Airline Support, Inc. v. ASM Capital II, L.P.
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Full Opinion
OPINION
I. INTRODUCTION
A limited partnership based in New York that invests in the claims of unsecured creditors sent a letter to an Alaska corporation offering to purchase one such claim for about one-third of its face value. The letter was addressed to the credit manager and was sent to the corporate offices. Upon receiving the envelope, the Alaska corporation forwarded it unopened to the manager of its accounts receivable department in Georgia. The manager executed the enclosed assignment agreement and returned it back to the limited partnership, which then sent a check in payment for the claim. The Alaska corporation eventually filed suit in superior court to have the agreement set aside. The superior court declined to do so. Because we conclude that there is a genuine issue of fact as to whether the manager of the accounts receivable department had apparent authority to execute the agreement as a matter of law, we reverse and remand for further proceedings.
II. FACTS AND PROCEEDINGS
Airline Support, Inc. is an Anchorage-based Alaska corporation that provides support services for airlines at the Ted Stevens Anchorage International Airport in Anchorage. On September 15, 2005, Northwest Airlines filed for Chapter 11 bankruptcy in the Southern District of New York. At the time of the bankruptcy filing, Northwest owed Airline Support $62,071. After the filing, Airline Support continued to provide services to Northwest and bill for those services.
ASM Capital II, L.P. invests in the claims of unsecured creditors in domestic bankruptcy cases. ASM monitors bankruptey filings and offers to purchase claims from bankruptcy creditors at a percentage of their face value. On May 15, 2006, ASM sent Airline Support a letter proposing to purchase Airline Support's bankruptcy claim for $19,862.72, which was 32% of the claim's face value. ASM sent the letter to Airline Support's corporate office in Anchorage, to the attention of "A/R-Credit Manager.
ASM Capital ("ASM") is a firm that invests in the claims of unsecured ereditors in domestic bankruptey cases. The above information refers to an unsecured claim ("Claim") that has been scheduled by Northwest Airlines Corporation in its case filed in the United States Bankruptcy Court for the Southern District of New York, Case. No. 05-17930 ("Case").
ASM is currently buying claims in the Case and is interested in purchasing your Claim:
Percentage: 32.00% (cents on the dollar)
Claim Amount: $62,071.00
ASM Purchase Price: $19,862.72
If you are interested in selling your Claim, you must send ASM, via fax or mail, an executed Assignment of Claim Agreement, a copy of which is attached. ASM reserves the right 1) to review the validity of the Claim; and (@) to refuse to purchase the Claim for any reason without further notice or obligation. If accepted, payments are typically sent by regular mail within 7 to 10 business days. Alternate payment methods may be available upon request.
With the exception of two closing lines, this is ASM's letter in its entirety.
In response, ASM received a letter on Airline Support letterhead signed by Katie Land, who identified herself as Airline Support's "Accounting Manager." Land lived in Georgia, and remotely acted as Airline Support's "accounts manager" and "bookkeeper." Enelosed with the letter from Land was the executed assignment agreement, dated June 14, 2006. The letter read:
Dear Mr. Corey,
Enelosed you will find the Airline Support, Inc. invoices that were part of the Northwest Airlines bankruptcy filing. The letter you sent to our company listed our claim*603 amount at $62,071.00. We actually have a total amount open of $71,404.00. Copies of all open invoices are attached.
Please contact me if you have further questions regarding this claim .,..
Regards,
Katie Land
Accounting Manager
Accompanying Land's letter were over 50 pages of invoices relating to Airline Support's claim in the Northwest bankruptey. In the space provided on the assignment agreement, Land had handwritten "$71,404.00" as the amount of Airline Support's claim in the bankruptey proceedings.
Following receipt of the executed assignment agreement, ASM filed a proof of claim in bankruptcy court against debtor Northwest on June 26, 2006, indicating that Airline Support had assigned its claim to ASM. On June 27, 2006, ASM sent a check to Airline Support for $19,862.72 in exchange for Airline Support's unsecured claim. In early August, Airline Support received a notice of transfer of its $62,071 bankruptcy claim. The notice stated that the bankruptcy claim had been transferred and informed Airline Support that it had until August 22, 2006, to object to the transfer. On September 29, Airline Support brought a challenge to the transfer of the bankruptey claim in the United States Bankruptey Court for the Southern District of New York. Airline Support moved for leave to file late, explaining that its objection to the transfer was late because, after receiving notice of the transfer, it conducted an internal investigation, retained counsel, and attempted to resolve the issue outside of court. Airline Support sought reconsideration of the bankruptey court's decision, arguing that the transfer was null and void because Land had not been authorized to sell the corporation's assets.
After briefing and a hearing, the bankruptcy judge denied Airline Support's motion and ordered that ASM be substituted as "the transferee of all claims asserted by Airline Support in the captioned bankruptey cases." However, the court also noted:
[The consequences of refusing to allow Airline Support to file a late objection to transfer are not fatal to its position, or even detrimental,. The Court's denial of its motion was without prejudice and thus remitted Airline Support to its State court rights and remedies.... [This is where the dispute [regarding Land's authority to transfer the claim], which is entirely tangential to the bankruptcy case, should be resolved.[3 ]
ASM incurred and paid $21,247.94 in attorney's fees responding to Airline Support's challenge in bankruptey court. ,
On February 15, 2007, Airline Support sued ASM in superior court in Anchorage. Airline Support's amended complaint asserted, among other things, a claim to set aside the assignment agreement.
Both parties moved for summary judgment as to whether Katie Land had authority to
Airline Support appeals the superior court's conclusion that Land had apparent authority arguing that ASM's interpretation of Airline Support's conduct was unreasonable as a matter of law. Airline Support also appeals the superior court's award of attorney's fees, arguing that the fees awarded were not "reasonable." ASM cross-appeals, arguing that the superior court erroneously concluded that it did not have authority to award fees incurred in bankruptcy court.
III. STANDARD OF REVIEW
We review grants of summary judgment on questions of contract formation de novo.
On questions of law, we exercise our independent judgment.
IV. DISCUSSION
It Was Error To Hold That Katie Land Had Apparent Authority To Execute The Assignment Agreement As A Matter Of Law.
In granting ASM's motion for summary judgment, the superior court held that Airline Support's accounting manager Katie Land had apparent authority to execute the assignment agreement as a matter of law. Airline Support argues that this was error.
We have adopted the Restatement's general rule for creation of apparent authority.
A. Manifestations by the principal
The manifestation may be in the form of the principal's "written or spoken words or any other conduct."
The superior court appears to have found that two instances of Airline Support's conduct were "manifestations" under the first prong of the apparent authority test. First, the superior court noted that Airline Support had forwarded ASM's solicitation letter and assignment agreement to Katie Land. Second, the superior court emphasized that Airline Support had furnished Land with Airline Support stationery.
Airline Support argues that forwarding the solicitation to Land is not a "manifestation." Citing Bruton v. Automatic Welding & Supply Corp.,
As to the second factor, the superior court found that ASM relied on Airline Support's manifestations by sending a check for $19,862.72 to Airline Support. Airline Support does not challenge this finding and has support in the record. Moreover, nothing in our case law or the Restatement suggests ASM's check did not satisfy the reliance requirement.
C. Reasonableness of the third party's reliance
The third element of apparent authority is satisfied if the third party's interpretation of the principal's manifestations and reliance on those manifestations were reasonable.
The reasonableness of a third party's reliance on an alleged principal's manifestations is generally a question of fact.
This is not one of those cases. The two manifestations the superior court identified give rise to a narrow set of factual inferences. First, the fact that Airline Support furnished Land with its stationery gives rise to the inference that she is an Airline Support employee who has some authority to speak for the corporation. Second, the fact that Airline Support forwarded an envelope addressed to the "A/R Credit Manager" Katie Land gives rise to the inference that Land held the position of "credit manager" at Airline Support or a position akin to "credit manager."
ASM argues that because it sent the letter to Airline Support's "credit manager" in An
"Accounting manager" and "credit manager" are nebulous titles that do not obviously apply to distinct positions within the corporate structure. Having addressed a letter to the "credit manager" and having received a response from the "accounting manager," ASM's inference-on this basis alone-that Airline Support had purposely put the solicitation before the accounting manager because she had the authority to transfer the claim, is not the only inference possible. Another reasonable inference is that Airline Support routed the letter to Land because she functioned as the "credit manager"-(or something like it). But it cannot be said that this must mean that Airline Support had intentionally put the matter before Land because she had the authority to assign Airline Swpport's claim.
In its order denying Airline Support's motion for reconsideration, the superior court appears to have departed slightly from its earlier position. Instead of the conclusion that Airline Support's manifestations gave rise to the reasonable inference that it had "opted to put [the] matter under [Land's] purview," it adopted the more moderate position that the forwarding gave rise to the inference that Land was Airline Support's credit manager. Rejecting Airline Support's motion for reconsideration, the superior court wrote:
The letter from ASM to Airline Support was addressed to the "credit manager". Airline Support tends to minimize her as a mere bookkeeper. ASM, having mailed the letter to the credit manager, could reasonably assume that the mail was routed to a company official of that or comparable rank.... None of [the arguments in Airline Supports's motion for reconsideration] in any way detracts from the reasonable conclusion that this particular credit manager had authority by virtue of her corporate status to consummate the assignment of a bankruptcy claim. In this instance, there is simply no logical link between [those arguments] and her apparent authority to act consistently with her perceived ramk in the corporate hierarchy. (Emphasis added.)
We agree with the superior court that it was reasonable for ASM to assume Land occupied a position comparable to credit manager. We disagree, however, that it was reasonable as a matter of law for ASM to conclude "by virtue of [Land's] corporate status" that she had the authority to sell a company asset potentially worth over $60,000. "[Alpparent authority can be created by appointing a person to a position, such as that of manager or treasurer, which carries with it generally recognized duties; to those who know of the appointment there is apparent authority to do the things ordinarily entrusted to one occupying such a position. ...
ASM argues that the superior court's conclusion that Land had apparent authority is supported by a case from Maine, Steelstone Industries, Inc. v. North Ridge.
First, the Maine Supreme Court was reviewing the trial court's conclusion that the agent had apparent authority as an issue of fact-not as a matter of law.
Airline Support cites a number of outside cases that it argues show that Land did not have apparent authority. But like Steel-stone, these cases are of limited value. In CSX Transportation, Inc. v. Recovery Express, Inc.,
Airline Support also analogizes this case to Trustees of the Ohio Bricklayers Pension Fund v. Skillcraft Systems of Toledo, Inc.,
Unlike Skilleroft, there is nothing that prompts us to doubt the authenticity of ASM's argument. Additionally, the assignment agreement form at issue here came complete with signature lines, and the executed agreement contained what was clearly Land's signature. But even without these differences, Skilleroft is distinguishable. In Skilleraft, the Sixth Cireuit held that the kinds of acts the bookkeeper had done in the past did not create apparent authority to do a very different kind of act-that is, to execute a binding collective bargaining agreement.
Because whether Land had apparent authority to execute the assignment agreement is a disputed question of material fact, we REVERSE and REMAND to the superior court for further proceedings. Accordingly, we also VACATE the superior court's order awarding ASM full reasonable fees.
WINFREE, Justice, concurring.
STOWERS, Justice, concurring in part and dissenting in part.
. "A/R" stands for "Accounts Receivable."
. In fact, the bankruptcy claim only had a $62,071 value, as ASM had originally stated. Northwest's additional debt to Airline Support was not part of the bankruptcy claim, and was directly paid in full by Northwest.
. In re Northwest Airlines Corp., 2007 WL 498285, *4 (Bankr.S.D.N.Y.2007) (Feb. 9, 2007).
. Airline Support also asserted an Alaska Securities Act claim and an Unfair Trade Practices Act claim, neither of which are at issue on appeal.
. After the superior court granted ASM's motion for summary judgment with respect to the apparent authority issue, Airline Support may have abandoned its Securities Act claim and the court granted ASM summary judgment on Airline Support's Unfair Trade Practices Act claim. This disposed of all of Airline Support's claims against ASM.
. Askinuk Corp. v. Lower Yukon Sch. Dist., 214 P.3d 259, 264 (Alaska 2009) (citing Copper River Sch. Dist. v. Traw, 9 P.3d 280, 283 (Alaska 2000)).
. Id. (citing Copper River, 9 P.3d at 283).
. Burnett v. Covell, 191 P.3d 985, 990 (Alaska 2008) (citing McGee Steel Co. v. State for Use & Benefit of McDonald Indus. Alaska, Inc., 723 P.2d 611, 614 (Alaska 1986)).
. Fletcher v. S. Peninsula Hosp., 71 P.3d 833, 840 (Alaska 2003).
. Askinuk, 214 P.3d at 264 (citing Copper River, 9 P.3d at 283).
. Id.
. Anderson v. PPCT Mgmt. Sys., Inc., 145 P.3d 503, 509 (Alaska 2006) (citing City of Delta Junction v. Mack Trucks, Inc., 670 P.2d 1128, 1130 (Alaska 1983)).
. Askinuk, 214 P.3d at 264 (quoting Anderson, 145 P.3d at 509).
. Id. (citing Anderson, 145 P.3d at 509).
. Anderson, 145 P.3d at 509 (quoting Delta Junction, 670 P.2d at 1130) (internal citations omitted).
. Id. (citing Restatement (SEconp) or Acency § 8 cmt. b (1958)).
. Id. (citing Bruton v. Automatic Welding & Supply Corp., 513 P.2d 1122, 1126 (Alaska 1973)).
. Although the superior court looked to only these two facts in the record to support its conclusion that the manifestation prong of the apparent authority test was met-forwarding ASM's letter to Land and supplying her with company stationery-we note that other facts in the record support the conclusion: Airline Support provided Land with access to Airline Support billing invoices and it gave her the title of "accounting manager."
. 513 P.2d 1122 (Alaska 1973).
. Id. at 1126 ("After the fact manifestations ... are not evidence that a purported agent had apparent authority.").
. The partial dissent disagrees with our conclusion that there are no genuine issues of material fact with regard to this first factor in the apparent authority analysis. But the dissent defines 'this factor too broadly, first characterizing it as " 'the manifestations of the principal to the third party' to determine whether the principal has signaled, by word or deed, that the agent has authority to act on the principal's behalf," (Dissent 611) and then equating "authority to act' with the ultimate issue in this dispute: "[wlhether Land had apparent authority to bind Airline Support to the terms of ASM's assignment agreement." (Dissent 611). This places too much weight on the first factor. While, as a generality, referring to an apparent agent's "authority to act" is fine, in applying the first factor we look only to the principal's manifestations and whether those manifestations clothe the agent with some authority-here, with a given title and whatever authority is implied by that title.
Thus, the after-the-fact protestations of Airline Support's president that the corporation was unaware of Katie Land's actions, that the corporation had not authorized them, and that it took steps to undo them, are all irrelevant to the first factor: the manifestations that Airline Support made to ASM. There is no genuine issue of material fact that Airline Support, in forwarding
. In fact, the Restatement explains that "an action or forbearance on the part of a third party as a result of the agent's action and the principal's manifestation" will generally satisfy the reliance requirement. Restatement (THirp) or AcEncy § 2.03 cmt. e (2006). Furthermore, "[tlo establish that an agent acted with apparent authority, it is not necessary for the plaintiff to establish that the principal's manifestation induced the plaintiff to make a detrimental change in position." Id.
. Askinuk Corp. v. Lower Yukon Sch. Dist., 214 P.3d 259, 264 (Alaska 2009) (citing Anderson v. PPCT Mgmt. Sys., Inc., 145 P.3d 503, 509 (Alaska 2006)).
. See Cummins, Inc. v. Nelson, 115 P.3d 536, 544 (Alaska 2005).
. Cf. Holland v. Union Oil Co. of Cal., Inc., 993 P.2d 1026, 1031 (Alaska 1999) ('Because it is 'generally ... a question of fact whether the manual did modify the employment agreement,' this court should only conclude, as a matter of law, that the memo did not create a 'just cause' employment relationship, if no reasonable juror could conclude that it did." (citing Parker v. Mat-Su Council on Prevention of Alcoholism & Drug Abuse, 813 P.2d 665, 666 (Alaska 1991))); Drobny v. Boeing Co., 80 Wash.App. 97, 907 P.2d 299, 302 (1995) ("Only if reasonable minds could not differ in resolving this [question of fact] should a trial court decide it as a matter of law.").
. See, e.g., City of Delta Junction v. Mack Trucks, Inc., 670 P.2d 1128, 1130-31 (Alaska 1983) (reversing superior court's decision that there was no apparent authority as a matter of law on grounds that reasonable jurors could disagree as to whether inference of authority was reasonable); Cummins, 115 P.3d at 544 (affirming superior court's decision to have jury evaluate evidence of apparent authority and decide whether third party's interpretation was reasonable).
. Cf. Delta Junction, 670 P.2d at 1130-31.
. Apparent authority is based on a principal's manifestations not the agent's. See Anderson v. PPCT Mgmt. Sys., Inc., 145 P.3d 503, 509 (Alaska 2006) (quoting Restatement (Second) of Agency § 27 (1958)). Consequently, the fact that Land identified herself as "accounting manager'" would not, on its own, be relevant. However, in Land's affidavit-which Airline Support submitted with its motion for summary judgment-she identifies herself as Airline Support's "accounts manager," suggesting that, at the very least, Airline Support allowed her to use this title, and at most, bestowed it upon her. For this reason, it is appropriate to conclude that Land's "accounting manager" title was also a manifestation by Airline Support, and therefore, relevant to the apparent authority inquiry. Cf. City of Delta Junction, 670 P.2d at 1131 (holding that it could reasonably be inferred that Alaska Mack's use of Mack, Inc.'s corporate name and trademark was with Mack, Inc.'s knowledge and approval).
. Restatement (Seconp) or Acrwcy § 27 cmt. a (1958). See also Restatement (Third) of Agency § 3.03 cmt. b (2006) ("A principal may ... make a manifestation by placing an agent in a defined position in an organization.... Third parties who interact with the principal through the
. Neither party appears to have submitted evidence directly on point. ASM's senior vice-president did submit an affidavit explaining that his company directed the letter to "A/R Credit Manager" because "the credit manager of the company's accounts receivable department ... manages the debts owed to the company."
. 735 A.2d 980, 983 (Maine 1999). Although the superior court discussed Steelstone in the context of summarizing ASM's arguments, to what extent, if any, the superior court actually relied on the case is unclear.
. Id.
. Id.
. Id.
. Id. at 982.
. Id.
. 415 F.Supp.2d 6 (D.Mass.2006).
. Id. at 10-11.
. See, e.g., Muscletech Research & Dev., Inc. v. E. Coast Ingredients, LLC, No. 00-CV-0753A(F), 2004 WL 941815, at *32 (W.D.N.Y. Mar.25, 2004) (holding that issuance of company credit card, business cards with company logo, possession of company paraphernalia, and appearing in company advertisements were insufficient to create apparent authority where circumstances triggered duty to inquire into agent's purported authority); Asplund v. Selected Invs. in Fin. Equities, Inc., 86 Cal.App.4th 26, 103 Cal.Rptr.2d 34, 48-49 (2000) (holding purported issuance of plaque and business cards insufficient to create apparent authority); Cowburn v. Leventis, 366 S.C. 20, 619 S.E.2d 437, 448 (App.2005) (holding that supplying forms and business cards were not sufficient to create apparent authority).
. 99 Fed.Appx. 600 (6th Cir.2004).
. Id. at 601.