Opinion
No. 59756-6-I.
January 28, 2008.
Appeal from a judgment of the Superior Court for Snohomish County, No. 06-2-08507-6, David A. Kurtz, J., entered February 27, 2007.
Affirmed in part, reversed in part, and remanded by unpublished per curiam opinion.
Pacific Continental Shippers (PACCON), a Washington corporation, entered into an agreement with Baking Systems, Inc. (BSI), a Montana corporation, to arrange for the shipment of commercial ovens from Pennsylvania to New Mexico. BSI failed to pay PACCON's invoices, and PACCON eventually obtained a default judgment. Because service of process on BSI's employee was valid and BSI failed to demonstrate more than a prima facie defense or that its failure to appear was due to excusable neglect, we affirm the trial court's denial of BSI's motion to vacate the default judgment. But we remand the attorney fees award for the entry of findings of fact and conclusions of law.
FACTS
PACCON is an "intermodal marketing company" that brokers the shipment of goods by rail and truck. BSI sells and installs commercial baking equipment. In February 2005, Maria Benson, an employee at BSI's plant in Roundup, Montana, contacted PACCON's Everett office for assistance in shipping five large used commercial baking ovens and associated parts that BSI had acquired in Pittsburgh to a plant in New Mexico.
Because the projected shipping charges exceeded $75,000, PACCON required BSI to complete a credit agreement. BSI faxed the completed credit agreement, which contained the signature of David Roberts, BSI's president, back to PACCON. The credit agreement also included provisions for venue in Washington State and for an award of attorney fees and reasonable collection costs. After further checking BSI's credit references, PACCON agreed to arrange for the shipment of the ovens.
In Pittsburgh, BSI employees loaded the ovens and parts into 42 containers and secured them for shipment. After the loading was completed, PACCON directed a trucking company to deliver the containers to a railroad yard for shipment to New Mexico. While the containers were being transferred to a different rail line in Chicago, Union Pacific inspectors noticed that the load in one of the containers had shifted because of improper bracing. According to PACCON, BSI authorized PACCON to hire a company with the heavy equipment necessary to reload the container. All of the containers were delivered to the destination in New Mexico within 8-15 days. None of the shipping documents contain any notation of damage to the contents, and BSI never filed a claim for damages with the railroad or with PACCON.
PACCON maintains that when BSI failed to pay the shipping invoices, PACCON repeatedly attempted to contact BSI and resolve the matter, without success. In June 2005, Roberts wrote to PACCON indicating that BSI would soon "be receiving a rather substantial deposit out of which [PACCON] will be satisfied." In August 2005, BSI made a payment of $10,000. PACCON contacted BSI several more times about the amount due but received no further payment.
On March 14, 2006, PACCON arranged for service of a summons and complaint on John Eike, the plant manager at BSI's plant in Roundup, Montana. PACCON filed the summons and complaint on May 19, 2006, in Snohomish County Superior Court. On the same date, the court entered an order of default and a default judgment for approximately $109,000 for the outstanding shipping charges, interest, and attorney fees.
On February 7, 2007, a short time after PACCON garnished BSI's bank account for $102,000, BSI moved to vacate the order of default and default judgment. BSI argued that the default judgment was void because Eike was not authorized to accept service. BSI also alleged that PACCON was liable for damages resulting from shipping delays and from "the wreck of the train [PACCON] chose to use for shipping." BSI maintained that it had suffered damages exceeding $250,000, "far in excess of any amounts claimed by [PACCON]."
On February 27, 2007, the trial court denied BSI's motion to vacate, without prejudice to refile the motion following further discovery. On March 29, 2007, the court entered a judgment totaling $37,327.29 for attorney fees and collection costs.
DECISION
BSI first contends the default judgment is void because PACCON's service of process was invalid. BSI argues that John Eike, the employee who received the summons and complaint, was not statutorily authorized to receive process. In order to be sufficient, service of process must satisfy both due process and statutory requirements.
See Powell v. Sphere Drake Ins. PLC, 97 Wn. App. 890, 899, 988 P.2d 12 (1999) (trial court lacks jurisdiction over a defendant who is not properly served).
Weiss v. Glemp, 127 Wn.2d 726, 734, 903 P.2d 455 (1995).
On appeal, BSI has not challenged PACCON's assertion that the trial court properly exercised specific jurisdiction over this action based on the "forum selection clause" in the credit agreement and on Washington's long-arm statute, which provides for jurisdiction over claims arising from a foreign corporation's "transaction of any business within this state." Accordingly, we do not address this issue.
Initially, the parties dispute whether RCW 4.28.080(9) or RCW 4.28.080(10) governed service of process in this case. BSI contends that RCW 4.28.080(9), which authorizes service on the "managing agent" of a corporation, applies to foreign corporations when, as here, the trial court asserts specific jurisdiction under the long-arm statute. PACCON maintains that RCW 4.28.080(9) governs service on domestic corporations and that RCW 4.28.080(10), which authorizes service on "any agent" of "a foreign corporation . . . doing business within this state," applies even though there is no claim that BSI is doing business in Washington.
RCW 4.28.080(9) provides for service of process as follows:
If the suit be against a company or corporation other than those designated in the preceding subdivisions of this section, to the president or other head of the company or corporation, the registered agent, secretary, cashier or managing agent thereof or to the secretary, stenographer or office assistant of the president or other head of the company or corporation, registered agent, secretary, cashier or managing agent.
RCW 4.28.080(10) provides for service as follows: "If the suit be against a foreign corporation or nonresident joint stock company, partnership or association doing business within this state, to any agent, cashier or secretary thereof."
Neither side has cited any authority that directly addresses this issue or that even draws a substantive distinction between service on a "managing agent" under RCW 4.28.080(9) and service on "any agent" under RCW 4.28.080(10). But we need not resolve the parties' dispute for purposes of this appeal because service on Eike under the facts of this case satisfied both statutory requirements.
When determining whether a person is an "agent" for purposes of accepting service of process under RCW 4.28.080(10), a court reviews "all the surrounding facts and proper inferences therefrom." We construe the statute liberally, but "'agent' status will not be confirmed on an employee whose duties are purely mechanical and who has neither express nor implied authority to represent the corporation."
Fox v. Sunmaster Prods., Inc., 63 Wn. App. 561, 567, 821 P.2d 502 (1991), review denied, 118 Wn.2d 1029 (1992).
Id.
In Reiner v. Pittsburg Des Moines Corp., our Supreme Court concluded that service on the manager of "site support services" at Hanford's No. 2 site satisfied RCW 4.28.080(10) because his title "implies that he possessed sufficient discretionary authority to act in a representative capacity." In reaching its decision, the Reiner court relied expressly on Johanson v. United Truck Lines, in which the court held that a corporation's temporary branch manager, who also had authority to hire and fire certain workers, had sufficient representative authority to be an agent for service of process. But Johanson construed the "managing agent" provision of RCW 4.28.080(9), strongly suggesting that the Reiner court saw no substantive difference — for purposes of adequacy of service — between the "managing agent" requirement of RCW 4.28.080(9) and the "any agent" requirement of RCW 4.28.080(10).
101 Wn.2d 475, 680 P.2d 55 (1984).
Id. at 478.
62 Wn.2d 437, 383 P.2d 512 (1963).
See Reiner, 101 Wn.2d at 477-78.
BSI maintains that Eike lacked sufficient authority to accept service of process because he was simply "a working foreman who performs mechanical work." But the uncontroverted information from Eike's deposition does not support this characterization.
Eike stated that BSI had originally hired him at its plant and corporate headquarters in Roundup, Montana, as a sheet metal fabricator, but that his duties had changed when he was "brought into the office as a foreman." Eike, who reports directly to David Roberts, BSI's president, estimated that he now spends the majority of his time in the office, rather than on the plant floor. Even though Roberts requires Eike to obtain authorization for certain purchases, Eike is "by and large . . . the plant manager" and generally in charge of purchasing and "making sure that the work gets done." Eike was also generally in charge of the plant during the lengthy periods in which Roberts was out of town. Eike acknowledged that BSI's web site listed him as the "plant manager" and that the job title on his business card was "plant operations manager."
Eike's deposition testimony establishes that his duties were not purely mechanical. Rather, he had substantial discretionary authority and regularly acted in a representative capacity on behalf of BSI. The sheriff who served the summons and complaint reported that he had also served Eike on previous occasions because Roberts was often out of the state. The foregoing circumstances, including Eike's job title and actual duties, clearly demonstrate that he had sufficient authority to be an agent for accepting service of process under either RCW 4.28.080(9) and RCW 4.28.080(10).
See Johanson, 62 Wn.2d at 440.
BSI next contends that even if service of process was valid, the trial court erred in not vacating the default judgment under CR 60(b)(1). We review the trial court's ruling on a motion to vacate a default judgment for an abuse of discretion. But our primary concern "is whether [the trial court's] decision is just and equitable."
CR 60(b)(1) permits the trial court to relieve a party from judgment on the basis of "[m]istakes, inadvertence, surprise, excusable neglect or irregularity in obtaining a judgment or order."
Johnson v. Cash Store, 116 Wn. App. 833, 68 P.3d 1099,review denied, 150 Wn.2d 1020 (2003).
TMT Bear Creek Shopping Ctr., Inc. v. Petco Animal Supplies, Inc., 140 Wn. App. 191, 200, 165 P.3d 1271 (2007).
In seeking to vacate a default judgment, the moving party must generally demonstrate two primary and two secondary factors:
(1) that there is substantial evidence to support at least a prima facie defense to the claim asserted by the opposing party; (2) that the moving party's failure to timely appear and answer was due to mistake, inadvertence, surprise, or excusable neglect; (3) that the moving party acted with due diligence after notice of the default judgment; and (4) that the opposing party will not suffer substantial hardship if the default judgment is vacated.
Cash Store, 116 Wn. App. at 841 (citingWhite v. Holm, 73 Wn.2d 348, 352, 438 P.2d 581 (1968)).
If the moving party is able to demonstrate a "strong or virtually conclusive defense," the court will generally spend little time inquiring into the reasons for the failure to appear.
White v. Holm, 73 Wn.2d at 352.
BSI claims it has a "meritorious" breach of contract counterclaim that far exceeds the amount at issue in PACCON's collection action. To support this defense, BSI submitted a declaration from David Roberts, alleging that BSI had suffered at least $250,000 in damages when some of the containers did not arrive in New Mexico on time and the contents of several containers were damaged in a rail accident.
But there is no dispute that PACCON acted solely as a broker in arranging for the transportation of BSI's goods. BSI employees loaded the containers, which were then transported by truck and rail to New Mexico. The party seeking to vacate a default judgment "must precisely set out the facts or errors constituting a defense and cannot rely merely on allegations and conclusions." Although BSI alleged the existence of certain damages, it has failed to identify any meaningful factual or legal basis to support its conclusory allegations that PACCON was legally liable for damage to the containers' contents and for the alleged untimely delivery. In his deposition, Roberts acknowledged that he did not record the alleged damages on any of the shipping documents and he could offer no explanation for his decision to pay $10,000 to PACCON in August 2005 without disclosing BSI's claim for damages.
Cash Store, 116 Wn. App. at 847.
Under the circumstances, BSI's evidence did not constitute a prima facie defense, much less a "strong or virtually conclusive defense" to PACCON's collection action. BSI suggests the trial court improperly prevented it from presenting evidence or conducting discovery to establish the existence of a meritorious defense. But given the nature of BSI's claimed defense, the supporting evidence was primarily within BSI's own control. Nothing in the record supports BSI's allegation that it was from submitting such evidence in support of its motion to vacate.
See id.
Moreover, even if its conclusory allegations could be characterized as a prima facie defense, BSI has still failed to demonstrate that the trial court abused its discretion in denying the motion to vacate. When the moving party's evidence establishes only a prima facie defense, a court will examine the reasons for the failure to appear, the second primary factor, with greater care.
Id. at 842.
BSI claimed that the responsible individuals did not learn of the lawsuit and default judgment until PACCON garnished its bank account. Eike did not deny that he had been served with the summons and complaint, but he could not recall the event and offered no explanation for what he might have done with the documents. But if a company fails to respond to a properly served summons and complaint "because someone other than general counsel accepted service of process and then neglected to forward the complaint, the company's failure to respond is deemed due to inexcusable neglect."
Id. at 848; see also TMT Bear Creek Shopping Ctr., 140 Wn. App. at 212-13.
Because BSI acted with due diligence in filing the motion to vacate if it first learned of the default judgment when PACCON garnished its bank account and there is no indication that PACCON would suffer a substantial hardship if the default judgment were vacated, the two secondary factors were arguably met here. But BSI alleged no more than a prima facie defense to PACCON's action and failed to satisfy its burden of demonstrating that its failure to appear was the result of mistake, inadvertence, surprise, or excusable neglect. Accordingly, the trial court did not abuse its discretion in denying the motion to vacate the default judgment.
See Cash Store, 116 Wn. App. at 842.
See id. at 849.
BSI's final contention on appeal is that the trial court erred in awarding attorney fees. Among other things, BSI alleges that the amount of fees was unreasonable and included duplicative billings.
Under the terms of the credit agreement, PACCON was entitled to the recovery of reasonable attorney fees and collection costs. But we are unable to review BSI's challenge to the amount of the award because the trial court failed to enter findings of fact and conclusions of law as required byMahler v. Szucs, 135 Wn.2d 398, 434-35, 957 P.2d 632, 966 P.2d 305 (1998). Accordingly, we vacate the award and remand for the entry of findings of fact and conclusions of law.
BSI contends that the award of fees violated its due process rights because it had no opportunity to raise defenses to the credit agreement itself. But because BSI fails to support this contention with relevant legal argument or citation to authority, we decline to consider it. See Ang v. Martin, 154 Wn.2d 477, 487, 114 P.3d 637 (2005).
In light of our disposition, PACCON is also entitled to an award of attorney fees on appeal. Accordingly, on remand, the superior court will also determine the amount of appellate fees.
RAP 18.1(a).
RAP 18.1(i).
The trial court's denial of BSI's motion to vacate the default judgment is affirmed; we vacate the attorney fees award and remand for entry of findings of fact and conclusions of law and the determination of reasonable attorney fees on appeal.