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Berger v. Alaska (1/26/96), 910 P 2d 581
IN THE SUPREME COURT OF THE STATE OF ALASKA
ROGER BERGER, d/b/a FRONTIER )
FINANCIAL SERVICES, ) Supreme Court No. S-6078
) O R D E R
STATE OF ALASKA, Department )
of Revenue, )
Superior Court No. 3AN-89-8710 Civil
Before: Compton, Chief Justice, Rabinowitz,
Matthews, and Eastaugh, Justices. [Moore,
Justice, not participating.]
IT IS ORDERED:
1. Opinion No. 4289, published on December 1, 1995,
2. Opinion No. 4316 is issued on this date in its
place. The major changes to the opinion can be found on pages 4,
5 and 9.
Entered by direction of the Court at Anchorage, Alaska
on January 26, 1996.
CLERK OF THE SUPREME COURT
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) 264-0607, fax (907) 276-5808.
THE SUPREME COURT OF THE STATE OF ALASKA
ROGER BERGER, d/b/a FRONTIER )
FINANCIAL SERVICES, )
) Supreme Court No. S-6078
) Superior Court No.
v. ) 3AN-89-8710 CI
STATE OF ALASKA, Department ) O P I N I O N
of Revenue, )
Appellee. ) [No. 4316 - January 26, 1996]
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Dana A. Fabe, Judge.
Appearances: Mark A. Sandberg, Sandberg,
Smith, Wuestenfeld & Corey, Anchorage, for
Appellant. Vincent L. Usera, Assistant
Attorney General, Bruce M. Botelho, Attorney
General, Juneau, for Appellee.
Before: Moore, Chief Justice, Rabinowitz,
Matthews, Compton and Eastaugh, Justices.
COMPTON, Justice, with whom RABINOWITZ, Justice,
joins, dissenting in part.
A. Facts and Proceedings
In 1989, Roger Berger bought the rights to
approximately 3000 permanent fund dividends (PFDs). He paid
sellers between $325 and $400 for their PFDs.1 To guarantee that
he would receive the purchased PFDs, Berger had the sellers send
the State a PFD change of address form with Berger's address on
it and sign a power of attorney permitting Berger to cash the PFD
check. In addition, each seller agreed to pay Berger the amount
of the 1989 PFD if the State refused to honor the change of
address request or the purchase. Finally, Berger had each seller
sign a confession of judgment form so that he could collect the
PFD amount from each seller if the State refused to honor the
change of address request or the purchase.
Berger went to these lengths to guarantee collection
because he knew that the Department of Revenue (DOR) did not
favor PFD assignments. During the 1980s, DOR proposed
regulations that would have prohibited PFD assignments. In each
instance, the Attorney General advised DOR that the proposed
regulation violated state law. Nonetheless, in 1989 a regulation
was promulgated banning assignments "unless the assignee named is
a government agency." 15 Alaska Administrative Code 23.220
(1989). Berger continued to purchase PFDs.
In October 1989, the sellers received a letter from DOR
saying DOR would not honor the change of address forms and that
DOR would mail PFDs to the sellers. In response, Berger filed
suit, requesting damages, an injunction to force the State to
honor the PFD assignments, and a declaratory judgment that the
regulation barring PFD assignments is invalid.
The superior court denied injunctive relief, and this
court denied Berger's petition for review. In 1991, the superior
court found that the regulation was beyond the scope of DOR's
authority and invalid.2 Consequently, the superior court granted
partial summary judgment for Berger. The court declined,
however, to address whether the transactions were usurious, as
claimed by DOR. In 1992, the superior court refused to grant
either party summary judgment; it found that the State could not
raise the defense of usury because the defense of usury is
personal to a borrower, but found that the State could raise the
Alaska Small Loans Act (ASLA) as a defense. Finally, in 1993,
the superior court found that the PFD purchases were illegal and
unenforceable under ASLA, and granted summary judgment for the
State. Berger appeals.
B. Usury and the Small Loan Laws
The American colonies adopted English usury laws prior
to independence to limit the amount of interest a lender could
charge on a loan. See generally Howard J. Alperin & Roland F.
Chase, Consumer Law: Sales Practices and Credit Regulation ' 497
(1986). While usury laws prevented one evil, they fostered
another: loansharking. Usury interest limits were so low that
small loans were not profitable. Many people needed to take out
small loans, and turned to loansharks for small loans at illegal
interest rates. Because these loans could not legally be
enforced, lenders used extra-legal means for collection. 54 Am.
Jur. 2d Moneylenders & Pawnbrokers ' 7 (1971); National Consumer
Law Center, Usury and Consumer Credit Regulation '' 22.214.171.124,
In an attempt to curb the loanshark problem,
legislatures began passing small loan acts in the early 1900s.
These acts often were modeled after the Uniform Small Loan Law
drafted by the Russell Sage Foundation. National Consumer Law
Center, supra, '' 126.96.36.199, 188.8.131.52. Small loan laws were special
usury statutes, intended to be an exception to the general usury
laws. Small loan laws primarily provided a licensing framework
by which lenders could become licensed to offer small loans at
interest rates higher than those allowed under general usury
laws. These laws also prohibited unlicensed lenders from making
small loans at rates higher than the general usury rates.
Barbara A. Curran, Trends in Consumer Credit Legislation 15-45
(1965); F.B. Hubachek, Small Loan Series: Annotations on Small
Loan Laws - Based on the Sixth Draft of the Uniform Small Loan
Alaska followed this general trend. Alaska's usury
laws are codified at AS 45.45.010-.090. Under AS 45.45.010(a)
the rate of interest is "10.5 percent a year and no more . . .
except as provided in (b) of this section." Subsection (b)
provides that interest charged by express agreement may not
exceed "five percentage points above the annual rate charged
member banks for advances by the 12th Federal Reserve District"
on the day the agreement is made, and that an agreement greater
in amount than $25,000 "is exempt from the limitation of this
subsection."3 Borrowers are provided with civil remedies if
their lender charges too much interest. AS 45.45.010, .030. In
1955 the legislature passed the Alaska Small Loans Act, modeled
after the sixth draft of the Uniform Small Loan Law.4 Ch. 73 SLA
1955. ASLA describes the licensing process, AS 06.20.010-.220,
and provided civil and criminal5 penalties for both licensed and
unlicensed lenders who violate its provisions. AS 06.20.320.
ASLA also prohibits unlicensed lenders from lending less than
$25,000 with interest higher than the legal rate. AS 06.20.300.
It is this clause that the State claims Berger violated.
However, before discussing whether Berger violated ASLA, we must
first address whether the State can raise ASLA as a defense.
A. The State May Raise the Alaska Small Loans Act
as a Defense6
Berger contends that the State cannot raise ASLA as a
defense. Berger points out that ASLA is a form of usury statute.
Traditionally, only borrowers (or their trustees) could raise
usury as a defense. Because ASLA is a special usury statute, he
argues that only the "borrower" (or, in this case, original PFD
holder) can raise it as a defense.
The State addresses Berger's contention as a standing
issue.7 The State first points out that ASLA is not the State
usury statute. And, contrary to the usury statute, ASLA had
provisions for criminal enforcement by the Attorney General.8
Additionally, the Attorney General has the power to intervene in
cases in the public's interest. Since the Attorney General can
affirmatively act to enforce ASLA, the State argues that he can
raise ASLA as a defense.
The superior court found that the State had standing to
raise ASLA as a defense:
[ASLA] provides that violation of certain of
its requirements . . . constitutes a
misdemeanor. This court agrees with the
State's argument that if the attorney general
has the power to bring an action to enforce a
state law it must follow that the attorney
general has standing to raise [a] violation
of that statute in an action for damages
against the state.
We agree with the superior court and the State. We
have held that the State, through the Attorney General, can act
to enforce certain statutes. For example, in Public Defender
Agency v. Superior Court, 534 P.2d 947, 949-50 (Alaska 1975), we
held that the Attorney General may enforce child support orders.
The Attorney General's authority to enforce the support orders
stems, in part, from the fact that "willful non-support [is] a
misdemeanor." Id. at 949. Additionally, the Attorney General
has the common law power "to bring any action which he thinks
necessary to protect the public interest." Id. at 950. We
reaffirmed Public Defender Agency in State v. First National Bank
of Anchorage, 660 P.2d 406 (Alaska 1982). In First National the
Attorney General brought suit against several fraudulent real
estate developers. Id. at 408-09. The State sought an
injunction against further fraudulent sales and restitution for
fifty-three defrauded purchasers. Id. at 408. The developers
argued "that the State was without authority to enforce the
common law rights of these purchasers." Id. at 420. We held
that the Attorney General could bring a suit even "in the absence
of express statutory authority." Id. at 421.
This case is similar to Public Defender Agency. The
legislature has expressed an interest in protecting Alaskans from
usurious small loans by making such transactions misdemeanors.
Additionally, the State argues that invalidating the transactions
is in the public interest. Thus, as in Public Defender Agency,
we hold that the State can act to enforce a statute, in this case
by raising ASLA as a defense to Berger's suit.
B. The Alaska Small Loans Act Does Not Prohibit These
1. The scope of the Alaska Small Loans Act.
Alaska Statute 06.20.300(a) prohibits unlicensed
persons from making small loans, or similar transactions, at a
greater interest rate than that allowed under Alaska's general
usury statute. The statute states:
Except as authorized in this chapter, a
person may not directly or indirectly charge,
contract for, or receive any interest,
discount, or consideration greater than that
which the person would be permitted by law to
charge if the person were not a licensee,
upon the loan, use, or forbearance of money,
goods, or things in action, or upon the loan,
use, or sale of credit of the amount or value
of $25,000 or less.
The superior court ruled that Berger violated the plain
language of AS 06.20.300(a):
[Berger] "contracted for" a "consideration"
upon the "forbearance" of a "thing in
action". The contract entered into between
[Berger] and the individual applicant
provided that [Berger] would receive
consideration in the form of the applicant's
1989 Dividend (a "thing in action") or its
cash equivalent. [Berger] would forbear the
right to receive the Dividend or payment
until January 1, 1990. Therefore, AS
06.20.300 required that the consideration
received by [Berger] in these transactions
not be greater than authorized by law.
This misconstrues AS 06.20.300. Berger will receive a
handsome return on his purchases. However, the statute only
forbids handsome returns -- those in excess of the legal rate --
where there is (1) a loan/use/forbearance of money/goods/things
in action, or (2) a loan/use/sale of credit.
In this case Berger relinquished money. Thus, AS
06.20.300 only prohibits the transaction if, when Berger paid
each PFD seller, he was engaging in the loan or forbearance of
It is clear that Berger did not engage in the
forbearance of money;11 whether he loaned money is less clear.
There are two methods for determining whether Berger loaned
money. First, did Berger's transactions fit the objective
definition of a loan? Second, were the transactions loans
disguised as sales? If the answer to either question is yes,
Berger loaned money in violation of ASLA.12
2. The transactions do not fit the
definition of a loan.
A loan is the payment of money by a lender to a
borrower in exchange for an agreement to repay with or without
interest. See Southwest Concrete Prods. v. Gosh Constr. Corp.,
798 P.2d 1247, 1249 (Cal. 1990) ("A loan of money is the delivery
of a sum of money to another under a contract to return at some
future time an equivalent amount."); Liberty Nat'l Bank & Trust
Co. v. Travelers Indem. Co., 295 N.Y.S.2d 983, 986 (N.Y. App.
1968) ("A loan is defined in Webster's New Twentieth Century
Dictionary (1964) as '. . . anything furnished for temporary use
to a person at his request, on the condition that it shall be
returned, or its equivalent in kind, with or without a
compensation for its use . . . .'"); Consumer Credit Code (1974
Act) ' 1.301(25)(a)(i) (defining loan as including "the creation
of debt by the lender's payment of or agreement to pay money to
the debtor or to a third person for the account of the debtor").
A sale is the payment of money by a buyer to a seller
in exchange for title and possession of property. See Cullen v.
Bragg, 350 S.E.2d 798, 799-800 (Ga. App. 1987) (assignment of
expected tax refund of $474 for immediate payment of $296.53 a
sale rather than a loan); Grinnell Corp. v. United States, 390
F.2d 932, 947-48 (Ct. Cl. 1968) (describing sale as, normally,
transfer of property for a price); Kline v. Robinson, 428 P.2d
190, 194 (Nev. 1967) ("A sale is the transfer of the property in
a thing for a price in money. The transfer of the property in
the thing sold for a price is the essence of the transaction.");
U.C.C. ' 2-106(1) (1987) ("A 'sale' consists in the passing of
title from the seller to the buyer for a price.").
In this case, Berger gave each seller money in exchange
for a PFD and a promise to repay Berger the value of the PFD if
the State did not send Berger the proceeds. These transactions
thus contain elements of both definitions but do not exactly fit
either. The conditional guarantees add the element of possible
repayment (found in a loan) to a transfer of property for money
Case law holds that repayment guarantees do not
necessarily turn sales into loans. Where such guarantees exist,
however, transactions must be scrutinized to determine if they
are disguised loans. See Investors Thrift v. AMA Corp., 63 Cal.
Rptr. 157, 159 (Cal. App. 1967) ("[A] guarantee of the validity
of accounts implemented by an agreement to repurchase
'uncollectible or dispute accounts' [does] not, per se, render
the transaction a loan."); Refinance Corp. v. Northern Lumber
Sales, 329 P.2d 109, 113 (Cal. App. 1958) ("[T]he giving of a
guaranty is simply an item of testimony or evidence which the
trial court may consider in determining whether the transaction
is in fact a loan . . . ."); Webster v. Sterling Fin. Co., 195
S.W.2d 509, 515 (Mo. 1946) ("[S]ome or all of the unsold
installments in each note were pledged to secure the payment of
the alleged sold installments, but we find no case or text that
such would be evidence tending to show that the transactions were
not sales, as stated in the sale agreements."); Coast Fin. Corp.
v. Ira F. Powers Furniture Co., 209 P. 614, 615 (Or. 1922) ("The
great weight of authority is that [a guaranteed] transaction
should be regarded as a valid sale of a chattel with a warranty
of soundness . . . ."); Val Zimmermann Corp. v. Leffingwell, 318
N.W.2d 781, 790 (Wis. 1982) (When unsure if a guarantee makes a
transaction a loan, "examine all of the allegations . . . to
determine whether . . . [it is] a usurious loan."). Because the
presence of the guarantees precludes finding that the
transactions were by definition either loans or sales, we turn to
the question of whether the transactions were disguised loans.
3. The transactions are not disguised loans.
Courts often "pierce" suspicious commercial
transactions to examine their true nature. See, e.g., Milana v.
Credit Discount Co., 163 P.2d 869, 871 (Cal. 1945) ("The courts
have been alert to pierce the veil of any plan designed to evade
the usury law and in doing so to disregard the form and consider
the substance."). See generally Hubachek, supra, at 145-78
(discussing small loan law evasion). Berger's transactions are
sale-loan hybrids and should be subjected to the disguised loan
analysis we articulated in two prior cases, McGalliard v. Liberty
Leasing Co., 534 P.2d 528 (Alaska 1975), and Metcalf v. Bartrand,
491 P.2d 747 (Alaska 1971).
We first addressed a disguised loan transaction in
Metcalf. The transactions at issue began when Bartrand was
denied a bank loan. Id. at 748. Her friend, Metcalf, offered to
buy part of Bartrand's land for $3,500, but allow her to keep
possession of the land. Id. at 748-49. In return, Bartrand
agreed to buy the land back from Metcalf for $7,000 over three
years. Id. When Bartrand later needed more money, Metcalf
purchased another parcel of her land for $5,000 and she agreed to
buy it back from him for $10,000 over two years. Id.
When Bartrand failed to keep up her purchase payments,
Metcalf filed a foreclosure action claiming that Bartrand was in
default on her contract payments. Id. Bartrand raised usury as
a defense. Id. At trial, Metcalf testified that the
transactions were sales and repurchases. Id. Bartrand testified
that they were loans, and that she had intended to repay the
money she had received. Id. The trial court found that the
parties intended to make a loan, and that it was usurious and
On appeal, we upheld the trial court's characterization
of the transactions as disguised usurious loans. Id. at 750-51.
We held that the court must look "not to the form but to the
substance of the transactions." Id. at 751. We listed six
factors for trial courts to consider in deciding whether a
transaction is a disguised loan: (1) adequacy of consideration,
(2) possession, (3) parties' conduct, (4) parties' financial
status, (5) parties' expectations, and (6) accuracy of documents.
Id. at 750. We also held that Bartrand did not have to prove
mutual intent to disguise a loan. Id. at 750-51. We concluded
that the evidence presented at trial, including Bartrand's
testimony of her intent to repay the money she received, was
sufficient to support the trial court's finding of a disguised
usurious loan. Id.
Our second disguised loan case was McGalliard v.
Liberty Leasing Co., 534 P.2d 528 (Alaska 1975). The McGalliards
desired to acquire trade fixtures. They selected what they
wanted from a fixture supplier, Western Fixtures. It was
arranged that Liberty Leasing would pay $17,836.88 to Western for
the fixtures and lease them to the McGalliards who would make
thirty-six lease payments totalling $24,721.92 to Liberty. Id.
at 529. At the end of three years, Liberty would extend the
lease indefinitely for annual payments of $1,783.68. Id. After
one extension Liberty would normally abandon leased property to
its lessees. Id. at 532.
When the McGalliards defaulted after making nineteen
payments, Liberty sued them for the balance of the lease. Id. at
529. The McGalliards raised usury as a defense. Id. The trial
judge found that the usury statute did not cover the transaction
and the McGalliards appealed. Id. In deciding McGalliard, we
again listed several factors to consider in determining whether a
transaction is a disguised loan: (1) the parties' intent, (2) the
parties' discussion of alternatives, (3) the parties'
relationship, (4) trade custom, (5) adequacy of consideration,
and (6) computation of "charges in a manner in which loan
interest is usually computed." Id. at 530. We found that there
was substantial evidence that both parties intended to treat the
transaction as a loan. Id. at 530-33. We reversed the trial
judge and held that the "transaction was a third-party loan," id.
at 533, that is a loan by Liberty, the proceeds of which were
used by the McGalliards to buy fixtures from Western.
These cases seem to illustrate that one constant
element of a loan is that the borrower has an expectation to
repay the money advanced unconditionally, and not merely in
default of some other occurrence.13 See McGalliard, 534 P.2d at
530; Metcalf, 491 P.2d at 750; see also Kline v. Robinson, 428
P.2d 190, 194 (Nev. 1967) (holding that a loan is the transfer of
money under a contract to repay, "and if such be the intent of
the parties the transaction will be deemed a loan regardless of
its form"). In both Metcalf and McGalliard the borrowers
intended to repay the entity which had advanced money, not only
because there was a legal obligation to do so, but because that
was in their economic interest at the time each transaction was
entered into. McGalliard, 534 P.2d at 529-30; Metcalf, 491 P.2d
In the present case, it is obvious from the structure
of the questioned transactions that the PFD sellers did not have
an unconditional repayment expectation, as distinct from
knowledge that repayment might be forced upon them as a secondary
remedy.15 To cast the transactions in the present case in
lender/borrower terms, forfeiture of the security (the PFD) is
what the borrower intends and expects. Payment of the whole
amount of the PFD to the lender (Berger), as distinct from
allowing the forfeiture of the security, has no particular
advantage from the borrower's standpoint because the security is
the exact equivalent of the amount owed and is not independently
useful to the borrower. These transactions thus lack an
essential element of disguised loans and are therefore not
forbidden by ASLA.
Because Berger did not loan or forbear money, ASLA does
not cover his purchase of PFD rights, and the State cannot
successfully raise ASLA as a defense to paying Berger.
Therefore, we REVERSE the decision of the superior court and
REMAND for proceedings consistent with this opinion.
COMPTON, Justice, with whom RABINOWITZ, Justice, joins,
dissenting in part.
I conclude that the transactions at issue were
disguised loans subject to the interest rate limitation of the
Alaska Small Loans Act. Since the monetary return to Berger
exceeded that limitation, the loan may not be enforced. AS
06.20.310. Thus, I dissent from Section II(B)(3) of the opinion.
The court concludes that the transactions were not
disguised loans because the "sellers did not have an
unconditional repayment expectation, as distinct from knowledge
that repayment might be forced upon them as a secondary remedy."
A fair reading of the record, however, reveals that the sellers
did have an unconditional repayment expectation.16 By signing the
Purchase Agreement the sellers knew that there was no condition
under which the money represented by the permanent fund dividend
would not be paid to Berger. Furthermore, the sellers knew that
they were ultimately responsible for this payment.
While the court minimizes the importance of the
repayment guarantees, I consider them crucial to resolving the
sale/loan question. An appropriate analogy, given the sui
generis nature of permanent fund dividends, is to the sale of
accounts receivable at a discount. Parties holding accounts
receivable often sell them at less than their face value to
obtain immediate cash in hand. If the seller of the accounts is
"absolutely released from the obligations imposed by the
instrument upon its discount and subsequent transfer," Western
Auto Supply Co. v. Vick, 277 S.E.2d 360, 369 (N.C. 1981), aff'd
on rehearing, 283 S.E.2d 101 (1981), then the transfer is
considered a true sale not subject to usury laws. See Milana v.
Credit Discount Co., 163 P.2d 869, 871 (Cal. 1945) ("Contractors
are free to buy and sell their property, and this may include
promissory notes and other instruments, at a price agreed upon,
and when the bona fides of the parties is established the
percentage of profit has no relation to the usury law.").
Conversely, if the seller of the accounts remains
ultimately responsible for repayment, by means of an endorsement
or guarantee, then such transfers are considered loans subject to
usury laws, regardless of how the parties describe the
transaction. See, e.g., Western Auto Supply, 277 S.E.2d at 368
("[I]f the purchaser of a note requires the endorsement of the
seller as a guaranty of payment . . . the transaction is, in
effect, a loan."); Dorothy v. Commonwealth Commercial Co., 116
N.E. 143 (Ill. 1917) (a purported sale of discounted accounts
receivable was actually a pledge of those accounts for a loan of
money, due to the fact that the seller guaranteed payment of the
accounts); Mercantile Trust Co. v. Kastor, 112 N.E. 988, 991
(Ill. 1916) ("Calling the transaction a sale of accounts does not
alter the fact that the transaction is merely an advancement of
money, to be repaid by the borrower with a rate of interest
greater than that allowed by law."); Brierley v. Commercial
Credit Co., 43 F.2d 724, 727 (E.D.Pa. 1929) ("[The seller] got
money from the credit company and was bound to see that money in
the same amount was returned to the credit company when the
accounts came due. What it paid for the accommodation of getting
the money from the credit company, instead of having to wait to
collect it from its customers, was really interest, though it was
called by another name."); Milana v. Credit Discount Co., 163
P.2d at 872 ("The significant fact is that if the defendants had
really purchased the accounts and had taken absolute title there
would be no occasion for the provision or practice relating to
guarantees of payment within specified periods. . . .").
The distinction these cases draw between sales and
loans, a distinction which focuses on the alleged seller's
continuing obligations to the buyer, offers a more meaningful
method of rooting out disguised loans than the rule established
by the court today. I would apply this authority to the present
case. By requiring permanent fund dividend "sellers" to
guarantee repayment unconditionally, the Purchase Agreement
"create[d] a debit and credit relationship which [was] not
terminated until replacement of the sum borrowed with agreed
interest." Id. at 871. In other words, the Purchase Agreement
created a loan. I would so hold.
1 Each PFD was estimated to be worth $840, and turned out
to be worth $873.16.
2 In 1992 the legislature amended AS 43.23.069(a) to
prohibit PFD assignments. This amendment has no effect on the
3 Subsection (b) was passed at a time when the rate it
permitted was substantially higher than the 10.5 percent rate
allowed under subsection (a). At this writing, however, the rate
charged by the Federal Reserve is 5.25 percent and the
permissible rate under subsection (b) is therefore 10.25 percent.
This obviously paradoxical situation would appear to be worthy of
4 The legislative history does not state this, but the
Uniform Small Loan Law and the original Alaska Small Loan Act are
nearly identical. Compare Ch. 73 SLA 1955 with Hubachek, supra,
5 In 1993 the legislature repealed ASLA's criminal
penalty provision. Ch. 26, ' 102, SLA 1993.
6 Whether the State can raise ASLA as a defense is a
question of law. We review questions of law using our
independent judgment and apply the "rule of law which is most
persuasive in light of precedent, policy and reason." Summers v.
Hagen, 852 P.2d 1165, 1169 (Alaska 1993).
7 The State also argues that the doctrine of "estoppel"
does not apply. Berger does not use the term estoppel, but
claims that because the State did not raise ASLA until other
claims failed, "the State's position is one of convenience rather
than conviction." He does not cite any legal authority or
explain why this is legally significant. Therefore, we do not
address the estoppel argument. Adamson v. University of Alaska,
819 P.2d 886, 889 n.3 (Alaska 1991).
8 Although the State speaks in the present tense, the
legislature repealed ASLA's criminal penalty provision in 1993.
Ch. 26, ' 102, SLA 1993.
9 Whether ASLA applies to these transactions is a
question of law. We review questions of law using our
independent judgment and apply the "rule of law which is most
persuasive in light of precedent, policy and reason." Summers v.
Hagen, 852 P.2d 1165, 1169 (Alaska 1993).
10 We interpret the word "use," in this context, to be
parallel and similar in meaning to the word "loan" and to apply
when the subject matter is goods or things in action rather than
11 To forbear money is to refrain from collecting a debt.
See Boerner v. Colwell Co., 577 P.2d 200, 204 n.7 (Cal. 1978) ("A
'forbearance' of money is the giving of further time for the
repayment of an obligation or an agreement not to enforce a claim
at its due date."); H.V. Tygrett v. University Gardens
Homeowners' Ass'n, 687 S.W.2d 481, 483 (Tex. App. 1985)
("'Forbearance' occurs when there is a debt due or to become due,
and the parties agree to extend the time of its payment.").
12 The superior court analyzed the transactions to
determine if they were disguised loans, but found that "it [was]
not necessary to address this argument, given the fact that ASLA
specifically covers the transactions."
13 By contrast, the lender may not expect the borrower to
repay the money advanced and, as in Metcalf, may hope that it is
not repaid because the value of the security exceeds the amount
owed. Metcalf, 491 P.2d at 749.
14 Repayment by the borrower in Metcalf was in the
borrower's interest because the security was worth more than the
amount owed. In the case of McGalliard, repayment was in the
borrower's interest because the secured property was needed for
the borrower's business.
15 In the accounts receivable financing cases cited by the
dissent, the "seller" of the accounts receivable continued to
collect the proceeds due under the accounts from the account
debtors and forward them to the "buyer" of the accounts
receivable. Brierley v. Commercial Credit Co., 43 F.2d 724, 726
(E.D. Pa. 1929); Milana v. Credit Discount Co., 163 P.2d 869,
871 (Calif. 1945); Dorothy v. Commonwealth Commercial Co., 116
N.E. 143, 147 (Ill. 1917); Mercantile Trust Co. v. Kastor, 112
N.E. 988, 989 (Ill. 1916); Western Auto Supply Co. v. Vick, 277
S.E.2d 360, 366 (N.C. 1981). Thus the "seller" expected to repay
the buyer (by forwarding payments from account debtors) if the
transaction proceeded as the seller expected that it would; the
obligation to repay the buyer was thus not merely activated in
default of receipt of payments by account debtors. Thus these
cases are consistent with our decision in the present case.
Further, unlike the present case, the accounts receivable
financing cases involve continuing business relationships between
the parties which are in substance indistinguishable from
traditional lender/borrower roles.
16 The "Purchase Agreement" provided,
In the event that the Seller's Alaska
Permanent Fund Dividend or cash equivalent
thereof is not transferred to the Buyer by
January 1, 1990, due to the Seller's failure
to qualify for an Alaska Permanent Fund
Dividend, non-delivery of the Alaska
Permanent Fund Dividend to the Buyer, or a
claim to the Seller's Alaska Permanent Fund
Dividend paramount to the Buyer's then the
Seller shall be in material breach of this
This clause was followed by a confession of judgment.