Board of Liquor License Commissioners v. J.R. Bros.

EYLER, Judge. The question presented by this appeal is whether the Board of Liquor License Commissioners for Baltimore County (Board), appellant, exceeded its statutory authority because of the nature of the sanction imposed against a licensee, J.R. Brothers, Inc. t/a The Turf Inn (The Turf Inn), appellee. We answer that question in the affirmative. Facts The Turf Inn is a restaurant and bar located in Baltimore County.

The Board had previously issued a Class B (restaurant) beer, wine, and liquor license for the premises. The Turf Inn sent a letter dated March 16, 1995, to the Board, requesting permission to build a 1,200 square foot deck for dining, which was to be attached to its existing building. The Board advised The Turf Inn to file an application. The Turf Inn sent another letter to the Board, dated March 24, 1995, enclosing a plat showing the existing building, parking, and the proposed deck.

The stated purpose of the deck was for “light dining and/or crabs along with an outside smoking area.” Pursuant to the Board’s local rules, The Turf Inn filed ³¹⁰ an application dated April 21, 1995, in which it applied for permission to increase the licensed premises by the addition of a “1,200 square foot outside deck.” The Board held a hearing on May 22, 1995, and at the conclusion of the hearing, approved “this plan.” At the hearing, the following colloquy occurred between Anthony J. DiPaolo, one of the individual licensees, and the licensees’ counsel: Q. What exactly do you intend to do with this deck space? I understand the panel has a copy of the plans that you have drawn for this project. What exactly do you want to do on this deck? A. It’s mainly for light fare dining and possibly crabs on the weekend.

That’s primarily it. Q. Also, do you want to use it as an outside smoke area? A. That’s when it first came up, because of the smoke ban I thought was going to go into effect. Q. And you’re here to petition this Board because you’d like to serve alcohol on that deck throughout — like you do throughout the restaurant?

A. Yes, sir. Q. What is your percentage of food revenues to alcohol revenues? A. Eighty percent food, 20 percent liquor. Q. Do you expect it will be the same on the deck?

A. Oh, yes. Q. How do you expect to deliver alcohol onto the increased space onto the deck? A. We are going to have two servers along with a couple bus boys, and possibly somebody on the deck to watch and maintain the deck. Q. You have to bring alcohol from the existing bar to the deck?

A. That’s correct. ³¹¹ Q. Do you expect you might have a small service bar on the deck? [1] A. It depends on our customer demand. We were thinking probably having a frozen drink cart possibly coming out. That’s about it. There were no additional questions or comments by the Board at the hearing with respect to the method of serving alcohol on the deck.

Several months later, the Board received a complaint that (1) The Turf Inn had constructed a deck 400 square feet larger than had been requested on its plans as approved,(2) had installed a permanent bar on the deck, and (3) was offering live music after 11:00 p.m. The Board conducted a hearing on August 19, 1996, for The Turf Inn to show cause why it was not in violation of Article 2B, §§ 10-401 and 10-403 and the Board’s local rules. 2 At the conclusion of the hearing, the Board ordered that the permanent bar on the deck (not depicted on the previously approved plans) be removed, that no live music be offered on the deck after 11:00 p.m., and that the 400 square foot addition be removed or, in the alternative, that The Turf Inn pay a fine of $400. The Turf Inn paid the fine, agreed to the restriction on live music, but appealed to the Circuit Court for Baltimore County that portion of the Board’s order requiring removal of the deck bar. By memorandum and order dated March 18, 1997, the circuit court reversed the decision of the Board requiring removal of the bar on the ground that the order exceeded the Board’s statutory authority. ³¹² Question Presented The parties present one question which, as rephrased by us, inquires whether the circuit court erred in reversing that portion of the Board’s order requiring removal of the outside bar on the ground that the Board exceeded its statutory authority.

Standard of Review The standard of review is governed by Md. Ann.Code Art. 2B, § 16-101(e), which provides in part: (l)(i) Upon the hearing of such appeal, the action of the local licensing board shall be presumed by the court to be proper 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. This Court’s review of the Board’s decision is the same as that of the circuit court. If the Board’s decision is supported by substantial evidence, and if it committed no error of law, we must reverse the circuit court and affirm the Board’s decision.

If the Board’s decision is not supported by substantial evidence, or if it did commit an error of law, we must affirm the circuit court. See Art. 2B, § 16-101(e)(4) (insofar as Baltimore County is concerned, the court may only affirm, reverse, or modify the action of the licensing board). Discussion Both parties to this appeal rely on the following trilogy of cases: Board of Liquor License Commissioners for Baltimore City v. Fells Point Cafe, 344 Md. 120 , 685 A.2d 772 (1996); Board of Liquor License Commissioners for Baltimore City v. Hollywood Productions, Inc., 344 Md. 2 , 684 A.2d 837 (1996); and Sullivan v. Board of License Commissioners for Prince ³¹³ George’s County, 293 Md. 113 , 442 A.2d 558 (1982). Appellee asserts that the cited cases stand for the general proposition that the penalties liquor boards may impose on licensees for noncompliance with lawful requirements are limited to those set forth in Article 2B, namely, monetary fines, license suspension, and license revocation.

The Board does not disagree with that general proposition but points out that a different result follows when a licensee consents to a restriction. It argues that this case falls within that exception. The Turf Inn acknowledges the exception but counters by asserting that it did not consent to the restriction in question. We look to the record to resolve that dispute, but first we review the applicable law.

Article 2B regulates and controls “the manufacture, sale, distribution, transportation and storage of alcoholic beverages within this State and the transportation and distribution of alcoholic beverages into and out of this State.... ” Art. 2B, § l-101(a)(l). The various boards of liquor license commissioners (liquor boards) are empowered to adopt and enforce regulations to further the purpose of the statute. See Art. 2B, §§ l-101(a)(2), l-101(b), and § 16-301. In Hollywood, one of the issues before the Court of Appeals was whether the liquor board exceeded its authority in restricting the hours of lawful operation of the licensee’s nightclub because its patrons, after exiting the licensed premises, were disturbing the peace of the surrounding residential neighborhood.

Although the sanction was not expressly authorized by statute, the liquor board contended that it fell within the scope of the board’s general regulatory authority. 344 Md. at 10, 684 A.2d 837 . In answering that contention, the Court first noted that none of the provisions in Article 2B specifically applicable to Baltimore City contained an express or implied grant of authority to the Baltimore City Liquor Board to restrict or modify the specific hours of operation permitted by the statute for the type of license involved. See Art. 2B, §§ ll-302(b)(2), ll-303(d)(2) and ll-503(a). The Court contrasted the provisions applicable to Baltimore City with the provisions applicable to Prince George’s County and noted that the Prince George’s County board was given ex ³¹⁴ press authority by the General Assembly to change the closing hour and reduce the hours of sale of any licensee after receipt of a complaint and a hearing.

The Court then stated: Article 2B also sets forth with particularity the potential penalties that may result from a licensee’s noncompliance with the restrictions and requirements of the article. In general, there appear to be three sanctions to which the General Assembly intends the liquor boards to resort in the appropriate circumstance: monetary fines, license suspension, and license revocation. All liquor boards have the authority, pursuant to § 10-401, to revoke or suspend a license upon the occurrence of certain enumerated events. In addition, Article 2B prescribes various monetary penalties that may be imposed.

For example, where a violation constitutes cause for license suspension, the Baltimore City Liquor Board may fine a licensee not more than $500 for a first offense and $1,000 for any subsequent offense, while the Carroll County and Caroline County liquor boards may impose fines not in excess of $2,000 and $2,500, respectively. § 16-507(d),(h),(g). Furthermore, while in Carroll County, the imposition of a fine is an alternative to license suspension under this provision, Caroline County authorities may impose a fine in conjunction with license suspension. § 16-597(h),(g). There are also specific enforcement tools available to different jurisdictions under Article 2B. For example, the liquor boards in certain counties and Baltimore City have the power to issue summonses for witnesses to testify at authorized hearings and inquiries, see § 16^10; while in Calvert County, the liquor board must inspect licensed premises every three months, see § 16-402.

As these provisions illustrate, Article 2B precisely establishes the sanctions available to a liquor board in responding to a licensee’s misconduct. Such an elaborate statutory scheme suggests a specific, rather than broad, delegation of authority to the liquor boards and contradicts the notion that restrictions, penalties, and sanctions may be fashioned on an ad hoc basis. An exception, of course, exists where the licensee consents and agrees to a reasonable restriction, ³¹⁵ as discussed in the decision of this Court in Board of Liquor License Commissioners v. Fells Point Cafe, Inc., 344 Md. 120 , 685 A.2d 772 (1996). In the instant case, however, there was no agreement between the parties.

Hollywood, 344 Md. at 14-15 , 684 A.2d 837 . In Hollywood , the violation, as found by the liquor board, was of a rule requiring licensees to avoid disturbing the peace, health, and welfare of the community. There was no challenge to the power of the Board to find such a violation, but the challenge was to the sanction imposed. In response to complaints, the liquor board for Baltimore City ordered the licensee to close on Sundays at 7:00 p.m.

The sanction imposed was not expressly authorized by statute. The Court of Appeals affirmed the circuit court and held that the Board exceeded its power in imposing the sanction. In Fells Point Cafe , as part of their effort to obtain approval for the transfer of a liquor license, the licensees agreed with the Fells Point Homeowners Association to certain restrictions on the operation of their business in exchange for the Association’s agreement not to oppose the transfer. Certain of those restrictions limited the licensees’ operations in ways otherwise allowed by provisions of Article 2B.

The Baltimore City Liquor Board granted the application subject to the restrictions contained in that agreement. Subsequently, the board held a hearing to determine if the restrictions had been violated. It found that they had and imposed additional restrictions. The Court of Appeals stated that it is reasonable to infer that the General Assembly did not intend all liquor boards to have the power to place restrictions on a license as an enforcement mechanism because it did not so state in Article 2B.

The Court went on to hold, however, that a liquor board may impose restrictions on a license with the uncoerced consent of the licensees. The Court noted that such power is not itself without restriction and left the determination of its parameters to another day. It did state that a liquor board (1) may not use its power to grant or transfer a license or to coerce acceptance of restrictions, and (2) that all restrictions ³¹⁶ agreed to are not necessarily valid. In the case before the Court, Fells Point Cafe conceded that the restrictions were voluntary, and the reasonableness of the restrictions was not an issue. 344 Md. at 141, 685 A.2d 772 .

In the third case, Sullivan , the Court of Appeals had before it the question of whether the Board of License Commissioners for Prince George’s County had acted within its authority in denying a licensee’s application to construct and operate a drive-in window for the sale of packaged alcoholic beverages on the licensed premises. In Sullivan , the licensee had a license to sell packaged alcoholic beverages but had applied for permission to expand its premises, including the addition of a drive-in window. The Prince George’s County Liquor Board approved the expansion but denied the request for a drive-in window based on a finding that it would be harmful to the health and welfare of the community. After affirmance by the circuit court, the Court of Appeals reversed and remanded.

The Court pointed out that then Article 2B, § 38(a)(5) permitted the Prince George’s County Board to adopt rules concerning alterations and additions to licensed premises, and the Board had in fact adopted such a rule. The Court, while recognizing the legitimate authority of the liquor board to regulate alterations or additions to the licensed premises, stated that drive-in windows are not inherently detrimental. Consequently, they may be prohibited only if necessary to protect the peace, safety, and welfare of the community. The Court remanded the case to the liquor board, because it was not clear if the liquor board had denied the request on that basis or in the belief that it could prohibit drive-in windows as a board policy.

In the case before us, the construction of a permanent bar was not reflected in the correspondence with the Board, in the application, or on the plans. The only evidence with respect to The Turf Inn’s intention as to the manner of serving alcoholic beverages on the proposed deck was. in response to its attorney’s questions at the May 22, 1995 hearing. When asked if there was an intent to have a small ³¹⁷ service bar, one of The Turf Inn’s licensees answered that it depended on customer demand, but they were thinking about a frozen drink cart. It is clear, therefore, that there was never a request by The Turf Inn to the Board to approve the construction of a permanent bar on the deck, and the Board never had to consider, nor did it consider, such a request.

Thus, we do not have before us an express consent to a restriction imposed by the Board, which could be specifically enforced even though not within the Board’s express list of available sanctions, as was the case in Fells Point Cafe . The Board contends that The Turf Inn conceded at the August 19, 1996, hearing that, at the May 22, 1995 hearing, it “consented to voluntary restrictions concerning the service of alcohol on the outdoor deck.” The transcript of the 1996 hearing reveals the following exchange: Q. (Turf Inn’s Counsel) Could you go in with your plans and things leading up to the first hearing