NL VENTURES VI FARMINGTON, LLC v CITY OF LIVONIA
Docket No. 323144
Court of Appeals of Michigan
December 22, 2015
Submitted December 9, 2015. Approved for publication January 28, 2016. Leave to appeal sought.
314 MICH APP 222
NL Ventures VI Farmington, LLC (plaintiff), filed a complaint in the Wayne Circuit Court against the city of Livonia (defendant). Plaintiff leased property to Awrey Bakeries, LLC (Awrey), and beginning in 2009, Awrey began failing to pay its bill for water service to the leased property. Defendant did not pursue collection from Awrey or certify the arrearages and place them on the tax roll or shut off water service to Awrey. Defendant continued to provide water service to Awrey without requiring timely payment. Awrey went out of business in 2012 and later filed for bankruptcy. Defendant initiated proceedings against Awrey to collect the water service arrearages. Defendant, Awrey, and Awrey‘s lender entered into a settlement agreement calling for Awrey‘s partial payment of the total owed for water service. Defendant then initiated proceedings against plaintiff to collect the balance of the unpaid water bills or to enforce its lien against plaintiff‘s property. Defendant filed a motion for summary disposition of plaintiff‘s claims. The trial court, David J. Allen, J., acknowledged that defendant did not comply with its own ordinance that authorized defendant to certify the arrearages each year and to place them on the property tax rolls for the property receiving water service. The court denied defendant‘s motion for summary disposition, and it granted summary disposition to plaintiff on one count (the liens were invalid and unenforceable). The court declined to rule on plaintiff‘s remaining claims. The court agreed with plaintiff that the liens were invalid and unenforceable because defendant did not comply with the applicable law and local ordinance governing liens arising from a consumer‘s failure to pay for its water service. The court denied defendant‘s motion for reconsideration, and it granted defendant‘s motion to stay the proceedings pending the outcome of defendant‘s appeal in the Court of Appeals.
The Court of Appeals held:
- The trial court erred by finding that the liens against plaintiff‘s property created by Awrey‘s failure to pay for water service were invalid and unenforceable. Defendant is entitled to payment of the arrearages within the three-year statutory limitations period. Defendant‘s failure to strictly comply with its own ordinance did not negate the lien on the property arising from
MCL 123.162 . The creation of a lien on real property as security for payment of water service a municipality provides to that property is automatic. However, there is no single method by which a municipality must respond to delinquencies in payment for water service. The applicable statutory provisions and defendant‘s own ordinance authorize defendant to (1) shut off water service to the property, (2) initiate proceedings to collect the money owed for water service received, or (3) certify the lien to the city assessor for entry of the lien amount on the city tax roll. A lien against real property for payment for water service to the property arises as soon as water is delivered to the property. A lien is not invalidated or altered in any way when a municipality opts not to exercise any of the methods available for collecting delinquent payments and continues providing water to the property. - Defendant‘s knowledge that plaintiff‘s tenant, Awrey, was using the water service provided did not relieve plaintiff of responsibility for the water service charges in arrears. A landlord must engage in an affirmative action to avoid liability for the arrearages belonging to the landlord‘s tenant. Plaintiff did not take any affirmative action to relieve itself of the obligation to pay for water service to its property. Plaintiff did not file an affidavit attesting that Awrey leased the property and was responsible for paying for water service, and plaintiff did not provide a copy of Awrey‘s lease.
- The trial court erred by failing to address plaintiff‘s remaining equitable claims. Plaintiff‘s remaining claims did not require remand for completion of discovery, however, because each claim should have been dismissed as a matter of law under
MCR 2.116(C)(7) andMCR 2.116(C)(8) . Plaintiff‘s equitable estoppel or waiver claim arose from defendant‘s subordination of its liens to those held by plaintiff‘s lender. Plaintiff argued that defendant‘s subordination agreement with the lender diverted funds to the lender that could have been used to pay plaintiff‘s outstanding bills for water service. Plaintiff‘s claim of equitable estoppel failed because there was no evidence that defendant made any representations to plaintiff upon which plaintiff relied and that would have prejudiced plaintiff if defendant was permitted to deny those representations. - Plaintiff‘s claims of unjust enrichment and quantum meruit failed because plaintiff did not demonstrate that defendant received a benefit from plaintiff as a result of the subordination agreement that, if retained, would result in defendant‘s unjust enrichment. Moreover, there was no merit in its argument that defendant‘s subordination of its liens to Awrey‘s lender constituted a voluntary relinquishment of any benefits it was entitled to receive.
- Plaintiff‘s claims of tortious interference and civil conspiracy could not overcome defendant‘s governmental immunity defense. Plaintiff failed to plead that the tortious interference occurred during defendant‘s exercise of a nongovernmental function or that a statutory exception to governmental immunity applied. In short, plaintiff failed to plead in avoidance of governmental immunity. A government function is an activity, either expressly or impliedly mandated or authorized by constitution, statute, local charter or ordinance, or other law. To determine whether an identified activity is a governmental function requires the Court to focus on the general activity involved and not the specific conduct. At all times relevant to this case, defendant operated the municipal water supply, which is routinely acknowledged to be a governmental function.
Vacated and remanded. Costs
Honigman Miller Schwartz and Cohn LLP (by Jason Conti and Gregory J. DeMars) for plaintiff.
Donald L. Knapp, Jr., and Michael E. Fisher for defendant.
Amici Curiae:
Eric D. Williams for the Michigan Municipal League and the Michigan Townships Association.
Dykema Gossett PLLC (by Jill M. Wheaton, Kathryn J. Humphrey, and Mark D. Jacobs) for the City of Detroit Water and Sewerage Department.
Before: SAWYER, P.J., and BECKERING and BOONSTRA, JJ.
PER CURIAM. Defendant appeals the order granting summary disposition in favor of plaintiff, which invalidated accumulated water and sewer charges and liens against plaintiff‘s real property. Defendant further appeals the trial court‘s denial of its motion for summary disposition on plaintiff‘s remaining tort claims. Defendant‘s motion for summary disposition was premised on governmental immunity and the failure to state a viable claim. We vacate the trial court‘s order and remand for further proceedings.
The factual and procedural history of this litigation is not disputed. Rather, this appeal is focused on the interpretations of, and interrelationships among, various statutory schemes, including (1)
Defendant first contends that the trial court erred by granting summary disposition in favor of plaintiff, which resulted in voiding and dismissing defendant‘s liens for unpaid water bills incurred by Awrey Bakeries, LLC (Awrey) while Awrey was a tenant on plaintiff‘s real property. Defendant argues that the trial court misconstrued and misinterpreted the meaning and interactions of the relevant statutory provisions in reaching its erroneous decision. Predictably, plaintiff lauds the trial court‘s decision and reasoning, emphasizing the correctness of the trial court‘s determination that defendant‘s failure to abide by or follow its own ordinance regarding the placement of water arrearages on the tax rolls necessitated voiding the liens, rendering them unenforceable.
Questions of statutory interpretation are reviewed de novo. Omelenchuk v City of Warren, 466 Mich 524, 527; 647 NW2d 493 (2002), overruled in part on other grounds Waltz v Wyse, 469 Mich 642; 677 NW2d 813 (2004). A trial court‘s decision on a motion for summary disposition under
When reviewing a motion under
“A motion for summary disposition brought under
There is a dearth of published caselaw discussing the statutory provisions relevant to this matter. The most efficacious approach to unraveling the complexities of this case requires a study of the actual statutory language involved in an attempt to determine how the provisions are to be applied to the circumstances of this case. The starting point is the recognition of certain, basic tenets of statutory construction.
The primary goal of statutory interpretation is to give effect to the intent of the Legislature. This determination is accomplished by examining the plain language of the statute itself. If the statutory language is unambiguous, appellate courts presume that the Legislature intended the meaning plainly expressed and further judicial construction is neither permitted nor required. Under the plain-meaning rule, courts must give the ordinary and accepted meaning to the mandatory word “shall” and the permissive word “may” unless to do so would frustrate the legislative intent as evidenced by other statutory lan- guage or by reading the statute as a whole. [Atchison v Atchison, 256 Mich App 531, 535; 664 NW2d 249 (2003) (citations omitted).]
The statutory provisions pertaining to municipal water and sewage liens appear
A municipality which has operated or operates a water distribution system or a sewage system for the purpose of supplying water or sewage system services to the inhabitants of the municipality, shall have as security for the collection of water or sewage system rates, or any assessments, charges, or rentals due or to become due, respectively, for the use of sewage system services or for the use or consumption of water supplied to any house or other building or any premises, lot or lots, or parcel or parcels of land, a lien upon the house or other building and upon the premises, lot or lots, or parcel or parcels of land upon which the house or other building is situated or to which the sewage system service or water was supplied. This lien shall become effective immediately upon the distribution of the water or provision of the sewage system service to the premises or property supplied, but shall not be enforceable for more than 3 years after it becomes effective. [
MCL 123.162 (emphasis added).]
In accordance with
turn,
Prioritization of liens created within this statutory scheme and a mechanism for lessors to avoid liability for the imposition of liens are discussed in
A municipality may discontinue water service or sewage system service from the premises against which the lien created by this act has accrued if a person fails to pay the rates, assessments, charges, or rentals for the respective service, or may institute an action for the collection of the same in any court of competent jurisdiction. However, a municipality‘s attempt to collect these sewage system or water rates, assessments, charges, or rentals by any process shall not invalidate or waive the lien upon the premises. [Emphasis added.]
Finally:
This act shall not repeal any existing statutory charter or ordinance provisions providing for the assessment or collection of water or sewage system rates, assessments, charges, or rentals by a municipality, but shall be construed as an additional grant of power to any power now prescribed by other statutory charter or ordinance provisions, or as a validating act to validate existing statutory or charter provisions creating liens which are also provided for by this act. [
MCL 123.167 (emphasis added).]
Under the statutory provisions of 1939 PA 178, the trial court erred by dismissing
Importantly, a municipality is granted discretion in the manner of collection; in accordance with
which provides a municipality with the authority to discontinue water service when arrearages exist “or [to] institute an action for the collection of the same in any court of competent jurisdiction.” Of significance is the further provision within
This is not to suggest that defendant is entitled to the entirety of the amount indicated by its liens. As noted in
The other statutory scheme relied on by the litigants is the Revenue Bond Act of 1933 (Bond Act),
There shall be created in the authorizing ordinance a lien, by this act made a statutory lien, upon the net revenues pledged to the payment of the principal of and interest upon such bonds, to and in favor of the holders of such bonds and the interest coupons pertaining thereto, and each of such holders, which liens shall be a first lien upon such net revenues, except where there exists a prior lien or liens then such new lien shall be subject thereto.
The Bond Act clearly prohibits providing services without charge: “[F]ree service shall not be furnished by a public improvement to a person, firm, or corporation, public or private, or to a public agency or instrumentality.”
Charges for services furnished to a premises may be a lien on the premises, and those charges delinquent for 6 months or more may be certified annually to the proper tax assessing officer or agency who shall enter the lien on the next tax roll against the premises to which the services shall have been rendered, and the charges shall be collected and the lien shall be enforced in the same manner as provided for the collection of taxes assessed upon the roll and the enforcement of the lien for the taxes. The time and manner of certification and other details in respect to the collection of the charges and the enforcement of the lien shall be prescribed by the ordinance adopted by the governing body of the public corporation. However, in a case when a tenant is responsible for the payment of the charges and the governing body is so notified in writing, the notice to include a copy of the lease of the affected premises, if there is one, then the charges shall not become a lien against the premises after the date of the notice. In the event of filing of the notice, the public corporation shall render no further service to the premises until a cash deposit in a sum fixed in the ordinance authorizing the issuance of bonds under this act is made as security for the payment of the charges. In addition to any other lawful enforcement methods, the payment of charges for water service to any premises may be enforced by discontinuing the water service to the premises and the payment of charges for sewage disposal service or storm water disposal service to a premises may be enforced by discontinuing the water service, the sewage disposal service, or the storm water disposal service to the premises, or any combination of the services. The inclusion of these methods of enforcing the payment of charges in an ordinance adopted before February 26, 1974, is validated. [
MCL 141.121(3) (emphasis added).]
The Bond Act provides that it “shall be liberally construed to effect the purposes hereof.”
In contrast to 1939 PA 178, the Bond Act is discretionary in areas or procedures relevant to this appeal. Specifically,
Charges for water service constitute a lien on the property served, and during March of each year the person or agency charged with the management of the system shall certify any such charges which as of March 1st of that year have been delinquent six (6) months or more to the city assessor, who shall enter the same upon the city tax roll of that year against the premises to which such service shall have been rendered; and said charges shall be collected and said lien shall be enforced in the same manner as provided in respect to taxes assessed upon such roll. [Livonia Ordinance § 13.08.350(A).]
This interpretation of
The primary goal of statutory interpretation is to give effect to the intent of the Legislature. To reach this goal, this Court has recognized the rule that statutes relating to the same subject matter should be read and construed together to determine the Legislature‘s intent. Further, it is a maxim of statutory construction that every word of a statute should be read in such a way as to be given meaning....
As detailed above, the... provisions... are interconnected and are part of a common legislative framework. Because the various statutory provisions implicated in this case relate to the same subject matter, the terms of the provisions should be read in pari materia. The object of the rule in pari materia is to carry into effect the purpose of the legislature as found in harmonious statutes on a subject. [Quotation marks and citations omitted.]
Statutes in pari materia are defined as “‘those which relate to the same person or thing, or the same class of persons or things, or which have a common purpose. It is the rule that in construction of a particular statute, or in the interpretation
All of the cited statutory provisions or schemes seek, at least in part, to provide mechanisms for collecting payment for water service rendered when payment for the service has fallen into arrears. All of the statutory provisions are clear that the provision of such service is not “free” and that there is a need to provide “security” for payment. See
The trial court erred by reading the statutory provisions as unrelated and by elevating the local ordinance to a position that would supersede 1939 PA 178 and
In addition, in the context of a lighting utility, this statutory scheme has been addressed by a federal court.3 See Brown Bark I, LP v Traverse City Light & Power Dep‘t, 736 F Supp 2d 1099 (WD Mich, 2010), aff‘d 499 F Appx 467 (CA 6, 2012). A municipal authority or government utility is not required “to file a specific lien... before the unpaid charges will cause the formation of a lien,” the court, citing an unpublished decision of this Court,4 opined:
So long as the municipality‘s governing body has enacted an ordinance exercising its § 141.121(3) authority,... the lien automatically comes into being as soon as the private party incurs the “charges for services furnished to [its] premises.” Thus, by operation of the
statute and the municipal implementing ordinance, [the] lien against the... property came into being each time [the municipality] furnished [the utility service] to that property. [Brown Bark, 736 F Supp 2d at 1118-1119 (first alteration in original).]
The Brown Bark court noted that delinquent charges exceeding six months “are to be treated like unpaid taxes.” Id. at 1119, citing
The people of this state have a valid lien on property returned for delinquent taxes, with rights to enforce the lien as a preferred or first claim on the property. The right to enforce the lien is the prima facie right of this state and
shall not be [set] aside or annulled except in the manner and for the causes specified in this act. [Brown Bark, 736 F Supp 2d at 1119, quoting
MCL 211.60a(4) (quotation marks omitted).]
This further serves to support the contention that the trial court erred by invalidating the liens in their entirety, because the trial court‘s ruling does not comport with the cited statutory schemes or the recognized statutes relevant to enforcement.
Therefore, we vacate the trial court‘s ruling and remand this matter to the trial court to reinstitute the liens, subject to determining whether any of the charges incurred has exceeded the time limitations for enforcement.
Our ruling is not altered by plaintiff‘s contention that, because of various negotiations and agreements entered into between defendant and Awrey, defendant was aware that plaintiff‘s tenant was the user of the services provided. Plaintiff claimed that notice of the tenant constituted the landlord‘s disavowal of liability for the changes. This claim is without merit. Specifically,
[T]his act shall not apply if a lease has been legally executed, containing a provision that the lessor shall not be liable for payment of water or sewage system bills accruing subsequent to the filing of the affidavit provided by this section. An affidavit with respect to the execution of a lease containing this provision shall be filed with the board, commission, or other official in charge of the water works system or sewage system, or both, and 20 days’ notice shall be given by the lessor of any cancellation, change in, or termination of the lease. The affidavit shall contain a notation of the expiration date of the lease. [Emphasis added.]
A similar provision exists within
However, in a case when a tenant is responsible for the payment of the charges and the governing body is so notified in writing, the notice to include a copy of the lease of the affected premises, if there is one, then the charges shall not become a lien against the premises after the date of the notice. In the event of filing of the notice, the public corporation shall render no further service to the premises until a cash deposit in a sum fixed in the ordinance authorizing the issuance of bonds under this act is made as security for the payment of the charges.
It is undisputed that plaintiff did not provide an affidavit in accordance with
Next, defendant takes issue with the trial court‘s failure to grant summary disposition to defendant on plaintiff‘s remaining tort and equitable claims. We agree that the trial court shirked its responsibilities by failing to address these issues, and instead, indicated that they were moot or premature due to the ongoing nature of discovery. Although plaintiff contends that if this Court deems error occurred, then the claims should be remanded to the trial court for the completion of discovery, we conclude that a remand is unnecessary. This Court reviews a trial court‘s decision regarding the applicability of governmental immunity de novo. Roby v Mount Clemens, 274 Mich App 26, 28; 731 NW2d 494 (2007). “A motion under
Plaintiff‘s complaint is cursory in the exposition of these claims. In support of its claim of estoppel or waiver, plaintiff asserts that defendant‘s entry into the subordination agreement precluded enforcement of the unpaid water charges and tax liens. It contends that defendant‘s agreement to subordinate its liens in favor of Awrey‘s lender improperly diverted funds that could have been used to pay the outstanding charges, and therefore, should be deemed a waiver. Plaintiff fails to identify the type of estoppel specifically asserted, leading this Court to assume, based on its pairing with an assertion of waiver, that plaintiff is asserting equitable estoppel. Huhtala v Travelers Ins Co, 401 Mich 118, 132; 257 NW2d 640 (1977) (“Equitable estoppel is essentially a doctrine of waiver.“).
“Equitable estoppel arises where a party, by representations, admissions, or silence intentionally or negligently induces another party to believe facts, the other party justifiably relies and acts on that belief, and the other party will be prejudiced if the first party is allowed to deny the existence of those facts.” Van v Zahorik, 460 Mich 320, 335; 597 NW2d 15 (1999) (citation omitted), implicit overruling on other grounds recognized by Stankevich v Milliron (On Remand), 313 Mich App 233, 239-240; 882 NW2d 194 (2015). Plaintiff‘s claim is deficient as it lacks any assertion, or evidence, that defendant made any representations to plaintiff. Any representations made were to Awrey and Cole Taylor Bank, entities that are not parties to this case. Hence, plaintiff‘s assertions of estoppel or waiver do not constitute viable claims.
Next, plaintiff claims unjust enrichment and quantum meruit, making the broad assertion that entry into the subordination agreement improperly diverted monies and enriched defendant to the detriment of plaintiff. “The theory underlying quantum meruit recovery is that the law will imply a contract in order to prevent unjust enrichment....” Morris Pumps v Centerline Piping, Inc, 273 Mich App 187, 194; 729 NW2d 898 (2006). As such, claims for unjust enrichment and quantum meruit have historically been treated in a similar manner. See id. at 195; see also Roznowski v Bozyk, 73 Mich App 405, 409; 251 NW2d 606 (1977). To establish a claim of unjust enrichment, plaintiff must demonstrate: “(1) the receipt of a benefit by the other party from the complaining party and (2) an inequity resulting to the complaining party because of the retention of the benefit by the other party.” Karaus v Bank of New York Mellon, 300 Mich App 9, 22-23; 831 NW2d 897 (2013). Plaintiff has failed to demonstrate that defendant received a benefit from plaintiff according to the subordination agreement. Any potential benefit received by defendant was through Awrey, not plaintiff. That a person benefits from another is not alone sufficient to require the person to make restitution for the benefit. In re McCallum Estate, 153 Mich App 328, 335; 395 NW2d 258 (1986). “Even where a person has received a benefit from another, he is liable to pay therefor only if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it.” Id. Plaintiff‘s complaint is also internally inconsistent. It asserts that defendant received a benefit from the subordination agreement, and it concurrently asserts that by agreeing to subordinate to Cole Taylor Bank its liens on Awrey‘s personal property, defendant voluntarily relinquished any benefit it would have been entitled to receive. This claim also lacks merit.
Plaintiff also asserts that defendant breached its ordinance and that plaintiff suffered damage as a proximate result of the breach. Based on our analysis of the statutory schemes pertaining to delinquent water charges, plaintiff‘s claim is rendered moot. “[A] moot case is one which seeks to get a judgment on a pretended controversy, when in reality there is none, or a decision in advance about a right before it has been actually asserted and contested, or a judgment upon some matter which, when rendered, for any reason, cannot have any practical legal effect upon a then existing controversy.” Parsons Investment Co v Chase Manhattan Bank, 466 F2d 869, 871 (CA 6, 1972) (quotation marks and citation omitted). We further note that plaintiff mistakenly pleaded this claim as suggestive of strict liability or having been established as a matter of law, which is incorrect. “[B]reach of an ordinance is evidence of negligence, not negligence per se.” Rotter v Detroit United R, 205 Mich 212, 231; 171 NW 514 (1919). The claim is not sustainable.
Plaintiff‘s remaining claims encompass tortious interference and civil conspiracy. The tortious interference claim is premised on plaintiff‘s assertions that defendant improperly interfered in its lease with Awrey by entering into the subordination agreement, which failed to comport with defendant‘s ordinance and which diverted funds from payment of the water arrearages. The civil conspiracy claim is intrinsically related to the tortious interference claim because it relies on the same alleged behaviors between Awrey, Cole Taylor Bank, and defendant. Defendant asserts governmental immunity as its defense to these claims.
As discussed in Laurence G Wolf Capital Mgt Trust v City of Ferndale, 269 Mich App 265, 269; 713 NW2d 274 (2005), “Generally, governmental agencies engaged in the exercise or discharge of a governmental function, i.e., an activity that is expressly or impliedly mandated or authorized by constitution, statute, local charter or ordinance, or other law, are immune from tort liability.” (Quotation marks and citations omitted.)
At the outset, plaintiff‘s complaint makes no reference or mention of governmental immunity with respect to these claims. Specifically, plaintiff failed to allege that the tortious interference occurred during the exercise of a nongovernmental function or that a statutory exception to immunity was applicable. Plaintiff never discussed or alleged in its complaint the question whether the collection or enforcement of charges for water service constituted a governmental function. Neither did plaintiff assert a pecuniary benefit, nor point out a proprietary function. Because plaintiff failed to state a claim that falls within a statutory exception to governmental immunity or to assert facts in its pleadings demonstrating that the alleged tortious action occurred during the exercise of a nongovernmental or proprietary function, plaintiff failed to plead in avoidance of governmental immunity, and its claims are subject to dismissal pursuant to
Even if plaintiff‘s pleadings were deemed adequate, summary disposition would still be appropriate. To survive a summary disposition motion premised on governmental immunity, a plaintiff must allege facts sufficient to demonstrate that governmental immunity is inapplicable or that the application of an exception is warranted. Tarlea v Crabtree, 263 Mich App 80, 87-88; 687 NW2d 333 (2004); Summers v Detroit, 206 Mich App 46, 48; 520 NW2d 356 (1994).
Plaintiff implies that defendant‘s effort to collect overdue water charges for services provided is not a governmental function. A “governmental function” is defined as an activity “expressly or impliedly mandated or authorized by constitution, statute, local charter or ordinance, or other law.”
It cannot be reasonably asserted or maintained that defendant‘s operation of a municipal water supply did not constitute a governmental function. It is routinely acknowledged that “[t]he operation of a municipal water supply system is a governmental function....” Citizens Ins Co v Bloomfield Twp, 209 Mich App 484, 487; 532 NW2d 183 (1995), citing
We vacate the trial court‘s ruling and remand for further proceedings consistent with this opinion. We do not retain jurisdiction. Defendant may tax costs.
SAWYER, P.J., and BECKERING and BOONSTRA, JJ.,
concurred.