O County of Ingham v. Mi County Road Commission Self-Insurance Pool

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

COUNTY OF INGHAM, COUNTY OF JACKSON, UNPUBLISHED

and COUNTY OF CALHOUN, July 14, 2022

Plaintiffs-Appellants,

v No. 334077

Ingham Circuit Court

MICHIGAN COUNTY ROAD COMMISSION LC No. 15-000432-NZ

SELF-INSURANCE POOL,

Defendant-Appellee.

ON SECOND REMAND

Before: O’BRIEN, P.J., GLEICHER, C.J., and STEPHENS, J.

PER CURIAM.

Following this Court’s decision in Ingham Co v Mich Co Rd Comm Self-Ins Pool, 321

Mich App 574; 909 NW2d 533 (2017) (Ingham Co I), defendant, Michigan County Road

Commission Self-Insurance Pool (the Pool), sought leave to appeal in our Supreme Court. In lieu

of granting leave to appeal—and without vacating or reversing any portion of Ingham Co I—the

Court remanded to this Court with instructions to consider whether certain documents were

“binding on the parties, and, if so, what effect they [had] on the plaintiffs’ entitlement to refunds.”

Ingham Co v Mich Co Rd Comm Self-Ins Pool, 503 Mich 917 (2018) (Ingham Co II). On remand,

this Court considered the documents identified by our Supreme Court and again concluded that

plaintiffs—Ingham County, Jackson County, and Calhoun County (collectively, the counties)—

were entitled to refunds of their surplus premiums from prior-year contributions. Ingham Co v

Mich Co Rd Comm Self-Ins Pool (On Remand), 329 Mich App 295, 298; 942 NW2d 85 (2019)

(Ingham Co III). To reach this conclusion, this Court reasoned in pertinent part that, although the

withdrawal policy in the documents—which precluded plaintiffs from receiving refunds—was

binding, it was unenforceable as contrary to public policy. Id. at 317-323. The Pool again appealed

to our Supreme Court, who reversed. The majority of that Court summarized its holding (and

offered remand instructions) as follows:

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We conclude . . . that the Pool’s limitation of membership to “county road

commissions” and its chosen method of distributing surplus equity reflect the

documents forming the parties’ agreement and are not contrary to the public policy

of this state.

In their claim of appeal from the circuit court’s order, the Counties argued

that the circuit court erred by dismissing the Counties’ claims of unconstitutional

lending, extortion, and conversion. The Court of Appeals did not address these

arguments in Ingham Co I. We reverse the Court of Appeals’ judgment that the

Pool’s withdrawal policy is contrary to public policy and that Jackson County

became a member of the Pool upon the dissolution of its county road commission,

and we remand to that Court for consideration of those arguments raised by the

Counties but not addressed in Ingham Co I. We do not retain jurisdiction. [Ingham

Co v Mich Co Rd Comm Self-Ins Pool, ___ Mich ___, ___; ___ NW2d ___ (2021)

(Ingham Co IV) (Supreme Court Docket No. 160186); slip op at 22 (citation

omitted).]

For the reasons set forth in this opinion, we conclude that the trial court did not err by dismissing

the counties’ claims for unconstitutional lending, extortion, and conversion. We therefore affirm

the trial court’s ruling in those respects.

I. BACKGROUND

This Court summarized the pertinent factual history of this case in Ingham Co I, 321 Mich

App at 577-579, as follows:

A Declaration of Trust created the Pool in April 1984. The Pool’s bylaws

limit membership to county road commissions located in the state of Michigan and

require each member to sign an inter-local agreement. The appointed road

commissions for Ingham County, Jackson County, and Calhoun County joined the

Pool soon after its formation.

Members of the Pool made annual premium contributions to cover the

payment of claims and the Pool’s operating and administrative expenses. The

Pool’s bylaws and the inter-local agreements permitted the refund of surplus funds

more than one year after payment of a member’s premium contribution. The

counties alleged that the Pool had a longstanding practice of refunding excess

contributions to members out of unused reserves in proportion to premiums paid,

typically calculated and refunded several years later.

In February 2012, the Legislature amended MCL 224.6 to permit transfer

of “the powers, duties, and functions that are otherwise provided by law for an

appointed board of county road commissioners . . . to the county board of

commissioners by resolution as allowed under . . . MCL 46.11.” MCL 224.6(7), as

amended by 2012 PA 14. At the same time, the Legislature amended MCL 46.11

to give a county board of commissioners the authority to pass a resolution

dissolving an appointed road commission and transferring the road commission’s

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“powers, duties, and functions” to the county board of commissioners. 2012 PA

15. Pursuant to these amendments, the Ingham County, Jackson County, and

Calhoun County Boards of Commissioners adopted resolutions to dissolve their

county road commissions and take over their roles.

Ingham County adopted the dissolution resolution on April 24, 2012,

effective June 1, 2012. About two weeks before adopting the resolution, Ingham

County paid its contribution to the Pool for the fiscal year beginning April 1, 2012,

apparently with the understanding that the Pool intended to amend its rules to

permit the county successors to the dissolved road commissions to participate in

the Pool. Ingham County maintained that it only learned later in May that the Pool

would not allow the county to remain a member of the Pool. On May 30 and 31,

2012, the Ingham County road commission signed two agreements—one to

withdraw from the Pool and one to cancel insurance through the Pool—effective

June 1, 2012.

Calhoun County signed a similar withdrawal agreement on October 23,

2012, effective November 1, 2012. It appears that Jackson County did not sign a

withdrawal agreement.

At Ingham County’s request, the Pool agreed to refund the unused pro rata

portion of the former road commission’s annual contribution for the 2012–2013

fiscal year. The Pool declined, however, to refund surplus equity flowing from

prior-year contributions because of the road commission’s withdrawal from

membership in the Pool.

The counties brought a four-count complaint against the Pool. The counties

alleged that they were eligible for 10 years’ worth of refunds because the Pool was

still refunding contributions from 2002 premiums. The Pool refused to issue those

refunds to the counties. Consequently, the counties maintained that the Pool’s

refusal reflected (1) unconstitutional lending under Const. 1963, art. 9, § 18; (2)

extortion; (3) conversion; and (4) breach of contract. The Pool denied the counties’

allegations and disputed their claims.

The counties filed a partial motion for summary disposition as to liability

under MCR 2.116(C)(9) and (10). The Pool filed a cross-motion for summary

disposition under MCR 2.116(I)(2). The trial court granted summary disposition

under MCR 2.116(I)(2) in favor of the Pool, rejecting all of the counties’

arguments.

The appellate history chronicled at the outset of this opinion, spanning Ingham Co I through

Ingham IV, ensued. Per our Supreme Court, we are now to consider “those arguments raised by

the Counties but not addressed in Ingham Co I”—i.e., “the Counties’ claims of unconstitutional

lending, extortion, and conversion.” Ingham Co IV, ___ Mich at ___; slip op at 22.

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II. STANDARD OF REVIEW

A trial court’s decision concerning summary disposition is reviewed de novo. Heaton v

Benton Constr Co, 286 Mich App 528, 531; 780 NW2d 618 (2009). The counties moved for

summary disposition under MCR 2.116(C)(9) and (10), but because the trial court considered

evidence aside from the pleadings, the motion is considered as having been brought under only

MCR 2.116(C)(10). See Sisk-Rathburn v Farm Bureau Gen Ins Co of Mich, 279 Mich App 425,

427; 760 NW2d 878 (2008) (explaining that a motion is considered “as having been pursuant only

to MCR 2.116(C)(10)” when “the trial court examined evidence outside the pleadings”); Ingham

Co I, 321 Mich App at 579 (explaining that, in a motion brought under MCR 2.116(C)(9), “the

trial court may only consider the pleadings”). The trial court, however, ultimately granted

summary disposition to the Pool under MCR 2.116(I)(2). Summary disposition under that rule is

proper “[i]f it appears to the court that the opposing party, rather than the moving party, is entitled

to judgment[.]” MCR 2.116(I)(2). Accordingly, in analyzing the trial court’s decision to grant

summary disposition under MCR 2.116(I)(2), we will utilize the general standard of review that

applies to a motion under MCR 2.116(C)(10). As this Court has explained:

A motion under MCR 2.116(C)(10) tests the factual support of a plaintiff's

claim. Summary disposition is appropriate under MCR 2.116(C)(10) if there is no

genuine issue regarding any material fact and the moving party is entitled to

judgment as a matter of law. In reviewing a motion under MCR 2.116(C)(10), this

Court considers the pleadings, admissions, affidavits, and other relevant

documentary evidence of record in the light most favorable to the nonmoving party

to determine whether any genuine issue of material fact exists to warrant a trial. A

genuine issue of material fact exists when the record, giving the benefit of

reasonable doubt to the opposing party, leaves open an issue upon which reasonable

minds might differ. [Zaher v Miotke, 300 Mich App 132, 139-140; 832 NW2d 266

(2013) (quotations marks and citations omitted).]

“We also review de novo questions regarding the proper interpretation of our 1963

Constitution.” O’Connell v Dir of Elections, 316 Mich App 91, 97; 891 NW2d 240 (2016). “The

primary objective in interpreting a constitutional provision is to determine the text’s original

meaning to the ratifiers, the people, at the time of ratification.” Studier v Mich Pub Sch Employees’

Ret Bd, 472 Mich 642, 652; 698 NW2d 350 (2005) (quotation marks and citation omitted). To

that end, “we apply the plain meaning of each term used . . . at the time of ratification unless

technical, legal terms were employed.” Id.

III. UNCONSTITUTIONAL LENDING

Const 1963, art 9, § 18 provides: “The credit of the state shall not be granted to, nor in aid

of any person, association or corporation, public or private, except as authorized in this

constitution.” The fundamental purpose underlying this provision “is to make certain that the

State, which itself cannot borrow, except as authorized, does not accumulate unauthorized debts

by indorsing or guaranteeing the obligations of others.” In re Advisory Opinion on

Constitutionality of Act No 346 of Pub Acts of 1966, 380 Mich 554, 564; 158 NW2d 416 (1968).

Further, Const 1963, art 9, § 18 applies only to “political subdivisions and instrumentalities of the

state,” In re Request for Advisory Opinion on Constitutionality of 1986 PA 281, 430 Mich 93, 119;

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422 NW2d 186 (1988) (Advisory Opinion), including counties, Wayne Co Bd of Comm’rs v Wayne

Co Airport Auth, 253 Mich App 144, 181; 658 NW2d 804 (2002). Accordingly, as a threshold

matter, Const 1963, art 9, § 18 is applicable only when the conduct in dispute constitutes both “a

loan of credit” and one made “by the state or one of its municipalities.” Advisory Opinion, 430

Mich at 119-120.1

In addition, “Const 1963, art 9, § 18 is violated only when the state creates an obligation

legally enforceable against it for the benefit of another.” Wayne Co Bd of Comm’rs, 253 Mich

App at 182, (quotation marks and citation omitted). Indeed, Const 1963, art 7, § 28 provides:

The legislature by general law shall authorize two or more counties,

townships, cities, villages or districts, or any combination thereof among other

things to: enter into contractual undertakings or agreements with one another or

with the state or with any combination thereof for the joint administration of any of

the functions or powers which each would have the power to perform separately;

share the costs and responsibilities of functions and services with one another or

with the state or with any combination thereof which each would have the power

to perform separately; transfer functions or responsibilities to one another or any

combination thereof upon the consent of each unit involved; cooperate with one

another and with state government; lend their credit to one another or any

combination thereof as provided by law in connection with any authorized publicly

owned undertaking. [Emphasis added.]

It is also notable that, under Const 1963, art 7, § 1, “[e]ach organized county shall be a body

corporate with powers and immunities provided by law,” and, pursuant to Const 1963, art 7, § 34,

constitutional provisions “concerning counties . . . shall be liberally construed in their favor,” and

the “[p]owers granted to counties . . . shall include those fairly implied and not prohibited by th[e]

constitution.”

Applying these principles to the instant case, assuming without deciding that (1) Const

1963, art 9, § 18 applies to county road commissions as instrumentalities of the state or its political

subdivisions,2 and (2) the self-insurance pool here involved a lending of state “credit,” the

arrangement is still permissible under Const 1963, art 9, § 18 because any loan of credit was made

1

Const 1963, art 7, § 26 provides “an exception to the general rule of art 9, § 18, governing the

lending of credit by municipalities.” Advisory Opinion, 430 Mich at 119. By its own terms,

however, Const 1963, art 7, § 26 applies to loans of credit by a “city or village,” it is seemingly

inapplicable to the counties (and their no-longer-extant road commissions) at issue here.

2

“A board of county road commissioners is not a municipal corporation; however, it is a ‘body

corporate’ that ‘shall act as an administrative board only’ and whose function ‘shall be limited to

the formation of policy and the performance of official duties imposed by law . . . .’ ” Oakland

Co Bd of Co Rd Comm’rs v Mich Prop & Cas Guaranty Ass’n, 456 Mich 590, 609; 575 NW2d

751 (1998) (citation omitted). But see MCL 691.1401(e) (providing that a “county road

commission” qualifies as a “political subdivision” of the state for purposes of the governmental

tort liability act (GTLA), MCL 691.1401 et seq.).

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between political subdivisions of the state (or their road-commission instrumentalities) and the

agreement is not enforceable against the state for the benefit of some other entity. See Wayne Co

Bd of Comm’rs, 253 Mich App at 182. Rather, the parties’ agreement—including its punitive

withdrawal policy—is only enforceable as against the member road commissions for the benefit

of the other road commissions and the Pool as a whole. It follows that if the member road

commissions qualify as instrumentalities of the state (or its political subdivisions), then any

lending of credit does not offend Const 1963, art 9, § 18. Alternatively, if the road commissions

do not qualify as instrumentalities of the state (or its political subdivisions) for the instant purposes,

then Const 1963, art 9, § 18 is inapplicable in the first instance. See Advisory Opinion, 430 Mich

at 119-120 (observing that Const 1963, art 9, § 18 only applies to the lending of “state” credit).

Accordingly, the trial court did not err by granting summary disposition in favor of the Pool on the

counties’ unconstitutional lending claim.

IV. CONVERSION

In the trial court, the counties asserted a claim for statutory conversion. Claims for

statutory conversion arise under MCL 600.2919a.3 Dep’t of Agriculture v Appletree Mktg, LLC,

485 Mich 1, 9-10; 779 NW2d 237 (2010). To prevail on such a claim, a plaintiff must satisfy all

of the elements for common-law conversion and also “show that the conversion was for the

defendant’s ‘own use.’ ” Magley v M & W Inc, 325 Mich App 307, 315-316 n 3; 926 NW2d 1

(2018) (quotation marks and citation omitted). Therefore, a claim of statutory conversion must be

supported by proof that (1) the defendant willfully engaged in a “distinct act of domain wrongfully

exerted over [the plaintiff’s] personal property in denial of or inconsistent with the rights therein”;

and (2) the defendant converted the property to his or her “own use” by “employ[ing] the converted

property for some purpose personal to the defendant’s interests, even if that purpose is not the

object’s ordinarily intended purpose.” Id. at 315-316 & n 3 (quotation marks and citations

omitted). Because the counties are alleging that the Pool converted money, they must also

establish that the Pool “obtained the money without [the countries’] consent to the creation of a

debtor-creditor relationship and must have had an obligation to return the specific money entrusted

3

MCL 600.2919a provides:

(1) A person damaged as a result of either or both of the following may

recover 3 times the amount of actual damages sustained, plus costs and reasonable

attorney fees:

(a) Another person’s stealing or embezzling property or converting property

to the other person’s own use.

(b) Another person’s buying, receiving, possessing, concealing, or aiding in

the concealment of stolen, embezzled, or converted property when the person

buying, receiving, possessing, concealing, or aiding in the concealment of stolen,

embezzled, or converted property knew that the property was stolen, embezzled, or

converted.

(2) The remedy provided by this section is in addition to any other right or

remedy the person may have at law or otherwise.

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to [its] care.” Lawsuit Fin, LLC v Curry, 261 Mich App 579, 591; 683 NW2d 233 (2004)

(quotation marks and citation omitted).

The trial court properly dismissed the counties’ statutory conversion claim for at least two

reasons. First, conversion sounds in tort, Elia Companies, LLC v Univ of Mich Regents, 335 Mich

App 439, 450; 966 NW2d 755 (2021), and “the distinguishing feature of a tort [is] that it consists

in the violation of a right given or neglect of a duty imposed by law, and not by contract,” In re

Bradley Estate, 494 Mich 367, 383; 835 NW2d 545 (2013) (quotation marks and citation omitted;

emphasis added; alteration in original). Accordingly, as a general rule, “a tort action will not lie

when based solely on nonperformance of a contractual duty.” Crews v Gen Motors Corp, 400

Mich 208, 226; 253 NW2d 617 (1977).

For the reasons explained in Section III of this opinion, the parties’ agreement was not

unenforceable as an unconstitutional lending of state credit under Const 1963, art 9, § 18. Further,

in Ingham Co IV, ___ Mich at ___; slip op at 22, our Supreme Court expressly reversed this Court’s

holding that the parties’ agreement was unenforceable as against public policy. The counties have

not offered any other argument suggesting that an enforceable contractual agreement does not exist

in this case. On the contrary, in their complaint, the counties admitted that their statutory-

conversion claim against the Pool was based on its refusal to comply with an alleged contractual

duty: the purported duty to issue “shares of surplus that would otherwise be or have been

distributed, for actuarial years 2002-2012, to the appointed road commissions” of the counties

under the terms of the parties’ agreement.

When, as here, a tort claim is “based on a contract and brought by a plaintiff who is not a

party to that contract,” “the threshold question is whether the defendant owed a duty to the plaintiff

that is separate and distinct from the defendant’s contractual obligations.” Fultz v Union-

Commerce Assoc, 470 Mich 460, 467; 683 NW2d 587 (2004). “If no independent duty exists, no

tort action based on a contract will lie.” Id. Because the counties have not alleged that the Pool’s

duty to refund the specific funds at issue here was noncontractual, the trial court reached the correct

result by granting summary disposition in favor of the Pool on the counties’ statutory conversion

claim.

Second, even if the counties were entitled to bring an action for conversion based on the

Pool’s nonperformance of its alleged contractual duty, the counties have still not set forth a prima

facie case for statutory conversion of money. In Ingham Co IV, ___ Mich at ___; slip op at 18,

our Supreme Court expressly ruled that, under the terms of the parties’ agreement, “even if the

Pool experiences a surplus for any fiscal year between 2002 and 2012 and makes distributions

accordingly, the Inter-Local Agreements did not provide the dissolved county road commissions

(and by extension, do not provide the Counties) with the right to share in any such distribution.”

In light of that holding, the counties cannot satisfy several of the essential elements for statutory

conversion—the counties cannot demonstrate (1) that the Pool had any obligation to return the

specific funds at issue here to the counties, (2) that the Pool acted wrongfully by refusing to do so

upon demand, or (3) that the Pool’s exercise of dominion over the disputed funds was inconsistent

with any right the counties might have had to those funds. Accordingly, for this reason as well,

the trial court reached the correct result by granting summary disposition in favor of the Pool on

the counties’ statutory conversion claim.

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V. EXTORTION

In the trial court, the counties sought to pursue a civil claim against the Pool for violation

of this state’s penal statute concerning the offense of extortion, MCL 750.213,4 and the Pool

challenged whether this was permissible. Assuming without deciding that the counties were

entitled to assert a claim for extortion based on MCL 750.213, the trial court did not err by granting

the Pool judgment as a matter of law with regard to the underlying merits of that claim. In People

v Harris, 495 Mich 120, 128-129; 845 NW2d 477 (2014), our Supreme Court held that the

elements of extortion under MCL 750.213 are as follows:

[T]he crime of extortion is complete when a defendant (1) either orally or by a

written or printed communication, maliciously threatens (2) to accuse another of

any crime or offense, or to injure the person or property or mother, father, spouse

or child of another (3) with the intent to extort money or any pecuniary advantage

whatever, or with the intent to compel the person threatened to do or refrain from

doing any act against his or her will. [Emphasis omitted.]

In the wake of Ingham Co IV, the second element is dispositive here.

In their initial brief on appeal in Ingham Co I, the only argument the counties offered on

the second element for extortion—i.e., whether the Pool either threatened to accuse another of

some crime or offense, or to injure the person or property or mother, father, spouse or child of

another—concerned a purported threat to property. The counties argued that the Pool had

threatened to “punish” the counties for “exercising their newly acquired rights” to dissolve their

road commissions “by stealing their successor shares of distributions of surplus reserves for

actuarial years 2002-2012.” But in Ingham Co IV, ___ Mich at ___; slip op at 18, our Supreme

Court expressly ruled that, under the terms of the parties’ agreement, “even if the Pool experiences

a surplus for any fiscal year between 2002 and 2012 and makes distributions accordingly, the Inter-

Local Agreements did not provide the dissolved county road commissions (and by extension, do

not provide the Counties) with the right to share in any such distribution.” See also id. at ___; slip

op at 17 (“Jackson County, like Ingham and Calhoun Counties, does not have a contractual right

to share in any distributions made after the effective date of the dissolution of its road

commission”). Given that our Supreme Court has already determined that the counties had no

legal right to the distributions that the Pool allegedly threated to “steal[]” from the counties, the

counties’ allegations fail to set forth a prima facie case with regard to the second element for a

civil claim of extortion under MCL 750.213.

4

In pertinent part, MCL 750.213 provides:

Any person who . . . shall orally or by any written or printed communication

maliciously threaten any injury to the person or property . . . of another with intent

thereby to extort money or any pecuniary advantage whatever, or with intent to

compel the person so threatened to do or refrain from doing any act against his will,

shall be guilty of a felony, punishable by imprisonment in the state prison not more

than 20 years or by a fine of not more than 10,000 dollars.

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Moreover, still assuming that a valid cause of action for extortion exists under MCL

750.213 and assuming that the counties’ allegations set forth a prima facie case for such a claim,

their claim would still fail because it would presumably sound in tort, specifically as an intentional

tort. See Harris, 495 Mich at 128-129 (stating elements for the criminal offense of extortion that

include malice and other specific intents); In re Bradley Estate, 494 Mich at 383 (explaining that

“the distinguishing feature of a tort [is] that it consists in the violation of a right given or neglect

of a duty imposed by law, and not by contract”) (quotation marks and citation omitted; emphasis

added; alteration in original). Just as the counties’ claim for statutory conversion will not lie

because it is a tort claim based on the Pool’s alleged failure to perform a contractual duty, the

instant extortion claim will not lie because it is also a tort claim founded on the Pool’s alleged

threat to exercise its contractual rights. See Fultz, 470 Mich at 467; Crews, 400 Mich at 226. For

these reasons, the trial court did not commit error warranting reversal by granting summary

disposition in favor of the Pool on the counties’ extortion claim.5

VI. CONCLUSION

Affirmed.

/s/ Colleen A. O’Brien

/s/ Elizabeth L. Gleicher

Stephens, J., Not participating.

5

In Ingham Co I and Ingham Co III, this Court did not directly address the counties’ argument

that the trial erred by granting the Pool summary disposition of the counties’ claim alleging breach

of contract; instead, this Court reversed and remanded in those prior appeals on alternate grounds.

Thus, it could be argued that the breach-of-contract issue falls within the scope of the Supreme

Court’s remand instructions here. See Ingham Co IV, ___ Mich at ___; slip op at 22 (reversing

and remanding for this Court’s “consideration of those arguments raised by the Counties but not

addressed in Ingham Co I”).

In reality, however, the Supreme Court’s decision in Ingham Co IV leaves little or nothing

for this Court to decide with regard to the counties’ breach-of-contract claim. That claim was

founded on the counties’ contention that they had the contractual right, as successors in interest to

their dissolved road commissions, to receive any future distributions of surplus equity from the

Pool to which their respective road commissions would have been entitled. Our Supreme Court

has, however, already ruled that the counties have no such contractual right. Ingham Co IV, ___

Mich at ___; slip op at 17-18 (“Jackson County, like Ingham and Calhoun Counties, does not have

a contractual right to share in any distributions made after the effective date of the dissolution of

its road commission”). Hence, the trial court did not commit any error requiring reversal by

granting summary disposition in favor of the Pool on the counties’ breach-of-contract claim.

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