345 P.3d 76 (Alaska 2015), S-14856, Alaska Fur Gallery, Inc. v. First Nat'l Bank Alaska

Docket Nº:S-14856, 14875, 6986
Citation:345 P.3d 76
Opinion Judge:BOLGER, Justice.
Party Name:ALASKA FUR GALLERY, INC., HERNANDEZ and ASSOCIATES, LLC, and THE INN AT WHITTIER, LLC, Appellants and Cross-Appellees, v. FIRST NATIONAL BANK ALASKA (formerly First National Bank of Anchorage), Appellee and Cross-Appellant
Attorney:Appearances: Don C. Bauermeister, Burke & Bauermeister, P.L.L.C., Bremerton, Washington, for Appellants and Cross-Appellees. William Grant Callow, II, Anchorage, and Stephen M. Dodge, A ustin, T exas, f or Appellee and Cross-Appellant.
Judge Panel:Before: Stowers and Bolger, Justices, and Eastaugh, Senior Justice.[*] [Fabe, Chief Justice, Winfree and Maassen, Justices, not participating.]
Case Date:March 13, 2015
Court:Supreme Court of Alaska
 
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345 P.3d 76 (Alaska 2015)

ALASKA FUR GALLERY, INC., HERNANDEZ and ASSOCIATES, LLC, and THE INN AT WHITTIER, LLC, Appellants and Cross-Appellees,

v.

FIRST NATIONAL BANK ALASKA (formerly First National Bank of Anchorage), Appellee and Cross-Appellant

Nos. S-14856, 14875, 6986

Supreme Court of Alaska

March 13, 2015

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Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Stephanie E. Joannides and Patrick J. McKay, Judges. Superior Court No. 3AN-06-06120 CI.

Appearances: Don C. Bauermeister, Burke & Bauermeister, P.L.L.C., Bremerton, Washington, for Appellants and Cross-Appellees.

William Grant Callow, II, Anchorage, and Stephen M. Dodge, A ustin, T exas, f or Appellee and Cross-Appellant.

Before: Stowers and Bolger, Justices, and Eastaugh, Senior Justice.[*] [Fabe, Chief Justice, Winfree and Maassen, Justices, not participating.]

OPINION

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BOLGER, Justice.

I. INTRODUCTION

A family of business owners obtained a bank loan to invest in a fledgling hotel project. The family later sued the bank, alleging that one of its loan officers fraudulently induced them to invest in the project. This appeal concerns numerous aspects of the resulting superior court proceedings. In particular,

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the family claims that the bank committed a fraud upon the court through inaccurate and inconsistent portrayals of the loan officer's conduct. We conclude that although some testimony offered by the bank may have been misleading, it was not sufficiently egregious as to constitute fraud upon the court. We therefore affirm.

II. FACTS AND PROCEEDINGS

William McGrew, now deceased, was a loan officer and the senior vice president for commercial lending at First National Bank Alaska (the Bank). Among the Bank's corporate customers were Alaska Fur Gallery, Inc. and Hernandez & Associates, LLC. Both entities are owned and operated by members of the Hernandez family, and we refer to these entities collectively as " the Hernandezes" unless context requires otherwise.

The Hernandezes borrowed money from the Bank to invest in a hotel project, the Inn at Whittier, LLC (the Inn). But according to the Hernandezes, McGrew used his position of trust to induce unwise investments in the Inn and, when trouble arose, assured the Hernandezes that he would relieve them of their financial liability by finding replacement financing, which never came to fruition. The Hernandezes filed suit, alleging both common law tort claims and Alaska Securities Act1 violations.

The case was originally tried in 2008, but for reasons not relevant to this appeal, the superior court ordered a new trial. This second trial, conducted in 2010, resulted in an award for the Hernandezes on their common law negligence claim only. The jury found that the Hernandezes had suffered $675,000 in damages but determined that the Bank was only partially at fault. The jury concluded that another investor, Edward Cronick, also contributed to the Hernandezes' loss, and that the Hernandezes themselves were negligent and unreasonably failed to avoid damages. The jury allocated 45% of the fault to the Hernandezes, 41% to Cronick, and 14% to the Bank.

Based on the jury's verdict, the superior court entered judgment against the Bank in the amount of $94,500 in damages, plus interest. The court also awarded the Hernandezes attorney's fees and costs. The Hernandezes' appeal and the Bank's cross-appeal involve multiple rulings at various stages of the superior court proceedings. These specific rulings and the underlying facts are detailed in the discussion below.

III. STANDARD OF REVIEW

A superior court's determination as to whether fraud upon the court has occurred is reviewed for abuse of discretion.2 " In reviewing the denial of a motion for directed verdict or [judgment notwithstanding the verdict (JNOV)], we apply an objective test to determine whether the evidence, when viewed in the light most favorable to the non-moving party, is such that reasonable [persons] could not differ in their judgment." 3 " We review denial of a new trial under an abuse of discretion standard wherein we disturb the trial court's discretion only in the most exceptional circumstances to prevent a miscarriage of justice." 4

A superior court's decision to admit or exclude evidence is reviewed for abuse of discretion, and " will be upset only if we find there has been an error which affected the substantial rights of a party." 5 " We review jury instructions de novo when a timely objection is made." 6 Absent a timely objection,

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we review only for plain error.7 Whether equitable estoppel applies is a question of law that this court reviews de novo.8

" We review the decision to award attorney's fees for abuse of discretion and [will] overturn it only where the award is manifestly unreasonable." 9 Here, the Bank asks for de novo review of the Hernandezes' enhanced attorney's fees award since the judge who made that award had not been present at the two trials. The Bank argues that since the awarding judge did not have the benefit of observing the proceedings, the rationale for the more deferential standard of review does not apply.10

We have never reviewed an award of attorney's fees with less deference where a new superior court judge has been assigned to a case, and we decline to do so here. Alaska Civil Rule 82(b)(3) gives the superior court significant discretion to " vary an attorney's fee award" based on the consideration of various factors, and makes no distinction between a judge sitting at trial versus a judge later assigned to a matter. Even a superior court judge who did not preside over the trial in a case may have a more current perspective through which to evaluate some of the Rule 82(b)(3) factors, such as " the reasonableness of the attorneys' hourly rates and the number of hours expended" ; " the reasonableness of the number of attorneys used" ; or an attorney's " efforts to minimize fees." 11 We therefore review the award of enhanced attorney's fees to the Hernandezes for abuse of discretion.

A superior court's prevailing party determination for purposes of attorney's fees is similarly reviewed for abuse of discretion.12 Whether an offer of judgment complies with Alaska Civil Rule 68, however, is a question of law to which we apply independent judgment.13 Similarly, we interpret the civil rules de novo,14 and apply our independent judgment to the interpretation of contracts.15

IV. DISCUSSION

A. Although The Bank's Litigation Conduct Supports The Award Of Enhanced Attorney's Fees For The First Trial, The Superior Court Did Not Err By Finding No Fraud Upon The Court.

Before the second trial in this case commenced, the Hernandezes filed a motion seeking to establish the Bank's liability on the grounds that the Bank perpetrated a " fraud upon the court" during the first trial.16 The Hernandezes argued that Bank officers, despite their knowledge that McGrew had in fact violated bank policy and may have violated federal or state laws, presented testimony and " directed a litigation defense" based on

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the claim that McGrew had never committed any wrongdoing. As evidence, the Hernandezes pointed to alleged inconsistencies between the Bank's testimony in their case ( AFG ) and a separate case involving McGrew's conduct with respect to a different Bank client, Todd Christianson ( Christianson ).17

The superior court concluded that the Hernandezes " failed to demonstrate, by clear and convincing evidence, conduct by [the Bank] egregious enough to support a finding of fraud upon the court." The court also noted that the verdict from the first trial had already been vacated; thus the Hernandezes would have an opportunity at the second trial to " examine the bank officers about their knowledge of McGrew's conduct." Finally, the order made clear that the Hernandezes could later seek attorney's fees incurred during the first trial if they could " show new evidence elucidated at the upcoming trial that [would] justify a finding of misconduct by [the Bank] or fraud upon the court."

Upon conclusion of the second trial, the Hernandezes filed a renewed fraud upon the court motion, which was similarly denied. However, the superior court noted it would " consider the actions of the defense and their witnesses in conjunction with the anticipated motion for attorney's fees," and the court ultimately awarded the Hernandezes enhanced fees for hours spent on the first trial and on the motion for a new trial. The court found that the Bank's " litigation conduct prior to the first trial was not undertaken in good faith and, at times, was unreasonable" and that " testimony given in the Christianson matter was at odds with testimony presented in this litigation." But with regard to the second trial, the court found that the Hernandezes were able to present " whatever evidence [they] deemed relevant and probative" and that no enhanced fees were warranted. The Bank appeals the award of enhanced attorney's fees for the first trial,18 and the Hernandezes contend that enhanced fees should have been awarded for both trials.

The Hernandezes also appeal the denial of their fraud upon the court motions and further contend the Bank has committed a fraud upon this court. A typical remedy for fraud upon the court is to vacate the fraudulently obtained judgment.19 Here, however, the Hernandezes seek an alternative remedy, which is for this court to direct judgment in their favor and remand solely for determination of damages.

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