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Ranes & Shine, LLC v. MacDonald Miller Alaska, Inc.

Supreme Court of Alaska

May 1, 2015

RANES & SHINE, LLC, Appellant,
v.
MACDONALD MILLER ALASKA, INC., Appellee

Page 504

Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, John Suddock, Judge. Superior Court No. 3AN-10-10232 CI.

Brent R. Cole, Law Office of Brent R. Cole, P.C., Anchorage, for Appellant.

Jason J. Ruedy, Law Offices of Royce & Brain, Anchorage, for Appellee.

Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and Bolger, Justices.

OPINION

Page 505

STOWERS, Justice.

I. INTRODUCTION

In 2005 Gordon Timmerman, the sole owner of MacDonald Miller Alaska, Inc., agreed to release a claim MacDonald Miller had against Ranes & Shine, LLC, and to pay an additional $18,000 in exchange for equipment Ranes & Shine claimed to own free of any encumbrances. Five years later First National Bank Alaska contacted Timmerman, asserting a security interest in the equipment and requesting its return. First National eventually filed this suit against Timmerman in 2010 to obtain possession of the equipment.[1]

Timmerman filed a third-party complaint against Ranes & Shine and its former managing

Page 506

member, Thomas Ranes, asserting breach of warranty of title, misrepresentation, unfair trade practices, and common law contract claims. In its answer, Ranes & Shine alleged among its other contentions that the applicable statutes of limitation barred Timmerman's suit because First National's publicly filed Uniform Commercial Code (UCC) financing statement should have placed Timmerman on inquiry notice of First National's security interest in the equipment at the time of the agreement in 2005. The superior court disagreed and held Ranes & Shine liable for breach of contract and misrepresentation, while also dismissing the claims asserted against Ranes individually. Ranes & Shine appeals.

We affirm the superior court's statute of limitations and attorney's fees and costs rulings, as well as various procedural rulings for the reasons discussed below. But we reverse the court's decision to dismiss the misrepresentation claim that Timmerman's company, MacDonald Miller, had asserted against Ranes in his individual capacity and remand for further proceedings on that issue.

II. FACTS AND PROCEEDINGS

A. Facts

Thomas Ranes, Ken Embley, and Tom Embley formed Ranes & Shine, LLC in October 2001. Ranes owned 50% of the company, and the Embleys each owned 25% of the company. Ranes had complete managerial authority, and the Embleys were essentially silent partners.

In 2002 Ranes & Shine applied for a loan from First National Bank Alaska. In connection with the loan, Ranes and the Embleys signed a promissory note, a business loan agreement, and a commercial security agreement to secure the loan. The commercial security agreement gave First National a security interest in various categories of collateral, including Ranes & Shine's equipment. On October 30, 2002, First National filed a UCC financing statement perfecting its security interest in the equipment. First National filed a continuation of that financing statement on August 7, 2007.

In 2003 Circle Plumbing & Heating, a company majority-owned by the Embleys, was hired to build Ranes & Shine's facility. Circle hired MacDonald Miller Alaska, Inc., a company wholly owned by Gordon Timmerman, to provide mechanical services for the new building.

MacDonald Miller worked on the project and billed Circle, but was not promptly paid. MacDonald Miller eventually filed a lien against Ranes & Shine's building for approximately $92,000. But MacDonald Miller released the lien a few hours later, allegedly because Tom Embley contacted Timmerman asking him to release the claim so Ranes & Shine could secure additional funding for the building project. Tom Embley allegedly assured Timmerman he would be paid, and Circle later paid MacDonald Miller $60,000 in 2004. This left a claimed balance of $32,000 outstanding.

Timmerman continued to pursue the debt without success until he contacted Ranes & Shine directly and spoke with Ranes. In October 2005 Timmerman and Ranes came to an agreement: in exchange for certain equipment, Timmerman executed a release of the remaining $32,000 debt owed to MacDonald Miller and paid an additional $18,000 to Ranes & Shine.

In the course of reaching this agreement, Ranes incorrectly represented to Timmerman that Ranes & Shine owned clear title to the equipment. Timmerman did not conduct a UCC record search; he later testified it was not his standard practice to do so and he " didn't even know what UCC stood for" prior to this lawsuit.

After Timmerman took possession of the equipment, he stored it in a shipping container. There it remained until the summer of 2010 when First National contacted him. First National explained it had filed a UCC financing statement documenting its security interest in the equipment several years before Timmerman's agreement with Ranes & Shine. First National also stated that the loan secured by the equipment had gone into default. First National demanded that Timmerman return the equipment, but Timmerman refused.

Page 507

B. Proceedings

First National brought suit against Timmerman in 2010 seeking the return of the equipment. Timmerman answered the complaint and asserted third-party claims against Ranes individually and Ranes & Shine based on Ranes's incorrect representation that Ranes & Shine owned the equipment without any encumbrances. Timmerman asserted the following third-party claims: (1) breach of warranty of title under the UCC; (2) misrepresentation; and (3) deceptive trade practices under Alaska's Unfair Trade Practices and Consumer Protection Act (UTPA). First National's claims against Timmerman were disposed of on summary judgment, leaving only Timmerman's third-party claims.

Ranes & Shine moved for summary judgment on Timmerman's claims based on the applicable statutes of limitation. Superior Court Judge John Suddock granted Ranes & Shine's motion in part, ruling that Timmerman's breach of warranty claim was subject to the UCC's strict four-year limitations period[2] and that Timmerman failed to bring his breach of warranty claim within that period. The superior court denied Ranes & Shine's motion with respect to the misrepresentation and UTPA claims, concluding that there were genuine issues of material fact regarding when Timmerman was put on inquiry notice. The court did not address a common law contract claim Timmerman had added through an amended complaint filed while the parties were briefing the summary judgment motion.[3]

The superior court held a two-day bench trial in May 2013 to address the remaining claims. The court ruled that Timmerman's misrepresentation, UTPA, and common law breach of contract claims were not barred by the statutes of limitation because Timmerman was not on inquiry notice until he was contacted by First National in 2010. The court also concluded that Timmerman had proven his misrepresentation and breach of contract claims, but not his UTPA claim.

The superior court observed, however, that the lawsuit had been " inaptly filed as a personal lawsuit by Mr. Timmerman against [Ranes & Shine] when all the evidence is that he was negotiating and settling and purchasing this equipment as a corporate officer of MacDonald Miller." Based on this finding, and further finding that Ranes & Shine would suffer no prejudice, the court on its own initiative substituted MacDonald Miller as the plaintiff.

MacDonald Miller prepared a final judgment for the superior court's signature. The proposed final judgment stated that the claims against Ranes individually were dismissed. Ranes & Shine objected, arguing that the superior court's oral ...


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