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City of Huntington Woods v. City of Oak Park

Court of Appeals of Michigan

June 11, 2015

CITY OF HUNTINGTON WOODS and CITY OF PLEASANT RIDGE, Plaintiffs/Counterdefendants-Appellants,
v.
CITY OF OAK PARK, Defendant/Counterplaintiff-Appellee, and 45TH DISTRICT COURT, Defendant/Appellee

Oakland Circuit Court. LC No. 2013-135842-CZ.

For CITY OF HUNTINGTON WOODS, CITY OF PLEASANT RIDGE, Plaintiffs-Counter Defendants-Appellants: TIMOTHY J CURRIER, BLOOMFIELD HILLS, MI.

For CITY OF OAK PARK, Defendant-Counter Plaintiff-Appellee: WILLIAM P HAMPTON, TROY, MI.

For 45TH DISTRICT COURT, Defendant-Appellee: PETER H WEBSTER, TROY, MI.

Before: JANSEN, P.J., and SAWYER and FORT HOOD, JJ.

OPINION

Page 215

[311 Mich.App. 98] Per Curiam.

Plaintiffs city of Huntington Woods and city of Pleasant Ridge appeal by leave granted the trial court's order granting in

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part defendant city of Oak Park's motion for summary disposition pursuant to MCR 2.116(C)(10). Plaintiffs argue on appeal that the trial court erroneously concluded (1) that plaintiffs have a statutory duty to contribute to the costs of operating the 45th District Court, and (2) that the city of Oak Park does not have a statutory duty to disburse to plaintiffs a portion of the fees assessed against criminal defendants in 45th District Court proceedings that are allocated to funds for building improvements and retiree healthcare benefits. We affirm.

I. HISTORY OF THE DISTRICT COURT ORGANIZATION

Before July 1, 2012, the 45-B District Court served Royal Oak Township and the cities of Huntington Woods, Pleasant Ridge, and Oak Park. Effective July 1, 2012, the Legislature abolished the 45-B District Court and established in its place the 45th District Court, also serving Royal Oak Township and the cities of Huntington Woods, Pleasant Ridge, and Oak Park. [311 Mich.App. 99] MCL 600.8123(4). The 45th district is a " district of the third class," meaning that it is " a district consisting of 1 or more political subdivisions within a county and in which each political subdivision comprising the district is responsible for maintaining, financing and operating the district court within its respective political subdivision except as otherwise provided in this act." MCL 600.8103(3). In third-class districts in which the district court does not sit in each political subdivision within the district, only one-third of the specified fines and costs are to be paid to the political subdivision whose law was violated when the district court does not sit in that political subdivision. MCL 600.8379(1)(c).

Defendants maintain that the 45th District Court and its predecessor were historically underfunded, almost from the time of the 45-B District Court's inception. In 1983, the Oak Park City Council passed a resolution requesting plaintiffs to provide court facilities within each of their political subdivisions, or alternatively, to enter into an agreement with Oak Park to share the expenses of maintaining, financing, and operating the 45-B District Court, which was located within Oak Park's political subdivision. Plaintiffs did not accept either proposal.

In 1995, the Oak Park City Council discussed the 45-B District Court's plan to add a $5 charge per ticket to cover the cost of including district court retirees in Oak Park's retiree healthcare plan. The council also discussed increasing " fees" or " fines" to fund construction of a new court facility. In September 1995, the State Court Administrative Office (SCAO) issued a report detailing the inadequacies of the Oak Park court facilities. These included noncompliance with current building standards for occupancy and fire safety, and [311 Mich.App. 100] inaccessibility to the disabled of areas of the building. Oak Park created a municipal building construction capital fund to account for expenditures made to construct a new district court building. The capital fund would be funded by a $5 per ticket charge on fines levied by the 45-B District Court. Oak Park also created an internal service fund to finance medical benefits for 45-B District Court retirees. The revenues were collected through an additional $5 per ticket charge added to violation fees. In 2007, the Oak Park City Council unanimously passed a resolution to increase the per ticket levies for the building fund and the retiree healthcare fund from $5 to $10. The resolution also imposed $100 in costs on certain misdemeanor defendants, to be allocated to the building fund.

In fiscal year (FY) 2012-2013 (beginning July 1, 2012), the newly established 45th

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District Court distributed one-third of the building fund and retiree healthcare fund assessments to plaintiffs in the same manner that other costs and fines were distributed. Defendants apparently regard this distribution as an error. In October 2012, SCAO issued a report in which it found that there was no agreement in place for the distribution of fines and costs to political subdivisions other than Oak Park. The report states:

The court distributed court costs, with the exception of court costs titled as operational costs, using the method of one-third to the political subdivision whose ordinance was violated and two-thirds to the city of Oak Park during the review period. It should be noted that in fiscal year 2013, the court started distributing the operational costs using the method that was previously used for all other court costs.

The SCAO report reviewed the history of the collection of court costs, beginning in August 1995. The court [311 Mich.App. 101] used an OPCS cash code for receipting these costs. From FY 1996 to FY 2012, the entire amount of cash received under these codes was distributed to Oak Park, which allocated the distributions to the building fund and retiree healthcare fund. Beginning in May 2007, the 45-B District Court began collecting court costs on misdemeanor violations, using an OPBF cash code for receipting the funds. For FY 2007 through FY 2012, the entire amount receipted under the OPBF cash code was distributed to Oak Park. SCAO calculated the amounts of court costs collected from violations occurring in plaintiffs' political subdivisions, and distributed to Oak Park under the OPCS and OPBF codes, for the period of FY 1996 through FY 2012. The report provided more detailed breakdowns of amounts contributed to the building fund and retiree healthcare fund per fiscal year for each political subdivision.

In correspondence to Oak Park's city manager dated May 13, 2013, plaintiffs and Royal Oak Township asserted that Oak Park " knowingly received and retained certain property owned by" plaintiffs, namely " various funds including a building fund, a retiree health care fund, and a serious misdemeanor fund." Plaintiffs demanded return of the funds, and cited SCAO's accounting of $111,696.33 of Pleasant Ridge's property, and $251,021.93 of Huntington Woods's property. In response, the Oak Park City Council passed a resolution declaring that money collected by the 45th District Court and transmitted to the building fund would be used for improvements to the 45th District Court, and money collected and transmitted to the retiree healthcare fund would be used only for the costs of retiree healthcare for district court employees. Defendants did not grant plaintiffs' demand, leading to the instant litigation.

[311 Mich.App. 102] II. PROCEDURAL HISTORY

Plaintiffs alleged in their complaint that from 1996 to 2011 defendants Oak Park and the 45th District Court violated their statutory duty under MCL 600.8379 to disburse one-third of the costs and fees assessed for the building fund and the retirees' healthcare fund. Plaintiffs referred to the October 2012 SCAO report and claimed that Huntington Woods and Pleasant Ridge were entitled to reimbursement of $251,021.93 and $111,696.33, respectively, because defendants wrongfully diverted court costs to the building fund and retiree healthcare fund instead of distributing one-third of these monies to plaintiffs. Plaintiffs asserted a claim for violation of MCL 600.8379 against both defendants, and a claim for statutory conversion under MCL 600.2919a against Oak Park only. Plaintiffs also asserted a claim for breach of contract, alleging (1) that they were

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third-party beneficiaries of a contract between Oak Park and the 45th District Court, pursuant to which the court collected monies for Oak Park while acting as a trustee of funds generated from fines and costs on tickets and violations that arose in plaintiffs' political subdivisions, and (2) that the court breached its duty to tender to plaintiffs one-third of the fines and costs it owed them. Plaintiffs also asserted a claim for unjust enrichment, alleging that Oak Park retained and used for its own benefit the portion of funds to which plaintiffs were entitled.

Oak Park filed a counterclaim for declaratory relief. Oak Park asserted that all district funding units were required, pursuant to MCL 600.8104, MCL 600.8621, and MCL 600.8271, to contribute to the expenses of the district court operating within their district. Oak Park sought a declaratory judgment that plaintiffs were required to contribute to the expenses of operating the [311 Mich.App. 103] 45th District Court, and that their responsibility to do so was not limited to the amount of fines and costs allocated to Oak Park under the statutory one-third/two-thirds arrangement. Oak Park also alleged that in 2012 and 2013, the court administrator erroneously disbursed to plaintiffs a portion of the fees collected for the building fund and retiree healthcare fund. Oak Park sought a declaratory judgment that these funds were incorrectly disbursed, and an order requiring plaintiffs to reimburse Oak Park for the incorrect disbursements.

Oak Park moved for summary disposition pursuant to MCR 2.116(C)(7), (8), and (10). Oak Park asserted that the amounts collected for the building and retiree healthcare funds were fees, and therefore not subject to distribution under MCL 600.8379, which requires distribution only of imposed fines and costs. Oak Park argued that plaintiffs failed to comply with the statutory mandate of MCL 600.8271(1). Oak Park requested that the trial court declare that plaintiffs were required to share the expenses of maintaining, financing, and operating the district court in accordance with an agreement authorized by MCL 600.8104(3), or the formula set forth in MCR 8.201. Oak Park also argued that the doctrine of laches, or alternatively, the statute of limitations, barred plaintiffs from asserting their entitlement to a one-third disbursement of these fees.

In their response to Oak Park's motion, plaintiffs reviewed the funding history of the district court. In December 1974, the city of Pleasant Ridge passed a resolution approving an arrangement in which the district court would sit in Oak Park. In exchange for waiving the requirement that the court sit in Pleasant Ridge, Pleasant Ridge would receive one-third of all fines and costs assessed for offenses that originated in [311 Mich.App. 104] Pleasant Ridge. The city of Huntington Woods passed a similar resolution. Plaintiffs argued that defendants did not have the authority to collect fines and costs in excess of two-thirds of the amount collected as authorized by the resolutions. Citing SCAO's review for FYs 1996 to 2012, plaintiffs asserted that the additional court costs collected by defendants for infractions originating in the plaintiffs' cities should have been distributed to plaintiffs pursuant to the statutory formula prescribed in MCL 600.8379.

Plaintiffs also argued that Oak Park's contention that MCL 600.8104 mandated that plaintiffs help fund the 45th District Court was based on a misinterpretation of the statute. MCL 600.8104(2) states that " a district funding unit shall be responsible for maintaining, financing, and operating the court only within its political subdivision." MCL 600.8104(3) provides that " district funding units within any district may agree among themselves to share any

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or all of the expenses of maintaining . . . the district court." (Emphasis added.) Plaintiffs argued that the district court was not within their political subdivisions, and therefore, they were not responsible for the expenses set forth in this provision. They emphasized that MCL 600.8104(3) used the permissive term, " may," instead of the directive, " shall." Plaintiffs remarked that the 45th District Court never presented a budget request to plaintiffs, and if it did, they would not have approved it because their populations and governmental operations budgets were significantly smaller than Oak Park's.[1] [311 Mich.App. 105] Plaintiffs disputed Oak Park's contention that the assessments at issue were fees, and not costs or fines, and plaintiffs asserted that the assessments were subject to MCL 600.8379(1)(c).

Oak Park argued in response that the district court was underfunded by plaintiffs and Royal Oak Township, and that the court facility was " sorely inadequate." Oak Park cited its 1996 Comprehensive Annual Financial Report, which explained that the assessments beginning in 1995-1996 addressed the problems of retiree healthcare and building expenses. Oak Park reiterated that the charges for the building fund and healthcare fund were not costs, and that the charges collected were kept in segregated accounts, pursuant to generally accepted accounting practices.

Regarding plaintiffs' argument that the SCAO reports referred to the assessments as costs, Oak Park argued that the report was not intended as a legal analysis of whether the collected payments for the building and healthcare funds were fees or costs. Oak Park denied that plaintiffs' waiver of the requirement that the court sit in plaintiffs' jurisdictions relieved plaintiffs of their obligation under MCL 600.8103(3) to contribute to the expenses of operating the district court.

The 45th District Court filed a brief concurring with Oak Park's summary disposition motion and asserting its own motion for summary disposition. The 45th District Court asserted that the municipalities within the district could not agree on a means of supporting the district court, so Oak Park became the control unit because of its population size, caseload volume, and available space for court operations. The municipalities could not agree on a formula for sharing expenses [311 Mich.App. 106] and costs, and thus complied with the statutory default mechanisms MCL 600.8103, MCL 600.8104, and MCL 600.8379. However, the 45th District Court was never adequately funded. Consequently, it began assessing additional fees for building improvements and retiree healthcare to compensate for inadequate funding.

The 45th District Court cited Oak Park's annual budget for FY 2013-2014 as evidence that the court required the assessments to cover expenses and obligations not paid by plaintiffs. The 45th District Court contended that plaintiffs had not met their responsibility to appropriate their fair share toward the costs of operating the district court, leaving it to Oak Park to make up the difference. Until July 1, 2012, Oak Park's burden was offset by the portion of fines and costs distributed pursuant to MCL 600.8379(1)(c), the building and healthcare fees, and other fees, charges, or penalties. The 45th District Court argued that plaintiffs' obligations to finance, maintain, and support the district court were not limited to the

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two-thirds allocation of fines and costs pursuant to MCL 600.8379, and that the two-thirds portion attributed to each plaintiff and allocated to the court was not sufficient to cover plaintiffs' obligations to financially support court operations. The 45th District Court also argued that even if the assessed fees were subject to distribution under MCL 600.8379, plaintiffs would not be entitled to the fees because plaintiffs were historically derelict in their duties to finance court operations.

The trial court granted summary disposition to defendants pursuant to MCR 2.116(C)(10). The court concluded in its order that pursuant to " the clear language of MCL 600.8104 and MCL 600.8271(1), all political subdivisions," which includes all the parties, [311 Mich.App. 107] " are responsible for the funding of the 45th District Court." The trial court ordered plaintiffs to comply with MCL 600.8271(1) " upon receipt of a Chief Judge line item budget which shall also be in with [sic] accord with MCR 8.201(A)." The court granted Oak Park the authority to establish a fund for court building improvements. It determined that funds designated for the building fund and retiree healthcare fund were " not fines and costs subject to distribution under MCL 600.8379." The trial court indicated that its order was not final, because Oak Park's claim for the return of revenues incorrectly transferred to plaintiffs from July 1, 2012, to June 30, 2013, had not been resolved.

III. ANALYSIS

Plaintiffs argue that MCL 600.8104 indicates that when the district court serves more than one political subdivision, but sits in only one of them, the political subdivision where the court sits is responsible for the financial operation of the court. Plaintiffs contend that any obligation they have to support the 45th District Court is satisfied by the district court's retention of two-thirds of the fines and costs assessed against individuals for violations that originate in plaintiffs' political subdivisions.

We review de novo a trial court's decision on a motion for summary disposition. Mercantile Bank Mtg Co, LLC v NGPCP/BRYS Centre, LLC, 305 Mich.App. 215, 223; 852 N.W.2d 210 (2014). A motion for summary disposition pursuant to MCR 2.116(C)(10) tests the factual sufficiency of the complaint. Corley v Detroit Bd of Ed, 470 Mich. 274, 278; 681 N.W.2d 342 (2004). " When deciding a motion for summary disposition under MCR 2.116(C)(10), a court must consider the pleadings, [311 Mich.App. 108] affidavits, depositions, admissions, and other documentary evidence submitted in the light most favorable to the nonmoving party." Ernsting v Ave Maria College, 274 Mich.App. 506, 509; 736 N.W.2d 574 (2007). " Summary disposition is proper under MCR ...


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