IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON COLUMBIA ASSET RECOVERY GROUP, LLC, a Washington limited liability corporation, Appellant,

v. JOSEPH R. KELLY, as the Successor Personal Representative of THE ESTATE OF WILLIAM D. PHILLIPS, SR., deceased, Respondent. DIVISION ONE

No. 69365-4-1 PUBLISHED OPINION

FILED: November 4, 2013 CO



### Dwyer, J.

—Columbia Asset Recovery Group, LLC (CARG) appeals from the trial court's order dismissing its complaint for lack ofpersonaljurisdiction. 

### Timothy Kennedy, CARG's sole member, was the guarantor of a one million dollar Business Loan Agreement and Promissory Note executed byWilliam 

### Phillips andAtlantic FrostHoldings, LLC (AFH). The Agreement contains 

### jurisdiction and venueprovisions permitting the lender, Columbia State Bank, to bring a collection action in King County. After Phillips died, neither his estate nor AFH paid the balance of the Note. Accordingly, the lenderdemanded payment 

### from Kennedy. In response, Kennedy formed CARG and caused CARG toNo. 69365-4-1/2 purchase the lender's rights under the Agreement and Note, which the lender assigned to CARG. CARG then filed suit in King County against the Estate of Phillips (the Estate). However, the trial court dismissed CARG's complaint for lack ofpersonaljurisdiction. Because there is a genuine issue of material fact as to whether CARG and the lender intended CARG's payment to constitute a discharge ofthe Estate's payment obligation, the trial court erred by granting the Estate's motion to dismiss. We reverse and remand for further proceedings consistent with this opinion.
I In June 2009, Phillips and AFHexecuted a Commercial Line of Credit 

### Agreement and Promissory Note (Note) in the principal amount of$1,000,000, payable to Columbia State Bank (the Bank), and a Business Loan Agreement 

### (Agreement). Phillips and AFH were the primary obligors. However, Timothy Kennedy personally guaranteed payment of the Note in the eventthat Phillips and AFH failed to pay. The Note contains a provision providing for paymentto 

### be made inSeattle. The Agreement includes ajurisdiction provisionproviding 

### that Phillips and AFH "agree to waive any objection tojurisdiction or venue on the ground that [they] are not residents of [the Bank's] locality"—which was Seattle. Phillips died in an airplane crash in 2010. Subsequently, the personal 

### representative of the Estate negotiated twoextensions of the Note. The Estate 

### paid interest on the AFH loanthrough February 2011 but, byMarch 17, 2011, the Estate informed the Bank that it could no longer pay the interest on the AFH loan

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### pursuanttoMaryland probate law.1 When theAgreement and Note became due in April 2011, neither AFH nor the Estate paid. Meanwhile, on October 22, 2010, the Bank demanded that Kennedy make 

### good onhis guaranty.2 On April 13, 2011, Kennedy spokewith a representative ofthe Bank regarding "options for enforcement of [the AFH Loan]." Kennedy subsequently formed CARG, a Washington limited liability company. Kennedy's counsel latertold the Estate's counsel that "Mr. Kennedy formed [CARG] to facilitate his satisfying the guaranty." Kennedy filed a counterclaim for indemnity against the Estate in the Delaware Court ofChancery on July 25, 2011. In his counterclaim, Kennedy claimed that Phillips "is the primary obligor on the debt owed to Columbia Bank. 

### Kennedy, as guarantor, is entitled to be indemnified for any amounts he is required to pay to Columbia Bank." 

### On August 4, 2011, the Bank and CARG entered into the LoanPurchase 

### andAssignmentAgreement(LPA Agreement). In the LPAAgreement, the Bank and CARG agreed to several provisions that the parties highlight in disputing whetherthe Bank and CARG intended the LPAAgreement to operate as an assignment rather than a discharge:

• "The Bank has made demand on Kennedy for payment ofthe amounts

1Maryland law bars an apparently insolventestatefrom making a preferential paymentto one claimant over another, and the Estate informed the Bank that continuing to pay interest on the loan would be viewed as preferential. See Md.Code Ann. § 8-105(b). 2Theparties referto Kennedy's obligation as both a "guarantee" and a "guaranty." For purposes ofthisopinion, the difference in spelling does not affectthe nature ofKennedy's obligation. -3-No. 69365-4-1/4 owing under the Loan pursuant to the Commercial Loan Guaranty. Kennedy has instead proposed to purchase the Loan through a new entity he has established for that purpose, [CARG]." • "The purchase price will be funded by a loan from Bank to Kennedy, the proceeds of which Kennedy will loan to [CARG]."

• "Subjectto the terms and conditions of this Agreement, the Bank also hereby agrees to assign to [CARG] all of the Bank's interests, rights and obligations under the Cooperation Agreement CARG then paid the Bank $1,026,071.94. 

### On February 3, 2012, Kennedy's counsel stated in a letter to the Estate's 

### counsel that Kennedy had been "forced to honor his personal guarantee" of the 

### obligation owed by Phillips andAFH. One weeklater, the Estate's counsel asked Kennedy's counsel toconfirm that the LPA Agreement"satisfied Mr. Timothy Kennedy's personal guarantee." Kennedy's counsel provided a letterfrom the Bank to Kennedy stating that "[f]rom the bank's perspective, yourpurchase of the loan forfull face value certainly satisfied all of your obligations to the Bank under 

### your personal guaranty, and we therefore view you to have honored your 

### guarantyin full." Additionally, Kennedy's counsel—during a hearing beforethe Delaware Court ofChancery—stated that "Mr. Kennedy used [CARG] as the vehicle to satisfy his personal guarantee." Finally, Kennedy submitted a declaration to the United States District Court for the Western District of 

### Washington that stated, "Sincethefiling ofthe Complaint, Ihave been required

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to make good on my guarantee of that debt by Columbia State Bank." On March 15, 2012, CARG brought suit to enforce the Agreement and Note againstthe Estate in King County Superior Court. On June 8, 2012, the Estate, pursuant to CR 12(b)(2), moved to dismiss the complaintfor lack of 

### personaljurisdiction. In its motion, the Estate argued that Kennedy and CARG
were alter egos and that Kennedy had fulfilled his obligation as guarantor by virtue ofthe Bank's assignmentto CARG, which had thereby discharged the 

### Agreement and Note. Itfollowed from this, the Estate contended, that the King County jurisdiction and venue provisions were also discharged and could no 

### longer provide a contractual basis for exercising personaljurisdiction over the Estate in Washington. CARG opposed the Estate's motion to dismiss, contending that 

### assignment ofthe Note and Agreement did notconstitute a discharge, especially where the parties did not intend such a discharge to occur. CARG further asserted that, ifitwas an alter ego of Kennedy, it would be subrogated to the 

### Bank's rights under the Agreement and Note. CARG also moved for summary 

### judgment in a separate motion. However, instead ofruling onCARG's motion for summaryjudgment, thetrial court granted the Estate's motion to dismissfor lack of personaljurisdiction and dismissed CARG's complaintwith prejudice. In 

### granting the Estate's motion to dismiss, thetrial court made nofindings offact. CARGsubsequently filed a motion for reconsideration. Although the trial 

### court grantedCARG's motion, it did so only insofar as itdismissedCARG's complaintwithout prejudice, therebyallowing CARG to refile itscomplaint
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elsewhere. CARG appeals both the order granting the Estate's motion to dismiss and the order granting CARG's motion for reconsideration to the extent that the second order did not vacate the first order's dismissal ofthe complaint.
II The Estate first contends that CARG's appeal is moot. This is so, the Estate asserts, because CARG is currently litigating an identical claim inthe United States District Court for the District of Maryland. We disagree. "Acase is moot ifa court can no longer provide effective relief." State v. Gentry, 125 Wn.2d 570, 616, 888 P.2d 1105 (1995). We avoid considering moot cases inorder "to 

### avoid the danger of an erroneous decision caused by the failure of parties, who no longer have an existing interest in the outcome of a case, to zealously 

### advocate theirposition." Orwick v. Citv of Seattle. 103 Wn.2d 249, 253, 692 P.2d 793 (1984). Here, notwithstanding CARG's pending action in federal district court, effective relief can still be granted. The Estate points to no finaljudgment 

### or otherruling in the federal court thatwould preclude us from providing CARG with such relief. Accordingly, this action is not moot. Ill The Estate next contends that the doctrine of judicial estoppel should 

### prevent us from considering CARG's appeal. The Estate reasons that because CARG misrepresented to the federal court the purpose for its appeal in 

### Washington, it gained an advantage in the federal courtlitigation: specifically, that the Estate's motion to stay proceedings in the federal court was denied.

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Even assuming the veracity ofthe Estate's claim, its remedy, ifany, lies in
federal court. "Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage by asserting one position in a court proceeding and later seeking an advantage by taking a clearly inconsistent position." Cunningham v. Reliable Concrete Pumping. Inc., 126 Wn. App. 222, 224-25, 108 P.3d 147 (2005). Application ofjudicial estoppel centers around three factors: "(1)whether a party's later position is clearly inconsistent with its earlier position; (2) whetherjudicial acceptance ofan inconsistent position in a later proceeding would create the perception that either the first or the second court was misled; and (3) whether the party seeking to assert an inconsistent position would derive an unfairadvantage or impose an unfairdetriment on the opposing party if not estopped." Millerv.Campbell. 164 Wn.2d 529, 539, 192 P.3d 352 (2008) (internal quotation marks omitted) (quoting Arkison v. Ethan Allen, Inc.. 160 Wn.2d 535, 538-39, 160 P.3d13(2007)). Here, it is for the federal court to determine whether CARG should be 

### judicially estopped from litigating in that court. The Estate contends that the misrepresentation was made to the federal court and that the advantage gained
was in that litigation. However, the federal court's order denying the Estate's motion to stay proceedings did not explain why the motionwas denied. The Estate now asks us to infer a causal relationship between CARG's argument 

### opposing the motion to stay and the court's ruling. Not only would this be 

### speculative, itwould be inappropriatebecause the Estate's remedy is in federal

-7-No. 69365-4-1/8 court. Accordingly, judicial estoppel does not prevent us from considering CARG's appeal.
IV CARG asserts that its paymentto the Bank inexchange for an assignment of the Bank's rights against the Estate did not discharge the Estate's obligation
as principal obligor. This is so, CARG contends, because whetherthe debt 

### evidenced by the Note was discharged must be determined by the parties' intent. We agree that the parties' intent is the proper standard. Moreover, because CARG and the Estate dispute CARG's and the Bank's intent inassigning the debt—a question offact—dismissal was inappropriate. "When the trial court considers matters outside the pleadings on a motion 

### to dismiss for lack of personaljurisdiction, we review the trial court's ruling under the de novo standard of review for summaryjudgment." Freestone Capital Partners LP v. MKA Real Estate Opportunity Fund I, LLC, 155 Wn. App. 643, 

### 653, 230 P.3d 625 (2010). Summaryjudgment is appropriate where there are no 

### genuine issues ofmaterial fact and the moving party isentitled to judgmentas a
matter of law. CR 56(c). 

### "Ordinarily, the intention ofthe parties determines whether a transfer of 

### money by athird person to a creditorconstitutes adischarge or purchase ofan underlying debt." 60Am.Jur.2d Payment§ 5 (2013). Similarly, we lookto the parties'intentwhendetermining whether an obligor's payment was intended to discharge another obligor's payment obligation:

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"We are in accord with the trend of modern authority, which tends to modify the strict common law rule by whichjoint contract obligors were often released from the burden oftheir contract by an inadvertent or ill advised release of one of their number. In connection with such questions as this, the modern rule that the intent ofthe parties, as expressed by their acts, and particularly by theirwritings, should receive a greatermeasure ofconsideration in determining contract rights, is clearly expressed in standard texts andjudicial decisions. This principle tends to accomplishjust and equitable results to a greater extent than did the strict rule ofthe common law." Seafirst Ctr. Ltd. P'ship v. Erickson. 127 Wn.2d 355, 364, 898 P.2d 299 (1995) (emphasis added) (quoting Johnson v. Stewart. 1 Wn.2d 439, 453, 96 P.2d 473 (1939)). Determining what the parties to a contract intended is generally a question of fact. Paradise Orchards Gen. P'ship v. Fearing. 122 Wn. App. 507, 517, 94 P.3d 372 (2004). 

### In dismissing CARG's claimbased on a lack ofpersonaljurisdiction, the trial courtwould have had to conclude that the LPAAgreement discharged the 

### Estate's paymentobligation and, with it, thejurisdiction and venue provisions in the original Agreement and Note. However, for the trial court to conclude that the underlying debt was discharged, rather than purchased, itwould have had to determine that the parties intended foritto be discharged, rather than purchased. This is a disputed question of fact. 

### CARG points to the language in the LPA Agreement as well as the 

### testimony of the Bank's vice president, both ofwhich indicate that CARG and the Bank intended the LPA Agreementto operate as a purchase of the Bank's rights, 

### not as a discharge of the Estate's payment obligation. On the other hand, the Estate points to different language in the LPA Agreement, as well as statements
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made by counsel for Kennedy to courts and opposing counsel, suggesting that CARG and the Bank intended the LPAAgreement to satisfy Kennedy's guaranty, which had the legal effect ofdischarging the Estate's payment obligation. The absence offact finding in the trial court's order to dismiss for lack of personal jurisdiction does not mean that there were implicitfindings made, as the Estate 

### suggests,3 andit does not mean that thiswas purely a legal question, as CARG suggests. Rather, a question of fact was improperly decided as a matter of law. Accordingly, dismissal was inappropriate. Additionally, the Estate asserts that payment or discharge of a guaranty constitutes performance and that the Bank is only entitled to one performance. It follows from this, the Estate reasons, that the Bank had no rights to assign to CARG once itreceived its one performance. It is true that a creditor is only 

### entitled to one performance. Revocable Living Trust of Strand v.Wel-Co Grp.. Inc.. 120 Wn. App. 828, 836, 86 P.3d 818 (2004). However, the Estate's 

### argument assumes that the Agreement constituted a discharge of Kennedy's guaranty, not a purchase of the Bank's rights. As explained above, the parties' intent is the controlling factor in determining whether the Agreement constituted a discharge or a purchase. Because intent is a factual question that was not resolved in the trial court, the Estate's "one performance" argument is contingent 

### upon the fact finder's determination of what the parties intended and should 3The Estate'sargument regarding "implicitfact finding" isuntenable. Weapply the summary judgment standard to the order herein. Neitherimplicit norexplicit fact-finding is permitted on summaryjudgment. Summaryjudgment isonly apposite when there are no genuine issues of material fact. Here, there are genuine issues of material fact, rendering dismissal improper. -10-No. 69365-4-1/11 therefore be considered by the trialcourt only after the intent of the parties to the LPA Agreement is determined.
V The Estate next contends that itwas properfor the trial courtto pierce CARG's corporate veil and that the summaryjudgment order can be upheld on this basis. Veil piercing was appropriate, the Estate reasons, because Kennedy 

### disregarded CARG's corporate form and his disregard resulted in injustice. We 

### disagree. To the extent that the trial courtbased its dismissal of CARG's complaint on piercing CARG's corporate veil, it erred by doing so in the absence of the factualfindings requisite to veil piercing. Accordingly, summary dismissal

on this basis was not warranted. 

### For a court to pierce the corporate veil, "two separate, essential factors must be established." Dickens v. Alliance Analytical Labs.. LLC. 127 Wn. App. 

### 433, 440, 111 P.3d 889 (2005). "'First, the corporate form must be intentionally used to violate orevade a duty.'" Dickens. 127 Wn. App. at 440-41 (quoting Meisel v. M & N Modern Hydraulic Press Co.. 97 Wn.2d 403, 410, 645 P.2d 689 

### (1982)). "Second, thefact finder mustestablish thatdisregarding thecorporate veil is necessary and required toprevent an unjustified loss to the injured party." Dickens, 127 Wn. App. at 441. Furthermore, a court may pierce the corporate 

### veil under an "alterego" theory "when 'the corporate entity has beendisregarded 

### bytheprincipals themselves so that there is such a unity ofownership and interest that the separateness of the corporation has ceased toexist.'" Grayson

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-No. 69365-4-1/12
v. Nordic Constr. Co.. 92 Wn.2d 548, 553, 599 P.2d 1271 (1979) (quoting Burns
v. Norwesco Marine. Inc.. 13 Wn. App. 414, 418, 535 P.2d 860 (1975)). We need not address whether Kennedy intentionally used CARG to violate or evade a duty; dismissal was not proper here because the trial court could not find, as a matter of law, that disregarding the corporate veil was necessary and required to prevent an unjustified loss to the injured party. At most, a disputed question of fact on the question is presented. The Estate 

### asserts that Kennedy's use ofCARG both to satisfy his guaranty and seekto enforce the Note against the Estate would work an injustice. CARG, on the other 

### hand, points out that the Estate seeks an "equitable" right of disregardwhen, in 

### reality, the Estatedefaulted onits loan obligations and isseeking to preserveits subsequentwindfall of$1,250,000—a windfall antithetical toequity. Beforethe trial court may pierce the corporate veil, it mustfind that piercing is necessary to 

### prevent an unjustified loss to the Estate. CARG's assertion raises a clearfactual question as to the existence ofanyequitable entitlement on the part ofthe Estate. The trial court could not resolve this disputed factual question utilizing 

### summary procedures and, therefore, dismissal was inappropriate.
VI 

### CARG correctlyargues that, if, on remand, the trial courtdoes pierce CARG's corporate veil, CARG will necessarily possess Kennedy's subrogation 

### rights againstthe Estate. This is so because Kennedy andCARG will betreated as one, allowing CARG—which is in greater need of equity than the Estate—to pursue this equitable remedy against the Estate.
-12-No. 69365-4-1/13 Equitable subrogation is applied broadly "'to include every instance in which one person, not acting voluntarily, pays a debtfor which another is primarily liable, and which in equity and good conscience should have been discharged by the latter.'" Tri-CitvConstr. Council v. Westfall. 127 Wn. App. 669, 675, 112 P.3d 558 (2005) (internal quotation marks omitted) (quoting In re Liquidation of Farmers & Merchs. State Bank of Nooksack. 175 Wash. 78, 85-86, 26 P.2d 631 (1933)). However, "there is no absolute right ofequitable subrogation"; instead, it is "based upon the circumstances ofeach case and the 

### demands of justice for an equitable result." Westfall, 127 Wn. App. at 674. Thus, 

### the party seeking equitable subrogation must be in greater need of equity than its adversary. Livingston v. Shelton. 85 Wn.2d 615, 619, 537 P.2d 774 (1975). 

### Once a party is subrogated, it"step[s] into the lender's shoes to the extent ofthe current obligation." Columbia Cmtv. Bank v. Newman Park. LLC. 177Wn.2d 566, 574, 304 P.3d 472 (2013). 

### Here, Kennedy had an obligation, as the guarantor, to pay the debt upon which the Estate was primarily liable. Moreover, Kennedy asserts the greater 

### need forequity because—as the result of hispayment—the Estate has retained
a windfall exceeding one million dollars. Nevertheless, the Estate contends that 

### subrogation isinappropriate both because Kennedy is not a party to the case and because subrogation is repugnant to the equity-based alter ego doctrine. The
Estate's contentions lack merit. 

### It is true that Kennedy is not a party to this case. However, if, on remand, the trial court determines to pierce CARG's corporate veilunder an alter ego
-13-No. 69365-4-1/14 theory, Kennedy and CARG must be treated as one in having answered forthe Estate's debt. Accordingly, CARG and Kennedy, as alter egos, would share an identical subrogation rightagainst the Estate. Thus, even though Kennedy is not
a named party to this action, as an incident of the alter ego finding, he and CARG, which is a named party in this action, would jointlypossess the right to subrogation. Therefore, CARG, as the alter ego of Kennedy, may seekto
recover from the Estate under a subrogation theory. The Estate is correct that piercing the corporate veil is an equitable 

### remedy imposed to rectify an abuse of the corporate privilege. From this, however, the Estate wrongly reasons that subrogation against it is not available because—as an equitable doctrine—subrogation may only be used to prevent 

### injustice, not perpetuateit. In making thisargument, however, the Estate disregards the factthatit has been unjustly enriched by over one million dollars as the result of CARG's payment. Focusing narrowly on Kennedy's alleged 

### disregard ofCARG's corporateform misses the largerinjustice resulting from the Estate's seven-figurewindfall. Thus, in the event that the trial courtdoes pierce 

### thecorporate veil, it mustdetermine whetherthe balance ofequities isin CARG's and Kennedy's favor. Accordingly, should thetrial court pierceCARG's corporateveil, CARG will still share the rightto subrogation with its alter ego, 

### Kennedy. Accordingly, CARG would step into the shoes ofthelender, the Bank, allowing ittoinvoke thejurisdiction and venueprovisions ofthe Note and the Agreement.

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VII CARG contends that because "performance ofthe obligations under the Note and Agreement were due in Seattle WA. There was therefore, specific jurisdiction for enforcement ofthe obligations in [King County] even in the absence ofthe contractual venue and jurisdiction provisions." Appellant's Opening Br. at 3-4. We need not consider this argument because CARG provides no authority to support its contention. See e.g.. State v. Logan. 102 

### Wn. App. 907, 911, 10 P.3d 504 (2000). However, CARG is not barred from presenting evidence and citing pertinent authority to support this contention on remand. Reversed and remanded.

We concur:



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