Kevin Hendrickson v. Malcolm Scott Sotebeer ( 2019 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
KEVIN HENDRICKSON, ) No. 79158-3-I
Respondent, )
v.
HEMPZEN ENTERPRISES, LTD.; )
MALCOLM SOTEBEER and JANE )
DOE SOTEBEER, husband and wife, )
and the marital community comprised )
thereof; GREGORY DAVENPORT and )
CARLA DAVENPORT, husband and )
wife, and the marital community )
comprised thereof; DARRELL WARE )
and CHARLOTTE WARE, husband and )
wife, and the marital bommunity )
comprised thereof; and ALL OTHER ) UNPUBLISHED OPINION
OCCUPANTS, )
) FILED: December 16, 2019
Appellants. )
__________________________________________________________________________________)
VERELLEN, J. — If a party substantially complies with the appearance
requirements of CR 4, then CR 55(a) does not allow for entry of a default judgment
without first providing notice of the motion for default. And if a party seeking a
default judgment purposefully deprives an opposing party of notice and misleads
the trial court about whether the opposing party appeared and was entitled to
notice, then the default judgment should be vacated if the motion to vacate is
brought within a reasonable time consistent with CR 60(b)(4).
No. 79158-3-1/2
Landlord Kevin Hendrickson knew his tenants entered an informal
appearance in response to his summons and complaint for unlawful detainer, but
he failed to provide notice of his default judgment motion. It is undisputed that
Hendrickson expressly represented to the court that no tenant had responded or
appeared. Because Hendrickson engaged in misconduct and misled the trial court
to obtain a default judgment and his tenants moved to vacate within a reasonable
time of learning about the judgment against them, the trial court should have
vacated the judgment under CR 55(c)(1) and CR 60(b)(4).
Therefore, we reverse.
FACTS
M. Scott Sotebeer, Gregory Davenport, Darrell Ware, their spouses, and
their company Hempzen Enterprises, Ltd., (collectively, “Tenants”) began renting a
commercial property from Hendrickson in May of 2014. Tenants stopped paying
rent in February of 2015. On October 5, Hendrickson gave them a 10-day notice
to pay rent or quit the premises. Later that month, Hendrickson served a
summons and complaint for unlawful detainer. He did not file the complaint at that
time. On November 21, Hendrickson served each tenant with an amended
summons and complaint. He still did not file the complaint. On November 30,
Tenants quit the premises.1
1 On reconsideration, Hendrickson asserted the condition of the premises
made unclear whether Tenants actually quit them. Regardless, it is undisputed
that Tenants left the premises and did not return to them after November 30.
2
No. 79158-3-1/3
On December 14, Hendrickson filed his unlawful detainer action
simultaneously with a motion for default and default judgment. He did not serve
Tenants with notice of the motion for default judgment. To support his motion for
default, Hendrickson and his attorney filed declarations stating that Tenants failed
to appear or respond to the summons. The court granted a $95,000 default
judgment the same day. Hendrickson recorded the judgment two weeks later.
In 2018, Tenants learned about the default judgment and moved to vacate.
The court denied the motion to vacate and denied a motion to reconsider,
concluding Tenants failed to appear and, even if they had appeared, failed to bring
their motion to vacate within a reasonable time.
Tenants appeal.
ANALYSIS
We review denial of a motion to vacate for abuse of discretion.2 A court
abuses its discretion where it bases its decision on untenable reasons or
untenable grounds.3
Washington courts favor meritorious judgments over default judgments.4
We “liberally set aside default judgments pursuant to CR 55(c)~,j CR 60[,J and for
equitable reasons in the interests of fairness and justice.”5
2 Castellon v. Rodriguez, 4 Wash. App. 2d 8, 14, 418 P.3d 804 (2018).
~ Sacotte Const., Inc. v. Nat’I Fire & Marine Ins. Co., 143 Wash. App. 410,
415, 177 P.3d 1147 (2008).
k~. at 414.
~ Morin v. Burns, 160 Wash. 2d 745, 749, 161 P.3d 956 (2007).
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No. 791 58-3-1/4
It is long-established in Washington that a party deserves notice of a default
judgment motion where they substantially comply with the appearance
requirements of CR 4•6 CR 55(a)(1) allows entry of default judgment against a
party who has failed to appear. Under CR 55(a)(3), a party who has appeared is
entitled to written notice of the motion for default. We will set aside a default
judgment if the party entitled to notice of the motion for default did not receive
notice and the requirements of CR 60 are met.7
The parties dispute whether Tenants appeared and were entitled to notice
of Hendrickson’s motion for default. To determine whether a party appeared, we
consider whether the defendants’ conduct was intended to and, in fact, did apprise
the plaintiff of their intent to litigate the case.8 Before the litigation is commenced,
mere correspondence between the parties is insufficient to substantially comply
with CR 4•9 “Those who are served with a summons must do more than show
6 See jçj~ (explaining a default judgment “will be set aside” where a
defendant does not receive notice of a default judgment motion after substantially
complying with appearance requirements of CR 4); Tiffin v. Hendricks, 44 Wash. 2d
837, 843-44, 271 P.2d 683 (1954) (holding that notifying only opposing counsel of
an appearance was sufficient to require notice of a motion for default); see also
State ex rel. Trickel v. Super. Ct. of Clallam Cty., 52 Wash. 13, 15-16, 100 P. 155
(1909) (because only “substantial compliance” with appearance statute was
sufficient, premature service of interrogatories established an appearance and
entitled the party to notice).
~ Sacotte, 143 Wash. App. at 415 (citing Morin, 160 Wash. 2d at 749);
CR 55(c)(1).
8 Servatron, Inc. v. Intelligent Wireless Products, Inc., 186 Wash. App. 666,
675, 346 P.3d 831 (2015) (citing Morin, 160 Wash. 2d at 755).
~ Morin, 160 Wash. 2d at 757.
4
No. 791 58-3-1/5
intent to defend; they must in some way appear and acknowledge the jurisdiction
of the court after they are served and litigation commences.”1° Once an attorney
appears, the defendant has appeared even if counsel later withdraws.11
Here, Hendrickson acknowledges that litigation was commenced by service
of a summons and complaint for unlawful detainer on October 31, 201512 On
November 4, Tenants’ attorney Collin Roberts e-mailed Hendrickson’s attorney:
I’m in the middle of gathering info from my client about rent
payments. They are still tracking down cancelled checks, receipts,
etc., but attached [to this email] is a good portion of receipts and
checks showing rent payments through August of this year. . I plan
. .
on filing a Notice of Appearance shortly but the claims you’ve made
in your complaint are largely rebutted by these payments so I believe
we should at least have a conversation about this prior to moving
forward with the lawsuit.[131
Roberts could not have filed a formal notice of appearance with the court,
however, because Hendrickson had not yet filed the unlawful detainer action.14
Around November 17, attorney Synthia Melton took over representation
from Roberts, and Roberts notified Hendrickson’s attorney of the change. That
same day, Hendrickson’s attorney wrote he had been “instructed to file this matter
10 Morin, 160 Wash. 2d at 749.
~ See Tiffin 44 Wash. 2d at 844 (withdrawal of defendant’s counsel did not
rescind counsel’s appearance).
12 An action is commenced by proper service of a valid summons and a
complaint. CR 3(a). Tenants do not contest the validity of the summons or the
process used to serve it.
13 Clerk’s Papers (CP) at 142.
14 See CP at 58 (e-mail from November 25, 2015, stating the lawsuit still
had not been filed).
5
No. 79158-3-116
and set a show cause hearing.”15 He also wrote, “I would prefer to settle this
without filing the case, but the opportunity to do so will lapse if my client does not
perceive there to be significant movement toward resolution in short order.”16 A
few days later, Hendrickson served the Tenants with an amended summons and
complaint. On November 25, Hendrickson’s attorney e-mailed Melton the
amended summons and complaint “[f]or your information and records.”17 On
November 30, Melton emailed Hendrickson’s attorney to notify him “that the
property has been vacated by everyone and your client can take possession” and
that she was “withdrawing my representation of Hempzen or it’s [sic] members.”18
Two weeks later and without notice, Hendrickson filed the action for unlawful
detainer, the motion for default and default judgment, and a declaration attesting
that the defendants had not appeared and were in default.19
Hendrickson relies on Morin v. Burns20 to argue Tenants’ attorneys’ conduct
did not substantially comply with CR 4 and so Tenants never appeared. But Morin
holds that prelitiqation contacts alone are insufficient to constitute an informal
appearance.21
15 CP at 100-101.
16 CP at 101.
17 CP at 102.
18 CP at 66.
19 CP at 15-16, 17, 20, 25.
20 160 Wash. 2d 745, 161 P.3d 956 (2007).
21 ki. at 757.
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No. 79158-3-1/7
Here, it is undisputed that the lawsuit commenced upon service of the first
summons and complaint in October 2015.22 After litigation commenced, Tenants’
attorney Roberts acknowledged the complaint, the possibility of litigation “moving
forward,” and disputed the amount of rent owed. Significantly, Roberts intended to
file a formal appearance with the court but could not have done so because
Hendrickson had not yet filed the lawsuit. Melton took over for Roberts, and
Hendrickson acknowledged her representation by sending her the same amended
summons and complaint he served on her clients. Tenants quit the premises only
after receiving Hendrickson’s summons and complaint for unlawful detainer. On
these facts, Tenants’ acknowledged the existence of a genuine legal dispute and
showed their desire to contest it. This substantially complied with CR 4•23
Because Tenants’ attorneys’ conduct constituted an informal appearance on
Tenants’ behalf, Tenants were entitled to notice of Hendrickson’s motion for
default and default judgment.24
Failure to provide notice is a serious procedural error that renders the
judgment voidable and justifies vacation when the requirements of CR 60 are
met.25 Although Tenants’ trial court motions and supporting materials do not refer
22 CR 3(a).
23 See Sacotte, 143 Wash. App. at 416 (“[T]he test for whether a party’s
conduct constitutes an informal appearance is . whether the party, after the suit
. .
has commenced, has shown intent to defend in court.”) (citing Morin, 160 Wash. 2d at
749).
24 Morin, 160 Wash. 2d at 754 (citing Tiffin, 44 Wash. 2d at 847); CR 55(a)(3).
25Rabbaqe v. Lorella, 5 Wash. App. 2d 289, 298, 300, 426 P.3d 768 (2018).
Tenants rely on Colacurcio v. Burger, 110 Wash. App. 488, 497, 41 P.3d 506 (2002),
7
No. 79158-3-1/8
to a specific portion of CR 60, the trial court addressed whether Tenants were
entitled to notice due to an appearance, whether the default judgment was
voidable for failure to provide notice, and whether the motion to vacate was made
within a reasonable time under CR 60. The trial court determined Tenants’ motion
to vacate was not brought “within a reasonable time” and cited Peoples State Bank
v. Hickey26 for the proposition a motion to vacate is not timely brought two-and-a-
half years after a misrepresentation was made in the default motion.27 Because
CR 60(b)(4) governs motions to vacate for misrepresentation or misconduct, the
question at the core of this appeal is whether the requirements of CR 60(b)(4)
have been met.28
and Servatron, 186 Wash. App. at 678-81, to argue failure to provide notice makes a
default judgment void. Both decisions rely on Tiffin, which stated that a party who
did not receive notice of a default “may have such a default judgment set aside as
a matter of right.” 44 Wash. 2d at 847. But as Rabbaqe explains, failure to provide
notice of a motion does not strip a court of its subject matter jurisdiction, so the
default judgment would only be voidable and not void. 5 Wash. App. 2d at 299-300.
Accordingly, the Tiffin court was simply stating that a voidable judgment must be
vacated if the other requirements of CR 60 are also satisfied. Tiffin, 44 Wash. 2d at
847. To the extent Colacurcio and Servatron overextended Tiffin, they are not
compelling authority.
2655 Wash. App. 367, 371-72, 777 P.2d 1056 (1989).
27 CP at 161.
28 For the first time at oral argument, Hendrickson contended CR 60(b)(4)
could not be considered as a basis for vacation because Tenants failed to raise it
to the trial court. Although there was no express mention of CR 60(b)(4), all
parties discussed CR 60(b), and a fair reading of the order denying
reconsideration shows the trial court considered CR 60(b)(4) as a basis to vacate.
Notably, the Peoples State Bank case cited by the trial court turned on analysis of
CR 60(b)(4), and the trial court applied the reasonable time standard that applies
to a CR 60(b)(4) motion. Because we may consider a theory to vacate that was
considered by the trial court, we address the issue.
8
No. 79158-3-1/9
CR 60(b)(4) authorizes vacation of a judgment obtained through the fraud,
misconduct, or misrepresentation of an adverse party. “[A] default judgment
should be set aside if the plaintiff has done something that would render enforcing
the judgment inequitable.”29 To warrant vacation, the misconduct or
misrepresentation “must cause the entry of the judgment such that the losing party
was prevented from fully and fairly presenting its case.”3° The party seeking
vacation bears the burden of establishing fraud, misrepresentation, or misconduct
by clear and convincing evidence.31
Tenants argue vacation is warranted under CR 60(b)(4) because
Hendrickson misled the court about Tenants’ failure to appear. It is undisputed
that Hendrickson and his attorney filed declarations in support of the default
judgment stating that Tenants did not appear or respond to the complaint.
Hendrickson and his attorney knew that Tenants informally appeared, however,
because Hendrickson’s attorney sent the Tenants’ attorney a copy of the amended
summons and complaint and engaged in negotiations about the amount of rent
owed. Thus, Hendrickson misled the court about Tenants’ appearance and, on
these facts, engaged in misconduct by failing to provide notice of the motion for
default when CR 55(a)(3) required it. “[V]igorous advocacy is not contingent on
29 Morin, 160 Wash. 2d at 755 (emphasis added); see CR 55(c)(l) (allowing
vacation of a default judgment for good cause and on just terms).
30 Lindqren v. Lindqren, 58 Wash. App. 588, 596, 794 P.2d 526 (1990)
(emphasis omitted) (citing Peoples State Bank, 55 Wash. App. at 372).
31 j~ (citing Peoples State Bank, 55 Wash. App. at 372).
9
No. 79158-3-1/10
lawyers being free to pursue litigation tactics that they cannot justify as
legitimate.”32 Because Hendrickson’s misconduct deprived Tenants of notice and
led directly to default judgment being entered against them, the trial court should
have granted the motion to vacate if Tenants moved to vacate “within a
reasonable time.”33
What constitutes a reasonable time for purposes of CR 60(b) depends on
the facts and circumstances of each case.34 When considering the timeline of
events, the critical period is the time between when the party seeking vacation
became aware of the judgment and the filing of the motion.35 We also consider
any prejudice to the nonmoving party from the delay and whether the moving party
had good reasons for failing to move sooner.36
In Suburban Janitorial Services v. Clarke American, this court held that the
lapse of 17 months between entry of a default judgment and a motion to vacate
was a reasonable time under the circumstances.37 The court affirmed vacation
under CR 60(b)(4) because, first, plaintiff’s counsel engaged in misconduct by
32 Sacotte, 143 Wash. App. at 418 (quoting Wash. State Physicians Inc. Exch.
& Ass’n v. Fisons Corn., 122 Wash. 2d 299, 354, 858 P.2d 1054 (1993)).
~ See Morin, 160 Wash. 2d at 755 (“[A] default judgment should be set aside if
the plaintiff has done something that would render enforcing the judgment
inequitable.”) (citing CR 60(b)(4)).
~ Luckettv. Boeing Co., 98 Wash. App. 307, 312, 989 P.2d 1144 (1999).
~ Ha v. Signal Elec., Inc., 182 Wash. App. 436, 454, 332 P.3d 991 (2014).
36 Tatham v. Rogers, 170 Wash. App. 76, 99, 283 P.3d 583 (2012).
~~72 Wn. App. 302, 308, 863 P.2d 1377 (1993).
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No. 79158-3-I/li
purposefully ignoring letters from the defendant showing it was ignorant of the
default judgment against it and, second, the defendant moved to vacate promptly
after learning about the judgment against it.38
Here, Tenants first learned of the default judgment and judgment lien
against their property in 2018. After becoming aware of the judgment, Tenants
attempted to resolve the issue informally with Hendrickson and, when that failed,
filed the motion to vacate in early July of 2018. Assuming Tenants learned of the
judgment on January 1, 2018, at most six months passed between the time
Tenants learned of the default judgment and when they moved to vacate.39 And
part of that time was spent attempting to resolve the issue informally. As in
Suburban, Tenants moved to vacate within a reasonable time.
Hendrickson argues vacating the default judgment would be prejudicial to
him because he would “have to file releases of the liens and refile lis pendens.”4°
But Hendrickson can hardly claim to be prejudiced by losing possession of liens he
obtained by misleading the court and engaging in misconduct.
Tenants informally appeared, Hendrickson misled the court and engaged in
misconduct to deprive Tenants of notice and obtain the default judgment, and
38 Id. at 308, 310.
~ Hendrickson appears to argue Tenants knew or should have known
about the default judgment because they “were on actual notice of the action
against them in court.” Resp’t’s Br. at 22. But he cites no authority to support any
theory of constructive notice in these circumstances.
4° Resp’t’s Br. at 22.
ii
No. 79158-3-1/12
Tenants moved to vacate that judgment within a reasonable time. Therefore, the
trial court should have granted Tenants’ motion to vacate the default judgment.41
Therefore, we reverse.
V
WE CONCUR:
41 Because we conclude the trial court should have vacated the default
judgment under CR 60(b)(4), we do not need to address the alternative theory that
the default judgment was void because it includes an award of damages not
authorized by RCW 59.12.170.
12