Court Opinion

ID: 9735773
Source: CourtListenerOpinion
Date Created: 2023-08-26 18:30:17.461291+00
Date Added: 2024-06-11T18:27:01.375601
License: Public Domain

Griffin, J.
I respectfully dissent.
The majority barely mentions, and then dismisses the effect of, a "Stipulation of Facts” entered into at trial by the parties. As the Court of Appeals emphasized, "That stipulation, which was received and approved by the court, was binding upon the parties.” 166 Mich App 397, 404; 420 NW2d 839 (1988).
As a result, the City of Detroit stipulated that the particular utility basis of rate-making specified in the 1980 Camp, Dresser & McKee (cd & m) report was used by Detroit in setting the rates for water sold to the City of Novi. Paragraph 8 of the stipulation by the parties provides:
*439The water rates charged by dwsd are based upon a methodology developed by consultant Camp, Dresser & McKee. The rate methodology is outlined in a June, 1980, report from Camp, Dresser & McKee, entitled "Proposed Water Rates.”
According to the stipulation, ¶ 12, distance and elevation factors were to be computed under the CD & m methodology on the following basis:
"3.2.2.1. Distance and Elevation — The distance parameter is equal to the average of five straight line distances drawn between a customer’s single meter connection or geographic center (where there is more than one meter connection) and each of the dwsd’s five water treatment facilities. The elevation parameter is equal to the average of five differentials in elevation established between a customer’s single meter connection or average service area elevation and the dwsd’s[1] five water treatment facilities.” [Emphasis added.]
The meaning of the term "service area,” both generally and as applied to the City of Novi, was a central question at trial. The expert witnesses of both parties testified that "service area” means the area actually receiving water.2_
*440Nevertheless, the majority completely dismisses the stipulation by acquiescing in the City of Detroit’s assertion that "[t]he stipulation merely explained several facts regarding the utility basis of rate-making, the origin of the dwsd’s rate-making method, and the cost factors considered in this particular method so that the trial court could decide the ultimate issue . . . Ante, pp 437-438. Accordingly, the majority reads the term "service area” in the stipulation to mean "entire geographic area” in order to conform the term to the very practice challenged by the City of Novi. Explaining away the significance of "service area” in this manner effectuates a retroactive amendment that renders the stipulation meaningless.
A stipulation entered into by the parties is an *441important procedural device for narrowing the issues at trial. It is a device that has no utility unless the facts stipulated are honored. If stipulations can be quickly dismissed as insignificant explanations, their efficacy as procedural tools will quickly dissipate. The majority’s treatment of the stipulation in this case does not square with past pronouncements by our Court on the integrity of stipulations:
[O]nce stipulations have been received and approved they are sacrosanct. ... A party must be able to rest secure on the premise that the stipulated facts and stipulated ultimate conclusionary facts as accepted will be those upon which adjudication is based. Any deviation therefrom results in a denial of due process for the obvious reason that both parties by accepting the stipulation have been foreclosed from making any testimonial or other evidentiary record. [Dana Corp v Employment Security Comm, 371 Mich 107, 110; 123 NW2d 277 (1963).]
Nor should the Court be satisfied with the excuse that the stipulation is a " 'semantic’ error” at odds with the dwsd’s actual practice. Ante, p 424. The City of Detroit has not alleged any of the factors that would allow us to "undo” its stipulation on the basis of error: there has been no showing that Detroit was misled into making the stipulation, nor was documentary evidence produced to demonstrate that the stipulation was in fact in error. Kittridge v Toledo, A A & G T R Co, 53 Mich 354; 19 NW 32 (1884). Thompson v Continental Motors Corp, 320 Mich 219; 30 NW2d 844 (1948). This "semantic error” is at the heart of the dispute before us: whether Detroit’s computation of rates for service to the City of Novi complied with the statute. Once Detroit stipulated that the *442cd & m methodology described in the stipulation was its methodology for purposes of this trial, there were only two questions left to be resolved:
1) Did the stipulated methodology satisfy the statute by reflecting the actual cost of service?
2) Did dwsd apply the formula properly to its service to the City of Novi?
The expert witnesses for Detroit and Novi both agreed at trial that the stipulated method satisfied the statute.3 The unrefuted testimony further established that the formula actually applied by the City of Detroit did not conform to the stipulation because the elevation factor was calculated using the entire geographic area rather than the service area as described in the stipulation. The majority’s reliance on the testimony of Detroit’s expert witness that the cd & m methodology did not actually use the service area for determining the elevation factor is misplaced; because that testimony refuted a stipulated fact, it should have been disregarded. "Any deviation [from a stipulation of facts] results in a denial of due process for the obvious reason that both parties by accepting the stipulation are foreclosed from making any testimonial or other evidentiary record.” Dana Corp v Employment Security Comm, supra at 110.
The implication by the majority that it is somehow unfair or contrary to the intent of 1981 PA 89 to hold the City of Detroit accountable to the stipulated cd&m methodology is simply untenable. The legislative history of 1981 PA 89 reveals that the City of Detroit specifically advanced the newly developed cd & m methodology as the pri*443mary justification for changing from a floor/ceiling limitation on rate-making to a cost-of-service, utility-basis model. The Senate Analysis Section analysis of the bill which became 1981 PA 894 was distributed to the Legislature prior to the final vote on the bill and offered the following rationale for amending the enabling act, 1917 PA 34:
Part of the difficulty in setting fair rates arises from the tremendous complexity of assigning proportional responsibility for such a huge, intricate, and interconnected system [the dwsd], but the difficulty also arises in part from the limitations placed on rate-making by Public Act 34. Detroit officials believe that the first difficulty has been largely overcome by a study performed by the Boston consulting firm of Camp, Dresser, and McKee (cdm) and the development of a computer program from that study which serves to identify the actual cost of providing water to each community. [Senate Analysis Section, HB 4029, First Analysis, April 27, 1981, p 1.]
The City of Detroit has used the question of the proper standard of review of rates as a smoke screen to obscure the effect of the stipulation it agreed to prior to trial. To find in favor of the City of Novi in this case, it is not necessary to determine that the standard of review was significantly changed by the enactment of 1981 PA 89: rates are still assumed to be reasonable, and the burden of proof continues to be on the challenging party to show that they are unreasonable. Detroit v Highland Park, 326 Mich 78, 100-101; 39 NW2d 325 (1949). Plymouth v Detroit, 423 Mich 106, 133-134; 377 NW2d 689 (1985). The fact that the standard of review was not changed by 1981 PA 89, how*444ever, does not save the City of Detroit from its own stipulation.
What was changed by 1981 PA 89 was the basis for determining whether a rate is unreasonable. Thus it did not "render inoperable the concept of reasonableness in the process of judicial review” (ante, p 432); rather, it clarified the concept. Prior to enactment of 1981 PA 89, a party challenging rates that fell within the limits of MCL 123.141(2); MSA 5.2581(2) had the burden of proving that the challenged rate did not bear a reasonable relationship to the service rendered.5 1957 PA 53 (repealed by 1981 PA 89). Now, the burden of the challenging party is more focused: it must prove that the rate is not "based on the actual cost of service as determined under the utility basis of rate-making.”6
Given the stipulation between the parties that the cd & m report constituted the chosen utility basis of rate-making, followed by evidence that the *445rates actually charged were calculated by applying an elevation factor inconsistent with that basis, I would find that the City of Novi met its burden.
The majority is correct, however, that the cd & m methodology, as stipulated by the parties, uses "service area” only in the calculation of elevation. While that distinction does not affect my conclusion that the City of Novi has demonstrated that the rates charged by the City of Detroit for the years in dispute were not in compliance with MCL 123.141(2); MSA 5.2581(2),7 the distinction does affect the amount of the overcharge. Consequently, I would remand to the trial court for further testimony aimed at establishing the overcharge on the basis of the failure to calculate the elevation factor using the "service area” as required by the methodology stipulated by the parties._

 The initials "dwsd” stand for Detroit Water and Sewerage Department.

 At the close of Novi’s expert’s testimony, in response to the City of Detroit’s motion for a directed verdict, the trial judge observed, "The only testimony I have that’s unrefuted and uncontradicted in any regard, is that the service area is the area that’s being served on the eastern side and not on the western side.” Subsequently, during the cross-examination of Detroit’s expert witness, the trial judge intervened and elicited the following:
The Court: What is the definition, in your opinion, of the service area, as it relates to Novi?
A. Novi — the area being served in Novi is the area to the right of that red line that’s shown on that map.
The Court: I didn’t ask you what was being served in Novi. I said the term — listen to me and look at me. The term service area as it relates to Novi, what area does it cover, does it meet?
*440A. That’s their current service area.
The Court: So that’s the service area. The term service area, as it relates to Novi, means that portion on the eastern part of the map that is presently being served. And that’s the definition of service area.
A. That would be my definition.
The Court: Okay, and is that the definition that’s used in the Detroit’s [sic] rate making of — when it uses the term service area?
A. They don’t use the definition service area.
The Court: ... So you, in effect, are defining the term service area the same as him [sic, presumably, Novi’s expert], the area that’s being served?
A. Yes, sir.
Counsel for the City of Novi then asked:
Q. [A]pplying that formula, then you would use the average elevation to the east of that red line; would you not, sir?
A. That is not what is done in the rate model methodology.
The trial judge again intervened:
The Court: But he’s asking you about that document [stipulation, ¶ 12] that says — using the service area, based on [sic] your definition, would it not mean just working with the east part.
A. If we used this paragraph literally, then we would use the right side of the area.

 Given the stipulation, it was unnecessary for the City of Novi to refute the testimony of Detroit’s expert witness that dwsd’s actual practice, as opposed to the stipulated cd & m methodology, conformed to the statute. The stipulation made this testimony irrelevant.

 HB 4029. The Senate Analysis Section analysis dated April 27, 1981 analyzed the version of the bill that was enacted and signed into law.

 The price charged may be more than double that paid by consumers within their own territory if the water is delivered to a city, village or township lying outside the county within which the corporations are situated, and lying more than 10 miles beyond the territorial limits of the corporations. Any price charged that is more than double shall bear a reasonable relationship to the service rendered. [1957 PA 53. Emphasis supplied.]

 I agree with the majority that courts of law generally 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.” Ante, p 430. 1981 PA 89 simplifies judicial review of rates established pursuant to its authority in two ways: 1) by establishing a more specific measure of reasonableness — (actual cost of service instead of cost bearing a "reasonable relationship to the service rendered”), and 2) specifying the method to be used to determine actual cost. Given the precise guidance provided by 1981 PA 89, I find it hard to share the majority’s concern that courts may become ultimate rate-making authorities. Ante, p 430. In the instant case, the court’s task was simplified even further by the fact that the parties had stipulated to the rate-making methodology to be examined at trial.

 The City of Detroit calculated the elevation factor using the entire geographic area of Novi rather than only the area served, as provided in the stipulation.