DOWNRIVER PLAZA GROUP v SOUTHGATE
Docket No. 95019
Supreme Court of Michigan
March 22, 1994
Rehearing denied May 16, 1994
444 Mich 656
Argued October 7, 1993 (Calendar No. 11). Decided March 22, 1994. Rehearing denied, 445 Mich 1203.
In an opinion by Chief Justice CAVANAGH, joined by Justices BRICKLEY, BOYLE, RILEY, GRIFFIN, and MALLETT, the Supreme Court held:
The city had the legal authority to assess user fees in fiscal years 1987-91; the retroactive validation of previously collected fees is consistent with the requirements of due process.
1. The city had the authority to levy user fees in 1987 and thereafter under the Drain Code and its council‘s 1975 resolution. While the implementation of the user charge system was initially deficient, the 1990 resolution, which was justified, satisfactorily corrected the defect. Thus, the assessments for 1987-91 are valid.
2. The retroactive validation was consistent with due process; its features serve a legitimate purpose that is achieved by rational means. The plaintiffs had been aware of the new drain system because of the ad valorem taxes they had to pay to help meet the drain‘s construction costs. More importantly, the 1975 resolution gave them direct notice that the city would impose charges on users. While their liability was deferred between 1980 and 1987, they did not have a right to have the deferral continue. At no time did the city represent that the services
Reversed.
Justice LEVIN, dissenting, stated that because
In the absence of a saving clause, an act amending a specific section of a former act strikes the former section from the law, obliterating it entirely and substituting the new section in its place. Thus, when the city first attempted to levy a service charge respecting the intracounty drain, its power to do so under
195 Mich App 192; 489 NW2d 178 (1992) reversed.
Fried & Levitt, P.C. (by David M. Fried and Dennis Watson), for the plaintiffs.
John F. Gilhool for the defendant.
Amicus Curiae:
Kohl, Secrest, Wardle, Lynch, Clark & Hampton (by John M. Donohue) for Michigan Municipal League.
OPINION OF THE COURT
CAVANAGH, C.J. Plaintiffs, property owners in the City of Southgate, filed this action against Southgate because the city placed a charge for the operation and maintenance costs of the Southgate-Wyandotte Drainage District (SWDD) on their 1987 and 1988 tax bills. Plaintiffs allege that the charges were illegal, and seek recovery of monies paid. The trial court ruled that the fees were valid, and denied recovery. The Court of Appeals re-
We hold that (1) Southgate was legally permitted to assess user fees in fiscal years 1987-91, and (2) the retroactive validation of previously collected fees is consistent with the requirements of due process.2
I. FACTUAL AND PROCEDURAL HISTORY
In 1975, Southgate, through Wayne County, received a $40,793,250 federal grant to construct a flood and pollution control plan that would operate in the SWDD. The SWDD services sixty percent of the population of Southgate. The federal government made the grant pursuant to the federal
The federal statute, and its accompanying regulations,4 required grant recipients to adopt “a system of charges” so as to assure that users of the improved drains would pay a proportionate share of the operating and maintenance costs for the drains.5 To that end, on April 17, 1975, the Southgate City Council passed a resolution in which it expressly adopted, and agreed to implement “a system of User Charges.”
Between 1980-87, the Wayne County Drainage Board (WCDB) assessed operation and maintenance costs against Southgate. However, the WCDB did not bill Southgate directly for these costs because the Wayne County Drainage Commissioner had unilaterally decided to apply excess construction funds to the initial charges. By 1988, this surplus had been depleted, and on March 17, 1988, the WCDB sent Southgate its first bill for operation and maintenance costs.
In response, the Southgate City Council planned a special public hearing for April 13, 1988, to discuss implementation of the user charge system that it had previously approved in 1975. The Southgate City Council published notice of the meeting in the city newspaper on April 3, 1988, and April 6, 1988.
On April 13, 1988, participants at the meeting discussed the user charge system and, in particular, the mathematical formula used to calculate individual user charges.6 Because less than a full Southgate City Council was present, the participants did not pass a resolution to implement the user charge system. Instead, the Southgate City Council tabled the user charge item until the next scheduled city council meeting.
Plaintiffs, users of the drains, were assessed charges on their 1987 and 1988 tax bills. While plaintiffs paid the assessments, they subsequently claimed that the fees were invalid. Thereafter, plaintiffs filed suit in the Wayne Circuit Court, demanding a refund of monies paid.
On July 28, 1989, the trial judge granted the plaintiffs’ partial summary disposition, finding that Southgate had violated its charter when it collected user charges for 1987 and 1988. Specifically, the Southgate City Council had failed to incorporate the rate for user charges into the relevant resolutions, contrary to charter requirements. On the basis of this error, the trial judge concluded that the 1987 and 1988 assessments were invalid.
On August 30, 1989, the Southgate City Council passed a resolution adopting “the individual user charge formula as presented initially at the public hearing on April 13, 1988 . . . .” The Southgate City Council then scheduled another hearing for January 3, 1990, in order to discuss assessed fees with the public.
On January 3, 1990, the Southgate City Council passed its final resolution regarding the user charge system. This resolution effectively validated all prior resolutions, and affirmed or reaffirmed user charges for fiscal years 1987-91.
On April 19, 1990, the trial judge entered a judgment of no cause of action in favor of Southgate, and against the plaintiffs. The trial judge found that the January 3, 1990, resolution sufficiently cured the previous charter violation. The
The Court of Appeals reversed this decision, ruling that retroactive application of the January 3, 1990, resolution would violate the plaintiffs’ rights under due process. The Court ordered Southgate to refund monies paid for the 1987 and 1988 assessments.7
On June 23, 1993, this Court granted leave.8
II. VALIDITY OF THE USER CHARGES
The plaintiffs claim that the assessments on their 1987 and 1988 tax bills are invalid. We disagree. Southgate had the authority to levy user fees in 1987 and thereafter, and, while the implementation of the user charge system was initially deficient, the 1990 resolution satisfactorily corrected the defect. Moreover, this Court finds that the retroactive application of the 1990 resolution is justified. Thus, we reverse the Court of Appeals decision, and hold that the assessments for years 1987-91 are valid.
A. AUTHORITY TO ASSESS USER CHARGES
Michigan‘s Drain Code enabled Southgate to legally assess user charges. The Drain Code is the comprehensive authority for drain systems operating in Michigan. As explained in Toth v Waterford Twp, 87 Mich App 173, 176; 274 NW2d 7 (1978),
The statute represents the Legislature‘s attempt
to codify all laws regarding drains and to provide for detailed, specific and exclusive procedures to be followed in proceedings to construct and maintain drains. . . . Absent fraud, all matters pertaining to the locating, constructing, cleaning, extending, etc., of drains are to be determined according to the procedures set forth in the Drain Code.
The SWDD is an intracounty drain system governed by chapter 20 of the Drain Code. Section 490 of chapter 20 unreservedly authorizes public corporations, such as Southgate, to collect “service charges” from property owners who utilize public drains.
In place of or in addition to levying special assessments, the public corporation, under the same conditions and for the same purpose, may exact connection, readiness to serve, availability, or service charges to be paid by owners of land directly or indirectly connected with the drain project, or a combination of projects . . . . [
MCL 280.490(4) ; MSA 11.1490(4).]
The plaintiffs argue that Southgate lacked the authority to assess user fees in 1988 because, by that time, the drain project had already been completed. Plaintiffs rely upon
The plaintiffs’ reliance upon
In addition, the Southgate City Council‘s own resolution, passed unanimously in 1975, empowered Southgate to collect user charges. In effect, the resolution obligated Southgate to make users pay the operation and maintenance costs for the new drain system.
On these bases, this Court holds that Southgate had the legal authority to assess user charges in 1987 and thereafter.
(iii) Notice that the proposed project is to be fully or partly financed by special assessment against property owners within the proposed district.
(iv) A statement that alternative plans of financing the proposed project will be on the meeting agenda.
(v) Notice of the time, date, and place of a meeting to be held by the legislative body of the public corporation to hear objections to the proposed drain project or special assessment, fee, or charge to be levied under this section. Notice prescribed by this subparagraph shall be mailed not less than 10 days before the meeting, and in addition, shall be given the manner prescribed by Act No. 267 of the Public Acts of 1976, as amended, being sections 15.261 to 15.275 of the Michigan Compiled Laws, and shall be published in a newspaper of general circulation in the public corporation. [MCL 280.489a(c) ; MSA 11.1489(1)(c).]
While finding that Southgate was legally permitted to assess user charges, we also recognize that implementation of the user charge system was originally flawed. Section 162 of the Southgate City Charter provides that when rates are established, the “Council shall fix such rates and charges by resolution.” This provision thus required the Southgate City Council to explicitly set forth the individual user rates in one of its resolutions. Undoubtedly, the Southgate City Council attempted in good faith to comply with § 162‘s direction. Nonetheless, the efforts technically fell short because the individual formula, while repeatedly discussed, was never expressly incorporated into a resolution. For this reason, the trial court was forced to find the 1987-88 assessments to be invalid.
However, Southgate subsequently took comprehensive steps to remedy the procedural oversight. On August 30, 1989, a little over a month after the trial judge‘s decision, Southgate unanimously passed a resolution that (1) incorporated the precise individual user charge formula, (2) directed interested persons to review the formula at the Office of the City Clerk, and (3) directed persons aggrieved by the formula to file a complaint with city officials within twenty-eight days. The Southgate City Council also attached a copy of the user formula to the resolution.
The Southgate City Council also notified property owners of another public meeting scheduled for January 3, 1990, in order to discuss assessed user charges. While not required under the Drain Code to do so, the Southgate City Council advertised the meeting by providing the estimated eight
Lastly, the Southgate City Council unanimously passed the final resolution regarding the user charge system at the January 3, 1990, hearing. The resolution reaffirmed the substance of all prior related resolutions. In particular, the resolution (1) readopted the individual user charge formula, (2) affirmed or reaffirmed that aggrieved users had twenty-eight days within the annual adoption of the user charge to file a grievance with city officials, and (3) reaffirmed the operation and maintenance costs for the SWDD for fiscal years 1987-91.
Despite Southgate‘s extensive efforts to cure the charter violation, the Court of Appeals ruled that retroactive application of the January 3, 1990, resolution would violate the plaintiffs’ rights under due process. To reach this conclusion, the Court of Appeals relied exclusively upon Metro Homes v City of Warren, 19 Mich App 664; 173 NW2d 230 (1969), cert den 398 US 959 (1970). We find this reliance improper because the Metro Homes pronouncements regarding due process limits on retroactivity are outdated. The appropriate focus rests with this Court‘s recent analysis of the retroactivity issue set forth in Romein v General Motors, 436 Mich 515; 462 NW2d 555 (1990), and the United States Supreme Court‘s subsequent affirmance of that analysis in General Motors Corp v Romein, 503 US 181; 112 S Ct 1105; 117 L Ed 2d 328
We begin our analysis of plaintiffs’ due process claim with mention of the applicable standard of review. We construe the Southgate City Council‘s January 3, 1990, resolution to be an economic legislative measure. When scrutinizing economic and social legislation, this Court applies the rational basis standard of review.10 Applying this standard, the resolution “‘come[s] to the Court with a presumption of constitutionality,‘” and “the burden is on the one complaining of a due process violation to establish that the legislature has acted in an arbitrary and irrational way.” Romein, 436 Mich 525, quoting Pension Benefit Guaranty Corp v RA Gray & Co, 467 US 717, 730; 104 S Ct 2709; 81 L Ed 2d 601 (1984).
Our specific concern in this case lies with the retroactive components of the January 3, 1990, resolution. As explained by the United States Supreme Court, retroactivity invokes special considerations:
Retroactive legislation presents problems of unfairness that are more serious than those posed by prospective legislation, because it can deprive citizens of legitimate expectations and upset settled transactions. [Romein, 112 S Ct 1112.]
The Court has also advanced that what may be a justification for prospective legislation, may not suffice for retroactive legislation.11
While cognizant of the unique concerns associ-
The rational relationship test applies to economic legislation whether it is retroactive or not. The retroactive aspects of legislation must meet the test of due process, “but that burden is met simply by showing that the retroactive application of the legislation is itself justified by a rational legislative purpose.” [Romein, 436 Mich 528, quoting Pension Benefit Guaranty, supra at 730.]
In affirming our decision in Romein, the United States Supreme Court articulated the due process test for retroactivity as follows: “a legitimate legislative purpose furthered by rational means.” Romein, 112 S Ct 1112.
Applying the requisite test, this Court finds that the retroactive features of the January 3, 1990, resolution serve a legitimate purpose. Retroactive validation of the 1987-88 user charges enable Southgate to impose operation and maintenance costs for the much needed and improved drain system, and only upon those that directly benefit from that system—the drain users. Significantly, when the plaintiffs challenge the retroactive application, they do not specifically argue that the costs are unreasonable in amount—they simply do not want to pay for their use of the drains.
When a court evaluates whether retroactive operation promotes a sound objective, it must specifically consider the extent of the parties’ reliance:
The justification for retrospective legislation must take into account the possibilities that the parties acted in reliance on current law and that
they may have altered their conduct to reduce liability if they had anticipated the imposition of later liability. [Romein, 436 Mich 527.]
While plaintiffs do not point to a specific law, they do contend that they relied on the fact that they did not have to pay user fees in 1980-87. They urge that they developed an expectation that Southgate would not charge them for using the drains. This Court acknowledges that the plaintiffs may have relied as they describe because of the situation that resulted when the County Drain Commissioner applied surplus ad valorem construction funds to starting-operation and maintenance costs. However, we are not persuaded by the plaintiffs’ belated assertion that they would have relocated within Southgate had they known that they would eventually have to pay user charges.
The SWDD provides service for sixty percent of the population in Southgate. Before 1975, the flooding and pollution within the SWDD had escalated to immense proportions—so much so that the federal government found it necessary to extend a $40 million grant in an effort to remedy the problem. Since 1980, the enhanced drainage system has provided users with health and economic benefits and has operated as an effective solution to an obstacle that was both widespread and serious. In light of the beneficial service that the drain system provides, we are not convinced that the plaintiffs would have considered actually moving outside of the SWDD simply to avoid paying user charges for the service.
This Court also finds that the January 3, 1990, resolution is a rational means of achieving the city‘s legitimate objective. The form of retroactivity should not produce arbitrary or unreasonable
Since 1975, the plaintiffs had been aware of the new drain system on the basis of the ad valorem taxes that they had paid to help meet the drains’ construction costs. More importantly, by virtue of the 1975 resolution, the plaintiffs had been given direct notice that Southgate would impose charges on users. At no time did Southgate represent that drain service would be gratuitous. Hence, the plaintiffs’ conclusion that they would never be charged for drain usage was unreasonable.
“This Court has held that a remedial statute which acts retroactively does not violate due process so long as it does not impair vested rights.” Romein, 436 Mich 531. Plaintiffs’ reliance did not give rise to a vested right. The plaintiffs may have hoped that they would never be charged for drain usage. However, their obligation to pay user fees had been in place since 1975. While the plaintiffs’ direct liability was deferred between 1980 and 1987, the plaintiffs did not possess a vested right to have that deferral continue. But for the charter violation, Southgate‘s collection of fees would have been proper in 1987, and would not have infringed on any legitimate rights of the plaintiffs. Similarly, when, on January 3, 1990, Southgate retroactively validated collected fees for 1987-89, it did not abrogate any vested rights belonging to the plaintiffs.
This Court concludes that retroactive application of the January 3, 1990, resolution represents a rational means to a legitimate purpose, and, thus, is consistent with due process. Accordingly, we reverse the Court of Appeals decision.
III. CONCLUSION
We hold that Southgate had the legal authority to assess the plaintiffs user fees. We also find that retroactive application of the January 3, 1990, resolution, curing a procedural irregularity regarding prior charges, comports with notions of due process.
Accordingly, we reverse the decision of the Court of Appeals.
BRICKLEY, BOYLE, RILEY, GRIFFIN, and MALLETT, JJ., concurred with CAVANAGH, C.J.
LEVIN, J. (dissenting). The plaintiffs, Downriver
The city contends that
I
Section 490 is found in chapter 20 (intracounty drains) of the Drain Code.4 Section 490 provides for levying of special assessments against land especially benefited by the construction of an intracounty drain, and for levying of service charges, in place of or in addition to special assessments, to be paid by owners of land directly or indirectly connected to the drain.
A
Intracounty drains may be located, established and constructed when “necessary for the public
When first enacted, the Drain Code did not provide for levying of either special assessments or service charges, and, thus, all costs respecting intracounty drains were then funded through ad valorem or other taxation.
The Drain Code was amended by 1957 PA 38 to add
Section 490 was amended by 1965 PA 253 to provide that in “lieu of or in addition to levying special assessments, the public corporation under the same conditions and for the same purpose may exact connection, readiness to serve, availability or service charges to be paid by owners of land directly or indirectly connected with the drain project, or any combination thereof.” (Emphasis added.)
B
It appears that a federal grant of over forty
The federal statute, pursuant to which the funds were provided, required recipients to adopt “a system of charges,”8 and, in this connection, the Southgate City Council, in 1975, resolved to implement “a system of User Charges,” but nothing further was done to actually levy user charges until after the receipt in 1988 of the first bill for operation and maintenance costs.
C
In 1980, the same year construction of the drain was completed,
This section shall not be construed to prevent
the assessment of public corporations at large under this chapter. In place of or in addition to levying special assessments, the public corporation, under the same conditions and for the same purpose, may exact connection, readiness to serve, availability, or service charges to be paid by owners of land directly or indirectly connected with the drain project, or a combination of projects, subject to section 489a. [
MCL 280.490(4) ; MSA 11.1490(4). Emphasis added.]
Section 489a provides that if a public corporation determines that a part of the land will be especially benefited by a “proposed drain project so that a special assessment, fee, or charge may be levied” under
Section 489a further provides that before actually filing a petition to constitute a drainage district, the legislative body may decide to proceed with the project and levy a special assessment, fee, or charge, or to proceed without levying a special assessment, fee, or charge, or to reject or withdraw from the proposed drain project. Persons aggrieved may appeal by instituting an action in the circuit court.11
II
The majority holds that plaintiffs’ reliance on
Consequently, it would not have been possible for Southgate to ever have complied with
§ 489a ‘s requirements. Clearly, the Legislature intended that§ 489a would have only prospective effect. Thus, we agree with the trial judge‘s conclusion that 489a is “without meaning in this case.” Further, we conclude that Southgate had valid authority to levy user fees under the appropriate Drain Code sections.12
The majority ignores plaintiffs’ argument that, in the absence of a saving clause, an act amending a specific section of a former act strikes the former section from the law, obliterating it entirely and substituting the new section in its place.13 One of this Court‘s recent pronouncements is Ballog v Knight Newspapers, Inc, 381 Mich 527; 164 NW2d 19 (1969), in which this Court, reversing a decision of the Court of Appeals, held that an amendment of a provision of the Revised Judicature Act concerning interest on a judgment should be given retrospective effect to all actions accrued, pending, and future. As set forth in the headnotes, this Court ruled:
An amendatory act has a repealing force, by the mechanics of legislation, different from that of an independent statute, repugnancy not being an es-
sential element of the implied repeal of specifically amended sections.
* * *
The original or older form of a section of a statute ceases to exist upon amendment and the section, as amended, supersedes it and becomes a part of the statute for all intents and purposes as if the amendment had always been there.
* * *
The effect of an amendment to a specific section of an act is to strike the old section from the law, in the absence of a saving clause, obliterate it entirely, and substitute the new section in its place, and while provisions carried over are deemed continued rather than repealed and enacted anew, they have their force from the new act and not the old. [Id., pp 527-528. Emphasis added.]
Similarly see the following decisions of this Court: Kalamazoo City Ed Ass‘n v Kalamazoo Public Schools, 406 Mich 579; 281 NW2d 454 (1979), Lahti v Fosterling, 357 Mich 578; 99 NW2d 490 (1959), Rookledge v Garwood, 340 Mich 444; 65 NW2d 785 (1954), Detroit Club v State of Michigan, 309 Mich 721; 16 NW2d 136 (1944), and People v Lowell, 250 Mich 349; 230 NW 202 (1930), and the following decisions of the Court of Appeals: Morgan v Taylor School Dist, 187 Mich App 5; 466 NW2d 322 (1991), Priest v Canada Life Assurance Co, 179 Mich App 731; 446 NW2d 352 (1989), and Avon Twp v State Boundary Comm, 96 Mich App 736; 293 NW2d 691 (1980).
I would hold, on the authority of the cited decisions of this Court, that in 1988, when the city first attempted to levy a service charge respecting this intracounty drain, its power to do so under
The majority has not justified its assumption that “the Legislature intended that
The 1979 amendment, adding
The Legislative Analysis continues that although the Drain Code requires that a hearing be held after a petition for a drain project has been filed, “landowners who are specially assessed claim that they often don‘t find out about the hearing and don‘t know they are being assessed until they get their tax bills.” And that the “bill would allow property owners to voice their concerns in the early planning stages of a drain project. Many landowners feel that their objections and comments will be considered more seriously before a petition for a drain project is filed and money is spent for engineering plans.” The Department of Agriculture suggested that “public health is the obligation of the municipalities and should not be assessed to the individual landowners.” Id.
Having in mind the evil at which the 1979 amendment was aimed—the levying of special
A decision of this Court that the 1979 amendment has retrospective effect, with the result that the cost of annual maintenance and operation of this public health project will be paid by ad valorem and other taxation of the entire community, is no more unreasonable or unfair to the forty percent who do not live in the drainage district than special assessment, without an opportunity to be heard before a city decides to specially assess or surcharge, is to the sixty percent who own property in the drainage district. Good arguments can be made on both sides of the question.
I would adhere to the rule of construction set forth in Ballog and the other cited cases, and hold that it is immaterial that the city was unable, in 1988, to comply with the prerequisites set forth in
Notes
(c) Forward by first-class mail to each person whose name and address appears on the tax rolls as owning land within the proposed district, at the address shown on the last tax assessment roll of the public corporation, a notice which contains all of the following:
(i) A general description of the proposed drain project.
(ii) Expected benefits of the proposed drain project.