Steven Hinderer v. Marcus Snyder

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

STEVEN HINDERER and KATHLEEN UNPUBLISHED

HINDERER, January 29, 2019

Plaintiffs-Appellants,

v No. 339759

Washtenaw Circuit Court

MARCUS SNYDER, CHELSEA BUILDERS, LC No. 15-001131-CK

INC., and JASON EASON,

Defendants-Appellees,

and

DONALD BARKER,

Defendant.

Before: CAMERON, P.J., and BECKERING and RONAYNE KRAUSE, JJ.

PER CURIAM.

In this dispute arising from the construction of a substantial addition to a residential

home, plaintiffs, Steven and Kathleen Hinderer, appeal the trial court’s orders dismissing their

claims against defendants Marcus Snyder, Chelsea Builders, Inc., and Jason Eason, for their

work and involvement in the construction of the addition in 2009.1 By March 2010, the

Hinderers identified numerous problems with Chelsea Builders’ work, and according to the

Hinderers, Chelsea Builders refused to rectify the problems and did not complete the project. On

November 6, 2015, the Hinderers filed their complaint against defendants. The trial court

granted defendants’ motion for summary disposition based on the applicable statute of

1

The Hinderers also named Donald Barker as a defendant on their original complaint, but they

never served him. The trial court later dismissed him from the case, and he is not a party to this

appeal.

limitations and laches. For the reasons more fully explained below, we affirm in part, reverse in

part, and remand for further proceedings consistent with this opinion.

I. PERIOD OF LIMITATIONS

The Hinderers first argue that the trial court erred when it dismissed their claims for

breach of contract (Count I); breach of warranty (Count II); violation of the builders’ trust fund

act (Count III); fraud (Count IV); negligent construction (Count VII); and violation of the

Michigan Consumer Protection Act (MCPA), see MCL 445.901 et seq. (Count VIII); on the

ground that those claims were each barred by the applicable statutes of limitations.

A. STANDARD OF REVIEW AND LAW

This Court reviews de novo a trial court’s decision on a motion for summary disposition.

Barnard Mfg Co, Inc v Gates Performance Engineering, Inc, 285 Mich App 362, 369; 775

NW2d 618 (2009). We also review de novo whether the trial court properly interpreted and

applied the relevant statutes. Pransky v Falcon Group, Inc, 311 Mich App 164, 173; 874 NW2d

367 (2015).

A party is entitled to have the trial court dismiss a plaintiff’s action when the claim is

barred by the applicable statute of limitations. See MCR 2.116(C)(7). As this Court has

explained, a party can establish that it is entitled to summary disposition under MCR 2.116(C)(7)

in two distinct ways: it can show that immunity is apparent on the face of the pleadings or it can

present evidence to establish that, notwithstanding the allegations in the plaintiff’s complaint,

there is no factual dispute that he or she is entitled to immunity as a matter of law. Yono v Dep’t

of Transp (On Remand), 306 Mich App 671, 678-680; 858 NW2d 128 (2014), rev’d on other

grounds, 499 Mich 636 (2016).

B. CONTRACT AND WARRANTY CLAIMS

A person cannot “bring or maintain an action to recover damages or money due for

breach of contract” unless the party brings the action within six years. MCL 600.5807(1), (9).2

A breach of contract claim accrues “at the time the wrong upon which the claim is based was

done regardless of the time when damage results.” MCL 600.5827. That is, a breach occurs

when the breaching party fails to perform as required under the agreement. See Cordova

Chemical Co v Dep’t of Natural Resources, 212 Mich App 144, 153; 536 NW2d 860 (1995).

In this case, the Hinderers alleged that the parties entered into an oral agreement for the

construction of an addition to the Hinderers’ home using the “broad outline of the draft contract

dated November 16, 2009,” but with the understanding that additional terms applied. Although

the Hinderers alleged that the parties entered into the agreement, they did not allege that Snyder

2

The Legislature amended the statute effective May 7, 2018. The changes affected the

numbering and wording of the relevant provisions but did not alter the substance. See 2018 PA

15.

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participated in any capacity other than as the duly authorized representative of Chelsea Builders.

Indeed, even the alleged draft agreement the Hinderers attached to the complaint showed that the

agreement was between Chelsea Builders and the Hinderers.3 The Hinderers then alleged that

“[d]efendants” breached the agreement in the “numerous ways” stated under their factual

allegations, which included—but was not limited to—“refusing to complete the project,”

“demanding payments in excess of the amount agreed,” “refusing to correct code violations,”

“failing to perform the work under the contractual standards,” and by “failing to work in a

manner so as to prevent damage to the existing structure and addition.” The Hinderers similarly

alleged, in relevant part, that “[d]efendants” expressly warranted the quality of the materials and

workmanship and warranted that the materials and workmanship would comply with building

codes and standards. The Hinderers further alleged that “[d]efendants” breached the warranties

by providing substandard materials and performing substandard work.

The Hinderers allege that these acts or omissions occurred after the parties orally agreed

to begin the project and after construction commenced on November 9, 2009. Assuming these

allegations to be true and construing them in favor of the Hinderers, which this Court must do,

see Maiden v Rozwood, 461 Mich 109, 119; 597 NW2d 817 (1999), the Hinderers alleged that

the breach of the agreement and the warranties occurred on or after November 9, 2009. The

Hinderers filed their original complaint on November 6, 2015, which means that—as alleged—

their breach of contract and warranty claims were timely. See MCL 600.5807(9); MCL

600.5827. Therefore, to the extent that the trial court dismissed the Hinderers’ breach of contract

and warranty claims as untimely, it erred.

C. BUILDERS’ TRUST FUND ACT

As for their claim under the builders’ trust fund act, see MCL 570.151 et seq., the

Hinderers alleged that Chelsea Builders and Snyder were contractors for purposes of the act and

that the Hinderers paid them more than $43,000 to purchase materials in the spring of 2009.

They wrote that they continued to make scheduled payments, which totaled over $98,000. They

further alleged that Chelsea Builders and Snyder did not use the money to purchase the materials

that were to be used in the project or to pay laborers, subcontractors, or materialmen, and that

they also appropriated the money for their own use in violation of the builders’ trust fund act.

More specifically, the Hinderers alleged that Chelsea Builders and Snyder failed to pay two

subcontractors and failed to return the funds to the Hinderers.

This Court has held that the six-year period of limitations stated under MCL 600.5813

applies to a claim under the builders’ trust fund act. See DiPonio Constr Co, Inc v Rosati

Masonry Co, Inc, 246 Mich App 43, 56; 631 NW2d 59 (2001). A claim under the builders’ trust

fund act accrues when the contractor receives money for either the labor or materials necessary

to make an improvement, appropriates the money to his or her own use, and fails to pay

subcontractors or materialmen that the contractor engaged to furnish labor or provide materials.

Id. at 57-58; see also BC Tile & Marble Co, Inc v Multi Bldg Co, Inc, 288 Mich App 576, 585;

794 NW2d 76 (2010) (stating the elements of a claim under the builders’ trust fund act).

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The Hinderers did not allege that Eason entered into any agreement with them.

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On appeal, Chelsea Builders and Snyder argue that the Hinderers’ claim under the act had

to have accrued in the spring of 2009 because that was the period within which the Hinderers

alleged that Chelsea Builders and Snyder received the funds to purchase materials for the project.

The Hinderers, by contrast, argue that the claim accrued when Chelsea Builders and Snyder

refused to refund the money or transfer the materials that it had purchased. Neither position is

correct. Although the Hinderers suggested that Chelsea Builders and Snyder could be liable

under the act for failing to purchase the materials that they agreed to purchase, or by failing to

return the funds that were paid for that purpose, the act applies only when the contractor or

subcontractor appropriates the money for his or her own use after having engaged a

subcontractor or materialman to provide services or materials and leaves the subcontractor or

materialman unpaid. See BC Tile, 288 Mich App at 585; see also MCL 570.152 (providing that

it is unlawful for a contractor or subcontractor to appropriate funds paid to him or her for any

purpose other than to first pay laborers, subcontractors, or materialmen). As such, neither the

failure to purchase the materials in advance of the project, nor the failure to return any funds that

were not needed to pay laborers, subcontractors, or materialmen were a violation of the act.

Because a contractor’s failure to engage a subcontractor or purchase materials from a

materialman does not violate the act, those failures cannot serve as the point at which such a

claim accrues. See MCL 600.5827 (stating that a claim accrues when the wrong is complete).

Therefore, to the extent that the Hinderers rely on those allegations to establish their claim under

the builders’ trust find act, they failed to state a claim upon which relief could be granted. See

MCR 2.116(C)(8).

Nevertheless, the Hinderers did allege that Chelsea Builders and Snyder accepted the

money, appropriated it to their own use, and left two subcontractors unpaid. If Chelsea Builders

or Snyder engaged the services of a subcontractor and used the money for a purpose other than to

pay the contractors first, it violated the act. See BC Tile, 288 Mich App at 585; MCL 570.152.

Because the Hinderers alleged that the two subcontractors provided services during the

construction project, which they alleged to have begun on or after November 9, 2009, the

Hinderers alleged a timely claim under the builders’ trust fund act with regard to the failure to

pay those two subcontractors. As such, the trial court erred to the extent that it determined that

the Hinderers claim under the builders’ trust fund act was untimely under the applicable six-year

period of limitation. MCL 600.5813.

D. FRAUD

The Hinderers’ fraud claims were also subject to a six-year period of limitations. See

MCL 600.5813; Boyle v Gen Motors Corp, 468 Mich 226, 228 n 2; 661 NW2d 557 (2003). A

claim of fraud accrues when the wrong was done—not when it was discovered, Boyle, 468 Mich

at 231-232, and the wrong is done when the plaintiff is harmed, id. at 231 n 5.

The Hinderers did not state with particularity whether and when they suffered any harm

from the alleged misrepresentations. See MCR 2.112(B)(1) (providing that the party alleging

fraud must state the circumstances constituting the fraud with particularity); Cooper v Auto Club

Ins Ass’n, 481 Mich 399, 414; 751 NW2d 443 (2008) (stating that every element of the fraud

claim must be pleaded with particularity); see also Frank v Linkner, 500 Mich 133, 150; 894

NW2d 574 (2017) (stating that, to determine when a claim accrued under MCL 600.5827, courts

must look to the harm alleged in the plaintiff’s cause of action). The Hinderers did allege that

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some misrepresentations occurred before construction began and that others occurred after

construction began. Construing the allegations in the light most favorable to the Hinderers, see

Maiden, 461 Mich at 119, any harm from the misrepresentations alleged to have occurred after

construction began would have had to have occurred on or after November 9, 2009. Thus, the

Hinderers’ claims of fraud—while lacking in particularity with regard to the nature and timing of

the harm actually suffered—nevertheless were timely to the extent that they involved

misrepresentations that occurred during the construction project. See MCL 600.5813; Boyle, 468

Mich 231-232. Moreover, as for the misrepresentations that the Hinderers alleged to have

occurred before the construction began, they may have been able to amend their pleadings to

more clearly state when the harm occurred, and leave to amend should be freely given to correct

such deficiencies. See MCR 2.118(A)(2). Consequently, on this record, the trial court erred to

the extent that it dismissed as untimely the Hinderers’ claims of fraud that occurred during the

construction project.

E. NEGLIGENT CONSTRUCTION OF AN IMPROVEMENT

Our Legislature provided that no “person” can “maintain an action to recover damages

for injury to property, real or personal, or for bodily injury or wrongful death, arising out of the

defective or unsafe condition of an improvement to real property . . . against any contractor

making the improvement, unless the action is commenced within” “[s]ix years after the time of

occupancy of the completed improvement, use, or acceptance of the improvement.” MCL

600.5839(1)(a). This period of limitations applies to tort actions; it does not apply to contract

actions. See Miller-Davis Co v Ahrens Constr, Inc, 489 Mich 355, 370; 802 NW2d 33 (2011).

In order for a claim to sound in tort when acting pursuant to a contract, the tortfeasor must have

breached a duty that was separate and distinct from the duties imposed under the contract. See

Bailey v Schaaf (On Remand), 304 Mich App 324, 332-340; 852 NW2d 180 (2014) (examining

the distinction between contractual liability and tort liability), vacated on other grounds 497

Mich 927 (2014). Indeed, our Supreme Court explained that it was error for this Court to expand

the application of MCL 600.5839(1) to all actions brought against a contractor involving an

improvement, including those brought for damage to the improvement itself. Miller-Davis Co,

489 Mich at 367.

Under Count VII, which was titled “Negligence in Construction,” the Hinderers alleged

numerous breaches that they claimed caused various harms. The Hinderers alleged that Chelsea

Builders and Snyder harmed their property through negligent construction practices.

Specifically, they alleged that Chelsea Builders and Snyder failed to properly protect the

property from the elements during construction, which harmed both the original structure and the

improvements made. They similarly claimed that Chelsea Builders and Snyder used “excessive,

damaging force,” which damaged the property, and used “unsafe methods” in demolishing the

sunporch to make room for the new addition. These claims, and similar ones stated under Count

VII, to the extent that they state a claim at all, do not appear to involve harms “arising out of the

defective or unsafe condition of an improvement.” MCL 600.5839(1). Rather, as Chelsea

Builders and Snyder argue on appeal, these claims appear to involve ordinary negligence, which

would be subject to the three-year period of limitations stated under MCL 600.5805, as amended

by 2011 PA 162, in addition to the statute of repose stated under MCL 600.5839(1).

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Notwithstanding the apparent application of former MCL 600.5805(10), currently MCL

600.5805(2), to the defective or unsafe condition of an improvement, this Court has held that

MCL 600.5839 established a six-year period of limitations and period of repose for all claims

involving negligent workmanship during the construction of an improvement. See Citizens Ins

Co v Scholz, 268 Mich App 659, 665-671; 709 NW2d 164 (2005) (discussing what constitutes a

defective or dangerous improvement subject to the six-year statute of repose and what constitutes

ordinary negligence). The Court in Citizens relied heavily on MCL 600.5805, as amended by

2002 PA 715, and our Supreme Court’s interpretation of that provision in Ostroth v Warren

Regency, GP, LLC (Ostroth I), 263 Mich App 1; 687 NW2d 309 (2004), aff’d 474 Mich 36

(2006), to conclude that the Legislature intended MCL 600.5839 to apply to all actions arising

from the construction of an improvement in addition to actions arising from the defective nature

of the improvement itself. See Citizens, 268 Mich App at 664-665. Our Supreme Court noted

that, under MCL 600.5805(14), as amended by 2002 PA 715, the Legislature stated that all

claims against contractors shall be “as provided” in MCL 600.5839. Ostroth v Warren Regency,

GP, LLC (Ostroth II), 474 Mich 36, 41; 709 NW2d 589 (2006), quoting former MCL

600.5804(14) (quotation marks omitted). Relying on that language, our Supreme Court

concluded that the Legislature intended MCL 600.5839 to serve as both a statute of limitations

and a statute of repose. Id. at 44-45.

Since the decisions in Ostroth II and Citizens Ins, the Legislature amended MCL

600.5805 to no longer state that the claims against contractors shall be “as provided” by MCL

600.5839. Instead, MCL 600.5805, as amended by 2011 PA 162, stated under MCL

600.5805(15), currently MCL 600.5805(14), that the “periods of limitation under this section are

subject to any applicable period of repose established in section [MCL 600.]5838a, [MCL

600.]5838b, or [MCL 600.]5839.” With this amendment, the Legislature modified the statutory

scheme to preclude MCL 600.5839 from being applied as a statute of limitations, clarifying that

it was a statute of repose that should be applied in addition to any applicable period of

limitations. Cf. Ostroth II, 474 Mich at 44-45 (stating that there was no evidence that the

Legislature intended MCL 600.5839 to be only a statute of repose and instead concluding that

the Legislature intended that provision to be both a statute of limitations and repose). Because

the periods of limitations are now subject to the period of repose stated under MCL 600.5839,

see former MCL 600.5805(15), courts must apply both the applicable period of limitations and

the applicable period of repose. As such, the Hinderers could not bring a claim involving

negligent construction of an improvement against a contractor unless they brought the claim

within three years after the claim first accrued, see former MCL 600.5805(1) and (10), and

within six years “after the time of occupancy of the completed improvement, use, or acceptance

of the improvement,” MCL 600.5839(1)(a). Because any tort claim involving negligence during

the construction of the improvement necessarily accrued before Chelsea Builders and Snyder

stopped working on the property in April 2010, and the Hinderers did not bring the claims until

November 2015, the claims stated under Count VII were untimely. See former MCL

600.5805(10).

The trial court did not err to the extent that it dismissed the Hinderers’ claims under

Count VII as untimely under MCR 2.116(C)(7).

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F. MICHIGAN CONSUMER PROTECTION ACT

The Hinderers also argue on appeal that their claims under the MCPA were timely under

the applicable statute of limitation. The trial court, however, did not dismiss these claims as

untimely under the applicable period of limitations. Instead, it determined that Chelsea Builders

and Snyder were exempt from the requirements of the MCPA and that the MCPA claims were

barred by the doctrine of laches. Consequently, we need not address whether these claims were

barred by the applicable period of limitations.

II. LACHES

A. STANDARD OF REVIEW

The Hinderers next argue that the trial court erred when it dismissed their claims under

the equitable doctrine of laches. This Court reviews de novo a trial court’s decision on a motion

for summary disposition and reviews de novo whether the trial court properly applied an

equitable doctrine to the facts of the case. See Knight v Northpointe Bank, 300 Mich App 109,

113; 832 NW2d 439 (2013). “A question of fact exists when reasonable minds could differ as to

the conclusions to be drawn from the evidence.” Dextrom v Wexford Co, 287 Mich App 406,

416; 789 NW2d 211 (2010). This Court reviews a trial court’s findings of fact in support of the

application of the doctrine of laches for clear error. Shelby Charter Twp v Papesh, 267 Mich

App 92, 108; 704 NW2d 92 (2005).

B. ANALYSIS

The doctrine of laches arose from the requirement that a complainant in equity must

come to the court with a clean conscience, in good faith, and after acting with reasonable

diligence. Knight, 300 Mich App at 114. “If a plaintiff has not exercised reasonable diligence in

vindicating his or her rights, a court sitting in equity may withhold relief on the ground that the

plaintiff is chargeable with laches.” Id. Although timing is important, laches is not triggered by

the passage of time alone; rather, it is the prejudice occasioned by the delay that justifies

application of the doctrine to bar a claim. Id. at 114-115. The defendant bears the burden of

proving that the plaintiff’s lack of diligence prejudiced the defendant sufficiently to warrant

application of the doctrine of laches. See Yankee Springs Twp v Fox, 264 Mich App 604, 612;

692 NW2d 728 (2004).

In their original motion for summary disposition, Chelsea Builders and Snyder argued

that the doctrine of laches applied to bar all of the Hinderers’ claims because the documentation

the Hinderers submitted to the trial court and the other record evidence showed that, although

they were aware of their claims six years earlier, they had inexplicably delayed bringing them.

During that time, they proceeded to have contractors perform work and alterations to the home.

In that way, the delay resulted in the loss of evidence, which prejudiced the defense.

In response, the Hinderers stated that photos, scans, and reports documenting the defects

existed. Further, they had submitted some photos and reports that they claim document the

condition of the property before any changes were made and offered Kathleen Hinderer’s

affidavit in which she averred that there was further documentation establishing the defective

condition of the improvements. They also maintained that they advised Chelsea Builders and

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Snyder of the defects so as to allow them the opportunity to correct them. Finally, they asserted

that the delay was not unreasonable because they were pursuing their claims against Chelsea

Builders and Snyder through a state agency.

In ruling on the original motion for summary disposition, the trial court characterized the

Hinderers’ delay as inexcusable and stated that it was reasonable to infer that significant

evidence had been lost. The trial court, however, did not address the evidence that permitted an

inference that the Hinderers’ delay was reasonable in light of their efforts to secure compensation

without proceeding to court, and it did not address the Hinderers’ evidence that they sufficiently

documented the construction work to allow Chelsea Builders and Snyder to present a reasonable

defense, which implicated whether the delay prejudiced Chelsea Builders. The trial court also

did not discuss whether Chelsea Builders and Snyder had the ability to obtain additional

evidence in their defense by deposing the persons involved in the original and subsequent

improvements.

In their second motion for summary disposition, Chelsea Builders and Snyder did not

specifically raise the doctrine of laches. They argued that the trial court should dismiss the

Hinderers’ breach of contract, warranty, and fraud claims for the same reasons argued in their

first motion for summary disposition, which included laches. The trial court granted the second

motion for summary disposition and dismissed all of the Hinderers’ claims except their MCPA

claim. In granting the motion, the trial court mentioned laches, but it did not address the

evidence in support of applying the doctrine of laches to bar the claims. It also did not discuss

the possible factual dispute involving whether the doctrine could be properly applied.

Chelsea Builders and Snyder did address the issue of laches in their supplemental brief as

it might apply to the Hinderers’ claims under the MCPA. And the Hinderers reiterated their

earlier arguments with regard to the doctrine of laches as it might apply to their MCPA claim.

Specifically, they maintained that they had taken reasonable steps to assert their rights before

resorting to the courts, which included filing a claim with Chelsea Builders’ insurer and

preserving the evidence before proceeding to complete the project. Chelsea Builders also

discussed the prejudice prong of the doctrine of laches and presented evidence that the

Hinderers’ dramatically altered the property.

At the hearing to consider whether to dismiss the Hinderers’ MCPA claims, the trial court

discussed its decision to apply laches more specifically. It stated that it had not “seen and

probably won’t ever see another case as clear an example of laches.” It agreed with defense

counsel and stated that it believed that the Hinderers had “lulled” Chelsea Builders and Snyder

into believing that they were just going to pursue their complaints with the state agency and the

insurer. The trial court again did not carefully analyze the evidence implicating whether the

Hinderers’ delay in filing suit was reasonable and did not discuss the evidence tending to show

that Chelsea Builders and Snyder were not prejudiced by the delay.

Chelsea Builders and Snyder had the burden to demonstrate that the Hinderers’ claim

should be barred under the doctrine of laches. Yankee Springs Twp, 264 Mich App at 612. And

whether to apply the doctrine of laches may depend on the resolution of factual disputes about

the reasonableness of the delay and the prejudice occasioned by the delay. See Eberhard v

Harper-Grace Hosps, 179 Mich App 24, 39-40; 445 NW2d 469 (1989). In this case, there was

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evidence that would permit a trial court sitting in equity to find that the Hinderers’ delay was

unreasonable and prejudiced Chelsea Builders and Snyder. But there was also evidence from

which the trial court could have found that the Hinderers proceeded with due diligence or that the

delay did not prevent Chelsea Builders or Snyder from defending the claims. Whether treated as

a decision on a motion for summary disposition under MCR 2.116(C)(7) or (C)(10), there was a

factual dispute on which reasonable minds may differ about whether the doctrine of laches

should apply, and as such, this issue cannot be resolved on a motion for summary disposition.

See White v Taylor Distributing Co, Inc, 275 Mich App 615, 630; 739 NW2d 132 (2007) (stating

that trial courts may not resolve factual disputes or determine credibility in ruling on a motion for

summary disposition).

For the same reason, we decline to consider the Hinderers’ argument that the doctrine of

unclean hands bars Chelsea Builders and Snyder from asserting laches as a defense. See

Attorney General v PowerPick Players’ Club of Mich, LLC, 287 Mich App 13, 52; 783 NW2d

515 (2010) (stating that one with unclean hands may not assert the equitable defense of laches).

The record requires further factual development to determine whether that equitable doctrine

might apply. See, e.g., Mudge v Macomb Co, 458 Mich 87, 109; 580 NW2d 845 (1998).

Further, although this Court has held that the equitable doctrine of laches applies to actions at

law, see Tenneco Inc v Amerisure Mut Ins Co, 281 Mich App 429, 456; 761 NW2d 846 (2008),

our Supreme Court has stated that the equitable doctrine of unclean hands “is only relevant in

equitable actions,” see Rose v Nat’l Auction Group, 466 Mich 453, 467-468; 646 NW2d 455

(2002). Hence, it is unclear whether the equitable doctrine of unclean hands can be used in an

action at law to defeat the application of laches.

The trial court erred to the extent that it applied the doctrine of laches to bar the

Hinderers’ claims without first holding a trial or evidentiary hearing to resolve the factual

disputes underlying the proper application of that doctrine.

III. MCPA

A. STANDARD OF REVIEW

The Hinderers next argue that the trial court erred when it determined that Chelsea

Builders and Snyder were exempt from the requirements of the MCPA and dismissed their

MCPA claims in part on that basis. This Court reviews de novo a trial court’s decision on a

motion for summary disposition. Barnard Mfg, 285 Mich App at 369. This Court also reviews

de novo whether the trial court properly interpreted and applied the relevant statutes. Pransky,

311 Mich App at 173.

B. ANALYSIS

The Legislature prohibited certain “[u]nfair, unconscionable, or deceptive methods, acts,

or practices in the conduct of trade or commerce” in the MCPA. MCL 445.903(1). However, it

also provided that the MCPA does not apply 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.” MCL 445.904(1). The party claiming the exemption has the burden

of proving it. MCL 445.904(4).

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Our Supreme Court first examined the scope of this exemption in Attorney General v

Diamond Mtg Co, 414 Mich 603; 327 NW2d 805 (1982). In that case, the Court had to

determine whether Diamond Mortgage was exempt from the MCPA for claims involving home

loans because it was licensed as a real estate broker, and the licensing act at the time, MCL

451.201 et seq., as repealed by 1980 PA 299, contemplated that real estate brokers would

negotiate such loans. Id. at 606, 616. The Diamond Court held that Diamond Mortgage was not

exempt because, “[w]hile the license generally authorizes Diamond to engage in the activities of

a real estate broker,” it did not specifically authorize the conduct at issue. Id. at 617. The Court

acknowledged that no act specifically authorizes “misrepresentations or false promises,” but it

disagreed that its construction rendered the exemption meaningless. Id. It explained that the

exemption would apply even when a party attached such labels to a transaction or conduct if the

underlying transaction or conduct had been specifically authorized under the laws administered

by a regulatory board. Id.

In Smith v Globe Life Ins Co, 460 Mich 446; 597 NW2d 28 (1999), our Supreme Court

returned to the exemption stated under MCL 445.904(1) and again rejected the contention that

the exemption only applies when the allegedly wrongful conduct was itself authorized by law.

The Court explained that the “relevant inquiry is not whether the specific misconduct alleged by

the plaintiff” is specifically authorized by law, but rather “whether the general transaction is

specifically authorized by law, regardless of whether the specific misconduct alleged is

prohibited.” Id. at 465.

Our Supreme Court examined the meaning of the term “specifically authorized” as it

applied to residential builders in Liss v Lewiston-Richards, Inc, 478 Mich 203; 732 NW2d 514

(2007). The Court reiterated that the focus must be on the “general transaction” and whether it

has been “explicitly sanctioned” by law and not whether the specific misconduct had been

prohibited. See id. at 212-213. The Court concluded that residential home building was conduct

that was exempt from the MCPA because the occupational code, specifically MCL 339.2401 et

seq., authorized residential home building. Liss, 478 Mich at 214. The Court clarified that

residential homebuilding was authorized under the occupational code because the code required

the home builder to have a license and a license constituted formal permission to do something

or carry on some business. Id. at 214 n 39. The Court also noted that there were only a limited

number of instances where a “non-licensed builder” was permitted to act as a residential builder.

Id. at 214. The Court concluded that, with limited exceptions, residential home building was a

transaction specifically authorized under the occupational code:

The clear import of the statutory scheme is that there are only a few instances

where one can engage in the business of a residential home builder without

having a license. Therefore, with limited exceptions, contracting to build a

residential home is a transaction “specifically authorized” under the [Michigan

Occupational Code], subject to the administration of the Residential Builders’ and

Maintenance and Alteration Contractors’ Board. [Id. at 215.]

Notably, in both Diamond Mtg and Liss, our Supreme Court emphasized that the

defendant was either exempt or not exempt from the MCPA on the basis of the conduct that was

specifically authorized for someone holding the relevant license. In Diamond Mtg, the Court

concluded that Diamond Mortgage was not exempt from the MCPA because its real estate

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broker’s license did not authorize it to make loans. Diamond Mtg, 414 Mich at 617; see also

Smith, 460 Mich at 464 (recognizing that the transaction at issue in Diamond Mtg was not

exempt from the MCPA because the conduct was not specifically authorized under the

defendant’s real estate broker’s license). By contrast, in Liss, the builder had a residential

builder’s license, which specifically authorized it to engage in the business of residential building

and so it was exempt from the MCPA when engaged in such conduct. Liss, 478 Mich at 214-

215, 214 n 39.

In this case, the Hinderers alleged that Chelsea Builders and Snyder were engaged in the

business of residential construction and alteration but did not have a residential builder’s license.

Accepting those allegations to be true, see Maiden, 461 Mich at 119, Chelsea Builders and

Snyder were not specifically authorized by the occupational code to engage in residential

building. As such, the exemption stated under MCL 445.904(1)(a) did not apply to the conduct

at issue. Liss, 478 Mich at 214-215; Diamond Mtg, 414 Mich at 617. Consequently, the trial

court erred when it determined that the exemption stated under MCL 445.904(1)(a) applied

because the “transaction or conduct” was “specifically authorized under laws administered by a

regulatory board . . . .” The occupational code does not authorize persons to conduct residential

building without a license.

On appeal, Chelsea Builders and Snyder maintain that the case law must be read to

examine whether the conduct or transaction at issue was authorized under some regulatory

scheme without regard to whether the individual engaging in the conduct or transaction held the

requisite license that would allow him or her to engage in the conduct or transaction. We

disagree. In Diamond Mtg, our Supreme Court did not examine whether the issuing of loans

secured by mortgages was an activity that was authorized under any regulatory scheme; rather, it

examined whether the license held by the defendant in that case authorized the issuing of loans

secured by mortgages and determined that it did not. Similarly, in Liss, our Supreme Court

explained that it is the holding of a license that confers the authority to act under the regulatory

scheme. Consequently, the relevant inquiry is not whether the conduct was authorized generally

under some regulatory scheme, but whether the license actually held by the defendant authorized

the general conduct or transaction at issue. It follows that a person who does not hold the license

to engage in the relevant conduct cannot claim the exemption under MCL 445.904(1)(a). See

Liss, 478 Mich at 214-215; Diamond Mtg, 414 Mich at 617.

The trial court erred when it determined that the exemption stated under MCL

445.904(1)(a) applied to the facts as alleged in this case. Therefore, it erred to the extent that it

dismissed the Hinderers’ claims on that basis, and we reverse this aspect of the trial court’s

decision.

IV. PIERCING THE CORPORATE VEIL

The Hinderers also argue that the trial court erred by dismissing their claim for piercing

the corporate veil as stated under Count V of their complaint.

Corporations and other artificial entities are legal fictions. Green v Ziegelman, 310 Mich

App 436, 450; 873 NW2d 794 (2015). Courts indulge a presumption that the entity is separate

and distinct from its owners absent some abuse of the corporate form. Id. at 451. A court sitting

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in equity may, however, pierce the veil of corporate structure and impose liability on the owners

to prevent fraud or injustice. Id. “[P]iercing the veil of a corporate entity is an equitable remedy

sparingly invoked to cure certain injustices” and not a separate cause of action. Gallagher v

Persha, 315 Mich App 647, 654; 891 NW2d 505 (2016). Whether to pierce the corporate veil

depends on the specific facts of the each case, see Rymal v Baergen, 262 Mich App 274, 293-

294; 686 NW2d 241 (2004), and the proponent seeking to disregard the separate existence of the

entity bears the burden to prove facts that would justify doing so, see Green, 310 Mich App at

454 (discussing the elements that the complainant must establish to justify disregarding an

entity’s separate existence). The party asking the trial court to disregard the separate existence of

an entity may do so in his or her original complaint or may do so in a subsequent complaint after

a judgment has been entered against the entity. See Gallagher, 315 Mich App at 665-666. Thus,

a plaintiff must specifically ask the trial court to disregard the separate existence of an entity and

must allege facts that, if true, would justify doing so.

In a separate count (Count V) of their third amended complaint, the Hinderers alleged

that Snyder could be personally liable for the wrongs committed by Chelsea Builders because he

was Chelsea Builders’ officer at the time. They also alleged that the trial court could impose

personal liability on Snyder because Snyder used Chelsea Builders as a “mere instrumentality” to

commit frauds and wrongs on the Hinderers, which caused them to suffer an “unjust loss.” They

further alleged that he failed to maintain Chelsea Builders’ corporate form, mingled his personal

funds with the corporation’s funds, and made improper distributions that left Chelsea Builders

without assets to pay creditors. If found to be true, these allegations might justify the trial

court’s exercise of equitable power to disregard the separate existence of Chelsea Builders and

impose personal liability on Snyder for any judgment against Chelsea Builders. See Green, 310

Mich App at 454. Accordingly, because we have concluded that the trial court erred when it

dismissed some of the Hinderers’ claims against Chelsea Builders, we agree that their claim that

the trial court should disregard Chelsea Builders’ separate existence remains a viable remedy.

V. CLAIMS AGAINST EASON

A. STANDARD OF REVIEW

Finally, the Hinderers argue that the trial court erred when it dismissed their claims

against Eason, as stated under Count VI of their complaint, for failure to state a claim. This

Court reviews de novo a trial court’s decision on a motion for summary disposition. Barnard

Mfg, 285 Mich App at 369.

B. ANALYSIS

A trial court should dismiss a claim under MCR 2.116(C)(8) when the claim is so clearly

unenforceable as a matter of law that no factual development could possibly justify recovery.

See Maiden, 461 Mich at 119.

Under Count VI of their complaint, the Hinderers alleged generally that Eason

participated in the events at issue by signing a draft version of an agreement on Chelsea

Builders’ behalf and by applying for the building permit that Chelsea Builders used in the

improvement project at issue. They then conclude from these general allegations that Eason

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could be held personally liable for the “portion of the work not done and for the defects of the

work actually done for which he pulled the permit as well as for all code violations and

violations of law which occurred during the construction regarding the Plaintiff’s project.”

In Count VI, the Hinderers did not identify any viable common law or statutory cause of

action against Eason. Although they alleged that Eason’s signature appeared on a draft

agreement, the Hinderers also alleged that they did not accept the draft agreement. As such, they

failed to state a contract claim against Eason. See Huntington Nat’l Bank v Daniel J Aronoff

Living Trust, 305 Mich App 496, 508; 853 NW2d 481 (2014) (stating that an essential element of

a breach of contract claim involves proving that the parties actually entered into a binding

agreement).

Similarly, although the Hinderers alleged that Eason engaged in wrongful conduct by

applying for the building permit, they did not identify any common law or statutory cause of

action that could make Eason liable for any and all harms arising from the project associated

with the building permit. On appeal, the Hinderers suggest that Eason might be liable under

MCL 339.2405(1), which provides that a corporation or other entity may obtain a license through

a qualifying officer and states that the “qualifying officer is responsible for exercising the

supervision or control of the building or construction operations” by the entity. However, the

Hinderers did not make any allegations against Eason involving MCL 339.2405(1), and on

appeal they maintain that Eason was not in fact a qualifying officer. Consequently, as alleged

under Count VI, the Hinderers failed to state any claim against Eason that was cognizable under

Michigan law.

Although the trial court did not specifically discuss the grounds for dismissing the claim

against Eason, it had the authority to dismiss the claim against Eason on its own initiative

because it was evident from the pleadings that he was entitled to judgment as a matter of law

under MCR 2.116(C)(8). See MCR 2.116(I)(1) (providing that a trial court must “render

judgment without delay” when the “pleadings show that a party is entitled to judgment as a

matter of law”).

The trial court did not err when it dismissed Count VI of the Hinderers’ third amended

complaint.

VI. CONCLUSION

For the reasons stated, we reverse the trial court’s decision to dismiss the Hinderers’

breach of contract, warranty, and fraud claims as untimely. We also reverse the trial court’s

decision to dismiss the Hinderers’ claim under the builders’ trust fund act to the extent that they

alleged that Chelsea Builders and Snyder appropriated the funds for their own use. We affirm

the trial court’s decision to dismiss the Hinderers’ negligent construction claims as untimely.

We also reverse the trial court’s decision to grant summary disposition on the ground that

the Hinderers were guilty of laches; there is a question of fact as to whether laches apply, which

could not be resolved on a motion for summary disposition. We also reverse the trial court’s

determination that Chelsea Builders and Snyder were exempt from application of the MCPA.

The Hinderers’ may continue to demand to pierce the corporate veil to the extent that the

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Hinderers have viable remaining claims against Chelsea Builders. Finally, we affirm the trial

court’s decision to dismiss Count VI of the Hinderers’ complaint for failure to state a claim.

Affirmed in part, reversed in part, and remanded for further proceedings consistent with

this opinion. We do not retain jurisdiction. Because none of the parties prevailed in full, we

order that none may tax costs. See MCR 7.219(A).

/s/ Thomas C. Cameron

/s/ Jane M. Beckering

/s/ Amy Ronayne Krause

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