Adair v. City of Detroit

Reilly, P.J. In these consolidated cases, plaintiffs/counterdefendants, Celia Adair and Joy Management Company, appeal by leave granted from a circuit court order holding that the counterclaims of defendant, the City of Detroit, could be maintained as a class action. We reverse and remand for proceedings consistent with this opinion. On December 12, 1989, Celia Adair filed a class action to recover fire insurance proceeds retained by the City of Detroit pursuant to MCL 500.2845; MSA 24.12845. Joy Management Company filed a *508 similar class action a short time later. Pursuant to the statute at issue in these consolidated cases, a city may receive and hold in escrow fifteen percent of insurance proceeds payable to the insured owner of property that is damaged by fire or explosion. 1 MCL 500.2845(1) and (2); MSA 24.12845(1) and (2). The city has thirty days after depositing the funds in escrow to apply in the circuit court for declaratory relief in order to establish its rights to the proceeds. "If the city . . . fails to apply for declaratory relief within the 30-day period, or if declaratory relief is denied, the city . . . shall immediately return to the insured the proceeds held in escrow.” MCL 500.2845(2)(d); MSA 24.12845(2)(d). In their complaints, plaintiffs alleged that the defendant city retained insurance proceeds in escrow without filing a declaratory action as required by the statute or, alternatively, that defendant did file declaratory actions in compliance with the statute, but allowed the actions to be dismissed for lack of progress. Defendant subsequently filed "class action” counterclaims against Adair and Joy Management. Defendant alleged that it was entitled to unpaid property taxes on the subject properties and that it was entitled to recover demolition costs from the property owners pursuant to statute and under a nuisance theory. The city also requested the entry of a declaratory judgment authorizing the transfer of the funds in escrow to cover, in part, the cost of demolishing the properties. The circuit court entered an order certifying both plaintiffs’ actions and defendant’s counterclaims as class actions pursuant to MCR 3.501. We note that Adair’s motion for summary disposition *509 was subsequently granted with respect to defendant’s counterclaims for unpaid taxes and demolition costs pursuant to statute. The surviving counterclaims are the claim for declaratory judgment pursuant to MCL 500.2845; MSA 24.12845 and the nuisance counterclaim seeking actual demolition costs. Whether the order granting summary disposition was proper is not an issue before us. Plaintiffs appeal the certification of defendant’s counterclaims as a class action. 2 Plaintiffs argue that the circuit court improperly certified defendant’s counterclaims as a class action because they are not equitable in nature and defendant seeks only to recover money from plaintiffs. In support of this argument, plaintiffs cite MCR 3.501(1), which provides that "[a]n action that seeks to recover money from individual members of a defendant class may not be maintained as a class action.” We disagree with the assertion that MCR 3.501(1), precludes defendant from asserting its counterclaims against the class composed of plaintiffs/counterdefendants. Initially, we recognize that defendant, in its remaining counterclaims, is seeking both equitable and monetary relief. In the declaratory action claim, defendant is seeking a judgment that it is entitled to retain the funds that it holds in escrow. Thus, defendant is not seeking to collect money from members of a class, but is seeking a determination that defendant, not plaintiffs, is entitled to the insurance proceeds held in escrow. Accordingly, the claim for declaratory relief would be unaffected by MCR 3.501(1). However, in the remaining claim based upon a nuisance abatement theory, defendant is seeking to recover actual *510 demolition costs with respect to the property of each plaintiff, which may exceed the amount held in escrow for each property. Therefore, that claim is for the recovery of money damages. 3 Nevertheless, we conclude that MCR 3.501 permits the types of counterclaims asserted by defendant. A court rule should be construed in accordance with the ordinary and approved usage of the language and in light of its purpose. Steward v Poole, 196 Mich App 25, 28; 492 NW2d 475 (1992). MCR 3.501(H)(1) provides that "[a] party to a class action may file counterclaims as in any other action, including counterclaims by or against a class or an individual class member.” MCR 3.501(H)(1) contains no limitation on the type of counterclaim or the type of recovery sought. Additionally, the committee comments to GCR 1963, 208.8, the predecessor of MCR 3.501(H)(1), indicate an intent to allow unrestricted filing of counterclaims by defendants in class actions. 4 Moreover, we reject the argument that MCR 3.501(1) precludes a counterclaim for money damages. MCR 3.501(1) applies to the maintenance of actions against a "class of defendants.” However, the plaintiffs in this case are not a "class of defendants,” but a "class of counterdefendants.” They are not the defendants in an original action. Rather, they are the plaintiffs who instituted class *511 actions, and they are being subjected to the counterclaims of the defendant, as permitted by MCR 3.501(H)(1), in a class action. Although we hold that MCR 3.501 permits the type of counterclaims filed in these cases, we conclude that the circuit court clearly erred in certifying defendant’s counterclaims against the plaintiffs’ class without determining whether the counterclaims met the requirements for a class action pursuant to MCR 3.501(A)(1). See Mooahesh v Treasury Dep’t, 195 Mich App 551, 556; 492 NW2d 246 (1992). 5 Accordingly, we cannot determine whether the trial court properly certified defendant’s counterclaims as a class action. 6 We remand for a determination whether defendant may assert its counterclaims as a class action pursuant to MCR 3.501(A). In view of this ruling, we do not address the issue whether the notice of pendency must contain language regarding defendant’s counterclaims. Further, we note that in the event the trial court determines that the counterclaims do not meet the requirements for a class action, but may be asserted against individual class members, it has the discretion, pursuant to MCR 3.501(H)(5), to take such steps as are necessary to prevent the counterclaims from making the plaintiffs’ class action unmanageable. Reversed and remanded for proceedings consistent with this opinion. We do not retain jurisdiction.__ Footnotes [1] The statute also applies to villages and townships. [2] Defendant filed a motion to amend its counterclaim. However, it does not appear from the record that the motion was decided by the trial court. [3] Although the nuisance abatement claim may be based upon the equitable principles of unjust enrichment and quasi contract, Brandon Twp v Jerome Builders, Inc, 80 Mich App 180, 182-183; 263 NW2d 326 (1977), defendant, nevertheless, seeks to recover money damages. [4] The committee’s proposal is to allow unrestricted filing of counterclaims by defendants in class actions, but to follow the approach of a number of more recent federal decisions which emphasize that the management tools available to the trial judge will almost always make it possible both to permit the action to proceed as a class action and also to allow the defendant to raise counterclaims that may reduce or eliminate its liability to at least some class members. [5] See the committee comments to GCR 1963, 208.8, where the committee noted that "[s]ection (A) would permit the filing of a counterclaim against a class or subclass, although the committee anticipates that it would be rare for such a counterclaim to itself meet the requirements for class certification.” [6] It also appears from the record before us that the trial court did not consider the requirements of MCR 3.501(A)(1) before certifying the plaintiff class in this case. However, defendant has not raised the issue of that ruling in this Court.