Blake v. Gilbert

• Citation: 702 P.2d 631
• Decision Date: 05 July 1985
• Docket Number: No. S-344,S-344
• Parties: Dean BLAKE, Appellant, v. Gary GILBERT and Haakon Olson, Appellees.
• Court: Supreme Court of Alaska (US)

Page 631

702 P.2d 631

Dean BLAKE, Appellant, v. Gary GILBERT and Haakon Olson, Appellees.

No. S-344.

Supreme Court of Alaska.

July 5, 1985.

Kurt M. LeDoux, LeDoux & LeDoux, Kodiak, for appellant.

Bernd C. Guetschow, Anchorage, for appellees.

Before RABINOWITZ, C.J., and BURKE, MATTHEWS, COMPTON and MOORE, JJ.

OPINION

BURKE, Justice.

The main issue in this appeal is whether the dismissal of a corporate plaintiff's action, for failure to pay its corporate tax and file its annual report as required by AS 10.05.720, operated as an adjudication on the merits, so as to bar a subsequent action on the ground of res judicata. The answer turns on whether such dismissal is one "for lack of jurisdiction" within the meaning of Alaska Civil Rule 41(b). Other issues are: (1) whether the trial court erred in granting partial summary judgment under the statute of limitations, (2) whether the court's award of attorney's fees was improper, (3) whether the trial judge should have been disqualified, and (4) whether the court erred in expunging plaintiff's notice of lis pendens.

I

Diversified Enterprises, Inc. (D.E.I.), ¹ brought suit against Gary Gilbert for breach of fiduciary duty and interference with contract rights, and against Haakon Olson for breach of contract. The case was dismissed, without opposition, on October 3, 1977, for D.E.I.'s failure to meet the requirements of AS 10.05.720. ² The court's order did not specify whether the dismissal was with or without prejudice. Three days later, D.E.I. paid its taxes and filed its annual report, but took no further action regarding the suit.

On March 1, 1978, D.E.I. assigned its claim to Dean Blake. ³ On March 10, Blake brought a substantially identical action against Gilbert and Olson. Gilbert moved for partial summary judgment on the issue of interference with contract rights, based on the statute of limitations and the nonexistence of a contract between D.E.I. and Swiftsure Seafoods, Inc. (Swiftsure). The trial court granted Gilbert's motion. Blake amended his complaint, deleting the contract interference count, but reserving his right to appeal the trial court's grant of partial summary judgment in favor of Gilbert.

Gilbert and Olson filed a motion to dismiss Blake's amended complaint, which the trial court granted on the ground that the action was barred by the doctrine of res judicata. The court deemed the dismissal in the original D.E.I. suit to be an adjudication on the merits under Civil Rule 41(b). ⁴ Blake's motion for reconsideration was denied and Blake filed a notice of appeal. Thereafter, the trial court granted the appellees' motion for attorney's fees, awarding them $15,000. Blake filed an amended statement of points on appeal to include the issue of attorney's fees.

Subsequent to judgment, Blake filed a motion to disqualify Judge Roy H. Madsen, because Judge Madsen's nephew, Ron Brockman, was one of Gilbert's partners in the ownership of a Kodiak office building. Judge Madsen denied the motion, as did Judge Victor D. Carlson when the matter was referred to him. Earlier, Blake recorded a notice of lis pendens covering property owned by Gilbert. Gilbert filed a motion to expunge the notice of lis pendens, and the motion was granted. Blake filed supplemental points on appeal, regarding the denial of his motion to disqualify Judge Madsen and the granting of Gilbert's motion for expunction of the lis pendens.

II

The trial court ruled that the dismissal in the D.E.I. suit was involuntary and operated as an adjudication on the merits, under Civil Rule 41(b) and Jefferson v. Greater Anchorage Area Borough, 451 P.2d 730, 732 (Alaska 1969). Applying the doctrine of res judicata, the court held that the dismissal order precluded subsequent litigation of the same cause of action.

Under the common law doctrine of res judicata, a judgment in a prior action operates as a bar to a subsequent action if (1) the prior judgment was a final judgment on the merits, (2) a court of competent jurisdiction rendered the prior judgment, and (3) the same cause of action and same parties or their privies were involved in both suits. Weston Funding Corp. v. Lafayette Towers, 410 F.Supp. 980, 983 (S.D.N.Y.1976); see also Aleutian Region R.E.A.A. v. Wolansky, 630 P.2d 529, 532-33 (Alaska 1981). Here, the second and third elements have obviously been satisfied, ⁵ but Blake contends that res judicata should not apply because the prior judgment was not rendered on the merits.

[O]rdinarily, the doctrine may be invoked only after a judgment has been rendered which reaches and determines "the real or substantial grounds of action or defense as distinguished from matters of practice, procedure, jurisdiction or form," and at common law, a dismissal on a ground which did not resolve the substantive merit of the complaint was not a bar to a subsequent action on the same claim.

Saylor v. Lindsley, 391 F.2d 965, 968 (2d Cir.1968) (citations omitted).

The court did not hear the substance of Blake's claim and, thus, under common law principles, res judicata does not apply. The involuntary dismissal of D.E.I.'s suit, however, is governed by Alaska Civil Rule 41(b), ⁶ which operates as an exception to the common law rule. Under Rule 41(b), an involuntary dismissal operates as an adjudication on the merits unless the court order specifies otherwise, or the dismissal is one for lack of jurisdiction, improper venue, or failure to join an indispensable party. Here, the trial court did not specify whether the dismissal of D.E.I.'s suit was with or without prejudice. Blake argues that the dismissal was without prejudice because D.E.I.'s failure to comply with the preconditions set forth in AS 10.05.720 was "jurisdictional" within the meaning of Rule 41(b).

In Costello v. United States, 365 U.S. 265, 81 S.Ct. 534, 5 L.Ed.2d 551 (1961), the United States Supreme Court interpreted "lack of jurisdiction" broadly in construing an identical federal rule, Fed.R.Civ.P. 41(b). A denaturalization proceeding was dismissed in Costello on the ground that the government had not filed an affidavit of good cause. The Court regarded the lack of jurisdiction exception of Federal Civil Rule 41(b) as encompassing dismissals based on a plaintiff's failure to comply with a precondition. The dismissal in Costello was, therefore, without prejudice and could not bar a subsequent denaturalization proceeding if the government satisfied the necessary precondition. The Court interpreted Federal Rule 41(b) as not intended to alter the common law principle that the disposition of a suit on grounds other than on the merits will not bar another suit. The Court reasoned that the policy behind the rule only bars future actions when "the defendant must incur the inconvenience of preparing to meet the merits because there is no initial bar to the Court's reaching them." Id. at 285-86, 81 S.Ct. at 544-45, 5 L.Ed.2d at 564-65.

Blake cites numerous cases and authorities following the holding of Costello, ⁷ including the Restatement (Second) of Judgments, which states that a judgment for defendant, which rests on plaintiff's failure to satisfy a precondition to suit, does not bar another action by plaintiff after the precondition has been satisfied. ⁸

Appellees maintain that lack of capacity to sue due to noncompliance with AS 10.05.720 is not a jurisdictional defect, citing Jefferson v. Greter Anchorage Area Borough, 451 P.2d 730 (Alaska 1969). Appellees' argument fails because they misread Jefferson. In Jefferson, the appellant's suit, questioning the validity of a bond election, was dismissed for failure to state a claim upon which relief could be granted and because the decision in the prior case of Dale v. Greater Anchorage Area Borough, 439 P.2d 790 (Alaska 1968) was res judicata. We held that because the trial court's order of dismissal in Dale (for plaintiff's failure to file a written notice of contest of election) did not specify otherwise, it operated as an adjudication on the merits under Rule 41(b).

In Jefferson, we discussed the fact that even though there was no trial on the merits in Dale, res judicata was still applicable, because Dale would have had an opportunity to be heard on the merits if she had filed timely notice. Quoting Olsen v. Muskegon Piston Ring Co., 117 F.2d 163, 165 (6th Cir.1941), we stated:

A judgment on the merits does not require a determination of the controversy after a trial or hearing on controverted facts. It is sufficient if the record shows that the parties might have had their controversies determined according to their respective rights if they had presented all their evidence and the court had applied the law. Such an opportunity was afforded the appellant, who did not avail himself of the right.

Jefferson, 451 P.2d at 732 (citation and footnote omitted). ⁹

The case at bar is easily distinguished from Jefferson. D.E.I. satisfied the precondition to suit immediately after the original dismissal; Jefferson, however, like Dale, never satisfied the precondition to suit. Thus, in Jefferson, the bar was never removed. 451 P.2d at 733 n. 10.

We have two choices in interpreting Rule 41(b): (1) interpret "jurisdiction" narrowly so that a dismissal for failure to comply with AS 10.05.720 "operates" as an adjudication on the merits, even though the substance of the claim was never reached, or (2) interpret "jurisdiction" broadly to include preconditions and other initial bars to suit, where the defendant has not yet incurred any significant prejudice. If we choose the former, a corporation such as D.E.I. would be denied access to the courts despite its subsequent compliance with the statute. This would defeat the purpose of AS 10.05.720, which is to compel compliance with the tax and reporting statutes rather than to punish the delinquent corporation. Annot., 6 A.L.R.3d 326, 329 (1966). In circumstances where a corporation has complied with statutory obligations after an action has been...