Bigelow v. Walraven

221 N.W.2d 328, 392 Mich. 566, 1974 Mich. LEXIS 195

• Court: Michigan Supreme Court
• Decided: September 6, 1974
• Docket: 5 May Term 1974, Docket Nos. 54,920, 54,921
• Status: Published

Opinions

Levin, J.

My colleague, Mr. Justice Thomas Giles Kavanagh, would hold that a trial judge may condition an order setting aside a default, entered following defendant’s failure to answer a complaint, on defendant not pleading the statute of limitations.

He states that a condition depriving defendant of the defense of the statute of limitations is not "wholly arbitrary and unreasonable” because the statute of limitations itself establishes an arbitrary deadline; a trial judge does not act arbitrarily or unreasonably in relieving a plaintiff of a failure to meet an "arbitrarily established deadline” so that the case can be tried "on its merits”.

The issue before us would be clearer if the judge had instead conditioned the setting aside of the default on the elimination of some other affirmative defense, e.g., contributory negligence, payment, release, discharge, fraud, duress, estoppel, statute of frauds or illegality.

If, for example, defendant claimed that he had settled with the plaintiff and paid the agreed-upon amoipit and the judge had conditioned setting aside of the default on waiver of that defense, we would all probably agree that was "wholly arbitrary and unreasonable”. Why the difference here? It is because of misgivings about the statute of limitations. As one who has himself been led astray in that regard,¹ I appreciate those sentiments. It has, however, come to be recognized that the statute of limitations is not a disfavored plea but a perfectly righteous defense, a meritorious defense,² that may, like other affirmative defenses, be raised tardily.³

I

My colleague says this is a matter of discretion. In a somewhat similar context, I wrote and others concurred:

"If we were to recognize a judge’s personal view of a claim or defense as a valid reason for rejecting an amendment, we would find it difficult to explain why his personal view should not also be relevant in assaying a claim or defense raised in the initial pleading.

"An individual judge may not properly substitute his personal view of justice and sound public policy for the statutory, or common-law or court rule meant to apply.” Ben P Fyke & Sons v Gunter Co, 390 Mich 649, 659-660; 213 NW2d 134 (1973).

Fyke is distinguished on the ground that it concerned amendment of a pleading and relevant Rule 118 does not expressly provide for the imposition of conditions, while Rule 520.4, concerning setting aside of defaults, does explicitly so provide. My colleague states, "[t]his difference is deliberate”:

"Amendment of pleadings is for the most part intended to assure accuracy and completeness in the presentation of the whole controversy on its merits. No good purpose occurs to us to warrant imposing, conditions for allowing it.”

Yet he discusses, with seeming approval, an earlier opinion recognizing a judge’s power to "impose just and reasonable terms as a condition precedent to the amendment”. Beecher v Wayne Circuit Judges, 70 Mich 363, 369; 38 NW 322 (1888).

Section 1 of the statute of amendments,⁴ *first enacted in 1846 and carried forward without substantive change to the Revised Judicature Act,⁵ authorizes a trial court to allow prejudgment amendment of a pleading “for the furtherance of justice, on such terms as shall be just”. This had been regarded as authorizing a judge to impose conditions when allowing an amendment.⁶ The authorities are legion throughout the land that amendment of a pleading may be granted subject to conditions.⁷

FR Civ P, 15(a), the source of Rule 118,⁸ similarly contains no express authorization for a trial judge to allow amendment of a pleading upon conditions, while, as Professors Wright and Miller write, "Rule 15(d) authorizes the court to permit a supplemental pleading to be served 'upon such terms as are just * * * ’. The absence of a comparable provision in Rule 15(a) has quite properly been ignored; it clearly should not be interpreted as preventing the court from imposing conditions on a grant of leave to amend under that subdivision. The statement in Rule 15(a) ¡that 'leave shall be freely given when justice so requires’[⁹], presupposes that the court may use its discretion to impose conditions on the allowance of a proposed amendment as an appropriate means of balancing the interests of the party seeking the amendment and those of the party objecting to it. The imposition of terms often will further the rule’s liberal amendment policy. If the party opposing the amendment can be protected by the use of conditions from any possible prejudice that might result from the untimeliness of the amendment, there is no justifiable reason for not allowing it.” 6 Wright & Miller, Fed Prac & Proc, § 1486, pp 423-424.¹⁰

II

My colleague sees rough or poetic justice in relieving the road commission of its default only on the condition that it not plead plaintiffs’ "default” in failing timely to file the complaint. His reasoning would permit a judge to refuse to allow the defense of the statute of limitations whenever a defendant fails timely to answer. The statute of limitations could then be raised, by amendment or in a late-filed answer, only as an indulgence of the judge.

If it is sound public policy to allow the defense of statute of limitations only if it is raised in a timely-filed answer, we should riot leave the matter to discretion. It would be better to amend the General Court Rules to provide that trial judge authority to allow pleading amendments and setting aside of a default does not extend to allowance of an amendment or late-filed answer which sets up the defense of statute of limitations. This unique exception to the general policy of encouraging the allowance of amendments and setting aside of defaults would be without viable precedent, but would be better than for allowance of the defense in such case to become a matter of judicial grace.

A judge may properly attach only those conditions necessary to prevent advantage to the tardy defendant and to relieve the plaintiff of prejudice attributable to defendant’s delay in answering or in proferring his amended pleading. He may not attach a wholly irrelevant condition.

Strauss v Douglas Aircraft Co, 404 F2d 1152, 1158 (CA 2, 1968) illustrates both that whether a statute of limitations defense may be raised belatedly does not rest entirely in trial judge discretion and that the principle which should guide its exercise is avoidance of advantage to defendant and prejudice to plaintiff. There, had defendant timely raised this defense, plaintiff could have timely commenced his action elsewhere. The United States Court of Appeals held "that because of the substantial prejudice to Strauss caused by Douglas’ excessivé delay in raising the Statute of Limitations defense, the court below abused its discretion in permitting Douglas to amend its answer”.

III

The trial judge abused his discretion in this case because the condition he imposed bore no relationship to any adverse consequence suffered by the plaintiffs as a result of the road commission’s default.¹¹ The condition does not restore the plaintiffs to the position they would have been in had the road commission timely answered, but, rather, places them in a vastly superior position. Default is not "a procedure intended to furnish an advantage to the plaintiff so that a defense may be defeated or a judgment obtained without the difficulty that arises from a contest by the defendant”.¹²

The question now before us was presented in Detroit v Wayne Circuit Judge, 112 Mich 317, 319; 70 NW 894 (1897). The trial court, in setting aside the city’s default, struck a notice, accompanying the city’s plea, that it would defend on the ground that it had not received timely notice of injury. This Court reversed because once the judge determined that the city had a right "to make defense to the action, * * * it was not within his discretion to limit its defense in the manner set forth”.

In the instant case, the trial court erroneously equated the "default” of the plaintiffs to commence their action against the road commission until 8 years after the accident with the default of the road commission in failing to answer within 20 days, a lapse it sought to rectify 14 days after entry of the default.

The statutes of limitations and procedures for default judgments serve different policies and purposes. Statutes of limitations are intended to "compel the exercise of a right of action within a reasonable time so that the opposing party has a fair opportunity to defend”; "to relieve a court system from dealing with 'stale’ claims, where the facts in dispute occurred so long ago that evidence was either forgotten or manufactured”; and to protect "potential defendants from protracted fear of litigation”.¹³

Default procedures serve to "keep the dockets current”, "to expedite the disposal of causes, thereby preventing a dilatory or procrastinating defendant from impeding the plaintiff in the establishment of his claim”.¹⁴

The road commission’s immediate effort to set aside the default fulfills the deterrent purpose of the default mechanism. After a short delay caused by inadvertence,¹⁵ the case can move toward disposition. The plaintiffs do not allege that the delay in any way impedes their ability to prove their claim.

In contrast, conditioning the setting aside of the default on waiver of the statute of limitations defense defeats the purposes of the time limitation. The road commission will be required to defend against a "stale claim”, a claim of which it had no notice until eight years after the accident.

During this period, while the plaintiffs were presumably interviewing witnesses and gathering evidence for trial, the road commission may have passed up similar opportunities because it did not realize it had any exposure. Its ability to cross-examine the plaintiffs’ witnesses and to have "a fair opportunity to defend” may have been impaired.¹⁶

The order of the trial court is reversed to the extent it precludes the road commission from asserting a defense and the cause is remanded for trial.

T. M. Kavanagh, C. J., and Swainson and M. S. Coleman, JJ., concurred with Levin, J.

1 See Wilson v Eubanks, 36 Mich App 287; 193 NW2d 353 (1971).

2 "No modern case has been called to our attention, however, wherein a reviewing court has reversed the ruling of a triad court allowing a plea of the statute of limitations by way of amendment. That defense was formerly in disfavor with the courts. However, it was Justice Story who wrote: 'It has often been matter of regret in modem times, that, in the construction of the statute of limitations, the decisions had not proceeded upon principles better adapted to carry into effect the real objects of the statute; that, instead of being viewed in an unfavorable light, as an unjust and discreditable defense, it had received such support, as would have made it what it was intended to be, emphatically, a statute of repose. It is a wise and beneficial law, not designed merely to raise a presumption of payment of a just debt, from lapse of time, but to afford security against stale demands, after the true state of the transaction may have been forgotten, or be incapable of explanation, by reason of the death or removal of witnesses. It has a manifest tendency to produce speedy settlements of accounts, and to suppress those prejudices which may rise up at a distance of time, and baffle every honest effort to counteract or overcome them.’ Bell v Morrison et al, 1 Pet 351, 26 US 351, 360, 7 L Ed 174 [1828].

"By the aid of such counsel the defense has gained in favor. It has been said that the statute of limitations should not be discriminated against but should be treated like any other defense. Thomas et ad v Price, 33 Wash 459, 74 P 563, 99 Am St Rep 961 [1903]. This court has held it to be a meritorious defense and has affirmed a ruling allowing it to be set up by amendment. Houts et al v Bartle et al, 14 SD 322, 85 NW 591 [1901]. That ruling accords with the overwhelming weight of authority. 34 Am Jur 350; Walters v Webster, 52 Colo 549, 123 P 952, Ann Cas 1914A, 24 [1912]. See Wrightson v Dougherty, 5 Cal 2d 257, 54 P2d 13 [1936], and Davenport v Stratton, Cal Sup, [24 Cal 2d 232] 149 P2d 4 [1944].” F M Slagle & Co v Bushnell, 70 So Dak 250, 255-256; 16 NW2d 914, 916-917 (1944).

3 "We align ourselves with the vast majority of courts in holding that an affirmative defense may be raised by amendment.” Ben P Fyke & Sons v Gunter Co, 390 Mich 649, 667; 213 NW2d 134 (1973), citing Groninger v Davison, 364 F2d 638, 640 (CA 8, 1966) (statute of limitations); Emich Motors Corp v General Motors Corp, 229 F2d 714, 716-718 (CA 7, 1956) (statute of limitations); Kraushaar v Leschin, 4 FRD 144, 145 (ED Pa, 1944) (statute of limitations); Systems Inc v Bridge Electronics Co, 335 F2d 465, 466 (CA 3, 1964) (dictum in case where defense was misrepresentation, fraud and economic duress); Villamor v Premier Insurance Co, 13 Mich App 30, 33; 163 NW2d 697 (1968) (statute of limitations); Great Lakes Restaurants, Inc v Rumery Construction Co, Inc, 23 Mich App 501, 506; 179 NW2d 36 (1970) (suspension of plaintiffs powers for failure to file annual report at time contract entered into).

Similarily, see 5 Wright & Miller, Fed Prac & Proc, § 1278, p 345.

4 "The court in which any action shall be pending, shall have power to amend any process, pleading or proceeding in such action, either in form or substance, for the furtherance of justice, on such terms as shall be just, at any time before judgment rendered therein.” RS 1846, ch 104, § 1.

5 "The court in which any action or proceeding is pending, has power to amend any process, pleading or proceeding in such action or proceeding, either in form or substance, for the furtherance of justice, on such terms as are just, at any time before judgment rendered therein. The court at every stage of the action or proceeding shall disregard any error or defect in the proceedings which do not affect the substantial rights of the parties.” MCLA 600.2301, MSA 27A.2301.

6 See Beecher v Wayne Circuit Judges, 70 Mich 363, 368; 38 NW 322 (1888).

"In the exercise of its discretion, the court should also be able to prescribe .conditions on which leave to amend will be granted, such as the time within which action must be taken, the method of trying issues interposed by the amendment, and the payment of expenses.” 1 Honigman & Hawkins, Michigan Court Rules Annotated (2d ed), Authors’ Comments, p 414.

7 "While the trial court is vested with a broad discretion as to the allowance of amendments, such discretion should be exercised on terms which will prevent any unfair advantage to the party making the amendment and will avoid prejudice and injustice to the adverse party.” 71 CJS, Pleading, § 306, p 690.

"Unless otherwise provided by statute, it is ordinarily the rule that a court, in its discretion, may grant the right to amend on such terms and conditions as, in the circumstances, are reasonable, or it may grant leave to amend unconditionally and without terms.” 61 Am Jur 2d, Pleading, § 312, p 717.

8 LaBar v Cooper, 376 Mich 401, 405; 137 NW2d 136 (1965); Ben P Fyke & Sons v Gunter Co, 390 Mich 649, 656; 213 NW2d 134 (1973).

9 So in Rule 118.

10 Similarly, see 3 Moore’s Federal Practice, ¶ 15.08[6], p 935; Parissi v Foley, 203 F2d 454 (CA 2,1953).

11 The imposition of conditions facilitates the goal of a "meritorious determination of issues”, (Walters v Arenac Circuit Judge, 377 Mich 37, 47; 138 NW2d 751 [1966]) by rectifying "any prejudice suffered by the nondefaulting party as a result of the default and the subsequent reopening of the litigation”. 10 Wright & Miller, Fed Prac & Proc, § 2700, pp 350-351.

12 47 Am Jur 2d, Judgments, § 1152, p 184.

13 51 Am Jur 2d, Limitation of Actions, § 17, pp 602-603.

14 47 Am Jur 2d, Judgments, § 1152, p 184. See, also 10 Wright & Miller, Fed Prac & Proc, § 2681, pp 245-251.

15 GCR 1963, 520.4 states in pertinent part:

"For good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 528.”

The rule further limits the setting aside of a default, unless grounded on the absence of jurisdiction over the defendant, to instances where "good cause is shown and an affidavit of facts showing a meritorious defense is filed.”

Satisfaction of the "good cause” requirement is generally accomplished by showing "(1) a substantial defect or irregularity in the proceedings upon which the default was based, (2) a reasonable excuse for failure to comply with the requirements which created the default, or (3) some other reason showing that manifest injustice would result from permitting the default to stand”. Authors’ Comments, 2 Honigman & Hawkins, Michigan Court Rules Annotated (2d ed) p 662.

The Clerk of the Board of Road Commissioners filed an affidavit asserting that the plaintiffs’ complaint was served on him together with another complaint in an unrelated matter. The process server made no mention that there were two separate complaints and the clerk believed that the plaintiffs’ complaint was just a duplicate of the other. He therefore "inadvertently failed” to forward plaintiffs’ complaint to the insurance carrier resulting in the road commissions’ failure timely to answer.

Plainly a judgment should not be entered against the road commission in consequence of this inadvertent failure to answer. The road commission has advanced a "reasonable excuse for failure to comply with the requirements which created the default” and should be given an opportunity to defend. The affidavit shows a meritorious defense, including the statute of limitations.

16 See Lud v Sammons, 391 Mich 416, 418; 216 NW2d 778 (1974) where this Court affirmed the Court of Appeals’ reversal of a trial judge’s reinstatement of a case dismissed after it appeared on a no progress docket. The opinion of the Court noted that "the five and one-half years between the accident and the motion to reinstate would dim the memories of most of us”.