Bray v. Department of State

• Decision Date: 01 December 1983
• Docket Number: No. 1,Docket No. 65164,1
• Citation: 341 N.W.2d 92,418 Mich. 149
• Parties: Willie BRAY, et al., Plaintiffs-Appellees and Cross-Appellants, v. DEPARTMENT OF STATE, Defendants-Appellants and Cross-Appellees. Calendar
• Court: Michigan Supreme Court

Page 92

341 N.W.2d 92

418 Mich. 149

Willie BRAY, et al., Plaintiffs-Appellees and Cross-Appellants, v. DEPARTMENT OF STATE, Defendants-Appellants and Cross-Appellees.

Docket No. 65164

Calendar No. 1.

Supreme Court of Michigan.

Argued April 7, 1983.

Decided Dec. 1, 1983.

Harry S. Ellman, Southfield, Donald E. Barris, Sharon M. Woods, Barris, Sott, Denn & Driker, Detroit, for plaintiffs-appellees and cross-appellants.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Former Sol. Gen., Louis J. Caruso, Sol. Gen., Harry G. Iwasko, Jr., Warren R. Snyder, Asst. Attys. Gen., Lansing, for defendants-appellants and cross-appellees.

BRICKLEY, Justice.

This is the culmination of a decade of litigation involving two trips up the judicial ladder of this state. It involves the desire of the plaintiffs, a class of some 350,000 Michigan residents, to each recover half of a $45 annual fee they were required to pay in order to register their uninsured motor vehicles in 1973, the last year uninsured motorists were permitted to operate their vehicles on Michigan roads. It is their claim that having paid for a full year's "privilege of driving an uninsured motor vehicle", the inauguration of the state's mandatory no-fault insurance act on October 1, 1973, midway through the registration year, entitled them to a refund.

Following two separate hearings before the circuit court and corresponding review by the Court of Appeals, the case comes to us following a holding that: 1) the $45 annual fee for uninsured motorists provided for in the Motor Vehicle Accident Claims Act, M.C.L. Sec. 257.1101 et seq.; M.S.A. Sec. 9.2801 et seq., the proceeds of which went to a fund for the benefit of the victims of accidents involving uninsured and unidentified motorists, "could be said to represent an annual insurance premium" which established a contractual relationship between the state and the uninsured motorist, a relationship that is a property right protected by the Fourteenth Amendment of the United States Constitution; 2) that the no-fault insurance act, M.C.L. Sec. 500.3101 et seq.; M.S.A. Sec. 24.13101 et seq., terminated that contractual relationship; and 3) that the contract right impaired by the state can be redeemed by a refund of a pro- rata portion of the annual $45 fee. It was the judgment of the Court of Appeals that because the pro-rata refund to which the plaintiffs were entitled was required on constitutional grounds it should be forthcoming from the state, irrespective of the resources of the Motor Vehicle Accident Claims Fund, the repository of the contested fee.

It is our conclusion that there is no legal or factual basis for finding that the MVACA is in the nature of an insurance policy for plaintiffs or that the required fee established any contractual rights. We find that the uninsured motorist fee is more in the nature of a tax than either a license fee or an insurance premium. We find no federal or state constitutional infringement of plaintiffs' rights occasioned by the enactment of the no-fault insurance act. Therefore, there is no contractual, statutory, or constitutional basis for concluding that the state is liable to plaintiffs. The history of this case follows.

In 1965, the Legislature enacted the Motor Vehicle Accident Claims Act, 1965 P.A. 198. As amended, the act provided that "[e]very person registering an uninsured motor vehicle in this state shall pay annually at the time of registering, in addition to any other fee prescribed by law, a fee of $45.00". 1971 P.A. 19, Sec. 3(3). The act further provided that it would be a misdemeanor for anyone who had not paid the fee to drive an uninsured motor vehicle. 1971 P.A. 19, Sec. 3(7). Insured motorists were originally required to pay a $1 fee. ¹ 1965 P.A. 198, Sec. 3(3).

The act provided that the proceeds of these fees would go into the Motor Vehicle Accident Claims Fund "for the payment of damages for injury to or death of certain persons or property damage", that is, persons who had the misfortune of being injured by uninsured, underinsured, or unidentified motorists. The Secretary of State, who was responsible for the fund, was subrogated to the rights of the injured parties as against the uninsured drivers. M.C.L. Sec. 257.1106(4); M.S.A. Sec. 9.2806(4). Uninsured motorists against whom there were unsatisfied judgments owing either to an injured party or the fund and with whom the Secretary of State had not been able to make a repayment arrangement were made subject to the revocation both of their driver's licenses and their automobile registrations. M.C.L. Sec. 257.1106(6); M.S.A. Sec. 9.2806(6).

On October 31, 1972, the no-fault act, M.C.L. Sec. 500.3101 et seq.; M.S.A. Sec. 24.13101 et seq., was approved by the Legislature. It provided that on October 1, 1973, in addition to the introduction of the no-fault concept, all motorists must be insured and must provide evidence of insurance. M.C.L. Secs. 500.3101, 500.3101a; M.S.A. Secs. 24.13101, 24.13101(1).

In August of 1973, nine months after the passage of the no-fault insurance act and two months before it became operational, plaintiffs commenced this action, seeking a declaration of their rights and a refund of half of the $45 uninsured motorist's fee paid in 1973. The suit was initiated in the Court of Claims; but, by stipulation of the parties, it was moved to the Wayne Circuit Court. The some 350,000 uninsured motorists constituting the plaintiff class claimed, from the outset, that the $45 that was required to be paid the preceding March 31 was a license fee for the privilege of driving an uninsured motor vehicle, and that they paid the $45 "with the understanding and agreement" that they could continue to drive their uninsured vehicles until April 1 of the following year without the necessity of obtaining motor vehicle insurance. They aver that by adopting the no-fault insurance act and by making it operational on October 1, 1973, the state unilaterally, midway through the year, canceled what they had paid for for an entire year. Plaintiffs claim "that logic, public policy, and the legal rights" of their class dictate a return of half of that $45 fee. They claim that the "defendants have breached the contract entered into" with the plaintiffs.

Over a year later, in November, 1974, the trial court issued what was to be only the first opinion in this case. The trial court declared the $45 payment to be a license fee and that, as such, the plaintiffs had received only half of the "protection" under the license that they had paid for, entitling them to a refund. ² In reaching its decision, the court expressly declined to consider the various constitutional claims of plaintiffs and based its decision, apparently, on equitable principles.

In May 1976, the Court of Appeals upheld plaintiffs' claim for a refund, but on different grounds. Bray v. Dep't of State, 69 Mich.App. 172, 178, 244 N.W.2d 619 (1976). The Court found that the $45 fee did not fit "neatly into either category" of license fee or tax. It found the fee to be "unique" and "to be designed to establish a state administered insurance program similar in some respects to a private insurance program. The $45 fee thus could be said to represent an annual insurance premium paid by those who have not acquired private insurance policies." The Court then referred to M.C.L. Sec. 500.3020; M.S.A. Sec. 24.13020, which requires a private insurer to refund the excess portion of a premium paid by an insured when there is an interruption in the policy period. Applying the rationale that the uninsured motorist fee was, in effect, an insurance policy for the plaintiffs and that the policy period was interrupted, the court held that an appropriate portion of the fee should be refunded. But, because plaintiffs were not the primary beneficiaries of the so-called insurance policy (those having a claim against an uninsured driver being the primary beneficiaries), plaintiffs were not entitled to their refund until the Motor Vehicle Accident Claims Fund had satisfied all of the claims and potential claims of the primary beneficiaries. The matter was remanded to the circuit court for further proceedings. Application for leave to appeal to this Court was denied on September 9, 1976. 397 Mich. 851.

On remand, the trial court decided to consider the constitutional arguments raised in the first hearing. The court applied the theory of the Court of Appeals that a contractual relationship between plaintiffs and the state existed, as in the nature of an insurance policy. It found that this contractual relationship was impaired by the adoption of the no-fault insurance act and that the impairment violated the Contract Clauses of the United States and Michigan Constitutions, U.S. Const., art. I, Sec. 10; Const. 1963, art. 1, Sec. 10, and the Due Process Clause of the Fourteenth Amendment of the United States Constitution. The court then concluded that a constitutional entitlement to the refund overrode the priority of other claimants to the fund.

The Court of Appeals affirmed the decision of the trial court, reasserting the contractual relationship and adopting the circuit court's constitutional findings to the extent that the adoption of the no-fault insurance act midway through the 1973 registration period amounted to a "taking" or diminution of a property interest. It also adopted the trial court's finding that, because the relief was constitutionally required, the right to the refund was absolute. 97 Mich.App. 33, 294 N.W.2d 236 (1980).

Leave to appeal to this Court was granted on June 8, 1981. 411 Mich. 972.

We first deal with the two basic theories on which plaintiffs' relief in the lower courts was founded. The theory propounded by the plaintiffs, with great consistency in their travels through the lower courts, was that during the automobile registration year of 1973 they paid $45 as a license fee for driving an uninsured motor vehicle for...