Title: MARCY ZAITER V RIVERFRONT COMPLEX LTD

State: michigan

Issuer: Michigan Supreme Court

Document:

____________________________________________________________________________________________________________________________ 
________________________________ 
 
C hief Justice 
Justices 
Maura D. Corrigan  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED JANUARY 18, 2001  
MARCY ZAITER,  
Plaintiff-Appellee,  
v  
No. 116357  
RIVERFRONT COMPLEX, LTD., AND 
VIRGIL D. RILEY,  
Defendants-Appellants.  
PER CURIAM  
After the defendants failed to participate in discovery,  
the circuit court entered a $50,000 default judgment.  The  
Court of Appeals affirmed. We affirm in part and reverse in  
part.  The circuit court did not err when it entered a default  
judgment with regard to liability.  However, we remand this  
case to the circuit court to allow the defendants the  
opportunity to have a jury decide the question of damages.  
I  
Plaintiff 
Marcy 
J. 
Zaiter 
worked 
for 
defendant 
Riverfront  
Complex, Ltd., as an x-ray technician.  She says she was fired  
because she was pregnant.  Riverfront says she was discharged  
 
as an economic move, because her salary was greater than the  
x-ray billings that were being generated from her work.  
On October 8, 1996, Ms. Zaiter filed a complaint in which  
she alleged that Riverfront had discharged her in violation of  
the Civil Rights Act.  MCL 37.2202; MSA 3.548(202). 
The  
complaint included a demand for a jury trial, and was  
accompanied by interrogatories and a request for the  
production of documents.1  
Riverfront answered the complaint, and stated its  
reliance on Ms. Zaiter's demand for a jury trial.  Signing the  
answer, counsel for Riverfront provided a business address on  
Edward Avenue in Madison Heights.  
By spring of the following year, Riverfront had not  
answered 
the 
interrogatories or the request for the production  
of documents.  Ms. Zaiter's attorney wrote to Riverfront's  
lawyer on February 4, 1997, demanding answers by February 14.  
This and all other correspondence mentioned in this opinion  
were sent to Riverfront's lawyer at her Edward Avenue address  
in Madison Heights.  
Ms. Zaiter's attorney wrote again on March 7 to confirm  
a March 6 telephone conversation in which answers had been  
promised by March 14.  The letter also included a request for  
production of two Riverfront employees for deposition.  
1 
 Ms. Zaiter also sued Virgil D. Riley, the sole 
shareholder of Riverfront. For the balance of this opinion, 
we will refer to the two defendants as “Riverfront.”  
2  
On April 2, Ms. Zaiter’s attorney filed a motion to  
compel answers to the interrogatories and document requests.  
A notice of hearing was sent to defense counsel.  Like the  
correspondence from Ms. Zaiter's lawyer, each notice of  
hearing mentioned in this opinion bore defense counsel's  
Edward Avenue address in Madison Heights.  
The circuit court's ruling was an April 14 order that  
required answers by April 24. Since defense counsel did not  
appear for the hearing, Ms. Zaiter's lawyer mailed a copy of  
the order to her on April 14, and enclosed a notice that the  
two employees would be deposed on April 23.  
An April 23 letter to defense counsel recites that the  
depositions were adjourned to May 9 at “your request" and  
confirms a telephone conversation in which defense counsel  
promised Ms. Zaiter's lawyer that she would provide answers to  
the discovery requests before the May 9 depositions.  
On May 9, Ms. Zaiter's lawyer faxed a letter to defense  
counsel.  Pursuant to a May 8 conversation, the depositions  
again had been adjourned. The letter also confirmed defense  
counsel’s promise to provide the overdue answers by May 12.  
Ms. Zaiter’s attorney filed a motion for default on June  
24, mailing notice of the hearing to defense counsel.  The  
attorney recited the broken promises regarding discovery and  
noted the court's April 14 order, and also explained that  
June 10 had been the third notice date for depositions, but  
3  
that defense counsel and her client’s employees had not  
appeared.  Ms. Zaiter’s counsel asked for default judgment and  
for an award of $2,5000 in costs.  
The circuit court considered the motion on June 30. Its  
conclusion was reflected in an order that was not entered  
until July 15, because entry was delayed so that Ms. Zaiter’s  
lawyer could mail to defense counsel the seven-day notice that  
is part of the procedure set forth in MCR 2.602(B)(3). The  
July 15 order required Riverfront to respond to the  
interrogatories and the request to produce by July 11.2  
Failing that, a default judgment would be entered. The court  
also ordered Riverfront to pay $250 in sanctions by July 29.  
When no answers were provided, Ms. Zaiter’s attorney  
filed a July 25 motion for default judgment. Two notices of  
hearing were mailed to defense counsel.  
The circuit court heard the motion on September 8.  
Defense counsel did not appear and thus did not assert  
Riverfront’s right to a jury trial on damages. 
At a short  
hearing on damages, Ms. Zaiter testified that she had suffered  
$18,000 in economic damages, and emotional stress as well.  
She had been diagnosed with depression, and her pregnancy  
“almost led to a miscarriage.” Counsel asked for judgment in  
2 Because of the delay in entry, the July 15 order did 
require the impossible-
--answers by July 11. 
This obvious  
error was of little significance, since Riverfront continued 
not to comply with the discovery requests that had been made 
the previous October.  
4  
 
the amount of $50,000, a figure that the court later  
attributed, inaccurately, to a mediation evaluation.  
At the conclusion of the hearing, the circuit court  
granted the request orally, but asked that entry of the  
written judgment be deferred until the seven-day entry  
procedure was followed again. Thus, Ms. Zaiter’s lawyer sent  
defense counsel notice of the pending entry of the default  
judgment.  No objection was received, and the court entered  
the $50,000 default judgment on September 22.3  Ms. Zaiter's  
attorney faxed a copy of the judgment to defense counsel.  
On October 9, Riverfront moved to set aside the default  
and the default judgment.  In the motion, defense counsel  
stated that she had received no correspondence from Ms.  
Zaiter's attorney since the May 9 fax; nor had she received  
any of the motions or orders.  Counsel suggested that the  
problem might lie in the court's records, which showed a  
former business address.  Counsel did not explain why  
correspondence mailed to her Edward Avenue address in Madison  
Heights would go unanswered.  She said that there was good  
cause to set aside the default judgment and that Ms. Zaiter's  
suit-
-
-“a case of questionable liability”-
-
-should be heard on  
its merits.  
The circuit court heard Riverfront's motion on October  
3 
 The judgment was against Riverfront and Mr. Riley, 
jointly and severally.  
5  
27.  Defense counsel said she could not explain her failure to  
receive mail at her current address, though she thought  
perhaps the problem was that the mail had been misdirected to  
another business on the same premises. 
She said that,  
throughout the same period, she had been providing diligent  
representation of Riverfront in an unrelated matter, and that  
there would have been no reason for her to neglect the present  
suit.  
Defense counsel also stated to the court her "belief"  
that she had answered the October 1996 discovery requests at  
some prior point, though she could not produce copies of  
answers or a proof of service.  She promised to look when she  
returned to her office.  
The court ruled on October 29, 1997.  Before the court  
delivered its opinion, defense counsel told the court that a  
search of her files revealed that she had sent the answers  
back on May 12.  Unfortunately, she had sent them to an  
attorney who had no role in this case-
-
-counsel for a party  
involved in unrelated litigation with Riverfront in district  
court. She also had sent the answers to the district court.  
So far as she knew, neither set of misdirected answers had  
ever been returned to her.4  
The court thanked defense counsel for that information,  
4 The record does not indicate that defense counsel has  
ever tendered a copy of the answers, or a copy of the proof of 
service showing the erroneous mailing.  
6  
 
and then delivered its opinion, concluding:  
Now, it has been five months since defense 
counsel last made contact with the plaintiff,[5] and  
they have stated that the lack of mail failed to 
give them notice of events or her need to contact 
plaintiff’s counsel.  However, as the Court has 
gone through the file and received oral argument 
Monday, plaintiff appears to have sent all of the 
mail to the Edwards Road address, which defendant 
claims is counsel’s correct address. It’s exactly 
this long period of time without contact which 
should have at least put defendant’s counsel on 
notice of a need to update itself with the status 
of the case, even-
-
-or-
-
-either through placing a 
phone call to plaintiff’s counsel or to this court.  
An attorney certainly has an ethical duty to 
act with reasonable diligence and promptness in 
representing a client according to Michigan Rules 
of Professional Conduct. 
Defendant’s attorney 
allowed five months to pass without an attempt to 
contact plaintiff or this court.  
Defendant offers as an explanation for her 
lack of contact, that control over this case, as 
nonreceipt of mail. She asserts that this is good 
cause and that a meritorious defense exists.  
However, this Court is convinced that the receipt 
of mail should not be the only method whereby an 
attorney should be prompted to keep abreast of the 
progress and status of a case.  The purpose of a 
default judgment is to discourage attorneys from 
failing to represent their clients in a reasonably 
diligent and prompt manner. Unfortunately, it has 
the effect of adjudicating matters not on the 
merits alone.  However, it is appropriate in 
specific circumstances and, unfortunately, the  
Court believes that this is one of them.  
This Court makes-
-
-takes no pleasure in denying 
a motion to set aside a default judgment, and  
5 The dissenting judge in the Court of Appeals pointed 
out that it is four months, not five, from May 9 (the fax that 
defense counsel acknowledges having received) to September 8 
(the hearing on the motion to enter default judgment). That  
error plainly is not the foundation of the circuit court's 
opinion.  
7  
 
counsel has appeared here today and she has been 
candid enough to indicate that the interrogatories 
appear to have been prepared and they may have 
inadvertently been sent to another court and they 
may very well have been sent to another attorney. 
Now why those things didn’t come back to her 
office, or this court, or the other attorney, I am 
not sure. 
It’s an unfortunate situation, and  
counsel has been respectful each time she has  
appeared here.  
It’s a difficult measure to be taken, but it 
is the ruling of the Court that the Motion to Set 
Aside the Default Judgment should be denied.  
On November 18, the circuit court entered an order denying the  
motion to set aside the default judgment.  
Riverfront next filed a December 1 motion, asking the  
circuit court to “reconsider its prior denial of Defendants’  
Motion, insofar as the Court must preserve Defendants’ right  
to a trial by jury on the issue of damages.”  Riverfront's  
motion was based on Wood v DAIIE, 413 Mich 573; 321 NW2d 653  
(1992).  
Reconsideration was denied by the circuit court in a  
January 15, 1998 opinion/order.6  
The Court of Appeals affirmed the $50,000 default  
6 MCR 2.119(F)(3) states the standard for deciding a 
circuit court motion for rehearing or reconsideration:  
Generally, 
and 
without 
restricting 
the  
discretion of the court, a motion for rehearing or 
reconsideration which merely presents the same 
issues ruled on by the court, either expressly or 
by reasonable implication, will not be granted. 
The moving party must demonstrate a palpable error 
by which the court and the parties have been misled 
and show that a different disposition of the motion 
must result from correction of the error.  
8  
 
judgment.7  
Riverfront has applied to this Court for leave to appeal.  
II  
The setting aside of a default or a default judgment is  
governed by MCR 2.603(D)(1), which 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.  
In the present case, the circuit court and the Court of  
Appeals found no good cause. 
For example, in denying  
Riverfront's motion for reconsideration, the circuit court  
said that the lengthy period without contact from opposing  
counsel should have put defense counsel on notice that  
something was awry. Likewise, the Court of Appeals majority  
concluded that good cause had not been shown:  
Under these circumstances we conclude that the  
circuit court did not abuse its discretion in  
finding 
that 
defense 
counsel 
unjustifiably 
neglected the instant case when she failed over a 
five-month period to make contact with plaintiff's 
counsel of any kind, or otherwise investigate the 
status of the case.  
The dissenting judge said that "[w]ithout some specific  
information 
or 
record 
support 
of 
docket 
management 
procedures,  
local rules, and prevailing time frames in the Genesee Circuit  
Court, I would say that the lack of contact between an  
7 
 Unpublished opinion per curiam, issued January 25, 
2000, amended January 31, 2000 (Docket NO. 209212).  
9  
 
attorney and the opposite side or the court for a period of  
four or five months is not sufficient ground for entry of a  
default 
against 
the 
attorney for failure ‘to diligently pursue  
and defend a case.’"  
We will not pause long on this aspect of the case. Our  
review is for clear abuse of discretion,8 and we find no such  
abuse in this case.  While we are not unsympathetic to the  
plight of an attorney betrayed by glitches in mail delivery,  
this case involves more than the occasional misdelivery of a  
piece of mail.  
Various letters and notices of hearing were mailed to  
defense counsel at her correct address in Madison Heights, all  
to no effect. 
This bundle of mail was necessitated by  
counsel's year-long failure to provide Ms. Zaiter's lawyer  
with answers to discovery requests that had been tendered with  
the complaint.  The eventual explanation that the answers had  
been mailed five months earlier to an attorney in an unrelated  
case 
provides 
little 
help-
-
-counsel 
herself 
acknowledged 
at 
the  
October 29 proceedings that this disclosure "I suppose in many  
senses increases my culpability in this matter."  
We have no doubt that real problems can arise as  
documents are transmitted by mail. On this record, however,  
the prolonged and repeated failure to receive mail, together  
8 Alken-Ziegler, Inc v Waterbury Headers Corp, 461 Mich 
219, 227-229; 600 NW2d 638 (1999).  
10  
  
 
with the other circumstances of this case, led the circuit  
court to conclude that Riverfront had failed to demonstrate  
good cause for setting aside the default judgment.9  In that  
conclusion, we can find no abuse of discretion.  
III  
This case also presents the issue whether the Riverfront  
can obtain a jury trial on damages.  As the parties and the  
lower courts have observed, this question was treated at  
length in our 1992 decision in Wood.  
The defendant in Wood was DAIIE. It failed to respond  
timely to proper discovery requests, resulting in a default  
and, after a further hearing, a default judgment. DAIIE did  
appear for the default judgment hearing, but the court refused  
to allow it to participate. 413 Mich 577.  
With regard to whether DAIIE had a right to a jury trial  
in Wood, this Court noted that DAIIE had requested a jury and  
had not waived that right.  Thus, the issue was whether the  
default functioned as a waiver. This Court held that it did  
not:  
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.  [413  
9 It is important that the “good cause” and “meritorious 
defense” elements of a motion to set aside be considered  
separately. Alken-Ziegler, 461 Mich 229-234.  There being no 
good cause in this case, we do not reach the question of 
meritorious defense.  
11  
 
Mich 583-584 (emphasis in original).]  
This Court then examined GCR 1963, 520 to determine when  
such a hearing is necessary.  That rule is the predecessor of  
MCR 2.603(B)(3)(b),10 which provides:  
If, in order for the court to enter judgment 
or to carry it into effect, it is necessary to  
(i) take an account,  
(ii) determine the amount of damages,  
(iii)  establish the truth of an allegation by 
evidence, or  
(iv) investigate any other matter,  
the court may conduct hearings or order references 
it deems necessary and proper, and shall accord a 
right of trial by jury to the parties to the extent 
required by the constitution.  
From there, this Court moved to the principal holding of Wood:  
However, once the trial court determines that  
a further proceeding is necessary, the rule  
mandates "a right of trial by jury to the parties 
when and as required by the Constitution".[11]  As  
noted above, the constitutional requirement is but 
a circular reference to the court rules.  The  
constitutional provision is repeated here: "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.  
Thus, the trial court in the case at bar, 
having determined that a hearing was necessary on 
the question of damages, was obliged to accord  
10 In pertinent part, the differences are only stylistic.  
11 The emphasized phrase from GCR 1963, 520.2(2) has been 
replaced by the words, “to the extent required by the 
constitution.”  No substantive change was intended by that 
rephrasing.  
12  
 
 
 
  
defendant its properly preserved right to jury 
trial. [413 Mich 585 (emphasis in original).]  
When it denied reconsideration in the present case, the  
circuit court explained that it had exercised discretion to  
determine whether a hearing was necessary to determine  
damages.  There being no such necessity, there was no need for  
a trial by jury.  
The Court of Appeals majority noted that the circuit  
court had conducted a hearing on damages,12 and therefore  
Riverfront’s 
“properly 
preserved 
right 
to 
a 
jury 
determination  
on the issue of damages must be recognized.”  The majority  
affirmed nonetheless.  It relied on the failure of Riverfront  
to appear at the hearing to assert the right to a jury trial,  
and Riverfront’s failure to raise this issue in its motion to  
set aside the default judgment.  
Noting the similarities between this case and Wood, the  
dissenting 
judge 
characterized 
Riverfront’s 
Wood-based  
argument as “compelling.”  
On this point, we agree with the dissent in the Court of  
Appeals. With its answer, Riverfront stated its reliance on  
Ms. Zaiter’s demand for a jury.  At no time has Riverfront  
ever said or done anything to waive its right to a jury. Wood  
teaches that Riverfront’s default does not constitute such a  
12 The majority also said that there had been no 
mediation, which prompted the dissent to describe the $50,000 
figure as “a rabbit from a hat.”  
13  
waiver.  413 Mich 583. Thus, we know that it had the right to  
trial by jury on damages if a hearing were held, as did occur  
in this case. MCR 2.603(B)(3)(b).  
All that remains is Riverfront’s failure to participate  
in the default judgment hearing. In light of the court rule,  
the analysis offered in Wood, and the circumstances of this  
case, we are satisfied that Riverfront’s failure to appear for  
the default judgment hearing did not constitute a waiver of  
its right to a jury trial. The failure to appear was simply  
another element of the continuing problem that gave rise to  
the present dispute. Whatever reasons caused the default also  
caused defense counsel not to appear for the default judgment  
hearing.  
As the Court of Appeals noted, Riverfront did not raise  
this issue in its motion to set aside the default judgment.  
Rather, this question was first raised in Riverfront’s motion  
for reconsideration of the court’s order denying the motion to  
set aside the default judgment. While that presentation may  
appear to be tardy, the constitutional nature of the right to  
trial 
by 
jury-
--a 
right never waived by Riverfront-
--compels us  
to grant partial relief in the circumstances of this case.  
The principles elaborated in Wood are the basis of this  
result.  
IV  
For the reasons stated in this opinion, we affirm in part  
14  
 
 
 
 
and reverse in part the judgments of the circuit court and the  
Court of Appeals.  We remand this case to the circuit court  
for a hearing before a jury on the amount of damages.  MCR  
7.302(F)(1).  
CORRIGAN, C.J., and CAVANAGH, WEAVER, 
KELLY, TAYLOR, 
YOUNG, 
and  
MARKMAN, JJ., concurred.  
15