Court Opinion

ID: 2810062
Source: CourtListenerOpinion
Date Created: 2015-06-19 12:12:15.39241+00
Date Added: 2024-06-11T12:23:35.525192
License: Public Domain

STATE OF MICHIGAN

                           COURT OF APPEALS

JAIME PRANSKY,                                                     FOR PUBLICATION
                                                                   June 18, 2015
               Plaintiff-Appellant,                                9:05 a.m.

v                                                                  No. 319266; 319613
                                                                   Oakland Circuit Court
FALCON GROUP, INC.,                                                LC No. 2013-134611-CK

               Defendant-Appellee.

Before: WILDER, P.J., and OWENS and M. J. KELLY, JJ.

M. J. KELLY, J.

        In this dispute over the validity of a consulting agreement, plaintiff, Jaime Pransky,
appeals by right the trial court’s opinion and order dismissing her claims against defendant,
Falcon Group, Inc., under MCR 2.116(C)(8) and MCR 2.116(C)(10).1 She argues the trial court
erred when it determined that the consulting agreement did not require Falcon Group to provide
any services that would require it to be registered under Michigan’s Uniform Securities Act
(2002), MCL 451.2101 et seq. Contrary to the trial court’s determination, Pransky maintains, the
consulting agreement required Falcon Group to provide services, which could only be provided
by someone registered under the Securities Act; and, because Falcon Group was not registered
under the act, the agreement was illegal and could be rescinded. For similar reasons, she
contends the trial court erred when it determined that her remaining claims were invalid.
Pransky also argues that the trial court did not have the authority to order her to pay Falcon
Group’s attorney fees as damages under the agreement because Falcon Group did not file a
counterclaim for damages. For the reasons more fully explained below, we conclude the trial
court did not err when it dismissed Pransky’s claims against Falcon Group. However, we agree
that the trial court did not have the authority to award Falcon Group damages under the
consulting agreement because Falcon Group did not sue Pransky for breach of contract.

1
 Pransky first appealed the trial court’s order dismissing her claims and this Court assigned that
appeal Docket No. 319266. After the trial court entered an order requiring Pransky to pay
Falcon Group’s attorney fees, she appealed that order and this Court assigned that appeal Docket
No. 319613. This Court then consolidated the appeals. See Pransky v Falcon Group, Inc,
unpublished order of the Court of Appeals, entered January 7, 2014 (Docket Nos. 319266 and
319613).

                                               -1-
Accordingly, we affirm the trial court’s opinion and order dismissing Pransky’s claims, but
vacate the trial court’s order compelling her to pay Falcon Group’s attorney fees.

                                       I. BASIC FACTS

        Pransky averred that she intended to open and operate a health and wellness spa in her
home state of Vermont. She claimed that Falcon Group’s principal, David Maciejewski,
promised to find investors for her spa. She said Maciejewski introduced her to a potential
investor, who told her that he wanted to invest $20 million in a franchised version of her spa.
She felt pressured to sign a consulting agreement in order to obtain the financing.

        Pransky executed the consulting agreement with Falcon Group in August 2012. As part
of the agreement, Falcon Group represented that it was in the business of providing “non-legal
advice and consulting services to individuals and to business entities concerning, among other
matters: mergers and acquisitions, marketing techniques and ideas, business opportunities,
business operations, business management, financial issues and concerns, and business assets
and liabilities.” Falcon Group recited that it would provide consulting services to Pransky in an
effort to help her “build a publicly traded franchised company.” Although Falcon Group stated it
was in the business of providing advice and consultation, the agreement primarily involved
compensating Falcon Group for its efforts to obtain investments or financing for Pransky’s
business.

       As a preliminary matter, Pransky agreed to pay Falcon Group a $50,000 retainer, which
was not refundable. The first $20,000 was due upon signing the agreement and the remaining
$30,000 was due upon receipt of the first investment. Pransky apparently added a handwritten
provision that made the $30,000 payment contingent on the first investment being at least
$30,000. Pransky also agreed to pay Falcon Group a “Success Fee” if she was able to sell her
business through Falcon Group’s efforts under the agreement. She agreed to pay a fee equal to
10% of “any monies [Falcon Group] raises or causes to be raised by [Falcon Group] or through
[Falcon Group’s] connections . . . .” She similarly agreed to pay Falcon Group a fee equal to 3%
of any financing that Pransky might obtain through Falcon Group’s “efforts or connections,”
which included any “line of credit or mortgage through a bank or financial institution introduced
by [Falcon Group].” These fees were to be paid out of the escrowed funds at the closing of the
funding or financing. Finally, according to Pransky, she hand wrote a paragraph into the
agreement that specifically required Falcon Group to provide its consulting services in
connection with “identifying and procuring investors and financing” for Pransky’s business.

        In April 2013, Pransky alleged she notified Falcon Group that she discovered that it was
not registered as a broker-dealer under the Securities Act and, for that reason, believed it could
not legally perform the services required by the consulting agreement. Pransky informed Falcon
Group that she was rescinding the consulting agreement and demanded the return of her $20,000
retainer.

        In June 2013, Pransky sued Falcon Group to recover the $20,000 retainer. She alleged
that Falcon Group acted as a “finder” under the Securities Act and, as such, had to be registered
as a “broker-dealer.” Because it was not registered under the act, the consulting agreement was
illegal and void. Accordingly, she asked the trial court to rescind the agreement and order

                                               -2-
Falcon Group to return her $20,000 retainer. Pransky also alleged that Falcon Group’s failure to
disclose that it was not registered as a broker-dealer, as required by the Securities Act, amounted
to silent fraud or misrepresentation and a breach of the Securities Act. Finally, she alleged that
Falcon Group’s refusal to return the $20,000 retainer that it took under the illegal agreement
amounted to conversion.

        In October 2013, Falcon Group moved for summary disposition under MCR 2.116(C)(8)
and (C)(10). Falcon Group stated that it was a business intermediary and that Pransky hired it to
provide advice and consultation “to get her to the point where she, as an officer or manager of an
entity (i.e. an ‘issuer’ under securities jargon) would be in a position to sell her own securities.”
It also asserted that it was undisputed that it provided Pransky with valuable advice on the
development of her business, but she refused to follow the advice. It then argued that each of her
claims must be dismissed.

        Falcon Group argued that the consulting agreement did not involve any services for
which it had to be registered under the Securities Act. It stated that the evidence showed that
Pransky did not own a business entity that had or could issue securities and, therefore, there were
no securities that Falcon Group could sell on Pransky’s behalf as a broker-dealer. Falcon Group
further argued that, even if the “success fee” provision of the consulting agreement violated the
Securities Act, the severability clause would preserve the remainder of the agreement. Because
the only provisions which might arguably be invalid under the Securities Act could be severed,
and Pransky did not allege that Falcon Group failed to provide her with consulting and advising
services, Falcon Group argued that the trial court should dismiss Pransky’s claims under MCR
2.116(C)(8).

        Pransky argued in response to Falcon Group’s motion that she was entitled to summary
disposition under MCR 2.116(I)(2) because the consulting agreement on its face demonstrated
that Falcon Group had to be registered under the Securities Act in order to provide the services
identified in the agreement. Pransky notes in particular that the agreement included
compensation for “monies” that Falcon Group “raises or causes to be raised” or raised through
“its connections,” which, she maintained, involved performing as a broker-dealer, agent, or
investment advisor under the Securities Act. She also argued that Falcon Group agreed to
connect her with investors, which made it a finder under the Securities Act. Because finders
must be registered as broker-dealers and it was undisputed that Falcon Group was not registered
as a broker-dealer, she maintained that the consulting agreement was void as against public
policy. Because the agreement was void in its entirety, the severability clause could not save the
agreement and her remaining claims also remained viable.

        The trial court held a hearing on Falcon Group’s motion in November 2013. The trial
court noted that Pransky’s claims were each premised on the belief that Falcon Group had to be
registered under the Securities Act in order to perform the services required by the consulting
agreement. The trial court stated that the agreement unambiguously required Falcon Group to
perform services that fell within the definition of a finder under the Securities Act, but
determined that the Securities Act did not require finders to be registered. Moreover, because
the consulting agreement did not require Falcon Group to “have any meaningful role in effecting
the actual transaction,” the court determined that the agreement did not require Falcon Group to
act as an agent or broker-dealer. Finally, the agreement did not require Falcon Group to advise

                                                -3-
anyone to invest, purchase, or sell a security. The consulting agreement, the trial court
concluded, did not on its face require Falcon Group to engage in any activity for which it would
have to be registered under the Securities Act. Having determined that Falcon Group did not
have to be registered under the Securities Act in order to perform the services required under the
act, the trial court concluded that Pransky’s claims premised on Falcon Group’s failure to
register necessarily failed. For that reason, it granted Falcon Group’s motion for summary
disposition.

       In November 2013, Falcon Group moved for its costs and attorney fees, as permitted
under the consulting agreement. Later that same month, the trial court granted the motion and
ordered Pransky to pay more than $6,800 in attorney fees to Falcon Group.

       Pransky now appeals in this Court.

                                II. SUMMARY DISPOSITION

                                A. STANDARDS OF REVIEW

        On appeal, Pransky argues the trial court erred when it determined that the consulting
agreement did not require Falcon Group to perform any service that would require it to be
registered under the Securities Act. For that reason, she maintains, the trial court erred when it
granted summary disposition in favor of Falcon Group.2 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). This Court also
reviews de novo whether the trial court “correctly selected, interpreted, and applied the relevant
statutes.” Kincaid v Cardwell, 300 Mich. App. 513, 522; 834 NW2d 122 (2013). Finally, this
Court reviews de novo the trial court’s construction of a contractual agreement. Rory v
Continental Ins Co, 473 Mich. 457, 464; 703 NW2d 23 (2005).

                                  B. THE SECURITIES ACT

        Michigan’s Legislature enacted the Securities Act to protect the public from fraud and
deception in the issuance, sale, and exchange of securities. See Fred J. Schwaemmle Const Co v
Dep’t of Commerce, 420 Mich. 66, 77; 360 NW2d 141 (1984) (examining the prior version of the
Securities Act).3 It accomplished this in significant part by limiting the types of securities that
may be offered and sold and by prohibiting certain practices involved with the offer and sale of
securities. See MCL 451.2301 (prohibiting persons from offering or selling a security in
Michigan unless the security meets certain criteria); MCL 451.2501 (prohibiting persons from

2
  Because the trial court considered evidence outside the pleadings—the consulting agreement—
in reaching its decision, we review the decision to grant summary disposition as having been
made under MCR 2.116(C)(10). See Kefgen v Davidson, 241 Mich. App. 611, 616; 617 NW2d
351 (2000).
3
  The prior act was the uniform securities act, see MCL 451.816, and was patterned on the
uniform securities act of 1956. See Uniform Securities Act (1956) (ULA).

                                                -4-
directly or indirectly engaging in schemes or practices to defraud or making misrepresentations
in connection with the offer, sale, or purchase of a security). However, it also chose to protect
the public by regulating the persons who are involved with the offer and sale of securities. See
MCL 451.2401 to MCL 451.2413. In particular, the Legislature prohibited persons from
transacting business in this state as a broker-dealer, agent, or investment advisor unless he or she
is registered as a broker-dealer, agent, or investment advisor under the act.4 See MCL
451.2401(1); MCL 451.2402(1); MCL 451.2403(1).

                            1. BROKER-DEALERS AND FINDERS

        On appeal, Pransky maintains that her consulting agreement with Falcon Group required
it to perform services that fell within the definition of broker-dealer, agent, and investment
advisor. She further contends that, although the trial court did not err when it determined that the
agreement required Falcon Group to act as a finder, it erred when it stated that finders were not
required to register under the Securities Act. In her view, the Securities Act specifically
contemplates that finders must register as broker-dealers.

        Under the Securities Act, a broker-dealer is defined to be “a person engaged in the
business of effecting transactions in securities for the account of others or for the person’s own
account.” MCL 451.2102(d).5 By defining a broker-dealer to be a person “engaged in the
business of effecting transactions in securities,” id., the Legislature limited the term to those
persons whose business operations regularly include transactions in securities. See Heligman v
Otto, 161 Mich. App. 735, 739, 741-742; 411 NW2d 844 (1987) (interpreting the definition of
broker-dealer under the prior act, see MCL 451.801(d), which defined a broker-dealer to be “any
person engaged in the business of effecting transactions in securities for the account of others or
for his or her own account,” and concluding that the isolated transaction at issue did not
constitute being engaged in the business of effecting transactions). Moreover, it is not enough
that the person’s business involves transactions in securities in any way, the person’s business
must be one “effecting” transactions in securities. MCL 451.2102(d). The verb “effect”
suggests something stronger than tangential involvement in the transfer of securities; rather, the
person’s business must involve bringing about or accomplishing the transactions in securities.
See The Oxford English Dictionary (2d ed, 1991) (defining the verb to mean: “To bring about
(an event, a result); to accomplish (an intention, a desire).”). As one foreign court has

4
   The Securities Act also regulates investment adviser representatives, federal covered
investment advisers, and Michigan investment markets, but those categories are not at issue on
appeal. See MCL 451.2404(1); MCL 451.2405(1); MCL 451.2453.
5
  The definition of broker-dealer corresponds to the definition of “broker” under federal
securities law except that under federal law a broker is someone who acts for the account of
others. See 15 USC 78c(a)(4)(A) (defining broker to mean “any person engaged in the business
of effecting transactions in securities for the account of other”). Federal law defines the term
dealer separately as someone who buys and sells securities for his or her own account. 15 USC
78c(a)(5)(A).

                                                -5-
explained,6 a broker-dealer is a person who participates in the transaction by effectuating the
trade—that is, by performing any function in connection with processing the transaction. See
Overstock.com, Inc v Goldman Sachs & Co, 231 Cal App 4th 513, 530-533; 180 Cal Rptr 3d 269
(2014) (examining the meaning of the terms “effect” and “effecting” as used in California’s
securities laws, and specifically referring to the definition of broker-dealer, which is the same as
this state’s definition); see also Legacy Resources, Inc v Liberty Pioneer Energy Source, Inc, 322
P3d 683, 688-690 (Utah, 2013) (construing the definition of broker under Utah’s securities laws
and holding that “one who is engaged in the business of ‘effecting’ a securities transaction is one
who is involved in ‘bring[ing it] about; mak[ing it] happen, caus[ing] or accomplish[ing it].’”)
(citation omitted); Indus Partners, LLC v Intelligroup, Inc, 77 Mass App 793, 796-798; 934
NE2d 264 (2010) (stating that a person effects transactions in securities when he or she
participates in the transaction at key points in the chain of distribution); In re Slatkin, 525 F3d
805, 817 (CA 9, 2008) (examining federal securities law and stating that the operative term,
“effecting”, means to bring about or make happen). With regard to persons who find investors
for securities, some courts have held that whether a person actively—as opposed to passively—
solicits investors for securities is a factor to consider when determining whether that person’s
activities fall within the definition of a broker-dealer. See Legacy Resources, 322 P3d at 688.
Other courts have held that the activities of a finder fall under the definition of broker-dealer.
See Black Diamond Fund, LLLP v Joseph, 211 P3d 727, 734 (Colo App, 2009) (“Individuals
who solicit investors by phone and in person, and who distribute documents and prepare and
distribute sales circulars in the hope that potential investors will deposit money in the account,
are seeking to effect securities transactions.”). But this Court must be careful when considering
whether the definition of broker-dealer necessarily includes the activities of finders because,
unlike other jurisdictions, our Legislature has specifically addressed the activities of finders
within our Securities Act.7

        The Legislature defined a finder as a “person who, for consideration, participates in the
offer to sell, sale, or purchase of securities by locating, introducing, or referring potential
purchasers or sellers.” MCL 451.2102(i). One might conclude that, by using the term
“participating” rather than “effecting,” the Legislature intended to differentiate between
participating in the offer, sale, or purchase and “effecting” a transaction in securities—that is, the
Legislature may have intended to exclude participation in that way from the definition applicable

6
  The Securities Act is a modified version of the Uniform Securities Act (2002). See 2008 PA
551; Uniform Securities Act (2002) (ULA). When interpreting a uniform act, this Court may
look for guidance in the caselaw of other jurisdictions where the uniform act has been adopted.
Heritage Resources, Inc v Caterpillar Fin Serv Corp, 284 Mich. App. 617, 632; 774 NW2d 332
(2009).
7
  The uniform version of the act does not include a definition for finder. See Uniform Securities
Act (2002) (ULA), article 1. It appears that the provisions for finders were drawn from the prior
version of the act. See, e.g., MCL 451.502(c); MCL 451.801(c); MCL 451.801(d)(5); MCL
451.801(i); MCL 451.801(l). Although the Legislature modeled the prior version of the act on
the uniform securities act of 1956, the uniform law did not include provisions for finders. See
Securities Act (1956) (ULA), § 401.

                                                 -6-
to broker-dealers. It is notable that the Legislature did not define broker-dealer to specifically
include finders. See MCL 451.2102(d).8 If the Legislature understood participating in the offer
to sell, sale, or purchase of a security by locating, introducing, or referring potential purchasers
and sellers as activities that amounted to “effecting transactions in securities,” it would not have
provided a separate definition for persons who engage in such activities; there would be no need
for a separate definition because those persons would fall under the definition of broker-dealer.
Id. Thus, by providing the term “finder” with its own definition and failing to include finders
within the definition of broker-dealer, the Legislature expressed its intent to exclude the activities
of finders from the activities that fall under the definition of broker-dealer. This is not to say that
a person who acts as a finder might not also meet the definition of a broker-dealer, but, in order
to respect the Legislature’s decision to separately define finder as a category distinct from
broker-dealer, we conclude that a person who meets the definition of a finder does not constitute
a broker-dealer unless his or her participation goes beyond that provided under MCL
451.2102(i). See Johnson v Recca, 492 Mich. 169, 177; 821 NW2d 520 (2012) (stating that
courts must give effect to every word, phrase, and clause in a statute and avoid an interpretation
that would render any part of the statute surplusage or nugatory). And, because the Legislature
did not enact any statutory provision that requires finders to register as finders, we further
conclude that the Legislature intended to exempt persons who limit their activities to those
described under MCL 451.2102(i) from the registration requirements. Cf. MCL 451.2406(1)
(providing a method for persons to register as a broker-dealer, agent, or investment advisor, but
not providing any method for a person to register as a finder).

        This construction is also consistent with the Legislature’s overall scheme for regulating
transactions in securities. The Legislature specifically regulated the practices of a broker-dealer
or investment advisor who also provides services as a finder. See MCL 451.2413 (regulating
acts by broker-dealers who act as finders); MCL 451.2502(2) (stating additional regulations that
apply to investment advisors who act as a finder).9 By imposing additional requirements on a
broker-dealer or investment advisor who acts as a finder, the Legislature recognized that there
was a distinction between the services provided by a broker-dealer or investment advisor and
those provided by a finder. The broker-dealer plays a more active role in effecting the
transaction than the finder, who might merely locate and introduce the sellers and buyers, but
have no further part in the transfer of securities. This additional involvement might give rise to a
conflict in interest between the broker-dealer’s activities as a broker-dealer and his or her
activities as a finder. Similarly, the impartiality of an investment advisor’s advice might be
compromised by the desire to obtain compensation for his or her finding activities. Indeed, the
extra regulations for broker dealers address the potential for self-dealing that arises when a
broker-dealer both solicits buyers and effects the transfer. See MCL 451.2413(a) (prohibiting a
broker-dealer who acts as a finder from taking possession of the funds or securities for any

8
  Under the prior act, the Legislature specifically defined the term “investment advisor” to
include finders. See MCL 451.801(l). Thus, finders had to register as investment advisors. See
MCL 451.601(c).
9
  These sections do not appear in the uniform version. See Uniform Securities Act (2002)
(ULA), article 4.

                                                 -7-
transaction in which the broker-dealer received payment as a finder); MCL 451.2413(b) and (e)
(imposing disclosure requirements on a broker-dealer who also acts as a finder); MCL
451.2413(d) (requiring broker-dealers who act as finders to obtain certain types of information
about the securities before participating in the offer, purchase, or sale of the securities); MCL
451.2413(f) (prohibiting broker-dealers who act as finders from locating, introducing, or
referring persons that the broker-dealer knows or should reasonably know are not suitable
investors). The extra regulations for investment advisors who act as finders are substantially
similar. See MCL 451.2502(2)(a) to (f).

        On the surface, it seems possible that the Legislature intended the activities of a finder to
invariably meet the definition of a broker-dealer and merely provided a separate definition for
the term “finder” in order to provide a convenient means to impose additional requirements on
broker-dealers or investment advisors whose activities also involve serving as a finder. But this
understanding leads to the incongruous result that persons who strictly confine their activities to
locating, introducing, and referring purchasers and sellers in conformity with MCL
451.2102(i)—that is, who act as finders and not as a broker-dealers or investment advisors—
would nevertheless be subject to all the regulations that apply to a broker-dealer in addition to
the special requirements applicable to a broker-dealer who acts as a finder. In other words, every
finder would automatically constitute a broker-dealer and finder, but not every broker-dealer
would constitute a finder. Under this construction, we would have to conclude that the
Legislature intended to subject persons who act strictly as finders to more comprehensive
regulation than it applied to persons who act strictly as broker-dealers.10

        This construction also leads to additional difficulties. If the definition of broker-dealer
necessarily includes finders, then any person acting as a finder would have to register as broker-
dealer. See MCL 451.2401(1) (prohibiting persons from transacting business as broker-dealer
without being registered as a broker-dealer). Every finder who complied with the law would
therefore be a “finder registered as a broker-dealer”; and, for that reason, there could never be an
investment advisor who acts as a finder. See MCL 451.2102a(e)(ix) (excluding a “finder
registered as a broker-dealer” from the definition of an investment advisor). Hence, the extra
regulations imposed on investment advisors who act as finders would have no practical effect
under this construction. Pransky in effect asks this Court to construe the definition of broker-
dealer to always include finders such that a finder must register as a broker-dealer and fully
comply with all the applicable regulations, notwithstanding that the Legislature elected to
separately define finder, chose not to include finder within the definition of broker-dealer (or
agent or investment advisor), and chose not to require finders to register. Because this Court
must avoid a construction that renders any part of the statute surplusage or nugatory, we cannot
construe the statute in this way. See Recca, 492 Mich. at 177.

10
  It should also be recalled that nothing precludes a person acting as a finder under Michigan
law from being deemed a broker-dealer under another state’s law or under federal law.

                                                -8-
        It is important to recall that, by defining a finder within the act as a person who
participates in the offer to sell, sale, or purchase of securities, the Legislature subjected finders to
the general prohibition against the use of schemes to defraud, misstatements, and fraudulent or
deceitful practices made “in connection with the offer, sale, or purchase of a security.” MCL
451.2501. Accordingly, even though the Legislature did not require finders to specifically
register as finders under the Securities Act, it still subjected finders to regulation under the act.
See also MCL 451.2601 to MCL 451.2612. Of course, if a person’s activities go beyond
participating in an offer to sell or sale of securities by locating, introducing, or referring potential
purchasers and sellers of securities, MCL 451.2102(i), that person might fall within the definition
of a finder in addition to that of a broker-dealer, agent, or investment advisor, or any
combination of those categories. In that case, the person would be subject to the regulations and
registration requirements imposed on broker-dealers, agents, or investment advisors, as the case
may be.

        Pransky nevertheless argues that the Legislature’s decision to specifically exclude finders
who are registered as broker-dealers from the definitions of agent and investment advisor
indicates that the Legislature intended to require finders to register as broker-dealers, even
though it chose not to specifically provide such a requirement in the act. Normally, this Court
must assume that the Legislature acted with due deliberation when it provided a separate
definition for finder and chose not to include finders within the definition of a broker-dealer.
Similarly, it must generally conclude that the Legislature elected to forego a statutory provision
requiring finders to register as broker-dealers because it did not intend to require finders to
register as broker-dealers. See Recca, 492 Mich. at 177, 187. But even setting the canons of
construction aside, there is nothing within the exceptions provided under the definition of agent
or investor advisor that is inconsistent with treating finders as a distinct category from that of
broker-dealers whose members are exempt from registration.

                         2. AGENTS AND INVESTMENT ADVISORS

        The Legislature defined an agent to be “an individual other than a broker-dealer who
represents a broker-dealer in effecting or attempting to effect purchases or sales of securities or
represents an issuer in effecting or attempting to effect purchases or sales of the issuer’s
securities.” MCL 451.2102(b). The Legislature, however, excluded from the definition of agent
those persons who represent broker-dealers or issuers if the person was acting solely as a finder
and registered as a broker-dealer: “The term [agent] does not include a person acting solely as a
finder and registered as a broker-dealer under this act . . . .”11 Id.

        Pransky argues that this exclusion demonstrates that the Legislature intended to require
finders to register as broker-dealers. But, contrary to Pransky’s suggestion, the fact that the
Legislature defined an agent to be a person “other than a broker-dealer” and then provided an
exception to the definition of an agent for finders who are registered as “broker-dealers” can best
be understood as a recognition by the Legislature that some finders are not broker-dealers and

11
  This exclusion does not appear in the uniform version. See Uniform Securities Act (2002)
(ULA), § 102(2).

                                                  -9-
that a finder need not be registered as a broker-dealer. Because an agent is broadly defined to
include a person who “represents” a broker-dealer or issuer in either “effecting” or “attempting
to effect” a transaction in securities, MCL 451.2102(b), a finder who serves as a representative
for a broker-dealer or issuer might easily fall within the definition of an agent by going beyond
the activities stated under MCL 451.2102(i):12

               The activities of a finder easily can fall within the agent definition so as to
       require further registration. If a finder becomes an advocate and seeks to induce a
       person to invest, the exemption for activities as a finder is lost. A finder operating
       under the Act may not actively participate in the offer and sale but rather may
       introduce the individual investor to the issuer or its representative. Counsel to
       issuers, broker-dealers, and finders should exercise caution in reviewing and
       directing the finders’ activities. Since the statutory distinction between finders
       and agents is not always clear, an active participant in the transaction will likely
       be classified an unregistered agent and endanger an exemption from registration.
       [Moscow & Makens, eds, Michigan Securities Reg (2d ed, 1994), § 4.09, p 116,
       discussing the prior securities act, which contained substantially similar
       definitions for finder and agent, see MCL 451.801(c) and MCL 451.801(i).]13

        By contrast, a person acting as an independent finder, rather than as the representative of
a broker-dealer or issuer, will not fall within the definition of agent and need not be registered as
either an agent or broker-dealer. Understood in this context, the exclusion from the definition for
persons acting solely as finders, even if the finder is the representative of a broker-dealer or
issuer, can best be construed as a means to avoid duplicate registration—that is, to prevent a
finder whose activities rise to the level of an agent and broker-dealer from having to register as
both an agent and a broker-dealer. This same logic applies to the exclusion provided for the
definition of an investment advisor.

12
  By limiting the definition of an agent to those persons who represent a broker-dealer or issuer,
the Legislature limited the term to those situations where the agent purports to act under
authority of the broker-dealer or issuer. But a person can locate and refer investors without
purporting to act under another’s authority. See Ferar v Hall, 330 Mich. 214, 222; 47 NW2d 79
(1951) (construing a prior version of the securities law and stating that an agent is one who is
actually authorized to act for his or her principal, or holds himself or herself out as having such
authority). This is consistent with the Legislature’s prohibition on agents representing more than
one broker-dealer or issuer at a single time. See MCL 451.2402(5). If the term “represents”
were broadly construed to apply to all acts to locate and introduce interested parties at someone’s
request, a finder could never work for more than one broker-dealer or issuer.
13
   Pransky also relies on a June 2009 article in the Michigan Bar Journal concerning the newly
enacted Securities Act, wherein these same two editors along with another co-author opined that
a finder would have to register as a broker-dealer under the new act. But the authors did not
offer any analysis or cite any authority to support their opinion. See Moscow, Makens, and
Hansen, New Michigan Securities Law, 88 Mich B J 38, 40 (June 2009). Accordingly, this
article provides no useful insight into the proper construction of the Securities Act.

                                                -10-
        The Legislature defined an investment advisor to be a “person that, for compensation,
engages in the business of advising others . . . as to the value of securities or the advisability of
investing in, purchasing, or selling securities or that, for compensation and as part of a regular
business, issues or promulgates analyses or reports concerning securities.” MCL 451.2102a(e).
The term excludes a “finder registered as a broker-dealer under this act.” MCL 451.2102a(e)(ix).
Similar to the situation with agents, a finder who goes beyond acting as a mere finder, as
described under MCL 451.2102(i), may fall within the definition of an investment advisor or
broker-dealer, or both and, as such, might have to register as both an investment advisor and a
broker-dealer if there were no exceptions. The Legislature may have excluded a finder who is
registered as a broker-dealer in order to avoid the duplicate registrations. In that way, a finder
who registers as a broker-dealer will automatically be excluded from the definitions of both an
agent and an investment advisor even if his or her activities would otherwise bring the finder
within the definition of agent or investment advisor.

        This construction has the added benefit of giving effect to the extra regulations for
investment advisors who act as finders. With this understanding, a person who qualifies as an
investment advisor would be able to provide services as a finder without having to be registered
as a broker-dealer, which he or she would have to do if finders invariably fell within the
definition of a broker-dealer. However, the investment advisor who elects to provide services as
a finder would then be subject to the additional regulations provided under MCL 451.2502(2).

        On appeal, Pransky asks this Court to infer that the Legislature intended to require finders
to register as broker-dealers—even if their activities do not fall within the definition of a broker-
dealer—on the basis of these exclusions and in the absence of a direct statutory requirement.
But, as explained, the exclusions can be understood as a means to avoid duplicate registration for
persons whose activities as a finder also include activities that cause them to fall within the
definition of agent, investment advisor, or broker-dealer and, for that reason, these exclusions do
not give rise to an inference that the Legislature intended to require finders to register as broker-
dealers. There is no reasonable interpretation of this statutory scheme that leads to the
conclusion that the Legislature intended to require finders to register as broker-dealers in every
case. In order to reach Pransky’s desired result, we would have to assume that the Legislature
intended to include finders within the definition of broker-dealer or intended to require finders to
register as broker-dealers, but forgot to include either provision in the statutory scheme. We
would then have to correct the Legislature’s error by reading Pransky’s preferred requirement
into the statute, which we cannot do. See Recca, 492 Mich. at 187 (stating that courts are not
permitted to supply a provision in a statutory scheme on the assumption that the Legislature
unintentionally omitted it); Book-Gilbert v Greenleaf, 302 Mich. App. 538, 547; 840 NW2d 743
(2013) (stating that this Court cannot read into a statute what the Legislature did not include).

        Finally, Pransky also relies on agency regulations which require finders to register. This
Court normally defers to an agency’s interpretation of an act that it was charged to implement
when the act is silent or ambiguous. Dep’t of Labor and Economic Growth, Unemployment
Insurance Agency v Dykstra, 283 Mich. App. 212, 223-224; 771 NW2d 423 (2009). It is not
evident that the Securities Act contains any ambiguity and the Legislature plainly made
provision for the registration of persons under the act and chose not to include finders in the
registration requirement. See MCL 451.2406(1). In any event, the current regulations were
promulgated under the authority of the prior version of the Securities Act, which has since been

                                                -11-
repealed, see 2008 PA 551, and the specific regulation that Pransky relies on, Mich Admin Code
R 451.803(7), has also been rescinded (although it was still in force during the events at issue).
See 2014 Mich Reg 15, p 128, 137. Therefore, we conclude that the regulations are not entitled
to any deference and, indeed, provide no guidance whatsoever.

        Examining the scheme as a whole and construing it according to its plain language, we
conclude that the Legislature intended to differentiate finders from broker-dealers, agents, and
investment advisors. Because the Legislature chose not to include finders within the definition
of a broker-dealer (or any other category), and chose not to specifically require finders to
register, a finder will not have to register as long as the finder constrains his or her activities to
those stated under MCL 451.2102(i). A person serving as a finder whose activities go beyond
those described under MCL 451.2102(i), however, must register as an agent, broker-dealer, or
investment advisor, as the case may be. Further, the finder may avoid having to register under
multiple categories by registering as a broker-dealer.

                                    C. APPLYING THE LAW

        In her complaint, Pransky alleged four claims: rescission, misrepresentation/silent fraud,
breach of the Securities Act, and conversion. She alleged that she was entitled to rescind the
consulting agreement because the agreement required Falcon Group to provide services that it
was illegal for it to provide without the requisite registration. As this Court has explained, a
party may rescind an agreement made in violation of the Securities Act. Michelson v Voison,
254 Mich. App. 691, 697; 658 NW2d 188 (2003). If rescinded, the agreement is abrogated from
the beginning and none of its provisions are applicable. Id. As for her misrepresentation and
statutory claims, Pransky alleged that Falcon Group had a duty to disclose that it was illegal for it
to perform the services required under the consulting agreement because it was not registered
under the Securities Act and failed to inform her of that fact and breached the Securities Act by
inducing her to enter into an illegal agreement without informing her that it was unregistered.
Finally, she alleged that, because the consulting agreement was illegal, Falcon Group’s exercise
of dominion over her retainer was wrongful and amounted to a conversion.

        As can be seen, none of Pransky’s claims depends on Falcon Group’s actions after
entering into the consulting agreement.14 Rather, each of her claims involves the legality of the
consulting agreement. The legality of the consulting agreement, in turn, depends on whether
Falcon Group could perform the services required under the agreement without being registered
as a finder, broker-dealer, agent, or investment advisor. Because it is undisputed that Falcon
Group is not registered under the Securities Act in any capacity and Pransky’s claims do not
depend on acts that it took after entering into the agreement, resolution of this case depends
solely on the nature of the services that Falcon Group agreed to perform under the consulting
agreement. If it could in theory perform the required services without being registered under the

14
  We offer no opinion as to whether Falcon Group might have violated the Securities Act during
the performance of its obligations.

                                                -12-
Securities Act, Pransky’s claims must fail.15 If, however, Falcon Group had to be registered
under the Securities Act in order to provide any of the services required under the agreement, the
agreement would be illegal and Pransky’s claims would remain viable.

         In the first eight paragraphs of the consulting agreement, the parties agreed to various
recitations, which they characterized as “background” to the main provisions. Falcon Group, for
example, recited that it was “engaged in the business of providing non-legal advice and
consulting services to individuals and to business entities concerning, among other matters:
mergers and acquisitions, marketing techniques and ideas, business opportunities, business
operations, business management, financial issues and concerns, and business assets and
liabilities.” The parties further recited that Pransky desired to retain Falcon Group’s services
because she had a “need for [Falcon Group’s] advice and consulting services.” Finally, in this
background section, Pransky agreed that she was not retaining Falcon Group to provide services
as a lawyer, accountant, or real estate broker.

        None of the first eight paragraphs required Falcon Group to provide illegal services.
Falcon Group’s statement of the services that it provides did not require it to perform any of
those services and, even if it had, none of the services necessarily required it to provide advice or
perform services involving securities. One can provide general advice concerning mergers and
acquisitions, marketing, business opportunities and operations, business management, financing,
and assets and liabilities without becoming involved in an activity regulated under the Securities
Act.

       In paragraphs ten through twenty-four, the parties also agreed to several general
provisions concerning the consulting agreement, which did not directly involve the provision of
services. Because these paragraphs did not require Falcon Group to perform a particular service,
they do not implicate the Securities Act. Pransky nevertheless relies on paragraph fifteen as
evidence that Falcon Group agreed to provide services that require registration under that act.
That paragraph requires Pransky to submit or direct “all communications regarding the
financing, acquisition of, sale to and/or any transaction with or concerning the Business and all
discussions or questions about the Business” to Falcon Group, rather than third-parties. A plain
reading of this paragraph shows that it does not require Falcon Group to do anything; it requires
Pransky to submit the identified business communications to Falcon Group, presumably so it can
provide her with advice or consultation on the communicated matter. Therefore, this paragraph
does not implicate the Securities Act. The only paragraph in the consulting agreement that
implicates the Securities Act is paragraph nine.

15
  The better course of action would be for finders acting pursuant to similar contracts to protect
themselves by registering, at the very least, as broker-dealers; the line between a finder’s
activities and that of a broker-dealer, agent, or investment advisor is a thin one and persons
acting under such contracts without being registered are inviting litigation.

                                                -13-
        The majority of paragraph nine addressed the compensation that Pransky would pay to
Falcon Group for its services. Pransky first agreed to pay a “non-refundable Retainer of
$50,000.” She agreed to pay $20,000 on signing and the remainder with the “first investment
money received.” She also agreed to pay Falcon Group “10% of any monies” that Falcon Group
“raises or causes to be raised” by Falcon Group “or through its connections.” Pransky agreed to
pay Falcon Group “3% of the financing obtained” “as a result of [Falcon Group’s] efforts or
connections,” including financing from “a bank or financial institution introduced by [Falcon
Group].” Finally, Pransky added a handwritten provision, which she labelled “9.e” to the section
on compensation. That provision required Falcon Group to “provide non-legal advice and
consulting services to [Pransky] in connection with identifying and procuring investors and
financing for the Business.”

        None of these provisions required Falcon Group to advise Pransky or anyone else on the
“value of securities or the advisability of investing in, purchasing, or selling securities” or
otherwise serve as a financial planner. MCL 451.2102a(e). Similarly, the parties specifically
agreed that they did not intend to “create or establish an agency . . . relationship” with the
agreement. And there is nothing in the agreement that suggests that Falcon Group will serve as a
representative for a broker-dealer. Because the parties agreed that Falcon Group was not
authorized to serve as Pransky’s agent, even if Pransky were an “issuer” for purposes of the
Securities Act, see MCL 451.2102a(g), the agreement did not require Falcon Group to represent
her “in effecting or attempting to effect purchases or sales of securities.” MCL 451.2102(b).
Therefore, Falcon Group could perform these services consistent with the agreement without
necessarily falling within the definition of an investment advisor or agent.16

        These provisions do unambiguously provide that Falcon Group would not receive any
compensation beyond the retainer unless it finds investors or financing for Pransky. When read
together and in light of Falcon Group’s agreement to provide its service “in connection with
identifying and procuring investors and financing”, it is evident that Falcon Group agreed to act
as a finder as that term is defined under MCL 451.2102(i). However, the provisions do not
require Falcon Group to provide services beyond serving as a finder.

        As we have already explained, the Legislature intended to differentiate finders from
agents, investment advisors, and broker-dealers, and intended to exempt persons who act solely
as finders from registration. Accordingly, because Falcon Group could perform under the
consulting agreement as a finder without having to be registered, the consulting agreement was
not on its face illegal under the Securities Act. The trial court did not err when it determined that
Falcon Group could perform the consulting agreement without having to be registered under the
Securities Act. Because each of Pransky’s claims were premised on her belief that Falcon Group

16
  Of course, it remains possible that Falcon Group’s actual performance of the agreement might
involve activities that fall within these definitions, but Falcon Group’s violation of the Securities
Act while performing under the agreement does not render the agreement illegal on its face.
Because Pransky’s claims all involve the facially illegality of the agreement, her claims must be
evaluated on the basis of the actual requirements of the agreement.

                                                -14-
had to be registered under the act in order to perform the consulting agreement, the trial court
also did not err when it concluded that those claims were not supported by the evidence and
dismissed them under MCR 2.116(C)(10).

                                     III. ATTORNEY FEES

                                 A. STANDARDS OF REVIEW

        Pransky next argues that the trial court erred when it amended the judgment in favor of
Falcon Group to award Falcon Group its attorney fees. Specifically, she maintains that an award
of attorney fees pursuant to a contractual provision constitutes damages, which must be asserted
in a claim for breach of contract. Because Falcon Group did not assert a counterclaim, the trial
court lacked the authority to award attorney fees under the agreement and any future claim is
now barred by res judicata. She also argues that Falcon Group was not entitled to the award
because the paragraph at issue only permits recovery if Falcon Group has to retain an attorney to
“enforce” a “collection action.” Because it hired its attorney to defend against Pransky’s claims
rather than to bring a collection action, she argues, Falcon Group did not establish its right to
fees under the agreement.

       This Court reviews de novo whether the trial court properly interpreted and applied the
relevant statutes and court rules. Brecht v Hendry, 297 Mich. App. 732, 736; 825 NW2d 110
(2012). This Court also reviews de novo the proper interpretation and application of a
contractual agreement. Rory, 473 Mich. at 464.

                                         B. ANALYSIS

        Michigan courts follow the “American Rule” with respect to the payment of attorney fees
and costs. Haliw v Sterling Heights, 471 Mich. 700, 706; 691 NW2d 753 (2005). Under that
rule, each party is responsible for his or her own attorney fees unless a statute or court rule
specifically authorizes the trial court to order an award of attorney fees. Id. However, the parties
to an agreement may include a provision respecting the payment of attorney fees within the
agreement, which courts will enforce like any other term unless contrary to public policy. See
Fleet Business Credit v Krapohl Ford Lincoln Mercury Co, 274 Mich. App. 584, 589; 735 NW2d
644 (2007) (stating that a contractual provision for payment of reasonable attorney fees is
judicially enforceable); Wilson Leasing Co v Seaway Pharmacal Corp, 53 Mich. App. 359, 366;
220 NW2d 83 (1974) (explaining that a contractual provision awarding attorney fees may be
contrary to public policy if unrelated to the fair value of the services rendered). Because the
authority to award attorney fees arises under the terms of the agreement, the attorney fees are a
type of general damages. Fleet, 274 Mich. App. at 589-592 (holding that an award of attorney
fees under a contractual provision constitutes general damages that need not be specifically
pleaded). In order to obtain an award of attorney fees as damages under a contractual provision
requiring such a payment, the party seeking payment must sue to enforce the fee-shifting
provision like any other contractual term. See Wilson Leasing, 53 Mich. App. at 87-88 (stating
that, in an action on a contract, the reasonable attorney fees allowed under the contract are an
element of the debt owed); see also 25 CJS, Damages, § 85, pp 428-429 (“Contractual attorney’s
fees are recoverable only in a suit brought directly on the contract. Unlike statutorily permitted
or rules-based attorney’s fees, contractually based attorney’s fees form part of the damages

                                               -15-
claim.”). That is, the party seeking the award of attorney fees as provided under the terms of an
agreement must do so as part of a claim against the opposing party.

        Here, Falcon Group did not file a counter-claim for damages under the consulting
agreement. Instead, it moved for an award of attorney fees and relied on the consulting
agreement as authority for the award. However, because the award of attorney fees was not
authorized by statute or court rule, but was instead part of a contractual agreement, the trial court
could only award the fees as damages on a claim brought under the contract. By entering an
order requiring Pransky to pay Falcon Group’s attorney fees, the trial court in effect entered a
judgment against Pransky on a claim that was never brought. A trial court may not enter
judgment on a claim that was not brought in the original action in the guise of a post-judgment
proceeding. See, e.g., Green v Ziegelman, 282 Mich. App. 292, 303-304; 767 NW2d 660 (2009)
(holding that the trial court erred when it allowed the plaintiffs to assert a claim for piercing the
corporate veil in a post-judgment proceeding because that claim had not been brought in the
original action). Therefore, the trial court lacked the authority to order Pransky to pay Falcon
Group’s attorney fees as damages for breach of the consulting agreement.

         Pransky also asks this Court to conclude that Falcon Group would be barred under the
doctrine of res judicata from subsequently filing suit to recover its attorney fees under the
consulting agreement. We decline to address this issue because it is premature. It is unclear
whether Falcon Group will try to recover its attorney fees by filing a contract claim. Id. at 305.
And should it do so, whether Falcon Group could have brought a claim for contractual damages
in this litigation is a matter best addressed by the trial court at that time. See Adair v Michigan,
470 Mich. 105, 123-125; 680 NW2d 386 (2004) (discussing the same transaction test for res
judicata). For similar reasons, we decline to address whether Falcon Group was a “prevailing
party in [a] collection action,” as required under paragraph twenty-one of the consulting
agreement. The trial court should address the proper construction of that paragraph and whether
the present litigation amounted to a collection action if and when the claim is properly before it.

                                       IV. CONCLUSION

         The trial court did not err when it determined that Falcon Group could in theory perform
its obligations under the consulting agreement without having to be registered as a broker-dealer,
agent, or investment advisor under the Securities Act. It also did not err when it determined that
the consulting agreement required Falcon Group to perform services as a finder, but that finders
did not have to be registered under the Securities Act. Because Falcon Group could perform its
obligations under the consulting agreement without being registered, the consulting agreement
was not on its face illegal. The trial court properly dismissed Pransky’s claims premised on the
illegality of the consulting agreement under MCR 2.116(C)(10). Consequently, we affirm the
trial court’s order dismissing Pransky’s claims.

       The trial court, however, lacked the authority to award Falcon Group its attorney fees as
damages under a contract claim because Falcon Group did not file a contract claim against
Pransky. Accordingly, we vacate the trial court’s order compelling Pransky to pay Falcon
Group’s attorney fees.

                                                -16-
         Affirmed in part, vacated in part, and remanded for further proceedings consistent with
this opinion. We do not retain jurisdiction. Because neither Pransky nor Falcon Group prevailed
in full, we order that neither party may tax costs. MCR 7.219(A).

                                                           /s/ Michael J. Kelly
                                                           /s/ Kurtis T. Wilder
                                                           /s/ Donald S. Owens

                                             -17-