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### STATE OF MICHIGAN

COURT OF APPEALS

OWENS-BROCKWAY GLASS CONTAINERS INC,

Plaintiff/Counter-DefendantAppellant, UNPUBLISHED October 21, 2014

v No. 314190 Ingham County Circuit Court STATE TAX COMMISSION, LC No. 11-000071-CK

Defendant-Appellee,

and

CITY OF CHARLOTTE,

Defendant/Counter-PlaintiffAppellee.

Before: R ONAYNE K RAUSE , P.J., and W ILDERand S TEPHENS , JJ.

P ER C URIAM

.
Plaintiff appeals as of right the December 14, 2012 judgmen t in favor of defendant after a bench trial in Ingham County Circuit Court. The trial court dismissed plai ntiff’s complaint for a declaratory judgment and awarded $4,015,875 in damages to defendant. We affirm.

I. FACTUAL BACKGROUND

Plaintiff owns a manufacturing plant in Charlotte, Michigan, that produced glass containers for the food industry. Plaintiff intended to close the plant in the late 1990s as a result of the high cost of operating in efficient equipment, primarily an obsolete furnace that was near
the end of its useful life. Plaintiff entered in to an agreement (Agreement) with the city of Charlotte (defendant) in 1999, where plaintiff recei ved a property tax abatement in exchange for upgrading its facilities and keeping at least 130 jobs at the plant. Plaintiff used the tax abatement to purchase and install a new oxy- fuel furnace, as well as e quipment for forming, inspection, load-building, and support.-2- The tax abatement was in the form of an Industrial Facilities Tax Certificate (IFT) granted by the State Tax Commission (STC) under the Plant Rehabili tation and Industrial Development District Act, Public Act 198 of 1974 (Act 198). MCL 207.572 requires such IFTs to be in writing. The tax abatement ran from December 30, 1999, to December 30, 2011, and the Agreement stipulated what woul d happen in the event plainti ff closed the plant prior to December 30, 2011: 4.1 In the event of closing as determined after investigation of the facts and a public hearing, [plaintiff] shall be immedi ately liable for penalties to be paid forthwith to the City, determined as follows:

4.1.1 [Plaintiff] shall pay to the City for pr o rata distribution to the taxing units experiencing the abatement, an amount equal to the difference between the [IFT] which it has paid, and the total property taxe s to the relevant taxing units which it would have paid, given its installation of improvements or equipment, during the years for which the [IFT] was in effect. In essence, [plaintiff] shall be liable to refund, in full, all abated taxes.

In Section 3.2, the Agreement stat ed that “[c]losing shall mean, fo r purposes of this agreement, the removal, without the transfer to another site with in the City of subs tantially all of the production facilities, and the elimination of substan tially all the jobs create d or retained thereby, which are set forth in [plaintiff’s] application.” The City’s Mayor at the time, David Brown, testified at trial that the purpos e of Sections 3.2 and 4.1 was to keep plaintiff in the community.

From December 30, 1999, to April 30, 2010, plainti ff fully complied with the Agreement. During that time, plaintiff earned net profits exceeding $57 million. However, in May 2010, plaintiff ceased manufacturing operations at the plant and released substantially all of its employees. Plaintiff proceeded to remove or dismantle equipment, including all four bottle machines and control equipment for the furnace. Other various pieces of equipment were transferred to other plants. By January 2011, enough equipment had been dismantled, shipped out, or disposed of that the plant was incapable of producing glass bottles.

On June 28, 2010, defendant submitted a resolution to the STC seeking the revocation of
Plaintiff’s IFT. The STC held a hearing on December 7, 2010, with representatives present from plaintiff and defendant. On December 20, 2010, th e STC voted to revoke plaintiff’s IFT and subsequently sent plaintiff an Order of Revocation on January 10, 2011. Defendant sent plaintiff a document titled “[Plaintiff] Tax Obligation” that estimated that plaintiff owed defendant $4
million.

Plaintiff filed a separate complaint seeking declaratory judgment against the STC and defendant on January 14, 2011. The parties refer to this action as “the ST C Appeal.” The trial court dismissed the STC Appeal for lack of standi ng. At trial, plaintiff claimed that it had not “closed” the plant under the terms of the Agreement, that Section 4.1.1 constituted an unenforceable penalty, and that defendant was attemp ting to collect an unconstitutional tax. The trial court determined that the “penalty” in the Agreement was a valid liquidated damages clause. Further, the trial court determined that, under the terms of Section 3.2 of the Agreement, plaintiff had “closed” the plant and owed defendant the abated taxes of $4,015,875. The trial court-3- dismissed plaintiff’s complaint for a decl aratory judgment and awarded $4,015,875 in damages to defendant. This appeal follows from that order.

II. PLANT CLOSING

On appeal, plaintiff argues that the trial court erred in determining that the definition of a plant “closing” under Section 3.2 was ambiguous a nd that a closing had actually occurred. In response, defendant argues that th e doctrine of res judicata precludes consideration of appeal of the closing issue. Applying the doctrine is a qu estion of law that this Court reviews de novo.
Pierson Sand & Gravel

, Inc v Keeler Brass Co , 460 Mich 372, 379; 596 NW2d 153 (1999). On the other hand, the arguments made by plaintiff concerning the issu e of closing are questions of fact. This Court reviews a trial court’s finding of fact in a bench trial for clear error. Alan
Homes

, Inc v Krol , 256 Mich App 505, 512; 667 NW2d 379 (2003).

In response to defendant’s claim of res judi cata, plaintiff argues th at the doctrine has no place in this appeal because the question of whether a “closing” under Section 3.2 of the Agreement occurred was never adjudicated in a ny case other than the contract case on appeal
here. Plaintiff contends that defendant offers no thing to show that the existence of a “closing” was decided on the merits in the STC Appeal or was ever an issue in that case at all. In fact, plaintiff’s argument makes clear th e fact that in the STC Appeal, all the trial court did was adopt its ruling of a “closing” from the contract case. Th is Court agrees with plaintiff’s argument in its entirety, noting that defendant admits in its own brief that this would be a highly unusual application of the doctrine.

The elements of res judicata are as follo ws: (1) the prior action was decided on the merits; (2) the prior decision resulted in a fi nal judgment; (3) both actions involved the same parties or those in privity with the parties; and (4) the issues presented in the subsequent case
were or could have been d ecided in the prior case. Stoudemire v Stoudemire , 248 Mich App 325, 334; 639 NW2d 274 (2001). The burden of proving th is doctrine’s applic ability rests with
defendant. Baraga Cty v State Tax Comm , 466 Mich 264, 269; 645 NW2d 13 (2002).

Defendant falls well short of its burden. The STC Appeal was dismissed simply as a matter of standing. A plain reading of the orde r shows unambiguously that there was no decision based on the merits. Instead, there is simply a reference to anothe r case, which happens to be the instant appeal. Because res judi cata is not applicable , the remaining arguments made by plaintiff
must be addressed.

Plaintiff argues that the tria l court used extrinsic evidence to impose new meaning on “closing” without ever finding any ambiguity , adding a gloss upon the terms “removal” and “substantially all” by injecting co ncepts of functionality and value not found in the four corners of the Agreement. Plaintiff contends that the trial court’s only duty was to determine what terms defendant actually wrote in Section 3.2, and then enforce those terms according to their defined or common meaning(s). Instead, plaintiff argue s, the trial court disregarded Section 3.2 as written, redefining “removal” to include not only the IFT property transferred outside the city, but also the IFT property on-site that had “no value.” Had th e trial court applied the plain meaning of Section 3.2 as written, plaintiff argues that it would have found in its favor as a matter of law. This Court agrees with plainti ff that the terms of the Agreement are unambiguous,-4- but disagrees with the conclusion reached by pl aintiff. The trial court clearly determined whether the plant had closed using the common m eaning of these terms. That the plant was no longer capable of converting raw ma terials into the end product is not a superfluous requirement, as argued by plaintiff; instead, it is a factual de termination made by the trial court in order to rule that the plant had closed.

When contractual terms are unambiguous, the only place a court can look to discern the parties’ intent is the four corners of the contract. Zurich Ins Co v CCR & Co (On Rehearing)

, 226 Mich App 599, 605-606; 576 NW2d 392 (1997). In the absence of ambiguity, “contractual interpretation begins and ends with the actual words of a written agreement.” Universal
Underwriters Ins Co v Kneeland , 464 Mich 491, 496; 628 NW2d 491 (2001). Although the trial
court did consider defendant’s extrinsic eviden ce, it did not do so for the purpose of discerning the meaning that the parties intended to give to the definition of “closing” in the Agreement. Rather, the trial court considered the extrinsic ev idence offered by defendant in order to make a
factual determination of whether the Agreement had been breached. Because the trial court was not discerning the parties’ intent when it consid ered defendant’s extrinsic evidence, plaintiff’s argument regarding ambiguity is erroneous.

Defendant had the burden of proving a plant “c losing” under Section 3.2. Plaintiff asserts that defendant did not carry this burden as it failed to prove the “removal” of “substantially all” of the IFT property from the plant. 1 According to plaintiff, the commonly used meaning of “removal” is the act or process of removing, an d the root word “remove” means “to change the location . . . of something.” Becau se the context of Section 3.2 se ts the term’s only qualification, “removal” in this context plainly means changi ng the physical location of the IFT property to a place outside the city. Similarly, plaintiff argues th at “substantially all” s hould be defined as the term is commonly used in the dictionary becaus e it does not have a special meaning in Section 3.2 and it is not a legal term of art. The dictionary defines the root word “substantial” as considerable in quantity. Therefore, given its context in Section 3.2, plai ntiff asserts that the common usage of “substantially all” requires a comparison between the “removed” IFT property and all the IFT property subject to the IFT Certificate. Plaintiff then contends that the Agreement provides only one quantifiable measuri ng device: the original $33 million investment of IFT property, which Section 1.2 lists by item description a nd investment amount for easy comparison and calculation.

After the plant ceased operations in April 201 0, four different analyses quantified the percentage of the original cost of the production f acilities that were still physically located in the

1 While defendant defined “closing” in Section 3.2, it did not specifically define “removal” or “substantially all.” The Michigan Supreme Court directs lower courts to “interpret [each] such term in accordance with its commonly used mean ing,” which can be determined by consulting a dictionary. Stanton v City of Battle Creek , 466 Mich 611, 617; 647 NW2d 508 (2002). Accordingly, plaintiff’s defini tions of “removal” and “substantially all,” including their variations and root words, are derived from Webster’s Ni nth New Collegiate Dictionary (Merriam-Webster Inc 1984), as well as from de fendant’s brief in opposition to second motion.-5- plant. While the separate analyses may vary some what, plaintiff points to the fact that they all report between 70% and 85% of the value of th e original IFT property had not been removed from the plant by the end of the Agreement’ s intended term on December 30, 2011. According to plaintiff, that means that only 15% to 30% of the original IFT property could have been removed, which neither defendant nor the tria l court could sincerely describe as being “substantially all” of the production facilities under Section 3.2.

However, that argument is fatally flawed. Plaintiff argues that the Agreement should be construed according to the comm on meaning of its terms, yet proceeds to analyze the IFT property in terms of value. In other words, plaintiff argues th at “substantially all” should be based on quantity rather than on value or functi onality, then immediately argues that “quantity”
is a function of “value.” This argument is simply not logical. Plaintiff asserts that the value (i.e. cost) of the IFT property in Section 1.2 is the only quantifiable measurement in the Agreement; however, the list by item description (i.e. unit by unit) in Section 1.2 is an equally viable quantifiable measuring device. De fendant offered direct and indi rect evidence supporting that substantially all of the producti on facilities had been removed fr om the facility. As direct evidence, defendant’s expert testified that th e plant was in a state of salvage and that substantially all of the capital equipment had b een removed. As indirect evidence, defendant offered an amended pleading by plaintiff asserting that the true cash value of the remaining IFT property in tax year 2011 was $250,000. Not only is th is inconsistent with plaintiff’s claim that there was between 70% and 85% of the property re maining on-site (the initial value of which was in excess of $33 million), but it is also an admission that substantially all of the equipment was no longer at the plant.

This Court will only upend the trial court’s findings of fact if it is left with a definite and
firm conviction that a mistake has been committed. Rigoni v Mich Power Co , 131 Mich App 336, 341; 345 NW2d 918 (1984). “A reviewing court must treat the trial court’s findings with substantial deference in light of its superior ability to assess the credibility of evidence.”
Habersack v Rabaut , 93 Mich App 300, 304; 287 NW2d 213 (1979). The credibility of witnesses is a question for the trier of fact and, in a bench trial, special regard is given to the findings of the trial court as it relates to credibility. Sweetman v State Highway Dept , 137 Mich App 14, 20; 357 NW2d 783 (1984). While plaintiff can plead inconsis tent theories, it can only allege two or more inconsistent statements of fact when in doubt about which one is true. MCR 2.111(A)(2)(a). Allegations of fact are admi ssible as admissions against interest. Grand Trunk Western R Co v Lovejoy , 304 Mich 35, 41; 7 NW2d 212 (1942).

A fair reading of this record plainly demons trates that the findings of the trial court regarding a closing as that term is defined in Section 3.2 are well supported by the evidence. In fact, plaintiff’s argument is unsuc cessful regardless of how “substantially all” is interpreted. Quantitatively, almost all of the enumerable items of IFT equipment had been removed from the plant by the time of closing. Valuably, plaintiff bases its argument on the original value of the furnace rather than its present value at the time of closing (which, according to testimony, was very minimal). And functionally, the entire opera tion was at the end of its lifespan and almost all of the plant’s functional IF T equipment had been removed or exhausted by the time of closing. Consequently, plaintiff’s argument fa ils no matter how the Agreement is construed, even if it is presumed that some one else’s dictionary offers a di fferent definition of “substantially-6- all.” Based on this record, this C ourt is not left with a definite and firm conviction that a mistake
has been made.

Finally, in its reply brief, plaintiff asserts th at its construction of the Agreement neither produces an absurd result nor breaches other c ovenants contained within the Agreement. Plaintiff argues that there was no breach of cont ract because the furnace had not been physically removed from the plant. However, defendant’s expert testified that it would be unheard of to relocate a furnace such as this because any atte mpted removal essentially destroys it. Under plaintiff’s interpretation of the Agreement, th ere could never be a circumstance in which the removal of any property other than the furnace w ould ever constitute “subs tantially all” of the production facilities because the furnace represen ted $17 million out of the original $33 million. We agree with defendant that such a construc tion would mean there co uld never be a closing and, in this circumstance, would re nder Section 3.2 meaningless.

Plaintiff argues that enforci ng the plain meaning of “closin g” under Section 3.2 of the Agreement does not conflict with other covenants contained in the Agreement, particularly
Sections 1.6 and 1.8. Th ese sections specify that, during the en tire term, plaintiff must maintain production and utilization of the improvements in equipment at th e plant, as well as maintain the equipment and improvements in accordance with pr actices standard in th e industry so as to minimize physical and functional obsol escence. Plaintiff asserts thatdefendant could have easily
correlated these three sections wh en it drafted the Agreement and that defendant’s failure to do so does not entitle it to invent any such relatio nship now. However, plaintiff cannot maintain production and utilization of the improvements and equipment and simultaneously transfer all of the useful property to other plants and abandon the unwanted property. Operating the furnace to the very end of its useful life, then proceeding to shut it down and wait on its demolition is not maintaining the improvements so as to minimi ze the physical and func tional obsolescence. Further, it is worth noting that plaintiff correlate d Sections 3.2 and 1.2 in its attempt to quantify the IFT property, yet now argues that defenda nt cannot correlate Sections 3.2, 1.6, and 1.8 without having specifically written such a relationship into the Agreement.

Contracts are to be construed as a whole, and all of its parts are to be harmonized so far as reasonably possible. Genesee Food Services

, Inc v Meadowbrook

, Inc , 279 Mich App 649, 656; 760 NW2d 259 (2008). Therefore, the trial cour t properly found that the plant had closed within the meaning of Section 3.2, which mean s that it did not commit clear error.

III. LIQUIDATED DAMAGES CLAUSE

Next, plaintiff argues the damages provision in the Agreement violates the principle of just compensation because the damages were ascer tainable when the Agreement was signed and the provision damages were disproportionate to the actual harm to defendant. Additionally, plaintiff argues that the liquidated damages clau se in the Agreement runs counter to public policy.

The meaning and legal effect of a c ontractual clause are reviewed de novo. Rory v Continental Ins Co , 473 Mich 457, 464; 703 NW2d 23 (2005). Contrary to most inquiries regarding contract law, the inte nt of the parties is not consid ered when addressing a damages
clause. Moore v St. Clair County , 120 Mich App 335, 339; 328 NW2d 47 (1982); See also-7- Wilkinson v Lanterman , 314 Mich 568, 574; 22 NW2d 827 (1946); Jaquith v Hudson , 5 Mich 123, 136 (1858). When the term “penalty” is used in a contract, it does not necessarily imply a penalty. Moore , 120 Mich App at 340. “The validity of a liquidated damages clause depends on the conditions existing when the contract was signe d rather than at the time of the breach.”
Barclae v Zarb , 300 Mich App 455, 485; 834 NW2d 100 (2013). Whether damages are ascertainable is not necessarily dispositive of a liquidated damages clause being enforceable; damages being difficult to ascertain only makes a liquidated damages clause more appropriate.
See St Clair Med

, PC v Borgiel , 270 Mich App 260, 271; 715 NW2d 914 (2006). The
determinative issue is just compensation. Jaquith , 5 Mich at 132-133. In determining whether a liquidated damages clause provides just compen sation, courts look to whether “the amount is reasonable with relation to the possible injury suffered and not unconscionable or excessive.” St Clair Med , 270 Mich App at 271. Whether or not the damages are reasonable can be determined by evaluating the magnitude of the sum compared to the subject matter of the agreement.
Watson v Harrison , 324 Mich 16, 20; 36 NW2d 295 (1949).

The facts of this case are similar to St Clair Med , 270 Mich App 260, where the court held “the amount of damages is reasonable in re lation to the possible injury suffered. Plaintiff
stated that the clause was included in the contra ct because damages associated with a physician's departure are difficult to calculate.” Id. at 271. Here, the damages associated with plaintiff’s departure would be similarly diffi cult to calculate. Defendant attempted to estimate the abated taxes in an Economic Impact Analysis from 1999, but the attempt does not necessarily mean that the damages were easily ascertainable. The impact of a breach by plaintiff on defendant and other taxing units would depend on whether the employees who lost their jobs were residents of the city, as well as on how those employees spen t their money within th e city. Further, the individuals holding those j obs over the course of the abatem ent could have changed, making the investigation into the impact on defendant and other taxing units even more complicated. In other words, the ripple effect of plaintiff’s breach made the po ssible injury to defendant very
difficult to calculate.

We note that a reader unfamiliar with the subject matter may question the fact that the running of the damages is retro active, rather than running from the time of the breach until the end of the contractual period. However, the very fact of closing the facility means that plaintiff would no longer be paying the same taxes or rece iving the abatement; ther efore, there would be no abated taxes during that period to repay. Thus, at the time of the Agreement, recouping the abated taxes in the event plaintiff breached w ould have been a reasonable way to compensate defendant for its damages.

Prior to signing the Agreement, plaintiff planned to close the plant and would have realized no profit from it during the same ten-year period. When compared to plaintiff’s $56 million net profit created by the Agreement, return ing the $4 million abatement does not strike us
as unreasonable or excessive. Fi nally, while not bindi ng because it had not be en enacted at the time of the Agreement, this Court finds persuasive that the Legislature now requires a provision in all Act 198 agreements that a business may be for ced to repay some or all abated taxes if they violate the contract. MCL 207.572(2)(b).

Lastly, plaintiff argues that because the liquidated damage s increase the longer a business stays in the city, an agreement requiring the repayment of abated taxes violates public policy by-8- creating a perverse incentive for businesses to l eave as early as possible. We disagree. Plaintiff’s argument fails to consider the benefits received by the busine ss during the period of the agreements. The longer a well-run business stays within the city, the more profit it can realize due to the tax abatement. Agreemen ts such as the one at issue here actually encourage businesses to stay in communities to maximize prof its, and do not run counter to public policy. Accordingly, under Michigan law, the liquida ted damages clause in the Agreement is
enforceable.

Plaintiff also asserts that defe ndant set out to collect an un constitutional tax. However, the liquidated damages set forth in the Agreement do not carry the essential features of a tax and do not pass the test laid out by our Supreme Court. Three factor s are to be considered when determining whether a payment is a tax. First, if it is a tax, its purpose is to raise revenue. Bolt

, 459 Mich at 161. Second, when distinguishing between a user fee and a tax, a user fee must be proportionate to the service. Id. at 161-162. Third, a ta x is not voluntary. Id. at 162.

Here, the purpose of the prov ision was to create an incenti ve for plaintiff to complete performance of the Agreement. As such, the liqu idated damages clause is not designed to raise
revenue and fails the first Bolt factor. The second Bolt factor is inapplicable because plaintiff received no service as part of the Agreement. The liquidated damages clause in the Agreement
also fails the third Bolt factor. Plaintiff had a choice in whet her to pay the stipulated damages. Had it not signed the Agreement, it could have a voided the abatement scenario in its entirety. Or, had it kept the plant open after signing the Agreement, it would not have incurred the damages claimed by defendant. Thus, the paymen t of the damages is voluntary. Because the purpose was not to raise revenue and payment wa s voluntary, the liquidate d damages clause was

not a tax.

IV. CONTRACT DISPUTE

The STC argues that it does not have a duty to review private agreements required by statute to obtain an IFT. It also argues that itis not the duty of the STC to enforce provisions of those agreements. This Court “review[s] a trial c ourt’s findings of fact in a bench trial for clear error and conduct[s] a review de novo of the court’s conclusions of law.” City of Flint v Chrisdom Properties

, Ltd , 283 Mich App 494, 498; 770 NW2d 888 (2009), quoting Chapdelaine
v Sochocki , 247 Mich App 167, 169; 635 NW2d 339 (2001).

When applying for an IFT under Act 198, MC L 207.572 requires that the parties file a written agreement with the Department of Tr easury. Without such an agreement, the STC cannot issue an IFT. In terms of revoking an IFT, following a hearing, “[t]he commission shall by order revoke the certificate if the commission finds that . . . the holder of the certificate has not proceeded in good faith with the replacement, restoration, or construction and operation of the facility or with the use of the speculative building as a manufacturing facility in good faith in a manner consistent with the purposes of this act.” MCL 207.565(3).

There is no language in MCL 207.527 requiring the STC to re view the agreements. In fact, the STC’s only duty is to review the applica tion to ensure it includes an agreement, rather than to review the agreement for specific te rms. MCL 207.527. When revoking an IFT, the STC does not look to whether a party has breached the private agreement. Instead, it has its own-9- criteria. MCL 207.565(3). Therefore, the instant a ppeal does not involve que stions related to the
STC. 2 We concur with the trial court’s ruling that the STC should not be a pa rty to this action.

Affirmed.

/s/ Amy Ronayne Krause
/s/ Kurtis T. Wilder /s/ Cynthia Diane Stephens

2 In fact, the STC Appeal involv es the question of whether the STC’s revocation of plaintiff’s IFT was appropriate.