Court Opinion

ID: 2671360
Source: CourtListenerOpinion
Date Created: 2014-04-26 00:01:43.123309+00
Date Added: 2024-06-11T12:22:09.241338
License: Public Domain

Notice: This opinion is subject to correction before publication in the P ACIFIC R EPORTER .
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              THE SUPREME COURT OF THE STATE OF ALASKA

AAA VALLEY GRAVEL, INC.,                          )
                                                  )    Supreme Court No. S-14680
                     Appellant,                   )
                                                  )    Superior Court No. 3PA-00-00716 CI
     v.                                           )
                                                  )    OPINION
ALICIA TOTARO and                                 )
HERMAN RAMIREZ,                                   )    No. 6902 - April 25, 2014
                                                  )
                     Appellees.                   )
                                                  )

             Appeal from the Superior Court of the State of Alaska, Third
             Judicial District, Palmer, Eric Smith, Judge.

             Appearances: William G. Royce, Anchorage, and Kenneth
             D. Albertsen, Palmer, for Appellant. Richard L. Harren, Law
             Offices of Richard L. Harren, P.C., Wasilla, for Appellee
             Alicia Totaro. Ross A. Kopperud, Palmer, for Appellee
             Herman Ramirez.

             Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and
             Bolger, Justices.

             PER CURIAM.

             FABE, Chief Justice, dissenting.

I.   INTRODUCTION
             This matter returns to us after the remand proceedings ordered in an earlier
appeal.1 The facts underlying this dispute over a 1984 gravel lease, a later sublease, and
overriding royalty payments under the sublease, are outlined in our previous decision.2
              Relevant to this appeal, we earlier vacated a judgment in favor of Alicia
Totaro, the sublease’s overriding royalty interest holder, and remanded for a
determination whether the original gravel lease between Herman Ramirez and Bill
Nelson, doing business as Cosmos Developers, Inc., was an exclusive lease for purposes
of gravel removal.3 The superior court conducted an evidentiary hearing and found that
Ramirez and Nelson intended the original gravel lease to be an exclusive lease. In
context, that finding led to the conclusion that the sublease from Cosmos to AAA Valley
Gravel, Inc. was exclusive and that AAA Valley Gravel’s gravel extraction under the
sublease triggered continued overriding royalty obligations to Totaro. Because AAA
Valley Gravel had discontinued the overriding royalty payments to Totaro in 1998 when
it purchased the property from Ramirez, the superior court entered judgment in favor of
Totaro for nearly $1 million in past royalty payments, interest, costs, and attorney’s fees.
              AAA Valley Gravel appeals, arguing that the superior court erred by:
(1) failing to rule that the original gravel lease’s failure to mention exclusivity rendered
the gravel lease non-exclusive as a matter of law; (2) implying exclusivity in the original
gravel lease as a matter of law; (3) placing the burden of persuasion on the exclusivity
issue on AAA Valley Gravel; (4) finding that the original gravel lease conveyed an
exclusive right to extract gravel from Ramirez’s property; (5) failing to find that the
original gravel lease expired 10 to 12 years after its inception; and (6) failing to specify

       1
            AAA Valley Gravel, Inc. v. Totaro (AAA Valley Gravel I), 219 P.3d 153,
160-62 (Alaska 2009).
       2
              Id. at 155-59.
       3
              Id. at 162.

                                            -2-                                       6902

in the final judgment when the original gravel lease would terminate.            Ramirez,
nominally an appellee in this appeal, also contends that the superior court erred; Ramirez
essentially joins in most of AAA Valley Gravel’s arguments.4
              For the following reasons, we affirm the superior court’s judgment.
II.    DISCUSSION
              1.     We are not persuaded by AAA Valley Gravel’s argument that, as a
matter of law, a non-integrated written lease agreement failing to mention exclusivity is
non-exclusive. In AAA Valley Gravel I, we implicitly held such silence is not dispositive
by remanding for fact-finding on exclusivity.5          Fact-finding would have been
unnecessary if silence renders a lease non-exclusive as a matter of law.6
              2.     We also are not persuaded by AAA Valley Gravel’s argument that
the superior court implied, as a matter of law, an exclusivity provision into the original
gravel lease. The superior court found, as a matter of fact, that Ramirez and Nelson
intended the original gravel lease to be an exclusive lease. We therefore review the
superior court’s factual finding for clear error.7

       4
             Totaro contends that Ramirez’s brief and arguments should not be
considered because: (1) Ramirez waived the exclusivity issue in the first round of
proceedings, and (2) his brief is essentially an appellant’s brief and was thus filed late.
We disagree with Totaro on this point and do consider Ramirez’s arguments on the
merits.
       5
219 P.3d at 160-62.
       6
              See also discussion infra, pp. 7-8 and related notes.
       7
              Shooshanian v. Dire, 237 P.3d 618, 622 (Alaska 2010) (“We review the
factual findings for clear error, reversing only when — ‘after a thorough review of the
record’ — we are left with a ‘definite and firm conviction that a mistake has been
made.’ ” (quoting Soules v. Ramstack, 95 P.3d 933, 936 (Alaska 2004))). We reject
AAA Valley Gravel’s argument that we should apply a less deferential standard of
                                                                          (continued...)

                                            -3-                                      6902

               3.    The superior court’s factual finding that Ramirez and Nelson
intended the original gravel lease to be exclusive is not clearly erroneous. The superior
court reviewed testimonial and documentary evidence, made specific credibility findings
supported by the evidence, and made many specific findings of fact supporting its
ultimate finding of exclusivity. AAA Valley Gravel’s argument essentially is that if the
credibility findings are rejected and inferences from the factual underpinning of the case
are viewed in its favor, a finding of non-exclusivity is the only logical result. But the
trial court makes the credibility findings and weighs the evidence, not this court;8 on this
record we cannot say that the superior court clearly erred in its factual finding of
exclusivity.
               4.    The superior court placed the burden of persuasion on AAA Valley
Gravel to prove the original gravel lease was intended to be non-exclusive. But the
superior court also ruled that even if it were Totaro’s burden of persuasion to prove the
original gravel lease was intended to be exclusive, she met that burden. We therefore do
not need to address AAA Valley Gravel’s argument that it was legal error to assign it the
burden of persuasion on the exclusivity issue.9
               5.    AAA Valley Gravel’s argument that the superior court erred by

       7
             (...continued)
review to a superior court’s factual findings based on non-testimonial evidence.
       8
             We give “[p]articular deference” to a superior court’s credibility
determinations. Gold Dust Mines, Inc. v. Little Squaw Gold Mining Co., 299 P.3d 148,
166 (Alaska 2012) (citing Wasserman v. Bartholomew, 38 P.3d 1162, 1167 (Alaska
2002)).
       9
             See Harris v. AHTNA, Inc., 193 P.3d 300, 306 (Alaska 2008) (rejecting
argument that trial court erred in assigning burden of persuasion when trial court
expressly concluded that result was same with alternative burden of persuasion
assignment).

                                            -4-                                       6902

failing to find the lease expired 10 to 12 years after inception also fails. We touched on
this issue in the first appeal.10 The lease provides that it remains in effect for as long as
it is economically feasible to take gravel from the property.11 The superior court found
after the first trial that the parties intended the lease to expire when either: (1) gravel
mining was no longer economically feasible; or (2) the property was suitable for
residential development, whichever came first.12 But the superior court’s final judgment
stated only that the lease should be specifically performed “until it is terminated by its
terms or by agreement of the parties.”13 Totaro cross-appealed this issue, arguing that
the superior court’s statement that the lease would terminate when the property was
suitable for residential development was dicta because the interplay between the “mining
no longer economically feasible” and “suitable for residential development” criteria was
not litigated.14 Agreeing with Totaro that the issue did not appear to have been a focal
point of the litigation and pointing to the language of the final judgment, and given our
remand on the exclusivity question, we determined that the superior court’s expression
of the lease termination criteria was not binding and would have to be resolved later.15
               After remand, when addressing AAA Valley Gravel’s renewed argument
that the lease was intended to expire 10 to 12 years after inception, the superior court
stated:

          10
219 P.3d at 167.

          11
               Id.

          12
               Id.

          13
               Id.

          14
               Id.

          15
               Id.

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             The issue raised at trial was whether the lease had a definite
             term, and if so, whether that term was 10 years. This court
             ruled that the lease had a definite term, but that the parties did
             not adopt a 10-year limit. Th[is] court then articulated what
             it understood to be the actual term. No one appealed the first
             two holdings; the third ruling was at issue on appeal. And the
             Alaska Supreme Court agreed . . . that it was not necessary to
             address precisely how to frame the actual term of the lease.
             It therefore effectively vacated this court’s ruling as to the
             precise nature of the term of the lease, holding that that
             matter could be addressed if necessary in the future.
                    In short, the [Supreme] Court did not vacate this
             court’s ruling that the lease had a definite term or that the
             term was not 10 years. Those rulings therefore stand. And
             since AAA and Mr. Ramirez did not appeal those rulings,
             they cannot properly argue at this point that the lease had a
             10 year term. (Citation omitted).
             The superior court correctly interpreted our earlier decision. AAA Valley
Gravel’s argument on remand that the lease expired 10 to 12 years after inception was
not properly before the superior court nor is it properly before us in this second appeal,
and we do not address it.
             6.     Finally, we do not agree with AAA Valley Gravel that the superior
court erred by not including in the final judgment a specific description of when the
original gravel lease would terminate. The superior court’s original ruling that the lease
had a definite term was not appealed and was the law of the case,16 although the specific
articulation of the termination criteria had not been adjudicated. On remand the parties
did not litigate the termination criteria, other than AAA Valley Gravel’s attempt to re-
litigate its contention that the lease expired 10 to 12 years after inception. The lease’s

      16
             Beal v. Beal, 209 P.3d 1012, 1016-17 (Alaska 2009) (explaining “law of
the case” doctrine generally prohibits reconsideration of issues that were or could have
been adjudicated in previous appeal).

                                            -6-                                     6902
termination date remains for resolution by the parties, through agreement or future
litigation, but its resolution is not necessary in connection with the present appeal.
              At oral argument, AAA Valley Gravel tangentially raised the question of
the enforceability of a lease exclusivity provision lacking a reasonable time limitation.
AAA Valley Gravel’s argument is difficult to discern from its briefing, but it points to
a case involving a shopping center lease and suggests that exclusivity provisions with
unreasonable geographic or temporal parameters are unenforceable restraints on trade.17
This argument causes us to reflect on the substantive nature of the gravel lease in this
case — although the parties did not discuss this point in the original trial, the first appeal,
or the second trial after remand, a gravel lease is a kind of easement, specifically a
profit.18 A profit’s exclusivity derives from the nature of the property right conveyed;
the profit holder generally has the right to exclude others.19 Conversely, exclusivity in

       17
             See, e.g., Horton v. Uptown Partners, L.P., 720 N.W.2d 192 (Iowa App.
2006) (unpublished table decision) (holding exclusivity clause in lease must be
reasonable in duration and scope to not be restraint on trade).
       18
              Laverty v. Alaska R.R. Corp., 13 P.3d 725, 735-36 & n.51 (Alaska 2000)
(holding gravel mining agreement conveyed “a kind of easement, specifically a ‘profit’ ”
(citing RESTATEMENT (THIRD ) OF PROP .: SERVITUDES § 1.2 (2000))). The parties
presented this case to the superior court and to this court as one of contract interpretation.
Although there is some difference in the interpretation rules for contracts and for
conveyances, had the case been presented as one of conveyance interpretation, the result
(remand for trial on whether the parties intended the lease to be exclusive) likely would
have been the same. Compare AAA Valley Gravel I, 219 P.3d at 160-62 (interpreting
lease contract terms), with Dias v. State, Dep’t of Transp. & Pub. Facilities, 240 P.3d
272, 274-75 (Alaska 2010) (interpreting easement conveyance deed terms). But, given
how the parties litigated this case, we do not need to consider that question.
       19
              RESTATEMENT (THIRD ) OF PROP .: SERVITUDES § 1.2 cmt. c (2000); 3 Rocky
Mountain Mineral Law Found., A M . LAW OF M INING §82-03[3], at 82-14 (2d ed. 2013)
(noting profits are presumptively exclusive).

                                             -7-                                         6902

a shopping center lease refers to the landlord’s covenant not to lease other property to
the tenant’s competitors; it imposes a burden on the landlord’s remaining property
rights.20 The rule that exclusivity covenants in such leases must be reasonable in
duration as restraints on trade applies to covenants burdening the landlord’s property
right,21 not to real property conveyances such as the profit granted in this case.22 In any
event, AAA Valley Gravel’s argument ignores the facts that (1) the superior court
determined that the lease has a defined end date, and (2) the exclusivity provision expires
when the lease expires. Contrary to AAA Valley Gravel’s urgings, the lease and its
exclusivity provision are not endless.
III.     CONCLUSION
              For the foregoing reasons, we AFFIRM the judgment of the superior court.

         20
              See, e.g., Davidson Bros. v. D. Katz & Sons, 579 A.2d 288, 295-96 (N.J.
1990).
         21
            3 M ILTON R. FRIEDMAN & PATRICK A. RANDOLPH , JR ., FRIEDMAN ON
LEASES § 28:1, at 28-1 (Patrick A. Randolph, Jr. ed., 5th ed. 2005); Horton, 720 N.W.2d
192; Davidson Bros., 579 A.2d at 295-96.
         22
              8 THOMPSON ON REAL PROPERTY § 65.03(b), at 42 (David A. Thomas ed.,
2d ed. 2005) (explaining landlord/tenant lease rules do not apply to profits, and attempts
to apply those rules to profits are “quite obviously mistaken”). We do not, as the dissent
suggests, make this point to rule as a matter of law that the lease was exclusive.
Regardless of the nature of the lease, the superior court found that the parties intended
it to be exclusive. Although our point does lend support to our intial remand for that
finding, here it is directed to the restraint of trade issue raised by AAA Valley Gravel.

                                           -8-                                       6902

FABE, Chief Justice, dissenting.
              I continue to hold the view, expressed in my dissent in the first appeal in
this case, that the “hopelessly deficient” lease between Ramirez and Cosmos “cannot
possibly sustain . . . [the] highly restrictive, multi-decade arrangement” that the court
today enforces.1 For the reasons explained in my first dissent and below, I would hold
that the lease’s silence on exclusivity is sufficient to render the lease non-exclusive as a
matter of law.2 AAA’s obligation to pay royalties to Totaro ended when it purchased the
property and began gravel mining as the owner; therefore, the superior court’s decision
holding AAA liable to Totaro should be reversed.
              As the court itself noted in the first appeal, “[c]ontract interpretation
generally is a question of law”3 and involves fact-finding only when “when facially
ambiguous contract language read in the context of all relevant extrinsic evidence
remains ambiguous.”4 Because the plain language of the lease is not facially ambiguous
on the issue of exclusivity, it was unnecessary to remand to the superior court for fact-
finding on the parties’ subjective intent. Despite recognizing our long-held standard on

       1
              AAA Valley Gravel, Inc. v. Totaro, 219 P.3d 153, 168 (Alaska 2009) (Fabe,
C.J., concurring in part and dissenting in part).
       2
               Id. at 169-70 (“Ambiguity in a contract does not arise from silence. And
unambiguous contract language is not rendered ambiguous simply because the parties
disagree on their intent at the time of contracting, because they advance different
interpretations during the course of litigation, or because the clear meaning of the
language used would work a hardship on one of the parties. By omitting any mention
of exclusivity, Ramirez retained a concurrent right to mine the gravel on his property.”)
(internal citations omitted).
       3
            Id. at 160 (per curiam) (citing Norville v. Carr-Gottstein Foods Co., 84 P.3d
996, 1004 (Alaska 2004)).
       4
             Id. at 161 (citing Little Susitna Constr. v. Soil Processing, Inc., 944 P.2d
20, 23 (Alaska 1997)).

                                            -9-                                       6902

contract interpretation, the court in its earlier decision strained to introduce ambiguity
into the lease’s silence on exclusivity, couching its conclusion in equivocal terms: “The
Ramirez/Cosmos lease does not mention exclusivity, but even though silent, some of its
provisions may make sense only if the lease had been intended to be exclusive.”5 It was
inappropriate for the court to augment the lease’s plain language to “create ambiguity
regarding the existence of such a crucially important restriction in a lease that is
otherwise completely silent on the matter.”6 Because ambiguity in a contract generally
does not arise from silence,7 especially with regard to a provision as important as
exclusivity, I conclude that the lease between Ramirez and Cosmos was not exclusive.
As I noted in my earlier dissent, “[j]ust as Ramirez had the right to mine the gravel pit
as fee simple owner, unencumbered by the lease with Cosmos, so too did AAA enjoy the
full panoply of ownership rights after the sale. When AAA secured the right to mine the
pit as its owner, its obligation to pay royalties to Totaro as a sublessee ended.”8
             But the court goes further than it did in the first decision, reaching an issue
today that was neither raised nor briefed by the parties. The court characterizes the

      5
             Id. at 160 (emphasis added) (footnote omitted).
      6
             Id. at 169 (Fabe, C.J., concurring in part and dissenting in part).
      7
              See Nissho Iwai Europe PLC v. Korea First Bank, 782 N.E.2d 55, 60 (N.Y.
2002) (“[A]s with all written agreements . . . ambiguity does not arise from silence, but
from ‘what was written so blindly and imperfectly that its meaning is doubtful.’ ”
(citation omitted)); Consol. Bearings Co. v. Ehret-Krohn Corp., 913 F.2d 1224, 1233
(7th Cir. 1990) (“Silence creates ambiguity . . . only when the silence involves a matter
naturally within the scope of the contract as written. A contract is not ambiguous merely
because it fails to address some contingency; the general presumption is that ‘the rights
of the parties are limited to the terms expressed’ in the contract.” (citation omitted)).
      8
              AAA Valley Gravel, 219 P.3d at 170 (Fabe, C.J., concurring in part and
dissenting in part).

                                           -10-                                       6902

gravel lease as a type of easement, specifically a profit. But characterizing the lease as
a profit does not remove the need for an express grant of exclusivity. Profits may be
exclusive or nonexclusive, and “[t]he degree of exclusivity of the rights conferred by an
easement or profit is highly variable.”9 The court claims that a “profit holder generally
has the right to exclude others.”10 But the court fails to point to any case in which a court
has held that profits are presumptively exclusive. The court’s sole source of authority
is a general statement from a treatise that “[a profit à prendre] creates a commercial,
rather than a personal, relationship between the parties and is presumptively assignable,
inheritable, and exclusive.”11 But the only cases relied on by that treatise in support of
its statement involve express grants of exclusivity.12 Indeed, other courts have held that

       9
              RESTATEMENT (THIRD ) OF PROPERTY : SERVITUDES § 1.2 cmt. c (2000).
       10
              Op. at 7.
       11
             3 Rocky Mountain Mineral Law Found., A M . LAW OF M INING § 82-03[3],
at 82-14 (2d ed. 2013).
       12
              Id. (citing Gerhard v. Stephens, 442 P.2d 692 (Cal. 1968); Bonner v. Okla.
Rock Corp., 863 P.2d 1176 (Okla. 1993) (other citations omitted)). The conveyance in
Gerhard was explicit on exclusivity, conveying “all petroleum, coal oil, naptha, asphalt,
maltha, brea, bitumen, natural gas and other kindred or similar substances and deposits
and rocks, gravels or other formations containing or yielding any of said substances,”
and these rights were “transferred to the corporation, its successors and assigns forever.”
442 P.2d at 732 n.4 (emphases added). Similarly, the easement in Bonner read: “It is
the intent and purpose of this instrument to give the Grantee, its successors and assigns,
a perpetual and exclusive right to go upon the property to test, mine, quarry and remove
such gravel, stone, rock, shale, and limestone and to process the same thereon.” 863
P.2d at 1179 n.10.
             These clear statements on exclusivity and duration stand in stark contrast
to the vague and equivocal language in the Ramirez/Cosmos lease, and Gerhard and
Bonner provide scant support for the court’s claim that profits are “generally” exclusive,
especially where a lease is silent on the matter.

                                            -11-                                       6902

as a general matter, “profits [à] prendres are not exclusive to the holder for ‘the grant of
a profit [à] prendre does not preclude the grantor from exercising a like right upon the
land or granting such right to others also.’ ”13 Of course, parties can contract for an
exclusive profit, but as with other contracts, courts have rightly required clear statements
of exclusivity: “A profit à prendre is a right to take something off another person’s land;
such a right does not prevent the owner from taking the same sort of thing from off his
own land; the first right may limit, but does not exclude the second. An exclusive right
to all the profit of a particular kind can no doubt be granted; but such a right cannot be
inferred from the language when it is not clear and explicit.”14
              Because the characterization of the lease as an easement has never been
litigated by the parties, AAA and Ramirez also have not had the opportunity to argue that
any exclusive servitude that may have been created by the lease must be limited to a
reasonable duration: “Servitudes may be interpreted to include a reasonable durational
limit . . . when the time limit lessens the chances that the servitude will operate as an
unreasonable restraint on alienation or otherwise violate public policy.”15 Even if the
lease could support the interpretation that it granted an exclusive profit, the
reasonableness of the duration of exclusivity of such a profit was not raised by the parties
or addressed by the superior court. And if the lease did in fact grant an exclusive profit
to Cosmos, then the existence of such a servitude would certainly violate the warranty

       13
             State ex rel. Rohrer v. Credle, 359 S.E.2d 45, 47 (N.C. App. 1987) aff’d,
369 S.E.2d 825 (N.C. 1988) (emphasis added) (italics removed) (quoting Builders
Supplies Co. of Goldsboro, N.C., Inc. v. Gainey, 192 S.E.2d 449, 453 (N.C. 1972)).
       14
              Stanton v. T. L. Herbert & Sons, 211 S.W. 353, 354 (Tenn. 1919) (citation
omitted).
       15
              RESTATEMENT (THIRD )      OF   PROPERTY : S ERVITUDES § 4.3 Reporter’s N.
(2000).

                                             -12-                                     6902

deed conveyed by Ramirez as the court itself acknowledged in the first appeal: “by
conveying with a warranty deed it was Ramirez, not AAA, who ‘decided that it was best
to proceed and to run the risk’ that the Ramirez/Cosmos lease would have continued
legal viability and be an encumbrance against title to the property.”16
             For these reasons, I respectfully dissent.

      16
             AAA Valley Gravel, 219 P.3d at 163.

                                          -13-                                  6902