Baraga County v. State Tax Commission

Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh

Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman

____________________________________________________________________________________________________________________________

FILED JUNE 12, 2002

BARAGA COUNTY, BARAGA TOWNSHIP,

L’ANSE TOWNSHIP, ROSEMARY

HAATAJA, and AMY ST. ARNOLD,

Plaintiffs-Appellees,

v No. 118922

STATE TAX COMMISSION,

Defendant-Appellant.

___________________________________

BEFORE THE ENTIRE COURT

CAVANAGH, J.

This is an action seeking an order of mandamus. The

State Tax Commission seeks a determination whether a consent

judgment entered by the Michigan Tax Tribunal is enforceable

against defendant, which was not a party to the action before

the tribunal.

We hold that the consent judgment is not enforceable

against defendant because defendant was not a party to the

tribunal proceedings. Under the rules of how privity applies

among governmental units that we adopt today, we further hold

that privity does not exist in this case to bind the state by

a judgment entered into by a subordinate political division.

Therefore, we reverse the decision of the Court of Appeals and

remand to the trial court for entry of a denial of plaintiffs’

request for an order of mandamus.

The history of this case dates back to 1992, when the

State Treasurer petitioned the Baraga Circuit Court for the

right to sell properties for delinquent taxes. The properties

were owned by members of the Keweenaw Bay Indian Community

(KBIC), including plaintiffs in this case, Haataja and St.

Arnold, and was located within the boundaries of the

community’s reservation. The property owners objected,

arguing that under an 1854 treaty between the United States

and the Chippewa, the state of Michigan lacked jurisdiction to

impose ad valorem property taxes on lands owned by members of

the KBIC and located within the boundaries of the community’s

reservation.

After losing in the circuit court, the property owners

filed petitions with the tribunal, naming L’Anse Township and

Baraga Township1 as respondents. Baraga County intervened in

1
Some of the property in question is located in one

township and some in the other township.

the tribunal proceedings as a respondent. A settlement was

reached during the tribunal proceedings, which resulted in a

consent judgment being entered in May 1994. Although the

properties owned by tribal members residing within the

reservation boundaries were to be “removed” from the tax and

assessment rolls and were listed as exempt, the townships and

county were required to have their township assessors continue

to assess the properties in the same way they assess nontribal

member owned property and to maintain such information

separately. This was to allow for the proper calculation of

“payment in lieu of taxes” to be billed to the KBIC, which was

to make a payment in lieu of taxes for the full amount of the

tax that would be due if the property were owned by a

nontribal member. For almost five years, the townships, the

KBIC, and tribal members apparently abided by the consent

judgment.

On December 28, 1998, defendant issued Bulletin No. 18,

regarding Indian-owned lands. In that bulletin, defendant

notified local assessors of the June 8, 1998, decision of the

United States Supreme Court in Cass Co, Minn v Leech Lake Band

of Chippewa Indians, 524 US 103; 118 S Ct 1904; 141 L Ed 2d 90

(1998). The bulletin indicated that it was defendant’s

position that Indian lands owned in trust by the United States

Government were exempt from the Michigan General Property Tax,

MCL 211.1 et seq. Lands owned in fee by individual Indians or

Indian communities were not exempt and were assessable.

Defendant further advised local assessors that any Indian

lands not held in trust by the United States that had been

previously exempted were no longer qualified for such

exemption and should be placed upon the assessment rolls.

Defendant also advised local assessors that agreements to

exempt from, and accept payments in lieu of, taxes were not

authorized by law, and that appropriate steps should be taken

to correct these situations.

Pursuant to Bulletin No. 18, the assessor for L’Anse and

Baraga Townships contacted defendant in regard to certain

lands within the townships that had previously been exempted

through the May 1994 consent judgment. The assessor was

advised to place the previously exempted properties on the

assessment roll unless they were held in trust by the federal

government, which gave rise to the present dispute.

Plaintiffs (the Indian landowners, Baraga and L’Anse

Townships, and Baraga County) sought mandamus and an order to

show cause in the Baraga Circuit Court. The trial court

ordered mandamus, and the Court of Appeals affirmed, holding

that defendant was in privity with the local units of

government in regard to property tax appeals before the

tribunal and, as such, the doctrine of res judicata applied to

bind defendant to the terms of consent judgments entered by

the Tax Tribunal in matters where defendant was not a party.2

We granted defendant’s application for leave to appeal.

We must first determine whether the trial court properly

issued the order of mandamus. An order of mandamus will only

be issued if a plaintiff proves it has a “‘clear legal right

to performance of the specific duty sought to be compelled’

and the defendant has a ‘clear legal duty to perform such act

. . . .’” In re MCI Telecommunications, 460 Mich 396, 443

444; 596 NW2d 164 (1999), quoting Toan v McGinn, 271 Mich 28,

34; 260 NW 108 (1935). We review a trial court’s decision

regarding an order of mandamus for abuse of discretion. Id.

at 443.

III

A. Privity

Defendant asserts that plaintiffs did not establish they

had a “clear legal right” to force defendant to abide by the

terms of the consent judgment because defendant was not a

party to the tribunal proceedings. The Court of Appeals

disagreed and concluded that the consent judgment was binding

on defendant under the principle of res judicata. There are

three prerequisites to the application of the doctrine of res

2
243 Mich App 452, 454-456; 622 NW2d 109 (2000).

judicata: “a prior decision on the merits; the issues must

have been resolved in the first case . . . ; and both actions

must be between the same parties or their privies.” Sloan v

Madison Heights, 425 Mich 288, 295; 389 NW2d 418 (1986).

Further, the burden of proving the applicability of the

doctrine of res judicata is on the party asserting it. Id.

We disagree with the Court of Appeals that defendant was

in privity with plaintiffs Baraga Township and L’Anse

Township.3 The Court of Appeals stated that “[p]rivity

between a party and a nonparty requires both a ‘substantial

identity of interests’ and a ‘working or functional

relationship . . . in which the interests of the nonparty are

presented and protected by the party in the litigation.’” 243

Mich App 456, quoting Phinisee v Rogers, 229 Mich App 547,

553-554; 582 NW2d 852 (1998) (citations and internal quotation

marks omitted). This definition of privity was taken from

Phinisee, an action involving a paternity judgment, in which

the Court of Appeals adopted the definition from a Colorado

paternity case.4 Thus, the Court of Appeals applied a

3
Because we hold that plaintiffs have failed to prove

privity, we need not decide whether plaintiffs have satisfied

the other requirements for the application of res judicata.

Sloan, 425 Mich 295.

4
SOV v Colorado, 914 P2d 355, 360 (Colo, 1996), quoting

Public Service Co v Osmose Wood Preserving, Inc, 813 P2d 785,

787 (Colo App, 1991) (involving an indemnification agreement).

definition of privity that originated in cases involving

private parties. In this case, the parties involved are

governmental units.

There is law directly describing how privity applies

among governmental units. Both Corpus Juris Secundum and

American Jurisprudence Second indicate that there is no

privity in this situation. 50 CJS, § 869, Judgments, p 443,

states:

A state may be bound by a judgment for or

against a public officer, or agency, but only with

respect to a matter concerning which he or the

agency is authorized to represent it, and it is not

bound by a judgment to which a subordinate

political subdivision was a party in the absence of

a showing that such political body had an interest

in the litigation as a trustee for the state.

47 Am Jur 2d, Judgments, § 700, p 167, states:

Courts have also generally found that no

privity exists between state and federal

governments, between the governments of different

states, or between state and local governments.

We agree with both these statements. As 50 CJS, § 869

indicates, there may be specific circumstances under which the

state may be bound by a judgment to which a subordinate

political division was a party and the state was not, such as

when the subordinate political subdivision is found to have

been acting as a trustee for the state. Such circumstances

are not present here.

While the definition of privity applied by the Court of

Appeals may be applicable in determining privity between

private parties, a determination that is not before this

Court, we hold today that privity does not exist in this case

to bind the state by a judgment entered into by a subordinate

political division.

B. Differing Roles of Townships and the Commissions

The Court of Appeals concluded that defendant was in

privity with plaintiffs Baraga Township and L’Anse Township,

reasoning:

Both townships were required by statute to

carry out assessments of properties within their

boundaries. MCL 211.10. Defendant was also

charged by statute to “take such measures as will

secure the enforcement of the provisions of this

act, to the end that all the properties of this

state liable to assessment for taxation shall be

placed upon the assessment rolls . . . .” MCL

211.150(1). The governmental entities that signed

the consent judgment were charged with assessing

property and collecting taxes, and, therefore, had

a “substantial identity of interests” with

defendant and represented the same legal right.

The townships secured that interest when they

negotiated to have the KBIC make payments in lieu

of the taxes that normally would have been

assessed. [Baraga Co, 243 Mich App 456-457

(citation omitted).]

The Court of Appeals erred in focusing on the fact that

the townships carry out the same set of property tax laws that

defendant is required to enforce. Rather, the Court should

have focused on the differing roles of the townships, to carry

out the tax laws, versus defendant, to step in if the

townships fail to carry out their duties. It properly noted

that, under MCL 211.10, the townships were required to carry

out assessments of properties within their boundaries.

However, the townships, in defendant’s view, removed taxable

property from the tax rolls. This must be an example of the

type of situation in which defendant is charged with

intervening so as to secure uniformity in the implementation

of the provisions of the General Property Tax Act. MCL

211.150 states:

It shall be the duty of the commission: (1) To

have and exercise general supervision over the

supervisors and other assessing officers of this

state, and to take such measures as will secure the

enforcement of the provisions of this act, to the

end that all the properties of this state liable to

assessment for taxation shall be placed upon the

assessment rolls and assessed at that proportion of

true cash value which the legislature from time to

time shall provide pursuant to the provisions of

article 9, section 3 of the constitution.

Given the supervisory role that the Legislature has assigned

to defendant over local assessors, it would be inconsistent

with the statutory scheme to allow agreements entered into by

such local assessors to bind defendant. Accordingly, we fail

to see, even using the definition of privity applied by the

Court of Appeals, how the parties could have a “substantial

identity of interests” and represent the same legal right when

defendant is empowered to intervene if it concludes that

municipalities have failed to place taxable property on the

tax rolls and defendant is specifically charged with

exercising general supervision over local assessors.

Further, we reject the Court of Appeals reasoning that

this is all somewhat academic because “[t]he townships secured

that interest [the interest in proper payment of taxes] when

they negotiated to have the KBIC make payments in lieu of the

taxes that normally would have been assessed.” 243 Mich App

457. Whether the taxes effectively got paid is important, of

course, but it is not to this alone that the statute is

directed. Under MCL 211.150(1), defendant is charged with

ensuring that all taxable properties are placed on the

assessment rolls.5 Plaintiffs and defendant cannot be

representing the same legal right or have a substantial

identity of interests if the townships purposefully did not

place taxable properties on the assessment rolls, an action

that defendant is required to ensure.

C. Estoppel

Plaintiffs ask this Court to find privity between

defendant and the townships, arguing that the history of this

case creates an estoppel to deny privity. In support of this

theory, plaintiffs claim that the Baraga Township supervisor

5
That this is indeed not academic can be seen from the

fact that certain state-to-local aid formulas key on those

very rolls and their cumulative taxable values. See, e.g.,

MCL 380.1226 (requiring a county treasurer to provide a

statement of assessed valuation of each school district or

fraction of a school district in a county).

“repeatedly contacted” a member of the commission regarding

the taxable status of the properties at issue for 1992-1994

and informed him of the proceedings. Moreover, plaintiffs

assert that the supervisor repeatedly requested guidance from

defendant, but the requests were ignored, thus, consigning the

townships to represent themselves in the tribunal proceedings.

Given all this, plaintiffs argue that there was acquiescence

so as to estop the State Tax Commission from challenging the

outcome of the litigation.

In countering this estoppel theory, defendant argues

here, as it did in the Court of Appeals, that nothing in the

legislation establishing lines of authority provides that the

State Tax Commission must render aid to local assessors or be

estopped to assert certain positions because of that. The

Court of Appeals, in deciding for plaintiffs disagreed. The

Court relied on MCL 209.104 to conclude that defendant was

“statutorily required” to render assistance to plaintiffs.

MCL 209.104 states in part:

The state tax commission shall have general

supervision of the administration of the tax laws

of the state, and shall render such assistance and

give such advice and counsel to the assessing

officers of the state as they may deem necessary

and essential to the proper administration of the

laws governing assessments and the levying of taxes

in this state.

We disagree that this section required defendant to

provide assistance merely because an assessing officer

requested it. It follows, therefore, that we also disagree

with the estoppel argument that is based upon this flawed

“requirement to assist” concept.

The statute states that the commission “shall render such

assistance . . . as they may deem necessary and essential

. . . .”6 This section of the statute is designed to outline

the duties of the State Tax Commission. One of those duties

is to provide “advice and counsel to the assessing officers of

the state.” The statute then qualifies this obligation by

providing that the advice shall be “as they may deem necessary

and essential to the proper administration of the laws

governing assessments and the levying of taxes in this state.”

(Emphasis added.) Because the predicate of the statutory

scheme is that defendant possesses greater expertise than the

subordinate assessing officers, it is logically necessary that

defendant–not the recipients of any advice–must determine what

6
While we recognize that “they” is a plural pronoun,

“they,” as used in this statutory provision, must refer to the

“state tax commission” even though this is a singular noun.

This construction is required to make the rest of the statute

organizationally coherent.

[T]he entire act must be read, and the

interpretation to be given to a particular word in

one section arrived at after due consideration of

every other section so as to produce, if possible,

a harmonious and consistent enactment as a whole.

[Grand Rapids v Crocker, 219 Mich 178, 182-183; 189

NW 221 (1922).]

advice is “necessary and essential.”

Thus, construing the statute in this fashion, it is

within the discretion of defendant when or if it renders

assistance. Defendant is never “required,” except by its own

good-faith judgment, to render assistance to anyone under this

statute. Therefore, we refuse to find privity on the basis of

an estoppel theory.

D. Practical Efforts

We would also point out that defendant argues

convincingly that plaintiffs’ position is unworkable if for no

other reason than that there could be between 7,000 and 10,000

property tax disputes filed yearly in the tribunal, most of

which are disposed of through consent judgments. Clearly,

defendant could not have been expected by the Legislature to

routinely monitor these proceedings to ascertain whether the

state’s interests are being adequately represented by the

local units of government. Thus, in addition to the language

of the statute controlling the relationship between the State

Tax Commission and the local assessors, we note that the way

these cases are handled militates against plaintiffs’

position.

The consent judgment entered by the tribunal is not

enforceable against defendant, which was not a party to the

tribunal proceedings. Privity does not exist in this case to

bind the state by a judgment entered into by a subordinate

political division. Therefore, res judicata cannot be applied

to bind defendant by the consent judgment. Without res

judicata, plaintiffs cannot satisfy the requirements for an

order of mandamus because they have no legal right to the

performance requested. Accordingly, we reverse the judgment

of the Court of Appeals and remand this case to the trial

court for entry of a denial of plaintiffs’ request for an

order of mandamus.

CORRIGAN , C.J., and WEAVER , KELLY , TAYLOR , YOUNG , and MARKMAN,

JJ., concurred with CAVANAGH , J.