Smith ex rel. Smith v. Arnold, 30488-1-II.

• Decision Date: 19 April 2005
• Docket Number: No. 30488-1-II.,30488-1-II.
• Citation: 127 Wn. App. 98,127 Wash. App. 98,110 P.3d 257
• Court: Washington Court of Appeals
• Parties: Caleb SMITH, a minor by and through his mother, Karen SMITH, Respondent, v. Beverly ARNOLD and Marvin Arnold, wife and husband and the marital community comprised thereof, Appellants.

110 P.3d 257

127 Wn. App. 98

127 Wash. App. 98

Caleb SMITH, a minor by and through his mother, Karen SMITH, Respondent, v. Beverly ARNOLD and Marvin Arnold, wife and husband and the marital community comprised thereof, Appellants.

No. 30488-1-II.

Court of Appeals of Washington, Division 2.

April 19, 2005.

Thomas Lee Schwanz, Snook Schwanz, Kirkland, WA, Marilee C. Erickson, Reed McClure, Seattle, WA, for Appellant.

Mark W. Watson, Attorney at Law, Milton, WA, for Respondents.

QUINN-BRINTNALL, C.J.

¶ 1 Beverly and Marvin Arnold appeal the superior court's order denying their motion to vacate an order of default in the personal injury suit against them. The Arnolds did not receive notice of the motion for an entry of default because they had not filed a notice of appearance. Nevertheless, they maintain that they were entitled to notice because they had "informally" appeared in the lawsuit through their out-of-court contacts with the plaintiff. Alternatively, the Arnolds argue that the default order should have been vacated under CR 55 because their failure to appear was the result of excusable neglect and they exercised due diligence in seeking to have the order set aside. We affirm.

FACTS

¶ 2 On October 3, 1997, while in Oregon, Beverly Arnold was involved in a single-car accident. At that time, the Arnolds were insured by Allstate Insurance Company. After the accident, Allstate settled lawsuits brought by three of the passengers in Beverly Arnold's vehicle. Caleb Smith, the Arnolds' grandson, and a fourth passenger in the vehicle, did not file a lawsuit.

¶ 3 Allstate sent letters to Smith after the accident indicating that he was likely covered under the Arnolds' personal injury protection (PIP) coverage. These letters informed Smith of the claims adjuster responsible for handling any PIP claim. In 2000 and 2001, Allstate received Smith's medical bills and demands for payment pursuant to the PIP coverage. In June 2001, Allstate wrote Smith explaining that a new claims adjuster had been assigned to the PIP claim. The letter also asked about the timeliness of Smith's treatment and submission of bills.

¶ 4 On May 20, 2002, Smith sent a settlement demand letter to Allstate in which he alleged that the accident was due to Beverly Arnold's negligence. In June 2002, Allstate called Smith to "discuss the claim" and the Oregon statute of limitations, which Allstate concluded would expire in October of that year. Clerk's Papers (CP) at 28. In August 2002, Allstate sent Smith a settlement offer.¹ Smith did not respond to the offer.

¶ 5 On October 1, 2002, Smith sued the Arnolds for negligence. Although they were properly served three days later, the Arnolds did not notify Allstate of the suit because Beverly Arnold was ill and the suit "was quite low on [their] list of priorities at the time." CP at 23. According to the Arnolds, they were not aware that they needed to forward the summons and complaint to their insurance company.

¶ 6 On November 20, 2002, Allstate received a copy of the summons and complaint from Smith's counsel.² But, the claims adjuster for the case was on vacation from November 23 to December 2 and did not review the documents until December 10. At that time, the claims adjuster contacted Smith's counsel, leaving a message inquiring about the case and whether a default order had been obtained. The parties dispute whether Smith's attorney responded to the message. After leaving the message, the claims adjuster also contacted Allstate's counsel and informed him that a notice of appearance should be filed.

¶ 7 No further communications between the parties occurred, and Smith obtained an order of default on December 20, 2002. Allstate's counsel filed a notice of appearance seven days later. On January 26, 2003, the Arnolds sent a letter to Smith requesting that the default order be set aside. That request was rejected.

¶ 8 On March 25, 2003, the Arnolds filed a motion to vacate the default order. They maintained that they had informally appeared in the lawsuit and that they were therefore entitled to notice of the motion for an entry of default. The superior court denied the motion, concluding that Allstate had not shown an intent to defend the lawsuit when it failed to promptly file a notice of appearance after it had reviewed the summons and complaint on December 10.

¶ 9 This court subsequently accepted the Arnolds' motion for discretionary review.

ANALYSIS

¶ 10 In Washington, "[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) (alteration in original) (quoting Dlouhy v. Dlouhy, 55 Wash.2d 718, 721, 349 P.2d 1073 (1960)). Relying on the disfavored status of default orders and judgments, the Arnolds present two arguments for why the default order in this case should have been vacated. First, they contend that while they did not file a formal appearance in the lawsuit, they "informally" appeared and were, therefore, entitled to notice of the default hearing. Alternatively, they maintain that the default order should have been set aside because their failure to appear resulted from excusable neglect and they diligently sought to have the default order set aside once they knew of it.

INFORMAL APPEARANCE

¶ 11 If a party has "appeared" before a motion for default has been filed, that party is entitled to notice of the motion before the trial court may enter a valid default order. CR 55(a)(3). A party "appears" in an action when the party "answers, demurs, makes any application for an order therein, or gives the plaintiff written notice of his appearance." Shreve v. Chamberlin, 66 Wash.App. 728, 732, 832 P.2d 1355 (1992) (quoting RCW 4.28.210), review denied, 120 Wash.2d 1029, 847 P.2d 481 (1993).

¶ 12 But these methods are not exclusive. "Informal" acts have also been held to constitute an "appearance." Prof'l Marine Co. v. Those Certain Underwriters at Lloyd's, 118 Wash.App. 694, 708, 77 P.3d 658 (2003); Gage v. Boeing Co., 55 Wash.App. 157, 162, 776 P.2d 991, review denied, 113 Wash.2d 1028, 784 P.2d 530 (1989). Whether a party has "appeared" informally is generally a "question `of intention, as evidenced by acts or conduct, such as the indication of a purpose to defend or a request for affirmative action from the court, constituting a submission to the court's jurisdiction.'" Gage, 55 Wash.App. at 161, 776 P.2d 991 (quoting Annotation, What Amounts to "Appearance" Under Statute or Rule Requiring Notice, to Party Who Has "Appeared," of Intention To Take Default Judgment, 73 A.L.R.3d 1250, 1254 (1976)). A party will not be considered to have appeared informally if the plaintiff could reasonably harbor illusions about whether the party intended to defend the matter. Wilson v. Moore & Assocs., Inc., 564 F.2d 366, 369 (9th Cir.1977); Gage, 55 Wash.App. at 162, 776 P.2d 991.

¶ 13 With that said, the standard governing appellate review of a trial court's resolution of an informal-appearance issue is not well settled. Divisions One and Three of this court have stated that a trial court's determination of whether a party has informally appeared is reviewed for an abuse of discretion. See Prof'l Marine Co., 118 Wash.App. at 708, 77 P.3d 658; Ellison v. Process Sys. Inc. Const. Co., 112 Wash.App. 636, 643, 50 P.3d 658 (2002), review denied, 148 Wash.2d 1021, 66 P.3d 637 (2003); Batterman v. Red Lion Hotels, Inc., 106 Wash.App. 54, 59, 21 P.3d 1174 (2001). But in one case, Division One used language suggesting that an informal appearance ruling is simultaneously reviewed for an abuse of discretion and as a factual finding:

We review the trial court's determination of whether a party has informally appeared for an abuse of discretion.

....

While some actions may be insufficient as a matter of law to constitute an appearance, the question of whether actions are sufficient to constitute an informal appearance will generally be a question of fact to be determined by the trial court. In reviewing such a determination, we will not substitute our judgment for that of the trial court.

Colacurcio v. Burger, 110 Wash.App. 488, 495, 497, 41 P.3d 506 (2002), review denied, 148 Wash.2d 1003, 60 P.3d 1211 (2003).

¶ 14 Whether a party has or has not appeared is a question of fact the trial court must resolve based on the evidence presented. A party's formal appearance is generally evidenced by filing and serving a notice of appearance with the court and on all proper parties. The existence of such documentary evidence is conclusive of the party's appearance and entitlement to notice of further proceedings. Likewise, a trial court's finding that a party has appeared informally must also be supported by evidence of actions manifesting an unquestionable intent to appear and defend the matter in court.

¶ 15 Divisions One and Three's cases are inconsistent with the long-standing rule for reviewing a trial court's factual findings, which is whether the record contains substantial evidence to support the factual findings. Nguyen v. Dep't of Health Med. Quality Assurance Comm'n, 144 Wash.2d 516, 530, 29 P.3d 689 (2001), cert. denied, 535 U.S. 904, 122 S.Ct. 1203, 152 L.Ed.2d 141 (2002). Substantial evidence is evidence sufficient to persuade a fair-minded, rational person of the truth of a declared premise. Davis v. Microsoft Corp., 149 Wash.2d 521, 531, 70 P.3d 126 (2003).

¶ 16 As a matter of law, a defendant who appears in an action but is not given notice of a plaintiff's intention to seek an order of default is entitled to have any such order vacated. CR 55(a)(3). And even where there is no appearance, we review a court's order for an abuse of discretion when the defendant sought relief from judgment under CR 60 or moved to have the default order vacated for good cause under CR 55(c). Scanlon v. Witrak, 110 Wash.App. 682, 686, 42 P.3d 447,review denied, 147 Wash.2d 1024, 60 P.3d 92 (...