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UNITED STATES DISTRICT COURT

DISTRICT OF ALASKA

 

In re: )                On Appeal From
  )                U.S. Bankruptcy Court
KING FISCHER FISHERIES LLC; )                Hon. Donald MacDonald IV
KING TRITON FISHERIES LLC; )                Case No. A00-00695 DMD
TRITON SEAFOODS, INC; KING )  
TRITON ENTERPRISES, INC.; ) Case No. A01-282 CV (JWS)
TRITON FISHERIES, INC.; and ) A01-283
KING FISCHER, INC., ) A01-284
  )  
Debtors. ) Consolidated Appeals
________________________________________ )  

I. APPEAL PRESENTED


          This is a consolidated bankruptcy appeal from the United States Bankruptcy Court for the District of Alaska in connection with the Chapter 11 bankruptcy proceeding of King Fischer Fisheries, LLC ("Debtor"), Bankruptcy No. A00-00695 DMD. Jurisdiction is conferred under 28 U.S.C. § 158(a)(1). Appellee in all instances is the Committee of Fisher Creditors ("Fishers") representing the interests of commercial fishers who sold fish to Debtor. Appellants are other creditors who are identified below. Oral argument was heard on April 16, 2002, in Anchorage, Alaska. 


II. BACKGROUND


          Debtor was a fish processor which operated fish processing plants in Kenai and Dillingham. During the 2000 salmon season Debtor purchased salmon from commercial fishers who harvested salmon in Bristol Bay and commercial fishers who harvested salmon in Cook Inlet. The salmon purchased by Debtor were picked up by a variety of fish tenders who accepted delivery of the fish from the commercial fishers, weighed the fish, issued fish tickets, stored the fish on ice or in chilled brine tanks, and finally, delivered the fish to Debtor's docks to be processed. Debtor then processed the fish which it had already contracted to sell through its agent, E&E Foods. It is the proceeds of the sale of the processed fish product which is the asset at stake.


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          The first of the three consolidated appeals was taken by Seattle-Tacoma Box Co. ("STB") from an order dated "September 18, 2001" according to the Notice of Appeal. 1. Footnote This court has not found an order in the record which was either dated September 18, 2001, or filed in the bankruptcy court on that date. However, this appeal is moot, because STB and appellee Fishers advised this court that STB's appeal has been settled. 2. Footnote


          The second appeal was taken by the Official Unsecured Creditor's Committee ("Committee") from a bankruptcy court order dated "August 28, 2001." 3. Footnote It appears that the appeal was actually taken from two related orders dated August 27, 2001, and then filed in the bankruptcy court on August 28, 2001: an order at docket 267granting Fishers' motion for summary judgment and an order at docket 268 granting Fishers an interim distribution of proceeds. The Committee's opening brief is at docket 8, and the appeal has been fully briefed.


          The third appeal was taken by a number of fish tenders as follows: Phil Erickson, Leonard Vohs, Sherly Ann Vohs, Ron Jolin, Ourania LLC, Dave Tolley, Hugh Wisner, James Niemela, and Sorensens' Lighterage Company, Inc. This appeal was taken from the same two orders as those which are the subject of Committee's appeal. The appeals by some of those involved in the third appeal, specifically Erickson, the two Vohs, Jolin, Ourania and Tolley have been settled. 4. Footnote The remaining appellants on this third appeal ("Tenders") filed their opening brief at docket 24. This appeal has also been fully briefed.


          In the bankruptcy court, Fishers moved for summary judgment on the ground that their liens were valid and superior to liens asserted by Tenders. The Commit-
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tee, Debtor's trustee, and Tenders (as well as the fish tenders who have subsequently settled) all cross moved for summary judgment on various theories. The bankruptcy court granted summary judgment to the Fishers holding their liens to be valid and superior to Tenders’ liens 5. Footnote and denied the cross-motions for summary judgment. 6. Footnote The bankruptcy court also granted Fishers' motion for an interim distribution of proceeds. 7. Footnote


 

III. STANDARD OF REVIEW


          This appeal turns solely on questions of law arising from a decision granting summary judgment to Fishers. A bankruptcy court's decision to award summary judgment is reviewed de novo. 8. Footnote

 


IV. DISCUSSION

          A. Lien statutes


          Alaska has long sought to protect the interests of those who contribute labor or materials to the value of processed fish products through statutorily created lien rights. All of the current statutory scheme codified at AS 34.35.320 thru AS 34.35.390 appeared in the 1949 compilation of Alaska Laws, 9. Footnote with the exception of one newer lien provision codified at AS 34.35.391 which was enacted in 1982. 10. Footnote The bankruptcy court determined that the older scheme pursuant to which Tenders’ claim liens and the newer provision pursuant to which Fishers’ claim liens were in conflict and that the conflict must be resolved by recognizing the priority of Fishers' liens over Tenders' liens. Fishers argue before this court that the Tenders did not provide labor or material as those terms are used in AS 34.35.320, et seq. The
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bankruptcy court's order did not address that issue, because its ruling on the priority issue rendered the question moot.


          The newer lien statute reads as follows:


Sec. 34.35.391. Fishermen's lien. (a) A person who sells fish to a fish processor as defined in AS 16.10.296, or to a primary fish buyer as defined in AS 16.10.296, or to a cooperative corporation organized under AS 10.15, and receives a fish ticket or a record of purchase as described in AS 16.05.690 has a lien upon the property of the fish processor, primary fish buyer, or cooperative corporation for the value of the fish.

(b) A person who claims the benefit of this section shall, within 90 days of the date the fish are sold, record a claim of lien in the recorder's office of the recording district where the fish were sold.

(c) The lien provided in this section is preferred, prior and superior to a mortgage, attachment, claim, or demand made or recorded in the recording district in which the property is located after the date on which the fish are delivered to the buyer of the fish.


The older lien law is divided into several sections codified at AS 34.35.320 through AS 34.35.390. Among the provisions are the following:


Sec. 34.35.320. Packer's and processor's lien. (a) A person who contributes to the preparation of fish . . . for food . . . or other article of commerce by furnishing material or labor for it has a line for the value of the labor and material upon (1) the product or output of the [processing plant], for which material or labor was furnished; and (2) the [processing plant] itself, including the houses, wharves, machinery, and equipment of the [processing plant], for the value of labor and material.

 

Sec. 34.35.330. Lien claim. (a) A person who claims the benefit of AS 34.35.320--34.35.390 shall, within 90 days after the completion of the work or the furnishing of material mentioned in AS 34.35.320, record a claim of lien in the recorder's office of the recording district where

(1) the product or output of the [processing plant] for which the material or labor is furnished is located; or

(2) the [processing plant] on which the lien is claimed is located.

* * *

(c) The lien claim shall be verified by the oath of the lien claimant or someone on behalf of the lien claimant who has knowledge of the facts.

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(d) If there is no express contract of employment or for furnishing the material, the claim shall state the reasonable value of the work, labor, or material.

 

Sec. 34.35.340. Priority. (a) A lien under AS 34.35.320-34.35.390 is preferred, prior and superior to a mortgage, attachment, claim, or demand made or recorded in the recorder’s office of the recording district where the property subject to the lien is located after

(1) the commencement of the work for which the lien is claimed;

(2) the material is furnished for which the lien is claimed.


          A separate provision, AS 34.35.360(b), establishes that, where there are several valid lien claims against the same property, “the court shall, as nearly as practicable, determine what particular item of property subject to the lien is the product in whole or in part of the labor or material furnished by each of the several claimants and for which each claims a lien, and shall give preference accordingly.” 11. Footnote


 


          B. Merits of the lien priority dispute


          The Alaska Supreme Court has rejected strict application of the “plain meaning” rule. 12. Footnote Instead, when interpreting statutory language, Alaska courts “look to the meaning of the language, the legislative history, and the purpose of the statute in question.” 13. Footnote Alaska courts apply a sliding scale analysis to evaluating statutory language with legislative history. “The plainer the statutory language is, the more convincing the evidence of contrary legislative purpose or intent must be.” 14. Footnote Where, as here, an issue of first impression is raised, Alaska courts adopt the rule of law “that is most persuasive in light of precedent, reason, and policy.” 15. Footnote


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          In a six-page order filed August 28, 2001, the bankruptcy court held that the older lien statute and the newer lien statute are in irreconcilable conflict. 16. Footnote The bankruptcy court held that priority should be granted to the Fishers who claim liens under the fishermen's lien statute, AS 34.35.391, because the newer statute was adopted to give fishermen a clear priority over other lien creditors. The bankruptcy court cited no statutory language to support its conclusion. The bankruptcy court did cite "Committee minutes from hearing on House bill 637, Senate Resources Committee, Alaska State Legislature, April 30, 1982" 17. Footnote to support its conclusion. The bankruptcy court did not point to anything specific in the minutes and did not cite the source from which it had obtained the minutes. It appears that the bankruptcy court also reasoned that because it was the more recent statute, the fishermen's lien statute provides for liens which must be given priority. In addition, the bankruptcy court relied on its own articulation of an "obvious" principle of public policy: "Fishermen are the obvious and vital link in the volatile chain that forms Alaska's seafood industry. There can be no seafood industry without fish and there can be no processing or packing without fish." 18. Footnote Finally, although the bankruptcy court acknowledged that, under AS 34.35.360(b), a court should pro-rate valid liens, it determined that liens claimed under the fishermen's lien statute were not subject to this provision.


          This court finds that the bankruptcy court erred in several respects. First, the two lien statutes are not irreconcilable. It is true that liens claimed under the two statutes do attach to much the same property, and the fact that each is given priority over interests perfected by recording after certain specified events could put lien claims in conflict. However, the law includes a provision for pro-rating liens that attach to the same property. While that provision is part of the older statutory scheme, it is not by its terms limited to liens created by the original statute and the newer law includes no provision rendering the pro-ration provision inapplicable to
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the liens it authorizes. There is no logical reason why the different liens could not all be recognized and protected to the extent of pro-rating under AS 34.35.360(b).


          Second, the language of the newer lien statute contains nothing which suggests the legislature recognized it was creating a conflict. There is no expression of priority for one class of lien claimants over the other. There is nothing to exclude operation of the pro-ration provision in the case of liens created under the newer law.


          Third, the bankruptcy court’s application of principles of statutory construction under Alaska law is flawed. The bankruptcy court concluded that the fishermen's lien statute must control and afford fishermen's liens priority over liens claimed under the original law, in large part simply because the fishermen's lien statute was enacted at a subsequent date. However, in reaching its conclusion, the bankruptcy court ignored a settled principle of statutory construction: statutes related to the same subject matter should be read in para materia to eliminate conflicts. 19. Footnote Applying that principle here raises a red flag. Packers and fishers are part of the same process. If, as the bankruptcy court assumed, the legislature intended to grant fishers a super-priority over packers, then the packers’ lien would be illusory in many cases. On the other hand, recognizing both types of liens and then pro-rating them would allow both legislative enactments to have effect in all cases. Put another way, the bankruptcy court’s analysis would for practical purposes amount to an evisceration of the statutory scheme conferring packers’ liens tantamount to an implied repeal. Implied repeals are disfavored.


          Fourth, the legislative history cited by the bankruptcy court does not support its conclusion. This court has reviewed a copy of the report referenced by the bankruptcy court as it appears on line at the State of Alaska's website location for older legislative history. 20. Footnote There is simply nothing in the committee minutes which supports the bankruptcy court's position. The only statement in the minutes which
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appears even relevant is a comment from a witness, Rodger Painter, who spoke in his capacity as the executive director of United Fishermen of Alaska and told the committee members that under existing law fishermen had no lien rights at all. To the extent that the legislature relied on those comments, they support the argument that the legislature acted, not to create a super-priority where a pro-rated priority formerly existed, but to create basic lien rights for fishermen within the existing framework of pro-rated liens.


          Fifth, the public policy principle articulated and relied upon by the bankruptcy judge is not obvious to this court. Without the men and women who labor to process fish, they cannot be sold by the processor. Without the suppliers of ice, salt, boxes, packaging materials, etc. the fish cannot be sold by the processor. Moreover, protection of the interests of those who labor to process fish or supply materials has been enshrined in the statutory law of Alaska since long before Statehood. Clearly, the legislature did not repeal the packers’ lien or the statute pro-rating valid liens when it enacted the fishermen's lien law. These considerations lead this court to conclude that public policy favors the pro-ration of the two types of liens as contemplated by existing statutory law, not the elevation of one type of lien over the other.


          For the reasons above, this court concludes that the bankruptcy court erred in concluding that the two lien statutes are in conflict and that fishermen's liens have priority. This court concludes that packer's liens and fishermen's liens are subject to pro-ration under AS 34.35.360(b).


          C. The Verification Issue


          This court may affirm a summary judgment decision on any grounds presented to the court below and adequately disclosed in the record on appeal. 21. Footnote Fishers argue that Tenders did not actually acquire lien rights under AS 34.35.020. The argument is premised on the undisputed fact that the original claims of lien were not verified as required by law. 22. Footnote Tenders do not dispute that their claims were not
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verified until long after the time for recording the liens had passed, but maintain that subsequent amendments cured the failure to verify the claims of lien. The Alaska Supreme Court has specifically stated that a claim of lien is "void and of no legal effect due to the omission of verifications." 23. Footnote In short, an unverified claim of lien is a legal nullity. An amendment made after the time has run for making an effective claim of lien cannot revivify that which did exist. It follows that Fishers are entitled to summary judgment on this basis.

 




          D. Committee's Appeal


          In addition to the dispute over lien priorities addressed above, there are two separate issues raised by the Committee's appeal. First, the Committee argues that the failure to mention a bona fide purchaser in the lien statutes means that the trustee can avoid the liens. The second argument advanced by the Committee is that Fisher's liens are good only as against property in the recording district where they were recorded and proceeds of such property.


          Each of these arguments depends on the Committee's use of the Trustee's powers to overcome Fishers' lien rights. The Trustee has not appealed, and the Committee lacks standing to assert his powers. 24. Footnote


          Even if the Committee had standing, this court finds that its arguments lack merit. As to the first argument, this court agrees with the analysis by the bankruptcy court and the arguments advanced by Fishers. As to the second argument, this court agrees with the arguments advanced by Fishers.


          E. The Interim Distribution


          The validity of the bankruptcy court's order for an interim distribution depends on the validity of the underlying decision to award Fishers summary judgment. This court has found that the decision should be affirmed based on the grounds that the Tenders' claims of lien were invalid. Accordingly, the order for an interim distribution must also be affirmed.

 


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V. CONCLUSION


          For the foregoing reasons, the decision of the bankruptcy court to award summary judgment to Fishers and its decision to direct an interim distribution are AFFIRMED.


           DATED at Anchorage, Alaska, this 17th day of April 2002.


 

 

JOHN W. SEDWICK

UNITED STATES DISTRICT JUDGE




N O T E S:

1.   See docket 1 in Case No. A01-282 CV.


2.   See docket 9 in Case No. A01-282 CV. The settlement may require approval by the bankruptcy court which has not yet been obtained. However, the appeal has not been briefed, and so the court cannot address it.


3.   See docket 1 in Case No. A01-283 CV.


4.   See docket 9 in Case No. A01-282 CV reciting that their claims have been settled along with those of STB. See footnote 2 above. The tenders with whom Fishers settled were those whose claims of lien were verified. The tenders who did not settle are those whose claims of lien were not verified.


5.   See docket 267 in Bankruptcy Case No. A00-00695 DMD. A motion for reconsideration was denied at docket 274 in that case.


6.   Id.


7.   See docket 268 in Bankruptcy Case No. A00-00695 DMD.


8.   See In Re Betacom of Phoenix, Inc., 240 F.3d 824, 828 (9th Cir. 2001).


9.   See §§ 26-6-1 thru 26-6-14 ACLA 1949.


10.   See § 6 ch 94 SLA 1982.


11.   See AS 34.35.360(b).


12.   See Muller v. BP Exploration (Alaska) Inc., 923 P.2d 783, 787 (Alaska 1996).


13.   Id.


14.   Id. at 788.


15.   Id. at 787 (quoting Foreman v. Anchorage Equal Rights Comm’n, 779 P.2d 1199, 1201 (Alaska 1989)).


16.   See Order, docket 267 in Bankruptcy Case No. A00-00695 DMD.


17.   Id., p. 6, n. 10.


18.   Id., p. 5.


19.   See, e.g., Hibschman v. City of Valdez, 821 P.2d 1354, 1363 (Alaska 1991). (Statutes to be "harmonized".)


20.   The internet address used was http://old-www.legis.state.ak.us/cgi-bin. It is not known where the bankruptcy court found the committee minutes.


21.   See, e.g., Hells Canyon Alliance v. United States Forest Serv. 227 F.3d 1170, 1176 (9th Cir. 2000).


22.   AS 34.35.330(c).


23.   H.A.M.S. Co. v. Electrical Contractors of Alaska, Inc., 563 P.2d 258, 264 (Alaska 1977) (Rabinowitz, J.)


24.   See Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6, 120 S. Ct. 1942, 1947 (2000).