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

• Citation: 44 Mich.App. 614,205 N.W.2d 895
• Decision Date: 20 February 1973
• Docket Number: No. 2,Docket No. 11641,2
• 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: Court of Appeal of Michigan — District of US

Page 895

205 N.W.2d 895

44 Mich.App. 614

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.

Docket No. 11641.

Court of Appeals of Michigan, Division No. 2.

Feb. 20, 1973.

Released for Publication April 9, 1973.

Norman Hyman and Robert A. Fineman, Honigman, Miller, Schwartz & Cohn, Detroit, for plaintiffs-appellants.

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

Before LESINSKI, C.J., and FITZGERALD and VanVALKENBURG, ^* JJ.

VanVALKENBURG, Judge.

The subject matter of this appeal, certain building-permit fees, has been the genesis of continuing litigation at all levels of the court system of this state for a period of more than twelve years. In order to put this chapter of the saga in proper perspective, a brief review of the prior litigation is necessary.

In 1959 our Supreme Court rendered its decision in Merrelli v. St. Clair Shores, 355 Mich. 575, 96 N.W.2d 144 (1959), holding that two ordinances enacted by defendant city in 1954 and 1956, relative to collection of certain building fees, were invalid. The Court held that the revenue derived from the building permits was entirely disproportionate to the cost of issuance and the proper regulation of construction.

Immediately following the release of the Merrelli opinion, fifteen separate actions involving twenty-seven named plaintiffs were filed against defendant city for the express purpose of recovering the excess fees allegedly paid by the respective plaintiffs.

On July 27, 1960, the action which is the subject of this appeal was filed. This suit was the only one which assumed the responsibility of collecting the alleged excess fees not only on behalf of the three named plaintiffs, but also for all members of their class. Following the filing of pleadings, including the answer and reply, no further proceedings were taken, except for a number of stipulations agreeing to adjournments of the pretrial hearing until the Supreme Court rendered its decision in Beachlawn Building Corp. v. St. Clair Shores, 370 Mich. 128, 121 N.W.2d 427 (1963).

The Court in the Beachlawn case held that the builders could recover the excess fees even though they had not been paid under protest. Judgment for plaintiff Beachlawn Building Corp., after remand and trial in the circuit court, was affirmed on appeal by the Supreme Court, 376 Mich. 261, 136 N.W.2d 926 (1965).

In November 1965 defendant moved for summary judgment to dismiss the class action by reason of the failure to comply with the notice requirements. In December 1965 a motion for summary judgment in favor of the three named plaintiffs was made. In August 1966 a motion for summary judgment in favor of the class plaintiffs was made.

On April 3, 1967, defendant's motion for summary judgment with respect to the class action was granted. Plaintiffs appealed to this Court. This Court held that the trial court improperly granted summary judgment in favor of defendant because of the inadequacy of notice to the class members. See 12 Mich.App. 104, 162 N.W.2d 297 (1968).

On May 16, 1967, during the pendency of the above-noted appeal to this Court, judgments were entered on behalf of the three named plaintiffs in the amount of their claims. These judgments were satisfied, but without any order continuing the litigation as a class action.

Subsequent to this Court's opinion, plaintiffs' attorneys moved for summary judgment and notice to the class members. After a hearing thereon, an order was entered which provided for notice by publication to the class members. The notice was published and seven individuals filed notice with the city that they desired to file claims and be bound by any judgment which might be entered. One of the claimants thereafter withdraw his claim. After a hearing in which three additional claimants testified, the class action was dismissed.

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. ¹

Before attempting to answer the question herein presented, it is necessary to first digress for a moment and set the nature and status of this litigation in proper perspective. Class actions were unknown at common law and historically were developed in equity so as to provide a vehicle whereby large groups of individuals with a common cause could enforce their equitable rights or obtain immunity from equitable wrongs. Montgomery Ward & Co., Inc. v. Langer, 168 F.2d 182, 187 (C.A. 8, 1948); Bond v. Ann Arbor School Dist., 18 Mich.App. 506, 171 N.W.2d 557 (1969). As a consequence of the above-mentioned developments, states promulgated rules or statutes governing the procedure to be followed in such actions. Michigan adopted the former method; the procedural aspects of class actions being governed by GCR 1963, 208. ²

GCR 1963, 208.1 ³ sets forth the three types of factual situations in which class action may be appropriate, assuming that the class is so numerous as to make it impracticable to bring all the members of the class before the court, and assuming that there is adequate representation. While the three classifications set forth in subsections (1), (2) and (3) of GCR 1963, 208.1 are not labeled, there are commonly referred to as being 'true', 'hybrid', and 'spurious' class actions, respectively. The nature of these types of class actions is succinctly stated in 59 Am.Jur.2d, Parties, § 51, pp. 415--417:

'The 'true' class action, which is the invention of equity, is the one which involves the enforcement of a right which is joint, common, or secondary or derivative.

'The 'hybrid' class action involves the enforcement of rights which are several, where the object of the action is the adjudication of claims which affect specific property impounded in the action.

'The 'spurious' class action under Rule 23(a)(3) involves the enforcement of rights which are several where there is a common question of law or fact and a common relief is sought. The spurious class suit is merely a permissive joinder device in which the right and the liability of each individual plaintiff are distinct. The class is formed solely by the presence of a common question of law or fact, and there is no jural relationship among the members of the class. It is an anomaly because it does not involve a recognizable class. The real justification for the spurious type of action is its convenience in litigating numerous individual claims in one action. It is really an invitation to all persons similarly situated to join the action and litigate their several claims, but except to the extent that common claims are litigated, it has no binding effect on the members of the class who are not parties to the action. Procedure in this respect is largely a matter of discretion of the trial court.

'The 'spurious' type of class action is not the invention of the drafters of Rule 23. It was known, although not often referred to as such, prior to such Rule, and is evidenced by decisions under the state code provisions and earlier chancery practice.'

See also Pressley v. Wayne County Sheriff, 30 Mich.App. 300, 317, 186 N.W.2d 412 (1971).

Since the claims of the members of the proposed class were 'several' in nature and since there was a common question of law affecting the several rights, this, as in Pressley, supra, is a spurious class action pursuant to GCR 1963, 208.1(3).

The named plaintiffs herein sought and were granted summary judgment as to their claims. While such judgment constituted a compromise, it was proper, upon approval of the trial court. Since the class action was brought pursuant to GCR 1963, 208.1(3), no notice of the compromise to the other members of the class was necessary. See GCR 1963, 208.5.

Under the circumstances of this case, the threshold question which must be answered is:

Where the named plaintiffs in a class action pursuant to GCR 1963, 208.1(3) secure judgment in their favor alone, prior to the intervention of any other member of the class, did the trial court err in dismissing the class action?

As noted previously, the named plaintiffs sought and were granted summary judgment as to their claims alone. These claims were acknowledged as satisfied on May 29, 1968. It is thus immediately apparent that on the date of the prior appeal of this matter to this Court the only persons interested in the class action were plaintiffs' attorneys. ⁴ Since, as the trial court put it, the named plaintiffs were 'gone from the scene,' the logical conclusion is that the attorneys engineered and paid the costs of the prior appeal.

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 the practicality of bringing all the members of the class befor the court. ⁵ 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. ⁶

The named plaintiffs by seeking and accepting judgment in favor of themselves alone clearly evidenced their lack of desire to continue the class action. ⁷ While we...