Comptroller of the Treasury v. Two Farms, Inc.

Zarnoch, J. This appeal raises two overlapping issues: 1) whether the Comptroller of the Treasury has the authority to suspend the cigarette retail license of a business that illegally sells tobacco products to a minor; and 2) whether the Comptroller possesses such power under Md. Code (1992, 2015 Repl. Vol.), Business Regulation (“BR”) Article, § 16—210(a)(2), which authorizes discipline of a licensee that “fraudulently or deceptively uses a license.” For reasons that follow, we conclude that the Comptroller has implied power—legislatively-recognized—to suspend a license for unlawful sales of tobacco products to a minor. Under these circumstances, the licensee is acting outside the scope of the license conferred by Title 16 of the BR Article. However, the authority to suspend is not derived from BR § 16-210(a)(2).

Because the administrative adjudication here was premised on the latter provision, the Circuit Court for Baltimore County correctly held that the suspension in this case cannot stand. BACKGROUND Two Farms is the operator of retail chain stores that are licensed to sell, among other things, cigarettes and tobacco products. On May 20, 2015, the Baltimore County Department of Health (the “Department”) warned Two Farms about making sales to minors and not asking for identification in violation of local ordinances. 1 In August 2015, the Department cited Two Farms for selling tobacco to minors on three separate occasions. All three violations occurred at the same location.

On August 6, 2015, a minor purchased a Black and Mild cigar. On August 10, 2015, a minor bought a tin of chewing tobacco and was not asked for identification. On August 11, 2015, a minor purchased a Black and Mild cigar from the retailer. In each instance, a Department officer brought the minor to the store to attempt to purchase tobacco.

Each time, Two Farms was issued a citation proposing a civil penalty for selling tobacco to a minor and, in one instance, for failing to ask for identification in violation of § 13-12-103.1 of the Baltimore County Code. These citations were adjudicated at a hearing before a county administrative law judge—a hearing that Two Farms did not attend. The retailer was found liable and civil penalties were imposed. The County Department notified the Comptroller about Two Farms’s violations.

On November 2, 2015, the Comptroller sent the retailer a Notice of Hearing directing the licensee to show cause why its license should not be suspended for violations of BR § 16—210(a)(2). On November 19, 2015, a hearing was held at the Comptroller’s office. Two officials from the County Department appeared as witnesses; however, Two Farms did not attend. One of the Department’s witnesses testified to the events described at the County adjudicative hearing.

At that point, the hearing officer issued his ruling, finding: Well, in light of the fact that [Two Farms] has failed to appear, the evidence is sufficient to substantiate a finding here of guilty, and as a result, since the Comptroller has the authority to impose a suspension or revocation of a license, this is a first offense for [Two Farms] on the State level, so they will be suspended for a period of ten days and their cigarette and tobacco licenses will be suspended for a period of ten days. On December 10, 2015, the Comptroller sent Two Farms a Notice of Final Determination, informing the business that its license to sell tobacco products would be suspended for ten days, pursuant to BR § 16-210(a)(2) for “fraudulently or deceptively us[ing] a license.” 2 On January 7, 2016, Two Farms sought judicial review of the Comptroller’s decision in the Circuit Court for Baltimore County. At a June 10, 2016 hearing, the business claimed that it was not aware of the proceeding before the Comptroller’s office because the citations had been served on store employees, and not on the company. 3 Two Farms argued that there was no evidence of fraudulent or deceptive use of a tobacco license, as required under BR § 16-210(a)(2). The retailer asserted that the minors were not being deceived when they bought the tobacco products.

The Comptroller countered that an unlawful action in and of itself proves fraud or deceit. The circuit court observed that there was no evidence of any misrepresentations made by the store. At the conclusion of the hearing, the court found that the evidence did not show a fraudulent or deceptive use of the license and vacated the order suspending Two Farms’s license. The Comptroller appealed from that decision. 4 STANDARD OF REVIEW The Comptroller frames the issue in this case as whether there was “substantial evidence that Two Farms fraudulently or deceptively used its license.” 5 However, in our view, this is not a substantial evidence case, but one presenting a purely legal issue of statutory interpretation—a question that we review de novo.

Matthews v. Horn. Auth. of Baltimore City, 216 Md.App. 572, 582 , 88 A.3d 852 (2014). DISCUSSION 1. Introduction The facts in the instant case are not complicated.

Two Farms received three citations for selling tobacco products to minors. Based on that evidence, the Comptroller suspended Two Farms’s license to sell tobacco products for ten days. In his order, the Comptroller stated that the license was being suspended pursuant to BR § 16-210(a)(2) for “fraudulently or deceptively use[ing] a license.” 6 Two Farms challenged that finding and the circuit court agreed, ruling that the facts did not support a fraudulent or deceptive use of the license. Therefore, the primary issue we must decide is whether the act of selling tobacco products to a minor constitutes a fraudulent or deceptive use of a license to sell tobacco products.

However, given the Comptroller’s reliance on BR § 16-212(e)(1)’s purported recognition of the power to suspend or revoke a license for illegal sales of tobacco, we also consider whether Title 16 or any part of it supports such authority. BR § 16-210(a) provides grounds upon which the Comptroller can suspend or revoke a license. Specifically, the Comptroller can suspend or revoke a license if the licensee: (1) fraudulently or deceptively obtains or attempts to obtain a license for the applicant or licensee or for another person; (2) fraudulently or deceptively uses a license; (3) fails to comply with the Maryland Cigarette Sales Below Cost Act or regulations adopted under that Act; (4) fails to comply with the provisions of Title 11, Subtitle 5A of the Commercial Law Article; (5) buys cigarettes for resale: (i) in violation of a license; or (ii) from a person who is not a licensed cigarette manufacturer, licensed subwholesaler, licensed vending machine operator, or licensed wholesaler; (6) is convicted, under the laws of the United States or of any other state, of: (i) a felony; or (ii) a misdemeanor that is a crime of moral turpitude and is directly related to the fitness and qualification of the applicant or licensee; or (7) has not paid a tax due before October 1 of the year after the tax became due. BR § 16-210(a) (Emphasis added). 7 Furthermore, BR § 16-212(e)(1) provides that “Except for a violation of § 10-107 of the Criminal Law Article,[ 8 ] whenever any license issued under the provisions of this subtitle is suspended or revoked by the Comptroller, the licensee may, before .the effective date of the suspension or revocation, petition the Comptroller for permission to make an offer of compromise consisting of a sum of money in lieu of serving the suspension or revocation.” (Emphasis added).

The Comptroller argues that the language of BR § 16-212(e)(1) makes it clear that he can suspend or revoke a license when a licensee distributes tobacco products to a minor. 9 According to the Comptroller, the only paragraph this could fall under is BR § 16-210(a)(2); therefore, a licensee’s unlawful distribution of tobacco to a minor constitutes a deceptive or fraudulent use of that license subject to discipline under BR § 16—210(a)(2). Two Farms argues that a suspension for violating CL § 10-107 is authorized under BR § 16-210(a)(6)(h), which allows the Comptroller to suspend or revoke a license when the licensee is convicted of certain misdemeanors that are crimes of moral turpitude. The retailer also contends that simply selling a tobacco product to a minor is not a deceptive or fraudulent act by itself. Two Farms also argues that there must be some fraudulent scheme involved in the sale to a minor in order for BR § 16-210(a)(2) to apply.

In addition, the business points to the failure of 2016 legislation, which among other things, would have expressly authorized the Comptroller to suspend or revoke a license for illegal sales to minors; and argues that this demonstrates a legislative intent to deny the Comptroller this authority. 2. Relevant Principles of Statutory Construction In addition to the text, the purpose and legislative history of the relevant statutes and the consequences of the proffered constructions are critical to resolving these contentions. Also, of special importance here are three precepts of statutory construction. The first is when interpreting a statute, we should “give effect to all of the language and avoid a construction that renders any portion superfluous.” Alston v. State, 433 Md. 275, 283 , 71 A.3d 13 (2013) (quoting Stanley v. State, 390 Md. 175, 183-84 , 887 A.2d 1078 (2005)).

Second, although a court is not authorized to ignore the text, it is free to explore “what is below the surface of the statute and yet fairly part of it.” Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum. L. Rev. 527 , 533 (1947). Finally, of particular relevance to the Comptroller’s arguments, is the principle that “a subsequent legislative amendment of a statute is not controlling as to the meaning of the prior law [but] ... can be considered helpful to determine legislative intent.” Chesek v. Jones, 406 Md. 446, 462 , 959 A.2d 795 (2008). 3. History and Purpose of the Relevant Statutes We focus on the relationship between three provisions: (1) CL § 10-107; (2) BR § 16-210(a); and (3) BR § 16-212(e)(1). 10 CL § 10-107 began life as Chapter 371, Laws of 1886, which according to its title, was designed “to protect the health and morals of minors in the State of Maryland.” More than a century later, Judge Rodowsky, in his dissenting opinion in Allied Vending, Inc. v. Cty. of Bowie, 332 Md. 279 , 631 A.2d 77 (1993) described this criminal statute as creating a “class of ineligible purchasers.” Id. at 327 , 631 A.2d 77 . 11 In a 1994 enactment, the General Assembly reinforced this conclusion by prohibiting a minor from possessing any tobacco product.

CL § 10-108. Chapter 110, Laws of 1994. This statute also expressly subjected “persons licensed under Title 16 of the Business Regulation Article” to its prohibitions. CL § 10-107(b)(2). 12 As introduced, the legislation would have mandated a license suspension for businesses convicted of violating § 10-107.

That language was deleted from the bill. The licensing provisions of Title 16 are almost as old as CL § 10-107. They became law in 1890. Chapter 91, Laws of 1890.

This statute was two sentences long: the first required a trader’s license to sell tobacco to be obtained from the clerk of the circuit court for each county and Baltimore City; the second directed an applicant for a license to state under oath that cigarettes sold “contain no injurious drug.” The latter requirement was deleted six years later. Chapter 439, Laws of 1896. If such a provision had remained in the law, in light of our present knowledge of the harmful effects of smoking, no retailer could have taken such an oath, and the sale of tobacco products would have been outlawed. The licensing provisions remained skeletal, even after the Comptroller was made an administrator/enforcer of the law and a few grounds were added as a basis for suspension or revocation, such as selling cigarettes below cost and unlawfully-buying cigarettes for resale.

Most significantly, in the 1988 non-substantive code revision of the Tax—General Article, Chapter 2, Laws of 1988, fraudulent or deceptive use of the license was added as a ground for suspension or revocation. 13 The Revisor’s Note for the change noted: Subsection (a)(1) and (2) of this section is new language added to conform to almost all of the occupational licensing acts adopted by the General Assembly in the past several years. See, e.g., the comparable sections on disciplinary actions in the various titles of the Health Occupations Article. The General Assembly expressly decided that the language of these items was to be included in each of those sections as a fundamental ground for disciplining a licensee. (Emphasis added).

The Revisor’s Note is consistent with the Commission to Revise the Annotated Code of Maryland’s Model Guide for Drafting Board, Commission, and Licensing Provisions (Jan. 1979). That Guide states that “in most instances there must be source law provisions in each subtitle to support the adoption of the uniform language ....” Id. at 1. The Guide goes on to note: However, the [Guide] does propose in certain sections the adoption of uniform provisions even if the source law of a given statute does not expressly support the provision. The proposals are made only when the additional language does nothing more than state a provision that is inherent or fundamental to the scheme of things for all of the regulatory boards with which we are concerned.

Id. 14 (Emphasis added). In 1992, the tobacco licensing provisions were moved to the new Business Regulations Article. Chapter 4, Laws of 1992. Subtitle 1 of Title 16 of the new article contains definitions, most notably § 16—101(e), which defines “Sell cigarettes at retail” as selling cigarettes “to a consumer,” Subtitle 2 regulates a host of tobacco business licenses; some of the provisions apply to retailers, some do not, An anomaly of the code revision organization of Title 16 is that there are two separate provisions governing the suspension or revocation of a retailer’s license; BR § 16-210 and BR § 16-306. 15 Section 16-210—'the more expansive of the two—seems to have been the “go-to” statute for subsequent amendments.

See Sanchez v. Potomac Abatement, Inc., 198 Md.App. 436, 449 , 18 A.3d 100 (2011), aff'd, 424 Md. 701 , 37 A.3d 972 (2012) (discussing this legislative phenomenon). We now fast-forward to 1994—the same year the General Assembly made major changes to CL § 10-107. The Legislature passed Chapter 464, Laws of 1994, a departmental bill that augmented the Comptroller’s authority over tobacco licensees. One significant change provided that the Comptroller could suspend or revoke a license if the licensee violates “Title 16 of the Business Regulation Article or regulations adopted under that title.” See BR § 16—210(b)(2).

A more controversial addition authorized a licensee facing suspension or revocation of its license to petition the Comptroller to permit a monetary offer of compromise. Anti-tobacco advocates opposed this provision. See Written Testimony of the Maryland Coalition to Stop Illegal Sales of Tobacco to Minors (“If illegal sales make money, why would the seller stop selling to children even with a fine?”) (Mar. 25, 1994). To head-off this attack, the Governor’s Legislative Office and the Comptroller offered an amendment that exempted violations of CL § 10-107 from the Comptroller’s proposed compromise authority. 16 The amendment was adopted and the legislation passed.

The compromise authority was codified as BR § 16-212(e)(1). One additional legislative development is worthy of note. In 2000, another departmental bill, HB 95, was introduced to require the Comptroller to investigate applicants for tobacco licenses and deny a license and or renewal for, among other reasons, if the applicant “is not a fit person to receive the license” or if “there are other reasons in the discretion of the Comptroller why the license should not be issued.” This language was deleted from the bill by the House Economic Matters Committee. Instead, the Committee amended BR § 16-210(a) to add certain convictions as an additional ground for suspension, revocation and reprimand.

See pp. 680-81, 174 A.3d at 457-58, supra. A floor amendment in the House further limited a portion of this provision to certain misdemeanors that were “crime[s] of moral turpitude.” This measure was enacted as Chapter 97, Laws of 2000. 4. Impact of Failed Legislation To support the circuit court decision, Two Farms relies in part on the “amendment-rejection theory.” It points to the failure in committee of HB 1015 in 2015. This bill, among other things, would have expressly authorized the Comptroller to suspend or revoke a license if the licensee failed to comply with laws regulating the sale of tobacco products to minors.

In addition, language was deleted from what became Chapter 464, Laws of 1994 that would have mandated a license suspension for persons convicted of violating CL § 10-107. Court of Appeals decisions on the amendment-rejection theory are not uniform. Compare Allied, 332 Md. at 304 , 631 A.2d 77 (The failure to enact legislation prohibiting minors access to cigarette vending machines strongly suggests that there was no intent to allow local governments to enact such legislation) with Goldstein v. State, 339 Md. 563, 570 , 664 A.2d 375 (1995) (Courts are reluctant to infer legislative intent from legislative inaction where there are several possible reasons for defeat). The amendments “rejected” here show that there can be no easy reliance on the amendment-rejection theory.

The 2015 legislation was largely a revenue measure that would have raised $4.4 million in annual tobacco licensing fees by 2020. Fiscal & Policy Note on HB 1015 (March 10, 2015). To think the bill was killed in a single committee because of a provision authorizing license suspension/revocation would be blinking reality. 17 The same would be true of the 1994 legislation that would have mandated license suspension for convictions of CL § 10-107. Such a rejection tells us nothing about the General Assembly’s views on authorizing suspension, particularly where, at the same session, the Legislature enacted, as an exception to the Comptroller’s compromise authority, language that assumed that he had the power to suspend or revoke for illegal sales to minors.

For these reasons, we will look to enacted, not rejected, legislation to resolve this case. 5. Are Illegal Tobacco Sales to Minors “Fraudulent or Deceptive Use” of a License? Despite the widespread use in the Maryland Code of “fraudulent or deceptive use of a license,” there is no Maryland case that explains the meaning of these terms. 18 However, out-of-state authorities, while not plentiful, are helpful. Relevant caselaw does not mandate that the terms, “fraud or deceit,” in a licensing statute be given their common law meaning.

Tompkins v. Bd. of Regents of Univ. of State of New York, 299 N.Y. 469 , 87 N.E.2d 517, 521 (1949) (“Since the [physician licensing] statute is not concerned with private rights, it should not be construed to require that anyone actually has been misled so long as the intent is present.”); and Hughes v. Bd. of Architectural Examiners, 68 Cal. App.4th 685 , 80 Cal.Rptr.2d 317, 322 (1998) (“There is nothing in the law or logic that requires the existence of a victim ... before the Board may order a license revoked as part its efforts to protect the people of California from unscrupulous conduct”). 19 See generally, Brian Rubens, Common Law Versus Regulatory Fraud: Parsing the Intent Requirement of the Felony Penalty Provision of Food, Drug, and Cosmetic Act, 724: U. Chic. L. Rev. 507 (2005). This Court expressed similar views in Stidwell v. Md. State Bd. of Chiropractic Examiners, 144 Md.App. 613 , 799 A.2d 444 (2002).

There, we upheld the denial of certification of a massage therapist with respect to an applicant previously convicted of solicitation of prostitution. One ground for the denial was Stidwell’s conviction for a “crime of moral turpitude.” Rejecting her assertion that the statute embraced the common law definition, we said: Stidwell would benefit if our analysis ended with these criminal cases, ... Her conviction, however, surfaced in the field of administrative law, where “moral turpitude” has evolved from its common law trappings into an even more fluid descriptive tool. Indeed, while Maryland’s administrative and regulatory statutes repeatedly use the phrase “moral turpitude,” that use is variable and inconsistent.

Our review of theses [sic] statutory provisions reveals that, whereas for trials, the expression “moral turpitude” speaks primarily to truthfulness, for the business of professional licensing and public appointments, the expression strikes the broader chord of public confidence in the administration of government. That is, a person who has credibility to testify may not have the public’s confidence to practice certain professions or to serve on a governmental board. Id. at 618-19 , 799 A.2d 444 . Caselaw aside, there is another reason why BR § 16-210(a)(2) does not lock into place common law understandings of fraud and deceit.

We know from the 1988 Tax—General revision, see p. 686, 174 A.3d at 460, supra, that when the “fraud or deceit” language was enacted, the General Assembly was codifying so-called inherent agency authority derived from statutory source law, not from the common law. Does freedom from the confines of the common law advance the Comptroller’s case past the goal line? Not if just the text of § 16-210(a)(2) is our focus. Highly instructive is the decision of the New York Court of Appeals in Tompkins, 87 N.E.2d 517 .

At issue was the proper interpretation of the words “fraud or deceit in the practice of medicine” as grounds for discipline in a physician licensing statute. Doctor Tompkins issued prescriptions for morphine to three persons—one, who was an agent and another, an informant for the Federal Bureau of Narcotics. Tompkins believed that each was an addict, but on the prescription, he noted that they were diagnosed with renal colic. Although the Board contended that the physician’s action violated federal and state law, the court said it would only consider whether the “fraud or deceit charge” had been demonstrated.

Id. at 520-21 . The appellate court went on to note: [I]t is urged that there is no proof of respondent’s intent to defraud any one. The board insists that the terms “fraud or deceit in the practice of medicine” are equivalent in meaning to “unprofessional conduct”, which is a ground for discipline in other professions than medicine .... Both contentions are wide of the mark.

The words “fraud or deceit” must be read in light of their traditional meaning in the law .... and cannot be synonymous with “unprofessional conduct” a term which may signify activity quite unlike fraud in the customary sense. Id. at 521 . Addressing the question of what persons were misled, the Court of Appeals said: The issuance of a prescription for narcotic drugs to an addict without proper medical basis is clearly an act which is calculated to deceive those whose legitimate concern is the enforcement of the laws