IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
BERSCHAUER PHILLIPS
CONSTRUCTION COMPANY, a
Washington state corporation,
Respondent,
v.
MUTUAL OF ENUMCLAW
INSURANCE COMPANY, an insurance
company,
Petitioner,
W. SCOTT CLEMENT, an adult
individual along with “JANE DOE”
CLEMENT and any marital community;
JOHN E. DROTZ, an adult individual
along with “JANE DOE” DROTZ and
any marital community; and JENNIFER
FOWLER, an adult individual,
Defendants.
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No. 66643-6-I
DIVISION ONE
UNPUBLISHED OPINION
FILED: June 27, 2011
Appelwick, J. — Berschauer Philips Construction Company (BPCC) held
a default judgment against Concrete Science Services of Seattle LLC (CSS), a
terminated Minnesota limited liability company. In an effort to collect upon the
No. 66643-6-I/2
judgment, BPCC sued upon claims CSS purportedly held against its insurer,
against two attorneys hired by the insurer on CSS’s behalf, and against the CSS
employee who managed the work. BPCC attached, but did not own these claims
when the action was filed. The defendants filed a motion to dismiss for lack of
standing, but the trial court instead granted BPCC’s request for a stay under CR
17, pending BPCC’s efforts to execute on those claims. This was error. The
trial court lacked the subject matter jurisdiction to hear the case. We reverse for
dismissal.
FACTS
In the summer of 2002, BPCC, a Washington corporation, subcontracted
with CSS, a Minnesota limited liability company, regarding the staining of
concrete floors at Redmond Junior High School.
On September 12, 2003,
following the project with BPCC, CSS was terminated by the State of Minnesota.
On March 15, 2004, BPCC filed a lawsuit in the King County Superior
Court against CSS and other subcontractors involved in the work at Redmond
Junior High School. CSS did not appear in the action, and on August 30, 2005,
BPCC obtained an order of default and default judgment in the amount of
$318,611.97 against CSS.
In September 2005, BPCC informed CSS’s insurer, Mutual of Enumclaw
Insurance Company (MOE), of the lawsuit and default judgment and demanded
payment of the judgment. MOE retained attorneys W. Scott Clement and John
Drotz on behalf of CSS. Clement and Drotz filed a motion to vacate the default
judgment on August 10, 2006, approximately 10 months after being retained to
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represent CSS. On August 29, 2006, the King County Superior Court denied the
motion to vacate.
CSS appealed from the trial court’s order denying the motion to vacate
the default judgment.
On July 30, 2007, this court affirmed the trial court’s
ruling: “Considering the length of the delay [in filing the motion to vacate] and
the absence of a sufficient excuse, we conclude CSS’[s] motion to vacate was
not brought within a reasonable time.”
Berschauer Phillips Constr. Co. v.
Conrete Sci. Servs. Nw., noted at 120 Wn. App. 1088, slip op. at 6 (2007)
(footnote omitted). According to BPCC, MOE paid the attorney fees awarded to
BPCC on appeal but did not pay the underlying judgment.
Thereafter, on October 31, 2008, BPCC filed a lawsuit on CSS’s “choses
in action” against MOE in the Thurston County Superior Court. BPCC alleged in
its complaint that it had “attached all available choses in action [CSS] had
against the MOE insurance policy.” These “choses in action” purportedly arose
due to MOE’s failure “to act reasonably and promptly in dealing with the default
judgment against its insured.”
Thus, BPCC contended that MOE was
responsible for the delay in moving to set aside the default judgment against
CSS.
On July 16, 2009, BPCC filed an amended complaint, alleging that it
attached CSS’s purported claims against MOE. It also alleges that it attached
CSS’s “choses in action” against attorneys Clement and Drotz and Jennifer
Faller,1 employee manager of and investor in CSS. The amended complaint
1
Faller’s last name was misspelled as “Fowler” in the complaint.
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alleges that Clement and Drotz, “[b]y failing [to] remove the default judgment in a
timely manner and in failing to put their client’s interests above those of MOE,”
had “failed to meet the standard of care for attorneys in Washington State.” It
further alleges that Faller “failed to timely tender claims to her company’s
insurance carrier” and “failed to reasonably assist MOE, Clement, and Drotz in
resisting the default judgment.”
In December 2009, the King County Superior Court issued three writs of
execution, directing the Sheriff of Thurston County to levy on CSS’s claims
against MOE, Clement, and Drotz. A sheriff’s sale of the claims was set for
February 10, 2010.
Clement and Drotz filed a motion in the King County Superior Court to
quash the writ of execution and strike the sheriff’s sale, contending that “there
are no such claims that plaintiff seeks to attach, and even if there were, such
claims are not subject to being executed upon.” The motion was granted, and
the sheriff’s sale stricken, in January 2010. MOE and Faller also filed similar
motions to quash, which Judge Paris Kallas of the King County Superior Court
granted on February 9, 2010, “on the alternative and equally applicable grounds
that” (1) “CSS has no property on which to execute” and (2) any property, if it
exists, “is not property capable of execution because it is too uncertain.”
BPCC appealed both orders to this court. On March 28, 2011, this court
affirmed the trial court’s order quashing the writs of execution.
Berschauer
Phillps Const. Co. v. Concrete Sci. Servs. of Seattle, LLC, noted at ___ Wn.
App. ___, 2011 WL 1107228, at *3.
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While the appeal on that matter was still pending, MOE, Clement and
Drotz filed motions for summary judgment in the trial court, arguing that the case
should have been dismissed, since BPCC had not acquired the claims before
filing suit, and thus lacked standing. BPCC responded, asking the trial court to
stay the entire action based on CR 17, until this court had resolved the first
issue. The trial court heard argument of these motions on February 19, 2010,
and decided to stay the suit while awaiting this court’s decision on the writs of
execution, in the parallel case. The trial court noted that this court’s decision on
appeal would be “determinative” of whether BPCC could acquire standing to
assert the claims it was making.
The defendants requested reconsideration, and the trial court denied that
motion on March 1, 2010.
MOE, Faller, Clement, and Drotz timely sought
discretionary review from the trial court’s orders.2
DISCUSSION
Whether a party has standing to sue and whether a court has subject
matter jurisdiction to hear a claim are questions of law that are reviewed de
novo. Spokane Airports v. RMA, Inc., 149 Wn. App. 930, 939, 206 P.3d 364
(2009), review denied, 167 Wn.2d 1017, 224 P.3d 773 (2010).
Where there is no justiciable controversy before the court, the court lacks
jurisdiction to consider it. See Reid v. Dalton, 124 Wn. App. 113, 122, 100 P.3d
349 (2004); High Tide Seafoods v. State, 106 Wn.2d 695, 701-02, 725 P.2d 411
2
Before oral argument, BPCC entered into a stipulated agreement with
Faller and Clement and Drotz, settling its claims against those defendants.
MOE, as the sole remaining petitioner, was unaffected by that agreement.
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(1986); Skagit Surveyors & Eng’rs, LLC v. Friends of Skagit County, 135 Wn.2d
542, 556-57, 958 P.2d 962 (1998). Where a trial court lacks subject matter
jurisdiction, dismissal without prejudice is the limit of what that court may do.
Housing Auth. v. Kirby, 154 Wn. App. 842, 850, 226 P.3d 222, review denied,
169 Wn.2d 1022, 238 P.3d 503 (2010).
Defendant MOE argues that the trial court should have granted its motion
for summary judgment, since BPCC had no interest in the claims it was pursuing,
and thus lacked standing. MOE contends that the trial court erred by granting
BPCC’s request for a stay. A plaintiff may not avoid dismissal by acquiring
standing after filing suit. Amende v. Town of Morton, 40 Wn.2d 104, 106, 241
P.2d 445 (1952).
BPCC responds that the trial court was entitled to grant a stay in
accordance with CR 17(a), which allows a plaintiff to perfect standing or status
as a real party in interest, even if it did not have proper standing at the time the
suit was filed.
CR 17(a) is a narrow exception to the general rule that lack of standing
requires dismissal. It provides, in relevant part:
Every action shall be prosecuted in the name of the real party in
interest. . . . No action shall be dismissed on the ground that it is
not prosecuted in the name of the real party in interest until a
reasonable time has been allowed after objection for ratification of
commencement of the action by, or joinder or substitution of, the
real party in interest; and such ratification, joinder, or substitution
shall have the same effect as if the action had been commenced in
the name of the real party in interest.
CR 17(a). BPCC asserts this provision applies here, or that at the very least, it
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was a fairly debatable point that justified the trial court’s decision to grant a stay.
But, by its plain language, CR 17(a) is inapplicable to BPCC. CSS, as the owner
of the choses in action that BPCC hoped to sue on, is the real party in interest.
BPCC was not seeking ratification, or joinder, or substitution of CSS, and likely
could not do so since CSS ceased to exist. Instead, BPCC was seeking outright
ownership of the choses in action, via the execution and levy process. Since CR
17(a) was inapplicable on its face, it did not grant the trial court the authority to
stay the case for a reasonable time. BPCC had no standing at the time it filed
the action, nor did it have standing at the time the stay was issued.3 The trial
court lacked subjected matter jurisdiction to hear the case and thus erred in
granting BPCC’s request for a stay, rather than dismissing the case.
We reverse for dismissal.
WE CONCUR:
3
Moreover, this court’s opinion in Berschauer Phillps Const. Co. v
Concrete Science Servs., LLC, noted at ___ Wn. App. ___, 2011 WL 1107228,
at *3, eliminated the possibility of acquiring ownership of those claims. It held
that the choses in action were too uncertain to be subject to execution. Id.
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