Muskegon Area Rental Ass'n v. City of Muskegon

• Decision Date: 18 December 2001
• Docket Number: Docket No. 118416.
• Citation: 636 N.W.2d 751,465 Mich. 456
• Parties: MUSKEGON AREA RENTAL ASSOCIATION, Roger Nielson, and Arthur Jasick, Plaintiffs-Appellees, v. CITY OF MUSKEGON, Defendant-Appellant.
• Court: Michigan Supreme Court

636 N.W.2d 751

465 Mich. 456

MUSKEGON AREA RENTAL ASSOCIATION, Roger Nielson, and Arthur Jasick, Plaintiffs-Appellees, v. CITY OF MUSKEGON, Defendant-Appellant.

Docket No. 118416.

Supreme Court of Michigan.

December 18, 2001.

Williams, Hughes, Corwin & Sininger, L.L.P (by Douglas M. Hughes, and Kellie A. Osborn), Muskegon, for the plaintiffs-appellees.

Parmenter O'Toole (by G. Thomas Johnson), Muskegon, for the defendant-appellant.

Opinion

PER CURIAM.

A Muskegon city ordinance provides that before a residential dwelling may be rented, all past due property taxes on the property must be paid. The plaintiffs, who are owners of rental property within the city, brought this action challenging the validity of the ordinance on various grounds. The circuit court granted summary disposition for the city on all the plaintiffs' claims, but the Court of Appeals reversed in part, finding that the ordinance violated the Equal Protection Clauses of U.S. Const. Am. XIV, and Const. 1963, art. 1, § 2.

We conclude that the ordinance does not violate equal protection guarantees, reverse the judgment of the Court of Appeals in part, and reinstate the judgment of the Muskegon Circuit Court.

I

The city of Muskegon enacted a property maintenance code that sets forth the maintenance standards for all existing structures, new structures, and additions to existing structures.¹ The code also requires a property owner to obtain a certificate of compliance before the owner may rent the property.

On May 27, 1997, the city amended the ordinance to impose additional conditions for obtaining a certificate of compliance. Muskegon Ordinance § 4-83(b) was amended to provide:

The City shall issue a certificate of compliance for a rental dwelling when the city finds that the rental dwelling, its units and accessory structures and yards comply with the standards set forth in this code; however, no certificate of compliance shall be issued until all of the following fees and debts to the city have been paid in full:

(1) all previously billed property taxes;

(2) all current or past due special assessment installments;

(3) water or sewer bills outstanding;

(4) all charges against the property for mowing, cleanup, weed or debris removal and similar charges by the city;

(5) any fees, fines, penalties or debts of any sort arising from the provisions or enforcement of the Property Maintenance Code.

The issue in this appeal is whether § 4-83(b)(1) violates the principle of equal protection under the law.

II

Plaintiff Muskegon Area Rental Association is an organization of about 145 members who own approximately 2,000 rental dwellings in the city of Muskegon. The individual plaintiffs are members of the association. Plaintiffs brought this action after the city attempted to enforce § 4-83(b)(1). Among other claims not before the Court, plaintiffs alleged that the ordinance violated their equal protection rights.

The plaintiffs argued that their equal protection rights were violated because other businesses who must register to do business in Muskegon are not required to pay real estate taxes before securing a certificate of registration under another ordinance.² After discovery, both sides moved for summary disposition under MCR 2.116(C)(10). The circuit court granted the city's motion. Regarding the equal protection claim, the court said:

The 1990 Census of Population and Housing shows that 45% of Muskegon's 14,767 occupied housing units were rental units.... Undisputed sworn testimony demonstrates that a substantial majority of rental properties which are not current in their tax payments are deteriorated, and unsafe for human occupancy.... When they deteriorate, the City generally does not apply to receive these tax reverted properties.... Tax delinquency carries over to lack of interest in providing safe rentals for the public.... Finally, the City's tax collection percentage is lower than the majority of Michigan municipalities. This results in higher interest costs when the City borrows or issues bonds....

At oral argument, the parties explored the link between the stated goals and the ordinance. Plaintiff's counsel argued there was little or no connection between fiscal responsibility and providing suitable housing. A landlord could be fiscally responsible and provide horrific housing. One could provide exemplary rental housing and owe delinquent taxes. The Court is, however, satisfied that the City has established the requisite connection. In any event, it is not for this Court to second guess local governing bodies absent a showing that the body was arbitrary or capricious. Kropf v. City of Sterling Heights, 391 Mich. [139, 161], 215 N.W.2d 179 (1974). [Circuit Court opinion issued January 19, 1999, pp. 8-9.]

III

The plaintiffs appealed, and the Court of Appeals affirmed the circuit court decision on all grounds except the equal protection claim.³ The majority noted that an ordinance is presumed constitutional and that the burden is on the party challenging the ordinance to show that it is not rationally related to a legitimate governmental interest. In finding a violation of the Equal Protection Clauses of the Michigan and U.S. Constitutions, the Court of Appeals majority reasoned as follows:

We utilize the test set forth in Alexander v. Detroit, 392 Mich. 30, 35-36, 219 N.W.2d 41 (1974), a case involving a constitutional attack on a city refuse collection ordinance. This test contains two prongs: (1) whether the ordinance's classifications are based on natural distinguishing characteristics and whether the classifications bear a reasonable relationship to the object of the ordinance and (2) whether all persons of the same class are included and affected alike or whether immunities or privileges are extended to an arbitrary or unreasonable class while denied to others of a like kind. Accord, Brittany Park Apartments [v. Harrison Charter Twp., 432 Mich. 798, 443 N.W.2d 161 (1989)], supra, p. 804.

[T]he problem here is that the ordinance treats rental property owners differently from other businesses. Other businesses (nonrental properties) are required to obtain a certificate of registration and one of the prerequisites for obtaining such a certificate is that all outstanding debts to defendant be paid, except real property or income taxes. Muskegon Code of Ordinances, § 5-9.6. Thus, defendant has created a subset of businesses—the owners of rental dwelling properties—and treats them entirely differently than it treats other, nonrental property businesses.

We hold that defendant's ordinance violates the guarantee of equal protection because it violates the second prong of the test set forth in Alexander. The ordinance does not include and affect all persons of the same class (businesses) and extends immunities or privileges to an arbitrary class (businesses who are not owners of rental properties and who are immune from the requirement of paying real property or income taxes before obtaining a certificate of registration), while denying the exact immunities and privileges to others of a like kind (businesses who are owners of rental properties and are required to pay all previously billed property taxes before obtaining a certificate of compliance). Consequently, we find that defendant's ordinance impermissibly treats certain components of the same class (businesses) differently. [244 Mich.App at 55-57, 624 N.W.2d 496 (emphasis in original).]

The dissent disagreed with the majority's equal protection analysis.

The purpose of defendant treating rental property businesses differently than other businesses is apparent. By requiring payment of taxes "up front," before units can be rented, defendant seeks to reduce the fiscal, safety, health, and welfare problems that result disproportionately from rental properties.

The majority states that defendant's position regarding the rational basis for this classification scheme "is not supported in any way by record evidence." Ante at 57, 624 N.W.2d 496. I first note that the majority's analysis in this regard ignores the presumption of constitutionality that defendant's ordinance enjoys and the corresponding heavy burden of proof that plaintiffs must bear to show that the ordinance is unconstitutional. In effect, the majority places the burden of proof on defendant, as if this is a "strict scrutiny" case. The question here is not whether defendant has proved the rational basis for the classification scheme. The question is whether plaintiffs have come forward with evidence sufficient to show defendant's ordinance to be arbitrary and wholly unrelated to a legitimate government purpose.

I conclude they have not. There has been no showing that rental properties are not disproportionately tax delinquent compared to properties owned by other businesses. In fact, the record includes admissions by members of the Muskegon Area Rental Association that allowing rental properties to become delinquent is a common business practice. Defendant has articulated reasons why its failure to promptly receive taxes when due causes fiscal problems, and plaintiffs have offered no evidence to suggest that those problems do not result from tax delinquencies. Thus, if the purpose of the classification scheme here was simply to encourage prompt payment of taxes for fiscal reasons, by enacting a special penalty against a class of property owners who disproportionately are tax delinquent, the classification would pass constitutional muster.

However, defendant has articulated other reasons for treating rental property owners differently than other businesses. In sum, defendant's position is that the deteriorating conditions of residential properties are commonly the result of or exacerbated by the failure to pay taxes when due. This seems a common sense conclusion to anyone familiar with "urban blight." It is certainly at least "rational speculation" on defendant's part. See Alexander v. Merit Systems

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