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City of Hydaburg v. Hydaburg Cooperative Association et al (8/27/93), 858 P 2d 1131
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NOTICE: This opinion 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
CITY OF HYDABURG, )
) Supreme Court No. S-4613
Appellant, )
)
v. ) Superior Court No.
) 1JU-88-866 Civil
HYDABURG COOPERATIVE )
ASSOCIATION, MARY E. GUSS, ) O P I N I O N
CLIFFORD H. SMITH, HYDABURG )
FISHERIES and HYDABURG )
FISHERIES, INC., )
)
Appellees. )
______________________________) [No. 4000, August 27, 1993]
)
ECONOMIC DEVELOPMENT )
ADMINISTRATION, )
)
Appellant, )
) Supreme Court No. S-4615
v. )
) Superior Court No.
HYDABURG COOPERATIVE ) 1JU-88-866 Civil
ASSOCIATION, MARY E. GUSS, )
CLIFFORD H. SMITH, HYDABURG )
FISHERIES and HYDABURG )
FISHERIES, INC., )
)
Appellees. )
______________________________)
Appeal from the Superior Court of the
State of Alaska, First Judicial District,
Ketchikan,
Thomas Jahnke, Judge.
Appearances: Patrick E. Murphy,
Batchelor, Murphy & Brinkman, Juneau, for
Appellant, City of Hydaburg in No. S-4613,
for Appellees in No. S-4615. Susan
Lindquist, Assistant U.S. Attorney, Wevley
Wm. Shea, United States Attorney, Anchorage,
and Stuart M. Gerson, Assistant Attorney
General, Robert S. Greenspan, and Michael E.
Robinson, Attorneys, Appellate Staff, Civil
Division, Department of Justice, for
Appellant Economic Development
Administration, in No. S-4615. Paul L.
Dillon, Dillon and Findley, Juneau, and
Anthony L. Rafel, Culp, Guterson & Grader,
Seattle, for Appellees in No. S-4613 and S-
4615.
Before: Moore, Chief Justice,
Rabinowitz, Burke, and Matthews. [Compton,
Justice, not participating.]
RABINOWITZ, Justice.
Hydaburg Fisheries and Hydaburg Fisheries, Inc.
("Hydaburg Fisheries") obtained a judgment against Hydaburg
Cooperative Association1 ("HCA") and proceeded to execute against
HCA's property. The Economic Development Administration ("EDA")
and the City of Hydaburg ("City") claimed interests in HCA's
property and sought to block the execution or to establish the
superiority of their claims as against Hydaburg Fisheries. The
superior court rejected their claims. This appeal followed.
In 1974 the City received from the State of Alaska
title to tidelands identified in Alaska Tidelands Patent No. 270
and Alaska Tidelands Survey No. 270. Additionally, the City
received title by quitclaim deed to a small portion of Lot 1,
Block 14 from HCA. In 1983 the City leased these properties to
the Hydaburg Indian Reorganization Act Council ("Hydaburg IRA
Council") pursuant to a plan
whereby the City could obtain federal
Economic Development Administration funds to
rockfill the Site and the Hydaburg Indian
Reorganization Act Council (hereinafter IRA)
has tentative approval, dependent upon this
lease, to secure a block grant from the
federal department of Housing and Urban
Development to construct a fish processing
facility. . . .
One of the conditions of the lease stated:
Permanent building and utilities on
expiration, termination or cancellation of
this lease shall become the property of the
City. Provided, if this lease be declared
void by a court of law, all improvements of
whatever nature on Site shall become the
property of the City that the City may best
give effect to the purposes for which this
lease is granted.2
In 1987, as part of an "Overall Economic Development
Plan" the City applied for a Community Development Block Grant
from the State of Alaska for the purpose of funding a "project"
which was to
provide the City of Hydaburg with funds
to complete the new processing plant and cold
storage facility. When completed the
facility will operate year round and provide
a significant boost to the economy.
. . . .
The new fish processing plant is located
on an industrial landfill, constructed on
city owned tidelands, under an agreement with
the Hydaburg IRA Tribal Council, owner of
adjacent property.
In accordance with this community development project,
the City signed a Property Management Agreement with EDA and HCA
which stipulated, among other things:
3. The real property acquired as part
of the Project or specifically improved and
included as a part of the Project . . . and
including any interest therein, shall not be
sold, leased, transferred, conveyed or
mortgaged without prior written consent of
the Assistant Secretary.
HCA constructed a fish processing plant with a $500,000
grant from the U.S. Department of Housing and Urban Development
("HUD") and purchased and installed a cold storage facility for
use in the fish processing plant with a $600,000 grant from EDA.
The EDA grant agreement to HCA expressly provided that it was
"subject to" the "Standard Terms and Conditions" required for
Public Works and Development facilities, including the Public
Works Act regulations set forth at 13 C.F.R. Chapter III and the
property management standards set forth in Office of Management
and Budget ("OMB") Circular No. A-102.
Under the provisions of Circular No. A-102, the grantee
may dispose of an item of nonexpendable personal property
("tangible personal property"purchased with grant funds) costing
more than $1,000 only after compensating EDA to the extent of its
participation in the original project. HCA and EDA also entered
into a Property Management Agreement with the City which stated
in part:
[T]o assure that the benefits of the
Project will accrue to the public and be used
as intended by both EDA and the Grantee
[HCA], the Grantee and Owner [City of
Hydaburg] hereby covenant and agree as
follows:
. . . .
2. During its expected useful life the
Project shall not be used for other than the
purposes for which the Project was financed
by EDA, as stated in the application, unless
prior written approval of the Assistant
Secretary is obtained.
3. The real property acquired as part
of the Project or specifically improved and
included as a part of the Project . . . shall
not be sold, leased, transferred, conveyed or
mortgaged without prior written consent of
the Assistant Secretary.
4. Whenever real property is sold,
leased or otherwise conveyed pursuant to 13
CFR 314.3(a)(1), the transferor shall add to
the document conveying such interest a
covenant, which has been previously approved
by the Assistant Secretary, prohibiting the
use of such property for any purpose other
than the general and special purpose of the
Grant as determined by the Assistant
Secretary. The instrument containing this
covenant shall be recorded in the pertinent
county public records affecting real property
or filed with the appropriate office in the
Bureau of Indian Affairs in the case of
Indian Projects.
The Property Management Agreement was recorded in the Ketchikan
Recording Office.
The events which precipitated the subject foreclosure
proceedings by Hydaburg Fisheries against HCA are detailed in a
letter dated October 17, 1988 from John Woodward, EDA Regional
Director, to Sylvester Peele, President of HCA:3
On July 23, 1987, the Hydaburg
Cooperative Association executed a "Joint
Management Agreement" with Hydaburg
Fisheries, which provided the processing
equipment, among other things. HCA submitted
a copy of the executed agreement to EDA for
approval, along with its letter of February
19, 1988. Those documents never reached EDA.
Copies of the letter and Agreement were
finally received by EDA on April 19, 1988.
EDA requested clarification and additional
documentation concerning the Agreement in its
letters of June 1, July 8 and September 28,
1988.
Upon receiving documentation clarifying the joint-
agreement between Hydaburg Fisheries and HCA, EDA terminated its
grant to HCA on the ground that the "Joint Management Agreement"
between HCA and Hydaburg Fisheries was in violation of the EDA
grant because it was "more than a mere management agreement and
[constituted] a transfer of such incidents of ownership as
possession, use and control of the facility." EDA demanded "full
repayment, with interest, in a reasonable time (i.e., within six
months)."
Hydaburg Fisheries requested that HCA give assurances
that it would repay the grant pursuant to EDA's letter. In the
alternative, Hydaburg Fisheries wanted HCA to provide a written
assurance from EDA that EDA would not initiate foreclosure
proceedings during the remainder of the joint venture agreement's
term. HCA did not comply with Hydaburg Fisheries' request.
Hydaburg Fisheries subsequently terminated its joint venture
agreement with HCA and sued to recover its investment.
Procedural History
Hydaburg Fisheries' claim against HCA was referred to a
panel of arbitrators pursuant to an arbitration provision in
their joint venture agreement. The arbitrators found in favor of
Hydaburg Fisheries. Thereafter, the superior court confirmed the
arbitration award and entered judgment in favor of Hydaburg
Fisheries.4
Hydaburg Fisheries then filed a creditor's affidavit
against HCA claiming a total judgment of $228,420.74 and
requesting issuance of a writ of execution. The affidavit listed
the following property as non-exempt properties of HCA:
1. The specialty seafood plant building
located on Lot 1, Block 14, U.S. Survey No.
1570, Hydaburg townsite, Ketchikan Recording
District and adjacent tidelands identified in
Alaska Tidelands Patent No. 270 and Alaska
Tidelands Survey No. 270.
2. All of the contents of the specialty
seafood plant building described in paragraph
1 above, including but not limited to the
cold storage facility and related cold
storage equipment within said building.
3. Lot 1, Block 14, U.S. Survey No.
1570, Hydaburg Townsite, Ketchikan Recording
District, except that portion conveyed to the
City of Hydaburg under a quitclaim deed filed
with the Ketchikan Recording District on May
11, 1980 and recorded in Book 138, pages 100-
101, a copy of which is attached hereto as
Exhibit A.
4. All other property of Hydaburg
Cooperative Association subject to execution.
The City and EDA then filed Notices of Third-Party
Claim pursuant to AS 09.35.130. The superior court denied the
City's claim of interest, ruling in part that the City's interest
"is at most that of an unliquidated, unsecured creditor. The
city also lacks standing to raise many of its claims: it does not
stand on [sic] the shoes of other government grantors who may
claim a superior interest in the property."
In explaining its denial of EDA's third party claim of
interest, the superior court stated:
The following personal property is
at issue in this proceeding: insulated panels
that form the walls and ceilings of chilling,
cold storage, and freezing rooms within a
larger processing plant building owned by
HCA; compressor units that cool the just-
described rooms; an ice-making machine;
control panels; and an extractor unit on a
concrete pad outside but immediately adjacent
to the plant building owned by HCA. Based
upon the evidence presented at the
evidentiary hearing, the court is satisfied
that the property just described constitutes
movable equipment or machinery that is
personal property, not real property.
For the reasons set out in Hydaburg
Fisheries' brief in opposition filed February
25, 1991, the third-party claim of EDA will
be denied and Hydaburg Fisheries will be
permitted to proceed with the execution sale.
Pursuant to the judgment of execution, the Department
of Public Safety conducted three successive public sales on July
2, July 9, and July 16, 1991. At the third sale, the property
was sold to Hydaburg Fisheries. On October 11, 1991, the
superior court entered an order confirming the sale.
Standards of Review
We review the trial court's factual findings regarding
EDA's and the City's claimed interests under a "clearly
erroneous"standard. A finding is clearly erroneous if it leaves
this court with "a definite and firm conviction on the entire
record that a mistake has been made."Parker v. Northern Mixing
Co., 756 P.2d 881, 891 n.23 (Alaska 1988).
In matters of statutory interpretation this court
exercises its independent judgment. Waller v. Richardson, 757
P.2d 1036, 1039 n.4 (Alaska 1988).
Arguments
I. DID THE SUPERIOR COURT ERR IN ITS RULING THAT
THE CITY OF HYDABURG LACKED STANDING TO RAISE MANY
OF ITS CLAIMS?
The City argues that the superior court erred as a
matter of law in holding that it lacked standing to raise many of
its claims. The City relies on Trustees For Alaska v. State, 736
P.2d 324, 327 (Alaska 1987), cert. denied, 486 U.S. 1032 (1988),
which holds that the basic requirement for standing in Alaska is
adversity, and AS 09.35.1305 in support of its argument.
Appellees do not address the standing argument.
The superior court denied the City standing on the
basis that "it does not stand on [sic] the shoes of other
government grantors who may claim a superior interest in the
property." See State Dep't of Transp. and Labor v. Enserch
Alaska Constr., Inc., 787 P.2d 624, 630 (Alaska 1989) (noting
that under limited circumstances, a litigant may assert the
rights of another). We need not reach the issue of third-party
standing, however, because we find that the City claims the
property in its own right.
The City has legal title to lands underlying the
seafood processing plant and claims title to the processing
building itself upon expiration of its lease with HCA. Since
these are the types of interests which are protected under AS
09.35.130, the superior court erred in concluding that the City
lacked standing to raise its claims.
II. DID THE SUPERIOR COURT ERR IN HOLDING THAT
THE CITY OF HYDABURG LACKED ANY EQUITABLE, LEGAL
OR POSSESSORY INTEREST IN THE PROPERTY SOUGHT TO
BE EXECUTED UPON BY A JUDGMENT CREDITOR PURSUANT
TO AS 09.35.130?
Appellees argue that the City failed to submit proof of
an interest superior to Hydaburg Fisheries' judgment lien. More
particularly, Appellees assert that the City failed to make the
argument that its ownership of the land under the HCA building
could prevent execution on the building, and claim that this
argument is raised for the first time on appeal.6 Appellees
contend that they executed solely against HCA's land, building
and equipment and the City offered the superior court no
documentary or testimonial evidence of a mortgage, security, lien
or title interest in the land, building or equipment. "Likewise,
HCA's continued ownership of the portion of Lot 1, Block 14 not
conveyed to the City in 1980 was confirmed by the City's silence
on that point."
The City responds that it presented the superior court
with evidence which documented its ownership interests in the
land underlying the fish processing plant.
The City further asserts that the buildings and facilities
located on City-owned land come within the meaning of "real
property," since that term has been defined to include things
that are permanent, fixed, and immovable.
We have adopted a liberal approach in determining
whether a particular theory of a case was raised in a lower court
proceeding. Zeman v. Lufthansa German Airlines, 699 P.2d 1274,
1280 (Alaska 1985). Thus, we will consider a theory if "it is
closely related to [plaintiff's] trial court theory and could
have been gleaned from the pleadings." Id. Moreover, "[t]he
appellant need not have expressly presented every theory
supporting an argument before the trial court, but can expand or
refine details of an argument otherwise preserved on appeal."
Id.; see also Deal v. State, 626 P.2d 1073, 1077 (Alaska 1980).
Review of the record indicates that the City owns title
to all of the land underlying the seafood processing complex.
The fish processing plant was built on City-owned tidelands
identified in Alaska Tidelands Patent No. 270 and Alaska
Tidelands Survey No. 270, and on that portion of Lot 1, Block 14,
which was conveyed by quitclaim deed to the City by HCA. The
City leased these lands to Hydaburg IRA Council. The lease
agreement contained the following provision:
Permanent building and utilities on
expiration, termination or cancellation of
this lease shall become property of the City.
Provided, if this lease be declared void by a
court of law, all improvements of whatever
nature on Site shall become the property of
the City that the City may best give effect
to the purposes for which this lease is
granted.
In Interior Energy v. Alaska Statebank, 771 P.2d 1352,
1356 (Alaska 1989), we approved of the approach taken by the
Restatement (Second) of Property 12.2(4) regarding the right of
a tenant to remove permissible annexations to real estate.
"Section 12.2(4) would allow the tenant to remove any permissible
annexations so long as the landlord and tenant have not agreed
otherwise and so long as the freehold can be restored to its
former condition." (Emphasis added).
In this case it is clear from the lease provisions
quoted above that it was the parties' intent that "[p]ermanent
buildings and utilities on expiration, termination, or
cancellation of this lease shall become the property of the
City." Thus, in Restatement terms, the parties have "agreed
otherwise" and the tenant, HCA, loses any claim of ownership to
the permanent buildings and utilities when the lease ends.7
For the above reasons, we conclude that the superior
court erred in holding that the City did not have an equitable or
legal interest in the property sought to be executed on by
Hydaburg Fisheries.
III. DID THE SUPERIOR COURT ERR IN HOLDING THAT
EDA DID NOT HAVE A REVERSIONARY INTEREST IN THE
COLD STORAGE EQUIPMENT?
EDA argues first that "no property interest of the
United States can be subjected to judicial process without
consent of the sovereign." See Buchanan v. Alexander, 45 U.S. (4
How.) 20, 20-21 (1846). EDA asserts that the federal government
has not given its consent in this case. See 42 U.S.C. 3211(11)
(1977).
EDA further asserts that the Public Works Act does not
authorize the federal government to allow appropriated funds to
be used to pay creditors of the grantee unless a creditor incurs
an expense specifically authorized by the grant and applicable
regulations. See 13 C.F.R. 305.62-305.63. EDA supports this
proposition by emphasizing the detailed regulations which
governed HCA's expenditure of federal funds in order to ensure
that such funds were used for approved purposes.
EDA argues that the highly specific controls on HCA's
use of funds are similar to the controls found by the court in In
re Joliet-Will County Community Action Agency, 847 F.2d 430, 432
(7th Cir. 1988), to be sufficient to make the grantee a mere
trustee of grant property. EDA contends that federal cases "make
clear that where a grant imposes detailed controls on a grantee's
use of funds, the grantee, in effect, serves as a trustee for
property purchased with grant funds, even where title to the
property is nominally vested in the grantee."See e.g. In re
Joliet-Will County Community Action Agency, 847 F.2d at 432;
Henry v. First Nat'l Bank of Clarksdale, 595 F.2d 291, 308-09
(5th Cir. 1979); Palmiter v. Action, Inc., 733 F.2d 1244, 1249-50
(7th Cir. 1984), cert. denied, 444 U.S. 1074 (1980). EDA argues
that the trial court made no effort to explain why the
reversionary interest analysis set forth in these cases does not
apply here.
EDA additionally contends that the federal policy
inherent in protecting grant funds for the purposes specified in
the grant must take priority over any competing interests of a
grantee's creditors. EDA argues:
[T]he specific purpose of the grant
money awarded to HCA was to reduce
unemployment by enabling local communities
"to help themselves achieve lasting
improvement and enhance the domestic
prosperity by the establishment of stable and
diversified local economies and improved
local conditions." 42 U.S.C. 3121. That
purpose is not served by allowing the value
of property purchased with grant funds to
fall to a judgment creditor of the grantee.
Appellees argue that EDA's sovereign immunity argument
is misplaced because the Supreme Court of the United States has
held that garnishment actions may be brought in state court
against federal agencies that may sue or be sued. FHA v. Burr,
309 U.S. 242, 244 (1940); Franchise Tax Board of California v.
United States Postal Service, 467 U.S. 512, 517 (1984).
Appellees note that section 701(11) of the EDA legislation
empowers the Secretary of Commerce to "sue and be sued in any
court of record of a State having general jurisdiction. . . ."
42 U.S.C. 3211(11). Appellees insist that "[t]he provision in
the statute that no collection process may be issued against 'the
Secretary or his property' does not apply where, as here, EDA has
failed to show that the property belongs to it."
Appellees challenge EDA's assertion that its interest
is superior to that of Hydaburg Fisheries because the cold
storage equipment was purchased with federal grant money.
Appellees argue that under federal property management standards,
personal property is classified as either "expendable" or
"nonexpendable." Appellees contend that the storage equipment
fits the definition of "nonexpendable personal property,"namely,
"tangible personal property having a useful life of more than one
year and an acquisition cost of $300 or more per unit."
Appellees argue that absent a specific reservation of an interest
by the government, a grant recipient takes title to nonexpendable
personal property upon acquisition.
Appellees rely upon the OMB Circular, which states:
Exempt property. When statutory
authority exists title to nonexpendable
personal property acquired with project funds
shall be vested in the recipient upon
acquisition unless it is determined that to
do so is not in the furtherance of the
objectives of the Federal sponsoring agency.
When title is vested in the recipient the
recipient shall have no other obligation or
accountability to the Federal Government for
its use or disposition except as provided in
6a below.
OMB Circular A-102, 5.
Paragraph 6a provides:
For items of nonexpendable personal
property having a unit acquisition cost of
$1,000 or more, the Federal agency may
reserve the right to transfer the title to
the Federal Government or to a third party
named by the Federal Government when such
third party is otherwise eligible under
existing statutes.
Appellees take the position that EDA failed to comply
with its own regulatory requirements for reserving an interest in
the cold storage equipment. Appellees further contend that EDA
failed to meet its burden of proof in the superior court that it
had reserved rights in the HCA cold storage equipment. Lastly,
Appellees argue that the public interest would best be served by
allowing them to levy on the cold storage equipment because it
allows a new owner to place the plant back in service.
EDA's sovereignty argument relies upon a finding that
the government has a reversionary property interest, which is the
precise issue now on appeal. While the regulations and the
circular on which EDA relies seem vague, poorly designed to
impart notice to potential creditors, and in general unbusiness
like as means by which to secure an interest in property, federal
case law has not found these shortcomings to be dispositive.
Although the question is extremely close, we have decided to
follow the approach mapped by such cases as In re Joliet-Will
County Community Action Agency, 847 F.2d 430, 432 (7th Cir.
1988). Whether the government retains a reversionary interest in
the property depends "on the terms under which the grants were
made." In re Joliet-Will County Community Action Agency, 847
F.2d 430, 432 (7th Cir. 1988). Federal authorities make clear
that the government retains a reversionary interest in property
purchased with grant money where "extensive and detailed
regulations govern [the grantee's] expenditure of federal funds
in order to ensure the use of grant funds for approved purposes
. . . [and where the grantee was required to] undergo an annual
audit to determine whether it has spent grant funds in a fashion
consistent with `applicable laws, regulations and directives.'"
Henry v. First Nat'l Bank of Clarksdale, 595 F.2d 291, 308-09
(5th Cir. 1979), cert. denied, 444 U.S. 1074 (1981); see also
Palmiter v. Action Inc., 733 F.2d 1244, 1247-50 (7th Cir. 1984)
(pervasive federal supervision of a grantee's expenditures of
grant funds makes those funds immune from garnishment by a
judgment creditor to the extent those funds are not used for
authorized grant purposes). In essence, the grant recipient
becomes a "trustee"of the grant property. See In re Joliet-Will
County Community Action Agency, 847 F.2d at 432; Henry v. First
Nat'l Bank of Clarksdale, 595 F.2d at 308-09.
In the instant case HCA was subject to numerous
"conditions" in its receipt of grant funds from the EDA which
imposed minute controls on the use of the grant, such that the
recipient had very little discretion. Specifically, the Grant
Agreement required HCA to comply with state and federal law, the
Public Works Act, 42 U.S.C. 3121-3246(h), and implementing
regulations at 13 C.F.R. Parts 301-18. These statutes and
regulations imposed detailed controls on HCA's use of grant
funds to ensure that property acquired with such grants would be
used for approved purposes. Such controls created a reversionary
interest in the federal government in the event such conditions
were not met.8 Thus we hold that EDA has a reversionary interest
in the cold storage equipment at issue here.
CONCLUSION
I. The superior court erred in ruling that the City
lacked standing to raise issues concerning its interests in the
land, building, and fixtures.
II. The superior court erred in ruling that the City
lacked any equitable or legal interests in the land and building
in question.
III. The superior court erred in ruling that EDA did
not possess a reversionary interest in the cold storage equipment
purchased with Federal grant funds.
IV. We affirm the superior court's determination that
the refrigeration and cold storage equipment was moveable
equipment not affixed to realty. The City's alleged property
interest in refrigeration and seafood processing equipment turns
on whether the equipment is deemed to be annexed or affixed to
real property or whether it is moveable personal property.
Review of the record shows that the City was permitted to
participate in the hearing held on this issue. The superior
court's determination is amply supported by the record and thus
we affirm the superior court's determination.
REVERSED in part, AFFIRMED in part, and REMANDED for
further proceedings consistent with this opinion.
_______________________________
1. HCA was chartered under the Indian Reorganization Act of
1934, as amended in 1936, to further the economic development of
Indians engaged in the fishing industry in Hydaburg, Alaska.
2. The Hydaburg IRA Council subsequently assigned its
rights under the 1983 lease and agreement with the City to HCA.
3. The EDA Regional Director noted that during construction
of the project "HCA became aware that, because of State funding
shortfalls and delays, it would be unable to purchase the
necessary processing equipment to operate the facility." HCA,
therefore, requested permission from EDA to lease the facility
and the request was denied. EDA denied the request to lease
because it would constitute a change in the project scope and
would violate Federal property management standards. HCA was
unable to locate other sources of funding and eventually
requested that the grant be terminated and arrangements be made
for all EDA grant funds to be repaid so that the facility could
be leased. In addition, HCA informed EDA that "because of
economic hardship in the community, it would be impossible to
repay EDA in one lump sum." HCA inquired if a payment schedule
could be arranged utilizing the profits from the EDA fish-
processing facility. EDA advised HCA that an alternative
repayment schedule was unfeasible and recommended that HCA seek
other solutions such as retaining full ownership and control of
the facility while contracting management out to a private party.
4. HCA subsequently filed an application for a declaratory
judgment and moved to stay the enforcement of the judgment
asserting that it had immunity and that section 16 of the Indian
Reorganization Act protected its assets from execution. The
motion was denied on April 26, 1991 and this court affirmed on
appeal. Hydaburg Cooperative Ass'n, of Hydaburg v. Hydaburg
Fisheries, 826 P.2d 751 (Alaska 1992).
5. Alaska Statute 09.35.130 reads:
Third party claims. If property levied
upon is claimed by a third person as the
person's property by an affidavit of title to
the property, or right to the possession of
the property and the ground of the title or
right, stating the value of the property, and
delivered to the person making the levy, that
person shall release the property. However,
the plaintiff, on demand of the person, may
give the person an undertaking executed by
two sufficient sureties in a sum equal to
double the value of the property levied upon.
The undertaking shall be in favor of and
shall indemnify the third person against
loss, liability, damages, and costs, by
reason of the taking or sale of the property
by the person.
6. Appellees contend that the City's only arguments were
as follows:
(1) The HCA plant was part of a 20 year
development plan that included projects
involving the City, hence the City had some
interest in the HCA plant;
(2) the City administered the HCA grants
and this somehow gave it an interest in the
property; and
(3) the City contributed $205,000 worth
of office repairs and electrical work to the
HCA plant.
7. Our decision is also supported by Pacific Metal Co. v.
Northwestern Bank of Helena, 667 P.2d 958 (Mont. 1983), where the
court considered whether a building constructed on leased real
property was "real property"or "personal property"for purposes
of judgment execution. The Montana court applied the following
three-prong test for determining the status of the structure:
"(1) annexation to the realty, (2) an adaption to the use to
which the realty is devoted and (3) intent that the object become
a permanent accession to the land." Pacific Metal Co., 667 P.2d
at 961 (quoting Grinde v. Tindall, 562 P.2d 818, 820 (Mont.
1977)). The court stressed that of the three, "the intent of the
parties has the most weight and is the controlling factor." Id.
The court then looked to the lease agreement to determine the
intent of the parties, and made its decision accordingly. Id.
We agree with and adopt the Montana Supreme Court's approach.
8. Implicit in this holding is our rejection of appellees'
contention that EDA failed to comply with its own regulations
governing reservations of interests in equipment. In our view
paragraph 5 of attachment N, OMB Circular A-102 is inapplicable;
rather paragraph 6 ("other non-expendable property") governs.
This paragraph provides that "[w]hen other non-expendable
tangible property is acquired by a grantee with project funds
title shall not be taken by the Federal Government but shall vest
in the grantee subject to [enumerated] conditions." Paragraph
6(c)(2) requires that the grantee compensate the granting agency
when the grantee no longer needs non-expendable personal property
with a unit acquisition cost of $1,000 or more for the purposes
specified in paragraph 6. Paragraph 6(b)(1) requires that the
grantee "use the property in the project or program for which it
was acquired as long as needed."
These conditions demonstrate that HCA only had nominal
title to the cold storage equipment.
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