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Clam Lake Township v. Department of Licensing and Regulatory Affairs/State Boundary Commission

Supreme Court of Michigan

July 3, 2017

CLAM LAKE TOWNSHIP and HARING CHARTER TOWNSHIP, Appellants,
v.
DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS/STATE BOUNDARY COMMISSION, TERIDEE LLC, and CITY OF CADILLAC, Appellees. TERIDEE LLC, JOHN F. KOETJE TRUST, and DELIA KOETJE TRUST, Plaintiffs-Appellees,
v.
HARING CHARTER TOWNSHIP and CLAM LAKE TOWNSHIP, Defendants-Appellants.

          Argued December 8, 2016

          SYLLABUS

         In Docket No. 151800, Clam Lake Township and Haring Charter Township (the Townships) appealed in the Wexford Circuit Court the determination of the State Boundary Commission (the Commission) that an agreement entered into under the Intergovernmental Conditional Transfer of Property by Contract Act, 1984 PA 425, MCL 124.21 et seq. (Act 425 agreement) between the Townships was invalid. The Townships entered into the agreement on May 8, 2013, and filed it with the Wexford County Clerk and the Secretary of State on June 10, 2013. The Act 425 agreement sought to transfer to Haring Charter Township an undeveloped parcel of roughly 241 acres of land in Clam Lake Township that was zoned for forest-recreational use. The agreement provided a description of the Townships' desired economic development project, including numerous minimum requirements for rezoning the property. Approximately 141 acres of the land were owned by TeriDee LLC, the John F. Koetje Trust, and the Delia Koetje Trust (collectively, TeriDee), who wished to develop the land for commercial use. To achieve this goal, TeriDee petitioned the Commission to have the land annexed by the city of Cadillac. The Commission found TeriDee's petition legally sufficient and concluded that the Townships' Act 425 agreement was invalid because it was created solely as a means to bar the annexation and not as a means of promoting economic development. The Townships appealed the decision in the circuit court, and the court, William M. Fagerman, J., upheld the Commission's determination, concluding that the Commission had the power to determine the validity of an Act 425 agreement. The Townships sought leave to appeal in the Court of Appeals, which the Court of Appeals denied in an unpublished order, entered May 26, 2015 (Docket No. 325350).

         In Docket No. 153008, as the Commission proceedings in Docket No. 151800 were ongoing, TeriDee brought an action in the Wexford Circuit Court against the Townships, seeking a declaratory judgment that the Act 425 agreement was void as against public policy because it contracted away Haring's zoning authority by obligating Haring's zoning board to rezone pursuant to the agreement. The court, William M. Fagerman, J., struck down the agreement, holding that the agreement required Haring to enact specific zoning ordinances, which was an impermissible delegation of zoning authority. The Townships appealed, and the Court of Appeals affirmed in an unpublished per curiam opinion, issued December 8, 2015 (Docket No. 324022). The Townships sought leave to appeal both cases in the Supreme Court, and the Supreme Court granted the Townships' applications. Clam Lake Twp v Dep't of Licensing & Regulatory Affairs, 499 Mich. 896, as amended 499 Mich. 949 (2016); TeriDee LLC v Haring Charter Twp, 499 Mich. 896, as amended 499 Mich. 950 (2016).

         In a unanimous opinion by Justice Viviano, the Supreme Court held:

         Because Casco Twp v State Boundary Comm, 243 Mich.App. 392 (2000), improperly concluded that MCL 124.29 authorized the State Boundary Commission to examine the validity of an Act 425 agreement, Casco Twp was overruled. When faced with an Act 425 agreement in annexation proceedings, the Commission may only review whether the agreement is "in effect." An Act 425 agreement is "in effect" if it is entered into and properly filed pursuant to MCL 124.30. The Townships' agreement met those conditions; therefore, the Commission and circuit court erred by invalidating the agreement on other grounds. Act 425 authorizes local units to provide for zoning ordinances in their conditional land transfer agreements. Because the Townships' agreement properly included such provisions, the Court of Appeals' contrary decision was reversed.

         1. Under MCL 24.306(1), a decision by the Commission will be set aside if substantial rights of the petitioner have been prejudiced because the decision or order is in violation of the Constitution or a statute, in excess of the statutory authority or jurisdiction of the agency, or affected by other substantial and material error of law. MCL 123.1011a grants the Commission jurisdiction over petitions or resolutions for annexation as provided in MCL 117.9, and MCL 117.9 tasks the Commission with determining the validity of the petition or resolution and endows it with the powers and duties it normally has when reviewing incorporation petitions. While these statutes furnish broad powers concerning annexations, none mentions Act 425 agreements or purports to grant the Commission authority over them.

         2. Act 425 provides that two or more local units may conditionally transfer property for a renewable period of not more than 50 years for the purpose of an economic development project. MCL 124.29, the only provision in Act 425 that implicates the Commission, provides that while a contract under this act is in effect, another method of annexation or transfer shall not take place for any portion of an area transferred under the contract. Therefore, all that is required to preempt an annexation petition is for the Act 425 agreement to be "in effect." Because an Act 425 agreement conditionally transfers property, it is "in effect, " or operative, when the property has been conditionally transferred. MCL 124.30 provides that a conditional transfer of property occurs when the parties enter into the contract and file the appropriate documents with the county clerk and Secretary of State. At that point, the agreement is "in effect" and preempts any other method of annexation. Act 425 does not condition preemption on a finding that the contract is otherwise valid, and it does not expressly grant to the Commission the power to determine the agreement's validity; instead, the Commission may only make an initial determination of whether the Act 425 agreement is in effect, i.e., whether the contract was entered into by the parties and filed in accordance with MCL 124.30. Casco Twp, 243 Mich.App. 392, which improperly concluded that MCL 124.29 authorized the Commission to examine the validity of an Act 425 agreement, was overruled. In this case, there was no dispute that the parties had entered into the Act 425 agreement and that it was properly filed at the time the Commission considered the annexation petition. Accordingly, the Townships' agreement was "in effect" and preempted TeriDee's annexation petition.

         3. A zoning ordinance is an "ordinance" under MCL 124.26(c). MCL 124.26(c) provides, in relevant part, that a contract under Act 425 may provide for the adoption of ordinances and their enforcement by or with the assistance of the participating local units. MCL 124.26(c) authorizes local units to bargain over the adoption of ordinances, which includes bargaining over their content and substance; i.e., it authorizes contract zoning. The Legislature can empower-and has empowered-municipalities to zone or take other action by agreement even though the agreement will bind those municipalities in the future and constrain their legislative discretion. Accordingly, MCL 124.26(c) authorized the Townships' zoning provisions.

         Circuit court judgment in Docket No. 151800 reversed; Court of Appeals judgment in Docket No. 153008 reversed; both cases remanded to the circuit court for further proceedings.

          Stephen J. Markman Justices, Brian K. Zahra Bridget M. McCormack David F. Viviano Richard H. Bernstein Joan L. Larsen Kurtis T. Wilder

          BEFORE THE ENTIRE BENCH

          OPINION

          Viviano, J.

         These consolidated cases present two issues. First, in Clam Lake Twp v Dep't of Licensing & Regulatory Affairs, we must decide whether the State Boundary Commission (Commission), when reviewing an annexation petition, has authority to determine the validity of a separate agreement entered into under the Intergovernmental Conditional Transfer of Property by Contract Act, 1984 PA 425, MCL 124.21 et seq. (Act 425 agreement). We hold that it does not. Instead, the Commission may only make the more limited determination of whether an Act 425 agreement is "in effect, " as described by the statute, in which case the agreement preempts the annexation petition.[1] The Commission here failed to properly limit its consideration of the Act 425 agreement between appellants Clam Lake Township and Haring Charter Township (Townships). Rather than asking whether the agreement was "in effect" under the statute, the Commission erred by more broadly reviewing the agreement's validity. The circuit court affirmed this determination, which we now reverse. Because we find the Townships' Act 425 agreement meets the statutory requirements for being "in effect, " it preempts the annexation petition.

         Second, in TeriDee LLC v Haring Charter Twp, we must decide whether an Act 425 agreement can include requirements that a party enact particular zoning ordinances. The plain language of MCL 124.26(c) permits these requirements. Accordingly, the Court of Appeals erred by determining that they were prohibited, and we reverse.

          I. FACTS AND PROCEDURAL HISTORY

         This case involves an undeveloped parcel of roughly 241 acres of land surrounding the interchange of M-55 and US-131 that was zoned for forest-recreational use. The land sits in Clam Lake Township. Approximately 141 acres are owned by appellees TeriDee LLC, the John F. Koetje Trust, and the Delia Koetje Trust (collectively, TeriDee), who have long wished to develop a mixed-use project on the property, including stores and other commercial entities. This would require connecting the land to sewer and water systems. To that end, in 2008, TeriDee sought approval of an Act 425 agreement[2] between appellant Clam Lake Township and appellee city of Cadillac. The agreement would have transferred the property to Cadillac's jurisdiction to facilitate its commercial development. But a voter referendum rejected the agreement.

         Undeterred, TeriDee filed a petition to have the land annexed by Cadillac in 2011. About the same time, Clam Lake Township and Haring Charter Township entered into an Act 425 agreement to transfer the land to Haring. The Commission reviewed both the annexation petition and the Act 425 agreement, which, if effective, would have preempted the petition.[3] In its decision, the Commission rejected the petition and also invalidated the Act 425 agreement, finding, among other things, that the agreement failed to define any economic development project and was instead a ploy to prevent Cadillac's annexation.

          The current round of disputes began in 2013, when the Townships learned that TeriDee was again planning to file for annexation. Cadillac, the proposed annexor, had public water and sanitary sewer services available near the proposed annexation area. In 2013, neither of the Townships could provide those services. However, that year Haring obtained financing for a new wastewater treatment plant that would enable it to extend water and sewer lines to the property. In light of this development, as well as TeriDee's impending petition, the Townships entered into an Act 425 agreement on May 8, 2013, transferring the land to Haring. The agreement was signed by the Townships and filed with the Wexford County Clerk and the Secretary of State on June 10, 2013.

         The agreement, as subsequently amended, describes the Townships' desired economic development project as having two components. First, the project would include "the construction of a mixed-use, commercial/residential development . . . in order to balance the property owners' desire for commercial use with the need to protect the interests of surrounding residential property owners[.]" Second, the project required "the provision of public wastewater services and public water supply services to the Transferred Area, so as to foster the new mixed-use, commercial/residential development . . . ." Further, the agreement provides that the forest-recreation zoning would remain in effect only until Haring could enact various zoning standards, including numerous minimum requirements. The agreement also states that the area's residential portions "shall be zoned in a Haring zoning district that is comparable" to the Township's existing zoning. The remaining property "shall be rezoned" according to the agreement's minimum requirements. The development had to comply with Haring's zoning ordinances, but "[w]here the [agreement's] regulations are more stringent, the more stringent regulations shall apply." Haring was required to make reasonable efforts to adopt these ordinances within one year.

         TeriDee subsequently filed its annexation petition. Though the petition mirrors TeriDee's 2011 attempt, the Commission this time found the petition legally sufficient. On review, the Commission concluded that the Act 425 agreement was invalid because it "was created solely as a means to bar the annexation and not as a means of promoting economic development." It cited five factual findings supporting this conclusion: (1) the economic project was "not believed by the Commission to be viable" because the Townships did not consult TeriDee, the landowner; (2) Clam Lake received no tax revenues from the agreement; (3) e-mails between Township officials indicated that the agreement was meant to prevent annexation; (4) the Commission questioned Haring's "ability to effectively and economically provide the defined public services"; and (5) the agreement's timing, shortly before TeriDee's annexation petition, suggested that it was a sham.

         The Townships appealed in the circuit court, which upheld the Commission's determination. Relying on Casco Twp v State Boundary Comm, [4] the court held that the Commission had the power to determine the validity of the agreement. The court then found that competent, material, and substantial evidence supported the Commission's determination that the agreement was an invalid sham. Next, the court found sufficient evidence supporting the Commission's decision to grant the annexation petition. The Court of Appeals denied the Townships' application for leave to appeal.

          As the Commission proceedings were ongoing, TeriDee sued the Townships, seeking a declaratory judgment that the Act 425 agreement was invalid. It argued that the agreement was a contrivance meant to block the annexation. Alternatively, it asserted that the agreement was void as against public policy because it contracted away Haring's zoning authority by obligating Haring's zoning board to rezone pursuant to the agreement. The circuit court declined to consider the first argument, finding that the Commission had primary jurisdiction over that contention. However, the court struck down the agreement based on TeriDee's alternative argument. It found that the agreement required Haring to enact specific zoning ordinances, an impermissible delegation of zoning authority.

         The Townships appealed, and the Court of Appeals affirmed.[5] It agreed that "the plain language of the agreement [improperly] contracts away Haring's zoning authority over the undeveloped property by providing how Haring must zone the property."[6] The Court of Appeals also concluded that MCL 124.26(c), part of Act 425, did not permit the parties to engage in this contract zoning.[7]

          The Townships appealed both cases in this Court. We granted leave in each, ordering that the cases be argued together.[8] Among the issues we ordered briefed in Clam Lake was

whether Casco Twp v State Boundary Comm, 243 Mich.App. 392, 399[, 622 N.W.2d 332');">622 N.W.2d 332, 335] (2000), correctly held that the State Boundary Commission (SBC) has the authority to determine the validity of an agreement made pursuant to the Intergovernmental Conditional Transfer of Property by Contract Act, 1984 PA 425, MCL 124.21 et seq. (Act 425)[.][[9]

In TeriDee LLC, two of the issues we asked the parties to address were

whether Inverness Mobile Home Community v Bedford Twp, 263 Mich.App. 241[, 687 N.W.2d 869] (2004), applies to the defendant townships' Agreement pursuant to the Intergovernmental Conditional Transfer of Property by Contract Act, 1984 PA 425, MCL 124.21 et seq. (Act 425); . . . [and] if so, whether the challenged provisions of the Act 425 Agreement were nevertheless authorized by Section 6(c) of Act 425, MCL 124.26(c)[.][[10]

         II. STANDARD OF REVIEW AND INTERPRETIVE PRINCIPLES

         Our Constitution requires that we review administrative agency decisions to determine whether they "are authorized by law."[11] The Administrative Procedures Act[12] also governs our review of the Commission's final decisions.[13] We will set aside a Commission decision "if substantial rights of the petitioner have been prejudiced because the decision or order is any of the following, " including "[i]n violation of the constitution or a statute, " "[i]n excess of the statutory authority or jurisdiction of the agency, " or "[a]ffected by other substantial and material error of law."[14] An agency's statutory interpretations are entitled to "respectful consideration, " but they "cannot conflict with the plain meaning of the statute."[15] We must also determine whether the decisions, findings, and rulings "are supported by competent, material and substantial evidence on the whole record, "[16] remaining sensitive to the deference owed to administrative expertise and not invading exclusive administrative fact-finding.[17]

         "We review de novo a trial court's determination regarding a motion for summary disposition."[18] "Summary disposition is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law."[19] Similarly, we review de novo the interpretation of statutes.[20] We interpret statutes to discern and give effect to the Legislature's intent, and in doing so we focus on the statute's text.[21] Undefined terms are presumed to have their ordinary meaning, unless they "have acquired a peculiar and appropriate meaning in the law, " in which case we accord them that meaning.[22] The statute must be considered as a whole, "reading individual words and phrases in the context of the entire legislative scheme."[23]Unambiguous statutes are enforced as written.[24]

         III. ANALYSIS

         A. ACT 425 AGREEMENTS

         We first address the scope of the Commission's power to review Act 425 agreements when considering an annexation petition.[25] The Commission, like other administrative agencies, only has the powers expressly granted to it or necessarily implied.[26] The Commission has authority over the incorporation and consolidation of local governments as well as over various alterations of those governments' boundaries.[27]With respect to the Commission's authority over annexation petitions, MCL 123.1011a grants the Commission "jurisdiction over petitions or resolutions for annexation as provided in [MCL 117.9]." That statute, in turn, tasks the Commission with "determining the validity of the petition or resolution" and endows it with the powers and duties it normally has when reviewing incorporation petitions.[28] Those powers include the ability to consider, among other things, population statistics, the need for governmental services in the incorporated area, and the general effect on the entire community.[29] While these statutes furnish "broad powers concerning annexations, "[30]none mentions Act 425 agreements or purports to grant the Commission authority over them.

         Next, we must consider whether Act 425 provides the Commission authority to review agreements created under that statute. Act 425 provides that "[t]wo or more local units may conditionally transfer property for a period of not more than 50 years for the purpose of an economic development project. A conditional transfer of property shall be controlled by a written contract agreed to by the affected local units."[31] An "economic development project" is defined, in relevant part, as the "land and existing or planned improvements suitable for use by an industrial or commercial enterprise, or housing development, or the protection of the environment, including, but not limited to, groundwater or surface water."[32]

          Local governmental units must consider various factors when entering into an Act 425 agreement, including the natural environment, population statistics, the need for and cost of government services, existing services, and the general effects of the transfer.[33]These factors are very similar to the ones the Commission must consider when reviewing proposed incorporations and annexations.[34] And like the Commission, the local units must hold public hearings on their proposed actions.[35] This indicates that, with respect to conditional land transfers under Act 425, the local units do much of the same work that the Commission does in its areas of assigned responsibility.

         Only one provision in Act 425 implicates the Commission, but it does so in a manner that circumscribes the Commission's involvement. MCL 124.29 states that "[w]hile a contract under this act is in effect, another method of annexation or transfer shall not take place for any portion of an area transferred under the contract." Thus, all that is required to preempt an annexation petition is for the Act 425 agreement to be "in effect." The ordinary meaning of "effect" is "the quality or state of being operative."[36]

          Because an Act 425 agreement conditionally transfers property, it is "in effect, " or operative, when the property has been conditionally transferred. The statute designates when this occurs: "The conditional transfer of property pursuant to a contract under this act takes place when ...


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