Grays Harbor Drug Task Force & Grays Harbor County v. Real Property ( 2020 )

Filed
Washington State
Court of Appeals
Division Two
June 16, 2020
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
GRAYS HARBOR DRUG TASK FORCE and No. 53277-8-II
GRAYS HARBOR COUNTY,
Respondents,
v.
REAL PROPERTY KNOWN AS 3010 UNPUBLISHED OPINION
SUMNER, HOQUIAM, LOCATED IN
GRAYS HARBOR COUNTY,
WASHINGTON and all appurtenances and
improvements thereon,
Defendant in rem,
TAO YUAN, INC.,
Appellant.
GLASGOW, J.—Grays Harbor County and the Grays Harbor County Drug Task Force
(hereinafter collectively the County) began forfeiture proceedings against real property in Grays
Harbor under chapter 69.50 RCW because the property had been used in a drug manufacturing
operation or had been purchased with proceeds from that operation. Tao Yuan Inc. whose
registered agent was Andy Zheng, owned the property. The County attempted to serve Tao Yuan
through Zheng at the address on record with the Secretary of State but was unable to locate Zheng.
The County then attempted service via certified mail, but the documents were returned as
undeliverable. Ultimately, the County served Tao Yuan through substitute service on the Secretary
of State.
No. 53277-8-II
The trial court entered an order of default and order of forfeiture in rem. Over two months
later, Tao Yuan and Zheng moved to vacate the default orders. Zheng stated that he had been out
of the state since late 2017 and never received notice of the proceedings against the property. The
trial court denied Tao Yuan’s motion.
Tao Yuan appeals arguing that the trial court erred by denying its motion to vacate the
default order. Specifically, Tao Yuan contends that the default order is void because the County
failed to comply with RCW 23.95.450 by not exercising reasonable diligence in locating Tao
Yuan’s registered agent before serving the Secretary of State and thus violated Tao Yuan’s due
process rights. We disagree and affirm.
FACTS
The County filed a complaint for forfeiture against real property owned by Tao Yuan under
chapter 69.50 RCW because the property had been used in a drug manufacturing operation or had
been purchased with proceeds from the operation. The property is located at 3010 Sumner,
Hoquiam, Washington. Zheng was the registered agent for service of process for Tao Yuan. The
address on record with the Secretary of State for Tao Yuan’s principal office, Tao Yuan’s principal
mailing address, and Zheng’s street and mailing addresses were all the same: 107 South Harbor
Street, Aberdeen, Washington.
The County attempted to personally serve Tao Yuan through Zheng at that address three
separate times but was unable to locate Zheng. The County then attempted service via certified
mail, but the documents were returned as undeliverable. Ultimately, the County served Tao Yuan
through substitute service on the Secretary of State.
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No. 53277-8-II
After receiving no notice of appearance or response from Tao Yuan within 90 days, the
County filed a motion for an order of default. The trial court granted the County’s motion and
entered an order of default.
Over two months later, Tao Yuan and Zheng filed a notice of appearance and motion to
vacate the default order. Tao Yuan argued that the default order was void because Tao Yuan never
received notice of the forfeiture action. Zheng’s declaration stated that he had been out of the state
since late 2017 and had arranged to have his mail forwarded to him in New York. While Zheng
was in New York, the 107 South Harbor Street property was also forfeited due to illegal drug
activity, and Zheng did not receive any mail addressed there. When Zheng returned to Washington
in October 2018, he learned that the 3010 Sumner property at issue here was subject to forfeiture.
Zheng went to the local police department where he obtained a copy of the complaint for forfeiture
and the supporting declaration of Sergeant Joe Strong.
The trial court found that the County properly served Tao Yuan through the Secretary of
State and denied Tao Yuan’s motion to vacate the default order. Tao Yuan then moved for
reconsideration, which the trial court denied.
Tao Yuan appeals.
ANALYSIS
Tao Yuan argues that the trial court erred by denying its motion to vacate the order of
default. Tao Yuan contends that the default order is void because the County failed to comply with
RCW 23.95.450 by not exercising reasonable diligence in locating Tao Yuan’s registered agent
before serving the Secretary of State under RCW 23.95.450(4) and thus violated Tao Yuan’s due
process rights. We disagree.
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No. 53277-8-II
I. STANDARD OF REVIEW
“‘Proper service of the summons and complaint is essential to invoke personal jurisdiction
over a party, and a default judgment entered without proper jurisdiction is void.’” Allstate Ins. Co.
v. Khani, 75 Wash. App. 317, 324, 877 P.2d 724 (1994) (quoting In re Marriage of Markowski, 50
Wash. App. 633, 635-36, 749 P.2d 754 (1988)). Generally, we review a motion to vacate for abuse
of discretion, but because courts have a mandatory, nondiscretionary duty to vacate void
judgments, we review de novo a trial court’s decision to deny a motion to vacate for lack of
jurisdiction. Wright v. B&L Props., Inc., 113 Wash. App. 450, 456, 53 P.3d 1041 (2002); Ahten v.
Barnes, 158 Wash. App. 343, 350, 242 P.3d 35 (2010). We review de novo whether service of
process was proper. Scanlan v. Townsend, 181 Wash. 2d 838, 847, 336 P.3d 1155 (2014).
“Constitutional due process concerns determine the minimum requirements for service, but
statutory service requirements may add to the constitutional requirements.” Crystal, China and
Gold, Ltd. v. Factoria Ctr. Invs., Inc., 93 Wash. App. 606, 609, 969 P.2d 1093 (1999).
II. STATUTORY COMPLIANCE
A. Service on Corporations
Title 23 RCW is Washington’s adoption of the Uniform Business Operations Code
(UBOC) and governs the operation of corporations in Washington. RCW 23.95.405 requires a
Washington corporation to maintain an in-state registered agent. The registered agent’s name,
street address, and mailing address must be filed with the Secretary of State. RCW 23.95.410, .415.
If a registered agent changes either address, they are required to file a statement of change with
the Secretary of State reflecting the new address. RCW 23.95.435.
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No. 53277-8-II
RCW 23.95.450 provides that a represented business entity may be served by serving the
entity’s registered agent. If an entity’s registered agent cannot with reasonable diligence be served,
RCW 23.95.450(2) provides that the entity may be served by registered or certified mail addressed
to the entity at the entity’s principal office. RCW 23.95.450(3) provides a third option for service
in the event service cannot be made on the registered agent or by certified mail: “If process, notice,
or demand cannot be served on an entity pursuant to subsection (1) or (2) of this section, service
may be made by handing a copy to the individual in charge of any regular place of business or
activity of the entity if the individual served is not a plaintiff in the action.” Finally, RCW
23.95.450(4) provides, “The secretary of state shall be an agent of the entity for service of process
if process, notice, or demand cannot be served on an entity pursuant to subsection (1), (2), or (3)
of this section.”
B. Reasonable Diligence
Tao Yuan argues that the County failed to comply with RCW 23.95.450 by not exercising
reasonable diligence when attempting to serve Tao Yuan’s registered agent. We disagree.
Reasonable diligence, as used in RCW 23.95.450(2), requires that the plaintiff make
“honest and reasonable efforts to locate the defendant.” Wright, 113 Wash. App. at 458. It does not,
however, require that the plaintiff employ all conceivable means to locate the defendant. Id. The
effort to locate a defendant “need not be exhaustive.” Id. at 459.
Tao Yuan likens this case to Davis v Blumenstein, 7 Wash. App. 2d 103, 432 P.3d 1251
(2019). But Davis is distinguishable. Davis involved service under the nonresident motorist statute,
which explicitly requires a plaintiff to attempt service on a defendant at all known addresses before
relying on substitute service. Id. at 111; see RCW 46.64.040. There, Division One held that the
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No. 53277-8-II
plaintiff failed to comply with the statutory notice requirements for substitute service when it did
not attempt to serve the defendant at an out of state address known to the plaintiff’s attorney. Id.
at 116-17. Here there is no evidence that the County knew an alternative address at which it could
serve Tao Yuan or even that Tao Yuan’s registered agent had left the state.
This case is more like Crystal, 93 Wash. App. at 606. There, Division One held that Crystal
exercised reasonable diligence in attempting to serve the defendant’s registered agent when it made
two attempts to serve the registered agent at its registered address before learning the agent would
be out of the office until after the 90-day statute of limitations had run. Id. at 612. Crystal was
unable to find the agent’s home address and ultimately effected service on the Secretary of State
in accordance with the substitute service statute. Id. (referencing former RCW 23B.05.040 (1989),
which was recodified as RCW 23.95.450 with the adoption of the UBOC).
Here, the County exercised reasonable diligence before resorting to service on the
Secretary of State. At all relevant times, the principal business address for Tao Yuan on record
with the Secretary of State was 107 South Harbor Street. 107 South Harbor Street was also listed
as the address for Tao Yuan’s registered agent. Three separate attempts were made to personally
serve Tao Yuan and its agent, Zheng, at that address, and the County also attempted service by
certified mail before resorting to substitute service.
These four attempts complied with RCW 23.95.450’s requirements for attempting service
with reasonable diligence before resorting to service on the Secretary of State. The County
attempted to personally serve the registered agent at his reported address, attempted personal
service at the business’s reported address, and attempted service by certified mail at the registered
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No. 53277-8-II
agent’s and the business’s reported address. When these attempts failed, the County was entitled
under the statute to serve the Secretary of State. RCW 23.95.450.
Tao Yuan argues that the County should have searched the Department of Licensing
database or obtained Zheng’s information from the public utility district to find an alternative
address for Zheng. But these additional means of attempting to locate Zheng were not required to
satisfy reasonable diligence. See Wright, 113 Wash. App. at 459. Tao Yuan was statutorily required
to maintain an updated address for its registered agent on record with the Secretary of State. RCW
23.95.415, .435.
Moreover, nothing in the record suggests that any such endeavors would have been fruitful;
Zheng left the state in 2017 and allegedly arranged for his mail to be forwarded from 107 South
Harbor Street, suggesting that the 107 South Harbor Street address was Zheng’s best mailing
address in Washington. Just as in Crystal, the County’s inability to serve Tao Yuan’s registered
agent was not a result of its lack of reasonable diligence, but rather a result of Tao Yuan’s registered
agent not being available for service.
Accordingly, we hold that the County used reasonable diligence when it attempted to serve
Tao Yuan’s registered agent prior to serving the Secretary of State and complied with RCW
23.95.450.
C. Alleged Subsequent Service On Zheng
Tao Yuan also argues that when Zheng obtained a copy of the complaint for forfeiture from
the police department it constituted service on him as Tao Yuan’s registered agent and nullified
the service on Tao Yuan through the Secretary of State. RCW 69.50.505(4) provides that a party
has 90 days to file a claim of ownership or right to possession after it is served with a notice of
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No. 53277-8-II
intended forfeiture of real property. Tao Yuan contends that the alleged service on Zheng restarted
the 90-day time period for Tao Yuan to file a claim of interest in the defendant property. We
disagree.
As an initial matter, the record does not support Tao Yuan’s contention that the County
effectuated personal service on Zheng. Zheng’s declaration states that he was given a copy of the
complaint for forfeiture and the declaration of Sergeant Strong. Nothing in the record indicates
that the County directed that these documents be provided to Zheng at the police station. Zheng
did not receive a copy of the summons, lis pendens, arrest warrant in rem, or any other document
contained within the initial pleadings. Zheng’s obtaining a copy of the complaint and declaration
at the police station did not amount to service.
Moreover, Tao Yuan offers no authority for its contention that subsequent service of an
entity’s registered agent following the proper service of that entity through substitute service would
nullify the original service. RCW 23.95.450 is clear—the Secretary of State may serve as the agent
of an entity for service of process if the entity cannot otherwise be served. The County complied
with RCW 23.95.450 and properly effectuated service on Tao Yuan through the Secretary of State
on July 12, 2018. As a result, the time period for appearing and answering the complaint for
forfeiture expired 90 days later. Zheng’s late discovery of the action after returning to the state
does not affect the expiration of the 90-day time period.
III. DUE PROCESS
Tao Yuan contends that its constitutional due process rights were violated regardless of the
County’s compliance with RCW 23.95.450 because, under the circumstances, the County’s
attempts of service were not reasonably calculated to provide Tao Yuan notice. We disagree.
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Statutory compliance does not preclude Tao Yuan from bringing an as-applied procedural
due process challenge. State v. Nelson, 158 Wash. 2d 699, 704, 147 P.3d 553 (2006). “‘A
constitutionally proper method of effecting substituted service need not guarantee that in all cases
the defendant will in fact receive actual notice; what is essential is that the method of attempted
service be reasonably calculated to provide notice to the defendant.’” Wright, 113 Wash. App. at
462-63 (quoting Woodruff v. Spence, 88 Wash. App. 565, 570-71, 945 P.2d 745 (1997)).
Tao Yuan had a statutory duty to maintain an in-state registered agent and keep its address
on record with the Secretary of State. Tao Yuan failed to uphold this duty when Zheng left the
state for over a year. As a result, the County was unable to personally serve Tao Yuan’s registered
agent despite three separate attempts and an attempt at service via certified mail. The
constitutionality of relying on substitute service following reasonable diligence to locate a
defendant is long settled in Washington. See Wright, 113 Wash. App. at 462-63; see also Boss v.
Irvine, 28 F. Supp. 983, 984 (W.D. Wash 1939). Here, the County used reasonable diligence to
serve Tao Yuan before resorting to substitute service.
We hold that the County’s compliance with RCW 23.95.450 was reasonably calculated to
provide notice to Tao Yuan and, therefore, Tao Yuan’s due process rights were not violated.
Accordingly, the trial court did not err by denying Tao Yuan’s motion to vacate the order of
default.
Finally, Tao Yuan requests attorney fees under RCW 69.50.505(6). But because Tao Yuan
is not a substantially prevailing party in this proceeding, we deny its request.
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No. 53277-8-II
We affirm.
A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,
it is so ordered.
Glasgow, J.
We concur:
Sutton, A.C.J.
Cruser, J.
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