Brown Bark I, L.P. v. Traverse City Light & Power Dept.
| Citation | 736 F.Supp.2d 1099 |
| Decision Date | 07 September 2010 |
| Docket Number | Case No. 1:09-cv-572 |
| Court | United States District Courts. 6th Circuit. United States District Court (Western District Michigan) |
| Parties | BROWN BARK I, L.P., Plaintiff, v. TRAVERSE CITY LIGHT & POWER DEPARTMENT, Defendant. |
BROWN BARK I, L.P., Plaintiff,
v.
TRAVERSE CITY LIGHT & POWER DEPARTMENT, Defendant.
Case No. 1:09-cv-572.
United States District Court,
W.D. Michigan,
Southern Division.
Sept. 7, 2010.
Jonathan T. Walton, Jr., Walton & Donnelly PC, Detroit, MI, for Plaintiff.
W. Peter Doren, Sondee Racine & Doren PLC, Traverse City, MI, Stanley J. Stek, Miller Canfield Paddock & Stone PLC, Grand Rapids, MI, for Defendant.
Opinion and Order
PAUL L. MALONEY, Chief Judge.
Holding that the Tax Injunction Act Does Not Bar Jurisdiction; Denying the Plaintiff's Motion for Summary Judgment; Granting the Defendant's Motion to Dismiss or for Summary Judgment; Directing the Parties to Jointly File a Statement of Damages and Interest by October 14, 2010
Plaintiff Brown Bark I, L.P. ("BBI") is the owner of a 15-acre parcel of real property in Elmwood Township, Leelanau County, Michigan, namely Lot 1, Section 33, Town 28 North, Range 11 West ("the property"), see Complaint filed June 22, 2009 ("Comp") ¶ 4 and Exhibit ("Ex") 1. BBI is a Delaware limited partnership which states that its principal place of business is in Texas and the members of the partnership are citizens of Texas and California, Comp ¶ 1. Defendant Traverse
On May 21, 2003, Republic Bank issued a loan to Brewery Creek Development, L.L.C. ("the developer"); in return, the developer granted Republic a mortgage, intending to use the proceeds to develop the property as a 13-unit condominium ("condo"). See Comp ¶ 5 and Ex 2 (mortgage recorded seven days later in Leelanau County Register of Deeds Liber 732, Page 897, May 28, 2003).
On April 1, 2004, the development's property owners' association, the non-profit Brewery Creek Center Condominium Association-not a party to this lawsuit-contracted with TCLP for the construction and installation of a street-lighting system on the property, which the developer then owned ("the contract"), Comp ¶ 6. Under the Lighting Agreement, TCLP did not construct or install the lights. See Plaintiff BBI's MSJ Ex 23 (Deposition of Timothy Arends executed March 1, 2010) at 20. Rather, TCLP merely advanced the cost of the equipment and labor. In its entirety, the Lighting Agreement provides as follows:
AGREEMENT FOR STREET LIGHTING
[stating date and names of parties to contract]
RECITALS
A. Brewery Creek has control of a condominium project called "Brewery Creek Center" in Elmwood Township, Leelanau County, Michigan, on approximately 15.09 acres, which are more fully described on Attachment "A" attached hereto and incorporated herein by reference.
B. Brewery Creek desires to obtain street lighting for the Brewery Creek Center.
C. TCL & P desires to provide the street lighting for the Brewery Creek Center and the electricity to service that lighting and the other facilities located in the Brewery Creek Center.
D. The condominium unit owners have each executed a Consent to Imposition of Tax Lien which will be recorded with the Register of Deeds.
AGREEMENT
THEREFORE, the parties agree as follows:
1. Project. TCL & P shall install or have installed street lighting for the private streets and areas within Brewery Creek as described in the drawing by Nealis Engineering, Inc., Project 02002. This drawing is Attachment "B", attached hereto and incorporated herein by reference. Brewery Creek shall make the site and access to the site available at all times to TCL & P, its agents and assigns, for the installation, maintenance and repair of the lighting.
2. Payment. Brewery Creek shall pay to TCL & P in equal monthly installments over ten (10) years for the cost of the lighting project, which is currently estimated to be TWO HUNDRED SIXTY-SIX THOUSAND FIVE HUNDRED FORTY AND 00/100 DOLLARS ($266,540.00) plus 10% capital plan funding and 6% interest
per annum. Payments estimated at $3,255 shall commence on June 1, 2004, and continue on the 1st day of each month thereafter until fully paid. Initial monthly payments shall be based on the estimated cost and adjusted after a final cost determination.
3. Final Cost Determination. The final cost of the lighting project will be determined by TCL & P upon final installation and operation of the lighting project. TCL & P shall make available to Brewery Creek copies of all bills and other charges which are included in the final cost determination.
4. Ownership. TCL & P shall own all of the installed lighting equipment, fixtures, conduits, wiring, controls, and other associated materials until Brewery Creek makes payment in full of the above amounts. Upon final payment by Brewery Creek, together with all outstanding maintenance and repair charges, TCL & P shall convey all lighting equipment, fixtures, conduits, wires, controls, and associated materials to Brewery Creek or its assigns. Unless otherwise agreed by the parties, conveyance shall be by Bill of Sale conveying the material and equipment on an as-is, where-is basis without warranties express or implied by TCL & P but with any manufacturer warranties.
5. Late Payments. * * *
6. Liens. If Brewery Creek defaults in its payments to TCL & P, and TCL & P accelerates all indebtedness, in addition to all other remedies available at law or otherwise, TCL & P may place all or part of the indebtedness on the tax roles [sic] to be assessed against each unit of the condominium project according to the percentages as described in the Brewery Creek Center Condominium under the Master Deed....
This lien shall be first and superior to all other liens and encumbrances on a unit[,] including any liens or encumbrances placed thereon by the condominium association. This lien shall be a tax lien collected in the same manner as all other property taxes. Unit owners have executed and delivered to Brewery Creek Consents to Imposition of Tax [L]iens[,] which have been recorded.
7. Maintenance. * * *
8. Insurance. * * *
9. Electricity. Brewery Creek agrees that TCL & P shall be the sole provider to the lighting project and also to all buildings and facilities using electricity in the Brewery Creek Center until final payment, and thereafter at the discretion of the parties.
IN WITNESS WHEREOF,....Plaintiff BBI's MSJ Ex 7 at 1-3. TCLP then contracted with a private company called Bay Resource Management, which furnished all the equipment and labor to construct/install the lighting. See P's MSJ Ex 1 (Deposition of James Cooper executed March 1, 2010) at 7.
When the Lighting Agreement was executed between the Brewery Creek Condo Association and TCLP on April 1, 2004, TCLP had two alternative policies in place to provide outdoor lighting on customers' land: (1) establishment of a Special Assessment District or (2) adding charges to the customer's monthly electric bill based on the wattage of the lighting installed, see Plaintiff BBI's MSJ Ex 5 ¶ 2(Special Assessment District) and Ex 6 (Monthly Rate recovery). The Lighting Agreement did not provide for either a Special Assessment District (i.e., an additional property-tax levy) or a Monthly Rate recovery. The Lighting Agreement did not specify any rate or other terms for TCLP's future sale of electricity to the Brewery Creek
It is undisputed that TCLP did not secure the consent of Republic Bank to place any tax lien or other encumbrance on the Brewery Creek property, which was already subject to Republic's mortgage lien before the Lighting Agreement was signed. The mortgage which Brewery Creek Development LLC executed in favor of Republic Bank expressly prohibited the placement of other liens on the Brewery Creek property, and it expressly disclaimed and denied consent to construction or any other activity which could result in such additional liens. The Republic-developer Future Advance Mortgage provided as follows:
The Mortgagor does and shall own good and marketable title to the Property, free of all easements, liens, mortgages, security interests, encroachments, encumbrances, leasehold interests, rights, claims, and other interests of any nature (herein "Interests"), other than interests which are consented to in writing by the Bank.Plaintiff BBI's MSJ Ex 2 at 2. Indeed, on March 9, 2004, about three weeks before TCLP and the Brewery Creek developer signed the Lighting Agreement, TCLP's counsel expressed concern that Republic's foreclosure on the mortgage would extinguish TCLP's claim. See BBI's MSJ Ex 8.
In connection with the contract, the developer simultaneously executed a separate Consent to Imposition of Tax Lien document with regard to each of the 13 units of the Brewery Creek condos. It is undisputed that the pre-existing mortgagee, Republic Bank, did not sign the Consents. The developer's Consents authorize TCLP to impose a lien on the property "in accordance with MCL 141.121" in the event that the developer did not pay TCLP for the lighting system. The developer's Consents further provide that each such lien "shall be a tax lien enforceable by [TCLP] and all taxing jurisdictions." Comp ¶ 6. TCLP recorded the developer's lien consents with the Leelanau County Register of Deeds ("the Register") in July 2004, see id. ¶¶ 16 and 20. The provision cited by the developer's Consents provides as follows:
(1) Rates for services furnished by a public improvement shall be fixed before the issuance of the bonds. The rates shall be sufficient to provide for all of the following: * * *
(2) The rates shall be revised and fixed by the governing body of the borrower so as to....
(3) Charges for services furnished to a premises may be 2 a lien on the premises,
and those charges...
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