Joy Management Co. v. City of Detroit, Docket Nos. 100897

• Decision Date: 05 June 1989
• Docket Number: 104378,Docket Nos. 100897
• Citation: 176 Mich.App. 722,440 N.W.2d 654
• Parties: JOY MANAGEMENT COMPANY, Plaintiff-Appellee, v. CITY OF DETROIT, Defendant-Appellant, and Michigan Basic Property Insurance Association, Defendant-Appellee, and John Doe Insurance Companies, Defendant (Two Cases).
• Court: Court of Appeal of Michigan — District of US

Page 654

440 N.W.2d 654

176 Mich.App. 722

JOY MANAGEMENT COMPANY, Plaintiff-Appellee, v. CITY OF DETROIT, Defendant-Appellant, and Michigan Basic Property Insurance Association, Defendant-Appellee,

and

John Doe Insurance Companies, Defendant (Two Cases).

Docket Nos. 100897, 104378.

Court of Appeals of Michigan.

Submitted Feb. 21, 1989.

Decided May 1, 1989.

Released for Publication June 5, 1989.

Irving M. Stahl, Southfield, for Joy Management Co.

Peter W. Macuga, II, Supervising Asst. Corp. Counsel, and Thomas C. Bromell and Mary Richman, Asst. Corp. Counsel, Detroit, for City of Detroit.

Before MICHAEL J. KELLY, P.J., and DOCTOROFF and CAVANAGH, JJ.

DOCTOROFF, Judge.

The City of Detroit (hereinafter defendant) appeals by leave granted from two orders entered by the Wayne Circuit Court. These orders have been consolidated on appeal. In the first order, entered May 18, 1987, the trial court denied defendant's motion for summary disposition under MCR 2.116(C)(4), lack of subject-matter jurisdiction, thereby rejecting defendant's claim that the Michigan Tax Tribunal had exclusive and original jurisdiction over these proceedings. We affirm the order in Docket No. 100897.

On September 1, 1987, the court issued a written opinion which addressed the parties' cross-motions for summary disposition. The court ruled that fire insurance proceeds are not a type of personal property that can be seized or distrained and sold to satisfy unpaid taxes pursuant to Sec. 47 of the General Property Tax Act, M.C.L. Sec. 211.47; M.S.A. Sec. 7.91. An order denying defendant's motion for summary disposition and granting partial summary disposition in favor of plaintiff was entered on October 23, 1987. The order, in part, enjoined defendant from claiming, asserting or imposing any liens for unpaid property taxes or unpaid water or sewage bills as against insurance proceeds. We affirm the order in Docket No. 104378.

Plaintiff, Joy Management Company, was the owner of property located at 3310 Lothrop, Detroit, Michigan. This property was insured against fire damage with Michigan Basic Property Insurance Association. The structure was completely destroyed by fire and an insurance claim was filed. The amount of loss arising out of the property damage was determined to be $13,218.81. Relying on Sec. 47, defendant claimed a lien on plaintiff's insurance proceeds for unpaid general property taxes, and made demand upon Michigan Basic to be included as a named payee on the proceeds check. Michigan Basic honored defendant's demand and informed plaintiff that the payment of insurance proceeds would be made jointly to plaintiff and defendant.

A check for the insurance proceeds was issued with plaintiff and defendant as named payees. Defendant refused to endorse the check without payment of the back taxes. Plaintiff eventually agreed to endorse the check and receive the net proceeds after $2,343 in taxes were paid from the proceeds. At no time has plaintiff denied that it owed the taxes or that the taxes constituted a first lien on the real property.

On February 25, 1986, plaintiff, on its own behalf and as representative of the class of insureds who had "lost" their insurance proceeds to defendant for unpaid taxes, filed a complaint for wrongful seizure against defendant, Michigan Basic, and all insurers who had allowed defendant to seize insurance proceeds by naming defendant as payee.

On May 7, 1986, defendant moved for summary disposition under MCR 2.116(C)(8), failure to state a claim, alleging that Sec. 47, which authorized seizure of personal assets for unpaid property taxes, authorized the seizure of insurance proceeds for satisfaction of plaintiff's delinquent taxes. Defendant's motion was denied on February 27, 1987. On March 17, 1987, defendant moved for reconsideration of its motion for summary disposition, alleging that under M.C.L. Sec. 205.731; M.S.A. Sec. 7.650(31) the Michigan Tax Tribunal had original and exclusive jurisdiction over plaintiff's claim, which defendant argued was in reality an action for a refund of the tax. In response, plaintiff claimed that the instant case was a dispute over defendant's method of collecting taxes and not over the validity of the tax itself. Defendant brought a second motion for summary disposition, alleging lack of subject-matter jurisdiction. Following a hearing, defendant's second motion for summary disposition was denied on May 18, 1987.

On September 1, 1987, the trial court issued an opinion on the parties' cross-motions for summary disposition, addressing the issue of whether plaintiff failed to state a claim under Sec. 47. The court ruled that Sec. 47 authorized defendant to distrain or seize and sell personal property to satisfy unpaid taxes, but that personal property which cannot be distrained or seized and sold in fact or law may not be seized by defendant's treasurer. Because rights under an insurance policy and proceeds of fire insurance in the hands of the insurer cannot be distrained or seized in the common meaning of those terms, the court concluded that defendant had no authority for its seizure of plaintiff's fire insurance benefits. On October 23, 1987, an order was entered denying defendant's motion for summary disposition and granting plaintiff's motion for partial summary disposition.

I

Defendant first argues that the trial court erred in denying its motion for summary disposition under MCR 2.116(C)(4), lack of subject-matter jurisdiction (Docket No. 100897). Defendant contends that the basis of plaintiff's claim for a return of fire insurance proceeds seized by defendant to satisfy unpaid property taxes is, in reality, a proceeding for a refund of taxes. Thus the claim falls within the exclusive jurisdiction of the Tax Tribunal under M.C.L. Sec. 205.731(b); M.S.A. Sec. 7.650(31)(b). Plaintiff claims that this is not a dispute over an assessment or a proceeding for a refund, but rather a dispute concerning the legality of defendant's method of collecting property taxes. Plaintiff contends that, in this case, the circuit court has jurisdiction. The trial court agreed with plaintiff's position and ruled that, because this was a dispute over the method of collecting taxes, it was not within the exclusive jurisdiction of the Tax Tribunal. We agree.

M.C.L. Sec. 600.601; M.S.A. Sec. 27A.601 provides:

"Circuit courts have the power and jurisdiction

"(1) possessed by courts of record at the common law, as altered by the constitution and laws of this state and the rules of the supreme court, and

"(2) possessed by courts and judges in chancery in England on March 1, 1847, as altered by the constitution and laws of this state and the rules of the supreme court, and

"(3) prescribed by rule of the supreme court."

However, M.C.L. Sec. 205.731; M.S.A. Sec. 7.650(31) provides:

"The tribunal's exclusive and original jurisdiction shall be:

"(a) A proceeding for direct review of a final decision, finding, ruling, determination, or order of an agency relating to assessment, valuation, rates, special assessments, allocation, or equalization, under property tax laws.

"(b) A proceeding for refund or redetermination of a tax under the property tax laws."

Although the circuit court's jurisdiction and powers are broad, it lacks jurisdiction where prohibited by the laws of this state. Wikman v. Novi, 413 Mich. 617, 644-645, 322 N.W.2d 103 (1982). In matters of taxation, the circuit court retains jurisdiction to entertain constitutional issues concerning the validity of tax laws and it may provide equitable relief from decisions of the Tax Tribunal. Sessa v. State Tax Comm., 134 Mich.App. 767, 771, 351 N.W.2d 863 (1984), lv. den. 422 Mich. 919 (1985); Kostyu v. Dep't of Treasury, 170 Mich.App. 123, 128, 427 N.W.2d 566 (1988).

The Tax Tribunal's jurisdiction and powers are defined by the Tax Tribunal Act, M.C.L. Sec. 205.701 et seq.; M.S.A. Sec. 7.650(1) et seq. The Tax Tribunal lacks equitable powers. It is a quasi-judicial agency. Its primary functions are to find facts and review the decisions of agencies within its jurisdiction. Wikman, 413 Mich. at p. 629, 322 N.W.2d 103. The expertise of the Tax Tribunal relates primarily to questions concerning the factual underpinnings of taxes. It is well qualified to resolve disputes concerning those matters that the Legislature has placed within its jurisdiction: assessments, evaluation, rates, allocation and equalization. Romulus City Treasurer v. Wayne Co. Drain Comm'r., 413 Mich. 728, 737-738, 322 N.W.2d 152 (1982).

In the instant case, plaintiff has not challenged a final decision regarding valuation, rates, allocation or assessment, nor is plaintiff asking for a refund or a redetermination of a tax. Rather, plaintiff has challenged the legality of the method used by defendant to enforce collection of the property taxes. Resolution of this issue depends not on findings of fact, but on conclusions of law based upon the construction of Sec. 47. This is clearly within the scope of the circuit court's jurisdiction. Thus, the trial court did not err by denying defendant's motion for summary disposition pursuant to MCR 2.116(C)(4), lack of subject-matter jurisdiction.

II

As part of its order of October 23, 1987, denying defendant's motion for summary disposition (Docket No. 104378), the court ordered that defendant was enjoined from claiming, imposing or asserting any liens for unpaid property taxes or unpaid water or sewage bills against any insurance proceeds. Defendant claims that this order enjoining it from imposing liens for unpaid taxes on fire insurance proceeds constituted a violation of M.C.L. Sec. 211.114; M.S.A. Sec. 7.168, which states:

"No injunction shall issue to stay proceedings for the assessment or collection of taxes under this act."

The general rule is that equity will not enjoin the assessment or collection of taxes. Forest Hill Cemetery Co. v. Ann Arbor, 303 Mich. 56, 67, 5 N.W.2d 564 (1942). In ...