Summary
In Maids Int'l, 224 Mich App at 511-512, this Court considered whether the plaintiff's violation of Michigan's Franchise Investment Law (FIL), MCL 445.1501 et seq., rendered void and unenforceable certain franchise agreements entered into between the plaintiff and the defendants.
Summary of this case from Johnson v. QFD, Inc.Opinion
Docket No. 192586.
Submitted April 10, 1997, at Detroit.
Decided July 15, 1997, at 9:15 A.M. Leave to appeal sought.
Colombo Colombo (by Robert Y. Weller and Patrick J. Ennis), for the plaintiff.
Raymond Prokop, P.C. (by Stephen M. Ryan and Jeffrey J. Mayer), for the defendants.
Before: MCDONALD, P.J., and REILLY and O'CONNELL, JJ.
Plaintiff, The Maids International, Inc., is a Nebraska-based franchisor that sold franchises to defendants and brought this action to recover fees and royalties allegedly due under the franchise agreements between the parties. Both parties filed motions for summary disposition. The trial court granted defendants' motion, finding the franchise agreements to be unenforceable because they were illegal as violative of Michigan's Franchise Investment Law (FIL), MCL 445.1501 et seq.; MSA 19.854(1) et seq. We reverse and remand for further proceedings.
The parties entered into franchise agreements for two franchises in 1988. Defendants agreed to pay franchise and other fees to plaintiff, who was to provide a unique system relating to the establishment, development, and operation of household maintenance and cleaning services. In 1993, the Michigan Attorney General asserted plaintiff failed to comply with the FIL in offering and selling franchises in Michigan. Specifically the Attorney General alleged plaintiff failed to provide prospective franchisees a copy of disclosure documents, contrary to MCL 445.1508; MSA 19.854(8). Eventually the Attorney General and plaintiff entered into an "Assurance of Discontinuance" whereby plaintiff assured the Attorney General it would not sell franchises without complying with the FIL and that it would offer rescission to all franchisees to whom they had sold franchises.
Plaintiff brought the instant suit in December of 1993 alleging breach of the franchise agreements it had with defendants. The trial court denied plaintiff's motion for summary disposition, finding conflicting evidence existed regarding whether defendants breached the franchise agreements. However, the court granted defendants' motion. In granting the motion, the court relied on the Assurance of Discontinuance and ruled the document indicated the franchise agreements between the parties were in violation of the FIL and therefore contrary to public policy. For this reason, the court held the agreements were unenforceable and plaintiff could not sue for breach.
On appeal, plaintiff first argues the trial court erred in considering the Assurance of Discontinuance as an admission plaintiff violated the FIL. We find it unnecessary to address this claim because, even assuming the trial court's consideration of the document as an admission was improper, the record contains sufficient evidence to demonstrate plaintiff's violation of the statute. Instead, the determinative issue on appeal is whether the court properly concluded a violation of the FIL rendered the parties' franchise agreements void or unenforceable.
In support of the trial court's conclusion, defendant cites case law setting forth the principle that contracts founded on acts prohibited by a statute, or contracts in violation of public policy, are void. See, e.g., Mahoney v Lincoln Brick Co, 304 Mich. 694; 8 N.W.2d 883 (1943); Skutt v Grand Rapids, 275 Mich. 258; 266 N.W. 344 (1936); Jaenicke v Davidson, 290 Mich. 298; 287 N.W. 472 (1939); Peeples v Detroit (On Rehearing), 99 Mich. App. 285, 302; 297 N.W.2d 839 (1980). We have no disagreement with the longstanding validity of these principles. However, we disagree with the trial court's and defendants' application of these principles to the facts of this case.
This case involves a contract to enter into a franchise business and does not involve the enforcement of a contract that calls for the commission of an act that violates either a statute or public policy. Entering into a franchisee-franchisor relationship violates neither public policy nor any statute of which we are aware. Instead, the Legislature has recognized the validity of such business relationships by enacting the FIL. As stated by the Court in Skutt, supra at 265, "`[t]he public policy of the government is to be found in its statutes and when they have not directly spoken, then in the decisions of the courts and the constant practice of the government officials'" (citation omitted). Here the Legislature has directly spoken with regard to public policy and the existence of franchises in its enactment of the FIL. The statute sets forth the various requirements a franchisor must meet in order to sell a franchise in this state. The Legislature also set forth the appropriate penalties for violation of the various requirements. The requirement plaintiff violated in this case, the provision of a disclosure statement, provides as remedies the franchisor's liability for damages or rescission of the franchise agreement. MCL 445.1531(1); MSA 19.854(31)(1); see Two Men a Truck/Int'l, Inc v Two Men a Truck/Kalamazoo, Inc, 949 F. Supp. 500 (WD Mich, 1996); Dynamic Enterprises, Inc v Fitness World of Jackson, 32 B.R. 509 (Tenn, 1983). There is no support for the trial court's conclusion plaintiff's violation rendered the contract void and unenforceable. Defendants' attempt to use a general public policy argument must fail where the Legislature has clearly addressed the public policy of the matter at issue.
Summary disposition on the grounds the contract was void and unenforceable was improperly granted.
Reversed and remanded for further proceedings. We do not retain jurisdiction.