Lansing Ice and Fuel Company v. Roy Smith, 328648

Background

Lansing Ice & Fuel sued Roy Smith for $9,148.09 on an open gas charge account, alleging breach, unjust enrichment, and conversion; when Smith did not timely answer, the trial court entered default judgment for $27,714.97 (treble damages, fees, interest).
Smith moved to set aside the default, alleging his gas cards were stolen, he promptly reported the theft to police and the company, and he missed the answer deadline due to physical/mental illness and stress from related criminal proceedings.
Plaintiff disputed Smith’s timeline and denied agreeing to keep any card active to catch unauthorized users; the account was closed for nonpayment in Feb 2015.
The trial court denied relief, finding no good cause (Smith was unemployed and had time to respond), no manifest injustice (he could sue third parties), and no meritorious defense (Smith remained ultimately responsible under the card agreement).
On appeal, the Court of Appeals reversed: it held Smith established a meritorious defense to the conversion claim(s) because plaintiff’s statutory conversion theory relied on a repealed statute (MCL 570.15) and, under MCL 600.2919a, plaintiff failed to allege conversion distinct from a debtor-creditor cardholder relationship.
Because Smith showed a meritorious defense to conversion (the basis for treble damages), the court found a lesser showing of good cause was required and that manifest injustice would result if the default judgment (including trebling) stood; it reversed and remanded for further proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the trial court erred denying motion to set aside default judgment	Default appropriate; Smith failed to show good cause, meritorious defense, or manifest injustice	Smith timely moved after service mistake, asserted theft and defenses to liability, and alleged good cause (illness, stress)	Reversed: court abused discretion; set aside default warranted to avoid manifest injustice
Whether plaintiff established statutory conversion under MCL 600.2919a	Conversion supports treble damages for unpaid card charges	Defendant argued no conversion because charges arose from debtor-creditor cardholder relationship	Held plaintiff’s MCL 600.2919a claim failed as matter of law; debtor-creditor relationship precluded conversion recovery
Whether plaintiff’s conversion claim under MCL 570.15 was valid	Relied on MCL 570.15 as basis for conversion/treble damages	Smith pointed out MCL 570.15 was repealed in 1982	Held MCL 570.15 was repealed; statutory conversion claim fails
Whether defendant showed meritorious defense and good cause to set aside default	Default should remain; defendant can pursue third parties for unauthorized charges	Defendant showed meritorious defense to conversion and reasons for missing deadline; trebling made judgment substantial	Held meritorious defense established for conversion claim, lowering good-cause burden; manifest injustice would result if default allowed

Key Cases Cited

Belle Isle Grill Corp v. Detroit, 256 Mich App 463 (trial court’s default-relief decision reviewed for abuse of discretion)
Saffian v. Simmons, 477 Mich 8 (standards for setting aside default; good-cause and meritorious-defense requirements)
Park v. Am. Cas. Ins. Co., 219 Mich App 62 (examples of good-cause factors for setting aside default)
Alken-Ziegler Co. v. Waterbury Headers Corp., 461 Mich 219 (lesser good-cause showing required where meritorious defense is strong)
Shawl v. Spence Bros., Inc., 280 Mich App 213 (factors and affidavit content for meritorious-defense inquiry)
Aroma Wines, Inc. v. Columbian Distrib. Servs., Inc., 497 Mich 337 (construction of MCL 600.2919a and requirement of conversion to "own use")
Dep’t of Agriculture v. Appletree Mktg., LLC, 485 Mich 1 (definition of conversion and improper use when in possession)
Dunn v. Bennett, 303 Mich App 767 (conversion of money requires identifiable, specific funds and obligation to return)
Lawsuit Fin., LLC v. Curry, 261 Mich App 579 (money conversion requires lack of debtor-creditor consent and an obligation to return specific funds)