You can
search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Hayes v. Bering Sea Reindeer Products (8/20/99) sp-5166
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.
THE SUPREME COURT OF THE STATE OF ALASKA
MICHAEL R. HAYES, )
) Supreme Court No. S-8452
Appellant, )
) Superior Court No.
v. ) 1JU-96-484 CI
)
BERING SEA REINDEER PRODUCTS, ) O P I N I O N
and WILL SHERMAN, )
) [No. 5166 - August 20, 1999]
Appellees. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, First Judicial District, Juneau,
Walter L. Carpeneti, Judge.
Appearances: Robert S. Spitzfaden, Gruening &
Spitzfaden, APC, Juneau, for Appellant. James
A. Bowen, Juneau, for Appellees.
Before: Matthews, Chief Justice, Eastaugh,
Fabe, and Bryner, Justices. [Carpeneti,
Justice, not participating.]
EASTAUGH, Justice.
I. INTRODUCTION
North Coast Industries (NCI) contracted to purchase an
aircraft from Bering Sea Reindeer Products but stopped making
payments because the aircraft was defective. Bering Sea
successfully sued NCI and its partners, including Michael Hayes,
for breach of contract. Michael Hayes appeals on various grounds.
Because he fails to demonstrate prejudicial substantive or
procedural error, we affirm the judgment against him.
II. FACTS AND PROCEEDINGS
NCI contracted to purchase a Beechcraft E-18 aircraft for
$73,000 from Bering Sea, a tribal enterprise established by the
Native Village of Mekoryuk. NCI intended to use the aircraft for
commercial purposes. NCI claimed that after it made the $25,000
down payment and took possession, it discovered that the aircraft
would require extensive repairs before it would pass Federal
Aviation Administration (FAA) inspection. It made no further
payments on the purchase price.
Bering Sea sued brothers Arthur and Michael Hayes
individually and in their capacity as partners in NCI. Michael was
then working on the Aleutian chain and communicated infrequently
with his brother in Juneau. When Michael found out that Bering Sea
had filed suit, he assumed that his brother would defend the
litigation. Arthur retained a defense attorney, but the attorney
withdrew shortly before the trial was to begin because Arthur could
not pay his fees. As a consequence, NCI and Arthur failed to
defend against Bering Sea's claims. The court entered default
judgment against NCI and Arthur but granted Michael's request for
a continuance so he could obtain counsel and contest the claims
against him.
Michael asserted defenses to Bering Sea's breach of
contract claim and counterclaimed for breach of contract and
misrepresentation. Michael also filed a third-party claim of
misrepresentation against Bering Sea's representative, Will
Sherman. The court dismissed his counterclaims on summary judgment
because it had previously determined that sovereign immunity barred
similar claims asserted against Bering Sea by NCI and Arthur.
After a bench trial on Bering Sea's claims against
Michael and Michael's claim against Sherman, the trial court
entered judgment against Michael on all claims. It also ruled that
Michael was liable to Bering Sea as a result of the prior judgment
against NCI and Arthur. Michael appeals from the portion of the
judgment based on the trial; he does not appeal from the default
judgment entered against NCI.
III. DISCUSSION
A. Standard of Review
We review questions of law de novo. [Fn. 1] We uphold a
grant of summary judgment only if there are no genuine issues of
material fact and the movant is entitled to judgment as a matter of
law. [Fn. 2]
We review findings of fact for clear error giving due
regard to the trial court's opportunity to judge the credibility of
the witnesses. [Fn. 3] Although we independently review a trial
court's interpretation of a written contract when it is based
exclusively on documentary evidence, we apply the clearly erroneous
standard when it is based on extrinsic testimonial evidence. [Fn.
4]
We review a trial court's award of attorney's fees for an
abuse of discretion. [Fn. 5]
B. Failure to Demonstrate Prejudice
Michael advances a variety of arguments why the trial
court erred in entering judgment against him after trial. They
relate to the effect of the alleged deficiencies in the aircraft,
the efficacy of disclaimer language in the contract, and the
failure to deliver a bill of sale satisfying FAA standards for
proof of ownership. Bering Sea contends that we need not reach
these issues because under the doctrine of res judicata the default
judgment against NCI precludes Michael from relitigating his
contractual liability to Bering Sea. Although our analysis is
somewhat different from Bering Sea's, we agree that the default
judgment is dispositive of Michael's liability to Bering Sea. [Fn.
6]
Because Michael has not demonstrated that the judgment
against him caused him harm, he is not entitled to relief from the
judgment on appeal. We will not disturb or modify a judicial
determination absent a demonstration of both error and prejudice.
[Fn. 7]
We reason as follows. Michael was a partner in NCI, and
is therefore jointly and severally liable to Bering Sea on Bering
Sea's judgment against NCI. Under partnership law, all partners
are jointly liable for the debts and obligations of the
partnership. [Fn. 8] The superior court found that Michael was a
partner at all relevant times. He has not contested this finding
on appeal, he has not sought to set aside the default judgment
against NCI, and he has not claimed that he cannot be liable for
the debts of NCI.
Because the judgment entered against Michael after trial
imposed no additional liability against him beyond that established
by the default judgment -- each judgment awarded Bering Sea
contract damages of approximately $53,000 -- the portion of the
judgment from which Michael appeals did not harm him. Bering Sea
can only recover once on the amount Arthur, Michael, and NCI
jointly and severally owe as a result of the default judgment
against NCI. Michael could avoid liability only if the default
judgment were also reversed. By the same token, reversal of the
judgment against Michael would not benefit him. Michael argues, in
responding to Bering Sea's res judicata argument, that the trial
court could not have intended the default judgment against NCI to
bind Michael, because the court entered the default judgment
against NCI without prejudice to Michael and then allowed Michael
to defend himself at trial by raising the warranty issues. He
argues that it is significant that the court did not limit him to
litigating his partnership status. But it appears the trial court
was not attempting to preserve Michael's ability to contest the
default judgment against NCI. When it entered judgment against NCI
on October 30, 1996, the court stated:
IT IS FURTHER ORDERED that nothing herein in
any way prejudices [Bering Sea] from pursuing its contract and tort
claims against defendant Michael Hayes, and seeking a judgment
against him which includes the above.
The claims Bering Sea then tried against Michael included
additional tort claims for fraud. Thus, the court included this
language not to protect Michael, but to preserve Bering Sea's
additional claims against Michael. And when it entered final
judgment in November 1997, the trial court ruled consistently that
Michael "was at all relevant times a partner of NCI. As such, in
addition to his liability set forth below, he is liable under this
Court's October 30, 1996, judgment in favor of Bering Sea and
against Arthur D. Hayes and NCI."
Michael argues that res judicata does not apply to the
default judgment because it was not a final judgment. Under Alaska
Civil Rule 54(b), a judgment involving multiple parties is presumed
not to be final unless expressly designated final by the court.
[Fn. 9] Although Michael is correct in stating that the October
1996 judgment was not a final judgment, the court subsequently
entered final judgment against NCI in November 1997. NCI did not
appeal from that judgment, nor did Michael establish any reason he
should not be bound by that judgment. Thus, we decline to consider
Michael's defenses to breach of contract.
C. Counterclaims
We turn to Michael's counterclaims against Bering Sea for
breach of contract. Bering Sea argues that Michael's counterclaims
are barred by sovereign immunity. Michael argues that Bering Sea
waived any claim of immunity by entering into the contract with
Michael and through a "sue and be sued" clause in its corporate
charter.
Absent clear waiver by the tribe or Congressional
abrogation, suits against Indian tribes are barred by sovereign
immunity. [Fn. 10] This immunity extends to cross-claims and
counterclaims. [Fn. 11] Any such waiver must be clear and
explicit. [Fn. 12]
Before Michael obtained separate counsel, Arthur and NCI
counterclaimed against Bering Sea for breach of contract and
misrepresentation. Bering Sea moved for partial summary judgment,
contending that the claims were barred by sovereign immunity.
Defendants did not oppose this motion, and the superior court
granted it.
After obtaining a continuance, Michael filed a motion
asking the court to rule that Bering Sea had waived its immunity.
Viewing Michael's motion as an untimely motion for reconsideration
of a previously decided issue, the court denied it. The court also
declined to revisit the issue based on the doctrine of the law of
the case.
Because we conclude that Michael's counterclaims are
meritless, we need not consider the procedural and substantive
merits of the court's rulings on sovereign immunity.
1. Express warranties
Michael contends that Bering Sea made and breached
express warranties; Bering Sea counters that it explicitly
disclaimed all express and implied warranties. The trial court
held that Bering Sea made no warranty concerning the condition of
the aircraft at the time of sale because Bering Sea expressly
disavowed any warranty in the contract of sale.
Michael argues that Bering Sea made three express
warranties during the sale negotiation. He first claims that
Bering Sea made an express warranty about the aircraft's
airworthiness by presenting its airworthiness certificate to NCI
before the sale. Michael next contends that Will Sherman, a
representative of Bering Sea, created an express warranty when he
assured NCI that the aircraft would meet FAA standards and that it
would easily pass inspection. Michael last asserts that Bering Sea
made an express warranty that the aircraft would conform to a
description Bering Sea faxed to NCI. He claims there were numerous
disparities and defects, particularly in the radios, avionics
systems, and anti-icing systems.
Denying that it made any express warranties, Bering Sea
also argues that it disclaimed any express warranties it arguably
made. The contract included the following disclaimer:
Prior to entering into this agreement, buyer
agrees that he has had ample opportunity to inspect aircraft and
its logs, and acknowledges that he is purchasing aircraft with no
warranty, either express or implied, as to the condition of the
aircraft or its components.
Seller states that they have in no way
misrepresented the aircraft, its condition, and equipment, and have
allowed buyer to make any reasonable "pre-buying" inspections of
the aircraft. Seller further states that to the best of their
knowledge the aircraft is being delivered in an airworthy
condition.
We assume for the sake of discussion that, but for the
disclaimer and the thorough pre-sale inspection opportunity, Bering
Sea's actions could have created express warranties regarding the
aircraft's condition. A description of the item to be sold [Fn.
13] or promise regarding its condition [Fn. 14] can create an
express warranty under the Uniform Commercial Code as long as it
forms part of the basis of the bargain. Such descriptions need not
be verbal; technical specifications [Fn. 15] or documents such as
airworthiness certificates [Fn. 16] can create warranties.
But we are not convinced that these representations
formed part of the basis of the parties' bargain, or that the trial
court erred in concluding that Bering Sea made no warranty
concerning the condition of the aircraft "as of the time of sale."
The court found that NCI's representative had inspected the
aircraft over a two-day period. The evidence about the extent and
results of this pre-sale inspection is not materially disputed.
Bering Sea offered NCI ample opportunity to inspect the aircraft,
and NCI fully exercised this opportunity before it entered into the
contract. A qualified airframe and powerplant mechanic selected by
NCI inspected the aircraft on December 16 and 17, 1994. He
observed numerous discrepancies between the faxed description and
the actual condition of the aircraft and its components. He
reported to Arthur Hayes his opinions concerning the condition of
the aircraft and whether it could pass an FAA inspection. As a
result of problems the mechanic perceived in the propellers during
his inspection, NCI negotiated a lower purchase price.
Two days after completion of the inspection, NCI and
Bering Sea entered into the contract on December 19. The first
paragraph of the disclaimer refers to the inspection. This
paragraph permits a conclusion that the inspection, not the prior
fax or conversation with Sherman, formed the basis for NCI's
understanding of the aircraft's condition. It also supports the
trial court's conclusion that Bering Sea, at the time of sale, made
no warranty of condition.
We are guided by our reasoning in B-E-C-K Constructors v.
State, Department of Highways. [Fn. 17] We there held that the
State made no implied warranty to a contractor regarding the
soundness of a bridge because any representations the State made
were not part of the basis of the bargain. [Fn. 18] The bridge
eventually collapsed. Although the State knew that BECK intended to
use the bridge in completing its project, the contract made no
representations as to the bridge's suitability for this use, the
contract specified that BECK would destroy the bridge upon
completion of the project, and the State explicitly disclaimed any
warranty regarding the bridge's condition based on sixty-year-old
engineering plans it provided BECK. [Fn. 19]
A seller cannot negate express warranties through
generalized disclaimers. [Fn. 20] But the clear, forceful,
specific disclaimer in this contract defeats Michael's claim that
Bering Sea made any enforceable express warranty. This is not a
fine-print boilerplate disclaimer which NCI could not have
negotiated or understood; it is a conspicuous, clearly written
provision in a two-page contract between parties with equal
bargaining power. Its recitation that the "buyer . . . had ample
opportunity to inspect [the] aircraft and its logs" is not a mere
formalism, but reflects NCI's actual conduct. We therefore
conclude that it was both an enforceable disclaimer and evidence of
the basis of the parties' bargain. The numerous discrepancies the
mechanic observed and the clear language of the disclaimer could
not have left NCI with any illusions that Bering Sea was
warrantying the aircraft's condition. We therefore affirm the
trial court's conclusion that Bering Sea "made no warranty
concerning the condition of the subject aircraft as of the time of
sale."
2. Warranty of title
Michael argues that Bering Sea breached its warranty of
title. Alaska Statute 45.02.312 requires sellers to provide buyers
with proper title. [Fn. 21]
Due to a defect in the bill of sale, the FAA refused to
register the aircraft. Ted Moses, who represented Bering Sea,
signed the bill of sale as "Ted Moses COO [chief operating
officer]" rather than as "Bering Sea Reindeer Products, by Ted
Moses, its COO." NCI asked Moses to remedy the defect by correctly
completing another form. Although Moses agreed to do so, he did
not prepare a corrected bill of sale before his untimely death
about a year later. Bering Sea contends that any harm caused by
the defect was de minimis because the FAA would have accepted some
document other than a bill of sale as proof of ownership.
The superior court found that the formal defect in title
did not harm NCI. It reasoned that because NCI was unable to
obtain FAA permission to operate the aircraft due to its poor
mechanical condition, NCI would have been unable to obtain
certification, with or without proper title. The court based this
conclusion partly on NCI's failure to pursue the matter with the
FAA. The court noted that NCI made no effort to "resolve the title
problem" with the FAA after the aircraft's temporary registration
expired "because the mechanical problems it was experiencing with
the aircraft made the title matter irrelevant." We agree with this
analysis, and reject Michael's argument that Bering Sea breached
its duty to provide proper title. Accordingly, the court also
properly denied relief under Alaska Civil Rule 41(b) based on the
same argument. [Fn. 22]
D. Misrepresentation
Michael also challenges the superior court's dismissal of
his claim against Bering Sea's agent, Will Sherman. [Fn. 23] He
argues that Sherman misrepresented the condition of the aircraft by
assuring him that it would pass FAA inspection and was useable for
a freight transport contract with United Parcel Service.
The superior court made no factual findings regarding the
content of Sherman's statements. Instead, it dismissed this claim,
reasoning that the express disclaimer in the contract shielded
Sherman from liability. We agree with the superior court's
conclusion that Michael's claims must fail, whether or not Sherman
made the assurances described by Michael.
Michael alleges that Sherman committed the torts of
innocent, negligent, and fraudulent misrepresentation. To prevail
on any such claim, Michael would have to demonstrate that he relied
on Sherman's representations when NCI purchased the aircraft. [Fn.
24] Because any representations Sherman may have made were not
part of the bargain, as discussed above in Part III.C.1, Michael
could not reasonably have relied on them. Therefore, the court did
not err in dismissing Michael's claim.
E. Interest Calculation and Attorney's Fees
Michael argues that the superior court erred in imposing
a statutory rate of interest, rather than the rate specified in the
contract, on the award against him. He also challenges Bering
Sea's attorney's fee award because it was based in part on the
prejudgment interest award.
An award for the payment of money is subject to
prejudgment interest at the statutory rate unless the award is
based on a contract specifying a different rate. The version of AS
09.30.070(a) in effect when the parties entered into the contract
provided:
Interest on judgments; prejudgment interest.
(a) The rate of interest on judgments and
decrees for the payment of money is 10.5 percent a year, except
that a judgment or decree founded on a contract in writing,
providing for the payment of interest until paid at a specified
rate not exceeding the legal rate of interest for that type of
contract, bears interest at the rate specified in the contract if
the interest rate is set out in the judgment or decree.[ [Fn. 25]]
Although the judgment noted that the contract specified a 9%
interest rate, the court applied a 10.5% prejudgment rate to the
damage award of $53,675. We conclude that the exception for
contract-specified interest rates applies here: the damage award
was based on a written contract that provided for payment of
interest at a specified and legally permissible rate, and the rate
was set out in the judgment. [Fn. 26] The prejudgment interest
should have been calculated at the 9% rate specified in the
contract.
But the error did not prejudice Michael. The superior
court applied a 10.5% prejudgment interest rate to the default
judgment. Michael has not challenged use of this rate in the
default judgment against Arthur and NCI. Thus, he has effectively
waived any right to challenge use of this rate in the judgment
against him, and any error is harmless. Accordingly, we affirm the
court's calculation of prejudgment interest and the attorney's fee
calculation based on that interest.
IV. CONCLUSION
We AFFIRM the judgment.
FOOTNOTES
Footnote 1:
See Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
Footnote 2:
See Mount Juneau Enters. v. City of Juneau, 923 P.2d 768, 772-
73 (Alaska 1996).
Footnote 3:
See Alaska R. Civ. P. 52(a); see also Klosterman v. Hickel
Inv. Co., 821 P.2d 118, 121-22 (Alaska 1991).
Footnote 4:
See Klosterman, 821 P.2d at 122.
Footnote 5:
See McNett v. Alyeska Pipeline Serv. Co., 856 P.2d 1165, 1167
(Alaska 1993).
Footnote 6:
We may uphold a trial court's decision on an alternate legal
theory. See Demoski v. New, 737 P.2d 780, 786 (Alaska 1987); cf.
Wright v. State, 824 P.2d 718, 720 (Alaska 1992). Bering Sea has
not targeted Michael's failure to demonstrate prejudice. But its
appellate brief recites and analyzes all facts salient to our
analysis. In arguing that Michael's judgment was barred by res
judicata, Bering Sea gave Michael sufficient opportunity, and the
need, to raise any relevant facts or theories in rebuttal.
Footnote 7:
See Alaska R. Civ. P. 61; see also Sloan v. Atlantic Richfield
Co., 541 P.2d 717, 722 (Alaska 1975) (holding that appellant bears
burden of proving prejudice as well as error), modified on other
grounds by 552 P.2d 157 (Alaska 1976).
Footnote 8:
See AS 32.05.100; Bradford v. First Nat'l Bank of Anchorage,
932 P.2d 256, 264 (Alaska 1997).
Footnote 9:
Alaska Civil Rule 54(b) provides:
When more than one claim for relief is
presented in an action, whether as a claim, counterclaim, cross-
claim, or third-party claim, or when multiple parties are involved,
the court may direct the entry of a final judgment as to one or
more but fewer than all of the claims or parties only upon an
express determination that there is no just reason for delay and
upon an express direction for the entry of judgment. In the
absence of such determination and direction, any order or other
form of decision, however designated, which adjudicates fewer than
all of the claims or the rights and liabilities of fewer than all
the parties shall not terminate the action as to any of the claims
or parties, and the order or other form of decision is subject to
revision at any time before the entry of judgment adjudicating all
the claims and the rights and liabilities of all the parties.
Footnote 10:
See Oklahoma Tax Comm'n v. Citizen Band Potawatomi Indian
Tribe of Oklahoma, 498 U.S. 505, 509 (1991); Santa Clara Pueblo v.
Martinez, 436 U.S. 49, 58 (1978).
Footnote 11:
See United States v. United States Fidelity & Guar. Co., 309
U.S. 506, 512 (1940).
Footnote 12:
See Blachford v. Native Village of Noatak, 501 U.S. 775, 786
(1991); Parker Drilling Co. v. Metlakatla Indian Community, 451 F.
Supp. 1127, 1136 (D. Alaska 1978).
Footnote 13:
AS 45.02.313 provides in relevant part:
(a) Express warranties by the seller are
created as follows:
. . . .
(2) a description of the goods which is made
part of the basis of the bargain creates an express warranty that
the goods shall conform to the description;
. . . .
(b) It is not necessary to the creation of an
express warranty that the seller use formal
words such as "warrant" or "guarantee" or that the seller have a
specific intention to make a warranty, but an affirmation merely of
the value of the goods or a statement purporting to be merely the
seller's opinion of commendation of the goods does not create a
warranty.
Footnote 14:
AS 45.02.313(a)(1) provides: "an affirmation of fact or
promise made by the seller to the buyer which relates to the goods
and becomes part of the basis of the bargain creates an express
warranty that the goods shall conform to the affirmation or
promise."
Footnote 15:
See U.C.C. sec. 2-313 cmt. 5 ("A description need not be by
words. Technical specifications, blueprints and the like can
afford more exact description than mere language and if made part
of the basis of the bargain goods must conform with them.").
Footnote 16:
See Limited Flying Club, Inc. v. Wood, 632 F.2d 51, 55-57 (8th
Cir. 1980) (holding that seller's presentation of aircraft logbook,
including airworthiness certificates, created express warranty
under provision of Iowa's version of U.C.C. identical to Alaska's).
Footnote 17:
604 P.2d 578, 583 (Alaska 1979).
Footnote 18:
See id. at 583 n.9.
Footnote 19:
See id. at 580-84.
Footnote 20:
AS 45.02.316(a) provides:
Words or conduct relevant to the creation of
an express warranty and words or conduct tending to negate or limit
warranty shall be construed where reasonable as consistent with
each other; but subject to the provisions on parol or extrinsic
evidence (AS 45.02.202) negation or limitation is inoperative to
the extent that such construction is unreasonable.
U.C.C. sec. 2-316 cmt. 1 states:
This section is designed principally to deal
with those frequent clauses in sales contracts which seek to
exclude "all warranties, express or implied." It seeks to protect
a buyer from unexpected and unbargained language of disclaimer by
denying effect to such language when inconsistent with language of
express warranty. . . .
Footnote 21:
AS 45.02.312(a) provides that "there is in a contract for sale
a warranty by the seller that (1) the title conveyed shall be good,
and its transfer rightful."
Footnote 22:
See Alaska R. Civ. P. 41(b) (providing for involuntary
dismissal of actions).
Footnote 23:
Although he asserted a counterclaim of misrepresentation
against Bering Sea in the superior court, Michael does not assert
on appeal that Bering Sea should be liable for Sherman's
representations. We note that any such claim would necessarily
fail for the same reasons that his claim against Sherman fails.
Footnote 24:
See Barber v. National Bank of Alaska, 815 P.2d 857, 862-63
(Alaska 1991) (upholding dismissal of fraudulent and negligent
representation claims based on failure to demonstrate reliance);
Bevins v. Ballard, 655 P.2d 757, 761-62 (Alaska 1982) (stating that
reliance is element of prima facie claim of innocent
misrepresentation).
Footnote 25:
AS 09.30.070(a) (1994), amended by ch. 26 sec. 18, SLA 1997.
The current version retains the exception for contractually
specified
interest rates. See AS 09.30.070(a) (1998).
Footnote 26:
See Riley v. Northern Commercial Co., 648 P.2d 961, 968
(Alaska 1982) (interest rate specified by promissory note, rather
than statutory rate, governed prejudgment and post-judgment
interest calculations).
