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Fenner v. Gaffner2/7/2005
Following this court's remand of the Fenners' claims against the Gaffners in Fenner v. Gaffner, No. 45255-0-I (2001), the Fenners obtained default judgments against Gary and Carol Gaffner in the amount of $3,425,463.09, and against Mary Ellen Gaffner in the amount of $282,200. The Gaffners appeal the trial court's denial of their motion to vacate the default judgments, arguing that the order is void for lack of proper notice to Mary Ellen Gaffner and for lack of subject matter jurisdiction. Because the complaint alleged matters subject to the exclusive jurisdiction of the bankruptcy court, the trial court lacked subject matter jurisdiction, rendering the trial court's order granting default judgment void. Accordingly, we reverse.
FACTS
Beginning in the 1970s, Gary Gaffner served as financial advisor to Dr. Ray Fenner and his wife Susan Fenner, and the Fenners invested in Gaffner's business. In 1991, Gary and his wife Carol filed for Chapter 11 bankruptcy protection for the Seattle Club, the fitness facility they owned that was experiencing financial difficulties. Following the bankruptcy court's approval of a reorganization plan in October 1992, and also with the court's approval, the Fenners agreed to loan the Gaffners over $2.5 million in April 1993 to fund the refinancing of the fitness club. The Gaffners secured the loan with four pieces of real property that the Fenners listed as collateral, along with some of their own properties, on the $3.5 million the Fenners borrowed from an investment firm to make the loan to the Gaffners.
In April 1994, Fenner and Gaffner agreed to extend their equipment lease agreement requiring payments of $18,000 per month. Although the original 1989 lease agreement was specifically addressed in the bankruptcy court's plan of reorganization, the parties apparently did not address the extension agreement with the bankruptcy court.
According to Fenner, in March and July of 1994 Gaffner obtained a $60,000 check from San Juan County and a $554,136.12 check from Fenner's pension fund and deposited them into his own accounts for personal use, rather than into Fenner's accounts or for purchasing more equipment for the club as Fenner intended.
In the fall of 1994 the Fenners defaulted on their $3.5 million loan, and the investment firm foreclosed on properties belonging to the Gaffners and the Fenners. Although Fenner filed a declaration with the bankruptcy court in April 1995 stating that following the foreclosure, the Gaffners were no longer indebted to him on the refinancing loan, Gaffner wrote a note on a copy of the declaration stating that he would reimburse the Fenners for their losses on the loan. The handwritten agreement was not disclosed to or approved by the bankruptcy court. Gaffner made monthly payments to Fenner at least until March 1997. Following the appointment of a trustee, the sale of the fitness club, and the distribution of the remaining assets, the bankruptcy court entered a final decree in March 1998.
The Fenners sued the Gaffners, claiming that Gary Gaffner (1) breached the two loan agreements executed in April 1993 and April 1995, (2) breached the lease extension agreement executed in April 1994, (3) improperly obtained funds in March and July of 1994 that were not repaid, and (4) in 1994 and 1995 fraudulently transferred funds that were owed to the Fenners to Gary's father Haines Gaffner and/or his mother Mary Ellen Gaffner. In June 2002, the Fenners obtained default judgments against Gary and Carol Gaffner in the amount of $3,425,463.09 and against Mary Ellen Gaffner in the amount of $282,200. The Gaffners moved to vacate the judgments in June 2003. The Gaffners appeal the trial
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