Court Opinion

ID: 4297368
Source: CourtListenerOpinion
Date Created: 2018-07-25 09:07:35.215725+00
Date Added: 2024-06-11T14:41:19.989603
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

MEIR HAR-TZION,                                                        UNPUBLISHED
                                                                       July 24, 2018
               Plaintiff-Appellee/Cross-Appellant,

v                                                                      No. 336711
                                                                       Genesee Circuit Court
ZEEV SAGI,                                                             LC No. 13-100561-CZ

               Defendant-Appellant/Cross-
               Appellee,
and

ASAF, LLC,

               Defendant.

Before: BORRELLO, P.J., and M. J. KELLY and BOONSTRA, JJ.

PER CURIAM.

       Defendant-appellant/cross-appellee, Zeev Sagi, appeals as of right the trial court’s
decision to enter a default judgment against him in favor of plaintiff-appellee/cross-appellant,
Meir Har-Tzion. Because there are no errors warranting reversal, we affirm.

                                         I. BASIC FACTS

       Har-Tzion filed a complaint against Sagi and defendant, ASAF, LLC, alleging that he had
provided them with approximately $50,000 to purchase real property in Fenton, Michigan in
exchange for a 50% interest in ASAF. He contended that, despite remitting the money to Sagi,
he never received the ownership interest in ASAF, nor did he receive a promised refund of the
money he remitted.

         The procedural history of this case is pertinent. ASAF was defaulted on July 8, 2013
after Sagi improperly filed an answer on its behalf. The trial court set aside this default and the
ensuing default judgment, thereby permitting ASAF to file an answer to the complaint. The
initial notice of hearing for a non-jury trial in this matter was issued on August 8, 2014, for a trial
date of December 16, 2014. However, on November 13, 2014, Sagi and ASAF’s lawyer sought
and obtained permission to withdraw. The December 2014 trial date was adjourned, presumably
to permit Sagi sufficient time to retain a new lawyer. A new proof of service and notice to
appear for a non-jury trial was sent on January 22, 2015, for a trial date of April 7, 2015. A
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separate notice to appear was also issued on January 22, 2015, indicating at the bottom of the
page: “FAILURE OF THE PLAINTIFF/DEFENDANT TO APPEAR may result in a dismissal
of the case or cause a default judgment to be entered.” Sagi submitted a physician’s
recommendation suggesting his health would not permit his appearance on the scheduled date.
A third non-jury trial notice to appear was issued on April 27, 2015, identifying a trial date of
September 9, 2015, and indicating to the parties: “YOU ARE DIRECTED TO APPEAR” at the
identified courthouse and courtroom for the initiation of a non-jury trial. Sagi did not assert that
he had failed to receive any of these mailings from the trial court. Yet, on the date set for trial,
Sagi did not appear, he did not have a lawyer present on his behalf, and there was no one present
to represent ASAF.

        When Sagi failed to appear for trial, Har-Tzion sought a default, which the court granted.
The trial court held a hearing on damages before concluding that Har-Tzion was entitled to treble
damages under MCL 600.2919a(1) (authorizing treble damages for statutory conversion), and a
default judgment was entered against Sagi. Har-Tzion voluntarily dismissed the claims against
ASAF, and no judgment was entered against it.

        In January 2016, Sagi moved to set aside the default judgment for a variety of reasons,
including that he had not been ordered to appear for trial so a default could not be entered, he did
not have appropriate notice of the entry of the default judgment, the trial court failed to properly
articulate the basis for its findings, the trial court improperly pierced the corporate veil by
ordering Sagi to personally pay claims against ASAF, and that the claim for statutory conversion
and treble damages was improper. In March 2016, the court entered an order granting relief
from judgment as to the issue of statutory conversion and treble damages. And, eventually, the
court entered a default judgment against Sagi, ordering him to pay Har-Tzion $49,750 in
damages, $1,254.18 in taxable costs, and $16,583.33 in attorney fees under MCR 2.403(O).

                                           II. DEFAULT

                                  A. STANDARD OF REVIEW

        On appeal, Sagi challenges the trial court’s entry of a default against him for his failure to
appear for trial. Sagi also challenges the trial court’s decision to hold a hearing on damages
immediately after entering the default, and he contends that the trial court failed to sufficiently
articulate the basis for its ruling premised on statutory conversion. “A trial court’s decision
regarding a motion to set aside a default judgment is reviewed for an abuse of discretion. An
abuse of discretion occurs when the court’s decision results in an outcome that falls outside the
range of principled outcomes.” Epps v 4 Quarters Restoration LLC, 498 Mich. 518, 528; 872
NW2d 412 (2015) (citations omitted).

                                          B. ANALYSIS

      Sagi argues that the default was not proper because there was no court order or subpoena
compelling his appearance. However, as explained by our Supreme Court in Maldonado v Ford
Motor Co, 476 Mich. 372, 376; 719 NW2d 809 (2006):

       trial courts possess the inherent authority to sanction litigants and their counsel,
       including the power to dismiss an action. This power is not governed so much by
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       rule or statute, but by the control necessarily vested in courts to manage their own
       affairs so as to achieve the orderly and expeditious disposition of cases.

               We further acknowledge that our trial courts also have express authority to
       direct and control the proceedings before them. MCL 600.611 provides that
       “[c]ircuit courts have jurisdiction and power to make any order proper to fully
       effectuate the circuit courts’ jurisdiction and judgments.” Additionally, MCR
       2.504(B)(1) provides that “[i]f the plaintiff fails to comply with these rules or a
       court order, a defendant may move for dismissal of an action or a claim against
       that defendant.” [Citations omitted.]

Further, this Court has held that under MCR 2.603, “a party is subject to a default judgment if
the party fails to appear at trial[.]” Marshall Lasser, PC v George, 252 Mich. App. 104, 108; 651
NW2d 158 (2002). Similarly, in Vincencio v Ramirez, 211 Mich. App. 501, 506; 536 NW2d 280
(1995), this Court has recognized that “[a] court, in its discretion, may dismiss a case with
prejudice or enter a default judgment when a party or counsel fails to appear at a duly scheduled
trial.” Thus, although “[d]ismissal is a drastic step that should be taken cautiously,” id., it is a
permissible sanction that may be entered for a party’s failure to appear at a duly scheduled trial.
Accordingly, because Sagi failed to appear for a duly schedule trial, the court had discretion to
enter a default judgment against him. Maldonado, 476 Mich. at 376; Marshall Lasser, PC, 252
Mich. App. at 108; Vincencio, 211 Mich. App. at 506.

        Next, Sagi contends that the trial court erred by immediately addressing the issue of
damages after entering the default. Sagi asserts that notice had to be provided to him before the
trial court could determine damages. We disagree.

        MCR 2.603(B) addresses what notice must be provided to a defaulted party when a
default judgment is sought. Relevant to this appeal, MCR 2.603(B)(1)(d) provides that “[i]f the
default is entered for failure to appear for a scheduled trial, notice under this subrule is not
required.” Here, as the default was entered following Sagi’s failure to appear for trial, no notice
was required under the court rules.

        Sagi next argues that the trial court violated MCR 2.517 by failing to properly articulate
the basis for its findings related to statutory conversion. MCR 2.517(A) provides in part:

               (1) In actions tried on the facts without a jury or with an advisory jury, the
       court shall find the facts specially, state separately its conclusions of law, and
       direct entry of the appropriate judgment.

              (2) Brief, definite, and pertinent findings and conclusions on the contested
       matters are sufficient, without overelaboration of detail or particularization of
       facts.

              (3) The court may state the findings and conclusions on the record or
       include them in a written opinion.

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              (4) Findings of fact and conclusions of law are unnecessary in decisions
       on motions unless findings are required by a particular rule. See, e.g., MCR
       2.504(B).

Assuming arguendo that the trial court did not comply with this court rule when it decided to
award treble damages on the basis of statutory conversion, we could not grant relief on this basis
because the issue has been rendered moot by the trial court’s order setting aside the award of
treble damages for statutory conversion. “As a general rule, an appellate court will not decide
moot issues. A case is moot when it presents only abstract questions of law that do not rest upon
existing facts or rights. An issue is deemed moot when an event occurs that renders it impossible
for a reviewing court to grant relief.” B P 7 v Bureau of State Lottery, 231 Mich. App. 356, 359;
586 NW2d 117 (1998).

        Sagi also argues that any award for damages should have been entered against ASAF, not
Sagi, because the trial testimony reflected that ASAF was the entity that received the money
from Har-Tzion. Sagi contends that the facts show that if there was a breach of contract, it was
ASAF, not Sagi, who breached the contract. He argues that, as a result, the trial court judgment
against him improperly pierced the corporate veil of ASAF in order to make him personally
liable for the LLC’s debts.

        However, “it is an established principle that ‘a default settles the question of liability as to
well-pleaded allegations and precludes the defaulting party from litigating that issue.’ ”
Kalamazoo Oil Co v Boerman, 242 Mich. App. 75, 79; 618 NW2d 66 (2000) (citation omitted).
“In other words, where a trial court has entered a default judgment against a defendant, the
defendant’s liability is admitted and the defendant is estopped from litigating issues of liability.”
Id. In this instance, liability was established only with regard to Sagi and not ASAF. As a result,
the imposition of damages to Sagi and not ASAF was in accordance with the legal principles
governing the default. Stated differently, although Sagi argues that the facts show that he did not
breach the contract, the allegations in the complaint contended that Sagi breached his contract
with Har-Tzion, and, because a default was properly entered against Sagi, he is precluded from
arguing that he has no liability for breach of contract.

        In addition, Sagi’s argument that the trial court improperly pierced ASAF’s corporate veil
is without merit. “The traditional basis for piercing the corporate veil has been to protect a
corporation’s creditors where there is a unity of interest of the stockholders and the corporation
and where the stockholders have used the corporate structure in an attempt to avoid legal
obligations . . . .” RDM Holdings, LTD v Continental Plastics Co, 281 Mich. App. 678, 715; 762
NW2d 529 (2008) (quotation marks and citations omitted). Here, because there is no judgment
against ASAF, there is no need for Har-Tzion to pierce its corporate veil in order to reach Sagi’s
assets.

                                       III. CROSS-APPEAL

                                   A. STANDARD OF REVIEW

        On cross-appeal, Har-Tzion asserts the trial court should not have set aside its holding
finding statutory conversion and the award of treble damages under MCL 600.2919a. This Court

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reviews a trial court’s determination of damages and its factual findings for clear error. Alan
Custom Homes, Inc v Krol, 256 Mich. App. 505, 513; 667 NW2d 379 (2003).

                                         B. ANALYSIS

        The trial court initially awarded treble damages for statutory conversion, but Sagi
challenged that decision. “If the amount of damages is in dispute, a defaulting defendant is
nonetheless entitled to a hearing, at which it may challenge the plaintiff’s alleged damages
amount, if the trial court determines that a hearing is necessary.” Epps, 498 Mich. at 555. The
trial court permitted the parties to submit proposed orders on this issue, ultimately accepting the
version proffered by Sagi and setting aside its ruling on treble damages. In doing so, the court
indicated that it believed damages were available under a breach of contract, not a conversion
theory, thereby signifying that it was setting aside the default as it related to statutory
conversion.

       In accordance with MCL 600.2919a:

              (1) A person damaged as a result of either or both of the following may
       recover 3 times the amount of actual damages sustained, plus costs and reasonable
       attorney fees:

              (a) Another person’s stealing or embezzling property or converting
       property to the other person’s own use.

               (b) Another person’s buying, receiving, possessing, concealing, or aiding
       in the concealment of stolen, embezzled, or converted property when the person
       buying, receiving, possessing, concealing, or aiding in the concealment of stolen,
       embezzled, or converted property knew that the property was stolen, embezzled,
       or converted.

             (2) The remedy provided by this section is in addition to any other right or
       remedy the person may have at law or otherwise.

As explained by this Court in Head v Phillips Camper Sales & Rental, Inc, 234 Mich. App. 94,
111-112; 593 NW2d 595 (1999) (citations and quotation marks omitted):

       To support an action for conversion of money, the defendant must have an
       obligation to return the specific money entrusted to his care. The defendant must
       have obtained the money without the owner’s consent to the creation of a debtor
       and creditor relationship.

        Based on Har-Tzion’s own statements, his voluntary remittance of monies to Sagi and the
title company to provide the down payment for the purchase of the property in Fenton did not
comprise the statutory conversion of these payments. In exchange for the monies, Har-Tzion
asserted he was to be afforded an ownership interest in ASAF, which Sagi disputes. Regardless,
the monies were voluntarily remitted and the designated property was purchased. Sagi, however,
failed to subsequently provide Har-Tzion with the promised interest in ASAF. Simply because
Har-Tzion allegedly failed to receive the benefit or promised result of his bargain with Sagi does

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not establish a conversion. As a result, the trial court’s determination that the damages were
limited to the amount of monies invested or remitted by Har-Tzion does not constitute reversible
error.

       Affirmed.

                                                           /s/ Stephen L. Borrello
                                                           /s/ Michael J. Kelly
                                                           /s/ Mark T. Boonstra

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