MSC 147727 DANNY EPPS V 4 QUARTERS RESTORATION LLC Opinion on Application - Other 09/28/2015

EPPS v 4 QUARTERS RESTORATION LLC
Docket No. 147727. Argued on application for leave to appeal March 10, 2015. Decided
September 28, 2015.
Following a flood in 2006 that did extensive damage to their home, Danny and Joyce
Epps brought an action in the Wayne Circuit Court against the individuals and businesses
involved in the restoration of their home or with the flow of monies associated with the
restoration project. Their insurance provider, defendant Auto Owners Insurance Company,
employed defendant AM Adjusting to refer plaintiffs to professionals capable of performing the
restoration work. AM Adjusting referred plaintiffs to defendant Troy Willis and his companies,
defendants 4 Quarters Restoration LLC and Emergency Insurance Services. Plaintiffs contracted
with Willis to perform the restoration work. Willis failed to inform plaintiffs that his residential
builder’s license had been revoked. Willis began work on plaintiffs’ home and making insurance
claims through their homeowners’ policy. When Willis received checks from Auto Owners, he
indorsed them himself, signing plaintiffs’ names. Willis would then cash the checks at defendant
Denaglen Corp.’s check-cashing business, MBM Check Cashing. Denaglen would then deposit
the funds into its account at defendant Comerica Bank. Ultimately, Willis received and indorsed
checks from Auto Owners totaling $128,047. Willis discontinued work on plaintiffs’ home at
the end of 2006. The parties disputed whether the restoration was complete and whether the
work that had been done was performed in a satisfactory manner. After plaintiffs filed suit,
Comerica filed an interpleader action and deposited $128,047 from Denaglen’s account into
escrow. The claims against Comerica were subsequently dismissed. Auto Owners assigned to
plaintiffs any claims it had against the other defendants, and the claims against it were dismissed
as were the claims against AM Adjusting. Plaintiffs alleged in their complaint that Willis and his
businesses were not entitled to compensation for the work they performed because Willis was
unlicensed and their contract was therefore void, that Willis had defrauded them, had conducted
the restoration in an unworkmanlike manner, and had converted their insurance proceeds.
Plaintiffs further alleged that Denaglen wrongfully cashed the insurance checks and converted
the funds paid by Auto Owners to plaintiffs. Denaglen failed to timely respond to plaintiffs’
complaint and a default judgment was entered against it. The court, Michael F. Sapala, J., denied
Denaglen’s motion to set aside the default. The remaining parties moved for summary
disposition. The court granted summary disposition in favor of plaintiffs. Willis and his
businesses and Denaglen appealed. The Court of Appeals affirmed. Willis and his businesses
and Denaglen then sought leave to appeal in the Michigan Supreme Court. The Supreme Court
Michigan Supreme Court
Lansing, Michigan
Syllabus Chief Justice:
Robert P. Young, Jr.
Justices:
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
Richard H. Bernstein
This syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
Reporter of Decisions:
Corbin R. Davis

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ordered and heard oral argument on whether to grant the application or take other peremptory
action. 496 Mich 853 (2014).
In a unanimous opinion by Justice M ARKMAN , the Supreme Court held:
MCL 339.2412(1) does not prevent an unlicensed builder from defending against a
lawsuit on its merits. Nor does the statute afford a homeowner an independent cause of action to
seek damages for its violation. Contracts between an innocent homeowner and an unlicensed
residential builder are voidable by the homeowner, and thereby effective in conveying rights and
authorities to both parties and third parties. The Court of Appeals therefore erred when it
declared the contract at issue void ab initio.
1. MCL 339.2412(1) prohibits an unlicensed residential builder from bringing or
maintaining an action for the collection of compensation by filing or pursuing a complaint, cross-
claim, counterclaim, or third-party claim against a homeowner. However, if it is the homeowner
who seeks compensation or performance from the unlicensed builder, the homeowner has
brought the action. And if the builder offers reasons why the homeowner should not recover in
its action, the builder has asserted a defense and the assertion of a defense is not barred by
MCL 339.2412(1).
2. MCL 339.2412(1) does not afford a homeowner a separate and independent right to
demand that an unlicensed builder return funds paid for work conducted when the builder lacked
the requisite license. The statute was written to protect a homeowner by imposing a burden on a
builder who, in the Legislature’s view, would endanger public safety by performing construction
work without a license. However, a homeowner is protected from the harm that may result from
the performance of unlicensed work—i.e., the provision of unsatisfactory or unsafe building
services—through existing and traditional common-law causes of action in tort and contract. In
addition, MCL 339.2412 expressly provides a mechanism for its enforcement, apart from civil
liability, by providing for civil prosecution by the Attorney General or a prosecuting attorney.
By expressly conferring enforcement authority only on prosecutors and the Attorney General, the
statute would seem by implication not to give similar authority to a private party. Given these
facts, there is no basis for inferring a private cause of action to enforce MCL 339.2412(1).
3. The courts of this state have often pronounced contracts involving an unlicensed
builder to be “void,” but it appears that in many cases, courts have stated that these contracts are
“void” without actually intending to use the term in its literal sense as evidenced by the fact that
courts have shown a willingness to allow a homeowner to enforce such contracts against an
unlicensed builder. In addition, while MCL 339.2412(1) imposes a limitation on the unlicensed
builder, preventing the builder from bringing any kind of lawsuit in order to receive
compensation for work performed without a license, the statute does not place any similar
limitation on the acts that may be taken by a homeowner. The statute therefore suggests that
contracts between a homeowner and an unlicensed builder are characterized by an asymmetrical
enforceability. This statutory framework is largely in accordance with the nature of a voidable
contract because in the case of a voidable contract, the party with the power of avoidance has the
unilateral option to either rescind the contract and avoid the obligation of performance, or to
ratify the contract and render it enforceable. Although there has been considerable confusion

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regarding the proper legal status of these contracts, treating them as voidable is the only outcome
that satisfactorily applies MCL 339.2412(1) while giving due consideration to our judicial
precedents.
4. The trial court did not abuse its discretion by refusing to set aside Denaglen’s default.
Even after receiving notice of its default, Denaglen inexplicably waited seven weeks before
moving to have the default set aside. In arguing Denaglen’s motion to set aside the default, and
in their applications for leave to appeal, the parties presented irreconcilable accounts of the
circumstances surrounding the default. It was for the trial court to evaluate the credibility and
reasonableness of the parties’ arguments, and it determined that Denaglen had not made the
necessary showing to merit relief from the default. However, because this opinion calls into
question the legal justifications for the lower courts’ decisions in favor of plaintiffs’ conversion
claims against defendants, the potential for an inconsistent result exists. If defendant Willis is
not liable for converting the insurance checks, then logically Denaglen could not have converted
the checks, either. In the face of such an outcome, Denaglen’s default, as to the conversion
claim only, would need to be set aside.
5. The contract between defendant Willis, the unlicensed builder, and plaintiff
homeowners was voidable. Because the contract was not a nullity from the outset, it could in
theory have conveyed to Willis the authority to receive, indorse, and cash the insurance checks.
The trial court, however, granted plaintiffs summary disposition without deciding whether the
contract, if valid, would have conferred that authority on Willis. We therefore remand to that
court for a determination of whether the agreement granted Willis and his companies the specific
authority to perform those actions on plaintiffs’ behalf and whether they acted within the scope
of that authority. If on remand the trial court determines that Willis and his companies might be
liable for any of plaintiffs’ claims arising under the contract, those defendants must be permitted
to defend against those claims. Neither Willis’s breach of the contract nor MCL 339.2412(1)
prevent Willis from demanding that plaintiffs prove their actual damages. If plaintiffs seek
judicial redress, including damages, they are required to prove the extent to which they have
been harmed by defendants and defendants are entitled to rebut those proofs. With regard to any
outstanding equitable claims, such as restitution, plaintiffs must also be prepared to establish that
they have acted equitably.
Affirmed in part, reversed in part, and remanded.
©2015 State of Michigan

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FILED September 28, 2015
S T A T E O F M I C H I G A N
SUPREME COURT
DANNY EPPS and JOYCE EPPS,
Plaintiffs-Appellees/Cross-
Appellants,
v No. 147727
4 QUARTERS RESTORATION LLC,
DENAGLEN CORP., d/b/a/ MBM CHECK
CASHING, EMERGENCY INSURANCE
SERVICES, and TROY WILLIS,
Defendants-Appellants/Cross-
Appellees,
and
AM ADJUSTING & APPRAISAL, LLC,
MICHAEL N. ANDERSON, JR., HOME
OWNERS INSURANCE COMPANY,
PAULA MATHEWS, MAXIMUM
RESTORATION, LLC, AUTO OWNERS
INSURANCE COMPANY, CHARLES
WILLIS, and COMERICA BANK,
Defendants.
Michigan Supreme Court
Lansing, Michigan
OPINION Chief Justice:
Robert P. Young, Jr.
Justices:
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
Richard H. Bernstein

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2
BEFORE THE ENTIRE BENCH
MARKMAN , J.
Defendants, an unlicensed residential builder; his businesses; and Denaglen Corp.,
a check-cashing service, seek leave to appeal the decision of the Court of Appeals
denying them relief from summary judgment. The trial court entered judgment in favor
of plaintiffs, a married couple and parties to a home restoration contract with the
unlicensed builder defendant and his businesses, and the Court of Appeals affirmed. We
directed that oral arguments be held to address whether to grant the application for leave
to appeal or take other action pursuant to MCR 7.302(H)(1). Epps v 4 Quarters
Restoration, LLC, 496 Mich 853 (2014). After hearing arguments on March 10, 2015,
defendants’ application is now considered. This case raises four issues: (1) whether
MCL 339.2412(1), which prohibits an unlicensed builder from “bring[ing] or
maintain[ing] an action . . . for the collection of compensation” prevents an unlicensed
builder from defending on the merits against claims asserted against him by a
homeowner; (2) whether MCL 339.2412(1) provides a homeowner with an independent
cause of action for damages arising from the statute’s violation; (3) whether a contract for
the services of an unlicensed builder is void ab initio or whether it may have some form
of continuing legal existence; and (4) whether the trial court abused its discretion in
refusing to set aside the default of defendant Denaglen Corp., the check-cashing service.
In lieu of granting leave to appeal, we affirm in part and reverse in part the judgment of
the Court of Appeals and remand to the trial court for further proceedings consistent with
this opinion.

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3
I. FACTS AND HISTORY
Plaintiffs Danny and Joyce Epps own a home in Detroit. On July 26, 2006, that
home was damaged in a flood. Plaintiffs’ home insurance provider, Auto Owners
Insurance Company, employed AM Adjusting for the purpose of referring plaintiffs to
professionals capable of performing the necessary restoration work. AM Adjusting
referred plaintiffs to defendant Troy Willis and his companies, 4 Quarters Restoration
and Emergency Insurance Services. Willis met with plaintiffs and showed them a book
depicting some of his work. The book also displayed a copy of Willis’s residential
builder’s license, although Willis neglected to inform plaintiffs that the license had been
revoked on January 31, 2006.
Plaintiffs subsequently decided to hire Willis to perform restoration services on
their home and on personal property damaged in the flood, and the parties signed a
misnamed “Fire Repair Agreement” to that effect on July 26, 2006.1 That agreement
states that plaintiffs:
assign[] the proceeds of the adjusted [insurance] claim to the Emergency
Insurance Services [Willis’s company], as full payment for the fire repairs.
* * *
The owner, the undersigned, is not liable for anything in excess of
the insurance check. The owner is to approve specifications before work is
started, endorsement of the [insurance checks] to Emergency Insurance
Services, will be payment in full for the . . . repairs. [2]
1 Capitalization and emphasis altered.
2 Capitalization and emphasis altered.

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4
An addendum, titled “Work Authorization,”3 states in relevant part:
To the Insurance Companies, their agents, or to Whom it may
Concern:
I/We, Danny & Joyce Epps, the undersigned, hereby irrevocably
engage 4 Quarters Restoration LLC., to make all necessary restoration and
or clean damage [to the] property caused by your loss occurring on the 26 th
day of July 2006. To the property owned by the undersigned located at . . .
City Detroit, State Michigan.
The undersigned to insure payment, assigns the proceeds of the
adjusted claim to 4 Quarters Restoration LLC., as full payment for cleaning
and or restoration. [4]
Another addendum, titled “Insurance Power of Attorney,”5 was signed by plaintiffs and
contained the following language:
To: The Insurance Companies
Their Agents
All Concerned Parties
I Danny Epps & Joyce Epps, hereby give my (Contractor), Troy
Willis Power of Attorney, to sign my name to all documents pertaining to
settling the insurance claim and restoring the damage to my property . . . . [6]
Defendant Willis began work on plaintiffs’ home, and also began making
insurance claims through plaintiffs’ homeowners’ policy. Plaintiffs were aware that
Willis was filing claims on their behalf, although they assert they were unaware of the
3 Emphasis altered.
4 Emphasis altered.
5 Emphasis altered.
6 Emphasis altered.

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5
amounts of these claims. Upon approving the claims, Auto Owners sent checks directly
to Willis. Sometimes these checks listed both Willis and the plaintiffs as payees, and at
other times only the plaintiffs were listed as payees. When Willis received the checks, he
indorsed them himself, signing plaintiffs’ names. In total, Willis received and indorsed
checks from Auto Owners equaling $128,047. Upon receiving and endorsing the checks,
he then cashed these at defendant Denaglen’s check-cashing business, MBM Check
Cashing.7 Denaglen charged Willis a 3% fee for providing its services. After Willis had
indorsed the checks to Denaglen, the latter deposited the funds into its account at
Comerica Bank. By the end of 2006, Willis had apparently discontinued work on
plaintiffs’ home. The parties dispute both whether the restoration had been completed
and whether the work had been performed in a satisfactory manner.
On July 24, 2009, plaintiffs filed the present action in the Wayne Circuit Court
against all the individuals and businesses involved in either the restoration of their home
or with the flow of monies associated with the project, including Willis and his
businesses, Denaglen Corporation, Comerica Bank, Auto Owners Insurance, and AM
Adjusting. Comerica Bank filed an interpleader action and deposited $128,047 from
Denaglen’s account into escrow and the claims against Comerica were dismissed. Auto
Owners Insurance assigned to plaintiffs any claims it had against the other named
7 Although Willis cashed the checks at MBM Check Cashing, that entity is an alter ego of
defendant Denaglen Corp. Because the parties refer to this defendant as “Denaglen,” this
opinion will do the same.

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6
defendants and the claims against it were also dismissed, as were the claims against AM
Adjusting.
As to Willis and his businesses, plaintiffs alleged that these parties performed
restoration services on plaintiffs’ home absent the requisite license and therefore were not
entitled to receive compensation for their services. Plaintiffs sought to have the
agreement between them and Willis declared “illegal, void and unenforceable” and
thereby rescinded. Plaintiffs further alleged that Willis defrauded them, carried out their
restoration in an unworkmanlike manner, and converted the proceeds of their insurance
checks. Regarding the latter claim, plaintiffs sought treble damages measured by the face
value of the insurance checks.
With regard to Denaglen, plaintiffs alleged that it wrongfully cashed the insurance
checks, acted in bad faith and without employing reasonable commercial standards, and
converted the funds paid by Auto Owners to plaintiffs. As a result, plaintiffs sought the
$128,047 placed into escrow by Comerica. Denaglen failed to file a timely answer to
plaintiffs’ complaint and a default judgment against it was entered. Denaglen
subsequently moved to have the default set aside, but the trial court denied the motion.
The parties filed competing motions for summary disposition. The trial court
granted plaintiffs’ motion and denied defendants’ motion, ordering that the escrow funds
be awarded to plaintiffs. The court explained its ruling by stating, “MCL 339.2412(1) is
applicable in this case and Plaintiffs are entitled to summary disposition as a matter of
law.” The trial court finally held that defendants were liable as a matter of law for
converting the insurance checks issued by Auto Owners.

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7
Defendants appealed, and the Court of Appeals affirmed albeit on different
grounds. The Court of Appeals disagreed with the trial court that MCL 339.2412(1)
mandated judgment in plaintiffs’ favor, noting that MCL 339.2412(1) states only that an
unlicensed builder may not “ ‘bring or maintain an action . . . for the collection of
compensation . . . .’ ” Epps v 4 Quarters Restoration, LLC, unpublished opinion per
curiam of the Court of Appeals, issued June 6, 2013 (Docket No. 305731), p 4. Because
defendants did not “bring or maintain an action,” but sought only to defend against
plaintiffs’ action, MCL 339.2412(1) did not impose liability on defendants. Id. The
Court also held that the statute did not afford plaintiffs a private cause of action to seek
damages for its violation, but rather that a homeowner aggrieved by a builder’s
unlicensed work was obligated to seek damages under traditional common-law contract
and tort theories. Id. at 5-6.
The Court of Appeals nonetheless affirmed summary disposition in favor of
plaintiffs because it believed that defendants had converted the proceeds of the insurance
checks. The court noted that Willis had misrepresented himself to plaintiffs as a licensed
builder and held that “Willis’s fraud rendered the power of attorney entered by the
[plaintiffs] void ab initio.” Id. at 6. Accordingly, it concluded that “Willis therefore had
no authority to endorse and negotiate checks issued by the insurance company on the
[plaintiffs’] behalves.” Id. The court agreed with the trial court that the proper measure
of damages for the conversion was the face value of the converted instruments and
affirmed the lower court’s order distributing the funds held in escrow to plaintiffs.
Defendants sought leave to appeal in this Court, contending that the Court of
Appeals erred by finding defendants liable for conversion as a matter of law and also that

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8
the trial court abused its discretion when it failed to set aside Denaglen’s default.
Plaintiffs filed a cross-appeal, conditioned upon this Court granting defendants’
application for leave, contending that the Court of Appeals erred when it held both that
MCL 339.2412(1) did not provide plaintiffs with a private cause of action to recover the
funds paid to Willis and that Willis was entitled under the statute to defend himself
against plaintiffs’ claims.
II. STANDARD OF REVIEW
This case involves matters of statutory and contract interpretation, which are
reviewed de novo. Sands Appliance Servs v Wilson, 463 Mich 231, 238; 615 NW2d 241
(2000). A trial court’s ruling on a motion for summary disposition is also reviewed de
novo. Costa v Community Emergency Med Servs, Inc, 475 Mich 403, 416; 716 NW2d
236 (2006). A trial court’s decision regarding a motion to set aside a default judgment is
reviewed for an abuse of discretion. Lawrence M Clarke, Inc v Richco Constr, Inc, 489
Mich 265, 272; 803 NW2d 151 (2011). An abuse of discretion occurs when the court’s
decision results in an outcome that falls outside the range of principled outcomes.
Barnett v Hidalgo, 478 Mich 151, 158; 732 NW2d 472 (2007).
III. ANALYSIS
A. ABILITY TO DEFEND
The trial court granted summary disposition in favor of plaintiffs because it
believed that MCL 339.2412(1) mandated that result. The Court of Appeals disagreed,
holding that the statute does not apply because it only operates to prevent an unlicensed
builder from “bring[ing] or maintain[ing]” claims against a homeowner. The statute

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9
does not, however, prevent an unlicensed builder from defending itself against a claim on
its merits. Because it was the homeowners bringing claims against the builder in the
instant case, MCL 339.2412(1) is inapplicable. We agree with that analysis.
MCL 339.2412(1) 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 primary goal of statutory interpretation is ‘to ascertain the legislative intent that
may be reasonably inferred from the words expressed in the statute.’ ” Allison v AEW
Capital Mgt, LLP, 481 Mich 419, 427; 751 NW2d 8 (2008), quoting GC Timmis & Co v
Guardian Alarm Co, 468 Mich 416, 420; 662 NW2d 710 (2003). When the language of
a statute is clear, it is presumed that the Legislature intended the meaning expressed
therein. Allison, 481 Mich at 427. If a statute does not define a word, it is appropriate to
consult dictionary definitions to determine the plain and ordinary meaning of the word.
Id., citing Koontz v Ameritech Servs, Inc, 466 Mich 304, 312; 645 NW2d 34 (2002).
Legal terms, however, are to be construed according to their “peculiar and appropriate
meaning in the law.” MCL 8.3a.
MCL 339.2412(1) prohibits an unlicensed builder from “bring[ing] or
maintain[ing] an action . . . for the collection of compensation . . . .” The Court of
Appeals was correct in holding the statute inapplicable here; it does not bar the
compensation itself, but only an “action” to collect it. An “action” is defined as “a
lawsuit brought in court; a formal complaint within the jurisdiction of a court of law.”

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10
Black’s Law Dictionary (6th ed). “Cause of action” is similarly defined as, “[t]he fact or
facts which give a person a right to judicial redress or relief against another. . . . A
situation or state of facts which would entitle a party to sustain action and give him right
to seek a judicial remedy in his behalf.” Id. A party may assert a cause of action by
filing a “complaint, cross-claim, counterclaim, or third-party claim . . . .”
MCR 2.111(F)(2).
By contrast, a “defense” is “[t]hat which is offered and alleged by the party
proceeded against in an action or suit, as a reason in law or fact why the plaintiff should
not recover or establish what he seeks; [t]hat which is put forward to diminish plaintiff’s
cause of action or to defeat recovery.” Black’s Law Dictionary (6th ed). It is not an
action, such as a complaint, cross-claim, counterclaim, or third-party claim, but rather an
assertion made in response to an action. Therefore, a party may bring an “action”
seeking compensation by filing a complaint and the adverse party may then assert a
“defense” as a reason why the complainant should not recover what he or she seeks or
otherwise prevail in the action. An “action” and a “defense” are separate assertions and
are essentially a call and a response, the assertion of the former preceding and triggering
the latter. A party bringing an “action” seeks to recover from the opposing party, while a
party asserting a “defense” seeks to “diminish” or “defeat” that action.
In the context of litigation involving an unlicensed builder, MCL 339.2412(1) bars
an unlicensed builder from seeking compensation by pursuing a complaint, cross-claim,
counterclaim, or third-party claim against a homeowner. In these circumstances, the
unlicensed builder would be asking the court to order the homeowner to pay some
amount allegedly due. However, if it is the homeowner who seeks compensation or

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11
performance from the unlicensed builder, the homeowner has brought the “action.” And
if the builder offers reasons why the homeowner should not recover in its action, the
builder has asserted a “defense” and the assertion of a defense is not barred by
MCL 339.2412(1).
Further supporting the conclusion that MCL 339.2412(1) does not impair an
unlicensed builder’s ability to defend himself or herself from litigation, the statute forbids
actions for the “collection of compensation[.]” The American Heritage Dictionary of the
English Language (New College ed, 1981) defines “collect” as “to call for and obtain
payment of.” When an unlicensed builder defends against an action by a homeowner to
recover sums paid, the builder does not seek to “collect” compensation; rather, the
builder presumably seeks to retain compensation already possessed. Any other
interpretation would mean that a defendant in a lawsuit who asserts a successful defense
has somehow “collected” from the plaintiff. While it is true that in many cases, as here,
the unlicensed builder may have previously collected some amount of payment from the
homeowner, MCL 339.2412(1) only prohibits actions “in a court of this state” for the
collection of compensation. Any collection of payment that occurred before the litigation
was not accomplished by an “action in a court” and therefore does not come within the
scope of MCL 339.2412(1).
We also concur with the Court of Appeals in Parker v McQuade Plumbing &
Heating, Inc, 124 Mich App 469, 471; 335 NW2d 7 (1983), in which the following was
said of MCL 339.2412(1): “The statute removes an unlicensed contractor’s power to sue,
not the power to defend, [and] was intended to protect the public as a shield, not a
sword.” This, we believe, constitutes the most reasonable interpretation of the statute,

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12
and when a statute is plain and unambiguous, it must be applied as written and without
judicial gloss. Wayne Co v Hathcock, 471 Mich 445, 456; 684 NW2d 765 (2004).
MCL 339.2412(1) operates as a bar to actions, not a bar to defenses. It prevents an
unlicensed builder from attempting to “collect” payment from a homeowner through the
filing of “actions” in a court of law. It does not, however, prevent an unlicensed builder
from seeking to “diminish” or “defeat” actions filed against the builder by arguing that
the claimant has not been damaged by the builder to the extent alleged.8
8 Plaintiffs support their argument that an unlicensed builder may not defend itself under
MCL 339.2412(1) by citing Roberson Builders v Larson, unpublished opinion per curiam
of the Court of Appeals, issued September 19, 2006 (Docket No. 260039), lv den 482
Mich 1138 (2008), as well as Justice M ARILYN K ELLY ’s concurring statement to this
Court’s order denying leave at 482 Mich 1138. The Court of Appeals refused to allow an
unlicensed builder to argue for a reduction in the amount of a homeowner’s damages
claim arising from allegedly poor workmanship. The builder had provided services for
which it had not been paid. When litigation arose, the builder sought to use the value of
unpaid services not contemplated by the contract to reduce the homeowner’s recovery.
The Court essentially treated the builder’s argument as a separate claim for compensation
for the additional work performed: “At issue is whether the trial court erred when it
allowed [the builder] to present evidence that it was entitled to recover the unpaid balance
of the contract, as well as payment for extra work performed that was not included in the
original contract.” Roberson, unpub op at 2. We believe the Court’s distinction to have
been artificial; the builder did not seek to defend the portion of the contract that it did not
perform or to collect for the portion of the contract that it did perform; rather, it sought
only to challenge the homeowner’s alleged damages arising from its deficient
performance. By pointing out that it was not paid for other services that it provided, the
builder sought only to show that the homeowner had not been damaged to the extent
alleged. It was not maintaining an “action” for compensation; rather, it was seeking only
to reduce the amount of damages that the homeowner could collect, and its argument was
asserted in a purely defensive context.
Justice K ELLY similarly believed that MCL 339.2412(1) prevented the contractor
in Roberson from arguing for a reduction in the amount owed to the homeowner. She
cited Black’s Law Dictionary (8th ed), defining “action” to include any “ ‘civil or
criminal judicial proceeding,’ ” and cited MCL 440.1201, defining “action” to include

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B. PRIVATE CAUSE OF ACTION
The Court of Appeals concluded that MCL 339.2412(1) does not give rise to a
private cause of action that a homeowner may bring against an unlicensed builder.
Plaintiffs argue that the statute should be interpreted to allow a homeowner to bring a
private cause of action seeking the disgorgement of monies paid to an unlicensed builder.
We agree, however, with the analysis of the Court of Appeals that MCL 339.2412(1)
does not afford a homeowner a separate and independent right to demand that an
unlicensed builder return funds paid for work conducted when the builder lacked the
requisite license.
MCL 339.2412(1) clearly does not create an express private cause of action, given
that by its terms it only purports to preclude certain actions by an unlicensed builder.
Nonetheless, it is sometimes possible that a court can infer a private cause of action from
a statute when necessary to remediate its breach. Such an inference is appropriate when
“ ‘recoupment[s], counterclaim[s], setoff[s], suit[s] in equity, and any other proceedings
in which rights are determined.’ ” Roberson, 482 Mich at 1139 (emphasis omitted). She
concluded that the builder’s argument for a reduction in its liability was actually a
“setoff,” and that if the builder was allowed to so argue, it would be collecting
“compensation” for work it performed while unlicensed. Id. at 1139-1140. But as with
the Court of Appeals, she treated the builder’s argument regarding the value it provided
the homeowner as separate and distinct from the circumstances that formed the basis for
the homeowner’s lawsuit. However, there was a single transaction in Roberson-- the
builder’s performance of building services. We respectfully believe that Justice KELLY ’s
definition of an “action” also comes into tension with the term “defense,” which Black’s
Law Dictionary (6th ed) has defined as “[t]hat which is put forward to diminish plaintiff’s
cause of action or to defeat recovery[.]” Put simply, in Roberson the homeowner alleged
that the builder’s actions had impaired the value of his property by a certain amount. The
builder should have been allowed to argue that the homeowner’s actual damages were
less than that amount, thus merely “diminish[ing]” the homeowner’s recovery.

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the statute provides no express remedy for its violation, yet it is deemed, exclusively or in
part,
(a) to protect a class of persons which includes the one whose interest is
invaded; (b) to protect the particular interest which is invaded; (c) to protect
that interest against the kind of harm which has resulted; and (d) to protect
that interest against the particular hazard from which the harm results.
[Lash v Traverse City, 479 Mich 180, 192-193; 735 NW2d 628 (2007),
quoting cases quoting 2 Restatement Torts, 2d, § 286, p 25 (quotation
marks omitted).]
We find no basis here for inferring a private cause of action to enforce MCL 339.2412(1).
Clearly, the statute was written to protect homeowners, such as plaintiffs in this case, by
imposing a burden on a builder who in the Legislature’s view would endanger the public
safety by performing construction work without a license. However, a homeowner is
protected from the harm that may result from the performance of unlicensed work-- i.e.,
the provision of unsatisfactory or unsafe building services-- through existing and
traditional common-law causes of action in tort and contract. Therefore, even if
MCL 339.2412(1) did not exist, an unlicensed builder could be held liable for the
consequences of poorly performed construction work.
Furthermore, MCL 339.2412 expressly provides a mechanism for its enforcement,
apart from civil liability:
A prosecuting attorney and the attorney general may bring an action
for a civil violation in a court of competent jurisdiction against a person not
licensed under this article that has violated [MCL 339.601 or MCL
339.602]. The court shall assess a civil fine, to be paid to the prosecuting
attorney or the attorney general bringing the action, of not less than
$5,000.00 and not more than $25,000.00, aside from any civil damages or
restitution. [MCL 339.2412(4).]

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15
By expressly conferring enforcement authority only on prosecutors and the Attorney
General, the statute would seem by implication not to confer similar authority on a
private party.9 MCL 339.2412(1) was written, as its terms make reasonably clear, to
impose a burden on an unlicensed builder, not-- except indirectly by its restriction of
lawsuits by the builder against the homeowner-- to afford a benefit to a homeowner.
In summary, (a) MCL 339.2412(1) prevents an unlicensed builder from bringing
“actions,” i.e., claims, counterclaims, cross-claims, and third-party claims, to collect
compensation for services performed in violation of our state’s licensing requirements;
(b) MCL 339.2412(1) does not, however, prevent an unlicensed builder from defending
on the merits against an action brought by a homeowner seeking to recover sums already
paid to the builder;10 and (c) MCL 339.2412(1) does not create a private cause of action
allowing a homeowner to bring claims against an unlicensed builder. The statute has but
9 See Claire-Ann Co v Christenson & Christenson, Inc, 223 Mich App 25, 30-31; 566
NW2d 4 (1997):
Michigan jurisprudence holds that where a statute creates a new right or
imposes a new duty unknown to the common law and provides a
comprehensive administrative or other enforcement mechanism or
otherwise entrusts the responsibility for upholding the law to a public
officer, a private right of action will not be inferred.
10 We are not oblivious to the fact that this understanding of the statute creates a potential
anomaly: an unlicensed builder may receive compensation for illegally provided services,
be sued by the homeowner, and by an effective defense be able to retain some portion of
that compensation, even though it would not have been able affirmatively to seek that
compensation by filing a lawsuit if the homeowner had simply refused to pay. However,
this is the result that the statute mandates.

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16
one purpose-- to prevent an unlicensed builder from “bring[ing] or maintain[ing] . . .
action[s] . . . for the collection of compensation . . . .”
C. STATUS OF CONTRACT
We must next assess the legal character of the purported contract between
plaintiffs and Willis.11 Plaintiffs argue that the restoration contract was illegal and
therefore void ab initio because it contemplated the performance of an illegal act-- the
provision of construction services by an unlicensed builder in violation of
MCL 339.601.12 Plaintiffs thereby argue that the contract, in effect, never came into
existence and was a nullity from the outset and thus could not confer rights or obligations
on either of the parties.13 Defendants disagree and argue that the contract was merely
11 We note that there is no indication in the record that plaintiffs knew about defendants’
unlicensed status. Accordingly, our analysis in this case is limited to determining the
legal status of a contract between an “innocent” homeowner and an unlicensed builder.
Cf. Stokes v Millen Roofing Co, 466 Mich 660; 649 NW2d 371 (2002); Leland v Ford,
245 Mich 599, 609-610; 223 NW 218 (1929).
12 “A person shall not engage in or attempt to engage in the practice of an occupation
regulated under this act [including residential building services] 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(1).
13 See Alexander Bros v Weishuhn, 166 Mich 532, 536; 131 NW 1107 (1911) (“ ‘If the
contract is held to be void, title never passed. . . . [And] neither party could enforce their
rights. Neither party would have rights under it.’ ”), quoting the trial court ruling; Mich
Mut Auto Ins Co v Reddig, 129 Mich App 631, 635; 341 NW2d 847 (1983) (“Since the
sale, unaccompanied by the delivery of the certificate of title, was in violation of the
statute, . . . it was void and . . . the seller remained the owner of the vehicle.”).

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17
voidable at the option of plaintiffs. If that were the case, the contract would be valid and
enforceable unless and until plaintiffs themselves exercised their option to rescind it.14
The legal status of the instant contract-- implicating the distinction between a
“void” contract, a “voidable” contract, and a valid and enforceable contract-- is crucial in
resolving the underlying dispute because it determines whether the Court of Appeals
correctly held that, as a matter of law, defendants here converted the insurance checks
drawn by Auto Owners. “Void” is defined as: “[n]ull; ineffectual; nugatory; having no
legal force or binding effect . . . .” Black’s Law Dictionary (6th ed). “Void contract” is
similarly defined as: “[a] contract that does not exist at law; a contract having no legal
force or binding effect. . . . [S]uch contract creates no legal rights and either party thereto
may ignore it at his pleasure, insofar as it is executory.” Id. In contrast, “voidable” is
defined as: “[t]hat which may be avoided, or declared void; not absolutely void, or void
in itself[,]” while a “voidable contract” is defined as: “[a] contract that is valid, but which
may be legally voided at the option of one of the parties. . . . One which can be avoided
14 See Poli v Nat’l Bank of Detroit, 355 Mich 17, 19-20; 93 NW2d 925 (1959) (stating
that when a contract is voidable, it is valid until the party with the option to avoid the
contract exercises that option). See also Whitcraft v Wolfe, 148 Mich App 40, 52-53; 384
NW2d 400 (1985) (stating that when a contract is induced by fraud, it is merely voidable,
and the aggrieved party may choose to either rescind the contract and seek return of the
property, or sue for damages caused by the fraud); Semmens v Floyd Rice Ford, 1 Mich
App 395, 401; 136 NW2d 704 (1965) (concluding that a minor who had executed a
voidable contract to purchase an automobile had legal responsibility for its use, and the
seller did not regain responsibility for the vehicle until after the contract was voided);
Jack Mann Chevrolet Co v Assoc Inv Co, 125 F2d 778, 784 (CA 6, 1942) (“When a party
has entered into a voidable contract and wishes to be restored to the rights he possessed
before the contract was executed, he must promptly disaffirm the contract . . . .”).

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18
(cancelled) by one party because a right of rescission exists as a result of some defect or
illegality (e.g., fraud or incompetence).” Id. Finally, a valid and enforceable contract is,
of course, simply a contract lacking any inherent flaws that would impair a party’s ability
to enforce it.
Plaintiffs argue, and the Court of Appeals held,15 that the instant contract was void
ab initio. Because the contract was a nullity from the outset, it could not as a matter of
law grant any authority to Willis. Consequently, the Court of Appeals held that summary
disposition in favor of plaintiffs on their conversion claim was appropriate. Because of
15 The Court of Appeals’ analysis conflated distinct contractual concepts: voidness for
illegality and fraud in the inducement. Courts have long stated that illegal contracts are
void. See, e.g., McNamara v Gargett, 68 Mich 454, 462; 36 NW 218 (1888) (“If any part
of a consideration is illegal, the whole consideration is void, because public policy will
not permit a party to enforce a promise which he has obtained by an illegal act or
promise . . . .”). The parties agree that a critical question before this Court is whether
Willis’s status as an unlicensed builder renders the restoration contract void. The Court
of Appeals, however, suggests that the contract was void because it was induced by
Willis’s fraudulent assertion that he was a licensed residential builder when in fact he was
not. “Willis’s fraud rendered the power of attorney entered by the Epps[es] void ab
initio.” Epps, unpub op at 6 (emphasis added). When a party fraudulently induces
another to enter into a contract, that contract is voidable at the option of the defrauded
party and is not void. Dunn v Goebel Brewing Co, 357 Mich 693, 697; 99 NW2d 380
(1959). Insofar as the Court of Appeals suggested that Willis’s fraud rendered the
contract void, it was mistaken. However, the Court of Appeals also cited for support
Wedgewood v Jorgens, 190 Mich 620, 622; 157 NW 360 (1916), which held that
contracts made in violation of licensing statutes are illegal and “void.” In so doing, it
appears the Court failed to distinguish between contracts rendered voidable by fraud in
the inducement, and contracts that contemplate services in violation of a licensing statute.
The latter flaw in the contractual relationship-- the violation of the licensing statute-- is
dispositive in this case. If Willis had, in fact, been licensed, but had otherwise
fraudulently induced plaintiffs into entering the contract, it is clear that under the rule in
Dunn the contract would have been voidable at plaintiffs’ option.

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19
this, it was unnecessary for the Court of Appeals to assess plaintiffs’ fraud and breach of
contract claims against Willis.
If plaintiffs and the Court of Appeals are correct that the instant contract is void ab
initio, then it could not as a matter of law have given Willis the right to receive, indorse,
and cash the insurance checks because defendants contend that Willis possessed that
authority pursuant to the contract’s assignment and “power of attorney” addendums.
According to defendants, because Willis’s alleged fraud rendered the contract at most
voidable, and because it is undisputed that plaintiffs never sought to rescind the contract
before Willis performed his services, at the time he indorsed and cashed the checks, he
possessed the authority to do so. If the contract is not void ab initio, then at least some
question is raised as to whether the actual terms of the contract conferred on Willis the
authority to receive, indorse, and cash the insurance checks on his own and without
plaintiffs’ knowledge.
In determining that the instant contract was void ab initio, the Court of Appeals
not unreasonably cited past decisions of this Court stating as much. Unfortunately, the
proper disposition of this issue-- whether a restoration contract such as in this case was
void, voidable, or lawful and valid under Michigan law-- remains unclear. Courts in
Michigan, as well as throughout the country, have treated contracts involving an
unlicensed builder in a disparate and inconsistent fashion.16 Furthermore, although the
courts of this state have often pronounced contracts involving an unlicensed builder to be
16 See 5 Bruner & O’Connor, Construction Law, §§ 16:19-16:22 and cases cited therein.

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20
“void,” it appears that in many instances, courts have stated that particular types of
contracts are “void” without employing that term in its actual sense.17 So while a court
may pronounce a contract “void,” it may nonetheless have treated the contract as
possessing some form of legal existence and import.
It is not altogether surprising that a lack of clarity has arisen surrounding the legal
status of these particular kinds of contracts. In a typical dispute involving an unlicensed
builder, the builder is attempting to enforce the contract against the homeowner and to
recover compensation.18 However, because the unlicensed builder is forbidden by MCL
339.2412(1) from asserting such an action, the court will determine that such a builder
cannot enforce the contract. Alexander v Neal, 364 Mich 485, 489-490; 110 NW2d 797
(1961). In so ruling, the court will sometimes refer to the contract as “void.” See, e.g.,
17 See, e.g., Way v Root, 174 Mich 418; 140 NW 577 (1913). In that case, the defendant
husband executed a contract for the sale of real property without the consent of his wife,
which was required by law. The purchaser sued for breach of contract, and the husband
defended by arguing that the contract was void, citing Naylor v Minock, 96 Mich 182; 55
NW 664 (1893). The Court in Way conceded that the defendant correctly cited Naylor
for the proposition that such contracts are void, but explained that “ ‘[the] term “void” is
perhaps seldom, unless in a very clear case, to be regarded as implying a complete
nullity; it is, in a legal sense, subject to large qualifications, in view of all the
circumstances calling for its application and the rights and interests to be affected in a
given case.’ ” Way, 174 Mich at 425, quoting Brown v Brown, 50 NH 538 (1871). The
Court then proceeded to hold that, although the contract was invalid as to its ability to
convey title to real property, it remained valid as to its ability to support a claim for
damages arising from its breach. Way, 174 Mich at 426.
18 See, e.g., Charles Featherly Constr Co v Prop Dev Group, Inc, 400 Mich 198; 253
NW2d 643 (1977); Bilt-More Homes, Inc v French, 373 Mich 693; 130 NW2d 907
(1964); Annex Constr, Inc v Fenech, 191 Mich App 219; 477 NW2d 103 (1991); Bernard
F Hoste, Inc v Kortz, 117 Mich App 448; 324 NW2d 46 (1982); Chilson v Clevenger, 12
Mich App 56; 162 NW2d 303 (1968).

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21
Bilt-More Homes, Inc v French, 373 Mich 693, 699; 130 NW2d 907 (1964). But in those
cases, it is far from clear that the court actually intended to “ ‘imply [that the contract is]
a complete nullity,’ ” devoid of any legal existence at any point in time. Way v Root, 174
Mich 418, 425; 140 NW 577 (1913) (citation omitted). Rather, the court merely might
have determined that the contract could not be enforced by the unlicensed builder; it did
not matter whether the contract was unenforceable because it was void ab initio or
because some other legal impediment precluded enforcement. In cases proclaiming
contracts with an unlicensed builder to be “void,” the distinction between a genuinely
void contract and a contract that is unenforceable but not altogether void did not often
make a difference in the outcome. In the present case, however, that distinction matters.
An analysis of the law regarding the present contract must recognize and closely
examine the lengthy line of precedent stating that contracts for the provision of
construction services by an unlicensed builder are illegal and therefore void. As recently
as 2002, this Court offered the following in Stokes v Millen Roofing Co, 466 Mich 660,
672; 649 NW2d 371 (2002): “ ‘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 . . . .’ ” That assertion
was drawn from a quotation in Bilt-More Homes, Inc v French, 373 Mich 693, 699; 130
NW2d 907 (1964), which in turn cited Alexander, 364 Mich at 487, for the proposition.
Alexander was apparently the first case in which this Court interpreted a predecessor
statute of MCL 339.2412(1); that statute forbade an unlicensed builder from “bring[ing]
or maintain[ing] an action in any court of this State for the collection of compensation for
the performance of any act or contract for which a license is required . . . .”

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22
1956 CL 338.986.19 In Alexander, we held that a residential builder was barred from
bringing an action to collect compensation for a roof he had installed absent the requisite
license. We further opined that the licensing statute was enacted “to protect the public
from incompetent, inexperienced, and fly-by-night contractors,” and that “contract[s]
made in violation of a police statute enacted for public protection [are] void and there can
be no recovery thereon.” Id. at 487 (citation omitted).
In holding the contract void, Alexander cited Turner v Schmidt Brewing Co, 278
Mich 464; 270 NW 750 (1936), which held that a builder could not recover for services
provided in building a beer garden for an unlicensed alcohol vendor. Turner refused to
enforce the contract, stating that “ ‘where statutes enacted to protect the public against
fraud or imposition, or to safeguard the public health or morals, contain a prohibition and
impose a penalty, all contracts in violation thereof are void.’ ” Id. at 469, quoting Cashin
v Pliter, 168 Mich 386; 134 NW 482 (1912). “ ‘It is also well settled that, if a contract be
void as against public policy, the court will neither enforce it while executory, nor relieve
a party from loss by having performed it in part.’ ” Turner, 278 Mich at 470, quoting
Richardson v Buhl, 77 Mich 632, 661; 43 NW 1102 (1889). On the basis of this Court’s
decision in Turner, a contract for the provision of services by an unlicensed builder has
19 However, the Michigan Legislature enacted laws requiring a residential builder to
obtain a license before this statute was passed. See, e.g., Sullivan v Graham, 336 Mich
65, 66; 57 NW2d 447 (1953) (analyzing 1939 PA 311, as amended by 1945 PA 315,
prohibiting a residential builder from providing services in counties with populations of
more than 250,000 without having a license to do so).

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23
generally been characterized in our courts as a contract that is “illegal” or “against public
policy.” It is also clear that our cases have sometimes characterized such contracts as
“void.”20 And Michigan is not alone in this regard; the courts of many states have
similarly described contracts made in contravention of licensing statutes.21
The difficulty as pointed out by the Restatement of Restitution and Unjust
Enrichment, is that courts have been known to be imprecise with their use of the term
“void,” and have on occasion mistakenly employed that term to describe a contract when
what is actually meant is that a contract is voidable or otherwise unenforceable, and not
20 See, e.g., Krause v Boraks, 341 Mich 149, 155; 67 NW2d 202 (1954), quoting Jaenicke
v Davidson, 290 Mich 298, 298; 287 NW 472 (1939) (Syllabus) (“ ‘All contracts which
are founded on an act prohibited by a statute under a penalty are void although not
expressly declared to be so and neither law nor equity will enforce a contract made in
violation of such a statute or one that is in violation of public policy.’ ”); McNamara v
Gargett, 68 Mich 454, 460; 36 NW 218 (1888) (“ ‘This rule, however, may be safely laid
down, that wherever any contract conflicts with the morals of the time, and contravenes
an established interest of society, it is void, as being against public policy.’ ”), quoting 1
Story, Contracts, § 675.
21 See, e.g., Dabbs v Four Tees, Inc, 36 So 3d 542, 551 (Ala, 2008) (“ ‘If any person
performs work within [the statutory definition of ‘general contractor’] and fails to obtain
a general contractor’s license, the contract must be declared null, void, and
unenforceable.’ ”), quoting Herbert v Birmingham-Jefferson Civic Ctr Auth, 694 F2d
240, 241 (CA 11, 1982); Rasmus Constr Corp v Nagel, 168 Misc 2d 520, 522; 646
NYS2d 926 (1996) (“Based upon the ‘public safety’ concerns underlying the Code
licensing requirements, home improvement contracts entered into by such unlicensed
entities are considered ‘void.’ ”); Elephant Lumber Co v Johnson, 120 Ohio App 266,
268; 202 NE2d 189 (1964) (“The general rule is that a contract entered into by a person
engaged in a business without taking out a license as required by law is void and
unenforceable . . . .”); Seaview Hosp, Inc v Medicenters of America, Inc, 570 SW2d 35,
39 (Ct Civ App Tex, 1978) (“A contract for engineering services to be performed by a
person who is prohibited from practicing engineering in Texas . . . is void, and being
void, is unenforceable.”).

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that it is void ab initio. Thus, “the fact that a particular contract is described by statute or
regulation as ‘illegal,’ ‘unenforceable,’ or ‘void’ is not necessarily the end of the
inquiry . . . .” 1 Restatement Restitution & Unjust Enrichment, 3d, Illegality, § 32,
comment a, p 507. As one commentator has observed of the law in this realm, “The law
is littered with confusion when it comes to the concept of voidness.” Schaefer, Beyond a
Definition: Understanding the Nature of Void and Voidable Contracts, 33 Campbell
L Rev 193, 194 (2010).
That confusion has permeated judicial opinions regarding contracts with an
unlicensed residential builder. While courts often proclaim these contracts to be “void,”
see Stokes, 466 Mich at 672, they have also shown a willingness to allow a homeowner to
enforce the contracts against an unlicensed builder. See, e.g., H A Smith Lumber &
Hardware Co v Decina, 258 Mich App 419, 437; 670 NW2d 729 (2003), rev’d on other
grounds, 471 Mich 925 (2004). Essentially, the courts of this state have on distinct
occasions viewed such contracts both as a complete nullity and as enforceable against an
unlicensed builder. Those propositions cannot both be true.
So it would seem that at the present a significant amount of uncertainty and
inconsistency exists in our state’s law regarding the legal status of contracts between a
homeowner and an unlicensed residential builder. However, when faced with a legal
question, our analysis must begin with any relevant statutes. Detroit Auto Inter-Ins Exch
v Gavin, 416 Mich 407, 425; 331 NW2d 418 (1982). In this case, a statute is in place that
governs the relationship between a homeowner and an unlicensed builder:
MCL 339.2412(1). That statute, once again, provides that an unlicensed residential
builder “shall not bring or maintain an action in a court of this state for the collection of

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compensation for the performance of an act or contract for which a license is
required . . . .” It furthermore imposes a limitation on the unlicensed builder, preventing
him from bringing any kind of lawsuit in order to receive compensation for work
performed without a license. The statute does not place similar limitations on the actions
that may be taken by the homeowner.
However, the statute does not directly address the question at hand-- whether the
contract between the unlicensed builder and the homeowner is void ab initio or voidable.
Therefore, because the statute, on its face, cannot supply a complete answer, we must
“determine and effectuate the intent of the Legislature through reasonable construction in
consideration of the purpose of the statute and the object sought to be accomplished.”
Gross v Gen Motors Corp, 448 Mich 147, 158-159; 528 NW2d 707 (1995). Despite its
lack of clarity on the instant matter, MCL 339.2412(1) allows us nonetheless to deduce
several relevant inferences in our effort to discern the Legislature’s intent.
First, it is relevant to look at the overall effect of MCL 339.2412(1). As
explained, the statute imposes a limitation on an unlicensed residential builder. This
Court has previously opined that the evident purpose of this limitation is to “protect the
public from incompetent, inexperienced, and fly-by-night contractors.” Alexander, 364
Mich at 487. It thus seems clear that the Legislature, in drafting MCL 339.2412(1),
intended the statute to be protective of the homeowner’s interests. So with that
overarching purpose in mind, we inquire whether this purpose would be better served by
treating contracts between an innocent homeowner and an unlicensed builder as void or
voidable. We believe that this inquiry militates in favor of treating such contracts as
voidable.

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If the contract is void, a homeowner defrauded by an unlicensed builder has but a
single remedial option: he or she can seek to undo the transaction and restore the status
quo ante.22 However, rescission might not be an entirely satisfactory remedy because it
might well preclude the homeowner from receiving the full benefit of his or her bargain.
That is, instead of undoing the transaction, the homeowner may find it more beneficial to
seek damages for a builder’s breach of contract. That remedy is only available, however,
if the homeowner is entitled to enforce the actual contract against the builder. If the
contract were to be treated as void, it would be a complete nullity and there would be
nothing for the homeowner to enforce. Therefore, the statute’s purpose in protecting the
homeowner would seem to be significantly advanced by treating contracts between an
innocent homeowner and an unlicensed builder as voidable rather than void.
Second, it is relevant to look at the manner in which MCL 339.2412(1) refers to
the business relationship between the homeowner and the unlicensed builder. The statute
precludes an unlicensed contractor from bringing an action “for the collection of
compensation for the performance of an act or contract for which a license is required . . .
22 See Groves v Jones, 252 Mich 446, 450-451; 233 NW 375 (1930) (“Having determined
that the parties are not in pari delicto [the parties are not equally culpable] in making a
contract prohibited by the statute, it follows that the plaintiff is entitled to recover . . . the
money he paid . . . .”); Kuchenmeister v Dusza, 218 Mich 497, 498; 188 NW 337 (1922)
(“Where a void contract still remains executory, money paid under it may be recovered
under the count for money had and received.”), citing De Croupet v Frank, 212 Mich
465, 467; 180 NW 363 (1920); Edward v Ioor, 205 Mich 617, 625; 172 NW 620 (1919)
(“When plaintiff’s stock in the Arizona Piano Company, received on this void contract,
was tendered back he was entitled to the stocks he had assigned in payment therefor. The
transaction had been rescinded . . . .”).

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without alleging and proving that the person was licensed under this article during the
performance of the act or contract.” (Emphasis added.) The statute’s very use of the
term “contract” strongly implies that the Legislature did not intend for all contracts
between a homeowner and an unlicensed builder to be rendered altogether void. Void
contracts do not in effect exist; indeed, the very term “void contract” is an oxymoron
because a contract that is void is not a contract at all. See Black’s Law Dictionary (6th
ed) (defining “void contract” as: “[a] contract that does not exist at law”) (emphasis
added). If the Legislature viewed all contracts between a homeowner and an unlicensed
builder as void, it would have no reason to craft a statute preventing an unlicensed builder
from enforcing “contracts;” there would be no contracts at all to enforce. We believe that
the Legislature’s use of the term “contract” further suggests that the contract at issue is
voidable and not void.
Third, it is relevant to examine the manner by which MCL 339.2412(1) seeks to
achieve its intended purpose. Which parties are affected by operation of the statute, and
in what manner? As observed, MCL 339.2412(1) imposes a limitation on the unlicensed
builder-- he alone is denied the ability to bring lawsuits seeking compensation for
unlicensed work. The statute therefore establishes that contracts between a homeowner
and an unlicensed builder are characterized by an asymmetrical enforceability. The
unlicensed builder is without authority to enforce the contract against the homeowner, but
the homeowner suffers no similar statutory disability. Thus, the statute leaves any power
of enforceability there may be over the contract exclusively within the hands of the
homeowner. This framework is largely in accordance with the nature of a voidable
contract. As to such a contract, the party with the power of avoidance has the unilateral

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option to either rescind the contract and avoid the obligation of performance, or to ratify
the contract and render it enforceable. Whitcraft v Wolfe, 148 Mich App 40, 52-53; 384
NW2d 400 (1986). A voidable contract, therefore, exhibits a distinctive one-sided
enforceability. By contrast, a void contract exhibits a symmetrical unenforceability; both
parties are equally denied the authority to enforce. We conclude that the asymmetrical
effect of MCL 339.2412(1) further suggests that the contract at issue is voidable and not
void.
Fourth, it is relevant to examine not only the words and phrases present in
MCL 339.2412(1), but also the words and phrases that are conspicuously absent. It is
clear that the statute was designed to limit the enforceability of contracts between the
homeowner and the unlicensed builder. However, there is no indication that the
Legislature intended to go so far as to mandate that all contracts with an unlicensed
residential builder be deemed void ab initio. If the Legislature had intended that result, it
could, without much difficulty, have said as much, as it has done in related contexts.23
Fifth, it is relevant that MCL 339.2412(1) says nothing regarding the rights or
obligations of third parties. In many situations that can be contemplated, particularly
with regard to agreements to build, a contract may serve to transfer rights to one of the
parties upon which a third party might reasonably rely. In this case, for example, the
contract purportedly gave defendant Willis the right to receive, indorse, and cash
23 See, for example, MCL 451.414(1). There, the Legislature specifically provided that a
contract to provide debt management services “made by a person without a license is null
and void.” (Emphasis added.)

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insurance checks made out to plaintiffs. Defendant Denaglen argues that it relied on the
contract’s transfer of indorsement rights when it allowed Willis to cash the checks at its
place of business. A contract may also directly give rights to third parties as intended
beneficiaries. MCL 600.1405; Schmalfeldt v North Pointe Ins Co, 469 Mich 422, 427-
428; 670 NW2d 651 (2003). These and other third parties could potentially be harmed if
contracts with an unlicensed builder were treated as void; they would be unable to rely on
or enforce any transfers of rights or obligations under a void contract. It is therefore clear
that by affecting the status of contracts between the homeowner and the unlicensed
builder, MCL 339.2412(1) has the potential to inflict a considerable hardship on third
parties. However, the statute is again conspicuously silent in this regard; if the
Legislature had intended to impose such a hardship or risk on third parties to all contracts
involving an unlicensed builder, it is reasonable to think that the Legislature would have
offered some express indication to that effect. We believe the statute’s silence in this
respect further suggests that the contract at issue is voidable and not void.
In summary, we conclude that MCL 339.2412(1) more strongly supports the
proposition that contracts between an innocent homeowner and an unlicensed builder are
voidable, than that they are void ab initio. This conclusion receives further support from
the caselaw of this state.24 As previously explained, many Michigan cases have
summarily and imprecisely referred to contracts with an unlicensed residential builder as
24 When the proper application of a statute is less than clear, it is appropriate to
supplement our understanding of the statute by referring to prior judicial decisions in
Michigan. Nummer v Treasury Dep’t, 448 Mich 534, 544; 533 NW2d 250 (1995);
Pierson v Manning, 2 Mich 445, 454 (1852).

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“void.”25 However, those cases generally only prevented the builder from engaging the
legal system to receive compensation for services performed without a license, while
reinforcing the principle that an unlicensed builder may not enforce a building contract or
recover the reasonable value of the builder’s services through equity.26 In those cases, it
did not matter whether the contract was unenforceable because it was genuinely “void,”
or because it was unenforceable for some other reason but not a nullity from the outset.
In addition, once the Legislature enacted the predecessor of MCL 339.2412(1), most
cases ceased referring to contracts with an unlicensed builder as “void,” and no longer
analyzed their validity under the common law. Instead, courts simply interpreted and
straightforwardedly applied MCL 339.2412(1).27 Given the lack of clarity in the
25 See, e.g., Stokes, 466 Mich at 672 (extinguishing a construction lien placed on a home
by an unlicensed residential builder); Bilt-More Homes, 373 Mich at 699 (barring an
unlicensed residential builder from seeking compensation); Alexander, 364 Mich at 487
(same); Barbour v Handlos Real Estate & Bldg Corp, 152 Mich App 174, 181-182; 393
NW2d 581 (1986) (refusing to discharge a mortgage given to an unlicensed residential
builder in exchange for his services in building a house); Robert H Pastor Bldg & Real
Estate Dev Co v Cole, 127 Mich App 168, 175; 339 NW2d 11 (1983) (builder not
required to be licensed, but joint venture in which it was to participate required license);
Brummel v Whelpley, 46 Mich App 93, 96; 207 NW2d 399 (1973) (unlicensed residential
builder’s claim for compensation dismissed).
26 See, e.g., Stokes, 466 Mich at 671-672 (unlicensed residential builder not entitled to
quantum meruit relief because “[c]ourts must be careful not to usurp the Legislative role
under the guise of equity”); Grosslight v Butts, 3 Mich App 51, 55; 141 NW2d 657
(1966), quoting Turner v Schmidt Brewing Co, 278 Mich 464, 469; 270 NW 750 (1936)
(unlicensed residential builder “cannot maintain an action to recover for such services or
materials”).
27 See, e.g., Edgewood Dev, Inc v Landskroener, 262 Mich App 162; 684 NW2d 387
(2004); Annex Constr, Inc v Fenech, 191 Mich App 219; 477 NW2d 103 (1991); Parker
v McQuade Plumbing & Heating, Inc, 124 Mich App 469; 335 NW2d 7 (1983); Bernard
F Hoste, Inc v Kortz, 117 Mich App 448; 324 NW2d 46 (1982).

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common law, some courts apparently wanted to avoid the issue altogether. So despite
numerous indications in dicta that courts believed these contracts to be void ab initio,28
there appears to be no Michigan case that has actually held that a transfer of property or
rights did not occur at all because the transfer was predicated on a void contract for the
provision of construction services by an unlicensed residential builder.
However, there are cases that have allowed a party to enforce a contract that
contemplated the provision of services by an unlicensed residential builder,29 suggesting
that such contracts are not genuinely void ab initio because, if they were, obviously no
party could seek recovery for breach of contract. The contract would never have come
into existence in the first place and there would have been no basis for a contractual
remedy. Raub v Smith, 61 Mich 543, 547; 28 NW 676 (1886) (“[I]t has been held that a
contract which is void under the statute of frauds cannot be used for any purpose. Such a
contract is regarded as a nullity.”) (citations omitted). It appears that when the
homeowner has been the party seeking to enforce the contract, as opposed to the
28 See, e.g., Brummel, 46 Mich App at 96 (“The contract in the present case is void and
unenforceable. The parties are in their same respective positions as before they entered
into the void contract.”).
29 See, e.g., H A Smith Lumber & Hardware Co v Decina, 258 Mich App 419, 437; 670
NW2d 729 (2003) (unlicensed residential builder defendant could not use equity to
defend against the homeowner’s claim because the homeowner sought damages for
breach of contract, and not equitable relief), rev’d on other grounds, 471 Mich 925
(2004); Parker, 124 Mich App at 471 (unlicensed residential builder may defend a breach
of contract lawsuit on its merits); Lindhout v Ingersoll, 58 Mich App 446, 450-451; 228
NW2d 415 (1975) (affirming award of damages for breach of contract to homeowner).

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unlicensed builder, courts have been willing, at least to some extent, to recognize the
validity of the contract.
Michigan’s application of the “substantial compliance” doctrine in regard to
contracts involving an unlicensed builder further suggests that these contracts are not
altogether void. Under this doctrine, if an unlicensed builder enters into a contract to
provide building services but subsequently obtains the requisite license before he
provides services for which the license is required, the contract has been deemed valid
and enforceable by the builder.30 Courts applying the doctrine reason that because the
builder has been licensed at the time that he begins performance, he has “substantially
complied” with the licensing requirement, even though he improperly entered into a
contract while unlicensed. Most pertinently, the doctrine could not be invoked if the
contract at issue was genuinely void; if it was truly a nullity at the time it was signed, the
builder’s subsequent licensure could not logically revive or resuscitate a legal obligation
that did not exist in the first place. Thus, courts applying this doctrine have not treated
contracts with an unlicensed builder as truly void.
30 See, e.g., Mich Roofing & Sheet Metal v Dufty Rd Props, 90 Mich App 732, 735-738;
282 NW2d 809 (1979), vacated on other grounds, 409 Mich 887; 295 NW2d 230 (1980);
accord Edgewood Dev, 262 Mich App at 166-167 (unlicensed builder could recover
under contract because the builder became licensed before construction began); Bernard
F Hoste, Inc, 117 Mich App at 452-453 (unlicensed builder could not recover under
contract because it performed services before it obtained license). We need not, and
therefore will not, address the merits of applying the “substantial compliance” doctrine to
contracts involving an unlicensed builder. Instead, we simply note that courts applying
this doctrine to contracts involving an unlicensed builder have not treated these contracts
as void.

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In conclusion, we hold that contracts involving an innocent homeowner and an
unlicensed residential builder are voidable.31 This conclusion is based on relevant
inferences derived from MCL 339.2412(1), which suggest that such contracts are better
characterized as voidable rather than void. The caselaw of this state further supports this
conclusion. Our courts have for decades indicated that a homeowner may be able to
enforce contracts with an unlicensed builder, and that such contracts are not necessarily a
nullity from the outset. There has been no instance in which an innocent homeowner was
denied the right to enforce a contract against an unlicensed builder because the court
deemed the contract void ab initio. So although there has been considerable confusion
regarding the proper legal status of these contracts, we believe that treating these
contracts as voidable is the only outcome that faithfully applies MCL 339.2412(1) while
giving due consideration to our judicial precedents.32
31 Our holding is limited to the type of contract at issue in this case: a contract with an
unlicensed residential builder for home construction or repair. The extent to which this
holding should be extended to “illegal contracts” of allegedly similar types must be
decided in future cases. Compare, e.g., MCL 339.1019, which prohibits an unlicensed
personnel agency from maintaining an action for the collection of compensation.
32 We recognize that contracts between an innocent homeowner and an unlicensed
residential builder are not “voidable” in the fullest and most traditional sense of that term.
A voidable contract may typically be ratified by the party with the power of avoidance,
rendering the contract fully enforceable by either party. Harry & Max Dunitz, Inc v
Meineke, 260 Mich 586, 588-589; 245 NW 524 (1932); Roszczewski v Jozwiak, 225 Mich
670, 672-673; 196 NW 359 (1923). However, in the instant circumstance, an innocent
homeowner exercising the power of ratification cannot give an unlicensed contractor the
ability to do what the law expressly prohibits-- “bring[ing] or maintain[ing] an action in a
court of this state for the collection of compensation” for the performance of residential
building services. MCL 339.2412(1).

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D. DEFAULT
Finally, we must determine whether the trial court erred by refusing to set aside
Denaglen’s default. A default is a punitive measure used to encourage participation and
cooperation in litigation. Rogers v JB Hunt Transp, Inc, 466 Mich 645, 653; 649 NW2d
23 (2002). Entry of a default judgment is equivalent to an admission of every well-
pleaded matter in the complaint. Lesisko v Stafford, 293 Mich 479, 481; 292 NW 376
(1940). “Once the default of a party has been entered, that party may not proceed with
the action until the default has been set aside by the court . . . .” MCR 2.603(A)(3). A
default or a default judgment may be set aside pursuant to MCR 2.603(D), which states:
A motion to set aside a default or a default judgment, except when
grounded on a lack of jurisdiction over the defendant, shall be granted only
if good cause is shown and an affidavit of facts showing a meritorious
defense is filed.
However, “the policy of this state is generally against setting aside defaults and default
judgments that have been properly entered.” Alken-Ziegler, Inc v Waterbury Headers
Corp, 461 Mich 219, 229; 600 NW2d 638 (1999). “The carelessness or neglect of either
the litigant or his attorney is not normally grounds for granting a belated application to
set aside a default regularly entered.” White v Sadler, 350 Mich 511, 522; 87 NW2d 192
(1957). At the same time, a default is merely an admission of liability and not an
admission regarding the proper amount of damages. Haller v Walczak, 347 Mich 292,
300; 79 NW2d 622 (1956) (“In ordinary actions founded on contract or tort the rule
seems well established that a default in appearing or pleading admits the right to recover,
but not the amount of the damages.”). If the amount of damages is in dispute, a
defaulting defendant is nonetheless entitled to a hearing, at which it may challenge the

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plaintiff’s alleged damages amount, if the trial court determines that a hearing is
necessary. Zaiter v Riverfront Complex, Ltd, 463 Mich 544, 554; 620 NW2d 646 (2001);
MCR 2.603(B)(3)(b).
We hold that the trial court did not abuse its discretion by refusing to set aside
Denaglen’s default. Even after receiving notice of its default, Denaglen inexplicably
waited seven weeks before moving to have the default set aside. In arguing Denaglen’s
motion to set aside the default, and in their applications for leave to appeal, the parties
presented irreconcilable accounts of the circumstances surrounding the default. It was for
the trial court to evaluate the credibility and reasonableness of the parties’ arguments, and
it determined that Denaglen had not made the necessary showing to merit relief from the
default. The Court of Appeals did not disturb that ruling by finding any abuse of
discretion on the part of the trial court and neither do we. Lawrence M Clarke, 489 Mich
at 272. However, because this opinion calls into question the legal justifications for the
lower courts’ decisions in favor of plaintiffs’ conversion claims against defendants, the
potential for an inconsistent or anomalous result exists. If defendant Willis is not liable
for converting the insurance checks, then logically Denaglen could not have converted
the checks, either. In the face of such an outcome, Denaglen’s default, as to the
conversion claim only, would need to be set aside. See Ackron Contracting Co v
Oakland Co, 108 Mich App 767, 774; 310 NW2d 874 (1981) (“[W]here a bill makes a
joint charge against several defendants, and one of them makes default, . . . if the suit
should be decided against the complainant on the merits, the bill will be dismissed as to
all the defendants alike—the defaulter as well as the others.”), quoting Frow v De La
Vega, 82 US (15 Wall) 552, 554; 21 L Ed 60 (1872).

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IV. APPLICATION
The contract between defendant Willis, the unlicensed builder, and plaintiff
homeowners was voidable. Because the contract was not a nullity from the outset, it
could in theory have conveyed to Willis the authority to receive, indorse, and cash the
insurance checks. The trial court, however, granted plaintiffs summary disposition
without deciding whether the contract, if valid, would have conferred that authority on
Willis. We therefore remand to that court for a determination of whether the agreement
granted Willis and his companies the specific authority to perform those actions on
plaintiffs’ behalf and whether they acted within the scope of that authority.33
If on remand the trial court determines that Willis and his companies might be
liable for any of plaintiffs’ claims arising under the contract, those defendants must be
permitted to defend against those claims. Neither Willis’s breach of the contract nor
MCL 339.2412(1) prevent Willis from demanding that plaintiffs prove their actual
damages. If plaintiffs seek judicial redress, including damages, they are required to prove
the extent to which they have been harmed by defendants and defendants are entitled to
33 We decline to address at this time the extent of damages to which plaintiffs may be
entitled should they establish defendants’ liability for conversion. We stress, however,
that while “the measure of liability [for conversion of a negotiable instrument] is
presumed to be the amount payable on the instrument, . . . recovery may not exceed the
amount of the plaintiff’s interest in the instrument.” MCL 440.3420(2). Furthermore,
under Michigan’s general conversion statute, MCL 600.2919a, a person whose property
has been converted “to the other person’s own use” “may recover 3 times the amount of
actual damages sustained, plus costs and reasonable attorney fees[.]” On remand, we
leave it to the parties to assert, and the court to resolve as necessary, whether and to what
extent plaintiffs’ “interest” in those proceeds, and their “actual damages” for any
conversion thereof, should be limited in some amount.

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rebut those proofs.34 Additionally with regard to any outstanding equitable claims, such
as restitution, plaintiffs must also be prepared to establish that they have acted equitably.
Goodenow v Curtis, 33 Mich 505, 509 (1876). Finally, as discussed earlier in this
opinion, the trial court did not abuse its discretion by refusing to set aside Denaglen’s
default. However, if on remand the trial court determines that defendant Willis and his
companies are not liable for converting the insurance checks, that court must set aside
Denaglen’s default in regard to plaintiffs’ conversion claim. This is because Denaglen
logically may only be held liable for conversion if Willis actually converted the checks
from plaintiffs. It is clear that Denaglen did not convert the checks directly from
plaintiffs; therefore, any conversion for which Denaglen may be held liable would have
been committed indirectly through Willis. Denaglen thus may not be held liable for
conversion if Willis is not. Furthermore, the amount of plaintiffs’ damages remains in
dispute as already noted. Denaglen is therefore entitled to participate in any hearing that
the trial court deems necessary to establish the amount of conversion damages owed to
plaintiffs.
V. CONCLUSION
The trial court and Court of Appeals erred by granting summary disposition in
favor of plaintiffs. The Court of Appeals correctly held that MCL 339.2412(1) does not
34 We note that the extent of the possible harm might include any harm that Auto Owners
Insurance suffered by paying any fraudulent or excessive claims. Because Auto Owners
assigned all of its claims to plaintiffs, plaintiffs are entitled to damages compensating any
injury sustained by Auto Owners, as well as any injuries that they might have personally
sustained.

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prevent an unlicensed builder from defending against a lawsuit on its merits and does not
afford a homeowner an independent cause of action to seek damages for its violation.
However, contracts between an innocent homeowner and an unlicensed residential
builder are voidable by the homeowner and thereby effective in conveying rights and
authorities to both parties and third parties. The Court of Appeals therefore erred when it
declared the contract at issue void ab initio, although that court’s error was wholly
understandable given the confusing state of applicable law. Finally, the trial court did not
abuse its discretion by refusing to grant defendant Denaglen relief from its default.
However, because the proper amount of damages remains in dispute, Denaglen may
attempt to challenge the extent of its liability. We therefore affirm in part and reverse in
part the judgment of the Court of Appeals and remand to the trial court for further
proceedings consistent with this opinion.
Stephen J. Markman
Robert P. Young, Jr.
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
Richard H. Bernstein

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