Michigan Supreme Court
Lansing, Michigan 48909
_____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh
Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________
FILED JULY 23, 2002
ROBERT and PATRICIA STOKES,
Plaintiffs-Appellants,
Cross-Appellees,
v No. 119074
MILLEN ROOFING COMPANY,
Defendant-Appellee,
Cross-Appellant.
___________________________________
BEFORE THE ENTIRE BENCH
KELLY, J.
This is a dispute over money claimed by cross-plaintiff
Millen Roofing Company from the cross-defendant homeowners,
Robert and Patricia Stokes, related to the parties'
residential construction contract. We hold that (1) Millen's
construction lien was properly extinguished because it was
invalid and unenforceable, and (2) MCL 339.2412 barred Millen,
an unlicensed contractor, from seeking compensation from
plaintiffs under its contract with them for the installation
of a slate roof.
I
Millen Roofing Company, a roofer unlicensed in Michigan,
placed a lien on the title to the Stokes' home after they
refused to pay the amount it claimed was due. The Stokes sued
to clear title, alleging that the lien was invalid and that
the residential builders act1 barred Millen from recovery
under the contract. Millen counterclaimed for breach of
contract, quantum meruit, and foreclosure of the construction
lien.
In response to various motions by the parties, the trial
court dismissed the counterclaim and extinguished the
construction lien. After Millen submitted an amended
counterclaim raising equitable claims, the court determined
that Millen was entitled to equitable relief. It held that
the Stokes could pay Millen the full amount of the original
contract price. If they chose not to do so, Millen could
reimburse plaintiffs for payments made and reclaim the slate
it had installed on plaintiffs' roof. Both parties appealed
from the trial court's decision.
The Court of Appeals affirmed, following the precedent of
Republic Bank v Modular One LLC, 232 Mich App 444; 591 NW2d
335 (1998). 245 Mich App 44; 627 NW2d 16 (2001). However,
1
MCL 339.2401 et seq.
2
the panel disagreed with the holding in Republic and sought
the vote of a special panel to resolve the conflict between
its view and the holding in Republic. No panel was convened.
Both parties appealed from the Court of Appeals judgment.
We granted the Stokes' application for leave to appeal along
with Millen's cross appeal of the dismissal of its legal
claims. 465 Mich 909 (2001).
II
The residential builders act states:
A person or qualifying officer for a
corporation . . . shall not bring or maintain an
action in a court of this state for the collection
of compensation for the performance of an act or
contract for which a license is required by this
article without alleging and proving that the
person was licensed under this article during the
performance of the act or contract. [MCL
339.2412(1).][2]
Under the statute, a builder may not bring an action for
collection of compensation unless it can prove that it
possesses the license "required by this article."
Millen argues that the only claims barred are those
arising from work for which "a license is required by this
article." It asserts that the "article" to which the statute
refers is article 24 of the Occupational Code. MCL 339.2401
et seq. Article 24 contains language that describes the scope
of a builder's license, application procedure, qualifications,
2
This statute was amended while the case was being
appealed. A subsection was added that is not relevant to this
case.
3
and process for suspension of a license. It also contains
procedures for complaints against licensees.
Millen asserts that no explicit requirement of a license
is found in article 24. Instead, it contends, the express
prohibition on unlicensed activity is in article 6 of the
Occupational Code. MCL 339.601(1). Therefore, Millen insists
that its claims are not barred because, although a license was
required, it was not required by article 24.
Millen's reading of § 2412 would render the statute's
prohibition nugatory. Under its interpretation, no license of
any kind would be "required" by article 24, and no claim of
any kind would be barred.
In actuality, virtually every section of article 24
specifically refers to a license requirement. Indeed, § 2403
contains several exceptions to the licensure requirement. By
implication, if a residential builder does not fit within one
of the exceptions there, it must be licensed. When the
Occupational Code is read as a whole and its provisions
harmonized to fulfill the purpose of the Legislature, it
becomes clear that Millen had to be licensed. State Treasurer
v Wilson, 423 Mich 138, 145; 377 NW2d 703 (1985). Section 601
specifically refers to occupations regulated under "this act,"
the Occupational Code. Residential builders are regulated
pursuant to article 24 of the act, unless an exception from
4
that article applies.3
Millen argues in the alternative that, even if § 2412
applies, it does not prevent it from recovering the reasonable
value of the labor and materials furnished to plaintiffs. It
claims that in such an action it would be seeking merely a
reimbursement for its materials, and not "compensation" as
that word is used in the act.
Because "compensation" is not defined in the act and is
not a term of art, we apply a dictionary definition. Random
House Webster's College Dictionary (1995) defines
"compensation" as
something given or received as an equivalent for
services, debt, loss, injury, etc.; indemnity;
reparation; payment."
Applying that meaning of "compensation," we find that § 2412
disallows an action for the reasonable value of materials
conveyed, because such an action seeks "payment" or "something
3
We do not agree with the dissent's footnoted suggestion
that Millen could be exempt from licensing as a subcontractor
of the plaintiffs. The dissent points out that plaintiffs are
allowed by § 2403(b) of the act to function in the capacity of
a residential builder with respect to property they own. It
suggests that there is a "strong argument" that, under this
contract, Millen could be exempted from licensing as a
subcontractor of plaintiffs.
In fact, the act prevents Millen from being exempted. If
Millen were not the contractor here, it would have to be a
person "engage[d] in the business of or act[ing] in the
capacity of a residential builder" for purposes of the act.
Sections 2401(a) and 2403. At subsection (e) of § 2403, such
persons must be licensed unless they are working with a
contractor licensed under the act. Plaintiffs could have been
contractors, but they were never licensed under the act.
5
given or received as an equivalent for [a] debt" or "loss."
Finally, Millen argues that, even if it is barred from
seeking compensation, it should be allowed to recover the
value of the materials it supplied. A "supplier" does not
require a license under the act.
The fact that Millen was not required to be licensed to
supply slate is of no consequence here. In order for the
"supplier" portion of this contract to be enforced, it would
have to be severed from the illegal portions of the agreement.
As the dissent points out, for that to occur, the illegal
provision must not be central to the parties' agreement. See
2 Restatement Contracts, § 603, pp 1119-1120.
[I]f the agreements are interdependent and the
parties would not have entered into one in the
absence of the other, the contract will be regarded
. . . as entire and not divisible. [3 Williston,
Contracts (3d ed), § 532, p 765.]
Hence, the contract can be bifurcated only if the
agreement to install the materials is independent of the
agreement to supply them. But, here the agreements were not
independent of one another. Applying the test formulated by
the dissent, it becomes apparent that the illegal section,
which provided for the installation of a slate roof, was
central to the parties' agreement. The parties' contract
required Millen to "furnish and install" the roofing
components and did not specify the portion of the total cost
attributable solely to materials. If the parties had not
6
intended Millen to install the roof, the Stokes would have had
the installer they selected deliver the slate. It follows
that the contract is entire and indivisible.
Even if, normally, the contract could be bifurcated, the
statute prohibits it. Section 2412 bars a suit for
compensation if a license was necessary for performance of "an
act or contract." The statute requires us to look for either
an act or a contract requiring a license. It does not make
provision for bifurcating building contracts into separate
labor and supply components. Accordingly, it is irrelevant
that Millen could have supplied slate without a license.
Millen's counterclaim was properly disallowed.4
III
Millen further alleges that, notwithstanding its lack of
a license, its lien is valid. The Construction Lien Act5
states:
A contractor shall not have a right to a
construction lien upon the interest of any owner or
lessee in a residential structure unless the
contractor has provided an improvement to the
residential structure pursuant to a written
contract between the owner or lessee and the
contractor and any amendments or additions to the
contract also shall be in writing. The contract
required by this section shall contain a statement,
in type no smaller than that of the body of the
4
All members of the Court share the concern that the
result reached here seems on its face unfair to Millen.
However, we, and the concurring justices, agree that this
result is mandated by the residential builders act.
5
MCL 570.1101 et seq.
7
contract, setting forth all of the following:
(a) That a residential builder or a
residential maintenance and alteration contractor
is required to be licensed under article 24 . . .
(b) If the contractor is required to be
licensed to provide the contracted improvement,
that the contractor is so licensed.
(c) If a license is required, the
contractor's license number. [MCL 570.1114.]
A "contractor" is defined in the statute as "a person
who, pursuant to a contract with the owner or lessee of real
property, provides an improvement to real property." MCL
570.1103(5). Millen built a slate roof pursuant to a contract
with the owners. Therefore, it is a contractor. Under
subsections (b) and (c), it needed to state that it was
licensed and provide its license number in order to have a
right to a lien.
Millen argues that its lack of a contractor's license
number is not dispositive, because the Construction Lien act
contains no penalty for failure to be licensed. It relies on
In re Craft,6 a case in which a federal bankruptcy court held
that failure to comply with the requirement to furnish a
contractor's license number does not invalidate a lien.
Because the statute is remedial, the Craft court was
satisfied with the defendant's "substantial compliance" with
the requirements of the act.
6
120 BR 84 (ED Mich, 1989).
8
We find Craft inapplicable to this case. The contractor
there actually possessed a license, but did not properly write
the license number on the form for a lien. We will not extend
a "substantial compliance" protection to Millen because it
lacked a license and could not have completed the form
properly under any circumstances. There is nothing in the
Construction Lien Act to suggest that the Legislature intended
the act to extend "substantial compliance" protection to
unlicensed builders.
IV
Having determined that the trial court properly
extinguished Millen's construction lien and dismissed its
legal claims, we consider whether Millen was entitled to
equitable relief. This Court first considered the interplay
between the residential builders act and a court's equitable
powers in Kirkendall v Heckinger, 403 Mich 371; 269 NW2d 184
(1978).
There, plaintiff Frank Kirkendall conveyed a parcel of
property to the defendant contractor. Pursuant to the
contract, the defendant then paid off Frank's land contract
and back taxes and constructed a house on the land for Frank's
son, plaintiff Dennis Kirkendall. Dennis helped with the
construction. A dispute arose about the amount plaintiffs
owed, and the plaintiffs brought suit. They asked for
equitable relief that would deem the sale an equitable
9
mortgage, return the land to plaintiffs, clear title, and
eject defendant from the land. Defendant counterclaimed for
breach of contract.
This Court held that the residential builders act barred
the defendant's counterclaim because he had no Michigan
residential builder's license. However, the dismissal of the
counterclaim did not end the litigation. The Court had to
clear title. It declared that the sale to defendant was an
equitable mortgage. If the plaintiffs wanted clear title,
they had to first do equity by paying the amount owed to the
defendant as an equitable mortgagee:
The plaintiffs sought an equitable remedy.
Before ordering the conveyance to Dennis Kirkendall,
the trial court was obliged to determine the amount
the plaintiffs were required to pay the defendants
in order to do equity. As the equitable mortgagee,
Heckinger was entitled as a condition to
reconveyance to reasonable expenditures for
improvements on the property made with the
Kirkendalls' consent (and in fact with Dennis
Kirkendall's active participation) while [defendant]
had title to the property. [Id. at 374.]
The Court of Appeals considered the Kirkendall decision
in Republic Bank and applied it, enlarging its scope. In
Republic Bank, the plaintiff had purchased eight residential
lots on which the defendant had a lien. The plaintiff
asserted that the liens were invalid, because they were for
monies owed for residential improvements made by the
defendant, who did not possess a license.
The Court of Appeals concluded that, as an unlicensed
10
builder, the defendant could not place a lien on the
properties. However, it required the plaintiff to do equity
by paying the defendant for the value of the homes before
getting equity in the form of a clear title. The Republic
Bank Court declined to distinguish the Kirkendall decision
even though, in Republic Bank, the defendant had no valid lien
or mortgage that survived dismissal of his claim and clouded
title.
In the case before us, the Court of Appeals followed
Republic Bank because it was binding authority. MCR
7.215(I)(1). Still, the Court made clear its dissatisfaction
with the holding in that case, opining that Republic Bank was
wrongly decided and that it should have distinguished
Kirkendall on its facts.
We agree that Kirkendall must be distinguished from
Republic Bank. First, the Court's reason for entertaining
equity in Kirkendall was because the conveyance to the
defendant was valid and clouded title. After the defendant's
counterclaim was dismissed, the plaintiffs' complaint
remained, and the Court had to find an equitable remedy.
Conversely, in both Republic Bank and this case, once it
was determined that the defendants' liens on the properties
were defective, the titles were clear. The complaints could
be dismissed. No further relief was necessary, equitable or
legal. By not recognizing this distinction, the Republic Bank
11
decision allowed an unlicensed contractor leverage to force
payment, using equity in a circumstance where no equity was
required. Moreover, the relief afforded was barred at law by
§ 2412.
The Kirkendall case also differs from the case at bar in
another key respect: the defendant's property right there was
not only created by the plaintiff, it was acquired in a valid
and legal manner. By contrast, both Millen and the defendants
in Republic Bank acquired liens by committing a misdemeanor,
performing an unlicensed activity. MCL 339.601(3). In
addition, they sought to force payment using a construction
lien acquired in derogation of the Construction Lien Act.
In its bench ruling granting equitable relief to Millen,
the trial court stated that a court in equity may provide for
nonlegal, equitable remedies to avoid unduly harsh legal
doctrines. Its analysis is invalid because, in this case,
equity is invoked to avoid application of a statute. Courts
must be careful not to usurp the Legislative role under the
guise of equity because a statutory penalty is excessively
punitive.7 As the Court of Appeals stated:
7
Our concurring colleagues assert that the Stokes used
the statutory provision to avoid paying for the slate roof.
In fact, they tendered a written offer to Millen in July 1994
to pay the balance of the original contract, along with a
$2,684 change order, in exchange for unconditional waiver of
lien. Millen rejected their offer.
Contrary to Justice Markman's assertion, slip op at 3, n
3, we make no assessment of the Stokes' motives in their
12
Regardless of how unjust the statutory penalty
might seem to this Court, it is not our place to
create an equitable remedy for a hardship created by
an unambiguous, validly enacted, legislative decree.
[245 Mich App 57-58.]
Moreover, as was stated in Bilt-More Homes, Inc v French,
373 Mich 693, 699; 130 NW2d 907 (1964):
"Contracts by a residential builder not duly
licensed are not only voidable but void--and it is
-
not for a trial court to begin the process of
attrition whereby, in appealing cases, the statutory
bite is made more gentle, until eventually the
statute is made practically innocuous and the teeth
of the strong legislative policy effectively pulled.
If cases of such strong equities eventually arise
that the statute does more harm than good the
legislature may amend it . . . ."
We overrule the holding of Republic Bank. If it were
allowed to stand, any unlicensed contractor could defy the
residential builders act and the Construction Lien Act by
refusing to obtain a Michigan residential builder's license.
It could contract with a residential home owner to perform
work on the owner's home. Then, if a dispute arose over money
due, it could cloud the title with a lien and wait until the
owner brought suit to clear title. It could then recover the
amount due in an equity judgment. Such a result violates MCL
339.2412 and ignores key distinctions in Kirkendall.
dealings with Millen. As our colleagues are well aware, their
good faith or lack of it was not a consideration available to
us in rendering this decision. If equity were available here,
we might all have agreed that the trial court acted fairly and
reasonably in applying equity as it did.
13
CONCLUSION
We hold that Millen Roofing Company's failure to obtain
a residential builder's license constitutes a bar to its
seeking compensation for installing slate on the Stokes' roof,
pursuant to MCL 339.2412. Also, because Millen was
unlicensed, its construction lien was invalid. Finally,
Millen cannot have equitable relief because any such relief
would allow equity to be used to defeat the statutory ban on
an unlicensed contractor seeking compensation for residential
construction.
The order of the trial court is reversed and the case
remanded for proceedings consistent with this opinion.
CORRIGAN , C.J., and TAYLOR and YOUNG , JJ., concurred with
KELLY, J.
14
S T A T E O F M I C H I G A N
SUPREME COURT
ROBERT and PATRICIA STOKES,
Plaintiff-Appellants,
Cross-Appellees,
v No. 119074
MILLEN ROOFING COMPANY,
Defendant-Appellee,
Cross-Appellant.
____________________________________
WEAVER, J. (concurring).
I concur in the majority’s conclusion that the contract
may not be bifurcated into separate labor and supply
components; the contract is entire and indivisible.
I also concur in the majority’s conclusion that defendant
Millen Roofing may not be awarded equitable relief. The
residential builders act clearly prohibits a contractor not
licensed in this state from maintaining an action for
compensation.1 Likewise, under the Construction Lien Act, MCL
1
As noted in the majority opinion, MCL 339.2412(1)
provides in pertinent part:
A person or qualifying officer for a
corporation or member of a residential builder or
residential maintenance and alteration contractor
(continued...)
570.1101 et. seq., a contractor does not have a right to a
construction lien unless it complies with licensing
requirements. MCL 570.1114.
In this particular instance, where plaintiff homeowners
invited defendant to enter into the illegal contract, knowing
defendant contractor was unlicensed in Michigan and having
already availed themselves of the statute to avoid paying a
previous unlicensed contractor, the statutory provision for
noncompliance with the licensing requirement undoubtedly
imposes a heavy penalty on defendant, while providing an
unwarranted windfall to these plaintiffs. Plaintiffs, who
sought out defendant and helped draft the actual contract, do
not allege that defendant was incompetent or inexperienced or
that defendant’s work was of inferior quality, and defendant
could hardly be characterized as some fly-by-night contractor.
Rather, plaintiffs are now using the statutory provision to
their advantage to avoid paying for their slate roof.
Nonetheless, in entering into the contract, defendant
1
(...continued)
shall not bring or maintain an action in a court of
this state for the collection of compensation for
the performance of an act or contract for which a
license is required by this article without
alleging and proving that the person was licensed
under this article during the performance of the
act or contract.
2
contractor specifically violated the licensing requirements of
the residential builders act, albeit at the plaintiff
homeowner’s invitation. Further, in filing a lien to seek
compensation for its services, which was done at defendant’s
own initiative, defendant violated both the residential
builders act and the Construction Lien Act. Additionally, as
noted by the majority, defendant rejected plaintiffs’ offer to
pay the balance of the $162,519 contract price plus a $2,684
change order. Defendant rejected the offer because it
believed it was owed approximately $50,000 more than
plaintiffs offered to pay. The language of the statutes is
clear, and, under these circumstances, equity may not be used
to avoid their effect.
For these reasons, I concur in the result of the majority
opinion.
3
S T A T E O F M I C H I G A N
SUPREME COURT
ROBERT and PATRICIA STOKES,
Plaintiffs-Appellants,
Cross-Appellees,
v No. 119074
MILLEN ROOFING COMPANY,
Defendant-Appellee
Cross-Appellant.
MARKMAN, J. (concurring).
I concur in the result reached by the majority, as well
as its analysis, because I agree that (1) cross-plaintiff’s,
Millen Roofing Company’s, construction lien was invalid under
MCL 570.1114 because Millen was unlicensed, (2) Millen cannot
seek compensation from the cross-defendant homeowners, Robert
and Patricia Stokes, under his contract with them for the
installation of a slate roof because MCL 339.2412 prevents an
unlicensed contractor from seeking such compensation, and (3)
Millen is not entitled to equitable relief because allowing
such relief would essentially enable Millen to circumvent a
statute that expressly prohibits an unlicensed contractor from
seeking compensation for the performance of an act or contract
for which a license is required. Accordingly, I would reverse
the trial court and remand this case to that court.
I write separately simply to point out the unfairness of
the result reached here today—a result nonetheless mandated by
the residential builders act. The Stokes have obtained a roof
from Millen at substantially below the contract price on the
basis that Millen lacked a residential builder’s license;
Millen is simply out of luck for the time, the materials, and
the money he has put into this roof’s construction because he
lacked this license. What renders this particularly unfair in
this case is that the Stokes knew that Millen was unlicensed,
knew that this meant that Millen would be unable to bring suit
against them for their failure to pay and be unable to obtain
a lien against their property, and had expressly indicated to
Millen that there was no need for him to be or become
licensed.1 In addition, the Stokes repeatedly assured Millen
1
Matt Millen testified that Mrs. Stokes had told him
that the “licenses would be her responsibilities,” that the
license “wasn’t a problem,” and that the license “was taken
care of.” The Stokes further communicated to Millen that they
would be willing to waive the assertion of Millen’s unlicensed
status in exchange for Millen’s waiver of his right to file a
construction lien. While such a communication is in accord
with Millen’s assertion that he was unaware that such a lien
(continued...)
2
that he would be paid for his work.2
The Stokes here avoid payment for work they requested
from Millen with full knowledge that Millen was required to be
licensed and that he was not. They also had full knowledge
that, as a result of Millen’s status, they would be able to
avoid paying him for his work, as evidenced by the fact that
the Stokes had recently prevailed in another lawsuit against
an unlicensed contractor they had hired to do home improvement
work. Under these facts, it appears that the Stokes were
seeking to take financial advantage of Millen’s unlicensed
status.3
1
(...continued)
was unlawful, and that he was acting in good faith when he
subsequently filed the lien, it is also consistent with the
Stokes’ interest in avoiding the need to bring a suit to quiet
title.
2
There is no indication from either party that the work
eventually performed by Millen was below par or substandard in
any respect. Thus, the Stokes had no apparent reason not to
pay Millen for his work, as agreed.
3
I do not believe, as the majority apparently does, that
the fact that the Stokes had, at one juncture, offered to pay
the balance of the contract price in exchange for an
unconditional waiver of lien necessarily means that the Stokes
were acting in good faith during the entirety of this process.
The fact that the Stokes now are unwilling to pay the contract
price, and now are strenuously opposed to the trial court’s
decision, which essentially ordered them to do nothing more
than pay the contract price, causes me to disagree with the
majority in its assessment of the Stokes’ conduct. The
majority states that it makes “no assessment” of the Stokes’
motives, slip op at 13, n 8, but this statement is difficult
to reconcile with its immediately preceding statement in the
(continued...)
3
In fashioning equitable relief, the trial court sought to
maintain the parties in the status quo ante. That is, the
court awarded Millen the amount of money that the Stokes had
agreed to pay Millen for the roof minus the amount that the
Stokes had already paid Millen.4 To the extent that equity was
appropriately applied in this case, I believe that the trial
court acted altogether fairly and reasonably, indeed
correctly.
However, despite this personal view that allowing the
Stokes here to have their roof without paying Millen the
contract price is a highly inequitable result, I nonetheless
agree with the majority that we cannot allow equity to
contravene the clear statutory intent of the Legislature.
Such an intent is established in the residential builders act,
which prohibits unlicensed residential builders from
recovering compensation from homeowners for their work. The
Legislature has determined that one, very considerable,
penalty for performing work without the required license is
that the unlicensed builder will be denied the ability to sue
3
(...continued)
same footnote.
4
The trial court did not award Millen any portion of the
$52,824 in “extras” that Millen claimed the Stokes owed him.
Rather, the trial court merely ordered the Stokes to pay
Millen the balance of the agreed upon contract price, which
was $113,269, as the Stokes had agreed to pay Millen $165,203
for the roof and had only paid Millen $51,934 for the roof.
4
for payment for the work performed. The trial court here,
despite the best of intentions, circumvented this legislative
intent by ordering the Stokes to pay Millen for the work
performed, even though Millen performed the work without the
required license. This is impermissible under the language of
MCL 339.2412. Accordingly, if such inequitable results are to
be avoided, it is the Legislature that must take action.
At the time Republic Bank v Modular One LLC, 232 Mich App
444; 591 NW2d 335 (1998), was decided, a case that I authored,
I believed that Kirkendall v Heckinger, 403 Mich 371; 269 NW2d
184 (1978), mandated the result reached in Republic Bank. At
the time, I understood Kirkendall to stand for the proposition
that equity may be invoked on behalf of an unlicensed builder
to require a homeowner to pay for work done when such
homeowner seeks to clear title. However, upon further
reflection, and after considering the analysis of the majority
opinion, I now agree with the majority that Republic Bank
erred and that Kirkendall was reasonably distinguishable.
In Kirkendall, the unlicensed builder had an equitable
mortgage on the subject property. When the homeowner filed
suit to clear his title, the Court concluded that before title
could be cleared, the homeowner would first have to pay the
unlicensed builder for the improvements that he made on the
property with his consent. Kirkendall, supra at 374. In
5
Republic Bank, as well as in this case, the unlicensed
builders did not have equitable mortgages on the properties;
instead they simply had invalid liens. Therefore, when the
homeowners brought suit to clear their titles, there was no
need for the homeowners to first pay the unlicensed builders
because the liens were simply unenforceable. That is, while
in Kirkendall, there was a valid encumbrance on the land
requiring the homeowner to do equity before the cloud on his
title could be removed, in Republic Bank and this case, there
simply were no valid encumbrances on the lands, and thus the
homeowners should not have been required to do equity in order
to get the clouds on their titles removed. Accordingly, I now
agree with the majority that Republic Bank erred, and that it
should be overruled. The homeowners here should not have been
required to pay the unlicensed builder for the roof because
MCL 339.2412 expressly prohibits an unlicensed contractor from
seeking compensation for the performance of an act or contract
for which a license is required.
6
S T A T E O F M I C H I G A N
SUPREME COURT
ROBERT and PATRICIA STOKES,
Plaintiffs-Appellants
and Cross-Appellees,
v No. 119074
MILLEN ROOFING COMPANY,
Defendant-Appellee,
and Cross-Appellant.
___________________________________
CAVANAGH, J. (dissenting).
The majority holds that the residential builders act
(RBA), MCL 339.2401 et seq., bars an unlicensed builder from
seeking compensation under a contract for both labor and
supplies because a license is required for the labor
component. Because I would hold that such a contract may be
bifurcated into separate labor and supply components under the
RBA, so that an unlicensed builder may recover for the supply
costs, I respectfully dissent.
Section 2412(1) of the RBA states:
A person or qualifying officer for a
corporation . . . shall not bring or maintain an
action in a court of this state for the collection
of compensation for the performance of an act or
contract for which a license is required by this
article without alleging and proving that the person
was licensed under this article during the
performance of the act or contract.
The RBA requires that a residential builder be licensed;
however, the definition of a residential builder does not
include supplying duties, as the majority notes. Thus, a
license is required to install, but not to supply.
Defendant, known by plaintiff to be an unlicensed
builder, contracted with plaintiffs to “supply and install” a
slate roof.1 The majority asserts that because a license was
1
A strong argument can be made that under this contract,
plaintiffs were the property owners and the general
contractors with defendant as the subcontractor. As the
defendant pointed out in its supplemental brief, plaintiffs
clearly requested defendant to return to the job, plaintiffs
listed defendant as a subcontractor, and plaintiffs supervised
over $700,000 worth of contracts. This would exempt defendant
from the license requirement under MCL 339.2403(b), which
provides:
Notwithstanding article 6, a person may engage
in the business of or act in the capacity of a
residential builder or a residential maintenance
and alteration contractor or salesperson in this
state without having a license, if the person is 1
of the following:
* * *
(b) An owner of property, with reference to a
structure on the property for the owner’s use and
occupancy.
(continued...)
2
required for the installation duty of the contract, defendant
may not recover for performing its duty as a supplier.
Although § 2412 looks for the “performance of an act or
contract” that requires a license, I cannot agree that the
entire contract qualifies as one requiring a license.
The contract expressly imposed two separate duties on
defendant: to “supply and install” the slate. According to
the majority, the installation duty, which requires a license,
prevails over the supply duty, which does not require a
license. Reading the contract as the majority does
effectively requires an unlicensed builder who has contracted
to supply materials in a single contract (in which he has also
agreed to install those supplies) to have a license to supply.
The RBA does not provide for such a result. Rather, the act
does allow bifurcating the labor and supply components of a
single contract by barring lawsuits for compensation of a
contract that requires a license. The bar, therefore, is
expressly limited to lawsuits involving a contract that
provides for the specific acts that require a license under
the RBA, i.e., installing. I cannot agree that including both
an installation and supply duty into one document extends the
license requirement necessary to perform the installation duty
1
(...continued)
Because I conclude that the contract is severable, however, I
do not rest on this argument.
3
to the supply duty, thus, generating an unenforceable
document. The result of such a holding requires this
unlicensed builder to create a separate supply contract,
stating the same information already repeated in a “supply and
install” contract, but limited to those duties relevant to
supplying. In other words, the majority’s holding mandates
bifurcation.
My position is supported not only by a plain reading of
the RBA, but also by traditional contract principles.
Under the occupational code, engaging in a licensed
activity without a license is a misdemeanor, thus, making the
installation part of the contract in this case illegal.2 The
general rule is that severance of an illegal provision of a
contract is warranted and the lawful portion of the agreement
is enforceable when the illegal provision is not central to
2
MCL 339.601(1) states:
A person shall not engage in or attempt to
engage in the practice of an occupation regulated
under this act or use a title designated in this
act unless the person possesses a license or
registration issued by the department for the
occupation.
MCL 339.601(3) describes the penalty for such a
violation:
A person, school, or institution which
violates subsection (1) or (2) is guilty of a
misdemeanor, punishable by a fine of not more than
$500.00, or imprisonment for not more than 90 days,
or both.
4
the parties’ agreement and the illegal provision does not
involve serious moral turpitude, unless such a result is
prohibited by statute. See 2 Restatement Contracts § 603, pp
1119-1120; Calamari & Perillo, Contracts, 3d, § 22-6.
As noted, I cannot agree that the RBA prohibits
severance. Moreover, in my view, the illegal provision,
providing for defendant to engage in the separate duty of
installation, is not central to the parties’ agreement that
the defendant “supply and install” a slate roof. The legal
provision, defendant engaging in the separate duty of
supplying, is clearly an entirely different component of the
contract, therefore, warranting its enforcement.
For the above reasons, I would hold that defendant was
only barred from the breach of contract suit seeking
compensation for the installation services and allow
defendant’s suit for supply costs. Accordingly, I would
conclude that the trial court erred in summarily disposing of
defendant’s entire breach of contract action.
5