Richard v. Carroll Home Services, LLC

McDonald, J. In the court system, a potential plaintiff has an interest in having sufficient time to investigate and assert a claim. A potential defendant has an interest in repose and finality as to whether it will be necessary to mount a defense. The public has an interest in the efficient use of public resources—what, in this context, is sometimes called judicial economy. The Legislature, as the primary policy-making branch of government, weighs those competing interests and establishes statutory limitations periods for bringing claims in court.

Maryland law, nevertheless, allows parties, in some circumstances, to further restrict access to the courts by shortening limitations periods by contract. When will the courts recognize such clauses as superseding the legislative policy determination as to an appropriate period of limitations? Given the wide variety of contracts, the creativity of lawyers in devising contract clauses, and the disparity in bargaining power that sometimes exists, there is no simple answer. This case concerns the standard “General Terms and Conditions” of a residential furnace maintenance agreement offered ⁶⁸⁴ by Respondent Carroll Home Services, LLC (“CHS”)- 1 One of those terms reduced the period for a consumer to bring a tort or contract claim against CHS from the statutory three years to one year, although it did not limit the time period for CHS to make a claim against a consumer.

Petitioners Richard and Daphne Ceccone, who had entered into a maintenance agreement with CHS, asserted tort and contract claims against CHS for damage to their residence that they attributed to the company. They filed their complaint well before the expiration of three years, but arguably more than a year after their claims accrued. The Circuit Court for Anne Arundel County dismissed their complaint on the basis of the shortened limitations provision in the agreement. We adopt the approach previously articulated by the Court of Special Appeals and hold that contractually-shortened limitations periods, like the one at issue here, are valid only if (1) there is no statute to the contrary; (2) the provision is not the result of fraud, duress, misrepresentation, or the like; and (3) the provision is reasonable in light of all pertinent circumstances.

Because the Circuit Court did not consider potential contract defenses or make an explicit finding on reasonableness, we remand the case to that court so that it may decide how those factors affect the validity of the limitations-shortening provision in the first instance. Background A. Facts The Maintenance Agreement At the time of the events underlying this case, the Ceccones heated their home in Anne Arundel County by means of an oil-fueled furnace. 2 They entered into a maintenance agree ⁶⁸⁵ ment for that furnace with CHS. CHS offered the maintenance agreement—titled “Carroll Home Services Ultra Oil Plan”—to customers to whom it supplied oil. Under the maintenance agreement, CHS agreed to provide 24-hour-a-day service for no-heat emergencies, to repair specified boiler parts if they became defective due to normal wear and tear, and to conduct a yearly “tune-up” of the heating system.

The customer agreed to properly vent the heating system, to maintain clean air filters, and to replace batteries as needed, among other things. 3 The “General Terms and Conditions” of the agreement appear in 18 numbered paragraphs on the back of the pre-printed form that comprises the agreement. Among the items set forth in those paragraphs are the duration of the agreement, procedures for cancellation, conditions for coverage under the agreement, exclusions from coverage, disclaimers of warranties, notices of costs a customer will incur for late payment or non-payment, and limitations of CHS’s liability, among other things. Pertinent to this case, Paragraphs 9 and 10 provide as follows 4 : 9. IRREGULAR PAYMENT AND DELAY IN ENFORCEMENT—We can accept late payments, partial payments or payments marked “payment in full” without losing ⁶⁸⁶ any of our rights under this Agreement, We can also delay enforcing any of our rights under this Agreement without losing any of our rights under this Agreement. 10.

LIMITS OF LIABILITY—We will not be responsible for loss or damages due to or resulting from: changes in oil consumption; improper operation of an attic fan or alternate fuel device; your failure to schedule service and or tune-ups; acts of God; terrorism; strikes; riots; material or labor shortages; fire; flood; hurricane; power interruption or loss; accidents; governmental acts; abuse or misuse of equipment; spontaneous part failure; insufficient water; frozen or jelled oil lines; or any other conditions beyond our reasonable control, including a vacant, unattended or unoccupied premises (in this Agreement, the term “vacant or unattended premises” shall mean premises at which no adult occupant is present for at least twenty-four (24) consecutive hours). TO THE MAXIMUM EXTENT PERMITTED BY LAW, we will have no liability for direct or indirect, special or consequential damages of any kind. We are not responsible for secondary damage as a result of a delay in rendering service. To the extent any warranty exists, our liability for any warranty claim will be limited, as permitted by law, to the repair or replacement of defective parts or service provided under this Agreement.

Any and all actions, whether based in contract or tort, whether for personal injury or property damage, and whether brought by Buyer or Buyer’s insurance company, must be commenced within one year of the cause of action or shall be barred as a matter of law. IN NO EVENT SHALL OUR LIABILITY TO YOU OR OTHERS UNDER THIS AGREEMENT OR OTHERWISE EXCEED $1,000, INCLUDING ANY LIABIILTY UNDER SECTION 11. (capitalized emphasis in original; italicized emphasis added). As is evident, Paragraph 10 provides that any actions brought by the Buyer—i.e., the Ceccones—-including tort or contract claims must be brought within one year of accrual of the cause of action.

This provision was apparently intended to shorten the three-year period of limitations that would otherwise apply to such claims pursuant to Maryland Code, Courts & Judicial ⁶⁸⁷ Proceedings Article (“CJ”), § 5-101. There is no corresponding provision that shortens the period of limitations for CHS or that requires it to bring a claim within one year. Rather, Paragraph 9 purported to permit CHS to delay enforcing its rights under the agreement “without losing any of [its] rights under the agreement.” An Incident with the Furnace During April 2014, there was an incident involving the Ceccones’ furnace that caused some damage to their home. For purposes of this opinion, the details of that incident and the damages are not important.

It suffices to say that the Ceccones suspected that faulty maintenance by CHS was responsible. According to the Ceccones, they consulted with an engineer and insurance adjuster, as well as another furnace maintenance company, all of which confirmed their belief that CHS was at fault. After conducting that investigation, they asked CHS to pay the cost of remedying the damage. Some negotiations ensued during 2015, but the parties ultimately did not agree on a resolution.

B. Legal Proceedings Proceedings in the District Court On December 24, 2015, the Ceccones filed a pro se small claims action in the District Court of Maryland sitting in Anne Arundel County. See CJ § 4-405; Maryland Rule 3-701. The Ceccones sought damages in the amount of $3,694.39, as well as costs. The complaint alleged that CHS had improperly maintained their heating system, and that this improper maintenance was both fraudulent and a breach of the parties’ contract.

CHS filed a Notice of Intend to Defend on January 19, 2016. On January 29, 2016, the Ceccones filed an amended complaint that added documentation concerning the requested damages and increased the amount requested by about $70. The amended complaint also added an allegation that CHS had not complied with certain licensing requirements. 5 ⁶⁸⁸ On March 17, 2016, the District Court dismissed the case, apparently on the basis of the shortened limitations period set forth in the maintenance agreement, and entered judgment in favor of CHS. The Ceccones then pursued a de novo appeal in the Circuit Court for Anne Arundel County.

See CJ § 12-401(f) (providing for de novo appeal in a circuit court when the amount in controversy does not exceed $5,000); Maryland Rule 7-102. Proceedings in the Circuit Court The Circuit Court conducted a brief hearing on the matter on July 8, 2016, At the outset, counsel for CHS noted that CHS denied liability, but advised the court that he wished to raise a limitations defense as a “preliminary matter.” He directed the court’s attention to the limitations-shortening provision in the maintenance agreement and asserted that the Ceccones were “on notice” of a potential claim as of October 2014, 6 more than a year before they filed suit in December 2015. The Circuit Court then turned to Mr. Ceccone, who argued that the shortened limitations period should not be enforced and proceeded to relate some of the reasons why the Ceccones believed that CHS had made misrepresentations that affected the enforceability of the contract. After hearing briefly from counsel for CHS concerning some of those allegations, the Circuit Court engaged in the following discussion with Mr. Ceccone concerning whether the shortened limitations provision should supersede the statutory three-year period for tort and contract claims: ⁶⁸⁹ THE COURT: Well, sir, I don’t think I can get around the language of the contract.

The contract is very-clear that the action must be filed within one year. And that’s clear. You contracted that way and that’s part of the contract. MR.

CECCONE: But I entered into the contract, Your Honor, as a result of believing that they were properly licensed. THE COURT: Well, you—but you may have some action with the—whoever regulates that company, bringing it to their attention. But so far as the Court is concerned you entered into a contract. You know what a contract is because you’re in the real estate business.

The terms are very clear. It says it must be filed within one year regardless of all of the background. MR. CECCONE: Well, Your Honor, I discovered on January of this year that, in fact, they did not provide— they were not properly insured to perform that work.

THE COURT: Well, and maybe that’s something you can take up with the regulatory agency. But that’s not anything I can do—handle. I’m only here on the contract. The contract is clear that you must file the action within one year.

And so I have no other— MR. CECCONE: But the statute of limitations is three years. That’s the statutory— THE COURT: That’s the general. But you can contract it out.

You can contract and make it six months, three— 30 days. MR. CECCONE: But who’s— THE COURT: That’s between you and [CHS]. MR.

CECCONE: Yeah. But would a reasonable person determine that that’s a reasonable amount of one year? THE COURT: Well, I’ve seen it before. ⁶⁹⁰ MR. CECCONE: Well, that’s—I understand that’s the case.

You’ve seen it before. But what’s basically happened is, is the contractor is setting an arbitrary amount of time for someone— THE COURT: Well, you could have, when you entered into the contract, said, look, I’m not going to agree to one year. It’s got to be three years. You could have said that and then put that in the agreement.

But you know what a contract is being in the real estate business. Whatever it’s contracted for, you’re stuck with. After further discussion with Mr. Ceccone about whether the allegedly false representations by CHS could be a basis for rescinding the contract, including the one-year limitations period, the Circuit Court rendered judgment in favor of CHS based on limitations. After judgment was entered in CHS’s favor, the Ceccones appealed to the Court of Special Appeals.

Because any further appellate review in this case properly belongs in this Court, 7 the Court of Special Appeals transferred the appeal to this Court pursuant to Maryland Rule 8-132. We treated the Notice of Appeal as a petition for a writ of certiorari, which we granted. II Discussion There is a single issue presented for our review: 8 In dismissing the complaint, did the Circuit Court properly determine that the shortened one-year period of limitations set ⁶⁹¹ forth in the maintenance agreement superseded the three-year statutory period of limitations? A. Standard of Review When deciding whether to grant a motion to dismiss a complaint as a matter of law, a trial court is to assume the truth of factual allegations made in the complaint and draw all reasonable inferences from those allegations in favor of the plaintiff.

When an appellate court reviews a trial court’s grant of a motion to dismiss, the appellate court applies the same standard to assess whether the trial court’s decision was legally correct. Heavenly Days Crematorium, LLC v. Harris, Smariga and Associates, Inc., 433 Md. 558, 568 , 72 A.3d 199 (2013). Because this review concerns resolution of a question of law, an appellate court does not accord any special deference to the trial court. B. Enforcement of Contractual Limitations Clauses Statutes of limitations are designed to balance the competing interests of plaintiffs, defendants, and the public.

A statutory period of limitations represents a policy judgment by the Legislature that serves the interest of a plaintiff in having adequate time to investigate a cause of action and file suit, the interest of a defendant in having certainty that there will not be a need to respond to a potential claim that has been unreasonably delayed, and the general interest of society in judicial economy. Pennwalt Corp. v. Nasios, 314 Md. 433, 437-38 , 550 A.2d 1155 (1988); Pierce v. Johns-Manville Sales Corp., 296 Md. 656, 665 , 464 A.2d 1020 (1983). In enacting the three-year statute of limitations that governs most tort and contract actions, the General Assembly thus made a policy decision as to an appropriate deadline for the filing of such a claim by a reasonably diligent plaintiff. See CJ § 5-101. 9 ⁶⁹² This is not to say that a period of limitations is immutable.

Statutes of limitation are not ordinarily jurisdictional, and parties may essentially lengthen them by waiving limitations 10 or by agreeing to toll the period of limitations for a particular claim that might otherwise become barred. 11 Similarly, parties may, in some circumstances, agree to shorten the period of limitations in a way that the courts will recognize. States have taken different approaches as to whether, and the extent to which, parties to a contract may agree in advance to shorten a statutory limitations period. Among the states that prohibit such provisions, some have enacted laws containing such a prohibition, 12 while others have imposed that prohibition judicially on the basis of public policy. 13 In other states, courts appear to allow for contractually-shortened limitations periods, absent a defense to contract formation, 14 Many ⁶⁹³ courts have assessed such provisions according to a criterion of reasonableness. 15 In any event, it seems safe to say that “where a limitations period is imposed by a contract rather than by a statute, the public policy considerations that typically weigh in favor of strict enforcement of the limitations period do not apply.” 16 Maryland law has combined these approaches. There are some provisions in the Maryland Code that explicitly bar any effort to shorten a statute of limitations.

See, e.g., Maryland Code, Insurance Article (“IN”), § 12-104 (provision in insurance or surety contract that purports to shorten period of limitations is “against State public policy, illegal, and void”); 17 see also St. Paul Travelers v. Millstone, 412 Md. 424 , 987 A.2d 116 (2010) (applying IN § 12-104 to hold a contractually-shortened limitations period void). Otherwise, the validity of a contractual provision that purports to shorten a statutory limitations period is