Little v. King

• Decision Date: 21 June 2007
• Docket Number: No. 77560-5.,77560-5.
• Citation: Little v. King, 161 P.3d 345, 160 Wn.2d 696 (Wash. 2007)
• Court: Washington Supreme Court
• Parties: Lisa LITTLE, Respondent, v. Annie KING, and The St. Paul Insurance Company, Petitioners.

161 P.3d 345

160 Wn.2d 696

Lisa LITTLE, Respondent, v.Annie KING, and The St. Paul Insurance Company, Petitioners.

No. 77560-5.

Supreme Court of Washington, En Banc.

Argued May 23, 2006.

Decided June 21, 2007.

Francis Stanley Floyd, Amber L. Pearce, Floyd & Pflueger PS, William Robert Hickman, Reed McClure, Katina Collier Thornock, Cozen O'Connor, Seattle, WA, for Petitioners.

Stanley Jay Rumbaugh, Rumbaugh Rideout Barnett & Adkins, Terry James Barnett, Attorney at Law, Tacoma, WA, for Respondent.

Bryan Patrick Harnetiaux, Attorney at Law, Spokane, WA, for Amicus Curiae on behalf of Washington State Trial Lawyers Association.

CHAMBERS, J.

¶ 1 A driver whose vehicle collided with another and an underinsured motorist insurer moved to vacate a default judgment.The driver, who had not filed an answer, came to the default judgment hearing but decided not to contest entry of judgment.The insurer, who was given notice of the litigation, chose not to intervene.We conclude that these moving parties have failed to make the required showing to set aside the judgment.We also conclude that because the insurer failed to intervene, it was not a party and was not entitled to notice of the hearing.

¶ 2 The driver and the insurer also complain that the trial judge did not enter formal findings of fact and conclusions of law.Findings of fact and conclusions of law are both desirable and required by CR55(b)(2).When the findings and conclusions are missing or are defective, the proper remedy is remand for entry of adequate ones unless the appellate court is persuaded that sufficient basis for review is present in the record.In this case, we find the record is adequate for our review.We affirm the Court of Appeals and remand for reinstatement of judgment.

FACTS

¶ 3 On March 16, 1999, Annie King rear-ended Lisa Little's automobile twice.The first time, both King and Little were in the fast lane on a freeway.The second time, they were merging back into traffic after exchanging insurance information.The record suggests that King was 16 or 17 years old at the time of the accidents.

¶ 4 At the time of the accidents, Little was driving on work-related business.Since 1984, Little had worked as an outside sales representative at Jim Little Staple Supply, Inc. Little immediately felt some neck and lower back pain but continued on because she had work to do and she thought the pain would pass.

¶ 5 The next day, Little consulted a chiropractor for back and neck spasms and was eventually referred to a neurosurgeon.Three months after the accidents, Little had a magnetic resonance image (MRI) done of the neck region of her cervical spine, which indicated to her doctor that surgery was needed.Five months after the accidents, Little had the first of two neck surgeries: "an anterior cervical discectomy and fusion" at the C5-6 level, using bone grafting and a metal plate to accomplish the fusion.Clerk's Papers(CP)at 60.After this first surgery, Little experienced some improvement in her neck-related symptoms, primarily elimination of radicular pain in her arms.However, Little's back and other neck pain remained.Little was referred to a pain management specialist and continued with treatment to her neck and back.This treatment included three selective transforaminal injections into her spine, pain medicine, and physical therapy.She also received further diagnostic testing including a discogram and additional MRI studies.After the two accidents, Little initially returned to work on a reduced schedule, working 4-5 hours a day.Little reported that her last day of work was August 8, 2000, due to her medical condition.

¶ 6 In November 2001, Little had microdecompressive back surgery at three lumbar levels.According to her doctors, the neck region of Little's cervical spine continued to deteriorate, as did her lumbar spine.Little's treating doctors declared that it was more probable than not that the two accidents in March 1999 caused "spinal problems [that] are serious, and will permanently reduce her physical capacities, both work-related and in her recreational and family life."CPat 116.

¶ 7The parties learned that the coverage on King's car had lapsed and thus she was an uninsured motorist at the time of the accident.Little was driving in the scope of her employment at the time, and her employer had uninsured motorist (UIM) coverage from The St. Paul Insurance Company.Little's counsel was in communication with St. Paul both before and after formally bringing suit against King.This communication included a letter to St. Paul's adjuster outlining Little's medical condition and treatment, alerting the adjuster that Little was likely to be permanently disabled and informing St. Paul that her past and future out-of-pocket expenses and wage loss alone could exceed $1 million.On May 22, 2002, Little's counsel mailed St. Paul a copy of the summons and complaint, the order setting case schedule, and the notice of deposition of Ms. King.St. Paul would have been permitted to intervene in the case if it had moved to do so because it was at risk of liability by virtue of its UIM obligations.SeeLenzi v. Redland Ins. Co.,140 Wash.2d 267, 280, 996 P.2d 603(2000);Fisher v. Allstate Ins. Co.,136 Wash.2d 240, 245-46, 961 P.2d 350(1998).St. Paul took no action to intervene.

¶ 8 Although youthful and uninsured, King did respond to the summons and complaint.While King did not file an answer, she did appear for her deposition.Despite receiving notice, St. Paul did not send a representative.On November 5, 2002, at St. Paul's request, Little's attorney sent St. Paul a copy of the transcript of the deposition, attached to a cover letter explaining that Little "continues to experience difficulties with her lumbar spine in particular."CPat 413.Little's attorney also enclosed Little's most recent MRI study indicating "progressive disc protrusion at L4-5 with right neural foramen narrowing, these findings having an adverse effect on the right L-4 nerve root."Id.Additional surgeries were performed.

¶ 9 Thirteen months after filing the complaint and eleven months after serving King and sending copies of the pleadings to St. Paul, Little moved for an order of default and default judgment (or, alternatively, for summary judgment) against King.Little filed a declaration of mailing, indicating that King was sent all documents related to the motions.Little continued to require medical attention during this time.

¶ 10 On May 23, 2003, a hearing was held on Little's motions.Little appeared at the hearing through her attorney of record and King was present, without an attorney.Little submitted numerous documents relating to her medical condition, her medical expenses, and her future prognosis, including declarations from her two surgeons and her clinical psychologist, the postoperative reports, the MRI reports, her disability certifications, the medical consultation notes, medical billsshe had submitted to the Department of Labor and Industries, and a copy of King's deposition.

¶ 11 At the hearing, Judge Laura Gene Middaugh gave King an opportunity to file an answer and explained that if she did, default judgment would be denied.Judge Middaugh then adjourned the proceedings to give King the opportunity to draft and file an answer.When the court reconvened, King declined the judge's invitation, explaining she had no real dispute with the factual allegations in the complaint, though she disputed the amount of damages as unreasonable.

¶ 12Judge Middaugh did not immediately enter judgment because she was concerned about calculating damages based on the record before her, and she requested counsel supplement the record.After that information was received, the judge entered a default judgment in favor of Little for $2,155,835.58, consisting of $249,234.48 for past economic damages, $1,256,601.10 for future economic damages, and $650,000 for general damages.CPat 306.However, the trial court did not prepare findings of fact or conclusions of law.A few weeks later, Little's attorney sent St. Paul a certified copy of the default judgment and a request for $2 million in uninsured motorist coverage payments.

¶ 13 About two weeks after that, St. Paul moved to intervene and vacate the default judgment.Subsequently, King, now represented by counsel, joined in St. Paul's motion.A different judge granted King and St. Paul's motions.Little appealed.The Court of Appeals reversed and we granted review.Little v. King, noted at 156 Wash.2d 1020, 132 P.3d 735(2006).

STANDARD OF REVIEW

¶ 14We review a trial court's decision on a motion to set aside a default judgment for abuse of discretion.Yeck v. Dep't of Labor & Indus.,27 Wash.2d 92, 95, 176 P.2d 359(1947).Among other things, discretion is abused when it is based on untenable grounds, such as a misunderstanding of law.Braam v. State,150 Wash.2d 689, 706, 81 P.3d 851(2003).

ANALYSIS

¶ 15 First, we note that St. Paul, unlike King, had not appeared in the action prior to the default judgment hearing.Since St. Paul had not appeared, it was not entitled to notice of this hearing.Dlouhy v. Dlouhy,55 Wash.2d 718, 721, 349 P.2d 1073(1960).¹

¶ 16We now turn to whether the trial court abused its discretion in vacating the default judgment under CR60(b)(1).²As a general matter, default judgments are not favored because "`[i]t is the policy of the law that controversies be determined on the merits rather than by default.'"Griggs v. Averbeck Realty, Inc.,92 Wash.2d 576, 581, 599 P.2d 1289(1979)(quotingDlouhy,55 Wash.2d at 721, 349 P.2d 1073).But we also value an organized, responsive, and responsible judicial system where litigants acknowledge the jurisdiction of the court to decide their cases and comply with court rules.SeeGriggs,92 Wash.2d at 581, 599 P.2d 1289.The fundamental principle when balancing these competing policies is "`whether or not...