Department of General Services v. Harmans Associates Ltd. Partnership

• Court: Maryland Court of Appeals
• Writing for the Court: Argued before WILNER; WILNER
• Citation: Department of General Services v. Harmans Associates Ltd. Partnership, 633 A.2d 939, 98 Md.App. 535 (Md. App. 1993)
• Decision Date: 01 September 1993
• Docket Number: No. 491,491
• Parties: DEPARTMENT OF GENERAL SERVICES v. HARMANS ASSOCIATES LIMITED PARTNERSHIP. ,

Page 535

98 Md.App. 535

633 A.2d 939

DEPARTMENT OF GENERAL SERVICES v. HARMANS ASSOCIATES LIMITED PARTNERSHIP.

No. 491, Sept. Term, 1993.

Court of Special Appeals of Maryland.

Dec. 8, 1993.

John H. Thornton, Asst. Atty. Gen., argued (J. Joseph Curran, Jr., Atty. Gen., on the brief), Baltimore, for appellant.

David G. Lane, argued (Timothy J. McEvoy and Venable, Baetjer and Howard, on the brief), Baltimore, for appellee.

Argued before WILNER, C.J., and BISHOP and FISCHER, JJ.

WILNER, Chief Judge.

The State Department of General Services (DGS) appeals from a judgment of the Circuit Court for Baltimore City affirming, with one modification, a decision of the Board of Contract Appeals (BCA) awarding $163,719 in extra compensation to appellee, Harmans Associates Limited Partnership. DGS complains that (1) BCA had no jurisdiction in the matter, (2) BCA and the court were wrong in awarding the extra compensation, and (3) the court was wrong in adding pre-decision interest to the BCA award when BCA had specifically rejected Harmans' request for such interest. Harmans, of course, defends the judgment but, in addition, has moved to dismiss this appeal as not allowed by law. We shall deny the motion to dismiss, affirm the judgment in part, and reverse it in part.

Underlying Facts

The State owned a tract of unimproved land in Anne Arundel County on which it desired to have constructed a headquarters facility for the State Highway Administration. The facility was to consist of three buildings and related storage and parking areas. Normally, the State would have proceeded to procure the services of an architect/engineer to design the facility and then, through competitive bidding, select a contractor to build it in accordance with the plans and specifications prepared by the architect/engineer. It would have financed the construction through the sale of State general obligation bonds. See, in general, Md.Code, State Fin. & Proc. art., §§ 13-102, 8-114.

In this instance, the State chose a different method of achieving the result, one that involved a form of "creative financing." The principal objective, we are informed, was to avoid the creation of a State "debt"--i.e., a pledge of the full faith and credit of the State--to finance the construction and yet have the interest paid on the private financing remain tax-exempt.

Through a number of agreements entered into in March and April, 1988, including a ground lease, a conditional purchase agreement, and a facility agreement, the deal was structured in the following manner. Subject to certain contingencies, the State leased the unimproved land to Harmans for a 16-year period at a rental of $1/year. Harmans designed and constructed a facility "substantially in accordance with the Conceptual Plans and Technical Specifications" that were included with the State's request for proposals. When the facility was completed, Harmans subleased the ground to the State for the remaining term of the ground lease and sold the improvements to the State in accordance with the conditional purchase agreement. At the end of the 16-year period, the ground lease (and the sublease) will end, and the State will own both the land and the improvements free of any encumbrances.

The $10.9 million cost of construction was financed through a private sale of certificates of participation. The proceeds were deposited with a trustee and were used to pay Harmans as construction proceeded. To secure the certificates, Harmans mortgaged to the trustee its interest in the land and in the contracts with the State. The State, as "purchaser" of the facility, is required to make semi-annual payments to the trustee in amounts sufficient to pay the principal and interest on the certificates over the term of the ground lease. The State retains the right, however, to terminate its obligation to make these payments at any time, in which event the trustee has the right to take possession of the land and improvements and either to sell or operate them in order to discharge its obligations to Harmans and the certificate holders.

In November, 1989, Harmans filed with DGS two formal claims for an equitable adjustment in the contract price, each claim having several sub-parts. One claim sought $186,860 for unexpected site conditions, including excessive amounts of topsoil; the other sought $93,854 for additional work necessary to comply with directives of the fire marshal, including the installation of smoke vents. When, on May 24, 1990, the procurement officer denied those claims, Harmans appealed to BCA. In November, 1990, BCA, in a Memorandum Decision, concluded that it had no jurisdiction and, for that reason, dismissed the appeals. BCA viewed the transaction from which the claims arose as a lease of real property rather than as a construction contract, and Md.Code, State Fin. & Proc. art., § 15-211(a)(2) excepts from BCA's jurisdiction contract claims relating to a lease of real property. Harmans sought judicial review of that decision, and, in an order entered in April, 1991, the Circuit Court for Baltimore County concluded, as a matter of law, that the claims were not contract claims relating to a lease of real property. It therefore reversed the dismissals by BCA and remanded the case to that Board for further proceedings.

Upon the remand, BCA heard evidence bearing on what remained of the two claims. ¹ In a decision filed on May 7, 1992, BCA directed a total equitable adjustment of $163,719, consisting principally of $113,329 for the soil conditions, $11,148 for service road undercuts, $6,162 for reseeding, and $31,677 for the smoke vents.

Nothing was said in the decision about pre-decision interest. In its claims, Harmans had sought interest from November, 1989, but, according to BCA, it offered no evidence at the BCA hearing regarding pre-decision interest. After some procedural skirmishing, the Circuit Court for Baltimore City directed BCA to consider Harmans' request for pre-decision interest, which had been renewed in a motion for reconsideration filed three days after DGS had filed for judicial review of the BCA decision. BCA did consider the motion but decided not to award any pre-decision interest. The case then returned to the circuit court which, on December 8, 1992, affirmed BCA except with respect to pre-decision interest. As to that, the court concluded that Harmans was entitled by law to such interest, dating from May 24, 1990--the date of the procurement officer's final decision on the claims. From an amended order dated January 5, 1993, that set the interest rate at 10%, DGS has appealed, raising the three issues noted above.

Motion To Dismiss

Md.Code, Cts. & Jud.Proc. art., § 12-301 permits a party to appeal from a final judgment entered by a circuit court, except as provided in § 12-302. Section 12-302(a) provides, in relevant part, that "[u]nless a right to appeal is expressly granted by law, § 12-301 does not permit an appeal from a final judgment of a court entered or made in the exercise of appellate jurisdiction in reviewing the decision of the District Court, an administrative agency, or a local legislative body." ² Where the action in the circuit court is thus one to review the decision of an administrative agency, no appeal will lie to this Court unless the right to take such an appeal is expressly granted somewhere in the law.

That right is found generally in the "contested case" subtitle of the Administrative Procedure Act (Md.Code, State Gov't art., title 10, subtitle 2). It is undisputed that BCA is an "agency" within the ambit of that subtitle, and it is also undisputed that the proceeding before BCA in this case was a "contested case." Section 10-215 of the Cts. & Jud.Proc. article entitles a party aggrieved by the final decision of an agency in a contested case to judicial review in the appropriate circuit court, and § 10-216, with two exceptions not relevant here, entitles any party aggrieved by a final judgment of the circuit court under the subtitle to appeal to this Court. ³

The "glitch" in this seemingly clear and express authority for DGS to pursue this appeal arises from an evident Code Revision error in the State Finance and Procurement article. To document that error, we need to recount some of the history of the BCA.

In 1978, by 1978 Md.Laws, ch. 418, the Legislature created a Board of Appeals within the State Department of Transportation, with jurisdiction to determine disputes arising from contracts, other than labor contracts, with that Department. The law governing the Board was codified in title 2, subtitle 6 of the Transportation article. Section 2-604 provided that "the Administrative Procedure Act shall apply to proceedings under this subtitle," which sufficed to invoke the judicial review sections of that Act. In 1980, by 1980 Md.Laws, ch. 775, the General Assembly generally rewrote the State procurement law, codifying it in a new article 21 of the Code. In that revision, it abolished the board created in 1978 and, in § 7-202 of art. 21, created in its place BCA, with jurisdiction to hear appeals arising from procurement disputes involving any State procuring agency. In § 7-203, the Legislature provided that the decisions of BCA were subject to judicial review "in accordance with the provisions of the Administrative Procedure Act as they relate to judicial review of contested cases."

In 1984, the State Government article was enacted as part of the on-going Code Revision process. In that article, the various provisions formerly known as the Administrative Procedure Act were divided into separate subtitles, each dealing with a separate aspect of administrative practice. They were captioned, respectively, Administrative Procedure Act--Regulations (subtitle 1), Administrative Procedure Act--Contested Cases (subtitle 2), Administrative Procedure Act--Declaratory Rulings (subtitle 3), and Administrative Procedure Act--Licensing (subtitle 4)....