| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
|
You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Deverette L. Williams v violeta Baker, Last Frontier Assisted Living, LLC (8/2/2019) sp-7389
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
DEvERETTE L. WILLIAMS, )
) Supreme Court No. S-16951
Appellant, )
) Superior Court No. 3AN-11-11648 CI
v. )
) O P I N I O N
vIOLETA BAKER; LAST )
FRONTIER ASSISTED LIvING, ) No. 7389 - August 2, 2019
LLC.; JOHNNY LEE WILLIAMS; )
PERSONALIZED TAX SOLUTIONS; )
and PERSONALIZED TAX )
SOLUTIONS, LLC., )
)
Appellees. )
)
A
ppeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Eric A. Aarseth, Judge.
Appearances: 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.
BOLGER, Chief Justice.
----------------------- Page 2-----------------------
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
-2- 7389
----------------------- Page 3-----------------------
for Baker in a personal capacity, but he also maintained the business Personalized Tax
1
Solutions.
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
1
Johnny filed to establish Personalized Tax Solutions as a limited liability
company in early 2011.
-3- 7389
----------------------- Page 4-----------------------
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 PersonalizedTaxSolutions andPersonalized Tax Solutions, LLC, in October
2 Baker amended the complaint in December, adding Deverette as a defendant.
2011.
Theamended complaintalleged negligence, breach ofcontract, andunfairtradepractices
against Johnny, Personalized Tax Solutions, and Personalized Tax Solutions, LLC;
unjust enrichment against Deverette; and fraud and punitive damages against all four
defendants.3
In December 2014 Baker asked the court to shift to Johnny and Deverette
the burden of proving by clear and convincing evidence (1) where Baker's lost money
had gone and (2) that it was properly spent. Baker argued that this shift in the burden of
proof was warranted because both Johnny and Deverette owed Baker fiduciary duties.
In response the superior court issued an order for a two-part trial format. In "Phase I"
of trial, Baker would have the burden of proving that a fiduciary relationship existed
between one or both of the Williamses and Baker. If the court found any such fiduciary
duty, in "Phase II" the burden would be on Johnny and/or Deverette to prove by clear
and convincing evidence that they did not breach the duty. Otherwise the burden of
proof would remain with Baker.
2 Baker's company, Last Frontier Assisted Living, was also a plaintiff in the
lawsuit. For convenience we refer to the two plaintiffs collectively as "Baker."
3 The superior court entered default judgment against Personalized Tax
Solutions, LLC in October 2012. Because the Williamses chose to represent themselves
and neither was a licensed attorney, they could not file an answer on behalf of the limited
liability company.
-4- 7389
----------------------- Page 5-----------------------
In Phase I of trial, Deverette and Johnny characterized the sums of money
Johnny transferred to Deverette as "allotments"fromhissalary,i.e., portions of Johnny's
lawful salary that were allotted and paid directly to Deverette. The court found that
Johnny had a fiduciary duty to manage Baker's payroll and other funds to which he was
given access; to record all related transactions; to provide competent payroll, IT, and tax
advice; and to affirmatively advise Baker as to the limits of his fiduciary duty. The court
found that Deverette did not owe Baker a direct fiduciary duty.
The court shifted the burden of proof to Johnny but not Deverette on all but
Baker's fraud and unjust enrichment claims. With respect to the fraud claim, the court
4 It stated that this claim had
shifted the burden of proof to both Deverette and Johnny.
a "broader scope" than the others because it alleged the taking of money and improper
use of those funds, not just their negligent mismanagement. According to the court, such
alleged fraud would violate Johnny's "direct fiduciary duty" and Deverette's "indirect
duty" to "not take any actions that would result in . . . or assist in . . . [Johnny]
improperly using [Baker's] funds."
Phase II of trial took place in July 2015 and 2016. In June 2017 the
superior court issued oral findings of fact and conclusions of law. It made extensive
findings about Johnny's culpability but very few findings about Deverette. It found that
Johnny had committed negligence, breach of contract, UTPA violations, and fraud. The
court concluded that Deverette was unjustly enriched by Johnny's payments to her from
Baker's accounts. And it found that Deverette's acceptance of these funds was
inconsistent with Johnny's fiduciary duties. The court concluded that both defendants
had "acted in bad faith and with little regard to [Baker's] interests" and were liable for
4
Because unjust enrichment liability does not depend on the existence of a
fiduciary duty, the court did not reverse the burden of proof on this claim.
-5- 7389
----------------------- Page 6-----------------------
fraud. This fraud consisted of Johnny's misrepresentations about his competency and
trustworthiness as a fiduciary and tax preparer. The court made no specific findings
providing the basis for its conclusion that Deverette had also committed fraud.
In November 2017 the court adopted Jones's final damages calculation of
$4,956,774. It trebled the damages since it concluded that the acts causing them were
violations of Alaska's UTPA. The court entered a final judgment of $20,274,763.77
jointly and severally against the Williamses, individually and doing business as
Personalized Tax Solutions and Personalized Tax Solutions, LLC.
Johnny died later in November 2017, and Deverette notified the court of
this fact in December. In early 2018 she filed this appeal.
III. DISCUSSION
Deverettearguesthat thesuperior courterred in concludingsheowed Baker
fiduciary duties and that the record does not support her liability for the fraud claim.
Reviewing the superior court's legal conclusions de novo and its factual findings for
clear error,5 we agree that the record does not support a conclusion that Deverette was
a fiduciary of Baker. We reverse that conclusion and remand for further proceedings on
the fraud claim.
A. The Superior Court Erred When It Concluded That Deverette Owed
Fiduciary Duties To Baker.
The superior court concluded that Deverette owed an "indirect" fiduciary
duty to Baker based on the following findings: first, that Deverette represented herself
to Baker as an agent of Johnny on the jobs he performed; second, that Deverette knew
of the scope of work performed by Johnny and of the level of trust placed in Johnny by
5 Offshore Sys.-Kenai v. State, Dep't of Transp. & Pub. Facilities, 282 P.3d
348, 354 (Alaska 2012) (citing Labrenz v. Burnett, 218 P.3d 993, 997 (Alaska 2009)).
-6- 7389
----------------------- Page 7-----------------------
Baker; and third, that Deverette knew that Baker trusted her to pass on correct and timely
information and to not take actions that would be inconsistent with Johnny's fiduciary
duties.
Having reviewed the entire record, we are left with a "definite and firm
6
conviction" that the superior court was mistaken in reaching certain of these findings.
Specifically it erred by finding that Deverette represented herself as Johnny's agent in
all the work he performed for Baker and by finding that Deverette knew Baker trusted
her to not take actions inconsistent with Johnny's fiduciary duties. The evidence in
Phase I of trial showed that while Deverette knew the scope of Johnny's fiduciary
relationship with Baker, Deverette herself had never been an employee of Baker; had
never assisted Johnny in, or been delegated, work for Baker; and was not perceived as
Johnny's or Personalized Tax Solutions's agent by Baker. There was evidence that
Deverette took Baker's calls for Johnny and delivered messages to him, but nothing
established that she acted or represented herself as an agent of Johnny in his fiduciary
capacities. And there was also no evidence that Baker had come to trust Deverette as a
co-fiduciary with Johnny. It was thus clear error for the court to find that Deverette
generally represented herself as Johnny's agent and to find that she was aware of
elevated trust placed in her by Baker. We reverse these findings.
The findings that remain do not support the court's conclusion that
Deverette owed fiduciary duties to Baker.7 We have stated that a fiduciary relationship
6 Labrenz, 218 P.3d at 997.
7 Whether a fiduciary relationship exists is a legal question reviewed
de novo. Thomas v. Archer, 384 P.3d 791, 795 (Alaska 2016); see also Munn v.
Thornton, 956 P.2d 1213, 1220 (Alaska 1998) ("We exercise our independent judgment
in reviewing questions of law, such as whether a cost-plus contract creates a fiduciary
(continued...)
-7- 7389
----------------------- Page 8-----------------------
"exists when one imposes a special confidence in another, so that the latter, in equity and
good conscience, is bound to act in good faith and with due regard to the interests of the
8 "Fiduciary relationships are generally defined by a level
one imposing the confidence."
9 and "[l]oyaltyand thedisavowal
oftrust beyond that inordinary business relationships,"
of self interest are hallmarks of the fiduciary's role."10 The factual findings supported
by the record do not establish the existence of such a relationship between Deverette and
Baker. And since the record contains no evidence supporting such a relationship, we
reverse the superior court's erroneous conclusion.
Reversing the superior court's fiduciary duty conclusion also requires us
to reverse its ruling that shifted the burden of proof on Baker's fraud claim to Deverette.
In a civil action, trial courts may shift the burden of proof to the defendant if the
11 Under such circumstances burden shifting
defendant is a fiduciary of the plaintiff.
helps ensure that those entrusted with the weighty obligations of a fiduciary are held
12 Absent special circumstances, however, burden shifting is
responsible for those duties.
7 (...continued)
relationship.").
8 Seybert v. Cominco Alaska Expl. , 182 P.3d 1079, 1090 (Alaska 2008)
(quoting Munn, 956 P.2d at 1220).
9 Munn, 956 P.2d at 1220 (citing Fiduciary duty, BLACK'S LAW DICTIONARY
(6th ed. 1990)).
10 Id. (alteration in original) (quoting Wagner v. Key Bank of Alaska, 846 P.2d
112, 116 (Alaska 1993)).
11 See Miller v. Sears, 636 P.2d 1183, 1190 (Alaska 1981).
12 See id. (stating that once a fiduciary relationship is established, burden
shifting is "in accord with general tenets of the duties of a fiduciary and ensures that [the
(continued...)
-8- 7389
----------------------- Page 9-----------------------
not appropriate when there is no fiduciary relationship, and there were no such
circumstances here. Because the superior court erred in concluding that Deverette owed
fiduciary duties to Baker, its reversal of the burden of proof was also erroneous.
B. We Remand The Fraud Claim.
The superior court made Deverette liable for the entire judgment, but its
findings only referenced Deverette with respect to Baker's unjust enrichment and fraud
claims. Deverette does not dispute her liability for the approximately $135,000 awarded
for unjust enrichment. She does, however, contest her liability for the remaining
13
damages, which are encompassed by the fraud claim.
These are the overpayments
made to Johnny and Personalized Tax Solutions, the unverified ACH transfers, and the
damages resulting from improper tax filing, all trebled as violations of the UTPA.
Deverette argues that she is not responsible for these damages because she is not liable
for fraud. Baker claims that Deverette can be found jointly liable, either as an agent who
14
assisted Johnny in his wrongdoing or as a joint tortfeasor in Johnny's misconduct.
12 (...continued)
fiduciary] discharges his general duties of loyalty and fair play").
13 In her reply brief, Deverette also raises a claim for apportionment of
damages under AS 09.17.080, but this claim was not raised in the superior court. We
will not address this claim on appeal because it was not raised in her opening brief. See
Maines v. Kenworth Alaska, Inc. , 155 P.3d 318, 326 (Alaska 2007). But the superior
court on remand is free to consider whether to allow Deverette to assert this claim.
14 Baker also argues that Deverette is liable for Johnny's misconduct because
the judgment is a "marital debt" and because Deverette, as Johnny's surviving spouse,
will inherit his judgment debt. But whether Johnny's judgment debt would be classified
as "marital" in a divorce proceeding or whether it would be inherited by Deverette in a
probate proceeding are questions irrelevant to the central issue in this appeal: whether
Deverette is legally culpable for the fraud.
-9- 7389
----------------------- Page 10-----------------------
Because we have reversed the superior court's burden-shifting ruling, on
remand the burden will remain with Baker to prove by a preponderance of the evidence
that Deverette is liable for fraud. Baker may attempt to do so under a theory of direct
common law fraud or on a theory that Deverette is jointly liable for Johnny's fraud.
Should the superior court on remand find that Deverette is liable as a co-conspirator or
joint tortfeasor in Johnny's fraud, it should be mindful that co-conspirators and joint
tortfeasors are liable only for the acts of their collaborators that fall within the scope of
15
their common tortious design.
C. We Reverse The Treble Damages verdict Against Deverette.
The superior court ruled that Deverette's fraud liability was sufficient to
support UTPA liability. But Baker conceded at oral argument that Deverette was not
liable under the UTPA. Therefore, we also reverse the court's treble damages verdict
against Deverette.
Iv. CONCLUSION
We AFFIRM Deverette's unjust enrichment liability. We REvERSE the
superior court's fiduciary duty conclusion and the UTPA treble damages. We vACATE
the superior court's fraud conclusion as to Deverette and REMAND for further
proceedings consistent with this opinion.
15 See Halberstam v. Welch , 705 F.2d 472, 484 (D.C. Cir. 1983) (stating that
civil co-conspirators are liable for "acts pursuant to, in furtherance of, or within the scope
of the conspiracy"); R ESTATEMENT (SECOND) OF TORTS § 876 cmt. a (A M. L AW INST .
1979) ("Whenever two or more persons commit tortious acts in concert, each becomes
subject to liability for the acts of the others.").
-10- 7389
 |
| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
|
