Area Development Corp. v. Free State Plaza, Inc.

Hammond, C. J., delivered the opinion of the Court. This case reflects some of the growing, or perhaps digestive, pains of the City of Bowie in Prince George’s County resulting from its annexation of the Belair subdivision created by Levitt and Sons, Inc. (Levitt), now ²⁷⁰ a subsidiary of IT&T, and certain adjacent land. Levitt had caused the appellant, Area Development Corporation (ADC), to come into being for the purpose of constructing a water supply and distribution system and a sewage collection and treatment and disposal system, collectively referred to as “the system.” In 1961 ADC and Bowie entered into an agreement whereby ADC leased the system to Bowie until the year 2011. Article 9C of the lease provides in pertinent part: “Lessee covenants and agrees that it will do none of the following things without the consent in writing of Lessor first hád and obtained: “(C) Make any extension of or connection with the water distribution or sewage collection systems to service any land or building, except for extensions of or connections to any sewage collection system which may be installed within the town of Bowie as its boundaries were constituted immediately prior to the annexation of the Belair development by the town of Bowie.

Any extensions or connections made by Lessee shall be at its expense and shall remain the property of Lessee.” In 1967 Free State Plaza, Inc., an appellee, acquired a subleasehold interest for a long term of years in a thirty-acre parcel of land fronting on the north side of Maryland Route 450 (across the road from the Levitt shopping center) within the city limits of Bowie, having been annexed by the city at the time of the annexation of Belair. Free State undertook the construction of a shopping center on its thirty acres and sought the use of the system — pipes of which were within 200 feet — for itself and its tenants. ADC would not grant Bowie permission to extend the system unless Free State paid all the costs which the extension and use of the system would require and generate. ADC and Free State could not come to terms and finally Free State filed suit against ADC and ²⁷¹ Bowie, seeking a summary judgment declaring that Article 9C of the lease between ADC and Bowie was void as against public policy.

Bowie took a neutral position in the trial court. Judge Digges held that Article 9C was contrary to public policy and illegal and void, and that Bowie was not bound thereby. ADC appealed on October 23, 1968, and the record was received in this