Fetz Engineering Co. v. Ecco Systems, Inc.

• Decision Date: 02 April 1991
• Docket Number: Docket No. 118712
• Citation: 188 Mich.App. 362,471 N.W.2d 85
• Parties: FETZ ENGINEERING COMPANY, a Michigan corporation, Plaintiff/Counter-Defendant/Appellant, v. ECCO SYSTEMS, INC., a Michigan corporation, Defendant/Counter-Plaintiff/Appellee. 188 Mich.App. 362, 471 N.W.2d 85
• Court: Court of Appeal of Michigan — District of US

Page 85

471 N.W.2d 85

FETZ ENGINEERING COMPANY, a Michigan corporation Plaintiff/Counter-Defendant/Appellant, v. ECCO SYSTEMS, INC., a Michigan corporation Defendant/Counter-Plaintiff/Appellee.

Docket No. 118712.

188 Mich.App. 362, 471 N.W.2d 85

Court of Appeals of Michigan.

Submitted Nov. 15, 1990, at Detroit.

Decided April 2, 1991, at 9:15 A.M.

Released for Publication June 21, 1991.

[188 MICHAPP 365] D'Agostini, Sable & Ruggeri by John F. Harrington, Sterling Heights, for plaintiff/counter-defendant/appellant.

Law Offices of Sullivan & Leavitt, P.C. by Andrew J. Haliw, III, and Andrew W. Mychalowych, Northville, for defendant/counter-plaintiff/appellee.

Before RICHARD ALLEN GRIFFIN, P.J., and SAWYER and BRENNAN, JJ.

PER CURIAM.

Plaintiff appeals from a judgment of the circuit court entered upon a mediation award on plaintiff's claim and defendant's counterclaim. We affirm.

Plaintiff brought the instant action against defendant, alleging breach of contract, account stated, quantum meruit, and unjust enrichment. Defendant filed a counterclaim, alleging breach of contract and breach of warranties, as well as claiming a setoff and incidental and consequential damages. The matter was submitted to a mediation panel, which rendered an award in plaintiff's favor in the amount of $13,000 on plaintiff's claim and entered an award in favor of defendant of $15,000 on defendant's counterclaim. Defendant [188 MICHAPP 366] accepted the award, while plaintiff filed a response which purported to accept the $13,000 award in its favor and reject the $15,000 award in defendant's favor. Defendant thereafter filed a motion for entry of judgment, arguing that plaintiff's response should be considered an acceptance of the entire award. The trial court initially ruled against defendant, but thereafter granted reconsideration in defendant's favor in light of this Court's decision in Henderson v. Sprout Bros., Inc., 176 Mich.App. 661, 440 N.W.2d 629 (1989). A motion by the plaintiff to set aside the judgment was later denied by the lower court.

I

Plaintiff first argues that the Henderson case was incorrectly decided by this Court and urges us to conclude, contrary to Henderson, that plaintiff was permitted to file a bifurcated response to the mediation evaluation. We agree, but affirm only because we are required to do so pursuant to Administrative Order No. 1990-6, 436 Mich. xxxi.

In our view, Henderson and its post-November 1, 1990, progeny, Rowe v. Lowry, 186 Mich.App. 136, 463 N.W.2d 110 (1990), were wrongly decided. ¹ Nevertheless, because Rowe is binding precedent, we must follow it pursuant to Administrative Order No. 1990-6. We will, however, seek to convene a [188 MICHAPP 367] special panel of the Court of Appeals to decide the issue which is common in all three cases. ²

During a five-year period between 1985 and 1990, former mediation court rule, MCR 2.403(L)(1), provided that "[t]he failure to file a written acceptance or rejection within 28 days constitutes acceptance." The deemed acceptance for failure to respond was a change from GCR 1963, 316.6(H)(1), which had provided that the failure "to file a written acceptance within 20 days constitutes rejection." Effective March 31, 1990, the Supreme Court returned the rule to its former practice by amending MCR 2.403(L)(1) to state that "[t]he failure to file a written acceptance or rejection within 28 days constitutes rejection."

Additionally, effective March 31, 1990, the Supreme Court amended MCR 2.403(M)(1) by including a statement that acceptance of the mediation evaluation "shall be deemed to dispose of all claims in the action." Before March 31, 1990, MCR 2.403(M)(1) read as follows:

If all the parties accept the panel's evaluation, judgment will be entered in that amount, which includes all fees, costs, and interest to the date of judgment.

Unchanged by the 1990 amendments is MCR 2.403(K)(2), which states:

The evaluation must include a separate award as to the plaintiff's claim against each defendant and as to each cross-claim, counterclaim, or third-party claim that has been filed in the action. For the purpose of this subrule, all such claims filed by any one party against any other party shall be treated as a single claim.

[188 MICHAPP 368] In the present case, plaintiff filed a timely mediation response which purported to accept the award on its claim but reject the award on defendant's counterclaim. We agree with Henderson and Rowe only to the extent that they hold that if plaintiff's mediation response were clearly improper, it should be treated as no response at all.

Plaintiff asserts that, because the mediation panel evaluated its claim against defendant separately from defendant's counterclaim, it was permitted under the court rule as it then existed to accept the mediation award on its claim and to reject the award on defendant's counterclaim. Plaintiff argues that the court rule, by requiring the rendition of separate awards, impliedly authorizes the acceptance or rejection of each such award. Furthermore, it is asserted that it would be a superfluous exercise for the mediation panel to evaluate plaintiff's claim separately from defendant's counterclaim if only the combined sum of the awards could be accepted or rejected. Although MCR 2.403(L)(1) requires each party to accept or reject the panel's evaluation, the term "evaluation" is not defined. Accordingly, it was unclear whether each award was an evaluation or whether only the combined sum of the awards was the evaluation.

At the time of mediation in the instant case, plaintiff's mediation response was reasonable in view of the inherent ambiguity of the court rule. Nevertheless, in the factually similar cases of Henderson and Rowe, our Court held that a bifurcated acceptance/rejection to separate mediation awards is improper and is to be treated as a nonresponse. The Henderson panel relied in large measure upon the judicial economy objective of the mediation process in construing the court rule:

[188 MICHAPP 369] In situations not concerning multiple parties, there is no provision in the mediation rule that allows a party to accept part of a mediation evaluation while rejecting the rest of it. The purpose of the mediation rule is to expedite and simplify the final settlement of cases. Smith v Elenges, 156 Mich App 260, 263; 401 NW2d 342 (1986). That purpose would clearly be frustrated if a party were permitted to split its response to a mediation evaluation so that, for example, it could accept a mediation award on its claim but reject an award on defendant's counterclaim. Such a procedure would not necessarily expedite or simplify the final settlement of the case since only a portion of it would be settled, the remaining portion still requiring to be fully litigated. The same parties as settled concerning a part of the lawsuit would nevertheless have to go to court and litigate the balance of the lawsuit. A "final settlement," in such an instance, can hardly be said to have resulted from the mediation process. Rather, at most, merely a partial settlement would have resulted, while the surviving portion of the case would continue to demand judicial attention. We agree with the observation of the circuit court:

"[A mediation evaluation] has to be accepted in its entirety or rejected in its entirety, otherwise [the mediation rule] doesn't make sense. The mediators simply can't operate under the circumstances where you reject part of it, settle for part of it. You have foiled the purpose of mediation by being given that ability." [Henderson, supra 176 Mich.App. at 667-668, 440 N.W.2d 629.]

Henderson appears to assume that a counterclaim arises out of the same transaction or occurrence at issue in the principal complaint. A counterclaim, however, need not necessarily arise out of the same transaction or occurrence that forms the basis of the plaintiff's claim. See MCR 2.203. In situations in which the counterclaim does not arise out of the same transaction or occurrence, judicial [188 MICHAPP 370] economy is certainly advanced by a separate disposition of either the plaintiff's claim or the counterclaim. See Martin, Dean & Webster, Michigan Court Rules Practice Rule 2.403 (1990 supplement), authors' comment, p. 76.

In the present case, like that in Henderson and Rowe, a settlement through the mediation process was judicially imposed upon parties who clearly did not intend to settle. The overly technical construction of the mediation court rule used to force the settlement is not plainly evident from the language contained in the court rule at issue. The injustice occasioned is the very type which the Supreme Court sought to avoid by amending the court rule in 1990.

Because the operation of the court rule under these facts was unclear at the time plaintiff filed its mediation response, we should take cognizance of the spirit of the court rules as embodied in MCR 1.105:

These rules are to be construed to secure the just, speedy, and economical determination of every action and to avoid the consequences of error that does not affect the substantial rights of the parties.

Forcing a judicial settlement in this instance is manifestly unjust and contrary to the purposes of the court rules as set forth in MCR 1.105.

Furthermore, the instant judgment which resulted from the application of the mediation court rule was clearly the product of "mistake, inadvertence, surprise, or excusable neglect." See MCR 2.612(C)(1) ³ and Great American Ins. Co. v. Old [188 MICHAPP 371] Republic Ins. Co., 180 Mich.App. 508, 448 N.W.2d 493 (1989). Under the circumstances of this case, the judgment should have been set aside. We would hold that the lower court abused its discretion in denying plaintiff's motion to set aside the judgment.

Were it not for Administrative Order No. 1990-6, we would reverse.

II

Plaintiff's second argument is that we should adopt the view of Judge McDonald in his partial...