Wood v. Detroit Auto. Inter-Insurance Exchange

• Decision Date: 28 June 1982
• Docket Number: Docket No. 65839,No. 10,INTER-INSURANCE,10
• Citation: 413 Mich. 573,321 N.W.2d 653
• Parties: Theodore WOOD, Plaintiff-Appellee, v. DETROIT AUTOMOBILEEXCHANGE, Defendant-Appellant. Calendar
• Court: Michigan Supreme Court

Page 653

321 N.W.2d 653

413 Mich. 573

Theodore WOOD, Plaintiff-Appellee, v. DETROIT AUTOMOBILE INTER-INSURANCE EXCHANGE, Defendant-Appellant.

Docket No. 65839.

Calendar No. 10.

Supreme Court of Michigan.

Argued Oct. 14, 1981.

Decided June 28, 1982.

Sommers, Schwartz, Silver & Schwartz, P.C. by Jeffrey N. Shillman, Southfield, for plaintiff-appellee.

Dickinson, Mourad, Brandt, Hanlon & Becker by Edmund P. Arbour, Detroit, for defendant-appellant; Gromek, Bendure & Thomas by Carl L. Gromek, Nancy L. Bosh, Detroit, of counsel.

FITZGERALD, Justice.

The several issues before this Court stem from a September 9, 1974, collision between plaintiff's motorcycle and an automobile driven by a man whom defendant insured.

For the reasons that follow, the judgment of the Court of Appeals is affirmed in part and reversed in part.

I

Plaintiff Wood, who was injured severely ¹ in the 1974 accident, did not carry a no-fault insurance policy. Defendant, as insurer of the motor vehicle owner involved in the accident, therefore became liable for payment of personal injury protection (PIP) benefits to plaintiff under M.C.L. § 500.3115(1)(a); M.S.A. § 24.13115(1)(a). ²

Defendant paid some $17,768 in medical expenses and about $13,428 in wage-loss benefits before terminating payments in mid-1976. Defendant's stated rationale for curtailing benefits was that it lacked "proof of Mr. Wood's continuing inability to work". ³

Plaintiff subsequently filed suit in late December, 1976, demanding a jury trial. Defendant answered and also demanded a jury trial.

The next relevant date is early July, 1978, when plaintiff served 28 interrogatories upon defendant. It was this discovery attempt which led to the present appeal.

Upon defendant's failure to answer the interrogatories, plaintiff obtained two court orders compelling responses. The first, in mid-November, 1978, gave defendant 30 days in which to answer. The second, in early January, 1979, ordered defendant to reply within 30 days or suffer automatic default.

A default eventually was entered and a hearing on plaintiff's motion for default judgment was set for March 23, 1979. Defendant was notified of the scheduled hearing, but did not respond.

The day before the motion was to be heard, defense counsel delivered to plaintiff's attorney answers to the interrogatories. He explained in a cover letter that he had "finally sat down with this file and stuck my nose into it". Defense counsel appeared at the hearing the following day, but the trial court denied him permission to participate. ⁴ The default judgment awarded plaintiff consisted of $11,708.93 in wage-loss benefits for 14 months and interest at 12%; $50,000 for mental anguish, and $5,000 in attorney fees. In addition, plaintiff received 6% interest on the entire judgment.

Defendant's subsequent motion to set aside the default judgment was denied.

The Court of Appeals reversed as to the $50,000 award for mental anguish, and noted that the trial court might want to reconsider the amount of attorney fees because of the decrease in the total judgment. The Court of Appeals affirmed the trial court in all other respects. ⁵

This Court granted leave to appeal on May 8, 1981. ⁶

II

It is an established principle of Michigan law that a default settles the question of liability as to well-pleaded allegations and precludes the defaulting party from litigating that issue. See, for example, Cogswell v. Kells, 293 Mich. 541, 292 N.W. 483 (1940); Lesisko v. Stafford, 293 Mich. 479, 292 N.W. 376 (1940); Messenger v. Peter, 129 Mich. 93, 88 N.W. 209 (1901).

It also appears that a defaulting party has a right to participate if further proceedings are necessary to determine the amount of damages. See, for example, Haller v. Walczak, 347 Mich. 292, 79 N.W.2d 622 (1956); Hanover Fire Ins. Co. of New York v. Furkas, 267 Mich. 14, 255 N.W. 381 (1934); and Grinnell v. Bebb, 126 Mich. 157, 85 N.W. 467 (1901). Federal decisions and those from other states are in accord. Plaintiff now concedes defendant's right to participate in such a proceeding.

However, this Court has not spoken definitively on whether a defaulting party has a right to jury trial in such a circumstance. In addressing this issue, it is necessary to set forth provisions of the various court rules which govern the parties in the case sub judice.

To begin, the rights of a party in litigation to obtain reasonable, unfettered discovery are spelled out in GCR 1963, 309. ⁷ The full text of that rule is set forth in the footnote, but for convenience, pertinent clauses are quoted here:

"The party to whom the interrogatories are directed for answer shall file * * * within 15 days" or "[w]ithin the time for answering * * * serve written objections". Defendant did neither.

Sanctions for failing to abide by discovery rules are spelled out in GCR 1963, 313.4. ⁸ Permissible penalties include "judgment by default".

The trial court in the instant case, after defendant ignored not only the time requirements of GCR 1963, 309, but also two orders compelling discovery, granted plaintiff's motion for a default judgment. This was a reasonable action which defendant no longer protests. ⁹

"The judicial system cannot tolerate litigants who flagrantly refuse to comply with the orders of the court and who refuse to make discovery, for '[d]elay and evasion are added burdens on litigation, causing waste of judicial and legal time, are unfair to the litigants and offend the administration of justice'." Denton v. Mr. Swiss of Missouri, Inc., 564 F.2d 236, 241 (CA 8, 1977).

In addition to the deterrent value of such penalties, this Court has noted the positive effect on the efficient administration of justice, in that default procedures "keep the dockets current" and "expedite the disposal of causes, thereby preventing a dilatory or procrastinating defendant from impeding the plaintiff in the establishment of his claim". Bigelow v. Walraven, 392 Mich. 566, 576, 221 N.W.2d 328 (1974).

Although now conceding the propriety of the default judgment, defendant continues to insist that it did not sacrifice its right to a jury determination of damages as demanded in its answer to plaintiff's complaint. Plaintiff, however, asserts that defendant's jury demand did not survive the default.

The right to jury trial in civil litigation is of constitutional dimension. "The right of trial by jury shall remain, but shall be waived in all civil cases unless demanded by one of the parties in the manner prescribed by law." Const.1963, art. 1, § 14.

The Constitution further authorizes this Court to promulgate rules governing litigation. "The supreme court shall by general court rules establish, modify, amend and simplify the practice and procedure in all courts of this state." Const.1963, art. 6, § 5.

GCR 1963, 508 ¹⁰ and 509 ¹¹ pertain to the right to jury trial. Rule 508 begins with a reference to the constitutional provision, supra, and goes on to detail the manner in which a jury trial is secured:

"Any party may demand a trial by jury of any issue so triable of right by filing a demand therefor in writing at any time after the commencement of the action and not later than 30 days after the filing of the answer or a reply filed within the time prescribed."

Both plaintiff and defendant in the instant case made proper demand for jury trial, plaintiff in his complaint and defendant in its answer.

If a party does not designate which issues are to be tried to a jury, Rule 508 provides that the demand is deemed to cover all issues so triable. Neither plaintiff nor defendant specified jury issues in this case, so their demands are construed to include all issues, e.g., the question of liability and the amount of recovery.

There is nothing in the record to indicate that defendant ever waived its right to jury trial under Rule 508. "A demand for trial by jury as herein provided may not be withdrawn without the consent, expressed in writing or in court, of the parties or their attorneys."

Thus, defendant had preserved its right to a jury trial as required by the court rules. The question which remains is whether defendant's default somehow canceled the right or was the functional equivalent of a waiver.

In holding that defendant's right to jury trial did not survive the default, the Court of Appeals cited Asmus v. Barrett, 30 Mich.App. 570, 577, 186 N.W.2d 819 (1971). The Asmus panel referred to 2 Honigman & Hawkins, Michigan Court Rules Annotated (2d ed.), p. 659:

"A defaulted defendant may not be heard on the trial of damages as a matter of right. Nor will he have any right to a trial by jury. Either he will have waived that right by failure to make a timely demand, Rule 508, or he will have forfeited his right to a contested trial by the acts constituting his default."

We note, first, that the above comment is not an accurate reflection of the law. Second, the Asmus Court's reference was dictum, unnecessary to its decision: "In light of counsel's failure to object to the denial of a demand for a jury trial, this Court need not consider the point." Asmus, at 577, 186 N.W.2d 819.

We note further that, unlike the defendant in the instant case, the defaulted defendant in Asmus had not made a timely jury demand. We need not decide in this case whether a defaulting party who has failed to properly invoke its right to a jury trial may do so on the issue of damages after a default has been entered.

We hold only that a defaulting party who has properly invoked his right to jury trial retains that right if a hearing is held to determine the amount of recovery.

It is important, therefore, to ascertain when such a hearing is required.

GCR 1963, 520 ¹² controls entry and judgment of default. The rule provides that the holding of further proceedings on the question of damages is within the discretion of the trial court.

"If, in order to enable the court to enter judgment or to carry it into effect, it is...