Kenai Chrysler Center, Inc. v. Denison

• Citation: 167 P.3d 1240
• Decision Date: 21 September 2007
• Docket Number: No. S-11707.,No. S-11688.,S-11688.,S-11707.
• Parties: KENAI CHRYSLER CENTER, INC., an Alaskan Corporation, DaimlerChrysler Insurance Agency, Inc., a Michigan Corporation, Appellants/Cross-Appellees, v. Dorothy and Michael DENISON, as guardians of David Denison, Appellees/Cross-Appellants.
• Court: Supreme Court of Alaska (US)

167 P.3d 1240

KENAI CHRYSLER CENTER, INC., an Alaskan Corporation, DaimlerChrysler Insurance Agency, Inc., a Michigan Corporation, Appellants/Cross-Appellees, v. Dorothy and Michael DENISON, as guardians of David Denison, Appellees/Cross-Appellants.

No. S-11688.

No. S-11707.

Supreme Court of Alaska.

September 21, 2007.

Dennis R. Acker, Anchorage, for Appellants/Cross-Appellees.

Thomas A. Dosik, Disability Law Center of Alaska, Anchorage, for Appellees/Cross-Appellants.

Before: BRYNER, Chief Justice, MATTHEWS, EASTAUGH, FABE, and CARPENETI, Justices.

OPINION

BRYNER, Chief Justice.

I. INTRODUCTION

Kenai Chrysler Center, Inc., sold a car to David Denison, not knowing that David was developmentally disabled and subject to the legal guardianship of his parents. When the Denisons tried to return the car and insisted that the contract was void, Kenai Chrysler refused to take it back and demanded restitution to rescind the contract. The Denisons sued Kenai Chrysler¹ and won an award of treble damages under Alaska's Unfair Trade Practices Act. On appeal, Kenai Chrysler challenges the jury verdict and various rulings made by the superior court. The Denisons cross-appeal, challenging the superior court's award of attorney's fees and its failure to impose sanctions against Kenai Chrysler. We find no merit in the parties' arguments and affirm the superior court's judgment.

II. FACTS AND PROCEEDINGS

A. Facts

David Denison is a developmentally disabled young man who has been under the legal guardianship of his parents since 1999, when he turned eighteen. In October 2002 David was living in his own apartment, but his parents strictly controlled his finances. They visited him at least once each week to make sure he had a clean and safe place to live and was budgeting his food money properly. They also visited him socially several times every week. They spoke with David nearly every day.

The Denisons first learned that David wanted to buy a car when David called his father, Michael, from Kenai Chrysler and asked him to cosign for a used car; David did not tell his father where he was when he called. Michael refused to cosign. The next day, David again tried to purchase a car from Kenai Chrysler. This time, he was trying to buy a new car, a Dodge Neon, which he could finance without a cosigner. David called his mother, Dorothy, to ask for money for a down payment. Dorothy refused and told him not to buy a car. She assumed her word would be final because she did not realize that David could obtain any appreciable amount of money with his debit card.

David used his debit card and bought the Neon. Kenai Chrysler charged $16,614 for the car and $945 for the dealership's extended service plan. With additional charges, fees, and taxes, the total price came to $17,802. Kenai Chrysler gave David credit for trading in his 1994 Pontiac Grand Am, and applied a $2,000 factory rebate to the down payment, which allowed David to buy the new Neon with only $500 in cash. Kenai Chrysler financed the remaining $12,851.77 at 11.99% APR for five years.

One or two days after David signed the contract, Dorothy came to Kenai Chrysler with David and informed the salesman who had sold David the car and a Kenai Chrysler manager that David was under the legal guardianship of his parents and had no legal authority to enter into a contract to buy the Neon. Dorothy showed the manager David's guardianship papers and asked him to take back the car. The manager refused; according to Dorothy, he told her that Kenai Chrysler would not take back the car, and that the company sold cars to "a lot of people who aren't very smart." Dorothy insisted that the contract was void, but the Kenai Chrysler manager ignored her and handed the keys to David over Dorothy's objection. David drove off in the new car. Dorothy contacted Duane Bannock, the general manager of Kenai Chrysler, the next day; he told her that he had seen the guardianship papers, but he still thought that the contract was valid and that David was bound by it.

A couple of days after Kenai Chrysler gave David back the keys, David damaged the Neon in a one-car accident. The Denisons then managed to get the car away from David and return it to Kenai Chrysler, but six days later, when David called Kenai Chrysler to ask for his Pontiac back, someone at the dealership told him that he could not have it but could pick up his new car any time. David got a ride to Kenai Chrysler and picked up the Neon. The next day the Denisons were able to convince David to return the car to Kenai Chrysler yet again, and this time he left the car there.

While they were trying to handle the immediate challenge of returning the Neon to Kenai Chrysler and preventing anyone there from giving it back to David, the Denisons also sought legal advice about the validity of the contract. They consulted the Alaska State Association for Guardianship and Advocacy and the Disability Law Center; advocates at both offices confirmed Dorothy's belief that the contract was void. Michael Denison also contacted the court-appointed investigator for David's guardianship case. The investigator contacted Kenai Chrysler's general manager, Bannock, and advised Bannock that the guardianship did indeed make the contract legally void; Bannock refused to listen to the advice. An advocate from the Disability Law Center contacted Robert Favretto, the owner of Kenai Chrysler, on the Denisons' behalf. Favretto would not listen to the advocate's advice. Despite these contacts, Kenai Chrysler sought no legal advice concerning the validity of the sales contract until November 15, a full month after the sale.

During this time, Kenai Chrysler continued in its active efforts to enforce the contract. The company promptly assigned David's loan to the General Motors Acceptance Corporation (GMAC) but never informed GMAC of David's incapacity. It also demanded storage fees from David for keeping the Neon on its lot. It sold David's Pontiac trade-in on the same day the Denisons brought the Neon back for the second time, even though the Denisons were still contesting the sale.

GMAC eventually repossessed the Neon and sold it, resulting in a deficiency on the loan. After the Denisons' attorney informed GMAC of David's guardianship, GMAC agreed to treat the loan as uncollectible. Kenai Chrysler paid GMAC the deficiency without asking whether GMAC intended to collect the loan.

B. Proceedings

On December 4, 2002, Kenai Chrysler petitioned in probate court to modify David's guardianship order so that it would allow him to purchase the car. The company claimed to have standing to file the probate petition as "a person interested in the ward's welfare." The probate court denied the petition and awarded the Denisons attorney's fees, expressly finding the petition to be frivolous and without good cause.

The day after Kenai Chrysler filed its petition in probate court, the Denisons sued the company, seeking a judgment declaring that the sales contract was void because of the guardianship. The Denisons also sought an injunction to prevent Kenai Chrysler from enforcing the contract, monetary damages under the Unfair Trade Practices Act (UTPA),² and punitive damages. Kenai Chrysler counterclaimed for restitution, including reimbursement for paying the deficiency to GMAC.

The parties filed cross-motions for summary judgment on Kenai Chrysler's liability under the UTPA. The superior court denied both motions, but noted that the Denisons appeared to be entitled to summary judgment on their claim to declare the contract void as a matter of law. The court also observed that, even though Kenai Chrysler had cited the Restatement (Second) of Contracts to support the validity of the contract, the company had "failed to address the section of the restatement dealing directly with the capacity of persons under guardianship by reason of an adjudication of mental illness or defect to incur contractual duties."

The Denisons then moved for summary judgment on their claim for declaratory relief. Kenai Chrysler requested a continuance for discovery to determine whether the Denisons had abandoned their guardianship. The company characterized this issue as the key to proving that the Denisons owed restitution. The superior court granted the continuance, but Kenai Chrysler failed to seek any appropriate discovery on the issue. The Denisons renewed their motion for summary judgment after the close of discovery, and Kenai Chrysler did not oppose their motion. The court granted the Denisons' motion for summary judgment and declared the sales contract void as a matter of law. It also summarily granted judgment against Kenai Chrysler on its affirmative defenses and counterclaims.

The Denisons' case proceeded to trial before a jury on the Denisons' UTPA claim. During the trial, the Denisons sought to refresh the memory of a Kenai Chrysler employee by referring to a rental rate quote that Dorothy had obtained from the company. The trial court allowed the Denisons to rely on the quote for this purpose, even though Kenai Chrysler objected that the quote had not been disclosed to it before trial.

The trial court also directed Kenai Chrysler general manager Duane Bannock to rely on a prepared script in responding to questions by Kenai Chrysler that asked Bannock to describe the legal advice he had received concerning the Denisons' claim.

At the conclusion of the trial, the jury returned a verdict in the Denisons' favor. The verdict awarded David $500 for loss of his down payment, $4,650 for the value of his Pontiac trade-in, and $5,000 for the loss of use of his Pontiac after the sale. Although the jury found that Kenai Chrysler had demonstrated "reckless indifference" to David's interests, the jury foreman advised the court that the jury did not favor awarding punitive damages. Upon learning of the foreman's advice, the Denisons indicated that they would waive their claim for punitive...