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Blogs | September 30, 2015
2 minute read

MSC holds that contracts with unlicensed residential builders are not “void,” contrary to statements in prior precedent

It seems esoteric, but “void” and “voidable”—a distinction that has long confused Michigan courts—may mean the difference between treble damages for conversion and no damages at all.  The Michigan Supreme Court in Epps v. 4 Quarters Restoration LLC, No. 147727, held that contracts with the homeowner might have granted the contractor authority to cash insurance checks to pay for restoration work at the time because the contracts were only ‘voidable” by the homeowner, not “void” from the start.  The Court also confirmed that the occupational code does not bar an unlicensed builder from defending against a homeowner’s claims on the merits and does not create a cause of action for homeowners.

Danny and Joyce Epps hired Troy Willis to restore their home after it was damaged by flooding.  Willis failed to inform the Epps that his residential builder’s license was revoked.  Through a power of attorney that the Epps gave Willis, Willis obtained and endorsed several insurance checks from the Epps’ insurance company presumably to pay for the restoration.  The checks were cashed at Denaglen Corporation’s check-cashing business. When Willis discontinued work on the house, the Epps filed suit, claiming that (a) under MCL 339.2412(1) Willis was not entitled to compensation for his work because he was unlicensed, and (b) that Willis had converted their insurance proceeds.  Denaglen failed to timely respond to the complaint, and a default judgment was entered against it.  Ultimately, the trial court granted summary disposition in the Epps’s favor, and Willis and Denaglen appealed.

The Court of Appeals affirmed, holding that Willis’s misrepresentations rendered the contracts between the parties void.  Importantly, because it determined the contract was void ab initio, the Court of Appeals reasoned that the agreement could not authorize Willis to cash the checks and held that summary disposition on the conversion claim was appropriate.  The Michigan Supreme Court disagreed, holding that despite language used in previous cases, contracts between an unlicensed builder and a homeowner are only voidable at the option of the homeowner.  Having resolved that confusion, the MSC remanded to the trial court for a determination of whether Willis acted with authority under the agreement or converted the insurance checks.

The Michigan Supreme Court also held that, while the trial court did not err in refusing to set aside Denaglen’s default, Denaglen’s default would have to be set aside if Willis was not liable for converting the insurance checks.