Inlet Associates v. Assateague House Condominium Ass'n

MURPHY, Chief Judge. This case involves a taxpayers’ action to enjoin, and conversely a real estate developer’s suit to compel, the conveyance of a municipality’s public right-of-way in part of a dedicated street, together with riparian rights purported to accrue as a result of the municipality’s interest in the dedicated streets I In December 1984, Inlet Associates (Inlet) obtained an option to purchase property known as “Holt’s Landing,” located at South Division Street between Philadelphia Ave ⁴¹⁸ nue and the Sinepuxent Bay in downtown Ocean City, Maryland. South Division Street, a 75-foot wide dedicated street, extends from the boardwalk which abuts the Atlantic Ocean on the east to Sinepuxent Bay on the west; it intersects with Baltimore and Philadelphia Avenues. To the immediate north of Holt’s Landing, fronting on the north side of South Division Street, is a Coast Guard Station owned by the United States.

Inlet planned to construct a hotel and marina complex on the Holt’s Landing property. In furtherance of its plans, Inlet’s managing partner, Leo D’Aleo, appeared before a public work session of the City Council of Ocean City on August 28, 1985. At that time, D’Aleo proposed alternate plans for the development of the property, one of which contemplated utilizing, as part of the hotel building site, 25 feet of the southerly side of South Division Street, the length of which extended some 275 feet from Philadelphia Avenue to the bay. By obtaining this additional land, Inlet would be able to construct a larger hotel complex than if it was required to build it entirely on the Holt’s Landing property.

In addition, Inlet’s plan contemplated using the City’s riparian rights in the western terminus of South Division Street to enable it to construct pavilion shops on a pier to be erected into the bay. Under this plan, and in exchange for these rights from the City, Inlet would provide a number of public amenities to enhance the revitalization of the project area, including a bay-front public boardwalk. On September 2, 1985, at a regular session of the City Council, this plan was presented to the Council. After some discussion of the proposal, the Council scheduled a public hearing for October 21,1985, to permit public expression on the proposed plan.

As advertised, the public notice of the meeting stated that the Council would consider Inlet’s request that the City “abandon as a part of a public street and ... grant, convey and quitclaim unto Inlet Associates ... the southernmost twenty-five (25) foot strip of South Division ⁴¹⁹ Street from Philadelphia Avenue to the Bay for the full width of twenty-five (25) feet, all riparian rights and all interest in and to South Division Street for the full seventy-five (75) foot width of South Division Street westward from the terminus of South Division Street and the Bay.” At the October 21 public meeting, the Council President asked D’Aleo to explain the purpose of Inlet’s request. D’Aleo stated that Inlet was “attempting to swap” 25 feet of the City’s public right-of-way on South Division Street in return for Inlet’s bulkheading the end of the street, providing a public boardwalk in front of the waterfront marina, installing street lighting and benches, and maintaining the entire area. D’Aleo also referred to six retail stores to be located in the marina complex. At this point, the Council President made clear that Inlet’s building project had been submitted to the Ocean City Planning and Zoning Commission for approval and that all the Council was then considering was whether to grant Inlet’s request to abandon and close the southerly 25 feet of South Division Street.

One councilman stated that the City would be “swapping what they regard as possibly unused street square footage for this privately constructed public walkway.” The Council President noted that Inlet’s project had been discussed at the August 28 public work session of the Council; he said that the Council believed that the amenities to be provided by Inlet in return for the 25-foot strip of South Division Street “were in the public interest” and that the purpose of the public hearing was to determine “if the public really did agree that it was worth trading 25 feet of the street for the amenities we were receiving.” A motion was then made that the City approve “the trading” of the 25-foot strip in return for the public amenities to be provided by Inlet, with the proviso that the hotel be limited to five stories in height, that the retail activity be limited to six shops, and that if Inlet’s project failed for any reason the 25-foot wide section of South Division Street would revert back to the City. Before the vote on the motion, the City Solicitor reminded ⁴²⁰ the Council that Inlet also wanted “the riparian rights of the western terminus of the entire [75-foot] street for the purposes of the pier.” The Council then voted unanimously (7-0) to approve Inlet’s request. By letter dated December 19, 1985, the City Solicitor confirmed that the municipality “as a result of formal action taken [by the Council] after the public hearing ... held on October 21, 1985,” had agreed, subject to the stated conditions, to “abandon and quitclaim” to Inlet the southerly 25 feet of South Division Street from Philadelphia Avenue west to the Bay”; and to “assign riparian rights adjacent to South Division Street from its western terminus to enable Inlet to construct a pier into the Bay.” The letter further specified Inlet’s agreement to limit retail activity on the pier to marina-related shops; to limit the height of its hotel to five stories; to construct a seawall and bulkhead at the southern boundary of its property; to construct a boardwalk at least 15 feet in width along the entire western edge of its property from South First Street to the northern side of South Division Street; to grant a public right-of-way over the boardwalk; and, if requested by the City, to construct a 10-foot boardwalk down the northern side of South Division Street from the bay to Philadelphia Avenue; and to maintain the improvements and install certain street lights in the area. The City Solicitor’s letter stated that “formal documentation” would have to be prepared which would provide “for a reverter to the City in the event Inlet fails to comply with the terms and conditions [of the agreement].” Following the favorable vote on the Council’s resolution, Inlet exercised its option and purchased the Holt’s Landing property.

It expended substantial sums of money in preparing plans to develop the project, ranging between one and two million dollars. Inlet obtained site plan approval for the property, a permit to construct the marina, and a height variance to allow for a five-story hotel. Up to this time, there was no opposition to the Inlet plan. ⁴²¹ The Corps of Engineers, in the summer of 1986, required Inlet to change the proposal for its contemplated pier into the waters of the bay at the end of South Division Street. As a consequence, Inlet returned to the City Council on September 15, 1986 and requested an amendment to the Council’s resolution to permit it to construct a restaurant in place of the pavilion shops.

Whether the restaurant would be built upon the pier, or would be located entirely landward of the bay across the full 75-foot width of South Division Street, is not clear from the record. In any event, on motion duly made the Council agreed to the amendment by a 3 to 2 vote, with the proviso that the restaurant not exceed one story. Because of some irregularity at this meeting, the Council reconsidered the proposal on October 6, 1986, again approving it, this time by a 4-2 vote. At the October 6 meeting, the question arose for the first time as to whether the disposition of the City’s property interests required an ordinance rather than a resolution.

The City Solicitor advised the Council that the City Charter permitted disposition of property by resolution after public notice and a public hearing. In October 1986, the City Solicitor prepared an “Agreement and Declaration of Covenants, Conditions, and Restrictions” between Ocean City and Inlet; it was characterized as a “general plan of development.” It recited Inlet’s ownership of the Holt’s Landing property; that South Division Street was a dedicated 75-foot public street; that the Planning Commission of Ocean City had approved Inlet’s project to construct a hotel with marina facilities; that Ocean City wanted Inlet’s property “developed as part of its comprehensive effort toward the redevelopment of ‘downtown’ Ocean City”; that as part of the redevelopment Ocean City wanted to obtain “public access and rights of way along the Sinepuxent Bay”; that Inlet was willing to grant to Ocean City, “for use and benefit of the public, a right of way along the bayside” of its property; and that Inlet wanted the use of the 25-foot southerly strip of South Division Street “and certain riparian rights of both South ⁴²² Division Street and South First Street.” The agreement then set forth its terms and conditions which were consistent with the City Solicitor’s earlier letter of December 19, 1985. The agreement, which was promptly signed by Inlet, was accompanied by a quitclaim deed and assignment, respectively, of the City’s interest in the southerly 25-feet of South Division Street and the subject riparian rights. The Mayor of Ocean City declined to sign any of the documents, stating the belief that the property transfers could only lawfully be accomplished by a duly enacted ordinance.

On November 19, 1986, a complaint was filed in the Circuit Court for Worcester County, naming Ocean City, its Mayor and City Council President as defendants. The plaintiffs were various individual taxpayers ánd property owners, most of whom resided near Holt’s Landing, together with Harrison Inn Inlet, Inc. (Harrison) and Assateague House Condominium Association (the Association), the council of unit owners of Assateague House Condominium. 1 The plaintiffs sought to enjoin the signing of any contract or deed for the conveyance of the 25-foot right-of-way on South Division Street or the assignment of the riparian rights; they claimed, inter alia, that valuable public property was being given without adequate consideration to private persons. The plaintiffs sought a declaration that in approving the subject property transfer, Ocean City had acted ultra vires; that an ordinance, rather than a resolution, was required to make any such dispositions; that the City Charter, as a condition to disposing of municipal property, required a determination by the City Council that the property was not needed for any public use and that the Council made no such determination. The plaintiffs further alleged that the City Council’s action was unlawful due to ⁴²³ conflicts of interest among Council members voting on the resolution; that the resolution itself was vague and unenforceable as an agreement; that the public notice of the Council meeting of October 21, 1985 failed to fairly apprise the public of the subject matter involved and the terms of the proposed transfers; that the terms of the purported agreement were materially varied after the adoption of the original October 21, 1985 resolution without additional public notice, as required by the charter.

The plaintiffs claimed that the suit was filed in the interest of the public to save substantial public funds in the form of property rights and that they should be awarded reasonable counsel fees and expenses. Ocean City and the individual defendants sought dismissal of the suit. Among other averments contained in their answer to the complaint, they asserted that a majority of the Council believed that a 75-foot wide street was not needed; that all other streets in downtown Ocean City were 50 feet in width; that maintenance of the additional 25 feet was not justified; and that the exchange for the boardwalk right-of-way along the bay was more beneficial to the public. Inlet intervened in the action as a party defendant.

It set forth nine defenses to the plaintiffs’ complaint, including lack of standing to sue; that the plaintiffs had unclean hands; that they were guilty of laches; that the plaintiffs’ action was barred by estoppel and waiver; and that no ordinance was required by the City Council to effectuate the proposed property transfers. Inlet also filed a cross-claim and counterclaim against Ocean City and the plaintiffs. It alleged that it had expended over one million dollars in reliance upon the Council’s favorable resolution and that a contract was thereby created between the City and Inlet. Inlet averred that the southerly 25 feet of South Division Street was “surplus” municipal property; that it had been the long-standing practice of the City to sell surplus municipal property to developers by resolution, and not by ordinance; and that no ⁴²⁴ ordinance was required by the City Charter to close or abandon streets or to assign riparian rights.

Inlet, therefore, sought a declaratory judgment that no ordinance was required and it also sought specific performance of its agreement with the City. The circuit court (Edmondson, J.), after an evidentiary hearing, concluded that the plaintiffs had standing to bring the suit; that the Ocean City Charter required an ordinance, rather than a resolution, to transfer the property interests in question; that the Council resolutions approving such property dispositions were, therefore, ultra vires and void; and that the plaintiffs’ suit was not barred by laches, estoppel or unclean hands. The court enjoined the defendants from executing and signing any contract, deed, or other document transferring or conveying the subject property interests. The court denied Inlet’s claim for specific performance; it also denied plaintiffs’ request for counsel fees and out-of-pocket expenses as against both Inlet and Ocean City.

Both Inlet and the plaintiffs appealed to the Court of Special Appeals. We granted certiorari prior to decision by the intermediate appellate court to consider the significant legal issues raised in the case. II Inlet first contends that the trial judge erred in determining that the City must pass an ordinance to authorize the conveyance of the property interests in question. It postulates that the City Council’s resolution authorized the conveyance of “essentially surplus property in return for the public amenities which would enhance the revitalization of the downtown area.”.

According to Inlet, this procedure of conveying City property by resolution was consistent with the practice in Ocean City since 1918. Nothing in the City Charter, Inlet argues, mandates that the authorization to convey City property must be by ordinance; to so require, Inlet claims, would unnecessarily hamper the functioning of municipal government. Inlet suggests that at best the ⁴²⁵ Ocean City Charter provisions are ambiguous as to the need for an ordinance as a prerequisite to the conveyance of City property. It therefore relies on the principle that a longstanding interpretation of the Charter as not requiring an ordinance should be followed.

Moreover, Inlet argues that because it relied to its detriment on the long-standing practice to convey by resolution, and expended large sums of money in reliance upon the practice, the City and its officers, who must execute the quitclaim deed and assignment, are equitably estopped from requiring an ordinance to accomplish the property transfers in this case. (A) The present Charter of Ocean City was adopted on August 17, 1965, pursuant to the provisions of the Municipal Home Rule Amendment, Article XI-E of the Constitution of Maryland, which was ratified by the people on November 2, 1954. The general purpose of the constitutional provision was to permit municipalities to govern themselves in local matters. Birge v. Town of Easton, 274 Md. 635 , 337 A.2d 435 (1975).

Maryland Code (1981 Repl.Vol.), Article 23A, § 1 empowers municipal corporations to “pass and adopt all ordinances, resolutions or bylaws necessary or proper to exercise the powers granted herein or elsewhere.” Section 2 of Article 23A implements Article XI-E by an express grant of powers to municipalities. Annapolis v. Annap. Waterfront Co., 284 Md. 383, 389 , 396 A.2d 1080 (1979). This section enumerates a number of “express ordinance-making powers” ranging in subject matter from advertising through zoning; it authorizes the municipality “to pass such ordinances not contrary to the Constitution of Maryland, public general law, or public local law as they may deem necessary” for municipal purposes.

Among other express powers contained in § 2(b) is that granted by subparagraph (24) which authorizes a municipality “to sell at public or private sale after twenty days’ public notice and to convey to the purchaser or purchasers thereof any real or leasehold property belonging to the ⁴²⁶ municipality when such legislative body determines that the same is no longer needed for any public use.” Prior to the enactment in 1965 of Ocean City’s present Charter, the municipality’s Charter provisions were contained in the Code of Public Local Laws of Worcester County, §§ 170-208 (Everstine, 1961). Section 184 of the former Charter vested power in the City Council to make ordinances for a broad range of municipal purposes, expressly including the closing or altering of streets, lanes, and alleys. It further provided that the Mayor and City Council of Ocean City was vested with “control and superintendence over the public property of the city, and the ... easements of the public streets, ... with power to grant the same whenever to them the interest of the public shall demand.” Section 185 of the former Charter expressly empowered the City Council “to pass all such ordinances not contrary to the Constitution of this State as it may deem necessary ... (3) for the protection and preservation of the city’s property, rights and privileges”; and (54) “to close streets or parts of streets, lanes or alleys.” Ocean City’s present Charter is arranged in fifteen Titles, covering Sections C-102 through C-1511.

Section C-406 requires the City Council to keep a journal of its proceedings, including final action taken “on any question, resolution or ordinance.” Section C-409 deals with procedures for enacting ordinances; it specifies that no ordinance may be passed at the meeting at which it is introduced; that after its first reading the proposed ordinance shall be published in a newspaper of general circulation in the municipality; and that no ordinance will be effective until approved by the Mayor or passed over the Mayor’s veto by the City Council. Section C-410 deals with vetoes of ordinances by the Mayor and contains provisions relating to an override of the May- or’s veto. Section C-411 entitled “Referendum” establishes the procedure for petitioning ordinances to referendum vote of the people of the municipality. Section C-413A provides for the general powers and duties of the City Council.

It authorizes the Council to ⁴²⁷ make all “policy decisions,” subject to the provisions of the Charter. Section C-414 outlines the powers of the City Council “to pass all such ordinances not contrary to the Constitution and laws of the State of Maryland or this charter as it may deem necessary” for municipal purposes. Section 414(49) entitled “Property” authorizes the Council to “convey any real or leasehold property when no longer needed for the public use, after having given at least twenty (20) days’ public notice of the proposed conveyance.” Section C-414(53) entitled “Streets” permits the Council to regulate the use of streets and to “close streets, or parts of streets, lanes or alleys and to permit the construction of public structures at the point where said streets dead end at parks, at the beach or at natural bodies of water.” Section C-415 provides that for the purpose of carrying out the granted powers in the Charter the Council “may pass all necessary ordinances”; it also provides that the powers of the City “shall be exercised and enforced in the manner prescribed by this charter; or, if the manner be not prescribed, then in such manner as may be prescribed by ordinance.” Section C-1103C empowers the City to “close up any existing town public way or part thereof.” Section C-1301 authorizes the City to “sell ... or otherwise dispose of any property belonging to the town.” 2 (B) 5 E. McQuillin, Municipal Corporations, § 15.02 (3d ed. 1981) explains the difference between a resolution and an ordinance. A resolution “ordinarily denotes something less solemn or formal than, or not rising to the dignity of, an ordinance.” A resolution passed by a legislative body ⁴²⁸ “deals with matters of a special or temporary character ... [and] generally speaking, is simply an expression of opinion or mind concerning some particular item of business coming within the legislative body’s official cognizance, ordinarily ministerial in character and relating to the administrative business of the municipality.” Id.

See also Shaw v. City of Wakeeney, 187 Kan. 301 , 356 P.2d 832 (1960); Baker v. City of Milwaukie, 17 Or.App. 89 , 520 P.2d 479 (1974); Evans v. City of Jackson, 202 Miss. 9 , 30 So.2d 315 (1947). 1 C. Antieau, Municipal Corporation Law, § 414 (1988) declares that all administrative or ministerial powers possessed by the governing body of a municipality may be exercised by resolution. See State ex rel. Morrison v. City of Seattle, 6 Wash.App. 181 , 492 P.2d 1078 (1971); Kalamazoo Mun. Util.

Assn. v. City of Kalamazoo, 345 Mich. 318 , 76 N.W.2d 1 (1956). An ordinance is distinctly a legislative act; it prescribes “some permanent rule of conduct or government, to continue in force until the ordinance is repealed.” McQuillin, supra, § 15.02. Municipal charters generally “contemplate that all legislation creating liability or affecting in any important or material manner the people of the municipality should be enacted by ordinances.” Id. Of course, a common distinction between a resolution and an ordinance is that only the latter need be signed by the Mayor or passed over his veto.

Id. That municipal enactments must be in the form of ordinances when so required either by charter or statute is clear. See Antieau, supra, § 415 and cases there cited. Otherwise stated, whenever the controlling law directs the legislative body to do a particular thing in a certain manner the thing must be done in that manner.

We recognized these principles in Hagerstown v. Long Meadow Shopping Center, 264 Md. 481 , 287 A.2d 242 (1972). Citing McQuillin, supra, § 15.02, we there concluded that, absent an ordinance, a long-standing policy of a municipality not to require a building permit in certain circumstances was without legal effect. See also Havre de Grace v. State Board, 234 Md. 222 , 198 A.2d 732 (1964). Indeed, our cases ⁴²⁹ recognize that if a municipal action is one of general application prescribing a new plan or policy, it is considered legislative and therefore must be accomplished by ordinance.

See, e.g., City of Bowie v. County Comm’rs, 258 Md. 454, 463-64 , 267 A.2d 172 (1970); Scull v. Montgomery Citizens League, 249 Md. 271, 282 , 239 A.2d 92 (1968). See also McQuillin, supra, § 10.06. (C) As already observed, § 2 of Article 23A, in enumerating the powers granted to the legislative body of a municipality, refers to them collectively as “express ordinance-making powers.” The provisions of this statute “establish minimum requirements with respect to the affairs of municipalities [but] ... municipalities are not prohibited by the [Municipal Home Rule] Amendment or the statute from providing such additional standards and safeguards as to them seem appropriate.” Reed v. Pres. of North East, 226 Md. 229, 249 , 172 A.2d 536 (1961). Consistent with § 2 of Article 23A, §§ C-414 and C-415 of the Ocean City Charter refer collectively to the exercise of the powers granted to the City Council in terms of enacting ordinances.

Of the fifty-eight express powers enumerated in C-414, four contain a provision for their exercise “by ordinance” or “by appropriate ordinance.” 3 As all the powers granted to the legislative body by Article 23A, § 2 are characterized as ordinance-making powers, we reject Inlet’s suggestion that the passage of an ordinance is required under the Ocean City Charter only in connection with those four subsections of § C-414, and, conversely, when special mention of an ordinance is omitted, as in most other sections of the charter, including §§ 0-414(49), C-1301, and C-1103, an ⁴³⁰ ordinance is not necessary. To so conclude would, of course, permit the City Council to exercise most of its governing powers without ever enacting an ordinance which was subject to the executive’s veto or the people’s right to referendum. Manifestly, this runs counter to the provisions of Article 23A, § 2, which in their entirety demonstrate an intention that the city council act upon municipal affairs through ordinances when performing its legislative function. On the other hand, since Article 23A, § 2 and § C-406 of the Ocean City Charter also authorize the City Council to act by resolution in the exercise of its granted powers, the enactment of ordinances in every instance was not contemplated; otherwise, the City Council could never act by resolution.

Consequently, we think it plain that the express mention of “ordinance” in the four subsections of § C-414 is, at most, a drafting redundancy. 4 Implicit in the statutory and charter provisions is the recognition that the city council may act only by ordinance when enacting municipal legislation. Thus, where the charter requires that the municipal action be done by ordinance, as with legislative acts, a resolution will not suffice. McQuillin, supra, § 15.06. In considering the legality of the action taken by the City Council in this case, therefore, and in particular whether in the circumstances the conveyances could properly be authorized by resolution, we look to the substance of what the City Council undertook to achieve by its action.

We first note that streets are held and controlled by the municipality “as avenues of communication for the whole public, and not to be hired or rented to private persons for revenue. ... [T]he general public [is] entitled to the use of the street from end to end and from side to side.” Huebschmann v. Grand Co., 166 Md. 615, 628 , 172 A. 227 (1934), quoted with approval in Perellis v. M. & C. C. ⁴³¹ of Balto., 190 Md. 86, 93 , 57 A.2d 341 (1948). In other words, the streets of a municipality are held in trust for the benefit, use, and convenience of the general public. Sinclair v. Weber, 204 Md. 324 , 104 A.2d 561 (1954); Townsend, Grace & Co. v. Epstein, 93 Md. 537 , 49 A. 629 (1901). Thus, the closing of a street, and the conveyance of the City’s interest in the street solely for the private benefit of another, is not within the legislative body’s power; whether to close a dedicated street necessarily turns “upon considerations of public benefit, and not by barter and sale to private interests, otherwise the location of the highways would be in the hands of the highest bidders.” Perellis, supra, 190 Md. at 94-95 , 57 A.2d 341 .

See also Van Witsen v. Gutman, 79 Md. 405 , 29 A. 608 (1894) and Rescue Fire Co. v. County Commissioners, 188 Md. 354 , 52 A.2d 733 (1947). These same principles, we think, apply to the assignment of the City’s riparian rights, if any, at the western terminus of South Division Street and South First Street. Article 23A, § 2(b)(24), which authorizes a municipality to sell and convey municipal property, requires that the “legislative body determine[ ] that the same is no longer needed for any public use.” Section C-414(49) of the Ocean City Charter, dealing with the conveyance of City-owned property, authorizes the City Council to convey such property “when no longer needed for the public use.” The requirement that the legislative body affirmatively make such a determination is implicit in Ocean City’s Charter; indeed, it is mandated by the controlling provisions of Article 23A, § 2(b)(24). While §§ 0414(53), C-1103C, and C-1301 of the City Charter separately authorize the City Council to close or abandon a dedicated street, a determination that there is no longer any public need for the street is requisite to the validity of the Council’s action.

(D) The purported agreement between Inlet and Ocean City encompassed more than merely a street closing and assign ⁴³² ment of municipal riparian rights. These proposed conveyances were inextricably tied to, and provided the quid pro quo for, Inlet’s willingness to provide and maintain the heretofore described public amenities by which, along with its own construction projects,