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.
I
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.
1
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.”
2
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
3
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.
4
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
3
The judgment was against Riverfront and Mr. Riley,
jointly and severally.
5
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.
6
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.
7
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.
8
judgment.7
Riverfront has applied to this Court for leave to appeal.
II
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
7
Unpublished opinion per curiam, issued January 25,
2000, amended January 31, 2000 (Docket NO. 209212).
9
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).
10
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.
11
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.
12
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.”
13
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.
IV
For the reasons stated in this opinion, we affirm in part
14
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.
15