrew acted  



                                                                                        

only as a finder, including expert testimony from one of the Bank's witnesses, Professor  



Theresa Gabaldon.  At trial, Gabaldon stated, "Everything I have reviewed is entirely  



consistent with . . . my conclusion that [McGrew] was acting as a finder, as understood  



                                                                         

for purposes of federal banking law."  Testimony from the Inn's original investors, Kirk  



                                                                                                                  

Loeffler and Edward Cronick, provided further evidence favoring the Bank on this issue.  



According to Loeffler, McGrew informed him that while he could provide the contact  



information of potential investors, Loeffler would need to actually "sell the project" to  



                        

these contacts. Cronick similarly testified that McGrew gave "suggestions" of potential  



                                                                                     

investors and that the Inn was not using McGrew "as a sales agent."  In light of this  



                                                      

evidence,  reasonable  jurors  could  have  reached  differing  conclusions  on  whether  

McGrew acted solely as a "finder."49  



                                                                                  

                    The Hernandezes argue that the prejudice they suffered from the denial of  



                                                                                                       

their motion for directed verdict was exacerbated by the absence of a "curative" jury  



                                                                         

instruction "that McGrew's use of nominee loans was felonious conduct."  In view of our  



disposition on the "finder" issue, however, the jury would have been precluded from  



finding  the  Bank  liable  on  the  plaintiffs'  securities  claims  in  any  event.    And  the  



          48        The jury was instructed,  "You may believe all or none of the testimony of       



any  witness.    You  need  not  believe  a  witness  even  if  the  witness'[s]   testimony  is  

uncontradicted."  



          49        The superior court also denied the Hernandezes' subsequent motion for  



                                                                                                        

JNOV on the "finder" issue and in the alternative, a new trial on several issues, including  

                                                             

the securities claims.  We conclude that for the same reasons as articulated above, the  

superior court did not err in denying this motion.  



                                                             -21-                                                       6986
  


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

Hernandezes do not show how an instruction regarding nominee loans would have been  



                                                            50  

relevant to their non-securities claims.                        Accordingly, we are not required to decide  



                                                                                                  

whether the judge should have given a jury instruction regarding the legality of nominee  



loans.  



                                                                                    

                     Similarly, we need not reach the issue of whether the superior court erred  



                                                                                                                            

in denying the Hernandezes' motion for JNOV finding certain outstanding debts to the  



Bank non-collectible under AS 45.55.930(g). Under this statutory provision, a person  



                  

cannot sue to enforce a contract if that person had knowledge of facts which rendered the  



                                                                                                                     51 

                                                                                                                         But the  

making or performance of the contract a violation of the Alaska Securities Act. 



                                                        

jury's conclusion that McGrew was only a "finder" relieved the Bank of liability under  



the Securities Act.  



          C.	        The Superior Court Did Not Abuse Its Discretion In Limiting The  

                    Evidence Concerning The McCullough Report.  



                                                                   

                    The  Hernandezes  argue  that  the  superior  court  erred  in  excluding  the  



                                                                                                                

McCullough Report from evidence and limiting McCullough's testimony.  As discussed  



above,  the  Bank  retained  McCullough  to  prepare  a  report  for  its  defense  in  the  



                                                                                                       

 Christianson  litigation,  and  the  report  opined  that  McGrew  had  engaged  in  illegal  



                                  

lending activity with respect to Bank client Todd Christianson.  In this case, the Bank  



argued that the McCullough Report was irrelevant to McGrew's interactions with the  



                                                                            

Hernandezes, and even if it were relevant for some limited purpose, the report's assertion  



          50         The Hernandezes do contend that the absence of an instruction regarding         



nominee loans "allowed jurors to more easily accept [the Bank's] repeated claims . . .   

that McGrew's wrongful conduct was merely minor and was undertaken only in an  

attempt to assist his clients."  But they do not appear to argue that such an impression  

would have affected the jury's consideration of the non-securities claims.  



          51        AS 45.55.930(g).  



                                                               -22-	                                                       6986
  


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

that McGrew engaged in criminal wrongdoing with respect to Christianson was highly  

                                                                            



prejudicial.  



                   The  court  ultimately  excluded  the  McCullough  Report  and  limited  



                                                                                    

McCullough's testimony.  Specifically, McCullough was allowed to testify that he had  



                                                                 

provided the Bank with a report concluding that McGrew had repeatedly violated both  



                                                                                                         

banking regulations and the Bank's policies and procedures.  But he was not allowed to  



state his conclusion that McGrew's conduct described in Christianson was felonious.  



                                                                  

                   A trial court's decision to admit or exclude evidence is reviewed for abuse  



                                                                           52  

                                                                               The Hernandezes argue that the  

of discretion and for prejudice to the opposing party. 



trial court was compelled to admit the McCullough Report based on our holding in Fred  

                                                       



                                             53  

Meyer of Alaska, Inc. v. Bailey .                But our analysis in Fred Meyer did not implicate the  



key issue on which the trial court based its decision to limit McCullough's testimony:  

                                                                                        

relevance.54  



                   In Fred Meyer , the superior court was tasked with determining whether the  

                                                            



defendant-employer had acted in good faith in classifying an employee as exempt from  

                                                                                                       



                                                                                    55  

overtime under the Alaska Wage and Hour Act (AWHA).                                     In a previous lawsuit, the  



employer had commissioned an expert report concluding that the plaintiff-employee's  



          52       Cartee  v.  Cartee,  239  P.3d  707,   712  (Alaska  2010)  (citing  Dobos  v.  



Ingersoll , 9 P.3d 1020, 1023 (Alaska 2000)).  



          53        100 P.3d 881 (Alaska 2004).  



          54       See id. at 888.  In Fred Meyer , we discussed three evidentiary objections  



to the admission of an expert report:  1) that the report violated the rule limiting an  

opposing party's access to non-testifying expert witnesses; 2) that the report's author  

lacked the requisite personal knowledge for a lay witness; and 3) that the report was  

inadmissable hearsay.  Id.  



          55       Id. at 882, 887.  



                                                           -23-                                                      6986
  


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

                                                                             56  

                                                                                                                       

job  position  should  be  classified  as  non-exempt.                             Because  this  arguably  put  the  



employer on notice of its AWHA violation, the report was directly relevant to evaluating  



                                                                                                     57  

the employer's defense that the misclassification was in good faith.                                     



                    The  contents  of  the  McCullough  Report,  in  contrast,  raise  relevance  



                                                                                        

problems not present in Fred Meyer . First, the Bank did not receive the McCullough  



                                               

Report until 2009 - well after the events relevant to the Hernandezes' claims took place.  



Moreover, the report was limited to McGrew's misconduct relating to Christianson's  



                                                                                      

loans  and  did  not  discuss  possible  misconduct  with  respect  to  the  Hernandezes'  



                                                                                                   

transactions.  According to McCullough, none of the materials he reviewed in preparing  



                                                  

his report related to McGrew's interactions with the Hernandezes or the Inn's other  



investors, Cronick and Loeffler.  



                                                  

                    The superior court could therefore reasonably conclude that the report was  



                                                                  

not directly relevant to McGrew's conduct with respect to the plaintiffs.  The court had  



considerable discretion, moreover, to limit McCullough's testimony about McGrew's  



                                                                         58  

criminal  misconduct  to  avoid  unfair  prejudice.                            The  limitations  on  McCullough's  



                                                                                   

testimony were not unreasonable in view of the other evidence that the court admitted  



regarding McGrew's wrongdoing in the Christianson matter.  



          56        Id. at 888.  



          57        See id. ("[The plaintiff] did not offer the report for the truth of the matters  



stated; rather he offered it to show that Fred Meyer had notice of its potential violations  

                                                                              

of Alaska law." (footnote omitted)).  



          58        See Cartee v. Cartee, 239 P.3d 707, 712 (Alaska 2010) ("A trial court's  



decision to admit or exclude evidence is reviewed by us for abuse of discretion, and will  

                                                                                                   

be upset only if we find there has been an error which affected the substantial rights of  

                                                                                                                      

a party." (citing Dobos v. Ingersoll , 9 P.3d 1020, 1023 (Alaska 2000))).  



                                                              -24-                                                         6986
  


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

            D.         No Plain Error Resulted From The Special Verdict Form.  



                                                                                                       

                       The Hernandezes argue that the questions on the special verdict form led  



                                                                                                                            

the jury to "unknowingly make a double reduction" of the Hernandezes' damage award.  



                              

Absent a timely objection, we review the propriety of the special verdict form and the  

associated jury instructions for plain error.59  



                       The special verdict form contained two questions that the Hernandezes  



claim  may  have  confused  the  jury.    Question  6  asked  the  jury  "[w]hat  amount  of  

                     



damages, if any, was legally caused by the [Bank's] negligence," and the jury answered   



"$675,000."    And  Question  25  asked  the  jury  to  determine  the  percentage  of  fault  

                                                    



assigned to the Hernandezes, the Bank, and Cronick, who settled with the Hernandezes  

                                                                                                     



out of court.  The jury determined the Bank to be 14% at fault.  The Hernandezes argue  



                                                                                                        

that  the  jury  understood  the  $675,000  figure  to  be  solely  attributable  to  the  Bank's  



negligence and did not realize that the allocation of fault in Question 25 would reduce  



the amount of damages ultimately owed to the Hernandezes.  



                                                                                 

                       The Hernandezes are correct that Question 6 could have been framed more  



clearly to emphasize that it referred to their total damages.  But any ambiguity in the  



question  was  directly  addressed  at  trial,  when  subsequent  requests  for  clarification  



                                           

confirmed that the jury correctly understood what was asked of them.  First, the jury  



                                                                

responded  in  the  affirmative  to  the  question,  "Does  your  answer  to  Question  No.  6  



 [damages caused by the Bank's negligence] reflect the damages you awarded to Plaintiff  



            59         See Cummins, Inc. v. Nelson                      , 115 P.3d 536, 541 (Alaska 2005) ("Without     



a timely objection, we will only review [jury] instructions for plain error.  A special  

verdict  form  is  a  type  of  jury  instruction  subject  to  the  same  standard  of  review."  

(footnote omitted)).  We note that when a timely objection has been made, we review  

jury instructions de novo.   Id.  Here, however, the Hernandezes point to no objection  

                                                                                   

raised below, never argue that we should apply our independent judgment, and expressly  

                                                                      

assert that the trial court committed "plain error."  



                                                                       -25-                                                                 6986
  


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

before you made any deduction based upon your answer to Question No. 25 [allocation        

                                                                                              60   A second request asked  

of fault among the Bank, Cronick, and the Hernandezes]?"                                            



the jury to re-examine its apportionment of fault "[i]n light of [its] decision that Plaintiffs  



                                                                                                            

are only entitled to damages based upon their claim of negligence."  The request further  



instructed  the  jury  to  "consider  the  nature  of  [the  Bank's,  Cronick's,  and  the  



                                                                                                                       

Hernandezes'] conduct and the extent of the causal relationship between the conduct and  



any damages" the jury had identified. The jury returned the same apportionment as in  



their original verdict.   



                                                                         

                     These interrogatories show that in answering the special verdict form, the  



                                                                                                 

jury properly calculated the amount of the Hernandezes' loss and then apportioned fault  



to  take  into  account  the  degree  to  which  the  Bank,  the  Hernandezes,  and  Cronick  



                                                                                                                        

contributed to that loss.  In light of this clarification, we conclude that no plain error  



resulted from the special verdict form.  



                                                      

           E.	       The Hernandezes' Common Law Tort Claims Are Not Barred By The  

                     Statute Of Limitations.  



                     The Hernandezes' common law tort claims are governed by a two-year  



                                 61  

                                                                                  

statute of limitations.              "Although a cause of action generally accrues when the plaintiff  

incurs an injury, accrual can be delayed under . . . [the] common-law discovery rule."62  



"[T]he  discovery  rule  may  provide  different  possible  dates  on  which  a  statute  of  



                                                63  

                                                                       

limitations can begin to run."                      Generally, however, the operative date is "when the  



                                                                                                                            

plaintiff has information which is sufficient to alert a reasonable person to begin an  



           60        Emphasis added.  



           61        See AS 09.10.070(a).  



           62         Gefre v. Davis Wright Tremaine, LLP, 306 P.3d 1264, 1274 (Alaska 2013).  



           63        Id. at 1275.  



                                                                 -26-	                                                           6986
  


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

                                                                                                           64  

inquiry  to  protect  his  rights"  -  often  referred  to  as  inquiry  notice.                                 Here,  the  



                                                   

Hernandezes conceded "that as of October of 2003 [they] were on 'inquiry notice'. . . as  



                                                                                                                 

to their common law misrepresentation claims."  However, the Hernandezes did not file  



their complaint until March 2006, after the two-year period had run.  



                    But we have held that "[a] party who fraudulently conceals from a plaintiff  



                                                             

the existence of a cause of action may be estopped to plead the statute of limitation if the  



                                                                         

plaintiff's delay in bringing suit was occasioned by reliance on the false or fraudulent  



                        65  

representation."            Specifically, a plaintiff must show:  "(1) fraudulent conduct, which  



                            

may take the form of either an affirmative misrepresentation or a failure to disclose facts  

where there is a duty to do so; (2) justifiable reliance; and (3) damage."66  



                         

                    In the proceedings below, the Bank filed a motion for summary judgment,  



                                                                                                        

arguing that the Hernandezes' common law tort claims were barred by the statute of  



limitations.  In opposition, the Hernandezes pleaded equitable estoppel, citing McGrew's  



                                                                                                  

alleged assurances that he would find other investors or arrange for alternative financing  



          

to get the Hernandezes out of their investment in the Inn.  The court denied the Bank's  



                                                   

motion, finding there were issues of fact "as to whether it was utterly unreasonable for  



Plaintiffs to not be fully aware of the falsity of McGrew's alleged misrepresentation 



  .  .  .  until  informed  so  by  [Bank]  Vice  President  Stringer  after  McGrew's  death  in  



January 2005."  



          64       Id.  (quoting  Cameron  v.  State,  822  P.2d  1362,  1366  (Alaska  1991))  



(internal quotation marks omitted).  



          65       Palmer v. Borg-Warner Corp. , 838 P.2d 1243, 1247 (Alaska 1992) (quoting  



Sharrow  v.  Archer,  658  P.2d  1331,  1333  (Alaska  1983))  (internal  quotation  marks  

omitted).  



          66        Gefre, 306 P.3d at 1277 (quoting                 Williams v. Williams, 129 P.3d 428, 432  



(Alaska 2006)) (internal quotation marks omitted).  



                                                             -27-                                                       6986
  


----------------------- Page 28-----------------------

                    The Bank later filed a motion for directed verdict on the same grounds,  



                                                                   

which the court similarly denied, first noting that it is the judge who determines whether  



                                                      

the elements of estoppel have been satisfied, acting "as a factfinder in determining the  



                     

applicability  of  the  statute  of  limitations."    The  court  found  that  McGrew  made  



misrepresentations to the Hernandezes and that the Bank "knew about the weaknesses  



of the project" but did nothing to stop McGrew from refinancing it.  Accordingly, the  



court concluded that the Hernandezes' reliance on McGrew's misrepresentations was not  



                                                                                             

"utterly unreasonable."  The Bank filed a motion for JNOV on the same grounds, which  



the court summarily denied.  



                                                                             

                    1.	       The  superior  court  applied  the  correct  burden  of  proof  to  

                              determine the elements of equitable estoppel.  



                    The   Bank   contends   the   superior   court   should   have   required   the  



                                                             

Hernandezes  to  prove  each  element  of  equitable  estoppel  by  "clear  and  convincing  



                                                                             

evidence."  But the Bank relies on our application of this standard in real estate cases  



where the application of equitable estoppel divests title from one party and transfers it  

to another.67  Where title to land is at issue, the stricter standard serves to "foster reliance  



                                                                68   But these policy concerns do not apply  

on record title and enhance marketability."     



here, and we have never required "clear and convincing evidence" to prove equitable  

                                                                                                      



estoppel in the context of a statute of limitations defense.  We decline to do so now.  



                    The  Bank  also  takes  issue  with  the  superior  court's  application  of  the  



"utterly  unreasonable"  standard  this  court  articulated  in  Palmer  v.  Borg-Warner  



          67        See, e.g., Dressel v. Weeks , 779 P.2d 324, 329 (Alaska 1989).  



          68        See Curran v. Mount, 657 P.2d 389, 391 (Alaska 1982) (adopting the clear   



and convincing standard for adverse possession cases).  



                                                             -28-                                                           6986  


----------------------- Page 29-----------------------

                    69  

Corporation.            As we have noted, "a party should be charged with knowledge of the  



                                                                                                     

fraudulent misrepresentation or concealment only when it would be utterly unreasonable  

                                                                      70   Once it is utterly unreasonable not to  

                                                                                           

for the party not to be aware of the deception."  



know  about  the  deception,  the  plaintiff  must  take  timely  action  or  risk  losing  the  



                                                 71  

protection of equitable estoppel.                     



                    The  Bank  contends  that  the  "utterly  unreasonable"  standard  is  only  

                                                                                                                       



applicable  "in  cases  of  fraudulent  concealment   of  a  claim."    Yet  the  "utterly  

                                                                               



unreasonable"  standard  as  we  have  articulated  it  expressly  applies  to  "fraudulent  



                             72  

misrepresentation,"              which is precisely what the Hernandezes alleged.  We conclude that  



the superior court correctly applied the "utterly unreasonable" standard in this case.  



          69        838 P.2d at 1251.  



          70        Id. ; see also Waage v. Cutter Biological Div. of Miles Labs., Inc.                            , 926 P.2d  



1145, 1149 (Alaska 1996).  



          71        Palmer , 838 P.2d at 1251.  



          72        Waage, 926 P.2d at 1149.  



                                                              -29-                                                         6986
  


----------------------- Page 30-----------------------

                   2.	       The  superior  court  reasonably  concluded  that  the  Bank's  

                             defense was barred by equitable estoppel.  



                                                                                                               

                    The issue of whether equitable estoppel applies is a question of law that we  



                        73  

review de novo.             However, the elements of equitable estoppel involve questions of  

fact,74 which we review for clear error.75  



                                    

                    The Bank asserts there was insufficient evidence to support the superior  



                                             

court's finding that "McGrew failed to adequately make necessary disclosures and made  



                                                                           

misrepresentations to [the Hernandezes], such that they continued to work with him and  



                                                   

[the Bank]." But the Hernandezes attested that "[e]ach time McGrew advanced funds to  



                                                                                          

the Hernandez family members he would repeat that this was going to work and that as  



                                                 

soon as the hotel was finished he could find other investors to take the Hernandez family  



completely  out."    McGrew  allegedly  made  such  representations  in  October  and  



                                                                      

December of 2003, and in January, April, May, and October of 2004.  According to the  



Hernandezes, McGrew also stated that he would combine the Hernandezes' various loans  



into a single "wrap around" loan secured by the completed Inn.  



                    The  Bank  does  not  appear  to  argue  on  appeal  that  the  Hernandezes'  



                                                 

recounting of their conversations with McGrew is inaccurate.  Rather, the Bank contends  



that these statements were not "misrepresentations," but merely promises that were never  



performed.  We have noted that "[a] statement made as to future intentions and actions  



          73	       Ogar v. City of Haines           , 51 P.3d 333, 335 (Alaska 2002) (citing Hubbard  



v. Hubbard , 44 P.3d 153, 155 (Alaska 2002)).  



          74       See,  e.g.,  Palmer ,  838  P.2d  at  1251  ("The  determination  of  when  a  

                                                                                                              

fraudulent misrepresentation or concealment should have been discovered is a question  

                                                                   

of  fact  for  the  trial  court  to  decide."  (citing  Carter  v.  Hoblit,  755  P.2d  1084,  1087  

                                            

(Alaska 1988))).  



          75       Shumway v. Betty Black Living Trust, 321 P.3d 372, 375 (Alaska 2014).  



                                                            -30-	                                                      6986
  


----------------------- Page 31-----------------------

                                                                                    

is not a misrepresentation if it is accurate when it is made, even if future events render  



                       76  

                            But the Bank does not point to any evidence that McGrew intended to  

it inaccurate."                                                                        



perform on his promise, such as an indication that McGrew was actively searching for  

                                          



another investor or had the capacity to divest the Hernandezes of their responsibility for  

                                              



the  project.    The  Bank  does  point  out  that  the  Hernandezes  believed  McGrew  was  



                                                                                                                    

seeking replacement financing, but this does not show that McGrew actually intended  



                                                                                                    

to do so.  Accordingly, it was not clearly erroneous for the superior court to conclude  



that McGrew's reassurances were "misrepresentations."  



                                                                      

                      The  Bank  also  makes  two  arguments  as  to  why,  as  a  matter  of  law,  



McGrew's  statements  could  not  be  considered  misrepresentations.    The  first  is  that  



                                                  

McGrew's promise to divest the Hernandezes of their investment was unenforceable  



                                                                                                      

under the Statute of Frauds, since certain types of financing or loans in excess of $50,000  



                               77  

                                                                                                                

must be in writing.                 But the provision the Bank cites applies only to "an agreement to  



                                                                  78  

                                                                              

lend  .  .  .  or  to  grant  or  extend  credit"                     and  therefore  does  not  apply  to  McGrew's  



promises to divest the Hernandezes of their financial responsibility for existing loans.  



The  Bank  also  argues  that  McGrew's  assurances  were  merely  speculative  promises  



                                                                      

regarding a third party's actions and thus could not have been misleading as a matter of  



          

law.   However, McGrew also allegedly told the Hernandezes that if they helped him  



finish building the Inn, he would help them by "find[ing] an investor to take over the  



project."  Thus, McGrew was taking personal responsibility for an outcome he failed to  



provide, and accordingly, such a promise could constitute a misrepresentation.  



           76          Valdez Fisheries Dev. Ass'n v. Alyeska Pipeline Serv. Co.                                   , 45 P.3d 657, 672   



(Alaska 2002).  



           77         See AS 09.25.010(a)(13). 
 



           78         Id.
  



                                                                     -31-                                                              6986
  


----------------------- Page 32-----------------------

                    In its order denying the Bank's motion for directed verdict, the superior  



                                                                                             

court also found that "in light of the bank's tacit support of McGrew's actions," the  



                     

Hernandezes  were  not  "utterly  unreasonable"  in  relying  on  McGrew's  "continued  



misrepresentations to allay their suspicions."  



                                                                               

                    As  an  initial  matter,  the  Bank  argues  that  the  Hernandezes  have  never  



provided  evidence  that  they  actually  relied  on  McGrew's  assurances.    But  the  



                                           

Hernandezes' reliance may be inferred from the nature of McGrew's assurances and  



                                               

evidence that the Hernandezes continued to sign loan documents after their discussions  



with McGrew.  



                    The Bank also argues that reliance on McGrew's assurances would have  



been  unreasonable.    In  particular,  the  Bank  asserts  it  was  unreasonable  for  the  



                                     

Hernandezes to rely on statements about potential financing that contained no details  



                                                       

regarding amount, source, or terms. As the superior court noted, however, McGrew was  



                                                                                                          

a "long-time friend and trusted loan officer."  And even testimony from the Bank's own  



                                                                       

officers confirmed that the Hernandezes should have had no reason not to trust McGrew.  



                                                                      

Accordingly, it was not "utterly unreasonable" for the Hernandezes to rely on McGrew's  



assurances that he would secure new financing for the Inn.  



                                                                                              

          F.        The Issue Of Whether An Interest In An LLC Is A Security Is Moot.  



                                                                                                         

                    The Bank argues that the superior court erred in ruling that the Hernandezes  



acquired a "security" interest in the Inn, within the meaning of the Alaska Securities Act.  



                                                        

The court made this finding when it denied the Bank's motion for summary judgment  



                                                                 

on the Hernandezes' securities claims. But the jury ultimately found that McGrew acted  



only as a "finder," thus relieving the Bank of any liability under the Alaska Securities  



                                                             -32-                                                        6986
  


----------------------- Page 33-----------------------

      79  

Act.      Therefore our determination of this issue would have no direct bearing on the  



outcome of this litigation.  



                    "Under ordinary circumstances, we will refrain from deciding questions  



where events have rendered the legal issue moot.  A claim is moot if it is no longer a  



present, live controversy, and the party bringing the action would not be entitled to relief,  



                            80  

                                But under the collateral consequences exception, we may decide  

even if it prevails."  



                                                                                   

a case that is otherwise moot where "a judgment may carry indirect consequences in  



                                                                                                  

addition to its direct force, either as a matter of legal rules or as a matter of practical  

effect."81 



                     The Bank contends that the superior court's security interest finding has  



"important  collateral  consequences"  for  the  Bank.    Because  its  insurer  withdrew  



                                                                                                         

coverage and defense since its policy did not cover "any claims arising out of efforts to  



                                                      

promote the sale of a security," and because policy disputes under the insurance policy  



                                                                                                         

are submitted for binding arbitration, the Bank claims that the superior court's decision  



may  "unfairly  prejudice  the  arbitrators"  or  be  considered  dispositive  in  the  future  



coverage dispute.  



          79        See 12 C.F.R.  7.1002(a) ("It is part of the business of banking under 12   



U.S.C. 24(Seventh) for a national bank to act as a finder, bringing together interested  

parties to a transaction."); see also Gutierrez v. Wells Fargo Bank, NA , 704 F.3d 712,  

722 (9th Cir. 2012) (noting that state law may not "prevent or significantly interfere with  

                                                                   

the  national  bank's  exercise  of  its  powers."  (citation  and  internal  quotation  marks  

                                                  

omitted)).  



          80       Fairbanks Fire Fighters Ass'n, Local 1324 v. City of Fairbanks , 48 P.3d  



          

1165, 1167 (Alaska 2002) (alteration omitted) (quoting Gerstein v. Axtell, 960 P.2d 599,  

601 (Alaska 1998)) (internal quotation marks omitted).  



          81  

                            

                   In re Mark V. , 324 P.3d 840, 843 (Alaska 2014) (quoting In re Joan K. , 273  

P.3d 594, 598 (Alaska 2012)) (internal quotation marks omitted).  



                                                             -33-                                                       6986
  


----------------------- Page 34-----------------------

                    We   disagree.            The   mere   possibility   of   "unfairly   prejudic[ing]   the  



                                                                        

arbitrators" is insufficient to compel resolution of an otherwise moot issue.  And the  



                                                                             

Bank  presents  no  legal  authority  explaining  how  the  superior  court's  interlocutory  



finding  would  preclude  an  arbitration  panel  from  reaching  its  own  independent  



conclusion on this question of law.  A court's resolution of an issue has preclusive effect  



only if that issue is essential to the final judgment, and other courts are not bound by  



                                                                                                 82  

interlocutory  findings  that  are  not  essential  to  a  final  judgment.                            Accordingly,  the  



                                                                                                                     

superior court's finding that the Hernandezes acquired a security interest in the Inn will  



                                                                                             

not be controlling in the Bank's insurance coverage arbitration because that finding was  



not essential to the final judgment.  



                                                                                                           

                    We  therefore  conclude  that  this  issue  is  moot  and  that  the  collateral  



consequences exception does not apply.  



          G.	       The     Superior         Court   Did         Not   Err        In    Determining            That   The  

                    Hernandezes Were Entitled To Attorney's Fees And Costs.  



                                

                    In   the   proceedings   below,   the   superior   court   determined   that   the  



                                  

Hernandezes were the prevailing party and awarded them attorney's fees and costs.  The  



Bank appeals this award on several grounds.  



                                                  

                    1.	      The Bank's deeds of trust did not preclude the superior court  

                             from awarding attorney's fees to the Hernandezes.  



                                                                         

                    The Bank first argues that the award of attorney's fees and costs in this case  



                                                                                                                

was governed by contract - namely, the deeds of trust securing the Bank's loans to the  



Hernandezes.  The Bank points to the following provision in its deeds of trust:  



          82        See RESTATEMENT (SECOND) OF JUDGMENTS  27 cmt. h (1982) ("If issues  



are determined but the judgment is not dependent upon the determinations, relitigation  

      

of  those  issues  in  a  subsequent  action  between  the  parties  is  not  precluded.    Such  

                         

determinations have the characteristics of dicta, and may not ordinarily be the subject of  

                                                                                         

an appeal by the party against whom they were made.").  



                                                             -34-	                                                      6986
  


----------------------- Page 35-----------------------

                                                                                                 

                    If [the Bank] institutes any suit or action to enforce any of the  

                    terms of this Deed of Trust, [the Bank] shall be entitled to  

                                                                             

                    recover such sum as the court may  adjudge reasonable as  

                                                                                        

                    attorneys' fees at trial and upon any appeal.  Whether or not  

                                                                                  

                    any court action is involved or pending, and to the extent not  

                                                                                      

                    prohibited by law, all reasonable expenses [the Bank] incurs  

                                                                                        

                    that in [the Bank's] opinion are necessary at any time for the  

                    protection of its interest or the enforcement of its rights shall  

                    become a part of the indebtedness payable on demand and  

                    shall bear interest at the Note rate . . . .  



The Bank contends this suit required it to "protect and enforce" its right to repayment of  

        



the Hernandezes' loans, and the superior court was therefore required to grant the Bank  

                                                                                             



attorney's fees and costs for its defense.    



                                                   

                    We have held that "where a contract between the parties allows for one  



party to recover attorney's fees in the event of litigation, the contract provision must  



                                                                                          

prevail"  over  the  general  rule  that  the  prevailing  party  in  a  civil  case  is  awarded  



                       83  

attorney's fees.                                                                               

                           Accordingly, an attorney's fees provision in the Bank's deeds of trust  



                                                                                                  

would arguably govern here.  We interpret the relevant contract provision applying our  



                                   84  

                                                                                                          

independent judgment.                  "In interpreting a contract, the object is to give effect to the  



                                                                                                              

reasonable expectations of the parties.  To ascertain these expectations, the court looks  



          83        O'Connell v. Will, 263 P.3d 41, 47 (Alaska 2011) (quoting Rockstad v.  



Erikson , 113 P.3d 1215, 1224 (Alaska 2005)) (internal quotation marks omitted); see  

                              

also Alaska R. Civ. P. 82(a) ("Except as otherwise provided by law or agreed to by the  

                                                                                                        

parties, the prevailing party in a civil case shall be awarded attorney's fees calculated  

                                                                                             

under this rule.").  



          84        See Casey v. Semco Energy, Inc., 92 P.3d 379, 382 (Alaska 2004) (citing  



Old Harbor Native Corp. v. Afognak Joint Venture, 30 P.3d 101, 104 (Alaska 2001)).  



                                                              -35-                                                         6986
  


----------------------- Page 36-----------------------

to  the  language  of  the  disputed  provision,  the  language  of  other  provisions  of  the  

contract, relevant extrinsic evidence, and case law interpreting similar provisions."85  



                    The first sentence of the excerpt above states only that the Bank will be   



entitled to reasonable fees in any suit the Bank "institutes" to enforce the deed of trust.                          



But this suit was brought by the Hernandezes, and the Bank did not bring a counterclaim             



to enforce the deed of trust.  Therefore, this provision is inapplicable.  



                                                          

                    The Bank seems to rely on the second sentence of the quoted language,  



which allows "all reasonable expenses" necessary to protect the Bank's interest to be  



                                                                                                

added  to  the  note  by  "becom[ing]  a  part  of  the  indebtedness  payable  on  demand,"  



"[w]hether or not any court action is involved or pending."  Accordingly, the Bank may  



indeed be entitled to add certain litigation expenses to the indebtedness owed on the  



                                                                                                    

Hernandezes' notes.  But the Bank did not counterclaim to enforce its notes, nor are we  



reviewing  any  judicial  or  nonjudicial  proceeding  to  collect  on  the  "indebtedness  



                                                                                                                  86 

payable."  It would therefore defy the "reasonable expectations" of the parties                                      to grant  



the Bank its litigation expenses outside of a proceeding to collect on the Hernandezes'  



notes.  



                                                                                     

                    Because the attorney's fees provision in the parties' contractual agreement  



is inapplicable to the present dispute, the civil rules control.  



                    2.	       The superior court did not err in finding that the Bank's offers  

                              of judgment were invalid under Civil Rule 68.  



                    The  Bank  argues  that  it  made  valid  offers  of  judgment  that  were  



significantly higher than the Hernandezes' recovery at trial, thus rendering the Bank the  



          85        Peterson  v.  Wirum ,  625  P.2d  866,  872  n.10  (Alaska  1981)  (citation  



omitted).  



          86	       See id.  



                                                             -36-	                                                          6986  


----------------------- Page 37-----------------------

prevailing party under Civil Rule 68.  Rule 68 encourages settlement87 by providing that  

                                                         



if a  party  makes  an  offer  of judgment that is  rejected, the rejecting  party  must  pay  

                                                                                                           



attorney's fees and costs if the final judgment "is at least 5 percent less favorable" than  

                                                                               



                           88  

the rejected offer.            However, "[a]n offer not in compliance with Rule 68 may not be  

                                                                                89  "Whether an offer of judgment  

considered in determining costs and attorney's fees."  

                                                                                                    



complies with Civil Rule 68 is a question of law that we review using the independent  

                                                   

judgment standard." 90  



                    The Bank's offer presented two recovery options to the Hernandezes:  (1)  



the sum of $230,000, plus interest; or (2) 105% of $212,167.67, Alaska Civil Rule 79  

                                                                          



costs, and interest.  Under either of these two options, however, $100,000 of this amount  

                                                     



was to "be paid by offset against the principal of one or more" of three loans owed to the  

                                                                                                         



Bank:  one  belonging  solely  to  Alaska  Fur  Gallery,  one  shared  between  Alaska  Fur  



                                                                        

Gallery and Hernandez & Associates, and one shared between Alaska Fur Gallery and  



                                                                                                      

the Inn.  Additionally, the offer provided that, with the exception of one particular loan,  



the Hernandezes would be "discharged from their payment guarantees" for the Inn's  



outstanding loans.  However, the offer also listed four loans that would be "confirmed  



                                                                                                    

as being valid and enforceable liabilities of the plaintiffs." In total, the principal on these  



loans exceeded $5 million.  



          87        Pagenkopf v. Chatham Elec., Inc. , 165 P.3d 634, 644 (Alaska 2007).  



          88        Alaska R. Civ. P. 68(a), (b).  If there are multiple defendants, the threshold       



is ten percent rather than five percent.  Alaska R. Civ. P. 68(b).   



          89        Grow v. Ruggles, 860 P.2d 1225, 1227 (Alaska 1993).  



          90        Anderson  v.  Alyeska  Pipeline  Serv.  Co. ,  234  P.3d  1282,  1286  (Alaska  



2010).  



                                                              -37-                                                         6986
  


----------------------- Page 38-----------------------

                                                                                                   

                    We agree with the superior court that this offer was invalid.  First, both  



                                                

options were joint offers, which are usually invalid as Rule 68 offers of judgment due to  



                                       91  

apportionment difficulties.                In determining whether a joint offer may nonetheless be  



                                                                           

valid, we consider two factors:  (1) whether "[t]he settlement offer clearly indicated all  



claims  between  the  parties  would  be  resolved  if  the  offer  were  accepted";  and  (2)  

whether apportionment difficulty actually exists.92  



                    While the Bank's offer may satisfy the first factor in that it would have  



                                                                                              

resolved all of the plaintiffs' claims, "apportionment difficulty" indeed exists here.  The  



Bank points out that Alaska Fur Gallery and Hernandez & Associates are both owned  



                                                                           

by members of the Hernandez family, who stated during trial that they did not see the  



                                                           

two entities as "distinct."  But the offer of judgment not only required a lump sum to be  



                                                              

apportioned between these two plaintiffs, but also implicated several different loans -  



                                                                                                                       

one of which was held jointly by Alaska Fur Gallery and the Inn.  Accordingly, it was  



                                                                                                           

not clear how the $100,000 "offset" against the loan principal would be apportioned or  

which of the three plaintiffs would reap the benefit of that principal reduction.93  



          91        See Brinkerhoff   v. Swearingen Aviation Corp ., 663 P.2d 937, 943 (Alaska  



1983).  



          92        John's Heating Serv. v. Lamb , 46 P.3d 1024, 1042 & n.85 (Alaska 2002)  

                                                                                        

(alteration in original) (citation and internal quotation marks omitted).  



          93        The Bank contends that the Inn should not be considered a plaintiff for  



purposes of the Rule 68 offer because it had no individual claim aside from those raised  

                                                                                      

by the Hernandezes, and because the court instructed the jury that the word "plaintiff"  

                                                                                             

or  "plaintiffs"  in  the  instructions  referred  to  Alaska  Fur  Gallery  and  Hernandez  &  

Associates.  However, the Bank itself referred to the Inn as a separate party in its offer  

of judgment, and the Bank provides no authority as to why the Inn is not a relevant party  

                                                                                                    

for Rule 68 purposes.  



                                                             -38-                                                       6986
  


----------------------- Page 39-----------------------

                                                           

                   Finally, even if the Bank's offer were valid under Rule 68, it is unclear that  



it is a better offer than what the Hernandezes received from the final judgment.  The offer  



contains a condition that the plaintiffs confirm the validity of over five million dollars  



                                    

in loans.  The litigation did not satisfy that condition: while the final judgment in this  



                                            

case  may  not  have  relieved  the  Hernandezes  of  their  debt  obligations,  it  did  not  



                                                               

affirmatively confirm their loans as "valid and enforceable liabilities."  In this sense, it  



                                                                           

would be incorrect to say that the Bank's offer - "confirming" millions of dollars in  



debt  liability  with  approximately  $230,000  in  compensation  -  was  better  than  the  



plaintiffs' recovery at trial.  



                   3.	       The superior court did not abuse its discretion by concluding  

                             that the Hernandezes were the prevailing party.  



                                                                                                        

                   The Bank argues that it was the prevailing party, based on its defeat of  



numerous claims and the small size of the Hernandezes' award compared to the total  



                          

damages sought.  A superior court's prevailing party determination is reviewed for abuse  



                   94  

of discretion.         



                   As we have held,  



                                                                                                 

                   For purposes of awarding fees pursuant to Civil Rule 82, the  

                   general rule is that the prevailing party is the one who has  

                   successfully prosecuted or defended against the action, the  

                   one who is successful on the main issue of the action and in  

                                                               

                   whose  favor  the  decision  or  verdict  is  rendered  and  the  

                                              [95]  

                   judgment entered.  



          94       Progressive Corp. v. Peter ex rel. Peter , 195 P.3d 1083, 1092 (Alaska  



2008)  (citing  Interior  Cabaret,  Hotel,  Rest.  &  Retailers  Ass'n  v.  Fairbanks  N.  Star  

                                                

Borough , 135 P.3d 1000, 1002 (Alaska 2006)).  



          95       Day  v.  Moore , 771 P.2d 436, 437 (Alaska 1989) (quoting Adoption of  



 V.M.C., 528 P.2d 788, 795 n.14 (Alaska 1974)) (internal quotation marks omitted).  



                                                            -39-	                                                     6986
  


----------------------- Page 40-----------------------

                                                                     

"[A] party does not have to prevail on  all the  issues in the case to be a 'prevailing  



             96  

                                                                                                 

party.'  "         "With  few  exceptions,  the  party  who  obtains  an  affirmative  recovery  is  

considered prevailing."97  



                                                                            

                    Here, the Hernandezes prevailed on their negligence claim, and recovered  



                                                                                                           

$94,500 in damages, plus interest.  Based on this affirmative recovery, the superior court  



could reasonably conclude that the Hernandezes were the prevailing party.  



                                                                      

                    4.         The superior court did not err by declining to apportion costs.  



                    The Bank argues that the superior court erred in awarding the Hernandezes  



                                                                                                

 100% of their costs, given the jury's verdict that the Bank was only 14% at fault for the  



                                                                                                           

Hernandezes'  damages.    The  Bank  requested  a  modified  cost  bill  that  would  have  



                                     

apportioned only 14%  of the Hernandezes' costs to the Bank, but the superior court  



                                                                                                    

denied that request.  The court concluded, and the Hernandezes argue on appeal, that  



                                                                                     

Civil Rule 79(h) only applies to apportionment among multiple non-prevailing parties.  



                                                                                                                  

Because this issue involves the interpretation of the civil rules, we review this question  

de novo.98  



                     Civil  Rule  79(h)  states:    "In  a  case  in  which  damages  are  apportioned  



among  the  parties  under  AS  09.17.080,  costs  must  be  apportioned  and  awarded  



                                                                                       

according to the provisions of Civil Rule 82(e)."  Rule 82(e) provides:  "In a case in  



          96        Id. (quoting Malvo v. J.C. Penney Co. , 512 P.2d 575, 586 (Alaska 1973)).   



          97  

                                                                        

                    Alaska Ctr. for the Env't v. State , 940 P.2d 916, 921 (Alaska 1997) (citing  

Hillman v. Nationwide Mut. Fire Ins. Co. , 855 P.2d 1321, 1327-28 (Alaska 1993)).  



          98        See E.P. v. Alaska Psychiatric Inst., 205 P.3d 1101, 1106 (Alaska 2009)  



                                                  

("We  .  .  .  review  questions  of  statutory  interpretation  de  novo.");  City  of  Kodiak  v.  

Parish ,  986  P.2d  201,  202  (Alaska  1999)  (applying  independent  judgment  to  the  

interpretation of Rule 82(e)); Ford v. Municipality of Anchorage , 813 P.2d 654, 655  

(Alaska 1991) ("Since this case involves the interpretation of a civil rule, we exercise our  

                                                 

independent judgment.").  



                                                               -40-                                                         6986
  


----------------------- Page 41-----------------------

which damages are apportioned among the parties under AS 09.17.080, the [attorney's]     



fees awarded to the plaintiff under (b)(1) of this rule must also be apportioned among the               



parties according to their respective percentages of fault."                                               And the fee schedule in Rule     



82(b)(1) requires the court to calculate attorney's fees based on the judgment and, if     



awarded, the prejudgment interest.  



                        We have previously held that "the fit between Rule 79(h) and Rule 82(e)  

                99  When "Rule 82(e) does not apply with regard to attorney's fees, . . . the same  

is snug."                                               

conclusion must follow with respect to Rule 79(h) costs."100  And because Rule 82(b)(1)  



calculates attorney's fees based on the final judgment awarded to the prevailing party -  

                                                                                                                             



not the claimant's total injury before apportionment - attorney's fees calculated under  



                                                                                                                    

Rule 82(b)(1) will already have been reduced to reflect any fault attributed to the plaintiff  



                                                                       

or to non-parties.  Where there is only one non-prevailing party, no further reduction is  



necessary.    Accordingly,  Rule  82(e)  apportionment  should  only  occur  if  there  are  



multiple non-prevailing parties to the litigation.  



                                                                                                                       

                        Here, although the jury found that the Hernandezes, the Bank, and  Cronick  



                                                                                                        

all shared fault to the varying degrees, the Bank was the only non-prevailing party, and  



                                                                                                                                          

the  final  judgment  against  the  Bank  reflected  the  Bank's  percentage  of  fault:  14%.  



Because the Bank was the only non-prevailing party against whom the jury awarded  



damages,  the  court  correctly  determined  that  Rule  82(e)  did  not  apply;  further  



                                                                                                               

apportionment of the attorney's fee award would result in a double reduction to that  



                                                                                                                                                        

award.  And because Rule 82(e) did not apply, Rule 79(h) was also inapplicable.  We  



therefore conclude that the superior court did not err by declining to apportion costs.  



            99          Parish , 986 P.2d at 204.  



            100         Id.  



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V.     CONCLUSION 



              We AFFIRM the superior court's judgment in all respects.  



                                        -42-                                   6986
  

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