By Lo Oil Co. v. Department of Treasury, No. 251200

Citation267 Mich. App. 19,703 N.W.2d 822
Decision Date10 May 2005
Docket Number No. 251200, No. 251201.
PartiesBY LO OIL COMPANY, Plaintiff-Appellant, v. DEPARTMENT OF TREASURY, Defendant-Appellee. By Lo Oil Company, Plaintiff-Appellant, v. Department of Treasury, Mark A. Murray, Rex Pierce, and David Wagg, Defendants-Appellees.
CourtCourt of Appeal of Michigan — District of US

703 N.W.2d 822
267 Mich.
App. 19

BY LO OIL COMPANY, Plaintiff-Appellant,
v.
DEPARTMENT OF TREASURY, Defendant-Appellee.
By Lo Oil Company, Plaintiff-Appellant,
v.
Department of Treasury, Mark A. Murray, Rex Pierce, and David Wagg, Defendants-Appellees

Nos. 251200, 251201.

Court of Appeals of Michigan.

Submitted April 14, 2005, at Lansing.

Decided May 10, 2005.

Approved for publication June 21, 2005, at 9:10 a.m.

Released for Publication September 2, 2005.


703 N.W.2d 827
Clark Hill, P.L.C. (by Ronald A. King), Okemos, for the plaintiff

Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Ross H. Bishop, Assistant Attorney General, for the defendants.

Before: MURRAY, P.J., and MARKEY and O'CONNELL, JJ.

PER CURIAM.

These consolidated cases arise out of an audit by the Department of Treasury of plaintiff's records and subsequent assessment of taxes under the General Sales Tax Act (GSTA), M.C.L. § 205.51 et seq., and the motor fuel tax act (MFTA), M.C.L. § 207.101 et seq. Plaintiff distributes and sells at retail gasoline and diesel fuel in St. Clair County and other eastern Michigan counties. Rex Pierce supervised and David Wagg conducted the audit, which began in May 1996. The audit culminated

703 N.W.2d 828
in the department issuing orders of determination on April 15, 1999. One order finalized a deficiency assessment for diesel motor fuel tax and interest of $46,249.22 for the period of January 1994 to the end of September 1996. Another order finalized an adjusted deficiency assessment for sales tax of $4,714.00 for the period of February 1994 through September 1996. Plaintiff paid these assessments under protest and commenced these proceedings. The trial court granted summary disposition for defendants, dismissing all of plaintiff's claims for tax refunds in the Court of Claims and for damages as well as declaratory and injunctive relief in the circuit court. Plaintiff appeals by right. We affirm

I. Summary of Facts and Proceedings

Plaintiff filed a complaint in St. Clair Circuit Court on July 1, 1999, seeking declaratory and equitable relief. Plaintiff also sought money damages and injunctive relief alleging that Pierce and Wagg violated 42 U.S.C. § 1983 (count I) by denying plaintiff its right to due process under the Fifth Amendment and the Fourteenth Amendment. Plaintiff further alleged (count II) that it was deprived of property without due process of law guaranteed by Const. 1963, art. 1, § 17. In addition, plaintiff asserted in count II that defendants' conduct during the audit, the department's enforcement of its Revenue Administrative Bulletin 1991-12 (RAB 91-12), and the use of a "block sampling" auditing procedure, deprived it of "fair and just treatment" for which plaintiff sought injunctive and "other relief." Plaintiff also sought declaratory and injunctive relief in counts III, IV and V. It asserted that § 22 of the MFTA, M.C.L. § 207.1221 was unconstitutionally vague and unlawfully delegated to the department the authority to specify necessary requirements for invoices that § 22 mandated for diesel fuel sales. Plaintiff also claimed that because RAB 91-12 was not adopted pursuant to the Administrative Procedures Act (APA), M.C.L. § 24.201 et seq., it was unenforceable. In addition, plaintiff contended that the department's use of "block sampling" to determine an error rate to apply to plaintiff's tax returns over the entire audit period was not "fair and just treatment" and was in violation of Const. 1963, art. 1, § 17.

On July 13, 1999, plaintiff filed a suit in the Court of Claims in which it sought a refund of taxes, interest, and penalties it had paid under protest. Plaintiff asserted the same arguments it raised in the circuit court case. Specifically, plaintiff again alleged § 22 of the MFTA did not provide reasonably precise standards and therefore unlawfully delegated legislative authority to the department; the application of RAB 91-12 was unfair, unjust and unlawful; and, the department's use of the "block sampling" technique was also unfair, unjust, and unlawful. Plaintiff added a claim that the department interpreted § 6a of the GSTA, M.C.L. § 205.56a (regarding prepayment credits) in an arbitrary, capricious, and, therefore, unlawful manner.

After a series of motions in each court, and after appeals to this Court,2 plaintiff's circuit court action was transferred by an order changing venue to the Ingham Circuit Court, where it was heard with the Court of Claims action. Defendants subsequently moved for summary disposition

703 N.W.2d 829
in each case under MCR 2.116(C)(4), (7), (8) and (10); the trial court granted the motions and dismissed all of plaintiff's claims in each case

The trial court ruled with respect to the circuit court action that plaintiff had failed to plead a valid claim for damages and injunctive relief pursuant to 42 U.S.C. § 1983 against the individual defendants for alleged violations of federal due process; that plaintiff had failed to plead a valid claim against defendants for injunctive relief for alleged violations of state due process rights under Const. 1963, art. 1, § 17; that § 22 of the MFTA does not unlawfully delegate authority to the department contrary to state due process of law requirements and the separation of state governmental power doctrine; that § 22 of the MFTA directly authorized the department's adoption and enforcement of RAB 91-12 so that compliance with rule promulgation requirements of the APA was unnecessary; that the auditing method used by the department was fully authorized by the GSTA and not in violation of state due process rights; and that plaintiff failed to plead a valid claim for declaratory relief by alleging that § 22(2) of the MFTA, the RAB 91-12, and the "block sampling" auditing method were unlawful and unenforceable.

In the Court of Claims action for a refund, the trial court ruled that plaintiff failed to state a valid claim because § 22 of the MFTA was a constitutional delegation of legislative authority to the department; that RAB 91-12 was not an unlawful enforcement of § 22; that the "block sampling" audit method did not unconstitutionally deprive plaintiff of state due process rights; and, that the department's interpretation of the "prepayment credit" provisions in § 6a of the GSTA was neither arbitrary nor capricious but, in fact, was consistent with and thus authorized by the statute.

II. Standard of Review

The interpretation, application, and constitutionality of statutes are questions of law that this Court reviews de novo. Eggleston v. Bio-Medical Applications of Detroit, Inc., 468 Mich. 29, 32, 658 N.W.2d 139 (2003); Tolksdorf v. Griffith, 464 Mich. 1, 5, 626 N.W.2d 163 (2001). We also review de novo issues of constitutional construction and a trial court's ruling on a motion for summary disposition. Carmacks Collision, Inc. v. Detroit, 262 Mich. App. 207, 209, 684 N.W.2d 910 (2004).

The trial court dismissed plaintiff's claims under MCR 2.116(C)(7), (8), and (10).3 A motion for summary disposition under MCR 2.116(C)(7) asserts that a claim is barred by immunity granted by law; a C(8) motion asserts the pleading fails to state a claim on which relief can be granted, and summary disposition under C(10) is proper where there is no genuine issue of material fact and a party is entitled to judgment as a matter of law.

A motion under MCR 2.116(C)(7) may be supported or opposed by affidavits, depositions, admissions, or other documentary evidence; the substance or content of the supporting proofs must be admissible in evidence. Maiden v. Rozwood, 461 Mich. 109, 119, 597 N.W.2d 817 (1999). The allegations of the complaint are accepted as true unless contradicted by documentary submissions. Id., citing Patterson v. Kleiman, 447 Mich. 429, 434 n. 6, 526 N.W.2d 879 (1994). A trial court properly

703 N.W.2d 830
grants a motion for summary disposition under MCR 2.116(C)(7) when the undisputed facts establish that the moving party is entitled to immunity granted by law. Poppen v. Tovey, 256 Mich.App. 351, 354, 664 N.W.2d 269 (2003); MCR 2.116(I)(1).

A motion brought under MCR 2.116(C)(8) tests the factual sufficiency of the complaint on the basis of the pleadings alone. MCR 2.116(G)(5); Corley v. Detroit Bd. of Ed., 470 Mich. 274, 277, 681 N.W.2d 342 (2004). The trial court must grant the defendant's motion if no factual development could justify the asserted claim for relief. Id.; Spiek v. Dep't of Transportation, 456 Mich. 331, 337, 572 N.W.2d 201 (1998).

A C(10) motion tests the factual sufficiency of a complaint and must be supported by affidavits, depositions, admissions, or other documentary evidence. MCR 2.116(G)(3)(b); Corley, supra at 278, 681 N.W.2d 342. The moving party must specifically identify the undisputed factual issues and support its position with documentary evidence. MCR 2.116(G)(4); Smith v. Globe Life Ins. Co., 460 Mich. 446, 455, 597 N.W.2d 28 (1999). The trial court is required to consider the submitted documentary evidence in the light most favorable to the party opposing the motion. Corley, supra at 278, 681 N.W.2d 342. If the moving party satisfies its burden of production, the motion is properly granted if the opposing party fails to proffer legally admissible evidence that demonstrates that a genuine issue of material fact remains for trial. Maiden, supra at 120-121, 597 N.W.2d 817.

III. Docket No. 251201

We begin by reviewing the trial court's rulings with respect to plaintiff's circuit court case for two reasons. First, that is the order in which the trial court proceeded. Second, plaintiff's circuit court case raises almost all the same issues that plaintiff asserts in its Court of Claims complaint as a basis for a refund and it names all defendants.

A. 42 U.S.C. § 1983

Plaintiff claims that the individual defendants violated state law and regulations governing the department's conduct when auditing taxpayers and, therefore,...

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