Joseph H. Munson Co., Inc. v. Secretary of State, 42

CourtCourt of Appeals of Maryland
Citation448 A.2d 935,294 Md. 160
Docket NumberNo. 42,42
PartiesJOSEPH H. MUNSON COMPANY, INC. v. SECRETARY OF STATE for the State of Maryland.
Decision Date05 August 1982

Yale L. Goldberg, Rockville (Mark A. Winkler, Rockville, on the brief), for appellant.

James G. Klair, Asst. Atty. Gen., Baltimore (Stephen H. Sachs, Atty. Gen., Baltimore, on the brief), for appellee.



The principal issue in this case is whether Maryland Code (1957, 1978 Repl.Vol.), Art. 41, § 103D, which places a limit upon the amount of expenses that a charitable organization may pay in connection with fund-raising activity, violates the First Amendment to the United States Constitution. A second issue concerns the standing of the plaintiff to raise this question. Art. 41, § 103D, prohibits a charitable organization, in connection with any fund-raising activity, from paying or agreeing to pay as expenses more than 25 percent of the gross amount raised. The statute also states that the Secretary of State shall issue rules and regulations to permit a charitable organization to pay or agree to pay as expenses more than 25 percent of the amount raised where the 25 percent limitation would "effectively prevent the charitable organization from raising contributions." 1

Section 103D is part of a comprehensive subtitle, enacted by Ch. 679 of the Acts of 1976, for the purpose of regulating charitable organizations and charitable solicitations. See Art. 41, §§ 103A-103L. For example, § 103B provides for the registration of charitable organizations with the Secretary of State and the furnishing of detailed financial data to the Secretary. Under § 103F, one may not act as a professional fund-raiser counsel or a professional solicitor for a charitable organization unless he also registers with the Secretary, furnishes certain information, pays an annual fee, files a bond, and complies with the requirements of the subtitle. Section 103D(c) states that "[e]very contract or agreement between a professional fund-raiser counsel or a professional solicitor and a charitable organization shall be in writing, and a copy of it shall be filed with the Secretary of State within ten days after it is entered into and prior to any solicitations." Under § 103L(a), a charitable organization, professional fund-raiser counsel or professional solicitor is subject to criminal liability for wilfully violating the requirements of the subtitle. 2 Other sanctions for violating the subtitle are contained in § 103L(b) and (c). 3

The Joseph H. Munson Co., Inc., instituted this action in the Circuit Court for Anne Arundel County, seeking declaratory and injunctive relief against the Secretary of State. Munson is in the business of promoting fund raising events and giving advice to clients on how those events should be conducted. In Maryland, Munson's clients consist of various chapters of the Fraternal Order of Police. In its amended bill of complaint, Munson alleged that it "regularly charges the said chapters of the Fraternal Order of Police an amount in excess of twenty-five percent (25%) of the total gross income of the event which it is involved in promoting." Munson further alleged that it had been in contact with the Secretary of State, and that the Secretary had taken the position "that the Plaintiff is subject to [§ 103D] ... and that the continued failure to comply therewith will require the Defendant to seek prosecution of the Plaintiff for violation of the said statute." In counts I and II of its five-count amended bill of complaint, 4 Munson sought a declaratory judgment as to whether it was subject to the registration and 25 percent fund-raising limitation provisions of the statute, as well as injunctive relief. In count III, Munson prayed a declaratory judgment that § 103D contained an unconstitutional delegation of legislative authority to the Secretary of State. In count V, Munson sought a declaration that § 103D on its face violates the First and Fourteenth Amendments to the United States Constitution, on the ground that the 25 percent fund-raising limitation unduly intrudes upon Munson's right to free speech and assembly. Finally, in count IV, Munson asked for an injunction restraining the Secretary from enforcing § 103D.

In its answer, the Secretary did not flatly deny that he had initially threatened Munson with criminal prosecution. Instead, the Secretary's denial of the allegation concerning threatened prosecution was on the ground that "there had been no determination concerning the applicability of the statute to the Plaintiff or that he is in violation of the Charitable Solicitation Act." The Secretary sought a dismissal of counts I and II on the ground that Munson had not exhausted administrative remedies created by regulations of the Secretary of State. Otherwise, the Secretary asserted that § 103D was constitutional. In a memorandum accompanying the Secretary's answer, the Secretary stated that it "seriously questions Plaintiff's standing to seek a declaratory judgment." In a supplemental memorandum of law, the Secretary argued that Munson lacked standing.

No testimony was taken in the circuit court. Instead, according to the opinion of the circuit court, the case was decided on the pleadings, the memoranda of law submitted, and a stipulation of facts. One of the stipulated facts was that "the Fraternal Order of Police, Montgomery County Chapter, ... is reluctant to enter into a contract with the Plaintiff ... for promotion of fund raising events due to the limitation imposed by Article 41, Section 103, ... that nothing in excess of 25% of the gross income raised through fund raising activities may be expended on fund raising expenses." It was also stipulated that Munson's contracts with Fraternal Order of Police Chapters call for a fee for each event in excess of 25% of the net income raised.

The circuit court dismissed counts I and II of the amended bill of complaint on the ground that Munson had failed to exhaust administrative remedies. With regard to counts III and V, the court issued a detailed opinion and declaratory judgment that § 103D was facially valid, and that it neither amounted to an unconstitutional delegation of legislative authority nor violated the free speech guarantee of the First and Fourteenth Amendments. The court accordingly refused to enjoin enforcement of § 103D.

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

I. Standing

Although we granted the Secretary's cross-petition challenging Munson's standing, a preliminary question is raised by Munson as to whether we should consider this issue. We shall assume that the Secretary properly raised the issue in the circuit court when, in a memorandum of law, it argued that the action should be dismissed for lack of standing. Instead of dismissing the action, however, the trial court in effect upheld Munson's standing and rendered a declaratory judgment on the merits of the constitutional issues presented in counts III and V of the bill of complaint. Although Munson took an appeal from the declaratory judgment, the Secretary did not file an order of appeal. Munson argues in this Court that, because of the Secretary's failure to take a cross-appeal on the issue of standing, the issue is not properly before us.

Under circumstances where absence of standing would present an alternate ground for upholding a trial court's judgment, an appellee is entitled to argue that ground in an appellate court. Temoney v. State, 290 Md. 251, 261, 429 A.2d 1018 (1981), and cases there cited. In such situation, a cross-appeal would be unnecessary and, in fact, would be improper. Offutt v. Montgomery Co. Bd. of Ed., 285 Md. 557, 564, n. 4, 404 A.2d 281 (1979). Moreover, in that situation, even if lack of standing were not raised by the appellee, an appellate court noticing the issue would normally consider it sua sponte under the principle that a judgment will ordinarily be affirmed on any ground adequately shown by the record, whether or not relied on by the trial court or raised by a party. Robeson v. State, 285 Md. 498, 502, 403 A.2d 1221 (1979), cert. denied, 444 U.S. 1021, 100 S.Ct. 680, 62 L.Ed.2d 654 (1980).

Thus, in the case at bar, if the trial court had dismissed the action on some ground other than lack of standing, the Secretary as appellee would be entitled to argue Munson's alleged lack of standing as an alternate basis for affirmance. However, the trial court did not dismiss the action. Instead, it rendered a declaratory judgment on the merits. Munson's alleged lack of standing would not furnish an alternate ground for affirming the declaratory judgment. On the contrary, the Secretary's argument amounts to an attack upon the judgment. If the issue is properly before us, and if we agreed that Munson had no standing, we would be obliged to order that the trial court's judgment be reversed and that the case be remanded with directions to dismiss the action.

Consequently, the Secretary is attempting to challenge the trial court's judgment in this case without having taken an appeal. A party to a trial court proceeding, however, is not entitled to seek direct appellate review and reversal of the trial court's judgment unless he has filed a valid, timely order of appeal. See, e.g., Pearlman v. State, 226 Md. 350, ...

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