STATE OF MICHIGAN COURT OF APPEALS MEIJER, INC., Petitioner-Appellant/Cross- Appellee, UNPUBLISHED March 24, 2005 v No. 252660 Tax Tribunal CITY OF MIDLAND, LC No. 00-190704 Respondent-Appellee/Cross- Appellant. Before: Hoekstra, P.J., and Whitbeck, C.J., and Neff, JJ. PER CURIAM. Petitioner Meijer, Inc. appeals as of right from an opinion and judgment on remand entered by the Tax Tribunal. On appeal, petitioner argues that this Court should again remand to the Tax Tribunal with direction that petitioner be awarded discounts from the assessed value of the property, as directed by this Court in Meijer, Inc v City of Midland, 240 Mich App 1; 610 NW2d 242 (2000) (Meijer I). On cross-appeal, respondent City of Midland argues that the Tax Tribunal began with an incorrect starting point when using the cost approach to assess the property s market value, and also erred by deducting from its original valuation a five-percent developer fee. We affirm. In Meijer I, petitioner asserted that the Tax Tribunal committed legal error in determining the true cash value of petitioner s property under the replacement cost approach when it failed to include a deduction for functional obsolescence due to the cost of modifying the buildings for use by another retailer if the buildings were leased or sold. Id. at 5-6 We agreed and remanded the case to the Tax Tribunal to make an independent determination of how much functional obsolescence exists due to modification costs. Id. at 8. After affording the parties the opportunity to brief the issue, the Tax Tribunal examined the record and found no evidentiary support for a reduction of the assessed value of the property for functional obsolescence. Now, on appeal again to this Court, petitioner argues that the Tax Tribunal violated both the law of the case doctrine and the principles of res judicata because this Court s opinion in Meijer I required a deduction from the assessed value for functional obsolescence. We disagree. The doctrine of res judicata generally precludes relitigation of matters involving the same parties that have been, or could have been, fully litigated and finally resolved. See, e.g., -1-
Andrews v Donnelly (After Remand), 220 Mich App 206, 209; 559 NW2d 68 (1996). Although the doctrine is typically applied to bar multiple actions between the same parties, the principles of res judicata are arguably applicable in the context of remand proceedings to bar relitigation of issues that have been previously raised on appeal. See, e.g., Gose v Monroe Auto Equipment Co, 409 Mich 147, 160; 294 NW2d 165 (1980) (res judicata is to be broadly applied in Michigan). Similarly, under the law of the case doctrine, a previous decision of an appellate court must generally be followed in order to maintain consistency and avoid reconsideration of matters in the course of a single, continuing lawsuit. Bennett v Bennett, 197 Mich App 497, 499-500; 496 NW2d 353 (1992). Here, we find no breach of these principles in the Tax Tribunal s opinion and judgment on remand. In challenging the Tax Tribunal s resolution of this matter on remand, petitioner misconstrues our opinion in Meijer I. Relying on language found in the analysis of the functional obsolescence issue presented on appeal in Meijer I, petitioner construes the opinion to require on remand that the Tax Tribunal find and deduct from the assessed value a positive amount for functional obsolescence. Although we acknowledge that language in Meijer I could broadly be interpreted as petitioner has, ultimately the holding was to remand for an independent determination of how much functional obsolescence exists due to modification costs. Id. at 8. Consistent with that directive, the Tax Tribunal searched the record and concluded that the answer was zero. What petitioner fails to acknowledge is that zero is a potential amount that could result from the independent determination ordered in Meijer I. Presumably, if the amount to be deducted for functional obsolescence was certain and knowable, this Court would have remanded with instructions to deduct that amount. But that was not the case and is not what this Court ordered in Meijer I. Rather, the Court s specific instruction left it to the Tax Tribunal to review the evidence and make its finding. That finding plainly is not what petitioner anticipated. But tellingly, petitioner does not challenge the Tax Tribunal s determination of this fact question on grounds that the findings were not supported by competent, material, and substantial evidence on the record. And absent a finding of such error, we are without authority to order the Tax Tribunal to make a deduction from the assessed value of the property. See Comcast Cablevision of Sterling Heights, Inc v Sterling Heights, 218 Mich App 8, 11; 553 NW2d 627 (1996) ( the factual findings of the tax tribunal are final, provided that they are supported by competent, material, and substantial evidence on the whole record ); see also STC, Inc v Dep t of Treasury, 257 Mich App 528, 533; 669 NW2d 594 (2003). Consequently, under the circumstances, petitioner s claim that the Tax Tribunal violated the doctrines of law of the case and res judicata are unavailing because on remand the Tax Tribunal carried out this Court s instruction to it and arrived at a logically consistent conclusion. On cross-appeal, respondent argues that the Tax Tribunal erred in using replacement cost rather than reproduction cost as the starting point for the cost approach to assess the market value of the property. Because the issue is not properly before us we decline to address this claim. This issue is one that relates to the methodology used by the Tax Tribunal in its first decision and was subject to appeal in Meijer I. However, the issue was not raised or decided in that appeal. On remand following this Court s decision in Meijer I, respondent raised the issue, apparently for the first time, in its brief before the Tax Tribunal. Rightfully, the Tax Tribunal did not address this issue in its opinion and judgment on remand because resolution of the issue was unnecessary to decide the two issues identified by the Court in Meijer I as requiring decision on -2-
remand. In sum, this issue should have been raised in the first appeal and was not, and consequently it is not preserved for decision in this appeal following remand. See VanderWall v Midkiff, 186 Mich App 191, 201; 463 NW2d 219 (1990). Finally, we reject respondent s claim that the Tax Tribunal exceeded the scope of its authority on remand by deducting from the property s valuation a five-percent developer s fee. Contrary to respondent s assertion, it is clear from the record that the amount deducted by the Tax Tribunal was that characterized as entrepreneurial profit in Meijer 1, supra at 8-13, and found by this Court to have been erroneously included in the Tax Tribunal s original valuation. See id. at 13. Affirmed. /s/ Joel P. Hoekstra /s/ Janet T. Neff -3-
STATE OF MICHIGAN COURT OF APPEALS MEIJER, INC., Petitioner-Appellant/Cross-Appellee, UNPUBLISHED March 24, 2005 v No. 252660 Tax Tribunal CITY OF MIDLAND, LC No. 00-190704 Respondent-Appellee/Cross-Appellant. Before: Hoekstra, P.J., Whitbeck, C.J., and Neff, J. Whitbeck, C.J. (concurring in part and dissenting in part). I concur in the majority s conclusions that (1) the question of the Tax Tribunal s use of replacement, rather than reproduction cost, is not properly before us and (2) the Tax Tribunal did not exceed its scope of authority on remand by deducting a five-percent developer s fee from the property s valuation. It is with the majority s conclusion that in that same remand the Tax Tribunal carried out this Court s instruction to it [in Meijer 1 1 ] and arrived at a logically consistent conclusion that I respectfully disagree. I. The Tax Tribunal s Decision On Remand The majority cuts to the core of this issue when it states that on remand, the Tax Tribunal searched the record [in the original case that led to the appeal in Meijer 1] and concluded that the answer [to the question this Court posed in Meijer 1 of how much functional obsolescence exists at the property due to modification costs] was zero. I do not agree that this was the conclusion that the Tax Tribunal reached on remand. Rather, the Tax Tribunal stated that: Meijer failed to move forward with credible and competent evidence in order for the Tribunal to make an independent determination of a legally supportable specific cost to modify [Meijer s] appraiser s replacement cost. 1 Meijer, Inc. v City of Midland, 240 Mich App; 610 NW2d 242 (2000). -1-
Meijer has not persuaded the Tribunal, through testimony or substantiated evidence, that there was any further functional obsolescence that had not been accounted for by the use of its replacement cost approach. Its original determination that there was no evidentiary support or testimony to support a further reduction of value for functional obsolescence over and above that already recognized in [Meijer s] replacement cost model.... Rather obviously, the Tax Tribunal s third finding 2 is not a finding at all; that finding is not a complete sentence and lacks any wording describing its effect. It is fair to say, however, that when read together the Tax Tribunal s three statements amount to a determination that, based on the original record before it, there was no competent, material and substantial evidence in that record to support any further adjustment in the assessed value of the property for functional obsolescence. Respectfully, I suggest that this is not, as the majority holds, a decision on remand that the answer to the question of how much functional obsolescence exists at the property due to modification costs is zero. The Tax Tribunal made no such decision. Rather, it decided on remand that there was no competent, material and substantial evidence in the original record to support any further adjustment in the assessed value of the property for functional obsolescence. It follows, I believe, that the Tax Tribunal s actual decision on remand necessarily implicates the law of the case doctrine. The question then becomes: what did this Court hold in Meijer 1 and what, exactly, is the law of the case? II. The Holdings In Meijer 1 And The Law Of The Case In Meijer 1, this Court made the following statements: Meijer first argues that the Tax Tribunal committed legal error in determining the true cash value of [Meijer s] property under the replacement cost approach when it failed to include a deduction for functional obsolescence due to the cost of modifying the buildings for use by another retailer if the buildings were lease or sold. We agree. 3 [O]bsolescence should be calculated as a percentage of the building cost only and not the building and land together as [Meijer] attempted to do. However, the tribunal erred in failing to make its own determination of the functional obsolescence due to modification costs. 4 2 This sentence fragment is contained under that Tax Tribunal s conclusions of law, but the Tribunal nonetheless specifically used the term finding. 3 Meijer 1, supra at 5-6; emphasis supplied. 4 Id. at 7; emphasis supplied. -2-
The Tax Tribunal specifically found that the subject property includes improvements that have utility only to [Meijer] and that a typical buyer in the market place would incur considerable modification costs. This is the type of functional obsolescence that is not eliminated by adoption of the replacement cost approach. 5 The cost of these modifications [to signs, facades, truck bays, interior layouts, and other features] must be deducted from the replacement cost in order to determine the true cash value of the property. If a buyer could build an equivalent building for an amount equal to the replacement cost, that buyer would not buy a building needing substantial modification unless the selling price were lower than or equal to the replacement cost less the cost to modify the property. 6 Once the Tax Tribunal found that a typical buyer in the market place would incur considerable modification costs, it was not free to wholly reject [Meijer s] claim for functional obsolescence. While the Tax Tribunal is not required to accept valuations advanced by the taxpayer or the assessing unit, it remains the duty of the tribunal to adopt a valuation that is most appropriate to the individual case as the particular facts may indicate. 7 Therefore, we remand to the Tax Tribunal to make an independent determination of how much functional obsolescence exists due to modification costs. 8 III. Mistakes And Misunderstandings The City of Midland argues here that the panel in Meijer 1 mistakenly concluded as a matter fact that there was competent, material and substantial evidence in the record from which it could have, although it chose not to, make a finding as to the amount of costs which would be anticipated by a typical purchaser. 9 The City goes on to state, This misunderstanding by the Court of Appeals was the premise upon which it based both its Opinion and its directions on remand with respect to functional obsolescence. 10 It may well be that the panel in Meijer 1 was mistaken when it made the statements that I have quoted above. However, these statements establish and in my view indisputably 5 Id.; emphasis supplied. 6 Id. at 7-8; emphasis supplied. 7 Id. at 8, citing Teledyne Continental Motors v Muskegon Twp, 145 Mich App 749, 754; 378 NW2d 590 (1985); emphasis supplied. 8 Id.; emphasis supplied. 9 Emphasis supplied. 10 Emphasis supplied. -3-
establish that the Meijer 1 panel agreed that the Tax Tribunal committed legal error in determining the true cash value of Meijer s property under the replacement cost approach by failing to include a deduction for functional obsolescence. That panel also concluded that the Tax Tribunal erred in failing to make its own determination of the functional obsolescence due to modification costs. That panel finally concluded that the Tax Tribunal was not free to wholly reject Meijer s claim for functional obsolescence and that, while the Tribunal was not required to accept valuations advanced by Meijer or the City, it remained the Tribunal s duty to adopt a valuation that is most appropriate to the individual case as the particular facts may indicate. Meijer 1 was a published case and it is precedential. 11 This Court and the Tax Tribunal are therefore bound by it. It may further be that a misunderstanding by the Meijer 1 panel led to a faulty premise when that panel remanded for an independent determination by the Tax Tribunal of how much functional obsolescence existed at the property due to modification. But the remedy for such mistakes and misunderstandings, if they existed, was not to ignore them. Rather, the remedy was either to seek reconsideration or to apply to the Supreme Court for leave appeal. The City did not do the former. It did do the latter, but the Supreme Court denied its application. To belabor the point, the holdings in Meijer 1 are therefore the law of the case as far as this panel and the Tax Tribunal are concerned and neither we nor the Tax Tribunal are at liberty to ignore them. In the same vein, the remedy is not for this panel to, as the City suggests, review this matter with the correct facts in hand. Fortunately, the majority here has not adopted the City s suggestions. Unfortunately, however, the majority has adopted an approach that leads to the same result. Instead of substituting the City s version of the correct facts, the majority reads words into the Tax Tribunal s decision on remand that simply are not there. The Tax Tribunal did not decide that the amount of functional obsolescence at the property due to modification costs is zero; that word does not appear in the Tribunal s decision on remand. What the Tribunal did decide was that there was no competent, material and substantial evidence in the original record to support any further adjustment in the assessed value of the property for functional obsolescence. IV. The Effect Of The Law Of The Case In my view, this decision of the Tax Tribunal is directly contrary to the holdings of the panel in Meijer 1 and, therefore, the law of the case. As I outlined above, the panel in Meijer 1 (1) agreed that Tribunal committed legal error in determining the true cash value of Meijer s property under the replacement cost approach by failing to include a deduction for functional obsolescence, (2) concluded that the Tax Tribunal erred in failing to make its own determination of the functional obsolescence due to modification costs, (3) concluded that the Tax Tribunal was not free to wholly reject Meijer s claim for functional obsolescence and that it remained the Tribunal s duty to adopt a valuation that is most appropriate to the individual case as the 11 See MCR 7.215(C)(2). -4-
particular facts may indicate, and (4) remanded for the Tribunal s independent determination of how much functional obsolescence existed at the property due to modification. I think it inescapably follows that, under the law of the case doctrine, these decisions of the Meijer 1 panel bound the Tax Tribunal on remand. The Tribunal s decision on remand may have been, as the majority puts it, logically consistent. Nonetheless, the Tribunal did not follow the law of the case and it did not carry out this Court s instructions. Rather, it circumvented those instructions. This was an error of law. I would therefore reverse and remand with instructions to the Tribunal to make a finding as to how much, if any, functional obsolescence existed at the property due to modifications. In my view, this will of necessity require an evidentiary hearing at which both Meijer and the City may present evidence on this issue. I reach this conclusion because the Tax Tribunal on remand in Meijer 1 found that Meijer had presented no credible and competent evidence on the existence of functional obsolescence at the property. If this is the case and if it is also the case that the panel in Meijer 1 found that functional obsolescence did exist, then manifestly, a further hearing is required. While this may in fact give Meijer, as well as the City, two bites at this particular apple, I can see no other approach that comports with this Court s decision in Meijer 1. /s/ William C. Whitbeck -5-