ALTERNATIVES v. SCHOOL COMMISSIONERS

843 A.2d 252

155 Md. App. 415

ALTERNATIVES UNLIMITED, INC. v. NEW BALTIMORE CITY BOARD OF SCHOOL COMMISSIONERS et al.

No. 2818, Sept. Term, 2002.

Court of Special Appeals of Maryland.

March 3, 2004.

Douglas B. Riley (Rosenberg, Proutt, Funk & Greenberg, LLP on the brief), Baltimore, for Appellant.

Frank C. Derr, Associate Counsel, Baltimore City School System, Baltimore, for Appellee.

Panel JAMES R. EYLER, KENNEY, and CHARLES E., MOYLAN, JR., (retired, specially assigned), JJ. CHARLES E. MOYLAN, Jr., Judge, retired, specially assigned.

The leitmotif that runs through this opinion was first sounded by the Court of Appeals in 1943 in the landmark case of Gontrum v. City of Baltimore, 182 Md. 370, 35 A.2d 128. Gontrum established that many of the standard rules governing the relationship between two contracting parties do not apply when one of those parties, instead of being a private person or private corporation, is a municipality or other governmental entity. The rationale for the difference is very similar to the rationale behind sovereign immunity. The literal holding of Gontrum was in the context of an ostensibly express contract. This appeal requires us to determine whether the rationale, as opposed to the holding, of Gontrum also extends to implied contracts, both those implied in fact and those implied in law.

The appellant, Alternatives Unlimited, a Maryland corporation that provides alternative education programs, sued the appellee, the Baltimore City Board of School Commissioners, seeking compensation for services provided to the Board from September 25, 2000, through May 23, 2001. Carmen V. Russo, the Chief Executive Officer of the Baltimore City School system, was initially also a defendant, but summary judgments were granted in her favor on all counts against her. The appellant is not challenging those judgments, and Ms. Russo, therefore, is not a party to this appeal.

Dismissals By Judge Glynn And Summary Judgment By Judge Allison

The pleading that concerns us is the First Amended Complaint, filed on June 10, 2002. That complaint was drawn in nine counts. Following a full hearing in the Circuit Court for Baltimore City on July 17, 2002, Judge John Glynn granted the Board's Motion to Dismiss seven of those nine counts. The two counts against the Board which were not dismissed were Count V, a claim for Quantum Meruit, and Count VI, a claim of Unjust Enrichment.

After the filing of an Answer to the First Amended Complaint by the Board and a period of discovery, the Board filed a Motion for Summary Judgment on the two remaining counts. Following a full hearing on January 10, 2003, Judge Kaye A. Allison granted summary judgment in favor of the Board on those two remaining counts.

On appeal, Alternatives raises essentially the two contentions

1. that Judge Allison erroneously granted summary judgment in favor of the Board on Counts V and VI alleging, respectively, 1) quantum meruit and 2) unjust enrichment; and

2. that Judge Glynn erroneously dismissed Count IX, demanding an accounting from the Board.

Gontrum v. Baltimore

With respect to Alternatives's primary contention, it behooves us preliminarily, before even narrating the facts in this case, to set out the dispositive holding of Gontrum v. Baltimore, 182 Md. at 375-78, 35 A.2d 128. Every aspect of the factual narrative takes on legal significance when looked at through the prism of Gontrum. It was on the authority of Gontrum that Judge Glynn dismissed six of the eight substantive counts that were before him, dismissals that Alternatives does not now challenge. It was also on the authority of Gontrum that Judge Allison granted summary judgment in favor of the Board on the two remaining counts.

The plaintiff, Gontrum, sought relief against Baltimore City on the ground that he had been fraudulently induced by two city officials to convey a twenty-foot wide right of way across his property for a sewer line. The two city officials on whom he relied were 1) the Land Surveyor, who was an engineering aide in the Sewer Department and whose duty it was to secure rights of ways for sewers; and 2) an assistant city solicitor. The representation was that Baltimore City, which had already obtained a City Council ordinance for condemning and opening Cedonia Avenue across Gontrum's property, would soon be implementing that ordinance by condemning a sixty-foot right of way which would overlay the twenty-foot wide sewer right of way that Gontrum was conveying to the city voluntarily. The representation to Gontrum included the assurance that "he would suffer no abatement of compensation when the street was finally condemned and damages awarded, by reason of the [earlier and voluntary] conveyance of the twenty-foot sewer right of way." 182 Md. at 373, 35 A.2d 128.

After 1) ditches had been dug, 2) sewer pipes and drains had been installed, and 3) nine years had gone by without any hint of condemnation of his property for the opening of Cedonia Avenue, Gontrum finally demanded relief. He sought to have Baltimore City

at once begin the removal of its sewerage pipes and drains from the right of way and easement for sewers over the land of the appellants granted by said agreement, or pay to the appellants such damages as would be fair compensation for the land in the said right of way.

182 Md. at 372, 35 A.2d 128 (emphasis supplied).

Much as Alternatives in the present case relied upon an anticipated retroactive approval of a contract, Gontrum relied, to his detriment, on an anticipated condemnation by Baltimore City.

It is contended by the appellants that Glover represented to them that Cedonia Avenue would be opened by the City within a very short time, that this representation was confirmed by von Wyszecki, and that it was in reliance upon these representations that the sewer right of way agreement was signed.

182 Md. at 374, 35 A.2d 128 (emphasis supplied).

Just as the Board in this case may arguably have reaped certain benefits from the efforts of Alternatives without paying for them, the City of Baltimore, in the Gontrum case, had been for nine years very definitely "enjoying the benefits accruing to it under the sewer right of way agreement, without having compensated [Gontrum] therefor." 182 Md. at 377-78, 35 A.2d 128. Unfair as it may seem, Gontrum was nonetheless afforded no relief.

The overarching principle of Gontrum is that a governmental entity, unlike a private corporation, may never have an obligation imposed upon it to expend public funds except in the formal manner expressly provided by law. There is no exemption from this rule because of any apparent authority of one of its agents to bind the governmental entity. There is imposed on any party dealing with the governmental entity, moreover, an absolute responsibility 1) to know the limitations on the powers of the agent to contract on behalf of the governmental entity and 2) to be familiar with and bound by "the power of the particular officer or agency to make the contract" in question. Gontrum stated unequivocally:

[T]here is another and more cogent reason why the appellants are not entitled to relief in this case. It is a fundamental principle of law that all persons dealing with the agent of a municipal corporation are bound to ascertain the nature and extent of his authority. Dillon's Municipal Corporations, 5th Ed., Sec. 777. A municipal corporation is not bound by a contract made in its name by one of its officers or by a person in its employ, although within the scope of its corporate powers, if the officer or employee had no authority to enter into such a contract on behalf of the corporation.

Section 1268 of McQuillin's Municipal Corporations, 2d Ed., states that "The general rule is well settled and is constantly enforced that one who makes a contract with a municipal corporation is bound to take notice of limitation of its powers to contract and also of the power of the particular officer or agency to make the contract."

182 Md. at 375, 35 A.2d 128 (emphasis supplied).

Gontrum actually applied long-settled Maryland law, as it cited and quoted with approval from a line of Maryland decisions dating back to 1862. Baltimore v. Eschbach, 18 Md. 276, 282 (1862), first stated that a public entity will not be bound by an action of an employee even under circumstances where a private entity might well be bound by a similar action by one of its agents.

Although a private agent, acting in violation of specific instructions, yet within the scope of a general authority, may bind his principal, the rule, as to the effect of the like act of a public agent, is otherwise. The City Commissioner, upon whose determination to grade and pave, the contract was made, was the public agent of a municipal corporation, clothed with duties and powers, specifically defined and limited, by ordinances bearing the character and force of public laws, ignorance of which can be presumed in favor of no one dealing with him on matters thus conditionally within his official discretion.

(Emphasis supplied).

Baltimore v. Eschbach went on to hold:

[T]he law makes a distinction between the effect of the acts of an officer of a corporation, and those of an agent for a principal in common cases; in the latter the extent of authority is necessarily known only to the principal and the agent, while, in the former, it is a matter of record in the books of the corporation, or of public law. A municipal corporation cannot be held liable for the unauthorized acts of its agents, although done officii colore, without some corporate act of ratification or adoption; and, from considerations of public policy, it seems more reasonable that an individual should occasionally suffer from the mistakes of public agents or officers, than to adopt a rule, which, through improper combinations and collusion, might be turned to the detriment and injury of the public.

18 Md. at 282-83, quoted in Gontrum, 182 Md. at 375-76, 35...