Advertising v. Harwood

162 Wash.App. 385

254 P.3d 208

LAMAR OUTDOOR ADVERTISING, Appellant,

v.Joseph & Kristi HARWOOD, Bell Franklin, LLC, a Washington limited liability company, Bel Condominium Owners Association, a Washington corporation, Bel Franklin Apartments, LLC, a Washington limited liability company, and Spokane Housing Ventures, Inc., a Washington corporation, Respondents.

No. 29024–7–III.

Court of Appeals of Washington, Division 3.

June 28, 2011.

Patrick Mark Risken, Evans, Craven & Lackie, P.S., Sean Patrick Boutz, Attorney at Law, Spokane, WA, for Appellant.William Robert Spurr Law Office of William R. Spurr, Seattle, WA, Peter A. Witherspoon, Attorney at Law, Spokane, WA, for Respondents.KORSMO, A.C.J.

[162 Wash.App. 388] ¶ 1 Lamar Outdoor Advertising appeals the trial court's decisions (1) to vacate a default judgment it obtained and (2) summarily dismissing its case. We conclude that the trial court did not abuse its discretion in vacating the default judgment and correctly construed the rental contract at issue. The judgments are affirmed.

FACTS

¶ 2 This case has its beginnings in a “ground lease” for the roof of a commercial building in downtown Spokane. The one page document was entered into on September 12, 1994, between Pridemark Outdoor Advertising and building owners Joseph and Kristi Harwood. It allowed Pridemark to place a billboard on the roof of the building. The lease agreement was a form used by Pridemark. The lease covered a 10–year period and would renew for another 10–year period unless terminated at the end of the period; the lease also could be terminated if the property were sold. Pridemark remained the owner of the billboard. The lease also bound successors to its terms.

¶ 3 Lamar succeeded Pridemark's interest in the lease. The initial 10–year period passed without either party terminating the lease, leading to a second like term. In the fall of 2005, Mr. Harwood and Cory Colvin formed Bell Franklin, LLC (Bell) as equal owners. Mr. Harwood served as the managing member. In January 2006, the Harwoods transferred their interest in the building to Bell. The ownership of Bell was changed to recognize that Joseph and Kristi Harwood owned 50 percent and Cory and Elisabeth Colvin also owned 50 percent.

¶ 4 Bell converted the building into seven condominium units in April 2007. They were designated as Units 001, 002, 101, 102, 200, 300, and 400. The roof was allocated to Unit 101. Shortly thereafter, Units 101 and 102 were sold to Winthrop and Allison Taylor; Bell retained the other five units. Spokane Housing Ventures, Inc., signed a real estate purchase and sale agreement for the top three floors of the building—Units 200, 300, and 400—on July 13, 2007. The sale was scheduled to close May 15, 2008. Spokane Housing advised Bell that the billboard would have to be removed from the roof once the sale closed.

¶ 5 In January 2008, Spokane Housing formed Bel Franklin Apartments, LLC (Franklin).¹ A Lamar representative telephoned Spokane Housing several times at the beginning of 2008, asking if the billboard could remain on the roof. Spokane Housing advised Lamar that it would have to be removed. The sale of the top three floors to Franklin occurred July 7, 2008. The Harwoods also assigned their interests in the roof lease to Franklin at that time. Through the escrow company handling the sale, the Harwoods sent a notice of the sale and termination of the roof lease to Lamar, which received it July 14. In accordance with the terms of the lease, the letter directed Lamar to remove the sign within 90 days. Lamar notified Spokane Housing that because the Harwoods maintained an ownership interest in the property, the lease was still in effect. Lamar's counsel subsequently sent a letter expressing a similar opinion.

¶ 6 Franklin's architects and contractors indicated that the sign needed to be removed because of structural damage caused by the weight of the sign. The sign also needed to be removed to accommodate the renovation of the top three floors. If it was not removed by November 1, 2008, significant construction delays would result. Spokane Housing, acting as manager of Franklin, had the sign removed October 15, 2008. The sign had to be dismantled and removed from the roof at the cost of $13,854. Lamar subsequently retrieved some vinyl sign components, but declined the remainder.

¶ 7 Lamar filed suit October 17, 2008 against the Harwoods, Bell, Franklin, Spokane Housing, and the Bel Condominium Owners Association. All defendants but the Harwoods and Bell appeared. Bell and the Harwoods were served October 28, 2008. Lamar, on November 19, obtained an order of default and judgment against the Harwoods and Bell without giving notice to the other parties who had appeared in the case. The default judgment was in the sum of $528,568. Counsel for Bell and the Harwoods appeared December 3, 2008.

¶ 8 In mid-January 2009, counsel learned of the default judgment and moved to set it aside. After hearing argument, the trial court found excusable neglect and vacated the judgment against both parties.

¶ 9 All parties subsequently filed cross motions for summary judgment. At the initial hearing, the trial court dismissed Spokane Housing and the condominium association as defendants. The parties then prepared an undisputed statement of facts at the request of the trial court. After considering the arguments and the undisputed statement of facts, the court denied Lamar's motion for partial summary judgment and granted the motions of the remaining defendants for summary judgment.

¶ 10 Lamar then timely appealed to this court.

ANALYSIS

¶ 11 This appeal challenges both the propriety of the decision to vacate the default judgment as well as the summary judgment rulings. Lamar also seeks attorney fees. We will address each argument in turn.

Vacation of Default Judgment

¶ 12 The initial issue presented is whether the trial court erred in vacating the default judgments. Lamar erred in failing to give notice to the appearing defendants before it defaulted the nonappearing defendants. Additionally, there was no abuse of discretion in setting aside the default judgment.

¶ 13 The decision to vacate a default judgment is reviewed for abuse of discretion. Griggs v. Averbeck Realty, Inc., 92 Wash.2d 576, 582, 599 P.2d 1289 (1979). Discretion is abused when it is exercised on untenable grounds or for untenable reasons. State ex rel. Carroll v. Junker, 79 Wash.2d 12, 26, 482 P.2d 775 (1971). Refusal to vacate a default judgment is more likely to amount to an abuse of discretion because default judgments are generally disfavored. White v. Holm, 73 Wash.2d 348, 351–352, 438 P.2d 581 (1968).

¶ 14 Washington has a strong preference for giving parties their day in court; thus, default judgments are disfavored. Morin v. Burris, 160 Wash.2d 745, 754, 161 P.3d 956 (2007); Griggs, 92 Wash.2d at 581–582, 599 P.2d 1289. While not a proceeding in equity, the decision to vacate a judgment should be made in accordance with equitable principles. White, 73 Wash.2d at 351, 438 P.2d 581.

¶ 15 There are four factors to consider when hearing a motion to vacate a default judgment:

(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 occasioned by 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.

Id. at 352, 438 P.2d 581. The first two factors are of primary importance. Where the defendant promptly moves to vacate and has a strong case for excusable neglect, the actual strength of the defense is less important to the reviewing court. Id. at 353, 438 P.2d 581. Moreover, a default judgment should be vacated if the plaintiff has acted in such a way that enforcing the judgment would be inequitable. Morin, 160 Wash.2d at 755, 161 P.3d 956. The overriding concern is to ensure that justice is done. Griggs, 92 Wash.2d at 582, 599 P.2d 1289.

¶ 16 The trial court concluded that all four factors were satisfied. Clerk's Papers (CP) at 111–112. We agree. We also agree with respondents' argument that CR 55(a)(3) was violated. That rule provides:

(3) Notice. Any party who has appeared in the action for any purpose shall be served with a written notice of motion for default and the supporting affidavit at least 5 days before the hearing on the motion. Any party who has not appeared before the motion for default and supporting affidavit are filed is not entitled to a notice of the motion, except as provided in rule 55(f)(2)(A).

¶ 17 Lamar argues strenuously that it complied with the rules and that no irregularity exists. It argues that when subsection (3) is read in conjunction with subsection (1), no notice was required to any party. We disagree. CR 55(a)(1) ² simply provides that when a party has not appeared, it may be defaulted. Nothing in that portion of the rule governs notice. That task is left to CR 55(a)(3), which could not be clearer. The first sentence provides that “any party who has appeared” “shall be served with a written notice of motion for default.” The second sentence states that any party who has not appeared is not entitled to notice of the motion for default. Lamar's interpretation essentially reads the first sentence out of the rule, despite the command that an appearing defendant “shall” receive notice of a default. The only parties that can be defaulted are those who have not appeared. CR 55(a)(1). Franklin and its associated defendants were entitled to written notice of the default being sought against the Harwoods and Bell.

¶ 18 Lamar also contended at oral argument that it is not proper for one party to assert the rights of another, i.e., the defaulting defendants could...