NORTH AMBER MEADOWS HOMEOWNERS ASS'N. v. Haut Enterprises

SMITH, Judge. In what appears to us to be a case of first impression in Maryland, we shall hold that, upon the revocation of a license to use real estate, the licensee is not obliged to restore the premises to the condition that they were in prior to the ⁴⁵⁴ license. We likewise shall hold that the trial court erred in concluding that the City of Frederick had taken land by inverse condemnation. Accordingly, we shall reverse the judgments entered by the trial court.

There are other issues involved, but in the view we take of this case we are not obliged to address them. North Amber Meadows Homeowners Association, Inc., appellant and cross-appellee, and Haut Enterprises, appellee and cross-appellant, are adjoining landowners. A 32,000 square foot drainage pond exists on their properties, approximately 15,750 square feet on the Haut parcel and approximately 16,250 square feet on the North Amber parcel. The land was originally owned by a common predecessor in title.

Haut filed a four-count complaint against North Amber and the City of Frederick, seeking declaratory injunctive relief and damages. The first two counts were claims against North Amber for nuisance and for trespass. The third and fourth counts were against the City of Frederick, claimed inverse condemnation, and requested a declaratory judgment and damages. Judgment was entered in favor of North Amber on the nuisance count.

Summary judgment was entered in favor of Haut on counts one and four. The trial judge found that Haut granted a license to North Amber for the part of the pond on its property and that this license was later revoked. The trial judge ordered North Amber to reconfigure the pond entirely on its property. The trial judge also held that the actions of the City in denying Haut’s grading permit application to fill-in the pond and requiring Haut to bear the burden of providing storm water management, green space, a ball field, and a playground area for North Amber amounted to an unconstitutional taking.

Subsequent to the entry of the order granting partial summary judgment, North Amber and Haut entered into an agreement dismissing without prejudice the claims for damages the parties had filed against each other. The circuit court judge held that Haut need not show that it was deprived of all reasonable use of its property to be entitled to damages for an unconstitutional taking of its property and that the doctrine of exhaustion of administrative ⁴⁵⁵ remedies was not applicable to this case. She awarded damages to Haut against the City in the amount of $200,705.13. All parties have appealed.

I The facts may be succinctly stated. Prior to 1977, both parcels in question were owned by Frederick Business Properties. On August 19, 1977, it contracted to sell the parcel of land that now belongs to North Amber to Land Development Association. In 1978, the storm water management pond was placed on a site plan.

In November 1978, the Frederick City Planning Commission requested that the pond’s location be moved. In December 1978, the pond was approved in its present location and thereafter built. Around April 1980, Land Development Associates took possession of the property and thereafter transferred title to North Amber. In that same time frame, Haut’s predecessor in title purchased what is now the Haut parcel.

In June 1987, Haut purchased the land it now owns. The pond was on the plat and physically present on the parcel. In May 1988, the City engineer allegedly advised Haut that it was possible to move the pond. In September 1988, Haut informed the City that it intended to move the pond unless the City noted an objection by October 17, 1988.

The City never responded. Haut expended funds for the design and engineering of an office park on its land. Haut thereafter inferred, based on certain correspondence from City officials, that it would not be allowed to move the pond. In November 1990, Haut submitted to the City a site plan that showed the pond removed from its present location.

On February 6, 1991, five days before the Planning Commission meeting, Haut submitted its storm water calculations supporting the pond’s removal. On February 11, 1991, the Frederick City Planning Commission (Planning Commission) met and considered Haut’s site plan. No recommendation could be made on the storm water plan, as the City had not yet reviewed Haut’s calculations. The Planning Commission made no recommendation on the site plan, although two motions were made to address the plan.

Haut’s ⁴⁵⁶ representative then requested and was granted a sixty-day continuance and withdrew the site plan from consideration. Haut later submitted a new site plan showing the pond remaining in its present location. On April 8, 1991, the Planning Commission approved Haut’s amended site plan showing the pond in its present location. On July 9, 1991, the site plan was approved by the Frederick City engineer.

On July 17, 1991, Haut requested a grading permit from the City to fill in the portion of the pond on its parcel. The request was not in conformance with the approved site plan. On July 19, 1991, the City denied Haut’s request for a grading permit for that reason. On October 4, 1991, Haut sent a letter to North Amber revoking its license to have the pond in question occupy a part of Haut’s property.

On October 9,1991, the site plan was extended for one year at Haut’s request. In January 1992, the City engineer prepared plans and cost estimates for moving the entire pond to North Amber’s property. The site plan has expired and no site plan is presently approved for Haut’s land. II We have found no Maryland case that has addressed the issue of whether, upon revocation of a license, a licensee is required to restore the property.

The parties have cited cases that they say address the issue but, as we shall set forth, we conclude that they do not. 1A George W. Thompson, Commentaries on the Modem Law of Real Property § 218 (John S. Grimes, 1980 Repl.), plainly states the rule on this point: [I]f the license is revoked, the licensee is not required to remove structures placed on the premises. Where improvements have been made or money expended by the licensee, upon revocation of the license he may be entitled to compensation or to be placed in statu quo. [Footnotes omitted.] The same rule is stated in 3 Basil Jones, Tiffany Real Property § 838 (3d Ed.1939): “There is no obligation upon the licensee, on revocation of the license, to restore the land to the ⁴⁵⁷ condition in which it was before he made changes therein or placed structures thereon, under authority of the license. However, conditions and circumstances may be such as to impose this duty upon him.” (Footnotes omitted.) We reviewed 3 Richard R. Powell and Patrick J. Rohan, Powell on Real Property (Rev.Vol.1994), and found that it does not appear to address the point. The often-cited case of Hodgkins v. Farrington, 150 Mass. 19 , 22 N.E. 73 (1889), announces and illustrates the principle set forth by Thompson and Tiffany.

In that case, a garden wall separated two properties. The property owner who owned only a small portion of the wall asked for, and received, permission to improve the wall and rest timbers within it for construction of a building. There was no written easement to use the wall. After several conveyances by both property owners, Hodgkins (successor licensor) revoked the license of Farrington (successor licensee) to use the wall to support his building, and brought suit to determine whether the encroachment could be removed without the licensee’s consent.

After determining that there was a license which was properly revoked, the court stated: The erection of the superstructure on the wall, ... and the insertion of the timbers therein, were not unlawful when constructed, but the defendants have lost the right to continue them. If they do not remove them, the plaintiffs have the right to do this, or have it done, even if serious injury thereby results.... The fact (if it be so) that the plaintiffs will suffer no substantial injury if the wall remains as it is, while the defendants will suffer a heavy loss if the wall is removed, and they are thus compelled to take out their timbers and erect a new wall on their own land to support their building, cannot give them a right to the plaintiffs’ property if they have no legal interest therein. Id. 22 N.E. at 74 .

Citing the principles stated in Stevens v. Stevens, 52 Mass. 251 (1846), the court held that “plaintiffs are entitled to a decree authorizing them to remove the wall, so far as it stands upon their land, and also the timbers, so far as ⁴⁵⁸ they project over it,—but at their own expense, as these structures have become unlawful only since the license under which they were erected has been countermanded____” Id. 22 N.E. at 75 (emphasis added). Baltimore and Philadelphia Steamboat Co. v. Starr M.P. Church, 149 Md. 163 , 130 A. 46 (1925), cites Hodgkins in dicta. In that case, the church leased a small portion of Baltimore inner harbor waterfront, near the corners of Light and Pratt Streets, to the steamboat company. The steamboat company leased the areas surrounding the church’s property from others.

The steamboat company built a large wharf cutting off the corner of the harbor, and cutting off the church’s waterfront parcel from water access. The lease expired and was not renewed. The steamboat company refused to remove that portion of its wharf which denied the church’s parcel access to the harbor. See illustration id. at 172 , 130 A. 46 .

Restoration of the church’s riparian rights would have meant removing an interior portion of a very large wharf covering the harbor’s corner. Giving the church full navigable access to its parcel would have meant removing more of the wharf than that immediately in front of its parcel. The church sued to require the steamboat company to restore the church’s riparian rights—access to navigable waters from its shoreline. The Court of Appeals noted that the steamboat company’s right to use the riparian rights of its leased property was a “license coupled with [a] grant creating an interest or leasehold estate.... ” Id. at 175 , 130 A. 46 .

The Court then noted that a tenant is generally required to return a leasehold in the same condition as when possession was received. Likewise, the Court noted in dicta the general rule, as stated in Tiffany on Real Property and Hodgkins, supra, that “ ‘there is no obligation upon the licensee, on revocation of the license, to restore the land to the condition in which it was before he made changes therein or placed structures thereon, under authority of the license.’ ” Id. 149 Md. at 179 , 130 A. 46 . ⁴⁵⁹ The Court then held that, based on the equities and the unusual circumstances of the case, the church “should not be required to assume the risk and burden [ (which were both great) ] of removal and restoration.” Id. at 179-80 , 130 A. 46 . Haut likens the factual circumstances in the instant case to those in Starr M.P. Church , arguing in its brief that the general rule as announced in Tiffany and Hodgkins is to be tempered by equity, and that equity requires North Amber “to remove the Pond at its expense because Haut should not be compelled to bear the risk of removal and restoration.” Aside from the acknowledgement of the general rule in dicta, Starr M.P. Church is inapposite to the case at bar, which is restricted to a license issue, and does not involve any of the unusual risks and burdens that Star M.P. Church presented. Haut primarily relies on Mayor and City Council v. Brack, 175 Md. 615 , 3 A.2d 471 (1939), to support its position on this issue.

In Brack , Baltimore City, under an oral license, installed a water main across a lot. No easement was recorded. The property was conveyed to Brack, who revoked the City’s license for the water main. The Court addressed the question of whether the City could continue to use the water main pursuant to the oral license, the related question of whether the City was entitled to compensation for revocation of its license and, if the City did not have the right to continue using the main, “what form of decree shall be passed, in view of the undisputed fact that the appellant is a municipal corporation and that the utilities involved are used in public service?” Id. at 618 , 3 A.2d 471 .

The Court first determined that the license was revocable. It then stated: It follows, therefore, from what has been said, that the city is not entitled to compensation for expenditures made upon the premises, but on the contrary, is liable to the appellee for reasonable compensation for the use of the easement, pending such time as may be necessary to effectuate either the removal of the utilities from the property, or the acquisition of the easements or property by condemnation proceedings. ⁴⁶⁰ This conclusion is reached because the municipality is charged with the all-important public service of supplying sewerage, drainage and water facilities to its inhabitants; and while it may or may not be true that the removal of its utilities, to the extent involved in the instant case, before such time as may be required by the City to acquire new easements or rights of way for the continued service of the particular utility, would inconvenience and endanger the health of the public, the record being silent as to this phase of the question, in our opinion the record does not reveal a situation in which irreparable injury to the rights of the appellee will result by such delay as has been indicated. Id. at 622-23 , 3 A.2d 471 . After discussing a case in which a municipal water system was found to be, after a reasonable time to correct the problem, subject to an injunction to stop it from. polluting a stream, the Court concluded, under the facts in the case before us, [it] would seem reasonable, because, as we have indicated, the City must meanwhile pay the appellee for the use of the easements, and because the duty is incumbent upon the City either to remove the utilities as prayed for in the bill of complaint, or to acquire them through condemnation or otherwise, within a reasonable time, under all the circumstances of the case; such reasonable time to be limited to such period as is necessary for the expeditious conduct of final condemnation proceedings.

Id. at 624 , 3 A.2d 471 . Haut argues that in Brack the Court of Appeals held that the City was required to pay for removal of the water main. It did not. A better reading of the Court’s holding is that, because of the importance of a public water supply, the municipality should have had an adequate opportunity to obtain an easement or condemn a right-of-way for a water main before the license was finally revoked.

The Court never addressed the issue of whether the City was required to pay to remove the pipe in the ground, as opposed to discontinuing ⁴⁶¹ use of the water main and allowing the licensor to remove the pipe. An earlier Maryland case that, according to Haut, supports its interpretation of Brack is Shipley v. Fink, 102 Md. 219 , 62 A. 360 (1905). In Shipley , an oral license was given to build a butcher shop on a portion of Shipley’s lot by his predecessor in title. When Shipley purchased the lot, he revoked Fink’s license to maintain the building and began to dismantle it.

The Court determined that the building was erected pursuant to an oral license and that the license was revoked without reasonable notice or opportunity for Fink to move the building. The Court held: Without however undertaking to reconcile their testimony [as to negotiations for removal of the building or to pay rent], we are of opinion that under all the circumstances of the case Mr. Fink was entitled to a reasonable opportunity to remove the building without unnecessary injury to it, and that the notice given, in view of all the facts was not such reasonable notice. The proper course, in our opinion, would have been to retain the bill and continue the injunction for such period as would in the judgment of the Court enable Mr. Fink to remove the building from Mr. Shipley’s ground without unnecessary injury thereto, and we are of opinion that ten days will be a sufficient period therefor. Id. at 229 , 62 A. 360 .

Haut argues that the Court of Appeals held “that the butcher shop would have to be removed by Fink. In maintaining the injunction for an additional ten days, the court stated that ‘under all the circumstances of the case Mr. Fink was entitled to a reasonable opportunity to remove the building without unnecessary injury to it.... ’ Hence, Fink, the licensee, had to incur all expenses of removal.” Again, the Court did not hold that either party must bear the expense of demolition. The Court only held that, should Fink wish to dismantle the butcher shop at his own expense, he should be given the opportunity to do so. ⁴⁶² Another leading case cited by both parties is Great Falls Waterworks Co. v. Great Northern Ry. Co., 21 Mont. 487 , 54 P. 963 (1898).

There, the water company had installed mains across parcels owned by the railroad company and wished to install more of them. The court first determined that the water company’s interest was indeed only a license, that the license could be revoked, and that it must either remove the water mains or begin condemnation proceedings. The court then stated that “the better view, in presence of the statute of frauds, appears to be that ... the license may be revoked, though no action can be maintained against the licensee for what he has been induced or led to do.” Id. 54 P. at 966 . As to the issue of who should pay to remove the water mains, the court said: In such a case the licensee should be allowed to remove its property within a reasonable time after notice of the revocation by the licensor, or of acts deemed to be a revocation by the licensor.

This removal should be at the expense of the licensee, and without unnecessary harm to the rights of the appellants. If plaintiff does not remove its main, or proceed in eminent domain, within a reasonable time, defendants [licensors] should have the right to remove it. This we believe to be just, and within the power of the court. Id. 54 P. at 968 (citing Hodgkins, swpra).

For other cases citing Hodgkins, see Crawford v. French, 633 P.2d 524 (Colo.1981) (Licensor sought to have licensees pay to excavate and restore leaching field, which had been built with permission, later revoked, to its original state. The court held that the leaching field did not become