Franken Investments, Inc. v. City of Flint
| Citation | 218 F.Supp.2d 876 |
| Decision Date | 30 August 2002 |
| Docket Number | No. 00-CV-74682-DT.,00-CV-74682-DT. |
| Parties | FRANKEN INVESTMENTS, INC., a Michigan corporation, FranKen Sub-1, Inc., a Michigan corporation, and FranKen Sub-2, a Michigan corporation, Plaintiffs, v. THE CITY OF FLINT, a municipal corporation, and the City of Lansing, a municipal corporation, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Elias Mauwad, Mauwad & Mauwad, Southfield, MI, for plaintiffs.
Michael J. Gildner, Simen, Figura, Flint, MI, for City of Flint, defendant.
Jack C. Jordan, James D. Smiertka, City Attorney, Lansing City Attorney's Office, Lansing, MI, Brian W. Bevez, City Attorney's Office, Lansing, MI, for City of Lansing.
This matter is before the Court on the parties' cross-motions for summary judgment, filed October 1, 2002. Response Briefs have been filed by both parties, and a hearing was held on November 20, 2001. For the following reasons, Defendants' Motion is GRANTED and that of Plaintiffs DENIED.
The Plaintiffs, FranKen Investments, Inc., and its two wholly owned subsidiaries FranKen Sub-1, Inc. and FranKen Sub-2, Inc., are involved in the business of investing in real estate tax liens. Their principal members are Kenneth Frantz and Frank Simon, two attorneys. In 1998 and 1999, the Plaintiffs purchased real estate tax liens for properties located in various counties throughout the state. This lawsuit involves the purchase of lands located in the Cities of Flint and Lansing ("Defendant Cities"), which are in Genesee and Ingham counties, respectively. Plaintiffs did not inspect any of the lands they purchased.
Under the relevant version of the General Property Tax Act of Michigan, MICH. COMP. LAWS. ANN. 211.60 et seq., governmental entities such as Defendant Cities could recover delinquent taxes by selling tax liens at an annual tax lien sale usually held the first Tuesday in May. Cities would transfer all delinquent tax liens to the county in which they sit, and the county would then conduct the tax lien sale. Individual investors would "bid" on the tax liens on the properties, and in exchange for payment of the delinquent taxes they would receive a tax lien entitling them to repayment of their individual amount, plus interest at a rate of 15% or 50% per annum, depending upon circumstances.
According to Plaintiffs, Defendant Cities "have engaged in a custom and policy of intentionally and consistently deceiving the investors purchasing tax liens at the annual sale by knowingly reporting to the Counties `delinquent taxes' which inappropriately include some of the Cities' municipal non-tax `special assessments' and `special bills' as real estate taxes." Complaint ¶ 15. Specifically, Plaintiffs argue that Defendant Cities have included demolition charges in their calculation of the amount of delinquent taxes owed in violation of the statute. According to Defendant Cities, the tax liens transferred to the counties would be itemized such that the county could ascertain which delinquent amounts were for property taxes, and which amount were for other charges to the land. Defendant Cities claim that the county would publish a catalog listing all properties for sale, but aggregate all amounts into one sum.
Plaintiffs have produced a letter from the Assistant City Attorney of the City of Lansing dated March 1, 2000, to the Ingham County Treasurer. The letter states in pertinent part:
Please be advised that the City of Lansing has discovered an error in the reported assessments for the properties listed on the attached sheet. The amounts listed for the years designated are not the type of special assessment normally considered as capital improvements and should not have been added to the delinquent tax roll. Therefore, please remove them and reissue the tax certificates so that they reflect the correct redemption amounts.
Ps.' Ex. 1 (emphasis added). According to Plaintiffs, this letter was written as a result of a complaint by Plaintiffs' Principal, Kenneth Frantz, regarding demolition costs.
Plaintiffs have asserted various theories of recovery from the Cities of Flint and Lansing in the amounts of $110,576.16 and $37,080.05, respectively, plus costs, loss of interest at the relevant percentage rate and attorneys fees. Count I alleges violations of 42 U.S.C. § 1983 and the Headlee Amendment. Count II requests declaratory relief under 28 U.S.C. § 2201. Count III, which has been voluntarily dismissed, alleges breach of contract, and Count IV alleges unjust enrichment. All parties have moved for summary judgment.
Rule 56(c) states that summary judgment should be entered only where "the pleadings, depositions, answers to the interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The presence of factual disputes will preclude granting of summary judgment only if the disputes are genuine and concern material facts. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute about a material fact is "genuine" only if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.
Although the Court must view the motion in the light most favorable to the nonmoving party, where "the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Moreover, the court need not accept as true legal conclusions or unwarranted factual inferences. Hoeberling, 49 F.Supp.2d at 577.
Summary judgment must be entered against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. 2548. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. Id. A court must look to the substantive law to identify which facts are material. Anderson, 477 U.S. at 248, 106 S.Ct. 2505.
The crux of Plaintiffs' argument is that the cities of Flint and Lansing unlawfully included demolition costs in their calculations of delinquent taxes. Attempting to predict Defendants' arguments, Plaintiff disputes the categorization of demolition costs as "special assessments." Special assessments are improvements to the land, the costs of which are recoverable by the cities not as taxes, but as remuneration for the cost incurred to increase the property value. Claiming that demolitions do not "increase" the value of the land, Plaintiffs contend that they should not be included in the delinquent-tax calculation.
A review of Defendants joint motion for summary judgment, however, reveals that the cities do not contest the fact that demolition costs do not raise property value and therefore are not special assessments recoverable in the yearly tax sale. Instead, Defendants argue that they do not include demolition costs in their calculation of delinquent taxes, but that the counties do. The cities admit that the liens on the property do, in fact, include "costs incurred by the City for demolition of structures on the parcels, costs incurred by the City for mowing grass, or other costs related to the removal of blighting conditions on the parcels." Defendants contend, however, that they "list these expenses separately in its records and reported these items to the County separately as well." Defendants claim that it is the counties, not the cities, that combined these amounts and reported the aggregate in the catalog published in mid-March. "If that practice is unlawful," Defendants argue, "the County alone is responsible for it." Plaintiffs do not counter this argument.
MICH. COMP. LAWS ANN. § 211.61 sets forth procedures relative to notice and lists of lands to be sold. Section 211.61 states that the county clerk in each county in which lands are to be sold are to prepare and file a petition "addressed to the circuit court for the county stating by appropriate reference to lists or schedules annexed to the petition a description of those lands in the county upon which [delinquent taxes exist]." Section 211.61 further requires that the petition "be in a substantial record book, with the lists of lands and taxes annexed following the petition in the book," and that the record, to be known as the "tax record," "be ruled with appropriate columns, including 1 containing a description of the lands and other columns as the state treasurer considers necessary." Of particular relevance is the requirement that the description found within the tax record detail all "charges adjudged against the lands." Demolition costs are "charged against the land" if the requirements of MICH. COMP. LAWS. ANN. § 124.541 are met. It appears, therefore, that § 211.61 not only allows cities to submit the amount of delinquent taxes owed, but also contemplates the submission of demolition costs. Under this theory, the City Defendants had authority to submit demolition costs to their respective counties when submitting their list of properties with delinquent taxes.
Section 124.541(5) states that "the cost of the demolition ... shall be reimbursed to the city ... by the owner or party in interest in whose name the property appears." Section...
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