Amco Builders & Developers, Inc. v. Team Ace Joint Venture

• Decision Date: 17 July 2003
• Docket Number: Docket No. 120459, Calendar No. 11.
• Citation: 469 Mich. 90,666 N.W.2d 623
• Parties: AMCO BUILDERS & DEVELOPERS, INC., Plaintiff/Counter-Defendant-Appellant, v. TEAM ACE JOINT VENTURE, Defendant/Counter-Plaintiff/Cross-Defendant, and Hartford Fire Insurance Co., Defendant/Cross-Defendant, and Acme Demolition/Intervale Joint Venture, Defendant-Appellee, and Leroy Love doing business as Acme Demolition Co., Defendant/Counter-Plaintiff/Cross-Plaintiff, and Intervale Excavating & Demolition, Inc., Defendant/Appellee/Cross-Defendant, and Team Contracting, Inc. American Construction & Energy, and Jarvis Painting, Inc., Defendants.
• Court: Michigan Supreme Court

666 N.W.2d 623

469 Mich. 90

AMCO BUILDERS & DEVELOPERS, INC., Plaintiff/Counter-Defendant-Appellant, v. TEAM ACE JOINT VENTURE, Defendant/Counter-Plaintiff/Cross-Defendant, and Hartford Fire Insurance Co., Defendant/Cross-Defendant, and Acme Demolition/Intervale Joint Venture, Defendant-Appellee, and Leroy Love doing business as Acme Demolition Co., Defendant/Counter-Plaintiff/Cross-Plaintiff, and

Intervale Excavating & Demolition, Inc., Defendant/Appellee/Cross-Defendant, and

Team Contracting, Inc. American Construction & Energy, and Jarvis Painting, Inc., Defendants.

Docket No. 120459, Calendar No. 11.

Supreme Court of Michigan.

Argued March 12, 2003.

Decided July 17, 2003.

Rene S. Roupinian, Brooklyn Heights, NY, for the plaintiff-appellant.

Plunkett & Cooney, P.C. (by Ernest R. Bazzana), Detroit, for defendant-appellee Intervale Excavating & Demolition, Inc.

Opinion

MICHAEL F. CAVANAGH, J.

This case requires us to decide whether the trial court's refusal to set aside a default judgment was an abuse of discretion. Because we find that the trial judge did not abuse his discretion in refusing to set aside the default judgment, we reverse the judgment of the Court of Appeals.

I

This case involves claims for breach of contract and tortious interference with a contractual relationship arising from a construction project of the city of Detroit housing commission.

On November 23, 1998, the circuit court directed defendants, Acme Demolition/Intervale Joint Venture (Acme/Intervale Joint Venture) and Intervale Excavating & Demolition, Inc. (Intervale), to produce Clarence Carson, the principal of Intervale, for deposition within thirty days. This order was entered only after the trial judge "bent over backwards" for defendants, even providing defense counsel an opportunity to contact Mr. Carson to ensure that he could appear within thirty days. The order provided that "[f]ailure to produce Clarence Carson in conformity with this Order shall subject Defendant to a motion for default judgment."

When defendants Intervale and Acme/Intervale Joint Venture failed to comply with the order, plaintiff filed a motion for default judgment against defendants. At the January 15, 1999, hearing on the motion, defense counsel stated that he had been unable to reach Mr. Carson because of the holidays and the illness of defense counsel's son. He acknowledged that he had "not participated" in discovery and admitted "not having been available to properly represent" defendants. However, he assured the court that communications with his clients had been restored. The court granted the motion for default and the order of default was entered against both defendants on January 27, 1999, for failure to comply with the November 23, 1998, order.

Both defendants moved to set aside the default on February 12, 1999. Although defendants' attorney assumed responsibility for the delay, the motion was denied on March 12, 1999, because the court found that neither defendant demonstrated good cause to set aside the default.

Default judgment in the amount of $595,606.15 was entered against only Intervale when defense counsel did not appear for the March 18, 1999, hearing on the issue of damages.¹ New counsel for defendant moved to set aside the default entry against both Intervale and Acme/Intervale Joint Venture, as well as the default judgment against Intervale, claiming that Mr. Carson was not aware that the court had ordered his production for deposition. The court denied the motion at a hearing on April 30, 1999, because it had "bent over backwards ... making sure that ... [prior defense counsel] had the okay from his clients that they would be produced for deposition within the period of time." The circuit court was not satisfied that good cause for setting aside the default and the default judgment was presented. The order denying the motion was entered on May 5, 1999.

Defendant appealed both the entry of default judgment and the denial of the motion to set aside the default and the default judgment. The Court of Appeals reversed in a two-to-one unpublished opinion per curiam.² Finding that the actions of defense counsel constituted abandonment, the majority opined that there was good cause for setting aside the default and the default judgment. The Court of Appeals majority held that the trial court abused its discretion in refusing to set aside the default judgment. The dissenting judge concluded that the level of deference precludes reversal in this case; he found that the refusal to set aside the default and the default judgment was not an abuse of discretion.

Plaintiff appealed the Court of Appeals reversal of the trial court's denial of defendant's motion to set aside the default judgment. This Court granted plaintiff's application for leave to appeal. 467 Mich. 896, 654 N.W.2d 327 (2002).

II

This Court reviews a trial court's refusal to set aside a default or default judgment for an abuse of discretion. Zaiter v. Riverfront Complex, Ltd., 463 Mich. 544, 552, 620 N.W.2d 646 (2001); Alken-Ziegler, Inc. v. Waterbury Headers Corp., 461 Mich. 219, 227, 600 N.W.2d 638 (1999). As we recently reiterated in Alken-Ziegler:

The ruling on a motion to set aside a default or a default judgment is entrusted to the discretion of the trial court. Where there has been a valid exercise of discretion, appellate review is sharply limited. Unless there has been a clear abuse of discretion, a trial court's ruling will not be set aside.

* * *

This Court historically has cautioned appellate courts not to substitute their judgment in matters falling within the discretion of the trial court, and has insisted upon deference to the trial court in such matters. For example, the Court stated in Scripps v. Reilly, 35 Mich. 371, 387 (1877):

"It can never be intended that a trial judge has purposely gone astray in dealing with matters within the category of discretionary proceedings, and unless it turns out that he has not merely misstepped, but has departed widely and injuriously, an appellate court will not re-examine. It will not do it when there is no better reason than its own opinion that the course actually taken was not as wise or sensible or orderly as another would have been."

* * *

Moreover, although the law favors the determination of claims on the merits, it has also been said that the policy of this state is generally against setting aside defaults and default judgments that have been properly entered. [Alken-Ziegler at 227-229, 600 N.W.2d 638 (citations omitted).]

III

The setting aside of a default or 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.

Plaintiff has not challenged defendant's affidavit of meritorious defense; therefore, the trial court only examined whether there was good cause to set aside the default and default judgment. To show "good cause," a party may establish "`(1) a substantial defect or irregularity in the proceeding upon which the default was based,'" or "`(2) a reasonable excuse for failure to comply with the requirements which created the default....'" Alken-Ziegler at 230, 600 N.W.2d 638 (citation omitted).

Defendant asserts that there is good cause for setting aside the default and the default judgment because the actions of prior defense counsel constituted abandonment. While, generally, an attorney's negligence is attributable to that attorney's client, abandonment by counsel has been held to constitute good cause for setting aside a default or default judgment. White v. Sadler, 350 Mich. 511, 523-524, 87 N.W.2d 192 (1957). In White, this Court recognized that a default judgment may be set aside on the basis of abandonment or withdrawal by an attorney:

We find no ALR annotation squarely on the point of the negligence of an attorney as a ground for opening or vacating a default judgment, but we do find one on the abandonment of or withdrawal from a case by an attorney as such a ground (114 A.L.R. 279). That annotation has this revealing passage on page 280:

"An attorney's negligence or mistake is distinguishable, as regards the right to reopen a default judgment, from his abandonment of the case, which may be in effect a fraud on his client. So that from the mere fact that the attorney's negligence may be imputable to his client and prevent the latter from relying on that ground for vacating or opening a default judgment, it does not necessarily follow that the same rule will apply in the event of the attorney's abandonment of the case. It is said in 15 R.C.L. (Perm. Supp. ed.), Judgments, § 161, p. 711: `In some jurisdictions the negligence or mistake of an attorney is not imputable to his client, and does not debar him from obtaining relief from a judgment due thereto, but the decisions in most of the States are to the effect that the neglect or mistake of an attorney or agent must be treated as that of his principal, and hence whenever the mistake, negligence or inadvertence relied upon is of so gross a character that it would not have entitled the party to relief had it been his own, it is equally unavailable to procure him relief when attributable to his attorney.'" [Id.]

In this case, the circuit court examined the actions of the prior defense counsel and refused to set aside the default and the default judgment.

Defendant argued that the default and the default judgment should be set aside because Mr. Carson did not have knowledge that the trial court ordered him to appear for deposition, nor did he have knowledge that default had been entered. Defendant asserts Mr. Carson's lack of knowledge was the result of prior counsel's abandonment. Mr. Carson signed an affidavit dated April 22, 1999. The affidavit stated, in part, that before April 14, 1999,...