Court Opinion

ID: 4468310
Source: CourtListenerOpinion
Date Created: 2019-12-30 22:12:46.695143+00
Date Added: 2024-06-11T08:47:58.618300
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 CHENGDU GAISHI ELECTRONICS,
 LTD., a company incorporated under              DIVISION ONE
 the laws of China, and ZHIZHENG
 WANG, an individual, for the WANG               No. 79313-6-I
 GROUP,
                                                 OPINION PUBLISHED IN PART
                       Appellants,

              V.

 G.A.E.M.S., INC., a Washington State
 corporation; DWG ACQUISITION
 COMPANY, LLC, a Washington State
 limited liability company; DEAN
 MERCIER and JANE DOE MERCIER,
 husband and wife and the marital
 community composed thereof; JOHN
 SMITH and JANE DOE SMITH,
 husband and wife and the marital
 community composed thereof; and
 DECATHLON ALPHA, Ill, L.P., a
 Delaware limited partnership,
                                                 FILED: December30, 2019
                       Respondents.

      DWYER, J.    —   Chengdu Gaishi Electronics, Ltd. (Chengdu) and the Wang

Group brought this suit, seeking repayment of a debt, against G.A.E.M.S., Inc.

(GAEMS), DWG Acquisition Company LLC (DWG), Dean Mercier and John

Smith, two of DWG’s board members, and Decathlon Alpha Ill, L.P. (Decathlon),

another of GAEMS’s creditors. The trial court denied Chengdu’s motion to

appoint a receiver. It then granted DWG’s motion to dismiss for insufficiency of

service of process. Chengdu and the Wang Group appeal, averring that DWG
No. 79313-6-1/2

waived this affirmative defense and that the trial court erred in denying the

motion for receivership.     1

            In their joint brief, respondents GAEMS, DWG, and Mercier claim that the

orders from which the appeal was taken are not appealable and that the appeal

should be dismissed. On the other hand, respondent Decathlon views the

appeal as properly taken but urges affirmance of the trial court rulings. We view

the matter as properly appealable and hold that the defenses of insufficiency of

process and insufficiency of service of process were waived, thus necessitating

reversal of the order of dismissal. We also hold that the trial court did not abuse

its discretion in denying the motion to appoint a receiver.

                                                A

        In 2017, GAEMS entered into financing agreements with Chengdu, an

electronics manufacturing company. That same year, DWG, GAEMS’s parent

company, entered into a loan agreement with the Wang Group, a consortium of

several Chinese financiers led by Qiqi “Denny” Wang, with GAEMS as a

guarantor. Wang, a former officer and director of GAEMS, remains a 30 percent

owner of DWG.

        In June 2017, GAEMS entered into another loan agreement, this time with

Decathlon. Simultaneously, DWG, GAEMS, the Wang Group and Decathlon

entered into a “Subordination and lntercreditor Agreement,” pursuant to which

the Wang Group subordinated its loan to Decathlon’s and, with limited

        We refer to the appellants collectively, when discussing their arguments in this action, as
        1

“Chengdu.”

                                                2
No. 79313-6-1/3

exceptions, agreed that no payments would be made toward the Wang loan until

full payment was made on the Decathlon loan. DWG, the Wang Group, and

GAEMS also executed a letter agreement amending their prior loan agreement to

reflect the subordination agreement’s terms and confirm that the Decathlon loan

would be paid off prior to the Wang Group loan.

       In October 2017, the Wang Group sued GAEMS and two DWG board

members seeking payment on its loan. Later, the Wang Group voluntarily

dismissed the case. However, 11 months later, the Wang Group filed this

lawsuit, naming Chengdu as an additional plaintiff. The defendants in this action

are GAEMS, the previously-sued DWG members, Decathlon, and DWG.

       In October 2018, Chengdu moved for the trial court to appoint a receiver

to assume control of GAEMS and DWG. In its motion, it argued that GAEMS

was insolvent and that Chengdu had a probable right to GAEMS’s property.

GAEMS and DWG, in response, disputed these contentions and presented

evidence that GAEMS remained able to pay obligations as they came due, had

future prospects, and was not an appropriate candidate for receivership.

Separately, Decathlon opposed receivership on the basis that, as the senior

lender, it had priority over the Wang Group to assert rights in GAEMS’s property.

After considering the parties’ extensive briefing, but without comment or

explanation, the trial court entered an order declining to appoint a receiver.

       Chengdu filed a motion for reconsideration of the trial court’s denial of its

motion to appoint a receiver, alleging that the trial court had used the incorrect

                                          3
No. 79313-6-1/4

test to determine whether GAEMS was insolvent, and requesting further

explanation as to why the motion was denied.

                                             B

        Initially, Chengdu’s summons and complaint had referenced DWG, in both

the caption and in the body of the complaint, as “DWG Acquisition, LLP.”

However, the correct name of the entity was “DWG Acquisition Company LLC.”

After this error was called to plaintiffs’ counsels’ attention, Chengdu served on

DWG an amended summons and complaint, both of which referenced DWG as

“DWG Acquisition Company, LLC.”2 In addition, the amended complaint still

contained an isolated reference to “DWG Acquisition, LLP.”3 On November 13,

2018, Chengdu filed a praecipe, or errata sheet, seeking to replace the first page

of its amended complaint. It did not style this action as a motion to amend.

Indeed, it did not attempt to justify this action by referencing any court rule or

case authority.

        That same day, DWG filed a motion to dismiss Chengdu’s claims against

it, based on the plaintiffs’ failure to correctly identify it on the summons and

complaint and the plaintiffs’ failure to correct the error in the amended complaint.

Then, while its motion was pending, DWG joined in GAEMS’s counterclaims

against Chengdu and filed a cross claim against Denny Wang, who, until that

point, had not been named as a party.

        2   The comma preceding the letters LLC is not contained in the respondent’s proper
name.
         ~ DWG and Chengdu do not agree as to whether an amended summons was served on
DWG. While an amended summons was indeed served, it was simply titled, “Summons,” with no
indication that it had been amended.

                                                 4
No. 79313-6-1/5

         Chengdu opposed the motion to dismiss and, in its pleading in opposition

to the motion, indicated its willingness to move to amend its amended complaint

to properly name all parties. Nevertheless, on December 3, 2018, the trial court,

without explanation, granted DWG’s motion to dismiss.

         Meanwhile, prior to entry of the dismissal order, Chengdu filed its motion

to reconsider the trial court’s denial of its motion to appoint a receiver. On the

same day that the trial court granted DWG’s motion to dismiss, it also denied the

motion for reconsideration, stating:

              THIS MATTER having come before the Court on Plantiffs’
        Motion for Reconsideration and/or Clarification of Court’s Denial of
        Motion to Appoint General Receiver (the “Motion”), Motion is
        DEN IED.*
                *This case was dismissed on December 3, 2018 for
        insufficiency of service of process.

        Chengdu appeals.

        Chengdu first assigns error to the trial court’s dismissal of its action on the

stated basis of insufficient service of process.4 This decision was erroneous, it

asserts, because a motion based on insufficient service of process is an

allegation that the trial court lacks personal jurisdiction over the defendant, and

any objection by DWG to the trial court’s personal jurisdiction over it was waived

when it sought affirmative relief in the form of a cross claim. We agree.

         ~ In the order of dismissal, the trial court did not set forth a basis for dismissal. The sole
indication of a legal basis for dismissal is the notation on the order denying reconsideration of the
denial of receivership. We thus analyze this basis for dismissal in the published portion of this
opinion. We analyze the impropriety of granting dismissal on the other bases urged by the
movant in the unpublished portion of this opinion.

                                                   5
No. 79313-6-1/6

          “Proper service of the summons and complaint is a prerequisite to a

court’s obtaining jurisdiction over a party.’ Harvey v. Obermeit, 163 Wash. App.
311, 318, 261 P.3d 671 (2011). Whether service of process was proper is a

question of law that this court reviews de novo. Heinzig v. Seok Hwang, 189 Wn.

App. 304, 310, 354 P.3d 943 (2015). A party may waive a claim of lack of

personal jurisdiction by requesting the court to grant affirmative relief. Grange

Ins. Ass’n v. State, 110 Wash. 2d 752, 765, 757 P.2d 933 (1988). As this court has

stated:

          “[A] party, when he counterclaims, cross-claims, or impleads a third
          party, is seeking affirmative relief and is thereby invoking the
          jurisdiction of the court. He cannot at the same time deny that
          jurisdiction.”

Kuhiman Equip. Co. v. Tammermatic, Inc., 29 Wash. App. 419, 424, 628 P.2d 851

(1981) (quoting Globig v. Greene & Gust Co., 193 F. Supp. 544, 549 (ED. Wis.

1961)).

          It matters not that the counterclaims asserted may have been of the

compulsory variety. Although the assertion of compulsory counterclaims does

not waive the defense of lack of personal jurisdiction, Kuhlman Equip., 29 Wn.

App. at 423-24 n.4, “[u]nder CR 13(g), the assertion of a cross claim is

permissive” as opposed to compulsory. Krikava v. Webber, 43 Wash. App. 217,

221, 716 P.2d 916 (1986) (citing Nautilus, Inc. v. Transamerica Title Ins. Co. of

Wash., 13 Wash. App. 345, 353, 534 P.2d 1388 (1975)). By asserting its cross

claim, DWG sought affirmative relief, thus invoking the jurisdiction of the court.

                                           6
No. 79313-6-1/7

By invoking the jurisdiction of the court, it waived its defense of lack of personal

jurisdiction over it. The trial court erred by not so ruling.5

                                                Ill

        Chengdu next asserts that the trial court erred by declining to appoint a

receiver over GAEMS’s affairs. This is so, Chengdu argues, because

documentation before the trial court showed that the total of GAEMS’s liabilities

exceeded the total of GAEMS’s assets. For their part, GAEMS and Decathlon

dispute that this reflected the proper analysis to determine whether GAEMS was

solvent.   6   Further, they correctly note that solvency is not the sole consideration

before a trial court on a motion for appointment of a receiver, and the trial court’s

discretion to appoint or not appoint a receiver is not dependent solely on this

measure. GAEMS and Decathlon have the better arguments.

        A receiver is “a person appointed by the court as the court’s agent, and

subject to the court’s direction, to take possession of, manage, or dispose of

property of a person.” RCW 7.60.005(10). Washington statutes identify 40

circumstances in which a receiver may be appointed; in almost every

circumstance, the trial court must make the determination that appointing a

receiver “is reasonably necessary and that other available remedies either are

not available or are inadequate.” RCW 7.60.025(1). The appropriate item in

RCW 7.60.025’s list of scenarios provides for such appointment

         ~ By grounding our decision on waiver, we in no way indicate that a deficiency in the
wording of either a summons or complaint gives rise to a defense of insufficiency of service of
process, within the meaning of CR 12(b)(5). ~f. CR 12(b)(4) (insufficiency of process).
         6 As GAEMS and DWG have submitted a single respondent’s brief, they are referred to

collectively as “GAEMS” when their arguments on appeal are discussed.

                                                7
No. 79313-6-1/8

                (i) In an action against any person who is not an individual
            if that person is insolvent or is not generally paying the
       person’s debts as those debts become due unless they are the
       subject of bona fide dispute, or if that person is in imminent danger
       of insolvency.

RCW 7.60.025(1)(i). This was the basis on which Chengdu sought appointment

of a receiver over GAEMS.

        The power to appoint a receiver is discretionary. Kinci County Dep’t of

Cmty. & Human Servs. v. Nw. Defenders Ass’n, 118 Wash. App. 117, 122, 75 P.3d
583 (2003). As has long been recognized, a trial court’s decision regarding

appointment of a receiver is reviewed for abuse of discretion. Roberts v. Wash.

Nat’l Bank, 9 Wash. 12, 13, 37 P. 26 (1894); Mony Life Ins. Co. v. Cissne Family

LLC, 135 Wash. App. 948, 952, 148 P.3d 1065 (2006). “The court’s discretion is

not absolute or arbitrary, but a sound judicial discretion, in view of all the facts

and circumstances of the particular case, ‘exercised for the promotion of justice

and the protection of rights, where no other adequate remedy exists.” Union

Boom Co. v. Samish River Boom Co., 33 Wash. 144, 152, 74 P. 53 (1903). “A

trial court abuses its discretion when its decision ‘is manifestly unreasonable or

based upon untenable grounds or reasons.” Salas v. Hi-Tech Erectors, 168
Wash. 2d 664, 668-69, 230 P.3d 583 (2010) (quoting State v. Stenson, 132 Wash. 2d
668, 701, 940 P.2d 1239 (1997)); Mony Life Ins. Co., 135 Wash. App. at 952-53.

       In support of its argument that the trial court abused its discretion by not

appointing a receiver, Chengdu asserts that the court was required to use a

“balance sheet test” to determine whether GAEMS was insolvent. In support of

                                           8
No. 79313-6-1/9

its contentions, Chengdu points to the definition of ‘insolvent” in the receivership

statute:

       “Insolvent” or “insolvency” means a financial condition of a person
       such that the sum of the person’s debts and other obligations is
       greater than all of that person’s property, at a fair valuation,
       exclusive of (a) property transferred, concealed, or removed with
       intent to hinder, delay, or defraud any creditors of the person, and
       (b) any property exempt from execution under any statutes of this
       state.

ROW 7.60.005(5). This language tracks the federal bankruptcy statute’s

definition of “insolvent” as

       with reference to an entity other than a partnership and a municipality,
       financial condition such that the sum of such entity’s debts is greater than
       all of such entity’s property, at a fair valuation.

11 U.S.C.A.   § 101(32)(A).
       However, Washington’s receivership statute does not require the rote

application of the insolvency test to determine whether appointment of a receiver

is appropriate. ROW 7.60.025(1)(i) provides for receivership where a party “is

insolvent or is not generally paying the person’s debts as those debts become

due unless they are the subject of bona fide dispute, or if that person is in

imminent danger of insolvency.” (Emphasis added.) Thus, whether a receiver

should be appointed does not hinge on insolvency alone; rather, insolvency is

one factor informing a trial court’s consideration.

       Furthermore, as stated above, a trial court must determine whether

appointment of a receiver “is reasonably necessary and that other available

remedies either are not available or are inadequate.” ROW 7.60.025(1).

                                          9
No. 79313-6-1/10

         The trial court had before it ample evidence that appointing a receiver was

not necessary. GAEMS’s financial advisor, Debra Griffith, submitted a

declaration in opposition to Chengdu’s motion stating that GAEMS’s current

assets exceed its current liabilities by $463,802 as of September 30, 2018.

Griffith also stated, with support from exhibits, that GAEMS is profitable, is

current with its creditors, and “has significant prospects for growth,” making it

“well-positioned to rebound from past setbacks due to problematic leadership.”

This view was supported by the declaration of a financial partner, also citing to

Griffith’s exhibits, “that GAEMS is now in a very strong position to pay off its long-

term debt over the next 18-36 months.”

        Chengdu’s assertion, also supported by exhibits, that GAEMS was in fact

insolvent under the balance sheet test was also presented to the trial court.

However, the trial court “considered all briefs and supporting materials filed in

support of or opposition to the motion” and determined that appointing a receiver

was not warranted. The trial court had before it ample evidence aside from the

balance sheet test that indicated receivership was not warranted, and its decision

was in fact premised upon tenable reasons.7 Even if the receivership statute

requires establishing insolvency on a balance sheet test, it does not require a

trial court to appoint or deny appointment of a receiver based on this measure

        ~ In further support of the trial court’s decision, Decathlon also notes that, per RCW
7.60.025(1)(i), debts subject to a bona fide dispute do not factor into a trial court’s assessment of
insolvency.

                                                 10
No. 79313-6-I/il

alone. The trial court did not abuse its discretion by declining to appoint a

receiver.8

        A majority of the panel having determined that only the foregoing portion

of this opinion will be printed in the Washington Appellate Reports and that the

remainder shall be filed for public record in accordance with ROW 2.06.040, it is

so ordered.

                                                  IV

                                                  A

        The parties dispute whether the trial court’s order of dismissal is an

appealable order. Interestingly, this is not a situation in which the appellants and

respondents stand at loggerheads over the issue. Rather, appellant Chengdu

and respondent Decathlon agree that the trial court’s order, terse and

uninformative as it was, dismissed all claims as to all parties. GAEMS alone

maintains that the order dismissed only the claims against DWG, rendering the

order not appealable as a matter of right.

        The disagreement among the parties as to the scope of the trial court

order is understandable in light of its brevity and absence of specificity.

Decathlon offers an elegant analysis as to why the trial court’s order applies to all

claims and parties: if the facts warranted dismissal as to DWG, an indispensable

party to the litigation could no longer be joined, and failure to join an

indispensable party required dismissal of the entire case. Decathlon’s reasoning

        8   Our decision resolves the issue presented. It does not foreclose a future receivership
request based on facts as they then exist.

                                                  11
No. 79313-6-1/12

is sound. However, there is no indication in the record that the trial court adopted

this point of view. But, we suppose, it might have.

       GAEMS’s view, to the contrary, is that because DWG was the only

defendant to move for dismissal, the dismissal was, without more, operative only

as to Chengdu’s claims against DWG. To maintain its argument, GAEMS

suggests that the court’s statement on Chengdu’s motion for reconsideration—

‘[t]his case was dismissed”—actually meant something other than that the entire

case was dismissed. Again, this was in no way clearly stated by the trial court.

       Nevertheless, GAEMS invokes CR 54(b) and RAP 2.2(d) to support the

proposition that, absent a determination by the trial court supported by factual

findings that there is no just reason to delay appeal, a dismissal order not

expressly determining all of the issues before the trial court is not appealable as

a matter of right. Thus, it contends that the dismissal order herein cannot be

considered a final order because it did not dispose of all issues and parties in the

litigation. This argument, of course, is predicated upon Chengdu’s and

Decathlon’s views of the dismissal order being incorrect.

       Similarly, GAEMS contends that RAP 2.2(a)(3) cannot apply. RAP

2.2(a)(3) provides a right of appeal from “[amy written decision affecting a

substantial right in a civil case that in effect determines the action and prevents a

final judgment or discontinues the action.” GAEMS points to Chengdu’s claims

against the other defendants—GAEMS, Dean Mercier, John Smith, and

Decathlon—as issues left unresolved by the order. In its brief, GAEMS ascribes

importance to the fact that the trial court’s order did not specifically address

                                          12
No. 79313-6-1113

DWG’s own counterclaims (and cross claim), contending that such claims

remained to be litigated after DWG sought and received dismissal based on an

absence of personal jurisdiction over it. This is the point where the implications

of GAEMS’s argument become ludicrous.

       If the trial court did not dismiss DWG’s counterclaims and cross claim at

the same time that it dismissed Chengdu’s claims against DWG, the trial court

erred. Numerous federal courts have held that counterclaims must be treated as

conditional when asserted simultaneously with an affirmative jurisdictional

defense raised in a motion to dismiss: the party asserting both can only intend to

pursue the counterclaim if the motion to dismiss is denied.      ~,    ~ Neifeld v.

Steinberg, 438 F.2d 423, 431 n.17 (3d Cir. 1971) (“[D]efendant’s counterclaim

can be treated as conditional, its assertion being hypothecated upon an adverse

ruling on the defendant’s jurisdictional defenses.”); In re Med-Atlantic Petrol.

Corp. v. Macoil, 233 B.R. 644, 652 (S.D.N.Y. Bankr. 1999) (counterclaim for fees

and costs incurred in responding to complaint was conditional in effect, standing

only for proposition that “if the plaintiffs do not prevail, then [the defendant] is

entitled to be compensated for having been plunged into this litigation”).

       This rule allows for the assertion of jurisdictional defenses in an answer or

counterclaim, limiting the instances in which such defenses may be waived.

However, the rule rests on the premise that a defendant’s motion to dismiss on

the basis of absence of personal jurisdiction, if granted, also requires dismissal of

all counterclaims that the defendant has asserted. “[T]his practice of allowing a

defendant in effect to plead alternatively a counterclaim and one or more

                                           13
No. 79313-6-1/14

threshold defenses conserves judicial resources, for if one of the defenses

proves successful, the parties need not litigate a claim that the defendant

presumably has no interest in asserting independently.” 5C CHARLES ALAN

WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE: FEDERAL RULES

OF CIVIL PROCEDURE    § 1397, at 568 (3d ed. 2004)). In Kuhlman, we distinguished
Neifeld on the basis that “affirmative relief in the form of a cross claim is not a

defense or objection as contemplated by CR 12,” and “[j]udicial economy is not

served by permitting a defendant to pursue permissive claims against third

parties while the jurisdictional issue remains unresolved.” 29 Wash. App. at 424

(emphasis added). We did not, however, reject Neifeld’s reasoning on the effect

of a successful motion to dismiss, based on a lack of personal jurisdiction, on a

defendant’s counterclaim. Numerous state courts have found this reasoning to

be persuasive. See, ~ Lampros v. GeIb & GeIb, PC, 153 Md. App. 447, 459,

837 A.2d 229 (2003); Arkansas Game & Fish Comm’n v. Lindsey, 292 Ark. 314,

317, 730 S.W.2d 474 (1987); Crossman v. Contractors Rigging & Erection, 86
S.D. 448, 457, 198 N.W.2d 51(1972); Heineken v. Heineken, 683 So. 2d 194,

200 (Fla. Ct. App. 1996) (Benton, J., concurring).

       GAEMS’s appealability argument, however, relies on the premise that

DWG could move to dismiss the claims against it based on the absence of

personal jurisdiction over it and, if successful, nevertheless continue to litigate its

counterclaims in the same case before the same court. This is nonsense. No

party may disclaim and invoke jurisdiction simultaneously. Moreover, pursuant to

the civil rules, this state of affairs would then require Chengdu to re-assert its

                                          14
No. 79313-6-1/15

dismissed claims as they would now be compulsory counterclaims to DWG’s

counterclaims. Our law does not anticipate, let alone require, such an absurd

situation.

       If the trial court order means that which GAEMS claims it means, it is

clearly erroneous. To read it otherwise is to adopt the view espoused by

Chengdu and Decathlon. On the whole, on this record, we accept the arguments

of Chengdu and Decathlon and deem the trial court’s order of dismissal to be

appealable.

                                          B

       However, were we to take DWG’s assertion at face value and rule that the

trial court’s order is not appealable as a matter of right, we would necessarily be

called upon to accept discretionary review of the order pursuant to RAP 2.3.

       Our rules provide as follows, concerning grants of discretionary review:

       Considerations Governing Acceptance of Review. Except as
       provided in section (d), discretionary review may be accepted only
       in the following circumstances:
                (1) The superior court has committed an obvious error which
       would render further proceedings useless;
                (2) The superior court has committed probable error and the
       decision of the superior court substantially alters the status quo or
       substantially limits the freedom of a party to act;
                (3) The superior court has so far departed from the accepted
       and usual course of judicial proceedings, or so far sanctioned such
       a departure by an inferior court or administrative agency, as to call
       for review by the appellate court; or
                (4) The superior court has certified, or all the parties to the
       litigation have stipulated, that the order involves a controlling
       question of law as to which there is substantial ground for a
       difference of opinion and that immediate review of the order may
       materially advance the ultimate termination of the litigation.

RAP 2.3(b).

                                          15
No. 79313-6-1/16

       To reach the question of whether to grant discretionary review, we would

have to have adopted GAEMS’s interpretation of the dismissal order. Were this

the case, we would be presented with two clear, obvious trial court errors. First,

the failure to recognize that the defense of insufficient service of process had

been waived. And, second, the failure to dismiss GAEMS’s counterclaims and

cross claim simultaneously with the dismissal of the claims against it. These two

errors would condemn any ultimate trial court judgment to reversal on appeal.

The standards of RAP 2.3(b)(1) are, accordingly, met.

       This conclusion does not, however, end our inquiry. Although the trial

court identified a basis for its order of dismissal in the motion to reconsider an

entirely different order, it did not identify any basis in the order of dismissal itself.

This raises the possibility that the trial court could have perceived merit in any

other of DWG’s proposed bases for relief. Worse, it allows for the possibility that

such a view might prevail on remand. Under these circumstances, we address

these other proposed predicates for dismissal. As will be demonstrated, all are

without merit.

       DWG’s motion to dismiss was brought in reliance on defenses discussed

in CR 12. CR 12(b) governs the presentation of defenses to “a claim for relief”

made “in any pleading.” The rule lists a number of affirmative defenses that

defendants must assert either (1) by motion made before the responsive

pleading or (2) in the responsive pleading itself. CR 12(b). These affirmative

defenses include “lack of jurisdiction over the person,” CR 12(b)(2), “insufficiency

of process,” CR 12(b)(4), “insufficiency of service of process,” CR 12(b)(5), and

                                           16
No. 79313-6-1/17

“failure to state a claim upon which relief can be granted,” CR 12(b)(6). These

are the four bases cited by DWG in its motion to dismiss.

       “Process” in this context is defined as a “summons or writ, esp[eciallyj to

appear or respond in court.” BLACK’S LAW DICTIONARY 1458 (11th ed. 2019).

CR 4, entitled “Process,” discusses the requirements for a summons. By

contrast, “pleadings” are defined in rule 7.

       Pleadings. There shall be a complaint and an answer; a reply to a
       counterclaim denominated as such; an answer to a cross claim, if
       the answer contains a cross claim; a third party complaint, if a
       person who was not an original party is summoned under the
       provisions of rule 14; and a third party answer, if a third party
       complaint is served. No other pleading shall be allowed, except
       that the court may order a reply to an answer or a third party
       answer.

CR 7(a).

      A summons is not a pleading. Furthermore, deficiencies in a summons

are distinguished from defects in the service thereof on a party. “Under the

analogous federal rule, a motion under rule 12(b)(4) is the correct procedure with

which to raise an objection to the form of the process, while a motion under rule

12(b)(5) is the correct procedure with which to raise an objection to the manner

or method of service.” Sammamish Pointe Homeowners Ass’n v. Sammamish

Pointe LLC, 116 Wash. App. 117, 120, 64 P.3d 656 (2003) (citing 5A WRIGHT &

MILLER, surra,   § 1353, at 276-280).
      “A failure to accomplish personal service of process is not a defect that

can be cured by amendment of paperwork. Errors in the form of original process

are, however, generally viewed as amendable defects, so long as the defendant

is not prejudiced.” Sammamish Pointe, 116 Wash. App. at 124. “The modern rule

                                         17
No. 79313-6-1/18

is that the proper remedy is not to dismiss the cause of action, but rather to give

the parties the opportunity to amend   .   .   .   .   However, the plaintiff must make some

motion to amend.” In re Marriage of Morrison, 26 Wash. App. 571, 574-75, 613
P.2d 557 (1980). “Where the defendant appears and answers and does not

show prejudice caused by the inaccurate information, the summons can be

amended and the trial court should deny a motion to dismiss.” Sammamish

Pointe, 116 Wash. App. at 118.

       Indeed, the civil rules allow a plaintiff to move to amend a defective

summons:

       Amendment of Process. At any time in its discretion and upon
       such terms as it deems just, the court may allow any process or
       proof of service thereof to be amended, unless it clearly appears
       that material prejudice would result to the substantial rights of the
       party against whom the process issued.

CR 4(h).

       In its trial court memorandum, DWG claimed that its motion to dismiss was

proper under CR 12(b)(2) (lack of jurisdiction over the person), 12(b)(4)

(insufficiency of process), 12(b)(5) (insufficiency of service of process), and

12(b)(6) (failure to state a claim upon which relief can be granted). In GAEMS’s

appellate briefing, however, it defends the grant of DWG’s motion to dismiss only

as one brought for “insufficient service of process.”

       DWG’s motion to dismiss was not based on a deficiency in the manner in

which process was served. Instead, the motion identified deficiencies with the

form of process, a summons that identified it both in the caption and body as

“DWG Acquisition, LLP” rather than DWG Acquisition Company LLC. To the

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No. 79313-6-1/19

extent that the trial court’s decision was based on this error, the pertinent rule

would have been CR 12(b)(4), not CR 12(b)(5). ~ On the merits (in addition to the

fact that the defense was waived) there was not a basis to dismiss pursuant to

CR 12(b)(5).

        However, analyzing DWG’s motion under the CR 12(b)(4) standard also

leads to the conclusion that the motion was baseless on the merits. DWG’s

motion did not discuss in any detail how it was prejudiced by Chengdu’s error in

its identification of DWG. Nor does the motion discuss whether DWG was

prejudiced by any alleged failure on the part of Chengdu to serve an amended

summons.1° In addition to a lack of demonstrable prejudice arising from the

misspellings in the summons and amended complaint, there is also no basis for

the proposition that Chengdu was unwilling to amend its amended complaint to

address the errors.

        Chengdu, to be sure, is not without fault. Rather than address the defects

in its summons and amended complaint by moving to amend, Chengdu

responded with a praecipe identifying the errors and asking the court—and the

parties—to substitute its corrected first page of the first amended complaint for

         ~ At oral argument, counsel for GAEMS argued that DWG’s claim of insufficient service of
process could be premised on an alleged failure to serve the summons at the correct address.
GAEMS, however, provided no argument to support this contention in its opening brief on appeal.
Rather, it addressed the issue for the first time during oral argument. “We consider those points
not argued and discussed in the opening brief abandoned and not open to consideration on their
merits.” Fosbre v. State, 70 Wash. 2d 578, 583, 424 P.2d 901 (1967) (citing State v. Davis, 60
Wash. 2d 233, 373 P.2d 128 (1962); Kent v. Whitaker, 58 Wash. 2d 569, 364 P.2d 556 (1961)).
         10 Instead, DWG focuses on vagaries in Chengdu’s complaint and amended complaint.

Because a complaint is a pleading and not process, deficiencies in a complaint do not constitute
deficiencies of process. The proper remedy when a complaint is vague is a motion for a more
definite statement pursuant to CR 12(e).

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No. 79313-6-1/20

the original. As counsel for Chengdu acknowledged at oral argument, there is no

basis in our rules of civil procedure for filing an errata in lieu of moving to amend.

       However, in its memorandum in opposition to DWG’s motion to dismiss,

Chengdu stated:

       [ljf the Court determines it necessary to ensure that the complaint
       in this matter contain[s] no typographical errors regarding the
       names of the parties, Plaintiffs request leave to amend     . as the
                                                                       .   .

       Court deems appropriate.

       Thus, Chengdu’s strategy, flawed as it was, showed a willingness to

correct its errors—further belying any contention that dismissal pursuant to CR

12(b)(4) was an appropriate remedy.

       As dismissal under CR 12(b)(4) or 12(b)(5) was not warranted on the

merits, we turn to the next proffered grounds for dismissal—CR 12(b)(6). CR

12(b)(6) pertains to the complaint and allows dismissal predicated upon a

plaintiff’s “failure to state a claim upon which relief can be granted.” It is properly

applied if a trial court concludes that the plaintiff is unable to prove any set of

facts that would justify recovery. Kinney v. Cook, 159 Wash. 2d 837, 842, 154 P.3d
206 (2007). ~n evaluating a CR 12(b)(6) motion, we presume all of the plaintiff’s

factual allegations to be true and draw all reasonable inferences in favor of the

plaintiff from the factual allegations. Gorman v. City of Woodinville, 175 Wash. 2d
68, 71, 283 P.3d 1082 (2012). We may even consider hypothetical facts not in

the record to determine if dismissal is proper. Lakey v. Puget Sound Energy,

lnc~ 176 Wash. 2d 909, 922 n.9, 296 P.3d 860 (2013). “‘[hf a plaintiff’s claim

remains legally insufficient even under his or her proffered hypothetical facts,

dismissal pursuant to CR 12(b)(6) is appropriate.” FutureSelect Portfolio Mgmt.,

                                          20
No. 79313-6-1/21

Inc. v. Tremont Grp. Holdings, Inc., 180 Wash. 2d 954, 963, 331 P.3d 29 (2014)

(quoting Gorman v. Garlock, Inc., 155 Wash. 2d 198, 215, 118 P.3d 311 (2005)).

And, as the Supreme Court has stated, “there is no reason why the ‘hypothetical

situation should not be that which the complaining party contends actually

exists.” Halvorson v. DahI, 89 Wash. 2d 673, 674-75, 574 P.2d 1190 (1978)

(internal quotation marks omitted) (quoting Brown v. MacPherson’s, 86 Wash. 2d
293, 298 n.2, 545 P.2d 13 (1975)). “Because the legal standard is whether any

state of facts supporting a valid claim can be conceived, there can be no

prejudice or unfairness to a defendant if a court considers specific allegations of

the plaintiff to aid in the evaluation of the legal sufficiency of plaintiff’s claim.”

Halvorson, 89 Wash. 2d at 675.

       DWG maintained that Chengdu’s complaint was fatally insufficient for the

same fundamental reasons its process was purportedly insufficient: the

summons and complaint did not properly name DWG. To the extent, then, that

DWG sought dismissal based on an imprecisely worded complaint, the proper

remedy was not a motion to dismiss. Rather, it was a motion for a more definite

statement. The civil rules provide for this.

       If a pleading to which a responsive pleading is permitted is so
       vague or ambiguous that a party cannot reasonably be required to
       frame a responsive pleading, or if more particularity in that pleading
       will further the efficient economical disposition of the action, the
       party may move for a more definite statement before interposing a
       responsive pleading. The motion shall point out the defects
       complained of and the details desired. If the motion is granted and
       the order of the court is not obeyed within 10 days after the notice
       of the order or within such other time as the court may fix, the court
       may strike the pleading to which the motion was directed or make
       such order as it deems just.

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No. 79313-6.1/22

CR 12(e).

          Such a motion was never brought in this case. Any deficiencies in

Chengdu’s complaint that might warrant relief under CR 12(e) do not merit

dismissal under CR 12(b)(6) because, in adjudicating a CR 12(b)(6) motion, the

court may consider hypothetical facts not part of the record. Two hypothetical

facts would be pertinent here—first, that Chengdu’s amended summons and

complaint was sufficient to give DWG notice of the suit against it; second, if such

notice did not exist, that Chengdu would hypothetically correct the identification

errors.

          Within this hypothetical factual context, Chengdu’s complaint states clear

causes of action against DWG arising out of its soured transaction with GAEMS,

DWG’s subsidiary. If proved, the substance of these allegations would entitle

Chengdu to relief against DWG. This is all that is necessary to allow the

complaint to survive a 12(b)(6) motion.

          Finally, we turn to the affirmative defense offered pursuant to CR

12(b)(2)—lack of personal jurisdiction. This defense was based on the three

other asserted bases (CR 12(b)(4), CR 12(b)(5), and CR 12(b)(6)). No

independent argument was raised in the trial court or in this court regarding this

claim. Thus, none of the four bases offered in support of dismissal were

meritorious. Hence, in addition to the first two errors identified, if the trial court

relied on any of the other proffered bases for dismissal, that order, too, would be

erroneous. At that point, a grant of review pursuant to RAP 2.3(b)(3) would be

warranted.

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No. 79313-6-1/23

      We reverse the trial court’s order of dismissal. We affirm its denial of

Chengdu’s motion to appoint a receiver.

      Affirmed in part, reversed in part, and remanded for further proceedings.

WE CONCUR:

 YØk),tqfFii

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