STOWERS, Justice.
Leisnoi, Inc., an Alaska Native corporation, retained the law firm of Merdes & Merdes to represent it in litigation against Omar Stratman over its certification of and title to certain lands Leisnoi claimed under the Alaska Native Claims Settlement Act. Leisnoi and Merdes entered a contingency fee agreement under which, if Leisnoi was successful in the litigation, Merdes would receive an interest in the lands Leisnoi obtained or retained. The Stratman case was resolved in 1992 in favor of Leisnoi, although Stratman appealed and the related litigation continued for another decade. Leisnoi challenged the validity of the fee agreement with Merdes. A bar-appointed Arbitration Panel determined that Merdes was not entitled to an interest in the land itself, but was entitled to payment equal to a percentage of the adjusted value of Leisnoi's property, plus interest. In 1995, upon Merdes's motion, Superior Court Judge Brian C. Shortell confirmed the fee award and entered judgment
In October 2008, the Stratman litigation finally concluded in Leisnoi's favor. The following year, Merdes moved the superior court to issue a writ of execution. Leisnoi opposed the motion on the grounds that Merdes had not shown just and sufficient cause for failing to seek a writ of execution within five years of entry of the 1995 judgment. Leisnoi subsequently moved for relief from the 1995 judgment under Alaska Civil Rule 60(b), arguing among other things that the judgment was void under 43 U.S.C. § 1621(a)'s restrictions on contingency fee contracts involving Alaska Native Claims Settlement Act lands. In January 2010, Superior Court Judge Sen K. Tan issued an order denying Leisnoi's Rule 60(b) motion and granting Merdes's motion to execute. Six months later, Leisnoi paid Merdes the remaining balance. Leisnoi now appeals the superior court's ruling.
This case presents a number of complex issues involving questions of waiver and whether the superior court's 1995 judgment was void or voidable. We conclude that Leisnoi did not waive its right to appeal by paying Merdes the balance due on the judgment. We conclude that the Arbitration Panel's fee award and the superior court's 1995 entry of judgment violated 43 U.S.C. § 1621(a)'s prohibition against attorney contingency fee contracts based on the value of Native lands that were subject to the Act. We conclude that the superior court's 2010 order granting Merdes's motion to execute on the 1995 judgment separately violated the Act's prohibition against executing on judgments arising from prohibited attorney contingency fee contracts, and that order is reversed. We conclude that, notwithstanding the illegality of the Arbitration Panel fee award and the 1995 judgment, Leisnoi is not entitled to relief pursuant to Civil Rule 60(b): We conclude that the 1995 order was voidable rather than void for purposes of Civil Rule 60(b), and therefore not subject to attack under Civil Rule 60(b)(4); we also conclude that Leisnoi is not entitled to relief under Civil Rule 60(b)(5) or 60(b)(6). Accordingly, Merdes must return Leisnoi's payment of the $643,760 balance on the judgment, with interest, but Leisnoi is not entitled to recover payments made prior to the issuance of the writ of execution. Merdes may file an action for any fees it believes it is entitled to under a theory of quantum meruit.
Leisnoi, Inc. is a Native corporation certified under the Alaska Native Claims Settlement Act (ANCSA).
Merdes and Leisnoi entered into a contingency fee agreement providing that if the litigation proved successful, Merdes would be "remunerated by the Client conveying to him an undivided thirty percent ... interest in all lands and/or settlement the Client succeeds in obtaining and/or retaining by virtue of said litigation," along with any attorney's fees awarded by the court. In 1992, the case was resolved in favor of Leisnoi, which kept title to its lands.
The Arbitration Panel held a hearing in May 1994 at which both parties presented evidence and argument. The Arbitration Panel found that Merdes did not adequately explain the contingency fee agreement to Leisnoi's Board of Directors and failed to "make sure that the board ... understood that [Merdes] would end up being a co-owner of an undivided 30% interest in the land" — a situation that could cause Leisnoi to lose its tax exemption on the land. The Arbitration Panel also found that Merdes had, without Leisnoi's knowledge or consent, improperly agreed to divide his fees with other attorneys he hired to help with the case. The Arbitration Panel noted, however, that "Ed Merdes... did fight an uphill battle and achieved the best possible outcome on behalf of the client" and "took a considerable risk that his time would be completely uncompensated."
The Panel declined to award Merdes a 30% interest in the land itself. But it found that 30% was a "reasonable percentage" and awarded $721,000 in attorney's fees, plus interest, payable in $100,000 yearly installments. It appears to have calculated this amount by taking 30% of the value of the land after substantially discounting that value to reflect clouds on Leisnoi's title, the portion of the land subject to pre-existing low-rent grazing leases, and payments made by Leisnoi to Merdes pursuant to a modification not clearly agreed to by the Leisnoi board. Interest was to accrue at 8% per annum, except that any payments in default would accumulate interest at 10.5% per annum. The Panel also ordered Leisnoi to pay Merdes $55,000 in court-awarded attorney's fees. Both parties subsequently filed applications for modification with the Arbitration Panel; in an August 1994 decision, the Arbitration Panel clarified the applicable interest rates and declined to modify the panel-awarded attorney's fee amount. It noted:
In January 1995, in response to a motion by Merdes, the superior court issued an order confirming the Arbitration Panel's award of fees and entered judgment for attorney's fees to Merdes against Leisnoi. That same year, Leisnoi made payments totaling $100,000. It continued to make annual $100,000 payments for the next five years, followed by two $50,000 payments in October 2001 and April 2002. (These $50,000 payments covered the installment due September 1, 2001, which Leisnoi had not paid when it was due.) At that point, Leisnoi, which still had payments outstanding to cover the substantial interest accrued on the judgment, ceased making payments. Leisnoi later explained that "the continued expense of litigation in defense of its property... prevented it from making further payment." The obligation under judgment went into default as of September 1, 2002.
Over the next several years, Merdes attempted to negotiate with Leisnoi regarding its unpaid fees. Leisnoi appears to have been open to negotiation, and it repeatedly thanked Merdes for being patient and indicated that payments would be forthcoming when funds were available. For example, in
Leisnoi generally did not dispute the validity of the judgment awarded to Merdes and actively proposed settlement arrangements.
Merdes recorded the 1995 superior court judgment against Leisnoi in the Kodiak Recording District in May 2007. On October 6, 2008, the Ninth Circuit ruled in favor of Leisnoi in its litigation against Stratman.
On January 13, 2010, the superior court issued an order denying Leisnoi's Rule 60(b) motion, granting Merdes's motion to execute, and granting Leisnoi's motion to expunge the judgment lien and attorney lien. Leisnoi subsequently settled the claims of the other attorneys hired by Merdes. In July 2010, Leisnoi paid Merdes $643,760, the remaining balance owed. Leisnoi claims that it "was forced to borrow the funds" to pay and did so to remove clouds from its land title "[s]o that it could pursue business opportunities." Leisnoi now appeals the superior court's January 2010 order.
"The standard for review of an order denying a Rule 60(b) motion is whether the superior court abused its discretion. Reversal is justified only if this court concludes the trial court was clearly mistaken."
Merdes argues that Leisnoi waived its right to appeal by voluntarily satisfying the judgment against it in July 2010. Merdes contends that Leisnoi's "cryptic unsworn assertion" that it paid the judgment "so that it could pursue business opportunities" is insufficient to overcome the presumption of voluntary payment, and further, that Leisnoi could have deposited its funds into the registry of the court or otherwise indicated that it was paying under protest. Merdes cites to a number of cases from other jurisdictions for the proposition that "when a judgment debtor voluntarily satisfies the judgment in full, he waives any right to appeal."
We have not directly discussed the question when payment of a judgment will result in waiver of the right to appeal. Some jurisdictions hold that payment of an adverse judgment is compulsory.
We conclude a rule providing that payment of an adverse judgment is involuntary properly protects the judgment debtor's right to appeal and the creditor's interest in prompt payment. This rule also minimizes the accrual of interest and the cost of enforcing a judgment.
Here, Merdes has failed to show that Leisnoi's payment indicated an intent to compromise or settle. And we can discern no intent of Leisnoi to waive its right to appeal the judgment. Because we hold that payment of an adverse judgment entered by a court in the absence of a compromise or settlement is involuntary as a matter of law, we conclude that Leisnoi's payment was involuntary, and Leisnoi did not waive its right to appeal.
Leisnoi argues that its fee agreement with Merdes, the Arbitration Panel's fee award, the superior court's 1995 entry of judgment, and the superior court's 2010 issuance of the writ of execution violated 43 U.S.C. § 1621(a). That statute, part of ANCSA, provides:
Leisnoi contends that this statute prohibited the contingency fee contract and the superior court's actions ("execution or judgment to fulfill such a contract"
As Leisnoi points out, the superior court's 2010 order implied that the statute was applicable to the contract between Merdes and Leisnoi, as interpreted by the Arbitration Panel: The superior court noted that "the Arbitration Award decision was clear that the monetary award was based on its estimate of 30% of the value of Leisnoi's land. There is no question that the $721,000 [award to Merdes] was `based on a percentage fee of the value of all or some portion of the settlement granted.'"
Leisnoi is correct that the Arbitration Panel's award fell within the parameters prohibited by 43 U.S.C. § 1621(a). And it is clear that the original agreement between Merdes and Leisnoi violated the statute: It was based on a percentage fee of the value of Leisnoi's ANCSA lands. Contrary to Merdes's argument that the Arbitration Panel abrogated the contract's percentage fee award and "independently calculated [a] monetary fee," the Arbitration Panel itself stated that it had "specifically refused to void the contract.... Rather ... the arbitration award interpreted the contingent fee contract to not be a 30% ownership interest in land, but a security interest or lien against the land...." In other words, the Arbitration Panel essentially enforced the contingency fee contract — making what it viewed as a minor adjustment to avoid the problems associated with giving Merdes co-ownership in the land itself — and thus violated 43 U.S.C. § 1621(a). (The adjustment made by the Arbitration Panel was arguably an independent violation of section 1621(a) to the extent it subjected ANCSA lands to a lien in order to fulfill the contingency fee contract.)
Leisnoi argues that the 1995 judgment was entered in violation of 43 U.S.C. § 1621(a)'s prohibition on "judgment[s] to fulfill ... contract[s] [for ANCSA lands]." Merdes responds that Leisnoi failed to present this argument to the Arbitration Panel or superior court before the 1995 judgment was entered, effectively waiving it. Merdes also generally contends that the statute does not deprive states of their power to award reasonable attorney's fees.
Whether the entry of judgment on the illegal contract constitutes a separate violation of 43 U.S.C. § 1621(a) depends on whether the statute is viewed as creating a defense that must be raised by the parties or, alternatively, an independent obligation on the court's part to decline to enforce the illegal contingency fee contract regardless of what the parties argue. Leisnoi takes the latter position, arguing that the statute's characterization of contingency fee agreements as unenforceable reflects an intent to protect Alaska Natives and Native corporations from the effects of contingency fee contracts "even if they fail[], by incompetence, neglect, mistake or otherwise, to raise the statute as a defense in an action to enforce such agreements."
We have held that courts have "no power, either in law or equity, to enforce an agreement which directly contravenes a legislative enactment,"
Decisions from other jurisdictions have similarly stated that courts may have an independent obligation not to enforce contracts that are contrary to statute or illegal on public policy grounds.
Here, the illegality of the contingency fee agreement between Merdes and Leisnoi is "of a serious nature": The agreement directly violates an important federal statute, the Alaska Native Claims Settlement Act, jeopardizing the Native property interests that 43 U.S.C. § 1621(a) is intended to protect. Under the standards used by most jurisdictions, the fact that Leisnoi did not plead illegality before the Arbitration Panel or the superior court in opposition to Merdes's 1995 motion to enforce the fee award does not amount to waiver of 43 U.S.C. § 1621(a)'s prohibition against ANCSA attorney fee contingency contracts. Thus, the entry of judgment constituted a violation of 43 U.S.C. § 1621(a). While Merdes is correct that section 1621(a) does not deprive an arbitration panel or state court of the power to independently award reasonable attorney's fees, that is not what happened in this case; rather, by entering judgment pursuant to the arbitration award, the superior court enforced a contingency fee contract that is illegal under ANCSA.
This same prohibition on contingency fee contracts pertaining to ANCSA lands and the judgment thereon applied to the superior court's 2010 issuance of its writ of execution on the illegal judgment. The issuance of the writ of execution violated 43 U.S.C. § 1621(a) just as the 1995 entry of judgment did: This statute provides both that "[n]one ... of the lands granted by [ANCSA] to the Regional and Village Corporations and to Native groups ... shall be subject to any contract which is based on a percentage fee of the value of ... some portion of the settlement granted by this Act" and "[a]ny such contract shall not be enforceable ... [and] shall not be subject to lien, execution or judgment to fulfill such a contract." (Emphasis added.)
Just as it was error for the Arbitration Panel to make its fee award and for the superior court to enter judgment on that award in 1995, it was error for the superior court in 2010 to issue an order purporting to authorize Merdes to execute on the illegal judgment. We therefore reverse the court's order issuing the writ of execution.
Because we hold that the writ of execution was illegally issued, Leisnoi is entitled to recover the balance it paid on the judgment after the writ of execution was issued. However, our discussion does not end here. Leisnoi argues that it is entitled to relief from the 1995 judgment under Civil Rule 60(b), which would entitle Leisnoi to recover all payments made to Merdes following the 1995 entry of judgment. We must therefore determine whether Leisnoi is entitled to relief under Civil Rule 60(b).
Civil Rule 60(b) provides:
Leisnoi filed a Civil Rule 60(b) motion in the superior court, arguing that it was entitled to relief pursuant to Rule 60(b)(4) or 60(b)(6) because: (1) the circumstances surrounding the 1995 entry of judgment had changed such that enforcement of the judgment was no longer just or equitable; and (2) the contingency fee contract and the entry of judgment violated 43 U.S.C. § 1621(a), rendering both void. Leisnoi also made several arguments as to why it was not equitable to enforce the judgment because the judgment should have been "considered satisfied with the payments made on the obligation to date," effectively arguing the superior court should vacate the judgment under Rule 60(b)(5). The superior court denied the motion.
Leisnoi argues on appeal that the Arbitration Panel's violation of 43 U.S.C. § 1621(a) calls for relief under Rule 60(b)(4) or, alternatively, 60(b)(6), and that the unanticipated duration of the Stratman litigation and Leisnoi's resulting inability to generate income from its property justify relief under Rule 60(b)(5). Merdes responds that, if Leisnoi had an objection to the judgment against it, there were a number of mechanisms by which it could have directly attacked Merdes's judgment at various stages of the proceedings (e.g., by moving to vacate the Arbitration Panel's award, by opposing Merdes's motion for judgment on the award, or by moving to reconsider the judgment in light of 43 U.S.C. § 1621(a)), rather than waiting 15 years to bring a collateral Rule 60(b) motion. Under the circumstances, Merdes contends, Leisnoi's Rule 60(b) challenge to the judgment against it was an improper and untimely appeal on the merits, at odds with this court's emphasis on judicial economy and procedures under the Appellate Rules.
Rule 60(b) provides that a motion for relief from a judgment "shall be made within a reasonable time, and for clauses (1), (2), and (3) not more than one year after date of notice of the judgment or orders." Leisnoi seeks relief from judgment under Rule 60(b)(4), (5), and (6) only; thus, the one-year time limit does not apply and the time to file the 60(b) motion need only be "reasonable," at least with respect to clauses (5) and (6).
Rule 60(b)(4) provides relief from a void judgment. We have held that "[t]his rule of relief applies without time limitations because a void judgment cannot gain validity simply by the passage of time,"
Leisnoi argues that its contract with Merdes was illegal under 43 U.S.C. § 1621(a) and therefore void, which in turn renders the judgment entered on the contract void and subject to vacation under Rule 60(b)(4).
Merdes responds that Rule 60(b)(4) applies only where the trial court "lacks fundamental jurisdiction" and "usurps its statutory authority to ... render a decision in the first instance" — which Merdes contends did not occur here. Merdes argues that we and other courts have not found such a lack of jurisdiction even where there were significant irregularities at the trial court level or even where the trial court acted in violation of federal statute.
The superior court in this case concluded that 43 U.S.C. § 1621(a) does not "deprive[] a state trial court of subject matter jurisdiction to enter judgment [a]ffecting title to ANCSA grant revenues or real property"; the court based this conclusion on the fact that "[t]he Alaska Supreme Court has previously exercised authority to decide whether ANCSA exemptions apply to particular cases and has thus vindicated this court's jurisdiction to decide such a claim."
We have held that a judgment is void only where the court that issued it
The validity of a Rule 60(b)(4) motion is strictly a question of law.
A judgment is not void merely because it is erroneous.
Leisnoi also argues that the trial court "usurped power" in entering judgment against Leisnoi. The "usurpation of power" standard for voidness largely mirrors the subject matter jurisdiction standard: It is to be "rarely and sparingly employed," with application "limited to cases which involve an arrogation of authority which the court clearly lacks."
Our conclusion is the same under the "usurpation of power" standard as under our subject matter jurisdiction analysis: The superior court's judgment, while entered in error, did not amount to an arrogation of authority. The circumstances do not justify disturbing a judgment that has stood for over 17 years.
The superior court correctly ruled that Leisnoi was not entitled to relief under Rule 60(b)(4).
Unlike Rule 60(b)(4), which applies without time limitations, a Rule 60(b)(5) or 60(b)(6) motion must be made within a "reasonable time." We have concluded that "as a matter of law, a period of almost seven and one-half years is not a reasonable time within which to file a motion for relief under section (b)(5-6) [of Civil Rule 60]."
The superior court found that the reasonable time limitation was not satisfied with regard to Rule 60(b)(6) because Leisnoi failed to offer any excuse "for not seeking to vacate the judgment for fourteen years." We conclude that the superior court did not abuse its discretion in denying Leisnoi relief. Leisnoi did not challenge the 1995 judgment on the basis of Rule 60(b)(6) until filing its May 2009 Rule 60(b) motion — a period of over 14 years. Leisnoi's Rule 60(b)(6) motion was untimely, and we need not consider whether relief would otherwise be justified under this clause.
The superior court did not address the timeliness of Leisnoi's Rule 60(b)(5) motion but instead ruled on the merits, essentially concluding that the equities did not compel granting Rule 60(b)(5) relief. Leisnoi contends that it is entitled to relief under Rule 60(b)(5) because "the fundamental assumptions made by the arbitration panel and... the trial court have proven to be so wrong as to have made the continued enforcement of the judgment unconscionable." Specifically, Leisnoi points to the fact that ongoing litigation with Stratman and the related cloud on title to the corporation's lands prevented it from generating significant income from its property, even as interest continued to accrue on the judgment. It contends that these circumstances made the land less valuable, such that "the actual value received by Leisnoi has proven to be unconscionably less than that awarded by the arbitration panel." Merdes responds that Rule 60(b)(5) does not apply to money judgments because they are not deemed prospective. The superior court agreed with Merdes, noting that while "there is no doubt that Leisnoi had wished for a swifter outcome in its favor," Merdes accepted a case with extremely high risks such that "[t]he interest rate ... imposed by the Arbitration Award ... is not extraordinary or outrageous" so as to justify relief under Rule 60(b)(5).
We have held that "clause (5) is typically invoked to obtain relief from declaratory judgments and injunctions whose continued enforcement becomes inequitable.... [C]lause (5) is applicable to any judgment having prospective effect."
To summarize, Leisnoi did not waive its right to appeal because its $643,760 payment to Merdes was involuntarily made in response to the 2010 issuance of the writ of execution. Leisnoi's contingency fee agreement with Merdes violated ANCSA's prohibition against contingency fee agreements, as did the Arbitration Panel's fee award, the superior court's 1995 entry of judgment, and the 2010 writ of execution. The 1995 entry of judgment was voidable, not void, and Leisnoi was not entitled to relief under Civil Rule 60(b)(4), 60(b)(5), or 60(b)(6). Leisnoi is entitled to recover the balance that it paid after the writ of execution was unlawfully issued, but it is not entitled to recover payments made prior to the issuance of the writ of execution. The amount to be repaid should include interest. Merdes may seek to recover any fees it believes are owed under a theory of quantum meruit.
The superior court's order issuing a writ of execution on the 1995 judgment is REVERSED. The superior court's order denying Leisnoi's Civil Rule 60(b) motion to set aside the 1995 judgment is AFFIRMED.
WINFREE, Justice, not participating.
Before: FABE, Chief Justice, STOWERS, Justice, and CARPENETI, Senior Justice
In our recent opinion in this case we stated, among other things, that on remand to the superior court, appellee Merdes & Merdes, P.C. "may seek to recover any fees it believes are owed under a theory of quantum meruit."
