| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
|
You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Smallwood Creek, Inc. v. Build Alaska General Contracting, LLC; Western National Mutual Insurance Company; and Lexon Insurance Company (7/15/2022) sp-7601
Notice: This opinion is subject to correction before publication in the P ACIFIC 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, email
corrections@akcourts.gov.
THE SUPREME COURT OF THE STATE OF ALASKA
SMALLWOOD CREEK, INC., )
) Supreme Court No. S-17774
Appellant, )
) Superior Court No. 4FA-19-02428 CI
v. )
) O P I N I O N
BUILD ALASKA GENERAL )
CONTRACTING, LLC; WESTERN ) No. 7601 - July 15, 2022
NATIONAL MUTUAL INSURANCE )
COMPANY; and LEXON )
INSURANCE COMPANY, )
)
Appellees. )
)
ppeal from t
A he Superior Court of the State of Alaska,
Fourth Judicial District, Fairbanks, Earl A. Peterson, Judge.
Appearances: Robert A. Sparks, The Law Office of Robert
A. Sparks, and Thomas R. Wickwire, Fairbanks, for
Appellant. Jason J. Ruedy, Law Offices of Royce & Brain,
Anchorage, for Appellees.
Before: Winfree, Maassen, Carney, and Borghesan, Justices.
[Bolger, Chief Justice, not participating.]
BORGHESAN, Justice.
I. INTRODUCTION
A general contractor hired a subcontractor to provide material for a project
at a state park. After the project was completed, the general contractor sent the
----------------------- Page 2-----------------------
subcontractor a check described as "final payment." The subcontractor, believing it was
owed more, initially refused to accept the check. Months later, the subcontractor cashed
the check but then attempted to repay the amount to the general contractor. The general
contractor refused repayment, claiming that the subcontractor's cashing the check
constituted satisfaction of its claim of payment.
The superior court granted summary judgment to the general contractor,
ruling that the evidence established an accord and satisfaction. We hold that there is a
genuine dispute of material fact about two requirements for an accord and satisfaction:
whether the payment was tendered in good faith, and whether there was a bona fide
dispute about the amount owed. We therefore vacate the judgment and remand for
further proceedings.
II. FACTS & PROCEEDINGS
A. Facts
Build Alaska General Contracting, LLC (Build Alaska) executed a prime
1 with the State of Alaska, Department of Natural Resources (DNR) for a
contract
trailhead improvement project at the Chena River State Recreation Area (Chena River
Project). The Chena River Project involved improvements at three separate trailhead
facilities.
InJune2018BuildAlaskaandSmallwoodCreek, Inc. (Smallwood) entered
into a subcontract agreement for work on the Chena River Project. Smallwood agreed,
1 A prime contract is a contract entered into between the client and the
contractor, who is responsible "for the completion of the entire project, including
purchasing all materials, hiring and paying subcontractors, and coordinating all the
work." Contractor, B LACK 'S LAW DICTIONARY (11th ed. 2019).
-2- 7601
----------------------- Page 3-----------------------
2
among other things, to furnish the Type A borrow material that the bid schedule for the
project had called for. The subcontract notes in its "Services and Rates" section that
quantities of Type A borrow material will be totaled by means of truck load counts. The
subcontract's list of rates contains two lines for Type A borrow material: one that
Smallwood stockpiles and loads onto trucks, and one that Build Alaska self-loads from
the stockpile. The former was agreed to at a rate of $8.00 per cubic yard. The latter's
rate was not clearly specified in the subcontract.
However, Todd VanLiere, a co-owner of Build Alaska, mentioned a rate
of $4.00 per cubic yard for self-loaded borrow in an email exchange with Karl Benson,
the corporate secretary and vice president of Smallwood. VanLiere indicated on June 3
that Build Alaska "determined [they] would be loading the Borrow [themselves]" at
$4.00 per cubic yard. Benson replied the next day, confirming the $4.00 per cubic yard
rate for self-loaded borrow and specifying that "yardage is counted as yards loaded in
the truck." But later that day in a separate email thread, VanLiere wrote that instead of
loading the borrow themselves as he had indicated in his initial email, "[Build Alaska]
would like to have [Smallwood] do all of the stockpiling and loading of Trucks for the
Type A Borrow at $8.00 [per cubic yard] as quoted." VanLiere's email also stated,
3
among other things, that "[t]ruck counts will be confirmed with the survey quantities."
Benson replied, indicating that they "may need to come to an agreement as to how to
calculate final quantities for payment" to account for material lost during hauling,
compaction of the material at the project site, and quantities rejected by the State for not
2 The prime contract describes "borrow material" as material, such as sand
or gravel, that is "borrowed" from one site for use at another site.
3 According to State of Alaska Standard Specifications for Highway
Construction(StandardSpecifications), DNRpays for borrowmaterialby volume, which
is to be established by cross-section survey.
-3- 7601
----------------------- Page 4-----------------------
conforming to specifications. VanLiere indicated he received this email on June 8, but
the record indicates no additional discussions about the terms before the subcontract was
finalized on June 13.
Build Alaska paid Smallwood periodically throughout the project. On
September 6, 2018, Build Alaska issued a check for $19,543.60 for the Upper Chena
Trailhead. A week later, on September 15, 2018, Build Alaska issued another check for
$9,960.72 for the Mastodon Trailhead. The memo lines of both checks included the
calculation for the total payment issued, the portion of the project they covered, and the
words "PAID IN FULL." It is not clear whether the volume was calculated by truck load
counts,butafter somequestioning, Smallwood accepted thesepayments without dispute.
At the conclusion of the project, Build Alaska provided Smallwood with
final survey results on the project. Build Alaska relied upon the survey results to
establish the total volume of material furnished by Smallwood and calculate the
outstanding amount owed to Smallwood under the subcontract.
Build Alaska then delivered a check to Smallwood in the amount of
$37,472.48. Build Alaska wrote in the memo line of the check "Chena River Trail
Improvements Final Payment." After receiving the check, Smallwood notified Build
Alaska via email that it would not accept the check due to the restrictive endorsement
"Final Payment" because it was "half of what is owed [to] us" and that Smallwood would
"beforwarding documentationthroughoutthedayto help[BuildAlaska]understand [its]
liability to the amount stated on [Smallwood's] invoice." An employee of Build Alaska
sent an email to Smallwood that same day, stating: "Per Conversation, Contract has been
voided since it past [sic] 120 days from last conversation. We are abiding by State of
Alaska requirements." Two days later Smallwood wrote back with a counteroffer. It
claimed to be owed $78,991.18 but was willing to accept $72,912.78 to settle the dispute.
-4- 7601
----------------------- Page 5-----------------------
Despite a series of communications about what Build Alaska owed
Smallwood under the contract, the parties were unable to resolve their dispute. Build
Alaska rejected Smallwood's counteroffer and maintained that its $37,472.48 payment
satisfied Build Alaska's payment obligations under the subcontract. It maintained that
the "subcontract agreement incorporates, by reference, the terms of the prime contract,
which clearly specifies that all quantities are to be calculated on the basis of cross-section
survey." Build Alaska also maintained that the parties' email correspondence before the
subcontract was executed indicated that truck counts would be confirmed with survey
quantities. Smallwood's counsel sent notice of a claim to Build Alaska's payment bond
surety, Western National Mutual Insurance Company, advising that Build Alaska owed
Smallwood the principal sum of $85,579.05 on the project.
Four months after receiving the check marked "Final Payment," Benson,
the vice president and corporate secretary of Smallwood, cashed it on behalf of the
company. Several months later, Smallwood attempted to return the amount of the cashed
check ($37,472.48) to Build Alaska via certified mail, with return receipt requested.
Smallwood's repayment was returned because it was improperly addressed. Smallwood
continued to attempt to repay Build Alaska; however, Build Alaska refused to accept
repayment, insisting the payment dispute was resolved when Smallwood cashed the
check marked "Final Payment."
B. Proceedings
Smallwood sued Build Alaska in superior court, alleging breach of contract
and breach of the covenant of good faith and fair dealing.4 Build Alaska then moved for
4 The complaint also included a claim against a surety on a payment bond
issued by Western National Mutual Insurance Company and a claim against a
contractor's bond posted by Lexon Insurance Company, neither of which are at issue in
(continued...)
-5- 7601
----------------------- Page 6-----------------------
summary judgment, arguing that Smallwood's cashing of the check constituted a
knowing accord and satisfaction of the claim under AS 45.03.311. Smallwood opposed
on several grounds, arguing there was a genuine dispute of material fact on several
issues: (1) whether the check marked "Final Payment" was tendered in good faith; 5
(2) whether there was a "bona fide dispute" about the amount of the claim;6 (3) whether
Smallwood had cashed the check knowing it was intended to be full satisfaction of the
claim;7 and (4) whether Smallwood accepted payment under economic duress. Both
parties requested oral argument but the court did not hold argument.
The superior court granted summary judgment to Build Alaska. First, the
court ruled that Smallwood failed to present evidence showing that Build Alaska did not
tender the check in good faith, as required for an accord and satisfaction. It observed that
Build Alaska's VanLiere had submitted an affidavit stating "that the check amount was
based on Build Alaska's calculation of what it owed Smallwood under the contract" and
that Smallwood presented no competing evidence.
Second, the superior court ruled that the amount was subject to a bona fide
dispute, determining that "admissible evidence submitted by both Build Alaska and
Smallwood establish that there was a genuine, or bona fide, dispute between the parties
4 (...continued)
this appeal.
5
See AS45.03.311(a)(1) (accord and satisfactionrequires tender ofpayment
in good faith).
6 See AS 45.03.311(a)(2) (accord and satisfaction requires that amount of
claim be "subject to a bona fide dispute").
7 See AS 45.03.311(d) (providing that claim is discharged if person who
obtains payment on check "knew that the instrument was tendered in full satisfaction of
the claim").
-6- 7601
----------------------- Page 7-----------------------
over the amount Build Alaska owed Smallwood under the contract prior to Smallwood
cashing the check."
Third, the superior court concluded that Build Alaska was entitled to
judgment as a matter of law because Smallwood knew that the check was tendered in full
satisfaction of its claim against Build Alaska, in accordance with AS 45.03.311(d). It
concluded that although Smallwood now claimed that the memo line "Final Payment"
was ambiguous, its previous communications with Build Alaska disputing the payment
suggested that Smallwood knew that Build Alaska tendered the check as full satisfaction
of Smallwood's claims.
Fourth, the court rejected Smallwood's claim of economic duress,
concluding that Smallwood presented no evidence that Build Alaska was aware of
Smallwood's precarious financial situation and therefore knew that Smallwood would
have no choice but to accept Build Alaska's tender. Accordingly the superior court
granted summary judgment to Build Alaska.
Smallwood moved for reconsideration. The superior court denied
reconsideration and entered final judgment in favor of Build Alaska. Smallwood now
appeals.
III. STANDARD OF REVIEW
8 In doing so, we construe
We review grants of summary judgment de novo.
the facts in the light most favorable to the non-moving party and draw all reasonable
inferences in the non-moving party's favor.9 We affirm the trial court's grant of
summary judgment when there are no genuine issues of material fact and the prevailing
8 Cornelison v. TIG Ins. , 376 P.3d 1255, 1267 (Alaska 2016).
9
Lockwood v. Geico Gen. Ins. Co., 323 P.3d 691, 696 (Alaska 2014)
(quoting Lum v. Koles, 314 P.3d 546, 552 (Alaska 2013)).
-7- 7601
----------------------- Page 8-----------------------
10
party is entitled to judgment as a matter of law. "[T]he burden of showing the absence
11
of a genuine issue as to any material fact is upon the moving party."
"Whether the
evidence presented a genuine issue of material fact is a question of law that we
12 "Defeating a motion for summary judgment 'only requires a
independently review."
showing that a genuine issue of material fact exists to be litigated, and not a showing that
the party will ultimately prevail.' "13
IV. DISCUSSION
A. It Was Error To Grant Summary Judgment On Grounds Of Accord
And Satisfaction.
An accord and satisfaction "discharges a contractual obligation or cause of
action when the parties agree to exchange something of value in resolution of a claim or
14
demand and then performon that agreement." Although the doctrine is of common law
origin, the legislature has enacted a statute based on the Uniform Commercial Code
15
(UCC) to govern accord and satisfaction through the use of a negotiable instrument.
This statute, codified at AS 45.03.311, has four subsections.
10 Id. (quoting ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum,
Inc., 322 P.3d 114, 122 (Alaska 2014)).
11 Id. (alteration in original) (quoting Wilson v. Pollet, 416 P.2d 381, 383
(Alaska 1966)).
12 Hahn v. Geico Choice Ins. Co., 420 P.3d 1160, 1166 (Alaska 2018)
(quoting ConocoPhillips Alaska, Inc., 322 P.3d at 122).
13 Lockwood, 323 P.3d at 696 (quoting Moffatt v. Brown, 751 P.2d 939, 943-
44 (Alaska 1988)).
14 WILLISTON ON CONTRACTS § 73:29 (4th ed. 2021).
15
See AS 45.03.101 ("This chapter may be cited as the Uniform Commercial
Code - Negotiable Instruments.").
-8- 7601
----------------------- Page 9-----------------------
Subsection (a) establishes the prerequisites for an accord and satisfaction.
It provides that the statute will apply if: (1) the person in good faith tendered an
instrument to the claimant as full satisfaction of the claim; (2) the amount of the claim
was unliquidated or subject to a bona fide dispute; and (3) the claimant obtained payment
of the instrument. 16
Subsection (b) requires that tender of full satisfaction be clear. It provides
that, unless an affirmative defense to accord and satisfaction listed in subsection (c)
applies, the claim is discharged so long as the "instrument or an accompanying written
communication contained a conspicuous statement to the effect that the instrument was
tendered as full satisfaction of the claim."17
Subsection (c), in turn, creates an exception for when the payment was
18 This exception reduces the risk of an inadvertent accord and
processed by mistake.
satisfaction by giving a creditor two options. The creditor may send a conspicuous
statement to debtors that communications concerning disputed debts, including
instruments tendered in full satisfaction of disputed debts, be sent to a designated person,
office, or place. If the payment instrument is not received by the designated person,
office, or place, negotiation of the instrument does not discharge the claim (subject to
subsection (d)).19 A creditor that does not send such a "conspicuous statement" to
16 AS 45.03.311(a).
17
AS 45.03.311(b).
18
See AS 45.03.311(c).
19
AS 45.03.311(c)(1).
-9- 7601
----------------------- Page 10-----------------------
debtors and erroneously negotiates payment of the check may avoid an accord and
satisfaction by repaying the amount of the check within 90 days. 20
Subsection (d) is designed to ensure that subsection (c)'s exception only
applies when there was in fact a mistake, and not when the claimant has second thoughts.
It provides that "[a] claim is discharged if the person against whom the claim is asserted
proves that within a reasonable time before collection of the instrument was initiated, the
claimant . . . knew that the instrument was tendered in full satisfaction of the claim."21
Under subsection (d), "[i]f the creditor takes a full payment instrument knowing that an
accord and satisfaction was intended, the rules in subsection (c) designed to prevent an
inadvertent accord and satisfaction do not apply."22
With this framework in mind, we turn to the superior court's decision to
grant summary judgment to Build Alaska on grounds of accord and satisfaction.
1. There is a genuine dispute of material fact about whether Build
Alaska tendered payment in good faith.
The superior court ruled that there was no genuine dispute of material fact
about whether the elements of an accord and satisfaction described in AS 45.03.311(a)
were met. It rejected Smallwood's argument that Build Alaska had tendered payment
in bad faith, ruling that Smallwood submitted "no admissible evidence that Build
Alaska's dispute over the amount owed was not honest or not submitted in observance
20 AS 45.03.311(c)(2); see also U.C.C. § 3-311 cmt. 5 (Am. L. Inst. & Unif.
L. Comm'n 2017). Subsection (c) addresses the concern that machines and automated
processes for processing checks are unable to recognize a "full payment" legend on a
check. Michael D. Floyd, How Much Satisfaction Should You Expect From An Accord?
The UCC Section 3-11 Approach , 26 L OYOLA U. C HI. L.J. 1, 15-16 (1994).
21 AS 45.03.311(d).
22 Floyd, supra note 20, at 16.
-10- 7601
----------------------- Page 11-----------------------
of reasonable standards of fair dealing." We independently review whether the evidence
presented a genuine issue of material fact precluding summary judgment. 23
The concept of good faith tender, for purposes of accord and satisfaction,
"refers to the manner in which the tender is offered, not to conduct related to the
underlying claim."24 According to the commentary for the UCC, instances that might
amount to bad faith tender include the debtor tendering a very small amount while
knowing that the creditor is in great need and "routinely printing full satisfaction
language on [its] check . . . whether or not there is any dispute with the creditor."25
Although the superior court correctly stated that accord and satisfaction
requires a tender made in "observance of reasonable commercial standards of fair
dealing,"26 we disagree with its conclusion that there was no dispute of material fact as
to whether Build Alaska's tender met this standard. A reasonable person could conclude
that the series of communications between Smallwood and Build Alaska shows
27 After receiving Build Alaska's check, Smallwood notified Build Alaska via
otherwise.
email that it would not accept the check due to the restrictive endorsement "Final
Payment" because it was "half of what is owed" to Smallwood and that Smallwood
would "be forwarding documentation throughout the day to help [Build Alaska]
23 Hahn v. Geico Choice Ins. Co. , 420 P.3d 1160, 1166 (Alaska 2018).
24 2J AMES J.W HITE,R OBERT S.S UMMERS,&R OBERT A.H ILLMAN,U NIFORM
C § 17:44 (6th ed. 2010).
COMMERCIAL ODE
25 U.C.C. § 3-311 cmt. 4.
26 Id.
27 Christensen v. Alaska Sales & Serv., Inc., 335 P.3d 514, 520 (Alaska 2014)
("After the court makes reasonable inferences from the evidence in favor of the
non-moving party, summary judgment is appropriate only when no reasonable person
could discern a genuine factual dispute on a material issue.").
-11- 7601
----------------------- Page 12-----------------------
understand [Build Alaska's] liability." Build Alaska replied later that day claiming that
the subcontract had "been voided since it past [sic] 120 days from last conversation" and
insisted that it was "abiding by State of Alaska requirements." But nothing in the
subcontract suggests that its requirements would lapse after 120 days. There is also no
evidence in the record suggesting that any such timeline was discussed, nor does Build
Alaska point to any provision of law or in its contract with the State that would void
Smallwood's claim for payment on these grounds. Drawing all inferences in favor of
Smallwood, this email may be read to suggest that Build Alaska was simply looking for
pretexts to avoid paying what Smallwood claimed it was owed, in turn suggesting that
the payment was not tendered in good faith.
Build Alaska argues that because the email mentioning 120 days was sent
after Build Alaska tendered the check stating "Final Payment," the email "does not affect
[its] good faith in tendering the check to Smallwood." But subsequent actions may be
28 and Build Alaska cites no cases indicating
evidence of an earlier state of mind,
otherwise.
In addition, a reasonable person could doubt that Build Alaska's final
payment was tendered in good faith because of the contrast between this payment and
its earlier payments.29 Build Alaska issued two checks to Smallwood prior to completion
of the project: one for the "Upper Chena" portion of the project, another for the
"Mastodon" portion of the project. Each check contained the language "paid in full" in
the memo line next to a calculation. According to Benson's affidavit, he questioned
28 See North Pac. Processors, Inc. v. City & Borough of Yakutat , 113 P.3d
575, 585 (Alaska 2005) ("[P]arties' conduct after entering into [a] contract is probative
of intent.").
29 Christensen, 335 P.3d at 520 (summary judgment only appropriate when
"no reasonable person could discern a genuine factual dispute on a material issue").
-12- 7601
----------------------- Page 13-----------------------
VanLiere about this language and was assured that it did not mean "paid in full" for all
Type A borrow material used in each portion of the project; rather, it meant full payment
for the quantities listed. As noted earlier, the UCC commentary suggests that routinely
30 Accordingly,
printing "full payment" on checks could be evidence of bad faith tender.
a reasonable person drawing all inferences in favor of Smallwood could conclude that
Build Alaska's repeated use of "full payment" language on its checks regardless of
whether the payment fully satisfied its debt suggests a bad faith tactic to trap creditors
rather than a good faith offer to settle a debt.
Because there is a dispute of material fact about whether Build Alaska
tendered its payment in good faith,31 it was error to grant summary judgment to Build
Alaska on this issue.
2. There is a genuine dispute of material fact about whether the
claim between Build Alaska and Smallwood was subject to a
bona fide dispute.
To establish an accord and satisfaction, the party claiming the debt was
discharged must show that "the amount of the claim was unliquidated or subject to a
bona fide dispute."32
The statute does not define bona fide dispute. As noted above, the
statute is modeled on the UCC provision regarding accord and satisfaction,33 which in
turn "incorporates the standard common law rules regarding an amount that is . . . subject
30 U.C.C. § 3-311 cmt. 4.
31
Hahn v. Geico Choice Ins. Co., 420 P.3d 1160, 1166 (Alaska 2018)
("Whether the evidence presented a genuine issue of material fact is a question of law
that we independently review." (quoting ConocoPhillips Alaska, Inc. v. Williams Alaska
Petrol., Inc., 322 P.3d 114, 122 (Alaska 2014)).)
32 AS 45.03.311(a)(2).
33 See AS 45.03.101 ("This chapter may be cited as the Uniform Commercial
Code - Negotiable Instruments.").
-13- 7601
----------------------- Page 14-----------------------
34
to a 'bona fide dispute.' " Williston's treatise on contracts suggests that the concept of
a bona fide dispute includes both subjective and objective elements: the underlying
35 That rule is consistent with our
dispute must be "honest and not obviously frivolous."
treatment of the issue in Air Van Lines, Inc. v. Buster , which held that to resist an accord
and satisfaction, a party would have to show either subjective bad faith or lack of legal
merit in the underlying dispute.36 Accordingly, we consider whether the evidence at
summary judgment, considered in the light most favorable to Smallwood, supports an
inference of Build Alaska's bad faith or establishes that the underlying payment dispute
was frivolous.
The underlying dispute concerns how to calculate the amount of borrow
material for which payment is owed. Build Alaska maintains that quantities are to be
calculated according to survey results showing how much material was used in the
project. Smallwood maintains that the amount is to be calculated by truck loads. Build
Alaska relies on email communications prior to the execution of its contract with
34 2J AMES J.W HITE,R OBERT S.S UMMERS,&R OBERT A.H ILLMAN,U NIFORM
COMMERCIAL CODE § 17:44 (6th ed. 2010).
35 3 W ILLISTON ON CONTRACTS § 7:34 (4th ed. May 2022 update).
36
673 P.2d 774, 778 (Alaska 1983) ("For AVL to avoid summary judgment
on the issue of whether the accord was supported by adequate consideration, it would
have to establish either bad faith or the absence of a bona fide dispute. . . . In the absence
of some direct evidence of bad faith, AVL must establish that . . . no bona fide dispute
existed as a matter of law."). Because our decision characterized subjective bad faith as
distinct from a bona fide dispute, it could be read to suggest that subsequently enacted
AS 45.03.311, which refers only to bona fide dispute, addresses only the legal merits of
the underlying dispute - i.e., whether it is frivolous as a matter of law. But because our
statute is modeled on the UCC, which incorporates the common law doctrine, which
entailed both subjective and objective elements of good faith, the better reading of bona
fide dispute in AS 45.03.311 includes both objective and subjective elements.
-14- 7601
----------------------- Page 15-----------------------
Smallwood in which Build Alaska's VanLiere stated that "[t]ruck counts will be
confirmed with the survey quantities." Smallwood's Benson responded that they "may
need to come to an agreement as to how to calculate final quantities for payment." The
subsequent contract between the parties includes a price schedule in which the words
"Quantities will be totaled by means of Truck Load Counts" are conspicuously typed,
in bold and underlined font, in the row for Type A borrow material loaded by
Smallwood. The price schedule does not mention survey results.
Build Alaska attempts to contradict the bolded contract terms stating that
quantities will be totaled using truck loads by pointing to evidence that, prior to
finalizing the contract, the parties were negotiating whether quantities should be totaled
using a different method: survey results. In support of its position, Build Alaska points
to the fact that its prime contract with DNR, which specifies that DNR's payment would
be determined by a survey of the material in place, is incorporated into Build Alaska's
subcontract with Smallwood. Yet there is no provision in the prime contract between
Build Alaska and DNR directly addressing what Build Alaska owes Smallwood.
37 However,
Build Alaska's legal position is not frivolous as amatter oflaw.
a reasonable person viewing the evidence in the light most favorable to Smallwood could
37 We note, but do not decide, a threshold legal question of whether the prior
communications cited by Build Alaska would be admissible as evidence to determine the
contract's meaning. See Froines v. Valdez Fisheries Dev. Ass'n , 75 P.3d 83, 86-87
(Alaska 2003) ("When a written statement sets out the terms of an agreement between
contracting parties, the parol evidence rule generally precludes the parties from using
evidence of prior agreements to contradict the written terms. If the writing expresses part
of the parties' agreement, the agreement is considered to be partially integrated; a writing
that sets out the parties' complete agreement is deemed fully integrated. The parol
evidence rule forbids contradiction of partially integrated terms but allows them to be
'explained or supplemented . . . by evidence of consistent additional terms.' In contrast,
the rule does not allow the terms of a fully integrated contract to be varied by evidence
of additional terms, even if those terms are consistent." (quoting AS 45.02.202)).
-15- 7601
----------------------- Page 16-----------------------
conclude that Build Alaska held this position in bad faith, given the course of events -
the parties were negotiating how to measure quantities for payment, and then the contract
expressly provides (in bolded language) for one method - and Build Alaska's initial
attempt to avoid payment by claiming the contract had "been voided since it past [sic]
120 days from last conversation." Because there is a genuine dispute of material fact
about the existence of a bona fide dispute, we reverse the grant of summary judgment on
this issue.
3. There is no dispute that Smallwood knew the payment was
made in full satisfaction of the claim.
The superior court concluded that Build Alaska was entitled to summary
judgment because there was no disputeof material fact about whether Smallwood cashed
the check knowing that it was tendered in full satisfaction of its claim against Build
Alaska. The court rejected Smallwood's argument that the note "Final Payment" in the
memo line was ambiguous.
Smallwoodreprises its argumenthere,arguing that thetwo previous checks
it received from Build Alaska included the phrase "PAID IN FULL" in their respective
memo lines, and those were only partial payments. It also cites its January 28 email to
VanLiere, suggesting it shows Benson's confusion about what "Final Payment" meant.
We agree with the superior court here. Alaska Statute 45.03.311(d)
provides that "[a] claim is discharged if the person against whom the claim is asserted
proves that within a reasonable time before collection of the instrument was initiated, the
38
claimant . . . knew that the instrument was tendered in full satisfaction of the claim."
The communications between Smallwood and Build Alaska in which they dispute the
amount owed Smallwood for the job clearly show that Smallwood understood that this
38 AS 45.03.311(d).
-16- 7601
----------------------- Page 17-----------------------
"Final Payment" was meant to be payment for the entire job. After receiving the check,
Smallwood notified Build Alaska via email that it would not accept the check "because
[it had] written in notes 'final payment' " and the amount was "half of what is owed."
Smallwood stated that it would "beforwarding documentation throughout theday to help
[Build Alaska] understand [its] liability to the amount stated on [Smallwood's] invoice."
Two days later, Smallwood wrote back with a counteroffer to accept the lesser amount
of $72,912.78 in settlement of the dispute. In light of the language "Final Payment" on
the check and these communications, a reasonable person could not conclude that
Smallwood was unaware that Build Alaska's payment of $37,472.48 was meant to be a
full satisfaction of the claim. The superior court did not err in granting summary
judgment to Build Alaska on this issue. 39
B. It Was Not Error To Grant Summary Judgment In Favor Of Build
Alaska On Smallwood's Duress Defense.
The superior court rejected Smallwood's claim that it accepted Build
Alaska's payment under economic duress. We affirm this ruling.
Economic duress exists where "(1) one party involuntarily accepted the
terms of another, (2) circumstances permitted no other alternative, and (3) such
circumstances were the result of coercive acts of the other party."40
On the question of
whether circumstances permitted "no other alternative," "[a]n available legal remedy,
39 Lockwood v. Geico Gen. Ins. Co. , 323 P.3d 691, 696 (Alaska 2014) ("A
party is entitled to summary judgment only if there is no genuine issue of material fact
and if the prevailing party is entitled to judgment as a matter of law." (quoting
ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum, Inc. , 322 P.3d 114, 122
(Alaska 2014))).
40 Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Serv. Co., 584 P.2d
15, 21 (Alaska 1978).
-17- 7601
----------------------- Page 18-----------------------
41
such as an action for breach of contract, may provide such an alternative." But this
court also recognizes that "[a]n available alternative . . . remedy may not be adequate
wherethedelay involved in pursuing that remedywouldcauseimmediateandirreparable
42 To establish the third element of coercion,
loss to one's economic or business interest."
"the assertion of duress must be proven by evidence that the duress resulted from
defendant's wrongful and oppressive conduct and not by the plaintiff's necessities."43
"In many cases, a threat to breach a contract or to withhold payment of an admitted debt
has constituted a wrongful act"; however, "[i]mplicit in such cases is the additional
requirement that the threat to breach the contract or withhold payment be done in bad
faith."44
Smallwood analogizes its situation to Totem Marine Tug & Barge, Inc. v.
45 In that case, Totem was facing bankruptcy and had no
Alyeska Pipeline Serv. Co .
choice other than accepting the immediate cash payment offered by Alyeska.46 We
acknowledged that Totem would survive summary judgment if it provided any evidence
showing that
Alyeska deliberately withheld payment of an acknowledged
debt, knowing that Totem had no choice but to accept an
inadequate settlement of that debt; . . . that Totem was unable
to meet its pressing debts other than by accepting the
41 Id. at 22.
42 Id.
43 Id. at 21 (quoting W.R. Grimshaw Co. v. Nevil C. Withrow Co., 248 F.2d
896, 904 (8th Cir. 1957)).
44 Id. at 22.
45 Id.
46 See id. at 24.
-18- 7601
----------------------- Page 19-----------------------
immediate cash payment offered by Alyeska; and that
through necessity, Totem thus involuntarily accepted an
inadequate settlement offer from Alyeska and executed a
release of all claims under the contract. [47]
What Smallwood fails to show, and what therefore distinguishes this case
from Totem, is any awareness by Build Alaska that Smallwood's financial position gave
it no choice but to accept the payment. Without this showing, Smallwood cannot
establishthatBuild Alaska's tender ofpayment was coercive,thenecessarythird element
of duress. Smallwood submitted an affidavit by Benson stating that while the dispute
with Build Alaska was ongoing, his personal and professional finances got "very tight"
and cashing Build Alaska's check was "the only way for [his] company to survive." But
Smallwood did not submit any evidence showing that Build Alaska knew of
Smallwood's dire financialstraits or that Build Alaskadeliberately withheld the payment
in order to coerce Smallwood into accepting the payment due to its financial exigency.
Smallwood supports its duress argument by pointing to evidence of Build Alaska's
alleged about-face with regard to how the contract terms are construed and cryptic
message about the contract being void after 120 days. This evidence could suggest,
when viewed in the light most favorable to Smallwood, that Build Alaska was attempting
to evade its payment obligations to Smallwood. But the superior court correctly stated
that "Smallwood produces no admissible evidence that Build Alaska knew of its . . .
financial situation such that Build Alaska could have known that continuing its dispute
with Smallwood would force Smallwood's hand to cash the check."
If Build Alaska were hoping to win the dispute by attrition, it would need
to know that Smallwood needed the payment to avoid financial insolvency. And
Smallwood has not pointed to any evidence in the record suggesting this may be the case.
47
23-24.
Id. at
-19- 7601
----------------------- Page 20-----------------------
Therefore, the superior court did not err in ruling that Smallwood's claim of economic
duress does not defeat summary judgment. 48
C. The Failure To Hold Oral Argument When Requested Was Error, But
SmallwoodWaivedTheArgumentThatThis ErrorCausedPrejudice.
Lastly, Smallwood claims that the superior court erred by failing to
schedule oral argument on Build Alaska's motion for summary judgment when it was
requested by both parties. The superior court must allow oral argument on summary
49
judgment if requested, and failing to do so here was error. But "[a] party on appeal
who alleges that oral argument was improperly denied must show . . . that the error
50
caused substantial prejudice." Smallwood has waived this argument by failing to
address it in its opening brief. Although Smallwood's brief mentioned the issue in the
statement of points on appeal, it did not contain any argument on this issue. The issue
was addressed in detail only in the reply brief.
48 Lockwood v. Geico Gen. Ins. Co. , 323 P.3d 691, 696 (Alaska 2014) ("A
party is entitled to summary judgment only if there is no genuine issue of material fact
and if the prevailing party is entitled to judgment as a matter of law." (quoting
ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum, Inc. , 322 P.3d 114, 122
(Alaska 2014))).
49 Alaska R. Civ. P. 77(e); see Bennett v. Hedglin, 995 P.2d 668, 674 (Alaska
2000).
50 Bennett, 995 P.2d at 674 (quoting Cleary Diving Serv., Inc. v. Thomas,
Head & Greisen, 688 P.2d 940, 942 (Alaska 1984)).
-20- 7601
----------------------- Page 21-----------------------
A "[f]ailure to argue a point of law constitutes abandonment" of that issue
51 52
on appeal.
"[I]ssues not argued in opening appellate briefs are waived." "[A]ttention
53 Smallwood therefore waived this
to the issue in a reply brief does not resuscitate it."
argument, and we decline to consider it now.
V. CONCLUSION
We REVERSE the superior court's grant of summary judgment and
REMAND for further proceedings.
51 Oels v. Anchorage Police Dep't Emps. Ass'n , 279 P.3d 589, 598 (Alaska
2012) (alteration in original) (quoting Smallwood v. Cent. Peninsula Gen. Hosp., Inc. ,
227 P.3d 457, 460 (Alaska 2010)).
52 Id. (quoting Hymes v. DeRamus, 222 P.3d 874, 887 (Alaska 2010)); see
also Heller v. State, Dep't of Revenue, 314 P.3d 69, 83 n.77 (Alaska 2013) (emphasizing
that arguments inadequately briefed on appeal are considered waived).
53 Oels, 279 P.3d at 598 (quoting Braun v. Alaska v. Com. Fishing & Agric.
Bank, 816 P.2d 140, 145 (Alaska 1991)).
-21- 7601
 |
| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
|
