Joseph H. Munson Co. v. Secretary of State

Eldridge, J., delivered the opinion of the Court. The principal issue in this case is whether Maryland Code (1957,1978 Repl. Vol.), Art. 41, § 103D, which places a limit upon the amount of expenses that a charitable organization may pay in connection with fund-raising activity, violates the First Amendment to the United States Constitution. A second issue concerns the standing of the plaintiff to raise this question. ¹⁶³ Art. 41, § 103D, prohibits a charitable organization, in connection with any fund raising activity, from paying or agreeing to pay as expenses more than 25 percent of the gross amount raised.

The statute also states that the Secretary of State shall issue rules and regulations to permit a charitable organization to pay or agree to pay as expenses more than 25 percent of the amount raised where the 25 percent limitation would "effectively prevent the charitable organization from raising contributions.” 1 Section 103D is part of a comprehensive subtitle, enacted by Ch. 679 of the Acts of 1976, for the purpose of regulating charitable organizations and charitable solicitations. See ¹⁶⁴ Art. 41, § 103A-103L. For example, § 103B provides for the registration of charitable organizations with the Secretary of State and the furnishing of detailed financial data to the Secretary. Under § 103F, one may not act as a professional fund-raiser counsel or a professional solicitor for a charitable organization unless he also registers with the Secretary, furnishes certain information, pays an annual fee, files a bond, and complies with the requirements of the subtitle.

Section 103D (c) states that "[e]very contract or agreement between a professional fund-raiser counsel or a professional solicitor and a charitable organization shall be in writing, and a copy of it shall be filed with the Secretary of State within ten days after it is entered into and prior to any solicitations.” Under § 103L (a), a charitable organization, professional fund-raiser counsel or professional solicitor is subject to criminal liability for wilfully violating the requirements of the subtitle. 2 Other sanctions for violating the subtitle are contained in § 103L (b) and (c). 3 ¹⁶⁵ The Joseph H. Munson Co., Inc., instituted this action in the Circuit Court for Anne Arundel County, seeking declaratory and injunctive relief against the Secretary of State. Munson is in the business of promoting fund raising events and giving advice to clients on how those events should be conducted. In Maryland, Munson’s clients consist of various chapters of the Fraternal Order of Police. In its amended bill of complaint, Munson alleged that it "regularly charges the said chapters of the Fraternal Order of Police an amount in excess of twenty-five percent (25%) of the total gross income of the event which it is involved in promoting.” Munson further alleged that it had been in contact with the Secretary of State, and that the Secretary had taken the position "that the Plaintiff is subject to [§ 103D]... and that the continued failure to comply therewith will require the Defendant to seek prosecution of the Plaintiff for violation of the said statute.” In counts I and II of its five-count amended bill of complaint, 4 Munson sought a declaratory judgment as to whether it was subject to the registration and 25 percent fund-raising limitation provisions of the statute, as well as injunctive relief.

In count III, Munson prayed a declaratory judgment that § 103D contained an unconstitutional delegation of legislative authority to the Secretary of State. In count V, Munson sought a declaration that § 103D on its face violates the First and Fourteenth Amendments to the United States Constitution, on the ground that the 25 percent fund-raising limitation unduly intrudes upon Munson’s right to free speech and assembly. Finally, in count IV, Munson asked for an injunction restraining the Secretary from enforcing § 103D. ¹⁶⁶ In its answer, the Secretary did not flatly deny that he had initially threatened Munson with criminal prosecution. Instead, the Secretary’s denial of the allegation concerning threatened prosecution was on the ground that "there had been no determination concerning the applicability of the statute to the Plaintiff or that he is in violation of the Charitable Solicitation Act.” The Secretary sought a dismissal of counts I and II on the ground that Munson had not exhausted administrative remedies created by regulations of the Secretary of State.

Otherwise, the Secretary asserted that § 103D was constitutional. In a memorandum accompanying the Secretary’s answer, the Secretary stated that it "seriously questions Plaintiffs standing to seek a declaratory judgment.” In a supplemental memorandum of law, the Secretary argued that Munson lacked standing. No testimony was taken in the circuit court. Instead, according to the opinion of the circuit court, the case was decided on the pleadings, the memoranda of law submitted, and a stipulation of facts.

One of the stipulated facts was that "the Fraternal Order of Police, Montgomery County Chapter, ... is reluctant to enter into a contract with the Plaintiff... for promotion of fund raising events due to the limitation imposed by Article 41, Section 103, . .. that nothing in excess of 25% of the gross income raised through fund raising activities may be expended on fund raising expenses.” It was also stipulated that Munson’s contracts with Fraternal Order of Police Chapters call for a fee for each event in excess of 25% of the net income raised. The circuit court dismissed counts I and II of the amended bill of complaint on the ground that Munson had failed to exhaust administrative remedies. With regard to counts III and V, the court issued a detailed opinion and declaratory judgment that § 103D was facially valid, and that it neither amounted to an unconstitutional delegation of legislative authority nor violated the free speech guarantee of the First and Fourteenth Amendments. The court accordingly refused to enjoin enforcement of § 103D.

Munson took an appeal to the Court of Special Appeals, contending only that § 103D on its face violated the First ¹⁶⁷ and Fourteenth Amendments. The Secretary took no cross-appeal. The (Court of Special Appeals affirmed, Joseph H. Munson Co. v. Sec. of State, 48 Md.App. 273 , 426 A.2d 985 (1981). Munson then filed a petition for a writ of certiorari, raising only the free speech issue under the First and Fourteen Amendments, and the Secretary filed a cross-petition, asserting that Munson lacked standing to challenge the First Amendment validity of § 103D.

We granted both the petition and the cross-petition. I. Standing A Although we granted the Secretary’s cross-petition challenging Munson’s standing, a preliminary question is raised by Munson as to whether we should consider this issue. We shall assume that the Secretary properly raised the issue in the circuit court when, in a memorandum of law, it argued that the action should be dismissed for lack of standing. Instead of dismissing the action, however, the trial court in effect upheld Munson’s standing and rendered a declaratory judgment on the merits of the constitutional issues presented in counts III and V of the bill of complaint.

Although Munson took an appeal from the declaratory judgment, the Secretary did not file an order of appeal. Munson argues in this Court that, because of the Secretary’s failure to take a cross-appeal on the issue of standing, the issue is not properly before us. Under circumstances where absence of standing would present an alternate ground for upholding a trial court’s judgment, an appellee is entitled to argue that ground in an appellate court. Temony v. State, 290 Md. 251, 261 , 429 A.2d 1018 (1981), and cases there cited.

In such situation, a cross-appeal would be unnecessary and, in fact, would be improper. Offutt v. Montgomery Co. Bd. of Ed., 285 Md. 557, 564, n. 4 , 404 A.2d 281 (1979). Moreover, in that situation, even if lack of standing were not raised by the appellee, an appellate court noticing the issue would normally consider it ¹⁶⁸ •sua sponte under the principle that a judgment will ordinarily be affirmed on any ground adequately shown by the record, whether or not relied on by the trial court or raised by a party. Robeson v. State, 285 Md. 498, 502 , 403 A.2d 1221 (1979), cert. denied, 444 U.S. 1021 , 100 S.Ct. 680 , 62 L.Ed.2d 654 (1980).

Thus, in the case at bar, if the trial court had dismissed the action on some ground other than lack of standing, the Secretary as appellee would be entitled to argue Munson’s alleged lack of standing as an alternate basis for affirmance. However, the trial court did not dismiss the action. Instead, it rendered a declaratory judgment on the merits. Munson’s alleged lack of standing would not furnish an alternate ground for affirming the declaratory judgment.

On the contrary, the Secretary’s argument amounts to an attack upon the judgment. If the issue is properly before us, and if we agreed that Munson had no standing, we would be obliged to order that the trial court’s judgment be reversed and that the case be remanded with directions to dismiss the action. Consequently, the Secretary is attempting to challenge the trial court’s judgment in this case without having taken an appeal. A party to a trial court proceeding, however, is not entitled to seek direct appellate review and reversal of the trial court’s judgment unless he has filed a valid, timely order of appeal.

See, e.g., Pearlman v. State, 226 Md. 350 , 173 A.2d 733 (1961); Riviere v. Quinlan, 210 Md. 76 , 122 A.2d 332 (1956); Gaines v. Lamkin, 82 Md. 129 , 33 A. 459 (1895); Hopper v. Jones, Adm’r, 64 Md. 578 , 4 A. 273 (1886); Walter v. Second Nat’l Bank of Baltimore, 56 Md. 138 (1881); 2 Poe, Pleading and Practice §§ 823-824 (5th ed. H. Tiffany 1925); Maryland Rules 1010, 1011. The Secretary, not having filed an order of appeal, may not on appeal attack the trial court’s declaratory judgment. Furthermore, the filing of a cross-petition for a writ of certiorari in this Court cannot overcome the failure of a purported cross-appellant to have taken an appeal from the trial court’s judgment.

While the Secretary is in no position to challenge the trial court’s judgment, the standing issue may be that type of question which we will resolve on our own motion. When a ¹⁶⁹ case is properly before us on an order of appeal and writ of certiorari, we will sua sponte address a narrow category of issues which come to our attention even though not raised by an appellant, and which may require a reversal of the judgment below. This category includes the jurisdiction of the intermediate appellate court, the jurisdiction of the trial court, and the certain fundamental questions of policy relating to the trial court’s exercise of jurisdiction. See, e.g., Creamer v. Helferstay, 294 Md. 107 , 448 A.2d 332 (1982) (authority of the trial court to grant a particular type of relief); Sec., Dep’t of Human Res. v. Wilson, 286 Md. 639, 644-645 , 409 A.2d 713 (1979) (failure to exhaust administrative remedies); Attorney Gen. v. A. A. Co. School Bus, 286 Md. 324 , 407 A.2d 749 (1979) (mootness); Biro v. Schombert, 285 Md. 290, 293 , 402 A.2d 71 (1979) (jurisdiction of the Court of Special Appeals); Reyes v. Prince George’s County, 281 Md. 279, 282-283 , 380 A.2d 12 (1977) (whether suit is collusive); Hartford County v. Schultz, 280 Md. 77 , 371 A.2d 428 (1977) (whether there is an "actual controversy” between contending parties within the meaning of the Declaratory Judgments Act); State v. McCray, 267 Md. 111, 126 , 297 A.2d 265 (1972) (subject matter jurisdiction of the trial court).

See also Smith v. Taylor, 285 Md. 143, 147 , 400 A.2d 1130 (1979) (jurisdiction of this Court). Several Maryland cases, however, indicate that questions concerning the plaintiffs standing to maintain the action do not fall within this category. They take the position that, if the plaintiffs alleged lack of standing is not properly raised by the defendant, an appellate court will not consider the matter. See Toomey v. Gomeringer, 235 Md. 456, 460-461 , 201 A.2d 842 (1964); Costello v. Seiling, 223 Md. 24, 29 , 161 A.2d 824 (1960); Pressman v. Baltimore, 222 Md. 330, 334 , 160 A.2d 379 (1960); Baltimore v. N.A.A.C.P., 221 Md. 329, 332 , 157 A.2d 433 (1960); Pumphrey v. Pumphrey, 11 Md.App. 287, 292-293 , 273 A.2d 637 (1971).

On the other hand, some cases seem to suggest that the standing of a plaintiff to maintain an action is an issue which an appellate court will address on its own motion. Reyes v. Prince George’s ¹⁷⁰ County, supra, 281 Md. at 287-289 ; Ginn v. Farley, 43 Md.App. 229, 232 , 403 A.2d 858 (1979), cert. denied sub nom. Engel v. Farley, 286 Md. 747 (1980); Balance Limited, Inc. v. Short, 35 Md.App. 10, 11 , 368 A.2d 1116 (1977). See also Craig v. Boren, 429 U.S. 190, 192-194 , 97 S.Ct. 451 , 50 L.Ed.2d 397 (1976).

The rationale for this view would appear to be that, if a plaintiff lacks standing, there may be no "interested parties” asserting adverse claims, and thus there may be no "justiciable controversy,” which is a matter regularly noticed by appellate courts sua sponte. Reyes v. Prince George’s County, supra, 281 Md. at 288 ; Harford County v. Schultz, supra. See also Patuxent Co. v. Commissioners, 212 Md. 543, 548-549 , 129 A.2d 847 (1957). 5 Whether there is a conflict among the above-cited cases, and whether Munson’s standing is an issue properly before us, are questions which need not be resolved in the present case. If we assume for purposes of argument that the issue is before us despite the Secretary’s failure to take a cross-appeal, the result will be no different, for we believe that Munson clearly had standing to challenge the facial constitutionality of Art. 41, § 103D.

B The Secretary’s contention that Munson has no standing to attack the constitutionality of § 103D seems to have two related prongs. First, the Secretary argues that § 103D only applies to charitable organizations and there has been no final administrative determination that the various chapters of the Fraternal Order of Police with which Munson contracts are charitable organizations within the meaning of § 103D. Munson, according to the Secretary, failed to exhaust its administrative remedies in this regard. Second, the Secretary contends that even if the Fraternal Order of ¹⁷¹ Police chapters are charitable organizations, Munson may not assert their First Amendment rights.

However, Munson has clearly suffered injury as a result of § 103D, as the stipulation of facts in the trial court was that the Montgomery County Chapter of the Fraternal Order of Police would not contract with Munson for promotion of fund-raising events because of the 25 percent limitation imposed by § 103. Futhermore, Munson alleged that the Secretary had been in contact with Munson’s counsel, had taken the position that Munson is subject to § 1081 and had stated that, if Munson failed to comply with the statute, the Secretary would seek prosecution of Munson. The Secretary’s denial of this allegation was because there had been no final determination by the Secretary concerning the applicability of the statute to Munson or whether Munson was in violation of § 103D. Thus, the Secretary is essentially arguing a failure to exhaust administrative remedies.

We have consistently held, however, that when one is attacking the validity of a statute on its face, rather than a particular application of the statute, administrative remedies ordinarily need not be exhausted. National Asphalt v. Prince Geo’s Co., 292 Md. 75, 77, n. 2 , 437 A.2d 651 (1981); Shipp v. Bevard, 291 Md. 590, 599 , 435 A.2d 1114 (1981); Harbor Island Marina v. Calvert Co., 286 Md. 303, 308-309 , 407 A.2d 738 (1979), and cases there cited. The contention that Munson may not assert the First Amendment rights of the Fraternal Order of Police Chapters with which Munson normally contracts, is also without merit. Although ordinarily one may not assert the constitutional rights of others, nevertheless where a statute is directed at persons with whom the plaintiff has a business or professional relationship, and impairs the plaintiff in that relationship with such other persons, thereby threatening real and immediate injury to the plaintiff, he is normally accorded standing to challenge the validity of the statute.

Craig v. Boren, supra, 429 U.S. at 194-197 ; Singleton v. Wulff, 428 U.S. 106, 112-118 , 96 S.Ct. 2868 , 49 L.Ed.2d 826 (1976); Doe v. Bolton, 410 U.S. 179, 188 , 93 S.Ct. 739 , 35 ¹⁷² L.Ed.2d 201 (1973); Eisenstadt v. Baird, 405 U.S. 438, 443-446 , 92 S.Ct. 1029 , 31 L.Ed.2d 349 (1972); Griswold v. Connecticut, 381 U.S. 479, 481 , 85 S.Ct. 1678 , 14 L.Ed.2d 510 (1965); Pierce v. Society of Sisters, 268 U.S. 510, 535-536 , 45 S.Ct. 571 , 69 L.Ed. 1070 (1925); Baltimore v. A. S. Abell Co., 218 Md. 273, 281-282 , 145 A.2d 111 (1958). Finally, an argument similar to that which the Secretary makes here was rejected in Schaumburg v. Citizens For Better Environ., 444 U.S. 620 , 100 S.Ct. 826 , 63 L.Ed.2d, 73 (1980), also involving a challenge to a charitable solicitation statute imposing a limitation like that in Art. 41, § 103D. In Schaumburg , the soliciting organization (CBE) had obtained summary judgment declaring the statute void and enjoining its enforcement. The defendant argued in the Supreme Court that summary judgment was inappropriate because "there was an unresolved factual dispute concerning the true character of CBE’s organization” and that the defendant should have had an opportunity to show that CBE "may appropriately be deemed an organization existing for private profit rather than for charitable purposes.” 444 U.S. at 633 .

In rejecting this argument, the Supreme Court stated (id. at 633-634) (footnote omitted): "We agree with the Court of Appeals that CBE was entitled to its judgment of facial invalidity if the ordinance purported to prohibit canvassing by a substantial category of charities to which the 75-percent limitation could not be applied consistently with the First and Fourteenth Amendments, even if there was no demonstration that CBE itself was one of these organizations. Given a case or controversy, a litigant whose own activities are unprotected may nevertheless challenge a statute by showing that it substantially abridges the First Amendment rights of other parties not before the court. Grayned v. City of Rockford, 408 U.S. 104, 114-121 (1972); Chaplinsky v. New Hampshire, 315 U.S. 568 (1942); Schneider v. State, 308 U.S., at 162-165; Lovell v. Griffín, 303 U.S., at 451; ¹⁷³ Thornhill v. Alabama, 310 U.S. 88, 97 (1940). See also the discussion in Broadrick v. Oklahoma, 413 U.S. 601, 612-616 (1973); and in Bigelow v. Virginia, 421 U.S. 809, 815-817 (1975).

In these First Amendment contexts, the courts are inclined to disregard the normal rule against permitting one whose conduct may validly be prohibited to challenge the proscription as it applies to others because of the possibility that protected speech or associative activities may be inhibited by the overly broad reach of the statute.” We hold, therefore, that Munson had standing to challenge the facial validity of § 103D.

II

Constitutionality Of § 103D In our view, the Supreme Court’s opinion in Schaumburg v. Citizens For Better Environ., supra, is also dispositive of the merits, and requires a declaration that § 103D is unconstitutional under the First and Fourteenth Amendments. Schaumburg involved a municipal ordinance which required that every charitable organization intending to solicit contributions in the village " 'by door-to-door solicitation or the use of public streets and public ways, shall prior to such solicitation apply for a permit.’ ” 444 U.S. at 623 . The permit application had to contain satisfactory proof " 'that at least seventy-five percent of the proceeds of such solicitation will be used directly for the charitable purpose of the organization.’ ” Id. at 624 . CBE, an environmental organization which solicited contributions from door-to-door, and which could not demonstrate that it would use 75 percent of the receipts for charitable purposes, brought an action for declaratory and injunctive relief.

The Supreme Court in Schaumburg held that the expense limitation provision of the ordinance, requiring that 75 percent of the funds collected be used for charitable purposes, violated the free speech clause of the First Amend ¹⁷⁴ ment, applicable to state legislation under the Fourteenth Amendment. In reaching this conclusion, the Court rejected the Village’s argument that charitable solicitation is not "speech” protected by the First Amendment as long as the charity is free to propagate its views. The Court discussed and relied on several cases holding that charitable, religious or other solicitation is protected by the First Amendment. Schneider v. State, 308 U.S. 147 , 60 S.Ct. 146 , 84 L.Ed. 155 (1939); Cantwell v. Connecticut, 310 U.S. 296 , 60 S.Ct. 900 , 84 L.Ed. 1213 (1940); Jamison v. Texas, 318 U.S. 413 , 63 S.Ct. 669 , 87 L.Ed. 869 (1943); Largent v. Texas, 318 U.S. 418 , 63 S.Ct. 667 , 87 L.Ed. 873 (1943); Murdock v. Pennsylvania, 319 U.S. 105 , 63 S.Ct. 870 , 87 L.Ed. 1292 (1943); Martin v. Struthers, 319 U.S. 141 , 63 S.Ct. 862 , 87 L.Ed. 1313 (1943); Thomas v. Collins, 323 U.S. 516 , 65 S.Ct. 315 , 89 L.Ed. 430 (1945); Hynes v. Mayor of Oradell, 425 U.S. 610 , 96 S.Ct. 1755 , 48 L.Ed.2d 243 (1976).

The Court also relied on Valentine v. Chrestensen, 316 U.S. 52 , 62 S.Ct. 920 , 86 L.Ed. 1262 (1942), and Breard v. Alexandria, 341 U.S. 622 , 71 S.Ct. 920 , 95 L.Ed. 1233 (1951), involving commercial solicitation, with the Court noting ( 444 U.S. at 632-633, n.7 ) that today, under Va. Pharmacy