Pioneer State Mutual Insurance Company v. Stephen a Michalek ( 2019 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
PIONEER STATE MUTUAL INSURANCE FOR PUBLICATION
COMPANY, October 3, 2019
9:05 a.m.
Plaintiff-Appellee,
v No. 344567
Berrien Circuit Court
STEPHEN A. MICHALEK and BARBARA M. LC No. 14-000245-CK
MICHALEK,
Defendants-Appellants,
and
JUSTIN B. AGRESTI,
Intervening Plaintiff.
PIONEER STATE MUTUAL INSURANCE
COMPANY,
Plaintiff-Appellee,
v No. 344577
Berrien Circuit Court
STEPHEN A. MICHALEK and BARBARA M. LC No. 14-000245-CK
MICHALEK,
Defendants,
and
JUSTIN B. AGRESTI,
Intervening Plaintiff-Appellant.
-1-
Before: MURRAY, C.J., and METER and FORT HOOD, JJ.
MURRAY, C.J.
These consolidated appeals are from a final order awarding attorney fees to plaintiff,
Pioneer State Mutual Insurance Company, in a case where the trial court found after a bench trial
that insurance fraud was committed by defendants, Stephen A. Michalek and Barbara M.
Michalek. Intervening plaintiff, Justin B. Agresti, appeals the same order by right. We affirm.
I. BACKGROUND
In November 2011, Agresti was injured while riding his bicycle at defendants’ (his
grandparents) lakefront property in Dowagiac. At the time of the injury, the property was
insured pursuant to a homeowner’s policy issued by Pioneer. Agresti sued defendants in a
separate premises liability action. Defendants signed a statement in the Agresti litigation in
which they stated that members of defendants’ family dug a hole on the property on July 4, 2011,
to fix a faulty septic pump, and then failed to refill the hole upon departing the property.
Defendants asserted that the hole remained unfilled in November 2011, when Agresti rode his
bicycle into the hole and injured himself. Pioneer retained counsel for defendants in the Agresti
litigation, and counsel advanced a challenge to the duty (or lack thereof) by asserting an open
and obvious defense.
After the trial court denied defendants’ motion for summary disposition in the Agresti
litigation, Pioneer commenced this action to void coverage under a fraud provision contained in
the homeowner’s policy. Pioneer alleged that defendants misrepresented that they dug a hole,
and left the hole open until November 2011. Following a bench trial, the trial court issued an
opinion on March 15, 2017, finding that defendants made fraudulent representations to Pioneer
that voided the policy. Appellants moved for reconsideration of that opinion, but before
addressing that motion, the trial court entered a judgment in favor of Pioneer on July 17, 2017.
On August 15, 2017, the trial court denied their motion for reconsideration of the March opinion.
On September 5, 2017, defendants filed a claim of appeal in this Court, appealing the
August 15, 2017 trial court order denying their motion for reconsideration of the opinion. This
Court dismissed the appeal for lack of jurisdiction because the August 15, 2017 order was not a
final order under MCR 7.202(6)(a).1 In doing so, this Court noted that the July 17, 2017
judgment “appears to be a final order.” This Court dismissed Agresti’s claim of appeal for the
same reason.2
Two days after this Court dismissed the appeals for lack of jurisdiction, appellants again
moved for a new trial or relief from judgment. Then, before the trial court addressed and
1
Pioneer State Mut Ins Co v Michalek, unpublished order of the Court of Appeals, entered
September 26, 2017 (Docket No. 339991).
2
Pioneer State Mut Ins Co v Michalek, unpublished order of the Court of Appeals, entered
September 26, 2017 (Docket No. 340016).
-2-
decided the motions, defendants filed in this Court an application for delayed appeal of the trial
court’s July 17, 2017 judgment. On the same day, the trial court held a motion hearing to
address the second motions for a new trial or relief from judgment, but it did not rule on the
motions.
On May 18, 2018, this Court denied defendants’ application for delayed appeal of the
July 17, 2017 judgment “for lack of merit on the grounds presented.”3 Thereafter, the trial
court entered an order granting Pioneer’s motion for attorney fees and costs. The trial court held
that, given its previous finding that defendants committed fraud, attorney fees were warranted
under MCR 2.114(F). Defendants and Agresti separately appealed the order by right, and this
Court consolidated the appeals.4
II. CHALLENGES TO THE JULY 17, 2017 JUDGMENT
Defendants advance several issues in this appeal that are unrelated to the award of
attorney fees, and that they previously asserted in their application for delayed appeal the July
17, 2017 judgment. This Court denied that application for lack of merit in the grounds
presented. Pioneer argues that consideration of these issues is barred by the law of the case
doctrine. Pioneer is correct, but there is an additional jurisdictional ground that precludes us
from considering these challenges to the July 17, 2017 judgment.
We first address the jurisdictional issue. 5 In their claim of appeal forms, appellants
identified the order that they are appealing by right as the June 19, 2018 order regarding attorney
fees and costs, and in their docketing statements, they noted that the order was a postjudgment
order. Under MCR 7.202(6)(a)(iv), a postjudgment award of attorney fees is a final order from
which a claim of appeal can be taken. However, MCR 7.203(A)(1) limits the appeal taken under
MCR 7.202(6)(a)(iv) “to the portion of the order with respect to which there is an appeal of
right,” meaning that these appeals only pertain to the award of attorney fees. Consequently, any
issue outside those challenging the award of attorney fees goes beyond our jurisdiction over
these appeals.
Second, even if we had jurisdiction, Pioneer is correct: the law of the case doctrine would
preclude our consideration of the issues arising out of the July 17, 2017 judgment. “The law of
the case doctrine holds that a ruling by an appellate court on a particular issue binds the appellate
court and all lower tribunals with respect to that issue.” Ashker v Ford Motor Co, 245 Mich. App.
9, 13; 627 NW2d 1 (2001). “Thus, a question of law decided by an appellate court will not be
3
Pioneer State Mut Ins Co v Michalek, unpublished order of the Court of Appeals, entered May
18, 2018 (Docket No. 340967).
4
Pioneer State Mut Ins Co v Michalek, unpublished order of the Court of Appeals, entered
August 7, 2018 (Docket Nos. 344567; 344577).
5
Neither party raised this issue, but because it is jurisdictional we can do so without the parties
first doing so. Yee v Shiawassee Co Bd of Commissioners, 251 Mich. App. 379, 399; 651 NW2d
756 (2002).
-3-
decided differently on remand or in a subsequent appeal in the same case.” Id. “The primary
purpose of the doctrine is to maintain consistency and avoid reconsideration of matters once
decided during the course of a single continuing lawsuit.” Id. The doctrine applies “only to
issues actually decided, either implicitly or explicitly, in the prior appeal.” Grievance Admin v
Lopatin, 462 Mich. 235, 260; 612 NW2d 120 (2000).
In exercising the discretion afforded it when reviewing an application for leave to appeal,
Great Lakes Realty Corp v Peters, 336 Mich. 325, 328; 57 NW2d 901 (1953), the Court has
numerous options: it can grant the application and hear the case on the merits, deny the
application, enter peremptory relief, or take any other action deemed appropriate. See MCR
7.205(E)(2). If the assigned panel determines that an application (late or otherwise) from a final
order warrants denial, the panel often—as was done here—indicates that it is for “lack of merit
on the grounds presented.” In contrast to interlocutory applications for leave to appeal from
nonfinal orders, where the Court generally does not express an opinion on the merits,
applications for delayed appeal address whether to allow an appeal (filed after the 21-day period
has elapsed) to be taken on a merits challenge to a final order. Hence, when we deny an
application from a noninterlocutory order for lack of merit in the grounds presented, the order
means what it says—it is on the merits of the case.6 Consistent with this conclusion, this Court
has previously applied the law of the case doctrine to orders denying applications for “lack of
merit in the grounds presented.” See People v Douglas, 122 Mich. App. 526, 529-530; 332
NW2d 521 (1983), People v Hayden, 125 Mich. App. 650, 662-663; 337 NW2d 258 (1983), and
People v Wiley, 112 Mich. App. 344, 346; 315 NW2d 540 (1981).
The first four issues raised in defendants’ and Agresti’s appeal briefs were raised in
defendants’ prior application for delayed appeal from the July 17, 2017 judgment. Additionally,
appellants have not shown a change in the material facts or an intervening change in the relevant
law. Because this Court previously denied defendants’ application for delayed appeal “for lack
of merit on the grounds presented,” even if we had jurisdiction to address the merits challenge to
the July 17, 2017 judgment, we would not address the merits of those issues under the law of the
case doctrine.7 See id. See also Locricchio v Evening News Ass’n, 438 Mich. 84, 109, n 13; 476
NW2d 112 (1991).
6
If a panel decides to deny an application challenging an interlocutory nonfinal order, it typically
uses language indicating that the application was denied because the Court was not persuaded
that immediate appellate review was necessary. There is no merits language in those denial
orders because no merits determination was made; instead, the panel has simply determined
appellate intervention was not necessary at the time. As a result, parties are still free to challenge
these interlocutory orders when appealing the final order. See Dean v Tucker, 182 Mich. App. 27,
31; 451 NW2d 571 (1990).
7
We reject appellants’ arguments that this Court lacked jurisdiction to deny defendants’ delayed
application for leave to appeal in Docket No. 340967. See MCR 7.205(G); MCR 7.203(B)(5).
Similarly, the arguments that this Court lacks jurisdiction to address these appeals are devoid of
merit. See MCR 7.206(6)(a)(iv); MCR 7.203(A)(1).
-4-
III. ATTORNEY FEES
As to the merits of the final order they did appeal of right, appellants argue that the trial
court erred in awarding attorney fees, and in the amount of the fees awarded. This Court reviews
a trial court’s award of attorney fees and costs for an abuse of discretion. Smith v Khouri, 481
Mich. 519, 526; 751 NW2d 472 (2008). “An abuse of discretion occurs when the trial court’s
decision is outside the range of reasonable and principled outcomes.” Id. This Court reviews for
clear error a trial court’s factual findings underlying its fee award including a finding that a claim
or a defense was frivolous. See Ladd v Motor City Plastics Co, 303 Mich. App. 83, 103; 842
NW2d 388 (2013). “A decision is clearly erroneous when, although there may be evidence to
support it, we are left with a definite and firm conviction that a mistake has been made.”
Guerrero v Smith, 280 Mich. App. 647, 677; 761 NW2d 723 (2008).
A. FRIVOLOUS DEFENSE
Without holding a hearing, but after briefing by the parties, the trial court entered an
order granting Pioneer’s motion for attorney fees. The trial court awarded attorney fees pursuant
both to MCL 600.2591 and MCR 2.114(F)8 on the basis of its finding at the bench trial that
defendants engaged in fraud.
“Generally, awards of costs and attorney fees are recoverable only where specifically
authorized by a statute, a court rule, or a recognized exception.” Edge v Edge, 299 Mich. App.
121, 127; 829 NW2d 276 (2012) (quotation marks, brackets, and citations omitted). MCL
600.2591 grants, and MCR 2.114(F) had granted, “a court the authority to award sanctions in the
form of attorney fees and costs to a prevailing party if an action or defense is deemed ‘frivolous.’
” Keinz v Keinz, 290 Mich. App. 137, 141; 799 NW2d 576 (2010). MCL 600.2591(3) defines
“frivolous”:
(a) “Frivolous” means that at least [one] of the following conditions is
met:
(i) The party’s primary purpose in initiating the action or asserting the
defense was to harass, embarrass, or injure the prevailing party.
(ii) The party had no reasonable basis to believe that the facts underlying
that party’s legal position were in fact true.
(iii) The party’s legal position was devoid of arguable legal merit.
The trial court’s finding of frivolousness was based on its conclusions following the
bench trial that defendants acted fraudulently, and that they knew they had engaged in fraud yet
8
MCR 2.114 was repealed effective September 1, 2018. Administrative Order No. 2002-31,
501 Mich. cxx, cxxxvii (2018). The substantive provisions of MCR 2.114 have been
incorporated into MCR 1.109. Because MCR 2.114 was in effect at the time the trial court
awarded sanctions, we make reference to that rule.
-5-
still put up a defense. “The determination whether a claim or defense is frivolous must be based
on the circumstances at the time it was asserted.” Robert A Hansen Family Trust v FGH Indus,
LLC, 279 Mich. App. 468, 486; 760 NW2d 526 (2008) (quotation marks and citation omitted).
The trial court found that the defense was frivolous at the time it was asserted—i.e., at the time
defendants responded to Pioneer’s complaint, and throughout the proceedings. The trial court
had conducted a three-day bench trial on the fraud issue, had made detailed findings of fact after
trial, and its reference to those findings was sufficient to explain why it found the defense of
these claims to be frivolous. Although “the mere fact that [a party] did not ultimately prevail on
its legal position” does not per se render that position frivolous, id. at 487, the trial court’s
findings went beyond a mere rejection of defendants’ legal position.
In applying this deferential standard of review, and given the fact-specific nature of the
case and the trial court’s findings, we hold that the trial court did not clearly err in finding that
defendants’ defense was frivolous.
B. REASONABLENESS OF FEES AND COSTS
Under the former MCR 2.114, if a trial court determined that a claim was frivolous in
violation of MCR 2.114(F), sanctions were mandatory under MCR 2.114(E), which provided as
follows:
If a document is signed in violation of this rule, the court, on the motion of
a party or on its own initiative, shall impose upon the person who signed it, a
represented party, or both, an appropriate sanction, which may include an order to
pay to the other party or parties the amount of the reasonable expenses incurred
because of the filing of the document, including reasonable attorney fees. The
court may not assess punitive damages.
Similarly, MCR 2.625 provides that “if the court finds on motion of a party that an action
or defense was frivolous, costs shall be awarded as provided by MCL 600.2591.” MCL
600.2591 provides, in relevant part, as follows:
(1) Upon motion of any party, if a court finds that a civil action or defense
to a civil action was frivolous, the court that conducts the civil action shall award
to the prevailing party the costs and fees incurred by that party in connection with
the civil action by assessing the costs and fees against the nonprevailing party and
their attorney.
(2) The amount of costs and fees awarded under this section shall include
all reasonable costs actually incurred by the prevailing party and any costs
allowed by law or by court rule, including court costs and reasonable attorney
fees.
“[T]he burden of proving the reasonableness of the requested fees rests with the party
requesting them.” Smith, 481 Mich. at 528-529. “When requested attorney fees are contested, it
is incumbent on the trial court to conduct a hearing to determine what services were actually
rendered, and the reasonableness of those services.” Reed v Reed, 265 Mich. App. 131, 166; 693
NW2d 825 (2005). In determining the reasonableness of a requested fee, a trial court should
-6-
“consider the totality of special circumstances applicable to the case at hand.” Smith, 481 Mich.
at 529. The Supreme Court has provided nonexclusive factors to guide a trial court in
determining the reasonableness of attorney fees. See Pirgu v United Servs Auto Ass’n, 499 Mich.
269, 281-282; 884 NW2d 257 (2016).
The trial court awarded Pioneer the hours it requested, but it reduced the hourly rate from
the requested $240.00 an hour to the billed rate of $140.00 an hour. In doing so, the trial court
did not make any findings of fact with respect to the reasonableness of the requested fees or the
number of hours expended on the proceeding. Instead, it adopted the analysis set forth in
Pioneer’s brief, which had attached to it detailed billings, affidavits, and a state bar survey of the
average rates in the relevant community.
The Michigan Supreme Court has explained:
In considering the time and labor involved . . . the court must determine
the reasonable number of hours expended by each attorney. The fee applicant
must submit detailed billing records, which the court must examine and opposing
parties may contest for reasonableness. The fee applicant bears the burden of
supporting its claimed hours with evidentiary support. If a factual dispute exists
over the reasonableness of the hours billed or hourly rate claimed by the fee
applicant, the party opposing the fee request is entitled to an evidentiary hearing
to challenge the applicant’s evidence and to present any countervailing evidence.
[Smith, 481 Mich. at 532.]
Although Pioneer’s motion was properly supported, in their response brief, defendants
did not contest the reasonableness of the hourly rate, the number of hours expended, nor did they
request a hearing to resolve any disputed facts. Rather, defendants exclusively challenged the
trial court’s findings of fraud after trial, and placed other legal objections to the award of
attorney fees. Thus, there was no need for the trial court to hold a hearing to allow defendants to
contest the reasonableness of the requested fees because, based on their submissions, they were
not challenging that aspect of Pioneer’s request. Id. And, although defendants did make a
request for an evidentiary hearing in their motion for reconsideration, that motion was simply too
late to preserve the request. See Vushaj v Farm Bureau Gen Ins Co of Mich, 284 Mich. App. 513,
519; 773 NW2d 758 (2009) (“This issue was not raised until plaintiff filed his motion for
reconsideration. Where an issue is first presented in a motion for reconsideration, it is not
properly preserved.”). And, the trial court does not abuse its discretion by rejecting arguments
made in a motion for reconsideration that could have been made in response to the original
motion. Yoost v Caspari, 295 Mich. App. 209, 220; 813 NW2d 783 (2012) (“Ordinarily, a trial
court has discretion on a motion for reconsideration to decline to consider new legal theories or
evidence that could have been presented when the motion was initially decided.”).
The trial court did not clearly err in finding that the defense was frivolous, and did not
abuse its discretion in awarding attorney fees.
-7-
Affirmed.
Plaintiff-appellee may tax costs.
/s/ Christopher M. Murray
/s/ Patrick M. Meter
/s/ Karen M. Fort Hood
-8-