ROBERT P THOMAS V GEORGE JEROME & CO
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STATE OF MICHIGAN
COURT OF APPEALS
ROBERT P. THOMAS,
UNPUBLISHED
May 21, 2002
Plaintiff-Appellant,
v
GEORGE JEROME & COMPANY, DENNIS J.
CHEGASH, BROOKS WILLIAMSON &
ASSOCIATES INCORPORATED, TOWN
SQUARE ASSOCIATES LLC, SAL-MAR
HOMES INCORPORATED, MCNAMEE
PORTER & SEELEY INCORPORATED, CITY
OF NEW BALTIMORE, ERIC WIEDERHOLD,
ANN BILLOCK, DEPARTMENT OF
ENVIRONMENTAL QUALITY, RICH
POWERS, DAVID HAMILTON, and MICHAEL
B. NURSE,
No. 224259
Macomb Circuit Court
LC No. 99-002331-CE
Defendants-Appellees.
Before: Cooper, P.J., and Cavanagh and Markey, JJ.
PER CURIAM.
Plaintiff appeals by right the trial court’s order dismissing this case because plaintiff
failed to post bonds required as security for costs. We affirm in part, reverse in part, and remand.
Plaintiff argues that the trial court abused its discretion when it set aside the defaults
entered against eight of the defendants: Sal-Mar, Town Square, Chegash, City of New Baltimore,
Wiederhold, Billock, Jerome & Company, and McNamee Porter & Seeley.1 Plaintiff asserts that
defendants did not present the trial court with good cause and an affidavit of a meritorious
defense. We agree. The trial court abused its discretion in setting aside these defaults because it
did not follow MCR 2.603(D), the court rule that sets forth the proper procedure for setting aside
defaults. We reverse and remand on this issue. This Court reviews the trial court’s decision on a
1
We note that the default issue does not pertain to defendants Michigan Department of
Environmental Quality (MDEQ), Hamilton, Powers, Nurse, and Brooks Williamson.
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motion to set aside a default for an abuse of discretion. Kowalski v Fiutowski, 247 Mich App
156, 158; 635 NW2d 502 (2001).
MCR 2.603(D) states as follows:
(1) 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.
(2) Except as provided in MCR 2.612, if personal service was made on the party
against whom the default was taken, the default, and default judgment if one has
been entered, may only be set aside if the motion is filed
(a) before entry of judgment, or
(b) if judgment has been entered, within 21 days after the default was
entered.
(3) In addition, the court may set aside an entry of default and a judgment by
default in accordance with MCR 2.612.
(4) An order setting aside the default must be conditioned on the party against
whom the default was taken paying the taxable costs incurred by the other party in
reliance on the default, except as prescribed in MCR 2.625(D). The order may
also impose other conditions the court deems proper, including a reasonable
attorney fee.
Generally, the law favors the determination of claims on the merits. Alken-Ziegler, Inc v
Waterbury Headers Corp, 461 Mich 219, 229; 600 NW2d 638 (1999). However, “the policy of
this state is generally against setting aside defaults and default judgments that have been properly
entered.” Id. As the court rule explains, a party must demonstrate good cause and file an
affidavit of a meritorious defense. MCR 2.603(D)(1); Alken-Ziegler, supra. Good cause can be
demonstrated by showing a “substantial irregularity or defect in the proceeding upon which the
default is based” or “a reasonable excuse for failure to comply with the requirements that created
the default.” Alken-Ziegler, supra at 233. Our Supreme Court, however, has clarified that
manifest injustice is not a third factor that can be used to satisfy the good cause requirement. Id.
Instead, manifest injustice is the “result that would occur if a default were allowed to stand
where a party has satisfied the ‘meritorious defense’ and ‘good cause’ requirements of the court
rule.” Id. Further, our Supreme Court explained that “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 manifest injustice.” Id. at 233-234.
In this case, defendants Town Square, Sal-Mar, George Jerome & Company, Chegash,
City of New Baltimore, Wiederhold, Billock, and McNamee Porter & Seeley were in default on
August 10, 1999 after they failed to answer plaintiff’s first amended complaint. On August 23,
1999, defendants Town Square, Sal-Mar, George Jerome & Company, and Chegash moved to set
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aside the default, and defendants City of New Baltimore, Billock, and Wiederhold joined in the
motion by filing a “joinder and concurrence” on August 24, 1999.
We conclude that the trial court abused its discretion when it set aside the defaults
entered against these defendants. First, at the hearing, it appears that defendants and the trial
court agreed that the defaults were properly entered. Consequently, these defendants cannot
demonstrate good cause by showing a substantial defect in the proceeding where the default was
entered. Second, defendants also failed to demonstrate good cause by providing a reasonable
excuse for their failure to comply. Defendants Town Square, Sal-Mar, George Jerome &
Company, and Chegash argued that their attorney had traveled to Florida because of a family
member’s death and that this was good cause. However, the trial court properly rejected this
argument once plaintiff pointed out that the answer was due several days before their attorney
left. Further, defendants City of New Baltimore, Wiederhold, and Billock made no attempt to
demonstrate good cause at all. Yet, the trial court still found good cause and set aside the
default. This was an abuse of discretion. Moreover, although the trial court’s sole basis for
finding good cause was a pending motion, the trial court recognized that the pending motion was
a motion for summary disposition filed by defendant Brooks Williamson, a defendant that had
not been found in default. Thus, we do not agree with the trial court that the defaulted
defendants could demonstrate good cause because they were waiting for the outcome of this
motion. Third, defendants City of New Baltimore, Billock, and Wiederhold did not file an
affidavit of a meritorious defense. The court rule plainly requires that such an affidavit be filed
by the moving party before a default is set aside.2 MCR 2.603(D). The court rule also requires
that any order setting aside a default must be conditioned on the party against whom the default
was taken paying the taxable costs of the party taking the default. MCR 2.603(D)(4). The trial
court here also failed to follow this portion of the court rule. Therefore, the defaults entered
against these defendants were improperly set aside. With respect to these defendants that moved
to set aside the default, we reverse and remand so that the trial court can conduct a second
hearing and appropriately apply the court rule.
We also conclude that the trial court abused its discretion when it set aside the default
entered against defendant McNamee Porter & Seeley. Defendant McNamee Porter & Seeley did
not move to set aside the default, did not appear at the hearing on the motion to set aside the
defaults, and did not otherwise demonstrate good cause and a meritorious defense. Thus,
because defendant McNamee Porter & Seeley failed to meet any of the requirements of the court
rule, the trial court abused its discretion when it set aside the default. We reverse the trial court’s
order setting aside the default with respect to McNamee Porter & Seeley.
Plaintiff argues that the trial court abused its discretion when it relied on MCR 2.109(A)
rather than MCL 324.1702 in ordering him to post a bond for security for costs. We disagree.
This Court reviews the trial court’s decision to impose a bond as security for costs for an abuse
of discretion. Farleigh v Amalgamated Transit Union, Local 251, 199 Mich App 631, 633; 502
NW2d 371 (1993). Further, interpretation and application of a statute involves a question of law
that this Court reviews de novo. People v Webb, 458 Mich 265, 274; 580 NW2d 884 (1998).
2
We note that defendants Town Square, Sal-Mar, Chegash, and Jerome & Company filed an
affidavit of meritorious defense.
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MCR 2.109(A) provides in pertinent part:
On motion of a party against whom a claim has been asserted in a civil action, if it
appears reasonable and proper, the court may order the opposing party to file with
the court clerk a bond with surety as required by the court in an amount sufficient
to cover all costs and other recoverable expenses that may be awarded by the trial
court, or, if the claiming party appeals, by the trial and appellate courts. The court
shall determine the amount in its discretion. MCR 3.604(E) and (F) govern
objections to the surety.
MCL 324.1702 provides:
If the court has reasonable grounds to doubt the solvency of the plaintiff or the
plaintiff’s ability to pay any cost or judgment that might be rendered against him
or her in an action brought under this part, the court may order the plaintiff to post
a surety bond or cash in an amount of not more than $500.00.
First, it is necessary to decide if the court rule and statute directly conflict. “To determine
whether there is a real conflict between a statute and a court rule, both are read according to their
plain meaning.” Staff v Johnson, 242 Mich App 521, 530; 619 NW2d 57 (2000). We conclude
that in respect to this particular fact situation, the statute and court rule directly conflict. MCL
324.1702 restricts the amount of a bond to $500 whereas MCR 2.109 places no restriction on the
amount of the bond. Further, the statute and court rule both address the same situation, the
requirement that plaintiff post a bond as security for costs. Contrary to defendants’ argument,
both MCR 2.109(A) and MCL 324.1702 concerned a plaintiff’s ability to pay costs. MCR
2.109(A) allows a court to order plaintiff to post a bond for costs where it is “reasonable and
proper.”3 MCL 324.1702 also allows a court to require a plaintiff to post a bond for costs when a
court has “reasonable grounds” to question the plaintiff’s ability to pay costs. Thus, the statute
and court rule conflict.
Second, this Court must determine whether the statute or court rule governs in the instant
case. We conclude that MCR 2.109(A) applies.
The authority to determine the rules of practice and procedure rests exclusively with our
Supreme Court. McDougall v Schanz, 461 Mich 15, 26; 597 NW2d 148 (1999); Staff, supra at
531. Indeed, the Constitution gave our Supreme Court this exclusive power. See Const 1963, art
3, § 2; Const 1963, art 6, § 5; McDougall, supra. Therefore, the Legislature cannot interfere
with our Supreme Court’s powers in this arena. McDougall, supra at 27. Likewise, our
Supreme Court does not have authority to “enact court rules that establish, abrogate, or modify
the substantive law.” Id. To determine whether the court rule or the statute governs in the
instant case, this Court must determine whether the statute addresses a matter of practice and
3
We note that MCR 2.109(B)(1) also addresses a party’s financial ability to furnish a security
bond.
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procedure or substantive law. Staff, supra at 530-531. “The task of determining the line
between practice and procedure and substantive law is a difficult one that must be determined
case by case.” Id. at 531.
In this case, the trial court relied on MCR 1.104 and Omne Financial, Inc v Shacks, Inc,
226 Mich App 397, 404; 573 NW2d 641 (1997), aff’d 460 Mich 305; 596 NW2d 591 (1999), to
conclude that the court rule prevailed over the statute. MCR 1.104 states that “[r]ules of practice
set forth in any statute, if not in conflict with any of these rules, are effective until superseded by
rules adopted by the Supreme Court.” Moreover, in Omne, supra at 399, this Court considered
whether contractual venue provisions are binding. In making this determination, this Court was
required to consider a conflict between a court rule and a statute in matters of venue. Id. at 403404. This Court stated as follows:
We note that venue is not governed solely by statute. The parties’ choice of
venue and motions for change of venue are matters of practice and procedure,
which are primarily treated by court rule. Where there is a conflict between a
court rule and a statute, the court rule should prevail. [Id. at 404.]
The trial court in the present case relied on this language to conclude that the posting of a
security bond was a matter of practice and procedure and ordered plaintiff to post a bond for
$169,000.
Plaintiff, however, argues that to reach this decision, the trial court completely
disregarded our Supreme Court’s decision in McDougall, supra at 15. In McDougall, our
Supreme Court addressed the issue of whether MCL 600.2169, a statute governing the admission
of expert testimony, was unconstitutional because it conflicted with MRE 702 and infringed
upon the Supreme Court’s authority to promulgate rules regarding practice and procedure. Id at
18. Ultimately, our Supreme Court concluded that the statute was an enactment of substantive
law and did not “impermissibly infringe this Court’s constitutional rulemaking authority over
‘practice and procedure.’” Id. at 37. Plaintiff apparently misreads McDougall and argues that it
stands for the proposition that in all instances a statute takes precedence over a court rule.
Unfortunately for plaintiff, the ruling of our Supreme Court was not as broad. Instead, our
Supreme Court emphasized the need for a case-by-case analysis to determine whether the statute
involves a matter of practice and procedure or substantive law to decide whether the statute or
court rule governs. Id. at 36.
Apparently anticipating that this Court would reach that conclusion, plaintiff urges this
Court to conclude that MCL 324.1702 concerns a matter of substantive law. However, we are
inclined to agree with the trial court and conclude that posting a security bond concerns a matter
of practice and procedure. In other words, the statutory provision does not regulate a substantive
area of environmental law. Indeed, were it not for the $500 limit, the statutory provision would
essentially mirror the court rule. In any event, we believe that requiring a party to post a security
bond is a matter of practice and procedure related to court administration; therefore, the court
rule applies. See generally Staff, supra at 531 (statutes of limitation are regarded as procedural
and not substantive).
With respect to the trial court’s order for bond for security for costs, we also reverse and
remand because the trial court did not follow the applicable law when determining the bond. As
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previously stated, MCR 2.109(A) states that a bond may be ordered if it is “reasonable and
proper.” However, MCR 2.109(B) provides that subrule A does not apply in the following
circumstances:
The court may allow a party to proceed without furnishing security for costs if the
party’s pleading states a legitimate claim and the party shows by affidavit that he
or she is financially unable to furnish a security bond.
In In re Surety Bond for Costs, 226 Mich App 321, 331-332; 573 NW2d 300 (1997), this
Court explained the criteria for requiring a plaintiff to post a bond as security:
Security should not be required unless there is a substantial reason for doing so.
A “substantial reason” for requiring security may exist where there is a “tenuous
legal theory of liability,” or where there is good reason to believe that a party’s
allegations are “groundless and unwarranted.” If a party does not file a security
bond as ordered, a court properly may dismiss that party’s claims. [Internal
citations omitted.]
In this case, the trial court ordered plaintiff to post a $169,000 bond as security for
potential costs. Because the court did not follow the applicable law cited above when it ordered
the bond, we remand the bond issue to the trial court for a hearing and the appropriate
application of the law. We also note parenthetically that the bonds the court ordered are high
amounts. We note further that with respect to defendant McNamee, the bond order is reversed
because of the default appropriately entered against McNamee. With respect to the other seven
defendants involved in the default issue, this issue may be moot if the trial court determines on
remand that the defaults were appropriately entered. Regarding the five defendants that were not
defaulted, Brooks Williamson, MDEQ, Powers, Hamilton, and Nurse, the bond order is reversed
and remanded for a determination in accordance with the applicable law.
Plaintiff argues that his FOIA claims against defendants City of New Baltimore, Billock,
and Wiederhold should be reinstated. Initially, we note that this issue will also be moot if the
trial court determines on remand that the defaults were appropriately entered against these
defendants. However, to provide guidance to the trial court in case it finds that the defaults
should be set aside, we offer the following. We conclude that the trial court abused its discretion
in dismissing plaintiff’s FOIA claims because plaintiff had failed to post a security bond as to
these three defendants. As previously stated, the trial court cannot order plaintiff to post a
security bond unless it has a substantial reason. In re Surety, supra at 331-332. A substantial
reason can be demonstrated if plaintiff relies on a tenuous theory of liability or if plaintiff’s
allegations are groundless. Id. In this case, the trial court ordered defendants City of New
Baltimore, Wiederhold, and Billock to produce the information that plaintiff had requested.
Therefore, plaintiff’s FOIA claims are not groundless or based on a tenuous legal theory, and the
plaintiff’s FOIA claims should be reinstated. To the extent that plaintiff has alleged other
theories of liability against these defendants that the trial court may determine upon remand to be
tenuous or groundless, the trial court may order a bond as security for costs after it follows the
applicable law regarding security bonds.
Plaintiff also argues that the trial court abused its discretion when it granted defendants’
motions to add affirmative defenses rather than granting plaintiff’s motion for summary
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disposition. With respect to plaintiff’s summary disposition motion, we disagree. This Court
reviews a trial court’s decision on a motion for summary disposition de novo. Village of
Dimondale v Grable, 240 Mich App 553, 563; 618 NW2d 23 (2000).
In this case, plaintiff moved for summary disposition against all defendants under MCR
2.116(C)(9). However, the trial court only ruled on the motion for summary disposition brought
against defendant Brooks Williamson because defendant withdrew the remaining motions after
the trial court’s decision on the first motion. Therefore, we only address the motion for summary
disposition brought against defendant Brooks Williamson.
The trial court denied plaintiff’s motion for summary disposition against defendant
Brooks Williamson after reasoning that the motion was premature because discovery was
incomplete and further factual development was necessary. The trial court, however, informed
plaintiff that the motion was denied without prejudice, and plaintiff could move for summary
disposition again once discovery was completed.
We agree with plaintiff that the trial court’s reasons for denying the motion for summary
disposition were incorrect. The court rule clearly states that only the pleadings may be
considered when ruling on such a motion. MCR 2.116(G)(5). Therefore, the fact that discovery
was incomplete is an inappropriate reason to deny summary disposition under this ground.
Nevertheless, we conclude that summary disposition was still properly denied. Plaintiff
alleged causes of action against defendant Brooks Williamson under the natural resources and
environmental protection act (NREPA). Defendant Brooks Williamson filed an answer to the
first amended complaint and either categorically denied plaintiff’s allegations or stated that it
lacked sufficient knowledge to either admit or deny the allegations. Defendant Brooks
Williamson also raised the following as affirmative defenses: plaintiff failed to state a claim
upon which relief may be granted; plaintiff’s claim for injunctive relief fails to establish a
substantial material injury; plaintiff failed to exhaust administrative remedies; plaintiff lacks
standing; plaintiff’s claims are barred by laches, waiver, and unclean hands; and plaintiff’s
claims are barred by the statute of limitations. As our Supreme Court explained in Nasser v Auto
Club Ins Ass’n, 435 Mich 33, 47-48; 457 NW2d 637 (1990), when material allegations contained
in the complaint are categorically denied, summary disposition is improper.
First, as explained above, merely denying liability is itself a valid defense.
The fact that the defense ultimately might be unsuccessful in whole or in part does
not render it invalid for purposes of MCR 2.116(C)(9), nor does the fact that it
ultimately might be found not to create a genuine issue of material fact to be
resolved at trial, thus entitling plaintiff to summary disposition under MCR
2.116(C)(10). [Id. at 48.]
Thus, we conclude that the denial of summary disposition was proper.
Next, plaintiff argues that the trial court abused its discretion when it granted defendants’
motions to add affirmative defenses. Defendants’ sought to add the affirmative defense
recognized by the NREPA. MCL 324.1703. Plaintiff argues that defendants waived this
statutory defense because it was not raised earlier. The trial court’s decision to grant or deny a
motion for leave to amend is reviewed for an abuse of discretion. Frank W Lynch & Co v Flex
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Technologies, Inc, 463 Mich 578, 583; 624 NW2d 180 (2001). With respect to defendant
McNamee, which was appropriately defaulted in this matter, the motion should not have been
granted, and that portion of the order granting McNamee’s motion to add affirmative defenses is
reversed. With respect to the other seven defaulted defendants, this issue is moot. If the defaults
were appropriately entered against these defendants, then the motion should not have been
granted. If the defaults are set aside upon remand, then defendants will have an opportunity to
file affirmative defenses in their answers to plaintiff’s first amended complaint in accordance
with the court rules. With respect to the five defendants that were not defaulted, Brooks
Williamson, MDEQ, Nurse, Powers, and Hamilton, we conclude that the trial court did not abuse
its discretion in allowing these defendants to add the affirmative defense contained in the
NREPA.
In this case, defendants sought to add the affirmative defense contained in the NREPA.
This affirmative defense states that “there is no feasible and prudent alternative to defendant’s
conduct and that his or her conduct is consistent with the promotion of the public health, safety,
and welfare in light of the state’s paramount concern for the protection of its natural resources
from pollution, impairment, or destruction.” MCL 324.1703(1). The trial court granted
defendants’ requests because there was no prejudice to plaintiff as plaintiff was aware of the
statute. Thus, the trial court gave defendants seven days to file amended affirmative defenses.
We agree with the trial court’s conclusion. There was no evidence of bad faith in
defendants’ delays in raising this affirmative defense. Furthermore, we agree with the trial
court’s conclusion that plaintiff would not be prejudiced if the trial court granted the requests for
amendment. There is no evidence that plaintiff would be denied a fair trial. Discovery was
incomplete, there was no impending trial date, and there was no evidence that defendants’ delays
in raising this defense resulted in the loss of valuable witnesses or evidence. Finally, plaintiff
was not surprised by this affirmative defense because it is provided for by the NREPA, the act
plaintiff relied on to state a cause of action against defendants. Thus, given that leave should be
freely granted when justice requires, we conclude that the trial court did not abuse its discretion
in allowing these nondefaulted defendants to add the affirmative defense.
Plaintiff argues that the trial judge abused his discretion when he refused to disqualify
himself from hearing this case. Plaintiff further claims that this case should be reassigned to a
different judge on remand. We disagree. This Court reviews the denial of a motion for
disqualification for an abuse of discretion, People v Bennett, 241 Mich App 511, 513; 616 NW2d
703 (2000), while reviewing the application of the facts to the law de novo, Cain v Dep’t of
Corrections, 451 Mich 470, 503 n 38; 548 NW2d 210 (1996).
MCR 2.003(B) governs the disqualification of a trial judge and lists several grounds that
disqualify a judge from hearing a case including that “[t]he judge is personally biased or
prejudiced for or against a party or attorney.” MCR 2.003(B)(1). The challenging party bears
the burden of demonstrating that disqualification is warranted. Michigan Ass’n of Police v City
of Pontiac, 177 Mich App 752, 757; 442 NW2d 773 (1989). In addition, the challenging party
must overcome the presumption of impartiality. Cain, supra at 497.
After reviewing plaintiff’s arguments and the record, we conclude that the trial court
properly denied the motion for disqualification, and that it need not be assigned to a different
judge upon remand. There is no evidence to substantiate plaintiff’s claim that the trial court was
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biased or prejudiced against plaintiff. Disqualification based on bias or prejudice cannot be
established merely by repeated rulings against a litigant even if the rulings were erroneous.
Wayne Co Prosecutor v Parole Bd, 210 Mich App 148, 155; 532 NW2d 899 (1995).
We affirm in part, reverse in part, and remand for further proceedings consistent with this
opinion. We do not retain jurisdiction.
/s/ Jessica R. Cooper
/s/ Mark J. Cavanagh
/s/ Jane E. Markey
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