BERSCHAUER v. SEATTLE, 58912-1-I (Wash.App. 7-30-2007)

No. 58912-1-I.The Court of Appeals of Washington, Division One.
July 30, 2007.

Appeal from a judgment of the Superior Court for King County, No. 04-2-05087-1, Mary E. Roberts, J., entered August 29, 2006.

Affirmed by unpublished per curiam opinion.

PER CURIAM.

A decision denying a motion to vacate a default judgment will not be disturbed absent a manifest abuse of discretion. Because the motion to vacate in this case was not filed within a reasonable time, appellants did not formally or informally appear prior to the default, and the factors governing the trial court’s decision under CR 60 did not favor vacation, we conclude the court was within its discretion in denying appellants’ motion to vacate. Accordingly, we affirm.

FACTS
In March 2004, following the failure of a concrete sealant on a school construction project, the school district sued the general contractor, Berschauer Phillips Construction Company. BPC eventually settled that action.

On March 15, 2004, BPC sued Concrete Science Services of Seattle, LLC, Vexcon Chemicals Inc., Rodda Paint, and others for indemnification. CSS had dissolved eight months prior to BPC’s suit. BPC served a summons and complaint on CSS’ registered agent, CT Corp., but CSS never answered the complaint or formally appeared in the action.

In June 2004, the owner of CSS, Jennifer Faller, was deposed by a party in the original action against BPC. Faller indicated during the deposition that CSS was not at fault for the failure of the sealant.

In April 2005, Faller submitted a declaration in support of Vexcon Chemicals’ motion for summary judgment in this case. The caption on the declaration named “Concrete Science Services of Seattle” as the first of several defendants.

On August 30, 2005, the superior court entered an order of default and a default judgment against CSS. Shortly thereafter, BPC notified CSS’ insurer of the default.

By letter dated October 7, 2005, the insurer acknowledged notice of the default and indicated it had retained counsel and instructed him to take steps to set aside the judgment. Ten months later, counsel filed a motion to vacate the default judgment. In an attached declaration, Faller alleged that CSS “was not aware that it had been served with the Complaint” and that “CSS was never notified of BP’s motion for default judgment.” The superior court denied the motion. CSS appeals.

DECISION
CSS first contends the default judgment should have been vacated because it was entitled to, but never received, notice of the motion for default. We disagree.

Under CR 55, a party seeking a default judgment must first give notice to a defendant who has “`appeared in the action.'”[1] A party formally “appears” in an action when the party “`answers, demurs, makes any application for an order therein, or gives the plaintiff written notice of his appearance.'”[2] Certain informal acts have also been held to constitute an “appearance.”[3] In a series of decisions, the divisions of this court agreed that an informal appearance could be found so long as a party manifested their intent to defend.[4] During the pendency of this appeal, however, our State Supreme Court rejected this formulation of the informal appearance doctrine, stating:

The informal appearance doctrine urged by the respondents would permit any party to a dispute, or any claims representative to a potential dispute, to simply write a letter expressing intent to contest litigation, then ignore the summons and complaint or other formal process and wait for the notice of default judgment before deciding whether a defense is worth pursuing. If a less formal approach to litigation is to be adopted, it should be by rule and not by this court’s adoption of an informal appearance rule. Parties formally served by a summons and complaint must respond to the summons and complaint or suffer the consequences of a default judgment.

Accordingly, we hold that parties cannot substantially comply with the appearance rules through prelitigation contacts. Parties must take some action acknowledging that the dispute is in court before they are entitled to a notice of default judgment hearing, though they may still be entitled to have default judgment set aside upon other well established grounds.[5]

Thus, contrary to the decisions cited by the parties in this appeal, a party claiming an informal appearance “must do more than show intent to defend they must in some way appear and acknowledge the jurisdiction of the court after they are served and litigation commences.”[6]

It is undisputed that CSS did not formally appear in this action. The sole question is whether Faller’s statements in her deposition and declaration amounted to an informal appearance. CSS contends they did because they showed its intent to defend itself in the litigation. But the statements do not demonstrate such intent[7] and, in any event, are plainly insufficient under Morin[8] to constitute an informal appearance. The trial court correctly concluded that CSS did not informally appear.

Alternatively, CSS argues that even if it did not informally appear and was not entitled to notice, the court still abused its discretion in failing to vacate the default judgment under CR 60 and White v. Holm, 73 Wn.2d 348, 352, 438 P.2d 581 (1968).[9] In White, the Supreme Court set out four factors the moving party must demonstrate in order to have a default judgment set aside:

(1) That there is substantial evidence extant to support, at least prima facie, a defense to the claim asserted by the opposing party; (2) that the moving party’s failure to timely appear in the action, and answer the opponent’s claim, was due to mistake, inadvertence, surprise, or excusable neglect; (3) that the moving party acted with due diligence after notice of entry of the default judgment; and (4) that no substantial hardship will result to the opposing party.[10]

These factors are not weighted evenly; the first two are the chief considerations, while the third and fourth are less important.[11] If a “strong or virtually conclusive defense” is demonstrated, the court will spend little time inquiring into the reasons for the failure to appear and answer, provided the moving party timely moved to vacate and the failure to appear was not willful.[12] However, when the moving party’s evidence supports no more than a prima facie defense, the reasons for the failure to timely appear will be scrutinized with greater care.[13]
Applying the White principles here, we conclude the court was well within its discretion in denying the motion to vacate.

Initially, we note that the motion was untimely.[14] A motion to vacate under CR 60(b) must be filed within a “reasonable time.” The critical period is the period between the party’s discovery of the judgment or order and the filing of the motion to vacate.[15] What constitutes a “reasonable time” depends on the facts and circumstances of each case.[16] “Major considerations” include prejudice to the nonmoving party and “whether the moving party has good reasons for failing to take appropriate action sooner.”[17]

Here, it is undisputed that CSS’ insurer received notice of the default judgment in September 2005 and directed its counsel in October 2005 “to take action to set aside [the default judgment] on behalf of our insured.” Yet, the motion to vacate was not filed until August 10, 2006. CSS offers no good reason for this 10-month delay.[18] Considering the length of the delay[19] and the absence of a sufficient excuse, we conclude CSS’ motion to vacate was not brought within a reasonable time.

Our conclusion is supported by our decision in Luckett. There, Luckett’s attorney waited four months before filing a motion to vacate a dismissal order. Although no prejudice from the delay had been shown, we concluded that the motion was not filed within a reasonable time because Luckett had shown no good reason for the delay. The case before us involves a much longer delay and a similarly insufficient excuse. We acknowledge, as we did in Luckett, that there is generally a preference for resolving cases on their merits. But as in Luckett, we conclude that the timely pursuit of available remedies is generally a prerequisite to application of that preference.

Even if the motion to vacate was timely, a review of the White factors supports the trial court’s decision. As to the first factor, CSS has demonstrated a prima facie defense, but not a complete or conclusive one. The default judgment was based in part on findings that Faller and CSS knew that the concrete floor contained a silicone sealer but assured BPC they could strip the sealer from the concrete and apply a stain finish to the floor. In her declaration, Faller specifically denied that she or CSS knew about the silicone sealer or that they agreed to remove it. There is also evidence indicating that the failure of CSS’ stain was due to the presence of silicone in the concrete. This evidence is sufficient to establish a prima facie defense.

But the asserted defense is only partial and cannot be characterized as “strong or virtually conclusive.” The alleged failure of BPC and others to tell CSS about the silicone does not, if believed, necessarily or conclusively establish that CSS was without fault. There is no evidence that CSS inquired about silicone in the concrete, and CSS offers no argument or authority establishing that it had no duty under the circumstances to inquire about silicone or other substances in the concrete before contracting to apply a finish to it. In addition, the default judgment contains a finding that CSS negligently performed its work and damaged lockers, plumbing, and other property by improperly applying muriatic acid. Nothing in CSS’ materials below demonstrated a defense to this claim.

In short, while CSS did establish a prima facie defense in its motion to vacate, the defense was only partial and, in any event, cannot be characterized as “virtually conclusive.” Accordingly, we must carefully scrutinize the other factors.

Regarding the second factor, CSS contends its failure to timely appear was due to mistake, inadvertence, surprise, or excusable neglect. Specifically, it contends the amended complaint was served on its registered agent, CT Corp., after CSS had dissolved, and it never received notice from CT Corp. But service on CSS’ agent is deemed to be service on CSS,[20] and CSS does not argue that such service was insufficient. Moreover, it is undisputed that months prior to the default, Faller signed a declaration on behalf of another defendant that listed CSS as the first of several defendants in the suit. We see no basis for a finding of mistake, inadvertence, surprise, or excusable neglect.

A case cited by CSS — Showalter v. Wild Oats, 124 Wn. App. 506, 101 P.3d 867 (2004) — is inapposite. In Showalter, declarations from a paralegal and a manager established that the manager misunderstood the paralegal’s request that the summons and complaint be forwarded to the claims administrator. Given that unrebutted evidence, and because the trial court had granted the motion to vacate the default judgment, th Showalter court held the trial court’s decision was “reasonable under all of the circumstances[.]”[21] By contrast, the sole evidence presented by CSS in this case was Faller’s declaration that CSS was dissolved at the time of service and was not aware that it had been served with the complaint or that it was a named party in the suit. There was no evidence from CSS’ agent, CT Corp., as to what it did with the summons and complaint. Absent such evidence, there was no basis to conclude that CSS’ failure to appear was due to mistake, inadvertence, or excusable neglect.

CSS also fails to establish the third factor for vacation — i.e. that it acted with due diligence after learning of the default. As discussed above, CSS offers no good reason for the 10-month delay between its insurer’s direction to counsel to pursue vacation and the actual filing of the motion.[22]

In light of CSS’ failure to satisfy both primary and secondary factors under White, and given its failure to demonstrate a strong or virtually conclusive defense below, we cannot say the superior court abused its discretion in denying the motion to vacate.[23]

BPC requests attorney fees on appeal. “A party is entitled to attorney fees on appeal if a contract, statute, or recognized ground of equity permits recovery of attorney fees at trial and the party is the substantially prevailing party.”[24] Trial courts have equitable authority to impose terms on parties seeking to vacate a default judgment.[25] In this case, because BPC has substantially prevailed on appeal, and because we find little merit in CSS’ appeal, we award BPC attorney fees conditioned on its compliance with RAP 18.1(d).

Affirmed.

For the Court: