Atlantic Golf, Ltd. Partnership v. Maryland Economic Development Corp.

PER CURIAM ORDER For reasons to be stated in an opinion later to be filed, it is this 7th day of November, 2001, ORDERED, by the Court of Appeals of Maryland, that the judgment of the Circuit Court for Montgomery County be, ¹¹⁷ and it is hereby, AFFIRMED. Costs to be paid by the Appellant. Mandate to issue forthwith. ELDRIDGE, J. On November 7, 2001, we issued an order affirming the judgment of the Circuit Court for Montgomery County in this case.

We shall now set forth the reasons for that order. The issue in this case is whether the provision in Article III, § 48, of the Maryland Constitution, which revokes the tax-exempt status of previously tax-exempt corporations that have availed themselves “of any rights, privileges or advantages” granted by the Legislature, is applicable to a public corporation. We hold that this constitutional provision is not applicable to a public corporation. 1 I. In 1984, the Maryland General Assembly created the Maryland Economic Development Corporation (“MEDCO”), Maryland Code (1957, 1982 Repl.Vol., 1985 Supp.), Article 41, §§ 558 through 573, as a public corporation with the objective of promoting economic development within the state. 2 The ¹¹⁸ Legislature granted MEDCO various powers to carry out its statutory objective, including the power to “[bjorrow money and issue bonds for the purpose of financing or refinancing” the cost of its economic development projects, Article 41, § 562(12), and an exemption from state taxation “[w]ith the exception of [certain specified] State and local real estate taxes.” Article 41, § 567. The Legislature further provided in § 567 that “[t]he bonds of the Corporation and the interest thereon are forever exempt from all State, municipal, and local taxation.” In 1994, Anne Arundel County circulated a request for proposals to finance, construct, and operate a public golf course in the Pasadena area of Anne Arundel County.

In 1997, MEDCO responded to this request, along with several ¹¹⁹ private golf course developers. Anne Arundel County selected MEDCO to develop the project, 3 and accordingly the County entered into a “Golf Course System Agreement” with MEDCO on December 1, 1997, whereby MEDCO would issue $17 million in tax-exempt revenue bonds, would use the proceeds therefrom to construct a golf course, would operate the course for the County, and would eventually turn the project over the County when the bonds were paid off. In October 2000, on the eve of the issuance of the bonds, MEDCO received notification from Atlantic Golf, a limited partnership and private entity that owned a competing golf course in Anne Arundel County, that Atlantic Golf was challenging MEDCO’s issuance of the bonds as an ultra vires act that was beyond the scope of MEDCO’s enabling act. Atlantic Golf claimed that the Pasadena golf course project exceeded MEDCO’s then-existing statutory authorization on the grounds that: (1) the project was not located in an area of the state that was “experiencing significant economic dislocation or distress,” as required by Maryland Code (1957, 1998 Repl.Vol.), Article 83A, § 5-202(c); (2) the private sector had demonstrated significant interest in the bid, and therefore MEDCO should not have bid on the project, pursuant to § 5-202(b) (mission of corporation includes developing “economic resources in which the private sector has not demonstrated serious and significant interest or development capability [that] would serve the public interest”); and (3) the project was structured under the Golf Course System Agreement to remain permanently as public property, rather than to be turned over to the private sector following its completion as required under § 5-202(c).

In response to Atlantic Golfs claim that MEDCO had violated statutory provisions, MEDCO cancelled the issuance of the tax-exempt bonds for the golf course project and requested from the General Assembly relief from the restrictions imposed by law, as well as expanded powers that would permit it to complete the project. ¹²⁰ The General Assembly responded to MEDCO’s request for revisions to its enabling legislation by thoroughly revising the statutes so as to permit MEDCO to conduct the transactions incident to building and operating the Pasadena golf course. On April 20, 2001, the Governor of Maryland signed these revisions into law as Ch. 338 of the Acts of 2001. This legislation authorized MEDCO to undertake projects anywhere in Maryland and not solely in distressed areas (Article 83A, § 5-202(c)(l)), authorized it to compete with private taxpaying enterprises (§ 5-202(c)(5)(i)(ii)), authorized MED-CO to own for profit enterprises (§ 5-205(16)), removed the requirement that MEDCO turn over its projects to private enterprises upon completion (§ 5-202(c)(2)), and removed the requirement that MEDCO projects be located upon land conveyed to MEDCO by the State (§ 5 — 201(h)(i)). MEDCO subsequently announced that its first project under the new legislation would be the Pasadena golf course.

In response to this announcement by MEDCO, Atlantic Golf filed a complaint on May 1, 2001, in the Circuit Court for Montgomery County, seeking a declaratory judgment that MEDCO had surrendered its tax-exempt status under Article III, § 48, of the Maryland Constitution, as a result of the amendments to the statutory provisions governing MEDCO. 4 Atlantic Golf ¹²¹ further alleged in its complaint that, because MEDCO had surrendered its tax exemption, all of its activities and revenue, as well as the bonds that it had issued to finance the Pasadena golf course (and any interest thereon), were subject to taxation as of April 20, 2001. Atlantic Golf specifically relied upon the second clause of the third sentence in Article III, § 48, which states: “... and any Corporation chartered by this State which shall accept, use, enjoy, or in any wise avail itself of any rights, privileges or advantages that may hereafter be granted or conferred by any general or special Act, shall be conclusively presumed to have thereby surrendered any exemption from taxation to which it may be entitled under its Charter, and shall be thereafter subject to taxation as if no such exemption has been granted by its Charter.” The State of Maryland filed a motion to intervene as “an additional party defendant in support of the constitutionality and continuing validity” of the statutory provision granting MEDCO a tax exemption. The Circuit Court granted this motion. The defendants, MEDCO and the State, each filed motions for summary judgment, in which they argued that Article III, § 48, did not require MEDCO to forfeit its tax-exempt status.

The defendants contended that the tax exemption surrender provision was inapplicable to MEDCO because MEDCO was a public corporation. The defendants took the position that the purpose of Article III, § 48, was to affect the status of private corporations, not public ones. They further asserted that the constitutional provision only applied to corporations chartered ¹²² prior to 1851, whereas MEDCO was created in 1984. The defendants also claimed that the constitutional provision covered only corporate entities that operated under a “charter,” and that, as a public corporation, MEDCO was founded and governed by an act of the Legislature, not a charter.

The Circuit Court granted both of the defendants’ motions for summary judgment, and entered a declaratory judgment that Article III, § 48, did not apply to either public corporations or to corporations that were formed after 1851. Atlantic Golf took an appeal and, prior to any proceedings in the Court of Special Appeals, filed in this Court a petition for a writ of certiorari presenting the question of whether “the tax exemption surrender provision ... [is] limited to private corporations chartered prior to 1851, or limited to private chartered corporations, and therefore, inapplicable to a public corporation like MEDCO?” We granted the petition, Atlantic Golf v. MEDCO, 365 Md. 472 , 781 A.2d 778 (2001).

II

Atlantic Golf argues before this Court that MEDCO is covered by the third sentence of Article III, § 48, because the tax exemption surrender provision applies to both public entities and to corporations chartered after 1851. Atlantic Golf explains that, for instance, the provision affects all corporations that operate under a “charter,” and that MEDCO qualifies as operating under a “charter” in that it functions pursuant to enabling legislation. According to Atlantic Golf, MEDCO’s enabling act is equivalent to a “charter” under Maryland law. See Code (1975, 1999 Repl.Vol.), § 1-101(e)(1)(i) of the Corporations and Associations Article (“ ‘Charter’ includes ... [a] charter granted by special act of the General Assembly”).

MEDCO and the State respond that public corporations are not covered under the tax exemption surrender provision. First, they argue that.a public corporation such as MEDCO does not fall within the provision based on the language of the provision. The appellees explain that the provision involves ¹²³ “any exemption from taxation to which [a corporation] may be entitled,” that public corporations are not covered under this language because their “enabling act[s] ... can always be repealed or modified,” and that, therefore, they have no entitlements to tax exemptions or to any other right, privilege, or power (State’s brief at 6-7, emphasis added). MEDCO and the State also claim that MEDCO is not covered as a public corporation because it does not operate under a “charter.” According to the appellees, a “charter” refers specifically to a contract between the State and a private corporate entity, a contract that the State often cannot change because of the prohibition in Article I, cl. 10, of the federal constitution against the impairment of contracts.

MEDCO and the State explain that, in contrast to a charter, MEDCO’s enabling act is subject to alteration at will by the Legislature. They rely on Mayor & City Council of Hagerstown v. Sehner, 37 Md. 180, 193 (1872) (stating that public corporations are “ ‘mere organizations for public purposes, liable to have their public powers, rights and duties modified or abolished at any moment by the Legislature. * * * [Generally, the doings between them and the Legislature are in the nature of legislation rather than compact, and therefore to be considered as not violated by subsequent legislative changes’ ”). MEDCO and the State further argue that, based on the history of the constitutional provision, the framers intended that it affect solely private corporations. They state that the provision was intended to apply specifically to private railroad companies that were chartered prior to 1851.

The appellees refer to an 1890 message to the General Assembly by then Governor Elihu Jackson, who was instrumental in proposing the constitutional amendment that included the tax exemption surrender provision, in which Governor Jackson stated that the purpose of the amendment was to limit the tax exemptions of the railroad companies.

III

We hold that the tax exemption surrender provision is inapplicable to public corporations such as MEDCO and that, ¹²⁴ therefore, MEDCO is not required to relinquish its tax exemption as a result of the alterations to its enabling legislation. We need not and do not reach the issue of whether the provision applies only to corporations chartered prior to 1851. Preliminarily, we do not agree with MEDCO’s and the State’s argument that the word “charter” acts to exclude public corporations. The enabling act of a public corporation fits within the Maryland statutory definition of a “charter.” See § 1 — 101(e)(1)(i) of the Corporations and Associations Article; Trailway Oil Co. v. City of Mobile, 271 Ala. 218, 225 , 122 So.2d 757, 764 (1960); Matthews v. Macon Water Auth, 273 Ga. 436, 437 , 542 S.E.2d 106, 107 (2001); McDonald v. Brooks, 215 Tenn. 535, 540 , 387 S.W.2d 803, 805 (1965).

In addition, this Court has consistently recognized that municipal corporations, home rule counties, and certain other government entities operate under charters. See, e.g., Mayor & Council of Rockville v. Woodmont Country Club, 348 Md. 572, 575 , 705 A.2d 301, 302 (1998). Moreover, the enabling act of MEDCO is similar in form and