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Offices of Steven D. Smith, P.C. v. Borg-Warner Security Corp. (12/23/99)
sp-5222
Law Offices of Steven D. Smith, P.C. v. Borg-Warner Security Corp. (12/23/99)
sp-5222
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907)
264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
LAW OFFICES OF STEVEN D. )
SMITH, P.C., ) Supreme Court No. S-8250
)
Appellant, )
) Superior Court No.
v. ) 3AN-94-4331 CI
)
BORG-WARNER SECURITY CORP., ) O P I N I O N
formerly BORG-WARNER CORP., )
and its Division MARVEL- ) [No. 5222 - December 23, 1999]
SCHEBLER/TILLOTSON, FACET )
AEROSPACE PRODUCTS CO., )
PUROLATOR PRODUCTS CO., )
formerly FACET ENTERPRISES, )
INC., all Delaware )
Corporations, )
)
Appellees. )
)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
John Reese, Judge.
Appearances: Steven D. Smith, Law Offices of
Steven D. Smith, P.C., and Michael W. Flanigan, Walther & Flanigan,
Anchorage, for Appellant. Bruce A. Bookman and Helena L. Hall,
Perkins Coie, LLP, Anchorage, for Appellees.
Before: Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.
COMPTON, Justice.
I. INTRODUCTION
This is the fourth appeal to arise from a 1986 airplane
crash apparently caused by a defective carburetor made by Borg-
Warner Security Corporation (Borg-Warner). The first two appeals
concerned the superior court's 1989 dismissal, on statute-of-
limitations grounds, of a wrongful-death suit against Borg-Warner.
[Fn. 1] Attorney Steven Smith, representing the estate of
passenger Merrett Palmer, had filed the suit. Smith learned after
the suit's dismissal that Borg-Warner had fraudulently concealed
evidence of the allegedly defective carburetor. In 1994, after the
estate's successful second appeal, the superior court held on
remand that Borg-Warner's conduct excused the estate's lateness in
filing suit. The estate eventually recovered five million dollars.
Smith, however, was paid nothing. While its appeals were pending,
the estate had terminated Smith's contingent-fee contract and sued
him for malpractice. In settling that suit, Smith had waived any
claim for attorney's fees based on his contingent-fee contract with
the estate.
In 1994 Smith sued Borg-Warner for fraud and intentional
interference with contract. The superior court dismissed his
claims on the basis of the statute of limitations. Applying the
two-year limitation period for torts, and the discovery rule, the
court held that by the time Smith had lost his contingent-fee
contract, been sued for malpractice, and learned of Borg-Warner's
fraudulent concealment, he had discovered his potential claims
against Borg-Warner. Unfortunately for Smith, that time was 1990.
Smith argues on appeal that he could not have sued until
the superior court reinstated the estate's claim in 1994. He
reasons that he had been collaterally estopped to argue, and/or had
not yet discovered, that Borg-Warner's fraud, and not his own
negligence, had been the legal cause of the estate's tardiness in
filing suit. Smith also argues that the six-year statute of
limitations for actions for injury to personal property governs his
claims, not the two-year tort statute, because he seeks to recover
economic losses. Finally, he claims that Borg-Warner's misconduct
should estop it to plead or should equitably toll the statute of
limitations. We affirm.
II. FACTS AND PROCEEDINGS
A. Preface
The complex history of this second-generation lawsuit is
necessary to provide the context for the issues before us. It
involves two streams of sometimes overlapping events, each of which
has its own causal sequence. One is the Palmer estate's ultimately
successful claim against Borg-Warner, including five key rulings by
the superior court and this court from 1989 to 1994. The other is
Smith's litigation with the estate and with Borg-Warner and its
attorneys. We first recount the history of Palmer v. Borg-Warner
from 1986 to 1994, and then return to 1986 and recount Smith's
interactions with the estate, Borg-Warner, its counsel, and the
courts, indicating the stage of and then-in-force holdings in
Palmer v. Borg-Warner.
B. The Palmer v. Borg-Warner Litigation
The following account, with alterations as noted in the
margin, [Fn. 2] is from this court's second Palmer v. Borg-Warner
Corp. [Fn. 3] opinion (Palmer II). We stress that Borg-Warner's
fraudulent concealment was not, as in many such cases, a response
to the underlying tort, i.e., the 1986 crash that killed Palmer.
It instead consisted of Borg-Warner's 1981 deception of the Federal
Aviation Administration (FAA) in order to conceal a manufacturing
defect that later caused, inter alia, the 1986 crash.
On September 8, 1986, a Piper aircraft crashed in
the Brooks Range. Kenneth Swanson, the pilot, and Merrett Palmer,
his sole passenger, died in the accident. Palmer's widow was
informed of her husband's death by September 11, 1986. On October
1, 1986, the aircraft's engine was removed from the scene of the
crash and later transported to Fairbanks. The National
Transportation Safety Board (NTSB) then began an investigation into
the cause of the crash, issuing its findings in July 1987. (The
NTSB controls access to aircraft wreckage from the time of a crash
until its investigation is complete.) The NTSB's report found
probable cause to believe that the crash had been caused by pilot
error.
The report also noted that the "carburetor was
intact and showed no signs of external damage other than heat
damage"and that the "carburetor was equipped with a fibre
composite float which was heavily damaged by the fire."
On July 30, 1987, the Palmer estate filed a
wrongful-death action against the estate of Kenneth
Swanson. In November the Swanson estate answered, asserting, inter
alia, that (a) third parties were responsible for the accident; and
(b) the Palmer estate had failed to join indispensable third
parties. Neither the basis for the third parties' liability nor
the third parties were identified. On September 7, 1988, one day
before the second anniversary of the crash, Swanson's estate filed
a wrongful-death action against Borg-Warner, the carburetor
manufacturer, [Fn. 4] specifically alleging that a defective
carburetor had caused the crash. [Swanson's attorneys had obtained
evidence of Borg-Warner's concealment of the defect through
discovery in an unrelated suit, and had not shared this finding
with Smith.]
On September 19, 1988, the Palmer estate, after
learning that the cause of the crash was more likely a defective
carburetor float than pilot error, agreed to the dismissal of its
suit against the Swanson estate. The Palmer estate filed suit
against Borg-Warner the next day, two years and nine days after
Palmer's widow had first learned of the accident.
Borg-Warner moved for summary judgment against the
Palmer estate, arguing that the estate's suit for wrongful death
was barred by the two-year statute of limitations provided in
AS 09.10.070. The Palmer estate argued that, "[a]s of September
20, 1986, Plaintiffs did not know, nor could they have reasonably
been expected to know, that the carburetor of the aircraft
. . . may have been defective."
On March 14, 1989, the superior court granted
summary judgment for Borg-Warner, ruling the claim time-barred as
a matter of law. (Judge Hodges concluded that as of September 11,
1986, the Palmer estate had been obliged to investigate in some
manner its potential claims for wrongful death.) An Order of
Dismissal was entered against the Palmer estate, and the estate
appealed. We affirmed the dismissal, ruling [in November 1990]
that the estate's suit against Borg-Warner had been untimely filed.
Palmer v. Borg-Warner Corp., 818 P.2d 632, 636 37 (Alaska 1990)
(Palmer I). Alleged fraudulent concealment of the cause of the
crash was not then an issue at either the trial or appellate level.
In February 1990, after a bench trial in the Swanson
estate's suit, Judge Hodges issued a memorandum decision and
findings of fact and conclusions of law. He found that:
[T]he float in the carburetor of the Swanson
aircraft absorbed fuel becoming heavy and sinking causing a sudden
unexpected engine failure; the absorption of the fuel by the float
was a result of a defect in the manufacturing process or a change
in the structure of the float over time; the product was defective
at the time it was manufactured or did not perform as a reasonable
consumer would expect under normal use.
Judge Hodges held Facet Enterprises, Inc. [a Borg-
Warner subsidiary], legally responsible for the death of
Kenneth Swanson because of Facet's failure "to manufacture a
carburetor and carburetor float that would perform in a manner that
a reasonable consumer would expect." He also found by clear and
convincing evidence that:
Facet knew that some . . . composite floats
[had a manufacturing defect that led them to] absorb fuel and
become "heavy"; that [Facet] knew [that] a heavy carburetor float
. . . could cause an unexpected loss of power while in flight; that
although they suspected [that] the use of auto gas adversely
affected the . . . float, none of the tests conducted by them [had]
substantiated this; that in spite of the lack of evidence, they
published to the FAA, the engine manufacturer, and the public, as
fact, that auto gas had an adverse effect on the . . . float; [that
it saved Facet money to convince the FAA to attribute the float
problem to the use of auto gas, and not to a defect]; that Facet
concealed from the consumers (the engine manufacturer, the airplane
manufacturer, and the ultimate user) the fact that some floats in
use had [manufacturing defects]; that this failure to disclose is
outrageous conduct and [reflects] a reckless disregard of the
rights of others entitling Swanson to an award of punitive
damages.[ [Fn. 5]]
Borg-Warner settled with the Swanson estate prior to
entry of final judgment. [This court later held, in Borg-Warner's
suit for contribution against the makers of the engine, plane, and
carburetor float, that Judge Hodges's findings collaterally estop
Borg-Warner from relitigating whether it had outrageously and
fraudulently concealed evidence, with reckless disregard for the
rights of others.[ [Fn. 6]] Borg-Warner appropriately does not
challenge that fact in this appeal.]
On April 23, 1990, the Palmer estate filed a Civil
Rule 60(b) motion for relief from judgment. The Palmer estate
argued that the finding in the Swanson estate's case that
Borg-Warner had engaged in misconduct by concealing from the public
the cause of carburetor failure, required that the earlier judgment
dismissing the Palmer estate's case be vacated. Judge Hodges
denied this motion without comment, findings or conclusions. The
Palmer estate appeal[ed].
In Palmer II, this court considered the claim that Borg-
Warner had fraudulently concealed the real reason that the
carburetor tended to cause crashes, i.e., a defect, not the use of
auto gas. It held that newly discovered evidence of such
concealment could warrant relief from the judgment of dismissal
under Alaska Civil Rule 60(b)(2). Once relieved from the
dismissal, the estate then could argue that Borg-Warner's conduct
equitably estopped it to plead the statute of limitations. [Fn. 7]
This court focused in part on whether the Palmer estate
could show the diligence required for equitable estoppel, i.e.,
that it had filed suit soon after it had "discovered or reasonably
should have discovered the fact that evidence of a potential cause
of action had been fraudulently concealed."[Fn. 8] This court
made two pertinent comments about the relationship between the
estate's and Smith's negligence in investigating the cause of the
crash, and Borg-Warner's deceit in having, before the crash,
concealed evidence that would have aided that investigation:
In Palmer I, we held that the statute of
limitations began to run on the date the Palmer estate became aware
of the crash because it "reasonably should have known from [that]
date that potential claims existed against the pilot, the carrier,
or the manufacturers." 818 P.2d at 634. This holding does not
conflict with the rule that fraudulent concealment precludes a
defendant from relying on the statu[t]e of limitations. Estoppel
is "used as a means of preventing [a party] from taking an
inequitable advantage of a predicament in which his [or her] own
conduct had placed his [or her] adversary."Estoppel does not
require that defendant's representation be the sole cause of
plaintiff's predicament. It is enough that the representation
influenced plaintiff's conduct. . . . [W]hen a defendant
accomplishes his or her goal of deceiving the plaintiff, then it
should not matter that the plaintiff is partly at fault for his or
her predicament unless his or her conduct is utterly unreasonable.[[Fn. 9]]
. . . .
In Palmer I we held that the Palmer estate had
not exercised due diligence[,] and that a diligent inquiry would
have revealed the elements of the Palmer estate's cause of action
against Borg-Warner. However, if the Palmer estate is able to show
fraud or intentional concealment of material facts on the part of
Borg-Warner, the Palmer estate's failure to engage in a reasonable
inquiry will be excused.[ [Fn. 10]]
Palmer II thus did not undermine Palmer I's holding that
the estate (and Smith) had not reasonably inquired into the cause
of the crash, i.e., that they had been "partly at fault for [their]
predicament." This court merely concluded that, if Borg-Warner had
previously fraudulently concealed evidence, then that conduct would
equitably estop Borg-Warner to plead the statute of limitations.
This was so even if the estate had been negligent, so long as it
had not been "utterly unreasonable for the [estate] not to [have
become] aware of the deception"before the limitation period had
run. [Fn. 11] This court remanded the case to the superior court
to reconsider the estate's Rule 60(b)(2) motion. [Fn. 12]
On remand, the superior court granted the estate's Rule
60(b)(2) motion in June 1994, vacating the summary judgment that
had dismissed the estate's suit. The court found that, while "the
attorneys for the Palmer Estate may have been negligent"in
investigating the crash, "Borg-Warner's misrepresentations [had]
substantially influenced the Palmer Estate's actions,"and the
estate had not been "utterly unreasonable"in failing to discover
the concealment before the March 1989 summary judgment. The estate
then recovered five million dollars from Borg-Warner.
C. The Smith v. Borg-Warner Litigation
Palmer's estate entered into a contingent-fee contract
with Smith in February 1987, five months after the crash. Smith
filed the estate's untimely suit against Borg-Warner in September
1988. Borg-Warner's attorney suggested at oral argument on summary
judgment that Smith could have found in the public record reason to
sue Borg-Warner before the limitation period had run. The court
granted summary judgment, and, in September 1989, while the
estate's appeal was pending, the estate sued Smith for malpractice.
In October 1989 Borg-Warner's attorney, David Hunter, of Lane,
Powell & Barker, argued to this court in Palmer I that the estate's
inability to investigate the plane and crash site during the NTSB
investigation should not toll the statute under the discovery rule.
He detailed the information available in FAA and other public
records.
In February 1990 Judge Hodges found, in Swanson v. Borg-
Warner, that Borg-Warner had fraudulently concealed from the FAA
why its carburetors tend to cause crashes. [Fn. 13] In April 1990
the estate terminated Smith's contingent-fee contract. Three weeks
later Smith filed the estate's Rule 60(b) motion, based on the
Swanson findings, which had alerted Smith to Borg-Warner's
concealment. In July 1990 the court denied the motion, and the
estate filed the Palmer II appeal.
In May 1992, after this court had held in Palmer I that
"[t]he estate [had] failed to exercise 'reasonable diligence' when
it neglected to promptly investigate the possibility of engine
failure,"[Fn. 14] and while Palmer II was pending, Smith and the
estate settled the malpractice claim. [Fn. 15] In the agreement,
Smith expressly waived any claim for fees under the contingent-fee
contract.
This court issued Palmer II, and remanded the case, in
November 1992. While the estate and Borg-Warner were litigating
the estate's revived Rule 60(b) motion, Smith filed suit against
Borg-Warner, Hunter, and Lane, Powell & Barker on May 18, 1994.
Smith never served his original complaint. He has affied that, as
of April or May 1994, he knew that the court would soon rule on the
estate's Rule 60(b) motion, and that he did not intend to serve the
complaint "unless or until [the court] reinstated Palmer's cause of
action because [otherwise he] would have no economic loss." On
June 10, 1994, the court granted the estate Rule 60(b) relief. In
September 1994, Smith filed and served an amended complaint (and
motion for extension of time for service).
Smith's amended complaint alleged that the defendants
had, during the Palmer litigation, committed fraud and
intentionally interfered with his contingent-fee contract by
communicating to the estate that if Smith had diligently examined
the public record, he could have timely seen the need to file the
estate's suit against Borg-Warner. Smith claims that this was
fraudulent because Borg-Warner and its attorneys had known, but not
disclosed, that Borg-Warner had fraudulently distorted the public
record. [Fn. 16]
It is important to remember that Smith's suit, unlike the
estate's efforts to obtain relief from the dismissal of Palmer v.
Borg-Warner, is predicated on what he calls "Phase 2"of the fraud.
"Phase 1"consists of Borg-Warner's efforts, in the years before
the crash, to fraudulently conceal evidence in order to distort the
public record about the fact that manufacturing defects, not the
use of auto gas, made its carburetors fail. [Fn. 17] That
fraudulent concealment ultimately led the superior court to relieve
the estate from the dismissal of its suit, and to equitably estop
Borg-Warner from pleading the statute of limitations in that suit.
The fraud that Smith claims harmed him is not the pre-accident
fraudulent concealment, but Borg-Warner's alleged fraud in
litigating Palmer I and Palmer II in 1989 91, i.e., in gaining the
original dismissal, this court's affirmance, and the denial of the
Rule 60(b) motion. The alleged Phase 2 fraud was to convince the
court and the estate that Smith, not Borg-Warner, was to blame for
the late filing because, had Smith investigated the public record,
he would have timely realized the need to sue Borg-Warner. That
argument allegedly constitutes fraud, and supports a piggybacked
intentional interference with contract claim, because Borg-Warner
knew that it had distorted the public record to hide evidence that
would have led a reasonable attorney to sue Borg-Warner.
In April 1997 the court granted Borg-Warner and Lane,
Powell & Barker summary judgment on the ground that Smith had not
filed his suit within the applicable two-year tort period of
limitation. The court reasoned that by April 1990, Smith had known
of the acts giving rise to, and had suffered most of the injuries
underlying his claim. The court denied Smith's motion to
reconsider and entered a final judgment in July 1997. Smith
appeals.
III. DISCUSSION
A. Summary of Issues and Standards of Review
This court reviews summary judgments de novo. Where
there is no genuine dispute of material fact, this court will
affirm if the undisputed facts entitle the movant to judgment as a
matter of law. [Fn. 18] This court views the facts in the light
most favorable to the nonmovant and draws all reasonable inferences
in his or her favor. [Fn. 19]
At least one issue, whether the six- or two-year statute
of limitations governs Smith's claims, poses a general question of
law [Fn. 20] that this court reviews de novo, adopting the rule
that best reflects precedent, reason, and policy. [Fn. 21] Smith
notes that other issues in the case "require factual
determinations."[Fn. 22] Some of his claims about standards of
review for various issues are debatable. But this case was
dismissed on summary judgment, and so this court's review of the
dismissal as it relates to various issues does not depend on
whether the issues are factual or legal. Even if some of them are
factual, and so would be reviewed for clear error in a post-trial
appeal, this court must in reviewing a summary judgment determine
whether, on the undisputed facts viewed in the light most favorable
to Smith, Borg-Warner was entitled to judgment as a matter of law.
B. Could Smith Have Filed Suit Before the June 1994 Ruling
that Reinstated the Estate's Claim Against Borg-Warner?
Smith makes two related arguments that both turn on the
premise that he timely filed his suit because he could not have
done so before the superior court had reinstated the estate's claim
against Borg-Warner in June 1994. Smith argues that the grant of
Rule 60(b) relief removed the bar of past judgments which held, as
he reads them, that his negligence, and not Borg-Warner's fraud,
had caused the estate to file suit late. He argues in terms of
issue preclusion that he "could not ignore the prior
adjudication[s]"to that effect, and, in terms of the discovery
rule, that he "could not have known the causal element [of his
claims] before the prior adjudications were reversed."
1. Smith's discovery-rule argument is inadequately
briefed.
Smith argues that (1) "a cause of action does not accrue
until the plaintiff discovers or reasonably should discover the
existence of all of the elements of his cause of action"; [Fn. 23]
(2) one element of his cause of action is proximate cause, i.e.,
that Borg-Warner's conduct was the legal cause of the injury or
damages suffered; and (3) the reinstatement of the estate's cause
of action "supplied the necessary element of a [proximate] causal
connection between the conduct of Borg-Warner/Facet and Smith's
damages and eliminated Smith as the sole cause."
Because Smith has failed to adequately brief an argument
for his novel proposition, we decline to consider it.
2. Was Smith collaterally estopped to argue that Borg-
Warner's fraud had harmed him until the court
relieved the estate from dismissal?
We find unpersuasive Smith's suggestion that, in the
early 1990s, he thought that he was estopped from suing Borg-Warner
for intentional torts because of what he perceived as a prior
finding that he had been negligent. While we accept the portion of
Smith's characterization of the prior final judgments that concerns
his "negligence,"we do not accept his claim that the dismissal of
the estate's suit was based on merely his fault and not Borg-
Warner's. Borg-Warner's fraudulent concealment and alleged
secondary fraud in Palmer were not at issue below or on appeal in
Palmer I. [Fn. 24] Smith concedes that the superior court denied
the estate's 1990 Rule 60(b) motion without comment, and so the
issue of the relative effect of his negligence and Borg-Warner's
fraudulent concealment was not even arguably "decided." Moreover,
Judge Hodges's dismissal of the Rule 60(b) motion, even had it
arguably "decided"the issue of Smith's alleged negligence, would
not have barred him from suing Borg-Warner on his own behalf at the
same time as he filed the estate's Rule 60(b) motion.
Smith's only plausible argument is that he was
collaterally estopped from relitigating his negligence in
comparison to Borg-Warner's alleged fraud. However, it is unlikely
that his negligence would have prevented him from recovering from
Borg-Warner for fraud. "The clearly prevailing view is that
comparative negligence principles are not applicable to intentional
torts. . . . Before comparative negligence was widely adopted, it
was black-letter law that contributory negligence principles were
not a defense to an intentional tort action. And under comparative
negligence, this . . . carried over and became the general rule[.]"
[Fn. 25] In fact, this court noted in Palmer II that a plaintiff's
"mere negligence"cannot bar its attempt to equitably estop a
fraudulent defendant because "such a standard would be 'clearly
inconsistent with the general rule that mere negligence of the
plaintiff is not a defense to an intentional tort.'"[Fn. 26]
Finally, we note that it seems very dubious as a matter
of policy to let litigants who erroneously believe their suits are
barred by collateral estoppel to argue that the statute of
limitations is tolled until they believe or reasonably should
believe that the estoppel has been removed. Borg-Warner is right
that Shaw v. State, Department of Administration, [Fn. 27] which
Smith cites to support his proposition, is not a collateral-
estoppel case.
We conclude that a party arguing that the statute of
limitations should be tolled because of collateral estoppel must
show that the estoppel bar made suit futile by clear and convincing
evidence. In Smith's case, the likelihood of Borg-Warner's success
in using collateral estoppel to bar his claim was far too remote to
excuse Smith from attempting to file suit.
C. Should the Two- or Six-Year Statute of Limitations Govern
Smith's Claims for Economic Losses Caused by Fraud and Intentional
Interference with Contract?
At all times pertinent to this appeal, Alaska had a six-
year statute of limitations, AS 09.10.050, covering actions "upon
a contract or liability, express or implied"or "for waste or
trespass upon real property"or "for taking, detaining, or injuring
personal property."[Fn. 28] It also had a two-year statute of
limitations, AS 09.10.070, "for any injury to the person or rights
of another not arising on contract and not specifically provided
otherwise."[Fn. 29]
Smith argues that the superior court should have applied
the six-year statute to his claims for economic loss. He bases
this argument on the text of AS 09.10.070(a)(1) and
AS 09.10.050(3), and on two cases, Lee Houston and Associates v.
Racine [Fn. 30] and Breck v. Moore. [Fn. 31]
Smith argues that the loss caused by the cancellation of
his contingent-fee contract is the loss of a right arising from
contract and is therefore excluded from AS 09.10.070(a)(1) which
refers to an action for any injury to the rights of another "not
arising on contract." Further, he argues that the loss of his
contingent-fee contract is a personal property right and is thus
specifically covered by AS 09.10.050(3) which refers to an action
"injuring personal property."
Smith's argument concerning the phrase "not arising from
contract"contained in AS 09.10.070 is linguistically possible.
His contention is that the phrase modifies "rights of another."
But we believe that the phrase modifies "an action"for injury to
rights of another rather than "rights of another." We reach this
conclusion for two reasons.
First, distinguishing economic losses arising from the
loss of existing contracts from those economic losses which arise
from lost economic opportunities, as Smith argues, would serve
little purpose. Such a distinction implies that the tort of
intentional interference with contractual relations is governed by
the six-year statute, while the closely related tort of intentional
interference with prospective economic advantage is governed by the
two-year statute. It is difficult to think of any reason why the
legislature would have intended such a result.
Second, reading the phrase "not arising from contract"to
modify "an action"suggests that AS 09.10.070 distinguishes
contract from non-contract actions. Such a reading is consistent
with the fact that contract actions are expressly covered under the
six-year statute. Thus AS 09.10.070 reinforces the legislative
intent expressed in AS 09.10.050(1) that contract actions are
governed by the six-year statute.
Smith's textual argument concerning AS 09.10.050
interprets the term "personal property"used in the phrase "for
taking, detaining, or injuring personal property"to include
economic loss. We reject this interpretation and believe that
"personal property"as used in AS 09.10.050(3) refers to tangible
property. We stated in Kodiak Electric Association v. Delaval
Turbine, Inc. [Fn. 32] "that the phrase 'injuring personal
property' incorporates actions for injury to tangible personal
property." In so doing, we noted that we need not decide "the
exact parameters of the types of actions encompassed within
'injuring personal property.'"[Fn. 33] Subsequent to Delaval we
have decided a number of tort cases -- as distinct from cases which
might be said to arise either in tort or in contract -- involving
economic loss, and have not held that economic loss was encompassed
within the "injuring personal property"language of AS
09.10.050(3). [Fn. 34]
Smith's argument based on Lee Houston and Breck is also
unavailing. In those cases we held that claims arising out of
professional service relationships which involved economic loss
were governed by the six-year rather than the two-year statute. We
noted that such claims might reasonably be said to arise either in
tort or in contract [Fn. 35] and that in such circumstances the
longer limitations period should be chosen. [Fn. 36] In the
present case, there was no contractual relationship between Smith
and Borg-Warner and thus no grounds exist for contending that
Smith's claim is one based on an express or implied contractual
obligation.
In his reply brief, Smith relies on McDowell v. State,
[Fn. 37] in which we held that AS 09.10.050(2) applied to a claim
for underground contamination of the plaintiff's real property by
petroleum products. This holding has no important bearing on the
present controversy as the McDowell claim concerned statutory
"trespass upon real property."[Fn. 38]
Because the economic losses do not constitute "an action
. . . arising on contract"for an injury to Smith's rights, we
conclude that the two-year statute of limitations governs Smith's
claims for economic loss.
D. Borg-Warner's Litigation Conduct Should Not Estop It from
Asserting or Equitably Tolling the Statute of Limitations.
Smith's equitable arguments are plainly without merit.
1. Equitable estoppel
Borg-Warner correctly states that "Smith's equitable
estoppel argument is a red herring." For a plaintiff to equitably
estop a defendant from pleading the statute of limitations, the
plaintiff must show that he or she relied on the defendant's fraud
by either consciously relying on an affirmative misrepresentation,
[Fn. 39] or failing to discover fraudulently concealed evidence.
[Fn. 40]
The estate's success in estopping Borg-Warner from
pleading the statute of limitations against it involved the latter
sort of fraud. Therefore, the estate had only to show that its
ignorance of the deception and its failure to discover "that
evidence of a potential cause of action had been fraudulently
concealed"were not "utterly unreasonable."[Fn. 41] This court
noted in Palmer II that, when a party successfully fraudulently
conceals facts, "the defrauded party's response is inaction . . .
[not] 'reliance' in the sense of a conscious change of position."
[Fn. 42] The defrauded party is "ignorant of the concealment
itself and will not act due to [that] ignorance."[Fn. 43]
Smith can show neither type of "reliance." He cannot
show ignorant inaction resulting from Borg-Warner's initial
fraudulent concealment, for he has affied that he "learned of the
intentional withholding/misrepresentation of Facet"by April 23,
1990. He remained inactive, but not ignorant.
Nor can Smith show conscious, reasonable reliance on
Borg-Warner's statements in Palmer I because their falsity was
manifest by April 1990. Smith alleges that Borg-Warner falsely
blamed him in Palmer I when it implied that he could have timely
determined that the estate should sue Borg-Warner if he had made
reasonable efforts to examine the record. Furthermore, Smith
claims that he could not have discovered this false blame because
Borg-Warner never owned up to fraudulently concealing evidence that
should have been in the public record. No court has ruled on
whether Smith could have unearthed Borg-Warner's fraud, but in
April 1990 Smith himself filed a 60(b) motion on behalf of the
Palmer estate seeking relief from judgment on the grounds that
Borg-Warner had engaged in misconduct by concealing the cause of
carburetor failure. From then on, Smith could not rely on Borg-
Warner's representation that he could have known to sue Borg-Warner
before the statute of limitations had run. [Fn. 44] From then on,
whether Smith or Borg-Warner caused the late filing in Palmer I was
an open question, one that Smith could have litigated.
Smith argues that despite his knowledge of the fraudulent
concealment in 1990, he had no means to "conduct discovery and
gather evidence on the issue"of which party's conduct had caused
Palmer's case to be filed late until after Palmer's remand in
September 1992. We disagree. He could have had "a vehicle by
which to conduct discovery"had he filed a timely suit on his own
behalf. His argument all but admits that he was using the estate's
Rule 60(b) litigation as a dry run for his own suit. Smith's
argument that he "relied upon the court's acceptance of Borg-
Warner/Facet's fraudulent misrepresentation as to the nature of the
public record"is irrelevant to the question whether he relied upon
the misrepresentation, which he plainly did not.
2. Related arguments not made below
Neither Smith nor the trial court addressed the issues of
quasi-estoppel or equitable tolling in the proceeding below. Smith
does not argue on appeal why this court should do so, though the
issues may well be sufficiently related to his equitable estoppel
argument that this court could review them. [Fn. 45] Borg-Warner,
moreover, has responded briefly to the very limited merits of
Smith's points, rather than noting his waiver. Nonetheless, we
decline to address them.
IV. CONCLUSION
The judgment of the superior court is AFFIRMED.
FOOTNOTES
Footnote 1:
The third appeal is of little relevance to this case.
Footnote 2:
For clarity we have cut footnotes or moved their contents to
in-text parentheticals, trimmed peripheral details, and made minor
corrections without noting each change; we have also interpolated,
in brackets, some additional material.
Footnote 3:
838 P.2d 1243 (Alaska 1992).
Footnote 4:
The carburetors were manufactured by Borg-Warner's subsidiary,
Marvel-Schebler/Tillotson. The Marvel-Schebler carburetor line was
later purchased by Facet Enterprises, Inc. [Palmer II, 838 P.2d at
1245 n.3.]
Footnote 5:
Alterations in findings ours.
Footnote 6:
See Borg-Warner Corp. v. AVCO Corp. (Lycoming Div.), 850 P.2d
628, 634 36 (Alaska 1993).
Footnote 7:
See Palmer II, 838 P.2d at 1252.
Footnote 8:
Id. at 1251.
Footnote 9:
See id. at 1249 n.9 (quoting W. Page Keeton et al., Prosser &
Keeton on the Law of Torts sec. 105, at 733 (5th ed. 1984)
[hereinafter Prosser & Keeton on Torts] and citing sec. 108, at
749).
Footnote 10:
See id. at 1251 n.14.
Footnote 11:
Id. at 1251.
Footnote 12:
See id. at 1252.
Footnote 13:
No. 4FA-88-01553 CI, Memorandum Decision at 27-29, 34 (Alaska
Super., February 6, 1990).
Footnote 14:
Palmer I, 818 P.2d at 634 35 n.4.
Footnote 15:
Smith's attorney signed a copy of the agreement on May 4,
1992; Smith did so on May 13. He signed another copy, which still
recited that it had been made on May 4, on May 20. Smith's
malpractice insurer, however, apparently did not sign any copy
until May 26.
Footnote 16:
Smith did not need to plead the fraud specifically.
Nevertheless, his memoranda relied on Borg-Warner's attorneys'
arguments in securing the dismissal in March 1989, in Palmer I in
October 1989, in opposing the Rule 60(b) motion in May 1990, and in
Palmer II in October 1991.
Footnote 17:
See Palmer II, 838 P.2d at 1246.
Footnote 18:
See, e.g., Metcalfe Invs., Inc. v. Garrison, 919 P.2d 1356,
1360 (Alaska 1996).
Footnote 19:
See id.
Footnote 20:
See Jenkins v. Daniels, 751 P.2d 19, 21 (Alaska 1988).
Footnote 21:
See Todd v. State, 917 P.2d 674, 677 (Alaska 1996).
Footnote 22:
Smith argues that the court's application of the discovery
rule, and its refusal to apply equitable estoppel or tolling,
entail factual determinations. He argues that whether Borg-Warner
should be quasi-estopped to assert the statute of limitations is a
question of law.
Footnote 23:
Misquoting though accurately paraphrasing Cameron v. State,
822 P.2d 1362, 1366 (Alaska 1991).
Footnote 24:
See Palmer II, 838 P.2d at 1245 & n.5.
Footnote 25:
Allan L. Schwartz, Annotation, Applicability of Comparative
Negligence Principles to Intentional Torts, 18 A.L.R. 5th 525, 525
(1995); see also Reichert v. Atler, 875 P.2d 384, 389-90 (N.M. App.
1992) (summarizing development of law and collecting authorities).
Footnote 26:
Palmer II, 838 P.2d at 1251 (quoting Prosser & Keeton on Torts
sec. 108, at 750).
Footnote 27:
816 P.2d 1358 (Alaska 1991).
Footnote 28:
At the time this lawsuit was filed, AS 09.10.050 provided:
Unless the action is commenced within six
years, a person may not bring an action
(1) upon a contract or liability,
express or implied, excepting those mentioned in AS 09.10.040;
(2) for waste or trespass upon real
property; or
(3) for taking, detaining, or injuring
personal property, including an action for its specific recovery.
Footnote 29:
At the time this lawsuit was filed, AS 09.10.070(a)(1)
provided:
A person may not bring an action (1) for
libel, slander, assault, battery, seduction, false imprisonment, or
for any injury to the person or rights of another not arising on
contract and not specifically provided otherwise . . . unless the
action is commenced within two years.
Footnote 30:
806 P.2d 848 (Alaska 1991).
Footnote 31:
910 P.2d 599 (Alaska 1996).
Footnote 32:
694 P.2d 150, 156 (Alaska 1984).
Footnote 33:
Id. at n.9.
Footnote 34:
See, e.g., Hayes v. A.J. Associates, 960 P.2d 556, 572 (Alaska
1998); Alaska Tae Woong Venture v. Westward Seafoods, 963 P.2d
1055, 1065 (Alaska 1998).
Footnote 35:
See Lee Houston, 806 P.2d at 853-54.
Footnote 36:
Id. at 855.
Footnote 37:
957 P.2d 965 (Alaska 1998).
Footnote 38:
Id. at 966.
Footnote 39:
See, e.g., Gudenau & Co., Inc. v. Sweeney Ins., Inc., 736 P.2d
763, 769 (Alaska 1987).
Footnote 40:
See Palmer II, 838 P.2d at 1249; see also Pedersen v. Zielski,
822 P.2d 903, 909 (Alaska 1991) ("An affirmative misrepresentation
is not always necessary to establish estoppel.").
Footnote 41:
Palmer II, 838 P.2d at 1251.
Footnote 42:
Id. at 1249.
Footnote 43:
Id.
Footnote 44:
One cannot reasonably rely on a known misrepresentation. See
Sharrow v. Archer, 658 P.2d 1331, 1334 (Alaska 1983).
Footnote 45:
See Sea Lion Corp. v. Air Logistics of Alaska, Inc., 787 P.2d
109, 115 (Alaska 1990) (holding that this court will review
arguments not made below if they concern issues that are "1) not
dependent on any new or controverted facts; 2) closely related to
the appellant's trial court arguments; and 3) could have been
gleaned from the pleadings") (citations and quotations omitted).
