Midwest Mental Health Clinic, PC v. Blue Cross & Blue Shield , 119 Mich. App. 671 ( 1982 )

119 Mich. App. 671 (1982) 326 N.W.2d 599

MIDWEST MENTAL HEALTH CLINIC, PC
v.
BLUE CROSS & BLUE SHIELD OF MICHIGAN

Docket Nos. 60493, 61017, 61018.

Michigan Court of Appeals.

Decided September 22, 1982.

Bushnell, Gage, Doctoroff & Reizen (by Noel A. Gage and Thomas A. Heller), for plaintiff.

Foster, Swift, Collins & Coey, P.C. (by Theodore W. Swift and William K. Fahey) and Beier, Howlett, McConnell, Googasian & McCann (by Kenneth B. McConnell), for defendant.

Before: R.B. BURNS, P.J., and D.F. WALSH and P.J. MARUTIAK,^[*] JJ.

R.B. BURNS, P.J.

Defendant, Blue Cross and Blue Shield of Michigan (hereinafter BCBSM), brings this appeal from the trial court's September 16, 1981, order denying defendant's motion to set aside a default judgment entered against defendant on July 20, 1981.

Plaintiff, a psychiatric out-patient clinic, filed a complaint against defendant, dated June 2, 1981, alleging that BCBSM unlawfully and tortiously advised its subscribers that its participation contract with plaintiff would be terminated on June 1, 1981.

On July 8, 1981, after defendant failed to answer the complaint or otherwise defend within 20 days, plaintiff entered a default against BCBSM.

At a July 20, 1981, hearing on the damages, BCBSM's counsel appeared but was not allowed to present testimony or cross-examine any witnesses. Following this hearing, the circuit court entered a default judgment against BCBSM in the amount of $446,470. Subsequent motions brought by defendant for rehearing and to set aside the default were denied.

On October 29, 1981, we granted defendant's emergency application for leave to appeal and motion to stay the circuit court's order.

Defendant first claims that the trial court erred in failing to set aside the default judgment. However, a trial court's decision not to set aside a default judgment will not be reversed absent a clear abuse of discretion. Glasner v Griffin, 102 Mich. App. 445; 301 NW2d 889 (1980). The policy of this state's courts is against setting aside regularly entered default judgments. Griffin, supra; Zinn v Fischer Distributing Co, 27 Mich. App. 591; 183 NW2d 859 (1970), lv den 384 Mich. 796 (1971).

Under GCR 1963, 520.4, in order for defendant to have the default set aside, defendant must either show lack of jurisdiction or demonstrate good cause and submit an affidavit of facts showing a meritorious defense. In the instant case, jurisdiction is undisputed. However, defendant claims that good cause and a meritorious defense were established. We disagree.

In Glasner v Griffin, supra, p 448, this Court stated:

"``Good cause' sufficient to set aside an entry of default under the above cited court rule includes such matters as ``(1) a substantial defect or irregularity in 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'. Harrison v VMC Building Corp, 71 Mich. App. 458, 460; 248 NW2d 584 (1976) (quoting 2 Honigman & Hawkins, Michigan Court Rules Annotated [2d ed], Comments, p 662)."

Defendant's explanation for BCBSM's counsel's failure to comply with the requirement which created the default is that "the press of the circumstances" caused him to fail to file a timely answer to plaintiff's complaint. However, "the press of the circumstances" involved only defendant's counsel's attention and preparation in a related case, matters in other circuit courts, and drafting a brief to be submitted to this Court on an unrelated matter.

As this Court stated in Badalow v Evenson, 62 Mich. App. 750, 754; 233 NW2d 708 (1975):

"That the neglect or omission of a defendant's attorney does not constitute adequate ground for setting aside a default judgment is virtually axiomatic."

Defendant's counsel's excuse is simply inadequate to excuse his failure to timely interpose an answer to plaintiff's complaint. Our statement in Mission Investment Co v Perfect Totalisator Corp, 51 Mich. App. 376, 380; 214 NW2d 898 (1974), is applicable here:

"As for counsel's assertion that he was involved in a trial in Detroit after his return, no citation of authority is needed for the proposition that all attorneys are pressed with busy schedules. This should not, however, excuse a failure to meet filing deadlines."

In light of the foregoing, defendant's assertion that BCBSM has a meritorious defense is immaterial, because both good cause and a meritorious defense must be shown before a default judgment may be set aside. GCR 1963, 520.4; First Bank of Cadillac v Benson, 81 Mich. App. 550; 265 NW2d 413 (1978); Butler v Cann, 62 Mich. App. 663; 233 NW2d 827 (1975).

Defendant's next claim is that the trial court erred in denying counsel for BCBSM his right to participate at the damages hearing. We agree. While the question of a defendant's liability is cemented by a default, a defendant has a right to participate where further proceedings are necessary to determine the amount of damages. Wood v Detroit Automobile Inter-Ins Exchange, 413 Mich. 573; 321 NW2d 653 (1982), see also Haller v Walczak, 347 Mich. 292; 79 NW2d 622 (1956). Therefore, the trial court, on remand, must afford defendant the opportunity to contest the amount of damages.

For these reasons, we affirm the trial court's order of default but reverse and remand for further proceedings on the issue of damages. Because of the foregoing disposition, we need not address defendant's other issues.

Affirmed in part, reversed in part.

NOTES

[*] Circuit judge, sitting on the Court of Appeals by assignment.