Columbia State Bank, Res. v. Mark v. Jordan And Cynthia Jordan, Apps.
73915-8
Wash. Ct. App. UMay 22, 2017Background
- In 2012 Invicta Law Group, PLLC (PLLC), managed solely by Mark Jordan, borrowed $165,000 from Columbia State Bank (CSB) under a promissory note, loan agreement, and security agreement; Jordan signed as manager and individually guaranteed the loan.
- Jordan filed personal Chapter 7 bankruptcy on September 30, 2013, ceased operating the PLLC that day, and the bankruptcy court discharged his personal guaranty. The PLLC did not file bankruptcy.
- Immediately after, Jordan operated a sole proprietorship under the same trade name (Invicta Law Group), using the same offices, phone, website, employees, clients, insurance, lease/subleases and much of the same equipment; client work and receipts flowed to the new accounts.
- CSB learned of the bankruptcy/default, inspected collateral that it deemed worth less than disposition costs, foreclosed on the PLLC via summary judgment, then sued Jordan on an equitable successor-liability theory (mere continuation).
- After a bench trial the court found the sole proprietorship was a mere continuation of the PLLC, entered joint-and-several judgment against PLLC and Jordan for principal, interest and attorneys’ fees, and ordered turnover of collateral; Jordan appealed.
Issues
| Issue | Plaintiff's Argument (CSB) | Defendant's Argument (Jordan) | Held |
|---|---|---|---|
| Whether equitable successor liability was barred because CSB had an adequate legal remedy (foreclosure) | Equitable successor liability is appropriate because foreclosure on available collateral would not provide complete relief—the collateral was insufficient and other assets were transferred to the successor. | Foreclosure was an adequate, speedy legal remedy so equity should not intervene. | Court held equity properly exercised: foreclosure was inadequate to provide complete relief given asset transfer and low collateral value. |
| Whether Jordan’s sole proprietorship was a "mere continuation" of the PLLC (transfer of assets) | The continuity of business, same owner/operator, clients, name, location, employees, equipment and receipts shows the sole proprietorship was essentially the same business—no formal transfer document required. | No formal written assignment/sale of PLLC assets; therefore no evidence of transfer to support successor liability. | Court held substantial evidence supported the mere-continuation finding—business continued under a "new hat," so Jordan is successor liable. |
| Sufficiency/specificity of trial court findings of fact | Findings identify the factual bases (continuity, transfers, account receipts) and are sufficient for meaningful review. | Findings are conclusory and lack specificity on determinative facts (esp. findings about transfers and account receivables). | Court found the findings adequate and supported by substantial evidence; unchallenged findings are verities on appeal. |
| Admissibility of CSB witness testimony refreshed by a payoff printout and sufficiency of damages proof | The bank officer's memory was refreshed by a document (ER 612); the testimony plus loan documents allowed a reasonable certainty of damages. | The printout was hearsay and not in evidence; it improperly informed the witness. | Court held allowing refreshed recollection was within discretion (not hearsay problem for refreshment); even if erroneous, admission was harmless because loan documents alone permitted a reasonable damages calculation. |
| Entitlement to contractual attorneys’ fees against successor | Successor liability extends underlying contract liabilities, including contractual fee provisions; successor who is mere continuation assumes contract obligations. | Jordan was not a party to the note and cannot be charged under its fee provision. | Court held contractual fee provision applied because successor liability enforces the contract against the successor; fees awarded and affirmed. |
Key Cases Cited
- Cambridge Townhomes, LLC v. Pacific Star Roofing, Inc., 166 Wn.2d 475 (2009) (articulates successor-liability exceptions and mere-continuation factors)
- Hall v. Armstrong Cork, Inc., 103 Wn.2d 258 (1984) (explains policy behind non‑liability on asset purchases and exceptions)
- Gall Landau Young Constr. Co. v. Hedreen, 63 Wn. App. 91 (1991) (equitable successor‑liability and adequacy of legal remedies)
- Sorenson v. Pyeatt, 158 Wn.2d 523 (2006) (limitations on equitable relief where innocent third‑party property owner is implicated)
- Brown Bark III, L.P. v. Haver, 219 Cal. App. 4th 809 (2013) (successor liability is not independent of contract and successor may be held to contract fee provisions)
- Lewis River Golf, Inc. v. O.M. Scott & Sons, 120 Wn.2d 712 (1993) (damages must be proven with reasonable certainty)