Per & Melody Westerdal v. Name Intelligence, Inc.
195 Wash. App. 170
| Wash. Ct. App. | 2016Background
- Bero obtained a $1.4 million judgment against Jay Westerdal for breach of a settlement; Jay did not pay, so the trial court placed Jay’s companies and certain assets in a receivership to protect Bero’s security interests.
- Jay later paid the Bero judgment in full (December 2014); Jay also paid Per and Melody Westerdal for guaranty-related amounts they had asserted.
- Per and Melody asserted a separate unsecured claim to 25% of the eventual sale proceeds of the domain holiday.com (and other claimed debts), and moved to have that claim allowed in the receivership; the trial court denied the motion without prejudice.
- The trial court determined the receivership’s purpose (protecting and securing payment of the Bero judgment) had been accomplished and terminated the receivership, reasoning continued administration would be wasteful and unnecessary.
- Per and Melody appealed, contending the court should have adjudicated or disallowed their holiday.com claim before terminating the receivership, relying on chapter 7.60 RCW protections for claims served on a receiver.
Issues
| Issue | Plaintiff's Argument (Per & Melody) | Defendant's Argument (Bero/Receiver/Trial Court) | Held |
|---|---|---|---|
| Whether RCW 7.60.290(5) and related provisions permit the trial court to terminate a receivership before adjudicating all creditor claims | Properly served claims that are not disallowed become "entitled" to distributions and thus the receivership cannot terminate until such claims are adjudicated or disallowed | RCW 7.60.290(5) grants broad discretion to terminate; being "entitled" by service means qualifying to seek distribution, not an automatic right to a distribution or to block termination | Court held the statute gives the trial court discretion to terminate; it need not adjudicate every claim before termination |
| Whether RCW 7.60.220(1) creates a vested right in creditors that prevents termination absent disallowance | Service of a claim confers a vested right to share in distributions that must be preserved until allowed or disallowed | That reading conflicts with other provisions (e.g., RCW 7.60.230) and undermines the receiver’s and court’s discretion; service is a step to qualify for distribution, not sufficient to force distribution | Court rejected the vested-right argument; service does not bar termination or compel distribution absent allowance |
| Whether the trial court abused its discretion by terminating the receivership given Per & Melody’s unresolved claim and paragraph 2.52 of the receivership order | Court’s prior order and paragraph 2.52 required termination only upon full satisfaction of "all amounts due" under the Bero judgment; Per & Melody argue their claim meant full satisfaction had not occurred and the court should have retained jurisdiction | Trial court found all amounts due on Bero’s judgment (and guaranty payments) were paid; the holiday.com claim is separate and could be pursued outside the receivership; continued receivership would be costly and unnecessary | Court held no abuse of discretion: receivership purpose was satisfied and termination was reasonable given cost, complexity, and availability of separate litigation |
| Whether the trial court was required to estimate Per & Melody’s unliquidated claim under RCW 7.60.220(3) before terminating | The court could and should have used the estimation power to avoid delay and resolve the claim within the receivership | Estimation is discretionary and intended to prevent undue delay in administering claims within the receivership’s purpose; here the claim was outside that purpose and estimation was not required | Court held estimation was not required where claim was unrelated to the receivership’s fulfilled purpose and termination was appropriate |
Key Cases Cited
- Bostain v. Food Express, Inc., 159 Wn.2d 700 (2007) (recognizes discretionary nature of receivership appointment)
- Cornu–Labat v. Hosp. Dist. No. 2, 177 Wn.2d 221 (2013) (statutory interpretation principles; court discretion)
- Nat’l Elec. Contractors Ass’n v. Riveland, 138 Wn.2d 9 (1999) (interpretation of receivership-related statutory language)
- Gahagan v. Wisner, 139 Wash. 664 (1926) (historical statement that receivership is an extraordinary equitable remedy and should be used with restraint)
- MONY Life Ins. Co. v. Cissne Family L.L.C., 135 Wn. App. 948 (2006) (discusses receiver powers and termination when purpose is accomplished)
- United States v. Amodeo, 44 F.3d 141 (2d Cir. 1995) (courts typically leave receivership termination to trial court discretion)
- Sec. & Exch. Comm’n v. An–Car Oil Co., 604 F.2d 114 (1st Cir. 1979) (court discretion to terminate receivership and consider parties’ interests)