Northview Const. Co. v. City of St. Clair Shores

• Decision Date: 01 March 1974
• Docket Number: No. 10,10
• Parties: NORTHVIEW CONSTRUCTION COMPANY, a Michigan Corporation, et al., Plaintiffs-Appellants, v. CITY OF ST. CLAIR SHORES, a Municipal Corporation organized and existing under the laws of the State of Michigan, Defendant-Appellee. ,
• Court: Michigan Supreme Court

Page 396

236 N.W.2d 396

395 Mich. 497

NORTHVIEW CONSTRUCTION COMPANY, a Michigan Corporation, et al., Plaintiffs-Appellants, v. CITY OF ST. CLAIR SHORES, a Municipal Corporation organized and existing under the laws of the State of Michigan, Defendant-Appellee.

No. 10, March Term, 1974.

Supreme Court of Michigan.

Dec. 18, 1975.

Honigman Miller Schwartz & Cohn, Detroit (Norman Hyman and John Sklar, Detroit, of counsel), for plaintiffs-appellants.

John H. Yoe, Detroit, for defendant-appellee.

PER CURIAM.

Plaintiffs appeal the dismissal of their class action against defendant City of St. Clair Shores. This cause was instituted in 1960. It has twice been before the Court of Appeals. A brief review of the prior proceedings is necessary for a proper understanding of the issues now before us

In Merrelli v. St. Clair Shores, 355 Mich. 575, 96 N.W.2d 144 (1959), this Court held unlawful certain amendments to the St. Clair Shores building code on the grounds that they established an illegally excessive building permit fee schedule. No refund issue was present in the Merrelli case. After Merrelli some unrelated and independent individual actions were instituted by various builders to recover illegal building permit fees already paid to the city. One such suit, viewed as a test case, was Beachlawn Building Corp. v. St. Clair Shores, 370 Mich. 128, 121 N.W.2d 427 (1963); 376 Mich. 261, 136 N.W.2d 926 1965). Therein, this Court ruled that the City of St. Clair Shores was obligated to refuned all excessive building permit fees paid to it by the Beachlawn Building Corporation.

After the initial filing of Beachlawn, plaintiffs filed the instand lawsuit in order to secure a refund of the excess fees paid by the named plaintiffs and also a refund of all excess fees paid by the class of all persons who purchased building permits between September 20, 1954 ¹ and the date of the filing of the action, July 27, 1960. In conjunction with the complaint, plaintiffs filed an ex parte motion for notice to class members. The motion requested that notice and a bill of complaint be served on the Builders Association of Metropolitan Detroit. Plaintiffs' motion was immediately granted by the circuit court.

After the city filed its answer, progress on the case halted. The parties entered into a stipulation adjourning the suit until the final decision in Beachlawn. From 1960 until 1965 the case lay dormant.

On Nobember 17, 1965, progress toward resolution of this suit again began when the city filed a motion for summary judgment seeking to dismiss plaintiffs' complaint. The city argued that the pleadings did not establish a proper class action and alao challenged the adequacy of the notice to the absent class members. Plaintiffs opposed the city's motion for summary judgment and, in addition, on September 8, 1966, filed their own motion for summary judgment. This latter motion requested a judgment establishing the liability of the city for the claims of the class.

In April, 1967, the trial court granted the city's motion for summary judgment and dismissed the class action portion of the suit. The court based its judgment on the apparent lack of interest by potential class members. The court noted that while several individual refund suits had been filed against the city, no class members attempted to intervene or otherwise include themselves in this suit. Having thus dismissed the class action, the court found it unnecessary to provide the class with proper notice and also found it unnecessary to determine if the named plaintiffs fould adequately represent the class.

The plaintiffs filed a timely claim of appeal from the dismissal of the class action. The following month, however, the circuit court granted plaintiffs' motion for summary judgment as limited by the court to the named plaintiffs. Judgment was entered in favor of the trustee in bankruptcy of Northview Construction Company in the principal amount of $16,144.00 plus interest and costs, in favor of R and L Building Company in the principal amount of $2,470.00 plus interest and costs and in favor of Sunnyview Building Company in the principal amount of $3,480.00 plus interest and costs. Plaintiffs' attorney filed a satisfaction of judgment with the Macomb Circuit Court on June 3, 1968.

The class action appeal was nonetheless prosecuted in the Court of Appeals. A unanimous panel reversed the dismissal of the action by the circuit court. Northview Construction Co. v. St. Clair Shores, 12 Mich.App. 104, 162 N.W.2d 297 (1968). The Court of Appeals ruled that the plaintiffs' allegations were sufficient to state a cause of action under the class action rule, GCR 1963, 208; but the court of Appeals found it impossible to grant binding relief 'for or against members of the class * * * on the present record.' It remanded the case to the circuit court for proper notice to the class members and instructed the court to reevaluate the question of adequacy of representation after the new notice had been served.

Following remand to trial court, defendant made available to plaintiffs its building permit records. From these records plaintiffs were able to determine the names and addresses of the previously unnamed class members. In September, 1969, plaintiffs filed a two-pronged motion. First, the motion requested a partial summary judgment in favor of the class establishing the city's liability for all properly presented claims. Second, the motion requested a determination of the form of notice to class members. Plaintiffs proposed that their attorney be allowed a claim notice of the action accompanied by a claim form to each class member appearing in the city's building permit records and also be allowed to place notice in area newspapers. After hearing arguments on the motion, the circuit court entered an order for notice by publication only in the belief that to permit claim forms to be mailed would be tantamount to a solicitation of claims by plaintiffs' attorney and constitute a breach of the Canons of Ethics. The newspaper publication notice ordered by the court was of a more limited scope than that proposed by plaintiffs. The publication order permitted notice once a week for three weeks in the Macomb County Legal News, The Detroit Legal News, and The Community Newspaper, a local St. Clair Shores newspaper.

The response to the notice was minimal, as only six other builders responded. In mid-1970, the trial court held a hearing to determine of the class action should be allowed to continue. Later in that year the court again ruled that the action should be dismissed 'but in such form as not to affect the respective and several legal rights of the business entities that have made response and indicated their intent to file claims in these proceedings.'

An appeal was taken by the plaintiffs to the Court of Appeals. On this appeal the Court of Appeals affirmed the ruling of the circuit court and upheld the dismissal of the class action. Northview Construction Co. v. St. Clair Shores, 44 Mich.App. 614, 205 N.W.2d 895 (1973). The Court of Appeals wrote:

'The sole question before this Court is whether the trial court properly dismissed the class-action suit. The trial court dismissed the class action on the basis that since the named plaintiffs had already departed from the case and since there was so little response from the remaining class members, the requisite indicia of adequate representation was not present: therefore, the class action should not be continued.

'In the prior appeal, this Court held only that the trial court should not have dismissed the class action because of want of adequate notice and that, at the time of the dismissal, there was not a sufficient basis to determine the adequacy of representation and practicality of bringing all the members of the class before the court. See 12 Mich.App. 104, 106, 162 N.W.2d 297 (1968). This Court directed the trial court to serve notice upon the members of the class and thereafter determine the adequacy of the representation. This the trial court did.

'The named plaintiffs by seeking and accepting judgment in favor of themselves alone clearly evidenced their lack of desire to continue the class action. While we perceive that the trial court could have determined that there was not adequate representation from the mere fact that the named plaintiffs had departed from the suit prior to the appearance of any other member of the class, and thus obviating the necessity of notice to the other members of the class, the members of the class who did respond to the notice only serve to buttress the trial court's determination that there was not adequate representation to justify the continuation of the class action. Not only was the response to the notice small, but those who responded to the notice clearly indicated that they were interested only in their own claims and were not interested in continuing the class action.

'The trial court had a clear duty to terminate the class action at such time as it became evident that there was not adequate representation to protect those who were absent. GCR 1963, 208.4. Clearly, under these circumstances, it cannot be said that the trial court was clearly erroneous in its determination that there was not adequate representation to justify continuation of the class action.' (Footnotes omitted.) 44 Mich.App. 614, 617, 620--622, 205 N.W.2d 895, 897.

We reverse the Court of Appeals and remand this matter to the circuit court for expeditions resolution of the class claims. The record does not support the conclusion reached by the Court of Appeals and the circuit court that the named plaintiffs and their counsel have not adequately represented the class.

CLASS ACTIONS UNDER GCR 19638208.1(3)

As applicable to the present case GCR 1963, 208.1(3)

'If persons constitution a class are so numerous as to make it impracticable to bring them all before the court, such of them, 1 or more, as...