Midwest Valve & Fitting Co. v. City of Detroit

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MIDWEST VALVE &FITTING COMPANY, and all others similarly situated, Plaintiff-Appellant, v. CITY OF DETROIT, Defendant-Appellee.

No. 358868

Court of Appeals of Michigan

March 9, 2023

UNPUBLISHED

Wayne Circuit Court LC No. 18-014337-CZ

Before: RICK, P.J., and M. J. KELLY and RIORDAN, JJ.

PER CURIAM

Plaintiff-appellant Midwest Valve &Fitting Company, appeals as of right the trial court's order that, after a bench trial, dismissed its remaining claims related to the legality of certain fees charged by defendant, City of Detroit. The appeal also involves the trial court's earlier opinion and order granting summary disposition in favor of defendant on appellant's other claims.

This case involves appellant's challenge to the legality of certain annual charges that are imposed by defendant. The trial court determined that the charges are legal and dismissed appellant's claims, some in a pretrial motion for summary disposition and the remainder after a bench trial. Because its arguments have no merit, we affirm.

I. FACTS

Defendant imposes an annual charge on owners of commercial real property and multiunit residential real property located in Detroit. Although appellant initially claimed that the charges were "fire inspection charges," appellant on appeal has acquiesced to the trial court's and defendant's position that they are "permit fees."

Appellant received bills from defendant for these charges since at least 2013 and paid them. However, appellant maintained that it never received any fire safety inspection during this time.

Appellant filed a complaint, alleging numerous claims against defendant: Count I- violation of the Headlee Amendment, Count II-assumpsit/unreasonable charges, Count III- unjust enrichment/unreasonable charges, Count IV-assumpsit/violation of MCL 141.91, Count V-unjust enrichment/violation of MCL 141.91, Count VI-assumpsit/violation of city ordinance, Count VII-unjust enrichment/violation of city ordinance, and Count VIII-violation of equal protection.

Appellant moved for summary disposition under MCR 2.116(C)(10) on Counts I, IV, and V. It argued that the charges constituted taxes, which were imposed in violation of § 31 of the Headlee Amendment^[1] and MCL 141.91.^[2] After analyzing the characteristics of the charges, the trial court ruled that the charges were fees, not taxes, and granted summary disposition in favor of defendant on Counts I, IV, and V.

The trial court conducted a one-day bench trial on the remaining counts. In support of its position that the charges at issue were inspection fees, appellant primarily relied on (1) a fire marshal web page indicating that inspections get scheduled after payment of the fee, and (2) some internal city documents^[3] that used terminology, such as "safety inspection charges" or "fire permit safety inspection," while referencing these charges. But, Fire Marshal Shawn Battle testified that those representations were factually incorrect because the fees were exclusively for permits, which allow businesses to operate, and have no relation to inspections.^[4] Although it was the department's goal to inspect every commercial property every year, Battle stated this was not feasible because of a lack of manpower. Battle also testified that his department did not utilize any of the documents appellant relied on and instead it used a system called MobileEyes, which identifies the charges as being for "permits." Further, the actual invoices and permits relating to these charges were admitted into evidence via stipulation. Those documents specifically reference "industrial/business/mercantile occupancy permit[s]," with no mention of inspections.

Although defendant was unable to verify that the city council had approved the charges any time before May 2021, the council later approved them retroactively back to 2013.

In its closing argument, appellant argued that even if the charges were "permit fees," they would be illegal because the city council never approved them, which was required by the city charter and ordinances. Appellant claimed that the city council's attempt to retroactively approve the charges was a legal nullity. Regarding its equal-protection claim, appellant argued that, with it not receiving any inspections, as opposed to other commercial property owners, it had not been treated objectively and reasonably.

The trial court found that the charges at issue are annual permit fees and not inspection fees. The trial court also noted that the burden was on appellant to prove that any fee or charge was unreasonable or otherwise unlawful. Further, the trial court ruled that Counts II and VI were not viable because Michigan does not recognize an independent cause of action for assumpsit.

The trial court dismissed appellant's unjust enrichment claims in Counts III and VII. The court noted that Count III was premised on the allegation that the charges were for fire inspections when no inspections had taken place. The trial court rejected this claim because the charges are not for inspections, but are for permits. The trial court also ruled two additional arguments appellant raised relating to the claims of unjust enrichment were unpersuasive. First, the trial court rejected appellant's contention that the charges were in violation of the city ordinance because they were in excess of the cost of the "issuance" of permits. The trial court noted that cities are allowed to recover all of their direct and indirect costs related to the regulation of those who are charged the fee and that courts are to give deference to a city's interpretation of its own ordinances. Second, the court rejected appellant's contention that defendant was unjustly enriched because the charges were never approved by the city council. The trial court then ruled that the city council's retroactive approval of the charges was permissible as a matter of law.

Finally, the trial court ruled that appellant failed to prove any of the essential elements of its equal-protection claim, including that defendant made a classification identifying a particular group, that defendant intentionally or purposefully treated that group differently from similarly situated individuals, and that there is no rational basis for defendant's disparate treatment.

II. HEADLEE AMENDMENT AND MCL 141.91

Appellant argues that the trial court erred when it granted summary disposition in favor of defendant on Counts I, IV, and V of its complaint. We disagree.

Whether a municipal charge is a "tax" is a question of law, which 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 also reviews a trial court's decision on a motion for summary disposition de novo. Odom v Wayne Co, 482 Mich. 459, 466; 760 N.W.2d 217 (2008). "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). A motion under (C)(10) is properly granted if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Michalski v Bar-Levav, 463 Mich. 723, 730; 625 N.W.2d 754 (2001).

In Counts I, IV, and V, appellant alleges violations of § 31 of the Headlee Amendment and MCL 141.91. Section 31 of the Headlee Amendment states, in pertinent part:

Units of Local Government are hereby prohibited from levying any tax not authorized by law or charter when this section is ratified, without the approval of a majority of the qualified electors of that unit of Local Government voting thereon. [Const 1963, art 9, § 31 (emphasis added).]

This section "prohibits units of local government from levying any new tax or increasing any existing tax above authorized rates without the approval of the unit's electorate." Durant v Mich, 456 Mich. 175, 183; 566 N.W.2d 272 (1997).

MCL 141.91 states:

Except as otherwise provided by law and notwithstanding any provision of its charter, a city or village shall not impose, levy or collect a tax, other than an ad valorem property tax, on any subject of taxation, unless the tax was being imposed by the city or village on January 1, 1964. [Emphasis added.]

In concert, these provisions restrain a local government's ability to assess taxes. If the charges levied are not taxes, the Headlee Amendment is not implicated and appellant's claims here, based on violations of the Headlee Amendment and MCL 141.91, would necessarily fail. See Bolt v City of Lansing, 459 Mich. 152, 158-159; 587 N.W.2d 264 (1998) (stating that user fees are not taxes and are not affected by the Headlee Amendment).^[5]

"There is no bright-line test for distinguishing between a valid user fee and a tax that violates the Headlee Amendment." Id. at 160. Three primary factors are considered in determining whether a charge is a fee or a tax. "The first criterion is that a user fee must serve a regulatory purpose rather than a revenue-raising purpose." Id. at 161. "A second, and related, criterion is that user fees must be proportionate to the necessary costs of the service." Id. at 161-162. A third criterion is voluntariness: fees generally are voluntary while taxes are not. Id. at 162. "[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 is not a fee." Graham v Kochville Twp, 236 Mich.App. 141, 151; 599 N.W.2d 793 (199...