Title: Schwartz v. DNR

State: maryland

Issuer: Maryland Supreme Court

Document:

In the Circuit Court for Queen Anne’s County
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.
Opinion by Raker, J.
Wilner, J., Dissents. 
Filed:   March 14, 2005
1In addition to fields for identifying a vessel, its dealer, and its purchasers, the form
contains the following language: “Owner Certification: I certify under penalty of perjury that
the vessel described above will be used principally in the state of __________, and will be
kept at (marina name or residence address) __________.”
We must decide in this case whether appellants were required to pay Maryland excise
tax under section 8-716(c) of the State Boat Act, Md. Code (1973, 2000 Repl. Vol), §§ 8-701
et seq. of the Natural Resources Article.  We shall hold that appellants are liable for the tax,
albeit for different reasons than were relied upon by the Circuit Court.
I. 
On June 9, 2000, appellants Robert and Joanne Schwartz purchased a new Symbol
Model 557 yacht, later named the Mahalo Hawaii IV (hereinafter “the vessel”), from The
Yacht Center dealership in Edgewater, Maryland. 
On June 10, 2000, appellants signed a DNR form B-110, captioned “Certification of
State of Principal Use.”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 purchaser’s
acknowledgment of the receipt of the information.  All
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.
-2-
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
Maryland is considered to be in readiness for use.”
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 indicates 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, penalties, and interest.
Appellants appealed the assessment, and on July 11, 2001, the Office of
Administrative Hearings held a hearing pursuant to Md. Code (1973, 2000 Repl. Vol), § 8-
716.2(e) of the Natural Resources Article.
Before the Administrative Law Judge (ALJ), appellants introduced into evidence the
ship’s log, which detailed twenty-four trips taken on the vessel between June 9, 2005 and
October 28, 2005.  Five of these trips were designated as “sea trials”: one to set the autopilot,
one to reset and check onboard electronics, one to calibrate compasses, one to reset the
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autopilot, and one to “test the ride” with respect to rolling.  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 Mears Point Marina to some point in the water,
returning to Mears Point without another destination.  The remaining journeys ranged from
ten to 144 miles, involved stops at various points around Maryland, one stop in Atlantic City,
New Jersey, and included overnight stays on eight occasions.  With the exception of the two-
day trip to Atlantic City, New Jersey, the vessel remained in Maryland 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 Delaware, and had never been Maryland residents.  Appellants offered into
evidence copies of Mr. Schwartz’s Florida driver’s license and voter registration card to
support these statements.  Mr. Schwartz acknowledged that 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 accommodate the vessel, and extensively remedied its dock in anticipation of
the vessel’s requirements.  Appellants produced the deed to the Florida residence, dated April
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
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improvements were made with some haste, because “I wanted to have this dock ready for this
boat when I purchased the boat and went back to Florida with it.”
Mr. Schwartz indicated that he had purchased the vessel knowing that it had some
“major” problems, but expected that the dealer would continue to correct its problems after
delivery.  According to Mr. Schwartz, these warranty-covered defects prevented him from
removing the boat from Maryland. 
 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 location (necessary to prevent 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 non-
functioning original.  Accomplished July 14, 2000.
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7. Repair of trash compactor.  Problem not discovered until
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. Replacement of incorrect 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. Repair of generator.  Required two service visits.  Problem
not satisfactorily resolved.
Appellants introduced a letter from Mark A. Schulstad, President of The Yacht Center,
stating that the vessel “required warranty repairs from June 2000 through October 2000.”
Mr. Schwartz also testified to a more serious warranty issue: a persistent oil leak from
the vessel’s transmission.  According to Mr. Schwartz, the beginnings 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, repaired, and reinstalled.  This process was accomplished over the one-month
period, detailed infra, that the vessel was being outfitted with aftermarket stabilizers.
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Appellants 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 vessel transmissions.”
The most serious problem to which Mr. Schwartz testified was the vessel’s tendency
to roll significantly in even moderate 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 course of the summer on which the vessel took significant rolls,
several of which caused the vessel’s furniture to overturn.  After the third or fourth roll,
Schwartz “deemed [the] boat to be totally unsafe,” and 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 based on his knowledge as a licensed boat captain. 
The ship’s log contained numerous references to the stability 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
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question him because this was the 1st time that I had ridden in
the boat but I was uncomfortable.”
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 with it but I am still trying to adjust
to the steering because of what Mike P had told me.
* * *
8-11-00 . . . Seas were moderate but the boat rolled again when
turning into a beam sea.  Very dangerous roll.
* * *
8-19-00 . . . 1 to 2 ft seas. . . . Boat took another hard roll to port
when turning into the beam sea.  Furniture rolled all over inside
the boat.  There is definitely something wrong with this boat.
* * *
8-27-00 . . . App. 2' waves 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
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the interior and put bad scratches in the beautiful cherry/holly
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 shore
so we were sure to ride in the beam rollers going to shore to see
if I could figure out what was wrong 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 Delaware Bay, 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 UNSAFE.  I am sure
this boat will roll completely over someday in a heavy beam sea
or entering a rough inlet.  Something must be done ASAP as this
boat is not seaworthy.
9-23-00 . . . Sea trial for hard rolling.  The wind was blowing
hard with app. 3' waves.  A good time to test the ride.  Boat
rolled beyond an acceptable ride.”
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
Symbol Model 557 yachts, to correct that model’s tendency to roll excessively.
Mr. Schwartz testified that he contracted with the Oxford Yacht Agency to install the
stabilizers.  Appellants introduced a written estimate from Oxford Yacht Agency, in the
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amount of $33, 930, and stating “Work to commence week of October 1st.  Please allow two
weeks for job to be accomplished.”  Mr. Schwartz explained that a delay in obtaining parts
had caused the installation to last until 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 the
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 this 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 part needed to be air-
freighted from the State of Washington.  The vessel was fully operational by October 28th,
and then appellants departed Maryland waters.  Appellants introduced into evidence a bill
for the electronics work. 
With respect to the vessel’s failure to reach Florida before the end of 2000, Mr.
Schwartz 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. Schwartz, appellants left the vessel in Georgia in favor of a rental car because they
wished to vote in the 2000 presidential elections and could not reach their home county 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 accounting at his automobile
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dealership and to spend the holidays with his children and grandchildren.  He claimed that
a serious computer malfunction required his presence at the dealership for six weeks,
preventing him from collecting the boat until late January. 
DNR called Robert Wilson, general manager of the Mears Point Marina.  Wilson
produced and authenticated Marina records showing Mr. Schwartz’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-May and departed in early October.  Mr. Schwartz is a very
knowledgeable captain and maintains meticulous records in his ship’s log.”  Wilson
acknowledged on cross-examination that some slipholders do not keep their boats at the
Marina for their entire rental periods.  He also testified that he had frequently observed
maintenance and repair work being performed on the vessel.
Francis Keller, an investigator for DNR’s Boat Tax Enforcement unit testified that he
had observed the vessel in its slip 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 cross-
examination 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
2 Unless indicated otherwise, all subsequent statutory references will be to Md. Code
(continued...)
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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 Unit 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 inoperable, and that work performed on the starter motors likely
had rendered the vessel inoperable for approximately twenty hours.  But he testified 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 had no knowledge about Mr.
Schwartz’s competency as a captain, and that he was not a mechanic.  He also stated his
opinion that installation of the aftermarket stabilizers had been “by choice,” and not essential
to the vessel’s seaworthiness.  
 Before the ALJ, both parties agreed that Md. Code (1973, 2000 Repl. Vol.), § 8-
716(c) of the Natural Resources Article 2 imposes a 5% excise tax upon the titling or sale of
2(...continued)
(1973, 2000 Repl. Vol), Natural Resources Article.  Because the taxable event at issue
occurred in 2000, we refer to the law as it existed 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 relevant.
Section 8-716(c) provides, in pertinent part:
“(1) Except as provided in § 8-715(d) of this subtitle and in
subsections (e) and (f) of this section, and in addition to the fees
prescribed in subsection (b) of this section, an excise tax is
levied at the rate of 5% of the fair market value of the vessel on:
(i) The issuance of every original certificate of
title required for a vessel under this subtitle;
(ii) The issuance of every subsequent certificate
of title for the sale, resale, 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 State to be used principally
in the State.”
(Emphasis added.)
The exceptions contained in §§ 8-715(d) and 8-716(f) apply only to the § 8-
716(c)(1)(iv) tax on possession.  The sale-related exceptions in § 8-716(e) concern transfers
to family members, dealers, the government, and charitable organizations; the remaining
exceptions in § 8-716(e) apply only to the tax on possession.  Thus, none of the statutory
exceptions is applicable here. 
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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, “used principally” should have the meaning assigned in
§ 8-716(a)(3):
3 Section 8-701(n) provides: “‘State of principal use’ means the state on whose waters
a vessel is used or to be used most during a calender year.”
Section 8-701(p) provides: “‘Use’ means to operate, navigate, or employ a vessel.  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.”
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“‘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 vessel is used or used most, a
vessel is not considered to be in use for any period of time that
it is held for maintenance or repair for 30 consecutive days or
more.”
Appellants argued that the vessel had been “held for maintenance 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, they drew attention 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 that, even if the vessel had not been “held for maintenance or repair,” it should
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 purchased 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 maintenance or repair” during periods when it was completely 
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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 had not been “used” by appellants
anywhere prior to its purchase, DNR contended that principal use therefore turned on
whether the boat had been used more in Maryland than in any other state from June 9 to
December 31, 2000.
 On September 5, 2001, the ALJ found that the vessel had been in Maryland 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 110 days.  In making 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
destinations.”
The ALJ held that principal use should 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
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ten days total in Virginia and the Carolinas in 2000.  She thus held that the vessel’s 110 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.
Appellants noted exceptions to the Secretary of Natural Resources.  They argued that
the language of § 8-716(a)(3) did not support a reading that a vessel must be completely
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 ‘held for maintenance and repair’ depends
on the facts.  The vessel does not need to be ‘totally inoperable,’
as the Department argued to the ALJ.  Rather, the vessel must,
in fact, have been held for maintenance and repair ‘for 30
consecutive days or more.’  In this case, the ALJ . . . specifically
found that ‘not all of [the repair] 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 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 September 29 through October 27.  The ALJ
properly excluded this time from the calculation of “use” in
Maryland.”
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 Maryland waters.  Here, Appellants purchased the
vessel on June 9 in Maryland, and a tax was due.  Appellants did
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not pay this tax because they certified that they were going to
move the vessel to Florida.  But as the ALJ noted, from the date
of purchase until the end of the 2000 calendar year, ‘the vessel
did not spend a single day in the State of Florida.’”
Appellants filed a petition for judicial review in the Circuit Court for Queen Anne’s
County.  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.  Appellants argued 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 exemption.”  DNR argued that the Secretary’s
factual findings with 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 principally in Maryland even if it spends less than six
months in the State.  DNR argued that its construction of the statutory term “used principally
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 basis 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 Secretary, with instructions to dismiss the
appeal.
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Appellants noted a timely appeal to the Court of Special Appeals.  We issued a Writ
of Certiorari on our own initiative before consideration by that court.  Schwartz v. DNR, 383
Md. 569, 861 A.2d 60 (2004).
II.
Before this Court, both parties argue that the Circuit Court erred in concluding 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 collect the excise tax from buyers of vessels who certify under
penalty of perjury that the vessel will be used principally outside of Maryland.  DNR supports
its argument with the longstanding principle that an agency’s interpretation and
administration of its statute is entitled to deference.  
In support of its argument, DNR points to The Boat Dealers Manual, a published DNR
document, containing the B110 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 eighteen years that Act has provided for the 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 permit non-residents to bring vessels into Maryland for up to
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ninety days without incurring an excise tax); Md. Code (1973, 2000 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 Natural Resources Article (amending statute
to provide definition of “held for maintenance or repair.”)  Appellants essentially join in
DNR’s legal construction of the Act. 
Appellants 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 exemption.”  Appellants
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
delays in ordering parts and scheduling technician services during the busy summer months.
Finally, 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 suggest that this language is ambiguous, and
open to two contradictory interpretations.  Under the first interpretation, principal use would
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 considered.  According to appellants, the former interpretation is correct; their
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vessel would not qualify as “principally used in Maryland” under that test; and the Secretary
erred in applying the latter interpretation.  They argue that the Secretary’s reading leads 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 potentially keep the boat in
Maryland for 162 days without incurring an excise tax liability, whereas under the
Secretary’s interpretation, their vessel’s 110 adjusted (140 gross) days subjects them to
liability.
DNR argues that substantial evidence supports the Secretary’s finding that the vessel
was “held for maintenance 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 therefore did not prohibit its
“use” by appellants.  It also contends that appellants’ regular May through October stays in
Maryland suggest that the vessel was not being kept in the State merely 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 before it is considered principally
used in this State.  Rather, it contends that the Secretary correctly applied the law by
comparing the vessel’s 110 adjusted days in Maryland with the fifty-seven it spent in
Georgia, and determined that Maryland was the state of principal use.  It further suggests that
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determining “principal use” in this manner is a longstanding administrative policy of DNR,
and thus entitled to deference.
 
III.
Review of a decision 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 proceeding under this section, the court may:
(1) remand the case for further proceedings;  
(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 unconstitutional;  
(ii) exceeds the statutory authority
or jurisdiction of the final decision
maker;  
(iii) results from an unlawful
procedure;  
(iv) is affected by any other error of
law;  
(v) is unsupported by competent,
material, and substantial evidence
in light of the entire record as
submitted; or  
(vi) is arbitrary or capricious.”
In reviewing the decision of an administrative agency, we evaluate the decision of the
agency under the same statutory standards as would the circuit court.  Spencer v. Board of
-21-
Pharmacy, 380 Md. 515, 523-24, 846 A.2d 341, 346 (2004).  We therefore assume without
deciding that DNR could properly grant the tax exemption at issue, and consider only
whether the Secretary erred in concluding that appellants were not entitled to the exemption
as a matter of fact.  In doing so, we will assume that the parameters of the exemption are as
defined by the parties – that purchasers are entitled to the exemption 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 ordinarily a court will only review the actions
of an administrative agency to determine if its conclusions are, as a matter of law, 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 record of the evidence submitted to the agency.  
When an agency decision encompasses a mixed question of law and fact, we review
it under the “substantial evidence” standard provided in Md. Code (1984, 2004 Repl. Vol.),
§§ 10-222(h)(3)(v) of the State Government Article.  Charles County v. Vann, 382 Md. 286,
296, 855 A.2d 313, 319 (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 merely whether “a reasoning
mind” could have reached those conclusions on the record before the agency.  Vann at 295,
855 A.2d at 318; Board of Physician Quality v. Banks, 354 Md. 59, 67-68, 729 A.2d 376,
-22-
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
agency, and this deference extends to subsequent inferences drawn from that fact finding, so
long as supported by the record.  Christopher 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 inferences.’”  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 basis
of fact from which the issue can be reasonably inferred. 
With respect to an agency’s conclusions of law, we have often stated that a court
reviews de novo for correctness.  Spencer, 380 Md. at 528, 846 A.2d at 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 determine whether an agency’s
conclusions of law are correct, and to remedy them if wrong.  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 Circuit Court for
Queen Anne’s County ruled on an issue that was never raised before the agency.  We
-23-
recognize the conundrum the Circuit Court faced: the court believed that the State Boat Act
did not contain the exemption that both parties, the administrative law judge, and the
Secretary of DNR believed to exist, yet the issue was one of law, never raised before the
agency.  
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 administrative proceedings.  Brodie’s driver’s
license had been revoked by the Motor Vehicle Administration (MVA) and he requested a
hearing before the Office of Administrative Hearings.  The administrative law judge 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 Circuit Court for the first time.  The Circuit
Court addressed his argument on the merits, rejected it, and affirmed the administrative
decision.  Id. at 3, 785 A.2d at 748.
We granted Brodie’s petition for Writ of Certiorari, which raised the single legal
question decided by 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
4 This case should provide fair 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
(continued...)
-24-
A.2d at 749.  We reiterated our standard of judicial review and generally accepted practice
with regard to agency decisions, stating that a reviewing court ordinarily
“‘may not pass upon issues presented to it for the first time on
judicial review and that are not encompassed in the final
decision of the administrative agency.  Stated differently, a . . .
. court will review an adjudicatory agency decision solely on the
grounds relied upon by the agency.’”
Id. at 4, 785 A.2d at 749 (quoting Dept. of Health v. Campbell, 364 Md. 108, 123, 771 A.2d
1051, 1060 (2001)).  
Under the aegis of Brodie, unless the question of whether an exemption actually exists
under the statute is encompassed in the final decision of the administrative agency, we should
not review the circuit court decision addressing 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 encompassed 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 decide whether the Circuit Court was correct in its
construction of the statute.4 
4(...continued)
been correct in its interpretation, DNR might consider proposing to the Legislature language
clarifying or amending the statute to provide explicitly for that which is reflected in Form
110B.
5 The phrase “held for maintenance or repair” is susceptible to various interpretations.
Does “held” mean “held by a mechanic?”  If so, must the vessel be in the mechanic’s
physical custody, or merely brought regularly to the mechanic 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?  Can it be used for
pleasure trips as well as sea trials?  What ratio of pleasure 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 vessel is deemed to be held
for maintenance, repair, or commissioning if:  
(i) The maintenance, repair, or commissioning
work is provided in exchange for compensation;
(ii) The maintenance, repair, or commissioning
work is performed pursuant to a schedule
preestablished 
with one or more marine
contractors; and  
(iii) The total cost of the maintenance, repair, or
commissioning work is at least two times the
reasonable current market cost of docking or
storing the vessel.  
(2) Time spent conducting sea trials shall be included when
(continued...)
-25-
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
5(...continued)
calculating the period of time a vessel is held for maintenance,
repair, or commissioning under subsection (a)(4) of this
section.”
Md. Code (1973, 2000 Repl. Vol., 2004 Cum. Supp.), § 8-716(k) of the Natural
Resources Article.
 
-26-
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 thirty or more consecutive days during which a vessel is not used
for any purpose unrelated to maintenance.  With regard to the meaning of “held for
maintenance or repair,” the Secretary stated: 
“The vessel does not need to be ‘totally inoperable.’ . . . Rather,
the vessel must, in fact, have been held for maintenance and
repair ‘for 30 consecutive days or more.’ . . . [The ALJ]
specifically found that ‘not all of [the repair] 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 consecutive days
or more – was from September 29 through October 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 non-maintenance purposes.  The Secretary
6 While the intentions underlying appellants’ 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-
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 opportunity 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  Appellants maintained that the vessel 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 witnesses, and made a credibility
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 vessel had been “held
for maintenance or repair” only during the thirty days it spent at the Oxford Yacht Agency.
-28-
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 question of law.  Where statutory language is
unambiguous when construed according to its ordinary and everyday meaning, we give effect
to the statute as it is written.  Collins v. State, 383 Md. 684, 688-89, 861 A.2d 727, 730
(2004).  The parties agree that the language of Md. Code (1973, 2000 Repl. 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 or to be used most during a calendar year.”
This language is not ambiguous.  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. 2004).  The inclusion of calendar year as a
synonym for this type of year stands in contrast to Black’s second definition of year – for
which calendar year is not given as a synonym – “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 most” during the period lasting from January 1 of the year in
question to the following December 31.  The language is susceptible to only one reading: if
a vessel is used more in Maryland than it is used in any other state during a given calendar
year, Maryland is the vessel’s “state of principal use.”  The plain language will not support
-29-
appellants’ proposed six-month requirement.  Appellants would apparently have us replace
“used or to be used most during a calendar year” with “used or to be used for most of 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 or subtle interpretation 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. Baltimore County, 382 Md. 102, 114, 854 A.2d 1191, 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 (approximately six months) here.  But that is not the only situation in which a vessel
could be “used most” in Maryland.  A vessel used five months in Maryland, four months 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.  The Secretary did not err in finding that the vessel was “used principally” in
Maryland in the year 2000.
-30-
JUDGMENT 
OF 
THE 
CIRCUIT
COURT 
FOR 
QUEEN 
ANNE’S
COUNTY  
VACATED. 
 
CASE
REMANDED TO THAT COURT
WITH INSTRUCTIONS TO AFFIRM
THE ORDER OF THE SECRETARY
O F 
TH E  
D E P A R TMENT 
O F
NATURAL RESOURCES.  COSTS TO
BE PAID BY APPELLANTS.
In the Circuit Court for Queen Anne’s County
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 part 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 affirm the judgment of the Circuit Court because 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 and in the public interest, the Court of Appeals 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 before any decision by the Court of Special 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
-2-
Excise Tax exists when the boat is purchased in Maryland for use principally outside the
State.  That was the sole basis upon which the Circuit Court’s judgment rests, and it was the
flagship issue raised by appellants in their brief, upon which our decision to grant certiorari
was based.  It is an issue of public importance in Maryland, which is a maritime State
possessing a vibrant boating industry and hosting boat shows of national and international
significance.  
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 during the year 2000.  That is entirely factual and, however decided, 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 support the Secretary’s conclusion that the boat was used in Maryland for 110 days.  
The legal issue resolved by the Circuit 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 Department of Natural Resources is
deliberately declining to collect a tax that the General Assembly has specifically charged it
-3-
with collecting.  By nothing more than its own policy directive, it has created an exemption
found nowhere in the statute, and until such time as this Court holds that policy invalid, the
Department will persist in not collecting the tax and the State will not receive the revenue
that the General Assembly has declared it should receive.  The issue that the Court hopes
might some day arise in an administrative proceeding likely will never arise in that context.
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 Department of Natural Resources is
likely a forlorn one.  
If the Circuit Court’s reading of the statute is correct, but may cause some economic
hardship to the boating industry in Maryland, the industry can ask the General Assembly,
which is now in session 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 Legislature.  If the General Assembly 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
-4-
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.