                           STATE OF MICHIGAN

                            COURT OF APPEALS



FIFAREK HOUSE TRUST,                                                   UNPUBLISHED
                                                                       March 7, 2017
               Petitioner-Appellant,

v                                                                      No. 330489
                                                                       Tax Tribunal
TOWNSHIP OF LONG LAKE,                                                 LC No. 15-000793-TT

               Respondent-Appellee.


Before: RONAYNE KRAUSE, P.J., and O’CONNELL and METER, JJ.

PER CURIAM.

       Petitioner appeals as of right from a final opinion and judgment of the Michigan Tax
Tribunal denying its appeal regarding the valuation of real property located at 1949 South Long
Lake Road North in Grand Traverse County. We affirm.

         On March 25, 2015, respondent sent to petitioner a document entitled “Assessor Affidavit
Regarding ‘Uncapping’ of Taxable Value.” The document indicated that, for the 2015 tax year,
the taxable value of the property at issue would be “corrected” and increased from $134,981 to
$222,600.1 John R. Fifarek, a principal of Lasky Fifarek, P.C., and the trustee for petitioner, sent
a letter to respondent on April 9, 2015, stating, in part, that (1) the trustee held the property after
the death of Robert Fifarek on August 14, 2014; (2) the trustee published the required Notice to
Creditors on September 11, 2014; (3) the statutory four-month period for creditors to make
claims against the trust expired on January 11, 2015; (4) thus, no conveyance from the trust
could have occurred until after that date; and (5) at any rate, no transfer of assets from the trust
had yet occurred at all. The trustee therefore argued that no transfer of ownership occurred in




1
  MCL 211.27a(3) provides: “Upon a transfer of ownership of property after 1994, the
property’s taxable value for the calendar year following the year of the transfer is the property’s
state equalized valuation for the calendar year following the transfer.” This statute provides for
an “uncapping” of the limit on increases in taxable value provided by Proposal A in 1994, which
amended Const 1963, art 9, § 3.


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2014 and respondent erred in basing its “corrected” taxable value on the assumption that a
transfer occurred in 2014.2

       Petitioner filed an appeal with the Small Claims Division of the Michigan Tax Tribunal.
Respondent replied on May 29, 2015. The assessor, Angela Friske, stated, “I have consistently
uncapped the taxable value the year following the change of primary beneficiaries (unless to
include or exclude spouse) as the beneficial use of the property transfers to the succeeding
beneficiaries.” She indicated that she uncapped the taxable value based on MCL 211.27a(6)(e),
which states:

               (6) As used in this act, “transfer of ownership” means the conveyance of
       title to or a present interest in property, including the beneficial use of the
       property, the value of which is substantially equal to the value of the fee interest.
       Transfer of ownership of property includes, but is not limited to, the following:

              (e) A change in the sole present beneficiary or beneficiaries of a trust,
       except under any of the following conditions:

              (i) A change that adds or substitutes the spouse of the sole present
       beneficiary.

              (ii) Beginning December 31, 2014, for residential real property, a change
       that adds or substitutes the settlor’s or the settlor’s spouse’s mother, father,
       brother, sister, son, daughter, adopted son, adopted daughter, grandson, or
       granddaughter and the residential real property is not used for any commercial
       purpose following the conveyance. Upon request by the department of treasury or
       the assessor, the sole present beneficiary or beneficiaries shall furnish proof
       within 30 days that the sole present beneficiary or beneficiaries meet the
       requirements of this subparagraph. If a present beneficiary fails to comply with a
       request by the department of treasury or assessor under this subparagraph, that
       present beneficiary is subject to a fine of $200.00.[3]

She indicated that Robert Fifarek died before December 31, 2014, and thus MCL
211.27a(6)(e)(ii) had not been triggered.

       In a brief filed with the tribunal on September 16, 2015, petitioner argued, in part, that the
assessor erred in relying on MCL 211.27a(6)(e) because there had simply been no changes in the


2
  We note that, in his letter, the trustee made an additional argument, concerning MCL
211.27a(6)(d), but petitioner has not advanced this argument on appeal.
3
  This is the current version of MCL 211.27a(6)(e), enacted by 2014 PA 310. At the time of
Robert’s death, MCL 211.27a(6)(e) simply stated that a transfer of ownership included “[a]
change in the sole present beneficiary or beneficiaries of a trust, except a change that adds or
substitutes the spouse of the sole present beneficiary.”


                                                -2-
beneficiaries of the trust. Petitioner argued that this would have required an amendment to the
trust and that such an amendment had not occurred.

        The tribunal issued a final opinion and judgment, ruling for respondent, on November 13,
2015. The tribunal stated that the dispositive statute was MCL 211.27a(6)(e). The tribunal
concluded that, under this statute, a “change in the sole present beneficiary or beneficiaries of a
trust” constitutes “[t]ransfer of ownership of property,” and the potential exception in MCL
211.27a(6)(e)(ii) did not apply because Robert Fifarek died before December 31, 2014. The
tribunal stated:

              Petitioner’s contention that a change in beneficiaries requires an officially
       executed amendment is without merit. Nothing in the plain language of MCL
       211.27a(6)(e) suggests that the Legislature intended any such requirement.
       Instead, the language, particularly the opening phrase, acknowledges that there is
       not one singular method for effecting a change in beneficiaries, and indicates that
       any event triggering such a change is sufficient to constitute a transfer of
       ownership.

The tribunal further held that statutes excluding from the phrase “transfer of ownership” the
transfer of residential real property to certain relatives, see MCL 211.27a(7), did not apply
because the statutes addressed “different types of conveyances,” whereas MCL 211.27a(6)(e)
specifically and dispositively addressed the issue in the present case: a change in the
beneficiaries of a trust.

        “Review of decisions by the Tax Tribunal is limited.” Michigan Properties, LLC v
Meridian Twp, 491 Mich 518, 527; 817 NW2d 548 (2012). “The Tax Tribunal’s factual findings
are final if they are supported by competent, material, and substantial evidence on the whole
record.” Id. “If the facts are not disputed and fraud is not alleged, our review is limited to
whether the Tax Tribunal made an error of law or adopted a wrong principle.” Id. at 527-528.
As in Michigan Properties, the present case involves statutory interpretation, which we review
de novo. Id. at 528.

       When interpreting statutes, this Court must ascertain and give effect to the intent
       of the Legislature. In interpreting a statute, this Court avoids a construction that
       would render any part of the statute surplusage or nugatory. When considering
       the correct interpretation, the statute must be read as a whole. Individual words
       and phrases, while important, should be read in the context of the entire
       legislative scheme. [Id. (citations and quotation marks omitted).]

        Petitioner makes two primary arguments on appeal. It first argues, as it did below, that
no transfer of ownership of the property took place. Petitioner states that it was impossible for a
transfer to have occurred before January 2015, because, in compliance with applicable laws, the
trustee published the required Notice to Creditors on September 11, 2014, and the four-month
statutory period, see MCL 700.3801 and MCL 700.7607, expired on January 11, 2015.
Petitioner argues that property could not be distributed from the trust until after January 11,
2015. Petitioner contends that, contrary to the tribunal’s conclusion, there was no “transfer of
ownership” under MCL 211.27a(6)(e) when Robert died because that statute specifically refers

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to a “change” that adds or substitutes parties, and no such “change” to the trust occurred here.
Petitioner further notes that the trust specifically states that the trustee was to determine whether
to sell the real estate and distribute the proceeds to Robert’s children or whether to convey the
real estate to the children. Petitioner indicates that the trustee had not yet done so and could not
have done so before January 2015 because, among other reasons, the trustee was waiting for the
four-month period to expire and was also waiting to assess the health of his ill sister.

        Petitioner’s second appellate argument is that, even assuming, arguendo, that Robert’s
death in 2014 somehow resulted in an “automatic transfer of ownership,” an exemption from
uncapping remained in place under MCL 211.27a(7)(t)—formerly MCL 211.27a(7)(s)—which
states:

               Transfer of ownership does not include the following:

                                                ***

               Beginning December 31, 2013 through December 30, 2014, a transfer of
       residential real property if the transferee is related to the transferor by blood or
       affinity to the first degree and the use of the residential real property does not
       change following the transfer.

       We will first address the second argument raised by petitioner. At the time of Robert’s
death, MCL 211.27a(7)(s) stated that “transfer of ownership” did not include:

               Beginning December 31, 2013, a transfer of residential real property if the
       transferee is related to the transferor by blood or affinity to the first degree and the
       use of the residential real property does not change following the transfer. As
       used in this subdivision, “residential real property” means real property classified
       as residential real property under section 34c.

2014 PA 310, effective October 10, 2014, changed the wording to that of the current statute,
adding the end date of “December 30, 2014,” and adding a section, currently labeled MCL
211.27a(7)(u), also exempting, beginning December 31, 2014, a transfer of residential real
property “if the transferee is the transferor’s or the transferor’s spouse’s mother, father, brother,
sister, son, daughter, adopted son, adopted daughter, grandson, or granddaughter and the
residential real property is not used for any commercial purpose following the conveyance.”4
2014 PA 310, as noted earlier, also amended MCL 211.27a(6)(e) by adding subsection MCL
211.27a(6)(e)(ii), which states, in pertinent part, that a transfer of ownership of property includes
a change in the sole present beneficiary or beneficiaries of a trust, except:

              Beginning December 31, 2014, for residential real property, a change that
       adds or substitutes the settlor’s or the settlor’s spouse’s mother, father, brother,


4
  2014 PA 310 also added a section, with similar wording, concerning “a conveyance from a trust
. . . .” See current MCL 211.27a(7)(v) (emphasis added).


                                                 -4-
       sister, son, daughter, adopted son, adopted daughter, grandson, or granddaughter
       and the residential real property is not used for any commercial purpose following
       the conveyance.

We are to avoid interpretations of statutes that would lead to surplusage. People v Juntikka, 310
Mich App 306, 309; 871 NW2d 555 (2015). In 2014 PA 310, the Legislature was clearly
viewing the “transfer of residential real property” provision as something separate from a trust
beneficiary change related to real property, because otherwise there would have been no need to
enact both MCL 211.27a(6)(e)(ii) and what is currently MCL 211.27a(7)(u).

        At the time of Robert’s death, the statues at issue, read together, provided (as applied to
this appeal) that a transfer of ownership included a change in the sole beneficiaries of a trust but,
commencing December 31, 2013, did not include a transfer of residential real property from a
parent to a child. That a change in the sole beneficiaries of a trust and a transfer of residential
real property were intended by the Legislature to be two separate concepts is evident not only
from the wording of the statutes at the time (“[a] change in the sole present beneficiary or
beneficiaries of a trust” versus “a transfer of residential real property”) but also from the
subsequent enactment of 2014 PA 310. Accordingly, we cannot find that the tribunal erred in
finding that two different types of conveyances were at issue and that MCL 211.27a(7) does not
entitle petitioner to the relief it sought.

         The remaining question, then, is whether Robert’s death effected a “change in the sole
present beneficiary or beneficiaries of a trust” such that a transfer of ownership occurred. The
trust indicates at Article 3 that Robert Fifarek and Dorothy Fifarek had the right to withdraw any
asset from the trust and indicates at Article 5 that “[a]ny income generated by the Trust assets
shall be distributed to us no less than quarter-annually . . . .” Clearly, Robert and Dorothy were
the initial beneficiaries of the trust. The parties do not dispute that Robert was “the survivor” as
set forth in Article 6. Article 6 states that, “[a]s soon as practicable following the death of the
survivor of us, the Trust assets shall be distributed outright to our children . . . .” Article 6
further states, “Neither the principal nor the income of the Trust shall be liable for the debts of a
beneficiary, and no beneficiary shall have the power to sell, assign, transfer, encumber,
hypothecate, dispose of, or anticipate his or her interest in the Trust assets.” It is manifestly
evident that upon Robert’s death, the children became the beneficiaries of the trust, given that
Dorothy and Robert were no longer alive. As such, a “change” in beneficiaries did indeed occur.
As noted, MCL 211.27a(6) states that a transfer of ownership includes the conveyance of “the
beneficial use of the property . . . .” The children obtained this “beneficial use” after the death of
Robert. As noted by respondent, it is clear that if Robert had died on December 31, 2014, or
afterwards, then uncapping would have been disallowed under MCL 211.27a(6), but
unfortunately for petitioner, the Legislature saw fit to effectuate its new policy related to trusts
on that date—December 31, 2014—and not earlier. The tribunal did not commit an error of law.




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Affirmed.



                  /s/ Peter D. O'Connell
                  /s/ Patrick M. Meter




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