Wayside Church v. Van Buren Cty.

Citation: Not availableDocket: 15-2525

Court: Court of Appeals for the Sixth Circuit; February 9, 2017; Federal Appellate Court

Original Court Document: View Document

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Plaintiffs Wayside Church, Myron W. Stahl, and Henderson Hodgens appeal a district court decision that granted Defendants Van Buren County and Treasurer Karen Makay's motion to dismiss their complaint. The Plaintiffs alleged violations of their Fifth Amendment rights due to property being taken without just compensation. Defendants cross-appealed, claiming the district court improperly asserted jurisdiction. The Sixth Circuit Court vacated the district court's judgment and remanded the case with instructions to dismiss it for lack of subject matter jurisdiction.

The case background reveals that Plaintiffs owned properties in Van Buren County, Michigan, which became subject to forfeiture after they failed to pay property taxes in 2011. Following a foreclosure judgment in April 2014, the properties were transferred to the County, and subsequently auctioned by Treasurer Makay, with the minimum bid set based on outstanding taxes, fees, and sale administration costs.

Plaintiff Wayside Church’s former property, with a minimum bid of $16,750, was sold at auction for $206,000, resulting in surplus proceeds of $189,250 for Defendant Van Buren County. Similarly, Stahl's property, with a minimum bid of $25,000, sold for $68,750, yielding a surplus of $43,750, while Hodgens' property, with a minimum bid of $5,900, sold for $47,750, generating $41,850 in surplus proceeds. The Plaintiffs claim a cognizable property interest in the surplus funds from their foreclosed properties and allege that the Defendants failed to compensate them as required by the Fifth Amendment, constituting a taking without just compensation. They seek a declaratory judgment without challenging the foreclosure process itself. 

On December 11, 2014, the Plaintiffs filed a complaint in federal court against the Defendants, asserting three claims: Count I for violation of Fifth Amendment rights, Count II for monetary damages under 42 U.S.C. § 1983, and Count III for a declaration regarding the tolling of the redemption period due to the Michigan Circuit Court's failure to comply with state law. The Plaintiffs also aim to represent a class of former Michigan property owners who lost properties sold for amounts exceeding their tax debts. 

Defendants moved to dismiss the complaint on January 7, 2016, citing lack of jurisdiction and failure to state a claim under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The district court denied the jurisdictional dismissal but granted the dismissal for failure to state a claim on November 9, 2015. The Plaintiffs appealed on November 30, 2015, contesting the dismissal, while the Defendants cross-appealed regarding jurisdiction. The court emphasized that it must consider the jurisdictional challenge first, as the merits become moot if the court lacks subject matter jurisdiction. The determination of ripeness is crucial, as unripe claims lead to dismissal for lack of jurisdiction. The document outlines the standards for reviewing jurisdictional challenges, distinguishing between facial and factual attacks under Rule 12(b)(1).

A facial attack on subject-matter jurisdiction challenges the sufficiency of the pleadings, with the district court treating the allegations in the complaint as true, akin to a Rule 12(b)(6) motion. Such challenges are reviewed de novo. In contrast, a factual attack involves weighing conflicting evidence to determine jurisdiction, and findings from the district court are upheld unless clearly erroneous. The district court in this case treated the challenge as a facial attack, thus the appeal is similarly reviewed de novo. The plaintiff bears the burden of proving jurisdiction under Rule 12(b)(1). The defendants assert two reasons for lacking jurisdiction: (1) the plaintiffs’ claims are not ripe for review, and (2) the Tax Injunction Act and principles of comity bar federal court jurisdiction. 

Regarding the ripeness of Takings Clause claims, the Takings Clause of the Fifth Amendment, applied to states via the Fourteenth Amendment, does not prohibit the taking of private property but requires just compensation when such taking occurs. A state violates this clause only if it refuses compensation after a taking. Compensation does not need to be provided prior to or at the time of the taking, and a takings claim is not ripe unless the state fails to offer an adequate post-deprivation remedy for property loss.

The Supreme Court's Williamson County established a two-part test for the ripeness of takings claims in federal court: (1) the plaintiff must obtain a 'final decision' from the relevant governmental authority, and (2) the plaintiff must seek 'compensation through the state’s provided procedures.' State procedures must be 'reasonable, certain, and adequate' to necessitate state court redress before federal litigation. Although the Williamson County test is classified as 'prudential' rather than strictly jurisdictional, its application often supports federalism interests, particularly regarding state-defined property rights. 

In the current case, the defendants acknowledge the first prong of the test is met but challenge the district court’s conclusion that adequate state procedures for the plaintiffs to contest the alleged taking do not exist. They argue that the plaintiffs could have challenged the tax law constitutionally or pursued inverse condemnation in state court. However, the district court indicated that such options were limited by the General Property Tax Act (GPTA), specifically Section 211.78l, which delineates that post-foreclosure monetary claims must be made in the Court of Claims, which lacks jurisdiction against the state if a federal remedy is available. Consequently, the plaintiffs assert that there is no adequate state forum for their claims, as the Court of Claims cannot address cases where federal remedies exist.

Plaintiffs argue that federal court is the sole venue for their claims, a position supported by the district court, which identified that under the GPTA, a cause of action for monetary damages against a county treasurer is only valid for claims of lack of notice as required by the act. The court acknowledged that the Court of Claims has jurisdiction over GPTA challenges but concluded that federal claims are barred there, leading to the finding that the state did not provide an adequate remedy. The court applied the Williamson County test to determine the claim's ripeness.

However, this reasoning is critiqued on two grounds. First, the district court misinterpreted the statute by restricting all GPTA challenges to those concerning notice procedures. The statute allows for monetary damages only when both the former owner's rights are extinguished by foreclosure and the owner contests the receipt of required notice. Plaintiffs, not disputing the notice, do not fit this criteria, thus the restrictions do not apply to their Takings Clause claim. 

Second, the district court incorrectly held that the Court of Claims has exclusive jurisdiction over all GPTA-related claims. The distinction between 'section' and 'act' in the statute indicates that 'section' refers to specific provisions of the GPTA, while 'act' encompasses the entire law. This suggests that jurisdiction limitations apply only to claims directly under the specified section, not to the broader GPTA.

Section 211.78l of the GPTA pertains only to claims by former property owners regarding notice provisions, which does not apply to the Plaintiffs in this case. As a result, Plaintiffs were not obligated to file their claims in the Court of Claims, thus avoiding the statutory bar against claims where a federal remedy exists. The district court incorrectly concluded that the GPTA failed to provide a remedy for the Plaintiffs’ constitutional claims. Additionally, interpreting the statute as the district court did would render it unconstitutional, violating the principle of constitutional avoidance, which requires courts to adopt the interpretation that preserves the statute's constitutionality when two interpretations exist. The Michigan Supreme Court has affirmed that the legislature cannot establish a legal framework that permits constitutional violations without recourse, deeming such provisions unconstitutional. Therefore, 211.78l does not prevent the Plaintiffs from pursuing their Takings Clause claims in state court. 

However, it remains necessary to assess whether the Plaintiffs can generally bring their Takings Clause and 1983 claims in Michigan state court, independent of 211.78l. The Michigan Court of Appeals has indicated that the Court of Claims is the appropriate venue for inverse condemnation claims against the State. Nonetheless, the current action is not against the State of Michigan; it is against Van Buren County and the county treasurer, who is responsible for the alleged taking of the Plaintiffs’ properties.

Counties are not within the jurisdiction of the Court of Claims, as established in Doan v. Kellogg Community College and Cameron v. Monroe County Probate Court, which affirmed that circuit courts have jurisdiction over complaints against county courts when the state is not a party. Consequently, Lim is not applicable to Plaintiffs' case, and they are not required to file in the Court of Claims. The argument that all claims against political subdivisions must be litigated in federal court overlooks Michigan's interpretation of its jurisdictional statutes. In Gordon v. Sadasivan, the Michigan Court of Appeals clarified that state courts possess concurrent jurisdiction over 1983 claims and can hear cases even when remedies exist in federal court, confirming that the Court of Claims lacks jurisdiction in such instances. The circuit court is the appropriate forum for these claims, as evidenced by multiple cases where state courts adjudicate matters with federal remedies. Therefore, Plaintiffs are not barred from bringing their actions in state circuit court and have access to a state forum for their federal constitutional claims. The district court incorrectly concluded that federal jurisdiction was appropriate, failing to recognize that Michigan law provided adequate remedies. Additionally, the district court found that the Tax Injunction Act does not prevent jurisdiction, but this Act prohibits federal courts from intervening in state tax matters when an effective remedy is available in state courts.

Federal court jurisdiction over challenges to state tax laws is limited by the principle of comity, which prevents taxpayers from bringing 42 U.S.C. § 1983 actions against state tax systems in federal courts. This principle is distinct yet related to the Tax Injunction Act, 28 U.S.C. § 1341, and applies to cases seeking both monetary damages and equitable relief. Federal jurisdiction is permitted only when state courts fail to provide a "plain, adequate, and complete" remedy for tax-related claims. The court found that the plaintiffs had a sufficient avenue in state court to raise constitutional objections to the tax, which the district court incorrectly overlooked. As a result, the district court's assertion of jurisdiction over the plaintiffs’ claims was erroneous, leading to the conclusion that the judgment should be vacated and the action dismissed for lack of subject matter jurisdiction.

In dissent, Circuit Judge Kethledge argued that the federal courts possess jurisdiction in this case, emphasizing the obligation to exercise that jurisdiction as granted by Congress. He criticized the reliance on Williamson County, which necessitates state remedies for takings claims, suggesting that the court should address whether the actions of Van Buren County constituted a taking under the federal Constitution.

The doctrine referenced is discretionary and judge-created, allowing for its dismissal when its application does not align with sound judicial process. The certainty of a remedy under Michigan substantive law for the alleged taking remains unclear. While Michigan law allows for inverse condemnation claims—where property is taken without formal eminent domain proceedings—there is no established state law determining if a local government's property appropriation under its taxing power constitutes a taking, especially when the property value exceeds the owed taxes. This uncertainty is compounded by potential jurisdictional issues for plaintiffs seeking to file their inverse-condemnation claim. They must choose between the state circuit court or the court of claims, with a risk of misjudging the appropriate venue. The majority opinion suggests circuit court, despite the statutory exclusive jurisdiction of the court of claims over monetary claims against the state, including its instrumentalities. Previous Michigan Court of Appeals rulings indicate that such claims against county agencies belong in the court of claims. Additionally, jurisdiction remains uncertain due to a statutory provision that prohibits claims in the court of claims if an adequate remedy exists in federal courts, complicating the plaintiffs' situation since they assert a federal constitutional claim.

Plaintiffs are directed by statute 600.6440 to pursue their claims in federal court, while the majority's interpretation of Williamson County mandates state court litigation. The majority deems the state’s jurisdictional framework unconstitutional, allowing plaintiffs to file in state circuit court contrary to Michigan statutes. This raises concerns about constitutional integrity, as the plaintiffs’ claim involves federal constitutional issues regarding property takings for tax obligations. Despite a congressional grant of jurisdiction over this claim and the state’s preference for federal court adjudication, the majority prioritizes federalism, effectively sending plaintiffs back to state court where procedures are uncertain and confusing. The majority cites Haywood v. Drown to support its conclusion, but the dissent argues this case does not apply, as there is no evidence that Michigan's statute seeks to undermine federal takings claims; instead, federal courts, through Williamson County, have obstructed these claims. The dissent expresses concern about the contradictions and lack of sound legal process resulting from the majority's decision.