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Municipal Caselaw Update

There is something for everyone this month as our E-letter recaps several cases of interest to municipalities. We review the taxes available for levy to charter townships, the importance of zoning definitions and when a land use may become abandoned, the proper determination of when plaintiff must file a sewer overflow case, how to properly categorize re-zoning decisions and applications for marihuana permits, and a reminder that if you identify a problem you can often fix it before it gets worse. Read on to learn how many mills a charter township established in 1979 can levy, who the “owner” of a zoning permit can be, how long you need to be concerned with sewer or storm water overflows, how best to defend local decisions in court, and that even in the face of combined FOIA and OMA violations, reenactment may offer a solution.

All Charter Townships May Levy Their Full Millage

Oshtemo Charter Township v Kalamazoo County, ___ Mich App ___ (September 30, 2021, Docket No 355634).

The Charter Township of Oshtemo overturned a 1985 decision of the Attorney General limiting the millage amount available to Charter Townships for general operations.

The Headlee Amendment was adopted in 1978 and generally limits the amount of taxes governments can levy without voter approval. Oshtemo converted from a general law township (1 mill limit) to a charter township (5 mill limit) in 1979. Oshtemo operated within the one mill limitation until 2019 when it sought to levy an additional half mill. The County refused to allow the additional levy relying on an opinion from the Attorney General from 1985. The Court of Appeals reversed the decision and determined Oshtemo was not limited to the tax rate for general law townships when Headlee was adopted.

The Headlee Amendment prohibits a local government “from levying any tax not authorized by law or charter when this section is ratified…without approval of a majority” of voters. Const 1963, art 9, § 31. In 1985, the Attorney General opined, essentially, that “any post-Headlee tax increase requires voter approval.” Slip op. at 6. But the Michigan Supreme Court later held that Headlee excluded “an increased rate of an existing tax, that was authorized by law when that section was ratified.” Id. at 6.

In this case, the five-mill tax was authorized by law when Headlee was ratified. And townships could become charter townships then as well. Oshtemo’s change from a general law township to a charter township did not create a “new” tax but merely opened the door to a tax rate “previously authorized” and “now eligible to levy.” Slip op. at 4. The Court further agreed with the Michigan Townships Association (“MTA”) that under the County’s argument whether Headlee applied would be “arbitrary.” Instead, all charter townships may levy up to five mills for operating purposes.

Who Owns—Or Abandons—A Sign Variance?

Detroit Media Group LLC v Detroit Board of Zoning Appeals, ___ Mich App ___ (September 23, 2021; Docket No 352452).

In this case, the Court of Appeals considered whether a land use is considered abandoned from the perspective of a leaseholder or a property owner, concluding that—under the local ordinance—a tenant under a lease is considered an “owner.”

In 2004, successors to Detroit Media Group (“DMG”) obtained a variance for an illuminated changeable sign on an existing building mural. The sign was used for advertisements from 2006 to 2012 but was removed by the building owner in October 2012 to accommodate building renovations. DMG was unable to reinstall the sign due to historic building preservation criteria. In early 2013, they advised the City that it had not abandoned its sign variance. DMG remained in contact with Detroit, renewed its lease for several years (ultimately to 2032), and again sought to utilize its sign after the historic building criteria were inapplicable. The City argued that DMG had abandoned its sign variance by inactivity. The ZBA initially held that DMG’s conduct was most important and found the variance was not abandoned but then reconsidered and ruled for the City that the sign had been abandoned. DMG appealed to Circuit Court which reversed the ZBA decision.

The Court of Appeals affirmed the Circuit Court, looking to the ordinance definition of owner. In its ordinance, the City provided that someone could be an owner in any of three ways, by holding: 1) legal title; 2) another beneficial interest; or 3) a contractual right to purchase. Slip op. at 9. The Court reiterated the principal that owning property “consists of various rights with each right represented as a stick” and an owner may own all or some of this “bundle of sticks.” Id. A tenant who rents a premises has beneficial enjoyment of the property under its lease. Since DMG was a beneficial owner for advertisement space and was issued the variance, it was an “owner” under the ordinance and had not abandoned the variance. Id. at 10. The Court rejected the City’s argument (about a “dominant owner”) because it was not inline with the definitions in the ordinance, which highlights the importance of each community’s unique zoning provisions and self-governance.

This case highlights the importance of local definitions and that municipalities should consider and preserve communication from landowners regarding their uses of property. The parties have sought further review from the Michigan Supreme Court; we will monitor developments.

Claims for Sewage Disposal Events – When Do They Start?

Sunrise Resort Assoc, Inc v Cheboygan County Road Comm’n, ___ Mich App ___ (December 2, 2021, Docket No 354540).

The Court of Appeals considered for the first time when a claim accrues under the sewage-disposal-system-event exception to governmental immunity, concluding that each instance of overflow causing damage was its own “event” giving rise to a new potential lawsuit.

Plaintiffs owned property through which a public storm water drainage system diverted stormwater to nearby Burt Lake. Modifications to the drainage system were implemented in mid-2010 for a bicycle path and minor damage resulted from an overflow in 2015. Plaintiffs alleged that on May 4, 2018, their property sustained serious damage from an overflow and backup of the drainage system and filed their case on February 20, 2020. Defendant argued that the applicable statute of limitations was three years (the period applicable to property damage) and therefore the claim was too old. Plaintiffs responded that they were not seeking relief for the 2015 minor damage but the 2018 event and thus they were within three years. The trial court ruled the claim started with the event in 2015 and stopped the lawsuit under the statute of limitations.

When a plaintiff’s claim starts can be at different times, but in this case, it started when the plaintiff was harmed and not when the road commission acted. The Court noted the statute of limitations starts when the claim accrues. For PA 222 claims, there must be an overflow onto real property and damages. The Court agreed that the plaintiffs’ lawsuit was “premised on a specific, discrete backup event” in May 2018 and sought “damages that occurred only on that occasion.” Slip op. at 6. Whether there was also an “event” in 2015 was irrelevant to the Court since plaintiffs only sought damages from 2018. The Court also held that governmental immunity did not stop plaintiffs from asking for an injunction to prevent future nuisance. Id. at 8-9.

This case cautions municipalities with stormwater systems or wastewater sewerage systems that different dates of damage may result in different claims and that a potential plaintiff who previously knew of the system defect or potential for damage may not automatically stop a lawsuit. The road commission has asked the Michigan Supreme Court to review this decision; we will monitor future developments.

Rezoning Decisions are Legislative Decisions

Connell v Lima Township, ___ Mich App __ (March 4, 2021, Docket No 353871)

The Court of Appeals reiterated that a rezoning decision is not an administrative decision but a legislative act. Here a 3.41 acre parcel was previously used as a factory but was then abandoned for 30 years. In 2018, the current property owner sought a conditional rezoning to light industrial. Only for the first planning commission meeting, notice was mailed to neighboring property owners. At the November meeting, the planning commission recommended the Township Board deny the conditional rezoning. The Township Board returned the rezoning application to the Planning Commission. The Commission then recommended approval of the updated site plan and conditions in June 2019. Neighbors were not mailed additional notice and the rezoning with conditions was approved. In response to requests, the Township verbally informed the plaintiffs their appeal could only be heard in Circuit Court, which plaintiffs then commenced.

In Court, the Township argued that the individual property owners failed to exhaust their administrative remedies and should have filed an appeal to the ZBA. If there is an administrative remedy—such as an appeal to the ZBA—then a plaintiff is required to seek that relief before appealing to Court. The trial court adopted the Township’s arguments.

The Court of Appeals held that there was no administrative appeal available. Although one can appeal variances, site plan review, and decisions of zoning administrators to the ZBA, it is “settled law in Michigan that the zoning and rezoning of property are legislative functions.” Slip op. at 11. Rezoning one parcel is an amendment of the zoning ordinance and a legislative act. The ZBA did not have authority to alter or change the zoning classification of property. (The Township argued they followed proper procedure and that the first mailed notice was sufficient. Unfortunately, the Court of Appeals did not rule on this point, leaving it for the trial court on remand.) The conditional rezoning was a final legislative decision; the appeal was proper in the Circuit Court.

This case reconfirms that rezoning actions are legislative decisions. Although Townships have substantial policy discretion in their legislative decisions, they can be reviewed on appeal and a Township may need to defend the Board action properly with precision and clarity.

Seemingly Administrative Decisions Might Be Appealed Directly to Circuit Court

Attitude Wellness LLC, d/b/a Lume Cannabis Co v Village of Edwardsburg, unpublished per curiam opinion of the Court of Appeals, issued November 23, 2021 (Docket No 355767).

This case involves the review of applications for recreational marihuana permits and the available avenues of appeal. Although considering these applications is more administrative than legislative, the Court of Appeals held there was no internal appeal mechanism and thus the first appeal was in the Circuit Court.

Edwardsburg adopted an ordinance allowing two recreational marihuana businesses in the village. A three-person committee would evaluate any applications and make recommendations to the Village Council. Plaintiff applied for a local license but it was not granted; they filed suit in Circuit Court.

One of the applicants that did receive a local permit, NOBO, argued that the trial court could not hear the case because the Village’s licensing decision “was an administrative decision” which must be appealed. They argued there must be an appeal filed, not a “new” lawsuit. The defendants asserted the decision to issue a local license was “quasi-judicial.” Relying on zoning cases to understand the appeal, the Court agreed that the Village’s process was an administrative action and that it was quasi-judicial.

The Court of Appeals ruled it was not a quasi-judicial proceeding. The Court noted that there was no requirement to present a case, no right to a hearing on the applications submitted, and no right to submit exhibits, among other factors. Since the Village Council merely voted on the recommendations submitted, the process was not quasi-judicial. These applications were not like land use and zoning cases, and the trial court could consider whether the local ordinance was valid. In holding that the process was not quasi-judicial, the Court did not state what it was, whether that would be legislative, administrative, or something else.

In Lima Township, the Court noted legislative decisions go straight to court. Here again, in Village of Edwardsburg, the Court again sent the decision straight to court. For different reasons, neither municipality was able to utilize their zoning boards of appeal for review and an administrative remedy. Not only should your township carefully consider its ordinance provisions, but you must also carefully consider when and how to file—or defend—decisions in Circuit Court.

Reenactment Can Protect Your Township

Rotta v City of Ludington et al., unpublished per curiam opinion of the Court of Appeals, issued October 28, 2021 (Docket No 356343).

In this case, a city corrected an OMA violation to prevent a FOIA violation and reminds municipalities of the option—and importance—of correcting procedurally improper actions.

The City of Ludington was locked in litigation with Mr. Rotta. At their November 2019 meeting, the City entered closed session to discuss a settlement of that litigation and ultimately unanimously approved settlement. There was only one problem: only four of the seven council members were present, less than the two-thirds necessary to enter a closed session under the applicable sections 7 and 8 of the OMA. At their December meeting—with six members present—the City again voted to enter closed session and again unanimously approved the settlement agreement. Plaintiff sued arguing that “‘a legitimate purpose existed for the first closed session but not a proper quorum, whereas a legitimate quorum existed for the second closed session, but not a proper purpose.’” Unpub op. at 2. Plaintiff also sought minutes from the closed meetings under FOIA—to which he might be entitled if the City was not properly in closed session.

The City admitted that the vote to enter closed session in November was improper since the required 2/3 vote was not present. Importantly, this was not intentional. The Court noted that a municipality may cure procedural defects by re-enactment of the decision, including a decision to enter closed session. The plaintiff submitted his FOIA request on December 13 which was after the City reenacted its decision to enter closed session on December 9; therefore the minutes were not disclosable under the FOIA.

Plaintiff claimed there was no longer a proper purpose because the settlement was approved. However, the City was authorized to correct the error and “there is nothing sinister about seeking to correct a prior procedural error” as permitted by statute. Id. at 5. Additionally, there was a valid concern the prior settlement vote could have been rendered invalid if not reenacted. The City properly reenacted its decisions, no violation of the OMA ultimately occurred, and also no violation of the FOIA occurred.

This case highlights that although discovering errors and correcting them procedurally may be cumbersome, the re-enactment of decisions ultimately protects the public body and serves the public with transparency.

By: Matthew Kuschel

This publication is intended for educational purposes only. This communication highlights specific areas of law and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.

 

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