Johnson v. QFD, Inc.

• Decision Date: 21 April 2011
• Docket Number: Docket No. 294732.
• Parties: JOHNSON v. QFD, INC.
• Court: Court of Appeal of Michigan — District of US

292 Mich.App. 359

74 UCC Rep.Serv.2d 397

807 N.W.2d 719

JOHNSON

v.QFD, INC.

Docket No. 294732.

Court of Appeals of Michigan.

Submitted Jan. 11, 2011, at Detroit.Decided April 21, 2011, at 9:10 a.m.

Shelton Legal Services, PLLC (by Steven E. Shelton), for Robert and Amanda Johnson.

Swistak & Levine, P.C., Farmington Hills (by I. Matthew Miller), for QFD, Inc.

Before: JANSEN, P.J., and OWENS and SHAPIRO, JJ.

JANSEN, P.J.

Plaintiffs appeal by right the trial court's grant of summary disposition in favor of defendant QFD, Inc.¹ We reverse in part and remand for further proceedings consistent with this opinion.

I

In this case of first impression, we are required to interpret and apply certain provisions of Michigan's Mobile Home Commission Act (MHCA), MCL 125.2301 et seq. Specifically, we are asked to determine whether plaintiffs were entitled to sue QFD under MCL 125.2331 for rescission of their agreement to purchase a mobile home. We are also asked to determine whether, assuming plaintiffs were entitled to sue under MCL 125.2331, the applicable statutory period of limitations was effectively shortened by a term in the parties' contract.

In November 2006, plaintiffs entered into a contract to purchase a mobile home from QFD at a mobile home park in Burton, Michigan. Thereafter, plaintiffs executed certain loan documents with QFD. Plaintiffs assert that their agreement to purchase the mobile home was conditioned on QFD's promise to complete certain necessary repairs to the home. QFD apparently failed to complete these repairs, and plaintiffs hired an outside contractor to finish the work. According to plaintiffs, the contractor discovered that the hot-water heater in their mobile home was defective and “not safe for mobile home use.” It is plaintiffs' contention that this defective hot-water heater was hidden behind a wall where it could not easily be inspected. Plaintiffs filed a complaint with the Bureau of Construction Codes, reporting the unsafe hot-water heater and detailing certain other alleged problems and irregularities with the sale, title, and condition of the mobile home. In September 2007, plaintiffs stopped making their monthly payments on the mobile home. Plaintiffs subsequently moved out of the home, allegedly because of the defective hot-water heater. At some point, QFD discovered that plaintiffs had moved out of the mobile home, and its agent entered and took possession of the home.

In September 2008, plaintiffs filed the instant action in the Genesee Circuit Court. After amending their complaint three times, plaintiffs ultimately set forth several claims against QFD, including claims of breach of warranty, false advertising, trespass to land, trespass to chattels, innocent misrepresentation, fraudulent misrepresentation, and constructive eviction. Plaintiffs also set forth claims (1) alleging that QFD had sold them the mobile home in violation of the MHCA and seeking damages, (2) seeking rescission of their mobile home purchase agreement and restoration of the status quo, (3) seeking revocation of acceptance under Article 2 of the Uniform Commercial Code (UCC), MCL 440.2102 et seq. , and (4) alleging certain violations of Article 9 of the UCC, MCL 440.9101 et seq.

In September 2009, QFD moved for summary disposition pursuant to MCR 2.116(C)(7) and (10). Among other things, QFD argued that many of plaintiffs' claims were based on the purchase agreement and actually sounded in breach of contract and were therefore time-barred by a shortened, one-year limitations period contained in the parties' contract. It is undisputed that ¶ 14 of the parties' purchase agreement provided:

Purchaser understands and agrees that—if either of us should breach this contract—the other of us shall have only one year, after the occurrence of that breach, in which to commence an action for a breach of contract.

QFD asserted that its sale of the mobile home to plaintiffs was governed by the UCC, under which buyers and sellers may contractually agree to “reduce the period of limitation to not less than 1 year.” MCL 440.2725(1). QFD asserted that because plaintiffs had waited more than one year after their purchase of the mobile home to file suit, their claims (including those alleging violations of the MHCA and seeking rescission) were barred by the shortened, one-year limitations period in the contract. QFD also contended that plaintiffs' claims seeking rescission and revocation of acceptance were barred by ¶ 11 of the parties' contract, which provided in pertinent part:

PURCHASER ALSO AGREES THAT ONCE PURCHASER HAS ACCEPTED THE UNIT, EVEN THOUGH A WARRANTY DOES NOT ACCOMPLISH ITS PURPOSE, THAT PURCHASER CANNOT RETURN THE UNIT TO RETAILER AND SEEK A REFUND FOR ANY REASON.

QFD lastly argued that even if plaintiffs' claims were not barred by these two provisions in the purchase agreement, there remained no genuine issues of material fact and it was entitled to judgment as a matter of law.

In response to QFD's motion for summary disposition, plaintiffs argued that they were entitled to sue for rescission of the purchase agreement because QFD had violated the MHCA in several respects. Plaintiffs pointed out that the MHCA contains its own internal statute of limitations, and argued that their claims were governed by this statutory limitations period rather than by the shortened, one-year period contained in the parties' contract. Specifically, plaintiffs argued that because their claims were primarily based on the MHCA rather than on the parties' contract, they were not breach-of-contract claims as QFD asserted and were therefore unaffected by the shortened, one-year period set forth in the purchase agreement.

The trial court entertained oral argument concerning QFD's motion for summary disposition. The trial court agreed with QFD's assertion that plaintiffs' claim for rescission was actually a “contract” claim and that it was therefore time-barred by the shortened, one-year limitations period set forth in the purchase agreement. The court also found that plaintiffs' remaining claims were either time-barred or insufficiently supported by admissible evidence. On October 5, 2009, the trial court entered an order granting QFD's motion for summary disposition “for the reasons stated on the record.”

II

We review de novo a trial court's decision to grant a motion for summary disposition. Spiek v. Dep't of Transp., 456 Mich. 331, 337, 572 N.W.2d 201 (1998). Statutory interpretation is a question of law that we review de novo on appeal. In re Complaint of Rovas Against SBC Michigan, 482 Mich. 90, 102, 754 N.W.2d 259 (2008). Contract interpretation similarly presents a question of law that we review de novo. DaimlerChrysler Corp. v. G–Tech Prof. Staffing, Inc., 260 Mich.App. 183, 184–185, 678 N.W.2d 647 (2003).

III

Plaintiffs argue that because QFD was operating in violation of certain provisions of the MHCA or the administrative rules promulgated thereunder, it was unauthorized to enter into any contract for the sale of a mobile home in this state. As a consequence, plaintiffs argue, the parties' purchase agreement was void and unenforceable. We disagree.

The MHCA prohibits a dealer from engaging in the retail sale of mobile homes without a license. MCL 125.2321(1). The MHCA further authorizes the promulgation of administrative rules concerning, among other things, “[t]he business, sales, and service practices of mobile home dealers.” MCL 125.2305(1)(b). The rules promulgated under the MHCA specifically require a mobile home dealer to “obtain a license for each location from which the [dealer] proposes to operate,” Mich. Admin. Code, R. 125.1214g(1), and require a mobile home dealer to file “[s]eparate [license] applications ... for each sales location,” Mich. Admin. Code, R. 125.1214g(2). It is undisputed that QFD was in violation of these rules because it did not have a license to sell mobile homes at the Burton location.

It is true, as a general matter, that “contracts founded on acts prohibited by a statute, or contracts in violation of public policy, are void.” Maids Int'l, Inc. v. Saunders, Inc., 224 Mich.App. 508, 511, 569 N.W.2d 857 (1997); see also Sands Appliance Servs., Inc. v. Wilson, 463 Mich. 231, 239, 615 N.W.2d 241 (2000). But it does not necessarily follow that every statutory or regulatory violation by one of the contracting parties renders the parties' contract void and unenforceable. In Maids Int'l, 224 Mich.App. at 511–512, 569 N.W.2d 857, this Court considered whether the plaintiff's violation of Michigan's Franchise Investment Law (FIL), MCL 445.1501 et seq. , rendered void and unenforceable certain franchise agreements entered into between the plaintiff and the defendants. In that case, the plaintiff, a Nebraska-based franchisor, sold franchises to the defendants. Maids Int'l, 224 Mich.App. at 509, 569 N.W.2d 857. However, the plaintiff allegedly failed to provide necessary disclosure documents to the defendants as required by the FIL. Id. at 510, 569 N.W.2d 857. The trial court determined that the franchise agreements were void because the plaintiff had failed to comply with the FIL, and accordingly granted summary disposition in favor of the defendants. Id. at 509, 569 N.W.2d 857.

On appeal, this Court reversed, rejecting the defendants' argument that the franchise agreements were void. Id. at 511–512, 569 N.W.2d 857. This Court noted that the Legislature had “directly spoken” on the matter in question, and observed that the FIL “sets forth the various requirements a franchisor must meet in order to sell a franchise in this state.” Id. This Court went on to observe: “The Legislature also set forth the appropriate penalties for violation of the various requirements. The requirement plaintiff violated in this case, the provision of a disclosure statement, provides as remedies the franchisor's liability for damages or rescission of the franchise agreement.” Id. at 512, 569 N.W.2d 857. B...