Sprik v. REGENTS OF THE UNIVERSITY OF MICH.

204 N.W.2d 62, 43 Mich. App. 178, 1972 Mich. App. LEXIS 1013

• Court: Michigan Court of Appeals
• Decided: September 28, 1972
• Docket: Docket 11671
• Status: Published

Opinions

Bronson, J.

Defendant Regents maintain approximately 1,300 family units for housing married students on their North Campus. Some residents have children, some do not. In 1970, some 386 children from these units attended the Ann Arbor public schools. Plaintiffs are members of a class representing both the residents of this housing with children attending the Ann Arbor public schools and the residents who do not have children attending those schools. The lease agreements between the Regents and members of the plaintiffs’ class read, in part, as follows:

"The University reserves the right to revise rental rates upward or downward during the term of this lease. In the event of a rent adjustment, the Lessee will be given a sixty-day notice of the increase prior to implementation.”

On May 15, 1970, the defendant passed a resolution providing for a rent increase of $6 per month per unit "of married student housing”.¹ This sum was to be part of a payment by the university to the Ann Arbor School District in lieu of taxes since university property is tax exempt. Some married student housing residents have children attending school in the Ann Arbor School District, others do not. Residents were informed of this increase by letter of May 25, 1970. The increase became effective August 1, 1970, and has been collected since.

Plaintiffs began this class action on March 5, 1971, in the Court of Claims. They requested a refund of the rental sum paid to defendant Regents for transmittal to the Ann Arbor Public Schools. Plaintiffs claimed that the defendant had no authority to collect this money or to make payments to the Ann Arbor School District.

Both parties moved for summary judgment agreeing there was no genuine issue of fact but disagreeing on the conclusion of law. The trial judge granted defendant’s motion for summary judgment holding that defendant had authority to collect from the plaintiffs and to distribute the money to the Ann Arbor School District as a payment in lieu of taxes. Plaintiffs appeal this determination.

On appeal we are bound by the record as stipulated to by the parties which prevents this Court from adding to or supplementing the facts.

Plaintiffs’ first contention is that defendant’s general counsel could not represent the Regents in the Court of Claims as an unpaid Special Assistant Attorney General. When the hearing on this suit began, plaintiffs moved to strike the pleading submitted by defendant’s general counsel, arguing that only the Attorney General or one of his assistants may represent the state’s interest before the Court of Claims. MCLA 600.6416; MSA 27A.6416.

Defendant argues that its general counsel was appointed a Special Assistant Attorney General to try this matter in the Court of Claims and that the trial judge correctly denied plaintiffs’ motion.

The Court of Claims has exclusive jurisdiction over claims against the state. MCLA 600.6419; MSA 27A.6419. As the University of Michigan is a state institution, this includes claims against the Regents. Fox v Board of Regents of the University of Michigan, 375 Mich 238 (1965). The Attorney General is the exclusive representative of the state before the Court of Claims. MCLA 600.6416; MSA 27A.6416. Further, the Attorney General has the power to appoint assistants as he deems necessary. These assistants may appear before any court with powers and duties of the Attorney General subject to his orders and directions. Defendant’s general counsel took the requisite oath and was appointed a Special Assistant Attorney General. There is nothing in the statute indicating that an assistant may not be appointed to perform only a single function. There is also no requirement that an assistant be paid by the Attorney General. 1 OAG, 1956, No 2561, p 583 (October 8, 1956). See, also, 1 OAG, 1955, No 2249, p 565 (October 25, 1955). Defendant’s general counsel was legally qualified to practice before the Court of Claims.

Plaintiffs argue that defendant has no power to make payments to the Ann Arbor School District and that the rent increase is an illegal tax. Defendant, on the other hand, argues that it has merely raised the rent in compliance with the terms of the lease and that plaintiffs have not been granted a voice in the management of these premises. Central to this controversy is whether this increased monthly payment is a tax or a rent.

A tax is an enforced proportioned burden, charge, or contribution from persons and property, levied by the state, by virtue of its sovereignty, for the support of government in discharge of its various functions and duties for all public needs. Cooper, Wells & Co v St Joseph, 232 Mich 255 (1925); Employment Security Commission v Patt, 4 Mich App 228 (1966). Rent is the return which the tenant makes to the landlord for use of the premises. Munson v Menominee County, 371 Mich 504 (1963); Marsh v Butterworth, 4 Mich 575 (1857). The two differ in that a tax is an enforced payment to a governmental unit for the public good which is uncertain as to amount and time of payment. 52 CJS, Landlord and Tenant, § 463, pp 347-348. The payment exacted here is being made to the university in its status as a landlord, is certain as to time and amount, and is being used to make a voluntary payment to a governmental unit. The governmental unit which will ultimately receive the money, the Ann Arbor School District, cannot enforce payment. The essence of this payment is that it is in return for the right to remain on the premises. The defendant is correct in its assertion that this exaction is merely an increase in rent. The fact that it is being used for a specific purpose does not change the nature of the payment. Munson v Menominee County, supra.

The lease in question allows the defendant to raise rent provided a 60-day notice is given prior to implementation. Defendant complied with this provision. Plaintiffs concede this but argue that rent may be raised only for legitimate purposes connected with housing occupied by the plaintiff class. They contend that this increase was not within the parties’ contemplation and violates public policy. Lease provisions which violate public policy are void. Skutt v Grand Rapids, 275 Mich 258 (1936); Feldman v Stein Building & Lumber Co, 6 Mich App 180 (1967). Defendant argues that the increase is valid under the lease’s terms and that the lease does not grant plaintiffs a voice in managing university funds:

It is settled that courts attempt to effectuate the intent of the parties to a lease as it is set forth in the agreement. Detroit Trust Co v Howenstein, 273 Mich 309 (1935). It is clear from the lease’s language and the surrounding circumstances that defendant may raise rents for any legal purpose.²

It is true that words used in a lease should be given a reasonable construction, if possible, which will not give one party an unreasonable advantage over the other. Bortz v Norris, 248 Mich 247 (1929). This is especially important, where, as here, the parties do not have equal bargaining power. The general rule does not mean that this Court must accept the lessee’s theory of what the lease means. McComb v McComb, 9 Mich App 70 (1967). We do not agree with plaintiffs that the increase in question is for an illegal purpose.

The University of Michigan is a corporation established by the Constitution of this state. Const 1963, art 8, § 5. The Board of Regents has general supervisory control over the university and controls and directs all expenditures from university funds. Const 1963, art 8, § 5. It is well established that this section gives the Regents the entire control and management of university affairs, including the management of property and expenditure of funds, to the exclusion of all other departments of the state. Weinberg v Regents of the University of Michigan, 97 Mich 246 (1893). As the Legislature may not encroach on the Regents’ power, once state funds are appropriated to the university, only the Regents may direct how they are spent. Sterling v Regents of University of Michigan, 110 Mich 369 (1896); Board of Regents of the University of Michigan v Auditor General, 167 Mich 444 (1911). The Legislature may put certain conditions on money it appropriates for the university which are binding if the Regents accept the money. These conditions may not interfere with the Regents’ management of the university and may be applied only to state appropriated funds. Regents v Auditor General, supra; State Board of Agriculture v Auditor General, 180 Mich 349 (1914); State Board of Agriculture v Auditor General, 226 Mich 417 (1924). As the funds in question are not state appropriations, the defendant may spend the money for any object which is not subversive of its purpose. Bauer v State Board of Agriculture, 164 Mich 415 (1911). We may interfere with university control only if the proposed expenditure violates our Constitution or public policy.

Prior to 1969, the university operated a primary and secondary school which was attended by children of many Ann Arbor residents. This has been phased out and the land has been sold to the Ann Arbor School District. The Ann Arbor public schools are attended by children of residents in student married housing. No funds are received to compensate the district for the cost of educating these children. This lack of funding plus the phasing out of the university’s school has placed a financial burden on the school district. When confronted with this problem, defendant chose to make a voluntary payment to the school district. Defendant chose to allocate part of this payment to that housing which imposes the burden on local schools, student married housing. As the maintenance of this housing places a direct burden on the school district, we believe that a rational relationship exists between maintaining the housing and the purpose for which the increased rent is to be used.

A university does not exist in a vacuum. It is an integral part of the community in which it is located, in this case Ann Arbor. Actions taken by a university often have a direct and substantial impact on the community. Their actions often work to the serious disadvantage of the community and result in a lowering of the quality of life in the surrounding area. Many universities have been publicly criticized in recent years for failing to consider the consequences of their decisions on their neighbors and for refusing to alleviate the detrimental effects of these decisions when confronted by the community. Here, defendant has chosen to help alleviate the burden created as a result of its decision to maintain student married housing. This payment not only promotes university-community relations, it also encourages local public primary and secondary education. Not only is this consistent with the constitutional provision favoring education, Const 1963, art 8, § 1, it is also consistent with the concern a university should have for encouraging high-quality education at all levels.

Under article 8, section 1, the Legislature controls the state public school system. Lansing School District v State Board of Education, 367 Mich 591 (1962). As the donated funds in question are university revenues derived from rentals of university property, this payment does not infringe on the Legislature’s right to manage the school system. If any limitation on the Regents’ power to make this payment exists it must be found elsewhere in the Constitution.

Plaintiffs suggest three constitutional limitations on defendant’s power to use increased rentals to make this payment. First, they contend that defendant’s action is a selective waiving in favor of the Ann Arbor School District of the property tax exemption granted to the university. They further argue that since only the Legislature has the power to tax and to grant tax exemptions, only the Legislature may provide for payments in lieu of taxes. See MCLA 32.226; MSA 4.786(1); MCLA 120.20; MSA 5.2170; MCLA 125.1415a; MSA 16.114(15a). Defendant’s action thus intrudes on the Legislature’s power to tax by violating its exemption policies.

A waiver is the voluntary relinquishment of a known right. Black’s Law Dictionary (4th ed), pp 1751-1752. University property is tax exempt. Auditor General v Regents of the University of Michigan, 83 Mich 467 (1890); Detroit v George, 214 Mich 664 (1921); People ex rel Regents of the University of Michigan v Brooks, 224 Mich 45 (1923); Rockwell Spring & Axle Co v Romulus Twp, 365 Mich 632 (1962). The exemption was granted by the Legislature, MCLA 211.7; MSA 7.7, and is protected by the Constitution. Const 1963, art 9, § 4. The consequences of waiving the exemption, assuming but not deciding the university may do so, would be for university property to be subject to taxation by all local taxing authorities. The power to tax this property would include the power to enforce the accruing liability. The waiver of an exemption subjects the waiving party to the duties and responsibilities the exemption allowed him to avoid.

We do not believe the defendant’s action constitutes a waiver. The Regents have merely exercised their power over university funds to make a donation they believe will be beneficial to the university. The university has no legal obligation to make this payment and the Ann Arbor School District has no power to enforce it in the future. The Regents are free to alter their donation in the future or to decline to give it. The Regents have not agreed and their actions do not indicate that they have submitted university property to local taxation.

We also find no merit in plaintiffs’ contentions that defendant needs legislative authority to make these payments and that its action intrudes on the Legislature’s power to tax. Const 1963, art 9, § 1; Lucking v People, 320 Mich 495, 504 (1948). The university is a constitutionally established corporation. Const 1963, art 8, § 5. Its powers are separate and distinct from those of the Legislature. Weinberg v Regents, supra. Not being a legislative creature, it does not need legislative approval of its expenditures. Weinberg v Regents, supra; Sterling v Regents, supra; Board of Regents of the University of Michigan v Auditor General, 167 Mich 444 (1911). This being the case, in the absence of a waiver, there is no basis for finding that defendant has encroached on the Legislature’s power to tax.

Plaintiffs’ second contention is that defendant’s action is a grant of the state’s credit to the Ann Arbor School District. Article 9, § 18 of the 1963 Michigan Constitution provides:

"Sec. 18. The credit of the state shall not be granted to, nor in aid of any person, association or corporation, public or private, except as authorized in this constitution.”

This prohibition is violated only when the state creates an obligation legally enforceable against it for the benefit of another. See Bullinger v Gremore, 343 Mich 516 (1955); Dearborn v Michigan Turnpike Authority, 344 Mich 37 (1955); Advisory Opinion re Constitutionality of PA 1966, No 346, 380 Mich 554 (1968). As defendant’s voluntary payment to the Ann Arbor School District did not constitute a waiver of the university’s tax exemption, no legally enforceable obligation has been created.

Plaintiffs’ final contention is that an exaction for the benefit of the Ann Arbor School District violates their children’s right to a free education. Const 1963, art 8, § 2. In Bond v Ann Arbor School District, 383 Mich 693 (1970), the Supreme Court held that free means without cost or charge and that a school district could not exact a fee for those things essential to a system of free public education.

Plaintiffs would have us believe that the increased rent is a fee for the right of their children to attend public school. It is not. It is a charge for the right to live on the premises, a rent. The fact that it is used for a specific purpose does not change the nature of the payment. Munson v Menominee County, supra.

The trial judge did not err in granting a summary judgment in favor of defendant.

Affirmed.

Holbrook, J., concurred.

1 The Regents agreed to pay the Ann Arbor School District $252,000 subject to approval by the Attorney General or court decision. Thirty-five percent of this was to come from increased rents in married student housing. As of July 5, 1971, approximately $89,640 had been collected, assuming all sums assessed had been paid.

2 In addition to permitting the university to raise rents, the lease provides that "[t]he Lessee and the University agree to comply with all Federal, state, and local ordinances”.