State v. Board of Educ. of Montgomery County

• Decision Date: 01 September 1997
• Docket Number: No. 41,41
• Citation: 346 Md. 633,697 A.2d 1334
• Parties: , 120 Ed. Law Rep. 514 STATE of Maryland, et al. v. BOARD OF EDUCATION OF MONTGOMERY COUNTY. ,
• Court: Maryland Court of Appeals

Page 633

346 Md. 633

697 A.2d 1334, 120 Ed. Law Rep. 514

STATE of Maryland, et al. v. BOARD OF EDUCATION OF MONTGOMERY COUNTY.

No. 41, Sept. Term, 1997.

Court of Appeals of Maryland.

June 26, 1997.

Reconsideration Denied Aug. 22, 1997.

Lawrence P. Fletcher-Hill, Assistant Attorney General Elisabeth A. Sachs and Nicolett H. Pervost, Assistant Attorneys General, Baltimore, for Petitioner.

Roger W. Titus, Kevin Collins, and Ariana J. Wright, Venable, Baetjer & Howard, Rockville, for Respondent.

Submitted before BELL, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI, RAKER and WILNER, JJ.

ELDRIDGE, Judge.

This case arose out of an intra-governmental dispute between a principal department of the State government and a State agency, the Board of Education of Montgomery County. ¹ The dispute concerned a former program, established by the General Assembly, under which the State made monetary contributions for the employer costs of providing Social Security and retirement benefits for certain school board employees. Following an audit, the Department ² determined that the State had made overpayments for employees of the Montgomery County Board of Education.

The Board then took an appeal to a hearing examiner pursuant to Maryland Code (1957, 1988 Repl.Vol.), Art. 73B, § 39(e), which provided as follows:

"(e) Delinquent payments. (1) Delinquent payments due under paragraphs (1) and (3) of subsection (d) may, with interest at the rate of six per centum per annum be recovered by action in a court of competent jurisdiction against the political subdivision liable therefor, or may at the request of the State Agency, be deducted from any other moneys payable to such subdivision by any department or agency of the State.

(2)(i) If an audit of the records of a school system, public library, or educational institution reveals that the system, library, or institution owes money to the Contribution Fund, any delinquent payment may not be collected until:

1. The school system, public library, or educational institution has an opportunity to appeal the decision to a hearing examiner who shall be appointed by the Secretary of the Department of Budget and Fiscal Planning; and

2. The hearing examiner finds that the funds are owed to the Contribution Fund.

(ii) If the hearing examiner determines that moneys are owed to the Contribution Fund, the moneys shall be deducted from any State funds that would otherwise be paid to the school system, public library, or educational institution.

(iii) An appeal taken pursuant to this paragraph is not a contested case, for the purposes of the Administrative Procedure Act."

A hearing was held before a hearing examiner, although, in light of § 39(e)(2)(iii) quoted above, the proceedings before the hearing examiner were not transcribed. After the hearing, the hearing examiner determined that the State had made overpayments to the Board totaling over $1.2 million, and that such sum was owed to the State. This determination was based on the hearing examiner's findings that the State had made payments for a particular category of Board employees, called "special education school bus aides," who had not been eligible for such payments. The Secretary of the Department endorsed the hearing examiner's decision.

Thereafter, the Board sought judicial review of the Department's decision by filing in the Circuit Court for Montgomery County a complaint for a declaratory judgment. Named as defendants were the State of Maryland, the Secretary of the Department, and the Central Collection Unit which is part of the Department. ³ The Board asserted in the complaint that the special education school bus aides had been eligible employees for the State contributions, and that the Department erred in finding that they were not eligible.

After several hearings, the circuit court granted the State's motion to dismiss. The court held that judicial review of the Department's decision was precluded by this Court's decision in Board v. Secretary of Personnel, 317 Md. 34, 562 A.2d 700 (1989).

The Board appealed, and the Court of Special Appeals, in an unreported opinion, reversed. Although apparently of the view that there was no statutory right of judicial review, the Court of Special Appeals held that the Department's decision was subject to judicial review under the principles set forth in Criminal Inj. Comp. Bd. v. Gould, 273 Md. 486, 331 A.2d 55 (1975). The intermediate appellate court quoted Gould, 273 Md. at 501, 331 A.2d at 65, " 'that the Legislature cannot divest the courts of the inherent power they possess to review and correct actions by an administrative agency which are arbitrary, illegal, capricious or unreasonable.' " While recognizing that portions of this Court's more recent opinion in Board v. Secretary of Personnel, supra, 317 Md. 34, 562 A.2d 700, were contrary to its holding in the present case, the Court of Special Appeals characterized those portions of our opinion in Board v. Secretary of Personnel as "dicta." In addition, the intermediate appellate court stated that this Court's opinion in Board v. Secretary of Personnel was inconsistent with our earlier opinion in Criminal Inj. Comp. Bd. v. Gould.

The State has filed in this Court a petition for a writ of certiorari. The Board has filed an opposition, arguing that the pertinent portion of our opinion in Board v. Secretary of Personnel is dicta and should not be followed. According to the Board, the circuit court is "vested with the inherent residual authority to review" the Department's decision under the principles set forth in Heaps v. Cobb, 185 Md. 372, 45 A.2d 73 (1945), and Criminal Inj. Comp. Bd. v. Gould.

We have granted the State's petition, and we shall summarily reverse the judgment of the Court of Special Appeals. The relevant portion of this Court's opinion in Board v. Secretary of Personnel was not dicta, and the Court of Special Appeals was bound by that opinion. Moreover, there is no inconsistency between Board v. Secretary of Personnel and earlier cases such as Heaps v. Cobb and Criminal Inj. Comp. Bd. v. Gould.

The dispute in Board v. Secretary of Personnel involved the same contribution program and the same statutory provisions as the dispute in the case at bar. In Board v. Secretary of Personnel, an audit revealed that the State had made overpayments on behalf of employees of the Board of Education of Prince George's County. According to the State, it had made payments on behalf of ineligible employees and had made some duplicate payments. The Board then took an appeal to a hearing examiner pursuant to former Art. 73B, § 39(e). Despite the language of former § 39(e)(2)(iii) stating that the administrative proceeding was not a contested case, the Prince George's County Board of Education, at a pre-hearing conference, requested "that the hearing be a 'contested case' hearing under the Maryland Administrative Procedure Act." Board v. Secretary of Personnel, 317 Md. at 37, 562 A.2d at 701. The hearing examiner denied the request, and the Board filed a petition with the Secretary of the Department for a "declaratory ruling" on the issue. At the subsequent administrative hearing, the Board's counsel was present and requested a postponement until the Secretary ruled on the pending petition, but the hearing examiner refused. The Board then refused to participate in the hearing, and the hearing examiner subsequently ordered that the appeal be dismissed for lack of prosecution. In addition, the Secretary declined to issue a declaratory ruling on the question of the Board's entitlement to a contested case hearing.

Next, the Board filed an action in the Circuit Court for Prince George's County, seeking a writ of mandamus to compel the Department to provide a contested case hearing and to compel the Secretary to issue a declaratory ruling. The circuit court refused to issue an order compelling the Department to conduct a contested case hearing. The court did, however, issue a writ of mandamus requiring the Secretary to render a declaratory ruling on the matter. Both the Board and the Secretary appealed, and this Court issued a writ of certiorari prior to any proceedings in the Court of Special Appeals.

On the Board's appeal, the Board made alternative arguments as to why it was entitled to a contested case administrative hearing. First, the Board asserted that the dispute was not covered by former Art. 73B, § 39(e), or, if it were covered, the remedy provided by § 39(e) was not intended to be the exclusive remedy. The Board contended that it was entitled to a contested case hearing and judicial review under the Maryland Administrative Procedure Act, Code (1984, 1995 Repl.Vol.), § 10-201 et seq. of the State Government Article. ⁴ Second, the Board argued that it should have a contested case administrative hearing so that the administrative decision could be judicially reviewed, and that the Board was constitutionally entitled to such judicial review under the principles set forth in Criminal Inj. Comp. Bd. v. Gould, supra, 273 Md. 486, 331 A.2d 55, and similar cases. In effect the Board maintained that, if § 39(e) were intended to provide the exclusive remedy and to preclude judicial review, the statute would be unconstitutional. The Board's argument was as follows (Board v. Secretary of Personnel, 317 Md. at 43-44, 562 A.2d at 704-705):

"The Board seeks a contested case administrative proceeding, instead of proceeding under § 39(e), so that it will be entitled to judicial review. It argues that it is constitutionally entitled to a hearing which will be subject to judicial review, relying on Criminal Inj. Comp. Bd. v. Gould, 273 Md. 486, 500-502, 331 A.2d 55 (1975). Specifically, the Board quotes the following from the Gould case (Board's Brief, p. 23, quoting 273 Md. at 500-502, 331 A.2d at 64-65):

" 'The Legislature cannot, of course, interfere with the judicial process by depriving litigants from raising...