Hartman v. Roberts-Walby Enterprises, Inc.

• Decision Date: 25 June 1969
• Docket Number: Docket No. 2858,ROBERTS-WALBY,No. 2,2
• Parties: Charlotte HARTMAN, Plaintiff-Appellee, v.ENTERPRISES, INCORPORATED, a Michigan corporation, Defendant, and United Bonding Insurance Company, a foreign corporation, jointly and severally, Defendant-Appellant
• Court: Court of Appeal of Michigan — District of US

Page 292

170 N.W.2d 292

17 Mich.App. 724

Charlotte HARTMAN, Plaintiff-Appellee, v. ROBERTS-WALBY ENTERPRISES, INCORPORATED, a Michigan corporation, Defendant and United Bonding Insurance Company, a foreign corporation jointly and severally, Defendant-Appellant.

Docket No. 2858.

Court of Appeals of Michigan, Division No. 2.

June 25, 1969.

Rehearing Denied July 25, 1969.

Released for Publication Sept. 16, 1969.

Seth H. Barsky, Detroit, for appellant.

George Silitch, William E. Wade, Detroit, for appellee.

Before J. H. GILLIS, P.J., and LEVIN and BRONSON, JJ.

LEVIN, Judge.

Plaintiff's complaint alleged that defendant Roberts-Walby Enterprises, Incorporated, a tavern owner, and its surety, United Bonding Insurance Company, were liable to the plaintiff under the dramshop act ¹ because of illegal sales of intoxicating beverages by the tavern owner to plaintiff's husband.

Both defendants were duly served with copies of the summons and complaint. The tavern owner answered but no answer or appearance was filed in behalf of the surety. A default judgment in the sum of $5,000 was entered against the surety. Thereafter it moved to set aside the judgment. That motion was denied and this appeal followed. ² Although the 'trend of our jurisprudence is toward meritorious determination of issues' (Walters v. Arenac Circuit Judge (1966), 377 Mich. 37, 47, 138 N.W.2d 751, 754), we have concluded that in this case the trial judge did not err in refusing to grant the surety's motion to set aside the default judgment.

The court rule ³ provides:

'A proceeding to set aside default or a default judgment, except when grounded on want 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.' GCR 1963, 520.4.

The sole issue on this appeal concerns the sufficiency of the surety's showing before the trial judge in support of its assertion that it has a meritorious defense. ⁴

The surety's motion to set aside the default judgment was the subject of several hearings. Between hearings the moving papers were changed and supplemented. Initially, the surety alleged that it 'has a meritorious defense to this matter inasmuch as all sums which they are deemed to pay are subject to reimbursement from the named assured, which is a co-defendant in said matter.'

We agree with the trial judge that the surety's right to indemnification from its principal, the tavern owner, does not constitute a defense to plaintiff's action under the dramshop act against the surety. Similarly, the plaintiff was not required first to obtain a judgment against the tavern owner before taking a default judgment against the surety. The dramshop act expressly authorizes suits against a tavern owner and his surety 'severally and jointly.' ⁵

'If the surety is, as the statute provides, severally liable, it is difficult to conceive why an action may not be brought against him alone. Language could not well be plainer than the employed in the statute itself, and we need not enlarge upon it.' Scahill v. Aetna Indemnity Co. (1909), 157 Mich. 310, 311, 312, 122 N.W. 78, 79. ⁶

The defendant surety's reliance on Lafler v. Monroe Circuit Judge (1898), 118 Mich. 677, 77 N.W. 265, is misplaced. In that case the Supreme Court held that since a judgment obtained by the plaintiff against a tavern owner and its surety for $5,000 would be satisfied upon payment by either the tavern owner or the surety, the trial court did not err in ordering a new trial unless the plaintiff agreed to reduction of the judgment to $3,000, the amount which was the limit of the surety's liability under its bond. Similarly, see Merrinane v. Miller (1909), 157 Mich. 279, 285, 118 N.W. 11, 25 L.R.A.,N.S., 585.

The plaintiff's complaint against the tavern owner has not yet been tried. In contrast to Lafler v. Monroe Circuit Judge, Supra, and Merrinane v. Miller, Supra, in this case a judgment was not entered against the tavern owner and the surety for an amount greater than the amount of the surety's bond. If the plaintiff succeeds in collecting the default judgment she obtained against the defendant surety, the tavern owner might, indeed, have a good defense to the continued prosecution of this action against it. But the defense which might then arise in favor of the tavern owner does not give the surety a good defense at this time.

After the motion to set aside the default judgment was denied the surety filed a petition for rehearing with a supporting affidavit signed by its attorney. At the subsequent hearing, the trial judge declined to consider the attorney's affidavit stating that although it was made on purported personal knowledge, in reality, as the attorney acknowledged in open court, the attorney had no personal knowledge of the facts. The attorney asked for time to file an affidavit of one who did have personal knowledge of the facts, which request was granted.

Subsequently an affidavit of an officer of the tavern owner was filed. This affidavit stated that the affiant was present on the premises on the day plaintiff's husband was allegedly served intoxicants 'and of his own personal knowledge states that the above named defendant (the tavern owner) did not, through any of his agents, servants or employees, violate the Michigan Dram Shop Act, being MSA 18.993 as amended in relation to plaintiff's husband Nelton Hartman.' At the next hearing the trial judge ruled this affidavit insufficient because, among other reasons, it stated a mere conclusion and did not state a factual basis for that conclusion.

A motion which seeks to set aside a default judgment is addressed to the trial judge's discretion. ⁷ Had the judge been satisfied with the surety's moving papers we would be disinclined to interfere with an order setting aside the default judgment. But it was clearly within his prerogative under the circumstances of this case to require that the surety furnish the affidavit of one who had personal knowledge of the facts. The judge's action in requiring an affidavit based on personal knowledge is particularly appropriate where, as here, the attorney's affidavit, admittedly not made on personal knowledge, did not state the basis or source of his information and belief. The surety's attorney did not claim that he would experience any difficulty in obtaining an affidavit from one who had personal knowledge of the facts and, indeed, told the judge that such an affidavit could be obtained. ⁸

GCR 1963, 520.4 provides that a motion to set aside a default judgment shall be granted only if 'an affidavit of Facts showing a meritorious defense is filed.' (Emphasis supplied.) The trial judge was not obliged to accept the affidavit of the tavern owner's officer which, although made on personal knowledge, contained only the conclusory statement that the tavern owner did not violate the dramshop act in respect to the plaintiff's husband. ⁹

The function of the affidavit is to provide the judge with information so that he can determine whether the defaulted defendant has a meritorious defense. The judge in this case could hardly have been enlightened on that issue by the tavern owner's conclusory affidavit which did not contain a single supporting factual assertion and which, indeed, beyond its general denial of liability, did not even state the nature of the defense. ¹⁰ The tavern owner's affidavit was not an 'affidavit of Facts.'

As an additional ground of appeal the surety asserts that the plaintiff's complaint failed to state a cause of action ¹¹ because on its face it shows that plaintiff's husband's injuries were not caused by the defendant's actions but, rather, by the intervening act of a third party. ¹² This contention was not argued by the defendant at any of the hearings before the trial judge. That aspect of the plaintiff's complaint was never called to the attention of the trial judge.

The attorney's affidavit in support of the petition for rehearing did Factually allege that the plaintiff's husband's injuries were caused by the actions of a third party but, as we have previously stated, the trial judge was within his prerogative in rejecting an 'affidavit of facts' made by one who did not have personal knowledge of the statements therein set forth and which did not state the sources or basis of the information therein contained. We again mention that the surety's attorney said he could and would obtain an affidavit from one who did have personal knowledge. They surety never contended, and the trial judge had no reason to suppose, that the surety might be able to show that it had a meritorious defense independently of the factual allegations in the attorney's affidavit.

If the defendant surety wished to set up a meritorious defense on the ground that the inadequacy of the causal relationship between the tavern owner's sales of intoxicants and the plaintiff's husband's injuries appeared on the face of plaintiff's complaint, it should have brought this defense clearly to the attention of the trial judge either by stating such asserted defense in its motion to set aside default judgment or in its petition for rehearing or, minimally, by arguing it orally before the court.

At the oral argument the defendant was given ample opportunity to present...