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Northland Center Michigan, LLC v. City of Southfield

United States District Court, E.D. Michigan, Southern Division

April 28, 2017




         This matter is before the Court on defendant's motion for summary judgment [docket entry 23]. This matter is fully briefed, so the Court, under E.D. Mich. LR 7.1(f)(2), will dispense with a hearing.

         The following facts are summarized from the parties' briefs; where there is disagreement, the Court views the facts in the light most favorable to plaintiff.

         From December 2008 to September 2014, plaintiff operated the Northland Center Mall in Southfield, Michigan. Several business leased space in the mall. Water services were provided by the South Oakland County Water Authority (“SOCWA”), which delivered water via two main entry points-the north and south mains. SOCWA, after reading its meters, would bill defendant, who, relying on SOCWA's meter readings, would in turn bill plaintiff. Plaintiff, after reading its internal mall meters, would then bill its individual tenants.

         Four problems arose under this billing procedure: First, in addition to billing plaintiff for all mall properties combined, defendant also directly billed two of plaintiff's tenants-Wendy's and CSL Plasma. The water delivered to Wendy's and CSL Plasma was not counted twice because defendant agreed to subtract their charges from plaintiff's bill. Nevertheless, plaintiff's alleges its water bill was too high. Second, defendant allegedly operated an improper “flow-through” on the mall property. That is, defendant did not use its own pipe network to deliver water to Wendy's and CSL Plasma-its own customers-but plaintiff's pipe network, and specifically the north water main. Third, in 2011, a leak in the structurally-unsound north main caused water to gush directly into the storm sewer for several days. Fourth, plaintiff alleges that from 2009 to the present, defendant systematically neglected to maintain the mall's water system, which resulted in “substantial water losses” for which plaintiff was unjustly charged. Pl.'s Br. p. 8.

         By early 2014, the Northland mall was financially failing. In May 2014, its chief lender, 21500 Northwestern High Holdings, LLC, filed a complaint in Oakland County Circuit Court, requesting that a receiver be appointed. The state court did so in September 2014.

         In September 2015, the receiver sold the mall property to defendant for $2.4 million. The Purchase Agreement, Section 12, Prorations and Adjustments, stated:

(b) Electricity, gas, and telephone charges based, to the extent practicable, on final meter readings and final invoices, with Seller paying those amounts which accrued and/or are attributable to the period prior to or on the date of Closing. At Closing Purchaser shall be entitled to a credit against the Purchase Price in an amount equal to the then outstanding water and sewer charges against the Real Property, which Purchaser and Seller acknowledge and agree, for the purposes of this Agreement and this Closing, total $699, 138.83 as of September 28, 2014 and total $151, 978.90 from September 29, 2014 through August 31, 2015. Seller acknowledges and agrees the credit against the Purchase Price at Closing shall be in the sum of the above amounts plus the outstanding water and sewer charges against the Real Property as of the date of Closing. Purchaser will take title to the Real Property subject to such outstanding charges.

         On October 8, 2015, the state court entered an order approving and confirming the sale of the mall property. On October 30, 2015, plaintiff filed the instant complaint, alleging that Southfield, due to the flow-through, leakage, and negligent repair, systematically overcharged plaintiff for years. The complaint has three counts: Count I, declaratory judgment that defendant overcharged plaintiff and, thus, is not entitled to the full credit it received on the sale of the mall property; Count II, defendant has been unjustly enriched “by virtue of overpayments”; and Count III, an equitable accounting, which defendant must prepare at its sole expense, that details the alleged overcharges dating back to January 2009. In February 2017, defendant filed the instant summary judgment motion.

         I. ANALYSIS

         a. Res judicata, collateral estoppel, laches, and equitable estoppel

         Defendant argues that this action is barred by res judicata, collateral estoppel, laches, and equitable estoppel. Plaintiff responds that these doctrines are inapplicable. The Court agrees. Res judicata does not apply because this cause of action is different from the cause of action in the state court case. Collateral estoppel does not apply because the overpayment issue was not previously litigated, nor is it clear that it was essential to the judgment. Laches does not apply because defendant was not prejudiced by plaintiff's alleged delay. And equitable estoppel is inapplicable because there is no statute of limitations challenge here.

         Res judicata “bars the reinstitution of the same cause of action by the same parties in a subsequent suit.” Topps-Toeller, Inc. v Lansing, 209 N.W.2d 843, 847 (Mich. Ct. App. 1973). Here, the original judgment was a state court order confirming the receiver's sale of the mall property to defendant, whereas the current action is a suit by plaintiff for monetary damages because defendant allegedly miscalculated plaintiff's water bill. These causes of action, while related, are not the same, so the doctrine of res judicata does not apply. The Court now turns to collateral estoppel.

         Collateral estoppel “bars the relitigation of issues previously decided when such issues are raised in a subsequent suit by the same parties based upon a different cause of action.” Id. The Michigan Court of Appeals recently summarized the doctrine as follows:

Generally, application of collateral estoppel requires (1) that a question of fact essential to the judgment was actually litigated and determined by a valid and final judgment, (2) that the same parties had a full and fair opportunity to litigate the issue, and (3) mutuality of estoppel.
In the subsequent action, the ultimate issue to be concluded must be the same as that involved in the first action. The issues must be identical, and not merely similar. In addition, the common ultimate issues must have been both actually and necessarily litigated.
To be actually litigated, a question must be put into issue by the pleadings, submitted to the trier of fact, and determined by the trier. The parties must have had a full and fair opportunity to litigate the issues in the first action.
For collateral estoppel to apply, the parties in the second action must be the same as or privy to the parties in the first action. A party is one who was directly interested in the subject matter and had a right to defend or to control the proceedings and to appeal from the judgment, while a privy is one who, after the judgment, has an interest in the matter ...

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