Tia Corporation v. Peaceways ( 2020 )

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
TIA CORPORATION, UNPUBLISHED
April 30, 2020
Plaintiff-Appellee,
v No. 346591
Calhoun Circuit Court
PEACEWAYS, LC No. 17-000014-CH
Defendant,
and
FREDERICK C. ROESTI,
Defendant-Appellant.
Before: BORRELLO, P.J., and O’BRIEN and CAMERON, JJ.
PER CURIAM.
Defendant-appellant, Frederick C. Roesti, appeals as of right a November 1, 2018 order,
which held that plaintiff-appellee, Tia Corporation, was entitled to sanctions under MCR
1.109(E)(6)1 and ordered Roesti to pay Tia Corporation $250. We affirm.
I. FACTS AND PROCEDURAL HISTORY
In 1988, Peaceways, a nonprofit organization, became the owner of real property located
1
Although the trial court held that it was granting sanctions under MCR 1.109(D)(6), it is clear
from the record that the trial court intended to grant sanctions under MCR 1.109(E)(6).
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in Calhoun County, Michigan.2 At all relevant times, Father John Marie Vianney was the president
of Peaceways, and Roesti was its secretary.
On October 2, 2014, Vianney transferred the property, by way of a quitclaim deed, from
himself as “a single man,” to Imre Vincent and Jason Vincent for $100. The deed was handwritten
and was recorded. In an April 24, 2015 quitclaim deed, the property was transferred from
Peaceways, by Vianney as its president, to the Vincents for $1. This deed, which was typed, was
also recorded. On September 16, 2015, the Vincents conveyed the property to Tia Corporation by
warranty deed for $40,000. According to Roesti, he did not know until March 2016 that Vianney
had conveyed the property and that Tia Corporation possessed the property. In the months that
followed, Roesti sent letters to Tia Corporation. In the letters, Roesti informed Tia Corporation
that Vianney had not been authorized to transfer the property to the Vincents and that Roesti had
“visited” the property.
On January 3, 2017, Tia Corporation filed a quiet title action against Peaceways and Roesti.
Tia Corporation also filed a claim for injunctive relief, requesting that the trial court enjoin Roesti
from trespassing on the property. On January 16, 2017, Tia Corporation served Peaceways with a
summons and a copy of the complaint, through personal service on Vianney, who was Peaceways’
resident agent at the time. After Peaceways failed to answer the complaint, the clerk entered a
default against Peaceways, and Tia Corporation moved the trial court to enter a default judgment
against Peaceways. Vianney was served with a copy of the default, a copy of the motion for entry
of default judgment, and a copy of the notice of hearing. On March 13, 2017, the trial court entered
a default judgment following a hearing and held that Tia Corporation held “sole fee simple title to
the Property, free of any and all claims by Peaceways.”
After the default judgment was entered, Roesti was served with a summons and a copy of
the complaint. Roesti, who was licensed to practice law in California, answered the complaint on
his own behalf. He alleged that Peaceways held full legal and equitable title to the property. With
respect to the claim for injunctive relief, Roesti acknowledged that he had entered the property but
alleged that the act was “privileged” because he was acting as an officer and director of Peaceways.
A short period of time after Roesti filed an answer, Tia Corporation moved for summary
disposition under MCR 2.116(C)(9) (failure to state a valid defense). In lieu of filing a response
to the motion, Roesti moved the trial court to grant a 90-day adjournment. Roesti argued that it
was necessary to adjourn the hearing because he intended to seek pro hac vice admission so as to
file a motion to set aside the default judgment on behalf of Peaceways. Tia Corporation opposed
the motion, arguing that Roesti’s desire to seek pro hac vice admission in order to represent
Peaceways was unrelated to the pending motion for summary disposition.
In a June 15, 2017 order, the trial court denied Roesti’s motion and granted Tia
Corporation’s motion for summary disposition under MCR 2.116(C)(9). The order provided that
it was a final order that resolved the last pending claims and closed the case.
2
Although Peaceways was named as an appellant in the claim of appeal, Peaceways was later
dismissed for lack of jurisdiction. See Tia Corporation v Peaceways, unpublished order of the
Court of Appeals, entered February 14, 2019 (Docket No. 346591).
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On August 28, 2017, Roesti filed a motion for admission pro hac vice, which Tia
Corporation opposed. On September 18, 2017, the trial court held that Roesti was permitted to
appear pro hac vice as counsel for Peaceways. Six months later, Roesti filed a motion on behalf
of Peaceways to set aside the default judgment. Peaceways argued that the default judgment
should be set aside because (1) Tia Corporation failed to effectuate service on Peaceways because
it served the summons and a copy of the complaint on Vianney instead of Roesti, (2) Peaceways
did not receive notice of the request for entry of the default judgment, (3) Peaceways had an
“absolute defense” to the quiet title action given that Tia Corporation had violated MCL 750.535,
and (4) Peaceways established the criteria set forth in MCR 2.612(C)(1)(c) and (f). An affidavit
executed by Roesti accompanied the motion to set aside the default judgment. Tia Corporation
opposed Peaceways’ motion, arguing that it was untimely and lacked merit.
On April 30, 2018, the trial court held a hearing on Peaceways’ motion to set aside the
default judgment. After oral argument, the trial court denied Peaceways’ motion, holding that the
motion was not timely filed. The trial court further held that, even if the motion had been timely
filed, Peaceways had failed to establish good cause or a meritorious defense. Thereafter,
Peaceways filed a motion for reconsideration from this decision, which essentially reiterated the
arguments contained in the original motion. Along with the motion, Peaceways filed a notice of
hearing, which indicated that the motion for reconsideration would be heard on June 18, 2018.
However, Peaceways later requested that the hearing be “removed” from the trial court’s calendar.
On August 27, 2018, Peaceways moved the trial court to schedule oral argument on the
motion for reconsideration. Peaceways also filed a motion for leave to file a counterclaim against
Tia Corporation. The proposed counterclaim alleged that Tia Corporation was liable as a result of
its violation of MCL 750.535. Tia Corporation opposed the motions, arguing that Peaceways had
“unilaterally noticed” the motion for reconsideration for a hearing in violation of MCR 2.119(F)(2)
and that, because Peaceways failed to establish palpable error, the trial court should “dispense” of
the motion for reconsideration without hearing oral argument. Tia Corporation also argued that,
because the trial court denied Peaceways’ motion to set aside the default judgment, Peaceways
was prohibited from attempting to “proceed with the action” by seeking leave to file a counterclaim
against Tia Corporation. Tia Corporation also argued that Peaceways’ motions were frivolous,
and moved the trial court to sanction Peaceways and Roesti under MCR 1.109.3
On October 22, 2018, the trial court heard oral argument on the motions. Following oral
argument, the trial court denied Peaceways’ motions in a November 1, 2018 order. The trial court
also denied Tia Corporation’s request for sanctions against Peaceways, but the trial court granted
Tia Corporation’s request for sanctions against Roesti under MCR 1.109(E)(6). The trial court
ordered Roesti to pay $250 to Tia Corporation’s counsel. This appeal followed.
3
Although Tia Corporation’s pleading requested sanctions under MCR 1.109(D)(5) and (D)(6), it
is clear that Tia Corporation intended to cite MCR 1.109(E)(5) and (E)(6).
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II. ANALYSIS
A. JURISDICTION
On appeal, Roesti argues that it would be “manifest injustice to allow the quiet-title default
judgment to stand when there is an absolute defense against it.” However, this issue is not properly
before this Court because it is outside of the scope of appeal from the November 1, 2018 order.
The November 1, 2018 order from which Roesti appeals is “a post judgment order” granting
attorney fees and costs. MCR 7.202(6)(a)(iv). Under MCR 7.203(A), the scope of the appeal from
that order is “limited to the portion of the order with respect to which there is an appeal as of right,”
i.e., whether the trial court properly granted the motion for attorney fees and costs. Therefore, this
Court lacks jurisdiction to consider whether the trial court abused its discretion by denying
Peaceways’ motion to set aside the default judgment.4
B. SANCTIONS
Roesti argues on appeal that the trial court improperly ordered him to pay $250 in sanctions.
We disagree.
“This Court reviews for clear error a trial court’s decision regarding sanctions based on
frivolous pleadings or claims.” Home Owners Ins Co v Andriacchi, 320 Mich. App. 52, 75; 903
NW2d 197 (2017). “A finding is clearly erroneous where, although there is evidence to support
the finding, the reviewing court on the entire record is left with the definite and firm conviction
that a mistake has been made.” Ambs v Kalamazoo Co Rd Comm, 255 Mich. App. 637, 652; 662
NW2d 424 (2003). This Court reviews de novo whether a trial court properly interpreted and
applied relevant court rules. Henry v Dow Chem Co, 484 Mich. 483, 495; 772 NW2d 301 (2009).
The purpose of sanctions in the court rules “is to deter parties and attorneys from filing
documents or asserting claims and defenses that have not been sufficiently investigated and
researched or that are intended to serve an improper purpose.” FMB-First Mich Bank v Bailey,
232 Mich. App. 711, 722-723; 591 NW2d 676 (1998). As relevant to this appeal, MCR 1.109(E)
provides, in relevant part, the following:
(5) Effect of Signature. The signature of a person filing a document,
whether or not represented by an attorney, constitutes a certification by the signer
that:
(a) he or she has read the document;
(b) to the best of his or her knowledge, information, and belief formed after
reasonable inquiry, the document is well grounded in fact and is warranted by
4
In a March 27, 2019 order, this Court held “[t]his appeal remains pending at this time only as to
appellant Frederick C. Roesti and is limited to appeal of attorney fees and/or costs awarded as a
sanction in the November 1, 2018 postjudgment order[.]” Tia Corporation v Peaceways,
unpublished order of the Court of Appeals, entered March 27, 2019 (Docket No. 346591).
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existing law or a good faith argument for the extension, modification, or reversal
of existing law; and
(c) the document is not interposed for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase in the cost of litigation.
(6) Sanctions for Violation. 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.
Accordingly, as relevant here, a trial court is required to impose sanctions if it finds that a
document was not “well grounded in fact and [was not] warranted by existing law or a good-faith
argument for the extension, modification, or reversal of existing law.” MCR 1.109(E)(5) and (6).
See Smitter v Thornapple Twp, 494 Mich. 121, 136; 833 NW2d 875 (2013) (the use of the word
“shall” denotes mandatory action). See also Home-Owners Ins Co, 320 Mich. App. at 76
(“Sanctions are mandatory if a court determines that a document was signed in violation of [MCR
1.109(E)].”).
When considering whether Peaceways’ motion for reconsideration was “well grounded in
fact and warranted by existing law or a good-faith argument for the extension, modification, or
reversal of existing law,” it is first necessary to consider the merits of Peaceways’ original motion
to set aside the default judgment. With respect to Peaceways’ argument that Tia Corporation failed
to properly effectuate service, the issue of jurisdiction is, in part, tied to service of process. As our
Supreme Court explained in Lawrence M Clarke, Inc v Richco Constr Inc, 489 Mich. 265, 274;
803 NW2d 151 (2011):
A court cannot adjudicate an in personam controversy without first having
obtained jurisdiction over the defendant by service of process. A court must obtain
personal jurisdiction over a defendant in order to satisfy the due process
requirement that a defendant be informed of an action by the best means available
under the circumstances.
If jurisdiction was not established through proper service of process, a default judgment
will be rendered void. See Jackson City Bank & Trust Co v Fredrick, 271 Mich. 538, 544; 260
N.W. 908 (1935).
In this case, Peaceways argued that Tia Corporation should have served the summons and
a copy of the complaint on Roesti instead of Vianney. We disagree. Service of process on a
domestic corporation may be made by “serving a summons and a copy of the complaint on an
officer or the resident agent.” MCR 2.105(D)(1). “The word ‘or’ is a disjunctive term that allows
a choice between alternatives.” Ellison v Dep’t of State, 320 Mich. App. 169, 179; 906 NW2d 221
(2017). Thus, under MCR 2.105(D)(1), Tia Corporation could make service of process on
Peaceways by serving a summons and a copy of the complaint on an officer or its resident agent.
At the time of service, Vianney was Peaceways’ resident agent, and there was no dispute in the
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trial court that Vianney signed the acknowledgment of service in his capacity as Peaceways’
resident agent. Thus, because service on Vianney was sufficient under MCR 2.105(D)(1), the trial
court had jurisdiction over Peaceways when it entered the default judgment. Thus, Peaceways was
not entitled to have the default judgment set aside on this ground.
Peaceways also asserted that the default judgment should be set aside because Roesti was
not served with Tia Corporation’s motion for entry of default judgment. We again disagree. As
already discussed, Peaceways was properly served with process at the commencement of the case.
Because Peaceways did not answer the complaint or otherwise appear, a default was entered on
February 10, 2017. On February 16, 2017, Vianney—as Peaceways’ resident agent—was served
via first class mail with notice of entry of the default, Tia Corporation’s motion for entry of a
default judgment, and notice of the March 13, 2017 hearing. Because Tia Corporation complied
with the mandates outlined in MCR 2.603(B)(1)(b) and (c), we conclude that Peaceways was
properly notified of the default proceedings. Thus, Peaceways was not entitled to relief on this
ground.
Peaceways also argued that it was entitled to relief under MCR 2.603(D) because it had an
“absolute defense.” MCR 2.603(D) provides, in pertinent part:
(1) A motion to set aside a default or a default judgment, except when
grounded on lack of jurisdiction over the defendant, shall be granted only if good
cause is shown and an affidavit of facts showing a meritorious defense is filed.
(2) Except as provided in MCR 2.612, if personal service was made on the
party against whom the default was taken, the default, and default judgment if one
has been entered, may be set aside only if the motion is filed
(a) before entry of a default judgment, or
(b) if a default judgment has been entered, within 21 days after the default
judgment was entered.
We conclude that, even if Peaceways had a meritorious defense and good cause for failing
to answer the complaint, Peaceways would not be entitled to relief under MCR 2.603(D)(1)
because the motion to set aside the default judgment was not timely filed. The default judgment
was entered on March 13, 2017, and the motion to set aside the default judgment was not filed
until March 30, 2018, which was well beyond the 21-day limit in MCR 2.603(D)(2)(b).5
Furthermore, even if the motion had been timely filed, we would conclude that Peaceways
failed to establish that it had a meritorious defense. According to Peaceways, it had a meritorious
defense to the quiet title claim because Tia Corporation knew or had reason to know that the
5
Roesti argues on appeal that he submitted a request for “equitable tolling” and that the trial court
should have granted the motion. However, because Roesti does not provide any authority to
support this argument, it is abandoned. See Peterson Novelties, Inc v Berkley, 259 Mich. App. 1,
14; 672 NW2d 351 (2003).
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property had been embezzled when it bought the property. Specifically, Peaceways claimed that,
because the April 2015 quitclaim deed identified Peaceways as a nonprofit organization, and
because Peaceways’ “bylaws and rules” prohibited the conveyance, Tia Corporation should have
known that the property had been embezzled. However, the only legal authority that Peaceways
cited was MCL 750.535, which is a penal statute. Generally, where a statute contains criminal
penalties for violations of its provisions, this Court has held that no private cause of action based
on alleged violations of the statute will lie. See Lane v KinderCare Learning Ctrs Inc, 231 Mich
App 689, 695-696; 588 NW2d 715 (1998). See also Lowell R Fischer v WA Foote Memorial Hosp,
261 Mich. App. 727, 730; 683 NW2d 248 (2005). Thus, there was no basis for Peaceways’ assertion
that a cause of action arose from the alleged violation of MCL 750.535. Furthermore, the mere
fact that the April 2015 quitclaim deed stated that Peaceways was a nonprofit organization is not
a fact that would lead an honest, ordinarily cautious man to make further inquiries into the April
2015 conveyance. See Kastle v Clemons, 330 Mich. 28, 31; 46 NW2d 450 (1951). Indeed, there
is nothing that would suggest to Tia Corporation that Vianney, as president of Peaceways, did not
have authority to convey the property to the Vincents. Therefore, Peaceways was not entitled to
have the default judgment set aside on this ground.
Peaceways also asserted that it was proper to set aside the default judgment because it
established the criteria set forth in MCR 2.612(C)(1)(c) and (f). MCR 2.612 provides, in relevant
part, the following:
(C) Grounds for Relief From Judgment.
(1) On the motion and on just terms, the court may relieve a party or the
legal representative of a party from a final judgment, order, or proceeding on the
following grounds:
* * *
(c) Fraud (intrinsic or extrinsic), misrepresentation, or other misconduct of
an adverse party.
* * *
(f) Any other reason justifying relief from the operation of the judgment.
(2) The motion must be made within a reasonable time, and, for the grounds
stated in subrules (C)(1)(a), (b), and (c), within one year after the judgment, order,
proceeding was entered or taken . . . .
Peaceways argued that Tia Corporation engaged in fraud in a variety of ways. However,
because the motion to set aside the default judgment was filed more than one year after the default
judgment was entered on March 13, 2017, the motion was not timely and relief could not be
granted under MCR 2.612(C)(1)(c). See MCR 2.612(C)(2).
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Peaceways also requested relief under MCR 2.612(C)(1)(f). This Court has stated that for
relief to be granted under MCR 2.612(C)(1)(f), the following three requirements must be met:
(1) the reason for setting aside the judgment must not fall under subsections a
through e, (2) the substantial rights of the opposing party must not be detrimentally
affected if the judgment is set aside, and (3) extraordinary circumstances must exist
that mandate setting aside the judgment in order to achieve justice. [Heugel v
Heugel, 237 Mich. App. 471, 478-479; 603 NW2d 121 (1999).]
Peaceways did not specifically state what “other reason” justified relief from the default
judgment, MCR 2.612(C)(1)(f), and it made no mention of the three requirements that must be met
to obtain relief. Therefore, it failed to establish that relief should be granted under MCR
2.612(C)(1)(f). Furthermore, MCR 2.612(C)(2) requires that a motion for relief from judgment
under MCR 2.612(C)(1)(f) be filed within a “reasonable time.” We conclude that waiting more
than 12 months after the default judgment was entered to file the motion to set aside the default
judgment was not reasonable.
Finally, Peaceways alleged that it was entitled to relief under MCR 2.612(B). A defendant
is entitled to relief from a default judgment under MCR 2.612(B) if, in relevant part, a defendant
“had no knowledge of the action pending against” it. See Richco Constr Inc, 489 Mich. at 273. As
already stated above, Tia Corporation served Vianney with a summons and copy of the complaint,
a copy of the default, the motion for entry of default judgment, and a copy of the default judgment.
Thus, Peaceways had knowledge of the action and the default proceedings. Consequently,
Peaceways was not entitled to relief under MCR 2.612(B).
In sum, Peaceways entirely failed to establish in its motion to set aside the default judgment
that it was entitled to relief. Indeed, Peaceways’ arguments that the trial court lacked jurisdiction,
that Peaceways did not have notice, and that Peaceways had a meritorious defense were entirely
without merit. Additionally, many of the arguments contained in Peaceways’ motion were not
asserted in a timely manner. Nonetheless, Peaceways—through Roesti—filed a motion for
reconsideration following the denial of the motion to set aside the default judgment. The motion
for reconsideration was essentially identical to the original motion. Generally, reconsideration is
not warranted where the court is merely asked to revisit issues it ruled upon previously. Traverse
City Light and Power Bd v Home Ins Co, 209 Mich. App. 112, 126-127; 530 NW2d 150 (1995).
Given that the motion to set aside the default judgment was not “well grounded in fact and [was
not] warranted by existing law or a good-faith argument for the extension, modification, or reversal
of existing law” and because the motion for reconsideration merely recited the arguments
contained in the original motion, we conclude that the trial court did not clearly err by finding that
sanctions were warranted under MCR 1.109(E)(6).
With respect to Peaceways’ motion for leave to file a counterclaim, “[a]
counterclaim . . . must be filed with the answer or filed as an amendment in the manner provided
by MCR 2.118.” MCR 2.203(E). In this case, Peaceways did not answer the complaint, let alone
file a counterclaim. Furthermore, it was not until after the trial court entered the default judgment
against Peaceways and the case was closed that Peaceways moved the trial court for leave to file
the counterclaim. Although Roesti argues on appeal that he only sought to file the counterclaim
in the event the default judgment was set aside, this argument is not supported by the record given
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that Roesti noticed the motion for leave to file a counterclaim for a hearing even though the default
judgment was still in effect. As a result, Tia Corporation’s attorney drafted a response to the
motion and attended the hearing on the motion. Thus, Peaceways’ motion for leave to file a
counterclaim was not “well grounded in fact and [was not] warranted by existing law or a good-
faith argument for the extension, modification, or reversal of existing law.” See MCR 1.109(E)(5).
In sum, we conclude that Peaceways’ motion for leave to file a counterclaim and motion
for reconsideration were not “well grounded in fact and [were not] warranted by existing law or a
good-faith argument for the extension, modification, or reversal of existing law.” MCR
1.109(E)(5). Because Roesti signed the motions, the trial court did not clearly err in determining
that sanctions were appropriate under MCR 1.109(E)(6).
Affirmed.
/s/ Stephen L. Borrello
/s/ Colleen A. O’Brien
/s/ Thomas C. Cameron
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