Sau-Tuk Indus., Inc. v. Allegan Cnty.

• Decision Date: 28 June 2016
• Docket Number: 325926.,Docket Nos. 324405
• Citation: 316 Mich.App. 122,892 N.W.2d 33
• Parties: SAU–TUK INDUSTRIES, INC. v. ALLEGAN COUNTY. In re Petition of Allegan County Treasurer for Foreclosure.
• Court: Court of Appeal of Michigan — District of US

316 Mich.App. 122

892 N.W.2d 33

SAU–TUK INDUSTRIES, INC.

v. ALLEGAN COUNTY.In re Petition of Allegan County Treasurer for Foreclosure.

Docket Nos. 324405

325926.

Court of Appeals of Michigan.

Submitted March 8, 2016, at Grand Rapids.

Decided June 28, 2016, at 9:05 a.m.

Rhoades McKee PC, Grand Rapids (by Gregory G. Timmer ) for Sau–Tuk Industries, Inc.

Miller Johnson, Kalamazoo (by Craig H. Lubben ) for Allegan County and the Allegan County Treasurer.

Before: O'CONNELL, P.J., and MARKEY and MURRAY, JJ.

PER CURIAM.

These consolidated appeals present the same legal issue: the validity of liens for unpaid utility charges assessed by the city of Holland's Board of Public Works (BPW) under the city's charter and ordinances as authorized by MCL 141.121(3) and enforced in the same manner as delinquent property taxes. The liens secured payment for electric and water services to property that appellant, Sau–Tuk Industries, Inc., leased to Michigan Wood Pellet, LLC (MWP), and were enforced by appellee, Allegan County Treasurer, at its annual sale of properties to satisfy delinquent taxes. In Docket No. 324405, Sau–Tuk appeals by right the trial court's October 10, 2014 order that granted appellee Allegan County's motion for summary disposition because appellant failed to comply with the plain language of MCL 141.121(3) and the city's ordinances to exempt the property from the utility liens. Sau–Tuk also appeals by right the portion of the trial court's February 2, 2015 judgment of foreclosure of properties for unpaid taxes that included the property at issue (Docket No. 325926). We conclude that the trial court correctly ruled that because Sau–Tuk failed to follow the plain mandate of MCL 141.121(3) and the city's ordinances to forestall the liens, Allegan County was entitled to summary disposition in Docket No. 324405 and a judgment of foreclosure in Docket No. 325926. We affirm.

I. STATE STATUTE AND LOCAL ORDINANCES AT ISSUE

Section 21 of the Revenue Bond Act (RBA), MCL 141.101 et seq., MCL 141.121, is at issue in these cases. Under the RBA, a public corporation—such as a city or county, see MCL 141.103(a) —is "authorized to purchase, acquire, construct, improve, enlarge, extend or repair 1 or more public improvements and to own, operate and maintain the same, within or without its corporate limits, and to furnish the services, facilities, and commodities of any such public improvement to users within or without its corporate limits." MCL 141.104. A "public improvement" is defined to include sewage disposal and water supply systems, and "utility systems for supplying light, heat, or power...." MCL 141.103(b). Pertinent to collecting charges for such utility services, Section 21 of the RBA provides:

Charges for services furnished to a premises may be a lien on the premises, and those charges delinquent for 6 months or more may be certified annually to the proper tax assessing officer or agency who shall enter the lien on the next tax roll against the premises to which the services shall have been rendered, and the charges shall be collected and the lien shall be enforced in the same manner as provided for the collection of taxes assessed upon the roll and the enforcement of the lien for the taxes. The time and manner of certification and other details in respect to the collection of the charges and the enforcement of the lien shall be prescribed by the ordinance adopted by the governing body of the public corporation. However, in a case when a tenant is responsible for the payment of the charges and the governing body is so notified in writing, the notice to include a copy of the lease of the affected premises, if there is one, then the charges shall not become a lien against the premises after the date of the notice. In the event of filing of the notice, the public corporation shall render no further service to the premises until a cash deposit in a sum fixed in the ordinance authorizing the issuance of bonds under this act is made as security for the payment of the charges. [MCL 141.121(3) (emphasis added).]

Pursuant to the authorization in MCL 141.121(3), the city of Holland, in Chapter 12 of its charter, provides for municipal ownership of utilities and for the creation of liens to secure payment for utility services, which "become effective immediately upon the distribution or supplying of such utility service or services to such premises." Holland Charter, § 12.18. Furthermore, the city of Holland, in its code of ordinances, provides for the creation and enforcement of liens by which it may recover charges for utility services, subject to the landlord exception of MCL 141.121(3). As authorized by the RBA, § 9–3 of Holland's code of ordinances provides that the city, subject to state law, "shall have as security for the collection of all charges for electric services ... a lien upon the premises to which such electric services were supplied. Such liens shall become effective immediately upon the distribution or supplying of such electric service or services to such premises." Section 9–6 of Holland's code of ordinances also adopts the landlord exception of MCL 141.121(3), which provided at all times pertinent to this case:

If the owner of a premises which receives electric services provided by the City shall lease such premises to a tenant who is responsible under the lease for the payment of the charges for electric services, and such property owner notifies the Board of public works [BPW], in writing, of such fact, the notice to include a true copy of the lease of the affected premises, if there is one, then the charges for electric services provided to such premises shall not become a lien against the premises after the date such notice is received by the [BPW]. Immediately after the filing of such notice, the [BPW] shall render no further service to the premises until it receives from the tenant, or an individual or entity acting on behalf of the tenant, a cash deposit or surety bond, as established by resolution adopted by City Council, or it receives record of a previously established good credit history of not less than 12 consecutive months, as security for the payment of the electric charges.... [Holland City Code, § 9–6.] ^{[1 ]}

The city of Holland also provides for the creation of a lien on premises to which water services are provided.

See Holland City Code, § 37–30. Although a nominal part of this case, the exception to imposition of a lien for water charges provides:

If the owner of a premises which receives water services provided by the City shall lease such premises to a tenant who is responsible under the lease for the payment of the charges for water services accruing subsequent to the filing of an affidavit by the property owner with the Board of Public Works, said affidavit to affirm the execution of such a lease containing a provision regarding the tenant's responsibility for payment of the charges for water services and to contain a notation of the expiration date of the lease, then the charges for water services provided to such premises shall not become a lien against the premises after the date such affidavit is received by the Board of Public Works.... [Holland City Code, § 37–33; see also MCL 123.165.]

II. FACTS AND PROCEEDINGS

Sau–Tuk owns the property at issue in these appeals and leased it to MWP for an initial lease term that extended from November 1, 2006, to October 31, 2011. Sau–Tuk then renewed the lease for an additional five years from October 31, 2011. Under the terms of the lease, as stated in the trial court's opinion, MWP "assumed responsibility for the payment of all utility charges, taxes, and fees," as well as the "operation, repair, maintenance and management of the Property." Sau–Tuk acknowledges that it did not initially inform the BPW of this fact in a written notice and with a copy of the lease as is required by MCL 141.121(3) and city ordinance to exempt the property from the imposition of a lien for any unpaid utility charges.

Sometime in October 2006, MWP contacted the BPW about providing utility services to the property. Because MWP was a new business without an established good credit history, and because MWP was renting the property, the BPW required MWP to provide either a surety bond or a cash deposit as a condition of obtaining utility services. According to Julie Thompson, the BPW's corporate designee, the BPW does not require security by owners of property who request utility services. MWP complied with the request and obtained a surety bond in the amount of $54,000 in May 2007. The amount of the surety bond was determined by the BPW and approved by an assistant city attorney in an April 2, 2007 letter to the insurance company. Sau–Tuk argues that this letter and Thompson's testimony show that the BPW had actual knowledge of MWP's tenancy and obligation to pay for utility services provided to the property.

After MWP obtained the surety bond, the BPW began providing utility services to the subject property and billing MWP directly for those services. MWP timely paid all charges for water and electric service between 2007 and 2010. During this time frame, MWP renewed its surety bond several times before the BPW released it from its surety-bond requirement in a March 17, 2010 letter because MWP had established "a good payment history of twelve consecutive months...." Thereafter, MWP continued timely paying its utility bills. In May 2011, MWP began to fall behind on its utility payments. By the January 2012 BPW statement for utility services, MWP owed $74,324.77, of which $35,390.52 was delinquent. On March 8, 2012, Sau–Tuk, for the first time, sent the BPW a written notice, with a copy of the lease, of MWP's agreement to pay for utility charges incurred at the leased property.

On January 14, 2014, the Allegan County Treasurer served Sau–Tuk with a notice of forfeiture based on the unpaid utility charges that MWP had incurred. The notice of forfeiture referred to the delinquent...