RONALD L WINANS V PAUL AND MARLENE INC
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STATE OF MICHIGAN
COURT OF APPEALS
UNPUBLISHED
July 8, 2003
RONALD L. WINANS and DANETTE L.
WINANS,
Plaintiffs-Appellees,
v
No. 230944
Shiawassee Circuit Court
LC No. 98-002500-CH
PAUL AND MARLENE, INC., d/b/a GRAND
VALUE HOMES,
Defendant/Third-Party PlaintiffAppellant,
and
SHOAL EXCAVATING,
Third-Party Defendant-Appellee.
Before: Sawyer, P.J., and Jansen and Donofrio, JJ.
JANSEN, J. (concurring in part and dissenting in part).
I respectfully dissent from the portion of the majority’s decision which would reverse the
trial court for failing to direct a verdict on the Michigan Consumer Protection Act [hereinafter
“MCPA”] claim. I cannot agree that a licensed builder is exempt from the MCPA pursuant to
MCL 445.904(1) when it is alleged that the licensed builder made misrepresentations with regard
to the standard of work performed. A licensed builder is not specifically authorized to make
misrepresentations to consumers. The exemption granted by the majority was pursuant to
general regulations with regard to construction of a residence. An extension of the MCPA
exemption in this manner renders the MCPA inapplicable to most businesses and deprives
consumers of a meaningful remedy. The majority’s extension of the MCPA exemption is against
public policy, and was not the intent of the legislature.
Statutory interpretation or construction is a question of law which is considered de novo
on appeal. Eggleston v Bio-Medical Applications of Detroit, Inc, 468 Mich 29, 32; 658 NW2d
139 (2003).
I would find, unlike my colleagues, that defendant is not exempt from the MCPA
under our Supreme Court’s ruling in Smith v Globe Life Insurance Co, 460 Mich 446; 597
NW2d 28 (1999), because the plain language of the statute and the legislative intent behind it
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demonstrates that MCL 445.904(1)(a) exempts conduct or transactions specifically authorized by
law, not conduct or transactions by residential builders that is subject to general regulation.
Defendant’s case factually differs from the defendant’s case in Smith, supra, because the real
estate industry is not as extensively regulated as the insurance industry.
The MCPA was enacted to do the following:
prohibit certain methods, acts, and practices in trade or commerce; to prescribe
certain powers and duties; to provide for certain remedies, damages, and
penalties; to provide for the promulgation of rules; to provide for certain
investigations; and to prescribe penalties. [MCL 445.901.]
The resolution of this issue relies on the proper interpretation and application of the exemption
section of the MCPA, MCL 445.904(1)(a). The exemption section of the MCPA, MCL
445.904(1), states, in relevant part, the following:
(1) This act does not apply to either of the following:
(a) A transaction or conduct specifically authorized under laws administered by a
regulatory board or officer acting under statutory authority of this state or the
United States.
***
(4) The burden of proving an exemption from this act is upon the person claiming
the exemption.
The primary goal of judicial interpretation of statutes is to ascertain and give effect to the
intent of the Legislature. Frankenmuth Mutual Ins v Marlette Homes, Inc, 456 Mich 511, 515;
573 NW2d 611 (1998). Statutory language should be construed reasonably, keeping in mind the
purpose of the act. Draprop Corp v Ann Arbor, 247 Mich App 410, 415; 636 NW2d 787 (2001).
Once the intention of the Legislature is discovered, it must prevail regardless of any conflicting
rule of statutory construction. Green Oak Twp v Munzel, 255 Mich App 235, 240; 661 NW2d
243 (2003). If the plain and ordinary meaning of the language is clear, judicial construction is
normally neither necessary nor permitted. Sun Valley Foods Co v Ward, 460 Mich 230, 236; 596
NW2d 119 (1999); Toth v AutoAlliance International (On Remand), 246 Mich App 732, 737;
635 NW2d 62 (2001). In reviewing a statute’s language, every word should be given meaning,
and the court should avoid a construction that would render any part of the statute surplusage or
nugatory. Wickens v Oakwood Healthcare System, 465 Mich 53, 60; 631 NW2d 686, 690
(2001); Altman v Meridian Twp, 439 Mich 623, 635; 487 NW2d 155 (1992). Statutory
provisions must also be read in the context of the entire statute so as to produce a harmonious
whole. Macomb County Prosecuting Attorney v Murphy, 464 Mich 149, 159; 627 NW2d 247
(2001).
The MCPA is a remedial statute designed to prohibit unfair practices in trade or
commerce and must be liberally construed to achieve its intended goals. Forton v Lazar, 239
Mich App 711, 715; 609 NW2d 850 (2000); Price v Long Realty, 199 Mich App 461, 470-471;
502 NW2d 337 (1993). In reviewing the statutory exemption language, the Court should
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consider the purpose of the MCPA and the objective it seeks to accomplish. Lorencz v Ford
Motor Co, 439 Mich 370, 377; 483 NW2d 844 (1992).
The plain language of the statute clearly demonstrates that MCL 445.904(1)(a) exempts
conduct or transactions “specifically authorized” by law, not conduct or transactions subject to
regulation generally or “generally regulated activities.” On its face, the statutory language of
MCL 445.904(1)(a) does not exempt all transactions and conduct of whole industries and types
of businesses, generic behavior, methods, or practices, but rather, only exempts specific activity
or singular actions that are “specifically authorized” by law. The legislative intent behind the
MCPA reinforces the plain language reading of the statute. The MCPA was designed to protect
consumers from damages resulting from material misrepresentations or omissions when making
purchases. Zine v Chrysler Corp, 236 Mich App 261, 271; 600 NW2d 384 (1999). The clear
intent of the MCPA is to protect consumers in the purchase of goods and services. Forton, supra
at 715. The Michigan Legislature drafted the MCPA to apply to “trade or commerce,” which is
defined to include virtually all consumer transactions. MCL 445.902(d). MCPA was enacted to
enlarge the “remedy for consumers who are mulcted by deceptive business practices.” Dix v
American Bankers Life Ins Assurance Co of Florida, 429 Mich 410, 417; 415 NW2d 206 (1987).
Therefore, a reasonably narrow construction of the exemption section, as the plain meaning
dictates, would allow the MCPA to accomplish its intended goals. When the statute is broadly
construed, as the majority interprets it, the exemption provisions swallow the statute whole.
The majority relies heavily upon our Supreme Court’s ruling in Smith, supra at 446, to
extend the exemption section of the MCPA to residential builders contrary to the plain language
reading and the legislative intent behind the MCPA. In Smith, supra, our Supreme Court
analyzed the statutory exemption language “specifically authorized,” and concluded that the
defendant credit life insurance company was exempt from the MCPA. Id. at 465 The plaintiff in
Smith, supra, sued the defendant life insurance company alleging breach of contract and
violations of the MCPA regarding the manner in which the defendant represented the benefits
and conditions of the plaintiff’s insurance policy. Id. at 449. Credit life insurance is governed
by MCL 550.601, which authorizes the sale of credit life insurance, and requires written
insurance policies to be submitted to the Michigan Insurance Commission for review. The
defendant asserted that it was exempt from the MCPA because the underlying transaction, the
sale of credit life insurance, was “specifically authorized” by the insurance statute and all of the
defendant’s insurance forms were submitted to and approved by the state commissioner of
insurance. The plaintiff argued that the insurance statute did not “specifically authorize” the
alleged fraudulent insurance practices of the defendant, and thus, the defendant could not be
exempt from the MCPA. Id. at 463. The Smith Court found that its decision in Diamond
Mortgage Co, 414 Mich 603; 327 NW2d 805 (1982), controlled the resolution of this issue, and
in concluding so, it analyzed Diamond Mortgage Co (a real estate industry case) and a case
involving the insurance industry, Kekel v Allstate, 144 Mich App 379; 375 NW2d 455 (1985),
overruled on other grounds by Smith, supra at 464 (in regard to an erroneous interpretation of
MCL 445.904(2)).
In Diamond Mortgage Co, supra, the trial court’s decision was reversed and it was found
that a real estate broker’s license does not exempt a real estate broker from the MCPA for the
following reasons:
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While the license generally authorizes Diamond to engage in the activities of a
real estate broker, it does not specifically authorize the conduct that plaintiff
alleges is violative of the Michigan Consumer Protection Act, nor transactions
that result from that conduct. In so concluding, we disagree that the exemption of
§ 4(1)(a) becomes meaningless. While defendants are correct in stating that no
statute or regulatory agency specifically authorizes misrepresentations or false
promises, the exemption will nevertheless apply where a party seeks to attach
such labels to “a transaction or conduct specifically authorized under laws
administered by a regulatory board or officer acting under statutory authority of
this state or the United States.” For this case, we need only decide that a real
estate broker’s license is not specific authority for all the conduct and transactions
of the licensee’s business. [Id. at 617.]
Thus, the Diamond Mortgage Court indicated that the MCL 445.904(1)(a) exemption will apply
where a party is seeking to classify certain transactions or conduct as illegal under the MCPA,
when the very same transactions and conduct are specifically authorized and under the regulatory
control of a board or officer acting under statutory authority of this state or the United States. Id.
The Supreme Court in Smith, supra, noted that the defendant in Diamond Mortgage,
supra, was not exempt from the MCPA because the transaction at issue, the mortgage writing,
was not “specifically authorized” under the defendant’s real estate broker’s license. Smith, supra
at 464. The Supreme Court then analyzed the difference between Diamond Mortgage, and a
case involving the insurance industry, Kekel, supra at 379. In Kekel, the defendant insurer was
found to be exempt from the MCPA after this Court found the following:
Diamond is distinguishable from the case at bar. The activities of the
defendant in Diamond which the plaintiffs there were complaining of were not
subject to any regulation under the real estate broker’s license of the defendant
and thus such conduct was not reviewable by the applicable licensing or
regulatory authority. . . . The insurance industry is under the authority of the State
Commissioner of Insurance and subject to the extensive statutory and regulatory
scheme, all administered “by a regulatory board or officer acting under statutory
authority of this state.” [Kekel, supra at 384.]
Consistent with the above findings in Diamond Mortgage, supra, and Kekel, supra, the Supreme
Court in Smith, supra, interpreted the exemption language of the MCPA and held:
[W]hen the Legislature said that transactions or conduct “specifically authorized”
by law are exempt from the MCPA, it intended to include the conduct the legality
of which is in dispute. Contrary to the “common-sense reading” of this provision
by the Court of Appeals, we conclude that the relevant inquiry is not whether the
specific misconduct alleged by the plaintiffs is “specifically authorized.” Rather,
it is whether law, regardless of whether the specific misconduct alleged is
prohibited, specifically authorizes the general transaction. [Smith, supra at 465.]
Thus, the Supreme Court found that the defendant insurer was exempt from the MCPA just as
the insurer in Kekel, supra, was, but contrary to the real estate broker in Diamond Mortgage,
because the general transaction of selling credit life insurance is “specifically authorized under
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laws administered by a regulatory board or officer acting under statutory authority of this state or
the United States.” Id. at 465. The Smith Court did not address the applicability of the MCL
445.904(1)(a) exemption to other regulated businesses or transactions that were not before the
Court. However, in response to concerns expressed in a dissenting opinion, the majority noted
that the insurance business is not like other businesses and did not address other consumer
transactions because “it is clear in this case that the sale of credit life insurance is ‘specifically
authorized’ under the Credit Insurance Act.” Id. at 465 n 12 (emphasis in original; citation
omitted). The footnote in Smith, supra, seems to emphasize the decision was based on how
heavily regulated the insurance industry is, and that the analysis did not apply to other consumer
transactions.
Defendant asserts that it is exempt from the MCPA pursuant to Smith, supra, because the
general activity it engaged in, resulting in this suit, is specifically authorized under its residential
builder’s license and regulated under the Occupational Code, MCL 339.2401(a). Subsection (a)
applies to a builder that “assembles, constructs, deals in, or distributes a residential . . . structure
which is prefabricated, preassembled, precut, packaged or shell housing.” Yet, defendant fails to
recognize that its case is more analogous to that of the defendant real estate broker in Diamond,
supra, not the defendant in Smith, supra, nor Kekel, supra, where the insurance industry was
concerned. The Smith Court noted that the insurance industry was unlike most other businesses
because insurance transactions require an extensive degree of state authorization. Smith, supra,
460 Mich 465-466 n 12. Because of the extensive regulation of the insurance industry, and
oversight of each document and aspect of every insurance transaction, the entire credit insurance
transaction can be viewed as “specifically authorized” by the regulating board or commission. In
the present case, the licensing and regulation of residential builders is not as extensive as the
insurance industry and is similar to the statutory and regulatory treatment of many, if not most
other industries in the state.1 Therefore, every aspect of a transaction involving a residential
builder should not be viewed as “specifically authorized” by the regulating board or commission.
1
An overview of the regulation of residential builders compared to the regulation of credit life
insurance companies demonstrates a significant difference in the levels of regulation. The
Occupational Code, MCL 339.101, covers, among other businesses, barbers, cosmetologists,
surveyors, real estate brokers, appraisers, hearing aid dealers, foresters, ocularists, and collection
agencies. (MCL 339.1101; § 2001, § 2501, § 1301, § 2701, § 901, § 1201, § 2101, § 2601). The
Occupational Code contains licensing requirements, requires the existence of a board or officer,
and regulates each area of business to a similar extent. The same procedure for finding
violations applies to all the businesses covered by the code, and one set of penalties is applicable
to all violations. Pursuant to article 24, which applies to residential builders and contractors, a
residential builder, maintenance and alteration contractor’s board is created within the
Department of Consumer and Industry Services [hereinafter “DCIS”] to promulgate rules, set
minimal standards of practice, interpret licensure and registration requirements, and assess
penalties for violations of the code. MCL 339.2403; MCL 339.2404. The board has little
authority or control over residential builders’ practices. The purpose of the residential builder’s
licensing act is only to protect homeowners from “incompetent, inexperienced, and fly-by-night
contractors.” Kirkendall v Heckinger, 105 Mich App 621, 627-628; 307 NW2d 699 (1981),
citing Alexander v Neal, 364 Mich 485, 487; 110 NW2d 797 (1961). On the other hand, the
(continued…)
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The present case is analogous to Price, supra at 461, where the defendant real estate
agency was sued for misrepresenting the fact that the plaintiff’s house could be constructed close
enough to the road so that a pole barn could be constructed behind it, when in fact it could not. It
could not because the county health department had concluded that putting a house on the front
part of the property created a serious health problem regarding installation of the septic system.
Price, supra, 199 Mich App 464. While the Court found that real estate licensees who perpetrate
fraud are subject to penalties under the Occupational Code, it found that the defendant’s license
does not specifically authorize the conduct that plaintiff alleges is violative of the MCPA. Id. at
471. This Court found that the mere fact that a regulatory board exists in a particular occupation
will not warrant an exemption from the act unless that board specifically authorizes certain
conduct. Id. Therefore, this Court ruled that a real estate agency’s conduct in misrepresenting to
purchasers the permitted location of their house on a vacant lot was not exempt from the MCPA,
even though the listing and sale of the property is directly regulated by the occupational code
under article 25, governing real estate brokers. Id. Similarly, defendant, in the present case, may
have misrepresented the condition of the plaintiffs’ land on which the house was constructed. 2
While a builder’s license will subject defendant to certain penalties under the Occupational
Code, it does not specifically authorize any of the conduct engaged in by defendant. The
majority has over generalized the transaction to the point that a licensed contractor or residential
builder is exempt from the MCPA whenever a general “construction of a residence” is involved.
As noted by the majority as “helpful,” Chief Justice Corrigan commented in her
concurrence to the denial of leave to appeal in Forton v Laszar, 463 Mich 969, 970; 622 NW2d
61 (2001), that “arguably” Smith, supra, would apply equally to the defendant’s sale of a
residential home because portions of the Occupational Code regulate the conduct of residential
builders and a board regulates residential builders. Forton, supra at 970. However, as Justice
(…continued)
Insurance Code manifests an intent to regulate the entire insurance field, and not leave any
portion of it unregulated. Credit life insurance is regulated by the credit insurance act, MCL
550.602 to 550.624, and twenty-one rules in an administrative code with more than 130
subsections, 1999 AC, R 550.201 to R 550.221. Statutes and rules governing credit insurance
require that virtually every document used to arrange and sell credit insurance be submitted for
review by the insurance commissioner before being used in a sale to consumers. MCL 550.602
to 550.624; 1999 AC, R 550.201 to R 550.221. The commissioner also has authority over all
rates and premiums charged in credit insurance transactions, and rates are set by rules
conforming to 1999 AC, R 550.211 and R 550.212. Clearly, residential builders are not as
regulated as the credit insurance industry.
2
Defendant contends that the Price, supra, holding is incorrect as matter of law under the Smith,
supra, ruling because the focus was incorrectly placed on whether the alleged misconduct was
“specifically authorized,” without looking at the overall transaction at issue, and whether that
was “specifically authorized” under laws administered by a regulatory board or officer.
However, Price, supra, is not incorrect under Smith, supra, because the Smith Court did not
address other regulated industries, noting that the insurance industry is unlike most other
businesses. To the contrary, Smith, supra, specifically notes that the holding applies on
transactions involving the insurance industry, and not to other consumer transactions. Id. at 465,
n 12.
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Kelly reiterated in her concurrence with Chief Justice Corrigan, it is well settled that what is
stated in an order denying leave has no precedential significance. Id. at 971. Specifically,
Justice Kelly stated:
I wish to reiterate the well-settled fact that nothing of precedential
significance should be deduced from an order of this Court denying leave.
Accordingly, I caution the bench and bar against treating such an order or, for that
matter, an accompanying explanation as having legal precedential significance.
[Id.; citations omitted.]
Therefore, as noted by Justice Kelly, the comments made by Chief Justice Corrigan, though
maybe somewhat persuasive, are by no means precedential. Id.; See Tebo v Havlick, 418 Mich
350, 363 n 2; 343 NW2d 181 (1984).
Defendant also argues that the conduct complained of by plaintiffs, which is the failure to
repair, and poor workmanship, are specifically regulated and prohibited under article 24 of the
Occupational Code, MCL 339.2411(2)(h) and (m). Subsection (h) prohibits the failure to deliver
to the purchaser the entire agreement of the parties when the agreement involves manufacture,
assembly, construction, and sale of a residential structure that is prefabricated, preassembled,
precut, packaged or shell housing. Subsection (m) provides for situations where workmanship
did not meet the standards of the custom or trade. Nothing in the Occupational Code specifically
authorizes a licensed builder to make misrepresentations regarding the condition of land and with
regard to the quality and standard of work performed. While the Occupational Code does
provide certain remedies, it does not specifically authorize the conduct and misrepresentations
alleged by plaintiffs. Merely holding a license to build and sell homes is not specific authority
for all the transactions of defendant’s business. Diamond Mortgage, supra at 617. Defendant
cited MCL 339.2411(2)(h) and (m) as conduct regulated by the Occupational Code, but it did not
cite any statute that specifically authorized any of the activities resulting in this suit. Possession
of a builder’s license is not specific authority for the conduct of advising plaintiffs as to the
location of the house on their property, making decisions regarding the condition of the land, or
misrepresenting or misleading plaintiffs as to what their role and relationship was.
As argued by plaintiffs and the Attorney General, amicus curiae for plaintiffs, if the
MCPA were read as exempting generic behavior because it is subject to government regulation,
Virtually all
like licensing, it would nullify or render other parts of the MCPA surplusage.3
consumer lending businesses, including mortgage and finance companies, that are not licensed
3
State and federal statutory schemes generally regulating credit or vehicular transactions would
wholly displace application of the MCPA and these sections would not have any application.
Additionally, a broad reading of MCL 445.904(1)(a) would make MCL 445.904(2) surplusage,
exempting certain conduct already exempt by MCL 445.904(1)(a) as to Attorney General
actions. Furthermore, MCL 445.904(3) exempting unfair, unconscionable, or deceptive
methods, acts or practices made unlawful by chapter 20 of the Insurance Code, MCL 500.2001 to
500.2093, would also be surplusage, exempting conduct of licensed insurance agents already
exempt a second time by a broad reading of MCL 445.904(1)(a).
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and regulated by the federal government, must be licensed and regulated by the state.4 The
Legislature could not have intended to exempt lenders because the MCPA contains sections
applicable only to lenders. See MCL 445.903.
Liberally construing the exemption provision of the MCPA, I would find that defendant
is not exempt from the MCPA under our Supreme Court’s ruling in Smith, supra, because the
plain language of the statute and the legislative intent behind it demonstrates that MCL
445.904(1)(a) exempts conduct or transactions specifically authorized by law, not conduct or
transactions subject to regulation generally. Defendant’s case factually differs from the
defendant’s case in Smith, supra, because the real estate industry is not as extensively regulated
as the insurance industry. As a public policy concern, extending the MCPA and granting a
blanket exemption to residential builders who are involved with “construction of a residence”
will render the MCPA inapplicable to most other businesses and deprive consumers of an
effective, meaningful remedy.
For the above reasons, I would affirm the trial court.
/s/ Kathleen Jansen
4
Mortgage lenders are regulated under the mortgage lenders, brokers and servicers act, MCL
445.1651, and pawnbrokers are regulated under the pawnbroker act, MCL 445.471. Sellers
extending credit are regulated by the motor vehicle sales finance act, MCL 492.101, the home
improvement finance act, MCL 445.1101, and other similar regulatory statutes. All lenders are
also regulated by the truth in lending act, which is overseen by the Federal Reserve Board. 15
USC 1601.
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