If this opinion indicates that it is “FOR PUBLICATION,” it is subject to 

revision until final publication in the Michigan Appeals Reports.

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S T A T E O F M I C H I G A N

C O U R T O F A P P E A L S

CITY OF ALPENA,

Plaintiff/CounterdefendantAppellee/Cross-Appellant,

UNPUBLISHED

March 17, 2020

v No. 345817

Alpena Circuit Court

TOWNSHIP OF ALPENA, LC No. 14-006077-CK

Defendant/CounterplaintiffAppellant/Cross-Appellee

and

ALPENA TOWNSHIP CLERK and MARIE 

TWITE,

Defendants.

Before: O’BRIEN, P.J., and JANSEN and GLEICHER, JJ.

PER CURIAM.

The city and the township of Alpena have been battling since 2014 over the cost of water 

and sewer services. On March 1, 2018, it appeared the parties were prepared to settle. However, 

the city and township never reached an agreement regarding several outstanding essential terms. 

Despite that no settlement was actually reached, the trial court entered a final judgment purporting 

to enforce a settlement agreement. This was done in error.

In cross-appeals, the parties raise several challenges to the entry of the judgment, the 

judgment provisions, and the trial court’s earlier ruling on a motion for summary disposition. We 

affirm the denial of summary disposition, vacate the court’s final judgment, and remand for further 

proceedings consistent with this opinion.
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I. BACKGROUND

The city of Alpena has provided wholesale water and sewer services to the township of 

Alpena since 1977. In 2014, the Alpena City Council voted to drastically increase the rates charged 

to the township. The city filed suit when the township refused to pay these new rates. On February 

28, 2018, the Alpena City Council and the Alpena Township Board of Trustees approved 

“agreement[s] to settle water/sewer lawsuit” as part of the ongoing litigation. The agreements 

were identical in many respects but diverged on certain points. The Township’s resolution 

provided:

[B]ased upon the joint recommendation of the City’s rate expert and the 

Township’s rate expert, [the City Council and the Township Board] agree[] to settle 

the pending lawsuit based upon the following general terms[1]:

1. The rates for the Township would be established based upon the utility 

basis of rate making.

2. The rates would be subject to annual reconciliations of actual and audited 

financial results and volumes.

3. The rates would be established using an 8% rate of return.

4. Water treatment expenses will be allocated based upon current billed 

volumes, inclusive of/adjusted to account for water losses.

5. Shared water distribution expenses will be allocated based upon volumes 

inclusive of water losses, with the shared system being defined as 61% of the City’s 

system with that percentage remaining fixed for a term of 10 years. After 10 years 

the parties will use a specific process to be determined as part of the settlement for 

allocating the percentage of the City’s system that is common.[2]

6. Shared sewer collection expenses will be allocated based upon billed (for 

[operating and maintenance] expenses) or total volumes (for Capital expenses), 

excluding measured volumes through the Township’s State Street forced main, 

with the shared system being defined as 23% of the City’s system with that 

percentage remaining fixed for a term of 10 years. Subject to review as stated 

above.

 

1 The City Council resolution included the following additional language: “with the settlement of 

the current lawsuit to be effective upon the execution of a formal written agreement.”

2 The City Council approved a different version of this provision: “Shared water distribution 

expenses will be allocated based upon volumes inclusive of water losses, with the shared system 

being defined as 61% of the City’s distribution system and subject to the terms and conditions 

outlined by the City Attorney.”
-3-

7. Sewer treatment expenses will be allocated based upon billed volume 

(for [operating and maintenance] expenses and approximately 25% of Capital 

expenses) and total volumes (for approximately 75% Capital expenses), per 

information provided by William Stannard, Rate Expert for the City of Alpena and 

Andrew Burnham, Rate Expert for the Township of Alpena.

[3]

8. The escrow account will be distributed by applying the agreed settlement 

formula to the period beginning May 2014, any funds due and owing to the City of 

Alpena following this application will be paid and will include judgement interest 

pursuant to statute.[4]

9. A formal written agreement will be prepared by counsel for the City and 

Township and presented to the Board, as well as the Township Board, for final 

approval consistent with above.[5]

The next day, which was to be the second day of trial, the township’s attorney advised the 

court of the votes:

[Township Attorney]. . . . Well the parties are pleased to announce to the 

court . . . that they have reached an agreement. Both the counsel [sic] and the 

Township Board have taken votes to approve the principles of the agreement that 

they discussed in their earlier settlement conference. The (inaudible) terms since 

there’s a matter of settlement and . . . they’re gonna be finalized. But the parties 

are satisfied that they are the terms that were set forth by the experts.

The next step, pursuant to the agreement is that . . . counsel will get together 

and hash out the essential terms in writing so that their respective boards or counsel 

[sic] can review that in writing and approve those. We need a little bit more detailed 

framework in order to draft a formal agreement.

So after the term sheet is worked out, which we expect to be finished by the 

weekend. But by Monday I hope. Then we will submit a written settlement 

agreement to each other for final approval. . . .

* * *

 

3 The City Council passed a different version of this provision: “Sewer treatment expenses will be 

allocated based upon billed volume (for operating and maintenance expenses and capital expenses) 

and total volumes for capital expenses.”

4 This provision of the City Council resolution clarified that it applied to the escrow account “that 

currently exists.”

5 The city’s resolution included a tenth point: “The City Attorneys are authorized to sign a stay of 

proceedings order regarding the current lawsuit while the written settlement agreement is being 

drafted and then ultimately to be reviewed and executed by the City and the Township.”
-4-

[City Attorney]. You’re [sic] Honor that’s a correct statement by [the 

township’s attorney]. The City concurs with what he just placed on the record and 

we will prepare the necessary documents as soon as practical.

But the parties did not “hash out” the essential terms and their “agreement” to settle never 

matured into an actual written settlement agreement. On May 31, 2018, the court ordered the 

parties to appear for a status conference on July 27. Thereafter, the township filed a “summary of 

post settlement activities and request to enforce the settlement agreement,” as well as a proposed 

judgment. At the July 27 status conference, the city’s attorney challenged any request for the court 

to enter a final judgment:

One of the problems with the court entering any final judgment or order is 

the language that both parties agreed to at the time of the trial, which was that 

there’d be a final written agreement that would reflect what the parties thought they 

agreed to. And that those would be presented to both the City Council and the 

Township Board for final approval consistent with the above.

And that has not taken place. We have not gotten that far in the process 

unfortunately. And whether it be the Township[’]s fault or the City’s fault or 

nobody’s fault the agreement that was placed on the record contemplated that. And 

so I’m not sure how the court could enter a final judgment that requires the parties 

to be bound by that particular language when that has not occurred yet.

The court acknowledged on the record that the parties had simply made “an agreement to 

agree later either in writing or otherwise” and that this preliminary agreement was “nonenforceable” as a final agreement. The court continued:

But my recommendation to the City is simply this. You’ve been presented 

with a, a final judgment. I recommend that you present your own . . . proposed 

final judgment within [21] days from today. And what I’ll do is I’ll compare the 

two and see . . . which one most closely purports with the statement made on the 

record. . . . [O]f which there were several important and critical agreements, 

elements that might conclude this litigation. Do that within [21] days and I’ll 

compare the two and issue my ruling.

The city eventually filed its own proposed judgment and the parties lodged objections to 

each other’s proposals. One of the main points of contention was whether the terms of the 

judgment should apply only to the rates accumulated thus far, or would revise the contract into the 

future. “Based on a review of the respective bodies’ meeting minutes, an audio recording of the 

City’s meeting minutes, a transcript of the March 1, 2018 court proceeding, and the parties’ 

respective arguments,” the circuit court outlined the “principle terms of the settlement that are 

binding upon both parties.” These provisions mostly mirrored the resolutions passed by the city 

council and township board. The court added the following elements, however:

e. Shared water distribution expenses will be allocated based upon volumes 

inclusive of water losses, with the shared system being defined as 61% of the City’s 

system.
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f. The percentage of 61% shall remain fixed until the City first provides the 

Township a complete hydraulic water model of the City’s system. Within 6 months 

after the City provides the Township the City’s water model, the Township will 

either agree with the output of that model as conclusive of the Township’s use of 

the City’s system or provide notice of a dispute of the City’s water model output. 

The City’s engineer and the Township’s hydraulic modeler will meet, either orally 

or in person, to establish a third-party independent engineer who will then review 

the conclusions of both parties. If the third-party independent engineer agrees with 

neither parties’ output, then the third-party independent engineer shall establish 

what he or she believes is the accurate model output, which shall become the 

Township’s percentage of use of the City’s system. If the parties hire a third-party 

independent engineer, the costs of the third-party independent engineer will be split 

equally between the parties. If the Township does nothing during that 6-month 

period, the City’s water model output will be the Township’s use of the City’s 

system. The percentage will remain fixed, except that it is subject to the same 

review process every 5 years thereafter.

* * *

i. [The parties’ rate experts] will meet as soon as possible to prepare a written rate 

methodology that will be incorporated into a formal written agreement to be 

executed by the parties.

Despite that provision (f) referenced five-year review periods, the court subsequently found that 

the judgment’s terms were limited to a specific timeframe—May 1, 2014 through June 30, 2018. 

The court then ordered the township to pay the city designated amounts for water and sewer 

services for different periods between May 1, 2014 and June 30, 2017. The court noted that the 

parties had yet to agree on the sums owed in the 2018 fiscal year.

II. JUDGMENT BASED ON SETTLEMENT AGREEMENT

The parties filed cross appeals challenging various provisions of the court’s judgment. The 

judgment cannot stand, however, as the court attempted to enforce a “settlement agreement” that 

was never placed on the record.

“An agreement to settle a pending lawsuit is a contract and is to be governed by the legal 

principles applicable to the construction and interpretation of contracts.” Kloian v Domino’s Pizza, 

LLC, 273 Mich App 449, 452; 773 NW2d 766 (2006) (quotation marks and citation omitted). For 

a settlement agreement to be formed, just as with any contract, there must be an offer and 

acceptance as well as “mutual assent or a meeting of the minds on all the essential terms.” Id. at 

452-453. “A meeting of the minds is judged by an objective standard, looking to the express words 

of the parties and their visible acts, not their subjective states of mind.” Id. at 454 (quotation marks 

and citations omitted). “Mere discussions and negotiation, including unaccepted offers, cannot be 

a substitute for the formal requirements of a contract.” Kamalnath v Mercy Memorial Hosp Corp, 

194 Mich App 543, 549; 487 NW2d 499 (1992). And where the parties have not “met upon all 
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the essential particulars,” the court may not create the missing essentials. Czeizler v Radke, 309 

Mich 349, 358; 15 NW2d 665 (1944) (quotation marks and citation omitted).6

“However, this Court will not enforce a settlement agreement” even if it “fulfills the 

requirements of contract principles if that agreement does not also satisfy the requirements of the 

court rule.” Mich Mut Ins Co v Indiana Ins Co, 247 Mich App 480, 484-485; 637 NW2d 232 

(2001). Specifically, MCR 2.507(G) provides that a settlement agreement “is not binding unless 

it was made in open court, or unless evidence of the agreement is in writing, subscribed by the 

party against whom the agreement is offered or by that party’s attorney.” “ ‘Subscribe’ means to 

append, as one’s signature, at the bottom of a document or the like; sign.” Kloian, 273 Mich App 

at 459 (quotation marks and citation omitted).

Here, the parties did not enter a settlement on the record and they did not have a meeting 

of the minds on the essential terms of the agreement. On March 1, 2018, the township’s attorney 

stated in open court that the parties had “reached an agreement.” Counsel noted that the city 

council and township board had voted “to approve the principles of the agreement.” However, 

counsel then asserted that the parties had yet to reach an agreement on “the essential terms” of the 

settlement—“The next step . . . is that . . . counsel will get together and hash out the essential terms 

in writing. . . .” Without a meeting of the minds on the essential terms, there cannot be a settlement. 

Without stating those essential terms in open court or having both parties subscribe to a writing 

with the essential terms, the court cannot enforce a “settlement.”

The city council and township board votes also support that the parties did not reach a 

meeting of the minds over the settlement’s essential terms. The city council and township board 

approved only “general terms” and even those were not identical. There was critical variance 

within those general terms; the township approved entering an agreement where the allocation 

percentage for water distribution expenses would be fixed for a 10-year period, while the city did 

not. The township also approved the general terms on the caveat that the city’s and township’s 

rate experts would provide certain information, while the city did not. The length of the contract 

and the availability of information were hotly contested issues in this case and were essential terms 

for contract formation.

Accordingly, the circuit court improperly entered a judgment based on the parties’ 

“settlement agreement.” As the court should not have entered the judgment, we need not consider 

the parties’ various challenges to the provisions of that judgment. Instead, we vacate the judgment 

in its entirety and remand for further proceedings. If the parties have yet to agree on the essential 

terms of their contract, both past and present, a full trial may be required.

III. SUMMARY DISPOSITION

The city further challenges the circuit court’s earlier denial of its motion for partial 

summary disposition in its favor of Count I of its complaint. That count sought a declaratory 

judgment that the parties’ 1977 agreement “had expired and has terminated under its own terms 

 

6

If the missing terms are not “essential,” however, “the law supplies the missing details by 

construction.” Nichols v Seaks, 296 Mich 154, 159; 295 NW 596 (1941).
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given the fact that Defendant Township of Alpena has a viable alternative water and sewer system 

that can be feasibly developed or may feasibly purchase water and sewer services from the City of 

Alpena.” The city sought summary disposition only regarding the township’s “proportionate 

share” of the sewer services. In support of its motion, the city contended that it was required to 

charge the township its “proportionate share” as a recipient of the sewer services under the terms 

of a federal grant it secured to construct the system.

The township directly addressed this argument. However, the township first asserted that 

the court would not be required to reach this issue if the court agreed with its position that under 

the common-law utility basis of ratemaking, the city was required to charge a “reasonable rate”

and had not.

The court denied the city’s motion. In doing so, the court made the following statement 

that is challenged by the city on cross-appeal:

Regardless of the label attached to the Township, i.e., as a “wholesale” or 

“retail” customer, the central issue remains the same: whether the rates are 

reasonable. In addressing this, the Township has not identified any specific 

unreasonable charge. Rather, it contends the rates – as a whole – are unreasonable 

per se.

The challenged statement was only a small part of the court’s analysis of this issue, however. The 

trial court further noted that “[h]istorically, courts have accorded great deference to authorizedrate making authorities when reviewing the validity of municipal water rates” and acknowledged 

that such “rates are ‘presumptively reasonable’ because ‘courts of law are ill-equipped to deal with 

the complex, technical processes required to evaluate the various cost factors and various methods 

of weighing those factors required in rate-making.’ ”

7

 Ultimately, the court ruled that it could not 

“conclude that the rates are unreasonable at this juncture. For it has been widely held that the 

determination of ‘reasonableness’ is considered to be a question of fact.”

However one characterizes the city’s challenge, it stands true that there remained questions 

of fact in the summer of 2016, precluding summary disposition at that time. 

A motion under MCR 2.116(C)(10) “tests the factual support of a plaintiff’s 

claim.” Walsh v Taylor, 263 Mich App 618, 621; 689 NW2d 506 (2004). 

“Summary disposition is appropriate under MCR 2.116(C)(10) if there is no 

genuine issue regarding any material fact and the moving party is entitled to 

judgment as a matter of law.” West v Gen Motors Corp, 469 Mich 177, 183; 665 

NW2d 468 (2003). “In reviewing a motion under MCR 2.116(C)(10), this Court 

considers the pleadings, admissions, affidavits, and other relevant documentary 

evidence of record in the light most favorable to the nonmoving party to determine 

whether any genuine issue of material fact exists to warrant a trial.” Walsh, 263 

 

7 Although a city’s utility rates are presumptively reasonable, “the presumption of reasonableness 

may be overcome by a proper showing of evidence.” Trahey v Inkster, 311 Mich App 582, 594;

876 NW2d 582 (2015).
-8-

Mich App at 621. “A genuine issue of material fact exists when the record, giving 

the benefit of reasonable doubt to the opposing party, leaves open an issue upon 

which reasonable minds might differ.” West, 469 Mich at 183. [Zaher v Miotke, 

300 Mich App 132, 139-140; 832 NW2d 266 (2013).]

Voluminous evidence would be required to determine the appropriateness of the water and 

sewer rates charged in this case. But as late as the summer of 2018, two years after the court 

denied summary disposition, the city was still withholding information necessary to make those 

calculations. Accordingly, it would have been premature to grant summary disposition in either 

party’s favor in the summer of 2016.

We affirm the denial of summary disposition, but vacate the September 19, 2018 final 

judgment and remand for further proceedings consistent with this opinion. We do not retain 

jurisdiction.

/s/ Colleen A. O’Brien 

/s/ Kathleen Jansen 

/s/ Elizabeth L. Gleicher