Comsult LLC v. Girdwood Mining Company
397 P.3d 318
Alaska2017Background
- Girdwood Mining and Comsult LLC entered into a Fundraising Agreement and a Management Agreement in 2003; Comsult was to receive stock and a 1% precious-metals royalty for raising capital and management services.
- The parties executed a 2004 Memorandum of Understanding terminating the prior agreements and providing for 60,000 shares and the 1% royalty to Comsult (and a promissory note for other compensation).
- Comsult sued Girdwood to collect on the promissory note; Girdwood confessed judgment in 2008 and did not assert illegality then.
- In 2009 Girdwood sued to cancel Comsult’s stock and royalty interests, arguing the Fundraising Agreement violated Alaska securities law; the superior court initially granted summary judgment to Comsult, but this court reversed on appeal.
- On remand the superior court found the Fundraising Agreement illegal and, invoking the principle of not aiding wrongdoers, denied relief to both parties; Comsult appealed the denial of its motions and sought enforcement of its property interests.
Issues
| Issue | Plaintiff's Argument (Comsult) | Defendant's Argument (Girdwood) | Held |
|---|---|---|---|
| Whether AS 45.55.930(g) (base-no-suit) bars enforcement of stock and royalty interests transferred under an illegal securities contract | The suit seeks to vindicate property rights (stock and royalties) independent of the illegal contract, so the base-no-suit bar does not apply | The base-no-suit provision bars any suit to enforce rights that derive from an illegal securities contract, including enforcement of the transferred interests | Court held AS 45.55.930(g) does not bar enforcement of property rights in stock and royalties once transferred; suit is on property rights, not the contract |
| Whether the stock and royalty interests are executory (and thus unenforceable if contract illegal) | The Fundraising Agreement was fully performed: Comsult provided services and received the shares and royalty; rights are property not executory obligations | The agreement remains executory because future obligations (e.g., dividends, royalty payments) flow from the agreement and thus cannot be enforced if illegal | Court held the agreement was not executory for purposes of relief here; the interests are already transferred property and enforceable |
| Whether a court would be ordering enforcement of an illegal contract by recognizing property rights | Comsult: recognizing ownership enforces property rights created outside contract law and does not require enforcing the illegal contract | Girdwood: any court order recognizing rights would effectively enforce obligations created by the illegal contract | Court held enforcing recognition of ownership does not equate to executing an illegal contract; stocks/royalties are governed by property and corporate law distinct from the securities contract |
| Whether equitable principle of refusing aid to wrongdoers bars relief to Comsult | Comsult: equitable bar inapplicable because relief enforces property rights and Comsult did not seek contract-based recovery | Girdwood: court should deny relief to avoid aiding wrongdoing and enforcing unlawful agreements | Court rejected blanket denial; permitted Comsult to proceed to enforce its property rights and reversed superior court |
Key Cases Cited
- Girdwood Mining Co. v. Comsult LLC, 329 P.3d 194 (Alaska 2014) (prior opinion interpreting AS 45.55.930(g) and defining what it means to "base" a suit on a contract)
- ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum, Inc., 322 P.3d 114 (Alaska 2014) (standard for reviewing legal questions and choosing rules of law)
- Insight Assets, Inc. v. Farias, 321 P.3d 1021 (Utah 2013) (textual interpretation of what it means to "base" a suit on a contract)
- K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702 (Alaska 2003) (treating stocks/royalties as property and discussing tort conversion)
- Conn. Nat’l Bank v. Giacomi, 699 A.2d 101 (Conn. 1997) (authority on unenforceability of promissory notes and mortgages linked to illegal contracts)