Opinion
351980
01-06-2022
WALNUT CREEK COUNTRY CLUB, Petitioner-Appellant/Cross-Appellee, v. LYON TOWNSHIP, Respondent-Appellee/Cross-Appellant.
UNPUBLISHED
Oakland Circuit Court LC No. 2017-002531
Before: Boonstra, P.J., and Borrello and Rick, JJ.
Per Curiam.
Petitioner Walnut Creek Country Club appeals as of right the Tax Tribunal's judgment determining the true cash value and taxable value of petitioner's property in respondent Lyon Township for tax year 2017. Respondent cross-appeals the Tax Tribunal's order denying its motion for costs and attorney fees. We affirm.
I. FACTS AND PROCEEDINGS
Petitioner operates a private, member-owned country club on four adjacent parcels of real property in Lyon Township. In addition to a 27-hole golf course, the property has a swimming pool, tennis courts, banquet facility, and restaurant/grill. Petitioner offers both golf and nongolf memberships, and it hosts various social activities, such as holiday parties, for members.
Respondent assessed the true cash value (TCV), state equalized value (SEV), and taxable value (TV), of the four parcels for tax year 2017 as follows:
Petitioner challenged the assessments and claimed that the correct values were as follows:
Petitioner also listed a fifth parcel of property, Parcel 008, in its petition, but afterward sold Parcel 008 and did not include it in his property appraisal. The Tax Tribunal dismissed Parcel 008 from the petition before the hearing.
Petitioner's appraisal expert, Michael Rende, concluded that the subject property's highest-and-best use was as a public, daily-fee golf course. Rende opined that this was a permissible use in respondent's residential-agricultural (R-1) zoning district with a special use permit. Respondent's appraisal expert, Michael Williams, opined that the highest-and-best use was as a private, nonequity club, in which members had no ownership interest.
The Tax Tribunal conducted a seven-day hearing. Rende testified regarding his capitalization-of-income analysis of the subject property if used as a public, daily-fee course. Respondent cross-examined Rende regarding the compatibility of this use with respondent's current zoning ordinance. Respondent also questioned Rende regarding his alleged double-accounting for golf cart expenses and his assumption that a public course would have similar personal property values as a private club.
After petitioner rested, respondent moved to call respondent's municipal planner, Brian Keesey, to testify regarding the land use approvals petitioner would have to obtain to convert the subject property to a public, daily-fee course. Petitioner objected on the ground that Keesey had not been disclosed as a witness. The Tax Tribunal allowed Keesey to testify, but reserved the question whether to consider his testimony. Keesey testified that the swimming pool, restaurants, and other features would not conform to the present zoning ordinance if they became open to the public.
Williams testified regarding his capitalization-of-income analysis for the subject property if it was converted to a nonequity private club. On cross-examination, petitioner attempted to demonstrate that Williams's analysis was unreliable because Williams failed to allocate a portion of membership dues to nontangible benefits such as "white-glove service" and access to social events that did not pertain to the real property. Williams admitted that he had no opinion regarding the portion of membership dues that members paid to receive these benefits. However, he testified that these benefits were attributable to petitioner's payment of employees to provide high-level service, and therefore, were accounted for as payroll expenses in his capitalization-of-income approach.
The Tax Tribunal concluded that Rende's appraisal was unreliable because the daily-fee course was not the subject property's highest-and-best use and because Rende made improper entries in his calculation of expenses. The Tax Tribunal stated its findings of the parcels' TCV, SEV, and TV as follows:
The tribunal also used AV (assessed value) to refer to the SEV.
Respondent moved for costs under MCR 2.625, MCL 600.2591(3)(b), MCL 205.752, and Mich. Admin Code, R 792.10209. The Tax Tribunal denied the motion.
II. STANDARD OF REVIEW
"[T]his Court's review of decisions of the Tax Tribunal, in the absence of fraud, is limited to determining whether the tribunal made an error of law or adopted a wrong principle; the factual findings of the tribunal are final, provided that they are supported by competent and substantial evidence." President Inn Props, LLC v Grand Rapids, 291 Mich.App. 625, 630-631; 806 N.W.2d 342 (2011) (cleaned up); see Const 1963, art 6, § 28. Thus, the tribunal's factual findings "that are supported by competent, material, and substantial evidence on the whole record will not be disturbed on appeal." Columbia Assoc, LP v Dep't of Treasury, 250 Mich.App. 656, 665; 649 N.W.2d 760 (2002). "Substantial evidence is the amount of evidence that a reasonable person would accept as being sufficient to support a conclusion; it may be substantially less than a preponderance of the evidence." Wayne Co v Mich. State Tax Comm, 261 Mich.App. 174, 186-187; 682 N.W.2d 100 (2004). Issues of statutory construction are reviewed de novo. Forest Hills Coop v Ann Arbor, 305 Mich.App. 572, 587; 854 N.W.2d 172 (2014).
III. REVENUE FOR NONTANGIBLE BENEFITS
Petitioner argues that the Tax Tribunal erred by failing to allocate a portion of membership dues and initiation fees as payments for benefits not derived from the real property. At the hearing, petitioner cross-examined Williams regarding the portion of membership dues attributable to high-quality, "white-glove service" associated with a country club and to social activities. Williams did not have an opinion regarding allocation of membership dues in this manner, but stated that the high-quality service is reflected in the subject property's higher payroll to provide this service.
"In a property tax dispute, the petitioner must prove by the greater weight of the evidence that the disputed assessment was too high on the basis of the Tax Tribunal's findings of true cash value." Forest Hills Coop, 305 Mich.App. at 588. However, the tribunal must make an independent determination of TCV. President Inn Props, 291 Mich.App. at 631. Accordingly, "the Tax Tribunal has the overall duty to determine the most accurate valuation under the individual circumstances of the case." Id. "The Tax Tribunal is under a duty to apply its expertise to the facts of a case in order to determine the appropriate method of arriving at the true cash value of property, utilizing an approach that provides the most accurate valuation under the circumstances." Great Lakes Div of Nat'l Steel Corp v City of Ecorse, 227 Mich.App. 379, 389; 576 N.W.2d 667 (1998).
"True cash value is synonymous with fair market value." Id. "The three most common approaches for determining true cash value are the capitalization-of-income approach, the sales-comparison or market approach, and the cost-less-depreciation approach." Id. at 390. In President Inn Props, 291 Mich.App. at 639, this Court stated that
a valuation method is wrong only if it does not lead to the most accurate determination of the taxable property's true cash value or fair market value. Thus, the Tax Tribunal has a duty to select the approach which provides the most accurate valuation under the circumstances of the individual case. [Cleaned up.]For the valuation analysis, an appraiser must analyze "data mathematically to determine an estimate of the fair market value of both the physical real estate and all the interests, benefits, and rights inherent in ownership of that real property." Meadowlanes Ltd Dividend Housing Ass'n v City of Holland, 437 Mich. 473, 485; 473 N.W.2d 636 (1991). The petitioner bears the burden of proving a property's TCV. Menard, Inc v City of Escanaba, 315 Mich.App. 512, 520; 891 N.W.2d 1 (2016); MCL 205.737(3).
The capitalization-of-income approach "is based on the premise that a property's value is related to how much income the property can earn." Forest Hills Coop, 305 Mich.App. at 594. "Because the main benefit to the owner is the future net income that the property can earn, the property's worth is largely based on the income, although the net amount receivable from the property when the ownership is terminated is also a benefit." Id. "The capitalization-of-income approach measures the present value of the future benefits of property ownership by estimating the property's income stream and its resale value (reversionary interests) and then developing a capitalization rate which is used to convert the estimated future benefits into a present lump-sum value." Id. (cleaned up).
"In determining the true cash value, the assessor shall also consider . . . present economic income of structures, including farm structures; present economic income of land if the land is being farmed or otherwise put to income producing use . . . ." MCL 211.27(1). "Real property may not be assessed on the basis of the value of its use to the owner." Huron Ridge LP v Ypsilanti Twp, 275 Mich.App. 23, 33; 737 N.W.2d 187 (2007). "The legislature shall provide for the uniform general ad valorem taxation of real and tangible personal property not exempt by law . . . ." Const 1963, art 9, § 3.
Petitioner argues that the Tax Tribunal applied a wrong principle of law by accepting Williams's capitalization-of-income analysis, notwithstanding Williams's failure to deduct from petitioner's revenue the portion of membership dues and initiation fees attributable to nontangible benefits of membership. Petitioner argues that a portion of membership revenues should be excluded from petitioner's revenue in the income analysis because the intangible benefits members enjoy is not derived from the real property "being farmed or otherwise put to income producing use." MCL 211.27(1). Although petitioner frames this issue as a question of law, in substance it presents a question of fact, namely, whether evidence supports the Tax Tribunal's decision.
The Tax Tribunal did not disregard petitioner's assertion that the benefits of joining a country club include intangible benefits not directly arising from the real property. Instead, the Tax Tribunal agreed with Williams's testimony that this circumstance was accounted for in petitioner's payroll, which reflected the higher employment costs involved in providing "white glove" service. Moreover, petitioner failed to present evidence of any other way to allocate membership dues and initiation fees between benefits tied to the real estate from benefits purportedly separated from real estate. Petitioner attacked Williams's appraisal for its failure to make the allocation without presenting an alternative. Additionally, several of the allegedly intangible benefits, such as parties and golf instruction, cannot be reasonably separated from the real estate necessary to hold the events. Accordingly, the tribunal's findings are supported by competent, material, and substantial evidence. President Inn Props, 291 Mich.App. at 631; Columbia Assoc, 250 Mich.App. at 665.
In Southfield Western, Inc v City of Southfield, 146 Mich.App. 585; 382 N.W.2d 187 (1985), this Court found no error in the Tax Tribunal's refusal to deduct the going-concern value of a hotel business from the true cash value of the realty where the petitioner failed to meet its burden of proving the existence of a separate and intangible business value and failed to cite any authority in support of such a deduction or the method for measuring the intangible business value.Similarly, petitioner here has failed to meet this burden.
"Although cases decided before November 1, 1990, are not binding precedent, MCR 7.215(J)(1), they nevertheless can be considered persuasive authority." In re Stillwell Trust, 299 Mich.App. 289, 299 n 1; 829 N.W.2d 353 (2012).
Petitioner cites Mich Bell Tel Co v Dep't of Treasury, 445 Mich. 470, 486; 518 N.W.2d 808 (1994), for the principle that Const 1963, art 9, § 3 "distinguish[es] between tangible and intangible property, and it limits the application of the general ad valorem property tax to real and tangible personal property." This case does not bolster petitioner's position because the trial court properly found that Williams's accounting method did not result in taxation of intangible property.
IV. UNDISCLOSED WITNESS
Petitioner argues that the Tax Tribunal violated its procedural rules by allowing respondent to call an undisclosed witness, Michael Keesey, without first addressing whether respondent had good cause to call the witness. Petitioner also argues that Keesey's testimony was improper expert testimony even though he was not called or qualified as an expert.
Petitioner preserved its procedural challenge to the admissibility of Keesey's testimony by objecting below on the ground that he was an undisclosed witness. MRE 103(a)(1). However, petitioner did not raise an objection that Keesey was improperly giving expert testimony. Therefore, the latter aspect of this issue is unpreserved. We review petitioner's preserved evidentiary issue for an abuse of discretion. Craig v Oakwood Hosp, 471 Mich. 67, 76; 684 N.W.2d 296 (2004). An abuse of discretion occurs when a trial court's decision falls outside the range of reasonable and principled outcomes. Maldonado v Ford Motor Co, 476 Mich. 372, 388; 719 N.W.2d 809 (2006). Any preliminary questions of law are reviewed de novo. Dep't of Transp v Frankenlust Lutheran Congregation, 269 Mich.App. 570, 575; 711 N.W.2d 453 (2006). Issues concerning the interpretation and application of administrative rules are also reviewed de novo. Lake Isabella Dev, Inc v Village of Lake Isabella, 259 Mich.App. 393, 398; 675 N.W.2d 40 (2003). Unpreserved issues are reviewed for plain error affecting a party's substantial rights. Total Armored Car Serv, Inc v Dep't of Treasury, 325 Mich.App. 403, 412; 926 N.W.2d 276 (2018).
As a threshold matter, the Michigan Tax Tribunal rules of practice and procedure provide that "if an applicable entire tribunal rule does not exist," the Michigan Rules of Court govern. Signature Villas, LLC v Ann Arbor, 269 Mich.App. 694, 705; 714 N.W.2d 392 (2006) (cleaned up). "To ensure that a petitioner is afforded due process, hearings in the Tax Tribunal" follow "the provisions of Chapter 4 of the Administrative Procedures Act, MCL 24.271 et seq. . . .; MCL 205.726 . . . ." Georgetown Place Coop v City of Taylor, 226 Mich.App. 33, 51-52; 572 N.W.2d 232 (1997). "The parties must be given the opportunity to present evidence and arguments regarding issues of fact, cross-examine witnesses, and submit rebuttal evidence." Id. at 52. "The rules of evidence must be followed as far as practicable, but the tribunal 'may admit and give probative effect to evidence of a type commonly relied upon by reasonably prudent men in the conduct of their affairs.'" Id., quoting MCL 205.746(1).
Michigan Tax Tribunal Rule 237(3) provides:
A party shall submit to the tribunal and the other party or parties a prehearing statement, as required by R 792.10247. The prehearing statement shall provide the other party or parties and the tribunal with the name and address of any person who may testify and with a general summary of the subject area of the testimony. A person who is not disclosed as a witness shall not be permitted to give testimony, unless, for good cause shown, the tribunal permits the testimony to be taken. [Mich Admin Code, R 792.10237(3).]Petitioner argues that respondent did not demonstrate good cause to introduce Keesey's testimony because petitioner's valuation disclosure gave respondent notice that petitioner intended to introduce testimony that the highest-and-best use of the property was as a public, daily-fee course. We agree.
The Tax Tribunal ruled that it had discretion to allow a rebuttal witness. The Tax Tribunal relied on Pastrick v Gen Tel Co of Mich, 162 Mich.App. 243, 246-247; 412 N.W.2d 279 (1987), in which this Court affirmed a trial court's decision to allow testimony by an undisclosed rebuttal witness. This Court concluded:
Justice is not served by merely restricting a trial judge's decision in such a case to permitting or not permitting an undisclosed witness to testify. Rather, we believe that justice is best served where an unlisted witness can be permitted to testify while the interests of the opposing party are adequately protected. If reasonable conditions can allow the testimony of the undisclosed witness to be admitted without prejudice to the opposing parties, then we see nothing wrong with permitting the witness to testify subject to those conditions. No party is prejudiced and the jury is afforded a fuller development of the facts surrounding the case. [Id. at 246.]The Tax Tribunal's reliance on Pastrick was misplaced because it did not address Rule 792.10237(3) or acknowledge that Pastrick involved general civil proceedings.
Respondent's argument on appeal in support of Keesey's testimony relies on general evidentiary principles regarding rebuttal testimony without addressing the Tax Tribunal rules. "Rebuttal evidence is evidence that explains, contradicts, or otherwise refutes a defendant's evidence. Its purpose is to undercut the defendant's case and not merely to confirm that of the plaintiff." Sullivan Indus, Inc v Double Seal Glass Co, Inc, 192 Mich.App. 333, 348; 480 N.W.2d 623 (1991). "Rebuttal testimony is used to contradict, explain, or refute evidence presented by the other party in order to weaken it or impeach it." Lima Twp v Bateson, 302 Mich.App. 483, 502; 838 N.W.2d 898 (2013) (cleaned up). Evidence offered during a party's case-in-chief is not rebuttal evidence. Rather, rebuttal evidence is evidence offered after each party has completed its case-in-chief. See Winiemko v Valenti, 203 Mich.App. 411, 418-419; 513 N.W.2d 181 (1994). We discern no basis for classifying Keesey's testimony as rebuttal testimony rather than testimony in support of respondent's case-in-chief. Keesey's testimony was not offered after each party completed its case-in-chief. Keesey's testimony supported respondent's position that a public, daily-fee golf course was not the highest and best use of the property, in part because the accessory features were not permissible uses in the zoning district.
Petitioner argues that Rule 792.10237(3) limits the Tax Tribunal's discretion and takes precedence over general rules of civil procedure. We must "interpret statutes in a way that gives 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." Mays v Governor, 323 Mich.App. 1, 43; 916 N.W.2d 227 (2018), aff'd 506 Mich. 157(2020) (cleaned up). "In construing administrative rules, courts apply principles of statutory construction." Coldwater v Consumers Energy Co, 500 Mich. 158, 167; 895 N.W.2d 154 (2017) (cleaned up). The plain language of Rule 792.10237(3) states that an undisclosed witness "shall not be permitted to give testimony, unless, for good cause shown, the tribunal permits the testimony to be taken." (Emphasis added). The word "shall" "indicates a mandatory and imperative directive." Fradco, Inc v Dep't of Treasury, 495 Mich. 104, 114; 845 N.W.2d 81 (2014). The rule does not grant the tribunal broad discretion to allow testimony by undisclosed witnesses. The tribunal can permit the testimony only "for good cause shown." The tribunal did not observe this directive. The tribunal indicated before Keesey testified that it would decide later whether his testimony would be considered as evidence. In its final opinion, however, the tribunal summarized Keesey's testimony without addressing its admissibility. Accordingly, it is apparent that the tribunal considered Keesey's testimony, but without finding that there was good cause for the testimony. The tribunal erred by failing to observe the requirements of Rule 792.10237(3). Nevertheless, we find the tribunal's consideration of this testimony to constitute harmless error.
An error by the Tax Tribunal is subject to review for harmless error under MCR 2.613(A), which provides that "[a]n error in the admission or the exclusion of evidence . . . is not ground for granting a new trial, for setting aside a verdict, or for vacating, modifying, or otherwise disturbing a judgment or order, unless refusal to take this action appears to the court inconsistent with substantial justice."
The tribunal summarized Keesey's testimony regarding the need for special land use approval if the subject property was converted to a public daily-fee course. However, the tribunal's list of 16 findings of fact does not include any fact adopted from Keesey's testimony. The purpose of the testimony was to refute Rende's testimony that a public, daily-fee golf course was the highest and best use of the property, in part because the accessory features were not permissible uses in the zoning district. In its analysis, however, the tribunal noted that "Rende failed to consider the legal permissibility of the subject property as a PDFC [public, daily-fee course] under the existing zoning on the date of value of December 31, 2016," in his conclusion regarding highest and best use. The tribunal quoted Rende's admissions that he did not "know the specifics of what would need to be done" in order to obtain approval. The tribunal also cited "issues that bring pause to the Tribunal's consideration of Mr. Rende's income approach, including his deduction of [furniture, fixtures, and equipment ("FF&E")] taken from the subject property personal property statements, which represents the personal property of a private country club." The tribunal found that "replacement reserves should be lower for a PDFC." The tribunal stated further:
Mr. Rende failed to consider the legal permissibility of a PDFC situated on the subject property, on the date of value. He did not speak to anyone in the planning or zoning department, failed to determine how to get special land use
approval, and provided no breakdown of costs to be incurred in the process. . . . Further, Mr. Rende utilized dated revenue and operating expense data, and the incorrect FF&E deduction. The Tribunal also prefers Mr. Williams' tax loaded cap rate based on the blended Lyon Township non-homestead and personal property millage rates, given the analysis includes real estate and personal property.
This analysis indicates that Rende's own ignorance of the zoning requirements was sufficient to support the Tax Tribunal's findings that a public, daily-fee golf course was not the highest and best use of the subject property. The tribunal's findings that Rende was uninformed regarding zoning requirements are supported by Rende's own testimony. The tribunal thus discredited Rende's opinion for reasons independent of Keesey's testimony. Accordingly, any error related to the admission of Keesey's testimony was harmless.
Petitioner also argues that Keesey's testimony was in substance expert testimony. Mich. Admin Code, R 792.10255(3) provides:
If a witness is not testifying as to the value of property or as an expert witness, then his or her testimony in the form of opinions or inferences shall be limited to opinions or inferences that are rationally based on the perception of the witness and that are helpful to a clear understanding of his or her testimony or the determination of a fact in issue, as provided in rule 701 of the Michigan rules of evidence.MRE 701 permits the admission of limited, lay opinion testimony. The rule provides:
If the witness is not testifying as an expert, the witness' testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness and (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue.The admissibility of expert testimony is governed by MRE 702, which provides:
If the court determines that scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise if (1) the testimony is based on sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.
Keesey's testimony regarding the zoning approvals petitioner would need to convert its property to a public, daily-fee golf course involved specialized knowledge regarding municipal planning and land use. Keesey's testimony was not lay testimony based on his own perceptions, but on his specialized knowledge of how increased use of property triggers requirements for an expanded parking area and other modifications to accommodate the more intensive use.
Had petitioner objected on the ground that Keesey had not been qualified as an expert, respondent would likely have been able to establish that he was sufficiently qualified on the basis of his knowledge and experience. In any event, as stated earlier, the Tax Tribunal's findings and conclusions did not rely on Keesey's testimony. Accordingly, petitioner has not established that any error affected its substantial rights. Total Armored Car Serv, 325 Mich.App. at 412.
V. HIGHEST-AND-BEST USE
Petitioner argues that the Tax Tribunal erred by finding that the highest-and-best use of the property was as a private club, and not as a public, daily-fee golf course. We disagree.
"The concept of 'highest and best use' is fundamental to the determination of true cash value." Detroit Lions, Inc v City of Dearborn, 302 Mich.App. 676, 697; 840 N.W.2d 168 (2013)." 'Highest and best use' means the most profitable and advantageous use the owner may make of the property even if the property is presently used for a different purpose or is vacant, so long as there is a market demand for such use." Id. (cleaned up).
The Tax Tribunal stated that a public daily-fee golf course was permissible in the R-1.0 zoning district with granting of a special land use permit, but Rende admitted that he failed to "explore whether [the permit] would be available, what the process for approval might be, or how much it would cost, among other factors." The tribunal also cited Williams's testimony that he discontinued investigating the public, daily-fee suggestion after he determined it was not maximally productive. The tribunal concluded:
Mr. Williams should have considered the legal permissibility of a PDFC [public daily-fee golf course] before preparing his pro forma to determine it's [sic] maximum productivity; nevertheless, the Tribunal is persuaded that the highest and best use of the property is not as a PDFC based on Mr. Williams' overall analysis. Mr. Williams further testified that he did not consider there to be a legal issue with the continued use of the course as a private club, because "[t]he subject as a private country club is its existing use and we're not changing the use." Because Mr. Rende determined the highest and best use of the property to be a PDFC, his lack of consideration of the legal permissibility of this proposition is telling, with regard to the appropriateness of his appraisal report.
Petitioner argues that the Tax Tribunal erroneously concluded that the absence of a pending application for special land use approval precluded the tribunal from further considering whether the PDFC was the best and highest use. This argument mischaracterizes the tribunal's statement. The tribunal considered Williams's failure to investigate the permissibility issue, Williams's conclusion that a public golf course was not maximally productive, and Rende's failure to fully investigate special use permits. Petitioner argues that approval of the public golf course and its accessory uses would have been "largely a ministerial task with minimal discretion." However, petitioner did not present evidence in support of this assertion in the Tax Tribunal. Furthermore, Rende's suggestion that the restaurant, pool, and tennis courts could be approved as accessory uses was merely speculative because he failed to investigate the matter. Therefore, the Tax Tribunal's finding concerning highest-and-best use is supported by competent, material, and substantial evidence. The tribunal's analysis of this issue is not based on an erroneous principle of law. President Inn Props, 291 Mich.App. at 631.
Petitioner cites State Hwy Comm'r v Eilender, 362 Mich. 697, 699; 108 N.W.2d 755 (1961), for the principle that a reasonable possibility of a zoning change should be considered in determining the value of real property. Eilender involved valuation of real property in eminent domain proceedings. Id. at 698. To the extent that it applies by analogy to a TV determination, Eilender did not require the tribunal to assume that there was a reasonable possibility that a special use permit would be granted. It merely states that a "reasonable possibility" of zoning reclassification "should be considered." Id. at 699.
VI. RESPONDENT'S CROSS-APPEAL
Respondent argues on cross-appeal that the Tax Tribunal erred by denying its motion for costs on the ground that aspects of petitioner's appeal were frivolous. Generally, a trial court's finding regarding whether an action is frivolous is reviewed for clear error. Kitchen v Kitchen, 465 Mich. 654, 661; 641 N.W.2d 245 (2002). "A finding is clearly erroneous where, although there is evidence to support the finding, the reviewing court on the entire record is left with the definite and firm conviction that a mistake has been made." Home-Owners Ins Co v Andriacchi, 320 Mich.App. 52, 75-76; 903 N.W.2d 197 (2017) (cleaned up). However, the Tax Tribunal's findings are reviewed under the substantial evidence standard. Columbia Assoc, 250 Mich.App. at 665.
Under MCL 205.752(1), "[c]osts may be awarded in the discretion of the tribunal" when it issues its final order. Mich. Admin R 792.10209(1) provides that the tribunal "may, upon motion or its own initiative, award costs in a contested case, as provided by section 52 of the tax tribunal act, MCL 205.752." MCR 2.625 provides:
(A) Right to Costs.
(1)In General. Costs will be allowed to the prevailing party in an action, unless prohibited by statute or by these rules or unless the court directs otherwise, for reasons stated in writing and filed in the action.
(2)Frivolous Claims and Defenses. In an action filed on or after October 1, 1986, if the court finds on motion of a party that an action or defense was frivolous, costs shall be awarded as provided by MCL 600.2591.MCL 600.2591 provides:
(1)Upon motion of any party, if a court finds that a civil action or defense to a civil action was frivolous, the court that conducts the civil action shall award to the prevailing party the costs and fees incurred by that party in connection with the civil action by assessing the costs and fees against the nonprevailing party and their attorney.
(2)The amount of costs and fees awarded under this section shall include all reasonable costs actually incurred by the prevailing party and any costs allowed by law or by court rule, including court costs and reasonable attorney fees.
(3)As used in this section:
(a)"Frivolous" means that at least 1 of the following conditions is met:
(i) The party's primary purpose in initiating the action or asserting the defense was to harass, embarrass, or injure the prevailing party.
(ii) The party had no reasonable basis to believe that the facts underlying that party's legal position were in fact true.
(iii) The party's legal position was devoid of arguable legal merit.
(b)"Prevailing party" means a party who wins on the entire record.The statute and administrative rule directly pertaining to the Tax Tribunal grant the tribunal discretion to impose costs. MCR 2.625(A) provides that costs "will" be granted to the prevailing party. MCR 6.625(B) and MCL 600.2591 provide that costs "shall" be awarded if the opposing party's position was frivolous. Respondent acknowledges that costs are discretionary under MCL 205.752 and Rule 792.10209, but argues that the tribunal erred by finding that petitioner did not assert frivolous claims. Respondent also argues that MCR 2.625 and MCL 600.2591 apply to Tax Tribunal proceedings; thus, these mandatory provisions applied to this case. Accordingly, it is necessary to determine as a threshold issue whether MCL 600.2591 and MCR 2.625 apply to this case.
"[T]he [Michigan Tax Tribunal] rules of practice and procedure provide that if an applicable entire tribunal rule does not exist," the Michigan Rules of Court govern. Signature Villas, 269 Mich.App. at 705 (cleaned up). Because the tribunal has its own rule regarding awards of costs, MCR 2.625(A)(1) and its caselaw interpretations are irrelevant. Accordingly, respondent is not entitled to costs under MCR 2.625(A)(1) as a prevailing party.
MCL 205.752 and Rule 792.10209 do not provide standards for the Tax Tribunal to consider in deciding whether to award costs. In Pontiac Country Club v Waterford Twp, 299 Mich.App. 427, 438-439; 830 N.W.2d 785 (2013), this Court applied the frivolous action standards from MCR 2.625(A)(2) and MCL 600.2591(3)(a) in determining whether a Tax Tribunal action was frivolous, noting that it was required to "affirm the Tribunal's findings of fact if competent, material, and substantial evidence on the record supports them." Applying these standards to the instant case, sufficient evidence supports the Tax Tribunal's decisions to deny respondent's motions for costs. Wayne Co v Mich. State Tax Comm, 261 Mich.App. at 186-187. Respondent failed to demonstrate that petitioner's failure to voluntarily dismiss Parcel 008 from its petition was intended to harass respondent, and it does not appear from the record that petitioner had no basis to believe that its challenge to the assessment of Parcel 008 was false or devoid of arguable legal merit at the time the petition was filed. Rather, Parcel 008 was later sold and it appears that petitioner's failure to amend its petition to exclude that parcel was a mere oversight.
Petitioner's theory concerning the property's highest-and-best use also was not frivolous. Petitioner's arguments that the golf course could be converted from a private club to a public, daily-fee course were not wholly without merit. Public and private golf courses were permissible uses in the district. Petitioner was not unreasonable in its belief that the zoning commission would approve continuation of the already-existing restaurant and pool as accessory uses to the golf course. Respondent's own appraiser began an income analysis of a public, daily-fee golf course without also first considering whether the use was permissible. In view of these considerations, the Tax Tribunal's denial of respondent's motion is supported by competent, material, and substantial evidence.
Affirmed.