Vill. of Edmore v. Crystal Automation Sys. Inc.

• Decision Date: 19 October 2017
• Docket Number: No. 334135,334135
• Citation: 911 N.W.2d 241,322 Mich.App. 244
• Parties: VILLAGE OF EDMORE, Plaintiff/Counter–Defendant–Appellee, v. CRYSTAL AUTOMATION SYSTEMS INC., Defendant/Counter–Plaintiff–Appellant.
• Court: Court of Appeal of Michigan — District of US

322 Mich.App. 244

911 N.W.2d 241

VILLAGE OF EDMORE, Plaintiff/Counter–Defendant–Appellee,

v.CRYSTAL AUTOMATION SYSTEMS INC., Defendant/Counter–Plaintiff–Appellant.

No. 334135

Court of Appeals of Michigan.

Submitted October 4, 2017, at Grand Rapids.

Decided October 19, 2017

Approved for Publication December 7, 2017

Miller Canfield Paddock & Stone, PLC (by Floyd E. Gates, Jr., and Paul D. Hudson ) and Bodman PLC (by Thomas J. Rheaume, Jr. ) for plaintiff.

Clark Hill PLC (by David W. Centner ) for defendant.

Before: Murray, P.J., and Sawyer and Markey, JJ.

Per Curiam.

Defendant, Crystal Automation Systems, Inc., a provider of phone and internet services to residents living in and around plaintiff, the village of Edmore, a Michigan municipal corporation in Montcalm County, appeals as of right the trial court's Order for Entry of Default Judgment, Order Granting Plaintiff's Motion for Partial Summary Disposition, and Order Denying Defendant's Motion to Vacate and/or Set Aside Default and Granting Plaintiff's Motion for Entry of Default Judgment. Defendant contends that the trial court committed error requiring reversal when it entered a default judgment against defendant, refused to set aside an improperly entered default, and granted plaintiff partial summary disposition on the basis of an incorrectly construed and interpreted lease agreement (the Lease) between the parties. We agree and reverse each of the trial court's orders and remand for further proceedings.

I. FACTS AND PROCEEDINGS

Since April 2003, defendant has rented space on and near plaintiff's water tower for its antennas and equipment. During 2015, plaintiff contracted with Utility Service Co., Inc. (USC) to repaint and maintain its water tower. USC told plaintiff that before USC commenced the work, all tenants of the water tower had to remove their equipment. For that reason, plaintiff ordered defendant to remove all of its equipment on and from around the water tower and threatened defendant that if it did not do so, plaintiff would remove the equipment and charge defendant for doing so. Defendant objected to plaintiff's demand on the ground that the Lease did not permit plaintiff to order defendant to vacate the premises. Defendant also advised plaintiff that if plaintiff removed the equipment, local residents’ phone, 911, and Internet services would be interrupted in violation of the law. Shortly after receiving defendant's objection, plaintiff informed defendant that it would delay the project until spring of 2016.

During the interim period, defendant attempted to work out an alternative arrangement with plaintiff that would allow defendant to provide its customers with uninterrupted services while plaintiff repainted the water tower. Plaintiff's manager represented to defendant that it could erect a new tower on a different piece of property owned by plaintiff, but plaintiff ultimately decided it did not want to provide that option to defendant. Defendant also offered to move its equipment to allow USC to work around it, but plaintiff refused that offer. Then, on March 3, 2016, plaintiff's counsel ordered defendant to remove its equipment from on and around the water tower by May 1, 2016. Plaintiff sued defendant on March 18, 2016, alleging breach of contract and seeking injunctive relief to force defendant to remove its equipment and to terminate the Lease.

The Lease signed by the parties granted defendant an initial five-year term with three additional automatically renewable five-year terms unless defendant notified plaintiff before the end of the initial term of its intent not to extend the Lease. The Lease also granted defendant the right to terminate the agreement upon 30 days' notice in specified circumstances, but the Lease did not give plaintiff the right to terminate the contract. The Lease also contained the following provisions:

7. Maintenance:

* * *

D. In the event the Landlord or any other Tenant undertakes painting, construction or other alterations on the premises, Tenant shall take reasonable measures as [sic] Tenant's cost to cover Tenant's equipment, personal property or antenna facilities and protect such from paint and debris fallout which may occur during painting, construction or alteration process.

* * *

10. Interference: Tenant's installation, operation, and maintenance of its transmission facilities shall not damage or interfere in any way with the Landlord's water tower operations or related repair and maintenance activities or with such activities of other Tenants of the water tower. Landlord, at all times during this Lease, reserves the right to take any action it deems necessary, in its sole discretion, to repair, to maintain, alter or improve the premises in connection with the tower operations as may be necessary, including leasing parts of the water tower and surrounding ground space to others.

* * *

12. Indemnity:

* * *

B. Tenant's Indemnification: Any and all liability, obligation, damages, penalties, claims, liens, costs, charges, losses and expenses (including, without limitation, reasonable fees and expenses of attorney's [sic], expert witnesses and consultants), which may be imposed upon, incurred by or be asserted against the Landlord, its agents or employees, by reason of any act or omission of Tenant, its personnel, employees, agents, contractors or subcontractors, resulting in personal injury, bodily, [sic] injury, sickness, disease or death to any person or damage to, loss of or destruction of tangible or intangible property, copyright, patent, service mark or any other right of way [sic] person, firm, or corporation, which may arise out of or be in any way connected with the construction, installation, operation, maintenance, use or condition of the premises or Tenant's antenna facilities or the Tenant's failure to comply with any federal, state or local stature [sic], ordinance or regulation.

On March 22, 2016, plaintiff served its complaint on defendant along with an ex parte motion for a preliminary injunction, which sought an order that defendant vacate the water tower. Without delay, on March 23, 2016, defendant opposed plaintiff's motion by arguing that the Lease did not grant plaintiff the right to evict defendant from the water tower. Plaintiff filed a reply in which it requested that the trial court order defendant to remove its equipment by May 1, 2016, or allow plaintiff to do so at defendant's expense, and enter judgment against defendant.

The parties appeared the next day for a hearing, and a conference was held off the record where it was agreed that, rather than having the trial court hear and decide the motion for injunctive relief, plaintiff would file a motion for partial summary disposition, defendant would respond, and the trial court would hear the motion, all on an expedited basis so that the hearing on the motion could happen on April 15, 2016. The trial court later entered an order requiring plaintiff to file its motion by April 1 and defendant to respond by April 12. The order also stated that the parties could file their pleadings by e-mail with the original sent by first-class mail.

Consistently with the order, on April 1, 2016, plaintiff moved for partial summary disposition under MCR 2.116(C)(9) and (10). Plaintiff argued that because the Lease unambiguously required defendant to vacate the premises if in plaintiff's sole discretion it ordered defendant to do so for maintenance and repair of the water tower, defendant's refusal to vacate upon demand breached the Lease. In its timely response, defendant denied that plaintiff was entitled to force defendant to vacate its leasehold and argued that plaintiff's conduct violated defendant's right to quiet enjoyment of the premises and effectively nullified the purpose of the Lease.

Late on the afternoon of April 14, 2016, defendant also filed its answer, affirmative defenses, and jury demand by e-mail and the original by first-class mail. That same afternoon, however, plaintiff filed a request for entry of default against defendant for failure to timely file its answer. The clerk entered the default, and plaintiff served defendant the default by mail.

The very next day, at the hearing on plaintiff's motion for partial summary disposition, plaintiff's counsel announced that a default had been entered against defendant and that plaintiff's motion was essentially unopposed because, under MCR 2.603(A)(3), defendant was precluded from responding to plaintiff's motion after the entry of the default. Defendant argued that it had opposed plaintiff's motion and requested that the trial court set aside the default. The trial court told defendant that it would prefer having defendant file a motion to set aside the default, having the parties brief the issue, and having the motion heard on an expedited basis. The trial court then adopted the arguments made by plaintiff in its briefs and granted plaintiff summary disposition under MCR 2.116(C)(9) and (10).

On April 22, 2016, defendant moved to vacate or set aside the default, arguing, in part, that the default was improperly entered because defendant had defended the action vigorously from the start. Defendant asserted that plaintiff would suffer no prejudice if the default were set aside and explained that good cause existed to set aside the default because defendant had a meritorious defense. According to defendant, the numerous factors articulated in Shawl v. Spence Bros., Inc ., 280 Mich. App. 213, 238–239, 760 N.W.2d 674 (2008), all weighed in favor of finding good cause to set aside the default. Defendant further argued that under the terms of the Lease, it was not liable to plaintiff. Defendant filed an affidavit of meritorious defense in which defendant's president denied that the Lease gave plaintiff the right to evict defendant from the water tower and denied that plaintiff could terminate the Lease but stated that defendant had nevertheless removed all of its equipment as previously ordered by the court.

O...