Epps v. 4 Quarters Restoration LLC, 498 Mich. 518

Background

Homeowners Danny and Joyce Epps hired Troy Willis/4 Quarters Restoration after flood damage; Willis showed a revoked residential builder license and obtained insurance checks totaling $128,047.
Willis indorsed plaintiffs’ insurance checks, cashed them at Denaglen Corp. (MBM Check Cashing), which charged fees and deposited funds into its account; work was later halted and quality disputed.
Plaintiffs sued Willis, his companies, Denaglen, Comerica, Auto-Owners, and AM Adjusting asserting unlicensed-contractor claims, fraud, breach, and conversion; Comerica interpleaded $128,047.
Trial court granted plaintiffs summary disposition under MCL 339.2412(1) and awarded escrow funds; Court of Appeals affirmed on conversion grounds but held the statute did not (1) bar an unlicensed builder’s defenses or (2) create a private cause of action for homeowners.
Michigan Supreme Court granted oral argument, affirmed in part and reversed in part: held MCL 339.2412(1) bars only an unlicensed builder’s affirmative suits for compensation (not defenses), does not create a private cause of action, and that contracts with innocent homeowners are voidable (not void ab initio).
Remanded for trial-court determination whether the contract conferred Willis authority to indorse/cash checks; Denaglen’s default denial was affirmed unless Willis is found not liable (then Denaglen’s default as to conversion must be set aside).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether MCL 339.2412(1) bars an unlicensed builder from defending claims	Epps: statute prevents unlicensed builder from asserting claims or defenses that effectively seek compensation	Defendants: statute bars only affirmative suits to collect compensation, not defenses to homeowner suits	Held: statute bars only actions to collect compensation; unlicensed builders may defend on the merits (may rebut plaintiff’s damages)
Whether MCL 339.2412(1) creates a private cause of action for homeowners	Epps: statute implies homeowner can recover disgorgement from unlicensed builder	Defendants: statute does not create private remedy; enforcement reserved to public prosecutors/AG	Held: No private cause of action; homeowners use common-law contract/tort remedies; enforcement provision contemplates public actors
Whether contracts with unlicensed residential builders are void ab initio or merely voidable	Epps/Ct. of Appeals: contract is illegal and void ab initio, so Willis had no authority to indorse checks	Willis/defendants: contract was voidable for fraud but valid until rescinded and could convey authority to act	Held: Contracts with innocent homeowners are voidable (not void ab initio); may convey rights until rescission — remand to determine whether Willis had authority to indorse/cash checks
Whether trial court abused discretion in denying Denaglen’s motion to set aside default	Denaglen: default should be set aside for good cause and meritorious defense	Plaintiffs: default properly entered and Denaglen delayed in moving	Held: No abuse of discretion denying set-aside; but if on remand Willis is found not liable for conversion, Denaglen’s default as to conversion must be set aside

Key Cases Cited

Allison v. AEW Capital Mgmt., LLP, 481 Mich. 419 (statutory interpretation principles)
Sands Appliance Servs. v. Wilson, 463 Mich. 231 (standard of review for statutory/contract interpretation)
Alexander v. Neal, 364 Mich. 485 (statute’s protective purpose; unlicensed builder cannot sue to collect compensation)
Stokes v. Millen Roofing Co., 466 Mich. 660 (discussing prior characterizations of unlicensed-contractor contracts)
Bilt-More Homes, Inc. v. French, 373 Mich. 693 (unlicensed builder cannot enforce contract to collect compensation)
Parker v. McQuade Plumbing & Heating, Inc., 124 Mich. App. 469 (statute removes power to sue, not to defend)
Way v. Root, 174 Mich. 418 (distinguishing “void” contracts from contracts unenforceable in particular respects)