Williams v. Baker

          Appeal from the Superior Court No. 3AN-11-11648 CI of the State of Alaska, Third Judicial District, Anchorage, Eric A. Aarseth, Judge.

          Ronald A. Offret and J.E. Wiederholt, Aglietti Offret & Woofter, LLC, Anchorage, for Appellant.

          Thomas S. Gingras and Debra J. Fitzgerald, Eide & Gingras, P.C., Anchorage, for Appellees

          Violeta Baker and Last Frontier Assisted Living, LLC. No appearances by Appellees Johnny Lee Williams, Personalized Tax Solutions, and Personalized Tax Solutions, LLC.

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

          OPINION

          BOLGER, CHIEF JUSTICE.

         I. INTRODUCTION

         The superior court found Deverette and Johnny Williams liable for defrauding Johnny's employer, Violeta Baker, after concluding that both owed her fiduciary duties and therefore had the burden of persuasion to show the absence of fraud. The court totaled fraud damages at nearly five million dollars and trebled this amount under Alaska's Unfair Trade Practices and Consumer Protection Act (UTPA). After final judgment was entered against Deverette and Johnny, Johnny died. Deverette now appeals her liability for the fraud. We affirm Deverette's liability for the portion of the fraud damages that the superior court otherwise identified as her unjust enrichment. But we reverse the superior court's conclusion that she owed Baker a fiduciary duty, and we reverse the UTPA treble damages against Deverette. We vacate the superior court's fraud conclusion as to Deverette and remand for further proceedings.

         II. FACTS AND PROCEEDINGS

         Johnny Williams worked for Violeta Baker and her home healthcare services company, Last Frontier Assisted Living, LLC (Last Frontier), from 2004 to 2009. Baker hired Johnny to provide payroll, tax-preparation, bookkeeping, and bill-paying services. She authorized him to make payments from her accounts, both for tax purposes and business expenses, such as payroll. She also gave him general authority to access her checking account and to execute automated clearing house (ACH) transactions from her accounts. Finally, Baker allowed Johnny to write checks bearing her electronic signature.

         Johnny did not invoice Baker for his labor. Rather he and Baker had a tacit understanding that he would pay himself a salary from Baker's payroll for his services. Baker and Johnny never discussed a precise amount for this salary, and Johnny did not keep a record of the hours he worked for Baker. Johnny presented himself as working for Baker in a personal capacity, but he also maintained the business Personalized Tax Solutions.^[1]

         Deverette Williams, Johnny's wife, was not an employee of Baker, Last Frontier, Johnny, or Personalized Tax Solutions. During Johnny's employment with Baker, Deverette primarily managed their home, though at times she also ran her own part-time businesses from home. Deverette discussed Johnny's business with him; she knew of advice he had given and services he had provided Baker. She witnessed Johnny using their home printer and computers in his work for Baker, and she relayed Baker's phone messages to him.

         In 2009 the Internal Revenue Service (IRS) notified Baker that her third-quarter taxes had not been filed and she owed a penalty and interest. Baker contacted Johnny to find out why the taxes had not been filed. When he could not produce a confirmation that he had e-filed them, Baker contacted her son for help. Baker's son discovered that several checks had been written from Baker's accounts to Personalized Tax Solutions and Deverette. Baker hired Mary Jones, a certified public accountant, to perform an audit of her accounts from 2004 to 2009.

         Jones concluded that payments from Baker's accounts to Johnny, Personalized Tax Solutions, and Deverette totaled a little over one million dollars. Transfers from Baker to Deverette equaled $135, 125. The final destination of some ACH transfers from Baker's accounts could not be verified; these "unidentified" transfers totaled $3, 644, 978. Jones estimated that Johnny's services over the time period could be valued between $47, 500 and $55, 000. Subtracting this from the total in transfers to Johnny, Deverette, and Personalized Tax Solutions resulted in an overpayment to the Williamses of approximately $950, 000. Jones also documented damages resulting from mistakes in Johnny's tax filings for Baker.

         In light of Jones's findings, Baker sued Johnny, individually and doing business as Personalized Tax Solutions and Personalized Tax Solutions, LLC, in October 2011.^[2] Baker amended the complaint in December, adding Deverette as a defendant. The amended complaint alleged negligence, breach of contract, and unfair trade practices against Johnny, Personalized Tax Solutions, and Personalized Tax ...