Wasser & Winters Co. v. Ritchie Bros. Auctioneers (America), Inc.

185 P.3d 73, 2008 Alas. LEXIS 76, 2008 WL 2152508
CourtAlaska Supreme Court
DecidedMay 23, 2008
DocketS-12581, S-12611
StatusPublished
Cited by18 cases

This text of 185 P.3d 73 (Wasser & Winters Co. v. Ritchie Bros. Auctioneers (America), Inc.) is published on Counsel Stack Legal Research, covering Alaska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wasser & Winters Co. v. Ritchie Bros. Auctioneers (America), Inc., 185 P.3d 73, 2008 Alas. LEXIS 76, 2008 WL 2152508 (Ala. 2008).

Opinion

OPINION

EASTAUGH, Justice.

I. INTRODUCTION

A creditor authorized an auctioneer to sell seven pieces of equipment in which the ereditor held a security interest, and agreed to release its interest upon payment of "net proceeds" not to exceed the entire amount of debt owed to the creditor and subject to the payoff of a known senior lien. The ereditor and auctioneer disagree about whether "net proceeds" was to include the proceeds from the sale of all of the debtor's equipment or only the equipment in which the creditor held a security interest. They also disagree on which party bears the risk of mistake due to the discovery of additional liens after the release of the creditor's interest. The superior court concluded that "net proceeds" was limited to the items in which the ereditor held a collateral interest, reformed the contract to reflect payoff of all senior lien holders before payoff to the creditor, and granted summary judgment to the auctioneer. Because we determine that the superior court correctly declined to assign the risk of mistake to the auctioneer and therefore did not err in reforming the contract, we affirm the grant of summary judgment. We remand for further proceedings relating to the prevailing party's paralegal fees.

II. FACTS AND PROCEEDINGS

Wasser & Winters, Inc. made loans to Ben A. Thomas, Inc., a logging company. Thomas's debt to Wasser was secured by liens on seven pieces of Thomas's equipment. In early 2004 Thomas hired Ritchie Bros. Auctioneer, an auctioneer of used industrial equipment, to sell some of its equipment. The auction contract made Thomas responsible for identifying the creditors holding an interest in the equipment to be auctioned. Thomas identified KeyBank National and Wasser as its creditors.

Ritchie then informed Wasser that Ritchie was arranging a sale of the equipment seeur-ing the Thomas obligations. Ritchie wanted to auction the equipment free of any liens. Ritchie sent Wasser a release form (Release #1) asking for Wasser's consent and requested payoff figures for Wasser's lens. Release # 1 gave Wasser three options: disclaim any interest in the equipment or its proceeds; accept the net proceeds earned from the auction; or accept payment of a fixed amount. Ron Berg, Wasser's viee president, returned Release # 1 by fax on March 1, 2004. Berg chose the fixed amount option and set the proposed payoff figure as $331,078.55, the amount of Thomas's total debt to Wasser.

On March 29, 2004, Ritchie employees held an internal telephone conference to discuss the Thomas auction. The conference included Karl Werner, regional manager for Ritchie's Northwest Division. He was responsible for approving or denying Wasser's request. During the conversation the Rit-chie representatives identified liens held by Wasser, KeyBank, and HSBC. Werner compared the value of the equipment to Thomas's debt and would not agree to the payoff proposed in Release # 1.

Werner telephoned Wasser's Berg to discuss the terms of Wasser's proposed release. During the call, Berg asked Werner whether there were any IRS liens against the equipment. Werner put Berg on hold and asked John Meese of Ritchie's Settlement Department if Meese was "positive" there were no other liens; Meese stated "(that's correct." Werner later testified that he informed Berg *76 there were no other liens. Werner apparently did not tell Berg about the HSBC lien because it was specific to picces of Thomas's equipment in which Wasser did not hold a security interest.

This March 29 conversation between Berg and Werner is at the center of this lawsuit. According to Wasser, Ritchie agreed to pay Wasser up to approximately $831,000 from the net proceeds of the entire Thomas auction after discharge of the KeyBank lien. Thomas's auction equipment consisted of thirty-eight items in total; Wasser held a security interest in seven of those items. Wasser contends that the parties agreed that Wasser would receive net proceeds from sale of all thirty-eight items of Thomas's equipment and without consideration of the HSBC Tien or any lien other than the KeyBank lien. But Ritchie asserts that Werner and Berg agreed that Wasser would receive only the net proceeds from the sale of the items of equipment in which Wasser held a security interest, and then only after Thomas's senior creditors were paid.

Ritchie prepared a new release form, Release #2, based on the March 29 conversation with Berg. Release #2 lists the seven pieces of Thomas's equipment in which Was-ser held a security interest and states that Wasser accepts "NET PROCEEDS not to exceed $331,078.55 after KeyBank National payoff." Ritchie sent Release #2 to Wasser and Wasser signed it without modification on March 29.

Ritchie held the auction on March 30, 2004. The Thomas auction was part of Ritchie's quarterly regional auction which included over 3,000 lots and generated gross sales exceeding twenty-three million dollars. The sale of all of Thomas's equipment resulted in gross revenue of $961,550 and net proceeds of $607,064.77. The sale of the seven items in which Wasser held a security interest yielded gross revenue of $174,000 and net proceeds of $127,063.88.

Meese informed Wasser's Berg on April 9 that Ritchie would pay Wasser $831,000 on April 21. On April 19 Ritchie issued a check payable to Wasser in the amount of $331,078.55. Before sending the check, Rit-chie discovered various loggers' pension trusts that were claiming a priority interest in approximately $450,000 of the proceeds of the sale of all of Thomas's auctioned equipment. The equipment was also encumbered by tax liens in favor of the IRS and the Kodiak Island Borough. After discovering the additional liens Ritchie held the sale proceeds in a trust account. Ritchie withheld the Wasser check and eventually cancelled it.

On July 2 Thomas was forced into involuntary bankruptcy proceedings by the loggers' pension trusts. Ritchie filed an inter-pleader complaint in bankruptcy court and deposited the net proceeds-$607,064.77from the entire Thomas auction into the court registry. The loggers' pension trust liens were subordinate to Wasser's lien, but the IRS and the Kodiak Island Borough tax liens had higher priority than the unsecured portion of Wasser's liens. The tax liens reduced Wasser's proceeds from sale of the seven pieces of equipment and consumed the excess proceeds from sale of the other Thomas equipment. Wasser agreed to a stipulated resolution of the creditors' entitlement to the interpleader funds and received $85,954.36 in net proceeds from the seven items in which it held a collateral interest. On July 22 Wasser sued Ritchie, asserting breach of contract, misrepresentation, promissory estoppel, and conversion. Ritchie removed the case to United States District Court for the District of Alaska, which referred the case to bankruptcy court.

In 2005 Ritchie moved for summary judgment in the bankruptcy court. After determining that a mutual mistake existed and that it was "more reasonable to have Wasser bear the risk" of the parties' mistake, the bankruptcy court granted Ritchie's motion and dismissed Wasser's lawsuit. The bank-ruptey court later vacated its grant of summary judgment, noting that it did not have jurisdiction over Wasser's complaint because it was a state-law contract dispute. The district court then remanded the case to the superior court.

Ritchie moved for summary judgment in the superior court.

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Cite This Page — Counsel Stack

Bluebook (online)
185 P.3d 73, 2008 Alas. LEXIS 76, 2008 WL 2152508, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wasser-winters-co-v-ritchie-bros-auctioneers-america-inc-alaska-2008.