Blackburn v. Board of Liquor License Commissioners

MARVIN H. SMITH, Judge, Retired, Specially Assigned. In this appeal, appellants Robert L. Blackburn and Holmes & Churchill, Ltd., f/a Windsor Club (hereinafter collectively referred to as “the licensees”) challenge a decision of the Circuit Court for Baltimore City, which affirmed a finding by the Board of Liquor License Commissioners for Baltimore City (“the Board”) that the licensees violated the Board’s rules. Because we conclude that the Board failed to set forth sufficient findings of fact to support its decision, we shall ⁶¹⁹ direct the court below to remand the case to the Board for further proceedings. FACTS Blackburn and Holmes & Churchill, Ltd. hold the liquor license for the Windsor Club.

Holmes & Churchill, Ltd. owns the establishment. The Windsor Club’s liquor license is a Class B-D-7 license which was transferred from another establishment. At the time of the transfer, the licensees believed that smoking would soon be banned in places of public accommodation. In order to avoid the smoking ban, they requested that the Board specify on the license that the Windsor Club was a “private membership club.” The Board granted the request, noting on the face of the license: “PREMISES MUST OPERATE AS A PRIVATE MEMBERSHIP CLUB ONLY.” The Windsor Club apparently is the only establishment with a Class B-D-7 license that operates under such a restriction.

Members of the Windsor Club pay $500.00 to join, then $250.00 each year to renew their memberships. At 3:15 a.m. on May 24, 1998, an inspector for the Board of Liquor License Commissioners for Baltimore City entered the premises with several police officers. The inspector thereafter cited the licensees for selling and allowing the consumption of alcohol on the premises after hours. By notice dated July 7, 1998, the Board informed the licensees that they were accused of violating Rule 4.05(a) and (b) of the Rules and Regulations for the Board of Liquor License Commissioners for Baltimore City.

Rule 4.05(a) provides: “No licensee shall permit any person to consume alcoholic beverages on the licensed premises during hours when such sales are prohibited by law.” Rule 4.05(b) states: “No alcoholic beverages shall be served, dispensed, furnished or given away in any part of the premises during the hours when such sales are prohibited by law.” The Board instructed the licensees to appear for a hearing on July 23, 1998 “to show cause why your Alcoholic Beverage License ... should not be suspended or revoked .... ” ⁶²⁰ The inspector and a police officer testified against the licensees at the hearing. Blackburn testified on behalf of the licensees. Counsel for the licensees then pointed out that there was no evidence that anyone had actually seen alcohol being served after 2:00 a.m. Counsel concluded that therefore there was insufficient evidence of a violation of Rule 4.05(b).

Counsel acknowledged that there was evidence that persons were consuming alcohol on the premises after hours. He argued, however, that Rule 4.05(a), which purports to prohibit such consumption, can not lawfully be applied to private membership clubs. The Board took counsel’s arguments under advisement. Subsequently, by letter dated August 12, 1998, it informed counsel that it had rejected the arguments.

The Board stated: Because a previous violation of this Rule was dismissed on a technicality, this is actually a first conviction for Mr. Blackburn. He is, therefore, found guilty and a $500 fine or 5 day suspension is imposed. Because this is a first finding of guilt, the penalty will be suspended. Please note that if your client appears before the Board on a similar violation and [is] found guilty, the now suspended fine will be reimposed.

(Emphasis omitted.) 1 The licensees appealed to the Circuit Court for Baltimore City. A hearing was held at which counsel for the licensees and the Board presented argument. Counsel for the licensees posited that the Board had not determined that the licensees were guilty of serving alcohol after hours but only that they were guilty of allowing consumption after hours. He urged the court to determine that Rule 4.05(a) does not prohibit such consumption at private membership clubs.

Counsel for the Board countered that the Board had found the licensees guilty of violating both part (b) and part (a) of Rule 4.05, and that both findings were proper. ⁶²¹ The court agreed with counsel for the Board that the guilty finding referred to both parts (a) and (b) of the Rule. It further determined that the evidence was sufficient to support the Board’s finding that the licensees had engaged in after-hours sales. The court opined that, because the guilty finding could be affirmed on the basis of the violation of Rule 4.05(b), it was not necessary for the court to determine the validity of the Board’s finding that a violation of Rule 4.05(a) had occurred. ISSUES On appeal to this Court, the licensees argue, in essence, that: I. The trial court erred in affirming the guilty finding where the Board failed to specify whether it found a violation of Rule 4.05(a), Rule 4.05(b), or both, and where the Board otherwise failed to set forth sufficient findings of fact to support its decision, II.

The trial court erred in refusing to review the Board’s apparent finding that the appellants violated Rule 4.05(a), and in therefore failing to determine that the Rule does not apply to private membership clubs, and III. The trial court erred in affirming the guilty finding on the basis of a violation of Rule 4.05(b) where, if in fact the Board found such a violation, the finding was not supported by substantial evidence. Because we find merit in the licensees’ first argument, we shall vacate the judgment of the trial court and remand the case to that court with instructions to remand to the Board for specific findings of fact and conclusions of law. We shall address the licensees’ second and third arguments for guidance purposes.

DISCUSSION I Specificity of Board’s Decision The Board’s August 12, 1998 letter to counsel for the licensees stated, in its entirety: ⁶²² At the conclusion of the public hearing concerning the violation of Board Rule 4.05(a) and 4.05(b) (sale and consumption after legal hours), the Board held the decision concerning the Windsor Club sub curia. In reviewing our files and Rules & Regulations, the Board is taking the position that although Mr. Blackburn has elected to operate as a private membership club, his alcoholic beverage license remains a Class “BD7” Beer, Wine & Liquor license which is not a club license. You have indicated that Article 2B, Section 11 — 305(b) refers to premises open to the public and have argued that since Mr. Blackburn is operating a private club he is not covered under the provisions of this section. It is our position that the sale and consumption of alcohol at this location must cease at 2:00 a.m.

Because a previous violation of this Rule was dismissed on a technicality, this is actually a first conviction for Mr. Blackburn. He is, therefore, found guilty and a $500 fine or 5 day suspension is imposed. Because this is a first finding of guilt, the penalty will be suspended. Please note that if your client appears before the Board on a similar violation and [is] found guilty, the now suspended fine will be reimposed.

(Emphasis omitted.) The licensees argue that the Board failed to make clear in the letter whether it found them guilty of violating Rule 4.05(a) or (b) or both. The licensees further contend that the Board failed to set forth the facts on which it based its finding or findings. The Board responds that, by stating in its letter that “the sale and consumption of alcohol” at the Windsor Club “must cease at 2:00 a.m.,” the Board made clear that it found the licensees guilty of violating both parts (a) and (b) of Rule 4.05. Judicial review of the Board’s decision is authorized by Md.Code (1957, 1998 RepLVol., 1999 Cum.Supp.), § 16-101(a) of art. 2B.

Section 16 — 101(e)(l)(i) provides: Upon the hearing of such appeal, the action of the local licensing board shall be presumed by the court to be proper ⁶²³ and to best serve the public interest. The burden of proof shall be upon the petitioner to show that the decision complained of was against the public interest and that the local licensing board’s discretion in rendering its decision was not honestly and fairly exercised, or that such decision was arbitrary, or procured by fraud, or unsupported by any substantial evidence, or was unreasonable, or that such decision was beyond the powers of the local licensing board, and was illegal. The case shall be heard by the court without the intervention of a jury. If, in the opinion of the court it is impracticable to determine the question presented to the court, in the case on appeal, without hearing of additional evidence, or if in the opinion of the court any qualified litigant has been deprived of the opportunity to offer evidence, or if the interests of justice otherwise require that further evidence should be taken, the court may hear such additional testimony to such extent and in such manner as may be necessary.

Id. The court may also remand to the Board for further proceedings. See id., § 16 — 101 (e)(4)(ii). While the last sentence of § 16 — 101(e)(l)(i) expressly permits the trial court, under certain circumstances, to hear additional evidence, the court may hear such evidence only to ascertain the veracity of findings of fact and conclusions of law reached by the Board.

As the section does not authorize appeals de novo, the trial court may not hear additional evidence on matters not addressed by the Board. This Court has consistently explained that judicial review of a decision by the Board is similar to review of decisions by most other administrative agencies. See generally Bd. of Liquor License Comm’rs for Baltimore County v. J.R. Bros., Inc., 119 Md. App. 308, 312 , 705 A.2d 16, 18 (1998); Patten v. Bd. of Liquor License Comm’rs for Baltimore City, 107 Md.App. 224, 229-30 , 667 A.2d 940, 943 (1995); Baines v. Bd. of Liquor License Comm’rs for Baltimore City, 100 Md.App. 136, 142-43 , 640 A.2d 232, 235-36 (1994). “It is a cardinal rule of administrative appeals that ‘a reviewing court ... shall apply the substantial evidence test to final decisions of an administrative ⁶²⁴ agency [such as the Board], but .it must not itself make independent findings of fact or substitute its judgment for that of the agency.’ ”' Id. at 142 , 640 A.2d at 235 (citation and emphasis omitted). “Judicial review of administrative action differs from appellate review of a trial court judgment. In the latter context the appellate court will search the record for evidence to support the judgment and will sustain the judgment for a reason plainly appearing on the record whether or not the reason was expressly relied upon by the trial court.

However, in judicial review of agency action the court may not uphold the agency order unless it is sustainable on the agency’s findings and for the reason stated by the agency.” Id. at 143 , 640 A.2d at 235-36 (citation and emphasis omitted). Of course, the reviewing court may substitute its judgment for that of the Board on questions of law. See Patten, 107 Md.App. at 230 , 667 A.2d at 943 . There is no express requirement that the Board set forth specific findings of fact and conclusions of law.

See Sheeler v. Handelman, 212 Md. 152, 162 , 129 A.2d 78, 84 (1957). In order for any meaningful review to be conducted, however, the Board must do so, at least informally. As the licensees contend, neither the transcript of the hearing before the Board nor the Board’s letter to the licensees’ counsel specifies which provision the licensees were found to have violated. Contrary to the Board’s assertion, the statement in the letter that “[i]t is [the Board’s] position that the sale and consumption of alcohol at [the Windsor Club] must cease at 2:00 a.m.,” does not clarify the matter.

The statement reveals what the Board believes the law to be, but does not suggest a finding as to any particular violation. Because the Board failed to set forth the basis for its decision, or even to specify whether it found the licensees guilty of one violation or two violations, the trial court could not properly review the Board’s decision. The court erred in affirming the decision on the ground that the evidence supported a finding that the licensees violated Rule 4.05(b) by ⁶²⁵ dispensing alcohol after hours. Furthermore, the court erroneously assumed that the licensees’ argument regarding Rule 4.05(a) could be ignored if the evidence supported the guilty finding as to Rule 4.05(b).

The licensees were cited for two separate violations. Accordingly, they were entitled to know of what they were found guilty. The licensees made clear to the court that they believed Rule 4.05(a) did not apply to private membership clubs and therefore could not be enforced against them. If the Board found the licensees guilty of violating Rule 4.05(a), and if the licensees continued to serve alcohol after hours and incurred a second guilty finding for that offense, the Board could, in accordance with the August 12, 1998 letter, impose the suspended penalty.

In addition, in light of the previous offense, the Board might well impose a more severe sanction, such as revocation or suspension of the license, for the second guilty finding. See Code (1957, 1998 RepLVol., 1999 Cum.Supp.), § 10-401(a)(2) of art. 2B. We therefore vacate the trial court’s judgment and remand the case to that court with instructions to remand to the Board to set forth express findings of fact and conclusions of law. In doing so, we acknowledge that, while § 16-101(e)(4)(h) of art. 2B has long authorized remand to several local licensing boards, it did not authorize remand to the Board of Liquor License Commissioners for Baltimore City until October 1, 1999, when 1999 Laws of Maryland, chapter 48 took effect.

We reject the licensees argument that remand is inappropriate in this case because the amendment did not take effect until the instant appeal was pending. The licensees contend that, in light of the insufficiency of the Board’s findings, this Court has no choice but to reverse the case without remanding it. Their argument is premised on the general rule that “statutes are presumed to operate prospectively and are to be construed accordingly.” Washington Suburban Sanitary Comm’n v. Riverdale Heights Volunteer Fire Co., Inc., 308 Md. 556, 560 , 520 A.2d 1319, 1321 (1987). “There is no absolute prohibition against retroactive application of a statute,” however. Holland v. Woodhaven ⁶²⁶ Bldg. & Dev., Inc., 113 Md.App. 274, 282-83 , 687 A.2d 699, 704 (1996).

In Holland , this Court observed: The rules governing retroactivity ... are easy to state but difficult to apply. A number of Maryland cases can be cited for the general proposition that a statute is presumed to operate prospectively from its effective date absent a clear expression of legislative intent that the statute is to be applied retroactively. Arundel Corp. v. County Comm’rs of Carroll County, 323 Md. 504, 510 , 594 A.2d 95 (1991); Mason v. State, 309 Md. 215, 219 , 522 A.2d 1344 (1987); WSSC v. Riverdale Heights Volunteer Fire Co., 308 Md. 556, 560-60 [sic ], 520 A.2d 1319 (1987) and cases discussed therein. Despite the presumption of prospectivity, a number of other cases support the proposition that when a legislative change in law affects only procedural matters, rather than substantive rights, it applies to all actions, whether accrued, pending, or future, unless a contrary intention is expressed.

Roth v. Dimensions, 332 Md. 627, 636-38 , 632 A.2d 1170 (1993); Starfish Condo. Assoc. v. Yorkridge Serv. Corp., Inc., 295 Md. 693, 705 , 458 A.2d 805 (1983); Winston v. Winston, 290 Md. 641, 649-50 , 431 A.2d 1330 (1981); Holmes v. Crim. Injuries Comp.

Bd., 278 Md. 60 , 63 n. 2, 359 A.2d 84 (1976); Richardson v. Richardson, 217 Md. 316, 320 , 142 A.2d 550 . To complicate matters, [there is] another line of cases that hold that “an appellate court must apply the law in effect at the time a case is decided, provided that its application does not affect intervening vested rights.” O'Donnell v. Bassler, 289 Md. 501, 508 , 425 A.2d 1003 (1981) (citing County Council for Prince George’s County v. Carl M. Freeman Associates, Inc., 281 Md. 70, 76 , 376 A.2d 860 (1977); Rockville Fuel & Feed Co. v. City of Gaithersburg, 266 Md. 117, 127 , 291 A.2d 672 (1972)). See also Yorkdale v. Powell, 237 Md. 121, 124 , 205 A.2d 269 (1964) (quoting Woman’s Club of Chevy Chase v.