Bray v. Department of State

Brickley, J.

This is the culmination of a decade of litigation involving two trips up the judicial ladder of this state. It involves the desire of the plaintiffs, a class of some 350,000 Michigan residents, to each recover half of a $45 annual fee they were required to pay in order to register their uninsured motor vehicles in 1973, the last year uninsured motorists were permitted to operate their vehicles on Michigan roads. It is their claim that having paid for a full year’s "privilege of driving an uninsured motor vehicle”, the inauguration of the state’s mandatory no-fault insurance act on October 1, 1973, midway through the registration year, entitled them to a refund.

Following two separate hearings before the circuit court and corresponding review by the Court of Appeals, the case comes to us following a holding that: 1) the $45 annual fee for uninsured motorists provided for in the Motor Vehicle Accident Claims Act, MCL 257.1101 et seq.; MSA 9.2801 et seq., the proceeds of which went to a fund for the benefit of the victims of accidents involving uninsured and unidentified motorists, "could be said to represent an annual insurance premium” which established a contractual relationship between the state and the uninsured motorist, a relationship that is a property right protected by the Fourteenth Amendment of the United States Constitution; 2) that the no-fault insurance act, MCL 500.3101 et seq.; MSA 24.13101 et seq., terminated that contractual relationship; and 3) that the contract right impaired by the state can be redeemed by a refund of a pro*154rata portion of the annual $45 fee. It was the judgment of the Court of Appeals that because the pro-rata refund to which the plaintiffs were entitled was required on constitutional grounds it should be forthcoming from the state, irrespective of the resources of the Motor Vehicle Accident Claims Fund, the repository of the contested fee.

It is our conclusion that there is no legal or factual basis for finding that the MV AC A is in the nature of an insurance policy for plaintiffs or that the required fee established any contractual rights. We find that the uninsured motorist fee is more in the nature of a tax than either a license fee or an insurance premium. We find no federal or state constitutional infringement of plaintiffs’ rights occasioned by the enactment of the no-fault insurance act. Therefore, there is no contractual, statutory, or constitutional basis for concluding that the state is liable to plaintiffs. The history of this case follows.

In 1965, the Legislature enacted the Motor Vehicle Accident Claims Act, 1965 PA 198. As amended, the act provided that "[e]very person registering an uninsured motor vehicle in this state shall pay annually at the time of registering, in addition to any other fee prescribed by law, a fee of $45.00”. 1971 PA 19, § 3(3). The act further provided that it would be a misdemeanor for anyone who had not paid the fee to drive an uninsured motor vehicle. 1971 PA 19, § 3(7). Insured motorists were originally required to pay a $1 fee.1 1965 PA 198, § 3(3).

*155The act provided that the proceeds of these fees would go into the Motor Vehicle Accident Claims Fund "for the payment of damages for injury to or death of certain persons or property damage”, that is, persons who had the misfortune of being injured by uninsured, underinsured, or unidentified motorists. The Secretary of State, who was responsible for the fund, was subrogated to the rights of the injured parties as against the uninsured drivers. MCL 257.1106(4); MSA 9.2806(4). Uninsured motorists against whom there were unsatisfied judgments owing either to an injured party or the fund and with whom the Secretary of State had not been able to make a repayment arrangement were made subject to the revocation both of their driver’s licenses and their automobile registrations. MCL 257.1106(6); MSA 9.2806(6).

On October 31, 1972, the no-fault act, MCL 500.3101 et seq.; MSA 24.13101 et seq., was approved by the Legislature. It provided that on October 1, 1973, in addition to the introduction of the no-fault concept, all motorists must be insured and must provide evidence of insurance. MCL 500.3101, 500.3101a; MSA 24.13101, 24.13101(1).

In August of 1973, nine months after the passage of the no-fault insurance act and two months before it became operational, plaintiffs commenced this action, seeking a declaration of their rights and a refund of half of the $45 uninsured motorist’s fee paid in 1973. The suit was initiated in the Court of Claims; but, by stipulation of the parties, it was moved to the Wayne Circuit Court. The some 350,000 uninsured motorists constituting the plaintiff class claimed, from the outset, that the $45 that was required to be paid the preceding March 31 was a license fee for the privilege of driving an uninsured motor vehicle, and that they *156paid the $45 "with the understanding and agreement” that they could continue to drive their uninsured vehicles until April 1 of the following year without the necessity of obtaining motor vehicle insurance. They aver that by adopting the no-fault insurance act and by making it operational on October 1, 1973, the state unilaterally, midway through the year, canceled what they had paid for for an entire year. Plaintiffs claim "that logic, public policy, and the legal rights” of their class dictate a return of half of that $45 fee. They claim that the "defendants have breached the contract entered into” with the plaintiffs.

Over a year later, in November, 1974, the trial court issued what was to be only the first opinion in this case. The trial court declared the $45 payment to be a license fee and that, as such, the plaintiffs had received only half of the "protection” under the license that they had paid for, entitling them to a refund.2 In reaching its decision, the court expressly declined to consider the various constitutional claims of plaintiffs and based its decision, apparently, on equitable principles.

In May, 1976, the Court of Appeals upheld plaintiffs’ claim for a refund, but on different grounds. Bray v Dep’t of State, 69 Mich App 172, 178; 244 NW2d 619 (1976). The Court found that the $45 fee did not fit "neatly into either category” of license fee or tax. It found the fee to be "unique” *157and "to be designed to establish a state administered insurance program similar in some respects to a private insurance program. The $45 fee thus could be said to represent an annual insurance premium paid by those who have not acquired private insurance policies.” The Court then referred to MCL 500.3020; MSA 24.13020, which requires a private insurer to refund the excess portion of a premium paid by an insured when there is an interruption in the policy period. Applying the rationale that the uninsured motorist fee was, in effect, an insurance policy for the plaintiffs and that the policy period was interrupted, the Court held that an appropriate portion of the fee should be refunded. But, because plaintiffs were not the primary beneficiaries of the so-called insurance policy (those having a claim against an uninsured driver being the primary beneficiaries), plaintiffs were not entitled to their refund until the Motor Vehicle Accident Claims Fund had satisfied all of the claims and potential claims of the primary beneficiaries. The matter was remanded to the circuit court for further proceedings. Application for leave to appeal to this Court was denied on September 9, 1976. 397 Mich 851.

On remand, the trial court decided to consider the constitutional arguments raised in the first hearing. The court applied the theory of the Court of Appeals that a contractual relationship between plaintiffs and the state existed, as in the nature of an insurance policy. It found that this contractual relationship was impaired by the adoption of the no-fault insurance act and that the impairment violated the Contract Clauses of the United States and Michigan Constitutions, US Const, art I, § 10; Const 1963, art 1, § 10, and the Due Process Clause *158of the Fourteenth Amendment of the United States Constitution. The court then concluded that a constitutional entitlement to the refund overrode the priority of other claimants to the fund.

The Court of Appeals affirmed the decision of the trial court, reasserting the contractual relationship and adopting the circuit court’s constitutional findings to the extent that the adoption of the no-fault insurance act midway through the 1973 registration period amounted to a "taking” or diminution of a property interest. It also adopted the trial court’s finding that, because the relief was constitutionally required, the right to the refund was absolute. 97 Mich App 33; 294 NW2d 236 (1980).

Leave to appeal to this Court was granted on June 8, 1981. 411 Mich 972.

We first deal with the two basic theories on which plaintiffs’ relief in the lower courts was founded. The theory propounded by the plaintiffs, with great consistency in their travels through the lower courts, was that during the automobile registration year of 1973 they paid $45 as a license fee for driving an uninsured motor vehicle for 12 months. The basic theory of the lower courts was that the effect of the plaintiffs’ payment of $45 was to engage the state in a contractual relationship, a relationship that was impaired by the adoption of the no-fault insurance act midway through the 1973 registration year. An analysis of each theory depends on an examination of the nature of the extraction of the $45 fee by the state from its uninsured motorists.

That examination indicates to us that the plaintiffs were clearly not buying anything, and, contrary to the Court of Appeals position that it was akin to the buying of insurance, we find nothing to *159indicate that plaintiffs as a class were securing any benefits. If anything, in exchange for the $45 paid under the Motor Vehicle Accident Claims Act, rather than being insured, they were made more vulnerable in the area of automobile liability. The fund that plaintiffs’ fees were financing was clearly not primarily for the benefit of the uninsured motorists. Prior to 1965, those who were injured by uninsured and uncollectible drivers often found it useless to attempt to perfect their claims and secure judgments. After the passage of the MVACA, they had good reason to do so because of the possibility of collecting from the fund within the limits provided by the act. They were required to subrogate their interests to the Secretary of State, who then could pursue the uninsured motorist. The Secretary of State had a weapon that the injured motorist did not have, his ability under the MV ACA to suspend both the operator’s licenses and motor vehicle registrations of those against whom there were uncollected judgments and who had not entered into arrangements with the Secretary of State for repayment. The plaintiff class was clearly made more vulnerable by the passage of the MV AC A. If there were any benefits received by the plaintiff class, those benefits elude us.3

*160The Court of Appeals itself, in other decisions, has reinforced our conviction that the state had not entered into anything in the nature of an insurance contract with the plaintiffs. In Weisberg v DAIIE, 36 Mich App 513; 194 NW2d 193 (1971), the Court held that the Motor Vehicle Accident Claims Fund was not a substitute for personal insurance for uninsured motorists and, in Abbott v Secretary of State, 84 Mich App 23; 269 NW2d 292 (1978), lv den 406 Mich 940 (1979), it held that the Secretary of State represented the fund, not the uninsured motorists. The payment of a fee was not, in our judgment, a payment for specific services or rights and cannot be considered to have created an insurance contract. Accordingly, plaintiffs’ claims under the Contract and Due Process Clauses must fail.

We next deal with the contention that the fee paid was a license fee. License fees are paid to engage in activities that the state has a right to regulate, if not prohibit. Hunting and fishing license fees, occupational fees, and driver’s license fees are examples. Without paying these fees, citizens are normally precluded from the activities or the privileges licensed, and it is well-settled law in this state that the amount of the fees charged must be related to the costs of the regulation. Vernor v Secretary of State, 179 Mich 157; 146 NW 338 (1914); Merrelli v St Clair Shores, 355 Mich 575; 96 NW2d 144 (1959). There is considerable authority that a claim for recovery of license fees, even in cases where they were illegally collected in the first instance, is difficult to establish. See, eg., Beachlawn Building Corp v St Clair Shores, 370 Mich 128; 121 NW2d 427 (1963). If we were to conclude that the fee was a license, it would still fall to the plaintiffs to establish a basis *161for a refund notwithstanding the termination of the license halfway through the license year.

The plaintiff class, prior to the enactment of the MV ACA in 1965, was entitled to drive uninsured motor vehicles. There is no indication in the MV ACA that the state wished to curtail driving by uninsured motorists. What the state clearly wanted to do was to raise money to solve a problem. The problem it wished to solve was the increasing number of motorists injured by uninsured and uncollectible drivers. In order to provide a fund to protect that class, money was raised from the group that caused the problem, the group represented by the plaintiff class.4 Once it was decided to raise the money from that class, what better time and way to collect it than at the time of registering the motor vehicle? There was never a showing that there was a desire on the part of the state to regulate the uninsured motorist.

In its first opinion in this case, the Court of Appeals stated:

"Although MVACA, on its face, appears to grant permission to uninsured motorists to drive their uninsured vehicles, it was not intended primarily as a registration provision. The title of MCL 257.1101 et seq.; MSA 9.2801 et seq., makes this clear. It states:
" 'An Act providing for the establishment, maintenance, and administration of a motor vehicle accident claims fund for the payment of damages for injury to or death of certain persons or property damage arising out of the ownership, maintenance, or use of motor vehicles in the state in certain cases and to provide penalties for violation of this act.’
"Also the fact that there is a separate statute, MCL *162257.1 et seq.; MSA 9.1801 et seq., which deals specifically with registration of motor vehicles, both insured and uninsured, indicates that MVACA was not intended as a licensing provision. This is further indicated by the fact that fees imposed under MCL 257.1 et seq.; MSA 9.1801 et seq., which are much lower than the MVACA fee, cover licensing and administration expenses.” 69 Mich App 178.

We agree. Simply because the state chose to enforce payment of the fee by suspending the licenses and registrations of the offending motorists does not transform the collection of the fee into a licensing and regulatory scheme.

We find the fee paid by plaintiffs to be in the nature of a tax.

A tax is designed to raise revenue. Merrelli v St Clair Shores, 355 Mich 575; 96 NW2d 144 (1959). As we explained in Dukesherer Farms, Inc v Dep’t of Agriculture (After Remand), 405 Mich 1, 15-16; 273 NW2d 877 (1979):

"Exactions which are imposed primarily for public rather than private purposes are taxes. See People ex rel the Detroit & H R Co v Salem Twp Board, 20 Mich 452, 474; 4 Am Rep 400 (1870). Revenue from taxes, therefore, must inure to the benefit of all, as opposed to exactions from a few for benefits that will inure to the persons or group assessed. Knott v Flint, 363 Mich 483, 499; 109 NW2d 908 (1961); Fluckey v Plymouth, 358 Mich 447, 451; 100 NW2d 486 (1960).”

The MVACA was obviously designed to raise revenue. As we have previously explained, the revenue raised by the MVACA did not inure to the benefit of the group assessed. The fund existed for the public purpose of providing certain compensation to all those persons injured by uninsured motorists. The Legislature did not, however, by taxing *163those who caused a problem, engage the state in any express or implied contractual or licensing arrangement. The Legislature simply chose the most appropriate group to tax. And despite plaintiffs’ arguments to the contrary, we find that no refund of this tax is due.

Plaintiffs argue that if the MV ACA is considered a tax its collection violated the provisions of Const 1963, art 9, § 3, which requires that a non-ad valorem tax be "uniform upon the class or classes on which it operates.” Plaintiffs argue that after October 1, 1973, there was only one class — insureds — and that, as a result, the portion of the tax attributable to the period from October 1, 1973, to March 31, 1974, was unconstitutional.

Relying on Goodenough v Dep’t of Revenue, 328 Mich 56; 43 NW2d 235 (1950), plaintiffs further argue that as of October 1, 1973, they were illegally taxed for a privilege that, in fact, no longer existed. Both of these arguments fail to recognize the nature of a tax.

The MV ACA fee can only be viewed as a tax for the privilege of operating an uninsured motor vehicle. The obligation to pay a privilege tax is due on the date set by law. Events occurring after the tax liability is due, in the absence of legislative intent to the contrary, are irrelevant. See Holland Hitch Co v Michigan, 318 Mich 474; 28 NW2d 242 (1947); Case v Detroit, 129 Mich 298; 88 NW 626 (1902); Ecorse Screw Machine Products Co v Michigan Corp and Securities Comm, 1 Mich App 414; 136 NW2d 758 (1965), aff'd 378 Mich 415; 145 NW2d 46 (1966).

Plaintiffs were required to pay the uninsured motorist tax at the time they registered their uninsured vehicle. MCL 257.226, 257.1103(3); MSA 9.1926, 9.2803(3). 1971 PA 19, §3(3), provided: *164"Every person registering an uninsured motor vehicle in this state shall pay annually at the time of registering in addition to any other fee prescribed by law, a fee of $45.00.” It did not say that, if 30 days from the registration and the payment of the fee a person were to decide to purchase insurance, he could get a refund of 11/12 of the $45 fee, nor did it say that, if a person were to purchase and register a new uninsured motor vehicle halfway through the year, he would pay only half of the $45 fee. It merely set a fee and the time and circumstances for paying the fee. We find no evidence in the act of a legislative intent to alter the basic principle that a tax is due on the date set by law and nonrefundable regardless of later events.

What evidence of a legislative intent that does exist shows that the Legislature considered and rejected the idea of refunding a portion of the uninsured motorist fee. HB 5215 (1973), which would have reconciled the MV ACA with the then recently enacted no-fault act, provided for such a refund. Over strongly worded dissents, HB 5215 (1973) was passed by the House, but was never reported out of the Senate Committee on Commerce. See 4 Michigan House J (1973), pp 2882-2906; 3 Michigan Senate J (1973), p 2463. SB 1323 (1974) , which was substantially similar to HB 5215 (1973) except that it made no provision for a refund, was passed by both houses and became 1974 PA 223. See 3 Michigan House J (1974), pp 2342-2343; 2 Michigan Senate J (1974), pp 1158, 1365, 1625. This history makes it clear that the Legislature intended no refund.5

*165We find Goodenough, supra, to be distinguishable. There, the plaintiffs, nonresident trustees of trusts having their situs in Pennsylvania, were subjected to an intangibles tax. This Court held that the plaintiffs could not be validly taxed on a privilege that they did not possess in this state. In this case, the tax was on uninsured vehicles. Plaintiffs are members of the class of persons who operated uninsured vehicles. They were not being taxed for a privilege or status they did not possess at the time of taxation.

We find the uninsured motorist fee to be in the nature of a tax. Because we have found that no contractual or licensing arrangement existed between plaintiffs and the state, plaintiffs’ constitutional claims are without merit. Because there is no express or implied legislative intent to refund the fee, plaintiffs are due no refund.

Reversed.

Williams, C.J., and Ryan, Cavanagh, and Boyle, JJ., concurred with Brickley, J.

Uninsured motorists were required to pay a $25 fee by 1965 PA 198, § 3(2). The fee was raised to $35 by 1968 PA 223, § 3(2), and to $45 by 1971 PA 19, § 3(3). In 1971, the Legislature waived payment of the $1 fee by insured motorists whenever the fund had a surplus of 40% or more greater than the fund’s combined gross claims and claim expense reserves. 1971 PA 19, § 3(5). The $1 insured motorist fee was not collected for the 1971,1972, or 1973 registration years.

Plaintiffs’ complaint also sought a refund of interest on monies transferred by the Legislature from the fund to the general fund. 1971 PA 19, § 3a, authorized this transfer at an interest rate "to be determined annually by the legislature”. Pursuant to 1973 PA 59, § 2, the money was repaid to the fund without interest. Plaintiffs have cross-appealed from the conclusion of the trial court and the Court of Appeals that the trial court had no power to substitute its judgment as to a proper interest rate for that of the Legislature. Our conclusion on the necessity of a refund obviates a decision on this matter.

Plaintiffs could, of course, recover from the fund for damages suffered because of the acts of other uninsured motorists. This right was granted to all persons who suffered such damage, existed independent of one’s status as an uninsured motorist, and, therefore, cannot be considered a benefit giving rise to any contract rights in an uninsured motorist qua uninsured motorist.

This lack of an especial benefit to the uninsured motorist likewise precludes the conclusion that the uninsured motorist fee was a special assessment. An especial benefit to the assessed group is the sine qua non of a special assessment. See Dukesherer Farms, Inc v Dep’t of Agriculture (After Remand), 405 Mich 1; 273 NW2d 877 (1979); Newman v City of Indianola, 232 NW2d 568 (Iowa, 1975); Heavens v King County Rural Library Dist, 66 Wash 2d 558; 404 P2d 453 (1965).

Earmarking the proceeds of a tax for a specific fund or special purpose, as is frequently the case in Michigan’s scheme of taxation, rather than the general fund does not make the exaction any less a tax.

In a footnote to their brief, plaintiffs also argue that the uninsured motorist tax violated Const 1963, art 9, § 9 which, prior to its amendment by House Joint Resolution F, proposal M, ratified November 7, 1978, provided:

*165"All specific taxes, except general sales and use taxes and regulatory fees, imposed directly or indirectly on fuels sold or used to propel motor vehicles upon highways and on registered motor vehicles shall, after the payment of necessary collection expenses, be used exclusively for highway purposes as defined by law.” The MVACA does not define the compensation of persons injured by uninsured motorists as a highway purpose.

We need not decide whether the uninsured motorist fund falls within prior legislative definitions of highway purposes or whether the MVACA implicitly is such a definition, because plaintiffs seek only a refund. The proper relief for a validly imposed, but unconstitutionally spent, tax is to enjoin the improper spending. Plaintiffs have requested no such relief.