ISB Sales Co v. Dave's Cakes

• Decision Date: 26 November 2003
• Docket Number: Docket No. 238921.
• Citation: 672 N.W.2d 181,258 Mich. App. 520
• Parties: ISB SALES COMPANY, Plaintiff-Appellee, v. DAVE'S CAKES, Defendant-Appellant, and Meurer Bakeries, Defendant.
• Court: Court of Appeal of Michigan — District of US

672 N.W.2d 181

258 Mich. App. 520

ISB SALES COMPANY, Plaintiff-Appellee, v. DAVE'S CAKES, Defendant-Appellant, and Meurer Bakeries, Defendant.

Docket No. 238921.

Court of Appeals of Michigan.

Submitted September 9, 2003, at Lansing.

Decided September 23, 2003, at 9:05 a.m.

Released for Publication November 26, 2003.

Nelson, Kreuger & Schrotenboer, P.C. (by Jon J. Schrotenboer), Hudsonville, for ISB Sales Company.

Robert J. Riley, Grand Rapids, for Dave's Cakes.

Before: DONOFRIO, P.J., and FORT HOOD and SCHUETTE, JJ.

PER CURIAM.

Defendant Dave's Cakes¹ appeals as of right from the trial court's order granting a default judgment in favor of plaintiff. We reverse and remand for proceedings consistent with this opinion.

I. BASIC FACTS AND PROCEDURAL HISTORY

On October 27, 2000, plaintiff filed an action against Meurer Bakeries and defendant. The complaint alleged that plaintiff acted as a "manufacturers representativebroker" for Meurer Bakeries pursuant to a contractual agreement. In accordance with the terms of the contract, plaintiff was paid commissions based on the sale of Meurer Bakeries' products. The complaint acknowledged that the business relationship terminated on September 11, 2000, and further alleged that defendant "acquired" Meurer Bakeries, although the date of acquisition was not identified. Commissions in the amount of $21,262.81 were allegedly owed to plaintiff pursuant to the Michigan sales representative commission act (SRCA), M.C.L. § 600.2961. Plaintiff sought the amount of commissions that were due and outstanding, double damages in accordance with the SRCA, and reasonable costs and attorney fees. In the prayer for relief portion of the complaint, plaintiff sought a judgment in excess of $25,000, and did not request a sum certain. The complaint referenced the attachment of three documents: the contract between plaintiff and Meurer Bakeries, evidence of the termination of the contractual relationship, and documents showing the outstanding commissions. Despite this reference, there were no documents attached to the complaint² filed with the trial court.

Although defendant was based in Georgia, it was represented by counsel in Milwaukee. On November 15, 2000, Milwaukee counsel sent a letter with documentation purportedly demonstrating that defendant was not the real party in interest and requesting dismissal. In this communication, it was alleged that defendant had purchased the assets of Meurer Bakeries, not the liabilities, through an intermediary. It was further alleged that Meurer Bakeries did not have authority to represent that there had been an assumption of liabilities by defendant. It was requested that plaintiff's counsel contact Milwaukee counsel immediately if voluntary dismissal would not occur to alert Milwaukee counsel of the need to file the appropriate answer to the complaint.

Milwaukee counsel did not receive any communication in response from plaintiff's counsel. Consequently, Milwaukee counsel sent a second letter dated January 26, 2001, seeking voluntary dismissal. The letter was sent after several telephone calls to plaintiff's counsel were not returned. To prompt action on the part of plaintiff's counsel, the letter stated that it would be presumed that defendant would be dismissed from the litigation if contact did not occur within the next ten days.

There is no evidence that plaintiff's counsel acted within ten days as requested. Rather, on April 17, 2001, plaintiff's counsel wrote a letter to defendant, stating that the documentation submitted was insufficient to absolve defendant of the liabilities of Meurer Bakeries. The letter warned that responsive pleadings should be filed by May 15, 2001, or a request for entry of a default would be filed.

On May 2, 2001, Milwaukee counsel sent another letter to plaintiff's counsel in an attempt to resolve the matter before proceeding with the litigation. This letter offered additional information regarding the succession of the purchase of the assets of Meurer Bakeries. In closing the letter, Milwaukee counsel requested communication by telephone or in writing regarding whether the litigation would proceed so as to allow defendant time to retain local counsel in Michigan. The letter stated that it was presumed that defendant would be given two weeks' notice so that it could retain local counsel. Although plaintiff's counsel had represented that a request for a default would be sought if responsive pleadings were not filed by May 15, 2001, the deadline passed without action by plaintiff and the case became dormant.

Correspondence between the attorneys effectively ceased in May 2001, and activity was eventually prompted by the circuit court. On September 12, 2001, the case flow division of the circuit court sent a notice to plaintiff's counsel and defendant's corporate headquarters in Georgia that the litigation would be dismissed for lack of progress unless activity occurred within the next twenty-eight days. Prompted by the notice from the circuit court, plaintiff's counsel sent a letter to Milwaukee counsel indicating that an application for entry of default and an entry of default had been filed with the trial court. The letter, dated October 3, 2002, was silent regarding any time frame to allow defendant to retain local counsel. Rather, the letter advised Milwaukee counsel to contact plaintiff's counsel upon receipt to discuss the matter further.

Although the last communication sent by plaintiff's counsel indicated that further discussions would occur,³ plaintiff's counsel took action to obtain the default judgment. On October 8, 2001, an application for entry of default was filed in the trial court. The document provided that defendant had failed to appear, plead, or otherwise defend the litigation as required by law. The entry of default was signed by the deputy court clerk.

On October 30, 2001, plaintiff's counsel filed an affidavit to support the entry of a default judgment. This affidavit, contrary to the allegations contained in the complaint,⁴ alleged that the claim was "not based on a note or other written evidence." A total judgment amount of $90,154.57 was requested.⁵ On October 31, 2001, the trial court signed the order of default judgment.

On November 5, 2001, defendant, through local counsel, moved to set aside the default judgment. The motion disputed the acquisition of jurisdiction over defendant and the propriety of service of the complaint. The motion also alleged a meritorious defense based on the purchase of the assets alone of Meurer Bakeries through an intermediary, and good cause for failing to answer the complaint based on the parties' informal communications to resolve the litigation. Affidavits delineating the meritorious defense and good cause requirements were submitted by Milwaukee counsel and David Stenglein, defendant's president.

Plaintiff opposed the motion to set aside the default judgment. It was alleged that the motion was untimely filed beyond the twenty-one day period provided by the court rules. Plaintiff further alleged that correspondence and payments by defendant showed defendant's assumption of the liabilities of Meurer Bakeries in order to dispute the allegations of good cause and a meritorious defense. The trial court held that the motion was untimely filed and that good cause had not been established. Defendant moved for reconsideration of the decision, alleging procedural deficiencies regarding the entry of the default judgment and citing the informal relationship and agreement developed between the parties' counsel to allow time to retain local counsel. The trial court granted the motion for reconsideration and, on reconsideration, affirmed its prior determination.

II. STANDARD OF REVIEW

The trial court's decision to enter a default is reviewed for an abuse of discretion. Barclay v. Crown Bldg. & Dev., Inc., 241 Mich.App. 639, 642, 617 N.W.2d 373 (2000). Although the law favors a determination of a claim on the basis of its merits, the policy of this state is generally against setting aside defaults and default judgments that have been properly entered. Alken-Ziegler, Inc. v. Waterbury Headers Corp., 461 Mich. 219, 229, 600 N.W.2d 638 (1999). The construction and interpretation of court rules present a question of law that this Court reviews de novo. Barclay, supra. When construction of a court rule is required, the legal principles that govern the construction and application of statutes are utilized. Grievance Administrator v. Underwood, 462 Mich. 188, 193, 612 N.W.2d 116 (2000). Issues of statutory construction present questions of law that are reviewed de novo. Cruz v. State Farm Mut. Automobile Ins. Co., 466 Mich. 588, 594, 648 N.W.2d 591 (2002). The primary goal of statutory interpretation is to give effect to the intent of the Legislature. In re MCI Telecom Complaint, 460 Mich. 396, 411, 596 N.W.2d 164 (1999). This determination is accomplished by examining the plain language of the statute. Id. Although a statute may contain separate provisions, it should be read as a consistent whole, if possible, with effect given to each provision. Gebhardt v. O'Rourke, 444 Mich. 535, 542, 510 N.W.2d 900 (1994). If the statutory language is unambiguous, appellate courts presume that the Legislature intended the meaning plainly expressed and further judicial construction is neither permitted nor required. DiBenedetto v. West Shore Hosp., 461 Mich. 394, 402, 605 N.W.2d 300 (2000). Statutory language should be reasonably construed, keeping in mind the purpose of the statute. Draprop Corp. v. Ann Arbor, 247 Mich.App. 410, 415, 636 N.W.2d 787 (2001). If reasonable minds could differ regarding the meaning of a statute, judicial construction is appropriate. Adrian School Dist. v. Michigan Pub. School Employees' Retirement Sys., 458 Mich. 326, 332, 582 N.W.2d 767 (1998). When construing a statute, a court must look at the object of the statute in light of the harm...