Wendel v. Swanberg

• Citation: 185 N.W.2d 348,384 Mich. 468
• Decision Date: 01 October 1970
• Docket Number: No. 20,20
• Parties: Richard O. WENDEL and Elizabeth M. Wendel, Plaintiffs-Appellants, v. Helen SWANBERG, Defendant-Appellee, and Travelers Indemnity Co., Garnishee Defendant-Appellee. ,
• Court: Michigan Supreme Court

Page 348

185 N.W.2d 348

384 Mich. 468

Richard O. WENDEL and Elizabeth M. Wendel, Plaintiffs-Appellants, v. Helen SWANBERG, Defendant-Appellee and Travelers Indemnity Co., Garnishee Defendant-Appellee.

No. 20, October Term, 1970.

Supreme Court of Michigan.

April 5, 1971.

Donald G. Jennings, Manistee, for plaintiffs-appellants.

John E. Hart, Manistee, for defendant-appellee.

Korn & Burns, Cadillac, for garnishee defendant-appellee.

Before the Entire Bench, except SWAINSON and WILLIAMS, JJ.

T. M. KAVANAGH, Chief Justice.

On February 15, 1966, Elizabeth Wendel, plaintiff-appellant, visted Helen Swanberg, defendant-appellee, at Mrs. Swanberg's home in Onekama, Manistee county, Michigan. As she was departing, Mrs. Wendel slipped and fell on the defendant's premises before reaching her automobile. She sustained a fracture of her left hip.

At the time of the accident Mrs. Swanberg was insured by Travelers Indemnity Company, garnishee defendant-appellee, under a homeowner's policy issued through the Boyer Agency of Manistee. The policy had a personal liability limit of $25,000 and contained the standard defense clause as to personal injury lawsuits. ¹ Under the heading 'GENERAL CONDITIONS' the policy contained a provision reading as follows:

'Section II--Insured's Duties in the Event of Loss, Accident or Occurrence:

'(a) Coverage E (Personal Liability) And F (Personal Medical Payments): When an occurrence takes place, written notice shall be given by or on behalf of the Insured to The Travelers or any of its authorized agents as soon as practicable. * * *

'(b) Coverage E: If claim is made or suit is brought against the Insured, the Insured shall immediately forward to The Travelers every demand, notice, summons or other process received by him or his representative.'

By mid-June, 1966, Travelers had been informed of the accident by Mrs. Swanberg, had made an investigation and had offered Richard and Elizabeth Wendel a 'voluntary payment' of $500, which was rejected.

On February 3, 1967, in Manistee county circuit court, the Wendels commenced a personal injury lawsuit against Helen Swanberg based on the above described accident. They demanded $25,000 in damages. Complaint and summons were personally served on Mrs. Swanberg on February 7, 1967. Upon her failure to appear and answer, an affidavit of default was filed and default was entered on April 20, 1967. On May 8, 1967, after hearing testimony on behalf of the plaintiffs, the Honorable Charles A. Wickens entered a default judgment awarding Elizabeth Wendel $15,000 damages and Richard Wendel $10,000. ²

On December 1, 1967, a writ of garnishment was issued directed to Travelers Indemnity Company, garnishee defendant-appellee. Travelers' disclosure stated the company had no liability or indebtedness to defendant Swanberg; but in answer to interrogatories, Travelers admitted the existence of the above-discussed policy, attached a copy, and stated that it was in effect at the time of the accident. Subsequently, in its answer to plaintiffs' motion for summary judgment, Travelers set up policy defenses, Viz., the alleged failure of Mrs. Swanberg to give prompt notice of the personal injury suit. Mrs. Swanberg testified she mailed the suit papers to the Boyer Agency in June, 1967, and received a return receipt. No one denied they were received by the agency. An employee of the Boyer Agency testified that she found the papers among its files near the end of November, 1967, and promptly presented them to a Travelers representative. Judge Wickens denied both parties' motions for directed verdicts. On March 19, 1968, the jury found Travelers liable to plaintiffs. Thereafter, the trial court granted plaintiffs' previous motion for a summary judgment on the grounds that the only issues of fact, those raised by Travelers' policy defenses, were raised too late, and that, therefore, Travelers' admission in its disclosure of the existence of the applicable policy rendered the insurer liable to plaintiffs as a matter of law. Following denial of its motion for vacation of the garnishment judgment and for a new trial, Travelers claimed an appeal to the Court of Appeals.

While the garnishment action was proceeding to trial, Mrs. Swanberg, defendant in the principal action, first appeared therein on February 16, 1968, by filing a motion to set aside the default judgment. After a hearing, on February 26, 1968, Judge Wickens denied the motion. An appeal was claimed to the Court of Appeals which was consolidated with Travelers' later appeal from the garnishment judgment.

The Court of Appeals reversed the decision of the trial court on the motion to set aside the default judgment and remanded the case for trial. The garnishment judgment was accordingly vacated. 17 Mich.App. 235, 169 N.W.2d 364. Appellants are here on leave granted. 383 Mich. 755.

Although the parties have raised several issues ³ two are controlling:

1) Assuming the trial court had discretion to set aside the default judgment in the principal action, ⁴ did it abuse its discretion by refusing to so act in this case?

2) Assuming the insurer's policy defenses were timely raised, was it entitled to a directed verdict of nonliability in the garnishment action?

We have concluded that both questions must be answered negatively and the trial court's judgments reinstated. Our prior decisions sharply limit appellate review of a trial court's valid exercise of discretion:

'The term discretion itself involves the idea of choice, of an exercise of the will, of a determination made between competing considerations. In order to have an 'abuse' in reaching such determination, the result must be so palpably and grossly violative of fact and logic that it evidences not the exercise of will but perversity of will, not the exercise of judgment but defiance thereof, not the exercise of reason but rather of passion or bias.' Spalding v. Spalding (1959), 355 Mich. 383, 384, 385, 94 N.W.2d 810, 811--812.

Furthermore, although we have assumed for the purposes of this decision that Judge Wickens had discretion to set aside the default judgment, ⁵ we note that the setting aside of default judgment after 4 months has long been disfavored in Michigan:

'Our Court has traditionally been strict on setting aside defaults once regularly entered. Where a default following personal service is regularly taken the court rule (former Court Rule 28(4), (1945)) providing that it shall not be set aside after a certain time (presently 4 months) has generally been regarded as mandatory (Hensey v. Hensey, 331 Mich. 518, 50 N.W.2d 308; Gombasy v. Gombasy, 318 Mich. 139, 27 N.W.2d 517; Watkins v. Wayne Circuit Judge, 247 Mich. 237, 225 N.W. 554), and this rule however harsh, has been subject to few exceptions, the most notable being that of fraud (Hensey v. Hensey, Supra), which is not urged or suggested here.' ⁶ White v. Sadler (1957), 350 Mich. 511, 521, 522, 87 N.W.2d 192, 198; also quoted in Walters v. Arenac Circuit Judge, Supra, at 55, 138 N.W.2d 751 (dissenting opinion) and in Haenlein v. Saginaw Building Trades Council, A.F.L. (1960), 361 Mich. 263, 266, 105 N.W.2d 166.

Applying these principles to the present facts we find no abuse of discretion. Mrs. Swanberg was personally served in February, 1967. She knew of the default judgment by November, 1967, at the latest when her bank account was garnisheed and a writ of execution levied on her home. Travelers informed her that it would not attempt to defend her early in December, 1967. Yet her motion to set aside the default judgment was not filed until February 16, 1968, more than nine months after the default judgment was regularly entered. When a motion is addressed to the trial court's discretion, appellate courts may reverse only when they find the trial judge abused his discretion. Spalding v. Spalding, Supra. We hold that the trial court did not abuse its discretion in refusing to set aside the default judgment.

The second issue is whether Travelers was entitled to a directed verdict of nonliability in the garnishment action because its insured, Mrs. Swanberg, did not 'immediately forward' the suit papers to Travelers upon receipt, as required by the insurance contract.

Provisions in liability insurance contracts requiring the insured to give the insurer immediate or prompt notice of accident or suit are common, if not universal. The purpose of such provisions is to allow the insurer to make a timely investigation of the accident in order to evaluate claims and to defend against fraudulent, invalid, or excessive claims. Wehner v. Foster (1951), 331 Mich. 113, 49 N.W.2d 87; Exo v. Detroit Automobile Inter-Insurance Exchange (1932), 259 Mich. 578, 244 N.W. 241. See also, Anno., 18 A.L.R.2d 443; Comment, 51 Mich.L.Rev. 275. The pertinent legal principles deducible from our cases and statutes regarding such notice provisions are as follows:

Notice an authorized agent is notice to the insurer. ⁷ By statute liability insurance policies must contain 'a provision that notice given by or on behalf of the insured to any authorized agent of the insurer within this state, with particulars sufficient to identify the insured shall be deemed to be notice to the insurer * * *.' M.C.L.A. § 500.3008 (Stat.Ann.1957 1957 Rev. § 24.13008). Mandatory statutory provisions are read into insurance contracts though they be omitted by the parties. Galkin v. Lincoln Mutual Casualty Co. (1937), 379 Mich. 327, 272 N.W. 694; Chrysler Corporation v. Hardwick (1941), 299 Mich. 696, 1 N.W.2d 43.

2) Mere delay in giving the required notice does not work a forfeiture because such provisions are construed to require notice within a reasonable time. Kennedy v. Dashner (1947), 319 Mich. 491, 30 N.W.2d 46; Exo v. Detroit Automobile Inter-Insurance Exchange, Supra.

3) Prejudice to the insurer is a material element in determining whether notice is reasonably given (Wehner v. Foster, Supra; Weller v. Cummins (19...