Board of License Commissioners v. Pizza Hut of Maryland, Inc.

ROSALYN B. BELL, Judge. Appellant, the Board of License Commissioners of Carroll County (Board), filed suit in the Circuit Court for Carroll County, seeking a declaratory judgment, pursuant to the Maryland Uniform Declaratory Judgments Act, Md.Cts. & Jud.Proc.Code Ann. §§ 3-401 through 3-415 (1974, 1989 Repl.Vol.), that all of the Pizza Hut restaurants located in Carroll County are “chain stores” within the meaning of Md.Code Ann. Art. 2B, § 41(a-l) (1959, 1990 Repl.Vol., 1992 Cum.Supp.). 1 The complaint requested further that the ²⁹³ court declare, under the statute, that the liquor licenses of the Carroll County Pizza Hut restaurants were invalid. Appellees, Pizza Hut of Maryland, Inc., and others 2 (Pizza Hut), moved for summary judgment, asking the circuit court to rule as a matter of law that the term “chain stores,” used in Art. 2B, § 41(a-l), does not include restaurants. The Board filed a cross-motion for summary judgment.

After denying the parties’ motions for summary judgment, the circuit court set the case for trial and, on May 13, 1992, issued a Memorandum Order declaring that Art. 2B, § 41(a-l) does not apply to the Pizza Huts in Carroll County because they are not “stores.” The Board has appealed, contending that the establishments operated in Carroll County under the management and direction of Pizza Hut, all of which are licensed as “chain stores” under Md.Code Ann. Art. 56, § 57 (1957, 1990 RepLVol., 1991 Cum.Supp.), 3 are “chain stores” within ²⁹⁴ the proscription of Art. 2B, § 41(a-l). Finding no error, we affirm and explain. THE FACTS Pizza Hut of Maryland, Inc., a Kansas corporation, was granted an exclusive franchise by Pizza Hut, Inc., a Dela ²⁹⁵ ware corporation, to operate Pizza Hut restaurants in Baltimore City, Anne Arundel County, Baltimore County, Carroll County, Cecil County, Harford County, and Howard County. In turn, Pizza Hut of Maryland, Inc. granted licenses to the other appellees to operate the Pizza Huts in question in Carroll County.

By virtue of the parties’ trial stipulation that all of the Carroll County Pizza Huts are part of a “chain” of restaurants, we are not called upon to scrutinize the business structure and the relationships between appellees as that might otherwise bear on the issue decided by the trial court and which is now before us. Three of the Carroll County Pizza Huts, located in Westminster, Eldersburg and Mount Airy, have Class B — Beer, Wine and Liquor licenses issued by the Board. Pizza Hut restaurants serve food to the public, including pizza and other menu items. To be issued a Class B liquor license in Carroll County, a restaurant must operate in facilities having an assessed value of not less than $50,000 and must generate 41 percent of its average total monthly receipts from the sale of food to comply with Md.Code Ann. Art. 2B, § 19(h)(l)(iii) (1959, 1990 Repl.Vol., 1992 Cum.Supp.), and Rule 21, Rules and Regulations of the Board of License Commissioners for Carroll County (June 11, 1991).

The first of the three existing Class B liquor licenses involved in this case was issued in 1972 and has been renewed each year since then. The second was issued in 1976 and has also been renewed each year. The third license was issued in 1986 and has been renewed each year, as well. An application for a fourth Class B — Beer, Wine, and Liquor license was filed in 1989 by Gregory Hendrickson on behalf of Stead, Inc. for use at Pizza Hut in Hampstead, Maryland.

The Board held a hearing on the application in September 1989. The Board then filed the declaratory judgment suit. The parties agreed that the court could stay further proceedings in the action while the General Assem ²⁹⁶ bly considered House Bill 633, introduced during the 1990 legislative session, designed to authorize chain stores in Carroll County to apply for and receive Class B liquor licenses. When this legislation failed to pass the General Assembly, Pizza Hut answered the suit against it and both parties filed their motions for summary judgment.

Subsequently,- the Board discovered that Pizza Hut was officially listed as a “chain store” by the Comptroller of the Treasury 4 and that Pizza Hut had applied for and obtained chain store licenses from the Clerk of the Circuit Court for Carroll County. Again, the Board filed a Motion for Summary Judgment, and again the court denied it. The court held a merits hearing on May 4, 1992. The case then concluded with the court’s ruling, in a Memorandum Opinion and Order, that the prohibition in Art. 2B, § 41(a-l), against issuing Class B (Restaurant) licenses to chain stores, does not prohibit issuance of such licenses to restaurant chains.

This appeal followed. CHAIN STORES As a preliminary matter, it must be determined whether the Carroll County Pizza Huts are “chain stores” for purposes of Art. 2B, § 41(a-l). The term “chain stores” is defined as a “[njumber of stores under common name, ownership and management; normally selling some general line of merchandise or products.” Black’s Law Dictionary 208 (5th Ed.1979). A chain includes a person, firm, corporation, association, or copartnership that opens, establishes, operates, or maintains two or more stores or mercantile establishments where goods, wares and/or merchandise are offered for sale at retail under the same general management, supervision, or ownership.

Maryland Law Encyclopedia, Licenses § 35 (1986). Thus, a chain store is simply one selling merchandise that is ²⁹⁷ owned and managed by the same body as that of other stores selling merchandise. The issue of whether a store belongs to a “chain” appears most often in the context of taxation. Pizza Hut relies on Pizza Hut, Inc. v. Dolan, 619 P.2d 508, 509 (Col.Ct.App.1980), for the proposition that Pizza Huts are restaurants, not stores, for licensing purposes.

Dolan , a Colorado case, dealt with this issue by differentiating between the purpose of restaurants and stores. The Colorado Court stated: “The difference between a store or mercantile establishment and a restaurant is that the restaurant sells a service; the sale of food is merely an incidental part of that service. The distinction is well stated in State Tax Commission v. Gay-Teague Realty Co., 237 Ala. 133 , 185 So. 739 (1938). ‘But we do not think that a restaurant is a mercantile establishment, though it is a place where food is prepared and sold for consumption then and there. The restaurateur as a mile does not sell the food in the form in which he buys it.

He adds a service and provides facilities for its consumption, which distinguish his place from that of a store or mercantile establishment. The distinction being that in the latter the sale is ordinarily made of the article in the form in which it is bought by the merchant, and not to be then consumed. While they are both places for sales of personal property in a certain sense, each is distinctive in name and substance from the other, and is so well understood.’ ” Dolan, 619 P.2d at 509 . The Colorado Court went on to conclude that the Pizza Hut outlets were restaurants, not stores or mercantile establishments.

The Court stated that even the sale of cigarettes, mints, and salad dressings, which made up one percent of Pizza Hut’s total net sales, did not change the result that the Pizza Huts should not be considered “stores” for the purpose of taxation. Under the holding in Dolan , restaurants can be distinguished from entities encompassed under the broad definition of “chain stores” provided by Black’s Law Dictionary, ²⁹⁸ supra. While a group of restaurants may share a common name, ownership, and management, they also provide services, which make them unique from other groups of stores, such as supermarkets. Thus, for purposes of definition, we need not concern ourselves with the broad definition provided by Black’s Law Dictionary, supra.

The Court of Appeals in Fair Lanes, Inc. v. Comptroller of the Treasury, 265 Md. 361, 369-370 , 289 A.2d 595 (1972), discussed the appropriateness of a tax on chain stores, including restaurants. The Court looked at the advantages that chain stores enjoy and concluded that the opportunities and powers the chain has as one company are greater than those available to individual businesses. Fair Lanes, Inc., 265 Md. at 369 , 289 A.2d 595 . The Court also looked at certain factors that were more specifically set out in State Board of Tax Commissioners of Indiana v. Jackson, 283 U.S. 527, 534 , 51 S.Ct. 540, 542 , 75 L.Ed. 1248 (1931).

In Jackson , the Court investigated the difference between chain stores and independently owned units. It noted that chain stores have inherent qualities that give them advantages over individual units. These qualities include: “quantity buying, which involves the application of the mass process to distribution, comparable to the mass method used in production; buying for cash and obtaining the advantage of a cash discount; skill in buying, so as not to overbuy, and at the same time keep the stores stocked with products suitable in size, style and quality for the neighborhood customers who patronize them; warehousing of goods and distributing from a single warehouse to numerous stores; abundant supply of capital, whereby advantage may be taken of opportunities for establishment of new units; a pricing and sales policy different from that of the individual store, involving slightly lower prices; a greater turn-over, and constant analysis of a turn-over to ascertain relative profits on varying items; unified, and therefore cheaper and better ²⁹⁹ advertising for the entire chain in a given locality; standard forms of display for the promotion of sales; superior management and method; concentration of management in the special lines of goods handled by the chain; special accounting methods; standardization of store management, sales policies and goods sold.” Jackson, 283 U.S. at 534-35 , 51 S.Ct. at 542 . A store in a chain under one owner, management scheme, and control can be run more efficiently than a single, independent store.

Jackson, 283 U.S. at 534-535 , 51 S.Ct. at 542 . Additionally, the opportunities and powers of a chain store become greater with the growth of the number of units maintained. As a result, in Fair Lanes, Inc., the Court held that the State taxing authority may impose a chain store tax on companies that have more than one store in the State. The Court in Fair Lanes, Inc. 265 Md. at 370 , 289 A.2d 595 , quoting Read Drug & Chemical Co. v. Claypoole, 165 Md. 250, 258 , 166 A. 742 (1933), stated that the purpose of the tax is “ 'to exact an additional license fee for the privilege of engaging in the “chain store” business, by reason of the advantages such a method of conducting business has over the individual operator, thereby rendering more equal competition and also deriving additional revenue for the State.

It is evident that the Legislature concluded that, as the number of stores or mercantile establishments in the chain increased there was a corresponding increase in the advantages secured.’ ” Thus, all the Pizza Hut restaurants in Maryland must obtain a trader’s license, a restaurant license, and a chain store license in order to conduct business. We do not, however, conclude that the payment of a chain store license fee for tax purposes is dispositive with respect to liquor license status. Even if the taxing statute and the licensing statute are taken in pari materia, we reach the same result. See Smith v. Higinbothom, 187 Md. 115, 131-32 , 48 A.2d 754 ³⁰⁰ (1946).

In State v. Loscomb, 291 Md. 424, 432 , 435 A.2d 764 (1981), the Court of Appeals stated: “It is a general rule of statutory construction that statutes that deal with the same subject matter, share a common purpose, and form part of the same general system are in pari materia and must be construed harmoniously in order to give full effect to each enactment.” For example, there is nothing in conflict between the Workers’ Compensation Act and the Wrongful Death Act and, thus, the two Acts must be construed together. See Knoche v. Cox, 282 Md. 447 , 453 n. 2, 385 A.2d 1179 (1978). In the. instant case, however, the scope and aim of the two statutes are distinct. The taxing statute, which was originally passed in 1933, appeared in Art. 56, § 57 and now appears in Md.Bus.Reg.Code Ann. § 17-1809.

Its purpose, set forth in Fair Lanes, Inc., 265 Md. at 370 , 289 A.2d 595 , is to raise revenue and exact an additional license fee for the privilege of engaging in the chain store business. The licensing statute, passed in 1962, is found in Art. 2B, § 41(a-l). As will be explained in greater detail in the next section, its purpose is to “foster and promote temperance.” See Md.Code Ann. Art. 2B, § 1 (1957, 1990 Repl.Vol.). Therefore, the two statutes are not aimed at achieving the same goals.

Moreover, counsel has given us no examples in the case law where the two general articles in'which the two statutes are contained have been construed to be in pari materia. Therefore, we are not persuaded by the Board’s argument that the language of the taxing statute is controlling. APPLICABILITY OF ART. 2B, § 41(a-l) The Board argues that, regardless of whether Pizza Hut restaurants are chain stores, the Legislature intended to include operations like Pizza Hut restaurants under the auspices of Art. 2B, § 41(a-l) and prohibit them from receiving a liqiior license. We disagree. ³⁰¹ In construing a statute, the courts must look first to the language of the statute to discern its plain meaning.

Kaczorowski v. Mayor of Baltimore, 309 Md. 505, 513-14 , 525 A.2d 628 (1987). A court is not limited to the words of the statute and “may and often must consider other ‘external manifestations’ or ‘persuasive evidence,’ including a bill’s title and function paragraphs, amendments that occurred as it passed through the legislature, its relationship to earlier and subsequent legislation, and other material that fairly bears on the fundamental issue of legislative purpose or goal, which becomes the context within which we read the particular language before us in a given case.” Kaczorowski, 309 Md. at 514-15 , 525 A.2d 628 . A court may be aided in its search for the meaning of the statute by its purpose. Criminal Injuries Compensation Bd. v. Gould, 273 Md. 486, 495 , 331 A.2d 55 (1975).

In construing a statute, a court should avoid results that are unreasonable or inconsistent with common sense. Frank v. Baltimore County, 284 Md. 655, 659 , 399 A.2d 250 (1979). The