Opinion
362158
03-21-2024
CITY OF HIGHLAND PARK, Plaintiff/Counterdefendant-Appellant, v. WAYNE COUNTY LAND BANK CORPORATION, Defendant/Counterplaintiff-Appellee.
UNPUBLISHED
Wayne Circuit Court LC No. 19-010949-CZ
Before: CAVANAGH, P.J., and JANSEN and MALDONADO, JJ.
PER CURIAM.
Plaintiff appeals by right the trial court's order denying its motion for summary disposition and granting defendant's motion for summary disposition MCR 2.116(C)(10) (no genuine issue of material fact). We affirm in part, reverse in part, and remand for additional proceedings.
I. BACKGROUND
This is the second time this case has been before this Court. The relevant background facts were summarized in this Court's prior opinion in City of Highland Park v Wayne Co Land Bank Auth Corp, unpublished per curiam opinion of the Court of Appeals, issued April 22, 2021 (Docket No. 354434), pp 1-3:
Plaintiff owns and operates a "combined" sewer system, meaning that both stormwater runoff and sanitary sewage are transported in the same pipes. All of the combined sewage is transported to a regional wastewater treatment facility. Defendant was formed in 2006 through an agreement between the Wayne County treasurer and the Michigan Land Bank Fast Track Authority . . . and owns hundreds of parcels of property in Highland Park, some of which have structures, and some of which are vacant land. Defendant receives drainage and stormwater runoff conveyance and treatment services from plaintiff with respect to properties it owns in Highland Park. In July 2016, plaintiff enacted a drainage and stormwater billing ordinance. The ordinance requires owners of property in Highland Park to be charged and pay for the drainage and stormwater runoff conveyance and treatment
services attributable to their property. Consistent with the ordinance, plaintiff began billing Highland Park property owners, including defendant, for these services in August 2016. Defendant has never paid its bills. Plaintiff thus filed its complaint against defendant on August 12, 2019, for violation of the drainage and stormwater billing ordinance.
Defendant answered the complaint and asserted various affirmative defenses, including that the charges for drainage and stormwater runoff conveyance and treatment services constitute unconstitutional taxes under the Headlee Amendment, Const. 1963, art. 9, §§ 25 to 34. Defendant also filed a countercomplaint asserting that pursuant to Tax Reverted Clean Title Act (specifically MCL 211.1025), once it has conveyed title of a property to a third party, defendant is entitled to receive 50% of all taxes collected on the conveyed properties for a period of five years [(5/50 taxes)]. According to defendant, it has conveyed many, many properties to third parties since January 2016 but has yet to receive its 50% share of the taxes collected on those properties. Defendant asserted that plaintiff owes it $15,407.37 for 2017, $37,405.93 for 2018, and $86,157.86 for 2019.
Plaintiff filed a motion for partial summary disposition, citing MCR 2.116(C)(9) and (10). Plaintiff asserted that defendant's affirmative defense relying on the Headlee Amendment is subject to a one-year statute of limitations pursuant to [MCL 600.308a(3)], such that defendant is barred from challenging any drainage and runoff fees imposed prior to September 16, 2018 (one year prior to its filing of the affirmative defense). Plaintiff also asserted that the 50% tax fee defendant asserts is payable to it requires that defendant file a list of the properties sold in each calendar year to the Highland [P]ark assessor under MCL 211.1024(1). Defendant provided no list to the assessor until December 18, 2018, and is thus not entitled to its 50% of taxes for the 2017 and 2018 calendar years. Plaintiff thus sought dismissal of defendant's counterclaim with respect to its claim for 2017 and 2018 tax years. Plaintiff also sought dismissal of defendant's claim for the 2019 tax year without prejudice, as the claim was not yet ripe for adjudication. Finally, plaintiff sought partial summary disposition in its favor with respect to defendant's attempt to challenge plaintiff's charges for drainage and stormwater runoff conveyance and treatment services as a tax to the extent that such charges became due prior to September 16, 2018.
Defendant asserted that it did not pay the charged fees because the fee is actually a tax and defendant is exempted from paying taxes and because defendant, as an involuntary property owner, is not required to pay the stormwater drainage fee charged by plaintiff. Defendant also asserted that the fee constitutes an unconstitutional tax in violation of the Headlee Amendment and the statute of limitations imposed as to a Headlee claim has not begun to run in this case given that defendant did not bring an action under the Headlee Amendment. In addition, defendant asserted that it sold 417 parcels of property in Highland Park since 2017 and even if it did not provide a list of the properties sold to the assessor, the Tax Reverted Clean Title Act does not state that failure to provide a list excuses plaintiff
from its obligation to provide defendant with its share of the tax money collected on those properties.
Defendant also filed its own motion for partial summary disposition pursuant to MCR 2.116(C)(10). According to defendant, it involuntarily obtained title to vast majority of the properties in Highland Park (except for seven of them) due to plaintiff's refusal to accept title to the properties (at no cost) following tax foreclosure. Defendant asserted that MCL 124.764(4) excuses involuntary property owners from plaintiff's imposed fees such that defendant was not subject to the fees for all but seven of the properties it sold.
On July 15, 2020, without a hearing and without issuing a written opinion, the trial court denied plaintiff's motion for partial summary disposition and granted defendant's partial motion for summary disposition. It simply issued an order that stated "Highland Parks motion denied-Wayne County Land Banks motion granted." However, the trial court issued a second order that day indicating that the case was closed. That order stated that defendant's motion was granted and "no attorney fees-case closed."
Only plaintiff appealed those orders. However, because of the trial court's cursory treatment of all the issues raised, this Court deemed "it impossible . . . to engage in any meaningful analysis." Highland Park, unpub op at 3. This Court noted that despite both parties having moved for partial summary disposition, and with the trial court's rulings on those motions, defendant's counterclaim was never resolved. Thus, this Court vacated the portion of the order closing the case and remanded for the trial court to
issue a written opinion and order setting forth a thorough and detailed analysis of each of the issues presented in the parties' motions for partial summary disposition. The trial court may do so with or without conducting a hearing, as it deems necessary, but in no way may it submit a written opinion to this [C]ourt that closes the case or does not completely address the arguments of the parties. [Id. at 3.]
On remand, the trial court issued an opinion and order detailing the basis for its summarydisposition rulings. The court agreed with defendant that statutes of limitation only apply to "actions," and not affirmative defenses. The trial court also addressed plaintiff's argument that defendant's claim for 5/50 taxes for tax year 2019 should be dismissed because it is not ripe. The court agreed, stating that because defendant's counterclaim was filed in September 2019, there were five months remaining in the 2019 winter tax year, which resulted in the claim not being ripe at the time of the filing. In its motion for partial summary disposition, defendant argued that with respect to all but seven properties it owned, it was an involuntary property owner, and therefore, it was exempt from paying the stormwater drainage fee under MCL 124.764(4). The trial court agreed that, as an involuntary owner, defendant was immune from suit and could assert other legal defenses under MCL 124.764(4), which makes it not liable to pay for stormwater services. The court therefore granted defendant's motion for partial summary disposition.
With the resolution of the parties' motions, the remaining claims involved plaintiff's claim for stormwater charges for the seven properties defendant did not obtain through involuntary foreclosure and defendant's counterclaim for 5/50 taxes for tax years 2017 and 2018. Plaintiff moved for summary disposition pursuant to MCR 2.116(C)(7) and (10). With regard to (C)(7), plaintiff argued that because defendant never previously appealed the trial court's sua sponte dismissal of its counterclaim, defendant was precluded by the doctrine of res judicata from pursuing its counterclaim. With respect to MCR 2.116(C)(10), plaintiff argued that there was no genuine issue of fact that defendant owed it the fees for the seven properties it did not involuntarily own. Plaintiff further argued that defendant could not demonstrate an issue of fact regarding its Headlee challenge that the fees at issue are actually taxes. Defendant moved for summary disposition pursuant to MCR 2.116(C)(10) regarding its counterclaim for the 5/50 taxes. Defendant argued that it was owed the 5/50 taxes as a matter of law and that there was no dispute that defendant sold a combined total of 345 properties in the city. Defendant sought 5/50 taxes for the years 2018, 2019, 2020, and 2021, totaling $195,744.96. Defendant acknowledged that plaintiff made two payments totaling $48,022.18, which brought the amount owed down to $147,721.78.
The trial court rejected plaintiff's argument that res judicata barred defendant's counterclaim. The court noted that res judicata was inapplicable because, with this Court vacating the trial court's closing of the case, the counterclaim was never decided on the merits. The court also rejected plaintiff's other argument that it was entitled to judgment for the charges pertaining to the seven parcels not involuntarily owned by defendant. The trial court agreed with defendant's position that the charges were actually taxes-not fees-and because defendant was not subject to pay taxes, dismissed plaintiff's claims. Regarding defendant's motion for summary disposition, the trial court recognized that, unlike before, the counterclaims pertaining to 2019 and 2020 were ripe. The trial court consequently ordered judgment in favor of defendant on its counterclaims in the requested amount of $147.721.78.
As mentioned below, the trial court did not address whether any claim for tax year 2021 was ripe.
II. STANDARDS OF REVIEW
This Court reviews questions of law, such as issues of statutory interpretation and rulings on motions for summary disposition, de novo. Lear Corp v Dep't of Treasury, 299 Mich.App. 533, 537; 831 N.W.2d 255 (2013); Shinkle v Shinkle (On Rehearing), 255 Mich.App. 221, 224; 663 N.W.2d 481 (2003); Ardt v Titan Ins Co, 233 Mich.App. 685, 688; 593 N.W.2d 215 (1999). Further, whether a charge is a tax or a fee is a question of law that this Court reviews de novo. Mapleview Estates, Inc v Brown City, 258 Mich.App. 412, 413-414; 671 N.W.2d 572 (2003).
This Court reviews de novo a trial court's decision to grant or deny a motion for summary disposition, and the evidence is viewed in a light most favorable to the nonmoving party. West v Gen Motors Corp, 469 Mich. 177, 183; 665 N.W.2d 468 (2003). "A motion under MCR 2.116(C)(10) tests the factual sufficiency of the complaint." Maiden v Rozwood, 461 Mich. 109, 119; 597 N.W.2d 817 (1999). "In evaluating such a motion, a court considers the entire record in the light most favorable to the party opposing the motion, including affidavits, pleadings, depositions, admissions, and other evidence submitted by the parties." Corley v Detroit Bd of Ed, 470 Mich. 274, 278; 681 N.W.2d 342 (2004). The motion should be granted if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Kisiel v Holz, 272 Mich.App. 168, 170; 725 N.W.2d 67 (2006).
III. PLAINTIFF'S CLAIMS FOR STORMWATER CHARGES
A. VIABILITY OF DEFENDANT'S AFFIRMATIVE DEFENSE
Plaintiff argues that defendant's affirmative defenses regarding its position that the user fees are actually taxes are time-barred. We disagree.
Defendant asserted as affirmative defenses that it was not liable because the fees were actually taxes, that these taxes were enacted in violation of Headlee Amendment, Const 1963, art IX, § 31, and that defendant as a land bank was exempt from taxation pursuant to MCL 124.754(5) and MCL 124.763. Plaintiff argues that defendant could not take such a position more than a year after the imposition of the fees. MCL 600.308a provides:
(1) An action under section 32 of article 9 of the state constitution of 1963 may be commenced in the court of appeals, or in the circuit court in the county in which venue is proper, at the option of the party commencing the action.
(2) The jurisdiction of the court of appeals shall be invoked by filing an action by the taxpayer as plaintiff according to the court rules governing procedure in the court of appeals.
(3) A taxpayer shall not bring or maintain an action under this section unless the action is commenced within 1 year after the cause of action accrued.
(4) The unit of government shall be named as defendant ....
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(6) A plaintiff who prevails in an action commenced under this section shall receive from the defendant the costs incurred by the plaintiff in maintaining the action.
This statute plainly only applies to actions brought under Const 1963, art 9, § 32, which states, "Any taxpayer of the state shall have standing to bring suit in the Michigan State Court of Appeals to enforce the provisions of Sections 25 through 31, inclusive, of this Article ...."
The Headlee Amendment was approved in 1978 and is found in §§ 25-33 of Article IX of the Michigan Constitution.
Sections 25 through 31, in turn, placed restrictions on how some taxes could be levied. For instance, § 31 prohibits local governments from levying taxes not authorized by law when that section was ratified without the approval of the voters at an election. Durant v Michigan, 456 Mich. 175, 183; 566 N.W.2d 272 (1997). Defendant argues that it does not need to pay the user fees because they were actually taxes enacted in violation these constitutional provisions, but plaintiff argues that this defense is time-barred pursuant to MCL 600.308a(3).
MCL 600.308a(3) places a limitations period on the commencement of an action brought to enforce the Headlee Amendment. However, defendant did not commence an action, he defended an action commenced by plaintiff. Plaintiff cites no authority supporting its position that a party who asserts a defense commences an action. Instead, plaintiff relies on Van Reken v Darden, Neef &Heitsch, 259 Mich.App. 454, 461; 674 N.W.2d 731 (2003), in which this Court stated that "an action" is "an assertion of a right through a judicial proceeding." Van Reken is distinguishable because it involves a discussion regarding whether an ex parte motion brought to modify or extend a judgment was an "action," and the Court did not discuss affirmative defenses. Moreover, MCL 600.308a(3) specifically limits itself to actions brought "under section 32 of article 9 of the state constitution of 1963," MCL 600.308a(1), and pursuant to this constitutional provision, "[a]ny taxpayer of the state shall have standing to bring suit" to enforce the preceding sections. Const 1963, art 9, § 32 (emphasis added). Defendant did not bring a lawsuit, it defended a lawsuit brought by plaintiff.
Even if the Headlee Amendment defense was time-barred, this argument would still fail because defendant also asserted MCL 124.754(5) and MCL 124.763. Both of these statutes insulate defendant from paying taxes assessed by the state or any localities. Plaintiff does not dispute that defendant, as a land bank, is exempt from paying taxes. Therefore, even if defendant cannot assert the Headlee Amendment, it would prevail if it can establish that the fees were taxes.
In conclusion, the affirmative defenses were not time-barred.
B. IMMUNITY AND THE LAND BANK FAST TRACK ACT
Plaintiff argues that the trial court erred when it ruled that the Land Bank Fast Track Act (LBFTA), MCL 124.751 et seq., shielded defendant, as an involuntary owner, from liability. We agree.
The statutes pertaining to the mandatory nature of tax foreclosure proceedings are found in The General Property Tax Act (GPTA), MCL 211.1a et seq. Section 78g of the GPTA provides in relevant part:
(1) Except as otherwise provided in this subsection, on March 1 in each tax year . . . property that is delinquent for taxes, interest, penalties, and fees for the immediately preceding 12 months or more is forfeited to the county treasurer for the total amount of those unpaid delinquent taxes, interest, penalties, and fees....
(2) Not more than 45 days after property is forfeited under subsection (1), the county treasurer shall record with the county register of deeds a certificate in a form determined by the department of treasury for each property forfeited to the county treasurer, specifying that the property has been forfeited to the county treasurer and not redeemed and that absolute title to the property and any equity associated with an interest in the property will vest in the foreclosing governmental
unit on the March 31 immediately succeeding the entry of a judgment foreclosing the property....[MCL 211.78g.]
Section 78h of the GPTA provides in relevant part:
(1) Not later than June 15 in each tax year, the foreclosing governmental unit shall file a single petition with the clerk of the circuit court of that county listing all property forfeited and not redeemed to the county treasurer . . . for the total of the forfeited unpaid delinquent taxes, interest, penalties, and fees.... The petition shall seek a judgment in favor of the foreclosing governmental unit for the forfeited unpaid delinquent taxes, interest, penalties, and fees listed against each parcel of property. The petition shall request that a judgment be entered vesting absolute title to each parcel of property in the foreclosing governmental unit, without right of redemption. [MCL 211.78h.]
Thus, when property taxes are left unpaid, the subject property is forfeited to the local governmental unit, and that governmental unit is required to initiate foreclosure proceedings.
The conveyance of foreclosed upon property to land banks is governed by the Land Bank Fast Track Act (LBFTA), MCL 124.751 et seq. Section 5 of the LBFTA provides that "an authority may acquire by gift, devise, transfer, exchange, foreclosure, purchase, or otherwise on terms and conditions and in a manner the authority considers proper, real or personal property, or rights or interests in real or personal property." MCL 124.755(1)." 'Authority' means a land bank fast track authority created" pursuant to the LBFTA. MCL 124.753(a). An authority may also acquire property from "[a] foreclosing governmental unit under the [GPTA]," MCL 124.755(3)(b), but "[a] foreclosing governmental unit may not transfer property subject to forfeiture . . . until after the property has been offered for sale . . . and the foreclosing governmental unit has retained possession of the property ...." MCL 124.755(6). Section 6 of the LBFTA authorizes land banks to do anything "necessary to preserve the value of the property it holds or owns." MCL 124.756(1). Finally, section 14 of the LBFTA provides in relevant part:
(1) This act shall be construed liberally to effectuate the legislative intent and the purposes as complete and independent authorization for the performance of each and every act and thing authorized by this act, and all powers granted shall be broadly interpreted to effectuate the intent and purposes and not as a limitation of powers. In the exercise of its powers and duties under this act and its powers relating to property held by the authority, the authority shall have complete control as fully and completely as if it represented a private property owner and shall not be subject to restrictions imposed on the authority by the charter, ordinances, or resolutions of a local unit of government.
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(4) The transfer to an authority of tax reverted property, the title to which involuntarily vested . . . in a foreclosing governmental unit . . . shall be construed as an involuntary transfer of property to the authority. After a transfer described in this subsection, the authority shall be deemed to have assumed any governmental
immunity or other legal defenses of this state, the foreclosing governmental unit, or the local unit of government related to the property and the manner in which title to the property was held by this state or the local unit of government. [MCL 124.764.]
In Harbor Watch Condo Ass'n v Emmet Co Treasurer, 308 Mich.App. 380, 381-382; 863 N.W.2d 745 (2014), the plaintiff condominium association had several units subject to foreclosure due to delinquent property taxes, and the units were subsequently sold at a pair of auctions. The plaintiff sued, arguing that the "defendant was required to pay the common expenses described in the Harbor Watch bylaws for the period defendant was an owner of the units." Id. at 382. The defendant argued that because "it was required by law to foreclose" on the property "and was therefore an involuntary taker," it was not bound by the condominium bylaws. Id. The trial court granted summary disposition in favor of the defendant, and the plaintiff appealed. On appeal, this Court concluded that the defendant could not "be held liable for assessments when it was performing a statutory obligation" and that it was statutorily bound to take possession of the units pursuant to MCL 211.78g(2) and MCL 211.78h(1). Id. at 385. In the present case, the trial court cited Harbor Watch to support its conclusion that defendant, as an involuntary taker, did not have to pay the sewage fees.
After Harbor Watch was decided, this Court issued its opinion in a more similar case in Highland Park v State Land Bank Auth, 340 Mich.App. 593; 986 N.W.2d 638 (2022). In that case, which involved the same plaintiff and sewage system as the present case, the defendant land bank "argued that it was entitled to partial summary disposition because it was an involuntary landowner of all but five of the subject properties," and its status as an involuntary landowner gave it "the immunity available to the foreclosing entities." Id. at 597. The Court of Claims denied the defendant's motion for summary disposition to the extent that it was premised on governmental immunity. Id. at 598. On appeal, this Court explained:
MCL 124.764(4) provides that if tax-reverted property, "the title to which involuntarily vested" in the state or a foreclosing governmental unit under the GPTA or in a qualified city under its charter or ordinances, is transferred to an authority such as defendant, then the transfer "shall be construed as an involuntary transfer of property to the authority." [Id. at 600-601.]
In other words, the Court agreed that the defendant was an involuntary owner. This Court further explained that, because the defendant was an involuntary owner of the property, it was entitled to governmental immunity. Id. at 601. However, this tort immunity does not extend to claims for breach of contract or unjust enrichment. Id. at 603-604.
The defendant argued in this Court that, "under MCL 124.764(4), it has no obligation to pay plaintiff's drainage and stormwater charges for the properties defendant received through involuntary transfers because this Court held in Harbor Watch that foreclosing governmental units were not liable for local charges that were otherwise required by law." Id. at 608. This Court disagreed and instead concluded that Harbor Watch did not apply with respect to the sewage charges. Id. at 610. This Court explained that Harbor Watch could be distinguished because "Harbor Watch pertained to condominium fees that the defendant never agreed to pay, whereas plaintiff's charges for utility services were based on a municipal ordinance" and because the "defendant-unlike the defendant in Harbor Watch, who lacked the legal authority to pay under the GPTA-was not prohibited by the LBFTA from paying plaintiff's charges ...." Id. at 610 (quotation marks and citation omitted).
The facts of this case are indistinguishable from the facts of Highland Park. In this case, defendant came into possession of the properties at issue following foreclosure because plaintiff declined to accept title. In accordance with this Court's interpretation of the relevant statutes, this manner of acquisition makes defendant an involuntary owner. See Highland Park, 340 Mich.App. at 600-601, discussion MCL 124.764(4). This status as an involuntary owner does confer the same level of tort immunity upon defendant as would be conferred upon a local governmental entity, but the holding in Highland Park makes clear that this does not insulate defendant from ordinance-mandated utility fees. Just like the land bank in Highland Park, defendant cites Harbor Watch to support its assertion that it is immune from sewer charges. However, Harbor Watch involved contract-based condominium fees. In Harbor Watch the defendant, who was an involuntary owner, never agreed to the condominium bylaws through which the relevant fees arose. However, the present case involved the same ordinance at issue in Highland Park that applied to all property owners in the locality irrespective of their assent. Therefore, this Court's holding in Highland Park binds us to conclude that governmental immunity does not shield defendant from liability for the sewage charges.
Therefore, the LGFTA does not grant defendant immunity from sewage charges.
C. FEE OR TAX
Plaintiff argues that the trial court erred when it concluded that the stormwater charges in this case were taxes instead of user fees. We agree.
Whether a certain charge is a tax or a fee is important because if the charge is a tax and was not approved by the voters, it would violate § 31 the Headlee Amendment. See Const 1963, art 9, § 31; American Axle & Mfg, Inc v City of Hamtramck, 461 Mich. 352, 356; 604 N.W.2d 330 (2000) (noting that § 31 "adds the requirement of voter approval of new taxes"); Durant, 456 Mich. at 183 (recognizing that § 31 prohibits local governments from levying any taxes not authorized by law at the time that section was ratified without the approval of the voters at an election). In this case, the inquiry is important regardless of its constitutionality because defendant's special status makes it exempt from all taxes, not just unconstitutional taxes. See MCL 124.754(5) ("The property of an authority and its income and operations are exempt from all taxation by this state or any of its political subdivisions."; MCL 124.763 ("The property of the authority and its income and operation are exempt from all taxes and special assessments of this state or a local unit of government of this state.").
"There is no bright-line test for distinguishing between a valid user fee and a tax ...." Bolt v City of Lansing, 459 Mich. 152, 160; 587 N.W.2d 264 (1998). "Generally, a 'fee' is exchanged for a service rendered or a benefit conferred, and some reasonable relationship exists between the amount of the fee and the value of the service or benefit. A 'tax,' on the other hand, is designed to raise revenue." Id. at 161 (quotation marks and citations omitted). There are "three primary criteria to be considered when distinguishing between a fee and a tax." Id. These criteria have come to be known as the Bolt factors. First, "a user fee must serve a regulatory purpose rather than a revenue-raising purpose." Id. Second, user fees must be proportionate to the necessary costs of the service." Id. at 161-162. "[T]he first two criteria are closely related ...." Graham v
Kochville Twp, 236 Mich.App. 141, 151; 599 N.W.2d 793 (1999). Finally, the third criterion is voluntariness. Bolt, 459 Mich. at 162. A cost might be deemed voluntary if it is possible for property owners "to refuse or limit their use of the commodity or service." Id. "[T]hese criteria are not to be considered in isolation, but rather in their totality, such that a weakness in one area would not necessarily mandate a finding that the charge at issue is not a fee." Graham, 236 Mich.App. at 151. The party challenging the validity of the cost has the burden of proof. Jackson Co v City of Jackson, 302 Mich.App. 90, 98; 836 N.W.2d 903 (2013).
1. PURPOSE
Regarding the first factor, "[w]hile a fee must serve a primary regulatory purpose, it can also raise money as long as it is in support of the underlying regulatory purpose. Graham, 236 Mich.App. at 151. Further, "[a] fee also confers benefits only upon the particular people who pay the fee, not the general public or even a portion of the public who do not pay the fee." Id. The trial court's analysis of this issue is not detailed. The court concluded that "there is no question of fact that the charge serves a revenue rising [sic] purpose." The basis for the court's ruling seems to be its prior statement that
[defendant] points out that stormwater revenue is combined with sewer and water revenue in a single fund, and there is evidence that 100% of the capital improvement dollars in the single fund were intended to fund an entirely different system and infrastructure, without any funding for the stormwater system. Further, there is evidence that the charges are intended to defray portions of the cost of other water utility services for which the City is billed by the [Great Lakes Water Authority].
Notably, although the trial court said that defendant "point[ed] out" certain evidence, the court never identified what the actual evidence was.
In its response to plaintiff's motion for summary disposition, defendant presented its position and relied on its expert John Damico, who authored a report and provided testimony. In Damico's report, he opined that the charges do not serve primarily a regulatory purpose and instead exist for revenue-raising purposes only. His position was based on his view that the method of calculating the charges does not reflect an "accurate calculation of the contribution to runoff" and "therefore results in a wholly inaccurate and unreliable estimate of the cost of service to any parcel owner." He also pointed out that the methodology used does "not meet the minimum industry standards." Finally, Damico suggested that "[a] user fee requires accurate calculations not just best guess estimates." However, "whether a municipality has chosen the best, wisest, most efficient, or most fair system for funding a municipal improvement or service" is not related to whether the charge is designed as regulatory in nature. Shaw v Dearborn, 329 Mich.App. 640, 668; 944 N.W.2d 153 (2019). Damico's opinions that there are "better" or more accurate methods to reflect how much runoff a property has is insufficient to demonstrate that the charges at issue serve a primary revenue-generating purpose.
Plaintiff also argues that the trial court erred by not addressing its motion to strike Damico as an expert witness, but we decline to address that issue because, as discussed below, even when viewing Damico's testimony and report, it is clear that they are inadequate to show that the charges in this case were taxes or unreasonable.
Defendant also relies on its assertion that "100% of the capital improvement dollars in the single enterprise fund were intended to fund an entirely different system and infrastructure, without any funding for the sanitary or stormwater system." Defendant relies primarily on the deposition testimony of Damico in support of this proposition, but none of the cited pages relate to the capital improvement dollars purportedly funding an entirely different system and infrastructure, with no funding for the sanitary or stormwater system. Defendant also relies on deposition testimony from Damon Garrett, the Director of the Highland Park Water Department, for the proposition that there is only a "single fund" in Highland Park. Even assuming there is a single fund that comingles funds received for water, sewer, and stormwater services, that alone is not evidence that the stormwater charges are for a revenue-raising purpose. Defendant infers that, because there is a single fund, the money received for stormwater services is being used to pay for other purposes, mainly drinking water capital improvement, wastewater, and administrative costs. However, defendant has not identified any evidence to support that position. Additionally, plaintiff and Detroit entered into an agreement for a "satisfactory user charge system" that, consistent with 33 USC 1284(b)(1) of the Clean Water Act, 33 USC 1281, et seq., required recipients of waste treatment services to pay a "proportionate share . . . of the costs of operation and maintenance" of waste-treatment services. Thus, the charges at issue, on their face, are regulatory in nature.
For these reasons, we conclude that defendant has failed to show that the charges at issue had a revenue-raising purpose rather than a regulatory purpose. See Jackson Co v City of Jackson, 302 Mich.App. 90, 98; 836 N.W.2d 903 (2013).
2. PROPORTIONALITY
The second Bolt factor addresses whether the charge is proportionate to the necessary costs of the service. "[R]evenue derived from regulation, i.e., a fee, must be proportionate to the cost of the regulation, although we presume that the amount of the fee is reasonable unless the contrary is established." Graham, 236 Mich.App. at 151. "Notably, the presumption of reasonableness regarding municipal utility rates is a pertinent consideration when considering the second Bolt factor." Youmans v Bloomfield Charter Twp, 336 Mich.App. 161, 226-227; 969 N.W.2d 570 (2021) (quotation marks and citation omitted). This presumption is overcome if the fee "is facially or evidently so wholly out of proportion to the expense involved that it must be held to be a mere guise or subterfuge to obtain the increased revenue." Shaw v Dearborn, 329 Mich.App. 640, 654; 944 N.W.2d 153 (2019) (quotation marks and citation omitted). "[R]ate-making is a legislative function that is better left to the discretion of the governmental body authorized to set rates" because courts "are ill-equipped to deal with the complex, technical processes required to evaluate the various cost factors and various methods of weighing those factors required in rate-making." Id. (quotation marks and citation omitted).
In support of its argument that the charges are not proportionate, defendant largely relies on the same arguments related to the first factor, mainly that the method used to calculate the charges are "not accurate" and that charges are not "industry standard." For this factor, the trial court seemingly adopted these arguments. However, as discussed, the fact that there may be better or more accurate methods to calculate the runoff of a property does not mean that the charges are not proportionate to the costs of the service. Indeed, Damico admitted that he had no knowledge of the costs of the service or what portion of plaintiff's combined sewer volume consists of stormwater versus wastewater, and the proportionality of a cost is necessarily measured in relation to the cost of the service. Therefore, defendant did not satisfy its burden of proving a disproportionate rate.
3. VOLUNTARINESS
The third Bolt factor is the voluntariness of the charge. There is no way for property owners to avoid or otherwise mitigate the charge, so it is involuntary. "Nevertheless, the lack of volition does not render a charge a tax, particularly where the other criteria indicate the challenged charge is a user fee and not a tax." Wheeler v Shelby Charter Twp, 265 Mich.App. 657, 666; 697 N.W.2d 180 (2005). Looking at the factors in their totality, because the first two factors weigh heavily on the side of the charge being a fee, the fact that the fee is not voluntary does not override the countervailing factors showing that the charge is a fee. For these reasons, the trial court erred when it ruled that the stormwater charge was a tax and not a fee.
The trial court also concluded that even if the charge is a fee and not a tax, it is void because it is unreasonable. However, the court relied on the same evidence that it relied on when determining that the charge was a tax and not a fee. Moreover, without an analysis related to plaintiff's costs versus its charges, it cannot be shown that a particular rate is unreasonable. To perform a reasonableness analysis without this crucial component is to engage in impermissible speculation, which is insufficient to prevail with respect to summary disposition. Karbel v Comerica Bank, 247 Mich.App. 90, 97; 635 N.W.2d 69 (2001). Accordingly, the trial court's ruling that the fee is unreasonable is also erroneous.
IV. DEFENDANT'S COUNTERCLAIMS FOR 5/50 TAXES
Plaintiff argues that the trial court erred when it granted summary disposition in favor of defendant on its counterclaims. Defendant in its amended counterclaim, which was filed on November 7, 2019, alleged that under the Tax Reverted Clean Title Act (TRCTA), MCL 211.1021 et seq., it was owed 5/50 taxes from "2016 to present." However, elsewhere in the counterclaim, defendant clarified that it was owed payments for the years 2017, 2018, and 2019.
A. ABANDONMENT
As a preliminary matter, plaintiff argues that defendant abandoned its counterclaims by failing to appeal their initial dismissal by the trial court. When the trial court initially addressed the parties competing motions for summary disposition, it entered orders that, with no explanation, denied plaintiff's motion, granted defendant's motion, and closed the case. This closure occurred even though the granting of defendant's motion did not address plaintiff's claims for stormwater fees related to the seven properties that defendant did not involuntarily own and did not address defendant's counterclaims. On appeal, this Court recognized that the trial court's actions constituted a sua sponte dismissal of defendant's counterclaims. Highland Park, unpub op at 1. Despite defendant not appealing the trial court's rulings, this Court vacated "that part of the trial court's order closing the case" and remanded for the trial court "to issue a written opinion and order setting forth a thorough and detailed analysis of each of the issues presented in the parties' motions for partial summary disposition." Id. at 3. On remand, in its written opinion and order, the trial court agreed with plaintiff that any counterclaim for 5/50 taxes pertaining to tax year 2019 was premature and dismissed the claim without prejudice, but it ruled that there were genuine questions of material fact for tax years 2017 and 2018.
When plaintiff moved for summary disposition, it argued that res judicata barred the counterclaims. According to plaintiff, defendant's failure to appeal the earlier sua sponte dismissal of the counterclaims resulted in the claims being abandoned. As plaintiff observed, a party's failure to appeal an initial final order generally means that it cannot later challenge certain aspects of it. See Vanderwall v Midkiff, 186 Mich.App. 191, 201-202; 463 N.W.2d 219 (1990). However, that principle does not apply in this instance because this Court expressly vacated the portion of the trial court's order that sua sponte closed the case, i.e., dismissed defendant's counterclaims. Highland Park, unpub op at 3. So, even though defendant did not appeal the dismissal of its counterclaims, this dismissal was nevertheless reversed. Once this Court vacated the portion of the trial court's order dismissing defendant's counterclaims, the trial court had no option but to proceed as if the counterclaims had never been dismissed. See Farley v Carp, 287 Mich.App. 1, 9; 782 N.W.2d 508 (2010) ("[T]he trial court had no alternative in this case other than to comply with the direction of this Court in our previous opinion."). Therefore, those counterclaims were still pending on remand and were no longer dismissed, which meant that defendant was free to pursue them and defend against their dismissal.
B. RECOVERY OF 5/50 TAXES UNDER THE TRCTA
Under the TRCTA, when a property is sold by a land bank, it becomes "eligible tax related property" and under the General Property Tax Act (GPTA), MCL 211.1 et seq., it is exempt from the collection of taxes under the GPTA for five years. MCL 211.7gg(2); MCL 211.1022(c); MCL 211.1023. That property is then placed on a separate tax roll, where it is subject to the specific tax described under the TRCTA. MCL 211.7gg(4). That specific tax is described in MCL 211.1025, in pertinent part, as follows:
(1) Except as otherwise provide in [MCL 211.1025a], there is levied upon every owner of eligible tax revered property a specific tax to be known as the eligible tax reverted property specific tax.
(2) The amount of the eligible tax reverted property specific tax in each year is the amount of tax that would have been collected on that parcel under the [GPTA] if that parcel was not exempt under [MCL 211.1023]....
(3) The eligible tax reverted property specific tax shall be assessed, collected, and disbursed in accordance with this act.
(4) The eligible tax reverted property specific tax is an annual tax, payable at the same times, in the same installments, and to the same officer or officers as taxes imposed under the [GPTA], and the state education tax act, 1993 PA 331, MCL 211.901 to 211.906, are payable. The eligible tax reverted property specific tax is subject to the same collection fee and interest as taxes imposed under the [GPTA]. Except as otherwise provided in this section, the officer or officers shall disburse the eligible tax reverted property specific tax payments received by the officer or officers each year as follows:
(a) Fifty percent of the eligible tax reverted property specific tax to and among this state and cities, townships, villages, school districts, counties, or other taxing units, at the same times and in the same proportions as required by law for the disbursement of taxes collected under the [GPTA].
(b) Fifty percent of the eligible tax reverted property specific tax to the authority that sold or otherwise conveyed the property under the [LBFTA], which sale or conveyance caused the property to be eligible tax reverted property....
Thus, under the TRCTA, once the specific tax on the property is collected, 50% is remitted to the land bank authority for a period of five years following the sale of the property by the land bank authority.
When plaintiff initially moved for summary disposition with respect to defendant's counterclaim, it argued that any claim regarding tax year 2019 should be dismissed because it was not ripe. "The doctrine of ripeness is closely related to the standing doctrine in that it focuses on the timing of the action." Van Buren Twp v Visteon Corp, 319 Mich.App. 538, 553; 904 N.W.2d 192 (2017) (quotation marks and citation omitted). "The ripeness doctrine requires that a party has sustained an actual injury to bring a claim. A party may not premise an action on a hypothetical controversy." Id. at 554 (citation omitted).
Plaintiff explained that, pursuant to the TRCTA, it only disbursed the 5/50 taxes once each year, which necessarily had to occur after the winter taxes were collected in February of the following tax year. Because defendant's counterclaim was filed five months before the 2019 winter taxes were due, defendant had no right or claim to any 5/50 taxes for the 2019 tax year. The trial court agreed that, because the counterclaim was filed before the 2019 winter taxes were due, the claim was not ripe. In its order reopening the case following the first appeal, the trial court dismissed defendant's claim, without prejudice, pertaining to tax year 2019. Thus, with the claim pertaining to 2019 having been explicitly dismissed, it is not clear how the trial court later granted summary disposition in favor of defendant on that very same claim. With the 2019 claim not pending at the time of the parties' subsequent motions for summary disposition, we conclude that without defendant having filed an amended pleading to re-allege or otherwise revive those claims pertaining to tax year 2019, the trial court erred as a matter of law when it later treated those claims as never haver having been dismissed.
Plaintiff next argues that defendant could not prevail on any claims pertaining to tax years 2020 and 2021 because those claims were never pleaded. We agree. The amended counterclaim was filed in 2019. Thus, the allegations could not involve claims for unpaid taxes in future years.
In this instance, at the time of the amended counterclaim, defendant had not suffered any actual injury related to tax years 2020 or 2021. Thus, for the same reasons the court initially dismissed the claim for tax year 2019, it should have refrained from addressing any purported claims for tax years 2020 and 2021. In sum, the counterclaim never alleged any claims for tax years 2020 or 2021, and the trial court erred when it implicitly allowed defendant to add those claims without amending the counterclaim.
To be clear, defendant never asserted any claims or damages for tax years 2020 or 2021 in its counterclaim. Instead, defendant requested damages associated with those tax years in its second motion for summary disposition filed on August 6, 2021. Thus, even if the counterclaim could be viewed as alleging a claim for tax year 2021, with 2021 not yet completed and the tax receipts not due until February 2022, such a claim necessarily would be unripe at the time of the summarydisposition motion filing.
That leaves the claims for tax years 2017 and 2018 because any claims for 2019-2021 were not properly filed at the trial court. We initially recognize that in its second motion for summary disposition, contrary to its earlier filings, defendant did not assert that it was owed any money for 5/50 tax payments for the 2017 tax year. Instead, it asserted it was owed money for tax years 2018-2021. Thus, only 2018 remains. Regarding liability, plaintiff argues that the trial court erred when it granted defendant's motion for summary disposition regarding the 5/50 tax payments because defendant provided no evidence that plaintiff actually received any tax payments. Under the TRCTA, plaintiff's obligation to pay 5/50 taxes is based on the amount of "eligible tax reverted property specific tax" it "receive[s]." MCL 211.1025(4)(b). Plaintiff argues that with no evidence presented regarding the amount of specific taxes it received in any tax year, defendant failed to show that it was entitled to judgment as a matter of law. While speculation and conjecture are insufficient to support a motion for summary disposition, Karbel, 247 Mich.App. at 97, the inference involved here is more than mere speculation. The law requires property owners to pay their taxes. A natural inference from that requirement is that taxes were indeed paid, thereby making plaintiff liable. Thus, summary disposition in favor of defendant on the issue of liability is warranted.
However, whether summary disposition was warranted regarding the amount of damages for the 2018 tax year is a separate inquiry. Regarding tax year 2018, defendant asserted that it was owed $14,040.46 in 5/50 revenue for that year, but it also acknowledged that it had received a total of $48,023.18 in 5/50 payments from the city. The evidentiary support for defendant's various assertions is wanting. Notably, in its motion for summary disposition, defendant did not cite any evidence in support of its assertions of the various amounts owed by plaintiff. Moreover, the nearly 400 pages of exhibits attached to that motion did not reveal any obvious source of how defendant derived those figures. This failure to produce evidence is fatal to defendant's motion pursuant to MCR 2.116(C)(10). See Quinto v Cross &Peters Co, 451 Mich. 358, 362; 547 N.W.2d 314 (1996) ("In presenting a motion for summary disposition, the moving party has the initial burden of supporting its position by affidavits, depositions, admissions, or other documentary evidence."). The trial court erred when it failed to deny defendant's motion for summary disposition with respect to damages. Moreover, defendant admits that plaintiff's 5/50 payments to it did not include any information regarding which properties those payments applied to.
Likewise, it is not evident which tax years those payments were for. This also creates a question of fact, which precludes summary disposition under MCR 2.116(C)(10) as to the amount of damages.
V. CONCLUSION
The trial court correctly ruled that the statute of limitations did not preclude defendant from arguing that the at-issue stormwater fees were actually disguised taxes. However, the court erred when it concluded that the charges were taxes because the totality of the pertinent evidence established that the charges were fees. The court further erred when it ruled that the LBFTA shielded defendant from liability for those stormwater fees. With respect to defendant's counterclaims, the trial court properly granted summary disposition regarding the issue of liability in favor of defendant for its claims pertaining to tax year 2018. However, the court erred when it included tax years 2019 and beyond because they either had been previously dismissed without prejudice and never revived, or had never been pleaded to begin with. Finally, the trial court erred when it granted summary disposition in favor of defendant regarding the amount of damages it was owed for the 5/50 payments.
Affirmed in part, reversed in part, and remanded for proceedings consistent with this opinion. We do not retain jurisdiction.