Graf Properties LLC v. Michael Graf Jr

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
GRAF PROPERTIES, LLC, a Michigan limited UNPUBLISHED
liability corporation, ELISABETH GRAF SHAFA, January 21, 2020
MARK GRAF, and TAMARA GRAF,
Plaintiffs-Appellees,
v No. 346212
Benzie Circuit Court
MICHAEL GRAF, JR., LC No. 17-010792-CH
Defendant-Appellant.
Before: BOONSTRA, P.J., and TUKEL and LETICA, JJ.
PER CURIAM.
Defendant appeals by right the default judgment entered by the trial court in favor of
plaintiffs on October 12, 2018. We affirm.
I. PERTINENT FACTS AND PROCEDURAL HISTORY
Plaintiffs Elisabeth Graf Shafa (Elisabeth), Mark Graf (Mark), and Tamara Graf
(Tamara), as well as defendant Michael Graf (Michael), are members of Graf Properties, LLC
(Graf).1 On December 11, 2017, plaintiffs filed a complaint against Michael, another individual
(Jerome Springman), and what the complaint termed an “unincorporated and fictitious entity”
named Dode Group CTO (Dode). The complaint sought to quiet title to four parcels of real
property owned by Graf and to void liens that had been recorded against the property by Dode
and Springman. The complaint also alleged that defendant had conspired with Dode and
Springman to slander title to these properties in order to prevent the properties from being sold,
and sought monetary damages as well as equitable relief.
1
Due to many of the parties possessing the same surname, we will refer to the individual
members of Graf Properties, LLC by their first names.
-1-
Michael was served with the summons and complaint, but failed to respond.2 On March
7, 2018, plaintiffs requested that a default be entered against Michael, and a default was entered
that same day. Thereafter, Michael, acting in propria persona, filed a document with the trial
court that, although untitled, referred to Michael as a “counterclaimant,” asserted that he3 had
perfected a security interest in the properties, and requested that the trial court quiet title to the
properties in his favor. It is not clear from the trial court’s register of actions how the court clerk
characterized this document, but the document made no reference to Michael’s default status, nor
does any proof of service or notice of hearing appear in the record associated with this
document.4
On May 8, 2018, plaintiffs filed a motion for summary disposition as to Springman and
for entry of default judgment as to Michael and Dode, noting that a default had been entered
against Michael and that he had failed to seek to have it set aside. This motion was served on all
of the defendants, along with a notice of hearing. On July 2, 2018, Michael filed two motions,
entitled “Motion to Deny Identified Plaintiffs’ Motion for Summary Disposition and Entry of
Default Judgment” and an “Amended” version of the same; the motions were dated May 30th
and May 31st and submitted to the trial court, but Michael did not pay the filing fee for these
motions until July 2. These motions asserted various defenses to plaintiffs’ claims, including
that plaintiffs were not the real parties in interest because Michael was the sole managing
member of Graf, and that plaintiffs had failed to met their burden of proof regarding the facts
underlying their claims; however, these motions made no reference to Michael’s default status
and did not seek to set aside the default. The motions were not noticed for hearing.
On July 10, 2018, the trial court held a hearing on plaintiffs’ motion; Michael did not
appear. During the motion hearing, the trial court stated the following regarding Michael’s
motions:
The Court recognizes that Michael Graf, Junior has filed a document
captioned Amended Motion to Deny Plaintiffs’ Motion for Summary Disposition
2
Dode also failed to respond and was the subject of a default judgment. Springman answered
the complaint and summons, but the trial court ultimately granted summary disposition in favor
of plaintiffs on their claims against Springman. Neither Dode nor Springman is a party to this
appeal.
3
The document specifically referred to its author as “Michal Graf Jr. sui juris, in pro person,
Paterfamiliās of the House and Family Graf, an assignee and holder in due course of security
interest in land and property located in Benzie County Michigan as party to private contract
(‘Graf’),” which, from context, appears to refer to Michael in his individual capacity.
4
Michael does not appear to have filed a proof of service with regard to any of his various
motions and filings. However, at the October 12, 2018 motion hearing, plaintiffs’ counsel
answered in the affirmative when the trial court asked if plaintiffs had “been served with a series
of motions that appear to have been filed by Michael Graf, Junior?” It thus appears that Michael
served plaintiffs with at least some of the documents he filed in this case, although the record
lacks further clarity.
-2-
and Entry of Default Judgment. I’ve reviewed that document that has been filed,
and it simply fails to comply with Michigan Court Rule 2.603. It is not, in this
Court’s opinion, an effort to set aside the previously entered default . . . . I’m
satisfied that the default was properly entered and the Court rules have been
complied with by the plaintiffs and as such the Court will at this time sign a
default judgment as it relates to Dode Group, CTO and Michael Graf, Junior and
grant the relief requested in the plaintiffs’ prayers for relief.
On August 8, 2018, after the motion hearing but before the trial court had entered an
order reflecting its ruling, Michael filed a document with the trial court entitled “Rebuttal of
Presumption,” which again stated that plaintiffs were not the real parties in interest and lacked a
viable claim against him. The document requested that the trial court “take administrative and
judicial NOTICE” of his claim for relief and to “dispense with this action as is within its
prerogative.” Once again, the document was silent regarding Michael’s default status, and was
not noticed for hearing. On August 14, 2018, after plaintiffs filed a proposed order and the
seven-day objection period had passed, the trial court entered an order granting plaintiffs a
default judgment against Michael. The order stated that plaintiffs “intend to bring a subsequent
motion to determine expenses, including all attorney fees and costs, for clearing title.” Plaintiffs
filed their motion for damages two weeks later.
Subsequently, on September 12, 2018, Michael filed documents with the trial court
entitled “Motion to Show Cause as the Real Party in Interest” and “Motion for the Production of
Documents in Support of Motion to Show Cause as the Real Party in Interest.” These motions
essentially referred the court to Michael’s previous arguments related to whether plaintiffs were
real parties in interest and requested that the trial court order plaintiffs to produce “exemplified
documentation warranting the usurpation” of Michael’s authority as managing member of Graf.
Neither motion directly challenged the trial court’s holding that Michael’s default had been
properly entered; nor was either motion noticed for hearing. On September 20, 2018, Michael
also filed a motion to stay the proceedings on plaintiffs’ motion for damages, again failing to
notice the motion for hearing. This motion repeated Michael’s argument that plaintiffs were not
the real party in interest, but again did not address the default.
The trial court held a hearing on October 2, 2018; Michael did not appear. At the
hearing, the trial court addressed Michael’s numerous post-default filings, stating:
The Court finds that none of these motions are timely, and although Mr.
Graf hasn’t set the matters on [sic] for hearing I’m going to rule that each of the
motions filed are not timely, and the issues raised are at this time moot for the
reasons that Mr. Graf failed to answer the complaint. He was defaulted, and then
subsequently a default judgment was entered.
The trial court granted plaintiffs’ motion for damages. It subsequently entered a default
judgment in favor of plaintiffs. It also entered an order denying all of Michael’s motions filed
after the default was entered, finding that defendant was in default and failed to “properly move
and notice for hearing a motion to set aside” either the default or the default judgment.
This appeal followed.
-3-
II. STANDARD OF REVIEW
We review for an abuse of discretion a trial court’s decision to enter a default judgment.
See Shawl v Spence Bros, 280 Mich. App. 213, 218; 760 NW2d 674 (2008). An abuse of
discretion occurs only when the trial court’s decision is outside the range of reasonable and
principled outcomes. Saffian v Simmons, 477 Mich. 8, 12; 727 NW2d 132 (2007).
III. ANALYSIS
Michael argues on appeal that the trial court erred by rejecting his various motions and
failing to consider his argument (repeated in several filed documents) that plaintiffs were not the
real parties in interest in the lawsuit. We disagree.
MCR 2.603(A)(1) provides that a default may be entered against a party who has been
personally served but has “failed to plead or otherwise defend” in the action as required by the
court rules. “Once the default of a party has been entered, that party may not proceed with the
action until the default has been set aside by the court” in accordance with MCR 2.603(D) or
MCR 2.612. MCR 2.603(A)(3).
A defaulted party may move to set aside the default before entry of the default judgment,
or to set aside the default judgment within 21 days after the default judgment was entered.
MCR 2.603(D)(1) and (2); ISB Sales Co v Dave’s Cakes, 258 Mich. App. 520, 528, 530; 672
NW2d 181 (2003). An order granting a default judgment is a final judgment,
MCR 7.202(6)(a)(i); Allied Electric Supply Co v Tenaglia, 461 Mich. 285, 288; 602 NW2d 572
(1999), and relief from that judgment may also be sought under MCR 2.612(C) after the
judgment is entered. Alken-Ziegler, Inc v Waterbury Headers Corp, 461 Mich. 219, 234 n 7; 600
NW2d 638 (1999).
A motion to set aside a default or default judgment shall be granted only for (1) lack of
personal jurisdiction or (2) a showing of good cause and the filing of an affidavit of facts
showing a meritorious defense. MCR 2.603(D)(1); Woods v SLB Prop Mgt, LLC, 277 Mich. App.
622, 628; 750 NW2d 228 (2008). The moving party bears the burden of demonstrating good
cause and a meritorious defense. Saffian, 477 Mich. at 14.
Good cause sufficient to warrant setting aside a default or a default judgment can be
shown by: (1) a substantial procedural defect or irregularity in the proceedings, (2) a reasonable
excuse for the failure to comply with requirements that created the default; or (3) another reason
showing that manifest injustice would result from permitting the default to stand. Alken-Ziegler,
461 Mich. at 233; Huntington Nat’l Bank v Ristich, 292 Mich. App. 376, 390; 808 NW2d 511
(2011). Factors relevant to establishing good cause include: (1) whether the party completely
failed to respond or simply missed the deadline to file; (2) if the party simply missed the deadline
to file, how long after the deadline the filing occurred; (3) the duration between entry of the
default judgment and the filing of the motion to set aside; (4) whether there was defective
process or notice; (5) the circumstances behind the failure to file or file timely; (6) whether the
failure was knowing or intentional; (7) the size of the judgment and the amount of costs due; (8)
whether the default judgment resulted in an ongoing liability; and (9) if an insurer is involved,
whether internal policies of the company were followed. Shawl, 280 Mich. App. at 238.
-4-
An affidavit of meritorious defense “requires the affiant to have personal knowledge of
the facts, state admissible facts with particularity, and show that the affiant can testify
competently to the facts set forth in the affidavit.” Huntington Nat’l Bank, 292 Mich. App. at 390.
Factors relevant to the existence of a meritorious defense include whether there is evidence that:
(1) the plaintiff cannot prove or the defendant can disprove an element of the claim or a statutory
requirement; (2) a ground for summary disposition exists; or (3) the plaintiff’s claim rests on
inadmissible evidence. Shawl, 280 Mich. App. at 238.
In determining whether there is a meritorious defense and good cause to warrant the
setting aside of a default, a trial court should consider the totality of the circumstances. Id. at
236-237.
Here, Michael never argued that the trial court lacked personal jurisdiction over him;
rather, to the extent that any of his motions could be construed as implicitly arguing that the
default against him should be set aside, the argument was premised on his claim that plaintiffs
were not real parties in interest. Even if the trial court had given his various filings an extremely
generous interpretation and viewed them as satisfying the requirements of an affidavit of
meritorious defense, none of Michael’s various filings address good cause for his failure to
respond to the action, other than the bare assertion that he lives in Illinois. Michael was
indisputably aware of the action against him, at the latest when he received notice of the default
against him; yet nowhere in numerous filings he made with the trial court did he reference his
default status or assert good cause for setting aside the default. Instead, he attempted to belatedly
defend the action against him without addressing the default, in violation of MCR 2.603(A)(3).
He failed to appear for scheduled hearings even after being made aware of the case against him
and, despite including a statement in nearly every document filed with the trial court that he was
“available for telephonic conference,” does not appear from the record to have attempted to
make any arrangements to appear by telephone or other remote means. Michael has not alleged
a substantial defect or irregularity in the proceedings that caused him to be unable attend or seek
to adjourn or reschedule these hearings, and has not provided any other reasonable excuse for his
failure to attend or his failure to raise the issue of setting aside the default with reference to the
proper legal standards under MCR 2.603(D).
Considering the totality of the circumstances in this case, Shawl, 280 Mich. App. at 238,
the trial court’s decision to enter a default judgment was not an abuse of discretion. Shawl, 280
Mich. App. at 218. Because we conclude that the trial court did not err by entering a default
judgment, we decline to address the merits of Michael’s argument concerning the real party in
interest, as that issue was resolved by the entry of that judgment. See Reed Estate v Reed, 293
Mich. App. 168, 181; 810 NW2d 284 (2011).
Affirmed. As the prevailing party, plaintiffs may tax costs. MCR 7.219(A).
/s/ Mark T. Boonstra
/s/ Jonathan Tukel
/s/ Anica Letica
-5-