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LLC v. Town of Bel Air

Court of Appeals of Maryland

June 23, 2016


Circuit Court for Harford County Case No. 12-C-13-2116

          Argued: March 7, 2016

          Barbera, C.J., [*]Battaglia, Greene, Adkins, McDonald, Watts, Hotten, JJ.


          McDonald, J.

         Petitioner Brutus 630, LLC ("Brutus 630") seeks a refund of certain sewer connection charges that it asserts were wrongly charged by Respondent Town of Bel Air ("Town"). The question before us is not whether Brutus 630 gets a refund, but rather whether it gets a day in court - more precisely, a day before the administrative agency known as the Maryland Tax Court - to decide its claim for a refund.

         Brutus 630, the assignee of the entity that paid the charges, seeks a refund pursuant to Maryland Code, Local Government Article ("LG"), §20-113 et seq., a statute that provides a mechanism for a person to seek a refund of "a tax, fee, charge, interest, or penalty" that is "erroneously, illegally, or wrongfully" assessed by or paid to a local government. Under that statute, a refund applicant who is dissatisfied with the disposition of a refund claim by the local government may pursue an administrative appeal of that decision in the Maryland Tax Court.

         In this case, the Town rejected Brutus 630's refund claim. On appeal, the Tax Court concluded that it lacked jurisdiction to consider the claim because the claim was not authorized by the refund statute and, accordingly, even if the Town had miscalculated or illegally imposed the charges, the common law voluntary payment doctrine precluded Brutus 630 from obtaining a refund.

         We hold that Brutus 630 may pursue its refund claim under the refund statute, that its claim is not barred by the voluntary payment doctrine, and that the Maryland Tax Court has jurisdiction to consider the appeal. We express no opinion on whether the claim should be granted.

          I Background

         A. Refund of Money Paid to a Local Government

         On occasion, a person who has paid money to the State or a local government may seek a refund of the payment on the ground that the payment was made erroneously or without a basis in law. Under the common law, the default rule, known as the voluntary payment doctrine, was that a payment voluntarily made to the State or local government could not be recovered - a rule that some courts have characterized as "harsh." There are some common law exceptions to the rule and statutory provisions that override the rule by allowing a claim for a refund. Thus, one who seeks a refund of a payment to the government must be able to point to a common law exception to the voluntary payment doctrine or to a statute that authorizes such a claim.

         1. Voluntary Payment Doctrine

         Origin of the Doctrine

         The voluntary payment doctrine is a principle developed under the English common law. Subject to certain exceptions, a person who voluntarily pays money to another person under a mistake of law may not bring a common law action to recover the money. See Dua v. Comcast Cable of Maryland, Inc., 370 Md. 604, 646-47, 805 A.2d 1061 (2002). The doctrine was originally based on the maxim that "ignorance of the law is no excuse."[1] See generally Colin E. Flora, Practitioner's Guide to the Voluntary Payment Doctrine, 37 S. Ill. U. L.J. 91 (2012). The doctrine has been adopted or acknowledged in some form in every American jurisdiction. Id., Table 1 (Index of Cases by Jurisdiction).

         "Ignorance of the law is no excuse" may be an apt rationale when applied to a murderer ignorant of the degrees of homicide, a fraudster whose scheme unintentionally falls within range of the theft statute, or a towed motorist who neglects to read a street sign before parking. It seems less compelling when applied to a payment required by a law that is murky in its coverage or complex in its computation. Perhaps for that reason, courts have searched for other policies to justify the voluntary payment doctrine: (1) providing certainty to the payee that allows the payee to use the funds received; (2) encouraging discourse, rather than litigation, over disputed charges; (3) penalizing a payor's negligence; (4) allocating the risk of late-discovered mistakes; (5) not allowing the payor a litigation advantage in the choice of when to sue and whether to be plaintiff or defendant in a controversy over a disputed charge. Flora, supra, at 94-97.

         The Voluntary Payment Doctrine in Maryland

         This Court applied the voluntary payment doctrine in a series of cases in the 19thcentury. See City of Baltimore v. Lefferman, 4 Gill 425, 431 (1846) ("It is now established, by an unbroken series of adjudications in English and American courts, that where money is voluntarily and fairly paid, with a full knowledge of the facts and circumstances under which it is demanded, it cannot be recovered back in a court of law, upon the ground, that the payment was made under a misapprehension of the legal rights and obligations of the party.") (emphasis in original); Baltimore & Susquehanna R.R. Co. v. Faunce, 6 Gill 68, 76 (1847) ("It is rightly said, that a party cannot recover money voluntarily paid with a full knowledge of all the facts, although no obligation to make payment such existed. If informed of the law which exempts him, he must abide by the consequences of his folly, in abandoning the protection it afforded him - if ignorant, he was bound to acquire more information."); Lester v. City of Baltimore, 29 Md. 415, 419-20 (1868).

         Application of the Doctrine to Payments Made to the Government

         While the common law principle originated in cases involving private parties, it has also been applied in cases of mistaken payment of taxes or other government charges. Dua, 370 Md. at 646; see, e.g., White v. Prince George's County, 282 Md. 641, 653-54, 387 A.2d 260 (1978) (voluntary payment doctrine barred an action to recover recordation taxes unless the statutory remedy applied); Morris v. Mayor & City of Baltimore, 5 Gill 244 (1847) (challenging taxes levied on bank stocks). The voluntary payment doctrine has been held to bar recovery even when the payment is made under an unconstitutional statute or ordinance. See Apostol v. Anne Arundel County, 288 Md. 667, 672, 421 A.2d 582 (1980) ("the rule that no action lies to challenge the validity of a tax paid under a mistake of law, except for any refund sanction specifically provided by the Legislature, has been applied consistently by this Court, regardless of the nature of the legal attack mounted or the type of mistake of law claimed."); Lefferman, 4 Gill at 430-37 (party was barred from recovering excess money paid to Baltimore City, even though the ordinance requiring payment was unconstitutional); accord Morris, 5 Gill at 248; Monticello Distilling Co. v. Mayor and City of Baltimore, 90 Md. 416, 45 A. 210 (1900).


         The courts have recognized some common law exceptions to the voluntary payment doctrine. Chief among the exceptions are cases involving payments made as a result of fraud, mistake of fact, or duress. Flora, supra, at 98-109; see Furman v. Lanahan, 159 Md. 1, 5, 149 A. 465 (1930) ("[w]here money has been paid upon misrepresentation, under a mistake of fact, or under circumstances amounting to duress, it may be recovered in an appropriate action, " but where money has been paid voluntarily with a full knowledge of the facts, it cannot be recovered); Baltimore & Susquehanna R.R. Co., 6 Gill at 77 ("A payment cannot well be said to be made voluntarily when it is made in consequence alone of a false view of the facts."); see also Dua, 370 Md. at 646 (common law actions to recover excessive interest).

          In addition, to mitigate the perceived harshness of the doctrine, the General Assembly has enacted several laws that authorize State and local agencies to refund mistaken, erroneous, or illegal payments in certain circumstances.

         2. The Refund Statute

         Among the legislation that the General Assembly has enacted to mitigate the voluntary payment doctrine is a statute providing for refunds of certain payments made to local governments, including municipalities. It is currently codified at Maryland Code, Local Government Article ("LG"), §20-113 et seq.[2] The statute provides that a claim for a refund by one who:

(1)Erroneously pays to a county or municipality a greater amount of tax, fee, charge, interest, or penalty than is properly payable; or
(2)Pays to a county or municipality a tax, fee, charge, interest, or penalty that is erroneously, illegally, or wrongfully assessed or collected in any manner.

         LG §20-113. The claim is to be filed with the tax collector for the local government, along with supporting documents, within three years of the date that the payment was made. LG §§20-114, 20-115. The tax collector is to conduct an investigation and hold a hearing on the claim, if requested by the claimant, and notify the claimant of the determination of the claim. LG §20-116(a), (c).[3]

         The claimant may appeal the determination of the local government to the Maryland Tax Court within 30 days after the municipality notifies the claimant of its determination. LG §20-117(a). If no notice is given within six months of the filing of the claim, the claimant may treat the claim as being disallowed and pursue an appeal in the Tax Court. LG §20-117(b).

         Despite its name, the Maryland Tax Court is an administrative unit within the executive branch of State government. Maryland Code, Tax-General Article ("TG"), §3-102; see Frey v. Comptroller, 422 Md. 111, 137, 29 A.3d 475 (2011). The appeal is to be conducted according to the Tax Court's procedures. LG §20-117(a); TG §13-514 et seq. Any party to the Tax Court proceeding may seek judicial review of a final order of the Tax Court according to the procedures of the State Administrative Procedure Act for contested cases. TG §13-532; Maryland Code, State Government Article, §§10-222, 10-223.

         B. Factual and Procedural History

         This case arose out of a dispute between Brutus 630 and the Town concerning the imposition and calculation of certain sewer connection fees imposed by the Town. The Tax Court did not make findings of fact, as there was no evidentiary hearing in that forum and the parties did not agree to a stipulation of facts. However, the essential facts for our purposes do not appear to be in dispute.

         1. Sewer Connection Fees Charged by the Town

         The Town has relied on Harford County for the treatment of sewage generated within the Town pursuant to a series of agreements between the Town and the County.[4]According to the decision of the Town's hearing officer in this case, the Town collects various charges related to the use of the County sewer system and pays those charges to the County. Pertinent to this case, under the most recent agreement, the Town has agreed to collect and pay to the County user charges, equivalent area connection charges, sewer connection charges, and other related charges in return for the County's provision of sewage treatment service to Town residents. That agreement describes the purpose for the charges in the following terms: (1) the user charge defrays the cost of transmission and treatment of the sewage; (2) the equivalent area connection charge constitutes the Town's proportional share of the cost of existing sewage treatment facilities; and (3) the sewer connection charge defrays the cost of future replacement and expansion of the sewage treatment facilities. The charges are imposed on property owners through Town ordinances. See Bel Air Code, §397-14 et seq. This case concerns a dispute over the calculation and payment of the third category of charges - sewer connection charges.

         2. The Charges in Dispute

         Brutus 630 is a real estate developer that developed certain property in the Town as a community of 274 condominiums. As part of the project, Brutus 630 sold lots to NVR, Inc., a builder, for the construction of the buildings. As a condition of obtaining building permits from the Town during the period from February 2004 through July 2011, NVR paid the Town a total of $1, 186, 627 in sewer connection fees. NVR assigned its interest in a potential refund of those sewer connection charges to Brutus 630.[5]

         3. Denial of Refund Application

         On February 12, 2012, Brutus 630 filed an application for a refund of the sewer connection charges with the Town's Director of Finance, its tax collector. Citing the refund statute, Brutus 630's application contended, among other things, that the Town lacked legal authority for the sewer connection charges and that the Town had incorrectly computed the charges. The Director of Finance held a hearing, after which she denied Brutus 630's refund application in a written decision issued May 11, 2012. As an initial matter, the Director of Finance opined that the refund statute did not apply to the claim and that the

         Town was considering the claim only as a "matter of courtesy."[6] On the merits of the refund request, the Director of Finance concluded that the Town had legal authority to collect the sewer connection charges, that it had correctly calculated the amount of the sewer connection charges, and that it had remitted that amount to the County pursuant to the terms of the most recent agreement with the County.

         4. Administrative Appeal to Tax Court

         On June 7, 2012, Brutus 630 filed an appeal with the Maryland Tax Court reiterating, in some detail, its arguments that the Town had exceeded its authority in assessing the sewer connection charges and that, in any event, the Town had erred in its computations. The Town filed a motion to dismiss, asserting that the Tax Court was without jurisdiction to hear the merits of the appeal because the sewer connection charges were not taxes, but rather regulatory fees charged for services. Brutus 630 and the Town also filed cross-motions for summary judgment on the merits of the refund claim.

         After conducting two hearings for legal argument, [7] the Tax Court decided that it was unable to address the motions for summary judgment and granted the Town's motion to dismiss on the ground that it lacked jurisdiction because the sewer connection charges were not regarded as taxes or charges "in the nature of taxes" and therefore did not come within the purview of the refund statute. The Tax Court also concluded that, even if the sewer connection charges were illegal or miscalculated, Brutus 630 would be barred from seeking a refund by the voluntary payment doctrine because there is no statutory remedy available which permits a party to seek a refund for sewer connection charges that were paid voluntarily. On June 13, 2013, the Tax Court issued an order granting the motion to dismiss.

         5. Judicial Review

         Brutus 630 then sought judicial review of the Tax Court decision in the Circuit Court for Harford County. The Town filed a motion to dismiss, which the Circuit Court granted on December 12, 2013. Brutus 630 noted a timely appeal to the Court of Special Appeals, which affirmed in an unreported opinion. We granted Brutus 630's petition for a writ of certiorari to decide whether the Maryland Tax Court has jurisdiction under the refund statute to consider the appeal of the Town's denial of the refund application.



         We review a decision of an administrative agency like the Maryland Tax Court by "looking through" the decisions of the Circuit Court and Court of Special Appeals and evaluating directly the decision of the agency. Green v. Church of Jesus Christ of Latter Day Saints, 430 Md. 119, 132, 59 A.3d 1001 (2013). Although we would accord deference to any fact findings of the Tax Court, it made no findings here. (As noted above, while there may be some dispute over the facts concerning the merits of the refund claim, there do not appear to be any disputed facts pertinent to the question of the Tax Court's jurisdiction.) In any event, we accord less deference to the Tax Court's legal conclusions than to fact findings. Green, 430 Md. at 132-33.

         A. Whether a Claimant May Seek a Refund of a Sewer Connection Charge under the Refund Statute

         In its oral ruling, the Tax Court opined that it did not have jurisdiction of the refund claim because the sewer connection charges in question are not "taxes or fees in the nature of taxes, but rather … charges for the sale, [of] the service, or a commodity." Based on our review of the refund statute text, its legislative history, and the prior decisions of this Court, this appears to be an excessively narrow conception of the refund statute. Moreover, the authority relied upon by the Tax Court in its oral ruling is ...

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