Opposition Brief — Smith v. Michigan Department of Treasury

ee ry ——_ ———

a " Supreme Court, U.S.

FILED

i APR 28 1988

_— JOSEPH F-SPANIOL, JR.

CLERK

No. 87-1628

{

IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1987

JACK SMITH, GILBERT SMITH, ARTHUR

SMITH and FRANCES SMITH,

- Petitioners,

v

STATE OF MICHIGAN, DEPARTMENT OF

TREASURY and ROBERT A. BOWMAN, State Treasurer,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE SUPREME COURT OF THE STATE OF MICHIGAN

RESPONDENTS’ BRIEF IN OPPOSITION

FRANK J. KELLEY

Attorney General

Louis J. Caruso

Solicitor General

Counsel of Record

761 Law Building

Lansing, MI 48913

(517) 373-1124

Milton I. Firestone

George M. Elworth

Assistant Attorneys General

PRINTED BY SPEAKER-HINES AND THOMAS, INC., LANSING, MICHIGAN—1988

is al

i

QUESTIONS PRESENTED

1. Whether Petitioners timely and properly raised federal

questions in the state courts and whether those courts de-

cided federal questions?

2. Where Petitioners’ claims, based upon an unissued

1839 state tax stock certificate, were summarily dismissed by

the state court because the statute of limitation had expired,

is the judgment based upon an adequate and independent

state ground, thereby precluding this Court’s review?

3. Whether Petitioners were deprived of due process or

equal protection in state court proceedings resulting in a

judgment of summary disposition under Michigan court

rules, statutes and decisions?

I

il

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ...... 2.2.2... esse eeeees i

INDEX OF AUTHORITIES . .. 0.0... ccc ccccecsevess iii

OPINIONS BELAW . . oo. c iss is Sena oe eeees 1

JURISDICTION ....60450:cifeeheseeeneee eee eee 2

COUNTERSTATEMENT OF THE CASE............ 2

REASONS FOR DENYING THE WRIT ............ 4

1. The questions presented are not federal questions. . 4

2. Petitioners’ failure to present any federal claim to

the Michigan courts precludes Petitioners from pur-

suing such claims in this Court...............-. 6

3. The summary dismissal of Petitioners’ claims, based

on an unissued 1839 state tax stock certificate be-

cause the statute of limitation had expired, is a judg-

ment based on an adequate and independent state

4. The proceedings of the Court of Claims did not deny

Petitioners Gue ProCOSS . 6.6 cccewesesscsssceees 8

5. The dismissal of Petitioners’ claim by the Court of

Claims, as being time-barred, was not a denial of

equal protection ......5..dsauneeenew he ees eens 12

CONCLUSION . ......0604cs eee eee eee eee 14

INDEX OF AUTHORITIES

Cases Page

Atchafalaya Land Co v F-B. Williams Cypress Co,

ie neg ich a yy oad are 9 4-0.6 08 0% 8 7

Bowe v Scott, 233 US 658 (1914) .................. 5)

Callender v Florida, 383 US 270 (1966) ............. 2

Ellis v Dixon, 349 US 458 (1955)............ 000000. 12

Flushing Nat’l Bank v Municipal Assistance Corp,

40 NY2d 731; 390 NYS2d 22; 358 NE2d 848 (1976)... 13

Frishett v State Farm Mutual Auto Ins Co,

er ee re 1

Klinger v Missouri, 80 US (13 Wall.) 257 (1871)....... 7

Missouri Pacific R. Co v Larabee, 234 US 459 (1914) .. 12

Mitcham v Detroit, 355 Mich 182; 94 NW2d 388 (1959). 6

Patterson v New York, 432 US 197 (1977)............ 8

Pittsburgh C.C. & St. L. R. Co v Backus,

a 5 ee ae 10

Rogers v Jones, 214 US 196 (1909) ................. 8

Uo ¥ Serves, 200 US 462 (1923) ..... 2... 0. ee eee 2

Webb v Webb, 451 US 493 (1981)................. 6, 7

Statutes

tad es Lie kg dw & 6 5 960s wwe a0 G0 wei 5

MCL 600.6419; MSA 27A.6419.................... 8

Meus mene: MOON SIA.G4S2.. ww ees 8

MCL 600.6443; MSA 27A.6443..................05. 8

Other Sources Page

a ee Cr. aa De es csawedne akan stab se 5

er ee lh a eae ae a eek ee 5

ee ete SE PROSE iy epee O OTT e 9

Supreme Court Rule 17 «2. 2.6 cee cance neces i

No. 87-1628

IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1987

JACK SMITH, GILBERT SMITH, ARTHUR

SMITH and FRANCES SMITH,

Petitioners,

Vv

STATE OF MICHIGAN, DEPARTMENT OF

TREASURY and ROBERT A. BOWMAN, State Treasurer,

Respondents.

OPINIONS BELOW

The opinion of Michigan Court of Claims (hereafter

“Court of Claims”), granting Respondents’ motion for sum-

mary disposition and dismissing Petitioners’ complaint, was

entered July 17, 1985 (Pet. App. E). Petitioners’ motions for

rehearing and other post-judgment relief were denied by or-

der of the Court of Claims, dated September 17, 1985 (Pet.

App. D).

The decision of the Court of Claims was affirmed by the

Michigan Court of Appeals on July 1, 1987. The opinion is

reported at 163 Mich App 178; 414 NW2d 374 (1987) (Pet.

App. B).

On December 30, 1987, the highest court of the state, the

Michigan Supreme Court, denied Petitioners’ application for

leave to appeal the decision of the Michigan Court of Ap-

peals. See 429 Mich 888 (1987) (Pet. App. A).

The decision of the state court for which review by certio-

rari is being sought is that of the Michigan Court of Appeals.

The Michigan Supreme Court has held (Frishett v State Farm

a

Mutual Auto Ins Co, 378 Mich 733, 734 [1966}) that where it

enters an order denying leave to appeal, such action “ ‘im-

ports no expression of opinion upon the merits of the case; ”

citing this Court's decision in US v Carver, 260 US 482, 490

(1923), with respect to the effect of a denial of writ of certio-

rari by this Court.

Accordingly, the instant petition for a writ of certiorari

should properly be treated as being directed to the Court of

Appeals for the State of Michigan. See Callender v Florida,

383 US 270 (1966).

JURISDICTION

The jurisdiction of this Court has not been invoked be-

cause (1) Petitioners questions do not present federal issues,

(2) Petitioners did not raise federal questions below, and (3)

the Michigan courts, including the Michigan Court of Ap-

peals, did not decide any federal questions in this case.

COUNTERSTATEMENT OF THE CASE

This case involves a claim against the State of Michigan for

payment of an 1839 tax stock certificate (bond). The claim

was summarily dismissed by the Court of Claims for two

reasons. First, the applicable statute of limitation had long

since expired. Second, there was no genuine issue of mate-

rial fact, and the state was entitled to judgment as a matter of

law: in that Petitioners’ Certificate No. 84 had never been

issued and was cancelled (Pet. App. E).

The dismissal of Petitioners’ claim was affirmed by the

Michigan Court of Appeals on the basis of the expiration of

the statute of limitation (Pet. App. B). The Michigan Su-

preme Court declined to grant Petitioners leave to appeal

the decision of the Michigan Court of Appeals (Pet. App. A).

=

The record in this case is devoid of any indication that the

Petitioners have raised any federal question. A careful read-

ing of Petitioners’ “Statement” shows that they do not even

claim to have specifically asserted either due process or

equal protection rights during the proceedings before the

Court of Claims (Pet. pp 5-10). Petitioners assert that they

raised the issue of due process in the Court of Appeals (Pet.

p 9). Petitioners stated, as follows, on p 7 of their brief to the

Michigan Court of Appeals, dated July 1, 1986:

“In addition, by denying the filing of the Amended

Complaint, Appellants [Petitioners] have been signifi-

cantly prejudiced by the limitation of certain arguments

to be made to this Court, have lost legitimate claims

against Appellees [Respondents] and have been de-

prived of due process of law.”

Petitioners repeated this statement in their brief to the

Michigan Supreme Court, at p 7, dated July 22, 1987. No

authority was cited in support of this assertion. Neither of

the indices to authorities for those briefs of Petitioners made

any reference to either the Due Process Clause or the Equal

Protection Clause of the Fourteenth Amendment. No refer-

ence to either due process or equal protection was made by

the Petitioners in their “Statement of Questions Involved” in

those briefs.

The 1839 bond issue is summarized in footnote 3 to the

opinion of the Michigan Court of Appeals (Pet. App. B, pp

11-13). The certificates were essentially delinquent tax

bonds. The proceeds of the 1839 issue were to be distrib-

uted to counties which had experienced revenue shortfalls

on account of overdue property taxes. The state was to be

reimbursed by the counties when the delinquent property

taxes were finally collected. While the state hoped to sell

$100,000 of these bonds in denominations of $1,000 each,

only 31 bonds were sold. These bonds were not redeemed

a

on their stated date of maturity, July 15, 1842, due to a lack

of funds; but all 31 bonds were redeemed by 1845. (See Pet.

App. B, pp 8-9, for the wording of Certificate No. 84 con-

cerning the amount owed, maturity date, interest rate, and

coupons to be presented for payment of interest.)

Respondents located ten unissued certificates from the

1839 issue in the archives of the State of Michigan; and each

had the signatures of the state officials, text, and coupons

lined out in the same manner as Certificate No. 84. Their

numbers were 32, 44, 45, 46, 49, 51, 81, 85, 87, and 91. The

Court of Claims concluded that Respondents had not issued

any certificates over No. 31 for the following reasons: (1) the

state would not have issued the certificates from the 1839

bond issue out of sequence, (2) the state records showed that

Certificates Nos. 1-31 were issued and redeemed, and the

financial account of that activity was set forth in minute de-

tail, and (3) there were no state records to show issuance of a

certificate with a number higher than No. 31 (Pet. App. E,

pp 22-28). In addition, the Court of Claims concluded that

Certificate No. 84 had been cancelled when it stated:

“The color of the signature of the ink of the [State]

Treasurer is different from the rest of the ink used, and I

can’t imagine why anybody would line out the State

Treasurer's signature with another ink, or [the Auditor

General] Mr. Howard's signature for that matter, unless

the purpose was to have some destructive value as to

the documents.” (Pet. App. E, pp 30-31).

REASONS FOR DENYING THE WRIT

1. The questions presented are not federal questions.

Petitioners’ questions, while referring to “due process of

law” and “equal protection of the law,’ do not refer to the

a

U.S. Constitution. As such, Petitioners have failed to present

questions for review under 28 USC 1257, which provides, in

relevant part:

“Final judgments or decrees rendered by the highest

court of a State in which a decision could be had, may

be reviewed by the Supreme Court as follows:

(3) By writ of certiorari...where the validity of a State

statute is drawn in question on the ground of its being

repugnant to the Constitution, treaties or laws of

the United States, or where any title, right, privilege or

immunity is specifically set up or claimed under the

Constitution, treaties or statutes of...the United States.”

Bowe v Scott, 233 US 658, 665 (1914), held that if the

constitution of the state in whose courts the case was heard

has a due process clause, a claim that “due process” has

been denied is deemed to refer to that clause in the state

constitution:

“{Ijt is settled that such an averment making no refer-

ence to the Constitution of the United States and assert-

ing no express rights thereunder is solely referable to

the state constitution, which in this instance has a due

process clause, and affords no basis whatever for invok-

ing the jurisdiction of this court.”

Due process and equal protection are provided for, as fol-

lows, in the Michigan Constitution of 1963:

“No person shall be denied the equal protection of

the laws....” [Art 1, § 2.]

“No person shall...be deprived of life, liberty or prop-

erty, without due process of law....” [Art 1, § 17.]

a

Since the questions presented do not raise federal issues,

the petition should not be granted.

2. Petitioners’ failure to present any federal claim to the

Michigan courts precludes Petitioners from pursuing

such claims in this Court.

No mention of any federal constitutional claim was made

by Petitioners in the proceedings before the Court of

Claims.

In Webb v Webb, 451 US 493, 496-497 (1981), this Court

declined to assume that a reference to full faith and credit by

a litigant in a state court proceeding was to the clause of

that name in the U.S. Constitution when that litigant was

attempting te seek the review of the case by way of certio-

rari. The only mention of due process in the Michigan appel-

late courts was by way of passing reference to the inability of

Petitioners to amend their complaint. However, the phrase

“due process” used by Petitioners was not tied to the U.S.

Constitution.

Petitioners tailed to argue any position regarding due

process in the Michigan appellate courts, and they did not

even mention equal protection at any level. Under Michigan

law, failure to brief a question on appeal is tantamount to

abandoning it. Mitcham v Detroit, 355 Mich 182, 203; 94

NW2d 388 (1959).

The lack of discussion of these topics by the Michigan

Court of Appeals in its opinion in this case (Pet. App. B) also

serves to demonstrate that Petitioners did not raise these

issues on appeal. Indeed, according to Webb v Webb, 451 US

493, 495:

“This Court has frequently stated that when ‘the high-

est state court has failed to passupon a federal question,

it will be assumed that omission was due to want of

proper presentation in the state courts, unless the ag-

grieved party in this Court can affirmatively show the

contrary. ”

Moreover, in their application for leave to appeal to the

Michigan Supreme Court, Petitioners did not complain of a

failure of the Michigan Court of Appeals to rule on issues of

due process and equal protection.

Since the Michigan appellate courts did not decide the

federal claims asserted here by Petitioners, none of the crite-

ria listed in Rule 17 of the Supreme Court Rules for the

granting of writs of certiorari have been met.

Since Petitioners have failed to show that their federal

claims were adequately presented in the Michigan courts,

the Petition should be rejected. Webb vy Webb, 451 US 493,

501-502 (1981).

3. The summary dismissal of Petitioners’ claims, based on

an unissued 1839 state tax stock certificate because the

statute of limitation had expired, is a judgment based on

an adequate and independent state ground.

Klinger v Missouri, 80 US (13 Wall.) 257, 263 (1871),

stated that where it appears that a state court bases its judg-

ment on an adequate and independent state ground, this

Court will not take jurisdiction of the case. Statutes of limita-

tion were recognized as constitutional in Atchafalaya Land

Co v F. B. Williams Cypress Co, 258 US 190, 197 (1922):

“The act of prescription was a proper exercise of sov-

ereignty.... They [statutes of limitation] do not necessarily

lessen rights of property or impair the obligation of con-

=—

tracts. Their requirement is that the rights and obliga-

tions be asserted within a prescribed time. If that be

adequate, the requirement is legal, and its justice and

wisdom have the testimony of the practices of the

world.”

The applicable 20-year Michigan statute of limitation was

an adequate and independent basis for the dismissal of Peti-

tioners’ complaint by the Court of Claims, thereby preclud-

ing the claims of Petitioners from this Court's review. Rogers

v Jones, 214 US 196, 204 (1909).

4. The proceedings of the Court of Claims did not deny

Petitioners due process.

This Court has declared that the states enjoy wide latitude

in establishing the rules governing the administration of

their laws:

“Among other things, it is normally ‘within the power

of the State to regulate procedures under which its laws

are carried out...and its decision in this regard is not

subject to proscription under the Due Process Clause

unless ‘it offends some principle of justice so rooted in

the traditions and conscience of our people as to be

ranked as fundamental. ” [Patterson v New York, 432 US

197, 201-202 (1977).]

The Court of Claims has exclusive jurisdiction to adjudi-

cate contract and tort claims against the state and its agen-

cies. MCL 600.6419; MSA 27A.6419. Cases in the Court of

Claims are required by statute to be heard by a judge with-

out a jury. MCL 600.6443; MSA 27A.6443. In general, the

practices and procedures of the Court of Claims are the

sume as those prescribed for the circuit courts of general

jurisdiction in this state. MCL 600.6422; MSA 27A.6422.

i

cs

Since March 1, 1985, proceedings in the Court of Claims

have been governed by the Michigan Court Rules of 1985

and prior to that date by the Michigan General Court Rules

of 1963. The Court of Claims administration of this case,

pursuant to those rules, provided due process to Petitioners

by way of notice and an opportunity to be heard.

There were more than ten months between the filing of

Petitioners’ complaint in the Court of Claims on August 17,

1984 and the evidentiary hearing on June 26, 1985. During

that time, Petitioners were entitled to conduct discovery un-

der the court rules. The record is devoid of any restraint on

Petitioners utilizing the usual discovery methods, such as in-

terrogatories, depositions, and requests for production of

documents.

Petitioners were informed of Respondents’ defenses (1)

through a motion filed on September 5, 1984 for accelerated

judgment based on, among other things, statutes of limiia-

tion, and (2) through a supplemental brief filed on Decem-

ber 17, 1984 which outlined in detail (22 pages and affidavits

of the State Archivist and State Documents Librarian) the

history of the 1839 tax stock issue and included copies from

the State Archives of ten unissued certificates from that is-

sue, which like the Petitioners’ Certificate No. 84, were

higher than No. 31 and had their signatures, text, and cou-

pons lined out in ink.

On June 26, 1985, an evidentiary hearing was held pursu-

ant to notice from the Court of Claims. MCR 2.116(1)(3)

authorizes a court to hold an immediate trial to resolve dis-

puted issues of fact concerning a statute of limitation de-

fense. Three witnesses were called by Respondents, and two

witnesses were called by Petitioners. Nine exhibits were of-

fered by Respondents, and eight were received by the court.

At the conclusion of the evidentiary hearing on June 26,

ii tle

1985, the Court of Claims discussed with Petitioners’ coun-

sel his intention to review Respondents’ hearing brief and

afforded him an opportunity to make that review:

“THE COURT: All right. What type of argument do

you desire?

“MR. DeBOER: | would like the opportunity to re-

view it [Respondents’ hearing brief] and file a respon-

sive argument or brief, brief of that sort. I could go on

for the next...30 minutes, but I don’t know that I’m re-

sponding to everything in that and I would like to do

that in writing.

“THE COURT. All right. I think what I will do, and

you can call and verify tomorrow, is finish this matter

then on Monday with any oral argument you desire. If

you wish to file something by then, that’s fine’ [Tran-

script, pp 89-90.]

Following the hearing, the Court of Claims granted Re-

spondents’ motion for summary disposition based on the

statute of limitation having expired (Pet. App. C, p 18). The

Court of Claims also concluded that Respondents were enti-

tled to a judgment as a matter of law and that no genuine

issues of material fact had been raised by Petitioners in op-

position to the testimony and exhibits presented by Respon-

dents establishing that Certificate No. 84 had never been

issued and had ink lines drawn through it (Pet. App. E, pp

18-32).

Petitioners’ motion for a rehearing was denied on Septem-

ber 17, 1985 (Pet. App. D). However, there is no due process

right to a rehearing. Pittsburgh C.C. & St. L. R. Co v Backus,

154 US 421, 426-427 (1894).

< CAR NS Ove a

It should be noted that Petitioners nade no reference in

ther rguments to the Michigan appellate courts to a lack of

oppe ity for discovery or a lack of notice as to Respon-

dents — gal position or defenses.

Rega. ing Petitioners’ contention that they should have

been p mitted to amend their complaint, the Michigan

Court o. Appeals stated that the amendment would have

been futile:

“Finally, plaintiffs’ [Petitioners’] contention that they

should be allowed to amend their complaint is without

merit. Leave to amend a complaint is properly denied

where the amendment would be futile. Meyer v Hubbell,

117 Mich App 699; 324 NW2d 139 (1982), lv den 417

Mich 993 (1983). Since plaintiffs [Petitioners] have

made no effort to explain how their second amended

complaint avoids the statute of limitation problems en-

countered by their first complaint, it is clear that the

amendment would be futile and was properly disal-

lowed.” [Pet. App. B, pp 14-15.]

It should also be noted that Petitioners failed to obtain a

ruling from the Court of Claims on their motion for leave to

file an amended complaint. Their motion- was filed on Au-

gust 6, 1985 with a notice of hearing for November 26, 1985.

The record shows no action, after August 6, 1985, by Peti-

tioners to obtain a ruling from the Court of Claims on this

issue.

In light of the foregoing, it should be concluded that Peti-

tioners’ claims of denials of due process are without merit.

aaiiias

5. The dismissal of Petitioners’ claim by the Court of

Claims, as being time-barred, was not a denial of equal

protection.

Missouri Pacific R. Co v Larabee, 234 US 459, 474 (1914),

stated that the Equal Protection Clause of the Fourteenth

Amendment

“was not intended to deprive the States of their power to

establish and regulate judicial proceedings and that its

provisions therefore only restrain acts which so tran-

scend the limits of classification as to cause them to

conflict with the fundamental conceptions of just and

equal legislation....”

In Ellis v Dixon, 349 US 458, 460 (1955), a writ of certio-

rari was dismissed as improvidently granted when petition-

ers had failed to allege in their pleadings with respect to a

claim under the Equal Protection Clause of the Fourteenth

Amendment how they were being treated differently from

other organizations of a similar character. Similarly, Petition-

ers have failed to demonstrate that the statute of limitation

and case law regarding the commencement of a statute of

limitation have been applied to them in a manner different

from other Michigan litigants.

The Michigan Court of Appeals carefully considered the

function of a statute of limitation in barring stale claims and

demonstrated in its opinion that the applicable statute of

limitation began to run by 1845, thereby expiring twenty

years later in 1865 (Pet. App. B, pp 6-11, 14).

Petitioners cite several cases, for the first time in this liti-

gation, referring to commencement of the running of the

statute of limitation where certificates of indebtedness, gen-

erally warrants, are payable out of a special fund. However,

those cases are inapplicable because a reading of Certificate

a

No. 84 shows that the obligation was not payable out of a

specific fund. The certificate’s language contained a promise

to pay $1,000 on July 15, 1842, along with the promise to

pay semiannual interest coupons as they became due and

were presented over a three-year period. (See Pet. App. B,

pp 8-9, for the wording of the certificate.) As noted in Flush-

ing Nat’l Bank v Municipal Assistance Corp, 40 NY2d 731,

735; 390 NYS2d 22, 358 NE2d 848 (1976), the effect of a

pledge of full faith and credit is not to create a lien upon the

unspecified revenues of the obligor not therein specifically

obligated to payment of such bonds, but is to acknowledge

an indebtedness for the amount of money received as con-

sideration for the bonds, which indebtedness is enforceable

in an ordinary action.

Petitioners’ argument that Respondent State of Michigan

should be required to call Certificate No. 84 as a condition

precedent to the commencement of the statute of limitation,

is at odds with both the law applied by the Michigan courts

and the facts The result sought by Petitioners would (1)

impose a call procedure on Certificate No. 84 even though

none is set forth therein, (2) require the state to call un-

known certificates from unknown parties, since the state had

no record of issuing Certificate No. 84 nor a record of a

holder of that certificate, and (3) permit the holder of certifi-

cates to wait indefinitely prior to filing claims against the

state.

Petitioners have failed to show how the treatment of their

claim by the Court of Claims discriminated against them.

The claim of Petitioners regarding equal protection is with-

out merit and should be rejected.

a

CONCLUSION

For these reasons, the petition for a writ of certiorari

should be denied, ;

Respectfully submitted, :

FRANK J. KELLEY j

Attorney General ;

Louis J. Caruso

Solicitor General

Counsel of Record

761 Law Building

Lansing, MI 489135

(517) 373-1124

Milton I. Firestone

George M. Elworth

Assistant Attorneys General

Dated: April 28, 1988

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