Zaiter v. Riverfront Complex, Ltd

C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh

Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman

____________________________________________________________________________________________________________________________

FILED JANUARY 18, 2001

MARCY ZAITER,

Plaintiff-Appellee,

v No. 116357

RIVERFRONT COMPLEX, LTD., AND

VIRGIL D. RILEY,

Defendants-Appellants.

________________________________

PER CURIAM

After the defendants failed to participate in discovery,

the circuit court entered a $50,000 default judgment. The

Court of Appeals affirmed. We affirm in part and reverse in

part. The circuit court did not err when it entered a default

judgment with regard to liability. However, we remand this

case to the circuit court to allow the defendants the

opportunity to have a jury decide the question of damages.

Plaintiff Marcy J. Zaiter worked for defendant Riverfront

Complex, Ltd., as an x-ray technician. She says she was fired

because she was pregnant. Riverfront says she was discharged

as an economic move, because her salary was greater than the

x-ray billings that were being generated from her work.

On October 8, 1996, Ms. Zaiter filed a complaint in which

she alleged that Riverfront had discharged her in violation of

the Civil Rights Act. MCL 37.2202; MSA 3.548(202). The

complaint included a demand for a jury trial, and was

accompanied by interrogatories and a request for the

production of documents.1

Riverfront answered the complaint, and stated its

reliance on Ms. Zaiter's demand for a jury trial. Signing the

answer, counsel for Riverfront provided a business address on

Edward Avenue in Madison Heights.

By spring of the following year, Riverfront had not

answered the interrogatories or the request for the production

of documents. Ms. Zaiter's attorney wrote to Riverfront's

lawyer on February 4, 1997, demanding answers by February 14.

This and all other correspondence mentioned in this opinion

were sent to Riverfront's lawyer at her Edward Avenue address

in Madison Heights.

Ms. Zaiter's attorney wrote again on March 7 to confirm

a March 6 telephone conversation in which answers had been

promised by March 14. The letter also included a request for

production of two Riverfront employees for deposition.

Ms. Zaiter also sued Virgil D. Riley, the sole

shareholder of Riverfront. For the balance of this opinion,

we will refer to the two defendants as “Riverfront.”

On April 2, Ms. Zaiter’s attorney filed a motion to

compel answers to the interrogatories and document requests.

A notice of hearing was sent to defense counsel. Like the

correspondence from Ms. Zaiter's lawyer, each notice of

hearing mentioned in this opinion bore defense counsel's

Edward Avenue address in Madison Heights.

The circuit court's ruling was an April 14 order that

required answers by April 24. Since defense counsel did not

appear for the hearing, Ms. Zaiter's lawyer mailed a copy of

the order to her on April 14, and enclosed a notice that the

two employees would be deposed on April 23.

An April 23 letter to defense counsel recites that the

depositions were adjourned to May 9 at “your request" and

confirms a telephone conversation in which defense counsel

promised Ms. Zaiter's lawyer that she would provide answers to

the discovery requests before the May 9 depositions.

On May 9, Ms. Zaiter's lawyer faxed a letter to defense

counsel. Pursuant to a May 8 conversation, the depositions

again had been adjourned. The letter also confirmed defense

counsel’s promise to provide the overdue answers by May 12.

Ms. Zaiter’s attorney filed a motion for default on June

24, mailing notice of the hearing to defense counsel. The

attorney recited the broken promises regarding discovery and

noted the court's April 14 order, and also explained that

June 10 had been the third notice date for depositions, but

that defense counsel and her client’s employees had not

appeared. Ms. Zaiter’s counsel asked for default judgment and

for an award of $2,5000 in costs.

The circuit court considered the motion on June 30. Its

conclusion was reflected in an order that was not entered

until July 15, because entry was delayed so that Ms. Zaiter’s

lawyer could mail to defense counsel the seven-day notice that

is part of the procedure set forth in MCR 2.602(B)(3). The

July 15 order required Riverfront to respond to the

interrogatories and the request to produce by July 11.2

Failing that, a default judgment would be entered. The court

also ordered Riverfront to pay $250 in sanctions by July 29.

When no answers were provided, Ms. Zaiter’s attorney

filed a July 25 motion for default judgment. Two notices of

hearing were mailed to defense counsel.

The circuit court heard the motion on September 8.

Defense counsel did not appear and thus did not assert

Riverfront’s right to a jury trial on damages. At a short

hearing on damages, Ms. Zaiter testified that she had suffered

$18,000 in economic damages, and emotional stress as well.

She had been diagnosed with depression, and her pregnancy

“almost led to a miscarriage.” Counsel asked for judgment in

2
Because of the delay in entry, the July 15 order did

require the impossible--
--answers by July 11. This obvious

error was of little significance, since Riverfront continued

not to comply with the discovery requests that had been made

the previous October.

the amount of $50,000, a figure that the court later

attributed, inaccurately, to a mediation evaluation.

At the conclusion of the hearing, the circuit court

granted the request orally, but asked that entry of the

written judgment be deferred until the seven-day entry

procedure was followed again. Thus, Ms. Zaiter’s lawyer sent

defense counsel notice of the pending entry of the default

judgment. No objection was received, and the court entered

the $50,000 default judgment on September 22.3 Ms. Zaiter's

attorney faxed a copy of the judgment to defense counsel.

On October 9, Riverfront moved to set aside the default

and the default judgment. In the motion, defense counsel

stated that she had received no correspondence from Ms.

Zaiter's attorney since the May 9 fax; nor had she received

any of the motions or orders. Counsel suggested that the

problem might lie in the court's records, which showed a

former business address. Counsel did not explain why

correspondence mailed to her Edward Avenue address in Madison

Heights would go unanswered. She said that there was good

cause to set aside the default judgment and that Ms. Zaiter's

suit--“a case of questionable liability”--should be heard on

- -

its merits.

The circuit court heard Riverfront's motion on October

The judgment was against Riverfront and Mr. Riley,

jointly and severally.

27. Defense counsel said she could not explain her failure to

receive mail at her current address, though she thought

perhaps the problem was that the mail had been misdirected to

another business on the same premises. She said that,

throughout the same period, she had been providing diligent

representation of Riverfront in an unrelated matter, and that

there would have been no reason for her to neglect the present

suit.

Defense counsel also stated to the court her "belief"

that she had answered the October 1996 discovery requests at

some prior point, though she could not produce copies of

answers or a proof of service. She promised to look when she

returned to her office.

The court ruled on October 29, 1997. Before the court

delivered its opinion, defense counsel told the court that a

search of her files revealed that she had sent the answers

back on May 12. Unfortunately, she had sent them to an

attorney who had no role in this case--counsel for a party

involved in unrelated litigation with Riverfront in district

court. She also had sent the answers to the district court.

So far as she knew, neither set of misdirected answers had

ever been returned to her.4

The court thanked defense counsel for that information,

4
The record does not indicate that defense counsel has

ever tendered a copy of the answers, or a copy of the proof of

service showing the erroneous mailing.

and then delivered its opinion, concluding:

Now, it has been five months since defense

counsel last made contact with the plaintiff,[5] and

they have stated that the lack of mail failed to

give them notice of events or her need to contact

plaintiff’s counsel. However, as the Court has

gone through the file and received oral argument

Monday, plaintiff appears to have sent all of the

mail to the Edwards Road address, which defendant

claims is counsel’s correct address. It’s exactly

this long period of time without contact which

should have at least put defendant’s counsel on

notice of a need to update itself with the status

of the case, even--or--either through placing a

- -
phone call to plaintiff’s counsel or to this court.

An attorney certainly has an ethical duty to

act with reasonable diligence and promptness in

representing a client according to Michigan Rules

of Professional Conduct. Defendant’s attorney

allowed five months to pass without an attempt to

contact plaintiff or this court.

Defendant offers as an explanation for her

lack of contact, that control over this case, as

nonreceipt of mail. She asserts that this is good

cause and that a meritorious defense exists.

However, this Court is convinced that the receipt

of mail should not be the only method whereby an

attorney should be prompted to keep abreast of the

progress and status of a case. The purpose of a

default judgment is to discourage attorneys from

failing to represent their clients in a reasonably

diligent and prompt manner. Unfortunately, it has

the effect of adjudicating matters not on the

merits alone. However, it is appropriate in

specific circumstances and, unfortunately, the

Court believes that this is one of them.

This Court makes--takes no pleasure in denying

-
a motion to set aside a default judgment, and

5
The dissenting judge in the Court of Appeals pointed

out that it is four months, not five, from May 9 (the fax that

defense counsel acknowledges having received) to September 8

(the hearing on the motion to enter default judgment). That

error plainly is not the foundation of the circuit court's

opinion.

counsel has appeared here today and she has been

candid enough to indicate that the interrogatories

appear to have been prepared and they may have

inadvertently been sent to another court and they

may very well have been sent to another attorney.

Now why those things didn’t come back to her

office, or this court, or the other attorney, I am

not sure. It’s an unfortunate situation, and

counsel has been respectful each time she has

appeared here.

It’s a difficult measure to be taken, but it

is the ruling of the Court that the Motion to Set

Aside the Default Judgment should be denied.

On November 18, the circuit court entered an order denying the

motion to set aside the default judgment.

Riverfront next filed a December 1 motion, asking the

circuit court to “reconsider its prior denial of Defendants’

Motion, insofar as the Court must preserve Defendants’ right

to a trial by jury on the issue of damages.” Riverfront's

motion was based on Wood v DAIIE, 413 Mich 573; 321 NW2d 653

(1992).

Reconsideration was denied by the circuit court in a

January 15, 1998 opinion/order.6

The Court of Appeals affirmed the $50,000 default

6
MCR 2.119(F)(3) states the standard for deciding a

circuit court motion for rehearing or reconsideration:

Generally, and without restricting the

discretion of the court, a motion for rehearing or

reconsideration which merely presents the same

issues ruled on by the court, either expressly or

by reasonable implication, will not be granted.

The moving party must demonstrate a palpable error

by which the court and the parties have been misled

and show that a different disposition of the motion

must result from correction of the error.

judgment.7

Riverfront has applied to this Court for leave to appeal.

The setting aside of a default or a default judgment is

governed by MCR 2.603(D)(1), which provides:

A motion to set aside a default or a default

judgment, except when grounded on lack of

jurisdiction over the defendant, shall be granted

only if good cause is shown and an affidavit of

facts showing a meritorious defense is filed.

In the present case, the circuit court and the Court of

Appeals found no good cause. For example, in denying

Riverfront's motion for reconsideration, the circuit court

said that the lengthy period without contact from opposing

counsel should have put defense counsel on notice that

something was awry. Likewise, the Court of Appeals majority

concluded that good cause had not been shown:

Under these circumstances we conclude that the

circuit court did not abuse its discretion in

finding that defense counsel unjustifiably

neglected the instant case when she failed over a

five-month period to make contact with plaintiff's

counsel of any kind, or otherwise investigate the

status of the case.

The dissenting judge said that "[w]ithout some specific

information or record support of docket management procedures,

local rules, and prevailing time frames in the Genesee Circuit

Court, I would say that the lack of contact between an

Unpublished opinion per curiam, issued January 25,

2000, amended January 31, 2000 (Docket NO. 209212).

attorney and the opposite side or the court for a period of

four or five months is not sufficient ground for entry of a

default against the attorney for failure ‘to diligently pursue

and defend a case.’"

We will not pause long on this aspect of the case. Our

review is for clear abuse of discretion,8 and we find no such

abuse in this case. While we are not unsympathetic to the

plight of an attorney betrayed by glitches in mail delivery,

this case involves more than the occasional misdelivery of a

piece of mail.

Various letters and notices of hearing were mailed to

defense counsel at her correct address in Madison Heights, all

to no effect. This bundle of mail was necessitated by

counsel's year-long failure to provide Ms. Zaiter's lawyer

with answers to discovery requests that had been tendered with

the complaint. The eventual explanation that the answers had

been mailed five months earlier to an attorney in an unrelated

case provides little help--counsel herself acknowledged at the

October 29 proceedings that this disclosure "I suppose in many

senses increases my culpability in this matter."

We have no doubt that real problems can arise as

documents are transmitted by mail. On this record, however,

the prolonged and repeated failure to receive mail, together

8
Alken-Ziegler, Inc v Waterbury Headers Corp, 461 Mich

219, 227-229; 600 NW2d 638 (1999).

with the other circumstances of this case, led the circuit

court to conclude that Riverfront had failed to demonstrate

good cause for setting aside the default judgment.9 In that

conclusion, we can find no abuse of discretion.

III

This case also presents the issue whether the Riverfront

can obtain a jury trial on damages. As the parties and the

lower courts have observed, this question was treated at

length in our 1992 decision in Wood.

The defendant in Wood was DAIIE. It failed to respond

timely to proper discovery requests, resulting in a default

and, after a further hearing, a default judgment. DAIIE did

appear for the default judgment hearing, but the court refused

to allow it to participate. 413 Mich 577.

With regard to whether DAIIE had a right to a jury trial

in Wood, this Court noted that DAIIE had requested a jury and

had not waived that right. Thus, the issue was whether the

default functioned as a waiver. This Court held that it did

not:

We hold only that a defaulting party who has

properly invoked his right to jury trial retains

that right if a hearing is held to determine the

amount of recovery. It is important, therefore, to

ascertain when such a hearing is required. [413

9
It is important that the “good cause” and “meritorious

defense” elements of a motion to set aside be considered

separately. Alken-Ziegler, 461 Mich 229-234. There being no

good cause in this case, we do not reach the question of

meritorious defense.

Mich 583-584 (emphasis in original).]

This Court then examined GCR 1963, 520 to determine when

such a hearing is necessary. That rule is the predecessor of

MCR 2.603(B)(3)(b),10 which provides:

If, in order for the court to enter judgment

or to carry it into effect, it is necessary to

(i) take an account,

(ii) determine the amount of damages,

(iii) establish the truth of an allegation by

evidence, or

(iv) investigate any other matter,

the court may conduct hearings or order references

it deems necessary and proper, and shall accord a

right of trial by jury to the parties to the extent

required by the constitution.

From there, this Court moved to the principal holding of Wood:

However, once the trial court determines that

a further proceeding is necessary, the rule

mandates "a right of trial by jury to the parties

when and as required by the Constitution".[11] As

noted above, the constitutional requirement is but

a circular reference to the court rules. The

constitutional provision is repeated here: "The

right of trial by jury shall remain, but shall be

waived in all civil cases unless demanded by one of

the parties in the manner prescribed by law."

Const 1963, art 1, § 14.

Thus, the trial court in the case at bar,

having determined that a hearing was necessary on

the question of damages, was obliged to accord

10
In pertinent part, the differences are only stylistic.

11
The emphasized phrase from GCR 1963, 520.2(2) has been

replaced by the words, “to the extent required by the

constitution.” No substantive change was intended by that

rephrasing.

defendant its properly preserved right to jury

trial. [413 Mich 585 (emphasis in original).]

When it denied reconsideration in the present case, the

circuit court explained that it had exercised discretion to

determine whether a hearing was necessary to determine

damages. There being no such necessity, there was no need for

a trial by jury.

The Court of Appeals majority noted that the circuit

court had conducted a hearing on damages,12 and therefore

Riverfront’s “properly preserved right to a jury determination

on the issue of damages must be recognized.” The majority

affirmed nonetheless. It relied on the failure of Riverfront

to appear at the hearing to assert the right to a jury trial,

and Riverfront’s failure to raise this issue in its motion to

set aside the default judgment.

Noting the similarities between this case and Wood, the

dissenting judge characterized Riverfront’s Wood-based

argument as “compelling.”

On this point, we agree with the dissent in the Court of

Appeals. With its answer, Riverfront stated its reliance on

Ms. Zaiter’s demand for a jury. At no time has Riverfront

ever said or done anything to waive its right to a jury. Wood

teaches that Riverfront’s default does not constitute such a

12
The majority also said that there had been no

mediation, which prompted the dissent to describe the $50,000

figure as “a rabbit from a hat.”

waiver. 413 Mich 583. Thus, we know that it had the right to

trial by jury on damages if a hearing were held, as did occur

in this case. MCR 2.603(B)(3)(b).

All that remains is Riverfront’s failure to participate

in the default judgment hearing. In light of the court rule,

the analysis offered in Wood, and the circumstances of this

case, we are satisfied that Riverfront’s failure to appear for

the default judgment hearing did not constitute a waiver of

its right to a jury trial. The failure to appear was simply

another element of the continuing problem that gave rise to

the present dispute. Whatever reasons caused the default also

caused defense counsel not to appear for the default judgment

hearing.

As the Court of Appeals noted, Riverfront did not raise

this issue in its motion to set aside the default judgment.

Rather, this question was first raised in Riverfront’s motion

for reconsideration of the court’s order denying the motion to

set aside the default judgment. While that presentation may

appear to be tardy, the constitutional nature of the right to

trial by jury-- right never waived by Riverfront--
--a --compels us

to grant partial relief in the circumstances of this case.

The principles elaborated in Wood are the basis of this

result.

For the reasons stated in this opinion, we affirm in part

and reverse in part the judgments of the circuit court and the

Court of Appeals. We remand this case to the circuit court

for a hearing before a jury on the amount of damages. MCR

7.302(F)(1).

CORRIGAN , C.J., and CAVANAGH , WEAVER , KELLY , TAYLOR , YOUNG , and

MARKMAN, JJ., concurred.