Teridee LLC v. Charter Township of Haring

Michigan Supreme Court
Lansing, Michigan

Syllabus
Chief Justice: Justices:
Stephen J. Markman Brian K. Zahra
Bridget M. McCormack
David F. Viviano
Richard H. Bernstein
Joan L. Larsen
Kurtis T. Wilder
This syllabus constitutes no part of the opinion of the Court but has been Reporter of Decisions:
prepared by the Reporter of Decisions for the convenience of the reader. Kathryn L. Loomis

CLAM LAKE TOWNSHIP v DEPARTMENT OF LICENSING
AND REGULATORY AFFAIRS

TERIDEE LLC v HARING CHARTER TOWNSHIP

Docket Nos. 151800 and 153008. Argued December 8, 2016 (Calendar No. 3). Decided
July 3, 2017.

In Docket No. 151800, Clam Lake Township and Haring Charter Township (the
Townships) appealed in the Wexford Circuit Court the determination of the State Boundary
Commission (the Commission) that an agreement entered into under the Intergovernmental
Conditional Transfer of Property by Contract Act, 1984 PA 425, MCL 124.21 et seq. (Act 425
agreement) between the Townships was invalid. The Townships entered into the agreement on
May 8, 2013, and filed it with the Wexford County Clerk and the Secretary of State on June 10,
2013. The Act 425 agreement sought to transfer to Haring Charter Township an undeveloped
parcel of roughly 241 acres of land in Clam Lake Township that was zoned for forest-
recreational use. The agreement provided a description of the Townships’ desired economic
development project, including numerous minimum requirements for rezoning the property.
Approximately 141 acres of the land were owned by TeriDee LLC, the John F. Koetje Trust, and
the Delia Koetje Trust (collectively, TeriDee), who wished to develop the land for commercial
use. To achieve this goal, TeriDee petitioned the Commission to have the land annexed by the
city of Cadillac. The Commission found TeriDee’s petition legally sufficient and concluded that
the Townships’ Act 425 agreement was invalid because it was created solely as a means to bar
the annexation and not as a means of promoting economic development. The Townships
appealed the decision in the circuit court, and the court, William M. Fagerman, J., upheld the
Commission’s determination, concluding that the Commission had the power to determine the
validity of an Act 425 agreement. The Townships sought leave to appeal in the Court of
Appeals, which the Court of Appeals denied in an unpublished order, entered May 26, 2015
(Docket No. 325350).

In Docket No. 153008, as the Commission proceedings in Docket No. 151800 were
ongoing, TeriDee brought an action in the Wexford Circuit Court against the Townships, seeking
a declaratory judgment that the Act 425 agreement was void as against public policy because it
contracted away Haring’s zoning authority by obligating Haring’s zoning board to rezone
pursuant to the agreement. The court, William M. Fagerman, J., struck down the agreement,
holding that the agreement required Haring to enact specific zoning ordinances, which was an
impermissible delegation of zoning authority. The Townships appealed, and the Court of
Appeals affirmed in an unpublished per curiam opinion, issued December 8, 2015 (Docket No.
324022). The Townships sought leave to appeal both cases in the Supreme Court, and the
Supreme Court granted the Townships’ applications. Clam Lake Twp v Dep’t of Licensing &
Regulatory Affairs, 499 Mich 896, as amended 499 Mich 949 (2016); TeriDee LLC v Haring
Charter Twp, 499 Mich 896, as amended 499 Mich 950 (2016).

In a unanimous opinion by Justice VIVIANO, the Supreme Court held:

Because Casco Twp v State Boundary Comm, 243 Mich App 392 (2000), improperly
concluded that MCL 124.29 authorized the State Boundary Commission to examine the validity
of an Act 425 agreement, Casco Twp was overruled. When faced with an Act 425 agreement in
annexation proceedings, the Commission may only review whether the agreement is “in effect.”
An Act 425 agreement is “in effect” if it is entered into and properly filed pursuant to MCL
124.30. The Townships’ agreement met those conditions; therefore, the Commission and circuit
court erred by invalidating the agreement on other grounds. Act 425 authorizes local units to
provide for zoning ordinances in their conditional land transfer agreements. Because the
Townships’ agreement properly included such provisions, the Court of Appeals’ contrary
decision was reversed.

1. Under MCL 24.306(1), a decision by the Commission will be set aside if substantial
rights of the petitioner have been prejudiced because the decision or order is in violation of the
Constitution or a statute, in excess of the statutory authority or jurisdiction of the agency, or
affected by other substantial and material error of law. MCL 123.1011a grants the Commission
jurisdiction over petitions or resolutions for annexation as provided in MCL 117.9, and MCL
117.9 tasks the Commission with determining the validity of the petition or resolution and
endows it with the powers and duties it normally has when reviewing incorporation petitions.
While these statutes furnish broad powers concerning annexations, none mentions Act 425
agreements or purports to grant the Commission authority over them.

2. Act 425 provides that two or more local units may conditionally transfer property for a
renewable period of not more than 50 years for the purpose of an economic development project.
MCL 124.29, the only provision in Act 425 that implicates the Commission, provides that while
a contract under this act is in effect, another method of annexation or transfer shall not take place
for any portion of an area transferred under the contract. Therefore, all that is required to
preempt an annexation petition is for the Act 425 agreement to be “in effect.” Because an Act
425 agreement conditionally transfers property, it is “in effect,” or operative, when the property
has been conditionally transferred. MCL 124.30 provides that a conditional transfer of property
occurs when the parties enter into the contract and file the appropriate documents with the
county clerk and Secretary of State. At that point, the agreement is “in effect” and preempts any
other method of annexation. Act 425 does not condition preemption on a finding that the
contract is otherwise valid, and it does not expressly grant to the Commission the power to
determine the agreement’s validity; instead, the Commission may only make an initial
determination of whether the Act 425 agreement is in effect, i.e., whether the contract was
entered into by the parties and filed in accordance with MCL 124.30. Casco Twp, 243 Mich App
392, which improperly concluded that MCL 124.29 authorized the Commission to examine the
validity of an Act 425 agreement, was overruled. In this case, there was no dispute that the
parties had entered into the Act 425 agreement and that it was properly filed at the time the
Commission considered the annexation petition. Accordingly, the Townships’ agreement was
“in effect” and preempted TeriDee’s annexation petition.

3. A zoning ordinance is an “ordinance” under MCL 124.26(c). MCL 124.26(c)
provides, in relevant part, that a contract under Act 425 may provide for the adoption of
ordinances and their enforcement by or with the assistance of the participating local units. MCL
124.26(c) authorizes local units to bargain over the adoption of ordinances, which includes
bargaining over their content and substance; i.e., it authorizes contract zoning. The Legislature
can empower—and has empowered—municipalities to zone or take other action by agreement
even though the agreement will bind those municipalities in the future and constrain their
legislative discretion. Accordingly, MCL 124.26(c) authorized the Townships’ zoning
provisions.

Circuit court judgment in Docket No. 151800 reversed; Court of Appeals judgment in
Docket No. 153008 reversed; both cases remanded to the circuit court for further proceedings.

©2017 State of Michigan
 Michigan Supreme Court
Lansing, Michigan

OPINION
Chief Justice: Justices:
Stephen J. Markman Brian K. Zahra
Bridget M. McCormack
David F. Viviano
Richard H. Bernstein
Joan L. Larsen
Kurtis T. Wilder

FILED July 3, 2017

STATE OF MICHIGAN

SUPREME COURT

CLAM LAKE TOWNSHIP and HARING
CHARTER TOWNSHIP,

Appellants,

v No. 151800

DEPARTMENT OF LICENSING AND
REGULATORY AFFAIRS/STATE
BOUNDARY COMMISSION, TERIDEE
LLC, and CITY OF CADILLAC,

Appellees.

TERIDEE LLC, JOHN F. KOETJE TRUST,
and DELIA KOETJE TRUST,

Plaintiffs-Appellees,

v No. 153008

HARING CHARTER TOWNSHIP and
CLAM LAKE TOWNSHIP,

Defendants-Appellants.
BEFORE THE ENTIRE BENCH

VIVIANO, J.
These consolidated cases present two issues. First, in Clam Lake Twp v Dep’t of

Licensing & Regulatory Affairs, we must decide whether the State Boundary Commission

(Commission), when reviewing an annexation petition, has authority to determine the

validity of a separate agreement entered into under the Intergovernmental Conditional

Transfer of Property by Contract Act, 1984 PA 425, MCL 124.21 et seq. (Act 425

agreement). We hold that it does not. Instead, the Commission may only make the more

limited determination of whether an Act 425 agreement is “in effect,” as described by the

statute, in which case the agreement preempts the annexation petition. 1 The Commission

here failed to properly limit its consideration of the Act 425 agreement between

appellants Clam Lake Township and Haring Charter Township (Townships). Rather than

asking whether the agreement was “in effect” under the statute, the Commission erred by

more broadly reviewing the agreement’s validity. The circuit court affirmed this

determination, which we now reverse. Because we find the Townships’ Act 425

agreement meets the statutory requirements for being “in effect,” it preempts the

annexation petition.

Second, in TeriDee LLC v Haring Charter Twp, we must decide whether an Act

425 agreement can include requirements that a party enact particular zoning ordinances.

The plain language of MCL 124.26(c) permits these requirements. Accordingly, the

Court of Appeals erred by determining that they were prohibited, and we reverse.

1
MCL 124.29.

2
 I. FACTS AND PROCEDURAL HISTORY

This case involves an undeveloped parcel of roughly 241 acres of land

surrounding the interchange of M-55 and US-131 that was zoned for forest-recreational

use. The land sits in Clam Lake Township. Approximately 141 acres are owned by

appellees TeriDee LLC, the John F. Koetje Trust, and the Delia Koetje Trust

(collectively, TeriDee), who have long wished to develop a mixed-use project on the

property, including stores and other commercial entities. This would require connecting

the land to sewer and water systems. To that end, in 2008, TeriDee sought approval of an

Act 425 agreement 2 between appellant Clam Lake Township and appellee city of

Cadillac. The agreement would have transferred the property to Cadillac’s jurisdiction to

facilitate its commercial development. But a voter referendum rejected the agreement.

Undeterred, TeriDee filed a petition to have the land annexed by Cadillac in 2011.

About the same time, Clam Lake Township and Haring Charter Township entered into an

Act 425 agreement to transfer the land to Haring. The Commission reviewed both the

annexation petition and the Act 425 agreement, which, if effective, would have

preempted the petition. 3 In its decision, the Commission rejected the petition and also

invalidated the Act 425 agreement, finding, among other things, that the agreement failed

to define any economic development project and was instead a ploy to prevent Cadillac’s

annexation.

2
As discussed in more detail below, Act 425 agreements permit “[t]wo or more local
[government] units” to “conditionally transfer property for a period of not more than 50
years for the purpose of an economic development project.” MCL 124.22.
3
MCL 124.29 (“While a contract under this act is in effect, another method of annexation
or transfer shall not take place for any portion of an area transferred under the contract.”).

3
 The current round of disputes began in 2013, when the Townships learned that

TeriDee was again planning to file for annexation. Cadillac, the proposed annexor, had

public water and sanitary sewer services available near the proposed annexation area. In

2013, neither of the Townships could provide those services. However, that year Haring

obtained financing for a new wastewater treatment plant that would enable it to extend

water and sewer lines to the property. In light of this development, as well as TeriDee’s

impending petition, the Townships entered into an Act 425 agreement on May 8, 2013,

transferring the land to Haring. The agreement was signed by the Townships and filed

with the Wexford County Clerk and the Secretary of State on June 10, 2013.

The agreement, as subsequently amended, describes the Townships’ desired

economic development project as having two components. First, the project would

include “the construction of a mixed-use, commercial/residential development . . . in

order to balance the property owners’ desire for commercial use with the need to protect

the interests of surrounding residential property owners[.]” Second, the project required

“the provision of public wastewater services and public water supply services to the

Transferred Area, so as to foster the new mixed-use, commercial/residential

development . . . .” Further, the agreement provides that the forest-recreation zoning

would remain in effect only until Haring could enact various zoning standards, including

numerous minimum requirements. The agreement also states that the area’s residential

portions “shall be zoned in a Haring zoning district that is comparable” to the Township’s

existing zoning. The remaining property “shall be rezoned” according to the agreement’s

minimum requirements. The development had to comply with Haring’s zoning

ordinances, but “[w]here the [agreement’s] regulations are more stringent, the more

4
stringent regulations shall apply.” Haring was required to make reasonable efforts to

adopt these ordinances within one year.

TeriDee subsequently filed its annexation petition. Though the petition mirrors

TeriDee’s 2011 attempt, the Commission this time found the petition legally sufficient.

On review, the Commission concluded that the Act 425 agreement was invalid because it

“was created solely as a means to bar the annexation and not as a means of promoting

economic development.” It cited five factual findings supporting this conclusion: (1) the

economic project was “not believed by the Commission to be viable” because the

Townships did not consult TeriDee, the landowner; (2) Clam Lake received no tax

revenues from the agreement; (3) e-mails between Township officials indicated that the

agreement was meant to prevent annexation; (4) the Commission questioned Haring’s

“ability to effectively and economically provide the defined public services”; and (5) the

agreement’s timing, shortly before TeriDee’s annexation petition, suggested that it was a

sham.

The Townships appealed in the circuit court, which upheld the Commission’s

determination. Relying on Casco Twp v State Boundary Comm, 4 the court held that the

Commission had the power to determine the validity of the agreement. The court then

found that competent, material, and substantial evidence supported the Commission’s

determination that the agreement was an invalid sham. Next, the court found sufficient

evidence supporting the Commission’s decision to grant the annexation petition. The

Court of Appeals denied the Townships’ application for leave to appeal.

4
Casco Twp v State Boundary Comm, 243 Mich App 392, 399; 622 NW2d 332 (2000).

5
 As the Commission proceedings were ongoing, TeriDee sued the Townships,

seeking a declaratory judgment that the Act 425 agreement was invalid. It argued that the

agreement was a contrivance meant to block the annexation. Alternatively, it asserted

that the agreement was void as against public policy because it contracted away Haring’s

zoning authority by obligating Haring’s zoning board to rezone pursuant to the

agreement. The circuit court declined to consider the first argument, finding that the

Commission had primary jurisdiction over that contention. However, the court struck

down the agreement based on TeriDee’s alternative argument. It found that the

agreement required Haring to enact specific zoning ordinances, an impermissible

delegation of zoning authority.

The Townships appealed, and the Court of Appeals affirmed. 5 It agreed that “the

plain language of the agreement [improperly] contracts away Haring’s zoning authority

over the undeveloped property by providing how Haring must zone the property.” 6 The

Court of Appeals also concluded that MCL 124.26(c), part of Act 425, did not permit the

parties to engage in this contract zoning. 7

5
TeriDee LLC v Charter Twp of Haring, unpublished per curiam opinion of the Court of
Appeals, issued December 8, 2015 (Docket No. 324022), p 1.
6
Id. at 3.
7
Id. at 5-7.

6
 The Townships appealed both cases in this Court. We granted leave in each,

ordering that the cases be argued together. 8 Among the issues we ordered briefed in

Clam Lake was

whether Casco Twp v State Boundary Comm, 243 Mich App 392, 399[, 622
NW2d 332, 335] (2000), correctly held that the State Boundary
Commission (SBC) has the authority to determine the validity of an
agreement made pursuant to the Intergovernmental Conditional Transfer of
Property by Contract Act, 1984 PA 425, MCL 124.21 et seq. (Act 425)[.][9]

In TeriDee LLC, two of the issues we asked the parties to address were

whether Inverness Mobile Home Community v Bedford Twp, 263 Mich App
241[, 687 NW2d 869] (2004), applies to the defendant townships’
Agreement pursuant to the Intergovernmental Conditional Transfer of
Property by Contract Act, 1984 PA 425, MCL 124.21 et seq. (Act 425); . . .
[and] if so, whether the challenged provisions of the Act 425 Agreement
were nevertheless authorized by Section 6(c) of Act 425, MCL
124.26(c)[.][10]

II. STANDARD OF REVIEW AND INTERPRETIVE PRINCIPLES

Our Constitution requires that we review administrative agency decisions to

determine whether they “are authorized by law.” 11 The Administrative Procedures Act 12

8
Clam Lake Twp v Dep’t of Licensing & Regulatory Affairs, 499 Mich 896 (2016);
TeriDee LLC v Haring Charter Twp, 499 Mich 896 (2016).
9
Clam Lake Twp, 499 Mich at 896, as amended 499 Mich 949 (2016).
10
TeriDee LLC, 499 Mich at 896-897, as amended 499 Mich 950 (2016).
11
Const 1963, art 6, § 28.
12
MCL 24.201 et seq.

7
also governs our review of the Commission’s final decisions. 13 We will set aside a

Commission decision “if substantial rights of the petitioner have been prejudiced because

the decision or order is any of the following,” including “[i]n violation of the constitution

or a statute,” “[i]n excess of the statutory authority or jurisdiction of the agency,” or

“[a]ffected by other substantial and material error of law.” 14 An agency’s statutory

interpretations are entitled to “respectful consideration,” but they “cannot conflict with

the plain meaning of the statute.” 15 We must also determine whether the decisions,

findings, and rulings “are supported by competent, material and substantial evidence on

the whole record,” 16 remaining sensitive to the deference owed to administrative

expertise and not invading exclusive administrative fact-finding. 17

“We review de novo a trial court’s determination regarding a motion for summary

disposition.” 18 “Summary disposition is appropriate if there is no genuine issue regarding

any material fact and the moving party is entitled to judgment as a matter of law.” 19

13
MCL 123.1018 (“Every final decision by the commission shall be subject to judicial
review in a manner prescribed in Act No. 197 of the Public Acts of 1952, as
amended . . . .”); see also Midland Twp v State Boundary Comm, 401 Mich 641, 671-672;
259 NW2d 326 (1977).
14
MCL 24.306(1).
15
In re Complaint of Rovas Against SBC Mich, 482 Mich 90, 108; 754 NW2d 259
(2008).
16
Const 1963, art 6, § 28.
17
Midland Twp, 401 Mich at 673.
18
Odom v Wayne Co, 482 Mich 459, 466; 760 NW2d 217 (2008).
19
Id. at 467 (citation and quotation marks omitted).

8
Similarly, we review de novo the interpretation of statutes. 20 We interpret statutes to

discern and give effect to the Legislature’s intent, and in doing so we focus on the

statute’s text. 21 Undefined terms are presumed to have their ordinary meaning, unless

they “have acquired a peculiar and appropriate meaning in the law,” in which case we

accord them that meaning. 22 The statute must be considered as a whole, “reading

individual words and phrases in the context of the entire legislative scheme.” 23

Unambiguous statutes are enforced as written. 24

III. ANALYSIS

A. ACT 425 AGREEMENTS

We first address the scope of the Commission’s power to review Act 425

agreements when considering an annexation petition. 25 The Commission, like other

20
Bank of America, NA v First American Title Ins Co, 499 Mich 74, 85; 878 NW2d 816
(2016).
21
Ronnisch Constr Group, Inc v Lofts on the Nine, LLC, 499 Mich 544, 552; 886 NW2d
113 (2016).
22
MCL 8.3a.
23
Madugula v Taub, 496 Mich 685, 696; 853 NW2d 75 (2014).
24
Id.
25
Appellees argue that the Townships did not properly preserve this issue and are
otherwise estopped from raising it. We disagree and find that we may reach this issue
because the Townships properly preserved it. Indeed, in the Townships’ initial challenge
to the annexation petition, they argued that the Commission had no authority because the
Act 425 agreement had already transferred the land. Their basic argument—that the
Commission lacks power to make certain determinations—has remained unchanged
throughout the proceedings.

9
administrative agencies, only has the powers expressly granted to it or necessarily

implied. 26 The Commission has authority over the incorporation and consolidation of

local governments as well as over various alterations of those governments’ boundaries. 27

With respect to the Commission’s authority over annexation petitions, MCL 123.1011a

grants the Commission “jurisdiction over petitions or resolutions for annexation as

provided in [MCL 117.9].” That statute, in turn, tasks the Commission with

“determining the validity of the petition or resolution” and endows it with the powers and

Appellees have also claimed that the Townships are judicially estopped from
challenging Casco Twp, 243 Mich App 392, because in TeriDee, the Townships
successfully relied on Casco to obtain partial dismissal under the primary jurisdiction
doctrine. A party is judicially estopped from asserting a position inconsistent with one it
successfully and unequivocally asserted in a prior proceeding. Paschke v Retool Indus,
445 Mich 502, 509; 519 NW2d 441 (1994). There is nothing inconsistent in the
Townships’ positions. In TeriDee, they claimed that Casco required the Commission,
rather than the circuit court, to have the first opportunity to review the Act 425
agreement. In Clam Lake, the theory they offer, and prevail on, is that Casco gave the
Commission too much authority to review Act 425 agreements, and that the statute limits
review to determining whether an agreement is “in effect” under MCL 124.29. In both
cases, the Commission can examine the agreement; the pertinent argument here, and the
one that the Townships have consistently made, concerns the scope of that examination.
Therefore, the Townships are not estopped from challenging this aspect of Casco.
26
Coffman v State Bd of Examiners in Optometry, 331 Mich 582, 590; 50 NW2d 322
(1951); see also Soap & Detergent Ass’n v Natural Resources Comm, 415 Mich 728, 736;
330 NW2d 346 (1982) (“It is beyond debate that the sole source of an agency’s power is
the statute creating it. If a certain power . . . is withheld in the statute, the agency may
not act.”).
27
Midland Twp, 401 Mich at 650. None of the statutory provisions regarding the
Commission’s authority over incorporation, consolidation, or reannexation expressly or
impliedly pertain to Act 425 agreements. See, e.g., MCL 123.1008 (granting the
Commission power over incorporation); MCL 123.1009 (listing criteria for
incorporation); MCL 123.1012 to 1012a (addressing consolidation); MCL 123.1012b
(addressing reannexation).

10
duties it normally has when reviewing incorporation petitions. 28 Those powers include

the ability to consider, among other things, population statistics, the need for

governmental services in the incorporated area, and the general effect on the entire

community. 29 While these statutes furnish “broad powers concerning annexations,” 30

none mentions Act 425 agreements or purports to grant the Commission authority over

them.

Next, we must consider whether Act 425 provides the Commission authority to

review agreements created under that statute. Act 425 provides that “[t]wo or more local

units may conditionally transfer property for a period of not more than 50 years for the

purpose of an economic development project. A conditional transfer of property shall be

controlled by a written contract agreed to by the affected local units.” 31 An “economic

development project” is defined, in relevant part, as the “land and existing or planned

improvements suitable for use by an industrial or commercial enterprise, or housing

development, or the protection of the environment, including, but not limited to,

groundwater or surface water.” 32

28
MCL 117.9(2).
29
MCL 123.1009.
30
Owosso Twp v City of Owosso, 385 Mich 587, 590; 189 NW2d 421 (1971).
31
MCL 124.22(1). The “local units” refer to cities, townships, and villages. MCL
124.21(b).
32
MCL 124.21(a).

11
 Local governmental units must consider various factors when entering into an Act

425 agreement, including the natural environment, population statistics, the need for and

cost of government services, existing services, and the general effects of the transfer. 33

These factors are very similar to the ones the Commission must consider when reviewing

proposed incorporations and annexations. 34 And like the Commission, the local units

must hold public hearings on their proposed actions. 35 This indicates that, with respect to

conditional land transfers under Act 425, the local units do much of the same work that

the Commission does in its areas of assigned responsibility.

Only one provision in Act 425 implicates the Commission, but it does so in a

manner that circumscribes the Commission’s involvement. MCL 124.29 states that

“[w]hile a contract under this act is in effect, another method of annexation or transfer

shall not take place for any portion of an area transferred under the contract.” Thus, all

that is required to preempt an annexation petition is for the Act 425 agreement to be “in

effect.” The ordinary meaning of “effect” is “the quality or state of being operative.” 36

33
MCL 124.23.
34
MCL 123.1009.
35
Compare MCL 123.1008(3) (“At least 60 days but not more than 220 days after the
filing with the commission of a sufficient petition proposing incorporation, the
commission shall hold a public hearing at a convenient place in the area proposed to be
incorporated.”), with MCL 124.24(1) (providing that the “legislative body of each local
unit affected by a proposed transfer of property under this act shall hold at least 1 public
hearing before entering into a contract under this act”).
36
Merriam-Webster’s Collegiate Dictionary (11th ed). See also Black’s Law Dictionary
(10th ed) (defining “effect” as the “result that an instrument between parties will produce
on their relative rights, or that a statute will produce on existing law, as discovered from
the language used, the forms employed, or other materials for construing it”).

12
Because an Act 425 agreement conditionally transfers property, it is “in effect,” or

operative, when the property has been conditionally transferred. The statute designates

when this occurs: “The conditional transfer of property pursuant to a contract under this

act takes place when the contract is filed in the manner required by this section.” 37

Thus, the conditional land transfer takes place when the parties enter into the

contract and file the appropriate documents with the county clerk and Secretary of State.

At that point, the agreement is operative, or “in effect,” and the agreement preempts any

other method of annexation. Act 425 does not condition preemption on a finding that the

contract is otherwise valid, and it does not expressly grant to the Commission the power

to determine the agreement’s validity. Instead, the Commission may only make an initial

determination of whether the Act 425 agreement is operative, i.e., whether the contract

was entered into by the parties and filed in accordance with the statute. 38

Only one Court of Appeals case has essayed a serious interpretation of Act 425.

In Casco Twp, landowners in Casco and Columbus Townships petitioned to have

Richmond City annex their lands; however, Lenox Township had shortly before acquired

37
MCL 124.30. The statute goes on to state:

After the affected local units enter into a contract under this act, the clerk of
the local unit to which the property is to be conditionally transferred shall
file a duplicate original of the contract with the county clerk of the county
in which that local unit, or the greater part of that local unit, is located and
with the secretary of state. That county clerk and the secretary of state shall
enter the contract in a book kept for that purpose. The contract or a copy of
the contract certified by that county clerk or by the secretary of state is
prima facie evidence of the conditional transfer. [Id.]
38
MCL 124.30.

13
the land through two Act 425 agreements. 39 As in the present case, the Commission

suspected the agreements were a ploy to avoid annexation and rejected them as invalid. 40

The Court of Appeals affirmed. 41

In Casco Twp, the Court of Appeals erred by concluding that MCL 124.29

authorizes the Commission to examine an Act 425 agreement’s validity rather than

simply to determine its effectiveness. The Court interpreted MCL 124.29 to “expressly

require[] an Act 425 agreement that is ‘in effect’ and, therefore, necessitates a valid

agreement. Consequently, this statutory bar to the commission’s consideration of an

annexation petition requires an agreement that fulfills the statutory criteria . . . .” 42

Accordingly, the Commission could canvass the agreement for violations of the Act 425

“criteria.” 43

The problem with this analysis is that an Act 425 agreement preempts annexation

when the agreement is “in effect.” The statute makes no mention of validity. The

Legislature could have employed this potentially broader term had it intended the

Commission to wield more expansive review powers. For example, the Legislature

expressly provided the Commission power to examine “the validity of the [annexation]

39
Casco Twp, 243 Mich App at 399.
40
Id. at 396.
41
Id. at 395.
42
Id. at 398-399.
43
Id.

14
petition . . . .” 44 No such language appears in Act 425; instead, as mentioned above, the

agreement must merely be “in effect,” and effectiveness occurs when the local units have

entered into and properly filed the agreement. 45

In sum, Casco misinterpreted Act 425, and we take this opportunity to overrule it.

The plain language of the Act provides that the Commission must find any annexation

petition preempted if a relevant Act 425 agreement is “in effect.” In that situation, the

Commission lacks the power to make any further determination of the agreement’s

validity.

Here, there is no dispute that the parties had entered into the Act 425 agreement

and that it was properly filed with the Wexford County Clerk and the Secretary of State at

the time the Commission considered the annexation petition. 46 Accordingly, the

44
MCL 117.9(2).
45
Our opinion in Shelby Charter Twp v State Boundary Comm, 425 Mich 50; 387 NW2d
792 (1986), does not, as Casco asserted, support a contrary conclusion. There we
addressed MCL 42.34, which exempted charter townships from annexation if they met
certain statutory criteria. Id. at 53. One criterion was that the charter township provide
water or sewer services. MCL 42.34(1)(f). We framed the issue narrowly as “whether
the lower courts correctly construed [this statute] to require only the provision of any
water or sewer services” rather than a non-de minimis amount. Shelby, 425 Mich at 72.
We determined that the Commissioner correctly construed the statute to require more
than a de minimis level of services. Id. at 72-77. As we do in this case, Shelby merely
specified what the Commission had to consider in order to determine whether the
annexation was preempted. Accordingly, Shelby does not implicitly stand for the
proposition that the Commission has expanded authority over statutes related to
annexation.
46
The Commission’s decision noted this filing, and the record contains a letter from the
Department of State acknowledging receipt of the filing and assigning an effective date
of June 10, 2013.

15
agreement was “in effect” and preempted TeriDee’s annexation petition. 47 We reverse

the circuit court’s decision to the contrary. 48

B. ZONING ORDINANCES

We next consider whether the Townships’ Act 425 agreement is void as against

public policy for impermissibly contracting away Haring’s legislative zoning authority.

The Court of Appeals concluded that it was. To reach this result, it first found that the

Act 425 agreement required Haring to enact specific zoning standards, thus restraining

the Township’s discretion in how to zone the property. 49 In other words, it held that the

agreement contracted away Haring’s zoning powers. Relying on the general proposition

that such contract zoning is prohibited unless specifically authorized by statute, 50 the

Court then examined whether the Legislature had authorized it in Act 425, specifically in

MCL 124.26. 51 That statute states, in relevant part:

If applicable to the transfer, a contract under this act may provide for
any of the following:

* * *

47
MCL 124.29.
48
It is important to highlight the limits of our holding. We do not opine on whether a
party could seek to invalidate an Act 425 agreement in the circuit court on other grounds.
We merely hold that the Commission, when faced with an annexation petition and an Act
425 agreement that is “in effect,” must find the petition preempted.
49
TeriDee, unpub op at 3-4.
50
Id. at 2-3, citing Inverness Mobile Home Community, 263 Mich App at 247-248.
51
TeriDee, unpub op at 5-6.

16
 (c) The fixing and collecting of charges, rates, rents, or fees, where
appropriate, and the adoption of ordinances and their enforcement by or
with the assistance of the participating local units.[52]

The Court of Appeals concluded that this provision did not permit the local units

to agree to zoning ordinances. A contrary interpretation, it feared, “reads more words

into the statute than are present.” 53 The plain language only allows the agreement to

provide for the adoption and enforcement of ordinances; it does not state that the

“agreement may provide for the manner in which the participating local units will adopt

ordinances, such as dictating how a local unit must zone or rezone the property.” 54 It

does “nothing more than determin[e] which local unit has jurisdiction over the

property . . . and does not necessarily encompass the right to contract zone.” 55

We disagree with this analysis of MCL 124.26(c) and hold that the statute

authorizes the Townships’ zoning provisions. 56 We find nothing in the provision limiting

the local units to a determination of which unit has jurisdiction. It is MCL 124.28, 57 not

MCL 124.26(c), that allows the units to select which side has jurisdiction and for what

52
MCL 124.26 (emphasis added).
53
TeriDee, unpub op at 6.
54
Id.
55
Id. at 6-7.
56
Because the statute permits these provisions, Inverness Mobile Home Community, 263
Mich App at 247-248, is inapplicable.
57
MCL 124.28 (“Unless the contract specifically provides otherwise, property which is
conditionally transferred by a contract under this act is, for the term of the contract and
for all purposes, under the jurisdiction of the local unit to which the property is
transferred.”).

17
purposes. We must reject the Court of Appeals’ analysis. Instead, we interpret MCL

124.26(c) to authorize local units to bargain over the adoption of ordinances, which

includes bargaining over their content and substance.

The only remaining question is whether a zoning ordinance is an “ordinance”

under MCL 124.26(c). The Court of Appeals thought not, because the statute does not

mention zoning. But no specific types of ordinances are named in the statute. Therefore,

the Court of Appeals’ observation does not end the inquiry of whether a zoning ordinance

qualifies under the statute as an “ordinance.” An “ordinance” is simply “a law set forth

by a governmental authority,” specifically “a municipal regulation.” 58 Michigan statutes

and caselaw are rife with references to zoning regulations as ordinances, which

demonstrate that an “ordinance” can zone. 59 Accordingly, when MCL 124.26(c) says

“ordinance” and does not expressly exclude zoning ordinances, that term must be read to

include them.

58
Merriam-Webster’s Collegiate Dictionary (11th ed). See also Black’s Law Dictionary
(10th ed) (defining “ordinance” as “[a]n authoritative law or decree,” especially “a
municipal regulation . . . on matters that the state government allows to be regulated at
the local level”).
59
See, e.g., MCL 125.3201(1) (“A local unit of government may provide by zoning
ordinance for the regulation of land development and the establishment of 1 or more
districts within its zoning jurisdiction . . . .”); Kyser v Kasson Twp, 486 Mich 514, 529;
786 NW2d 543 (2010) (“[A] zoning ordinance is presumed to be reasonable, and a
person challenging such an ordinance carries the burden . . . .”) (emphasis added);
Paragon Props Co v City of Novi, 452 Mich 568, 574; 550 NW2d 772 (1996) (“Because
zones established by ordinance will not always reflect the realities of all land controlled
by a zoning ordinance . . . .”) (emphasis added); Bengston v Delta Co, 266 Mich App
612, 614; 703 NW2d 122 (2005) (“Because the township ordinance zoning the property
for commercial use is controlling . . . .”) (emphasis added).

18
 From here, completing the statutory analysis is syllogistic. MCL 124.26(c)

permits the local units to specify the content and substance of ordinances in their Act 425

agreement, and a zoning ordinance is an ordinance for purposes of the statute. It follows

that MCL 124.26(c) allows the units to specify the content and substance of zoning

ordinances in their Act 425 agreement. As applied here, MCL 124.26(c) authorizes the

Townships’ zoning provisions. 60

Neither the parties nor the courts below suggest any reason why the Legislature

would be prohibited from authorizing this form of contract zoning. True, the zoning

power “constitutes a legislative function” that municipalities may exercise. 61 But a

township “has no inherent power to zone” and can only do so to the extent the power is

granted by the Constitution or Legislature. 62 Accordingly, the Legislature can

empower—and has empowered 63—municipalities to zone or take other action by

agreement even though the agreement will bind those municipalities in the future and

constrain their legislative discretion. As a leading treatise notes, “Statutes and charters

sometimes authorize municipal boards to make contracts which will extend beyond their

60
It is notable that since Haring derives its zoning authority from the Act 425 agreement,
Haring would have no authority to zone the transferred lands but for the agreement.
Thus, the agreement does not contract away any zoning powers Haring would have
otherwise possessed.
61
Kyser, 486 Mich at 520.
62
City of Livonia v Dep’t of Social Servs, 423 Mich 466, 493-494; 378 NW2d 402
(1985); see also Whitman v Galien Twp, 288 Mich App 672, 679; 808 NW2d 9 (2010)
(“A local unit of government may regulate land use through zoning only to the limited
extent authorized by that legislation.”).
63
See, e.g., MCL 125.3405 (authorizing conditional rezoning).

19
own official term, and the power of the legislature in this respect is well settled.” 64 And,

indeed, our Constitution encourages legislation such as Act 425 that allows local

governments to “enter into contractual undertakings or agreements with one another . . .

for the joint administration of any of the functions or powers which each would have the

power to perform separately . . . [or to] transfer functions or responsibilities to one

another . . . .” 65

Accordingly, the Legislature in Act 425 enabled local units to contract for zoning.

We reverse the Court of Appeals’ contrary conclusion.

IV. CONCLUSION

In Clam Lake, we hold that the Commission, when faced with an Act 425

agreement in annexation proceedings, may only review whether the agreement is “in

effect.” 66 An agreement is “in effect” if it is entered into and properly filed. 67 Here,

those conditions were met, and the Commission and circuit court erred by invalidating

the agreement on other grounds. Accordingly, TeriDee’s annexation petition was

64
10A McQuillin, Municipal Corporations (3d ed, 2009), § 29.102, p 67. See also 1
Salkin, Am Law Zoning (5th ed), § 9:21, p 9-65 (“It is clear that if conditional zoning . . .
is ‘contract zoning’ in the sense that the municipality has bargained away a portion of its
zoning power, such zoning is unlawful except in the unusual situation where a statute
authorizes agreements between governmental units.”); 83 Am Jur 2d, Zoning and
Planning, § 38, p 75 (“Absent valid legislative authorization, contract zoning is
impermissible . . . .”).
65
Const 1963, art 7, § 28.
66
MCL 124.29.
67
MCL 124.30.

20
preempted, and we reverse the circuit court’s decision. In TeriDee, we hold that Act 425

authorizes local units such as the Townships to provide for zoning ordinances in their

conditional land transfer agreements. The Townships properly included such provisions

in their agreement, and we reverse the Court of Appeals’ decision to the contrary. We

remand both cases to the circuit court for further proceedings consistent with this

opinion. 68

David F. Viviano
Stephen J. Markman
Brian K. Zahra
Bridget M. McCormack
Richard H. Bernstein
Joan L. Larsen
Kurtis T. Wilder

68
Because these holdings fully resolve the appeals, we do not address the other issues
raised in our grant orders.

21