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Opinions – 4/25/13: Maryland Court of Appeals

Constitutional Law

Removal of elected official 

BOTTOM LINE: Plaintiff was removed from office by operation of law on the day she was sentenced for misconduct in office while in office, notwithstanding the fact that she subsequently was afforded probation before judgment.

CASE: Hall v. Prince George’s County Democratic Central Committee, No. 100, Sept. Term, 2012 (filed Apr. 8, 2013) (Judges BATTAGLIA, Adkins, Barbera & McDonald) (Judges Bell, Harrell & Greene dissenting). RecordFax No. 13-0408-20, 48 pages.

FACTS: In September 2011, a grand jury returned an indictment (September Indictment) against Tiffany Alston, who was at the time a member of the House of Delegates, charging her with various violations of the Criminal Law and Election Law Articles of the Maryland Code, based on her alleged misappropriation of campaign funds.

In December 2011, another grand jury indictment (December Indictment) was returned by an Anne Arundel County grand jury against Ms. Alston, this time for conduct that occurred between January 7, 2011 and January 26, 2011, during which period of time she was a member of the House of Delegates.

Ms. Alston was tried on the December Indictment first. A jury returned a verdict of guilty as to both counts, which embodied offenses that qualified her for removal under §2 of Article XV of the Maryland Constitution; the trial judge, however, deferred sentencing until resolution of the charges in the September Indictment.

In October of 2012, however, Ms. Alston negotiated a plea agreement, which purported to resolve not only the outstanding charges in the September Indictment but also the sentence from her convictions of the charges in the December Indictment. Under the terms of the plea agreement, Ms. Alston specifically agreed to waive her appellate and post-conviction rights in both cases, agreed to a sentence of “one year incarceration with the entire term suspended, followed by three years of probation,” with the additional conditions that she pay restitution in the amount of $800 to the Maryland General Assembly and perform 300 hours of community service. Furthermore, Ms. Alston would be permitted to seek, and the State would not oppose, a modification of sentence for her misconduct in office conviction, if she completed her community service, paid the ordered restitution, and paid the civil fine.

At the sentencing hearing, the trial judge accepted the plea agreement and agreed that he would be bound to grant the probation before judgment. There was no mention of staying the misconduct in office conviction in the plea agreement.

Daniel Friedman, an Assistant Attorney General who operated as Counsel to the General Assembly, issued an advice letter dated October 10, 2012 to the Speaker of the House of Delegates, in which Mr. Friedman opined that Ms. Alston had been suspended by operation of law on October 9, 2012, the day she was originally sentenced. On November 1, 2012, Mr. Friedman issued another advice letter in which he opined that Ms. Alston was permanently removed from office by operation of law on the day of her sentencing as a result of her sentence to a term of imprisonment, and that a subsequent modification of her sentence, even if done in accordance with her plea agreement, was not sufficient to prevent her removal.

The next day, the Prince George’s County Democratic Central Committee voted to nominate Gregory Hall to Ms. Alston’s seat, pursuant to §13(a)(1) of Article III of the Maryland Constitution, but thereafter learned that Mr. Hall had been convicted in state court in 1992 of a misdemeanor handgun violation. The Governor sent a letter to the Central Committee asking that it withdraw Mr. Hall’s name.

Mr. Hall filed a complaint in the circuit court requesting injunctive relief to prevent the Central Committee from taking any action related to the withdrawal of his name. Ms. Alston intervened as a third-party plaintiff in the matter, asserting her claim against both the Governor and the Speaker of the House of Delegates that she had not been removed from office by operation of law, because her conviction had been modified to probation before judgment.

The circuit court ruled that Ms. Alston’s seat in the House of Delegates was vacated by operation of law on the day she was originally sentenced, October 9, 2012, that the Central Committee had the right to withdraw a name submitted to the Governor at any time before the Governor made the appointment, and that the Governor’s duty to appoint the name sent by the Central Committee was merely directory, not mandatory.

The Court of Appeals granted certiorari before any proceedings in the Court of Special Appeals and affirmed the judgment of the circuit court.

LAW: Under §2 of Article XV of the Maryland Constitution, any elected official who during his term of office is convicted of a crime shall be suspended by operation of law. If the conviction becomes final, such elected official shall be removed from the elective office by operation of Law.

Under CL §6-220(g)(1), when a defendant pleads guilty, a court may stay the entering of judgment and place the defendant on probation subject to reasonable conditions if certain conditions are met. See CL §6-220(g)(1)(i)-(iii). If a conviction and sentence are stayed, pursuant to CL §6-220(b)(1), a probation before judgment entered subsequently acts to strike the conviction from the defendant’s record. CL §6-220(g)(3).

Thus, the issue here was whether Alston’s probation before judgment, entered after conditions are fulfilled, harkened back to the date of the original conviction and sentencing for purposes of collateral consequences.

A conviction and sentence in and of themselves, not stayed, carry legal disabilities and collateral consequences, if any are appropriate. See, e.g., Myers v. State, 303 Md. 639, 647-48 (1985). Here, the circuit court clearly and unequivocally convicted Ms. Alston on the misconduct in office count as a result of her guilty plea and did not enter the stay required by §6-220(b)(1) in order for a probation before judgment to harken back to the date of original sentencing.

It was clear that the trial judge knew that what he was doing was not in concert with the strictures of the probation before judgment statute when he did not stay the conviction and sentence. No objection was made by Ms. Alston, and no motion to withdraw her guilty plea was ever offered by her.

Because no stay of Ms. Alston’s conviction and sentence for misconduct in office was entered on October 9, 2012, the collateral consequence of removal was triggered, as long as the constitutional provision was satisfied.

The finality of a conviction, “denot[es] the point of time when the courts are powerless to provide a remedy for the defendant on direct review.” Terry v. Warden of Maryland Penitentiary, 243 Md. 610, 612 (1966). Clearly, finality “by judicial review” refers to the end of direct appellate jurisdiction.

Finality under the “or otherwise” provision has never been explored by the Court of Appeals, although finality in a case, other than by the end of appellate rights, can only occur when a convicted person waives his or her right to appeal or allows the appeal period to lapse. Ms. Alston lost her ability to seek direct review because she waived her appeal rights on the record. The result is not altered in any way by the circuit court’s agreement to grant a probation before judgment upon a modification motion, if Ms. Alston fulfilled the conditions. See Avery v. State, 17 Md. App. 686, 692-93 (1973).

The fact that a probation before judgment could have been entered, if conditions were met by Ms. Alston, does not change the fact that finality attached to the judgment of conviction as to the misconduct in office count on October 9, 2012, without a stay, and, as of that moment, Ms. Alston was removed as a Delegate by operation of law from her seat.

COMMENTARY: Section 13(a)(1) of Article III of the Maryland Constitution provides that the Governor has fifteen days after a name is submitted to him by the Central Committee to appoint a person to fill a vacancy for a Delegate or Senator.

In In re Petition of the Commission on the Governorship of California, 603 P.2d 1357 (Cal. 1979) (en banc), the California court considered whether an appointment made by the Lieutenant Governor, while the Governor was absent, was properly withdrawn by the Governor upon his return. Id. at 1365. In holding that the Governor had the power to rescind the appointment, the court made clear that “uncompleted appointments are subject to withdrawal.” Id. The court based its holding, in part, on the principle that, “[t]he withdrawal power prolongs gubernatorial scrutiny of the appointment, furthering the confirmation’s ultimate purpose of assuring thorough consideration of the candidate’s qualifications.” Id. Thus, the Governor has the ability to rescind Mr. Hall’s nomination which had not yet been acted upon. See also Cook v. Botelho, 921 P.2d 1126, 1129 (Alaska 1996).

It was uncontested that the fifteenth day after the Governor received Mr. Hall’s nomination was Thursday, November 22, 2012, but this was Thanksgiving. The next day, Friday, November 23, 2012 was a State holiday. The next day on which State government was operating was Monday, November 26, 2012.

Statutes provide mechanisms for calculating the ending points for various time frames under our statutes and Rules. These statutes provide for taking action beyond what would have been the last day upon which action was allowed because it would not be possible to act on that day. See, e.g., Rule 1-203(a).

In this case, the act that must be completed before the expiration of the fifteen-day window was an exercise of governmental power by the Governor. To exercise this power, it is axiomatic that the government must be operating. Thus, the only reasonable interpretation is that, if the final day of the fifteen-day window falls on a holiday, a Saturday, or a Sunday, the Governor has until the next day the government is operating to make his appointment, which, in this case, was Monday, November 26, 2012.

Thus, the Central Committee timely withdrew the nomination and the Governor was free to appoint another individual to the seat.

DISSENT: According to the dissent, because the trial court agreed to strike their guilty finding it entered against Delegate Alston, vacate her conviction and enter probation before judgment, if she completed 300 hours of community service, paid $800.00 in restitution, and paid $500.00 in civil fines, Delegate Alston’s conviction was not, and could not have been, final within the contemplation, and in satisfaction of Article XV, §2. Consequently, the Legislature did not have the power, or the authority, to remove Delegate Alston from its body.

PRACTICE TIPS: Where “a plea rest[s] in any significant degree on a promise or agreement of the prosecutor, so that it can be said to be part of the inducement or consideration, such promise must be fulfilled.” Tweedy v. State, 380 Md. 475, 484 (2004) (quoting Santobello v. New York, 404 U.S. 257, 262 (1971).

Tax Law

Recordation tax exemptions 

BOTTOM LINE: The plain meaning of Economic Development Article §10-129(a) exempts Maryland Economic Development Corporation from paying the recordation tax at issue.

CASE: Maryland Economic Development Corporation v. Montgomery County, No. 44, Sept. Term, 2012 (filed Apr. 9, 2013) (Judges Harrell, Battaglia, Greene, ADKINS, Barbera & Eldridge (retired, specially assigned)) (Judge Bell dissenting). RecordFax No. 13-0409-20, 27 pages.

FACTS: Maryland Economic Development Corporation (MEDCO) is a public corporation formed by the General Assembly in 1984. The purpose for creating MEDCO was to “promote economic development” and “encourage the increase of business activity and commerce and a balanced economy in the State.” ED §10-104(b). To help accomplish this purpose, MEDCO was given the power to “accept loans, grants, or assistance of any kind from…a private source.” ED §10-115(4). MEDCO may “borrow money and issue bonds to finance any part of the cost of a project or for any other corporate purpose of the Corporation.” ED §10-117(a)(1). MEDCO may then “secure the payment of any portion of the borrowing by pledge of or mortgage or deed of trust on property or revenues of the Corporation.” §10-117(a)(2). To further aid in promoting the economic development of the State, MEDCO was given a tax exemption. See ED § 10-129.

MEDCO originally financed the Shady Grove Technology Development Center project in 1998 by issuing bonds. In 2009, MEDCO sought to retire the bonds but still finance the project and arranged to borrow $3,300,000 from PNC Bank (PNC). As part of the loan transaction, MEDCO was required to execute a promissory note and provide PNC with a “first priority perfected security interest” in the Shady Grove property.

On March 26, 2009, MEDCO executed a Leasehold Deed of Trust, Assignment and Security Agreement with PNC, which required MEDCO to pay all “recording costs and fees and all federal, state, county and…other taxes…in connection with the recordation or filing of any Loan Documents.”

To close the loan transaction, MEDCO presented the deed of trust for recording in Montgomery County, claiming an exemption from the recordation tax based on ED §10-129(a). The County Transfer Office denied the exemption and required MEDCO to pay $31,450 in recordation tax. MEDCO then filed a Transfer/Recordation Tax Refund Claim. Following an administrative hearing, the Montgomery County Department of Finance denied the claim.

MEDCO appealed to the Maryland Tax Court, but the court denied MEDCO’s petition for appeal. The circuit court reversed the decision of the Maryland Tax Court. The Court of Special Appeals reversed and vacated the circuit court’s decision, affirming the judgment of the Maryland Tax Court

The Court of Appeals reversed the Court of Special Appeals.

LAW: ED §10-129(a) provides that, except as provided in subsection (b) of the section, MEDCO “is exempt from any requirement to pay taxes or assessments on its properties or activities.” A direct tax is a property tax, which “is a charge on the owner of property by reason of his ownership alone without regard to any use that might be made of it.” Weaver v. Prince George’s County, 281 Md. 349, 357 (1977). In contrast, an excise tax is “defined as a tax imposed upon the performance of an act, the engaging in an occupation, or the enjoyment of a privilege” which “is said to embrace every form of taxation that is not a burden directly imposed on persons or property.” Id. at 357-58. The recordation tax at issue here is “an excise tax imposed upon the privilege of recording the deed.” Dean v. Pinder, 312 Md. 154, 159 1187 (1988).

MEDCO cited Federal Land Bank v. Bismarck Lumber Co., 314 U.S. 95 (1941), which considered whether the Federal Land Bank of St. Paul was exempt from state sales tax. In that case, the statute stated, “every Federal land bank…shall be exempt from Federal, State, municipal, and local taxation.” Id. at 99. The Supreme Court held that “[t]he unqualified term `taxation’ used in [the statute] clearly encompasses within its scope a sales tax.” Id. The Court reasoned that a broad construction of the term was “indicated by Congress’s intention to advance credit to farm borrowers at the lowest possible interest rate.” Id. at 100.

ED §10-129(a) does exempt MEDCO from both direct and excise taxes. The Court must look to the statutory intent to determine the scope of the exemption. Pittman v. Housing Authority of Baltimore City, 180 Md. 457, 463 (1942) (Pittman (Md.).

Applying the “plain meaning” rule, it is apparent that the Legislature did not seek to so restrict the exemption in this case. The Legislature chose to use the modifier “any” unrestricted by qualifiers. This modifier connotes a broad and expansive meaning which is commonly understood to mean “[o]ne, some, every, or all without specification.” American Heritage Dictionary of the English Language 81 (4th ed. 2006). Furthermore, the Legislature went on to expressly exempt taxes on “properties or activities.” Thus, the Legislature expressly provided that MEDCO’s tax-exempt status in ED §10-129(a) includes direct taxes on its properties and excise taxes on its activities. Thus, ED §10-129(a) includes an exemption from recordation taxes.

MEDCO is empowered to “accept loans…from…a private source,” ED §10-115(4), to “borrow money…to finance any part of the cost of a project…of the Corporation,” ED §10-117(a)(1), and to “secure the payment of any portion of the borrowing by…deed of trust on property…of the Corporation.” ED §10-117(a)(2). The Legislature then went further, and gave MEDCO the authority to “do all things necessary or convenient to carry out the powers expressly granted by this subtitle.” ED §10-115(14).

It was “necessary” for MEDCO to record the deed of trust because the loan documents required MEDCO to do so, and the loan would not have closed without the recording. The granting of the deed of trust and the subsequent recording of the deed of trust were both “indispensable elements” to obtaining the financing from PNC. See Pittman v. Home Owners Loan Corp., 308 U.S. 21, 32 (1939) (Pittman (S. Ct.). The deed of trust and its recording were part of the same activity necessary to carry out MEDCO’s express power to obtain financing from PNC. Therefore, the recording of a deed of trust falls within the category of MEDCO’s activities to which MEDCO’s tax-exempt status in ED §10-129(a) applies.

Under the ordinary definition of “requirement,” MEDCO was required to pay the recordation tax in two respects. First, PNC required MEDCO to pay any and all potential costs of the loan. MEDCO did not have a choice: if it did not agree to this requirement, then PNC would have refused to grant the loan. In this regard, it is no bar to the exemption that MEDCO was required to pay the recordation tax based on a contractual agreement. The Tax-Property Article specifically allows the parties to agree as to who will pay the recordation tax, TP §12-111, and it further instructs that such tax will be imposed on the instrument of writing being recorded rather than the lender or borrow specifically. TP §12-102.

Second, the County also required MEDCO to pay the recordation tax as MEDCO was the entity from whom the tax was demanded before the deed of trust would be recorded. The recording of the deed of trust was an “indispensable element” to the financing agreement with PNC and the loan would not have closed until MEDCO recorded the deed. The party who presents the writing for recordation in Maryland is the party who is required to pay the tax. Pittman S. Ct, 308 U.S. at 32. Therefore, MEDCO was “required” to pay the recordation tax within the meaning of the exemption set forth in ED §10-129(a).

Finally, the plain meaning interpretation of the ED §10-129(a) directly “carr[ies] out and effectuate[s], or aid[s] in, the general purposes and policies” of MEDCO. See Johnson v. State, 75 Md. App. 621, 630 (1988).

Interpreting ED §10-129(a) to exempt MEDCO from paying recordation tax allows MEDCO to save money, helps to keep MEDCO projects affordable, and helps to make MEDCO bonds competitive and marketable to potential purchasers. That allows MEDCO to promote additional, less expensive, business development in the State, directly enhancing all five purposes for creating MEDCO. See ED §10-104(b).

COMMENTARY: The County argued that any claimed exemption from recordation taxes must be strictly construed in favor of the County and that ED §10-129(a) must be harmonized with the Tax-Property Article.

ED §10-129(a) and TP §§12-108 and 116 can easily be harmonized by reading ED §10-129(a) as a limited exception to the general rules set out in the Tax-Property Article. See Md.-Nat’l Capital Park & Planning Comm’n v. Anderson, 395 Md. 172, 183 (2006). TP §§12-108 and 116 provide the general framework, under which transfers to a state agency are exempt from the recordation tax, and transfers from a state agency are not. ED §§10-129(a), however, provides a very limited exception, allowing all instruments recorded by one, and only one, particular state agency — MEDCO — to be exempt from taxation. This interpretation harmonizes all of the statutes and serves the purposes for which they were enacted — giving MEDCO tax-exempt status (ED §10-129(a)), and allowing the counties to choose whether to exempt transfers from other state agencies (TP §12-116).

Alternatively, even if this interpretation were read to bring the statutes into conflict, it is well established that the more specific statute will override the more general statute. See Magnetti v. Univ. of Md., 402 Md. 548, 567 (2007). ED §10-129(a) is the more specific statute, and therefore, MEDCO’s tax exemption will create a limited exception which overrides the general provisions of TP §§12-108 and 116. See id.

DISSENT: The dissent agreed with the views collectively expressed by the Maryland Tax Court and by the Court of Special Appeals. See Montgomery Co. v. Maryland Economic Dev. Corp., 204 Md. App. 282 (2012).

PRACTICE TIPS: When construing a tax statute, the Court of Appeals must strictly construe any exemption against the taxpayer and resolve any doubt in favor of the taxing authority. Comptroller of the Treasury v. Martin G. Imbach, Inc., 101 Md. App. 138 (1994).