Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions


Touch N' Go
, the DeskTop In-and-Out Board makes your office run smoother.

  This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com

You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Asher v. Alkan Shelter, LLC (07/31/2009) sp-6392

Asher v. Alkan Shelter, LLC (07/31/2009) sp-6392

     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

MARTHA L. ASHER, )
) Supreme Court No. S- 12464
Appellant, )
) Superior Court No.
v. ) 4FA-04-00304 CI
)
ALKAN SHELTER, LLC., ) O P I N I O N
)
Appellee. ) No. 6392 - July 31, 2009
)
          Appeal  from the Superior Court of the  State
          of    Alaska,   Fourth   Judicial   District,
          Fairbanks, Raymond M. Funk, Judge Pro Tem.

          Appearances:  John C. Pharr, Law  Offices  of
          John  C.  Pharr,  Anchorage,  for  Appellant.
          Zane  D. Wilson, Cook Schuhmann & Groseclose,
          Inc., Fairbanks, for Appellee.

          Before:    Fabe,  Chief  Justice,   Eastaugh,
          Carpeneti,  and Winfree, Justices. [Matthews,
          Justice, not participating.]

          CARPENETI, Justice.
I.   INTRODUCTION
          I.   An employer sued a former employee and his ex-wife for
damages it incurred when the employee embezzled a substantial sum
from  the employer.  The ex-wife now appeals that portion of  the
judgment  rendered against her, arguing that the courts  findings
are  insufficiently  specific  for  appellate  review,  that  the
complaint did not plead fraud with sufficient particularity, that
the court should not have allowed amendment of the complaint, and
that  it  was  error  to  impose  joint  and  several  liability.
Concluding  that the court did not err in any of the first  three
areas,  we affirm the trial courts determination that the ex-wife
is  liable  for fraud.  But because it was error to impose  joint
and  several liability, and because the trial court did not  have
jurisdiction  when it attempted later to amend the  judgment,  we
reverse  the  damages award and remand the matter  to  the  trial
court for reassessment of both compensatory and punitive damages.
II.  FACTS AND PROCEEDINGS
     A.   Facts
          Mitch and Martha Asher married in 1995 and divorced  in
2002  in  Florida.  In February 2003 Mitch moved to Fairbanks  to
work  for  Alkan  Shelter, LLC (Alkan)  as  its  chief  financial
officer.  He worked there until November 2003.  During that  time
he  stole about $104,000 from Alkan.  The court found Martha  was
involved in three fraudulent transactions, described below.
          1.   Health insurance
          Mitch  enrolled  Martha on Alkans health  insurance  by
lying  and saying they were married.  Martha claimed she did  not
know about the fraud, and that she paid Mitch $100 per month  for
the  insurance.  The trial court did not believe her,  and  found
that  she knew Mitch got her insurance by fraud.  The court found
the  health insurance cost Alkan Shelter $3,457, which the  court
found to be part of the money embezzled by Mitchell Asher.
          2.   House purchase
          While  Mitch  was in Fairbanks, Martha bought  a  house
there.   Martha  claimed  Mitch loaned her  some  money  for  the
purchase, and she paid him back.  The trial court did not believe
her.   The  court  found  that Mitch  actually  had  a  financial
interest  in the house, even though it was in Marthas name.   The
trial  court  found that Mitch put about $11,000  embezzled  from
Alkan into the house, and that Mitch and Martha put the house  in
her  name  in  order to keep Alkan from getting its  money  back.
Mitch testified that he expected to get about $30,000 when Martha
sold the house, but that she refused to pay him that money.   The
trial court believed Mitch.
          3.   Fraudulent affidavit
          When  Alkan first sued Mitch and Martha, its  complaint
alleged the house Martha bought was really Mitchs, and should  be
available to pay Alkan back for the money Mitch embezzled.   With
the  complaint, Alkan filed a lis pendens on the house.  Although
it  appears this lis pendens had no legal effect relevant to this
case,1 everyone, including the trial court, assumed that the  lis
pendens  gave Alkan a security interest in the house against  its
claim for damages.
          In order to get Alkan to release the lis pendens, which
she  thought  was  a lien, Martha gave Alkan an  affidavit.   The
affidavit provided:
          1.   I did not have any knowledge, nor did  I
          receive the proceeds of any theft by Mitchell
          Asher from Alkan Shelter LLC.
          2.    I   am the sole and exclusive owner  of
          the  property identified in the  lis  pendens
          filed  by Alkan Shelter LLC (hereinafter  the
          property).
          3.    The funds used to purchase the property
          were  solely  and exclusively  my  money  and
          Mitchell  Asher had no concealed interest  in
          these funds.  I did not purchase the property
          for Mitchell Asher and Mitchell Asher had  no
          legal or equitable interest in the property.
Alkan then released the lis pendens.
          The   trial  court  found  that  Martha  lied  in  this
affidavit  in  order  to defraud Alkan Shelter  by  hiding  money
[Mitch]  stole  from Alkan Shelter, that Alkan  Shelter  at  that
point  in  the litigation reasonably relied on the representation
and  dismissed the lis pendens voluntarily, and suffered the lack
of  those funds being secured and available to settle claims  for
this  litigation.   The  court made this  finding  by  clear  and
convincing  evidence, and wrote:  The court also finds  by  clear
and   convincing  evidence  that  Martha  Asher  was   recklessly
indifferent  to  the rights of Alkan Shelter and the  conduct  by
Martha Asher was outrageous in nature.
     B.   Proceedings
          In  February  2004  Alkan sued  Mitch  and  Martha  for
damages.   The complaint alleged that Mitch embezzled money  from
Alkan. It alleged that the house
          belongs to defendant Mitchell Asher, but  has
          fraudulently  been  placed  in  the  name  of
          Martha  Liliana  Asher  for  the  purpose  of
          avoiding  creditors and making the  defendant
          Mitchell  Asher  judgment  proof  .  .  .   .
          Defendant Mitchell Asher is the true owner of
          the  above-referenced  described  (sic)  real
          estate   and  said  real  estate  should   be
          available  to pay for the thefts by defendant
          Mitchell Asher from Alkan Shelter  .  .  .  .
          Funds embezzled from Alkan Shelter, LLC  were
          used  to purchase, or have been invested  in,
          the above-referenced real estate and as such,
          plaintiffs interest in those funds should  be
          traced into that real estate.
Finally,  the  complaint alleged that Mitch and  Marthas  actions
were  criminal,  outrageous and extreme, such that  an  award  of
punitive damages should be entered against them.
          With   the  complaint,  Alkan  filed  the  lis  pendens
described above.  After Martha gave Alkan the affidavit described
above, Alkan released the lis pendens.
          In  June  2004  Mitch confessed judgment to  Alkan  for
$105,830.
          In  October 2004 Alkan amended its complaint to  allege
that  Martha committed fraud by lying in her affidavit to  induce
Alkan to release the lis pendens on the house.
          Mitch  having  confessed judgment, trial began  against
Martha  in June 2006 before Superior Court Judge Pro Tem  Raymond
M. Funk.  At the time, Mitch was in federal prison, and therefore
testified by deposition.  At her own request, Martha participated
telephonically from Florida.  In his oral findings at the end  of
trial,  Judge  Funk noted: [I] find[] this one of  the  strangest
trials  Ive  ever  done  in eight years  on  the  bench  in  that
everything turned on the credibility of two people that the court
never saw.
          At  trial,  Alkan  presented, and Martha  contested,  a
great  deal  of  evidence about the authenticity  of   Mitch  and
Marthas divorce, and prior instances of fraud and theft by  Mitch
of  which  Martha was aware.  Judge Funk found, in  this  regard,
that Martha previously knew he was a thief in many situations.
          Alkans   complaint  did  not  mention  Marthas   health
insurance,2 and only alleged Mitch embezzled from Alkan.  But one
of  Alkans  witnesses  testified about Marthas  health  insurance
twice, and Martha testified about it once.  After both sides  had
presented their witnesses, Alkan moved to amend its complaint  to
allege that Mitchell and Martha . . . stole health insurance from
Alkan  Shelter  for  her benefit, and she received  that  benefit
either  knowingly or with reckless disregard for it being stolen.
Alkan  moved  to  amend  under Civil  Rule  15(b),  which  allows
amendment  of the complaint to conform to the evidence  presented
at trial.  Martha opposed the motion, but the trial court granted
it.
          The  court made oral findings.  After the trial, Martha
moved for additional, more specific findings under Civil Rule 52.
The  court  then entered written findings of fact and conclusions
of   law.    The  court  entered  judgment  against   Mitch   for
$101,080.37,  making  Martha jointly and  severably  liable  with
Mitch  for $33,457 of that total.  The court also awarded  $5,000
in  punitive damages against Martha.
          Martha appealed that judgment, and also objected in the
superior  court to joint and several liability.  The trial  court
agreed that joint and severable liability was inappropriate,  and
instead allocated fault between Mitch (seventy-five percent)  and
Martha  (twenty-five percent) and calculated Alkans  loss  at  an
even $104,000.  The court then entered an amended final judgment,
making  Martha  individually liable for  $29,872.75  (twenty-five
percent  of  $104,000,  plus pre-judgment interest).   The  trial
court again awarded $5,000 in punitive damages against Martha.
III. STANDARD OF REVIEW
          When  a  trial court hears a case without  a  jury,  we
review  the  trial courts findings of fact for clear  error.3   A
finding  of  fact is clearly erroneous if it leaves us  with  the
definite and firm conviction on the entire record that the  trial
court made a mistake.4  We review the trial courts application of
the law to the facts de novo.5  We review a trial courts decision
to allow amendment of the pleadings for abuse of discretion.6  We
treat  the  trial  courts allocation of comparative  fault  as  a
question  of fact, and therefore review it for clear error.7   We
will  overturn an award of punitive damages entered  by  a  court
sitting   as   the  trier  of  fact  only  if  it  is  manifestly
unreasonable, the result of passion or prejudice, or  entered  in
disregard of rules of law.8  We review issues not raised  in  the
trial court for plain error.9
IV.  DISCUSSION
     A.   Alkan Pled Fraud with Sufficient Particularity.
          Martha  argues Alkan did not plead its cause of  action
for  fraud  with sufficient specificity.  Alaska Civil Rule  9(b)
requires that in all averments of fraud . . . , the circumstances
constituting fraud or mistake shall be stated with particularity.
          This standard is not high.  Civil Rule 9(b) simply requires a
claim  of  fraud  to specify the time and place where  the  fraud
occurred; it seeks to prevent conclusory pleading by requiring  a
complaint to do more than recit[e] without specificity that fraud
existed,   but  it  does  not  prevent  plaintiffs  from   filing
complaints based on available information and belief.10
          Alkans complaint met Civil Rule 9(b)s requirement.   It
alleged how and when Mitch embezzled from Alkan:  In his capacity
as  a  financial officer and controller, defendant Mitchell Asher
embezzled  funds from the plaintiff. The complaint then described
the property Martha bought, and alleged that the property belongs
to  defendant Mitchell Asher, but has fraudulently been placed in
the  name  of  Martha Liliana Asher for the purpose  of  avoiding
creditors  and  making  the  defendant  Mitchell  Asher  judgment
proof . . . .  Funds embezzled from Alkan Shelter, LLC were  used
to  purchase, or have been invested in, the above-referenced real
estate.   Alkans  complaint then alleged that Martha  represented
under  oath  that  Mitchell  Asher  had  no  interest,  legal  or
equitable, in the above referenced real estate . . . when in fact
Mitchell  Asher did have an interest in the above described  real
estate . . . .  Through the use of the above fraudulent testimony
and  documents, Martha Liliana Asher convinced Alkan Shelter  LLC
to  release  its lis pendens on the property.  These  allegations
set forth facts supporting all five elements of fraud.11  They are
sufficient to meet the standard in Civil Rule 9(b).
     B.   The  Trial  Court  Did  Not  Abuse  Its  Discretion  in
          Granting Alkans Motion To Amend Its Complaint.
          Martha   argues  that  the  trial  court   abused   its
discretion by allowing Alkan to amend its complaint under  Alaska
Civil  Rule 15(b) to conform to the evidence about Marthas health
insurance at the end of trial.12  We disagree.
          Amendment  of the pleadings under Civil Rule  15(b)  is
appropriate  (1)  with  the opposing partys  express  or  implied
consent, or (2) in certain circumstances over the opposing partys
objection  that the evidence is not within the issues  raised  by
the  pleadings.13   In this case Martha did  not  object  to  the
evidence when Alkan offered it, and therefore situation (2)  does
not apply.  Martha did not expressly consent to try the matter of
the  health  insurance,  so the question becomes  whether  Martha
impliedly consented to try the matter.
          Alkans  complaint does not allege that Martha embezzled
or  stole anything from Alkan directly, it only alleges  she  hid
funds Mitch embezzled in the house.  But at trial Alkan presented
evidence  about  the  health insurance three  times,  and  Martha
responded on the merits.  First, Alkan called Diane Pederson, the
accountant who untangled Alkans finances after Mitch left,  about
Mitchs  embezzlement.  Alkan asked Ms. Pederson  to  give  us  an
emphasis  on, did Martha Asher receive benefits, funds,  tickets,
anything  .  .  . directly from Alkan Shelter?  In response,  Ms.
Pederson described the health insurance.
          Later,   Alkan  questioned  Martha  about  the   health
insurance  on direct examination.  Rather than objecting,  Martha
responded on the merits, stating that she did not know Mitch  got
the  insurance  by fraud.  She claimed he told her the  insurance
          was group insurance, (i.e.,  came through a group plan) and that
she  paid  him  $100  a  month for it.   She  said  she  was  not
suspicious about the source of the health insurance because  such
group plans are not uncommon in Miami.  She claimed to be on such
a group plan, not through her work, at the time of trial for $134
a  month.   When  Alkans lawyer asked why she  had  not  produced
evidence  of the payments to Mitch, she responded I didnt  submit
anything  because  you  didnt ask me about  it.   Finally,  after
Martha presented her case, Alkan called Ms. Pederson again.   She
testified  briefly  that  Alkan paid $3,457  for  Marthas  health
insurance.  Again, Martha did not object.
          We  have  held  that  when  both  parties  address  the
substantive  merits  of  an  issue at  trial,  the  parties  have
impliedly consented to try it.14  Alkan introduced evidence  that
Mitch   obtained   medical  coverage  for  Martha   through   his
employment.   Although mere failure to object to the introduction
of  evidence potentially relating to a new claim does not  amount
to  implied consent to try that claim,15 in this case Martha  not
only  failed to object to the evidence, she countered it  on  the
merits.16   Martha  argues  that  the  trial  court  abused   its
discretion because the amendment prejudiced her, and that had she
known  about  [the amendment] sooner, she could have defended  by
proving  that  she  paid  Mr.  Asher  $100  a  month  for  health
insurance.   But  prejudice  is  only  one  relevant  factor   in
determining  implied consent,17 and we find other  considerations
outweigh  any  slight prejudice in this case.  Although  we  have
found  that a party did not impliedly consent to try an issue  on
which it presented no evidence,18 Martha presented evidence on the
matter.  Thus, where Alkan directly questioned Martha and  Martha
directly  testified on the matter, and Martha did not  object  to
Alkans witness testifying on it twice, Martha impliedly agreed to
try the matter.
     C.   The Trial Courts Findings Are Sufficiently Specific for
          Review by This Court.
          Martha  argues that the trial courts fact findings  are
insufficient  for  us to review them.  We have held  sufficiently
detailed  findings  are  critical  to  appellate  review.19   The
elements    of   fraud,   as   discussed   below,20    are    (1)
misrepresentation, (2) made fraudulently, (3) for the purpose  of
inducing  another to act in reliance on it; and  (4)  justifiable
reliance  by the recipient, (5) causing loss.21  The trial  court
appears  to  have found these elements met in each of  the  three
incidents  on  which  it based liability: the  health  insurance,
Marthas affidavit, and the house purchase.
          Concerning the health insurance,22 the trial court found
that  (1)  Mitch misrepresented that he and Martha were  married,
and  Martha ratified his misrepresentation by knowingly accepting
the  benefit of it;23 (2) Mitch and Martha knew she was  not  his
wife;  (3) Mitch and Martha made the misrepresentation to  induce
Alkan  to pay for health insurance for her; (4) Alkan justifiably
relied on the misrepresentation; and (5) as a result, Alkan  paid
for her health insurance.  These findings are sufficient to allow
appellate review.
          Concerning Marthas affidavit, the court found that  (1)
          Martha misrepresented that the house belonged solely to her, (2)
knowing Mitch had an interest in it, (3) in order to get Alkan to
release  its  lis  pendens on the house,  (4)  Alkan  justifiably
relied  on  her affidavit, and (5) suffered damages by  releasing
its  lis pendens and losing its claim on the house.  Again, these
findings are sufficient.
          Concerning  the house purchase, we need not  separately
consider the trial courts findings because when Martha gave Alkan
her  fraudulent  affidavit, she became liable for  fraud  to  the
extent  of  Mitchs interest in the house that she concealed  from
Alkan.
          Thus,   the   trial  courts  findings  and  conclusions
adequately  demonstrate  the legal and factual  grounds  for  its
conclusion.
     D.   The  Trial Courts Credibility Findings Are Not  Clearly
          Erroneous.
          Martha  argues  that,  although  normally  this   court
accepts  a trial courts assessment of credibility, this  case  is
different  because Mitch testified by deposition  and  Martha  by
telephone.  Martha argues we should not defer to the trial  court
because  the  trial court did not have its usual  opportunity  to
evaluate  witness credibility.  Martha points out that the  trial
judge  mentioned  how  strange  it  was  to  make  a  credibility
determination about two people he never saw.  Martha also  points
out that even though everyone testified that Mitch is a dishonest
person, the court believed everything he said about Martha.
          Alaska  Civil Rule52(a) instructs appellate  courts  to
give  due  regard . . . to the opportunity of the trial court  to
judge the credibility of the witnesses.  Civil Rule 99 authorizes
courts   to   allow  a  party  to  participate   in   proceedings
telephonically.   As  Martha  herself  requested  to  participate
telephonically, we decline to credit the argument she  now  makes
that  we  should reject the trial courts findings on that  basis.
In  any  event,  a  trial court is in a much better  position  to
evaluate a partys credibility when the party testifies live  over
the  telephone, than we are able to evaluate it from a transcript
later.   We  find no clear error in the trial courts  credibility
determination on this basis.24
          As   for  Mitchs  deposition  testimony,  although   we
generally   use  a  broader  standard  of  review  for  testimony
presented  to the trial court as a transcript,25 we conclude  the
trial  court  did  not  err  in  finding  him  credible.   Mitchs
testimony  addressed  only  one issue relevant  to  this  appeal.
Mitch  did not testify regarding the health insurance.  His  only
testimony  relevant to Marthas liability concerned his  ownership
interest  in the house.26  He testified that he, not Martha,  was
the  true  owner  of the house, and that they put  the  house  in
Marthas  name to protect it from his creditors, particularly  the
IRS.   Other  evidence  presented  at  trial  corroborated   this
testimony that he had an ownership interest in the house.27
          Martha  also  argues  that the  trial  court  erred  in
believing Mitchs testimony that he expected to get about  $30,000
at  the  sale of the house, but that Martha refused to  pay  that
money  to  him.   Martha claims that Mitchs  explanation  of  the
          $30,000 figure does not make any sense, but we disagree.  Mitch
testified:
          The  30,000,  if youd like to know  how  that
          number  was computed, was roughly the $11,000
          down  payment  .  .  .  roughly  the  $18,000
          capital  gain  between the $151,000  purchase
          price, and the $169,000 sales price . .  .  .
          That would have brought the total to $29,000,
          plus  I  had  been  paying her  approximately
          $1,500 a month in mortgage payments that  had
          reduced   my   loan   balance   to   her   to
          approximately 135,000.  So there was a $5,000
          gain on the loan that she had put up the cash
          for.  So if you take the $11,000, plus the 18
          is  29,  plus 5 is 34,000.  There  were  some
          disbursements made at closing to a  lady  who
          helped   sell  the  house,  and  some   other
          expenses that would have brought the net  due
          to me down to approximately $30,000.
          Martha  argues that Mitchs computation of  the  $30,000
figure is not possible. When the house was bought, how could they
have  know  its  sale would net $18,000?  But  we  disagree  with
Marthas  interpretation of this testimony: that Mitch and  Martha
agreed when buying the house that Mitch would get $30,000 at  the
sale.   The  trial  court could have reasonably interpreted  this
testimony  to  reflect calculations made after the sale;  indeed,
that  is  the  more likely interpretation. We conclude  that  the
trial   court  committed  no  error  in  accepting   Mitchs   own
description of his ownership interest in the house.
     E.   The   Trial  Courts  Fraud  Findings  Are  Not  Clearly
          Erroneous.
          On  appeal, Martha argues that the trial court erred in
finding her liable for fraud because its fact findings failed  to
satisfy all of the elements for fraud.  We consider her arguments
as  they  relate to two incidents  the health insurance, and  the
fraudulent   affidavit   and  find  it  unnecessary  to   analyze
separately the third  the house purchase.
          The  elements of fraudulent misrepresentation28 are (1)
misrepresentation  of fact or intention, (2)  made  fraudulently,
(3)  for  the purpose or with the expectation of inducing another
to   act  in  reliance;  and  (4)  justifiable  reliance  by  the
recipient, (5) causing loss.29  A representation is fraudulent if
the maker knows it is untrue.30  A statement can be literally true
and  still  be a fraudulent misrepresentation if the maker  knows
the statement is materially misleading.31
          1.   The health insurance
          Marthas  broad  challenges do not specifically  address
her  health insurance, and we see no reason to disagree with  the
trial  court  on this matter.  The trial court found that  Martha
knew  Mitch lied on his insurance forms to get Alkan to  pay  for
her    insurance.     Although    Martha    herself    made    no
misrepresentation, we agree with the trial court that Martha  may
be  liable for this misrepresentation by knowingly accepting  the
benefits of Mitchs misrepresentations.32  Thus, Mitch fraudulently
          misrepresented that he and Martha were married in order to get
Alkan  to  pay  for health insurance for Martha, Martha  ratified
that misrepresentation by knowingly accepting the benefits of it,
Alkan  justifiably relied on that misrepresentation, and suffered
damages of  $3,457.


          2.   The fraudulent affidavit
          The   circumstances   surrounding  Marthas   fraudulent
affidavit  met  all the elements of fraud:  Martha misrepresented
that  Mitch had no interest in the house; she did so knowing  her
affidavit was untrue; she executed the affidavit with the  intent
of  inducing Alkan to release its lis pendens on the  house;  and
Alkan  justifiably relied on the affidavit;33  released  its  lis
pendens;  and suffered damages by losing its claim on the  house.
The  final element of damages here is somewhat troubling, because
Alkans lis pendens had no legal effect.34  However, as Martha did
not  argue  below  that  the lis pendens  had  no  legal  effect,
reversal on those grounds is not available to her.35  Ultimately,
since both parties and the trial judge treated the lis pendens as
though it legitimately created a lien on the house, it apparently
had substantial practical effect, even if no legal effect.
          When  Martha  gave  Alkan this  affidavit,  she  became
liable  for fraud to the extent of Mitchs interest in  the  house
that  she  concealed  from Alkan.  This  is  true  regardless  of
whether  or not she committed fraud when she originally purchased
the house in her name.  Even if she did not know Alkan claimed to
be  Mitchs  creditor  at the time she purchased  the  house,  she
certainly knew after Alkan sued her.  Thus, we need  not consider
whether  or  not  Martha committed fraud when she  purchased  the
house.  Because Martha is liable for fraud for her affidavit,  it
is unnecessary to consider whether she is additionally liable for
her earlier actions in concealing Mitchs interest in the house.36
          F.     It   Was  Error  To  Impose  Joint  and  Several
          Liability.
          The   trial  court  first  imposed  joint  and  several
liability,  and then changed its damages theory to allocation  of
fault  when  it  no  longer  had  jurisdiction  over  this  case.
Although  the  trial  court was correct that it  should  allocate
fault  rather  than impose joint and several liability,  it  also
committed clear error in its allocation of fault.
          At  first  the trial court found Mitch liable  for  the
approximately  $104,000  he stole from  Alkan,  and  made  Martha
jointly  and  severably liable for $33,457 of that amount.   That
number represented the $30,000 that Mitch expected to get out  of
the  sale  of  the  house  and  the  $3,457  for  Marthas  health
insurance.   Martha appealed, but also subsequently  objected  to
joint  and several liability in the superior court.  The superior
court  then  changed its damages theory, and instead made  Martha
twenty-five  percent  liable for the full  $104,000  Mitch  stole
($29,872.75).
          When Martha filed her notice of appeal, the trial court
lost  jurisdiction  over the matter.  Alaska Appellate  Rule  203
gives supervision and control of the proceedings to the appellate
          court from the filing of the notice of appeal.  Absent an express
remand  order, the superior court cannot then modify any  matters
directly  or  necessarily involved in the  matter  under  review,
although  the superior court retains jurisdiction over collateral
matters.37  We proceed to analyze the superior courts alternative
damages  award,  however, to provide guidance  to  the  court  on
remand.
          As  the  trial  court ultimately concluded,  Alaska  no
longer  uses joint and several liability in tort cases like  this
one.38   Thus, the first damages award was erroneous.  The  trial
court correctly concluded that it should allocate damages between
those  at  fault.  However, the trial court overlooked two  legal
requirements in allocating damages.  First, it failed to consider
the  factors required by statute when calculating the  percentage
of   damages  allocated  to  Martha.   Second,  it  found  Martha
partially  liable  for  the full amount  Mitch  stole,  when  its
findings  support  liability for Martha only  as  to  her  health
insurance and her fraudulent affidavit.
          Alaska  Statute  09.17.080 requires a court  allocating
damages to consider both the nature of the conduct of each person
at  fault,  and  the  extent of the causal relation  between  the
conduct and the damages claimed.  There is no indication  in  the
record  that the trial court considered these factors.  In  fact,
there is no indication at all how the trial court arrived at  the
twenty-five  percent  figure.  On remand  the  trial  court  must
consider those factors.
          Next, the trial court allocated fault to Martha for the
full  amount that Mitch stole, although Alkan never alleged,  and
the  court  never  found,  that Martha  was  involved  in  Mitchs
embezzlement  other than the insurance and the funds  that  Mitch
hid  in  the house.39  A trial court can allocate fault  only  in
actions involving the fault of more than one person.40  The  only
matters  the  trial court found that involved the fault  of  both
Mitch  and Martha were the insurance and the hidden house  funds.
As  to  these matters, the court must allocate fault in assessing
damages.   Thus, the trial court should have allocated  fault  to
Martha  only  on the damages related to the health insurance  and
the house, not the entire amount Mitch stole.
          Martha  argues, for the first time on appeal, that  the
trial  court  should also have allocated fault to Alkan  when  it
allocated  fault  between Mitch and Martha.  We review  arguments
not made in the trial court for plain error.41  Plain error exists
where  an  obvious  mistake has been made which  creates  a  high
likelihood  that injustice has resulted.42  To determine  whether
there  was  plain  error,  we  start with  consideration  of  the
governing statute, AS 09.17.080:
          In  all actions involving fault of more  than
          one  person . . . the court, unless otherwise
          agreed  by  all parties, shall  instruct  the
          jury to answer special interrogatories or, if
          there   is   no  jury,  shall  make  findings
          indicating  . . . (2) the percentage  of  the
          total   fault  that  is  allocated  to   each
          claimant [and] defendant . . . .
           In Domke v. Alyeska Pipeline Service Co., we discussed
allocation  of  fault where, as is the case here,  the  cause  of
action has a justification element.43  In that case, the cause of
action  was  tortious interference with a third partys  contract,
which  requires the interference be unjustified.44   We  reasoned
that   if  the  plaintiff  had  been  at  fault,  the  defendants
interference  in  the contract would have been justified.45   The
definition  of the cause of action does not allow a finding  that
the harm [the defendant] caused was partly justified.46
          Similarly,  a  successful fraudulent  misrepresentation
claim requires the plaintiff show it was justified in relying  on
the  defendants misrepresentations.  If Alkan were  at  fault  in
trusting  Mitch and Martha, then it would not have been justified
in  relying  on their fraudulent misrepresentations.  Thus,  when
the trial court found Martha liable for fraud, it impliedly found
that   Alkan   was   not   at  fault  in   relying   on   Marthas
misrepresentations.  Therefore, we conclude that in this case the
trial court did not plainly err in failing to allocate damages to
the plaintiff as well as the defendants.
     G.   Although  the Trial Court Did Not Clearly  Err  in  Its
          Punitive  Damages Award Against Martha, We  Remand  the
          Punitive   Damages  Award  in  Light  of   Our   Remand
          Concerning Compensatory Damages.
          Martha  argues that the trial court erred  in  imposing
punitive damages against her because it did not make its findings
by  clear and convincing evidence.  We conclude that, because the
evidence  presented at trial in support of punitive  damages  was
clear  and  convincing, the trial court did not  clearly  err  in
awarding punitive damages.47
          We  find  no error because, despite the courts  initial
oral  statement  suggesting that it might have  awarded  punitive
damages on the basis of a preponderance of the evidence, it  made
abundantly  clear  in  its written decision  that  it  based  its
punitive  damages  ruling  on  the correct  standard,  clear  and
convincing  evidence.  And the evidence presented was  clear  and
convincing.   On  the fraudulent affidavit, for example,  Marthas
only defense was that she told the truth, and that Mitch did  not
have  an  ownership  interest in the house.  But  Alkan  produced
substantial evidence that Mitch did have an ownership interest in
the  house,  including Mitchs deposition, the  testimony  of  Mr.
Myers  and the realtor who sold the house, and documents  related
to  the  transaction.48  Thus, the trial court had  a  sufficient
basis to make this finding by clear and convincing evidence.49
          Nonetheless,  we  must  remand the  award  of  punitive
damages  for  two  reasons.   First,  as  discussed  above,   the
compensatory damages issue will have to be revisited by the trial
court  on  remand.50   The proportionality  between  compensatory
damages  and  punitive  damages is one factor  to  consider  when
awarding punitive damages,51 and therefore the trial court should
have the opportunity to adjust the punitive damages award to  fit
any new compensatory damages award, should it choose to do so.52
          Second,  the trial court did not explain how it arrived
at  the  $5,000 amount.  Alaska Statute 09.17.020(c) instructs  a
court  to  hold a separate proceeding to determine the amount  of
          punitive damages it will award.53  At such a proceeding, the
statute instructs that
          the   fact  finder  may  consider   (1)   the
          likelihood  at the time of the  conduct  that
          serious  harm would arise from the defendants
          conduct;  (2)  the degree of the  defendant's
          awareness of the likelihood described in  (1)
          of   this  subsection;  (3)  the  amount   of
          financial   gain  the  defendant  gained   or
          expected   to  gain  as  a  result   of   the
          defendant's conduct; (4) the duration of  the
          conduct  and  any intentional concealment  of
          the conduct; (5) the attitude and conduct  of
          the  defendant upon discovery of the conduct;
          (6) the financial condition of the defendant;
          and (7) the total deterrence of other damages
          and punishment imposed on the defendant as  a
          result of the conduct, including compensatory
          and  punitive  damages awards to  persons  in
          situations similar to those of the  plaintiff
          and the severity of the criminal penalties to
          which  the  defendant  has  been  or  may  be
          subjected.
On  remand, the trial court must consider any applicable  factors
listed  in AS 09.17.020(c)  in reaching its decision on  punitive
damages.

V.   CONCLUSION
          In conclusion, we uphold Marthas liability, but REVERSE
the  damages awarded against her and REMAND for recalculation  of
those damages in accordance with this opinion.
_______________________________
     1    See infra Part IV.E.2.

     2    See supra Part II.A.1.

     3    Cousineau v. Walker, 613 P.2d 608, 612 (Alaska 1980).

     4    Id.

     5    Rausch v. Devine, 80 P.3d 733, 737 (Alaska 2003).

     6     Alderman v. Iditarod Props., 32 P.3d 373, 380  (Alaska
2001).

     7     S.   Alaska  Carpenters Health & Sec.  Trust  Fund  v.
Jones, 177 P.3d 844, 858 (Alaska 2008).

     8     Mapco Express, Inc. v. Faulk, 24 P.3d 531, 536 (Alaska
2001)  (quoting Pluid v. B.K., 948 P.2d 981 (Alaska 1997)).   See
also Alaska Statebank v. Fairco, 674 P.2d 288, 296 (Alaska 1983).

     9     Owen M. v. State, Office of Childrens Servs., 120 P.3d
201, 203 (Alaska 2005).

     10     Williams  v.  Engen, 80 P.3d 745, 750  (Alaska  2003)
(alteration in original) (citations omitted) (quoting Law Offices
of  Vincent  Vitale  v. Tabbytite, 942 P.2d  1141,  1147  (Alaska
1997)).  As  an example of a conclusory pleading, see D.J.  Moore
Corp.  v.  Cook Inlet Region, Inc., 1992 WL 12549796, *1  (Alaska
May  6,  1992) (holding fraud insufficiently pled where complaint
alleged only that defendant worked a fraud upon plaintiff).

     11    See infra text accompanying notes 21.

     12     In  her  reply brief, Martha extensively quotes  from
Huestess  v.  Kelly-Heustess, in which we  held  that  the  court
violated a husbands due process rights by awarding the wife child
support  for the years before they were married when it  came  up
for the first time on rebuttal, and the husband lacked notice and
an  opportunity  to  be heard on this issue. 158  P.3d  827,  835
(Alaska  2007).   Ironically, Martha brings up this  due  process
argument for the first time in her reply brief, and we decline to
address it. Huestess does not discuss Alaska Civil Rule 15.

     13     Alaska R. Civ. P. 15(b).

     14    Oaksmith v. Brusich, 774 P.2d 191, 199 (Alaska 1989).

     15     Belluomini  v. Fred Meyer of Alaska, Inc.,  993  P.2d
1009, 1015-16 (Alaska 1999).

     16     See Tufco v. Pacific Envtl. Corp., 113 P.3d 668,  673
(Alaska 2005) (finding no abuse of discretion in denial of motion
to  amend  pleadings  under Rule 15(b) where the  opposing  party
objected to the introduction of evidence relevant to the proposed
amendment,  and  the  parties did not  litigate  the  substantive
issues of the proposed amendment).

     17     Alderman v. Iditarod Props., 32 P.3d 373, 396 (Alaska
2001).

     18    Id.

     19     See Hanlon v. Hanlon, 871 P.2d 229, 233 (Alaska 1994)
(To  permit  meaningful appellate review, the  trial  court  must
provide sufficiently detailed and explicit findings to give  this
court  a  clear  understanding of the basis of the  trial  courts
decision,  and to enable it to determine the ground on which  the
trial  court  reached  its  decision.)  (internal  citations  and
quotation marks omitted).

     20    See infra Part IV.E.

     21    Lightle v. State, Real Estate Commn, 146 P.3d 980, 983
(Alaska 2006).

     22    Even though Alkans amendment appeared to state a claim
for  embezzlement of the insurance, the trial court found  Martha
liable on a fraud theory.

     23    See infra Part IV.E.1.

     24     Martha also objects to the trial courts finding  that
Martha  Asher portrayed herself as an innocent dupe, an immigrant
who  miraculously went from waitress to wealthy  successful  real
estate  broker  but  who was unaware of what Mitchell  Asher  was
doing.  The court found her testimony incredible.  We agree  with
Martha that her status as an immigrant, should not reflect on her
credibility,  but  the trial courts mention of Marthas  immigrant
status related only to Marthas own attempted characterization  of
herself as ignorant.  Martha mentioned her status as an immigrant
once  at  the  trial, as did Alkan, completely in  passing.   But
throughout  the  trial,  Martha claimed  ignorance  of  straight-
forward matters when it would help her case, while at other times
appearing  savvy and well-informed.  There is no clear  error  in
the   trial   courts   finding  Marthas   claims   of   ignorance
disingenuous.

     25    See State v. Phillips, 470 P.2d 266, 268 (Alaska 1970)
([W]here  the  trial  judges findings are  based  on  nondemeanor
sources,  such as documentary evidence, deposition testimony,  or
transcribed testimony, our scope of review is broader than  under
the clearly erroneous standard.).

     26    As discussed below, we conclude that the relevant fact
in  this  appeal is whether Mitch had an interest in  the  house.
See  infra  Part IV.E.2.  If so, Martha became liable  for  fraud
when  she gave Alkan the fraudulent affidavit, and her intent  in
purchasing the house is irrelevant.  For this reason we  also  do
not  reach Marthas argument that the trial court erred in finding
a  conspiracy between Mitch and Martha at the time of  the  house
purchase.

     27     In  addition  to Mitchs deposition  testimony,  Alkan
presented  other  evidence and testimony at  trial  corroborating
this  statement.   Gerald Myers, Alkans manager,  testified  that
Mitch told him that he (Mitch) had outstanding IRS claims against
him.  Mitch told him that he and Martha divorced in order to hide
assets  from the IRS.  Mr. Myers also testified that  Mitch  told
him that he (Mitch) intended to buy a house.  Mr. Myers testified
that  Mitch asked him to come look at the house and give  him  an
opinion on it.  Mr. Myers recommended an engineer to Mitch to  do
a  full  inspection.  Mr. Myers testified that Martha was not  in
town  at  that time, and that he never met her.  The trial  court
saw exhibits demonstrating that Mitch made earnest money and down
payments  on  the house.  Alkan also called Traci  Schachle,  the
realtor  who  sold the house to Martha.  She testified  that  she
understood that Martha was purchasing it for Mitch because he was
staying  here  with their son.  She testified that she  contacted
both Mitch and Martha throughout the purchase process.  The court
also  saw the engineers report, which was addressed to both Mitch
and Martha Asher.

     28    The trial court referred only to fraud in its findings.
Alaska also recognizes the tort of fraudulent conveyance when one
party  conveys  property to another in  order  to  hide  it  from
creditors.  See Summers v. Hagen, 852 P.2d 1165, 1169-70  (Alaska
1993).   The  elements  for fraudulent  conveyance  are:  (1)  an
unlawful  agreement; (2) specific intent of each  participant  in
the  scheme  to hinder, delay and defraud a creditor of  one  who
participated  in  the  scheme; (3) acts  taken  pursuant  to  the
unlawful  agreement; and (4) damages caused by those  acts.   Id.
The  parties have analyzed this case under the tort of fraudulent
representation; we do so as well.

     29    Lightle v. State, Real Estate Commn, 146 P.3d 980, 983
(Alaska 2006).

     30    Id.

     31     Id.  at  986.   Alkan does not dispute  that  it  was
literally true that the house was in Marthas name alone.

     32     See McClung v. Watt, 211 P. 17, 20 (Cal. 1922) ([T]he
rule  generally is that one who accepts the fruits  of  a  fraud,
with  knowledge of the misrepresentations or concealment by which
the  fraud  was perpetrated, thereby inferentially  ratifies  the
fraud  complained of and will be liable therefor, even though  he
did not personally participate in the fraud . . . .); Bransom  v.
Standard Hardware, Inc., 874 S.W.2d 919, 924-25 (Tex. App.  1994)
(concluding that, although  [a] party . . . may become liable  by
mere  silent  acquiescence and partaking of the benefits  of  the
fraud, evidence insufficient that husband knew wife had embezzled
money to hold husband liable for wifes fraud).

     33    Martha argues in her brief that Alkan was not justified
in  relying  on her affidavit: [Alkan] released its lis  pendens,
through counsel, with its sophisticated eyes wide open.   We  see
no  merit  in  this argument.  Alkan was justified  in  believing
Marthas sworn statement whether or not it had a lawyer.

     34     AS  09.45.940 describes a lis pendens: In  an  action
affecting  the  title  to  or the right  of  possession  of  real
property,  the plaintiff . . . may record . . . a notice  of  the
pendency  of  the action . . . . From the time of  recording  the
notice,  a purchaser, holder of a contract or option to purchase,
or  encumbrancer of the property affected has constructive notice
of the pendency of the action  . . . .  We strictly construe this
statute.  Blake  v.  Gilbert, 702 P.2d  631,  643  (Alaska  1985)
overruled  on other grounds in Bibo v. Jeffreys Rest.,  770  P.2d
290  (Alaska 1989).  A lis pendens is only appropriate  in  cases
disputing title or physical possession of real property.  Id.  We
have  previously  found  lis  pendens  inappropriate  where   the
litigation sought damages for breach of fiduciary duty and breach
of  contract, even though the complaint demanded an accounting of
all  defendants  ill-gotten gains that might  be  traced  to  the
property  on  which the plaintiff filed a lis pendens.   Id.   In
that  case  we  held  that a lien which results  merely  from  an
ultimate  entry of a judgment provides no basis for filing  of  a
lis pendens notice.  Id. We also cited with approval a California
case  holding  a  lis pendens inappropriate where  the  plaintiff
alleged  fraudulent misrepresentation and sought  a  constructive
trust  in  property  in  which defendant allegedly  invested  the
profits  from  the tort.  Id. (citing Brownlee v. Vang,  24  Cal.
Rptr. 158 (Cal. App. 1962)).

     35     See  Great W. Sav. Bank v. George W. Easley Co.,  778
P.2d 569, 579 (Alaska 1989) (It is noteworthy that appellant does
not  contend that equitable estoppel will not support a claim for
affirmative relief.  The general rule is to that effect . .  .  .
Both  parties  appear  to  have  treated  equitable  estoppel  as
equivalent to a misrepresentation theory.  Although this may have
been  error,  it  was not raised in the trial court  and  is  not
raised  on  appeal.   It is thus not grounds  for  reversing  the
judgment in this case.) (internal citations omitted).

     36    Although Martha argues the trial court clearly erred in
believing Mitchs claim that he expected to realize $30,000 out of
the  sale  of the house, she does not argue that Alkan should  be
limited to recovering the $11,000 of Alkans money Mitch put  into
the house.  Therefore we do not consider whether $11,000 would be
a  more appropriate measure of Alkans damages from releasing  the
lis pendens than the $30,000.

     37     Heppinstall v. Darnall Kemna & Co., 851 P.2d  78,  79
(Alaska  1993) (quoting 4 Am. Jur. 2d. Appeal and Error  355,  at
834 (1962)).

     38     See  AS 09.17.080; Robinson v. Alaska Props., 878  F.
Supp.  1318,  1322  (D. Alaska 1995) (Under current  Alaska  law,
joint  and  several liability is abolished and the plaintiff  may
recover from each potential tortfeasor who is joined as a  party,
only  in  the  proportion  that his  fault  bears  to  her  total
damages.).

     39    In its oral findings, the court said: The court did not
find  by a preponderance that there was a larger scheme, although
there  mightve  been.   And  beyond the  house  and  the  medical
insurance, it appears that Martha Asher may have benefitted  from
money  stolen  from  Alkan Shelter and spent  on  her  while  she
traveled  to Alaska; however, the court has insufficient evidence
to clearly determine an amount for that.

     40     AS 09.17.080.

     41    Owen M. v. State, Office of Childrens Servs., 120 P.3d
201, 203 (Alaska 2005).

     42    Id. (quoting D.J. v. P.C., 36 P.3d 663, 667-68 (Alaska
2001)).

     43    137 P.3d 295, 305-07 (Alaska 2006).

     44    Id. at 306.

     45    Id. at 306-07.

     46    Id. at 306.

     47    Martha correctly points out that in its oral ruling the
trial  court  made  somewhat contradictory statements  about  the
standard  of  proof.  The court initially stated:  [B]ased  on  a
preponderance  of  the evidence standard,  the  court  makes  the
following  findings.  But when it issued its written ruling,  the
court  clarified  that it was using the proper  standard  for  an
award  of  punitive damages: The court having orally  ruled  that
there  was more than preponderance and less than proof  beyond  a
reasonable doubt clarifies its oral ruling and makes this finding
by clear and convincing evidence.

          Martha  also argues that Alkan did not present a  claim
for  punitive  damages  to  the trial  court,  but  we  disagree.
Although  Alkan only said the words punitive damages once  during
the  trial,  it requested punitive damages in its complaint,  and
presented evidence relevant to punitive damages, such as  Marthas
motives, at trial.

     48    See supra note 27.

     49    Martha does not argue the courts findings do not amount
to  outrageous or recklessly indifferent conduct,  which  is  the
standard  to  be  proven  by clear and convincing  evidence.   AS
09.17.020(b).  Therefore we do not consider whether  the  conduct
found by clear and convincing evidence meets that standard.

     50    See supra Part IV.F.

     51     See Ben Lomond, Inc. v. Campbell, 691 P.2d 1042, 1048
(Alaska 1984).

     52    Alkan defended the award of punitive damages, in part,
on  the  grounds  that it was modest.  If the trial  court  finds
Martha  twenty-five  percent liable  for  $33,457,  she  will  be
individually  liable  for  $8,364.25, which  makes  the  punitive
damages award appear much less modest, in comparison.

     53    The trial court did not hold such a separate proceeding
in this case, but Martha does not argue this was error.

This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com
Case Law
Statutes, Regs & Rules
Constitutions
Miscellaneous


IT Advice, Support, Data Recovery & Computer Forensics.
(907) 338-8188

Please help us support these and other worthy organizations:
Law Project for Psychiatraic Rights
Soteria-alaska
Choices
AWAIC