Vytar Associates v. Mayor of Annapolis

RODOWSKY, Judge. These are claims for refund of license fees voluntarily paid to a municipality .under an ordinance later judicially invalidated for lack of municipal power. We must first determine whether the^refund statute relied upon, Md.Code (1957, 1980 Repl.Vol.), Art. 81, § 215, authorizes refunds of license fees paid under the circumstances presented here. If it does, we must then decide the constitutionality of an attempt by the General Assembly retroactively to validate municipal imposition of the class of fees involved.

The Annapolis City Code (1969) (ACC) § 12-16 proscribes the operation of certain rental dwellings in the City of Annapolis without a license and establishes a license fee. Vytar Associates, Refuse Removers, Inc., and Hilltop Associates (Owners), each of which operated rental dwellings in the city, voluntarily paid, for several years, substantial fees to the Mayor and Aldermen of the City of Annapolis, a municipal corporation, (Annapolis) for operating licenses. ⁵⁶¹ Then this Court decided Campbell v. City of Annapolis, 289 Md. 300 , 424 A.2d 738 (1981). We held that the license fee imposed by ACC § 12-16(f) was invalid under MD. Const, art.

XI-E, § 5 because the fee had not been expressly authorized by the General Assembly. Id. at 311-12, 424 A.2d at 744 . Whereupon each of Owners filed a claim with Annapolis for a refund of the license fees which it had paid. Then the General Assembly responded to Campbell by enacting two identical bills as emergency legislation.

See Ch. 565 (S.B. 751) and Ch. 684 (H.B. 1292) of the Acts of 1981. Section 1 of this legislation, codified as Md.Code (1957, 1981 Repl.Vol., 1984 Cum.Supp.), Art. 23A, § 2(b)(32) and (33), expressly bestows upon an incorporated municipality the power which we had found in Campbell to be lacking, namely the right to charge a rental dwelling license fee. Section 2 of the emergency legislation, not codified, in terms ratifies previously imposed fees. Annapolis disallowed the claims.

Owners appealed to the Maryland Tax Court. The Maryland Tax Court held that “the refund claims should have been honored and paid.” Annapolis noted an appeal to the Circuit Court for Anne Arundel County. The circuit court reversed the order of the Maryland Tax Court. This appeal by Owners followed on which we issued the writ of certiorari on our own motion prior to consideration of the case by the Court of Special Appeals.

Owners suggest that the threshold question is whether the Maryland Tax Court had jurisdiction to entertain the claims for refunds of the license fees. This question, however, is answered by a determination whether Owners were entitled to file claims with Annapolis for a refund of the fees which they paid. If they were so entitled, the Maryland Tax Court had jurisdiction to entertain an appeal in the event the claims were disallowed. We explain.

Owners “do not dispute that the common law rule in Maryland is that in the absence of some statutory provision authorizing it, taxes, fees or other governmental charges ⁵⁶² voluntarily paid under a mistake of law cannot be recovered back. Walk-A-Show, Inc. v. Stanton, 182 Md. 405 [, 35 A.2d 121 ] (1943).” See White v. Prince George’s County, 282 Md. 641, 651-54 , 387 A.2d 260, 266-67 (1978); Rapley v. Montgomery County, 261 Md. 98, 106-11 , 274 A.2d 124, 128-31 (1971). The Maryland Legislature, however, has somewhat eased the plight of the harried taxpayer by creating over the years the present scheme for the refund in certain circumstances of ordinary and special taxes and of “other fees or charges;” Md.Code (1957, 1980 Repl.Vol., 1984 Cum.Supp.), Art. 81, title “Revenue and Taxes,” §§ 213-219 comprising the subtitle “Refund of Taxes.” 1 See White, 282 Md. at 647-48 , 387 A.2d at 264-65 ; Rapley, 261 Md. at 109-10 , 274 A.2d at 130 . Within that subtitle, § 215, set forth infra, is the statute on which Owners rely for entitlement to refunds and to avoid the common law rule.

They first made their claims at the municipal level (§ 216) and appealed to the Maryland Tax Court pursuant to § 217 from the “final action taken under the provisions of § 216 ... in disallowing [their] claim[s] for refund____” Section 224 of Art. 81 bestows on the Maryland Tax Court “the powers and duties in [Art. 81] specified.” Consequently if Owners had the right to claim a refund from Annapolis under § 215, the Maryland Tax Court, by § 217, had jurisdiction to entertain an appeal from a disallowance of the claim. 2 ⁵⁶³ The principal issue between the parties arises over the construction of § 215. In order to highlight the problem we present as separate paragraphs the three clauses of § 215 which describe when its refund authorization applies. Whenever any person shall have erroneously or mistakenly paid to any State, county or municipal agency authorized to collect the same more money for special taxes or other fees or charges, than was properly and legally payable, or shall have paid any special taxes which were erroneously or illegally assessed or collected, or penalties or interest thereon collected without authority, or in any other manner wrongfully collected, he may file with such agency a written claim for the refund thereof. Such agency shall investigate the merits of such claim, and the taxpayer filing the same shall be entitled to a hearing thereon before such agency.

Such claim for refund shall be in such form[,] verified in such manner, contain such information and be supported by such documents as may be prescribed by the Comptroller, or the chief fiscal officer of the county or municipality, as the case may be, and shall be filed within three years from the date of the payment of the special taxes, fees, charges, penalties or interest for which refund is requested. The parties agree that the monies Owners paid and seek to have refunded represent license fees and not special taxes. 3 Under the first clause a person is entitled to a ⁵⁶⁴ refund “[w]henever [he] shall have erroneously or mistakenly paid to any ... municipal agency authorized to collect the same more money for special taxes or other fees or charges, than was properly and legally payable .... ” The disputed payments met these criteria. They fell into the category of “other fees or charges” as fees to obtain licenses to operate rental dwellings. 4 The fees were “erroneously or mistakenly paid” because the law establishing them was declared unconstitutional. They were paid to the agency designated by the Annapolis City Code to collect them.

They were in an amount more than was “properly and legally payable” because in fact no fee at all was then “properly and legally payable.” That is, the words “more money” must be read in conjunction with the phrase “than ... properly and legally payable.” Annapolis focuses, as did the circuit court, on the phrase “paid to any ... municipal agency authorized to collect the same.” It is the view of Annapolis that because the code provision fixing the fee was declared unconstitutional, the municipal agency was never “authorized to collect” a fee. It is apparent to us that the authority to collect the fee referred to in Art. 81, § 215 is with respect to the statutory authority bestowed and not to the constitutional validity vel non of the fee itself. Annapolis had purported authority under the Annapolis City Code to collect the license fees ⁵⁶⁵ and they were paid, as required by the Code, to Annapolis. Reference to “agency authorized to collect” appears in clause one of the first sentence of § 215.

The second sentence twice refers to “such agency,” despite the fact that the second sentence applies to all three clauses. The second sentence applies to payments made “erroneously or mistakenly,” to payments of taxes “illegally assessed or collected,” and to penalties and interest “collected without authority.” Similar usage of the words “agency authorized to collect the same” and “such agency” in §§ 216 through 218 indicates that these words are not used to limit claims but, rather, to identify the agency to which the claim is to be submitted. Annapolis also presents the view, espoused by the circuit court, that if the first clause of § 215 provides Owners with entitlement to file a claim for a refund, then the refunds authorized by the second clause would be encompassed by the first clause so that “the second clause would be rendered surplusage.” This, Annapolis emphasizes, would violate “[a] cardinal rule of statutory construction----” We do not agree that the second clause is superfluous. The purpose of the second clause is to contrast the operation of § 215 with the different rule for refunds of ordinary taxes established in §§ 213 and 214.

A brief historical review clarifies our reading. In the general revision of Art. 81 effected by Ch. 226 of the Acts of 1929, refunds were treated in §§ 152 and 153, both of which dealt with persons who had “erroneously or mistakenly paid____” Section 152 related to “State taxes” and § 153 to “taxes or other charges” paid to a county or the City of Baltimore. These sections made no distinction between ordinary and special taxes. In 1933 Mayor of Baltimore v. Home Credit Co., 165 Md. 57 , 166 A. 604 , on motion for reargument, 165 Md. 69, 69 , 167 A. 552 , 552, involving the valuation of intangibles for ordinary taxation, decided that the remedies by way of appeal of an assessment were cumulative to refund and not exclusive.

The taxpayer could obtain a refund of taxes paid on nontaxable ⁵⁶⁶ intangibles which the taxpayer had included in its report to the assessor. In 1934 this Court held that a taxpayer could assert the unconstitutionality of imposing ordinary taxes on his out-of-state intangible property in resisting a tax collection suit and that the defense had not been lost by failure to raise it on appeal from the assessment. Mayor of Baltimore v. Gibbs, 166 Md. 364, 367-68 , 171 A. 37, 38 , cert. denied, 293 U.S. 559 , 55 S.Ct. 71 , 79 L.Ed. 660 (1934). Then Ch. 407 of the Acts of 1935 added “other charges” to § 152, as a subject of refunds which could be obtained from the state.

Chapter 407 also added in § 153 a proviso applicable to both refund sections which was “apparently intended to overcome, to the extent specified, the Gibbs and Home Credit cases, supra.” Wasena Housing Corp. v. Levay, 188 Md. 383, 391 , 52 A.2d 903, 907 (1947). That amendment to § 153 read: [Pjrovided, however, that no refund under the provisions of this or the preceding section of this sub-title shall be required in any case where the validity of the assessment upon which such taxes were levied might have been challenged by way of appeal therefrom under any of the provisions of this Article. The General Assembly restructured the “Refund of Taxes” subtitle of Art. 81 into its present basic format by Ch. 701 of the Acts of 1941. In outline form the 1941 subtitle contained —a section authorizing certain refunds of state ordinary taxes (now § 213); —a section authorizing certain refunds of county and municipal ordinary taxes (now § 214); —a section authorizing certain refunds of state special taxes or other fees and charges (later enlarged to embrace counties and municipalities and now § 215); —a section on the procedure for applying for refunds, applicable at least to special taxes or other fees and charges (now § 216); ⁵⁶⁷ —a section on appeals from the initial agency action taken under the preceding section (now § 217); —a section on the general mechanics of paying from public monies refunds “of special taxes, fees, charges, penalties or interest” (now § 218); and —a section on the effect of other unpaid taxes owed by the taxpayer (now § 219).

Significant for present purposes is the fact that the substance of the 1935 proviso concerning appeals from assessments was expressly continued only in the two sections (§§ 161 and 162 of Ch. 701) dealing with ordinary taxes. Their successors, §§ 213 and 214, still include the following part of the 1941 enactment: No refund shall be made ... in any case where it appears that the assessment upon which such taxes were levied and collected has become final and has not been modified on appeal as provided in this article, and the only basis for the refund is a claim that such assessment was erroneous or excessive .... Sections 213 and 214, like their 1941 predecessors, operate “[wjhenever any person shall claim to have erroneously or mistakenly paid ... more money ... than was properly and legally chargeable to or collectible from such person .... ” In this respect clause one of present § 215 is similar. It applies “[wjhenever any person shall have erroneously or mistakenly paid ... more money ... than was properly and legally payable ____” But the authorization for refunds in cases involving ordinary taxes differs from that for refunds in cases involving special taxes and other fees and charges.

Clause two tells us that claims for refund under § 215 are not subject to disallowance because the overpayment of special taxes results from error in an unchallenged assessment. Clause two makes plain that the limitation under §§ 213 and 214 on refund of money “erroneously or mistakenly paid” is not a limitation under § 215 on the refund of money “erroneously or mistakenly paid.” Consequently clause two is not to be read as limiting the ⁵⁶⁸ scope of clause one under which Owners’ claims literally fall. We hold that under Art. 81, § 215 Owners were entitled to file claims for refund of the license fees they had paid Annapolis. Next, we examine the status of the emergency legislation and its impact on the refund claims.

The Maryland Tax Court saw no need to address whether the emergency legislation was constitutional, saying: This law was passed after the applications for refunds had already been made. If the claims for refund had come after [the emergency legislation] was enacted, a different situation may exist, but this Court is not deciding that at this time and indeed does not have to under the circumstances here existing, The circuit court, in reversing the Tax Court, could find no basis in § 215 for granting the refunds and did not reach the constitutional issue. On this appeal, however, Owners vigorously dispute the validity of the emergency legislation. 5 Although the question was not decided in either of the lower courts, it was presented to each of them. The question is pertinent to a final resolution of this appeal.

We shall exercise our discretion under Maryland Rule 885 and answer it. The chronology of events leading to the appeals by Owners to the Maryland Tax Court is as follows: March 31, 1978 — August 15, 1980: license fees were paid by Owners to Annapolis as required by ACC