Court Opinion

ID: 9917355
Source: CourtListenerOpinion
Date Created: 2024-01-12 05:04:31.194102+00
Date Added: 2024-06-11T08:02:25.537643
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                           STATE OF MICHIGAN

                            COURT OF APPEALS

PONTIAC DRYWALL SYSTEMS, INC.,                                       UNPUBLISHED
                                                                     January 11, 2024
               Petitioner-Appellant,

v                                                                    No. 365189
                                                                     Tax Tribunal
DEPARTMENT OF TREASURY,                                              LC No. 22-003222

               Respondent-Appellee.

Before: BOONSTRA, P.J., and O’BRIEN and SWARTZLE, JJ.

PER CURIAM.

       Petitioner appeals by right the order of the Michigan Tax Tribunal (the Tribunal) denying
reconsideration of its order dismissing petitioner’s case for failing to cure a default. We vacate
the order denying reconsideration and remand for further proceedings.

                                       I. BACKGROUND

        In 2022, respondent1 imposed several Michigan Use Tax assessments against petitioner.
Petitioner asserts that it negotiated the cancelation of three of those assessments directly with
respondent. Petitioner also filed a petition—prepared using a form prepared by the Tribunal—
with the Tribunal challenging another two of those assessments. On its face, the petition form
required a “Signature of Petitioner’s Authorized Representative or, if none, Petitioner,” an email

1
 Petitioner appears to conflate respondent and the Tribunal, and much of its argument is premised
on that misapprehension. They are not the same entity. See MCL 205.721(1) and MCL 205.800.
“People are presumed to know the law.” Cummins v Robinson Twp, 283 Mich App 677, 698; 770
NW2d 421 (2009) (quotation marks and citation omitted). Furthermore, petitioner appears to
believe that respondent had a duty to advise petitioner of the orders entered by the Tribunal in this
matter, but petitioner offers no support for that proposition.

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address, and a mailing address. The petition filed by petitioner (using this form), included a
signature, albeit an illegible one, an email address, and a mailing address.2

        The Tribunal held petitioner in default for, in relevant part, “failing to identify the name of
its authorized representative” and stated that it was “unclear” whether the petition had been signed
by petitioner’s authorized representative.3 The Tribunal gave petitioner 14 days to cure the default,
and it purportedly sent a copy of the default to petitioner at the email address provided in the
petition. Petitioner did not respond.

        In December 2022, the Tribunal entered an order granting petitioner an additional 14 days
to cure the default, and it further specified that, to do so, petitioner must, within 14 days, file an
amended petition, file a motion to set aside default, pay a $25 filing fee, and file proof that the
motion was served on respondent. Petitioner admits that it received the extension order at the e-
mail address provided in the petition; however, petitioner contends that the e-mail went into the
address’s “spam folder.” The record contains no evidence supporting that contention. Petitioner
did not timely cure the default, and the Tribunal entered an order of dismissal. The order of
dismissal cited the seven factors the Tribunal was required to consider under Grimm v Dep’t of
Treasury, 291 Mich App 140, 149; 810 NW2d 65 (2010).

        In January 2023, petitioner filed an amended petition that identified its authorized
representative by name (independent of the signature). The amended petition included the same
e-mail and mailing addresses that had been on the original petition. Petitioner also filed a motion
to set aside the dismissal and for reconsideration, requesting that the “respondent” (presumably
meaning the Tribunal) issue an order setting aside the default and dismissal, grant its motion for
reconsideration, and reinstate the petition. In its motion, petitioner argued in significant part that
its violations of the Tribunal’s orders cannot be considered wilful or deliberate because it was
guilty of, at most, negligence in failing to manage its e-mail. Petitioner argued that its
communications with respondent showed that it had been actively engaged in contesting the tax
assessments, which was evidence that its failure to respond to the default was due to a lack of
notice rather than any intention of causing delay. Petitioner further argued that any prejudice to
respondent would be minimal, whereas the prejudice to itself would be significant. Petitioner
concluded that a lesser sanction than dismissal would serve the interests of justice.

        In February 2023, the Tribunal entered an order denying reconsideration. The Tribunal
acknowledged that petitioner had filed an amended petition, but it concluded that petitioner had
nevertheless not complied with its orders because petitioner had not filed a motion to set aside the
default, paid the associated filing fee, and filed proof that it had served the motion on respondent.

2
 Apart from providing this information, the petition did not identify its authorized representative.
However, the petition form also did not specifically request it.
3
  The default order cited to TTR 227, which is an Administrative Hearing Rule, found at Mich
Admin Code 792.10227, that governs the filing of petitions in the Tribunal. Like the petition form,
however, TTR 227 requires that a petition be signed but does not otherwise require the
identification of any authorized representative. See Mich Admin Code 792.10227 (1), (3).

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The Tribunal therefore concluded that petitioner had not cured the default, and it denied
reconsideration and closed the case.

                                  II. STANDARD OF REVIEW

        “We review for an abuse of discretion a decision by the Tax Tribunal to dismiss a petition
for failure to comply with its rules or orders.” Grimm, 291 Mich App at 149. “The abuse-of-
discretion standard recognizes that there will be circumstances in which there will be more than
one reasonable and principled outcome, and selection of one of these principled outcomes is not
an abuse of discretion.” Id.

                                         III. ANALYSIS

       Petitioner argues primarily that its failure to comply with the Tribunal’s orders was
unintentional. We conclude that the Tribunal abused its discretion by failing to explicitly consider
the Grimm factors before denying petitioner’s motion. We decline to resolve whether petitioner’s
noncompliance actually was unintentional.

        “[T]he Tax Tribunal has the authority to dismiss a petition for failure to comply with its
rules or orders.” Prof Plaza, LLC v Detroit, 250 Mich App 473, 475; 647 NW2d 529 (2002).
Before the Tribunal may dismiss a case, it must carefully consider all of its options on the record,
Grimm, 291 Mich App at 149-150, and it must specifically consider seven enumerated factors:

       (1) whether the violation was wilful or accidental; (2) the party’s history of refusing
       to comply with previous court orders; (3) the prejudice to the opposing party; (4)
       whether there exists a history of deliberate delay; (5) the degree of compliance with
       other parts of the court’s orders; (6) attempts to cure the defect; and (7) whether a
       lesser sanction would better serve the interests of justice. [Id. at 149 (quotation
       marks and citation omitted).]

        The first and fourth Grimm factors pertain to conduct that was “wilful” or “deliberate.”
“Wilful” conduct is conduct that is intentional and “involves design and purpose.” Jennings v
Southwood, 446 Mich 125, 139-140; 521 NW2d 230 (1994). In the civil context of “deliberate
indifference,” a person must “know of and disregard” a particular risk, and it is not enough that a
person merely should have realized the risk. Mays v Snyder, 506 Mich 157, 192-193; 954 NW2d
139 (2020) (quotation marks, brackets, and citation omitted). In the criminal context of first-
degree premeditated murder, “to deliberate is to measure and evaluate the major facets of a choice
or problem.” People v Oros, 502 Mich 229, 240; 917 NW2d 559 (2018) (quotation marks and
citation omitted). The second Grimm factor pertains to “refusing to comply with” orders. As
compared to merely not complying with orders, the word “refusal” connotes intentional conduct.
See People v Likine, 492 Mich 367, 389-392; 823 NW2d 50 (2012).

        In short, three of the Grimm factors require the Tribunal to consider a party’s intentions as
well as the party’s actions. Furthermore, in general, carelessness, negligence, or incompetence do
not rise to the level of wilful or deliberate misconduct. People v Otto, ___ Mich App ___, ___;
___ NW2d ___ (2023) (Docket No. 362161); slip op at 6; Morden v Grand Traverse Co, 275 Mich
App 325, 338; 738 NW2d 278 (2007). Nevertheless, intent may be inferred from “a line of

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conduct” with only one “reasonable explanation.” See Hawkins v Dillman, 268 Mich 483, 491;
256 NW 492 (1934) (quotation marks and citation omitted).

        In this case, the Tribunal’s order denying reconsideration does not address petitioner’s
arguments concerning petitioner’s allegedly negligent handling of its email system. The Tribunal
abused its discretion by failing to give any consideration on the record, let alone the “careful
consideration” it was required to give, as to whether petitioner’s noncompliance was intentional
or unintentional. Grimm, 291 Mich App at 149-150.

        Moreover, there is nothing in the record indicating that the Tribunal considered the
remaining Grimm factors, other than the Tribunal’s assertion that “all correspondence was properly
sent” to the email address that petitioner provided with the initial petition, and its assertion that
petitioner “failed to file a Motion to set aside the default with required filing fee and proof of
service.” “When considering the sanction of dismissal, the record should reflect that the Tax
Tribunal gave careful consideration to the factors involved and considered all of its options in
determining what sanction was just and proper in the context of the case before it.” Grimm, 291
Mich at 150 (citations and quotation marks omitted).

        Regarding its holding that petitioner failed to cure the default because petitioner failed to
file a motion to set aside the default along with a $25 filing fee and proof that the motion was
served on respondent, the Tribunal never considered whether plaintiff’s “motion to set aside
dismissal and for reconsideration” satisfied this requirement. Courts must consider the substance
of a pleading rather and are not bound by the labels applied to those documents by the parties.
Brendel v Morris, ___ Mich App ___, ___; ___ NW2d ___ (2023) (Docket No. 359226); slip op
at 5. Although petitioner filed what it described as either a motion for reconsideration or a motion
to set aside the dismissal and for reconsideration, in substance, the motion sought to set aside the
default. And although it did not include the particular $25 filing fee specified by the Tribunal, it
did include a $50 filing fee. Petitioner attached proofs of service indicating that the motion and
brief were served on respondent, and there is nothing in the record indicating that respondent was
not actually served. Although petitioner did not file anything formally captioned as a motion to
set aside the default, nothing in the Tribunal’s order denying consideration reflects whether it
considered the document as a whole to determine its true nature, and the Tribunal never recognized
that petitioner’s motion indeed requested that the default be set aside. See Brendel, ___ Mich App
at ___; slip op at 5. We conclude that the Tribunal abused its discretion by apparently relying
solely on petitioner’s labeling of its motion in concluding that it did not satisfy the Tribunal’s
requirements for setting aside the default. Grimm, 291 Mich at 150 (citations and quotation marks
omitted).

        The Tribunal was also silent on the relative prejudice to petitioner and respondent, and did
not provide any indication in its order denying reconsideration that it had considered the possibility
of lesser sanctions. Under these circumstances, we conclude that the Tribunal’s order denying
reconsideration and dismissing petitioner’s case must be vacated, and the case remanded for
further proceedings before the Tribunal. We decline to order that the petition be reinstated; rather,
the Tribunal should reconsider the issue in light of this opinion and, if it again dismisses

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petitioner’s case, it should provide an explicit discussion of the Grimm factors in order to facilitate
appellate review.4

       Vacated and remanded. We do not retain jurisdiction.

                                                               /s/ Mark T. Boonstra
                                                               /s/ Colleen A. O’Brien
                                                               /s/ Brock A. Swartzle

4
 In doing so, the Tribunal should bear in mind that, although its default was premised on petitioner
having failed to identify its authorized representative, neither TTR 227 nor the Tribunal’s petition
form specifically required petitioner to do so other than by way of a signature.

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