CO - Koh v Inno Pacific Holdings Ltd (10/07/2002)

[Riser Adkisson LLP]

Koh v. Inno-Pacific Holdings, Ltd.
54 P.3d 1270 (Wash.App.Div.1 10/07/2002)

Synopsis

Inno-Pacific Holdings, Ltd. is a Singapore public corporation with its principal place of
business in Singapore. Inno- Pacific employed Kay Yew Koh to conduct business activities on
its behalf in California. Koh sued Inno- Pacific for wrongful termination in California, and
prevailed. In post-judgment discovery, Koh learned that Inno-Pacific owned a 50 percent
interest in Sawyer Falls, a limited liability company, registered under the laws of the state
of Washington as a domestic limited liability company. Sawyer Falls has an agent in
Washington and owns 478 acres of undeveloped real property in Washington. However, Sawyer
Falls registered as its principal place of business an address in Malaysia and represents
that its main office, officers, employees, books, and records are located in Malaysia.

Koh obtained a charging order against Inno’s interest in Sawyer Falls. Inno moved to quash
the charging order stating that the court lacked personal jurisdiction. The court held that
Washington's Limited Liability Company Act clearly allows him to reach Inno-Pacific's
interest in Sawyer Falls through a validly entered foreign judgment and charging order
entered in Washington by a court of competent jurisdiction. A charging order entered here
against the property interest is permissible.

Opinion

Koh v. Inno-Pacific Holdings, Ltd., 54 P.3d 1270 (Wash.App.Div.1 10/07/2002)

Washington Court of Appeals

No. 47991-1-I

114 Wash.App. 268, 54 P.3d 1270, 2002.WA.0001445

October 07, 2002

KAY YEW KOH, APPELLANT,
v.
INNO-PACIFIC HOLDINGS, LTD., RESPONDENT.

Appeal from Superior Court of King County Docket No: 002223285 Judgment or order under review Date
filed: 12/18/2000 Judge signing: Hon. Robert Alsdorf

* * *

The opinion of the court was delivered by: Grosse, J.

Concurring: William W. Baker, Walter E. Webster

PUBLISHED OPINION

Normally, personal property is found, for purposes of levy or attachment, where it is physically
located or where the owner resides. The interest of a member in a limited liability company is
personal property. Therefore, once it has been determined by a court of competent jurisdiction
that a defendant is a debtor of the plaintiff, an action to realize on that debt in Washington,
where the defendant has a property interest in a limited liability company, is proper whether or
not Washington would have had jurisdiction to determine the existence of the debt as an original
matter.

FACTS

Inno-Pacific Holdings, Ltd. (Inno-Pacific) is a Singapore public corporation with its principal
place of business in Singapore. Inno- Pacific employed Kay Yew Koh (Koh) to conduct business
activities on its behalf in California. Koh sued Inno- Pacific for wrongful termination in
California, and prevailed receiving a money judgment against Inno-Pacific in the amount of
$240,000 (Singapore dollars). Inno-Pacific had appeared through counsel to defend itself against
Koh's claim.

In post-judgment discovery, Koh learned that Inno-Pacific owned a 50 percent interest in Sawyer
Falls, a limited liability company, registered under the laws of the state of Washington as a
domestic limited liability company. Sawyer Falls has an agent in Washington and owns 478 acres of
undeveloped real property in Washington as a long-term development project.

However, Sawyer Falls registered as its principal place of business an address in Malaysia and
represents that its main office, officers, employees, books, and records are located in Malaysia.

Two years after the California judgment, Koh obtained a charging order in King County Superior
Court against Inno-Pacific's interest in Sawyer Falls. Inno-Pacific filed a motion to quash the
charging order based on lack of personal jurisdiction and lack of in rem jurisdiction, but did not
contest the validity of the California judgment. The trial court quashed Koh's charging order
holding that the 'Court lacks jurisdiction over Defendant's membership interest in Sawyer Falls
because the membership interest as personal property is located outside the state of Washington.'
Koh appeals.

DISCUSSION

Preliminary to the issue of jurisdiction is the location of Inno- Pacific's interest in Sawyer
Falls. Clearly, Inno-Pacific's interest in Sawyer Falls is personal property to Inno-Pacific.*fn1
Inno-Pacific argues that an entity's interest in a limited liability company exists where the
entity resides, in this case in Singapore. Thus, Inno-Pacific concludes that Washington courts
have no jurisdiction over its personal property interest in Sawyer Fal ls. Koh counters that an
entity's interest in a limited liability company is located where that company is formed.

Koh's position is the more accurate. The touchstone of Inno-Pacific's argument regarding
jurisdiction is In re Estate of Grady.*fn2 That case does stand for the proposition that personal
property is located where the owner is domiciled. Unquestionably, that is true for purposes of
taxation.

However, that proposition does not preclude jurisdiction over personal property where it is
found.*fn3 Certainly the language of the statute appears to reflect that a partnership interest is
located where the partnership is formally organized:

On application to a court of competent jurisdiction by any judgment creditor of a member, the
court may charge the limited liability company interest of the member with payment of the
unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor
has only the rights of an assignee of the limited liability company interest. This chapter does
not deprive any member of the benefit of any exemption laws applicable to the member's limited
liability company interest.*fn4

Washington's Limited Liability Company Act is modeled substantially upon the Uniform Limited
Liability Company Act, which was in turn based upon the Uniform Partnership Act and the Revised
Uniform Partnership Act, adopted in full or in part by various states.*fn5 Therefore, although the
comments to the Uniform Limited Liability Company Act, the Uniform Partnership Act, and the
Revised Uniform Partnership Act do not directly discuss this issue, we can look to the few cases
that do address the location of a partnership interest under one of these uniform acts.

In Rankin v. Culver, 16 years after Pennsylvania's enactment of its version of the Uniform
Partnership Act, the Supreme Court of Pennsylvania analyzed whether a creditor could attach the
partnership interest of a nonresident debtor when the partnership was organized and doing business
in Pennsylvania.*fn6 The Rankin court found that an interest of a partner in firm assets is
personalty and subject to foreign attachment. Further, the court held that a partnership doing
business in Pennsylvania constituted a property interest in Pennsylvania to those who owned an
interest in the partnership, thus a writ of foreign attachment on the partnership interest was
valid.*fn7

In Federal Deposit Insurance Corporation v. Birchwood Builders, Inc., a plaintiff received a
judgment in New York and learned that the debtor, a New York resident, owned 40 percent of a
partnership organized in New Jersey under that state's version of the Uniform Partnership Act.*fn8
The partnership owned a tract of vacant land in New Jersey, although it earned no income. The
plaintiff attempted to attach the partnership interest through a charging order in New Jersey.
Although the New Jersey court did not discuss in detail the location of the partnership interest,
it determined that even though the owner of the partnership interest resided in New York, the
partnership was incorporated in New Jersey and thus the interest was subject to attachment in New
Jersey.*fn9

These cases illustrate at the least that where a partnership organizes under the laws of a state,
the partnership interest is located within that state. Here, Sawyer Falls is registered under the
laws of the State of Washington, maintains an office and registered agent in Washington, and owns
a parcel of property in Washington. Therefore, the partnership interest is located here.

Koh correctly asserts that Washington's Limited Liability Company Act clearly allows him to reach
Inno-Pacific's interest in Sawyer Falls through a validly entered foreign judgment and charging
order entered in Washington by a court of competent jurisdiction.*fn10 Nevertheless, Inno-Pacific
argues, or appears to argue, that this apparent jurisdiction and authority should not be exercised
because it offends the Constitution, citing Shaffer v. Heitner*fn11 and Hanson v. Denckla.*fn12
But, a careful look at those cases convinces us that jurisdiction does lie.

At first glance, the action here does appear to be the type of quasi in rem action described in
the case of Hanson v. Denckla, a proceeding where the plaintiff seeks to apply property unrelated
to the claim to the satisfaction of a judgment or claim against the defendant.*fn13 Clearly, Koh
is attempting to apply the property of Inno-Pacific to a debt unrelated to that property. This
type of quasi in rem jurisdiction was addressed in Washington in Ace Novelty Company v. M.W. Kasch
Company and later addressed by the United States Supreme Court in Shaffer v. Heitner.*fn14

Ace Novelty involved a plaintiff that attempted to sue in Washington a Wisconsin company for a
debt by attaching unrelated assets that the company allegedly owned in Washington. Shaffer
involved a nonresident shareholder of a Delaware corporation who filed a motion in Delaware to
attach the corporate stock of nonresident officers and directors to force them to appear for
purposes of a different shareholder's derivative suit. Both Ace Novelty and Shaffer held that this
type of proceeding requires the same minimum contacts discussed in International Shoe Company v.
State of Washington.*fn15 However, neither of the plaintiffs in those cases ha d obtained a valid
foreign judgment, as Koh did here. This action is different. It involves action on a valid foreign
judgment to obtain a charging order against the property of a judgment debtor. Here, it is
registration of the foreign judgment in conjunction with the presence of the property that
satisfies due process.

As the court in Shaffer notes, once a court of competent jurisdiction has determined that a
defendant is a debtor of the plaintiff under the Full Faith and Credit Clause 'there would seem to
be no unfairness in allowing an action to realize on that debt in a State where the defendant has
property, whether or not that State would have jurisdiction to determine the existence of the debt
as an original matter.'*fn16 Therefore, because we have determined that the property exists in
Washington and that Koh has a valid foreign judgment, our decision is simple. The Full Faith and
Credit Clause and Washington's Foreign Judgments Act allow Koh to register his California judgment
and obtain a charging order against Inno-Pacific's interest in Sawyer Falls.*fn17 There is no
unfairness in allowing an action in this jurisdiction to realize on a valid California judgment.
Indeed, such a result is required in order to give full faith and credit to the California
judgment. The property is here. A charging order entered here against the property interest is
permissible.

Reversed.


Opinion Footnotes

*fn1 RCW 25.15.245(1).

*fn2 In re Estate of Grady, 79 Wn.2d 41, 483 P.2d 114 (1971).

*fn3 Hanson v. Denckla, 357 U.S. 235, 247, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958) (citing State
Tax Comm'n of Utah v. Aldrich, 316 U.S. 174, 62 S. Ct. 1008, 86 L. Ed. 1358 (1942); Curry v.
McCanless, 307 U.S. 357, 59 S. Ct. 900, 83 L. Ed. 1339 (1939)).

*fn4 RCW 25.15.255.

*fn5 6A Nat'l Conference on Comm'rs on Uniform State Laws, Business and Nonprofit Organizations
and Associations Laws at 235, 401 (West 1995) (sec. 703 of 1976 Revised Uniform Limited
Partnership Act; sec. 22 of 1916 Uniform Limited Partnership Act); see, e.g., The Charging Order
Under the Uniform Partnership Act, 28 Wash. L. Rev, 1, 18 (Gose) 1953; Sherwood v. Jackson, 121
Cal. App. 354, 357, 8 P.2d 943 (1932); see, e.g., Ala. Code sec. 10-12-35 (1975); Conn. Gen. Stat.
Ann. sec.. 34-30 (1961); Del. Code Ann. sec. 18-703 (2000); Haw. Rev. Stat. Ann. sec. 428-504
(1996); Ill. Comp. Stat. Ann. sec. 180/30-20 (1994); La. Code Ann. sec. 486A.504 (West 1998)
(noting that the section is similar to sec. 504 of Uniform Partnership Act (1997)); Mont. Code
Ann. sec. 35-8-705 (1993); N.J. Stat. Ann. sec. 42:1A-30 (2000) (modeled after sec. 504 of Uniform
Partnership Act (1997)); Or. Rev. St. Ann. sec. 63.259 (1993); Pa. Cons. Stat. Ann. sec. 8345
(West 1988); S.C. Code Ann. sec. 33-44-504 (Law. Co-op. 1976); S.D. Codified Laws Ann. sec. 47-
34A-504 (Michie 1998); Utah Code Ann. sec. 48-2c-1103 (1953); Vt. Stat. Ann. tit. 11, sec. 3074
(1995); Va. Code Ann. sec. 13.1-1041 (Michie 1991); see, e.g., former RCW 25.04.280 (1955),
repealed by Laws of 1998, ch. 103, sec. 1308 (effective January 1, 1999).

*fn6 Rankin v. Culver, 303 Pa. 401, 154 A. 701 (1931).

*fn7 Rankin, 303 Pa. at 404.

*fn8 Fed. Deposit Ins. Corp. v. Birchwood Builders, Inc., 240 N.J. Super. 260, 263, 573 A.2d 182
(1990); N.J. Stat. Ann. sec. 42:1-24 (West 1990).

*fn9 Birchwood Builders, Inc., 240 N.J. Super. at 266.

*fn10 RCW 6.40.050; RCW 25.15.255.

*fn11 Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977).

*fn12 Hanson v. Denckla, 357 U.S. 235.

*fn13 See Hanson, 357 U.S. at 246 n.12.

*fn14 Ace Novelty Co. v. M.W. Kasch Co., 82 Wn.2d 145, 508 P.2d 1365 (1973); Shaffer, 433 U.S.
186.

*fn15 Int'l Shoe Co. v. Wash., 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945); Ace Novelty
Co., 82 Wn.2d at 150; Shaffer, 433 U.S. at 187-88.

*fn16 Shaffer, 433 U.S. at 210 n.36 (emphasis added).

*fn17 U.S. Const. art. IV, sec. 1; 28 U.S.C.A. sec. 1738; RCW 6.40.050. Other jurisdictions have
come to similar conclusions using the reasoning and language of Shaffer. Ruiz v. Lloses, 233 N.J.
Super. 608, 559 A.2d 866 (1989); Fine v. Spierer, 486 N.Y.S.2d 9, 109 A.D.2d 611 (1985).