Himelfarb v. American Express Co.

RODOWSKY, Judge. This case involves applying the statute of limitations to an action on a credit card account containing a disputed debit. We shall hold that the cause of action accrued more than three years before the card issuer filed suit against the cardholder. We shall also conclude that the cardholder did not acknowledge the disputed debit by making part payments and that the statute was not tolled while the card issuer investigated the dispute in a manner similar to that which the Federal Fair Credit Billing Act would have required, if applicable.

In 1973 American Express Company (Amexco) and Stephen R. Himelfarb (Himelfarb) of Rockville, Maryland entered into an agreement relating to a credit card issued by Amexco to Himelfarb. On August 13, 1978, at a jewelry store in Atlantic City, New Jersey, Himelfarb used the credit card to purchase a specific ring at a cash price of $3,596 for delivery by mail to the home of Himelfarb’s then fiancee. His fiancee participated in selecting the ring, which had a cluster of diamonds and was to be an engagement ring. The face of the jewelry store’s sales slip, just above Himelfarb’s signature, contained a legend reading, “NO REFUNDS.

MERCHANDISE EXCHANGES ONLY. RECEIPT MUST ACCOMPANY RETURNS.” At trial Himelfarb and the young woman, who meanwhile had married someone else, each testified that they were orally assured by the store manager that the ring could be returned and the price refunded. This assurance was said to have been obtained because the fiancee was uncertain whether she preferred the cluster to a solitaire setting. The ring, sized for the fiancee, arrived from the jeweler about one week after the sale.

For reasons which are not material to the decision of this case, Himelfarb mailed the ring back to the jeweler on September 12, 1978, with the request that a credit be processed to his Amexco account. ⁷⁰¹ The first statement from Amexeo to Himelfarb containing the $3,596 purchase was that for the billing period ending September 26, 1978 (the September statement or bill). On receipt of that statement and at a time which, under the evidence most favorable to Amexeo, was not later than Monday, October 2, 1978, Himelfarb telephoned American Express “Customer Service.” 1 It is uncontradicted that in this conversation Himelfarb told Amexeo that the ring had been purchased on approval, that he had returned the ring to the jeweler, and that he “would not be paying for it____” He never has. Amexeo entered an “Adjustment — Interim Credit” to Himelfarb’s account and investigated the matter with the jeweler. When Amexeo received a copy of the sales slip which Himelfarb had signed, it wrote to Himelfarb and advised that the interim credit would be reversed.

The $3,596 charge for the ring was again posted to Himelfarb’s account on January 2, 1979, and it appeared on the periodic statement sent to Himelfarb for the billing cycle ending January 25, 1979. At some point prior to February 15, 1979, the jeweler had again sent the ring to Himelfarb, but on that date Himelfarb mailed the ring back to the jeweler. He continued, without success, his efforts to obtain a credit for the price of the ring on his Amexeo account. On or about August 13, 1981, Amexeo sued Himelfarb in the Superior Court of the District of Columbia.

The instant suit by Amexeo against Himelfarb was filed on October 5, 1981, in the District Court of Maryland sitting in Montgomery County. Himelfarb had raised an objection to suit ⁷⁰² against him in the District of Columbia and that action was ultimately dismissed on April 19, 1982. In the Maryland action Himelfarb immediately raised the defense of limitations, which was rejected at a pretrial hearing. No court record of the reasons for that ruling has been supplied to us.

At trial Amexco’s only witness was a custodian who produced the records of Himelfarb’s account for the period September 1978 through February 1979. A composite of these records is attached as an appendix. Amexco did not present account records for March through June 1979. A delinquent account record from Amexco picks up Himelfarb’s balance in July 1979 at $3,927.10, a figure which that exhibit reflects as a constant for each month thereafter through December 1979.

Consequently the computation of the outstanding balance of $3,927.10 is not in evidence. Amexco’s witness, however, agreed on cross-examination that, based on records at which he had looked, it “would appear” that every purchase charged to Himelfarb’s account, other than the ring, had been paid. Himelfarb renewed his limitations defense at trial but it was again rejected. The trial judge concluded “that there were negotiations and communications and no definite ascertainment that the debt was in fact a closed debt” prior to October 5, 1978.

On April 14, 1983, the District Court entered judgment in favor of Amexco for $4,359 plus costs and an attorney’s fee of $589.06. On Himelfarb’s appeal on the record the Circuit Court for Montgomery County affirmed. That court gave three reasons for its conclusion that limitations had not run: (1) The ring had not been “finally charged” until early 1979; (2) Himelfarb’s part payments on the account started limitations running anew on the entire account balance; and (3) under the Fair Credit Billing Act “[ujntil [the creditor] makes the correction or gives written explanation the creditor is prohibited from taking action to collect the disputed amount.” ⁷⁰³ We granted Himelfarb’s petition for certiorari. His issues as we restate them are: 1.

Did Amexco’s cause of action for the $3,596 charge for the ring accrue prior to October 5, 1978? 2. If so: A. Did any of Himelfarb’s part payments on the account renew the running of the full three years’ limitations period; or B. Does the Fair Credit Billing Act’s prohibition against collection of a disputed debit before the creditor notifies the consumer of the decision on a claimed billing error toll the running of the statute of limitations? I Md.Code (1974, 1984 Repl.Vol.), § 5-101 of the Courts and Judicial Proceedings Article (Courts Article) provides that “[a] civil action at law shall be filed within three years from the date it accrues .... ” When accrual occurs “is left to judicial determination.” See Goldstein v. Potomac Electric Power Co., 285 Md. 673, 684 , 404 A.2d 1064, 1069 (1979). “In contract cases, the general rule is that the period of limitations begins to run from the date of the breach, for it is then that the cause of action accrues and becomes enforceable.” Mayor of Federalsburg v. Allied Contractors, Inc., 275 Md. 151, 157 , 338 A.2d 275, 280 , cert. denied, 423 U.S. 1017 , 96 S.Ct. 452 , 46 L.Ed.2d 389 (1975). In the instant case Himelfarb’s breach of contract occurred upon failure to pay Amexco when he had promised that payment would be made.

Time for payment to Amexco by Himelfarb as a “Member,” i.e., cardholder, is governed by ¶ 2 of the credit card agreement. In relevant part it reads: Member ... shall pay to Amexco the amount of any and all purchases charged to the account together with all annual and other fees (“Charges”) immediately upon receipt of Amexco’s monthly statement of Charges ____ ⁷⁰⁴ Each “Statement of Account” sent by Amexco to Himelfarb contained the preprinted statement “Payable on Receipt in U.S. Dollars.” This is set forth immediately to the left of the computer printout of Himelfarb’s name and address. Further, at the top of the September statement, which contained the initial billing for the ring, appears the following computer-printed statement: “TERMS — PAYABLE IN FULL UPON RECEIPT OF STATEMENT.” Consequently Himelfarb’s payment of the $3,596 was to be made “immediately upon receipt” of the statement. We neéd not here decide whether or to what extent there may be any elasticity in complying with the terms “immediately upon receipt.” The evidence is uncontradicted that after Himelfarb had received Amexco’s September bill and prior to October 5, 1978, Himelfarb took the position with Amexco that he would not pay for the ring.

If Himelfarb’s contractual duty to pay the new balance on the September statement had arisen prior to his telephone call to Amexco, then he had already breached his contract and Amexco’s cause of action for the September new balance had accrued by the time of the call. If Himelfarb’s duty to pay “immediately upon receipt” had not yet arisen when he spoke by telephone to Amexco, his announced refusal to pay for the ring was an anticipatory breach of his promise when payment was imminent. See generally C. W. Blomquist & Co. v. Capital Area Realty Investors Corp., 270 Md. 486 , 311 A.2d 787 (1973); String v. Steven Dev. Corp., 269 Md. 569 , 307 A.2d 713 (1973); Weiss v. Sheet Metal Fabricators, Inc., 206 Md. 195 , 110 A.2d 671 (1955).

When Himelfarb admitted to Amexco his receipt of the September bill and stated he would not pay $3,596 of it, Amexco was in a position at that time to prove the essential elements of an action on the account. See James v. Weisheit, 279 Md. 41, 44 , 367 A.2d 482, 484 (1977). The rulings in the courts below intimated that accrual of an action on the credit card agreement was postponed in this case because Himelfarb asserted a right to return the ring which would wipe out the debit to his account. This ⁷⁰⁵ did not defer the time of accrual.

From the standpoint of the Maryland common law of contracts, Himelfarb’s claimed defense is as ineffective to prevent accrual of the creditor’s cause of action as is a debtor’s statement that he mailed a check in full payment which the creditor should have received, or that his signature on a document evidencing the obligation is unauthorized, or that he is excused from paying because of material breach in the creditor’s performance. The limitations clock begins to tick while the creditor is deciding whether an asserted defense is meritorious. II Amexco next argues that the three-year period had not expired by October 5, 1981, because part payments made by Himelfarb on the account after October 5, 1978, started new periods of limitations running as to the entire outstanding balance. The general principle Amexco relies upon is described in 1A A. Corbin, Corbin on Contracts § 217, at 301-03 (1963).

The making of a part payment on account of a larger claim then identified and not denied, justifies the inference of a promise to pay the balance and revives an enforceable right to that balance. This is true whether the payment is made to be applied toward either the principal debt or interest thereon. If the payment is made before the statutory period has fully expired, the implied promise starts a new period running in place of the partly expired one. The new period begins from the day of payment.

The debtor can, by any appropriate expression, prevent the inference of a promise to pay the balance. Such is the case if he says, “I pay you this but will pay no more.” [Footnotes omitted.] Part payment on an open account, made within three years of suit, does not in and of