Court Opinion

ID: 4707840
Source: CourtListenerOpinion
Date Created: 2021-07-30 09:08:23.403176+00
Date Added: 2024-06-11T08:06:46.323780
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                          STATE OF MICHIGAN

                           COURT OF APPEALS

MOORINGS OF LEELANAU, LLC,                                          UNPUBLISHED
                                                                    July 29, 2021
               Petitioner-Appellant,

v                                                                   No. 353911
                                                                    Tax Tribunal
CITY OF TRAVERSE CITY,                                              LC No. 19-001535-TT

               Respondent-Appellee.

Before: FORT HOOD, P.J., and MARKEY and GLEICHER, JJ.

PER CURIAM.

        Petitioner appeals as of right the order of the Michigan Tax Tribunal holding that
respondent was entitled to uncap the taxable value of petitioner’s real property, which included 92
parcels of land adjoining Traverse City. Petitioner, a limited-liability company, argues that no
transfer of ownership occurred when two of its three members relinquished their membership in
the company, and that uncapping was therefore impermissible. We affirm.

                                       I. BACKGROUND

         MI Moorings, LLC (MIM) was established by Mark Johnson and Jason Warren in 2014
for the purpose of purchasing, managing, and selling real estate. The Moorings of Leelanau, LLC
(TML) was subsequently established by MIM, Robert Brick, and Edward W. Lockwood for the
purpose of purchasing, developing, and selling the subject property. MIM owned a 42% interest
in TML, and Brick and Lockwood each owned a 29% interest in TML. The subject property was
at all relevant times owned entirely by TML.

         A dispute arose between the members of MIM and the members of TML, resulting in
litigation. This litigation was resolved when the parties executed a settlement agreement under
which Brick and Lockwood agreed to relinquish their ownership rights in TML in exchange for
payments totaling $2,575,000. As a result of this agreement, MIM became the sole owner of TML.
Following this transaction, respondent uncapped the taxable value of the subject property, and
petitioner challenged this decision before the Tax Tribunal.

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       The tribunal granted summary disposition under MCR 2.116(C)(10) in favor of respondent
and ordered a partial uncapping of the property’s taxable value. Subsequently, the tribunal granted
respondent’s motion for reconsideration and held that respondent was entitled to uncap the entire
taxable value of the property. This appeal followed.

                                         II. DISCUSSION

       Petitioner argues that the tribunal erred by granting summary disposition in favor of
respondent because no transfer of ownership occurred. We disagree.

        “Review of a decision by the [Tax Tribunal] is very limited.” Drew v Cass Co, 299 Mich
App 495, 498; 830 NW2d 832 (2013). “Absent fraud, our review of [the tribunal’s] decisions is
limited to determining whether the [tribunal] erred in applying the law or adopted a wrong legal
principle.” VanderWerp v Plainfield Charter Twp, 278 Mich App 624, 627; 752 NW2d 624
(2008). We review de novo the tribunal’s interpretation and application of statutes. Id. See also
Stirling v Leelanau Co, ___ Mich App ___, ___; ___ NW2d ___ (2021) (Docket No. 353117); slip
op at 2 (“ ‘[R]espectful consideration’ is given to the [tribunal’s] construction of a statute, but
ultimately the meaning of a statute is a legal question to which we owe no deference.”).

        We review de novo a trial court’s decision to grant or deny a motion for summary
disposition, and the evidence is viewed in a light most favorable to the nonmoving party. West v
Gen Motors Corp, 469 Mich 177, 183; 665 NW2d 468 (2003). Summary disposition should be
granted under MCR 2.116(C)(10) when the evidence reveals no genuine issue of material fact.
West, 469 Mich at 183. “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.” Id.

        This Court’s “primary task in construing a statute . . . is to discern and give effect to the
intent of the Legislature.” In re AGD, 327 Mich App 332, 343; 933 NW2d 751 (2019). “The
words used by the Legislature in writing a statute provide us with the most reliable evidence of the
Legislature’s intent.” Drew v Cass Co, 299 Mich App 495, 499; 830 NW2d 832 (2013). “When
statutory language is unambiguous, judicial construction is not required or permitted because the
Legislature is presumed to have intended the meaning it plainly expressed.” People v Campbell,
329 Mich App 185, 193-194; 942 NW2d 51 (2019).

       The capping and uncapping of a property’s taxable value is established by Article IX of
the Michigan Constitution, which provides in relevant part:
       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[1] of this article, or 5 percent,
       whichever is less until ownership of the parcel of property is transferred. When

1
  “ ‘General Price Level’ means the Consumer Price Index for the United States as defined and
officially reported by the United States Department of Labor or its successor agency.” Const 1963,
art 9, § 33.

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        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. [Const 1963,
        art 9, § 3.]

This provision of the Constitution is implemented by section 27a of the General Property Tax Act
(GPTA), MCL 211.1 et seq. MCL 211.27a provides the method for calculating a property’s
taxable value:

                (2) Except as otherwise provided in subsection (3), for taxes levied in 1995
        and for each year after 1995, the taxable value of each parcel of property is the
        lesser of the following:

               (a) The property’s taxable value in the immediately preceding year minus
        any losses, multiplied by the lesser of 1.05 or the inflation rate, plus all
        additions. . . .

               (b) The property’s current state equalized valuation.

               (3) Upon a transfer of ownership of property after 1994, the property’s
        taxable value for the calendar year following the year of the transfer is the
        property’s state equalized valuation for the calendar year following the transfer.

        MCL 211.27a(6) contains a definition of “transfer of ownership” and provides in relevant
part:

                As used in this act, “transfer of ownership” means the conveyance of title
        to or a present interest in property, including the beneficial use of the property, the
        value of which is substantially equal to the value of the fee interest. Transfer of
        ownership of property includes, but is not limited to, the following:

                                               * * *

                 (h) Except as otherwise provided in this subdivision, a conveyance of an
        ownership interest in a corporation, partnership, sole proprietorship, limited
        liability company, limited liability partnership, or other legal entity if the ownership
        interest conveyed is more than 50% of the corporation, partnership, sole
        proprietorship, limited liability company, limited liability partnership, or other legal
        entity. . . . [Emphasis added.]

In Signature Villas, LLC v Ann Arbor, 269 Mich App 694, 696; 714 NW2d 392 (2006), this Court
considered “whether the sale of all the membership interests in a limited liability corporation
(LLC) that owns all the membership interests in another LLC that owns real property constitutes
a ‘transfer of ownership’ of the property” for the purposes of the uncapping provisions of the
GPTA. This Court held that “[b]y the plain language of the statute, the transaction that occurred
was unambiguously a ‘transfer of ownership’ because it transferred ownership of the property at
issue from buyer to seller, by transferring ownership of the membership interests in the LLC.” Id.
at 70.

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        Here, it is undisputed that, at all relevant times, the subject property belonged to TML.
Prior to the settlement agreement, Brick and Lockwood had a combined 58% ownership interest
in TML. Pursuant to the settlement agreement, they relinquished their interests in TML in
exchange for payments totaling $2,575,000, and MIM became the sole owner of TML. In other
words, Brick and Lockwood transferred their 58% collective ownership interest in TML to MIM.
This exceeded the 50% threshold that is set out in MCL 211.27a(6)(h). Under this Court’s holding
in Signature Villas, 269 Mich App at 700-701, by transferring a 58% ownership interest in TML
to MIM, Brick and Lockwood also transferred a 58% ownership interest in the subject property to
MIM. Thus, the uncapping of the subject property for tax purposes was permissible.

        Petitioner suggests that application of MCL 211.27a(6)(h) in this context runs afoul of the
Michigan Constitution. However, petitioner’s argument is based on the fact that the Constitution
allows uncapping only if there has been a “transfer” of ownership, 1963 Const, art 9, § 3, and
petitioner simply reasserts its argument that no transfer of ownership occurred when Brick and
Lockwood withdrew from TML. For the same reasons we reject this argument in the context of
the GPTA, we also reject this argument in the context of the Constitution. See Const 1963, art 9,
§ 3 (“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.”). Again, by withdrawing from
TML, Brick and Lockwood transferred their collective 58% ownership interest to MIM.
Accordingly, we can discern no error of law on the part of the tribunal.

       Affirmed.

                                                            /s/ Karen M. Fort Hood
                                                            /s/ Jane E. Markey
                                                            /s/ Elizabeth L. Gleicher

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