Opinion
No. 53440-8-I
Filed: May 9, 2005 UNPUBLISHED OPINION
Appeal from Superior Court of King County. Docket No: 02-2-04904-4. Judgment or order under review. Date filed: 08/15/2003. Judge signing: Hon. Patricia H Aitken.
Counsel for Appellant(s), Terry James Barnett, Rumbaugh Rideout Barnett, PO Box 1156, Tacoma, WA 98401-1156.
Stanley Jay Rumbaugh, Rumbaugh Rideout Barnett, PO Box 1156, Tacoma, WA 98401-1156.
Counsel for Respondent(s), William Robert Hickman, Reed McClure, Two Union Square, 601 Union St Ste 1500, Seattle, WA 98101-1363.
Counsel for Respondent Intervenor(s), Francis Stanley Floyd, Floyd Pflueger PS, 2505 3rd Ave Ste 300, Seattle, WA 98121-1445.
Amber L Pearce, Floyd Pflueger PS, 2505 3rd Ave Ste 300, Seattle, WA 98121-1445.
Kim Carter Pflueger, Floyd Pflueger, 2505 3rd Ave Ste 300, Seattle, WA 98121-1445.
In one incident, an uninsured driver twice rear-ended the plaintiff. The driver failed to answer the summons, and after taking evidence, the trial court granted a $2.1 million default judgment against her. A different judge permitted the plaintiff's underinsured motorist (UIM) carrier to intervene, and vacated the order and judgment. Because neither the defendant nor the insurer has a prima facie defense and their failure to answer is inexcusable, neither is entitled to this ruling. We reverse and remand for reinstatement of the judgment.
BACKGROUND
In March 1999, 16-year-old Annie King rear-ended Lisa Little on SR 167. King admitted she was distracted when she struck Little's car because she was trying to remove a hair from her eye. After the two pulled over and exchanged information, King rear-ended Little's car while looking behind her for an opportunity to merge into traffic, having assumed Little had already merged. Little did not stop after the second impact.
The following day, Little sought chiropractic treatment for severe pain in her neck, shoulder, low back, and leg. She was referred to a physical medicine specialist, and then to a neurosurgeon. She received extensive medical treatment for cervical and lumbar spinal injuries, which her doctors believed were more probably than not caused by the collisions. Little's treatment included a plated fusion cervical surgery, transforaminal injections in the cervical spine, micro-decompressive surgery for lumbar spondolytic stenosis, arthroscopic fragmentectomy and decompression with neurotomies, and cervical decompressive surgery. Little received psychological treatment for depression, sleep disorder, chronic pain disorder, and anxiety disorder, also related to the accident. Little was driving in the course of her employment at the time of the collision. Little's employer's uninsured motorist carrier was St. Paul Insurance Company. Little's attorney contacted St. Paul in November 1999. St. Paul requested information about King and documentation of Little's injuries and medical bills. On December 3, 1999, Little's attorney provided the available information on King, certain medical records on Little, and advised, `We are in the process of obtaining updated copies of Lisa's medical records and billing statements, and we shall forward them in the near future.' Clerk's Papers at 316. St. Paul reminded Little's attorney to provide the remaining medical records in March, April, and December 2000.
In March 2001, St. Paul for the first time requested Little's past medical history, as well as all medical records, reports, and bills regarding treatment incurred to date. Little's attorney responded in April 2001, providing medical records and billing statements from various health care providers, including records of primary care providers from the early 1990s until several months before the accident. In May 2001, St. Paul acknowledged receipt of the medical records and requested that additional records be forwarded when received by Little's lawyer.
In December 2001, Little's attorney advised St. Paul that Little had incurred substantial injury likely rendering her permanently disabled, and expressed the belief that the two separate collisions yielded two separate coverages, which in the aggregate, provided total UIM limits of $2 million. The letter warned that `special damages alone may exceed $1,000,000.' Clerk's Papers at 399. St. Paul did not respond to this letter. In February 2002, Little requested that St. Paul indicate within 10 days whether it would honor her UIM claims and whether it agreed that two separate claims were established. The February letter also noted that the statute of limitations on Little's claim against King would expire on March 16, 2002, extinguishing St. Paul's right to litigate subrogation entitlement against King. Little stated she would cooperate in whatever efforts St. Paul chose to undertake in its subrogation claim, but did not intend to take independent action against King, `since any judgment is quite likely to be uncollectible anyway.' Clerk's Papers at 331. When St. Paul took no action before the end of the limitations period, Little filed a summons and complaint against King to preserve her cause of action. King never answered.
Little initially sued King's parents as well, but later dropped King's parents from the lawsuit.
In May 2002, Little advised St. Paul that the case had been filed, and provided the cause number, return of service, order setting civil case schedule, summons, complaint, and notice of deposition. In June, Little's attorney wrote to St. Paul again, acknowledging that St. Paul had requested updated medical records, promising to forward the relevant records, and agreeing to St. Paul's request to attend King's deposition. Little invited the company `to participate in this litigation in any manner permitted under Washington State law.' Clerk's Papers at 408. King appeared for her deposition, admitted her negligence, and established that she had no insurance at the time of the collisions. St. Paul did not participate in the deposition and made no move to intervene.
The letter actually referred to the deposition of Little, but the record makes clear this was a clerical error.
In October 2002, St. Paul told Little's counsel that Little's records showed a prior history of symptoms similar to her current complaints, and asked for a medical authorization and a list of Little's past medical providers. Little's lawyer agreed to send the information and release. The release form was not, however, returned to St. Paul. By April 2003, King still had not answered the complaint, and St. Paul still had not moved to intervene. The discovery cutoff was June 16, and trial was scheduled to begin in August. Little moved for an order of default and default judgment, or, if King answered, for summary judgment. A hearing was held before Judge Laura Gene Middaugh in May 2003. King attended the hearing, and Judge Middaugh adjourned briefly to give King the opportunity to review the complaint and submit a handwritten answer. King reviewed the complaint, but declined to answer.
The court entered an order of default on May 30, 2003 and requested additional evidence as to Little's vocational prospects. After Little submitted a declaration by vocational consultant Merrell Cohen, the court entered an order granting default judgment on June 30, 2003. The court awarded Little $249,234.48 for past economic damages, $1,256,601.10 for future economic damages, and $650,000 as general damages, for a total of $2,155,835.58.
In July 2003, Little informed St. Paul of the default judgment and demanded UIM policy limits of $2 million. St. Paul immediately moved to intervene and to set aside the order of default and default judgment. King retained counsel and joined in St. Paul's motion. Judge James Cayce granted the motions. Little sought reconsideration, which was denied.
DISCUSSION
A UIM insurer is bound by a judgment or arbitration award against an uninsured or underinsured tortfeasor if the UIM insurer had a reasonable opportunity to appear in, and thus to protect its interests in, the proceedings that led up to the judgment or award. Finney v. Farmers Ins. Co., 21 Wn. App. 601, 619, 586 P.2d 519 (1978), affirmed, 92 Wn.2d 748 (1979); Fisher v. Allstate Ins. Co., 136 Wn.2d 240, 249-50, 961 P.2d 350 (1998). This is so even if the insured secures a default judgment. Lenzi v. Redland Ins. Co., 140 Wn.2d 267, 281, 996 P.2d 603 (2000).
Default judgments are generally disfavored in the law as `one of the most drastic actions a court may take to punish disobedience to its commands.' Griggs v. Averbeck Realty, Inc., 92 Wn.2d 576, 581, 599 P.2d 1289 (1979) (citing Widucus v. Southwestern Elec. Co-op., Inc., 26 Ill.App.2d 102, 109, 167 N.E.2d 799 (1960)). It is "the policy of the law that controversies be determined on the merits rather than by default." Griggs, 92 Wn.2d at 581 (quoting Dlouhy v. Dlouhy, 55 Wn.2d 718, 721, 349 P.2d 1073 (1960)). This policy is balanced against the necessity of having a responsive and responsible system that mandates compliance with judicial summons. Griggs, 92 Wn.2d at 581. The fundamental principle in balancing these competing policies is "whether or not justice is being done." Griggs, 92 Wn.2d at 582 (quoting Widucus, 167 N.E.2d at 803). `Justice will not be done if hurried defaults are allowed any more than if continuing delays are permitted. But justice might, at times, require a default or a delay. What is just and proper must be determined by the facts of each case, not by a hard and fast rule applicable to all situations regardless of the outcome.'
Griggs, 92 Wn.2d at 582 (quoting Widucus, 167 N.E.2d at 803). A party seeking to vacate a default judgment must establish that: (1) substantial evidence supports a prima facie defense to the claim; (2) failure to timely appear and answer was due to mistake, inadvertence, surprise, or excusable neglect; (3) the moving party acted with due diligence upon notice of entry of the default judgment; and (4) no substantial hardship will result to the opposing party. White v. Holm, 73 Wn.2d 348, 352, 438 P.2d 581 (1968); Boss Logger, Inc. v. Aetna Casualty Surety Co., 93 Wn. App. 682, 685, 970 P.2d 755 (1998). The four factors are not weighted evenly; the first two are the chief considerations, while the third and fourth factors are less important. White, 73 Wn.2d at 352; Boss Logger, 93 Wn. App. at 685-86.
A trial court's ruling on a motion to vacate a default judgment will not be disturbed on appeal unless the trial court has abused its discretion. White, 73 Wn.2d at 351; Griggs, 92 Wn.2d at 582. A court abuses its discretion if it relies on untenable grounds or untenable reasons, or the discretionary act was manifestly unreasonable. Coggle v. Snow, 56 Wn. App. 499, 507, 784 P.2d 554 (1990). If the trial court's decision is based upon tenable grounds and is within the bounds of reasonableness, it must be upheld. Lindgren v. Lindgren, 58 Wn. App. 588, 595, 794 P.2d 526 (1990). Abuse of discretion is less likely to be found if the default judgment is set aside. White, 73 Wn.2d at 351-52.
Prima Facie Defense. King admitted at her deposition that she first rear-ended Little because `I didn't brake fast enough because I was getting something out of my eye.' Clerk's Papers at 147. King also admitted, `I was looking behind me trying to figure out when I could go, didn't know that she hadn't went yet, and when I went to go, she was so close that I just hit the back of her car again.' Clerk's Papers at 149. Given these admissions, it is clear that King has no defense to liability. Having presented no defense, the default judgment of liability must stand. Calhoun v. Merritt, 46 Wn. App. 616, 619-20, 731 P.2d 1094 (1996).
Neither King nor St. Paul argues there is any defense to liability. Instead, St. Paul contends Little can no longer challenge the decision to set aside the order of default because she did not assign error to that decision separately. That is, Little assigned error to `that decision of the trial court entered August 15, 2003 . . . which vacated a default judgment' but not to the decision that vacated the order of default. Opening Br. at 1. Thus, St. Paul argues it need not show a prima facie defense to liability because the court's vacation of the default judgment `is technically an issue concerning the validity and amount of damages.' St. Paul Br. at 12. This argument is without merit. The same order vacated both the order of default and default judgment, and it is clear from Little's brief that she appeals both decisions. See State v. Olson, 126 Wn.2d 315, 323, 893 P.2d 629 (1995) ('In a case where the nature of the appeal is clear and the relevant issues are argued in the body of the brief and citations are supplied so that the court is not greatly inconvenienced and the respondent is not prejudiced, there is no compelling reason for the appellate court not to exercise its discretion to consider the merits of the case or issue.').
`Nevertheless, a trial court has discretion to vacate the damages portion of a default judgment even where no meritorious defense is established.' Shepard Ambulance, Inc. v. Helsell, Fetterman, Martin, Todd Hokanson, 95 Wn. App. 231, 241, 974 P.2d 1275 (1999) (citing Calhoun, 46 Wn. App. at 622). In Calhoun, Division Three upheld a default judgment of liability where the defendant presented no defense, but recognized the defendant's difficulty in developing a prima facie case on damages without the opportunity for discovery. The court noted, `it would be inequitable and unjust to deny the motion to vacate the damage portion of the judgment on the ground that [he] did not present a prima facie defense.' Calhoun, 46 Wn. App. at 620-21. Accordingly, the court examined the remaining factors set out in White.
St. Paul contends it would be inequitable to reverse the order vacating the damages portion of the judgment because St. Paul could fully develop a defense to damages if allowed to participate in discovery. It points out that medical records indicated Little had preexisting medical conditions similar to the injuries she alleged were caused by the collisions. King also claims to have a defense to damages, emphasizing that the collisions were low-speed and that Little complained of no injury at the time. While these facts may constitute a prima facie case on damages, King and St. Paul had ample opportunity to appear in the litigation and present this evidence. Their reasons for failing to appear are therefore of primary import.
Reason for Failure to Appear and Answer. King appeared in this litigation by participating in a deposition and by attending the default hearing. At the hearing, the trial court invited her to file an answer, and adjourned to provide King an opportunity to reread Little's complaint and handwrite a short answer. King read the complaint, but chose not to answer it. King's only excuse for this is that `she is not sophisticated in legal matters, has only a high school education, and during much of the pendency of the lawsuit was a recovering drug addict.' King Br. at 18. King does not contend she was impaired or intoxicated at this time, and King's inexperience in the law does not constitute mistake, inadvertence, surprise, or excusable neglect.
Pro se litigants are bound by same rules of procedure and substantive law as attorneys. Westberg v. All Purpose Structures, et al, 86 Wn. App. 405, 411, 936 P.2d 1175 (1997).
St. Paul contends it would have intervened earlier if Little `had provided the requested medical records, and not misrepresented the status of the claim.' St. Paul Br. at 15. This argument has little merit. It is true that Little stated in a February 2002 letter that she would take no independent action against King. But it was clear from Little's December 2001 letter that she would make two UIM claims seeking more than $1 million. Since Little could only make a UIM claim if she was `legally entitled' to recover damages, St. Paul should have known that Little would have to file the lawsuit before the statute of limitations barred any recovery. More importantly, Little informed St. Paul the case had been filed in May 2002, one year before the court entered the order of default. Any suggestion that Little should have given St. Paul notice of her intent to seek a default judgment or otherwise advise St. Paul of the case's progress is answered by Lenzi v. Redland Ins. Co., 140 Wn.2d 267, 996 P.2d 603 (2000), in which the court confirmed that the insured need only timely notify a UIM carrier of the filing of the summons and complaint:
RCW 48.22.030(2) requires all new and renewed policies to provide UIM coverage to those `who are legally entitled to recover damages from owners or operators of underinsured motor vehicles.' RCW 48.22.030(2).
Receipt of such pleadings is sufficient to put an alert and concerned party on notice that further proceedings in which it might have an interest may occur, and that in order to protect its interests, the interested party needs to act to assure receipt of subsequent pleadings.
Lenzi, 140 Wn.2d at 276. Thus, `[t]he Finney-Fisher rule requires only timely notice by the insured to an insurer of the insured's action against an uninsured tortfeasor and an opportunity for the insurer to intervene, not notice of all pleadings filed.' Lenzi, 140 Wn.2d at 278.
St. Paul also contends its failure to appear should be excused because it was waiting for Little to sign a medical release or provide complete medical records, as she had promised through her attorney. St. Paul contends that Little's failure to provide these documents `interfered with St. Paul's ability to assess whether a drastic measure such as intervention was required.' St. Paul Br. at 18. St. Paul characterizes as deliberate duplicity Little's unfulfilled promise to provide the documents and release, because King had already effectively admitted the measure of damages by failing to respond to Little's requests for admission. But review of the correspondence between Little's attorney and St. Paul reveals no affirmative misrepresentations about the medical records or the requests for admission. Little agreed to send medical records, and did send at least some of these records, including records indicating Little's medical history of symptoms similar to those she alleged were caused by the collision. Thus, by October 2002, St. Paul knew Little was planning to claim more than $1 million in damages, and knew that there was a possible defense to damages. Under the circumstances, we cannot attribute St. Paul's failure to intervene within the next seven months to surprise or excusable neglect.
CR 36(a) (the matter of which an admission is requested is admitted unless denied).
The remaining two factors, due diligence and substantial hardship, may be resolved in favor of respondents, who exercised due diligence after notice of the default by moving to vacate the default order and judgment within a month of entry of the judgment. Any hardship Little may suffer as a result of vacation of the judgment is primarily due to the delay in litigating the merits of the case and does not, standing alone, amount to `substantial hardship.' See Johnson v. Cash Store, 116 Wn. App. 833, 842, 68 P.3d 1099 (`vacation of a default . . . cannot be said to substantially prejudice the nonmoving party merely because the resulting trial delays resolution on the merits'), review denied, 150 Wn.2d 1020 (2003). But these secondary considerations are insufficient to overcome the inability of King and St. Paul to show any viable excuse for failing to appear and answer, particularly where the possible defense relates only to damages. Both were apprised of the litigation and chose to remain on the sidelines. They are not entitled to await developments and then ask the court to begin anew.
St. Paul also contends that the default judgment was fatally defective for failing to include findings of fact and conclusions of law, as required by CR 55(b)(2), and that this failure justifies relief from operation of the judgment under CR 60(b)(11) (any other reason justifying relief from the operation of the judgment). We disagree.
We first note the facts as to liability and damages were undisputed. While the judgment does not contain express findings and conclusions, Judge Middaugh listed all the materials she considered, and entered default judgment in Little's favor in specific amounts (`$249,234.48 for past economic damages, $1,256,601.10 for future economic damages, and $650,000 as general damages'). Clerk's Papers at 306. This necessarily implies a finding of fact that Little suffered damages in the given amounts and the conclusion of law that Little was entitled to recover those sums from King. Thus, while the findings could have been more detailed, they are sufficient to allow appellate review. We decline to affirm vacation of the default order and judgment on this basis.
The Judgment is Supported by Substantial Evidence. St. Paul argues the evidence was insufficient to support the award in this case because `the trial court never had the opportunity to consider [Little's] preexisting injuries prior to entering a judgment of over two million dollars.' St. Paul Br. at 30. St. Paul blames Little for failing to provide this information to the trial court. But whether other evidence exists has no bearing on whether the proof actually submitted was sufficient to support the judgment.
The standard for vacating awards of damages from default judgments is the same as the standard for setting aside awards of damages from trials. Shepard, 95 Wn. App. at 242. Thus, a default award not supported by substantial evidence will be vacated. Shepard, 95 Wn. App. at 242. Evidence is substantial if it is sufficient to persuade a fair-minded, rational person of the truth of the declared premise. Price v. Kitsap Transit, 125 Wn.2d 456, 465-66, 886 P.2d 556 (1994).
The court considered declarations of Little; her attorney; her primary physician, neurosurgeon, and psychologist; and that of a vocational consultant, which was provided at the court's request. At the time of the collisions, Little was employed as a sales agent by James Little Staples Supply Company. She earned $47,870 per year in straight pay, fringe benefits, and bonuses. From the date of the accident through July 1, 2004, Little's lost wages totaled $209,433.52. Clerk's Papers at 269-70 (declaration of Stanley J. Rumbaugh).
After the collisions, Little received extensive medical treatment for spinal injuries. Because Little was in the course of her employment when the collisions occurred, the Department of Labor and Industries (DLI) paid these medical costs, plus time loss compensation and other benefits under Little's claim. DLI paid medical costs through June 26, 2003 totaling $184,158.87. Little's physician, Solomon Kamson, estimated future medical costs would exceed $30,000.
Dr. Kamson also concluded that Little's spinal problems will permanently reduce her physical capacities and make return `to the competitive labor market on a full-time basis improbable.' Clerk's Papers at 117. In a supplemental declaration, Kamson stated Little should be able to engage in some type of sedentary employment on a 15-20 hour per week basis, but Little's options were limited by her inability to hold her head in a static position for more than 10 or 15 minutes at a time, her inability to lift more than 5 pounds on a regular basis, and her need for frequent changes of position. `It is not probable that Ms. Little will be able to engage in even sedentary employment which requires her to attend a workplace on a consecutive, 5-day-per-week part-time basis.' Clerk's Papers at 292. Vocational specialist Merrill Cohen opined that `the best possible vocational outcome for Ms. Little will be for her to be able to obtain short-term, part-time, temporary clerical assignments through temporary employment agencies.' Clerk's Papers at 260. Cohen suggested that Little could earn between $4,800 and $8,000 per year, `assuming Little was always ready and available to accept these assignments.' Clerk's Papers at 261. This assumption is questionable, however, given Kamson's opinion that Little may be able to work several partial days in a row, but then may be physically unable to work for a few days thereafter as a result of symptom flare-up. She may have the capacity to work 4 or 5 hours one day, but be unable to work at all the next.
Clerk's Papers at 292. Based on Cohen's assessment, Little's attorney calculated the value of the lost earning capacity ranges between $983,199.02 and $1,062,119.02.
Thus, the evidence demonstrated the severity of Little's injuries, her dismal prognosis, her inability to return to her work or to be otherwise employed on a consistent full or part-time basis, and the significant psychological problems from which Little now suffers, as well as Little's preaccident employment and income. The court's award of $249,234.48 for past economic damages, $1,256,601.10 for future economic damages, and $650,000 as general damages is within the range of evidence.
Little Was Not Required to Pay Two Filing Fees. In granting the motions to vacate the order of default and default judgment, Judge Cayce signed both the proposed order provided by King and the proposed order provided by St. Paul. King contends Little's failure to appeal both orders and pay two filing fees means her appeal should have been dismissed. This argument is specious, and has already been rejected by Court of Appeals Commissioner Mary Neel, a panel of this court who rejected a motion to modify Commissioner Neel's ruling, and Supreme Court Commissioner Geoffrey Crooks, who rejected a petition for discretionary review on this matter. We see no reason to revisit this issue.
Reversed and remanded for reinstatement of the default order and judgment.
COLEMAN and APPELWICK, JJ., concur.