Halle Development, Inc. v. Anne Arundel County

JAMES R. EYLER, Judge. Appellants, Halle Development, Inc., Halle Enterprises, Inc., and Arundel Homes, Inc., challenge the legality of a practice engaged in by appellee, Anne Arundel County, whereby appellee contracts with a developer to waive the application of one or more of the requirements of its adequate public facilities ordinance to a proposed subdivision in exchange for the payment of money or the conveyance of land by a developer. We hold that the practice is lawful. Factual Background On September 5, 2000, appellants Halle Development, Inc. and Halle Enterprises, individually and on behalf of a class, filed a complaint in the Circuit Court for Anne Arundel County against appellee and several present and former county officials.

Arundel Homes was later added as a plaintiff. Appellants alleged that all plaintiffs were engaged in residen ⁵⁴⁵ tial development in Anne Arundel County or were persons seeking to subdivide “small parcels and family conveyances” of land in the county. The following is the essence of appellants’ claim. In 1967, appellee adopted an adequate public facilities ordinance (APF), Anne Arundel County Code, Article 26, sections 2-409 through 2-420.

The purpose of the ordinance was to protect the citizens of Anne Arundel County, and the environment, from proposed residential subdivision developments that failed to demonstrate adequate fire suppression facilities, roads, schools, water supply systems, sewerage systems, and storm drainage systems. Article 26 is entitled “subdivisions”; title 2 is entitled “plat submission and approval proceedings”; subtitle 4 is entitled “final plan review”; and part 2 is entitled “adequacy of facilities.” The ordinance provides that a final subdivision plat cannot be approved until the ordinance’s requirements have been satisfied. See Article 26, § 2-413. Sections 2-416 and 2-411 are particularly relevant to this case.

Section 2-416(b) provides that, “within two years following approval of a final subdivision plat, elementary and secondary schools in the service area of the proposed subdivision shall be adequate to accommodate the school population projected to be generated from the proposed subdivision.” Section 2-411(b) provides: On request by a subdivider, the Planning and Zoning Officer may waive the application of one or more of the requirements of this Part 2 of this subtitle to a proposed subdivision, if the Planning and Zoning Officer finds that: (1) the application of the requirement to the proposed subdivision would result in peculiar and exceptional practical difficulty to or exceptional and demonstrable undue hardship on the subdivider, other than financial considerations; (2) the physical features and other characteristics of the proposed subdivision are such that the waiver may be granted without impairing the intent and purpose of the requirement for which the waiver has been requested, the ⁵⁴⁶ other provisions of this article, the Zoning Article, and the General Development Plan; (3) the grant of the waiver will not endanger or present a threat to the public health, safety, or welfare; and (4) the waiver is the minimum relief available and necessary to relieve the difficulty or hardship to the subdivider. Section 2-411(c) provides: “The Planning and Zoning Officer may impose such conditions on the grant of the waiver as are reasonably necessary to further the intent of the requirement for which the waiver was requested and to ensure the protection of the public health, safety, and welfare.” In 1989, according to appellants, appellee created a procedure whereby applicants could obtain approval to subdivide land by entering into agreements with appellee pursuant to which appellee would waive the requirements of the APF ordinance in exchange for money or land. Pursuant to the practice, appellee, according to appellants, collected millions of dollars plus land that was conveyed to it to be used as sites for future facilities. The following agreements were entered into between one or more of the appellants and appellee.

The agreements all relate to waiver of the APF ordinance’s requirements with respect to adequate school facilities. By letter dated February 10,1989, in connection with Halle Development’s proposed subdivision known as Seven Oaks, appellee advised Halle Development that existing school facilities were not adequate and that a school waiver agreement would be necessary in order to gain approval of its proposed subdivision. An agreement entitled Seven Oaks School Agreement, dated March 22, 1989, was entered into between Halle Development and appel-lee. Pursuant to the terms of the agreement, Halle Development agreed to pay $4,700,000 to appellee in installments.

On February 21, 1995, Halle Development and appellee entered into the Old Mill High School Agreement. Pursuant to the terms of that agreement, Halle Development agreed to pay appellee $124,000 in exchange for a waiver of the APF ordinance’s requirements with respect to adequate school facilities. ⁵⁴⁷ On March 30, 1995, in connection with a proposed development in the Crofton area, Crofton Farms Development Corp., Severn Valley Farms, Inc., Halle Enterprises, and the Richards Group of Washington entered into a school agreement whereby Halle Enterprises agreed to convey a parcel of land to appellee in exchange for a waiver of the APF ordinance’s school requirements. On August 24, 1999, Arundel Homes and appellee entered into the Cape St. Clair Elementary School Agreement. Pursuant to that agreement, Arundel Homes agreed to pay $34,200 to appellee in exchange for a waiver of the APF ordinance’s requirements with respect to schools applicable to a proposed subdivision known as Walnut View.

The Seven Oaks subdivision was originally intended to contain 4,767 dwelling units. In the early 1990’s, it was reduced in size. A dispute arose between Halle Development and appellee over payment of the amounts contained in the agreement. On October 11, 1990, Halle Development filed suit in the Circuit Court for Anne Arundel County against appellee seeking adjudication of its liability under the agreement.

Appellee filed a counterclaim for failure to make the last payment under the agreement. The parties entered into a settlement agreement on January 16,1992. Pursuant to the settlement, the total amount due was reduced and Halle Development agreed to transfer real property to be used as a future school site. The case was dismissed with prejudice.

On July 1, 1992, Halle Development defaulted under the settlement agreement. Subsequently, Halle Development filed a bankruptcy petition pursuant to Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland. Halle Development also filed an adversary proceeding in which it requested that the acreage transferred pursuant to the settlement agreement be made part of the bankruptcy estate. After the automatic stay imposed by the United States Bankruptcy Code was lifted, appellee filed a complaint for declaratory judgment in the Circuit Court for Anne Arundel County.

The parties, on June 9, 1993, again settled their differences. The ⁵⁴⁸ settlement was approved by the United States Bankruptcy Court, and the adversary proceeding and the declaratory judgment action were dismissed with prejudice. On August 6, 1997, Halle Development filed suit in the Circuit Court for Anne Arundel County challenging the Old Mill High School Agreement dated February 21, 1995. Halle Development alleged breach of contract and an unconstitutional taking in violation of the Fifth Amendment.

The suit was based upon new projections indicating that school facilities were adequate. Summary judgment was entered in favor of Halle Development in the amount of $124,000, and the judgment was satisfied. Appellants alleged that they had no knowledge of the practice described above until February 11, 2000, when an article appeared in The Baltimore Sun newspaper. The article discussed the practice and, according to appellants, quoted a county legal representative as stating “ ‘the county ordinance (APF) specifically forbids the granting of waivers for financial considerations/ ” The complaint and amended complaint, filed by appellants in the case before us, contained numerous counts.

We summarize the counts with a few explanatory comments of our own. Count one alleged a violation of 42 U.S.C. § 1983 but did not set forth any specific constitutional provisions. Count two alleged a violation of Article 6 of the Maryland Declaration of Rights. Article 6 provides that persons invested with legal or executive powers of government are accountable for their conduct.

Count three alleged a violation of Article 14 of the Maryland Declaration of Rights. Article 14 provides “no aid, charge, tax, burthen or fees” may be levied without the consent of the Legislature. Count four alleged a violation of Article 24 of the Maryland Declaration of Rights in that appellants were deprived of property without due process of law. Count five alleged a violation of Article XI-F, section 9, of the Maryland Constitution.

Article XI-F is applicable to code counties, and section 9 deals with the power to levy taxes or license fees. Count six ⁵⁴⁹ alleged that appellee fraudulently induced appellants to enter into the school waiver agreements. Count seven alleged that appellee fraudulently misrepresented its authority to request such agreements. Count eight alleged a conspiracy to implement the unlawful practice.

Count nine alleged that the school waiver agreements were in violation of public policy, Count ten alleged breach of contract based on an assertion that each provision in the waiver agreements “represented an impossible condition of performance.” Count eleven alleged that the agreements were illegal and sought rescission. Count twelve alleged that the conveyances of property pursuant to the agreements were illegal and invalid. Count thirteen alleged negligence. As relief, appellants requested a declaratory judgment that appellee’s conduct was unlawful and unconstitutional; rescission of the school waiver agreements; the return of property conveyed pursuant to the agreements; compensatory damages in the amount of $25 million; punitive damages in the amount of $25 million; attorney’s fees; and costs.

On October 19, 2000, by stipulation of the parties, appellants dismissed their claims with respect to the individual defendants, counts six, seven, eight, and thirteen as to all defendants, and the punitive damage claims as to all defendants. Subsequently, appellants and appellee filed cross-motions for summary judgment. In an opinion and order dated February 16, 2001, the circuit court granted appellee’s motion for summary judgment and denied appellants’ motion for summary judgment. The circuit court held that the claims by the Halle plaintiffs'were barred by the statute of limitations; the claims by the Halle plaintiffs were barred by res judicata; the common law tort claims were barred by failure to give notice under the Local Government Tort Claims Act; appellee had the power and authority to collect the money and to accept the conveyances of land called for in the waiver agreements; and as a result, there was no evidence of breach of contract, fraud, ⁵⁵⁰ negligence, or conspiracy.

Appellants noted an appeal to this court, and appellee noted a cross-appeal. Questions Presented Appellants present the following questions, as rephrased by us: ■ 1. Does the school waiver agreement process violate Article 14 of the Maryland Declaration of Rights because appellee was not granted the power by the Legislature to enter into the agreements? 2. If the process does not violate Article 14 of the Maryland Declaration of Rights, is it arbitrary and capricious? 3.

Are the claims barred by the statute of limitations? 4. Are the claims barred by res judicata? With respect to the cross-appeal, appellee presents the following questions, as rephrased by us: 1. Are appellants’ claims barred because appellants failed to exhaust administrative remedies? 2.

Are appellants’ claims based on violations of the state constitution barred for failure to comply with the notice provisions of the Local Government Tort Claims Act? 3. Are appellants’ claims barred by the doctrine of laches? 4. Does appellants’ claim under 42 U.S.C § 1983 state a claim upon which relief can be granted? Discussion 1.

Appellants contend that the compensation received by ap-pellee pursuant to the waiver agreements constituted an excise tax. Appellants assert that a charter county, such as appellee, does not have the power to tax unless it has been delegated that power by the Legislature. The circuit court agreed with appellants that the compensation was an excise tax but found that appellee had the power to impose the tax under Maryland Code, Article 25A, section 5(0), the enabling ⁵⁵¹ legislation for charter counties, or pursuant to the Laws of Maryland 1986, chapter 350, a public local law. Appellants disagree with that conclusion.

Appellee contends that the compensation received pursuant to the agreements was not a tax, and that the agreements were valid, binding agreements. We agree with appellee. Appellants are correct that the county has taxing power only to the extent delegated by the State. See Waters Landing Limited Partnership v. Montgomery County, 337 Md. 15, 19 , 650 A.2d 712 (1994).

Appellee has not been given general power to tax. Appellants are also correct that, if the compensation received by appellee under the school waiver agreements