STEPHEN ORDWAY V TOWNSHIP OF STARAnnotate this Case
STATE OF MICHIGAN
COURT OF APPEALS
TOWNSHIP OF CHESTONIA,
May 17, 2005
Antrim Circuit Court
LC No. 03-007911-CZ
TOWNSHIP OF STAR,
STEPHEN ORDWAY, SHERRIE ORDWAY,
PERRY A. RUSNELL, JEANETTE P.
RUSNELL, KEITH A. RUSNELL, MELISSA
RUSNELL, DAVID D. HOLZ, CAROLYN
COON, ANGELA GAPINSKI, TERRY
GAPINSKI, RONALD MILITELLO, ROSE
MILITELLO, GENE W. CASE, LOUISE A.
CASE, TERRY OLDS, DARLINE A. OLDS,
GARY ZIMPFER, JUDY L. ZIMPFER,
SERAPHIME MIKE, MICHELE JEWELL,
MARVIN WOOD, LEON J. WALDMAN,
ELAINE WALDMAN, BRYCE SEELEY,
PATRICIA MILLIGAN, WARNER B. BROWN,
SHIRLEY A. BROWN, PHYLLIS K. GILL,
THOMAS GILL, ROLAND L. ORDWAY, SR.,
THERESA I. JOHNSON, ELLA L. HOPP,
HERMAN D. HOPP, WILFRED GATES, ELISA
GATES, ANNETTE L. VOELKER, TAMMY J.
PADGETT, MARIANN JACKMAN, NORM
JACKMAN, MITCH COON, PAULINE L.
COON, SCOTT JOHNSON, PENNY A. COON,
SCOTT E. COON, GEORGINA MADAGAME,
MABEL PRICE, LOIS V. BATES, WALTER W.
JONES, JR., JAMES D. WILKINSON, and
JULIA KIM WILKINSON,
TOWNSHIP OF STAR, ARLEN TURNER,
MARILYN RYPKOWSKI, KAY RINGLE, and
Antrim Circuit Court
LC No. 03-007967-AW
Official Reported Version
Before: Fort Hood, P.J., and Meter and Schuette, JJ.
In this contract action, plaintiff township of Chestonia appeals by right the order
terminating the operation of a joint fire department operated by the two parties and the order
dividing the assets of that fire department. We reverse and remand. We do not retain
The parties to this case are two small neighboring communities in Antrim County.
Plaintiff Chestonia Township has a population of approximately six hundred. Defendant Star
Township has a population of approximately 750.
Since the 1940s, the two communities have operated a joint fire department. At least as
early as 1974, the electorates of both townships voted to have their communities "join for the
creation of a special assessment district for the purpose of providing fire protection for said joint
fire district, and levy a special assessment" for the support and maintenance of the joint fire
department. At that time, a five-member board was created to oversee the joint fire department
and was given the name of Alba Fire Board. From that time until the parties began legal action
against one another in April 2002, the parties continued to operate the joint fire department in
this manner: the Alba Fire Board ran the fire department, and the two townships maintained the
joint fire district and voting millages for the expansion, maintenance, and operation of the joint
On January 1, 1985, the parties entered into what was apparently the first written
agreement between the townships regarding the operation of the joint fire department. This
agreement, entitled Fire Board Agreement, was entered pursuant to MCL 124.2.1 The agreement
legally created a joint fire department, called the Alba Fire Department, and set out the terms
governing the Alba Fire Board. The agreement provided that the contract between the parties
The 1985 agreement itself refers to this statute as Act No. 35, Public Acts of 1951.
would continue until both townships deemed it unfeasible. It further provided that the agreement
between the parties could be extended, terminated, or amended only by the unanimous consent of
On September 1, 1999, the parties amended this agreement, under the name of Fire Board
Agreement (Amended) (Amended Agreement), to permit members of the board of either
township to sit on the Fire Board as a voting member. In all other respects the 1985 and 1999
agreements were identical.
Shortly after the Amended Agreement was signed, however, differences began to arise
among the members of the two township boards of trustees. These differences included
disagreements over expenditures, concerns over lack of accountability, differences over who
should be appointed fire chief, concerns regarding insurance coverage for the joint fire
department, and general personality conflicts. As a result of these differences, on January 30,
2002, the Star Township board passed a resolution purporting to withdraw from the Amended
Subsequently, on April 8, 2002, Star Township filed a complaint2 naming Chestonia
Township as defendant. Star Township sought a declaratory ruling that its January 30, 2002,
action had terminated the 1999 Amended Agreement and, thereby, also terminated the existence
of the Alba Fire Board. Star Township further requested the court to order an accounting, to
make an equitable division of the joint Alba Fire Department's assets, and to order the return of
revenues levied and collected pursuant to millages passed by Star Township for the purpose of
providing fire protection.
Star Township then brought a motion for summary disposition. On October 14, 2002, the
trial court heard arguments on this motion. At the conclusion of the hearing, the trial court found
that there was no evidence that the January 30, 2002, action had actually terminated the
agreement, because the motion passed by the township merely expressed its desire to terminate
the agreement and not its intent to do so. Accordingly, the court granted partial summary
disposition for Chestonia Township. In so ruling, the court explicitly left open the question
whether Star Township had the authority to unilaterally withdraw from the Amended Agreement.
On November 14, 2002, the Star Township board passed a resolution explicitly setting
forth its intent to withdraw immediately from the Alba Fire Board and the Alba Fire Department.
On January 13, 2003, Chestonia Township filed a complaint claiming breach of agreement.
Chestonia Township sought specific performance of the Amended Agreement and damages for
Star Township's breach. Trial was held on June 24 and 25, 2003.
At the conclusion of trial, the trial court made the following findings and rulings. First,
the court noted that the question whether Star Township had the right to unilaterally withdraw
The April 8, 2002, complaint was not the complaint filed in the instant suit.
from the Amended Agreement had not been considered by the court during the first action
between the parties. Accordingly, the court concluded that the doctrine of res judicata did not
preclude the present action. Next, the court concluded that the Amended Agreement essentially
constituted a perpetual contract. Therefore, the court concluded that the Amended Agreement
was void as against public policy. The court also concluded that the language of the various
millages passed by the two townships to provide for fire protection for their communities did not
require the joint fire department to continue for any set length of time and that Star Township
was not required to continue paying over the revenue from the fire protection millages passed by
its residents past a reasonable period. It found this reasonable time to end with the payment of
any unpaid revenues levied through December 31, 2002, including any delinquent taxes owed
from that period. Finally, the court ordered the parties to submit proposals regarding the
liquidation and distribution of the Alba Fire Board assets. The court entered an order reflecting
these rulings on July 17, 2003.
Following a hearing on the question of the liquidation and distribution of the Alba Fire
Board's assets, on September 3, 2003, the court entered an order awarding Star Township 2/3 and
Chestonia Township 1/3 of the value of the assets of the Alba Fire Department. In this order, the
court further awarded to Chestonia Township any remaining funds held by the Alba Fire Board.
The court also made specific distributional rulings concerning certain of the Alba Fire
II. RES JUDICATA
Plaintiff argues that the trial court erred when it held that the partial summary disposition
order and the stipulation and order of dismissal in the first action between the parties was not a
determination on the merits and that, therefore, the doctrine of res judicata did not apply. The
trial court did not err.
A. Standard of Review
The applicability of res judicata is a question of law, which is reviewed de novo. Adair v
Michigan, 470 Mich 105, 119; 680 NW2d 386 (2004).
In the first case between the parties, Star Township specifically placed before the court
the question whether it had the authority to withdraw from the Amended Agreement, but the trial
court declined to rule on the issue. Therefore, this claim was neither litigated, nor could it have
been litigated in the first action between the parties.
Res judicata bars a subsequent action between the same parties when the facts or
evidence essential to the action are identical to those essential to a prior action. Sewell v Clean
Cut Mgt, Inc, 463 Mich 569, 575; 621 NW2d 222 (2001). Res judicata bars litigation in the
subsequent action of not only those claims actually litigated in the first action, but also those
claims arising out of the same transaction that the parties, by exercising reasonable diligence,
could have litigated but did not. Adair, supra at 121.
In the first action between the parties, the trial court declined to rule on the question
whether Star Township had the authority to unilaterally terminate the Amended Agreement.
Therefore, this issue was not actually litigated in the first action. Moreover, this is not a situation
in which a claim that could have been brought and litigated in the first action was not. In fact, in
the original case, Star Township did bring the claim challenged here by plaintiff. However, the
trial court then elected not to rule on the issue. Accordingly, the doctrine of res judicata does not
apply to this case. As a result, the trial court did not err in so finding.
III. UNILATERAL TERMINATION OF CONTRACT
Plaintiff argues that the trial court erred when it found that Star Township could
unilaterally terminate the Amended Agreement between the parties and in finding the agreement
void as against public policy. We agree.
A. Standard of Review
This Court reviews de novo questions of contract interpretation. Morley v Automobile
Club of Michigan, 458 Mich 459, 465; 581 NW2d 237 (1998).
On January 1, 1985, the parties entered into a Fire Board Agreement. The parties
amended this agreement on September 1, 1999. The Amended Agreement, in paragraph 1,
provided: "This agreement shall commence on the date here in [sic] and continue until both
Townships deem it unfeasible." The Amended Agreement further provided, in paragraph 12,
"This agreement may be extended, terminated, or amended by the unanimous consent of the
Both the 1985 agreement and the 1999 agreement were entered into pursuant to MCL
124.1 et seq., which authorizes and prescribes, in part, intergovernmental contracts between
municipal corporations. MCL 124.2 provides as follows:
Any municipal corporation shall have power to join with any other
municipal corporation, or with any number or combination thereof by contract, or
otherwise as may be permitted by law, for the ownership, operation, or
performance, jointly or by any 1 or more on behalf of all, of any property, facility
or service which each would have the power to own, operate or perform
MCL 124.1(a) defines "municipal corporation," for the purposes of MCL 124.2, as including
In April 2002, Star Township (defendant here) brought suit requesting, among other
things, that the court find that it had the right to unilaterally terminate the Amended Agreement.
The court granted summary disposition to Chestonia Township (plaintiff here) on another basis
and never reached this question. When Chestonia Township filed the present case in January
2003, defendant then brought a counter-complaint again raising this question.
At the conclusion of the trial, the court concluded that defendant had the authority to
unilaterally terminate the Amended Agreement because the agreement constituted a perpetual
agreement and such agreements are void as against public policy. We find that the Amended
Agreement is not a perpetual agreement. Neither party nor the trial court has cited any legal
authority defining what constitutes a perpetual contract, and we have found no case law
providing such a definition.3 Black's Law Dictionary (6th ed), however, defines "perpetual" as
"[n]ever ceasing; continuous; enduring; lasting; unlimited in respect of time; continuing without
intermission or interval." It further defines the term "in perpetuity" as meaning of "[e]ndless
duration; lasting; forever."
The Amended Agreement does not state that it is unlimited or never to cease. Rather, the
Amended Agreement states, "This agreement shall commence on date here in [sic] and continue
until both Townships deem it unfeasible." (Emphasis added.) Our Supreme Court addressed a
similar issue and found that a contract stating that it would "remain in 'full force and effect
indefinitely, unless terminated at an earlier date'" had a definite term because use of the word
unless provided a means for termination. Lichnovsky v Ziebart Int'l Corp, 414 Mich 228, 240;
324 NW2d 732 (1982). The contract here contains a similarly limiting provision: the Amended
Agreement may terminate when both parties believe the continuation of the agreement is not
An analysis under general principles of contract interpretation arrives at the same result.
The primary "goal of contract interpretation is to enforce the parties' intent." Burkhardt v Bailey,
260 Mich App 636, 656; 680 NW2d 453 (2004). Where the language used is clear,
interpretation and enforcement are limited to that language. Id. at 656-657. Parties are presumed
to understand and intend what the language employed clearly states. Id. at 656. Therefore, this
Court enforces a contract as written if there is only one possible interpretation. Morley, supra at
Here, as noted, the contract clearly provides that it is to continue until both townships
deem it unfeasible, and it is terminable only "by the unanimous consent of the Townships." The
only possible interpretation is that Star Township therefore lacked the authority to unilaterally
terminate the Amended Agreement.
The term "perpetual contract" is found in two published Michigan cases—both from the
nineteenth century. In Lewis v Weidenfeld, 114 Mich 581, 594; 72 NW 604 (1897), our Supreme
Court simply reported that a witness had testified that a contract "was perpetual, because it was
based upon a perpetual contract." In Horner v Eaton Rapids, 122 Mich 117, 121; 80 NW 1012
(1899), our Supreme Court used the term "perpetual contract," but apparently used it as a
synonym for "permanent contract." Neither case made any apparent attempt to define the term.
IV. REMAINING ISSUES
In light of our decision in the previous issue we need not decide whether the trial court
erred in allowing the Star Township board to divert tax revenues to be used for an independent
Star Township fire department and not for the joint fire district, or decide whether the trial court
erred in failing to apply the doctrine of equitable estoppel to require the enforcement of the
Amended Agreement between the parties.
Reversed and remanded for proceedings consistent with this opinion.
/s/ Karen Fort Hood
/s/ Patrick M. Meter
/s/ Bill Schuette