Kincaid v. City of Flint

311 Mich.App. 76

874 N.W.2d 193

KINCAID

v.CITY OF FLINT.

Docket No. 318906.

Court of Appeals of Michigan.

Submitted Jan. 7, 2015, at Detroit.

Decided June 11, 2015, at 9:10 a.m.

Christopher J. McGrath, PLLC, Novi (by Christopher J. McGrath), and Valdemar L. Washington, PLLC (by Valdemar L. Washington ), for plaintiffs.

Peter M. Bade, Flint City Attorney, and Anthony Chubb and David Roth, Assistant Flint City Attorneys, for defendant.

Before: DONOFRIO, P.J., and BORRELLO and STEPHENS, JJ.

STEPHENS, J.

Plaintiffs, all residents of defendant City of Flint, appeal as of right the order of the circuit court granting defendant's motion for summary disposition and denying plaintiffs' motion to amend their complaint. We reverse and remand.

I. BACKGROUND

On August 15, 2011, defendant's finance director, Michael Townsend, sent to the city council and mayor a notice of a proposed 35% water and sewer rate increase to be effective September 6, 2011. The increase was proposed to meet a projected fiscal year deficit in the sewer fund of $14,789,666 as well as a water fund deficit of $8,078,917.¹ The city council adopted the proposal and the mayor signed it.

Shortly thereafter, defendant was declared to be in a state of financial emergency.² On November 28, 2011, Governor Rick Snyder appointed Michael Brown as defendant's Emergency Manager (EM).³ On May 30, 2012, after he was informed by newly appointed finance director, Gerald Ambrose, of the financial disarray of defendant's water and sewer funds, EM Brown created Emergency Order No. 31. Order No. 31 ratified and confirmed the water and sewer rates implemented under former finance director Townsend on September 16, 2011, and additionally raised water and sewer rates, 12.5% and 45%, respectively, effective July 1, 2012.

After the emergency order by EM Brown, plaintiffs in this suit filed a complaint seeking this Court's original jurisdiction pursuant to Const. 1963, art. 9, §§ 31 and 32. The claim of error was that defendant violated the Headlee Amendment.⁴ This Court dismissed plaintiffs' claims without a hearing, finding that the rate increases from September 2011 and those set to take place in July 2012 were "revisions of existing user fees that do not implicate the Headlee Amendment." Kincaid v. Flint, unpublished order of the Court of Appeals, entered June 29, 2012 (Docket No. 310221). Plaintiffs' claims not relating to the Headlee Amendment were dismissed for lack of original jurisdiction. Id.

After the case before this Court was dismissed, plaintiff filed the instant action. The essence of this case is a claim that the rate increases in September 2011 were made contrary to defendant's Ordinances § 46–52.1 and § 46–57.1, and a claim that defendant had illegally pooled the monies collected for the water and sewer funds and used them to pay general obligations not related to sewer or water expenses. Plaintiffs requested that the trial court certify a class action suit against defendant by all sewer and water customers of defendant, declare that the rate increases were an illegal tax under the Headlee Amendment, and order the commingling of funds to cease. Additionally, plaintiffs asked for monetary relief in the form of a refund of the illegally collected rates and for damages caused to defendant's residents who were left without water and sewer service.

In lieu of filing an answer, defendant moved the trial court to grant it summary disposition pursuant to MCR 2.116(C)(6), (7), and (8). However, before defendant's motion for summary disposition was heard, plaintiffs moved the trial court for leave to amend their complaint to allege a violation of MCL 123.141(2) and (3).⁵

Defendant responded to plaintiffs' motion to amend their complaint by arguing that it should be denied as futile. On February 15, 2013, the trial court heard the two outstanding motions. On June 21, 2013, the trial court entered an opinion and order granting summary disposition in favor of defendant. On July 12, 2013, plaintiffs moved the trial court to reconsider its decision after which the court entered an order permitting defendant to respond to plaintiffs' motion for reconsideration. The court denied the motion on October 14, 2013. Plaintiffs now appeal the order granting defendant summary disposition.

During the pendency of this case in the trial court, 2011 PA 4 was repealed after it was rejected by a majority of the electorate.⁶ One month later, on December 26, 2012, the Legislature approved the local financialstability and choice act, 2012 PA 436,⁷ effective March 28, 2013.⁸ Many of the provisions of 2012 PA 436 mirror those of 2011 PA 4.

II. STANDARDS OF REVIEW

The trial court ordered summary disposition under MCR 2.116(C)(8) and the parties base their arguments before this Court on that subsection, but our review of the record shows that the trial court went beyond the pleadings in making its decision as did both parties in making their arguments. Plaintiffs' response to defendant's motion for summary disposition relied on 16 exhibits. Plaintiffs also moved for summary disposition themselves and cited exhibits outside the pleadings. The analysis of this case therefore will be done under MCR 2.116(C)(10). See Cuddington v. United Health Servs., Inc., 298 Mich.App. 264, 270, 826 N.W.2d 519 (2012) ("[B]ecause the trial court considered documentary evidence beyond the pleadings, we construe the motion as having been granted pursuant to MCR 2.116(C)(10).").

"This Court reviews decisions on motions for summary disposition de novo to determine if the moving party was entitled to judgment as a matter of law." Alcona Co. v. Wolverine Environmental Prod., Inc., 233 Mich.App. 238, 245, 590 N.W.2d 586 (1998). A motion for summary disposition under MCR 2.116(C)(10)"tests the factual sufficiency of the complaint...." Joseph v. Auto Club Ins. Assoc., 491 Mich. 200, 206, 815 N.W.2d 412 (2012). "In evaluating a motion for summary disposition brought under this subsection, a trial court considers affidavits, pleadings, depositions, admissions, and other evidence submitted by the parties, MCR 2.116(G)(5), in the light most favorable to the party opposing the motion." Maiden v. Rozwood, 461 Mich. 109, 120, 597 N.W.2d 817 (1999). Summary disposition is proper when there is no "genuine issue regarding any material fact...." Id. A party opposing a motion made under MCR 2.116(C)(10)"has the burden of showing that a genuine issue of disputed fact exists." Major v. Auto Club Ins. Assoc., 185 Mich.App. 437, 440, 462 N.W.2d 771 (1990). "The opposing party may not rest upon mere allegations or denial in the pleadings, but must, by affidavit or other documentary evidence, set forth specific facts showing that there is a genuine issue for trial." Id.

This Court also reviews issues of statutory interpretation de novo. Allen v. Bloomfield Hills Sch. Dist., 281 Mich.App. 49, 52, 760 N.W.2d 811 (2008).

When interpreting a statute, we follow the established rules of statutory construction, the foremost of which is to discern and give effect to the intent of the Legislature. The first step when interpreting a statute is to examine its plain language, which provides the most reliable evidence of [legislative] intent. If the language of a statute is clear and unambiguous, the statute must be enforced as written and no further judicial construction is permitted. When an ambiguity does indeed exist, we may go beyond the statutory text to ascertain legislative intent. Effect should be given to every phrase, clause, and word in the statute and, whenever possible, no word should be treated as surplusage or rendered nugatory. [People v. Carrier, 309 Mich.App. 92, 104, 867 N.W.2d 463 (2015) (citations and quotation marks omitted; alteration in original).]

III. CLAIMS OF ERROR

Plaintiffs' claims of error are three: (1) water and sewer rate increases that occurred under former finance director Townsend in September 2011 were not authorized by defendant's ordinances, (2) EM Brown did not have the authority to ratify Townsend's unauthorized increases and then further increase water and sewer rates in violation of the same ordinances, and (3) defendant wrongly deposited funds from water and sewer revenue into a single pooled cash account.

A. ORDINANCE VIOLATIONS

Plaintiffs claim that defendant violated Ordinance 46–52.1 and Ordinance 46–57.1.

Ordinance 46–52.1 reads as follows:

(a) Every year the Director of Finance shall calculate and transmit on or before April 15, to the Mayor and City Council the new water rate schedules with a complete itemization of water system costs for all classes of customers as given in § 46–52, for the purpose of calculating all bills for the forthcoming 12 months beginning July 1 of that year. The new water rate schedules shall be published at least 30 days prior to the date of implementation.

(b) Water rates shall be reviewed annually and the water rate percentage index (WRI) as applied to the water rate schedules shall be limited to an adjustment of 8% in any year unless:

(1) Such adjustment is necessary to provide for all costs of operation, maintenance, replacement and debt service of the water supply system; or

(2) Such adjustment is necessary to comply with applicable provisions of the city's water supply revenue bond resolutions or ordinances.

Ordinance 46–57.1 reads:

Every year the Director of Finance shall calculate and transmit on or before April 15, to the Mayor and City Council the new sewage rate schedules with a complete itemization of sewage system costs for all classes of customers as given in § 46–57, for the purpose of calculating all bills for the forthcoming 12 months beginning July 1 of that year. The new sewage rate schedules shall be published at least 30 days prior to the date of implementation.

Plaintiffs argue that the rate increases of September 2011 and those imposed by EM Brown failed to meet the notice and effective date requirements of the ordinances and exceeded the percentage of increase allowed under the...