Michigan Transp. Co. v. Secretary of State, Docket No. 9790

• Citation: 201 N.W.2d 83,41 Mich.App. 654
• Decision Date: 03 July 1972
• Docket Number: No. 2,Docket No. 9790,2
• Parties: MICHIGAN TRANSPORTATION CO. et al., Plaintiff-Appellee, v. SECRETARY OF STATE James M. Hare, Defendant-Appellee, and Keith H. Livsei et al., Defendants-Appellants
• Court: Court of Appeal of Michigan (US)

Page 83

201 N.W.2d 83

41 Mich.App. 654

MICHIGAN TRANSPORTATION CO. et al., Plaintiff-Appellee, v. SECRETARY OF STATE James M. Hare, Defendant-Appellee and Keith H. Livsei et al., Defendants-Appellants.

Docket No. 9790.

Court of Appeals of Michigan, Division No. 2.

July 3, 1972.

Released for Publication Oct. 2, 1972.

Leave to Appeal Denied Feb. 21, 1973.

Paul C. Younger, Lansing, James P. Hoffa, Detroit, John S. Williamson, Jr., and David L. Uelmen, Milwaukee, Wis., for Keith H. Livsei, and others.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Russel A. Searl, Asst. Atty. Gen., for the Sec'y of State, James M. Hare.

Robert A. Sullivan, Detroit, for Michigan Transportation Co.

Before DANHOF, P.J., and BRONSON and TARGONSKI, ^* JJ.

TARGONSKI, Judge.

Plaintiffs filed suit on August 21, 1969, seeking a declaratory judgment ¹ and conjunctional injunctive relief with respect to their rights and duties concerning Section 801(k) of Chapter VII of the Michigan Vehicle Code as amended by 1969 P.A. 309, effective immediately. M.C.L.A. § 257.801(k); M.S.A. § 9.2501(k). The trial was on December 22, 1969, and the circuit court opinion filed February 24, 1970, construed Section 801(k) favorably to plaintiffs and denied the injunction since the decision rendered it unnecessary. ² Defendants-appellants filed a motion for reconsideration on March 6, 1970. After a June 12, 1970 hearing thereon, the motion was denied on June 24, 1970, except that the court limited the judgment to include only a narrow class of defendants. This appeal is presented as of right.

Plaintiffs are all Michigan motor carriers involved in the interstate shipment of goods. Defendants-appellants each own and lease motor vehicles to plaintiffs, which motor vehicles are driven by defendants-appellants, hereinafter known as 'owner-operators'. Contracts between plaintiffs and the owner-operators are national in scope, pursuant to the National Labor Relations Act, 49 Stat. 449 (1935); 29 U.S.C.A. § 151 et seq., as amended by the Labor Management Relations Act, 61 Stat. 136 (1947); 29 U.S.C.A. § 141 et seq. Contracts are negotiated through collective bargaining procedures, the owner-operators being represented by the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America. Basic wage scales for the employment services of owner-operators leased by plaintiffs and minimum rental fees are included terms of the collective bargaining agreement.

In 1967, Section 801(k) of the Michigan Vehicle Code was amended to increase the registration fee taxable against all owners (including the owner-operators herein) of motor vehicles, which section reads in part:

'Where a truck or road tractor without trailer is leased from an individual owner-operator, the lessee, whether person, firm or corporation, shall pay to the owner-operator 60% Of the fee prescribed in this subdivision for the truck-tractor or road tractor at the rate of 1/12 for each month of the lease or arrangement in addition to the compensation the owner-operator is entitled to for the rental of his equipment, Except where the same has been otherwise agreed to by the owner-operator and the lessee in writing.' M.C.L.A. § 257.801(k); M.S.A. § 9.2501(k) (Emphasis Added) ³

Then, in 1969, the Teamsters lobbied successfully for an amendment to the above Michigan statute whereby the italicized clause in Section 801(k) was deleted, to read as follows:

'Where a truck or road tractor without trailer is leased from an individual owner-operator, the lessee, whether person, firm or corporation, shall pay to the owner-operator 60% Of the fee prescribed in this subdivision for the trucktractor or road tractor at the rate of 1/12 for each month of the lease or arrangement in addition to the compensation the owner-operator is entitled to for the rental of his equipment.' M.C.L.A. § 257.801(k); M.S.A. § 9.2501(k).

On account of this 1969 amendment, plaintiffs feared that said deletion signified that the collective bargaining agreement, in effect at the time of this amendment, which provided that the owner-operator shall pay the license fee, would no longer control the apportionment of the payment of the registration fee as between carriers and owner-operators, and filed this suit.

As previously mentioned, the trial court filed an opinion on February 24, 1970, in which Ingham County Circuit Judge Donald Reisig held, in pertinent part as follows:

'Thus this Court finds that the section in question as amended by Act #309, 1969, is constitutional and further that it can be interpreted so as to neither impair the obligation of existing contracts nor enter an area heretofore preempted by the federal government. That is, this Court holds the Amended section does not prohibit the enforcemetn of contracts which provide for some other provision for the payment by the lessee to the owner-operator of the 60% Of the fee prescribed in the subdivision, nor does it prohibit future contracts to the same effect. However, where the contract is silent, i.e., where there has been no agreement between the owner-operator and the lessee in writing with reference to the fee, the statute is enforceable, valid and constitutional. Such interpretation gives full effect to both the 1967 Act and the 1969 amendment without requiring that the Court write the stricken provision back into the statute or requiring the Court to invalidate the entire provision.'

The owner-operators now appeal from the above lower-court decision, alleging that the 1969 amendment of M.C.L.A. § 257.801(k); M.S.A. § 9.2501(k) prohibits and precludes any other arrangement for the payment of these fees except in the manner found in the statute.

I. IF THE 1969 AMENDMENT DELETING CERTAIN LANGUAGE FROM SECTION 801(K) OF THE MICHIGAN VEHICLE CODE WAS INTENDED TO PROHIBIT CARRIERS AND OWNER-OPERATORS FROM CONTRACTING TO ALTER THE STATUTORY APPORTIONMENT OF THE REGISTRATION FEE, DOES SUCH A CONSTRUCTION OF THE AMENDED SECTION AMOUNT TO AN UNCONSTITUTIONAL LAW IMPAIRING THE RIGHTS AND OBLIGATIONS OF PRIVATE CONTRACTS?

Plaintiffs assumed that the effect of the 1969 amendment deleting the language 'except where the same has been otherwise agreed to by the owner-operator and the lessee in writing' was to prohibit a collective bargaining agreement between carriers and owner-operators altering the 60-40 fee payment ratio established in the statute. Plaintiffs brought this suit seeking a declaration that carriers and owner-operators are not prohibited from agreeing to alter the ratio. The trial court apparently assumed that if the amended statute were construed to prohibit such an agreement, section 801(k) would then be rendered unconstitutional. But the trial court opinion never reaches this issue.

Plaintiffs' basic contention is that the aforesaid construction of the amended statute would amount to a violation of due process in that plaintiffs are denied their right to enter into private contracts and are thus deprived of property without due process of law, there being no public purpose upon which to rest this exercise of police power. The owner-operators reason to the contrary, alleging that strict interpretation of the 60-40 fee payment ratio is mandatory. Further, the owner-operators allege that such a construction of the amended statute, prohibiting contracting otherwise, does not amount to an unconstitutional law impairing the rights and obligations of private contracts. ⁴

The basis for plaintiffs' reliance upon their 'right to enter into private contract' is obviously the constitutional provision barring any state from passing a law impairing the obligations of contracts.

'No state shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.' U.S. Const. art. I, § 10.

'No bill of attainder, ex post facto law or law impairing the obligation of contract shall be enacted.' Const. 1963, art. 1, § 10 .

Plaintiffs, as carriers, and the owner-operators were signatories to the National Master Freight Agreement and National Iron and Steel and Special Commodity Supplementary Agreement which covered the period from April 1, 1967, through March 31, 1970, and contained the following language in article 59, § 10:

'It is expressly understood that the owner-driver shall pay the license fee in the state in which title is registered.'

This collective bargaining agreement, or private contract, placed the burden upon the owner-operators to pay the registration fee.

If the 1969 amendment is given the construction assumed under the heading of this issue, it appears that the most the Legislature could decree is a prospective, and not a retroactive, effect. The controlling case on this general principle is Guardian Depositors Corp. v. Brown, 290 Mich. 433, 439, 287 N.W. 798, 800 (1939):

'We are here faced squarely with the question of whether the Act may be applied to contracts created before it went into effect * * *. The trial court found that a new and substantial right was created by the statute, rather than a mere additional remedy, and for this reason held that to apply it to the assumption agreement made between defendants and the Treventhans would impair the obligations of the contract and violate due process in contravention of both State and Federal Constitutions.

'Admittedly, a statute cannot be retroactive so as to change the substance of a contract previously entered into.'

See, further, Schoolcraft Community School District No. 50 v. Burson, 357 Mich. 682, 688, 99 N.W.2d 353 (1959).

The amendment went into effect August 19, 1969. The above-cited authority, based upon article 1, § 10, of both the Federal and State Constitutions, prevents a retroactive apportionment of...