Heritage Oak Management And Shane Douglas, Apps V. Firegang, Inc. ( 2021 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
FIREGANG, INC., a Washington ) No. 82012-5-I
corporation, )
)
Respondent, )
)
v. )
)
HERITAGE OAK MANAGEMENT, LLC, )
a California limited liability company, )
and SHANE DOUGLAS, an individual, ) UNPUBLISHED OPINION
)
Appellant. )
)
VERELLEN, J. — A Washington court can exercise personal jurisdiction over
an out-of-state defendant when Washington’s long arm statute applies or when a
defendant consents. Because Californian Dr. Shane Douglas consented by
agreeing to a contract that contained a forum selection clause for Washington, the
trial court did not err by denying a motion to vacate a judgment for lack of personal
jurisdiction. But because the record shows Douglas’s codefendant, Heritage Oak
Management, a California limited liability company, neither consented nor had any
contacts with Washington, the court erred by denying the motion to vacate as to it.
Therefore, we affirm in part, reverse in part, and remand for further
proceedings consistent with this opinion.
FACTS
Firegang, Inc., is a Washington corporation that provides online dental
marketing services. In May of 2016, Shane Douglas, a dentist in California, signed
No. 82012-5-I/2
a contract for Firegang’s services. The contract required a monthly payment of
$2,750 for a one-year contract with automatic renewals every six months. In
March of 2018, Douglas wrote to Firegang, stating, “I would like to finish my
services with Firegang . . . . Let me know how to proceed.”1 Firegang asked how it
could “make these last three months with Firegang better for you (if you’d still like
to leave in July).”2 It did not hear from him again and did not cancel services. In
January of 2019, Douglas contacted his credit card company to initiate
chargebacks for six months of services. The chargebacks totaled $16,500.
That March, Firegang filed a complaint in King County Superior Court
naming Douglas and Heritage Oak Management, LLC as defendants in a breach
of contract action. Douglas is the president of Heritage Oak Management, which
manages a commercial property and “has nothing to do with” Douglas’s dental
practice.3 Douglas was personally served a summons and complaint in California,
both in his personal capacity and as representative for Heritage Oak Management.
Neither Douglas nor Heritage Oak Management appeared in King County
Superior Court. In May, Firegang obtained a default judgment for $29,200.88,
including $16,500 in damages and $11,633.50 in attorney fees. Firegang
registered the judgment in California and served it on Douglas personally.
Douglas and Heritage Oak Management filed a motion in that court to dismiss the
sister-state judgment, and the California court denied the motion.
1 Clerk’s Papers (CP) at 184.
2 CP at 184.
3 CP at 250-51
2
No. 82012-5-I/3
Douglas and Heritage Oak Management then moved under CR 60(b) in
King County Superior Court to vacate the default judgment, arguing neither was a
party to the Firegang contract. The court denied the motion.
Douglas and Heritage Oak Management appeal.
ANALYSIS
I. Motion to Vacate
Douglas and Heritage Oak Management argue the default judgment must
be vacated as void because the Washington court lacked personal jurisdiction
when the judgment was entered.4 Whether a trial court possessed jurisdiction is a
question of law,5 so we review de novo whether a court had personal jurisdiction
over a party when the default judgment was entered.6 We presume a default
4 Firegang contends they are precluded from raising this issue because the
issue was already decided by the California court. Although it cites to authority
regarding claim preclusion, it appears to argue issue preclusion applies because
Firegang’s argument focuses on a single issue rather than many issues within a
larger claim. Issue preclusion, also called collateral estoppel, “‘prevents
relitigation of an issue after the party estopped has had a full and fair opportunity
to present its case.’” Weaver v. City of Everett, 4 Wn. App. 2d 303, 314, 421 P.3d
1013 (2018) (emphasis omitted) (internal quotation marks omitted) (quoting Barr v.
Day, 124 Wn.2d 318, 324-25, 879 P.2d 912 (1994)). To prove issue preclusion
applies, Firegang must show, among other elements, a judgment on the merits of
the issue. In re Marriage of Pennamen, 135 Wn. App. 790, 805, 146 P.3d 466(2006) (quoting Christiansen v. Grant County Hosp., 152 Wn.2d 299, 307, 96 P.3d
957 (2004)). Because the California court resolved the issue by stating it “cannot
set aside the sister state judgment under California Code of Civil Procedure
section 473(b)” and did not actually consider the issue raised here, CP at 255-56,
Firegang fails to show issue preclusion applies.
5 Long Painting Co., Inc. v. Donkel, 14 Wn. App. 2d 582, 587, 471 P.3d 893(2020) (citing Dougherty v. Dep’t of Labor & Indus. for State of Wash., 150 Wn.2d
310, 314, 76 P.3d 1183 (2003)).
6Ahten v. Barnes, 158 Wn. App. 343, 350, 242 P.3d 35 (2010) (quoting
Dobbins v. Mendoza, 88 Wn. App. 862, 871, 947 P.2d 1229 (1997)).
3
No. 82012-5-I/4
judgment is supported by substantial evidence, so the party seeking vacation of
the default judgment has the burden of demonstrating the court lacked personal
jurisdiction.7 But default judgments are not favored,8 and evidence submitted by
the movant is viewed in a light most favorable to it.9
A Washington court can exercise personal jurisdiction over an out-of-state
defendant when the defendant consents.10 A defendant can consent by agreeing
to a forum selection clause.11 A forum selection clause “is one in which the parties
agree on a presiding tribunal.”12 “Forum selection clauses are prima facie valid.”13
The party challenging the clause bears “‘a heavy burden of proof’”14 and “must
7Pfaff v. State Farm Mut. Auto. Ins. Co., 103 Wn. App. 829, 834, 14 P.3d
837 (2000) (citing White v. Holm, 73 Wn.2d 348, 352, 438 P.2d 581 (1968)); see
CR 60(e)(1) (requiring party seeking vacation to provide an affidavit “setting forth a
concise statement of the facts or errors upon which the motion is based, and if the
moving party be a defendant, the facts constituting a defense to the action or
proceeding”); CR 12(b)(2) (listing lack of personal jurisdiction as a defense).
8
Little v. King, 160 Wn.2d 696, 703, 161 P.3d 345 (2007) (citing Griggs v.
Averbeck Realty, Inc., 92 Wn.2d 576, 581, 599 P.2d 1289 (1979)).
9 Id. at 705 (citing White, 73 Wn.2d at 352).
10Kysar v. Lambert, 76 Wn. App. 470, 484, 887 P.2d 431 (1995). A court
can also exercise personal jurisdiction when the state’s long-arm statute,
RCW 4.28.185, is satisfied. Ralph’s Concrete Pumping, Inc. v. Concord Concrete
Pumps, Inc., 154 Wn. App. 581, 584-85, 225 P.3d 1035 (2010) (citing State ex rel.
Coughlin v. Jenkins, 102 Wn. App. 60, 64, 7 P.3d 818 (2000)).
11
Kysar, 76 Wn. App. at 484 (quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 472 n.14, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985)).
12Id. at 485 (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 587-
88, 111 S. Ct. 1522, 113 L. Ed. 2d 622 (1991)).
13Dix v. ICT Grp., Inc., 160 Wn.2d 826, 834, 161 P.3d 1016 (2007) (citing
Kysar, 76 Wn. App. at 484-85).
14
Carnival Cruise Lines, 499 U.S. at 592 (quoting M/S Bremen v. Zapata
Off-Shore Co., 407 U.S. 1, 17, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972)).
4
No. 82012-5-I/5
present evidence to justify nonenforcement.”15
The Firegang contract incorporates terms and conditions.16 Those terms
provide that “[a]ny disputes arising from this contract are to be arbitrated, and
done so within the state of Washington.”17 Neither Douglas nor Heritage Oak
Management challenge this provision as invalid or as insufficient to allow an
exercise of personal jurisdiction over a party consenting to it.
Douglas contends the court lacked personal jurisdiction over him because
he signed the contract with Firegang in only a representative capacity as president
of his dental practice, Shane Douglas DDS PC. Heritage Oak Management
argues it was not party to the Firegang contract and did not transact any business
in Washington. Because “‘[e]ach defendant's contacts with the forum [s]tate must
be assessed individually’” when multiple parties challenge personal jurisdiction,18
we begin with Douglas.
The question is whether Douglas consented to the contract individually or
only in his representative capacity. Washington uses the objective manifestation
15 Dix, 160 Wn.2d at 835 (citing Voicelink Data Servs., Inc. v. Datapulse,
Inc., 86 Wn. App. 613, 618, 937 P.2d 1158 (1997)); accord M/S Bremen, 407 U.S.
at 18 (“[I]t should be incumbent on the party seeking to escape his contract to
show that trial in the contractual forum will be so gravely difficult and inconvenient
that he will for all practical purposes be deprived of his day in court.”).
16 CP at 27.
17 CP at 30.
18 Failla v. FixtureOne Corp., 181 Wn.2d 642, 651, 336 P.3d 1112 (2014)
(quoting Calder v. Jones, 465 U.S. 783, 790, 104 S. Ct. 1482, 79 L. Ed. 2d 804(1984)) (first alteration in original).
5
No. 82012-5-I/6
theory for contracts.19 To form a contract, the parties must objectively manifest
mutual assent to its terms.20 A person’s signature on a contract can be an
objective manifestation of his intent to be bound by the contract’s terms.21
“[W]here an agreement contains language binding the individual signer, ‘additional
descriptive language added to the signature does not alter the signer’s personal
obligation.’”22
In Losh Family, LLC v. Kertsman, this court held a signatory was personally
liable for a judgment despite adding his title to his signature.23 Losh Family owned
a warehouse, which it leased to an international food business.24 A married
couple formed a limited liability company and used it to purchase the food
business, including the lease.25 The husband signed the lease assignment as
“Grover International, LLC, by William Grover member,” and the food business
assigned its lease to “William and Teresa Grover as individuals dba Grover
19P.E. Sys., LLC v. CPI Corp., 176 Wn.2d 198, 207, 289 P.3d 638 (2012)
(quoting Keystone Land & Dev. Co. v. Xerox Corp., 152 Wn.2d 171, 177, 94 P.3d
945 (2004)).
20 Keystone, 152 Wn.2d at 177-78 (citing Yakima County Fire Prot. Dist. No.
12 v. City of Yakima, 122 Wn.2d 371, 388, 858 P.2d 245 (1993)).
21Retail Clerks Health & Welfare Tr. Funds v. Shopland Supermarket, Inc.,
96 Wn.2d 939, 944, 640 P.2d 1051 (1982); see Wilson Court Ltd. P’ship v. Tony
Maroni’s, Inc., 134 Wn.2d 692, 695, 952 P.2d 590 (1998) (“We hold a signature on
a guaranty with additional words that are descriptio personae generally binds the
individual who signed the agreement unless the signature creates an ambiguity as
to who is bound.”).
22Losh Family, LLC v. Kertsman, 155 Wn. App. 458, 464, 228 P.3d 793(2010) (quoting Wilson Court, 134 Wn.2d at 700).
23 155 Wn. App. 458, 464, 228 P.3d 793 (2010).
24 Id. at 461.
25 Id.
6
No. 82012-5-I/7
International, LLC.”26 The couple later sold the lease to someone who defaulted.27
Losh Family sued the food business and its owner, the couple and their company,
and the defaulting party.28 The trial court granted summary judgment for Losh
Family, concluding the husband was individually liable for the breach and had to
indemnify the food business and its owner.29
The husband argued his signature was intended to bind only the company
owned by him and his wife, rather than binding him personally. 30 But because the
food business signed over the lease to the couple “as individuals” and the
husband signed the assignment, he was individually liable.31 “If [the husband] did
not want to be personally bound on the assignment, he should have insisted on
the elimination of the language within the agreement that designated the assignee
as ‘William and Teresa Grover as individuals.’”32
Similarly, in Wilson Court Limited Partnership v. Tony Maroni’s, Inc., the
court held the president of a corporation operating a pizza parlor was personally
liable as a guarantor despite using his title after his signature on the guaranty.33
The pizza parlor leased a retail space, and the landlord required a guaranty as a
26 Id. at 461, 463.
27 Id. at 462.
28 Id.
29 Id.
30 Id. at 463.
31 Id. at 464.
32 Id.
33 134 Wn.2d 692, 695-96, 952 Wn.2d 590 (1998).
7
No. 82012-5-I/8
lease condition.34 The guaranty referred to the pizza parlor as “Tenant,” the
landlord as “Landlord,” and the president as “Guarantor.”35 When signing the
guaranty, the president signed “Anthony L. Riviera President” beneath the word
“Guarantor.”36 The lease’s signature block identified the pizza parlor as the tenant
and Riviera as its president.37 After the pizza parlor declared bankruptcy and its
lease assignee defaulted, the landlord obtained a judgment against the pizza
parlor president personally.38 On appeal, the president argued he signed the
guaranty only in a representative capacity, making the guaranty unenforceable
against him personally.39
The court held the president was personally liable.40 Although “a signature
with additional descriptive language may create an ambiguity requiring judicial
construction of the agreement to determine who is bound by its terms,”41 the
unambiguous language of the guaranty identified the president as the “Guarantor,”
distinct from the pizza parlor as “Tenant.”42
34 Id. at 696.
35 Id. at 696-97.
36 Id. at 697.
37 Id. at 698.
38 Id.
39 Id. at 699.
40 Id. at 705.
41 Id. at 700 (citing Hansen v. Lindell, 14 Wn.2d 643, 649-54, 129 P.2d 234(1942)).
42 Id. at 705-06.
8
No. 82012-5-I/9
Here, Douglas is identified in the name and signature blocks of the contract,
as appear below:
....
Like the pizza parlor president in Wilson Court, Douglas’s name appears near his
title without stating he signed in his representative capacity. Despite identifying a
company and title, Douglas signed his name only and did not indicate he was
signing as a company representative.43
43 Douglas contends Firegang is judicially estopped from arguing he is
individually bound by this contract because it relied upon a similar contract in a
different case and did not argue that signatory was individually bound. The
purpose of judicial estoppel is to protect the sanctity of judicial proceedings by
guarding courts from adopting inconsistent positions due to a litigant’s duplicity.
Arkison v. Ethan Allen, Inc., 160 Wn.2d 535, 538, 160 P.3d 13 (2007) (quoting
Cunningham v. Reliable Concrete Pumping, Inc., 126 Wn. App. 222, 225, 108
P.3d 147 (2005)); see Johnson v. Si-Cor, Inc., 107 Wn. App. 902, 907, 28 P.3d
832 (2001) (judicial estoppel “doctrine is designed to protect the court and not
litigants”). Thus, it more likely applies when “‘a party’s later position’ is clearly
inconsistent with its earlier position.’” Arkison, 160 Wn.2d at 538-39 (internal
quotation marks omitted) (quoting New Hampshire v. Maine, 532 U.S. 742, 750-
51, 121 S. Ct. 1808, 149 L. Ed. 2d 968 (2001)). Because the issue in the prior
lawsuit was whether the signatory possessed the authority to bind the corporation
and not, as here, whether the signatory was personally bound, Firegang’s
positions are not inconsistent. Douglas fails to establish the doctrine of judicial
estoppel applies.
9
No. 82012-5-I/10
Also like Wilson Court and like Losh Family, the contract’s terms show
Douglas signed individually. Throughout the contract, it refers to what the “Client”
must do but does not use the terms “Company Name” or “Client’s Title.” Next to
the “Client Signature” line, Douglas signed his name without adding any title or
reference to a representative position. And Douglas wrote only “SD” on the initial
line to confirm “I have read, accept, and agree to the terms & conditions outlined”
on the Firegang website.44
Like the contract document, the terms and conditions use the term “Client”
to define one party’s duties and do not use the term “Company.” For example,
“[i]n the event client chooses to engage with Firegang, Client agrees to contract
with Firegang as outlined per the terms above.”45 The termination terms specify
“Client acknowledges a 1 month minimum cancellation notice. . . . Prior to the
cancellation or reduction of services, . . . an ‘exit interview’ is required to take
place with Firegang and the person that signed the original agreement.”46 This
acknowledges a “Client” could be different from a contract signatory, but only
Douglas is identified as the “Client” and only Douglas’s name is written next to
“Client Signature.”
Douglas’s subsequent conduct shows he acted as the “Client.”47 When he
asked about cancelling his contract, he wrote
44 CP at 27.
45 CP at 30.
46 CP at 30.
47See Pelly v. Panasyuk, 2 Wn. App. 2d 848, 866, 413 P.3d 619 (2018)
(regardless of ambiguity, a court may consider extrinsic evidence of “the
10
No. 82012-5-I/11
I would like to finish my services with [F]iregang and redirect all
marketing to the standard office number . . . . I would also need to
get all the documentation and sign-in information for the different
web portals and services. I would like the sight [sic] to be put back
on siteground servers. Let me know how to proceed.[48]
Notably, the agreement requires that the “Client” provide passwords to Firegang to
allow website access, provides for the “Client” to receive website data from
Firegang upon termination of the contract, gives the “Client” authority to direct
advertising spending, and states that the “Client” owns the website after Firegang
has been paid.49
As in Losh Family, Douglas failed to clearly identify himself as a company
representative. Like Wilson Court, the mere presence of his title and the
company’s name adjacent to his name did not manifest an intent to sign only as a
company representative. Although Douglas asserts he signed only in his “capacity
as President of Shane Douglas, DDS PC,”50 his objective manifestation of intent
proves otherwise.51
subsequent conduct of the parties” to determine the intent of the parties) (citing
Berg v. Hudesman, 115 Wn.2d 657, 666-68, 801 P.2d 222 (1990)).
48 CP at 184 (emphasis added).
49 CP at 27, 30-31.
50 CP at 180-81.
51 See Pelly, 2 Wn. App. 2d 865 (courts interpret contracts “‘by focusing on
the objective manifestations of the agreement, rather than on the unexpressed
subjective intent of the parties’”) (quoting Hearst Commc’ns, Inc. v. Seattle Times
Co., 154 Wn.2d 493, 503, 115 P.3d 262 (2005)). Although Douglas argues
Firegang viewed him as signing in his corporate capacity because a declaration
from a Firegang employee stated he signed the contract “for” Shane Douglas,
DDS PC, the argument is not persuasive. The employee refers to Douglas as one
defendant and to his dental practice as another defendant. CP at 24. Even
viewed in a light most favorable to Douglas, this fleeting reference does not
unsettle the unambiguous contract language.
11
No. 82012-5-I/12
Douglas was a party to the Firegang contract. Because Douglas was a
party to the contract and its terms and conditions included a forum selection
clause with Washington as the chosen forum, he consented to Washington courts
exercising personal jurisdiction over him.52 The court did not err by denying the
motion to vacate for lack of personal jurisdiction as to Douglas.53
Heritage Oak Management contends it could not be subject to the default
judgment because the trial court could not exercise personal jurisdiction over it.
Heritage Oak Management is a California company. Douglas, who is also
president of Heritage Oak Management, declared that the company “has nothing
to do with my dental practice and had no contact with Firegang, Inc.”54 The record
52 Kysar, 76 Wn. App. at 484 (quoting Burger King, 471 U.S. at 472 n.14).
53 Even if Douglas had not consented, his contacts with Washington would
have been sufficient for the court to exercise personal jurisdiction. The Fourteenth
Amendment and Washington’s long arm statute, RCW 4.28.185, allow a
Washington court to exercise personal jurisdiction over a foreign defendant when
(1) he purposefully does some act or consummates some transaction in the forum
state; (2) the act or transaction is connected with the cause of action; and (3) the
exercise of jurisdiction does not offend traditional notions of fair play and
substantial justice. Precision Lab. Plastics, Inc. v. Micro Test, Inc., 96 Wn. App.
721, 726, 981 P.2d 454 (1999) (quoting Tyee Constr. Co. v. Dulien Steel Prods.,
Inc., 62 Wn.2d 106, 115-16, 381 P.2d 245 (1963)). Douglas signed a one-year
contract with a Washington company, hiring it to provide custom made website
and marketing services and allowing the contract to automatically renew for two
more six-month terms. By personally forming a contract “contemplating future
consequences and creating a continuing relationship with ongoing obligations,”
Douglas “purposefully and continuously transacted business within Washington
[s]tate.” Precision Lab. Plastics, 96 Wn. App. at 727. Firegang filed a complaint in
Washington alleging Douglas breached that contract. And the forum selection
clause in the contract warned Douglas he would be subject to the exercise of
personal jurisdiction by Washington courts in the event of a contract dispute.
Because all three requirements are met, Washington’s long arm statute allowed
the court’s exercise of jurisdiction over Douglas.
54 CP at 250-51.
12
No. 82012-5-I/13
shows Heritage Oak Management was not party to the Firegang contract and had
no contacts with Washington. Because it did not consent to a Washington court’s
exercise of jurisdiction and has no contacts with Washington other than this
litigation, the court erred by denying the motion to vacate the judgment against
Heritage Oak Management for lack of personal jurisdiction.55
II. Attorney Fees
RAP 18.1 allows an award of attorney fees where authorized by law,
contract, or equity.56 Douglas and Heritage Oak Management request attorney
fees on appeal under RCW 4.28.185(5). RCW 4.28.185(5) authorizes an award of
attorney fees “to a defendant who, having been hailed into a Washington court
under the long-arm statute, ‘prevails in the action.’”57 Because Douglas does not
prevail, he is not entitled to an award of attorney fees. However, because
Heritage Oak Management prevailed, it is entitled to attorney fees from this appeal
subject to compliance with RAP 18.1.
Firegang contends it is entitled to an award of attorney fees from appeal
under its contract with Douglas. The terms and conditions authorize an award of
55 See Precision Lab., 96 Wn. App. at 725 (“an out-of-state defendant must
have some minimum contact with the state” for an exercise of personal
jurisdiction) (citing International Shoe Co. v. State of Washington, Etc., 326 U.S.
310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945)); Kysar, 76 Wn. App. at 484 (quoting
Burger King, 471 U.S. at 472 n.14) (parties can consent to exercise of personal
jurisdiction).
56Buck Mountain Owners’ Ass’n v. Prestwich, 174 Wn. App. 702, 731, 308
P.3d 644 (2013) (quoting Equitable Life Leasing Corp. v. Cedarbrook, Inc., 52 Wn.
App. 497, 506, 761 P.2d 77 (1988)).
57Scott Fetzer Co., Kirby Co. Div. v. Weeks, 114 Wn.2d 109, 112, 786 P.2d
265 (1990).
13
No. 82012-5-I/14
attorney fees, collection costs, and court costs.58 When a contract authorizes an
award of attorney fees, RCW 4.84.330 allows an award of fees to the prevailing
party.59 A prevailing party “is the one ‘who receives an affirmative judgment in its
favor.’”60 Because Firegang is entitled to an affirmative judgment in its favor
against Douglas, it is a prevailing party and entitled to an award of attorney fees
from appeal, subject to compliance with RAP 18.1.
Therefore, we affirm in part, reverse in part, and remand for modification of
the judgment in accordance with this opinion.
WE CONCUR:
58 Although Firegang relies upon its 2018 terms and conditions in its request
for attorney fees, the record does not show Douglas consented to them. The 2016
terms and conditions, which Douglas read and agreed to when he contracted for
services, prohibits modification “of the agreement between us, except as we may
later agree in writing to modify.” CP at 30. The record does not show any
subsequent written agreement between Douglas and Firegang to modify the
applicable 2016 terms and conditions, which include an attorney fee provision.
59 Kysar, 76 Wn. App. at 493.
60 Id. (quoting Marassi v. Lau, 71 Wn. App. 912, 915, 859 P.2d 605 (1993)).
14