Alex Von Kleist v. Graoch 161-1, Inc.

IL D
01iRT } APPEALS
D I VISIMP, h
201 FEB —4 AM 9= 17
IN THE COURT OF APPEALS OF THE STATE C!
M 0(
DIVISION II By
Dt UTY
ALEX VON KLEIST, No. 43138 -6 -II
Consolidated with Nos. 43718 -0 -II,
Respondent, 43885 -2 -II, 43318- 4- 11, 43335- 4- 11,
and 43425 -3 -II)
VIM
PAUL J. LUKSHA, a Canadian citizen, and
GREGORY COCHRANE, a Canadian citizen,
Appellants,
GRAOCH 161 - 1 GP, INC., a Washington .
corporation, and GRAOCH 161 GP, L. P., a
Washington limitedpartnership, GRAOCH
160 -1 GP, INC., a Washington corporation,
and GRAOCH 160 CP, L. P., a Washington
limited partnership, THE JACKALOPE FUND
LIMITED PARTNERSHIP, a British
Columbian limited partnership, GARY GRAY
and JANE DOE GRAY, and the marital
community thereof, LES PIOCH, a Canadian
citizen,
Defendants.
HUNT, J. — Gregory Cochrane and Paul J. Luksha appeal the superior court' s denial of
their motions to vacate two default judgments against them' in Alex Von Kleist' s action for
The second default judgment did not list Luksha as a judgment debtor; but his name appears on
the third page of the judgment summary along with the other Defendants' names. We treat this
as a scrivener' s error because Von Kleist' s second motion for default judgment named other
Defendants, including Cochrane, but it did not name Luksha.
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -11, 43318 -4 -II, 43335 -4 -II, 43425 -3 -II)
2 3
securities fraud , intentional misrepresentation, negligent misrepresentation, accounting, breach
4
Washington' s Consumer Protection Act,
receivers
of contract, violation of and appointment of a
for their partnership. Cochrane and Luksha argue that the superior court lacked personal
jurisdiction over them and that there were other irregularities in procuring the judgments.
Holding that improper service initially prevented the superior court from having personal
jurisdiction over Cochrane and Luksha, we reverse its denial of their motion to vacate the first
default judgment and remand to strike that judgment. Holding that proper service later bestowed
personal jurisdiction over Cochrane, we affirm the superior court' s denial of his motion to vacate
the second default judgment; but because Luksha was not similarly later served, we remand for
the superior court to strike his name from the second default judgment summary.
FACTS
Alex Von Kleist is a Canadian citizen who resides in British Columbia, Gregory
Cochrane and Paul J. Luksha, also Canadian citizens, are general partners in Graoch Associates
Limited Partnership ( GALP), a Canadian limited partnership, which controls hundreds of
corporate entities in Canada and the United States under' GALP President- Gary M: Gray' s
management.
a RCW 21. 20. 010.
s RCW 25. 10. 210.
RCW 19. 86. 090; RCW 19. 86. 093.
s
RCW 7. 60. 025.
2
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 - II)
I. VON KLEIST' S INVESTMENT IN WASHINGTON LIMITED PARTNERSHIP
On the advice of GALP general partner Les Pioch, Von Kleist decided to invest
1, 012,000 in a GALP -controlled Washington limited partnership, " GRAOCH ASSOCIATES
Limited Partnership # 161" ( Graoch 161). Clerk' s Papers ( CP) at 1301. Pioch presented Von
Kleist with various documents about Graoch 161 and explained to him that ( 1) Graoch 161 was a
Washington " Loan and Funding vehicle" for " GRAOCH ASSOCIATES # 160 LP ,6 ( Graoch
7; (
160) 2) Von Kleist' s investments would be returned and payable back to him no later than
October 15, 2008; and ( 3) if Graoch 161 missed a repayment date, Von Kleist would be entitled
to 18 percent compounded interest per annum until Graoch 161 repaid his ( Von Kleist' s)
investment. Based on these representations, Von Kleist felt that his investment " would be.
secure." CP at 1301. On November 15, 2007, Von Kleist entered into a " Subscription
Agreement" with Graoch 161 to invest in that limited partnership. CP at 1302.
A. Subscription Agreement: Forum Selection and Consent to Service by Mail
This Agreement provided that ( 1) for $ 1, 012, 000, Von Kleist would acquire a limited
partnership interest in-Graoch 161; ( 2) Graoch 161 would make one or more loans of $6,784, 000
to Graoch 160, due and payable no later than October 15, 2008 ( " Loan Repayment Date"); ( 3)
within 30 days of the Loan Repayment Date, Von Kleist would receive a written option ( a) to
remain a limited partner of Graoch 161 for an additional 12 months or ( b) to withdraw as a
limited partner of Graoch 161 and to recover his total investments plus accrued distributions.
6CPat1301.
7 Graoch 160 was another GALP -controlled limited partnership in Washington.
BCPat1302.
3
Consolidated Nos. 43138 -6 -II (with 43718 -0 -I1, 43885 -2 -I1, 43318 -4 -II, 43335 -4 -II, 43425 -3 -11)
Section 16 of this Agreement contained provisions selecting Washington as a forum selection
and allowing service by mail. Section 15 of this Agreement contained an assignment provision.
Section 16 of the Agreement, provided, in pertinent part,
This Subscription Agreement and all rights hereunder shall be governed by, and
interpreted in accordance with, the laws of the State of Washington. The
undersigned hereby submits to the nonexclusive jurisdiction of the courts of the
State of Washington and of the federal courts in the Western District of
Washington with respect to any action or legal proceeding commenced by any
person or entity relating to or arising out of this Subscription Agreement, the
Partnership or the Partnership' s business, and consents to the service of process in
any such action or legal proceeding by means of registered or certified mail,
return receipt requested, in care of the address set forth below on the signature
page or such other address as the undersigned shall furnish in writing to the
Partnership.
CP at 1320.
Von Kleist signed this Agreement as a " Subscriber "; he was the sole " undersigned" to
which the Agreement referred. CP at 1321. Although there was a blank signature line for GALP
President Gray, neither Gray nor anyone else signed the Agreement on behalf of the referenced
9;
partnership " GALP general partner Pioch signed only as a " Witness." CP at 1321.
On December 12, however; - month after Von Kleist had signed the Agreement, GALP -
a
10
President Gray sent Von Kleist a " written acceptance " acknowledging receipt of Von Kleist' s
bank wire transfer of $ 1, 012, 658. 23 to Graoch 161 in satisfaction of the Agreement. Gray' s
letter also represented that Von Kleist' s initial distribution check was enclosed and that the next
check would be delivered in January.
9 CP at 1322.
to Br. of Appellant at 28.
M
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 - II)
B. Breach of Agreement
As the October 15, 2008 loan repayment date neared, Von Kleist had not received the
promised written option to withdraw his partnership. He contacted Pioch about this " missing"
option letter and explained that he wanted . o withdraw as -limited partner of Graoch 161 and to
t
recover his investments and accrued distributions. Pioch repeatedly promised that Von Kleist
would receive payment in March 2009, but Von Kleist never received it. On July 17, 2009, Von
Kleist contacted GALP general partner Cochrane requesting corporate information about Graoch
161. Von Kleist sent a follow up email, to which Cochrane responded, promising to provide
financial statements, which, again, Von Kleist never received.
On September 17, 2009 Von Kleist' s attorney, Stephen Pidgeon, sent demand letters to
Graoch 161' s registered agent for service of process ( Bruce P. Weiland), Gray, Pioch, Cochrane,
and Luksha, demanding full and complete $ 1, 248, 845. 53 payment to Von Kleist and complete
financial statements for Graoch 161 and Graoch 160. Von Kleist received no response to these
demand letters.
II PROCEDURE -
A. Superior Court Action
Von Kleist sued Graoch 160; Graoch 161; Graoch 161 - 1 GP, Inc.; Graoch 160 -1 GP,
Inc.; The Jackalope Fund Limited Partnership; Gary Gray and Jane Doe Gray; Pioch; Cochrane;
and Luksha ( collectively, " Defendants ") for ( 1) accounting; ( 2) appointment of a receiver for
Defendants under RCW 7. 60. 025; and ( 3) damages based on violations of chapter 21. 20 RCW
securities fraud), intentional misrepresentation, negligent misrepresentation, breach of contract,
and violation of chapter 19. 86 RCW ( Consumer Protection Act).
5
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 - II)
Von Kleist served Defendants with a summons and verified complaint; he served some of
them personally and others by certified mail. On December 9, Von Kleist effected personal
service on Bruce Weiland, attorney and registered agent for Graoch 161, Graoch 161 - 1 GP, Inc.,
Graoch 160, and Graoch 160 GP, Inc., with a summons and verified complaint. On December
11, Von Kleist served Pioch, The Jackalope Fund Limited Partnership ( " The Jackalope Fund "),
Cochrane, and Luksha by certified mail. On December 18, Von Kleist secured personal service
on Gray with a summons and verified complaint.
1. First default judgment
On January 27, 2010, Von Kleist filed a motion for order of default against all
Defendants for failure to appear or to indicate any intent to appear or to defend. That same day,
the superior court entered an order of default against all Defendants, including Cochrane and
Luksha, and a default judgment for $ 1, 245, 165. 31, listing all Defendants as judgment debtors.
In March 2009, attorney David Spellman spoke with Pidgeon on behalf of the out -of-
country Defendants to negotiate an order relieving them from the default judgment. The
attorneys prepared a stipulation agreement and order vacating the superior court' s default order
and default judgment against international Defendants: The Jackalope Fund, Luksha, Pioch, and
Cochrane; they also discussed the possibility of settlement. On April 22, Pidgeon sent Spellman
an email about the settlement and inquired whether Spellman had an offer; but he never heard
back from Spellman about the settlement. The attorneys never signed the stipulation or filed it
with the court.
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -I1, 43335 -4 -II, 43425 -3 - II)
2. Second default judgment
Von Kleist then secured personal service on all international Defendants, except Luksha.
On February 18, 2010, Von Kleist personally served the original summons and verified
complaint on Cochrane and The Jackalope Fund. On March 1, 2010, Von Kleist secured
personal service on Pioch. On May 10, Von Kleist filed affidavits of service as to Cochrane, The
Jackalope Fund, and Pioch; he also filed a second motion for default judgment as to these
defendants, but he did not include Luksha. That same day, the superior court entered a second
default judgment as to international defendants Cochrane, Pioch and The Jackalope Fund. Von
Kleist did not include Luksha' s name in the second default judgment' s list of debtors, which
included Cochrane, Pioch and The Jackalope Fund. Nevertheless, the second default judgment
mentioned Luksha on the third page of the default judgment, which appears to have been a
scrivener' s error.
3. Motion to vacate default judgments
Defendants did not directly appeal either default judgment. Instead, on January 11, 2011,
they filed motion to vacate both default judgments, arguing that -(1) the default judgments were -
void under CR 60(b)( 5) for lack of personal jurisdiction over them, and ( 2) there were procedural
irregularities in the grant of default judgments entitling them to vacation under CR 60( b)( 1). 11
On April 6, 2012, the superior court denied Defendants' CR 60 motion, ruling that there was no
basis for vacating the default judgments because it had jurisdiction over the Defendants under the
11 In their motion to vacate, Defendants also argued that ( 1) Von Kleist had misrepresented his
personal service under CR 60( b)( 4) on Gray and Weiland, and ( 2) procedural and jurisdictional
problems warranted the vacation of the default judgment under CR 60( b)( 11). They do not,
however, pursue these two issues in this appeal.
VA
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 -II)
Agreement' s" dispositive" " initial forum selection clause." Verbatim Report of Proceedings
VRP) ( Apr. 6, 2012) at 7.
B. Appeal from Denial of CR 60 Motion To Vacate Default Judgments
Defendants appealed. Cochrane and Luksha also filed a separate Notice of Appeal
seeking review of the superior court' s denial of their motion to vacate the default judgments
entered against them. On November 20, 2012, ' a commissioner of our court dismissed the
appeals of all Defendants except Cochrane and Luksha, who remain the only active appellants
before us in this consolidated appeal.
ANALYSIS
Cochrane and Luksha argue that the superior court erred in denying their motion to
vacate the default judgments under CR 60( b)( 5) and CR 60( b)( 1) on two alternative grounds: ( 1)
The default judgments were void under CR 60( b)( 5) because the superior court lacked personal
jurisdiction over them based on lack of proper personal service ( required under Washington' s
12;
long arm statute) and ( 2) in the alternative, the default judgments against Cochrane and
Luksha suffered from serious irregularities that warrant vacation under CR 60(b)( 1).
We agree with Cochrane and Luksha that the superior court lacked personal jurisdiction
over them and, therefore, the first default judgment was void. As for the second default
judgment, however, the record shows that Von Kleist complied with the long arm statute' s
service requirement when he personally served Cochrane with the summons and complaint on
February 18; thus, the second default judgment is not void as to Cochrane. The record also
12
RCW 4.28. 185.
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -11, 43335 -4 -II, 43425 -3 -II)
shows that Von Kleist neither named nor attempted to serve Luksha with the second motion for
default.
I. PERSONAL JURISDICTION
Cochrane and Luksha first argue that both default judgments were void for lack of
personal jurisdiction because ( 1) Von Kleist had not personally served them with his summons
and complaint as required by Washington' s long arm statute; and ( 2) thus, the superior court
erred in denying their motion to vacate default judgments under CR 60( b)( 5). Von Kleist
counters that the Agreement' s forum selection ( Washington) clause rendered Washington' s long
arm statute inapplicable; and, therefore, service by mail under CR 4( i)( 1)( D) established personal
jurisdiction. 13
We hold that because Cochrane and Luksha did not consent to service by mail, ( 1)
Washington' s long arm statute governed service of process over them, ( 2) Von Kleist did not
properly serve them in person outside the state with his first motion for default so as to confer
personal jurisdiction, and ( 3) the first default judgment was void for lack of personal jurisdiction.
We -
further hold that the superior court similarly lacked jurisdiction to enter the -second default
judgment as to Luksha. Finally we hold that the superior court did not lack jurisdiction over
Cochrane to enter the second default judgment; therefore, we disagree with his assertion that the
second default judgment was void as to him.
13
Von Kleist asserts that because CR 4( i)(1)( D) controls, instead of the long arm statute, no
affidavit was necessary to show an attempt to serve Defendants in Washington. See RCW
4. 28. 185( 4). See also, contra, RCW 4. 28. 185( 2), which allows personal service outside the state
on a defendant with minimum Washington contacts, and subsection ( 4), which requires the filing
of an affidavit of such service stating that " service cannot be made within the state." RCW
4. 28. 185( 4). See also RCW 4.28. 180.
G0,
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 -II)
A. Standard of Review; Personal Jurisdiction over Nonresident Defendant
Generally, we review for abuse of discretion a superior court' s ruling on a motion for
relief from judgment under CR 60( b). Showalter v. Wild Oats, 124 Wash. App. 506, 510, 101 P.3d
867 ( 2004). A superior court abuses its discretion if it exercises discretion without tenable
grounds or reasons. State ex. rel. Carroll v. Junker, 79 Wash. 2d 12, 26, 482 P.2d 775 ( 1971).
We review de novo, however, a trial court' s denial of a motion to vacate a default
14
judgment for lack of jurisdiction. Ralph' s Concrete Plumbing, Inc., v. Concord Concrete
Pumps, Inc., 154 Wn. App. 581, 585, 225 P.3d 1035 ( 2010). CR 60( b)( 5) permits relief from a
final judgment that is void. A default judgment entered against a person over whom the court
has no personal jurisdiction is void, and a court has a nondiscretionary duty to vacate it. Scott v.
Goldman, 82 Wn. App. 1, 6, 917 P.2d 131, review denied, 130 Wash. 2d 1004 ( 1996); In re
Marriage ofMarkowski, 50 Wash. App. 633, 635, 749 P.2d 754 ( 1988).
A superior court has personal jurisdiction over an out - - tate defendant if (1) the party
of s
asserting jurisdiction meets the requirements of Washington' s long arm statute, or ( 2) there is
written consent to personal jurisdiction Ralph' s Concrete Plumbing, 154 Wash. App. at 584 -85
Washington courts may assert personal jurisdiction over out -of - tate defendant if long arm
s
statute is satisfied); Kysar v. Lambert, 76 Wash. App. 470, 484, 887 P.2d 431, review denied, 126
Wash. 2d 1019 ( 1995) ( consent to personal jurisdiction by written agreement); Voicelink Data
14
In Morris v. Palouse River & Coulee City R. R., 149 Wash. App. 366, 370 -71, 203 P.3d 1069,
review denied, 166 Wash. 2d 1033 ( 2009), Division Three analyzed whether the trial court erred in
denying defendant' s CR 60( b)( 5) motion to vacate for lack of jurisdiction under abuse of
discretion. The court in Morris, however, reviewed de novo the specific question of whether
service of process complied with statutory requirements for jurisdiction. Morris, 149 Wash. App.
at 371.
10
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 -II)
Servs., Inc. v. Datapulse, Inc., 86 Wn. App. 613, 620, 937 P.2d 1158 ( 1997). Washington' s long
arm statute, RCW 4. 28. 185, extends the jurisdiction of Washington courts to out - - tate
of s
defendants, so long as both the long arm statute' s requirements and due process are satisfied. In
re Marriage of Yocum, 73 Wn. App. 699, 702, 870 P.2d 1033 ( 1994). The party asserting
jurisdiction under the long arm statute has the burden of establishing its requirements " by prima
facie evidence." Yocum, 73 Wn. App. at 703. To establish jurisdiction over an out - state
of -
defendant under the long arm statute, a party must ( 1) show that the out - state defendant
of -
5, (
committed one of the acts listed in the statute' 2) personally serve the out - state defendant,
of -
and ( 3) file an affidavit of service that is " to the effect that service cannot be made within the
state." RCW 4. 28. 185( 1), ( 2), ( 4). As an alternative to the long arm statute, a second,
independent basis for personal jurisdiction is proof of consent to personal jurisdiction. Kysar, 76
Wn. App. at 487. A valid forum selection clause in a "`` freely negotiated "' agreement is proof of
consent to jurisdiction. Kysar, 76 Wash. App. at 484 ( quoting Burger King Corp. v. Rudzewicz,
471 U.S. 462, 472 n. 14, 105 S. Ct. 2174, 85 L. Ed. 2d 528 ( 1985)).
B. Cochrane and Luksha Did Not Consent to Service - y Mail
b
Section 16 of the Subscription Agreement, into which Von Kleist and the Defendants
entered, contained the following provision for forum selection, consent to personal jurisdiction,
and consent to service by mail:
This Subscription Agreement and all. rights hereunder shall be governed by, and
interpreted in accordance with, the laws of the State of Washington. The
undersigned hereby submits to the nonexclusive jurisdiction of the courts of the
State of Washington and of the federal courts in the Western District of
15
The long arm statute lists the acts that permit personal service outside Washington State for
purposes of establishing personal jurisdiction in our courts. See RCW 4. 28. 185( 1) -( 6).
11
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 -II)
Washington with respect to any action or legal proceeding commenced by any
person or entity relating to or arising out of this Subscription Agreement, the
Partnership or the Partnership' s business, and consents to the service of process in
any such action or legal proceeding by means of registered or certified mail,
return receipt requested, in care of the address set forth below on the signature
page or such other address as the undersigned shall furnish in writing to the
Partnership.
CP at 1320. The plain language of this provision, however, bound only Von Kleist to personal
16
jurisdiction in Washington and service by mail.
Cochrane and Luksha, both GALP partners, contend they did not consent to personal
jurisdiction in Washington or to service by mail because the Agreement' s forum
selection/ service by mail provision did not bind the Graoch 161 partnership and, therefore, could
not bind them as partners. They argue that this provision was not binding on them because ( 1)
17
the Agreement was a mere " offer" from Von Kleist to invest in Graoch 161; ( 2) the parties
18
intended that the Agreement would bind only Von Kleist, the sole " undersigned " to the
Agreement; ( 3) neither they nor any other Graoch 161 agent signed the Agreement; and ( 4)
Graoch 161 did not assume the obligations stated in the Agreement, such as the forum selection
and service by mail provision. 19- We agree. - - - -
16
We disagree with the superior court' s ruling that Section 16 of the Agreement governed all
parties' selection of Washington as a forum and constituted all Defendants' consent to
Washington court jurisdiction, including service by mail.
17
Br. of Appellant at 28.
18 Br. of Appellant at 29.
19 Von Kleist counters that because Cochrane and Luksha were partners of various Graoch
including Graoch 161 and GALP, ( 1) they were bound by the actions of GALP' s other
entities,
partners, including Graoch 161' s acceptance of the Agreement; and ( 2) because all Defendants
were third - arty beneficiaries of the Agreement that Von Kleist entered into with Graoch 161,
p
the Agreement should be binding on them.
12
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 - II)
A valid contract requires mutual assent, generally in the form of an offer and an
acceptance. Yakima County ( W. Valley) Fire Prot. Dist. No. 12 v. City of Yakima, 122 Wash. 2d
371, 388 -89, 858 P.2d 245 ( 1993). In interpreting contracts, Washington courts follow the
objective manifestation test" for contract formation. Wilson Court Ltd. P' ship v. Tony
Maroni' s, Inc., 134 Wash. 2d 692, 699, 952 P.2d 590 ( 1998). A court determines the parties' intent
by focusing on their objective manifestations as expressed in the agreement. McGuire v. Bates,
169 Wash. 2d 185, 189, 234 P.3d 205 ( 2010). A court will not read into a contract that is otherwise
clear and unambiguous. Mayer v. Pierce County Med. Bureau, Inc., 80 Wash. App. 416, 420, 909
P.2d 1323 ( 1995).
The plain language of Section 16 of the Agreement expresses no intent to bind Graoch
161 ( and its partners) to service by mail. Rather, under this provision, only " the undersigned"
Von Kleist) must accept service by mail:
The undersigned hereby submits to the nonexclusive jurisdiction of the courts of
the State of Washington and of the federal courts in the Western District of
Washington with respect to any action or legal proceeding commenced by any
person or entity relating to or arising out of this Subscription Agreement, the
Partnership or the Partnership' s business, and consents to the service of process in
any such action or legal proceeding by means of registered or certified mail,
return receipt requested, in care of the address set forth below on the signature
page or such other address as the undersigned shall furnish in writing to the
Partnership.
CP at 1320 ( emphasis added). This reference to the " undersigned" unambiguously refers to Von
Kleist, who signed as the sole subscriber and who was the only party who signed the Agreement
20
in a binding contractual capacity. The last clause of Section 16 — " such other address as the
20 Pioch, the only other person who signed the Agreement, signed only as a witness, not as a
Graoch 161 agent in a contractual capacity.
13
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 - II)
undersigned shall furnish in writing to the Partnership " —further demonstrates the parties' intent
that the service by mail provision was to bind only " the undersigned," namely Von Kleist, and
21
not " the Partnership" ( Graoch 161). CP at 1320 ( emphasis added).
Although the Agreement contained a blank signature line for Gray, neither Gray nor any
Graoch 161 or GALP representative signed the Agreement. Again, Pioch signed, but only as a
w] itness." CP at 1321. Accordingly, the service by mail provision did not bind either
Cochrane or Luksha; instead, it bound only the " undersigned," namely Von Kleist, to the
Agreement and its provisions. 22 Because the Agreement did not bind Luksha and Cochrane, they
did not consent to service by mail and, therefore, Washington' s long arm statute governs service
of process here. 23
C. Service of Process under Washington' s Long Arm Statute
Proper service of process is basic to personal jurisdiction. Pascua v. Heil, 126 Wash. App.
520, 526, 108 P.3d 1253 ( 2005). To subject defendants located outside our state to state court
21
See, e. g., Oltman v. Holland Am. Line USA, Inc., 163 Wash. 2d 236, 250, 178 P.3d 981 ( 2008)
forum selection clause not binding on third party who did not agree to the contract containing
the clause).
22 Because we hold that the Agreement bound only Von Kleist, and not Graoch 161, we do not
address whether the Agreement bound Cochrane and Luksha under partnership theory or third
party beneficiary theory.
23
Cochrane and Luksha concede that the GALP partnership " accepted" Von Kleist' s
Subscription Agreement when GALP President Gray acknowledged receipt of Von Kleist' s
1, 012, 000. Br. of Appellants at 28. This acceptance of Von Kleist' s offer to buy in as a Graoch
161 partner did not, however, constitute acceptance of the service by mail obligation under the
Agreement, which, again, by its plain terms bound only the " undersigned," Von Kleist. CP at
1320.
14
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 - II)
24
jurisdiction, Washington' s long arm statute, RCW 4. 28. 185, requires personal service on them.
Cochrane and Luksha are Canadian citizens residing in Canada; thus, our long arm statute
required personal service to confer jurisdiction over them in Washington courts. RCW 4. 28. 185.
Cochrane and Luksha assert that Von Kleist failed to comply with Washington' s long
arm statute because ( 1) he served them by mail instead of serving them in person as the statute
requires; and ( 2) he failed to file the statutorily required affidavits of service before the superior
court granted both default judgments. Cochrane and Luksha are correct that before obtaining the
first default judgment, Von Kleist did not personally serve them. Instead, Von Kleist served
Cochrane and Luksha with his summons and complaint by certified mail. 25 When Cochrane and
Luksha did not respond, the superior court granted Von Kleist' s motion and entered the first
default judgment against them on January 27, 2010. Because Von Kleist did not personally
of state
serve out - - defendants Cochrane and Luksha, as required by the long arm statute, ( 1) Von
Kleist failed to satisfy the long arm statute service requirements; and ( 2) as a result, the superior
court lacked personal jurisdiction over Cochrane and Luksha to enter the first default judgment
against them.
24
RCW 4. 28. 185( 2) states:
Service of process upon any person who is subject to the jurisdiction of the courts
of this state, as provided in this section, may be made by personally serving the
defendant outside this state, as provided in RCW 4. 28. 180, with the same force
and effect as though personally served within this state.
25
Von Kleist argues that ( 1) the long arm statute personal service requirement did not apply here
because Cochrane and Luksha contractually consented to service by mail; and ( 2) therefore, CR
4( i)( 1)( D)' s service by mail provision controlled instead. We disagree. Because we hold that the
Agreement' s forum selection and consent to service by mail provision did not bind the Cochrane
and Luksha to accept service by mail, we do not further address this argument.
15
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 - II)
For purposes of the second default judgment, however, Von Kleist complied substantially
with the long arm statute to confer personal jurisdiction over Cochrane in Washington courts.
Cochrane and Luksha do not dispute that before the superior court entered the second default
judgment, Von Kleist had personally served his summons and complaint on Cochrane. Instead,
Cochrane and Luksha contend that the second default judgment was void for lack of personal
jurisdiction over them because ( 1) Von Kleist failed to file a timely affidavit of inability to serve
Cochrane in Washington, as required under RCW 4. 28. 185( 4); and ( 2) Von Kleist did not
personally serve Luksha.
We first dispose of Cochrane and Luksha' s second point: Von Kleist did not name
Luksha in his second motion for default judgment; nor did the second default judgment list
Luksha as a debtor. Therefore, to the limited extent that the second default judgment arguably
included Luksha, the superior court had no personal jurisdiction over him; and, other than
ordering Luksha' s name stricken from the judgment summary, we do not further address the
second default judgment as to him.
We- next address Cochrane and Luksha' s first point— whether VonVon Kleist timely filed an
affidavit of inability to serve Cochrane in Washington to satisfy the long arm statute' s
requirement. Personal service outside Washington state is valid under the long arm statute only
when an affidavit is made and " filed to the effect that service cannot be made within the state" on
16
Consolidated Nos.. 43138- 6- 11 ( with 43718 -0 -II, 43885 -2 -II, 43318 -4 -I1, 43335 -4 -II, 43425 -3 -II)
26
the named defendant. RCW 4. 28. 185( 4). If a plaintiff has not complied with this affidavit
requirement, then there is no personal jurisdiction over the named defendant and any judgment
entered against that defendant is void. Sharebuilder Sec. Corp. v. Hoang, 137 Wash. App. 330,
335, 153 P.3d 222 ( 2007). The standard for meeting this RCW 4. 28. 185( 4) affidavit
requirement, however, is substantial and not strict compliance. Barr v. Interbay Citizens Bank of
Tampa, Fla., 96 Wash. 2d 692, 696, 649 P.2d 827 ( 1982).
Here, as Cochrane and Luksha acknowledge, Von Kleist personally served Cochrane on
February 18, 2010. Von Kleist' s affidavit of service on Cochrane in Canada, and Pidgeon' s later
declaration in support of Von Kleist' s motion for default judgment against international
defendants, established that Cochrane is a Canadian citizen residing in Toronto, Ontario. Thus,
Von Kleist' s affidavit of service as to Cochrane substantially complied with the long arm
statute' s requirement that the affidavit of service include a statement " to the effect that service
cannot be made within the state" of Washington. RCW 4.28. 185( 4).
Cochrane and Luksha incorrectly assert, however, that Von Kleist waited until January 5,
2011, to file his affidavit27, which; therefore, was untimely because the statute required that it be
26 It is caselaw, not the long arm statute, that mentions filing of such affidavit should occur
before" the court enters judgment. Sharebuilder Sec. Corp. v. Hoang, 137 Wash. App. 330, 334-
35, 153 P.3d 222 ( 2007); see also RCW 4. 28. 185( 4). But neither Sharebuilder nor any other
case of which we are aware specifically addresses and holds that such affidavit is insufficient if
filed on the same day as judgment is entered, as was the case here, regardless of whether it is
filed immediately before or after the judgment.
27 The January 5, 2011 affidavit, to which Cochrane and Luksha refer, is Pidgeon' s affidavit
about service on the out - - tate defendants, filed in response to defendants' motion to vacate
of s
under CR 60( b)( 5). Pidgeon' s affidavit includes the timely May 10, 2010 affidavit of service as
to Cochrane.
17
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filed before the superior court entered default judgment on January 27, 2010, or May 10, 2010.28
On the contrary, the record shows that Von Kleist filed his affidavit of service on Cochrane on
May 10, 2010, the same day the superior court entered the second default judgment against
Cochrane. We hold that ( 1) this affidavit' s filing substantially complied with the long arm
29
statute to confer personal jurisdiction over Cochrane; ( 2) the superior court, therefore, had
personal jurisdiction over him; and ( 3) the second default judgment was not void as to Cochrane
30
for lack of jurisdiction.
II. CR 60( b)( 1) Motion To Vacate
In the alternative, Cochrane and Luksha argue that even if the superior court had personal
jurisdiction over them, the superior court erred in denying their motion to vacate the default
judgments under CR 60( b)( 1) because there were procedural irregularities in entering these
judgments. Having already held that the first default judgment was void as to both Cochrane and
Luksha and should have been vacated under CR 60( b)( 5), we need not reach their argument
about irregularities in the first default judgment. Thus, we address only whether the superior
court erred in denying their CR 60( b)( 1) motion to vacate the second default judgment, which
under our holding above, was potentially valid only as to Cochrane.
28 Moreover, the cases Cochrane and Luksha cite are distinguishable and do not apply here.
These cases involved filing affidavits months after the entry of the default judgment, which is not
what happened here.
29 RCW 4. 28. 185( 4).
30 As previously explained, however, the superior court did not have personal jurisdiction over
Luksha and, thus, we remand to remove his name from the judgment summary in the second
default judgment.
18
Consolidated Nos. 43138 -6 -II (with 43718- 041, 43885 -2 -II, 43318 -4 -II, 43335 -4 -II, 43425 -3 - II)
Cochrane and Luksha argue that the following " irregularities" occurred: ( 1) The superior
court granted the second default judgment without previously amending or vacating the first
default judgment; ( 2) the superior court granted the second default judgment without previously
securing an entry of default against Luksha; and ( 3) Cochrane and Luksha had meritorious
defenses to Von Kleist' s claims. Br. of Appellants at 40. The exclusive procedure for attacking
an allegedly defective judgment is by appeal from the judgment, not by appeal from denial of a
CR 60( b) motion. Bjurstrom v. Campbell, 27 Wn. App. 449, 451, 618 P.2d 533 ( 1980). CR
60( b) is not a substitute for appeal. Bjurstrom, 27 Wn. App. at 451. An unappealed final
judgment cannot be restored to an appellate track by means of moving to vacate and then
appealing the denial of the motion. State v. Gaut, 111 Wash. App. 875, 881, 46 P.3d 832 ( 2002).
31
Because Cochrane and Luksha did not appeal the second default judgment, the validity
or irregularity of its entry is not before us here. Instead, we have before us their appeal of only
the superior court' s denial of their motion to vacate the second default judgment under CR
60( b)( 1). In this more limited challenge, they fail.
A. Standard of Review
On review of an order denying a CR 60( b) motion to vacate a judgment, only the
propriety of the motion' s denial, not the impropriety of the underlying judgment, is before us.
Gaut, 111 Wn. App. at 881. We will not disturb a superior court' s decision on a motion to
vacate a default judgment unless the superior court has abused its discretion. Morin v. Burris,
31
RAP 5. 2( a) requires that notice of appeal be filed within 30 days of entry of the judgment in
the superior court. Cochrane and Luksha did not file direct appeals from the superior court' s
January 2010 default judgment or its May 2010 default judgment. Instead, they waited until
January 2011 and filed.a CR 60( b) motion to vacate these default judgments.
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160 Wash. 2d 745, 753, 161 P.3d 956 ( 2007). A superior court abuses its discretion if it exercises
discretion based on untenable grounds or reaches a decision based on untenable reasons. Morin,
160 Wash. 2d at 753.
B. No Abuse of Discretion
Cochrane and Luksha argue that the superior court abused its discretion in denying
their motion to vacate the second default judgment in two respects: ( 1) it did not first vacate the
prior default judgment, which failure constitutes an " irregularity" warranting grant of their CR
32
60( b)( 1) motion to vacate the second default judgment; and ( 2) although the White factors do
not apply to a claim of irregularity, if these factors did apply here, Cochrane and Luksha had
meritorious defenses" to Von Kleist' s claims, which support vacation of the default judgment as
a matter of equity. 33 Br. of Appellants at 44. These arguments fail.
Irregularities under CR 60( b)( 1) are those relating to failure to adhere to some
prescribed rule or mode of proceeding. In re Guardianship ofAdamec, 100 Wash. 2d 166, 174, 667
P.2d 1085 ( 1983). Cochrane and Luksha fail to provide any authority to support their position
that a superior court cannot issue a second default judgment without first vacating a previously
32
White v. Holm, 73 Wash. 2d 348, 352, 438 P.2d 581 ( 1968). Typically, we evaluate a motion to
vacate under CR 60( b)( 1) under the four White factors, which look to whether ( 1) there is
substantial evidence to support a prima facie defense to the claims; ( 2) the moving party' s failure
inadvertence, surprise, or excusable neglect; ( 3) the
to appear timely was occasioned by mistake,
moving party acted with due diligence after notice of entry of default; and ( 4) no substantial
hardship will result to the opposing party.
33 Cochrane and Luksha also argue that the superior court did not first issue a valid order of
default against Luksha before entering the second default judgment, which failure constituted an
irregularity" under CR 60( b)( 1). Br. of Appellants at 43. Having already held that the second
default judgment did not apply to Luksha, we do not address this argument.
20
Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -II, 43318 -4 -II, 43335 -44I, 43425 -3 -II)
34;
entered default judgment nor are we independently aware of any such authority. Accordingly,
Cochrane and Luksha fail to establish that the superior court' s entry of the second default
judgment was an irregularity warranting vacation under CR 60(b)( 1).
Focusing primarily on alleged equities, Cochrane and Luksha next contend that their
meritorious defenses" to Von Kleist' s claims met the requirements for setting aside a default
35
judgment under the four -
part White test. Br. of Appellants at 44. Yet they correctly
36
acknowledge that this White four -
part test does not control a claim of irregularity. We agree
that Washington law is clear that vacating a default judgment for irregularity does not hinge on
whether the defendant can show a meritorious defense. See Kennewick Irrigation Dist. v. 51
Parcels of Real Property, 70 Wash. App. 368, 371, 853 P.2d 488, review denied, 122 Wash. 2d 1027
1993) ( White factors do not apply to alleged irregularity under CR 60( b)( 1)). But we disagree
that the White factors apply to Cochrane and Luksha' s claim of irregularity. See, e. g.,
Mosbrucker v. Greenfield Implement, Inc., 54 Wn. App. 647, 652, 774 P.2d 1267 ( 1989) ( a claim
of irregularity is not controlled by the test set out in White, which applies to cases involving
excusable neglect or inadvertence). We hold that Cochrane and Luksha fail to establish that the - -
superior court abused its discretion in denying their motion to vacate the second default
judgment under CR 60( b)( 1). Therefore, we affirm the superior court' s denial of this motion;
nevertheless, for reasons previously explained, we agree that Luksha should not have been
included in this second default judgment and that his name should be stricken on remand. We
34 The cases that Cochrane and Luksha cite do not support this proposition; rather, they address
collateral issues.
31 See n.34.
36 See, e.g., CR 60(b)( 1).
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Consolidated Nos. 43138 -6 -II (with 43718 -0 -II, 43885 -2 -I1, 43318 -4 -II, 43335 -4 -II, 43425 -3 - II)
reverse the superior court' s denial of Cochrane and Luksha' s motion to vacate the first default
judgment, entered January 27, 2010. We affirm the superior court' s denial of their motion to
vacate the second default judgment entered May 10, 2010, with the exception of remanding to
strike Luksha' s name from the third page of the second default judgment.
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.
unt, J.
We concur:
22