Kimberly Gale v. C & K Remodel, Inc, Westco Insurance Co ( 2015 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
KIMBERLY GALE, a single woman,
No. 72420-7-1
Respondent,
DIVISION ONE
v.
UNPUBLISHED OPINION
C&K REMODEL, INC., a Washington
corporation,
Appellant,
WESCO INSURANCE COMPANY, a
foreign insurance company,
Defendant. FILED: October 5, 2015
Trickey, J. — Civil Rule (CR) 11 provides a proper basis for striking an unsigned
pleading. However, a trial court must provide a party that files an unsigned pleading a
reasonable time within which to cure the signature deficiency before striking the pleading
pursuant to CR 11. In this matter, the trial court struck an unsigned answer, but did not
give the defendant an opportunity to cure the defective pleading. Instead, on the same
day that it struck the answer, the court entered an orderof default and a default judgment
against the defendant. The court subsequently denied the defendant's motion to vacate
the default judgment, including its request for additional time to file an amended answer.
Because the defendant was not in default when the court entered the default judgment,
the judgment must be set aside.
FACTS
Kimberly Gale hired C&K Remodel, Inc., to repair flooding damage to her home.
C&K discovered faulty work done by previous contractors that needed to be corrected.
C&K then attempted to repair the faulty work, and also communicated with Farmers
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Insurance Company, Gale's homeowner's insurer, to determine the type of repair work
that Farmers would cover. Gale paid C&K directly for its work, with the expectation that
Farmers would later reimburse her. After Gale had already authorized over $20,000 in
payments to C&K, a dispute developed between Gale and Farmers over how much of
C&K's work would be covered under Gale's policy.
Subsequently, Gale placed a "stop payment" on the credit card payments to C&K
that she had previously authorized.1 In response, C&K stopped working on Gale's
property. C&K then hired an attorney, Jeffrey Rupert, in order to place a materialman's
lien on Gale's property.
Shortly thereafter, Gale's attorney sent a letter to Rupert demanding that C&K
remove the lien. Gale's attorney stated that C&K had failed to serve Gale with the "Right
to Lien" "Notice to Customer" before commencing work, as required by RCW 18.27.114 2
Gale's attorney also advised Rupert that C&K was not a registered contractor with the
Washington State Department of Labor and Industries at the time it performed work on
Gale's residence, and was not bonded from April 17, 2012 to March 25, 2013. C&K
released the lien.
On October 21, 2013, after C&K had released the lien, Gale filed suit against C&K,
claiming breach of contract, negligence, and Consumer Protection Act (CPA), chapter
19.86 RCW, violations. Gale also sued C&K's bonding company, Wesco Insurance
Company, to recover C&K's bond.
On November 12, C&K entered a notice of appearance through attorney Stuart
Sinsheimer.
1 Clerk's Papers (CP) at 163, 172.
2 CP at 98, 228.
No. 72420-7-1 / 3
Gale initially agreed to allow C&K additional time to file an answer so that C&K
could tender its defense to its insurer. On January 2, 2014, C&K's insurer denied
coverage and defense.
On February 5, Sinsheimer mailed his notice of intent to withdraw as C&K's
counsel, effective February 19, 2014. He withdrew because he could not get in contact
with C&K. Sinsheimer did not file an answer to Gale's complaint on behalf of C&K before
withdrawing.
On April 15, Gale filed the confirmation of joinder, parties, claims, and defenses,
stating that "Defendant C&K Remodel, Inc. has failed to file an Answer. Plaintiff will note
and serve Motion for Default."3
On June 24, Gale noted a motion for default for hearing on July 3, 2014, in King
County Superior Court. The motion was filed with Gale's personal declaration, a
declaration ofa construction repair estimator, and Gale's counsel's declaration. Gale also
filed a certificate of service of these documents on C&K via legal messenger.
Gale's motion stated that her damages caused "by way of [C&K's] violation of the
[CPA] cannot be reasonably segregated from damages caused by Defendant's
negligence and breach of contract."4 She claimed total and unsegregated damages of
$136,153.50, upon which she then relied in requesting treble damages under the CPA in
the amount of $25,000—the maximum permitted by the CPA. She also requested an
award of attorney fees in the amount of $53,180.66.
On June 30, Chris Greer—the sole shareholder and officer of C&K—filed an
answer to Gale's complaint. Greer signed the answer and a stamped certificate of
3 CP at 29.
4 CP at 34.
No. 72420-7-1/4
mailing. That same day, Greer called Gale's attorney and requested his address in order
to mail a copy of the answer.
On July 1, Gale's attorney informed Greer that he had not received anything in the
mail.
On July 2, Gale's attorney received the answer. Gale's attorney immediately
brought motions to strike the answer and to shorten time within which to strike the answer,
such that the motion to strike could be heard the next day, July 3—the day on which the
motion for default was scheduled for hearing. Gale's attorney also called Greer that
afternoon and explained to Greer that Gale was moving to strike on the grounds that
Greer could not represent C&K in court proceedings.
On July 3, Greer met with Rupert in order to rehire him as an attorney to represent
C&K. Rupert then faxed to Gale's attorney a notice of appearance, which was later filed
on July 15.
On July 3, the trial court granted Gale's motion to shorten time, struck C&K's
answer, granted Gale's motion for default, and entered default judgment against C&K.
Although the court did not, in granting the motion to strike, state the basis for its
order, it did state that the motion to strike was brought pursuant to CR 11.
In granting the motion for default, the courtorderedthat judgment would be entered
against C&K in the amount of $214,334.15.5
In entering default judgment, the court made the following findings:
• The principal amount of damages of $136,153.50 was a sum certain;
• Gale was entitled to exemplary damages in the amount of $25,000 pursuant to the
5 Subsequently, on July 31, the court entered an amended default judgment against C&K. The
reason for doing so was to include a summary of judgment in the judgment in accordance with
RCW 4.64.030.
No. 72420-7-1 / 5
CPA;
• Gale was entitled to attorney fees in the amount of $53,180.66 pursuant to the
CPA; and
• The total judgment was in the amount of $214,334.16, plus 12 percent
postjudgment interest.^1
Several weeks later, C&K, through counsel, filed a motion to set aside the default
and vacate the default judgment. C&K argued that it had a "meritorious defense," and
that its failure to timely file an answer was the result of excusable neglect or mistake.7
After hearing oral argument on the motion, the trial court denied the motion to set aside
the default and vacate the default judgment. The trial court ruled that C&K had not met
the CR 60(b) criteria tovacate thedefault judgment, including mistake, excusable neglect,
or irregularity in the proceedings. Additionally, in the order denying the motion, the trial
court crossed out C&K's proposal that "C&K shall file an amended Answer forthwith."8
On September 2, C&K filed a notice of appeal of the amended default judgment
against C&K, entered on July 31, and the order denying the motion to vacate the default
judgment.
ANALYSIS
C&K contends that the trial court erred in granting Gale's motion for default against
C&K, entering judgment against C&K, and refusing to grant C&K's motion to vacate the
default judgment. We agree.9
6 CP at 132.
7 CP at 160-88.
8 CP at 416.
9As a preliminary matter, Gale contends that C&K failed to preserve for review the issue of the
trial court's failure to give C&K additional time to cure its defective answer. We disagree. The
trial court was well aware that Gale moved to strike the answer pursuant to CR 11, and both
parties addressed the motion to strike and the proper application ofCR 11 in arguing the motion
to vacate the default judgment. Moreover, in its proposed order to vacate the default judgment,
No. 72420-7-1 / 6
Default judgments are notfavored; they "'are normally viewed as proper only when
the adversary process has been halted because of an essentially unresponsive party.'"
Colacurcio v. Burger, 110 Wash. App. 488, 495, 41 P.3d 506 (2002) (quoting Batterman v.
Red Lion Hotels. Inc., 106 Wash. App. 54, 61, 21 P.2d 1174 (2001)). This is so because of
a strong preference in favor of deciding controversies on the merits. Little v. King, 160
Wash. 2d 696, 703, 161 P.3d 345 (2007). Strong though this preference may be, it must be
balanced against the value of "'an organized, responsive, and responsible judicial system
where litigants acknowledge the jurisdiction of the court to decide their cases and comply
with court rules.'" TMT Bear Creek Shopping Ctr., Inc. v. Petco Animal Supplies, Inc.,
140 Wash. App. 191, 199, 165 P.3d 1271 (2007) (quoting Little, 160 Wash. 2d at 703).
CR 55 governs when an order or judgment of default may be entered against a
party and when the order or judgment may be set aside.10 The rule permits a party to
bring a motion for default when the "party against whom a judgment for affirmative relief
is sought has failed to appear, plead, or otherwise defend as provided by these rules."
CR 55(a)(1). The rule further provides that "[i]f the party has appeared before the motion
is filed, [the party] may respond to the pleading or otherwise defend at any time before
the hearing on the motion." CR 55(a)(2). However, "[e]ven if a party has appeared in an
action, if the party then fails to answer a pleading required by, or to file a responsive
C&K included a provision that would have allowed it to file an amended answer. The trial court
denied the motion by order and, in doing so, crossed out the provision requesting an opportunity
for C&K to file an amended answer. C&K appeals from this order. In view of the foregoing, we
conclude that the issue was preserved for review.
10 Relief from default judgments and orders is governed by CR 60(b). Burlinqame v. Consol.
Mines & Smelting Co.. Ltd.. 106 Wash. 2d 328, 336, 722 P.2d 67 (1986). The rule "does not
authorize vacation of judgments except for reasons extraneous to the action of the court or for
matters affecting the regularity of the proceedings." Burlinqame, 106 Wash. 2d at 336. As such, CR
60(b) may not be used to correct errors of law; "rather, direct appeal is the proper means of
remedying legal errors." Burlinqame, 106 Wash. 2d at 336.
6
No. 72420-7-1 / 7
pleading listed in, CR 7(a), the party may still enter default." Durvea v. Wilson, 135 Wn.
App. 233, 238, 144 P.3d 318 (2006) (footnote omitted).
We review a trial court's ruling on a motion for default judgment and on a motion
to vacate a default judgment for abuse of discretion, and will not disturb the trial court's
decision unless it was manifestly unreasonable, based on untenable grounds, or
untenable reasons. Old Republic Nat'l Title Ins. Co. v. Law Office of Robert E. Brandt,
PLLC, 142 Wash. App. 71, 74, 174 P.3d 133 (2007); TMT Bear Creek., 140 Wash. App. at
199; Mecum v. Pomiak. 119 Wash. App. 415, 422, 81 P.3d 154 (2003). "[W]here the court
has no authority to enter a default judgment because the defendant is not in default, the
court has no discretion to exercise on the question of whether the judgment should be set
aside." Tiffin v. Hendricks, 44 Wash. 2d 837, 847, 271 P.2d 683 (1954); accord Duryea, 135
Wash. App. at 238. Consequently, "[i]n the latter instance, the defendant may have such a
default judgment set aside as a matter of right and no showing of a meritorious defense
is necessary." Tiffin, 44 Wash. 2d at 847; accord Durvea, 135 Wash. App. at 238.
The trial court in this matter had no authority to enter default judgment because
C&K was not in default when judgment was entered.11 C&K appeared through counsel
before the motion for default was filed. After the motion for default was filed, but before
the hearing on the motion was held, C&K filed an answer. This answer was timely filed
under CR 55(a)(2). However, the answer did not comply with CR 11, which sets forth the
standards attorneys or pro se litigants must observe when filing pleadings in superior
11 While trial courts have inherent authority to sanction litigation conduct, State v. S.H., 102 Wn.
App. 468, 475, 8 P.3d 1058 (2000), the record does not support a finding that the trial court acted
pursuant to its inherent authority. To the contrary, in its order striking the answer, the trial court
noted that the motion to strike was brought pursuant to CR 11. Furthermore, to properly invoke
this inherent authority, a trial court must make a finding of bad faith, which the court in this case
did not do. S.H., 102 Wash. App. at 475.
No. 72420-7-1 / 8
court, including pleadings authorized under CR 55(a)(2). The answer did not comply with
CR 11 because it was not signed by an attorney—a requirement for pleadings submitted
by a corporate entity. See, e^, Biomed Comm. Inc. v. Dep't of Health, Bd. of Pharmacy,
146 Wash. App. 929, 938, 193 P.3d 1093 (2008). Given that the answer was signed by
Greer, a corporate officer, the answer was, for purposes of CR 11, unsigned. Biomed,
146 Wash. App. at 938, 943.
CR 11 (a) directs that unsigned pleadingsshall be stricken. However, this directive
is conditional—an unsigned pleading "shall be stricken unless it is signedpromptly after
the omission is called to the attention of the pleader or movant." CR 11(a) (emphasis
added).
When a corporation submits an unsigned pleading, the trial court may enter an
order striking the pleading; however, in order to comply with CR 11, the court must provide
the corporation "a reasonable amount of time after entry of its order to cure the defect."
Biomed, 146 Wash. App. at 938; see also Dutch Vill. Mall. LLC v. Pelletti, 162 Wash. App.
531, 539, 256 P.3d 1251 (2011) ("The trial court correctly granted the motion to strike the
pleadings of [the corporate entity] unless, within 30 days, they were either withdrawn or
signed by an attorney."); Llovd Enters.. Inc. v. Lonoview Plumbing &Heating Co., Inc., 91
Wash. App. 697, 700-01, 958 P.2d 1035 (1998) (affirming trial court's entry of default
judgment against corporation that filed an unsigned answer but failed to cure the
deficiency within the 20 day period allotted by the court).
The trial court did not provide C&K a reasonable timewithin which it could cure the
timely filed, albeit defective, answer, as required by CR 11. Quite the opposite—the court
struck the answer and entered an order of default and a default judgment against C&K
8
No. 72420-7-1 / 9
on the very same day. Because C&K was not in default when the default judgment was
entered, the court erred both in entering the judgment and in later denying C&K's motion
to vacate the judgment. On remand, C&K is entitled to have the default judgment set
aside.12
Reversed and remanded.
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WE CONCUR:
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12 Gale's request for prevailing party attorney fees is denied.
9