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.

 

You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Brett Crowley; Knik Aircraft Leasing, LLC; and Wingnuts Aviation, LLC., v. Northern Aviation, LLC, and NA Holdings, LLC. (5/10/2019) sp-7361

Brett Crowley; Knik Aircraft Leasing, LLC; and Wingnuts Aviation, LLC., v. Northern Aviation, LLC, and NA Holdings, LLC. (5/10/2019) sp-7361

           Notice:   This opinion is subject to correction before publication in the P                     ACIFIC  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, email  

                                                                                                                            

           corrections@akcourts.us.  



                       THE SUPREME COURT OF THE STATE OF ALASKA                                        



BRETT  CROWLEY;  KNIK                                             )  

AIRCRAFT  LEASING,  LLC;  and                                     )    Supreme Court No. S-16587  

                                                                                                         

WINGNUTS  AVIATION,  LLC,                                         )  

                                                                  )    Superior  Court  No.  3AN-11-10519  CI  

                                 Appellants,                      )  

                                                                                            

                                                                  )    O P I N I O N  

           v.                                                     )  

                                                                                                          

                                                                  )    No. 7361 - May 10, 2019  

                                                       

NORTHERN AVIATION, LLC and                                        )
  

                               

NA HOLDINGS, LLC,                                                 )
  

                                                                  )
  

                                 Appellees.                       )
  

                                                                  )
  



                                                                                                               

                                    

                      Appeal from the Superior Court of the State of Alaska, Third  

                                                                                                  

                      Judicial District, Anchorage, Eric A. Aarseth, Judge.  



                                                                                                      

                      Appearances:             Kevin  T.  Fitzgerald,  Ingaldson  Fitzgerald,  

                                                                                                                 

                      P.C., Anchorage, for Appellants.   Gregory S. Parvin, Law  

                                                                                          

                      Office of Gregory S. Parvin, Wasilla, for Appellees.  



                                                                                                            

                      Before: Stowers, Chief Justice, Winfree, Bolger, and Carney,  

                                                                           

                      Justices.  [Maassen, Justice, not participating.]  



                                          

                      CARNEY, Justice.  



I.         INTRODUCTION  



                                                                                                                               

                      Two   debtor   limited   liability   companies   (LLCs)   executed   security  



                                                                                                                                           

agreements in favor of two creditor LLCs, giving the creditor LLCs security interests in  



                                                                                                                                           

three airplanes. Disputes arose when the creditor LLCs, considering the debtor LLCs in  


----------------------- Page 2-----------------------

default, took possession of two airplanes and removed and retained parts of a third  

                                                                                                                             



airplane. After a bench trial the superior court entered judgment against the debtor LLCs  

                                                                                                                            



and an individual associated with both of them.  The debtor LLCs and the individual  

                                                                                                                     



appeal, raising issues about default, seizure of collateral, and post-seizure notice; the  

                                                                                                                                



individual alsoquestions thejudgment against himpersonally. We affirmin part, reverse  

                                                                                                                          



in part, and remand for further proceedings.  

                                                



II.       FACTS AND PROCEEDINGS     



          A.        Facts  



                                                                           

                     1.        Businesses involved in the dispute  



                                                                                                                    

                    The debtor LLCs in this litigation are Wingnuts Aviation, LLC (Wingnuts)  



                                                                                                                               

and Knik Aircraft Leasing, LLC (Knik), both aviation-related LLCs. Brett Crowley was  



                                                                                                                              

a member of both LLCs. Wingnuts operated a flight school that was, for most of the time  



                                                                                                                       

relevant to this case, based at the Palmer Airport.  Knik was organized to buy airplanes  



                                                                                                                        

that Wingnuts could lease.  Each debtor LLC had one other member:  the other member  



                                                                                                                              

of Wingnuts was Tara Chesnut, and the other member of Knik was Richard Walker, who  



                                                                               

also operated a separate aviation-related business.  



                                                                                                                              

                    The creditor LLCs involved in this litigation are Northern Aviation, LLC  



                                                                                                                               

(Northern) and NAHoldings, LLC; Jeffrey Helmericks is the sole owner ofNorthern and  



                                                                                                                         

NA Holdings.  Northern leased, maintained, and sold aircraft.  NA Holdings offered  



                                                                                                                                

"fuel, tie-down spaces, aircraft maintenance," and "[b]asic aviation support." All of the  



                                                                                                         

businesses involved in the litigation operated at the Palmer Airport.  



                                                   

                    2.         The Cessna loan  



                                                                                                                          

                    On July 1, 2013, Knik signed purchase agreements related to two Cessna  



                                                                                                                       

airplanes, one agreement with Northern and one with N8681U, "a sub-LLC of Northern  



                                                                                                                            

Aviation at the time."  The purchase agreements required Knik to make a 20% down  



                                                                                                                             

payment on each aircraft, with the purchase to be completed in ten days.  Because Knik  



                                                                -2-                                                         7361
  


----------------------- Page 3-----------------------

                                                                                                                              

was not able to obtain outside financing, Northern agreed to lend $72,000 to Knik, and  



                                                                                                                                     

on July 10, Knik signed loan and security agreements for financing the Cessna airplanes.  



                                                                                                                       

Helmericks obtained both contracts from an internet site.  The loan agreement included  



                                                                                                         

a  guaranty  provision  under  which  Crowley  and  Walker  both  "unconditionally  



                                                      

guarantee[d]" Knik's obligations.  



                                                                                                                              

                    The loan agreement set out a payment schedule over 15 years, recited that  



                                                                                                                         

the loan was secured by the Cessnas, and listed events that would be considered default  



                                                                                                                              

by Knik, including "a default in any security agreement which secures this [n]ote."  The  



                                                                                                                      

security agreement identified the two Cessna airplanes as collateral and gave Northern  



                                                                                                                             

a security interest in them.  It required Knik to "maintain insurance at all times with  



                                                                                                                            

respect to all collateral against risks of fire, theft, and other such risks and in such  



                                                                                                                       

amounts as [Northern] may require" and to "make all repairs . . . necessary to maintain  



                                                                                                                               

any [c]ollateral in good working order and condition."  The default provision of the  



                                                                                                            

security agreement specified that Knik would be in default "upon any non compliance  



                                                                                                                     

with or non performance of [its] obligations" under the security agreement.  



                                                                                                                     

                    Knik made the down payment in mid-July.  Knik's subsequent payments  



                                                                                                                               

frequently varied from the loan agreement schedule in both amount and timing, but  



                                                                                                                            

Northern continued to accept them. Knik's sole source of income was Wingnuts's lease  



                                                                                                                  

payments.  It is undisputed that Knik never had insurance for the Cessnas.  Helmericks  



                                                                                                                      

was aware of the lack of coverage as early as late 2013.   Helmericks and Crowley  



                                                                                                                        

discussed alternatives to commercial insurance because of its cost but disputed whether  



                                                               

they had agreed to a specific alternative.  



                                                                                                                       

                    In November 2014 Crowley informed Helmericks that Wingnuts intended  



                                                                                                                                     

to  move  its  operations  to  Wolf  Lake,  a  location  about  seven  miles  from  Palmer.  



                                                                                                                              

Helmericks said Wingnuts could not take the Cessnas there; Crowley disagreed, and  



                                                                                                                                 

Helmericks told Crowley that Knik was in default and had been from the first month of  



                                                               -3-                                                         7361
  


----------------------- Page 4-----------------------

                                                                                                                                 

the contract.  A heated discussion that included Walker ensued.  The exact sequence of  



                                                                                                                       

actionsin theCessnas' repossession is disputed, but Helmericks, evidently with Walker's  



                                                                                                                         

cooperation, secured the Cessnas in hangars. Helmericks agreed that Knik made another  



                                                                                                                              

payment on the Cessna loan the following month.  Northern later sold one Cessna, and  



                                                                                                                              

at the time of trial the other Cessna was apparently still in Northern's possession.  The  



                                                                                                                     

record does not contain any written agreement between Northern and Knik following  



                                                                                                                            

Northern's possession of the Cessnas, nor is  there any type of written notice from  



                                                                                                                                

Northern to either Knik or Crowley.  At trial Crowley contended Knik had overpaid its  



                                                                                  

obligation and was owed money on the Cessna loan.  



                                                                                             

                    3.        Contracts between Wingnuts and NA Holdings  



                                                                                                                                

                    Wingnuts and NA Holdings entered into two written contracts and had an  



                                                                                                                                     

ongoingbusiness relationship that resulted in Wingnuts incurringadebttoNAHoldings.  



                                                                                                                           

                    Wingnuts entered into a one-year lease with NA Holdings on July 1, 2013,  



                                                                                                                         

agreeing to rent office space and outside parking for up to four aircraft at the Palmer  



                                                                                                                             

Airport.        The  lease,  obtained  from  an  internet  site,  required  arbitration  of  any  



                                                                          

"controversy or claim relating to this contract."  



                                                                                                                              

                    Wingnuts  also  bought  fuel  from  NA  Holdings,  often  on  credit.                                    NA  



                                                                                                                             

Holdings  sent  Wingnuts  statements  that  included  not  only  the  fuel  costs  but  also  



                                                                                                                          

Wingnuts's rent and what appear to be charges for renting aircraft. Wingnuts fell behind  



                     

in payments.  



                                                                                                                             

                    Ultimately, "Bret[t] Crowley, DBA Wingnuts Aviation" signed a loan  



                                                                                                                                     

document and a security agreement related to the delinquent account with NA Holdings.  



                                                                                                                              

Crowley signed the loan agreement in early May 2014, with a principal amount of just  



                                                                                                                    

over $38,800; monthly payments were to be made over five years.   The agreement  



                                                                                                                   

contained  a  guaranty  that  Crowley  and  Wingnuts  "unconditionally  and  personally  



                                                                                                                       

guarantee[d] all the obligations of the [b]orrower  under  this [n]ote."                                       The security  



                                                               -4-                                                         7361
  


----------------------- Page 5-----------------------

                                                                                                                         

agreement gave NA Holdings a security interest in a Mooney airplane stated to be owned  



                                            

"free and clear" by Chesnut and Crowley.  The security agreement required Wingnuts  



                                                                                                                    

to "keep the collateral free from unpaid charges, taxes, and liens," to maintain insurance,  



                                                                                                                             

and  to  make  all repairs  needed  to  keep  the  collateral  "in  good  working  order  and  



                   

condition."  



                                                                                                                         

                    Wingnuts continued to buy gas oncredit fromNAHoldings after theparties  



                                                                                                                             

signed the loan agreement secured by the Mooney airplane.  The parties refer to this  



                                                                                                                               

ongoing debt as the "net 30" account.  As of late October 2014, the unsecured net 30  



                                                                                                           

account had a balance of a little less than $18,500 and was unsecured.  



                                                                                                                              

                    In August 2014 a student and Crowley did a "gear-up" landing at the  



                                                                                                                           

Wasilla Airport in the Mooney. The Mooney sustained damage to its propeller and body,  



                                                                                                             

and Wingnuts missed its September 2014 payments.  Neither Crowley nor Wingnuts  



                                                                 

took steps to repair the Mooney promptly.  



                                                                                                                              

                    Discussions between Crowley and Helmericks became less cordial in the  



                                                                                                                     

following months, although the cause of the friction was disputed. Helmericks indicated  



                                                                                                                              

he was fed up with Crowley and Wingnuts, but Crowley contended that Helmericks had  



                                                                                                                                

inappropriately disclosed Crowley's personal financial information and also hoped to  



                                                                                                                             

prevent Wingnuts from moving its operations to Wolf Lake where Chesnut's father had  



                                

purchased a hangar.  



                                                                                                                            

                    In  October  2014  Crowley  and  Helmericks  exchanged  numerous  text  



messages related to finances.  The interpretation of the text messages was disputed, as  



                                                                                                                             

set out more fully below.  On October 23 Crowley made a $19,000 cash payment to one  



                                                                                                                  

of Helmericks's businesses.  The payment's disposition was also disputed:  Helmericks  



                                                                                                                            

applied the cash first to the net 30 account and then credited the balance to the loan  



                                                                                                                    

secured by the Mooney; Crowley insisted he directed the payment to the Mooney- 



                                                                                                                      

secured loan. In November 2014 Crowley informed Helmericks that Wingnuts intended  



                                                               -5-                                                        7361
  


----------------------- Page 6-----------------------

                                                                                                                              

to move its base of operations to Wolf Lake. On December 2, 2014, Wingnuts gave NA  



                                                                                                                                 

Holdings written notice that it was vacating its office space at the Palmer Airport as of  



                           

January 1, 2015.  



                                                                                                                                 

                    The Mooney remained at the Wasilla Airport without its propeller, and in  



                                                                                                                            

June  2015  Helmericks  removed  the  radio  (or  avionics)  -  the  terms  are  used  



                                                                                                                                     

interchangeably in the record - from the Mooney and took the equipment to his office.  



                                                                                                                              

According to Helmericks he visited the airport to look at the plane and observed that  



                                                                                                                              

someone  had  attempted  to  tape  the  window  shut  with  duct  tape  but  the  tape  had  



                                                                                                                                

weathered over the winter.  He said the door was unlocked - Crowley disputed this -  



                                                                                                                               

so he entered the plane and removed the avionics.  Someone reported the removal of the  



                                                                                                                                     

avionics to  Crowley,  who  contacted  the police,  who  in  turn  contacted  Helmericks.  



                                                                                                                           

According to Crowley, Helmericks told the police that he had the equipment in his office  



                                                                                               

and that he had removed it through the window of the plane.  



                                                                                                                              

                    In   early   November   2015   Chesnut   completed   an   Application   for  



                                                                                                                    

Airworthiness Certificate in an apparent attempt to get the Mooney repaired. According  



                                                                                                                  

to Crowley the permit was intended to get the Mooney to Wolf Lake so Wingnuts's  



                                                                                                                            

mechanic could fix it. Crowley intended to put a propeller on the plane and fly it to Wolf  



                                                                                                                               

Lake later that month.   At about this time Helmericks removed the engine from the  



                                                                     

Mooney and placed it with Walker, where it remained at the time of trial.  Helmericks  



                                                                                                                                  

testified that rather than litigate the return of the avionics, he "opted to leave them . . . in  



                                                                                                                              

the cupboard, where they were secure," and he agreed that his position at trial was that  



                                                                                                                             

he would release the engine and avionics to Crowley or Wingnuts if the debt was paid  



                                                                                                                                

in full.   The City of Wasilla impounded the Mooney in December 2015 because of  



                                                                                                                        

unpaid fees.  According to NA Holdings's closing argument at trial, the City of Wasilla  



                                                       

intended to dispose of the Mooney.  



                                                               -6-                                                         7361
  


----------------------- Page 7-----------------------

            B.          Proceedings  



                                                                     

                        1.          Complaints and answers  



                                                                                                                                              

                        In February 2015 Crowley, in his individual capacity and through counsel,  



                                                                                                                                                      

sued Northern for breach of contract and several other causes of action based on the  



                                                                                                                                                              

business transactions between Knik and Northern.  Northern answered the complaint.  



                                                                                                                                               

                        In early April 2015 Northern as a defendant and NA Holdings as a third- 



                                                                                                                                          

party plaintiff filed a motion under Alaska Civil Rule 14 to allow a third-party complaint  



                                                                                           1  

                                                                                                                                                   

against Knik, Wingnuts, and Crowley individually.                                              Shortly after the motion was filed,  



                                                                                                                                                        

Crowley's  attorney  withdrew,  citing  a  conflict  of  interest,  and  Crowley  began  to  



                                                                                                                                                        

represent himself.  The court granted the motion to allow the third-party complaint in  



                                                                                                                                                       

June. The third-party complaint set out three different breach of contract claims: one for  



                                                                                                 

the Cessna transactions, one for the lease agreement, and one for the Mooney-secured  



                                                                                                                                                     

loan.  The fourth cause of action was for "delivery" of the Mooney.  No summons was  



                                                                           2  

                                                                                                                                                       

issued related to the third-party complaint.                                   Copies of the contracts were attached to the  



                                                                                                                                               

third-party complaint, but the complaint itself did not set out a cause of action against  



                                                                                                                                    

Crowley as an individual and only mentioned the Cessna loan guaranty.  



                                                                                                                                                   

                        Another attorney entered an appearance on behalf of Crowley in early  



                                                                                                               

August.  Crowley and Wingnuts, through counsel, answered the third-party complaint  



                                                                                                                                                      

against them in April 2016 and asserted several affirmative defenses, including the  



            1           No one questioned in the trial court or on appeal this unorthodox use of                                                        



Rule 14, so we do not discuss the appropriateness of the procedure.                                    



            2           See Alaska R. Civ. P. 14(a) (stating that a third-party plaintiff "may cause  

                                                                                                                                                  

a summons and complaint to be served upon a person not a party to the action who is or  

                                                                                                                                                        

may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the  

                                                                                                                                                       

third-party plaintiff").  

                                         



                                                                           -7-                                                                     7361
  


----------------------- Page 8-----------------------

                                                                                3                                                                                                                 4  

 illegality of the repossessions.                                                    Wingnuts brought several counterclaims,                                                                         including  



breach of contract, replevin, interference with a prospective economic advantage, and                                                                                                                                



 conversion against Northern and Helmericks individually, but it did not bring a cross-  

                                                  5    The counterclaims mostly concerned actions taken with respect to  

 claim against Knik.                                                                                                                                                                                                      



 the Mooney, although the factual allegations included Northern and the repossession of  

                                                                                                                                                                                                                         



 the Cessnas.  Helmericks was not formally joined as a party, nor did anyone attempt to  

                                                                                                                                                                                                                          

join Walker as a party. 6                                        Northern answered the counterclaims.  In later pleadings, the  

                                                                                                                                                                                                                       



 attorney  representing  Northern  and  NA  Holdings  indicated  that  he  represented  

                                                                                                                                                                                               



 Helmericks as well, although he never formally entered an appearance.   His closing  

                                                                                                                                                                                                           



 argument asked the court to award Helmericks and his businesses "the entire amount of  

                                                                                                                                                                                                                         



 damages they have incurred."  

                                                                               



                                   2.               Relevant motion practice  

                                                                                                   



                                   At the beginning of the case in early April 2015, Crowley, still represented,  

                                                                                                                                                                                                



                  3                Knik's status during the pendency of the case was unclear given that it was                                                                                                     



 never summoned or served with a copy of the complaint.                                                                                                  The attorney representing            

 Crowley and Wingnuts indicated that he was submitting written closing and rebuttal                                                                                                                       

 statements on behalf of Knik, although the signature blocks on these pleadings do not                                                                                                                                

 reflect his representation, andhenever                                                          formally entered an appearance. Northern                                                                   offered  

 no objection in the trial court to Crowley's attorney arguing on behalf of Knik, although                                                                                                              

 it phrased its rebuttal as though Crowley as an individual, rather than Knik, had made the                                                                                                                            

 arguments.   



                  4                See Alaska R. Civ. P. 13(a)-(c) (distinguishing compulsory and permissive  

                                                                                                                                                                                                   

 counterclaims and allowing counterclaims different in kind or amount from original  

                                                                                                                                                                                                          

 claim).  



                  5                See Alaska R. Civ. P. 13(g) (allowing cross-claim against a co-party that  

                                                                                                                                                                     

 arises out of same transaction that is subject of original action or counterclaim).  

                                                                                                                                                                        



                  6                See Alaska R. Civ. P. 13(h) (allowing joinder of other parties under Alaska  

                                                                                                                                                                                                             

 Rules of Civil Procedure 19 and 20).  

                                                                                     



                                                                                                            -8-                                                                                                   7361
  


----------------------- Page 9-----------------------

 filed a motion under Alaska Civil Rule 88 for the Cessnas' return, arguing that he was                                                                                                                                                                            



 not in default on the loan agreement because, even though his payments had not been                                                                                                                                                                            



 regular, he had paid more on the account than he owed up to the time of repossession and                                                                                                                                                                           



 had in fact made a loan payment after the repossession.                                                                                                                        Northern opposed the motion  



 and raised as a defense Crowley's lack of standing to assert Knik's rights. At the hearing                                                                                                                                                             



 on the motion, the trial court noted Northern's objection but allowed Crowley to proceed                                                                                                                                                              



 for purposes of the hearing in an effort to ascertain whether he (or Knik) had any                                                                                                                                                                                



 colorable claim for the aircraft.                                                                         At the conclusion of the hearing the court denied                                                                                             



 Crowley's motion because he had not met his burden of showing either the probable                                                                                                                                                                 



 validity of his claim to the property or the "absence of any reasonable probability that a                                                                                                                                                                                 

                                                                                                                           7  by Northern.  

 successful defense [could] be asserted"                                                                                                                                  



                                           In early July 2015 Northern filed a motion for summary judgment on all of  

                                                                                                                                                                                                                                                                         



 the claims in Crowley's complaint based on lack of privity, arguing that the contract  

                                                                                                                                                                                                                                                      



 underlying  the  original  complaint  was  between  Northern  and  Knik,  not  Crowley  

                                                                                                                                                                                                                                                  



 individually; because he was not a party to the contract, Northern argued, Crowley could  

                                                                                                                                                                                                                                                              



 not assert in his individual capacity any of the claims made in his complaint.  The trial  

                                                                                                                                                                                                                                                  



 court  notified  the  parties  in  October  2015  that  it  intended  to  grant  the  motion  for  

                                                                                                                                                                                                                                                                     



 summary judgment but, recognizing that Crowley had been self-represented for several  

                                                                                                                                                                                                                                                         



 months while the motion was pending, it gave him 15 more days to file an opposition.  

                                                                                                                                                                                                                                                                                  



 Crowley, through counsel, ultimately responded that he would "not assert a personal  

                                                                                                                                                                                                                                                 



 breach of contract claim," noted that Northern had filed a third-party complaint against  

                                                                                                                                                                                                                                                         



 Knik, and concluded that he did not oppose summary judgment. He argued the summary  

                                                                                                                                                                                                                                                   



judgment motion should affect "only Count I, and possibly Count II" of the initial  

                                                                                                                                                                                                                                                            



 complaint and represented that he would "in short order" submit "a pleading cleaning up  

                                                                                                                                                                                                                                                                        



                      7  

                                                                                                   

                                          Alaska R. Civ. P. 88(d).  



                                                                                                                                    -9-                                                                                                                                     7361  


----------------------- Page 10-----------------------

                                                                                                                      

his claims."  The court then gave the parties notice that it intended "to grant summary  



                                                                                                                                

judgment  dismissal"  on  all  counts  in  the  initial  complaint  unless  Crowley  filed  an  



                                                                                                                        

opposition or amended his pleadings by mid-March 2016.  When Crowley did neither,  



                                                                                                                          

the  court  granted  summary  judgment  and  dismissed  all  claims  in  Crowley's  initial  



                  

complaint.  



                                                                                                                       

                    In July 2015 NA Holdings asked the court to order delivery of the Mooney  



to it pursuant to the security agreement.  At the same time Northern asked the court to  



                                                                                                                     

order Crowley to deliver the logbooks and keys to the Cessnas as well as "any additional  



                                                                                                                          

documents required for registration" of those aircraft.  In October 2015 the court issued  



                                                                                                                            

an order inviting NA Holdings and Northern "to resubmit the affidavits attached to these  



                                                                                                                         

motions to correct deficiencies" in them.  They never did.  In late October the parties  



                                                                                                                   

stipulated that the logbooks, keys, and registration to the Cessnas were in Northern's  



                                                                                              

possession.  Apparently nothing else was filed related to the Mooney because the trial  



                                                                                                             

court deemed the motion related to the Mooney moot in January 2016.  



                                       

                    3.         The trial  



                                                                                                                  

                     The trial court held a bench trial over three days in June 2016. Helmericks,  



                                                                                                                    

Crowley, Chesnut,and Helmericks's sonBrandon, who kept thebooksfor thebusinesses  



                                                                                                                        

and generally kept track of business during the winter, were the only witnesses. Because  



                                                                                                                        

the parties did not clearly segregate their business transactions related to the various  



                                                                                                                                 

contracts, the evidence presented at trial at times was relevant to more than one cause of  



action.  



                                                                                                                               

                     The trial testimony suggested that the parties did not strictly adhere to the  



                                                                                                      

written contracts they had made.  For example, the parties agreed they had discussed  



                                                                                                                               

alternatives to the insurance requirement for the Cessnas:  Helmericks testified that the  



                                                                                                                     

cost of commercial aviation insurance was "almost prohibitive," so instead of insurance  



                                                                                                                        

he would be satisfied with a CD in Northern's name in the amount of the loan balance  



                                                               -10-                                                        7361
  


----------------------- Page 11-----------------------

                                                                                                                                     

or  with  Crowley  putting  some  of  Chesnut's  "securities"  in  a  similar  arrangement.  



                                                                                                                            

Crowley understood that no insurance was required but that he, Wingnuts, or Knik  



                                                                                                                               

would  be  responsible  for  any  damage  to  the  Cessnas.                              He  said  that  based  on  his  



                                                                                                                    

conversations with Helmericks, he did not think he ever needed "independent third-party  



                                                                                                                              

insurance."   There is also ample evidence in the record that Northern accepted late  



                                                                                                 

payments and partial payments from both Knik and Wingnuts.  



                                                                                                                         

                    With  regard  to  the  loan  and  repossession  of  the  Cessnas,  the  parties  



                                                                                                                 

disputed whether Knik was in default at the time of the repossession.   Helmericks  



                                                                                                                

testified  that Knik  was in  default by  not having  any  insurance on the  Cessnas,  by  



                                                                                                                             

improperly using the planes, by failing to maintain the aircraft, and by not making loan  



                                                                                                                              

payments on time. He said that "[t]he deficiency with the loan - with the payments was  



                                                                                                                               

their . . . irregularity, not their amount."  Crowley testified that:  (1) Knik overpaid the  



                                                                                                                     

amount  due  on  the loan  as of December  2014; (2)  Northern waived  the insurance  



                                                                                                                              

requirement; and (3) Knik properly maintained the aircraft. Crowley did not dispute that  



                                                                                                                              

Knik had not consistently adhered to the payment terms of the loan, but he noted that  



                                                                                                                       

Northern continued to accept payments without objecting and in fact accepted a payment  



                                                                                                                              

after it took possession of the Cessnas.  Helmericks acknowledged that Northern was  



                                                                                                                    

inconsistent in charging late fees and agreed that Crowley, evidently through Wingnuts,  



                                                                                                                    

had made an additional payment on the Cessna loan on behalf of Knik in December  



                                                                                                                             

2014, after the planes were in Northern's possession.   Helmericks indicated he was  



                                                                                                                               

aware of conflict within Knik between Crowley and Walker about "the direction the  



                                                                                                                                     

business  was  going"  when  Walker  assisted  Helmericks  in  securing  the  Cessnas.  



                                                                                                                                

Although Helmericks first said there was a balance remaining on the Cessna loan, he  



                                                                                                                    

later agreed that Northern had not been damaged by any of the breaches of the Cessna  



                                                                                             

contracts, calling the claimed damages of over $8,000 in his businesses' trial brief "an  



             

error."  



                                                              -11-                                                         7361
  


----------------------- Page 12-----------------------

                                     With respect to the disputes between Wingnuts and NA Holdings, the                                                                                                                             



partiesoffered                          sharply conflicting                                 testimony about the                                   allocation ofthe$19,000payment                                      



Crowley made in late October 2014.                                                                         At that time Wingnuts was not current in the                                                                             



Mooney-secured loan payments and owed more than $18,000 on the net 30 account.                                                                                                                                                                  



Crowley contended that he instructed NA Holdings to use the $19,000 for the Mooney-                                                                                                                                 

                                                                                                                                                                                                    8     He evidently  

secured loan, effectively prepaying the loan through sometime in 2016.                                                                                                                                   



did not intend any of the funds to apply to the net 30 account balance.  Two invoices  

                                                                                                                                                                                                                      



dated October 24, 2014 show that on October 23, $18,430.63 was credited to the net 30  

                                                                                                                                                                                                                                      



account and $569.37 was credited to the Mooney-secured loan account.  Helmericks  

                                                                                                                                                                                                            



testified that Crowley and Wingnuts owed $42,678.34 on the Mooney-secured loan at  



the end of May 2016.  

                                                             



                                     Helmericks and Crowley, in rebuttal and surrebuttal, offered into evidence  

                                                                                                                                                                                                                     



a series of text messages they had exchanged relevant to the debts and this cash payment.  

                                                                                                                                                                                                                                                



On October 18 Helmericks texted to Crowley:  "Loan Balance As of today, October  

                                                                                                                                                                                                                       



 18th:  Airplanes $69,538.18 Loan $37,626.04[.]  Apply payments to the open net 30  

                                                                                                                                                                                                                                      



account first, the unsecured debt next and the secured debt last.  Any questions, text or  

                                                                                                                                                                                                                                       



call me."  (Emphasis in original.)  According to Crowley, this text message was sent to  

                                                                                                                                                                                                                                        



both Crowley and Brandon. Brandon, the bookkeeper for NA Holdings, said he usually  

                                                                                                                                                                                                                          



took direction from Crowley about how payments were to be applied to the different  

                                                                                                                                                                                                                     



accounts and agreed that the allocation of the payment to the net 30 account first was not  

                                                                                                                                                                                                                                     



                  8                  This calculation was based on Crowley's interpretation of the agreement's                                                                                              



prepayment clause. Crowley testified that he understood the prepayment clause to allow                                                                                                                                        

him to make a large payment at times when he had a lot of income, such as the summer,                                                                                                                                 

so that he would not need to worry about making the minimum payments when he had                                                                                                                                                   

little income.                        Helmericks had a different interpretation, indicating that NA Holdings                                                                                                        

applied   any   amount   paid   over   the   minimum   payment  to  the   principal   balance   but  

required a minimum payment every month.                                                                                   



                                                                                                                 -12-                                                                                                           7361
  


----------------------- Page 13-----------------------

                                                                                                                                

an agreement Crowley had with him directly.   The next day Crowley texted only to  



                                                                                                                              

Helmericks,  "All  of  the  cash  has  not  come  in  yet.                           I  am  going  to  start  with  the  



                                                                                                                     

outstanding balance for Wingnuts and Knik.  Then hopefully Wednesday or Thursday  



                                                                                                                               

we will get the two loans done.  I'm sorry for the delay, but I haven't even gotten the  



                 

cash yet."  



                                                                                                                                

                    The parties then texted about a payment on the Cessnas, and on October 23  



                                                                                                                                     

Helmericks texted Crowley, "Do you have a timeline for the two loan payoffs yet?"  



                                                                                                                                

Crowley responded that he would talk to Helmericks the next day.   On October 28  



                                                                                                                                     

Crowley texted Helmericks that he had deposited $19,000 in Helmericks's account.  



                                                                                                                   

After some back and forth about whether thedeposit had actually been made, Helmericks  



                                                                                                                             

informed Crowley that the bank "found it" and told Crowley that the problem with  



                                                                                                                 

payments was "one of the primary reasons [he couldn't] continue funding [Crowley's]  



                 

venture."  



                                                                                                                                

                    Helmericks  initially  disputed  the  existence  of  the  October  18  text;  he  



                                                                                                                               

asserted that the October 19 text message from Crowley referred to the allocation of the  



                                                                                                                     

$19,000 payment.  Helmericks testified that "the two loans" referred to the Mooney- 



                                                                                                                              

secured loan and the Cessna loan.  He agreed that this text "confirmed" his position that  



                                                                                                                               

the  "revolving  account  was  to  be  paid  first."                       In  contrast  Crowley  interpreted  his  



                                                                                                                        

statement in the October 19 text that he was "going to start with the outstanding balance  



                                                                                                                              

for Wingnuts and Knik" as an instruction to Helmericks to apply the money to the two  



                                                                                                                               

secured loans first and not to the net 30 account as Helmericks had proposed in the  



                                                                                                                                

October  18  text.           Crowley  points  to  no  testimony  or  other  evidence  indicating  he  



                                                                                                                            

complained to NA Holdings about the allocation of the large cash payment at that time,  



                                                                                                

and the record indicates that Wingnuts made another payment on the Mooney-secured  



                                       

loan in November 2014.  



                                                              -13-                                                         7361
  


----------------------- Page 14-----------------------

                                                                                                                              

                    Helmericks and Crowley also disagreed about how to characterize the  



                                                                                                                               

removal of the engine and the avionics from the Mooney.  Helmericks denied that he  



                                                                                                                               

ever repossessed the Mooney, asserting that he was protecting the collateral when he  



                                                                                                                   

took these parts of the plane.  Crowley called it a repossession.  The parties apparently  



                                                                                                                            

agreed that neither Northern nor NA Holdings gave any written notice prior to or after  



                                                                                                                            

the repossessions; there is no documentation of any written notice in the record.  And  



                                                                           

Helmericks indicated that the avionics remained in his office and the engine remained  



                                                                                                                               

in Walker's hangar, apparently under Helmericks's control.   Helmericks offered no  



                                                                                                                         

testimony that he had attempted to sell the seized parts; instead, he agreed he would  



                                                                                                                            

return  them to  Crowley  if  Wingnuts  paid  whatever  it  owed  to  him under  the  loan  



                   

agreement.  



                                                                                                                                    

                    Thepartiessubmittedsimultaneous written closing argumentsandrebuttals.  



                                                                                                                             

Crowley's attorney included arguments on behalf of Knik as well as Wingnuts and  



                                                                                                  

Crowley, and the attorney who represented Helmericks's LLCs filed a written closing  



                                                                                                                              

on behalf of Northern, NA Holdings, and Helmericks individually.  Helmericks did not  



                                                                                                                    

object to Crowley's attorney making a closing argument on behalf of Knik; he responded  



                                                 

substantively to the arguments.  



                                                                                                                             

                    In closing Northernsummarilyarguedthat Knikbreachedits contracts with  



                                                                                                         

Northern and that Northern was damaged by the breaches, although it did not identify  



                                                                                                                              

any  damages  and  argued  that  Northern  had  mitigated  damages  "following  its  



                                                                                                                                

repossession of the planes, and therefore did not present additional evidence related to  



                                                                                                                             

post-repossession damages."  Northern asked for an award of nominal damages.  NA  



                                                                                                                              

Holdings asked for damages related to the lease agreement as well as $42,967.87 for the  



                                                                                                                                    

Mooney-secured loan; it argued that it had properly allocated the $19,000 cash payment.  



                                                                                                                             

Finally Helmericks asserted the Mooney might have "little value" in light of the fees  



                                                                                                                             

charged by the City of Wasilla but asked the court to transfer title to the Mooney to him  



                                                              -14-                                                        7361
  


----------------------- Page 15-----------------------

                                                                                                                          

in light of "liabilities associated with the possession of the abandoned aircraft."  



                                                                                                                                     

                     Crowley and his LLCs argued that Knik was current in its payments and  



                                                                                                                   

not only was not in default of the loan agreement at the time Northern took possession  



                                                                                                                   

of the Cessnas but in fact had overpaid its obligation.  As to the security agreement,  



                                                                                                                             

Crowley  argued  that  Helmericks  had  waived  the  insurance  requirement  and  had  



                                                                                                                               

presented no evidence that Knik failed to maintain the Cessnas. Wingnuts pointed to the  



                                                                                                                              

lease's arbitration clause and asked the court to dismiss the claim. Wingnuts argued that  



                                                                                                          

Crowley had directed the $19,000 cash payment to be applied to the Mooney-secured  



                                                                                                                              

loan, relying on the text messages and what he called a "historical understanding and  



                                                                                                                                

practice of how payments were prioritized."   Wingnuts concluded that it was not in  



                                                                                                                              

default of the loan agreement in either November 2014 or June 2015, and it argued that  



                                                                                                                 

Helmericks's seizure of the engine and avionics were thus impermissible.  



                                                                                                                               

                    Wingnuts set out the evidence presented about its attempts to have the  



                                                                                                                               

Mooney repaired, including the application to allow it to fly the plane to Wolf Lake for  



                                                                                                                             

repairs.  It denied that the Mooney had been "abandoned" and asked the court to take  



                                                                                                                               

judicial notice that as of June 2015, when Helmericks removed the avionics from the  



                                                                                                                              

Mooney, he had already asserted a judicial claim for the Mooney and "[t]he matter was  



                                                                                                                                  

then before th[e] [c]ourt."   Wingnuts also contended that abandonment was "not a  



                                                                                                                        

specified basis for executing the Security Agreement" and that the seizure of the avionics  



                                                                                                                          

"not only rendered the plane inoperable . . . but was both improper and illegal."  



                                                                                                                               

                     The court issued its decision in December 2016, concluding it had no  



                                                                                                                            

jurisdiction over the lease dispute because of the mandatory arbitration clause. The court  



                                                                                                                        

found that Crowley disputed the legality of the repossession of the Cessnas and claimed  



                                                                                                                              

damages on behalf of Wingnuts, but "offered no evidence that in fact Wingnuts was  



                                                                                                                           

damaged." It faulted Wingnuts for failing to include Knik as a co-defendant in the action  



                                                                                                                      

it had brought against Helmericks and Northern and for neglecting to provide evidence  



                                                               -15-                                                        7361
  


----------------------- Page 16-----------------------

about Walker's authority to act on behalf of Knik.  The court found that the testimony                                                         



showed Helmericks did not waive the requirement for insurance and "expected Knik to                                                                                                               



at a minimum buy a CD in Northern Aviation's name or pledge sufficient securities."                                                                                                                   



                               The court observed that the security agreement "states that notice shall be                                                                                       

                                                   9  and cited a provision from AS 45.29 that the superior court said  

in writing if required,"                                                                                                                                                                      



"require[d] notice prior to disposition of property seized pursuant to AS 45.29.609." The  

                                                                                                                                                                                              



court found that Crowley did not "claim harm due to the lack of notice" and decided the  

                                                                                                                                                                                                



lack of statutory notice was "harmless in this sequence of events."  The court did not  

                                                                                                                                                                                               



discuss Crowley's claim that Knik had overpaid on the loan and was thus owed money.  

                                                                                                                                                                                                         



                               The court found that Northern failed to produce evidence that Knik had not  

                                                                                                                                                                                                



maintained the aircraft, and it further found that Knik was current in its payments at the  

                                                                                                                                                                                                



time of repossession.  It found that Northern failed to show any damages arising from a  

                                                                                                                                                                                                    



breach of the contracts related to the Cessnas and that Walker's conduct in assisting to  

                                                                                                                                                                                                  



secure the Cessnas mitigated any potential damages.  The court held that Northern met  

                                                                                                                                                                                              



its burden of showing that Knik had breached the security agreement by not insuring the  

                                                                                                                                                                                                



Cessnas but concluded that Northern "failed to show that Knik breached the loan or  

                                                                                                                                                                                                 



security agreement due to late payments or a failure to maintain the aircraft."  

                                                                                                                                                                                   



                               Turning to NA Holdings's claims against Wingnuts, the court interpreted  

                                                                                                                                                                              



the text messages in a way that neither party had advocated.  The court decided that  

                                                                                                                                                                                             



Crowley's intent was to allocate enough of the payment to the Mooney-secured loan to  

                                                                                                                                                                                                  



make  it  current,  thereby  curing  Wingnuts's  default.                                                                       After  that,  the  court  decided,  

                                                                                                                                                                                  



Crowley intended to direct the remainder of the $19,000 to the net 30 account.  Of the  

                                                                                                                                                                                                



$19,000, the court allocated $2,580.82 - the amount it determined that Wingnuts was  

                                                                                                                                                                                              



               9  

                                                                                                                                                                                             

                               A  provision  stated  that  "[a]ny  notice  required  to  be  given  under  this  

                                                                              

Agreement" was to be in writing.  



                                                                                               -16-                                                                                                7361  


----------------------- Page 17-----------------------

 in arrears - to the Mooney-secured loan.                                                                                                                                                                                     The court calculated the amount due on the                                                                                                                                                                           



 Mooney-secured loan but did not appear to base its calculations on evidence in the trial                                                                                                                                                                                                                                                                                                                                                      



 record; the court cited an exhibit to which both parties referred at trial but which was not                                                                                                                                                                                                                                                                                                                                                      



  admitted as evidence. The court found that NA Holdings "had a right to seize the radios                                                                                                                                                                                                                                                                                                                                           



  and engine pursuant to AS 45.29.609" and found that "any failure to comply with the                                                                                                                                                                                                                                                                                                                                                              



 notice requirement" of AS 45.29 was either "irrelevant or harmless."                                                                                                                                                                                                                                                                                                      



                                                                       The court further decided that NA Holdings could recover damages of over                                                                                                                                                                                                                                                                                              



  $33,000 and that it was "legally entitled to the possession and ownership of the Mooney                                                                                                                                                                                                                                                                                                                               



 to satisfy the remaining debt owed by Wingnuts."                                                                                                                                                                                                                         It ordered NA Holdings to comply                                                                                                                  



 with the notice requirements of AS 45.29 in its disposition of the aircraft and parts. The                                                                                                                                                                                                                                                                                                                                                   



 court found against Wingnuts and Crowley on all of their counterclaims and entered final                                                                                                                                                                                                                                                                                                                                                    



judgment for over $33,000 plus interest in favor of NA Holdings and against Wingnuts                                                                                                                                                                                                                                                                                                                            



  and Crowley (individually); it issued adeclaratory judgment awarding NA                                                                                                                                                                                                                                                                                                                    Holdings title   



 to the Mooney.                                                                     The court did not explain the basis for its entry of judgment against                                                                                                                                                                                                                                                                    



  Crowley as an individual, simply saying in a footnote, "The judgment will also enter                                                                                                                                                                                                                                           



  against Brett Crowley in his individual capacity."                                                                                                                                                                                                                  



                                                                       Wingnuts, Crowley, and Knik appeal.                                                                                                                                                                     



 III.                               STANDARD OF REVIEW                                                                              



                                                                       We review a superior court's findings of fact under the clearly erroneous                                                                                                                                                                                                                                                               



  standard; a finding of fact is clearly erroneous if after reviewing the record we are left  

                                                                                                                                                                                                                                                                                                                                                  10   Under Alaska Civil  

 with a definite and firm conviction that a mistake has been made.                                                                                                                                                                                                                                                                                                                                                                       



 Rule 52(a), the superior court is required to make findings of fact and conclusions of law;  

                                                                                                                                                                                                                                                                                                                                                                                                                                              



 those "findings and conclusions should be so clear and explicit as to give [this] Court a  

                                                                                                                                                                                                                                                                                                                                                                                                                                                              



                                    10                                 Stanton  v.  Fuchs,  660  P.2d   1197,   1198  (Alaska   1983).  



                                                                                                                                                                                                                         -17-                                                                                                                                                                                                              7361  


----------------------- Page 18-----------------------

                                                                                                               11  

clear understanding of the basis for the decision made."                                                            When the superior court's              



                                                                                                                          12  

findings are inadequate, we remand the case for further findings.                                                                                     

                                                                                                                               "Questions regarding  



                                                                                                                                                                   

the interpretation and application of a statute are questions of law to which we apply our  



                                               13  

                                                     

                          

independent judgment." 



IV.	         DISCUSSION  



             A.	          The Superior Court Did Not Clearly Err In Finding That Knik Was  

                                                                                                                                                                

                          In Default And That Failure To Provide Notice Before Repossessing  

                                                                                                                              

                          The Cessnas Was Harmless.  

                                                                



                          On appeal Knik contends that the superior court erred in finding that Knik  

                                                                                                                                                               



breached the security agreement by failing to insure the Cessnas. It argues that Northern,  

                                                                                                                                                      



through its sole member, Helmericks, waived the insurance requirement and thus waived  

                                                                                                                                                           



its ability to repossess the aircraft on that basis. Knik further contends that Northern was  

                                                                                                                                                                 



required  to  provide  written  notice  of  the  alleged  breach  before  it  could  rightfully  

                                                                                                                                                     



repossess theCessnas. In responseNorthernmaintains that Crowley cannot assert claims  

                                                                                                                                                             

on behalf of Knik (as the superior court decided14) and that even if he could, the superior  

                                                                                                                                                         



court's finding that there was a breach of the security agreement is not clearly erroneous.  

                                                                                                                                                                          



Northern does not discuss the notice issue.  

                                                                                     



             11	          Sullivan v. Subramanian                         , 2 P.3d 66, 69 (Alaska 2000).                               



             12           See, e.g.       ,  Ilardi v. Parker             , 914 P.2d 888, 892-93 (Alaska 1996) (remanding                          



for further findings).     



             13	          State v. Jeffery, 170 P.3d 226, 229 (Alaska 2007).  

                                                                                                               



             14           The  superior  court  order  on  which  Northern  relies  dealt  only  with  

                                                                                                                                                               

Crowley's standing as an individual to bring an affirmative lawsuit for breach of contract  

                                                                                                                                                          

against Northern.  The trial court did not explicitly decide whether Crowley could, as a  

                                                                                                                                                                       

member of Knik or as a guarantor, raise arguments on behalf of Knik in defending  

                                                                                                                                                     

against Northern's third-party lawsuit.  

                                                                             



                                                                                -18-	                                                                          7361
  


----------------------- Page 19-----------------------

                         Knik's status in the trial court is difficult to discern because                                            Knik was never     



 served with a summons and complaint and never answered or formally appeared in the                                                                         

                                                                                                                                    15  But judgment  

trial proceedings, even if it may have been included in closing argument.                                                                        



was entered against Knik, and its status in this appeal is not ambiguous.  The notice of  

                                                                                                                                                              



 appeal filed in this court lists Knik as an appellant and shows that it is represented by the  

                                                                                                                                                             



 same  attorney  who  represents  Crowley  and  Wingnuts.                                                      Knik  clearly  can  appeal  a  

                                                                                                                                                 



judgment entered against it under these circumstances.  

                                                                            



                         The trial court determined that Helmericks acted with Walker's consent  

                                                                                                                                                    



when he took possession of the Cessnas.  Walker, one of the members of Knik, actively  

                                                                                                                                                   



participated  in  the surrender  of at least one Cessna to  Northern.                                                            Crowley  did  not  

                                                                                                                                 



 explicitly argue in the superior court, and neither he nor Knik argues on appeal, that  

                                                                                                                                                           



Walker lacked the authority to act on Knik's behalf in surrendering the Cessnas.  Knik  

                                                                                                                                                         



 asserts on appeal that it does not seek return of the collateral.  Because Knik does not  

                                                                                                                                                            



 seek  return  of the Cessnas and  because Crowley  and Wingnuts did  not appeal the  

                                                                                                                                                            



 superior court's decision that they failed to prove any of their claims against Northern  

                                                                                              



 (or their putativeclaims against Helmericks), we agree with thesuperiorcourtthat failure  

                                                                                                                                                      

to give any notice before action on the alleged default in this case was harmless.16  

                                                                                                                                     



             15          See supra          notes 2 and 3 and accompanying text.                                     



             16          Crowley's  claim that  notice  was  required  appears  to  be  based  on  our  

                                                                                                                                                           

precedent  about  waiver,  but  his  argument  does  not  clearly  articulate  why  pre- 

                                                                                                                                                         

repossession notice was required here.  Two of our prior cases have discussed notice in  

                                                                                                                                                               

the repossession context when waiver is alleged.  See Alaska Statebank v. Fairco, 674  

                                                                                              

P.2d 288, 292-93 (Alaska 1983) (affirming trial court decision that pre-repossession  

                                                                                                                                  

notice was necessary when creditor's conduct and oral statements modified contract);  

                                                                                                                                                

Kupka v. Morey, 541 P.2d 740, 746 (Alaska 1975) (holding that creditor could not base  

                                                                                                                                                          

 default on failure to insure airplane when creditor had obtained insurance pursuant to one  

                                                                                                                                                            

 contract provision but failed to inform debtor of insurance cancellation).  

                                                                                                               



                                                                             -19-                                                                       7361
  


----------------------- Page 20-----------------------

                         Turning to Crowley's argument that Knik was not in fact in default and his                                                        



                                                                                                                                            17  

consequent argument that Northern had no right to possession of the Cessnas,                                                                   Crowley  



                                                                                                                                                

presented no evidence that Knik had ever insured the Cessnas; his defense was that  



                                                                                                                                                         

Helmericks did not insist on insurance coverage.  But Crowley also failed to show that  



                                                                                                                                           

Knik complied with any of the alternatives to commercial insurance that Helmericks  



                                                                                                                                                          

claimed the parties had discussed.   The trial court resolved any conflict between his  



                                                                                                                                                 

testimony and Helmericks's in favor of Helmericks.  As a result, we affirm the superior  



                                                                                                                                                           

court's determinations that Knik breached the security agreement by failing to insure the  



                                                                                                                                               

Cessnas and that any failuretogivenotice before repossessing the Cessnas was harmless.  



                                                                                                                                                          

            B.	          It Was Error Not To Address The Question Of An Overpayment On  

                                                                                                                                                      

                         The  Cessna  Loan  And  To  Find  That  Northern's  Failure  To  Give  

                                                                              

                         Notice Of Disposition Was Harmless.  



                                                                                                                                               

                         In  the  final  judgment,  the  superior  court  cited  parts  of  the  Uniform  



                                                                                                        18  

                                                                                                                                              

Commercial  Code  (U.C.C.)  -  Secured  Transactions,                                                       in  particular  the  provision  



                                                                                                                                                    19  

                                                                                                                                                         

mandating notice before a secured creditor disposes of collateral in its possession.                                                                    The  



                                                                                                                                                         

court wrote that Helmericks agreed he had not provided any written notice and that  



                                                                                                                                                            

Crowley did "not claim harm due to the lack of notice."  It then found that the lack of  



                                                                                                                                              

written notice was more likely than not harmless.  The superior court never addressed  



                                                                                                                                           

Crowley's argument that Northern owed Knik money for the Cessna loan.  



                                          

                         Because neither party mentioned the statutory sections related to secured  



                                                                                                                                           

transactions in the trial court, the superior court did not have the benefit of the parties'  



            17           See  AS 45.29.609 (allowing secured party to take possession of collateral                                            



after default).   



            18           AS 45.29.101-.811.  

                                



            19           See AS 45.29.611-.614.  

                                        



                                                                            -20-	                                                                     7361
  


----------------------- Page 21-----------------------

advocacy to better understand the impact of the law on this case.                                                                                                                         20  While the superior   



court applied to this case parts of AS 45.29.101-.811, as set out more fully below, its                                                                                                                                                          



finding that Northern's failure to give notice of disposition of the collateral was harmless                                                                                                                                   



error lacks evidentiary support and must be reversed.                                                                          



                                      Alaska Statutes 45.29.611-.613 prescribe the notification requirements for                                                                                                                                

                                                                                                                                                                                                                    21       Walker's  

a secured creditor to use when disposing of collateral in its possession.                                                                                                                                                  



surrender of the collateral to Northern, the secured creditor, gave Northern the authority  

                                                                                                                                                                                                                              



to dispose of the collateral and apply the proceeds to the balance of the debt secured by  

                                                                                                                                                                                                                                                 

the Cessnas.22   Under AS 45.29.610(b), Northern was required to act in a commercially  

                                                                                                                                                                                                               



reasonable manner in "[e]very aspect of a disposition of collateral, including the method,  

                                                                                                                                                                                                                                 



manner, time, place, and other terms."  Additionally, Northern was required to provide  

                                                                                                                                                                                                                                  



notice  of  disposition  of  the  property  to  both  the  debtor  (Knik)  and  any  secondary  

                                                                                                                                                                                                                         

obligors.23                        After disposition Northern was required to pay any surplus to Knik; if a  

                                                                                                                                                                                                                                                    



                   20                 Northern brought its claim as a breach of contract action, but by retaining                                                                                                             



the Cessnas and disposing of at least one without litigation, Northern availed itself of                                                                                                                                                          

secured creditors' statutory remedies. AS 45.29.609-.610. The security agreement gave                                                                                                                                                      

Northern "the remedies of a Secured Party under the law" and contains a provision that                                                                                                                                                       

the    agreement    is    to    be    construed    in    accordance    with    Alaska    law.       Alaska  

 Statutes  45.29.101-.811  govern  secured  transactions  in  Alaska  and  apply  to  this  case.  



                   21                 Rules for notice in consumer transactions are found in AS 45.29.614.  

                                                                                                                                                                                                               



                   22                 AS 45.29.610, .615.  

                                                                                  



                   23                 AS  45.29.611(b)-(c).                                                 As  a  guarantor  under  the  security  agreement,  

                                                                                                                                                                                                                      

Crowley may have had the status of a secondary obligor. See AS 45.29.102(a)(90). Not  

                                                                                                                                                                                                                                             

all guarantors are secondary obligors.  See U.C.C.  9-102(a)(71) & cmt. 2(a), 3 U.L.A.  

                                                                                                                                                                                                                                  

62, 65-66 (2010) (explaining addition of "secondary obligor" to revised Article 9).  But  

                                                                                                                                                                                                                                             

secondary obligors have specific rights under AS 45.29, including some rights to notice,  

                                                                                                                                                                                                                                     

see AS 45.29.611(b)-(c), as well as the ability to raise defenses in an action related to a  

                                                                                                                                                                                                                                                     

deficiency, see AS 45.29.626.  

                                                        



                                                                                                                      -21-                                                                                                                7361
  


----------------------- Page 22-----------------------

deficiency remained after disposition of the collateral, Northern could bring an action for                                                                          



                                             24  

a deficiency judgment.                                                                                                                                                

                                                  We have previously discussed the consequences of failing to  



                                                                                                                                            

provide proper notice prior to disposing of collateral:  when a secured creditor fails to  



                                                                                                                                                     

comply with statutory notice requirements, a presumption exists in a later deficiency  



                                                                                                                                                                      25  

                                                                                                                                                             

action that the collateral's value is at least equal to the amount of the outstanding debt. 



                          While Northern's third-party complaint did not clearly set out a claim for  

                                                                                                                                                                    



a deficiency judgment, by the time of trial Northern had disposed of at least one Cessna  

                                                                                                                                                            



but still sought damages of over $8,000 - in other words, Northern apparently sought  

                                                                                                                                                             

a deficiency judgment.26   Northern also made allegations related to Crowley's status as  

                                                                                                                                                                      



a guarantor under the Cessna loan agreement in its third-party complaint.  Crowley, in  

                                                                                                                                                                      



contrast,  claimed  that  Knik  was  not  in  default  as  to  payments  at  the  time  Walker  

                                                                                                                                                          



surrendered  the  Cessnas  and  that  Northern  in  fact  owed  Knik  money  because  of  

                                                                                                                                                                     



payments made after repossession of the Cessnas.   The superior court agreed with  

                                                                                                                                                                



Crowley that Knik was not in default in payments at the time Northern took possession  

                                                                                                                                                     



of the planes and decided Northern had not shown a breach of the agreement by failing  

                                                                                                                                                             



to maintain the aircraft.  But the court made no findings about Crowley's assertion that  

                                                                                                                                                                  



Northern owed Knik money.  

                                                           



                          Knik and Crowley contend that the superior court erred in failing to order  

                                                                                                                                                                



Northern to provide some type of accounting about any surplus or deficiency resulting  

                                                                                                                                                         



             24           AS 45.29.615.   



             25           Hoch v. Ellis             , 627 P.2d 1060, 1062-63 (Alaska 1981);                                           see also Dischner   



                                                                                                                                                                   

v. United Bank Alaska, 631 P.2d 107, 110 (Alaska 1981) (holding that presumption that  

actual value of collateral is equal to amount of outstanding debt may be rebutted by clear                                                                       

                                

and convincing evidence).  



             26           See AS 45.29.626 (setting out burdens of proof in actions where deficiency  

                                                                                                                                                      

or surplus is in issue).  

                               



                                                                                 -22-                                                                           7361
  


----------------------- Page 23-----------------------

from disposal of the collateral because Crowley presented evidence at trial that he or                                                                                                                                                                  



Knik made payments on the Cessna loan after the planes were repossessed.                                                                                                                                                         Knik and   



Crowley also argue that the superior court erred in finding lack of notice harmless.                                                                                                                                                                              



Northern   maintains  only   that   Crowley   cannot   assert   arguments   on   behalf   of   Knik,  



contending that Crowley's guaranty "does not give him the ability to assert claims                                                                                                                                                         



against [Northern]"; it does not respond to arguments about the application of AS 45.29.                                                                                                                                                                          



                                       Northern's   argument   is   not   detailed,   but   its   position   that  Crowley,   as  



guarantor, cannot assert claims against Northern may be incorrect.                                                                                                                                          We assume that                         



Northern intended to obtain a judgment against Crowley individually in his capacity as                                                                                                                                                                   



a guarantor of the Cessna loan; we see no other explanation for Northern's allegations                                                        

                                                                                                                                                                                                                                         27      As a  

related to Crowley's personal guaranty of that loan in its third-party complaint.                                                                                                                                                                          



guarantor,  Crowley  may  have  been  a  secondary  obligor  and  therefore  able  as  an  

                                                                                                                                                                                                                                                      

individual to assert defenses available to secondary obligors.28   But even if Crowley is  

                                                                                                                                                                                                                              



not a secondary obligor, Northern does not argue convincingly that he could not in the  

                                                                                                                                                                                                                                                      



trial court assert defenses on behalf of Knik, one of the parties Northern sued when it  

                                                                                                                                                                                                                                                           



filed its third-party complaint.  

                                                                                           



                                       Northern seemingly acquiesced in the trial court to Crowley's assertion of  

                                                                                                                                                                                                                                                         



defenses  related  to  Knik:                                                          it  did  not  object  and  offered  substantive  responses  to  

                                                                                                                                                                                                                                                       



arguments Crowley (or possibly Knik) made about the Cessna loan.  We have already  

                                                                                                                                                                                                           

noted Knik's status as a party who was never served with a summons.29   Northern asks  

                                                                                                                                                                                                                                                  



that we affirm the judgment entered in this case but does not explain who represented  

                                                                                                                                                                                                                             



                    27                 As we observed earlier, the complaint fails to set out explicitly a cause of                                                                                                                                      



action against Crowley as an individual.                                                                                See supra                       p. 7.           



                    28                 See supra note 23.  

                                                                                     



                    29                 See supra notes 2 and 3.  

                                                                                                          



                                                                                                                          -23-                                                                                                                  7361
  


----------------------- Page 24-----------------------

Knik's interests at trial if Crowley did not or why it could rely on the actions of one                                                                                                                                                               



member   of   Knik   -   Walker   -   to   justify   its   possession   of   the   Cessnas  while  



 simultaneously arguing that Crowley, the other member of Knik, cannot assert defenses                                                                                                                                                  



to the loan on Knik's behalf.                                                           



                                        The trial court made no findings about the disposition of the Cessnas or                                                                                                                                           



 about Northern's application of the proceeds to the loan balance.                                                                                                                                  Helmericks testified  



that one Cessna had been sold, evidently after some refurbishing.                                                                                                                                      The record has no                                  



 information about the sale price of that Cessna, the cost of any work done to prepare it                                                                                                                                                                     



 for sale, or the commercial reasonableness of Northern's actions; the record is silent                                                                                                                                                          

                                                                                                                                   30         With  no information  about the actual  

 about the disposition                                             of the second                                 plane.                                                                                                                        



 disposition  of  the  collateral,  it  is  impossible  to  ascertain  whether  Northern  could  

                                                                                                                                                                                                                                                



 overcome any presumption about the Cessnas' value and whether there was a surplus or  

                                                                                                                                                                                                                                                            



 deficiency on the loan.  

                                                      



                                        There is no evidence of any written notice to Knik, Crowley, or Walker in  

                                                                                                                                                                                                                                                            



the record, and Northern does not on appeal dispute the superior court's finding that  

                                                                                                                                                                                                                                                      



Helmericks agreed he did not provide written notice. A debtor has an interest in ensuring  

                                                                                                                                                                                                                                        



that collateral is sold for as much as possible in order to minimize any deficiency, and  

                                                                                                                                                                                                                    

notice of the sale can allow a debtor to help publicize the sale.31                                                                                                                                       Additionally, both  

                                                                                                                                                                                                                                                    



 debtors and secondary obligors have a right to redeem repossessed collateral, but that  

                                                                                                                                                                                                                                                      



                    30                  A   sale   is   not   the   only   way   a   creditor   can   dispose   of   collateral.    See  



AS 45.29.610(a) (permitting secured party to "sell, lease, license, or otherwise dispose"                                                                                                                                               

 of collateral after default).                       



                    31                  Cf. Kobuk Eng'g &Contracting Servs., Inc. v. Superior Tank &Constr. Co.  

                                                                                                                                                                                                                                                        

Alaska , 568 P.2d1007, 1011-12 (Alaska 1977) (holding that creditor's sale of equipment  

                                                                                                                                                                                                                                   

to itself with little notice and for substantially less than it obtained weeks later from  

                                                                                                                                                                                                                                                   

 another buyer was not commercially reasonable).  

                                                                                                               



                                                                                                                           -24-                                                                                                                    7361
  


----------------------- Page 25-----------------------

                                                                                                                                                                                                                                                            32  

right must be exercised before the creditor disposes of it.                                                                                                                                                                                                         Notice of disposition thus                                                                         



 serves an important function in the repossession context.                                                                                                                                                                                                           Because of the dearth of                                                                                  



information about disposition of the planes, we are unable to evaluate whether the failure                                                                                                                                                                                                                                                                    



to give notice of that disposition was harmless as the superior court found.                                                                                                                                                                                                                                                             



                                                           Crowley asserted in the superior court that Knik had overpaid its loan                                                                                                                                                                                                                                     



obligation, bringing into question whether Northern owed Knik money.                                                                                                                                                                                                                                                          The superior   



court did not mention this argument in its decision.                                                                                                                                                                          Because the record has virtually no                                                                                                              



information about disposition of the Cessnas, we cannot evaluate the superior court's                                                                                                                                                                                                                                                                      



finding that failure to give pre-disposition notice was harmless.                                                                                                                                                                                                                            We thus reverse the                                                           



 superior   court's   finding  that  Northern's   failure   to   provide   notice   as   required   by  



AS   45.29.611-.613   was   harmless   and   remand   to   the   superior   court   for   further  



proceedings about disposition of the Cessnas and Crowley's claim that Knik is owed a                                                                                                                                                                                                                                                                                                



 surplus.  



                              C.	                          The Superior Court's Finding That Wingnuts Was In Default And Its                                                                                                                                                                                                                                                  

                                                           Interpretation Of The Text Messages Were Not Clearly Erroneous.                                                                                                                                                                                                     



                                                           Crowley and Wingnuts contend that Wingnuts was not in default on the                                                                                                                                                                                                                                             



 security or loan agreements and conclude that NA Holdings had no right to possess the                                                                                                                                                                                                                                                                                      



Mooney.    They argue extensively that the superior court's interpretation of the text                                                                                                                                                                                                                                                                                  



messages   about  the   $19,000   payment   was   clearly   erroneous.     They   assert   that   the  



 superior court's statement that Crowley had left the Mooney "to rot" did not take into                                                                                                                                                                                                                                                                                 



account Crowley's purchase of a propeller for the plane. NA Holdings responds that the                                                                                                                                                                                                                                                                                       



trial court's interpretation of the text messages was correct and that it had a right to                                                                                                                                                                                                                                                                                        



possess the Mooney.                                                                           



                             32  

                                                                          

                                                          AS 45.29.623.  



                                                                                                                                                                                     -25-	                                                                                                                                                                           7361  


----------------------- Page 26-----------------------

                                                                                                                               

                    Crowley  made  a  $19,000  deposit  to  an  account  owned  by  one  of  



                                                                                                                                   

Helmericks's LLCs in late October 2014.  Crowley relies on the parties' "history . . .  



                                                                                                                                 

over their several agreements," a notation on Wingnuts's bank records, and a series of  



                                                                                                                                 

text messages the parties exchanged during the two weeks before the $19,000 deposit to  



                                                                                                                  

support his argument that he allocated this deposit to the Mooney-secured loan.  None  



                                                                                                                              

of  these  sources  shows  that  Crowley  gave  clear  instructions  to  Helmericks  or  NA  



                                                                                                                               

Holdings to apply the deposit primarily to that loan.  First, there is no evidence that the  



                                                                                                                              

notation on Wingnuts's bank records was ever communicated to Helmericks or NA  



                                                                                                                                

Holdings before Crowley made the deposit, so it cannot possibly have served as an  



                                                                                                                            

instruction to Helmericks or his LLCs.  Nor does the parties' "history" show a clear  



                                                                                                                              

intent that the money be used to satisfy and pay forward the Mooney-secured loan; this  



                                                                                                                       

argument  relies  exclusively  on  Crowley's  testimony,  but  the  trial  court  credited  



                                                    

Helmericks's testimony over his.  



                                                                                                          

                    Crowley's intent in allocating the payment solely to the Mooney-secured  



                                                                                                                             

loan when he sent the text messages is not, as he claims, "clear," and we disagree with  



                                                                                                                       

his assertion that there is only one way to interpret these messages.  While the superior  



                                                                                                                               

court  interpreted  the  text  messages  in  a  way  that  neither  party  advocated,  its  



                                                                                                                             

interpretation is not clearly erroneous.   Helmericks provided Crowley with the loan  



                                                                                

balances for the two secured debts as of October 18 and indicated he would apply any  



                                                                                                                              

payments to the net 30 account first and the secured debt last.  Crowley responded that  



                                                                                                                             

he was going to "start with the outstanding balance for Wingnuts and Knik" and then  



                                                                                                                              

"hopefully Wednesday or Thursday we will get the two loans done."  Crowley's text  



                                                                      

implies that he was waiting for more money.  



                                                                                                                   

                    The superior court interpreted Crowley's response as directing Helmericks  



                                                                                                                

to allocate enough money to the Mooney-secured loan to bring that loan current.  The  



                                                                                                                         

superior court noted that Crowley made a separate payment to bring Knik's loan current  



                                                              -26-                                                         7361
  


----------------------- Page 27-----------------------

and reasoned that Crowley anticipated paying off the two loans from other sources. The                                                                                                                                                                



court decided                               that any money                                     remaining   after   the Mooney-secured                                                                             loan   was made   



current should go to pay the net 30 account. This interpretation is not clearly erroneous:                                                                                                                                                                           



it accounts for ambiguities in the messages and takes into account the background events                                                                                                                                                       

at the time the messages were exchanged.                                                                                    33  



                                        The interpretation of the text messages was only one part of the superior  

                                                                                                                                                                                                                                         



court's analysis of Wingnuts's default.  The superior court also discussed the "gear-up"  

                                                                                                                                                                                                                                    



landing in August 2014 and the subsequent delay in attempting to repair the Mooney  

                                                                                                                                                                                                                                        



aircraft.  The security agreement related to the Mooney required Wingnuts to make all  

                                                                                                                                                                                                                                                          



repairs necessary "to maintain [the Mooney] in good working order and condition."  

                                                                                                                                                                                                                                                                     



Even if Crowley bought  a  replacement propeller as he argues, he took no steps to  

                                                                                                                                                                                                                                                           



promptly repair the Mooney.  It is uncontested that the Mooney was still at the Wasilla  

                                                                                                                                                                                                                                           



Airport when Helmericks removed the avionics in June 2015, almost a year after the  

                                                                                                                                                                                                                                                        



"gear-up" landing.  Wingnuts was thus in breach of the security agreement's provision  

                                                                                                                                                                                                                                     



that  the  collateral  be  maintained  "in  good  working  order  and  condition"  when  

                                                                                                                                                                                                                                               



Helmericks seized the avionics.  

                                                                                                



                                        The superior court's finding that Wingnuts was in breach of the loan and  

                                                                                                                                                                                                                             



security agreements was not clearly erroneous.  The court's interpretation of the text  

                                                                                                                                                                                                                                                      



messages and allocation of the payment was also not clearly erroneous, and Wingnuts  

                                                                                                                         



failed to maintain the Mooney as required in any event.  

                                                                                                                                                   



                    33                  We reject Crowley's argument that the superior court erred as a matter of                                                                                                                                           



law in its analysis.                                      The superior court's discussion suggests that it was attempting to                                                                                                                                

discern Crowley's allocation instructions from an ambiguous text.                                                                                                                                         Given the lack of                                

clarity, the superior court reasonably evaluated the parties' credibility to determine the                                                                                                                                                              

text messages' meaning.                       



                                                                                                                           -27-                                                                                                                    7361
  


----------------------- Page 28-----------------------

                    D.	                  The Superior Court Must Make Additional Factual Findings About                                                                                                                                          

                                         The Repossession Of The Mooney With Respect To A Breach Of The                                                                                                                                                  

                                        Peace.  



                                         Crowley and Wingnuts raise on appeal the question whether Helmericks's                                                                                                               



actions in removing the avionics and engine fromthe Mooney constituted a breach of the                                                                                                                                                                       



peace under AS 45.29.609, making the repossession illegal.                                                                                                                                  NA Holdings does not                                           



respond to this argument.                                                       



                                        Neither party cited the U.C.C. in the superior court.                                                                                                                   Nonetheless, the   



superior court found that "Helmericks had a right to seize the radios and engine pursuant                                                                                                                                                   



to AS 45.29.609."                                        Alaska Statute 45.29.609 permits a secured party to take possession                                                                                                         



of collateral after default without judicial process "if it proceeds without breach of the   



                       34  

peace."                                                                                                                                                                                                                                             

                              Here the parties offered different accounts of certain facts which might prove  



                                                                                                                                                                                                                                              

important in deciding whether Helmericks's removal of the avionics and engine violated  



                                                                                                                                                                                                                                                       

AS 23.30.609's directive, such as whether the plane was locked when the avionics were  



                            35  

removed.                                                                                                                                                                                                                                      

                                    With no factual determinations to review, we are unable to evaluate whether  



                                                                                                                                                                                                                                                            

Helmericks's actions in removing the engine and avionics were done in breach of the  



                      

peace.  



                                                                                                                                                                                                                                                            

                                         The superior court also did not explain why removal of only parts of the  



                                                                                                                                                                                                                                                 

collateral was commercially reasonable, despite conflicting testimony by the parties  



                    34                  We have not been called upon to clarify what constitutes a breach of the                                                                                                                                            



peace under AS 45.29.609(b); "breach of the peace" was left undefined by the U.C.C.'s                                                                                                                                                      

drafters, "leaving that matter for continuing development by the courts." U.C.C.  9-609                                                                                                                                                          

&   cmt.   3,   3   U.L.A.   671-72  (2010).    As   Wingnuts   and   Crowley   assert,   there   is  

considerable case law on this subject from other jurisdictions, and it is not uniform.                                                                                                                                            



                    35                  See Madden v. Deere Credit Servs., Inc., 598 So. 2d 860, 866 (Ala. 1992)  

                                                                                                                                                                                                                                                    

("The  creditor's  privilege  is  most  severely  restricted  when  repossession  can  be  

                                                                                                                                                                                                                                                            

accomplished only by the actual breaking or destruction of barriers designed to exclude  

                                                                                                                                                                                                                                              

intruders.").  



                                                                                                                             -28-	                                                                                                                     7361
  


----------------------- Page 29-----------------------

about that question, or why Helmericks's retention of the collateral with no apparent  

                                                                                                                      



effort to dispose of it was commercially reasonable.  

                                                                                



                    Because  the  breach  of  the  peace  issue  could  affect  the  legality  of  the  

                                                                                                                              



Mooney's repossession and thus the evaluation of damages, we vacate the superior  

                                                                                                                      



court's judgment against Wingnuts and Crowley as well as its order transferring title to  

                                                                                                                                



the Mooney and remand to the superior court for further proceedings.  

                                                                                       



          E.	       The   Superior   Court   Must   Explain   The   Basis   For   The   Judgment  

                    Against Crowley Individually.  

                                                 



                    Crowley contends that the judgment entered against him as an individual  

                                                                                                                    



should not stand because the Mooney-secured loan was an obligation of Wingnuts, an  

                                                                                          



LLC,  and  NA  Holdings  offered  no  evidence  or  argument  to  support  piercing  the  

                                                                                                                             



corporate  veil.          NA  Holdings  contends  that  the  judgment  against  Crowley  as  an  

                                                                                                                              



individual was based on his status as a guarantor of the Mooney-secured loan.  

                                                                                                                       



                    Thesuperior court did not explainwhy it entered judgmentagainst Crowley  

                                                                                                                      



"in his individual capacity" for the Mooney-secured loan - it merely stated it would do  

                                                                                                                               



so in a footnote.  Because we are presented with conflicting legal theories and no way  

                           



to determine the basis for the superior court's decision, we vacate the judgment against  

                                                                                                                        



Crowley in his individual capacity and remand this issue to the superior court.  

                                                                                                              



V.	       CONCLUSION  



                    We AFFIRM the superior court's finding that failure to give Knik Aircraft  

                                                                                                                       



Leasing notice of default prior to repossession of the Cessnas was harmless; we also  

                                                                                                                             



AFFIRMthesuperiorcourt'sinterpretationofthetext messagesbetween Helmericks and  

                                                                                                                              



Crowley.  We REVERSE the superior court's decision that Northern Aviation's failure  

                                                                                                                         



to provide notice of disposition of the Cessnas was harmless. We VACATE the superior  

                                                                                                                       



court's decisions about the repossession of the Mooney, its entry of judgment on the  

                                                                                                                              



Mooney-secured  loan,  and its entry  of judgment against Crowley  in  his  individual  

                                                                                                        



                                                              -29-	                                                       7361
  


----------------------- Page 30-----------------------

capacity. We                   REMANDthis                         case to the superior court for further proceedings consistent  



with this opinion.     



                                                                                                   -30-                                                                                  7361
  

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