Green v. Ingersoll

280 N.W.2d 496, 89 Mich. App. 228, 1979 Mich. App. LEXIS 2064

• Court: Michigan Court of Appeals
• Decided: March 20, 1979
• Docket: Docket 78-1777
• Status: Published

Opinion

D. F. Walsh, P.J.

Plaintiffs, Richard and Sandra Green, appeal the entry of judgment for defendants, Robert and Pauline Ingersoll, in the amount of $5,758.51, plus 6% interest from July 20, 1977. The judgment was awarded on defendants’ counterclaim against plaintiffs; plaintiffs’ complaint was dismissed with prejudice.

Defendant, Robert Ingersoll, a residential builder since 1951, purchased 14 parcels of property in Kent County. On November 4, 1970, the township issued a building permit to him for construction of a house on the lot at 7660 Hessler Drive, Rockford, Michigan. Construction was completed in May 1971, at which time a certificate of occupancy was issued. Mr. Ingersoll built a total of 13 houses on the 14 lots. The house at 7660 Hessler Drive was used by the Ingersolls as a model home. The garage of the house was used as a storage place for equipment and other items owned by defendants. Mr. Ingersoll and his son spent two nights in the house to protect it against Halloween vandalism. The house was at all times open for sale to the general public. During construction and after completion there were offers to purchase which did not result in sale of the house.

In June 1972, plaintiffs and defendants entered into a buy-sell agreement for the house at 7660 Hessler Drive. The purchase price was $41,400. Plaintiffs assumed an existing mortgage and made a down payment of approximately $5,000. They also agreed to execute a second mortgage in favor of defendants in the amount of $6,400. This amount was reduced to $5,758.51 due to agreed-upon work done by Mr. Green on the house. It is undisputed that Mr. Ingersoll did not have a residential builders license during construction of the house or at the time of sale.

Within a few months plaintiffs began to experi ence problems with the house. Mr. Ingersoll visited the house in an attempt to remedy the problems.

On July 16, 1974, defendants filed an affidavit of lien with the Kent County Register of Deeds. In the affidavit they stated that plaintiffs had failed to execute the note and mortgage in accordance with their 1972 agreement. The affidavit’s purpose was to notify subsequent purchasers that defendants claimed a lien on the property in the amount still owing to them for the home.

On July 11, 1977, plaintiffs sold the house to third-party defendants, Roy and Sharon Bennett. Because of the recorded affidavit of lien the title insurance company involved in the sale required delivery of $8,900 into an escrow account until the issue of liability on the mortgage mentioned in the affidavit was settled.

Plaintiffs filed a complaint against defendants on July 20, 1977. They claimed, inter alia, that defendants could not enforce their claim against plaintiffs because Mr. Ingersoll did not have a residential builders license when the house was constructed and sold. MCL 338.1516; MSA 18.86(116). Plaintiffs asked the circuit judge to declare defendants’ lien illegal and void and to set aside the cloud on the title; to release the escrow funds to plaintiffs; to order defendants to pay the attorney fees and costs incurred by plaintiffs in removing the cloud from the title; to order defendants to release to plaintiffs all right, title and interest claimed by defendants in the property and to declare that defendants had no rights, title or interest therein; to bar defendants from maintaining any action against plaintiffs for money due on the home; and to grant such further relief as would accord with equity and good conscience. Defendants counterclaimed for the balance due on the agreed-upon but unexecuted second mortgage.

After hearing the testimony of Mrs. Green and Mr. Ingersoll, the trial court found that Mr. Ingersoll had built the house "for sale but also for his own use and occupancy until that sale could be accomplished”. The judge found that the house had been "used and occupied by him [Mr. Ingersoll] as an office, storage facility and showcase for open houses; also overnight on two occasions”.

The trial judge concluded that the transaction between plaintiffs and defendants was exempt from the requirements of the residential builders licensing act, MCL 338.1501 et seq.; MSA 18.86(101) et seq., for the reason that defendants came within the statutory exemption from the licensing requirement for "owners of property, with reference to structures thereon for their own use and occupancy”. MCL 338.1503(b); MSA 18.86(103)(b). Accordingly, the court ruled that § 16 of the act did not bar defendants’ counterclaim for a money judgment against plaintiffs. MCL 338.1516; MSA 18.86(116).

On appeal defendants, in support of the result reached by the trial court, argue that, since they did not enter into a construction contract with plaintiffs, the residential builders licensing act does not apply to them. The act’s definition of residential builder, however, expressly includes a "person who erects a residential structure except for his own use and occupancy on his own property”. MCL 338.1502(b); MSA 18.86(102)(b). To come within the act’s purview, a builder need not enter into a contract for construction with a particular buyer. Unless one of the statutory exemptions applies, defendants are precluded from seeking a money judgment against plaintiffs in connection with the sale of the house.

As noted above, the trial court relied on the statutory provision which exempts from the licensing requirement owners of property who build structures thereon for their own use and occupancy. MCL 338.1503(b). It is undisputed that defendants "used” the house. What is at issue is whether it was also "occupied” by them so as to remove them from the § 16 prohibition against suit by unlicensed builders. The trial judge adopted the following broad definition of occupancy: "to take or enter upon possession of; to hold possession of; to hold or keep for use; to possess; to tenant; to do business in”. Black’s Law Dictionary (4th ed 1968), p 1231.

In construing the term "occupancy” as used in another section of the residential builders licensing act, the Attorney General, noting the significance of the act’s purpose to protect consumers, expressed approval of the following definition from American & Foreign Ins Co v Allied Plumbing & Heating Co, 36 Mich App 561, 565; 194 NW2d 158 (1971), lv den 387 Mich 753 (1972): "ordinarily a building is not * * * 'occupied’ until it is put to a practical and substantial use for which it was designed * * *.” OAG 1975-1976, No. 4782, p 70 (April 30, 1975).

The Legislature hás described the purpose of the residential builders licensing act as the protection of homeowners and persons undertaking to become homeowners. MCL 338.1501; MSA 18.86(101). The provisions of the act must be construed with this legislative purpose in mind. Tracer v Bushre, 381 Mich 282, 290; 160 NW2d 898 (1968), Artman v College Heights Mobile Park, Inc, 20 Mich App 193, 199; 173 NW2d 833 (1969). According to the act, residential builders do not include those persons who erect residential structures "for [their] own use and occupancy on [their] own property”. MCL 338.1502(b). Construing the exemption section together with this definitional provision, it is clear that the Legislature intended to exempt only those builders who actually build residential structures on their own property for the purpose of personally using and occupying the structures.

In view of the legislative directive that the act is to protect homeowners, we adopt the Attorney General’s approach and require the unlicensed builder claiming exemption under MCL 338.1503(b) to present evidence of his own practical and substantial use of the building for the purpose for which it was designed.

The sole reasonable interpretation of the evidence presented by the instant parties is that Mr. Ingersoll built the house at 7660 Hessler Drive for the purpose of sale as a dwelling and not for his own use and occupancy. The two nights he and his son spent in the house cannot reasonably be interpreted as substantial use of the building for the residential purpose for which it was designed. Nor do the storage of equipment and other items and the use of the house as a model home constitute the "occupancy” clearly contemplated by the Legislature.

Because Mr. Ingersoll was not licensed during the construction or sale of the house, the act divested him of the power to seek (by way of complaint or counterclaim) a money judgment against plaintiffs. Charles Featherly Construction Co v Property Development Group, Inc, 400 Mich 198, 203; 253 NW2d 643 (1977).

Proper disposition of this case, however, does not end with reversal of the entry of judgment in defendants’ favor. The Supreme Court recently discussed the significance of the equitable nature of the plaintiff home-buyer’s suit as it relates to the defendant seller’s concurrent right to be treated equitably. In Kirkendall v Heckinger, 403 Mich 371; 269 NW2d 184 (1978), the plaintiffs filed suit requesting equitable relief in the form of either conveyance of a parcel of property, on which defendant Carl Heckinger had built a home at plaintiffs’ direction, provided plaintiffs pay a certain sum of money to defendants, or alternatively a money award from defendants to prevent unjust enrichment. The defendant builder, who was unlicensed, counterclaimed for a sum representing, inter alia, the cost of his labor and materials. Citing § 16 of the residential builders licensing act, the trial court dismissed the counterclaim. The Supreme Court concluded that the trial court correctly dismissed the counterclaim but nonetheless remanded to the circuit court for a determination of the amount of reasonable expenses the plaintiffs (Kirkendalls) were to pay defendants (Heckingers) on conveyance of the property:

"Heckinger, whether a plaintiff or as here a counter-claimant, could not seek a money judgment against the Kirkendalls because of the statute. The trial court was consequently correct in dismissing the counterclaim.

"That does not end our inquiry, however.

" 'It is a cardinal principle that equity will not aid a party in doing that which is not equitable. He who seeks equity must be prepared to do equity.’ Goodenow v Curtis, 33 Mich 505, 509 (1876).

"See, also, Bonninghausen v Hansen, 305 Mich 595; 9 NW2d 856 (1943).

"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 Kirkendalls’ consent (and in fact with Dennis Kirkendall’s active participation) while Heckinger had title to the property. Osborne, Mortgages, §§ 169-170; 4 Pomeroy’s Equity Jurisprudence (5th ed), § 1217.” Id., at 374.

So too in this case, as noted by the trial judge, it was plaintiffs who first invoked the equity powers of the court. Although we disavow the trial judge’s definition of "use and occupancy” and hold that the court was precluded, under the statute, from granting defendants any relief on their counterclaim, he was bound to determine the relative equitable rights of all parties in fashioning the appropriate relief.

We therefore reverse the judgment entered for defendants and remand this case to the circuit court for a determination of the equitable rights of the parties. If the court determines that plaintiffs are entitled to the equitable relief which they seek, it shall also determine what plaintiffs must pay defendants in order to do equity.

Reversed and remanded for proceedings consistent with this opinion. No costs, each party having partially prevailed.