4.11Default and Default Judgments

There is a distinction between entry of default and entry of default judgment: “the former operates as an admission by the defaulting party of issues of liability, but leaves the issues of damages unresolved until entry of judgment. The latter reduces the default to a judgment for money damages.” Dollar Rent-A-Car Sys v Nodel Constr, 172 Mich App 738, 743 (1988) (citations omitted). “A defaulted party retains the right to challenge the amount of damages, but the defaulted party may no longer challenge liability.” Lakeside Retreats, LLC v Camp No Counselors, LLL, 340 Mich App 79, 89 (2022).

A.Default

1.Purpose of Default

“The purpose of the default procedure is to keep the dockets current, to expedite the disposal of causes so as to prevent a dilatory or procrastinating defendant from impeding the plaintiff in the establishment of his claim.” Mason v Marsa, 141 Mich App 38, 41 (1985).

A party may be found in default for either failing to plead or answer, or for improper conduct such as discovery abuses (in which case, default is used as a sanction).¹ Kalamazoo Oil Co v Boerman, 242 Mich App 75, 87 (2000).

2.Entry of Default

MCR 2.603(A)(1) governs entry of default:

“If a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules, the clerk must enter the default of that party if that fact is:

(a) known to the clerk of the court, or

(b) verified in the manner prescribed by MCR 1.109(D)(3) and filed with the court in a request for the default.”

“[A] party must not be defaulted [under MCR 2.603(A)(1)] if the party pleads or, as an alternative to filing a responsive pleading, otherwise defends the action.” Huntington Nat’l Bank v Ristich, 292 Mich App 376, 388 (2011) (defendant failed to “otherwise defend” himself by filing a motion for an evidentiary hearing and stay of the proceedings and was therefore properly defaulted). See also Marposs Corp v Autocam Corp, 183 Mich App 166, 168-170 (1990) (defendant “otherwise defend[ed]” itself under MCR 2.603(A)(1) by filing an application for leave to appeal trial court’s denial of its motion for change of venue and was therefore improperly defaulted). Note that both Huntington Nat’l Bank and Marposs were decided before verification under MCR 1.109(D)(3) was required. See ADM File No 2002-37, effective May 1, 2019.

Notice of entry of the default must be sent to the defaulted party and all parties who have appeared. MCR 2.603(A)(2). If the defaulted party has not appeared, notice of entry of the default must still be given either by personal service, ordinary first-class mail at his or her last known address or place of service, or as the court directs. MCR 2.603(A)(2). The party seeking a default must send the notice and file proof of service and a copy of the notice with the court. MCR 2.603(A)(2)(b).

3.Effect of Entry of Default

Entry of a default does impact:

•The defaulted party’s right to challenge liability. Lakeside Retreats LLC v Camp No Counselors LLC, 340 Mich App 79, 89 (2022). The defaulted party’s right to assert affirmative defenses. Haller v Walczak, 347 Mich 292, 299 (1956). Presumably, this means comparative negligence would not apply to the damages proceedings. However, the trial court has discretion whether to allow evidence of comparative negligence for purposes of a damages hearing in “only those instances where default is utilized as a sanction for discovery abuses.” Kalamazoo Oil Co v Boerman, 242 Mich App 75, 87-88 (2000).

•The right to participate in the adjudication of the property division after a default is entered in an equitable action, such as a divorce. Draggoo v Draggoo, 223 Mich App 415, 427 (1997).

Entry of a default does not impact:

•The defaulted party’s right to challenge the amount of damages. Lakeside Retreats, 340 Mich App at 89 (2022). “[T]herefore, a party is . . . entitled to notice in advance of a default judgment for purposes of challenging the amount of damages.” Id. at ___.The defaulted party’s right to a jury trial on the issue of damages. Zaiter v Riverfront Complex, Ltd, 463 Mich 544, 554 (2001). If the defaulted party preserved the right to a jury trial and if further proceedings are necessary to determine damages, the defaulted party has the right to a jury trial on the issue of damages. Id. at 554. However, with the defaulted party’s consent, the moving party may ask the court to decide the damages issue.² Marshall Lasser, PC v George, 252 Mich App 104, 106 (2002).

•A party’s right to contest its vicarious liability (where that party’s sole source of liability is vicarious) once a default has been entered against a coparty. Rogers v J B Hunt Transp, Inc, 466 Mich 645, 655 (2002).

B.Default Judgments

1.Notice of Request for Judgment

The defaulted party must be given notice of a request for default judgment if:

•the defaulted party has appeared in the action;³

•the judgment seeks relief different in kind or in a greater amount than the pleadings state; or

•the pleadings do not demand a specific amount of damages. MCR 2.603(B)(1)(a)(i)-(iii).

“The purpose of the notice requirement is to apprise the default[ed] party of the possibility of entry of judgment so that he may have an opportunity to participate in any hearing necessary to ascertain the amount of damages or other form of remedy to be granted.” Dollar-Rent-A-Car Sys v Nodel Constr, 172 Mich App 738, 743 (1988). See Section 4.11(B)(2) for more information about the hearing on damages.

“The notice . . . must be served at least 7 days before entry of the requested default judgment.” MCR 2.603(B)(1)(b). This seven-day notice period also applies “to any hearing or trial necessitated by the request for judgment when that hearing occurs on a date preceding the actual entry of the default judgment.” Dollar-Rent-A-Car Sys, 172 Mich App at 743-744. Notice must be pursuant o MCR 2.107 if the defaulted party has appeared. MCR 2.603(B)(1)(c). If the defaulted party has not appeared, notice may be by personal service, ordinary first-class mail at the defaulted party’s last known address or the place of service, or as the court directs. Id.

A pleading’s caption must identify the document. MCR 1.109(D)(1)(b)(iv). Where the pleading’s caption does not identify “that the pleading contain[s] or [is] intended to be notice of plaintiff’s intent to request entry of a default judgment,” the document “cannot be considered as notice that is consistent with either the letter or the spirit of [MCR 1.109(D)(1)(b)(iv)].”⁴ Brooks Williamson and Assoc, Inc v Mayflower Constr Co, 308 Mich App 18, 28 (2014) (rejecting the claim that timely notice was provided in the text of a case evaluation summary filed by the plaintiff with the mediation tribunal and noting that the Court’s “construction of [MCR 1.109(D)(1)(b)(iv)] prevents a party from concealing notice in the text of a document that might not be given close or immediate attention prior to the entry of a default judgment and preserves the fair opportunity for a defendant to contest damages where the defendant might otherwise not dispute liability”).

2.Hearings on Damages

“[A] default is merely an admission of liability and not an admission regarding the proper amount of damages.” Epps v 4 Quarters Restoration LLC, 498 Mich 518, 554 (2015). Thus, “[i]f the amount of damages is in dispute, a defaulting defendant is nonetheless entitled to a hearing, at which [the defendant] may challenge the plaintiff’s alleged damages amount, if the trial court determines that a hearing is necessary.” Id. at 555. The defaulted party has a right to participate in the proceedings on damages. American Central Corp v Stevens Van Lines, Inc, 103 Mich App 507, 513 (1981).

3.Entry of Default Judgment

By clerk. The clerk may enter the default judgment for the amount requested if the amount that the plaintiff is seeking is made by written request, verified under MCR 1.109(D)(3), and if:

•the plaintiff’s claim is for a sum certain or amount that can be certain by computation;

•the defendant was defaulted for failure to appear;

•the defendant is not an infant or incompetent person; and

•the amount of damages is less than or equal to the amount stated in the complaint. MCR 2.603(B)(2).

By court. The court may enter default judgments in all other cases. MCR 2.603(B)(3). The party seeking the default judgment must file a motion requesting the court to enter a default judgment. Id. However, the court cannot enter a default judgment “against a minor or incompetent person unless the person is represented by a conservator, guardian ad litem, or other representative.” MCR 2.603(B)(3)(a).

In certain instances, it may be necessary to conduct more proceedings before the judgment may be entered. See MCR 2.603(B)(3)(b). See Section Section 4.11(B)(2) for information on conducting a hearing on damages in order to enter or effectuate a default judgment.

Effect. “Entry of a default judgment is equivalent to an admission of every well-pleaded matter in the complaint.” Epps v 4 Quarters Restoration LLC, 498 Mich 518, 554 (2015).

Notice. Once a default judgment is entered, the party who sought the default must promptly serve the default judgment on all parties. MCR 2.603(B)(4). “Proof of service must be filed with the court.” Id.

4.Entry of Default Judgment as a Sanction

When a party fails to obey an order to provide or permit discovery, MCR 2.313(B)(2)(c) authorizes a trial court to enter a default judgment against the disobedient party. However, the court “should carefully consider the circumstances of the case to determine whether a drastic sanction such as the entry of a default judgment is appropriate.” In re Hall Trust, ___ Mich App ___, ___ (2023) (quotation marks and citation omitted). “The record should reflect that the trial court gave careful consideration to all of the factors involved and considered all of its options in determining the sanction that was just and proper in the context of the case before it. Ultimately, the court’s chosen discovery sanction must be proportionate and just.” Id. at ___ (cleaned up).

“Before imposing the sanction of a default judgment, a trial court should consider whether the failure to respond to discovery requests extends over a substantial period of time, whether an existing discovery order was violated, the amount of time that has elapsed between the violation and the motion for a default judgment, the prejudice to parties seeking the sanction, and whether willfulness has been shown.” In re Hall Trust, ___ Mich App at ___ (cleaned up; holding that “[e]ach of those considerations supports the default-judgment sanction imposed” “based upon the persistent, willful, egregious discovery violations committed”).