Appleton Regional Community Alliance v. Board of County Commissioners

21 A.3d 1116, 420 Md. 172, 2011 Md. LEXIS 431

• Court: Court of Appeals of Maryland
• Decided: June 21, 2011
• Docket: 137, September Term, 2009
• Status: Published

Opinions

MURPHY, J.

This appeal from the Circuit Court for Cecil County requires that we interpret Md. Ann.Code art. 25, § 8(a) which, in pertinent part, provides:

(a) ... [T]he County Commissioners of Cecil County, in addition to, but not in substitution of, the powers which may have been or may hereafter be granted them, shall have the full power and authority to acquire by lease, purchase or condemnation real or leasehold property needed for any public purpose and to erect buildings thereon for the benefit of the county and to sell at public or private sale or lease any real or leasehold property belonging to the county when in their discretion it is no longer needed for public use, and to execute and acknowledge any and all deeds and/or other instruments necessary to effect and complete such lease, purchase or sale of real or leasehold property!/]

Appellants are residents of Cecil County who argue that the above quoted statute prohibits the Board of Cecil County Commissioners (the Board), Appellee, from selling County owned water and wastewater facilities to the company that has been granted a franchise to provide water services. The Circuit Court for Cecil County rejected that argument in a Memorandum Opinion that concluded as follows:

The Board of Cecil County Commissioners have properly determined that the water and wastewater Facilities are no longer needed for public use by Cecil County and should not continue to be owned and maintained by the County as county-owned property. In doing so, the Commissioners have not exceeded their discretionary authority as permitted by Article 25, § 8(a), by the enactment of the Resolutions on October 7, 2008 providing for the sale of the Facilities to Artesian, a privately owned, publicly regulated utility company, for the continued use and benefit of the citizens of Cecil County.

After Appellants noted a timely appeal to the Court of Special Appeals, both Appellants and Appellee filed Petitions for Writs of Certiorari. We granted those petitions. 411 Md. 598, 984 A.2d 243 (2009).

Appellants argue that we should answer “no” to the following question:

Whether Annotated Code of Maryland, Article 25 § 8(a) authorizes the Cecil County Commissioners to sell operating County water and wastewater facilities as “no longer needed for public use” when they must continue to be operated by the new owners as water and wastewater facilities or revert to County ownership and operation?

The Board argues that the question should be rephrased as follows:

Does the “Public Need Test” as set forth in Article 25, Section 8(a) and clarified in South Easton Neighborhood Association (“SENA”), Inc., et al. v. Town of Easton, Maryland, 387 Md. 468, 876 A.2d 58 (2005), permit the Commissioners to convey County-owned water and waste-water facilities to privately owned, publicly-regulated utilities, when the Commissioners determined they no longer needed to own the facilities because they previously granted exclusive water and wastewater franchises to those companies exclusively to provide water and wastewater services in the area served by the facilities?

For the reasons that follow, we shall hold that art. 25, § 8(a) does not prohibit the Board from conveying the property at issue. We shall therefore affirm the judgment of the Circuit Court.

Background

In a Memorandum Opinion filed on April 30, 2009, the Circuit Court stated:

The operative facts are relatively simple. On August 19, 2008, the Board of County Commissioners of Cecil County (the “Board” or “County”) voted to grant a water services and a wastewater franchise to Artesian Water Maryland, Inc. and Artesian Wastewater Maryland, Inc., respectively (for ease of reference, both companies are referred to collectively as “Artesian”). On September 18, 2008, Petitioners, Appleton Regional Community Alliance, et al. (“Appleton”), filed the initial petition for judicial review of the decision of the Countyf.]

On October 7, 2008, the Board approved additional resolutions and a related Asset Purchase Agreement (the “Agreement”) that provides for the sale and transfer to Artesian of various county-owned water and wastewater facilities, along with associated parcels of real property, easement rights, and other water and wastewater system assets. On November 4, 2008, Appleton filed a second petition for judicial review specifically addressing the purposed transfers of county property and assets[.]

The Franchise Agreements include the following provisions:

Agreement

NOW, THEREFORE, in consideration of the County’s grant of the Franchise to Franchisee, and Franchisee’s contractual undertaking to provide Water Service to Customers in the Franchise Area pursuant to and consistent with Applicable Laws, pursuant to the terms, covenants, conditions and restrictions set forth in this Agreement, and other good and valuable consideration, the receipt and the adequacy of which are hereby acknowledged, the County and Franchisee agree as follows.

3 GRANT OF FRANCHISE; LIMITS AND RESERVATIONS.

3.1 Generally.

(b) Franchisee and County shall execute a definitive agreement for the transfer of the County’s water facilities within the Service Area as described in Exhibit A from the County to Franchisee in accordance with the terms reflected in the Letter of Intent at Exhibit F.

11.1 County Approval of Transfer of Control Required.

(a) No Transfer of Control of Franchisee may occur without the prior written consent of the County.

(b) No Transfer of Control of the Franchise may occur without the prior written consent of the County.

11.2 Other Actions Affecting Franchise

(a) Franchisee shall not enter into any agreement or contract with any Person which materially affects Franchisee’s performance of its obligations under the Franchise and this Agreement, or abandon or discontinue the exercise of the Franchise, and the operation of the Water System within the Franchise Area, as a whole or in part, without the prior written consent of the County.

12.1 Termination Events. This Franchise and Agreement may be terminated in any one of the following circumstances (each a “Termination Event”).

(a) Upon expiration of the Term, if no further Extension Term exists or if Franchisee shall have failed or refused to exercise its right and option to renew this Agreement and the Franchise for an Extension Term, then this Agreement, the Franchise and Franchisee’s right to provide Water Service in the Franchise Area shall terminate subject to Applicable Laws.

(b) Prior to the stated expiration date of the Term, as to all or part of the Franchise, the Franchise Area and the rights and obligations of the parties under this Agreement, upon application by Franchisee to the County in accordance with Section 11.2(a), and following application to and approval of such action by the Commission, as provided in § 5-202 of the PUC Article and Section 11.3(b).

(c) Prior to the stated expiration date of the Term, upon request by the County to Franchisee, and with the consent of Franchisee, and following application to and approval of such action by the Commission, as provided in § 5-202 of the PUC Article and Section 11.3(b).

(d) Upon action by the Commission, in exercise of its powers under the PUC Article, to suspend or revoke Franchisee’s right to exercise the Franchise and to operate the Water System.

(e) By the County, following a Default by Franchisee, and as provided in Section 12.2.

(f) By the County, without regard to the existence of a Breach or a Default, in connection with the County’s exercise of its reserved rights under Section 3.8 and § 67-6 of the County Code.

12.4 Effect of Termination—Expiration of Term.

If the Franchise and this Agreement expire as provided in Section 12.1(a) then the Water System shall be transferred and conveyed by Franchisee and acquired by the County free of all liens and encumbrances; and Franchisee shall be bound to execute such further assurances of the conveyance of title as the County shall deem reasonable. The County shall pay Franchisee the Fair Market Value for the Water System, as and when conveyed to the County. The County and Franchisee shall be bound to cooperate with one another and to exercise due diligence to effectuate the sale and transfer.

12.5 Effect of Termination—by Agreement.

If the Franchise and this agreement are terminated as provided in Section 12.1(b) and Sections 12.1(c) then the Water System shall be disposed of between the parties on such price and terms as they shall agree.

12.6 Effect of Termination—Default.

If the Franchise and this Agreement are terminated as provided in Section 12.1(d) or Section 12.1(e), then the Water System shall be transferred and conveyed by Franchisee and acquired by the County free of all liens and encumbrances; and Franchisee shall be bound to execute such further assurances of the conveyance of title as the County shall deem reasonable. The County shall pay Franchisee the Adjusted Rate Base for the Water System, as and when conveyed to the County. The County and Franchisee shall be bound to cooperate with one another and to exercise due diligence to effectuate the sale and transfer. 12.7 Effect of Termination—Taking.

If the Franchise and this Agreement are terminated as provided in Section 12.1(f) then the Water System shall be transferred and conveyed by Franchisee and acquired by the County in accordance with the provisions set forth in § 67-6 of the County Code. The Water System shall be transferred and conveyed by Franchisee and acquired by the County free of all liens and encumbrances; and Franchisee shall be bound to execute such further assurances of the conveyance of title as the County shall deem reasonable. The County shall pay Franchisee the Fair Market Value for the Water System, as and when conveyed to the County. The County and Franchisee shall be bound to cooperate with one another and to exercise due diligence to effectuate the sale and transfer.

The Asset Purchase Agreements include the following provisions:

Section 2.3 Liabilities

(a) Assumed Liabilities. At the Closing, the Buyer will assume Liability for and agree to pay, perform, and discharge, in a timely manner and in accordance with the terms thereof, all of the following (collectively, the “Assumed Liabilities”):

(i) all obligations and responsibilities to provide water transmission and distribution services to the Service Area arising from and after the Closing ...

Section 4.5 Real Estate

... (c) To the County’s Knowledge, the Owned Real Property, the Leased Property, and Easements comprise all of the real property interests necessary for the Buyer to operate the Facilities and the Water Transmission and Distribution Systems after the Closing as they are each presently being conducted by the County and they will each be conducted by the County on the Closing Date.

Section 6.1 Conduct of Business Pending Closing.

Except as set forth in Schedule 6.1 or as may be first consented to by the Buyer in writing, during the period from the date of this Agreement through and including the Closing Date, the County shall conduct the operations of the Facilities, the Water Transmission and Distribution Systems and other Purchased Assets according to its ordinary and usual course of business and preserve intact the Purchased Assets and will not sell, lease, transfer, assign, or convey any Purchased Assets, amend modify, cancel or terminate any Assumed Contract, will not amend any Tax Return and will otherwise maintain satisfactory relationships with respect to the Purchased Assets with other Governmental Authorities, Suppliers, agents, Customers, and others having relationships with the County in respect of the operations of the Facilities, the Water Transmission and Distribution Systems or the other Purchased Assets.

The Circuit Court granted the Board’s motion for summary judgment on the issue of its right to award the Franchise Agreements on the ground that, “the Board’s award of a franchise to operate a water and wastewater system to a private concern ... is clearly a planning action ... and is not judicially reviewable as a quasi-judicial proceeding.” After denying the Board’s motion for summary judgment on the issue of whether it had a right to sell the County owned property, the Circuit Court ultimately concluded that the County did have a right to do so. In a Memorandum Opinion filed on July 27, 2009, the Circuit Court stated:

Indeed, there can be little doubt that the Facilities, which provide necessary services of the County, are and will continue to be needed and operated for public purpose and benefit. It therefore becomes necessary to examine the language and intent of Article 25 § 8.

.... The question then, is whether the legislative discretionary power and authority of the Commissioners is so limited that it applies solely to property no longer needed for any public use, such as surplus property.... However, the statute can certainly be construed to permit the sale of property used by the public, but not necessary for public use, such as a street or alley, or a portion thereof, where other means of access may be available. Inlet Assoc. v. Assateague House Condo. Assn., et al.[] 313 Md. 413[, 545 A.2d 1296] (1987).

Both Parties rely on the Court of Appeals decision in South Easton Neighborhood Association, Inc., et al. v. Town of Easton, Maryland, 387 Md. 468[, 876 A.2d 58] (2005) (“SENA ”). The Court in SENA rejected the proposition that because a certain street in Easton (Adkins Avenue) was in continued use by the public, that in and of itself would foreclose the Town of Easton’s discretionary authority to close the street and sell the right-of-way to a hospital under Article 23A, § 2(b)(24). The Court observed, “[r]ecognizing an absolute no-use standard would permit one person to walk the length of Adkins Avenue, or any other public right of way, and thereby foreclose any conveyance of the roadbed, regardless of the Town Council’s legislative determinations.” (Id. at 495 [876 A.2d 58]). This, of course, would tend to undermine Petitioners’ contention that “no longer needed for public use” equates to a finding that the property must be surplus. In SENA there was ample evidence that the public had access to and continued to use the subject street on a daily basis, even though it was not the sole means of access for various property owners in the vicinity. Thus, the continued public use argument had failed to persuade the Court of Appeals that a legislative decision of the Town of Easton to transfer the roadbed in Easton Memorial Hospital was somehow an abuse of discretion under Article 23A, § 2(b)(24).

Here, the County, in the exercise of its statutory discretion, made a legislative determination that: a) it would franchise the operation of its water and wastewater systems to a private entity, and b) it no longer needed the subject property for the existing public use and would convey it to the private entity, consistent with the franchise award to operate those water and wastewater systems for the continued public benefit.

It has already been determined that the County, in the proper exercise of its legislative function may grant a franchise to a private entity to provide water and wastewater services to its citizens. As the County now suggests, that made superfluous the continuing “public use” of the facilities by the County by its lawful action in granting the franchises to Artesian.

In a practical sense, the Facilities to be transferred are in fact no longer needed for the public use by Cecil County. Artesian, by providing, among other things, the personnel, administration, necessary upkeep and capital improvements, engineering expertise and flexibility as to discharge credits, as well as assuming major liabilities and obligations providing a financial benefit to the County, will essentially remove the existing water and wastewater facilities from the County needs inventory, even though the Facilities will continue to be maintained for a public use, purpose and benefit to the citizens of Cecil County. The question is whether Article 25, § 8 imposes a narrow limitation on the discretionary authority of the Commissioners to a degree that they may not sell or lease property to a private entity if the property continues to be maintained for public use, benefit and purpose. Although the [Appellants] seek to distinguish the holding in SENA from the instant matter as public property “no longer needed for public use” as opposed to public property “still needed for public use,” this Court does not interpret SENA to represent such a limitation on the discretionary authority of the Board of Commissioners. Indeed, the SENA court reasoned that the street bed to be transferred would continue to be used for a public purpose and benefit as a hospital, facilitating emergency and outpatient care services. Id. at 499 [876 A.2d 58]. Although the particular public purpose and benefit may have changed, the property nevertheless continued to be maintained for a public use, benefit and purpose. Accordingly, the [Appellants’] position is without merit.

(Emphasis in original. Footnotes omitted).

The record includes a JOINT STIPULATION that “Appellants now challenge only those portions of the Franchise Agreements and attachments thereto that provide for, or relate to, the sale and transfer of County water and wastewater assets[.]”

Discussion

Although they concede that the Board is expressly authorized by art. 25, § 3D(b) to grant franchises for “water and sewerage systems in order to assure delivery of [such] services to its citizens, to avoid duplication of facilities, ... and to promote the general health and welfare by providing for adequate water and sewerage systems,” Appellants argue that the Board is prohibited by art. 25, § 8(a) from selling facilities that will continue to provide essential services to the citizens of Cecil County. According to Appellants, the Board does not have authority to sell county property pursuant to a transaction in which (a) the County has granted a water and wastewater services franchise to a private company; (b) the property will be sold to the franchisee, who will continue to use the property to provide the very same essential services to the citizens of Cecil County, and (c) the County has a right to reenter the property and resume providing the same public services that it had been providing prior to the sale. According to the Board, however, in the words of its brief:

The Public Need Test requires that two findings be apparent from the record: first, that the governing body has identified and considered the existing public use property in question; and second, that the governing body has determined that it no longer needs to own and operate that property for the existing public use. See SENA, 387 Md. at 489, 876 A.2d at 71.... The facts of this case are on all fours with SENA.

As we apply the well settled principles of statutory interpretation to these arguments, we (1) attempt to harmonize the Board’s statutory authority to grant water and wastewater franchises with the Board’s “additional” statutory authority to sell property when, in the Board’s “discretion,” the property is no longer needed for public use, (2) presume that the legislature intended that both art. 25, § 3D(b) and art. 25, § 8(a) would operate together as a consistent and harmonious body of law, and (3) avoid a construction that is unreasonable, illogical, or inconsistent with common sense. See, e.g., Condon v. State of Maryland-University of Maryland, 332 Md. 481, 491-92, 632 A.2d 753, 757-58 (1993); Barbre v. Pope, 402 Md. 157, 172, 935 A.2d 699, 708 (2007).

We are persuaded that art. 25, § 3D(b) and art. 25, § 8(a) can be harmonized. As we see it, art. 25, § 8(a) is an express grant of “additional” authority to the Board. We therefore disagree with the argument that art. 25, § 8(a) prohibits the Board from exercising the “discretion” that was exercised in the case at bar. As the Court of Special Appeals has stated, “discretion signifies choice. Consideration of the various elements of the problem does not preordain a single permissible conclusion.” Hart v. Miller, 65 Md.App. 620, 625-26, 501 A.2d 872, 875-76 (1985). Art. 25, § 3D(b) authorized the Board to grant the franchises, as well as to take appropriate action in order to “avoid the duplication of facilities,” while art. 25, § 8(a) provided the Board with the discretion to structure the transaction for maximum public benefit.

As to the issue of whether Appellants’ interpretation of art. 25, § 8(a) is unreasonable, the Board argues, in the words of its brief:

Appellants would permit the Commissioners the power to grant exclusive franchises to Artesian but would deny them the statutory authority to convey the very systems which would allow Artesian to carry out the services attendant to those franchises. Further, having granted lawful water and wastewater Franchises within the franchise area, the County would be constrained to own and to operate Facilities, “for public use,” in perpetuity, in effect creating two operating and competing water and wastewater systems within the same geographic area. The statute cannot, it should not, and it need not be read to create such an implausible result. See Dickerson v. State, 324 Md. 163, 171, 596 A.2d 648, 652 (1991) (recognizing that statutes should generally be interpreted to produce “reasonable” rather than “absurd” or “extraordinary” results).

(Emphasis in original). We agree with this argument. It would be unreasonable and illogical to hold that, although expressly authorized to grant the franchises, the Board is prohibited by art. 25 § 8(a) from performing its duty “to avoid the duplication of [water and sewerage] facilities.”

For the reasons stated above, we hold that art. 25, § 8(a) does not prohibit the Board from entering into the Asset Purchase Agreements at issue. We shall therefore affirm the judgment of the Circuit Court.

JUDGMENT OF THE CIRCUIT COURT AFFIRMED; APPELLANTS TO PAY THE COSTS.

HARRELL, BATTAGLIA and GREENE, JJ., Dissent.