Louis Jackson v. Southfield Neighborhood Revitalization Initiative

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

LOUIS JACKSON, MICHAEL C. BIRAC, LEE FOR PUBLICATION

CRAFT, GAYLYNN CRAFT, RONALD HAYES, September 21, 2023

SMFJ, LLC, EVERTT HODGE, DONALD 9:20 a.m.

SWINNEY, STEFANIE BOYD, LISA SMITH, and

KIRK BOYD,

Plaintiffs-Appellants,

v No. 361397

Oakland Circuit Court

SOUTHFIELD NEIGHBORHOOD LC No. 2018-162877-NZ

REVITALIZATION INITIATIVE, FRED ZORN,

CITY OF SOUTHFIELD, KEN SIVER, OAKLAND

COUNTY, and SOUTHFIELD NON-PROFIT

HOUSING CORPORATION,

Defendants-Appellees,

and

ETOILE LIBBETT, MICHAEL A.

MANDELBAUM, SUSAN WARD WITKOWSKI,

also known as SUSAN WARD and SUSAN

WITKOWSKI, and GERALD WITKOWSKI,

Defendants.

Before: GADOLA, P.J., and CAVANAGH and K. F. KELLY, JJ.

PER CURIAM.

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In this putative class action regarding tax-foreclosure and sale procedures, plaintiffs appeal

as of right the trial court’s order granting summary disposition in favor of defendants1 under MCR

2.116(C)(7) (dismissal of the action is warranted because of a prior judgment), (C)(8) (failure to

state a claim on which relief could be granted), and (C)(10) (no genuine issue as to any material

fact). We affirm in part, reverse in part, vacate in part, and remand to the trial court for further

proceedings consistent with this opinion.

I. BACKGROUND FACTS AND PROCEDURAL HISTORY

This case returns to us after our Supreme Court vacated the previous opinion of this Court

and remanded the case to the trial court.2 The lawsuit at issue arose out of much-litigated former

provisions of the General Property Tax Act (GPTA), MCL 211.1 et seq., which required the

foreclosing governmental unit (FGU) to take title to real property to cover the cost of the unpaid

tax debt and associated fees without compensating the owner for their equity in the property. This

Court, in its previous opinion in this case, provided the following summary of the background

facts:

This case arises out of alleged irregularities in the tax-foreclosure sale

procedures and later conveyances of tax-foreclosed properties. The named

plaintiffs owned real property in the city of Southfield and were delinquent on their

property taxes in 2012, 2013, and 2014. The Oakland County Treasurer began the

tax-foreclosure process against those delinquent properties, as he was legally

required to do under the [GPTA]. There is no dispute in this case that the Oakland

County Treasurer complied with the notice requirements of the GPTA with respect

to tax-foreclosure. In a separate action in the circuit court, a judgment of

foreclosure was entered against plaintiffs’ properties on February 8, 2017. The

judgment noted that the right to redeem the properties by paying all applicable

taxes, interest, and fees expired March 31, 2017. If not redeemed, the properties

would vest title absolutely in the Oakland County Treasurer. [Jackson v Southfield

Neighborhood Revitalization Initiative, unpublished per curiam opinion of the

Court of Appeals, issued December 19, 2019 (Docket No. 344058), p 2, vacated

507 Mich 866 (2021).]

In that appeal, but not this one, Oakland County’s payment-plan program was partially at issue.

As relevant here, it is enough to note plaintiffs did not complete their payment plans, which would

1

When plaintiffs amended their complaint after the remand from our Supreme Court, they

removed Etoile Libbett, Michael A. Mandelbaum, Oakland County Treasurer, Andrew Meisner,

Susan Ward Witkowski, and Gerald Witkowski as defendants. Therefore, this opinion will not

address those parties, except where necessary for a full understanding of the case.

2

Jackson v Southfield Neighborhood Revitalization Initiative, 507 Mich 886; 953 NW2d 402

(2021).

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have allowed them to redeem their forfeited properties. Id. at 2-3. “Subsequently, the Oakland

County Treasurer perfected title to the subject properties.” Id. at 3.

In 2016 and 2017, the city began a process where it would exercise its right

of first refusal under MCL 211.78m(1)[, as amended by 2014 PA 501,3] and

purchase tax-foreclosed properties, from the Oakland County Treasurer, within the

city limits, for the minimum bid. At the June 20, 2016 Southfield City Council

meeting, defendant Zorn, who was the Southfield city administrator, made a

recommendation for the counsel to enter into an agreement with defendant[]

Southfield Non-Profit Housing Corporation (SNPHC). The agreement would

require the city to exercise its statutory right of first refusal under [former] MCL

211.78m(1) for 45 properties that had been foreclosed and had title taken by the

Oakland County Treasurer. Under the language of [former] MCL 211.78m(1), the

city had the ability to purchase the tax-foreclosed properties “for a public

purpose . . . by payment to the [FGU] of the minimum bid.” The terms of the

agreement between SNPHC and the city, as reflected in the meeting minutes,

required SNPHC to “assume all costs in connection with the acquisition undertaken

by the City from the Oakland County Treasurer regarding the 45 properties. . . .”

Stated simply, SNPHC would be supplying money to the City of Southfield in order

for the city to exercise its rights under [former] MCL 211.78m(1).

The minutes from the June 20, 2016 meeting further explain the proposed

purpose behind the deal with SNPHC:

The purpose of the acquisition is to rehabilitate and renovate these

homes and then return them to productive use and purchase by

individuals and families seeking housing opportunities within the

City of Southfield. The program is designed to make available more

owner-occupied housing opportunities within the City of Southfield

and to revitalize and stabilize neighborhoods. In conjunction with

the acquisition of these properties[,] the City intends to contract with

[SNPHC], which will acquire the properties from the City,

rehabilitate and renovate them, and, subsequently, make them

available for purchase by financially qualified individuals and

families. Staff has negotiated a contract with [SNPHC], pursuant to

which [SNPHC] will accept title to the forty-five (45) 2016 tax-

foreclosed properties from the City, renovate, repair, and

rehabilitate the properties, and subsequently market them for sale to

qualified individuals and families.

Defendant Zorn testified at the meeting that he and the city were concerned about

individuals and companies purchasing tax-foreclosed properties for the sole

purpose of turning them into rental properties. Defendant Zorn explained that

3

As will be discussed in greater depth below, MCL 211.78m has since been amended, 2020 PA

255.

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owners of rentals do not care for the properties in the same manner that owner-

occupiers do. Thus, increasing the number of rentals in Southfield was causing

blight and concerns regarding public safety and health.

Under the terms of the agreement, SNPHC would not only provide the funds

for the city to exercise their right of first refusal, but would also pay for all fees and

costs to rehabilitate the properties once title was transferred to SNPHC. Notably,

defendant Zorn went on to testify that he was a board member and the vice president

of SNPHC. Defendant Ken Siver, Southfield’s mayor, was president of SNPHC

and sat on the board of directors. . . . Following a vote, the recommendation was

adopted by the Southfield City Council, and the agreement was formed between the

city of Southfield and SNPHC on June 20, 2016.

On June 21, 2016, defendant, Southfield Neighborhood Revitalization

Initiative (SNRI), was registered as a limited liability company (LLC) with the

Department of Licensing and Regulatory Affairs (LARA). The document filed

with LARA listed defendant Zorn as the resident agent for SNRI. On August 23,

2016, SNRI executed their “Operating Agreement,” which reflected that the sole

member of SNRI was SNPHC. Defendant Siver, as president of SNPHC, signed

the Operating Agreement. The document also listed SNRI’s “managers,” which

included defendant Zorn . . . .

The Operating Agreement also described SNRI’s purpose as an

organization:

1.3 Purpose (or Purposes). [SNRI] has been formed for the

purpose of purchasing tax foreclosed and other properties,

improving such properties, selling such properties to persons of low

and moderate income when possible and improving housing and

homeownership opportunities in the City of Southfield. [SNRI]

shall have all the powers necessary or convenient to effect any

purpose for which it is formed, including all powers granted by the

Act. [emphasis added.]

It is undisputed that the tax-foreclosed properties to which the Oakland County

Treasurer gained title on March 31, 2016, were deeded to the city, and then to SNRI

that same year. Throughout 2016 and 2017, the city used funds given to it from

SNPHC to exercise its first refusal right to 101 properties. Once it obtained title to

the properties by deed from the Oakland County Treasurer on July 31, 2017, the

city conveyed the properties to SNRI via quitclaim deeds.

Once plaintiffs became aware that they no longer had title to their

properties, the instant litigation was initiated against the Oakland County Treasurer

and Andrew Meisner, who held the position of treasurer (“the treasury

defendants”); the city, Siver, Zorn, [Michael A.] Mandelbaum, city attorney Susan

Ward Witkowski, and Gerald Witkowski, who was the former code director for the

city (“the city defendants”); and SNPHC, SNRI, and [Etoile] Libbett (“the private

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defendants”). Plaintiffs made a wide array of allegations, including alleged

violations of their constitutional rights to procedural due process, substantive due

process, and equal protection. Plaintiffs also claimed that the actions of the

governmental entities violated the Just Takings Clauses of the Michigan and United

States Constitutions. In addition to those constitutional claims, plaintiffs also

asserted claims for a violation of the GPTA, and civil damages under the Racketeer

Influence and Corrupt Organizations Act (RICO), 18 USC 1961 et seq. Plaintiffs[’]

requested relief included damages for their lost equity in the properties (treble

damages under the relevant portion of RICO), declaratory and injunctive relief, and

to quiet title to their properties in their favor.

In lieu of responding to the complaint, defendants moved for summary

disposition of all of plaintiffs’ claims, and for sanctions. Defendants argued that

plaintiffs’ lawsuit was not permitted under the GPTA because it was an attempt to

collaterally attack the judgment of foreclosure. Under the statutory scheme, having

failed to timely redeem their properties or appeal the judgment, plaintiffs were

limited in their available relief to a suit for damages arising out of a lack of any

notice before the Court of Claims. Defendants further argued that plaintiffs were

barred from asserting those claims under the doctrine of res judicata, plaintiffs

lacked standing to bring the lawsuit considering their interest in the properties had

been extinguished, and the trial court lacked jurisdiction to hear the lawsuit.

Defendants made significant arguments that plaintiffs remaining claims, even if

properly before the trial court, lacked legal and factual merit. For that same reason,

defendants argued that plaintiffs’ lawsuit was frivolous and defendants were

entitled to sanctions in the form of attorney fees and costs.

The trial court agreed with defendants that it lacked jurisdiction to hear the

lawsuit, plaintiffs lacked standing to bring it, and that res judicata barred the

lawsuit, thereby summarily disposing of the entire complaint. Despite granting

summary disposition in favor of defendants, the trial court denied their requests for

sanctions, citing that plaintiffs’ lawsuit, while unlikely to succeed, was not

frivolous. [Jackson, unpub op at 3-6.]

Although not covered in the previous opinion, the trial court record also included evidence

plaintiffs Ronald Hayes and SMFJ, LLC—along with other parties not associated with this case—

sued the treasury defendants, Southfield, and SNRI in Oakland Circuit Court, LC No. 2017-

157366-CZ. The lawsuit was a putative class action alleging the scheme described above was

developed with the unconstitutional purpose of removing African-American homeowners from

Southfield. As part of their relief requested, the plaintiffs sought the equity in their homes. The

trial court granted summary disposition in favor of the defendants in that case and there was no

appeal.

In this case, plaintiffs appealed the trial court’s dismissal to this Court. Given that Oakland

County satisfied the minimum requirements of procedural due process, this Court concluded

plaintiffs no longer had legal standing to challenge the foreclosure, and the trial court did not have

the jurisdiction to decide the issue. Jackson, unpub op at 7-9. The panel affirmed on that ground.

Id. at 9-10. However, this Court disagreed with the trial court that the judgment of foreclosure

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warranted dismissal of the claims on the basis of res judicata. Id. Plaintiffs applied for leave to

appeal this Court’s opinion to our Supreme Court. While the application was pending, our

Supreme Court decided Rafaeli, LLC v Oakland Co, 505 Mich 429; 952 NW2d 434 (2020). The

relevant facts and holdings of our Supreme Court’s decision will be discussed in greater depth

below, but as relevant at this point, the Court decided the following:

We hold that [the] plaintiffs, former property owners whose properties were

foreclosed and sold to satisfy delinquent real-property taxes, have a cognizable,

vested property right to the surplus proceeds resulting from the tax-foreclosure sale

of their properties. This right continued to exist even after fee simple title to [the]

plaintiffs’ properties vested with [the] defendants, and therefore, [the] defendants’

retention and subsequent transfer of those proceeds into the county general fund

amounted to a taking of [the] plaintiffs’ properties under Article 10, § 2 of our 1963

Constitution. Therefore, [the] plaintiffs are entitled to just compensation, which in

the context of a tax-foreclosure sale is commonly understood as the surplus

proceeds. [Rafaeli, 505 Mich at 484-485.]

In response to our Supreme Court’s decision in Rafaeli, on December 22, 2020, the

Legislature amended the GPTA, 2020 PA 256, to create a method for property owners to “claim

an interest in any applicable remaining proceeds from the transfer or sale of foreclosed property

under [MCL 211.78m.]” MCL 211.78t(1). The amendment provided different processes for those

property owners who had their interests foreclosed or sold after July 17, 2020, which was when

the Court decided Rafaeli, and before July 18, 2020. MCL 211.78t(1)(a) and (b). In the present

case, all of plaintiffs’ properties were sold before July 18, 2020, so MCL 211.78t(1)(b) is relevant

and states:

(1) A claimant may submit a notice of intention to claim an interest in any

applicable remaining proceeds from the transfer or sale of foreclosed property

under section [MCL 211.78m], subject to the following:

* * *

(b) For foreclosed property transferred or sold under [MCL 211.78m]

before July 18, 2020, both of the following:

(i) A claim may be made only if the Michigan supreme court orders

that its decision in Rafaeli[, 505 Mich at 429], applies retroactively.

(ii) Subject to subparagraph (i), the notice of intention must be

submitted pursuant to subsection (6).

In addition to amending the GPTA to add MCL 211.78t, the Legislature also amended

MCL 211.78m in a manner relevant to the present case, 2020 PA 255. Recall, as discussed above,

that Southfield was able to purchase the subject properties without an auction and for the

“minimum bid,” because of its statutory right of first refusal provided in former MCL 211.78m(1).

Jackson, unpub op at 3. While the new version of MCL 211.78m(1) still provided cities with the

right of first refusal, the process was different if there were claimants for surplus proceeds under

MCL 211.78t. Pertinently, in such a situation, a city “may purchase foreclosed property located

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within that city . . . included in the judgment and subject to sale under this section by paying the

[FGU] the greater of the minimum bid or the fair market value of the property.” MCL 211.78m(1)

(emphases added). The amendment of MCL 211.78m did not specifically address whether it

should be applied prospectively or retrospectively.

Subsequently, on February 2, 2021, our Supreme Court entered an order in this case stating,

“in lieu of granting leave to appeal, we VACATE the judgment of the Court of Appeals and we

REMAND this case to the Oakland Circuit Court for reconsideration of the defendants’ motions

for summary disposition in light of Rafaeli [], 505 Mich 429 [].” Jackson, 507 Mich at 866. Back

before the trial court, plaintiffs amended their complaint with leave of the trial court. They pleaded

three counts against Oakland County, but only two are relevant in this appeal. Pertinently,

plaintiffs claimed Oakland County violated the Takings Clauses of the United States and Michigan

Constitutions by taking their equity in their properties without just compensation.4 Plaintiffs also

brought an unjust-enrichment claim against SNRI; a civil-conspiracy claim under 42 USC 1983

against Southfield, SNRI, SNPHC, Zorn, and Siver; and a claim for declaratory relief against all

defendants. As relevant to the present appeal, plaintiffs sought a declaration that Rafaeli, MCL

211.78m, and MCL 211.78t should all be given retroactive effect.

Defendants moved for summary disposition in lieu of answering the amended complaint.

Oakland County argued Rafaeli should be given prospective-only application, and even if not,

Rafaeli did not save plaintiffs’ claims. Specifically, Oakland County noted Rafaeli stated the

property owners’ interest in the foreclosed lands were limited to the surplus from the tax-

foreclosure sale maintained by the FGU. Here, Oakland County was the FGU and did not retain

any surplus funds from plaintiffs’ properties because they were sold to Southfield for the minimum

bid. SNRI and SNPHC (“the corporate defendants,” collectively) also moved for summary

disposition, and reiterated Oakland County’s arguments related to Rafaeli. After deciding Rafaeli

was inapplicable to the case, the trial court was required to conclude that SNRI had done nothing

wrong, and therefore, plaintiffs’ unjust-enrichment claim must fail. Moreover, SNRI did not

receive a direct benefit from plaintiffs, which was required for an unjust-enrichment claim. The

corporate defendants additionally asserted the civil-conspiracy claim lacked merit because there

was no underlying tort, which was required for such a claim. Alternatively, the corporate

defendants argued Hayes’s and SMFJ’s claims were barred by the doctrine of res judicata because

of their previous litigation.

Later, Southfield, Zorn, and Siver (“the city defendants,” collectively), moved for summary

disposition under MCR 2.116(C)(7) and (C)(8). The city defendants reiterated the arguments

already made about application of Rafaeli to the case and the doctrine of res judicata with respect

4

As an example, plaintiffs’ representative, Louis Jackson, pleaded the following:

Plaintiff Louis Jackson had a Tax Delinquency of $34,161. On July 31,

2017, Oakland transferred the property to Southfield, which paid the minimum

amount due under [former] MCL § 211.78m. On September 13, 2017, the property

was conveyed by quit claim deed from Southfield to SNRI for $1.00. The property

was valued in excess of $225,000 at that time, resulting in the loss of over $190,000

of Equity.

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to Hayes and SMFJ. As to the civil-conspiracy claim under 42 USC 1983, the city defendants

argued Zorn and Siver were entitled to qualified immunity. Additionally, the claim failed as to all

parties because, given the limitation stated in Rafaeli, plaintiffs had not pleaded an underlying

constitutional violation. The city defendants urged the trial court to hold the amended version

MCL 211.78m should only be given prospective application.

Plaintiffs responded to the three motions for summary disposition, arguing defendants were

attempting to improperly limit the holding of Rafaeli. Plaintiffs insisted the Court in Rafaeli did

not rule out cases like this one, where the government bypassed a foreclosure sale, sold properties

for the minimum bid, and thereby eliminated the possibility of any excess proceeds from a sale.

Further, plaintiffs asserted Rafaeli should be given retroactive effect, as is the general rule for

decisions of our Supreme Court. As to the civil-conspiracy claim, plaintiffs noted that, under 42

USC 1983, such a claim requires only an underlying constitutional violation, which plaintiffs

satisfied by pleading a violation of the Takings Clause of the United States Constitution. With

respect to retroactive application of MCL 211.78m, plaintiffs argued the amendment of MCL

211.78t made clear the Legislature intended the amendments to be given retroactive effect if our

Supreme Court’s decision in Rafaeli was given retroactive effect. Plaintiffs encouraged the trial

court to do both of those things. Plaintiffs contended Zorn and Siver were not entitled to summary

disposition on the basis of qualified immunity because they violated a clearly established

constitutional right. The unjust-enrichment claim should survive summary disposition, plaintiffs

insisted, because SNRI received a benefit from plaintiffs via an intermediary, which was enough

under applicable caselaw. Lastly, plaintiffs asserted res judicata did not apply to Hayes’s and

SMJF’s claims because they did not and could not have brought the same claims in their previous

litigation.

One day after plaintiffs filed their response briefs, on January 6, 2022, this Court released

its opinion in Proctor v Saginaw Co Bd of Comm’rs, 340 Mich App 1; 985 NW2d 193 (2022). As

relevant to the present case, this Court held “that Rafaeli, . . . should be applied to pending cases,

such as those of the named plaintiffs, in which a challenge has been raised and preserved.”

Proctor, 340 Mich App at 23. In other words, the Proctor Court stated Rafaeli was to be given, at

least, partial retroactive effect. This Court in Proctor also reiterated the holding in Rafaeli related

to surplus proceeds from a tax-foreclosure sale: “ ‘We reject the premise that just compensation

requires that plaintiffs be awarded the fair market value of their properties so as to be put in as

good of position had their properties not been taken at all.’ ” Proctor, 340 Mich App at 28, quoting

Rafaeli, 505 Mich at 483.

In defendants’ reply briefs filed after Proctor was issued, defendants relied on the second

holding in the decision and argued it barred plaintiffs’ claims in the present case because there

were no surplus proceeds from a tax-foreclosure sale. Because there was no unjust-takings claim

under the facts presented in this case, defendants argued that all of plaintiffs’ derivative claims

similarly lacked merit. During oral arguments regarding the motions for summary disposition,

plaintiffs took their opportunity to address Proctor. Plaintiffs initially noted the Proctor decision

clearly meant Rafaeli applied to the present case to the extent it created a cause of action for an

unjust taking as a result of a tax-foreclosure sale. As for the second holding in Proctor, plaintiffs

reiterated their belief that the facts of Rafaeli rendered it distinguishable from the present case.

Briefly, because there were no foreclosure sales at a public auction in the present case, the

limitation in Rafaeli regarding surplus proceeds did not apply here.

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After taking the issues under advisement, the trial court granted defendants’ motions for

summary disposition and provided the following reasoning:

As an initial matter, the Court finds that the Supreme Court has not declared Rafaeli

retroactive and the lack of retroactive language in MCL 211.78m indicates a lack

of intent for retroactive application by the Legislature. Rafaeli clarified the extent

of the property interest available to Plaintiffs post-foreclosure and limited it to

excess proceeds from a tax foreclosure sale. In the instant case, Plaintiffs have

failed to identify a property interest that was taken from them. The Federal

Constitutional claims raised by Plaintiffs have been routinely rejected by Federal

Courts post Rafaeli. Plaintiffs’ claims of unjust enrichment and civil conspiracy

are without merit because there has been no unlawful or unjust conduct warranting

restitution. The claims of Plaintiffs Hayes and SMFJ are barred by res judicata

because they arise from the same core set of facts related to the foreclosure and

transfer of their former properties and could have been raised in the previous

lawsuit.

Plaintiffs moved the trial court to reconsider its decision because it seemingly ignored this

Court’s decision in Proctor. After ordering defendants to respond and considering those

responses, the trial court denied plaintiffs’ motion for reconsideration. This appeal followed.

II. RETROACTIVE APPLICATION OF RAFAELI

Plaintiffs argue the trial court erred when it refused to retroactively apply Rafaeli to the

present case. Given that there is binding precedent on exactly this question, we agree.

“Whether a judicial decision applies retroactively is a question that this Court reviews de

novo.” Jawad A Shah, MD, PC v State Farm Mut Auto Ins Co, 324 Mich App 182, 191; 920

NW2d 148 (2018). “The general rule is that judicial decisions are to be given complete retroactive

effect.” Michigan Educ Employees Mut Ins Co v Morris, 460 Mich 180, 189; 596 NW2d 142

(1999) (quotation marks, citation, and alterations omitted). However, “a more flexible approach

is warranted where injustice might result from full retroactivity.” Schafer v Kent Co, ___ Mich

App ___, ___; ___ NW2d ___ (2022) (Docket No. 356908); slip op at 3 (quotation marks and

citation omitted). Stated differently, “[p]rospective application of a judicial decision is a departure

from the general rule and is only appropriate in exigent circumstances.” Proctor, 340 Mich App

21 (quotation marks and citation omitted). “Our Supreme Court has held that prospective

application of a judicial decision ‘is appropriate when the holding overrules settled precedent or

decides an issue of first impression whose resolution was not clearly foreshadowed.’ ” Schafer,

___ Mich App at ___; slip op at 3-4, quoting Lindsey v Harper Hosp, 455 Mich 56, 68; 564 NW2d

861 (1997), superseded by statute on other grounds by MCL 700.2121 et seq.

Consequently, “[t]he threshold question in determining the application of a new decision

is whether the decision in fact clearly established a new principle of law.” Proctor, 340 Mich App

at 21 (quotation marks and citation omitted). When the threshold question is answered in the

affirmative, prospective application still is not guaranteed, because this Court must consider

“whether it is still appropriate to apply the judicial decision retroactively by analyzing the

following three factors: ‘(1) the purpose to be served by the new rule, (2) the extent of reliance on

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the old rule, and (3) the effect of retroactivity on the administration of justice.’ ” Schafer, ___

Mich App at ___; slip op at 4, quoting Pohutski v City of Allen Park, 465 Mich 675, 696; 641

NW2d 219 (2002).

As argued by plaintiffs, we need not engage in analysis of these rules regarding

retroactivity because this Court has already done so in published, and therefore binding, opinions.

Initially, in Proctor, 340 Mich App at 26-27, this Court held “our Supreme Court has indicated its

intent that Rafaeli be applied to cases in which the parties” had raised and preserved a similar

challenge before the Rafaeli decision was released. The panel in Proctor, 340 Mich App at 25-26,

was presented with a case like the present one, where the plaintiffs raised challenges to the clauses

in the GPTA that allowed an FGU to keep the surplus proceeds from a tax-foreclosure sale of their

real property before the Court decided Rafaeli. Consequently, the decision in Proctor, 340 Mich

App at 26-27, on its own, was determinative of the issue of whether Rafaeli should be applied in

the present case, because plaintiffs raised a similar argument at a similar time.

To the extent there was any doubt about applying Rafaeli retroactively, this Court recently

went one step further and held: “To remove uncertainty, we hold Rafaeli did not announce a new

rule of law but returned the law to that which was recognized at common law and by the ratifiers

of the Michigan Constitution of 1963, see Rafaeli, 505 Mich at 472, and should be given full

retroactive effect.” Schafer, ___ Mich App at ___; slip op at 5. The published opinions in Schafer

and Proctor have “precedential effect under the rule of stare decisis.” MCR 7.215(C)(2). Indeed,

in an even more recent decision questioning whether Rafaeli should be applied retroactively, this

Court stated: “Both Proctor and Schafer have applications for leave to appeal pending in our

Supreme Court;[5] unless and until the Court determines the issue of Rafaeli’s retroactivity, Schafer

conclusively resolves this issue, and we will not revisit it.” Breiner v Michigan, ___ Mich App

___, ___ n ___; ___ NW2d ___ (2022) (Docket Nos. 356501 and 356850); slip op at 11 n 6.

Briefly, then, we are bound by the decisions in Proctor, 340 Mich App at 26-27, and Schafer, ___

Mich App at ___; slip op at 5, to apply Rafaeli retroactively. The trial court was similarly bound

by Proctor, 340 Mich App at 26-27, at least, which had been released when the trial court entered

its order granting summary disposition in favor of defendants. To the extent the trial court declined

to retroactively apply Rafaeli, it erred.

III. FEDERAL TAKINGS CLAUSE

Plaintiffs contend the trial court improperly concluded the United States Constitution failed

to recognize a protected property interest in the equity plaintiffs had in their homes. We agree.

5

The application for leave to appeal in Schafer has since been granted by our Supreme Court,

Schafer v Kent Co, ___ Mich ___; 990 NW2d 876 (2023). However, this does not change the

precedential nature of the Schafer opinion because MCR 7.215(C)(2) (emphasis added)

specifically states: “The filing of an application for leave to appeal in the Supreme Court or a

Supreme Court order granting leave to appeal does not diminish the precedential effect of a

published opinion of the Court of Appeals.”

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A. STANDARD OF REVIEW

As noted above, “[w]hether a judicial decision applies retroactively is a question that this

Court reviews de novo.” Jawad A Shah, MD, PC, 324 Mich App at 191. In this issue, plaintiffs

also contend the trial court erred when it granted summary disposition in favor of Oakland County

as related to plaintiffs’ federal takings claims. The trial court order indicated it was entered under

MCR 2.116(C)(7), (C)(8), and (C)(10). However, because the arguments focus solely on whether

plaintiffs pleaded legally cognizable unjust-takings claims under the United States Constitution,

the summary-disposition order with respect to this issue is properly considered under MCR

2.116(C)(8).

We review de novo a circuit court’s summary disposition decision. Dalley

v Dykema Gossett PLLC, 287 Mich App 296, 304; 788 NW2d 679 (2010). “A court

may grant summary disposition under MCR 2.116(C)(8) if the opposing party has

failed to state a claim on which relief can be granted.” Id. (quotation marks and

brackets omitted). “A motion brought under subrule (C)(8) tests the legal

sufficiency of the complaint solely on the basis of the pleadings.” Id. (citation

omitted). All well-pleaded factual allegations are accepted as true and construed in

a light most favorable to the nonmoving party. Id. at 304-305. “Summary

disposition on the basis of subrule (C)(8) should be granted only when the claim is

so clearly unenforceable as a matter of law that no factual development could

possibly justify a right of recovery.” Id. at 305 (quotation marks and citation

omitted). [Nyman v Thomson Reuters Holdings, Inc, 329 Mich App 539, 543; 942

NW2d 696 (2019).]

Michigan appellate courts “also review de novo questions of constitutional law.” Bauserman v

Unemployment Ins Agency, 509 Mich 673, 686-687; 983 NW2d 855 (2022).

B. APPLICABLE LAW AND ANALYSIS

The trial court erred when it granted Oakland County’s motion for summary disposition of

plaintiffs’ claims under the Takings Clause of the United States Constitution.

“The United States Constitution precludes the federal government from taking private

property unless it is taken for a public use and with just compensation.” Blue Harvest, Inc v Dep’t

of Transp, 288 Mich App 267, 277; 792 NW2d 798 (2010), citing US Const, Am V. “That

prohibition, of course, applies against the States through the Fourteenth Amendment.” Webb’s

Fabulous Pharmacies, Inc v Beckwith, 449 US 155, 160; 101 S Ct 446; 66 L Ed 2d 358 (1980).

“Because the Constitution protects rather than creates property interests, the existence of a property

interest is determined by reference to ‘existing rules or understandings that stem from an

independent source such as state law.’ ” Phillips v Washington Legal Foundation, 524 US 156,

164; 118 S Ct 1925; 141 L Ed 2d 174 (1998), quoting Bd of Regents of State Colleges v Roth, 408

US 564, 577; 92 S Ct 2701; 33 L Ed 2d 548 (1972). However, the United States Supreme Court

has been clear that “ ‘a State, by ipse dixit, may not transform private property into public property

without compensation’ simply by legislatively abrogating [a] traditional rule” regarding

recognized property rights. Phillips, 524 US at 167, quoting Webb’s Fabulous Pharmacies, 449

US at 164. “In other words, at least as to confiscatory regulations (as opposed to those regulating

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the use of property), a State may not sidestep the Takings Clause by disavowing traditional

property interests long recognized under state law.” Phillips, 524 US at 167.

In Hall v Meisner, 51 F4th 185, 189-190 (CA 6, 2022), the Sixth Circuit considered the

Takings Clause of the United States Constitution and the above-cited federal caselaw in the context

of the exact scheme contemplated in this case:

In February 2018, per the [GPTA], Oakland County foreclosed on the home of

Tawanda Hall to collect a tax delinquency (meaning, as used here, the outstanding

taxes, interest, penalties, and fees) of $22,642; [Oakland] County then conveyed

the property to the City of Southfield for that same amount. [Southfield] in turn

conveyed the property for $1 to a for-profit entity, [SNRI], which later sold it for

$308,000. Pursuant to that same process, in February 2016, [Oakland] County

foreclosed on the home of Curtis and Coretha Lee for a tax delinquency of $30,547;

after the same series of conveyances, [SNRI] sold it for $155,000. [Oakland]

County likewise foreclosed on the home of Kristina Govan for a tax delinquency

of $43,350; [SNRI] (after the same conveyances) still holds title to the property.

[Hall, 51 F4th at 188-189.]

The plaintiffs in Hall sued Oakland County, Southfield, SNRI, and “certain officers of each,”

asserting “claims under the Takings Clause of the Fifth Amendment (as applied to the states

pursuant to the Fourteenth), along with various other federal and state claims.” Id. at 189. The

United States District Court for the Eastern District of Michigan dismissed those claims at the

summary-judgment phase of the litigation, relying primarily on our Supreme Court’s decision in

Rafaeli, 505 Mich at 462. Hall, 51 F4th at 189. The defendants in Hall made many of the same

arguments that defendants raise in the present case about whether Rafaeli applies to the facts of

this case. In dismissing the plaintiffs’ action, the district court agreed with the defendants’

interpretation of Rafaeli, as explained by the Sixth Circuit:

The district court, for its part, disagreed [with the plaintiffs] in a carefully

reasoned opinion. Specifically, the court held that, in the event of foreclosure, the

former property owner has a property right only to any surplus proceeds (meaning

proceeds in excess of the tax delinquency) obtained by the “foreclosing

governmental unit” after a foreclosure sale—if in fact there was one. For that

proposition the court relied upon the Michigan Supreme Court’s opinion in Rafaeli,

which arguably said as much, albeit in dictum. See 505 Mich. at 462. And here

the foreclosing governmental unit—[Oakland] County—had not obtained any

surplus at all from its disposition of the plaintiffs’ homes, because it conveyed them

(to the City of Southfield) for merely the amounts of their tax delinquencies. [Hall,

51 F4th at 189.]

The Sixth Circuit disagreed with the district court’s analysis, noting the district court’s

reading of Rafaeli was overly broad and would improperly permit Michigan to “ ‘sidestep the

Takings Clause by disavowing traditional property interests long recognized under state law.’ ”

Hall, 51 F4th at 190, quoting Phillips, 524 US at 167. When considering whether Michigan law

recognized an equitable interest in real property, the Sixth Circuit began its survey in the 1100s in

England, when a lender, or mortgagee, was permitted to take land when the entire sum owed was

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not paid by the debtor, or mortgagor, on a specific day referenced in the mortgage, known then as

“the law day.” Hall, 51 F4th at 190-191. “But irrevocable forfeiture of the debtor’s entire interest

in the land, no matter what the reason for the borrower’s failure to pay on the law day—for example

if, on that day, the lender was nowhere to be found—was before long regarded as an intolerably

harsh sanction for the borrower’s default.” Id. at 191. When the common law failed to provide

for a more tolerable result, England’s court of equity, the Court of Chancery, stepped in to fill the

gaps. Id. By the 1600s and 1700s, the Court of Chancery acknowledged a borrower’s “equitable

interest in the land,” and, in an effort to “vindicate that interest, the Court of Chancery recognized

the mortgagor’s ‘Equity of Redemption[,]’ which allowed him to regain legal title to the land by

repayment of the amount due even after the law day.” Id. (alteration in original). In 1759, a

preeminent English jurist, Lord Mansfield, stated a borrower’s equitable interest in real property

was an established property right that “could be devised or conveyed like any other interest in

property.” Id. 191-192.

“Yet the Court of Chancery also recognized, at least nominally, the lender’s right to

foreclose upon the land.” Id. at 192. Initially, the Court of Chancery permitted a “strict

foreclosure,” which “would extinguish the landowner’s equitable interest in the property and grant

the lender full ownership of land whose value might far exceed the amount of the unpaid debt.”

Id. “And even when the Court of Chancery granted a decree of strict foreclosure, it remained open

to vacatur years later if the landowner filed a petition to that effect.” Id. In the 1800s, American

courts began to consider these same issues and “were uniformly hostile to strict foreclosure in

cases—like this one—where the land’s value exceeded the amount of the debt.” Id. As early as

1827, the highest equitable court in New York “opined that, in cases where ‘the mortgaged

premises exceed the amount of the debt in value,’ strict foreclosure would be ‘unconscionable[.]’ ”

Id., quoting Lansing v Goelet, 9 Cow 346, 355 (NY, 1827) (alteration in Hall). The Sixth Circuit

noted the same ideal had been recognized in 1215, with the signing of the Magna Carta, which

“provided that a debtor’s lands could be taken only to the extent necessary to satisfy the debt.”

Hall, 51 F4th at 193. The American courts’ solution to this problem was “ ‘development of

foreclosure by sale (with the surplus over the debt refunded to the debtor) as a means of avoiding

the draconian consequences of strict foreclosure.’ ” Id., quoting BFP v Resolution Trust Corp,

511 US 531, 541; 114 S Ct 1757; 128 L Ed 2d 556 (1994) (emphasis added in Hall).

Further, these property rights did not exist solely in the context of mortgages, as the Sixth

Circuit noted, but instead “extended fully to foreclosures for payment of unpaid taxes.” Hall, 51

F4th at 193. “Indeed—given the absence of any agreement by the landowner (as with a mortgage)

to forfeit the land upon default—the foreclosure remedy was more limited in tax cases.” Id. To

support this statement, the Sixth Circuit cited to a decision of the United States Supreme Court

from 1808, in which it “held that a tax collector had ‘unquestionably exceeded his authority’ when

he had sold more land than ‘necessary to pay the tax in arrear.’ ” Id., quoting Stead’s Executors v

Course, 8 US 403, 414; 4 Cranch 403; 2 L Ed 660 (1808). The reason selling more property than

necessary to pay the tax debt was improper, the Sixth Circuit reasoned, is because the property

owner retained equitable title to the property, which “was an interest in property like any other.”

Hall, 51 F4th at 194. “To extinguish the equitable title of the debtor, the creditor was required” to

obtain an order of foreclosure and sell the property at a public sale. Id. (quotation marks and

citation omitted). Even then, “[u]nder those same long-settled principles, the debtor would then

be entitled to any surplus proceeds from the sale, which represented the value of the equitable title

thus extinguished.” Id., citing Bronson v Kinzie, 42 US (1 How) 311, 318; 11 L Ed 143 (1843).

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The Sixth Circuit then turned to the issue presented to it, which was whether the GPTA

violated the longstanding property rights discussed above. Hall, 51 F4th at 194. The Sixth Circuit

ruled the GPTA was unconstitutional to the extent it allowed Oakland County to take absolute title

to the plaintiffs’ properties without paying them for their equitable interests therein:

Michigan law flatly contravened all these long-settled principles when it

allowed Oakland County to take “absolute title” to the plaintiffs’ homes as payment

for their tax delinquencies. M.C.L. § 211.78k(6). By taking absolute title to the

plaintiffs’ property, [Oakland] County took their equitable titles; and [Oakland]

County did so without a public foreclosure sale and without payment to the

plaintiffs for the value of those titles. [Oakland] County’s foreclosure of these

properties was thus nothing less than a strict foreclosure—a practice that English

courts had steadfastly prevented as far back as the 1600s and that American courts

(not least Michigan ones) effectively eradicated as “unconscionable” and

“draconian” some 200 years ago. Lansing, 9 Cow. at 355; Resolution Trust Corp.,

511 U.S. at 541. [Oakland] County took the plaintiffs’ equitable titles without

paying for them simply because the [GPTA] said it could. Thus—by that ipse

dixit—the Act “sidestep[ped] the Takings Clause by disavowing traditional

property interests long recognized under state law.” Phillips, 524 U.S. at 167.

[Hall, 51 F4th at 194.]

The Sixth Circuit noted this attempt by Michigan to divest individuals of their equitable interest in

property was an aberration even in Michigan itself, citing cases where Michigan appellate courts

recognized equitable interests held by those in situations involving land-sale contracts, “timber

and mineral rights,” and the distribution of “marital assets in a divorce proceeding.” Id. at 194-

195, citing Graves v American Acceptance Mortg Corp, 469 Mich 608, 615; 677 NW2d 829

(2004); City of Marquette v Mich Iron & Land Co, 132 Mich 130, 132; 92 NW 934 (1903); In re

$55,336.17 Surplus Funds, 319 Mich App 501, 508-509; 902 NW2d 422 (2017); Reeves v Reeves,

226 Mich App 490, 493; 575 NW2d 1 (1997); Stevens Mineral Co v Michigan, 164 Mich App

692; 418 NW2d 130 (1987).

As indicated above, the Sixth Circuit did not believe our Supreme Court’s decision in

Rafaeli should be read so broadly as to preclude the plaintiffs’ action when there were no surplus

proceeds from a tax-foreclosure sale because a public sale never occurred. Hall, 51 F4th at 195.

The Sixth Circuit reasoned the right to surplus proceeds from a public tax-foreclosure sale

recognized in Rafaeli arose from the protected property interest an owner has in their equitable

title, stating:

The defendants, for their part, insist throughout their briefing that, under

Michigan law, a homeowner’s equitable interest in her property is limited to any

“surplus” proceeds after a foreclosure sale conducted by the “foreclosing

governmental unit.” See Rafaeli, 505 Mich. at 462. (Of which there were none

here, because there was no public foreclosure sale.) But that proposition, as shown

above, overlooks the very reasons why a property owner has a right to the surplus.

That right does not arise in manner akin to quantum mechanics, materializing

suddenly without any apparent connection to anything that existed before. The

owner’s right to a surplus after a foreclosure sale instead follows directly from her

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possession of equitable title before the sale. The surplus is merely the embodiment

in money of the value of that equitable title. [Hall, 51 F4th at 195.]

The Sixth Circuit concluded by opining: “On the facts alleged here, [Oakland] County took the

plaintiffs’ property without just compensation, in violation of the Takings Clause.” Id. at 196.

From this summary of Hall, it is plain the Sixth Circuit’s decision is particularly troubling

for Oakland County in the present case. Indeed, although plaintiffs raised federal takings claims

before the decision in Hall, they effectively have relied solely on application of that case in the

present appeal. To avoid its application, Oakland County argues this Court should either conclude

Hall applies prospectively only or was wrongly decided and, thus, should not be followed by this

Court. Addressing each in turn, Oakland County’s argument with regard to retroactivity are the

same arguments it raised when insisting Rafaeli should not be applied in this case. Pertinently,

Oakland County claims Hall announced a new rule of law, it could not have been foreseen, placed

an extra duty on Oakland County that did not previously exist, and would cause injustice to

Oakland County.

As discussed above, the general rule regarding judicial opinions is that they are to have

retroactive effect. Michigan Educ Employees Mut Ins Co, 460 Mich at 189. Stated differently,

“[p]rospective application of a judicial decision is a departure from the general rule and is only

appropriate in exigent circumstances.” Proctor, 340 Mich App 21 (quotation marks and citation

omitted). “The threshold question in determining the application of a new decision is whether the

decision in fact clearly established a new principle of law.” Id. (quotation marks and citation

omitted). When the threshold question is answered in the affirmative, this Court must consider

“whether it is still appropriate to apply the judicial decision retroactively by analyzing the

following three factors: ‘(1) the purpose to be served by the new rule, (2) the extent of reliance on

the old rule, and (3) the effect of retroactivity on the administration of justice.’ ” Schafer, ___

Mich App at ___; slip op at 4, quoting Pohutski, 465 Mich at 696.

According to the above-cited caselaw, the first question to consider is whether Hall “in fact

clearly established a new principle of law.” Proctor, 340 Mich App at 21 (quotation marks and

citation omitted). It is difficult to see how one could read the opinion in Hall and determine it was

announcing a new principle of law. Indeed, the Sixth Circuit surveyed the law regarding whether

an individual had an equitable interest in real property protected from seizure by creditors dating

back to the 1100s in England. According to the Sixth Circuit’s analysis, courts of equity have

practically never approved of a creditor taking absolute and irredeemable title to real property to

satisfy a debt worth less than the value of the property. Instead, such actions were identified as

being improper in the Magna Carta in 1215, by the Court of Chancery thereafter, and by American

courts when the issue was considered as early as 1827. An equitable interest in real property over

the amount of a debt, then, was a recognized property right under the Takings Clause of the United

States Constitution long before the GPTA was legislated. Consequently, in ruling that Oakland

County violated the federal constitution by taking equitable interest in real property without just

compensation, the Sixth Circuit was restoring the plaintiffs’ property rights that had existed for

hundreds of years.

Notably, our Supreme Court performed a similar review of the history of the law when

deciding Rafaeli, 505 Mich at 456-470. After doing so, the Court concluded “our 1963

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Constitution protects a former owner’s property right to collect the surplus proceeds following a

tax-foreclosure sale under Article 10, § 2.” Rafaeli, 505 Mich at 473. When addressing whether

Rafaeli should be applied retroactively, this Court noted it must first consider the threshold

question of whether “the decision in fact clearly established a new principle of law.” Proctor, 340

Mich App at 21 (quotation marks and citation omitted). The Proctor Court answered the question

in the negative, stating “we do not conclude that our Supreme Court in Rafaeli overruled clear and

uncontradicted caselaw or specifically announced a new rule that at least had not been previously

foreshadowed.” Proctor, 340 Mich App at 23. “Therefore, because this Court determined in

Proctor that this threshold question is not satisfied, then full retroactive application of Rafaeli is

appropriate.” Schafer, ___ Mich App at ___ n ___; slip op at 6 n 3.

Oakland County has provided no reason why the same logic would not apply with respect

to Hall, 51 F4th at 190-194, which conducted a substantially similar discussion of the same general

ideas presented in Rafaeli. The Sixth Circuit in Hall did not overrule “clear and uncontradicted

caselaw or specifically announce[] a new rule that at least had not been previously foreshadowed.”

Proctor, 340 Mich App at 23. Consequently, the threshold question we must consider when

determining whether a judicial opinion should be given retroactive effect has been answered in the

negative. Id. Upon such a conclusion, full retroactive application is appropriate. Schafer, ___

Mich App at ___ n ___; slip op at 6 n 3. Thus, Oakland County’s attempt to escape the holding in

Hall, 51 F4th at 196, on the basis of retroactivity lacks merit.

As noted, Oakland County also argues Hall was incorrectly decided and should not be

followed by this Court. Inherent in this argument is that we are “not bound by decisions of any

lower federal courts, because ‘[a]lthough lower federal court decisions may be persuasive, they

are not binding on state courts[.]’ ” Bienenstock & Assoc, Inc v Lowry, 314 Mich App 508, 515;

887 NW2d 237 (2016), quoting Abela v Gen Motors Corp, 469 Mich 603, 606-607; 677 NW2d

325 (2004). While such is true, it is also true that “[w]ith regard to issues involving federal law,

this Court is bound by decisions of the United States Supreme Court . . . .” Bienenstock & Assoc,

314 Mich App at 515 (emphasis added). In its briefing, Oakland County insists Hall was wrongly

decided on the basis of a longstanding precedent of the United States Supreme Court. Indeed,

Oakland County asserted with confidence the Supreme Court would reverse Hall. However, on

June 20, 2023, the Supreme Court denied Oakland County’s petition for writ of certiorari. Meisner

v Hall, ___ US ___; ___ S Ct ___; ___ L Ed 2d ___ (2023) (No. 22-874). In addition to denying

certiorari with respect to Hall, the Supreme Court quoted Hall in a recent opinion when discussing

how property rights are defined, along with references to state law, under the Takings Clause of

the United States Constitution:

But state law cannot be the only source. Otherwise, a State could “sidestep the

Takings Clause by disavowing traditional property interests” in assets it wishes to

appropriate. Phillips, 524 U.S., at 167; see also Webb’s Fabulous Pharmacies [],

449 U.S. [at] 164 []; Hall [], 51 F.4th [at] 190 (Kethledge, J., for the Court) (“[T]he

Takings Clause would be a dead letter if a state could simply exclude from its

definition of property any interest that the state wished to take.”). [Tyler v

Hennepin Co, Minn, 598 US 631, 638; 143 S Ct 1369; 215 L Ed 2d 564 (2023).]

While the Supreme Court’s citation to and quotation of Hall certainly should not be

considered a validation of all of its holdings, the Tyler opinion also impliedly adopted the reasoning

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in Hall as it related to a property owner’s equitable interest after tax foreclosure. Tyler, 598 US at

642-643. Most relevantly, the Supreme Court in Tyler discussed its previous decision in United

States v Lawton, 110 US 146; 3 S Ct 545; 28 L Ed 100 (1884). The Supreme Court described the

case and its rulings in the following manner:

The property owner [in Lawton] had an unpaid tax bill under the 1862 Act for

$170.50. [Lawton, 110 US at 148]. The Federal Government seized the taxpayer’s

property and, instead of selling it to a private buyer, kept the property for itself at a

value of $1100. Ibid. The property owner sought to recover the excess value from

the Government, but the Government refused. Ibid. The 1861 Act explicitly

provided that any surplus from tax sales to private parties had to be returned to the

owner, but it did not mention paying the property owner the excess value where the

Government kept the property for its own use instead of selling it. See 12 Stat. 304.

We held that the taxpayer was still entitled to the surplus under the statute, just as

if the Government had sold the property. Lawton, 110 U.S., at 149-150. Though

the 1861 statute did not explicitly provide the right to the surplus under such

circumstances, “[t]o withhold the surplus from the owner would be to violate the

Fifth Amendment to the Constitution and to deprive him of his property without

due process of law, or to take his property for public use without just

compensation.” Id., at 150. [Tyler, 598 US at 643.]

In discussing Lawton, the Supreme Court recognized the situation was slightly different than a

case where there was a tax-foreclosure sale. Id. When the Supreme Court turned to its explanation

of Lawton, it had just referenced an earlier decision involving excess proceeds from a tax-

foreclosure sale. Id. at 642, citing United States v Taylor, 104 US 216, 218-219; 26 L Ed 721

(1881). The Supreme Court then described Lawton, 110 US at 149-150, as “extend[ing] a

taxpayer’s right to surplus even further” than the actual proceeds from a tax-foreclosure sale.

Tyler, 598 US at 643.

Although the Supreme Court in Tyler was considering a case involving surplus proceeds

from tax-foreclosure sales, it also stated an unjust taking occurs under the federal constitution

when the government keeps the entire property itself instead of holding a tax-foreclosure sale. Id.,

citing Lawton, 110 US at 149-150. In Lawton, the Supreme Court noted the government took title

to the entire property subject to a tax debt and associated fees of $170.50. Lawton, 110 US at 149.

Because the property was “purchased” by the taxing authority, “no money was paid on the sale.”

Id. Instead, the entire property was retained by the United States, and the Supreme Court noted

the property was valued at $1,100.6 Lawton, 110 US at 149. Despite there being no actual

6

The opinion does not state exactly how this value was calculated. Instead, the Supreme Court

stated, “[t]he land in the present case [was] ‘struck off for’ and ‘bid in’ for the United States at the

sum of $1,100 . . . .” Lawton, 110 US at 149. It would be reasonable to assume such was the

assessed value of the property at issue, but again, the Supreme Court never specifically stated it

was. Id. The Supreme Court in Tyler, 598 US at 643, explained it as the United States keeping

“the property for itself at a value of $1100.” Interestingly, our Supreme Court discussed Lawton

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proceeds, the Supreme Court determined the $929.50 difference between the value of the property

and tax delinquency (including associated costs and fees), must be treated “in like manner as if it

were the surplus of purchase money received by the United States from a third person on a sale of

the land to such person for the non-payment of the tax.” Id. at 149-150. Thus, the Supreme Court

in Lawton effectively stated a property owner has an equitable interest in the value of their property

above the tax debt and associated fees, even when a tax-foreclosure sale does not occur. Id. This

was, at least, how the Supreme Court interpreted Lawton when deciding Tyler, 598 US at 643

(“We held that the taxpayer was still entitled to the surplus under the statute, just as if the

Government had sold the property.”).

In light of these cases, Oakland County’s argument that Hall was wrongly decided has lost

nearly all of the minimal weight it carried at the time Oakland County raised it. Pertinently, since

Oakland County filed its brief, the United States Supreme Court denied certiorari in Hall, cited

and quoted Hall when discussing recognized property rights under the Takings Clause of the

United States Constitution, and described Lawton in a manner that would be entirely consistent

with the holding in Hall. Consequently, even though we are not strictly bound to follow the

holding in Hall, 51 F4th at 196, it appears to be well-founded on precedent of the United States

Supreme Court, which is binding on us, Tyler, 598 US at 643; Lawton, 110 US at 149-150.

Therefore, we hold that Hall, 51 F4th at 196, applies in this case and stands for the proposition

that Oakland County committed a taking under the United States Constitution when it took title to

plaintiffs’ properties under the GPTA without paying plaintiffs just compensation for their equity

in the subject properties. Because the trial court determined plaintiffs had not pleaded an unjust-

takings claim under the United States Constitution, it erred. As succinctly stated by the Sixth

Circuit when describing the exact situation presented in this case: “On the facts alleged here,

[Oakland] County took the plaintiffs’ property without just compensation, in violation of the

Takings Clause.” Hall, 51 F4th at 196. Thus, summary disposition under MCR 2.116(C)(8) was

unwarranted and is reversed.

IV. MICHIGAN TAKINGS CLAUSE

Plaintiffs contend the trial court improperly concluded our Supreme Court’s decision in

Rafaeli did not permit plaintiffs’ takings claims against Oakland County under the Michigan

Constitution. We agree.7

“[T]he Michigan Constitution requires that ‘[p]rivate property shall not be taken for public

use without just compensation.’ ” Blue Harvest, 288 Mich App at 277, quoting Const 1963, art

10, § 2. “The government’s seizure of real property is the clearest form of a taking requiring just

compensation.” Rafaeli, 505 Mich at 455. “But a taking can, and often does, encompass more

than just the physical deprivation of real, tangible property; it also includes the government’s

interference with one’s personal, intangible property.” Id., citing AFT Mich v Michigan, 497 Mich

197, 218; 866 NW2d 782 (2015). While the general law regarding unjust takings under the

when deciding Rafaeli, 505 Mich at 458-459, but did not comment on the fact that no money was

exchanged in the case and the governmental entity simply kept the property.

7

The same standard of review stated above in Section III.A of this opinion also applies here.

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Michigan Constitution is enlightening, the parties do not dispute that the outcome of this case

depends on application of Rafaeli.

In Rafaeli, 505 Mich at 445-446, our Supreme Court considered the same statutory

subsections at issue in the present case, which allowed Oakland County to take absolute title to a

taxpayer’s real property, regardless of the amount of the tax debt, after conducting the tax-

foreclosure process. The case differed from the present case in one important way. Specifically,

in Rafaeli, 505 Mich at 438-439, the plaintiffs’ properties were not purchased for the minimum

bid by another governmental entity under former MCL 211.78m(1), but were sold at a public tax-

foreclosure sale by the FGU, Oakland County. These public auctions resulted in surplus proceeds

retained by Oakland County—over $20,000 in one instance and over $75,000 in the other. Rafaeli,

505 Mich at 439. The GPTA did not provide any process by which the former property owners

could petition for reimbursement of the excess proceeds of the tax-foreclosure sales. Id. at 449.

While the parties in that case raised various challenges to Oakland County’s actions, our Supreme

Court decided the issue solely under the Takings Clause of the Michigan Constitution. Id. at 441,

478-479.

The Court noted the Michigan Takings Clause protected property interests that would have

been recognized by the ratifiers of the 1963 Michigan Constitution. Rafaeli, 505 Mich at 456. To

determine this, our Supreme Court conducted an exhaustive review of English common law,

American common law, Michigan common law, and Michigan statutory law. Id. at 456-473. After

doing so and citing many of the same cases discussed by the Sixth Circuit in Hall, the Court

provided the following conclusion:

It is clear that our 1963 Constitution protects a former owner’s property

right to collect the surplus proceeds following a tax-foreclosure sale under Article

10, § 2. This right existed at common law; was commonly understood to exist in

the common law before the 1963 ratification of our Constitution; and continues to

exist after 1963, as our decision in Dean [v Michigan Dep’t of Natural Resources,

399 Mich 84; 247 NW2d 876 (1976),] demonstrates. Because this common-law

property right is constitutionally protected by our state’s Takings Clause, the

Legislature’s amendments of the GPTA could not abrogate it. While the

Legislature is typically free to abrogate the common law, it is powerless to override

a right protected by Michigan’s Takings Clause. [Rafaeli, 505 Mich at 473.]

Of course, the issues in the present case arose from some of the specific statements made

by the Court in Rafaeli, beginning with “our 1963 Constitution protects a former owner’s property

right to collect the surplus proceeds following a tax-foreclosure sale under Article 10, § 2.”

Rafaeli, 505 Mich at 473 (emphasis added). Defendants contend this means the holding in Rafaeli

does not apply in the present case because there were no surplus proceeds from a foreclosure sale—

Oakland County sold the property to Southfield for the “minimum bid” under former MCL

211.78m(1), which meant Oakland County only got what it was owed. Defendants recognize other

statements from Rafaeli, 505 Mich at 476-477, including that the “plaintiffs’ takings claim was

not compensable until their properties sold for an amount in excess of their tax debts,” and “a

former property owner only has a right to collect the surplus proceeds from the tax-foreclosure

sale; that is, a former property owner has a compensable takings claim if and only if the tax-

foreclosure sale produces a surplus.” The Court also addressed the plaintiffs’ arguments in Rafaeli

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that the measure of damages should be on the basis of the fair market value of the properties sold

when the tax-foreclosure sale produces less than that amount. Id. at 482. Our Supreme Court

responded to this argument in the following manner:

We reject the premise that just compensation requires that [the] plaintiffs be

awarded the fair market value of their properties so as to be put in as good of

position had their properties not been taken at all. First, this would run contrary to

the general principle that just compensation is measured by the value of the property

taken. In this case, the property improperly taken was the surplus proceeds, not

[the] plaintiffs’ real properties. Second, [the] plaintiffs are largely responsible for

the loss of their properties’ value by failing to pay their taxes on time and in full.

If [the] plaintiffs were entitled to collect more than the amount of the surplus

proceeds, not only would they be taking money away from the public as a whole,

but they would themselves benefit from their tax delinquency.

Accordingly, when property is taken to satisfy an unpaid tax debt, just

compensation requires the foreclosing governmental unit to return any proceeds

from the tax-foreclosure sale in excess of the delinquent taxes, interest, penalties,

and fees reasonably related to the foreclosure and sale of the property—no more,

no less. [Id. at 483-484 (citations omitted).]

Defendants also cite this Court’s decision in Proctor, 340 Mich App at 27, when it

considered a similar argument: “[The p]laintiffs argue that, under the state Constitution, plaintiffs

are entitled to recover more than merely the difference between the foreclosure-sale price and the

delinquent taxes (plus interest, costs, and penalty fees, etc.).” More specifically, the “[p]laintiffs

claim that they are also entitled to recover their loss of equity that resulted from the forfeiture and

sale of the properties for less than market value.” Id. Relying on our Supreme Court’s decision

in Rafaeli, 505 Mich at 483-484, the panel in Proctor, 340 Mich App at 27-28, determined the

argument lacked merit.

Initially, it is apparent why the specific holdings of our Supreme Court in Rafaeli, and the

interpretation of those holdings in Proctor, could be considered damaging to plaintiffs’ unjust-

takings claims under the Michigan Constitution in the present case. After all, Rafaeli and Proctor

are generally binding on this Court and stated a former property owner can only obtain just

compensation in the form of the surplus proceeds of a tax-foreclosure sale. As defendants

consistently point out, there were no such surplus funds in this case. However, upon closer

inspection, the decisions in Rafaeli and Proctor are distinguishable from the present case. As

indicated above, the important difference between this case and those cases is that a public tax-

foreclosure sale occurred in Rafaeli and Proctor, but not here.

Defendants attempt to gloss over this distinction by claiming the language in Rafaeli was

clear—an unjust taking only occurs when there are surplus proceeds from a tax-foreclosure sale

and the government retains those proceeds. They insist the Court in Rafaeli, 505 Mich at 477,

could not have been more explicit when it said, “a former property owner has a compensable

takings claim if and only if the tax-foreclosure sale produces a surplus.” The Sixth Circuit in Hall,

51 F4th at 189, interpreted this highly specific language as “dictum” as it pertained to the same

facts of the present case. It is logical that, in a case where a public foreclosure sale has occurred,

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the value of the property at issue should be calculated by reference to the sale price. After all, as

noted by our Supreme Court in Rafaeli, 505 Mich at 483, if instead the government was required

to compensate property owners for value over the price of sale, the government would lose money

in the process. As explained by the Sixth Circuit, when there is a public tax-foreclosure sale, “[t]he

surplus is merely the embodiment in money of the value of [the property owners’] equitable title.”

Hall, 51 F4th at 195. In other words, the surplus funds realized after a tax-foreclosure sale flow

directly from the equitable interest the property owners continued to maintain after forfeiture. Id.

The right to a surplus “does not arise in manner akin to quantum mechanics, materializing suddenly

without any apparent connection to anything that existed before. The owner’s right to a surplus

after a foreclosure sale instead follows directly from her possession of equitable title before the

sale.” Id.

In Rafaeli, our Supreme Court had no reason to consider what result would be required

when the government merely retained title to the subject property and transferred it to another

governmental entity for the cost of the tax debt and associated fees and costs. The right to the

retention of surplus proceeds necessarily relies on an arms-length public auction, which allows for

a real-time evaluation of the value of the subject property. When no such auction occurs, such as

was the case here, the lack of surplus proceeds can hardly be described as not a taking—plaintiffs

still lost their equitable title in their properties. The crux of Rafaeli was that the government cannot

receive more than it was owed (including costs and fees, of course). In cases where there was a

public tax-foreclosure sale, the amount the FGU received was the monetary value for which the

property was sold. When there is no public sale, what did the FGU receive? A piece of real

property with a certain value. Despite the lack of an exchange of currency, the government still

received more than it was owed. Consequently, like the Sixth Circuit, we conclude the specific

language in Rafaeli about former property owners having only an interest in the surplus from a

public tax-foreclosure sale was obiter dicta. “Obiter dicta are not binding precedent. Instead, they

are statements that are unnecessary to determine the case at hand and, thus, lack the force of an

adjudication.” Secura Ins Co v Stamp, 341 Mich App 574, 585 n 9; 991 NW2d 244 (2022).

Because the facts in Proctor, 340 Mich App at 7-8, also reflected that tax-foreclosure sales

occurred, this Court’s discussion of Rafaeli’s holdings is likewise obiter dicta as related to this

case, and thus, not binding on us presently. Secura Ins Co, 341 Mich App at 585 n 9.

Indeed, reading Rafaeli in this manner resolves issues that would otherwise arise if this

Court interpreted Rafaeli in the manner requested by defendants. First, when the Rafaeli Court

reached its decision, it did not have the benefit of the Sixth Circuit’s decision in Hall, 51 F4th at

196, nor the United States Supreme Court’s decision in Tyler, 598 US at 643. As discussed above,

those two cases state and imply, respectively, that the Takings Clause of the United States

Constitution protects plaintiffs’ equitable interests in real property under the circumstances

presented in this case. Id.; Hall, 51 F4th at 196. This is troubling as related to Rafaeli, because in

that case, our Supreme Court plainly stated “that Michigan’s Takings Clause has been interpreted

to afford property owners greater protection than its federal counterpart when it comes to the state’s

ability to take private property for a public use under the power of eminent domain,” Rafaeli, 505

Mich at 454, citing Wayne Co v Hathcock, 471 Mich 445; 684 NW2d 765 (2004), and again later,

“our holding speaks to Michigan’s Takings Clause, which this Court has, on occasion, interpreted

as offering broader protection to property owners,” Rafaeli, 505 Mich at 477, citing AFT Mich,

497 Mich at 217 n 9. It would be peculiar, then, for Rafaeli to be read in a manner allowing for

greater protection under the Takings Clause of the United States Constitution than that under the

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related state constitutional provision. Interpreting Rafaeli in the manner suggested above remedies

this potential problem, and provides an indication such was the Michigan Supreme Court’s

intended meaning.

Second, by interpreting Rafaeli as recommended, the Court’s citation to Lawton, 110 US

at 149-150, when discussing the property interests recognized at common law would be more

logical. Rafaeli, 505 Mich at 457-459. As discussed above and summarized by the Supreme Court

in Tyler, 598 US at 643, the Lawton decision recognized an unjust-takings claim when there was

no public tax-foreclosure sale, but instead, the FGU simply maintained title to the subject property.

In such a case, the “surplus” was calculated by reference to the value of the property as opposed

to the sale price, because no such sale price existed. Tyler, 598 US at 643. By relying on Lawton,

our Supreme Court indicated such property rights were also recognized in Michigan, though the

Rafaeli Court had no reason to later specify the difference when a case involves a public tax-

foreclosure sale and another case does not. Therefore, the Court did not express itself in a manner

that is clearly applicable to the present case, but implied such an understanding of the common

law in place when the 1963 Michigan Constitution was ratified. Thus, we hold Rafaeli applies to

the present case and does not preclude plaintiffs’ unjust-takings claims under the Michigan

Constitution. Instead, in situations when there is not a public tax-foreclosure sale, Rafaeli requires

the “surplus” to be calculated on the basis of the value of the property retained, less what was

legally owed.8 Because the trial court erred in ruling otherwise and granting Oakland County’s

motion for summary disposition, we reverse.

V. RETROACTIVITY OF MCL 211.78M AND 78T

Plaintiffs argue the trial court erred by refusing to give retroactive application to the

amended language in MCL 211.78m and 78t. Because there is binding precedent on the issue, we

agree.

This issue “concerns the statutory interpretation and retroactive application of amended

statutes. We review both these matters de novo.” Buhl v City of Oak Park, 507 Mich 236, 242;

968 NW2d 348 (2021). Once again, the trial court ignored binding precedent when deciding MCL

211.78m and 78t should not be retroactively applied to cases like the present one, when claims

similar to those in Rafaeli were raised and pending on appeal when the Legislature amended the

statute. Proctor, 340 Mich App at 25-26. As relayed above, Southfield was able to purchase the

properties at issue in this case for the minimum bid because former MCL 211.78m(1) permitted it

to do so. Indeed, the statute gave a city the right of first refusal, after the state, to purchase tax-

foreclosed properties within the city’s jurisdiction for the minimum bid, which was just the taxes

and associated fees and costs, so long as such was for a public purpose. Id. After Rafaeli, the

8

To further make the point, we question whether the Court’s decision in Rafaeli, 505 Mich at 429,

would be held to its strictest term if there was a tax-foreclosure sale but there was evidence the

FGU took steps to ensure such was not “public,” such as holding the sale at 1:00 a.m. on Sunday,

or not giving any notice of the sale. If our Supreme Court believed the FGU engaged in such

behavior to ensure it could obtain the subject property for the minimum bid, it would hardly seem

logical that the property owner would be barred from bringing an unjust-takings claim under the

holding in Rafaeli. The same logic applies here.

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Legislature amended the GPTA, 2020 PA 256, adding MCL 211.78t, which provided an avenue

for property owners to request surplus proceeds from tax-foreclosure sales of their real properties.

The addition of MCL 211.78t contained references to the amended version of MCL 211.78m, 2020

PA 255, which no longer permitted cities to purchase tax-foreclosed properties for the minimum

bid when claims had been made by the property owners for surplus funds. Instead, when such

claims had been made, the amended version of MCL 211.78m(1) requires the city to pay “the

greater of the minimum bid or the fair market value of the property.”

The Legislature’s addition of MCL 211.78t acknowledged there may be property owners

seeking relief whose interests had been foreclosed, properties sold, and surplus funds kept before

our Supreme Court decided Rafaeli. With respect to such individuals, under MCL 211.78t(1)(b),

the Legislature stated their claims would only be permitted if they provided the proper notice of

intention and “the Michigan supreme court orders that its decision in Rafaeli, [505 Mich 429],

applies retroactively.” In Proctor, 340 Mich App at 25-26, this Court considered whether the

amended version of the GPTA should apply to the plaintiffs who had raised their challenges to the

tax-foreclosure system in place before Rafaeli and the relevant amendments:

The properties at issue in the present case were sold under § 78m “before

July 18, 2020”; accordingly, MCL 211.78t(1)(b)(i) now provides the exclusive

mechanism for the former property owners to claim the surplus proceeds from a tax

sale. The statute indicates [the] plaintiffs’ claims would not be viable unless our

Supreme Court issues a ruling that Rafaeli is to be applied retroactively. However,

2020 PA 256 had an effective date of December 22, 2020, and the Legislature did

not specify that the new statute had retroactive application. [The p]laintiffs’

lawsuits and claims of appeal were all filed well before the effective date. Further,

despite the wording of MCL 211.78t(1)(b)(i), this Court is empowered to rule that

Rafaeli applies to [the] plaintiffs’ claims because they were pending on appeal at

the time of the Rafaeli decision and the enactment of 2020 PA 256. See Hathcock,

471 Mich at 484; see also Davis v State Employees’ Retirement Bd, 272 Mich App

151, 155; 725 NW2d 56 (2006) (“[S]tatutes and amended statutes are to be applied

prospectively unless the Legislature manifests an intent to the contrary.”). MCL

211.78t(1)(b)(i) sets forth when a claim can be made, but plaintiffs had already

made their claims before the Rafaeli decision and before the enactment of the

statute. It would neither be logical nor just for the plaintiffs in Rafaeli to be entitled

to relief, see Rafaeli, 505 Mich at 485, but the present plaintiffs denied relief, even

though both sets of [the] plaintiffs raised and preserved the pertinent issue. This

result is further buttressed by the detailed analysis and conclusion in Rafaeli, which

our Supreme Court reached by consideration and application of the constitutional

rights that existed at the time of the adoption of the 1963 Michigan Constitution.

[Proctor, 340 Mich App at 25-26.]

While the above analysis is a bit confusing and seems to conflate the questions of retroactivity of

Rafaeli with retroactivity of the amended version of the GPTA, the ultimate holding was clear—

the plaintiffs were entitled to relief under the amended statutes because they preserved their claims

before Rafaeli and the amendments. Proctor, 340 Mich App at 25-26. Under the doctrine of stare

-23-

decisis, of course, the Proctor Court’s decision is binding on us. MCL 7.215(C)(2).9 We therefore

vacate the trial court’s dismissal of any of plaintiffs’ claims reliant on the retroactive application

of the amended version of MCL 211.78m and 78t.

VI. PLAINTIFFS’ REMAINING CLAIMS

Plaintiffs contend the trial court improperly granted summary disposition in favor of

defendants with respect to plaintiffs’ inverse-condemnation, unjust-enrichment, and civil-

conspiracy claims. We agree in part, and disagree in part.

A. STANDARDS OF REVIEW

The trial court granted summary disposition under MCR 2.116(C)(7), (C)(8), and (C)(10).

“We review de novo the circuit court’s resolution of defendant[’s] summary disposition motion.”

Stephens v Worden Ins Agency, LLC, 307 Mich App 220, 227; 859 NW2d 723 (2014).

“[S]ummary disposition pursuant to MCR 2.116(C)(7)” is proper when “the moving party was

entitled to judgment as a matter of law.” Wells Fargo Bank, NA v Null, 304 Mich App 508, 518;

847 NW2d 657 (2014). “Summary disposition may be granted under MCR 2.116(C)(7) when a

claim is barred by res judicata or collateral estoppel.” Allen Park Retirees Ass’n, Inc v City of

Allen Park, 329 Mich App 430, 443; 942 NW2d 618 (2019). “In reviewing a ruling pursuant to

subrule (C)(7), we consider all documentary evidence submitted by the parties, accepting as true

the contents of the complaint unless affidavits or other appropriate documents specifically

contradict them.” Seldon v Suburban Mobility Auth for Regional Transp, 297 Mich App 427, 432-

433; 824 NW2d 318 (2012) (quotation marks, citation, and alterations omitted). Further, “the

circuit court must accept the nonmoving party’s well-pleaded allegations as true and construe the

allegations in the nonmovant’s favor.” Stephens, 307 Mich App at 227 (quotation marks, citation,

and alterations omitted). Likewise, “[t]he applicability of the doctrine of res judicata constitutes a

question of law that this Court also reviews de novo.” Beyer v Verizon North Inc, 270 Mich App

424, 428; 715 NW2d 328 (2006).

We review de novo a circuit court’s summary disposition decision. Dalley

[], 287 Mich App [at] 304 []. “A court may grant summary disposition under MCR

2.116(C)(8) if the opposing party has failed to state a claim on which relief can be

granted.” Id. (quotation marks and brackets omitted). “A motion brought under

subrule (C)(8) tests the legal sufficiency of the complaint solely on the basis of the

pleadings.” Id. (citation omitted). All well-pleaded factual allegations are accepted

as true and construed in a light most favorable to the nonmoving party. Id. at 304-

305. “Summary disposition on the basis of subrule (C)(8) should be granted only

when the claim is so clearly unenforceable as a matter of law that no factual

development could possibly justify a right of recovery.” Id. at 305 (quotation marks

and citation omitted). [Nyman, 329 Mich App at 543.]

9

We note that, on remand, the trial court will potentially have the benefit of a decision of our

Supreme Court with respect to the retroactivity of Rafaeli, which would settle the retroactivity of

MCL 211.78t under the plain language of the statute.

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“This Court [] reviews de novo decisions on motions for summary disposition brought

under MCR 2.116(C)(10).” Pace v Edel-Harrelson, 499 Mich 1, 5; 878 NW2d 784 (2016). A

motion for summary disposition under MCR 2.116(C)(10) “tests the factual sufficiency of the

complaint . . . .” Joseph v Auto Club Ins Ass’n, 491 Mich 200, 206; 815 NW2d 412 (2012). “In

evaluating a motion for summary disposition brought under this subsection, a trial court considers

affidavits, pleadings, depositions, admissions, and other evidence submitted by the parties, MCR

2.116(G)(5), in the light most favorable to the party opposing the motion.” Maiden v Rozwood,

461 Mich 109, 120; 597 NW2d 817 (1999). Summary disposition is proper where there is no

“genuine issue regarding any material fact.” Id. “A genuine issue of material fact exists when

reasonable minds could differ on an issue after viewing the record in the light most favorable to

the nonmoving party.” Auto-Owners Ins Co v Campbell-Durocher Group Painting & Gen

Contracting, LLC, 322 Mich App 218, 224; 911 NW2d 493 (2017) (quotation marks and citation

omitted).

B. INVERSE CONDEMNATION

First, we consider plaintiffs’ inverse-condemnation claim against Oakland County. “A

property owner may bring an inverse condemnation action seeking just compensation for a ‘de

facto taking,’ when the state fails to follow [the proper] procedures.” Dorman v Clinton Twp, 269

Mich App 638, 645; 714 NW2d 350 (2006). There is “[n]o precise formula” for determining when

a taking has occurred; however, “a ‘taking’ is not narrowly construed, nor does it require an actual

physical invasion of the property.” Hinojosa v Dep’t of Natural Resources, 263 Mich App 537,

548; 688 NW2d 550 (2004). “Pertinent factors include whether ‘the governmental entity abused

its exercise of legitimate eminent domain power to plaintiff’s detriment.’ ” Id., quoting Heinrich

v Detroit, 90 Mich App 692, 698; 282 NW2d 448 (1979). “When considering whether a de facto

taking has occurred, we must consider the form, intensity, and the deliberateness of the government

actions in the aggregate.” Dorman, 269 Mich App at 645 (quotation marks omitted). In most

cases alleging inverse condemnation, the plaintiff is required to establish two things: “(1) that the

government’s actions were a substantial cause of the decline of the property’s value and (2) that

the government abused its powers in affirmative actions directly aimed at the property.” Blue

Harvest, 288 Mich App at 277. There must also be a “causal connection” between the damages

claimed by the plaintiff and the actions of the government. Id.

Initially, we question whether an inverse-condemnation claim is the appropriate claim for

the wrongs identified by plaintiffs under the facts of this case. Specifically, plaintiffs do not allege

a “de facto taking” by the governmental entities, but instead, they allege an actual taking. Dorman,

269 Mich App at 645. Indeed, the facts reveal that Oakland County and then Southfield took title

to plaintiffs’ properties, which included their equitable interests. There were not allegations the

actions of the governmental entities resulted in a reduction of value of the properties, essentially

amounting to a taking. Instead, the allegation is the governmental entities took title to plaintiffs’

properties without providing just compensation. Thus, the proper analysis need not focus on

whether inverse condemnation occurred, but whether Oakland County committed an unjust taking.

For the reasons discussed above, plaintiffs have pleaded unjust-takings claims against Oakland

County under the Michigan and United States Constitutions. Therefore, there seemingly is no

reason to maintain an alternatively titled claim on the basis of the same constitutional provisions.

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Nevertheless, our Supreme Court in Rafaeli, 505 Mich at 454, stated the plaintiffs in that

case brought an “inverse-condemnation action alleging that [the] defendants have taken [the]

plaintiffs’ properties without just compensation.” As discussed above, the Court concluded the

plaintiffs’ claims were legitimate under the Michigan Constitution. Id. at 484. The “defendants’

retention and subsequent transfer of those proceeds into the county general fund amounted to a

taking of [the] plaintiffs’ properties under Article 10, § 2 of our 1963 Constitution.” Rafaeli, 505

Mich at 484-485. The Court’s decision in Rafaeli states that a claim of inverse condemnation is

colorable under facts similar to those presented in this case. Thus, it appears that, under Rafaeli,

505 Mich at 484-485, the trial court erred when it summarily disposed of plaintiffs’ inverse-

condemnation claims, and we now reverse that decision.10

C. RES JUDICATA

Plaintiffs argue the trial court improperly determined Hayes’s and SMFJ’s claims were

barred by res judicata. The city and corporate defendants argue Hayes’s and SMFJ’s claims were

barred by the doctrine of res judicata because they could have been brought in their previous action.

Notably, despite Oakland County not presenting any argument on this issue, absent error by the

trial court, Hayes’s and SMFJ’s claims against Oakland County for unjust takings and inverse

condemnation would not be permitted to continue. The trial court’s order granting summary

disposition in favor of defendants spoke broadly about applying the doctrine of res judicata against

Hayes and SMFJ: “The claims of Plaintiffs Hayes and SMFJ are barred by res judicata because

they arise from the came core set of facts related to the foreclosure and transfer of their former

properties and could have been raised in the previous lawsuit.”

“The doctrine of res judicata is employed to prevent multiple suits litigating the same cause

of action.” Adair v Michigan, 317 Mich App 355, 365; 894 NW2d 665 (2016) (quotation marks

and citation omitted). “The doctrine bars a second, subsequent action when (1) the prior action

was decided on the merits, (2) both actions involve the same parties or their privies, and (3) the

matter in the second case was, or could have been, resolved in the first.” Washington v Sinai Hosp

of Greater Detroit, 478 Mich 412, 418; 733 NW2d 755 (2007) (quotation marks and citation

omitted). “The doctrine bars not only claims already litigated, but also every claim arising from

the same transaction that the parties, exercising reasonable diligence, could have raised but did

not.” Adair, 317 Mich App at 365 (quotation marks and citation omitted). Michigan courts “use[]

a transactional test to determine if the matter could have been resolved in the first case.”

Washington, 478 Mich at 420. “The ‘transactional’ test provides that the assertion of different

kinds or theories of relief still constitutes a single cause of action if a single group of operative

facts give rise to the assertion of relief.” Id. (quotation marks and citation omitted). “Whether a

factual grouping constitutes a transaction for purposes of res judicata is to be determined

pragmatically, by considering whether the facts are related in time, space, origin or motivation,

[and] whether they form a convenient trial unit . . . .” Adair, 317 Mich App at 366-367 (quotation

marks and citation omitted; alterations in original).

10

Regardless of the nomenclature used, though, plaintiffs are only entitled to one form of relief,

whether it be unjust takings or inverse condemnation.

-26-

After the judgment of foreclosure was entered, Hayes and SMFJ joined others in a lawsuit

against the Oakland County Treasurer and Meisner (“the treasury defendants”), Southfield, and

SNRI. In that case, Hayes and SMFJ contended that title to their property had been taken by the

treasury defendants, improperly deeded to Southfield under its right of first refusal under former

MCL 211.78m(1), and then conveyed to SNRI. Hayes and SMFJ alleged, in part, that they had

been the victim of a scheme to take their equity in their properties. The purpose of the scheme,

Hayes and SMFJ alleged, was to remove African-American homeowners from Southfield. Thus,

the lawsuit implied Southfield’s exercise of it right of first refusal was not for a proper “public

purpose” as required by the statute. Hayes and SMFJ also claimed they were denied adequate

notice before title to their property was taken. As damages for the harm suffered, Hayes and SMFJ

requested “equitable relief if possible, or actual damages sustained including the loss of equity” in

the properties, considering the tax debt was significantly less than the fair market value of those

properties. The treasury defendants, Southfield, and SNRI moved the trial court in that case for

summary disposition under MCR 2.116(C)(8). The trial court granted the motion, reasoning that

Hayes’s and SMFJ’s claims had no merit. Hayes and SMFJ did not appeal that decision.

Plaintiffs do not dispute the first two elements of res judicata are fulfilled, but focus on the

third element instead. The final element for res judicata to apply is that “the matter in the second

case was, or could have been, resolved in the first.” Washington, 478 Mich at 418 (citation

omitted). Some of the arguments in the present case undoubtedly were not argued in Hayes and

SMFJ’s first case. Indeed, plaintiffs insist there were no unjust-takings claims under the United

States and Michigan Constitutions in the previous litigation. The question then becomes, could

those claims have been brought in Hayes’s and SMFJ’s prior action? Id. The most important fact

related to this issue is that, in the original case, Hayes and SMFJ were again part of a putative class

action. Thus, their ability to make claims in that case were limited by the types of claims common

to their class. In that case, the class was defined as African-American homeowners who had lost

title to their homes, and the equity accrued therein, under the same system challenged in this case.

The complaint alleged that the scheme resulted in housing discrimination on the basis of race, with

the ultimate goal being to remove African-American homeowners from the city. In this case, the

class was not limited by racial divides, and thus, the claims did not have to pertain to fair-housing

practices. Given the premature state of the record, it is not entirely clear whether Hayes and

SMFJ’s class in the first case could have brought the same claims as their class in this case. Thus,

because Hayes and SMFJ may have been limited in bringing all of the claims here in the putative

class action of which they previously were members, it is likely that the additional claims in this

case could not have been resolved in the previous case, and res judicata should not apply. Id.

Consequently, the trial court erred when it granted summary disposition of Hayes’s and SMFJ’s

claims on the basis of res judicata, especially because the order was entered before any discovery

has taken place. Id. We vacate that portion of the trial court’s order without prejudice.

D. UNJUST ENRICHMENT AND CIVIL CONSPIRACY

Plaintiffs challenge the trial court’s ruling related to their unjust-enrichment claims, which

were brought solely against SNRI, and their civil-conspiracy claims brought against the city and

corporate defendants. Both of these claims fail for the same reason, and therefore will be addressed

together. Our Supreme Court “has long recognized the equitable right of restitution when a person

has been unjustly enriched at the expense of another.” Michigan Ed Employees Mut Ins Co, 460

Mich at 197. “Whether a specific party has been unjustly enriched is generally a question of fact

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. . . [but] whether a claim for unjust enrichment can be maintained is a question of law[.]” Morris

Pumps v Centerline Piping, Inc, 273 Mich App 187, 193; 729 NW2d 898 (2006). “A claim of

unjust enrichment requires the complaining party to establish (1) the receipt of a benefit by the

other party from the complaining party and (2) an inequity resulting to the complaining party

because of the retention of the benefit by the other party.” Karaus v Bank of NY Mellon, 300 Mich

App 9, 22-23; 831 NW2d 897 (2012).

This Court has held that “not all enrichment is necessarily unjust.” Landstar Express

America, Inc v Nexteer Auto Corp, 319 Mich App 192, 205; 900 NW2d 650 (2017). In the context

of a third party potentially benefiting from previous dealings, this Court expounded upon that rule

in Karaus:

A third party is not unjustly enriched when it receives a benefit from a contract

between two other parties, where the party benefited has not requested the benefit

or misled the other parties. . . . Otherwise stated, the mere fact that a third person

benefits from a contract between two other persons does not make such third person

liable in quasi-contract, unjust enrichment, or restitution. Moreover, where a third

person benefits from a contract entered into between two other persons, in the

absence of some misleading act by the third person, the mere failure of performance

by one of the contracting parties does not give rise to a right of restitution against

the third person. [Karaus, 300 Mich App at 24, quoting Morris Pumps, 273 Mich

App at 196, quoting 66 Am Jur 2d, Restitution and Implied Contracts, § 32, p 628.]

“A civil conspiracy is a combination of two or more persons, by some concerted action, to

accomplish a criminal or unlawful purpose, or to accomplish a lawful purpose by criminal or

unlawful means.” Advocacy Org for Patients & Providers v Auto Club Ins Ass’n, 257 Mich App

365, 384; 670 NW2d 569 (2003) (quotation marks and citation omitted). “However, a claim for

civil conspiracy may not exist in the air; rather, it is necessary to prove a separate, actionable tort.”

Id. (quotation marks and citation omitted). The corporate defendants rely on this caselaw by

arguing plaintiffs’ civil-conspiracy claims fail because they did not plead a separate, actionable

tort. Id. However, plaintiffs clarified they brought a civil-conspiracy claim under 42 USC 1983,

which has different requirements and does not require a separate, actionable tort:

A civil conspiracy is an agreement between two or more persons to injure another

by unlawful action. Express agreement among all the conspirators is not necessary

to find the existence of a civil conspiracy. Each conspirator need not have known

all of the details of the illegal plan or all of the participants involved. All that must

be shown is that there was a single plan, that the alleged coconspirator shared in the

general conspiratorial objective, and that an overt act was committed in furtherance

of the conspiracy that caused injury to the complainant. [Spadafore v Gardner, 330

F3d 849, 854 (CA 6, 2003) (quotation marks and citation omitted).]11

11

We acknowledge we are “not bound by decisions of any lower federal courts, because

‘[a]lthough lower federal court decisions may be persuasive, they are not binding on state

-28-

A claim under 42 USC 1983, which includes a civil-conspiracy claim, is premised on a violation

of a constitutional right, not a common-law tort. Radu v Herndon & Herndon Investigations, Inc,

302 Mich App 363, 389-390; 838 NW2d 720 (2013). Consequently, plaintiffs’ failure to plead a

separate, actionable tort was not a valid reason for summarily disposing of their civil-conspiracy

claims under 42 USC 1983.

As indicated above, there is a single reason why plaintiffs’ unjust-enrichment and civil-

conspiracy claims must fail—causation. The second element of a claim for unjust enrichment

requires plaintiffs to plead and prove “an inequity resulting to [plaintiffs] because of the retention

of the benefit by” SNRI. Karaus, 300 Mich App at 22-23 (emphasis added). With respect to the

civil-conspiracy claim, plaintiffs were required to plead and prove “an overt act was committed in

furtherance of the conspiracy that caused injury to” plaintiffs. Spadafore, 330 F3d at 854

(emphasis added). Briefly then, both of these claims have a causation element. Karaus, 300 Mich

App at 22-23; Spadafore, 330 F3d at 854. Notably, plaintiffs have not pleaded those claims against

Oakland County. Instead, the unjust-enrichment claim is against SNRI only, and the civil-

conspiracy claim is against the city and corporate defendants. Given this, plaintiffs cannot prove

causation.

From the analysis above, it is plain the unjust taking faced by plaintiffs occurred when

Oakland County took absolute title to their properties without any manner under the GPTA of

allowing plaintiffs to request and receive just compensation for their equitable interests in those

properties. See Rafaeli, 505 Mich at 484-485; Hall, 51 F 4th at 196. As explained by the Sixth

Circuit, the constitutional violation was Oakland “County’s taking of ‘absolute title’ to the

plaintiffs’ homes. Before that event, the plaintiffs held equitable title; after it, they held no title at

all. Thus, so far as the Takings Clause is concerned, [Oakland] County alone is responsible for

the taking of the plaintiffs’ property.” Id. Importantly, under the GPTA as it then existed, at the

moment Oakland County took title to plaintiffs’ properties in this case, regardless of what

happened afterward, there was no way plaintiffs would ever be paid for their equitable interests in

their properties. To put it another way, plaintiffs would have been in the exact same position if

Oakland County sold the properties at a public auction, kept the properties for itself, or sold the

properties to Michigan for the minimum bid. Regardless of what occurred, no money was ever

going to be paid to plaintiffs. Thus, all of the damages were done when Oakland County acted

and could not have changed regardless of the subsequent actions of the city and corporate

defendants.

Therefore, with respect to the city and corporate defendants, as related to plaintiffs’ claims

against them, they simply did not cause plaintiffs to suffer damages. Because causation is an

element of both claims, the trial court properly granted summary disposition in favor of the city

and corporate defendants as related to those claims. See Karaus, 300 Mich App at 22-23;

Spadafore, 330 F3d at 854. Simply put, because plaintiffs did not plead facts that could ever

sustain causation in their civil-conspiracy and unjust-enrichment claims, they “failed to state []

courts[.]’ ” Bienenstock & Assoc, 314 Mich App at 515, quoting Abela, 469 Mich at 606-607.

However, we find this decision from the Sixth Circuit to be persuasive.

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claim[s] on which relief can be granted,” warranting summary disposition under MCR

2.116(C)(8). Nyman, 329 Mich App at 543 (quotation marks and citation omitted).12

VII. CONCLUSION13

For all of the reasons stated above, we reverse in part, vacate in part, affirm in part, and

remand for further proceedings consistent with this opinion. We do not retain jurisdiction.

/s/ Michael F. Gadola

/s/ Mark J. Cavanagh

/s/ Kirsten Frank Kelly

12

We express no opinion on whether Oakland County has a claim against any of the other

defendants in this case, considering the facts presented here. We merely note that if the properties

had gone to an auction, Oakland County would only be responsible for the surplus funds it realized

under Rafaeli. Further, those would be benefits Oakland County actually received, which

presumably would dampen the blow of having to repay it. On the facts presented here, it seems

the city and corporate defendants only caused one entity to suffer actual damages—Oakland

County.

13

In light of our decisions above, the remaining issues raised by the parties have been rendered

moot, and we decline to consider them. See TM v MZ, 501 Mich 312, 316-317; 916 NW2d 473

(2018).

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