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Columbia Asset Recovery Group, LLC v. Kelly

Court of Appeals of Washington, Division 1

November 4, 2013

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

ORDER CHANGING OPINION

The panel having determined that the opinion should be changed, it is hereby ORDERED that the opinion of this court in the above-entitled case filed November 4, 2013 be changed as follows:

The following text shall be added as a footnote following the penultimate sentence on page 15:

Each party requests an award of attorney fees premised on the Business Loan Agreement and on the Commercial Line of Credit Agreement and Note. As a result of our decision in this appeal, neither party has established itself as the prevailing party in the action. Accordingly, neither party has established that it is entitled to an award of attorney fees pursuant to either the Business Loan Agreement or the Commercial Line of Credit Agreement and Note.

The remainder of the opinion shall remain the same.

Dwyer, J.

Columbia Asset Recovery Group, LLC (CARG) appeals from the trial court's order dismissing its complaint for lack of personal jurisdiction. Timothy Kennedy, CARG's sole member, was the guarantor of a one million dollar Business Loan Agreement and Promissory Note executed by William Phillips and Atlantic Frost Holdings, LLC (AFH). The Agreement contains jurisdiction and venue provisions 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 lender demanded payment from Kennedy. In response, Kennedy formed CARG and caused CARG to 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 of personal jurisdiction. Because there is a genuine issue of material fact as to whether CARG and the lender intended CARG's payment to constitute a discharge of the 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 AFH executed 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 event that Phillips and AFH failed to pay. The Note contains a provision providing for payment to be made in Seattle. The Agreement includes a jurisdiction provision providing that Phillips and AFH "agree to waive any objection to jurisdiction 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 two extensions of the Note. The Estate paid interest on the AFH loan through February 2011 but, by March 17, 2011, the Estate informed the Bank that it could no longer pay the interest on the AFH loan pursuant to Maryland probate law.[1] When the Agreement 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 on his guaranty.[2] On April 13, 2011, Kennedy spoke with a representative of the Bank regarding "options for enforcement of [the AFH Loan]." Kennedy subsequently formed CARG, a Washington limited liability company. Kennedy's counsel later told 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 of Chancery 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 Loan Purchase and Assignment Agreement (LPA Agreement). In the LPA Agreement, the Bank and CARG agreed to several provisions that the parties highlight in disputing whether the Bank and CARG intended the LPA Agreement to operate as an assignment rather than a discharge:

• "The Bank has made demand on Kennedy for payment of the amounts 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 ...

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