Lyra Jean Spencer v. Franklin Hills Health-Spokane, LLC

• Court: Court of Appeals of Washington
• Decided: June 1, 2023
• Docket: 38858-1
• Status: Unpublished

Opinion

FILED JUNE 1, 2023 In the Office of the Clerk of Court WA State Court of Appeals, Division III

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE

LYRA JEAN SPENCER, ) ) No. 38858-1-III Appellant, ) ) v. ) ) FRANKLIN HILLS HEALTH-SPOKANE, ) UNPUBLISHED OPINION LLC, a Washington Limited Liability ) Company, ) ) Respondent. )

STAAB, J. — Lyra Jean Spencer filed a personal injury action against Franklin

Hills Health, LLC. Process server David Kenworthy attempted to serve the registered

agent for Franklin Hills, Jeremy Tolman, but instead served the human resources and

payroll manager, Sheri Flavel, because Tolman was unavailable. Franklin Hills then

brought a motion to dismiss on the basis of improper service of process under RCW

4.28.080(9). The motion was granted and Spencer brought a motion for reconsideration,

which was denied.

Spencer appeals, arguing that service on Flavel was proper under the statute

because Flavel was Tolman’s office assistant or, alternatively, she was a managing agent No. 38858-1-III Spencer v. Franklin Hills Health-Spokane, LLC

of Franklin Hills. Franklin Hills contends that service on Flavel was improper because

she is neither.

We conclude that Spencer has met her burden of making a prima facie showing of

proper service with evidence that process was served on a human resource manager for

the defendant. Thus, the superior court erred in dismissing this case for improper service

without holding an evidentiary hearing to determine if the manager was a managing agent

or office assistant under RCW 4.28.080(9).

BACKGROUND

Because this motion to dismiss was brought by Franklin Hills, the following facts

are set forth in a light most favorable to Spencer.

Spencer filed a personal injury action against Franklin Hills in July 2021. David

Kenworthy was retained by Spencer to serve Franklin Hills. Kenworthy researched

Franklin Hills and found that the registered agent was Jeremy Tolman. A month after

Spencer’s action was filed, Kenworthy attempted service on Franklin Hills. He asked for

Jeremy Tolman and advised the initial person he spoke with that he had legal papers to

serve on the company. This person indicated that Tolman was unavailable. “Ms. Flavel

came [sic] to the front area and accepted the summons, complaint, interrogatories and

case assignment notice. She signed the case assignment notice [attached] with her name,

the date of 8-10-21 and her position, HR Manager.” Clerk’s Papers at 39. Flavel did not

indicate that she was not authorized to accept service.

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In January 2022, Franklin Hills filed a motion to dismiss for failure to properly

serve the summons and complaint pursuant to RCW 4.28.080(9). To support its motion,

Franklin Hills included a declaration from Flavel. Flavel declared that as the human

resources and payroll manager she served under the executive director, director of

nursing services, and the business office manager. While she claimed that it was not until

later that she learned that the papers she accepted included a summons and complaint, she

did not dispute that she personally signed the case assignment notice that included the

caption naming Franklin Hills as a defendant. She declared that she did not indicate to

the process servicer that she was authorized to accept service and did not direct the

process server to leave the papers with her.

A declaration from Christopher DePretis, the compliance officer for Franklin

Hills, was also filed. DePretis declared that Tolman, in addition to being the registered

agent, is the executive director of Franklin Hills.

A court hearing was held and the trial court considered the declarations of the

parties, the court file, and the arguments of counsel. The court ultimately issued an order

granting Franklin Hills’ motion to dismiss and dismissed the case.

Spencer timely filed a motion for reconsideration, which the trial court denied.

Spencer now appeals.

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ANALYSIS

The sole issue on appeal is whether the trial court erred in holding that service on

Flavel was insufficient under RCW 4.28.080.

Spencer argues that service on Flavel was proper because she was the office

assistant to Tolman or, alternatively, because she was a managing agent pursuant to RCW

4.28.080(9). Franklin Hills contends that Flavel was neither an office assistant to Tolman

nor a managing agent and that service was therefore ineffective. We conclude that

Spencer made a prima facie showing of proper service with evidence that process was

served on the defendant’s human resource manager.

We review a trial court’s decision to dismiss an action on legal grounds de novo.

Brundridge v. Fluor Fed. Servs., Inc., 109 Wn. App. 347, 352, 35 P.3d 389 (2001) (citing

In re Estate of Peterson, 102 Wn. App. 456, 462, 9 P.3d 845 (2000)). “Failure to

properly serve a defendant prevents the court from obtaining jurisdiction over the

defendant.” Crystal, China & Gold, Ltd. V. Factoria Ctr. Invest., Inc., 93 Wn. App. 606,

608, 969 P.2d 1093 (1999).

When a defendant moves to dismiss an action based on insufficient service of

process, “‘the plaintiff has the initial burden [of] making a prima facie showing of proper

service.’” Witt v. Port of Olympia, 126 Wn. App. 752, 757, 109 P.3d 489 (2005)

(quoting 14 KARL B. TEGLAND, WASHINGTON PRACTICE CIVIL PROCEDURE § 4.40, at

108 (2004)). A plaintiff may make this initial showing by producing an affidavit of

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service that on its face shows that service was proper. Id. If a plaintiff is able to make

this showing, then the burden shifts to the defendant “who must prove by clear and

convincing evidence that service was improper.” Id. (citing State ex. rel. Coughlin v.

Jenkins, 102 Wn. App. 60, 65, 7 P.3d 818 (2000); Woodruff v. Spence, 88 Wn. App. 565,

571, 945 P.2d 745 (1997)).

Strict compliance with RCW 4.28.080(9) is required for service to be effective.

See Witt, 126 Wn. App. at 757 (“[T]he Washington Legislature has said that under RCW

4.28.080(9), ‘[p]ersonal service must be made on the person designated by statute.’”);

Crystal, China and Gold, Ltd., 93 Wn. App. at 610 (“[T]he service statute for

corporations communicates the Legislatures’ decision that only persons holding in certain

positions can accept service on behalf of a corporation.”). Consequently, service on

individuals not specifically named in RCW 4.28.080(9) renders service ineffective upon a

corporation. Id.

RCW 4.28.080(9) states:

Service made in the modes provided in this section is personal service. The summons shall be served by delivering a copy thereof, as follows: (9) If against a company or corporation other than those designated in subsections (1) through (8) of this section, to the president or other head of the company or corporation, the registered agent, secretary, cashier or managing agent thereof or to the secretary, stenographer or office assistant of the president or other head of the company or corporation, registered agent, secretary, cashier or managing agent.

(emphasis added).

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Spencer contends that Flavel was either a managing agent of the clinic or the

office assistant to Tolman and that service was therefore proper. Spencer has the burden

of demonstrating a prima facie showing of proper service.

A. Historical Analysis

We first consider whether Flavel can be considered a “managing agent” of the

defendant. Whether an individual is a managing agent of a corporation for purposes of

accepting service pursuant to RCW 4.28.080(9) is a “‘question [that] turns on the

character of the agent, and, in the absence of express authority given by the corporation,

on a review of the surrounding facts and the inferences which may properly be drawn

therefrom.’” Reiner v. Pittsburg Des Moines Corp., 101 Wn.2d 475, 477, 680 P.2d 55

(1984) (quoting Crose v. Volkswagenwerk Aktiengesellschaft, 88 Wn.2d 50, 58, 558 P.2d

764 (1977)).

Historically, Washington statutes have listed specific individuals who are

authorized to accept service of process on a corporation. For more than 100 years, the list

of authorized persons has included the corporation’s president or other head of the

company, secretary, cashier, and managing agent. See Osborne & Co. v. Columbia

County Farmers’ Alliance Corp., 9 Wash. 666, 667, 38 P. 160 (1894). While the

president of a company is a relatively distinct position, the character of a “managing

agent” has never been defined with specificity.

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More than one hundred years ago, in Osborne, our Supreme Court applied a

narrow definition to the term managing agent. The Court held that a “managing agent”

was one who managed the affairs of an entire corporation “and not some particular part

or branch thereof only.” Id..

Sixty years ago, the narrow holding in Osborne was overruled as “an unrealistic

holding in today’s world of decentralization in business, banking, and industry.”

Johanson v. United Truck Lines, 62 Wn.2d 437, 441, 383 P.2d 512 (1963). Instead, the

court cited with approval the definitions used by the trial court and a California court in

Roehl v. Texas Co. 107 Cal. App. 691, 291 P. 255 (1930). The trial court had concluded

that a managing agent is one who “‘must have some substantial part in the management

of its affairs generally or in a particular district or locality.’” Johanson, 62 Wn.2d at 440.

The California court applied an even broader definition, noting that the term “managing

agent” was not limited to one who manages the affairs of the corporation as a whole and

did not “‘necessarily exclude[ ] one in charge of a single department of the corporation’s

business.’” Johanson, 62 Wn.2d at 441 (quoting Roehl, 107 Cal. App. at 704).

Ultimately, after considering the character of the position and the surrounding facts and

inferences, the court concluded that a temporary branch manager qualified as a managing

agent because he participated in the branch’s management, had the authority to hire and

fire most of the employees at his branch, had previously received service of process, and

did not deny his authority to accept service. Id. at 440.

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In Johanson, 62 Wn.2d at 440, the court cited with approval the authorities set

forth in an A.L.R. annotation that provides:

Where the statute specifies “a managing agent,” it is generally considered that the representative of a domestic corporation need not have charge and management of all the business and operations of the corporation in order to be “a managing agent” thereof within the meaning of the statute relative to service of process; on the contrary, he will ordinarily be regarded as “a managing agent” if he is in charge of the corporation’s property, business, and affairs in the locality in which he is stationed, or of some branch or division of its operations, and has powers of a managerial character in relation to that portion of the corporation’s business.

C.T. Foster, Annotation, Who Is “Managing Agent” of Domestic Corporation within

Statute Providing for Service of Summons or Process Thereon, 71 A.L.R.2d 178, § 3[b]

at 186 (1960). And see generally 71 A.L.R.2d 178. In applying this rule, trial courts

should keep in mind whether the “duties of the person on whom the process is served are

such that the corporation would normally be informed that the service had been made.” §

4416. Person or persons who may or must be served—Managing agent, 9 Fletcher Cyc.

Corp. § 4416.

B. Modern Character of a Managing Agent

With this background in mind, we hold that a person is a “managing agent” of a

domestic corporation for purposes of RCW 4.28.080(9) if they are in charge of, or have

managerial authority over the corporation’s property, business, or affairs in a particular

locality, branch, division, or significant department of the corporation’s operations. As

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we noted above, whether a person is a managing agent will be determined on a case-by-

case basis that depends on the “‘character of the agent, and, in the absence of express

authority given by the corporation, on a review of the surrounding facts and the

inferences which may properly be drawn therefrom.’” Reiner, 101 Wn.2d at 477

(quoting Crose, 88 Wn.2d at 58).

We now turn to whether Spencer made a prima facie showing that Flavel qualified

as a managing agent under this rule. Flavel was the human resource manager of the

defendant, Franklin Hills. By definition, a “human resources” department is “[a]n

organization’s department dealing with employment policies, training, and generally

helping employees.” BLACK’S LAW DICTIONARY, at 889 (11th ed. 2019). Under modern

corporate structure, a human resource manager manages this particular department of the

corporation, generally exercises independent judgment and discretion with respect to

issues related to the corporation’s human resources, and usually has input into hiring and

firing decision, if not direct authority to make these decisions.

More specifically, the surrounding fact and inferences suggest that Flavel has

managerial authority. When the process server appeared at Franklin Hills and indicated

that he was there to serve Tolman with legal process, he was told that Tolman was

unavailable. At this point, Flavel came to the front area and accepted the papers.

Although she did not declare that she had authority to accept service, she identified

herself as the human resource manager and did not deny authority to accept service. And

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while Flavel claimed that she did not realize she was accepting service of process, she

does not dispute that she personally signed the case assignment notice naming Franklin

Hills as a defendant.

Flavel is the manager of a particular department of Franklin Hills’ operations. As

a human resource manager, it is reasonable to assume that when she signed for legal

process, the corporation, i.e., her supervisors would be informed that she had been served

with process. This is sufficient to make a prima facie showing of effective service and

the superior court erred in failing to shift the burden to Franklin Hills to demonstrate at an

evidentiary hearing that this person was not a managing agent for the corporation.

C. Office Assistant

Spencer also argues that Flavel qualified as an office assistant to the executive

director and registered agent of Franklin Hills. Service upon a domestic corporation can

also be accomplished by serving the “office assistant” to the registered agent or to the

president or other head of a company. RCW 4.28.080(9). Similar to the term “managing

agent,” the term “office assistant” has been used for over a century but is not well-

defined. Nevertheless, case law indicates that an office assistant to a president or

registered agent is someone who answers directly to those positions and would have

responsibility to ensure that communications are delivered to those persons.

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In Witt, the petitioner served a 17-year-old high school intern who was working

behind the front desk and performing office tasks at the respondent’s office. 126 Wn.

App. at 755. The court recognized that being an office assistant was not enough. Instead,

the statute requires the person to be an office assistant to particular positions that are

enumerated in RCW 4.28.080(9). While the intern in Witt “may have occupied a position

similar to an office assistant,” there was no evidence that the intern was an office

assistant to one of the particular persons enumerated in RCW 4.28.080(9) and was

therefore not qualified to accept service of process. Id. at 758.

In Weber v. Associated Surgeons, P.S., 166 Wn.2d 161, 163, 206 P.3d 671 (2009)

(per curiam), the defendant physician was a shareholder of Associated Surgeons. The

registered agent for Associated Surgeons was a shareholder and worked at Inland

Vascular. The plaintiff served a person described as the practice manager, officer

manager, or administrative manager of Inland Vascular. In a per curiam decision, the

Supreme Court reversed our decision and held that since the registered agent was also a

shareholder at Inland Vascular, which employed the administrative manager, the

administrative manager qualified as the registered agent’s office assistant. Id. at 164.

Here, Flavel is the human resource and payroll manager for Franklin Hills and

serves under the direction of Tolman, the executive director and registered agent for the

defendant. In arguing that Flavel was not a managing agent, Franklin Hills refers to her

as an employee who worked under the supervision of others, including Tolman. Neither

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party attempts to define the general duties of an office assistant under a modern corporate

structure. Given the statute’s language that persons authorized to accept service on

behalf of a domestic corporation include a secretary or office assistant to the head of the

corporation or managing agent, the legislature was ensuring that service is made upon

specifically identified persons who represent the corporation and exercise independent

judgment and discretion, or persons who work directly under the supervision of those

who are identified within the statute. Thus, while the conclusion in Weber lacked

analysis or a definition, the court concluded that an administrative manager of the office

where the registered agent was a shareholder qualified as an office assistant.

Likewise, even if Flavel is not a managing agent, she worked under the direct

supervision of the registered agent and executive director and, as the human resource

manager, would be responsible for ensuring that important communications are delivered

to those persons. Thus, Spencer has made a prima facie showing that Flavel is an office

assistant.

We hold that Spencer has met her burden of demonstrating a prima facie showing

of valid service. We remand to the superior court where Franklin Hills will have an

opportunity to show by clear and convincing evidence that Flavel was not authorized to

accept service.

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Reversed and remanded.

A majority of the panel has determined this opinion will not be printed in the

Washington Appellate Reports, but it will be filed for public record pursuant to RCW

2.06.040.

_________________________________ Staab, J.

WE CONCUR:

_________________________________ Lawrence-Berrey, A.C.J.

_________________________________ Pennell, J.