Opinion
No. 342101
06-14-2018
MICHAEL DAVID SKINNER, JASON ANDREW BORCHERS, ROBERT WILLIAM CARPENTER, LYNDA ANN CARPENTER, THOMAS KEITH AMICK, GARY D. YURICH, JANIE L. YURICH, SOREN R. ANDERSEN, WALLIS MAY ANDERSEN, CYNTHIA K. WHITEFOOT, SARA ORWICK, MARGARET YOUNG, RICHARD J. LANNEN, BARBARA J. LANNEN, THOMAS ROSS KENNEDY, CHRISTINE MARIE WELLS, IVAN BENDA, MARY BENDA, HEATHER BRADSHAW, MICHAEL SCHOWALTER, PATTY SCHOWALTER, ELIZABETH TAYLOR, ADAM TAYLOR, DAVID WM. BRISBOIS, SHAVAN M. GIFFEN, THOMAS H. ALLARD II, and PAUL RANDY WELLS, Plaintiffs-Appellants, v. CITY OF ROYAL OAK, Defendant-Appellee, and PAUL MARK, MAUREEN WESLEY LAFLEUR, NATHAN RICHARD, ANGELIE PROVIDOTUMAGH MARTZKE, and MICHAEL P. DEPASSIO, Defendants.
UNPUBLISHED Oakland Circuit Court
LC No. 2017-159655-CZ Before: MURPHY, P.J., and JANSEN and RONAYNE KRAUSE, JJ. PER CURIAM.
In this property tax dispute, plaintiffs, 28 property owners, appeal as of right the trial court's order dismissing their suit for lack of subject-matter jurisdiction. Plaintiffs also contend that the trial court abused its discretion by denying their motion for leave to amend their complaint. We affirm.
I. RELEVANT FACTS AND PROCEDURAL HISTORY
Plaintiffs are property owners in the City of Royal Oak (the city). The City Commission (Commission) has identified plaintiffs' properties as areas that need sidewalks, and has ordered the construction of these sidewalks. The cost of the project is to be paid by the owner of the property adjacent to the sidewalk. Plaintiffs each received letters providing them with an estimate of the cost of the work if performed by the city's contractor. Plaintiffs were given the option to hire their own contractor to perform the same work. The letters explicitly state that they are not bills, and that no payment is to be made. Rather, final bills will be provided after the work is completed and the final cost known. Plaintiffs may pay the entire cost at once, or may ask that the city assess the cost over a six-year period, with interest.
After receiving these letters, plaintiffs voiced their concerns to the Commission, but to no avail; the Commission decided to move forward with the project. Plaintiffs then filed the instant suit in the Oakland Circuit Court. The trial court granted plaintiff's request for a temporary injunction, which put a halt to the project in 2017. In the fall of 2017, the city moved for summary disposition pursuant to MCR 2.116(C)(4), arguing that the matter was within the exclusive jurisdiction of the Michigan Tax Tribunal (MTT). The trial court agreed and dismissed the case. Plaintiffs sought reconsideration, but the trial court denied reconsideration in January 2018. Plaintiffs also sought leave of the trial court to amend their complaint, but this too was denied. The trial court also refused to stay its decision pending the instant appeal.
Plaintiffs have since asked this Court to peremptorily reverse the trial court's decision, and to stay the trial court's decision pending the instant appeal. This Court has declined both requests. Skinner v City of Royal Oak, unpublished order of the Court of Appeals, entered February 8, 2018 (Docket No. 342101) (denying plaintiffs' motion for peremptory reversal); Skinner v City of Royal Oak, unpublished order of the Court of Appeals, entered February 23, 2018 (Docket No. 342101). This Court did, however, grant plaintiffs' request to expedite the appeal. Skinner v City of Royal Oak, unpublished order of the Court of Appeals, entered February 28, 2018 (Docket No. 342101).
II. SUBJECT MATTER JURISDICTION
Plaintiff's primary focus on appeal is the trial court's conclusion that it lacked subject-matter jurisdiction. We agree with the trial court, and conclude that this matter lies within the MTT's exclusive jurisdiction.
As this Court explained in Harris v Vernier, 242 Mich App 306, 309; 617 NW2d 764 (2000):
We review a trial court's decision on a motion for summary disposition based on MCR 2.116(C)(4) de novo to determine if the moving party was entitled to judgment as a matter of law, or if affidavits or other proofs demonstrate that there is an issue of material fact. Further, whether the trial court had subject-matter jurisdiction over a claim is a question of law that is reviewed de novo. [Citations omitted.]"Issues of statutory interpretation are also reviewed de novo." Hillsdale Co Senior Servs, Inc v Hillsdale Co, 494 Mich 46, 51; 832 NW2d 728 (2013).
In In re AMB, 248 Mich App 144, 166; 640 NW2d 262 (2001), this Court explained:
Jurisdiction over the subject matter is the right of the court to exercise judicial power over that class of cases; not the particular case before it, but rather the abstract power to try a case of the kind or character of the one pending; and not whether the particular case is one that presents a cause of action, or under the particular facts is triable before the court in which it is pending, because of some inherent facts which exist and may be developed during the trial. [Quotation marks and citations omitted.]
Plaintiffs argue that the circuit court's jurisdiction over the present matter stems from 1963 Const, art 6, §28, which provides, in relevant part:
All final decisions, findings, rulings and orders of any administrative officer or agency existing under the constitution or by law, which are judicial or quasi-judicial and affect private rights or licenses, shall be subject to direct review by the courts as provided by law.For its part, the city argued that jurisdiction over this particular matter rested solely with the MTT pursuant to MCL 205.731(a), which provides the MTT with "exclusive and original jurisdiction over . . . [a] proceeding for direct review of a final decision, finding, ruling, determination, or order of an agency relating to assessment, valuation, rates, special assessments, allocation, or equalization, under the property tax laws of this state." In Hillsdale, 494 Mich at 53, the Court explained that four elements must exist for a matter to fall within the MTT's exclusive jurisdiction:
(1) a proceeding for direct review of a final decision, finding, ruling, determination, or order; (2) of an agency; (3) relating to an assessment, valuation, rate, special assessment, allocation, or equalization; (4) under the property tax laws. Where all such elements are present, the tribunal's jurisdiction is both original and exclusive.
The trial court's main focus at the motion hearing and in its opinion was on whether a final decision had been reached. Certainly, given plaintiffs' continued insistence that the special assessment process had not begun, let alone reached its conclusion, the court's focus on this question was understandable. However, when it came to the trial court's jurisdiction over the matter, both parties relied on authority that required the existence of a final decision. 1963 Const, art 6, §28; MCL 205.731(a). Thus, for the trial court to even possibly have jurisdiction, there must be a final decision.
Both parties now accept that there was a final decision, which was the decision reached by the Commission on May 22, 2017, to move forward with the sidewalk improvement plan. Thus, when it comes to MCL 205.731(a), the first element is met; plaintiffs seek review of a final decision. Hillsdale, 494 Mich at 53. There is no dispute that the Commission is an agency, nor should there be. Pursuant to MCL 205.703(a), an "agency" is "a board, official, or administrative agency empowered to make a decision, finding, ruling, assessment, determination, or order that is subject to review under the jurisdiction of the [MTT] or that has collected a tax for which a refund is claimed." The Commission is clearly an "agency" under this definition; it is a board empowered to make a decision, assessment, or order.
The true dispute in this case is whether the third requirement of Hillsdale is satisfied. For this element to be satisfied, the final order that is challenged must be one "relating to an assessment, valuation, rate, special assessment, allocation, or equalization . . . ." Hillsdale, 494 Mich at 53. Plaintiffs believe this element cannot be satisfied because no special assessment has actually been levied. "[T]he gravamen of an action is determined by reading the complaint as a whole . . . ." Adams v Adams, 276 Mich App 704, 710-711; 742 NW2d 399 (2007). It is quite clear from reading the entire complaint that what plaintiffs challenge is the procedure the city is using to pay for the sidewalk improvements. Plaintiffs expressed as much at the motion hearing, repeatedly asserting that while they did not dispute the city's ability to have the sidewalks constructed, they disputed the process the city was using to pay for the construction.
The following statements are examples of plaintiffs' position as explained to the trial court. "[W]e're not contesting [that] the City has the authority to install sidewalks in public rights of way . . . ." "[W]e're not disputing that they have the authority, if they follow the proper steps to install the sidewalks or fund them through special assessments. What we're saying is they haven't followed the steps." "The City's charter and its ordinances spell out clearly what they need to do to install sidewalks. They either pay for it, or they establish a special assessment district. They haven't done that." "We are appealing the city commission's inclusion of our - of the property owners' properties into the . . . 2017 sidewalk improvement program, specifically because of the way they're trying to have it paid for." "[W]e're challenging the City's chosen mechanism to fund the installation of these sidewalks."
We conclude that plaintiffs' challenge is indeed one "relating to a[] . . . special assessment . . . ." Hillsdale, 494 Mich at 53. A special assessment is a "pecuniary exaction[] made by the government for a special purpose or local improvement, apportioned according to the benefits received . . . ." Wikman v Novi, 413 Mich 617, 632-633; 322 NW2d 103 (1982), superseded by statute as stated in Ashley Ann Arbor, LLC v Pittsfield Charter Twp, 299 Mich App 138, 149; 829 NW2d 299 (2012). See also Kadzban v Grandville, 442 Mich 495, 500; 502 NW2d 299 (1993) ("A special assessment is a levy upon property within a specified district. . . . In contrast to a tax, a special assessment is imposed to defray the costs of specific local improvements, rather than to raise revenue for general governmental purposes."); MCL 211.761(e) (defining a "special assessment" as "an assessment against real property calculated on a benefit or ad valorem basis for curb and gutter, sidewalk, sewer, water, or street paving . . . ." (emphasis added)).
Despite their protestations to the contrary, there can be no doubt that plaintiffs are alleging the existence of a special assessment. Plaintiffs allege that the city has imposed the cost of the sidewalk project by apportioning it among individual property owners who stand to benefit from the particular improvement at issue. That is a special assessment. MCL 211.761(3); Kadzban, 442 Mich at 500; Wikman, 413 Mich at 632-633. What plaintiffs are truly doing is challenging the city's procedures; plaintiffs contend that the city is imposing a special assessment without following the proper procedures. As this Court has held, a challenge that a taxing authority is not following proper procedures for imposing an assessment falls within the MTT's jurisdiction. Michigan's Adventure, Inc v Dalton Twp, 287 Mich App 151, 154; 782 NW2d 806 (2010). As such, third element of Hillsdale is satisfied.
This leaves the fourth element of Hillsdale, which is that the assessment be made under property tax laws. "[T]he word 'laws' in MCL 205.731 . . . encompasses both statutes and municipal charters and ordinances." Wikman, 413 Mich at 637. Here, the city's actions were taken under authority granted to it by its charter and by its ordinances to impose the costs of certain improvements against property owners. As such, all four elements required to place the matter within the MTT's exclusive jurisdiction are met. The trial court properly ruled that it lacked jurisdiction.
On appeal, plaintiff argues that the trial court misread its complaint. Plaintiffs argue that their complaint challenged two final decisions reached by the Commission on May 22, 2017. One challenge was to the way the city is funding the project, a challenge that lies in the jurisdiction of the MTT for the reasons discussed. The other purported challenge is to the Commission's decision to deny plaintiffs' exemption requests. Plaintiffs contend that the trial court ignored their challenge to the decision to deny their exemptions, and that this challenge would have been within the circuit court's jurisdiction because it was entirely separate from any funding issue.
At the outset, plaintiffs' position that the trial court ignored a challenge to the denial of their exemption requests is somewhat dubious. The operative complaint did mention the fact that plaintiffs were denied exemptions in the recitation of the underlying facts. But when it came to the substantive counts of the complaint, the complaint only briefly addressed the exemptions. In Count I of the complaint, plaintiffs alleged:
68. The City Commission has also acted arbitrarily and capriciously in disregarding the prior exemptions granted and its established past practice in relation to exemption requests filed by [plaintiffs].Count I otherwise focused entirely on whether the city had followed proper procedures with regard to funding the sidewalk project. In Count III of the complaint, which sought declaratory relief, plaintiffs asked for an order declaring that the city could not install the sidewalks "or, at least, the prior exemptions enforced and requested exemptions should be granted based upon the failure to comply with state law and local charter and ordinance requirements." The only state law, charter, and ordinance requirements discussed elsewhere in the complaint related to the funding of the project.
In response to the city's motion, plaintiffs barely discussed the denial of their exemptions. Rather, in describing the action, plaintiffs explained that they were alleging "that the City cannot assess the cost of the sidewalks upon them absent a special assessment." Plaintiffs went on to argue that the special assessment process had not begun, and thus, there was no final order that would be appealable under MCL 205.731. Plaintiffs' response further stated that plaintiffs did not contest the city's authority to install the sidewalks or to implement a special assessment. Only in a footnote did plaintiffs specifically address the mention of the exemption denials in Count I, explaining: "Count I, [plaintiffs'] appeal from the City's administrative decision not to grant exemptions, does include the City's failure to grant exemptions but this relates to the City's deviation from its procedures, not its underlying ability to construct sidewalks or impose special assessments." (Emphasis added.) What "procedures" plaintiffs referred to is unclear at best, but could easily be read as referring to the funding procedure that was discussed throughout the complaint and response to the motion. And given the statement in Count III of the complaint, that certainly seemed to be the impetus of plaintiffs' discussion of the exemptions.
Further, at the motion hearing, plaintiffs did not discuss the exemption issue at all. Rather, plaintiffs focused on whether the city had followed the proper procedures with regard to paying for the improvements; they did not challenge the city's authority to install the sidewalks as a general matter. Given the cursory treatment of the exemption question below by plaintiffs, it is hardly surprising that the trial court did not recognize this as a separate issue in the suit. At no point prior to the trial court's ruling did plaintiffs truly explain their theory that the exemption question was entirely separate from the funding issue that is at the heart of this case.
Plaintiffs did attempt to explain how the exemption question was overlooked to the trial court in their reconsideration motion. The trial court denied the motion, concluding, in relevant part, that it raised issues that could have, but were not, presented before the trial court's decision to dismiss the case. This was entirely proper. A trial court does not abuse its discretion by denying a motion for reconsideration that rests on legal theories or facts that could have been raised or pleaded before the trial court's initial disposition of the motion. Woods v SLB Prop Mgmt, LLC, 277 Mich App 622, 630; 750 NW2d 228 (2008).
Regardless, even if plaintiffs had properly presented this challenge below, it would not have led to a different result. Again, as plaintiffs have repeatedly stated, their challenge is one to the method of paying for the construction of the sidewalks; it is not a challenge to the ability of the city to have the sidewalks installed. As this Court explained in Kasberg v Ypsilanti Twp, 287 Mich App 563, 568; 792 NW2d 1 (2010):
[T]he MTT has exclusive and original jurisdiction as to the imposition of taxes by agencies operating under the authority of the property tax laws. There is no "except" clause for cases where other laws might limit that authority or exempt
taxpayers from tax liability. See In re Petition of Wayne Co Treasurer for Foreclosure, 286 Mich App 108, 111; 777 NW2d 507 (2009) ("The Tax Tribunal has jurisdiction under MCL 205.731(a) to determine whether a taxpayer is entitled to a property tax exemption because the determination relates to an assessment."); MCL 205.735a(3) (The MTT has jurisdiction regarding the "exemption of property" from an assessment as long as a protest has been filed before the Board of Review.) As this panel has recently noted, the MTT has been granted exclusive jurisdiction to decide all sorts of statutory and constitutional questions that might impact the propriety of taxation imposed under the authority of the property tax laws. Michigan's Adventure, Inc, . [Emphasis added.]In other words, the fact that plaintiffs were denied exemptions from what they claim is a defective special assessment process does not take the matter out of the MTT's jurisdiction. The exemptions also relate to the special assessment process, and thus, are within the MTT's exclusive jurisdiction.
III. MOTION FOR LEAVE TO AMEND COMPLAINT
The second issue we must address is the trial court's denial of plaintiffs' motion for leave to amend their complaint. A trial court's decision on a motion seeking leave to amend a pleading is reviewed for an abuse of discretion. PT Today, Inc v Comm'r of Office of Fin and Ins Servs, 270 Mich App 110, 142; 715 NW2d 398 (2006). A trial court "abuses its discretion only when the court's decision is outside the range of reasonable and principled outcomes." Coloma Charter Twp v Berrien Co, 317 Mich App 127, 163; 894 NW2d 623 (2016).
On appeal, plaintiffs ask us to consider whether the trial court should have granted summary disposition in their favor pursuant to MCR 2.116(I)(2) and (C)(10). Because the trial court lacked subject-matter jurisdiction, it correctly refused to reach this question. "When a court lacks subject matter jurisdiction to hear and determine a claim, any action it takes, other than to dismiss the action, is void." Bowie v Arder, 441 Mich 23, 56; 490 NW2d 568 (1992). We likewise refuse to consider the question. --------
After the trial court concluded that it lacked jurisdiction over this case, plaintiffs sought to amend their complaint to address the trial court's jurisdictional concerns. The motion, which cited MCR 2.116(I)(5) as authority, stated that the purpose of the amendment was to "clearly identify the two final orders that they appeal." Plaintiffs went on to explain that they sought to appeal (1) the denial of their prior exemptions, and (2) the decision to "fund sidewalk construction by directly billing that cost to" plaintiffs. Plaintiffs again explained that they believed the only way the city could pass the cost of the sidewalk plan on to property owners was through a special assessment, and that the city was acting improperly by foregoing the special assessment process.
The proposed amended complaint, which was attached to the motion, contained the same underlying factual allegations. Count I of the proposed amended complaint specifically challenged the denial of the exemptions because the city had not considered the exemptions individually. Without citing any authority, the complaint claimed that doing so was contrary to law. Count II again challenged the method of funding the construction of the sidewalks, asserting that the city could only impose this cost on plaintiffs through a special assessment. Count III sought a declaration that the city could not require plaintiffs to construct the sidewalks themselves or pay the city directly for the cost of the sidewalks. Count IV sought a "permanent injunction" prohibiting the city from moving forward with the construction of the sidewalks until the instant litigation was completed.
The trial court denied the motion, noting that MCR 2.116(I)(5), which generally requires a court to give parties "an opportunity to amend their pleadings as provided by MCR 2.118" if summary disposition is granted under "[MCR 2.116](C)(8), (9), or (10)" was inapplicable because the motion was granted under MCR 2.116(C)(4). Further, because it lacked subject-matter jurisdiction over the operative complaint, the trial court explained that it had no other choice but to dismiss the suit. The trial court went on to explain that the proposed amendment would be futile because the proposed amended complaint was simply an attempt to clarify the operative complaint, and added nothing new that would give the court jurisdiction over the case.
The trial court's decision was not an abuse of discretion. As the trial court explained, MCR 2.116(I)(5) only contemplates the amendment of a complaint after a suit is dismissed under MCR 2.116(C)(8), (9), or (10). Here, summary disposition was granted under MCR 2.116(C)(4), due to the trial court's lack of subject-matter jurisdiction. MCR 2.116(I)(5) would not appear applicable. Further, the trial court correctly noted that where a court lacks subject-matter jurisdiction, it must dismiss the suit because any other action it takes is void. Bowie v Arder, 441 Mich 23, 56; 490 NW2d 568 (1992).
And in any event, the proposed amendment was indeed futile. Through the amendment, plaintiffs simply wished to clarify that they were attacking two decisions: (1) the denial of their exemptions, and (2) the process by which the city intended to fund the sidewalk project. For the reasons discussed, both of these claims are properly within the exclusive jurisdiction of the MTT. Accordingly, the trial court would have lacked jurisdiction over the amended complaint, rendering the amendment futile. And while leave to amend should be freely given, it is appropriate to deny leave to amend where the proposed amendment would be futile. Lane v KinderCare Learning Cntrs, Inc, 231 Mich App 689, 697; 588 NW2d 715 (1998).
Affirmed.
/s/ William B. Murphy
/s/ Kathleen Jansen
/s/ Amy Ronayne Krause