Schwartz v. DNR

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In the Circu it Court for Q ueen A nne s Co unty Case No. CV-8746 IN THE COURT OF APPEALS OF MARYLAND No. 94 September Term, 2004 ROB ERT A. SC HW ART Z, ET AL. v. MARYLAND DEPARTMENT OF NATURAL RESOURCES Bell, C.J. Raker Wilner Cathell Harrell Battaglia Greene, JJ. Opinion by Raker, J. Wilne r, J., Disse nts. Filed: March 14, 2005 We must decide in this case whether app ellants were required to pay Maryland excise tax under sec tion 8-716 (c) of the S tate Boat A ct, Md. Code (1973, 2000 Repl. Vol), §§ 8-701 et seq. of the Natural Resources Article. W e shall hold th at appellants are liable for the tax, albeit for diff erent reason s than we re relied upo n by the Circu it Court. I. On June 9, 2000, appellants Robert and Joanne Schwartz purchased a new Symbol Model 557 yacht, later named the Mahalo H awaii IV (hereinafter the vessel ), from The Yach t Cente r dealer ship in E dgew ater, M aryland. On June 10, 2000, appellants signed a DNR form B-110, captioned Certification of State of Prin cipal U se. 1 Appellants indicated on the form that the vessel would be used principally in the State of Florida, and would be kept at an address in Key Colony Beach, Florida. The reverse side of the B-110 form contains the following language: The Certification of State of Principal Use is a dual-purpose form used when a vessel is to be used principally outside of Maryland and is, therefore, exempt from Maryland excise tax. It serves as the certification by the dealer that the purchaser has been advised about Maryland excise tax and as the pu rchaser s acknowledgment of the receipt of the information. A ll information requested on the certification and the signature of the purchaser must be furnished. If the vessel was purchased from a Maryland licenced dealer, the dealer must also sign the certification. 1 In addition to fields for identifying a vessel, its dealer, and its purchasers, the form contains the following language : Own er Certificatio n: I certify under penalty of perjury that the vessel described above will be used principally in the state of __________, and will be kept at (m arina na me or re sidenc e addre ss) ___ _____ __. State of Principal Use The state or jurisdiction in which a vessel is used the greatest percentage of time in a calender year. Use The operation, navigation, or utilization of a vessel. A vessel is considered in use whenever it is upon the water, whether it is moving, anchored, or tied up to any manner of dock or buoy. A vessel is also considered in use if it is kept in any structure in readiness for use. A vessel stored on a trailer in Marylan d is con sidered to be in r eadine ss for u se. Based on their execution of this form, appellants did not pay the 5% Maryland excise tax, due at the time of purchase, on the sale of a vessel in Maryland. The record indic ates that a DNR investigator observed the vessel in a slip at Mears Point Marina, in Grasonville, Maryland, on June 16, July 15, August 15, and September 28, 2000. It appeared to the investigator that no maintenance was being performed on the vessel on those dates. Because the vessel had been observed in Maryland over the summer months, DNR issued a Notification of Assessment to appellants, stating that the vessel had incurred a Maryland excise tax liability in the amount of $34,625.43, plus fees, pe nalties, and inte rest. Appellan ts appealed the assessment, and on July 11, 2001, the Office of Administrative Hearings held a hearing pursuant to Md. Code (1973, 2000 Repl. Vol), § 8716.2(e) of the Natural Resources Article. Before the Administrative Law Judge (ALJ), appellants in troduced in to evidence the ship s log, which detailed tw enty-four trips ta ken on the vessel between June 9, 2005 and October 28, 2005. Five of these trips were designated as sea trials : one to se t the autopilot, one to reset and check onboard electronics, one to calibrate compasses, one to reset the -2- autopilot, and one to test the ride w ith respect to ro lling. With the exception of this last trip, all of the designated sea trials were journeys of six miles or less. All five sea trials were journeys from the vessel s slip at M ears Point Marina to so me point in the wa ter, returning to Mears Point without another destination. The remaining journeys ranged from ten to 144 miles, involved stops at various p oints aro und Maryland, on e stop in A tlant ic Ci ty, New Jersey, and included overnight stays on eight occasions. With the exception of the twoday trip to Atla ntic C ity, Ne w Je rsey, the vessel rem ained in M aryland from the date of its purchase until October 28, 2000. The vessel arrived in Thunderbolt, Georgia on November 5, 2000, where it remained until Mr. Schwartz took it to Florida on January 23, 2001. Mr. Schwartz testified that he and his wife were residents of Florida, had previously been residents of Delaw are, and ha d never b een Ma ryland residents . Appellan ts offered in to evidence copies of M r. Schwartz s Flo rida driver s lice nse and v oter registration card to support these statem ents. Mr. S chwartz a cknow ledged tha t appellants owned a summer residence in Stevensville, where they typically spent the months of May through September or October. According to Mr. Schwartz, appellants purchased a waterfront house in Florida specifically to accom modate the vessel, an d extensive ly remedied its dock in anticipation of the vessel s requirements. Appellants produced the d eed to the F lorida residen ce, dated A pril 19, 2000, a building permit for the Florida dock renovations dated April 18, 2000, and invoices dated April 24 and 25 for the construction work. Mr. Schwartz testified that these -3- improvem ents were made with some haste, because I wanted to have this dock ready for this boat w hen I pu rchase d the bo at and w ent bac k to Flo rida wi th it. Mr. Schwartz indicated that he had purchased the vessel knowing that it had some major problems, but expected that the deale r would c ontinue to c orrect its problems after delivery. According to Mr. Schwartz, these warranty-covered defects prevented him from remov ing the b oat from Marylan d. Appellants offered into evidence a list compiled by Mr. Schwartz, detailing various warranty repairs performed by The Yacht Center. The list recounted the following actions: 1. Relocation of fresh water filtration units, following an incorrect installation that prohibited the filters from being changed. Accomplished August 29, 2000. 2. Replacement of defective window blinds. Required four service visits from time of purchase to eventual correction by the end of July, 2000. 3. Investigation of engine voltage drop, possibly due to incorrect wiring. Required at least one service visit on September 7, 2000. It is unclear from the exhibit whether this problem was ever remedied. 4. Replacement of incorrect compass on upper station. Accomplished prior to July 12, 2000. 5. Removal of water intake from behind underwater exhaust and reinstallation in another lo cation (nec essary to preve nt air conditioning from failing while vessel underway). Required two prior service visits to diagnose. Accomplished September 19, 2000. 6. Installation of new microwave oven to replace nonfunctioning original. Accomplished July 14, 2000. -4- 7. Repair of trash com pactor. Prob lem not disc overed u ntil August 26, 2000. Accomplished approximately September 11, 2000. 8. Replacement of incorrect propellers. Date not indicated. 9. Repair of malfunctioning cable master. Required two service visits. Accomplished September 6, 2000. 10. Replace ment of in correct anchor. Required two service visits. Accomplished September 1, 2000. 11. Repair of onboard television sets. Required two service visits. Problem not satisfactorily resolved. 12. Repair and eventual replacement of defective bimini canvas top. Required four service visits. 13. Re pair of g enerato r. Required two service visits. Problem not satisfactorily resolved. Appellan ts introduced a letter from Mark A. Schulstad, Presiden t of The Yac ht Center, stating th at the ve ssel req uired w arranty rep airs from June 2 000 thr ough O ctober 2 000. Mr. Schwa rtz also testified to a more ser ious warra nty issue: a persistent oil leak from the vessel s transmission. Acco rding to Mr. Schwa rtz, the beginn ings of this problem were apparent from day one, but it was not until September that a representative of the engine manufacturer informed Mr. Schwartz that the transmission would need to be removed from the vessel, re paired, and reinsta lled. This pro cess was accomp lished over the one-m onth period, detailed infra, that the vessel was being outfitted with aftermarket stabilizers. -5- Appellan ts introduced a letter from the engine manufacturer detailing the transmission work, as well as prior service activities. These included: June 17, 2000 - June 22, 2000 Troubleshooting an active fault code July 17, 2000 - July 19, 2000 Troubleshooting and replacement of the Starter Motor September 01 - September 11, 2000 Troubleshooting and repair of Charging system September 28, 2000 - October 27, 2000 Troubleshooting and repair of oil leaks that required the removal and reinstallation of the ves sel trans mission s. The most serious problem to which Mr. Schwartz testified was the vessel s tendency to roll significan tly in even mo derate seas. Schwartz stated that had noticed this behavior the first time he rode on the vessel, prior to his taking possession from the dealer. He recalled nine occasions over the co urse of the summe r on whic h the vesse l took signific ant rolls, several of which caused the vessel s furniture to overturn. After the third or fourth roll, Schwa rtz deemed [the] boat to be totally unsafe, a nd felt that he could not safely take it to Florida with this problem for fear of capsizing en route. Schwartz testified that this opinion was b ased on his kno wledg e as a lice nsed b oat cap tain. The ship s lo g conta ined nu merou s refere nces to the stab ility problem . On the occasion of his first trip with the Yacht Agency salesman, Mr. Schwartz wrote: Boat made a crazy roll to port upon going thru another boats heavy wake. Sea was very flat. Mike made a comment that the boat was bow steering, however, I have never seen this in flat seas. He told me I would find that the boat steered somewhat different than what I had experienced in other boats. I didn t -6- question him because this was the 1st time that I had ridden in the boa t but I w as unco mforta ble. Additional log entries indicate as follows: 6-11-00 . . . The boat made another crazy roll to starboard in moderate seas. Was not sure what caused this. *** 7-1-00 . . . Got another crazy roll to port but not as bad as previous rolls. Sea was very flat. This seems to happen when the sea is from the beam. *** 7-8-00 . . . Encountered app . 1 foot seas to the starboard beam. Boat took a hard roll to port when turning into the beam sea. Furniture & tables turned over due to this hard roll. Feel the boat has something wrong w ith it but I am still trying to adjust to the steering because of what Mike P had told me. *** 8-11-00 . . . Seas we re modera te but the boat rolled again when turning into a beam sea . Very dange rous roll. *** 8-19-00 . . . 1 to 2 ft s eas. . . . Boat took another hard roll to port when turning into th e beam se a. Furniture ro lled all over inside the boat. Th ere is definitely so mething w rong with this boat. *** 8-27-00 . . . App. 2' wa ves from the beam port side coming up the bay. Made a 90 degree turn to starboard putting the seas to the port beam. I thought the boat was going to turn over. The boat rolled hard to port & starboard all the way up the bay. Wife got sick and had to go below. Chairs, tables & etc. flew all over -7- the interior and pu t bad scratch es in the bea utiful cherry/ho lly pilothouse door. THIS BOAT IS NOT SAFE TO RIDE IN. *** 9-16-00 . . . Atlantic City to Mears. Atlantic ocean had beam seas of app. 2/3'. Boat took several hard rolls to port and starboard. Wife got sick. Ran the boat app . 1½ miles off sho re so we were sure to ride in the beam rollers going to shore to see if I could figu re out wh at was w rong with this boat. Was forced to go out several miles to get out of the rollers to get away from the hard rolls . Upon entering the D elaw are B ay, we had a head sea and the boat ran wonderful as it always has in head seas. Made the decision that something had to be done about these hard rolls as this boat is definitely UNS AFE. I am su re this boat will roll c ompletely over som eday in a heavy beam sea or entering a rough inlet. Something must be done ASA P as this boat is no t seawor thy. 9-23-00 . . . Sea trial for har d rolling . The wind was blowing hard with app. 3' waves. A good time to test the ride. Boat rolled b eyond an accep table rid e. Mr. Schwartz testified that he contacted Jim Booth, sales manager for Holiday Marine Sales, LLC, one of the largest Symbol dealers in the United States. Appellants introduced an affidavit from Booth, who described himself as extremely familiar with the operating characteristics of Symbol Yachts, including the 557 model. Booth averred that it is the practice of Holiday Marine Sales to install Wesmar RS600 aftermarket stabilizers on all Symb ol M odel 557 yacht s, to c orrect tha t model s tendency to roll ex cess ively. Mr. Schwa rtz testified that he contracted with the Oxford Yacht Agency to install the stabilizers. Appellants introduced a written estimate from Oxford Yacht Agency, in the -8- amount of $33, 930, and s tating Work to com mence we ek of Octobe r 1 st. Please allow two weeks for job to be ac comp lished. Mr. Sch wartz explained that a delay in ob taining parts had caused the installation to last u ntil October 26th . During this period, he stated, the vessel was out of the water and kept within a building. It was also during this period that th e transmission work, detailed supra, was accomplished. Schwartz testified that he took the vessel on a sea trial on October 26th , and was satisfied that the stabilizers were having the desired effect. During th is sea trial, however, an electronic problem developed which prevented him from transferring control of the vessel among its three piloting stations. In order to fix this problem, a p art needed to be airfreighted from the State of Washington. The vessel was fully operational by October 28th , and then appe llants departe d Maryland waters. A ppellants intro duced into evidence a bill for the e lectroni cs wo rk. With respect to the vessel s failure to reach Florida before the end o f 2000, Mr. Schwa rtz testified that the vessel broke down twice en route, once in North Carolina and once in South Carolina, the latter incident requiring a three-day stop for repairs. According to Mr. Sch wartz, app ellants left the v essel in Georgia in favor of a rental car because they wished to vote in the 2000 presidential elections and could not re ach their ho me coun ty in time by sea. He indicated that they did not return to the vessel after the election because they took a previously scheduled two-week vacation in Australia. Upon his return from Australia, Mr. Schwarz testified, he proceeded to Delaware for year-end accountin g at his autom obile -9- dealership and to spend the holidays w ith his ch ildren an d grand children . He claimed that a serious computer m alfunction required his prese nce at the dealership for six weeks, preven ting him from c ollecting the boa t until late Januar y. DNR called Robert Wilson, general manager of the Mears Point Marina. Wilson produced and authe nticated M arina record s showin g Mr. Sc hwartz s slip rental contracts for the periods May 1, 2000 to October 15, 2000 and May 1, 2001 to October 1, 2001. Wilson also authenticated a letter he had written to DNR, stating Mr. Schwartz is a long-time slipholder at Mears Point Marina and has always brought his previous vessels from Florida to Mears Point Marina in mid-M ay and departed in early Octobe r. Mr. Schwartz is a ve ry knowle dgeable captain and maintains meticulous records in his ship s log. Wilson acknowledged on cross-ex amination that some slip holders do not keep their boats at the Marina for their entire rental periods. He also testified that he had frequently observed maintena nce and re pair work being perf ormed o n the vesse l. Francis Keller, an investigator for DNR s Boat Tax Enforcement unit testified that he had observed the vessel in its s lip at Mears Point on June 16, 2000, July 5, 2000, August 15, 2000, and September 28, 2000, and that the boat appeared ready for use on each occasion. He clarified that he considered the vessel ready for use because he didn t see anyone working on it, and the vessel was in the water like it was ready for use. On crossexamination he estimated that he had spent two to three minutes observing the boat on each occasion, for a total of twelve minutes. He acknowledged that he did not know whether the -10- vessel s transmissions or generators had been working, or whether the boat had been suffering from stability problems. David Van Dyke, Program Director of the Tax Enforcement Un it of the Natural Resources Police, also testified for DNR. He indicated that he considered himself to be experienced in the mechanics and operability of boats, based on twenty-five years boating experience and on having passed the Master Exam Coast Guard for 100 ton vessels. Mr. Van Dyke testified that, in his opinion, removal of both transmissions would have rendered the vessel inoperable, that removal of a single transmission would have rendered the vessel difficult to operate, but not inoperab le, and that work performed on the starter mo tors likely had rendered the vessel inoperable for approximately twenty hours. But he testif ied that, from his examination of the other repair documentation, it could not be established that such repairs had rendered the vessel inoperable. On cross-examination, Mr. Van Dyke stated that he had never operated a fifty-seven foot boat, that he had never taken a boat to Florida, that he ha d no know ledge about M r. Schwartz s competency as a captain, and that he was not a mechanic. He also sta ted his opinion that installation of the aftermarket stabilizers had been by choice, and not essential to the ve ssel s se aworth iness. Before the ALJ, both parties agreed that Md. Code (1973, 2000 Repl. Vol.), § 8716(c) of the Na tural Resou rces Article 2 imposes a 5% excise tax upon the titling or sale of 2 Unless ind icated otherw ise, all subsequ ent statutory refe rences w ill be to Md. Code (contin ued...) -11- any vessel within the State of Maryland. The parties further agreed that a purchaser who certifies on form B-110 that a vessel will be used principally in a state other than Maryland is not required to pay the tax. The parties agreed implicitly that, rather than the definition set forth on the reverse of form B -110, use d principally sh ould have the m eaning ass igned in § 8-716(a)(3): 2 (...continued) (1973, 2000 Repl. Vol), Natural Resources Article. Because the taxable event at issue occurred in 2000, w e refer to the law as it existe d in that year. Section 8-716(c) has not been amended since 2000. Post-2000 amendments to other sections of the State Boat Act will be addressed infra where re levant. Section 8-7 16(c) prov ides, in pertine nt part: (1) Except as provided in § 8-71 5(d) of this su btitle and in subsections (e) and (f) of this section, and in addition to the fees prescribed in subsection (b) of this sec tion, an excis e tax is levied at the rate of 5% of the fair market value of the vessel on: (i) The issuance of ev ery original certificate of title required for a vessel under this subtitle; (ii) The issuance of every subsequent certificate of title for the sale, re sale, or transfer of the vessel; (iii) The sale within the State of every other vessel; and (iv) The possession within the State of a vessel purchased outside the S tate to be used princ ipally in the S tate. (Emp hasis ad ded.) The exception s contained in §§ 8-71 5(d) and 8 -716(f) ap ply only to the § 8716(c)(1)(iv) tax on possession. The sale-related exception s in § 8-716(e) conce rn transfers to fam ily members, dealers, the government, and charitable organizations; the remaining exceptions in § 8-716(e) apply only to the tax on possession. Thus, no ne of the statutory excep tions is a pplicab le here. -12- Used principally in this State means that this State is the state of principal use as defined in § 8-701(n)[3] of this subtitle, except that in calculating where the ves sel is use d or use d most , a vessel is not consid ered to be in use for any period of time that it is held for maintenance or repair for 30 consecuti ve days or more. Appellan ts argued that the vessel had been held for m aintenance or repair for 30 consecutive days or more during its entire stay in Maryland, and that none of this time should count towards the calculation of principal use . In particular, the y drew attentio n to the fact that most of the work done on the vessel consisted of warranty repairs performed by the Maryland dealer. They also contended that the vessel had not been safe for the ocean voyage to Florida until completion of the stabilizer installation on October 26, 2000. They further argued tha t, even if the vessel had not been held for m aintenance or repair, it sho uld not be considered used principally in Maryland because it had been used in the State for less than six months. DNR argued that, regardless of the state of principal use, a vessel purchase d in Maryland must be removed from Maryland within 30 days to qualify for the exemption. Assuming that principal use was an issue, DNR argued that the vessel should only be considered held for m ainte nance or repa ir during periods wh en it w as co mpletely 3 Section 8-701(n) provides: State of principal use means the state on whose w aters a vesse l is used o r to be u sed mo st during a calen der year. Section 8-701(p) p rovides: U se means to operate, navigate, or emp loy a vess el. A vessel is in use whenever it is upon the water, whether it is moving, anchored, or tied up to any manner of dock or buoy. A vessel is also in use if it is kept in any structure in readiness for use . -13- inoperable. In any event, it contended, the evidence did not support appellants contention that the vessel had remained in Maryland solely because of its maintenance requirements. It also argued that DNR s longstanding policy was to base principal use calculations on calendar years ending December 31. Because the vessel h ad not bee n used by appellants anywhere prior to its purchase, DNR contended that principal use therefore turned on whether the boat ha d been us ed more in Maryland th an in any other state from Jun e 9 to December 31, 2000. On S epte mbe r 5, 2001, the A LJ found tha t the v esse l had been in M arylan d 140 days in 2000 from the time of purchase to the time of departure. She credited appellants with time held for maintenance or repair for 30 consecutive days or more only for those times she found the vessel to have been actually inoperable or unusable. Further, she found four periods of inoperability: June 17-22, July 17-19, September 19, and September 28 to October 27. Only the final period lasted thirty days or longer, and the ALJ accordingly subtracted thirty days from the vessel s use in Maryland, leaving 1 10 days. In m aking this determination, the ALJ noted that only five of the vessel s summer voyages were logged as sea trials, and that the vast majority of the trips appear to be for pleasure to various destina tions. The ALJ he ld that princip al use shou ld be calculated from the date of purchase to the end of the calendar year, because the excise tax liability does not arise until the time of purchase. She determined that the vessel had spent fifty-seven days in Georgia, and less than -14- ten days total in Virg inia and the C arolinas in 20 00. She thu s held that t he vesse l s 11 0 days of use in Maryland made this State the state of principal use. Accordingly, the ALJ concluded that DNR s assessment was proper and not subject to revision. Appellan ts noted exceptions to the Secretary of Natural Resources. They argued that the language of § 8-716(a )(3) did not su pport a read ing that a ve ssel must be complete ly inoperable to qualify as held for maintenance or repair. They again argued that principal use requires use for more than six months in a calendar year. The Secretary issued the final decision on January 31, 2002. With regard to maintenance or repair, the Secretary stated as follows: Whether a vessel is he ld for maintenance and repair depends on the facts. The vessel does not need to be totally inop erable, as the Department argued to the ALJ . Rather, the v essel must, in fact, have been held f or maintenance and repair for 30 consecutive days or more . In this case, the A LJ . . . specifica lly found that not all of [the repair] problems prevented the Appellan ts from u sing the vessel . . . . For example, the Appellants made 24 voyages on their vessel from June 11 through September 28, only five of which were for sea trials. She concluded and I agree that the vess el was in u se in Maryland for this period of time. The only time it was not in use held for maintenance or repair for 30 consecutive days or more was from Septemb er 29 throu gh Octo ber 27. The ALJ properly excluded this time from the calculatio n of use in Marylan d. With regard to the calculation of principal use, the Secretary held: there is no six-month requirement in the law. . . . A tax is due upon the sale or transfer of a vessel, or upon the movement of a vessel into Marylan d wate rs. Here, Appellants purchased the vessel on June 9 in Maryland, and a tax was due. Appellan ts did -15- not pay this tax because they certified that they were go ing to move the vessel to Florida. Bu t as the AL J noted, from the date of purchase until the end of the 2000 calendar year, the vessel did not spend a single d ay in the State of Florida. Appellan ts filed a petition for judicial review in the Circuit Court for Q ueen Anne s Cou nty. The primary focus of both sides arguments before the Circuit Court was whether appellants qualified for an exemption of the excise tax based on a factual determination of whether the vessel was held for maintenance or repair in Maryland. Appellan ts argued that [a]lthough the Secreta ry correctly construe d the maintenance or repair exemption, [his] Final Decision was erron eous bec ause it failed to consider the Petitioners extensive maintenance or repair evidence in light of the exemption. DNR argued that the Secretary s factual findings w ith respect to the duration of use versus maintenance or repair periods were supported by substantial evidence. Appellants also challenged the Secretary s legal conclusion that a vessel may be used princ ipally in Maryland even if it spe nds less than six months in the State. DNR argued that its construction of the statutory term u sed princip ally in this state as containing no six-month requirement was entitled to deference. To the surprise (and dismay) of both parties, the Circuit Court decided the case not on a factual ba sis but rather on legal grounds: that no exemption exists under the statute, and that the court could not invent an exemption. Because the court held the exemption found by the ALJ and the Secretary did not exist, it reversed the decision of the Secretary of Natural Resources and remanded the case to the Secretar y, with instructions to dismiss the appeal. -16- Appellan ts noted a timely appeal to the Court o f Special A ppeals. W e issued a W rit of Certiorari on our own initiative before consid eration b y that cou rt. Schwartz v. DNR, 383 Md. 569, 861 A.2d 60 (200 4). II. Before this Court, bo th parties argu e that the Circ uit Court erre d in conclu ding that there is no exemption to the excise tax provision of the State Boat Act. DNR argues that since the 1989 addition of a sales and use tax to the State Boat Act, it has interpreted the Act as not requiring dealers to co llect the excise tax from buyers of vessels who certify under penalty of perju ry that the v essel w ill be use d princ ipally outs ide of M aryland. DNR supports its argumen t with the lon gstanding principle that a n agency s in terpretation and admin istration o f its statut e is entitle d to def erence . In support of its argumen t, DNR points to The Boat D ealers Manual, a published DNR docume nt, containing the B11 0 form, Certification of State of Principal Use, and the specific instructions for dealers in reference to persons who make the required certification. In addition, DNR relies on the inaction of the General Assembly, which has neither legislatively revoked nor modified DNR s published practice despite having amended the State Boat Act several times in the eightee n years tha t Act ha s provid ed for th e tax. See, e.g ., Md. Code (1973, 2000 Repl. Vol., 2002 Cum. Supp.), § 8-716(e)(8) of the Natural Resources Article (amending statute to perm it non-residen ts to bring ve ssels into M aryland for up to -17- ninety days without incurring an excise tax); M d. Code (1 973, 200 0 Repl. Vol., 2002 Cum. Supp.), § 8-716(a)(4) of the Natural Resources Article (amending statute to exclude sea trials of vessels from calculations of principal use under certain conditions); Md. Code (1973, 2000 Repl. Vol., 2004 Cum. Supp .), § 8-716(k ) of the N atural Reso urces Artic le (amend ing statute to provide d efinition of held for m aintenance or repair. ) A ppellants ess entially join in DNR s legal c onstruc tion of th e Act. Appellan ts argue that [a]lthough the Secretary correctly construed the maintenance or repair exemption, [his] Final Decision was erroneous because it failed to consider the Petitioners extensive maintenance or repair evidence in light of the exem ption. Ap pellants point again to the evidence which they introduced before the ALJ. They suggest that any contradictory evidence presented by DNR was speculative and superficial. They contend that many of the periods during which no repair work was performed can be explained by the dela ys in ordering parts and scheduling technician services during the busy summer months. Fina lly, appellants repeat their argument that Maryland cannot be the state on whose waters a vessel is used or to be used most during a calendar year under § 8-701(n) if a vessel spends less than six months in Maryland . They sugge st that this language is ambiguous, and open to two contradictory interpretations. Under the first interpretation, p rincipal use w ould be calculated based on a full calendar year. Under the second, if the owner purchased the vessel during a year in question, only that portion of the year which follows the purchase would be consid ered. Acc ording to ap pellants, the fo rmer interpre tation is correc t; their -18- vessel would not qualify as principally used in Maryland u nder that test; and the Secretary erred in applyin g the latte r interpre tation. They argue that the Sec retary s reading le ads to absurd results and treats similarly situated taxpayers differently. They point out that a person purchasing a boat on January 1 of a particular year could potenti ally keep the bo at in Maryland for 162 days without incurring an excise tax liability, whereas under the Secretary s interpretation, their vessel s 110 adjusted (140 gro ss) days subjec ts them to liabi lity. DNR argues that substantial evidence supports the Secretary s finding that the vessel was held for maintenan ce or repair for only thirty days. In particular, it points to the Secretary s observation that nineteen of the vessel s twenty-four voyages appeared to have been for pleasure, and that the vessel s operational problems th erefore did not prohib it its use by appellants. It also contends that appellants regular M ay through O ctober stays in Maryland suggest that the vesse l was not b eing kept in the State m erely for maintenance or repair in 2000. DNR asserts that nothing in § 8-701(n) supports appellants suggestion that a vessel must remain in Maryland six months of a calendar year be fore it is cons idered princ ipally used in this State. R ather, it conten ds that the Se cretary correctly app lied the law by comparing the vessel s 110 ad justed days in M aryland with th e fifty-seven it sp ent in Georgia, and determined that Maryland was the state of principal use. It further suggests that -19- determining principal u se in this manner is a longstanding administrative policy of DNR, and thus entitled to deference. III. Review of a decisio n of the Department of Natural Resources is governed by the Administrative Procedure Act, Md. Code (1984, 2004 Repl. Vol.), §§ 10-101 et seq. of the State Government Article. Section § 10-222(h) of the State Government Article provides as follows: (h) In a p roce edin g under this sectio n, the court ma y: (1) reman d the case f or further p roceeding s; (2) affirm the final decision; or (3) reverse or modify the decision if any substantial right of the petitioner may have been prejudiced because a finding, conclusion, or decision: (i) is unconstitu tional; (ii) exceeds th e statutory autho rity or jurisdiction of the final decision maker; (iii) results from an unlawful procedu re; (iv) is affected by any other error of law; (v) is unsupported by compete nt, material, and substantial evidence in light of the entire record as submitted; or (vi) is arb itrary or cap ricious. In reviewing th e dec ision of an adm inistrativ e age ncy, we evalu ate the decision of the agency under the same statutory standards as would the c ircuit co urt. Spencer v. Board of -20- Pharmacy, 380 Md. 515, 523-24, 846 A.2d 341, 346 (2004). We therefore assume without deciding that DNR could pro perly grant the tax exemptio n at issue, and consider o nly whether the Secretary erred in concluding that appellants were not entitled to the exemption as a matte r of fac t. In doing so, we w ill assume that the parameters of the exemption are as defined by the parties th at purchase rs are entitled to the exem ption if their vessels are not used principally in this State as defined in § 8-716(a) of the Natural Resources Article. Many Maryland cases have set out the standard for judicial review of administrative agency decisions. We have often stated that ord inarily a court w ill only review the actions of an admin istrative agen cy to determine if its conclusions are, as a matter of la w, arbitrary, capricious, or contrary to law, and that before a court will review the administrative agency s actions as to whether they are arbitrary, capricious, or contrary to law, the court must have the reco rd of th e evide nce sub mitted to the age ncy. When an agency decision encompasses a mixed question of law and fact, we review it under the substantial evidence standard provided in Md. Cod e (1984, 2004 R epl. Vol.), §§ 10-222(h )(3)(v) of the State Gove rnmen t Article . Charles County v. Vann, 382 Md. 286, 296, 855 A.2 d 313, 31 9 (2004); Ramsay, Scarlett & Co. v. Comptroller, 302 Md. 825, 838, 490 A.2d 1296, 1303 (1985). Substantial evidence review is narrow; the question is not whether we would have reached the same conclusions, but mer ely whether a reasoning mind could have reached those conclusions on the record before the age ncy. Vann at 295, 855 A.2d at 31 8; Board of Physician Quality v. Banks, 354 Md. 59, 67-68, 729 A.2d 376, -21- 380-81 (1999 ). See Bulluck v. Pelham Wood Apts., 283 Md. 505, 512-13, 390 A.2d 1119, 1123-24 (1978). We appraise an agency s fact finding in the light most favorable to the agen cy, and this deference extends to subsequent inferences drawn from that fact finding, so long as supp orted b y the reco rd. Christoph er v. Dept. of Health , 381 Md. 188, 199, 849 A.2d 46, 52 (2004). Indeed, not only is it the province of the agency to resolve conflicting evidence, but where inconsistent inferences from the same evidence can be drawn, it is for the agency to draw the infe rences. Gigeous v. ECI, 363 Md. 481, 504, 769 A.2d 912, 926 (2001) (quoting Bulluck, 283 Md. at 513, 390 A.2d at 1124). We give great deference to the agency s assessment of the credibility of the witnesses. The agency s determination of factual issues will be upheld if the record of the agency proceeding affords a substantial ba sis of fac t from w hich the issue ca n be rea sonab ly inferred . With respect to an agency s conclusions of law, we have often stated that a co urt reviews de novo for cor rectnes s. Spencer, 380 M d. at 528, 84 6 A.2d a t 348-49 . We frequently give weight to an agency s experience in interpretation of a statute that it administers, but it is always within our prerogative to de termine whether an agency s conclusions of law are correct, and to remedy the m if wron g. Christopher at 198, 849 A.2d at 52; Balto. Lutheran High Sch. v. Emp. Sec. Adm., 302 Md. 649, 662, 490 A.2d 701, 708 (1985). The difficult problem presented in the case sub judice is that the Circ uit Court for Queen Anne s County ruled on an issue that was never raised before the agency. We -22- recognize the conundrum the Circuit Court faced: the court believed that the State Boat Act did not contain the exem ption that bo th parties, the ad ministrative law judge, and the Secretary of DNR believed to exist, yet the issue was one o f law, never raised bef ore the agenc y. In Brodie v. MVA, 367 Md. 1, 785 A.2d 747 (2001), the petitioner raised a single legal issue that had never been raised during the adm inistrative proceedings. Brodie s d river s license had been revoked by the Motor Vehicle Administration (MVA) and he requested a hearing before the Office of Administrative Hearings. The administrativ e law judg e upheld the revocation and Brodie filed in the Circuit Court a petition for judicial review. Before the Circuit Court, he argued that the MVA could not revoke a driver s license when that license has already been revoked. This legal argument had never been presented in the administrative proceedings and was raised in the C ircuit Court f or the first time . The Circu it Court addressed his argument on the merits, rejected it, and affirmed the administrative decisio n. Id. at 3, 785 A.2d at 748. We granted Brodie s petition for Writ of Certiorari, which raised the single legal question decided b y the Circuit Court. We affirmed the Circuit Court, without addressing the merits of the legal issue presented, holding that [s]ince Brodie s entire challenge to the administrative decision was based on an issue not raised before the agency, the Circuit Court should have affirmed the administrative decision without reaching the issue. Id. at 5, 785 -23- A.2d at 749. We reiterated our standard of judicial review and generally accepted practice with regard to agency de cisions, stating th at a review ing court or dinarily may not pass upon issues p resented to it for the first time on judicial review and that are not encompassed in the final decision of the administrative agenc y. Stated d ifferen tly, a . . . . court will rev iew an ad judicatory agen cy decision so lely on the grounds relied upon by the agency. Id. at 4, 785 A.2d at 749 (quoting Dept. o f Health v. Cam pbell, 364 Md. 108, 123, 771 A.2d 1051, 1 060 (2 001)). Under the aegis of Brodie, unless the question of whe ther an exe mption ac tually exists under the statute is encompassed in the final decision of th e adm inistrativ e age ncy, we shou ld not review the circu it court d ecision addres sing it. A reasonable argument can be made that when the agency considered whether appellants qualified for an exemption, the premise that the exemption exists under the Act was encompassed implicitly in the final decision of the administrative agency. On the other hand, a reasonable argument can be made that, since the question of whether an exemption exists was neither raised, briefed, nor argued, that issue is not encom passed in the final agency decision. Because, even if the exemption exists, we agree with the agency decision that appellants are not entitled to the exemption as a matter of fact, we will not in this case de cide whe ther the Circ uit Court w as correct in its construction of the statute.4 4 This case s hould provide fa ir notice to the Department of Natural Resources, boat dealers, boat builders, and potential boat purchasers that the exemption at issue may not exist under the statute. Inasmuch as the Circuit Court for Queen Anne s County may well have (contin ued...) -24- Whether and for how long the vessel was held for maintenance or repair is a mixed question of law and fact. That is, its resolution requires not only factual findings as to the vessel s movements and maintenance history, but also construction of the somewhat ambiguous statutory language in light of those facts.5 4 (...continued) been correct in its interpretation, DNR might consider proposing to the Legislature language clarifying or amending the statute to p rovide explicitly for that which is reflected in F orm 110B. 5 The phrase held for maintenance or repair is susceptible to various interpretations. Does held mean h eld by a mechanic? If so, must the vessel be in the m echanic s physical custody, or merely brought regularly to the m echanic for a course of maintenance? Or does held mean held in Maryland i.e. kept here rather than removed to some other state? If so, must maintenance be the only reason, the primary reason, or just one reason among many the vessel remains here? Can the vessel be operable? C an it be used for pleasure trips as well as sea trials? Wh at ratio of plea sure trips to sea trials is permissible? Is the owner s intent relevant? The resolution of these questions is inextricably intertwined with the factual determinations at issue. We note that the current version of § 8-716 does contain a definition of held for maintenance or repair which would seem to resolve some but not all of these questions for future determinations: (k) Vessel held for maintenance or repair: (1) For purposes of subsection (a)(4) of this section, a ve ssel is deem ed to be he ld for mainte nance, rep air, or comm issioning if: (i) The maintenance, repair, or commissioning work is provided in exchange for compensation; (ii) The maintenance, repair, or commissioning work is perform ed pursua nt to a sched ule preestablished with one or more marine contractors; and (iii) The total cost of the maintenance, repair, or commiss ioning work is at least two times the reasonab le current market cost of docking or storing t he vess el. (2) Time spent con ducting sea trials shall be included when (contin ued...) -25- Upon review of the record before the agency, we hold that there is substantial evidence to support the decision of the agency. We find that the Secretary s findings and inferences with respect to maintenance or repair were within the province of a reasoning mind. The Secretary construes held for maintenance or repair for 30 consecutive days or more to require a period of thir ty or m ore c onse cutiv e days during which a vessel is not used for any purpose unrelated to maintenance. With regard to the meaning of held for maintena nce or repa ir, the Secreta ry stated: The vessel does not nee d to be totally inop erable. . . . Rather, the vessel must, in fact, have been held for maintenance and repair for 30 consecutive d ays or more. . . . [The ALJ] specifically found that not all of [the rep air] problems prevented the Appellants from using the vessel . . . . For example, the Appellants made 24 voyages on their vessel from June 11 through September 28, only five of which were for sea trials. She concluded and I agree that the vessel was in use in Maryland during this period of time. The only time it was not in use held for maintenance or repair for 30 consecu tive d ays or mor e wa s from Septem ber 29 t hroug h Octo ber 27. This construction is not unreasonable. The Secretary concluded that nineteen of appellants trips prior to September 28, 2000 were not taken as sea trials i.e. were taken for n on-maintenance p urposes. The Sec retary 5 (...continued) calculating the period of time a vessel is held for maintenance, repair, or comm issioning un der subsec tion (a)(4) of this section . Md. Code (1973, 2000 Repl. Vol., 2004 Cum. Supp.), § 8-716(k) of the Natural Resources Article. -26- adopted and incorporated the factual findings of the ALJ, who noted that only five trips were recorded in the ship s log as sea trials, and that these trips were distinguishable by the short distances traveled and the lack of destinations or overnight stays. The ALJ concluded that [t]he vast majority of the trips appear to be for pleasure to various destinations, and we find this inference to be reasonable in light of the record. Conflicting testimony was presented to the ALJ, requiring the ALJ to make credibility assessments. The ALJ had the parties before her, had an op portunity to observe them while they testified, and determined which witness testimony to accept. The Secretary relied on the ALJ s findings. The Secretary and ALJ found, based on the testimony and evidence presented at the hearing, that appellants intended to keep their vessel in Maryland for the summer boating season regardless of its maintenance needs.6 Appella nts maintain ed that the v essel was in Maryland and used in Maryland to diagnose operational problems, or that appellants had every intention of removing the vessel to Florida but were stymied by mechanical and stability issues. The ALJ heard the evidence, viewed the witness es, and ma de a credib ility determination; neither the ALJ nor the Secretary was clearly erroneous in disbelieving appellant. Because we conclude that the Secretary s findings and inferences are supported by substantial evidence, we hold that he did not err in deciding that the vesse l had been held for maintenance or repair only during the thirty d ays it s pent at th e Ox ford Yac ht Agency. 6 While the intentions un derlying appe llants decision to keep the vessel in Maryland are not directly relevant under the Secretary s construction of held for maintenance or repair, this finding does provide support for the inference that many of the vessel s summer 2000 trips were taken for pleasure, not maintenance. -27- The issue of whether a vessel can be used principally in this State if kept here fewer than six months in a given year is solely a q uestion of la w. Wh ere statutory lang uage is unambiguous when construed according to its ordinary and everyday meaning, we give effect to the statu te as it is w ritten. Collins v. Sta te, 383 Md. 684, 688-89, 861 A.2d 727, 730 (2004). The p arties ag ree that th e langu age of Md. C ode (19 73, 200 0 Rep l. Vol.), § 8-701(n) of the Natural Resources Article controls the determination of principal use in this case. That statute provides: State of principal use means the state on whose waters a vessel is used o r to be u sed mo st during a calen dar year. This langua ge is no t ambig uous. Calendar year is defined in Black s Law Dictionary via a cross-reference to year, the first definition of which is given as follows: 1. Twelve calendar months beginning January 1 and ending December 31. Also termed calendar year. Black s Law Dictionary 1646 (8th ed. 200 4). The inclusion of calendar year as a synon ym for this type of year stands in contrast to Black s second definition of year for which calendar year is not give n as a synon ym 2. A consecutive 365-day period beginning at any point; a span of twelve months. Id. The statute thus defines the state of principal use as the state on whose waters a vessel is used or to be used m ost during the period lasting from Janu ary 1 of the year in question to the fo llowin g Dec embe r 31. The language is susceptible to only one rea ding: if a vessel is used more in Maryland than it is used in any other state during a given calendar year, Marylan d is the v essel s state of princip al use. The plain languag e will not support -28- appellants proposed six-month require ment. Appellants would apparently have us replace used or to be used most during a calendar year with used or to be used for most o f a calendar year. As we have often stated, we will neither add nor delete words to a clear and unambiguous statute to give it a meaning not reflected by the words the Legislature used or engage in a forced o r subtle interpre tation in an attempt to extend or limit the statute s meaning. Serio v. Baltimore County, 384 Md. 373, 390, 863 A.2d 952, 962 (2004) (quoting O Connor v. Baltimo re Coun ty, 382 Md. 102, 114 , 854 A.2d 119 1, 1198 (2004)). If a vessel happens to be used in only two states throughout a calendar year, then it is true that the vessel will not be principally used in Maryland unless it spends at least 183 days (approxim ately six months) here. But that is not the only situation in which a vessel could be used most in Maryland. A vessel used five mon ths in Ma ryland, four m onths in Delaware, and three months in Virginia would still be used most in this State. A vessel acquired by its owners midway through the year thus not used by them in any state prior to purchase and then used in Maryland fewer than six months but longer than in any other state would still be used most in this State. This latter possibility describes precisely the facts sub judice. The vessel was not used by appellants prior to June 9, 2000. After adjusting for time spent held for maintenance or repair, it was used for 110 days in Maryland, fifty-seven days in Georgia, and ten days total in other states. T he Secreta ry did not err in finding that the vesse l was use d principally in Maryland in the year 2000. -29- JUDGMENT OF TH E CIRCU IT COURT FOR QUEEN ANNE S COUNTY VACATED. C A SE REMANDED TO THAT COURT WITH INSTRUCTIONS TO AFFIRM THE ORDER OF THE SECRETARY OF THE DEPARTMENT O F NATURAL RES OUR CES . COSTS TO BE PAID BY APPEL LANTS. -30- In the Circu it Court for Q ueen A nne s Co unty Case No. CV-8746 IN THE COURT OF APPEALS OF MARYLAND No. 94 September Term, 2004 ______________________________________ ROBERT A. SCHWARTZ, ET AL. v. MARYLAND DEPARTMENT OF NATURAL RESOURCES ______________________________________ Bell, C.J. Raker Wilner Cathell Harrell Battaglia Greene, JJ. ______________________________________ Dissenting Opinion by Wilner, J. ______________________________________ Filed: March 14, 2005 Although I agree entirely with the Court that appellants are not entitled to the exemption from the State Boat Excise Tax that they seek, in pa rt for the reason stated by the Court, I dissent from the judgment vacating the judgment of the Circuit Court and from what, to me, is the unwarranted refusal of the Court to address the one important issue in the case. I would a ffirm the ju dgment o f the Circu it Court bec ause it was right. With but a handful of exceptions, none of which apply in this case, this Court is a certiorari court. Review is discretionary. Maryland Code, § 12-203 of the Courts and Judicial Proceedings Article provides that [i]f the Court of Appeals finds that review of the case described in § 12-301 is desirable an d in the pub lic interest, the Court of Appea ls shall require by writ of certiorari that the case be certified to it. That is the standard we use in determining whether to review a case on appeal whether review is desirable and in the public interest, whether it has public importance beyond the interest of just the particular litigants. Although we have been somewhat uneven in implementing that provision, we have generally recognized a duty, once we have granted certiorari because we believe that an issue of public importance requiring a definitive, binding, precedential decision by this Court is presented, to address and resolve that issue, unless for some good reason we conclude, after reading the briefs and listening to argument, that the issue is not properly presented or cannot for some other procedural reason be decided. We took this case bef ore any decisio n by the Cou rt of Specia l Appeals . Although three issues were raised in appellants brief, only one, to me, justified our taking the case whether the Circuit Court was correct in concluding that no exemption from the State Boat Excise Tax exists when the boat is purchased in Maryland for use principall y outside the State. That was the sole b asis upon which the Circuit Court s judgment rests, and it was the flagship issue raised b y appellants in th eir brief, upon which o ur decision to grant certiorari was based. It is an issue of public im portance in Maryland, w hich is a ma ritime State possessing a vibrant boating industry and hosting boat shows of national and international signific ance. There is nothing of any public importance about whether there was legally sufficient evidence in an administrative record to document how many days appellants boat was undergoing repair d uring th e year 20 00. That is entirely factual an d, howe ver decide d, would be of little or no precedential value to anyone other than the litigants here. Yet the Court deliberately omits to address the only issue worthy of this Court s consideration and, instead, wades through an intensely factual administrative record searching for the straws of evidence to supp ort the S ecretary s conclu sion tha t the boa t was u sed in M aryland f or 110 days. The lega l issue resolve d by the Circu it Court needs to be addressed and determined by this Court, for otherwise it will continue to lurk in the law, affect an important revenue measure for the State, and cast a shadow of doubt on every boat sale in Maryland in which the owner certifies an intent to use the boat elsewhere. It is particularly important for us to address that issue because , if the Circuit Court s conclusion is correct, which I believe it is, the D epartmen t of Natura l Resourc es is deliberately declining to collect a tax that the General Assemb ly has specifica lly charged it -2- with collecting. By nothing more than its own policy directive, it has created an exemption found nowhe re in the statute, a nd until such time as this Court holds that policy invalid, the Department will persist in not collecting the tax and the State will not receiv e the revenue that the General Assembly has declared it should receive. The issue that the Court hopes might some da y arise in an adm inistrative proc eeding like ly will never arise in that contex t. The boat purchaser will always assume that the departmentally-created exemption applies, as will the Department, and the fight will always be over some other exemption. That has been true for many years. Because neither of the adversarial parties has any incentive to raise the issue of the principal use exemption that does not exist in the statute, the hope of ever getting a proper administrative determination by the De partment o f Natural R esources is likely a fo rlorn on e. If the Circuit Court s rea ding of the statute is correc t, but may caus e some ec onomic hardship to the boating indu stry in Maryland, the indu stry ca n ask the G ener al Assem bly, which is now in s ession and will remain in session for another month, to reconsider the tax statute and create the exemption that is not presently there. That is the normal way, and a perfectly effective way, in which a statutory construction decision by this Court can be reviewed by the Legisla ture. If the G eneral As sembly believes that the kind of exemption created by the Department of Natural Resources should exist, it can easily and quickly place it into the law. To acknowledge but then fail to address the issue will, because of the -3- lingering uncertainty, create more of a hardship for the boating industry than a clear decision which, unfavorable to the industry, can easily be corrected by the Legislature. -4-