Supreme Court No. S-13048 Superior Court No.3PA-05-01894 CI Appeal from the Superior Court of the State of Alaska, Third Judicial District, Palmer, Eric Smith, Judge.
The opinion of the court was delivered by: Carpeneti, Chief Justice.
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER. Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, e-mail firstname.lastname@example.org.
Before: Carpeneti, Chief Justice, Fabe, Winfree, and Christen, Justices. [Eastaugh, Justice, not participating.]
After a borough terminated a timber sale contract with a forester, the forester appealed first to the local board of adjustment and appeals and then to the superior court. Both upheld the Borough's termination of the contract. The forester now appeals to this court, claiming that the board hearing violated his right to due process by denying him the ability to call witnesses. The forester also claims the timber sale contract was improperly terminated. Because we find that the board hearing did not provide a full and fair opportunity for the forester to be heard, we agree that the hearing did not comport with due process. Accordingly, the forester was entitled to a trial de novo on his contract claims in the superior court. We therefore remand the case to the superior court.
II. FACTS AND PROCEEDINGS
1. Timber sale contract between Borough and Nash
On September 25, 1998, the Matanuska-Susitna Borough (Mat-Su or MSB) Assembly entered a timber sale contract with Charles Nash, under which Nash would harvest timber in the Chijuk Creek Forest. Nash agreed to pay the Borough $20.56/acre harvested and to harvest at least 1,000 acres per year during the contract period, which extended from July 1, 1999 through June 30, 2008.
Before Nash began working, the Alaska Department of Fish and Game issued a notice of violation to the Borough on December 2, 1998, charging that the Borough had violated state law in the manner in which it had previously built some stream crossings on Oilwell Road -- the access road to the timber Nash was to harvest. The U.S. Army Corps of Engineers also issued a notice of violation regarding the same stream crossings.
To resolve the road situation in light of the stream crossing violations, Nash attended a February 18, 1989, meeting between officials of the MSB Department of Public Works, the Upper Susitna Soil and Water Conservation District, and the Corps of Engineers. The parties decided that "work for the violations would be the borough's responsibility and work needed for logging trucks would be the responsibility of Charlie Nash." Although construction and maintenance of roads to the harvest area was Nash's responsibility under the original timber sale contract, Nash claims that the "Road Agreement" added to his responsibilities or at least changed the scope of his contract. Indeed, Nash claims that his construction of 11 miles of all-weather road made up the largest part of his $1.5 million investment in the Chijuk timber project.
2. Events leading to MSB's termination of the contract
Shortly after the Oilwell Road Agreement, Nash requested, and was given, permission to reduce the contract's timber harvest requirements so that he could work on the road. In his request, Nash stated: "I need to get going on reconstructing the road for the Chijuk Sale. By way of this agreement, I would correct the problems that are open issues with Fish and Game." He added: "It's a good deal for the Borough. In order to accomplish this work, I'm going to need a roll back in the first year's total harvested acres from 1,000 to 500."
Still, Nash did not meet even the reduced goal of 500 acres harvested in the first year -- in fact, he did not harvest any timber before June 30, 2000. He had, however, largely completed work on two important bridges and was preparing to do other work on the road. On June 28, 2000, Nash requested a second change to the timber sale contract in the form of an extension of time for harvesting the first 500 acres until September 30, 2000. The Borough manager approved the request.
In August 2000 it became apparent that Nash would not meet the new deadline and a third accommodation would be necessary. In recommending approval of an extension, borough staff noted that the road being built was "very good," and that because of the quality of the road construction it was in the Borough's best interest to grant Nash the additional time he requested to complete the construction of Oilwell Road and harvest his timber. On November 16, 2000, the Borough approved the third amendment of the contract, providing that Nash would harvest 500 acres by January 31, 2001, and an additional 1,000 acres by June 30, 2001, and every contract year thereafter. By January 15, 2001, Nash had fully completed the bridges, prepared the access road from the Moose Creek Bridge to the Kroto Creek Bridge, and begun to cut some trees. However, his progress was still not up to the contract's requirements, and on January 31, 2001, the Borough approved a fourth amendment pushing back the date for the harvest of the first 500 acres to February 28, 2001.
However, Nash still did not meet his requirements, and on June 25, 2001, the Borough officially notified Nash that he was in breach of the timber sale contract. Eventually, the fifth amendment to the contract and all subsequent ones were issued under a notice of breach -- that is, the extensions allowed Nash to continue harvesting timber, but did not relieve him of being in breach of contract. Ultimately the Borough would approve eight amendments under breach, bringing the total contract amendments to 12.
Nash claims to have completed work on the road during the summer of 2001. Meanwhile, he subcontracted with RK Custom LLC to help him log and mill the timber. RK actively logged the area, and appears to have been responsible for much of the logging that was completed. However, relations between Nash and RK eventually broke down to the point that RK exercised an option in its contract with Nash, granting RK an assignment of part of the timber sale. Nash had granted the option to RK earlier, as capital to collateralize a loan for sawmill equipment. RK noted that it had no other recourse but to take this assignment because Nash "continues to fail at meeting production levels as outlined in all agreements."
On February 11, 2002, the Alaska Division of Forestry sent Nash a letter reminding him that he had failed to submit a required annual operations plan. The division also informed him that he would be in violation of the State Forest Practices Act if he did not remove felled white spruce that was piled along the logging roads by June 1, 2002. The state was concerned that downed logs could facilitate the spread of the spruce bark beetle, but Nash had stopped removing ...