Klooster v. City of Charlevoix

• Decision Date: 10 March 2011
• Docket Number: Docket No. 140423.Calendar No. 4.
• Parties: Nathan KLOOSTER, Petitioner–Appellee,v.CITY OF CHARLEVOIX, Respondent–Appellant.
• Court: Michigan Supreme Court

488 Mich. 289

795 N.W.2d 578

Nathan KLOOSTER, Petitioner–Appellee,

v.CITY OF CHARLEVOIX, Respondent–Appellant.

Docket No. 140423.Calendar No. 4.

Supreme Court of Michigan.

Argued Nov. 5, 2010.Decided March 10, 2011.

Law Weathers, Grand Rapids (by Steven F. Stapleton) for petitioner.Young, Graham, Elsenheimer & Wendling, PC, Bellaire (by James G. Young and Bryan E. Graham), for respondent.Bill Schuette, Attorney General, James J. Bursch, Solicitor General, and Steven B. Flancher and Ross H. Bishop, Assistant Attorneys General, for amicus curiae the State Tax Commission and the Department of Treasury.Paul V. McCord, PLC (by Paul V. McCord), for amicus curiae the Taxation Section of the State Bar of Michigan.Miller, Canfield, Paddock and Stone, P.L.C. (by Steven D. Mann, Detroit and Don M. Schmidt, Kalamazoo), for amicus curiae the Michigan Municipal League, the Michigan Association of Equalization Directors, the Michigan Assessors Association, and the Michigan Townships Association.

Opinion

MICHAEL F. CAVANAGH, J.

This case involves the General Property Tax Act (GPTA) ¹ and two particular circumstances in which a conveyance of property may or may not permit a taxing authority to “uncap” and reassess the value of that property. Specifically, we granted leave to appeal to address whether a “conveyance” as that term is used in MCL 211.27a(3) must be by means of a written instrument and whether, under MCL 211.27a(7)(h), petitioner's property was uncapped for purposes of property-tax reassessment by either the death of the other joint tenant in January 2005 or the creation of a subsequent joint tenancy in September 2005. Klooster v. Charlevoix, 486 Mich. 932, 781 N.W.2d 850 (2010). We hold first that a “conveyance” for purposes of MCL 211.27a does not require a written instrument. Second, we hold that while the January 2005 termination of the joint tenancy caused by the death of a cotenant was within the joint-tenancy exception created by MCL 211.27a(7)(h) and was thus not a transfer of ownership that uncapped the property, the September 2005 conveyance from petitioner to himself and his brother as joint tenants did uncap the property, because the conveyance did not fall within the joint-tenancy exception. Therefore, we reverse the judgment of the Court of Appeals and hold that respondent, the city of Charlevoix, properly issued its 2006 notice of reassessment and that the Tax Tribunal reached the correct result, albeit for the wrong reason.

I. FACTS AND PROCEDURAL HISTORY

The facts are undisputed. In 1959, James and Dona Klooster acquired title to the subject property in the city of Charlevoix and held it as tenants by the entirety. On August 11, 2004, Dona quitclaimed her interest in the property to James, leaving James as the sole owner. On that same day, James quitclaimed the property to himself and his son, petitioner Nathan Klooster, as joint tenants with rights of survivorship. On January 11, 2005, James died, leaving petitioner as the sole property owner by operation of law. On September 10, 2005, petitioner quitclaimed the property to himself and his brother, Charles Klooster, as joint tenants with rights of survivorship.

In 2006, the assessor for the city of Charlevoix issued to petitioner and Charles Klooster a notice of assessment, taxable valuation, and property classification, indicating that, because of a transfer of ownership, the property's taxable value had been reassessed using the true cash value of the property. The notice did not state whether the termination of the joint tenancy caused by the death of petitioner's father in January 2005 or the September 2005 creation of the joint tenancy between petitioner and his brother constituted the transfer of ownership. As a result of the reassessment, the taxable value of petitioner's property increased from $37,802 to $72,300.

Petitioner appealed unsuccessfully to the city's board of review. Petitioner then appealed to the Tax Tribunal. The Tax Tribunal affirmed the reassessment, ruling that the transfer of ownership to petitioner by virtue of his father's death was a conveyance for purposes of the GPTA. Additionally, the Tax Tribunal ruled that the joint-tenancy exception from MCL 211.27a(7)(h) did not apply to the January 2005 transfer because petitioner was not an original owner or an already existing joint tenant before the August 2004 joint tenancy was created. The Tax Tribunal did not rule on the September 2005 conveyance.

Petitioner appealed as of right in the Court of Appeals, claiming that the transfer of ownership caused by his father's death was not a conveyance, and that even if it had been, petitioner would have qualified for the MCL 211.27a(7)(h) exception from uncapping. The Court of Appeals reversed the tribunal, determining that a “conveyance” requires a transfer of title by a written instrument, and thus James's death and the resulting transfer of fee title to petitioner by operation of law did not constitute a transfer of ownership under the GPTA that would uncap the property. Klooster v. Charlevoix, 286 Mich.App. 435, 441–443, 781 N.W.2d 120 (2009). We granted respondent's application for leave to appeal. Klooster, 486 Mich. at 932–933, 781 N.W.2d 850.

II. STANDARD OF REVIEW AND RULES OF STATUTORY INTERPRETATION

“In the absence of fraud, review of a decision by the Tax Tribunal is limited to determining whether the tribunal erred in applying the law or adopted a wrong principle; its factual findings are conclusive if supported by competent, material, and substantial evidence on the whole record.” Mich. Bell Tel. Co. v. Dep't of Treasury, 445 Mich. 470, 476, 518 N.W.2d 808 (1994).

Issues of statutory interpretation are questions of law that are reviewed de novo. Brown v. Detroit Mayor, 478 Mich. 589, 593, 734 N.W.2d 514 (2007). The primary goal of statutory interpretation is to give effect to the Legislature's intent, focusing first on the statute's plain language. Sun Valley Foods Co. v. Ward, 460 Mich. 230, 236, 596 N.W.2d 119 (1999). “The words of a statute provide ‘the most reliable evidence of its intent....’ ” Id., quoting United States v. Turkette, 452 U.S. 576, 593, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). When construing a statute, a court must read it as a whole. People v. Jackson, 487 Mich. 783, 791, 790 N.W.2d 340 (2010).

III. STATUTORY BACKGROUND

Resolving this case requires that we examine the January 2005 and September 2005 changes in the ownership of petitioner's property to determine whether respondent properly reassessed the property under the GPTA. We begin our analysis by briefly reviewing Proposal A and the GPTA before turning to the joint-tenancy exception and the specific conveyances at issue.

A. PROPOSAL A AND THE GPTA

In 1994, voters passed Proposal A, amending article 9, § 3 of the Michigan Constitution to limit the annual increase in property tax assessments and to authorize enabling legislation. The purpose of Proposal A was to limit tax increases on property as long as it remains owned by the same party, even though the actual market value of the property may have risen at a greater rate. Toll Northville Ltd. v. Northville Twp., 480 Mich. 6, 12, 743 N.W.2d 902 (2008). The Michigan Legislature was charged with determining the specifics needed to give effect to Proposal A's mandate. See Const 1963, art 9, § 3 (providing for the reassessment of a parcel's value when ownership has been transferred “ as defined by law ”) (emphasis added). The 1995 amendments of the GPTA ² fixed the cap on assessment increases at the lesser amount of either 5 percent of the assessed value of the property for the previous year or the increase in the rate of inflation from the previous year. MCL 211.27a(2). After certain “transfer[s] of ownership” occur, however, property becomes uncapped and thus subject to reassessment based on actual property value. MCL 211.27a(3).³

The GPTA defines “transfer of ownership” as a “conveyance of title to or a present interest in property, including the beneficial use of the property, the value of which is substantially equal to the value of the fee interest.” ⁴ MCL 211.27a(6) provides a nonexhaustive list of examples of transfers of ownership, including conveyances by deed or by land contract and conveyances to or distributions from trusts. See MCL 211.27a(6)(a) through (j). From the definition of “transfer of ownership,” however, MCL 211.27a(7) excludes 17 specific transfers and conveyances, including the one found in MCL 211.27a(7)(h), regarding the creation and termination of certain joint tenancies.

B. THE JOINT–TENANCY EXCEPTION: MCL 211.27a(7)(h)

The joint-tenancy exception from the definition of “transfer of ownership” provides that a transfer of ownership does not include

[a] transfer creating or terminating a joint tenancy between 2 or more persons if at least 1 of the persons was an original owner of the property before the joint tenancy was initially created and, if the property is held as a joint tenancy at the time of conveyance, at least 1 of the persons was a joint tenant when the joint tenancy was initially created and that person has remained a joint tenant since the joint tenancy was initially created. A joint owner at the time of the last transfer of ownership of the property is an original owner of the property. For purposes of this subdivision, a person is an original owner of property owned by that person's spouse. [MCL 211.27a(7)(h).]

While this is not the simplest provision to understand at first reading, a careful deconstruction reveals its plain meaning. We begin by noting that MCL 211.27a(7)(h) establishes the requirements for excluding three types of conveyances from the definition of “transfer of ownership”: (A) the termination of a joint tenancy, (B) the creation of a joint tenancy where the property was not previously held in a joint tenancy, and (C) the creation of a successive joint tenancy.⁵

Before examining two requirements of the...