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Wright v. State of Alaska (1/24/92), 824 P 2d 718
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Notice: This is subject to formal correction
before publication in the Pacific Reporter.
Readers are requested to bring typographical
or other formal errors to the attention of
the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, in order
that corrections may be made prior to
permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
SANDE L. WRIGHT, )
) Supreme Court File No. S-4245
Appellant, ) Superior Court File No.
) 3AN-88-5403 CI
v. )
)
STATE OF ALASKA, ) O P I N I O N
)
Appellee. ) [No. 3802 - January 24, 1992]
)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Brian C. Shortell, Judge.
Appearances: C. R. Kennelly, Stepovich,
Kennelly & Stepovich, P.C., Anchorage, for
Appellant. Kevin M. Saxby, Assistant
Attorney General, Anchorage, and Charles E.
Cole, Attorney General, Juneau, for Appellee.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton and Moore, Justices.
COMPTON, Justice.
Sande L. Wright appeals the dismissal of his lender
liability claims against the State of Alaska (state)
arising out of his participation in the Point MacKenzie
Agricultural Project. On summary judgment the superior
court concluded that Wright's claims were barred by the
doctrines of equitable and quasi estoppel, because he
failed to disclose his claims during his bankruptcy
proceeding. The superior court concluded also that
Wright's tort-based misrepresentation claims were
barred by AS 09.50.250(3). We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
Wright operated a dairy farm in the Point MacKenzie
area. He had purchased the parcel in 1984 from one of
the winners of the Point MacKenzie Agricultural Project
lottery.1 In order to develop the farm, Wright
borrowed almost a million dollars from the Alaska
Agricultural Revolving Loan Fund (ARLF), a state agency
within the Department of Natural Resources (DNR).
For a variety of economic reasons, Wright was unable to
meet his debt obligations. In August 1987 the state
sued Wright in state court to collect his defaulted
loans. Shortly thereafter, Wright filed a Chapter 11
bankruptcy petition in federal court. Pursuant to 11
U.S.C. 362(a), Wright's petition automatically stayed
the state's collection proceedings. Wright was unable
to work out a reorganization plan with the state and
other creditors. Following a hearing on May 26, 1988,
the bankruptcy court granted the state's motion for
relief from automatic stay. 11 U.S.C. 362(d).
Eventually Wright's Chapter 11 reorganization was
converted to a Chapter 7 liquidation. Wright
cooperated in the state's efforts to locate and
repossess cattle, equipment and other chattels that
secured some of the state's loans. On March 31, 1989,
the bankruptcy court discharged Wright's debts.
Wright filed the lender liability suit, which is the
subject of this appeal, on May 20, 1988, during the
pendency of the bankruptcy proceeding. He alleged that
the state: (1) misrepresented the economic viability of
the Point MacKenzie project and the opportunity to
consolidate parcels; (2) negligently promoted and
managed the project; (3) breached its fiduciary duty
and its duties of good faith and fair dealing; and (4)
failed to comply with the requirements of the Alaska
Administrative Procedure Act (AAPA) in operating the
ARLF program and managing the assets of the Matanuska
Maid Creamery. Based on these theories, Wright
requested cancellation of his indebtedness to the
state, an injunction prohibiting the state's collection
efforts, rescission of his contractual obligations to
the state, and monetary damages. Wright's claim was
consolidated with several other cases filed by other
participants in the Point MacKenzie project.
The state filed a motion for summary judgment following
its relief from the automatic stay. The superior
court entered judgment in the state's favor, concluding
that Wright's bankruptcy position barred his suit
against the state under the doctrines of quasi and
equitable estoppel. The superior court also addressed
alternative grounds advocated by the state to support
summary judgment in its favor, ruling that Wright's
tort-based misrepresentation claims were barred by
state immunity pursuant to AS 09.50.250(3). The court
rejected the state's arguments that the negligence and
breach of fiduciary duty and bad faith claims were
barred by discretionary function immunity and that
Wright's AAPA claims were time-barred or subject to
discretionary function immunity.2
Final judgment was entered against Wright dismissing
all of his claims with prejudice. Wright appeals.
II. STANDARD OF REVIEW
When reviewing a grant of summary judgment, the court
must determine whether any genuine issue of material
fact exists and whether the moving party is entitled to
judgment on the law applicable to the established
facts. Zeman v. Lufthansa German Airlines, 699 P.2d
1274, 1280 (Alaska 1985). All reasonable inferences of
fact from proffered materials must be drawn against the
moving party and in favor of the non-moving party. Id.
This court is not bound by the reasoning articulated
by the trial court and can affirm a grant of summary
judgment on alternative grounds. Moore v. State, 553
P.2d 8, 21 (Alaska 1976). Moreover, this court should
consider any matter appearing in the record, even if
not passed upon by the lower court, in defense of the
judgment. State v. Pete, 420 P.2d 338, 341 (Alaska
1966); Ransom v. Haner, 362 P.2d 282, 285 (Alaska
1961).
III. DISCUSSION
THE SUPERIOR COURT DID NOT ERR IN BARRING WRIGHT'S
CLAIMS UNDER THE DOCTRINE OF QUASI ESTOPPEL.
The state argues that Wright's lender liability claims
against it are inconsistent with his failure to contest
his obligation to the state during his bankruptcy
proceedings. Like the superior court, the state relies
on Oneida Motor Freight v. United Jersey Bank, 848 F.2d
414, 416-20 (3rd Cir. 1988) (debtor's failure to
disclose possible claims against bank for its alleged
breach of loan agreement during pendency of Chapter 11
bankruptcy proceedings equitably and judicially
estopped debtor from later prosecuting claims in non-
bankruptcy forum).
Wright emphasizes that the application of the doctrine
of quasi estoppel rests on findings of fact, citing
Jamison v. Consolidated Utilities, Inc., 576 P.2d 97,
102 (Alaska 1978). Contrary to the state's assertions,
Wright contends that he did inform the state of his
lender liability claims during the bankruptcy
proceedings. He argues that the state failed to show
that his lender liability suit is unconscionable in
light of his position during bankruptcy. According to
Wright, at best the state has only demonstrated that
material facts are in dispute as to the assertion of an
inconsistent position and therefore summary judgment is
inappropriate.
Wright also argues that the state failed to
conclusively establish detrimental reliance, a
necessary element of equitable estoppel. He asserts
that he told the state that he would bring a civil
action against the state if he was unable to reorganize
his debts. According to Wright, he simply did what he
told the state he would do after the state rejected all
reorganization efforts. Wright argues that the state
cannot claim detrimental reliance because it did not
compromise in the bankruptcy proceeding. He concedes
that had the state agreed to settle all claims and
approve a reorganization plan and then he had filed
this action, detrimental reliance could possibly be
found.
Alaska recognizes two separate estoppel doctrines. The
elements of equitable estoppel are "the assertion of a
position by conduct or word, reasonable reliance
thereon by another party, and resulting prejudice."
Jamison, 576 P.2d at 102. Neither ignorance nor
reliance, however, are essential elements of quasi
estoppel. Dressel v. Weeks, 779 P.2d 324, 331 (Alaska
1989). Quasi estoppel appeals to the conscience of the
court and applies where "the existence of facts and
circumstances mak[es] the assertion of an inconsistent
position unconscionable." Jamison, 576 P.2d at 102.
This court has instructed trial courts to consider the
following factors in determining whether the doctrine
of quasi estoppel is applicable: "whether the party
asserting the inconsistent position has gained an
advantage or produced some disadvantage through the
first position; whether the inconsistency was of such
significance as to make the present assertion
unconscionable; and, whether the first assertion was
based on full knowledge of the facts." Id. at 103.
In our view, quasi estoppel was properly applied
because Wright's lawsuit is not consistent with his
bankruptcy position. In his affidavit, Wright states
that he raised the lender liability issues during the
bankruptcy proceedings. According to Wright, the
bankruptcy judge was unwilling to address these issues.
Wright attests that he attempted to settle with the
state and filed suit when these efforts failed. Since
this is a review of summary judgment, we must accept
Wright's version of the facts. However, these are not
material facts that preclude entry of summary judgment.
In his initial bankruptcy petition Wright did not
schedule any claims against the state or any set off or
counterclaims against the state's claims. However, he
did amend his schedules before his discharge in
bankruptcy and filed suit against the state before its
own motion for relief from the automatic stay was
granted. Indeed he repeatedly asserted that unless he
and the state and other creditors reached a mutually
acceptable reorganization plan in the Chapter 11
bankruptcy, he would pursue his lender liability
claims. The parties did not reach a mutually
acceptable plan, and the Chapter 11 proceeding was
converted to a Chapter 7 liquidation. Just as he had
threatened, Wright pursued his lender liability claims.
However, accepting these operative facts as true does
not dispose of the quasi estoppel defense.
The state claims that Wright's cooperation in the
recovery of bankruptcy estate assets is not consistent
with his later pursuit of his lender liability claim.
We are unwilling to hold that a cooperative debtor is
to be penalized for such conduct. That argument aside,
the fact remains that while Wright successfully
discharged the bulk of his debt to the state and other
creditors in the bankruptcy proceeding, he retained the
apparent right to pursue damages against the state in
state court, immune from state recourse against him.
Material consequences flow from that result.
Wright's lender liability claims against the state are
inextricably interwoven with the state's borrower
liability claims against Wright. When the state sued
Wright to collect on the defaulted loans, Wright
responded by filing a Chapter 11 bankruptcy proceeding.
But for that petition, Wright would have been required
to file his lender liability claims against the state
as compulsory counterclaims in the state court
proceeding. Civil Rule 13 (a). Failure to do so would
have precluded Wright from later pursuing those claims
in another proceeding. Wright effectively circumvented
compulsory joinder requirements, and the orderly
resolution of all claims arising out of the same
transaction or occurrence, by his resort to the
bankruptcy proceeding and failure thereafter to pursue
his lender liability claims within the context of the
bankruptcy proceeding.
The state asserts, and Wright does not dispute, that it
relied on his bankruptcy position when it pursued non-judicial
foreclosure of collateral, thereby giving up its right
to seek a deficiency judgment for any balance due, even
if it had been able to do so notwithstanding the
bankruptcy discharge. Whether the state could have
done so is problematic. Furthermore, despite Wright's
pursuit of monetary relief, the state's ability to
offset or recoup its own damages against any recovery
Wright might obtain is also problematic. Additionally,
as the state points out, other creditors in the
bankruptcy proceeding have had their claims against
Wright discharged. They now may be unable to recover
against Wright should he recover against the state on
his lender liability claims, which would have accrued
to their benefit had those claims been pursued in the
bankruptcy proceeding.3
Wright makes no claim that his delay in filing his
lender liability claims was due to any lack of
knowledge on his part. He
asserts that lack of funds made it impossible for him to pursue
those claims until after the bankruptcy proceeding had
been initiated.
We conclude that Wright's conduct falls within the
ambit of unconscionable inconsistency articulated in
Jamison. Wright could have pursued his lender
liability claims as compulsory counterclaims when the
state sought to collect his defaulted loans. Having
filed bankruptcy, Wright should have scheduled his
lender liability claims both affirmatively and
defensively in his petition, thereby putting the state
(and other creditors) on notice of those claims.
Oneida Motor Freight, 848 F.2d at 416. The claims
could then have been pursued within the context of the
bankruptcy proceeding. When the state obtained relief
from the automatic stay in the bankruptcy proceeding
after Wright had filed his lender liability suit,
Wright could have sought permission from the bankruptcy
court to pursue that suit in the state court
proceedings, either as a compulsory counterclaim or
through joinder of his lender liability suit with the
state's collection proceeding. Wright did none of
these, the results of which are plain from the record
as noted.
The judgment of the superior court is AFFIRMED.4
_______________________________
1. The Point MacKenzie lottery occurred in 1982. The
objectives of the lottery were to stimulate in-state
milk production, to provide milk to Alaska consumers at
a competitive market price, and to assist in gaining
agricultural self-sufficiency for the state. The state
sold the agricultural interest (i.e. the right to use
the land for agricultural purposes) in twenty-nine
parcels totaling 13,940 acres in the vicinity of Point
MacKenzie.
2. The parties do not address these latter issues in their
appellate briefs.
3. A long-standing tenet of bankruptcy law
requires one seeking benefits under its terms
to satisfy a companion duty to schedule, for
the benefit of creditors, all his interests
and property rights. In Re Hannan, 127 F.2d
894 (7th Cir. 1942).
Oneida Motor Freight, 848 F.2d at 416.
4. In view of our disposition of the quasi estoppel issue,
we find it unnecessary to address other issues raised
by the parties or decided by the superior court.
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