{ Banner Image }

Clerical Error and Mutual Mistake of Fact

Click to Share Share  |  Twitter Facebook
Steven H. Lasher
Foster Swift Municipal Law News
May 2010

In Briggs Tax Serv, LLC v Detroit Public Sch, __ NW2d __; __ Mich __ (2010), the Michigan Supreme Court examined the meaning of MCL 211.53a. Pursuant to this statute:

Any taxpayer who is assessed and pays taxes in excess of the correct and lawful amount due because of a clerical error or mutual mistake of fact made by the assessing officer and the taxpayer may recover the excess so paid, without interest, if suit is commenced within 3 years from the date of payment, notwithstanding that the payment was not made under protest.

Seven years prior to Briggs, voters in the Detroit Public School (DPS) district approved a 32.25-mill school operating property tax. This millage was to expire on June 30, 2002. In March of 1994, voters approved Proposal A which precluded local school districts from levying more than 18 mills in property taxes. According to Proposal A, all unexpired millages authorized before January 1, 1994, were valid. Therefore, the 32.25-mill school operating property tax remained valid.

Although voter approval for the DPS operating millage expired on June 30, 2002, DPS levied an unauthorized 18-mill tax for tax years 2002-2004 without voter approval. DPS believed that pursuant to Proposal A, local school district electors no longer needed to approve a tax rate of 18 mills. In August 2005, DPS acknowledged that the taxes levied for 2002-2004 were levied without authorization and that revenue from those taxes might have to be refunded. Briggs sued DPS seeking a refund of the unauthorized taxes. The Tax Tribunal dismissed the claim because Briggs failed to file the suit within 30 days of the issuance of the applicable tax bills. In an amended petition, Briggs alleged that a mutual mistake of fact under MCL 211.53a occurred and, therefore, it had three years to file a suit to recover the unauthorized taxes. The Tax Tribunal held that MCL 211.53a did not apply and again dismissed the claim.

The Court of Appeals reversed, holding that Briggs could rightfully pursue a refund claim under MCL 211.53a. According to the Court of Appeals, the mistake regarding the validity of imposing the tax was a mutual mistake of fact between the taxpayer and the assessor. The Michigan Supreme Court granted respondents’ applications for leave to appeal. The issue before the Supreme Court was whether a mutual mistake of fact occurred such that the three-year limitations period of MCL 211.53a applied.

The Michigan Supreme Court explained that generally a petitioner needs to file a petition with the Tax Tribunal within 30 days of the issuance of the applicable tax bills. The Supreme Court pointed out that if another statute provides a different limitations period for filing a petition with the Tax Tribunal, that statute trumps the general rule. To determine whether MCL 211.53a applied to Petitioner’s claim, the Court focused its analysis on the meaning of the phrase "mutual mistake of fact made by the assessing office and the taxpayer." The Court emphasized that the phrase acquired a particular meaning under Ford Motor Co v City of Woodhaven, where the court found that a mutual mistake of fact existed. In that case, the Court held that a "mutual mistake of fact" is "an erroneous belief, which is shared and relied on by both parties, about a material fact that affects the substance of the transaction." In its analysis, the Court first focused on the mutuality requirement. Since the mistake at issue could be attributed to DPS alone, the court found that no such mutuality existed. Specifically, while a mistake occurred, the mistake was not made by the assessor. The assessor performed his or her statutory duties (duties which include the creation of the annual tax assessment roll, determination of property values for tax assessment purposes, and the determination of taxable values. The Supreme Court continued by acknowledging that assessors are required to spread the taxes on the tax roll, but that assessors can not review or alter certified tax rates. As a result, there could be no mutual mistake of fact.

Second, the Court explained that the collection of an unauthorized tax constitutes a mistake of law rather than a mistake of fact. The Court distinguished Briggs from Ford explaining that in Ford, the assessor and petitioner shared a mistaken belief as to the amount of Ford’s property subject to tax. In contrast, the mistake in Briggs simply consisted of the imposition of a tax not supported by law.

For all of the foregoing reasons, the Michigan Supreme Court determined that the DPS District’s mistake in levying an unauthorized mill tax for three tax years was not a mutual mistake of fact and, therefore, MCL 211.53a did not apply to Petitioner’s claim. Accordingly, Briggs was not entitled to a refund, since it did not file its petition within 30 days of the issuance of the applicable tax bills, the general limitations period.