Opinion
53351-7-I
Filed: March 28, 2005 UNPUBLISHED OPINION
Appeal from Superior Court of King County. Docket No. 01-2-35169-9. Judgment or order under review. Date filed: 11/07/2003. Judge Signing: Hon. Michael J. Fox.
Counsel for Appellant(s), William Arthur Keller, Attorney at Law, 701 5th Ave Ste 2500, Seattle, WA 98104-7022.
Dennis Michael Moran, Moran Windes Wong PLLC, 5608 17th Ave NW, Seattle, WA 98107-5207.
Counsel for Respondent(s), Philip Lempriere, Attorney at Law, 1301 5th Ave Ste 1515, Seattle, WA 98101-2625.
Catharine M Morisset, Keesal Young Logan, 1301 5th Ave Ste 1515, Seattle, WA 98101-2625.
Bergen Industries Fishing Corporation and OOO Rybocomflot (Bergen), the judgment creditor, registered its foreign judgment in King County Superior Court and used procedures in chapter 6.27 RCW to obtain several ex parte, post-judgment writs of garnishment. One of these was served on a Seattle bank that held funds for the judgment debtor, Joint Stock Holding Company Dalmoreproduct (DMP), in the name of a third party, Dalmoreproduct Fishing Services (DFS). Bergen served a separate writ on DFS. The bank froze funds in DFS's accounts in response to the writ, which named DMP the defendant/judgment debtor. DFS claims that RCW 6.27.060 is unconstitutional because it permits judgment creditors to garnish the funds of non-judgment debtors without due process of law. DFS further claims that it prevailed in supplemental proceedings below, that the unconstitutional taint of the impermissible writ invalidates all the lower court proceedings except the summary judgment in its favor, that the lower court impermissibly stayed an order and granted an injunction, and that DFS should be awarded attorney fees and costs for all proceedings. We hold that the trial court did not abuse its discretion in ordering the stay or the injunction, or in awarding attorney fees. We affirm.
FACTS
In 1995, Bergen chartered three vessels to DMP. DFS was DMP's Seattle-based manager of these vessels. In December 2000, Bergen terminated the charter party and sued DMP for failure to pay charter hire. In May 2001, DMP agreed through a Consent Order to deposit funds it generated from the operation of the three vessels into Seattle bank accounts held in DFS's name (Designated Bank Accounts). The Consent Order required these proceeds to be deposited in Seattle bank accounts `in the name of DFS' in order to pay any judgment if Bergen prevailed at trial. DMP then issued a Notice to All DMP Employees and Agents (Notice) specifying the Washington Mutual Bank (WaMu) account numbers, in DFS's name, that would constitute the Designated Bank Accounts. Bergen subsequently prevailed at the English trial and obtained a judgment against DMP in August 2001 for more than $48 million. Bergen first filed an action in federal district court for the Western District of Washington to collect on the English judgment. Bergen registered its English judgment with the federal court and obtained a writ of garnishment against WaMu. As RCW 6.27.080(3) applies to the writ to WaMu, a financial institution, the writ would only be effective to attach deposits of the defendant. In the writ, Bergen named itself the judgment creditor and DMP the judgment debtor/defendant. It did not identify DFS as the judgment debtor/defendant. The writ further provided: `Counsel for the plaintiff has knowledge that the defendant's account numbers are: 208-00671101, 208-0065201, 208-00629001.' These are the three account numbers identified as the Designated Bank Accounts in the Notice prepared by DMP pursuant to the consent order. WaMu froze the accounts when the writ was served.
Two writs were served on WaMu in the federal action; the first writ was amended to include a reduced foreign judgment amount.
The Notice identifies account number 208-00652501. The writ identifies account number 208-0065201. This seems to be a typographical error in the writ, as the account numbers are very similar.
WaMu answered the amended writ, stating that through DFS, it held $554,735.98 due and owing to the judgment debtor. In an attachment, WaMu stated `Pursuant to RCW 6.27.290 garnishee prays the court to determine whether or not the named defendant is the same entity as the defendant named in the writ based on a similarity of names.' On DMP's motion, the federal action and related writs were dismissed on February 25, 2002, for lack of subject matter jurisdiction.
In December 2001, prior to the dismissal of the federal action, Bergen initiated parallel proceedings and registered its foreign judgment in King County Superior Court. In these proceedings, Bergen sought and issued new writs upon WaMu and upon DFS. The state court writ to WaMu was similar to the federal court writ, but did not identify the three bank accounts. Like the federal writ, it identified DMP, not DFS, as the judgment debtor/defendant. The writ was served on January 18, 2002. WaMu answered, stating that defendant maintained a bank account at WaMu but that it held no funds in the account. It made the same request to the court to determine the identity of the parties. WaMu then amended its answer, stating that it had frozen funds pursuant to the prior federal writ such that `if the Federal action fails, the amount available to the creditor in the state action is $551,719.26.'
Bergen also obtained writs of garnishment against many other parties in superior court. The only writs at issue in this appeal are those against WaMu as garnishee and against DFS as garnishee.
The amount available under the state writ was slightly less than the amount initially frozen under the federal writ because between the issuance of the federal writ and the issuance of the state writ, DFS became further indebted to WaMu.
As required by RCW 6.27.290, the court issued a citation to DFS to appear and answer concerning its identity. DFS answered the citation, stating that it was not the same person as DMP. DFS demanded a hearing pursuant to
RCW 6.27.290. The court set an identity of parties hearing for May 16, 2002. In the interim, the funds in the accounts WaMu held in DFS's name remained frozen. WaMu sought and obtained a court order on March 19, 2002, permitting it to deposit the frozen funds into the court's registry pending a hearing to determine ownership of the funds.
Although WaMu's answer does not state the authority for freezing the funds, RCW 30.22.210 provides authority for a financial institution to refuse to disburse funds when it is aware of a dispute between persons as to their respective rights to the funds.
The identity of parties issue was eventually resolved by summary judgment. The court found that DMP and DFS were not the same person and ordered the funds released to DFS. The trial court did not address DFS's alternative basis for seeking summary judgment, that chapter 6.27 RCW is unconstitutional. In its order the trial court ordered the funds be released to DFS. However, the court stayed its order `for 30 days to permit appeal or alternative relief.' On August 29, 2002, the court granted Bergen's motion to make DFS a party to supplemental proceedings to determine ownership of the funds, and enjoined the court clerk from releasing funds in the court's registry to DFS pending the outcome of supplemental proceedings. On DFS's motion, the court ordered Bergen to post a $150,000 bond to secure the injunction. Bergen posted the bond. In addition to the WaMu writ of garnishment, Bergen obtained a separate state court writ directed to DFS as garnishee, naming DMP as judgment debtor/defendant. This writ was served on January 18, 2002, the same day the WaMu writ was served. DFS answered that it had no indebtedness to DMP. Through declarations filed by its president in this action, DFS asserted that all the funds in the accounts belonged to DFS, as compensation for DFS's services to DMP. Bergen controverted DFS's answer, stating it had good reason to believe that DFS's answers to the writs were incorrect. The superior court consolidated the identity of parties issue with the supplemental proceedings to which it had made DFS a party. On August 29, 2003, the jury awarded approximately half the frozen funds to Bergen. The court determined that Bergen was the prevailing party in the controversion action and awarded Bergen attorney fees and costs under RCW 6.27.230. DFS argues that RCW 6.27.060 is unconstitutional because it allows the prejudgment garnishment of property that does not belong to a judgment debtor without due process of law. Further, DFS argues that the court abused its discretion in staying the release of funds after determining DFS and DMP were not the same legal entity and in issuing the injunction, initially without bond. DFS argues that because it prevailed on the identity-of-parties issue, the court erred in finding that Bergen was the prevailing party and granting attorney fees and costs to Bergen. DFS argues that because the initial WaMu garnishment was unconstitutional, all subsequent proceedings are tainted and should be reversed.
Based on the consent order, the Notice identifying the bank account numbers and identifying DFS as the holder of the bank account numbers, and the fact that Bergen issued writs both to DFS and to WaMu as garnishees against DMP as judgment debtor, it is clear that Bergen knew that DFS and DMP were not the same person, but was seeking to garnish funds held by DFS for the benefit of DMP.
DFS listed some property being held, but answered that it owed no debt to DMP.
ANALYSIS I. Constitutional Challenges to Chapter 6.27 RCW
To the extent that DFS is arguing the trial court should have ruled on the constitutionality of chapter 6.27 RCW in its summary judgment ruling, it has no standing to make the argument. Only an aggrieved party may seek appellate review. `An aggrieved party is one who has a present, substantial interest, as distinguished from a mere expectancy, or . . . contingent interest in the subject matter.' Tinker v. Kentucky Fried Chicken, 95 Wn. App. 761, 764, 977 P.2d 627 (internal quotation omitted) `An aggrieved party is one whose proprietary, pecuniary, or personal rights are substantially affected.' In re Guardianship of Lasky, 54 Wn. App. 841, 848, 776 P.2d 695 (1989). DFS prevailed at summary judgment. DFS may not seek review of a decision in its favor merely because it disagrees with the reasoning of the decision. City of Tacoma v. Taxpayers of Tacoma, 108 Wn.2d 679, 685, 743 P.2d 793 (1987). DFS cannot be considered `aggrieved' and therefore does not have standing to appeal the trial court's summary judgment order.
Bergen argues that DFS's challenge to the constitutionality of chapter 6.27 RCW is moot. `A case is technically moot if the court cannot provide the basic relief originally sought, or can no longer provide effective relief.' Snohomish County v. State, 69 Wn. App. 655, 660, 850 P.2d 546 (1993), (internal citation omitted).
To the extent that DFS argues that chapter 6.27 RCW is unconstitutional as applied, its claim is moot because this court cannot provide effective relief. If this court were to reach the constitutional issue and decide in favor of DFS, the relief would be to quash the writ. See, e.g., Olympic Forest Products, Inc., v. Chaussee Corp., 82 Wn.2d 418, 437, 511 P.2d 1002 (1973). But the writ of garnishment against WaMu has already been dismissed by the trial court in its summary judgment order. Therefore, this court can provide no effective relief and the case is moot. DFS's argument is essentially a request for an advisory opinion on a constitutional issue. `It is a basic rule of judicial restraint that the issue of the constitutionality of a statute will not be passed upon if the case can be decided without reaching that issue.' City of Kirkland v. Steen, 68 Wn.2d 804, 809, 416 P.2d 80 (1966).
DFS argues that the as-applied claim is not moot because 42 U.S.C. sec. 1983 provides a remedy for parties who have had their property illegally seized in violation of their due process rights. (citing Van Blaricom v. Kronenberg, 112 Wn. App. 501, 50 P.3d 266 (2002)). The Van Blaricom case noted that a party whose due process rights have been violated by an unconstitutional property attachment may recover against the attorney who effected the attachment by demonstrating that the attorney actually knew or should have known that the attachment procedure used was unconstitutional. See Van Blaricom, 112 Wn. App. at 514. The Van Blaricom case further outlined claims, defenses, procedures, and provision for attorney fees for the prevailing party in such an action. See Van Blaricom, 112 Wn. App. at 514-15 n. 14. But, DFS has not brought a sec. 1983 action here. By bringing its as-applied constitutional claim outside the contours of the sec. 1983 action, DFS seeks a backdoor to challenge the constitutionality of chapter 6.27 RCW and to avoid addressing the claims and defenses allowed in such an action. This claim is not properly before us.
`In general, when a case involves only moot questions or abstract propositions, the appeal should be dismissed.' In re Detention of A.S., 91 Wn. App. 146, 154, 955 P.2d 836 (1998); RAP 18.9(c)(2). `A widely recognized exception to this general rule lies within the court's discretion when the case concerns `matters of continuing and substantial public interest.'' A.S., 91 Wn. App. at 154-55 (quoting Dunner v. McLaughlin, 100 Wn.2d 832, 838, 676 P.2d 444 (1984)). The criteria to be considered in determining whether a sufficient public interest is involved are: `(1) the public or private nature of the question presented; (2) the desirability of an authoritative determination [that] will provide future guidance to public officers; and (3) the likelihood that the question will recur.' In re Cross, 99 Wn.2d 373, 377, 662 P.2d 828 (1983); Sorenson v. City of Bellingham, 80 Wn.2d 547, 558, 496 P.2d 512 (1972). While we acknowledge the discretion to reach the constitutional issues, we decline to do so.
II. Trial Court Stay and Injunction
DFS challenges the trial court's order staying release of funds in the court's registry to DFS upon determining that DFS and DMP were not the same party. The court has inherent power to stay its proceedings where the interest of justice so requires. King v. Olympic Pipeline Co., 104 Wn. App. 338, 350, 16 P.3d 45 (2000) (citing Landis v. N. Am. Co., 299 U.S. 248, 254-55, 57 S. Ct. 163, 81 L. Ed. 153 (1936)). Every court has an inherent power `to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. How this can best be done calls for the exercise of judgment, which must weigh competing interests and maintain an even balance.' King, 104 Wn. App. at 350 (quoting Landis, 299 U.S. at 254-55). A court of general equity jurisdiction `may grant and enforce its decrees in such manner as the justice of the particular case requires.' State ex rel. Burrows v. Superior Court for Chehalis County, 43 Wn. 225, 228, 86 P. 632 (1906). The general practice permits courts to control their judgments in the interest of justice . . . I do not perceive how it can be said that there is no power in the court of original jurisdiction to suspend the operation of a judgment pending an appeal, and especially where, by so doing, the parties would be left in the position in which they were when the action was brought.
Burrows, 43 Wn. at 229 (quoting Genet v. President etc. Canal Co., 113 N.Y. 472, 475, 21 N.E. 390 (1889)).
A court's determination on a motion to stay proceedings or grant a protective order is discretionary, and is reviewed only for abuse of discretion. Olympic Pipeline, 104 Wn. App. at 348. A trial court abuses its discretion only if its ruling is manifestly unreasonable or is based upon untenable grounds or reasons. Olympic Pipeline, 104 Wn. App. at 348. Although the court concluded that DFS and DMP were not the same legal entity, the court had the power to issue a stay of execution on its judgment. At the time the court granted DFS's summary judgment motion, there was significant evidence in the record that some or all of the funds in DFS's garnished accounts were actually the property of DMP. Given the facts of the case, we find no abuse of discretion in issuing the stay. DFS also challenges the trial court's imposition of an injunction against the release of the funds from the court registry pending the outcome of supplemental proceedings. The supplemental proceedings were instituted to resolve ownership of the funds, and such proceedings are governed by chapter 6.32 RCW. The trial court granted an injunction under RCW 6.32.120, which provides:
The judge . . . may make an injunction order restraining any person . . . from making or suffering any transfer or other disposition of or interference with the property of the judgment debtor or the property or debt concerning which any person is required to attend and be examined, until further direction in the premises. Such an injunction may be made simultaneously with the order or warrant by which the special proceeding is instituted, and upon the same papers or afterwards, upon an affidavit showing sufficient grounds therefor. The judge or court may, as a condition of granting an application to vacate or modify the injunction order require the applicant to give security in such sum and in such manner as justice requires.
This statute grants the court broad powers to issue an injunction to restrain the transfer of property involved in supplemental proceedings. See Smith v. Weed, 75 Wn. 452, 465, 134 P. 1070 (1913).
Generally, injunctive relief will not be granted where there is a plain, complete, speedy, and adequate remedy at law. Kucera v. Dep't of Transp., 140 Wn.2d 200, 209, 995 P.2d 63 (2000). However, an injunction will be granted when it is the speedier and more efficacious remedy. Cline Piano Co. v. Sherwood, 57 Wn. 239, 241, 106 P. 742 (1910). A party may obtain injunction relief if (1) it has a clear legal or equitable right; (2) it has a well grounded fear of immediate invasion of that right; and (3) the acts it complains of are either resulting in or will result in actual and substantial injury. Kucera 140 Wn.2d at 209. The court's decision to grant an injunction is reviewed for abuse of discretion. Kucera 140 Wn.2d at 209. A court abuses its discretion if it's decisions are based on untenable grounds, is manifestly unreasonable, or is arbitrary. Kucera 140 Wn.2d at 209.
In granting the injunction, the court found that:
4. [DFS] claims ownership of these previously garnished funds. However, it appears to the court on the evidence presented that the judgment debtor may own or have a right of possession to some or all of these same funds.
5. [DFS] is not an ongoing company and has no assets beyond the previously garnished funds. Allowing [DFS] possession of the previously garnished funds pending trial on the determination of ownership may result in an interference with plaintiffs' legal or equitable rights to the actual and substantial injury of the plaintiffs. Plaintiffs have no viable remedy at law.
6. The relative equities of the parties support issuance of an injunction.
The trial court concluded that a `plain, complete, speedy, and adequate remedy' see Kucera, 140 Wn.2d at 209, does not exist by finding that plaintiffs have `no viable remedy at law.' There is no basis for appellant's argument that the court's use of the word `viable' changes the test from an objective one into a subjective one. Appellant argues that Bergen had an adequate remedy: use of the prejudgment garnishment statute. However, there is and would not be a `judgment' against DFS in favor of Bergen, because Bergen's claim was that DFS was in possession of DMP's funds, and that Bergen was DMP's judgment creditor. No alternative remedy of a suit at law was present because Bergen was not suing DFS on the basis of DFS's personal obligations to Bergen.
The trial court's findings in its order issuing the injunction meet the remaining requirements of the Kucera test for granting a preliminary injunction. The court found that under the evidence, Bergen probably had a right to some or all of the funds, that releasing the funds to DFS would result in an interference with Bergen's rights, and that the interference would cause actual and substantial injury to the plaintiffs. Although an injunction is an equitable remedy that `should not be lightly indulged in,' Kucera, 140 Wn.2d at 209, here all the elements of the test are met and an injunction was appropriate. The trial court did not abuse its discretion in granting the injunction.
DFS argues that the court erred by not requiring Bergen to post a bond at the time it issued the injunction. Generally, a bond is a condition precedent to the issuance of an temporary injunction. CR 65(c) provides: Except as otherwise provided by statute, no restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.
The purpose of CR 65(c) is to provide indemnification for parties wrongfully restrained or enjoined. Cedar-Al Prods., Inc. v. Chamberlain, 49 Wn. App. 763, 765, 748 P.2d 235 (1987). Posting a bond is a condition precedent to obtaining a temporary restraining order or preliminary injunction against a non-governmental party. Cedar-Al Prods., 49 Wn. App. at 765. (citing Evar, Inc. v. Kurbitz, 77 Wn.2d 948, 950-51, 468 P.2d 677 (1970) (citing RCW 7.40.080)).
However, the trial court did not err by invoking RCW 6.32.120 to grant an injunction pending the outcome of supplemental proceedings without a simultaneous bond. CR 69 provides that:
The procedure . . . in proceedings supplementary to and in aid of a judgment . . . shall be in accordance with the practice and procedure of the State as authorized in RCW . . . 6.32 . . ., and any other applicable statutes.
The trial judge enjoined transfer of the garnished funds from the court's registry under RCW 6.32.120. CR 65(c) requires an injunction be accompanied by a bond, `[e]xcept as otherwise provided by statute.' CR 69 requires that supplemental proceedings in aid of judgment follow procedures set out in chapter 6.32 RCW, among other statutes. RCW 6.32.120 does not require posting a bond to enjoin the transfer of property that is the subject of supplemental proceedings. See Seventh Elect Church in Israel v. Rogers, 34 Wn. App. 105, 119, 660 P.2d 280 (1983) (holding that under CR 69, the requirements of CR 65 need not be met in supplemental proceedings under RCW 6.32). Therefore, the trial court was within the authority granted by CR 65(c) and RCW 6.32.120 to enjoin transfer of the funds from the court's registry without a bond.
Furthermore, when DFS filed a motion requesting a bond, the trial court ordered Bergen to post a $150,000 bond to secure the injunction. Bergen posted the bond. DFS did not prevail in the supplemental proceedings, and therefore suffered no damages.
III. Determination of Prevailing Party and Attorney Fees at Trial
DFS argues that the trial court erred in ruling that Bergen was the prevailing party and in granting Bergen attorney fees. DFS argues that because it prevailed on the identity-of-parties issue, and because Bergen was awarded less than 50 percent of the frozen funds, DFS was the prevailing party and should have been awarded fees. DFS also argues that it is entitled to fees for prevailing in federal court.
A. State Court Writ Served on DFS
The purpose of the attorney fee provision in the garnishment statute is to encourage garnishees to respond truthfully. Burr v. Lane, 10 Wn. App. 661, 677, 517 P.2d 988 (1974) (discussing former RCW 7.33.290, recodified as 6.27.230). RCW 6.27.230 is the only provision in chapter 6.27 RCW providing for attorney fees. It provides for attorney fees to the prevailing party:
Where the answer is controverted, the costs of the proceeding, including a reasonable compensation for attorney's fees, shall be awarded to the prevailing party: Provided, That no costs or attorney's fees in such contest shall be taxable to the defendant in the event of a controversion by the plaintiff.
A prevailing party is generally the party that receives a judgment in its favor. Schmidt v. Cornerstone Inv., Inc., 115 Wn.2d 148, 164, 795 P.2d 1143 (1990). Washington courts have found a party prevails at a controversion hearing when the party makes any recovery after controverting the garnishee's answer that it owed nothing to the judgment debtor. See, e.g., Hinote's Home Furnishings, Inc. v. Olney Pederson, Inc., 40 Wn. App. 879, 886-87, 700 P.2d 1208 (1985) (holding that garnishor was prevailing party in garnishment proceeding where garnishee made unqualified answer that he owed nothing, even though garnishor originally claimed garnishee owed debt greater than that which was ultimately determined (discussing former RCW 7.33.290, recodified as RCW 6.27.230)). Under RCW 6.27.210, either the plaintiff or the defendant can controvert the garnishee's answer. DFS, as garnishee, answered the writ directed to it and claimed that it held no money belonging to DMP. Bergen controverted this answer. After trial, the jury awarded Bergen approximately half of the funds from DFS's WaMu accounts. Bergen therefore was the prevailing party as to this writ.
Under RCW 6.27.230, the court must award attorney fees to the party who prevails at the controversion hearing; only the amount to be awarded is discretionary. Burr 10 Wn. App. at 677-78. (discussing former RCW 7.33.290, recodified as RCW 6.27.230). The court did not err in granting fees and costs to Bergen.
B. State Court Writ Served on WaMu
Bergen served a writ on WaMu with DMP named as the defendant. WaMu's answer to the writ sought a court determination, under RCW 6.27.290(1), of whether DFS and DMP were the same party. As required by RCW 6.27.290(2), the court issued a citation to DFS to appear and answer whether it was the same party. On DFS's motion for summary judgment, the court determined that DFS and DMP were not the same party and the WaMu writ was quashed. But, it is undisputed that no party had controverted the WaMu answer. Therefore, the proceedings under the WaMu writ did not trigger RCW 6.27.230, the only attorney fees provision in chapter 6.27 RCW. Thus, although it prevailed on the identity-of-parties issue, DFS was not entitled to fees under RCW 6.27.230.
C. Federal Court Writ
DFS argues that it should be awarded attorney fees for the federal court garnishment proceedings under Lindgren v. Lindgren, 58 Wn. App. 588, 598-99, 794 P.2d 526 (1990), because it had to intervene and defend itself in the federal action. But the federal court dismissal was for lack of subject matter jurisdiction, not on the merits. see Frigard v. United States, 862 F.2d 201, 204 (9th Cir. 1988). Also, the dismissal was on a motion brought by DMP not DFS. DFS was not a prevailing party in the federal action. Because DFS did not prevail following controversion of a garnishee's answer, it is not a prevailing party under RCW 6.27.230. Because it is not a prevailing party, Lindgren does not support DFS's claim for fees. The trial court did not err in denying DFS fees for the federal action.
IV. Attorney Fees on Appeal
Bergen seeks its attorney fees on appeal. A party prevailing on appeal that was entitled to attorney fees at trial may properly seek fees on appeal. RAP 18.1(a). Bergen was entitled to fees at trial; therefore, Bergen is entitled to fees on appeal.
We affirm the trial court and award fees and costs to Bergen.
SCHINDLER and BECKER, JJ., Concur.