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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Wolff v. Cunningham (07/08/2008) sp-6285
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,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| JANAY WOLFF, | ) |
| ) Supreme Court No. S- 12263 | |
| Appellant, | ) |
| ) Superior Court No. 3KN-04-889 CI | |
| v. | ) |
| ) O P I N I O N | |
| RALPH CUNNINGHAM, | ) |
| individually and d/b/a IGLOO ICE, | ) No. 6285 - July 11, 2008 |
| ) | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District, Kenai,
Charles T. Huguelet, Judge.
Appearances: Kenneth P. Jacobus, Kenneth P.
Jacobus, P.C., Anchorage, for Appellant.
William D. Artus, Anchorage, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Carpeneti, Justices.
EASTAUGH, Justice.
MATTHEWS, Justice, dissenting.
I. INTRODUCTION
In 2002 Janay Wolff, Ralph Cunningham, and Ronnie
Clanton agreed that a $25,000 payment from Cunningham to Wolff
would settle a business debt between Cunningham and Clanton,
remove a Child Support Enforcement Division lien from Cunninghams
real property in Soldotna, and satisfy Clantons child support
obligation. When Cunningham failed to pay, Wolff filed suit to
enforce the agreement.
The superior court dismissed Wolffs complaint because
it held that enforcing the agreement would modify Clantons child
support obligations in violation of Alaska Civil Rule 90.3 and
public policy. Because Clantons child support obligation is
distinct from Cunninghams obligation to pay Wolff, we reverse the
judgment of dismissal and remand for further proceedings.
II. FACTS AND PROCEEDINGS
Janay Wolff and Ronnie Clanton are the parents of a
child born in June 1978. Wolff and Clanton divorced in 1980 and
Clanton was ordered to pay Wolff child support of $200 per month.
Clanton failed to stay current with his support payments, and by
late August 1991 his arrearages totaled $15,504.59. In August
1991 the Alaska Child Support Enforcement Division (CSED)
asserted a lien against Clantons real and personal property in an
effort to recover the child support arrearages.
Ralph Cunningham is Wolffs brother and Clantons former
business partner. Cunningham and Clanton operated Igloo Ice
Inc., an ice-making business in Soldotna, as a partnership until
August 1992. CSEDs lien covered Clantons interest in Igloo Ice.
On August 27, 1992 Clanton signed a Waiver of Claim whereby he
waived all claims he might have to any of the real property,
personal property, stocks or any other interest in any assets of
IGLOO ICE, INC. Also on August 27, 1992 Clanton and Cunningham
signed an agreement not to compete that prohibited Clanton from
competing against Cunningham and Igloo Ice.1 Clanton agreed not
to compete against Cunningham and Igloo Ice in exchange for
Cunninghams promise to pay CSED $15,504.59 plus interest on or
before February 1, 1993, to satisfy CSEDs August 1991 child
support lien. Cunningham did not pay CSED per this agreement and
CSED did not remove the lien from Clantons property.
In June 1995 Clanton and Wolff sued Cunningham for
breach of the non-competition agreement. Before trial on this
suit was to begin, Clanton, Wolff, and Cunningham settled. Their
settlement agreement was not filed with the court. Cunningham did
not pay in accordance with the settlement agreement.
In 2002 Cunningham, Clanton, and Wolff signed a new
agreement, titled Promissory Note. The 2002 promissory note
states:
As per agreement I, Ralph E. Cunningham,
agree to pay Janay B. [Wolff] twenty five
thousand ($25,000) dollars by the 31st of
October 2002. Payments or portions can be
made before then and will be subtracted from
any balance owing at that time. When the
balance has been paid, all obligations from
me to Ronnie R. Clanton will have been met,
and Ronnie R. Clantons child support
obligations to Janay B. [Wolff] will also
have been met. Any liens, encumbrances, or
judgments involving myself or my properties
will be dismissed, considered paid in full,
and all conditions met. If problems should
arise with the release of any of the liens,
encumbrances, or judgments involving myself
or my properties, Ronnie R. Clanton and Janay
B. [Wolff] will make reasonable effort to
facilitate that release.
Cunningham did not pay Wolff the $25,000 as promised in
this document. Although titled a promissory note, the 2002
agreement contains mutual promises and was signed by all three
parties. Even though we refer to this document as the promissory
note, it was a contract.
In September 2004 Wolff sued Cunningham in the superior
court in Anchorage to enforce the 2002 promissory note.2 Wolffs
complaint sought damages for emotional distress, back child
support, and attorneys fees, and asked the court to foreclose on
the Igloo Ice property to satisfy the child support obligation.3
Cunningham responded, raised affirmative defenses, and moved for
a change of venue to Kenai. The court ordered the case
transferred to the superior court in Kenai.
Following transfer, Cunningham moved to dismiss Wolffs
emotional distress claim; to dismiss Wolffs entire claim as
barred by res judicata; and to quash CSEDs lien on the Soldotna
property. Cunninghams motion to quash CSEDs lien argued that the
lien had expired. Wolff filed a motion for partial summary
judgment on the issue of Cunninghams liability under the
promissory note; she also conceded that dismissal of her
emotional distress claim was appropriate because it was
unsupported by Alaska law.
In May 2005 the court issued a memorandum decision and
order that dismissed Wolffs complaint in its entirety. The court
held that res judicata did not apply to Wolffs claims; that CSEDs
lien on the Soldotna property was still valid; that Wolffs
emotional distress claim was, as Wolff acknowledged,
appropriately dismissed given prevailing Alaska law; and that the
promissory note was unenforceable due to lack of mutuality of
obligation and consideration.
In May 2005 Wolff moved for partial reconsideration of
the ruling that the promissory note is unenforceable because it
lacks consideration and mutuality of obligation. The court
granted the reconsideration motion and asked both parties for
additional briefing on contract law. After receiving the
supplemental briefing, the court affirmed its May 2005 order
dismissing Wolffs complaint. The court based its reconsidered
decision on Alaska Civil Rule 90.3 and public policy grounds
rather than on contract law.
Because the court interpreted the promissory note as an
agreement to waive Mr. Clantons past and future child support
obligations, it held that the promissory note could not be
enforced without prior judicial approval and that entering into
agreements for the purpose of avoiding child support obligations
is a violation of public policy. In August 2005, after the court
dismissed Wolffs complaint, Wolff filed motions for
reconsideration and for judicial approval of the promissory note.
The court did not respond to either motion. Per Alaska Civil
Rule 77(k)(4), the reconsideration motion was deemed denied.4
The superior court entered final judgment in February 2006.
Wolff appeals.
III. DISCUSSION
A. Standard of Review
The superior court dismissed Wolffs complaint because
it held that enforcement of the promissory note would modify
Clantons child support obligations in violation of Civil Rule
90.35 and public policy. We review the grant or denial of a
motion to dismiss de novo.6 The superior courts interpretation
of the civil rules presents a question of law that we review de
novo.7 We also review the superior courts interpretation of the
promissory note de novo.8
B. Neither Civil Rule 90.3 nor the Public Policy Behind
Civil Rule 90.3 Bars Wolffs Enforcement of the
Promissory Note Against Cunningham.
Wolff argues that it was error to dismiss her complaint
because the promissory note does not modify Clantons child
support obligations or violate public policy. Cunningham argues
in response that the promissory note is void because it lacks
mutual consideration, runs contrary to the relevant case law and
statu[t]es, and allows Clanton . . . to avoid paying child
support. Because Cunninghams performance does not alter Clantons
child support obligations or violate public policy, we hold that
Civil Rule 90.3 does not bar either Cunningham or Wolff from
enforcing the promissory note.
Civil Rule 90.3. Cunninghams argument that
enforcement of the promissory note will modify Clantons child
support in violation of Civil Rule 90.3 is unavailing because it
does not correctly interpret the parties reasonable contractual
expectations and because it misconceives Cunninghams promised
$25,000 payment to Wolff as a child support payment. We
interpret contracts to give effect to the parties reasonable
expectations and attempt to give effect to all of the contracts
terms, if possible.9
Cunningham has three identifiable expectations under
the terms of the promissory note. He can expect that a $25,000
payment to Wolff will settle his business debt with Clanton; that
Clanton will not become a competitor of Igloo Ice; and that he
will receive Clantons interest in Igloo Ice.10 The promissory
note also gives Cunningham a reasonable expectation that his
performance will reduce, and thus potentially discharge, the CSED
lien up to the amount of his payment. Because neither Wolff nor
Clanton promised more than their reasonable efforts to remove the
CSED lien and because Cunningham could not know in advance
whether the $25,000 payment would fully discharge the lien,
Cunningham can only expect a dollar-for-dollar reduction to the
amount of the lien.
Cunninghams identifiable promissory note expectations
including the expectation of a dollar-for-dollar reduction of the
CSED lien do not waive or modify Clantons child support
obligations. Cunninghams $25,000 payment to Wolff does not alter
Clantons child support obligations because Cunninghams
expectations can be fulfilled regardless of the status of
Clantons arrearages; the $25,000 payment will secure Cunninghams
benefit of the bargain whether or not Clantons support obligation
continues. Civil Rule 90.3 therefore does not apply to the terms
of the promissory note that require Cunningham to pay $25,000 to
Wolff.
Public Policy. The superior court held that the
promissory note is an agreement to waive Mr. Clantons past and
future child support obligations and that it is a violation of
public policy to enter into such agreements for the purpose of
avoiding child support obligations. An agreement that would
excuse an obligor from his or her child support obligation would,
without court approval, violate public policy.11 But, because we
do not interpret the agreement between Wolff and Cunningham to be
an agreement to waive Clantons child support obligations, we hold
that public policy does not prohibit Cunningham or Wolff from
performing and enforcing their obligations under the promissory
note.12
Enforcing the clause stating [w]hen the [$25,000] has
been paid, all obligations from [Cunningham] to Ronnie R. Clanton
will have been met, and Ronnie R. Clantons child support
obligations to Janay B. Wolf[f] will also have been met does not
violate public policy when the clause is applied to Cunninghams
obligations. Because public policy can be applied to this clause
in a way that limits the effect of the clause without prejudice
to Cunningham, Cunningham cannot escape performance.13 In other
words, even if this clause were unenforceable by Clanton absent
prior judicial approval, the value of the bargain to Cunningham
does not turn on the existence of the child support obligation
portion of the clause.
Furthermore, Cunningham appears to have had an
adequate commercial interest in making the $25,000 payment given
his desire to obtain Igloo Ice free and clear of CSEDs lien. And
given that Wolff and Clanton promised to make reasonable efforts
to remove the CSED lien, potentially including, as Wolff argues,
Clantons obligation to make reasonable efforts to pay any
remaining arrearages necessary to discharge the lien, Cunninghams
payment cannot be interpreted as a modification of Clantons child
support obligation.
Because Cunninghams obligations under the promissory
note do not alter Clantons child support obligation, it was error
to dismiss Wolffs complaint based on Civil Rule 90.3 and the
public policy behind Civil Rule 90.3.
C. We Do Not Reach the Parties Other Arguments.
Wolff argues that the promissory note is enforceable as
either a third-party beneficiary contract or as a promissory note
(negotiable instrument) under AS 45.03.104(a).14 Cunningham
concedes that there is no question that the parties signed a
promissory note with all of the requisite bells and whistles.
Because enforcement of the promissory note does not depend on its
legal definition, we decline to classify the promissory note as
either a third-party beneficiary contract or as a promissory note
(negotiable instrument).
The parties raise numerous other arguments. But,
because the dismissal of Wolffs complaint was founded on a narrow
issue of public policy and because we reverse the judgment of
dismissal and remand for further proceedings, we do not need to
address these other arguments. Legal and factual disputes may
arise on remand and nothing in our decision today is meant to
restrict the superior courts consideration of those issues or
disputes.15
IV. CONCLUSION
Because neither Civil Rule 90.3 nor the public policy
behind Civil Rule 90.3 bars Wolffs enforcement of the promissory
note against Cunningham, we REVERSE the judgment of dismissal and
REMAND for further proceedings.
MATTHEWS, Justice, dissenting.
Todays opinion concludes that Cunningham did not have
an expectation that upon payment of the note the amount
underlying the lien on his property would be considered paid in
full and the lien discharged. I disagree. The third and fourth
sentences of the promissory note state that
[w]hen the balance has been paid, all
obligations from me to Ronnie R. Clanton will
have been met, and Ronnie R. Clantons child
support obligations to Janay B. Wolff will
also have been met. Any liens, encumbrances,
or judgments involving myself or my
properties will be dismissed, considered paid
in full, and all conditions met.
The court reads the promissory note as giving Cunningham a
reasonable expectation that his performance will reduce, and thus
potentially discharge, the CSED lien up to the amount of his
payment.1 But this understates the plain meaning of the note.
It says that when the balance ($25,000) has been paid then
Clantons child support obligations to Wolff will . . . have been
met and [a]ny liens . . . will be dismissed [and] considered paid
in full. (Emphasis added.) The note clearly contemplates that
the payment of the $25,000 would fully discharge (and not just
reduce or potentially discharge) the CSED lien.2
In my view, the superior court was correct in
considering the promissory note as an agreement regarding child
support and therefore not valid until it receives judicial
scrutiny under Rule 90.3.3 In my opinion, what the superior
court should have done upon making this observation was review
the note and consider whether it should be approved.4 If the
superior court had taken this step as of the time of its initial
ruling on May 4, 2005, the record indicates that it would have
found that the amount necessary to discharge the lien was a
little less than the amount of the note plus interest.5 Thus
there would have been no reason not to approve the note as an
agreement regarding support. Although we do not know how the
account currently stands, it seems at least reasonably possible
that even now approval and enforcement of the note would be
appropriate and would not retroactively modify child support
arrearages.
Based on this rationale, I think the judgment of the
superior court should be reversed with directions to the court to
consider approving the note as an agreement regarding support.6
_______________________________
1 See infra note 10.
2 Wolffs complaint named Cunningham, individually and
doing business as Igloo Ice, and John Does I-X (unknown parties
with a possible interest in Igloo Ices property) as defendants.
Ronnie Clanton is not a named party. The record is silent on
whether Clanton has knowledge of this action.
3 Wolff renews her foreclosure request on appeal: The
judgment of the trial court should be reversed, and . . . the
property involved in this action [should] be ordered foreclosed
and sold to pay all or part of [the $25,000 plus interest].
Because we reverse the judgment and remand for further
proceedings, we do not need to consider her foreclosure request.
4 Alaska R. Civ. P. 77(k)(4) ( If the motion for
reconsideration has not been ruled upon by the court within 30
days from the date of the filing . . . the motion shall be taken
as denied.); cf. Kenai Chrysler Ctr., Inc. v. Denison, 167 P.3d
1240, 1262 (Alaska 2007) (stating a moving party forfeits the
right to appeal an issue raised in a motion left unresolved by
the trial court unless the party called the motion to the trial
courts attention and insisted on a ruling before the court
entered final judgment).
5 Alaska R. Civ. P. 90.3(h) (modification of child
support awards); see Nix v. Nix, 855 P.2d 1332, 1334 (Alaska
1993) (stating parental agreements waiving child support are
invalid until they receive judicial approval under Civil Rule
90.3).
6 McElroy v. Kennedy, 74 P.3d 903, 906 (Alaska 2003).
7 Miller v. Clough, 165 P.3d 594, 599 n.8 (Alaska 2007)
(citing Fuller v. City of Homer, 113 P.3d 659, 662 (Alaska
2005)).
8 See Dunlap v. Dunlap, 131 P.3d 471, 474 (Alaska 2006)
(We review a superior courts interpretation of a child support
agreement as we would review the interpretation of any contract,
de novo.) (citing Gaston v. Gaston, 954 P.2d 572, 574 (Alaska
1998)); cf. Hixson v. Sarkesian, 66 P.3d 753, 757 (Alaska 2003)
(The interpretation of an agreement between two parties is a
question of law to which we apply our independent judgment.)
(citing Flannery v. Flannery, 950 P.2d 126, 129 (Alaska 1997)).
9 See Matanuska Elec. Assn v. Chugach Elec. Assn, 99 P.3d
553, 562 (Alaska 2004).
10 Cunninghams expectations under the promissory note are
likely similar to his expectations under the August 27, 1992
Agreement Not To Compete. In relevant part the August 1992
agreement states:
THIS AGREEMENT made this 27th day of
August, 1992, by and between RONNIE CLANTON .
. . hereinafter referred to as CLANTON, and
RALPH CUNNINGHAM and IGLOO ICE INC., . . .
hereinafter referred to as CUNNINGHAM/IGLOO.
WHEREAS, CLANTON and CUNNINGHAM/ IGLOO
wish to enter into a Non-competition
Agreement in consideration of the sum of . .
. ($15,504.59). CUNNINGHAM/IGLOO shall pay
said sum plus any accrued interest to the
State of Alaska, Child Support Enforcement
Division on or before February 1, 1993, in
payment of that certain Assertion of Lien for
Child Support . . . recorded on August 23,
1991 . . . . CUNNINGHAM/IGLOO acknowledges
that failure to pay the sum set forth above
shall constitute a breach of this agreement
and as a result this agreement shall be
deemed null and void.
NOW THEREFORE, in consideration of the
premises, the covenants made herein, the acts
performed and to be performed by the parties
hereto, the parties have agreed and by these
presents do agree to the following non-
competition agreement.
The appellate record contains only two pages of the five-page
1992 non-competition agreement. It appears that this agreement,
if fully performed, would have precluded Clanton from competing
against Cunningham and would have given Cunningham ownership of
Igloo Ice unencumbered by CSEDs lien. In August 1992 Clanton
also signed a Waiver of Claim that waived all claims he might
have to any of the real property, personal property, stocks or
any other interest in any assets of IGLOO ICE, INC.
11 Contracts that waive child support obligations are
unenforceable until they receive judicial approval. Nix, 855
P.2d at 1334 (discussing Cox v. Cox, 776 P.2d 1045, 1048 (Alaska
1989)).
12 See Matanuska Elec. Assn, 99 P.3d at 562.
13 Cunningham argues that Evans v. Jeff D. prohibits
enforcement of the promissory note because the context of the
note cannot be separated from its contents, which violate public
policy. 475 U.S. 717, 727 (1986) (quoting Restatement (Second)
of Contracts 184 cmt. a (1981)). Evans is not applicable in
this case because it involved an interpretation of Federal Rule
of Civil Procedure 23(e), and a federal statute, The Civil Rights
Attorneys Fee Awards Act of 1976, 42 U.S.C. 1988, not the state
rule, Alaska Civil Rule 90.3, that we construe here. Evans, 475
U.S. at 727.
14 AS 45.03.104 (negotiable instruments definition).
15 At oral argument on appeal Wolffs attorney stated that
it would be appropriate for this court to approve the promissory
note as an agreement regarding support, presumably per AS
25.27.065 and Nix, 855 P.2d at 1334. Considering that the child
was over eighteen when the promissory note was signed and
considering that the difference between the amount necessary to
discharge the lien and the amount owed under the promissory note
may now be relatively small, the superior court, in its
discretion, might determine on remand that approval of the
promissory note satisfies AS 25.27.065, Nix, and public policy.
See Nix, 855 P.2d at 1334.
1 Slip Op. at 8.
2 The court relies on the fifth sentence of the
promissory note which promises reasonable effort to facilitate
the release of any of the liens as proof that Cunningham could
not have expected that the $25,000 would fully discharge the
lien. Slip Op. at 8; Slip Op. at 10. But this sentence seems
best read as a promise on behalf of Clanton and Wolff to help out
in obtaining a lien release, not as a statement that Cunningham
must pay the amount of the note even if the payment would not
result in the states lien being released. Under this reading,
the third, fourth, and fifth sentences in the note are
reconcilable rather than conflicting.
3 Nix v. Nix, 855 P.2d 1332, 1334 (Alaska 1993)
(discussing Cox v. Cox, 776 P.2d 1045 (Alaska 1989)).
4 Instead, the superior court simply concluded that the
agreement was not enforceable because it was never presented to
the court for approval. A few days after the court made this
ruling Wolff moved for approval of the note as an agreement
related to child support. She contended that the note with
interest would when paid fully discharge arrearages. The court
made no ruling on this motion.
5 See Child Support State of Account as of April 30,
2005. Despite the fact that the note is silent on the subject of
interest, Cunningham appears to have admitted that the note bears
interest. Thus when asked by the superior court about liability
for excess accounts due, Cunningham answered: Defendant admits
that the promissory note states plus interest, however denies the
note is collectable by Janay Wolff in this case.
6 Could the court on remand approve the note if doing so
would forgive a part of the outstanding arrearages? Civil Rule
90.3(h)(2), which prohibits the retroactive modification of child
support arrearages, would seem to bar any such action. On the
other hand, one may question whether a slight discount in
arrearages should necessarily stand in the way of obtaining
substantial satisfaction, given the age of the arrearages the
child reached the age of majority in 1996 and the difficulties
encountered in collecting them. It is often a foolish policy to
reject a very good result in pursuit of a perfect one. It may be
that the case would be seen as sufficiently compelling that the
prohibition on retroactive modification could be relaxed under
Civil Rule 94. In any event, this issue is only a hypothetical
possibility at this point because payment of the note plus
interest might fully satisfy the outstanding arrearages.
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