Action for damages arising out of the restoration of a home after a flood; Whether an unlicensed builder may defend itself under MCL 339.2412(1); Parker v. McQuade Plumbing & Heating, Inc.; Roberson Builders v. Larson (Unpub.); Whether MCL 339.2412(1) creates a private cause of action that a homeowner may bring against an unlicensed builder; Claire-Ann Co. v. Christenson & Christenson, Inc.; Whether a contract between a homeowner & an unlicensed builder is void ab initio; Stokes v. Millen Roofing Co.; Barbour v. Handlos Real Estate & Bldg. Corp.; Robert H. Pastor Bldg. & Real Estate Dev. Co. v. Cole; Brummel v. Whelpley; Grosslight v. Butts; Edgewood Dev., Inc. v. Landskroener; MCL 339.601; Dabbs v. Four Tees, Inc. (AL); Elephant Lumber Co. v. Johnson (OH App.); Seaview Hosp., Inc. v. Medicenters of Am., Inc. (TX App.); H A Smith Lumber & Hardware Co. v. Decina; Whether the contract was merely voidable; Poli v. National Bank of Detroit; Whitcraft v. Wolfe; Whether an unlicensed builder can enforce the contract; Alexander v. Neal; Way v. Root; Charles Featherly Constr. Co. v. Property Dev. Group, Inc.; Bilt-More Homes, Inc. v. French; Turner v. Schmidt Brewing Co.; Whether a plaintiff may recover money paid; Groves v. Jones; Kuchenmeister v. Dusza; Rescission; Whitcraft v. Wolfe; Third-party rights; MCL 600.1405; Schmalfeldt v. North Pointe Ins. Co.; The “substantial compliance” doctrine; Michigan Roofing & Sheet Metal v. Dufty Rd. Props.; Default; Rogers v. JB Hunt Transp., Inc.; Default judgment; Lesisko v. Stafford; Effect of a default; MCR 2.603(A)(3); Setting aside a default or a default judgment; MCR 2.603(D); Alken-Ziegler, Inc. v. Waterbury Headers Corp.; White v. Sadler; Haller v. Walczak; Ackron Contracting Co. v. Oakland Cnty.; Damages; Zaiter v. Riverfront Complex, Ltd.
Holding that the Court of Appeals properly found that MCL 339.2412(1) was inapplicable, but erred in finding that the contract between the plaintiffs-homeowners and the defendants-unlicensed builder (Willis) was void ab initio, the court affirmed in part, reversed in part, and remanded. Plaintiffs sued Willis, his business, a check cashing service they used (Denaglen), and others for damages resulting from restoration services performed on their home, and payment for those services. As to Willis and his business, they alleged that because he was unlicensed he was not entitled to compensation for his services, and that he defrauded them by signing their names and cashing their insurance checks, which totaled $128,047. As to Denaglen, they alleged that it “wrongfully cashed the insurance checks, acted in bad faith and without employing reasonable commercial standards, and converted the funds paid by” their insurer. Denaglen defaulted and the trial court denied its motion to set aside the default. The trial court granted summary disposition for plaintiffs and the Court of Appeals affirmed. The court agreed with the Court of Appeals’ holding that MCL 339.2412(1) was inapplicable and thus, Willis was not precluded from defending himself in the suit. “MCL 339.2412(1) operates as a bar to actions, not a bar to defenses. It prevents an unlicensed builder from attempting to ‘collect’ payment from a homeowner through the filing of ‘actions’ in a court of law. It does not, however, prevent an unlicensed builder from seeking to ‘diminish’ or ‘defeat’ actions filed against the builder by arguing that the claimant has not been damaged by the builder to the extent alleged.” It also agreed with the Court of Appeals that “MCL 339.2412(1) does not afford a homeowner a separate and independent right to demand that an unlicensed builder return funds paid for work conducted when the builder lacked the requisite license.” A homeowner “is protected from the harm that may result from the performance of unlicensed work-- i.e., the provision of unsatisfactory or unsafe building services-- through existing and traditional common-law causes of action in tort and contract.” However, it disagreed with the Court of Appeals’ determination that the contract was void ab initio, concluding that “contracts involving an innocent homeowner and an unlicensed residential builder are voidable.” Finally, the court held that the trial court did not abuse its discretion by refusing to set aside Denaglen’s default. However, as the proper amount of damages remained in dispute, “Denaglen may attempt to challenge the extent of its liability.”
Full Text Opinion
State Bar of Michigan
306 Townsend St
Lansing, MI 48933-2012