Jordan appeals the trial court's ruling that his sole
proprietorship, Invicta Law Group, was a successor in
liability to Invicta Law Group, PLLC (PLLC), on a promissory
note to Columbia State Bank (CSB). Jordan asserts that the
trial court: (1) erred in finding that the sole
proprietorship is a successor to the PLLC under the
"mere continuation" theory, (2) provided
insufficient findings of fact, (3) abused its discretion in
allowing refreshed recollection testimony supporting damages,
and (4) erred in awarding CSB its attorney fees and costs. We
1999, Jordan formed the PLLC and was the sole member and
manager. In February 2012, the PLLC borrowed $165, 000 from
CSB. In order to do so, the PLLC entered into several loan
documents including a commercial promissory note (note), loan
agreement, and security agreement. Jordan signed all three
loan documents as manager of the PLLC. Jordan also signed the
loan agreement individually as guarantor.
the terms of the note, the PLLC was required to make 23
consecutive monthly payments of $2, 377.04 beginning March
20, 2012, at an interest rate of 5.5 percent per year, with a
final balloon payment of the balance on February 20, 2014.
The security agreement granted CSB a first-priority security
All Equipment, Inventory, Chattel Paper, Accounts, and
General Intangibles; whether it is owned now or acquired
later; all accessions, additions, replacements, and
substitutions relating to the Collateral; all records and
proceeds of any kind relating to the Collateral (including
insurance, general intangibles and other account proceeds).
event of a default, the loan documents preserved the right
for CSB to accelerate the loan and indebtedness, take
immediate possession of the collateral, and to pursue any
remedy under any of the loan documents, at law or in equity.
the loan agreement and note included an "Attorneys'
Fees and Other Costs" provision that states, if
"legal proceedings are instituted to enforce the terms
of this Note, borrower agrees to pay all costs of the lender
in connection therewith, including reasonable attorneys'
fees to the extent permitted by law." The note and
security agreement include a "survival clause"
confirming they are binding on all "heirs, executors,
administrators, assigns and successors" of the borrower.
September 30, 2013, Jordan filed for voluntary Chapter 7
bankruptcy. On January 2, 2014, the bankruptcy court
discharged Jordan's personal guaranty on the loan
same day he filed for bankruptcy, Jordan also ceased
operating as the PLLC. The PLLC did not file for bankruptcy.
Jordan filed for personal bankruptcy, he also stopped (as
sole owner and managing partner) making PLLC's payments
on the note. The PLLC made its last payment on the loan to
CSB in October 2013. The PLLC maintained two bank accounts at
CSB, a general account and an IOLTA account. In September and
October 2013, the PLLC deposited fewer and fewer funds into
its CSB general account until all funds were withdrawn on
October 25, 2013. The PLLC also withdrew funds held in the
CSB IOLTA account, which historically carried a balance of
approximately $20, 000 to $23, 000. All funds in the CSB
IOLTA account were withdrawn by November 6, 2013.
after filing for personal bankruptcy, Jordan began operating
a law practice known as the Mark V. Jordan sole
proprietorship (sole proprietorship). The sole proprietorship
was owned, operated, and controlled by Jordan. Jordan applied
for and received a new tax identification number, a new
Unified Business Identifier number, and opened new bank
accounts at Umpqua Bank and American West Bank under the name
Invicta Law Group.
continued his individual law practice, using the same name,
website, signage, telephone number, offices, insurance,
employees, equipment, and representing the same clients.
Jordan continued to use the full name Invicta Law Group, PLLC
in new client engagement letters for nearly six months.
Jordan also continued under the same contracts as the PLLC
including: lease agreement, subtenant agreements, existing
client agreements, and malpractice insurance agreement.
Jordan continued representing the same clients the PLLC had
represented at the time the PLLC ceased operation. No clients
left the PLLC due to its change in legal structure. Indeed,
Jordan did not tell the clients until months later. Jordan
allocated nearly all of his income after September 30, 2013,
from clients and from the sublease agreements, to the sole
proprietorship's bank accounts.
learning Jordan filed for bankruptcy, counsel for CSB
contacted counsel for Jordan and notified him that the loan
was in default. CSB requested access to the collateral as
well as detailed financial information. Jordan acknowledged
the requests for information and offered to make the
collateral available. Jordan never provided the requested
financial information. Jordan moved some office equipment to
a storage facility and sent a storage unit key to CSB. After
inspection, CSB declined to accept the collateral as full or
partial satisfaction of the debt. CSB explained that it did
"not wish to take possession of the Collateral or
dispose of the Collateral, as the estimated cost of
disposition exceeds the value of the Collateral."
February 6, 2014, CSB filed a lawsuit in King County Superior
Court against the PLLC, Jordan, and Jordan's marital
community. CSB's complaint alleged causes of action
against the PLLC for breach of contract and for foreclosure
of the security interest. CSB sought recovery against Jordan
under a claim of successor liability. After initial
discovery, CSB moved for summary judgment on its claims
against the PLLC and Jordan. On December 17, 2014, the trial
court granted summary judgment in favor of CSB for its claims
against the PLLC. The court denied CSB's motion as it
pertained to the claim against Jordan for successor
claim against Jordan for successor liability proceeded to a
three-day bench trial in June 2015. The trial court issued
its findings of fact and conclusions of law on July 9, 2015.
The court found in favor of CSB and awarded CSB $151, 360.40
against the PLLC and Jordan jointly and severally under the
doctrine of successor liability, holding that Jordan's
sole proprietorship was a "mere continuation" of
the PLLC. Specifically, the trial court concluded: (1) the
PLLC defaulted on the note, (2) the PLLC transferred all of
its assets to Jordan, (3) there was no consideration given by
Jordan, and (4) that Jordan was liable for the PLLC's
obligations on the note.
sought to recover $314, 662.54 for its attorney fees and
costs. After reviewing the fee petition and supporting
declarations, the trial court reduced the requested fees and
awarded CSB $258, 045.78 for its attorney fees and costs. The
attorney fees award was also jointly and severally against
the PLLC and Jordan individually. The court entered a
judgment and awarded $409, 406.18 in damages against Jordan
and the PLLC jointly and severally.
trial court's judgment also held that CSB's interest
in the collateral identified in the security agreement was
superior to any claim of right or interest by the PLLC or
Jordan. The court directed issuance of a writ of execution
for law enforcement to take possession of the collateral and
deliver it to CSB, and for any net proceeds or credits to be
applied against the judgment. Jordan appealed.
argues first that CSB's equitable claim for successor
liability is precluded because CSB had an adequate remedy at
law. We disagree.
liability is an equitable claim. A court may grant relief in
both law and equity. GMB Enterprises. Inc. v. B-3
Enterprises, Inc.. 39 Wn.App. 678, 687, 695 P.2d 145
(1985); Yount v. Indianola Beach Estates. Inc.. 63
Wn.2d 519, 525, 387 P.2d 975 (1964). The general rule is that
courts will not exercise equity jurisdiction when there is a
clear, adequate, complete, and speedy remedy at law. Gall
Landau Young Const. Co., Inc. v. Hedreen. 63 Wn.App. 91,
99, 816 P.2d 762 (1991); see also Roon v. King
County. 24 Wn.2d 519, 166 P.2d 165 (1946) (holding
equity will not act if there is a complete and adequate
remedy at law). We review the decision of whether to grant
equitable relief de novo. Niemann v. Vaughn Comm'ty
Church. 154 Wn.2d 365, 374, 113 P.3d 463 (2005).
argues that the trial court erred in granting equitable
relief because CSB had an adequate remedy at law. Jordan
contends that because CSB had the legal remedy of foreclosure
against the PLLC and the collateral under the security
agreement, equitable remedies are barred. Jordan does not
dispute CSB's claim that after inspecting the stored
collateral it determined that the "estimated cost of
disposition exceeds the value of the Collateral." Jordan
argues instead that it is irrelevant that the any remaining
assets of the PLLC and the collateral may not be sufficient
to satisfy the judgment. Jordan ignores that the test for
exercising equitable jurisdiction is whether the plaintiff
lacks a "clear, adequate, complete,
and speedy remedy at law." Hedreen. 63 Wn.App.
at 99 (emphasis added). "Where the remedy by action for
damages is inadequate or insufficient to do complete justice
between the parties, equity will take jurisdiction and grant
proper relief." 30A C.J.S. Equity. § 25
(2007). "The fact that a plaintiff may have a remedy at
law by an action for damages does not prevent equity from
assuming jurisdiction if the equitable remedy is better
adapted to render more perfect and complete justice than the
remedy at law." 30A C.J.S. Equity, § 25.
The trial court's conclusion that CSB was left without an
adequate remedy at law was supported by substantial evidence.
relies on Seattle Mortgage Co. v. Unknown Heirs of
Gray. 133 Wn.App. 479, 136 P.3d 776 (2008), to support
his claim that CSB had an adequate legal remedy to foreclose
on some of the PLLC's physical collateral. Seattle
Mortgage did not involve a claim for successor
liability. Instead, Tacoma Public Utilities Department (PUD)
made a $3, 186.96 loan secured by a deed of trust on the
borrower's residence. After the borrower defaulted, PUD
sought an equitable lien which would have allowed PUD to
terminate utility service to the residence until the loan was
paid. Seattle Mortgage. 133 Wn.App. at 499. The
court refused to grant the equitable lien because PUD had the
right to foreclose on the borrower's residence, which was
worth substantially more than the loan balance. The court
concluded that an equitable lien was not necessary to prevent
injustice. Seattle Mortgage. 133 Wn.App. at 500-01.
the collateral made available by Jordan was not worth the
cost of disposal. All of the other assets that belonged to
the PLLC, including its clients and accounts, were
transferred to Jordan's sole proprietorship. Foreclosure
on the available collateral would be inadequate and would not
provide a clear, adequate, or complete remedy.
reliance on Sorenson v. Pyeatt. 158 Wn.2d 523, 544,
146 P.3d 1172 (2006), is similarly misplaced. In
Sorenson, our Supreme Court rejected a claim for an
equitable lien against real property because the plaintiff
had already obtained an $868, 000 judgment against the
defendants based on a deed, and the owner of the real
property was an innocent third party. Sorenson. 158
Wn.2d at 544. The Court concluded that "the Lenders have
failed to show how the equities would be served by requiring,
in essence, Sorenson [innocent third party] to bear the
burden of satisfying the Lenders' judgment against the
Pyeatts [the defendants]. Sorenson. 158 Wn.2d at
unlike Sorenson. the trial court found CSB's
legal remedy-foreclosure on the available
collateral-inadequate in light of the debt owed. Moreover,
Jordan is not an innocent third party; he is the successor to
case is more similar to Hedreen. Hedreen
concerned an attempt by the Gall Landau Young Construction
Company (GLY) to hold the R.C. Hedreen Company (Hedreen), the
successor to the assets of Parkside Building Company
(Parkside), liable for Parkside's debts to GLY. Hedreen
asserted that the court could not exercise its equitable
jurisdiction because GLY had prevailed against Parkside at
the trial court level in bankruptcy court. Hedreen.
63 Wn.App. at 99. We disagree because GLY's claim in
bankruptcy court was on appeal and therefore not certain, and
also because there was "no guarantee" that
GLY's bankruptcy claim would provide complete relief.
Gall. 63 Wn.App. at 99-100.
CSB prevailed on summary judgment in its claim to foreclose
against the PLLC. However, there is no dispute that the
collateral made available to CSB does not satisfy the amount
owed on the debt. Based on this, the trial court concluded
that "the legal remedies that may be available to
Plaintiff do not provide a guarantee that they would provide
complete, or any, relief." Like Hedreen, CSB
should be able to proceed in its equitable claim for
successor liability against Jordan. The trial court did not
err in exercising its equitable jurisdiction and granting
both an equitable and legal remedy.
argues next that the trial court's decision finding
successor liability fails because there is no evidence
supporting a transfer of assets from the PLLC to Jordan's
sole proprietorship. We disagree.
review of an appeal from a bench trial is "limited to
determining whether a trial court's findings are
supported by substantial evidence, and if so, whether those
findings support the conclusions of law." American
Nursery Prods.. Inc. v. Indian Wells Orchards, 115 Wn.2d
217, 222, 797 P.2d 477 (1990). Substantial evidence "is
the quantum of evidence sufficient to persuade a rational
fair-minded person." Sunnyside Valley Irrig. Dist.
v. Dickie. 149 Wn.2d 873, 879, 73 P.3d 369 (2003).
"We view the evidence and all reasonable inferences in
the light most favorable to the prevailing party. State
v. Kaiser, 161 Wn.App. 705, 724, 254 P.3d 850 (2011). We
do not review credibility determinations on appeal.
Kaiser. 161 Wn.App. at 724. Unchallenged findings
are verities on appeal. In re Estate of Jones. 152
Wn.2d 1, 8, 93 P.3d 147 (2004).
follows the general rule that "a corporation purchasing
the assets of another corporation does not become liable for
the debts and liabilities of the selling corporation."
Cambridge Townhomes. LLC v. Pacific Star Roofing.
Inc.. 166Wn.2d 475, 481-82, 209 P.3d 863 (2009). The
rationale for this rule is a "bona fide purchaser who
gives adequate consideration and who lacks notice of prior
claims against the property acquires no liability for those
claims." Hall v. Armstrong Cork. Inc., 103
Wn.2d 258, 262, 692 P.2d 787 (1984)). There are, however,
exceptions to this general rule. A successor may be held
liable for the debts of a predecessor, where:
(1) there is an express or implied agreement for the
purchaser to assume liability; "(2) the purchase is a de
facto merger or consolidation; (3) the purchaser is a mere
continuation of the seller; or (4) the transfer of assets is