Charter Tp. of Muskegon v. City of Muskegon, 00-2472.
| Decision Date | 19 September 2002 |
| Docket Number | No. 00-2472.,00-2472. |
| Citation | 303 F.3d 755 |
| Parties | CHARTER TOWNSHIP OF MUSKEGON, Plaintiff-Appellant, v. CITY OF MUSKEGON, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Philip A. Grashoff, Jr. (argued and briefed), Varnum, Riddering, Schmidt & Howlett, Grand Rapids, MI, for Appellant.
G. Thomas Johnson, Parmenter O'Toole (argued and briefed), Muskegon, MI, for Appellee.
Before SILER and CLAY, Circuit Judges; OBERDORFER, District Judge.*
CLAY, J., delivered the opinion of the court, in which OBERDORFER, D.J., joined. SILER, J., (p. 764), delivered a separate opinion concurring in part and dissenting in part.
Plaintiff, Charter Township of Muskegon, appeals from the district court's order entered on November 13, 2000, denying its motion for relief from judgment under Federal Rule of Civil Procedure 60(b)(5), and sua sponte dismissing in its entirety this action brought against Defendant, the City of Muskegon, for lack of subject matter jurisdiction. For the reasons set forth below, we REVERSE the district court's order as to the lack of subject matter jurisdiction, and REMAND the case to the district court for a hearing on the merits of Plaintiff's Rule 60(b) motion.
In 1958, the Charter Township of Muskegon, Michigan ("the Township") issued revenue bonds to finance the construction of the Muskegon Township Water Distribution System No. 2. The Township went into default, and in 1964, certain out-of-state bondholders filed a diversity action in the United States District Court for the Western District of Michigan in order to protect their interests. The case was docketed as No. 4731. Both the Township and the City of Muskegon, Michigan ("the City") were named as defendants.
A trial was held in 1969. Excerpts from the proceedings over which District Judge W. Wallace Kent presided indicated that the parties were seeking to reach a settlement and that it was "understood that the decree [settlement] may include a provision that upon retirement of all the bonds and upon payment of all the bonds and upon payment of all the other obligations of the Township system, that the Township system will then become merged into and become part of the water system of the City of Muskegon." (J.A. at 78-79.) Significant to the matter at hand, the excerpts from the proceedings also indicate that the following colloquy took place:
(J.A. at 79.)
On June 15, 1972, judgment was entered by Judge Kent. The judgment, which provided a method for ensuring that the bonds would be paid, resulted from efforts by the Township and the City to reach a settlement. The judgment ordered the City to assume operation of the water system in the capacity of trustee and to loan sufficient funds to the water system to cure any default in its bonded obligations. Paragraphs 7 and 12 of the judgment are relevant to this case and provide, respectively, that
[t]he rates and charges of the township customers shall become uniform with the rates and charges throughout the City when all the outstanding bonds have been fully paid for the existing bond issue and the City has been fully reimbursed of any monies it may have obliged to loan to the Muskegon Township Water Distribution System No. 2.
* * *
The City's trusteeship and its obligation to maintain books and records shall continue until all existing bond and other obligations of the System, including obligations due the City, are paid in full, at which time title to the said Muskegon Township Water Distribution System No. 2 and any future extensions thereto shall vest in the City of Muskegon and shall be merged into the City Water System. Rates and charges shall thereafter be uniform throughout the City and Township except where a differential is justified as hereinbefore provided.
(J.A. at 77-78; emphasis added.)
The City made its final payment on the 1958 bonds in May of 1998. At that point, all debts and obligations existing in 1972 were paid in full, and according to the City, it automatically acquired title to the system at that time. In a June 30, 1998, letter from the City to the Township, the parties attempted to negotiate a new water service agreement. In the interim, the arrangement that was in place prior to the last bond payment by the City was continued. Then, on August 29, 2000, after no agreement could be reached, the City gave notice to the Township that effective September 29, 2000, it would assume ownership and operation of the water system in accordance with the 1972 judgment. The Township responded by filing a Rule 60(b) motion in district court under the 1972 case number to enjoin the City from assuming ownership. The motion was, however, docketed by the clerk as a new case and given a new case number.
On October 4, 2000, a hearing was held by the district court, Judge Bell, presiding, regarding the Township's request for injunctive relief. The court sua sponte expressed concern regarding its jurisdiction given that the out-of-state bondholders were no longer parties to the action, and neither diversity jurisdiction nor federal question jurisdiction appeared to be present. The court instructed the parties to brief the issue, and took the matter under advisement. Thereafter, on November 9, 2000, the district court entered an opinion and an order wherein the court ruled "that the prior judgment vesting title of the Muskegon Township Water Distribution System must stand," that it did not have "subject matter jurisdiction over the present controversy of rate setting, and [that] the parties should seek redress in the appropriate state forum on those issues." (J.A. at 76-87.)
In dicta, the district court determined that even if it did have jurisdiction over the matter, it would deny the Township the relief that it was seeking. The court began by noting that the Township was seeking to revisit the 1972 judgment under Federal Rule Civil Procedure 60(b)(5), which allows a court to relieve a party from a final judgment when "`the judgment has been satisfied, released, or discharged, or ... it is no longer equitable that the judgment should have prospective application.'" (J.A. at 83.) The court noted that any motion brought under this Rule "`must be made within a reasonable time,'" and that the Township's motion some twenty-eight years after judgment was entered was not within a reasonable time, nor did the judgment rise to the level of inequity necessary for the court to revisit it. (J.A. at 83-84.) The district court opined that
[t]he Township seems to want to have its cake and eat it, too. Having struck a bargain with the City in 1972 to save the Township from financial default, it now wishes to retain the City's benefit of the bargain. In dismissing the current case, this Court allows the Township to pursue its aims in the appropriate forum — the courts of the State of Michigan, while at the same time ruling that the 1972 judgment stands.
* * *
A court should engage in post-judgment consideration of the equities of the judgment "only under circumstances when the judgment involves prospective obligations and effects requiring ongoing court supervision or execution." The judgment in this case does not involve prospective obligations, nor does it require ongoing court supervision. The judgment was fully executed in 1998 when the original bondholders were repaid, and title to the water system vested in the City. Further arbitration contemplated by the judgment concerning rates can be done through the appropriate state forum.
(J.A. at 85-87 (citation omitted).)
The Township filed the instant appeal from the district court's order, and also moved before this Court for injunctive relief pending appeal. In so moving, the Township requested that the City be enjoined from: (1) taking any action to assume or exert ownership of Township Water Distribution System No. 2, including setting water rates for Township residents; (2) taking control of the assets of the system; (3) making any decisions associated with connections and expansions to the system without the Township's approval; (4) taking any action that would affect the Township's rights in the system including retiring the remaining outstanding obligations of the system; and (5) violating any other term of the 1972 judgment. In an order filed on January 26, 2001, this Court denied the Township's motion for an injunction pending appeal, finding that the four-factor test used to determine whether an injunction should issue did not weigh in favor of the Township's request.
The Township's appeal is now before the Court, wherein the Township argues that the sole issue on appeal is whether the district court erred in finding that it lacked subject matter jurisdiction over the Township's case. The Township contends that because the district court held that it lacked jurisdiction to hear the matter, the court improperly ruled, albeit in dicta, upon the merits of the Township's request for relief from judgment. As a result, the Township urges this Court to reverse the district court's decision holding that it lacked subject matter jurisdiction, and remand the case for a hearing on the...
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