CHERYL BROWN V CITY OF DETROIT
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STATE OF MICHIGAN
COURT OF APPEALS
PEGGY JENKINS, Personal Representative of the
Estate of DELROY JOHNSON, Deceased, and
LARRY KOPP, Personal Representative of the
Estate of MICHAEL TURNER, Deceased,
UNPUBLISHED
November 6, 2001
Plaintiffs-Appellees,
v
No. 215116
Wayne Circuit Court
LC No. 94-417320-NO
CITY OF DETROIT,
Defendant-Appellant.
SHIRLEY P. MARICAL, Personal Representative
of the Estate of VIOLA MAY MULL, Deceased,
Plaintiff-Appellee,
v
No. 215117
Wayne Circuit Court
LC No. 94-418025-NO
CITY OF DETROIT,
Defendant-Appellant.
CHERYL BROWN, Personal Representative of the
Estate of HERMAN HOLT, Deceased,
Plaintiff-Appellee,
v
No. 215118
Wayne Circuit Court
LC No. 95-515825-NO
CITY OF DETROIT,
Defendant-Appellant.
Before: McDonald, P.J., and Whitbeck and Collins, JJ.
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PER CURIAM.
Defendant City of Detroit (“defendant” or “the City”) appeals as of right the judgment
entered in favor of plaintiffs following a bench trial. We reverse.
These consolidated cases arose from a tragic fire that occurred on June 2, 1992, at 88-90
Pingree (the Pingree property) in Detroit. Robert and Janie Nelson (the Nelsons) were operating
an unlicensed adult foster care (AFC) facility at that address.1 The fire resulted in the deaths of,
among others, plaintiffs’ decedents. At the time of the fire, the City held legal title to the Pingree
property. The Nelsons, who had previously lost title to the Pingree property for nonpayment of
taxes, purchased the Pingree property from the City in April 1985 under a land contract.
Plaintiffs filed complaints naming the City as a defendant. They alleged, among other
things, that the Pingree property constituted a nuisance in fact and a nuisance per se. They
claimed that defendant was liable as owner of the property and “as the sovereign municipality”
because of its failure to cure violations of state law and its own housing and fire codes when the
property was sold and afterward. Further, they contended that in entering into the land contract
with the Nelsons, defendant engaged in a proprietary function.
Trial testimony showed that the Nelsons purchased the Pingree property through a
program run by defendant that allowed persons to reacquire property they previously owned.
Defendant acquired a number of properties from the State of Michigan that had reverted to the
state for nonpayment of taxes. Defendant determined the amount of back taxes owing, added an
administrative fee, and offered to sell title back to the former owner by land contract with
defendant. The evidence showed that the Nelsons entered into such a contract with defendant in
April 1985, that the land contract never was recorded, and that the Nelsons made payments,
including interest, on the contract through January 1987. However, they made no payments after
that January 1987 and were in default at the time of the fire. Trial testimony also showed that
although the cause of the fire was unrelated to any fire code violations, there were code
violations within the building that contributed to the loss of life, including the lack of enclosed
stairwells and the absence of outside exits from either the second or third floors. Evidence
showed that such safety features are required in group homes.
At the conclusion of the trial, the court found defendant liable for damages suffered by
plaintiffs as a result of the fire at the Pingree property. The court found that the building was a
nuisance per se for which defendant was responsible as the owner. The court also determined
that defendant transferred the building to the Nelsons knowing of the Nelsons’ intended use of
the building, that fire code violations existed, and that defendant failed to enforce its own fire
code. The court concluded that governmental immunity did not apply in this case because there
exists a nuisance per se exception to governmental immunity. The court further found that
1
In August 1979, the Nelsons were permanently enjoined from operating an AFC facility at the
Pingree property and at three other locations in the City of Detroit.
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defendant’s sale of the Pingree property to the Nelsons constituted a proprietary function, another
exception to governmental immunity.
Defendant argues on appeal that the trial court erred as a matter of law in imposing
liability on defendant, because none of the theories of liability presented by plaintiffs was viable
under the facts of this case and, in any event, the City was immune from any liability that would
otherwise attach.
We agree with defendant that governmental immunity barred plaintiffs’ tort claims; thus,
we address that issue first. This Court reviews a trial court’s factual findings for clear error,
Bracco v Michigan Technological University, 231 Mich App 578, 585; 588 NW2d 467 (1998),
but reviews de novo the trial court’s application of the facts to the relevant law. Brandon
Charter Twp v Tippett, 241 Mich App 417, 421-422 n 1; 616 NW2d 243 (2000). “When a trial
court incorrectly chooses, interprets, or applies the law, it commits legal error that the appellate
court is bound to correct.” Bracco, supra.
MCL 691.1407(1), before it was amended by 1999 PA 241, sets forth the general scope of
governmental immunity in this case:
Except as otherwise provided in this act, all governmental agencies shall be
immune from tort liability in all cases wherein the government agency is engaged
in the exercise or discharge of a governmental function.
MCL 691.1401(f) defines “governmental function” as “an activity which is expressly or
impliedly mandated or authorized by constitution, statute, local charter or ordinance, or other
law.” Coleman v Kootsillas, 456 Mich 615, 619; 575 NW2d 527 (1998). “[T]he term
‘governmental function’ is to be broadly construed and the statutory exceptions thereto . . . are to
be narrowly construed.” Horace v City of Pontiac, 456 Mich 744, 749; 575 NW2d 762 (1998).
Defendant argues that it was entitled to governmental immunity because enforcement of
its fire code constitutes a governmental function under MCL 29.8, MCL 117.3(j) and (k), and
MCL 125.31 et seq., and its real estate and urban planning activities are authorized by the Detroit
City Code. Plaintiffs contend that the trial court properly found that the Pingree property
constituted a nuisance per se, that there exists a nuisance per se exception to governmental
immunity, and that the proprietary function exception to governmental immunity, MCL
691.1413, also applies in this case. We address the proprietary function exception first. The
statute provides, in pertinent part, as follows:
The immunity of the governmental agency shall not apply to actions to
recover for bodily injury or property damage arising out of the performance of a
proprietary function as defined in this section. Proprietary function shall mean
any activity which is conducted primarily for the purpose of producing a
pecuniary profit for the governmental agency, excluding, however, any activity
normally supported by taxes or fees. [MCL 691.1413.]
Thus, in order to be considered a proprietary function, an activity (1) must be conducted
primarily for the purpose of producing a pecuniary profit, and (2) cannot normally be supported
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by taxes or fees. Hyde v University of Michigan Bd of Regents, 426 Mich 223, 258; 393 NW2d
847 (1986). Whether an activity actually generates a profit is not dispositive, but the existence of
a profit is relevant in determining the governmental agency’s intent. Adam v Sylvan Glynn Golf
Course, 197 Mich App 95, 97-98; 494 NW2d 791 (1992). If profit is deposited in a general fund
or used on unrelated events, the use indicates a pecuniary motive, but use to defray expenses of
the activity indicates a nonpecuniary purpose. Taylor v City of Detroit, 182 Mich App 583, 587;
452 NW2d 826 (1989).
In Coleman, supra at 622, the Supreme Court found that the primary purpose of the
operation of a landfill by the City of Riverview was to produce a pecuniary profit. The Court
noted that the City of Riverview’s operation of a landfill was “an unusual case, one in which the
government has chosen to run a commercial enterprise for the purpose of reaping a pecuniary
profit.” Id. at 623, n 11. The Court found that during an eight year period of operation, the
landfill generated a profit exceeding seven million dollars, that the profits were used to fund
other city projects, including “the expansion of the fire hall and the purchase and modifications
of a building to house city hall,” and that “the profits also helped fund city operations such as the
police and fire departments, the city library, the city ski hill, and the department of public
services.” Id. at 622. The court also found that the City of Riverview’s millage rate had
“steadily declined . . . due, in part, to the availability of landfill revenue that was transferred to
the general fund.” Id.
The Coleman Court also considered the nature of the City of Riverview’s operation of a
landfill and concluded that it satisfied the second prong of the proprietary function test:
In this case, it is more than the operation of a municipal landfill. It is the
operation of a commercial landfill that accepts garbage, not merely from the city
of Riverview, but from communities as distant as Ontario, Canada. An enterprise
of such vast and lucrative scope is simply not normally supported by a community
the size of the city of Riverview either through taxes or fees. [Id. at 622-623.]
Here, in support of their argument that the primary purpose of defendant’s real estate activities in
general, and its sale of the Pingree property specifically, was to produce a pecuniary profit,
plaintiffs presented evidence that defendant obtained the Pingree property and a number of others
for only a dollar, the purchase price offered to buyers such as the Nelsons included taxes for
years that title to the property was held by the state, defendant charged a ten percent
administrative fee to purchasers, it charged interest on unpaid balances, and, in the case of the
Pingree property, it received funds from the insurance company for demolition of the house and
payoff of the land contract when the property burned. Plaintiffs also showed that the proceeds
from the sale of the properties were deposited in defendant’s general fund.
The trial court’s findings do not indicate that it considered whether the primary purpose
of defendant’s sale of the properties in question was to generate a pecuniary profit. Rather, it
appears from the record that the trial court concluded that defendant was engaged in a proprietary
function on the basis of its finding that the City realized a profit from the sale.2 However, as
2
When asked whether the it was finding that defendant was engaged in a proprietary function,
(continued…)
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noted above, whether an activity actually generates a profit is not dispositive. Adam, supra.
Further, simply because defendant received money as a result of the sale of the properties does
not mean that it realized a profit. Testimony showed that a portion of the payments made by the
people who repurchased the properties consisted of taxes that had gone unpaid. Defendant was
recouping taxes that it was previously owed on the properties, and also paying county taxes out
of the payments made by the Nelsons and others who repurchased properties. Also, although
testimony showed that the proceeds from the sales of properties were deposited into defendant’s
general fund, unlike Coleman, here there was no evidence offered to show that the funds
deposited as a result of the sale of homes through defendant’s planning and development
department financed unrelated activities. We conclude that the evidence presented does not
support a finding that the primary purpose of defendant’s sale of tax reverted properties to prior
holders of title was to generate a pecuniary profit and, to the extent that the trial court found that
profit was defendant’s primary purpose, it clearly erred.
Moreover, urban development and stabilization of neighborhoods are the sorts of
activities normally funded through taxes. Nancy Trecha, principal development specialist in
property management for the real estate division of the planning and development department of
the City, testified that the mission of that division “is to procure, sell, manage and maintain city
owned real estate for the purpose of developing and stabilizing neighborhoods and promoting
relocation assistance to those citizens displaced through governmental actions.” She also said
that the activities of the real estate division of the planning and development department included
managing its inventory of tax-reverted properties, processing evictions, relocating displaced
residents, boarding up vacant properties, and demolishing abandoned buildings. Further, that the
offers of repurchase were made to the prior owners of title who were residing in Detroit, and not
to the general population, indicates that the sales were not essentially commercial in nature. See
Coleman, supra at 622-623; Taylor, supra at 588.
In sum, the evidence does not support the conclusion that defendant was engaged in a
proprietary function when it sold the Pingree property back to the Nelsons. Accordingly, the trial
court erred in finding that the proprietary function exception to governmental immunity applies
in this case.
(…continued)
the trial court responded as follows:
Yes. Not only were they getting interest on the land contract, but when the
building burned, they not only got the balance paid off on the land contract, they
also got five thousand dollars ($5,000.00) worth of interest. That sounds like a
proprietary function to me.
***
The selling of that building was definitely for a profit. It was not a governmental
function, but a proprietary function.
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Defendant also argues that the court erred in finding that the Pingree property constituted
a nuisance per se and that there exists a nuisance per se exception to governmental immunity.
Because we conclude that the Pingree property was not a nuisance per se, we need not consider
whether there exists a common law nuisance per se exception to governmental immunity.
Defendant first contends that the trial court abused its discretion in allowing plaintiffs, at
the conclusion of trial, to amend their complaint to include a nuisance per se claim, because
defendant was not on notice that nuisance per se would be an issue at trial. We note, however,
that plaintiffs Jenkins and Kopp included a nuisance per se allegation in their amended complaint
filed August 12, 1994. The court, however, did not address that allegation in its summary
disposition ruling. In any event, the trial court did not abuse its discretion in allowing plaintiffs
to amend their complaint to include a nuisance per se claim. Plaintiff Brown’s counsel asserted
during opening statements that plaintiffs would show that the Pingree property constituted a
nuisance per se, defendant did not object, and plaintiffs, relying on evidence presented at trial,
argued during their closing that defendant was liable under a nuisance per se theory. Because the
issue was “tried by express or implied consent of the parties,” MCR 2.118(C)(1), the trial court
did not abuse its discretion in allowing amendment of the pleadings to conform to the evidence.
“As our case law has long recognized, a nuisance per se is an activity or condition which
constitutes a nuisance at all times and under all circumstances, without regard to the care with
which it is conducted or maintained.” Li v Feldt (After Second Remand), 439 Mich 457, 476477; 487 NW2d 127 (1992). The Supreme Court has further explained as follows:
“‘From the point of view of their nature, nuisances are sometimes classified as
nuisances per se or at law, and nuisances per accidens or in fact. A nuisance at
law or a nuisance per se is an act, occupation, or structure which is a nuisance at
all times and under any circumstances, regardless of location or surroundings.
Nuisances in fact or per accidens are those which become nuisances by reason of
circumstances or surroundings, and an act may be found to be a nuisance as a
matter of fact where the natural tendency of the act is to create danger and inflict
injury on person or property. The number of nuisances per se is necessarily
limited, and by far the greater number of nuisances are nuisances per accidens.’”
[Hadfield v Oakland Co Drain Comm’r, 430 Mich 139, 152-153; 422 NW2d 205
(1988), quoting Rosario v City of Lansing, 403 Mich 124, 132-133; 268 NW2d
230 (1978) (opinion of Fitzgerald, J.), quoting Bluemer v Saginaw Oil Service,
Inc, 356 Mich 399, 411; 97 NW2d 90 (1959).]
“‘[U]nlike the nuisance in fact, nuisance per se is not predicated on the want of care, but is
unreasonable by its very nature.’” Li, supra at 477, quoting Hadfield, supra at 208 (Boyle, J.
concurring).
The building on the Pingree property did not constitute a nuisance at all times and under
all circumstances. It was not inherently dangerous; rather, the evidence showed that its condition
became dangerous when the Nelsons began using the home as an adult foster care facility and
failed to properly maintain the house in that capacity, i.e., they failed to comply with fire code
requirements for group homes. Because the Pingree property was not unreasonable by its very
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nature, but the danger it posed was a function of circumstance and want of care, the property did
not constitute a nuisance per se.
Finally, defendant contends that the trial court did not impose liability on the basis that
defendant maintained a dangerous building in violation of MCL 125.528, but to the extent that
plaintiffs maintain that it did, any such ruling was in error because defendant did not have
possession or control of the building.
The record does not indicate that the trial court imposed liability on the basis that
defendant violated the Michigan Housing Law, MCL 125.401 et seq. Although the court’s ruling
on defendant’s motion for summary disposition clearly left the statutory claim for trial, the court
never addressed the state housing law in its findings. Rather, its ruling appears to be premised
entirely on its findings that defendant owned the Pingree property and that the building
constituted a nuisance per se. Generally, this Court will not address an issue that was not decided
below. Herald Co, Inc v Ann Arbor Public Schools, 224 Mich App 266, 278; 568 NW2d 411
(1997). However, because plaintiffs raised the issue below, and it is a question of law and the
facts necessary for its resolution have been presented, we will address it. Carson Fischer Potts
and Hyman v Hyman, 220 Mich App 116, 119; 559 NW2d 54 (1996); see also Peterman v Dep’t
of Natural Resources, 446 Mich 177, 183; 521 NW2d 499 (1994).
Plaintiffs contend that because defendant held legal title to the Pingree property as the
land contract vendor, it was liable under MCL 125.536 and MCL 125.538,3 for the damages that
resulted from the Pingree fire. However, in Morrison v Brown, 360 Mich 460; 104 NW2d 223
(1960), where a legal owner/land contract vendor had no right under its contract with the
landlord/land contract vendee to inspect the premises or interfere with the possession, right of
control, and management of the premises by the landlord, id. at 464, the Supreme Court held that
the legal owner was not liable under MCL 125.401 et seq. for injuries sustained by a tenant’s
mother when she was burned because a water heater malfunctioned. Id. at 462, 466. The Court
stated:
3
MCL 125.536 provides, in pertinent part, as follows:
(1) When the owner of a dwelling regulated by this act permits unsafe, unsanitary
or unhealthful conditions to exist unabated in any portion of the dwelling, whether
a portion designated for the exclusive use and occupation of residents or a part of
the common areas, where such condition exists in violation of this act, any
occupant, after notice to the owner and a failure thereafter to make the necessary
corrections, shall have an action against the owner for such damages he has
actually suffered as a consequence of the condition. . . .
MCL 125.538 provides as follows:
It is unlawful for any owner or agent thereof to keep or maintain any dwelling or
part thereof which is a dangerous building as defined in [MCL 125.539].
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The theory is untenable that the legislature intended to impose a duty, and liability
for nonobservance, on the holder of the legal title to a building for failure to
inspect and make reasonable repairs when the right to the possession,
management, and control of such building is legally in another. [Id. at 466.]
Plaintiffs distinguish Morrison on the basis that there was no evidence that the legal owner in
that case had knowledge of any defects in the property and he had no right to inspect the
premises, while in this case, defendant knew of the existing code violations when it sold the
property to the Nelsons, knew because of its subsequent inspections that the violations had not
been corrected, and had the right to possession and control of the property because the Nelsons
were in default on the land contract. We do not find this distinction persuasive.
The Morrison Court’s interpretation of the word “owner” focuses on possession and
control. See also Oxenrider v Gvoic, 340 Mich 591, 601; 66 NW2d 80 (1954). Although the
land contract gave defendant the right to take immediate possession of the premises if the
Nelsons failed to perform any part of the contract, at the time of the fire, defendant had not
exercised its right of possession and the Nelsons were still in possession and control of the
building. Further, any right that defendant had to enter the premises to inspect or enforce the fire
or building codes, it had by virtue of its status as a governmental entity, not as land contract
vendor. Because defendant did not have possession or control of the Pingree property at the time
of the fire, it is not liable under MCL 125.536 and MCL 125.538 for damages suffered by
plaintiffs.
Reversed.
/s/ William C. Whitbeck
/s/ Jeffrey G. Collins
Judge Gary R. McDonald not participating.
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