Mooahesh v. Department of Treasury

Decision Date17 August 1992
Docket NumberDocket No. 122480
PartiesKamel MOOAHESH, Plaintiff-Appellee, v. DEPARTMENT OF TREASURY of the State of Michigan and State of Michigan, Bureau of State Lottery, Defendants-Appellants.
CourtCourt of Appeal of Michigan — District of US

Richard A. Lenter, Southfield, for plaintiff-appellee.

Frank J. Kelley, Atty. Gen., Thomas L. Casey, Sol. Gen., and Keith D. Roberts and George H. Weller, Asst. Attys. Gen., for defendants-appellants.



In this class action, plaintiff and other winners of the Michigan lottery 1 sought relief from the repeal of the statutory exemption of state lottery winnings from Michigan taxes. 1988 P.A. 516; M.C.L. Sec. 432.34; M.S.A. Sec. 18.969(34). Defendants appeal the trial court's grant of plaintiff's motion for summary disposition and its ruling that 1988 P.A. 516 violated the title-object clause of the Michigan Constitution. Const.1963, art. 4, Sec. 24. We affirm in part and reverse in part.

In 1987, Kamel Mooahesh, a member of a lottery club, shared one-half of a one million dollar prize won in the state lottery, M.C.L. Sec. 432.1 et seq.; M.S.A. Sec. 18.969(1) et seq. The prize money has since been paid and will be paid to him until 2006 in $25,000 annual installments.

At the time Mooahesh purchased his lottery ticket, Sec. 34 of the Lottery Act expressly provided: "No state or local taxes of any kind whatsoever shall be imposed upon the proceeds from a prize awarded by the state lottery." M.C.L. Sec. 432.34; M.S.A. Sec. 18.969(34). This tax exemption existed continuously from the lottery's inception in 1972 until 1988. On December 30, 1988, however, 1988 P.A. 516 was enacted. A portion of the act provided:

For a tax year beginning after 1987, in calculating taxable income, a taxpayer shall not subtract from adjusted gross income the amount of prizes won by the taxpayer under [the Lottery Act ]. [M.C.L. Sec. 206.30(6); M.S.A. Sec. 7.557(130)(6).]

In addition, the act expressly repealed M.C.L. Sec. 432.34; M.S.A. Sec. 18.969(34):

Section 34 of the McCauley-Traxler-Law-Bowman-McNeely lottery act, Act No. 239 of the Public Acts of 1972, being section 432.34 of the Michigan Compiled Laws, is repealed effective January 1, 1988. [1988 P.A. 516, Sec. 2.]

On March 14, 1989, Mooahesh, individually and on behalf of a class consisting of other lottery winners before December 31, 1988, filed a six-count complaint in the Wayne Circuit Court against the Department of Treasury and the Bureau of State Lottery. The complaint was later amended to add two individual defendants, the State Treasurer and the Commissioner of the Bureau of State Lottery. All six counts arose from the passage and enforcement of 1988 P.A. 516.

The amended complaint alleged that the state breached its contract and that 1988 P.A. 516 violated the state and federal constitutions. Plaintiff also pleaded other counts not pertinent to this appeal. 2 Each of the counts alleged the $10,000 jurisdictional amount. Plaintiff's generalized prayer for relief sought (1) a declaratory judgment that the state had breached its contract with plaintiff and other members of the class; (2) a declaratory judgment that 1988 P.A. 516 was unconstitutional; (3) segregation of payments collected pursuant to 1988 P.A. 516 pending resolution of the dispute; and (4) payment of costs and attorney fees.

Defendants moved for summary disposition, contending that exclusive jurisdiction was vested in the Court of Claims. M.C.L. Sec. 600.6419; M.S.A. Sec. 27A.6419. This motion was denied as to the state and the lottery bureau, but granted as to the treasurer and the lottery commissioner, who were dismissed from the case. Plaintiff has not appealed that order.

Plaintiff then moved for summary disposition, seeking a declaration that 1988 P.A. 516 violated the title-object clause of the Michigan Constitution, Const.1963, art. 4, Sec. 24. That motion was granted.

At the same time that plaintiff brought this action, a similarly situated class filed suit in the Court of Claims. The class was essentially defined as all state lottery winners before December 31, 1988, who had received awards or installment payments in 1988, who filed 1988 state income tax returns, and who paid state income taxes under protest. The Court of Claims granted summary disposition for the plaintiffs, holding that 1988 P.A. 516 did not apply to those who won the lottery before December 30, 1988. This Court affirmed. Shay v. Michigan, unpublished opinion per curiam, decided February 11, 1991 (Docket No. 120806). The Court of Claims ruled solely on the breach of contract claim.

I. Certification of the Class

The lower court certified the class represented by plaintiff as follows:

All winners of State of Michigan lottery prizes, which prizes were paid in installment payments, provided that at least one installment payment was received or receivable on or before December 31, 1988; the class shall not include those persons or entities who did not choose to exclude themselves from [a] certain class action presently pending in the Michigan Court of Claims, said action being known as Shay v. State of Michigan....

On appeal, defendants contend that this certification was in error because the Mooahesh class could not be distinguished from the Shay class. We do not agree.

This Court will reverse an order of class certification only where it is clearly erroneous. Grigg v. Michigan Nat'l Bank, 72 Mich.App. 358, 365, 249 N.W.2d 701 (1976), rev'd on other grounds 405 Mich. 148, 274 N.W.2d 752 (1979); Northview Const. Co. v. St. Clair Shores, 395 Mich. 497, 507, 236 N.W.2d 396 (1975). The lower court did not clearly err in certifying the Mooahesh class.

MCR 3.501(A)(1) describes the requirements for a class action:

One or more members of a class may sue or be sued as representative parties on behalf of all members in a class action only if:

(a) the class is so numerous that joinder of all members is impracticable;

(b) there are questions of law or fact common to the members of the class that predominate over questions affecting only individual members;

(c) the claims or defenses of the representative parties are typical of the claims or defenses of the class;

(d) the representative parties will fairly and adequately assert and protect the interests of the class; and

(e) the maintenance of the action as a class action will be superior to other available methods of adjudication in promoting the convenient administration of justice.

Neither the explicit language of the court rule nor the corresponding federal court rule, F.R.Civ.P. 23, requires that a defined class be unique, i.e., that all its members be ineligible for membership in any other class. Defendants have cited no legal authority for this proposition and this Court has discovered no judge-made law imposing any such limitation. Moreover, as presently defined, no one can be a member of both the Mooahesh and the Shay classes. Thus, we have no legal or factual basis for concluding that the lower court's decision to certify the Mooahesh class was clearly erroneous.

Defendants also complain that the class as certified differs from the class identified in the complaint. Although defendants do not identify the alleged discrepancies, we assume the problem lies in the paragraph of the complaint that refers to "all persons who have won Lotto and/or Super Lotto prizes in the State of Michigan Lottery Contest since its inception in 1973." The trial court's order refers to "All winners of State of Michigan lottery prizes, which prizes were paid in installment payments, provided that at least one installment payment was received or receivable on or before December 31, 1988." These descriptions are functionally identical. The trial court's definition is, if anything, more restrictive than that in the complaint, so any inconsistency works to defendants' advantage. We see no reason to reverse the decision of the circuit court on this ground.

II. Circuit Court Jurisdiction

We next find that the circuit court had jurisdiction of the constitutional issues. Further, we find that plaintiff requested equitable relief and has no adequate remedy at law.

The portions of M.C.L. Sec. 600.6419; M.S.A. Sec. 27A.6419 pertinent to the present dispute provide:

Except as provided in [M.C.L. Sec. 600.6419a; M.S.A. Sec. 27A.6419a and M.C.L. Sec. 600.6440; M.S.A. Sec. 27A.6440], the jurisdiction of the court of claims, as conferred upon it by this chapter, shall be exclusive.... The court has power and jurisdiction:

(a) To hear and determine all claims and demands, liquidated and unliquidated, ex contractu and ex delicto, against the state and any of its departments, commissions, boards, institutions, arms, or agencies.

M.C.L. Sec. 600.6419a; M.S.A. Sec. 27A.6419(1) provides, in pertinent part:

[T]he court of claims has concurrent jurisdiction of any demand for equitable relief and any demand for a declaratory judgment when ancillary to a claim filed pursuant to [M.C.L. Sec. 600.6419; M.S.A. Sec. 27A.6419]. The jurisdiction conferred by this section is not intended to be exclusive of the jurisdiction of the circuit court over demands for declaratory and equitable relief conferred by [M.C.L. Sec. 600.605; M.S.A. Sec. 27A.605.]

The Court of Claims plainly has exclusive jurisdiction over contract claims against the state and its agencies. It does not have exclusive jurisdiction over demands for declaratory and equitable relief (although, of course, it does have ancillary jurisdiction when applicable). See 77th Dist. Judge v. Michigan, 175 Mich.App. 681, 699, 438 N.W.2d 333 (1989) (the Court of Claims lacked power to issue injunction in a case involving a district judge's claim of an equal protection violation because of unequal salaries and benefits),...

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