Kenai Chrysler Center, Inc. v. Denison
167 P.3d 1240 (2007)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A contract entered into by a person under a legal guardianship is void as a matter of law, not merely voidable, because the guardianship order provides constructive notice to the public of the ward's incapacity. A merchant's persistent and aggressive attempts to enforce such a contract after receiving actual notice of the guardianship constitutes an unfair trade practice.
Facts:
- David Denison, a developmentally disabled adult, was subject to a legal guardianship held by his parents.
- His parents refused his requests to help him buy a car from Kenai Chrysler Center, Inc.
- Without his parents' consent, David Denison purchased a new Dodge Neon from Kenai Chrysler, using his debit card and trading in his 1994 Pontiac Grand Am.
- One or two days later, David's mother, Dorothy, went to Kenai Chrysler, presented the guardianship papers, and asked the dealership to take the car back and void the contract.
- A Kenai Chrysler manager refused to rescind the contract, stating they sold cars to 'a lot of people who aren't very smart,' and returned the car keys to David over his mother's objection.
- The Denisons, a court-appointed investigator, and an advocate from the Disability Law Center all subsequently contacted Kenai Chrysler's management, confirming the contract was legally void, but the dealership's general manager and owner refused to rescind the sale.
- Kenai Chrysler sold David's Pontiac trade-in, assigned the new car's loan to GMAC without disclosing David's incapacity, and sent a letter to David demanding he pay storage fees for the Neon.
- A few days after the sale, David damaged the new Neon in a one-car accident.
Procedural Posture:
- Kenai Chrysler petitioned the probate court to modify David's guardianship to validate the car sale; the probate court denied the petition as frivolous and awarded attorney's fees to the Denisons.
- The Denisons sued Kenai Chrysler in superior court (the trial court), seeking a declaratory judgment that the contract was void and damages under the Unfair Trade Practices Act (UTPA).
- Kenai Chrysler counterclaimed for restitution.
- The superior court granted summary judgment for the Denisons, declaring the contract void as a matter of law and dismissing Kenai Chrysler's counterclaims and affirmative defenses.
- The UTPA claim proceeded to a jury trial.
- The jury found in favor of the Denisons, awarding damages for the down payment, the value of David's trade-in vehicle, and for the loss of use of that vehicle.
- The superior court entered judgment for the Denisons, trebling the jury's damage award pursuant to the UTPA.
- Kenai Chrysler, as appellant, appealed the judgment to the Supreme Court of Alaska (the state's highest court), and the Denisons, as appellees, cross-appealed on the issue of attorney's fees.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Is a contract for the sale of a vehicle entered into by a developmentally disabled adult under a legal guardianship void as a matter of law, and do the seller's subsequent efforts to enforce the contract after being informed of the guardianship constitute an unfair trade practice under Alaska law?
Opinions:
Majority - Bryner, C.J.
Yes, the contract is void as a matter of law, and yes, the dealership's actions constitute an unfair trade practice. The court reasoned that under the Restatement (Second) of Contracts, a guardianship order serves as public, constructive notice of the ward's incapacity, precluding the formation of a valid contract. Therefore, the contract between David Denison and Kenai Chrysler was void from its inception. The court rejected Kenai Chrysler's claim that it was entitled to restitution or that the guardians had abandoned their duties. Furthermore, the court found that Kenai Chrysler's conduct violated Alaska's Unfair Trade Practices Act (UTPA) because it went far beyond a good-faith mistake. The dealership actively fought rescission after receiving multiple credible notifications of the guardianship, sold the trade-in vehicle, ignored the guardians' instructions, and continued to try to enforce the void contract, which a reasonable jury could find to be unethical, oppressive, and in blatant disregard of the Denisons' rights.
Dissenting - Matthews, J.
I agree the contract is void and that Kenai Chrysler committed an unfair trade practice, but the damages for loss of use were excessive. The dissent agreed with the majority that the contract was void and that Kenai Chrysler committed an unfair trade practice. However, the dissent argued that the jury's $5,000 award for loss of use of the trade-in vehicle was excessive and should be remitted. The reasoning is that using unincurred rental car costs as a measure for damages over a long period (twenty months) is unrealistic and unreasonable, as no one would actually rent a car on a long-term basis at retail monthly rates. The dissent proposed that damages based on unincurred rental costs should be limited to the short period reasonably necessary for a person of ordinary means to purchase a replacement vehicle, and would have reduced the loss-of-use award to $499.
Analysis:
This decision solidifies the legal principle in Alaska that contracts with individuals under guardianship are void ab initio, not merely voidable. It underscores that a formal guardianship order serves as constructive notice to the entire world, meaning a party's lack of actual knowledge of the guardianship is not a defense. The case significantly clarifies the scope of Unfair Trade Practices Acts (UTPA), demonstrating that post-transaction conduct, such as aggressive and unethical enforcement of a known-to-be-void contract, can independently constitute an unfair practice. This precedent puts businesses on notice that they must act reasonably and investigate upon receiving credible information about a contracting party's legal incapacity, or risk not only the voiding of the contract but also liability for substantial damages under consumer protection statutes.
Unlock the full brief for Kenai Chrysler Center, Inc. v. Denison