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Kazan v. Dough Boys, Inc.

Supreme Court of Alaska

February 20, 2009

Nicholas KAZAN, Petitioner,
v.
DOUGH BOYS, INC., Respondent.

Rehearing Denied April 7, 2009.

Page 509

[Copyrighted Material Omitted]

Page 510

Brewster H. Jamieson and Joshua M. Kindred, Lane Powell LLC, Anchorage, for Petitioner.

Roy Longacre, Longacre Law Offices, Ltd., Anchorage, for Respondent.

Before : FABE, Chief Justice, MATTHEWS, EASTAUGH, and WINFREE, Justices.

OPINION

FABE, Chief Justice.

I. INTRODUCTION

This appeal arises from a claim based on the filing of a financing statement with an overly broad description of the property subject to a lien under Revised Article 9 of the Uniform Commercial Code. A single overarching question is presented: Is it error as a matter of law to rescind a settlement agreement with respect to one party and not the other? In the proceedings below, the trial court awarded Dough Boys, Inc. $60,000 in damages after holding that Nicholas Kazan used his overbroad financing statement to " leverage" a $60,000 settlement payment as part of the sale of a business owned by Dough Boys. The superior court affirmed and we granted Kazan's petition for hearing. Because we conclude that it was error to not enforce the parties' settlement agreement in its entirety and that Dough Boys was not harmed by Kazan's overbroad financing statement, we reverse the $60,000 award to Dough Boys.

II. FACTS AND PROCEEDINGS

A. Facts

In 2002 Nicholas Kazan sold two business, Europa Bakery and Caf Europa, to Dough Boys, Inc. in two separate transactions. When Dough Boys purchased Caf Europa in the second transaction, it gave Kazan a promissory note for part of the purchase price. The parties also entered into a security agreement that secured the promissory note and all amounts Dough Boys might owe Kazan in the future under the parties' sale agreement for Caf Europa. Both the Caf Europa sale agreement and the security agreement authorized Kazan to file a financing statement covering the assets of Caf Europa. Dough Boys paid the $125,000 balance on the note in full and on time at the end of 2002.

It is undisputed, and the trial court found, that the financing statement's description of Dough Boys' property subject to Kazan's lien was overly broad because it covered all of

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Dough Boys' property.[1]The parties' sale agreement for Caf Europa authorized Kazan " to execute and record ... an initial financing statement covering equipment, inventory, fixtures, accounts receivable, general intangibles and proceeds thereof arising from any business operation owned by [Dough Boys] and operated under the name of Caf Europa." Similarly, the parties' security agreement, which authorized Kazan to file a financing statement, limited the collateral to the assets of Caf Europa. The financing statement filed by Kazan, however, did not limit the property to that of Caf Europa but instead covered Dough Boys' " equipment[,] inventory, fixtures, accounts receivable, general intangibles, trademarks, customer lists, booked orders, attachments and accessions, leasehold interest, products and proceeds."

In 2005 Dough Boys sold both Europa Bakery and Caf Europa to Sagaya Corporation, again in two separate transactions. Sagaya and Dough Boys signed a purchase agreement for Europa Bakery in January 2005, and a ...


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