Opinion
No. 50645-5-I c/w 51384-2-I
Filed: November 24, 2003 UNPUBLISHED OPINION
Appeal from Superior Court of King County Docket No: 01-2-31494-7 Judgment or order under review Date filed: 05/24/2002
Counsel for Appellant(s), Stephen Alexander Bernheim, Attorney at Law, 512 Bell St, Edmonds, WA 98020-3147.
Counsel for Respondent(s), Thomas John Foley, Attorney at Law, P.O. Box 609, Vancouver, WA 98666-0609.
Northwest Container Services, Inc. (NWC), an Oregon company, hired Newton Associates Inc. (Newton), a Louisiana company, to be NWC's collection agency. Newton subsequently sued NWC in Louisiana for services rendered but not paid for, and obtained a default judgment. Newton then filed the judgment in Oregon, and NWC moved to set it aside, citing three statutory grounds. An Oregon court declined to enforce the judgment, but did not indicate its reasoning. This order was not appealed. Newton then filed the Louisiana judgment in Washington. NWC moved to quash. The King County Superior Court declined to enforce the judgment, and awarded NWC $2,903.68 in fees and costs as a CR 11 sanction. Newton filed an appeal in this court, challenging only the CR 11 sanction. The trial court subsequently awarded NWC an additional $2,359 in fees and costs as a CR 11 sanction. And after NWC requested an appeal bond to secure the additional fees and costs that it anticipated this court would award on appeal, the trial court ordered Newton to post an $8,075 appeal bond a kind of relief that was abolished in the state in 1957. Newton appealed these orders as well, and we consolidated the two appeals. We now reverse the judgments for CR 11 sanctions, and the trial court's order that Newton post an appeal bond. We have considered awarding Newton a sanction against NWC for having requested the appeal bond, but because Newton never posted the bond, and therefore suffered no monetary loss by reason of the trial court's error in ordering it, we have decided not to do so.
FACTS
Northwest Container Services, Inc. (NWC), an Oregon company, hired Newton Associates Inc. (Newton), a Louisiana company, to be NWC's collection agency. Newton subsequently sued NWC in Louisiana for services rendered but not paid for, and obtained a default judgment. Newton filed the judgment in Oregon, and NWC moved to have it set aside. NWC argued that the Louisiana court lacked both personal and subject matter jurisdiction, that process was insufficient, and that the State of Louisiana was an inconvenient forum for the action. Newton asserted that the contacts between Newton and NWC provided sufficient 'minimum contacts' for personal jurisdiction over NWC in Louisiana, and that both Oregon and Louisiana law provided jurisdiction. Newton filed the declaration of James McDermott, one of its sales representatives, as evidence that NWC had engaged in business in Louisiana. McDermott declared that Chris J. Reynolds, an employee of NWC in Oregon, placed collection accounts with Newton at Newton's branch office in Oregon, and that these accounts were handled by Newton employees in Louisiana. Newton also provided the declaration of Thomas E. Brenan, its Chief Financial Officer, who declared that NWC had placed 67 accounts with Newton and had communicated with Newton's Louisiana offices several times regarding these accounts. Brenan also declared that NWC had sent payments to Newton at its accounting services office in Louisiana. NWC provided the declaration of Jason Bjornholt, its Chief Financial Officer, who asserted that NWC had conducted no business in Louisiana, was not served personally, had not voluntarily appeared for suit in Louisiana, had no office in Louisiana, and had not agreed with NWC that venue would lie in the State of Louisiana.
NWC cited three Oregon statutes in its request for relief: ORS 24.200, ORS 24.240, and ORS 24.220(4)(f). ORS 24.200 and ORS 24.240 address the recognition of foreign judgments where the defendant was served personally in the foreign state, or where personal or subject matter jurisdiction otherwise existed for the foreign judgment. ORS 24.220(4)(f) states that a foreign judgment need not be recognized if, in the case of jurisdiction based only on personal service, the foreign court was a seriously inconvenient forum.
The Oregon Circuit Court for Multnomah County set aside the foreign judgment on the basis that 'good cause exists to grant defendant's motion.' Although NWC had provided three alternative bases for asking the court not to recognize the judgment, the court did not specify upon which basis or bases it refused to enforce the judgment. This decision was not appealed. Over a year later, Newton hired new counsel, who filed the Louisiana judgment in King County, Washington pursuant to Chapter 6.36 RCW. NWC moved to quash the filing, and later twice re-noted its motion after providing additional evidence. NWC first argued that the Oregon court had set aside the foreign judgment on the basis that NWC had had no contacts with Louisiana, and that Louisiana therefore lacked personal jurisdiction under its long-arm statute. NWC also requested reasonable attorney fees. Newton objected on grounds that NWC had provided only inadmissible hearsay evidence of the Oregon court's order, and that sufficient contacts existed to provide the Louisiana court with personal jurisdiction over NWC in any event. NWC re-noted the motion, this time providing certified copies of various Oregon court documents. Newton objected again, arguing that Washington was required to give full faith and credit to the Louisiana judgment, and that the judgment was properly entered. NWC again re-noted the motion, asserting that Newton's attempt to register the Louisiana judgment in Washington was barred by collateral estoppel, and requesting to be awarded its attorney fees as a sanction under CR 11. Newton filed a response to NWC's second re-noted motion, asserting that the Oregon order was ambiguous in that it failed to show whether the court had determined that the Louisiana court lacked jurisdiction over NWC, or whether the order was based on forum non conveniens. Prior to receiving Newton's response, the court entered an order setting aside the Louisiana judgment. This occurred on March 8, 2002. The court's order stated that it had reviewed the records, files, and evidence, and that 'good cause exists to grant defendant's motion.' The court awarded attorney fees to NWC, reserving the amount, without making any findings of fact. After discovering that the court had already ruled, Newton filed a motion for reconsideration, asserting that if the court's award of fees was based on CR 11, such an award was not appropriate because the right of a judgment creditor to file its judgment in Washington after such judgment has been rejected by a court in another state is an issue of first impression. NWC then submitted a declaration requesting $2,903.68 in attorney fees and copying and postage costs. Newton objected, asserting that some of the hours were duplicative and that postage and photocopying charges were not recoverable as costs. The court denied Newton's motion for reconsideration and awarded NWC its entire requested amount of attorney fees and costs. Again, the court did not enter findings. Newton appealed the imposition of the sanction to this court. Thereafter, NWC requested, and the superior court entered, written findings and conclusions. The court stated that the knowledge of Newton, its agents, and the attorneys who worked on the Oregon motion was imputed to the attorney who filed the Louisiana judgment in Washington. The court also found that Newton had submitted no evidence from its prior attorneys who worked on the Oregon case to dispute NWC's argument that the Oregon court's decision was based on lack of jurisdiction. The court then found that NWC's 'sole basis' for relief in its Oregon motion had been lack of jurisdiction, and stated that it was 'clear from the face of the motion and the prayer contained in the accompanying affidavit that the relief granted was based solely on the issue of lack of jurisdiction.' Clerk's Papers at 152-53 (2003).
RCW 6.36.025(1) provides that a copy of any foreign judgment may be filed in the office of the clerk of any superior court of any county of this state and the clerk shall treat the foreign judgment the same as a judgment of a Washington superior court.
The trial court also determined that Newton's subsequent filing in Washington was baseless and ungrounded in fact, not warranted under any existing law or good faith argument for the extension, modification, or reversal of existing law, that the act was intended to further harass NWC and increase its litigation costs, and that Newton's Washington attorney failed to conduct a reasonable inquiry into the basis for the Oregon court's ruling, prior to filing the foreign judgment in Washington. Thus, the court concluded that Newton violated CR 11, and NWC was entitled to recover its reasonable attorney fees and costs by way of a sanction. NWC requested the trial court to require an 'appeal bond' pursuant to RAP 8.1 to cover the costs associated with responding to Newton's motion for reconsideration, which it estimated to be $2,360, and to cover costs and additional fees likely to be awarded on appeal. The court ordered Newton to post and maintain an appeal bond in the amount of $8,075 until further order of the trial court or termination of the appeal, and ordered Newton to pay an additional amount of $2,359 for fees and costs incurred since its first order dated March 8, 2002. Newton appealed this order, and the two appeals were consolidated for purposes of review.
Newton's motion to consolidate, contained in its first briefing, was granted by a commissioner's ruling dated February 5, 2003. This ruling consolidated No. 50645-5 and No. 51384-2 for all purposes of appeal and required both Newton and NWC to file single replacement briefs to address all issues on appeal.
DISCUSSION I. Jurisdiction
Newton first argues that the Washington court erred when it found that the Oregon court had determined that Louisiana lacked jurisdiction over NWC, because the Oregon order is ambiguous. NWC counters that its Oregon motion clearly indicated that it was seeking relief solely based on lack of jurisdiction, thus the Washington court did not err when it concluded that the Oregon court's decision was limited to a jurisdictional basis. Newton does not appeal the trial court's ruling setting aside the Louisiana judgment, but only the imposition of the CR 11 sanctions and the appeal bond.
However, since the CR 11 sanctions are linked with the court's determination that the filing was baseless under the law, an examination of the court's legal conclusion that the Oregon court had determined that the Louisiana court lacked jurisdiction is necessary here. Legal conclusions are reviewed de novo. State v. Mackey, 117 Wn App. 135, 138, 69 P.3d 375 (2003), citing State v. Mendez, 137 Wn.2d 208, 214, 970 P.2d 722 (1999). Similarly, appellate review of a trial court's determination of whether or not to accord full faith and credit to a foreign judgment is de novo. Tonga Air Servs., Ltd. v. Fowler, 118 Wn.2d 718, 725, 826 P.2d 204 (1992).
Newton filed the Louisiana judgment against NWC in Washington under the Uniform Enforcement of Foreign Judgments Act, RCW 6.36.025. This statute requires that a foreign judgment filed in a Washington superior court be treated in the same manner as a judgment of the superior court of this state. RCW 6.36.025(1); In re Estate of Tolson, 89 Wn. App. 21, 31-34, 947 P.2d 1242 (1997).
In considering a petition for registration of a foreign judgment in Washington, ordinarily the court is limited to determining whether the foreign forum had jurisdiction and whether the acquisition of such jurisdiction was fraudulent. Industrial Fin. Co. v. Lovell, 9 Wn. App. 829, 831-33, 515 P.2d 1304 (1973). In the unusual circumstances here presented, we nevertheless think it was appropriate for the trial court to consider the possible bases for the Oregon court's ruling. But the court's determination that NWC requested, and that the Oregon court granted relief based solely on lack of jurisdiction, is not supported by the record. Contrary to its claims, NWC did not request relief based exclusively on lack of jurisdiction by the Louisiana court. In its initial motion before the Oregon court, NWC requested that the foreign judgment be set aside because Louisiana lacked personal and subject matter jurisdiction, and because Louisiana was an inconvenient forum for the matter. While NWS now argues that ORS 24.220(4)(f), the forum non conveniens statute that NWC cited in its initial Oregon motion, is not applicable because no personal service was obtained, NWC does not provide any citation to the record establishing that personal service was not achieved.
The Oregon court did not specify why it granted the relief requested. The court's order stated simply that 'good cause exists to grant defendant's motion.' Clerk's Papers at 159-162 (2002). The Oregon court's order did not discuss any of the statutes or evidence presented by either side. While Washington courts are required to respect a foreign judgment determining jurisdictional facts, no such jurisdictional facts were determined by the Oregon court's order. See, e.g., Tolson, 89 Wn. App. at 33-35. It is not clear whether the Oregon court dismissed the motion based solely on a determination of lack of jurisdiction, or based on some other basis for relief, such as forum non conveniens. Thus, we conclude that the Washington trial court erred in determining both that NWC's 'sole basis' for requesting relief in its Oregon motion was lack of jurisdiction, and also that the Oregon court granted relief 'based solely on the issue of lack of jurisdiction.' Clerk's Papers at 152-53 (2003). Such a determination is impossible based on the records provided from the Oregon action. And since the parties have not briefed Oregon law, particularly as it relates to forum non conveniens, it is impossible to conclude that the Oregon court's ruling had only one legally permissible basis, namely, lack of jurisdiction by the Louisiana court.
After erroneously concluding that the Oregon court's determination was based solely on jurisdiction, the Washington court granted NWC's motion to quash the registration of the Louisiana judgment. The court then determined that Newton's filing of the Louisiana judgment in Washington was baseless, and not warranted under any existing law or good faith argument for the extension, modification, or reversal of the law. Thus, the court assessed CR 11 sanctions against Newton for filing the Louisiana judgment in Washington.
Although neither party properly briefed the issue of collateral estoppel, the court appeared to rely on this doctrine when it determined that Newton's filing of the motion under RCW 6.26.025 was precluded by the Oregon court's decision, and was thus not warranted by law. Collateral estoppel operates to prevent relitigation of an issue that has been fully and fairly argued and where a final judgment has been entered on the merits of that issue. Four requirements must be met for the doctrine to apply:
(1) the issue decided in the prior adjudication must be identical with the one presented in the second; (2) the prior adjudication must have ended in a final judgment on the merits; (3) the party against whom the plea is asserted must be a party or in privity with a party to the prior adjudication; and (4) application of the doctrine must not work an injustice. Nielson v. Spanaway Gen. Med. Clinic, Inc., 135 Wn.2d 255, 262-63, 956 P.2d 312 (1998). Conversely, the doctrine of collateral estoppel does not prevent reexamination of a jurisdictional issue where an original foreign order does not address that jurisdictional issue. In re Marriage of Murphy, 90 Wn. App. 488, 952 P.2d 624 (1998). In Marriage of Murphy, a wife disputed the jurisdiction of an Ohio court to enter an order of child custody, and sought to obtain a custody order in Washington. The Washington trial court declined jurisdiction. 90 Wn. App. at 492-93. This court found that the Ohio child custody orders contained no findings of fact or conclusions of law regarding the basis upon which the Ohio court assumed jurisdiction. Thus, collateral estoppel did not prevent the wife from relitigating the issue in Washington, and the jurisdictional issue was remanded for determination by the trial court. 90 Wn. App. at 498. Applying this analysis, it is clear that the doctrine of collateral estoppel did not prevent relitigation of the jurisdictional issue in the present case because the Oregon order was ambiguous and did not constitute a final judgment on the merits of whether Louisiana lacked jurisdiction over NWC. Further, while reexamination of a court's jurisdiction is not permitted where the issue has been fully litigated and decided in the court which rendered the original judgment, that is not what happened here. See, e.g., In re Estate of Tolson, 89 Wn. App. at 32; Durfee v. Duke, 375 U.S. 106, 111, 84 S.Ct. 242, 11 L.Ed.2d 186 (1963). Here, a default judgment was entered in Louisiana. An Oregon court set aside the filing of that judgment in Oregon, but did not specify its reasoning. To the extent that the Oregon order was ambiguous and not determinative of the issue of Louisiana's jurisdiction, no case law exists which prevented the Washington court from independently determining, under RCW 6.36.025, whether Louisiana had jurisdiction to enter a default judgment against NWC. NWC argues that this is forum shopping, but cites no authority for this contention. In sum, because no case law prevented Newton from filing the order in Washington where the Oregon order was ambiguous, we hold that the court erred when it concluded that Newton's filing was baseless and not warranted by existing law. Thus, the trial court could have independently determined whether Louisiana had jurisdiction to enter the default judgment. RCW 6.40.040(1) (a foreign judgment is not conclusive if the foreign court did not have personal jurisdiction or jurisdiction over the subject matter). See also, Brown v. Brown, 46 Wn.2d 370, 281 P.2d 850 (1955) (a decree can be collaterally attacked upon the ground that it is void for want of jurisdiction); Maple v. Maple, 29 Wn.2d 858, 189 P.2d 976, 980 (1948); Wampler v. Wampler, 25 Wn.2d 258, 263, 170 P.2d 316 (1946). Instead, the court relied on an ambiguous Oregon order, and erroneously concluded that an enforcement action by Newton in Washington was barred. However, we will not remand this case for a determination of whether Louisiana had jurisdiction to enter a default judgment against NWC because Newton does not appeal the court's decision on the merits.
II. CR 11 Sanctions
The court assessed CR 11 sanctions against Newton, finding that his filing of the Louisiana judgment was baseless and ungrounded in fact, not warranted under any existing law, intended to further harass NWC, and that Newton's counsel failed to conduct a reasonable inquiry into the basis of the Oregon court's ruling prior to filing the Louisiana judgment in Washington. Newton asserts that the court erred. Findings of fact are upheld if they are supported by substantial evidence. Johnson v. Department of Licensing, 71 Wn. App. 326, 332, 858 P.2d 1112 (1993). Substantial evidence is evidence in sufficient quantum to persuade a fair — minded person of the truth of the declared premise. Robinson v. Safeway Stores, Inc., 113 Wn.2d 154, 157, 776 P.2d 676 (1989). CR 11 provides that pleadings, motions, or memoranda to the court must be signed by the attorney who represents the party and that the attorney thus certifies that to the best of the party's or attorney's knowledge, information, and belief, formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
The filing of a lawsuit is subject to sanctions if three criteria are met:
(1) The action was not well grounded in fact; (2) it was not warranted by existing law; and (3) the attorney signing the pleading has failed to conduct a reasonable inquiry into the factual or legal basis of the action. Manteufel v. Safeco Ins. Co. of America, 117 Wn. App. 168, 176, 68 P.3d 1093, (2003), citing Doe v. Spokane Inland Empire Blood Bank, 55 Wn. App. 106, 110, 780 P.2d 853 (1989). CR 11 sanctions are reviewed for abuse of discretion. Washington State Physicians Ins. Exch. Ass'n v. Fisons Corp., 122 Wn.2d 299, 338-39, 858 P.2d 1054 (1993).
Because the record does not support the trial court's factual findings and legal conclusions, the court exercised its discretion on untenable grounds, thereby abusing its discretion when it awarded CR 11 sanctions against Newton. As discussed above, the Oregon decision was ambiguous and did not clearly determine the issue of jurisdiction. Because on these facts no case law prevented a Washington court from determining whether Louisiana had jurisdiction, the filing of the judgment was neither baseless nor unwarranted by existing law. NWC makes no argument that Newton could not properly have filed the judgment in Washington, but for the Oregon court's earlier ruling. Nor was the filing ungrounded in fact, where Newton requested that the court give full faith and credit to the Louisiana judgment and provided evidence in support of its argument that Louisiana properly exercised jurisdiction. Additionally, the record contains no evidence that the filing was intended to harass NWC.
The court's final finding, that Newton failed to conduct a reasonable inquiry into the Oregon court's previous ruling, is not a sufficient basis for granting CR 11 sanctions where the other two requirements have not been met. Further, in determining whether an attorney's investigation is reasonable, this court asks whether a reasonable attorney in similar circumstances could believe that his or her actions were factually and legally justified. Bryant v. Joseph Tree, Inc., 119 Wn.2d 210, 220-21, 829 P.2d 1099 (1992). In making this determination the court may consider the time that was available to the signer, the extent of the attorney's reliance upon the client for factual support, whether a signing attorney accepted a case from another member of the bar or forwarding attorney, the complexity of the factual and legal issues, and the need for discovery to develop factual circumstances underlying a claim. Bryant, 119 Wn.2d at 220-21. Here, the reasons for filing the Louisiana judgment in Washington were factually and legally justified where the Oregon order was ambiguous, the pleadings and motions in Oregon did not reflect only one possible basis for that court's decision, and Washington cases only prevent re-litigation of jurisdictional issues that have been fully determined by the court which entered the original order. Further, while the court's order suggests that NWC's version of the Oregon court's reasoning for its decision was presumptively correct, no Washington case requires an attorney to rely on the representations of opposing counsel regarding a trial court's reasons for dismissing an action, if those reasons are not apparent either on the face of the court's order or in the context of the briefing and pleadings to the other court. We also observe that no Washington case imputes the knowledge of a client's prior attorney to the current attorney.
Because the three criteria for granting CR 11 sanctions were not met, we hold that the trial court erred when it granted CR 11 sanctions against Newton for filing the Louisiana judgment in Washington.
III. Appeals Bond
Newton argues that the court erred when it required appellant to post and maintain an 'appeals bond,' and asserts that NWC's request for such a bond pursuant to RAP 8.1 likely violated CR 11. NWC provides no contrary argument, but requests, without citation to authority or the record, that this court dismiss the appeal for Newton's failure to post the bond. RAP 7.2 allows a court to act on matters of supersedeas, stays, and bonds as provided in RAP 8.1, RAP 8.4, CR 62(a), (b), and (h), and RCW 6.17.050. See RAP 7.2(h). These rules provide a means for delaying enforcement of a trial court decision or a money judgment, not a means for securing additional financial requirements pending the outcome of an appeal. See, e.g., RAP 8.1 ('This rule provides a means of delaying the enforcement of a trial court decision in a civil case in addition to the means provided in CR 62(a), (b), and (h)' by filing a bond in the trial court); RAP 8.4 (specifies who may act as a surety for the bond); CR 62 (section (a) provides for an automatic stay of 5 days upon the execution of superior court judgments; section (b) allows additional stays upon certain motions for relief; section (h) allows stay of enforcement of judgments against multiple parties); RCW 6.17.050 (allows execution of judgment against the surety on a bond after the stay period expires).
No other appellate rule provides a means for imposing an appeal bond after the award of a money judgment. The only Washington law that provided a means for requiring one party to post an appeals bond was repealed in 1957. Rem. Rev. Stat. sec. 1721 (recodified as RCW 4.88.050 (repealed by Laws 1957, ch. 7 sec. 10, eff. Feb. 19, 1957)); Wyback v. Board of Prison Terms and Paroles, 32 Wn.2d 780, 203 P.2d 1083 (1949). Thus, the court erred when it required Newton to post such a bond.
Newton also maintains that NWC's request, pursuant to RAP 8.1, was a violation of CR 11. We agree. The request was not well grounded in fact, not warranted by existing law, and Newton's attorney failed to conduct a reasonable inquiry into the factual or legal basis of the request. A cursory examination of RAP 8.1 would have shown NWC that the rule provides a means for delaying enforcement of a money judgment, not a means for securing additional obligations on Newton that might be awarded by the appellate court. Although Newton requests no specific relief, an appellate court, on its own motion, may sanction a party who fails to comply with the Rules of Appellate Procedure. RAP 18.9(a). We would impose such a sanction here but for the fact that Newton did not post the appeal bond, and accordingly was put to no additional expense by reason of the trial court's erroneous grant of NWC's request.
Newton requests the return of its second appellate filing fee, on the basis that NWC failed to obtain findings of fact or conclusions of law prior to the first appeal. The ruling consolidating the appeals, dated February 3, 2003, specifically noted this issue, and instructed Newton to address it, along with the other issues, in a single brief. Newton raised the issue in the brief for the consolidated appeal but failed to support the request with citation to authority as contemplated by the commissioner's ruling, and as required by RAP 10.3(a)(5). Accordingly, we decline to consider the request. Camer v. Seattle Post-Intelligencer, 45 Wn. App. 29, 36, 723 P.2d 1195 (1986).
We reverse the trial court's judgment awarding attorney fees and costs to NWC by way of CR 11 sanctions, together with its order that Newton post an appeal bond.
COLEMAN and AGID, JJ., concur.