Outsource Servs. Mgmt., LLC v. Nooksack Bus. Corp.
| Decision Date | 03 April 2017 |
| Docket Number | No. 74764-9-I,74764-9-I |
| Parties | OUTSOURCE SERVICES MANAGEMENT, LLC, Respondent, v. NOOKSACK BUSINESS CORPORATION, Appellant. |
| Court | Washington Court of Appeals |
UNPUBLISHED OPINION
VERELLEN, C.J. — The Nooksack Business Corporation (NBC) borrowed more than $15 million to finance construction of and improvements to a casino on Nooksack Indian Tribe land. 25 U.S.C. § 81(b) (Section 81) requires preapproval by the Secretary of the Interior for any agreement or contract that "encumbers" tribal land. NBC's limited recourse loan is secured by a pledge of revenue to the lender. But because the lender's right to collect pledged revenues does not deprive the tribe of its exclusive proprietary control of its land, the loan agreements do not encumber tribal land for purposes of Section 81.
Under the broad language of the loan agreements, the lender may execute upon future revenues and rents whether or not the facilities are used as a casino. Additionally, merger does not preclude the lender from executing upon assets pledged as security for the loan. And, consistent with our Supreme Court's decision in a prior appeal between the lender and NBC, the state court has subject matter jurisdiction to adjudicate the lender's right to enforce its judgment.
The loan agreement provides for attorney fees to the prevailing party. Because the lender is the prevailing party, it is entitled to attorney fees on appeal.
Therefore, we affirm.
FACTS
NBC, wholly-owned by the Nooksack tribe, borrowed funds to build and improve a casino on tribal land. Outsource Services Management (OSM) is the successor of the original lender. NBC, the tribe, and the lender1 entered into several written agreements, including the terms of the loans and the lender's collection rights upon default. The loan agreements were limited recourse agreements, which restricted the lender's collection rights to the pledged assets. The pledged assets include pledged revenues, defined as:
"Facilities" are defined as "all Equipment and Improvements used in connection with the Nooksack River Casino."3 "Improvements" are defined as "any buildings and improvements to land."4
The agreements "continue in full force and effect until all outstanding Secured Obligations shall have been paid in full."5 The lender expressly agreed it has no control over the management of the facilities.6 And the agreement "does not encumber any land of the Borrower or to otherwise subject this [agreement] to the requirements of 25 U.S.C. § 81."7
OSM sued NBC after it defaulted in 2010. NBC challenged the state court's subject matter jurisdiction in a prior appeal. Our Supreme Court held the waiver of sovereign immunity and consent to be sued in state court provided Whatcom County Superior Court with subject matter jurisdiction "for claims related to the contract."8 On remand, NBC filed a counterclaim for declaratory judgment, including a determination that pledged assets and revenues do not extend to any funds received by NBC or thetribe for activity after the casino ceased operations. OSM moved for summary judgment.
On May 7, 2015, the court granted OSM summary judgment for the amount of the outstanding debt.9 The trial court also limited enforcement of the judgment "by the terms of the loan documents and the Indian Gaming Regulatory Act,"10 stayed execution of the judgment until the parties identified the assets available for execution, and prohibited NBC and the tribe from transferring, disposing of, or interfering with pledged assets from the casino.11
On January 13, 2016, the court issued a letter opinion finding the loan agreements valid and enforceable. The court also ruled OSM has "the right to revenues received by NBC or the Tribe from activities at the Facilities," even though the casino closed.12 The court reasoned:
NBC argues that the loan agreements are not valid because making Facilities revenues available to collection would be the equivalent of giving OSM a legal interest in the Facilities themselves—an interest prohibited by the loan agreements and by the law. But there are significant differences between a legal ownership interest and the right to collect revenues, and the loan agreements recognize this fact. The agreements make it clear that NBC and the Tribe are the Facilities' sole owners and decision makes. They give the lender no authority to determine or influence the use of the Facilities. NBC and the Tribe may choose to use the Facilities in a manner that generates no income; the agreements give them that opinion. If the Facilities are used in a manner that generates income, however, that income is a Pledged Revenue subject to collection. The loan agreements are consistent with the law.13
The trial court denied NBC's motion for reconsideration, emphasizing that "OSM's right to enforce the Judgment through execution on Pledged Revenues includes the right to all revenue from activities conducted at the Facilities."14
NBC appeals.
ANALYSIS
NBC argues the loan agreements are invalid under Section 81 because they encumber the tribe's trust property and lack the required preapproval from the Secretary of the Interior.15
Statutory interpretation is a question of law that we review de novo.16 The fundamental objective in interpreting a federal statute is to ascertain congressional intent.17 The traditional rules of statutory interpretation apply.18 If the statute's meaning is plain on its face, we give effect to that plain meaning as an expression of legislative intent.19 To determine a statute's plain meaning, we look to the language of the statute itself and the context of the statute, including related statutes.20 If the statute is susceptible to more than one reasonable interpretation, we may resort to statutoryconstruction, legislative history, and relevant case law for assistance in determining legislative intent.21
Section 81 provides, "No agreement or contract with an Indian tribe that encumbers Indian lands for a period of 7 or more years shall be valid unless that agreement or contract bears the approval of the Secretary of the Interior or a designee of the Secretary."22 Section 81 does not provide a definition of "encumber," but the related federal regulation, 25 C.F.R. § 84.002, defines "encumber" as:
[T]o attach a claim, lien, charge, right of entry or liability to real property ; (referred to generally as encumbrances). Encumbrances covered by this part may include leasehold mortgages, easements, and other contracts or agreements that by their terms could give to a third party exclusive or nearly exclusive proprietary control over tribal land.23
As originally enacted in 1872, Section 81 reflected, "Congressional concerns that [Native Americans], either individually or collectively, were incapable of protecting themselves from fraud in the conduct of their economic affairs."24 Before its amendment in 2000, Section 81 focused on preapproval for agreements "relative to their lands."
Because the provision "relative to their lands" was "'susceptible to the interpretation that any contract that touches or concerns' [tribal] lands must be approved,'" Congress concluded it was "untenably broad."25 Congress sought to foster business and entrepreneurship on tribal land26 and promote "modern attitudes towards tribal self-determination."27
As a result, Congress "limited the section to apply to only agreements concerning a duration of 7 or more years, and it replaced 'relative to Indian lands' with 'encumbering Indian lands.'"28 The comments to the new Section 8129 explain:
Section 81 [as amended] will no longer apply to a broad range of commercial transactions: Instead, it will only apply to those transactions where the contract between the tribe and a third party could allow that party to exercise exclusive or nearly exclusive proprietary control over the [tribal] lands.30
The Senate Report that accompanied the bill31 gives examples:
For example, a lender may finance a transaction on [a Native] reservation and receive an interest in tribal lands as part of that transaction, If, for example, one of the remedies for default would allow this interest to ripen into authority to operate the facility, this would constitute an adequate encumbrance to bring the contract within Section 81. By contrast, if the transaction concerned "limited recourse financing" and the lender merely acquired the first right to all of the revenue derived from specified lands for a period of years, this would not constitute a sufficient encumbrance to bring the transaction within Section 81.32
The commentary to the Bureau of Indian Affairs regulation defining "encumber" echoes the same examples contained in the Senate Report:
[T]he legislative history of Section 81 states, for example, that, if the default provision in a contract or agreement allows a third party (e.g., a lender) to operate the facility, that contract or agreement would "encumber" tribal land within the meaning of Section 81. If, however, the lender is only entitled to first right to the revenue from the facility, the contract or agreement would not "encumber...
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