In this action for breach of contract and fraud, defendant, Jovica Ristich, appeals as of right the trial court’s January 25, 2010, order denying defendant’s motion to set aside a default and entering a default judgment in favor of plaintiff Huntington National Bank. We affirm.
i
On October 1, 2009, plaintiff filed a complaint against defendant alleging two counts of breach of contract and one count of fraud. Plaintiff alleged that defendant breached (1) a June 2009 personal loan agreement in which defendant obtained approximately $55,000 in financing for a 2008 BMW 6 Series automobile and (2) a June 2009 personal credit-line agreement in which defendant obtained $25,000. According to plaintiff, defendant did not grant it a security interest in the BMW pursuant to the loan agreement, and he misrepresented his yearly income on his applications for the loan and credit line.
if he [were] required to answer the Complaint and compelled to proceed in [the] cause of action, his responses could be utilized against him if charged by the U.S. Attorney’s Office and this obligation would violate his fifth amendment rights guaranteed under the United States Constitution and art 1, § 17 of the Michigan Constitution of 1962.
Defendant, therefore, requested that the trial court conduct an evidentiary hearing and stay the proceedings to “protect his constitutional rights.” He did not file an answer to the complaint.
Plaintiff subsequently requested, and the county clerk entered, a default against defendant “for failure to plead or otherwise defend as provided by law.” Plaintiff then moved for findings of fact and a default judgment against defendant. Plaintiff also filed a response to defendant’s motion for an evidentiary hearing and a stay of the proceedings, arguing that it was entitled to have defendant respond to the complaint and to a discovery record of his assertion of the privilege against self-incrimination in response to each question plaintiff asked. Plaintiff argued that defendant could not make a blanket assertion of the privilege against self-incrimination by refusing to file an answer and that defendant had failed to “provide support in the record” to warrant an evidentiary hearing.
At a January 4, 2010, hearing, the trial court denied defendant’s motion for an evidentiary hearing and a stay of the proceedings because a default had been entered against him. The court opined that the arguments defendant raised in his motion were insufficient, stating that defendant could not “just wave a magic wand because he’s been indicted and say I’m immune from civil process.” The court instructed defendant to answer the complaint and answer each allegation specifically and to raise the privilege against self-incrimination in response to each paragraph that he believed he could not answer so that the court could determine whether it was a sufficient response to the complaint. Finally, the court instructed defendant to move the court in writing if he wished to set aside the default.
Thereafter, plaintiff again moved for findings of fact and a default judgment against defendant. Defendant moved to set aside the default, arguing that manifest injustice would result if the court allowed the default to stand because his motion for an evidentiary hearing and a stay of the proceedings constituted “other action permitted by law” under MCR 2.108(A)(1) and a defense under MCR 2.603(A)(1). Defendant also submitted an affidavit of meritorious defense. In the affidavit, defendant stated: “I have a meritorious defense to Plaintiffs complaint in that I dispute the amount of the debt owed.”
At a January 25, 2010, hearing, the trial court denied defendant’s motion to set aside the default. The court stated that “there may be” good cause to set aside the default, but “it’s not been fleshed out or put forth to me by way of affidavit.” The court held that defendant had not provided a meritorious defense, stating that
the only affidavit that we do have from [defendant] only says that he has a meritorious defense and that he disputes theamount of debt owed.. .. [I]t’s not sufficient in terms of an affidavit setting forth what the defense to the claim is, simply to make a general denial.
The court concluded that defendant had defrauded plaintiff and entered a default judgment in plaintiffs favor in the amount of $86,423.06, plus interest. Defendant moved for reconsideration, and the court denied the motion on March 18, 2010.
n
Defendant argues that the trial court erred when it denied his request to set aside the default and granted the default judgment. Specifically, defendant argues that his motion to stay the proceedings was equivalent to a request for an extension of time to file an answer. We disagree.
We review defendant’s unpreserved claim for plain error affecting his substantial rights. See Kern v Blethen-Coluni,
Defendant moved for an evidentiary hearing and stay of the proceedings. However, the motion did not state that he was seeking an extension of time to file an answer, nor did it state the grounds or authority on which the trial court could extend the time for filing an answer, i.e., MCR 2.108(E). Therefore, we cannot conclude that defendant moved for an extension of time to file an answer, which would have shielded him from default in the event that he did not file an answer within 21 days after being served with the summons and complaint. See MCR 2.108(A)(1); MCR 2.603(A)(1).
According to defendant, moving for a stay of the proceedings is equivalent to moving for an extension of time under MCR 2.108(E) because both motions request the same relief: more time to file an answer. But defendant has not identified any legal rule supporting the assertion that the two motions are equivalent. Moreover, defendant’s argument, which focuses on the factual circumstances of his case, ignores a significant distinction between a motion for a stay of the proceedings and a motion for an extension of time to file an answer. While a defendant might assume that a motion to stay the proceedings extends the time for filing an answer, nothing in the motion notifies the trial court of the defendant’s desire to extend the time, as a motion under MCR 2.108(E) does. The trial court could assume that the defendant fully intends to answer within 21 days of service. For this reason, motions to stay the proceedings and to extend the time for filing an answer should not be treated synonymously. In order to request an extension of time for filing an answer, a defendant must file a motion pursuant to MCR 2.108(E), particularly requesting the extension. See MCR 2.119(A)(1).
nr
Defendant further argues that the trial court should have granted his motion to set aside the default because he took “other action permitted by law” under MCR 2.108(A)(1) and “otherwise defend[ed]” himself under MCR 2.603(A)(1) by filing a motion for an evidentiary hearing and a stay of the proceedings, wherein he invoked the constitutional privilege against self-incrimination. Again, we disagree.
Defendant preserved this issue by raising it in bis motion to set aside the default. See Detroit Leasing Co v Detroit,
The United States and Michigan Constitutions provide for a privilege against self-incrimination. US Const, Am V; Const 1963, art 1, § 17. “The privilege against self-incrimination under the Michigan Constitution is no more extensive than the privilege afforded by the Fifth Amendment of the United States Constitution.” Phillips v Deihm,
Our Supreme Court has long recognized that “a defendant may not be required in his answer to state facts which would tend to criminate” him. People ex rel Moll v Danziger,
When a question is propounded (a question which the witness declines to answer upon the ground that it may tend to criminate him) it belongs to the court to consider and to decide whether any direct answer to it can implicate the witness. If this be decided in the negative, then he may answer it without violating the privilege which is secured to him by law. If a direct answer to it may criminate himself, then he must be the sole judge [of] what his answer would be. The court cannot participate with him in this judgment, because they cannot decide on the effect of his answer without knowing what it would be; and a disclosure of that fact to the judges would strip him of the privilege which the law allows, and which he claims. It follows necessarily, then, from this statement of things, that, if the question be of such a description that an answer to it may or may not criminate the witness, according to the purport of that answer, it must rest with himself, who alone can tell what it would be, to answer the question or not. If, in such a case, he say upon his oath that his answer would criminate himself, the court can demand no other testimony of the fact. [Id. (quotation marks and citation omitted).]
Although a defendant in a civil action may raise the privilege against self-incrimination in his or her answer to the complaint, we have not discovered any Michigan law excusing a defendant who invokes the privilege from filing an answer. To the contrary, our Supreme Court’s opinion in Danziger suggests that the invocation of the privilege does not excuse the obligation to file an answer. See id. at 48 (“The constitutional rights of the defendant must be protected, hut the constitutional rights of the plaintiff to his day in court must likewise be protected.”). The Court indicated that in its “answer defendant may assert its constitutional right to decline to answer such paragraphs ... as call for an answer which . . . violates such rights.” Id. at 51 (emphasis added). The Danziger Court’s statement suggests that a defendant must answer the complaint paragraph for paragraph, asserting the privilege when he or she feels it is necessary.
The United States Court of Appeals for the Fourth Circuit directly addressed this issue in North River Ins Co v Stefanou, 831 F2d 484 (CA 4, 1987). The court noted that the privilege against self-incrimination applies at the pleading stage of civil actions. Id. at 486. It emphasized that “a proper invocation of the privilege [does not] mean that a defendant is excused from the requirement to file a responsive pleading.” Id. Rather, a defendant “is obliged to answer those allegations that he can and to make a specific claim of the privilege as to the rest.” Id. The court also stated that the “strategy” used by a defendant to invoke the privilege against self-incrimination cannot “effectively [negate] a fair balancing of his interests against the interests of those pursuing a claim against him, and the interests of society in the expeditious resolution of litigation.” Id. As for the effect of a defendant’s invocation of the privilege in an answer to the complaint, federal appellate courts have held that a defendant’s proper invocation of the privilege in an answer is treated as a specific denial. See, e.g., Rogers v Webster, 776 F2d 607, 611 (CA 6, 1985);
We agree with the federal courts that have addressed this issue and hold that a defendant desiring to invoke the privilege against self-incrimination at the pleading stage of a civil action is not excused from filing a timely answer to the complaint unless otherwise provided by law. A defendant must answer the allegations in the complaint that he or she can and make a specific claim of privilege to the rest. A defendant’s proper invocation of the privilege in an answer will be treated as a specific denial.
In this case, defendant did not file an answer to plaintiffs complaint within 21 days after being served with the summons and complaint. Rather, defendant moved for an evidentiary hearing and a stay of the proceedings, asserting that his responses to the complaint could be self-incriminating. Defendant’s failure to invoke the privilege against self-incrimination in an answer to plaintiffs complaint was an improper invocation of the privilege. See Danziger,
Moreover, defendant’s failure to answer the complaint violated MCR 2.108(A)(1). Defendant argues that his motion for an evidentiary hearing and a stay of the proceedings constituted “other action permitted by law” under MCR 2.108(A)(1). MCR 2.108(A)(1) requires a defendant to “serve and file an answer or take other action permitted by law or [the Michigan Court Rules] within 21 days after being served.” But defendant has not provided us with any legal basis on which to conclude that filing a motion for an evidentiary hearing and a stay of the proceedings constitutes other action permitted by law under the court rule. Other than a motion to extend the time for filing an answer under MCR 2.108(E), this Court has recognized only certain actions as altering the time for filing an answer, such as motions for summary disposition under MCR 2.116, to strike, and for a more definite statement. MCR 2.108(C)(1) and (4); Belle Isle Grill Corp v Detroit, 256 Mich App 463, 470-471;
Defendant further argues that the default was improperly entered because he “otherwise defend[ed]” himself under MCR 2.603(A)(1) by filing the motion for an evidentiary hearing and a stay of the proceedings. A court clerk must enter a default “[i]f a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend.. . .” MCR 2.603(A)(1). This Court has previously interpreted MCR 2.603(A)(1) as meaning that a party must not be defaulted if the party pleads or, as an alternative to filing a responsive pleading, otherwise defends the action. In Marposs Corp v Autocam Corp,
We conclude, however, that defendant’s motion for an evidentiary hearing and a stay of the proceedings cannot be characterized as otherwise defending an action under MCR 2.603(A)(1). Defendant has not provided us with any legal basis for such a conclusion. Furthermore, the essence of defendant’s motion was not defensive; rather, the essence of the motion was to postpone the proceedings indefinitely, i.e., for as long as the possibility that he could be criminally indicted existed. Nothing in defendant’s motion demonstrated that he was intending to defend or was defending the action. Finally, defendant’s suggestion that he defended himself by raising self-incrimination concerns in his motion fails because, as articulated earlier, the proper method for invoking the privilege against self-incrimination is through a responsive pleading.
Defendant did not file an answer as required by MCR 2.108(A)(1), and his motion for an evidentiary hearing and stay of the proceedings did not constitute other action permitted by law or a defense to the action. Therefore, we must conclude that defendant was properly defaulted.
rv
Under some circumstances, a default may be set aside, even when it was initially properly entered. But we cannot conclude that the trial court in this case abused its discretion by declining to set aside the default and granting plaintiff a default judgment. As indicated, we review for an abuse of discretion a trial court’s decision on a motion to set aside a default and whether to grant a default judgment. Saffian,
Under MCR 2.603(D)(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.” (Emphasis added.) Our Supreme Court has recognized that “ ‘good cause’ and a ‘meritorious defense’ are separate requirements that may not be blurred and that a party must have both,” but “trial courts should base the final result on the totality of the circumstances.” Shawl,
Good cause can be shown by: (1) a substantial defect or irregularity in the 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. [Id. at 221 (quotation marks and citations omitted).][1 ]
“The first two prongs of the Honigman & Hawkins[3 ] ‘good cause’ test are unremarkable and accurately reflect our decisions. It is the third factor, ‘manifest injustice,’ that has been problematic. The difficulty has arisen because, properly viewed, ‘manifest injustice’ is not a discrete occurrence such as a procedural defect or a tardy filing that can be assessed independently. Rather, manifest injustice is the result that would occur if a default were to be allowed to stand where a party has satisfied the ‘meritorious defense’ and ‘good cause’ requirements of the court rule. When a party puts forth a meritorious defense and then attempts to satisfy ‘good cause’ by showing (1) a procedural irregularity or defect, or (2) a reasonable excuse for failure to comply with the requirements that created the default, the strength of the defense obviously will affect the ‘good cause’ showing that is necessary. In other words, if a party states a meritorious defense that would be absolute if proven, a lesser showing of ‘good cause’ will be required than if the defense were weaker, in order to prevent a manifest injustice.” [Id. at 235, quoting Alken-Ziegler,461 Mich at 233-234 .]
In regard to a showing of good cause, defendant did not in this case specifically assert that a substantial defect or irregularity in the proceedings existed or that he had a reasonable excuse for failing to file a timely answer to the complaint. Rather, in his motion to set aside the default, defendant argued that “manifest injustice would result if the default were allowed to stand because Defendant would not have been given a fair opportunity to litigate
Furthermore, even if defendant’s reading of the law at the time this case commenced could be construed as a reasonable excuse for failing to file an answer, the trial court did not abuse its discretion by holding that defendant failed to submit an affidavit of facts establishing a meritorious defense. Although defendant submitted a document entitled affidavit of meritorious defense with his motion to set aside the default, the affidavit did not provide the trial court with any particular facts establishing a meritorious defense. See Miller,
Because defendant failed to establish both good cause and a meritorious defense, the trial court did not abuse its discretion
Affirmed.
Notes
The Shawl Court held that in determining whether a party has shown good cause, the trial court should consider the relevant factors from the following nonexhaustive list of factors:
(1) [W]hether 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 the judgment;
(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 under MCR 2.603(D)(4);
(8) whether the default judgment results in an ongoing liability (as with paternity or child support); and
(9) if an insurer is involved, whether internal policies of the company were followed. [Shawl,280 Mich App at 238-239 .]
Id. at 221 & n 10, 229-230.
2 Honigman & Hawkins, Michigan Court Rules Annotated (2d ed), comment 7, p 662 (discussing GCR 1963, 520.4).
In determining whether a party has a meritorious defense, the trial court should consider, when relevant, whether the affidavit contains evidence that
(1) the plaintiff cannot prove or defendant can disprove an element of the claim or a statutory requirement;
(2) a ground for summary disposition exists under MCR 2.116(C)(2), (3), (5), (6), (7) or (8); or
(3) the plaintiffs claim rests on evidence that is inadmissible. [Shawl,280 Mich App at 238-239 .]
While it may be arguable in some cases that requiring a defendant to submit an affidavit of meritorious defense alleging specific facts would infringe on the constitutional privilege against self-incrimination, defendant has not raised such an argument, either before the trial court or now on appeal. Therefore, we decline to address it.