Lakewest Condominium Owners Association v. Tokio Marine & Nichido Fire Insurance Company, Ltd., No. 62852-6-I (Wash. App. 6/1/2010)

• Decision Date: 01 June 2010
• Docket Number: No. 62852-6-I.,62852-6-I.
• Parties: LAKEWEST CONDOMINIUM OWNERS ASSOCIATION, Appellant, v. TOKIO MARINE & NICHIDO FIRE INSURANCE COMPANY, LTD., Respondent.
• Court: Washington Court of Appeals

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LAKEWEST CONDOMINIUM OWNERS ASSOCIATION, Appellant, v. TOKIO MARINE & NICHIDO FIRE INSURANCE COMPANY, LTD., Respondent.

No. 62852-6-I.

Court of Appeals of Washington, Division One.

Filed: June 1, 2010

Appeal from King County Superior Court. Docket No: 07-2-16458-8. Judgment or order under review. Date filed: 12/11/2008. Judge signing: Honorable Michael J Trickey.

Counsel for Appellant(s), Gregory Louis Harper, Harper | Hayes PLLC, 600 University St Ste 2420, Seattle, WA, 98101-1129.

Todd Christopher Hayes, Harper Hayes PLLC, 600 University St Ste 2420, Seattle, WA, 98101-1129.

Charles K Davis, Harper Hayes PLLC, 600 University St Ste 2420, Seattle, WA, 98101-1129.

Counsel for Defendant(s), Dennis Smith, Wilson Smith Cochran Dickerson, 1215 4th Ave Ste 1700, Seattle, WA, 98161-1010.

James Thomas Derrig, Eklund Rockey Stratton PS, 521 2nd Ave W, Seattle, WA, 98119-3927.

Counsel for Respondent(s), Steven Walter Fogg, Corr Cronin Michelson Baumgardner & Pree, 1001 4th Ave Ste 3900, Seattle, WA, 98154-1051.

Seann C Colgan, Attorney at Law, 1001 4th Ave Ste 3900, Seattle, WA, 98154-1051.

Thomas Lether, Cole Lether Wathen & Leid PC, 1000 2nd Ave Ste 1300, Seattle, WA, 98104-1082.

UNPUBLISHED OPINION

DWYER, C.J.

The Lakewest Condominium Owners Association challenges the trial court's order vacating a default judgment obtained against Tokio Marine & Nichido Fire Insurance Company, Ltd. The motion to vacate was brought on CR 60(b)(5) and CR 60(b)(11) grounds. Based on the record herein, we cannot find a basis supporting the trial court's order. Accordingly, we reverse.

I

Lakewest Condominiums is located in Seattle, near Lake Union. In 2005, the Lakewest Condominium Owners Association discovered that several Lakewest buildings would need major repairs due to severe damage from rain. Lakewest hired an engineering firm to investigate the damage and hired a construction company to provide an estimate for making the necessary repairs.¹ The estimated repair cost was in excess of $4.8 million.

Lakewest filed claims for the damage with numerous insurance companies based on policies issued by the various insurers from 1989 to 2006. Two policies from Traders & Pacific Insurance Company covered Lakewest, one from March 22, 1993 to October 1, 1993 and the other from October 1, 1993 to October 1, 1994. At the time each of these policies was issued, Traders & Pacific was wholly owned by Houston General Insurance Company, which was a directly-owned subsidiary of Tokio Marine & Fire Insurance Company, Ltd., a Japanese corporation (Tokio-Japan).

Lakewest discovered that Traders & Pacific, along with Houston General, had been sold by Tokio-Japan but none of the subsequent owners had acquired Traders & Pacific's preexisting liabilities or policies. Ultimately, an employee of one subsequent owner suggested that Lakewest should file its claim with Tokio through Tokio's third-party administrator, Cunningham & Lindsey. Cunningham & Lindsey subsequently denied Lakewest's claim, stating that the damage was excluded under the policies' language.²

Subsequently, in May 2007, Lakewest filed suit against seven different insurance companies, including Tokio. Lakewest served Tokio through the Washington State Insurance Commissioner. The insurance commissioner certified that it had served Tokio through the company's New York office. The New York office location is the office for the United States' branch of Tokio (Tokio-U.S.). Tokio-Japan established Tokio-U.S. in 1911 so that it could conduct insurance business in the United States. Tokio-U.S. is authorized to sell insurance in the State of Washington and has consented to and authorized the Washington State Insurance Commissioner to accept service of process on Tokio-U.S.'s behalf.

The summons and complaint were delivered to Tokio-U.S.'s mailroom, where an employee signed for receipt of the documents. However, Tokio's registered agent and general counsel, B. Steven Goldstein, claimed to have never personally received the documents.

Tokio failed to appear in Lakewest's lawsuit. Eventually, Lakewest moved for entry of an order of default against Tokio. The trial court granted Lakewest's motion in August 2007. Then, in October 2007, Lakewest moved for entry of a default judgment against Tokio. The trial court granted the motion. Lakewest's complaint did not state a specific amount of damages, but, in determining the amount of damages to award, the trial court considered the declarations and supporting documents from Lakewest's structural engineer and Lakewest's contractor. The trial court granted all of Lakewest's requested damages in the amount of $7,525,530.15, including more than $2.6 million in attorney fees based on a 35 percent contingency fee agreement.³

At the same time that it obtained the default judgment, Lakewest moved to amend the case caption, its complaint, and the order of default in order to change Tokio's denotation from "Tokio Marine & Fire Insurance Company, Ltd." to "Tokio Marine & Nichido Fire Insurance Company, Ltd."⁴ The trial court granted Lakewest's motion to amend. Lakewest did not serve a copy of the amended complaint on Tokio.

More than one year after entry of the default judgment, Lakewest sent Tokio a letter demanding satisfaction of the judgment. Tokio claimed not to be aware of the proceeding against it until this time. Tokio then entered an appearance and moved to vacate the default judgment. Subsequently, the trial court⁵ vacated the default judgment without entering findings of fact or conclusions of law.

Lakewest appealed from the trial court's order granting Tokio's motion to vacate the default judgment.

Tokio then moved in the trial court for a stay of the proceedings against the remaining defendant insurance companies pending resolution of Lakewest's appeal.⁶ The trial court granted the stay. In support of a motion for reconsideration of the stay, Lakewest included new documentary evidence—related to the question of whether Tokio-U.S. and Tokio-Japan are the same entity—that had not been presented to the trial court at the time it considered the motion to vacate the default judgment. The motion for reconsideration was denied.

II

Default judgments are generally disfavored in Washington because "[w]e prefer to give parties their day in court and have controversies determined on their merits."Morin v. Burris, 160 Wn.2d 745, 754, 161 P.3d 956 (2007). However, our policy of disfavoring default judgments is constrained by applicable court rules.CR 55 governs default judgments. When a party against whom a judgment is sought has failed to appear, an entry of default may be ordered. CR 55(a). Subsequently, a default judgment may be entered. CR 55(b). However, CR 55 also provides that "if a judgment by default has been entered, [the trial court] may likewise set it aside in accordance with rule 60(b)." CR 55(c)(1). CR 60(b) provides, in relevant part:

(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;

. . .

(5) The judgment is void;

. . . (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.

Tokio moved to vacate the default judgment entered against it based on CR 60(b)(5) and CR 60(b)(11). The trial court did not enter written findings of fact and conclusions of law or otherwise articulate its reasoning for granting the motion. Lakewest contends that no basis existed for the trial court to have vacated the default judgment. Thus, we consider in turn each of the potential bases articulated by the parties.

III

Lakewest first contends that the trial court could not properly vacate the default judgment pursuant to CR 60(b)(5). Tokio argued before the trial court that service of process was improper because Lakewest had served Tokio-U.S. with the summons and complaint but had obtained the default judgment against Tokio-Japan. Thus, Tokio argued, the superior court did not have personal jurisdiction over Tokio-Japan. Lakewest contends that Tokio-U.S. and Tokio-Japan are the same entity and, therefore, personal jurisdiction existed. The determination of whether Tokio-Japan and Tokio-U.S. are the same entity or, conversely, are separate entities is a factual question. However, the trial court made no factual findings. The lack of necessary factual findings by the trial court precludes us from determining the answer to the following question: was it proved in the trial court that the party against whom the judgment was entered was not the same entity as the entity that was served?

In their briefing and in oral argument before this court, the parties evinced much confusion as to our role in this dispute, the applicable standard of review that we are to apply, and the trial court's role. Each party treated the question presented—whether the entity against which judgment was entered was the same entity as that which was served through the Office of the Insurance Commissioner—as a question of law. It is not.

We review de novo questions of law and the application of the law to established facts. Attorney Gen.'s Office, Public Counsel Section v. Utils. & Transp. Comm'n, 128 Wn. App. 818, 827, 116 P.3d 1064 (2005). Thus, when the underlying facts are undisputed, the determination of whether a superior court has personal jurisdiction is a question of law that we review de novo. Lewis v. Bours, 119 Wn.2d 667, 669, 835 P.2d 221 (1992) (quoting MBM Fisheries, Inc. v. Bollinger Mach. Shop & Shipyard, Inc., 60 Wn. App. 414, 418, 804 P.2d 627 (1991)). Similarly,...