Allstate Ins. Co. v. Khani

• Decision Date: 08 August 1994
• Docket Number: No. 33337-2-I,33337-2-I
• Court: Washington Court of Appeals
• Parties: ALLSTATE INSURANCE COMPANY, a foreign corporation, Respondent, v. Mohamad Amar KHANI and Jane Doe Khani, husband and wife, and their marital community, Appellants.

Page 317

75 Wn.App. 317

877 P.2d 724

ALLSTATE INSURANCE COMPANY, a foreign corporation, Respondent, v. Mohamad Amar KHANI and Jane Doe Khani, husband and wife, and their marital community, Appellants.

No. 33337-2-I.

Court of Appeals of Washington Division 1.

Aug. 8, 1994.

Jeri-Beth Bowman, Seattle, for appellants.

William P. Harris, Seattle, for respondent.

SCHOLFIELD, Judge.

Allstate Insurance Company obtained a default judgment against Mohamad Amar Khani and his wife (collectively, Khani) in 1988. In 1993, the trial court denied Khani's motion to vacate the judgment, quash service of process, and quash a writ of garnishment. Khani appeals the trial court's order, arguing that the default judgment was void for lack of jurisdiction. Khani also contends the trial court erred by finding that he was required to bring the CR 60(b)(5) motion within a reasonable time and that he failed to do so despite having actual notice of the default judgment. Alternatively, Khani argues that under CR 60(b)(11) he did bring the motion within a reasonable time given the peculiarities of this case. Finally, Khani seeks attorney fees and costs for the proceedings before the trial court and on appeal. We reverse.

On February 21, 1987, Mohamad Amar Khani was involved in a car accident with Deborah Head, who was insured by Allstate Insurance Company. According to a police officer's report of the incident, the brakes on Khani's car "did not work per Khani". The report also gave Khani's phone number and listed his address as 30602 Pacific Highway South, E-105, in Federal Way, Washington. He lived there at that time with his brother, who was supporting him.

According to Khani's affidavit, he received a letter from Allstate on March 11, 1987 indicating that the insurance company had determined the accident was his fault. Khani, a native of Syria who arrived in the United States in 1985 pursuant to a student visa, did not know he could contest Allstate's conclusion. Allstate asked him to verify his insurance coverage or make payment arrangements. He wrote to Allstate offering to pay $10 per month, as that was all he could afford given the work restrictions of his visa. ¹

On April 1, 1987, Khani received correspondence through his post office box from an Allstate agent in Anchorage, Alaska. The agent asked him to sign a "Confession of Judgment Without Action" form, indicating it would be filed in an Alaska state court, and a form stating he agreed to pay Allstate $100 each month until the sum of $2,495.55 was paid. The agent wrote that if he did not receive the signed documents within 10 days, he would file a lawsuit and "[t]hat way will cost you much, much more money." Khani wrote to Allstate and again explained he could pay only $10 each month but he would willingly renegotiate payments if his employment status changed. Allstate mailed its written rejection of that offer to Khani's post office box on April 9, 1987.

Khani subsequently married and moved from his brother's apartment in Federal Way to his mother-in-law's home in Seattle on September 10, 1987. Khani notified the Washington Department of Licensing (DOL) of his address change within 10 days of moving, and the Khanis lived at that Seattle address until December 1988. Khani kept his original post office box for his mail. In October 1987, Khani's brother also moved out of the Federal Way apartment.

On January 12, 1988, Allstate attempted to serve a summons and complaint on Khani in an effort to recover the amount it had paid its insured. Allstate hired a professional process server to accomplish service. An affidavit of service signed by R. Davis states that he served the documents on January 12, 1988 at 30602 Pacific Highway South, E-105, in Federal Way, by giving them to a man named Matthew Welton. Davis also stated the following in another affidavit:

At 6:20 am, I went to 30602 Pacific Highway South # E-105, Federal Way. A man answered the door. I asked for Mohamad Khani, he told me that he was sleeping. I asked him if he was a resident and what his name was. He told me that his name is Ma[t]thew Welton and that he was a resident. I served Mat[t]hew Welton the documents and he signed for them. He is: Caucasian male, 6' 170 lbs, with Brown hair.

According to an affidavit of the apartment manager, the business records of the complex show that no one named Matthew Welton or Mohamad Amar Khani was ever named as a tenant. However, the records show that on November 30, 1987, Don McDonough moved into apartment E-105. McDonough's affidavit states that Matthew Welton was living with him on the date service of process on Khani was attempted, and Welton's affidavit confirms that fact. Welton's affidavit also states he has never known or lived with anyone named Mohamad Khani.

Without Khani's knowledge, a default judgment was entered against him in favor of Allstate on October 28, 1988 for $2,853.55 plus attorney fees and costs. On December 9, 1988, Khani received a notice from DOL stating that his driving privilege would be suspended because the October 1988 default judgment against him had not been satisfied. Khani "was shocked and completely unaware of any such judgment". The notice advised Khani he could request a hearing on the matter because the record of judgment did not indicate he had been personally served with process before the judgment was entered.

Khani requested a hearing, and the DOL hearing officer found that Khani had not received actual and timely notice of Allstate's suit against him when process was served on Matthew Welton. The hearing officer also found that Khani had notified DOL of his address change on September 23, 1987. Thus, on May 24, 1989, the hearing officer reversed the notice of suspension. According to Khani's affidavit, he believed the hearing officer's decision disposed of the matter completely.

In June 1990, Khani received a copy of his credit report and saw that it included the 1988 judgment. After sending a copy of the hearing officer's decision to the company that prepared the report, the company deleted the judgment. In October 1990, DOL sent Khani a second notice of suspension based on the October 1988 default judgment. However, when Khani referred a DOL employee to the hearing officer's 1989 decision, the employee told Khani to disregard the second notice because the decision resolved the matter. Khani again believed that the matter was finally resolved, and the default judgment never reappeared on his subsequent credit reports.

In December 1992, Khani and his wife attempted to obtain financing to purchase a home and were informed by a real estate agent that the title insurance report listed the unsatisfied 1988 default judgment. That report also identified Allstate's attorney as William P. Harris. The real estate agent contacted Harris and attempted to reach an agreement where the Khanis would pay $75 each month until the judgment was paid in full. Allstate, through Harris, rejected that offer on January 15, 1993, and responded that it would only agree to a $300 deposit and monthly payments of $100 thereafter. The Khanis felt that arrangement was unacceptable in light of the DOL hearing officer's decision and their belief that the matter had been resolved years earlier. Allstate subsequently sent a copy of the default judgment to DOL. In February 1993, DOL wrote to Allstate's counsel, explaining that the hearing officer had reversed the previous suspension order and DOL was "unable to initiate suspension action against Mr. Khani."

On April 5, 1993, Khani received notice that a writ of garnishment had been served on his employer, Alaska Airlines. ² On that same day, Khani obtained counsel. He thereafter moved to vacate the default judgment and quash the service of process and the writ of garnishment. The trial court entered the following findings with regard to that motion:

(1) The Defendant has provided convincing evidence that Defendant did not reside at the location the documents were served (# E-105) and that said substituted service is thus defective;

(2) The Defendant did not bring this motion within a reasonable time; and Plaintiff would be prejudiced if the motion is granted; and

(3) Attorney fees and costs were denied to both parties.

The court also made the additional finding that

prior to the running of the statute of limitations the defendant had actual notice that a lawsuit had been started against him and a judgment had been entered. Non[e]theless he waited for over four years before doing anything about it or taking any action to have it set aside. That the plaintiff was prejudiced by this unreasonable delay.

The court consequently denied Khani's motion and the parties' respective requests for attorney fees and costs. Khani appeals.

I.

We first decide whether the trial court erred by denying Khani's motion to vacate the default judgment and quash service of process and the writ of garnishment, given the court's finding that service of process was defective. ³ Khani argues that because service of process was defective, the default judgment is void for lack of personal jurisdiction, and thus, the trial court erred by denying his motion. Allstate contends that the trial court did not abuse its discretion by denying the motion or by finding Khani failed to bring the motion within a reasonable time and Allstate would be prejudiced if the motion were granted.

A trial court's decision to grant or deny a motion to vacate a default judgment is generally reviewed for an abuse of discretion. Leen v. Demopolis, 62 Wash.App. 473, 478, 815 P.2d 269 (1991), review denied, 118 Wash.2d 1022, 827 P.2d 1393 (1992). However, a court has a nondiscretionary duty to vacate a void judgment. Leen, 62 Wash.App. at 478, 815 P.2d 269; In re Marriage of Markowski, 50 Wash.App. 633, 635, 749 P.2d 754 (1988); Brickum Inv. Co. v. Vernham Corp., 46 Wash.App. 517, 520, 731 P.2d 533 (1987).

A motion to vacate under CR 60(b)(5) ⁴ ...