Campbell v. Mayor and Aldermen of City of Annapolis

• Decision Date: 16 January 1981
• Docket Number: No. 3,3
• Citation: 289 Md. 300,424 A.2d 738
• Parties: Robert H. CAMPBELL et ux. v. The MAYOR AND ALDERMEN OF the CITY OF ANNAPOLIS.
• Court: Maryland Court of Appeals

Page 300

289 Md. 300

424 A.2d 738

Robert H. CAMPBELL et ux. v. The MAYOR AND ALDERMEN OF the CITY OF ANNAPOLIS.

No. 3.

Court of Appeals of Maryland.

Jan. 16, 1981.

Theodore G. Bloom, Annapolis (Goodman, Bloom & Cohen, Annapolis, on brief), for appellants.

Richard G. Anderson, City Atty., Annapolis, and Richard T. Wright, Asst. City Atty., Annapolis (Roger A. Perkins, Asst. City Atty., Annapolis, on brief), for appellee.

Argued before MURPHY, C. J., and SMITH, DIGGES, ELDRIDGE, COLE, DAVIDSON and RODOWSKY, JJ.

ELDRIDGE, Judge.

The issue in this case concerns the validity of a license fee imposed by an incorporated municipality upon operators of residential rental units, in light of restrictions imposed by Article XI-E, § 5, of the Maryland Constitution.

Article XI-E, § 5, provides that no municipality "shall levy any type of tax, license fee, franchise tax or fee" not in effect on January 1, 1954, unless the General Assembly gives "express authorization" for the tax or fee. ¹

Subsequent to 1954, the City of Annapolis enacted a scheme for the regulation and licensing of rental dwellings. Included in this regulatory plan is a provision for inspections by city officials to determine whether rental units comply with city ordinances. Annapolis City Code, § 12-9. ² Section 12-16 of the Annapolis City Code provides for licensing residential rental units, including an annual license fee of ten dollars per unit. ³

Petitioners Robert H. Campbell and Annie Jane Campbell own and operate certain residential rental units located in Annapolis, but they refused to obtain an operator's license as required by § 12-16. The Mayor and Aldermen of Annapolis sought a mandatory injunction in the Circuit Court for Anne Arundel County, requiring that the Campbells comply with the licensing provisions of § 12-16 and permit access to the properties for inspections pursuant to § 12-9. The Campbells responded by asserting that the licensing provisions in § 12-16 of the City Code were invalid on three grounds: (1) they unreasonably discriminated against owners of residential rental property in violation of the Fourteenth Amendment; (2) they were not authorized by the Annapolis City Charter; and (3) they violated Art. XI-E, § 5, of the Constitution of Maryland, which prohibits municipalities from levying "any type of tax, license fee, franchise tax or fee" without express authorization from the Legislature. The case was submitted to the circuit court upon the pleadings and a stipulation of facts, which disclosed that the dispute between the parties related solely to the validity of the § 12-16 licensing plan. There was no indication that the City had ever sought to conduct § 12-9 inspections or that the Campbells had refused a request to conduct inspections.

In a memorandum opinion, the circuit court held that the City of Annapolis was entitled to the requested injunctive relief. The court ruled that the City Charter contained broad police powers, including the authority to enact the licensing scheme. Defendants' Fourteenth Amendment equal protection argument was rejected because the court found a rational basis for the City's treating rental housing differently than other real property. As to the Campbells' challenge to § 12-16 on state constitutional grounds, the court assumed that Art. XI-E, § 5, of the Maryland Constitution required authorization by the General Assembly of the license fee imposed by § 12-16, since that ordinance had been enacted subsequent to January 1, 1954. The court found the necessary legislative authorization in Maryland Code (1957, 1973 Repl.Vol., 1980 Cum.Supp.), Art. 23A, § 2, together with Art. 23B, § 22(33). Section 2 of Art. 23A grants municipalities the general power to pass ordinances for the "preservation and promotion of the health, recreation, welfare and enlightenment of its inhabitants." Art. 23B is a model charter for incorporated municipalities, and § 22(33) of that charter relates to licensing and regulating schemes and the collection of license fees. The court made no findings regarding the purpose of the annual license fee imposed by § 12-16(f). Thereafter, an injunction issued ordering the Campbells to procure operating licenses for the rental units they owned and to allow city agents access to the rental premises to conduct inspections pursuant to § 12-9.

The Campbells appealed to the Court of Special Appeals, challenging both the trial court's holding that the license fee provision of § 12-16(f) does not violate Art. XI-E, § 5, of the Maryland Constitution, and that portion of the injunction ordering allowance of § 12-9 inspections of the rental premises. The Campbells did not pursue their claims that the City lacked charter authority to enact a licensing scheme or that the scheme is invalid under the Equal Protection Clause of the Fourteenth Amendment.

The Court of Special Appeals upheld the validity of the § 12-16 license fee on different grounds than those of the trial court. Campbell v. City of Annapolis, 44 Md.App. 525, 409 A.2d 1111 (1980). The intermediate appellate court held that Art. XI-E, § 5, only prohibits the levy of a license fee without General Assembly authorization if the primary purpose of the fee is to raise revenue, and that a fee imposed as part of a regulatory scheme is not covered by § 5. The Court of Special Appeals found that the fee imposed by § 12-16(f) was part of a regulatory plan and was not for the purpose of raising revenue. Thus, under that court's interpretation of Art. XI-E, § 5, the license fee did not require the General Assembly's authorization. The Court of Special Appeals, consequently, did not reach the question of whether the State Legislature had authorized the fee. The court did overturn that part of the injunction which ordered the Campbells to permit § 12-9 inspections, on the ground that there was no evidence that the City had ever requested or the Campbells refused such inspections.

This Court granted the Campbells' petition for a writ of certiorari, which presented only their contention that the license fee imposed upon residential rental dwellings by § 12-16(f) of the Annapolis City Code violates Art. XI-E, § 5, of the Maryland Constitution. No cross-petition for certiorari was filed by the City of Annapolis.

I.

Historically, for some purposes, cases have recognized a distinction between governmental charges that are essentially revenue-raising and those that are primarily part of a regulatory scheme. Anne Arundel County v. English, 182 Md. 514, 520, 35 A.2d 135 (1943); see American Nat'l v. M. & C. C., 245 Md. 23, 30, 224 A.2d 883 (1966). While statutory language may be indicative of the nature of a charge, e. g., "tax" generally refers to a revenue-raising measure, the purpose of the enactment governs rather than the legislative label. See Theatrical Corp. v. Brennan, 180 Md. 377, 381-382, 24 A.2d 911 (1942). Assuming the necessity in certain contexts for drawing the distinction, in our view there is no reason in this case for us to decide whether the fee imposed by § 12-16(f) of the Annapolis City Code is primarily revenue-raising or is primarily for a regulatory purpose. In either event, it is within the ambit of the constitutional restriction.

Article XI-E, § 5, of the Maryland Constitution prohibits a municipality from levying "any type of tax, license fee, franchise tax or fee," unless the charge is expressly authorized by the General Assembly, or was in effect prior to January 1, 1954. By use of the words "tax" and "license fee" individually, and further use of "franchise tax or fee," the constitutional language shows an intention to encompass both revenue-raising and regulatory levies. The phrase "any type" underscores this intention. The construction of Art. XI-E, § 5, by the Court of Special Appeals is at odds with the plain language of the Constitution. The language employed is all-encompassing, negating the distinction drawn by the Court of Special Appeals.

The history of Art. XI-E, § 5, confirms that the restriction was intended to embrace all license fees regardless of purpose. In June 1952, the Commission on Administrative Organization of the State, known as the "Sobeloff Commission," ⁴ submitted its second interim report on local legislation in Maryland. At that time "(l)ocal legislation ma(de) heavy demands on the time and energy of members of the General Assembly," because localities had little power to legislate for themselves. Local Legislation in Maryland, Commission on Administrative Organization of the State 1 (2d Rep. 1952). The Sobeloff Commission recommended two constitutional amendments to help alleviate the diversion of state legislative energies into local legislation, as well as to help instill greater flexibility and responsibility in local governments. Id. at 2-3. One of the Commission's recommendations provided the basis for what is now Article XI-E of the Maryland Constitution. The Sobeloff Commission proposed that "the Constitution be amended to prohibit State enactment of local legislation relating to municipalities, except for maximum limits on local property taxes and debt." Id. at 3. Section 5 of Article XI-E, as suggested by the Commission, is as follows (id. at 52-53):

"Notwithstanding any other provision in this Article, the General Assembly may enact, amend, or repeal local laws placing a maximum limit on the rate at which property taxes may be imposed by any municipal corporation and regulating the maximum amount of debt which may be incurred by any municipal corporation. However, no such local law shall become effective in regard to a municipal corporation until and unless it shall have been approved at a regular or special municipal election by a majority of the voters of that municipal corporation voting on the question. All charter provisions enacted under the authority of Section 3 of this Article shall be subject to any local laws enacted by the General Assembly and...