Case Title: Alaska Statebank v. Kirschbaum

Citation: 

Docket Number: 

State: alaska

Court: Alaska Supreme Court

Date: 1983-04-08T00:00:00Z

Document:
Alaska Statebank v. Kirschbaum  662 P.2d 939 (1983) ALASKA STATEBANK, Appellant, v. Allen T. KIRSCHBAUM and Gisele Kirschbaum, Appellees. No. 6488. Supreme Court of Alaska. April 8, 1983. *940 Peter C. Ginder, Kemppel, Huffman & Ginder, Anchorage, for appellant. Herbert A. Ross, Anchorage, for appellees. Before BURKE, C.J., RABINOWITZ, and COMPTON, JJ., and CARLSON,[*] Superior Court Judge. RABINOWITZ, Justice. Alaska Statebank ("the Bank") appeals from an order granting partial summary judgment[1] in favor of Allen Kirschbaum.[2] The primary question on appeal is whether the Bank may seek a deficiency judgment against Kirschbaum in the event the proceeds of a judicial foreclosure sale of his encumbered property are insufficient to satisfy his debt to the Bank. In the summer of 1979, Kirschbaum borrowed $350,000 from the Bank to refinance a residential subdivision in Kenai and to complete development of the Sea Scape Subdivision ("the land loan"). At about the same time Kirschbaum obtained a second loan from the Bank for $400,000 to finance the construction of homes on four lots in the subdivision ("the construction loan").[3] Both loans were secured by deeds of trust; the construction loan deed of trust covered the four lots upon which Kirschbaum was to build residences, and the land loan trust deed covered the remaining 54 lots in the subdivision. Each trust deed contained a "dragnet" clause which provided that the trust deed secured not only the indebtedness in connection with which it was executed but also any other debts owed by Kirschbaum to the Bank.[4] Kirschbaum eventually defaulted on both loans. After extended discussions between Kirschbaum and the Bank concerning the terms upon which the 54 unimproved lots could be sold to a third party, the Bank declared the land loan in default and noticed a nonjudicial sale of the 54 lots securing that loan. The Bank subsequently acquired these lots with an offset bid. Thereafter, the Bank instituted judicial proceedings to foreclose on the remaining four lots for nonpayment of the construction loan and to establish its right to obtain a deficiency judgment against Kirschbaum should the four lots sell for less than the balance due on the construction loan.[5] Kirschbaum contended that the Bank was barred from seeking a deficiency judgment against him by virtue of its decision to commence a nonjudicial foreclosure on a contiguous parcel of unimproved real property upon which the Bank also held a first deed of trust ("the land loan"). Kirschbaum further contended that during the negotiations preceeding the foreclosures, the Bank used the dragnet clauses to treat the *941 two loans as a single obligation.[6] Kirschbaum argues that the Bank, having already pursued a nonjudicial foreclosure on the two-loans-as-one, is barred by Alaska's anti-deficiency statute[7] from obtaining a deficiency judgment against him. In other words, Kirschbaum argued that a lender who invokes a dragnet clause thereby elects to treat two or more debts as a single obligation, and that the now single obligation is subject to Alaska's anti-deficiency statute. In response to Kirschbaum's contentions the Bank argued that it never elected to rely on the dragnet clauses and, further, that the statements upon which Kirschbaum relies as evidence of such an election were made during settlement negotiations and therefore are inadmissible under Evidence Rule 408. Kirschbaum moved for a summary judgment. The superior court ruled that the doctrine of estoppel prevented the Bank from obtaining a deficiency judgment against Kirschbaum.[8] This appeal followed. I. EFFECT OF THE DRAGNET CLAUSES Apart from the Bank's evidentiary objection, the principal question in this appeal is whether the land loan and the construction loan should be treated as a single obligation. If the two loans are so treated, then Kirschbaum is correct when he states that the Bank may not obtain a deficiency judgment; for the very purpose of the anti-deficiency statute is to free him of personal liability once the Bank consummates a nonjudicial foreclosure. On the other hand, if the two loans are viewed as independent obligations, the Bank is free to pursue one remedy with respect to one loan and a separate remedy with respect to the other. Kirschbaum asserts that the doctrines of estoppel and quasi-estoppel prevent the Bank from claiming that the two loans are independent obligations enforceable by separate remedies since the Bank treated the two loans as a single obligation during repayment negotiations. Alternatively, Kirschbaum argues that apart from notions of estoppel the two loans are inherently so interrelated that they should be viewed as a single obligation.[9] II. ESTOPPEL AND QUASI-ESTOPPEL In regard to the doctrine of estoppel we have held that a party asserting estoppel must demonstrate, among other things, that he reasonably relied on another's representation *942 and that he would suffer some detriment if the other were now permitted to change his position.[10] In the instant case the superior court did not articulate any reasons in support of its conclusion that summary judgment in favor of Kirschbaum on the issue of estoppel was appropriate, and thus we cannot tell why the superior court apparently believed that there were no issues of fact remaining relevant to the elements of Kirschbaum's estoppel claim. Nevertheless, it is our view that the Bank has presented a persuasive case that the issues of Kirschbaum's reliance on the Bank's representations and of the resulting detriment are genuinely open to dispute and thus were inappropriate for resolution by summary judgment. The gist of Kirschbaum's estoppel argument is that he relied on the Bank's representation that he would not be able to take clear title to the 54 lots securing the land loan unless he paid a substantial portion of the construction loan as well as the full balance on the land loan, and that his reliance took the form of permitting the Bank to consummate a nonjudicial foreclosure and extinguish his rights in the 54 lots. Implicit in this assertion is the underlying assumption that Kirschbaum would have been able to, and in fact could have, paid the balance due on the land loan and would have attempted to secure the release of the 54 lots had the Bank not represented that it would not accept tender of only the amount due on the land loan. In other words, Kirschbaum's estoppel argument depends on his ability to show that events might have turned out differently had the Bank not made the alleged representation. The record indicates, however, that Kirschbaum was never able to pay even a fraction of the balance due on the land loan, much less tender payment of the full amount owed to the Bank. If Kirschbaum could not have avoided foreclosure in any event it is not apparent to us how it can be said that he detrimentally relied on the Bank's representation.[11] Thus we hold that the superior court could not have decided the question of detrimental reliance on the record presented and that summary judgment in Kirschbaum's favor on the ground of estoppel was improper.[12] Kirschbaum's alternative theory of estoppel is that of quasi-estoppel. In Jamison v. Consolidated Utilities, Inc., 576 P.2d 97 , 102-03 (Alaska 1978), we explained that reliance is not an element of a claim based on quasi-estoppel. Rather, *943 The essence of the doctrine of quasi-estoppel is the existence of facts and circumstances making the assertion of an inconsistent position unconscionable.[13] Our review of the record persuades us that it cannot be concluded as a matter of law that the Bank's assertion and course of action were so offensive as to be unconscionable. First, the instant case arises out of a commercial context in which the party asserting quasi-estoppel on the basis of unconscionable conduct borrowed a total of $650,000 from the Bank. Second, any element of unconscionability is lacking on this record. As with the estoppel issue it is also relevant to resolution of the quasi-estoppel issue to consider whether Kirschbaum in fact suffered any detriment. On the record presented we hold that there remains a significant issue as to whether Kirschbaum's position would have been any better had the Bank not taken the course of action he questions in the litigation. We thus hold that the superior court's grant of summary judgment on the basis of quasi-estoppel was erroneous.[14] III. ADMISSIBILITY OF REPRESENTATIONS MADE BY THE BANK DURING SETTLEMENT NEGOTIATIONS The Bank argues that Kirschbaum's claim arises only because the Bank mentioned the *944 dragnet clause during settlement negotiations and that Evidence Rule 408 excludes evidence of statements made and positions taken during such negotiations. Evidence Rule 408 states: Evidence of (1) furnishing or offering or promising to furnish or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible... . This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negativing a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution, but exclusion is required where the sole purpose for offering the evidence is to impeach a party by showing a prior inconsistent statement. According to the Bank, if the evidence upon which Kirschbaum relies is inadmissible that evidence cannot provide the basis for summary judgment. Further, the Bank makes an appealing policy argument that Evidence Rule 408 should be construed broadly to extend its privilege to the kinds of comments and representations that Kirschbaum contends are admissible. The Bank argues that lenders will be reluctant to meet with defaulting borrowers and help them work out their problems in a manner less drastic than foreclosure if statements made by lenders during such negotiations may subsequently be employed to defeat the lenders' claims. Kirschbaum counters that Rule 408 is by its terms inapplicable because the Bank's claim against him was not "disputed as to either validity or amount."[15] The crucial question is whether evidence of discussions and statements made at a time when the parties agreed on the validity and the amount of the claim, but were negotiating remedies, is excludable under Evidence Rule 408. In our view the answer to this question is supplied by the text of the rule. Rule 408 provides in part that evidence relevant to a claim "which was disputed as to either validity or amount is not admissible to prove liability." (emphasis added) This language indicates that the validity or amount of the claim must have been in dispute at the time that the statements sought to be admitted were made. In other words, the language of the rule does not require exclusion of the evidence upon which Kirschbaum bases his claims since they were made at a time when neither the validity nor the amount of the Bank's claim was disputed. The superior court's grant of summary judgment in favor of Kirschbaum is REVERSED.