Summary
The Alaska Supreme Court reviewed a dispute arising from a cancelled contract for the sale and installation of a wind turbine. It held that the contractor was required to register as a specialty steel erection contractor and could not maintain a breach-of-contract counterclaim because it was unregistered, while affirming rescission and liability rulings. The court concluded that the superior court erred only in calculating the equitable setoff owed to the contractor.
Topics
Practice areas
Questions Presented
- Whether AWI's installation of a tower-mounted wind turbine was subject to Alaska's contractor-registration requirement or exempt as the installation of a finished product.
- Whether an unregistered contractor may maintain a breach-of-contract counterclaim or pursue remedies under the Uniform Commercial Code.
- Whether the superior court abused its discretion by awarding AWI an equitable setoff based on its incurred costs.
- Whether the setoff calculation was clearly erroneous because it failed to account for AWI's actual resale profit.
- Whether the superior court properly relaxed the Civil Rule 59(f) deadline and amended the judgment after AWI failed to pay.
- Whether LLC members were personally liable when they acted as agents for an undisclosed principal rather than being liable solely by reason of LLC membership.
- Whether the Daggetts had standing to challenge Standard Steel's successor liability while appearing pro se on behalf of themselves rather than the corporation.
Holdings
- A contractor installing a wind turbine affixed to a 49-foot tower is required to register as a specialty steel-erection contractor; the finished-products exemption in AS 08.18.161(5) does not apply because the turbine becomes a permanent, fixed structure.
- AS 08.18.151 bars an unregistered contractor from bringing an action for breach of a contract for which registration was required.
- AS 08.18.151 also bars an unregistered contractor from pursuing UCC remedies for wrongful rejection when those remedies seek compensation or arise from the contract.
- The superior court did not abuse its discretion by awarding an equitable setoff to compensate AWI for appropriate costs incurred before rescission.
- The setoff calculation was clearly erroneous because it failed to account for AWI's actual $6,104.52 profit on resale of the turbine components.
- AS 10.50.265 does not shield LLC members from liability arising from their own acts as agents of an undisclosed principal; it protects members only from liability imposed solely by reason of membership.
- The court declined to reach the merits of Standard Steel's successor liability because the pro se Daggetts lacked standing to represent the corporation in litigation.
Key quotations
“The provision must be read as exempting the installation of finished products that do not become a permanent, fixed part of a structure or do not become permanent, fixed structures themselves.” (slip op. at 14)
“The plain language of AS 08.18.151 therefore prohibits AWI’s counterclaim.” (slip op. at 17)
“Where a limited liability company member’s liability arises from the member’s own actions, the statute provides no protection.” (slip op. at 25)
“For the reasons explained above, we AFFIRM in part, REVERSE in part, and REMAND to the superior court to redetermine the setoff amount.” (slip op. at 27)
Factual background
Richard Feeney contracted with Alaskan Wind Industries, the trade name for Daggett LLC, to purchase and install a wind turbine, tower, and inverter on his Homer property. After a neighbor asserted that the proposed 49-foot turbine violated a subdivision covenant limiting structures to 35 feet, the project was stopped and Feeney sought cancellation and return of his $32,880 down payment. AWI was not registered as a specialty steel-erection contractor when the contract was executed, and the contract stated that AWI was qualified by law as a licensed steel erector. AWI incurred costs, later resold the turbine components for a profit, and failed to satisfy the judgment entered against it.
Procedural history
Feeney sued AWI, James Daggett, and Nadia Daggett seeking rescission and return of his down payment. After a bench trial, the superior court held that AWI was required to be registered as a specialty steel-erection contractor, had misrepresented its licensing status, and was barred from pursuing its breach-of-contract counterclaim. The court rescinded the contract, awarded Feeney restitution less a $9,609.06 setoff, and later amended the judgment to impose liability on the Daggetts and Standard Steel after AWI failed to pay. The Daggetts appealed and Feeney cross-appealed the setoff calculation.
Remand instructions
Remand to the superior court to recalculate the equitable setoff, accounting for AWI's actual resale profit and correcting any apparent $65 arithmetic discrepancy in the out-of-pocket expense calculation.