Stokes v. Millen Roofing Co.

• Decision Date: 07 May 2001
• Docket Number: Docket No. 216334.
• Citation: 627 N.W.2d 16,245 Mich. App. 44
• Parties: Robert STOKES and Patricia Stokes, Plaintiff-Appellant/Counter-Defendant/Cross-Appellee, v. MILLEN ROOFING COMPANY, Defendant-Appellee/Counter-Plaintiff/Cross-Appellant, and Douglas Sumner, Comerica Bank, Thomas Dowling and George Schuler, Third-Party Defendants.
• Court: Court of Appeal of Michigan — District of US

627 N.W.2d 16

245 Mich. App. 44

Robert STOKES and Patricia Stokes, Plaintiff-Appellant/Counter-Defendant/Cross-Appellee, v. MILLEN ROOFING COMPANY, Defendant-Appellee/Counter-Plaintiff/Cross-Appellant, and Douglas Sumner, Comerica Bank, Thomas Dowling and George Schuler, Third-Party Defendants.

Docket No. 216334.

Court of Appeals of Michigan.

Submitted September 5, 2000, at Grand Rapids.

Decided March 9, 2001, at 9:15 a.m.

Released for Publication May 7, 2001.

Bassey and Selesko, P.C. (by Robert C. Zack and Mark Merlanti), Southfield, for the plaintiffs.

Visser & Bolhouse (by Donald R. Visser), Grandville, for the defendant.

Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, and Michael A. Lockman, Assistant Attorney General, Detroit, for amicus curiae Bureau of Commercial Services, Department of Consumer and Industry Services.

Before DOCTOROFF, P.J., and HOLBROOK, and SMOLENSKI, JJ.

DOCTOROFF, P.J.

Plaintiffs appeal as of right from a May 1998 judgment of the Kent Circuit Court that found no cause of action on defendant's¹ counterclaim against plaintiffs, but awarded defendant equitable relief. Defendant cross appeals, challenging the trial court's grant of partial summary disposition to plaintiff that dismissed all but two of defendant's claims. We affirm the trial court's judgment awarding equitable relief because we are bound by MCR 7.215(H)(1) to follow the precedent of Republic Bank v. Modular One LLC, 232 Mich.App. 444, 591 N.W.2d 335 (1998). Were we not bound by Republic Bank, we would reverse and remand for the reasons set forth below.

I

In December 1993, plaintiffs contracted with defendant, an unlicensed roofing contractor, for the construction of a slate roof with appurtenances on plaintiffs' residential property. Shortly after the work began, the parties developed "artistic differences," and a total breakdown in the parties' relationship in February 1994 resulted in a suspension of work. The parties renegotiated their agreement, and defendant resumed work on the roof. After a dispute arose regarding payment, defendant filed a construction lien on plaintiffs' property. Thereafter, plaintiffs filed suit against defendant, seeking damages for breach of contract and removal of the construction lien. Defendant filed a counterclaim, alleging breach of contract, seeking foreclosure on the construction lien, and requesting recovery based on quantum meruit and other theories. The trial court dismissed defendant's counterclaim and vacated the construction lien on the basis that defendant, as an unlicensed residential builder, was prohibited by M.C.L. § 339.2412; MSA 18.425(2412) from recovering compensation for the work performed. However, the trial court allowed defendant to amend his countercomplaint to add eleven counts. Upon plaintiffs' motion for summary disposition, the trial court dismissed all claims in defendant's countercomplaint, except a count alleging an accord and a count for "claim and delivery" or common-law replevin.

At the conclusion of a bench trial in May 1998, the trial court found that defendant's accord theory was not supported by the evidence. However, the court found that the "extraordinary circumstances" of the case warranted equitable relief. The court fashioned a complicated remedy that allowed defendant to remove the roofing materials it placed on plaintiffs' house if defendant paid $52,934 to an escrow agent, who would pay those funds to plaintiffs upon defendant's removal of the roofing materials. However, once defendant paid the funds to the escrow agent, plaintiffs would have twenty-eight days to deposit $113,269 with the escrow agent. If plaintiffs chose to do so, defendant would not have the right to remove the roofing materials, but would receive the funds placed in escrow, and the matter would be resolved.

II

Plaintiffs first argue that the trial court erred in granting equitable relief to defendant and in failing to dismiss all claims brought by defendant because the residential builders licensing act, M.C.L. § 339.2401 et seq.; MSA 18.425(2401) et seq., bars defendant's claims. Plaintiffs are correct that defendant is barred from suing to collect for the contracted work by M.C.L. § 339.2412; MSA 18.425(2412), which states:

A person or qualifying officer for a corporation or member of a residential builder or residential maintenance and alteration contractor 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 statute clearly prohibits a residential builder or contractor from maintaining any action to collect compensation for its work unless the builder or contractor was licensed at the time the work was performed. Charles Featherly Constr. Co. v. Property Development Group, Inc., 400 Mich. 198, 203, 253 N.W.2d 643 (1977). This prohibition has been interpreted as extending to counterclaims as well as complaints. Republic Bank, supra at 449, 591 N.W.2d 335; Parker v. McQuade Plumbing & Heating, Inc., 124 Mich.App. 469, 471, 335 N.W.2d 7 (1983). Because defendant was unlicensed at the time it performed the work on plaintiffs' roof, defendant had no right to pursue a claim against plaintiffs.

A

Although unlicensed residential builders or contractors are prohibited by statute from suing for compensation, case law has provided for recovery in certain circumstances under equitable principles. An unlicensed residential builder's or contractor's right to equitable compensation was first addressed in Kirkendall v. Heckinger, 403 Mich. 371, 269 N.W.2d 184 (1978). In Kirkendall, the plaintiff property owner approached the defendant builder to construct a house for plaintiff's son on plaintiff's property. The plaintiff owed $1,250 on the property pursuant to a land contract. The defendant agreed to pay off the land contract and the back taxes and to provide the labor and materials to construct the house in exchange for a disputed amount of money. The plaintiff conveyed the property to the defendant, who was to convey the property to the plaintiff's son upon the completion of the house. However, when the house was completed, a dispute arose regarding the amount owed to the defendant.

The plaintiff filed suit, requesting a conveyance of the property to the plaintiff's son in exchange for $9,250 paid to the defendant, or in the alternative, an award of $7,000 on a theory of unjust enrichment. The defendant filed a counterclaim seeking an award of money damages, which included the value of the labor and materials used in the construction of the house. The trial court ruled that legal title to the property should go to the plaintiff's son upon the payment of approximately $1500 to the defendant as reimbursement for his payment of the land contract and back taxes. The trial court dismissed the defendant's counterclaim on the basis of the provision in the residential builders licensing act prohibiting unlicensed builders from bringing a claim to collect for work performed.

On appeal, after noting the maxim that "he who seeks equity must be prepared to do equity," our Supreme Court concluded:

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 Kirkendall's consent (and in fact with Dennis Kirkendall's active participation) while Heckinger had title to the property. [Id. at 374, 269 N.W.2d 184.]

Although the holding of Kirkendall would appear to be controlling and dictate a result similar to that reached by the trial court, Kirkendall is distinguishable from the case at bar. First, the circumstances under which the trial court's equitable powers were invoked in the present case is significantly different. In Kirkendall, the trial court found that an equitable mortgage existed between the parties. Id. at 373, 269 N.W.2d 184. The circumstance that gave rise to the equitable mortgage, namely, the contractor's promise to transfer title to the property to the original owner's son, existed before the parties' dispute arose and was premised upon the property owner's promise to pay the contractor. Further, although the contractor had no right to pursue payment against the property owner because of his unlicensed status, there was nothing invalid or illegal about the manner in which the contractor obtained title to the property, and, accordingly, an equitable remedy for the contractor was appropriate.

By contrast, in the present case, there was no predispute agreement whereby plaintiffs agreed to pay defendant in exchange for receiving clear title to their property. In fact, the circumstance that compelled plaintiffs to seek an equitable remedy, defendant's lien on plaintiffs' property, was not a term of the parties' agreement and did not arise until after the relationship between the parties had broken down. In addition, as an unlicensed residential builder, defendant had no legal right to claim a lien on plaintiffs' property. MCL 570.1114; MSA 26.316(114).² Although the lien was invalid and unenforceable, plaintiffs were compelled to seek an equitable remedy, not to unjustly enrich themselves at defendant's expense, but to clear the clouded title on their property. These clear distinctions lead to the conclusion that the equitable exception to M.C.L. § 339.2412; MSA 18.425(2412) created by the Kirkendall Court should be limited to the facts of that case and need not be applied to the present case.

B

Although the facts of Kirkendall are clearly distinguishable from ...