Brutus 630, LLC v. Town of Bel Air

• Decision Date: 23 June 2016
• Docket Number: No. 67, Sept. Term, 2015.,67, Sept. Term, 2015.
• Citation: 448 Md. 355,139 A.3d 957
• Parties: BRUTUS 630, LLC v. TOWN OF BEL AIR, Maryland.
• Court: Court of Special Appeals of Maryland

448 Md. 355

139 A.3d 957

BRUTUS 630, LLC

v.TOWN OF BEL AIR, Maryland.

No. 67, Sept. Term, 2015.

Court of Appeals of Maryland.

June 23, 2016.

Michael J. Moran (The Law Offices of Michael J. Moran, Middle River, MD), on brief, for petitioner.

Charles B. Keenan, Jr. (Craig H. DeRan, Stark and Keenan, P.A., Bel Air, MD), on brief, for respondent.

Argued before 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.

IBackground

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 19th century. 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, 805 A.2d 1061

; 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).

Exceptions

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, 805 A.2d 1061 (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...