Alaska Fur Gallery, Inc. v. First National Bank Alaska
345 P.3d 76
| Alaska | 2015Background
- The Hernandez family entities (Alaska Fur Gallery; Hernandez & Associates) invested in the Inn at Whittier after borrowing from First National Bank Alaska; William McGrew (deceased) was the bank loan officer involved.
- The Hernandezes sued the Bank alleging McGrew fraudulently induced the investment and that the Bank committed misconduct in litigation; claims included common-law negligence and Alaska Securities Act violations.
- The first trial (2008) verdict was vacated and a retrial occurred in 2010; at retrial the jury awarded $675,000 in damages but apportioned fault (45% Hernandezes, 41% Cronick, 14% Bank), producing a judgment of $94,500 plus interest for plaintiffs.
- The Hernandezes sought findings of fraud upon the court based on alleged inconsistent/misleading testimony by Bank officers in this case versus a related Christianson case; the superior court denied fraud-on-the-court but awarded enhanced fees for the first trial due to the Bank’s litigation conduct.
- The Bank appealed multiple rulings (including enhanced fees, denial of Rule 60 fraud-on-the-court relief, evidentiary rulings, Rule 68 offer validity, and prevailing-party/costs determinations). The Supreme Court of Alaska affirmed in all respects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud upon the court (first trial) | Bank knowingly misled court by presenting testimony contradicting later evidence (Christianson) — warrants vacatur or directed judgment | Testimony inconsistencies were misleading but not so egregious as to corrupt the judicial process | Denied fraud-on-the-court; inconsistencies insufficient (need clear & convincing evidence of extreme misconduct) |
| Fraud upon the court (second trial & appellate filings) | Renewed claim based on additional Christianson materials and McCullough report; Bank’s appellate briefs contradict earlier denials | Bank’s later statements do not amount to fraud on this Court; no particular fraudulent statements directed at this Court | Denied; no fraud on this Court shown |
| "Finder" status / Alaska Securities Act liability | McGrew made representations and recommendations beyond finder role; directed verdict/JNOV should have been entered for plaintiffs on securities claims | Evidence supported that McGrew acted only as a finder; jury could reasonably reach that conclusion | Denied directed verdict and JNOV; jury reasonably could find McGrew was a finder, relieving Bank of Securities Act liability |
| Admissibility / scope of McCullough Report | Report shows Bank knowledge of illegal nominee loans and is relevant to notice and credibility | Report was untimely, limited to Christianson, and highly prejudicial; limited testimony appropriate | Trial court did not abuse discretion in excluding the report and limiting testimony to avoid unfair prejudice and relevance problems |
| Special verdict form / double reduction of damages | Form wording could have led jury to double-reduce damages when apportioning fault | Jury was asked clarifying questions and affirmed understanding; verdict properly apportioned | No plain error; jury correctly applied damages then apportioned fault |
| Statute of limitations / equitable estoppel | Plaintiffs were on inquiry notice in 2003 so claims time-barred; plaintiffs rely on estoppel based on McGrew’s assurances | Plaintiffs justifiably relied on McGrew’s misrepresentations and were not "utterly unreasonable" in doing so | Court applied proper standards; estoppel claim survives and statute of limitations defense was rejected on the record |
| Attorney’s fees, Rule 68 offers, and prevailing party / costs | Bank says fee clauses in deeds of trust or valid Rule 68 offers make it prevailing and deny plaintiff fees; costs should be apportioned to 14% fault | Deed clauses inapplicable (Bank did not institute enforcement); Rule 68 offers invalid (joint offers, apportionment issues); plaintiffs obtained affirmative recovery | Court affirmed award of fees to plaintiffs, denied Rule 68 benefit to Bank, found plaintiffs prevailing party, and correctly declined to apportion costs where only one non-prevailing party existed |
Key Cases Cited
- Mallonee v. Grow, 502 P.2d 432 (Alaska 1972) (fraud-on-the-court doctrine — willful or reckless misconduct can justify setting aside judgment)
- Murray v. Ledbetter, 144 P.3d 492 (Alaska 2006) (fraud on the court limited to egregious corruption of judicial process; perjury alone often insufficient)
- Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (U.S. 1944) (classic U.S. Supreme Court fraud-on-the-court precedent)
- Pumphrey v. K.W. Thompson Tool Co., 62 F.3d 1128 (9th Cir. 1995) (fraud on the court by concealment of pivotal evidence by in-house counsel)
- Turner v. Municipality of Anchorage, 171 P.3d 180 (Alaska 2007) (standard for directed verdict/JNOV review)
- Williams v. GEICO Cas. Co., 301 P.3d 1220 (Alaska 2013) (abuse-of-discretion standard for attorney’s fees awards)