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Dabbs v. Anne Arundel County

Court of Appeals of Maryland

April 10, 2018

WILLIAM A. DABBS, JR., et al.
v.
ANNE ARUNDEL COUNTY

          Argued: November 3, 2017

          Circuit Court for Anne Arundel County Case No. 02-C-11-165251

          Adkins, McDonald, Watts, Hotten, Getty, Harrell, Glenn T., Jr., (Senior Judge, Specially Assigned) Cathell, Dale R., (Senior Judge, Specially Assigned), JJ.

          OPINION

          Harrell, J.

         "[D]espite reams of papers being filed, it is[, still to this day, ] [] difficult to tease out [precisely what the Dabbs Class'] specific contentions are except for the assertion that they should receive a refund of some unspecified amount."

         Memorandum Opinion (at 14), Senior Judge Dennis Sweeney (ret.), Dabbs, et al. v. Anne Arundel County, Circuit Court for Anne Arundel County, Case No. 02-C-11-165251 (14 January 2016).

         This is the latest installment of a litigation saga (although perhaps we are nearing its end) traveling two quite kindred paths over more than fifteen years, (Halle, et al. v. Anne Arundel County ("Halle") and Dabbs, et al. v. Anne Arundel County ("Dabbs")) in Maryland's courts. Pursuant to the power vested in the government of Anne Arundel County, Maryland ("the County") through 1986 Md. Laws, ch. 350, the County imposed road and school impact fees according to County districts beginning in 1987.[1] These fees were paid usually by land developers and builders.[2] Those who paid impact fees (like the Dabbs Class) might become eligible, under certain circumstances, for refunds of those fees. See Anne Arundel County Code § 17-11-210.[3] Refunds were contingent upon the County's failure to utilize or encumber within a specified time the collected fees for present or future eligible capital improvements, i.e., projects for the "expansion of the capacity of public schools, roads, and public safety facilities and not for replacement, maintenance, or operations." § 17-11-209(a).[4] The Dabbs Class' claims are a demand for refunds of an unspecified amount of impact fees collected by the County between fiscal years (FY) 1997-2003.

         FACTUAL AND PROCEDURAL BACKGROUND

         I. The Halle Chronicles.

         A total of 12 reported and unreported opinions, orders, and memorandum opinions have been issued to date collectively by this Court, the Court of Special Appeals, and the Circuit Court for Anne Arundel County, in the Halle litigation (the older sibling to the present case).[5] The core contention in Halle is relevant to the present case. In 2001, the Halle Class asserted that they were entitled to refunds of impact fees collected during FY 1988-1996 that were expended on what was ultimately determined to be ineligible capital improvements.[6] In Halle, the circuit court, on 15 December 2006, found $4, 719, 359 in refunds were "due to the current owners of specified fee paying properties, " plus five-percent interest from the date of the payment of each initial fee.[7] The circuit court based its ruling in favor of the payors on its determination that the § 17-11-210(e) extension[8]decisions made by the County's Planning and Zoning Officer (PZO) were invalid. The Halle Class and the County cross-appealed. The County, on appeal,

argued that the circuit court erred by refusing to permit the County to count the encumbrances in calculating the refund. In their cross-appeal, the [Halle Class] contended that (1) the circuit court improperly calculated the amount of impact fees available for refund by excluding funds that were spent on ineligible development projects; and (2) counsel for the property owners were entitled to the 40 [percent] contingency fee provided by their fee agreement with the named class representatives.

Halle Dev., Inc. v. Anne Arundel County, No. 1299, Sept. Term, 2016 at 6 (Md. Ct. Spec. App. Nov. 22, 2017).[9] The intermediate appellate court, in 2008, held, inter alia in an unreported opinion, that the circuit court erred in its formulation of the mathematical formula used to calculate that $4, 719, 359 in refunds were due. The County was entitled, in fact, to count impact fee encumbrances[10] when determining impact fees available for refund. Halle Development v. Anne Arundel County, No. 2552, Sept. Term, 2006 at 8-9 (Md. Ct. Spec. App. May. 5, 2008) (the appellate court granted a motion for reconsideration to clarify its 7 February 2008 remand instruction); Halle Development v. Anne Arundel County, No. 2552, Sept. Term, 2006 at 52 (Md. Ct. Spec. App. Feb. 7, 2008) (the intermediate appellate court found that the circuit court erred by refusing to allow the County to count impact fee encumbrances in determining the amount of impact fee refunds to which Owners are entitled under § 17-11-210(b)). The intermediate appellate court, on remand, instructed the circuit court to recalculate appropriately the refunds with consideration given to the encumbered impact fees. See id. The County sought successfully a writ of certiorari from this Court to review that judgment. We affirmed, on 6 May 2009, the intermediate appellate court regarding its decision as to the encumbrances, and directed a remand to the circuit court to calculate available impact fee refunds. See Anne Arundel County v. Halle Dev., Inc., 408 Md. 539, 971 A.2d 214 (2009).

         On 25 March 2011, the circuit court reduced the refunds for which the payors were eligible from $4, 719, 359 to $1, 342, 360, plus interest. The Halle Class, in response, filed a petition for a writ of certiorari with this Court. We denied the Halle Class' attempt to pole-vault over review by the intermediate appellate court. The Halle Class appealed then to the intermediate appellate court. In a 29 July 2013 unreported opinion, the Court of Special Appeals affirmed the circuit court's 25 March 2011 order. The Halle Class petitioned again for a writ of certiorari. We denied that petition also. The circuit court awarded, on remand on 13 May 2014, counsel fees in the amount of 39 percent of the $1, 342, 360 in refunds, plus five-percent interest on each refund, and, on 8 August 2016, issued its final judgment. The owners appealed to the intermediate appellate court, which, in an unreported opinion on 22 November 2017, affirmed the circuit court's 8 August 2016 order, explaining, "in prior opinions, [the intermediate appellate court and this Court] have already addressed all but one[11] of the arguments raised by the [Halle Class]." Halle Development v. Anne Arundel County, No. 1299, Sept. Term, 2016 at 1 (Md. Ct. Spec. App. Nov. 22, 2017).[12]

         II. The Dabbs trilogy.

         We adopt, supplementing as needed, the intermediate appellate court's recitation of the procedural posture of this case as rendered in Dabbs v. Anne Arundel County, 232 Md.App. 314, 328-31, 157 A.3d 381, 389-91 (2017), cert. granted Dabbs v. Anne Arundel County, 454 Md. 677, 165 A.3d 473 (2017):

In the present case, involving impact fees collected in FYs 1997-2002, [the Dabbs Class] sought refunds on the ground that the impact fees were not expended or encumbered in a timely manner under § 17-11-210(b). [The Dabbs Class] also argued that the amendments to the Impact Fee Ordinance in Bill No. 27-07 and Bill No. 71-08 unconstitutionally interfered with their vested rights in refunds. After hearing from the parties, [the circuit court entered, ultimately, a declaratory judgment in favor of the County as to all issues raised in the proceeding.] [T]he circuit court ruled that the County had applied the Impact Fee Ordinance as required by this Court's 2008 opinion and found that there are no impact fees available for refund under § 17-11-210. Further, the circuit court rejected [the Dabbs Class'] constitutional and state law challenges to the Impact Fee Ordinance, finding that most of the challenges had already been resolved against the class plaintiffs in Halle.
More specifically, the circuit court found that the County prepared the six FY charts in the format approved by the Halle courts, properly comparing the amount of impact fees collected in each FY and district under review to the amount of impact fees expended (disbursed) and encumbered as of the end of the sixth FY following the FY of collection. Kurt Svendsen, the County's Assistant Budget Officer, who had been employed by the County since September 1, 1997, was responsible for (a) the preparation of the County's Capital Budget portion of the Annual Budget and Appropriation Ordinance, and (b) the monitoring of encumbrances and expenditures recorded in connection with appropriations for capital projects. Because Svendsen monitored expenditures and encumbrances recorded against appropriations of capital projects on an almost daily basis, he was delegated the responsibility for conducting the six FY test under § 17-1-210(b).
In the present case, the County prepared six FY charts for FYs 1997-2002 in the same manner as the charts prepared in Halle for FYs 1988-2002, but also included impact fee expenditures on temporary classrooms. The charts indicated that all impact fees collected in FYs 1997-2002 were expended or encumbered within six FYs following the FY of collection and, thus, no impact fees collected in these FYs were available for refund.

         Lastly, the circuit court found that, in applying the six FY test, the County properly interpreted the term "impact fees encumbered" in § 17-11- 210(b) to mean:

(1) the amount of impact fees collected in a district account in a FY which have not been expended on June 30 of the sixth FY following the FY of collection, for which there is
(2) as of the same date, an encumbrance (purchase order) on an impact fee eligible capital project in the district.

         According to the circuit court, this definition is the only logical one based on [generally accepted accounting principles (GAAP)], the applicable provisions of the County Charter, and Annual Budget and Appropriation Ordinances. Under GAAP, an appropriation states the legal authority to spend or otherwise commit a government's resources. See Stephen Gauthier, Governmental Accounting Auditing and Financial Reporting at 305 (Government Finance Officers Ass'n 2001). Meanwhile, § 715(a) of the County Charter provides that County officials and employees may not spend or commit funds in excess of appropriations, and § 17-11-201(2) defines an encumbrance as "a legal commitment for the expenditure of funds, chargeable against the applicable appropriation for the expenditure, that is documented by a contract or purchase order." Thus, the court concluded that when determining the amount of "impact fees encumbered, " the County was correct in comparing the amount of unexpended impact fees in the district account at the end of the relevant FY to the encumbrances entered in relation to capital projects in the district that have been determined by the [Planning and Zoning Office] to be eligible in the district. As pertinent to the certiorari questions for which we granted the petition in this case, the intermediate appellate court - in reliance on Waters Landing, Ltd. P'ship v. Montgomery Cnty., 337 Md. 15, 650 A.2d 712 (1994)[13] - held unfounded the Dabbs Class' arguments that the County's Impact Fee Ordinance is subject to the "rational nexus/rough proportionality test" of Dolan v. City of Tigard, 512 U.S. 374, 114 S.Ct. 2309 (1994), and Nollan v. California Coastal Comm'n, 483 U.S. 825, 837, 107 S.Ct. 3141 (1987).[14]

         The intermediate appellate court held, moreover, that Bill No. 27-07 had legitimate retrospective applicability. The court, although professing not to be bound by the law of the case doctrine, [15] explained it was unable to reach a different conclusion in this regard than that reached in its 2008, 2011, and 2013 Halle opinions and this Court's 2009 Halle opinion. Specifically, given the close identity between the Halle Class' assertions and many of those advanced in the Dabbs Class action, the court "fail[ed] to see how [it could] reach a different conclusion." Dabbs, 232 Md.App. at 336, 157 A.3d at 394.

         The court held valid also the prospective application of Bill No. 71-08, reasoning that "the repeal of a statute creating a right purely of statutory origin, such as [the right to a refund via] § 17-11-210, wipes out the right unless [it] is vested." Dabbs, 232 Md.App. at 341, 157 A.3d at 397. In so holding, the court rejected the Dabbs Class' argument that Bill No. 71-08 impaired their contractual and legal relationship with the County, also violating the rough proportionality/rational nexus doctrine. Id.

         Finally, the court held valid also Bill No. 96-01, "which, effective February 3, 2002, authorized the County to use impact fees for temporary classroom structures provided they expanded the capacity of the schools to serve new development." Dabbs, 232 Md.App. at 338, 157 A.3d at 395. The court found that neither the rational nexus doctrine nor the takings clause applied to Bill No. 96-01. Id. The court noted further that "[t]he County's definition of [school] capacity is consistent with the enabling law for impact fees (1986 Md. Laws, ch. 350, § 1, codified at § 17-11-214), and it is the County, not the State [Board of Education], that determines the scope of its Impact Fee Ordinance." Id.

         On 31 July 2017, we granted the Dabbs Class' certiorari petition, Dabbs, et al., v. Anne Arundel County, 454 Md. 677, 165 A.3d 473 (2017), to consider only the following questions:

I. Did the lower courts err in determining that ". . . the rough proportionality test [or the rational nexus test] has no application to development impact fees . . . where monetary exactions are imposed, " in contravention of Howard County v. JJM, 301 Md. 256, 482 A.2d 908 (1984)?
II. Did the lower courts err in permitting the retroactive application of legislation and not finding a taking under Article III, section 40 of the Maryland Constitution?

         Standard of Review

         Maryland Code (1973, 2006 Repl. Vol.), § 3-409(a) of the Courts and Judicial Proceedings Article provides that a court "may grant a declaratory judgment or decree in a civil case, if it will serve to terminate the uncertainty or controversy giving rise to the proceeding." We have made clear that the decision to issue a declaratory judgment is within the sound discretion of the trial court. Sprenger v. Pub. Serv. Comm'n of Maryland, 400 Md. 1, 20, 926 A.2d 238, 249 (2007). Such discretionary matters are "much better decided by the trial judges than by appellate courts, and the decisions of such judges should only be disturbed where it is apparent that some serious error or abuse of discretion or autocratic action has occurred." Northwestern Nat'l Ins. Co. v. Samuel R. Rosoff, Ltd., 195 Md. 421, 436, 73 A.2d 461, 467 (1950). An abuse of discretion

occurs where no reasonable person would take the view adopted by the [trial] court, or when the court acts "without reference to any guiding rules or principles. We will find an abuse of discretion when the ruling is clearly against the logic and effect of facts and inferences before the court, when the decision is clearly untenable, unfairly depriving a litigant of a substantial right and denying a just result, when the ruling is violative of fact and logic, or when it constitutes an "untenable judicial act that defies reason and works an injustice.

Powell v. Breslin, 430 Md. 52, 62, 59 A.3d 531, 537 (2013) (internal citations and quotation marks omitted).

         Analysis

         I. Nollan and Dolan - Impact Fees & the Rough Proportionality/Rational Nexus Test.

         The Dabbs Class argues that the intermediate appellate court erred in concluding that the rough proportionality test/rational nexus test of Nollan and Dolan has no application to the present case.[16] As this argument goes, the County must "demonstrate that its expenditure of impact fees was attributable reasonably to new development and each such expenditure reasonably benefitted 'new development' and/or individual 'against whom the fee was charged.'"

         The County responds, consistent with its position asserted in Halle and the lower courts in Dabbs, that, in Waters Landing, 337 Md. at 40-41, 650 A.2d at 724, we held that the individualized determination of rough proportionality required by Dolan is not applicable to development impact fees or taxes that are imposed legislatively and set on a general basis across a jurisdiction or district.

         At the outset, it must be remembered that the Takings Clause of the Fifth Amendment and Article III, § 40B of the Maryland Constitution do not prohibit the government from taking property for public use; rather, it requires the government to pay "just compensation" for any property it takes. U.S. Const. amend. V; MD Constitution, Art. 3, § 40. For "just compensation" to be paid, however, an actual taking of property must occur. The Nollan and Dolan line of cases was expanded recently to apply to a narrow set of monetary exactions, i.e., a condition of the payment of money for favorable governmental action on a required permit application for a specific parcel of land. See Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 599, 133 S.Ct. 2586, 2591 (2013).

         In Koontz, the Florida legislature enacted a regulation making it illegal for anyone to "'dredge or fill in, on, or over surface waters'" without a Wetlands Resource Management (WRM) permit acquired from the St. Johns River Water Management District (the District). Koontz, 570 U.S. at 601, 133 S.Ct. at 2592. Moreover, Florida enacted the Water Resources Act, authorizing each district to regulate construction impacting waterways in the state. Id. Under this regulation, "a landowner wishing to undertake such construction must obtain from the relevant district a Management and Storage of Surface Water (MSSW) permit, which may impose 'such reasonable conditions' on the permit as are 'necessary to assure' that construction will 'not be harmful to the water resources of the district.'" Id.

         Koontz proposed to develop the northern 3.7 acres of his 14.9 acre property, which would affect local waterways. Id. He applied to the District for WRM and MSSW permits. Id. The District reviewed Koontz's permit applications and approved them upon his agreement to either of two conditions:

the District proposed that [Koontz] reduce the size of his development to 1 acre and deed to the District a conservation easement on the remaining 13.9 acres. To reduce the development area, the District suggested that [Koontz] could eliminate the dry-bed pond from his proposal and instead install a more costly subsurface storm water management system beneath the building site. The District also suggested that [Koontz] install retaining walls rather than gradually sloping the land from the building site down to the elevation of the rest of his property to the south. In the alternative, the District told [Koontz] that he could proceed with the development as proposed, building on 3.7 acres and deeding a conservation easement to the government on the remainder of the property, if he also agreed to hire contractors to make improvements to District-owned land several miles away. Specifically, [Koontz] could pay to replace culverts on one parcel or fill in ditches on another.

Koontz, 570 U.S. at 601-02, 133 S.Ct. at 2592-93. Koontz argued that the District's mitigation demands were excessive, and that he was entitled to money damages if the state agency's actions constituted a taking without just compensation. Koontz, 570 U.S. at 602, 133 S.Ct. at 2593. The Supreme Court held that a monetary exaction for mitigation as a condition for issuing a land-use permit to enable development of an individual property must meet the nexus and rough proportionality requirements of Nollan and Dolan. Koontz, 570 U.S. at 612, 133 S.Ct. at 2599. The Supreme Court stressed that the requirements of Nollan and Dolan were the same for monetary exactions as for when "the government approves a permit on the condition that the applicant turn over property or denies a permit because the applicant refuses to do so." Koontz, 570 U.S. at 606, 133 S.Ct. at 2595 (emphasis in original).

         In Koontz, the Supreme Court explained that its holding was distinguished from Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S.Ct. 2131 (1998) (plurality opinion), [17]explaining that "[u]nlike the financial obligation in Eastern Enterprises, the demand for money at issue here '[operated] upon . . . an identified property interest' by directing the owner of a particular piece of property to make a monetary payment." Koontz, 570 U.S. at 613, 133 S.Ct. at 2599. Thus, the District's proposed monetary exaction burdened Koontz's ownership and development of a specific parcel of land. Id. (emphasis added). The Court elaborated further that Koontz resembled cases holding "that the government must pay just compensation when it takes a lien-a right to receive money that is secured by a particular piece of property." Koontz, 570 U.S. at 613, 133 S.Ct. at 2599. In holding that the proposed monetary exaction in Koontz was subject to Nollan and Dollan, the Court emphasized that "[t]he fulcrum this case turns on [is] the direct link between the government's demand and a specific parcel of real property." Koontz, 570 U.S. at 613, 133 S.Ct. at 2599 (emphasis added).

         The Court affirmed that taxes and user fees, however, are not takings subject to Nollan and Dolan, and assured that its holding did not affect the authority of governments to "impose property taxes, user fees, and similar laws and regulations that may impose financial burdens on property owners." Koontz, 570 U.S. at 615, 133 S.Ct. at 2601.

         The Dabbs Class' surfeit of arguments relating to Koontz's application to the County's development impact fees does not convince us that they have a sound jurisprudential basis.[18] Koontz did not hold that land-use regulations are generally subject to a takings analysis under Nollan and Dolan; rather, it held that challenges to governmental demands for money (except application fees) in connection with the permit review process for a specific property are subject to nexus and rough proportionality analysis. Koontz, 570 U.S. at 618-19, 133 S.Ct. at 2603. The Court went out of its way to stress that it was not expanding Nollan and Dolan much beyond its narrow confines:

[Koontz's] claim rests on the [] limited proposition that when the government commands the relinquishment of funds linked to a specific, identifiable property interest such as a bank account or parcel of real property, a per se [takings] approach is ...

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