Opinion
Docket No. 63577.
Decided September 27, 1983. Leave to appeal denied, 419 Mich ___.
Davidson, Gotshall, Kohl, Secrest, Wardle, Lynch Clark (by Patrick J. Nolan), for plaintiffs.
Gary R. Rentrop, P.C. (by Jeffrey K. Haynes), for appellants.
Defendants, D.B. Snider, Inc., Sail Haven, Inc., and Production Land Company, appeal by leave granted from an order of the trial court setting aside plaintiffs' acceptance of a mediation award, and a subsequent order denying defendants' motion for rehearing.
On July 18, 1979, plaintiff Thomas Coolman was injured when he fell through a dock located at the Sail Haven Marina in Mount Clemens. Coolman and his wife, Susan Coolman, brought suit against the Production Land Company, the owner of the land; Sail Haven, Inc., the lessee of the Marina; D.B. Snider, Inc., operator of the boat sales office at the marina; and Leonard Siudara and Dean Balcirak, owners of the boat plaintiff was to crew on when the accident occurred.
On December 2, 1980, plaintiffs learned that Siudara and Balcirak carried liability coverage on their boat in an amount of $100,000, while D.B. Snider, Inc., Sail Haven, Inc., and Production Land Company were uninsured. Mediation was held on July 20, 1981. The mediators returned an evaluation of no cause of action against defendants D.B. Snider, Inc., and Production Land Company. $10,000 was evaluated against Sail Haven, Inc., and $35,000 was evaluated against Siudara and Balcirak.
On August 6, 1981, plaintiffs accepted the mediation award and served acceptance on the adverse parties. Defendants Siudara and Balcirak accepted the mediation award on August 7, 1981, and likewise sent notice of their acceptance to all parties. By stipulation of the parties dated August 10, 1981, defendants Sail Haven, Inc., D.B. Snider, Inc., and Production Land Company were granted an additional 21 days to accept or reject the mediation award. The stipulations stated that these defendants, related entities, needed additional time to consult with officers and directors of the corporations regarding the decision to accept or reject the award. On August 21, 1981, all defendants accepted the mediation award.
Shortly after defendants accepted the mediation award, plaintiffs' counsel was informed that defendants would not pay plaintiffs the amount owing and that collection proceedings would have to be instituted. On September 10, 1981, plaintiffs moved in the Macomb County Circuit Court that the mediation award be set aside. Prior to the hearing on the motion, plaintiffs settled with defendants Siudara and Balcirak for the amount agreed on in mediation. After a hearing on plaintiffs' motion, the circuit judge issued his opinion and order dated October 27, 1981, setting aside the acceptance of the mediation award by the parties.
On November 3, 1981, plaintiffs rejected the mediation award. Defendants D.B. Snider, Inc., Sail Haven, Inc., and Production Land Company moved for a rehearing of the court's opinion and order. The trial court denied defendants' motion for a rehearing and certified its opinion and order of October 27, 1981.
GCR 1963, 316.7(a) provides:
"If all the parties accept the [mediation] panel's evaluation, judgment will be entered in that amount, which includes all fees, costs, and interest to the date of judgment."
The legal question presented by this appeal is one of first impression. Does a trial judge have discretion to set aside, on motion of a party, a mediation evaluation accepted by all parties? We are guided in this inquiry by two recent appellate decisions concerning Wayne County mediation rules.
In Cooper v Automotive Finishes, Inc, 109 Mich. App. 530; 311 N.W.2d 414 (1981), the plaintiff sued the defendants for wrongful discharge from employment. The mediation board unanimously evaluated the plaintiff's claim at $4,500, and notice of this evaluation was mailed to the attorneys. Pursuant to local rule 403, specifically WCCR 403.7(e) and 403.15(a), the evaluation was deemed to have been accepted upon the defendants' failure timely to reject the evaluation in writing, and the parties were notified that judgment was being entered.
The General Court Rules provision governing acceptance or rejection of a mediation award is the exact opposite. Under GCR 1963, 316.6(h)(1), the failure to file a written acceptance of a mediation evaluation constitutes rejection.
The defendants then moved for leave to file a belated rejection of the mediation evaluation and to set aside the judgment. Defendants' counsel argued that they had been unaware that a written rejection was required and that acceptance had not been intended. The trial court was of the opinion that the local rules conferred upon it no discretion to consider such a motion and, upon denying the motion, entered judgment in favor of the plaintiff.
This Court ruled that denial of the motion to file a belated rejection was proper, as WCCR 403 unambiguously provided that judgment was to be entered if the evaluation was not rejected. However, the Cooper Court observed that relief from the resultant judgment was available under GCR 1963, 528.3:
"We conclude that this subrule 528.3 was available to the court to enable it to make a discretionary decision on whether relief could be granted from the mediation final judgment. In short, the court had the power under GCR 1963, 528.3 to consider whether to grant or deny a motion for relief on the basis of the enumerated grounds.
"Since the trial court can exercise its discretionary power under GCR 1963, 528.3, we reverse and remand for the court's discretionary determination of whether counsel's admitted unawareness of the necessity to send a written rejection within 40 days constitutes either mistake, inadvertence, surprise, excusable neglect, or a reason justifying relief from the operation of the judgment." Cooper, supra, p 534. Cooper was cited as controlling in MGM Brakes Division of Indian Head, Inc v Uni-Bond, Inc, 111 Mich. App. 467; 315 N.W.2d 170 (1981), lv den 414 Mich. 943 (1982), under facts substantially similar to those in Cooper. Here again the defendant failed to send written acceptance or rejection of a mediation evaluation in a timely fashion, and acceptance of the award was presumed under WCCR 403. The plaintiff moved for entry of judgment and the defendant moved to set aside the evaluation. The court granted the former motion but denied the latter. Subsequently, defendant filed a motion for rehearing and to set aside the judgment. This motion was denied and defendant took its appeal therefrom.
Following Cooper, this Court ruled that, while the trial judge had the discretionary power to overturn the judgment per GCR 1963, 528.3, it had indeed exercised its discretion in this case. What is not clear from this Court's opinion in the MGM Division case is whether the trial judge had discretion to grant the defendant's initial motion to set aside the mediation evaluation.
The Supreme Court granted the defendant's motion for reconsideration and disposed of the case in the following manner:
"In lieu of granting leave to appeal, pursuant to GCR 1963, 853.2(4), the case is remanded to the circuit court for reconsideration of the motion to set aside the acceptance of the mediation evaluation. It is unclear on the record before the Court whether the circuit judge understood that he had the discretion to grant the motion. Consequently, on remand, he shall hear the motion and exercise his discretion." 417 Mich. 905 (1983).
The source and extent of the trial court's discretion to address the defendant's prejudgment motion to overturn acceptance of the mediation evaluation was not defined.
The cases discussed above are, of course, capable of being distinguished from the instant case as a different procedural rule was involved. However, we question whether this distinction is meaningful. In this case the mediation rules anticipate entry of judgment upon acceptance of the mediation evaluation by all parties. GCR 1963, 316.7(a). The Wayne County local rules, while treating failure timely to reject as an acceptance, similarly provide for an automatic entry of judgment upon acceptance. If a judge has discretion to set aside, before judgment is entered, acceptance of an evaluation under the Wayne County rules, he should be able to do so under the General Court Rules as well.
Written acceptance of a mediation award could be the result of a mistake or misunderstanding and, hence, should not be distinguished from failure to file a written rejection for purposes of this comparison.
Recognition of such discretion also makes practical sense. If under the court rule entry of judgment is a ministerial legal consequence of universal acceptance of a mediation evaluation, and GCR 1963, 528.3 gives the court discretion to set aside the judgment itself, why should the same degree of discretion not exist prior to entry of judgment on motion to set aside the mediation acceptance? We hold that a trial judge may properly entertain, prior to entry of judgment, a motion to set aside acceptance of a mediation evaluation under GCR 1963, 316 for any of the reasons enumerated in GCR 1963, 528.3.
GCR 1963, 528.3 "provides broadly for discretionary relief from a final judgment upon any grounds that would establish the injustice of permitting the judgment to stand". Miller v Varilek, 117 Mich. App. 165, 169; 323 N.W.2d 637 (1982). The granting or withholding of such relief is of course discretionary. Postill v Postill, 116 Mich. App. 578, 580; 323 N.W.2d 491 (1982), lv den 417 Mich. 902 (1983). In the instant case that discretion was exercised, but improvidently so; hence we reverse.
Plaintiffs argued below, as they do here, that acceptance of the mediation evaluation by defendants raised an implied promise to pay, and that refusal to tender payment constituted a fraud on the court. The trial court's opinion expressed a similar view:
"Herein, Sail Haven, apparently knew that its financial situation was precarious. It could have petitioned to avoid mediation, but did not do so. Moreover, having gone through the mediative process, Sail Haven could and should have rejected the award if it could not pay it. Sail Haven's present tactic amounts to bad faith, mocks the mediation rule and amounts to legal reneging. In the absence of demonstrated sanctions for such conduct, the court will order that the Coolman's acceptance of the award against Sail Haven, Snider and Production, be set aside and held for naught."
We cannot agree with this. Initially, we find no evidence of fraud or bad faith in defendants' conduct. Plaintiffs were aware that defendants carried no applicable insurance, and defendants never represented to plaintiffs that they were otherwise capable of paying the sum assessed against them. We reject plaintiffs' contention that acceptance of a mediation award implies a promise to satisfy that award. The function of mediation is to determine liability and damages. See GCR 1963, 316.1(a) and 316.6(f)(2). The trial court's opinion that a financially troubled defendant should avoid mediation entirely or reject an award that it cannot readily satisfy is specifically disapproved. We know of no authority suggesting that mediation is unavailable to the impecunious and decline to so hold. Plaintiffs' acceptance of the mediation award is reinstated.
Reversed and remanded.