Shanty Town Associates Ltd. Partnership v. Department of Environment , 89 Md. App. 1 ( 1991 )

DARLENE G. PERRY, Judge, Specially Assigned.

Appellant, Shanty Town Associates Limited Partnership (Shanty Town), appeals from an order of the Circuit Court for Worcester County affirming the denial by Appellee, Maryland Department of the Environment (MDE), of Shanty Town’s application for increased sewer service to support the proposed expansion of its West Ocean City commercial facilities.

The controversy centers on the interpretation of a consent order entered into by the Maryland Department of Health and Mental Hygiene (Department)¹ and the Worcester County Sanitary Commission (WCSC) which restricts access to the sewer system. MDE construed the consent order as barring Shanty Town’s request for additional sewage discharge. The Circuit Court affirmed, ruling that the agency decision was supported by substantial evidence. We now reverse the Circuit Court.

The consent order at issue was the product of a WCSC plan to install a central sewage collection system for the West Ocean City area. Such a system was needed to replace the existing private on-site septic systems which had become a major sanitation problem by the late 1970’s. Due to the considerable expense involved, however, WCSC was forced to seek aid from the federal government in the form of an Environmental Protection Agency (EPA) construction grant. The EPA conducted a comprehensive study addressing the potential environmental impact of the proposed system, concluding that the system would be environmentally sound only if excessive development within the 100-year floodplain and the wetlands was prevented once it was in place.

As a result, the EPA conditioned approval of the grant on restrictions limiting access to the system. Those restrictions were formalized in a duly executed Assistance Agreement (Agreement) between the EPA and WCSC. As a further condition, the EPA sought assurance that state authorities would enforce the terms of the agreement. The EPA agreed that this demand would be met should the Department and WCSC enter into an appropriate consent order. After a series of meetings attended by representatives of the Department, WCSC, and numerous environmental groups, the consent order was signed on June 28, 1983. A construction grant was then issued by the EPA and the system ultimately installed.

The consent order begins with a preamble setting forth a six-part policy embodying the desired restrictions on sewer service. The order also requires that WCSC prepare a map depicting the respective boundaries of the areas affected by the restrictions, i.e.; the wetlands and the 100-year floodplain of the West Ocean City Sanitary District. The remaining provisions relevant to this appeal set forth the standards upon which an application for sewer service is to be considered and the procedure by which an unsuccessful applicant may pursue a grievance.²

The Shanty Town property consists of an island and causeway of approximately 4.5 acres situated within the West Ocean City Sanitary District. It is zoned B-2 (General Business District). The property is currently improved with a complex of interconnected shops and restaurants as well as boat mooring facilities, with the remainder of the land consisting primarily of a parking lot. These improvements were constructed in 1974-75. Shanty Town seeks to expand the complex by constructing a condominium hotel and adding approximately 20,000 feet of new store space. This case arose when Shanty Town applied for and was refused the additional sewer service that the proposed expansion would require.

It is undisputed that the Shanty Town property lies within the 100-year floodplain located in the geographical area encompassed by the consent order. The parties likewise agree that the Department acted within its authority in executing the consent order and that the same is controlling in this case. See Department of Environment v. Showell, 316 Md. 259, 558 A.2d 391 (1989).³ The conflict herein, rather, involves the interpretation of two of the six policy provisions contained in the consent order. Those provisions read as follows:

Paragraph A.

Sewer service will not be permitted for the undeveloped lots in the 100-year floodplain as defined by the Federal Emergency Management Administration (FEMA), unless the lots were platted as building lots prior to June 1, 1977. Development on a lot for which sewer service will be permitted will be limited to one equivalent dwelling unit (EDU). For the purpose of this Order, an EDU is defined as any non-single family dwelling unit having a sewage flow associated with a residential dwelling unit (280 gallons per day).

# # # * # *

Paragraph C.

No sewer service or connections will be provided for any structure in the floodplain area not included in the West Ocean City service area as defined in the March, 1982, edition of Amendment # 1 to the North Central Ocean Basin (NCOB) Wastewater Facilities Plan.

The initial decision on Shanty Town’s application was made by Dr. Donald Harting, Deputy State Health Officer, who denied additional sewer service on the ground that the property had not been previously platted into individual lots (i.e., prior to 1977). Shanty Town appealed to Richard B. Sellars, Jr., Director of the Water Management Administration (WMA), who had been an active participant in the drafting of the consent order. Sellars affirmed Dr. Harting in a written response, adding that the drafters never intended to provide expanded service to developed lots. The next step in the process was a full evidentiary hearing before William F. Clark, Chief Hearing Examiner of the Department. Examiner Clark found that, while the Shanty Town property was in fact platted before June 1, 1977, the estimated additional flow of 30,000 gallons per day was far in excess of that permitted by Paragraph A of the consent order. Accordingly, he recommended that the appeal be denied.

The final administrative proceeding consisted of oral arguments before Kenneth E. McElroy, Jr., Designee of the Secretary of MDE. By written order dated January 15, 1988, Designee McElroy made the following findings relevant to this appeal: (1) that the language of the consent order, being clear and unambiguous, should be given its plain meaning without consideration of extrinsic evidence; (2) that Paragraph A is irrelevant because it applies only to undeveloped lots and, assuming the property constitutes a single lot, there had been commercial development since 1974; (3) that Paragraph C, rather, is dispositive in that its plain meaning dictates that no sewer service be provided for structures erected after 1982; (4) that the result would be the same even if the consent order were determined to be ambiguous; and (5) that the restrictive provisions of the consent order should be viewed not as six exceptions to some other overall policy, but rather as the policy, to be read as a cohesive whole. In accordance with these findings, MDE subsequently entered a final denial of Shanty Town’s application.⁴

Shanty Town filed an appeal in the Circuit Court for Worcester County, where the case was assigned to Judge Theodore R. Eschenburg. On appeal, Shanty Town contended that the Designee’s decision was erroneous because the plain meaning of the consent order does not preclude Shanty Town from obtaining the additional sewer service for which it applied. Upon reviewing the record, Judge Eschenburg rejected that argument, affirming the Designee’s interpretation of the consent order on the ground that substantial evidence supported the factual findings and there was no error of law. The sole issue before this Court is whether the Circuit Court was clearly erroneous in that holding.

The standard and scope of review by which the Circuit Court was bound is set forth in the Maryland Administrative Procedure Act, Code (1984) § 10-215 of the State Government Article. Under subsection (g)(3), a reviewing court may:

“reverse or modify the decision [of the agency] if any substantial right of the petitioner may have been prejudiced because a finding, conclusion, or decision of the agency:

(i) is unconstitutional;

(ii) exceeds the statutory authority or jurisdiction of

the agency;

(iii) results from an unlawful procedure;

(iv) is affected by any other error of law;

(v) is unsupported by competent, material, and substantial evidence in light of the entire record as submitted;

or

(vi) is arbitrary or capricious.”

Under Maryland law, “substantial evidence” is such relevant evidence that a reasoning mind could accept as a proper basis for the conclusion reached by the agency. Caucus v. Maryland Securities, 320 Md. 313, 577 A.2d 783, (1990); Maryland State Police v. Lindsey, 318 Md. 325, 568 A.2d 29, (1990). A reviewing court must not substitute its own judgment for that of the agency, whose expertise is presumed, but rather exercise “restrained and disciplined judicial judgment so as not to interfere with the agency’s factual conclusions.” Caucus, supra., 320 Md. at 324, 577 A.2d at 788 (quoting Supervisor v. Asbury Methodist Home, 313 Md. 614, 625, 547 A.2d 190,195 (1988)). In State Election Board v. Billhimer, 314 Md. 46, 58, 548 A.2d 819 (1988), cert. denied, 490 U.S. 1007, 109 S.Ct. 1644, 104 L.Ed.2d 159 (1989), the Court of Appeals elaborated upon the degree of deference to be accorded a final agency decision:

This deference applies not only to agency fact finding, but to the drawing of inferences from the facts as well____ When, however, the agency’s decision is predicated solely on an error of law, no deference is appropriate and the reviewing court may substitute its judgment for that of the agency____

Shanty Town contends that the Designee’s interpretation of Paragraph C of the consent order is erroneous as a matter of law. We agree.

We hold, as did both the Designee and the Circuit Court below, that the language of the consent order is clear and unambiguous. Citing Roged, Inc. v. Paglee, 280 Md. 248, 372 A.2d 1059 (1977), where such is the case, all terms are to be given their plain meaning in construing the order.

Paragraph C is plain in its meaning. It neither precludes nor permits the relief sought by Shanty Town. The paragraph is geographically, not structurally, restrictive.

A specific detailed plan preceded the Agreement and the consent order so that the grant could be given for a system to service a known geographical area and known sewer usage. Paragraph C precludes service in the floodplain unless the area was included in the West Ocean City service area as of 1982. Recalling that the new system was intended to alleviate failing septic systems in a specific area, it was the obvious intent of the framers of the consent order to identify and restrict the geographical area the new system would serve. Read as a part of the entire order, there is nothing in the intent of the order to suggest that, in the converse, the intent of Paragraph C is to grant unlimited service to all structures within the described geographical area, as well as any future expansion to those structures. Paragraph C simply does not apply.

It is Paragraph A which applies. In light of the lengthy previous administrative and judicial controversies that have been spawned by this situation,⁵ we go further than simply addressing whether Paragraph C of the consent order applies in order to resolve the underlying dispute. Although it is undeniably desirable to exercise the judicial restraint set forth in Rule 8-131(a) in virtually all situations, we find the case sub judice to be an appropriate one in which to offer guidance to endeavor to avoid, if possible, the expense and delay of another appeal. See Yarema v. Exxon Corp., 305 Md. 219, 503 A.2d 239 (1986); Taub v. State, 296 Md. 439, 463 A.2d 819 (1983).

Paragraph B precludes sewer service for structures in a wetland. Although the Hearing Examiner states that some portion of Shanty Town’s 4.5 ± acres are in wetlands, there is no suggestion that its request was denied because any of the proposed structures were to be located in wetlands. Paragraph B is not applicable. We held earlier Paragraph C is a geographical limitation and that the appellant’s property is inside its bounds; it is in the 100-year floodplain of the defined West Ocean City service area. Paragraph D’s prohibition of a particular sewer line extension is inapplicable because the appellant’s property is already served by an authorized sewer line. Paragraph E’s restriction is inapplicable because the Shanty Town site is not industrially zoned. Paragraph F merely precludes service to structures located outside the defined geographical boundaries of the service area unless the agreement of the WCSC and the E.P.A. are obtained. With the exception of Paragraph A, the remainder of the consent order concerns itself with procedural requirements for the implementation of the policies.

It is Paragraph A which applies. The first sentence of Paragraph A prohibits any sewer service to undeveloped lots not platted as building lots prior to June 1, 1977. The parties agree that the entire Shanty Town property was platted as a single lot in 1922. Although, as the Hearing Examiner found, it is “unclear” as to whether the property was platted as a building lot, apparently for purposes of this appeal the parties concede that the property was platted as a building lot. Thus, the first sentence of Paragraph A does not prohibit the service requested by Shanty Town.

The plain meaning of the second sentence of Paragraph A, however, is to limit the additional sewer service Shanty Town seeks to the extent that it exceeds one EDU. Shanty Town concededly seeks sewer service for development on its platted lot; the second sentence of Paragraph A governs “development on a lot.” That sentence specifically provides:

Development on a lot for which sewer service will be permitted will be limited to one equivalent dwelling unit. (EDU)

Thus, Paragraph A specifically limits sewer service for “development” to one EDU per lot. There is nothing in this sentence which limits its impact to original development of previously undeveloped lots. Rather, unlike the first sentence of Paragraph A, it applies without qualification to “[development on a lot for which sewer service will be permitted.” Platted building lots which are being developed must share the allotment equally without regard to whether development is original or an expansion of existing development. Accordingly, Paragraph A may not be construed to grant the increase in sewer flow from 5,200 gallons to the 30,000 gallons which Shanty Town seeks. Rather, because it is undisputed that the Shanty Town property is at most a single building lot, its future additional allotment for development is limited to that provided by the second sentence of Paragraph A, i.e.; one EDU, of 280 gallons per day.

There is no necessity for this court to review the evidence heard by Designee McElroy to determine whether it was substantial and therefore could have supported the conclusion reached. The error made was an incorrect interpretation and application of Paragraph C of the consent order. Where the error made is one of law, the reviewing'court, under the provisions of Annotated Code of Md., State Government Art., § 10-215 (1984) may reverse or modify the decision of the agency for that reason alone. The erroneous application of Paragraph C of the consent order dictates that we reverse and remand.

REVERSED AND REMANDED TO THE CIRCUIT COURT FOR WORCESTER COUNTY FOR FURTHER REMAND TO THE SECRETARY OF THE MARYLAND DEPARTMENT OF THE ENVIRONMENT FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS ORDER. COSTS ARE TO BE PAID BY THE APPELLEE.

1 . At the time of Shanty Town's initial application for expanded sewer service in 1983, responsibility for supervision and control over matters concerning the physical condition of State waters was vested in the Department of Health and Mental Hygiene. See Md.Code Ann. Health-Environmental § 9-319 (1982). Subsequently, however, the legislature created the Department of the Environment, which assumed authority over these matters effective July 1, 1987. See Md. Code Ann. Environment §§ 9-252, 9-253, 9-319 (1987). Accordingly, the Department of the Environment was substituted as a party shortly thereafter. In this opinion, reference to "the Department” is to the Department of Health and Mental Hygiene and reference to “MDE” is to the Department of the Environment.

2 . These provisions state:

Section 2a. Through delegation of authority, the Health Officer of Worcester County will be the responsible party in deciding, based on the sewer service policy presented heretofore and on the information contained in the approved map and its accompanying underlying structure, whether a structure or a parcel of platted land is allowed sewer service.

Section 2b. Should any aggrieved applicant challenge the decision of the Health Officer, the matter will be referred to the Director of' Maryland’s Water Management Administration (WMA) for review. Any appeal beyond the level of WMA will be administered in accordance with the procedures of the Administrative Procedure Act.

3 . In Showell, the Court of Appeals held that the Department had the implicit authority under its general statutory powers to execute the consent order as necessary in furtherance of the prevention of water pollution. 316 Md. at 271, 558 A.2d at 397.

4 . Initially, this ruling was made contingent on the outcome of Showell, supra. In Showell, the Circuit Court for Worcester County had held that the Department lacked the authority to execute the consent order. On appeal, the Court of Appeals granted certiorari prior to consideration by this Court and had yet to rule at the time of Designee McElroy’s Final Order of January 15, 1988. Accordingly, by its own terms the Order was stayed, to become effective thirty days after a decision in Showell. The Court of Appeals subsequently upheld the validity of the consent order by opinion dated June 2, 1989, thereby triggering final denial of the application by MDE.

5 . Shanty Town Associates Ltd. Partnership v. E.P.A., 843 F.2d 782 (4th Cir.1988); Dept. of Environment v. Showell, 316 Md. 259, 558 A.2d 391 (1989); and the administrative and judicial proceedings leading to these two decisions.