STATE FARM MUTUAL AUTOMOBILE INS CO V SYLVESTER HUDSON
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STATE OF MICHIGAN
COURT OF APPEALS
STATE FARM MUTUAL AUTOMOBILE
INSURANCE CO.,
UNPUBLISHED
October 7, 2008
Plaintiff-Appellee,
v
No. 277300
Wayne Circuit Court
LC No. 06-612812-AV
SYLVESTER HUDSON,
Defendant-Appellant.
Before: Murray, P.J., and Whitbeck and Talbot, JJ.
PER CURIAM.
Defendant appeals by leave granted from a circuit court order affirming the district
court’s denial of his motion to set aside default and default judgment. We affirm.
Defendant argues that he has demonstrated good cause and a meritorious defense to
justify setting aside his default and default judgment and the lower courts erred in concluding
otherwise. We disagree.
In order to set aside a default, a court must determine that a party has shown both good
cause and a meritorious defense. MCR 2.603(D)(1); Alken-Ziegler v Waterbury Headers Corp,
461 Mich 219, 229, 234; 600 NW2d 638 (1999). Good cause may be established by showing, “a
substantial procedural irregularity or defect, a reasonable excuse for failure to comply with the
requirements that created the default, or some other reason why a manifest injustice would result
if the default judgment were not set aside.” Alken-Ziegler, supra at 229-230. A meritorious
defense must be established separately from the procedural irregularity underlying the “good
cause” element. Id. at 230. Further, the meritorious defense must be established by an affidavit
of facts. MCR 2.603(D)(1). Finally, “[t]he policy of this state is generally against setting aside
defaults and default judgments that have been properly entered.” Alken-Ziegler, supra at 229.
Defendant first argues that there is good cause to set aside the default because he was not
properly served with the summons and complaint. Because this issue is preserved, we review the
lower court’s ruling for an abuse of discretion. Alken-Ziegler, supra at 227. “The construction
and interpretation of court rules is a question of law that [this Court] review[s] de novo.”
Barclay v Crown Bldg & Dev, 241 Mich App 639, 642; 617 NW2d 373 (2000).
MCR 2.105(I)(1) provides:
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On a showing that service of process cannot reasonably be made as provided by
this rule, the court may by order permit service of process to be made in any other
manner reasonably calculated to give the defendant actual notice of the
proceedings and an opportunity to be heard.
Because plaintiff failed initially to locate and serve defendant, the district court ordered
alternative service of process by posting, pursuant to MCR 2.106(E). Defendant contends
plaintiff failed to demonstrate, in accordance with MCR 2.105(I)(1) “that service of process
cannot reasonably be made.” As such, defendant argues that the district court should not have
permitted alternative service.
On appeal in the circuit court, the judge queried plaintiff’s counsel regarding its efforts to
procure service on defendant. Plaintiff indicated it initially attempted to serve defendant by mail
at the address contained in the police report for defendant’s brother as the driver of the vehicle
involved and on the address designated on the copy of the registration for the vehicle that was
available. When service was not obtained, plaintiff sought alternative service, pursuant to MCR
2.105(I), at the home of defendant’s brother. Plaintiff asserted this address was used because
defendant’s brother was also a party to the action and based on the belief that service at this
address was “reasonably calculated to give the defendant actual notice . . . and an opportunity to
be heard.” MCR 2.105(I)(1). Although the circuit court opined that “plaintiff could have done
more to ascertain the true address of [defendant],” the court ruled that it could not “find and do
not find that it was improper for the district court to allow substituted service in the manner and
form that service was effectuated.” Further, service was made to a relative of defendant’s who
was also involved in the litigation. Defendant has not demonstrated why this would not
constitute reasonable alternate service. As the district court noted, “[I]t makes no sense to this
court why [the brother] would not say anything to [defendant] at all.” Thus, defendant’s
argument regarding defective service is without merit.
Defendant next argues that grounds exist for relief from judgment based on good cause
and the presence of a meritorious defense. To constitute good cause, the grounds cited by
defendant to set aside the judgment must demonstrate the existence of “(1) a substantial
procedural irregularity or defect, (2) a reasonable excuse for failure to comply with the
requirements that created the default, or (3) some other reason showing that a manifest injustice
would result from permitting the default to stand.” Alken-Ziegler, supra at 230. Because
defendant did not properly preserve this issue, we review for plain error. Kern v Blethen-Coluni,
240 Mich App 333, 336; 612 NW2d 838 (2000).
Defendant first argues that “[m]istake, inadvertence, surprise, or excusable neglect”
provide good cause because the judgment against him would have been dealt with as part of his
intervening bankruptcy had defendant known of it. The possibility of bankruptcy does not
evidence a procedural irregularity or provide an excuse for defendant’s failure to comply with
the requirements that created the default. Alken-Ziegler, supra at 230.
“‘[M]anifest injustice’ is not a discrete occurrence such as a procedural defect or a tardy
filing that can be assessed independently. 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.” Alken-Ziegler, supra at 233. We do not find that
the possibility that defendant could have erased the debt incurred by this judgment constitutes
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manifest injustice. Defendant does not actually claim that the outcome of the lawsuit was
incorrect; rather, he argues that if he had known about it earlier, he could have avoided the debt
through bankruptcy. The only question in the instant appeal is whether the failure to set aside the
default itself was appropriate, not the subsequent difficulties encountered by defendant because
of the judgment. It was not plain error for the lower courts to decline to set aside the default and
default judgment because defendant would have been better positioned to deal with the judgment
debt if he had participated in the case at an earlier time.
Defendant next argues that plaintiff committed intrinsic fraud because it knew that it did
not have defendant’s personal address but served him at another address anyway. Defendant has
not presented any evidence that plaintiff acted in bad faith. Plaintiff filed and attempted to serve
defendant and, when it was initially unsuccessful, refiled in district court and sought permission
to pursue alternate means of service. Thus, there is nothing to indicate that plaintiff was
fraudulently trying to obtain a default and default judgment against defendant. Alternatively,
defendant argues that plaintiff committed fraud by knowingly filing after the statute of
limitations period.
Defendant asserts that plaintiff brought its case after the three-year statute of limitations
period prescribed for this case. MCL 600.5805(10). Plaintiff originally filed its case with the
circuit court within the period but the case was dismissed without prejudice for failure to locate
and serve defendant. Plaintiff then filed its case with the district court more than three-years
after the accident. The lower courts ruled that the limitations period was tolled during the time
plaintiff’s case was pending in circuit court, in accordance with the rule in effect at that time as
set forth in Buscaino v Rhodes, 385 Mich 474; 189 NW2d 202 (1971)1, which tolled the
limitations period upon mere filing. In Gladych v New Family Homes, Inc, 468 Mich 594; 664
NW2d 705 (2003), the Court overruled Buscaino and determined that both filing and service
were necessary to toll the statute of limitations. However, Gladych was given prospective
application with retroactive application only to cases in which this specific issue had been raised
and preserved at the time the rule was announced. Gladych, supra at 607-608. Because
defendant did not raise this issue in the district court until 2005, two years after Gladych, the
altered rule regarding tolling is not applicable and defendant’s assertions pertaining to violation
of the statute of limitations must fail.
Finally, defendant argues that he has established the meritorious defense that he was not
an owner of the vehicle at the time of the accident, thus relieving him from liability. Plaintiff
presented an expired vehicle registration containing defendant’s name as one of the owners of
the car. Defendant argues that he transferred title in the vehicle prior to the accident. Although
defendant was given the opportunity to provide evidence regarding transfer of ownership, the
only evidence he presented was a self-serving affidavit stating that he transferred title in the car
without any other form of documentation for verification. We review a lower court’s findings of
fact for clear error. MCR 2.613(C); Smith v Smith, 278 Mich App 198, 204; 748 NW2d 258
(2008). It was not clear error for the lower courts to conclude that defendant owned the car at the
1
Overruled by Gladych v New Family Homes, Inc, 468 Mich 594; 664 NW2d 705 (2003).
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time of the accident because the only available registration information for the car listed
defendant as an owner. Thus, defendant has also not demonstrated a meritorious defense.
Affirmed.
/s/ Christopher M. Murray
/s/ William C. Whitbeck
/s/ Michael J. Talbot
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