Court Opinion

ID: 2793753
Source: CourtListenerOpinion
Date Created: 2015-04-14 21:19:38.909217+00
Date Added: 2024-06-11T12:18:19.415793
License: Public Domain

FILED
                                                                                      COURT OF APPEALS
                                                                                          DIVISION 11

                                                                                     2 (115 APP 14   AM 9: 51

                                                                                      STATE

                                                                                      BY

      IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                           DIVISION II

PETER LaROCK, an unmarried man, and AJL                                  No. 45490 -4 -II
INVESTMENTS, INC., a Washington
 Corporation,

                                Respondents,                    UNPUBLISHED OPINION

         v.

 EDWARD KUNCHICK and KATHERINE
 KUNCHICK, husband and wife; UP TO
 GRADE CONCRETE PRODUCTS, INC., a
 Washington Corporation; PRECAST
 CONCRETE INDUSTRIES, INC., a
 Washington Corporation,

                                Appellants.

        JOHANSON, C. J. —    Edward Kunchick, his marital community, Precast Concrete Industries

Inc. ( PCI),   and Up To Grade Concrete Products Inc. appeal the bench trial judgment in Peter

LaRock' s favor on LaRock' s claims of unjust enrichment, conversion, and replevin. We hold that

LaRock had standing to sue, that judgment for conversion was proper, that the trial court

specifically found no partnership existed, that Kunchick was unjustly enriched, and that Kunchick

was   properly found personally liable.   Accordingly,   we affirm   the trial   court.
No. 45490 -4 -II

                                                    FACTS

        LaRock was the sole shareholder of AJL Investments Inc., which did business as K &K

Concrete Products ( AJL) 1 in Everett. Kunchick was the owner of Up To Grade Concrete Products

Inc. in Tacoma. In 2009, because of the poor economy, Kunchick closed Up To Grade and began

working for LaRock, bringing Up To Grade' s equipment and property with him to AJL.

        In   February   2011, AJL   was   evicted   from its Everett location.   LaRock and Kunchick

relocated to Fife, moved AJL' s equipment and other property to the new location, and agreed to

form a new corporation called Precast Concrete Industries Inc. In order to prevent AJL' s creditors

from reaching PCI' s assets, they left LaRock' s name off of PCI' s incorporation paperwork. Once

LaRock had resolved AJL' s debt problems or PCI was successful enough to handle the additional

debt burden, it was agreed that LaRock would become a co- shareholder of PCI. LaRock prepared

the incorporation paperwork, and he and Kunchick incorporated PCI on April 27, 2011, with

Kunchick listed as PCI' s sole shareholder. LaRock also created a set of books for PCI on AJL' s

computers and began to generate AJL' s accounts receivable in PCI' s name.

        LaRock and Kunchick also agreed that LaRock would wind down AJL, work for PCI, and

then take.a short trip to Montana during which he would receive $600 a week from PCI plus certain

expenses.    But because PCI and Kunchick had not paid him and Kunchick was not speaking to

him, LaRock returned from Montana early. Upon his return, LaRock found that he was locked out

of PCI and that Kunchick and PCI refused to return to LaRock what was formerly AJL' s property

1 The parties refer to AJL interchangeably as K &K and AJL. Because there is a specific argument
in this appeal about a transfer of assets from AJL to LaRock personally, we use AJL throughout
in this opinion.

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No. 45490 -4 -II

and its accounts receivable. Neither Kunchick nor PCI paid LaRock for any of his time or labor

or for any part of PCI.

         In June 2012, LaRock and AJL sued Kunchick, Kunchick' s marital community, Up To

Grade,   and   PCI ( Kunchick)          for a declaratory judgment that a partnership existed between

Kunchick and LaRock, breach of fiduciary duties, receivership, unjust enrichment, conversion,

and replevin. Kunchick filed a counterclaim for abuse of process.

         On February 13, 2013, AJL sold its assets and liabilities to LaRock personally ( the AJL

transfer) and on February 22, AJL was dismissed from the lawsuit as a plaintiff. Kunchick argued

that the AJL transfer was invalid, negating LaRock' s standing to sue on AJL' s behalf, because the

AJL transfer was fraudulent under the Washington Uniform Fraudulent Transfer Act (UFTA)2 or

because the AJL transfer was an improper shareholder distribution under RCW 23B. 06. 400( 2).

         After a week -long trial, the trial court concluded that LaRock had standing because he

owned all of      AJL'   s assets and   liabilities,   including   its "   rights of action,"   and that Kunchick and

PCI were liable for unjust enrichment, conversion, and replevin. Clerk' s Papers ( CP) at 875. The

trial court also dismissed LaRock' s other claims and Kunchick' s counterclaim; found that LaRock

and Kunchick had not formed a partnership, and ordered Kunchick and PCI to pay LaRock $25, 000

for his " labor   and services," $   112, 000 for      what was    formerly     AJL'   s accounts receivable, $ 17, 000

for personal property, and to return a list of other personal property that was on PCI' s premises

but   formerly    belonged to AJL         and   LaRock.      CP    at   873.    Kunchick appeals the trial court' s

judgment.

2 Ch. 19. 40 RCW.

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No. 45490 -4 -II

                                                         ANALYSIS

                                                    I. STANDARD OF REVIEW

          We review a trial court' s findings of fact for substantial evidence to support its findings

and   then    review     de   novo whether        those findings      of   fact   support   its   conclusions of   law. Scott' s

Excavating Vancouver, LLC v. Winlock Props., LLC, 176 Wn. App. 335, 341 -42, 308 P.3d 791

 2013),   review       denied, 179 Wn.2d 1011 ( 2014).                Unchallenged findings of fact are verities on

appeal.    Humphrey Indus., Ltd. v. Clay Street Assocs., LLC, 176 Wn.2d 662, 675, 295 P. 3d 231

 2013).      We make all reasonable inferences from the facts in LaRock' s favor as the prevailing

party below. Scott' s Excavating, 176 Wn. App. at 342.

                     II. LAROCK HAD STANDING BECAUSE THE AJL TRANSFER WAS VALID

          Kunchick argues that the trial court erred when it concluded that the sale of assets from

AJL to LaRock was valid, thereby ensuring LaRock' s standing to sue as an individual.3 We agree
with the trial court.

                     A. THE WASHINGTON UNIFORM FRAUDULENT TRANSFER ACT (UFTA)

          Kunchick argues that the AJL transfer was invalid because it was a fraudulent transfer or

an improper shareholder distribution. We disagree.

          Washington' s UFTA provides that

             a) [   a] transfer made or obligation incurred by a debtor isfraudulent as to a creditor
          whose claim arose before the transfer was made or the obligation was incurred if

3
    Kunchick        also cites   to Amende   v.   Town of Morton, 40 Wn.2d 104, 241 P. 2d 445 ( 1952), for the
first time in his reply brief to        argue      that "[   t]he general rule is that a plaintiff' s failure to own the
cause of action at the inception of suit is not cured by the plaintiff' s later obtaining the cause."
Reply Br. of Appellant at 10. However, Kunchick ignores the fact that AJL was a plaintiff at the
inception of the suit and that it sold its claims to LaRock personally before the court dismissed it
as a party. This is not a barrier to standing.

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No. 45490 -4 -II

         the debtor made the transfer or incurred the obligation without receiving reasonably
          equivalent value in exchange for the transfer or obligation and the debtor was
          insolvent at that time or the debtor became insolvent as a result of the transfer or
          obligation.

                    b) A transfer made by a debtor is fraudulent as to a creditor whose claim
          arose before the transfer was made if the transfer was made to an insider for an
          antecedent       debt, the debtor     was     insolvent   at       that time,   and the insider had
          reasonable cause to believe that the debtor was insolvent.

RCW 19. 40. 051 (     emphasis added).        A "creditor" is a person who has a " claim" against a debtor,

defined   broadly   as a " right   to   payment."     RCW 19. 40. 011( 3), ( 4).

          In order to avoid the AJL transfer because it was fraudulent under RCW 19. 40. 051,

Kunchick     must    first   establish   that he is    a " creditor"   of     AJL.   RCW 19. 40. 051(   a).   Kunchick

presented no evidence at trial and the court made no findings to support a conclusion that Kunchick

had a " right to payment" from AJL. Kunchick points to no evidence in the record to establish that

he was a creditor of AJL. Therefore, he fails the first step in the UFTA analysis.

          Accordingly, Kunchick failed to show the AJL transfer was fraudulent and the trial court
                                                                         4
did   not err when   it    concluded    that LaRock had standing.

                                               B. RCW 23B. 06. 400( 2)

          Kunchick also argues that the AJL transfer was invalid because it was an improper

shareholder    distribution    under     RCW 23B. 06.400( 2). RCW 23B. 06.400( 2) states that a corporation

may not make a distribution to its shareholders if, after " giving [the distribution] effect,"

                    a) [   t]he corporation would not be able to pay its liabilities as they become
          due in the usual course of business; or

4 Even if Kunchick were a creditor of AJL, he also presented no evidence at trial to establish that
AJL did    not receive       reasonably    equivalent value      for the AJL transfer.        The trial court made no
finding and the evidence presented at trial does not support a finding that the $49, 840 in loans that
LaRock forgave in exchange for AJL' s assets and liabilities was not "reasonably equivalent value."
RCW 19. 40. 051( a).

                                                             5
No. 45490 -4 -II

                   b) The corporation' s total assets would be less than the sum of its total
          liabilities plus, unless the articles of incorporation permit otherwise, the amount
          that would be needed, if the corporation were to be dissolved at the time of the
          distribution, to satisfy the preferential rights upon dissolution of shareholders
          whose preferential rights are superior to those receiving the distribution.

Kunchick argues that subsection (b) applies because AJL had been administratively dissolved at

the time of the AJL transfer.

          At trial, LaRock testified that he thought AJL had become administratively dissolved at

some point but was unsure when. LaRock also testified that he thought transferring AJL' s assets

and   liabilities to himself personally   might   be   part of   the   administrative   dissolution   process.    The

trial evidence is unclear whether or when AJL had been administratively dissolved, and the trial

court' s failure to find that AJL was administratively dissolved at the time of the AJL transfer was

not erroneous.'    Accordingly, the AJL transfer was not an improper shareholder distribution under

RCW 23B. 06. 400( 2),    and the trial court did not err when it concluded that LaRock had standing

to sue.

                                     III. CLAIM FOR CONVERSION

          Kunchick argues that the trial court erred when it granted judgment in LaRock' s favor on

his conversion claim because LaRock consented or partially consented to Kunchick' s use of the

property.    Kunchick does not challenge the trial court' s findings of fact and argues that the trial

court' s conclusion   that Kunchick " wrongfully        withheld"      LaRock' s   chattel was erroneous.        CP at

876. We disagree.

5 Even if AJL had been administratively dissolved at the time of the transfer of its assets, Kunchick
did not present evidence that AJL' s total assets were less than its total liabilities and the trial court
made no relevant findings of fact on that issue.

                                                         6
No. 45490 -4 -II

            A   claim   for   conversion requires proof of         three    elements:         that ( 1) Kunchick intentionally

interfered with chattel that belonged to LaRock, (2) by either taking or unlawfully retaining it, and

 3) thereby deprived LaRock, the chattel' s rightful owner, of possession. Aldaheffv. Meridian on

Bainbridge Island, LLC, 167 Wn.2d 601, 619, 220 P. 3d 1214 ( 2009).

            Here, the trial court found that Kunchick and PCI were in possession of LaRock' s property,

that this property was formerly in LaRock' s possession, that LaRock permitted Kunchick and PCI

to   use   the property " for the        purpose of   earning   profits,   in   which    he   would   be   entitled   to   share," and

that Kunchick and PCI " have used, and continued to use, this property to earn profits, but refuse

to share them with LaRock, and have likewise refused LaRock' s demand" to return the property.

CP at 874. Kunchick does not challenge these findings and, therefore, they are verities on appeal.

Humphrey Indus., Ltd., 176 Wn.2d at 675.

            Based on these facts, the trial court concluded that LaRock was the rightful owner of the

listed property     and       that "[   b] y refusing to return this property to LaRock upon his demand, and by

continuing to maintain possession and use of the property beyond the scope of LaRock' s consent,

defendants have willfully interfered with, and wrongfully withheld, chattel belonging to LaRock,

depriving him,          the   rightful owner, of possession."         CP        at   876. The trial court' s findings support

this conclusion. Because his property was not used for the permitted purpose, Kunchick and PCI

unlawfully retained LaRock' s property and his claim for conversion is proper.

            Kunchick merely cites two cases without analysis to support his argument that even " partial

consent" is sufficient to relieve him of liability for conversion: Banning v. Livesly, 87 Wash. 580,

 152 P. 4 ( 1915),       and    Michel    v.   Melgren, 70 Wn.    App.     373, 853 P. 2d 940 ( 1993). Br. of Appellant

at 19. But neither case supports Kunchick' s argument. Because Kunchick provides no argument

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No. 45490 -4 -II

as to why these cases support his position, we consider this argument no further. Stiles v. Kearney,

168 Wn. App. 250, 266 -67, 277 P. 3d 9 ( citing Holland v. City of Tacoma, 90 Wn. App. 533, 538,

954 P. 2d 290,   review    denied, 136 Wn.2d 1015 ( 1998)), review denied, 175 Wn.2d 1016 ( 2012).

         Accordingly, because the trial court' s unchallenged findings of fact support its conclusion

that Kunchick and PCI exceeded the scope of their permission to use LaRock' s property and

Kunchick presents no compelling argument otherwise, the conversion claim is proper. Kunchick

fails to meet his burden of proving consent as an affirmative defense. We affirm the trial court' s

judgment in LaRock' s favor for conversion.

                                         IV. DAMAGES FOR UNJUST ENRICHMENT

         Kunchick argues that the trial court erred in awarding all of the accounts receivable to

LaRock when there was a conflict between the trial court' s oral and written rulings as to whether

a partnership had been formed. Because the written ruling controls, we disagree.6
                                            A. WRITTEN RULING CONTROLS

         Where the trial court' s oral decision conflicts with its written findings and conclusions, the

written decision controls. Stiles, 168 Wn. App. at 258 ( citing Ferree v. Doric Co., 62 Wn.2d 561,

566 -67, 383 P. 2d 900 ( 1963)).            The trial   court' s "   oral   decision ...   has no final or binding effect,

unless   formally     incorporated into the findings,          conclusions, and       judgment." Ferree, 62 Wn.2d at

566 -67.

6 Kunchick also appears to argue that unjust enrichment is not an appropriate theory because it
 cannot arise    in   respect   to   a   duty imposed by     contract."      Br. of Appellant at 16. However, he does
not 'argue that a contract existed, LaRock did not plead breach of contract, and the trial court did
not make any findings or conclusions regarding the existence of a contract. Therefore, we do not
consider this argument further.

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No. 45490 -4 -II

        The trial    court' s written         finding      of   fact regarding partnership         stated   that " LaRock and

Kunchick agreed to do business together on various occasions, but did not enter into a formal

partnership   agreement."        CP     at   873.   The trial court' s written conclusion of law plainly states that

  p] laintiff is not entitled to a declaratory judgment that a partnership exists between himself and

defendant, Edward Kunchick."                  CP    at   875.   The trial court' s written finding and conclusion that

no partnership was formed controls.

                                       B. BENEFITS CONFERRED ON KUNCHICK

        Kunchick also argues that the trial court failed to distinguish which benefits were conferred

on Kunchick specifically. Again, we disagree.

        A suit for unjust enrichment seeks to recover the " value of the benefit retained" where no

contractual relationship existed because notions ofjustice and fairness require it. Young v. Young,

164 Wn.2d 477, 484, 191 P. 3d 1258 ( 2008).

        Here, the trial court specifically listed the benefits that Kunchick and PCI retained when

Kunchick locked LaRock out of PCI. The trial court found that LaRock and Kunchick acted as if

they   were   going into business together                 at   PCI    and   that LaRock'    s   conduct—   transferring all of

AJL' s property and assets to PCI, setting up new accounts receivable for PCI at AJL, and working

many hours to      help   set   up PCI       and wind     down AJL — can
                                                                     "             only be explained by an expectation of

co- ownership"     in PCI. CP          at   873.    The trial court found that based on LaRock' s and Kunchick' s

conduct   to that    point,     this    expectation        was       reasonable.    The findings of fact also state that

  s] pecifically, LaRock conferred benefits on Kunchick and PCI in the form of: labor and services

with a value of    approximately $25, 000;                accounts receivable       in the   amount of $112, 000;"   and a list

of multiple   items   of personal           property. CP        at   873. Again, because Kunchick does           not challenge
No. 45490 -4 -II

any of these findings, they are verities on appeal. Humphrey Indus., Ltd., 176 Wn.2d at 675. These

findings support the trial court' s conclusion that LaRock is entitled to that property or its value.

              Accordingly, we hold that the trial court' s written conclusion controls, a partnership did

not exist, and the trial court specifically found which benefits accrued to Kunchick personally.

Therefore, the damages awarded for unjust enrichment were proper and were supported by the trial

court' s unchallenged findings of fact.

                                     V. ISSUES RAISED FOR THE FIRST TIME ON APPEAL

              Kunchick raises two arguments for the first time on appeal: that ( 1) he should not be held

personally liable because LaRock did not plead or prove corporate disregard below, and (2) unjust

enrichment            is   not an appropriate   theory   of   recovery   where   LaRock has   unclean   hands.      These

arguments fail.

              In general, we will decline to consider arguments that are raised for the first time on appeal.

RAP 2. 5(       a).    There are exceptions to this general rule where the party seeking to raise an argument

for the first time asserts a lack of jurisdiction, a " failure to establish facts upon which relief can be

granted," or where             the   argument concerns a " manifest error    affecting   a constitutional right."   RAP

2. 5(   a).   However, none of these exceptions apply.

                                 A. PERSONAL LIABILITY AND CORPORATE DISREGARD

              Kunchick argues that the trial court erred when it held him personally liable for unjust

enrichment, conversion, and replevin because LaRock did not plead or prove corporate disregard.

But the trial court did not have the opportunity to consider Kunchick' s corporate disregard theory

                                                                 10
No. 45490 -4 -II

because he    raises      it here for the first time.? See Washburn           v.   Beatt   Equip. Co., 120 Wn.2d 246,

291, 840 P. 2d 860 ( 1992) ( " the purpose of RAP 2. 5( a) is met where the issue is advanced below

and   the trial   court   has   an   opportunity to   consider and rule on relevant         authority ").   We, therefore,

need not address it.

         In addition, as discussed above in sections III and IV, the trial court found Kunchick

personally responsible for conversion and determined the specific unjust enrichment benefit that

accrued to Kunchick personally. It was unnecessary to pierce the corporate veil to hold Kunchick

personally liable for his own, individual conduct. Accordingly, this argument fails.

                                     B. UNCLEAN HANDS AND UNJUST ENRICHMENT

         Next, Kunchick argues that the trial court erred when it awarded damages based on a theory

of unjust enrichment            because LaRock has       unclean    hands.     We decline to consider whether the

unclean hands doctrine defeats LaRock' s claim for unjust enrichment because Kunchick raises it

for the first time on appeal and unclean hands does not fall within one of the RAP 2. 5( a) exceptions.

                                                      VI. CONCLUSION

          We hold that the trial court did not err when it concluded that ( 1) LaRock had standing to sue

because the AJL transfer was not fraudulent or an improper shareholder distribution, (2) Kunchick

and PCI are liable for conversion because LaRock revoked his consent, (3) unjust enrichment benefits

7 Kunchick argues that he raised corporate disregard below in his objections to conclusions 10 and
16 to LaRock' s           posttrial   proposed   findings   of   fact   and   conclusions     of   law.   However, these
objections were insufficient to preserve an argument that corporate disregard prevents individual
liability. Moreover, Kunchick did not raise these objections until after the court had announced
its ruling.
No. 45490 -4 -II

were conferred on both Kunchick and PCI, and ( 4) Kunchick was personally liable for his individual

actions. Therefore, we affirm the trial court' s decision in all respects.

        A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06. 040,

it is so ordered.

 We concur:

 MAX

 LLE, J.

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