Washington National Arena Ltd. Partnership v. Treasurer, Prince George's County

Eldridge, J., delivered the opinion of the Court. This case represents the final chapter, we trust, in a long controversy between the government of Prince George’s County and certain taxpayers over the proper rate of recordation taxes in Prince George’s County. The specific issue before us is whether the retroactive application of a 1976 recordation tax statute would impair constitutionally protected rights. ⁴⁰ I. The dispute had its origins in 1968 when the General Assembly amended Maryland Code (1957, 1975 Repl. Vol.), Art. 81, § 277, relating to the tax imposed upon the recordation of certain written instruments.

Subsection (b) of § 277 provided in 1968, and continues to provide, that the basic rate of recordation taxes throughout the State would be $0.55 for each $500.00 of the consideration paid or, in the case of an instrument securing a debt, $0.55 for each $500.00 of the principal amount of the debt secured. The Legislature in 1968 enacted a new subsection (q) of § 277 which in substance stated that the counties and Baltimore City could, by resolution or ordinance, fix a recordation tax rate in lieu of the basic rate, but that in the absence of such resolution or ordinance, the rate specified in § 277 would continue to apply. Also in 1968, the Legislature added a new subsection (r) to § 277. Subsection (r), applicable only to Prince George’s County, provided that “[notwithstanding the other provisions of this section,” Prince George's County could by resolution adopt, in lieu of the basic recordation tax rate specified in subsection (b), a rate of $1.10 for each $500.00 of consideration or secured debt.

In 1968, soon after subsection (r) was enacted into law, the County Commissioners of Prince George’s County by resolution set the recordation tax rate at $1.10. A few months later, however, in September 1968, the Prince George’s County Commissioners adopted a new resolution increasing the recordation tax rate to $1.65. The question of the proper recordation tax rate in Prince George's County first came before us in Prince George's Co. v. White, 275 Md. 314 , 340 A.2d 236 (1975) (hereinafter referred to as White I). The taxpayers in that case had recorded deeds of trust among the Prince George’s County land records in 1971 and l972, and they were required to pay recordation taxes computed at a rate of $1.65 for each $500.00 of debt secured.

The taxpayers then filed a claim for a partial refund of the recordation taxes pursuant to Art, 81, §§ 214-217. The Maryland Tax Court, the administrative agency empowered to render a final administrative decision ⁴¹ in the matter, held that the legal rate for recordation taxes in Prince George’s County was $1.10 for each $500.00 of debt secured and that, therefore, the taxpayers were entitled to a partial refund representing the difference between the taxes actually paid at the $1.65 rate and the amount of taxes which should have been paid based upon the proper rate of $1.10. This Court in White /affirmed the Tax Court, holding that the Legislature intended the $1.10 rate, specified in subsection (r), to be the applicable rate in Prince George’s County. The subject of recordation taxes under Art. 81, § 277, next came before us in Blumenthal v. Clerk of Cir. Ct., 278 Md. 398 , 365 A.2d 279 (1976).

There this Court held that Baltimore City and certain counties, not including Prince George’s County, were authorized by subsection (q) of § 277 to set whatever recordation tax rates those subdivisions deemed appropriate. We pointed out that subsection (r), limiting the rate to $1.10, was applicable just in Prince George’s County, and we reiterated our holding in White I that the Legislature intended for subsection (r) to take precedence over the general authority granted counties by subsection (q). Blumenthal v. Clerk of Cir. Ct., supra, 278 Md. at 407 . The year following this Court’s decision in White / two statutes amending Art. 81, § 277, were enacted.

Chapter 142 of the Acts of 1976, inter alia, amended subsections (q) and (r) to provide that all of the counties could by resolution or ordinance fix whatever recordation tax rate they desired, and that, in the absence of such resolution or ordinance, the recordation tax rate in Prince George’s County should be $1.65 for each $500.00 of consideration or secured debt. Chapter 142, enacted as an emergency law and taking effect on April 13, 1976, was entirely prospective in its operation. The other 1976 statute which amended Art. 81, § 277, was Ch. 129 of the Acts of 1976. It is Ch. 129 which gives rise to the retroactivity issue presented in the instant case.

Section 1 of Ch. 129 stated the “legislative intent” that, from and after July 1, 1968, the recordation tax rate prescribed by a county resolution or ordinance superseded the tax rates set forth in any subsection of § 277. Section 2, in the first ⁴² paragraph, purportedly “ratified, confirmed, and validated” the “authority to collect recordation taxes pursuant to a tax rate fixed” by resolution or ordinance of a subdivision on or after July 1,1968. The second paragraph of § 2 provided that the statute did not apply to “actions which are res judicata, nor whenever constitutionally protected rights would be impaired.” 1 The matter of the Prince George’s County recordation tax rate, in light of the provisions of Ch. 129 of the Acts of 1976, was before us in White v. Prince George's County, 282 Md. 641 , 387 A.2d 260 (1978) (hereinafter cited as White II). White //involved two categories of recordation tax refund claims.

One category consisted of claims which had never been presented to the Maryland Tax Court, and we refused to consider the merits of those claims because of the taxpayers’ failure to exhaust their administrative remedies. The other category of recordation tax refund claims before us in White //consisted of the identical claims involved in White I, as to which the taxpayers had, of course, exhausted administrative remedies. In spite of our decision in White I that the taxpayers in that case were entitled to refunds, Prince George’s County had refused to refund the money. The County initially argued that we should reconsider our prior interpretation of the recordation tax provisions. ⁴³ Alternatively, the County argued that Ch. 129 of the Acts of 1976 had the effect of retroactively increasing the recordation tax rate in Prince George’s County to $1.65, so that the $1.65 rate was applicable to the White I claims involving 1971 and 1972 taxes.

It was the County’s contention that the White I claims were not excepted from the operation of Ch. 129 by the second paragraph of § 2, because the White I litigation was not res judicata and because constitutionally protected rights were not impaired. In White II, we rejected both arguments by Prince George’s County. First ( 282 Md. at 657 ), we refused to depart from the interpretation of Art. 81, § 277 (q) and (r), which we rendered in White I and reaffirmed in Blumenthal v. Clerk of Cir. Ct., supra. Second (id. at 658-659), we held that the White I proceedings were res judicata and that, therefore, the White I claims were excepted from the operation of Ch. 129.

Because of our ruling with regard to res judicata, it was unnecessary for us in White II to decide whether constitutionally protected rights would also have been impaired. That issue must now be resolved in the case at bar.

II

The relevant facts of this case are undisputed and may be briefly stated. The petitioners are several corporations and partnerships which, at various times prior to 1976, recorded written instruments among the Prince George’s County land records and were required to pay recordation taxes based upon the $1.65 rate. They all filed timely claims for partial refunds which, because of the County’s failure to act upon them within six months, were disallowed by operation of law. 2 Petitioners all took timely appeals to the Maryland Tax Court, and, by that time, Ch. 129 of the Acts of 1976 had been ⁴⁴ enacted into law. The Maryland Tax Court viewed Ch. 129 as “a curative act” which “resurrected the [1968] resolution adopted by the County Commissioners of Prince George’s County fixing the recordation tax rate at $1.65 per $500.00.” The Tax Court held that, as a “curative act,” Ch. 129 could be retroactively applied to petitioners without impairing constitutional rights.

Upon judicial review of the Tax Court’s decision, the Circuit Court for Prince George’s County affirmed on the ground that Ch. 129 of the Acts of 1976 was “curative” legislation, curing a prior defect in Prince George’s County’s authority to collect recordation taxes at the rate of $1.65, and, as such, its retroactive application to the taxpayers in this case did not impair constitutionally protected rights. The taxpayers took an appeal to the Court of Special Appeals. Before any further proceedings in that intermediate appellate court, the taxpayers filed a petition for a writ of certiorari which we granted.

III

The issue in this case could be viewed either as one of statutory interpretation or as a matter of constitutionality. It makes no practical difference whichever way it is viewed. The Legislature, in Ch. 129 of the Acts of 1976, expressly stated its intention that the statute should not apply “whenever constitutionally protected rights would be impaired.” Consequently, from a technical viewpoint, if the retroactive application of the 1976 tax statute to the recordation of written instruments at various times between September 1968 and 1976 would impair taxpayers’ constitutional rights, then, as a matter of legislative intent, the statute does not apply. However, in order to determine the application of Ch. 129 on this statutory interpretation ground, it is obviously necessary to resolve the constitutional question.

In this Court, Prince George’s County defends the constitutionality of applying Ch. 129 of the Acts of 1976 to recordations before 1976 solely on the ground that the Act, ⁴⁵ as so applied, represents permissible “curative” legislation. The County does not contend, apart from the statute’s being “curative,” that the Legislature could, consistent with constitutional limitations, in 1976 retroactively increase the tax on recording transactions which were completed as long ago as 1968. Considering the degree of retroactivity and the nature of the transactions here being taxed, we agree that if the application of Ch. 129 to recording transactions between 1968 and 1976 can be sustained, it must be on the ground that the act is valid “curative” legislation. 3 It is often said that “curative acts,” although retroactive, are generally upheld on the ground that whatever a legislative body “may authorize in prospect, it may adopt and validate in retrospect, so long as there is no interference with vested rights or contractual obligations.” (Emphasis supplied.) Co. Council v. Carl M. Freeman Assoc., 281 Md. 70, ⁴⁶ 79 , 376 A.2d 860 (1977); Dryfoos v. Hostetter, 268 Md. 396, 404 , 302 A.2d 28, 32-33 (1973). The problem, frequently, is in determining whether there is an “interference with vested rights or contractual obligations.” 4 With respect to legislation imposing taxes or other governmental charges, which is retroactive to prior years, and which purports to correct defects in the collecting authority for those prior years, the line between permissible “curative” legislation and unconstitutionally retroactive legislation has been somewhat difficult to draw. 5 The two leading Supreme Court cases which illustrate each side of that line are United States v. Heinszen, 206 U.S. 370 , 27 S. Ct. 742 , 51 L. Ed. 1098 (1907), and Forbes Pioneer Boat Line v. Board of Commissioners, 258 U.S. 338 , 42 S. Ct. 325 , 66 L. Ed. 647 (1922).

The facts in Heinszen were as follows. In November 1898, after the Philippine Islands came under the military control of the United States, a tariff on goods coming into the Philippines went into effect pursuant to an order of the President as Commander in Chief. The treaty of peace ending the Spanish-American War was ratified in April 1899, and collections went on under the same tariff. In April 1900, a governing commission was appointed by the President, and the same tariff continued in effect.

Then, in March 1902, an Act of Congress continued the original tariff in force. In a series of cases between that time and 1906, dealing with ⁴⁷ Puerto Rico and the Philippine Islands, the Supreme Court held that the President, as Commander in Chief, had authority to impose the tariff until the treaty of peace was ratified but that, after ratification, the authority had to come from Congress. Consequently, between 1898 and April 1899, when the treaty was ratified, the tariff duties were properly collected, and after March 1902, when Congress acted, they were properly collected. But there was a hiatus in the authority to collect the duties under the tariff between April 1899 and March 1902.

Congress responded to this problem in June 1906 by enacting a statute which “legalized and ratified ... the collection of all such duties” during the gap in authority prior to March 1902. The issue in United States v. Heinszen, supra, was the constitutional validity of the June 1906 statute ratifying the collection of duties under the tariff pursuant to the presidential order. The Court of Claims had refused to give effect to the Act, and the government appealed. The Supreme Court, in an opinion by Mr. Justice White on behalf of a five-judge majority, reversed, applying the principle that a legislative body may “ ‘cure irregularities, and confirm proceedings which without the confirmation would be void, because unauthorized, provided such confirmation does not interfere with intervening rights.’ ” ( 206 U.S. at 384 , quoting from Mattingly v. District of Columbia, 97 U.S. 687, 690 , 24 L. Ed. 1098 (1878)).

With regard to the argument that the 1906 Act amounted to a retroactive imposition of tariff duties, the majority opinion relied upon the “fact that when the goods were brought into the Philippine Islands there was a tariff in existence under which duties were exacted in the name of the United States.” Id. at 385. The Court also held that it made no difference that the appellee taxpayers’ action for a refund was pending when the “curative act” was enacted, id. at 387. Forbes Pioneer Boat Line v. Board of Com’ rs, supra, was decided by the Supreme Court sixteen years after Heinszen. Forbes involved the collection of tolls at a canal built and ⁴⁸ operated by the State of Florida. 6 The Board of Commissioners, being the public agency charged with maintaining the canal as part of the Everglades drainage district, and acting under what it viewed as a broad grant of statutory authority, collected tolls for passage from the Forbes Pioneer Boat Line.

The boat line in 1917 filed suit for a refund. The Supreme Court of Florida, based on its interpretation of the statutory provisions (see 82 So. at 347-351), held that the Board of Commissioners was not empowered to collect tolls for passage through the canal. On the same day in 1919 as the Florida Supreme Court’s decision, the State Legislature passed a statute providing that “ ‘all tolls heretofore collected ... [are] legalized and validated.’ ” (86 So. at 201.) The Florida Supreme Court in Forbes upheld the validity of the ratification statute, relying on United States v. Heinszen, supra. The Supreme Court of the United States, however, in a unanimous opinion written by Mr. Justice Holmes, reversed, holding the statute to be an infringement of constitutionally protected property rights.

The Court explained ( 258 U.S. at 339 ): “Stripped of conciliatory phrases the question is whether a state legislature can take away from a private party a right to recover money that is due when the act is passed. The argument that prevailed below was based on the supposed analogy of United States v. Heinszen & Co., 206 U.S. 370 ,... which held that Congress could ratify the collection of a tax that had been made without authority of law. That analogy, however, fails. A tax may be imposed in respect of past benefits, so that if instead of calling it a ratification Congress had purported to impose the tax for the first time the enactment would have been within its power.

Wagner v. Baltimore, 239 U.S. 207, 216, 217 . Stockdale v. Atlantic Insurance Co., 20 Wall. 323 . But generally ratification of an act is not ⁴⁹ good if attempted at a time when the ratifying authority could not lawfully do the act. Bird v. Brown, 4 Exch. 786, 799.

If we apply that principle this statute is invalid. For if the Legislature of Florida had attempted to make the plaintiff pay in 1919 for passages through the lock of a canal, that took place before 1917, without any promise of reward, there is nothing in the case as it stands to indicate that it could have done so any more effectively than it could have made a man pay a baker for a gratuitous deposit of rolls.” The Court went on to acknowledge that some of the ratification cases had gone beyond the principles set forth above, but the opinion made it clear that such extension cannot “go very far” in order to be upheld {id. at 339-340): “It is true that the doctrine of ratification has been carried somewhat beyond the point that we indicate, in regard to acts done in the name of the Government by those who assume to represent it.... [Citations omitted.] It is true also that when rights are asserted on the ground of some slight technical defect or contrary to some strongly prevailing view of justice, Courts have allowed them to be defeated by subsequent legislation and have used various circumlocutions, some of which are collected in Danforth v. Groton Water Co., 178 Mass. 472, 477 . Dunbar v. Boston & Providence R.R. Co., 181 Mass. 383, 385 . In those cases it is suggested that the meaning simply is that constitutional principles must leave some play to the joints of the machine. “But Courts can not go very far against the literal meaning and plain intent of a constitutional text....” The Supreme Court then pointed out that, in light of the decision of the Florida court below interpreting the Commissioners’ statutory authority, the “transaction was not one for which payment naturally could have been expected.” ⁵⁰ (Id. at 340.) The Court concluded by stating that because the Legislature omitted to authorize