Larry Shears v. Douglas Bingaman

STATE OF MICHIGAN

COURT OF APPEALS

LARRY SHEARS and MARGARET FRALICK, UNPUBLISHED

August 24, 2017

Plaintiffs-Appellees,

v No. 329776

Genesee Circuit Court

DOUGLAS BINGAMAN, individually and as LC No. 14-103476-CZ

CITY OF FLINT TREASURER, DARNELL

EARLEY, individually and as CITY OF FLINT

EMERGENCY MANAGER, and CITY OF

FLINT,

Defendants-Appellants.

Before: O’BRIEN, P.J., and SERVITTO and STEPHENS, JJ.

PER CURIAM.

Douglas Bingaman (“Mr. Bingaman”), Darnell Earley (“Mr. Earley”), and the City of

Flint (“the City”) (referred to collectively as “defendants”) appeal as of right the circuit court’s

October 15, 2015 order on the parties’ motions for summary disposition, which denied in part

defendants’ motion for summary disposition. We reverse in part and remand for the entry of an

order granting summary disposition in defendants’ favor.

The named plaintiffs in this class action, Larry Shears (“Mr. Shears”) and Margaret

Fralick (“Ms. Fralick”), filed this lawsuit against defendants, challenging defendants’ decisions

to increase water and sewer rates by 35 percent and to increase a readiness-to-serve charge

effective September 16, 2011. The complaint included the following six counts:

[]COUNT I - 42.U.S.C. § 1983

VIOLATION OF MCL § 123.141(3)

69. Plaintiffs restate and reallege each and every allegation set forth in all

previous paragraphs and incorporate them by reference herein.

70. MCL § 123.141(3), required Flint, a wholesale customer of the city of

Detroit Water Supply Department, to provide water at a price equal to the actual

cost of providing water service to Plaintiffs as retail customers of Flint. This

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statutory entitlement to water at this price created a property interest for Flint’s

retail customers under the laws of the State of Michigan.

71. Flint’s practice, policy, and custom of charging and collecting from its

retail water customers increased water rates from September 16, 2011 to the end

of its wholesale Detroit water purchase contract on or about April 30, 2014, that

were in excess of the actual cost of providing the water that it purchased from the

Detroit Water Supply Department, was in violation of MCL § 123.141(3) and

deprived its retail water customers of their property interests in water charges that

comport with state law, without just compensation and without due process of

law, in violation of the Fourteenth Amendment of the United States Constitution

and Article I § 17 of the Michigan Constitution.

COUNT II - 42.U.S.C. § 1983

UNCONSTITUTIONAL DEPRIVATION OF PROPERT[Y ]WITHOUT

DUE PROCESS – VIOLATION OF FLINT CHARTER § 46-52(b)(1)

72. Plaintiffs restate and reallege each and every allegation set forth in all

previous paragraphs and incorporate them herein by reference.

73. Flint ordinance 46 – 52(b)(1) required FLINT to keep on file in Appendix

A of the Flint City Code, with the City Clerk, an authorizing resolution of the

Flint City Council, which established how its water readiness to serve charge was

calculated for its retail residential, small business, and industrial water customers

with and without remote water meters.

74. Flint’s practice, policy, and custom of collecting water readiness to serve

charges from its retail residential, small business, and industrial water customers

with and without remote water meters between September 16, 2011 and the date

hereof, is in violation of its Ordinance 46 – 52 (b)(1) and deprived its retail

residential, small business, and industrial water customers with and without

remote water meters water customers of their property interests in validly

computed/calculated water readiness to serve charges that comport with Flint

ordinances, without due process of law, or just compensation, in violation of the

Fourteenth Amendment of the United States Constitution and Article I § 17 of the

Michigan Constitution.

COUNT III - 42.U.S.C. § 1983

UNCONSTITUTIONAL DEPRIVATION OF PROPERTY WITHOUT DUE

PROCESS – VIOLATION OF FLINT CHARTER § 46 -52.1

75. Plaintiffs restate and reallege each and every allegation set forth in all

previous paragraphs and incorporate them herein by reference.

76. At all times relevant hereto Flint ordinance 46-52.1, required that water

and sewer rates be calculated and transmitted on or before April 15th to the Mayor

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and City Council for the purpose of pricing and calculating all bills for the

forthcoming 12 months, beginning July 1 of that year, thereby creating a property

interest for its retail water and sewer customers to have their water and sewer

rates calculated and collected in conformity with Flint’s ordinance 46-52.1,

created an entitlement for those retail water and sewer customers to be charged a

specific price for water and sewer services beginning July 1 of each year.

77. Flint’s practice, policy, and custom of collecting the 35% increased water

and sewer rates from its retail customers between September 16, 2011 and July 1,

2012 deprived Plaintiffs of their property interests in water and sewer charges that

were implemented in conformity with Flint ordinances, by collecting more

money, then it was legally entitled to collect, at a time not authorized by Flint

ordinance for retail water and sewer rates, without due process of law or just

compensation, in violation of the Fourteenth Amendment of the United States

Constitution and Article I § 17 of the Michigan Constitution.

COUNT IV – 42.U.S.C. § 1983

UNCONSTITUTIONAL DEPRIVATION OF PROPERTY WITHOUT DUE

PROCESS – VIOLATION OF FLINT CHARTER § 46 -52.1(b)

78. Plaintiffs restate and reallege each and every allegation set forth in all

previous paragraphs and incorporate them herein by reference.

79. At all times relevant hereto Flint ordinance 46-52.1(b) required that water

rates be limited to an 8% annual adjustment.

80.. Flint’s practice, policy, and custom of collecting the 12.5% water rate

increase from its retail customers between July 1, 2012 and the date hereof,

deprived Plaintiffs of their property interests in water rate charges that comport

with FLINT ordinances by collecting from its retail water customers more money

then it was legally entitled to collect for annual retail water increases, without due

process of law or just compensation, in violation of the Fourteenth Amendment of

the United States Constitution and Article I § 17 of the Michigan Constitution.

COUNT V

CLAIMS FOR REFUNDS OF ILLEGALLY COLLECTED INCREASED

WATER AND SEWER RATES AND INCREASED READINESS TO

SERVE CHARGES

81. Plaintiffs restate and reallege each and every allegation set forth in all

previous paragraphs and incorporate them herein by reference.

82. Flint has collected a 35 % illegal rate increase and increased readiness to

serve charge between September 16, 2011 and July 1, 2012 from customers of

Flint’s water and sewer serves department.

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83. The actual amount can be readily identified from the financial records of

Flint.

84. Flint should be ordered to refund to each and every one of its water and

sewer customers the illegal 35 % rate increase/service charge amounts that said

customers have paid to Flint between September 16, 2011 and July 1, 2012.

COUNT VI

CLAIMS FOR DECLARATORY RELIEF AND MONETARY DAMAGES

85. Plaintiffs restate and reallege each and every allegation set forth in all

previous paragraphs and incorporate them herein by reference.

86. Many of Flint’s customers have been unable or unwilling to pay the illegal

rate increases since September 16, 2011 and have had their water service

disconnected by Flint.

87. Flint should be enjoined from further disconnections based upon the

illegal rate and service charge increases.

88. Flint should be required to pay monetary damages to the customers who

have had their water service disconnected due to their inability or unwillingness to

pay the illegal water and sewer rate increases implemented on September 16,

2011.

Eventually, the parties exchanged motions for summary disposition, and defendants’

motion for summary disposition relied, in part, on their assertion that governmental immunity

barred all of plaintiffs’ claims as set forth in the complaint and quoted above. The circuit court

agreed in part, explaining, in full, as follows:

The Court agrees with Defendants that the ordinances that they clearly violated do

not create a private cause of action to recover money damages; so to the extent

that Plaintiffs have alleged claims for money damages based on ordinance

violations, this Court cannot grant relief on those claims because they do not

exist. And, as such, the Defendants are entitled to summary disposition on those

specific claims pursuant to MCR 2.116(C) (8) because they are entitled to

judgment as a matter of law.

However, to the extent that Plaintiffs’ claims against Defendant regarding

the water and sewer rates and the service charge are based on a theory of unjust

enrichment, since unjust enrichment is a valid, equitable claim, Plaintiffs have

stated a claim on which this Court may grant relief; so Defendants are not entitled

to summary disposition of any unjust enrichment claims pursuant to MCR

2.116(C) (8) because they are not entitled to judgment as a matter of law.

Because a claim of unjust enrichment is an equitable claim that sounds in

contract, not in tort, Defendants are not entitled to immunity from these claims

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under the GTLA. As such, Defendants are not entitled to summary disposition on

any claims that sound in contract under MCR 2.116(C) (7), because they are not

entitled to judgment as a matter of law.

Finally, and although it seems on the surface that charging and collecting a

thirty-five percent increase in water and sewer rates and a service charge certainly

is unjust when those charges were collected by Defendants while they were

clearly not complying with their own ordinances, the Court cannot decide the

issue of Defendants’ potential liability as a matter of law. A party’s legal

arguments concerning unjust enrichment claims have not been fully fleshed out.

In fact, Defendants have not even addressed the issue of unjust enrichment and

Plaintiffs have merely stated that they have alleged their – that claim.

After conducting its own research on unjust enrichment, it appears to the

Court that the resolution of this claim is a highly fact-intensive endeavor. As

such, the Court is not in a position to grant either party’s motion for summary

disposition under (C) (10) because the Court cannot rule as a matter of law on the

merits of Plaintiffs’ unjust enrichment claims. To the extent that Plaintiffs seek

relief for water and sewer rates and service – and the service charge under the

theory of unjust enrichment, they have stated a claim on which the Court may

grant relief. Because the claim of unjust enrichment sounds in contract, the

Defendants are not immune from this claim under the GTLA.

Finally, because unjust enrichment is a highly fact-intensive question, this

Court cannot decide Defendants’ liability as a matter of law at this point in time.

Plaintiffs’ motion for summary disposition as to liability should be denied.

Defendants’ motion for summary disposition under (C) (8) should be granted to

the extent that Plaintiffs’ claims seek money damages for violating City

ordinances. In all other respects, Defendants’ motions should be denied.

Defendants appealed as of right this decision, MCR 7.202(6)(a)(v), arguing, in pertinent

part, that summary disposition pursuant to MCR 2.116(C)(7) was appropriate with respect to all

six counts as set forth in plaintiffs’ complaint. We agree.

This Court reviews de novo the trial court’s decision on a motion for

summary disposition under MCR 2.116(C)(7). Rowland v Washtenaw Co Rd

Comm, 477 Mich 197, 202; 731 NW2d 41 (2007). A defendant is entitled to

summary disposition under MCR 2.116(C)(7) if the plaintiff’s claims are barred

because of immunity granted by law. Id. at 466. If reasonable minds could not

differ on the legal effects of the facts, it is a question of law whether

governmental immunity bars a plaintiff’s claim. Snead v John Carlo, Inc, 294

Mich App 343, 354; 813 NW2d 294 (2011).

We review de novo the applicability of governmental immunity and the

statutory exceptions to governmental immunity. Moraccini v City of Sterling Hts,

296 Mich App 387, 391; 822 NW2d 799 (2012). [Milot v Dep’t of Transp, ___

Mich App ___, ___; ___ NW2d ___ (2016); slip op at 2 (Docket No. 329728).]

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The Governmental Tort Liability Act (“GTLA”), MCL 691.1401 et seq., provides “broad

immunity from tort liability to governmental agencies whenever they are engaged in the exercise

or discharge of a governmental function . . . .” Milot, ___ Mich App at ___; slip op at 2.

Consequently, a plaintiff may only sue a governmental entity in tort if the suit falls within one of

six statutory exceptions. Id. Those exceptions include the highway exception, MCL 691.1402,

the motor-vehicle exception, MCL 691.1405, the public-building exception, MCL 691.1406, the

propriety-function exception, MCL 691.1413, the governmental-hospital exception, MCL

691.1407(4), and the sewage-disposal-system-event exception, MCL 691.1417(2) and (3).

Hannay v Dep’t of Transp, 497 Mich 45, 60 n 34; 860 NW2d 67 (2014). This Court broadly

construes the scope of governmental immunity and narrowly construes its exceptions. Milot, ___

Mich App at ___; slip op at 2.

To maintain an action against a government agency or its employees exercising a

governmental function, a plaintiff must plead in avoidance of governmental immunity. County

Road Ass’n of Mich v Governor, 287 Mich App 95, 119; 782 NW2d 784 (2010). A plaintiff does

so by asserting that a claim that fits within a statutory exception or by pleading facts that

demonstrate that the alleged wrong occurred during the exercise or discharge of a

nongovernmental function. Kendricks v Rehfield, 270 Mich App 679, 681; 716 NW2d 623

(2006). Here, as is evidenced by the quoted portion of plaintiffs’ complaint above, plaintiffs did

not plead in avoidance of governmental immunity. Indeed, it does not even appear that

governmental immunity is acknowledged in the complaint. Nevertheless, plaintiffs argue, and

the circuit court concluded, that some of or all of plaintiffs’ claims survived summary disposition

as unjust-enrichment claims. We do not agree. The phrase “unjust enrichment,” or anything

similar to that phrase, is not present in the complaint. In fact, the only mention of a “contract” is

made in reference to “Flint’s . . . wholesale Detroit water purchase contract . . . .” While it is true

that we look to the substance of a complaint rather than its form, Adams v Adams (On

Reconsideration), 276 Mich App 704, 710-711; 742 NW2d 399 (2007), we are of the view that

neither the substance nor the form of the complaint at issue here includes an unjust-enrichment

claim as argued by plaintiffs and found by the circuit court. Rather, it is quite apparent, at least

in our view, that plaintiffs’ claims constitute constitutional or tort claims based on alleged

violations of various ordinance provisions, see In re Bradley Estate, 494 Mich 367, 387; 835

NW2d 545 (2013) (providing that MCL 691.1407(1)’s reference to “tort liability,” not “tort

claim” or “tort action,” reflects the Legislature’s intent to apply governmental immunity based

“on the nature of the liability rather than the type of action pleaded”), and the circuit court

explicitly dismissed those claims:

The Court agrees with Defendants that the ordinances that they clearly

violated do not create a private cause of action to recover money damages; so to

the extent that Plaintiffs have alleged claims for money damages based on

ordinance violations, this Court cannot grant relief on those claims because they

do not exist.

Plaintiffs did not appeal that decision. We are therefore prohibited from granting any relief in

that regard. See Rohl v Leone, 258 Mich App 72, 77 n 2; 669 NW2d 579 (2003) (“[A]n appeal is

limited to the issues raised by the appellant, unless the appellee cross-appeals as provided in

MCR 7.207.”).

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Moreover, even if a claim for unjust enrichment had been properly alleged, we are not

convinced that such a claim could move forward under the facts and circumstances of this case.

Michigan caselaw is clear in that there is a “strong presumption that statutes do not create

contractual rights.” Studier v Mich Pub Sch Employees’ Retirement Bd, 472 Mich 642, 661; 698

NW2d 350 (2005). “In order for a statute to form the basis of a contract, the statutory language

must be plain and susceptible of no other reasonable construction than that the Legislature

intended to be bound to a contract.” Id. at 662 (citations and internal quotation marks omitted).

“[I]n addition to the absence of such clear and unequivocal statutory language, the circumstances

of a statute’s passage may belie an intent to contract away governmental powers.” Id. at 663

(citations and internal quotation marks omitted). These rules apply to ordinances as well.

Warren’s Station, Inc v Bronson, 241 Mich App 384, 388; 615 NW2d 769 (2000). On appeal,

plaintiffs do not attempt to overcome this “strong presumption.” Studier, 472 Mich at 661.

Rather, they seek to circumvent that presumption by arguing that various ordinance provisions

created a claim for unjust enrichment, which is an implied contractual relationship between

plaintiffs and the City of Flint. See Karaus v Bank of New York Mellon, 300 Mich App 9, 23;

831 NW2d 897 (2012) (providing that if a party satisfies the two elements of an unjust-

enrichment claim, “the law will imply a contract to prevent the unjust enrichment.”). We are

simply unaware of any authority that would support the proposition that, where an ordinance or

statutory provision does not create a contractual relationship, a party may nevertheless create one

under the guise of unjust enrichment, which sounds in equity and contract. We therefore reject

plaintiffs’ argument in this regard.

Plaintiffs’ other arguments on appeal do little to alter this conclusion. Plaintiffs argue

that defendants’ actions constitute “ultra vires misconduct,” that various bondholders have

claims against defendants, and that replevin applies. These arguments are so far removed from

the claims alleged in plaintiffs’ complaint and those addressed by the circuit court that we feel

any attempt to address them would be inappropriate. Indeed, because they have not been

adequately developed below or on appeal, we are prohibited from doing so. See Rohl, 258 Mich

App at 77 n 2. Plaintiffs also argue that this case is controlled by this Court’s decision in Trahey

v Inkster, 311 Mich App 582; 876 NW2d 582 (2015). However, Trahey supports defendants’,

not plaintiffs’, position in this case. Indeed, in that case, a case where the plaintiffs challenged

an increase in water and sewer rates as being unreasonable and constituting unjust enrichment,

this Court expressly reversed the trial court’s verdict in the plaintiffs’ favor. Id. at 598.

Specifically, it “reverse[d] the trial court’s determination regarding the rates and remand[ed] for

entry of a judgment of no cause of action in favor of the city with respect to plaintiff’s claim that

the water and sewer rates violated the Inkster Charter” and “reverse[d] the trial court’s unjust-

enrichment finding, which was predicated on the court’s erroneous evaluation of the water and

sewer rates.” Id. There is no reason why the same should not also prove true in this case.

Finally, plaintiffs’ claims in this case have, for all intents and purposes, already been

addressed and rejected by a panel of this Court in a published, and thus binding, decision. MCR

7.215(J)(1). In Kincaid v Flint, 311 Mich App 76, 82-83; 874 NW2d 193 (2015), this Court

addressed the following three issues:

(1) water and sewer rate increases that occurred . . . in September 2011 were not

authorized by defendant’s ordinances, (2) [the emergency manager] did not have

the authority to ratify [the] unauthorized increases and then further increase water

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and sewer rates in violation of the same ordinances, and (3) defendant wrongly

deposited funds from water and sewer revenue into a single pooled cash account.

This Court summarized those issues as follows: “The essence of this case is a claim that the rate

increases in September 2011 were made contrary to defendant’s Ordinances §§ 46-52.1 and 46-

57.1, and a claim that defendant had illegally pooled the monies collected for the water and

sewer funds and used them to pay general obligations . . . .” Id. at 79. This Court expressly

rejected that claim, concluding that “Plaintiffs’ argument that the increases also violated

Ordinance 46-52.1 by increasing the water rates above 8% is not supported by the language of

the ordinance,” id. at 84, and that plaintiffs’ argument “that defendant illegally commingled

funds” had “no merit,” id. at 92. The claims at issue in this case, with the exception of the newly

raised concept of unjust enrichment, are, in essence, the same, and there is nothing in the record

in this case or in Kincaid to suggest that a different outcome would be appropriate here.

Therefore, summary disposition in defendants’ favor with respect to all claims is ultimately

appropriate. The only reason a remand was deemed necessary in Kincaid was to allow the

plaintiffs an opportunity to amend their complaint; however, in this case, unlike in Kincaid, a

motion to amend the complaint has not been filed. Id. at 94-95. Consequently, there is no denial

of such a decision for this Court to evaluate.

Reversed and remanded for entry of an order granting summary disposition pursuant to

MCR 2.116(C)(7) in defendants’ favor. We do not retain jurisdiction.

/s/ Colleen A. O'Brien

/s/ Deborah A. Servitto

/s/ Cynthia Diane Stephens

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