Cyrus Way Partners, Llc, V. Cadman, Inc.

• Court: Court of Appeals of Washington
• Decided: June 26, 2023
• Docket: 84291-9
• Status: Unpublished

Opinion

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

CYRUS WAY PARTNERS, LLC, a No. 84291-9-I Washington limited liability company, DIVISION ONE Respondent,

v.

CADMAN, INC., a Washington corporation, UNPUBLISHED OPINION

Appellant,

OLYMPIC CONCRETE FINISHING, INC., a Washington corporation,

Defendant.

BOWMAN, J. — Cadman Inc., now Cadman Materials Inc., appeals an

order denying its motion to vacate a default judgment for Cyrus Way Partners

LLC. Because Cadman’s motion to vacate is untimely under CR 60(b)(1) and

Cadman establishes no other ground for relief, we affirm.

FACTS

Mike Bourgeois is the owner of both Cyrus and Orca Beverage Inc. In

early 2018, Cyrus commenced a project to build a warehouse on one of its

properties for Orca’s use as a tenant. The project required installation of a

concrete slab. Cyrus hired Kosnik Engineering to design the slab. No. 84291-9-I/2

Cyrus first hired SKR Northwest Inc. as the concrete subcontractor for the

project. SKR then selected Cadman to provide concrete for the slab. Sometime

later, Cyrus terminated SKR, and Cadman orally agreed to continue providing

concrete for the warehouse project.

Cyrus hired Olympic Concrete Finishing Inc. to finish the concrete slab.

Kosnik created and provided to Cadman and Olympic the concrete slab’s

specifications. The specifications required the slab to be “seven inches thick,

heavily rebar reinforced, with added macro fiber to increase strength.” Cadman

was responsible for preparing the proper concrete mix to comply with Kosnik’s

specifications.

On April 1, 2018, Cadman poured the concrete while Olympic followed to

finish the slab. The day after the pour, Cyrus discovered defects with the slab.

The defects included “uneven texture, mounds, pattern cracks, and

uplifts/delamination.” Cadman and Olympic blamed each other for the defects.

So, Cyrus hired an expert, American Engineering Testing Inc. (AET), to test the

slab to determine the source of the issue.

In a September 2019 report, AET stated it found “exceptionally high air

content” in the concrete Cadman used and “concluded that this high air content

likely caused the slab’s overall failure.” Cadman then hired its own expert,

BASF, to test the slab. BASF took core samples of the concrete and created an

October 2019 report that showed the concrete contained “ ‘[h]igher-than-

designed’ ” air content and that this “ ‘likely made determining the proper timing

of finishing difficult.’ ”

2 No. 84291-9-I/3

Cadman assured Cyrus that it wanted to resolve the problems with the

slab “ ‘as quickly as possible.’ ” It told Cyrus in February 2020 that it hired “ ‘a

contractor to come out and bid for the repair work,’ ” but “nothing happened.” On

May 18, 2020, Cyrus e-mailed Cadman, asking how it intended to repair the slab.

About a week later, on May 26, Cadman told Cyrus that one of its employees

would reach out “ ‘shortly’ ” to discuss the details. But again, no one reached

out.

On July 7, 2020, Dean von Kallenbach of the law firm Williams Kastner

(WK) sent Cadman’s technical service manager a letter, notifying him that WK

represented “Cyrus Way LLC / Orca Beverage.” Von Kallenbach explained in the

letter that his client wanted to know what Cadman planned to do to repair the

slab. Von Kallenbach warned Cadman that while Cyrus “wants to resolve this

matter in an amicable manner,” it had been more than 15 months since Cadman

poured the concrete, and that Cyrus “cannot wait forever for Cadman to take

action.” Still receiving no response from Cadman, Cyrus hired HTI Polymer Inc.

to repair the slab. Cyrus paid HTI $240,377.75 for the repairs.

After sending the July 2020 letter, WK discovered it represented Cadman

in unrelated matters. So, on October 21, 2020, WK sent Cadman’s senior

associate general counsel a letter, alerting Cadman that WK “has been asked to

represent its longstanding client, Orca . . . , in connection with a matter involving

Cadman[’s] . . . installation of concrete . . . at a warehouse owned by Orca.” WK

sought a waiver of any potential conflict of interest. Cadman’s general counsel

signed the waiver.

3 No. 84291-9-I/4

On December 10, 2020, without admitting any fault, Cadman offered

$10,000 toward remediation of the concrete slab “on the condition Orca and

Cyrus Way, LLC sign a final release in a form prepared by Cadman.” Cyrus did

not respond to the offer.

On December 22, 2020, Cyrus sued both Cadman and Olympic. It

alleged causes of action for breach of contract, breach of warranty, negligent or

intentional misrepresentation, and violation of the Consumer Protection Act,

chapter 19.86 RCW. Cyrus properly served a summons and complaint on

Cadman’s registered agent. The registered agent forwarded the complaint to

Bruce Luck, senior associate general counsel for Cadman’s Canada region.

Cadman did not answer the lawsuit.

On January 26, 2021, Cyrus moved for default against Cadman. The trial

court granted the motion on February 4, 2021. On March 22, 2021, the court

entered a default judgment of $240,377.75. Then, on March 31, 2021, the court

signed an agreed order voluntarily dismissing Olympic from the lawsuit under CR

41(a)(1)(A). On April 11, 2022, the court entered a “Final Judgment and

Judgment Summary,” adding accrued interest to the original judgment for a total

of $270,803.87.

In May 2022, Cyrus learned that Cadman Inc. merged with Cadman

Materials Inc. Cyrus moved to amend the default judgment to substitute

“Cadman Materials, Inc.” as the proper judgment debtor. Cyrus served Cadman

with notice of its motion to amend.

4 No. 84291-9-I/5

Cadman then formally appeared in the lawsuit. On May 24, 2022, it

opposed Cyrus’ motion to amend the default judgment, moved to disqualify WK,

and moved to vacate the default judgment under CR 55(c) and CR 60(b).

Cadman senior associate general counsel Luck filed a declaration in support of

the motion to vacate, explaining that the registered agent’s December 2020 e-

mail with the summons and complaint “got lost” in his inbox “due to the craziness

of the holiday season and the Covid-19[1] pandemic.” The court denied

Cadman’s motions.

On May 31, 2022, the trial court granted Cyrus’ motion and entered an

“Amended Final Judgment and Judgment Summary,” naming “Cadman

Materials, Inc.” as the judgment debtor. Then, on June 2, 2022, Cadman moved

to vacate the amended default judgment.2 And on June 9, it again moved to

disqualify WK. The trial court denied both motions, as well as Cadman’s

subsequent motion to reconsider denial of its motion to disqualify WK.

Cadman appeals.

ANALYSIS

Cadman argues that the trial court erred by refusing to vacate the

amended default judgment under CR 55 and CR 60(b). It also argues for the first

time on appeal that we should vacate the default judgment under CR 12(b)(6).

1 Coronavirus disease 2019. 2 Cadman refiled its motion to vacate on June 3 and again on June 24, 2022 after the court rejected the motions for calendaring and formatting errors.

5 No. 84291-9-I/6

Generally, we review a trial court’s ruling on a motion to vacate a default

judgment for an abuse of discretion. Little v. King, 160 Wn.2d 696, 702, 161

P.3d 345 (2007). A trial court abuses its discretion when its decision is

manifestly unreasonable or based on untenable grounds or untenable reasons.

Rush v. Blackburn, 190 Wn. App. 945, 956, 361 P.3d 217 (2015).

Washington courts generally disfavor default judgments. See Morin v.

Burris, 160 Wn.2d 745, 754, 161 P.3d 956 (2007). “We prefer to give parties

their day in court and have controversies determined on their merits.” Id. “But

we also value an organized, responsive, and responsible judicial system where

litigants acknowledge the jurisdiction of the court to decide their cases and

comply with court rules.” Little, 160 Wn.2d at 703. Our primary concern in

reviewing a trial court’s decision on a motion to vacate is whether that decision is

just and equitable. Rush, 190 Wn. App. at 956-57.

CR 55 Notice Requirements

Cadman argues we must vacate the amended default judgment because

Cyrus did not notify Cadman of its motion for default under CR 55(a)(3) or the

entry of the default judgment under CR 55(f).

CR 55(a)(3) Notice of Motion for Default Judgment

Cadman argues it had a right to notice of Cyrus’ motion for default under

CR 55(a)(3) because it “informally appeared” in the case. We disagree.

Under CR 55(a)(3), once a party appears in an action “for any purpose,”

the movant “shall” serve that party “with a written notice of motion for default and

the supporting affidavit at least [five] days before the hearing on the motion.”

6 No. 84291-9-I/7

Under RCW 4.28.210, a party appears in a proceeding when it gives written

notice of appearance. Absent a formal notice of appearance as contemplated in

RCW 4.28.210, a party may still substantially comply with the appearance

requirements. See Morin, 160 Wn.2d at 749. This generally requires a

defendant to take some formal or informal action after litigation begins,

“acknowledging that the dispute is in court.” Id. at 757. Examples of informal

appearances include the parties exchanging correspondence, Ellison v. Process

Systems Inc. Construction Co., 112 Wn. App. 636, 644, 50 P.3d 658 (2002);

exchanging telephone calls, Sacotte Construction, Inc. v. National Fire & Marine

Insurance Co., 143 Wn. App. 410, 416, 177 P.3d 1147 (2008); engaging in

discovery, State ex rel. Trickel v. Superior Court of Clallam County, 52 Wash. 13,

15, 100 P. 155 (1909); and engaging in settlement negotiations, Servatron, Inc.

v. Intelligent Wireless Products, Inc., 186 Wn. App. 666, 676, 346 P.3d 831

(2015); so long as those things occur after the plaintiff files suit. See Morin, 160

Wn.2d at 756-57 (defendant must go beyond merely acknowledging that a

dispute exists and instead acknowledge that a dispute exists in court).

Here, Cadman argues that “[t]he record provides substantial evidence of

communications between Cadman and Orca and its counsel prior to litigation.”

Specifically, it points to the settlement offer it communicated to Cyrus on

December 10, 2020. But Cyrus did not file its complaint until December 22,

2020. Because Cadman’s settlement offer occurred before Cyrus filed suit, it

does not amount to an informal appearance in the litigation. Cadman had no

right to notice of Cyrus’ default motion under CR 55(a)(3).

7 No. 84291-9-I/8

CR 55(f) Notice of Entry of Default Judgment

Cadman argues that even if it did not appear in the lawsuit, it had a right to

notice of entry of Cyrus’ default judgment under CR 55(f).3 We disagree.

CR 55(f)(1) states, in relevant part:

When more than 1 year has elapsed after service of summons with no appearance being made, the court shall not sign an order of default or enter a judgment until a notice of the time and place of the application for the order or judgment is served on the party in default, not less than 10 days prior to the entry.

A “judgment” is a “final determination of the rights of the parties in the action and

includes any decree and order from which an appeal lies.” CR 54(a)(1). When

multiple parties are involved in an action, any order or other decision adjudicating

fewer than all the parties “shall not terminate the action as to any of the claims or

parties” before “entry of judgment adjudicating all the claims and the rights and

liabilities of all the parties.” CR 54(b).

Cyrus served Cadman with a summons and complaint on December 22,

2020. On March 22, 2021, the trial court entered default judgment against

Cadman. But Olympic remained as a defendant in the lawsuit. On March 31,

2021, the court granted Cyrus and Olympic’s stipulated motion to dismiss

Olympic from the lawsuit under CR 41(a)(1)(A). As of that date, the trial court

had adjudicated all the rights and liabilities of the parties, and Cyrus’ judgment

against Cadman became final. See Rush, 190 Wn. App. at 959 (default

judgment against one party became final when the court dismissed the remaining

3 Cadman makes this argument for the first time on appeal, arguing that it amounts to manifest constitutional error under RAP 2.5(a)(3). Cyrus does not challenge whether the issue is properly before us. So, we address the issue on its merits.

8 No. 84291-9-I/9

claims against the other party). Because one year had not yet elapsed between

the time Cyrus served Cadman with the summons and complaint and when the

trial court entered the default judgment, Cadman had no right to notice under CR

55(f)(1).

Still, Cadman argues that because the voluntary dismissal of Olympic was

“without prejudice,” it amounts to an interlocutory order that did not become final

until April 11, 2022 when the court entered the Final Judgment and Judgment

Summary. But a “judgment without prejudice is the same as a judgment with

prejudice” in that it still “entirely disposes of the present action.” Rose v. Fritz,

104 Wn App. 116, 121, 15 P.3d 1062 (2001). A final judgment without prejudice

is different from a final judgment with prejudice only in that it “does not preclude a

subsequent action based on the same claims.” Id. As a result, the trial court’s

order dismissing Olympic without prejudice disposed of the lawsuit entirely,

rendering Cyrus’ judgment against Cadman final.

We reject Cadman’s argument that CR 55(f) entitled it to notice of entry of

the default judgment.

CR 60(b) Relief from Judgment

Cadman argues that the trial court erred when it refused to vacate the

default judgment under CR 60(b)(1) or (11).

CR 60(b)(1) Excusable Neglect

Cadman argues CR 60(b)(1) entitles it to relief because its failure to

answer the complaint was excusable. Cyrus argues Cadman’s CR 60(b)(1)

motion was untimely. We agree with Cyrus.

9 No. 84291-9-I/10

Under CR 60(b)(1), a litigant may seek relief from a judgment if

“[m]istakes, inadvertence, surprise, excusable neglect or irregularity” occurred “in

obtaining a judgment.” But the motion “shall be made within a reasonable time

and . . . not more than 1 year after the judgment.” CR 60(b). As discussed

above, the default judgment against Cadman became final on March 31, 2021.

Cadman moved to vacate the default judgment on May 24, 2022, almost 14

months later. As a result, the CR 60(b)(1) motion was untimely.

CR 60(b)(11) Extraordinary Circumstances

Cadman argues in the alternative that “extraordinary circumstances”

warrant vacation of the default judgment under CR 60(b)(11). Again, we

disagree.

Under CR 60(b)(11), a party may seek relief from a judgment for “[a]ny

other reason justifying relief from the operation of the judgment.” The use of CR

60(b)(11) should be saved for situations involving extraordinary circumstances

not covered by any other section of the rule. Freibe v. Supancheck, 98 Wn .App.

260, 266, 992 P.2d 1014 (1999). Moreover, those circumstances must relate to

“ ‘irregularities extraneous to the action of the court or questions concerning the

regularity of the court’s proceedings.’ ” Topliff v. Chi. Ins. Co., 130 Wn. App. 301,

305, 122 P.3d 922 (2005) (quoting In re Marriage of Yearout, 41 Wn. App. 897,

902, 707 P.2d 1367 (1985)). Irregularities justify vacation under CR 60(b)(11),

errors of law do not. In re Marriage of Furrow, 115 Wn. App. 661, 674, 63 P.3d

821 (2003). The remedy for an error of law is to appeal from the judgment. Id.

10 No. 84291-9-I/11

First, Cadman argues that WK’s failure to explain in its request for a

conflict waiver that it sought to represent both Cyrus and Orca amounts to

extraordinary circumstances justifying vacation of the default judgment. But

Cadman fails to explain how WK’s failure to request a conflict waiver specific to

Cyrus caused it to default in the lawsuit. Indeed, Cadman’s general counsel

acknowledged that Cyrus properly served the lawsuit but that “due to the

craziness of the holiday season and the Covid-19 pandemic,” Cadman failed to

respond.

Next, Cadman argues that extraordinary circumstances exist because

Cyrus lacked standing to sue Cadman on behalf of Orca. But the strength of

Cadman’s purported lack of standing defense is a factor to be considered under

a CR 60(b)(1) analysis.4 And Cadman cannot use CR 60(b)(11) to circumvent

the one-year time limit under CR 60(b)(1). Freibe, 98 Wn. App. at 267.

The trial court did not err by refusing to vacate Cyrus’ default judgment

under CR 60(b)(11).5

4 There are four factors to consider when determining whether to set aside a default judgment under CR 60(b)(1). White v. Holm, 73 Wn.2d 348, 352, 438 P.2d 581 (1968). They are (1) whether there is substantial evidence to support a prima facie defense to the claim asserted by the opposing party; (2) whether the moving party’s failure to timely appear in the action and answer the opponent’s claim was occasioned by mistake, inadvertence, surprise, or excusable neglect; (3) whether the moving party acted with due diligence after notice of entry of the default judgment; and (4) whether substantial hardship will result to the opposing party. Id. 5 Cadman argues alternatively and for the first time on appeal that we should vacate the default judgment under CR 60(b)(4) because of WK’s “misconduct” in not requesting a conflict waiver specific to Cyrus and not notifying Cadman that Cyrus filed a lawsuit. We generally will not consider issues raised for the first time on appeal. RAP 2.5(a); State v. Kirkman, 159 Wn.2d 918, 926, 155 P.3d 125 (2007). Cadman makes no argument about why we should address this issue for the first time here, so we decline to do so.

11 No. 84291-9-I/12

CR 12(b)(6) Failure to State a Claim

Finally, Cadman argues that we should vacate the default judgment

because Cyrus’ complaint failed to establish facts on which a court can grant

relief under CR 12(b)(6). According to Cadman, no facts in the complaint show

that Cyrus was a party to the contract.

A CR 12(b)(6) motion to dismiss challenges the legal sufficiency of the

allegations in a complaint. Contreras v. Crown Zellerbach Corp., 88 Wn.2d 735,

742, 565 P.2d 1173 (1977). The trial court may dismiss a complaint under CR

12(b)(6) only if it appears beyond doubt that the plaintiff can prove no set of facts,

consistent with the complaint, entitling the plaintiff to relief. Bravo v. Dolsen Cos.,

125 Wn.2d 745, 750, 888 P.2d 147 (1995). We presume all facts alleged in the

plaintiff’s complaint are true. Tenore v. AT & T Wireless Servs., 136 Wn.2d 322,

329-30, 962 P.2d 104 (1998).

Cadman argues CR 12(b)(6) for the first time on appeal. It asserts without

meaningful analysis that it may do so under RAP 2.5(a)(2) (one exception to the

general rule that we may refuse to review any claim of error not raised in the trial

court is when the claim is for “failure to establish facts upon which relief can be

granted”). Cyrus does not respond to the argument. In any event, Cadman’s CR

12(b)(6) argument lacks merit. Cyrus explained in its complaint that “Cyrus Way

Partners, LLC and Orca Beverage, Inc., are collectively referred to as ‘Orca.’ ” It

then alleges that “Orca entered into an oral contract with Cadman to provide

materials for and to pour the [concrete] slab.” Assuming these alleged facts are

12 No. 84291-9-I/13

true, Cyrus’ complaint adequately alleges it was a party to the contract. We

reject Cadman’s CR 12(b)(6) challenge.

Because Cadman’s motion to vacate was untimely under CR 60(b)(1) and

it provides no other ground for relief, we affirm.

WE CONCUR: