Milford Hills Properties Inc v. Charter Township of Milford

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

MILFORD HILLS PROPERTIES, INC., and RPL UNPUBLISHED

OF MICHIGAN, INC., September 2, 2021

Plaintiffs-Appellees,

v Nos. 353249; 353489

Oakland Circuit Court

CHARTER TOWNSHIP OF MILFORD, LC No. 2017-162642-CZ

Defendant-Appellant.

Before: LETICA, P.J., and SERVITTO and M. J. KELLY, JJ.

PER CURIAM.

These consolidated cases arise from a zoning dispute. In Docket No. 353249, defendant,

the Charter Township of Milford, appeals as of right the circuit court’s opinion and order denying

its motion for summary disposition insofar as defendant claimed governmental immunity in

response to tort claims brought by plaintiffs, who are real estate developers frustrated at

defendant’s refusal to rezone certain property to accommodate their aspirations. In Docket No.

353489, defendant appeals that same order by leave granted1 insofar as it denied defendant’s

motions for summary disposition in connection with plaintiffs’ non-tort claims and also

defendant’s invocation of an arbitration agreement. We affirm the trial court’s determination that

defendant has not shown that the arbitration agreement should be enforced, but reverse the court’s

denial of summary disposition in connection with all of plaintiffs’ claims.

I. FACTS

In or about 2002, defendant agreed to support plaintiffs’ construction of a wastewater

treatment plant in connection with plaintiffs’ development of certain property. Plaintiffs sought

approval of a plant with a capacity of 50,000 gallons per day, but defendant insisted on a capacity

of 70,000 gallons per day. Plaintiffs agreed to construct a plant with the larger capacity on the

1

Milford Hills Props Inc v Charter Twp of Milford, unpublished order of the Court of Appeals,

entered July 9, 2020 (Docket No. 353489).

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condition that they retain the right to use the anticipated excess of 20,000 gallons per day for the

future development of property located on the west side of Milford Road. The parties entered into

an agreement that stated that “the Township shall be obligated to use its ‘best efforts’ to

expeditiously provide approval of all plans, paperwork, permits or otherwise to effectuate this

Agreement.”

In 2017, plaintiffs began the process of developing the property on the west side of Milford

Road. They applied to defendant’s planning commission to conditionally rezone the property to

allow the construction of a development of a density that far exceeded the current zoning.

Ultimately, the planning commission recommended that the request be denied, and defendant

adopted that recommendation.

The trial court’s order engendering these appeals noted the following particulars:

The parcels that make up the subject property are zoned for Restricted Office and

Suburban Residential. Current zoning allows for the development of 22 homes and

340,000 square feet of offices and necessary parking. Plaintiffs sought conditional

rezoning of the subject property to build a single-family residential development.

The initial plan presented by Plaintiffs was to build 178 homes. Plaintiffs reduced

the number of homes in subsequent presentations. Following the denial by the

[zoning board of appeals], Plaintiffs filed an Appeal (which was voluntarily

dismissed) and the instant action.

Plaintiffs’ complaint made issue of their rights to use any of their wastewater treatment

plant’s excess capacity in connection with development of real property they acquired, which they

described as follows: “By the early part of 2017, the Plaintiffs had obtained ownership of or

development rights over nine (9) parcels of land consisting of over 66 acres situated in the Charter

Township of Milford, . . . and generally located west of Milford Road . . . .” Plaintiffs further

reported that “[a] portion of the Property is currently being utilized for a single-family home, with

the remainder being vacant land.”

Plaintiffs set forth claims of breach of contract (Count I), promissory estoppel (Count II),

taking without just compensation regarding the water-treatment plant (Count III) and the property

(Count V), denial of substantive due process regarding the plant (Count IV) and the property

(Count VI), tortious interference with prospective economic advantages (Count VII), fraudulent

misrepresentation (Count VIII), and innocent misrepresentation (Count IX). Plaintiffs based their

contract claim on the parties’ June 5, 2003 Working/Development Agreement for Operation of

Community Sewer System (“capacity agreement”). That agreement recites that the parties earlier

“entered into an ‘Agreement to Assume Responsibility for Operation of Community Sewer

System,’ ” the provisions of which are not here at issue.

On February 15, 2019, defendant filed a motion for summary disposition, seeking dismissal

of the contract and promissory estoppel claims on the grounds that plaintiff “failed to establish a

contract or promise to rezone the subject property,” seeking dismissal of the tort claims “on

grounds of governmental immunity,” citing MCL 691.1407, and seeking dismissal of the

constitutional claims “because there is no genuine issue of material fact that Defendant’s zoning

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was not unreasonable, nor did it amount to a taking of Plaintiffs’ Property.” Proceedings were

then stayed in deference to facilitation, which was not successful.

On December 18, 2019, plaintiffs filed a motion for summary disposition of Counts I

through IV of their complaint on the ground that “there is no genuine issue as to any material fact

sufficient for trial.” Defendant followed with a second motion for summary disposition, in which

it stated that “[i]n addition to the reasons set forth in Defendant’s Motion for Summary Disposition,

Defendants are entitled to dismissal of Plaintiffs’ claims based on the arbitration language in the

Capacity Agreement.” After a hearing on the motions, the trial court issued an order stating that

“neither party is entitled to summary disposition,” because “[t]here are numerous genuine issues

of material fact and Defendant has not shown that the arbitration agreement should be enforced

under the facts presented.” The court did not expressly address the issue of governmental

immunity.

These appeals followed.

II. GOVERNMENTAL IMMUNITY

MCR 2.116(C)(7) authorizes motions for summary disposition premised upon “immunity

granted by law . . . .” This Court reviews a trial court’s decision on a motion for summary

disposition de novo as a question of law. Ford Credit Int’l, Inc v Dep’t of Treasury, 270 Mich

App 530, 534; 716 NW2d 593 (2006). A motion for summary disposition based on governmental

immunity is decided by examining all documentary evidence submitted by the parties, accepting

all well-pleaded allegations as true, and construing all evidence and pleadings in the light most

favorable to the nonmoving party. Tarlea v Crabtree, 263 Mich App 80, 87; 687 NW2d 333

(2004).

Under the governmental tort liability act, MCL 691.1401 et seq., governmental agencies

are immune from tort liability for actions taken in furtherance of governmental functions, with

limited, specific exceptions. MCL 691.1407(1). “[T]he immunity conferred upon governmental

agencies is broad, and the statutory exceptions thereto are to be narrowly construed.” Nawrocki v

Macomb Co Rd Comm, 463 Mich 143, 158; 615 NW2d 702 (2000) (emphasis in original). “A

plaintiff filing suit against a governmental agency must initially plead his claims in avoidance of

governmental immunity.” Odom v Wayne Co, 482 Mich 459, 478-479; 760 NW2d 217 (2008).

A “governmental agency” for this purpose includes “this state or a political subdivision.”

MCL 691.1401(a). A “political subdivision” includes a municipal corporation. MCL 691.1401(e).

“ ‘Municipal corporation’ means a city, village, or township or a combination of 2 or more of these

when acting jointly.” MCL 691.1401(d). A “governmental function” is “an activity that is

expressly or impliedly mandated or authorized by constitution, statute, local charter or ordinance,

or other law.” MCL 691.1401(b). In this case, there is no dispute that defendant is a municipal

corporation, or that its actions underlying this litigation were in furtherance of a governmental

function. Even so, this issue has produced some unusual procedural history.

Two months after defendant claimed the appeal in connection with the governmental

immunity issue, plaintiffs filed a motion in this Court to dismiss the appeal for mootness,

explaining that, “[d]espite believing the tort claims to have merit, Plaintiffs/Appellees offered to

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dismiss the three tort claims with prejudice to streamline the issues for trial and to avoid appeal,

and filed a motion for voluntary dismissal,” but that defendant objected, and the trial court ordered

a stay of proceedings “before the motion to dismiss was heard.”

Plaintiffs’ motion below, a copy of which plaintiffs provided to this Court, stated that

“plaintiffs have determined that it is the best interest of justice to dismiss the claims set forth in

counts VII, VIII, and IX, which are based on State tort theory, as the defendant is likely to prevail

under the theory of governmental immunity pertaining to these claims only.” Defendant’s

response in opposition to the motion below correctly stated that the trial court lacked jurisdiction

to act on the motion while the claim of appeal was pending, see MCR 2.614(D), and, alternatively,

that, “[h]aving litigated this matter through discovery, briefing and a hearing on a motion for

summary disposition . . . , [the trial court’s] issuance of a decision, and the filing of an appeal,”

defendant “is entitled to a final decision that will provide full res judicata effect—that is, that can

be used as the basis of issue and claim preclusion.” In answering the motion that plaintiffs filed

in this Court, defendant stated that it “is entitled to proceed with its meritorious appeal of three tort

claims and to a ruling from this Court reversing the trial court decision and to the full law of the

case/collateral estoppel effect of any such ruling.”

This Court denied plaintiffs’ motion to dismiss “for failure to persuade the Court at this

time that the appeal is moot.” Milford Hills Props Inc v Charter Twp of Milford, unpublished

order of the Court of Appeals, entered July 1, 2020 (Docket No. 353249).

Having failed to achieve speedy dismissal of the tort claims below, or of the claim of appeal

involving them in this Court, plaintiffs do not now offer searching argument in opposition to

defendant’s claim of governmental tort immunity, but instead tacitly ask this Court to eschew

deciding the issue on its merits while explicitly asking this Court to remand this case to the trial

court in order that plaintiffs might move the court to allow them to amend their complaint in hopes

of salvaging their tort claims. Plaintiffs explain as follows:

While Appellee could have moved to amend its complaint before or after

the denial of summary disposition, Appellee chose not to do so in an effort to

proceed to [trial] at once. Now, however, given the delay caused by this appeal, . .

. and the lengthy delay resulting from the unforeseeable COVID 19 pandemic, there

remains no financial incentive for Appellee to now abandon these claims. Appellee

should be given the opportunity to amend its complaint in the interest of justice

given the information uncovered during discovery.

We note that plaintiffs on appeal do not expressly disclaim the concession they offered below, and

also with an exhibit attached to their motion to dismiss in this Court, that “defendant is likely to

prevail under the theory of governmental immunity pertaining to [the tort] claims,” but do appear

to recognize that they require other avenues in order to maintain those theories of recovery,

explaining that they now wish to “add claims and parties,” asserting that “[t]here is ample evidence

of intentional misconduct, gross negligence, and bad faith dealing on the part of several

Appellant’s employees and officers, which avoids the doctrine of governmental immunity.”

We decline to express any opinions about the propriety or merits of plaintiffs’ plans to

amend their complaint in furtherance of their tort theories, because there has been no such decision

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below for this Court to review. The issue in this claim of appeal remains whether the trial court

erred when it denied defendant’s motion for summary disposition of the tort claims insofar as it

was predicated on governmental immunity. We conclude that it did err.

As noted, the trial court denied the parties’ cross-motions for summary disposition on the

ground that “[t]here are numerous genuine issues of material fact,” and did so with no elaboration

or differentiation of issues or defenses. We think it apparent that the court simply overlooked the

immunity issue.

Plaintiffs’ complaint neither cited the governmental tort liability act nor otherwise

mentioned immunity. Nor did plaintiffs plead facts in connection with its tort theories in terms

that clearly implicated one of the statutory exceptions to governmental immunity. 2 Defendant’s

answer to the complaint was accompanied by a list of affirmative defenses, in which defendant

invoked governmental immunity in connection with the claims of tortious interference and

fraudulent or negligent misrepresentation. In their response to defendant’s affirmative defenses,

plaintiffs stated in connection with each of defendant’s invocations of immunity only that “[t]he

allegations contained in [the pertinent paragraph] are denied as untrue for the reasons set forth in

Plaintiffs’ Complaint.” Those vague denials, at best, are invitations to study the complaint

generally while trying to glean from it information that might be applicable to a statutory

exception. We decline the invitation. See McIntosh v McIntosh, 282 Mich App 471, 485; 768

NW2d 325 (2009) (“This Court will not search the record for factual support for a party’s claim.”).

As noted, defendant filed its first motion for summary disposition on February 15, 2019,

which sought dismissal of the tort claims on the basis of governmental immunity. Proceedings

were then stayed in deference to ongoing facilitation. Plaintiffs did not file their brief in opposition

to defendant’s motion for summary disposition, and in support of their own motion for partial

summary disposition, until December 18, 2019, after the stay had expired, thus 10 months after

defendant filed its motion. In that brief, plaintiffs presented argument relating to contract law,

promissory estoppel, takings, and substantive due process, but made no mention of defendant’s

invocation of governmental immunity in connection with the claims of tortious interference with

a business expectancy, or fraudulent or innocent misrepresentation. Further, plaintiffs cited MCR

2.116(C)(8) (failure to state a claim), (C)(10) (no question of material fact), and (I)(2) (party

opposing summary disposition entitled to judgment), but not (C)(7) (“immunity granted by law”).

As noted, defendant soon followed with its second motion for summary disposition, which

effectively incorporated by reference its earlier one without repeating its particulars, thus including

its claim of governmental immunity, and added an alternative request to refer the matter to

arbitration.

2

“The statutory exceptions to the governmental immunity provided to the state and its agencies

are the highway exception, MCL 691.1402; the motor-vehicle exception, MCL 691.1405; the

public-building exception, MCL 691.1406; the proprietary-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).” Odom, 482 Mich at 478 n 62.

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The perfunctory hearing on the cross-motions for summary disposition included no

discussion of governmental immunity, and the written order that followed did not mention

immunity beyond acknowledging in passing that defendants had invoked MCR 2.116(C)(7), along

with (C)(8) and (C)(10).

Despite the trial court’s failure to indicate whether it offered the issue any serious or distinct

consideration, we, in the interests of judicial economy, choose to proceed to decision de novo of

the immunity question. We conclude that the trial court erred by failing to recognize defendant’s

immunity with respect to plaintiffs’ tort claims.

Again, the statutory grant of governmental immunity is broad, and exceptions are to be

construed narrowly. Nawrocki, 463 Mich at 158. And a plaintiff filing suit against a governmental

agency must plead in avoidance of governmental immunity. Odom, 482 Mich at 478-479. As

noted, plaintiffs made no effort to plead in avoidance of governmental immunity below, and even

acknowledged in a document submitted to this Court that “defendant is likely to prevail under the

theory of governmental immunity.” For these reasons, we reverse the result below as regards

defendant’s claim of appeal, and remand this case to the trial court with instructions to grant

defendant summary disposition in connection with plaintiffs’ tort claims for tortious interference

with prospective economic advantages (Count VII), fraudulent misrepresentation (Count VIII),

and innocent misrepresentation (Count IX).

III. NON-TORT CLAIMS

Defendant argues that the trial court also erred by failing to grant its motion for summary

disposition in connection with plaintiffs’ non-tort claims.3 We agree.

When reviewing an order of summary disposition under MCR 2.116(C)(10), this Court

examines all documentary evidence in the light most favorable to the nonmoving party to

determine whether there exists a genuine issue of material fact. Ardt v Titan Ins Co, 233 Mich

App 685, 688; 593 NW2d 215 (1999). “A motion for summary disposition under MCR

2.116(C)(8) tests the legal sufficiency of a claim by the pleadings alone.” Smith v Stolberg, 231

Mich App 256, 258; 586 NW2d 103 (1998). In reviewing a (C)(8) motion, this Court accepts as

true all factual allegations supporting the claim “to determine whether the claim is so clearly

unenforceable as a matter of law that no factual development could establish the claim and justify

recovery.” Id.

3

Plaintiffs’ responsive briefing on appeal includes much advocacy of the merits of their positions

below, and concludes by asking this Court to “either grant summary disposition in favor of

Plaintiffs-Appellees pursuant to MCR 2.116(I)(2), or remand this matter in its entirety for trial.”

But as defendant points out, plaintiffs did not file a cross-appeal, and thus are not entitled to ask

for any change in the results below. See ABATE v Pub Serv Comm, 192 Mich App 19, 24; 480

NW2d 585 (1991) (“an appellee that has not sought to cross appeal cannot obtain a decision more

favorable than was rendered by the lower tribunal”). We thus look upon plaintiffs’ arguments

about the merits of their positions simply as defending the trial court’s decision to deny defendant’s

motion for summary disposition.

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A. CONTRACT

Plaintiffs based their contract claim on language in the parties’ capacity agreement calling

on defendant to use its best efforts to effectuate the agreement, including expeditiously approving

attendant plans, paperwork, and permits. Plaintiffs thus rely on ¶ 3 of the agreement:

It is agreed that the parties shall cooperate and use their “best efforts” to

effectuate the terms and provisions of the Agreement to Assume Responsibility and

this Addendum. This includes, but is not limited to, the obligation on the part of

the Developer to use its “best efforts” to complete the Community Sewer System

and senior citizen portion of the Development in an expeditious fashion. Likewise,

[defendant] shall be obligated to use its “best efforts” to expeditiously provide

approval of all plans, paperwork, permits or otherwise to effectuate this Agreement

and the Agreement to Assume Responsibility. This includes using its best efforts

to cooperate with the Oakland County Road Commission or others in the granting

of any easements necessary to effectuate the Agreement to Assume Responsibility

or this Working/Development Agreement for Operation of Community Sewer

System.

This provision says nothing about rezoning, and plaintiffs do not suggest that any part of the

capacity agreement expressly addresses that subject.

The reservation of the right to use any excess capacity includes no express or implied

guarantee that defendant would take whatever legislative action might be needed to accommodate

any plan plaintiffs might devise for taking advantage of their excess capacity. Instead, this

agreement called for “best efforts” to effectuate only specified goals—plaintiffs’ building a

wastewater treatment plant and reserving the rights to use any excess capacity.

Further, defendant cites plausible authority for the proposition that it is doubtful whether

an agreement to rezone property or approve a future development plan would have been

enforceable, on the ground that a governmental entity may not contract in derogation of its

legislative authority. See Essexville v Carrollton Concrete Mix, Inc, 259 Mich App 257, 265; 673

NW2d 815 (2003) (“The power to zone and rezone property is a legislative function.”); Harbor

Land Co v Grosse Ile Twp, 22 Mich App 192, 205 n 4; 177 NW2d 176 (1970) (“The true test is

whether the contract itself deprives a governing body, or its successor, of a discretion which public

policy demands should be left unimpaired.” (Quotation marks and citation omitted.)); Sun

Communities v Leroy Twp, 241 Mich App 665, 669; 617 NW2d 42 (2000) (“it is settled law in

Michigan that the zoning and rezoning of property are legislative functions”); AFT Mich v

Michigan, 303 Mich App 651, 663; 846 NW2d 583 (2014) (“one legislature cannot bind the power

of a successive legislature”), aff’d 497 Mich 197 (2015).

Moreover, our Supreme Court has reiterated that “an agreement to agree is not enforceable

where the document or contract that the parties agree to make is to contain any material term that

is not already agreed on.” LaFontaine Saline, Inc v Chrysler Group, LLC, 496 Mich 26, 37; 852

NW2d 78 (2014) (quotation marks and citation omitted). In this case, plaintiffs argue that the

capacity agreement includes defendant’s agreement to agree in the future to new zoning

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particulars. However, neither the capacity agreement itself, nor anything else in the record,

suggests that the parties had arrived at an understanding.

For these reasons, we conclude that the capacity agreement on its face did not obligate

defendant to rezone the subject property to accommodate plaintiffs’ development aspirations, and,

alternatively, that any such promise would have been unenforceable as an attempt to constrain

defendant’s future legislative prerogatives. Accordingly, the trial court erred by failing to grant

defendant summary disposition of plaintiffs’ contract claim.

B. PROMISSORY ESTOPPEL

The elements of promissory estoppel consist of

(1) a promise, (2) that the promisor should reasonably have expected to induce

action of a definite and substantial character on the part of the promisee, (3) which

in fact produced reliance or forbearance of that nature, and (4) in circumstances

such that the promise must be enforced if injustice is to be avoided. [Ardt, 233

Mich App at 692 (quotation marks and citation omitted).]

The doctrine should be applied cautiously, and “only where the facts are unquestionable and the

wrong to be prevented undoubted.” Novak v Nationwide Mut Ins Co, 235 Mich App 675, 687; 599

NW2d 546 (1999).

As the elements plainly indicate, promissory estoppel comes into play in situations that

approach, but do not perfectly achieve, contract formation. Accordingly, that doctrine does not

operate in controversies arising from a written contract. “ ‘Promissory estoppel is not a doctrine

designed to give a party to a negotiated commercial bargain a second bite at the apple in the event

it fails to prove breach of contract.’ ” Gen Aviation, Inc v Cessna Aircraft Co, 915 F2d 1038, 1042

(CA 6, 1990), quoting Walker v KFC Corp, 728 F2d 1215, 1220 (CA 9, 1984). See also Isle Grill

Corp v Detroit, 256 Mich App 463, 478; 666 NW2d 271 (2003) (“a contract will be implied only

if there is no express contract covering the same subject matter”) (concerning unjust enrichment).

In this case, the parties disagree over certain terms of their capacity agreement, but do not

dispute that it constitutes a legally binding contract between them. Further, plaintiffs do not allege

that some alternate set of negotiations, considerations, understandings, or circumstances shadowed

those that culminated in the written capacity agreement, let alone that such unwritten machinations

constituted an understanding entirely apart from what the capacity agreement covered. It would

thus be an incautious extension of the doctrine of promissory estoppel to allow it to impose

obligations on defendant apart from the provisions of the parties’ written contract. Accordingly,

the trial court erred by failing to grant defendant summary disposition of plaintiffs’ promissory

estoppel claim.

C. TAKINGS

In their complaint, plaintiffs alleged that defendant, “[b]y failing to approve Plaintiffs’

project on the Property, . . . has effected a complete denial of Plaintiffs’ reasonable use of the

excess capacity” of the wastewater treatment plant, thus “an unconstitutional taking of the excess

capacity available at the Plant without due compensation.” Plaintiffs additionally alleged that

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defendant’s “refusal to approve Plaintiffs’ request for conditional rezoning has resulted in

Plaintiffs being deprived of any viable economical use” of the subject real property.

Both the United States and Michigan Constitutions prohibit the taking of private property

for public purposes without due process and just compensation. US Const, Ams V and XIV, § 1;

Const 1963, art 1, § 17 and art 10, § 2. “ ‘[T]he Fifth Amendment is violated when land-use

regulation ‘does not substantially advance legitimate state interests or denies an owner

economically viable use of his land.’ ” Lucas v South Carolina Coastal Council, 505 US 1003,

1016; 112 S Ct 2886; 120 L Ed 2d 798 (1992) (emphasis added), quoting Agins v City of Tiburon,

447 US 255, 260; 100 S Ct 2138; 65 L Ed 2d 106 (1980). In other words, “when the owner of real

property has been called upon to sacrifice all economically beneficial uses in the name of the

common good, that is, to leave his property economically idle, he has suffered a taking.” Lucas,

505 US at 1019. Accordingly, “total regulatory takings must be compensated.” Id. at 1026.

In this case, the parties dispute the extent to which defendant’s refusal to rezone the subject

property has deprived plaintiffs economic value in that property or their right to use any of the

wastewater treatment plant’s excess capacity, and presumably those were among the “numerous

genuine issues of material fact” causing the trial court to decide that summary disposition was not

appropriate. Regardless, the court overlooked a purely legal basis for dismissal of the takings

claims.

An exception to the requirement that the government compensate a property owner for a

regulatory taking is when the regulation at issue simply mirrors a limitation on the use of the land

that already existed under applicable property law or nuisance doctrine at the time the property

was acquired. Lucas, 505 US at 1029-1031. “Where the State seeks to sustain regulation that

deprives land of all economically beneficial use, . . . it may resist compensation only if the logically

antecedent inquiry into the nature of the owner’s estate shows that the proscribed use interests

were not part of his title to begin with.” Id. at 1027.

In this case, plaintiffs argue that, although they “acquired the Subject Property with the

knowledge of its current zoning,” the parties’ capacity agreement induced plaintiffs to expect

defendant to “exercise ‘best efforts’ to expeditiously provide approval of all plans, paperwork,

permits or otherwise to effectuate the entire Capacity Agreement, thus giving Appellees a

justifiable expectation that a rezoning application would be expeditiously approved.” Plaintiffs

thus concede that their development ambitions ran afoul of existing zoning. Because “the

proscribed use interests were not part of [plaintiffs] title to begin with,” plaintiffs’ resort to

constitutional takings doctrine is without merit. Accordingly, the trial court erred by failing to

grant defendant summary disposition of plaintiffs’ takings claims.

D. SUBSTANTIVE DUE PROCESS

In their complaint, plaintiffs alleged that “failing to allow a rezoning that would allow

Plaintiffs to use excess capacity that they were compelled by [defendant] to construct is a denial

of . . . substantive due process . . . by irrational and arbitrary government action.” Plaintiffs

elaborated, “In requiring Plaintiffs to construct additional capacity for which there is no user, and

which serves no rational purpose, [defendant] has damaged plaintiffs.” Plaintiffs additionally

alleged that “[f]ailing to allow a rezoning that would allow Plaintiffs to actually develop their

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Property is a denial of Plaintiffs’ substantive due process rights . . . by irrational and arbitrary

government action,” elaborating that defendant “has exercised its police power through regulation

that illegally prohibits the use of Plaintiffs’ Property,” and that “[t]he actions and omissions of

[defendant] are unreasonable, arbitrary, confiscatory, illegal and unconstitutional.”

A person’s right to due process of law when facing certain kinds of adverse action at the

hands of the state or one of its subdivisions is guaranteed under both the United States and

Michigan Constitutions. US Const, Am XIV, § 1; Const 1963, art 1, § 17.4 “Due process protects

vested property rights or entitlements.” Mich Ed Ass’n v State Bd of Ed, 163 Mich App 92, 98;

414 NW2d 153 (1987). However, the constitutional due-process guarantees extend beyond merely

insuring fair procedures in the implementation of governmental policy: “The Due Process Clause

contains a substantive component that bars certain arbitrary, wrongful government actions

‘regardless of the fairness of the procedures used to implement them.’ ” Zinermon v Burch, 494

US 113, 125; 110 S Ct 975; 108 L Ed 2d 100 (1990), quoting Daniels v Williams, 474 US 327,

331; 106 S Ct 662; 88 L Ed 2d 662 (1986). “[A] claim may be based on a denial of substantive

due process where a plaintiff is deprived of property rights by irrational or arbitrary governmental

action.” Bevan v Brandon Twp, 438 Mich 385, 391; 475 NW2d 37 (1991) (quotation marks and

citation omitted). A party asserting that governmental action is not a proper exercise of the police

power “must prove either that no public purpose is served by the act or that no reasonable

relationship exists between the remedy adopted and the public purpose sought to be achieved.”

Van Slooten v Larson, 410 Mich 21, 42-43; 299 NW2d 704 (1980).

The United States Supreme Court has expressed a general reluctance to expand the

applicability of substantive due process. It decreed that “[w]here a particular Amendment provides

an explicit textual source of constitutional protection against a particular sort of government

behavior, that Amendment, not the more generalized notion of substantive due process, must be

the guide for analyzing these claims.” Sacramento Co v Lewis, 523 US 833, 842; 118 S Ct 1708;

140 L Ed 2d 1043 (1998) (alteration retained, quotation marks and citations omitted).

In this case, plaintiffs are arguing that defendant failed to keep promises on which plaintiffs

detrimentally relied, thus their contract and promissory estoppel claims. And also, that defendant’s

refusal to rezone the subject property stripped all value related to their investment-backed

expectations concerning excess plant capacity and development of the subject property, thus their

takings claims. To the extent that plaintiffs rely on the latter constitutional doctrine, their

alternative invocation of substantive due process is inapt. Id.

Plaintiffs both assert that “[t]he conduct of [defendant] serves no legitimate governmental

purpose,” and acknowledge that the existing zoning follows from a desire to maintain a lower

density of land usage than what plaintiffs propose, effectively establishing “a park for the benefit

of developments adjacent to the Subject Property” in the context of objecting to the frustration of

their expectations, not challenging the legitimacy of preserving low-density land uses.

4

Our state constitution’s due-process provision is coextensive with that of the United States

Constitution. Cummins v Robinson Twp, 283 Mich App 677, 700-701; 770 NW2d 421 (2009).

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We further observe that the bulk of plaintiffs’ argument under the rubric of substantive due

process concerns defendant’s action or inaction based on defendant’s understanding of the parties’

capacity agreement along with defendant’s benign policy preferences. In protesting defendant’s

alleged “breach the Capacity Agreement,” and resultant frustration of plaintiffs’ “justifiable

expectation that a rezoning application would be expeditiously approved,” plaintiffs complain of

broken promises, not irrational governmental action. And by complaining that defendant “chose

to ignore several lucid presentations made by Plaintiffs and the Appellant Township’s own

Planner’s opinions that that there is no market for offices at the Subject Property and that master

plan allows for residential development of the Subject Property,” plaintiffs are objecting to policy

decisions, not seriously attempting to expose irrationality. Indeed, plaintiffs do not specifically

assert that the zoning at issue was wholly irrational and thus a violation of substantive due process

all along, but instead argue that such a violation came about as the result of defendant’s refusal to

rezone the subject property as if such action were required by the capacity agreement.

Plaintiffs themselves acknowledge that, “[i]n order to sustain a substantive due process

claim, an aggrieved party must have a legitimate claim to entitlement to, or a justifiable expectation

in, a property right,” citing G M Engineers & Assoc, Inc v West Bloomfield Twp, 922 F2d 328 (CA

6, 1990).5 In that persuasive6 case, the plaintiff alleged that a municipality’s “denial . . . of

proposed lot-splits deprived the plaintiff of liberty and property without due process of law and

amounted to a taking of property.” Id. at 329. The federal Sixth Circuit held as follows:

The viability of plaintiff’s due process claim depends upon establishing that the

local board did not have discretion to deny the proposed lot-split once the plaintiff

complied with the mandatory minimal requirements. If . . . the board members had

discretion as to whether or not to approve the proposal, then plaintiff had neither a

legitimate claim of entitlement, nor a justifiable expectation, in approval of the

proposed lot-split. [Id. at 331 (footnote, quotation marks, and citations omitted).]

After setting forth these principles, plaintiffs immediately complain that defendant

breached the parties’ capacity agreement. Plaintiffs’ substantive due process claim, then, is

ultimately derived from their contract claim, according to which plaintiffs assert that the parties’

capacity agreement left defendant without discretion to deny plaintiffs’ requests for rezoning.

Because we have already concluded that no such contractual obligation existed, we conclude here

that defendant did not lack the discretion to deny the request for rezoning, and thus that rejection

of plaintiffs’ rezoning request did not provide a factual basis upon which to ground plaintiffs’

substantive due process claims.

5

See also Bevan v Brandon Twp, 438 Mich 385, 391; 475 NW2d 37 (1991) (“a claim may be

based on a denial of substantive due process where a plaintiff is deprived of property rights by

irrational or arbitrary governmental action” (quotation marks and citation omitted)).

6

“Although state courts are bound by the decisions of the United States Supreme Court construing

federal law, there is no similar obligation with respect to decisions of the lower federal courts.”

Abela v Gen Motors Corp, 469 Mich 603, 606; 677 NW2d 325 (2004) (citation omitted). The

latter may, however, be consulted as persuasive authority. Id. at 607.

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For these reasons, the trial court erred by failing to grant defendant summary disposition

of plaintiffs’ substantive due process claims.

IV. ARBITRATION

Defendant alternatively argues that, if any claims are not dismissed on their merits, the

matter should be referred to arbitration to resolve a dispute over the amount of excess capacity.

We agree with the trial court that defendant has failed to show that arbitration was in order.

The provision in the parties’ capacity agreement covering excess capacity includes the

following:

Should there be a dispute between the parties as to whether there is Excess Capacity

for the Developer, the parties shall attempt to work out their differences. Failing

resolution, the parties shall have their dispute(s) arbitrated through the American

Arbitration Association according to its rules then prevailing. The arbitrator shall

be a competent engineer familiar with waste water treatment plants and similar

operations. His decision shall be final and binding upon the parties and his award

may be enforced in any circuit court or other court having appropriate jurisdiction

thereof.

The provision covering amendments includes the following:

It is understood and agreed that to the extent that the Developer uses Excess

Capacity, that the provisions relating to the maintenance and replacement escrow

funds may need to be modified to better reflect the proportional costs for the

operation, maintenance or replacement of the Community Sewer System. In that

event, the parties agree to use their best efforts to negotiate in good faith an amend-

ment that more fully and fairly reflects the proportional costs for operating,

maintaining and replacing the Community Sewer System. Should the parties be

unable to agree, the matter shall be submitted to arbitration in accordance with the

arbitration provision set forth in Paragraph 2 above.

The agreement does not otherwise mention arbitration.

Defendant argues that “the gravamen of [plaintiffs’] claims is that they have been damaged

because they cannot use (and be paid for) excess capacity,” and thus that “to determine any of their

claimed damages under any theory, the amount of excess capacity will need to be determined.”

According to defendant, “Until the amount of excess capacity is determined under the agreement,

the Developers’ claims are premature, and the matter should be submitted to arbitration.”

Plaintiffs, however, assert that defendant waived recourse to arbitration by failing to invoke it in a

timely fashion, and also cite exhibits to show that the Department of Environmental Quality, as it

was then named, had already determined the extent of the excess capacity, thus obviating any need

to resort to arbitration for that determination.

On December 23, 2019, two years after defending this action, defendant, citing the first of

the two arbitration provisions quoted above, filed what it styled as its “Second Motion for

Summary Disposition to Enforce Arbitration Agreement,” asking the trial court to “grant its

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Motion and Dismiss Plaintiffs’ Complaint in its entirety, or in the alternative dismiss Plaintiffs’

Complaint and/or order the parties to arbitration pursuant to the arbitration clause contained in the

Capacity Agreement.” Defendant thus implied below that an arbitration provision covering only

the factual question of the existence of excess capacity broadly covered plaintiffs’ contract and

constitutional claims. On appeal, however, defendant suggests that arbitration is proper to

determine only the existence, or extent, of excess capacity.

This situation seems potentially to raise issues concerning the scope of the arbitration

provision, whether it must yield regardless to an administrative agency’s independent

determination of excess capacity, and whether defendant waived recourse to arbitration for having

failed to invoke that provision until two years into the litigation. See Madison Dist Pub Sch v

Myers, 247 Mich App 583, 596; 637 NW2d 526 (2001) (“waiver of arbitration can occur when a

party files a responsive pleading without asserting the right to arbitration”); Salesin v State Farm

Fire & Cas Co, 229 Mich App 346, 356; 581 NW2d 781 (1998) (“In general, . . . defending an

action without seeking to invoke a right to compel arbitration, constitutes a waiver of the right to

arbitration.”).

The trial court eschewed wading into that thicket. Having stated that “[t]here are numerous

genuine issues of material fact and Defendant has not shown that the arbitration agreement should

be enforced under the facts presented,” the court implied that cutting away to arbitration for inquiry

into the extent of excess capacity was premature at that time.

It logically follows that our conclusion that all of plaintiffs’ claims are without merit as a

matter of law renders the issue of the extent to which the subject wastewater treatment plant has

excess capacity moot in connection with those claims. We further conclude that the question of

arbitration remains premature until and unless plaintiffs on remand persuade the trial court to allow

them to amend their complaint to attempt to revive their tort claims by adding individual parties

and new theories in avoidance of governmental immunity. For these reasons, we affirm the trial

court insofar as it declared that “Defendant has not shown that the arbitration agreement should be

enforced” at this time.

V. CONCLUSION

For the reasons stated, we affirm the trial court’s decision not to surrender this case to

arbitration, but reverse the court’s decision to deny defendant’s motion for summary disposition

in connection with each of plaintiffs’ claims as pleaded and supported.

Affirmed in part, reversed in part, and remanded for further proceedings consistent with

this opinion. We do not retain jurisdiction.

/s/ Anica Letica

/s/ Deborah A. Servitto

/s/ Michael J. Kelly

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