Maids Intern., Inc. v. Saunders, Inc., 192586

• Decision Date: 15 July 1997
• Docket Number: No. 192586,192586
• Citation: 224 Mich.App. 508,569 N.W.2d 857
• Parties: The MAIDS INTERNATIONAL, INC., Plaintiff-Appellant, v. SAUNDERS, INC., d/b/a The Maids, David T. Saunders and Lori N. Saunders, Defendants-Appellees. Decided
• Court: Court of Appeal of Michigan — District of US

Page 857

569 N.W.2d 857

224 Mich.App. 508

The MAIDS INTERNATIONAL, INC., Plaintiff-Appellant, v. SAUNDERS, INC., d/b/a The Maids, David T. Saunders and Lori N. Saunders, Defendants-Appellees.

Decided No. 192586.

Court of Appeals of Michigan.

Submitted April 10, 1997, at Detroit.

Decided July 15, 1997, at 9:15 a.m.

Released for Publication Oct. 8, 1997.

Colombo & Colombo by Robert Y. Weller and Patrick J. Ennis, Bloomfield Hills, for Plaintiff-Appellant.

Raymond & Prokop, P.C. by Stephen M. Ryan and Jeffrey J. Mayer, Southfield, for Defendants-Appellees.

Before McDONALD, P.J., and REILLY and O'CONNELL, JJ.

McDONALD, Presiding Judge.

Plaintiff, The Maids International, Inc., is a Nebraska-based franchisor that sold franchises to defendants and brought this action to recover fees and royalties allegedly due under the franchise agreements between the parties. Both parties filed motions for summary disposition. The trial court granted defendants' motion, finding the franchise agreements to be unenforceable because they were illegal as violative of Michigan's Franchise Investment Law (FIL), M.C.L. § 445.1501 et seq.; M.S.A. § 19.854(1) et seq. We reverse and remand for further proceedings.

The parties entered into franchise agreements for two franchises in 1988. Defendants agreed to pay franchise and other fees to plaintiff, who was to provide a unique system relating to the establishment, development, and operation of household maintenance and cleaning services. In 1993, the Michigan Attorney General asserted plaintiff failed to comply with the FIL in offering and selling franchises in Michigan. Specifically the Attorney General alleged plaintiff failed to provide prospective franchisees a copy of disclosure documents, contrary to M.C.L. § 445.1508; M.S.A. § 19.854(8). Eventually the Attorney General and plaintiff entered into an "Assurance of Discontinuance" whereby plaintiff assured the Attorney General it would not sell franchises without complying with the FIL and that it would offer rescission to all franchisees to whom they had sold franchises.

Plaintiff brought the instant suit in December of 1993 alleging breach of the franchise agreements it had with defendants. The trial court denied plaintiff's motion for summary disposition, finding conflicting evidence existed regarding whether defendants breached the franchise agreements. However, the court granted defendants' motion. In granting the motion, the court relied on the Assurance of Discontinuance and ruled the document indicated the franchise agreements between the parties were in violation of the FIL and therefore contrary to public policy. For this reason, the court held the agreements were unenforceable and plaintiff could not sue for breach.

On appeal, plaintiff first argues the trial court erred in considering the Assurance of Discontinuance as an admission plaintiff violated the FIL. We find it unnecessary to address this claim because, even assuming the trial court's consideration of the document as an admission was improper, the record contains sufficient evidence to demonstrate plaintiff's violation of the statute. Instead, the determinative issue on appeal is whether the court properly concluded a violation of the FIL rendered the parties' franchise agreements void or unenforceable.

In support of the trial court's conclusion, defendant cites case law setting forth the principle that contracts founded on acts prohibited by a statute, or contracts in violation of public policy, are void. See, e.g., Mahoney v. Lincoln Brick Co., 304 Mich. 694, 8 N.W.2d 883 (1943); Skutt v. Grand Rapids, 275 Mich. 258, 266 N.W. 344 (1936); Jaenicke v. Davidson, 290 Mich. 298, 287 N.W. 472 (1939); Peeples v. Detroit (On Rehearing), 99 Mich.App. 285, 302, 297 N.W.2d 839 (1980). We have no disagreement with the longstanding validity of these principles. However, we disagree with the trial court's and defendants' application of these principles to the facts of this case.

This case involves a contract to...