Reed v. Walsh, Docket No. 98088

• Decision Date: 29 August 1988
• Docket Number: Docket No. 98088
• Parties: Rosemary M. REED, Guardian of the Person and Conservator of the Estate of Steven Robert Troy, a legally incapacitated person, and Rosemary M. Reed, Individually, and Karen Troy, Michael Troy, and Robin Reed, Plaintiffs-Appellees, v. Thomas C. WALSH, Personal Representative of the Estate of Anne Marie Ward, Deceased, and William A. Graham, Jr., Defendants, and Hurst & Walters, Inc., d/b/a Twilliger's Bar, Defendant-Appellant. 170 Mich.App. 61, 427 N.W.2d 588
• Court: Court of Appeal of Michigan — District of US

Page 588

427 N.W.2d 588

Rosemary M. REED, Guardian of the Person and Conservator of the Estate of Steven Robert Troy, a legally incapacitated person, and Rosemary M. Reed, Individually, and Karen Troy Michael Troy, and Robin Reed, Plaintiffs-Appellees, v. Thomas C. WALSH, Personal Representative of the Estate of Anne Marie Ward, Deceased, and William A. Graham Jr., Defendants and Hurst & Walters, Inc., d/b/a Twilliger's Bar Defendant-Appellant.

Docket No. 98088.

170 Mich.App. 61, 427 N.W.2d 588

Court of Appeals of Michigan.

Submitted March 1, 1988.

Decided July 18, 1988.

Released for Publication Aug. 29, 1988.

[170 MICHAPP 62] Denfield, Timmer & Taylor by John W. Cotner, Lansing, for plaintiffs-appellees.

Frank S. Spies, Grand Rapids, for Hurst & Walters, Inc.

Before SAWYER, P.J., and KELLY and RASHID, ^* JJ.

KELLY, Judge.

In this case the sole question presented is whether the trial court abused its discretion in declining to set aside a default despite finding that there was a meritorious defense.

On July 6, 1984, Steven Troy was a passenger in a car driven by Anne Marie Ward. While driving on US 27, south of St. Johns, Michigan, Ward apparently crossed the center line and drove into [170 MICHAPP 63] oncoming traffic. Ward and another passenger were killed in the collision. Troy suffered severe injuries that resulted in brain damage and quadriplegia.

Along with seeking damages against Ward's estate and the owner of the vehicle (Ward's father) for negligent operation of an automobile, plaintiffs also sought damages against defendant-appellant Hurst & Walters, Inc., doing business as Twilliger's Bar, under the dramshop act, M.C.L. Sec. 436.22; M.S.A. Sec. 18.993. Plaintiffs' complaint alleged that Ward had been served alcoholic beverages at defendant-appellant's bar while she was visibily intoxicated.

On September 13, 1985, defendant-appellant was served, and as no action was taken (no answer forthcoming), plaintiffs pursuant to MCR 2.603(A)(1), filed an affidavit stating that defendant-appellant had failed to plead or otherwise defend and plaintiffs requested the clerk of the court to enter the default. A default was entered on October 17, 1985.

On November 4, 1985, plaintiffs filed an application for determination of damages and entry of default judgment and defendant-appellant's attorney on November 5, 1985, filed a motion to set aside the default. Subsequently, the trial court issued an order staying proceedings because defendant-appellant's liquor liability insurer, which was obliged to defend defendant-appellant, was ordered into receivership in Missouri.

Finally, on September 22, 1986, a hearing was held on defendant-appellant's motion to set aside the default. Defendant-appellant presented the affidavit of John L. Hurst, an officer of the corporation. The affidavit stated that, following an investigation into this matter, it was determined that none of defendant-appellant's employees served [170 MICHAPP 64] any visibly intoxicated persons on the date in question and that witnesses who saw Ward in the bar on that date did not notice her to be visibly intoxicated. Subsequently, the trial court, despite finding that a meritorious defense existed, nonetheless denied defendant-appellant's motion to set aside the default, concluding that there was no good cause to set aside the default.

Thereafter, on January 2, 1987, after evidence on damages had been taken, the trial court made a finding and issued an order placing total damages at $3,825,000 and entered a judgment in favor of plaintiffs against defendant-appellant in this amount. Defendant-appellant did not request a jury trial on the issue of damages, and let plaintiffs present their proofs of damages without objection. This case is thus limited to consideration of defendant-appellant's appeal of this final judgment.

MCR 2.603(D)(1) provides:

"A motion to set aside a default or a default judgment, except when grounded on lack 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."

For purposes of MCR 2.603(D), "good cause" includes: (1) a substantial irregularity or defect in the proceeding upon which the default is based, (2) a reasonable excuse for failure to comply with the requirements which created the default, or (3) some other reason showing that manifest injustice would result if the default is not set aside. 3 Martin, Dean & Webster, Michigan Court Rules Practice, p. 386. See also Federspiel v. Bourassa, 151 Mich.App. 656, 660, 391 N.W.2d 431 (1986).

Here, there is no argument made of an irregularity [170 MICHAPP 65] or defect in the proceeding upon which the default was based to support good cause to set it aside. And, although defendant did make an argument of reasonable excuse, we agree with the trial court that a lay defendant's lack of knowledge of the law and its consequences will not necessarily provide a reasonable excuse and good cause to set aside a default.

Defendant also argued manifest injustice. The trial court responded:

"There is always room to claim--and I will consider it implicitly claimed--that it would be manifestly unjust to have someone adjudicated liable for injuries who isn't, but manifest injustice has to mean more than that, or every default would be set aside on that basis. So, I don't think there is any manifest injustice evident."

We cannot agree with this conclusion.

In SNB Bank & Trust v. Kensey, 145 Mich.App. 765, 378 N.W.2d 594 (1985), plaintiff claimed the trial court abused its discretion in setting aside the default against defendant. Defendant had moved to set aside a default judgment almost immediately and cited...