Maryland Port Administration v. I.T.O. Corp.

Gilbert, C. J., delivered the opinion of the Court. This case involves the Second Battle for the Port of Baltimore. 1 It is not, however, being waged between a British fleet and soldiers under the command of Major General Samuel Smith, 2 but rather between the Maryland Port Administration (MPA) 3 and a stevedoring and terminal operating company, I.T.O. Corporation of Baltimore (ITO). 4 The battle is not being fought by cannon and shot but by counsel and contract. The objective of the parties is, nevertheless, somewhat the same as that of September 1814, but the motivation is vastly different. Admiral Cochrane, after the successful sacking of Washington, D.O., expressed his desire to lay Baltimore “under a severe contribution.” 5 ⁶⁹⁹ ITO is,determined to require MPA to pay to ITO the sum of $213,601.17, but instead of being met by 15,000 defenders armed with various weapons, they were confronted with the invisible and, when applicable, invincible shield of sovereign immunity.

The Superior Court of Baltimore City brushed aside MPA’s defense, and a jury of that court rendered a verdict against MPA in the amount of $213,601.17. It would appear that ITO succeeded where the British failed, but the “perilous fight” was not ended with the jury’s verdict. The MPA has appealed. 6 In this Court it asserts: I. The trial court should have granted MPA’s motion raising preliminary objection on the basis of sovereign immunity.

II

The trial judge should have excluded oral evidence concerning ITO’s intention or understanding of a contract dated January 13, 1971.

III

The jury should have been instructed that testimony grounded on memory of oral statements made with a person since deceased “should be received with great caution and if a long time has elapsed since the alleged statements, such testimony is held to be unsatisfactory and inconclusive.” If MPA’s first attack is successful, they carry the day, and we need not respond to the other two sorties. Before discussing the merits of the appeal, we shall set the stage upon which this drama was played. MPA is clothed by statute, Md. Transportation Code Ann. § 6-204 (i) with authority to “construct, reconstruct, rehabilitate, improve, maintain, lease as lessor or as lessee, ⁷⁰⁰ repair, and operate port facilities within its territorial jurisdiction____” Under full color of its powers, MPA has developed the Dundalk Marine Terminal within Baltimore Harbor. Among the terminal services provided by ITO is the partial loading and unloading of cargo from trucks.

The performance of such services is referred to in the industry as “tailgate service.” ITO “tailgated” for MPA 7 at the Dundalk terminal under a “tariff” filed by MPA with the Federal Maritime Commission. On February 1, 1967, MPA and ITO entered into a written contract which spelled out a billing procedure whereby MPA then paid ITO in accordance with the agreement. In short, MPA, for a fee, acted as the billing and collection agent of ITO. The 1967 contract provided in pertinent part: “I. Truck Freight A. Export (5) Maryland Port Authority will be responsible for the billing and collection in accordance with the prevailing tariff charges. “(6) Maryland Port Authority will verify ■ each day, with representative of subcontractor, the total amount of truck tonnage handled that day and service provided.

NOTE: All billing on verified information will be final. (7) Subcontractor will bill Maryland Port Authority semi-monthly covering the period of the first 15 days or the last 15 days of each month for the unloading service calculated at the total tons handled multiplied by the rate of $1.68 per ton for tailgate service or $3.68 per ton for full unloading service. ⁷⁰¹ EXCEPTION: Commodities on which a negotiated rate is permitted will be billed by the Maryland Port Authority at the rate supplied by the subcontractor including 32 cents per ton. (8) The Maryland Port Authority will remit the amount billed by the subcontractor within 30 days.” (Emphasis supplied.) With respect to “imports,” the wording of the contract was identical except for the changing of “export” to “import,” “received” to “delivered,” and making other verb modifications indicative of the distinction between shipping and receiving. The tariff alluded to in the quoted agreement at I. A.

(5) was a terminal operator’s tariff published by the Baltimore Marine Terminal Operator’s Association (BMTA), and it was binding on both MPA and ITO. The tariff provided published rates for truck loading and unloading, including a per ton charge. It also provided for a minimum charge per bill of lading when the cargo was less than one ton. A new billing procedure agreement was entered into between MPA and ITO in January 1971, effective February 5, 1971, replacing the 1967 agreement.

The 1971 agreement, containing the seeds of the not-so-friendly strife leading to this litigation, was similar to the 1967 agreement except with respect to part I. A. 7. The section provided: “I. Truck Freight A. Export (7) Subcontractor will bill Maryland Port Authority semi-monthly, covering the period of the first 15 days or the last 15 days of each month, for the unloading service performed. Reimbursement will be calculated by multiplying the total tons handled in the period by the prevailing tariff charges and deducting therefrom $.03 per ton service charge. EXCEPTION: Commodities on which a negotiated rate is permitted will be billed by ⁷⁰² Maryland Port Authority at the rate supplied by the subcontractor subject to the calculations enumerated above.” (Emphasis supplied.) The section of the contract dealing with “imports” read in the same way except for the change from “export” to “import” where applicable.

Subsequent to the execution of the 1971 agreement, MPA withdrew from BMTA. It then published its own tariff. 8 Both the BMTA and MPA tariffs contained a rate per ton and a minimum rate per bill of lading. When ITO did its own billing prior to 1967, it collected the minimum rate as per the tariff. The former vice-president of ITO told the jury that the purpose of the minimum charges was to compensate ITO for its labor and equipment costs, and that it was as expensive to handle one hundred pounds as it was one ton.

Following the effective date of the 1967 agreement, MPA billed shippers on the basis of the per ton rate when applicable and on the basis of the minimum charge per bill of lading, when the flat ton rate was inapplicable. MPA made remittances to ITO by multiplying the total tons handled by the dollar amount set out in the 1967 agreement and, under the 1971 agreement, by the per ton rate set out in the applicable tariff. What MPA did not do is to account to ITO for the minimum charges per bill of lading. MPA explained at the trial that the minimum charges were included in the tariff in order to compensate it for the cost of billing and collecting for relatively small shipments. 9 Added to the invoices which were sent to the shippers by MPA was a nominal terminal service charge.

MPA contended that such a charge compensated it for the cost of maintaining the roads and other terminal facilities. ⁷⁰³ Over the objection of MPA, a former vice-president of ITO was allowed to testify that he negotiated the 1967 and 1971 agreements with the then Director of Transportation, 10 and that while nothing was ever said about the minimum bill of lading charges, it was the intent of the parties that those charges would be remitted by MPA to ITO. MPA was limited to a $.03 per ton service charge for billing and collecting from the various shippers. The trial judge permitted that parol evidence because it served to explain the ambiguity in the 1971 agreement relative to the minimum charges. The former ITO vice-president informed the jury that he had always assumed that MPA was remitting the minimum charges to ITO and that it was not until after he left the company and a new accounting method was installed that it was learned that MPA was not accounting to ITO for those minimum charges.

ITO unsuccessfully demanded payment from MPA. This law suit in assumpsit followed. I. The principal thrust of this appeal is MPA’s assertion that its motion raising preliminary objection on the ground of sovereign immunity should have been granted. That doctrine, sometimes alternatively styled “governmental immunity,” stems from the Common Law.

Herilla v. Baltimore City, 37 Md. App. 481 , 378 A. 2d 162 (1977). The Court of Appeals, in Brohawn & Bros., Inc. v. Board of Trustees of Chesapeake College, 269 Md. 164, 165 , 304 A. 2d 819, 820 (1973), speaking through Judge Digges, explained the doctrine thusly: “[A] litigant is precluded from asserting an otherwise meritorious cause of action against this sovereign State or one of its agencies which has inherited its sovereign attributes, unless expressly waived by statute or by necessary inference from such a legislative enactment.” ⁷⁰⁴ Numerous Maryland appellate decisions have discussed the concept of governmental immunity from its origin to the present time. See e.g., Board v. John K. Ruff, Inc., 278 Md. 580 , 366 A. 2d 360 (1976); American Structures v. City of Baltimore, 278 Md. 356 , 364 A. 2d 55 (1976); Godwin v. County Comm’rs, 256 Md. 326 , 260 A. 2d 295 (1970); Cox v. Anne Arundel County, 181 Md. 428 , 31 A. 2d 179 (1943); University of Maryland v. Maas, 173 Md. 554 , 197 A. 123 (1938); State v. B. & O. R. R., 34 Md. 344 (1871); Herilla v. City of Baltimore, 37 Md. App. 481 , 378 A. 2d 162 (1977); Frosburg v. State, 37 Md. App. 18 , 375 A. 2d 582 (1977). See also I. F. Pollock and F. Maitland, The History of the English Law, 518 (3d ed. 1909); 36 Md. L. Rev. 654 (1977). 11 The rationale for the continued application of the doctrine in Maryland seems to have begun to shift from the concept of inherited sovereignty to one of public policy.

That, at least, is the way it was expressed by Chief Judge Bartol in State v. B. & O. R. R., 34 Md. 344, 374 (1871) when he wrote: “This [sovereign] immunity belongs to the State by reason of her prerogative as a sovereign, and on grounds of public policy. Parties having claims or demands against her, must present them through another department of the Government — the Legislature — and cannot assert them by suit in the Courts.” (Emphasis supplied.) ⁷⁰⁵ Judge Barnes, in Godwin , revisited State v. B. & O. R. R., supra, and noted that in Maryland the doctrine was bottomed, inter alia, on “public policy.” He went on to note that: “[W]hen one considers the financial and other pro.blems which might arise if the doctrine of sovereign immunity were not applicable, it is probably wise that our predecessors did apply it in Maryland....” Godwin v. County Comm’rs, 256 Md. at 333 , 260 A. 2d at 298 . [ 12 ] Out of the cases has emerged the modern rule iterated in American Structures v. City of Baltimore, 278 Md. 356, 359 , 364 A. 2d 55, 56 (1976) and reiterated in Board v. John K. Ruff, Inc., 278 Md. 580, 584 , 366 A. 2d 360, 362 (1976) that: “[A]n action ... brought for a money judgment in contract or in tort against the State or an agency of the State without the State’s consent, actual or implied, . . . must be defended on the ground of sovereign immunity, which cannot be waived unless funds have been appropriated for the purpose or the agency can provide funds by taxation____” (Citations omitted.) (Emphasis supplied.) The word “taxation” means “l.a. The act or practice of imposing taxes, b. The fact of being taxed. 2.

An assessed amount of tax.” American Heritage Dictionary of the English Language (1970). In none of the prior cases has the noun “taxation” been used. All the previous decisions speak of the power or authority “to raise money for the purpose of paying damages.” University of Maryland v. Maas, 173 Md. at 558-560 , 197 A. at 125 (1938). See Calvert Associates v. Department of Employment and Social Services, 277 Md. 372 , 357 A. 2d 839 (1976); Brohawn v. Board of Trustees, supra; ⁷⁰⁶ Jekofsky v. State Roads Comm'n, 264 Md. 471 , 287 A. 2d 40 (1972); Stanley v. Mellor, 168 Md. 465 , 178 A. 106 (1935); Dunne v. State, 162 Md. 274 , 159 A. 751 (1932); Williams v. Fitzhugh, 147 Md. 384 , 128 A. 137 (1925); Fisher & Carozza Co. v. Mackall, 138 Md. 586 , 114 A. 580 (1921); State v. Rich, 126 Md. 643 , 95 A. 956 (1915); Weddle v. School Comm’rs, 94 Md. 334 , 51 A. 289 (1902); State v. B. & O. R. R., supra.

Thus, we believe the Court, in American Structures and Ruff, employed the word “taxation” in a non-technical or imprecise sense to mean the ability or power to raise funds. In any event, it is not necessary that the agency possess the power to tax. All that is required is that two specific criteria be met: first, the Legislature must have explicitly or implicitly removed the protective barrier of governmental immunity from the agency, and second, the agency either has the funds from which it can pay the claim or it possesses the power to raise those funds. Brohawn v. Board, supra.

Former Md. Ann. Code art. 62B, § 5, in effect at the time of the signing of the 1967 and 1971 agreements, provided that MPA was “(b) To have perpetual succession, and to sue and be sued in its own name and plead and be impleaded.” (Emphasis supplied.) 13 That language satisfied the first requirement of Brohawn and Ruff. There yet remains the question of whether MPA has funds available to pay a judgment against it or whether it possesses the power or authority to raise those funds. When the Legislature created the MPA by Laws 1956, Extra Session, ch. 2, then codified as Md. Ann. Code art. 62B, § 13 (a), it conferred upon the Authority sweeping powers to generate and expend funds. In fact, the MPA’s money raising activities were without supervision or regulation by any other agency of the State.

Article 62B, § 13 (a) provided: “The authority is hereby authorized to fix, revise, charge and collect rentals, rates, fees or other ⁷⁰⁷ charges for the use of each project.... Such rentals and other rates, fees and charges shall be so fixed and adjusted in respect of the aggregate thereof from the projects under the control of the Authority as to provide funds sufficient with other revenues, if any, (i) to pay the Authority’s current expenses ..., and (iv) to provide funds for paying the cost of enlarging, extending, reconstructing or improving any project or projects. Such rentals and other rates, fees, and charges shall not be subject to supervision or regulation by any department, division, commission, board, bureau or agency of the State or any political subdivision thereof.” (Emphasis supplied.) “Current expenses” were defined in section 4 (d) of article 62B to mean: “[T]he Authority’s reasonable and necessary current expenses of maintaining, repairing and operating the projects and shall include, without limiting the generality of the foregoing ... ordinary and usual expenses of maintenance and repair which may include expenses not annually recurring, expenses incurred in the performance of its powers and duties under the provisions of this Article, and any other expenses required to be paid by the Authority under the provisions of any trust agreement securing