text:
    137 A.3d 1045
    Mary HARVEY, et al. v. Joseph SINES, et al.
    No. 0691,
    Sept. Term, 2015.
    Court of Special Appeals of Maryland.
    June 2, 2016.

      Robert L. Allen, Jr., McHenry, MD, for appellant.
    Justin Gregory (J. Gregory Law Firm, L.C., on the brief) Oakland, MD, for appellee.
    Panel: KRAUSER, C.J., BERGER, and ROBERT A. ZARNOCH (Retired, Specially Assigned), JJ.

       The Honorable Christopher Kehoe did not participate in the conferencing or adoption of this opinion.

   ROBERT A. ZARNOCH, J. (Retired, Specially Assigned).

The opening of the Marcellus Shale in the late-2000s spawned a resurgence in natural resource extraction across the Northeast and Mid-Atlantic regions, including Western Maryland. In 2010, the General Assembly enacted the Maryland Dormant Mineral Interests Act, now codified at Section 15-1201, et seq. of the Environment Article (“Env.”), Maryland Code (1982, 2014 RepLVol.), to allow surface owners to terminate severed mineral interests that had gone unused for twenty years or more.

Toward the end of 2014, Joseph L. Sines and Sandra S. Sines (“the Sineses”), appellees, brought an action in the Circuit Court for Garrett County to terminate an undivided half-mineral interest owned by the descendants of Henry B. Harvey — Mary Harvey and Patricia Sue Lannom née Harvey (“the Harveys”), appellants. After the parties filed cross-motions for summary judgment, and without a hearing, the court found no material facts in dispute, and entered an order terminating the mineral interest of the Harveys.

The Harveys appealed to this Court and present the following question for our review, which we have rephrased:

Whether the Dormant Mineral Interests Act is unconstitutional under Article 24 of the Maryland Declaration of Rights and Article III, Section 40 of the Maryland Constitution?

We hold that the Maryland Dormant Mineral Interests Act is constitutional because it does not retroactively impair vested rights, nor does it take property without just compensation. We affirm the decision of the circuit court.

BACKGROUND

A. The Maryland Dormant Mineral Interests Act

The General Assembly passed the Maryland Dormant Mineral Interests Act (“the Act”) by a unanimous vote in each house during the 2010 legislative session. See 2010 Laws, ch. 268 (S.B.288), ch. 269 (H.B.320). The Act created a new cause of action, allowing a surface owner of real property subject to a mineral interest to terminate a dormant mineral interest. Env. § 15-1203(a)(l). The action is “in the nature of and require[s] the same notice as is required in an action to quiet title as set forth in § 14-108 of the Real Property Article.” Env. § 15-1203(b)(l). “A court order that terminates a mineral interest merges the terminated mineral interest, including express and implied appurtenant surface rights and obligations, with the surface estate in shares proportionate to the ownership of the surface estate, subject to existing liens for taxes or assessments.” Env. § 15-1203(d)(2).

The Act defines a dormant mineral interest as one that “is unused for a period of 20 or more years preceding the commencement of termination of the mineral interest.” Env. § 15-1203(a)(2)(i). Additionally, notice of the mineral interest must not have been recorded during the period of 20 or more years preceding the commencement of the action to terminate the mineral interest. Env. § 15 — 1203(a)(2)(ii). Several actions constitute “use” of the mineral interest by an owner. These include: (i) active mineral exploration or exploitation; (ii) payment of taxes on a separate assessment of the mineral interest; (iii) recordation of an instrument that evidences the continued existence of the mineral interest; and (iv) recordation of a judgment or decree that makes a specific reference to the mineral interest. Env. § 15 — 1203(c)(1). An owner of a mineral interest may record, at any time, a notice of intent to preserve the mineral interest or a part of a mineral interest. Env. § 15-1204(a)(l)

After a petition to terminate a dormant mineral interest has been filed, an owner of the mineral interest can still “record a late notice of intent to preserve the mineral interest as a condition of dismissal of the action, if the owner of the mineral interest pays the litigation expenses incurred by the surface owner of the real property that is subject to the mineral interest.” Env. § 15 — 1205(b). However, the Act precludes an owner of a mineral interest that has been unused for a period of 40 years or more preceding the commencement of the action from filing a late notice of intent to preserve the mineral interest. Env. § 15-1205(c). The Standing Committee on Rules of Practice and Procedure adopted rules to aid the implementation of the Act. See Md. Rules 12-701, et seq.

The Act’s stated purpose “is to make uniform the law governing dormant mineral interests among the states.” Env. § 15-1202(b). In that vein, Act was patterned on the Uniform Dormant Mineral Interests Act, which in turn was designed “to enable and encourage marketability of real property and to mitigate the adverse effect of dormant mineral interests on the full use and development of both surface estate and mineral interests in real property.” Uniform Law Commission, Uniform Dormant Mineral Interests Acts § 1(a). The uniform act also provides that it “shall be construed to effectuate its purpose to provide a means for termination of dormant mineral interests that impair marketability of real property.” Id. § 1(b). The Attorney General, in a letter to Governor Martin O’Malley, dated May 3, 2010, approved of the constitutionality of the statute.

B. The Sineses’ Property

The Sineses are the surface owners of approximately twenty acres in Garrett County, and own an undivided one-half interest in the minerals beneath the property. On November 20, 2014, the Sineses filed a petition in the circuit court to terminate any dormant mineral rights on their property. They identified the Harveys as potential owners of a portion of the mineral interest, as descendants of Henry B. Harvey who purchased a one-half interest in the minerals on the property, evidenced by a deed dated March 26,1912 and recorded in the Garrett County land records.

On April 17, 2015, the parties filed cross-motions for summary judgment. The record showed that there had been no use of the mineral interest for at least the past 40 years. The Sineses asserted that because there was no use during the past 40 years, the court should enter an order terminating the dormant mineral rights, pursuant to Env. §§ 15 — 1203(a), - 1205(c). The Harveys asserted that, among other things, the statute was facially unconstitutional because it abrogated vested rights. The Sineses opposed the Harveys’ motion for summary judgment. Neither party requested a hearing, and the record before the circuit court was sparse.

On May 12, 2015, the court entered an order, granting summary judgment for the Sineses, denying the Harveys’ motion, and terminating the dormant mineral interest in the property. The Harveys appealed to this Court on June 11, 2015.

DISCUSSION

Whether a circuit court’s grant of summary judgment is proper in a particular case is a question of law, subject to a non-deferential review on appeal. Charles Cnty. Comm’rs v. Johnson, 393 Md. 248, 263, 900 A.2d 753 (2006). In reviewing a grant of summary judgment, we review independently the record to determine whether the parties generated a dispute of material fact and, if not, whether the prevailing party was entitled to a judgment as a matter of law. Muskin v. State Dept. of Assessments & Taxation, 422 Md. 544, 554, 30 A.3d 962 (2011) (citing Charles Cnty. Comm’rs, 393 Md. at 263, 900 A.2d 753). We review the record in the light most favorable to the non-moving party and construe any reasonable inferences that may be drawn from the well-pled facts against the moving party. Id. Here, neither party has argued that any of the facts are in dispute; therefore it was proper for the trial court to make a decision on the parties’ motions for summary judgment. See id.

The Harveys argue that the Act violates Article 24 of the Maryland Declaration of Rights and Article III, Section 40 of the Maryland Constitution because it retroactively impairs vested rights and takes property without just compensation under the Court of Appeals’s decisions in two cases: Muskin v. State Dep’t of Assessments & Taxation, 422 Md. 544, 30 A.3d 962 (2011) and Scharf v. Tasker, 73 Md. 378, 21 A. 56 (1891). The Sineses assert that the cases are distinguishable and that the statute is constitutional because it does not impermissibly divest the mineral interest owner of a vested right.

In addressing a claim involving the constitutionality of a statute, we begin “with a presumption that the statute is constitutional.” Beattie v. State, 216 Md.App. 667, 678, 88 A.3d 906 (2014) (citing Walker v. State, 432 Md. 587, 626, 69 A.3d 1066 (2013)). We are reluctant to find a statute unconstitutional if, “by any construction, it can be sustained.” Galloway v. State, 365 Md. 599, 611, 781 A.2d 851 (2001) (quoting Beauchamp v. Somerset County, 256 Md. 541, 547, 261 A.2d 461 (1970)). The appellant bears the burden of overcoming this presumption and establishing the statute’s unconstitutionality. Beattie, 216 Md.App. at 678, 88 A.3d 906. We undertake an “independent constitutional appraisal” to determine whether a constitutional right has been infringed. Watkins v. Sec’y, Dept. of Pub. Safety & Corr. Services, 377 Md. 34, 46, 831 A.2d 1079 (2003) (citing Crosby v. State, 366 Md. 518, 526, 784 A.2d 1102 (2001)).

In light of the posture of and contentions in this case, the Harveys’ arguments are tantamount to a facial challenge to the Act. However, they would gain nothing if they contested the constitutionality of the Act as applied to their specific circumstances, considering the protracted time that this property was neither used nor taxed. The Harveys have not asserted their rights since the property was acquired more than 100 years ago in 1912.

The Court of Appeals observed in Muskin v. State Dep’t of Assessments & Taxation:

Together, Maryland’s Declaration of Rights and Constitution prohibit the retrospective reach of statutes that would have the effect of abrogating vested rights. Dua v. Comcast Cable of Md. Inc., 370 Md. 604, 630 n. 9, 805 A.2d 1061, 1076 n. 9 (2002). Article 24 of the Maryland Declaration of Rights, guaranteeing due process of law, and Article III, § 40 of the Maryland Constitution, prohibiting governmental taking of property without just compensation, have been shown, through a long line of Maryland cases, to prohibit the retrospective reach of statutes that would result in the taking of vested property rights. See Dua, 370 Md. at 604, 805 A.2d at 1061 and cases therein.

422 Md. 544, 555-56, 30 A.3d 962 (2011). The Maryland Declaration of Rights and the Maryland Constitution are generally read in concert with their federal constitutional counterparts, and cases interpreting federal constitutional provisions are treated as “persuasive authority by a Maryland court interpreting the Maryland Declaration of Rights and Constitution.” Id. (citing Dua, 370 Md. at 604, 805 A.2d 1061).

A. Retrospectivity

We first consider whether the statute operates retrospectively. “[A] statute does not operate ‘retrospectively’ merely because it is applied in a case arising from conduct antedating the statute’s enactment....” John Deere Const. & Forestry Co. v. Reliable Tractor, Inc., 406 Md. 139, 147, 957 A.2d 595 (2008) (quoting Landgraf v. USI Film Products, 511 U.S. 244, 269, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994)) (Internal quotation marks omitted). Moreover, a statute “is not made retroactive merely because it draws upon antecedent facts for its operation.” Landgraf, 511 U.S. at 297 n. 24, 114 S.Ct. 1483 (quoting Cox v. Hart, 260 U.S. 427, 435, 43 S.Ct. 154, 67 L.Ed. 332 (1922)). In evaluating retrospectivity, we consider three factors, “fair notice, reasonable reliance, and settled expectations,” to determine “the nature and extent of the change in law and the degree of connection between the operation of the new rule and a relevant past event.” John Deere Const., 406 Md. at 147, 957 A.2d 595 (quoting Landgraf, 511 U.S. at 270, 114 S.Ct. 1483) (Internal quotation marks omitted).

In Muskin, the Court of Appeals considered the constitutionality of a ground rent statute, which provided that, upon the failure of a ground rent owner to register this interest with the State, that interest in the land was automatically extinguished and transferred to the tenant. The Court concluded that the statute at issue in Muskin satisfied fair notice by providing a reasonable time period — two years — between its enactment and the registration deadline. 422 Md. at 558, 30 A.3d 962. Although the statute satisfied fair notice, it nevertheless operated retrospectively because it impermissibly impacted the reasonable reliance and settled expectations of ground rent owners. Id.

Because of the nature of a ground rent lease — where the fee simple owner (the ground rent owner) of a property received an annual or semi-annual payment (ground rent) and retained the right to re-enter the property and terminate the lease if the leaseholder failed to pay — the statute infringed upon the owners’ reasonable reliance and settled expectations. The Court noted that “[gjround rent owners rel[ied] reasonably on the future income from ground rents or the ability to sell the fee simple interest on the open market or in the future, if necessary.” Muskin, 422 Md. at 550, 558, 30 A.3d 962 (citing Kolker v. Biggs, 203 Md. 137, 141, 99 A.2d 743 (1953)). Moreover, the statute did not provide for additional remedies for the ground rent owner, such as an opportunity for a hearing or an appeal process. The Court posited a valid, alternative statutory approach in which the failure to register before a fixed deadline triggered restrictions on the property interest short of a total extinguishment of rights. Id. at 559, 30 A.3d 962.

Here, the Act provides fair notice. Although not quite the two-year grace period in Muskin, it provides for a similar grace period of one and a half years — the statute was enacted on May 4, 2010 and allowed the filing of a petition only on or after October 1, 2011. See John Deere Const., 406 Md. at 148, 957 A.2d 595 (Parties are presumed to be aware of the actions of the General Assembly). “The Maryland Constitution requires that a plaintiff must have a reasonable period of time, after the enactment of the new statute, to bring the cause of action which existed under prior law.” Dua, 370 Md. at 633, 805 A.2d 1061; see Env. § 15-1204(a) (“An owner of a mineral interest may record, at any time, a notice of intent to preserve the mineral interest or a part of a mineral interest”) (Emphasis added). In this case, the Sineses did not file a petition until November 20, 2014, more than four years after the law went into effect — providing the Harveys with a reasonable period of time to exercise their rights.

In contrast to Muskin, however, the Act does not impermissibly infringe the reasonable reliance and settled expectations of mineral interest owners. The owners subject to the act, by their very definition as owners of dormant mineral interests, are not relying on rents or income from the property. They have not made use of the interests for at least twenty, and in this case well beyond 40 years. In fact, the conveyance was made in 1912, over 102 years before this action was initiated, and there was no evidence that the mineral interest had ever been exploited.

We also note that a mineral interest owner may “use” the interest by paying taxes on it. “If minerals and mineral rights are owned separately from the land in which they are located, the supervisor may assess the minerals and mineral rights separately from the land.” Tax-Prop. § 8-229. The owner of the mineral rights can be assessed tax on its value even if the minerals are not then being exploited. See Macht, supra, 266 Md. at 608-09, 296 A.2d 162 (citing Weil v. Supervisor of Assessments, 266 Md. 238, 292 A.2d 68 (1972); Sears Roebuck v. State Tax Comm., 214 Md. 550, 557-558, 136 A.2d 567 (1957)) (noting that “situations may be postulated where a fair and equitable valuation can only be achieved by the use of this mechanism. It has long been established that assessors have reasonable latitude in selecting a method of valuation, so long as they arrive at the ‘full cash value’ ”). There was no evidence that taxes had ever been paid on the Harveys’ mineral interest.

The Act is also distinguishable from the legislation at issue in Muskin, because the interest is not automatically extinguished. The General Assembly, in this case, did not provide for unavoidable reversion of a mineral interest if the owner failed to register the interest by a certain date. Instead, it is the surface owner who initiates the process by filing an action in the circuit court. The owner of a mineral interest can, of course, use the interest at any time before the petition is filed by exploring for minerals or even paying taxes on the interest. Env. § 15-1203(c)(l). Alternatively, the owner can record a notice of intent to preserve the interest. Env. § 15-1204(a). Here, the Harveys had more than forty years to take some action to protect their property rights.

Unlike in Muskin, the Maryland Rules provide that the circuit court can hold a hearing on the petition, see Md. Rule 12-704(d), and a dominant mineral interest owner can appeal a court decision terminating his or her rights. Additionally, the Act provides remedies to the mineral owners who desire to retain their interests after a petition has been filed — if there has been a use of the mineral interest within forty years but later than twenty years, the mineral owner may file a late notice of intent to use. Env. § 15-1205.

In consideration of “the nature and extent of the change in law and the degree of connection between the operation of the [Act,]” its notice and procedural safeguards, and the continued non-use of the mineral interest, see John Deere Const., 406 Md. at 147, 957 A.2d 595, we conclude that the Act does not operate retrospectively to impair vested rights.

B. Takings and Vested Rights

Even if we had concluded that statute operated retrospectively, we would also conclude that it did not operate to impermissibly impair vested rights. Vested rights include “that which is regarded as a property right under Maryland property law.” Muskin, 422 Md. at 560, 30 A.3d 962 (quoting Dua, 370 Md. at 631, 805 A.2d 1061) (Internal quotation marks omitted). The Act defines a “mineral interest” as “an interest in a mineral estate, however created and regardless of form, whether absolute or fractional, divided or undivided, corporeal or incorporeal, including a fee simple or any lesser interest or any kind of royalty, production payment, executive right, nonexecutive right, leasehold, or lien in minerals, regardless of character.” Env. § 15-1201(c). From this, we conclude that a severed mineral interest constitutes a property right, and is, thus, a vested right.

In Safe Deposit & Trust Co. v. Marburg, the Court of Appeals considered the constitutionality of a statute that terminated a vested property right if the owner failed to exercise his or her rights for twenty years, as required under the statute. 110 Md. 410, 72 A. 839 (1909). Somewhat similar to the Dormant Mineral Interests Act, in Marburg, if a ground rent owner failed to collect rent for twenty years, the statute specified that the owner’s interest would be extinguished and fee simple would vest in the tenant of the property through adverse possession. Id. at 412, 72 A. 839. The act imposed new restrictions on a vested property right and potentially resulted in a transfer of property from the ground rent owner to the tenant, but only if the ground rent owner failed to exercise his or her rights. The Court upheld the statute, stating that the General Assembly has the power “to pass laws which may result in vesting good titles in those holding lands by adverse possession — provided, of course, the former owners have a reasonable time after the passage of such laws within which to assert their rights.” Id. at 414, 72 A. 839. The statute did not effect an unconstitutional impairment of vested rights or taking of property. See id.

In Muskin, the Court specifically contrasted the ground rent statute, in which owners were actively collecting rents, with a situation where the vested interest had gone unused for a long period of time. The Court stated:

Adverse possession doctrine existed historically to encourage beneficial use of properties and an orderly title system. [The statute] does not differentiate between ground rent owners who abandon their interests in the property and active, responsible ground rent owners, but rather strictly between registrants under an entirely new scheme and non-registrants.

422 Md. at 562, 30 A.3d 962.

The authority relied upon by the Harveys, Scharf v. Tasker, 73 Md. 378, 21 A. 56 (1891), is inapposite. In that case, the General Assembly attempted to assess tax on tracts of land, known as military lots, given to soldiers at the end of the Revolutionary War. 73 Md. at 382, 21 A. 56. By 1890, many of the owners could not be found, and the legislature passed a law “to compel these unknown owners to establish their title so that the property might be placed upon the assessment books of Allegany and Garrett counties.” Id. The Court held that:

the legislature exceeded the limits of its authority when it undertook, in the same section, to forfeit the property — the title and estate — of all unknown owners upon their failure to produce, within the time designated, the evidence of their title. It needs no argument and no citation of authority to show that the title of the unknown owners of these lots cannot be forfeited without due process of law; and that such legislation as this is far from having even the semblance of due process of law.

Id. Several factors distinguish Scharf from this case. First, the owners of the land at issue were unknown, and, thus, it was difficult, if not impossible, to ensure that notice of the requirement to establish title was provided. Second, the 1890 law created a universal registration requirement and transferred the ownership of the property to the State upon the failure of the owner to register by a certain deadline, similar to the ground rent law struck down by the Court in Muskin.

As discussed above, the Act at issue provides fair notice by giving dormant mineral interest holders a reasonable time after the passage of the law to assert their rights. Here, Harveys had a large window of opportunity in which they could have put the property to use or secured their rights by filing a notice of intent to use. The Act also does not automatically terminate the rights of an interest holder, instead, requiring a surface owner to initiate an action at some indefinite time. Although not identical to adverse possession, the process created by the Legislature is in a similar vein. Similar to the provision found to be constitutional in Marburg, the Act here allows a person to, after twenty years of neglect, file a petition to, essentially, quiet title and allow the land and minerals beneath it to be put to beneficial use. Env. § 15-1203; see Marburg, 110 Md. at 414, 72 A. 839. For these reasons, we hold that the Act satisfies due process as required by Article 24 of the Maryland Declaration of Rights.

We note that similar statutes in other states have been found to be constitutional under both federal and state constitutions. See, e.g., Texaco, Inc. v. Short, 454 U.S. 516, 526, 102 S.Ct. 781, 70 L.Ed.2d 738 (1982) (“[T]his Court has recognized that States have the power to permit unused or abandoned interests in property to revert to another after the passage of time”); Short v. Texaco, Inc., 273 Ind. 518, 406 N.E.2d 625 (1980), aff'd, 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738 (1982) (upheld under state constitution and federal constitution); Van Slooten v. Larsen, 410 Mich. 21, 299 N.W.2d 704 (1980) (same); Contos v. Herbst, 278 N.W.2d 732 (Minn.1979) (same); Love v. Lynchburg Nat. Bank & Trust Co., 205 Va. 860, 140 S.E.2d 650 (1965) (upheld under state constitution).

Moreover, the states that have found dormant mineral interests acts to be unconstitutional were considering statutory language that differed from the language of the Maryland act. See, e.g., Wilson v. Bishop, 82 Ill.2d 364, 45 Ill.Dec. 171, 412 N.E.2d 522, 523 (1980); Wheelock v. Heath, 201 Neb. 835, 272 N.W.2d 768 (1978); Chicago & N.W. Transp. Co. v. Pedersen, 80 Wis.2d 566, 259 N.W.2d 316, 317 (1977). The courts in these cases all considered statutes in which the mineral interest automatically reverted to surface holder unless the mineral interest owner registered the interest with the state within the statutory period, a scenario remarkably similar to the law found to be unconstitutional by the Court in Muskin, and different from the Act we now consider. Another case declined to give a dormant mineral act retrospective effect because the statute failed to provide for a method for owners to effectively preserve their interests via a grace period or a notice of intent to use. See Trustees of Tufts Coll. v. Triple R. Ranch, Inc., 275 So.2d 521 (Fla.1973).

Regarding the Harveys’ contention that the statute constitutes a taking without compensation under Article III, Section 40 of the Maryland Constitution, the Court has noted that “the Legislature, under the State’s police power, has some ability to regulate and restrict the rights of private property owners without providing just compensation.” Muskin, 422 Md. at 565, 30 A.3d 962 (2011) (citing Stevens v. Salisbury, 240 Md. 556, 563, 214 A.2d 775 (1965)) (giving as examples taxation and zoning requirements). Incarnations of this power include doctrines such as adverse possession, abandonment, and escheat. See Md.Code (1974, 2013 Repl.Vol.), Courts & Jud. Proc. Art. § 5-103(a) (adverse possession); Md.Code (1974, 2011 Repl.Vol.), Real Prop. Art. § 14-108 (quieting title to property), Md.Code (1975, 2013 RepLVol.), Commercial Law Art. (“C.L.”) § 17-101, et seq. (escheat and abandoned property); Md.Code (1974, 2015 Repl.Vol.), Est. & Trusts Art. § 3-105 (escheat of intestate property). For example, with regard to a savings account in Maryland, the funds within the account are presumed abandoned if within the three prior years, the owner has not, among other things, increased or decreased the amount in the account or engaged in any other transaction with the banking organization. C.L. § 17-301(a)(l).

The Maryland Dormant Mineral Interests Act is akin to these legislative provisions. In enacting the statute, the General Assembly created yet another vehicle to ensure the productive use of property in Maryland. The statute does not divest property from a private owner and transfer the property to the State. Instead, it allows a private party to maintain an action to clear title to disused property to allow the most productive use of the estate. Accepting appellants’ argument would allow minerals to go unused in perpetuity.

Moreover, in this case, the Sineses and the Harveys each own an undivided, one-half interest in the mineral estate. Divided ownership presents a barrier to productive mineral use. Legal scholar Ernest Smith observed that “[e]ach division of the mineral fee renders its development more difficult” because of the increased opportunity for disagreement among joint owners, and the possibility that a mineral interest will descend to an absent owner or a “minor [ ] or other person [ ] under a legal disability to contract[.]” Smith, supra n. 2, 43 Tex. L.Rev. at 130. Further, “the uncertainty as to the expenses which a successful oil and gas producer may deduct in accounting for profits to a co[owner]” who is not aware of or who has not agreed to the plan of development can prevent development because “if the drilling operations are unsuccessful, the developing co[owner] must bear the entire expense himself. If they do result in production, he [or she] can recoup the nonparticipating co-owner’s share of expenses only from that co-owner’s share of production, and, even then, some of these expenses may not be recoverable.” Id. at 131-32. These considerations make a co-owner of a mineral interest, like the Sineses in this case, reluctant to develop the resources under their property for fear of shouldering the entirety of the expenses for potentially little return.

Dormant mineral interests acts present a solution to this problem. See id. at 151-61, 164-66. The General Assembly apparently understood the ramifications of dormant mineral interests, and enacted Env. § 15-1201, et seq. to address the problems noted above. For all of these reasons, we conclude that the Maryland Dormant Mineral Interests Act does not operate retrospectively to impair vested rights and does not take property without just compensation.

JUDGMENT OF THE CIRCUIT COURT FOR GARRETT COUNTY AFFIRMED. COSTS TO BE PAID BY APPELLANTS.

      1. The Harveys, in their question presented, also mention Article 19 of the Maryland Declaration of Rights (right of access to the courts) in their questions presented; however, they make no other reference to Article 19, and make no argument in support of their contention, so we do not consider the issue.

      . During the 1960s, legal scholars identified “multiplicity of ownership” as a barrier to the development of mineral resources, resulting in mineral interests whose owners are unknown or unavailable, and interests whose owners are uncooperative. See James C. Roberton, Abandonment Of Mineral Rights, 21 Stan. L.Rev. 1227 (1969); Ernest E. Smith, Methods for Facilitating the Development of Oil and Gas Lands Burdened with Outstanding Mineral Interests, 43 Tex. L.Rev. 129 (1964). These scholars recommended, among other things, a statutory solution to the problem in the form of a dormant mineral interests act, like the one at issue here. But see Joshua Elias Teichman, Dormant Mineral Acts and Texaco, Inc. v. Short: Undermining The Taking Clause, 32 Am. U.L.Rev. 157 (1982) (criticizing dormant mineral interests acts as violations of the Takings Clause of the Fifth Amendment to the U.S. Constitution). Many states have since adopted dormant mineral interests statutes. See Clearing Land Titles § 10:1, et seq. (3d ed.).

      . The legislation had previously been introduced in the 2009 session, and had been unanimously approved in the House of Delegates, but failed to receive a vote in committee in the Senate. See H.B. 748. A Senate bill, S.B. 775 (2009), also died.

      . The definition of a “mineral" includes: gas, oil and oil shale, coal, gaseous, liquid, and solid hydrocarbons, cement materials, sand and gravel, road materials, and building stone, chemical substances, gemstone, metallic, fissionable, and nonfissionable ores, and colloidal and other clay, steam, and geothermal resources. Envir. § 15-1201(b).

      . "The action may be maintained, whether or not the owner of the severed mineral interest is an unknown or missing owner.” Env. § 15-1203(b)(2). If the owner is missing or unknown, the Act provides that the circuit court may create a trust for a severed mineral interest and appoint a trustee for the mineral interest. Env. § 15-1206. This case involves known owners, so we need not discuss the trust mechanism.

      . A tax assessor may value and tax mineral interests separately from the surface estate, as long as the valuation of the severed interests does not exceed the valuation of the property as a whole. See Md.Code (1985, 2012 Repl.Vol.), Tax-Property Art. ('Tax-Prop.”) § 8-229; Macht v. Dep't of Assessments of Baltimore City, 266 Md. 602, 610, 296 A.2d 162 (1972).

      . The Chair of the Rules Committee expressed concerns with the constitutionality of the mechanism terminating the rights of unknown or missing owners, mentioned supra, n. 5, because of the Act’s disparate treatment of known and unknown owners of mineral rights. See Draft minutes of the November 19, 2010 meeting of the Standing Committee on Rules of Practice and Procedure. As noted above, this case involves known owners, so we do not consider the Chair’s concerns.

      . However, we express no view on the constitutionality of the Act as applied to a situation where the appellant had made a more recent use of a mineral interest.

      9. Article 24 of the Maryland Declaration of Rights states: "That no man ought to be taken or imprisoned or disseized of his freehold, liberties or privilege, or outlawed, or exiled, or in any manner, destroyed, or deprived of his life, liberty or property, but by the judgment of his peers, or by the Law of the land."
      Article III, § 40 of the Maryland Constitution states: "The General Assembly shall enact no Law authorizing private property, to be taken for public use, without just compensation, as agreed upon between the parties, or awarded by a Jury, being first paid or tendered to the party entitled to such compensation.”

      . Similar legislation was introduced in 2009 (S.B.775), and sections of the Act were amended in 2012 (2012 Laws, ch. 370, H.B. 402). Thus, by virtue of the fact that the General Assembly was considering regulation of dormant mineral interests as early as 2009, and the fact that legislation concerning this issue was passed again in 2012, the Harveys were doubly on notice that efforts were being undertaken in Annapolis, which had the potential to affect their rights.

      . In Muskin, the ownership of the land was transferred to the tenant.

      . The doctrine of adverse possession is not directly applicable to the mineral interest in this case because the mineral interest has been severed from the surface estate, and, accordingly, one would need to possess the minerals to invoke the doctrine. See 53A AmJur.2d Mines and Minerals § 160 (2006, 2016 Supp.).


source: Caselaw Access Project

author: NAZARIAN, J.

license: Public Domain

text:
    137 A.3d 1056
    AMT HOMES, LLC v. Jeremy K. FISHMAN, et al.
    No. 757,
    Sept. Term, 2015.
    Court of Special Appeals of Maryland.
    June 2, 2016.

      Byron L. Huffman (Byron L. Huffman, P.C., on the brief) Columbia, MD, for appellant.
    Erica T. Davis (Axelson, Williamowsky, Bender & Fishman, P.C., on the brief) Rockville, MD, for appellees.
    Panel: NAZARIAN, REED and RAYMOND G. THIEME, JR. (Retired, Specially Assigned), JJ.
   NAZARIAN, J.

AMT Homes, LLC (“AMT”) purchased a property at a foreclosure sale. The sale was reported to the Circuit Court for Prince George’s County in a timely manner, but the court did not ratify the sale until six months later — not because the parties themselves caused any delay, but as a result of the court’s case load and staffing. Soon after ratification, AMT filed a Motion for Abatement of interest and taxes, arguing that it should not be responsible for interest and taxes that accrued more than sixty days after the date of sale until the date of ratification. The circuit court denied the motion after a hearing, AMT appeals, and we affirm.

I. BACKGROUND

Maryland Rule 14-204(a) allows the beneficiary of a deed of trust to institute a foreclosure action on the property subject to the lien. Before making the sale, the trustee must “publish notice of the time, place, and terms of the sale” at least once a week for three successive weeks. Md. Rule 14-210(a). The trustee or a court-appointed substitute then conducts the foreclosure sale. Md. Rule 14-207(a). The winning bidder pays a portion of the purchase price at the time of sale as a deposit, then pays the balance, plus interest and taxes, at the time of settlement. See, e.g., Donald v. Chaney, 302 Md. 465, 468, 488 A.2d 971 (1985) (explaining the general rule “of ancient lineage” that the purchaser always pays interest from the date of sale). In Zorzit v. 915 W. 36th Street, LLC, we summarized the court’s role in these foreclosure actions:

“As soon as practicable, but not more than 30 days after a sale, the person authorized to make the sale shall file with the court a complete report of the sale and an affidavit of the fairness of the sale and the truth of the report.” [Md. Rule 14-305(a) ]. Once the report of sale is filed with the court, the clerk issues a notice containing “a brief description sufficient to identify the property and stating that the sale will be ratified unless cause to the contrary is shown within 30 days after the date of the notice.” Rule 14-305(c). Within this 30-day period, a party may file exceptions to the sale. Rule 14-305(d)(l). If exceptions are filed, the court determines whether a hearing is necessary, but “it may not set aside a sale without a hearing,” and must hold a hearing if “a hearing is requested and the exceptions ... clearly show a need to take evidence.” Rule 14-305(d)(2).
A court will ratify the sale if the time for filing exceptions “has expired and exceptions to the report either were not filed or were filed but overruled, and ... the court is satisfied that the sale was fairly and properly made.” Rule 14-305(e). After the court issues a final order of ratification, settlement takes place with the foreclosure purchaser.

197 Md.App. 91, 99, 12 A.3d 698 (2011).

The estate of Thelma Battle owned the property at issue in this case, a home in Seat Pleasant (the “Property”), subject to a deed of trust. The estate defaulted, and the group of substitute trustees (Jeremy K. Fishman, Samuel D Williamowsky, and Erica T. Davis Ruth), petitioned the circuit court for a Decree for Sale, then advertised the Property for sale at public auction. The sale advertisement disclosed the terms:

The balance of the purchase price with interest at 2.375% per annum from the date of sale to the date of payment will be paid within ten days after the final ratification of the sale.
Adjustments on all taxes, public charges and special or regular assessments will be made as of the date of sale and thereafter assumed by purchaser.
Front Foot benefit charges are to be adjusted for the current year to date of sale and assumed thereafter by the purchaser.

The sale took place on July 30, 2014. AMT made the winning bid, $108,500.00, and paid a down payment of $10,000. The trustees filed a Report of Sale in the circuit court on August 1, 2014, and ten days later the court issued a Notice Report of Sale, which required anyone opposing the sale to show cause by September 11, 2014. No exceptions to the sale were filed, but as a result of its backlog of cases, the court did not ratify the sale until January 29, 2015.

In April 2015, AMT filed a Motion for Abatement of Interest in the amount of $2,198.35. AMT argued that Maryland Rule 14-305(a) and (c) required the court to ratify the sale within sixty days, and because ratification had been delayed through no fault of its own, AMT should not be responsible for the interest and taxes that accrued from September 29, 2014, sixty days after the sale, through January 29, 2015, the date of ratification. After a hearing on June 3, 2015, the circuit court held that the rule did not create a strict time limit for ratification, but that a decision must be rendered within a reasonable amount of time. The court then found that where the delay in ratification was not caused by either party, but was the result of judicial backlog, interest should not be abated. AMT filed a timely notice of appeal.

II. DISCUSSION

AMT asks us to hold that a purchaser at a foreclosure sale is entitled to abatement of interest when ratification is delayed unreasonably due to no fault of the purchaser, in this case because of judicial backlog. At argument, AMT suggested that a delay beyond thirty to sixty days should entitle a purchaser to an abatement. For the reasons we explain, though, we are not persuaded to alter the balance that the General Assembly and the Court of Appeals have struck among the interests of lenders, borrowers, and purchasers in the context of foreclosure sales.

First, though, the standard of review. AMT argues that we review the circuit court’s decision de novo because there is no dispute as to the facts or circumstances surrounding the appeal. The Substitute Trustees argue that the proper standard is abuse of discretion. Both are partly right. Although we review de novo the legal standard that the court applied, see, e.g., Fisher v. Ward, 226 Md.App. 149, 156, 126 A.3d 825 (2015), we review the court’s decision to deny abatement of interest in this instance under “the familiar abuse of discretion standard.” Baltrotsky v. Kugler, 395 Md. 468, 477 n. 7, 910 A.2d 1089 (2006); see also Thomas v. Dore, 183 Md.App. 388, 405, 961 A.2d 655 (2008) (generally, the decision to abate interest accrued in a foreclosure sale is “a decision entrusted to the discretion of the hearing judge”); Zorzit, 197 Md.App. at 96-97, 12 A.3d 698.

Foreclosures, and the ensuing sales, involve three parties in interest. First, of course, is the debtor, who owes an unpaid debt, both principal and interest, and holds title to the property. Second is the lender, who has the right to collect the debt and forecloses on the property as a remedy for the debtor’s failure to pay. Third is the purchaser, who agrees to buy the property from the debtor through the foreclosure sale process. The debtor’s and lender’s rights and obligations vis-a-vis each other, including the debtor’s obligation to pay interest and the lender’s right to receive it, are set forth in the documents that memorialize the debt. See, e.g., Anderson v. Burson, 424 Md. 232, 235-36, 35 A.3d 452 (2011). The purchaser’s rights are defined by the law governing foreclosures and the notices setting forth the terms of the foreclosure sale. Simard v. White, 383 Md. 257, 310, 859 A.2d 168 (2004).

Generally speaking, debtors owe interest to their lenders (and taxes to the government) up until the time of the sale, at which point the purchaser takes responsibility. Outside the context of foreclosures, the sale is consummated at settlement. In the foreclosure context, however, there is one additional step: the court still needs to ratify the sale, and the debt isn’t cleared until after that occurs, even though the purchaser takes equitable title at the time of the sale. And the possibility that court review might extend longer than sixty days is a risk that falls on the purchaser in a foreclosure sale. As equitable owner of the property, the purchaser should bear the risk associated with judicial review. See Donald, 302 Md. at 469, 488 A.2d 971 (explaining that at the time of sale, the purchaser receives “an inchoate and equitable title which becomes complete by ratification of the Court.”). With the benefits of equitable ownership come its obligations, one of which is that the purchaser pays interest from the time of sale. See id. at 468, 488 A.2d 971 (“It is a general rule as to sales under decrees of this Court, that the purchaser always pays interest, according to the terms of the decree, from the day of sale, whether he gets possession or not.” (quoting Brown v. Wallace, 2 Bland 585, 594 (1830))). Whether or not it’s fair — and reasonable people might disagree — this allocation of costs and responsibilities is well-known and frames everyone’s expectations. Purchasers know when they decide whether to bid at a sale that if they win, they will be on the hook for interest and taxes from that point forward. Presumably, and especially frequent and sophisticated participants like AMT, purchasers calibrate their bids to reflect their prospective interest and tax liability. And although the term “abatement” suggests that the liability at issue here would disappear altogether, it doesn’t — lenders will still be owed the unpaid interest and taxes, and will look to debtors (who would seem less able to pay) to recover.

The question, then, is less about eliminating an unfair obligation than about deciding whether it should be shifted to another party. Our cases have recognized three equitable exceptions to the usual allocation of costs and liabilities. Purchasers may be excused from paying interest that accrued between the originally scheduled settlement date and the actual date of settlement when the delay: (1) stems from neglect on the part of the trustee; (2) was caused by necessary appellate review of lower court determinations; or (3) was caused by the conduct of other persons beyond the power of the purchaser to control or ameliorate. Baltrotsky, 395 Md. at 478, 910 A.2d 1089; Donald, 302 Md. at 465, 488 A.2d 971; Zorzit, 197 Md.App. at 101, 12 A.3d 698; Thomas, 183 Md. App. at 396, 961 A.2d 655. AMT contends that the court’s delay in ratifying the sale falls into the third category, see Donald, 302 Md. at 477, 488 A.2d 971, and asks us to not only to recognize as much, but to hold that courts are obliged to provide relief to purchasers when ratification goes beyond a “reasonable time,” which they define as sixty days.

We decline to reallocate responsibility for interest and taxes when the delay results from judicial backlogs, and especially to declare sixty days (or any other time period) as the presumptive point past which a delay is “reasonable.” AMT has not cited, and we have not found, any authority for the proposition that a court is a “person[ ] beyond the power of the purchaser to control or ameliorate.” Id. And when courts have abated interest payments, those decisions have been grounded in the behavior of the former owners.

In Baltrotsky, for example, the Court of Appeals held that interest payments should be set aside when the former owner instituted pro se litigation, filing “persistent and monotonous pleadings” in an effort to void the foreclosure sale, delaying final settlement for approximately a year. 395 Md. at 476, 481, 910 A.2d 1089. In that case, the former owner’s efforts to void the sale placed the case squarely within the “conduct of other persons” exception. Id. at 479, 910 A.2d 1089. Similarly, in Zorzit, this Court found that the “conduct of other persons” merited an abatement when former owners of three Baltimore City properties filed exceptions to the foreclosure sale that delayed ratification for seventy-seven days. 197 Md.App. at 108-09, 12 A.3d 698. We emphasized that it was the former owners, who “used the legal process to delay the final ratification,” rather than the conduct of either party to the sale (or, for that matter, the court itself), that put the case into interest-abating territory. Id. at 109, 12 A.3d 698.

AMT tries to shoehorn the court itself into the “conduct of other persons” exception by relying on case law recognizing the circuit court as the vendor of property in a judicial sale. See Greentree Series V, Inc. v. Hofmeister, 222 Md.App. 557, 566, 114 A.3d 230 (2015) (explaining that in a judicial sale, the court is the vendor, and the “contract of sale is a transaction between the court as vendor, and the purchaser ...” (quoting White v. Simard, 152 Md.App. 229, 241, 831 A.2d 517 (2003), aff'd 383 Md. 257, 859 A.2d 168 (2004))). If the court is the true seller of the property, the argument goes, it may not impose upon the purchaser a cost that accrued because of its own delay.

This argument fails, however, because the court’s role in a foreclosure sale is fundamentally different than that of a private seller. While the court functions similarly to a private seller in many ways, see id. at 566-67, 114 A.3d 230 (“Before ratification the transaction is merely an offer to purchase which has not been accepted.”), Title 14 of the Maryland Rules charges the court with a layer of oversight that a normal private seller wouldn’t have. That is, the court must hear any exceptions to the sale and may only ratify it if it decides the sale was fairly and properly made. Md. Rule 14-305(e). It was AMT’s duty, as purchaser, to “assure the court that [it was] ready, willing and able to comply with the terms fixed for its completion.” Donald, 302 Md. at 478, 488 A.2d 971. AMT is not entitled to a reduction in the interest payments it promised to pay simply because the court exercised its oversight role over a longer-than-ideal period of time.

Certainly, AMT has the right to a timely decision, but it would not be appropriate for us to establish a rigid time limit into the rule, let alone a time limit that imposes financial consequences on another party that also has no control over the delay. AMT points us to our decision in Zorzit and to Md. Rule 14-305(c) for its argument that courts should be bound by an upper limit of sixty days after the date of sale. The rule requires that the sale “be ratified unless cause to the contrary is shown within thirty days after the date of notice,” while Zorzit observed that “the process of achieving final ratification after the foreclosure sale would have been accomplished ... well within the 60 days as contemplated by the rules.” 197 Md.App. at 110, 12 A.3d 698. But even if the law did set a strict sixty-day time limit, and we do not hold that it does, neither the Code nor the Maryland Constitution guarantees a remedy. Cf. Myers v. State, 218 Md. 49, 51, 145 A.2d 228 (1958) (Art. IV, Sec. 23 language directing a circuit court decision “within two months ... is not mandatory, but directory.”); McCall’s Ferry Power Co. v. Price, 108 Md. 96, 113, 69 A. 832 (1908) (observing that the constitutional provision guaranteeing that the Court of Appeals file an opinion within three months after argument is “merely directory, and not mandatory,” and explaining that “[i]t certainly would not be within either the letter or the spirit of this provision to grant a re-argument because an opinion had not been filed within three months[,] thereby causing further delay.”).

For these reasons, we see no abuse of discretion in the circuit court’s decision to deny AMT’s request for abatement. The sale advertisement at issue here required the eventual purchaser to pay interest at 2.375% on the unpaid balance of the purchase price from the date of payment until the date of final ratification. The delay in the court’s ability to consider the sale, although regrettable, falls within the universe of risks properly allocated to purchasers, and a cost of doing business in this space.

JUDGMENT OF THE CIRCUIT COURT FOR PRINCE GEORGE’S COUNTY AFFIRMED. COSTS TO BE PAID BY APPELLANT.

      . AMT calculated interest on the unpaid balance of $98,500.00 at 2.375%, the rate stated in the advertisement (a per-day total of $6.41). AMT also sought an abatement of real estate taxes in the amount of $11.61 per day.

      . AMT phrases the issues as follows:
      QUESTION ONE: Where ratification of a foreclosure sale is delayed by Court review, is the foreclosure purchaser entitled to an abatement?
      QUESTION TWO: Where ratification of a foreclosure sale is delayed by causes or persons beyond the foreclosure purchaser's control, is the foreclosure purchaser entitled to an abatement of taxes and other accruing charges in addition to an abatement of interest?

      . In many cases, the lender becomes the foreclosure sale purchaser, so these latter two roles often merge.

      . In Simard v. White, the Court of Appeals further explained the implications of becoming equitable owner:
      Although he thus becomes the substantial owner from the time of the sale, and the property is at his gain if it appreciate and at his risk in case of loss by fire or through depreciation, yet, notwithstanding the purchase money be paid, the legal title of the purchaser does not vest until the deed to him is delivered, but, upon its delivery, this deed is not effective merely from the day of its execution, but vests the property in the purchaser from the day of sale.
      383 Md. 257, 325, 859 A.2d 168 (2004) (quoting Union Trust Co. v. Biggs, 153 Md. 50, 56, 137 A. 509 (1927)).

      . As we explained in Campbell v. Council of Unit Owners of Bayside Condo., a purchaser in a foreclosure sale is in a unique position in that from the date of the foreclosure sale, the purchaser is the equitable owner of the property, "with [his or] her enjoyment of that ownership balanced by the obligations of that ownership during that interval.” 202 Md.App. 241, 250, 32 A.3d 149 (2011).


author: WOODWARD, J.

text:
    137 A.3d 1062
    Steven KOUGL, et al. v. The BOARD OF LIQUOR LICENSE COMMISSIONERS FOR BALTIMORE CITY.
    No. 935,
    Sept. Term, 2015.
    Court of Special Appeals of Maryland.
    June 2, 2016.

      Peter A. Prevas (Prevas and Prevas, on the brief) Baltimore, MD, for appellants.
    Shelley Johnson, Annapolis, MD, for appellees.
    Panel: WOODWARD, GRAEFF, and ARTHUR, JJ.
   WOODWARD, J.

The eagle suffers little birds to sing,
And is not careful what they mean thereby,
Knowing that with the shadow of his wings
He can at pleasure stint their melodyf.]
—Tamora, Titus Andronicus, Act 4, Scene 4 (W. Shakespeare)

In the instant case, we are called upon to decipher the meaning of the word “suffer,” and its analogs, “permit” and “allow.” Specifically, we must decide whether these terms, when used in rules governing the conduct of holders of a liquor license in Baltimore City, require proof of knowledge on the part of such licensees.

Appellant, Steven Kougl, owns Club Harem, a Baltimore tavern and adult entertainment business, and holds a liquor license for that location issued by appellee, the Board of Liquor License Commissioners for Baltimore City (“the Liquor Board”). On July 2, 2014, the Liquor Board charged Kougl with violating three Liquor Board Rules related to solicitation of prostitution, indecent exposure, and violation of public morals, all occurring on April 25, 2013, at Club Harem, when an employee exposed herself to an undercover police officer and then solicited sexual intercourse from the same officer. The Liquor Board found Kougl guilty of all three violations and ordered that his liquor license be suspended for one month. Kougl filed for judicial review in the Circuit Court for Baltimore City, which affirmed the decision of the Liquor Board.

On appeal to this Court, Kougl raises four questions for our review, which we have condensed and rephrased as two questions:

1. Did the Liquor Board make sufficient findings of fact in support of the three charged violations of the Liquor Board Rules?
2. Did the Liquor Board err in concluding that Kougl was guilty of the three violations even though there was no evidence that Kougl had knowledge of his employee’s behavior?

For reasons set forth herein, we answer both questions in the affirmative, and thus reverse the judgment of the circuit court and remand the case to that court for entry of a judgment reversing the decision of the Liquor Board.

BACKGROUND

On April 25, 2013, Detective Fletcher Jackson, a Baltimore City police officer assigned to the Special Enforcement Section, entered Club Harem in plain clothes to conduct a prostitution investigation. Jamaica Brickhouse, a woman who worked at Club Harem, approached Det. Jackson at the bar and asked if she could join him. Det. Jackson said “sure,” and bought Brickhouse a drink. After some initial conversation, Brickhouse exposed her breasts to Det. Jackson. Brickhouse invited Det. Jackson to touch her breasts, which he did. Brickhouse then suggested a lap dance or a trip to “the VIP,” where they could “do whatever up there.” Det. Jackson asked how much it would cost him to have sex with Brickhouse; Brickhouse replied that it would cost $170 “for the room,” plus a tip for her services. Det. Jackson said that he could tip $100, and Brickhouse agreed. Brickhouse returned to the stage to perform, and Det. Jackson notified other officers. Brickhouse, however, was not issued a criminal summons until December 10, 2013, almost eight months later.

Fifteen months after the incident, on July 2, 2014, the Liquor Board charged Kougl with violating three Liquor Board Rules related to solicitation of prostitution in violation of Rule 4.17(a), indecent exposure in violation of Rule 4.17(b), and violation of public morals in violation of Rule 4.18. On July 17, 2014, the Liquor Board held a hearing on the charges against Kougl. Det. Jackson was the only witness for the prosecution; Kougl testified in his own defense. The Liquor Board voted 2-1 that Kougl was guilty of the three violations and suspended his liquor license for one month.

On July 18, 2014, Kougl filed a Petition for Judicial Review in the circuit court. On March 2, 2015, Kougl filed his Memorandum, in which he argued that (1) the Liquor Board’s decision was not based on substantial evidence, because “[t]here [wa]s nothing in [Det. Jackson’s] testimony to indicate that the [licensee knew, allowed or permitted this type of activity, which is needed to sustain the violations”; (2) its decision was unreasonable and arbitrary, because the Chairman of the Liquor Board stated that a licensee “would be responsible for actions of an employee” regardless of “whether the [licensee knew or did not know or allowed or did not allow or permitted or did not permit” the prohibited activity; and (3) the Liquor Board failed to make specific findings of fact and conclusions of law as required. On April 15, 2015, the Liquor Board filed its Response to Kougl’s Memorandum, in which it contended that (1) its decision was based on substantial evidence; (2) its decision was reasonable; and (3) the Liquor Board made sufficient findings of fact and conclusions of law.

On May 22, 2015, the circuit court held oral argument and issued an oral ruling affirming the decision of the Liquor Board. On May 28, 2015, the court entered its order affirming the Liquor Board’s decision. On June 22, 2015, Kougl filed a timely notice of appeal.

STANDARD OF REVIEW

Maryland law provides by statute that the action of a local liquor board is presumed to be proper and places the burden of proof upon the licensee to show that the decision complained of was arbitrary, fraudulent, unsupported by substantial evidence, illegal, or against the public interest. Md.Code (1957, 2011 Repl. Vol), Art. 2B, § 16 — 101(e)(l)(i). This Court has explained appellate review of a Liquor Board’s decision as follows:

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. It is a cardinal rule of administrative appeals that a reviewing court ... shall apply the substantial evidence test to final decisions of an administrative agency such as the Board, but it must not itself make independent findings of fact or substitute its judgment for that of the agency.
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.

Blackburn v. Bd. of Liquor License Comm’rs for Balt. City, 130 Md.App. 614, 623-24, 747 A.2d 725 (2000) (emphasis added) (citations and internal quotation marks omitted).

“Of course, the reviewing court may substitute its judgment for that of the [Liquor] Board on questions of law.” Id. at 624, 747 A.2d 725. In deciding whether to substitute its judgment on a question of law, a court should accord a degree of deference to the position of the administrative agency. Md. Aviation Admin. v. Noland, 386 Md. 556, 572, 873 A.2d 1145 (2005). “Thus, an administrative agency’s interpretation and application of the statute which the agency administers should ordinarily be given considerable weight by reviewing courts.” Id. “An agency conclusion will not be upheld upon review, however, if based upon an error of law.” Hoyle v. Bd. of Liquor License Comm’rs for Balt. City, 115 Md.App. 124, 129, 692 A.2d 1 (1997).

DISCUSSION

I.

Sufficient Findings of Fact

“There is no express requirement that the Board set forth specific findings of fact and conclusions of law. In order for any meaningful review to be conducted, however, the Board must do so, at least informally.” Blackburn, 130 Md.App. at 624, 747 A.2d 725 (citation omitted).

Kougl argues that the Liquor Board did not make sufficient findings of fact to allow for meaningful judicial review. Specifically, Kougl contends that the Liquor Board’s decision consists of the following two statements, neither of which contain any findings of fact:

All right. The verdict is responsible for all three charges. The police department is not on trial here. Mr. Kougl is. And bar owners or licensees are responsible for the conduct of their employees, as I have said before, in all cases, in all bars, in the city of Baltimore.
All right, my finding is responsible to all three charges and close him for one month, effective immediately.

According to Kougl, the above statements were insufficient to support a legal conclusion that Kougl violated the Rules at issue.

The Liquor Board responds that there is no requirement that it set forth specific findings of fact so long as its informal findings are sufficient to allow for “meaningful appellate review.” Furthermore, the Liquor Board argues that it made informal findings of fact that were “sufficient for this Court to determine whether substantial evidence supports the Board’s conclusion that Kougl violated the three Liquor Board Rules as charged.” We agree with the Liquor Board and shall explain.

As previously indicated, Kougl, as the licensee, was charged ■with violating Rules 4.17(a), 4.17(b), and 4.18. Rule 4.17 provides:

Sexual Practices and Obscenity
(a) No licensee shall permit or suffer his premises to be used for the purpose of any sexual activity, nor shall any licensee permit or suffer any employee, patron or frequenter to solicit any person for prostitution or other immoral purposes.
(b) No licensee shall permit or suffer any person to appear in any act or other performance with breasts or the lower torso uncovered; nor shall any licensee knowingly permit or suffer his premises to be used for the conduct, exhibition or performance of an obscene act or other performance.

(Emphasis added).

Rule 4.18 provides:

Illegal Conduct
No licensee shall commit or allow the commission on his premises of any act which shall be contrary to any federal, state or local statute, law or ordinance or against the public peace, safety, health, welfare, quiet or morals.

At the conclusion of the hearing on the charges against Kougl, the following occurred:

CHAIRMAN WARD: All right. The verdict is responsible for all three charges. The police department is not on trial here. Mr. Kougl is. And bar owners or licensees are responsible for the conduct of their employees, as I have said before, in all cases, in all bars, in the city of Baltimore.
The only question now is punishment----
All right, my finding is responsible to all three charges and close him for one month, effective immediately. And I’d be glad to hear from the other commissioners.
COMMISSIONER JONES: I agree. I agree that there’s a guilty for all charges. It’s clear to me that this thing took place. I have confidence in the police department. If I didn’t, the system would have a great defect in it, so I agree to the one month close order.
CHAIRMAN WARD: Commissioner?
COMMISSIONER MOORE: I disagree. I don’t think that the evidence substantiates the charges. And I’m concerned that there was a lapse of eight months. And I think that is extraordinary. It is unusual and it is not acceptable practice. And I think that that argues against a finding of guilt. So I say no.
CHAIRMAN WARD: Two to one. You heard the thing, you heard the penalty, sir. Good luck to you.

(Emphasis added).

The excerpt above makes clear that Commissioner Jones expressly relied on Det. Jackson’s testimony, and Chairman Ward implicitly relied on such testimony. Moreover, Kougl, in his testimony, did not dispute any of the evidence presented in Det. Jackson’s testimony, so a finding of guilty necessarily meant that Chairman Ward and Commissioner Jones credited Det. Jackson’s testimony as true.

Furthermore, a “Board Summary” was issued after the hearing, which set forth the factual basis for each violation:

Violation of Rule 4.17(a) “No licensee shall permit or suffer his premises to be used for the purpose of any sexual activity, nor shall any licensee permit or suffer any employee, patron or frequenter to solicit any person for prostitution or other immoral purposes.” (Re: April 25, 2013, dancer solicited undercover police officer for sexual intercourse ) GUILTY 2-1
Violation of Rule 4.17(b) “No licensee shall permit or suffer any person to appear in any act or other performance with breasts or the lower torso uncovered; no[r] shall any licensee knowingly permit or suffer his premises to be used for the conduct, exhibition or performance of an obscene act or other performance” (Re: April 25, 2013, dancer exposed herself to undercover police officer) GUILTY 2-1
Violation of Rule 4.18 “No licensee shall commit or allow the commission on his premises of any act which shall be contrary to any federal, state or local statue [sic], law or ordinance or against the public peace, safety, health, welfare, quiet or morals.” (Re: April 25, 2013, dancer solicited undercover police officer for sexual intercourse; dancer exposed herself to undercover police officer) GUILTY 2-1

(Italics added) (bold in original). The facts supporting each violation, as emphasized in italics above, tracks Det. Jackson’s testimony, and provides a sufficient factual basis to allow for meaningful judicial review.

II.

Strict Liability

Kougl argues that Rules 4.17 and 4.18 require some evidence or inference therefrom that Kougl suffered, permitted, or allowed solicitation and nudity to occur, and there was no evidence to support such a finding. According to Kougl, there was insufficient evidence for the Liquor Board to infer that Kougl permitted such conduct to occur “merely by reason that the dancer solicited the detective.”

The Liquor Board responds that the three violations “are, as a matter of law, strict liability offenses,” none of which require “a licensee’s knowledge of the impermissible conduct.” The Liquor Board analogizes Rules 4.17(a) and (b) to Rule 4.01(a), which prohibits sales of alcohol to minors, to argue that both Rules “contain[] both a strict liability prohibition and a second provision with a knowledge requirement.” As for Rule 4.18, the Liquor Board argues that it “contains no knowledge or mens rea language. Therefore, it describes a strict liability offense.” According to the Liquor Board, Kougl was found guilty of violating the strict liability portion of the Rules.

By virtue of its argument that the charged violations are strict liability offenses, the Liquor Board concedes that the evidence adduced at the hearing was insufficient to find that Kougl had actual or constructive knowledge of the violations. Upon review of the record, we agree that there was simply no evidence of Kougl’s actual or constructive knowledge of the violations.

Whether Rules 4.17 and 4.18 impose a strict liability standard on a licensee depends on the meaning of the words “suffer,” “permit,” and “allow” as used in the Rules. In determining the meaning of such words, “we apply well-settled rules of statutory construction, the cardinal rule of [which] is to ascertain and effectuate the intent of the Legislature.” Assateague Coastkeeper v. Md. Dep’t of Env’t, 200 Md.App. 665, 708-09, 28 A.3d 178 (2011) (citations and internal quotation marks omitted).

In so doing, we look first to the normal, plain meaning of the language of the statute, read as a whole so that no word, clause, sentence or phrase is rendered surplusage, superfluous, meaningless or nugatory. If the language of a statute is clear and unambiguous, we need not look beyond the statute’s provisions and our analysis ends. Where the language of the statute is ambiguous and may be subject to more than one interpretation, however, we look to the statute’s legislative history, case law, purpose, structure, and overarching statutory scheme in aid of searching for the intention of the Legislature.

Whitley v. Md. State Bd. of Elections, 429 Md. 132, 149, 55 A.3d 37 (2012) (citations and internal quotation marks omitted).

In accord with the above standard, we turn to the plain meaning of the subject terms in the Rules. Black’s Law Dictionary defines “suffer” as:

To allow, to admit, or to permit. It includes knowledge of what is to be done under sufferance. To suffer an act to be done or a condition to exist is to permit or consent to it; to approve of it, and not to hinder it. It implies knowledge, a willingness of the mind and responsible control or ability to prevent.

Black’s Law Dictionary 1432 (6th ed.1990) (emphasis added) (citations omitted). “Permit” is defined as: “To suffer, allow, consent, let; to give leave or license; to acquiesce, by failure to prevent, or to expressly assent or agree to the doing of an act.” Id. at 1140. Finally, Black’s Law Dictionary defines “allow” as:

The word has no rigid or precise meaning, its import varying according to circumstances or context in connection with which it is used. It may mean to bestow or assign to any one as his right or due. To approve of, accept as true, admit, concede, adopt, or fix. To grant something as a deduction or an addition; to abate or deduct; as, to allow a sum for leakage. To sanction, either directly or indirectly, as opposed to merely suffering a thing to be done; to acquiesce in; to suffer; to tolerate.

Id. at 76 (emphasis added) (citations omitted).

No Maryland appellate opinion exists regarding the meaning of these words in the context of the Liquor Board Rules. Other jurisdictions that use “suffer,” “permit,” or “allow,” in their liquor board rules are divided on whether such terms impose a strict liability standard, or whether knowledge on the part of the licensee must be proven.

Wisconsin, Oregon, and New Jersey courts have held that their states’ liquor board rules, all of which use the words “suffer,” “permit,” or “allow,” impose strict liability on the part of the licensee. In City of West Allis v. Megna, the Supreme Court of Wisconsin held that an ordinance that stated that no licensee shall “either directly or indirectly suffer or permit any person of either sex under the age of 21 years ... to enter or be on such licensed premises for any purpose,” imposed a strict liability standard. 26 Wis.2d 545, 133 N.W.2d 252, 253 (1965). The Court determined that “[p]roof of knowledge on the part of the tavern keeper that the patron is actually under age is not required by the statute in order to obtain a conviction,” and that such standard “is a price that the operator pays for the privilege of becoming licensed.” Id. at 254.

Similarly, the Court of Appeals of Oregon held in DK Entertainment, LLC v. Oregon Liquor Control Commission that, when interpreting an ordinance stating that “ ‘[n]o licensee or permittee will permit any unlawful activity on the licensed premises or in areas the licensee controls that are adjacent to or outside the premises,’ ” the Oregon Liquor Control Commission “may impute to the licensee the knowledge of the licensees employees.” 249 Or.App. 659, 278 P.3d 112, 113 n. 2, 114 (2012). Finally, in Division of Alcoholic Beverage Control v. Maynards Inc., the Supreme Court of New Jersey held an ordinance providing that “[n]o licensee shall allow, permit or suffer in or upon the licensed premises any unlawful possession of or any unlawful activity pertaining to” narcotics and other controlled dangerous substances imposed a strict liability standard. 192 N.J. 158, 927 A.2d 525, 536 (2007). The Court noted that “[i]t has long been the law in New Jersey that, in the context of the regulation of alcoholic beverages, ‘the word suffer ... imposes responsibility on a licensee, regardless of knowledge, where there is a failure to prevent the prohibited conduct by those occupying the premises with his authority.’ ” Id. at 538 (ellipses and italics in original).

Conversely, other courts, such as those in Colorado, California, New York, and Washington, have held that the terms “suffer,” “permit,” or “allow” require actual or constructive knowledge. In Full Moon Saloon, Inc. v. City of Loveland, the Colorado Court of Appeals held that a statute making it unlawful to, among other things, “permit the sale, serving, giving, or procuring of any alcohol beverage to or for a person under the age of twenty-one years” required that “some level of knowledge by the licensee must be established by the evidence.” Ill P.3d 568, 569-70 (Colo.App.2005). The Court explained:

The word “permit” connotes affirmative or knowing conduct. Thus, licensees and their employees and agents “permit” such conduct if they have actual knowledge of the violation or have constructive knowledge that it is occurring.
Our conclusion that constructive knowledge of liquor code violations is sufficient to hold a licensee responsible for permitting the violation is consistent with cases from other jurisdictions. See Spitz v. Mun. Court, 127 Ariz. 405, 621 P.2d 911 (1980) (licensee is deemed to have constructive knowledge of the age of underage buyer if licensee provides alcohol to the minor and fails to follow certain procedures); Laube v. Stroh, 2 Cal.App.4th 364, 3 Cal.Rptr.2d 779 (1992) (to suspend liquor license, evidence must be presented that licensee had either actual or constructive knowledge of activity); Pinacoteca Corp. v. Dep’t of Bus. Regulation, 580 So.2d 881 (Fla.Dist.Ct.App.[4th DCA]1991) (where activity is persistent and recurring, licensee’s knowledge of the activity may be inferred); State v. Engberg, 109 Idaho 530, 708 P.2d 935 (Ct.App.1985) (violation may be found if licensee had constructive knowledge of the prohibited activity); Town & Country Lanes, Inc. v. Liquor Control Comm’n, 179 Mich.App. 649, 446 N.W.2d 335 (1989) (licensee violated liquor license rule by failing to exercise reasonable diligence to ascertain the age of underage customer); Leake v. Sarafan, 35 N.Y.2d 83, 358 N.Y.S.2d 749, 315 N.E.2d 796 (1974) (to sustain a violation, licensee must have knowledge of the activity or the opportunity through reasonable diligence to acquire knowledge of the alleged acts); Smith v. Bd. of Liquor Control, 96 Ohio App. 396, 121 N.E.2d 920 (1954) (licensee must have actual or constructive knowledge of prohibited activity) Tex. Alcoholic Beverage Comm’n v. Sanchez, 96 S.W.3d 483 (Tex.App.2002) (to suspend liquor license, evidence must be presented that licensee had either actual or constructive knowledge of activity); Reeb, Inc. v. Wash. State Liquor Control Bd., 24 Wash.App. 349, 600 P.2d 578 (1979) (to “permit” a violation, licensee must have actual or constructive knowledge of the activity).

Id. at 570-71 (emphasis added).

Similarly, in Laube v. Stroh, the Court of Appeal of California “h[e]ld that a licensee must have knowledge, either actual or constructive, before he or she can be found to have ‘permitted’ unacceptable conduct on a licensed premises.” 2 Cal.App.4th 364, 3 Cal.Rptr.2d 779, 788 (1992). The Court continued: “It defies logic to charge someone with permitting conduct of which they are not aware.” Id. Finally, the Court noted that “[failure to prevent the problem from recurring, once the licensee knows of it, is to ‘permit’ by a failure to take preventive action.” Id. at 789.

Likewise, in Leake, the Court of Appeals of New York noted the following regarding the statutory words “suffer” or “permit”:

There is no particular mystery or magic in the language of the statute. This court in Matter of Migliaccio v. O’Connell [307 N.Y. 566, 122 N.E.2d 914 (1955)] defined the intent of the statute when it stated that in considering what is implied by the phrase suffer or permit as employed in the statute quoted above, we are guided by what was written for this court (per Cardozo, J.) in People ex rel Price v. Sheffield Farms [225 N.Y. 25, 121 N.E. 474 (1918) ]: Sufferance as here prohibited implies knowledge or the opportunity through reasonable diligence to acquire knowledge. This presupposes in most cases a fair measure at least of continuity and permanence.

358 N.Y.S.2d 749, 315 N.E.2d at 797 (emphasis added) (citations and internal quotation marks omitted).

Finally, in Reeb, the Court of Appeals of Washington held: The word “permit” as used in the regulation does not imply that the licensee must have permanently sanctioned the prohibited act; it refers to the licensee’s actual or constructive knowledge of the circumstances which would foreseeably lead to the prohibited activity. Reeb was aware of the propensity of its dancers to engage in questionable conduct and chose nevertheless to maintain topless dancing on its licensed premises. Under these circumstances, the Board could find that Reeb permitted the conduct in violation of [the Liquor Board Rules]. This violation is sufficient to support the 7-day license suspension imposed by the Board.

600 P.2d at 581 (citation omitted).

Considering the plain meaning of the words “suffer,” “permit,” and “allow,” we conclude that the use of those words in Rules 4.17 and 4.18 necessarily require that “some level of knowledge by the licensee must be established by the evidence.” Full Moon Saloon, 111 P.3d at 569. As indicated above, the definition of “suffer” expressly states that “[i]t includes knowledge of what is to be done under sufferance.” Black’s Law Dictionary at 1432. The terms “permit” and “allow” also imply knowledge of what is to be permitted or allowed. See First Nat’l Bank & Trust Co. of Port Chester v. New York Title Ins. Co., 171 Misc. 854, 12 N.Y.S.2d 703, 709 (1939) (“It has been said that every definition of ‘suffer’ and ‘permit’ includes knowledge of what is to be done under the sufferance and permission, and intention that what is done is to be done.”).

We are fully cognizant of the strong public policy considerations behind requiring a strict liability standard in the Liquor Board Rules. Unlawful or immoral activities may be associated with places where alcoholic beverages are sold. However, one of the primary purposes of the Liquor Board Rules is to clearly inform licensees of their responsibilities regarding prohibited activities so that they can conform their conduct and the conduct of their businesses to be in compliance with the Rules. Interpreting the words used in the Liquor Board Rules at variance with their plain meaning does not advance the public purpose of achieving compliance with the Rules. Although we are obligated to give deference to the Liquor Board’s interpretation of its Rules, see Noland, 386 Md. at 572, 873 A.2d 1145, “[a]n agency conclusion will not be upheld upon review, however, if based upon an error of law,” Hoyle, 115 Md.App. at 129, 692 A.2d 1. Accordingly, we hold that the Liquor Board erred in interpreting the words “suffer,” “permit,” and “allow” in Rules 4.17 and 4.18 to impose a strict liability standard on licensees.

We also hold that the knowledge requirement implicit in the terms “suffer,” “permit,” and “allow” can be satisfied by proof of either actual or constructive knowledge on the part of the licensee. See Full Moon Saloon, 111 P.3d at 570. Actual knowledge is, of course, actual awareness of the prohibited activity. Actual knowledge also includes the concept of “deliberate ignorance” or “willful blindness.” See Rice v. State, 136 Md.App. 593, 604, 766 A.2d 663 (2001). In State v. McCallum, Judge Chasanow explained the meaning of this form of knowledge in a concurring opinion:

There is more than one mental state that may constitute “knowledge.” The first and highest form of “knowledge” is actual knowledge, that is, an actual awareness or an actual belief that a fact exists. A second form of “knowledge” is what has often been called “deliberate ignorance” or “willful blindness.” R. Perkins, Criminal Law, Ch. 7, § 4 at 687 (1957). The latter form of “knowledge” exists where a person believes that it is probable that something is a fact, but deliberately shuts his or her eyes or avoids making reasonable inquiry with a conscious purpose to avoid learning the truth. See 1 W. LaFave & A. Scott, Substantive Criminal Law, § 3.5 at 307 (1986), and authorities cited therein. In United States v. Jewell, 532 F.2d 697 (9th Cir.), cert. denied, 426 U.S. 951, 96 S.Ct. 3173, 49 L.Ed.2d 1188 (1976), the 9th Circuit Court of Appeals noted that the deliberate ignorance or willful blindness form of knowledge has been accepted by leading commentators in the United States and in England. The opinion quoted from Professor Glanville Williams’ Criminal Law: The General Part, § 57 at 157, 159 (2d ed.1961), as follows:
“To the requirement of actual knowledge there is one strictly limited exception.... [T]he rule is that if a party has his suspicion aroused but then deliberately omits to make further enquiries, because he wishes to remain in ignorance, he is deemed to have knowledge____The rule that wilful blindness is equivalent to knowledge is essential, and is found throughout the criminal law.”

Id. at 700.

321 Md. 451, 458-59, 583 A.2d 250 (1991) (Chasanow, J., concurring) (emphasis added).

Constructive knowledge, however, implies knowledge where a licensee should have known of the prohibited activity if reasonable care and diligence had been exercised. See Leake, 358 N.Y.S.2d 749, 315 N.E.2d at 797 (stating that “it must be demonstrated that the licensee had knowledge or the opportunity through reasonable diligence to acquire knowledge of the alleged acts”); Morgan v. Bd. of Water Works of Pueblo, 837 P.2d 300, 303 (Colo.App.1992) (stating that, if in the exercise of ordinary diligence a party should have known a fact, it will be deemed to have knowledge).

The Colorado Court of Appeals explained constructive knowledge as follows:

Constructive knowledge may be inferred if the conduct occurs openly, such that a reasonable person would observe it. If knowledge of the prohibited conduct could have been obtained through the exercise of reasonable care and diligence, constructive knowledge may be inferred.
Applying a constructive knowledge standard does not place an undue burden on the licensee because constructive knowledge requires only reasonable care and diligence and does not require extraordinary vigilance. Constructive knowledge means knowledge that one using reasonable care or diligence should have, and therefore that is attributed by law to a given person.

Full Moon Saloon, 111 P.3d at 570 (citations and internal quotation marks omitted).

Nevertheless, the Liquor Board argues that Rule 4.17 is similar to Rule 4.01(a), which we held in Hoyle to impose strict liability. We disagree.

Rule 4.01(a) provides: “No licensee shall sell or furnish alcoholic beverages to any person under twenty-one (21) years of age or to any person with the knowledge that such person is purchasing or acquiring such beverages for consumption by any person under twenty-one (21) years of age.” Hoyle, 115 Md.App. at 130, 692 A.2d 1. In Hoyle, the Liquor Board ruled that Martini’s Bar had violated Rule 4.01(a) when one of its employees served alcohol to a minor. Id. at 128, 692 A.2d 1. Martini’s Bar appealed, arguing that this Court “should read a ‘due caution’ provision into the [R]ule.” Id. at 131, 692 A.2d 1. We declined to do so, and instead held that the Rule “imposes strict liability for the sale on the licensees.” Id. at 133, 692 A.2d 1.

Our holding in Hoyle is clearly distinguishable from our holding in the case sub judice. Rule 4.01(a), unlike Rule 4.17, does not use the words “suffer,” “permit,” or “allow,” which, as explained above, necessarily include an element of knowledge. Instead, Rule 4.01(a) sets forth a simple directive — “No licensee shall sell or furnish ....”, which carries no implication of knowledge.

Finally, because the word “knowingly” appears in the second independent clause (“second clause”), and not in the first independent clause (“first clause”), of Rule 4.17(b), the Liquor Board claims that such sentence construction necessarily implies a strict liability standard in the first clause. Again, we disagree.

To reiterate, Rule 4.17(b) states:

No licensee shall permit or suffer any person to appear in any act or other performance with breasts or the lower torso uncovered; nor shall any licensee knowingly permit or suffer his premises to be used for the conduct, exhibition or performance of an obscene act or other performance.

The first clause clearly identifies the prohibited act — any person “appearing] ... with breasts or the lower torso uncovered.” On the other hand, the second clause prohibits the performance of an “obscene act or other performance.” In our view, the word “knowingly” appears in the second clause because an element of knowledge is required to constitutionally regulate obscenity, a class of unprotected speech that is not clearly defined in First Amendment jurisprudence. See generally Miller v. California, 413 U.S. 15, 20, 93 S.Ct. 2607, 37 L.Ed.2d 419 (1973) (summarizing “the somewhat tortured history of the Court’s obscenity decisions”).

Accordingly, we hold that the Liquor Board erred in finding that Kougl was guilty of violating Rules 4.17(a), 4.17(b), and 4.18, because there was no evidence that Kougl had actual or constructive knowledge of his employee’s prohibited activity.

JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY REVERSED. CASE REMANDED TO THAT COURT WITH INSTRUCTIONS TO ENTER A JUDGMENT REVERSING THE DECISION OF THE LIQUOR BOARD RENDERED ON JULY 17, 2014. COSTS TO BE PAID BY APPELLEE.

      .Kougl’s questions, as presented in his brief, are as follows:
      1. Did the Liquor Board make sufficient findings of fact and conclusions of law to allow for meaningful judicial review?
      2. Did the Liquor Board err in finding the licensee guilty of violating Liquor Board Rule 4.17(a)?
      3. Did the Liquor Board err in finding the licensee guilty of violating Liquor Board Rule 4.17(b)?
      4. Did the Liquor Board err in finding the licensee guilty of violating Liquor Board Rule 4.18?

      . These charges were nolle prossed by the State on January 6, 2014.

      . As set forth infra, the dissenting Commissioner found that the evidence did not support the charges, because "there was a lapse of eight months. And I think that is extraordinary. It is unusual and it is not acceptable practice."

      4. The Alcoholic Beverages Rules and Regulations for the Board of Liquor License Commissioners for Baltimore City were updated in 2015 and effective as of January 1, 2016. The new rules that correspond to old rules 4.17 and 4.18 are:
      Rule 4.15 — Sexual Practices and Obscenity
      (a) A licensee may not permit the licensed premises to be used for any sexual activity. A licensee, any employee, patron or frequenter may not solicit any person for prostitution or other immoral purposes.
      (b) A licensee may not permit a person to appear in an act or other performance with breasts or the lower torso uncovered. A licensee may not knowingly permit the licensed premises to be used for the conduct, exhibition, or any unlawful performance.
      (c) Section (b) of this rule does not apply to licensees that have a valid adult entertainment license issued by this Board.
      Rule 4.16 — Illegal Conduct
      A licensee may not commit or allow the commission on the licensed premises of an act that is contrary to any federal, State or local statute, law or ordinance or that is against the public peace, safety, health, welfare, quiet, or morals.
      The prior version of Rule 4.17 did not contain a subsection (c) exempting the application of the Rule to licensees with a valid adult entertainment license. There is nothing in the record, nor do the parties contend, that Kougl held a valid adult entertainment license for Club Harem at the time of the violations.

      . The existence of "the VIP" appears to be the only contested factual finding. In his testimony, Kougl denied that a "VIP room” existed at Club Harem. According to Det. Jackson, however, Brickhouse never referred to a room, but rather stated that she and Det. Jackson could "go up to the VIP.” Brickhouse could have been referring to the employees' dressing room or Kougl's offices, both of which are located "upstairs” at Club Harem.

      . Nothing in this opinion should be interpreted as precluding the Liquor Board from imposing a strict liability standard on licensees, so long as the language of the Liquor Board Rules explicitly provides for such standard.