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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Nerox Power Systems, Inc. v. M-B Contracting Co., Inc. (9/13/2002) sp-5628

Nerox Power Systems, Inc. v. M-B Contracting Co., Inc. (9/13/2002) sp-5628

     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 corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA


NEROX POWER SYSTEMS, INC.;    )
NEROX ENERGY CORPORATION,     )    Supreme Court No. S-9922
a/k/a E*TWO MEDIA.COM;        )
WILLIAM D. ARTUS; COAL        )    Superior Court No.
FACTORS, INC.; THE LKL TRUST; )    3AN-98-10356 CI
JOHN WALLACE, TRUSTEE FOR     )
THE WALLACE M.D. FAMILY  )    O P I N I O N
TRUST; GRETCHEN A. ROSS,      )
TRUSTEE  FOR  THE  G.A.R.        )    [No. 5628 -  September  13,
2002]
TRUST; and NICHOLAS E. ROSS,  )
                              )
                 Appellants,       )
                              )
     v.                       )
                              )
M-B CONTRACTING COMPANY, )
INC.; TOPE EQUIPMENT          )
COMPANY; ALASKA LAW           )
OFFICES, INC.; and STEVEN          )
JONES,                        )
                              )
                 Appellees.        )
________________________________)


          Appeal  from the Superior Court of the  State
          of    Alaska,    Third   Judicial   District,
          Anchorage, Karen L. Hunt, Judge.

          Appearances:  William L. Choquette, Choquette
          &  Farleigh,  LLC, Anchorage, for Appellants.
          Gary    Spraker,    Bundy   &   Christianson,
          Anchorage,   for   Appellee  Tope   Equipment
          Company.
          Before:    Fabe,  Chief  Justice,   Eastaugh,
          Bryner,  and Carpeneti, Justices.  [Matthews,
          Justice, not participating.]

          FABE, Chief Justice.


I.   INTRODUCTION

          In  April  1997 Nerox Power Systems, Inc. recorded  two

deeds  of trust encumbering mining rights to the Jonesville  coal

mine in Sutton, for the purpose of securing repayment of debts to

certain  alleged  creditors.  At issue  in  this  appeal  is  the

superior  courts decision to give other creditors  lien  priority

over   the  deeds  of  trust  under  the  doctrine  of  equitable

subordination.  A second issue concerning the legal  relationship

between   Nerox  Power,  its  parent  company,  and   the   major

shareholder in the parent company is which of these should assume

liability  for  the  debts of Nerox Power.   The  superior  court

pierced  the  corporate veil of the parent company  to  make  its

major shareholder liable for the debts of Nerox Power.  We affirm

the decision of the superior court in all respects.

II.  FACTS AND PROCEEDINGS

          Gemini  Capital Corporation was incorporated in  Nevada

in 1985, and its stock was publicly traded.  The corporation held

interests  in various gas and oil wells and based its profits  on

royalties  from  its  holdings.  By  April  1991  Gemini  Capital

Corporation  had run into financial difficulties, and  its  stock

was  de-listed  due  to  valuation  uncertainties.   The  company

remained dormant for the next several months and in 1992  changed

its name to Gemini Energy Corporation.  Gemini Operating Company,

a  subsidiary of Gemini Capital Corporation (later Gemini  Energy

Corporation), was incorporated in 1990.

          In   November   1992  Nicholas  E.  Ross   obtained   a

controlling   interest   in   Gemini  Energy   Corporation;   the

corporation changed its name to Nerox Energy Corporation in 1994.

Ross served as the president and chief executive officer of Nerox

Energy  from the time of purchase until November 1997.   In  1994

Ross  sought to acquire a five percent interest in a  Cook  Inlet

oil  field  owned by Stewart Petroleum.  In order  to  raise  the

necessary capital, Ross issued 108,394 shares of common stock  in

Nerox   Energy.   Because  Nerox  Energy  was  facing   financial

difficulties  at the time, Ross attracted investors by  promising

that  by 1996 Nerox Energys stock would reach $35.71, for a total

valuation of $3.87 million, and that any difference would be paid

either in cash or additional stock if this goal was not reached.1

Stewart  Petroleum went bankrupt in 1996, depriving Nerox  Energy

of its expected profit.

          In 1995 Ross decided to expand into coal mining through

the  subsidiary Gemini Operating Company, which he renamed  Nerox

Power  Systems,  Inc.  Nerox Power acquired the  Jonesville  coal

mine  in  Sutton,  which  was  not operational  at  the  time  of

acquisition.   The mining rights were previously owned  by  Hobbs

Industries,  Inc. under a sublease with Placer  Dome  U.S.,  Inc.

Hobbs  assigned its rights to Nerox Power on August 10,  1995  in

exchange  for  stock in Nerox Power and other consideration.   In

late  October 1995 Nerox Power purchased the mining  rights  from

Placer  Dome for $1 million, $800,000 of which was paid  in  cash

and  the  balance executed in a promissory note.  Of the $800,000

paid  in cash, $400,000 was contributed by the GAR Trust and  the

Ross  Family  Trust, while the other $400,000 was raised  by  the

sale  of  preferred  stock to a set of  investors.2   The  mining

rights  to  the Jonesville mine were the only asset  Nerox  Power

ever owned.

          The Jonesville mine was not successful, and Nerox Power

never  generated any revenue from the sale of coal.  Ross himself

personally loaned approximately $1.8 million to Nerox  Power  and

Nerox  Energy  to cover operating and development costs  for  the

mine.  In September 1996 Nerox Power leased heavy equipment  from

both M-B Contracting, Inc. and Tope Equipment Company for use  at

the  mine.   Out  of  frustration  over  Nerox  Powers  financial

difficulties, Ross fired its existing president in December  1996

and  replaced  him with William Artus, who had  been  serving  as

legal counsel for Nerox Energy.  Shortly after being hired, Artus

loaned $79,500 to Nerox Power to cover operating expenses  and  a

portion of the remaining $200,000 it owed to Placer Dome.   Artus

          was also owed a little over $68,000 for legal services he

provided  to  Nerox Energy prior to becoming president  of  Nerox

Power.  Nerox Energy issued Artus 151,016 shares of stock in 1997

but  did not specify for which debt the stock was issued  or  how

much  of  the  debt  was relieved by the issuance.   Nerox  Power

recorded a deed of trust against the Jonesville mine on April 11,

1997  to  secure a payment of $191,576 to Artus and Coal Factors,

Inc.,  which had supplied plans, materials, and equipment  for  a

coal washing plant.

          Ross purchased Nerox Power in 1998 for $10,000 and  the

assumption of all corporate debt.  Ross also transferred  control

of  Nerox  Energy  to  outside investors  as  part  of  the  same

transaction.  Nerox Energy was renamed E*two Media.com.

          M-B  recorded  a  lien against Nerox  Power  and  Nerox

Energy on May 14, 1997 and a lien extension on October 27,  1998.

Tope recorded a similar lien on May 22, 1997 and a lien extension

on  November 19, 1997.  Nerox Energy stipulated to a judgment  of

$47,500  in outstanding legal expenses to Alaska Law Offices  and

Steven Jones on August 28, 1997 for services rendered with regard

to   continuing   litigation  between  Nerox  Power   and   Hobbs

Industries.

          On  April  10,  1998,  M-B filed to  foreclose  on  its

mechanics  lien  and hold Nerox Energy liable  for  Nerox  Powers

debt.  Tope cross-claimed and counter-claimed to foreclose on its

mechanics  lien,  and Alaska Law Offices and Steven  Jones  later

moved  to  foreclose on its judgment lien.   As  a  sanction  for

failing to comply with a discovery order, the superior court held

that Nerox Energy was the alter ego of Nerox Power.  Following  a

May  2000  trial,  Superior Court Judge Karen L. Hunt  concluded,

based  on  extensive factual findings: that M-B  and  Tope  could

foreclose  on their mechanics liens and that Alaska  Law  Offices

and Steven Jones could foreclose on their judgment lien; that the

two  April 1997 deeds of trust were subordinated to the mechanics

and  judgment  liens; and that both Nerox Power and Nerox  Energy

were  instrumentalities of Ross, thus piercing the corporate veil

and  making  Ross  liable for their debts.   Ross,  Artus,  Nerox

Power,  Nerox Energy, and other investors in Nerox Energy  appeal

this decision.

III. DISCUSSION

          There  are  two main issues in this case:  (1)  whether

the  two  April 1997 deeds of trust can be equitably subordinated

to  the  liens  of  M-B, Tope, and Alaska Law Offices;3  and  (2)

whether  Ross is personally liable for the debts of  Nerox  Power

and  Nerox Energy.  The primary factual question raised  by  both

issues  is  whether  Ross and Artus acted fraudulently  in  their

handling  of  the  financial affairs for Nerox Energy  and  Nerox

Power.   Judge  Hunt found sufficient evidence to  conclude  that

fraud  existed.   To this finding we apply the clearly  erroneous

standard  of review.4  A finding of fact is clearly erroneous  if

it  leaves this court with a definite and firm conviction on  the

entire  record  that a mistake has been made. 5   This  standard,

therefore, requires us to give great deference to the findings of

the  superior  court.6   Judge Hunt further  concluded  that  the

deeds of trust should be subordinated to the liens and that  Ross

was  personally liable for the debts of Nerox Power.   These  are

questions of law to which we apply our independent judgment.7

     A.   The Superior Court Did Not Err by Subordinating the Two
          April  1997  Deeds of Trust to the Liens of M-B,  Tope,
          and Alaska Law Offices.
          
          The  Alaska  Supreme  Court  has  recognized  that  the

doctrine  of equitable subordination, whereby the court may  undo

or  offset any inequity in the claim position of a creditor  that

would produce injustice or unfairness to other creditors in terms

of  bankruptcy  results,8  can  exist  outside  of  the  standard

bankruptcy  context.9  A need for equitable subordination  arises

in  situations of [f]raud, unfairness, or breach of the rules  of

fair  play.  10  It is also the case, however, that an  insolvent

debtor may convey property to one creditor, even if it means that

the  debtors assets will thereby be depleted, and that the claims

          of other creditors will be defeated.11  In the absence of

inequitable conduct on the part of a debtor, a court cannot alter

the  pre-existing  priorities  among  creditors.12   It  is  also

important  to  note  that  we have held both  that  directors  of

insolvent  corporations have a fiduciary  duty  to  preserve  the

assets  of the corporation for its creditors13 and that attorneys

who  represent insolvent corporations and have control over their

assets  must  also protect those assets for the  creditors  where

they  know[ ] or should know that the director or officer intends

to   interfere   with  creditors  claims  through   an   improper

distribution of those assets.14

          1.   The April 11, 1997 deed of trust

               a.   The debt to William Artus

          On April 11, 1997, Nerox Power recorded a deed of trust

against  the Jonesville mine and listed as beneficiaries  William

Artus  and Coal Factors, Inc.  Artus himself signed the  deed  in

his  role as president of Nerox Power.  Debt amounts to Artus and

Coal  Factors  were not separately listed in the  deed  of  trust

itself.   The 1997 10-K report that Nerox Energy was required  to

file  with the Securities and Exchange Commission lists debts  to

Artus  of:  (1)  $68,196  for legal services  in  1996  and  1997

combined,  and  (2) $85,432 for a loan that Artus made  to  Nerox

Energy  in late 1996 or early 1997.  However, Artus testified  at

trial that he was owed $79,500 for the loan.  This amounts  to  a

total debt to Artus of either $153,628 or $147,696.  Nerox Energy

issued  151,016  shares of stock to Artus in conversion  of  debt

sometime in 1997.

          The  1997  10-K report does not explain to what  extent

the  debts  owed to Artus, both from his loan and for  his  legal

services,  were  satisfied by the 151,016 shares issued  to  him.

There  is no monetary value attached to the shares, although  one

could reasonably infer that the entire debt was satisfied by  the

issuance of stock.  The 1997 10-K report states that Nerox Energy

converted $568,168 in debt to shares of common stock in  1997  at

          $1.00 per share.  There is nothing definitive to say that the

issuance  of stock to Artus was included in this debt conversion,

although  converting debt at a dollar per share for  the  151,016

shares  issued  to Artus would closely approximate  the  combined

debt  owed  to Artus for his loan and for legal services.   Judge

Hunt  concluded that Artuss debt was satisfied by the issuing  of

the  stock.   She further found that the loan to Nerox  Power  by

Artus was a capital contribution for which he received the shares

of  common  stock in Nerox Energy.  Judge Hunt found  that  fraud

existed in these transactions:

          Mr.  Artus breached his fiduciary duty to the

          creditors   by   attempting  to   place   the

          interests  of  William  D.  Artus  and   Coal

          Factors,    Inc.,   shareholders    in    the

          corporation,  over  the interests  of  third-

          party  creditors.  The execution of the  deed

          of  trust  was  done  at  a  time  when  both

          corporations  were  grossly undercapitalized.

          Such   conduct   constituted   a   fraudulent

          conveyance,   hindered  creditors   and   was

          inequitable conduct.

          Artus  contends15  that  because  the  amount  of  debt

compensated  by the 151,016 shares is unclear, the conveyance  of

the  deed of trust cannot be fraudulent.  However, we cannot  say

that  the superior court was clearly erroneous in concluding that

Nerox Power satisfied any debts Nerox Power owed to Artus.  Based

on  the  1997 10-K statement that certain unspecified debts  were

converted to common stock at a price of $1.00 per share in  1997,

Judge Hunt found that the stock issued in satisfaction of debt in

1997 was issued for a dollar a share.  Because the 151,016 shares

issued to Artus are roughly equal to the amount of money owed  to

Artus  by Nerox Power ($153,628 based on the figures in the  1997

10-K),  there  is  evidentiary support for  the  superior  courts

conclusion  that all of Artuss debts had been satisfied,  and  we

          cannot say that this factual determination is clearly erroneous.

          Furthermore,   Judge  Hunt  could  have  effected   the

subordination   of  Artuss  interest  in  the   deed   of   trust

independently of whether or not she believed that  his  debt  had

been  satisfied by the issuance of stock.  Appellees  M-B,  Tope,

and Alaska Law Offices focus on Artuss position as an insider  in

Nerox  Power and argue that this status supports a finding  of  a

fraudulent  conveyance  to Artuss own benefit.   Appellees  argue

that this is sufficient to support equitable subordination of the

deed of trust.  The law supports this conclusion.  Federal courts

have   recognized  three  types  of  misconduct  that  constitute

inequitable  conduct:  (1)  fraud,  illegality,  or   breach   of

fiduciary duties; (2) undercapitalization; and (3) claimants  use

of  the  debtor as a mere instrumentality or alter ego.16   Judge

Hunt  found  the first two of these to exist, and her conclusions

were not clearly erroneous.

          The prohibition against fraudulent conveyances has been

codified  in  Alaska  law.17  The intent  to  defraud  through  a

conveyance  is  a  question  of fact  usually  to  be  proved  by

circumstantial  evidence.18   Many  circumstantial  factors   can

indicate the existence of fraud.19  Badges of fraud must be viewed

within  the context of each particular case.20  Judge Hunt  found

that  Artus either knew or should have known that many  creditors

had  not been paid at the time the deed of trust was recorded and

that these creditors would likely claim a lien against the mining

rights.   In  his role as a director of the company, and  in  his

former role as a lawyer for Nerox Energy, Artus had an obligation

to  protect  the  rights and assets of the  corporation  for  its

creditors.21  Judge Hunt further found that by naming himself as a

beneficiary  of  a  deed of trust encumbering Nerox  Powers  only

asset  for  the  purpose of repaying a loan and  reimbursing  the

costs  of legal services he provided, Artus ignored his fiduciary

duty and engaged in inequitable conduct.22

          We   have  recognized  inadequate  consideration,   the

          insolvency of the debtor/transferor, and a transfer of assets in

anticipation of a pending suit to be among the badges of fraud.23

All  of these existed in the present case.  Judge Hunt found that

Nerox   Power   was   insolvent;  that   there   was   inadequate

consideration  for the deed of trust; and that Artus  knew  Nerox

Power  was likely to be burdened by mechanics liens in  light  of

its insolvency.  These factual findings are not clearly erroneous

and satisfy the fraud category of inequitable conduct.

          Judge  Hunt also found that both Nerox Power and  Nerox

Energy  were  grossly undercapitalized and that this  constituted

inequitable  conduct.24  The only asset of Nerox  Power  was  the

right to mine coal at the Jonesville mine, which never went  into

production.   Judge Hunt found that Nerox Power had  neither  the

expertise nor the equipment to run a coal mine, hence the need to

hire  M-B  and Tope.  All the funding for the expenses  of  Nerox

Power came either directly from Ross or indirectly from Ross  via

Nerox Energy.  Given these facts, it was not clearly erroneous to

find  that Nerox Power was undercapitalized and that the deed  of

trust for Artus could thus be equitably subordinated to the liens

of M-B, Tope, and Alaska Law Offices.

               b.   The debt to Coal Factors, Inc.

          Judge Hunt found that Coal Factors was a consultant  to

Nerox Power and had advanced them funds for use in developing the

mine,  making  them either an investor or an unsecured  creditor.

Because  Nerox  Energy  satisfied its  debts  to  consultants  by

issuing  stock,  Judge Hunt found that the  debts  owed  to  Coal

Factors  had  been  satisfied.  Coal Factors thus  could  not  be

preferred  over  bona fide creditors.25  Yet, the evidence  Judge

Hunt  cites  to show that Coal Factors was a consultant  actually

suggests that Coal Factors was a standard contractor rather  than

a  consultant.  Furthermore, the billing statements in the record

demonstrate  that  a substantial amount of Coal Factorss  billing

was  for  material  goods  provided to Nerox  Power  for  use  in

developing  the  mine.  There is also very  little  testimony  at

          trial to support the conclusion that Coal Factors served as a

consultant.  However, M-B argues an alternative ground  on  which

to affirm the equitable subordination ordered by Judge Hunt.

          It  is  unclear  exactly  how much  was  owed  to  Coal

Factors.   There  are no specific debt figures contained  in  the

1997  10-K  report.   Artus  testified  conflictingly  that  Coal

Factors  was owed $115,000 and that it was owed $130,000.   Nerox

Power  and  Coal Factors do not provide in their combined  briefs

any clarification of the amount owed other than to rely on Artuss

testimony.26  Because the deed of trust was drafted for payment of

$191,576,  subtracting  the $151,016 that Artus  received  leaves

$40,560 for Coal Factors.  However, the timing between the  debts

incurred, the payments made, and the April 11, 1997 recording  of

the deed confuses matters further.

          The  largest expense incurred by Coal Factors   $80,000

for  structural  steel  for a coal wash plant   was  invoiced  on

September  8,  1997, several months after the deed of  trust  was

recorded  on  April  11, 1997.  It is conceivable  that  some  or

perhaps  all of this expense was incurred prior to the  recording

of  the deed of trust.27  Certain other expenses apparently  were

incurred  prior  to  April 11, 1997, even though  they  were  not

invoiced  until  several months later.   M-B  alleges  that  Coal

Factors was only owed $27,541.44 on April 11, 1997, when the deed

of  trust  was recorded.  Ultimately, it is impossible to  get  a

clear  accounting  from the record of the expenses  Coal  Factors

incurred before April 11, 1997.

          Based  upon  the  evidence  in  the  record,  there  is

insufficient  justification for the amount of  the  Coal  Factors

deed  of trust.28  The record shows that prior to April 11, 1997,

Coal Factors had incurred costs of $33,394.4629 for work done and

materials provided to Nerox Power30 and been paid $17,794.90  for

these  costs, leaving indebtedness of only $15,599.56.  The  deed

of  trust, as far as the record goes, provides collateral to Coal

Factors  for  a debt of only $40,560.  There is no indication  in

          the deed of trust as to what the deed is securing and no

indication  of what consideration, if any, Coal Factors  gave  to

Nerox Power to justify any amount in excess of its existing debt.

This  court  cannot  act  as  the accountant  for  Coal  Factors,

determining when its debts were incurred and which ones are valid

for  the purpose of the deed of trust.31  Were the deed of  trust

clearer  or  the record more complete, it is possible  that  Coal

Factors  could  demonstrate that it was error for Judge  Hunt  to

shift  the  priority of the liens of M-B, Tope,  and  Alaska  Law

Offices.32   As the record stands before this court,  however,  a

sufficient  implication  of  fraud  exists  with  regard  to  the

dealings  between Coal Factors and Nerox Power to  support  Judge

Hunts conclusion that Coal Factorss interest in the deed of trust

must be equitably subordinated to the claims of other creditors.

          2.   The April 21, 1997 deed of trust

          On   April  21,  1997,  Nerox  Power,  with  Artus   as

president,  recorded a deed of trust encumbering  the  Jonesville

mine  and  naming  as beneficiaries ten entities or  individuals:

Duane Albert, Mr. and Mrs. L.G. and C. Brotzman, George Peterson,

The  Larson Family Trust, The LKL Trust, Paul F. Schroff,  Robert

O.  Jones,  Sally L. Zutter, John Wallace for the Wallace  Family

Trust, and Gretchen A. Ross for the Ross Family Trust and the GAR

Trust.   The  total  debt owed to all of these beneficiaries  was

$1,040,000.   Judge Hunt found that those named as  beneficiaries

had  already  had  their debts satisfied by  receiving  preferred

shares  for  their  capital contributions.  As such,  Judge  Hunt

determined that the interests of these beneficiaries in the  deed

of  trust should be equitably subordinated to the claims of other

creditors.

          The  primary  dispute lies in who lent money  to  Nerox

Energy  to  raise  capital for the purchase of  the  Placer  Dome

lease.   Ross stated in his deposition33 that $800,000 was raised

for this purpose and that the investors received preferred shares

in  exchange. He listed as lenders:  Myself, or I should  say  my

          family trust, my wifes family trust, that was the GAR trust.

Last names only, Brockman; Shiba . . . ; Peterson; Larson; Albert

.  . . Schroff; . . . Zutter.  The corresponding total amount for

these  names on the deed of trust is $695,000, although no amount

can be found for the alleged investor Shiba.34  Nerox Power admits

in  its  brief  that the GAR Trust received shares  of  preferred

stock  in exchange for its loan of $400,000.  Nerox Power further

admits  that  Peterson, Larson, Albert, Schroff, and Zutter  also

received  preferred  stock.35  Nerox  Power  in  its  brief  only

challenges  the finding that Mr. and Mrs. L. G. and C.  Brotzman,

the  LKL  Trust,  Robert O. Jones, and the Wallace  Family  Trust

received preferred stock.

          Rosss  deposition confirms that those who supplied  the

money  for  the  Placer Dome lease received preferred  stock  for

their loans:

          Q:   Now  the  money that was paid to  Placer
               Dome,  youve already told us  that  came
               from these six or seven people you.....
               
          A:   Correct.
          
          Q:   Did  you end up paying back those people
               the amounts that they had lent?
               
          A:   They   got  preferred  shares  in  Nerox
               Energy Corporation.
               
          Q:   Were they ever paid back any money?
               
          A:   No, they had preferred shares.
               
          Q:   Are  they  still preferred  shareholders
               of.....
               
          A:   Theyre preferred shareholders, correct.
               
As such, these people would be investors and not creditors, which

would  prevent them from having priority over the liens  of  M-B,

Tope,   and   Alaska  Law  Offices  because  they  were   already

compensated for the money they provided.

          Artus  in his testimony provides further evidence  that

the  investors  who had provided money to acquire the  coal  mine

were  listed  as beneficiaries in the April 21 deed of  trust  to

compensate  them with collateral for their payment  used  in  the

          acquisition of the Jonesville lease:

          Q:   .  .  .  [W]ho  directed you  to  record
               either  or  both  of  these  [deeds   of
               trust]?
               
          A:   Myself as a director and Mr. Ross  as  a
               director.
               
          Q:   So other than yourself, Mr. Ross was the
               other one who directed you to do this?
               
          A:   Yes.
               
          Q:   From what Mr. Ross told you[,] what  was
               his  reasoning for reporting  these  two
               deeds of trust?
               
          A:   These  people were owed money  by  Nerox
               Power  Systems, Inc., and they  provided
               money  to acquire the coal mine, or  for
               the  development of the coal  mine,  and
               they  were owed money and he wanted them
               to   have  some  collateral  for   their
               payment.
               
          Q:   And  why was he or you taking this  step
               in  recording this deed of trust at this
               time?
               
          A:   Because    the   board   of    directors
               determined  it was an appropriate  thing
               to do.
               
          Q:   And why?
               
          A:   Because  these people had  loaned  money
               for  the  acquisition of the coal  lease
               and/or development of the coal mine  and
               we  thought it was appropriate that they
               have  security for payment of the  debts
               that were owed.
               
          By  themselves, the statements of Ross  and  Artus  are

inconclusive.  However, when Artuss statement that  those  listed

on  the  deed of trust were the people who had provided money  to

start the corporation is combined with Rosss statement that those

who  loaned  the money received preferred shares in  return,  one

could  reasonably reach the conclusion that those listed  in  the

deed  of  trust received preferred shares for their  investments.

Because  the mine had never gone into operation, these  investors

had  not  received any return on the money they provided to  Ross

and thus still could have been viewed as creditors.

          There  is  therefore  evidence to support  Judge  Hunts

conclusion  that  the parties listed in the deed  of  trust  were

investors  who  were  compensated  for  their  expenditures  with

preferred stock.36  Nerox Power argues that no evidence was  ever

provided   showing  that  the  beneficiaries   engaged   in   any

inequitable  conduct.  This misses the point.  The issue  is  not

whether those listed as beneficiaries in the deed of trust  acted

inequitably but rather whether those who recorded the  deed  did.

The evidence in the record supports the conclusion that those who

provided money to Nerox Power for the coal mine simply made a bad

investment.  This finding is not clearly erroneous.  It  was  not

inappropriate to conclude that to compensate these investors over

the   rights   of  bona  fide  creditors  would  be  inequitable.

Consequently,  the interests in the mining lease  held  by  those

named in the deed of trust could be equitably subordinated to the

liens by M-B, Tope, and Alaska Law Offices.

          3.   The extent of the lien

          In  her  final judgment, Judge Hunt recognized M-B  and

Tope as having mechanics liens on the entire Jonesville coal mine

site.  Nerox Power argues that mechanics liens only attach to the

specific location at which the hired machinery was used and  that

because  M-B  and  Tope did not identify the  specific  locations

where  their  machinery  was used, their mechanics  liens  cannot

extend  to  the entire lease site.  Nerox Power urges  that  this

interpretation  is required by the language in AS 34.35.055(a).37

However,   the   statute   does  not   require   so   narrow   an

interpretation.

          Although  the  determination  of  who  qualifies  as  a

lienholder is strictly construed, the intent and purpose of  lien

laws are to be liberally construed.38  In the present situation, M-

B  and Tope supplied equipment for use on the mining site.  Nerox

Power admits that the equipment was used on the mining site.  The

granting  of  a lien contemplates not just the physical  area  in

          which a contractor worked but also the monetary costs the

contractor  incurred.39  M-B and Tope were contracted to  provide

equipment for the purpose of developing the entire mine site, not

just a portion of it.  As such, their liens should extend to  the

entire mine site.40  The fact that construction was so incomplete

as  to  make it difficult or perhaps impossible to determine  the

precise  location or locations at which their equipment was  used

does not deprive M-B and Tope of recovery.

     B.   Judge Hunt Did Not Err in Ruling that Nicholas Ross Was
          Personally  Liable  for the Debts of  Nerox  Power  and
          Nerox Energy.
          
          Judge  Hunt  found  that  Nerox  Energy  was  the  mere

instrumentality  of Nicholas Ross.  As part  of  a  sanction  for

failure  to comply with a discovery order, Judge Hunt held  Nerox

Energy  to  be liable for the debts of Nerox Power.41  At  trial,

Judge Hunt also found Nerox Power to be a mere instrumentality of

Nicholas  Ross.  The finding that Nerox Power, both directly  and

via its identity with Nerox Energy, is a mere instrumentality  of

Ross  allows  M-B,  Tope, and Alaska Law Offices  to  pierce  the

corporate veil and hold Ross personally liable for the  debts  of

Nerox Power and Nerox Energy.42

          Alaska law establishes six factors for determining if a

corporation is a mere instrumentality of one of its shareholders:

(1)  whether the shareholder owns all or most of the  stock;  (2)

whether the shareholder subscribed to all of the capital stock or

caused  the incorporation; (3) whether the corporation is grossly

undercapitalized; (4) whether the shareholder uses  the  property

of  the  corporation for his or her own benefit; (5) whether  the

directors   of   the   corporation  act  independently   of   the

shareholder; and (6) whether the formal legal requirements of the

corporation  are  observed.43  It is not necessary  for  all  six

factors  to  be satisfied before instrumentality can be  found.44

However, at least some evidence of five of the six factors can be

found  in  the present case.  This evidence supports Judge  Hunts

conclusion  that  both  Nerox Energy and Nerox  Power  were  mere

          instrumentalities for Nicholas Ross and that Ross was thus liable

for  their  debts  to M-B, Tope, and Alaska Law  Offices.   Judge

Hunts  factual findings are not clearly erroneous;  we  therefore

affirm those findings.45

          1.   Ownership of stock

          Ross  admitted that he owned a controlling interest  in

Nerox  Energy.  Through Ross Production Company, Inc., for  which

Ross  was the sole shareholder, Ross never owned less than twenty

percent  of  Nerox  Energy.  Nicholas  Ross  admitted  that  Ross

Production  Company  had  no  business  and  was  just  a   shell

corporation.  Ross Production Company owned eighty-one percent of

the  shares of Nerox Power.46  As part of the conversion of Nerox

Energy   into  a  shell  corporation  for  purchase  by   outside

investors, Ross Production Company assumed all of the  debts  and

liabilities  of Nerox Power.  This evidence supports the  finding

that  Nicholas Ross was the dominant and controlling  shareholder

of Nerox Energy Corporation from 1992 through the end of 1998 and

exercised exclusive control over Nerox Power Systems, Inc.   This

finding is not clearly erroneous.

          2.   Cause of incorporation

          Ross  did  not  initially  incorporate  either  of  the

companies  that became Nerox Energy or Nerox Power.  However,  at

the  time  Ross  took  control of the two companies  under  their

former  names  of Gemini Energy Corporation and Gemini  Operating

Company,  both  were  essentially dormant.  Ross  thus  played  a

crucial  role  in  reactivating the two  companies.   Judge  Hunt

concluded  that this activation of Nerox Power was  substantively

no  different  than  originally  incorporating  the  corporation.

Judge  Hunt  reached a similar conclusion with  regard  to  Nerox

Energy,  which would have gone out of existence but for the  1992

infusion  of  capital  by  Mr.  Ross.   When  a  corporation  was

previously  dormant and thus for practical purposes non-existent,

the  difference  between activation of the  corporation  and  its

initial  incorporation  is,  for the  purposes  of  this  factor,

          minimal.  We therefore affirm the superior courts finding.

          3.   Undercapitalization

          The  determination of whether the capitalization  of  a

corporation is sufficient is based on whether the corporation has

sufficient  capital to satisfy its likely business obligations.47

This   matter   is  assessed  in  relation  to  the  corporations

operations.48  Judge Hunt found that the initial capitalization of

Nerox  Energy  was grossly inadequate and that  Nerox  Power  was

grossly undercapitalized during all relevant times.  Nerox Powers

only  asset  was the rights to the Jonesville mine,  which  never

went  into  production.  All of the funding for the  expenses  of

Nerox Power came from Ross.

          The  finances of Nerox Power were never entirely clear,

even  to  those ostensibly in charge.  The initial  president  of

Nerox  Power  testified  that he could  not  assess  whether  the

company  was  undercapitalized because he never knew  what  funds

were  in  its  accounts.  He further testified that  it  was  his

understanding that Nerox Power had none of its own  funding,  but

depended  entirely  on  money from Nerox Energy.   Nerox  Energy,

which was dependent in large part on a bankrupt Stewart Petroleum

for  its  source  of income, did not fare much better.   To  what

extent  these circumstances were business transactions gone  sour

and  to what extent they were initial undercapitalization is hard

to  determine definitively.  However, there is enough evidence to

conclude that Judge Hunts finding of undercapitalization  is  not

clearly erroneous.

          4.   Shareholder use of corporate assets

          Judge  Hunt found that Nicholas Ross used the corporate

assets  of Nerox Power and Nerox Energy for his personal  benefit

by:  naming his family trusts as beneficiaries in a deed of trust

encumbering  the  Jonesville coal mine  lease,  which  was  Nerox

Powers  only  asset; using Nerox Powers coal lease as  collateral

for  a  $300,000  loan (increasing to $500,000 when  interest  is

included)  that was used to pay the operating expenses  of  Nerox

          Energy; and improving his own financial situation as the

principal shareholder in Nerox Energy, and by extension in  Nerox

Power,  through  converting the debt of those two companies  into

shares   in   what  he  knew  to  be  an  essentially   insolvent

corporation.   These actions alone do not clearly  indicate  that

Nerox  Power  was  an instrumentality of Ross.  Because  not  all

factors  in  the Uchitel test need to be satisfied  to  institute

equitable subordination, we decline to determine whether  or  not

the  actions of Ross constitute the use of corporate  assets  for

ones own personal gain.

          5.   Independence of directors

          Judge  Hunt found that the various directors  of  Nerox

Power took their directions from Ross himself.49  This finding is

supported  by  trial  testimony.   Ross  personally  loaned  $1.8

million for continuing the operations of Nerox Power, giving  him

substantial  control over the operations of  the  company.   Ross

himself  admitted that Nerox Power could not make any investments

without  some  sort of loan from him.  This is confirmed  by  the

testimony  of  the  two  directors of  Nerox  Power.   The  first

director of Nerox Power testified that he had limited involvement

in  the  financial dealings of Nerox Power and did not even  have

the authority to sign checks for the company.  When asked who  he

considered himself an employee of  Nerox Power, Nerox Energy,  or

Nick  Ross   the director answered Nick Ross.  Artus, the  second

director  of Nerox Power,  testified that as director he recorded

the  deeds  of trust at Rosss direction.  Artus further testified

that  it was Rosss responsibility to ensure that there was enough

money  to  pay  the bills for Nerox Power.  Given  the  financial

control that Ross exercised over Nerox Power, this finding is not

clearly erroneous.

          6.   Corporate formalities

          Judge  Hunts conclusions about the inadequate financial

records kept by Nerox Power and Nerox Energy are supported by the

record, or lack thereof.  There was no documentation of the loans

          to  acquire  the Jonesville lease. There was incomplete

documentation  of  loans from Nerox Energy to Nerox  Power.   The

financial reports are exceedingly vague as to who received shares

of stock and in compensation for what.50 Nerox Power points in its

defense  to  the  fact  that its corporate meeting  minutes  were

transcribed.   While  these minutes are  helpful  in  building  a

chronology  of events, they do little to clarify the  sources  of

financing  for Nerox Energy or Nerox Power.  The lack  of  record

keeping  by Nerox Power calls into question its existence  as  an

independent entity and justifies the finding by Judge  Hunt  that

Nerox Power was an instrumentality of Nicholas Ross.

IV.  CONCLUSION

          Judge  Hunt  did not err in her factual  findings  that

Nerox  Power committed fraud in recording its deed of  trust  and

that  Nerox  Power was a mere instrumentality of Ross.   Nor  did

Judge  Hunt  err  in  applying the law to  these  findings.   The

decision  of  the  superior court is therefore  AFFIRMED  in  all

respects.

_______________________________
     1    An earlier financial statement also lists $3.87 million
of  expected  stock value but claims that the promised  value  of
each share was only one dollar, implying that 3.87 million shares
were  issued.  The number of shares issued is less important than
the amount of debt incurred by Nerox as a result.

     2     The exact number of investors is disputed and will  be
addressed in the later discussion of the April 21, 1997  deed  of
trust.

     3     References  to Alaska Law Offices also  implicate  any
debts owed to or arguments made by Steven Jones, as Jones was  an
attorney for Alaska Law Offices and the services rendered  appear
to  be  the same.  The two were treated as essentially  the  same
entity by Judge Hunt.

     4     Gillum  v. L & J Enterprises, Inc., 29 P.3d  266,  268
(Alaska 2001).

     5    City of Hydaburg v. Hydaburg Coop. Assn, 858 P.2d 1131,
1135  (Alaska 1993) (quoting Parker v. Northern Mixing  Co.,  756
P.2d 881, 891 n.23 (Alaska 1988)).

     6     Matanuska Elec. Assn, Inc. v. Rewire the Bd., 36  P.3d
685,  700-01  (Alaska 2001) (noting that the  use  of  a  clearly
erroneous  standard  of review for factual findings  in  contempt
proceedings  is  consistent with the deferential review  used  by
courts  in other jurisdictions); Berry v. Berry, 978 P.2d 93,  97
(Alaska  1999)  (referring to the clearly erroneous  standard  of
review  as  deferential); In re J.A., 962 P.2d 173,  175  (Alaska
1998)   (also  describing  the  clearly  erroneous  standard   as
deferential).

     7     Kinnard  v.  Kinnard, 43 P.3d 150, 153  (Alaska  2002)
(With  respect  to  questions of law, we  apply  our  independent
judgment  and adopt the rule that is most persuasive in light  of
precedent, reason, and policy.).

     8     White  v. State ex rel. Block, 597 P.2d 172, 176  n.13
(Alaska  1979)  (quoting 6 Harold Remington, A  Treatise  on  the
Bankruptcy  Law of the United States  2874 (5th ed.  1952));  see
also  Great Western Sav. Bank v. George W. Easley Co.,  778  P.2d
569, 581 (Alaska 1989).

     9     White, 597 P.2d at 175-76.  The United States  Supreme
Court  held  in Pepper v. Litton that bankruptcy courts  are  for
many  purposes  courts  of  equity and thus  can  exercise  their
equitable  powers  to subordinate the debts  of  shareholders  to
those of outside creditors.  308 U.S. 295, 307-08 (1939).

     10    White, 597 P.2d at 176.

     11    Blumenstein v. Phillips Ins. Ctr., Inc., 490 P.2d 1213,
1221 (Alaska 1971).

     12    White, 597 P.2d at 176.

     13     Willners Fuel Distributors, Inc. v. Noreen, 882  P.2d
399, 405 (Alaska 1994).

     14    Id. at 406.

     15     The  same  appellants brief is shared by Artus,  Coal
Factors,  Ross, Nerox Power, Nerox Energy, and various  investors
in Nerox Energy.

     16    In re Mobile Steel Co., 563 F.2d 692, 702-06 (5th Cir.
1977);  rule  summarized by In re Missionary  Baptist  Found.  of
America, Inc., 712 F.2d 206, 212 (5th Cir. 1983);  see also In re
604  Columbus  Ave. Realty Trust, 968 F.2d 1332, 1353  (1st  Cir.
1992);  In re Toy King Distrib., 256 B.R. 1, 198-99 (Bankr.  M.D.
Fla. 2000).

          Once    inequitable   conduct   is   found,   equitable
subordination  can  be employed as long as  there  is  either  an
injury  to the creditor or an unfair advantage conferred  to  the
claimant  and  as long as the remedy does not violate  bankruptcy
law.   Mobile  Steel, 563 F.2d at 700; Fabricators, 926  F.2d  at
1464-65.

     17    AS 34.40.010 states:

          Except   as  provided  in  AS  34.40.110,   a
          conveyance  or  assignment,  in  writing   or
          otherwise, of an estate or interest in  land,
          or in goods, or things in action, or of rents
          or profits issuing from them or a charge upon
          land, goods, or things in action, or upon the
          rents  or  profits from them, made  with  the
          intent to hinder, delay, or defraud creditors
          or  other  persons  of  their  lawful  suits,
          damages, forfeitures, debts, or demands, or a
          bond  or other evidence of debt given, action
          commenced, decree or judgment suffered,  with
          the  like  intent, as against the persons  so
          hindered, delayed, or defrauded is void.
          
     18     First Natl Bank of Fairbanks v. Enzler, 537 P.2d 517,
521-22 (Alaska 1975).

     19    Id. at 522.

     20    Blumenstein v. Phillips Ins. Ctr., Inc. 490 P.2d 1213,
1223 (Alaska 1971).

     21     Willners Fuel Distributors, Inc. v. Noreen, 882  P.2d
399,  405-06 (Alaska 1994).  Artus also had a fiduciary  duty  in
his  role  as  an attorney for Nerox Energy.  As we have  stated,
attorneys face a duty to protect the assets of a company for  its
creditors  if they have control over those assets.  Id.  at  406.
Creditors  can  bring suit against attorneys for  breaching  this
fiduciary  duty.   Id. at 405.  While there may  be  insufficient
evidence  provided to conclude that Artus had  control  over  the
assets  of  Nerox Power (or Nerox Energy) while he was  providing
only  legal  representation, he certainly had this  control  over
assets, at least with regard to Nerox Power, while simultaneously
serving as president of Nerox Power and continuing to offer legal
representation  for  both Nerox Energy and  Nerox  Power.   Artus
represented Nerox Power and Nerox Energy at trial.  He thus had a
fiduciary duty to the creditors of Nerox Power under both  prongs
of Willners Fuel Distributors, Inc. v. Noreen.

     22     Judge  Hunt  considered the  loan  to  be  a  capital
contribution that Artus made to Nerox Power.  Placing a  lien  on
Nerox  Powers  assets  to protect that loan  would  therefore  be
inequitable conduct.  See In re Fabricators, Inc., 926 F.2d 1458,
1467-68  (5th  Cir.  1991)  (holding that  obtaining  a  lien  on
corporate  assets  in  order to secure capital  contributions  is
inequitable  conduct).  Artus cannot place himself  on  the  same
level as other creditors.  To allow someone who has just ascended
to  the  head of a company to relieve personal debts  even  debts
validly incurred  mocks the equitable principle of protecting the
assets  of a corporation for its creditors by giving one creditor
an  unfair  advantage in raiding those assets.  Robson  v.  Smith
does  allow directors who become secured creditors by making good
faith loans to their own corporation to repay their secured  debt
ahead of unsecured creditors, but that is not the case here.  777
P.2d  659, 661-62 (Alaska 1989).  The debts owed to M-B and  Tope
were secured by a mechanics lien and the debts owed to Alaska Law
Offices  by a judgment lien.  This situation was not contemplated
in  Robson.  As Judge Hunt stated: A debtors conveyance to a bona
fide  creditor  is not fraudulent merely because it  prefers  one
creditor  over another.  But, a conveyance made with  the  actual
intent to hinder, delay or defraud is not cured by the mere  fact
that the transferee is a creditor.

     23    Enzler, 537 P.2d at 522.

     24     See In re Fabricators, Inc., 926 F.2d 1458, 1467 (5th
Cir.  1991);  In re Mobile Steel Co., 563 F.2d 692,  702-04  (5th
Cir. 1977).

     25     Alaska law requires that the preference to a creditor
be  a  bona fide preference.  Blumenstein v. Phillips Ins.  Ctr.,
Inc., 490 P.2d 1213, 1222 (Alaska 1971).

     26    Adding up the invoices found in the record, it appears
that  Nerox Power owed $116,848.79 to Coal Factors, although even
this  amount  may  have been reduced by payments  of  $17,794.90,
leaving $99,053.89 in debt.

     27     At oral argument before this court, the attorney  for
Coal  Factors contended that the material for which  the  $80,000
was  later  billed was supplied before April 11, 1997.   However,
this statement is unsubstantiated by the record.

     28     See  Miscovich v. Tryck, 875 P.2d 1293, 1304  (Alaska
1994)  (It is well established that a partys failure to designate
portions   of  the  record  that  are  necessary  to  allow   the
determination  of a point on appeal will amount to  a  waiver  or
abandonment  of  that  point.); see  also  City  of  Whittier  v.
Whittier  Fuel  &  Marine Corp., 577 P.2d 216, 223  n.26  (Alaska
1978)  (maintaining that this court will not  examine  on  appeal
documents that are not part of the record on appeal).

     29    Some of these expenses are for the full month of April
and impossible to break down further.

     30    This generously assumes that all costs stretching over
the entire month of April were accrued before April 11.

     31      Ketchikan  Retail  Liquor  Dealers  Assn  v.  State,
Alcoholic  Beverage  Control Bd., 602 P.2d  434,  438-39  (Alaska
1979)  (holding that the failure of appellee to designate in  the
record  support  for  its  factual claims  justifies  the  courts
adoption of the factual description asserted by appellant).

     32    See Walden v. Dept of Transp., 27 P.3d 297, 303 (Alaska
2001) (It is well-settled that it is an appellants responsibility
to   present  this  court  with  a  record  sufficient  to  allow
meaningful review of his or her claims.).

     33     Ross did not testify at trial; rather, his deposition
was  read into the record. Ross was not asked specifically  about
the financial relationship between Nerox Power and the LKL Trust,
Robert O. Jones, and the Wallace Family Trust.

     34     Nerox  Power implicitly argues in its  brief  that  a
difference  exists  between  Brockman  and  Brotzman  by  listing
Brotzman as among those listed in the deed of trust but not named
by  Ross.   Because  Ross  did not seem  entirely  clear  in  his
recollection, it was not unreasonable to assume that Brockman and
Brotzman are the same entities.

     35    In 1995 Nerox Energy issued 70,709 shares of preferred
stock  to  raise $495,000; it is unclear if any of  these  shares
were  paid to investors in Nerox Power, although both sides  seem
to assume that this was the case.

     36     Further circumstantial evidence supports Judge  Hunts
conclusion.  For one thing, Ross testified that the total  amount
paid  to  acquire the Jonesville coal mine lease was  $1,020,000:
the $800,000 payment to Placer Dome, the $200,000 promissory note
to  Placer  Dome,  and a $20,000 fee to the State.   This  amount
roughly matches the $1,040,000 owed to those listed on the  April
21,  1997  deed  of  trust.  There is  also  the  fact  that  the
investors  seemed  to  have their dealings primarily  with  Nerox
Energy, not Nerox Power.  Ross stated that the investors received
their  preferred stock in Nerox Energy. Indeed, it  appears  that
the  only parties who ever owned stock in Nerox Power were  Nerox
Energy   and   Hobbs  Industries.   Absent  evidence   that   the
beneficiaries  made their loans directly to Nerox  Power,  it  is
just  as  likely  that  their debts are properly  owed  by  Nerox
Energy.

     37    AS 34.35.055(a) provides:

          The  land  upon  which a  building  or  other
          improvement  described  in  AS  34.35.050  is
          constructed, together with a convenient space
          about the building or other improvement or so
          much  as  is required for the convenient  use
          and occupation of it (to be determined by the
          judgment  of  the court at the  time  of  the
          foreclosure  of the lien), and  the  mine  on
          which the work is performed or for which  the
          material is furnished is also subject to  the
          lien  created by AS 34.35.050  34.35.120  if,
          at  the  time  the  work is  started  or  the
          materials   for   the   building   or   other
          improvements  are first furnished,  the  land
          belongs to the person who causes the building
          or   other  improvement  to  be  constructed,
          altered, or repaired.
          
     38    H.A.M.S. Co. v. Elec. Contractors of Alaska, Inc., 563
P.2d 258, 262-63 (Alaska 1977); see also AS 34.35.930 (The intent
of this chapter is remedial and its provisions shall be liberally
construed.).

     39     Cascaden v. Wimbish, 161 F. 241, 245 (9th Cir.  1908)
(It  is the purpose of the lien law to secure priority of payment
of  the price and value of work performed and materials furnished
in  erecting  and  repairing a building  or  other  structure.  )
(quoting  Van Stone v. Stillwell & Bierce Mfg. Co., 142 U.S.  136
(1891)).

     40    See Dannemiller v. AMFAC Distrib. Corp., 566 P.2d 645,
651 (Alaska 1977) (The purposes of extending a statutory lien  to
the  land  is because the value of the land is increased  when  a
materialperson  provides labor or material for a structure  which
is  attached  to the land. The lien should extend  to  the  land,
which  is benefited by the materialperson.); see also Mitford  v.
Prior,  353  F.2d  550, 552-53 (9th Cir. 1965) (holding  that  an
entire subdivision was subject to a lien by a civil engineer  who
worked   on  the  water  and  sewer  system  because  the  entire
subdivision benefitted from the engineers efforts even though the
actual labor site was located outside the subdivision).

     41    Ross did not challenge this order either at trial or on
appeal.   Consequently, any objection to it is waived.   B.B.  v.
D.D, 18 P.3d 1210, 1214 (Alaska 2001) (Matters not made issues or
tried before the lower court will not be considered on appeal.).

     42     Uchitel  Co. v. Telephone Co., 646 P.2d  229,  233-34
(Alaska 1982); Jackson v. General Elec. Co., 514 P.2d 1170,  1173
(Alaska 1973) (The parent corporation may also be liable for  the
wrongful  conduct  of its subsidiary when the subsidiary  is  the
mere instrumentality of the parent.  Liability is imposed in such
instances  simply  because the two corporations  are  so  closely
intertwined  that  they  do  not  merit  treatment  as   separate
entities.); see also Murat v. F/V Shelikof Strait, 793  P.2d  69,
76  (Alaska  1990)  ([T]he primary consideration  in  determining
whether  to  pierce the corporate veil is whether  the  corporate
form has been abused by the person sought to be charged; that is,
whether   the   corporate  entity  was  used  to  defeat   public
convenience,  justify  wrong, commit fraud  or  defend  crime.  )
(citing  and quoting Eagle Air, Inc. v. Corroon & Black/Dawson  &
Co., Inc., 648 P.2d 1000, 1004 (Alaska 1982)).

     43     Uchitel, 646 P.2d at 235 (citing Jackson, 514 P.2d at
1173); see also McCormick v. City of Dillingham, 16 P.3d 735, 744
(Alaska  2001)  (affirming the applicability  of  the  six-factor
Uchitel  test  for piercing the corporate veil and holding  those
individuals in control of the corporation personally  liable  for
the misdeeds of the corporation).  This test is an adaptation  of
the  earlier eleven-part test in Jackson v. General Electric  for
determining  if a subsidiary is a mere instrument of  its  parent
company.    See   Jackson,  514  P.2d  at  1173.   Uchitel   also
establishes an alternate theory of personal liability whereby the
corporate  veil  cannot be pierced simply if one person  controls
the activities of the corporation; rather the corporation must be
used  to defeat public convenience, justify wrong, commit  fraud,
or  defend crime.  Uchitel, 646 P.2d at 234 (citing Jackson,  514
P.2d at 1172-73).

     44     Uchitel states only that these six factors should  be
considered  and  does not even establish the exclusivity  of  the
factors.   646 P.2d at 235.  See also McCormick, 13 P.3d  at  744
(If  other  factors militate in favor of piercing  the  corporate
veil, a court may impose personal liability on the control person
even if he owns no stock.); Murat, 793 P.2d at 76-77 (considering
the  possibility that instrumentality could be found on the basis
of  only two of the six Uchitel factors, but ultimately rejecting
the  finding on the grounds of an inadequate factual basis);  cf.
McKibben  v.  Mohawk Oil Co., Ltd., 667 P.2d 1223,  1230  (Alaska
1983)  (It is not necessary that all eleven of these factors  [in
the  Jackson  test]  be  found in order to pierce  the  corporate
veil.).

     45    Ross urges the application of Nevada law as opposed to
Alaska  law in this case.  Ross did not make this argument  below
and  in fact relied upon Alaska law both in his objections to the
proposed facts and conclusions and at trial.  Arguments not  made
at   trial  will  not  be  considered  on  appeal.   Sengupta  v.
University of Alaska, 21 P.3d 1240, 1255 n.61 (Alaska 2001) (This
court  will not consider arguments on appeal that were not raised
below  unless the new issues either establish plain error  or  do
not  depend on new or controverted facts, are closely related  to
the  appellants arguments at trial, and could have  been  gleaned
from the pleadings.).  Furthermore, while Nevada law does not lay
out  a six-factor test with quite the clarity contained in Alaska
law, it does list as factors in determining whether a company  is
the    alter   ego   of   a   person   co-mingling   of    funds,
undercapitalization, unauthorized diversion of  funds,  treatment
of  corporate  assets  as the individuals  own,  and  failure  to
observe corporate formalities.  Lorenz v. Beltio, Ltd., 963  P.2d
488,  497 (Nevada 1998); Polaris Indus. Corp. v. Kaplan, 747 P.2d
884, 887 (Nevada 1987).  These factors are substantially the same
as   those  listed  in  Uchitel.   Where  there  is  no  material
difference between the competing laws of two states, the conflict
of  laws issue can be ignored.  Williams v. Stone, 109 F.3d  890,
893  (3d Cir. 1997); Angelini v. Delaney, 966 P.2d 223, 227  (Or.
App. 1998).

     46    In June 1999 Ross Production Company sold its shares in
Nerox Power to outside investors.

     47    Fiumetto v. Garrett Enters., Inc., 749 N.E.2d 992, 1005
(Ill. App. 2001).

     48     Stirling-Wanner v. Pocket Novels, Inc., 879 P.2d 210,
213 (Or. App. 1994).

     49    Ross was the director of Nerox Energy.

     50     Indeed, Nerox Power frequently in its brief uses this
confusion  as  a  defense for being unable to  attach  loans  and
investments to compensation.