American Central Corp. v. Stevens Van Lines, Inc., Docket No. 48248

• Citation: 103 Mich.App. 507,303 N.W.2d 234
• Decision Date: 04 February 1981
• Docket Number: Docket No. 48248
• Parties: AMERICAN CENTRAL CORPORATION, a Michigan Corporation, Plaintiff-Appellee, v. STEVENS VAN LINES, INC., and United Van Lines, Defendants-Appellants. 103 Mich.App. 507, 303 N.W.2d 234
• Court: Court of Appeal of Michigan — District of US

Page 234

303 N.W.2d 234

AMERICAN CENTRAL CORPORATION, a Michigan Corporation, Plaintiff-Appellee, v. STEVENS VAN LINES, INC., and United Van Lines,

Defendants-Appellants.

Docket No. 48248.

103 Mich.App. 507, 303 N.W.2d 234

Court of Appeals of Michigan.

Feb. 4, 1981.

Released for Publication March 23, 1981.

[103 MICHAPP 508] Jeffrey J. Endean, Saginaw, for Stevens Van Lines.

[103 MICHAPP 509] Frederick J. Blackmond, Lansing, for United Van Lines.

Ronald G. Morgan, Lansing, for plaintiff-appellee.

Before V. J. BRENNAN, P. J., and ALLEN and BEASLEY, JJ.

V. J. BRENNAN, Presiding Judge.

This case is an appeal from a default judgment against defendants, which awarded plaintiff actual damages, exemplary damages, punitive damages, and attorney fees after a jury trial on the issue of damages alone.

The facts surrounding this case are relatively simple and straightforward. In August, 1977, plaintiff and defendant Stevens contracted to move plaintiff from its Lansing offices to new offices in East Lansing for $1,250. Subsequent to the move, plaintiff determined that some damage had occurred during the move and submitted a claim for $209.50. There then followed a number of telephone exchanges whereby plaintiff claimed that all necessary documentation had been sent, but defendant Stevens claimed that the necessary documents had not been received. Finally, after verification that plaintiff had paid defendant Stevens for the move, the claim was processed. Following this, defendant Stevens sent a check to plaintiff in the amount of $91.20 with an enclosed letter identifying the damage amounts allowed and disallowed. The check indicated that its acceptance would release defendant Stevens from further liability on the claim. However, plaintiff returned the check and initiated the instant civil action in circuit court. The complaint alleged breach of contract, unfair trade practices under the Michigan Consumer Protection Act, unfair insurance practices, fraud, interference with contractual relations, and the intentional infliction of emotional [103 MICHAPP 510] distress. The relief requested actual damages, exemplary damages, punitive damages, and attorney fees. No specific amount of money was requested. Defendant United Van Lines was joined as a defendant with Stevens based on a principal/agent or joint-ventures relationship.

Defendant Stevens was served on October 10, 1978, and its default entered on November 13, 1978. Defendant United Van Lines was served on December 1, 1978, and its default entered on January 3, 1979. The defaults were based on defendants' failure to appear or otherwise defend. Defendants' motions to set aside the defaults were denied by the trial judge on December 27, 1978, and February 22, 1979, respectively.

At a pretrial conference held on April 23, 1979, it was determined that plaintiff was entitled to have its damages determined by a jury. However, it was also determined that counsel for defendants would be barred from absolute participation in the damages trial because of the defaults entered against them. Thereafter, a jury trial on damages was held. Since the defendants' counsel was barred from any participation in the proceeding, the testimony of plaintiff's witnesses was not subject to any cross-examination, nor were any objections raised as to any testimony, evidence, closing argument, court rulings, or jury instructions. The jury returned a verdict in favor of plaintiff for $505 "direct" damages, $505 exemplary damages, $15,000 punitive damages, and $2,610 for attorney fees.

Defendants raise on appeal the first-impression question of whether a defaulted defendant has any right to participate in a subsequent jury trial on the assessment of damages. ¹

[103 MICHAPP 511] In Michigan, the entry of and judgment by default is controlled by GCR 1963, 520 which provides in pertinent part:

"1. Entry. When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules * * * the person seeking relief or his attorney shall enter the default of that party * * *. Once a default of any party has been duly filed or entered, that party shall not proceed with his case until his default has been set aside by the court in accordance with subrule 520.4.

"2. Judgment. Judgment by default may be entered as follows:

"(2) By the Court. In all other cases (other than a claim for a sum certain or for a sum which can by computation be made certain) the party entitled to a judgment by default shall apply to the court therefor; * * *. If the party against whom judgment by default is sought has appeared in the action, he (or if appearing by representative, his representative) shall be served with written notice of the application for judgment at least 7 days prior to the hearing on such application. If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper and shall accord a right of trial by jury to the parties when and as required by the constitution."

In the instant case, the plaintiff reasoned and the trial court concurred that the fact that the defaults were not set aside, GCR 1963, 520.1, precluded the defendants' right to participation in the [103 MICHAPP 512] trial by jury accorded to the parties by GCR 1963, 520.2(2). Defendants, while not directly challenging the court's orders denying their motions to set aside the defaults, reasoned that they still were entitled to participate in the subsequent jury trial to determine the amount of damages. We agree with the defendants.

While neither the industry of counsel nor our own research has resulted in finding any Michigan case which deals with the precise question we are called upon to decide, an examination of the legal consequences of a default lends support to our interpretation of GCR 1962, 520.

Entry of a default is equivalent to an admission by the defaulting party as to all well-pleaded allegations. Smak v. Gwozdik, 293 Mich. 185, 291 N.W. 270 (1940), Shan v. Brisson, 43 Mich.App. 666, 204 N.W.2d 692 (1972). However, the admission by the defaulting party is an admission as to liability and not an admission as to damages. Bonnici v. Kindsvater, 275 Mich. 304, 266 N.W. 360 (1936), Haller v. Walczak, 347 Mich. 292, 79 N.W.2d 622 (1956). The Court, in Hanover Fire Ins. Co. of New York v. Furkas, 267 Mich. 14, 19, 255 N.W.2d 381 (1934), stated the legal distinction thusly:

"In ordinary actions founded on contract or tort the rule seems well established that a default in appearing or pleading admits the right to recover, but not the amount of the damages.

" 'On the assessment of damages in assumpsit on a contract of sale, after the default of defendant, the amount of the damages alone is in issue; the liability of defendant on the contract being fixed by the default.' Grinnell v. Bebb (syllabus), 126 Mich. 157, 85 N.W. 467.

" 'A default in appearing or pleading where the action is in tort or upon an unliquidated claim, while it admits the right to recover, does not admit the amount, [103 MICHAPP 513] and further proceedings are required to determine the amount of the judgment.' 17 C.J. p. 1042."

Hence, not having admitted unliquidated damages, it seems apparent that the defaulted party should be permitted to participate in any proceeding under GCR 1963, 520.2(2) whereby the damages are assessed. The amount of the damages is still "at issue". While the defaulted party can in nowise challenge his liability in this proceeding, he should be permitted to participate in the hearing to determine the unliquidated damages. Allowing a defaulted defendant to contest the amount of damages at a jury hearing does not render the entry of default void, for liability is still admitted, but rather better enables a jury to ascertain the truth in assessing damages. This Court will construe the court rules so as to provide for the meritorious disposition of cases. Penney v. Protective National Ins. Co., 24 Mich.App. 218, 180 N.W.2d 44 (1970).

Further, we note that our interpretation is consistent with the notice requirement specified by GCR 1963, 520.2(2). This section requires that a defaulted party who has appeared in an action must be given 7 days written notice prior to an entry of a default judgment. This Court has previously held that this notice provision is founded on constitutional due process. Petroff v. Petroff, 88 Mich.App. 18, ...