MJC/LOTUS GROUP V TOWNSHIP OF BROWNSTOWN
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STATE OF MICHIGAN
COURT OF APPEALS
MJC/LOTUS GROUP,
FOR PUBLICATION
May 31, 2011
9:00 a.m.
Petitioner-Appellant,
v
No. 295732
Tax Tribunal
LC No. 00-327271
TOWNSHIP OF BROWNSTOWN,
Respondent-Appellee.
CW DEVELOPMENT LLC/MEADOW WALK,
Petitioner-Appellant,
v
No. 296499
Tax Tribunal
LC No. 00-319076
TOWNSHIP OF GRAND BLANC,
Respondent-Appellee.
TOLL NORTHVILLE LP and BILTMORE
WINEMAN LLC,
Petitioners-Appellees,
v
No. 301043
Tax Tribunal
LC No. 00-284952
TOWNSHIP OF NORTHVILLE,
Respondent-Appellant.
Before: MARKEY, P.J., and FITZGERALD and SHAPIRO, JJ.
PER CURIAM.
The three cases in the above-captioned matter have been consolidated for the purpose of
appellate review. In Docket No. 295732, petitioner, MJC/Lotus Group (“MJC”), appeals as of
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right the Tribunal’s order denying MJC’s motions for immediate consideration and summary
disposition and granting summary disposition in favor of respondent, Township of Brownstown
(“Brownstown”), on the ground that the Tribunal lacked jurisdiction to review the 2005 taxable
values of MJC’s properties. In Docket No. 296499, petitioner, CW Development LLC/Meadow
Walk (“CW”), appeals as of right the Tribunal’s opinion and judgment affirming, in favor of
respondent, Township of Grand Blanc (“Grand Blanc”), the 2004 taxable values of CW’s
properties for the tax years at issue on the ground that the Tribunal lacked jurisdiction to review
them. In Docket No. 301043, respondent, Township of Northville (“Northville”), appeals as of
right the Tribunal’s opinion and judgment adjusting the taxable values of properties owned by
petitioners, Toll Northville, LP, (“Toll”) and Biltmore Wineman, LLC, (“Biltmore”), for the tax
years at issue. We hold that the Tribunal lacks jurisdiction to indirectly review the accuracy of a
property’s taxable value in a year not under appeal notwithstanding that such value is used as a
starting point to calculate the property’s taxable value in a year properly under appeal.
Accordingly, we affirm the judgments reached in Docket Nos. 295732 and 296499, but reverse
the judgment reached in Docket No. 301043 and remand the case to the Tribunal for further
proceedings consistent with this opinion.
I. STANDARD OF REVIEW
The jurisdiction of the Tax Tribunal is set by statute, thereby raising a question of law,
which we review de novo. Nicholson v Birmingham Bd of Review, 191 Mich App 237, 239-240;
477 NW2d 492 (1991). When examining a decision made by the Tribunal, absent an allegation
of fraud, our review is “‘limited to determining whether the tribunal erred in applying the law or
adopted a wrong principle[.]’” Danse Corp v Madison Heights, 466 Mich 175, 178; 644 NW2d
721 (2002), quoting Michigan Bell Tel Co v Dep’t of Treasury, 445 Mich 470, 476; 518 NW2d
808 (1994). We treat the Tribunal’s factual findings as conclusive if “‘competent, material, and
substantial evidence on the whole record’” supports them. Id. “Substantial evidence must be
more than a scintilla of evidence, although it may be substantially less than a preponderance of
the evidence.” Jones & Laughlin Steel Corp v City of Warren, 193 Mich App 348, 352-353; 483
NW2d 416 (1992).
II. THE TRIBUNAL LACKS JURISDICTION TO REVIEW TAXABLE VALUES IN YEARS
NOT UNDER APPEAL
In each of the three consolidated cases, the petitioning party challenges as
unconstitutional the taxable values of the subject properties in the year immediately preceding
the first tax year under appeal. In Docket No. 295732, MJC challenges the subject properties’
2005 taxable values in its petition filed in tax year 2006, amended to include subsequent years.
In Docket No. 296499, CW challenges the subject properties’ 2004 taxable values in its petition
filed in tax year 2005, amended to include subsequent years. In Docket No. 301043, Toll and
Biltmore challenge the subject properties’ 2000 taxable values in its petition filed in tax year
2001, amended to include subsequent years.
Docket No. 301043 provided the impetus for the constitutional issue at hand. The case
was placed in abeyance while Toll and Biltmore pursued a declaratory judgment action in the
Wayne Circuit Court challenging the constitutionality of MCL 211.34d(1)(b)(viii). The case
reached the Michigan Supreme Court, which held as follows:
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The issue is the constitutionality of MCL 211.34d(1)(b)(viii), which, as written,
defines “public services” as “additions” and, therefore, would allow for the
taxation of the value added from the installation of public-service improvements,
which are “water service, sewer service, a primary access road, natural gas
service, electrical service, telephone service, sidewalks, or street lighting.” We
agree with the analysis and the decision of the Court of Appeals, which declared
MCL 211.34(1)(b)(viii) unconstitutional. The Court of Appeals correctly
concluded that the mere installation of public-service improvements on public
property or on utility easements does not constitute a taxable “addition”-- as that
term was understood when the public adopted Proposal A-- in this instance,
involving infrastructure improvements made to land destined to become a
residential subdivision. [Toll Northville Ltd v Twp of Northville, 480 Mich 6, 1314; 743 NW2d 902 (2008).]
Although the invalidity of MCL 211.34d(1)(b)(viii) is not contested on appeal, there remain
preliminary issues that must be addressed to decide the form of redress available to the parties in
the instant actions.
The first question is whether the Tribunal has subject matter jurisdiction to review the
accuracy (here, the constitutional legitimacy) of the properties’ taxable values in years not
directly under appeal. The challenge is an indirect one by virtue of the mathematical formula
that assessors use to compute a property’s taxable value in a given year, the starting point of
which is the property’s taxable value in the immediately preceding year. The mathematical
formula, set forth in MCL 211.27a, provides that a property’s taxable value in a given year
equals “[t]he property’s taxable value in the immediately preceding year minus any losses,
multiplied by the lesser of 1.05 or the inflation rate, plus all additions.” Petitioners in this case
argue that the immediately preceding year’s taxable values include “additions” for public service
improvements, which the Michigan Supreme Court declared unconstitutional. Therefore,
according to petitioners, the Tribunal must correct the constitutional errors, use the corrected
taxable values to recalculate the taxable values in the first year under appeal, and similarly adjust
the taxable values in subsequent years under appeal. We disagree.
Subject matter jurisdiction, which refers to the deciding body’s authority to try a case of
the kind or character pending before it, irrespective of the particular facts of the case, cannot be
waived. Travelers Ins Co v Detroit Edison Co, 465 Mich 185, 204; 631 NW2d 733 (2001).
Concerns regarding subject matter can be raised at any time, by any party, or sua sponte by the
Tribunal. Electronic Data Sys Corp v Flint Twp, 253 Mich App 538, 544; 656 NW2d 215
(2002). Indeed, when the Tribunal finds that it lacks subject matter jurisdiction, it is obliged to
dismiss the case and may proceed no further except to effectuate such dismissal. Id. at 544-545.
MCL 205.735(3) provides, in relevant part, that the Tribunal’s jurisdiction “is invoked by
a party in interest, as petitioner, filing a written petition on or before June 30 of the tax year
involved.” Although the petitions in the instant cases are not themselves untimely, petitioners
are attempting to use them to challenge the subject properties’ taxable values from tax years not
under appeal.
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In Leahy v Orion Twp, 269 Mich App 527; 711 NW2d 438 (2006), we addressed a
similar situation in which a petition filed in 2003 challenged the subject property’s 2003 assessed
value on the ground that it had been incorrectly calculated based on an error in the property’s
2002 assessment. Id. at 528-529. In challenging the 2002 assessment in his 2003 petition, the
petitioner “argued that the tax code requires property taxes to be based on the prior year’s
assessed value, so that the prior year’s value must be the correct value.” Id. at 529 (emphasis in
original). In rejecting the petitioner’s argument, we held:
Petitioner cannot be aggrieved by the tribunal’s finding that respondent
erroneously computed the 2003 assessment. Rather, petitioner challenges the
2003 assessment to the extent that it remains premised on an incorrect starting
point. . . . However, this challenge presents a collateral attack on a matter that is
no longer subject to litigation. [Id. at 530.]1
We concluded that “the fixed assessment value must be used where, as here, a statutory
assessment formula calls for the use of a now-unchallengeable assessed value.” Id. at 531. In
addition, we noted that the Tribunal correctly dismissed the claim for lack of jurisdiction,
explaining that the petitioner only appealed his 2003 assessment and attempts to challenge prior
years’ assessments are untimely under MCL 205.735. Id. at 532.
Accordingly, the law prohibits the Tribunal from revisiting the accuracy of assessments
and other evaluations that have become “unchallengeable,” whether because a final judgment has
been entered regarding the values (collateral estoppel), or the window for filing a petition to
challenge those values has lapsed (lack of jurisdiction). This long-held principle can be traced
back to the Supreme Court’s decision in Auditor General v Smith, 351 Mich 162, 168; 88 NW2d
429 (1958), where it stated, “[f]ailure to act to correct assessments and evaluations by the board
of review in the manner as provided by statute precludes later attack upon the assessment.”
Further, in Toll Northville, Ltd v Northville Township, 272 Mich App 352, 360; 726
NW2d 57 (2006), aff’d in part, vac’d in part on other grounds 480 Mich 6 (2008), we previously
acknowledged the implications of Leahy for the ultimate resolution of Docket No. 301043,
which, at the time, was held in abeyance in the Tribunal, we held “While we acknowledge that . .
. Leahy limit[s] the Tax Tribunal’s authority to decide the accuracy and methodology of
assessments to the tax years timely appealed, we do not agree that those decisions limit our
ability to resolve the constitutional issue at hand.” Id.
Consequently, we disagree with petitioners that nothing forbids the Tribunal from hearing
a constitutional argument regarding an invalid action occurring in the preceding year used to
calculate the tax assessment for the current year. MCL 205.735(3), Leahy, Auditor General, and
the foreshadowing in Toll Northville precisely forbid the Tribunal from taking such action.
1
The reference to a collateral attack was based on a 2002 action that petitioner brought in the
circuit court, which was dismissed, affirmed on appeal, and became a final judgment when the
petitioner failed to take advantage of further appellate opportunities. Id. at 530-531.
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MJC argues that its case is distinguishable in that it involves freshly split parcels in the
first year under appeal. We acknowledge that the original parent parcel, which MJC purchased
in 2001, was split into the child parcels that are the subject of this appeal in 2006, the first year
under appeal, and that, therefore, there are no taxable values corresponding to the child parcels in
2005, the year in which public service improvements were included in the parent parcel’s taxable
value. What MJC fails to explain, however, is why MJC could not have challenged the public
service additions included in the taxable value of the parent parcel in 2005. Because MJC has
not argued that anything prevented it from filing a petition in 2005, the distinction makes no
difference.
We agree with petitioners that unconstitutional statutes are void ab initio. Nevertheless, a
determination that a statute is unconstitutional does not nullify the limitation on the Tribunal’s
jurisdictional authority, that it may only review the accuracy of taxable values in years properly
under appeal. Contrary to petitioners’ suggestion, the tribunal’s lack of jurisdiction does not
nullify Toll Northville. Toll Northville was a declaratory judgment action to determine the
constitutionality of MCL 2.1134d(1)b)(vii), not an appeal from a Tribunal decision. Toll
Northville, 272 Mich App at 361. In Toll Northville, Northville argued that we were without
jurisdiction to decide whether MCL 211.34d(1)(b)(vii) was unconstitutional because “the Tax
Tribunal would have no authority to change the 2001 and 2002 tax assessments on the basis of
additions that occurred in tax year 2000.” We noted that “the Tax Tribunal has not yet issued a
ruling so as to invoke our review of its jurisdiction. The determination whether jurisdiction
exists to hear the developers’ challenge to the actual tax assessment is based on fact-finding
within the province of the Tax Tribunal.” Id. Thus, Toll Northville undisputedly held that MCL
211.34d(1)(b)(vii) was unconstitutional, but recognized that a party’s ability to invoke the
Tribunal’s jurisdiction to lower properties’ taxable values if, and to the extent that, such values
include additions for public service improvements would rely solely on whether the facts in the
specific case fell within the Tribunal’s jurisdiction—a question not before it at that time. Id.
That question is, however, precisely what is now before us and, as noted above, we conclude that
the Tribunal lacks jurisdiction to reach back into years not under appeal to correct those
constitutional errors.2
We also reject the argument that MCL 211.27a, which sets forth the mathematical
formula used to determine a property’s taxable value, somehow confers jurisdiction on the
Tribunal to review the prior year’s taxable value. MCL 211.27a provides, in pertinent part:
(2) Except as otherwise provided in subsection (3), for taxes levied in 1995 and
for each year after 1995, the taxable value of each parcel of property is the lesser
of the following:
(a) The property’s taxable value in the immediately preceding year minus any
losses, multiplied by the lesser of 1.05 or the inflation rate, plus all additions.
2
We also note that applying Toll Northville to the instant cases would nullify the mandates of
MCL 205.735(3).
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For taxes levied in 1995, the property's taxable value in the immediately
preceding year is the property's state equalized valuation in 1994. [Emphasis
added.]
Merely using a property’s taxable value in the immediately preceding year to perform a
calculation, as MCL 211.27a instructs, is quite different than reviewing the accuracy,
constitutional or otherwise, of such taxable value. We have reached a similar conclusion related
to uncapping issues. In Mich Props, LLC v Meridian Twp, ___ Mich App ___; ___ NW2d ___
(Docket Nos. 289174, 289175 & 289176, issued April 5, 2011), this Court concluded that the
Tribunal erred when it permitted property to be uncapped for the 2007 and 2008 tax years when
the transfer had occurred in 2004. Id. at ___, slip op at 2, 5. We conclude that the prohibition
must cut both ways. If a taxing authority may not reach back into the past to “correct” a property
value by uncapping where it failed to uncap at the time the transfer occurred, property owners
must likewise be denied the ability to reach back into the past and “correct” values where they
failed to appeal the taxable value during the designated statutory time period. Thus, although
MCL 211.27a calls for use of the immediately preceding year’s taxable value, it does not extend
the jurisdiction of the Tax Tribunal to permit a second bite at the apple to contest the taxable
value from tax years that were not timely appealed.3
III. PUBLIC SERVICE IMPROVEMENTS MAY NOT BE DEDUCTED AS A “LOSS”
Petitioners MJC, Toll, and Biltmore argue that, even assuming that the Tribunal lacked
jurisdiction to recalculate the subject properties’ taxable values in years not under appeal that
contain unconstitutional “additions” for public service improvements, it should have deducted
the same from the properties’ taxable values in years properly under appeal as a “loss.” For
several reasons, this argument must fail.
“Loss” is defined, in pertinent part, as “[p]roperty that has been destroyed or removed.”
MCL 211.34d(1)(h)(i). Under MCL 211.27a(2)(a), the taxable value of a parcel of property
equals “[t]he property’s taxable value in the immediately preceding year minus any losses,
multiplied by the lesser of 1.05 or the inflation rate, plus all additions.” Here, no loss occurred
because the public service improvements were neither removed nor destroyed.
Petitioners argue that the value of the public service improvements were “removed or
destroyed” when the larger parcels were divided into the smaller subject parcels, resulting in a
“separation” of the public service improvements from the properties. This position is contrary to
MCL 211.34d(1)(i)(i), which provides that the term, “loss,” does not include “decreased value
3
The Leahy, Toll Northville, and Auditor General decisions make it apparent that whether the
Tribunal may revisit an earlier year’s taxable value for the purpose of calculating the property’s
taxable value in a year properly under appeal is not an open question. Indeed, petitioners fail to
cite to any case in which the Tribunal has been permitted to reach back in time to correct taxable
values in years not under appeal. Therefore, it is unnecessary to consider the parties’ various
policy arguments that the Tribunal should be permitted to do so.
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attributable to . . . splits . . . of property,” and petitioners have cited no caselaw in which the
value of public service improvements, when such improvements are separated from property as a
result of a split, have been considered a “loss” under MCL 211.34d(1)(h)(i) that must be
deducted from a property’s taxable value under MCL 211.27a(2)(a).
In any event, the Toll Northville decision forecloses petitioners’ argument. Under Toll
Northville, the value of public service improvements may not be included in a property’s value
as an “addition.” Including such value is unconstitutional. In a timely filed petition, if a
property’s taxable value is found to include the value of public service improvements, the
Tribunal must reduce the property’s taxable value under Toll Northville. If we were to accept
petitioners’ position, the Tribunal would be required to reduce the property’s taxable value again,
and by the same amount, because the value of public service improvements constitutes, not only
an unconstitutional “addition,” but also a “loss.” Accordingly, we hold that there was no “loss”
within the meaning of the statute in these cases. Rather, in years not properly under appeal, the
subject properties’ taxable values, which are now finalized, include unconstitutional additions for
public service improvements. The Tribunal, however, lacks jurisdiction to reach back into years
not under appeal to correct those constitutional errors.4
IV. NORTHVILLE’S ADDITIONAL ISSUES
In addition to its jurisdictional argument, Northville argues that the Tribunal, by reducing
the subject properties’ taxable values by the amount of public service additions, violated the
doctrines of collateral estoppel, res judicata, and the “law of the case.” We decline to address
this argument because we find the Tribunal’s lack of jurisdiction a sufficient ground to reverse
the Tribunal’s decision adjusting the subject properties’ taxable values in a year not under
appeal.
Finally, Northville argues that the Tribunal clearly erred in calculating the properties’
taxable values inconsistent with the parties’ stipulations. We conclude that, because the Tribunal
lacked jurisdiction, it should not have engaged in any recalculation, and reverse any adjustment
in taxable values that occurred. Therefore, we need not determine whether the Tribunal’s
recalculation comported with the parties’ stipulations.
V. CONCLUSION
Because the taxable values challenged in the instant actions are beyond the Tribunal’s
jurisdiction to revisit, the only remaining question is whether the assessor properly applied the
mathematical formula used to determine the subject properties’ taxable values in the years
properly under appeal. With the exception of the “loss” argument, which we reject, the parties
do not dispute that the assessor properly applied the statutory inflationary factor to the subject
4
In light of our determination that there is no jurisdiction, we need not consider Grand Blanc’s
alternative argument regarding the application of MCL 211.27(a)(3).
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properties’ taxable values from the immediately preceding year to arrive at the subject
properties’ taxable values in the years properly under appeal.
In Docket No. 295732, the Tribunal properly found that it lacked jurisdiction to review
the subject properties’ 2005 taxable values. It further found that the assessor correctly calculated
the subject properties’ 2006 taxable values utilizing the allegedly erroneous 2005 taxable values,
and that the subject properties’ 2007 and 2008 taxable values were also correctly calculated
utilizing the previous years’ taxable values. Accordingly, it granted Brownstown’s motion for
summary disposition and dismissed the case. The Tribunal did not err.
In Docket No. 296499, the Tribunal properly found that it lacked jurisdiction to review
the subject properties’ 2004 taxable values. It further found that CW failed to show that the
assessor misapplied the statutory formula to arrive at the taxable values in tax years 2005, 2006,
2007, and 2008. Accordingly, it affirmed the properties’ taxable values for the tax years at issue
and ordered the case closed. The Tribunal did not err.
In Docket No. 301043, the Tribunal properly found that it lacked jurisdiction to review
the subject properties’ taxable values in a year not under appeal. However, the Tribunal then
stated:
The Tribunal finds that the taxable value of the properties as assessed includes an
amount for public service improvements. The Tribunal finds that this was found
to be unconstitutional and, therefore, prospectively amends the taxable value of
the properties at issue to conform to the Supreme Court’s decision in Toll
Northville . . . .”
By reducing the properties’ taxable values in a year not under appeal, the Tribunal violated the
jurisdictional statute. In this regard, the Tribunal misapplied the law and adopted a wrong
principle.
Accordingly, we affirm the orders in Docket Nos. 295732 and 296499. In Docket No.
301043, we reverse the order adjusting the subject properties’ taxable values and remand the
case back to the Tribunal with instructions that it affirm the subject properties’ taxable values for
the tax years at issue because it lacks jurisdiction to review them. We do not retain jurisdiction.
/s/ Jane E. Markey
/s/ E. Thomas Fitzgerald
/s/ Douglas B. Shapiro
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