Court Opinion

ID: 9929249
Source: CourtListenerOpinion
Date Created: 2024-02-02 05:06:19.789408+00
Date Added: 2024-06-11T10:06:23.408509
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

MURPHY-TELEGRAPH BUILDING, LLC,                                        UNPUBLISHED
                                                                       February 1, 2024
               Plaintiff-Appellee,

v                                                                      No. 364900
                                                                       Wayne Circuit Court
                                                                       LC No. 22-008171-NZ

DETROIT THERMAL, INC,

               Defendant-Appellant.

Before: GADOLA, P.J., and CAVANAGH and K. F. KELLY, JJ.

PER CURIAM.

       Defendant, Detroit Thermal, LLC, appeals as of right the trial court’s order denying
defendant’s motion to set aside the default judgment awarded to plaintiff, Murphy-Telegraph
Building, LLC. We vacate the trial court’s order and remand to the trial court for further
proceedings.
                                              I. FACTS

       Plaintiff owns property at 151 and 155 West Congress in Detroit, known as the “Murphy-
Telegraph Building” (the building). Defendant owns and operates steam lines near the building;
in 2015, defendant rebuilt approximately 120 feet of steam piping near the building.

         On July 8, 2022, plaintiff initiated this lawsuit alleging that defendant’s negligent operation
of its steam piping caused steam to escape from the manhole covers and damage the building, and
that the steam piping also significantly elevated the temperature of the building’s basement wall,
further damaging the building. In its complaint, plaintiff alleged in part that “the damage and
negligent acts as set forth herein are ongoing, constantly occurring and recurring since Plaintiff
has owned the buildings in question and started when Detroit Thermal made street repairs in 2015
and the occurrences and negligent acts and damages continue through today.”

                                                  -1-
       The parties do not dispute that plaintiff properly served defendant with the complaint by
personal service to defendant’s resident agent on July 19, 2022. Plaintiff also mailed a courtesy
copy of the complaint to defendant’s business address, and emailed a copy to defendant using the
contacts information on defendant’s business website. The trial court found that service of the
summons and complaint was proper.

        Defendant failed to answer the complaint. Plaintiff requested entry of a default on August
22, 2022, which was entered by the trial court clerk September 2, 2022. Plaintiff mailed a copy of
the entered default to defendant’s resident agent. On October 18, 2022, plaintiff moved for entry
of a default judgment in the amount of $488,220, plus interest, costs, and attorney fees. The motion
included as exhibits two reports regarding the condition of the building; one report concluded that
damage to the building was caused by steam from the steam lines, while the other report concluded
that no damage was caused by steam from the steam lines, but instead that any damage to the
building was caused by environmental factors and lack of maintenance. In its motion, however,
plaintiff incorrectly suggested that both reports concluded that damage to the building was caused
by escaping steam.

        The trial court held a hearing on the motion for default judgment on October 28, 2022. The
record indicates that plaintiff properly served a notice of hearing upon defendant’s resident agent.
At the conclusion of the hearing, the trial court found that defendant had failed to respond to the
complaint. The trial court also found adequate proof of damages and entered a judgment in favor
of plaintiff in the amount of $488,595.

        On November 21, 2022, defendant moved to set aside the default judgment. Attached to
the motion was the affidavit of Todd Grzech, defendant’s Chief Executive Officer (CEO),
explaining that for the preceding year his attention had been focused on the sale of defendant’s
business, which resulted in him traveling extensively, that he was away from defendant’s Detroit
office throughout October 2022 for that reason, and that he did not learn of the lawsuit until
October 21, 2022. According to his affidavit, Grzech “resolved to take care of it as soon as I
returned to the office in early November,” but “[b]efore I had the opportunity to contact legal
counsel, I received notice on November 8, 2022 that a judgment had been entered,” and thereafter
contacted legal counsel.

        The motion to set aside the default also was supported by a second affidavit of Todd Grzech
asserting that defendant had a meritorious defense. Specifically, Grzech asserted that defendant
did not cause the damage to the building and that “[a]ny damage Plaintiff has incurred, if any, was
caused by the elements, natural aging of the Subject Property, and/or Plaintiff’s failure to maintain
the property.” The affidavit also asserted that plaintiff had not demonstrated damages in the
amount sought.

        On January 27, 2023, the trial court held a hearing on the motion to set aside the default
judgment, at the conclusion of which the trial court denied the motion. The trial court specifically
found that service of the complaint and summons was proper, that defendant’s CEO received the
summons and complaint but did not “become aware” of it until October 21, 2022, after the period
for timely responding to the complaint, and that defendant had not established good cause to set
aside the judgment. The trial court further found that defendant failed to present a meritorious

                                                -2-
defense that would warrant setting aside the default judgment, and that sufficient evidence was
presented to support the damages awarded. Defendant now appeals.

                                          II. DISCUSSION

        Defendant contends that the trial court erred by denying its motion to set aside the default
judgment. We review a trial court’s decision to grant or deny a motion to set aside a default
judgment for an abuse of discretion. Lawrence M. Clarke, Inc v Richco Constr, Inc, 489 Mich
265, 272; 803 NW2d 151 (2011). A trial court abuses its discretion when its decision is outside
the range of principled outcomes, Farm Bureau Ins Co v TNT Equip, Inc, 328 Mich App 667, 672;
939 NW2d 738 (2019), and also when it makes an error of law, In re Nikooyi, 341 Mich App 490,
494; 991 NW2d 619 (2022). We review de novo the trial court’s interpretation and application of
court rules. Henry v Dow Chem Co, 484 Mich 483, 495; 772 NW2d 301 (2009). We review for
clear error the trial court’s determination regarding the amount of damages awarded. Jackson v
Bulk AG Innovations, LLC, 342 Mich App 19, 24; 993 NW2d 11 (2022).

         Michigan’s court rules confer upon the trial court the authority to enter a default and a
default judgment. Henry v Prusak, 229 Mich App 162, 168; 582 NW2d 193 (1998). MCR
2.108(A)(1) provides that “[a] defendant must serve and file an answer or take other action
permitted by law or these rules within 21 days after being served with the summons and a copy of
the complaint in Michigan in the manner provided in MCR 2.105(A)(1).” MCR 2.603(A)(1)
requires the trial court clerk to enter a default “[i]f a party against whom a judgment for affirmative
relief is sought has failed to plead or otherwise defend as provided by these rules. . . .” Huntington
Nat’l Bank v Ristich, 292 Mich App 376, 381; 808 NW2d 511 (2011).

       In this case, the parties do not dispute that plaintiff properly served defendant with the
complaint by personal service to defendant’s resident agent. The parties also do not dispute that
defendant failed to answer the complaint. Because defendant “failed to plead or otherwise defend
as provided by these rules,” MCR 2.603(A)(1) required the trial court clerk to enter a default. See
Huntington Nat’l Bank, 292 Mich App at 381. The trial court then entered the default judgment
awarding plaintiff the amount sought.

        Defendant thereafter moved to set aside the default judgment. Under MCR 2.603(D)(1),
“[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, verified in the manner prescribed
by MCR 1.109(D)(3), is filed.” See Epps v 4 Quarters Restoration, LLC, 498 Mich 518, 554; 872
NW2d 412 (2015). Although the law favors a determination of a claim on the merits, Alken-
Ziegler, Inc v Waterbury Headers Corp, 461 Mich 219, 229; 600 NW2d 638 (1999), and disfavors
defaults and default judgments, nonetheless, the law also disfavors setting aside a properly entered
default and default judgment, Saffian v Simmons, 477 Mich 8, 15; 727 NW2d 132 (2007).

                                         A. GOOD CAUSE

        The party moving to set aside a default judgment bears the burden of demonstrating good
cause and a meritorious defense. Id. at 14. Although good cause and a meritorious defense are
distinct requirements, a lesser showing of good cause is required if the moving party demonstrates
a strong meritorious defense. Alken-Ziegler, Inc, 461 Mich at 233-234.

                                                 -3-
        To demonstrate good cause to set aside a default and default judgment, the moving party
must show either “(1) a substantial defect or irregularity in the proceedings upon which the default
was based, (2) a reasonable excuse for failure to comply with the requirements which created the
default, or (3) some other reason showing that manifest injustice would result from permitting the
default to stand.” Shawl v Spence Bros, Inc, 280 Mich App 213, 221; 760 NW2d 674 (2008); but
see Brooks Williamson & Assoc, Inc v Mayflower Constr Co, 308 Mich App 18, 25; 863 NW2d
333 (2014) (Good cause may be established by demonstrating “a procedural irregularity or defect
or a reasonable excuse for failing to comply with the requirements that led to the default
judgment”) (quotation marks and citation omitted). Under Shawl, the factors relevant to whether
a party has shown good cause are:

       (1) whether the party completely failed to respond or simply missed the deadline to
       file;

       (2) if the party simply missed the deadline to file, how long after the deadline the
       filing occurred;

       (3) the duration between entry of the default judgment and the filing of the motion
       to set aside the judgment;

       (4) whether there was defective process or notice;

       (5) the circumstances behind the failure to file or timely file;

       (6) whether the failure was knowing or intentional;

       (7) the size of the judgment and the amount of costs due under MCR 2.603(D)(4);

       (8) whether the default judgment results in an ongoing liability (as with paternity
       or child support); and

       (9) if an insurer is involved, whether internal policies of the company were
       followed. [Shawl, 280 Mich App at 238 (footnote omitted).]

        In this case, the trial court determined that defendant had not demonstrated good cause.
The trial court found that service was proper and that defendant had failed to respond because its
CEO was occupied with selling the business and the correspondence of the business apparently
was mismanaged during that time; when the CEO was made aware of the lawsuit and the default,
he did not prioritize responding to the litigation, and as a result a default judgment was entered.

        We agree that defendant did not establish good cause by demonstrating a substantial defect
or irregularity in the proceedings upon which the default was based; defendant does not allege any
defects in the service or the notice. At first glance, defendant also did not establish good cause by
demonstrating a reasonable excuse for failure to respond to the complaint applying the relevant
Shawl factors. According to his affidavit, defendant’s CEO was extremely busy and traveling out
of the state during much of 2022 negotiating the sale of the business; in addition, there had been
many personnel changes during the year and changes in the duties of the employees. Grzech
admits, however, that he was aware of the lawsuit and the default by October 21, 2022, but chose

                                                 -4-
to delay contacting defendant’s attorney, apparently not appreciating the gravity of the situation.
Although initially defendant’s failure to respond perhaps was neither knowing nor intentional,
after October 21, 2022, defendant’s CEO chose to delay. Weighing against these circumstances
is the fact that the size of the judgment is substantial.

        “The carelessness or neglect of either the litigant or his attorney is not normally grounds
for granting a belated application to set aside a default regularly entered.” White v Sadler, 350
Mich 511, 522; 87 NW2d 192 (1957). In the context of determining good cause, a party is held to
be responsible for its own action or inaction, Alken-Ziegler, Inc, 461 Mich at 224, and negligence
in responding to a lawsuit typically does not establish good cause, Park v American Cas Ins Co,
219 Mich App 62, 67; 555 NW2d 720 (1996). In addition, “a lay defendant’s lack of knowledge
of the law and its consequences will not necessarily provide a reasonable excuse and good cause
to set aside a default.” Reed v Walsh, 170 Mich app 61, 65; 427 NW2d 588 (1988). Without
considering the defendant’s assertion of a meritorious defense, a review of the circumstances of
defendant’s default suggests that defendant did not establish good cause to set aside the default
judgment. See Shawl, 280 Mich App at 221. However, whether defendant established good cause
may be affected by whether defendant demonstrated a meritorious defense.

                                  B. MERITORIOUS DEFENSE

        To demonstrate a meritorious defense, the moving party must file an affidavit setting forth
sufficient facts to support a defense that, if proven, would afford the moving party a defense against
the plaintiff’s claim. Tindle v Legend Health, PLLC, ___ Mich App ___, ___; ___ NW2d ___
(2023) (Docket No. 360861); slip op at 6. The affiant must have personal knowledge of the facts,
state admissible facts with particularity, and show that the affiant can testify competently to the
facts averred. Huntington Nat’l Bank, 292 Mich App at 392.

        Factors relevant to establishing a meritorious defense include “whether the affidavit
contains evidence that: (1) the plaintiff cannot prove or the defendant can disprove an element of
the claim or a statutory requirement; (2) a ground for summary disposition exists under MCR
2.116(C)(2), (3), (5), (6), (7), or (8); or (3) the plaintiff’s claim rests on evidence that is
inadmissible.” Shawl, 280 Mich App at 238. The affidavit submitted typically must identify
evidence adequate to inform the trial court whether the movant has a meritorious defense. Tolas
Oil & Gas Exploration Co v Bach Servs & Mfg, LLC, ___ Mich App ___, ___; ___ NW2d ___
(2023) (Docket No. 359090); slip op at 5.

        In its motion to set aside the default judgment, defendant asserted that its meritorious
defense was that plaintiff failed to establish the elements of negligence, in particular the element
of causation. In this way defendant asserted that plaintiff cannot prove an element of its claim,
which is the first of the three alternative means of demonstrating a meritorious defense under
Shawl. Defendant supported its motion to set aside the default judgment with a second Grzech
affidavit asserting that plaintiff failed to establish either the breach or causation elements of its
negligence claim. The affidavit does not identify the evidence that supports the assertions;
however, evidence supporting the defendant’s argument was part of the trial court record, namely
the Nederveld report submitted as Exhibit E to plaintiff’s motion for default judgment. The trial
court therefore was already informed of the nature of defendant’s asserted defense sufficient to
permit the trial court to determine whether the defense was meritorious.

                                                 -5-
        As noted, plaintiff’s motion for default judgment attached two reports that ostensibly
demonstrated causation and damage. Attached as an exhibit to the motion is a 2015 inspection
report from Titus Associates, PC, an architecture and structural engineering firm. The report,
prepared by architect Ronald F. Titus, concluded that the steam bombarding the south side of the
building was accelerating the aging of the building. The report stated in part:

       We have found definitively that you do have reason for concern. In short, the
       constant and excessive moisture that this façade is bombarded with does in fact
       have detrimental effects on the following areas: the steel fire escape structure on
       the exterior of the building, the structural steel in the basement (first floor structure),
       and the complete south (alley) façade, including the brick masonry and the steel
       window lintels. The continuous exposure of the south (alley) façade to this constant
       flow of steam/moisture has basically accelerated the aging and therefore
       deterioration of all elements of the building that are exposed to it. This accelerated
       deterioration requires an equally accelerated and onerous maintenance program to
       ensure the integrity of the structure, longevity of the building and the ongoing safety
       of its occupants and neighbors.

        Also attached as an exhibit to the motion for default judgment is the Forensic Engineering
Report prepared by forensic engineers with Nederveld, Inc, apparently prepared for plaintiff’s
insurer based upon an inspection in January 2016. The Nederveld report confirms the deterioration
of certain aspects of the building, such as the fire escape and the brick, but disagrees that there is
evidence that the deterioration was caused by the steam. The Nederveld report notes that the Titus
report attributes the damage to moisture, but does not provide measurable data about the amount
of moisture or about the source of the moisture. The Nederveld report concludes that the
deterioration of the elements of the building in question was caused by environmental moisture,
especially as it drains from the top of the building down the fire escape and the building façade,
but is not attributable to the steam; the report notes that the moisture damage is greater at the top
of the building than at street level, which is subjected to the steam. The report also concludes that
the deterioration of the building is attributable to the age of the building (the oldest portion was
constructed in 1906, and the fire escape was reported to be over 100 years old), and lack of proper
maintenance. The report concludes in relevant part:

       Based on our investigation, it is our opinion that the observed conditions at the
       subject property are the result of long-term, chronic, environmental moisture
       exposure acting in combination with a readily apparent lack of proper and timely
       maintenance. The deterioration of exterior elements at the south side of the
       building and interior structural elements within the basement at the west and north
       have not been caused or exacerbated by exposure to steam, which exhausts at
       ground level. We observed the greatest degree of exterior brick façade deterioration
       to occur near roof level, six stories above the point source of the steam exhaust.

       With regard to the exterior façade and painted steel framed fire escape at the eastern
       portion of the building (Murphy Building), the spalling of the painted brick
       masonry and corrosion of the fire escape is, in our opinion, the result of exposure
       to expected environmental moisture. Chronic and long-term exposure to the
       elements has caused the various forms of deterioration observed. The increased

                                                  -6-
       incidence of spalling near to the roof is indicative of the elevated moisture volume
       from the roof. Similarly, the relatively greater degree of corrosion at the lower
       portion of the fire escape is the result of the increase in environmental moisture
       volume as it accumulates and drains down the building facade and fire escape. The
       deterioration of this steel structure is exacerbated by a lack of proper and timely
       maintenance. Like all structural elements, these reportedly over 100 year old steel
       elements have finite service lifespan which can be extended by proper and timely
       maintenance which includes replacement of building elements when they have
       reached the end of their useful service life.

       The deterioration of the concrete encased steel framing elements, including readily
       apparent and exposed corroded reinforcement steel of the elevated concrete slabs,
       at the western and northern portions of the Telegraph Building’s basement, is, in
       our opinion, the result of chronic long-term environmental moisture exposure
       originating from the sidewalks above at the exterior of the building which are
       supported by this portion of the structure. Moisture staining and moisture trails
       from the sidewalk region above confirm the intrusion of environmental moisture
       from downward migration through the slab. The deterioration of the noted
       structural elements is exacerbated both by the seasonal use of de-icing chemicals
       and salts on the sidewalk above, as well as by an apparent lack of proper and timely
       maintenance. From the presentation of the deteriorated structural elements, it is
       apparent that environmental moisture has been penetrating into this area of the
       structure for many years (decades). Over time this has caused deterioration of the
       concrete-encased steel framing and reinforcing elements, leading to expansion
       (long-term and chronic build-up of corrosion on the steel surfaces) of the material,
       resulting in eventual spalling deterioration of the concrete coverings. The
       widespread nature of this deterioration beneath the exterior sidewalks is not
       indicative of an isolated moisture source such as a steam pipe failure. Heat
       generated by the reported steam pipe failure, measured by the property owner to be
       up to 170°F, is well below the threshold capable of damaging either steel or
       concrete.

        In ruling on the motion for entry of the default judgment, the trial court did not discuss
whether plaintiff had set forth a claim of negligence before holding that plaintiff had presented
adequate support for the amount of damages requested. When later ruling on the motion to set
aside the default judgment, the trial court did not focus upon the merits of defendant’s asserted
defense that plaintiff failed to state a cause of action for negligence, but instead reasoned that by
failing to respond to the complaint, defendant had confessed the elements of duty, breach, and
causation. The trial court thus rejected defendant’s assertion of a meritorious defense on the basis
that defendant’s default precluded defendant from challenging plaintiff’s claim. The trial court
then held that the Grzech affidavit of meritorious defense was insufficient to establish a
meritorious defense:

       Here, evidence was presented that damage to Plaintiff’s building was a proximate
       cause of activity to wit the operation of the steam line that need not go any further
       because, respectfully, those allegations are deemed admitted due to Defendant’s
       failure to timely respond.

                                                -7-
                                                ***

                 I am not convinced by the evidence presented that the information provided
        is sufficient to cause me to consider that this claimed defense rises to the level that
        the law requires in such a motion. If one looks at the law, the meritorious defense
        that is required is significant. Even a close call would favor maintenance of the
        default judgment.

                                                ***

               All right, further in talking about a meritorious defense that the Plaintiff
        cannot prove or the Defendant can disprove an element of the claim is one part of
        a three-part test identifying other ways to support an Affidavit of Meritorious
        Defense.

               Here, I agree with Defendant, the Plaintiff’s claims were supported by
        admissible documents and the testimony taken. The second would be a ground for
        summary disposition exists under MCR 2.116[C](2), (3), (5), (7), and (8), and none
        of those grounds is here relevant. I find that the evidence presented is not
        inadmissible, implicit in the Court’s ruling is that each of the exhibits submitted
        were considered, weighed, and formed the basis of my ruling.

                As it relates to the manifest injustice argument again, here, if I were to set
        aside the default judgment, I would be eliminating that from the court rules as an
        option for a party seeking to proceed forward on its case

        As discussed, factors relevant to establishing a meritorious defense include whether the
affidavit contains evidence that “the plaintiff cannot prove or the defendant can disprove an
element of the claim or a statutory requirement.” Shawl, 280 Mich App at 238. Thus, a defendant
can demonstrate a meritorious defense by showing deficiencies in the plaintiff’s claim. See
Lawrence M. Clarke, Inc, 489 Mich at 283 (In the context of a motion for relief from judgment
under MCR 2.612, “[d]efendants have also noted several fundamental deficiencies in plaintiff’s
fraud claim that constitute a meritorious defense to those claims”).

         In this case, the trial court did not consider in detail defendant’s assertion that plaintiff had
not established the elements of negligence. At the hearing on the motion for entry of default
judgment, the trial court did not focus on the elements of duty, breach, or causation, and instead
focused primarily on damages. The trial court also did not observe that only the Titus report
supported plaintiff’s claim and that the Nederveld report unequivocally stated that steam from
defendant’s steam pipes was not the cause of the deterioration of the building. In later ruling upon
defendant’s motion to set aside the judgment, the trial court stated that it had reviewed all the
exhibits, but again did not discuss that one of the reports submitted supported defendant’s
argument. Instead, the trial court concluded that defendant had conceded that argument by
defaulting. This was an error of law, because the trial court was required by Shawl to consider at
this stage whether defendant had demonstrated that plaintiff could not prove an element of its claim
for damages. The trial court could not simply conclude, as it did here, that defendant had conceded

                                                   -8-
this point by not responding timely to the complaint. Indeed if that were the law, no defendant
could ever have a default judgment set aside.

        In sum, defendant raised a potentially meritorious defense in its motion to set aside the
default judgment.1 The trial court failed adequately to consider the merits of defendant’s asserted
defense because it concluded that defendant waived its right to challenge the sufficiency of the
complaint by defaulting. Because a defaulting defendant has the right to have the trial court
consider its assertion of a meritorious defense despite its default, the trial court erred as a matter
of law, and thereby abused its discretion. See In re Nikooyi, 341 Mich App at 494 (A trial court
abuses its discretion when it errs as a matter of law).

                                    C. MANIFEST INJUSTICE

        Defendant also contends that the default judgment should be set aside to prevent manifest
injustice. Defendant argues that because it set forth a meritorious defense, manifest injustice
would result from permitting the default to stand. However, defendant must establish good cause
even if defendant established a meritorious defense.

        As discussed, good cause and a meritorious defense are distinct requirements and each
must be demonstrated to warrant setting aside a default judgment, Alken-Ziegler, Inc, 461 Mich at
229, although a lesser showing of good cause is required if the moving party demonstrates a strong
meritorious defense. Id. at 233-234. As set forth in Shawl, good cause to set aside a default and
default judgment includes “(1) a substantial defect or irregularity in the proceedings upon which
the default was based, (2) a reasonable excuse for failure to comply with the requirements which
created the default, or (3) some other reason showing that manifest injustice would result from
permitting the default to stand. Shawl, 280 Mich App at 221.

         Manifest injustice occurs “if a default were to be allowed to stand where a party has
satisfied the ‘meritorious defense’ and ‘good cause’ requirements of [MCR 2.603(D)(1)].” Alken-
Ziegler, Inc, 461 Mich at 233. This test appears circular: To demonstrate manifest injustice, the
moving party must demonstrate good cause and a meritorious defense, but good cause to set aside
a default and default judgment may be demonstrated by showing that manifest injustice would
result from permitting the default to stand. However, in Alken-Ziegler, our Supreme Court
explained that despite the frequent recitation of the “manifest injustice” prong of the good cause
test, that prong does not alleviate a defendant from the burden of proving good cause. Id. at 233-
234. The Court stated:

       It is the third factor, “manifest injustice,” that has been problematic. The difficulty
       has arisen because, properly viewed, manifest injustice is not a discrete occurrence
       such as a procedural defect or a tardy filing that can be assessed independently.

1
  Defendant also argues that plaintiff’s claim is barred by the statute of limitation. Because this
argument is raised for the first time on appeal, it is not preserved for review and is deemed waived.
See Walters v Nadell, 481 Mich 377, 387; 751 NW2d 431 (2008). Although this Court has inherent
authority to review an issue not raised in the trial court to prevent a miscarriage of justice, id., we
find it more appropriate that the trial court consider this issue in the first instance on remand.

                                                 -9-
       Rather, manifest injustice is the result that would occur if a default were to be
       allowed to stand where a party has satisfied the “meritorious defense” and “good
       cause” requirements of the court rule. When a party puts forth a meritorious
       defense and then attempts to satisfy “good cause” by showing (1) a procedural
       irregularity or defect, or (2) a reasonable excuse for failure to comply with the
       requirements that created the default, the strength of the defense obviously will
       affect the “good cause” showing that is necessary. In other words, if a party states
       a meritorious defense that would be absolute if proven, a lesser showing of “good
       cause” will be required than if the defense were weaker, in order to prevent a
       manifest injustice. [Alken-Ziegler, 461 Mich at 231-232.]

       As discussed, in this case defendant has not stated a reason for its failure to respond to the
complaint that alone would be considered to be sufficient good cause. However, when weighed
together with the meritorious defense demonstrated by defendant, the showing of good cause was
arguably adequate to set aside the judgment to avoid manifest injustice.2

        In this case, defendant set forth an arguably meritorious defense; the record suggests that
plaintiff did not, and perhaps cannot, establish that the damage to its building was caused by
defendant. The trial court did not give full credence to defendant’s assertion of a meritorious
defense because it concluded that defendant conceded the allegations of the complaint by
defaulting. We conclude that under these circumstances a lesser showing of good cause is
sufficient and that manifest injustice would arise by allowing the default judgment to stand without
further proceedings before the trial court to permit plaintiff to demonstrate the merits of its
complaint, to permit defendant to establish the merits of its defense, and to permit the trial court
an opportunity to decide the merits of the parties’ arguments.

                                          D. DAMAGES

       Defendant also contends that the trial court abused its discretion by awarding the damages
sought because plaintiff failed to provide evidentiary support. We agree.

        We review for clear error the trial court’s determination regarding the amount of damages
awarded. Jackson, 342 Mich App at 24. Clear error exists when no evidence supports a finding,
or if the reviewing court is left with a firm and definite conviction that the trial court made a
mistake. King v Michigan State Police Dep’t, 303 Mich App 162, 185; 841 NW2d 914 (2013).

2
  Our Supreme Court in Alken-Ziegler also observed that although MCR 2.603(A) provides that a
motion to set aside a default judgment is granted only if the moving party establishes good cause
and a meritorious defense, MCR 2.603(D)(3) provides that “[i]n addition, the court may set aside
a default and a default judgment in accordance with MCR 2.612,” which governs motions for relief
from judgment. Although MCR 2.603(D)(3) “should not be read to obliterate the requirements of
MCR 2.603(D)(1), trial courts still have discretion to grant relief under MCR 2.603(D)(3) to
prevent manifest injustice.” Alken-Ziegler, 461 Mich at 234 n 7; see also Tolas Oil & Gas, ___
Mich App at ___; slip op at 5.

                                                -10-
        A default judgment is not an admission of the amount of damages, which a defaulting
defendant may dispute. Epps, 498 Mich at 554. In this case, the trial court awarded plaintiff
damages in the amount of $488,595. In support of its motion for default judgment, plaintiff
attached invoices that provided estimates for alleged expenses to repair the building totaling
approximately $278,938. Of that amount, it is unclear what the invoices represent or whether they
are justified. For some items for which damages were sought, there is no documentation or
testimony that links the amounts requested with work necessitated by the alleged steam damage.
The testimony presented at the hearing on the motion largely did not address the amounts sought
as damages. Because the evidence does not support the amount of damages awarded, the trial
court clearly erred. Remand therefore is warranted to permit plaintiff to provide evidence
supporting the amounts sought and to permit defendant to respond.

        We vacate the trial court’s order denying defendant’s motion to set aside the default
judgment and remand for further proceedings. On remand, the trial court should consider the
merits of defendant’s assertion of a meritorious defense and, should the trial court conclude the
default judgment should still not be set aside, to consider whether plaintiff adequately supported
its claim for damages.

                                                            /s/ Michael F. Gadola
                                                            /s/ Mark J. Cavanagh

                                              -11-