Michigan Supreme Court Allows Detroit Public Schools to Keep Funds Collected through Unauthorized Tax Levy

The Michigan Supreme Court’s March 30, 2010 ruling in favor of the Detroit Public Schools (DPS) allows DPS to keep millions of dollars that DPS collected improperly, by continuing to charge taxpayers for a millage for three years after it expired.  Briggs Tax Service, LLC v Detroit Public Schools.

In September 1993, voters in Detroit approved a 32.25 mill school operating property tax.  As a result, DPS was authorized to levy and collect property taxes from Detroit property owners until the millage expired on June 30, 2002.  After the expiration of the millage in 2002, DPS continued to levy the tax through 2004.  Taxpayers continued to pay the tax without objection.

In 2005, Briggs Tax Service filed a claim against DPS in the Michigan Tax Tribunal seeking a refund of the unauthorized taxes levied and collected by DPS.

The underlying issue in this case was whether the claim must be dismissed due to lack of jurisdiction (failure to timely file).  Ordinarily, the time limit to file a claim for a refund in Michigan is 35 days after a final decision. MCL 205.735(3).  Briggs did not meet this deadline and the Tax Tribunal initially dismissed Plaintiff’s claim.  The Tax Tribunal then allowed Briggs to amend its petition in order to assert a claim under MCL 211.53a, which has a three year statute of limitations.  Under MCL 211.53a, in order to assert a successful claim, the taxpayer must have been assessed and paid taxes in excess of the correct amount due to either (1) a clerical error or (2) a mutual mistake of fact by the assessing officer and the taxpayer.

There was no clerical error.  The DPS intended to levy the taxes.  Thus, in order for Briggs to successfully assert a claim under MCL 211.53a, Briggs had to prove that there was a mutual mistake of fact by both the assessing officer and the taxpayer.

The Michigan Supreme Court held that although a DPS employee certified the tax levy, a DPS employee is not the same as a tax assessor. Thus, there was no mistake by the assessing officer, because the “assessor” never certified the tax.

The Michigan Supreme Court also held that any mistake was a mistake of law, rather than a mistake of fact. The validity of a tax is a legal issue, rather than a factual issue.

While we find the result of the case somewhat surprising, the Michigan Supreme Court’s decision points out the importance of reviewing tax bills carefully, and promptly objecting to any item on the tax bill that you question.

Click here to download a PDF of the Michigan Supreme Court Opinion in Briggs Tax Service, LLC v Detroit Public Schools.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Jackson v Estate of Green: The Effect of a Partition Action on a Joint Tenancy

Joint tenants hold equal and undivided interests in a parcel, with a right of survivorship. When a joint tenant dies, the deceased’s interest does not descend to heirs. Instead, the entire ownership remains in the surviving joint tenant or tenants.  This transfer occurs automatically upon the death of the joint tenant.

Michigan recognizes two types of joint tenancies:  (a) the standard form, which can be unilaterally severed; and (b) a joint tenancy with express words of survivorship in the granting instrument which cannot be unilaterally severed.

The recent Michigan Supreme Court of Jackson v Estate of Green, involved a dispute between two joint tenants, one of whom sought to partition the properties held by both joint tenants.  While the matter was pending before the Court, the joint tenant seeking a partition suddenly died.

The Michigan Supreme Court ruled that the joint tenancy at issue was a “standard joint tenancy” because the deed granting them a joint tenancy did not include express language identifying the parties as having a “joint tenancy with full rights of survivorship”.  As a result, the Court held that the joint tenancy could be severed by one of the parties without the consent of the others.  However, the Court also ruled that the severance occurred only upon a Court’s Order.  Merely filing a Complaint in Court did not sever the joint tenancy.  Therefore, the decedent’s estate had no interest in the subject property upon the decedent’s death.  Instead, the Court ruled that the title to the subject property vested in the surviving joint tenant immediately upon the other joint tenant’s death.

This case not only explains at what point in time a partition action severs a joint tenancy, but highlights the importance of using express words of survivorship in the granting instrument if the parties intend to secure their rights of survivorship.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm.

McNeil v Charlevoix County: An Exception to Michigan’s Employment At-Will Doctrine

On July 21, 2009, the Michigan Supreme Court ruled in McNeil v Charlevoix County, 2009 Mich. LEXIS 1572, that a local health agency had the authority to require employers to adhere to a more strict regulation regarding workplace smoking than was required under state law. In addition, the Court ruled that (a) the local regulation gave employees a private right of action to seek the regulation’s enforcement and prohibit employers from retaliating against the employee, and (b) the local regulation prohibited an employer from discharging, refusing to hire, or otherwise retaliating against an employee for exercising his or her rights under the regulation.

Among other arguments, the Plaintiffs contended that the regulation violated the common-law right of an employer to discharge an employee at will and, therefore, was void.  However, the Michigan Supreme Court rejected the argument, citing the well established case, Suchodolski v Michigan Consolidated Gas Co., and holding that an employer is not free to discharge an employee at will when the reason for the discharge contravenes public policy. 412 Mich 692, 695 (1982).

Michigan is an “employment-at-will” state.  This means that private sector employers can hire and fire employees for any reason, unless that reason is illegal.  Likewise, employees can quit for any reason.  Exceptions to this rule include when an employment contract exists or when the reason for discharge is against public policy, as was the case in McNeil v Charlevoix County.

Michigan is not one of the thirty states that has adopted smoker’s rights laws.  Therefore, while most Michigan private sector employers may be permitted to hire or fire an employee based on their smoking habits, a regulation like the one highlighted in this recent Michigan Supreme Court decision provide employees who smoke certain rights even in the at-will employment setting under the public policy exception to the Michigan at-will employment doctrine.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm. Click here to view her professional resume.

Shortening the Time Period for Discharged Employees to Bring Suit

Employees normally have three years to file a lawsuit for discrimination under Michigan law.  The Statute of Limitations for a breach of contract case is six years.  However, Michigan courts will uphold agreements to shorten the period of limitations for employment disputes.  A recent Michigan Supreme Court opinion held that an agreement to shorten the period of limitations will be enforced unless the agreement violates law or public policy.  Consequently, employers may wish to shorten their period of exposure to lawsuits by shortening the limitations period for disputes arising out of the employment context.  The Courts have approved shortening the Statute of Limitations period to as little as six months.

Employers should consider inserting a provision for a shortened limitations period in all employment agreements.  This can also be accomplished by adding the necessary language to the employment application or an employee handbook.  Employers will then be able to dismiss more claims as untimely at the pleading stage and ultimately save the business significant litigation expenses.