Tindle v. Legend Health, PLLC
| Decision Date | 20 April 2023 |
| Docket Number | 360861 |
| Parties | ROLAND TINDLE, D.O., Plaintiff-Appellee, v. LEGEND HEALTH, PLLC, and COMPLETE CARE CENTER, PC, Defendants-Appellants. |
| Court | Court of Appeal of Michigan — District of US |
Oakland Circuit Court LC No. 2021-190848-CB
Before: Cavanagh, P.J., and Boonstra and Riordan, JJ.
In this breach-of-contract case, defendants appeal as of right the order denying their motion to set aside the default judgment and denying reconsideration under MCR 2.603(D)(1) and MCR 2.612(C). We reverse in part and remand to the trial court for further proceedings.
Plaintiff Roland Tindle, D.O., filed its breach-of-contract claim against Legend Health, PLLC, ("Legend Health") and Complete Care Center, PC, ("Complete Care") based upon a Stock Purchase and Sales Agreement ("sales agreement") plaintiff entered with Legend Health to sell his medical practice, Complete Care, to Legend Health. In his complaint, plaintiff alleged that defendants owed him a total of $248,601.26 under the sales agreement. Plaintiff claimed that he served a copy of the summons and complaint on defendants under the applicable court rule through a process server and by registered mail. Defendants did not respond to the action. Plaintiff requested that the clerk of the court enter a default judgment, and he certified to the clerk that he served copies of the request to enter default on defendants via first-class mail. Plaintiff then moved for entry of default judgment and, following a hearing on the motion, the trial court entered default judgment against defendants. Defendants moved the trial court to set aside the default judgment under MCR 2.603(D)(1) and MCR 2.612(C), which plaintiff opposed. The trial court waived oral argument and denied defendants' motion for a lack of merit on the grounds presented. This appeal followed.
Defendants argue that the trial court erred by denying their motion to set aside the default judgment under MCR 2.603(D)(1) as they had established good cause and a meritorious defense. They also argue that the trial court erred by denying their motion for reconsideration under MCR 2.612(C)(1)(a) as they were caught by surprise by the impending action and the entry of a default judgment and as a result had no time to prepare a defense in response thereto.
"Review of a trial court's decision on a motion to set aside a default or a default judgment is for a clear abuse of discretion." Saffian v Simmons, 477 Mich. 8, 12; 727 N.W.2d 132 (2007). This Court also reviews for an abuse of discretion a trial court's denial of reconsideration. See Woods v SLB Prop Mgmt, LLC, 277 Mich.App. 622, 629; 750 N.W.2d 228 (2008). "[A]n abuse of discretion occurs only when the trial court's decision is outside the range of reasonable and principled outcomes." Saffian, 477 Mich. at 12. "[T]he 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). "A trial court necessarily abuses its discretion when it makes an error of law." Pirgu v United Servs Auto Ass'n, 499 Mich. 269, 274; 884 N.W.2d 257 (2016). To the extent that this review requires "[t]he construction and interpretation of court rule[s]," this Court applies a de novo standard of review. Barclay v Crown Bldg & Dev, Inc, 241 Mich.App. 639, 642; 617 N.W.2d 373 (2000).
Defendants first argue that the trial court abused its discretion when it denied their motion to set aside the default judgment under MCR 2.603(D)(1). We agree in part. MCR 2.603(D)(1) states: "A motion to set aside a default or a default judgment . . . shall be granted only if good cause is shown and a statement of facts showing a meritorious defense is filed." We have explained that "the 'good cause' and 'meritorious defense' requirements of MCR 2.603(D)(1) are analytically different concepts and that a party must show both in order to prevail on a motion to set aside a default judgment." Barclay v Crown Bldg & Dev, Inc, 241 Mich.App. 639, 653; 617 N.W.2d 373 (2000). "[T]he burden of demonstrating good cause and a meritorious defense to set aside the default [falls] on defendant[s]." Saffian, 477 Mich. at 15.[1]
Defendants claim that they have established good cause because plaintiff's service of the summons and complaint to defendants was deficient. We have held that good cause can be shown by: "(1) a substantial procedural defect or irregularity or (2) a reasonable excuse for the failure to comply with the requirements that created the default." Saffian v Simmons, 267 Mich.App. 297, 301-302; 704 N.W.2d 722 (2005), aff'd 477 Mich. 8 (2007). Among the factors for a trial court to consider when making a finding on whether the defendant established good cause to set aside a default judgment is "whether there was defective process or notice." Shawl v Spence Bros, Inc 280 Mich.App. 213, 238; 760 N.W.2d 674 (2008). Therefore, if defendants establish that plaintiff failed to properly serve them, they have satisfied this prong of MCR 2.603(D)(1).[2]
Methods of proper service are listed in MCR 2.105 according to the "corporate nature of the defendant." Bullington v Corbell, 293 Mich.App. 549, 556; 809 N.W.2d 657 (2011). In Bullington, this Court stated:
The methods described in the rule are intended to satisfy the due process requirement that a defendant be informed of an action by the best means available under the circumstances. Compliance with the court rules fulfills the constitutional requirement of notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. [Id. (quotation marks and citations omitted).]
Defendants argue that plaintiff failed to comply with MCR 2.105(H)(2) and MCR 2.105(D)(2). Legend Health is a professional limited-liability company. To satisfy proper service to Legend Health, plaintiff was required to serve a copy of the summons and complaint under MCR 2.105(H). In relevant part, MCR 2.105(H) states:
In turn, premised on defendant Complete Care, PC's "corporate nature" as a professional corporation, plaintiff was required to serve Complete Care in compliance with MCR 2.105(D), which states in relevant part, that service is effected by:
As to defendant Legend Health, plaintiff contends that he served the limited-liability company via his process server in accordance with MCR 2.105(H)(2). Central to the issue of whether service was made according to the court rules is dependent on the meaning of the term "person in charge of an office." On one hand, a "person in charge of an office" could mean a person responsible for interim tasks such as answering phone calls, being responsive to persons who enter the office, and other tasks related to the practical functions of an office. On the other hand, a "person in charge of an office" might mean a person with authority and responsibility to make decisions on behalf of the office. Plaintiff urges that Malone is a "person in charge of an office" because she was alone in the office when the process server handed her a copy of the summons and complaint. Plaintiff's rationale suggests that his interpretation of the term is the former, i.e., a person who is responsible for interim tasks. Defendants argue to the contrary. They state that Malone is not a "person in charge of an office" because she is a medical assistant and, presumably, had no authority in managing any meaningful function.
The trial court denied defendants' motion to set aside the default judgment "for a lack of merit on the grounds presented." Because the trial court did not provide further explanation on its finding and waived oral argument, there is no record of the trial court's reasoning. However, we may infer that the trial court possibly assumed that a "person in charge of an office" could include Malone.
"The rules of statutory construction apply to the construction of court rules." Hill v L F Transp, Inc, 277 Mich.App. 500, 507; 746 N.W.2d 118 (2008). SMK, LLC v Dep't of Treasury, 298 Mich.App. 302, 309; 826 N.W.2d 186 (2012), aff'd in part and vacated in part on other grounds Fradco, Inc v Dep't of Treasury, 495 Mich. 104; 845 N.W.2d 81 (2014) (citations omitted).
The doctrine of noscitur a sociis is a helpful guide in determining the meaning of "person in charge of an office" in this court rule. "This doctrine is premised on the notion that the meaning of statutory language, plain or not, depends on context." Griffith ex rel Griffith v State Farm Mut Auto Ins Co, 472 Mich. 521, 533; 697 N.W.2d 895 (2005) (quotation marks and citation omitted). This context is provided by the words that ...
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