WPW ACQUISITION CO V CITY OF TROY
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Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice
Justices
Maura D. Cor rigan
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
Opinion
____________________________________________________________________________________________________________________________
FILED MAY 14, 2002
WPW ACQUISITION COMPANY,
Plaintiff-Appellant,
v
No.
118750
CITY OF TROY,
Defendant-Appellee.
____________________________________
BEFORE THE ENTIRE BENCH
TAYLOR, J.
Underlying this case is the adoption of the “Proposal A”
amendment of the Michigan Constitution at the special election
held on March 15, 1994.
In particular, Proposal A added
language to Const 1963, art 9, § 3 that generally limits
annual increases in property tax assessments on a parcel of
property as long as that property is owned by the same party.
However,
Proposal
A
allows
the
value
of
property
to
be
adjusted for “additions” without regard to this cap. At issue
is
the
constitutionality
211.34d(1)(b)(vii),
that
of
a
statutory
purports
to
provision,
include,
in
MCL
certain
circumstances, an increase in the value of property because of
increased
occupancy
“additions.”
by
tenants
within
the
meaning
of
We conclude that this statutory provision is
unconstitutional because it is inconsistent with the meaning
of the term “additions” as used in Proposal A.
I
In 1991, before the ratification of Proposal A, plaintiff
WPW Acquisition Company was granted by defendant city of Troy
a decrease in the assessed value of the parcel of property
that included the office building at issue.
At all relevant
times, this property has been owned by WPW.
In 1996, after the passage of Proposal A, Troy increased
its determination of the assessed “taxable value” of the
parcel of property, and thus its property tax assessment, by
over thirteen percent.1 Apparently, this increased assessment
was tied to an increased occupancy of the office building by
tenants.
WPW protested this assessment as violative of the
provision of the Proposal A constitutional amendment, codified
at Const 1963, art 9, § 3, that generally limits annual
increases
in
the
assessed
taxable
1
value
of
a
parcel
The taxable value assessed by Troy in 1995
$6,545,970. In 1996, it was increased to $7,434,940.
2
of
was
property to the lesser of five percent or the increase in the
“general price level” for the immediately preceding tax year.
However, Troy took the position that the increased assessment
was permitted by language in the constitutional amendment
allowing
adjustments
for
“additions”
and
a
subsequently
enacted statutory provision, MCL 211.34d(1)(b)(vii), which
defines
“additions”
increases
in
the
to
include,
value
of
in
property
some
circumstances,
attributable
to
an
increased occupancy rate.
After the Michigan Tax Tribunal ruled in favor of Troy
with regard to the assessment, WPW brought this action in the
circuit
court,
of
the
pertinent statutory provision, MCL 211.34d(1)(b)(vii).
The
circuit
was
court
challenging
held
that
the
this
constitutionality
statutory
provision
unconstitutional as an attempt by the Legislature to change
the
meaning
of
“additions”
as
used
in
the
Michigan
Constitution from the meaning established by the relevant
statute when Proposal A was passed.2
The Court of Appeals
reversed, holding that the constitutional amendment left the
meaning
of
consistent
“additions”
with
the
to
the
ratifiers’
2
Legislature
intent”
“to
and
define,
that
the
However, the circuit court denied WPW’s request that it
order a corresponding tax refund in its favor on the ground
that calculation and award of such a tax refund was within the
exclusive jurisdiction of the Tax Tribunal.
3
Legislature
had
done
so
in
a
reasonable
manner
in
the
pertinent statutory provision. 243 Mich App 260; 620 NW2d 883
(2001).
We granted WPW’s application for leave to appeal.
II
The
Michigan
Constitution,
Const
1963,
art
9,
§
3
provides in pertinent part with regard to taxation of real
property:
The legislature shall provide for the uniform
general ad valorem taxation of real and tangible
personal property not exempt by law except for
taxes levied for school operating purposes.
The
legislature shall provide for the determination of
true cash value of such property; the proportion of
true cash value at which such property shall be
uniformly assessed, which shall not, after January
1, 1966, exceed 50 percent; and for a system of
equalization of assessments. For taxes levied in
1995 and each year thereafter, the legislature
shall provide that the taxable value of each parcel
of property adjusted for additions and losses,
shall not increase each year by more than the
increase in the immediately preceding year in the
general price level, as defined in section 33 of
this article, or 5 percent, whichever is less until
ownership of the parcel of property is transferred.
When ownership of the parcel of property is
transferred as defined by law, the parcel shall be
assessed at the applicable proportion of current
true cash value. [Emphasis added.]
The emphasized language, which is central to the present case,
was
part
of
the
language
added
to
this
constitutional
provision by the Michigan electorate in ratifying Proposal A.
As
is
plain,
this
language
operates
to
generally
limit
increases in property taxes on a parcel of property, as long
as it remains owned by the same party, by capping the amount
4
that the “taxable value” of the property may increase each
year, even if the “true cash value,” that is, the actual
market
value,
of
the
property
rises
at
a
greater
rate.
However, a qualification is made to allow adjustments for
“additions.”
Resolution of the present case turns on the
meaning of the term “additions” as used in the emphasized
constitutional language.
When Proposal A was adopted (that is, on March 15, 1994),
the General Property Tax Act defined “additions” to mean
all increases in value caused by new construction
or a physical addition of equipment or furnishings,
and the value of property that was exempt from
taxes or not included on the assessment unit’s
immediately preceding year’s assessment role. [MCL
211.34d(1)(a), as then in effect.]
Obviously, this definition did not encompass any increases in
occupancy by tenants in a
building within the meaning of the
term “additions.”
However, after the pertinent constitutional language was
added
to
§
3
by
the
ratification
of
Proposal
A,
the
Legislature enacted amendments of MCL 211.34d(1)(b)(vii) that
state in pertinent part:
As used in this section or . . . section 3
. . . of article IX of the state constitution of
1963 [that is § 3 of the constitutional provision
at issue]:
* * *
(b) For taxes levied after 1994, “additions”
means, except as provided in subdivision (c), all
5
of the following:
* * *
(vii) An increase in the value attributable to
the property’s occupancy rate if either a loss, as
that term is defined in this section, had been
previously allowed because of a decrease in the
property’s occupancy rate or if the value of new
construction was reduced because of a below-market
occupancy rate.
Troy relied on this statutory provision in increasing
WPW’s taxable value for the office building at issue by over
thirteen percent in 1996 on the ground that this was based on
an increase in occupancy covered by the statute and, thus, on
an “addition” that was not subject to the general limit on
annual property tax increases imposed by § 3.
However, we agree with WPW that MCL 211.34d(1)(b)(vii) is
unconstitutional
in
purporting
to
define
“additions”
for
purposes of § 3 in a way that is inconsistent with the
established meaning of that term at the time that it was added
to this constitutional provision by the passage of Proposal A.
This is because “if a constitutional phrase is a technical
legal term or a phrase of art in the law, the phrase will be
given
the
meaning
that
those
sophisticated
in
the
law
understood at the time of enactment unless it is clear from
the
constitutional
intended.”
language
that
some
other
meaning
was
Michigan Coalition of State Employee Unions v
6
Civil Service Comm, 465 Mich 212, 223; 634 NW2d 692 (2001).3
At the time that Proposal A was submitted to the voters, the
General
Property
Tax
Act
established
“additions”
as
technical legal term in the area of property taxation.
a
As we
discussed above, that statutory definition of “additions”
simply did not encompass any increase in the value of property
due to increased occupancy by tenants.
Further, there is no indication when one examines the
purposes of the property tax limitation amendment to conclude
that
another
intended.4
case.
more
expansive
meaning
of
“additions”
was
On the contrary, the opposite appears to be the
The amendment generally was to not allow the taxable
value to increase above the “cap” regardless of any larger
increase
in
transferred.
true
market
value
until
the
property
was
The blanket bar was tempered, however, by
allowing for adjustments for additions. If what the amendment
had done was empower the Legislature, at its will, to define
an increase in the value of property (such as an increase due
3
See also People v Pickens, 446 Mich 298, 310-311; 521
NW2d 797 (1994), quoting 1 Cooley, Constitutional Limitations
(8th ed), p 132 (“technical words” and “words of art” in a
constitution should be considered “to be employed in their
technical sense”).
4
As we observed in Federated Publications, Inc v
Michigan State Univ Bd of Trustees, 460 Mich 75, 85; 594 NW2d
491 (1999), “we often consider the circumstances surrounding
the adoption of [a constitutional] provision and the purpose
it is designed to accomplish.”
7
to increased occupancy) to be classified as an “addition,”
then the property tax limiting thrust of § 3 would be, or
could soon be if the Legislature desired it, thwarted.
To
adopt Troy’s position regarding legislative power to amend the
meaning of terms understood at the time of ratification, would
be to assume the drafters and ratifiers of this amendment
desired to place a convenient sabotaging clause within this
tax limitation amendment that could be triggered whenever the
Legislature chose.
Such a skewed view of the intent, to say
nothing of the capabilities, of the drafters and ratifiers,
should be rejected.
Moreover, to adopt such a mode of
interpretation would, when applied in the future to other
constitutional language, hollow out the people’s ability to
place limits on legislative power.
In short, to recognize
such an expansive legislative power to redefine constitutional
terms is inconsistent with the constitution’s supremacy over
statutes.
See Marbury v Madison, 5 US (1 Cranch) 137; 2 L Ed
60 (1803).
Against this background, we see no principled way
to determine the meaning of “additions” as used in § 3 except
by considering it as a term of art that must be construed in
conformity with the meaning of “additions” as used in the
General Property Tax Act at the time that Proposal A was
8
adopted.5
Further, the position that Troy urges upon us, that the
ultimate definition of “additions” in § 3 was committed to the
Legislature,6
also
runs
counter
to
the
principle
that
construing the meaning of constitutional language is a basic
judicial function.
789;
629
NW2d
See Lewis v Michigan, 464 Mich 781, 788
868
constitutionality
is
(2001)
“a
(reviewing
core
judicial
a
statute
for
function”);
its
House
Speaker v Governor, 443 Mich 560, 575; 506 NW2d 190 (1993),
quoting Baker v Carr, 369 US 186, 211; 82 S Ct 691; 7 L Ed 2d
(1962) (describing this Court as the “ultimate interpreter of
the [Michigan] Constitution”). Moreover, the pivotal sentence
in § 3 states:
5
Troy emphasizes its view that WPW essentially got a tax
break when the assessed value of the property was lowered in
1991 on the basis of a decrease in occupancy, and that the
increase in value in 1996 was fair because it corresponded to
an ensuing increase in occupancy. While WPW disputes this
view with the contention that the decreased assessment in 1991
simply reflected a decline in market value, the point is
simply immaterial to our analysis. Nothing in the language of
§ 3 and, in particular, nothing in the established meaning of
“additions” at the time Proposal A was passed allows for an
increase in the taxable value of property beyond the general
cap established by Proposal A on the basis of such a prior
reduction in assessed value.
6
Troy states in its brief:
The Michigan Constitution, however, does not
specifically define additions and losses, and
therefore the legislature was left to format the
commonly understood meaning of these terms into
legislation.
9
For taxes levied in 1995 and each year
thereafter, the legislature shall provide that the
taxable value of each parcel of property adjusted
for additions and losses, shall not increase each
year by more than the increase in the immediately
preceding year in the general price level, as
defined in section 33 of this article, or 5
percent, whichever is less until ownership of the
parcel of property is transferred.
This language clearly imposes an obligation on the Legislature
to provide implementing legislation for a general limitation
on the increase in taxable value of parcels of property.
It
cannot
to
be
distorted
into
allowing
the
Legislature
periodically alter the meaning of “additions.”
That such a
limit on legislative power should be understood is underscored
by the immediately following sentence in § 3, which provides:
When ownership of the parcel of property is
transferred as defined by law, the parcel shall be
assessed at the applicable proportion of current
true cash value. [Emphasis added.]
This language shows that the drafters of the proposal knew how
to commit the definition of certain terms to the Legislature,
in this instance, what constitutes a transfer.
That no such
legislative authority was granted with regard to the term
“additions” reinforces the lack of such a commitment to allow
the Legislature this power.
For these reasons, we disagree with the essential premise
of the Court of Appeals in this case that § 3 “left it to the
Legislature to define” the term “additions.”
Therefore, we
hold that MCL 211.34d(1)(b)(vii) is unconstitutional because
10
it purports to define the term “additions” for purposes of § 3
in a way that violates the proper meaning of that term.7
It follows from our analysis that Troy’s decision in
1996,
in
reliance
on
this
unconstitutional
statutory
provision, to increase the assessment on the office building
at issue by far more than five percent, solely on the basis of
increased occupancy, facially violated the cap on annual
increases in taxable value imposed by § 3.
Thus, we reverse
the holding of the Court of Appeals.
III
In light of its holding rejecting WPW’s constitutional
challenge to MCL 211.34d(1)(b)(vii), the Court of Appeals
expressly declined to reach the issue whether the circuit
court had jurisdiction to order a tax refund premised on the
unconstitutionality of that statutory provision. Accordingly,
we remand this case to the Court of Appeals for initial
consideration of that issue.8
7
WPW also argues that this statutory provision violates
the “uniformity” requirement of the first sentence of Const
1963, art 9, § 3, which states in pertinent part, “The
legislature shall provide for the uniform general ad valorem
taxation of real and tangible personal property . . . .”
However,
in
light
of
our
analysis
holding
MCL
211.34d(1)(b)(vii) to be unconstitutional on other grounds, it
is unnecessary to consider that question.
8
While the parties argue this matter here, we consider
it most appropriate to allow the Court of Appeals to review it
in the first instance.
11
The opinion of the Court of Appeals is reversed.
case
is
remanded
to
that
Court
for
further
This
proceedings
consistent with this opinion.
CORRIGAN , C.J., and WEAVER , YOUNG , and MARKMAN , JJ., concurred
with TAYLOR , J.
12
S T A T E
O F
M I C H I G A N
SUPREME COURT
WPW ACQUISITION COMPANY,
Plaintiff-Appellant,
v
No. 118750
CITY OF TROY,
Defendant-Appellee.
___________________________________
CAVANAGH, J. (concurring).
The people of this state adopted Proposal A, which
amended Const 1963, art 9, § 3 by limiting the tax increase
that could be imposed on property tax assessments.
The
amendment permits an increase in excess of this cap if the
property valuation is adjusted for “additions.”
I agree with
the majority’s conclusion that the Legislature impermissibly
redefined “additions” in this instance.
separately
to
express
my
concern
However, I write
with
the
majority’s
overzealous condemnation of the Legislature’s attempt to enact
the provisions of the constitutional amendment and to caution
against
its
constitutional
analysis
that
suggests
the
undertaking lacks complexity.
I agree with the majority that the Legislature may define
constitutional terms when permitted by the text.
Because the
revised
articulated
definition
significantly
expands
the
exceptions to the cap on tax increases, it conflicts with the
original
intent
of
the
ratifiers.
This
legislative
overreaching is particularly evident because we are close in
time to the passage of the amendment, and we must assume the
ratifiers intended any exceptions to the cap on tax increases
be narrowly construed. However, contrary to what the majority
implies, even if this Court determined that the text of the
amendment expressly permits the Legislature to define the
term, its design could not be thwarted because this Court
would still be required to invalidate any definition that
violated the purpose of the amendment.
The Legislature can
never unconstitutionally define a term in the constitution.
Though
the
issues
this
case
presents
are
far
from
complex, the nature of constitutional interpretation is rarely
so straightforward.
Simply stated, the value of original
intent as one method among many in the endeavor to properly
interpret our constitution must be appreciated.
qualification, I respectfully concur.
KELLY , J., concurred with CAVANAGH , J.
2
With that
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