River Walk Apartments, LLC v. Twigg

BATTAGLIA, J. The Petitioners, River Walk Apartments, LLC, and Monocacy River Apartments, LLC, (“River Walk”) seek review of the Court of Special Appeals’s judgment which reversed sum ⁵³⁰ mary judgment entered by the Circuit Court for Frederick County on behalf of River Walk, directing Respondent, Roger Twigg, in his official capacity as the Director of Permits and/or Building Department Manager of the City of Frederick, to issue certain shell construction permits for 144 units, a club house, two garage buildings, and twelve buildings, in connection with the development of the Riverside Corporate Park. We granted certiorari, River Walk v. Twigg, 394 Md. 307 , 905 A.2d 842 (2006), to consider one question: Was the City of Frederick free to exercise its executive discretion—pursuant to Article 23A of the Maryland Code, the City Charter, and its common law right to enter into and be bound by contracts pursuant to this Court’s decisions—to purchase valuable rights-of-way necessary to complete a preexisting public project, without seeking legislative approval by ordinance? We shall hold that two contracts, a November Agreement and a Deferral Agreement, entered into by two different mayors of the City of Frederick, were not legislatively authorized and therefore, are unenforceable. I. Facts In November, 1999, J And R Limited Partnership contracted to sell to the Millennium Development Group, LLC, approximately 122 acres of property formerly known as the “South Rosenstock Farm,” located in the City of Frederick and encompassing Gas House Pike from its intersection with Monocacy Boulevard and running to the City’s eastern limits.

This piece of property had been annexed by the City of Frederick by Resolution Number 6-85, passed by the Mayor and Board of Aldermen (“Aldermen”) in 1985, and which required the following two conditions in exchange for becoming part of the municipality: 1. The owner of the land to be annexed shall pay the cost of any required advertising of this annexation matter. 2. Extension of water, sanitary sewer and storm drain lines, streets, curbs, lighting and all other public improvements to and into the area to be annexed shall be at the ⁵³¹ expense of the owner or owners or developers requesting same and shall not be at any cost to the City. City of Frederick, Resolution No. 6-85.

One month after entering into the contract for the purchase of the property with J And R Limited Partnership, Millennium assigned all of its rights in the South Rosenstock Farm property to Riverside Investment Group, LLC, which procured the property to incorporate it into the Riverside Corporate Park Project. The property was to constitute the “South Campus,” as one of four campuses—the North, South, East and West—of the development plan for the Corporate Park in the City of Frederick. 1 The South Campus was to surround Gas House Pike, which was a vital part of the Extension of Monocacy Boulevard Project, a project which entailed the completion of Monocacy Boulevard from its intersection with Gas House Pike to its southern end point at Hughes Ford Road, as well as the upgrade of Gas House Pike from its intersection with Monocacy Boulevard to its terminus at the eastern corporate limits of the City. On November 6, 2000, to “commence and complete” Phase III of the Monocacy Boulevard Project, its final phase, the Mayor of the City of Frederick entered into an agreement (the “November Agreement”) with Riverside Investment Group, LLC, Riverside Industrial Properties, LLC, Riverside Technology Park I, LLC, Riverside Technology Park II, LLC, and Riverside Technology Park III, LLC (“Property Owners”). Pivotal to the contract was the Property Owners’ agreement to dedicate to the City for no charge “any and all additional rights-of-way needed for the upgrade and widening of Gas House Pike along the frontage of the Property,” which was to be made “free and clear of all liens and/or encumbrance ⁵³² s,” 2 for which the Property Owners agreed to record the plats to be dedicated and execute all documents necessary for its completion.

The Property Owners also agreed to give their consent, and sign all necessary documents to subject the properties to a “Tax Increment Financing District” (TIF) to enable the City to finance the completion of Monocacy Boulevard, with the caveat that “Property Owner shall have no additional tax assessment or liability as a result of the creation of the [TIF].” In consideration for the Property Owners’ dedications and agreement to the TIF, the contract provided that the Properties and Property Owners would be subject to a “deferred contribution special assessment” of $1.00 per square foot of each building to be constructed, to be paid once to the City “upon application to the City for the Shell Construction Permit for such building.” The Agreement stated that “no additional fee for the special assessment shall be assessed or contribution required in conjunction with future permits for the same building,” nor would the Property be subject to additional “impact fees” 3 as “a condition of development of and/or construction of improvements on the Property.” ⁵³³ The contract was signed by a representative of each of the Property Owners and by Mayor James Grimes for the City of Frederick, and was to be “binding upon, and inure[ ] to the benefit of, the parties hereto and their respective heirs, personal representatives, agents, employees, invitees, successors and assigns,” and its enumerated obligations were to “run with the land ... and ... be binding upon all future owners.” In May of 2001, Riverside Investment Group assigned all of its rights in the contract to purchase the South Campus from J And R Limited Partnership to Riverside South, LLC, and J And R Limited Partnership subsequently sold and conveyed the deed to the property to Riverside South, LLC. On October 3, 2002, the City of Frederick passed Ordinance G-02-19, § 1, which titled Chapter 11 of the City Code, a reserved chapter, “Fees,” and levied impact fees for the first time in the City for the purpose of requiring: that new residential, commercial, institutional and industrial development pay for its appropriate share of capital improvements to the city’s water and sewer treatment and distribution systems through the imposition of water and sewer impact fees which will be used to finance, defray and reimburse the city for all or a portion of the costs of capital improvements to the city’s water and sewer treatment and distribution systems. City of Frederick Code, Chapter 11, Section 11—1(b). The ordinance cited for authority Article XI-E of the Maryland Constitution, Article 23A of the Annotated Code of Maryland, and the City of Frederick Charter.

Section 11-1 of the new chapter, entitled “Water and sewer impact fees,” provided in pertinent part: (d) Applicability. Any person who, after the effective date of this section, undertakes residential, commercial, institutional or industrial development shall pay a water and sewer impact fee prior to receiving a permit from the department of permits and inspections. The impact fee also applies to any existing residential, commercial, institutional or industrial structure which is not presently connected to a city ⁵³⁴ water and sewer system, when a new system is constructed or the extension of an existing system has been declared ready for service, and the property owner is required to connect to the new system. City of Frederick Code, Chapter 11, Section ll-l(d).

Another fee imposed by the new chapter was the “Park Facilities development impact fee” included in Section 2, which states in relevant part: d. Applicability. Any person who undertakes a residential development project shall pay a park facilities development impact fee and shall not receive a building permit until such park facilities development impact fee is paid. City of Frederick Code, Chapter 11, Section 11—2(d).

In June of 2004, then Mayor Jennifer Dougherty 4 and the Property Owners entered into a second agreement entitled “Agreement To Defer Public Improvements” (“the Deferral Agreement”). The new Agreement granted the Property Owners an exception to Sections 2(g), 5.02, and 5.03 of the Subdivision Regulations of the City of Frederick, which required installation and acceptance of necessary public improvements prior to the final approval of subdivision plats. 5 The Agreement also iterated that: ⁵³⁵ The City of Frederick and the Riverside Owners hereby agree that the present and/or future owners/developers of the Site Plan Lots shall, upon issuance of any permit issued by The City of Frederick with reference to any of the Site Plan Lots, pay unto the City of Frederick the Fee, based upon One Dollar ($1.00) per square foot of gross floor area of any proposed building to be constructed on any of the Site Plan Lots____ In no event shall any of the Lot Purchasers and/or owners/developers of the Site Plan Lots be required to pay any fees or assessments or otherwise be held responsible for payment of any fees or assessments related to offsite improvements beyond the $1.00 per square foot to be paid at time of building permit issuance. On June 25, 2004, Riverside South LLC sold its property rights in the South Campus of the Riverside Corporate Park Project to Riverside Apartments (“Riverside”), a limited liability company consisting of two member companies, River Walk Apartments, LLC, and Monocacy River Apartments, LLC. In October of 2004, and again in March of 2005, Riverside Apartments submitted applications for shell construction permits to construct 144 units, a club house, two garage buildings, and twelve buildings on plat 301 of the South Campus of the Riverside Corporate Park Project, along with a payment of the $1.00 per square foot for each proposed structure, as required by both the November and the Deferral Agreement.

The City denied the applications, stating that “in addition to the $1.00 per square foot fee, all impact fees must be paid prior to the issuance of any of the aforementioned building permits,” to include the payment of water, sewer, and park fees. Riverside responded by filing a complaint for a writ of mandamus and specific performance in the Circuit Court for Frederick County, requesting that the City of Frederick be directed to issue the shell construction permits for the $1.00 per square foot assessment fee provided in both the Novem ⁵³⁶ ber and the Deferral Agreements, and also filed a motion for summary judgment requesting judgment for Riverside on the grounds that there were no disputed facts, that the municipality was bound by its contracts, and that the City of Frederick had entered into a valid and enforceable written agreement and therefore was bound to honor the $1.00 per square foot special assessment fee. The City responded to the motion for summary judgment, stating that there were material issues of fact, specifically, whether Riverside had standing to enforce the Agreements because Riverside was not a signatory to either Agreement. The City also argued that Riverside was not entitled to judgment as a matter of law because the Agreements only exempted the property from regulatory fees, not water, sewer and park facility impact fees, and that, even if the Agreements did exempt River Walk from paying those fees, because they constitute taxes, they can only be waived by the Maryland General Assembly and therefore, without such authorization, the waiver was ultra vires and not enforceable.

After hearing oral argument on the motion for summary judgment, the trial judge ruled in Riverside’s favor, stating: [The November and the Deferral] agreements are clear and unambiguous. In each agreement, the City, in exchange for the rights-of-way granted to it by Riverside, pledges to charge the Plaintiff no more than the $1.00 per square foot special assessment for building permits. The City, however, has refused to issue any permits despite the fact that Riverside has complied with the terms of the contracts and paid the required special assessment fee for each permit it has applied for. The City, instead, attempts to charge Riverside for additional environmental impact fees beyond the agreed upon assessment.

This position is not consistent with the agreements entered into by the City in November of 2000 and June of 2004. While the City has willingly accepted the benefits of their agreements—the rights-of-way granted to it by Riverside—it has not fulfilled its obligations under the same contracts. The City entered into a valid and enforceable contract with the Plaintiff and must like any other individual ⁵³⁷ or entity, live up to the terms of its agreements. Accordingly, because there are no material facts in dispute, it is appropriate to enter summary judgment on behalf of the Plaintiff.

The judge also ordered that the City “not require [Riverside] to pay any additional fees, beyond the one dollar per square foot agreed upon” in the November and the Deferral Agreements in order to acquire the shell construction permits. The City noted a timely appeal to the Court of Special Appeals, wherein it argued that both the November Agreement and the Deferral Agreement’s special assessment fee and waiver of future impact fees were void. The City maintained that, under Section 2 of Article 23A of the Maryland Code (1957, 2001 RepLVoL), the legislative body of the municipality must enact ordinances in order to establish impact fees, and that the two Agreements were not legislatively authorized, but instead constituted private agreements between Riverside and the two mayors. 6 In the Court of Special Appeals, River Walk argued that the contracts actually constituted the purchase of certain rights of way, and that the Mayors possessed the authority under Section 2(b)(24) of Article 23A, Maryland Code (1957, 2001 RepLVol.), 7 and Section 35B of Article 5 of the City of Freder ⁵³⁸ ick Charter, to enter into contracts on behalf of the City to procure necessary rights-of-way to complete the Monocacy Boulevard Extension. River Walk also asserted that because municipalities are bound by their contractual obligations, the November and the Deferral Agreements should be enforced.

The Court of Special Appeals disagreed and reversed the grant of summary judgment to River Walk, holding that Section 2 of Article 23A and Section 7 of Article II of the City of Frederick Charter mandate that all fees imposed by the City and any waiver thereof must be authorized by ordinance, and because no ordinance authorizing either the November or the Deferral Agreement was enacted, both contracts were ultra vires and therefore void ab initio. Before this Court, River Walk contends that, pursuant to Sections 142, 143 and 147 of Article XI, 8 and Sections 168,172, ⁵³⁹ and 174 of Article XIV 9 of the City of Frederick Charter, the ⁵⁴⁰ Mayor possesses the executive power to purchase or condemn property such as the rights-of-way at issue in this case. Therefore River Walk maintains that, as an executive act, no ordinance or legislative act was required in order for the City to enter into the Agreements. Further, River Walk maintains that the Mayor, as the chief executive officer of the City, has the inherent, executive power to purchase property on the City’s behalf and the November and the Deferral Agreements, therefore, constituted an exercise of that executive power.

River Walk also argues that municipalities are bound by their contractual obligations. Conversely, the City of Frederick asserts that the November and the Deferral Agreements constituted a waiver of all impact and assessment fees and the creation of a new special assessment fee, which, the City maintains, the Mayor has no authority to do. The City argues that, before any fee can be ⁵⁴¹ imposed by the municipality, it must be legislatively authorized. Further, the City contends that, the waiver of fees is a corollary to the imposition of fees, so it too would require legislative authorization. 10 II.

Analysis In this case we are called upon to determine whether the trial judge properly granted summary judgment on behalf of River Walk. The entry of summary judgment is governed by Maryland Rule 2-501, which provides in pertinent part that: (f) Entry of judgment. The court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law. Maryland Rule 2—501(f).

The question of whether the trial court properly granted summary judgment is a question of law and is subject to de novo review on appeal. Standard Fire Ins. Co. v. Berrett, 395 Md. 439, 450 , 910 A.2d 1072, 1079 (2006); Miller v. Bay City Prop. Owners Ass’n, Inc., 393 Md. 620, 632 , 903 A.2d 938, 945 (2006), quoting Myers v. Kayhoe, 391 Md. 188, 203 , 892 A.2d 520, 529 (2006); Ross v. State Bd. of Elections, 387 Md. 649, 658 , 876 A.2d 692, 697 (2005); Todd v. MTA 373 Md. 149, 154 , 816 A.2d 930, 933 (2003); Beyer v. Morgan State Univ., 369 Md. 335, 359 , 800 A.2d 707, 721 (2002).

If no material facts are in dispute, we must determine whether summary judgment was correctly entered as a matter of law. Standard Fire Ins. Co., 395 Md. at 450 , 910 A.2d at 1079 ; Ross, 387 Md. at 659 , 876 A.2d at 698 ; Todd, 373 Md. at 155 , 816 A.2d at 933 ; Beyer, 369 Md. at 360 , 800 A.2d at 721 . On appeal from an order entering summary judgment, we ⁵⁴² review “only the grounds upon which the trial court relied in granting summary judgment.” Standard Fire, 395 Md. at 450 , 910 A.2d at 1079 ; Ross, 387 Md. at 659 , 876 A.2d at 698 , quoting Eid v. Duke, 373 Md. 2, 10 , 816 A.2d 844, 849 (2003), quoting in turn Lovelace v. Anderson, 366 Md. 690, 695 , 785 A.2d 726, 729 (2001).

In the case before us, River Walks seeks the enforcement of both the November and the Deferral Agreements, entered into by different Mayors. Both Agreements obliged the Property Owners’ successors to convey certain rights-of-way to the City in exchange for the creation of a “special assessment” fee provision, which allowed River Walk to obtain all necessary shell construction permits from the City for a fee of $1.00 per square foot of each shell to be constructed, instead of any impact fees. River Walk asserts that the November and the Deferral Agreements constituted the purchase of necessary rights-of-way necessary for the completion of an existing public ways project, specifically, Phase III of the Monocacy Boulevard Project. River Walk contends that, because these Agreements represented nothing more than the implementation of an already authorized and existing public project, they constituted executive, not legislative, actions, which the May- or, as the chief executive officer of the City, possessed the requisite authority to do on behalf of the City and cites Eggert v. Montgomery County Council, 263 Md. 243, 259 , 282 A.2d 474, 482 (1971) (stating that an executive action is one “which merely looks to or facilitates the administration, execution or implementation of a law already in force and effect”) (emphasis added), quoting Scull v. Montgomery Citizens League, 249 Md. 271, 282 , 239 A.2d 92, 98 (1968), and Queen Anne’s Conservation, Inc. v. County Commissioners of Queen Anne’s County, 382 Md. 306, 321 , 855 A.2d 325, 334 (2004) (stating that the negotiation of contracts on behalf of a local government body constitutes a discretionary, executive action), for authority.

Therefore, River Walks posits, the Agreements should be enforced. Contrary to River Walk’s assertions, the gravamen of this case is not whether the Mayor had the power to purchase ⁵⁴³ land, establish necessary rights-of-way, or even enter into contracts on behalf of the City. The gravamen of this case is whether the two Mayors had the requisite authority to create special assessment fees on behalf of the City and to waive impact fees. The City of Frederick is a municipality, incorporated in 1816 pursuant to Chapter 74 of the Acts of 1816.

Municipalities possess only such powers as have been conferred upon them by the Legislature. Jewel Tea Co. v. Town of Bel Air, 172 Md. 536, 539 , 192 A. 417, 418 (1937). This Court explicated as early as 1872 in Mayor and Council of Hagerstown v. Sehner, 37 Md. 180 (1872), that municipalities are: public corporations created by the Legislature for political purposes, with political powers, to be exercised for purposes connected with the public good, in the administration of civil government. They are instruments of government subject at all times to the control of the Legislature with respect to their duration, powers, rights and property.

It is of the essence of such a corporation, that the government has the sole right as trustee of the public interest, at its own good will and pleasure, to inspect, regulate, control and direct the corporation, its funds and franchises. These are the unquestioned general doctrines on this subject, sustained by all the authorities. Id. at 193 (emphasis added). Possessing no inherent powers, municipalities, therefore, are limited to exercising only those expressly granted by the Legislature, those “necessarily or fairly implied in or incident to the powers expressly granted,” and those powers essential or indispensable to “the accomplishment of the declared objects and purposes of the corporation.” Hardy v. Housing Mgmt.

Co., 293 Md. 394, 396-97 , 444 A.2d 457, 458 (1982); Barlow v. Friendship Heights Citizens’ Comm,. 276 Md. 89, 93 , 344 A.2d 415, 417 (1975); City of New Carrollton v. Belsinger Signs, Inc., 266 Md. 229, 237 , 292 A.2d 648 (1972); McRobie v. Mayor and Comr’s of Westernport, 260 Md. 464, 466 , 272 A.2d 655, 656 (1971). ⁵⁴⁴ The municipal power implicated in this case is the power to impose and waive impact fees. Article 14 of the Maryland Declaration of Rights states that “no aid, charge, tax, burthen or fees ought to be rated or levied, under any pretense,