K. Hovnanian Homes of Maryland, LLC, et al. v. Mayor and City Council of Havre de Grace, et al.
No. 22
IN THE COURT OF APPEALS OF MARYLAND
January 29, 2021
September Term, 2020
Opinion by Booth, J.
K. Hovnanian Homes of Maryland, LLC, et al. v. Mayor and City Council of Havre de Grace, et al., No. 22, September Term, 2020, Opinion by Booth, J.
MUNICIPAL CONTRACTS - ESTABLISHMENT OF FEES - MUNICIPAL HOME RULE AMENDMENT - ACTIONS INCONSISTENT WITH DELEGATION OF EXPRESS POWERS UNENFORCEABLE - K. Hovnanian Homes of Maryland, LLC sought to enforce an agreement against the Mayor and City Council of Havre de Grace, which was approved by the City Council by a verbal motion at a public meeting, but was not executed by the Mayor. The Court held that the agreement is not a valid and enforceable contract against the City. Stripped of its labels, the governmental action that is the subject of the agreement is the imposition and collection of a fee on municipal property owners. Under the Municipal Home Rule Amendment of the Maryland Constitution, Article XI-E, as well as the express powers delegated to municipalities by the General Assembly, and the applicable provisions of the Havre de Grace Charter, the imposition of a fee by the City must be undertaken by the municipal legislative body known as the “Mayor and City Council of Havre de Grace” and pursuant to a duly enacted ordinance. Because no such ordinance was enacted, the agreement is ultra vires and unenforceable.
Barbera, C.J.
McDonald
Watts
Hotten
Getty
Booth
Biran,
JJ.
Opinion by Booth, J.
Filed: January 29, 2021
After the City Council approved the Recoupment Agreement by verbal motion and authorized the Mayor to sign the Agreement, the owners of Parcels 2 and 3 objected to the Agreement. Hovnanian and the property owners were not able to agree on a reimbursement amount, and the Mayor refused to sign the Recoupment Agreement. In the meantime, development activities commenced on Parcel 3, resulting in the issuance of 33 building permits. The City did not collect any recoupment fees sought by Hovnanian under the Recoupment Agreement.
Hovnanian filed a complaint against the Mayor and City Council of Havre de Grace in the Circuit Court for Harford County.1
The case was decided on cross-motions for summary judgment, with the parties focusing their legal arguments on the applicable provisions of the Havre de Grace Charter (“Charter“). After the first summary judgment hearing, the circuit court determined that under the Charter, the Agreement was not valid and enforceable and entered judgment in favor of the Mayor and City Council. Hovnanian appealed. The Court of Special Appeals reversed the circuit court‘s judgment and remanded for further proceedings. Once again, the parties filed cross-motions for summary judgment. This time, the circuit court declared that under the applicable provisions of the Charter, the Agreement was, in fact, a binding and enforceable contract. The circuit court issued a writ of mandamus directing the Mayor to record the Agreement and entered judgment against the Mayor and City Council and in Hovnanian‘s favor, in the amount of $144,822.32. The City appealed to the Court of Special Appeals. In a reported opinion, the Court of Special Appeals reversed the judgment of the circuit court. Mayor and City Council of Havre de Grace v. K. Hovnanian Homes of Maryland, LLC, 246 Md. App. 144, 159 (2020). The Court of Special Appeals considered the Recoupment Agreement, and the City‘s authority to execute it, within the context of the Charter. Id. at 149–56. Based upon its reading of the Charter, the intermediate appellate court concluded that the structure of the Havre de Grace government constituted “a strong mayor system[.]” Id. at 150. The Court of Special Appeals reasoned that “[e]ntering into contracts is an executive branch function.” Id. at 154. Accordingly, the intermediate appellate court held that the Mayor, as the executive branch official, or his subordinate, must enter into the Recoupment Agreement. Id. at 158–59. Because the Mayor did not execute the Agreement, the Court of Special Appeals held that the City could not be bound. Id. at 159.
Hovnanian petitioned for writ of certiorari, and we granted its petition to answer the following question, which we have rephrased:2
Did the City Council‘s verbal motion at a public meeting to approve the Recoupment Agreement create a binding and enforceable agreement?
For the reasons set forth below, we answer the question in the negative. We affirm the judgment of the Court of Special
As set forth more fully herein, the applicable provisions of the Charter must be read within the context of
I
Factual Background
A. Annexation and Development of Parcel 1/Phase 1
In 2004, the Mayor and City Council of Havre de Grace adopted Annexation Resolution 244, which annexed approximately 150 acres of undeveloped property to the City. Greenway Investments, LLC (sometimes referred to as “Greenway Investments“) owned 133 acres of the property that was the subject of the annexation (the “Greenway Property” or “Property“). The Annexation Resolution contemplated that up to 690 residential dwelling units would be constructed on the Greenway Property. The Annexation Resolution set forth the general terms and conditions for constructing public improvements that would be required to serve the new development. Specifically, the owners of the Greenway Property would be responsible for all on-site public improvements to serve the Property, including water and sewer lines and public roads. After the improvements were constructed at the owner‘s expense, the Resolution contemplated that the water and sewer facilities and roads would be dedicated and accepted by the City, thereby becoming part of the public infrastructure.
Following annexation, Greenway Investments and Hovnanian worked with the City on a development plan for the Greenway Property consistent with the terms of the Annexation Resolution. In October 2005, the Greenway Property was subdivided into three separate parcels, identified as Parcels 1, 2, and 3. At the time of subdivision, a site plan was approved by the City‘s director of public works, which reflected the intended development of the three separate parcels in three corresponding phases. Specifically, the site plan contemplated that Parcel 1 would be developed as “Phase 1” (consisting of 276 residential units), Parcel 2 would be developed as “Phase 2” (consisting of 166 residential units), and Parcel 3 would be developed as “Phase 3” (consisting of 248 residential units).
In December 2005, the Mayor and City Council, Greenway Investments, and Hovnanian entered into a public works agreement for the construction of Phase 1 (“2005 PWA“). Although the recitals in the 2005 PWA referenced the contemplated development of the three distinct phases, the agreement only addressed the construction obligations associated with Phase 1, as well as the construction of some off-site improvements consisting of road and bridge improvements. Consistent with the Annexation Resolution, the 2005 PWA contemplated that all public facilities3 would
B. Parcels 2 and 3 Conveyed into Separate Ownership
While Greenway Investments pursued subdivision and site plan approval, the company underwent a change in ownership. In February 2005, the four individual members of Greenway Investments entered into a contract with Hovnanian to purchase all the membership interests in Greenway Investments. By January 2006, Greenway Investments was owned by Acacia Credit Fund 10-A, LLC (“Acacia“), an entity affiliated with Hovnanian. The terms and details of the acquisition are not relevant to the issue presented in this case. For our purposes, it is sufficient to note that, by the completion of the various transactions, Hovnanian had acquired title to Parcel 1, and Acacia owned Parcels 2 and 3. The purchase of Parcels 2 and 3 was financed by the former owners of
Greenway Investments, and was evidenced by a promissory note and secured by an indemnity deed of trust which created a lien on Parcels 2 and 3.
In 2007, after Acacia defaulted on the promissory note, the lenders (and former owners of Greenway Investments) commenced foreclosure proceedings on Parcels 2 and 3. After a judicial sale, title to Parcels 2 and 3 was transferred back to the original owners of Greenway Investments, and neither Hovnanian nor Acacia had any further ownership interest in those parcels.
C. Efforts to Develop Parcels 2 and 3
By 2009, after acquiring Parcels 2 and 3 through the foreclosure sale, the owners of Parcels 2 and 3 (the “Owners“)4 worked with the City to re-start development efforts on those parcels. To that end, the Owners and the Mayor and City Council of Havre de Grace entered into a public works agreement in December 2009 (“2009 PWA“) for the construction of 414 dwelling units on Parcels 2 and 3. Pursuant to the terms of the 2009 PWA, the Owners contractually agreed to reimburse the City for certain limited infrastructure expenses related to water improvements and two roads. The Owners also agreed to reimburse Hovnanian
for the actual cost incurred for the installation and materials necessary to construct those portions of Martha Lewis Boulevard and Mohegan Drive which will solely service Phases 2 and 3 of Greenway Farm and for the actual cost incurred for the installation and materials necessary to construct any water and sewer lines constructed by [Hovnanian] in Phase 1 which will solely service Phases 2 and 3.
Although the 2009 PWA contemplated that the Owners would reimburse Hovnanian for certain expenses related to road, water, and sewer improvements that had been constructed as part of Phase 1 and that “solely service[d]” Phases 2 and 3, the agreement did not provide for any specific
After the execution of the 2009 PWA, the Owners and Hovnanian were not able to reach an agreement on a specific reimbursement amount to be paid by the Owners for their pro rata share of Hovnanian‘s Phase 1 infrastructure costs. The Owners and Hovnanian sent the City various correspondence and memoranda setting forth their respective positions. The Owners disputed the recoupment amount sought by Hovnanian, believing it to be excessive and inequitable, given Hovnanian‘s default on its loan obligations, and subsequent foreclosure which the Owners alleged resulted in a monetary loss in excess of $6 million, as well as lapsed permits, which the Owners contended forced them to incur additional expenses.5
Given the Owners’ and Hovnanian‘s inability to agree on an amount, in June 2010, the City Attorney wrote to counsel for Hovnanian advising that, in light of the significant
difference between the positions asserted by Hovnanian and the Owners, “I strongly suggest that if there is going to be a negotiation of the amount considered by [Hovnanian], as opposed to an amount set by the City, that those discussions take place between [Hovnanian] and [the Owners].”
D. The 2010 Recoupment Agreement Presented by Hovnanian
Undeterred by the lack of an agreement with the Owners, in September 2010, Hovnanian prepared and presented to the Mayor and City Council an agreement titled “Infrastructure Capital Projects Cost Recoupment Agreement[.]” The parties to the Recoupment Agreement were the Mayor and City Council, Hovnanian, and Greenway Investments. Conspicuously absent from this “agreement” were the Owners, whose property was the subject of the agreement.
The recitals in the Recoupment Agreement state that the Owners of Phase 2 and Phase 3 are benefitted by the improvements previously constructed by Hovnanian and that the parties “recognize and acknowledge that it would be inequitable to impose all such costs on [Hovnanian], resulting in a windfall financial advantage for the owner(s) of Phases 2 and 3, unless provisions are made for a pro-rata recovery of such costs by [Hovnanian].” The Agreement recites that the “Mayor and City Council of Havre de Grace have determined that this Agreement is necessary to provide for the general welfare and safety of City residents” and that the agreement is further “required to protect the equitable and legal property rights of [Hovnanian.]”
Under the terms of the Recoupment Agreement, the total amount of Phase 1 infrastructure determined to benefit Phases 2 and 3 is $1,368,094.47. In order to reimburse Hovnanian for this amount, the Recoupment Agreement provides that the City will impose an infrastructure “fee” of $3,304.57 for each residential unit for which a building permit is issued on Parcel 2 or 3 (defined under the Agreement as
E. The October 4, 2010 Verbal Approval by the City Council
After Hovnanian presented the Recoupment Agreement to the City, the City Council voted 6-0 to approve the agreement at a public meeting on October 4, 2010. The City Council‘s approval was made by a verbal motion and was not accompanied by a written ordinance or resolution.6
Soon after the City Council voted on the Recoupment Agreement, it became clear to the City that the Owners—who were not parties to the “agreement” and whose property alone would be subject to “fees” in excess of $1.3 million—did not agree with the terms. On October 15, 2010, counsel for the Owners emailed the City Attorney and city officials “imploring the Mayor to veto the above resolution for many reasons too numerous to put in an email” and requesting “an audience with the Mayor for the purpose of reviewing this
issue.” Counsel for the Owners stated that he viewed the Agreement as “a tax used to collect a private (and illegitimate) claim” that would create a “windfall gain” to Hovnanian, and was approved “without due process, either procedural or substantive.” Counsel for the Owners stated that the “enactment of this ordinance7 will, without question, result in needless litigation.” In November 2010, the Owners’ counsel sent the Mayor and City Council a 16-page memorandum outlining the factual and legal reasons why the Owners contended that the City Council‘s approval of the Recoupment Agreement was inequitable and illegal. The Owners argued, inter alia, that the Agreement constituted the imposition of a tax by a governmental authority for the benefit of a private entity, which the City had no authority to approve under its express ordinance-making powers. The Owners pointed out that they did not agree to pay the fee, and that the City had not incurred any expenses in connection with construction of the infrastructure—which had been wholly constructed and funded by a private developer. According to the Owners, they had “received no notice and [did] not [have] an opportunity to challenge the proposed legislation.” The Owners urged the Mayor and City Council to “not implement the Resolution respecting recoupment passed October 4, 2010 and recall the measure.”
After the Owners objected to its terms, the Mayor and City Council did not undertake any efforts to execute the Recoupment Agreement. Between December 2010 and May 2011, the City, the Owners, and Hovnanian had discussions concerning Hovnanian‘s recoupment terms. Separately, the Owners presented the City with a revised
site plan for Phases 2 and 3 that would reduce or eliminate the need for
By May 2011, Hovnanian and the Owners were still at an impasse as far as the Owners’ willingness to pay Hovnanian a pro rata share of the Phase 1 infrastructure costs. With no meeting of the minds between the Owners and Hovnanian, Hovnanian sought to enforce the terms of the Recoupment Agreement against the City notwithstanding the fact that the Mayor had not executed it. Specifically, counsel for Hovnanian advised the City Attorney that the City was “in actual or anticipatory breach of the [Recoupment Agreement],” and that, despite the City Council‘s approval, “the Mayor has not signed the Agreement, thereby preventing its recordation.” Counsel for Hovnanian stated that, unless the Recoupment Agreement was signed and returned by May 31, 2011, it would commence litigation against the City. In May 2011, the City Attorney responded and mentioned that the City Council was “contemplating the reconsideration of the resolution that allowed for a recoupment agreement to be presented to the Mayor in the first place.” The City Attorney pointed out that Hovnanian had not presented deeds for the dedication of the Phase 1 infrastructure to the City, that the Mayor had not received confirmation from counsel that “the conditions for signature” have been met, and that “filing of suit . . . would negatively [affect] the efforts that have gotten us to this point.” In June 2011, counsel for Hovnanian advised that Hovnanian was prepared to dedicate the improvements to the City and argued that the Agreement could not “be unilaterally rescinded” by the City Council.
Despite Hovnanian‘s insistence that the City had entered into a binding agreement which could not be rescinded, the Recoupment Agreement was never signed by the Mayor, and development commenced on Parcel 3.8 The City issued 33 building permits on a portion of Parcel 3 but did not collect any recoupment fees. If the City had collected the fees contemplated by the Recoupment Agreement presented to and verbally approved by the City Council in October 2010, the total amount collected for those 33 lots would have been $109,050.81.
II
Procedural History
Hovnanian filed a complaint against the City in November 2012. Count one of the complaint sought a declaratory judgment, and requested that the circuit court declare that the Recoupment Agreement is a valid, binding, and enforceable contract, that the Mayor‘s execution of the Recoupment Agreement is a ministerial duty that the Mayor is required to perform, and that the City is required to record the fully executed Recoupment Agreement in the Land Records for Harford County. The second count of the complaint sought a writ of mandamus to compel the execution and recordation of the Recoupment Agreement. Count three of the complaint alleged breach of contract, requesting damages in the amount of $1,368,094.47 “for the actual and anticipated breach of the Recoupment Agreement.”
Hovnanian and the Mayor and City Council filed cross-motions for summary judgment. After a hearing, the circuit court denied Hovnanian‘s motion for summary
In the parties’ first trip to the appellate courts, the Court of Special Appeals, in an unreported opinion, vacated the circuit court judgment and remanded the case for further proceedings. K. Hovnanian Homes of Maryland, LLC v. Mayor and City Council of Havre de Grace, No. 1214, 2017 WL 5054229 (Md. Ct. Spec. App. Nov. 3, 2017). The intermediate appellate court determined that neither of the Charter sections relied upon by the circuit court—§§ 19 and 34—expressly required the Mayor‘s signature. Id. at *9. The Court of Special Appeals declined to consider any other grounds and remanded the matter for further proceedings. Id. at *11.
After the case was remanded, Hovnanian filed a first amended complaint containing the same counts that were pleaded in the original complaint. In the first amended complaint, Hovnanian contended that, if the circuit court granted the declaratory and mandamus relief and required the execution and recordation of the Recoupment Agreement, it was entitled to the fees that were not collected for the initial 33 building permits that had been issued in Phase 3 after October 2010, totaling $109,050.81, plus per diem interest from August 20, 2012, at a statutory rate of 6%.
Once again, the parties filed cross-motions for summary judgment. This time, in a complete reversal of its previous interpretation of the Charter, the circuit court entered summary judgment in favor of Hovnanian and declared that the Recoupment Agreement was a binding and enforceable contract as of October 4, 2010 when the City Council unanimously approved the Agreement by verbal motion. The circuit court declared that the execution of the Agreement by the Mayor was a ministerial duty and that the Mayor‘s refusal to sign constituted a breach of the Agreement by the Mayor and City Council. The circuit court issued a writ of mandamus directing the Mayor to execute the Agreement and record it in the land records. The circuit court entered judgment in favor of Hovnanian and against the Mayor and City Council in the amount of $144,822.32, representing uncollected recoupment fees on the 33 building permits that had been issued, plus per diem interest, accounting from August 29, 2012 (the date that the last of the 33 permits was issued), through the date of judgment. The Mayor and City Council appealed.
In a reported opinion, the Court of Special Appeals reversed the judgment of the circuit court. Hovnanian, 246 Md. App. at 159. The Court of Special Appeals considered the Recoupment Agreement, and the City‘s authority to execute it, within the context of the Charter. Id. at 149–56. Based upon its reading of the Charter, the intermediate appellate court concluded that the
Hovnanian filed a petition for writ of certiorari, which we granted to determine whether the Recoupment Agreement is a valid and enforceable contract against the Mayor and City Council. As discussed below, although we land in the same place as the Court of Special Appeals, we follow a different path to get there.
III
Discussion
A. Standard of Review
The circuit court issued its decision after the parties filed cross-motions for summary judgment. A case may be resolved on summary judgment when there is no dispute of material fact and the moving party is entitled to judgment as a matter of law.
B. Parties’ Contentions10
Hovnanian contends that the City Council‘s verbal motion to approve the Recoupment Agreement on October 4, 2010 created a binding and enforceable agreement against the City. To support its position, Hovnanian directs us to the various sections of the Charter, including § 33, which gives the City Council the broad “power to pass all ordinances and resolutions,” as well as § 34, which sets forth the specific authority to “pass and create resolutions and ordinances” related to “property, property acquisition, . . . public utilities, . . . sewer and sewer service, . . . streets or public ways, . . . [and] water service.” Hovnanian asserts that the City Council had the authority to adopt the Recoupment Agreement by verbal motion, and that the City Council was the governing body with the authority to enter into such an agreement. According to Hovnanian, to the extent that the Charter does not provide a clear answer as far as how municipal contracts are made, this Court should apply common law principles to “fill th[e] gap[.]” Hovnanian urges the Court to fill these gaps by looking to contract principles set forth in 10 McQuillin, The Law of
Municipal Corporations (3d. ed. rev. 2006) (“McQuillin“). Hovnanian points out that under McQuillin, “[g]enerally, the power to
The Mayor and City Council direct us to the same provisions of the Charter—§§ 33 and 34—and assert that under those provisions, the City Council is not given any general power to enter into any contracts, nor is it given any executive power. The City argues that the Court of Special Appeals correctly determined that the execution of contracts is an executive function that lies within the authority of the Mayor. Alternatively, in the event that this Court determines that the City Council was required to approve the Agreement, the City points out that the City Council rescinded its approval by verbal motion in
September 2014. The City also asserts that, at a minimum, the Mayor and City Council are required to act in concert with one another as the City‘s governing body.C. Analysis—The Importance of Starting in the Right Place
As is often the case with any complex legal issue, if one starts the inquiry in the wrong place, it is easy, as they say, to “miss the forest for the trees.”11 In this case, the parties and the lower courts started their analysis of the City‘s authority to enter into the Recoupment Agreement from the forest floor, examining the municipal charter as if it were a tree, attempting to discern the general municipal authority to execute contracts by studying its branches. As our cases illustrate, the correct starting point for our inquiry into municipal authority starts high above the forest canopy—with an examination of the Maryland Constitution and the express powers delegated by the General Assembly to Maryland municipalities. It is necessary to start any analysis from these sources of authority because any interpretation of the Charter, and application of secondary sources as gap fillers, as suggested by Hovnanian, must be consistent with the Maryland Constitution and the express powers delegated to municipalities by the General Assembly.
Municipalities derive their authority from the Municipal Home Rule Amendment,
A municipal corporation . . . can exercise the following powers, and no others: First, those granted in express words: second, those necessarily or fairly implied in or incident to the powers expressly granted; third, those essential to the accomplishment of the declared objects and purposes of the corporation,—not simply convenient, but indispensable.
See Hardy, 293 Md. at 396–97; Birge, 274 Md. at 639–40; City of New Carrollton v. Belsinger Signs, Inc., 266 Md. 229, 237 (1972); McRobie, 260 Md. at 466. The Home Rule Amendment,
In 2013,
The express ordinance-making powers formerly described in
- assure the good government of the municipality;
- protect and preserve the municipality‘s rights, property, and privileges;
- preserve peace and good order;
- secure persons and property from danger and destruction; and
- protect the health, comfort, and convenience of the residents of the municipality.”
(Emphasis added). In addition to the legislative grant of general ordinance-making powers, the General Assembly has granted express ordinance-making authority to municipal legislative bodies for specific types of legislative enactments outlined in
To summarize these general principles, the applicable provisions of a municipal charter must be read within the context of any limitations prescribed by the Municipal Home Rule Amendment, as well as any other specific delegations of authority provided by the General Assembly. Where the General Assembly has delegated authority to the governing body of a municipality and has expressly stated that the authority must be exercised by ordinance, the text of the municipal charter must be construed in a manner consistent with the express provisions of state law.
2. Whether the Recoupment Agreement is an Enforceable Contract Against the City
With these principles in mind, we return to the issue at hand—whether the Recoupment Agreement is an enforceable agreement against the City. To answer this question, we must ascertain whether the municipality had the legal authority to enter into such an agreement and whether the municipality exercised its authority in accordance with the law. As reflected in our analysis in similar cases, discussed in section III, C.2.d infra, we undertake our inquiry as follows. First, we consider the nature or type of governmental action that is at the heart of the dispute. As part of this inquiry, we strip away any forms or labels attached to the action—such as “contract” or “agreement” or “resolution“—and look at the substance of the action being undertaken by the municipality. Once we identify the precise nature of the municipal action in question, the second part of our analysis requires that we determine whether the municipality has the legal authority to undertake the action, and if so, whether the contemplated action was correctly undertaken consistent with the grant of authority.
a. The Nature of the Governmental Action—The Imposition and Collection of a Fee
As described above, Hovnanian seeks to recover from adjacent property owners, a portion of the infrastructure expenses that it incurred in connection with its development activities on Parcel 1. Unable to reach an agreement with the Owners, Hovnanian enlisted the City of Havre de Grace to use its governmental authority to levy fees on the adjacent properties, which would in turn, be remitted to Hovnanian. Hovnanian proposes that the City impose and collect a “recoupment fee” in the amount of $3,304.57 for each residential dwelling unit constructed on Parcels 2 and 3. The Recoupment Agreement provides
b. The Imposition of Fees by Municipal Governments—Constitutional and Statutory Restrictions
As noted above, the municipal power implicated in this case is the power to levy a fee on a new development. There are both constitutional and statutory limitations on a municipality‘s ability to levy taxes and fees.
No . . . municipal corporation shall levy any type of tax, license fee, franchise tax or fee which was not in effect in such municipal corporation on January 1, 1954, unless it shall receive the express authorization of the General Assembly for such purpose, by a general law which in its terms and its effect applies alike to all municipal corporations in one or more of the classes provided for in Section 2 of this Article.
(Emphasis added). As we have explained in other cases, “a municipality may levy only such type of tax, license fee, franchise tax or fee that is specifically authorized by the General Assembly.” Twigg, 396 Md. at 544 (quoting Tidewater/Havre de Grace, Inc. v. Mayor and City Council of Havre de Grace, 337 Md. 338, 343 (1995)); see also Campbell v. Mayor & Aldermen of Annapolis, 289 Md. 300, 305 (1981). In Campbell, we explained that, by using the words “tax” and “license fee” individually, and further use of “franchise tax or fee,” the constitutional language reflects “an intention to encompass both revenue-raising and regulatory levies.” 289 Md. at 305.
As part of its express ordinance-making powers, the General Assembly has delegated to municipal legislative bodies the authority to “establish and collect reasonable fees and charges: (i) for franchises, licenses, or permits granted by the municipality; or (ii) associated with the exercise of a governmental or proprietary function exercised by a municipality.”
c. The Provisions of the Charter Must be Read Consistently with the Express Authority Granted Under State Law
Against the parameters of
The Charter gives the Mayor and City Council the specific authority to levy and collect “taxes in the form of special assessments upon property” to pay for public improvements such as water, sewer, stormwater, and sidewalks that benefit a certain area. Charter, § 35. Again, reading those provisions through the prism of the express powers conferred by the General Assembly, these powers must be exercised by the municipal legislative body pursuant to an ordinance.
With respect to water and sewer, Charter, § 70 gives the Mayor and City Council the following specific authority:
The Mayor and City Council may enact Ordinances providing for the regulations and control of waters and sewers. In addition, the Mayor and City Council may enter into contracts for the purpose of providing water and sewer services to new service areas.17 Such contracts
may provide for advance payment of capital cost recovery charges, the construction of capital improvements to water and sewer facilities, and for crediting such advance payments and the value of such capital improvements to capital cost recovery charges which become payable in the future.
(Emphasis added). And finally, Charter, § 71 provides that
The City, by ordinance, may provide for the collection and disbursement of capital cost recovery charges for the purpose of recovering the capital cost of facilities needed to provide water and sewer service. Such charges may be collected on either a periodic basis or on the basis of a one time charge paid immediately prior to connection, or both.
(Emphasis added). Reading the above-referenced sections of the Charter within the larger context of the Maryland Constitution and the express ordinance-making powers conferred by the General Assembly, it is clear that the Mayor and City Council of Havre de Grace is the municipal legislative body that must establish fees and charges, and that the legislative mode for establishing such charges is pursuant to a duly enacted ordinance. These powers cannot be exercised by the Mayor, nor can they be exercised by a verbal resolution of the City Council, as the exercise of the power in either manner would be inconsistent with the statutory requirement that the establishment and collection of reasonable fees be undertaken by the legislative body by ordinance.
d. Municipal Action Taken in a Manner Inconsistent with the General Assembly‘s Delegation of Express Powers is Ultra Vires
Although the specific contract in this case has not been considered by this Court, we have analyzed other contracts that were sought to be enforced against municipal governments in a similar fashion. See Inlet Assocs., 313 Md. 413; Twigg, 396 Md. 527. As these cases demonstrate, where a party is seeking to enforce a contract against a municipality in which the substance of the contract was required to be adopted by an ordinance, and no such ordinance was enacted, the contract is ultra vires and unenforceable.
In Inlet Associates, a hotel and marina developer requested that the Ocean City Council enter into an agreement that would, in part, permit the city to convey to the developer a portion of a public right-of-way and public riparian rights in exchange for the developer providing enhanced public amenities. 313 Md. at 419. After a duly advertised public hearing, the city council verbally voted to approve the conveyance at a meeting. Id. at 419-20. Following the verbal resolution, the developer proceeded to purchase property and spent over one million dollars on plans to develop the project. Id. at 420. A year later, the developer requested a change in the construction plans (to construct a restaurant instead of some shops). Id. at 421. A question arose whether the initial approval was required to be undertaken by an ordinance, as opposed to a simple resolution, because the matter involved the disposition of public property. Id. The city attorney advised
Like Hovnanian in this case, the developer in Inlet Associates argued that an ordinance was not required for the agreement to be valid. Id. The developer asserted that the Ocean City Charter provisions were ambiguous as to whether an ordinance was required and contended that, because the City had never previously required an ordinance for the conveyance of property, it was equitably estopped from taking the position that an ordinance was required for the transaction in question. Id. at 424–25. We rejected the developer‘s argument and concluded that an ordinance was, in fact, required, and that the City Council‘s action to approve the conveyance by verbal resolution was ultra vires and invalid. Id. at 434.
We started our analysis with the Municipal Home Rule Amendment,
We examined the Ocean City Charter within the context of the express powers articulated in former
By contrast, we noted that “[a]n ordinance is distinctly a legislative act; it prescribes ‘some permanent rule of conduct or government, to continue in force until the ordinance is repealed.‘” Id. (quoting McQuillin, § 15.02). We observed that “[m]unicipal charters generally ‘contemplate that all legislation creating liability or affecting in any important or material manner the people of the municipality
In examining the applicable provisions of the Ocean City Charter and the express powers set forth under
Examining the substance of the transactions contemplated under the proposed agreement, we determined that the agreement between the developer and the city “encompassed more than merely a street closing and assignment of municipal riparian rights.” Id. at 431–32. We concluded that the proposed conveyances provided a “quid pro quo” for the developer‘s willingness to provide public amenities as part of a comprehensive redevelopment of downtown Ocean City. Id. at 432. We observed that, if implemented, the redevelopment plan “involved more on the part of the Council than the mere ministerial or administrative execution of an existing law.” Id. Accordingly, we concluded that “[l]egislative action by the Council was required consistent with the requirements of
Hovnanian argues that our analysis in Inlet Associates supports the conclusion that the City Council had the authority to approve the agreement by resolution. According to Hovnanian, the Recoupment Agreement falls within the types of governmental action that can be adopted by resolution because the subject matter does not involve a matter of “general application.” We reject Hovnanian‘s argument for two reasons. First and foremost, we do not apply common law definitions of “resolution” and “ordinance” in a manner inconsistent with the express powers contained in
Hovnanian‘s position is also inconsistent with our analysis in Twigg, 396 Md. 527. In that case, a property owner filed an action for mandamus and specific performance against the City of Frederick seeking to enforce two agreements that had been executed on two separate occasions by two different mayors of the City of Frederick, in which the city purported to waive impact fees and create a special tax district in exchange for the property owner‘s agreement to dedicate certain rights-of-way to the city. Twigg, 396 Md. at 531-32; 535-36. The agreements had been signed by the respective mayors in office at the time of the agreements’ execution. Id. at 533. Years later, after a successor owner sought to enforce the agreements in connection with development of the property, and the city attempted to collect the impact fees that it ordinarily charged prior to the issuance of the building permit, the developer sued to enforce the agreements which waived the fees. Id. at 535. The circuit court entered summary judgment in favor of the developer, concluding that the city, through its mayors, had entered into “valid and enforceable” agreements with the developer, and that “like any other individual or entity, [it had to] live up to the terms of its agreements.” Id. at 536–37. The city appealed the circuit court‘s decision to the Court of Special Appeals, maintaining that under the express ordinance-making powers enumerated in
Relying solely on the language in the Frederick City Charter, the developer argued that the mayor had the executive power to enter into the agreements, and that as an executive act, no ordinance or legislative act was required in order for the city to enter into the agreements. Id. at 540. We rejected this argument.
Undertaking the same type of analysis outlined in Inlet Associates, we examined the substance of the municipal action in question, looked beyond the label of “contract” or “agreement,” and observed that the “gravamen of this case is whether the two mayors had the requisite authority to create special assessment fees on behalf of the city and to waive impact fees.” Id. at 543 (capitalization omitted). As the starting point for our analysis, we
After pinning down the specific municipal power in question, we noted the limitations imposed on municipal authority to enact taxes and fees as established by the
Despite the mayor‘s lack of authority to establish or waive fees or assessments under the law, the developer, nonetheless, argued that the city was bound by the contract executed by the mayor—an agent acting on the municipality‘s behalf. Id.. We rejected the developer‘s argument as being inconsistent with this Court‘s pronouncements dating back to 1869, and reiterated again in Inlet Associates, 413 Md. at 433–34, that “acts undertaken by an agent of a municipality, including the Mayor, if not properly authorized, are ’ultra vires’ and therefore invalid.” Id. at 548 (citing Horn v. City of Baltimore, 30 Md. 218, 224 (1869)). Accordingly, we held that, because the mayors who signed the respective agreements lacked the “requisite authority to create a special fee or to waive impact fees[,]” which would have required legislative authorization, which was never obtained, the agreements were ultra vires and unenforceable. Id. at 549.
The same principles expressed in Inlet Associates and Twigg apply to the contract sought to be enforced by Hovnanian against the City in this case. Like the contracts in those cases, the fees that Hovnanian seeks to enforce under the Recoupment Agreement were not adopted by ordinance, and as such, the Agreement is ultra vires and unenforceable.
IV
Conclusion
For the reasons set forth above, the Recoupment Agreement is not a valid and enforceable agreement against the Mayor and City Council. Stripped of its labels, the nature of the governmental action that is the subject of the “agreement” is the imposition and collection of fees, which under
JUDGMENT OF THE COURT OF SPECIAL APPEALS AFFIRMED. CASE REMANDED TO THE CIRCUIT COURT FOR HARFORD COUNTY FOR ENTRY OF A DECLARATORY JUDGMENT CONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY PETITIONERS.
Notes
- Did the Court of Special Appeals err by holding that a “strong mayor” city charter abrogates the common law of municipal contracts, which gives a city council power to enter into contracts by motion or resolution without the mayor‘s signature?
- Did the Court of Special Appeals err by holding that under the separation of powers doctrine, a “strong mayor” city charter invalidates a recoupment agreement entered into by a city council without the mayor‘s signature?
In its modern parlance, Merriam-Webster describes the idiom as “to not understand or appreciate a larger situation, problem, etc., because one is considering only a few parts of it.” Miss the forest for the trees, Merriam-Webster, available at https//perma.cc/49D3-YYMU.And as he myght tell vs, that of Poules chyrch we may well se the stones, but we can not se the chyrce. And then we may well tell hym agayne, that he can not se the wood for the trees.
(Cleaned up).This Court often has had occasion to consider the impact of recodifications on the meaning of included statutory provisions vis a vis prior iterations of the relevant statutes. When a substantial part of an Article is revised, a change in the phraseology of a statute as part of a recodification will ordinarily not be deemed to modify the law unless the change is such that the intention of the Legislature to modify the law is unmistakable. Furthermore, recodification of statutes is presumed to be for the purpose of clarity rather than change of meaning and, thus, even a change in the phraseology of a statute by a codification will not ordinarily modify the law unless the change is so radical and material that the intention of the Legislature to modify the law appears unmistakably from the language of the Code.