Ha v. Signal Elec., Inc.

182 Wash.App. 436

332 P.3d 991

Judy HA, Appellant,

v. SIGNAL ELECTRIC, INC., a Washington corporation, Respondent,Juanita Mars aka Juanita Wright aka Juanita Carpenter, an individual; AEG Live NW, LLC d/b/a Showbox Sodo, a Washington limited liability company; and City of Seattle, a local government entity, Defendants.

No. 70423–1–I.

Court of Appeals of Washington, Division 1.

July 14, 2014.

Douglas C. McDermott, McDermott Newman, PLLC, Seattle, WA, for Appellant.

Steven George Wraith, Lee Smart PS Inc, Seattle, WA, for Respondent.

APPELWICK, J.

¶ 1 Ha sued Signal Electric after she was hit by a drunk driver in an intersection where Signal Electric was installing a new traffic light. Signal Electric was in Chapter 11 bankruptcy, so Ha sought and received permission to proceed. Ha then asked Signal Electric's bankruptcy attorney if he would accept service of process. The attorney agreed and executed an acceptance of service. However, the attorney sent the summons and complaint to Signal Electric's bankruptcy financial advisor, who forwarded them to the wrong insurance company and not to Signal Electric. When Signal Electric failed to appear, the trial court entered an order of default and default judgment. Signal Electric eventually received notice and moved to vacate under CR 60(b)(5) for improper service of process; CR 60(b)(1) for mistake, inadvertence, or excusable neglect; and CR 60(b)(11) for extraordinary circumstances. The trial court granted Signal Electric's motion and vacated the default judgment. We affirm.

FACTS

¶ 2 On the evening of October 28, 2010, Judy Ha attended a concert at Showbox Sodo, a venue located at 1700 1st Avenue South in Seattle. When the concert ended, Ha exited Showbox Sodo and walked to the southeast corner of 1st Avenue South and South Massachusetts Street. The intersection was under construction and Signal Electric, Inc. was installing a new traffic light. At the time, the crosswalks were unmarked and there were no traffic or pedestrian signals at the intersection. Ha and a group of people then walked westbound across the 1st Avenue South intersection. As they crossed, Juanita Mars failed to slow and drove her truck into the crowd, hitting Ha and several others. Ha suffered extensive injuries and incurred $197,511.22 in medical expenses as a result.

¶ 3 Mars admitted that she was drinking and driving when she struck Ha and others. Her blood alcohol content was 0.29 g/100 mL two hours after the collision. Police found her truck littered with empty and partially empty beer cans. Mars eventually pleaded guilty to vehicular assault.

¶ 4 On February 26, 2011, Signal Electric filed for Chapter 11 bankruptcy. Signal Electric retained J. Todd Tracy, of counsel at Crocker Law Group PLLC, as its bankruptcy attorney. Signal Electric filed an application with the bankruptcy court requesting approval of Tracy's appointment as its bankruptcycounsel. In the application, Tracy agreed to render the following services:

a. To take all actions necessary to protect and preserve Debtor's bankruptcy estate, including the prosecution of actions on Debtor's behalf. To undertake, in conjunction as appropriate with special litigation counsel, the defense of any action commenced against Debtor, negotiations concerning litigation in which Debtor is involved, objections to claims filed against Debtor in this bankruptcy case, and the compromise or settlement of claims.

b. To prepare the necessary applications, motions, memoranda, responses, complaints, answers, orders, notices, reports, and other papers required from Debtor as debtor-in-possession in connection with administration of this case.

...

d. To provide such other legal advice or services as may be required in connection with the Chapter 11 case.

The bankruptcy court granted the application.

¶ 5 Louise Tieman, a principal at vcfo,¹ was appointed as Signal Electric's financial advisor in the bankruptcy case. Tieman's engagement agreement specified that “vcfo is not a law firm and its services do not constitute legal advice, vcfo recommends that Client consult with legal counsel related to any and all subject matter requiring legal advice or legal representation.”

¶ 6 On February 24, 2012, Ha sued Mars; AEG Live NW LLC, d/b/a/ Showbox Sodo; Signal Electric; and the City of Seattle. The complaint alleged, in part, that Signal Electric created an unsafe condition for Ha; failed to exercise ordinary care; failed to properly design, construct, and/or maintain the intersection; failed to properly ensure and maintain safety of the intersection; and failed “to ensure compliance with all laws, rules, and regulations applicable to the construction work it was performing.” Ha claimed that these actions proximately caused her injuries. She requested both economic and non-economic damages. On March 1, 2012, Ha filed an amended complaint correcting Mars's legal name and aliases.

¶ 7 Ha completed service of process on Mars, Showbox Sodo, and the City of Seattle in early March 2012. All three answered Ha's complaint for damages. However, Ha could not complete service of process on Signal Electric, because Chapter 11 bankruptcy imposes an automatic stay on all collection efforts against the debtor.

¶ 8 On April 16, 2012, Ha filed a motion with the bankruptcy court seeking relief from the stay. The court granted Ha's motion and allowed her to proceed against Signal Electric. The court specified that “the stay is not lifted regarding collection or enforcement of judgment from [Signal Electric's] assets, except as to the proceeds of any applicable insurance policy that might satisfy a portion of Ms. Ha's claims, and any distribution made on Ms. Ha's claims in this bankruptcy.”

¶ 9 After obtaining relief from the bankruptcy stay, Ha asked Tracy if he would accept service of process on Signal Electric's behalf. At the time, Signal Electric's registered agent, Bernell Guthmiller, was in poor health. Tracy spoke to Tieman once or twice on the phone about whether he should accept service for Signal Electric, given Guthmiller's health. Tieman and Tracy agreed that he should.

¶ 10 On July 11, 2012, Tracy executed an acceptance of service prepared by Ha's counsel. In it, Tracy claimed to be an attorney representing Signal Electric in the personal injury lawsuit. Tracy verified that “I have the authority to accept and/or waive service of process on its behalf.” Tracy further agreed “that delivery of the Summons and the Complaint to me constitutes proper service of process, and that service of process upon Signal Electric was completed on July 11, 2012.” Tracy later explained, however, that he “did not intend to be signing as counsel for the Defendant, Signal Electric, Inc., as Crocker Law Group PLLC is a firm that specializes in bankruptcy law, and not personal injury or construction matters.”

¶ 11 Tracy then forwarded the summons and complaint to Tieman, who sent them on to Alaska National Insurance. Tieman believed that Alaska National Insurance was the Signal Electric's insurance company at the time of the accident. Alaska National did not contact Tieman or anyone at Signal Electric about the lawsuit. Tieman later learned that Berkley North Pacific, not Alaska National, was Signal Electric's insurance company when Ha was injured.

¶ 12 On August 1, 2012, Douglas McDermott, Ha's attorney, e-mailed Tracy requesting an answer to Ha's complaint. Tracy did not respond, so Ha moved for an order of default against Signal Electric on August 16.

¶ 13 On August 24, Tracy finally responded to McDermott's August 1 e-mail asking, “Did the Insurance Company ever show up in this case. We sent them everything but never heard anything from them, as I am just the lowly bankruptcy lawyer.” McDermott responded soon after, “Not to my knowledge.” Tracy did not reply. McDermott then asked an associate to call Tracy. That same day, the associate left Tracy a voice mail telling him that they had heard nothing from the insurance company about the pending motion for default. Tracy did not return the call.

¶ 14 On August 28, the trial court granted Ha's motion for default. Upon Ha's motion, the trial court dismissed her claims against Mars, Showbox Sodo, and the City of Seattle without prejudice.

¶ 15 On January 11, 2013, the trial court entered default judgment in Ha's favor against Signal Electric for $2,199,501.86. On January 29, Ha forwarded the default judgment to Signal Electric. On February 25, Signal Electric's insurance company informed Ha that it had received the default judgment and was appointing new counsel for Signal Electric.

¶ 16 Signal Electric entered a notice of appearance on April 3, 2013, without waiving its objection to jurisdiction or improper service. Soon thereafter Signal Electric gathered declarations from Tracy, Tieman, and Signal Electric's president, Jerry Kittelson. On April 19, Ha's counsel requested that Signal Electric delay filing its motion to vacate the default judgment until Tieman could be deposed on May 2, 2013.

¶ 17 On May 2, Signal Electric moved to vacate default on three grounds. First, Signal Electric argued that the default judgment was void under CR 60(b)(5) due to lack of personal jurisdiction, because Ha failed to perfect service on Signal Electric. Signal Electric asserted that it did not authorize Tracy, its bankruptcy attorney, to accept service on its behalf in this litigation.

¶ 18 Second, Signal Electric asked the court to vacate under CR 60(b)(1) for mistake, inadvertence, surprise, and/or excusable neglect. Signal Electric asserted the defense that it did not proximately cause Ha's injuries:

Signal Electric is not the cause of the plaintiff's injuries. Juanita Mars is. Ms. Mars struck Ms. Ha with her truck as the plaintiff was crossing the street in a group of people. When she pleaded guilty to vehicular assault, Ms. Mars admitted that she had been drunk while driving, had not been focusing on her driving, and failed to slow...