Everett v. Lay, No. 32682-5-II (Wash. App. 8/8/2006)
| Decision Date | 08 August 2006 |
| Docket Number | No. 32682-5-II,Consolidated with No. 33162-4-II,32682-5-II |
| Court | Washington Court of Appeals |
| Parties | JOHN EVERETT, Appellant, v. ROSS LAY, Respondent. BELL CONSUMERS, INC., Appellant, v. ROSS LAY, Respondent, RUNAR DEAN JOHNSON and LAVINA JOHNSON, husband and wife, aka Cutting Edge Enterprises, Appellants. |
Appeal from Superior Court of Clallam County. Docket No: 04-2-00090-7. Judgment or order under review. Date filed: 12/17/2004. Judge signing: Hon. Kenneth Day Williams.
Counsel for Appellant(s), John Everett (Appearing Pro Se), 609 West Washington Street 11-31, Sequim, WA 98382.
Runar & Lavina Johnson (Appearing Pro Se), 173 Token Lane, Sequim, WA 98382.
Christopher Marti Constantine of Counsel Inc PS, PO Box 7125, Tacoma, WA 98406-0125.
The Internal Revenue Service (IRS) assessed federal tax liens against the real property of Runar D. and Lavina R. Johnson. In an effort to avoid these federal tax liens, the Johnsons transferred their real property, through a series of questionable transactions, to Bell Consumers, Inc. (Bell Consumers). Through yet another questionable transaction, Bell Consumers transferred 10 percent of the real property to John Everett. Ultimately, the IRS sold the real property to Ross Lay at a federal tax foreclosure sale. In separate actions, Bell Consumers and Everett filed complaints to quiet title to the property, arguing that Lay had no right to it. But the trial courts concluded that neither Bell Consumers nor Everett had any right to the property. We affirm, but on a different ground.
The Johnsons owned about 10 acres of real property in Clallam County, Washington. By notice dated July 15, 1998, the IRS informed the Johnsons that they were being assessed unpaid taxes for 1993, 1994, and 1995, together with additional penalties, interest, and costs. On June 23, 1998, the Johnsons deeded the property to Cutting Edge Enterprises `for and in consideration of (21) Liberty u.S.A. {sic} Silver Dollars, plus corporate notes of undetermined value in hand paid.' 3 Clerk's Papers (CP) (No. 32682-5-II) at 258.1 Cutting Edge Enterprises describes itself as `{AN} UN-INCORPORATED FEDERAL BUSINESS ORGANIZATION IN THE FORM OF AN EXPRESS IRREVOCABLE PURE BUSINESS TRUST.' 4 CP (No. 32682-5-II) at 408.
On the same day, Cutting Edge Enterprises leased the real property to the Johnsons for $100 per month on a month-to-month basis. Runar Johnson signed the lease for Cutting Edge Enterprises in his capacity as `Trustee' and the Johnsons signed the lease as lessees. 3 CP (No. 32682-5-II) at 265.
On July 20, 1998, the IRS filed its notice of federal tax lien on all property and rights to property belonging to the Johnsons for the 1993, 1994, and 1995 taxes, additional penalties, interest, and costs that might accrue.
On August 23, 2000, Cutting Edge Enterprises and Bell Consumers entered into a `REAL PROPERTY BILL OF EXCHANGE CONTRACT & AGREEMENT.' 4 CP (No. 32682-5-II) at 439. Runar Johnson signed the contract for Cutting Edge Enterprises in his capacity as `executive trustee'; he also signed the contract for Bell Consumers identifying his capacity as `president.' 4 CP (No. 32682-5-II) at 442. Thereafter, Cutting Edge Enterprises deeded the property to Bell Consumers `for and in consideration of (21) Liberty u.S.A. {sic} Silver Dollars, plus corporate notes of undetermined value in hand paid.' 4 CP (No. 32682-5-II) at 436. Both the contract and the deed were later recorded on November 8, 2000.
On January 10, 2001, Bell Consumers and Everett entered into a `PRIVATE PROPERTY BILL OF EXCHANGE CONTRACT AND AGREEMENT.' 4 CP (No. 32682-5-II) at 383. Bell Consumers deeded `complete and absolute ownership and control, in allodium, of 10 percent' of the property to Everett. 4 CP (No. 32682-5-II) at 383. Runar Johnson signed the contract for Bell Consumers in his capacity as `President.' 4 CP (No. 32682-5-II) at 384. Neither of these documents was recorded.
On January 31, 2001, Lay purchased the property at a federal tax lien foreclosure sale. On the same day, the IRS quit claimed the property to Lay.
On July 23, 2001, Bell Consumers filed a complaint to quiet title to the property. Essentially, Bell Consumers argued that Cutting Edge Enterprises `bought all right, title, and interest from the Johnsons' and that, in turn, Bell Consumers `purchased all right, title, and interest from Cutting Edge Enterprises.' 6 CP (No. 33162-4-II) at 767-68. Arguing that the federal tax lien was invalid and that Lay obtained no legal right to the property by purchasing it at the tax foreclosure sale, Bell Consumers moved for summary judgment.
Lay filed an answer and a counterclaim.2 Lay asserted that the IRS awarded him the property at a federal tax lien foreclosure sale.
On January 30, 2004, after years of contentious litigation, including removal of the action to federal court on two separate occasions, Clallam County Superior Court Judge Wood filed his `MEMORANDUM OPINION AND ORDER' regarding the parties' respective summary judgment motions.3 2 CP (No. 33162-4-II) at 180. Among other things, the court found, `Bell Consumers, Inc. has neither appeared nor answered the third party complaint filed by Mr. Lay and is now in default.' 2 CP (No. 33162-4-II) at 181. The court also found:
Cutting Edge Enterprises is a unique entity, not in the form of any recognizable business organization. Its exact legal status is somewhat of a mystery. The `Contract of Indenture' dated December 29, 1997, asserts that Cutting Edge Enterprises is `un-incorporated' and claims its status is that of a `Federal Business Organization in the Form of an Expressly Irrevocable Pure Business Trust.' The Contract of Indenture does not state whether it is a general partnership, a limited liability partnership, a sole proprietorship or a trust organized under the Washington Trust Act. It disclaims any corporate status. . . .
. . . .
Mr. Johnson has signed the deeds and excise tax affidavits in connection with the transfers in question as the `Executive Trustee' of Cutting Edge Enterprises. As executive trustee he apparently has authority to transact business on behalf of the organization. . . . Cutting Edge Enterprises has neither appeared nor answered the third party complaint filed by Mr. Lay and is now in default.
2 CP (No. 33162-4-II) at 181-82. Therefore, the court stated:
Based upon the aforesaid findings, Bell Consumers, Inc. and Cutting Edge Enterprises are currently in default. The Johnsons claim no interest in the property in question and therefore cannot cloud the title thereto either in their individual capacity or as representatives of Bell Consumers, Inc. Nor do the Johnsons have ability in the present case to vacate the bill of sale and quit claim deed issued as a consequence of the IRS lien. The Court has already addressed the tax lien matter as being beyond the jurisdiction of this Court. It is an exclusively federal issue. There being no material issues of fact, {Lay's} request to quiet title shall therefore be granted.
2 CP (No. 33162-4-II) at 183.
Ultimately, the court granted Lay's summary judgment motion and ordered that title to `the real property . . . shall be quieted in . . . Lay, as against all interests of . . . Bell Consumers, Inc., Cutting Edge Enterprises and Runar Dean Johnson and Lavina Johnson, husband and wife.' 2 CP (No. 33162-4-II) at 185.
None of the parties appealed the court's decision. But almost a year later, on December 10, 2004, the Johnsons filed a petition to vacate the judgment under CR 60(b)(5). And on January 14, 2005, Bell Consumers filed a motion to vacate the default order and judgment under CR 55(c)(1), 60(b)(1) and (b)(5).
After hearing argument, the court denied the motions and awarded $500 sanctions to Lay. Bell Consumers later moved for reconsideration, but the court denied this motion as well.
Finally, Bell Consumers filed a notice of appeal. Essentially, Bell Consumers alleges that the trial court erred: (1) in denying its motion to vacate the default order and judgment; (2) in denying its motion for reconsideration; and (3) in granting sanctions to Lay.
On February 3, 2004, Everett filed a `Petition to Vacate Void Sale and Vacate Void Judgment and Quiet Title.' 2d Supp. CP (No. 32682-5-II) at 977. Essentially, Everett argued that the `bill of sale and quitclaim deed acquired by defendant Lay are null and void on the basis that the Johnsons had no interest in the `Property' at the time of the auction and, as a matter of public record, had no interest in the `Property' from June 22, 1998.' 2d Supp. CP (No. 32682-5-II) at 979. Thus, Everett sought to vacate the order quieting title to the property in Lay, which the court had entered in Bell Consumers, Inc. v. Lay (Clallam County Superior Court Cause No. 01-2-00582-3).4
Before any motions were heard, the Clallam County court administrator noted, `Mr. Everett and Mr. Wolfley advised that Judge Wood is recused.' 3d Supp. CP (No. 32682-5-II) at 1008. The Clallam County court administrator noted that the pending motions would be heard before Clallam County Superior Court Judge Williams.
Thereafter, Everett and Lay appeared before Judge Williams and argued several motions. After the arguments, the court stated, Report of Proceedings (RP) (May 7, 2004, No. 32682-5-II) at 21.
But before Judge Williams issued his opinion, Everett filed a `Motion for Recusal of Judge Williams,' claiming that the judge could not be a fair and impartial trier of facts. 6 CP (No. 32682-5-II) at 675. Citing RCW 4.12.050, Everett argued that his motion was timely because Judge Williams had not yet made any ruling.
Nevertheless, Judge Williams...
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