K. Hovnanian Homes v. Havre de Grace

K. Hovnanian Homes of Maryland, LLC, et al. v. Mayor and City Council of Havre de Grace, et al., No. 22, September Term, 2020, Opinion by Booth, J. MUNICIPAL CONTRACTS – ESTABLISHMENT OF FEES – MUNICIPAL HOME RULE AMENDMENT – ACTIONS INCONSISTENT WITH DELEGATION OF EXPRESS POWERS UNENFORCEABLE – K. Hovnanian Homes of Maryland, LLC sought to enforce an agreement against the Mayor and City Council of Havre de Grace, which was approved by the City Council by a verbal motion at a public meeting, but was not executed by the Mayor. The Court held that the agreement is not a valid and enforceable contract against the City. Stripped of its labels, the governmental action that is the subject of the agreement is the imposition and collection of a fee on municipal property owners. Under the Municipal Home Rule Amendment of the Maryland Constitution, Article XI-E, as well as the express powers delegated to municipalities by the General Assembly, and the applicable provisions of the Havre de Grace Charter, the imposition of a fee by the City must be undertaken by the municipal legislative body known as the “Mayor and City Council of Havre de Grace” and pursuant to a duly enacted ordinance.

Because no such ordinance was enacted, the agreement is ultra vires and unenforceable. Circuit Court for Harford County Case No.: 12-C-12-003214 Argued: December 8, 2020 IN THE COURT OF APPEALS OF MARYLAND No. 22 September Term, 2020 K. HOVNANIAN HOMES OF MARYLAND, LLC, et al. v. MAYOR AND CITY COUNCIL OF HAVRE DE GRACE, et al. Barbera, C.J. McDonald Watts Hotten Getty Booth Biran, JJ. Opinion by Booth, J. Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. Suzanne Johnson 2021-01-29 14:49-05:00 Filed: January 29, 2021 Suzanne C. Johnson, Clerk In this case, we are asked to determine whether a developer, K. Hovnanian Homes of Maryland, LLC (“Hovnanian”), can enforce an agreement against the Mayor and City Council of Havre de Grace (“Mayor and City Council”), which was approved by the City Council by a verbal motion at a public meeting.

The agreement, which is titled “Infrastructure Capital Projects Cost Recoupment Agreement” (sometimes referred to as “Recoupment Agreement” or “Agreement”), provides that the City will impose and collect a “recoupment fee” for each residential dwelling unit constructed on two parcels of property described as “Parcel 2” and “Parcel 3” in connection with the development of 414 residential dwelling units on those properties. Hovnanian constructed residential units on the adjacent parcel known as “Parcel 1,” as well as water, sewer, and other infrastructure that serve the Parcel 1 development, which Hovnanian contends will also benefit residences constructed on Parcels 2 and 3. Under the terms of the Recoupment Agreement, the City will collect a fee in the amount of $3,304.57 per residential dwelling unit, to be paid by the property owners upon the issuance of each building permit, and remit the fee to Hovnanian, representing the property owners’ pro rata share of Hovnanian’s infrastructure costs. The potential aggregate amount of fees that will be collected and remitted to Hovnanian under the Agreement is $1,368,094.47.

The City’s collection obligations are for 21 years. After the City Council approved the Recoupment Agreement by verbal motion and authorized the Mayor to sign the Agreement, the owners of Parcels 2 and 3 objected to the Agreement. Hovnanian and the property owners were not able to agree on a reimbursement amount, and the Mayor refused to sign the Recoupment Agreement. In the meantime, development activities commenced on Parcel 3, resulting in the issuance of 33 building permits.

The City did not collect any recoupment fees sought by Hovnanian under the Recoupment Agreement. Hovnanian filed a complaint against the Mayor and City Council of Havre de Grace in the Circuit Court for Harford County.1 In its complaint, Hovnanian sought: (1) a declaration that the Agreement is a “valid, binding and enforceable contract[;]” (2) the issuance of a writ of mandamus directing the current Mayor to sign the Agreement and record it in the land records; and (3) damages in the amount of $109,050.81, representing the fees that the City failed to collect on the first 33 building permits, plus per diem interest at the statutory rate of 6%. The case was decided on cross-motions for summary judgment, with the parties focusing their legal arguments on the applicable provisions of the Havre de Grace Charter (“Charter”). After the first summary judgment hearing, the circuit court determined that under the Charter, the Agreement was not valid and enforceable and entered judgment in favor of the Mayor and City Council.

Hovnanian appealed. The Court of Special Appeals reversed the circuit court’s judgment and remanded for further proceedings. Once again, the parties filed cross-motions for summary judgment. This time, the circuit court declared that under the applicable provisions of the Charter, the Agreement was, in fact, a binding and enforceable contract.

The circuit court issued a writ of mandamus directing the Mayor 1 The lawsuit was filed by K. Hovnanian Homes of Maryland, LLC (“Hovnanian”) and its affiliated entity, Greenway Investments, LLC against the Mayor and City Council of Havre de Grace, and William T. Martin, Mayor, in his official capacity. For simplicity’s sake, we shall collectively refer to the plaintiffs (now Petitioners) as “Hovnanian” and the defendants (now Respondents) as the “Mayor and City Council” or the “City.” 2 to record the Agreement and entered judgment against the Mayor and City Council and in Hovnanian’s favor, in the amount of $144,822.32. The City appealed to the Court of Special Appeals. In a reported opinion, the Court of Special Appeals reversed the judgment of the circuit court.

Mayor and City Council of Havre de Grace v. K. Hovnanian Homes of Maryland, LLC, 246 Md. App. 144, 159 (2020). The Court of Special Appeals considered the Recoupment Agreement, and the City’s authority to execute it, within the context of the Charter. Id. at 149–56. Based upon its reading of the Charter, the intermediate appellate court concluded that the structure of the Havre de Grace government constituted “a strong mayor system[.]” Id. at 150 .

The Court of Special Appeals reasoned that “[e]ntering into contracts is an executive branch function.” Id. at 154 . Accordingly, the intermediate appellate court held that the Mayor, as the executive branch official, or his subordinate, must enter into the Recoupment Agreement. Id. at 158–59. Because the Mayor did not execute the Agreement, the Court of Special Appeals held that the City could not be bound.

Id. at 159 . Hovnanian petitioned for writ of certiorari, and we granted its petition to answer the following question, which we have rephrased:2 2 The questions presented in the petition for writ of certiorari were: 1. Did the Court of Special Appeals err by holding that a “strong mayor” city charter abrogates the common law of municipal contracts, which gives a city council power to enter into contracts by motion or resolution without the mayor’s signature? 2. Did the Court of Special Appeals err by holding that under the separation of powers doctrine, a “strong mayor” city charter invalidates a recoupment agreement entered into by a city council without the mayor’s signature? 3 Did the City Council’s verbal motion at a public meeting to approve the Recoupment Agreement create a binding and enforceable agreement?

For the reasons set forth below, we answer the question in the negative. We affirm the judgment of the Court of Special Appeals, but for entirely different reasons. As set forth more fully herein, the applicable provisions of the Charter must be read within the context of Maryland Constitution, Article XI-E, Section 5 and the General Assembly’s delegation of express ordinance-making powers as set forth in Title 5, Subtitle 2 of the Local Government Article. Under the Maryland Constitution, the express powers delegated by the General Assembly, and the applicable provisions of the Charter, the imposition of a fee by the City must be undertaken by the municipal legislative body known as the “Mayor and City Council of Havre de Grace” and pursuant to a duly enacted ordinance.

Because no such ordinance was enacted, the Recoupment Agreement is ultra vires and unenforceable. I Factual Background A. Annexation and Development of Parcel 1/Phase 1 In 2004, the Mayor and City Council of Havre de Grace adopted Annexation Resolution 244, which annexed approximately 150 acres of undeveloped property to the City. Greenway Investments, LLC (sometimes referred to as “Greenway Investments”) owned 133 acres of the property that was the subject of the annexation (the “Greenway Property” or “Property”). The Annexation Resolution contemplated that up to 690 residential dwelling units would be constructed on the Greenway Property.

The 4 Annexation Resolution set forth the general terms and conditions for constructing public improvements that would be required to serve the new development. Specifically, the owners of the Greenway Property would be responsible for all on-site public improvements to serve the Property, including water and sewer lines and public roads. After the improvements were constructed at the owner’s expense, the Resolution contemplated that the water and sewer facilities and roads would be dedicated and accepted by the City, thereby becoming part of the public infrastructure. Following annexation, Greenway Investments and Hovnanian worked with the City on a development plan for the Greenway Property consistent with the terms of the Annexation Resolution.

In October 2005, the Greenway Property was subdivided into three separate parcels, identified as Parcels 1, 2, and 3. At the time of subdivision, a site plan was approved by the City’s director of public works, which reflected the intended development of the three separate parcels in three corresponding phases. Specifically, the site plan contemplated that Parcel 1 would be developed as “Phase 1” (consisting of 276 residential units), Parcel 2 would be developed as “Phase 2” (consisting of 166 residential units), and Parcel 3 would be developed as “Phase 3” (consisting of 248 residential units). In December 2005, the Mayor and City Council, Greenway Investments, and Hovnanian entered into a public works agreement for the construction of Phase 1 (“2005 PWA”).

Although the recitals in the 2005 PWA referenced the contemplated development of the three distinct phases, the agreement only addressed the construction obligations associated with Phase 1, as well as the construction of some off-site improvements consisting of road and bridge improvements. Consistent with the Annexation Resolution, 5 the 2005 PWA contemplated that all public facilities3 would be constructed by Greenway Investments and Hovnanian (defined in the agreement as “Developers”), at the Developers’ expense, and after inspection, dedicated to the City, thereby becoming public infrastructure. Notably, the 2005 PWA did not contain any recoupment provision that would permit the Developers to be reimbursed for construction costs associated with Phase 1 infrastructure that might be used by other residential properties developed in later phases. Thereafter, Hovnanian and Greenway Investments proceeded to develop Phase 1 and constructed the infrastructure necessary to serve that residential development, including water, sewer and stormwater facilities, and roads.

B. Parcels 2 and 3 Conveyed into Separate Ownership While Greenway Investments pursued subdivision and site plan approval, the company underwent a change in ownership. In February 2005, the four individual members of Greenway Investments entered into a contract with Hovnanian to purchase all the membership interests in Greenway Investments. By January 2006, Greenway Investments was owned by Acacia Credit Fund 10-A, LLC (“Acacia”), an entity affiliated with Hovnanian. The terms and details of the acquisition are not relevant to the issue presented in this case.

For our purposes, it is sufficient to note that, by the completion of the various transactions, Hovnanian had acquired title to Parcel 1, and Acacia owned Parcels 2 and 3. The purchase of Parcels 2 and 3 was financed by the former owners of 3 The 2005 PWA described the public facilities to be constructed by the Developers and conveyed to the City, as including a bridge, water, sewer, roads, storm drainage, stormwater management, sediment control, street lighting, street signs, rights-of-way and easements for future utilities, gas, electric, telephone, sidewalks, and cable television. 6 Greenway Investments, and was evidenced by a promissory note and secured by an indemnity deed of trust which created a lien on Parcels 2 and 3. In 2007, after Acacia defaulted on the promissory note, the lenders (and former owners of Greenway Investments) commenced foreclosure proceedings on Parcels 2 and 3. After a judicial sale, title to Parcels 2 and 3 was transferred back to the original owners of Greenway Investments, and neither Hovnanian nor Acacia had any further ownership interest in those parcels.

C. Efforts to Develop Parcels 2 and 3 By 2009, after acquiring Parcels 2 and 3 through the foreclosure sale, the owners of Parcels 2 and 3 (the “Owners”)4 worked with the City to re-start development efforts on those parcels. To that end, the Owners and the Mayor and City Council of Havre de Grace entered into a public works agreement in December 2009 (“2009 PWA”) for the construction of 414 dwelling units on Parcels 2 and 3. Pursuant to the terms of the 2009 PWA, the Owners contractually agreed to reimburse the City for certain limited infrastructure expenses related to water improvements and two roads. The Owners also agreed to reimburse Hovnanian for the actual cost incurred for the installation and materials necessary to construct those portions of Martha Lewis Boulevard and Mohegan Drive which will solely service Phases 2 and 3 of Greenway Farm and for the actual cost incurred for the installation and materials necessary to construct any water and sewer lines constructed by [Hovnanian] in Phase 1 which will solely service Phases 2 and 3. 4 Following the judicial sale, title to Parcel 2 was conveyed to Greenway Holding Parcel 2, LLC and title to Parcel 3 was conveyed to Greenway Holding Parcel 3, LLC. 7 Although the 2009 PWA contemplated that the Owners would reimburse Hovnanian for certain expenses related to road, water, and sewer improvements that had been constructed as part of Phase 1 and that “solely service[d]” Phases 2 and 3, the agreement did not provide for any specific amount, and contemplated that these fees would be memorialized in a future agreement.

After the execution of the 2009 PWA, the Owners and Hovnanian were not able to reach an agreement on a specific reimbursement amount to be paid by the Owners for their pro rata share of Hovnanian’s Phase 1 infrastructure costs. The Owners and Hovnanian sent the City various correspondence and memoranda setting forth their respective positions. The Owners disputed the recoupment amount sought by Hovnanian, believing it to be excessive and inequitable, given Hovnanian’s default on its loan obligations, and subsequent foreclosure which the Owners alleged resulted in a monetary loss in excess of $6 million, as well as lapsed permits, which the Owners contended forced them to incur additional expenses.5 Given the Owners’ and Hovnanian’s inability to agree on an amount, in June 2010, the City Attorney wrote to counsel for Hovnanian advising that, in light of the significant 5 In a written memorandum from the Owners to the City Council explaining the Owners’ objections to Hovnanian’s proposed reimbursement of its infrastructure costs, the Owners contended that the deed of trust instrument represented a non-recourse obligation, meaning that Acacia would not be responsible for any deficiency to the extent that the Owners’ loss exceeded the value of the property. The Owners asserted that Hovnanian and Acacia’s default on the loan obligation “cost[] them over $6 [m]illion.” Additionally, according to the Owners, Hovnanian “allow[ed] its stormwater and erosion control permits to lapse, and otherwise commit[ed] waste on [Parcels 2 and 3], [which] cost the [Owners] approximately $2 [m]illion.” 8 difference between the positions asserted by Hovnanian and the Owners, “I strongly suggest that if there is going to be a negotiation of the amount considered by [Hovnanian], as opposed to an amount set by the City, that those discussions take place between [Hovnanian] and [the Owners].” D. The 2010 Recoupment Agreement Presented by Hovnanian Undeterred by the lack of an agreement with the Owners, in September 2010, Hovnanian prepared and presented to the Mayor and City Council an agreement titled “Infrastructure Capital Projects Cost Recoupment Agreement[.]” The parties to the Recoupment Agreement were the Mayor and City Council, Hovnanian, and Greenway Investments.

Conspicuously absent from this “agreement” were the Owners, whose property was the subject of the agreement. The recitals in the Recoupment Agreement state that the Owners of Phase 2 and Phase 3 are benefitted by the improvements previously constructed by Hovnanian and that the parties “recognize and acknowledge that it would be inequitable to impose all such costs on [Hovnanian], resulting in a windfall financial advantage for the owner(s) of Phases 2 and 3, unless provisions are made for a pro-rata recovery of such costs by [Hovnanian].” The Agreement recites that the “Mayor and City Council of Havre de Grace have determined that this Agreement is necessary to provide for the general welfare and safety of City residents” and that the agreement is further “required to protect the equitable and legal property rights of [Hovnanian.]” Under the terms of the Recoupment Agreement, the total amount of Phase 1 infrastructure determined to benefit Phases 2 and 3 is $1,368,094.47. In order to reimburse 9 Hovnanian for this amount, the Recoupment Agreement provides that the City will impose an infrastructure “fee” of $3,304.57 for each residential unit for which a building permit is issued on Parcel 2 or 3 (defined under the Agreement as the “Service Area”) over a period not to exceed 21 years. The terms of the Agreement provide that the City will remit the recoupment fees to Hovnanian within 45 days after the end of each calendar quarter.

The Agreement further states that the City will not permit any property within the Service Area to use the Phase 1 infrastructure unless and until the recoupment fee is paid to the City. E. The October 4, 2010 Verbal Approval by the City Council After Hovnanian presented the Recoupment Agreement to the City, the City Council voted 6-0 to approve the agreement at a public meeting on October 4, 2010. The City Council’s approval was made by a verbal motion and was not accompanied by a written ordinance or resolution.6 Soon after the City Council voted on the Recoupment Agreement, it became clear to the City that the Owners—who were not parties to the “agreement” and whose property alone would be subject to “fees” in excess of $1.3 million—did not agree with the terms. On October 15, 2010, counsel for the Owners emailed the City Attorney and city officials “imploring the Mayor to veto the above resolution for many reasons too numerous to put in an email” and requesting “an audience with the Mayor for the purpose of reviewing this 6 The October 4, 2010 minutes reflect that the amounts in the Recoupment Agreement had been reduced by the city public works director to ensure that the total amount represented what was believed to be the pro rata share of the Phase 1 infrastructure costs that were attributable to Phases 2 and 3.

The minutes also reflect that the public works director did not believe that the owner of Phase 1 would receive a windfall and that the agreement was similar to other negotiated agreements previously executed by the City. 10 issue.” Counsel for the Owners stated that he viewed the Agreement as “a tax used to collect a private (and illegitimate) claim” that would create a “windfall gain” to Hovnanian, and was approved “without due process, either procedural or substantive.” Counsel for the Owners stated that the “enactment of this ordinance[7] will, without question, result in needless litigation.” In November 2010, the Owners’ counsel sent the Mayor and City Council a 16-page memorandum outlining the factual and legal reasons why the Owners contended that the City Council’s approval of the Recoupment Agreement was inequitable and illegal. The Owners argued, inter alia, that the Agreement constituted the imposition of a tax by a governmental authority for the benefit of a private entity, which the City had no authority to approve under its express ordinance-making powers. The Owners pointed out that they did not agree to pay the fee, and that the City had not incurred any expenses in connection with construction of the infrastructure—which had been wholly constructed and funded by a private developer. According to the Owners, they had “received no notice and [did] not [have] an opportunity to challenge the proposed legislation.” The Owners urged the Mayor and City Council to “not implement the Resolution respecting recoupment passed October 4, 2010 and recall the measure.” After the Owners objected to its terms, the Mayor and City Council did not undertake any efforts to execute the Recoupment Agreement.

Between December 2010 and May 2011, the City, the Owners, and Hovnanian had discussions concerning Hovnanian’s recoupment terms. Separately, the Owners presented the City with a revised 7 As noted herein, although counsel for the Owners referenced an ordinance, no such legislative enactment was undertaken by the Mayor and City Council. 11 site plan for Phases 2 and 3 that would reduce or eliminate the need for residential units constructed in those phases to use infrastructure constructed by Hovnanian in Phase 1. Hovnanian proposed a revision to the Recoupment Agreement which would limit the fees imposed on residential unit owners in Phases 2 and 3 only to those units or lots that actually used the Phase 1 infrastructure. By May 2011, Hovnanian and the Owners were still at an impasse as far as the Owners’ willingness to pay Hovnanian a pro rata share of the Phase 1 infrastructure costs.

With no meeting of the minds between the Owners and Hovnanian, Hovnanian sought to enforce the terms of the Recoupment Agreement against the City notwithstanding the fact that the Mayor had not executed it. Specifically, counsel for Hovnanian advised the City Attorney that the City was “in actual or anticipatory breach of the [Recoupment Agreement],” and that, despite the City Council’s approval, “the Mayor has not signed the Agreement, thereby preventing its recordation.” Counsel for Hovnanian stated that, unless the Recoupment Agreement was signed and returned by May 31, 2011, it would commence litigation against the City. In May 2011, the City Attorney responded and mentioned that the City Council was “contemplating the reconsideration of the resolution that allowed for a recoupment agreement to be presented to the Mayor in the first place.” The City Attorney pointed out that Hovnanian had not presented deeds for the dedication of the Phase 1 infrastructure to the City, that the Mayor had not received confirmation from counsel that “the conditions for signature” have been met, and that “filing of suit . . . would negatively [affect] the efforts that have gotten us to this point.” In June 2011, counsel for Hovnanian 12 advised that Hovnanian was prepared to dedicate the improvements to the City and argued that the Agreement could not “be unilaterally rescinded” by the City Council. Despite Hovnanian’s insistence that the City had entered into a binding agreement which could not be rescinded, the Recoupment Agreement was never signed by the Mayor, and development commenced on Parcel 3.8 The City issued 33 building permits on a portion of Parcel 3 but did not collect any recoupment fees.

If the City had collected the fees contemplated by the Recoupment Agreement presented to and verbally approved by the City Council in October 2010, the total amount collected for those 33 lots would have been $109,050.81. II Procedural History Hovnanian filed a complaint against the City in November 2012. Count one of the complaint sought a declaratory judgment, and requested that the circuit court declare that the Recoupment Agreement is a valid, binding, and enforceable contract, that the Mayor’s execution of the Recoupment Agreement is a ministerial duty that the Mayor is required to perform, and that the City is required to record the fully executed Recoupment Agreement in the Land Records for Harford County. The second count of the complaint sought a writ of mandamus to compel the execution and recordation of the Recoupment Agreement.

Count three of the complaint alleged breach of contract, requesting damages in the amount of $1,368,094.47 “for the actual and anticipated breach of the Recoupment Agreement.” 8 After this litigation commenced, in September 2014, the City Council voted to rescind the October 4, 2010 verbal motion approving the Recoupment Agreement. 13 Hovnanian and the Mayor and City Council filed cross-motions for summary judgment. After a hearing, the circuit court denied Hovnanian’s motion for summary judgment, and granted the City’s motion. The circuit court found that “the October 4, 2010 City Council vote to approve the Agreement in question did not create a valid or binding contract and [] the Mayor was under no ministerial duty to sign the agreement.” The circuit court considered the authority of the City Council within the context of the provisions of Sections 19 and 34 of the Charter9 and concluded “that there was not a lawful or binding contract between the parties in this case.” Hovnanian appealed the circuit court’s entry of summary judgment to the Court of Special Appeals. In the parties’ first trip to the appellate courts, the Court of Special Appeals, in an unreported opinion, vacated the circuit court judgment and remanded the case for further proceedings.

K. Hovnanian Homes of Maryland, LLC. v. Mayor and City Council of Havre de Grace, No. 1214, 2017 WL 5054229 , at ¹¹ (Md. Ct. Spec. App. Nov. 3, 2017). The intermediate appellate court determined that neither of the Charter sections relied upon by the circuit court—§§ 19 and 34—expressly required the Mayor’s signature. Id. at ⁹.

The Court of Special Appeals declined to consider any other grounds and remanded the matter for further proceedings. Id. at ¹¹. 9 Section 19 of the Havre de Grace Charter (“Charter”) sets forth the City Council’s general authority to adopt resolutions and ordinances, and the manner that such legislative acts may be enacted. Section 34 of the Charter sets forth specific enumerated powers that may be exercised by resolution or ordinance, including matters related to public utilities, water and sewer service, special assessments, streets, and public ways. 14 After the case was remanded, Hovnanian filed a first amended complaint containing the same counts that were pleaded in the original complaint. In the first amended complaint, Hovnanian contended that, if the circuit court granted the declaratory and mandamus relief and required the execution and recordation of the Recoupment Agreement, it was entitled to the fees that were not collected for the initial 33 building permits that had been issued in Phase 3 after October 2010, totaling $109,050.81, plus per diem interest from August 20, 2012, at a statutory rate of 6%.

Once again, the parties filed cross-motions for summary judgment. This time, in a complete reversal of its previous interpretation of the Charter, the circuit court entered summary judgment in favor of Hovnanian and declared that the Recoupment Agreement was a binding and enforceable contract as of October 4, 2010 when the City Council unanimously approved the Agreement by verbal motion. The circuit court declared that the execution of the Agreement by the Mayor was a ministerial duty and that the Mayor’s refusal to sign constituted a breach of the Agreement by the Mayor and City Council. The circuit court issued a writ of mandamus directing the Mayor to execute the Agreement and record it in the land records.

The circuit court entered judgment in favor of Hovnanian and against the Mayor and City Council in the amount of $144,822.32, representing uncollected recoupment fees on the 33 building permits that had been issued, plus per diem interest, accounting from August 29, 2012 (the date that the last of the 33 permits was issued), through the date of judgment. The Mayor and City Council appealed. In a reported opinion, the Court of Special Appeals reversed the judgment of the circuit court. Hovnanian, 246 Md. App. at 159 .

The Court of Special Appeals considered 15 the Recoupment Agreement, and the City’s authority to execute it, within the context of the Charter. Id. at 149–56. Based upon its reading of the Charter, the intermediate appellate court concluded that the structure of the Havre de Grace city government—which established a Mayor and City Council—was “typical of a strong mayor system[.]” Id. at 150 . The Court of Special Appeals commented that “[e]ntering into contracts is an executive branch function.” Id. at 154 .

Accordingly, the court reasoned that the Mayor, as the executive branch official, or his subordinate, must enter into the Recoupment Agreement. Id. at 158–59. Because the Mayor did not execute the Agreement, the Court of Special Appeals held that the City could not be bound. Id. at 159 .

Hovnanian filed a petition for writ of certiorari, which we granted to determine whether the Recoupment Agreement is a valid and enforceable contract against the Mayor and City Council. As discussed below, although we land in the same place as the Court of Special Appeals, we follow a different path to get there. III Discussion A. Standard of Review The circuit court issued its decision after the parties filed cross-motions for summary judgment. A case may be resolved on summary judgment when there is no dispute of material fact and the moving party is entitled to judgment as a matter of law.

Maryland Rule 2-501(f). There are no material disputes of fact and the issue presented in this case is purely legal. “Accordingly, we review [the] legal issue without according any special deference to the conclusions of the [c]ircuit [c]ourt or the Court of Special 16 Appeals.” Waterman Family Limited Partnership v. Boomer, 456 Md. 330, 340 (2017) (citation omitted). B. Parties’ Contentions10 Hovnanian contends that the City Council’s verbal motion to approve the Recoupment Agreement on October 4, 2010 created a binding and enforceable agreement against the City. To support its position, Hovnanian directs us to the various sections of the Charter, including § 33, which gives the City Council the broad “power to pass all ordinances and resolutions,” as well as § 34, which sets forth the specific authority to “pass and create resolutions and ordinances” related to “property, property acquisition, . . . public utilities, . . . sewer and sewer service, . . . streets or public ways, . . . [and] water service.” Hovnanian asserts that the City Council had the authority to adopt the Recoupment Agreement by verbal motion, and that the City Council was the governing body with the authority to enter into such an agreement.

According to Hovnanian, to the extent that the Charter does not provide a clear answer as far as how municipal contracts are made, this Court should apply common law principles to “fill th[e] gap[.]” Hovnanian urges the Court to fill these gaps by looking to contract principles set forth in 10 McQuillin, The Law of 10 During oral arguments in this case, this Court asked counsel questions concerning the applicability of the express powers delegated to municipal legislative bodies by the General Assembly, which are enumerated in Title 5, Subtitle 2 of the Local Government Article. In light of the Court’s questions, Hovnanian filed a motion requesting that the Court consider supplemental arguments on the express powers granted to municipalities under state law. The Court granted Hovnanian’s motion and accepted additional written arguments from Hovnanian and the Mayor and City Council. We discuss the parties’ additional arguments concerning the General Assembly’s delegation of express powers as those matters are discussed in this opinion. 17 Municipal Corporations (3d. ed. rev. 2006) (“McQuillin”).

Hovnanian points out that under McQuillin, “[g]enerally, the power to make contracts on behalf of a municipality rests in the council or the governing body.” 10 McQuillin, § 29:19. Hovnanian cites McQuillin for the general proposition that the terms of a proposed contract can be adopted by ordinance, resolution, or motion. Id. § 29:3. According to Hovnanian, there is no substantive difference between a verbal motion and a resolution and either method could have been used in this instance by the City Council to adopt the Recoupment Agreement.

Relying on our discussion and analysis in Inlet Associates v. Assateague House Condominium, 313 Md. 413 (1988), Hovnanian also argues that it was appropriate for the Council to adopt the Recoupment Agreement by verbal motion and that a formal ordinance was not required to create a binding and enforceable agreement against the Mayor and City Council. Hovnanian asserts that under the Charter, the Mayor did not have the sole authority to execute the Recoupment Agreement, and that the Court of Special Appeals erred in concluding that the authority to enter into the same was an “executive function” within the exclusive authority of the Mayor. The Mayor and City Council direct us to the same provisions of the Charter—§§ 33 and 34—and assert that under those provisions, the City Council is not given any general power to enter into any contracts, nor is it given any executive power. The City argues that the Court of Special Appeals correctly determined that the execution of contracts is an executive function that lies within the authority of the Mayor.

Alternatively, in the event that this Court determines that the City Council was required to approve the Agreement, the City points out that the City Council rescinded its approval by verbal motion in 18 September 2014. The City also asserts that, at a minimum, the Mayor and City Council are required to act in concert with one another as the City’s governing body. C. Analysis—The Importance of Starting in the Right Place As is often the case with any complex legal issue, if one starts the inquiry in the wrong place, it is easy, as they say, to “miss the forest for the trees.”11 In this case, the parties and the lower courts started their analysis of the City’s authority to enter into the Recoupment Agreement from the forest floor, examining the municipal charter as if it were a tree, attempting to discern the general municipal authority to execute contracts by studying its branches. As our cases illustrate, the correct starting point for our inquiry into municipal authority starts high above the forest canopy—with an examination of the Maryland Constitution and the express powers delegated by the General Assembly to Maryland municipalities.

It is necessary to start any analysis from these sources of authority because any interpretation of the Charter, and application of secondary sources The idiom “don’t miss the forest for the trees” has its origin in a passage from Sir 11 Thomas More’s “Confutation of Tyndale’s Answer,” published in 1533, which is More’s response to William Tyndale’s writings criticizing the Catholic Church. In the second volume of the text, More writes: And as he myght tell vs, that of Poules chyrch we may well se the stones, but we can not se the chyrce. And then we may well tell hym agayne, that he can not se the wood for the trees. In its modern parlance, Merriam-Webster describes the idiom as “to not understand or appreciate a larger situation, problem, etc., because one is considering only a few parts of it.” Miss the forest for the trees, Merriam-Webster, available at https//perma.cc/49D3-YYMU. 19 as gap fillers, as suggested by Hovnanian, must be consistent with the Maryland Constitution and the express powers delegated to municipalities by the General Assembly. 1.

The Municipal Home Rule Amendment and Express Ordinance-Making Powers Granted to Municipalities Municipalities derive their authority from the Municipal Home Rule Amendment, Article XI-E of the Constitution of Maryland, which was ratified by the people on November 2, 1954. Under the Home Rule Amendment, Art. XI-E, § 3, the legislative body of a municipality may adopt, amend, or repeal its charter, consistent with the authority granted by the Maryland Constitution and the express powers conferred by the General Assembly. As we have stated on numerous occasions, “[m]unicipalities possess only such powers as have been conferred upon them by the Legislature.” River Walk Apartments, LLC v. Twigg, 396 Md. 527, 543 (2007); see also Hardy v. Hous. Mgmt.

Co., 293 Md. 394, 396 (1982) (noting “[i]t is well established under our decisions that a municipal corporation has but limited authority”); Birge v. Town of Easton, 274 Md. 635, 639 (1975) (explaining that “a municipal corporation[] possesses only limited powers”); McRobie v. Mayor and Commissioners of Westernport, 260 Md. 464, 466 (1971). This Court has often quoted 1 J. Dillon, Municipal Corporations § 237 (5th ed. 1911) as follows: A municipal corporation . . . can exercise the following powers, and no others: First, those granted in express words: second, those necessarily or fairly implied in or incident to the powers expressly granted; third, those essential to the accomplishment of the declared objects and purposes of the corporation,—not simply convenient, but indispensable. See Hardy, 293 Md. at 396–97; Birge, 274 Md. at 639–40; City of New Carrollton v. Belsinger Signs, Inc., 266 Md. 229, 237 (1972); McRobie, 260 Md. at 466 . 20 The Home Rule Amendment, Article XI-E, was implemented by former Maryland Code Article 23A (1957). Inlet Assocs., 313 Md. at 425 .

As we explained in Inlet Associates, former Article 23A, § 112 empowered municipal corporations “to pass and adopt all ordinances, resolutions or bylaws necessary or proper to exercise the powers granted herein or elsewhere.” 313 Md. at 425 . Section 2 of former Article 23A implemented Article XI-E by an express grant of powers to municipalities. Id. “This section enumerate[d] a number of ‘express ordinance-making powers’ ranging in subject matter from advertising through zoning; it authorize[d] 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