| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
|
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
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.
 |
| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
|
