Leisnoi, Inc. v. Stratman

• Decision Date: 26 June 1992
• Docket Number: Nos. 5-3774,s. 5-3774
• Citation: 835 P.2d 1202
• Parties: LEISNOI, INC., Appellant, v. Omar N. STRATMAN; Mabel Marie Rice; Antoinette Burton and James Burton, Appellees. to 5-3776, 5-3781.
• Court: Alaska Supreme Court

Page 1202

835 P.2d 1202

LEISNOI, INC., Appellant, v. Omar N. STRATMAN; Mabel Marie Rice; Antoinette Burton and James Burton, Appellees.

Nos. 5-3774 to 5-3776, 5-3781.

Supreme Court of Alaska.

June 26, 1992.

Rehearing Granted in part, Denied

in part and Opinion Modified,

July 24, 1992. ^*

Edward A. Merdes, Law Offices of Merdes & Merdes, P.C., Fairbanks, for appellant.

Roger E. Henderson, Houston & Henderson, Anchorage, for appellee Omar N. Stratman.

William Grant Stewart, McCarrey & McCarrey, Inc., Anchorage, for appellee Mabel Marie Rice.

Alan L. Scmitt, Jamin, Ebell, Bolger & Gentry, Kodiak, for appellees Antoinette Burton and James Burton.

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

OPINION

COMPTON, Justice.

In late 1985 and early 1986, Kodiak Island residents Omar Stratman, Mabel Marie Rice, Antoinette Burton and James Burton (Plaintiffs) instituted separate actions against Leisnoi, Inc. (Leisnoi) and Koniag, Inc. (Koniag) seeking specific performance of a settlement agreement which they had negotiated with Koniag. At the time of negotiation and signing of the settlement, Leisnoi had merged with Koniag and did not exist as a separate corporate entity. Later, the merger was set aside. Leisnoi claimed it was not bound by Koniag's settlement agreement with the Plaintiffs. The superior court ruled summarily that Leisnoi was bound by the settlement as a matter of law. After a trial on the merits, it awarded the Plaintiffs specific performance of the agreement. Leisnoi appeals. We conclude that the settlement agreement cannot be enforced against Leisnoi, and therefore reverse.

I. FACTS AND PROCEEDINGS ¹

Omar Stratman, ² Antoinette Burton and James Burton were cattle ranchers on Kodiak Island. Stratman held federal grazing leases encompassing roughly 45,400 acres. The Burtons were 50% shareholders in the Kodiak Cattle Co., which held a federal grazing lease to 21,005 acres. ³ Pursuant to the Alaska Statehood Act the State of Alaska selected the lands subject to the leases. Administration of the three leases was eventually transferred to the state. Later, Congress passed the Alaska Native Claims Settlement Act (Act or ANCSA), 43 U.S.C.A. §§ 1601-42 (West 1986 & Supp.1992).

In 1974 Leisnoi was certified under ANSCA as a village corporation for the village of Woody Island. Leisnoi was eligible to select over 115,000 acres of public land as its entitlement under the Act. See 43 U.S.C.A. § 1613(a), (f) (West 1986). Under ANCSA, however, title to the surface estate would be severed from the subsurface estate. Leisnoi would receive title to the surface estate it selected; Koniag, the ANCSA regional corporation for the Kodiak Island region, would receive title to the subsurface estate as long as the lands were not part of a National Wildlife Refuge. ⁴ 43 U.S.C.A. § 1613(f) (West 1986).

Pursuant to its ANCSA entitlement, Leisnoi selected some land which partly overlapped the land subject to Stratman's and the Burtons' grazing leases. ⁵

The Decertification Litigation

In 1975 Antoinette Burton and others, in an association which eventually became known as the Citizens Action Group, met to discuss native land selections in the Kodiak area. The group learned that Woody Island and several other villages which were not originally named in ANCSA had claimed ANCSA village status. The group also learned that, upon certification, these villages could claim up to 800,000 acres of land on Kodiak Island.

In 1976 Omar Stratman, Antoinette Burton and others in the Citizens Action Group filed suit in federal district court against the Secretary of the United States Department of the Interior, seeking a permanent injunction preventing the transfer of any land patents from the United States to Leisnoi and several other ANCSA village corporations. The group alleged that injury to its recreational use of public lands would result from any such transfer. Stratman and Burton also alleged that they would incur a direct economic injury from any transfer as federal grazing leaseholders. The Plaintiffs amended their complaint in 1977 and joined as defendants Koniag, Leisnoi and other corporations which had claimed ANCSA village status. Although the Plaintiffs did not specifically request decertification of Leisnoi as an ANCSA-recognized corporation, this litigation became known as the decertification litigation.

In 1978 the federal district court dismissed for failure to exhaust administrative remedies claims based on injury to recreational use of public lands. Stratman's and the Burtons' remaining claims based on economic injury to their leaseholds were later dismissed for lack of a "case or controversy" after Leisnoi relinquished its ANCSA claims to the lands overlapping the grazing leases.

In 1981, however, the United States Court of Appeals for the Ninth Circuit ruled that allegations of potential injury to recreational uses were sufficient to satisfy constitutional requirements for standing to protest the land transfers. It therefore reinstated the decertification litigation as to Stratman and the Burtons. ⁶ Stratman v. Watt, 656 F.2d 1321 (9th Cir.1981).

The Demerger Litigation ⁷

Following the federal district court's dismissal of the decertification litigation, but prior to the federal circuit court's decision, the shareholders of Leisnoi and five other ANCSA villages in the region voted to merge their village corporations with Koniag, the regional corporation. On December 2, 1980, prior to the mergers, a member of the Afognak Native Corporation (Afognak) filed a derivative suit on behalf of himself and Afognak shareholders to set aside the proposed merger between Afognak and Koniag. He moved for a temporary restraining order the next day. The superior court stayed and later enjoined the merger of Afognak with Koniag. It found that the injunction was justified by serious and substantial issues of possible material misrepresentation in proxy solicitations submitted to Afognak shareholders.

Leisnoi and the four remaining village corporations accomplished the merger on December 10, 1980. The state issued a certificate of merger on that date. Thereafter Leisnoi ceased to exist as an independent corporation, and Koniag took over Leisnoi's defense in the federal district court decertification litigation. Koniag settled that litigation in March 1982 by entering into an agreement (Stratman Agreement) with Stratman and the Burtons.

On December 2, 1981, while Koniag was negotiating to settle the decertification litigation, a former Leisnoi shareholder named Nicholas Shuravloff filed a derivative suit on behalf of himself and other Leisnoi shareholders to set aside the merger of Leisnoi and Koniag. The parties have referred to Shuravloff's action as the demerger litigation. Stratman and the Burtons were not parties to this litigation.

On January 26, 1983, the superior court ruled on a motion for partial summary judgment that the joint proxy statement, which proposed the merger of Leisnoi and other village corporations with Koniag, was misleading. This court denied a petition for review of this decision and, on October 10, 1983, Koniag entered into a settlement agreement with all plaintiffs in the demerger litigation. ⁸ In the Stipulation for Settlement, the parties included language stating that the merger of Leisnoi with Koniag was void ab initio. The superior court reiterated this language on January 27, 1984, in its order approving the settlement. ⁹

As a result of the demerger settlement, the federal government transferred the surface estate for lands Leisnoi selected under ANCSA to Leisnoi rather than to Koniag. Koniag received the subsurface rights to those lands, including sand and gravel rights.

The Stratman Agreement

After the federal circuit court reinstated Stratman's and Antoinette Burton's claims in the decertification litigation, and while Leisnoi was merged with Koniag, the Koniag board of directors authorized Koniag's Chief Executive Officer, J.F. Morse, to negotiate a settlement of the decertification suit. ¹⁰ The ensuing negotiations, which occurred between November 1981 and March 1982, eventually led to the Stratman Agreement.

Mr. Morse and Koniag's land manager, Gene Sundberg, negotiated directly with Stratman and the Burtons to arrive at the terms of the settlement. Attorneys Roger Henderson, representing Stratman and the Burtons, and Dan Hensley, representing Koniag, were used primarily to reduce the parties' agreement to writing. Stratman and the Burtons were in contact with Henderson during the settlement negotiations. He was their attorney and agent at all times during the negotiations. During negotiations, Henderson and Hensley specifically discussed Koniag's desire to use a quitclaim deed to convey certain real property to Stratman and the Burtons. The Stratman Agreement went through several drafts. The final document, which was reviewed and approved by the attorneys for both parties, was the result of arms length negotiations. Stratman and the Burtons were aware through Henderson of the pending demerger litigation between Leisnoi and Koniag.

Before the Stratman Agreement was signed and while the demerger litigation was still pending, Nicholas Shuravloff filed a motion for a temporary restraining order to enjoin Koniag from settling the decertification litigation with Stratman and the Burtons. The TRO also sought to prohibit Koniag from selling or encumbering any land "to which Leisnoi, Inc. would have been entitled, except for merger, because of its status as a village corporation under [ANCSA]." Henderson was present at the hearing on the TRO as counsel for Stratman and testified at the hearing on the subject of the Stratman Agreement.

The superior court denied Shuravloff's motion. It ruled that Koniag could not be adequately protected if an injunction was erroneously issued and the Stratman Agreement was not finalized. The court reasoned that the potential harm...