Floyd v. CITY COUNCIL OF BALTIMORE

BATTAGLIA, J. Owners of property in the Charles Village area of Baltimore City are subject to a Supplemental Tax in addition to the property tax that the City imposes on all property owners, although it is not imposed on property that is otherwise exempt under Section 6-8(a)(2) of Article XIV of the Baltimore City Code or by any act of the General Assembly, such as property used for charitable, educational or religious purposes. Sections 7-202 and 7-204 of the Tax-Property Article, Maryland Code (1985, 2001 Repl.Vol., 2005 Supp.). ⁴⁶⁵ In the present case, Joan Floyd and other individuals 1 subject to the Supplemental Tax alleged in a complaint filed in the Circuit Court for Baltimore City that the 2007 tax could not properly be imposed, because the Charles Village Community Benefits District Management Authority Board did not have the requisite quorum, 2 on April 11, 2006, when the 2007 Supplemental Tax rate was approved for submission to the Board of Estimates. 3 The challengers contended that three of the ten Board members present at the April 11, 2006 meeting were ineligible to vote. They also asserted that the common law quorum requirement pertaining to governing bodies was applicable, so that ten voting members, a majority of the nineteen authorized voting members, were required to be present at the April 11, 2006 meeting to constitute a quorum. The defendants, the Mayor and City Council of Baltimore as well as the Charles Village Community Benefits District Management Authority, conversely, disputed that any of the Board members present at the meeting were ineligible to vote and argued that the Corporations and Associations Article of the Maryland Code (1975, 1999 RepLVol., 2005 Supp.), 4 applied so that a quorum of only nine voting members was required. ⁴⁶⁶ The trial court entered judgment in favor of defendants and the Court of Special Appeals, in a reported opinion, affirmed.

Floyd v. Mayor and City Council of Baltimore, 179 Md.App. 394 , 946 A.2d 15 (2008). We granted certiorari, Floyd v. Baltimore, 405 Md. 348 , 952 A.2d 224 (2008), to answer the following questions presented in the petition and cross-petition: 1. Did the Court of Special Appeals err in ruling that a special taxing district—created by a special act of the General Assembly—may conduct its business in accordance with certain provisions of the Corporations and Associations Article instead of the more strict common law quorum requirements of a governmental entity? 2. Did the Court of Special Appeals err in ruling that, while the enabling legislation requires a voting member of the Charles Village Community Benefits District Board of Directors to be an owner of taxable property or registered voter in the District, a voting seat may be held by an individual who is neither a registered voter nor an owner of property in the District, but is the ‘president and owner’ of a corporation that owns taxable property? 3.

Did the Court of Special Appeals err in ruling that where the Supplemental Tax rate must have the approval of a “majority of all of the voting Board members,” this requirement applies only to the sitting members instead of the full authorized membership, and that approval by the “majority” is not required annually, but only when the Supplemental Tax rate is changed?[ 5 ] 4. Did the Court of Special Appeals err in when it: a. “dismissed” the appeals of two non-Appellants? b. assessed all costs of the City of Baltimore’s unsuccessful Cross-Appeal against the Appellants?[ 6 ] ⁴⁶⁷ 5. Did the trial court err by entering a declaratory judgment in the absence of a justiciable controversy, when the District Board cured any possible defects in its proceedings by the subsequent ratification of its challenged actions? [ 7 ] I. Introduction In 1994, the General Assembly enacted legislation enabling the Mayor and City Council of Baltimore to “establish, by ordinance, not more than six community benefits district management authorities, including the Charles Village Community Benefits District,” 8 which would “promote and market ⁴⁶⁸ districts, provide supplemental security and maintenance services, provide amenities in public areas, provide park and recreational programs and functions, and after an authority is established, other services and functions as requested by the authority and approved through an ordinance.” Chapter 732 of the Maryland Laws of 1994.® The Legislature granted the Charles Village Community Benefits District Authority (the “Authority”) the power, as provided by ordinance, to “be a special tax district,” to submit to the Board of Estimates annually the proposed taxes to be imposed on properties in the district, to adopt bylaws, “to establish and elect officers and provide for their terms and duties” and “to do all things necessary or convenient to carry out its powers.” Id. It also empowered the Mayor and City Council to provide, in the establishing ordinance, for the imposition of taxes, subject to the Board of Estimates’ approval, and for the “organization and method of initial appointment of officers and board members of the Authority,” with the limitation that voting board members “be eligible to vote in the election under subsection ((k)] of this section.” 9 10 Id. ⁴⁶⁹ Pursuant to the enabling legislation, the City Council enacted, and then Mayor Kurt L. Schmoke signed, Ordinance No. 94-414, entitled “Charles Village Community Benefits District,” which has been codified since the time in question at Subtitle 6 of Article XIV of the Baltimore City Code. 11 Section 6-3 of the Baltimore City Code expressly created the Authority and, like the enabling legislation, sets forth the purpose of the Authority: “to promote and market the District, provide supplemental security and maintenance services, provide amenities in public areas [and] provide park and recreational programs and functions,” while the powers granted to the Authority, appearing in Section 6-4, include: § 6-4.

Powers of Authority. The Authority shall: (1) not be or constitute or be deemed an agency of the City or the State of Maryland; (2) to the greatest extent allowable by law, be deemed a special taxing district, and therefore a governmental body, both politic and corporate, exercising only such powers as are provided for in this subtitle; (3) not exercise any power specifically withheld by the terms of either the Enabling Legislation {Article II, § (63) of the City Charter (1996 Edition)}, or if more restrictive, this subtitle. However, the powers of the Authority shall be broadly interpreted in order to allow the Authority to achieve the goals of the Enabling Legislation, including the provision of supplementary security and maintenance services, the promotion and marketing of the District, and the provision of amenities in public areas; ⁴⁷⁰ (4) acquire, hold, and use both real and personal property necessary to achieve its purposes, including the acquisition by purchase, lease, or other means; (5) engage the services of an administrator (the “Administrator”), which may be an individual or an entity, to administer the programs and undertakings of the Authority; (6) sue and be sued, provided that the District, the Authority, its Board of Directors, and the Administrator shall benefit, to the fullest extent allowable by law, from any provisions of federal, state, and local law limiting the liability of employees, officers, agents, and officials of governmental bodies; ^ H 5 *!• (9) adopt an annual budget and impose, charge, and collect the taxes or charges on benefitted properties within the District authorized by the Enabling Legislation and this subtitle; provided, however, that no taxes shall be levied against properties which are exempt under state law from ordinary property taxes; (11) establish and elect such officers of the Board as are not specified in this subtitle and provide for their terms and duties; (13) subject to the approval of the Board of Estimates, adopt, amend, and modify bylaws, consistent with the Enabling Legislation and this subtitle; (17) do all other things necessary or convenient to carry out its goals, objectives, and powers. Consistent with the Authority’s ability to “impose, charge, and collect the taxes or charges on benefitted properties within the District authorized by the Enabling Legislation,” ⁴⁷¹ Section 6-8 of the Baltimore City Code dictates that a “Supplemental Tax shall be assessed and collected in conjunction with the property taxes assessed and collected by the City (‘Regular Tax’)” and that “[a]ny increase in the rate of the Supplemental Tax must be approved by a majority of the voting Board members.” Even if the Supplemental Tax rate is not increased, however, the Board “shall adopt an annual financial plan ... consisting of at least a proposed schedule of taxes or charges to be imposed throughout the District,” Section 6-7 of the Baltimore City Code, which “shall be subject to the approval of the Board of Estimates.” Section 6-14 of the Baltimore City Code.

In turn, Section 6—6(d) of the Baltimore City Code states that, “[t]he number of members of the full Board must be at least 14, excluding vacancies, and no more than 27,” and that, “[t]he Board may increase or decrease its membership, within these limits.” 12 Voting members of the Board “must be ⁴⁷² eligible to vote in the election,” Section 6-6(e)(7) of the Baltimore City Code; eligibility is limited to “owners of property within the District which is subject to tax” and “voters registered to vote within the District.” Section 6-15(b) of the Baltimore City Code. In addition to submitting proposed changes to the Supplemental Tax rate to the Board of Estimates, the Board also can “adopt such bylaws, rules, and regulations as it deems necessary in carrying out the powers of the Authority, so long as the same shall not be inconsistent with the terms of this subtitle or of any ordinance amendatory or supplementary hereof or of the Enabling Legislation.” Section 6-6(g) of the Baltimore City Code. All bylaws adopted by the Board must be approved by the Board of Estimates. Id.

The seminal interim Board members of the Authority adopted bylaws on January 11, 1995. 13 Bylaw 2.12, entitled “Quorum and Voting,” requires “[t]he actual presence of at least 9 voting members” for a quorum at all meetings of the Board and provides that, “[t]he act of a majority of voting members in attendance at a Board of Directors meeting at which a quorum is present shall be the act of the entire Board of Directors.” The language in bylaw 5.03 goes further, however, stating that the Supplemental Tax rate “must be approved by a majority of all of the voting Board members.” ⁴⁷³ Bylaw 2.09, on the other hand, states that, “[i]n the event of resignation, expiration or other departure from the Board of a member not appointed by an elected official or an association, a majority of the remaining directors, whether or not sufficient to constitute a quorum, may fill a vacancy on the Board of Directors.” Board members “not appointed by an elected official or an association” include the four at-large voting members, each of whom is elected from one of the quadrants of the District under bylaw 2.07. In the present case, Joan Floyd and other individuals subject to the Supplemental Tax (“Floyd”) filed a complaint in the Circuit Court for Baltimore City against the Authority as well as the Mayor and City Council of Baltimore (the “City”). Floyd sought preliminary and permanent injunctive relief as well as a declaratory judgment, arguing that the adoption of the Supplemental Tax rate at the April 11, 2006 meeting “was beyond the powers of the Authority as enumerated in the Code and the Baltimore City Charter.” Specifically, the complaint alleged that three voting Board members, Richard Burnham, Eric Friedman and Michael Gervais, were ineligible to vote at the April 11, 2006 meeting at which the Supplemental Tax was approved and that because there were an inadequate number of voting members present on April 11, 2006, the Board of Estimates “violated the express prohibition in both the Code and the Baltimore City Charter against approval of a Supplemental Tax in excess of what is proposed by the Authority,” when it approved the proposed tax at a May 17, 2006 meeting, thereby rendering the Supplemental Tax null and void. After Floyd filed her complaint, the Board held a special meeting on June 21, 2006 in order to “ratify some past actions of the [B]oard” and adopted a resolution containing the following provisions: 1.

That the Board hereby approves the Authority’s budget and the surtax rate for the Charles Village Community Benefits District for the fiscal year ending June 30, 2007, that were approved by the Board of Estimates of the City of Baltimore on or about May 17, 2006; ⁴⁷⁴ 2. That the Board hereby ratifies and approves the actions of the Board taken at the December 13 meeting, including but not limited to the appointment of Michael Gervais to membership on the Board as a voting member, representing Quad 4; 3. That the Board hereby ratifies and approves the actions of the Board taken at the April 11 meeting, including but not limited to the Board’s approval of the proposed budget for the Authority for the fiscal year ending June 30, 2007, and the Board’s vote to keep the surtax rate of 12 cents per $100 of assessed value unchanged for the fiscal year ending June 30, 2007; and 4. That these resolutions have retroactive effect to the fullest extent necessary and allowed by law.

The record does not reflect that this resolution was submitted to the Board of Estimates and acted upon or that the Board of Estimates acted to ratify its own acts at its meeting on May 17, 2006. The Circuit Court held a hearing on July 18, 2006, during which each party presented various exhibits, and the City called three witnesses to testify, including the Interim Administrator of the Authority, who testified that corporations that owned property in the District were listed as voters. The Circuit Court Judge, in a Memorandum Opinion, noted that Michael Gervais, one of the challenged Board members, was challenged because “he was ‘appointed’ at a December 13, 2005 meeting of the Authority Board to fill a vacancy occasioned by the resignation of a July elected Board member” and went on to articulate the issues and make various findings, none of which findings has been contested: [Plaintiffs] primary argument is that the quorum requirement for passage of the FY 2007 budget, financial plan and supplemental tax should be a majority of all voting members of the Board of the Authority and that on the critical dates in question here ... the Board acted without a quorum present and voting, due to its inclusion in that voting ⁴⁷⁵ quorum of three Board members whose eligibility is here challenged. The meeting minutes of April 11, 2006 (defendants’ Exhibit 5) indicates that there were ten voting and one non-voting members present.

The motions to approve the FY 2007 proposed budget, to maintain the same surtax rate of 12d; per $100 of assessed value and to send the approved budget to the Board of Estimates for final approval were all sustained by unanimous votes. Among the voting members were the three individuals whose voting eligibility is challenged by plaintiffs, Richard Burnham, Eric Friedman and Michael Gervais. Thus, in order for an appropriate quorum to be present at this meeting, at least two of the three challenged Board members had to be eligible to vote. Richard Burnham testified that he had been a voting member of the Authority’s Board for a period of five years and presently serves as its treasurer.

His capacity to serve as a voting member of the Board arises from his representation of a constituent organization, The Old Goucher Business Alliance, Inc., which is allotted two voting members under Code, Art. 14, § 6-6(e)(4). Mr. Burnham further testified that he is the owner of a business, located within the District, known as Graphic Imaging, Inc., a sub-chapter S corporation of which he is the sole owner and president. Consequently, he personally pays the supplemental tax imposed on the property owned by Graphic Imaging, Inc. Plaintiffs challenge Mr. Burham’s eligibility to serve as a voting member of the Board. They point to Code, Art. 14, § 6—6(e)(7) which requires that a voting member of the Board be eligible to vote in the election under § 6-15 of the Code.

By its express terms, § 6-15 limits eligible voters to “owners of property within the District which is subject to tax under § 6-8; and voters registered to vote within the District.” Code, Art. 14, § 6-15(b). Because Mr. Burnham is not technically either an owner of property within the ⁴⁷⁶ District or registered to vote there, plaintiffs contend that he may not serve on the Board in a voting capacity. Plaintiffs do not dispute that Eric Friedman is the Mayor’s current appointee to serve on the Authority’s Board. Nor do they dispute that the Code, Art. 14, § 6—6(e)(1) authorizes the Mayor to appoint one voting member to the Board.

Their contention with respect to Mr. Friedman is that he fails to meet the voting eligibility requirements of § 6-15 because he is neither an owner of property subject to the tax within the District nor a registered voter there. Defendants counter that the Board has never interpreted this provision to require the Mayor’s representative, the only citywide voting representative on the Board, to comply with the technical requirements of § 6-15 and, alternatively, that the City owns property within the District, although it is exempt from the supplemental tax. (Footnote omitted). In denying Floyd relief, the judge concluded that Burnham, although “not technically an owner of property subject to the tax within the District,” was the sole owner and president of a Subchapter S corporation who paid the Supplemental Tax on the property where his business was located and thus, was an eligible voting member.

The judge noted, “[Burnham’s] participation as a voting member of the Board is consistent with the provisions in all the governing documents calling for representatives of the professional and retail and tenant community to serve thereon.” With respect to Friedman, the judge determined that Friedman was eligible, because “the record is void of any evidence establishing that Eric Friedman either does not own property in the District subject to the tax or that he is not a registered voter in the District.” After the Circuit Court Judge held that nine voting members were necessary to constitute a quorum under the bylaws, he also held that there was a quorum present at the April 11, 2006 meeting, because both Burnham and Friedman were eligible voters. ⁴⁷⁷ With respect to the appointment of Gervais, the Circuit Court Judge concluded that because both Burnham and Friedman were eligible voting members, it was “unnecessary for the Court to determine whether [Gervais] became an eligible voting member of the Board on December 13, 2005, when he was appointed to fill a vacancy.” The Memorandum Opinion, nonetheless, stated: [W]ith the Court’s findings today that a valid quorum was constituted by nine present voting members, and that Mr. Burnham and Mr. Friedman were eligible voting members, it does appear that Mr. Gervais’ appointment was approved by the unanimous vote of the nine voting members present on that date (Defendants’ Exhibit 3). Mr. Gervais’ status, therefore, hinges on Authority by-law 2.09, which governs the filling of vacancies of Board members not appointed by elected officials or associations. The by-law appears to permit the actions taken on December 13, 2005. The fact that Ms. Mayer’s term had not yet begun points up a difficulty with the existing by-law because it does not contemplate such a situation.

Nonetheless, Michael Gervais was selected by a majority of the remaining directors to fill her vacancy and he is entitled to serve until the next annual meeting or a new Board member from Quad 4 is elected and qualified. The Authority would be well advised to reconsider this by-law provision in light of its inconsistent interpretation and limited scope. Floyd filed a Motion to Alter or Amend Judgment, alleging, in part, that the judge failed to decide whether bylaw 5.03(b) “required a majority, or 10 out of 19, of all voting members to approve the Supplemental Tax rate,” and that “the City was the custodian of an official document proving that Eric Friedman was neither a registered voter within the District nor an owner of property subject to the Supplemental Tax.” A hearing was held on the matter on August 22, 2006, during which a financial disclosure statement for Friedman was admitted, after which an Amended Declaratory Judgment was filed, which stated: ⁴⁷⁸ [T]he Court does not believe that plaintiffs have met their burden of proof by the introduction of admissible evidence to establish that Eric Friedman was neither an owner of property subject to the supplemental tax in the Benefits District nor a registered voter there. On the other hand, defendants cannot honestly contend that Mr. Friedman meets the voting member eligibility requirements of the Baltimore City Code, Art. 14, § 6—15(b).

Nor is there any express provision in the Baltimore City Code, exempting the Mayor’s appointed representative from those voting eligibility requirements. Thus, a reasonable interpretation of the Code provisions would be that the Mayor is entitled to appoint a voting member of the Authority’s Board, so long as he chooses someone who otherwise meets the voting eligibility requirements of § 6—15(b). For the purposes of this Amended Declaratory Judgment, therefore, the Court will not predicate its decision upon Eric Friedman’s eligibility to serves as a voting member of the Authority’s Board. The court concluded, nonetheless, that were Friedman’s vote on April 11, 2006 not to be counted, “there were still nine votes to approve the supplemental tax rate, clearly a majority of the fourteen voting members required by § 5.03B,” because Burnham was eligible to vote for the reasons stated in the July 26, 2006 Memorandum Opinion and Gervais was duly elected on December 13, 2006 under bylaw 2.09.

As to Gervais, the Amended Declaratory Judgment stated: In accordance with the by-laws of the Charles Village Community Benefits District and Management Authority § 2.09, Michael Gervais was duly elected to the Board of the Authority on December 13, 2005 to fill a vacancy occasioned by the departure of the recently elected Quad 4 Board representative, Tammy Mayer. He is entitled to serve on the Board until its next annual meeting or such earlier or later time as his successor is elected and qualifies. Giving full consideration to the concerns expressed in the Court’s Memorandum Opinion of July 26, 2006, the Court nevertheless finds that Michael Gervais was a valid, voting member of the Authority’s Board when it approved the FY 2007 ⁴⁷⁹ budget, financial plan and supplemental tax on April 11, 2006. Floyd appealed to the Court of Special Appeals, before which the parties reiterated their arguments previously articulated before the trial court.

Subsequently, the Court of Special Appeals, in a reported opinion, affirmed the judgment of the Circuit Court. 14 Floyd v. Mayor and City Council of Baltimore, 179 Md.App. 394 , 946 A.2d 15 (2008). In analyzing whether the Board properly set its own quorum “of at least 9 voting members” in bylaw 2.12, the Court of Special Appeals concluded that the Board had the authority to set a quorum of less than a majority of the nineteen authorized voting Board members, because it was a corporation subject to the Corporations and Associations Article: We also disagree with appellant’s claim that there was no statutory authority authorizing the Authority to adopt Bylaw 2.12. There are, in fact, several independent sources of this authority. First, the Ordinance creating the Authority granted it the power, “subject to approval of the Board of Estimates,” to “adopt, amend, and modify bylaws, consistent with the Enabling Legislation and this subtitle.” Code, Art. 14, § 6-4(13).

The Ordinance did not withhold from the Board the power to pass a bylaw setting a quorum of less than a majority, and Bylaw 2.12 is not in conflict with any provisions of the Enabling Law or the Ordinance. Second, the Authority’s power to enact Bylaw 2.12 derives from C.A. § 2-408(b), which authorizes Maryland corporations to set quorums of less than a majority, and C.A. § 1-102, which provides that the Article applies to every Maryland corporation, except as otherwise provided by statute. In this ⁴⁸⁰ regard, the Ordinance clearly states that, to the extent allowed under law, the Authority is a body corporate. Appellant suggests that C.A. § 2-408(b) does not apply to the Board because it is a “governmental body.” But, she cites no relevant authority to support her claim.

Id. at 436-37, 946 A.2d at 40 . The intermediate appellate court also affirmed the Circuit Court’s decision that Gervais was properly appointed under bylaw 2.09, which did not contradict the Baltimore City Code or enabling legislation. The court also determined that Burn-ham was eligible to vote on April 11, 2006, because, although “he neither lived in nor personally owned property in the District,” he was the owner of a corporation that did and the language of the Baltimore City Code “does not show any objective intent to restrict the meaning of the word ‘owner’ to include only natural persons.” Id. at 450, 452 , 946 A.2d at 48, 49 . The Court of Special Appeals went on to further note there was testimony presented that “corporations that owned property subject to the Surtax were eligible voters in the referendum held to approve the establishment of the Authority.” Id. at 452 , 946 A.2d at 49 .

Finally, the court held that, because the Board left the Supplemental Tax rate unchanged and bylaw 5.03(D) only required a majority of the Board to approve the Supplemental Tax rate if it is attempting to change the rate, no Board action was necessary: • ... Bylaw 5.03(D) only requires the Board to approve the supplemental tax rate if it seeks to change the rate. The Board left the rate unchanged, so it did not have to hold a vote on the Supplemental Tax. Consequently, no matter how we construe the meaning of the word “majority” in Bylaw 5.03(B), which applies to a change in the tax rate, there is no merit to appellant’s challenge to the Board’s approval of the Surtax.

Id. at 456 , 946 A.2d at 51 . We disagree with the Court of Special Appeals that the Corporations and Associations Article applies to the Authority, because it is a public corporation, but we will affirm its ⁴⁸¹ mandate as the actions related to the Supplemental Tax taken at the April 11, 2006 meeting of the Authority were valid, because a quorum was present, as Burnham, Friedman and Gervais were eligible voting members. Discussion Floyd argues that the Board was required to transact business at a meeting according to the requisites of our cases, as opposed to the provisions of the Corporations and Associations Article, which she contends applies only to private corporations. According to Floyd, our case law requires ten voting members, a majority of the fully authorized voting membership of 19, to constitute a quorum.

Floyd further asserts that even if the Corporations and Associations Article were to apply, so that a quorum would be constituted by nine voting members, on April 11, 2006, a quorum was not present, because out of the ten voting members present at that meeting, Burnham, who was neither the owner of property subject to the Supplemental Tax nor a registered voter in the District, was ineligible to vote as were Gervais, who was not appointed by a lawful quorum on the December 13, 2005 meeting, and Friedman. Both the Authority and the City, conversely, assert that the Corporations and Associations Article, which states, in Section 2-408(b), that corporate bylaws may provide for a quorum of less than a majority, applies to the Authority, so that only nine voting members needed to be present at the April 11, 2006 meeting to conduct business. The Authority and City also contend that were our cases to apply, the Board, which may have anywhere from 14 to 27 members, was not a body of definite membership but was a body of indefinite membership, so that only eight voting members were required to be present at the April 11, 2006 meeting. In response to the arguments of the Authority and the City, Floyd asserts that the Board was not an indefinite body ranging from 14 to 27 members, but instead a definite body consisting of 19 authorized voting seats, so that 10 voting members were required. ⁴⁸² Primarily, we note that under Section 2-408(b)(2) of the Corporations and Associations Article 15 a corporation’s “bylaws may provide that less than a majority, but not less than one-third of the entire board of directors, may constitute a quorum,” so that the quorum of nine voting members set forth in the Authority’s bylaws would be permissible if the Authority were a private corporation.

We have recognized, however, that, “[t]o constitute a corporate assembly at common law, there must always be present a quorum, consisting of at least a majority of the number of all the members, and no valid act can be done without a majority of a quorum,” so that either ten voting members, a majority of those authorized to serve as voting members, or eight voting members, a majority of those who occupied voting seats at the time of the April 11, 2006 meeting, needed to have been present. Murdoch v. Strange, 99 Md. 89, 110 , 57 A. 628, 630 (1904). See also Heiskell v. Mayor, Etc., of Baltimore, 65 Md. 125, 151 , 4 A. 116, 120 (1886) (stating that “the existing common law ... fixes the majority as the quorum”)