4.12Setting Aside Judgments

A.Generally

Relief from an entry of default or a default judgment may be granted under either MCR 2.603(D) or MCR 2.612(C). See Alken-Ziegler, Inc v Waterbury Headers Corp, 461 Mich 219, 234 n 7 (1999).

B.Setting Aside Default or Default Judgment Under Michigan Court Rule 2.603(D)

Unless MCR 2.612 provides otherwise, a motion to set aside default or default judgment brought pursuant to MCR 2.603 must be filed before the default judgment is entered or within 21 days of entry of the default judgment if the defaulted party was personally served. MCR 2.603(D)(2)(a)-(b).¹

Except when grounded on lack of jurisdiction (or under certain circumstances involving multiple defendants²), a default or default judgment may be set aside only when two conditions are fulfilled:

(1) Good cause for failure to make a timely response has been shown.

(2) A statement of facts showing a meritorious defense, verified in the manner prescribed by MCR 1.109(D)(3), is filed. MCR 2.603(D)(1).

Generally, the court “[should] not set aside a default that has been properly entered.” Village of Edmore v Crystal Automation Sys, Inc, 322 Mich App 244, 255 (2017).

The “good cause” and “meritorious defense” elements of a motion to set aside a default must be considered separately; it is improper to blur the two elements. Alken-Ziegler, Inc v Waterbury Headers Corp, 461 Mich 219, 229-234 (1999).³

1.Good Cause

Good cause sufficient to set aside a default “can be shown by: (1) a substantial procedural defect or irregularity or (2) a reasonable excuse for the failure to comply with the requirements that created the default.” Tindle v Legend Health, PLLC, ___ Mich App ___, ___ (2023) (quotation marks and citation omitted). While “the good cause and meritorious defense elements of MCR 2.603(D)(1) . . . are separate requirements,” and “if a party states a meritorious defense that would be absolute if proven, a lesser showing of ‘good cause’ will be required than if the defense were weaker, in order to prevent a manifest injustice.” Shawl v Spence Bros, Inc, 280 Mich App 213, 233-235 (2008) (cleaned up). Trial courts must consider the totality of the circumstances when determining whether a party has shown good cause in support of a motion to aside a default judgment, including the following factors:

“(1) whether the party completely failed to respond or simply missed the deadline to file;

(2) if the party simply missed the deadline to file, how long after the deadline the filing occurred;

(3) the duration between entry of the default judgment and the filing of the motion to set aside the judgment;

(4) whether there was defective process or notice;

(5) the circumstances behind the failure to file or file timely;

(6) whether the failure was knowing or intentional;

(7) the size of the judgment and the amount of costs due under MCR 2.603(D)(4);

(8) whether the default judgment results in an ongoing liability (as with paternity or child support); and

(9) if an insurer is involved, whether internal policies of the company were followed.” Shawl, 280 Mich App at 237-238.

This list is not intended to be exhaustive. Shawl, 280 Mich App at 239. Trial courts should only consider factors that are relevant to the case and should exercise its discretion in deciding how much weight each factor should receive. Id.

The following cases discuss whether good cause to set aside a default or default judgment exists:

•Tindle, ___ Mich App at ___: Because a medical assistant generally lacks “authority to make decisions on behalf of an office of an entity,” the “plaintiff did not properly serve defendants” despite mailing “a copy of the summons and complaint to [defendant’s] principal office as required by [MCR 2.105].”  Tindle ___ Mich App at ___, fn 2 (noting that “the failure to serve process is itself sufficient to warrant setting aside a default judgment”).

•Village of Edmore v Crystal Automation Sys, Inc, 322 Mich App 244, 257 (2017): Failing to file a timely answer where the party “otherwise defended” the action under MCR 2.603(A)(1) by “vigorously opposing plaintiff’s motions for injunctive relief and partial summary disposition.”

•Brooks Williamson and Assoc, Inc v Mayflower Constr Co, 308 Mich App 18, 26 (2014): “[S]ervice [of process] on [a court-appointed receiver is] sufficient under [MCR 2.105(I)⁴], and [a defendant] cannot establish good cause to set aside [a] default judgment on [the] ground” that “[the] defendant [was] also entitled to be personally served[.]”

•Bradley v Fulgham, 200 Mich App 156, 158-159 (1993): Failing to notify the defaulted party of entry of the default.

2.Verified Statement of Facts Showing Meritorious Defense

MCR 2.603(D)(1) requires defendants to execute a verified statement showing a meritorious defense “in the manner prescribed by MCR 1.109(D)(3)[.]” The purpose of a verified statement showing a meritorious defense “is to inform the trial court whether the defaulted defendant has a meritorious defense to the action.” Tindle v Legend Health, PLLC, ___ Mich App ___, ___ (2023) (citation omitted). Accordingly, the statement of facts must be verified by someone with “personal knowledge of the facts, state admissible facts with particularity, and show that the [person] can testify competently to the facts” contained in the verified statement. Id. at ___ (citation omitted). The defaulted party must file a verified statement of facts showing a meritorious defense before a default may be set aside, even if good cause exists. See Shawl v Spence Bros, Inc, 280 Mich App 213, 232 (2008);⁵ MCR 2.603(D)(1).

A statement filed in support of a motion to set aside a default or default judgment may be verified by:

“(a) oath or affirmation of the party or of someone having knowledge of the facts stated; or

(b) except as to an affidavit, including the following signed and dated declaration: ‘I declare under the penalties of perjury that this _____ has been examined by me and that its contents are true to the best of my information, knowledge, and belief.’” MCR 1.109(D)(3).

Trial courts must consider the totality of the circumstances when determining whether a party has presented a meritorious defense for the purposes of MCR 2.603(D). Shawl, 280 Mich App at 236-237. Trial courts should consider whether the verified statement 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, 280 Mich App at 238.

This list is not intended to be exhaustive. Shawl, 280 Mich App at 239. Trial courts should only consider factors that are relevant to the case and should exercise its discretion in deciding how much weight each factor should receive. Id.

“[W]hen it is shown that [a] party did not receive notice of [an] opponent’s intent to request a default judgment [as required under MCR 2.603(B)(1)⁶], the requirement in MCR 2.603(D)(1) that a party must show a meritorious defense to set aside a default judgment results in a denial of the constitutional right to due process[, and] . . . that portion of the court rule is unenforceable as applied to a party who has not been provided adequate notice.” Brooks Williamson and Assoc, Inc v Mayflower Constr Co, 308 Mich App 18, 36 (2014).

The following cases discuss whether a meritorious defense exists:

•Tindle, ___ Mich App at ___: Affidavit to support a meritorious defense lacked any particular facts about one corporate entity’s proffered defense. While the statement hinted the corporation may have a valid defense, the affidavit failed to state factual support for the meritorious defense with particularity. Id. at ___ (failure to mention corporation’s standing within the sales agreement or reference entity’s defense was detrimental to burden under MCR 2.603(D)(1)).

•Huntington Nat’l Bank v Ristich, 292 Mich App 376, 393-394 (2011)⁷: An unsupported assertion, without any particular facts or evidence that a defendant can defend against a plaintiff’s claim, does not constitute a meritorious defense.

•ISB Sale Co v Dave’s Cakes, 258 Mich App 520, 532-533 (2003)⁸: A meritorious defense existed where the affidavits supported the defendant’s claim that long-arm jurisdiction could not be acquired.⁹

•Lindsley v Burke, 189 Mich App 700, 702-703 (1991): A meritorious defense existed where the plaintiff’s complaint was insufficient as a matter of lawby failing to state a claim for relief.

•Hunley v Phillips, 164 Mich App 517, 523 (1987)¹⁰: A meritorious defense existed where the affidavits demonstrated that the defendant was not liable to the plaintiff, and the complaint failed to state a claim for relief in avoidance of governmental immunity.

3.Costs

“An order setting aside [a] default or default judgment must be conditioned on the defaulted party paying the taxable costs incurred by the other party in reliance on the default or default judgment, except as prescribed in MCR 2.625(D).” MCR 2.603(D)(4). The order may also impose other conditions, including reasonable attorney fees, as prerequisites to setting aside a default. Id.

C.Setting Aside Final Judgment Under Michigan Court Rule 2.612

While a default or default judgment may be set aside pursuant to MCR 2.603(D), relief may also be sought under MCR 2.612. See MCR 2.603(D)(3).

1.Defendant Not Personally Notified

 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.”

A default judgment constitutes a final judgment. Lawrence M Clarke, Inc v Richco Const, Inc, 489 Mich 265, 280 (2011).

Personal jurisdiction.¹¹ For purposes of MCR 2.612(B), personal jurisdiction over a party is required to satisfy due process. Lawrence M Clarke, Inc, 489 Mich at 272, 275. In Clarke, the Court assumed that personal jurisdiction was actually acquired (despite the defendants’ arguments to the contrary) because it ultimately “conclude[d] that defendants [lacked actual knowledge of the pending suit and thus were] entitled to relief under MCR 2.612(B)[.]” Lawrence M Clark, Inc, 389 Mich at 275-276.

Knowledge of the action. Based on the plain language of MCR 2.612(B), a defendant may seek relief from a default judgment under this rule “as long as the defendant did not have actual knowledge of the pending action.” Lawrence M Clarke, Inc, 489 Mich at 276. In Clarke, the defendants did not have actual knowledge of the pending action where (1) they were never personally served with a summons and complaint, (2) they stated in their affidavit of meritorious defense¹² that they only became aware of the action after personal property had been seized from their homes (nearly two years after the plaintiff filed a complaint), (3) the plaintiff’s attorney “impliedly conceded that defendants did not have actual notice . . . when he argued that constructive notice is sufficient to bar relief under MCR 2.612(B),” and (4) the plaintiff attempted to serve the defendants by repeatedly mailing notice to an address known to not be a current address and publishing notice in a newspaper located in a county where the defendants did not reside and had not worked for over three years. Lawrence M Clarke, Inc, 489 Mich at 277-278.

Reasons justifying relief. A defendant may show that he or she has a “‘reason justifying relief from the judgment’” as required by MCR 2.612(B) “by showing that he or she (1) did not have actual notice of the action and (2) has a meritorious defense.” Lawrence M Clarke, Inc, 489 Mich at 282. A defendant does not need to 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.” Lawrence M Clarke, Inc, 489 Mich at 281.

Prejudice to third parties. MCR 2.612(B) requires the court to determine that no innocent third parties will be prejudiced if relief is granted. See Lawrence M Clarke, Inc, 489 Mich at 285.

2.Other Grounds for Relief

“The procedure for obtaining any relief from a judgment shall be by motion as prescribed in [the Michigan Court Rules] or by an independent action.” MCR 2.612(C)(4).

Pursuant to MCR 2.612(C)(1), a court may relieve a party or the party’s legal representative from a final judgment, order, or proceeding on the following grounds:

“(a) Mistake, inadvertence, surprise, or excusable neglect.

(b) Newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under MCR 2.611(B).

(c) Fraud (intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party.

(d) The judgment is void.

(e) The judgment has been satisfied, released, or discharged; a prior judgment on which it is based has been reversed or otherwise vacated; or it is no longer equitable that the judgment should have prospective application.

(f) Any other reason justifying relief from the operation of the judgment.”

Motions made pursuant to MCR 2.612(C)(1)(a)-(c) must be made “within one year after the judgment, order, or proceeding was entered or taken.” MCR 2.612(C)(2). Motions made pursuant to MCR 2.612(C)(1)(d)-(f) must be made within a reasonable time. MCR 2.612(C)(2).

Relief under MCR 2.612 may be appropriate even if a case is closed. See Peterson v Oakwood Healthcare, Inc, 336 Mich App 333, 347 (2021). In Peterson, “[t]he trial court’s reliance on the fact that the case was closed [to deny relief was] highly dubious. Following that premise to its logical end, no party could ever obtain relief from judgment under MCR 2.612(C) once a case was closed,” and that “premise is patently wrong.” Peterson, 336 Mich App at 347-348 (concluding, however, that the trial court’s rejection of plaintiff’s argument that it could obtain relief from the final order based on a subsequently issued decision of the Court of Appeals was correct). “MCR 2.612 does not mention any such extra requirements and instead simply states that a party can seek relief ‘[o]n motion and on just terms,’ MCR 2.612(C)(1), and that [a] motion [under MCR 2.612(C)(1)(d)-(f)] must be made within a reasonable time, MCR 2.612(C)(2).” Peterson, 336 Mich App at 347 (alteration in original). “Additionally, . . . the vehicle to ‘reopen’ a case is MCR 2.612(C) itself.” Peterson, 336 Mich App at 347.

“If a circuit court order grants relief to a party as described under [MCL 600.309a(2)], an opposing party may file an appeal of right from that order to the court of appeals. Action in the circuit court must be stayed while the matter is on appeal.” MCL 600.309a(3). In addition, the court¹³ must “take appropriate steps toward ensuring, consistent with the appellate court rules, a timely processing of the appeal.” MCL 600.309a(4). MCL 600.309a “applies only if a party seeks relief from a circuit court judgment entered in a civil action based on a jury verdict on any of the following grounds:

(a) Mistake, inadvertence, surprise, or excusable neglect.

(b) Newly discovered evidence.

(c) Fraud, misrepresentation, or other misconduct of an adverse party.

(d) That the judgment is void.

(e) Another reason that justifies relief from the operation of the judgment.” MCL 600.309a(2).

MCL 600.309a “does not apply to an action to which [MCL 600.6098] applies,” and “applies only to an action, case, or proceeding commenced after” September 10, 2021. MCL 600.309a(5)-(6).

a.MCR 2.612(C)(1)(a)

A party may request relief from a final judgment, order, or proceeding on the basis of mistake, inadvertence, surprise, or excusable neglect. MCR 2.612(C)(1)(a). However, the “mistake, inadvertence, surprise, or excusable neglect” language should not be used “to bypass the analysis under MCR 2.603(D)(1)[.]” Tindle v Legend Health, PLLC, ___ Mich App ___, ___ (2023). “MCR 2.603(D)(1) establishes a rigorous analysis for the manner in which a default judgment could be set aside. Setting aside a judgment for merely being surprised about a hearing the next day, especially without arguing there was any issue with the notice of entry of default judgment, does not capture the essence of MCR 2.603(D)(1).” Tindle, ___ Mich App at ___. “Labeling improper service as such would swallow the analysis under 2.603(D)(1)[.]” Tindle, ___ Mich App at ___ (observing that defendants did “not present any extraordinary circumstance that would justify labeling the effect of the improper service as a ‘surprise’”).

b.MCR 2.612(C)(1)(b)

“Under MCR 2.612(C)(1)(b), newly discovered evidence is not sufficient to grant relief from a judgment unless it could not have been discovered through due diligence in time to move for a new trial under MCR 2.611(B).” Int'l Outdoor, Inc v SS Mitx, LLC, ___ Mich App ___, ___ (2023). “A party seeking relief from judgment based on newly discovered evidence must establish that (1) the evidence, not simply its materiality, is newly discovered, (2) the evidence is not merely cumulative, (3) the newly discovered evidence is likely to change the result, and (4) the party moving for relief from judgment was not able to produce the evidence with reasonable diligence.” Id. at ___.

c.MCR 2.612(C)(1)(c)

A party may request relief from a final judgment, order, or proceeding on the basis of fraud, misrepresentation, or other misconduct by the adverse party. MCR 2.612(C)(1)(c). “MCR 2.612(C)(1)(c) does not impose a due diligence requirement on the party seeking relief from judgment on the basis of fraud, misrepresentation, or the misconduct of an adverse party.” Int’l Outdoor, ___ Mich App at ___.

“An evidentiary hearing is necessary where fraud [on the court] has been alleged because the proof required to sustain a motion to set aside a judgment because of fraud is of the highest order.” Kiefer v Kiefer, 212 Mich App 176, 179 (1995) (quotation marks and citation omitted). “[I]t is generally an abuse of discretion for the court to decide the motion without first conducting an evidentiary hearing regarding the allegations.” Id.

d.MCR 2.612(C)(1)(e)

There is a distinction between a trial court’s judgment being reversed or vacated and being overruled by subsequent caselaw. Kidder v Ptacin, 284 Mich App 166, 170 (2009). “Reversing or vacating a decision changes the result in the specific case before an appellate court. On the other hand, a decision to overrule a particular rule of law affects not only the specific case before the appellate court, but also future litigation. . . . However, an appellate court’s pronouncement that a rule of law no longer applies does not change the result of an effective judgment.” Id. In a previous appeal in Kidder, the Court of Appeals, based on a case that was later reversed, ordered that summary disposition be granted in favor of the defendants. Id. at 169. When the case¹⁴ on which the Court based its decision was reversed, the Kidder plaintiff did not appeal the trial court’s decision to order summary disposition; instead she moved under MCR 2.612(C)(1)(e) to reinstate her case at the trial court. Kidder, 284 Mich App at 169. Because “MCR 2.612 envisions a court relieving a party from its own judgment, not the judgment of a higher authority” and the original Kidder decision to grant summary disposition to the defendants constituted the law of the case, the trial court erred in granting the plaintiff’s motion under MCR 2.612(C)(1)(e). Kidder, 284 Mich App at 170.

e.MCR 2.612(C)(1)(f)

“Generally, relief is granted under MCR 2.116(C)(1)(f) when the reason for setting aside the judgment is not included in [MCR 2.612(C)(1)(a)-MCR 2.612(C)(1)(e)], and when the judgment was obtained by the improper conduct of the party in whose favor the judgment was entered.” Int’l Outdoor, ___ Mich App at ___. Relief under MCR 2.612(C)(1)(f) “require[s] the presence of both extraordinary circumstances and a demonstration that setting aside the judgment will not detrimentally affect the substantial rights of the opposing party.” Rose v Rose, 289 Mich App 45, 62 (2010) (noting that “extraordinary circumstances warranting relief from a judgment [under MCR 2.612(C)(1)(f)] generally arise when the judgment was obtained by the improper conduct of a party.”) In addition, “the competing concerns of finality and fairness counsel a cautious, balanced approach” to setting aside a judgment under MCR 2.612(C)(1)(f). Rose, 289 Mich App at 58. 

Subsequently Issued Appellate Decision. “[R]elief from judgment under MCR 2.612(C)(1)(f) is inappropriate where a party has not sought appellate review of a trial court’s final order and the basis for relief from judgment is a subsequent appellate decision in a different case.” Peterson v Oakwood Healthcare, Inc, 336 Mich App 333, 348 (2021) (quotation marks and citation omitted) (“the trial court’s rejection of the [plaintiff’s] position that it could obtain relief from the final order based on a subsequently issued decision of [the Court of Appeals was] correct”).

Judgment of Divorce. In Rose, the parties entered into a consent judgment of divorce whereby the defendant would pay the plaintiff spousal support if the plaintiff would forego any interest in a jointly-owned company. Rose, 289 Mich App at 47. The divorce judgment expressly stated that “it is the intention of the parties that regardless of any change in circumstances . . . , this spousal support provision is to be non-modifiable.” Id. at 48. Two years after the consent judgment was executed, the company shut down, and the defendant sought relief from the divorce judgment under MCR 2.612(C)(1)(f). Rose, 289 Mich App at 48-49. The Court concluded that relief could not be granted because extraordinary circumstances did not exist and because setting aside the spousal support provision would “detrimentally affect plaintiff’s substantial rights.” Id. at 60-61. The Court stated:

“[T]he events giving rise to [the company’s] failure qualify as tragic, but hardly extraordinary. As a seasoned business owner, defendant undoubtedly understood that an economic downturn, or financial mismanagement could endanger the solvency of his company. He nevertheless agreed that plaintiff could receive nonmodifiable spousal support. We feel hard-pressed to conclude that a business failure amounts to a circumstance so unexpected and unusual that it may constitute a ground for setting aside a final, binding and nonmodifiable spousal support provision.” Rose, 289 Mich App at 62.

Caselaw Retroactively Reversed. Once a case is closed, a party cannot be granted relief under MCR 2.612(C)(1)(f) based upon a retroactive change or clarification in the law. King v McPherson Hosp, 290 Mich App 299, 304 (2010). In King, it was undisputed that the case was closed, and that the case¹⁵ on which the court relied was later reversed and given partial retroactive effect. Id. at 307-308. The Court of Appeals concluded that the plaintiff could not be granted relief under MCR 2.612(C)(1)(f) because binding precedent¹⁶ prohibited such relief and denying the requested relief did not constitute an extraordinary circumstance as required by MCR 2.612(C)(1)(f). King, 290 Mich App at 308.

Error in Jurisdiction. “An order entered without subject-matter jurisdiction may be challenged collaterally and directly. Error in the exercise of jurisdiction may be challenged only on direct appeal. The erroneous exercise of jurisdiction does not void a court’s jurisdiction as does the lack of subject-matter jurisdiction. However, error in the exercise of jurisdiction can result in the setting aside of the judgment.” Grubb Creek Action Comm v Shiawassee Co Drain Comm’r, 218 Mich App 665, 669 (1996) (internal citations omitted).

Attorney’s Negligence. An attorney’s negligence is generally attributable to his or her client and is not normally grounds to set aside a default judgment. Pascoe v Sova, 209 Mich App 297, 298-299 (1995). However, where the attorney withdraws from the case and does not provide notice to the client, and the client is defaulted because neither the client nor the withdrawn attorney appeared in court, grounds may exist to set aside the default judgment. Id. at 300-301.

3.Independent Action

“[MCR 2.612(C)] does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding; to grant relief to a defendant not actually personally notified as provided in subrule (B); or to set aside a judgment for fraud on the court.” MCR 2.612(C)(3). However, “[r]elief may not be sought or obtained by the writs of coram nobis, coram vobis, audita querela, bills of review, or bills in the nature of a bill of review.” MCR 2.612(C)(4).

“The express language of MCR 2.612(C)(3) states that the provisions in MCR 2.612(C)(1) and [MCR 2.612](2) in no way ‘limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding . . . .’ Hence, a party need not allege fraud or nonservice in order to seek relief from a judgment in an independent action pursuant to MCR 2.612(C)(3).” Trost v Buckstop Lure Co, Inc, 249 Mich App 580, 584-585 (2002).

If the claim is based on an independent action, the one year period of limitations stated in MCR 2.612(C)(2) does not apply. Kiefer v Kiefer, 212 Mich App 176, 182 (1995).

D.Standard of Review

1.Decisions Under MCR 2.603

The ruling on a motion to set aside a default or default judgment is reviewed for a clear abuse of discretion. Saffian v Simmons, 477 Mich 8, 12 (2007).

2.Decisions Under MCR 2.612

The ruling on a motion for relief from judgment pursuant to MCR 2.612(B) is reviewed for an abuse of discretion. Bullington v Corbell, 293 Mich App 549, 554-555 (2011). A motion brought pursuant to MCR 2.612(C) is also reviewed for an abuse of discretion. Mikedis v Perfection Heat Treating Co, 180 Mich App 189, 203 (1989). In exercising its discretion, the trial court should balance the public’s interest in the finality of judgments against the individual’s interest in correcting an injustice. Id.

“Where a party has alleged that a fraud has been committed on the court [pursuant to MCR 2.612(C)(1)(c)], it is generally an abuse of discretion for the court to decide the motion without first conducting an evidentiary hearing regarding the allegations.” Kiefer v Kiefer, 212 Mich App 176, 179 (1995).