College of Notre Dame of Maryland, Inc. v. Morabito Consultants, Inc.

EYLER, Judge. The issue in this case, one of first impression, is whether a provision in a contract is valid that purports to state when a cause of action accrues for breach, and if so, whether it can be used as a defense by a party to the contract in a suit by a nonparty to that contract. More specifically, the owner of a building contracted with an architect to perform design services and the architect contracted with a structural engineer to perform the structural engineering portion of the design services. Both contracts contained the accrual provision.

The owner sued the structural engineer. Factual Background The College of Notre Dame of Maryland, Inc., appellant, owns and operates a college located at 4701 North Charles Street in Baltimore City. The main administration building on campus is Gibbons Hall. Appellant decided to renovate Gibbons Hall, which included the conversion of space on the fifth floor from residential use to office and classroom use.

Appellant retained the architectural firm of Brown, Worrall & Johnson, Inc., to provide architectural services. The contract entered into between appellant and the architect was a standard American Institute of Architects (AIA) document, designated B141 (1987 ed.). The contract was dated December 12, 1989, and was signed on January 25, 1990. The ¹⁶³ contract included “normal structural, mechanical, and electrical engineering services.” On September 22, 1989, Morabito Consultants, Inc., a structural engineering firm and an appellee herein, submitted a proposal to the architect for “professional consulting structural engineering services for the structural review of Gibbons Hall.” The proposal was based on an hourly fee with the total not to exceed $2,000.

The proposal indicated that, following a review of the building, appellee would submit a structural analysis, which would outline any necessary repairs for the building to safely support “all superimposed live and dead loads as required by the BOCA 1987 building code.” The proposal was not signed by the architect. Morabito Consultants, Inc. proceeded with its review, however, and submitted a report dated October 26, 1989, in which it stated that the building was structurally sound. In pertinent part, in a section labeled “Fifth Floor & Attic Framing,” Morabito Consultants, Inc. stated that the trusses did not need structural repair but recommended that, during the renovation of the building, it review the condition of the bottom cord of the trusses. In its report, Morabito Consultants, Inc. concluded that the building was structurally sound and capable of supporting all superimposed live and dead loads as required by the applicable building code.

At the architect’s request, Morabito Consultants, Inc. visited the project on May 24, 1990, “in order to review the existing structure to assess what effect the proposed alterations have on this facility... . ” In the report dated May 25, 1990, relating to that visit, there was no mention of the trusses. On September 18, 1990, the architect and Morabito Consultants, Inc. executed an agreement dated September 10 for consulting structural engineering services for the proposed renovations at Gibbons Hall. The agreement provided for a lump sum fee of $2,000 and any additional services to be provided at an hourly rate. It provided that the engineering services would meet the design requirements contained in the contract between appellant and the architect.

It also specified ¹⁶⁴ that certain articles contained in AIA document C141, architect-consultant agreement, sixth edition, 1987, were incorporated into the contract between the architect and Morabito Consultants, Inc., including article 9.3. Article 9.3 in the contract between appellant and the architect (Form B141) and in the contract between the architect and Morabito Consultants, Inc. are identical. Article 9.3 provides: Causes of action between the parties to this Agreement pertaining to acts or failures to act shall be deemed to have accrued and the applicable statutes of limitations shall commence to run not later than either the date of Substantial Completion for acts or failures to act occurring prior to Substantial Completion, or the date of issuance of the final Certificate for Payment for acts or failures to act occurring after Substantial Completion. On March 26,1991, Morabito Consultants, Inc. inspected the building and, in a letter dated April 3, 1991 directed to appellant, stated that the building was structurally sound.

At that time, some of the walls and ceilings had been removed. The report stated that “a visual review” was performed but that “the majority of the building structure is still covered by ceilings and walls.” In pertinent part, the report indicated that no structural modifications needed to be made to the trusses. It also recommended that a representative of appellant climb into the truss space and visually inspect all of the trusses for pipe penetrations through the individual truss members and to notify appellee if any such conditions were found. In 1997, on a routine inspection of the building, appellant found significant movement “internal to the building” on the fifth floor.

It retained Whitney, Bailey, Cox & Magnani, consulting engineers, to inspect the building. That firm did so and concluded that the design team for the renovation, which included Morabito Consultants, Inc., had failed to calculate properly the increase in live loads associated with the change ¹⁶⁵ in occupancy of the building. As a result of the increase in loads, the truss system was overstressed. On December 9, 1998, appellant filed a complaint in the Circuit Court for Baltimore City against Morabito Consultants, Inc. and Frank T. Morabito, a professional engineer associated with the firm, appellees.

Appellant sued in negligence and breach of contract and alleged that appellees were hired to perform a structural analysis but failed to advise of problems, specifically, problems with the trusses. Appellants sought damages for the cost of repairs to the extent that they exceeded the amount that would have been expended had the problem been disclosed by appellees in April 1991. Appellees filed a motion to dismiss the complaint on the ground that article 9.3 in the January 25, 1990 contract between appellant and the architect, incorporated in the contract between the architect and Morabito Consultants, Inc., was applicable and required the action to be filed within three years after substantial completion of construction. Consequently, according to appellees, the action was time-barred.

Appellant opposed the motion and filed affidavits in support of its opposition. As a result, the circuit court treated the motion as a motion for summary judgment and, on March 3, 1999, granted it. Appellant filed a motion for reconsideration, which was denied, and then noted an appeal to this Court. The question before us is whether the circuit court erred in granting summary judgment in favor of appellees.

Appellant makes two arguments. First, appellant contends that a genuine issue of material fact exists as to whether the services rendered on March 26, 1991, as distinguished from the services rendered prior to that time, were in fulfillment of the obligations contained in the contract between appellant and the architect. Appellant’s position is that it contracted directly with appellees for the March 26, 1991 services, and the standard form of agreement between appellant and the architect had no application to those services. Additionally, with respect to Mr. Morabito individually, appellant argues that he was sued for services personally rendered by him, and ¹⁶⁶ he was not a party to the contract between the architect and Morabito Consultants, Inc. Thus, according to appellant, the contract could not apply to services rendered by him.

Second, appellant asserts that if the services were rendered in fulfillment of the contractual obligations of the architect to appellant, article 9.3 should not be enforced because it is ambiguous or not sufficiently clear and definite to warrant taking away a fundamental right of appellant. Appellant acknowledges that the project was substantially completed by the end of 1991 and that this action was filed too late and is barred unless the discovery rule applies. Because article 9.3 effectively eviscerates the discovery rule, according to appellant, a clear statement of intention is required. ■ Appellant points to the language in (1) article 9.3 that refers to “causes of action between the parties to this agreement” and does not expressly refer to consultants; (2) article 9.5 that prohibits assignment of the agreement without the written consent of the other party; and (3) article 9.7 that states the agreement represents the entire and integrated agreement between the parties. Standard of Review Maryland Rule 2-501(a) provides that “[a]ny party may file at any time a motion for summary judgment on all or part of an action on the ground that there is no genuine dispute as to any material fact and that the party is entitled to judgment as a matter of law.” Thus, “[i]n order to grant summary judgment, the trial court must determine that no genuine dispute exists as to any material fact, and that one party is entitled to judgment as a matter of law.” Crews v. Hollenbach, 126 Md.App. 609, 624 , 730 A.2d 742 , cert. granted, 356 Md. 16 , 736 A.2d 1064 (1999); Green v. Brooks, 125 Md.App. 349, 365 , 725 A.2d 596 (1999); Chicago Title Ins.

Co. v. Lumbermen’s Mut. Cas. Co., 120 Md.App. 538, 546 , 707 A.2d 913 (1998). To defeat a motion for summary judgment, the party opposing the motion must produce evidence demonstrating ¹⁶⁷ that the parties genuinely dispute a material fact.

Scroggins v. Dahne, 335 Md. 688, 691 , 645 A.2d 1160 (1994); Chicago Title Ins. Co., 120 Md.App. at 547 , 707 A.2d 913 . Even if the non-moving party demonstrates the existence of a disputed fact, it will not defeat the motion for summary judgment unless the dispute concerns a material fact. King v. Bankerd, 303 Md. 98, 111 , 492 A.2d 608 (1985); Keesling v. State, 288 Md. 579, 583 , 420 A.2d 261 (1980); Miller v. Fairchild Indus., Inc., 97 Md.App. 324, 340 , 629 A.2d 1293 , cert. denied, 333 Md. 172 , 634 A.2d 46 (1993).

Further, to demonstrate an adequate factual dispute, the non-moving party must present more than “mere general allegations which do not show facts in detail and with precision.... ” Beatty v. Trailmaster Prods., Inc., 330 Md. 726, 738 , 625 A.2d 1005 (1993). All reasonable inferences drawn from the facts, however, must be resolved in favor of the non-moving party. Green, 125 Md.App. at 365 , 725 A.2d 596 ; Tennant v. Shoppers Food Warehouse Md. Corp., 115 Md.App. 381, 387 , 693 A.2d 370 (1997); see also Berkey v. Delia, 287 Md. 302, 304-05 , 413 A.2d 170 (1980). When there is no dispute of any material fact, we review the trial court’s decision to determine whether the court reached the correct legal result.

Beatty, 330 Md. at 737 , 625 A.2d 1005 ; Chicago Title Ins. Co., 120 Md.App. at 547 , 707 A.2d 913 . Generally, appellate courts review a grant of summary judgment based only on the grounds relied upon by the trial court. IA Constr.

Corp. v. Carney, 341 Md. 703 , 708 n. 4, 672 A.2d 650 (1996); Blades v. Woods, 338 Md. 475, 478 , 659 A.2d 872 (1995); Gross v. Sussex, Inc., 332 Md. 247 , 254 n. 3, 630 A.2d 1156 (1993); McGraw v. Loyola Ford, Inc., 124 Md.App. 560 , 723 A.2d 502 , cert. denied, 353 Md. 473 , 727 A.2d 382 (1999); Hoffman v. United Iron & Metal Co., 108 Md.App. 117, 132-33 , 671 A.2d 55 (1996). Principles of Contract Interpretation Principles of contract interpretation are relevant to the issues before us, and we pause briefly to review them. Maryland courts apply an objective standard when interpreting and construing contracts. See, e.g., General Motors Ac ¹⁶⁸ ceptance Corp. v. Daniels, 303 Md. 254, 261 , 492 A.2d 1306 (1985); Aetna Cas. & Sur.

Co. v. Insurance Comm’r, 293 Md. 409, 420 , 445 A.2d 14 (1982). The principal goal in the interpretation of contracts is to effect the intention of the parties. Kasten Constr. Co., Inc. v. Rod Enters., Inc., 268 Md. 318, 328 , 301 A.2d 12 (1973); McIntyre v. Guild, Inc., 105 Md.App. 332, 355 , 659 A.2d 398 (1995).

When a contract’s language is expressed in clear and unambiguous terms, the court will not engage in construction, but will look solely to what was written as conclusive of the parties’ intent. General Motors, 303 Md. at 261 , 492 A.2d 1306 . In General Motors , the Court of Appeals set forth the following standard: A court construing an agreement under this test must first determine from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated. In addition, when the language of the contract is plain and unambiguous there is no room for construction, and a court must presume that the parties meant what they expressed.

Id. Discussion A. Interpretation of the Contracts We address appellant’s arguments in inverse order. Appellant argues that the accrual clauses in the contracts in question are ambiguous or, at least, are not sufficiently clear and definite to be enforceable. Appellant argues that article 9.3 is akin to an exculpatory provision and, therefore, should be read more stringently.

We do not agree. Exculpatory clauses are generally valid, but they must be unequivocal and clear, not merely unambiguous. See Adloo v. H.T. Brown Real Estate, Inc., 344 Md. 254, 259 , 686 A.2d 298 (1996). An exculpatory clause relieves a party from liability for harm caused by his or her own negligence.

See id. at 261 , 686 A.2d 298 . ¹⁶⁹ Article 9.3 of the contracts between the parties in this case does not relieve any of the parties from liability. Instead, it alters the time for accrual of a cause of action from what the law would otherwise impose. None of the cases that have recognized the right to contractually modify a limitations period or the time for accrual of a cause of action, discussed below, have referred to such provisions as exculpatory. Such contractual modifications are generally not disfavored in the law.

Indeed, all of the cases in which the provision in question or a similar one have been considered have held it to be enforceable. Such contractual clauses are supported by the public policy in favor of parties’ freedom to contract. With respect to such policy, see, e.g., Federal Maritime Comm’n v. Pacific Maritime Ass’n, 435 U.S. 40, 70 , 98 S.Ct. 927 , 55 L.Ed.2d 96 (1978)(Powell, J., dissenting); H.K. Porter v. NLRB, 397 U.S. 99, 107 , 90 S.Ct. 821 , 25 L.Ed.2d 146 (1970); Wolf v. Ford, 335 Md. 525, 531 , 644 A.2d 522 (1994); Leet v. Totah, 329 Md. 645, 662 , 620 A.2d 1372 (1993); Anne Arundel County v. Hartford Accident & Indem. Co., 329 Md. 677, 686 , 621 A.2d 427 (1993); Condry v. Laurie, 184 Md. 317, 326 , 41 A.2d 66 (1945).

We conclude that the disputed contract provision is unambiguous and susceptible of only one meaning. It specifies a clear date for accrual of a cause of action. In passing, we note that we would reach the same conclusion if we applied a heightened standard of scrutiny. B. Materiality of Issues Appellant argues that it created a genuine issue of fact with respect to whether it contracted directly with appellees for the March 26, 1991 services.

We agree. Appellant supported its opposition to summary judgment with affidavits from Phillip W. Worrall, an architect with the architectural firm in question, and Joseph Caruso, Director of Facility Management for appellant. The affiants stated that engineering services were required in the contract between appellant and Morabito Consultants, Inc., but that the inspection on March 26, 1991 was undertaken pursuant to an agreement between appellant ¹⁷⁰ and appellees, and appellees did not perform those services as consultants for the architect. While this created a genuine dispute of fact, in our view, it was not a material fact.

The complaint and other documentation filed by appellant, including the report of its consulting engineers, indicate that the problems in the building were as a result of defective design, based on a failure to calculate loads associated with the conversion of the use of space and the change in occupancy. Morabito Construction, Inc. performed a design analysis pursuant to the contracts between it and the architect and appellant and the architect. The complaint is not based on alleged visual deficiencies of the trusses that may or may not have existed on March 26,1991. C. Limitation of Actions In Maryland, the general statute of limitations is codified at Md.Code, Cts. & Jud.

Proc. § 5-101 (Repl.Vol. 1998). This provision establishes a three-year period, from the date a cause of action “accrues,” within which to file a civil action. In Maryland, as a general rule, a cause of action accrues on the date of the alleged wrong. See, e.g., Waldman v. Rohrbaugh, 241 Md. 137, 139 , 215 A.2d 825 (1966); Killen v. George Washington Cemetery, Inc., 231 Md. 337, 343 , 190 A.2d 247 (1963) (citations omitted).

Recognizing the potential for unfairness in application of the rule in certain cases, the Maryland courts have adopted the “discovery rule,” which suspends accrual of the statute of limitations until events have occurred that are reasonably likely to put a plaintiff on notice of a claim. See Doe v. Archdiocese of Wash., 114 Md.App. 169, 176-77 , 689 A.2d 634 (1997). The discovery rule holds that certain causes of action based on inherently unknowable wrongs do not accrue until the plaintiff learns, or reasonably should have learned, that he has been harmed by the defendant’s conduct. See Pennwalt Corp. v. Nasios, 314 Md. 433, 453 , 550 A.2d 1155 (1988). ¹⁷¹ Courts have acknowledged that the discovery rule is well suited to determine the date of accrual of a cause of action for negligent design.

See Steelworkers Holding Co. v. Menefee, 255 Md. 440, 443-14 , 258 A.2d 177 (1969) (noting that Maryland courts had applied the discovery rule in various types of professional malpractice actions and holding that the owners’ cause of action for negligence against the architect who designed the building for the owners accrued upon discovery of the defect therein); see generally Jane Massey Draper, Annotation, When Statute of Limitations Begins to Run on Negligent Design Claim Against Architect, 90 A.L.R.3d 507 (1979 & Supp.l999)(collecting and citing cases). Appellant contends that, pursuant to the discovery rule, its action was timely because it was filed “a little more than one year after the problem was first discovered after attempts to resolve the matter failed.” Appellant points to Md.Code (1974, 1998 Repl.Vol.), § 5-108 of the Courts and Judicial Proceedings Article, for the proposition that the Legislature has codified the discovery rule with respect to actions against architects, professional engineers, and contractors. 1 ¹⁷² In our view, section 5-108 has little relevance to the issue before us. Section 5-108 does not address the discovery rule; it is a statute of repose. Additionally, the statute applies to injury to person or property, and is, therefore, inapplicable here.

The contracts in question expressly provided the time for accrual of a cause of action. In the absence of a controlling statute, we are presented with the question of whether such a provision is legally valid. We begin by examining whether the limitations period provided by a legislative body is subject to modification by agreement. Unlike some other states, the Maryland general statute of limitations does not expressly prohibit its modification.

In the absence of a controlling statute, some state courts have held that, as a general rule, a contract provision limiting the time for bringing an action thereon is valid if the stipulated period of time is. reasonable. The Court of Appeals appears to agree with that principle. In Amalgamated Cas. Ins.

Co. v. Helms, 239 Md. 529 , 212 A.2d 311 (1965), the Court upheld a contractual limitations period in an automobile liability policy. The Court held that the provision prohibiting any action against the insurer unless commenced within two years and one day after date of any judgment secured against the insured was reasonable and lawful. Subsequent to that decision, the Legislature declared provisions in insurance and surety contracts that shortened periods of limitation to be against public policy and unlawful. See Md.Code (1974, Repl.Vol.1998), § 12-104 of the Insurance Article (original version at Md.Code (1957, 1994 Repl.Vol.), Art. 48A § 377B); see also General Ins.

Co. of America v. Interstate Serv. Co., Inc., 118 Md.App. 126, 133-38 , 701 A.2d 1213 (1997), cert. denied, 349 Md. 103 , 707 A.2d 89 (1998), cert. denied, 350 Md. 276 , 711 A.2d 869 (1998)(citing Md.Code Ann. (1957, 1994 Repl.Vol.), Art. 48A § 377B)(discussing the validity of contractual limitations provision in insurance contracts). Maryland courts have not ruled, however, on the validity of contractual limitations provisions in building or construction ¹⁷³ contracts. Other state courts, in the absence of statute and subject to a finding of reasonableness, have held such provisions valid and enforceable.

See generally Annotation, Validity of Contractual Time Period, Shorter Than Statute of Limitations, for Bringing Action, 6 A.L.R.3d 1197 , 1240-41 (1966 & Supp.l999)(collecting and citing cases). The Supreme Court has recognized the general principle that parties’ freedom to contract should be given effect absent clear policy considerations to the contrary. See Missouri, Kan. & Tex. Ry.

Co. v. Harriman Bros., 227 U.S. 657, 672 , 33 S.Ct. 397 , 57 L.Ed. 690 (1913). The Court explained that the policy underlying statutes of limitations is to “encourage promptness in the bringing of actions, [so] that the parties shall not suffer by loss of evidence from death or disappearance of witnesses, destruction of documents, or failure of memory.” Id. at 672 , 33 S.Ct. 397 . The Court concluded that “there is nothing in the policy or object of such statutes which forbids the parties to an agreement to provide a shorter period, provided the time is not unreasonably short.” Id. The Fourth Circuit has adhered to the principle that parties may contract for shorter limitations periods, noting that “it is well settled that such a provision, if reasonable in extent, is within the power of the parties and is binding upon them, even if the stipulated period is shorter than set up in the