Decker v. Trux R US, Inc ( 2014 )

STATE OF MICHIGAN
COURT OF APPEALS
JAMES DECKER and KAY DECKER, FOR PUBLICATION
October 28, 2014
Plaintiffs-Appellants, 9:00 a.m.
v No. 316479
Oakland Circuit Court
TRUX R US, INC., LC No. 2007-086261-NI
Defendant,
and
AUTO OWNERS INSURANCE COMPANY,
Garnishee Defendant-Appellee.
Before: RIORDAN, P.J., and CAVANAGH and TALBOT, JJ.
RIORDAN, J.
In this garnishment action, plaintiffs James and Kay Decker appeal as of right orders
denying their motion to extend discovery and granting summary disposition in favor of garnishee
defendant, Auto Owners Insurance Company. We affirm.
I. FACTUAL BACKGROUND
In October 2007, plaintiffs filed a lawsuit against defendant, Trux R Us, Inc., arising out
of injuries plaintiff James Decker sustained at a construction site when he was run over by a
bulldozer.
In May 2008, Auto Owners, the insurer for Trux R Us, brought a declaratory action
seeking a judgment that it had no duty to defend or indemnify Trux R Us with regard to the
Deckers’ claims. The Deckers were not named as parties to the declaratory action. On August
27, 2008, a default judgment was entered in favor of Auto Owners after Trux R Us failed to
respond to the lawsuit. On September 18, 2008, plaintiffs’ counsel was advised about this
declaratory action and was provided a copy of the default judgment. In December 2008, a
motion by Trux R Us to set aside the default judgment was denied and, because it was untimely,
on April 8, 2009, this Court granted Auto Owners’ motion to dismiss the claim of appeal filed by
Trux R Us. Auto Owners Ins Co v Trux R Us, Inc, unpublished order of the Court of Appeals,
entered April 8, 2009 (Docket No. 290421).
-1-
In September 2009, plaintiffs and Trux R Us entered into a consent judgment in the
amount of $2,250,000. At the June 2009 hearing in that regard, plaintiffs’ counsel advised the
trial court that the consent judgment was subject to an agreement which included that plaintiffs
would not execute the judgment against assets of Trux R Us, but would seek insurance proceeds
from a policy issued by Auto Owners to Trux R Us.
On February 13, 2013, plaintiffs filed a request and writ for non-periodic garnishment in
the amount of the consent judgment, naming Auto Owners as the garnishee of Trux R Us.
On February 21, 2013, Auto Owners filed its garnishee disclosure which indicated that it
was not indebted to Trux R Us for any amount and did not possess or control any of its property.
The reasons provided by Auto Owners in support of its denial included that: (1) the insurance
policy excluded coverage because James Decker was an employee of Trux R Us and was injured
in the course of his employment, (2) Trux R Us violated a condition of the policy by entering
into a consent judgment with plaintiffs, (3) the question of insurance coverage had been
previously litigated and resulted in a judgment in favor of Auto Owners, and (4) the doctrine of
laches prevented plaintiffs from proceeding.
On April 4, 2013, Auto Owners filed a motion for summary disposition of the
garnishment proceeding. Auto Owners argued that plaintiffs’ failure to contest its garnishee
disclosure by filing discovery requests under MCR 3.101(L)(1) caused the facts stated in the
disclosure to be accepted as true as provided by MCR 3.101(M)(2); therefore, the motion for
summary disposition should be granted and the writ of garnishment dismissed with prejudice.
Plaintiffs responded to Auto Owners’ motion, arguing that the motion for summary
disposition should be denied because the garnishee disclosure provided only erroneous legal
conclusions and not factual statements in support of its denial of liability to Trux R Us. In
particular, plaintiffs argued that whether res judicata applied presented a legal issue and, in this
case, did not apply. Further, they contend, insurance policy interpretation is a legal issue and,
under the policy terms, James Decker was an employee of Bell Site Services, not Trux R Us.
Moreover, because Auto Owners obtained a default judgment against Trux R Us before the
consent judgment was entered, any “consent” condition in Auto Owners’ policy was not
operative at the time the consent judgment was entered. Accordingly, plaintiffs argued, Auto
Owners was not entitled to summary disposition of this garnishment proceeding.
Auto Owners filed a reply to plaintiffs’ response, arguing that plaintiffs’ failure to initiate
discovery within 14 days of receiving the garnishment disclosure resulted in Auto Owners’
statement of nonliability to be deemed admitted; thus, “everything else is irrelevant.” But, in any
case Auto Owners argued, plaintiffs’ challenges to the reasons set forth in the disclosure are
without merit.
On April 10, 2013, pursuant to MCR 3.101(T), plaintiffs filed a motion to extend the time
to serve written interrogatories on Auto Owners. Plaintiffs argued that the trial court had
discretion to allow the requested extension of the discovery deadline set forth in MCR
3.101(L)(1). Plaintiffs explained that discovery was not sought in this matter because they
viewed Auto Owners’ disclosures as legal conclusions and were preparing a motion for summary
disposition in this matter. Plaintiffs noted that, in cases involving discovery admissions under
-2-
MCR 2.312, parties may be allowed to amend or withdraw an admission when the severity of the
sanction outweighs the equities involved in the matter. Further, MCR 1.105 provides that the
Michigan Court Rules should be construed “to avoid the consequences of error that does not
affect the substantial rights of the parties.” Plaintiffs attached a set of proposed interrogatories
that they would serve on Auto Owners if the court granted their motion.
Auto Owners responded to plaintiffs’ motion, arguing that the trial court did not have
discretion to extend the time in which discovery could be initiated after the 14 days provided in
MCR 3.101(L)(1) expired. That is, MCR 3.101(M)(2), provides: “The facts stated in the
disclosure must be accepted as true unless the plaintiff has served interrogatories or noticed a
deposition within the time allowed by subrule (L)(1) . . . .” Accordingly, plaintiffs were
impermissibly requesting the court to set aside the admissions made by plaintiffs as a
consequence of their failure to request discovery.
The trial court first issued a decision on plaintiffs’ motion to extend discovery and agreed
with Auto Owners, holding that because plaintiffs failed to initiate discovery within 14 days after
service of the garnishee disclosure as required by MCR 3.101(L)(1), the facts set forth in the
disclosure were accepted as true. The court noted that plaintiffs waited over three years to
attempt to collect the debt and, to the extent plaintiffs were attempting to set aside the garnishee
disclosure, no good cause was shown. Accordingly, the trial court entered an order denying
plaintiffs’ motion to extend the time to serve interrogatories on Auto Owners.
Subsequently, the court issued its decision on Auto Owners’ motion for summary
disposition holding that, because the facts stated by Auto Owners in its disclosure must be
accepted as true and Auto Owners stated that it was not indebted to Trux R Us for any amount,
summary disposition was appropriate under MCR 2.116(C)(6), (7), (8), and (10). Plaintiffs now
appeal.
II. SUMMARY DISPOSITION
A. STANDARD OF REVIEW
We review de novo a trial court’s decision granting a motion for summary disposition.
Coblentz v City of Novi, 475 Mich. 558, 567; 719 NW2d 73 (2006). We review for an abuse of
discretion a trial court’s decision regarding a motion to extend discovery. Shinkle v Shinkle (On
Rehearing), 255 Mich. App. 221, 224; 663 NW2d 481 (2003). “An abuse of discretion occurs
when the decision results in an outcome falling outside the principled range of outcomes.”
Woodard v Custer, 476 Mich. 545, 557; 719 NW2d 842 (2006).
B. ANALYSIS
At issue in this case is the interplay between the different subrules of MCR 3.101, which
provide:
(L) Steps After Disclosure; Third Parties; Interpleader; Discovery.
(1) Within 14 days after service of the disclosure, the plaintiff may serve
the garnishee with written interrogatories or notice the deposition of the
-3-
garnishee. The answers to the interrogatories or the deposition testimony
becomes part of the disclosure.
***
(M) Determination of Garnishee’s Liability.
***
(2) . . . The facts stated in the disclosure must be accepted as true unless
the plaintiff has served interrogatories or noticed a deposition within the
time allowed by subrule (L)(1) or another party has filed a pleading or
motion denying the accuracy of the disclosure. Except as the facts stated
in the verified statement are admitted by the disclosure, they are denied.
Admissions have the effect of admissions in responsive pleadings. . . .
***
(T) Judicial Discretion. On motion the court may by order extend the time for:
(1) the garnishee’s disclosure;
(2) the plaintiff’s filing of written interrogatories;
(3) the plaintiff’s filing of a demand for oral examination of the garnishee;
(4) the garnishee’s answer to written interrogatories;
(5) the garnishee’s appearance for oral examination; and
(6) the demand for jury trial.
The principles of statutory construction apply to the interpretation of the Michigan Court
Rules. Henry v Dow Chem Co, 484 Mich. 483, 495; 772 NW2d 301 (2009). Thus, we look to
“the plain language of the court rule in order to ascertain its meaning” and the “intent of the rule
must be determined from an examination of the court rule itself and its place within the structure
of the Michigan Court Rules as a whole.” Id. “If the rule’s language is plain and unambiguous,
then judicial construction is not permitted and the rule must be applied as written.” Jenson v
Puste, 290 Mich. App. 338, 342; 801 NW2d 639 (2010). Moreover, “[i]f we can construct two
rules so that they do not conflict, that construction should control.” Costa v Community
Emergency Med Services, Inc, 263 Mich. App. 572, 584; 689 NW2d 712 (2004) (quotations
marks and citation omitted).
As noted supra, on February 21, 2013, Auto Owners filed its garnishee disclosure.
Plaintiffs then had the option of how to proceed. They could have, but did not, pursue discovery.
Under MCR 3.101(L)(1), “the plaintiff may serve the garnishee with written interrogatories or
notice the deposition of the garnishee.” Here, plaintiffs failed to serve Auto Owners with written
interrogatories or notice of depositions. Thus, pursuant to MCR 3.101(M)(2), “[t]he facts stated
-4-
in the disclosure must be accepted as true unless the plaintiff has served interrogatories or
noticed a deposition within the time allowed by subrule (L)(1) . . . .”
Consistent with canons of statutory construction, we apply the plain meaning of court
rules. Henry, 484 Mich. at 495. The plain language of MCR 3.101(L) and (M) commands that
when a plaintiff fails to request discovery, the statements in the garnishee disclosure “must be”
accepted as true. The language of the court rule is mandatory, and plainly requires the trial court
to accept the statements in the garnishee disclosures as true. To read the court rule otherwise
ignores this plain language, thereby violating the maxim of avoiding “construing a court rule in a
manner that results in a part of the rule becoming nugatory or surplusage.” Dykes v William
Beaumont Hosp, 246 Mich. App. 471, 484; 633 NW2d 440 (2001).
Further, even if there is a conflict between a general provision in a statute and a specific
provision, the latter controls. Duffy v Michigan Dep’t of Natural Resources, 490 Mich. 198, 208;
805 NW2d 399 (2011); Gebhardt v O’Rourke, 444 Mich. 535, 542-543; 510 NW2d 900 (1994)
(“where a statute contains a general provision and a specific provision, the specific provision
controls”). MCR 3.101(M)(2) specifically states that when a plaintiff fails to serve
interrogatories or notices a deposition within the 14 days allowed by subrule (L)(1), the
statements in the garnishee’s disclosure must be accepted as true. Plaintiffs’ proposed reasoning
somehow extrapolates from (L)(1)’s specific 14 day time period an extension of almost 50 days,
or as long as a motion is filed at some point. This interpretation improperly disregards the
requirements of MCR 3.101 and cuts against the dictate that we are required to apply the more
specific terms of (L)(1) over the more general provision of subrule (T)(2).
We also find that any conflict between MCR 3.101(L) and (T) is not irreconcilable.
While subsections (L) and (M) provide a deadline for when a plaintiff must “serve” the
interrogatories or notice a deposition, subsection (T) deals with extending the time for the actual
“filing” of written interrogatories and demand for oral examination of the garnishee. A
harmonious reading of this subrule is that the trial court can exercise its discretion to extend
discovery as long as plaintiff has complied with MCR 3.101(M)(2). See Henry, 484 Mich. at 495
(court rules are read as a harmonious whole). Because this interpretation avoids a conflict
between the provisions, it controls. See Costa, 263 Mich. App. at 584 (“[i]f we can construct two
rules so that they do not conflict, that construction should control.”). With this interpretation,
both statutory provisions are left with independent operations and neither is rendered nugatory.
Also relevant is that the trial court did exercise its discretion in this case, and declined to
extend discovery under MCR 3.101(T). Almost 50 days after the garnishee disclosure, plaintiffs
filed a motion to extend discovery. The trial court denied the motion, stating that while plaintiffs
sought to extend discovery, that did not erase the fact that the admissions were accepted as true,
and there was no good cause to set them aside. While the trial court used the term “good cause,”
there is no indication that it was under some type of misunderstanding or misreading of the court
rule. Rather, the trial court was doing just what MCR 3.101(T) instructed, namely using its
“Judicial Discretion.” Moreover, MCR 3.101(M)(2) provides that admissions in the garnishee
disclosure have the same effect as admissions in responsive pleadings. Admissions do not
simply disappear with the passage of time or the filing of a motion to extend discovery.
-5-
Plaintiffs’ argument that the garnishee disclosure provided only erroneous legal
conclusions, rather than factual statements, simply is not true. In the garnishee disclosure, Auto
Owners alleged the following:
Garnishee is not indebted to the Defendant for any amount and does not
possess or control Defendant's property for the reasons that: (1) the insurance
policy issued to Trux R Us excludes coverage for injuries to Decker because he
was an employee and injured in the course of his employment; (2) the insurance
policy provides no coverage because Trux R Us violated the conditions section of
the policy which prohibits settlement (consent judgment) without the written
agreement of the insurer; (3) the question of coverage was previously litigated
between Trux R Us and Auto-Owners and judgment was entered in favor of Auto-
Owners with a finding of no coverage and, because Plaintiffs stand in the shoes of
Trux R Us for purposes of the garnishment, Plaintiffs are also precluded from
proceeding under doctrines of res judicata and collateral estoppel; and (garnishee
and or debtor are precluded from proceeding under the doctrine of laches[)].
As evident from this paragraph, Auto Owners did offer factual allegations, namely, that under
the facts of this case, the insurance policy excluded coverage and that the prior litigation
foreclosed garnishment.
III. CONCLUSION
Accordingly, the trial court properly granted summary disposition to defendant. We
affirm.
/s/ Michael J. Riordan
/s/ Michael J. Talbot
-6-