Suburban Janitorial Services v. Clarke American

• Citation: 72 Wn.App. 302,863 P.2d 1377
• Decision Date: 30 December 1993
• Docket Number: No. 31988-4-I,31988-4-I
• Parties: SUBURBAN JANITORIAL SERVICES, a Washington corporation, Appellant, v. CLARKE AMERICAN, Respondent.
• Court: Washington Court of Appeals

Page 302

72 Wn.App. 302

863 P.2d 1377

SUBURBAN JANITORIAL SERVICES, a Washington corporation, Appellant, v. CLARKE AMERICAN, Respondent.

No. 31988-4-I.

Court of Appeals of Washington Division 1.

Dec. 30, 1993.

Steven Quick-Ruben, Tacoma, for appellant.

Karen F. Jones and Riddell, Williams, Bullitt & Walkinshaw, Bellevue, for respondent.

FORREST, Judge.

Suburban Janitorial Services (Suburban) appeals the trial court's decision granting Clarke American's (Clarke) motion to vacate a default judgment contending the court was without authority to do so. We affirm.

Suburban served a summons and complaint on May 28, 1991 on Clarke alleging that Clarke had breached its contract by hiring one or more of Suburban's former employees in violation of a covenant not to compete. Clarke did not respond within 20 days of service. Suburban filed the complaint and obtained a default judgment on June 19, 1991.

In the interim between service and the answer deadline, Clarke's attorney, Wacker, drafted a notice of appearance, answer, and cover letter and sent them to Clarke for approval. For unexplained reasons, Wacker did not actually forward the materials to Suburban until after the default judgment had been entered. In his cover letter to Suburban, Wacker requested that Suburban inform him of their intentions. He received no answer. In a second letter sent 2 months later and received September 3, 1991, Wacker said, "May we presume that your client has dropped this claim and nothing further is required. Please give us your response in writing so that we and our client may close out our file in this matter." Again, no response was forthcoming.

Clarke's first actual notice of the default judgment occurred when it received a copy of an order directing appearance for examination and supplemental proceedings November 9, 1992, approximately 17 months after the default judgment was entered and 13 months after Suburban received Wacker's last letter. Clarke promptly moved to vacate the default judgment, supported by Wacker's affidavit that he had "a good-faith belief" that Suburban had decided not to pursue the matter and would notify him if the case were, in fact, to be filed and litigated. The court vacated the judgment "in the interest of equity and/or pursuant to CR 60(b)(1), 60(b)(4), and 60(b)(11)". Suburban appeals.

I

The general rule as to vacation of default judgments is well established.

The law favors determination of controversies on their merits and, consequently, default judgments are disfavored. Griggs v. Averbeck Realty, Inc., 92 Wn.2d 576, 581, 599 P.2d 1289 (1979). A proceeding to vacate a default judgment is equitable in character, and relief is to be afforded in accordance with equitable principles. The court should exercise its authority to the end that substantial rights be preserved and justice done between the parties. White v. Holm, 73 Wn.2d 348, 438 P.2d 581 (1968).

Lee v. Western Processing Co., Inc., 35 Wash.App. 466, 468, 667 P.2d 638 (1983). A motion to vacate is addressed to the sound discretion of the trial court whose disposition should not be disturbed unless it clearly appears that discretion has been abused. ¹ "Abuse of discretion is less likely to be found if the default judgment is set aside." Griggs v. Averbeck, 92 Wash.2d 576, 582, 599 P.2d 1289 (1979). The trial court's duty on such motions was expressed by the Washington Supreme Court:

The primary duty of the courts in considering motions to set aside default judgments is to inquire whether or not the moving party against the default has a defense on the merits. If it clearly appears that a strong defense on the merits exists, the courts will spend scant time inquiring into the reasons which resulted in the entry of the order of default.

Yeck v. Department of Labor & Indus., 27 Wash.2d 92, 97, 176 P.2d 359 (1947).

In exercising its discretion to vacate a default judgment under CR 60(b), the trial court must first decide whether substantial evidence exists to support a defense to the claim.

The purpose of this inquiry is to prove to the court a meritorious defense to the claim exists and a subsequent trial would not be useless. ² Any prima facie defense to the plaintiff's claim, albeit tenuous, is sufficient to support a motion to vacate a default judgment. ³ "A strong defense requires less of a showing of excuse, provided the failure to appear was not willful." Calhoun v. Merritt, 46 Wash.App. 616, 619, 731 P.2d 1094 (1986).

Clarke sets forth two defenses.

First, it argues that no breach occurred. Clarke terminated its agreement with Suburban and subsequently contracted with Lara Projects for janitorial services. Under the terms of the new agreement, Lara Projects had complete control over hiring of its employees. Because Clarke and Lara Projects were two separate business entities, Clarke argues it was not responsible for and had no control over Lara Project's hiring decisions. In support of this argument in its motion to vacate, Clarke attached an affidavit of Lisa Huntley, plant accounting manager of Clarke, and a copy of its agreements with Suburban and Lara Projects.

Second, Clarke contends the covenant not to compete is unenforceable because it is unreasonable, citing for support Perry v. Moran, 109 Wash.2d 691, 748 P.2d 224, cert. denied, 492 U.S. 911, 109 S.Ct. 3228, 106 L.Ed.2d 577 (1989). Facially, both contentions have merit and a subsequent trial would not be useless.

The second step in evaluating a motion to vacate a default is the reason for the party's failure to timely appear and defend, which includes his or her diligence in moving to vacate. Wacker served his appearance and answer 15 days after the time to answer had expired. His follow up letters showed a desire to defend, his reliance on the lack of an answer to his letters, while less than total diligence, is not gross neglect. In view of the strength of the asserted defenses and the understandable nature of the attorney's error, there is no doubt that, had the application to set aside the default been made within 1 year, it would have been granted. Indeed, Suburban concedes as much, but argues that the court was without power to grant relief.

II

The portions of CR 60 material to this appeal are as follows:

(b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud; etc. On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons:

(1) Mistakes, inadvertence, surprise, excusable neglect or irregularity in obtaining a judgment or order;

. . . . .

(4) Fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party;

. . . . .

(11) Any other reason justifying relief from the operation of the judgment.

The motion shall be made within a reasonable time and for reasons (1), (2) or (3) not more than 1 year after the judgment, order, or proceeding was entered or taken.

Also material is CR 6(b), which in relevant part states:

[T]he court for cause shown may at any time in its discretion, (1) with or without motion or notice, order the period enlarged if request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or, (2) upon motion made after the expiration of the specified period, permit the act to be done where the failure to act was the result of excusable neglect; but it may not extend the time for taking any action under rules 50(b), 52(b), 59(b), 59(d), and 60(b).

(Emphasis added.)

Suburban contends that the trial court was precluded from using CR 60(b)(1) because the motion to vacate occurred more than 1 year after a default and also more than 1 year after Wacker's last letter. We agree. CR 6 specifically excludes CR 60(b)'s time provisions from enlargement by the court. Case law supports the application of the rule as written. ⁴

III

Clarke argues that, even if relief is barred under CR 6 and CR 60(b)(1), the court was authorized to grant relief under CR 60(b)(4) and (b)(11). ⁵ Neither section contains any explicit time limitation so the courts have required that application for relief be made within a reasonable time. ⁶ The critical period in determining whether a time is reasonable is the time between learning of the default judgment and filing the CR 60 motion. Here, Clarke applied for relief promptly upon learning that judgment had been taken against it. Nor does the time of 17 months from judgment and 13 months from the last letter preclude relief. ⁷ Accordingly, we hold that Clarke's application was made within a reasonable time under both subsections.

IV

Suburban argues that relief cannot be granted under subsection (4) because the "fraud" ⁸ did not cause entry of the judgment. Since CR 60 addresses relief from judgments, it is unsurprising that most of the cases contain language indicating that the allegedly fraudulent conduct "must cause the entry of the judgment." Lindgren v. Lindgren, 58 Wash.App. 588, 596, 794 P.2d 526 (1990), review denied, 116 Wash.2d 1009, 805 P.2d 813 (1991). ⁹ Here, however, the claim of fraud is based on Suburban's failure to respond to the two letters, leaving defendant's counsel without any reason to know that a default judgment had been entered against his client and to believe that the matter had ended. All cases cited by Suburban ¹⁰ are readily distinguishable, because in those cases there was no claim of fraud occurring subsequent to the entry of judgment.

Suburban relies on a statement by a federal court that, "[d]efendants must establish that the alleged misconduct of the plaintiff was of a type that prevented them from fully and fairly presenting their case." Simon v. Pay Tel Management, Inc., 782 F.Supp. 1219, 1227 (N.D.Ill.1991). Our facts fall squarely within that language. Here the alleged misconduct in failing to respond to the letters...