Anne Arundel County v. Crofton Corp.

Davidson, J., delivered the opinion of the Court. This case presents three questions. The first question is whether the Anne Arundel County Sanitary Commission had authority to enter into a contract with a private developer which established charges for sewer and water connections. The second question involves the duration of that contract.

The third question concerns the impact upon such a contract ⁶⁶⁸ of subsequent legislation enacted by the Anne Arundel County Council which established uniform charges for sewer and water connections higher than those established by the contract. In 1963, appellee, Crofton Corporation (Crofton), owned 1,257 acres of land in Anne Arundel County which it wished to develop. At that time neither water nor sewer service was available. In order to proceed with development, Crofton, on 8 January 1964, entered into a contract (1964 Contract) with the Anne Arundel County Sanitary Commission (Commission).

Crofton agreed to “construct, own, and operate” certain sewerage and water systems, designed to service its 1,257 acre tract, and to transfer the ownership of any completed stage or stages of those facilities to the Commission, at no cost, within 66 months. The Commission, which then had the authority to establish charges for sewer and water connections, agreed to permit Crofton to connect its sewerage facilities to the Commission's Patuxent Sewerage Treatment Plant, and to charge Crofton $235 for each residential sewer connection as Crofton’s share of the capital cost of the Patuxent plant. Because Crofton was to construct the entire water system at its own cost, the Commission agreed to make no charge for any water connection. The 1964 Contract did not expressly provide for a specific termination date.

In 1965, the Charter of Anne Arundel County was adopted. Anne Arundel County Code (1967), Appendix A. The Commission was abolished and its authority to establish charges for sewer and water connections was transferred to the Anne Arundel County Council (County). Anne Arundel County Code (1967), § 15-100; Charter of Anne Arundel County, § 539. Anne Arundel County Code (1967), § 17-600 provided that all owners of real estate should pay charges for water and sewer connections.

Section 17-605 and § 17-606 1 established the amount of those charges. Anne Arundel County Code (1967), § 17-614 provided: “And be it further enacted, that no presently ⁶⁶⁹ existing obligation or contract right shall in any way be impaired by the provisions of this act.” [Laws of Anne Arundel County (1965), Bill No. 30, § 4, effective 1 July 1965.] In 1967, 1972, and 1976, the County dramatically increased the charges for sewer and water connections. 2 On each of these occasions, the County retained the provision that no existing obligation or contract right should in any way be impaired. Anne Arundel County Code (1967), § 17-614. In 1367, Crofton began to sell portions of its 1,257 acre tract to other developers. 3 The County continued to charge the 1964 Contract amount, and not the statutory amount, for water and sewer connections made within the 1,257 acre tract.

On 21 November 1968, Crofton sought a three-year extension of the time within which to complete the construction of the water and sewerage facilities and their transfer to the County. In a letter dated 26 February 1969, the County, while denying the requested extension, said: “The Office of the County Solicitor has reviewed the question as to whether or not Crofton would be allowed to continue connecting to water and wastewater systems at ‘Area Service Charges’ agreed to in the contract of January 8, 1964, after they transferred ownership of the utilities to Anne Arundel County on July 9, 1969. They have ruled that the original agreement was entered into prior to enactment of Bill 28-67 and, therefore, the contract of January 8,1964, is in full force and effect and is not negated by subsequent legislation in Bill 28-67.” ⁶⁷⁰ Thus, although the requested extension was denied, the County made it clear that after the facilities were transferred, the 1964 contractual charges would continue to apply. By July, 1969, only half of the water and sewerage facilities necessary to serve the 1,257 acre tract when fully developed had been completed.

On 9 July 1969, Crofton transferred to the County the completed portions of the water and sewerage facilities. Throughout this period, the County continued to charge the 1964 Contract amount for water and sewer connections. Thereafter, in 1969,1970, and 1972, the County entered into contracts with Levitt & Sons, Inc., Harbor Investments, Inc., and Crofton, respectively, concerning the construction of water and sewer facilities. In each of these contracts, the County expressly agreed that the 1964 Contract charges, rather than the statutory charges, would be applied.

Similar contracts with Levitt Residential ■ Communities, Inc., Tradewinds Investment Corporation, Maryland Southeastern Corporation, and Lake Louise, Inc., made in 1971 and 1972, contained no such provision. Between January, 1964 and December, 1972, the County charged Crofton and the developers (developers) the 1964 Contract amount for sewer and water connections. On 15 December 1972, the County asserted that the 1964 Contract had terminated on 9 July 1969 and, therefore, the developers had to pay the applicable statutory charges for all water and sewer connections which had been made after that date. The developers refused to pay.

On 18 May 1973, in the Circuit Court for Anne Arundel County, the County filed a petition for declaratory judgment and injunctive relief. It sought to enjoin the developers from making any further connections unless they paid the statutory connection charges. It also sought a determination of the amount of the charges incurred by the developers since 9 July 1969. On 11 July 1974, the Court of Special Appeals, in an unreported opinion, affirmed the trial court’s denial of an interlocutory injunction.

On 4 August 1975, the trial court granted motions for ⁶⁷¹ summary judgment filed by Crofton, Harbor Investments, Lae., and Levitt & Sons, Inc. Each had been party to an agreement made after 1969 which expressly provided that the 1964 Contract charges would govern. On 8 April 1976, this Court entered an order dismissing as premature an appeal from the trial court’s order granting the motions for summary judgment In May, 1977, the County’s suit against Levitt Residential Communities, Inc., Maryland Southeastern Corporation, and Tradewinds Investment Corporation was tried. In a decree dated 80 March 1978, the trial court declared that the County had the authority to enter into the 1964 Contract governing the amount to be charged for the water and sewer connections; that the 1964 Contract had not terminated in July, 1969, but was in full force and effect and would terminate on 8 January 1984; and that the statutory charges were not applicable during the contract period. It concluded that the County was entitled to collect only the 1964 Contract charges and not the statutory charges.

It entered judgment in favor of the developers, 4 and dismissed a cross-claim filed by Maryland Southeastern Corporation against Crofton. The County and Maryland Southeastern Corporation appealed. We issued a writ of certiorari to the Court of Special Appeals before consideration by that Court. Chapter 676, § 3 of the Laws of Maryland (1927) established the Anne Arundel County Sanitary Commission.

Sections 4,13,16,17, and 18 established that the Commission had authority to engage in a variety of activities necessary to achieve its purposes. 5 It had authority to enter into any ⁶⁷² contracts necessary for the provision of water and sewerage services, including contracts for the purchase or acquisition of lands, structures, buildings, and privately owned and operated water and sewerage systems. In addition, it had the authority to establish water and sewer connection charges. The 1964 Contract between Crofton and the Commission provided that Crofton build and operate a privately owned water and sewerage system which would ultimately be acquired by the County in exchange for, among other things, fixed favorable water and sewer connection charges. The Commission had the authority to enter into such a contract in order to provide such services.

While it is clear that the Commission had the authority to ⁶⁷³ enter into the 1964 Contract, it is not clear when that contract was to terminate. The rules which govern the construction of contracts between individuals and private corporations also govern the construction of contracts between individuals and municipalities. City of Frederick v. Brosius Homes Corp., 247 Md. 88, 92 , 230 A.2d 306, 308 (1967). Under the objective law of contracts, a court, in construing an agreement, must first determine from the language of the agreement itself, what a reasonable person in the position of the parties would have meant at the time it was effectuated.

Benson v. Board of Education of Montgomery County; 280 Md. 338, 349 , 373 A.2d 926, 932 (1977); Slice v. Carozza Properties, Inc., 215 Md. 357, 368 , 137 A.2d 687, 693 (1958); McKeever v. Washington Heights Realty Corp., 183 Md. 216, 220 , 37 A.2d 305, 308 (1944). Where the language is ambiguous, the court must then determine the intent and purpose of the parties at the time the contract was made, which is a question of fact. H & R Block, Inc. v. Garland, 278 Md. 91, 98 , 359 A.2d 130, 133 (1976); Canaras v. Lift Truck Services, Inc., 272 Md. 337, 352 , 322 A.2d 866, 874 (1974); Dorsey v. Hammond, 1 H. & J. 191 , 201 (1801). It must therefore consider the circumstances and conditions affecting the parties at that time, and their subsequent conduct and construction of the contract.

Canaras, 272 Md. at 352 , 322 A.2d at 874 ;