FILED JUNE 30, 2011 

S T A T E O F M I C H I G A N 

SUPREME COURT 

LAWRENCE M. CLARKE, INC., 

 Plaintiff-Appellee, 

v No. 140683 

RICHCO CONSTRUCTION, INC., and 

RONALD J. RICHARDS, JR., 

 Defendants-Appellants. 

BEFORE THE ENTIRE BENCH 

CAVANAGH, J. 

The issue in this case is whether the trial court abused its discretion when it 

concluded that defendants were personally notified of the default judgment against them 

and denied defendants’ motion to set aside the judgment. We hold that the trial court 

abused its discretion and that defendants are entitled to relief from the judgment under 

MCR 2.612(B) because (1) personal jurisdiction over defendants was necessary and 

Michigan Supreme Court

Lansing, Michigan

Opinion Chief Justice: 

Robert P. Young, Jr. 

Justices: 

Michael F. Cavanagh 

Marilyn Kelly 

Stephen J. Markman 

Diane M. Hathaway 

Mary Beth Kelly 

Brian K. Zahra 
2

apparently acquired,1

 (2) defendants had no knowledge of the action pending against 

them, (3) defendants entered an appearance within one year after the final judgment, (4) 

defendants have presented facts and arguments showing meritorious defenses to 

plaintiff’s breach of contract and fraud claims, and (5) granting defendants relief from the 

judgment will not prejudice any innocent third persons. Accordingly, we reverse and 

remand the case to the trial court for further proceedings consistent with this opinion. 

I. FACTS AND PROCEEDINGS 

The lawsuit at issue in this case arose out of a contractual relationship between 

plaintiff and defendant Richco Construction, Inc. In 2003 and 2004, plaintiff was 

working on a residential subdivision construction project in Monroe County. In the 

summer of 2003, plaintiff hired Richco as a subcontractor to work on the sewer system 

for the project. There was no written contract. 

It is undisputed that Richco’s corporate filings with the state of Michigan’s 

Department of Labor and Economic Growth (DLEG) (now the Department of Licensing 

and Regulatory Affairs) indicated that defendant Ronald Richards, Jr., was the 

corporation’s president and treasurer and that Thomas Richards2

 was the corporation’s 

 

1

 Although defendants contest the trial court’s personal jurisdiction over them, we will 

assume arguendo that the trial court acquired personal jurisdiction for purposes of 

applying MCR 2.612(B) in this opinion for the reasons discussed in part III(A) of this 

opinion. 

2

 After this Court heard oral arguments on defendants’ application for leave to appeal, 

plaintiff and Thomas agreed to a settlement, and Thomas withdrew his application for 

leave to appeal. Thus, Thomas is no longer a party to this case, and this opinion has no 

effect between plaintiff and Thomas. 
3

secretary and vice president. Further, the corporate filings identified Ronald as Richco’s 

resident agent and the corporation’s registered office address as 27734 Ecorse Road in 

Romulus, Michigan. Finally, the address shown for Ronald and Thomas as corporate 

officers was also 27734 Ecorse Road in Romulus. 

Richco’s work on the sewer system did not satisfy the governing municipality, and 

after Richco’s efforts to repair the work were not satisfactory, plaintiff contracted with 

another party to finish the work, delaying the project according to plaintiff. Defendants 

claim that Richco was never fully paid and, at some point, Richco recorded a construction 

lien, which plaintiff claims caused further problems. 

Plaintiff filed a breach of contract and fraud complaint on July 19, 2006, in the 

Monroe Circuit Court, but plaintiff was not able to serve any of the defendants. 

Plaintiff’s process server attempted to serve the complaint at Richco’s business address 

on file with DLEG, but no one was at that address. The process server discovered that 

Richco had vacated the listed address and had not left a forwarding address. A motor 

home was parked in the parking lot at the Ecorse Road address, and another tenant in the 

area told the process server that it might belong to one of the individual defendants. 

Plaintiff’s counsel used the license plate on the motor home to obtain a phone number, 

but the person who answered denied that the motor home was connected to either 

individual defendant. In October 2006, the process server investigated a lead about a 

Ronald Richards in Waterford, Michigan, but that person was not the defendant in this 

case. Plaintiff’s complaint was dismissed without prejudice on October 30, 2006, 

because plaintiff could not effect service. 
4

After the complaint was dismissed, plaintiff continued its efforts to locate 

defendants by contacting the Secretary of State and again searching DLEG’s files. These 

efforts were unsuccessful, however, and plaintiff refiled the same complaint on January 

7, 2007, along with a motion to allow alternative service. Plaintiff explained its previous 

efforts to locate defendants and noted that service was attempted at Richco’s registered 

office without success. The trial court allowed alternative service by (1) posting the 

documents at Richco’s registered address, (2) mailing the documents to the registered 

address for Thomas, (3) mailing the documents to the registered address for Ronald, and 

(4) publishing a copy of the order in a Monroe County newspaper pursuant to MCR 

2.106. After there was no response to the notice, the court clerk entered a default against 

all three defendants on April 5, 2007. Notice of the default was sent by regular and 

certified mail to Richco, Thomas, and Ronald at the Ecorse Road address and was 

published in a Monroe County newspaper. 

On September 28, 2007, plaintiff moved for entry of a default judgment, claiming 

approximately $244,000 in damages, plus the cost of a bond, “contractual interest,” 

$8,000 in attorney fees, and more than $15,000 in prejudgment interest. After a hearing 

on October 10, 2007, the trial court granted plaintiff’s motion and signed a default 

judgment ordering that Richco, Ronald, and Thomas were jointly liable for a total of 

$371,598.37. 

Plaintiff located defendants after the default judgment was entered and, on April 

12, 2008, Ronald’s and Thomas’s personal vehicles were seized from their homes in 

Wayne County. According to defendants, this was how they first became aware of 

plaintiff’s complaint and the default judgment. 
5

Four days later, on April 16, 2008, defendants filed an emergency motion to set 

aside the default judgment, and defense counsel made a special appearance. The motion 

was not accompanied by an affidavit, but defense counsel attempted to provide signed 

affidavits from Thomas and Ronald at the hearing on the motion held on April 22, 2008. 

The trial court refused to consider the affidavits and denied defendants’ motion to set 

aside the default judgment, noting that defendants had not filed an affidavit of factual and 

meritorious defense as required by MCR 2.603(D)(1). Defendants moved for 

reconsideration and included more detailed supporting affidavits from Thomas and 

Ronald, but the trial court denied reconsideration without a hearing. 

The Court of Appeals denied defendants’ application for leave to appeal, but this 

Court remanded for consideration as on leave granted. Lawrence M Clarke, Inc v Richco 

Constr, Inc, 481 Mich 939 (2008). On remand, the Court of Appeals affirmed the trial 

court’s decision to deny the motion to set aside the default judgment. Lawrence M 

Clarke, Inc v Richco Constr, Inc, unpublished opinion per curiam of the Court of 

Appeals, issued November 17, 2009 (Docket No. 285567). The Court of Appeals 

reasoned that defendants’ motion to set aside the default judgment was properly denied 

because defendants had failed to file a timely affidavit in support of their motion. 

Defendants sought leave to appeal in this Court, and this Court ordered oral argument on 

whether to grant the application or take other peremptory action. Lawrence M Clarke, 

Inc v Richco Constr, Inc, 486 Mich 1071 (2010). 

II. STANDARD OF REVIEW 

A trial court’s decision regarding a motion to set aside a default judgment is 

reviewed for an abuse of discretion. Alken-Ziegler, Inc v Waterbury Headers Corp, 461 
6

Mich 219, 227; 600 NW2d 638 (1999). When construing a court rule, this Court employs 

the legal principles governing the application and construction of statutes. Grievance 

Administrator v Underwood, 462 Mich 188, 193-194; 612 NW2d 116 (2000). 

III. ANALYSIS 

A trial court may grant relief from a judgment if the defendant was not personally 

notified of an action pending against the defendant and several additional requirements 

are satisfied. Specifically, MCR 2.612(B) states: 

A defendant over whom personal jurisdiction was necessary and 

acquired, but who did not in fact have knowledge of the pendency of the 

action, may enter an appearance within 1 year after final judgment, and if 

the defendant shows reason justifying relief from the judgment and 

innocent third persons will not be prejudiced, the court may relieve the 

defendant from the judgment, order, or proceedings for which personal 

jurisdiction was necessary, on payment of costs or on conditions the court 

deems just. 

Thus, defendants may be entitled to relief from the default judgment if (1) personal 

jurisdiction over defendants was necessary and acquired, (2) defendants in fact had no 

knowledge of the action pending against them, (3) defendants entered an appearance 

within one year after the final judgment, (4) defendants show a reason justifying relief 

from the judgment, and (5) granting defendants relief from the judgment will not 

prejudice innocent third persons. 

 As a preliminary matter, we acknowledge that defendants did not offer their 

affidavits of meritorious defense simultaneously with their motion to set aside the default 

judgment and that this arguable misstep was the foundation of the lower courts’ 

decisions. The lower courts, however, applied MCR 2.603(D)(1) in reaching their 
7

decisions. That rule permits a court to grant relief from a default judgment when, along 

with the fulfillment of other requirements, “an affidavit of facts showing a meritorious 

defense is filed.” We conclude that the lower courts’ reasoning is inapplicable to our 

analysis of MCR 2.612(B) because, unlike MCR 2.603(D)(1), MCR 2.612(B) does not 

expressly state that a defendant must provide an affidavit of meritorious defense. 

Therefore, we conclude that defendants may seek relief under MCR 2.612(B), and we do 

not opine about whether MCR 2.603(D)(1) requires that an affidavit of meritorious 

defense be filed simultaneously with a motion to set aside a default judgment.3

 

A. PERSONAL JURISDICTION 

A court “cannot adjudicate [an in personam] controversy without first having 

obtained jurisdiction [over the] defendant by service of process . . . .” Eisner v Williams, 

298 Mich 215, 220; 298 NW 507 (1941). A court must obtain personal jurisdiction over 

a defendant in order to “satisfy the due process requirement that a defendant be informed 

of an action by the best means available under the circumstances.” MCR 2.105(J)(1). 

“The 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 . . . .” Mullane v Central Hanover Bank & Trust Co, 339 US 306, 314; 70 S Ct 

 

3

 To the extent that defendants’ failure to offer their affidavits simultaneously with their 

motion creates any doubt that defendants are entitled to relief from the default judgment, 

our holding is consistent not only with the plain language of MCR 2.612(B), but also 

with the general principle that “[d]efaults are not favored and doubts generally should be 

resolved in favor of the defaulting party.” Wood v DAIIE, 413 Mich 573, 586; 321 

NW2d 653 (1982). 
8

652; 94 L Ed 865 (1950) (quotation marks and citation omitted). Personal notice, 

however, is not necessary to satisfy due process requirements in all cases. Jacob v 

Roberts, 223 US 261, 265; 32 S Ct 303; 56 L Ed 429 (1912). Rather, under MCR 

2.105(I)(1), “[o]n a showing that service of process cannot reasonably be made as 

provided by [MCR 2.105], 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.” As MCR 2.105(J)(1) explains, the 

provisions of the court rules related to service of process are “intended to satisfy the due 

process requirement that a defendant be informed of an action by the best means 

available under the circumstances.” See, also, Krueger v Williams, 410 Mich 144, 156; 

300 NW2d 910 (1981) (explaining that “[s]ervice may be made personally on a 

defendant or, if this is not possible, constructive service is permitted”), and Mullane, 339 

US at 314 (explaining that notice that is “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” is sufficient to satisfy due process). But while 

personal service is not always required, “[t]he requirement of notice so as to afford an 

opportunity to be heard is clearly the heart” of Michigan’s substituted-service court rule. 

Krueger, 410 Mich at 158.4

 

 

4

 In Krueger, we considered the predecessor of MCR 2.105(I), GCR 1963, 105.8, which 

was substantively similar to MCR 2.105(I)(1). 
9

Because defendants were parties to the action in this case, personal jurisdiction over 

them was required to satisfy due process. Defendants argue that the trial court failed to 

acquire personal jurisdiction over them because plaintiff’s efforts to provide them with 

notice were so lacking that they were deprived of notice and an opportunity to be heard. 

Nevertheless, for the purpose of this appeal, we assume arguendo that the trial court 

acquired personal jurisdiction over defendants because we conclude that defendants are 

entitled to relief under MCR 2.612(B) and this Court does not decide cases on 

constitutional grounds when doing so can be avoided. People v Quider, 172 Mich 280, 

288-289; 137 NW 546 (1912). 

B. DEFENDANTS’ KNOWLEDGE OF THE ACTION 

As previously stated, defendants must also show that they did not “in fact have 

knowledge of the pendency of the action” in order to be entitled to relief under MCR 

2.612(B). This Court has not considered what is required for a party to have knowledge 

in fact under MCR 2.612(B), but this Court has generally taken care to acknowledge that 

a difference in specificity exists between the phrase “actual knowledge” and mere 

“knowledge.” See, e.g., Travis v Dreis & Krump Mfg Co, 453 Mich 149, 173; 551 

NW2d 132 (1996) (opinion by BOYLE, J.) (explaining that when “the Legislature [is] 

careful to use the term ‘actual knowledge,’ and not the less specific word ‘knowledge,’ 

we determine that the Legislature meant that constructive, implied, or imputed 

knowledge is not enough”). 

But MCR 2.612(B) does not simply use the word “knowledge”; rather, it states that 

a defendant may be relieved of a judgment if the defendant “did not in fact have
10

knowledge of the pendency of the action . . . .” (Emphasis added.) “In fact” is defined as 

“[a]ctual or real; resulting from the acts of parties rather than by operation of law.” 

Black’s Law Dictionary (9th ed). This definition further distinguishes actual knowledge 

from constructive or implied knowledge of the pending action. Thus, we conclude that 

the plain language of MCR 2.612(B) permits a defendant to seek relief from a default 

judgment as long as the defendant did not have actual knowledge of the pending action. 

Our conclusion is supported by the available caselaw and supplemental authority. 

In Nat’l Car Rental v S & D Leasing, Inc, 89 Mich App 364, 368; 280 NW2d 529 (1979), 

the Court of Appeals concluded that lack of actual notice was sufficient to satisfy the 

knowledge-in-fact requirement.5

 In support of its conclusion that knowledge in fact is 

synonymous with actual knowledge, the Court of Appeals in Nat’l Car cited 3 Honigman 

& Hawkins, Michigan Court Rules Annotated (2d ed), p 180, which explained that “[t]he 

intent of [GCR 1963, 528.2] is that failure to receive actual notice is itself sufficient 

ground for relief from default judgment . . . .” (Emphasis added.) Notably, more recent 

 

5

 In Nat’l Car, the Court of Appeals applied GCR 1963, 528.2, the predecessor of MCR 

2.612(B). The language used in MCR 2.612(B) and GCR 1963, 528.2 is nearly identical. 

GCR 1963, 528.2 stated: 

Any defendant over whom personal jurisdiction was necessary and 

acquired but who did not in fact have knowledge of the pendency of the 

action may, at any time within 1 year after final judgment, enter his 

appearance, and if he shows reason justifying relief from the judgment and 

innocent third persons will not be prejudiced, the court may relieve him 

from the judgment, order, or proceedings as to which personal jurisdiction 

was necessary, on payment of such costs thereon or such creditors as the 

court deems just. 
11

supplemental authority also explains that failure to receive actual notice is sufficient to 

satisfy the knowledge-in-fact requirement of MCR 2.612(B). See 3 Longhofer, Michigan 

Court Rules Practice (5th ed), § 2612.8, p 505. 

In this case, defendants did not have actual knowledge, or knowledge in fact, of 

the action pending against them because defendants were never personally served with a 

summons and complaint and stated in their affidavits6

 that they only became aware of the 

action against them when personal property was seized from Thomas’s and Ronald’s 

homes on April 12, 2008. Also, during oral argument before this Court, plaintiff’s 

counsel impliedly conceded that defendants did not have actual notice of plaintiff’s action 

against defendants when he argued that constructive notice is sufficient to bar relief under 

MCR 2.612(B). 

 

6

 Despite the trial court’s refusal to consider defendants’ affidavits as part of defendants’ 

motion to set aside the default judgment under MCR 2.603(D)(1), it is proper for this 

Court to consider the affidavits as part of our analysis of MCR 2.612(B). To begin with, 

there is no requirement that an affidavit of meritorious defense be filed at all, let alone 

that it must be filed simultaneously with the motion for relief from judgment under MCR 

2.612(B). Also, MCR 2.119(C)(1) permits a court to modify the period for service of 

affidavits “for good cause.” In this case, good cause existed because defendants did not 

unreasonably delay production of the affidavits: the motion to set aside the judgment was 

filed in an emergency fashion only 4 days after defendants first learned of the judgment 

against them, and defendants provided affidavits at the hearing on their motion to set 

aside the judgment, which was held 10 days after the motion was filed. Moreover, 

Thomas was out of the state for work during the period between defendants’ first notice 

of the judgment and the filing of the motion. Finally, defendants also provided more 

detailed affidavits with their motion for reconsideration of the trial court’s order denying 

the motion to set aside the default judgment. Therefore, we conclude that defendants’ 

affidavits of meritorious defense may be considered as part of our application of MCR 

2.612(B). 
12

Finally, plaintiff’s attempts to serve defendants were unlikely to provide 

defendants with actual knowledge of the action against them, even under the court rules 

permitting substituted service. Under MCR 2.105(I)(2), a motion requesting substituted 

service 

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. 

“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,” Krueger, 410 Mich 

at 168, and substituted service “is not an automatic right,” id. at 159. Further, even if a 

motion for substituted service is granted, MCR 2.105(I)(1) requires that the substituted 

service be “reasonably calculated to give the defendant actual notice of the proceedings 

and an opportunity to be heard.” Thus, substituted service must be “‘reasonably certain 

to inform those affected,’” and “the means employed to notify interested parties must be 

more than a mere gesture; they must be means that one who actually desires to inform the 

interested parties might reasonably employ to accomplish actual notice.” Sidun v Wayne 

Co Treasurer, 481 Mich 503, 509-510; 751 NW2d 453 (2008), quoting Mullane, 339 US 

at 315. 

 In this case, even assuming that plaintiff’s attempt to personally serve defendants 

satisfied the diligent-inquiry requirement for seeking substituted service, the method of 

substituted service used was inadequate to provide defendants with actual knowledge of 

the action against them. Three of the trial court’s four requirements involved mailing 

service to the address that the trial court and plaintiff already knew was no longer a 
13

current address for defendants. And the trial court’s fourth requirement, publishing a 

copy of the order in a Monroe County newspaper, was also unlikely to succeed given the 

significant limitations of publication alone as a successful form of providing any notice, 

let alone actual notice. See Dow v Michigan, 396 Mich 192, 207, 210; 240 NW2d 450 

(1976) (stating that publication is unlikely to provide notice), and Mullane, 339 US at 

315-317 (stating that publication alone is not a reliable means of providing notice). On 

the other hand, we have previously concluded that when “the specific whereabouts of a 

person is unknown, service of process by publication may be the most practicable and 

adequate method of service available.” Krueger, 410 Mich at 166; see, also, Sidun, 481 

Mich at 510-512 (discussing Mullane, 339 US 306, and Jones v Flowers, 547 US 220; 

126 S Ct 1708; 164 L Ed 2d 415 [2006], and noting that, depending on any “unique 

information” about the intended recipient and the specific circumstances and conditions 

of the case, service by publication may be constitutionally sufficient with regard to 

parties whose addresses are unknown). Thus, it cannot be said with certainty that 

plaintiff’s efforts were insufficient to provide constructive knowledge that passed 

constitutional muster. But in this case, publication in a Monroe County newspaper was 

particularly unlikely to provide defendants with actual knowledge of the action against 

them, given that defendants resided in Wayne County and performed the work in Monroe 

County in 2004 at the latest and that the advertised notice was not published in the 

newspaper until 2007.7

 

7

 Although MCR 2.106(D)(1) requires that notice be published in a newspaper in the 

county where the defendant resides, publication in the Monroe County newspaper 

arguably satisfied that requirement with respect to Richco despite the fact that Richco 
14

 Thus, although plaintiff’s efforts may have been adequate to satisfy the 

requirements for granting a motion for substituted service and the subsequent substituted 

service may have been enough to provide defendants with sufficient constructive

knowledge of the action against them to satisfy MCR 2.105(I)(1), we conclude that 

plaintiff’s efforts were inadequate to provide defendants with actual knowledge as 

required by MCR 2.612(B). Thus, we conclude that defendants satisfied this requirement 

for relief from the default judgment under MCR 2.612(B). 

C. APPEARANCE WITHIN ONE YEAR AFTER FINAL JUDGMENT 

Next, under MCR 2.612(B), defendants must have entered an appearance within one 

year after the final judgment. A default judgment is a final judgment. Allied Electric 

Supply Co, Inc v Tenaglia, 461 Mich 285, 288; 602 NW2d 572 (1999).8

 In this case, the 

default judgment against the defendants was entered on October 10, 2007, when the trial 

court granted plaintiff’s motion and signed the default judgment. On April 16, 2008, 

defense counsel made a special appearance and filed an emergency motion to set aside 

the default judgment. On April 22, 2008, the trial court held a hearing on defendants’ 

 

was registered in Wayne County because when a corporation does not maintain its 

registered office, the corporation is “deemed to have a place of residence in the county 

where it exercises its corporate powers and transacts its business.” Flewelling v Prima 

Oil Co, 291 Mich 281, 285; 289 NW 160 (1939). But because Ronald and Thomas are 

not corporations, and both lived in Wayne County, it is unlikely that publication in 

Monroe County was sufficient to provide actual notice to the individual defendants. 

8

 Although the two dissenting justices in Allied Electric, 461 Mich at 291-292 (MARILYN 

KELLY, J., dissenting), continue to adhere to their position in that case, the disagreement 

between the majority and dissenting positions in Allied Electric is of no moment in this 

case. 
15

motion. Thus, defendants made an appearance well within one year after the default 

judgment. 

D. REASON JUSTIFYING RELIEF FROM THE JUDGMENT 

Defendants also must show “reason justifying relief from the judgment . . . .” MCR 

2.612(B). This Court has not previously considered what is required to justify relief in 

the context of this court rule. However, it is clear that a defendant seeking relief under 

MCR 2.612(B) need not show mistake, inadvertence, surprise, excusable neglect, newly 

discovered evidence, fraud, misrepresentation, or other misconduct of an adverse party 

because MCR 2.612(C) provides for relief from a judgment on those grounds. Indeed, 

MCR 2.612(C)(3) expressly states that subrule (C) “does not limit the power of a court to 

entertain an independent action to relieve a party from a judgment, order, or proceeding; 

[or] to grant relief to a defendant not actually personally notified as provided in subrule 

(B) . . . .” 

In one of the few published opinions applying either MCR 2.612(B) or its 

predecessor, GCR 1963, 528.2, the Court of Appeals in Nat’l Car, 89 Mich App at 368-

369, relied on Honigman & Hawkins, p 180, to provide further clarification of the 

requirement of a “reason justifying relief” and concluded that a defendant must only 

show that it did not have actual notice of the action and that a meritorious defense to the 

action exists. Nat’l Car’s conclusion is further supported by Longhofer, § 2612.8, p 505, 

which explains that 

[t]he requirement of showing “reason justifying relief” was intended 

substantially to restate the requirement of “showing a meritorious defense” 

applied in connection with setting aside default judgments. . . . [F]ailure to 
16

receive actual notice is itself sufficient ground for relief of default 

judgment, if the defendant can show that he or she has a meritorious 

defense . . . . 

This interpretation of what is required to satisfy MCR 2.612(B) is consistent with the 

other court rules addressing relief from a default judgment. Under MCR 2.603(D)(1), a 

party seeking to set aside a default judgment must satisfy two separate and distinct 

requirements: (1) good cause for the failure to respond to the complaint and (2) a 

meritorious defense. Alken-Ziegler, 461 Mich at 229. However, MCR 2.603(D) states 

twice that MCR 2.612 provides an exception to its requirements for setting aside a 

default judgment. MCR 2.603(D)(2) (“Except as provided in MCR 2.612 . . . .”); MCR 

2.603(D)(3) (“In addition, the court may set aside a default and a default judgment in 

accordance with MCR 2.612.”). Thus, we conclude that a defendant may satisfy the 

requirement of a “reason justifying relief from the judgment” by showing that he or she 

(1) did not have actual notice of the action and (2) has a meritorious defense. 

In this case, as previously explained, defendants did not have actual notice of the 

action. See part III(B). Defendants have also presented facts and arguments showing 

meritorious defenses to plaintiff’s breach of contract and fraud claims sufficient to justify 

relief from the default judgment. 

By forcefully contesting the damages awarded to plaintiff, defendants have 

presented facts showing a meritorious defense to plaintiff’s contract claim sufficient to 

justify relief from the judgment under MCR 2.612(B). “In actions for breach of 

contract, . . . in order to recover substantial damages the plaintiff must offer evidence 

from which the loss can be computed with reasonable certainty.” Vandenberg v Slagh, 
17

150 Mich 225, 229; 114 NW 72 (1907). In this case, the only support for the contract 

damages award of more than $370,000 was the testimony of a single witness who was 

employed by plaintiff. According to the record, that hearing was conducted over the 

course of six minutes, and no documentary evidence supporting the witness’s testimony 

regarding the contract damages was introduced. Furthermore, the witness provided no 

support for the award of contractual interest, prejudgment interest, attorney fees, or costs. 

Rather, the only support for those damages was the statements of plaintiff’s counsel on 

the record. Indeed, plaintiff’s counsel conceded at oral argument before this Court that 

“[t]here was no documentary evidence presented to the trial court . . . .” In fact, the only 

explanation plaintiff’s counsel offered to support plaintiff’s claim for contractal interest 

in this oral contract case was that it was his “understanding . . . that the contract interest 

was basically agreed upon by the parties . . . .” The documentary evidence in the record 

supporting the damages award is insufficient to allow calculation of the damages with 

reasonable certainty and, thus, the individual and corporate defendants in this case have a 

meritorious defense to plaintiff’s breach of contract claim. 

Defendants have also noted several fundamental deficiencies in plaintiff’s fraud 

claim that constitute a meritorious defense to those claims. Generally, in order to 

establish an actionable fraud claim, a plaintiff must show 

(1) [t]hat defendant made a material representation; (2) that it was false; (3) 

that when he made it he knew it was false, or made it recklessly, without 

any knowledge of its truth and as a positive assertion; (4) that he made it 

with the intention that it should be acted upon by plaintiff; (5) that plaintiff 

acted in reliance upon it; and (6) that he thereby suffered injury. [Scott v 

Harper Recreation, Inc, 444 Mich 441, 446 n 3; 506 NW2d 857 (1993) 

(quotation marks and citations omitted).] 
18

Furthermore, fraud requires a misrepresentation about the past or present. Hi-Way Motor 

Co v Int’l Harvester, 398 Mich 330, 336, 339; 247 NW2d 813 (1976). Finally, MCR 

2.112(B)(1) requires that fraud allegations be stated with particularity. 

We conclude that defendants have presented sufficient facts showing a meritorious 

defense against plaintiff’s fraud allegations given that plaintiff may not have stated its 

fraud claim with particularity under MCR 2.112(B)(1) because plaintiff did not allege in 

its complaint that defendants made a misrepresentation about the past or the present. 

Instead, the support for plaintiff’s fraud allegation addressed only what defendants 

“would” do in the future. Furthermore, plaintiff’s complaint only referred to Thomas’s 

and Ronald’s conduct; therefore, it appears that there may be no basis for a fraud claim 

against defendant Richco. In addition, defendants’ argument that plaintiff’s fraud 

allegations are merely mislabeled contract claims also represents a meritorious defense to 

the fraud claim because a plaintiff generally cannot maintain an action in tort for 

nonperformance of a contract. Ferrett v Gen Motors Corp, 438 Mich 235, 242; 475 

NW2d 243 (1991). Finally, defendants have presented an argument representing a 

meritorious defense to plaintiff’s claim that defendants fraudulently filed a construction 

lien on plaintiff’s property. Defendants argue that they filed the lien in accordance with 

the applicable laws only after plaintiff refused to pay them for the work that defendants 

had performed. Therefore, we conclude that defendants have presented facts and 

arguments representing meritorious defenses sufficient to satisfy the requirement of MCR 

2.612(B) that the defendant show a reason justifying relief from the judgment. 
19

E. PREJUDICE TO THIRD PARTIES 

Finally, defendants must show that “innocent third persons will not be prejudiced” if 

the default judgment is set aside. MCR 2.612(B). Because this case involves a contract 

dispute and all the parties to the contract were also parties to this action, it appears that no 

third parties would be prejudiced if the default judgment were to be set aside. Also, there 

is no evidence in the record that any third parties have an interest in this case. Thus, we 

conclude that this requirement is met. 

IV. CONCLUSION 

We hold that the trial court abused its discretion when it concluded that defendants 

were personally notified of the default judgment against them. We also hold that 

defendants are entitled to relief from the default judgment under MCR 2.612(B) because 

defendants satisfied each of the five elements within that court rule. Thus, we reverse 

and remand the case to the trial court for further proceedings consistent with this opinion. 

 Michael F. Cavanagh 

 Robert P. Young, Jr. 

 Marilyn Kelly 

 Stephen J. Markman 

 Mary Beth Kelly 

 Brian K. Zahra 
S T A T E O F M I C H I G A N 

SUPREME COURT 

LAWRENCE M. CLARKE, INC., 

 Plaintiff-Appellee, 

v No. 140683 

RICHCO CONSTRUCTION, INC., and 

RONALD J. RICHARDS, JR., 

 Defendants-Appellants. 

MARILYN KELLY, J. (concurring). 

I concur fully with the majority opinion. I would explicitly instruct trial courts 

that substituted service should not be permitted in cases like this one absent a showing 

that counsel made reasonable use of Internet search tools. I would add such a 

requirement by amending MCR 2.105(I). 

In 2011, electronic technology has greatly improved the likelihood of locating a 

defendant. How can someone establish that he or she has made a diligent but 

unsuccessful effort to locate another party unless, at a minimum, a cursory Internet search 

can be demonstrated? 

This case provides an apt illustration. In part by executing an Internet search, 

plaintiff was able to locate defendants in relatively short order after the default judgment 

was entered. Defendants demonstrated that a five-minute Google search for the 

individual defendants, even with the limited information available to plaintiff, would 

have led to their longtime home addresses. 

With these observations, I join the majority’s opinion. 

 Marilyn Kelly
S T A T E O F M I C H I G A N 

SUPREME COURT 

LAWRENCE M. CLARKE, INC., 

 Plaintiff-Appellee, 

v No. 140683 

RICHCO CONSTRUCTION, INC., and 

RONALD J. RICHARDS, JR., 

 Defendants-Appellants. 

HATHAWAY, J. (concurring). 

I agree with the majority that the trial court abused its discretion by failing to set 

aside the default judgment because defendants were entitled to relief from the judgment 

under MCR 2.612(B). The majority opinion “assume[s] arguendo” that personal 

jurisdiction was acquired over defendants.1

 I write separately because I do not believe 

that a court can properly determine whether defendants are entitled to relief under MCR 

2.612(B) without first establishing that personal jurisdiction was in fact acquired over the 

defendants. 

MCR 2.612(B) provides: 

A defendant over whom personal jurisdiction was necessary and 

acquired, but who did not in fact have knowledge of the pendency of the 

action, may enter an appearance within 1 year after final judgment, and if 

the defendant shows reason justifying relief from the judgment and 

innocent third persons will not be prejudiced, the court may relieve the 

 

1 Ante at 9. 
2

defendant from the judgment, order, or proceedings for which personal 

jurisdiction was necessary, on payment of costs or on conditions the court 

deems just. [Emphasis added.] 

The language of the rule is clear. In order to afford relief under MCR 2.612(B), 

the first issue that must be decided is whether personal jurisdiction was acquired over the 

defendant. If a court determines that personal jurisdiction was necessary and acquired, 

the court may provide relief, assuming the additional requirements of the rule are met. If 

the court determines that personal jurisdiction was not acquired, a party is not entitled to 

relief under MCR 2.612(B); rather, the judgment is void and the party may seek relief 

under MCR 2.612(C)(1)(d). The treatise Michigan Court Rules Practice explains: 

MCR 2.612(B) does not apply to cases in which the court lacked 

personal jurisdiction over the defendant, but such jurisdiction was required 

for entry of a valid judgment. In those cases the judgment is void and relief 

may be obtained at any time under MCR 2.612(C)(1)(d). [3 Longhofer, 

Michigan Court Rules Practice (5th ed), § 2612.8, p 505.] 

In this case, the facts as set forth in the majority opinion demonstrate that plaintiff 

made diligent efforts to locate and serve defendants. When plaintiff was unable to 

effectuate service, it properly applied to the trial court for substituted service, which the 

trial court appropriately allowed.2

 The trial court’s order allowing for substituted service 

was in accordance with the well-established procedures set forth in the court rules.3

 

Thus, substituted service on defendants was effectuated in accordance with the court 

rules. 

 

2

 MCR 2.105(I). 

3 Id.; MCR 2.106. 
3

Due process requires that service of process be reasonably calculated under the 

circumstances to provide the defendant with notice of the lawsuit.4

 However, due 

process does not require that actual notice be given in every case; instead, constructive 

notice is permitted.5

 The Court of Appeals correctly noted that because “the court rules 

pertaining to service of process are intended to satisfy due process requirements, a party 

who serves process consistently with those rules will, generally, comport with due 

process requirements. See MCR 2.105(J).”6

 There is nothing in the record to indicate 

that these defendants were not afforded due process. Accordingly, I would specifically 

hold that personal jurisdiction was in fact acquired over defendants, thus allowing the 

trial court to consider providing relief under MCR 2.612(B). 

In this case, all the requirements of MCR 2.612(B) had been met. Defendants’ 

motion was filed within one year of the judgment, defendants did not in fact have 

knowledge of the pendency of the action, defendants have shown reasons justifying relief 

from the judgment, and no innocent third persons will be prejudiced. Thus, the trial court 

abused its discretion by failing to set aside the default judgment, and defendants are 

entitled to relief. Therefore, I agree with the majority that this matter should be 

remanded to the trial court for further proceedings. 

 Diane M. Hathaway 

 

4

 See Krueger v Williams, 410 Mich 144, 156; 300 NW2d 910 (1981). 

5 Id. 

6 Lawrence M Clarke, Inc v Richco Constr, Inc, unpublished opinion per curiam of the 

Court of Appeals, issued November 17, 2009 (Docket No. 285567), p 3.