Penney v. Protective Nat. Ins. Co. of Omaha

• Decision Date: 28 May 1970
• Docket Number: No. 2,Docket Nos. 7613,7705,2
• Parties: Alan PENNEY, Plaintiff-Appellee, v. PROTECTIVE NATIONAL INSURANCE COMPANY OF OMAHA, a foreign corporation, Thomas Mulcahy d/b/a Greg's Collision, jointly and severally, Defendants-Appellants
• Court: Court of Appeal of Michigan — District of US

Page 44

180 N.W.2d 44

24 Mich.App. 218

Alan PENNEY, Plaintiff-Appellee, v. PROTECTIVE NATIONAL INSURANCE COMPANY OF OMAHA, a foreign

corporation, Thomas Mulcahy d/b/a Greg's

Collision, jointly and severally,

Defendants-Appellants.

Docket Nos. 7613, 7705.

Court of Appeals of Michigan, Division No. 2.

May 28, 1970.

Released for Publication Oct. 14, 1970.

Arthur J. Cole, Detroit, for Thomas Mulcahy.

Chester E. Palid, Detroit, for Protective Nat. Ins. Co. of Omaha.

Richard E. Cyrul, Mt. Clemens, for appellee.

Before R. B. BURNS, P.J., and FITZGERALD and VAN DOMELEN, ^* JJ.

VAN DOMELEN, Judge.

Defendants appeal from the trial court's denial of their motion to set aside a default judgment entered against them, arguing that the court below failed to follow the procedural guidelines of GCR 1963, 520.

Plaintiff brought suit in Macomb County Circuit Court on June 10, 1968, against defendant Protective National Insurance Company, through which he held insurance on his motor vehicle, and defendant Thomas Mulcahy, the local agent of the insurer and owner of Greg's Collision. Keith B. Trace, Jr., entered an appearance for both defendants on July 15th.

After he failed to appear at a pre-trial conference or for trial dates, the court made unsuccessful attempts to contact him by telephone. Finally, on April 21, 1969, the court took testimony and rendered a judgment for the plaintiff. The evidence introduced showed that the insurer issued a policy of auto insurance for plaintiff's 1966 Buick on November 17, 1967, providing coverage for collision, theft, vandalism, and malicious mischief up to the value of the vehicle; that plaintiff's automobile was involved in a collision on January 10, 1968; that plaintiff notified the insurer's agent who recommended he contact Greg's Collision; that during the time after the accident and before delivery to Greg's Collision the vehicle was vandalized; and that after five months, the repair shop billed the insurer $949.56, but plaintiff refused to accept the car because of shoddy workmanship. The judgment allowed plaintiff to recover the value of the car ($3500.00) and lost wages ($814.00).

Notice of the entry of default judgment was served by mail on May 7, 1969, although plaintiff had not filed a default with the clerk in accordance with GCR 1963, 520.1. The judgment was entered five days thereafter on May 12, 1969, although GCR 1963, 520.2(2) requires a seven-day waiting period. This departure from the rule takes on added significance in light of the fact that a second attorney, retained by the insurer because it was unable to contact Mr. Trace, inquired as to the status of the case on May 13, 1969 within the seven-day waiting period of 520.2(2). Defendant insurer moved to set aside the default judgment pursuant to GCR 1963, 520 and 528 on May 26, 1969, and defendant Mulcahy on June 3, 1969.

The trend of recent decisions both in our courts and in the Federal courts ¹ has been toward liberal construction of the default judgment provisions in order to achieve meritorious determination of cases. Walters v. Arenac Circuit Judge (1966), 377 Mich. 37, 47, 138 N.W.2d 751. The Supreme Court has combined this with strict construction of the procedural requirements of the rules.

In the many cases interpreting the predecessor of GCR 1963, 520, Court Rule No. 28 (1945) the Supreme Court held that there must be strict compliance with provisions relative to the entry of default judgments, and a failure in that regard required that the judgment be set aside. See E.g., Smak v. Gwozdik (1940), 293 Mich. 185, 291 N.W. 270; Rosen v. Wayne Circuit Judge (1928), 244 Mich. 397, 221 N.W. 276; McHenry v. Village of Grosse Pointe Farms (1933), 265 Mich. 581, 251 N.W. 783; Watkins v. Wayne Circuit Judge (1929), 247 Mich. 237, 225 N.W. 554. However, where the defect in procedure was only the failure to file the nonmilitary affidavit, now GCR 1963, 520.3, the Supreme Court has been reluctant to set aside the judgment absent a showing of prejudice because of the defect. Haller v. Walczak (1956), 347 Mich. 292, 79 N.W.2d 622.

In recent cases, we have required that plaintiffs must comply with the seven-day notice provision of GCR 1963, 520.2(2) once a party formally appears, in order for their judgments to retain validity. In Advance Dry Wall Co. v. Wolfe-Gilchrist, Inc. (1968), 14 Mich.App. 706, 165 N.W.2d 906, where one defendant had no notice of the default proceedings, we said as to her, 'The rules as to notice were not properly fulfilled and to allow the judgment to stand against her would be to deny her due process.' 14 Mich.App. at 713, 165 N.W.2d at 910; Rhodes v. Rhodes, (1966), 3 Mich.App. 396, 400, 142 N.W.2d 508.

On the other hand, the Supreme Court has expressed a clear policy against setting aside defaults. White v. Sadler (1957), 350 Mich. 511, 87 N.W.2d 192. The power to set aside such judgments has traditionally been one within the discretion of the trial court, disturbed on appeal only upon a showing of clear abuse, Rhodes v. Rhodes, Supra, 3 Mich.App. at 403, 142 N.W.2d 508; Seifert v. Keating (1955), 344 Mich. 456, 73 N.W.2d 894; Crew v. Zabowsky (1959), 357 Mich. 606, 99 N.W.2d 542. We have, however, distinguished White v. Sadler, Supra, in McDonough v. General Motors Corporation (1967), 6 Mich.App. 239, 148 N.W.2d 911, where we thought it unconscionable to let the default judgment stand:

'(White v. Sadler), demonstrating the Michigan position of strictness regarding setting aside default, is definitive and yet we do not believe that it was written with a view toward condoning and perpetuating a judgment fraught with manifest injustice.' 6 Mich.App. at 244, ...