Hometown Vill. of Marion Ass'n v. Marion Twp.

547 F.Supp.3d 672

HOMETOWN VILLAGE OF MARION ASSOCIATION, Plaintiff,

v.MARION TOWNSHIP, et al., Defendants.

Civil Action No. 20-11458

United States District Court, E.D. Michigan, Southern Division.

Signed July 1, 2021

Todd J. Skowronski, Makower Abbate Guerra Wegner Vollmer PLLC, Farmington Hills, MI, for Plaintiff.

Mark T. Koerner, The Koerner Law Group, PLLC, Okemos, MI, Thomas R. Meagher, Foster, Swift, Lansing, MI, for Defendant Marion Township.

Leland Prince, Dte Energy Company, Detroit, MI, for Defendant DTE Electric Company.

Matthew J. Zalewski, Rosati Schultz Joppich & Amtsbuechler, PC, Farmington Hills, MI, for Defendant Marion-Howell-Oceola-Genoa Water Authority.

OPINION & ORDER (1) DISMISSING COUNTS VII AND VIII OF THE COMPLAINT FOR LACK OF SUBJECT MATTER JURISDICTION AND (2) DENYING THE PENDING MOTIONS (Dkts. 32, 33, 34) WITHOUT PREJUDICE

MARK A. GOLDSMITH, United States District Judge

Plaintiff Hometown Village of Marion Association filed an eleven-count complaint stemming from Defendant Marion Township's use of property over which the Association claims ownership (Dkt. 1). The Township's ownership traces to a tax foreclosure in 2009, which purported to extinguish the rights of the Association's condominium developer over the disputed property, and a subsequent sale of the land to the Township the same year. Although the Township engaged in fairly open acts of ownership since 2010—leasing a portion of the property for farming, allowing the construction of a water tower, and granting a recorded utility easement—the Association filed the instant suit over a decade after the foreclosure sale, to challenge the validity of the foreclosure and the consequences flowing from it. Among those challenged consequences are the easements granted by the Township to Defendants Marion-Howell-Oceola-Genoa Water Authority (MHOG) and DTE Electric Company.

The parties agreed that phased discovery and motion practice would be appropriate because resolution of the Association's quiet title claim in Count VII might "inform resolution of all remaining counts and defenses." See Joint Discovery Plan at 9 (Dkt. 19). A case management and scheduling order was issued accordingly (Dkt. 24). Following completion of discovery limited to the quiet title issue, the Township (Dkt. 32), MHOG (Dkt. 33), and the Association (Dkt. 34) filed motions for summary judgment on the quiet title claim. The motions by MHOG and the Association also concerned Count VIII of the complaint, which the Association said was "essentially identical" to Count VII. Association MSJ ¶ 2 (Dkt. 34); see also MHOG MSJ ¶ 3 (Dkt. 33) (addressing Counts VII and VIII together).

The Court ordered supplemental briefing to address the question of whether the Tax Injunction Act, 28 U.S.C. § 1341, divests this Court of jurisdiction over some or all of the Association's claims (Dkt. 46). The three parties that had filed motions for summary judgment submitted supplemental briefs as directed (Dkts. 47, 48, 49).¹

Based upon that briefing, the Court is persuaded that its jurisdiction over the quiet title claim and related declaratory judgment claim is barred by the TIA. Accordingly, Counts VII and VIII are dismissed without prejudice.

I. BACKGROUND

On August 10, 2000, the Township, the Association, and developer Delcor-Hometown Village of Marion, Ltd. signed a Planned Unit Development Agreement (PUD) concerning Hometown Village of Marion (Dkt. 34-7).² According to the PUD, the condominium and its 267 units would be developed in three phases. See PUD at PageID.1019. By 2006, the first two phases were in various stages of completion, while the Phase III portion of the property—the primary subject of this lawsuit—remained undeveloped.³

In 2006, the Phase III portion of the property and units 134–173 became subject to a tax lien because of Delcor's failure to pay the summer and winter 2006 taxes, resulting in a certificate of forfeiture issued against it by the Livingston County Treasurer in 2008.⁴ Certificate of Forfeiture of Real Property at PageID.797 (Dkt. 32-5). When the property was not timely redeemed, the Livingston County Circuit Court entered a judgment of foreclosure in 2009, through which the Michigan Department of Treasury became vested with title. Notice of Judgment of Foreclosure (Dkt. 34-9). The Department conveyed its interest to the Township later that year. Quit Claim Conveyance (Dkt. 34-4).

The Township proceeded to take various actions regarding the property. According to the Association, the Township leased a portion for farming activity. See Compl. ¶ 41 (Dkt. 1). After public hearings, it issued a permit to MHOG in 2011 to construct a water tower, which was completed in 2012. See March 2011 Minutes (Ex. 33-9); April 2011 Minutes (Ex. 33-10); May 2011 Minutes (Ex. 33-11); MHOG Statement of Material Facts ¶ 23 (Dkt. 33). It also granted a recorded easement to DTE for utility purposes in 2013. DTE Easement (Dkt. 1-7).

In 2020, the Association filed this action to challenge the Township's decade-long assertion of ownership. In Count VII, the Association requests the following relief:

WHEREFORE, the Association respectfully requests the Court enter a recordable quiet title judgment in its favor and against Defendants that provides as follows: (A) the Township has never held valid title to the portion of the Condominium described in Exhibit I, referred to informally as "Phase III," nor title to Units 174 through 267 within the Condominium; (B) the Township and MHOG had no property rights to build, or allow to be built, the water tower and its related structures presently located in the northwest corner of the Condominium; (C) the Township had no rights to grant easements or leases over or to Condominium property to anyone for any reason, and any such grants are invalid and void; (D) Delcor Homes-Hometown Village of Marion, LTD is the titled owner of Units 174 through 267; and (E) except as to Delcor Homes-Hometown Village of Marion, LTD's fee simple title in Units 174 through 267, the Co-owners of the Condominium, represented here by the Association, have superior title over all other named Defendants to all general common element land located within the Condominium.

Compl. at PageID.25–26.⁵ The Association seeks nearly identical relief in Count VIII, except the request is for a declaratory judgment rather than to quiet title. Id. at PageID.28.

The Association's contentions regarding title turn on a challenge to the foreclosure sale, which it argues was invalid under Michigan law. The theory is that shortly after the Phase III property became subject to a tax lien, Delcor recorded the sixth amendment to the master deed, (Dkt. 34-3), which added the Phase III land to the condominium and created individual units 174–267. See Association MSJ Br. at 4 (Dkt. 34). The Township Assessor never assigned individual tax parcel ID numbers to units 174–267. Township MSJ Br. at 4; see also MHOG Resp. Br. to Association MSJ at 3 (Dkt. 38); Township Resp. Br. to Association MSJ at 4–5 (Dkt. 39). The Association's view is that despite the assessor's failure to recognize the change in legal status, Phase III converted from a single land parcel capable of individual ownership to part of the condominium project composed of multiple units and common elements. See Association MSJ Br. at 4–5.

According to the Association, the foreclosure sale and the subsequent conveyance from Michigan to the Township were void, because they violated provisions of the Michigan Condominium Act that supposedly limit the manner in which common elements and units may be conveyed. See Association MSJ Br. at 14–16 (addressing the foreclosure); id. at 10–13 (addressing the conveyance from Michigan to the Township).⁶ The Township and MHOG dispute the Association's interpretation and application of Michigan law. See generally MHOG Resp. Br. to Association MSJ; Township Resp. Br. to Association MSJ. But this is a dispute that the Court is powerless to resolve. As explained below, the TIA prohibits a federal court from invalidating a state tax foreclosure sale.

II. ANALYSIS

If a federal court determines at any time that it lacks subject-matter jurisdiction, it must dismiss the action. Fed. R. Civ. P. 12(h)(3). Furthermore, "federal courts have a duty to consider their subject matter jurisdiction in regard to every case and may raise the issue sua sponte." Answers in Genesis of Kentucky, Inc. v. Creation Ministries Int'l, Ltd., 556 F.3d 459, 465 (6th Cir. 2009).

The TIA is one constraint on federal court jurisdiction. The TIA states that "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341. As interpreted by the Supreme Court, "the Act divests the district court not only of jurisdiction to issue an injunction enjoining state officials, but also of jurisdiction to take actions that ‘suspend or restrain’ the assessment and collection of state taxes." California v. Grace Brethren Church, 457 U.S. 393, 408, 102 S.Ct. 2498, 73 L.Ed.2d 93 (1982).

The crucial question at this stage is whether quieting title in favor of the Association or declaring that the Association has title would violate the TIA. The Court finds that it would. Reaching this conclusion takes two steps. First, the Association cannot receive the relief it seeks without invalidating a prior judgment of foreclosure. Second, the TIA bars federal courts from invaliding prior judgments of foreclosure. Each of these conclusions is addressed in turn.

A. Quieting title in the Association's favor would require this Court to invalidate the prior judgment of foreclosure.

As demonstrated by the language from the prayer for relief quoted above, the complaint demands judgment declaring that the Phase III land belongs to Delcor and the condominium co-owners the Association represents. The body of the complaint...