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Ellingstad v. Alaska Department of Natural Resources (5/21/99), 979 P 2d 1000
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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.
THE SUPREME COURT OF THE STATE OF ALASKA
KAREN E. ELLINGSTAD, )
) Supreme Court No. S-7741
Appellant, )
) Superior Court No.
v. ) 1PE-93-75 CI
)
STATE OF ALASKA, DEPARTMENT ) O P I N I O N
OF NATURAL RESOURCES, and )
UNIVERSITY OF ALASKA, ) [No. 5120 - May 21, 1999]
STATEWIDE OFFICE OF LAND )
MANAGEMENT, )
)
Appellees. )
______________________________)
)
KAREN E. ELLINGSTAD, )
) Supreme Court No. S-8361
Appellant, )
) Superior Court Nos.
v. ) 1PE-95-46/47 CI
)
UNIVERSITY OF ALASKA BOARD )
OF REGENTS, )
)
Appellee. )
______________________________)
Appeal in File No. S-7741 from the Superior
Court of the State of Alaska, First Judicial District, Petersburg,
Walter L. Carpeneti, Judge. Appeal in File No. S-8361 from the
Superior Court of the State of Alaska, First Judicial District,
Petersburg, Michael A. Thompson, Judge.
Appearances: Frederick W. Triem, Petersburg,
for Appellant. Marie Sansone, Assistant Attorney General, and
Bruce M. Botelho, Attorney General, Juneau, for Appellee State of
Alaska. Peter C. Partnow, Partnow, Sharrock & Tindall, Anchorage,
for Appellee University of Alaska in File No. S-7741. Ronald L.
Baird, Anchorage, for Appellee Board of Regents as Trustee for the
University of Alaska in File No. S-8361.
Before: Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.
FABE, Justice.
I. INTRODUCTION
Karen Ellingstad, a purchaser under the Alaska land
lottery sales program, sued the State for breach of contract
because she received a quitclaim deed rather than a patent from the
State's assignee, the University of Alaska. Later, after
Ellingstad missed several installment payments on two of her land
contracts, the University sued to quiet title. Ellingstad moved to
dismiss the quiet title action, claiming the University should have
brought it as a compulsory counterclaim in the contract suit.
Because the University's conveyance of a quitclaim deed to
Ellingstad did not violate the terms of Ellingstad's contract with
the State, we affirm the superior court's grant of summary judgment
in the contract suit in favor of the University and the State.
And, because the claims in Ellingstad's contract action and the
University's quiet title action are not sufficiently factually
related, we affirm the superior court's denial of Ellingstad's
motion to dismiss the quiet title action.
II. FACTS AND PROCEEDINGS
In 1982 Karen Ellingstad signed a contract with the
Alaska Department of Natural Resources (DNR) to purchase land in
the Wrangell Narrows Subdivision in Petersburg, Alaska, through
Alaska's land lottery sales program. [Fn. 1] Ellingstad later
received two more land contracts by assignment from other original
lottery purchasers. The contracts provided that, after a twenty-
year payment period, Ellingstad would receive "a deed conveying the
Seller's interest"in the properties. The contracts restricted
Ellingstad's ability to assign her contractual rights but not DNR's
right to assign its interests.
In 1985 the University of Alaska sued DNR over DNR's
transfer of University trust land to the Municipality of Anchorage.
After an extensive public notice and comment period, DNR approved
a plan to compensate the University by conveying to it certain
state land interests. In 1988 the State and the University
executed the "Uni-Muni"settlement agreement, under which the
University was
responsible for the administration of the
[existing land sale] contracts and [assumed] all obligations and
rights of the State under the contracts, including the receipt of
and accounting for payments, the conveyance of legal title to the
purchasers upon fulfillment of the contract terms, and the
responsibility for any termination or foreclosure proceedings.
Thus, the University assumed all obligations and rights of the
State under Ellingstad's contracts.
In January 1992 Ellingstad failed to make quarterly
payments on two of her three land contracts. On March 23, 1992,
the University notified Ellingstad that her nonpayment constituted
a breach of contract. Ellingstad paid the full balance due on the
third contract in August 1992. The University issued her a
quitclaim deed for the property. Asserting that the State was
obligated by contract to issue her a land patent, she refused to
record or accept the quitclaim deed. The University nevertheless
recorded the conveyance and deed under Ellingstad's name. In 1994
the University assessed late fees and additional charges on
Ellingstad's two overdue accounts pursuant to state regulations
referenced in the contracts.
In September 1994 Ellingstad filed a class action suit
alleging that DNR had breached its contractual duty by: (1)
failing to issue her a land patent; (2) transferring its interest
to the University through the Uni-Muni agreement; (3) increasing
the amount of both late payment fees and recording and escrow
account charges; and (4) violating the covenant of good faith and
fair dealing. In her complaint, she also alleged interference with
contract, misrepresentation, wrongful delegation, and violation of
the uniform application clause of the Alaska Constitution.
Ellingstad requested that the University reconvey the land back to
DNR, that DNR issue her a patent, and that she receive damages for
improper late fees and other charges. Before the court ruled on
the issue of class certification, the University and the State
moved for summary judgment. The court granted the motion in April
1996.
While Ellingstad's contractual suit was pending, the
University sued Ellingstad to quiet title and collect payments with
respect to two of her land contracts. The University alleged that
Ellingstad had missed twelve quarterly payments, totaling
$7,329.48, on the first contract, and fifteen payments, totaling
$1,992.45, on the second contract. The University requested that
the court terminate the contracts, quiet title to the land, eject
Ellingstad from the properties, and allow the University either to
recoup all payments past due or to retain amounts already paid as
liquidated damages. The University moved for summary judgment in
its quiet title action on April 8, 1997. Two weeks later,
Ellingstad moved to dismiss the University's claims on the ground
that the University failed to raise them as counterclaims in her
prior contractual dispute with the State. On September 2, 1997,
the superior court granted the University's motion for summary
judgment, and with respect to Ellingstad's motion to dismiss,
decline[d] to hold that [the University] was
required by Alaska R. Civ. P. 13(a) to plead the then defaults in
payment as counterclaims to that "class action"(so entitled)
against it. While the cases seem split in this issue the better
result favors [the University].
Ellingstad appeals the court's grant of summary judgment
in favor of the University and the State in her contract suit, as
well as its denial of her motion to dismiss and grant of summary
judgment in favor of the University in the quiet title action.
III. STANDARD OF REVIEW
We will uphold a grant of summary judgment where the
record shows no "genuine issue of material fact"and where "the
moving party was entitled to judgment on the law."[Fn. 2] The
moving party "has the entire burden of proving that his opponent's
case has no merit."[Fn. 3] We review de novo questions of
contract interpretation, [Fn. 4] "adopt[ing] the rule of law which
is most persuasive in light of precedent, reason and policy."[Fn.
5] When reviewing the superior court's denial of Ellingstad's
motion to dismiss, we must interpret Alaska Civil Rule 13(a), which
also presents a question of law that we review de novo. [Fn. 6]
IV. DISCUSSION
A. The State Did Not Breach Its Contract with Ellingstad.
1. Ellingstad's contract does not require delivery of
a patent.
Ellingstad argues that the contracts impliedly require
conveyance by patent. We disagree.
First, the plain language of the contract does not
require the State to issue Ellingstad a patent deed. When the
language of a contract provision is unambiguous, we determine "the
parties' intention from the instrument itself."[Fn. 7] Here, each
of Ellingstad's three contracts with the State unambiguously
states: "The Seller hereby agrees . . . to execute and deliver to
the Purchaser or its heirs and assigns a deed conveying Seller's
interest . . . ." None of Ellingstad's contracts mentions the word
"patent"or any obligation to assign a certain type of deed.
Furthermore, according to AS 34.15.050, [Fn. 8] part of the
statutory scheme governing conveyances, a quitclaim deed conveys
all the existing legal and equitable rights of the seller in the
property described in the deed. By issuing Ellingstad a quitclaim
deed, the University transferred the State's interest in the land
and thus satisfied the express terms of the contract.
Nevertheless, Ellingstad further argues that Alaska
statutory law mandates that she receive a patent. She analogizes
the land sale lottery program to the Alaska homesite program, [Fn.
9] the latter of which specifically requires that the State issue
a patent deed when certain statutory requirements are met. [Fn. 10]
But AS 38.05.057, the statute governing land sale lotteries,
contains no such parallel provision requiring conveyance of patent
deeds. [Fn. 11] We thus reject Ellingstad's "statutory obligation"
argument.
Ellingstad alternatively contends that, because state
practice is to issue patents and not quitclaim deeds, the contract
impliedly requires a patent deed. The regulation governing land
exchanges, however, states that "[DNR] will convey land or
interests in land by patent or quitclaim deed."[Fn. 12] In its
final finding regarding the Uni-Muni settlement, DNR recognized
that, although "[n]ormally, a state patent would be issued to the
contract holder,"the issuance of a quitclaim deed for contracts
assumed by the University was "in the best interests of the state."
And Ellingstad does not provide, nor have we discovered, any legal
authority compelling the State to include the same terms and
conditions in all of its land disposals.
2. Ellingstad received the functional equivalent of a
patent.
Ellingstad claims that, because "[a] patent is the
highest evidence of title,"the quitclaim deed she received from
the University must necessarily be of lesser value and, thus, must
constitute a breach of contract on the part of the State. As the
United States Supreme Court explained long ago: "In the first
place, the patent is a deed of the United States. As a deed, its
operation is that of a quit-claim, or rather of a conveyance of
such interest as the United States possessed in the land . . . ."
[Fn. 13] We have recognized the same principle here in Alaska.
[Fn. 14] Thus, a patent deed operates as a quitclaim deed in that
it merely conveys whatever interest the State has in the land.
Accordingly, whether by quitclaim or patent deed,
Ellingstad received the equivalent of a land patent -- an
undisturbed, unencumbered interest in state land. Although the
State conveyed the land to the University through the Uni-Muni
settlement, that agreement is not an encumbrance on the land
because the University took the property subject to Ellingstad's
contracts. Alaska law assures that "land owned by the University
of Alaska is not and may not be treated as state public domain
land"and "may not be acquired by adverse possession, prescription,
or in any other manner except by conveyance from the university."
[Fn. 15] Had Ellingstad's land passed through many different
owners, or had it been encumbered in any way, her argument would
have more force.
Ellingstad next asserts that a patent deed would better
preserve her right to any interest the State might acquire in the
land after the State issues her the deed. The State Land Disposal
Brochure warns potential lottery participants that
[t]he state has not yet received final patent
from the federal government for some land available under this
offering. Such lands are designated as tentatively approved
(T.A.). Title for parcels on tentatively approved land will be
conditioned on the State receiving patent from the federal
government.
Ellingstad argues that, if the State were to receive a patent from
the federal government for Ellingstad's properties after conveying
her a quitclaim deed to the property, her interest in the property
would be compromised. [Fn. 16] Ellingstad is correct that
"[q]uitclaim deeds normally do not transfer after-acquired
interests or after-acquired title."[Fn. 17] But we have also held
that government patents are "without any covenants of warranty
whatever; and it is clear also that the doctrine of estoppel does
not apply thereto so as to pass an after-acquired title."[Fn. 18]
Thus, Ellingstad's interest in the land would be identical
regardless of whether she received a quitclaim deed or patent.
Additionally, because the Department of Interior has designated the
lands as tentatively approved, the State should have the same
quality of title now as it will when the federal government
ultimately surveys the land.
3. The State's conveyance to the University was not a
breach of its contract with Ellingstad.
Ellingstad claims that the State cannot force her to
accept a conveyance from a different grantor -- here, the
University. First, we discuss whether Ellingstad's contract
permits the State to convey its interest in the land to a third
party. Second, we examine whether the State's transfer to the
University harms Ellingstad's interests in any way.
a. Ellingstad's contract permits the State to
convey its interest to a third party.
Ellingstad contends that AS 38.05.920, governing
assignment of state land contracts, prevents the State from
assigning its interest to the University without Ellingstad's
consent. Section .920 provides:
[A]ll contracts of purchase or lease of land
or interest in land may be, on the affirmative approval of the
director, assigned or subleased in whole or in part in writing by
the contract holder or lessee, and the assignee or sublessee is
subject to the provisions of laws and regulations applicable to the
contract or lease.
Ellingstad argues that, because sec. .920 explicitly
allows
the purchaser's assignee to substitute as grantee with the State's
consent but is silent on the issue of assignment by the seller, it
impliedly disallows the seller's assignee to substitute as grantor.
Ellingstad encourages us to apply the maxim of statutory
interpretation "expressio unius est exclusio alterius,"meaning the
expression of one thing implies the exclusion of others. But
"[w]hile this maxim is often a useful and logical guide to the
meaning of an enactment,"it will not apply if contrary to the
purpose of the statute. [Fn. 19] Here, interpreting the provision
as requiring the seller's consent would impede the State from
conveying its interest to other components of state government.
Such an interpretation would also be inconsistent with AS 29.65.070
and 29.65.090, which allow conveyance and exchange of certain lands
to cities by DNR in fulfillment of the cities' general grant land
entitlement. Thus, we decline to interpret sec. .920 as forbidding
the State from assigning its interests and duties as grantor to a
third party. [Fn. 20]
b. The State's conveyance to the University does
not harm Ellingstad's interests.
The State's conveyance to a third party in this case does
not harm Ellingstad's interests. When a third party grantee takes
land with notice of a purchaser's interest in the land, such a
grantee "takes subject to the equitable interest of the earlier
purchaser . . . and is under obligation to complete the contract
and make a conveyance upon performance by the original purchaser."
[Fn. 21] In the Uni-Muni settlement, the University took the land
subject to existing installment contracts and conveyed the State's
interest to Ellingstad in accordance with her contract.
Furthermore, "there is no anticipatory breach on the part of a
vendor who conveys all, or a substantial part, of the property . .
. where the purchaser's rights are protected . . . or where the one
to whom [the conveyance] is made is not a bona fide purchaser."
[Fn. 22]
Also, because Alaska law treats the University as a state
entity for purposes of sovereign immunity, the State's transfer to
the University does not have the potential to harm Ellingstad's
interest in the same way that a transfer to a private entity might.
In University of Alaska v. National Aircraft Leasing, Ltd., [Fn.
23] we dealt with the question of whether the University is a
component of the State for purposes of sovereign immunity. In
holding that the University does fall within the scope of statutes
governing suits against the State, we wrote:
Despite the degree of constitutional [and]
statutory autonomy the University clearly possesses, . . . it
stands as the single governmental entity which was specifically
created by the people to meet the statewide need for a public
institution of higher education. In this light, the University
must be regarded as uniquely an instrumentality of the state
itself. . . . [I]t exists constitutionally to act for the benefit
of the state and the public generally.[ [Fn. 24]]
Ellingstad relies on a Missouri decision, Metropolitan Tickets,
Inc. v. St. Louis, [Fn. 25] to argue that a corporation without the
power to levy, collect, or receive taxes is not a government
entity. Metropolitan Tickets involved a for-profit ticket-sales
corporation that sold tickets to sporting events held at a
municipally owned arena and other privately owned venues. [Fn. 26]
Unlike the University of Alaska, however, the ticket-sales
corporation was not supported by tax money and had no special
constitutional origin. [Fn. 27] More importantly, we made clear in
National Aircraft Leasing that the University enjoys the status of
a state entity despite its corporate character:
The fact that the University has had conferred
upon it the status of a juristic person is not dispositive . . . .
Whatever the framers' intentions, we have in the past recognized
that corporate status alone is not determinative of the question of
whether or not an entity performing public or governmental
functions is an agent or instrumentality of the state.[ [Fn. 28]]
Thus, the State's conveyance to the University neither
violates the terms of Ellingstad's contract with the State nor
threatens to harm Ellingstad's interest in the land in any way.
[Fn. 29]
4. Any increase in service fees was incorporated by
reference into Ellingstad's contract and did not constitute a
breach by the State or the University.
Ellingstad next claims that her land contracts do not
authorize the State or the University to charge her late fees, fees
for returned checks, fees for reestablishment of an escrow account,
or recording fees. She claims the University's imposition of such
administrative fees constitutes a breach of contract.
As a general rule, applicable laws in existence at the
time of a contract's formation about which the parties are presumed
to know are incorporated into the contract and become a part of it
as though they had been expressly set forth in the contract. [Fn.
30] Here, Ellingstad's contracts with the State contain clauses
referencing and attesting to her knowledge of the provisions of
Alaska law [Fn. 31] that expressly contemplate assessment of
service charges with respect to state installment land contracts.
Hence, we read Ellingstad's contracts to include those provisions
of Alaska law allowing assessment of such fees.
Ellingstad's contracts are silent with respect to the
amount of fees the State may assess and DNR's ability to increase
the charges over time. Where a contract is silent on an issue, a
court may supply reasonable terms to fulfill the parties'
expectations. [Fn. 32] Here, the parties should have reasonably
expected that the State would effect a minor increase in fees over
the twenty-year life span of the contracts. [Fn. 33]
Specifically, Ellingstad alleges that the $50 late fee
imposed on her by the University was unreasonable and in breach of
contract. But as of July 1, 1984, AS 38.05.065(d) expressly
allowed such charges:
A breach caused by the failure to make
payments required by the contract may be cured within 30 days after
the notice of the breach has been received by the purchaser by
payment of the sum in default together with the larger of a fee of
$50 or five percent of the sum in default.[ [Fn. 34]]
Ellingstad also claims the State increased the amount of
certain fees, such as a returned check fee and assignment fee,
without proper notice to her. But, as the State points out, AS
38.05.035(a)(5) [Fn. 35] permits the Director of the Division of
Lands of DNR to prescribe fees or service charges for any service
rendered. And, because Ellingstad attested in the contract to her
knowledge of 11 AAC 05.010(a)(B) and (a)(4)(E), which allow a $25
check return fee and $100 assignment of contract fee, we read the
contract as incorporating these fees by reference. [Fn. 36] Thus,
the contract itself constituted sufficient notice of potential
fees.
We therefore conclude that the administrative fees
prescribed by statute and regulation are incorporated by reference
into Ellingstad's contracts with the State and that any assessment
of such fees against Ellingstad did not constitute a breach of
contract.
5. Neither the State nor the University breached the
implied covenant of good faith and fair dealing.
Ellingstad further argues as part of her contractual
claim that the State breached the covenant of good faith and fair
dealing by failing to disclose the proposed transfer of lands to
the University and the potential effects of that transfer on her
title. [Fn. 37] Because we conclude above that the State's
transfer of its interests to the University and the conveyance of
a quitclaim deed do not negatively affect Ellingstad's interests or
rights under the contract, we only briefly address these arguments.
All contracts contain an implied covenant of good faith
and fair dealing. [Fn. 38] The covenant requires that "neither
party . . . do anything which will injure the right of the other to
receive the benefits of the agreement."[Fn. 39] In this case, we
can see no evidence in the record of the State engaging in the
"[s]ubterfuges and evasions [that] violate the obligation of good
faith performance."[Fn. 40] DNR provided ample notice of the
proposed Uni-Muni settlement, as well as an opportunity to comment
on the proposed transfer, to all affected landholders. And the
final findings of the Department addressed the very contentions
Ellingstad now raises on appeal -- namely, the University's
assumption of the contract administration and its responsibility to
issue an "appropriate deed to each contract holder."[Fn. 41]
In sum, we agree with the superior court's assessment
that
[Ellingstad] got exactly what she paid for (a
deed) at the cost she bargained for . . . . Because the State was
under no contractual duty to provide Ellingstad with a patent, its
failure to warn her that the Uni-Muni settlement might prevent
issuance of a patent did not violate the covenant of good faith and
fair dealing.
B. The University Was Not Required to Bring Its Action to
Quiet Title as a Compulsory Counterclaim in Ellingstad's Prior
Suit.
We next consider the University's action to quiet title.
Ellingstad argues that because the University did not bring its
action to quiet title and to recover payment as a compulsory
counterclaim in her contract suit pursuant to Alaska Civil Rule
13(a), the action should be barred. Rule 13(a) provides:
A pleading shall state as a counterclaim any
claim which at the time of serving the pleading the pleader has
against any opposing party, if it arises out of the transaction or
occurrence that is the subject of the opposing party's claim . . .
.[ [Fn. 42]]
A party's failure to assert a compulsory counterclaim bars it from
bringing a later independent action on that claim. [Fn. 43]
In Miller v. LHKM, [Fn. 44] one of two previous cases in
which we analyzed a claim under Rule 13(a), we looked to the
Restatement of Judgments for guidance in construing the phrase
"transaction or occurrence":
The Restatement lists factors useful in
determining whether various claims arise from the same transaction.
These include whether the facts are related in time, space, origin,
or motivation; whether they form a convenient trial unit; and
whether their treatment as a unit conforms to the parties'
expectations or business understanding or usage.[ [Fn. 45]]
In holding that the counterclaim in Miller was indeed compulsory,
we found it particularly relevant that the claims "would involve
similar testimony concerning the intent of the parties when they
entered into the [agreements], the same exhibits, and the same
parties."[Fn. 46]
Most jurisdictions determine whether two claims arise out
of the same "transaction or occurrence"by looking for a "logical
relationship"between the claim and counterclaim. [Fn. 47]
Although we have not previously adopted the "logical relationship"
test in Alaska, we considered such a relationship in the only other
case in which we analyzed a claim under Rule 13(a), Wells v. Noey.
[Fn. 48] In Wells, we held that an action to declare a tax deed
invalid should have been brought as a counterclaim in a previous
suit to remove cloud on title based on a claim under the same tax
deed. [Fn. 49] In drawing this conclusion, we focused on several
factors, including: (1) whether the same evidence would sustain
both suits and whether there is "identity of things sued for"; [Fn.
50] (2) whether the decision on the counterclaim was necessary to
the result in the prior suit; [Fn. 51] and (3) whether a logical
relationship exists between the claim and counterclaim. [Fn. 52]
Such a "logical relationship"does not exist between
Ellingstad's contract claims and the University's action to quiet
title. Both actions originate in the same land contracts, but they
involve entirely different legal questions that do not call for
examination of the same evidence, facts, or circumstances.
Although Ellingstad includes as one of twenty-three allegations in
her amended class action complaint the claim that the State
unilaterally raised late payment fees, the two cases do not
meaningfully overlap. Ellingstad's suit for breach of contract
essentially requires us to determine whether a quitclaim deed from
the University is functionally equivalent to a patent from the
State. In contrast, the University's action against Ellingstad
only involves her failure to make timely payments on two of the
contracts.
The only significant element the two claims have in
common is their origin in the same series of land contracts. We
believe such a link, standing alone, is not sufficient to meet the
"same transaction or occurrence"test. As the Seventh Circuit
noted in comparing a Truth in Lending Act (TILA) claim to a
subsequent debt collection counterclaim:
The sole connection between a TILA claim and a
debt counterclaim is the initial execution of the loan document. .
. . A flexible application of the logical relationship test reveals
that this connection is so insignificant that compulsory
adjudication of both claims in a single lawsuit will secure few, if
any, of the advantages envisioned in Rule 13(a).[ [Fn. 53]]
Ellingstad points to a New York district court case in
which the court held that "[w]here one party brings an initial suit
for breach of contract, . . . an adverse party may not file a
subsequent action based on the same contract, unless [the] action
was pleaded as a counterclaim in the initial suit."[Fn. 54] But
in that case the prior suit was for recovery of equipment and the
subsequent suit was for breach of contract. [Fn. 55] When the
subsequent suit is to quiet title and recoup past payments due, the
argument for preclusion under Rule 13(a) becomes weaker.
We should also be wary of construing the compulsory
counterclaim rule in a way that impairs "valuable contract rights."
[Fn. 56] In this case, the University's right to receive payment
under the contracts it received from the State is a valuable
contract right. Indeed, the University presumably accepted the
State's offer to convey its interest in the properties on the
assumption that the University would retain the right to receive
payment from Ellingstad and the other grantees. We decline to
preclude the University from seeking a remedy for Ellingstad's
continued nonpayment by declaring that its action to quiet title
should have been brought as a compulsory counterclaim.
As a policy matter, forcing lenders to file counterclaims
for recovery of payment before they would otherwise select a remedy
would disturb the delicate process of payment negotiations between
lenders and debtors. For example, at the time Ellingstad filed her
contractual claim against the State and the University, the
University had not declared its intention to commence legal action
against Ellingstad; rather, it had merely sent Ellingstad a notice
requesting payment within thirty days to avoid possible litigation.
If the court required a creditor such as the University to bring an
action to quiet title as part of the debtor's suit for breach of
contract or the like, we might preclude a more amicable resolution
of a debtor's default. Courts in other jurisdictions have adopted
this rationale in holding that an action for debt collection [Fn.
57] does not arise until the creditor chooses a remedy. [Fn. 58]
Forcing the University to bring its action as a
counterclaim would also have been impracticable given the
procedural posture of this particular case. Had Ellingstad
succeeded in bringing her breach of contract suit as a class
action, the University and the State would have had to bring
separate counterclaims against each and every class member for
outstanding debt. And the University's selected remedy might
differ depending on the grantee's nonpayment situation. Such
duplicative litigation contravenes the policies underlying Rule
13(a). As we noted in Miller, the compulsory counterclaim rule
"further[s] the goal of judicial economy by avoiding multiple suits
and encouraging the determination of the entire controversy among
the parties before the court with a minimum of procedural steps."
[Fn. 59] We would hinder these goals by forcing the University to
bring an action to quiet title on each individual contract.
V. CONCLUSION
Because the University's conveyance of a quitclaim deed
to Ellingstad satisfied the terms of her contract with the State
and because the State was free to transfer its interest in the land
to the University, we AFFIRM the superior court's grant of summary
judgment to the State and University with respect to Ellingstad's
contractual claims. Also, because the University did not need to
bring its action to quiet title as a compulsory counterclaim in the
prior contract suit, we AFFIRM both the superior court's denial of
Ellingstad's motion to dismiss and its grant of summary judgment in
favor of the University.
FOOTNOTES
Footnote 1:
See AS 38.05.057 (disposal of land by lottery); see also AS
38.05.065(b)-(g), (i)(2) (applicable terms of contract of sale).
Footnote 2:
Zeman v. Lufthansa German Airlines, 699 P.2d 1274, 1280
(Alaska 1985) (citation omitted). See also Alaska R. Civ. P.
56(c).
Footnote 3:
Williams v. Municipality of Anchorage, 633 P.2d 248, 250
(Alaska 1981) (citation omitted).
Footnote 4:
See Jones v. Horace Mann Ins. Co., 937 P.2d 1360, 1361 (Alaska
1997); Peterson v. Wirum, 625 P.2d 866, 872 (Alaska 1981).
Footnote 5:
Newton v. Magill, 872 P.2d 1213, 1215 (Alaska 1994)
(quoting Ford v. Municipality of Anchorage, 813 P.2d 654, 655
(Alaska 1991)).
Footnote 6:
See Ford, 813 P.2d at 655 (noting that, with respect to rule
interpretation, "we exercise our independent judgment").
Footnote 7:
Klosterman v. Hickel Inv. Co., 821 P.2d 118, 124 (Alaska
1991).
Footnote 8:
AS 34.15.050 provides:
Effect of quitclaim. A deed of quitclaim and
release for the form in common use is sufficient to pass all the
real estate which the grantor can convey by a deed of bargain and
sale.
Footnote 9:
See AS 38.08.010-.120.
Footnote 10:
AS 38.08.060 provides:
Issuance of patent. (a) A person who enters
upon homesite entry land under a permit issued by the director
shall be issued a patent to the land conveying an unencumbered
title . . . .
Footnote 11:
Similarly, the regulations governing both land sale lotteries
and installment contracts contain no patent deed requirement. See
11 Alaska Administrative Code (AAC) 67.060-.070; 11 AAC 67.875-.880
(1996).
Footnote 12:
11 AAC 67.280 (emphasis added).
Footnote 13:
Beard v. Federy, 70 U.S. (3 Wall.) 478, 491 (1866).
Footnote 14:
See North Star Terminal & Stevedore v. State, 857 P.2d 335,
340 (Alaska 1993) (regarding State issued tideland patent); City of
Anchorage v. Nesbett, 530 P.2d 1324, 1329 (Alaska 1975) (noting
that issuance of a patent by the United States operates as a
quitclaim); see also 63C Am. Jur. 2d Public Lands sec. 49 (1997)
("As
a quitclaim deed, a land patent conveys whatever interest the
government has in the soil and the land.").
Footnote 15:
AS 14.40.291.
Footnote 16:
Ellingstad's contracts provide that
[i]f all or part of said Parcel has been
tentatively approved, but not yet patented, by the United States to
the Seller, then this Contract shall be conditioned upon receipt by
the Seller of such patent. If for any reasons the Seller does not
receive patent, this Contract shall terminate and all payments made
to the Seller pursuant to this Contract shall be refunded to the
Purchaser.
Footnote 17:
Willis v. City of Valdez, 546 P.2d 570, 575 n.8 (Alaska 1976).
Footnote 18:
North State Terminal & Stevedore v. State, 857 P.2d 335, 340
(Alaska 1993).
Footnote 19:
Sonneman v. Hickel, 836 P.2d 936, 939 (Alaska 1992).
Footnote 20:
The traditional requirement in property law that the vendor,
rather than a third party, must convey the land only applies to
warranty deeds. When, as here, the contract does not require a
warranty deed, "the vendee may not . . . refuse to accept a
quitclaim deed from a third person which conveys all the interest
the vendor had at the time of the making of the contract." 92
C.J.S. Vendor and Purchaser sec. 236(c) (1955) (emphasis added).
Footnote 21:
77 Am. Jur. 2d Vendor and Purchaser sec. 376 (1997) (footnotes
omitted).
Footnote 22:
77 Am. Jur. 2d Vendor and Purchaser sec. 385 (1997) (footnote
omitted); see also id. at sec. 299 (noting that taking subject to
the
rights and equities of the original purchaser is not a breach); 15
Richard R. Powell, Powell on Real Property sec. 84D.06[3] (1997)
(same).
Footnote 23:
536 P.2d 121 (Alaska 1975).
Footnote 24:
Id. at 124-25.
Footnote 25:
849 S.W.2d 52 (Mo. App. 1993).
Footnote 26:
See id. at 53.
Footnote 27:
See id. at 55. The court based its holding in part on the
fact that tax money did not support the corporation. The court
also found significant that the corporation had no power to govern
or regulate local and internal affairs of the community. See id.
Footnote 28:
536 P.2d at 125.
Footnote 29:
Ellingstad also argues that DNR's delegation of its
contractual obligations to the University runs afoul of the rules
of equitable conversion. Specifically, she argues that, once she
signed the land contract, the State became a mere trustee holding
bare legal title in trust for her and could not convey title to a
third party. But a trustee holding legal interest for the
purchaser in a land purchase may still transfer that interest so
long as the interest is not impaired. See Oberholtz v. Oberholtz,
74 N.E.2d 574, 578 (Ohio App. 1947). In any case, because
Ellingstad neither raised this issue in the trial court nor
expressly included it in her points on appeal, we consider the
argument waived. See Cool Homes v. Fairbanks North Star Borough,
860 P.2d 1248, 1264 n.27 (Alaska 1993) (citation omitted).
Footnote 30:
See Skagway City Sch. Bd. v. Davis, 543 P.2d 218, 222 (Alaska
1975), overruled in part on other grounds by Diedrich v. City of
Ketchikan, 805 P.2d 362, 366 n.8 (Alaska 1991).
Footnote 31:
The contract provides that "the Purchaser is aware of the
provisions of Title 38, Alaska Statutes, Title 11, Alaska
Administrative Code, and other applicable laws . . . and fully
understands the duties and obligations of the Purchaser under this
Contract."
Footnote 32:
See State v. Fairbanks North Star Borough Sch. Dist., 621 P.2d
1329, 1332 (Alaska 1981); Rego v. Decker, 482 P.2d 834, 837 (Alaska
1971).
Footnote 33:
In 1980 DNR issued Department Order 81-016, setting a late-
payment charge on all DNR transactions at $10 plus annual interest
on amounts over $100. DNR raised the fee to $25 in 1982. See 11
AAC 67.879.
Footnote 34:
Moreover, the $50 assessment represents two separate $25 late
service charges owed by Ellingstad.
Footnote 35:
AS 38.05.035(a) provides that the Director of DNR shall:
(5) prescribe fees or service charges, with
the consent of the commissioner, for any public service rendered.
Footnote 36:
The record is unclear as to whether Ellingstad was ever
charged any of the fees -- check return, assignment, recording, or
escrow reinstatement -- that she now claims are excessive. In
fact, the University paid to record the quitclaim deed on one of
the properties.
Footnote 37:
Ellingstad also claims that the University interfered with
contractual rights. To establish a prima facie case of intentional
interference with another's contract, a plaintiff must prove that
(1) a contract existed, (2) the defendant knew of the contract and
intended to induce a breach, (3) the contract was breached, (4) the
defendant's wrongful conduct engendered the breach, (5) the breach
caused the plaintiff's damages, and (6) the defendant's conduct was
not privileged or justified. [Fn. 60] See Knight v. American Guard
& Alert, Inc., 714 P.2d 788, 793 (Alaska 1986). Because we hold
that no breach occurred, we need not reach the other elements of
the potential claim.
Even if Ellingstad had presented a prima facie claim, the
State is immune from suits arising out of interference with
contractual rights. See AS 09.50.250(3). As discussed previously,
the University constitutes an arm of the state for purposes of sec.
.250(3).
Footnote 38:
See State, Dep't of Natural Resources v. Transamerica Premiere
Ins. Co., 856 P.2d 766, 774 (Alaska 1993).
Footnote 39:
Guin v. Ha, 591 P.2d 1281, 1291 (Alaska 1979).
Footnote 40:
Klondike Indus. Corp. v. Gibson, 741 P.2d 1161, 1168 (Alaska
1987) (quoting Restatement (Second) of Contracts sec. 205 cmt. d
(1979)).
Footnote 41:
Although Ellingstad also claims that the State's behavior
constitutes misrepresentation, she neither raised this issue below
nor included it in her points on appeal. In such a case, courts
may consider the issue waived. See State Farm Ins. Co. v. American
Mfrs. Mut. Ins. Co., 843 P.2d 1210, 1214 (Alaska 1992).
Additionally, we have repeatedly held that no duty of good faith
and fair dealing exists independent of the contract relationship.
See Hagans, Brown & Gibbs v. First Nat'l Bank of Anchorage, 783
P.2d 1164, 1166 n.3 (Alaska 1989). And, to the extent that the
University is a component of the State, it is immune from actions
for misrepresentation. See AS 09.50.250(3).
Because we conclude that the quitclaim deed Ellingstad
received from the University is functionally equivalent to a patent
from the State, we also reject Ellingstad's argument that the
State's actions violate the Uniform Application Clause of the
Alaska Constitution. See Alaska Const., art. VIII, sec. 17.
Footnote 42:
Alaska R. Civ. P. 13(a) (emphasis added).
Footnote 43:
See Andrews v. Wade & De Young, Inc. (Andrews I), 875 P.2d 89,
91 (Alaska 1994).
Footnote 44:
751 P.2d 1356 (Alaska 1988).
Footnote 45:
Id. at 1361 (citing Restatement (Second) of Judgments sec.
24(2)
(1981)).
Footnote 46:
Id.
Footnote 47:
See 6 Charles Alan Wright & Arthur R. Miller, Federal Practice
and Procedure sec. 1410, at 65 (2d ed. 1990); Baker v. Gold Seal
Liquors, Inc., 417 U.S. 467, 469 n.1 (1974). Most other
jurisdictions have adopted this test. See, e.g., Pochiro v.
Prudential Ins. Co., 827 F.2d 1246, 1249-50 (9th Cir. 1987);
Caleshu v. United States, 570 F.2d 711, 713 (8th Cir. 1978); Booth
v. Lewis, 798 P.2d 447, 449 (Haw. App. 1990); Broadhurst v.
Moenning, 633 N.E.2d 326, 331 (Ind. App. 1994).
Footnote 48:
399 P.2d 217 (Alaska 1965). We did not reference Wells in our
decision in Miller.
Footnote 49:
See id. at 220.
Footnote 50:
See id. at 218-19.
Footnote 51:
See id. at 219.
Footnote 52:
See id. at 219-20.
Footnote 53:
Valencia v. Anderson Bros. Ford, 617 F.2d 1278, 1291 (7th Cir.
1980), rev'd on other grounds, 452 U.S. 205 (1981), quoted with
approval in Hart v. Clayton-Parker & Assocs., 869 F. Supp. 774, 777
(D. Ariz. 1994); see also Whigham v. Beneficial Finance Co. of
Fayetteville, 599 F.2d 1322, 1324 (4th Cir. 1979) (declining to
find debt counterclaim compulsory in TILA suit in part because the
evidence needed to support each claim differed).
Footnote 54:
Quick Container Servs., Inc. v. Interpool Ltd., 115 F.R.D. 59,
61 (S.D.N.Y. 1987).
Footnote 55:
See id. at 60.
Footnote 56:
Stille v. Colborn, 740 S.W.2d 42, 44 (Tex. App. 1987).
Footnote 57:
This case is different from a debt collection action in that
the University sought to rescind the contracts with Ellingstad and
sued to quiet title, eject her from the properties, and recoup past
payments due as liquidated damages. But the rationale discussed in
the debt collection cases for encouraging amicable resolution of
nonpayment applies to this case as well.
Footnote 58:
See, e.g., Tallman v. Durussel, 721 P.2d 985, 988 (Wash. Ct.
App. 1986) (holding that default alone is insufficient to mature
the whole debt); United-Bilt Homes, Inc. v. Sampson, 864 S.W.2d
861, 862 (Ark. 1993) (noting that cause of action on debt owed
under contract did not arise until creditor exercised option);
Stille, 740 S.W.2d at 44 (holding that creditor's counterclaim
would have been premature prior to acceleration of the debtor's
remaining installment payments).
Footnote 59:
751 P.2d 1356, 1361 (Alaska 1988) (emphasis added).
Footnote 60:
See Knight v. American Guard & Alert, Inc., 714 P.2d 788, 793
(Alaska 1986).
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