Halle Dev., Inc. v. Anne Arundel Cnty.

HALLE DEVELOPMENT, INC. et al. v. ANNE ARUNDEL COUNTY

No. 1299

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2016

November 22, 2017

Circuit Court for Anne Arundel County

Case No. C-01-69418

UNREPORTED

Nazarian Beachley, Zarnoch, Robert A. (Senior Judge, Specially Assigned), JJ.

Opinion by Zarnoch, J.

*This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.

The hit musical Les Misérables¹ ran more than sixteen years on Broadway. This litigation has lasted even longer. This class action grew out of Anne Arundel County's ("the County") unlawful retention of development impact fees from property owners in the County between 1988-1996. The property owners' action to recover refunds of impact fees, has spanned more than sixteen years, resulting in numerous orders of the Circuit Court for Anne Arundel County and appellate opinions from this Court and the Court of Appeals. Most recently, the circuit court, on remand, decided in favor of the class of property owners, requiring the County to pay refunds of impact fees, interest, and counsel fees. On appeal to this Court, Phillip F. Scheibe ("Scheibe"), as counsel for appellants and named class members,² challenges the court's determination of available impact fee refunds and interest, its designation of John R. Greiber ("Greiber") as lead counsel for the Class and its division of attorneys' fees. However, in prior opinions, we have already addressed all but one of the arguments raised by the appellants.

BACKGROUND AND PROCEDURAL HISTORY

Legal Foundations

A "development impact fee" is a tax authorized in the Maryland Code that is imposed by a county ordinance for the purpose of reimbursing the county for the effects of new property development on local infrastructure. See Anne Arundel Cnty. v. Halle Dev.,Inc., 408 Md. 539, 548-49 (2009) (hereinafter Halle Dev. 2009); see also Waters Landing Ltd. v. Montgomery Cnty., 337 Md. 15, 24-25 (1994) (holding that Montgomery County's similar development impact fee constituted an excise tax, authorized by the Legislature). The Anne Arundel County Council enacted such an ordinance in 1987 for property development in the County. See Anne Arundel County Code (AACC) § 17-11-201 et seq.³ The County's impact fee ordinance required certain building permit applicants proposing a new development to pay impact fees to the County. Section 17-11-202, in relevant part, provides the following:

This title is adopted for the purpose of promoting the health, safety, and general welfare of the residents of the County by:

(1) requiring all new development to pay its proportionate fair share of the costs for land, capital facilities, and other expenses necessary to accommodate development impacts on public school, transportation, and public safety facilities . . . .

AACC § 17-11-202. Section 17-11-203 specifies who must pay fees -- "any person who improves real property and thereby causes an impact upon public schools, transportation, or public safety facilities . . . ." The amount of each impact fee is set forth in §§ 17-11-204 and 17-11-205.

Consistent with the purpose of collecting these fees, the ordinance required the County, in turn, to use the funds "solely for capital improvements for expansion of thecapacity of public schools, roads, and public safety facilities and not for replacement, maintenance, or operations." AACC § 17-11-209(a). Moreover, the ordinance stated that the funds must be spent on capital improvement projects within the fee district to "reasonably benefit" the property for which it was collected. § 17-11-209(d). The Council also included a refund provision⁴ in the impact fee ordinance, which permitted those required to pay impact fees to recoup those fees with interest if the County failed to expend or encumber the fees on eligible projects in accordance with § 17-11-209 within six fiscal years⁵ following payment of the fees. Section 17-11-210 provided:

(a) If fees collected in any district during a fiscal year have not been expended or encumbered by the end of the sixth fiscal year following collection, the Office of Finance shall give notice of the availability of a refund of the fees and refund the fees as provided in this section.

(b) Within 60 days from the end of a fiscal year during which fees become available for refund, the Controller shall cause to be published once a week for two successive weeks . . . a notice that development impact fees collected within a particular district for a preceding fiscal year are available for refund on application by the current owner of the property for which the fee was originally paid. The notice shall set forth the time and manner for making application for the refund.

(c) An eligible property owner shall file an application for a refund within 60 days of the last publication of notice. On proper application and demonstration that the fee was paid, the Controller shall refund the fees to the property owner with interest at the rate of 5% per year.

***

(e) The Planning and Zoning Officer may extend for up to three years the date at which the funds must be expended or encumbered under subsection (a). An extension shall be made only on a written finding that within a three-year period certain capital improvements are planned to be constructed that will be of direct benefit to the property against which the fees were charged.

AACC § 17-11-210.

Beginning in 1988 until 1996, the County collected millions of dollars in impact fees from property owners in Anne Arundel County. In 1994, the County had not expended or encumbered all of the 1998 fees on eligible capital improvements. In an attempt to extend the time period to expend or encumber the fees, the County issued an interoffice memorandum ("extension decision"), which stated that the impact fees would be used on an upcoming capital improvement project. The memo, however, failed to identify the properties that would be directly benefitted by the planned improvements, as required by AACC § 17-11-210(e). The County issued similar extension decisions with the same deficiencies in the years following.⁶ Because the County assumed the extension decisions were effective when it issued them, it did not publish notice to the Class that a refund of impact fees was available. The County's final publication of notice that a refund wasavailable, however, was the event that commenced the ordinance's limitations period for applying for a refund. See id.

Procedural History

As we noted above, this case has had a long life in our courts; we, therefore, address only the most relevant procedural facts to answer the questions raised in this appeal. The case began in February of 2001 when the appellees filed a class action complaint in the circuit court on behalf of all "current owners of real property located within the boundaries of Anne Arundel County . . . who have been deprived of refunds for 'developers impact fees.'" The putative class of property owners claimed that the County failed to refund impact fees as required by the impact fee ordinance, and in doing so, it was unjustly enriched. The circuit court initially dismissed the complaint, finding the property owners failed to exhaust their administrative remedies, but we reversed that decision on appeal. There, we held that the appellants could maintain an action in assumpsit due to the absence of an effective administrative remedy following the County's failure to publish a refund notice. On remand, the circuit court conditionally certified the class action pursuant to Md. Rule 2-231(b)(3).⁷

On December 15, 2006, the circuit court issued its decision on the merits, finding that $4,719,359 in refunds were "due to the current owners of specified fee paying properties," with "5% interest . . . from the date of each initial fee's payment." The courtincluded fees collected in 1988 through 1996.⁸ The circuit court's ruling in favor of the property owners was based on its determination that the extension decisions issued by the County's Planning and Zoning Officer were invalid. The amount due for impact fee refunds was based, in part, on its conclusion that the County could not offset the amount available for refund with encumbrances not accounted for in its annual budget process. Both parties appealed to this Court.

On appeal, the County 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 appellants 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% contingency fee provided by their fee agreement with the named class representatives. The property owners (including the appellants herein) did not contest the circuit court's award of only 5% interest as provided in AACC § 17-11-210.⁹

In our February 7, 2008 opinion and May 7, 2008 supplemental opinion, we held that the circuit erred by excluding fees that were encumbered within six years following collection. See Anne Arundel Cnty. v. Halle Dev., Inc., No. 2552, Sept. Term, 2006 (Feb.7, 2008, on reconsideration, May 7, 2008).¹⁰ In response to the property owners' arguments that the County was attempting to retroactively encumber impact fees, we said:

[T]here was a time limit prior to which the fact-finding of extension must be made, and made in the required format, in order to effect an extension. Section 17-11-210 does not mandate any format for effecting an encumbrance. . . . Funds are encumbered when the purchase order or contract becomes effective as an executory contract. Funds either have been encumbered or not within a given fiscal year. Demonstrating that historic fact from the

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