Opinion
No. 52462-3-I.
Filed: June 1, 2004. UNPUBLISHED OPINION
Appeal from Superior Court of King County. Docket No: 01-2-17477-1. Judgment or order under review. Date filed: 05/30/2003. Judge signing: Hon. John P Erlick.
Counsel for Appellant(s), David T Hasbrook, O'Shea Barnard Martin PS, 10900 NE 4th St. Ste 1500, Bellevue, WA 98004-5844.
Counsel for Respondent(s), Christopher Mark Alston, Attorney at Law, 1111 3rd Ave 34th Fl, Seattle, WA 98101-3292.
Daniel W. Ferm, Williams Kastner Gibbs PLLC, 601 Union St. Ste 4100, Seattle, WA 98101-2380.
Daniel Du-Ning Woo, Attorney at Law, 601 Union St. Ste 4100, Seattle, WA 98101-1368.
CMI Worldwide purchased software from PWI Technologies, Inc., but failed to pay. PWI sued CMI for breach of contract. It also sued Salton, Inc., and Icebox, LLC, under partnership liability, successor liability, and quantum meruit theories. The trial court entered judgment against CMI, which was dissolved at the time of trial, but did not find Salton or Icebox liable. PWI now argues that the court's findings were not supported by substantial evidence. But PWI failed to prove that CMI purchased the software on behalf of a partnership or joint venture with Salton, that Icebox was a liable successor corporation, or that Icebox benefited from the software sale. We affirm.
FACTS
CMI Worldwide was a Washington corporation that designed, developed, and marketed information technology appliances for kitchen use. One of CMI's first products, the Kitchen Coach, was essentially a TV/VCR for the kitchen. CMI later added Internet access to the product and called it the Advantage 2000. CMI's most recent product, the Icebox, was a combination TV, DVD player, and Internet access computer designed for kitchen use. Salton is a Delaware corporation that designs, markets, and distributes small household appliances. Salton agreed to market and sell at least one of CMI's products in exchange for a share of the profits. And on at least one occasion, Salton loaned CMI a large sum of money.
CMI purchased several products from PWI Technologies, a Washington corporation that sells computer hardware and software products to businesses. In April 2000, PWI sold Oracle software to CMI for $119,305. CMI received the software but never paid for it. In October 2000, CMI returned the unopened software to PWI, but PWI was unable to resell or return it. In June 2001, PWI sued CMI. CMI was administratively dissolved sometime thereafter, and Salton assumed all of CMI's assets. In August 2001, Salton formed Icebox, LLC, with Salton as its sole owner. PWI added Salton and Icebox as defendants in its suit. In its complaint, PWI alleges that CMI breached its sales contract for the software. It also alleges that it furnished a valuable product and service to CMI, Salton, and Icebox, and those businesses benefited from the product. CMI failed to appear or defend PWI's claims.
PWI's Vice President and Chief Financial Officer testified that once a software license comes into existence between a developer and a user, the product cannot be returned or resold. According to PWI, `[i]t is in essence the licensed use of the computer software that the customer purchases regardless of how the customer physically installs or accesses the licensed software for its use.'
The trial court conducted a two-day bench trial in November 2002. In December, the court issued its findings of fact and conclusions of law. In May 2003, the court entered a $163,240 judgment against CMI and dismissed PWI's claims against Salton and Icebox. The court awarded no attorney fees. On appeal, PWI asks us to reverse the order dismissing Salton and Icebox, direct that they be jointly and severally liable with CMI, and direct an award of attorney fees to PWI.
DISCUSSION
PWI challenges portions of the trial court's findings of fact and conclusions of law. On review, we must determine whether the trial court's findings of fact are supported by substantial evidence. There is substantial evidence `if the record contains evidence of sufficient quantity to persuade a fair-minded, rational person of the truth of the declared premise.' Where evidence conflicts, we need only decide whether the evidence most favorable to the respondent supports the findings. Any unchallenged findings of fact are verities on appeal. We must also determine whether the findings of fact support the conclusions of law and judgment, and we review conclusions of law de novo.
Bering v. SHARE, 106 Wn.2d 212, 220, 721 P.2d 918 (1986) (citing Thorndike v. Hesperian Orchards, Inc., 54 Wn.2d 570, 575, 343 P.2d 183 (1959)), cert. dismissed, 479 U.S. 1050 (1987).
Id. (citing In re Snyder's Welfare, 85 Wn.2d 182, 185-86, 532 P.2d 278 (1975)).
Miller v. Badgley, 51 Wn. App. 285, 290, 753 P.2d 530 (citing Thomas v. Ruddell Lease-Sales, Inc., 43 Wn. App. 208, 212, 716 P.2d 911 (1986)), review denied, 111 Wn.2d 1007 (1988).
Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 808, 828 P.2d 549 (1992) (citing Nearing v. Golden State Foods Corp., 114 Wn.2d 817, 818, 792 P.2d 500 (1990)).
Miller, 51 Wn. App. at 290 (citing Holland v. Boeing Co., 90 Wn.2d 384, 380, 583 P.2d 621 (1978)); Bingham v. Lechner, 111 Wn. App. 118, 127, 45 P.3d 562 (2002) (citing City of Seattle v. Megrey, 93 Wn. App. 391, 393, 968 P.2d 900 (1998)), review denied, 149 Wn.2d 1018 (2003).
I. Salton as CMI's Partner or Joint Venturer
PWI seeks to hold Salton jointly and severally liable based on a partnership liability theory. A partnership is `an association of two or more persons to carry on as co-owners a business for profit[.]' All partners are jointly and severally liable for the partnership's obligations. A joint venture is similar to a partnership but is `limited to a particular transaction or project.' Partnership law generally applies to joint ventures. In this case, PWI argues that CMI and Salton were partners or, alternatively, joint venturers, and thus Salton is jointly and severally liable for CMI's debt. But in order for Salton to be jointly and severally liable, the software purchase must have been within the scope of the partnership or joint venture.
Pietz v. Indermuehle, 89 Wn. App. 503, 510, 949 P.2d 449 (1998).
Id. (citing Paulson v. McMillan, 8 Wn.2d 295, 298, 111 P.2d 983 (1941)).
Barnes v. McLendon, 128 Wn.2d 563, 573-74, 910 P.2d 469 (1996) (citing Collyer v. Egbert, 200 Wn. 342, 348-49, 93 P.2d 399 (1939)).
The trial court found that PWI failed to prove the existence of a partnership or a joint venture because it did not present evidence that Salton agreed to either of these relationships. PWI argues that this was error. But we need not reach this issue because the court went on to find that, even if a partnership or joint venture existed, PWI had not proven that the software purchase fell within the scope of that relationship. Substantial evidence supports this finding.
First, former CMI president and current Icebox president Russell Whitman testified that Salton agreed to market CMI's Kitchen Coach product in exchange for a share of the profits. He could not recall any agreements relating to any other CMI product. Second, a memo from the Salton president to a CMI executive refers to a joint venture for marketing the Kitchen Coach. The evidence was that any partnership or joint venture between CMI and Salton thus related only to the Kitchen Coach product. And substantial evidence also shows that CMI's planned use for the Oracle software was entirely unrelated to marketing or selling the Kitchen Coach, which was not an Internet device.
According to Whitman, CMI purchased the software to develop a website called `mykitchen.net,' an Internet service provider which would deliver content such as news and weather to subscribing owners of the Icebox product. Brett Campbell, PWI's Vice President of Sales, testified that the Oracle software was pivotal to CMI's e-commerce site. But the trial court found that `CM[I] intended to purchase Oracle 8i Enterprise Edition software from PWI to develop content for CM[I]'s website that would have been made available to Icebox owners,' and because PWI did not challenge this finding, it is a verity on appeal.
The admissible evidence demonstrates that any partnership or joint venture between CMI and Salton related to the sales and marketing of the Kitchen Coach, and substantial evidence could convince a rational trier of fact that CMI's intended use for the Oracle software was unrelated to this purpose. PWI failed to show that CMI had the authority to bind Salton to its contract with PWI, and the trial court correctly concluded that Salton is not liable under a partnership or joint venture liability theory.
An act of a partner `for apparently carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership' binds the partnership. RCW 25.05.100(1). Citing this rule, PWI argues that Salton, as CMI's partner, is bound to pay CMI's debt. But as discussed above, PWI failed to prove that CMI purchased the software to further any partnership or joint venture that may have existed between CMI and Salton. In the absence of evidence establishing the major premise of this argument, the fact that a partner's act binds the partnership cannot make Salton jointly and severally liable here.
II. Icebox as a Successor Corporation
PWI seeks to hold Icebox jointly and severally liable with CMI based on a successor liability theory. But a corporation that purchases the assets of another corporation is generally not liable for the debts of the seller corporation. Four exceptions to this rule exist, and successor liability will be imposed if: (1) the buyer corporation expressly or impliedly agreed to assume the liability; (2) the purchase is a merger or consolidation; (3) the buyer corporation is a mere continuation of the seller; or (4) the corporations are transferring the assets for the fraudulent purpose of avoiding liability.
Eagle Pac. Ins. Co. v. Christensen Motor Yacht Corp., 135 Wn.2d 894, 901, 959 P.2d 1052 (1998) (citing Hall v. Armstrong Cork, Inc., 103 Wn.2d 258, 261, 692 P.2d 787 (1984)).
Id. (citing Hall, 103 Wn.2d at 261-62).
Here, PWI presented insufficient evidence that any of these exceptions applied to Icebox. Whitman testified that Salton assumed all of CMI's assets when CMI dissolved and that Salton is the sole owner of Icebox. But there was no evidence that Salton or Icebox agreed to assume CMI's liability. Nor did PWI present evidence that Salton's purchase of CMI and creation of Icebox was a de facto merger or consolidation. A de facto merger or consolidation occurs when two or more corporations unite, resulting in one being absorbed by the other or creating a new corporation. Because PWI presented no evidence that the consideration given to the selling corporation was shares of the buyer's stock, it cannot establish a de facto merger or consolidation.
Cashar v. Redford, 28 Wn. App. 394, 398, 624 P.2d 194 (1981) (citing 15 W. Fletcher, Cyclopedia of Private Corporations, sec. 7041 (Rev. Ed. M. Wolf 1973)).
Id.
Nor did PWI present evidence that Icebox is a mere continuation of the seller. `One crucial factor in a `continuation' is a common identity of the officers, directors, and stockholders in the selling and purchasing companies.' Although Whitman was president of both CMI and Icebox, there was no other evidence of identity offered. Another crucial factor in a "mere continuation" is the sufficiency of the consideration in light of the assets sold. Again, PWI presented no evidence of the consideration involved here, sufficient or otherwise. And finally, PWI offered no evidence that the transfer of assets was fraudulent. Therefore, the trial court's finding that Icebox was not a liable successor corporation is supported by substantial evidence.
Id. at 397 (citing Leannais v. Cincinnati, Inc., 565 F.2d 437 (7th Cir. 1977); Armour-Dial, Inc. v. Alkar Eng'g Corp., 469 F. Supp. 1193 (E.D. Wis. 1979)).
Id. at 397-98 (citing Ortiz v. S. Bend Lathe, 46 Cal.App.3d 842, 120 Cal.Rptr. 556 (1975)).
III. Icebox's Liability Under Quantum Meruit
Next, PWI seeks to hold Icebox liable under a quantum meruit theory. Quantum meruit is a legal remedy that measures recovery under an implied contract to compensate for services rendered. Recovery under quantum meruit is limited to the reasonable value of services. Alternatively, the remedy of unjust enrichment may apply when one retains money or benefits that in equity belong to another. Because unjust enrichment applies when one retains property or services, it is broader than quantum meruit and more readily applies to this case. To recover under quantum meruit or unjust enrichment, PWI must show that it conferred a benefit upon Icebox, Icebox accepted and used the benefit and, under these circumstances, it is inequitable to allow Icebox to retain the benefit without payment. Here, PWI claims that Icebox used the Oracle software PWI sold to CMI but for which CMI never paid. It bases this claim on the fact that Icebox currently uses Oracle software. But Icebox asserts that the software came not from PWI but from e-Pods, a Washington Internet company with whom Salton had a debtor-creditor relationship. In September 2000, Salton foreclosed upon and acquired e-Pods' assets. At Salton's direction, CMI took control of the e-Pods computer servers, which already had the Oracle software loaded. Those servers were then reacquired by Salton and conveyed to Icebox.
Bort v. Parker, 110 Wn. App. 561, 580, 42 P.3d 980 (citing Ducolon Mech., Inc. v. Shinstine/Forness, Inc., 77 Wn. App. 707, 711, 893 P.2d 1127 (1995)), review denied, 147 Wn.2d 1013 (2002).
Bailie Communications, Ltd. v. Trend Bus. Sys., Inc., 61 Wn. App. 151, 159, 810 P.2d 12, 814 P.2d 699 (1991) (citing Black's Law Dictionary 1243 (6th ed. 1990)), review denied, 117 Wn.2d 1029 (1991).
Id. at 160 (citing Smith v. Bliss, 44 Cal.App.2d 171, 112 P.2d 30 (1941)).
Id. (citing L A Drywall, Inc. v. Whitmore Constr. Co., 608 P.2d 626, 630 (Utah 1980)).
Id.
Id. at 159-60 (citing Black's Law Dictionary 1243, 1535-36 (6th ed. 1990)).
It is undisputed that CMI eventually returned an unopened box of Oracle software to PWI. But PWI argues that a company need not open the software package to acquire and use the software. Gary Henderson, Chief Financial Officer and President of PWI, testified that customers can download the software from the Internet, use trial software, or copy the software from disks or CDs. He stated that `[v]ery often by the time they actually place an order for the software, they've already gotten — normally, would already have it loaded in some fashion on their system, and all they're really doing is purchasing the license to use it, which in all cases is all they ever purchase is a license.' Therefore, according to PWI, while CMI may have returned the software package unopened, Icebox may have nevertheless used the Oracle license PWI sold to CMI.
PWI argues that there is no evidence that Salton, CMI, or Icebox ever acquired a license to use the software from anyone other than PWI, or that Oracle permitted a license transfer from any company to CMI, Salton, or Icebox. But PWI has the burden of proving that the companies used the license it sold to CMI, and PWI has failed to satisfy this burden. The trial court found that PWI `failed to prove that CM[I] used the Oracle software under the PWI sale rather than the software acquired from Salton. There was no admissible evidence that but for the PWI Oracle software, CM[I] could not legally have used the Salton-acquired Oracle software.' PWI did not challenge this finding, and it is a verity on appeal. PWI did not present sufficient evidence to support recovery under a quantum meruit or unjust enrichment theory, and the trial court did not err in so concluding.
IV. Attorney Fees
PWI appeals the trial court's refusal to award attorney fees against CMI. A prevailing party in a contract action is entitled to attorney fees when the contract contains an attorney fees provision. Here, the contract in dispute was the April 2000 purchase order by which CMI purchased the software from PWI. CMI transmitted the purchase order to PWI via fax, and it only faxed the front page. The attorney fee provision was on the back of the purchase order. Because PWI only received the front page of the purchase order, the contract had no attorney fee provision. But PWI argues that previous purchase orders between CMI and PWI contained attorney fee provisions on the front, thus establishing a course of performance. This course of performance, PWI argues, requires the court to interpret the April 2000 purchase order as containing an attorney fee provision.
The trial court found that the April 2000 purchase order did not include an attorney fee provision, and PWI does not dispute this finding.
Although PWI refers to a `course of performance' in arguing that attorney fee provisions in previous contracts should be used to interpret the present contract, PWI probably meant to argue `course of dealing.' A `course of dealing' refers to dealings between the same parties in other transactions or contracts that establish a common basis of understanding for interpreting other transactions or contracts. Morgan v. Stokely-Van Camp, Inc., 34 Wn. App. 801, 809, 663 P.2d 1384 (1983) (citing RCW 62A.1-205(1)). `Course of performance' refers to repeated occasions of prior conduct under a continuing sales contract while `course of dealing' refers to a sequence of conduct between the parties before the current contract. 67 Am Jur.2d Sales sec. 239 (citing U.C.C. sec. 1-303). But because this issue was not raised by either party and the trial court below treated it as a `course of performance' issue, it is the law of the case here. And, even if we were to evaluate the issue as a `course of dealing,' the outcome would be the same.
A court may interpret the meaning of a sales contract by looking to the parties' course of performance. A course of performance `involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other[.]' While Washington courts have not defined how many instances would establish `repeated occasions,' `a single occasion of conduct does not fall within the language of the [Uniform Commercial] Code provision.' Here, CMI issued purchase orders to PWI on two occasions before the April 2000 agreement. A November 1999 purchase order included an attorney fee provision at the bottom of the front page, as did a December 1999 order. But the November order was cancelled and never offered as evidence; thus, the trial court could consider only the December order. One purchase order containing an attorney fee provision does not establish `repeated occasions.' The trial court correctly concluded that there was no course of performance establishing PWI's right to attorney fees.
RCW 62A.2-208(1).
67 Am.Jur.2d Sales sec. 239 (2003) (citing Div. of Triple T Serv., Inc. v. Mobil Oil Corp., 60 Misc.2d 720, 304 N.Y.S.2d 191 (1969), aff'd, 34 A.D.2d 618, 311 N.Y.S.2d 961 (1970)).
PWI also assigned error to the trial court's decision to award prejudgment interest at 12 percent. It argues that the appropriate rate was 18 percent, but it fails to cite to any support in the record. Nor did PWI demonstrate that it had raised this issue in the trial court. Therefore we do not consider the argument.
Salton and Icebox request attorney fees on appeal based on RAP 18.1, RCW 4.84.330, and Herzog Aluminum, Inc. v. General American Window Corp. Herzog held that a party who successfully defends a contract action by arguing that the contract is void is still entitled to fees pursuant to the contract. Here, while Salton and Icebox successfully disputed the validity of the April 2000 order as it pertained to them, the contract at issue did not contain an attorney fee provision. In contrast, Herzog involved a contract that contained an attorney fee provision but was unenforceable for unrelated reasons. Because the April 2000 purchase order contained no attorney fee provision, we deny all requests for attorney fees.
Under RAP 18.1(a), this court may award attorney fees if an applicable law grants that right.
RCW 4.84.330 authorizes attorney fees to a prevailing party in any action on a contract when the contract specifically provides for fees.
39 Wn. App. 188, 692 P.2d 867 (1984).
Id. at 196-97.
Id. at 191. See also Bogle Gates, P.L.L.C. v. Holly Mountain Res., 108 Wn. App. 557, 563, 32 P.3d 1002 (2001).
PWI also assigned error to the trial court's decision to reject exhibit 12 but made no argument about the issue and cites no authority. Because a court may decline to examine assignments of error that are unsupported by argument and citation to authority, we will not address this issue. Ottgen v. Clover Park Technical College, 84 Wn. App. 214, 218 n. 2, 928 P.2d 1119 (1996) (citing State v. Lord, 117 Wn.2d 829, 853, 822 P.2d 177 (1991), cert. denied, 506 U.S. 856 (1992); State v. Dennison, 115 Wn.2d 609, 629, 801 P.2d 193 (1990)).
We affirm.
SCHINDLER and COLEMAN, JJ., concur.