Court Opinion

ID: 2751373
Source: CourtListenerOpinion
Date Created: 2014-11-14 14:04:22.529153+00
Date Added: 2024-06-11T10:17:49.572348
License: Public Domain

STATE OF MICHIGAN

                             COURT OF APPEALS

BROOKS WILLIAMSON AND ASSOCIATES,                                    FOR PUBLICATION
INC.,                                                                November 13, 2014
                                                                     9:10 a.m.
               Plaintiff-Appellee,

v                                                                    No. 317122
                                                                     Wayne Circuit Court
MAYFLOWER CONSTRUCTION CO., d/b/a                                    LC No. 12-009114-CZ
MAYFLOWER CUSTOM HOMES, and
WILLIAM R. ELDRIDGE,

               Defendants-Appellants,
and

GREGORY J. SAFFADY, as court-appointed
receiver for WILLIAM R. ELDRIDGE,

               Intervenor.

Before: FITZGERALD, P.J., and WILDER and OWENS, JJ.

WILDER, J.

        Defendants, Mayflower Construction Company, d/b/a Mayflower Custom Homes
(“Mayflower”), and William R. Eldridge, appeal as of right an April 9, 2013 order by Wayne
Circuit Judge Kathleen Macdonald awarding a default judgment to plaintiff, Brooks Williamson
and Associates, Incorporated. We reverse and remand.

                                                  I

         This action arises from a contract for plaintiff to perform environmental consulting and
permit-application services for Mayflower’s neighborhood development construction project.
Plaintiff claimed that it provided the contracted for services, from June 2006 to November 2007,
but that Mayflower failed to pay monthly invoices, which eventually totaled $18,852.83, plus
costs and fees. Plaintiff further averred that, as a direct result of Mayflower’s repeated failure to
pay the invoices, plaintiff stopped providing additional services to Mayflower and did not submit
its final permit application.

      In March 2009, in a separate divorce case involving Mayflower’s owner, Eldridge, Judge
Deborah Ross Adams appointed Gregory J. Saffady as a receiver with the authority to preserve
                                                -1-
Eldridge’s property, assets and interests, including Mayflower. In the trial court’s order, Saffady
was “directed and authorized to . . . [i]nitiate, defend, compromise, adjust, intervene in, dispose
of, or become a party to any actions or proceedings in state, federal or foreign jurisdictions
necessary to . . . collect, protect, or increase the assets of [Eldridge.]”

         Plaintiff first learned that defendants were subject to receivership when it sent a demand
letter for payment of the invoices to Eldridge. On July 10, 2012, plaintiff filed the complaint in
the instant case alleging: (1) breach of contract, (2) open account/account stated claim, (3) unjust
enrichment, (4) quantum merit, (5) a violation of the Building Contract Fund, MCL 570.151 et
seq, (6) conversion and treble damages under MCL 600.2919a, (7) commingling, siphoning, and
misappropriating of funds, and disregard of corporate formalities by Eldridge, rendering
Mayflower a mere instrumentality of Eldridge, thus warranting the piercing of Mayflower’s
corporate veil, and (8) fraudulent transfer under MCL 566.31. The complaint was served on
Saffady, as receiver for defendants, and Christopher J. Nesi, as attorney for Eldridge.
Defendants never answered the complaint.

        Plaintiff filed a request for admissions, interrogatories, and production of documents on
January 23, 2013. In February 2013, Saffady responded that he could not admit or deny the
interrogatories and requests for admissions because he lacked knowledge as to the matters
addressed, and he could not produce documents because they were not provided to him by
Eldridge.

        On April 1, 2013, plaintiff filed a document captioned, “BROOKS WILLIAMSON AND
ASSOCIATES, INC.’s CASE EVALUATION SUMMARY” with the 3rd Circuit Court’s
Mediation Tribunal Association. The case evaluation summary was served both on Saffady and
on Eldridge’s attorney. In the text of that document, plaintiff argued inter alia that it was
entitled to a default judgment because defendants failed to defend the action under MCR 2.313.
Plaintiff also stated in the case evaluation summary that it was “filing a default and default
judgment contemporaneously with this brief.”

        On April 3, 2013, plaintiff requested that the court clerk enter a default against
defendants for failure to plead or otherwise defend as provided by law, but the clerk did not
honor the request. On April 9, 2013, Judge Kathleen Macdonald entered a default judgment for
plaintiff awarding $56,846.40. A proof of service indicates that plaintiff’s request for default
and the default judgment were served on Saffady, Saffady’s attorney, and Eldridge, through his
attorney, by mail on April 10, 2013, one day after Judge Macdonald entered the default
judgment.

        On April 15, 2013, Saffady’s attorney submitted a letter to the case evaluation panel,
stating in part that Eldridge had failed to cooperate with Saffady or provide Saffady any
information from which the receiver could develop a response to the allegations of the
complaint.

       On April 29, 2013, defendants filed a motion to set aside the entry of a default judgment,
arguing in part that Saffady had appeared in the action, and that plaintiff was therefore obligated,
and failed, to send notice to defendants of the request for a default judgment under MCR
2.603(B)(1)(a)(i). In an affidavit of meritorious defenses attached to the motion, Eldridge

                                                -2-
maintained that the allegations by plaintiff were false, that he did not conduct business in an
individual capacity and there was no basis to pierce the corporate veil, that plaintiff did not
complete the work Mayflower had asked it to perform (or at least failed to timely complete the
work), that plaintiff failed to communicate appropriately with Mayflower, and that Mayflower
did not benefit from any of plaintiff’s work. Eldridge further claimed that, because the work was
not completed, the lots in the neighborhood development lost value when the real estate market
declined.

        Plaintiff’s response to defendants’ motion urged the trial court to deny the motion to set
aside the default judgment. Plaintiff contended that Saffady elected not to expend receivership
resources to defend the action, that even though Eldridge’s attorney received a copy of all the
pleadings, Eldridge also failed to defend the action, and that default judgment was appropriate
when 10 months had passed without defendants answering the complaint. Plaintiff also argued
that defendants failed to satisfy the requirements for setting aside a default judgment, challenging
defendants’ claim that the default judgment should be set aside on the basis that defendants did
not receive notice of the request for a default judgment as required by MCR 2.603(B)(1)(a)(i).
Regarding the issue of notice, plaintiff first argued that defendants were not entitled to notice
because they did not appear in the action, the request for relief was the same as requested in the
complaint, and the complaint stated the specific amount demanded. Plaintiff argued in the
alternative that it did notify defendants of the intent to request a default judgment by stating in
the case evaluation summary filed with the mediation tribunal that it was also
contemporaneously filing the request for default and default judgment. Finally, plaintiff
maintained the general denials in Eldridge’s affidavit were insufficient to establish a meritorious
defense.

        Following oral argument, the trial court denied defendants’ motion to set aside the default
judgment. In its oral ruling denying the motion, the trial court held that defendants failed to
establish either good cause or a meritorious defense. It reasoned that Eldridge “had notice of
everything that was going on in this case. He failed to cooperate with the receiver in the divorce
case and in this case, which is why the default was entered. So there is no good cause here.”
The trial court did not specifically address any of defendants’ asserted meritorious defenses on
the record.

                                                 II

        Defendants first argue that the trial court erred by concluding they failed to establish
good cause to set aside the default judgment. Defendants contend that plaintiff not only failed to
personally serve the summons and complaint on defendants, but that plaintiff also failed to give
defendants proper notice of the filing of plaintiff’s request for entry of a default judgment. We
agree, in part.

                                                 A

       This Court reviews the trial court’s ruling on a motion to set aside the default judgment
for an abuse of discretion. Amco Builders & Developers, Inc v Team Ace Joint Venture, 469
Mich. 90, 97; 666 NW2d 623 (2003). “[A]lthough the law favors the determination of claims on
the merits, it has also been said that the policy of this state is generally against setting aside

                                                -3-
defaults and default judgments that have been properly entered.” Alken–Ziegler, Inc v
Waterbury Headers Corp, 461 Mich. 219, 229; 600 NW2d 638 (1999) (citations omitted).

       “The interpretation and application of court rules present questions of law,” Lamkin v
Engram, 295 Mich. App. 701, 707; 815 NW2d 793 (2012), and this court “interpret[s] court rules
using the same principles that govern statutory interpretation.” In re Sanders, 495 Mich. 394,
404; 852 NW2d 524 (2014). The goal in interpreting court rules is to “give[] effect to the rule
maker’s intent as expressed in the court rule’s terms, giving the words of the rule their plain and
ordinary meaning. If the language poses no ambiguity, this Court need not look outside the rule
or construe it, but need only enforce the rule as written.” Peterson v Fertel, 283 Mich. App. 232,
235-236; 770 NW2d 47 (2009) (citations and internal quotation marks omitted).

                                                  B

       Pursuant to MCR 2.603(D)(1), “[a] motion to set aside a default or a default judgment . . .
shall be granted only if good cause is shown and an affidavit of facts showing a meritorious
defense is filed.” ‘ “The good cause requirement . . . may be satisfied by demonstrating a
procedural irregularity or defect or a reasonable excuse for failing to comply with the
requirements that led to the default judgment.” ’ Bullington v Corbell, 293 Mich. App. 549, 560-
561; 809 NW2d 657 (2011), quoting ISB Sales Co v Dave’s Cakes, 258 Mich. App. 520, 533; 672
NW2d 181 (2003).

                                                  1

        Defendants’ claim that they were never served with the summons and complaint is
inconsistent with the record, and does not establish good cause to set aside the default judgment.
A court “cannot adjudicate [an in personam] controversy without first having obtained
jurisdiction [over the] defendant by service of process . . . .” Lawrence M Clark, Inc v Richco
Constr, Inc , 489 Mich. 265, 274; 803 NW2d 151 (2011), quoting Eisner v Williams, 298 Mich.
215, 220; 298 N.W. 507 (1941). MCR 2.105(H) provides, “Service of process on a defendant
may be made by serving a summons and a copy of the complaint on an agent authorized by
written appointment or by law to receive service of process.” Here, under the receivership order,
Saffady was a receiver for Eldridge and his businesses and he was authorized to “defend . . . any
actions or proceedings necessary to . . . collect, protect, or increase the assets of [Eldridge.]” The
receivership order therefore made Saffady an agent authorized by law to accept service of
process for defendants. Id. In this capacity, Saffady signed an acknowledgement of service.
Therefore, defendants received service of process. Despite defendants’ claim that, in addition to
service upon Saffady, defendants were also entitled to be personally served with the summons
and complaint, service on Saffady was sufficient under MCR 2.105(H), and defendants cannot
establish good cause to set aside the default judgment on this ground.

                                                  2

        Defendants’ claim that they did not receive proper notice regarding the request to enter a
default judgment, however, does establish good cause to set aside the default judgment. MCR
2.603(B)(1) provides, in relevant part:

                                                 -4-
       (a) A party requesting a default judgment must give notice of the request to the
       defaulted party, if

       (i) the party against whom the default judgment is sought has appeared in the
       action;

       (ii) the request for entry of a default judgment seeks relief different in kind from,
       or greater in amount than, that stated in the pleadings; or

       (iii) the pleadings do not state a specific amount demanded.

       (b) The notice required by this subrule must be served at least 7 days before entry
       of the requested default judgment.

       (c) If the defaulted party has appeared, the notice may be given in the manner
       provided by MCR 2.107 . . . .

       The relief sought in the request for entry of default judgment is the same relief requested
in the pleadings, MCR 2.603(B)(1)(a)(ii), and the pleadings stated the specific amount
demanded, MCR 2.603(B)(1)(a)(iii). But, under MCR 2.603(B)(1)(a)(i),

       any action on the part of a defendant that recognizes the pending proceedings,
       with the exception of objecting to the court’s jurisdiction, will constitute a general
       appearance. Only two requirements must be met to render an act adequate to
       support the inference that there is an appearance: (1) knowledge of the pending
       proceedings and (2) an intent to appear. [In re Estate of Gordon, 222 Mich. App.
148, 159 n 9; 564 NW2d 497 (1997) (citations and quotation marks omitted).]

Because defendants appeared in the action when Saffady entered a general appearance by
answering the request for admissions, interrogatories, and production of documents, notice of
plaintiff’s intent to request entry of a default judgment was required. MCR 2.603(B)(1)(a)(i).

        Plaintiff claims that, even if notice was required under MCR 2.603(B)(1)(a)(i), timely
notice was provided in the text of the case evaluation summary it filed with the mediation
tribunal and sent to defendants on April 1, 2013. We find that the statement plaintiff placed in its
case evaluation summary did not constitute adequate notice. MCR 2.113(A) applies to the
captioning of “all motions, affidavits, and other papers provided for by these rules,” and MCR
2.113(C)(1)(d) requires “the identification of the pleading . . . .” The purpose of the notice of
intent to request a default judgment is to give an opponent the opportunity to contest damages.
See Dollar Rent-A-Car Systems v Nodel Constr Co, Inc, 172 Mich. App. 738, 743-744; 432
NW2d 423 (1988). Nothing in the document captioned, “BROOKS WILLIAMSON AND
ASSOCIATES, INC.’s CASE EVALUATION SUMMARY,” identified that the pleading
contained or was intended to be notice of plaintiff’s intent to request entry of a default judgment.
As such, the statement of intention contained in the body of the case evaluation summary cannot
be considered as notice that is consistent with either the letter or the spirit of MCR
2.113(C)(1)(d). Our construction of this court rule prevents a party from concealing notice in the
text of a document that might not be given close or immediate attention prior to the entry of a

                                                -5-
default judgment, and preserves the fair opportunity for a defendant to contest damages where
they might otherwise not dispute liability.

                                                 C

       Defendants next argue that they established a meritorious defense. We disagree.

               In determining whether a defendant has a meritorious defense, the trial
       court should consider 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 plaintiff's claim rests on evidence that is inadmissible. [Shawl v Spence
       Bros, Inc, 280 Mich. App. 213, 238; 760 NW2d 674 (2008).]

        In Huntington Nat’l Bank v Ristich, 292 Mich. App. 376, 393; 808 NW2d 511 (2011), the
“defendant submitted a document entitled affidavit of meritorious defense with his motion to set
aside the default.” But this Court concluded that “the affidavit did not provide the trial court
with any particular facts establishing a meritorious defense.” Rather, the defendant merely
asserted that he disputed the amount of the debt owed to the plaintiff. This Court held that
“[m]erely contesting the amount of liability does not establish a meritorious defense.”

        In contrast to the insufficient affidavit in Huntington, this Court concluded that the
affidavit in Bullington, 293 Mich. App. at 560, was sufficient where the defendants asserted
several defenses, including the open and obvious nature of an alleged stairway defect. This
Court held that the “open and obvious danger doctrine arguably affords [the] defendants with a
complete defense to this premises liability claim.”

       In the affidavit at issue in the instant case, Eldridge did not establish that defendants can
disprove the key elements of plaintiff’s claims, particularly (1) whether Mayflower was
obligated to pay the outstanding invoices from June 2006 to November 2007, (2) whether
Mayflower was liable for treble damages for converting plaintiff’s property, and (3) whether
Mayflower’s corporate veil could be pierced to reach Eldridge and hold him liable for any
damages owed to plaintiff.

                                                 1

       Eldridge’s affidavit focused on the losses Mayflower suffered from plaintiff’s failure to
complete the work, specifically—submitting the final permit application. But the parties do not
dispute that plaintiff failed to submit the final permit application. Plaintiff claimed Mayflower
repeatedly breached its obligation to pay numerous invoices for environmental consulting and for
services rendered in preparation of the final permit application, and it therefore refused to
provide any additional services to Mayflower, including submitting the final permit application,
before the invoices were paid. In his affidavit, Eldridge failed to articulate any particular facts

                                                -6-
disputing Mayflower’s obligation to pay the outstanding invoices.          Under Huntington, no
meritorious defense was established as to Mayflower’s obligation.

                                                2

        In the complaint, plaintiff alleged defendants converted plaintiff’s property, particularly
funds that should have been reserved in trust to pay plaintiff, laborers, subcontractors, and other
suppliers under MCL 570.151, and plaintiff was therefore entitled to treble damages. In their
brief on appeal, defendants argue that plaintiff’s conversion claim is “totally unfounded,” but, in
his affidavit, Eldridge made no reference to conversion, MCL 570.151, or treble damages.
Again, absent any particularized facts disputing these claims, Huntington, 292 Mich. App. at 393,
we cannot conclude that defendants established a meritorious defense.

                                                3

       In the “Piercing The Corporate Veil” section of the complaint, plaintiff alleged, in
relevant part:

       60. Upon information and [belief,] Eldridge was the sole owner and officer of
       Mayflower.

       61. Upon information and belief, Eldridge commingled assets of Mayflower with
       personal assets, and/or assets of his other entities.

       62. Upon information and belief, defendants commingled Building Contract Fund
       Act funds with personal assets, and/or assets of his other entities.

       63. Upon information and belief, defendants disregarded corporate formalities.

       64. Upon information and belief, Mayflower was a mere instrumentality of
       Eldridge.

       65. Upon information and belief, defendants exploited the corporate form to
       commit wrongful and/or fraudulent acts.

       66. Upon information and belief, Eldridge siphoned Mayflower’s funds and/or
       trust funds for his own benefit.

       67. Upon information and belief, defendants misappropriated, for their own use
       and benefit, funds paid to or received by Mayflower.

       68. Plaintiff[] has been damaged by the corporate shell-game engaged in by
       Defendants, and it would be unjust to allow them to hide behind the corporate veil
       to avoid paying the amount owed to Plaintiff[].

                                                -7-
In his affidavit, Eldridge merely averred:

       I never conducted any business with Plaintiff in my individual capacity and there
       is no basis for Plaintiff to attempt to “pierce the corporate veil.” None of
       Plaintiff’s claims against me personally have any merit whatsoever.

Although Eldridge claimed he did not conduct business in his individual capacity, he failed to
offer any facts disputing the allegations of commingling, misappropriating and siphoning of
assets, and disregard for corporate formalities. Under Huntington, no meritorious defense was
established regarding whether Mayflower’s corporate veil could be pierced to reach Eldridge and
hold him liable for the damages owed to plaintiff.

                                                 D

          Having concluded that defendants failed to establish a meritorious defense and therefore
have not satisfied the requirements of MCR 2.603(D)(1), we must next address defendants’
argument that regardless of their failure to prove a meritorious defense, because good cause to
set aside the default judgment has been established, a substantial defect in the proceeding has
been shown, and thus, manifest injustice would occur were we to permit the default judgment to
stand. Although not specifically stated as such by defendants, defendants’ argument is properly
characterized as an assertion that it is a violation of due process to require a party moving to set
aside a default judgment under MCR 2.603(D)(1) to demonstrate a meritorious defense under
circumstances where the movant did not receive proper notice under MCR 2.603(B)(1). This
Court reviews “de novo constitutional questions such as whether a party was denied due process
. . . .” Lima Twp. v Bateson, 302 Mich. App. 483, 503; 838 NW2d 898 (2013).

       As we noted above, this Court “interpret[s] court rules using the same principles that
govern statutory interpretation.” In re Sanders, 495 Mich. at 404; see also Lamkin, 295 Mich
App at 707. Moreover, “[s]tatutes are presumed to be constitutional, and we have a duty to
construe a statute as constitutional unless its unconstitutionality is clearly apparent.” In re
Sanders, 495 Mich. at 404.

       Every reasonable presumption or intendment must be indulged in favor of the
       validity of an act, and it is only when invalidity appears so clearly as to leave no
       room for reasonable doubt that it violates some provision of the Constitution that
       a court will refuse to sustain its validity. [Cady v Detroit, 289 Mich. 499, 505; 286
N.W. 805 (1939).]

When faced with a claim that the application of a court rule renders it unconstitutional, we must
analyze the court rule “as applied” to the particular case. See Keenan v Dawson, 275 Mich. App.
671, 681; 739 NW2d 681 (2007).

       In Petroff v Petroff, 88 Mich. App. 18; 276 NW2d 503 (1979), this Court analyzed the
former versions of the court rules at issue here, GCR 1963, 520.2(2) and GCR 1963, 520.4.

                                                -8-
GCR 1963, 520.2(2) provided:

       Judgment by default may be entered as follows:

                                           ***

       (2) By the Court. In all other cases the party entitled to a judgment by default
       shall apply to the court therefor . . . If the party against whom judgment by default
       is sought has appeared in the action, he . . . shall be served with written notice of
       the application for judgment at least 7 days prior to the hearing on such
       application.”

GCR 1963, 520.4 provided:

       “For good cause shown the court may set aside an entry of default and, if a
       judgment by default has been entered, may likewise set it aside in accordance
       with Rule 528. If personal service was made upon the party against whom the
       default was taken, it shall not be set aside unless application to have it set aside is
       made either before the entry of judgment or within 4 months after the default was
       regularly filed or entered except as provided in Rule 528. Any order setting aside
       such default shall be conditioned upon the party against whom the default was
       taken paying the taxable costs incurred by the other party in reliance upon the
       default, except as prescribed in subrule 526.8. Other conditions may be imposed
       as the court deems proper. A proceeding to set aside default or a default judgment,
       except when grounded on want 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.”

This Court held that, even though GCR 1963, 520.4 “makes it eminently clear” that both good
cause and a meritorious defense are required to set aside a default judgment, prior cases had not
required the showing of a meritorious defense when a party failed to provide notice of the
application for judgment. Petroff, 88 Mich. App. at 20. In addition, this Court held:

       constitutional due process requires notice so that an opportunity is provided to
       attend and present a claim or defense. We think that GCR 1963, 520.2(2) is an
       expression of a fundamental concept of law. It is patently unfair to compel a party
       to demonstrate a defense in order to get a default judgment set aside when the
       manner in which the default judgment was entered constituted a denial of due
       process. A party is entitled to due process regardless of the merits of his claim or
       defense. [Petroff, 88 Mich. App. at 21.]

Defendants cite to Perry v Perry, 176 Mich. App. 762, 770; 440 NW2d 93 (1989), in which this
Court, analyzing MCR 2.603(B) and MCR 2.603(D), successor court rules to GCR 1963,
520.2(2) and GCR 1963, 520.4, followed the reasoning in Petroff and held that the meritorious
defense requirement in MCR 2.603(D) “need not be followed in order for the defaulted party to

                                                -9-
prevail in its efforts to set aside a default judgment” where the notice provision in MCR
2.603(B)(1) was not satisfied.1

        In Peralta v Heights Med Ctr, Inc, 485 U.S. 80, 83, 86-87; 108 S. Ct. 896; 99 L. Ed. 2d 75
(1988), the United States Supreme Court held that a defendant’s constitutional due process rights
were impaired when, despite neither receiving timely service of process nor notice of a default
judgment, he was nevertheless required to show a meritorious defense in order to set aside the
default judgment. The Court explained:

       “An elementary and fundamental requirement of due process in any proceeding
       which is to be accorded finality is notice reasonably calculated, under the
       circumstances, to apprise interested parties of the pendency of the action and
       afford them the opportunity to present their objections.” Mullane v Central
       Hanover Bank & Trust Co, 339 U.S. 306 314; 70 S. Ct. 652, 657; 94 L. Ed. 865
       (1950). Failure to give notice violates “the most rudimentary demands of due
       process of law.” Armstrong v Manzo, 380 U.S. 545, 550; 85 S. Ct. 1187, 1190; 14 L
       Ed 2d 62 (1965). [Id. at 84.]

The Court reasoned that a party with notice of the suit and the default judgment might have
impleaded another party at-fault, negotiated a settlement, or paid the debt alleged (as opposed to
having his property sold at auction). Id. at 85.

        While the plain language of MCR 2.603(D)(1) requires a defendant to provide both
evidence of good cause and an affidavit of facts showing a meritorious defense in order to set
aside a default judgment, we agree with the reasoning of this Court in Petroff and the United
States Supreme Court in Peralta that, without a showing that a party has received notice of the
request for entry of default judgment, the requirement that a party must show a meritorious
defense in order to set aside a default judgment runs afoul of the party’s constitutional rights.
Cady, 289 Mich. at 505. A party served with a complaint who does not dispute liability may
reasonably choose not to respond to the complaint because it lacks a defense to the claim.
Nevertheless, that party is still entitled to contest the plaintiff’s asserted damages, and is entitled
to notice of a request for entry of a default judgment in order to exercise that opportunity. The
failure to provide notice denies that required opportunity. Applying this principle here, even if
Mayflower was liable for the amount of the unpaid invoices ($18,852.83), the failure to comply
with the notice provision under MCR 2.603(B)(1) precluded it from challenging the potential
award of treble damages, which would have otherwise been within the trial court’s discretion to
award or deny. We therefore find that, where it is shown that that party did not receive notice of
the opponent’s intent to request a default judgment, the requirement in MCR 2.603(D)(1) that a
party must show a meritorious defense to set aside a default judgment constitutes a denial of the
constitutional right to due process, and hold that portion of the court rule is unenforceable as
applied to a party who has not been provided adequate notice. Cady, 289 Mich. at 505; see also
In re Treasurer of Wayne Co, 478 Mich. 1, 10-11; 732 NW2d 458 (2007) (concluding that the

1
 We note that, because Petroff and Perry are pre-1990 decisions, they are not binding on this
Court. MCR 7.215(J)(1).

                                                 -10-
portion of a statute purporting to limit a court’s jurisdiction to modify judgments of foreclosure
is unconstitutional and unenforceable as applied to property owners who are denied due process).

        Accordingly, defendants having established good cause to set aside the default judgment
because they did not receive notice of plaintiff’s request for entry of a default judgment, were not
constitutionally required to also establish a meritorious defense. The trial court erred by denying
defendants’ motion to set aside the default judgment.

                                                  E

        Plaintiff alternatively argues that, if this Court finds that a default judgment was
inappropriate under MCR 2.603, the trial court could have entered a default judgment as a
sanction under MCR 2.313(B) or (D), for defendants’ failure to cooperate with the receivership
order and their failure to comply with discovery requests. Because the trial court did not
exercise its discretion to sanction defendants under MCR 2.313, plaintiff’s contention is
unpreserved. Having no lower court ruling to review regarding the application of MCR 2.313 to
the facts of this case, we decline to address in the first instance plaintiff’s alternative grounds in
support of maintaining the default judgment entered in its favor. See King v Mich State Police
Dept, 303 Mich. App. 162, 184-185; 841 NW2d 914 (2013) (where there was no exercise of
discretion to review with respect to newly asserted grounds for awarding attorney fees, this Court
declined to address the plaintiff's unpreserved arguments on appeal).

                                                 III

        We reverse the trial court’s order denying defendants’ motion to set aside the default
judgment and remand for further proceedings. We do not retain jurisdiction. Defendants, as
prevailing parties on appeal, may tax costs pursuant to MCR 7.219.

                                                              /s/ Kurtis T. Wilder
                                                              /s/ E. Thomas Fitzgerald
                                                              /s/ Donald S. Owens

                                                -11-