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Vanderstoep v. Guthrie

Court of Appeals of Washington, Division 2

September 19, 2017

TERRY A. VANDERSTOEP and CELESTE VANDERSTOEP, husband and wife, Respondents,
v.
GARY GUTHRIE and KATHLEEN GUTHRIE, as Guardians of HOWIE I. GUTHRIE, a minor, Appellants.

          MAXA, A.C.J.

         Gary and Kathleen Guthrie appeal the trial court's denial of their motion to set aside a default order and vacate a default judgment entered against them and in favor of Terry and Celeste VanderStoep. The VanderStoeps' lawsuit against the Guthries arose from an automobile collision caused by the negligence of Howie Guthrie, the Guthries' minor son, in which Terry[1] suffered serious injuries.

         After the Guthries were served with the lawsuit, they notified their insurer, American Family Insurance Company, and followed up with two telephone messages. American Family's adjuster handling the matter claimed that, for unexplained reasons, she never received notice of the lawsuit. Nobody appeared for the Guthries, and the VanderStoeps obtained a default judgment in the amount of $374, 580.36 for Terry's medical expenses, income loss and noneconomic damages, Celeste's loss of consortium, and costs.

         The Guthries argue that the trial court erred in denying their motion to set aside the default judgment under CR 60(b)(1) because (1) they presented evidence of a prima facie defense to the VanderStoeps' noneconomic damages claim and (2) their failure to timely appear was the result of mistake, inadvertence, or excusable neglect because they properly notified American Family and followed up on that notice, even if American Family did not have a legitimate excuse for not responding to the complaint. We agree and hold that the portion of the trial court's default judgment relating to the VanderStoeps' noneconomic damages should be set aside.

         Accordingly, we reverse the trial court's denial of the Guthries' motion to set aside the noneconomic damages portion of the default judgment, and we remand for further proceedings.

         FACTS

          Accident and Injuries

         In July 2014, Howie and Terry were involved in an automobile collision when Howie turned across oncoming traffic without yielding and collided with Terry's car. As a result of the collision, Terry suffered serious injuries to his low back, right knee, and left shoulder in addition to other injuries. A herniated disc in Terry's low back caused right hip and right leg pain.

         Terry was 67 years old at the time of the collision. He worked as a golf course groundskeeper. He was off work for about a month after the accident, returned to work part time for light duty for several months, and then was taken off work by his doctor in January 2015.

         In February, Terry underwent low back surgery for his herniated disc. The surgery relieved most of his leg symptoms, but he claimed that he continued to suffer hip pain. He also experienced various aches and pains that he attributed to the accident.

         Terry returned to work in March, but he claimed that he no longer could perform the physical tasks associated with his job. He was suffering more pain and was concerned that he might be reinjured. Terry retired in November 2015.

         Settlement Negotiations

         Shortly after the accident occurred, the Guthries reported a claim to their insurer, American Family. Kathleen understood that American Family would work directly with the VanderStoeps or their attorney to settle the claim on the Guthries' behalf. The Guthries had no contact with the VanderStoeps or American Family for over a year.

         American Family adjusters engaged in settlement negotiations with the VanderStoeps' attorney, William Robison. American Family did not contest that Howie was liable and conceded that Terry's surgery was causally related to the accident.

         On February 16, 2016, American Family adjuster Stacy Thrush had a telephone conversation with Robison. Robison stated that the VanderStoeps' final demand was $225, 000, and Thrush stated that American Family's final offer was $145, 060.44. According to Robison, he told Thrush that she should alert the Guthries that they would soon be served with a summons and complaint. According to Thrush, Robison said that he would obtain the VanderStoeps' permission to file a lawsuit. Thrush called Kathleen and advised her that a lawsuit might be filed.

         Service of Complaint

         The VanderStoeps filed a lawsuit against the Guthries on February 18. Robison did not inform Thrush that the VanderStoeps had filed suit or send her a copy of the complaint. The Guthries were served with the summons and complaint on February 27. That same day, Kathleen called American Family's general claims number and spoke for 13 minutes with a representative assigned to take such calls. Kathleen advised the representative that she had been served with the summons and complaint, provided pertinent information regarding the lawsuit, and answered questions posed to her.

         When Kathleen did not receive further communications from American Family, she called American Family's general claims number, once on February 29 or March 1 and again on March 7. On both occasions, she entered what she believed to be Thrush's extension number and left a voicemail stating she had been served with the summons and complaint. Kathleen believed that these communications sufficiently informed American Family of the lawsuit, and her understanding and expectation was that American Family would handle the Guthries' representation.

         Thrush stated that she did not receive any information or voicemails regarding the summons and complaint. She also told Kathleen later that she had no record of Kathleen's calls.

         Default Judgment

         The Guthries did not appear in the VanderStoeps' lawsuit. On March 24, the VanderStoeps filed a motion for default and a motion for a default judgment. The support for the default judgment motion was a four-page declaration from Robison describing the accident and summarizing Terry's injuries, treatment, and employment situation. The declaration did not attach any medical records, medical bills, or income loss documentation. Robison simply stated in a declaration that Terry's total medical expenses were $61, 836.44, claimed that Terry had lost $12, 000 in income, and stated that he believed a reasonable value for the case was $361, 836.44. He also stated that a reasonable sum for Celeste's loss of consortium claim was $15, 000.

         On March 30, the trial court conducted a short hearing on the motion for a default judgment. Both Terry and Celeste provided very brief testimony. Robison recommended $300, 000 for noneconomic damages. The court entered an order of default and a default judgment along with findings of fact and conclusions of law. The judgment included $61, 836.44 in medical expenses, $12, 000 in income loss, and $300, 000 in noneconomic damages.

         On April 21, over two months after Robison told Thrush that he would file suit, Thrush left a voicemail with Robison following up with the parties' settlement negotiations. Robison stated that he returned the call and received a voicemail recording, but he was not allowed to leave a message. Thrush called again on June 7 and learned of the default judgment. Thrush then called Kathleen, who said that she had notified American Family of the lawsuit.

         Motion to Vacate Default Judgment

         On June 8, American Family retained an attorney to represent the Guthries and the attorney filed a notice of appearance on June 13. On July 6, the Guthries filed a motion under CR 60(b)(1) to set aside the default order and vacate the default judgment. They challenged only the damages portion of the default judgment, not the liability portion.

         To establish a prima facie defense to the VanderStoeps' damages claim, the Guthries submitted as evidence two progress notes from Terry's doctor. A note dated February 12, 2015, a week after the low back surgery, stated that Terry's right leg pain had resolved and he was returning to daily activities without difficulty, but he would continue with pain medication as needed and would wear a lumbosacral corset for the next six weeks. A note dated March 11, five weeks after surgery, stated that Terry's right leg pain still was resolved, he only had occasional low back discomfort, he was off medication, and he was returning to his usual daily activities. The doctor discussed lifting and activity restrictions, but told Terry that he could perform a light exercise program and play golf.

         However, the Guthries also informed the court that they did not have enough information to fully challenge the damages award. Although Robison had supplied some medical records to American Family, the Guthries did not have all the medical records and had no opportunity to obtain a defense medical examination of Terry or take depositions of Terry and Celeste.

         Regarding the reason they had not appeared in the action before the default judgment, the Guthries claimed that there had been a miscommunication between them and American Family. But American Family provided no explanation for why Kathleen's notice that she had been served had not caused American Family to retain defense counsel or why Kathleen's messages were not forwarded to Thrush.

         The trial court denied the Guthries' motion. It explained its ruling orally, stating that "the disputing of the noneconomic damages by itself seems to be insufficient grounds for oversetting [sic] the default." Report of Proceedings (RP) (July 29, 2016) at 28. The court further explained that there was evidence of a substantial injury and medical expenses, and that based on substantial evidence and representations of counsel the damages award was appropriate.

         The Guthries appeal the trial court's order denying their motion to set aside the default order and the default judgment.

         ANALYSIS

         A. Standards for Setting Aside Default Judgment

         CR 55(c) provides that a trial court may set aside an entry of default and a default judgment in accordance with CR 60(b). Under CR 60(b)(1), a party may obtain relief from a default judgment based on "[m]istakes, inadvertence, surprise, excusable neglect or irregularity in obtaining a judgment or order."

         1. Application of White Test

         Whether a trial court should set aside a default judgment under CR 60(b)(1) depends upon application of a four-part test first articulated in White v. Holm, 73 Wn.2d 348, 352, 438 P.2d581 (1968).

A party moving to vacate a default judgment must be prepared to show (1) that there is substantial evidence supporting a prima facie defense; (2) that the failure to timely appear and answer was due to mistake, inadvertence, surprise, or excusable neglect; (3) that the defendant acted with due diligence after notice of the default judgment; and (4) that the plaintiff will not suffer a substantial hardship if the default judgment is vacated.

Little v. King, 160 Wn.2d 696, 703-04, 161 P.3d 345 (2007). The first two factors are "primary" and the second two are "secondary." Id. at ...


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