120 W. FAYETTE STREET, LLLP v. Mayor and City Council of Baltimore

GREENE, Judge. Í20 West Fayette Street LLP, et al. (“120 West Fayette”), seeking a declaratory judgment, filed a complaint in the Circuit Court for Baltimore City against the Mayor and City Council of Baltimore et al. (“the City”). The complaint alleged that the City violated its Charter and laws by entering into an illegal Land Disposition Agreement (“LDA”) with an entity seeking to purchase and develop an area in Baltimore’s west-side, known as the “Superblock.” The City made a motion to dismiss the complaint and the Circuit Court granted that motion. We shall hold that the Circuit Court erred in concluding that 120 West Fayette lacked standing and erred in failing to render a declaratory judgment. We shall also hold that the Circuit Court did not comply with Maryland Rule 2-322 in treating the City’s motion to dismiss as a motion for summary judgment.

The Circuit Court did not provide all parties a reasonable opportunity to present material pertinent to the summary judgment motion. I. In 1999, the Baltimore City Council enacted an urban renewal plan 1 for the westside of downtown Baltimore. The ²⁵⁹ renewal plan, known as the “Market Center Urban Renewal Plan,” has been advertised as Baltimore’s largest urban renewal plan since the plan to revitalize the city’s Inner Harbor. To implement the plan, the Baltimore Board of Estimates (“BOE”) delegated “ministerial and administrative” functions to a nonprofit corporation known as the Baltimore Development Corporation, Inc. (“BDC”).

The City asserts that it instructed the BDC to “work with developers and interested groups regarding the development of the westside, prepare and issue requests for development proposals, arrange and attend meetings between developers and business owners, and coordinate financial assistance.” On October 27, 2003, the BDC issued a Request for Proposals (“RFP”) that invited developers to submit proposals for developing the “Superblock.” The “Superblock” encompasses five blocks and is bound by Fayette Street, Howard Street, Lexington Street, Clay Street, and Park Avenue. The RFP provided for use of an Exclusive Negotiating Privilege (“ENP”) that would aid the City to “[set] out specific requirements and deadlines for fulfilling said requirements of [the] RFP.” Four entities, including Next Generation Chera, LLC (“Next Generation”), responded to the RFP and on June 24, 2005, the BDC offered an ENP to an affiliate of Next Generation, known as Lexington Square Partners, LLC (“Lexington Square”). Ultimately, the City and Lexington Square entered into a LDA, that provided for the sale and subsequent development of the “Superblock.” 120 West Fayette is an entity that pays taxes in Baltimore City. It is located adjacent to the “Superblock.” As a taxpayer and neighboring landowner, 120 West Fayette filed a declaratory judgment action against the City to challenge the ²⁶⁰ validity of the LDA on the basis that it is illegal and ultra vires.

The gist of 120 West Fayette’s complaint was that the City, and its agent, the BDC, unlawfully violated and manipulated the RFP process, in violation of the City’s Charter and laws, to award the LDA to a favored developer. As previously noted, the City made a motion to dismiss 120 West Fayette’s complaint, and the Circuit Court granted the City’s motion. In a “Memorandum and Opinion accompanying its Order Granting [the City’s] Motion to Dismiss (“Memorandum and Opinion”),” the Circuit Court concluded that it was appropriate to dismiss the complaint because, 120 West Fayette “failed to establish standing as a taxpayer plaintiff and failed to establish an actual or potential pecuniary loss, increase of taxes, special damages, the City’s illegal expenditure of public funds or ultra vires acts in the selection of a developer for the Superblock.” The Circuit Court also made the following conclusions based upon the pleadings and facts presented: 1) There is no expenditure of public funds in connection with the development of the Superblock, 2) the Defendant City acted according to the City’s Code in authorizing the BDC to act on its behalf, 3) the Superblock is not a public work subject to the competitive bidding process outlined in the City’s Charter, and 4) the Defendant City did not engage in any illegal or ultra vires acts in the LDA or ENP. 120 West Fayette filed a timely appeal to the Court of Special Appeals, but before that court could consider the case, we issued a writ of certiorari, 120 West Fayette v. Baltimore, 405 Md. 290 , 950 A.2d 828 (2008). 2 For the reasons stated herein, ²⁶¹ we shall reverse the judgment of the Circuit Court for Baltimore City.

II

As a preliminary matter, we shall consider whether the Circuit Court treated the City’s motion to dismiss as a motion for summary judgment. 120 West Fayette contends that the Circuit Court relied on facts outside of the pleadings to arrive at the conclusions set forth in its Memorandum and Opinion accompanying the order granting the City’s motion to dismiss. 120 West Fayette asserts that, in relying on matters outside of the pleadings, the Circuit Court converted the City’s motion to dismiss into a motion for summary judgment. 120 West Fayette further asserts that the court violated Maryland Rule 2-322 because the court failed to provide 120 West Fayette the opportunity it was entitled to under Maryland Rule 2-501. The City counters that all of the Circuit Court’s conclusions were supported by 120 West Fayette’s complaint and attached exhibits. When considering a motion to dismiss, a trial court is required to assume the truth of all of the well-pled facts in the complaint and attached exhibits, and the “reasonable inferences drawn from them, in a light most favorable to the non-moving party.” Converge v. Curran, 383 Md. 462, 475 , 860 A.2d 871, 878 (2004). Maryland Rule 2-322(c) provides in part: If, on a motion to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 2-501, and all parties ²⁶² shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 2-501.

The record reveals that the Circuit Court did rely on matters outside of the pleadings when granting the City’s motion to dismiss. In its Memorandum and Opinion, the Circuit Court concluded that the City had made “no expenditure of public funds in connection with the development of the Superblock.” The Court stated: Upon reviewing the pleadings and facts, this Court finds that the property subject to the LDA is not a public work and was a disposition of property that did not require competitive bidding as a result of the expansion of the project. Competitive bidding is not necessary because there is no expenditure of public funds (See Plaintiffs Affidavit 4B, Paul Rashke), and the Superblock is not a public work that requires competitive bidding. In the above statement, the Circuit Court cites the affidavit of 120 West Fayette’s Attorney, Paul Rashke, to support its conclusion that the City had made no expenditure of public funds.

Mr. Rashke’s affidavit, however, was not a part of the pleadings and yet, was considered by the court when granting the order of dismissal. 3 See Converge, 383 Md. at 475 , 860 A.2d at 879 (noting that “the universe of facts” pertinent to a motion to dismiss “are limited generally to the four corners of the complaint and its incorporated exhibits, if any”); Green v. H & R Block, 355 Md. 488, 501 , 735 A.2d 1039, 1046 (1999) (“The granting of a motion to dismiss ... depends solely on the adequacy of plaintiffs complaint.”); see also Young v. Medlantic Lab., 125 Md.App. 299, 303 , 725 A.2d 572 , 574 ²⁶³ (1999) (“It is clearly inappropriate in the context of a motion to dismiss for the judge to make a finding of fact.”). By relying on material outside of the pleadings when granting the City’s motion to dismiss, the Circuit Court, in effect, converted the motion to dismiss into a motion for summary judgment. See Converge, 383 Md. at 476 , 860 A.2d at 879 (“Because the Circuit Court ... did not state, in its order of dismissal or otherwise, that, in granting the [Defendant’s] motion to dismiss, it did not consider the factual allegations and exhibits beyond those in [Plaintiffs] complaint, the default provision established by the pertinent Rules and our cases interpreting them dictate that we review the action as the grant of summary judgment.”); Dual v. Lockheed Martin, 383 Md. 151, 161 , 857 A.2d 1095, 1100 (2004) (holding that a defendant’s motion to dismiss amounted to a motion for summary judgment when the record revealed that the trial court “considered factual matters, placed before it by the parties, beyond those alleged in the complaint or amended complaint”). Although such conversion is permissible under Maryland Rule 2-322, the court failed to abide by that Rule’s requirement that the court provide all parties “reasonable opportunity to present all material made pertinent” to a motion for summary judgment.

See Antigua v. Melba Investors, 307 Md. 700, 719 , 517 A.2d 75, 85 (1986) (noting that when a court considers matters outside of the pleadings and thus converts a motion to dismiss into a motion for summary judgment, the court must “give [plaintiffs a reasonable opportunity to present, in a form suitable for consideration on summary judgment, additional pertinent material”) (emphasis added). 120 West Fayette maintains that the facts necessary to oppose the City’s motion were unavailable absent the opportunity to engage in discovery, largely due to the nonpublic procedures engaged in by the City and the BDC. 4 120 West Fayette urges that in order to present additional perti ²⁶⁴ nent material below, it needed, but was denied, an opportunity to engage in discovery regarding: (1) the nature of the BDC’s authority, (2) the basis for [the City’s] assertion that plans for the development ‘always envisioned a site for parking,’(3) the precise financial commitments undertaken by the City, (4) any and all efforts to include or exclude the public and adjoining property owners from the process, (5) any legal justification for the use of the ... ENP, (6) the BDC-City connections including all contracts between BDC and the City, and all City appropriations to BDC, and (7) the BDC-City connections including the evolution of entities favored for the development. Because the Circuit Court failed to provide 120 West Fayette an opportunity to present material pertinent to a ruling on a summary judgment motion, the court erred as a matter of law. Cf.

Johnson v. RAC Corp., 491 F.2d 510, 514 (4th Cir.1974) (observing that when a motions court relies on matters outside of the pleadings to convert a motion to dismiss into a motion for summary judgment, the court must provide the plaintiff the opportunity “to employ discovery, in order to counter ... facts in the defendant’s affidavit or to establish a factual basis for his action against the defendant”). 5 Thus, it appears that the only way the Circuit Court could determine that the City made no improper expenditure of public money in this case was to draw inferences in favor of the City. To do so was inappropriate. It is settled that summary judgment is appropriate when there is no genuine dispute of material fact and a party is entitled to judgment as a matter of law. Hill v. Cross Country, 402 Md. 281, 294 , 936 A.2d 343, 350-51 (2007).

As to our appellate review, we consider the same material as the Circuit Court and view the facts in the light most favorable to the plaintiff, not the moving party. See, e.g., Myers v. Kayhoe, 391 Md. 188, 203 , 892 A.2d 520, 529 (2006) (noting that ²⁶⁵ when reviewing a grant of summary judgment under Maryland Rule 2-501, “[w]e review the record in the light most favorable to the nonmoving party and construe any reasonable inferences that may be drawn from the facts against the moving party.”). III. 120 West Fayette also contends that the Circuit Court nonetheless erred by dismissing its complaint for other reasons not implicated by our analysis in Part II of this decision. 120 West Fayette posits that it enjoys standing both as a taxpayer and as an owner of property that is situated in proximity to the “Superblock.” In support of its contention that it has taxpayer standing, 120 West Fayette asserts that its complaint satisfied the standards established by Maryland precedent. Particularly, 120 West Fayette maintains that to establish standing under Maryland law, a taxpayer need only assert that a municipality or public official engaged in illegal or ultra vires acts and that such acts pose potential pecuniary damage or a tax increase to the taxpayer. 120 West Fayette urges that it alleged facts sufficient to satisfy this standard.

By contrast, the City contends that the Circuit Court correctly granted its motion to dismiss. The City alleges that 120 West Fayette lacks standing to challenge its LDA agreement because 120 West Fayette failed to allege an unlawful expenditure by the City that may reasonably result in a pecuniary loss or tax increase to 120 West Fayette. The City argues that while Maryland law provides for broad taxpayer standing, “courts have not hesitated to dismiss suits for lack of standing where, as here, the plaintiffs fail to allege any special interest or loss, different in kind from that of the general public, or where the allegations of the complaint indicate that the challenged action will not result in any increase to the plaintiffs taxes.” Additionally, the City alleges that it has done nothing illegal and will make money by selling the properties that comprise the “Superblock.” The City reasons that if it is making money by conveying the properties that ²⁶⁶ comprise the “Superblock,” its actions will decrease rather than increase taxpayer burden. Maryland law liberally permits taxpayers to bring claims challenging alleged illegal or ultra vires acts of government officials.

Boitnott v. Baltimore, 356 Md. 226, 234 , 738 A.2d 881, 885 (1999); see also State v. Burning Tree Club, Inc., 315 Md. 254, 291 , 554 A.2d 366, 385 (1989) (“Under Maryland law, the doctrine of taxpayer standing is not as narrowly limited as it is under the law of some jurisdictions.”); Citizens P & H Ass’n v. County Exec., 273 Md. 333, 338 , 329 A.2d 681, 684 (1974) (“In this State, the courts have always maintained with jealous vigilance the restraints and limitations imposed by law upon the exercise of power by municipal and other corporations____”) (quoting Baltimore v. Gill, 31 Md. 375, 394-95 (1869)); Baltimore County v. Churchill, Ltd., 271 Md. 1, 5 , 313 A.2d 829, 832 (1974)(“[W]here the issues presented are of great public interest and concern, the interest necessary to sustain standing need only be slight.”) (citations omitted). There remain, however, essential requirements that a taxpayer’s claim must satisfy in order to establish standing. In Inlet Associates v. Assateague House, 313 Md. 413, 440-41 , 545 A.2d 1296, 1310 (1988), we explained: The law of Maryland on standing to sue is well articulated ---- [A] taxpayer may invoke the aid of a court of equity to restrain the action of a public official, which is illegal or ultra vires and may injuriously affect the taxpayer’s rights and property. The taxpayer will be allowed such relief, however, only when some special damage is alleged and proved, or a special interest is shown distinct from that of the general public.

This, ... “requires a showing that the action being challenged results in a pecuniary loss or an increase in taxes.” We have recognized, however, that the extent to which a taxpayer is capable of detailing the damage anticipated from an illegal and ultra vires act may be rather limited at the time the suit is initially filed. Thus, we [have] held that the taxpayer plaintiff is not required to allege facts which necessarily lead to the conclusion that taxes will be increased; rather, the test is whether the ²⁶⁷ taxpayer “reasonably may sustain a pecuniary loss or a tax increase”—“whether there has been a showing of potential pecuniary damage.” (citations omitted). It is thus clear that in order to establish taxpayer standing in Maryland, a taxpayer must allege two things: 1) an action by a municipal corporation or public official that is illegal or ultra vires, and 2) that the action may injuriously affect the taxpayer’s property, meaning that it reasonably may result in a pecuniary loss to the taxpayer or an increase in taxes. Id.; see also Medical Waste v. Maryland, Waste, 327 Md. 596, 613 , 612 A.2d 241 , 250 n. 10 (1992) (“[A] person’s or an organization’s status as a taxpayer entitles it to standing when the challenged statute, regulation, or government action increases or threatens to increase the taxpayer’s tax burden.”).

Our case law illustrates how standing is achieved when these requisite allegations are made. For example, in Boitnott v. Baltimore, 356 Md. at 226 , 738 A.2d at 885 , we determined that Baltimore taxpayers had standing to challenge an ordinance that amended the urban renewal plan pertaining to Baltimore’s Inner Harbor East based upon the taxpayers’ allegations that the ordinance violated the City’s Charter and that the City had spent 20 million dollars