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Pacific Marine Ins. of Alaska v. Harvest States Cooperative (7/1/94), 877 P 2d 264
<![CDATA[
Notice: This opinion is subject to
formal 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.
THE SUPREME COURT OF THE STATE OF ALASKA
IN THE MATTER OF: )
) Supreme Court No. S-5438
PACIFIC MARINE INSURANCE )
COMPANY OF ALASKA IN ) Superior Court No.
LIQUIDATION, ) 3AN-87-5072 Civil
______________________________)
PACIFIC MARINE INSURANCE ) O P I N I O N
COMPANY OF ALASKA IN )
LIQUIDATION, ) [No. 4100 - July 1, 1994]
)
Appellant, )
)
v. )
)
HARVEST STATES COOPERATIVE, )
)
Appellee. )
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Karen L. Hunt, Judge.
Appearances: Meredith A. Ahearn,
Hagans, Brown, Gibbs & Moran, Anchorage, for
Appellant. Kirsten Tinglum, Ashburn & Mason,
P.C., Anchorage, for Appellee.
Before: Moore, Chief Justice,
Rabinowitz, Matthews, and Compton, Justices.
[Burke, Justice, not participating.]
MOORE, Chief Justice.
I. INTRODUCTION
Appellant Pacific Marine Insurance Company of Alaska
("PacAk") has been in liquidation pursuant to AS 21.78.090(b)
since July 1989. This case involves an asset which PacAk
purports to own. The receiver for PacAk claims that an annuity
purchased by PacAk to fund a workers' compensation claim was
unlawfully transferred to an irrevocable Oregon trust, with an
Oregon trustee and a Washington beneficiary.
PacAk filed a motion to set aside and terminate the
irrevocable trust, dated February 25, 1992 (first motion).
Harvest States Cooperative ("Harvest States") entered a limited
appearance to move that the court decline to hear the first
motion based on its lack of jurisdiction over both the Washington
trustee and the Oregon beneficiary. The superior court issued an
order declining to hear the motion (first order) on September 24,
1992, based on these grounds. PacAk did not move for
reconsideration or appeal. Instead, PacAk filed a motion for
order to aid the receiver, dated October 16, 1992 (second
motion). On November 4, 1992, the superior court issued an order
declining to hear the second motion, holding that the court's
findings pursuant to the first motion were equally applicable to
the second. PacAk appeals from this order.
This case requires us to decide whether the trial court
correctly declined to hear PacAk's second motion. To reach this
decision, we must resolve whether an order in the course of an
ongoing insurance liquidation proceeding can form a basis for
applying collateral estoppel. If we find that such an order
cannot form a basis for applying collateral estoppel, we must
additionally determine whether the foreign trustee and
beneficiary are indispensable parties, without whom PacAk's
second motion cannot be heard. For the reasons stated below, we
reverse and hold that the superior court should hear PacAk's
second motion.
II. FACTS AND PROCEEDINGS
North Pacific Grain Growers, Inc., an Oregon
cooperative corporation and predecessor to Harvest States,
purchased a workers' compensation policy from PacAk to cover its
Kalama, Washington grain elevator operations. Richard Blessing
suffered a fatal accident in 1981 in the course of his employment
at the Kalama grain elevator. He was survived by his widow,
Joanne Blessing. PacAk purchased the annuity at issue from
Charter National Life Insurance Company to fund its potential
legal obligations to Joanne Blessing.
Subsequently, PacAk was declared insolvent by the
Alaska courts. At about the same time, Pacific Marine Insurance
Company ("PacWa"), a Washington corporation and separate entity
from PacAk, was declared insolvent by the courts of Washington.
In May 1989, the Deputy Receiver for PacWa, Virgil McQueen
("McQueen"), Special Deputy Insurance Commissioner for the State
of Washington, entered into an irrevocable trust agreement with
Harvest States, naming a Portland, Oregon attorney as trustee and
Joanne Blessing, a Washington resident, as beneficiary. The
annuity was assigned to the trustee.
The receiver for PacAk claims that McQueen assigned the
annuity to the trust without permission from or notice to PacAk,
although he knew that PacAk was the owner of the annuity.
Harvest States counters that PacWa had authority to transfer the
annuity because it fell under a 100% casualty quota share
agreement previously entered into between PacAk and PacWa.
Furthermore, the owner named on the annuity policy was simply
"Pacific Marine Insurance Company,"and evidence indicates that
it was purchased from a PacWa account. Thus, the ownership of
the annuity is the subject of a bona fide dispute.
The superior court issued the order declining to hear
the first motion on jurisdictional grounds on September 24, 1992.
PacAk did not move for reconsideration of that order within ten
days, pursuant to Alaska Rule of Civil Procedure 77(k), nor did
PacAk appeal the merits of the order within thirty days, pursuant
to Alaska Appellate Rule 204(a). Instead, PacAk filed its second
motion on October 16, 1992. On November 4, 1992, the superior
court issued the second order, from which PacAk appeals.
III. DISCUSSION
A.
Harvest States argues that the doctrine of collateral
estoppel dictates that the court's finding of lack of personal
jurisdiction over indispensable parties in the first order is
dispositive of the same issue in the second order.1 The
application of collateral estoppel to a given set of facts is a
question of law subject to independent review. Rapoport v.
Tesoro Alaska Petroleum Co., 794 P.2d 949, 951 (Alaska 1990). In
Rapoport, we set forth three requirements for the application of
collateral estoppel:
1) [t]he plea of collateral
estoppel must be asserted against a party or
one in privity with a party to the first
action;
2) [t]he issue to be precluded from
relitigation by operation of the doctrine
must be identical to that decided in the
first action;
3) [t]he issue in the first action
must have been resolved by a final judgment
on the merits.
Id. (quoting McKean v. Municipality of Anchorage, 783 P.2d 1169,
1171 (Alaska 1989)).
While the first requirement (identical parties) is
clearly met, the second requirement (same issues) is contested in
this case. The receiver argues that the second motion did not
seek to have the trust set aside, but merely asked the superior
court to find that the annuity was an asset of the receivership
and that it was wrongly transferred by McQueen to the trust.
Harvest States counters that the second motion is merely a change
in legal theory aimed at achieving the same goal as the first
motion -- removing the annuity from the trust. However, we need
not resolve whether the same issues are involved in both orders,
since we find that the third element was not satisfied.
We recently held that the "finality requirement does
not necessarily require the entry of a final judgment." Borg-
Warner Corp. v. Avco Corp., 850 P.2d 628, 635 (Alaska 1993).
Rather, "[i]n the absence of an appealable decision, the test is
whether the issue has been 'fully litigated.'" Id. (citation
omitted). See also Briggs v. State, Dep't of Pub. Safety, 732
P.2d 1078 (Alaska 1987). In Briggs, we stated:
For purposes of issue preclusion, "final
judgment"includes "any prior adjudication of
an issue in another action that is determined
to be sufficiently firm to be accorded
conclusive effect." Factors supporting a
conclusion that a decision is final for this
purpose are "that the parties were fully
heard, that the court supported its decision
with a reasoned opinion, that the decision
was subject to appeal or was in fact reviewed
on appeal."
Id. at 1082 (quoting Restatement (Second) of Judgments 13 &
cmt. g (1982)) (citations omitted).
Harvest States argues that collateral estoppel can be
based on a dismissal for want of jurisdiction. While we have
never addressed this specific issue, we believe that Harvest
States' argument has merit. This court has held that an order
that is not technically a "judgment"can still give rise to issue
preclusion if it is an appealable final judgment for purposes of
Appellate Rule 202.2 See Calhoun v. Greening, 636 P.2d 69, 72-73
& n.4 (Alaska 1981) (because denial of Civil Rule 60(b) motion is
appealable under Appellate Rule 202, it will be treated as final
judgment for res judicata purposes); see also City of Fairbanks
v. Electric Distrib. Sys., 413 P.2d 165, 168 (Alaska 1966) (an
order dismissing a complaint for lack of jurisdiction over an
indispensable party is an appealable order under the predecessor
to Appellate Rule 202).
However, Harvest States' argument relies upon the
characterization of the first order as a dismissal under Rule
41(b) and therefore a final judgment that was appealable under
Appellate Rule 202. The first order was not a dismissal. The
superior court merely "decline[d] to hear"the motion to set
aside and terminate the trust. We believe that PacAk's two
motions were simply part of many such motions in the course of an
ongoing liquidation proceeding, and we must therefore decide
whether to treat such orders as appealable final judgments.
Alaska Statute 21.78.010(c) provides:
An appeal shall lie to the supreme court
from an order granting or refusing
rehabilitation, liquidation, or conservation,
and from every other order in delinquency
proceedings having the character of a final
order as to the particular portion of the
proceeding embraced therein.
(Emphasis added.) Rather than disposing of this issue, the
statutory language begs the question of which orders in
delinquency proceedings have the "character of a final order."
We resolve this question by holding that no orders in a
liquidation or receivership are appealable as of right until the
receivership action is terminated, unless the trial court enters
a Civil Rule 54(b) certificate.3 Without either a final
judgment or a Civil Rule 54(b) direction by the trial court,
intermediate orders of the superior court do not have the
character of a final order and thus do not satisfy the third
requirement for collateral estoppel. Therefore, we hold that
the superior court's order declining to hear the first motion
does not prohibit the same court from hearing the second motion.
B.
Since we hold that the first order did not preclude the
court from considering the merits of the second motion, we review
the merits of the superior court's finding of lack of
jurisdiction over indispensable parties. We review a finding by
the trial court of indispensability pursuant to Alaska Civil Rule
19 under an abuse of discretion standard. See Farmer v. State,
788 P.2d 43, 50 (Alaska 1990).
In its order declining to hear the second motion, the
superior court found:
This court's September 24, 1992
findings[4] are equally applicable to the
receiver's attempt to remove the Charter
National Annuity from the Blessing
Irrevocable Trust. Consequently, this court
declines to hear the Receiver's motion due to
its lack of jurisdiction over indispensable
parties.
(Citations omitted.)
The proper test for determining whether parties are
indispensable is set out in Civil Rule 19. We see no evidence
that the superior court applied this test. Therefore, the
superior court abused its discretion.
A finding of indispensability requires a three-part
analysis. First, the court must determine whether the parties
are "necessary,"according to the standards set forth in Civil
Rule 19(a). Second, only if the parties are found to be
necessary, the court must then determine if they can be joined.
At this point in the inquiry, the court must decide whether it
can exercise personal jurisdiction over the parties. Finally, if
the court concludes that the parties are necessary and cannot be
joined, it must determine whether they are "indispensable" by
weighing the factors provided in Civil Rule 19(b).
Our analysis therefore begins by considering whether
the trustee and the beneficiary are necessary according to Civil
Rule 19(a).5 We have previously recognized that "parties will
not be considered indispensable if they are beneficiaries of a
trust whose interests their trustee may adequately represent."
Hardy v. Island Homes, Inc., 363 P.2d 637, 643 (Alaska 1961). We
extend this rule to provide that if the beneficiary's interest
will not as a practical matter be impaired by the trustee's
absence, then neither the trustee nor the beneficiary are
necessary parties.
We must therefore inquire whether the interests of the
beneficiary can be protected in the absence of both the
beneficiary and the trustee. Under general trust law principles,
the answer is no. See, e.g., 3A James Wm. Moore & Jo Desha
Lucas, Moore's Federal Practice 19.08 (2d ed. 1991) ("The
general rule is that in a suit to alter the terms of a trust
instrument or to declare the trust invalid all parties who would
be affected by the adjudication are indispensable.") However,
the motion at issue in this appeal does not seek to alter the
terms of the trust instrument or to declare the trust invalid.
It merely seeks to adjudicate proper ownership of the annuity.
Furthermore, even if the general rule were applicable here, we
find the facts in this case are sufficiently unusual as to
warrant a departure from this general rule. In this case, the
beneficiary's interest can be adequately protected by Harvest
States, the co-settlor of the trust.6
Joanne Blessing, the beneficiary, is entitled to
compensation from Harvest States under the Longshore and Harbor
Workers' Compensation Act7 (LHWCA). Harvest States was the
insured of PacAk, which accepted the LHWCA claim and purchased
the annuity at issue here to fund it. As long as the annuity
payments continue to be made to the trustee (incorrectly,
according to PacAk), then Harvest States itself need not pay the
obligation to Joanne Blessing. PacAk's second motion seeks to
have the annuity declared property of PacAk. If this relief is
granted, and Charter makes payments directly to PacAk, then
Harvest States, while remaining primarily liable to Joanne
Blessing on the LHWCA claim, will be in the same position as the
other insureds of PacAK in the liquidation proceedings, with full
recovery under the policy uncertain. This situation provides
Harvest States with a strong interest in adequately defending the
validity of the trust, thus eliminating the necessity of the
trustee and the beneficiary to be joined in this action.
Under general trust law principles, a trustee can
adequately represent the beneficiary in litigation because the
trustee owes a fiduciary duty to the beneficiary. If the trustee
fails to vigorously protect the trust property, then the
beneficiary has a cause of action against the trustee for breach
of this duty. Harvest States does not owe such a fiduciary duty
to Joanne Blessing in this case. However, this distinction is
not significant here. If Harvest States does not adequately
protect Joanne Blessing's interest in this litigation, this will
result in Harvest States being directly liable to Joanne Blessing
on the LHWCA obligation, the breach of which will give her a
cause of action against Harvest States.8 Thus, Joanne Blessing
would have rights against Harvest States if it unsuccessfully
defends the suit, as she would against a trustee who failed to
adequately protect her interests. For these reasons, we do not
find either Joanne Blessing or the trustee to be necessary
parties.9
IV. CONCLUSION
We hold that an order in the course of an insurance
liquidation proceeding is not sufficiently final to give rise to
collateral estoppel unless the court has entered a final judgment
or has certified the issue to this court under Civil Rule 54(b).
Therefore, the superior court's order declining to hear PacAk's
first motion did not bar it from considering the merits of
whether it should hear the second motion. Our analysis indicates
that the joinder of the trustee and/or the beneficiary was not
necessary for the second motion, and therefore they were not
indispensable parties. We therefore REVERSE the order below and
REMAND to the superior court to hear PacAk's motion to aid the
receiver.
IN THE SUPREME COURT OF THE STATE OF ALASKA
IN THE MATTER OF: )
) Supreme Court No. S-5438
PACIFIC MARINE INSURANCE )
COMPANY OF ALASKA IN )
LIQUIDATION, )
______________________________)
PACIFIC MARINE INSURANCE ) O R D E R
COMPANY OF ALASKA IN )
LIQUIDATION, )
)
Appellant, )
)
v. )
)
HARVEST STATES COOPERATIVE, )
)
Appellee. )
______________________________)
Superior Court No. 3AN-87-5072 Civil
Before: Moore, Chief Justice, Rabinowitz,
Matthews, and Compton, Justices. [Eastaugh,
Justice, not participating.]
On consideration of the petition for rehearing filed on
May 31, 1994,
IT IS ORDERED:
1. The petition for rehearing is GRANTED.
2. Opinion No. 4085 issued on May 20, 1994, is
WITHDRAWN.
3. Opinion No. 4100 is issued on this date in its
place.
Entered by direction of the Court at Anchorage, Alaska,
on July 1, 1994.
CLERK OF THE SUPREME COURT
__________________________
JAN HANSEN
_______________________________
1 Collateral estoppel was not specifically raised in the
superior court. Harvest States argued below that the parties
affected by each motion were identical, as were the "goals" and
the applicable legal principles. Harvest States did not use the
magic words "collateral estoppel." Therefore, we must determine
if Harvest States waived the issue of collateral estoppel by
raising it for the first time on appeal.
This court has held that it will consider a theory not
expressly presented to the trial court where "it is not dependent
on any new or controverted facts"and where "it is closely
related to [the] trial court theory and could have been gleaned
from [the] pleadings." Zeman v. Lufthansa German Airlines, 699
P.2d 1274, 1280 (Alaska 1985) (quoting O'Neill Investigations v.
Illinois Employers Ins., 636 P.2d 1170, 1175 n.7 (Alaska 1981)).
In the superior court, Harvest States essentially argued the
elements of collateral estoppel without using that term.
Furthermore, PacAk does not raise a waiver argument but instead
directly addresses the issue of collateral estoppel. PacAk does
not appear to have been prejudiced by Harvest States' failure to
use the term "collateral estoppel,"and therefore we do not find
that waiver is appropriate here.
2 Alaska Civil Rule 41(b) would not affect this analysis.
Civil Rule 41(b) excepts a dismissal for lack of jurisdiction
from operating as an adjudication upon the merits. A leading
treatise explains issue preclusion under the analogous Federal
Rule as follows:
Civil Rule 41(b) provides that a
dismissal for lack of jurisdiction . . . does
not operate as an adjudication upon the
merits. This provision means only that the
dismissal permits a second action on the same
claim that corrects the deficiency found in
the first action. The judgment remains
effective to preclude relitigation of the
precise issue of jurisdiction . . . that led
to the initial dismissal.
18 Charles A. Wright & Arthur R. Miller, Federal Practice and
Procedure 4436, at 338 (1981) (emphasis added; footnote
omitted).
3 Alaska Civil Rule 54(b) provides:
When more than one claim for relief is
presented in an action, whether as a claim,
counterclaim, cross-claim, or third-party
claim, or when multiple parties are involved,
the court may direct the entry of a final
judgment as to one or more but fewer than all
of the claims or parties only upon an express
determination that there is no just reason
for delay and upon an express direction for
the entry of judgment. In the absence of
such determination and direction, any order
or other form of decision, however
designated, which adjudicates fewer than all
of the claims or the rights and liabilities
of fewer than all the parties shall not
terminate the action as to any of the claims
or parties, and the order or other form of
decision is subject to revision at any time
before the entry of judgment adjudicating all
the claims and rights and liabilities of all
the parties.
4 The findings from the first order included
(3) That the trustee and beneficiary
are indispensable parties to the action to
set aside and terminate the trust;
(4) That the trustee and beneficiary
lack the necessary minimal contacts with the
State of Alaska to justify an assertion of
long-arm jurisdiction under AS 09.05.015;
(5) That based on the above findings
and rulings, the court should decline to hear
the Receiver's motion for lack of
jurisdiction over indispensable parties.
5 Rule 19(a) provides in part that a party shall be
joined if
(1) in his absence complete relief
cannot be accorded among those already
parties, or (2) he claims an interest
relating to the subject of the action and is
so situated that the disposition of the
action in his absence may (i) as a practical
matter impair or impede his ability to
protect that interest or (ii) leave any of
the persons already parties subject to a
substantial risk of incurring double,
multiple, or otherwise inconsistent
obligations by reason of his claimed
interest.
(Emphasis added.)
6 Harvest States does not assert that it will be in any
way prejudiced by the failure to include the trustee and/or the
beneficiaries, but merely asserts the prejudice to these
additional parties as the basis for dismissal.
7 33 U.S.C. 901-950 (1988).
8 If the employer defaults on an installment of an LHWCA
award, the deputy commissioner shall make a supplementary order
declaring either that installment of the award or, at his
discretion, the entire award, to be in default. 33 U.S.C.
918(a) (1988). The applicant can without paying any fee file a
copy of this supplementary order with the Federal district court
and may execute upon it as a final judgment. Id. If the
employer becomes insolvent and the judgment cannot be satisfied,
the Secretary of Labor may pay the amount of the award out of a
specially designated fund. 33 U.S.C. 918(b), 944 (1988).
Therefore, even without the trust, Joanne Blessing's rights to
recover from Harvest States would not be unduly prejudiced.
9 Because we reach this conclusion, we need not
independently address the issue of whether the Alaska courts lack
personal jurisdiction over the trustee or the beneficiary.
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