Title: WPW ACQUISITION CO V CITY OF TROY

State: michigan

Issuer: Michigan Supreme Court

Document:

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Michigan Supreme Court 
Lansing, Michigan 48909 
C hief Justice 
Justices 
Maura D. Corrigan  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED MAY 14, 2002  
WPW ACQUISITION COMPANY,  
Plaintiff-Appellant,  
v  
No. 118750  
CITY OF TROY,  
Defendant-Appellee.  
BEFORE THE ENTIRE BENCH  
TAYLOR, J.  
Underlying this case is the adoption of the “Proposal A”  
amendment 
of 
the 
Michigan Constitution at the special election  
held on March 15, 1994.  In particular, Proposal A added  
language to Const 1963, art 9, § 3 that generally limits  
annual increases in property tax assessments on a parcel of  
property as long as that property is owned by the same party.  
However, Proposal A allows the value of property to be  
adjusted for “additions” without regard to this cap.  At issue  
 
is the constitutionality of a statutory provision, MCL  
211.34d(1)(b)(vii), that purports to include, in certain  
circumstances, an increase in the value of property because of  
increased occupancy by tenants within the meaning of  
“additions.”  We conclude that this statutory provision is  
unconstitutional because it is inconsistent with the meaning  
of the term “additions” as used in Proposal A.  
I  
In 
1991, 
before 
the ratification of Proposal A, plaintiff  
WPW Acquisition Company was granted by defendant city of Troy  
a decrease in the assessed value of the parcel of property  
that included the office building at issue. At all relevant  
times, this property has been owned by WPW.  
In 1996, after the passage of Proposal A, Troy increased  
its determination of the assessed “taxable value” of the  
parcel of property, and thus its property tax assessment, by  
over thirteen percent.1  Apparently, this increased assessment  
was tied to an increased occupancy of the office building by  
tenants.  WPW protested this assessment as violative of the  
provision 
of 
the 
Proposal 
A 
constitutional 
amendment, 
codified  
at Const 1963, art 9, § 3, that generally limits annual  
increases in the assessed taxable value of a parcel of  
1  The taxable value assessed by Troy in 1995 was 
$6,545,970. In 1996, it was increased to $7,434,940.  
2  
 
 
property to the lesser of five percent or the increase in the  
“general price level” for the immediately preceding tax year.  
However, Troy took the position that the increased assessment  
was permitted by language in the constitutional amendment  
allowing adjustments for “additions” and a subsequently  
enacted statutory provision, MCL 211.34d(1)(b)(vii), which  
defines “additions” to include, in some circumstances,  
increases in the value of property attributable to an  
increased occupancy rate.  
After the Michigan Tax Tribunal ruled in favor of Troy  
with regard to the assessment, WPW brought this action in the  
circuit court, challenging the constitutionality of the  
pertinent statutory provision, MCL 211.34d(1)(b)(vii).  The  
circuit court held that this statutory provision was  
unconstitutional as an attempt by the Legislature to change  
the meaning of “additions” as used in the Michigan  
Constitution from the meaning established by the relevant  
statute when Proposal A was passed.2  The Court of Appeals  
reversed, holding that the constitutional amendment left the  
meaning of “additions” to the Legislature “to define,  
consistent with the ratifiers’ intent” and that the  
2 However, the circuit court denied WPW’s request that it 
order a corresponding tax refund in its favor on the ground 
that calculation and award of such a tax refund was within the  
exclusive jurisdiction of the Tax Tribunal.  
3  
 
 
Legislature had done so in a reasonable manner in the  
pertinent statutory provision.  243 Mich App 260; 620 NW2d 883  
(2001). We granted WPW’s application for leave to appeal.  
II  
The Michigan Constitution, Const 1963, art 9, § 3  
provides in pertinent part with regard to taxation of real  
property:  
The legislature shall provide for the uniform 
general ad valorem taxation of real and tangible 
personal property not exempt by law except for 
taxes levied for school operating purposes.  The  
legislature shall provide for the determination of 
true cash value of such property; the proportion of 
true cash value at which such property shall be 
uniformly assessed, which shall not, after January 
1, 1966, exceed 50 percent; and for a system of 
equalization of assessments.  For taxes levied in  
1995 and each year thereafter, the legislature  
shall provide that the taxable value of each parcel  
of property adjusted for additions and losses, 
shall not increase each year by more than the  
increase in the immediately preceding year in the  
general price level, as defined in section 33 of  
this article, or 5 percent, whichever is less until  
ownership of the parcel of property is transferred.  
When ownership of the parcel of property is  
transferred as defined by law, the parcel shall be  
assessed at the applicable proportion of current  
true cash value. [Emphasis added.]  
The emphasized language, which is central to the present case,  
was part of the language added to this constitutional  
provision by the Michigan electorate in ratifying Proposal A.  
As is plain, this language operates to generally limit  
increases in property taxes on a parcel of property, as long  
as it remains owned by the same party, by capping the amount  
4  
 
that the “taxable value” of the property may increase each  
year, even if the “true cash value,” that is, the actual  
market value, of the property rises at a greater rate.  
However, a qualification is made to allow adjustments for  
“additions.”
 Resolution of the present case turns on the  
meaning of the term “additions” as used in the emphasized  
constitutional language.  
When Proposal A was adopted (that is, on March 15, 1994),  
the General Property Tax Act defined “additions” to mean  
all increases in value caused by new construction 
or a physical addition of equipment or furnishings, 
and the value of property that was exempt from 
taxes or not included on the assessment unit’s  
immediately preceding year’s assessment role.  [MCL 
211.34d(1)(a), as then in effect.]  
Obviously, this definition did not encompass any increases in  
occupancy by tenants in a  building within the meaning of the  
term “additions.”  
However, after the pertinent constitutional language was  
added to § 3 by the ratification of Proposal A, the  
Legislature enacted amendments of MCL 211.34d(1)(b)(vii) that  
state in pertinent part:  
As used in this section or . . . section 3  
. . . of article IX of the state constitution of  
1963 [that is § 3 of the constitutional provision 
at issue]:  
* * *  
(b) For taxes levied after 1994, “additions” 
means, except as provided in subdivision (c), all  
5  
  
of the following:  
* * *  
(vii) An increase in the value attributable to 
the property’s occupancy rate if either a loss, as 
that term is defined in this section, had been 
previously allowed because of a decrease in the 
property’s occupancy rate or if the value of new 
construction was reduced because of a below-market  
occupancy rate.  
Troy relied on this statutory provision in increasing  
WPW’s taxable value for the office building at issue by over  
thirteen percent in 1996 on the ground that this was based on  
an increase in occupancy covered by the statute and, thus, on  
an “addition” that was not subject to the general limit on  
annual property tax increases imposed by § 3.  
However, 
we 
agree with WPW that MCL 211.34d(1)(b)(vii) is  
unconstitutional in purporting to define “additions” for  
purposes of § 3 in a way that is inconsistent with the  
established meaning of that term at the time that it was added  
to this constitutional provision by the passage of Proposal A.  
This is because “if a constitutional phrase is a technical  
legal term or a phrase of art in the law, the phrase will be  
given the meaning that those sophisticated in the law  
understood at the time of enactment unless it is clear from  
the constitutional language that some other meaning was  
intended.” 
Michigan Coalition of State Employee Unions v  
6  
 
 
Civil Service Comm, 465 Mich 212, 223; 634 NW2d 692 (2001).3  
At the time that Proposal A was submitted to the voters, the  
General Property Tax Act established “additions” as a  
technical legal term in the area of property taxation.  As we  
discussed above, that statutory definition of “additions”  
simply did not encompass any increase in the value of property  
due to increased occupancy by tenants.  
Further, there is no indication when one examines the  
purposes of the property tax limitation amendment to conclude  
that another more expansive meaning of “additions” was  
intended.4  On the contrary, the opposite appears to be the  
case.  The amendment generally was to not allow the taxable  
value to increase above the “cap” regardless of any larger  
increase in true market value until the property was  
transferred.  The blanket bar was tempered, however, by  
allowing for adjustments for additions.  If what the amendment  
had done was empower the Legislature, at its will, to define  
an increase in the value of property (such as an increase due  
3  See also People v Pickens, 446 Mich 298, 310-311; 521 
NW2d 797 (1994), quoting 1 Cooley, Constitutional Limitations 
(8th ed), p 132 (“technical words” and “words of art” in a 
constitution should be considered “to be employed in their 
technical sense”).  
4  As we observed in Federated Publications, Inc v  
Michigan State Univ Bd of Trustees, 460 Mich 75, 85; 594 NW2d 
491 (1999), “we often consider the circumstances surrounding 
the adoption of [a constitutional] provision and the purpose 
it is designed to accomplish.”  
7  
to increased occupancy) to be classified as an “addition,”  
then the property tax limiting thrust of § 3 would be, or  
could soon be if the Legislature desired it, thwarted.  To  
adopt 
Troy’s 
position regarding legislative power to amend the  
meaning of terms understood at the time of ratification, would  
be to assume the drafters and ratifiers of this amendment  
desired to place a convenient sabotaging clause within this  
tax limitation amendment that could be triggered whenever the  
Legislature chose. Such a skewed view of the intent, to say  
nothing of the capabilities, of the drafters and ratifiers,  
should be rejected.  Moreover, to adopt such a mode of  
interpretation would, when applied in the future to other  
constitutional language, hollow out the people’s ability to  
place limits on legislative power.  In short, to recognize  
such 
an 
expansive 
legislative 
power 
to 
redefine 
constitutional  
terms is inconsistent with the constitution’s supremacy over  
statutes.  See Marbury v Madison, 5 US (1 Cranch) 137; 2 L Ed  
60 (1803).  Against this background, we see no principled way  
to determine the meaning of “additions” as used in § 3 except  
by considering it as a term of art that must be construed in  
conformity with the meaning of “additions” as used in the  
General Property Tax Act at the time that Proposal A was  
8  
 
 
 
adopted.5  
Further, the position that Troy urges upon us, that the  
ultimate definition of “additions” in § 3 was committed to the  
Legislature,6 also runs counter to the principle that  
construing the meaning of constitutional language is a basic  
judicial function. See Lewis v Michigan, 464 Mich 781, 788­
789; 629 NW2d 868 (2001) (reviewing a statute for its  
constitutionality is “a core judicial function”); House  
Speaker v Governor, 443 Mich 560, 575; 506 NW2d 190 (1993),  
quoting Baker v Carr, 369 US 186, 211; 82 S Ct 691; 7 L Ed 2d  
(1962) (describing this Court as the “ultimate interpreter of  
the 
[Michigan] 
Constitution”).  
Moreover, 
the 
pivotal 
sentence  
in § 3 states:  
5 Troy emphasizes its view that WPW essentially got a tax 
break when the assessed value of the property was lowered in 
1991 on the basis of a decrease in occupancy, and that the 
increase in value in 1996 was fair because it corresponded to 
an ensuing increase in occupancy.  While WPW disputes this 
view with the contention that the decreased assessment in 1991  
simply reflected a decline in market value, the point is 
simply immaterial to our analysis.  Nothing in the language of 
§ 3 and, in particular, nothing in the established meaning of 
“additions” at the time Proposal A was passed allows for an 
increase in the taxable value of property beyond the general 
cap established by Proposal A on the basis of such a prior 
reduction in assessed value.  
6  Troy states in its brief:  
The Michigan Constitution, however, does not 
specifically define additions and losses, and  
therefore the legislature was left to format the 
commonly understood meaning of these terms into 
legislation.  
9  
For taxes levied in 1995 and each year 
thereafter, the legislature shall provide that the 
taxable value of each parcel of property adjusted 
for additions and losses, shall not increase each 
year by more than the increase in the immediately 
preceding year in the general price level, as 
defined in section 33 of this article, or 5 
percent, whichever is less until ownership of the 
parcel of property is transferred.  
This 
language 
clearly imposes an obligation on the Legislature  
to provide implementing legislation for a general limitation  
on the increase in taxable value of parcels of property. It  
cannot be distorted into allowing the Legislature to  
periodically alter the meaning of “additions.”  That such a  
limit 
on 
legislative 
power should be understood is underscored  
by the immediately following sentence in § 3, which provides:  
When ownership of the parcel of property is 
transferred as defined by law, the parcel shall be 
assessed at the applicable proportion of current 
true cash value. [Emphasis added.]  
This language shows that the drafters of the proposal knew how  
to commit the definition of certain terms to the Legislature,  
in this instance, what constitutes a transfer. That no such  
legislative authority was granted with regard to the term  
“additions” reinforces the lack of such a commitment to allow  
the Legislature this power.  
For 
these 
reasons, we disagree with the essential premise  
of the Court of Appeals in this case that § 3 “left it to the  
Legislature to define” the term “additions.”  Therefore, we  
hold that MCL 211.34d(1)(b)(vii) is unconstitutional because  
10  
 
 
it purports to define the term “additions” for purposes of § 3  
in a way that violates the proper meaning of that term.7  
It follows from our analysis that Troy’s decision in  
1996, 
in 
reliance 
on 
this 
unconstitutional 
statutory  
provision, to increase the assessment on the office building  
at issue by far more than five percent, solely on the basis of  
increased occupancy, facially violated the cap on annual  
increases in taxable value imposed by § 3. Thus, we reverse  
the holding of the Court of Appeals.  
III  
In light of its holding rejecting WPW’s constitutional  
challenge to MCL 211.34d(1)(b)(vii), the Court of Appeals  
expressly declined to reach the issue whether the circuit  
court had jurisdiction to order a tax refund premised on the  
unconstitutionality 
of 
that 
statutory 
provision. 
 
Accordingly,  
we remand this case to the Court of Appeals for initial  
consideration of that issue.8  
7 WPW also argues that this statutory provision violates 
the “uniformity” requirement of the first sentence of Const 
1963, art 9, § 3, which states in pertinent part, “The 
legislature shall provide for the uniform general ad valorem 
taxation of real and tangible personal property . . . .” 
However, 
in 
light 
of 
our 
analysis 
holding 
MCL  
211.34d(1)(b)(vii) 
to 
be 
unconstitutional 
on 
other 
grounds, 
it 
is unnecessary to consider that question.  
8  While the parties argue this matter here, we consider 
it most appropriate to allow the Court of Appeals to review it 
in the first instance.  
11  
 
 
 
 
The opinion of the Court of Appeals is reversed.  This  
case is remanded to that Court for further proceedings  
consistent with this opinion.  
CORRIGAN, 
C.J., 
and WEAVER, 
YOUNG, 
and MARKMAN, 
JJ., concurred  
with TAYLOR, J.  
12  
 
 
___________________________________ 
v 
S T A T E 
O F 
M I C H I G A N  
SUPREME COURT  
WPW ACQUISITION COMPANY,  
Plaintiff-Appellant,  
No. 118750  
CITY OF TROY,  
Defendant-Appellee.  
CAVANAGH, J. (concurring).  
The people of this state adopted Proposal A, which  
amended Const 1963, art 9, § 3 by limiting the tax increase  
that could be imposed on property tax assessments.  The  
amendment permits an increase in excess of this cap if the  
property valuation is adjusted for “additions.”  I agree with  
the majority’s conclusion that the Legislature impermissibly  
redefined “additions” in this instance.  However, I write  
separately to express my concern with the majority’s  
overzealous 
condemnation 
of 
the 
Legislature’s 
attempt 
to 
enact  
the provisions of the constitutional amendment and to caution  
against its constitutional analysis that suggests the  
undertaking lacks complexity.  
I agree with the majority that the Legislature may define  
constitutional terms when permitted by the text.  Because the  
revised definition significantly expands the articulated  
exceptions to the cap on tax increases, it conflicts with the  
original 
intent 
of 
the 
ratifiers. 
This 
legislative  
overreaching is particularly evident because we are close in  
time to the passage of the amendment, and we must assume the  
ratifiers intended any exceptions to the cap on tax increases  
be narrowly construed. However, contrary to what the majority  
implies, even if this Court determined that the text of the  
amendment expressly permits the Legislature to define the  
term, its design could not be thwarted because this Court  
would still be required to invalidate any definition that  
violated the purpose of the amendment.  The Legislature can  
never unconstitutionally define a term in the constitution.  
Though the issues this case presents are far from  
complex, 
the 
nature 
of 
constitutional 
interpretation 
is 
rarely  
so straightforward.  Simply stated, the value of original  
intent as one method among many in the endeavor to properly  
interpret our constitution must be appreciated.  With that  
qualification, I respectfully concur.  
KELLY, J., concurred with CAVANAGH, J.  
2