HARTMAN & EICHHORN BLDG CO INC V STEVEN DAILEYAnnotate this Case
STATE OF MICHIGAN
COURT OF APPEALS
HARTMAN & EICHHORN BUILDING
May 26, 2005
Oakland Circuit Court
LC No. 2001-032203-CK
STEVEN DAILEY and JANINE DAILEY,
Official Reported Version
GEORGE H. PRESLEY and ABN-AMRO, d/b/a
STANDARD FEDERAL BANK,
JEFFRY R. HARTMAN,
Before: Schuette, P.J., and Sawyer and O'Connell, JJ.
This case requires us to reconsider the issue whether a building contractor can be liable
under § 3 of the Michigan Consumer Protection Act.1 Although the Legislature apparently
intended liability under the act to extend to individuals for their "conduct," a building
contractor's construction or renovation of a house is regulated by the Occupational Code,2 so the
remedy provisions in the MCPA3 should not apply. Smith v Globe Life Ins Co.4 Nevertheless,
our decision in Forton v Laszar5 has already applied Smith to building contractors and found that
the act of building a house does not fit within the MCPA's exemption provision. As a result, and
in accordance with MCR 7.215(J)(2), we disagree with our earlier decision in Forton and follow
it only because we are required to do so by MCR 7.215(J)(1). We declare a conflict with Forton,
and, if we were not bound by this precedent, we would hold that the MCPA does not apply to the
performance of residential construction, renovation, or repair by licensed residential builders.
Third-party plaintiffs Steven and Janine Dailey entered into an agreement with Hartman
& Eichhorn Building Company, Inc. (HEBC), to renovate their house located in West
Bloomfield. The contract provided for a total amount to be paid of $166,041, with an initial
down payment and various draws as construction proceeded. Defendant Hartman signed the
contract on behalf of HEBC.
The Daileys became dissatisfied with the quality of the work performed by HEBC and
withheld a portion of the money due under the contract, demanding that various deficiencies be
corrected. Plaintiffs allege that HEBC refused to complete the project after plaintiffs refused
HEBC filed a complaint against the Daileys alleging breach of contract and unjust
enrichment, and seeking foreclosure on a construction lien. The Daileys filed a countercomplaint for breach of contract, negligence, and slander of title against HEBC, and also claims
of fraudulent misrepresentation, violation of the MCPA, and violation of the builders' trust fund
act6 against both HEBC and defendant Hartman in his individual capacity. Thereafter, the trial
court granted summary disposition on the claims against Hartman individually on the basis that
there was no genuine issue of material fact that Hartman could not bear any individual liability.
Specifically, the trial court held as follows:
Hartman argues he was not a party to the Agreement. Hartman claims that
the Daileys were dealing with him exclusively in his capacity as an officer and
agent of HEBC. Therefore, there is no basis for imposing liability upon him
MCL 339.101 et seq.; see MCL 339.2401 et seq. regarding residential builders and contractors.
MCL 445.901 et seq.
460 Mich 446, 462-467; 597 NW2d 28 (1999).
239 Mich App 711, 715; 609 NW2d 850 (2000).
MCL 570.151 et seq.
This Court agrees. The Court finds there is no genuine issue of material
fact that Hartman cannot bear any individual liability.
This Court thereafter granted the Daileys' application for leave to appeal. The only issue
before this Court is the dismissal of the claims against Hartman in his individual capacity. We
The Daileys first argue that the trial court erred by dismissing the fraud claim against
Hartman. Although the trial court stated that there is no genuine issue of material fact, it appears
to this Court that the trial court was concluding that there was no genuine issue of material fact
that Hartman was acting only in his capacity as an officer and agent of the corporation. Further,
it appears that the trial court accepted, without indicating any authority for its conclusion, the
argument that an agent cannot be liable for his tortious conduct if that conduct was done in the
capacity as an agent of the corporation. But as this Court observed in Warren Tool Co v
Stephenson,7 an agent may be held liable for those torts in which the agent participated.
It is a familiar principle that the agents and officers of a corporation are
liable for torts which they personally commit, even though in doing so they act for
the corporation, and even though the corporation is also liable for the tort. Zaino
v. North Woodward Construction Company [355 Mich 425, 429; 95 NW2d 33
(1959)] (fraudulent representations); Allen v. Morris Building Company [360
Mich 214, 218; 103 NW2d 491 (1960)] (willful change in natural flowage of
water); Wines v. Crosby & Co. [169 Mich 210, 214; 135 NW 96 (1912)] (active
promotion and sale of a compound known to be dangerous); Bush v. Hayes [286
Mich 546, 549; 282 NW 239 (1938)] (conversion); Hempfling v. Burr [59 Mich
294, 295; 26 NW 496 (1886)] (fraud). [Id.]
See also People v Brown,8 and Joy Management Co v Detroit.9
In sum, it does not appear from the trial court's opinion that the court was basing its
conclusion upon a determination that there was insufficient factual support of the Daileys' fraud
claim. Rather, it appears that the trial court's decision was based solely on the incorrect legal
conclusion that Hartman could not be held individually liable for tortious acts committed in the
course of his employment by the corporation. Accordingly, we reverse the grant of summary
disposition in favor of Hartman on the fraud claim.
11 Mich App 274, 300; 161 NW2d 133 (1968).
239 Mich App 735, 739-740; 610 NW2d 234 (2000).
183 Mich App 334, 340; 455 NW2d 55 (1990).
Next, the Daileys argue that the trial court erred in granting summary disposition on their
claim under the MCPA. Again, the only basis for the trial court's grant of summary disposition
was that there would be no individual liability by Hartman. We agree with the Daileys that the
Legislature intended to hold individuals, and not just their businesses, liable for conduct that
violates the MCPA. On appeal, Hartman also raises the issue whether the MCPA even applies to
building contractors. We are bound by precedent to hold that it does, so we reverse the trial
court's grant of summary disposition for Hartman on plaintiffs' MCPA claim.
The MCPA enables victims to sue those who violate the act, but the enabling provision
does not expressly limit a victim's choice of violating defendants to a certain class or type.10
Nothing in the act expressly states whether an individual who violates the act in his or her
capacity as an employee or corporate officer is personally liable in a civil suit. Nevertheless, we
note that most of the violations listed in MCL 445.903 have the common root of fraudulent or
deceptive practice, and, as noted above, torts are generally applicable first to the actual tortfeasor
and then vicariously to his or her employer in certain circumstances. In the realm of torts,
holding a company liable first and determining the liability of employees and executives second
is the equivalent of drifting a raft upstream.
Also, the MCPA makes unlawful "[u]nfair, unconscionable, or deceptive methods, acts,
or practices in the conduct of trade or commerce . . . ."11 Therefore, the act redresses actual
conduct, not board resolutions, and it goes without saying that no corporation or other business
entity can do anything, including violate the MCPA, without human action. This case makes the
point perfectly. While the Daileys claim that HEBC violated the act through various
representations and omissions, they attribute those same representations and omissions to
Hartman and claim that the acts sustain their MCPA claim against him individually. Because the
Legislature constructed the MCPA so that actions, rather than affiliations, yield liability,
individuals are necessarily the act's primary violators. It stands to reason that, absent express
language to the contrary, the Legislature intended that those who actually violate the act would
be the ones from whom victims could recover damages, regardless of the violators' affiliation
with any business entity.
Finally, the plain language of MCL 445.911(7) indicates that the act generally envisions
individual liability. The subsection states that "when a person commences an action against
another person, the defendant may assert . . . any claim under this act . . . ."12 In the absence of a
caveat excluding individuals acting as owners, employees, board members, or executives, this
language declares what should be intuitive–those who may sue for violations of the act may sue
those who violate the act. Therefore, Hartman was personally liable for any MCPA violations
that resulted from his conduct, and the trial court erred when it held to the contrary.
Id. (emphasis added).
MCL 445.911(7) (emphasis added).
This leaves us with Hartman's appellate argument that the MCPA does not apply to
actions taken by him or HEBC because the act of a building contractor repairing a house is
regulated by the Occupational Code. We agree, but we are bound by precedent to hold
otherwise. According to MCL 445.904(1), the MCPA "does not apply to . . .(a) [a] transaction or
conduct specifically authorized under laws administered by a regulatory board or officer acting
under statutory authority of this state . . . ." In Smith, supra at 465, our Supreme Court liberally
interpreted the phrase "transaction or conduct specifically authorized" to include any activity or
arrangement permitted by statute. The Court did not limit the scope of the inquiry to the specific
misconduct alleged. Id. Therefore, if a statute authorizes the performance of some service by a
licensed professional, then the MCPA does not apply to the professional's performance of the
service. Smith, supra at 465-466 n 12.
Applying Smith to this case, we would find that the statutes allow only licensed
residential builders or alteration contractors to perform the reconstruction work at issue here,
MCL 339.601(1), 339.2401, 339.2404, and Hartman held the license for HEBC in accordance
with MCL 339.2405. Therefore, Hartman and HEBC were generally allowed by statute to make
the repairs and renovations to the Daileys' home, and the MCPA should not apply.13 However,
in Forton, supra at 715, we expressly held that residential builders are subject to the MCPA.
While we question the wisdom of either Smith or Forton, we are bound by MCR 7.215(J)(1) to
apply Forton and hold Hartman accountable under the MCPA. As with the fraud claims, the trial
court did not address the merits of the Daileys' MCPA claims, so we reverse the court's grant of
summary disposition and remand for further proceedings.
Reversed and remanded. We do not retain jurisdiction.
Schuette, P.J., concurred.
/s/ Peter D. O'Connell
/s/ Bill Schuette
The identical conclusion was reached in Justice Corrigan's concurring opinion to our Supreme
Court's denial of leave to appeal in Forton. The concurrence, reported at 463 Mich 969 (2001),
explained that the regulation of residential builders justified their exemption from the act, but the
builder in that case failed to assert the issue in a timely manner.