Estate Of Robert M. Arnold v. Mark E. Phillips

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
THE ESTATE OF ROBERT M. No. 71050-8-1
ARNOLD, deceased, on behalf of
BANANA CORPORATION, a DIVISION ONE
Washington corporation, assignee,
Respondent,
v.
MARK PHILLIPS and A-DOT
CORPORATION, a Washington
corporation, UNPUBLISHED OPINION
Appellants,
KENNETH GORDON, JANE DOE
GORDON, and the marital community
composed thereof; and DOUG LOWER
AND MAUREEN LOWER, husband and
wife and the marital community
composed thereof,
Defendants. FILED: November 16, 2015
Schindler, J. — Mark Phillips appeals the order of partial summary judgment on
liability, denial of his motion to dismiss, and the court's entry of findings of fact and
conclusions of law and judgment against him for $4,190,000. We affirm in all respects.
No. 71050-8-1/2
FACTS
The material facts are not in dispute. In 2003, Mark Phillips formed A-Dot
Corporation (A-Dot), a manufacturing, research, and software development company.
Phillips was the sole shareholder, director, and chief executive officer of A-Dot.
In April 2005, Phillips formed MOD Systems Incorporated (MOD), a startup
company to develop compact disc kiosks. In July, Phillips transferred all A-Dot
employees and assets to MOD Systems.
On June 16, 2006, Phillips formed Banana Corporation (Banana) to develop and
market "Metawallet." Metawallet was a mobile payment technology designed to provide
mobile banking services in developing countries by using prepaid cell phones.
On June 19, Phillips assigned Banana all "ideas and intellectual property
including any and all derivative works" related to Banana's business plan, ideas, and
intellectual property in exchange for stock. The next day, Phillips licensed the same
intellectual property to Banana for $2,500,000.
In early 2006, Phillips solicited funding for Banana from Robert M. Arnold.
Between June 2006 and May 2007, Arnold invested $5,500,000 in Banana.
Phillips and Arnold were the only shareholders in Banana. Arnold owned a 15
percent interest and Phillips owned an 85 percent interest in Banana.
On July 1, 2006, Phillips on behalf of Banana entered into a "service agreement"
with A-Dot. A-Dot agreed to perform work for Banana. In September 2006, Banana
loaned A-Dot $2,385,000. Phillips executed a promissory note for the loan with a
maturity date of September 1, 2011. Phillips signed the promissory note on behalf of
Banana and on behalf of A-Dot.
No. 71050-8-1/3
On October 11, 2006, Phillips wired $150,000 from A-Dot to other entities he
controlled. Between June and December of 2006, Phillips paid himself "consulting fees"
from Banana totaling $1,160,000. On December 13, Phillips paid A-Dot a $1,000,000
"consulting fee" from Banana. The same day, Phillips transferred $1,000,000 from A-
Dot to his personal brokerage account.
Phillips also paid his high school friend Douglas Lower substantial amounts of
money. Phillips on behalf of Banana paid Lower "consulting fees" totaling $450,000 on
July 5 and on August 28, 2006. Phillips made the payments "in advance" based on a
June 28, 2006 consulting agreement between Banana and Lower. The consulting
agreement did not describe a work assignment, provide a fee schedule, or specify a
rate of pay, and there was no documentation for work performed by Lower.
On February 16, 2007, Phillips on behalf of Banana loaned Lower $200,000.
Lower executed a promissory note with a maturity date of February 16, 2012. Phillips
signed the note on behalf of Banana.
On February 23, 2007, Phillips on behalf of A-Dot wired himself $500,000. On
June 22, Phillips on behalf of A-Dot also wired himself $25,000 and made two payments
totaling $705,000 for his 2007 personal income taxes. On September 21, Phillips on
behalf of A-Dot made a $50,000 "shareholder disbursement" to an unknown account
identified as a "foreign wire."
In the spring of 2007, Arnold hired investment advisor Cole Younger to manage
his investments. Younger contacted Phillips to obtain financial information for Banana.
Phillips did not provide the requested information.
No. 71050-8-1/4
On February 18, 2009, Arnold filed a shareholder derivative lawsuit against
Banana. Phillips and the attorneys representing Banana retained auditing firm KPMG
LLP to "review and analyze company documents, financial records and electronically
stored information that related to allegations of potential misconduct by key Banana
shareholders/officers/directors/consultants and personnel."
KPMG partner Guido van Drunen analyzed the corporate and financial records of
Banana. Van Drunen also interviewed Phillips, Lower, and Banana bookkeeper
Kenneth Gordon. Van Drunen issued a lengthy and detailed report describing the
analysis and conclusions (the KPMG Report).
The KPMG Report describes a number of the "transactions entered into between
Banana, Phillips, A-Dot and other associated parties or entities." The report concluded
there was "no apparent business reason" for the September 2006 loan of $2,385,000
from Banana to A-Dot or the loan of $2,000,000 in February 2007 from Banana to
Lower. With respect to the consulting fees of $1,160,000 that Banana paid to Phillips
between June and December of 2006, the KPMG Report states, "There are no invoices
to evidence either the services provided or work conducted, nor is there other
supporting documentation to substantiate the work completed to justify the payments
made." According to the KPMG Report, the circumstances surrounding the $450,000 in
consulting fees paid to Lower on July 5 and August 28, 2006 suggested that the
transactions might be "viewed as a 'sham'" and that there was "no apparent business
reason" for the $200,000 loan from Banana to Lower in February 2007. Van Drunen
concluded in the KPMG Report that Phillips "acted on both sides of these transactions"
and "entered into transactions that were or could be perceived as being conflicts of
No. 71050-8-1/5
interest." The KPMG Report states that Phillips did not disclose any of the transactions
to Arnold.
In July 2009, Phillips hired Dennis Mandell of Mako Strategies Inc. to review the
"questionable financial transactions" addressed in the KPMG Report and "provide
litigation, damages, and valuation strategy for the complex allegations of financial fraud
against him." Mandell prepared a 39-page report (the Mako Report). Mandell
concluded there was "[n]o basis for a finding of embezzlement by Phillips" and Phillips's
conflicts of interest "were clearly disclosed to Arnold." The Mako Report states the
consulting fees paid to Phillips "were reasonable" and the "A DOT and Lower loans did
have business purposes."
On March 12, 2010, Arnold entered into a settlement agreement with Banana.
Banana assigned Arnold all claims against Phillips, A-Dot, and "any other person or
entity."
On March 12, Arnold filed a lawsuit on behalf of Banana against Phillips, Lower
and his spouse, and A-Dot. The lawsuit alleged breach of fiduciary duty in violation of
chapter 23B.08 RCW, conversion and embezzlement, corporate waste, unjust
enrichment, and breach of contract. Arnold entered into a settlement agreement with
Lower. Arnold agreed not to pursue his right to recover the amount Lower owed on the
February 2007 loan.
Arnold filed a motion for partial summary judgment on liability against Phillips and
A-Dot. In support, Arnold submitted a number of documents including the KPMG
Report. Phillips filed a declaration in opposition.
No. 71050-8-1/6
The court granted partial summary judgment on liability against Phillips for
breach of fiduciary duty, conversion and embezzlement, corporate waste, and unjust
enrichment. The court entered partial summary judgment on liability against A-Dot for
breach of contract and unjust enrichment. The order includes findings of fact on liability.
The order states, "[T]he following facts are identified pursuant to CR56(d) as without
substantial controversy and shall henceforth be deemed established for the purposes of
this litigation."
The 11-day trial began on February 5, 2013. Despite entry of the summary
judgment order on liability and entry of findings under CR 56(d), the parties presented
evidence on liability and damages. A number of witnesses testified including van
Drunen, Mandell, Phillips, Arnold's accountant Julia de Hann, and Banana/A-Dot
employee Kenneth Gordon. Van Drunen testified at length concerning his analysis and
the conclusions reached in the KPMG Report. Van Drunen testified about multiple
transactions that created a conflict of interest or lacked any business justification.
Mandell testified that he "looked at the allegations that had been prepared in the
KPMG report" and "did not see [the transactions identified in the KPMG Report] as
inappropriate costs." Mandell testified the transactions did not constitute embezzlement
and Phillips disclosed conflicts of interest. Mandell also testified there was a business
purpose for the $2,385,000 September 2006 loan from Banana to A-Dot and the
$200,000 February 2007 loan from Banana to Lower.
Arnold passed away during trial. The court entered an order substituting the
Estate of Robert M. Arnold on behalf of Banana Corporation as the plaintiff.
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No. 71050-8-1/7
At the conclusion of trial, the court entered extensive findings of fact and
conclusions of law. The court specifically states that it adopted the summary judgment
CR 56(d) findings of fact only to the extent the "evidence presented at trial corroborates
and supports" those findings. The court found van Drunen's testimony credible. The
court concluded Phillips did not provide notice and did not have the authority to enter
into the following transactions on behalf of Banana: (1) the $1,000,000 in consulting
fees paid to A-Dot in December 2006; (2) the $1,160,000 in consulting fees paid to
Phillips; (3) the $150,000 wired to entities controlled by Phillips in October 2006; (4) the
$500,000 Phillips wired from A-Dot to himself in February 2007; (5) the $25,000 Phillips
wired from A-Dot to himself in June 2007; and (6) the two payments totaling $705,000
that Phillips used for his personal income taxes in 2007. The court also found that the
$200,000 loan from Banana to Lower in February of 2006 "had no apparent business
purpose for Banana" and that the $450,000 in consulting fees Phillips paid to Lower
"was without business justification, was done without independent board review or
approval, . . . and constituted a breach of Phillips' fiduciary duty owed to Banana
Corporation." The court entered judgment against Phillips for $4,190,000.
The court found A-Dot repaid only $50,000 of the amount owed on the
$2,385,000 promissory note, A-Dot was in default on the promissory note, and entered
judgment against A-Dot for $3,095,710.
On October 31, 2013, Phillips filed an appeal of the order granting partial
summary judgment, the findings of fact and conclusions of law, and entry of the
judgmentagainst A-Dot and himself. On May 30, 2014, Phillips and the attorney
representing A-Dot filed a joint opening brief.
No. 71050-8-1/8
ANALYSIS
Motion to Dismiss Appeal of A-Dot
Preliminarily, we address the motion to dismiss the appeal of A-Dot. The Estate
filed a motion to dismiss the appeal of A-Dot. A-Dot filed a motion for relief from the
technically defective notice of appeal filed by Phillips as the sole shareholder of A-Dot.
At the beginning of oral argument, the attorney representing A-Dot withdrew the request
for relief.1 Accordingly, we grant the motion to dismiss the appeal Phillips filed on behalf
of A-Dot.
Appeal of Phillips
Phillips challenges the order granting partial summary judgment on liability,
denial of the motion to dismiss, the findings of fact and conclusions of law, and entry of
the judgment against him.
Partial Summary Judgment Order
Phillips contends the court erred in granting summary judgment on liability.
Phillips asserts the Mako Report "contradicted each and every material fact" asserted in
support of summaryjudgment. The Estate contends the Mako Report was not part of
the record on summary judgment and Phillips did not designate the Mako Report as part
of the summary judgment record on appeal. The record on summary judgment does
not include a copy of the Mako Report. However, the record establishes that at trial, the
parties disputed liability. The Estate relied on the KPMG report and Phillips relied on
the Mako Report, and the court entered liability findings and conclusions based on the
evidence at trial. Because the parties presented evidence on the contested issue of
liability, we do not address whether material issues of fact precluded summary
Accordingly, we affirm the judgment against A-Dot for $3,095,709.58.
No. 71050-8-1/9
judgment. See Johnson v. Rothstein. 52 Wn. App. 303, 307, 759 P.2d 471 (1988)
("[T]he nature of a summary judgment is such that once the issues have been tried to a
finder of fact, the summary judgment procedure to determine the presence of genuine,
material issues of fact has no further relevance.").
Motion to Dismiss
Phillips argues the court erred in denying his motion to dismiss under King
County Superior Court Local Civil Rule (KCLCR) 4(i)(1). KCLCR 4(i)(1) states the
failure of a party seeking affirmative relief "to appear for trial on the scheduled trial date
will result in dismissal of the claims." We review a trial court's decision on a motion to
dismiss for manifest abuse of discretion. Escude v. King County Pub. Hosp. Dist. No. 2,
117 Wn. App. 183, 190, 69 P.3d 895 (2003). "A trial court abuses its discretion when its
decision is manifestly unreasonable or based upon untenable grounds or reasons."
Salas v. Hi-Tech Erectors, 168 Wn.2d 664, 668-69, 230 P.3d 583 (2010).2
At the beginning of the trial on February 5, Phillips moved to dismiss on the
ground that Arnold was not present. The attorney told the court that "Mr. Arnold is 85
years old and in poor health.... He will at some point in time appear and testify, ifthat
is necessary."
The next day, Arnold filed a motion to excuse his attendance at trial. The
declaration in support of the motion states that Arnold was recuperating at his home in
California from cardiac surgery performed two weeks earlier. The declaration states
that according to his doctor, it was "not advisable for Mr. Arnold to travel to Washington
at the present time, and he cannot be subjected to any form of stress during his
recuperation."
2 Internal quotation marks omitted.
No. 71050-8-1/10
The court granted the motion to excuse Arnold from attending trial. Arnold
passed away before the conclusion of trial on February 27. We conclude the decision
to excuse Arnold from attending trial was not manifestly unreasonable or based upon
untenable grounds.
Findings of Fact and Conclusions of Law
Phillips contends substantial evidence does not support the findings. We review
the decision following a bench trial to determine whether substantial evidence supports
the findings of fact and whether those findings, in turn, support the conclusions of law.
Ridgeview Props, v. Starbuck. 96 Wn.2d 716, 719, 638 P.2d 1231 (1982). Substantial
evidence is the quantum of evidence "sufficient to persuade a rational fair-minded
person the premise is true." Sunnyside Valley Irrigation Dist. v. Dickie, 149 Wn.2d 873,
879, 73 P.3d 369 (2003). We will not "disturb findings of fact supported by substantial
evidence even if there is conflicting evidence." Merriman v. Cokelev, 168 Wn.2d 627,
631, 230 P.3d 162 (2010). We defer to the trial judge on issues of witness credibility
and persuasiveness of the evidence. Boeing Co. v. Heidv, 147 Wn.2d 78, 87, 51 P.3d
793 (2002); City of Univ. Place v. McGuire, 144 Wn.2d 640, 652, 30 P.3d 453 (2001).
Unchallenged findings of fact are verities on appeal. In re Estate of Jones, 152 Wn.2d
1,8, 93P.3d 147(2004).
Phillips challenges "Finding of Fact" 16, 17, and 27 arguing substantial evidence
does not support the findings. Phillips challenges the findings of fact that address the
$1,000,000 payment from A-Dot to Phillips on December 13, 2006, Finding of Fact 16
and Finding of Fact 17. Phillips does not challenge the fact that Banana made a
$1,000,000 payment to A-Dot or that he transferred the $1,000,000 to his personal
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No. 71050-8-1/11
brokerage account. Phillips appears to challenge the characterization of the $1,000,000
payment and the finding that the payment was "without business justification."
Finding of Fact 16 states:
[On December 13, 2006], Mark Phillips caused A-Dot to pay the
aforementioned $1,000,000 to Phillips' personal brokerage account.
Phillips has claimed that the $1,000,000 "consulting fee" payment from
Banana to A-Dot was actually for "license fees," and not pursuant to the
Service Agreement but at the time of the payment of the consulting fee,
the intellectual property allegedly licensed had already been assigned by
Phillips to Banana in return for stock.
Finding of Fact 17 states:
The self-payment of the $1,000,000 "consulting fee" was without business
justification, constituted a related party transaction without an independent
board review or approval, self-dealing, and a breach of Phillips' fiduciary
duty owed to Banana Corporation.
The findings show the court clearly rejected Phillips's assertion that the
$1,000,000 payment was a license fee. The undisputed testimony supports the finding
that "the intellectual property allegedly licensed had already been assigned by Phillips to
Banana in return for stock." The court expressly found that the $1,000,000 payment
was "without independent board review or approval" and constituted "self-dealing, and a
breach of Phillips' fiduciary duty owed to Banana Corporation." Unchallenged Finding of
Fact 15 supports the conclusion that the payment was without business justification.
Finding of Fact 15 states there are "no records justifying this payment," "no
documentation that Banana ever requested consultation services from A-Dot," and "no
documentation which establishes a scope of consultation services or otherwise
specifically describes the work relationship."
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No. 71050-8-1/12
Phillips claims the court incorrectly characterized the $450,000 paid to Lowerfor
consulting fees as a related-party transaction. Finding of Fact 27 states:
Banana also paid a total of $450,000 in alleged "consulting fees" to Doug
Lower on July 5, 2006 and August 28, 2006. These payments were made
"in advance," ostensibly based on a consultation agreement between
Banana and Lower, signed by Phillips, dated June 28, 2006. That
agreement does not describe a work assignment, provides no fee
schedule and identifies no rate of pay. There are no invoices to Banana
for the $450,000 in consulting fees paid to Lower. Based upon information
furnished by Mr. Lower, he was paid approximately $1,000 per hour for
every hour he spent working for Banana. There was no apparent Banana
business justification for this hourly rate paid to Mr. Lower. The payment
of the $450,000 "consulting fee" to Mr. Lower a long-time friend, was
without business justification, was done without an independent board
review or approval, constituted self-dealing, and constituted a breach of
Phillips' fiduciary duty owed to Banana Corporation. Moreover, Mr. Lower
was already receiving a salary of $60,000+ from Mod Systems. In
contrast to the $450,000 "consulting fee" and $60,000 Mod Systems
payment that Mr. Lower received, Kenneth Gordon only received $30,000
from Mod Systems for similar work.
The Estate admits Finding of Fact 27 contains a scrivener's error but as the
Estate points out, "Conclusion of Law 2" establishes the court did not identify the
consulting fees paid to Lower as a related-party transaction. Conclusion of Law 2
states, in pertinent part:
The following related-party transactions Mr. Phillips [sic] were entered into
on behalf of Banana:
a. $1 million consulting fee paid to A-Dot (December 2006);
b. $1,160,000 in consulting fees paid to Phillips (up to December
2006);
c. $150,000 wire to Phillips controlled entities (October 11, 2006);
d. $500,000 wire to Phillips from A-Dot (February 23, 2007);
e. $25,000 wire to Phillips from A-Dot (June 22, 2007); and
f. $705,000 in two income tax payments for Phillips' personal taxes
(2007).
Phillips also challenges Finding of Fact 18 through 25. But it is unclear which
portions of Finding of Fact 18 through 25 he challenges or why the findings are
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No. 71050-8-1/13
incorrect. Phillips also does not present argument on these findings. Under RAP 10.3,
an appellant must "present argument to the reviewing court as to why specific findings
of fact are in error and to support those arguments with citation to relevant portions of
the record." In re Disciplinary Proceeding Against Whitney, 155 Wn.2d 451, 466, 120
P.3d 550 (2005). Accordingly, we decline to address Phillips's challenge to Finding of
Fact 18 through 25.
Phillips also claims the court based a number of its findings of fact on
inadmissible hearsay. Specifically, Phillips points to the KPMG Report and statements
made to van Drunen by Banana employees. The record does not support Phillips's
argument.
The court expressly ruled the KPMG Report was not admissible as an exhibit and
the court would consider only the portions of the KPMG Report and the testimony of van
Drunen admissible under the rules of evidence. The court ruled, in pertinent part:
So the report itself is not admissible as an exhibit; however, in
addition to the report not being admissible as a hearsay document, the
report also contains hearsay statements.
However, the court believes that it can consider the contents of the
report, both, through the testimony of Mr. van Drunen, as well as certain
aspects of the report, to the extent that the information came from the
business records of Banana, A-DOT, or MetaWallet.
The court can also consider part of the contents of the report to the
extent that they contain statements of a party opponent, Mr. Phillips, to the
extent that they contained statements of party opponent, A-DOT, through
its authorized representatives, specifically, Mr. Gordon and Mr. Phillips,
and to the extent that the report contained a summary of information
gathered by Mr. van Drunen and his company, pursuant to Evidence Rule
10.06.. . .
For those reasons, the [KPMG Report] is not admitted, but the court
may consider some of the contents contained therein, based upon the
exceptions to the hearsay rule, as noted.
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No. 71050-8-1/14
Van Drunen testified extensively about the conclusions he reached in the KPMG
Report. Banana bookkeeper Kenneth Gordon authenticated the financial documents
relied on by van Drunen.
Phillips relies on Finding of Fact 22 to argue the court considered inadmissible
hearsay from Banana employees. Finding of Fact 22 states:
According to the testimony of Mr. van Drunen, none of the above
disbursements, "consulting fees." and loans from Banana to A-Dot and
from A-Dot to Phillips and others were disclosed in advance or
contemporaneously to or approved by Mr. Arnold. This testimony was
credible, and was corroborated by the testimony of Mr. Cole Younger and
Ms. Julia de Haan, both of whose testimony the court found credible,
documentary evidence, and admissions made by Mark Phillips to Mr. van
Drunen. Mr. Phillips' testimony to the contrary was not credible.[3]
Phillips claims van Drunen relied on interviews with key Banana personnel to
conclude that "none of the above disbursements, 'consulting fees,' and loans from
Banana to A-Dot and from A-Dot to Phillips and others were disclosed in advance or
contemporaneously to or approved by Mr. Arnold." But van Drunen testified that Phillips
admitted he did not disclose the transactions to Arnold.4
Q. And then the fourth bulleted paragraph, "Transactions were entered
into by Banana, where Phillips was the sole responsible party for all
aspects of the transaction. Examples are a loan to A-DOT, loan to
Phillips, consulting fees paid to Phillips, and consulting fees paid to
A-DOT. These transactions create clear potential for conflicts of
interest.
"Phillips neither disclosed these transactions to interested
parties, nor obtained a fairness opinion with respect to these
transactions."
Where would you have obtained this information?
A. I believe it would have been during the course of the interview with
Mr. PhillipsJ5]
3 Emphasis added.
4 The admission was a statement of a party-opponent under ER 801(d)(2).
5 Emphasis added.
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No. 71050-8-1/15
The court did not base its findings of fact on inadmissible hearsay from the KPMG
Report or Banana employees.
Calculation of Damages
Phillips challenges the award of damages. Phillips claims the court erred in
concluding his actions resulted in any damages to Banana. Phillips asserts there were
no damages because Arnold ratified each of the transactions. The testimony at trial
does not support his argument.
Van Drunen testified that Phillips did not disclose, and Arnold did not ratify, any
of the transactions. Van Drunen's testimony also established the damage to Banana.
Van Drunen testified, in pertinent part:
Q. If, in fact, the money that was paid to Virgin Galactic had been
refunded or was refunded to Banana Corporation, there would be
no damage or harm to the company as a result of that; is that
correct?
A. This is $120,000. We're talking about a startup, right?
Q. Uh-huh?
A. So a startup runs on cash. If this cash has been used for
something else, there is damage to the company because they're
short on cash, right? You're always trying to manage a burn right
at the start. So if you're using cash for one thing, that means you're
robbing Peter to pay Paul. So to say there's no damage, this
creates another need for funding, right?
Phillips also argues the trial court incorrectly calculated damages by including
amounts Lower owed Banana under the promissory note. Phillips contends that
because Arnold settled with Lower, waiver and estoppel preclude Arnold from obtaining
a judgmentfor the amounts Lower owed Banana. But as the Estate points out, the
lawsuit did not seek to enforce the Lower promissory note. Instead, the lawsuit alleged
the loan to Lower was evidence of breach of fiduciary duty.
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No. 71050-8-1/16
Phillips also claims the trial court erred in allowing the Estate to recover the funds
loaned in September of 2006 by Banana to A-Dot from Phillips and A-Dot. However,
Conclusion of Law 10 expressly states Phillips is entitled to an offset for any amount
paid by A-Dot on the promissory note. Conclusion of Law 10 states:
Based on the foregoing, Judgment shall be entered in the amount of
principal amount of $2,335,000 and $760,709.58 in accrued pre-judgment
interest against A-Dot Corporation. Post-judgment interest shall accrue at
the promissory note rate of five percent (5%). Should A-Dot make
payments on this judgment, such payments shall first be applied to
accrued and accruing interest, and then against the principal judgment.
Phillips shall be entitled to an offset of the judgment against him for such
principal payments (set forth in Conclusion 9 above), but not against line
items set forth in Conclusions 2.a. and b. above and the amounts set forth
in Conclusion 5 above.[6]
Next, Phillips contends the award of damages should not include the $150,000
he wired from A-Dot to himself on October 11, 2006 or the $500,000 he wired from A-
Dot to himself on February 23, 2007. Phillips argues that there is no evidence the funds
came from Banana. The record does not support his argument.
Exhibit 107 shows that on October 10, 2006, A-Dot received a $175,000 loan
from Banana and the next day, Phillips transferred $150,000 of the money from A-Dot to
himself. The A-Dot account balance prior to the loan from Banana was $48,872.14.
Similarly, exhibit 111 shows that on February 23, 2007, A-Dot received $500,000 from
Banana and the same day, Phillips wired $500,000 from A-Dot to his personal account.
The amount in A-Dot's account before and after these transactions was $47,304.
Substantial evidence supports the finding that the money used for the $175,000 and
$500,000 payments came from Banana.
6 Emphasis added.
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No. 71050-8-1/17
Phillips also claims he is entitled to a $2,500,000 "credit" for the June 2006
intellectual property license fee. However, unchallenged Finding of Fact 16 states that
"the intellectual property allegedly licensed had already been assigned by Phillips to
Banana in return for stock."
We conclude the record supports the award of damages against Phillips.
Attorney Fees
The Estate requests attorney fees on appeal under RAP 18.1 against Phillips and
A-Dot. The September 1, 2006 promissory note between Banana and A-Dot contains a
clause providing for the payment of "reasonable attorneys' fees and expenses [Banana]
expends or incurs in connection with the enforcement of this Note." But the Estate did
not seek to enforce the promissory note against Phillips, the scope of the appeal as to
A-Dot was limited, and A-Dot withdrew its objection to the Estate's motion to dismiss its
appeal. We decline to award attorney fees.
We affirm in all respects.
ju ir-efiOe
WE CONCUR:
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