Verbena Health, Res. v. Michelle L. Malkin, App.

CourtCourt of Appeals of Washington
DecidedApril 1, 2013
Docket68179-6
StatusUnpublished

This text of Verbena Health, Res. v. Michelle L. Malkin, App. (Verbena Health, Res. v. Michelle L. Malkin, App.) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Verbena Health, Res. v. Michelle L. Malkin, App., (Wash. Ct. App. 2013).

Opinion

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

VERBENA HEALTH, No. 68179-6-1

Respondent,

v.

MICHELLE L. MALKIN, UNPUBLISHED OPINION

Appellant. FILED: April 1,2013

Verellen, J. — Michelle Malkin appeals the trial court's grant of summary

judgment to Verbena Health based on her misappropriation of funds. Malkin contends

that Verbena, a dissolved nonprofit corporation, did not have standing to pursue an

action against her and did not properly serve the summons and complaint, rendering the

judgment void for lack of personal jurisdiction. But the record reflects Verbena timely

filed suit and service of process was adequate. Malkin also claims the trial court erred

in drawing adverse inferences against her because she invoked the Fifth Amendment

privilege. Because Verbena presented undisputed factual evidence of Malkin's financial

malfeasance, summary judgment was proper, without any consideration of the negative

inference. We affirm.

FACTS

Verbena was a nonprofit organization that provided community health services to

the lesbian, gay, bisexual and transgender community. Michelle Malkin was the No. 68179-6-1/2

executive director, responsible for the organization's budget and overall financial health.

In early 2008, interim treasurer David Haack attempted to recruit a certified public

accountant to join the board of directors, but Malkin refused to show Verbena's financial

records to the board candidate. Staff began to receive calls from vendors, creditors,

donors and grant recipients informing Verbena of bounced checks and delinquent

payments. On May 13, 2008, Verbena closed its doors because it could not meet its

financial commitments. The board learned that Verbena's bank account had been

depleted, that Malkin had made payments to unauthorized accounts, and that

suspicious charges from casinos and cruise lines filled Verbena's bank statements.

The Secretary of State administratively dissolved Verbena on August 3, 2009.

Based on the board's review of Verbena's financial documents, a complaint was

filed on June 17, 2010 alleging Malkin misused Verbena funds by (1) withdrawing funds

from automated teller machines (ATMs) for gambling at casinos; (2) charging personal

expenses to Verbena accounts; (3) withdrawing cash for personal expenses from

Verbena's checking account; and (4) issuing Verbena checks to herself, to Tammy

Kaiser (Malkin's domestic partner), and to a variety of businesses owned by Malkin and

Kaiser, including TKK Consulting, MLM Consulting, and Ripcord Enterprises. Verbena

alleged causes of action for conversion, breach of fiduciary duty, breach of contract,

breach of duty of good faith and fair dealing, fraud, unjust enrichment, embezzlement,

and tortious interference with contractual relations/business expectancy.

Service of the Complaint

Verbena hired a private detective to locate Malkin and serve the summons and

complaint. The detective, Brett Starr, obtained information linking Malkin to a residence No. 68179-6-1/3

at 224 Willow Park Way in Buffalo Grove, Illinois. Starr determined Malkin had two

possible cotenants, Alice Lundquist and Janet Lundquist. Starr's affidavit of service

states that he visited the residence in Buffalo Grove to attempt service on June 17,

2010, and June 20, 2010. On June 17, Starr spoke with Alice Lundquist, who informed

Starr that Malkin was out of the area, but in the state.

On June 20, Starr returned to the residence and again spoke with Alice

Lundquist. Lundquist told Starr she had been unable to reach Malkin. After verifying

that Malkin lived at the residence, Starr "served a copy of the summons and complaint

.. . upon the defendant's co-tenant Alice Lundquist."1

Malkin answered the complaint and asserted affirmative defenses, among them

that Verbena lacked standing to bring the action, and that "Plaintiff has failed to secure

sufficient process upon defendant."2 Discovery

Verbena served requests for production, interrogatories, and requests for

admission on Malkin, including discovery of her current residence. To each request for

production and interrogatory, Malkin answered, "Defendant objects to the request [as]

implicating Defendant's Fifth Amendment rights against self-incrimination. Objection is

noted also on grounds of lack of standing of Plaintiff to bring this lawsuit and of

Plaintiffs failure to acquire personal jurisdiction ofthe Defendant."3 Malkin provided the

1Clerk's Papers at 113-14. Starr also left a voicemail on the cell phone he had associated with Malkin, detailing the service of process at the Buffalo Grove residence and notifying Malkin she had 60 days to respond to the complaint. 2Clerk's Papers at 20. 3Clerk's Papers at 95-103. No. 68179-6-1/4

identical answer to Verbena's 11 requests for admission. Malkin then served a

discovery request on Verbena, seeking information about its board and organizational

status, and requesting documentation of the alleged wrongdoing.

Verbena deposed Malkin on September 2, 2011. After stating her name, Malkin

refused to answer each and every question, including questions directed to determine

Malkin's affirmative defense of insufficient service of process. Malkin's response to

each question during the deposition was, "I respectfully decline to answer based on my

Fifth Amendment right against self-incrimination."4 Verbena's Motion for Summary Judgment

Verbena moved for summary judgment on October 20, 2011. Verbena based its

motion on the documents it had gathered from its files, including Washington Mutual

bank statements highlighting the allegedly unauthorized withdrawals; allegedly

unauthorized checks issued by Malkin to herself and her partner, MLM Consulting, TKK

Consulting and Ripcord Enterprises; and correspondence from Malkin to her partner

regarding Malkin's personal debt. Verbena argued it was entitled to judgment based

upon substantive evidence of financial wrongdoing, coupled with the negative inference

of Malkin's reliance on the Fifth Amendment.

Malkin opposed summary judgment, asserting insufficient service of process and

arguing Verbena could not prosecute the action as a dissolved nonprofit organization.

In support of her service of process defense, Malkin submitted the declaration of Alice

Lundquist. Lundquist testified she lived at the Buffalo Grove residence with Malkin, as

4Clerk's Papers at 56-73. No. 68179-6-1/5

Starr had identified. However, Lundquist testified Malkin began attending school in

another part of the state in early June 2010 and had arranged to have mail forwarded to

a different address. On June 16,5 when Starr arrived at the Buffalo Grove residence,

Lundquist told Starr that Malkin would be away for at least a few months. On June 20,

when Starr returned, Lundquist told Starr that Malkin would not return to the Buffalo

Grove residence until at least sometime in August. Lundquist closed the door, and Starr

rang the doorbell and banged on the door. Lundquist was frightened to open the door

again. After Starr left, Lundquist opened the door to find papers between the screen

door and front door.

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