Motion to set aside a default judgment; MCR 2.603(D)(1); Brooks Williamson & Assoc, Inc, v Mayflower Constr Co; Good cause & a meritorious defense. Saffian v Simmons; Shawl v Spence Bros; Default for failure to appear at a scheduled conference; MCR 2.401(G); “Manifest injustice”; Alken-Ziegler, Inc v Waterbury Headers Corp

Holding that the trial court erred by entering a default judgment against defendant-Kahn and for plaintiff-adult toy distributor, the court reversed, vacate the order, and remanded. Plaintiff sued Kahn and his stores for breach of contract and account stated. The trial court entered a default judgment against them for failing to appear. Kahn later filed an answer denying the allegations and arguing that neither he nor his stores did business with plaintiff, and that he did not sign a contract that included a personal guarantee provision. Kahn asserted that he and his stores did business with the prior owner of plaintiff and that plaintiff was misrepresenting that it was the prior owner. On appeal, the court agreed with Kahn that the trial court abused its discretion by denying his motion to set aside the default judgment, finding it failed “to recognize Kahn had a potentially absolute defense to plaintiff’s claim.” Although it was not an abuse of discretion for the trial court to conclude that he failed to establish good cause, “a lesser showing of good cause is required if the moving party can demonstrate a strong meritorious defense.” In all of his pleadings, motions, and responsive briefings, Kahn “maintained that plaintiff’s claim against him as an individual cannot be sustained because no signed guarantee exists. Indeed . . . a signed copy of a personal guarantee between plaintiff and Kahn” did not exist in the record. He could not “be held personally liable for a corporate debt absent a signed guarantee. To allow the default judgment against Kahn as an individual to stand absent evidence of a signed guarantee constitutes a manifest injustice, and the trial court’s failure to set aside the default judgment against Kahn individually on this basis constituted an abuse of discretion. Although plaintiff may have an adequate response to Kahn’s potentially absolute defense, none has been offered to date.” Thus, remand was required “to allow plaintiff the opportunity to offer a signed copy of Kahn’s personal guarantee, or any other evidence to establish that Kahn agreed to be personally liable for the corporate debt at issue. Only then can the trial court fairly determine whether or not to set aside the” default judgment against him. However, the court cautioned Kahn that “on remand, his active participation in this litigation is imperative to any potentially successful defense.”