Background
Plaintiff A-Z Electrical Engineering, Inc. sued defendants James Jenkins and Jenkins Construction, Inc. for breach of contract, account stated, unjust enrichment, and fraudulent misrepresentation, seeking over $132,000 for unpaid electrical work. Defendants answered, denying personal liability for James Jenkins and alleging setoffs, but did not file a counterclaim. During the litigation, defendants’ attorney was suspended from practice.
Despite almost a year of repeated instructions from the trial court to retain new counsel, defendants failed to do so. On the day of the scheduled bench trial, neither James Jenkins nor an attorney for Jenkins Construction appeared. Instead, a non-attorney corporate representative of Jenkins Construction was present. The trial court, noting defendants’ failure to appear with proper representation, entered a default judgment against them for $69,030.02, an amount specified in the pretrial order.
Defendants subsequently retained new counsel and moved to set aside the default judgment, arguing they believed their former counsel would be reinstated or that their neglect was excusable. The trial court denied this motion, citing defendants’ long-standing awareness of their need for counsel and their decision not to secure it. This appeal followed.
The Court’s Holding
The Michigan Court of Appeals affirmed the trial court’s decision in its entirety, upholding both the entry of default and the denial of defendants’ motion to set aside the default judgment. The Court first addressed the entry of default, explaining that under Michigan law, a corporation (Jenkins Construction, Inc.) cannot appear in court without an attorney. Therefore, the appearance of a non-attorney corporate representative was tantamount to a failure to appear, and James Jenkins also failed to appear personally or through counsel. The Court concluded that the trial court did not abuse its discretion in entering the default pursuant to MCR 2.603.
Next, the Court rejected defendants’ argument that a separate hearing on damages was required. It applied the “raise-or-waive” rule, noting that defendants failed to raise this issue at the trial court level, thereby waiving it on appeal. Furthermore, the Court observed that the default judgment amount of $69,030.02 was a sum certain, specified in the pretrial order and supported by plaintiff’s invoices, making a separate damages hearing unnecessary even if the argument had not been waived.
Finally, the Court affirmed the denial of defendants’ motion to set aside the default judgment. Applying the factors outlined in Shawl v Spence Brothers, Inc., the Court found no excusable neglect. It highlighted that defendants had been repeatedly warned by the trial court over an extended period to retain new counsel after their original attorney’s suspension. The Court found James Jenkins’s affidavit, claiming he believed former counsel would appear, lacked merit, especially given evidence that he was aware of the ongoing suspension. The Court also found that defendants failed to demonstrate a meritorious defense, as the affidavit did not adequately rebut plaintiff’s core allegations regarding unpaid invoices. Therefore, the trial court’s decision was within the range of reasonable and principled outcomes.
Key Takeaways
- In Michigan, a corporation must be represented by a licensed attorney; appearance by a non-attorney corporate representative at trial is considered a failure to appear, justifying a default judgment.
- Arguments not presented to the trial court, such as the need for a separate damages hearing after a default, are generally waived and cannot be raised for the first time on appeal.
- To successfully set aside a default judgment, a party must demonstrate both good cause (e.g., excusable neglect) and a meritorious defense; repeated warnings from the court to secure counsel negate claims of excusable neglect for failing to appear.
Why It Matters
This opinion provides a clear and firm reminder to both individuals and corporate entities of the strict procedural requirements of litigation, particularly regarding legal representation. It underscores that courts will not tolerate a party’s prolonged failure to secure counsel, especially after explicit judicial warnings, and will enforce default judgments in such circumstances.
For attorneys, the case highlights the importance of advising corporate clients that they cannot represent themselves and must retain legal counsel. It also reinforces the necessity of meticulously preserving all arguments at the trial court level to avoid waiver on appeal, even in the context of challenging a default judgment.