Matia Investment Fund, Inc. v. City of Tacoma

543 ¶ 1 Matia Investment Fund, Inc., doing business as Norpoint Communities (Matia), appeals an order vacating a default judgment it obtained against the city of Tacoma (City). Finding that there was an informal appearance by the City and that the City was entitled to an order vacating the default order and judgment, we affirm. Van Deren, A.C.J. Background Facts ¶ 2 On April 1, 2002, the City issued a Request for Proposal (RFP) to sell a 10-acre parcel of property owned by the City’s Department of Public Utilities, Water Division, doing business as Tacoma Water. Tacoma Water explained the bid process and informed interested bidders that it would form a Selection Advisory Committee (Committee) to recommend a proposal to the Public Utility Board (Board) for its approval. ¶ 3 Section 1.06.266 of the Tacoma Municipal Code (TMC) sets out the process the Board uses when deciding to reject or accept a bid. TMC 1.06.266(D) states that the Board may reject all bids or recommend the approval of a bid to the City Council (Council). Following a public hearing, the Council has the authority to approve or reject the bid, or to remand the matter back to the Board. TMC 1.06.266(D). ¶ 4 The Committee recommended Matia’s proposal to purchase the property. The Board subsequently passed a resolution declaring the 10-acre property as surplus and authorizing Matia’s purchase. Tacoma Water and Matia entered into a purchase and sale agreement on August 2, 2002. The agreement included the condition that the sale of the property was subject to final approval by the Board and the Council. 544 ¶ 5 When the property purchase came before the Council, it invalidated the entire bidding and selection process.1 The Council then adopted Substitute Resolution No. 35649, in which the City directed Tacoma Water staff to revise and readvertise its RFR ¶ 6 On February 18, 2003, Matia filed a claim with the City, claiming damages of $108,758.95, to reimburse it for expenditures it incurred in preparing its bid for the property. On April 4, 2003, Mark Bubenik, Assistant City Attorney for Public Utilities, sent a written denial of the claim to Matia’s attorney detailing the reasons for the denial. ¶ 7 On June 5, 2003, Matia served a summons and complaint on the Tacoma City clerk’s office. Then on June 26, without notifying the City, Matia filed an ex parte motion and affidavit claiming the $108,758.95 as damages and obtained an order of default and a default judgment against the City for the entire sum. ¶ 8 The clerk’s office never forwarded the summons and complaint to the City attorney’s office. Matia did not notify either the City attorney’s office or any other City staff of the default judgment, nor did Matia make an attempt to collect the judgment until June 29, 2004, which was one year and three days after the entry of the default judgment. At that time, Matia requested a meeting with the water division superintendent and the City attorney staff and informed the City of the default judgment. ¶ 9 The City filed a motion to vacate the default judgment on July 7, 2004. It attached three declarations from City employees explaining the City’s long-standing procedures for documenting and handling incoming litigation. The superior court heard the motion on July 30, and, without stating a basis for its ruling, granted the City’s motion to vacate the default order and judgment. Matia filed this timely appeal. 545 CR 55 and Informal Appearance ¶ 10 The City asserts that it entered an informal appearance when it sent a letter responding to Matia’s claim for expenses and explaining why Matia’s claim was improper.2 The City maintains that because it informally appeared, it was entitled to notice of Matia’s motion for default under CR 55(a)(3). We agree. ¶ 11 Informal appearance is a factual question the trial court answers by reviewing the parties’ submitted evidence. Smith v. Arnold, 127 Wn. App. 98, 105, 110 P.3d 257 (2005). Where a trial court finds that a party has informally appeared, that finding must be supported by evidence of actions manifesting “an unquestionable intent to appear and defend the matter in court.” Arnold, 127 Wn. App. at 105. ¶ 12 Civil Rule 55(c)(1) states: “For good cause shown and upon such terms as the court deems just, the court may set aside an entry of default, and, if a judgment by default has been entered, may likewise set it aside in accordance with rule 60(b).” A party who appears before an opposing party files a motion for default is entitled to notice of the motion for default. CR 55(a)(3). ¶ 13 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 the order vacated. CR 55(a)(3); Tiffin v. Hendricks, 44 Wn.2d 837, 847, 271 P.2d 683 (1954); Arnold, 127 Wn. App. at 105. A default judgment entered without notice to an appearing party is void, and we need not consider the passage of time or whether a meritorious defense exists. Colacurcio v. Burger, 110 Wn. App. 488, 497-98, 41 P.3d 506 (2002), 546 review denied, 148 Wn.2d 1003 (2003); Allstate Ins. Co. v. Khani, 75 Wn. App. 317, 323-25, 877 P.2d 724 (1994). ¶ 14 RCW 4.28.210 provides that a party “appears” in an action at the time the party “answers, demurs, makes any application for an order therein, or gives the plaintiff written notice of his appearance.” The methods outlined in RCW 4.28.210 are not exclusive and courts may view other informal acts as an appearance. Skilcraft Fiberglass, Inc. v. Boeing Co., 72 Wn. App. 40, 45, 863 P.2d 573 (1993). Whether a party has appeared informally is generally a question of intent. Skilcraft, 72 Wn. App. at 45-46 (quoting Gage v. Boeing Co., 55 Wn. App. 157, 161, 776 P.2d 991 (1989)). f 15 In Arnold, we held that whether a party has appeared for the purpose of invoking the right to notice of a default judgment was a question of fact the court should narrowly construe. 127 Wn. App. at 107. We explained that by “adhering to a narrow meaning of ‘appearance,’ we recognize that controversies should be determined on the merits rather than by default orders and judgments.” Arnold, 127 Wn. App. at 108. But we further acknowledged: Whether a party has or has not appeared is a question of fact the trial court must resolve based on the evidence presented. ... [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. ... Where a party fails to file a notice of appearance or in some way submit to the trial court’s jurisdiction, any finding of an appearance must rest on substantial actions that could leave no reasonable doubt about whether the party intended to defend the matter. . . . . . . We acknowledge that in certain situations, the defendants’ actions may be so unambiguous as to leave the plaintiff with only one reasonable conclusion: that the defendant has every 547 intention to submit to the trial court’s jurisdiction and vigorously defend the matter. Arnold, 127 Wn. App. at 105-06, 109-10. ¶ 16 Although the City’s contact with Matia occurred before Matia filed its lawsuit, the City attorney for the Board unequivocally rejected both Matia’s claim and the basis for making a claim against the City: On behalf of the City, we are denying Norpoint Communities’ claim for damages. The reason the City is denying the claim for damages is that Norpoint Communities, [sic] was placed on notice in the City’s request for proposal that the proposed sale must be approved both by the Public Utility Board and City Council. In addition, the purchase and sale agreement which was negotiated with your client also provided that the proposed sale was subject to being approved by both the Public Utility Board and City Council. . . . Your client is a sophisticated real estate developer. Therefore, one would presume that your client is fully aware when a municipal entity proceeds through the decision making process on whether to approve a real estate sale, the approving body has substantial discretion on whether to approve the sale as being in the best interest of the municipality. Just because a bidder’s proposal was recommended by a review committee and approved by the Public Utility Board, does not take away the discretion of the City Council to deny the proposed sale for any reason. Therefore, the claim of Matia Investment Fund, Inc. d.b.a. Norpoint Communities is denied. Clerk’s Papers at 45-46. ¶ 17 This letter provided the City attorney’s name, address, and telephone number, and it explained his legal reasons for denying the claim against the City. After receiving this letter, Matia knew the identity of the City’s counsel, knew that the City had asserted a defense to Matia’s claim, and knew where notice of a default motion should be sent. ¶ 18 The circumstances here are similar to those in Gage. There, the employer participated in and defended an action before the Board of Industrial Insurance Appeals. The 548 employee subsequently sued and obtained a default judgment against the employer. Gage, 55 Wn. App. at 158. Division One held that the employer’s appearance in the administrative action precluded a default against the employer in the subsequent superior court action. Gage, 55 Wn. App. at 162. ¶ 19 The claims statute, RCW 4.96.020, which requires that a claim first be administratively determined by a local governmental entity, serves a similar purpose as the required administrative procedures preceding an injured employee’s lawsuit. Both provide an opportunity for the parties to resolve their claims without resort to the courts and both require exhaustion of the administrative process. ¶ 20 Here, as in Gage, the City attorney’s appearance under the claims statute clearly indicated the City’s intent to defend against Matia’s claim in subsequent proceedings. The City’s actions were so unambiguous as to leave Matia with only one reasonable conclusion: that the City manifested “an unquestionable intent to appear and defend the matter in court.” Arnold, 127 Wn. App. at 105. Thus, we hold that Matia could not in good faith assert that it assumed that the City did not intend to defend against Matia’s later-filed lawsuit. ¶ 21 The dissent suggests that “[i]t defies logic to say that a denial is an informal appearance, otherwise all denials coupled with some reason act as an informal appearance without using terms that specifically demonstrate affirmatively that the party will defend.” Dissent at 551. But our decision here does not mandate this result. Each case involving an informal appearance must be judged on its own facts in light of the purpose behind the rule and the policy of resolving cases on their merits. Griggs v. Averbeck Realty, Inc., 92 Wn.2d 576, 581, 599 P.2d 1289 (1979) (quoting Dlouhy v. Dlouhy, 55 Wn.2d 718, 721, 349 P.2d 1073 (I960)). As Division One stated in Colacurcio: While some actions may be insufficient as a matter of law to constitute an appearance, the question of whether actions are 549 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. 110 Wn. App. at 497. ¶ 22 Because substantial evidence supports the trial court’s conclusion that the City entered an informal appearance and was entitled to notice of the default motion, we affirm the trial court’s vacation of the default judgment as a matter of right and do not reach the question of whether vacation was proper under CR 60(b)(4), (5), or (11). f23 Affirmed. Hunt, J., concurs. Footnotes [1] City Charter section 9.1 requires that the Council approve any sale or other disposition of real property owned by the City. [2] RCW 4.96.020(4) states: No action shall be commenced against any local governmental entity for damages arising out of tortious conduct until sixty days have elapsed after the claim has first been presented to and filed with the governing body thereof. The applicable period of limitations within which an action must be commenced shall be tolled during the sixty-day period.