Mayor of Rockville v. Woodmont Country Club

ELDRIDGE, Judge. This case involves a challenge to the procedures used by the Mayor and Council of Rockville in levying special assessments ⁵⁷⁵ against the property of the Woodmont Country Club for the construction of a road and water transmission main. We issued a writ of certiorari primarily to decide whether the country club was entitled to cross-examine appraisers commissioned by the City of Rockville at a hearing to value the special benefit accruing to the club as a result of the construction project. I. Woodmont Country Club is located on approximately 459 acres in Rockville, Maryland, and is zoned R-E (Residential Estate), although it abuts both residential and commercial development.

The Mayor and Council of Rockville is a municipal corporation organized under Article XI-E of the Constitution of Maryland, and is authorized by Article XI of its Charter to assess the costs of public improvement projects against private property specially benefitted thereby. Article XI of the Charter lays out procedures to be followed by the Mayor and Council before levying any special assessments. Specifically, and most relevant here, Article XI, § 1, states as follows (emphasis added): “c. Before entering upon the construction of any work or improvement specified herein, the Council shall by ordinance designate the location, extent and kind of work or improvement proposed to be done or made, the kind of materials to be used, the estimated cost of the improvement and the real property which will be specially benefited thereby and which it is proposed to assess to pay all or any part of the cost thereof, and shall fix a time and place when and where the owner or owners of the property to be so assessed therefor can be heard in reference thereto.

Notice of such hearing, embodying the substance of said ordinance, shall be served upon the owners of said properties.... “d. If after the hearing the Council shall be of the opinion that the public health, safety, welfare, comfort, or convenience requires the work or improvement to be done or ⁵⁷⁶ made, it shall provide by ordinance for the same and may charge the expense thereof or any part of such expense against the property which it shall find to be specially benefited thereby according to the front foot rule of apportionment or some other equitable basis as may be determined by it; * * * The Council shall also provide in said ordinance the time and terms upon which payment of said assessments for said work and improvements shall be made by said property owners, the rate of interest, if any, that shall be charged upon deferred payments and shall provide penalties for failure to pay any deferred payment when due. * * * Any person aggrieved by the levy of a special assessment in accordance with the provisions of this Article may appeal the same to the Circuit Court for Montgomery County. ” Thus, the Charter contemplates a two-step process in making special assessments for public improvements. First, the Council must enact an ordinance explaining the particulars of the improvement and which properties are expected to be specially benefitted by it, and must establish a time and place for a hearing at which the property owners proposed to be assessed may be heard. Second, if after the hearing the Council believes that the improvement is required, it must provide by ordinance for its construction.

Additionally, it must provide in the same ordinance for the levy of special assessments against property found to be specially benefitted either by the front foot method or some other equitable basis, and must include the time and terms of payment, the interest rate for deferred payments, and any penalties for late payments. As part of its Master Plan, Rockville designed and planned a road, Wooton Parkway, as “a major east-west traffic corridor and an alternative to going through the Town Center,” and a related water main, which would cut through the Woodmont property. To that end, on March 28, 1990, after negotiations, the Council accepted Woodmont’s offer to sell ⁵⁷⁷ approximately 20.3 acres of land for construction of the roadway and water main at a cost of $6,400,00o. 1 On May 14, 1990, the City adopted two ordinances, 12-90 and 13-90, proposing construction of the road and water main and providing for a hearing to be held on June 4, 1990. Notice was sent to the owners of five properties proposed to be assessed for the cost of the roadway and water main, including Woodmont.

The other properties identified included property owned by D.F. Antonelli (commercial property near the intersection of Wooton Parkway and Rockville Pike), Rockville Pike Joint Venture (the Wintergreen Plaza Shopping Center), Donald N. and P.E. Coupard (the Congressional Oldsmobile dealership), and Tower-Dawson Limited Partnership (the Tower Oaks mixed-use site to be developed subsequently). 2 After the June 4th hearing, the Council adopted two further ordinances, 18-90 and 19-90, officially authorizing construction of the roadway and water main. The Council did not, however, specify which properties it found to be specially benefited, what basis for assessment would be used (front foot or some other equitable basis), or what the terms of payment, interest rates and penalties would be. Rather, the Council merely directed the City Manager to “cause appraisals of the proper ⁵⁷⁸ ties specially benefited by the proposed public improvements to be made prior to the commencement of the construction ... and, in addition, to cause appraisals to be made upon completion of the improvements____” The Council did not make clear how the appraisals would be used or how any assessments would be determined. Two appraisals were then made by the City for each of the Woodmont, Congressional Oldsmobile, and Wintergreen properties as to their highest and best use.

The construction was completed at a total cost of $24,060,725.00 for Wooton parkway and $946,952.79 for the water main. At that point two fresh appraisals were made by the City for each property, apparently to determine the amount of special benefit accruing to the three properties as a result of the construction. No appraisals were made of the Antonelli or Tower-Dawson properties because the owners of those properties had entered into negotiated “assessment agreements” with the City. Based on the appraisals and the assessment agreements, two additional proposed ordinances were introduced in the Council on March 22, 1993, to levy special assessments for the construction.

The ordinances proposed an assessment of $3,057,816.69 against the Tower-Dawson property for the roadway and $74,226.93 for the water main, based on the negotiated assessment agreement. Similarly, based on an assessment agreement, the ordinances proposed an assessment against the Antonelli property in the amounts of $100,-000.00 for the roadway and $18,750.06 for the water main. The ordinances proposed no assessments against the Wintergreen and Congressional Oldsmobile properties, based on the before-and-after appraisals made of those two properties. As noted previously, the City had commissioned two separate appraisals for each of the properties involved.

With respect to the Wintergreen property, one appraiser estimated $270,-000.00 in special benefit, while the other appraiser estimated zero special benefit. With respect to the Congressional Oldsmobile property, one appraiser estimated $700,000.00 in special benefit, while the other appraiser estimated zero. To ⁵⁷⁹ resolve these disparities, the City engaged a third appraiser to evaluate the first two appraisals of the Wintergreen and Congressional properties. In each case, the third appraiser determined that the property was not specially benefitted.

Therefore, the ordinances proposed no assessment against these properties. Regarding the Woodmont Country Club property, one appraiser valued the special benefit from the construction of the roadway at $2,650,000.00, while the second appraiser valued the benefit at $3,236,000.00. Each appraisal was based on a highest and best use valuation. The ordinances proposed an assessment based on an amount equal to the average of these two appraisals, $2,943,000.00.

The ordinances also proposed a special assessment against the Woodmont property for the water main in the amount of $61,319.38, apparently based on a front foot charge. The Council set a hearing date on these proposed assessments for May 17, 1993. Woodmont requested, both in writing and orally, that the hearing be postponed to allow it time to prepare its testimony and that the City’s appraisers be present at the hearing for cross-examination. The City denied the request that the appraisers be asked to attend, but it agreed to continue the hearing until June 21, 1993.

Wood-mont renewed its request that the appraisers be available for cross-examination. The City again denied the request, informing Woodmont that “cross-examination [would] not be granted and that the City’s appraisers and other consultants [would] not be present at [the] hearing.” Woodmont was the only property owner to appear at the hearing on May 17 and the continuation of the hearing on June 21. The owners of the Oldsmobile and Wintergreen properties did not appear because of the proposed zero assessments against their property. The owners of the Antonelli and Tower-Dawson properties did not appear in light of their previously negotiated assessment agreements.

At the hearing, Woodmont again renewed its request to cross-examine the City’s appraisers, and the request was denied for a third time. ⁵⁸⁰ Woodmont then presented testimony by a traffic consultant, a land planner and a land appraiser which generally disputed the appraisals prepared by the City’s appraisers. Wood-mont’s appraiser testified and submitted an appraisal that the special benefit to the country club as a result of the roadway construction was not more than $872,500.00. Alternatively, Woodmont argued to the Council that in valuing any special benefit to the club, the Council should not consider its highest and best use, but only its use as a country club, resulting in zero special benefit. After the hearing, at the request of the City Attorney, the City’s appraisers reviewed and evaluated the appraisal offered by Woodmont.

The City’s appraisers sent correspondence to the City disputing the appraisal offered by Woodmont and reaffirming their own appraisals. After discovering this exchange of correspondence, Woodmont objected to the City’s solicitation of these additional reports without affording Wood-mont any notice or opportunity to respond or to cross-examine the City’s appraisers. The City then gave Woodmont time to respond to these additional reports. On September 27, 1993, the Council adopted two final ordinances, 13-93 and 14-93, officially levying the special assessments for the roadway and the water main.

The assessments were levied in the exact amounts initially proposed in the ordinances adopted on March 22, 1993. Also, these ordinances contained detailed payment schedules and provided for penalties for late payments. Woodmont then sought judicial review of the assessments in the Circuit Court for Montgomery County, which upheld the assessments. Woodmont appealed to the Court of Special Appeals which reversed the circuit court’s decision and ordered that the case be remanded to the Council for further proceedings consistent with the court’s opinion.

Woodmont C.C. v. Rockville, 107 Md.App. 696 , 670 A.2d 968 (1996). The Court of Special Appeals held that the proceedings levying the special assessments on Woodmont were invalid because of the denial of Woodmont’s request to cross-examine the City’s ⁵⁸¹ appraisers. In so doing, the intermediate appellate court rejected the City’s assertions that the 1993 hearings were not required, and that, even if the hearings were required, Wood-mont had no right of cross-examination at those hearings because the City was engaged in a “legislative” function. The appellate court also rejected Woodmont’s arguments that it was improper for the Council to consider the special benefit to the club based on its highest and best use, and that the Council could only consider its current use as a country club, which would result in a finding of no special benefit.

The City and Woodmont filed petitions for a writ of certio-rari, and this Court granted both petitions. 342 Md. 507 , 677 A.2d 583 (1996). The City’s petition for a writ of certiorari presented the following question: “In a legislative proceeding to levy special assessments for a public improvement project, do the owners of benefited properties have a right to cross-examine the independent appraisers commissioned by the City to value the special benefit where, prior to the special assessment levy, the property owners are given the opportunity to oppose and criticize the appraisals and to present their own appraisals and testimony?” Woodmont’s cross-petition for a writ of certiorari presented the following questions: “1. Whether the Court of Special Appeals erred in determining that the valuation of special benefits based on a hypothetical ‘highest and best’ use of a property rather than the existing country club use constituted a ‘definite and just plan’ under case law and an ‘equitable basis’ under the City’s Charter when such valuation is against public policy, is too unreasonable and speculative, and was not uniformly applied? “2. Whether the Court of Special Appeals erred in determining that the valuation of special benefits based on the hypothetical ‘highest and best use’ of a property rather than the existing country club use was proper in light of the legislative intent behind the Tax-Property Article provisions ⁵⁸² enacted to protect country clubs from economic pressures caused by assessments at levels incompatible with the practical use of such property for country clubs? “3.

Whether the assessments should be voided as illegal based on the failure of the City to comply with the mandate of its Charter regarding the process and procedures for levying special assessments, which required a finding of special benefit in advance of the commencement of the improvement project?” Because we agree that the City erred in refusing to allow Woodmont reasonable cross-examination, and that new administrative proceedings will be required, we need not address the other issues raised by Woodmont. 3 II. Under Maryland law, as the City apparently concedes, the right of reasonable cross-examination attaches to adjudicatory administrative hearings. This Court held in Hyson v. Montgomery County, 242 Md. 55, 67 , 217 A.2d 578, 585 (1966), that “when an administrative board or agency is required to hold a public hearing and to decide disputed adjudicative facts based upon evidence produced and a record made, ... a reasonable right of cross-examination must be allowed the parties.” See, e.g., Birckhead v. Board of Co. Comm’rs, 260 Md. 594, 599 , 273 A.2d 133, 136 (1971); Bayer v. Siskind, 247 ⁵⁸³ Md. 116, 123, 230 A.2d 316, 319-320 (1967); Town of Somerset v. Board, 245 Md. 52, 65-66 , 225 A.2d 294, 302-303 (1966); Gorin v. Board of Co. Comm’rs, 244 Md. 106, 110 , 223 A.2d 237, 239 (1966) (“While proceedings before an administrative board are informal and the strict rules of evidence do not apply, when the board is functioning in an adversary proceeding, the fundamentals applicable to the decision of adjudicative facts by any tribunal must be preserved”). Cf.

West Mont. Ass’n v. MNCP & P Com’n, 309 Md. 183, 197 , 522 A.2d 1328, 1335 (1987) (no trial-type hearing required in connection with the determination of legislative facts); Montgomery Co. v. Woodward & Lothrop, 280 Md. 686, 707-714 , 376 A.2d 483, 495-498 (1977), cert. denied, 434 U.S. 1067 , 98 S.Ct. 1245 , 55 L.Ed.2d 769 (1978) (no trial-type hearing required in comprehensive rezoning, which is a quasi-legislative proceeding). The City defends its summary denial of Woodmont’s requests for cross-examination of the City’s appraisers at the 1993 special assessment hearing, however, by asserting that the hearing was not adjudicatory but was legislative. Alternatively, the City asserts that Woodmont’s opportunity to rebut the reports offered by the City’s appraisers was a reasonable substitute for cross-examination.

A. Contrary to the City’s assertion, the special assessment hearing in May and June 1993 was adjudicatory in nature. The purpose of the 1993 hearing was to decide, based upon the 1990 legislative determinations, the particular amount of the special assessment to be levied based on the amount of benefit to a specific piece of property. This is classically the type of adjudicatory determination, to which the right of cross-examination attaches, contemplated by the above-cited opinions of this Court. The City contends that the hearings were legislative, rather than adjudicatory, because “[sjpecial assessments are in the nature of a tax, and, like taxes, are legislative actions____ Like all legislative actions, a finding by the Mayor and Council ⁵⁸⁴ of Rockville that special benefit exists is presumed to be correct and constitutional, ‘even if the legislative body acted without any evidence at all.’ ” (City’s brief at 14).

The City’s argument, however, confuses the legislative aspects of the special assessment process with the adjudicatory aspects of that process. This Court has stated that the determination of whether to impose a special assessment and the mode of imposing a special assessment are legislative determinations. Montgomery County v. Schultze, 302 Md. 481, 490-491 , 489 A.2d 16, 20-21 (1985); Somerset Co. Sanit. v. Chamberlin, 254 Md. 630, 636-637 , 255 A.2d 290, 293 (1969); Leonardo v. County Com’rs, 214 Md. 287, 307 , 134 A.2d 284, 294 , cert. denied, 355 U.S. 906 , 78 S.Ct. 332 , 2 L.Ed.2d 260 (1957), and reh’g denied, 355 U.S. 967 , 78 S.Ct. 534 , 2 L.Ed.2d 543 (1958) (“The mode of assessment is a legislative question”). Nevertheless, the application of the mode of assessment to a particular piece of property to determine the specific amount to be assessed against that particular property is an adjudicative act.

The proceeding to determine the amount of benefit to a specific piece of property is adjudicatory or quasi-judicial. In Hyson v. Montgomery County, supra, 242 Md. 55 , 217 A.2d 578 , this Court held that parties to a hearing for a zoning reclassification were entitled to cross-examine witnesses at the hearing because the Montgomery County Council was required to “resolve disputed questions of adjudicative facts (as contradistinguished from legislative facts or judicial action) concerning particular parties.” 242 Md. at 64 , 217 A.2d at 584 . The Court reached this determination despite the fact that “the actual acts of zoning and rezoning are legislative or quasi-legislative in nature.” 242 Md. at 63 , 217