Hertzog v. City of Detroit

Adams, J.

(concurring in part). I agree with Justice Dethmers’ construction of O'LS 1961, § 117.4f (Stat Ann 1963 Oum Supp § 5.2079), and his conclusion that the property of the board of street railway commissioners of the city of Detroit, hereinafter referred to as the DSR, is not subject to taxation by the city or school district of Detroit. I do not agree that the DSR can be granted a refund of its 1963 tax.

*17As a general rule, a taxpayer suing for refund must establish involuntary payment of the tax. Voluntary payment bars recovery. National Bank of Detroit v. City of Detroit, 272 Mich 610, 614, 615; 13A West’s Michigan Digest, Taxation, § 538.

Section 53 of the general property tax act (CL 1948, § 211.53, as amended by PA 1962, No 133 [Stat Ann 1965 Cum Supp § 7.97]), a statutory exception to the rule, created a right to recover taxes paid, if such payment was accompanied by written protest and suit was instituted to recover the taxes within 30 days. This Court held in General Discount Corp. v. City of Detroit, 306 Mich 458, 465:

“The effect of [section 53] was merely to .make payment of an invalid tax under protest involuntary irrespective of any question of compulsion. When taxes are paid under actual duress the rule both before and since the statute is that protest is unnecessary.”

There is no claim in this case of involuntary payment. The question is whether section 53 bars recovery because of failure to sue within 30 days of payment and protest.

The trial judge relied upon a city charter provision1 allowing, by a two-thirds vote of the common council, refund of taxes illegally assessed or collected. He held that a taxpayer who had not complied with section 53 could make application to the common council for a refund. Even if this be correct, the taxpayer who wishes to appeal an adverse determination of the council must either comply with section 53 or establish that payment was involuntary. The decision relied upon by the trial judge, Blanchard v. City of Detroit, 253 Mich 491, 493, involved the involuntary payment of a.n assess*18ment. That taxpayer did not require section 53 for relief.

The question of the relation of a city charter provision to section 53 was decided in Paul v. City of Detroit, 318 Mich 545, 551. It was held that an action to recover property taxes paid to a city is governed by the statute setting forth the procedure for doing so rather than by a provision of the city charter not in accord with the statute. Since this suit was not brought within 30 days, section 53 bars recovery. National Bank of Detroit v. City of Detroit, supra; General Discount Corp. v. City of Detroit, supra; Paul v. City of Detroit, supra; Haggarty v. City of Dearborn, 332 Mich 304.

The trial judge (quoted in Justice Dethmers’ opinion) held that the status of the DSR, as a branch of the city of Detroit, precluded operation of general principles of law relating to a tax refund, and that this suit involves only a transfer from “one pocket of the city of Detroit to another pocket of the city of Detroit.” This assumes either (1) that the board of education is another division of the city of Detroit or (2) that the city of Detroit will not attempt to recoup the refund to the DSR from future tax collections allocable to the board of education.

Nothing in the law or the record supports either assumption. The board of education is not a part of the city of Detroit. It is a separate legal entity. The most concise statement of this proposition was made by Justice Cooley in Board of Education v. City of Detroit, 30 Mich 505, 510:

“The board of education, though existing for purposes strictly public, is nevertheless a distinct corporation from the city, having its distinct property and funds, and entitled to demand for them the same protection which may be demanded by other corporations or individuals.”

*19See the cases collected, 12A West’s Michigan Digest, Schools and School Districts, § 21. See, also, 78 CJS, Schools and School Districts, § 25b, p 661; 10 MLP, Education, § 21, p 158; CLS 1961, § 340.192 (Stat Ann 1963 Cum Supp § 15.3192).

The board of education alone determines the annual tax needs of the school district. CLS 1961, § 340.196 (Stat Ann 1959 Rev § 15.3196). The city of Detroit performs the ministerial task of collection. The board of education is limited in the amount that may be collected for it. Article 9, § 6, of the Michigan Constitution of 1963 establishes a 15-mill maximum tax rate which, together with millage authorized by the city charter, is the limit past which no property can be taxed without a vote of the property owners. (See, generally, CL 1948 and CLS 1961, § 211.201 et seq. [Stat Ann 1960 Rey and Stat Ann 1965 Cum Supp § 7.61 et seq.]). Where the maximum millage is reached, each “local unit” (CLS 1961, § 211.202 [Stat Ann 1965 Cum Supp § 7.62]) receives a given number of mills with the surplus left over being allocated among “local units” according to their needs. (CLS 1961, § 211.211 [Stat Ann 1965 Cum Supp § 7.71]). Whenever this amount proves insufficient as it has in-Detroit, unless the property owners authorize a millage increase, the local unit, i.e., in this case the board of education, must do without. The more the tax base is eroded, the more the board of education must do without.

The DSR paid 1963 real and personal property taxes totaling $554,545.54. The board of education’s portion of this tax collection is $240,163.41. CLS 1961, § 340.196 (Stat Ann 1959 Rev § 15.3196), provides in part:

“The city treasurer shall return to the school district its portion of the total tax collections on a *20percentage basis: * * * tbe tax levied by tbe board may in tbe discretion of the legislative body of tbe city be stated separately on each tax bill.”

Tbe city treasurer is a collection agent for another separate local governmental unit — tbe school board — and as such be is obliged to remit to tbe board of education only “its portion of tbe total tax collections.” How can it be said that a tax ordered refunded to tbe taxpayer has been paid? To recoup any overpayment, tbe city treasurer has only to withhold same from future payments due to tbe board of education.

Tbe DSR stood in tbe position of a taxpayer to tbe city of Detroit and the board of education prior to decision in this case. It may be there will be no less in tbe city of Detroit’s pocket if it refunds to its alter ego, tbe DSR, tbe tax paid to it. This is riot true, however, with regard to tbe board of education, a separate unit of government. Tbe transfer of funds back to the DSR can only result in a loss to it of $240,163.41, its share of tbe total tax collection from the DSR by the city.

Tbe declaratory judgment entered by tbe circuit judge reads, in part, as follows:

“It is ordered and adjudged that tbe said defendant and cross-complainant, tbe board of street railway commissioners of tbe city of Detroit, recover of tbe city of Detroit, a municipal corporation, and Chas. N. Williams, treasurer of tbe city of Detroit, and treasurer of the board of education of the city of Detroit,2 defendants, tbe said sum of $554,545.54, being tbe sum paid by said defendant and cross-complainant to said treasurer for real and personal city and school taxes for 1963.” (Emphasis supplied.)

*21The final question is whether plaintiff, a taxpayer seeking a declaratory judgment, is to he permitted, under color of such a judgment, to obtain for the DSR a refund of 1963 taxes which the DSR itself cannot obtain.3 Such a result transforms the “rights and other legal relations” (GCR 1963, 521.1, Declaratory Judgments) of those primarily interested in this litigation and gives to a declaratory judgment a retroactivity wholly beyond its scope or purpose. If plaintiff can secure refund of the 1963 tax for the DSR, why not the 1953 or the 1943í Hertzog’s right to obtain a refund for the DSR is derivative. He stands in no better position than the DSR nor is he entitled to any greater declaration of rights than it could obtain.

I vote to deny a refund of the 1963 taxes and to affirm the trial judge on all other points. No costs, a public question being involved.

T. M. Kavanagh, C. J., and Kelly and Smith, JJ., concurred with Adams, J. Souris, J,

I agree, with Mr. Justice Dethmers that plaintiff had a right to bring this suit for declaratory relief under GCR 1963, 521. I also agree that plaintiff’s right to seek a declaratory judgment defining the DSR’s prospective liability for city and school taxes, under CLS 1961, § 117.4f (Stat Ann 1963 Cum Supp § 5.2079), was not foreclosed by *22any action or inaction of the DSR. Finally, I agree with Justice Dethmers’ interpretation of CLS 1961, § 117.4f (Stat Ann 1963 Cum Supp § 5.2079).

Nonetheless, I agree with Mr. Justice Adams’ conclusion that plaintiff may not, by this action, obtain a judgment ordering a refund to the DSR of local and school taxes paid by it in 1963. Plaintiff was entitled in this suit to have adjudicated the rights and liabilities of the DSR with respect to the taxes sought to be imposed upon it. Under CL 1948, § 211.53, as amended by PA 1962, No 133 (Stat Ann 1965 Cum Supp § 7.97), the DSR had a right to recover the 1963 taxes paid only if the taxes were paid under protest1 and suit for their recovery was begun within 30 days of payment. This the DSR did not do, and the commencement of this suit could not restore to the DSR rights which it already had waived. By failing to comply with the above-cited statutory provision, the DSR waived its right to recover the 1963 taxes paid by it. Thus, an action brought by the DSR or hy anyone else to declare, inter alia, the rights of the DSR with regard to those 1963 taxes could result only in a declaration that the DSR had waived any right it had to recover those taxes.

The instant case should be distinguished from one in which recovery is sought for taxes paid under a mistake of fact. In the latter circumstance it is the law in Michigan that the taxpayer may recover even if the taxes were not paid under protest. Spoon-Shacket Company, Inc., v. County of Oakland (1959), 356 Mich 151, in which the Court overruled Consumers Power Company v. Township of Muskegon (1956), 346 Mich 243, and adopted the reasoning of Mr. Justice Talbot Smith’s dissenting *23opinion in that case. Unlike the mistakes of fact involved in Spoon-Shacket and Consumers Power, and in Farr v. Nordmen (1956), 346 Mich 266, the instant case involves what Justice Talbot Smith in Consumers Power (p 262) by reference to the Bestatement of Bestitution, § 75, denominated payment of “ ‘void taxes and assessments’ ”. Justice Talbot Smith commented (pp 262, 263):

“Confusion between such cases [relating to the recovery of void taxes and assessments], and the' case before us, involving one of the simplest of the mistakes of fact (double, or manifold, payment of the same tax) is noted in portions of the briefs before us. Here the person paying (i. e., ‘where a person pays for the second time a tax due from him personally’) is clearly and undisputably entitled to restitution of the amount so paid, whatever the situation may be as to ‘void and illegal taxes.’ The 2 situations involve different policy considerations," are differently resolved in the cases and treatises, and should not be muddled by us.”

Thus, while in Michigan recovery may be had for taxes paid under a mistake of fact, there is no authority for a like recovery of void taxes and assessments, see National Bank of Detroit v. City of Detroit (1935), 272 Mich 610, 614, 615, absent compliance with the statutory requirement of payment under protest accompanied by suit within 30 days thereof.

Subject to the foregoing, I concur in affirmance, of the trial judge’s order, but only insofar as it voids school and city taxes levied in 1964 and thereafter against the property of the board of commissioners under authority of CLS 1961, § 117.4f (Stat Ann 1963 Cum Supp § 5.2079).

Black, J., took no part in the decision of this case.

Title 6, chap 4, § 30, effectuated by chapter 73, § 1, Ordinance 80-D, of the Compiled Ordinances of the City of Detroit (1954).

CLS 1961, § 340.193 (Stat Ann 1959 Kev § 15.3193).

In Finlayson v. Township of West Bloomfield, 320 Mich 350, plaintiffs brought suit for declaratory judgment seeking to have an election declared void. They had not complied with the statutory procedure which required that sueh a suit be brought within 30 days of the election. In 22 Am Jur 2d, Declaratory Judgments, § 78, pp 940, 941, the Finlayson Case is cited for the following proposition: “Where a special statute of limitations, applies to special statutory proceeding, it will be applied when a declaratory judgment is sought to achieve the same result as the special proceeding.” See; also, 26 CJS, Declaratory Judgments, § 108b, p 241; Annotation, Statute of limitations' or doctrine of laches in relation to declaratory actions, 151 ALR 1076. •;

A portion of the 1963 taxes was paid under protest, but the DSR failed. Jo pursue its judicial remedy provided by the cited statute.