Opinion
No. 340565
08-21-2018
ESTATE OF LEONARD STUTTMAN, by KURT STUTTMAN, Personal Representative, Plaintiff-Appellant, v. CLARENCE JAMES EDINGTON and CONTINENTAL CASUALTY COMPANY, Defendants-Appellees.
UNPUBLISHED Ingham Circuit Court
LC No. 17-000328-NM Before: MURPHY, P.J., and GLEICHER and LETICA, JJ. PER CURIAM.
Kurt Stuttman, as personal representative for plaintiff, the estate of Leonard Stuttman, brought various claims against defendant Clarence James Edington for damages allegedly arising from an investment scheme. Plaintiff's complaint also included a claim for declaratory judgment against Edington's professional liability insurer, defendant Continental Casualty Company, alleging that it was required to provide indemnification for any losses suffered by reason of Edington's negligence. After plaintiff was unable to locate or effectuate service on Edington, Continental moved for summary disposition under MCR 2.116(C)(8). The parties stipulated to the entry of a dismissal order, in which plaintiff reserved the right to appeal the trial court's earlier order denying plaintiff's motion for a second summons and alternative service or, in the alternative, to amend the complaint. Plaintiff now appeals as of right, arguing that the appropriate course of action was for the trial court to allow plaintiff to serve Edington via alternative methods, or, in the alternative, to grant plaintiff declaratory relief as to the issues of Edington's liability and the amount of damages owed. We affirm.
I. BACKGROUND
In this action—the fifth lawsuit filed on the basis of the same facts—plaintiff alleged that Edington, without conducting due diligence, recommended that plaintiff's decedent invest $800,000 in an unregistered security with Bravata Group, which was ultimately revealed as a pyramid scheme that cost decedent his entire life savings. Plaintiff raised claims of breach of contract, professional negligence, fraudulent misrepresentation, innocent misrepresentation, negligent misrepresentation, and breach of fiduciary duty against Edington. Lastly, plaintiff requested that the trial court grant declaratory judgment in its favor on the issue of Continental's liability to plaintiff for the amount of damages owed as a result of Edington's alleged conduct.
Three prior lawsuits concerning the alleged pyramid scheme were filed by plaintiff's decedent before his death, and a fourth was filed by plaintiff after decedent's death. The first two suits were filed in Ingham Circuit Court, and both were dismissed without prejudice due to unsuccessful attempts to serve Edington with process. The third suit was filed in Kalamazoo Circuit Court. This time, Edington was found and served with the complaint and summons. Edington acknowledged that his then-current address was in Okemos, Michigan. However, the case was ultimately dismissed without prejudice again when plaintiff's decedent passed away and complications in procuring the letters of authority necessary to continue the suit hindered progress. Plaintiff refiled once again in the Ingham Circuit Court, but by then Edington had moved from the Okemos residence and left no forwarding address. After failing to locate Edington to serve him with process, the case was dismissed without prejudice for the fourth time.
In this case, plaintiff fared no better in discovering Edington's whereabouts. Plaintiff filed a motion seeking (1) a second summons and alternative service or (2) to amend the complaint to seek declaratory judgment against Continental as to the issues of Edington's liability and the amount of damages. The trial court denied plaintiff's motion. With regard to plaintiff's motion for alternate service, the trial court held that plaintiff did not follow the appropriate procedure for requesting alternative service, and further held that no new facts had arisen that would warrant the use of alternate service. Turning to plaintiff's motion to amend the complaint to add an additional claim for declaratory judgment, the trial court held that Continental could not be sued until Edington was found liable for plaintiff's injury. The trial court stated that declaratory judgment could not be used to circumvent Edington's right to defend the claims brought against him.
Continental then filed a motion for summary disposition under MCR 2.116(C)(8), arguing that the complaint failed to state a cause of action against Continental. The trial court entered a stipulated order granting Continental's motion, but reserving plaintiff's right to appeal the trial court's prior denial of plaintiff's motion.
II. ANALYSIS
A. ALTERNATE SERVICE
Plaintiff first argues that the trial court erred when it denied the motion for alternate service. We disagree. This Court reviews a trial court's decision on a motion for alternate service for an abuse of discretion. See State Farm Mut Auto Ins Co v Hudson, 486 Mich 856, 856-857; 780 NW2d 304 (2010); Bullington v Corbell, 293 Mich App 549, 556-558; 809 NW2d 657 (2011). "An abuse of discretion occurs when the trial court chooses an outcome falling outside the range of principled outcomes." Edry v Adelman, 486 Mich 634, 639; 786 NW2d 567 (2010).
Over the course of several years and several prior actions, many attempts were made to discover Edington's whereabouts and serve him with process. Following dismissal of the third suit, plaintiff searched a skip-trace database in an attempt to locate Edington, and discovered that Edington's previously acknowledged Okemos residence was owned by another man. The search also revealed that Edington might have resided in a Kalamazoo, Michigan apartment or a location in Grand Rapids, Michigan. After filing the fourth suit, plaintiff enlisted the aid of a process server, who went to the Okemos address to personally serve Edington with the summons and complaint. After four attempts to personally serve him with process, the process server determined that the residence was occupied by someone else. Plaintiff then attempted to determine the whereabouts of Edington's former roommate, but the most current address associated with the roommate was the same Okemos address.
Plaintiff also attempted to serve Edington with process at the Kalamazoo and Okemos addresses by registered mail, but both were returned undelivered and unable to forward. Plaintiff next contacted the manager of the Kalamazoo apartment complex, Edington's former insurance carrier, the Department of Insurance and Financial Services (DIFS), the National Insurance Producer Registry (NIPR), and Continental, requesting information relating to Edington's mailing address, residential address, physical address, whereabouts, and other information. None of these entities provided a more current residential address than the Okemos address. The DIFS and the NIPR provided plaintiff with a business address associated with Edington in Milford, Michigan; however, plaintiff's counsel placed a phone call to the Milford address and determined that Edington was not there.
After filing the current action, plaintiff obtained a "Locate Report" pertaining to Edington. The report indicated that the best residential addresses to reach Edington were the same three that had been previously discovered, plus one additional address in Grand Rapids, Michigan, which was associated with the Grand Rapids Home for Veterans. However, plaintiff took no further action in attempting to serve Edington with process.
Due process requires that a defendant be informed of an action against him or her using the best means available under the circumstances. Bullington, 293 Mich App at 556. Indeed, " '[t]he fundamental requisite of due process of law is the opportunity to be heard . . . . This right to be heard has little reality or worth unless one is informed that the matter is pending . . . .' " Id., quoting Lawrence M Clarke, Inc v Richco Constr, Inc, 489 Mich 265, 274; 803 NW2d 151 (2011) (alterations in original). The provisions in the Michigan Court Rules governing service of process are intended to satisfy this requirement. MCR 2.105(J)(1). Compliance with these provisions satisfies the constitutional requirement of " 'notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.' " Bullington, 293 Mich App at 556, quoting Mullane v Central Hanover Bank & Trust Co, 339 US 306, 314; 70 S Ct 652; 94 L Ed 865 (1950).
Ordinarily, process may be served on an individual defendant by delivering a summons and a copy of the complaint to the defendant personally or by sending such documents to the defendant by registered or certified mail. MCR 2.105(A)(1) and (2). However,
[o]n a showing that service of process cannot reasonably be made as provided by this rule, the court may by order permit service of process to be made in any other manner reasonably calculated to give the defendant actual notice of the proceedings and an opportunity to be heard. [MCR 2.105(I)(1).]Alternative service of process cannot be used before entry of a court order permitting it. MCR 2.105(I)(3). To obtain permission,
[a] request for an order under the rule must be made in a verified motion dated not more than 14 days before it is filed. The motion must set forth sufficient facts to show that process cannot be served under this rule and must state the defendant's address or last known address, or that no address of the defendant is known. If the name or present address of the defendant is unknown, the moving party must set forth facts showing diligent inquiry to ascertain it. [MCR 2.105(I)(2).]
"A truly diligent search for an absentee defendant is absolutely necessary to supply a fair foundation for and legitimacy to the ordering of substituted service. '[W]hen notice is a person's due, process which is a mere gesture is not due process.' " Krueger v Williams, 410 Mich 144, 168; 300 NW2d 910 (1981), quoting Mullane, 339 US at 315 (alteration in original). The Krueger Court, holding that the plaintiff had satisfied the diligent inquiry requirement, noted that the plaintiff had demonstrated that "there were no other means available to her to effect service of process except by appealing to the court, in its discretion, to allow her" to use alternative means of service. Krueger, 410 Mich at 163 (applying GCR 1963, 105.8). In contrast, in Bullington, 293 Mich App at 559, this Court held that the plaintiff had failed to demonstrate the requisite diligent inquiry when he failed to provide information indicating that personal service would have been ineffective. The plaintiff's motion for alternate service stated that service was attempted and refused at the defendants' last known address, but failed to allege that plaintiff actually did not know the defendants' addresses or that a diligent effort was made to ascertain the correct addresses. Id. Similarly, in State Farm Mut Auto Ins Co, 486 Mich at 856-857, the Michigan Supreme Court held that the plaintiff failed to demonstrate the necessary diligent inquiry under MCR 2.105(I)(2) when it only attempted to serve the defendant by mail at the defendant's brother's address and the address designated on the registration of a vehicle involved in the suit.
The details of the plaintiff's efforts to serve the defendant with process were outlined in State Farm Mut Auto Ins Co v Hudson, unpublished per curiam opinion of the Court of Appeals, issued October 7, 2008 (Docket No. 277300), p 2.
We cannot conclude that plaintiff satisfied the diligent inquiry requirement of MCR 2.105(I)(2). The record does not indicate that plaintiff made any continuing efforts to serve Edington with process in the manner provided by MCR 2.105(A) after the instant lawsuit was filed. Even before this action was commenced, plaintiff never attempted to personally serve Edington at the Kalamazoo address, although he did attempt to serve process by certified mail sent to that location during the pendency of one of the earlier proceedings. Plaintiff also failed to attempt service of process in any manner at the two Grand Rapids addresses determined to have been associated with Edington. Had plaintiff made all the effort of "one desirous of actually informing the absentee" of the case against him, see Mullane, 339 US at 315, plaintiff may well have found Edington at one of these addresses. In short, plaintiff has not shown that "there were no other means available . . . to effect service of process except by appealing to the court, in its discretion, to allow" plaintiff to use alternative means of service. Krueger, 410 Mich at 163.
B. DECLARATORY JUDGMENT
Plaintiff next argues that the trial court erred when it denied plaintiff's motion to amend the complaint to include a claim for declaratory judgment on the issues of Edington's liability and the amount of damages owed. We disagree. This Court reviews a trial court's denial of a motion to amend the complaint for an abuse of discretion. Diem v Sallie Mae Home Loans, Inc, 307 Mich App 204, 215-216; 859 NW2d 238 (2014).
Plaintiff sought leave to amend the complaint under MCR 2.118(A)(2), as the time under which plaintiff could have done so as a matter of course had already passed. Ordinarily, motions to amend a complaint are freely granted. Diem, 307 Mich App at 216. Even so, motions to amend may be denied for any of the following reasons:
(1) undue delay, (2) bad faith or dilatory motive on the part of the movant, (3) repeated failure to cure deficiencies by amendments previously allowed, (4) undue prejudice to the opposing party by virtue of allowance of the amendment, or (5) futility of the amendment. [Id., quoting Lane v KinderCare Learning Ctrs, Inc, 231 Mich App 689, 697; 588 NW2d 715 (1998) (emphasis added).]The parties agree that the first four exceptions do not apply in this case. However, plaintiff infers from the trial court's oral ruling that its motion was denied for futility, and Continental argues that the motion was properly denied on that basis. An amendment may be denied for futility if "(1) ignoring the substantive merits of the claim, it is legally insufficient on its face; (2) it merely restates allegations already made; or (3) it adds a claim over which the court lacks jurisdiction." PT Today, Inc v Comm'r of Office of Fin & Ins Servs, 270 Mich App 110, 143; 715 NW2d 398 (2006) (citations omitted).
Under MCR 2.605(A)(1), "[i]n a case of actual controversy within its jurisdiction, a Michigan court of record may declare the rights and other legal relations of an interested party seeking a declaratory judgment, whether or not other relief is or could be sought or granted." The existence of an actual controversy is a necessary prerequisite to invocation of declaratory relief. PT Today, Inc, 270 Mich App at 140. An actual controversy typically exists
where a declaratory judgment is necessary to guide a plaintiff's future conduct in order to preserve the plaintiff's legal rights. [W]hat is essential to an actual controversy under the declaratory judgment rule is that plaintiff plead and prove facts which indicate an adverse interest necessitating a sharpening of the issues raised. Generally, where the injury sought to be prevented is merely hypothetical, a case of actual controversy does not exist. [Citizens for Common Sense in Gov't v Attorney General, 243 Mich App 43, 55; 620 NW2d 546 (2000) (citations and quotation marks omitted).]
We disagree with plaintiff's contention that the trial court erred by denying leave to amend the complaint to add an additional claim for a declaratory judgment against Continental because the proposed amendment did not involve an actual controversy existing between plaintiff and Continental. Plaintiff attempted to obtain a declaration that Edington was liable, on the basis of his past conduct, for the losses suffered by plaintiff's decedent. Thus, while an actual controversy may exist, the controversy is between plaintiff and Edington—not Continental. This is simply not a situation in which the parties require clarification of their rights in order to avoid wrongful conduct or a resulting injury. The alleged misconduct and resulting damages have already occurred and the parties do not require guidance concerning their future actions in order to preserve their rights. Because an action for declaratory judgment against Continental was not the appropriate vehicle for establishing Edington's liability to plaintiff's decedent, plaintiff's proposed amendment would have been futile. Accordingly, the trial court did not err by denying leave to amend.
We recognize that the insurance policy at issue could potentially require Continental to indemnify Edington for the damages sustained by plaintiff's decedent. However, that obligation is entirely contingent upon a finding of liability on Edington's part in the first place, see South Macomb Disposal Auth v American Ins Co, 225 Mich App 635, 692; 572 NW2d 686 (1997) ("An insurer is not obligated to indemnify or pay damages to another until one's liability for the injury has been established.") (quotation marks and citation omitted), and plaintiff has not cited any authority to support its contention that Edington's liability can be determined by way of a declaratory action against Edington's insurance carrier, rather than Edington himself. Plaintiff's reliance on Allstate Ins Co v Hayes, 442 Mich 56; 499 NW2d 743 (1993), and Auto-Owners Ins Co v Keizer-Morris, Inc, 284 Mich App 610; 773 NW2d 267 (2009), is completely misplaced. Although both cases involved an injured party's right to participate in an action seeking declaratory relief when the insured tortfeasor was absent, the declaratory actions in those cases sought a determination as to whether coverage was available under the respective insurance policies. Allstate Ins Co, 442 Mich at 63 ("The precise issue is whether [the injured party], as a joined defendant, has standing in a declaratory action instituted by the insurer to pursue the action to a final determination of policy coverage.") (emphasis added); Auto-Owners Ins Co, 284 Mich App at 614-615 ("It is but a minor extension of Allstate to recognize the standing of an injured person to intervene in a declaratory action concerning insurance coverage for the alleged tortfeasor.") (emphasis added). Thus, while these cases would seemingly support plaintiff's right to contest Continental's denial of coverage, they do not permit plaintiff to use a declaratory action against Continental as a means of establishing Edington's underlying liability to plaintiff's decedent.
Indeed, plaintiff's complaint in this matter also included an appropriate claim for declaratory relief establishing the availability of insurance coverage in the event that plaintiff prevailed on its claims against Edington. --------
Lastly, having concluded that plaintiff's proposed amendment did not involve an actual controversy between plaintiff and Continental, we find it unnecessary to resolve plaintiff's remaining arguments that Edington was not a necessary party to the proposed additional claim and that the proposed amendment was not barred by application of MCL 500.3030.
Affirmed.
/s/ William B. Murphy
/s/ Elizabeth L. Gleicher
/s/ Anica Letica