Unpublished Disposition, 888 F.2d 130 (9th Cir. 1982)

MEMORANDUM^* 

Defendant-appellant Enserch Alaska Construction, Inc. ("Enserch Alaska")¹  appeals the denial of its motions for a directed verdict and judgment notwithstanding the verdict, contending the evidence was insufficient to support a damage award to Dennis S. Josephson, Inc. ("Josephson, Inc."). The award was based on royalties for sandbags produced after December 31, 1982, by machines Dennis S. Josephson ("Josephson") designed. Enserch Alaska contends that Josephson, Inc. had no contractual right to royalties after December 31, 1982, and that Enserch Alaska was not bound by any contract that might have existed between Josephson, Inc. and Enserch Alaska's predecessor corporation, Alaska International Contractors ("the old AIC"). Enserch Alaska also appeals the denial of its motion for a new trial based on inconsistent jury verdicts. Finally, Enserch Alaska appeals the district court's award of prejudgment interest and its award of attorney's fees to Josephson, Inc. Alaska International Construction, Inc. ("AIC-Enserch"), a related corporation also named as a defendant, appeals the district court's denial of its request for attorney's fees. Josephson, Inc. seeks attorney's fees on appeal. We affirm the district court, but decline to award attorney's fees on appeal.

I. Contract to Pay Josephson, Inc. Post-1982 Royalties

A. Contract Formation. Josephson testified that he and Fowler, the president of both the old AIC and of AIC-Enserch, orally agreed Josephson, Inc. would be paid royalties for sandbags manufactured after December 31, 1982. Josephson's June 12 letter refers to a previous agreement to pay royalties after December 31, 1982. While Josephson's July 31 letter requests "completing and finalizing" of the agreement, it also requests confirmation of the agreement. Josephson and Fowler testified that Josephson was unwilling to show the plans until a definite agreement between the parties had been reached. Josephson and Fowler testified that the plans were delivered and an agreement reached before the June 12 letter was sent. Josephson, Inc. had completely performed its side of the agreement, i.e., furnished the plans and Josephson's services as a consultant, before Josephson sent the July letter. AIC-Enserch, in its 1983 bid to Sohio Construction, Inc., listed among its costs $2.75 per sandbag for royalties.

All of this evidence supports the conclusion that under Alaska law the parties formed a contract for royalties after December 31, 1982. See Hall v. Add-Ventures, Ltd., 695 P.2d 1081, 1087 n. 9 (Alaska 1985) (Alaska law requires for formation of a contract, "an offer, encompassing all essential terms, an unequivocal acceptance by the offeree of all terms of the offer, consideration, and intent to be bound by the offer."). Such a contract could not be modified absent additional consideration, and Josephson, Inc. was under no obligation to correct AIC as to any subsequent correspondence setting forth terms differing from the previously formed contract. Holiday Inns of America, Inc. v. Peck, 520 P.2d 87, 95 n. 19 (Alaska 1974).

Paragraph three of the June 12 letter states that payment of royalties is to be made to Josephson, Inc. Correspondence between the parties dated June 12, July 20, and October 20 refer to Josephson, Inc. as the entity to whom royalties are to be paid.

Because Enserch Alaska failed to renew its motion for directed verdict at the close of all the evidence, we must uphold denial of both a directed verdict and a motion for judgment notwithstanding the verdict if the record contains any evidence, irrespective of its sufficiency, that supports the verdict, absent manifest injustice. Herrington v. Sonoma County, 834 F.2d 1488, 1500 & n. 11 (9th Cir. 1987), amended on other grounds, 857 F.2d 567 (1988), cert. denied, 109 S. Ct. 1557 (1989). The testimony and documentary evidence contained in the record support the jury's verdict that Josephson, Inc. and the old AIC entered into a contract whereby royalties would be paid to Josephson, Inc. after December 31, 1982. Accordingly, we affirm the denial of the motion for directed verdict and judgment notwithstanding the verdict on this issue.

B. Statute of Frauds. Enforcement of the parties' contract is not barred by lack of a writing. AIC was able to quit manufacturing sandbags at any time after entering into the contract. Alaska's statute of frauds, which renders unenforceable any oral agreement "that by its terms is not to be performed within a year from the making of it [,]" AS 09.25.010(a) (1), does not apply unless the contract "contains a negation of the right or capability of performance within the year." Howarth v. First Nat'l Bank of Anchorage, 540 P.2d 486, 491 (Alaska 1975). Contracts fully performable within one year do not fall within the statute "even though the time of its performance is uncertain, and may probably extend, be expected by the parties to extend, and in fact does extend, beyond the year." Id.

II. Enserch Alaska's Responsibility for Royalty Payments

The jury found Enserch Alaska liable for the entire amount of post-1982 royalties claimed. Josephson, Inc. argued below and on appeal that it had a contract with the old AIC which AIC-Enserch assumed, and that Enserch Alaska became liable because it was essentially the same corporation as AIC-Enserch.² 

A. AIC-Enserch and the Old AIC. A corporation buying the assets of another corporation may assume the latter's liabilities through either express or implied agreement. 15 Fletcher, Cyclopedia Corporations Sec. 7122, at 189 (rev. perm. ed. 1983). The transferee corporation can assume an obligation where it "purchases the property and franchises of another company, including property for which the latter was under obligation to pay, and to which it could acquire no right without payment." Id. at Sec. 7124, at 211. This type of implied assumption is based on intent, which is determined by the facts and circumstances of each case. Id.

AIC-Enserch paid royalties for sandbags placed by old AIC after the corporate changeover. In November of 1982, AIC-Enserch referred to "our agreement" to pay royalties. In 1983, AIC-Enserch listed sandbag royalties as a cost in its bid to Sohio Construction, Inc., which indicates that it was liable for royalties to Josephson, Inc. This evidence is sufficient to show that AIC-Enserch intended to assume the old AIC's royalty obligation.

B. Relationship of Enserch Alaska to AIC-Enserch. When two corporations are so closely intertwined that it is inequitable to treat them as separate entities, they are considered as one for purposes of corporate liability. See Husky Oil N.P.R. Operations, Inc. v. Sea Airmotive, Inc., 724 P.2d 531, 534 (Alaska 1986). Alaska applies the alter ego doctrine to corporate entities related other than as parent and subsidiary. Id.

Enserch Alaska is wholly owned by AIC-Enserch. Ellsworth is both vice president of AIC-Enserch and president of Enserch Alaska. Fowler, president of AIC-Enserch, is also a director of Enserch Alaska. Enserch Alaska, although it did millions of dollars worth of construction business, was financed with only $1,000. Enserch Alaska owned no significant construction equipment. All corporate functions other than actual construction were performed by AIC-Enserch. As of 1984, all sandbag construction was performed by Enserch Alaska. AIC-Enserch is now dormant. Under Alaska law each of these facts is relevant to the application of the doctrine of corporate disregard. See McKibben v. Mohawk Oil Co., Ltd., 667 P.2d 1223, 1230 (Alaska 1983), disavowed on other grounds, Wien Air Alaska v. Bubbel, 723 P.2d 627, 631 n. 4 (Alaska 1986).

Enserch Alaska did not renew its motion for directed verdict at the close of all the evidence. Accordingly, the verdict must be affirmed if there is any evidence, irrespective of its sufficiency, to support the verdict. Herrington, 834 F.2d at 1500. The record contains significant evidence that AIC-Enserch assumed the old AIC's royalty obligation to Josephson, Inc., and that Enserch Alaska should be treated as the same corporate entity as AIC-Enserch. Accordingly, we affirm the jury's verdict on this issue.

Before discharging the jury, the trial judge asked counsel whether there was any objection to the form of the verdict. No objection was made. Accordingly, the defendants waived their right to a new trial on the grounds of an inconsistent verdict. See Philippine Nat'l Oil Co. v. Garrett Corp., 724 F.2d 803, 806 (9th Cir. 1984) (when jury found for a plaintiff on liability but awarded no damages, challenge to the verdict was waived because it had not been raised before the jury was excused). Nor was the verdict necessarily inconsistent: the jury may have believed that AIC-Enserch was dormant and Enserch Alaska had taken over the business and assumed its obligations for royalties. The district court did not abuse its discretion in denying the motion for new trial on the ground that the verdict was inconsistent. See Robins v. Harum, 773 F.2d 1004, 1006 (9th Cir. 1985).

IV. Failure to Instruct on Statute of Frauds as to Assignments

Enserch Alaska requested that the jury be instructed that Alaska's statute of frauds requires that an assignment of contract obligations be in writing. AS 09.25.010(a) (3) provides in relevant part that "a special promise to answer for the debt of another" is unenforceable unless memorialized in writing. This statute does not apply to any assumption by AIC-Enserch of the old AIC's obligations to Josephson, Inc. because AIC-Enserch assumed the royalty payments primarily for its own benefit and not as a surety. See Merdes v. Underwood, 742 P.2d 245, 251 & n. 11 (Alaska 1987). According to our de novo interpretation, AS 09.25.010(a) (3) does not apply to the assumption, and the court's refusal to give the instruction was not legal error. See 999 v. C.I.T. Corp, 776 F.2d 866, 871 (9th Cir. 1985).

The trial court calculated interest individually from the month of October for each year in which sandbags were placed and royalties not paid, i.e., 1983, 1984, 1985, and 1986. Calculation of prejudgment interest in Alaska contract cases runs from the date of the breach. See Morris v. Morris, 724 P.2d 527, 529 (Alaska 1986). The record supports a conclusion that each year the sandbags were placed by October, after which time ice would close up the water around the islands. While the plaintiff has the burden of proof as to damages, Alaska Airlines, Inc. v. Sweat, 584 P.2d 544, 549 (Alaska 1978), the plaintiff need "only prove its damages to a reasonable certainty." State v. Northwestern Constr., Inc., 741 P.2d 235, 237 (Alaska 1987). The case Enserch Alaska cites to support its position that prejudgment interest should start when it received payment from the various project owners for its construction work is inapposite. That case, Industrial Indemn. Co. v. Wick Constr. Co., 680 P.2d 1100, 1106-07 (Alaska 1984), concerned a subcontract specifically governing the time of payment. We affirm the award of prejudgment interest.

Alaska Civil Rule 82 provides that attorney's fees are to be awarded pursuant to a fixed schedule " [u]nless the Court, in its discretion, otherwise directs [.]" The trial court is required to state its reasons when it makes an award of attorney's fees that varies from the schedule. Hayes v. Xerox Corp., 718 P.2d 929, 938-39 (Alaska 1986).

The formula in Alaska Civil Rule 82(a) (1) would result in a fee award of $23,382.94 to Josephson, Inc. The district court awarded $30,000, stating that the case was more complicated than most, so that the money judgment was not an accurate basis for determining the fee. Alaska law requires only that the trial court state reasons, and has no explicit requirement as to the degree of specificity of that statement. See, e.g., Taylor Constr. Servs., Inc., v. URS Co., 758 P.2d 99, 102-03 (Alaska 1988); Hayes, 718 P.2d at 938-39; Alvey v. Pioneer Oilfield, 648 P.2d 599, 601 (Alaska 1982); Chugach Elec. Ass'n v. Northern Corp., 562 P.2d 1053, 1063 (Alaska 1977). Therefore, there is no merit to Alaska Enserch's argument that the district court's finding of complexity was insufficiently detailed.

This case included a counterclaim, a summary judgment motion, an accord and satisfaction defense, whether changes to the machines eliminated royalty obligations, liability of the two corporate defendants, numerous post trial motions, and a jury trial that lasted four and a half days. The district court did not abuse its discretion and was not manifestly unreasonable in awarding the plaintiff a modest increase over the statutory formula. See Alvey, 648 P.2d at 601; Chugach, 562 P.2d at 1063.

The district court denied AIC-Enserch's request for attorney's fees, reasoning that Josephson, Inc. was in substance the only prevailing party. Alaska law defines the "prevailing party" as the party that wins on the central issue in dispute. Foss Alaska Line, Inc. v. Northland Servs., Inc., 724 P.2d 523, 526 (Alaska 1986). Here, both defendants were represented by the same attorney, presented the same pleadings, and presented virtually identical arguments. The record contains testimony that AIC-Enserch is dormant and that the companies are alter egoes. The defendants stipulated that Enserch Alaska would pay any damages found against AIC-Enserch. Under these circumstances, there is no merit to AIC-Enserch's contention that the district court abused its discretion in denying AIC-Enserch attorney's fees. See Hutchins v. Schwartz, 724 P.2d 1194, 1204 (Alaska 1986).

VIII. Plaintiff's Request for Attorney's Fees on Appeal

Josephson, Inc. requests attorney's fees on appeal under Alaska Appellate Rule 508(e), which allows Alaska appellate courts to impose attorney's fees for frivolous appeals.

Federal courts sitting in diversity should apply mandatory state attorney's fees rules denying or creating the right to attorney's fees when the state statute embodies a substantial policy of the state. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 259 n. 31 (1975). However, a federal court sitting in diversity applies Fed. R. App. P. 38 to determine whether fees should be awarded to the appellee on the ground that the appeal is frivolous. See Burlington Northern R.R. v. Woods, 480 U.S. 1 (1987). Thus, Alaska Appellate Rule 508 has no application in this case. We decline to award fees, sua sponte, under Fed. R. App. P. 38, which requires fees if the result is obvious, or the arguments of error are wholly without merit. DeWitt v. Western Pacific R.R., 719 F.2d 1448, 1451 (9th Cir. 1983). We do not consider this appeal sufficiently frivolous to justify a sua sponte award of fees.

The judgment of the district court is AFFIRMED. Josephson, Inc. is to recover its costs; Josephson Inc.'s request for attorney's fees is denied.