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Cannon Township v. Rockford Public Schools

Court of Appeals of Michigan

July 14, 2015

CANNON TOWNSHIP, Plaintiff-Appellee,
v.
ROCKFORD PUBLIC SCHOOLS, Defendant-Appellant

Kent Circuit Court. LC No. 12-009768-CZ.

For CANNON TOWNSHIP, Plaintiff-Appellee: DOUGLAS W. VANESSEN, GRAND RAPIDS, MI.

For ROCKFORD PUBLIC SCHOOLS, Defendant-Appellant: CRAIG R. NOLAND, GRAND RAPIDS, MI.

Before: SERVITTO, P.J., and BECKERING and BOONSTRA, JJ.

OPINION

Page 243

[311 Mich.App. 406] Mark T. Boonstra, J.

This is a consolidated appeal involving a claim under the " sewage disposal system event" exception to the governmental tort liability act (GTLA), MCL 691.1401 et seq. In Docket No. 320683, defendant Rockford Public Schools (RPS) appeals by right the trial court's order denying RPS's motion for summary disposition, in which RPS

Page 244

had argued that plaintiff Cannon Township was not the real party in interest and had failed to plead its claims in avoidance of governmental immunity. In Docket No. 320940, RPS appeals, by leave granted,[1] that same order, seeking again a determination that the township is not the real party in interest. This Court previously consolidated these appeals.[2] For the reasons set forth below, we affirm the trial court's order denying RPS's motion for summary disposition.

[311 Mich.App. 407] I. PERTINENT FACTS AND PROCEDURAL HISTORY

Cannon Township, located in Kent County, Michigan, owns and operates a sewage water collection and transportation system (i.e., a sewer system), a portion of which is known as the " Davies line." The Davies line serves the East Rockford Middle School (part of RPS, a public school system) as well as a number of residential customers, including Robert and Pamela Mack. The middle school has a water filtration system that connects to the Davies sewer line. The filtration system, which is located in the middle school's boiler room, works by filtering water through a series of tanks and pipes to remove iron and other sediments. The " backwash" --i.e., the wastewater containing the impurities--is ultimately discharged into the Davies line during a " backwash cycle."

The parties agree that the filtration system was designed so that when the system is filtering water, the pipes connecting the system to the sewer line, which are controlled by valves, remain closed. However, during the backwash cycle, the valves are designed to automatically open so that the wastewater can be discharged into the sewer line. The backwash cycle is designed to last approximately 15 minutes, after which the valves are supposed to close. However, if a power outage occurs during a backwash cycle, the valves remain in the open position after the power is restored, resulting in a large amount of water being discharged into the sewer line. The Davies line is not designed to handle such a large discharge of water. Accordingly, when such an event occurs, the Davies line is overwhelmed, which can lead to sewage backups.

This is exactly what happened on the weekend of August 20, 2011, when a power outage occurred, causing a valve in East Rockford Middle School's water [311 Mich.App. 408] filtration system to remain open. This resulted in a prolonged backwash cycle that caused a large volume of water to be discharged into the sewer line, which eventually led to a sewage backup in the Macks' home. The sewage backup allegedly caused in excess of $90,000 in damages.

The Macks submitted a claim to their homeowner's insurance company, which immediately paid the $5,000 policy limit for the event. The Macks then sought further compensation from the township and RPS. On November 1, 2011, the township and the Macks reached a settlement whereby the township agreed to pay the Macks, through its insurer, the Michigan Municipal League Liability and Property Pool (MMLLPP), the sum of $50,000 in partial compensation for the damages they had incurred. In exchange, the Macks agreed to release the township from any future liability and to " fully assign" to the township their claim " in total, including but not limited to any and all damages in excess of the Settlement Sum and including but not limited to any and all claims against [RPS] related to" the 2011 event. The parties

Page 245

further agreed that the township would likely pursue a claim against RPS " as an assignee or subrogee of the Macks' rights," that the Macks authorized such a lawsuit by the township, and that if the township recovered more than $50,000 in damages from RPS, the excess would be remitted to the Macks.

In October 2012, the township filed suit against RPS " on its behalf and additionally as assignee and subrogee of" the Macks, seeking $90,000 in damages. Subsequently, on October 14, 2013--i.e., approximately one year after the complaint was filed--the township and its insurer, the MMLLPP, entered into an " assignment agreement," whereby the parties stipulated that [311 Mich.App. 409] the MMLLPP had previously paid $50,000 to the Macks " on behalf of [the township]" and was therefore subrogated to the Macks' rights to recover against other entities. The agreement provided that MMLLPP would " assign all of its subrogation rights and obligations" to the township in exchange for ...


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