Title: McDaniel v. Honda Finance

State: maryland

Issuer: Maryland Supreme Court

Document:

Ronnette McDaniel, et al. v. American Honda Finance Corporation, No. 108, Sept. Term 2006.
CONTRACT LAW - LATE FEES - THE GENERAL ASSEMBLY, BY ENACTING
COMMERCIAL LAW § 14-2002(G)(1)(I), DELEGATED TO PRIVATE CONTRACTING
PARTIES THE AUTHORITY TO SET THE AMOUNT CHARGEABLE FOR LATE FEES,
WHICH IT IMPLIED WOULD NOT BE DEEMED INTEREST, OBVIATING THE
APPLICATION OF THE MAXIMUM CONSTITUTIONAL RATE OF INTEREST PRESCRIBED
BY MARYLAND CONSTITUTION ARTICLE III, § 57.
CONSTITUTIONAL LAW - SEPARATION OF POWERS - THE GENERAL ASSEMBLY, BY
ENACTING COMMERCIAL LAW § 14-2002(G)(1)(I), DELEGATED PROPERLY TO PRIVATE
CONTRACTING PARTIES ITS AUTHORITY TO DETERMINE MAXIMUM INTEREST
RATES.
Circuit Court for Prince  George ’s County
Case # CAL 00-21321
IN THE COURT OF APPEALS OF
MARYLAND
No. 108
September Term, 2006
RONNETTE MCDANIEL, ET AL.
v.
AMERICAN HONDA
FINANCE CORPORATION
Bell, C.J.
Raker
Cathell
Harrell
Battaglia
Greene
Wilner, Alan M. (Retired, specially
assigned),
JJ.
Opinion by Harrell, J.
Filed:    June 12, 2007
1The persistence of the question that went unanswered in Simpkins v. Ford Motor
Credit traces its provenance even further back to United Cable Television of Baltimore v.
Burch, 354 Md. 658, 685, 732 A.2d 887, 901 (1999) (Burch I), where our predecessors
declined to address whether late fees authorized by certain types of statutes constituted
interest.
2Commercial Law § 14-2002(g)(1)(i) provides that “[i]f a [consumer] lease permits,
a lessor may impose on the lessee: [a] late or delinquency charge for payments or portions
of payments that are in default under the lease.”  This section became effective on 1 January
1996.
In this appeal we are asked to address the merits of a question, which, because of
intervening procedural issues, we foresook in a previous opinion in Simpkins v. Ford Motor
Credit, 389 Md. 426, 430-31, 886 A.2d 126, 129 (2005).1  Specifically, that question is
whether a late fee charged by the lessor of a motor vehicle, in the first instance, constitutes
interest and, if so, whether the rate of interest charged was lawful under Maryland
constitutional and statutory law.  The Circuit Court for Prince George’s County dismissed
lessees-Appellants’ First Amended Complaint, which alleged that the late fee assessed by
lessor-Appellee was an amount in excess of the legal rate of interest of 6% per annum, as
provided by Article III, § 57 of the Maryland Constitution.  The trial court concluded that the
amount charged for the late fee, set by the lease agreement, was lawful because Maryland
Code (1975, 2000 Repl. Vol.), Commercial Law Article (hereinafter “Commercial Law”),
§ 14-2002(g)(1)(i)2 authorized a lessor to charge late fees set in the lease agreement, which
would not be deemed to be interest.  Not being interest, the late fees, and in particular their
amount, were not governed by the limit imposed by Article III, § 57.  We shall affirm the
3Ronnette McDaniel executed her lease on 23 May 1998, Yanick Hazlewood executed
her lease on 26 June 1998, and Laura Baptista executed her lease on 8 May 1997.
4This language appears in the lease of the 
original, and named representative, plaintiff,
Ronnette McDaniel.  The “late charge” terms contained in the other leases at issue are
identical in substance and vary only in the sense that the lease terms applicable to McDaniel
and Hazlewood are worded in the first person, and those applicable to Baptista are worded
in the second person.
5We digress to note a facially confounding aspect of the relevant pleadings and papers
in this regard.  The First Amended Complaint alleges generically that “[a]t some point during
the applicable statute of limitations period,” each of the Plaintiffs “paid a late fee” charged
by American Honda under their respective leases.  In support, the only demonstrable
indication of when a late fee actually was assessed may be inferred from a copy of a billing
statement dated 4 September 2000 from American Honda to McDaniel attached as an exhibit
(continued...)
2
Circuit Court’s judgment.
I. FACTS
The three representative plaintiffs in this putative class action suit executed lease
agreements for personal use motor vehicles, within the same relative period of time,3 with
American Honda Finance Corporation and its various entities (“American Honda”).  Each
agreement, although involving different dealerships, contained a nearly identical term
providing for a “late charge”: “I will pay a late charge equal to the lesser of $25 or 5% of the
unpaid portion on any payment that is not received within 10 days after it is due, or such
lesser amount as set by law.”4  Each plaintiff alleged that American Honda assessed, and
each plaintiff paid, a single late fee prescribed by the above-quoted term for failing to remit
timely a monthly amount due under their respective leases.5
5(...continued)
to the original Complaint, but not attached or referred to in the First Amended Complaint.
Our close comparison of the Record Extract and the Record revealed an anomalous Affidavit
of Ronnette McDaniel in Support of Plaintiffs Motion for Class Certification found in the
Extract, but not contained in the Record, to which was appended another copy of the 4
September 2000 billing statement.  No specifications as to when Hazlewood or Baptista were
assessed or paid a late fee could be found in the Record.
McDaniel’s billing statement detailed a total amount due of $916.70, comprised of the
regular monthly lease installment of $436.52, due on 23 September 2000; an unpaid prior
monthly payment of $436.52; a late fee of $21.83 resulting from the unpaid prior payment;
and, an additional late fee of $21.83 that seemingly was charged in anticipation of the
September monthly payment being late.  Despite American Honda’s insistence that, in accord
with its lease agreements, it only charges a single late fee for each monthly payment that is
10 days past due, the 4 September 2000 statement may not be construed reasonably in any
way other than that the second $21.83 late fee, listed under the heading of “Current Charges,”
represented either: (1) a late fee charged in anticipation of a late 23 September 2000
payment, or (2) a second late fee for the yet unpaid previous regular monthly payment.
Although the billing statement does not indicate explicitly for which prior monthly
billing period a late fee was assessed, the only reasonable inference is that the untimely prior
payment was from the preceding month’s billing period because it is listed among the
charges on the 4 September 2000 statement under the heading, “Prior Billing Detail.”
Without any further allegations advanced by Plaintiffs-Appellants, it also would be
reasonable to infer that the previously assessed late fee was the singular late fee referred to
in the First Amended Complaint and was from the payment due on 23 August 2000.
Commercial Law § 14-1315(d)(1), a provision stating explicitly that late fees provided
for in consumer contracts are not interest, became effective on 1 June 2000.  Chapter 59, §
10 of the Acts of 2000.  Therefore, based on the allegations and reasonable inferences
drawable therefrom, the causes of action alleged by Plaintiffs-Appellants relating to late fees
assessed after 1 June 2000 would appear to have accrued after the effective date of § 14-
1315(d)(1), thus rendering § 14-1315(d)(1) controlling on the issue of the legal character of
the late fees American Honda charged.  See infra Part IV.A.
Because McDaniel’s 4 September 2000 billing statement did not form a part of the
First Amended Complaint, however, we do not consider it in our analysis of the propriety vel
non of the trial court’s grant of American Honda’s motion to dismiss.
3
II. PROCEDURAL HISTORY
On 15 September 2000, McDaniel filed, in the Circuit Court for Prince George’s
6Maryland Code (1975, 2000 Repl. Vol.), Commercial Law Article, §§ 14-2001 to 14-
2010.
7Maryland Code (1975, 2000 Repl. Vol.), Commercial Law Article, §§ 13-301 to 13-
318.
4
County, a Complaint against American Honda, seeking class action certification and
asserting that American Honda charged her and putative class members a late fee in excess
of the 6% per annum limit on interest prescribed by the Maryland Constitution.  On 13
December 2000, McDaniel amended her Complaint to include two additional representative
plaintiffs, Yanick Hazlewood and Laura Baptista (collectively “Appellants”).  The First
Amended Complaint alleged four theories of recovery or relief: (1) the late fees provision
was an unlawful liquidated damages contract term exceeding the 6% per annum
constitutional limit on interest, (2) a declaratory judgment to the effect that the collection of
such a damages provision is not permitted by statute, (3) violation of the Maryland Motor
Vehicle Leasing Act,6 and (4) violation of the Maryland Consumer Protection Act.7
Compensatory and statutory damages, and declaratory and injunctive relief, were sought.
Reformation of the leases was not sought.
The Circuit Court stayed the proceedings on 13 February 2001 in contemplation of
the disposition of an expedited appeal to this Court in Dua v. Comcast Cable of Md, Inc., 370
Md. 604, 805 A.2d 1061 (2002), a case which the trial court felt raised issues bearing directly
on those in the present case.  The stay was continued by the Circuit Court in 2003 in light of
this Court issuing a writ of certiorari to the Court of Special Appeals in the Simpkins case,
8As technical matter, the Court of Special Appeals’s opinion in Simpkins v. Ford
Motor Credit, 160 Md. App. 1, 862 A.2d 471 (2004), was not binding, in a stare decisis
sense, on the trial court in this matter.  This is because this Court reversed the Court of
Special Appeals’s judgment in Simpkins, thus rendering it a nullity.  Carpenter Realty Corp.
v. Imbesi, 369 Md. 549, 562, 801 A.2d 1018, 1025-26 (2002) (quoting Litman v. Mass. Mut.
Life Ins. Co., 825 F.2d 1506, 1514 n.11 (11th Cir. 1987)) (“A reversal is defined as ‘the
annulling or setting aside by an appellate court of a decision of a lower court.’”); Carpenter
Realty Corp., 369 Md. at 562, 801 A.2d at 1026 (quoting Balducci v. Eberly, 304 Md. 664,
671 n.8, 500 A.2d 1042, 1046 n.8 (1985) (“It has been held that the effect of a general and
unqualified reversal of a judgment, order or decree is to nullify it completely and to leave the
case standing as if such judgment, order or decree had never been rendered, except as
restricted by the opinion of the appellate court.”).  Thus, the Simpkins case has no stare
decisis effect, but was, at most, persuasive authority.  West v. State, 369 Md. 150, 157, 797
A.2d 1278, 1282 (2002) (“A Court of Special Appeals’ opinion underlying a judgment,
which is reversed or vacated in its entirety by this Court on another ground, may, depending
upon the strength of its reasoning, constitute some persuasive authority in the same sense as
(continued...)
5
which facially presented substantive issues very similar to those posed in the instant case.
On 21 March 2006, the Circuit Court lifted the stay because of our decision to remand
Simpkins to the trial court for the consideration of procedural issues unrelated to the merits
of those substantive questions.
American Honda filed a Motion to Dismiss for failure of the First Amended
Complaint to state a cause of action upon which relief may be granted.  After conducting a
hearing on the motion, the trial court, on 1 September 2006, dismissed all claims and
declared that American Honda was entitled to charge late fees, as framed in the contracts,
pursuant to Commercial Law § 14-2002(g).  Evidently, the trial court was persuaded, and
perceived itself to be bound, by the Court of Special Appeals’s opinion in Simpkins v. Ford
Motor Credit, 160 Md. App. 1, 862 A.2d 471 (2004).8  Simpkins and the present case involve
8(...continued)
other dicta may constitute persuasive authority.  Nonetheless, analytically the intermediate
appellate court’s opinion is only dicta because it no longer supports or reflects a viable
appellate judgment.  Accordingly, such an opinion is not a precedent for purposes of stare
decisis.”) (citation omitted).  Notwithstanding its non-binding effect, the reasoning of the
Court of Special Appeals’s opinion in Simpkins certainly could be found persuasive by a
receptive court.
6
automotive finance companies charging late fees for untimely lease payments, challenged as
exceeding the legal rate of interest set by the Maryland Constitution.  Article III, § 57 of the
Maryland Constitution provides, in pertinent part, that the legal rate of interest is 6% per
annum “unless otherwise provided by the General Assembly.”  (emphasis added).  As
understood by the Circuit Court here, the General Assembly so provided by enacting
Commercial Law § 14-2002(g), which states that, if a motor vehicle lease permits, a lessor
may impose late payment fees on a lessee.   In reaching this conclusion, the Circuit Court
relied on the intermediate appellate court’s reasoning in Simpkins, holding that late fees
authorized by Commercial Law § 14-2002(g) are not interest and are exempt from the
constitutionally prescribed maximum interest rate.  Accordingly, the Circuit Court dismissed
the Complaint.
Appellants noted a timely appeal to the Court of Special Appeals.  Before the
intermediate appellate court could decide the case, Appellants petitioned for, and we granted,
a writ of certiorari.  396 Md. 12, 912 A.2d 648 (2006).  In the petition, two questions are
presented for our review:
1. Did § 14-2002(g)(1) of the Commercial Law Article authorize [Appellee]
7
American Honda Finance Corporation to charge [Appellants] a late fee in
excess of 6% per annum, the legal limit on interest set forth in Article III, § 57
of the  Maryland Constitution?
2. Did § 14-1315 of the Commercial Law Article authorize [Appellee]
American Honda Finance Corporation to charge [Appellants] a late fee in
excess of 6% per annum even though [Appellants’] lease agreements with
American Honda were entered into prior to the October 1, 2000 effective date
of section 14-1315?
Because we conclude that Appellants did not state a claim upon which relief could be
granted, we affirm the judgment of the Circuit Court dismissing the action.
III. STANDARD OF REVIEW
The standard of review for a grant of a motion to dismiss is well-settled.  In Debbas
v. Nelson, 389 Md. 364, 885 A.2d 802 (2005), we reiterated that:
In reviewing the underlying grant of a motion to dismiss, we
must assume the truth of the well-pleaded factual allegations of
the complaint, including the reasonable inferences that may be
drawn from those allegations.  In the end, “[d]ismissal is proper
only if the complaint would fail to provide the plaintiff with a
judicial remedy.”  In sum, because we must deem the facts to be
true, our task is confined to determining whether the trial court
was legally correct in its decision to dismiss.
389 Md. at 372, 885 A.2d at 807 (citations omitted); see also Fioretti v. Md. State Bd. of
Dental Exam’rs, 351 Md. 66, 71-72, 716 A.2d 258, 261 (1998).
IV. DISCUSSION
Appellants argue that, under our decision in United Cable Television of Baltimore v.
Burch, 354 Md. 658, 732 A.2d 887 (1999) (Burch I), the late fees American Honda assessed
them for late payments under their leases constitute interest subject to the Constitutional rate
9This calculation is premised on American Honda charging 5% on the balance of a
monthly lease installment yet unpaid after the lapse of 10 days from the due date of payment.
Appellants extrapolate this scheme to mean that 5% is charged every 10 days for an entire
year, thus amounting to 36.5 payments of 5%, or 182.5% annually.  American Honda claims,
as noted supra at note 5, that it charges only a one time late fee for each late monthly
payment.
8
limitation thereon.  This is because the late fee, like the “administrative fee” charged by
United Cable Television in Burch I for the late payment of cable bills, is not authorized by
statute to exceed the 6% per annum limit on interest.  Burch I, 354 Md. at 675, 732 A.2d at
896.  Appellants contend, in riposte to American Honda’s assertions and the Circuit Court’s
reasoning, that Commercial Law § 14-2002(g)(1)(i) does not sanction what Appellants
calculate to be a 182.5% annual interest rate.9  Therefore, they seek restitution and other
recompense for any late fee amounts exceeding the constitutional 6% rate “cap.”  We hold,
however, pursuant to Commercial Law § 14-2002(g)(1)(i), that the late fees American Honda
charged Appellants are not interest and the timing and amount of such fees are governed by
the terms of the leases in question.
A. The General Assembly “Provided Otherwise”
by Enacting Commercial Law § 14-2002(g)(1)(i)
As we noted previously, Article III, § 57 of the Maryland Constitution provides, in
pertinent part, that the legal rate of interest is 6% per annum “unless otherwise provided by
the General Assembly.”  (emphasis added).  This Court, in Burch I, held that, because the
General Assembly did not authorize or regulate by statute the assessment of late fees for
untimely payment of cable bills, the late fees charged by the cable provider remained subject
9
to the limit on interest rates imposed by Article III, § 57.   354 Md. at 681, 732 A.2d at 899.
That is not the case here.  Application of the principles of statutory interpretation lead us to
the conclusion that the General Assembly “provided otherwise” by enacting Commercial
Law § 14-2002(g)(1)(i), which applies to consumer motor vehicle leasing contracts such as
those binding Appellants.  See Commercial Law § 14-2001(g).
In Mayor & Town Council of Oakland v. Mayor & Town Council of Mountain Lake
Park, 392 Md. 301, 896 A.2d 1036 (2006), we said:
The cardinal rule of statutory construction is to ascertain and effectuate the
intent of the Legislature.  In ascertaining legislative intent, we first examine
the plain language of the statute, and if the plain language of the statute is
unambiguous and consistent with the statute's apparent purpose, we give effect
to the statute as it is written.  If a statute has more than one reasonable
interpretation, it is ambiguous.  If the language of the statute is ambiguous, we
resolve the ambiguity in light of the legislative intent, considering the
legislative history, case law, and statutory purpose.  We consider both the
ordinary meaning of the language of the statute and how that language relates
to the overall meaning, setting, and purpose of the act.  We avoid a
construction of the statute that is unreasonable, illogical, or inconsistent with
common sense.  We construe a statute as a whole so that no word, clause,
sentence, or phrase is rendered surplusage, superfluous, meaningless, or
nugatory.
392 Md. at 316, 896 A.2d at 1045 (citations omitted).
Section 14-2002(g)(1)(i) provides, “[i]f a lease permits, a lessor may impose on the
lessee: [a] late or delinquency charge for payments or portions of payments that are in default
under the lease.”  The statute plainly authorizes late fees, thus permitting and regulating that
which ordinarily was not permitted otherwise at that time.  See Burch I, 354 Md. at 680, 732
A.2d at 899.  The question remains whether these authorized late fees constitute interest.  We
10The General Assembly has shown, in legislation contemporaneously adopted with
the enactment of Commercial Law § 14-2002(g)(1)(i), that it is capable of discerning and
classifying certain types of late fees as interest.  See, e.g., Maryland Code (1995, 2003 Repl.
Vol.), Insurance Article, § 15-1221(g) (“The plan of operation shall provide for imposition
of an interest penalty for late payment of assessments.”) (enacted 1 October 1997) (emphasis
added).
10
believe that had the General Assembly intended the “late charges” under § 14-2002(g)(1)(i)
to be considered interest, the Legislature would have labeled them as such.10  Instead, the
General Assembly chose to refer to them as “late or delinquency charges.”  The General
Assembly, particularly at the time Commercial Law § 14-2002(g)(1)(i) was enacted,
demonstrated that it knew how to distinguish “late charges” from “interest.”  See, e.g.,
Maryland Code (1995, 2003 Repl. Vol.), Insurance Article, § 6-108(a) (“A tax not paid when
a report or declaration is due to be filed is subject to a penalty of 5% and interest . . . .”)
(emphasis added); Maryland Code (1974, 2003 Repl. Vol.), Real Property Article, § 11-
110(d) (“Payment of assessments, together with interest, late charges, if any, costs of
collection and reasonable attorney’s fees may be enforced by the imposition of a lien on a
unit in accordance with the provisions of the Maryland Contract Lien Act.”) (emphasis
added); Maryland Code (1974, 2003 Repl. Vol.), Real Property Article, § 11A-110(e)(1)(ii)
(same); Maryland Code (1993, 2004 Repl. Vol.), State Personnel & Pensions Article, § 21-
314(d)(2) (“A participating employer that does not submit supporting payroll data as required
by the State Retirement Agency within the time required is liable for: (i) a late charge of
$250 for each payroll for which the supporting data is late; and (ii) interest on delinquent late
11Judge Rodowsky, writing for the Burch I Court, delineated four distinct “classes”
of statutes pertaining to the imposition of late fees.  “Class I statutes regulate the amount and
timing of a late charge.”  Burch I, 354 Md. at 675, 732 A.2d at 896.  “[A] Class II statute
regulates the amount and timing of late charges and, in addition, expressly provides that those
charges are not interest.”  Burch I, 354 Md. at 676-77, 732 A.2d at 897.  “Class III statutes
authorize late charges without fixing any maximum late charge.  Further, these statutes
expressly state that any late charge permitted by the statute is neither interest nor a finance
charge.”  Burch I, 354 Md. at 677, 732 A.2d at 897.  “Class IV statutes simply recognize that
late charges, or late charges permitted by law, may in fact be assessed.”  Burch I, 354 Md.
at 678, 732 A.2d at 898.
12Burch I, 354 Md. at 678-79 & n.11, 732 A.2d at 898 & n.11.
11
charges at 10% per year if the late charge is not paid by the date certified by the State
Retirement Agency.”) (emphasis added).
It makes no difference in our analysis that several other statutes, classified by Burch
I as Class II and III statutes,11 declare specifically that the late charges they authorize are not
interest.  See Burch I, 354 Md. at 676-77 & nn. 6-8, 732 A.2d at 897-98 & nn. 6-8.  This is
because Class I statutes, which do not state specifically that their authorized late fees are not
interest, are no more informative on the matter of interest than Class IV statutes, of which
§ 14-2002(g)(1)(i) is an example;12 yet, late fees authorized by Class I statutes presumably
still are not subject to the limitation on interest in Article III, § 57.  See Burch I, 354 Md. at
680, 732 A.2d at 899 (“[A]bsent statutory authorization, [late fees] would constitute interest
on the presently due and payable debt and would be subject to the limitations on interest.”).
But see Burch I, 354 Md. at 685, 732 A.2d at 901 (“[W]e intimate no opinion on whether late
charges in other types of transactions [than those unauthorized by statute], particularly those
falling within Class IV, . . . are or are not interest.”).  In any event, Burch I did not rely on
12
the fact that Class II and III statutes contained “disclaimers stating that certain statutorily
authorized late charges are not interest,” but viewed them as merely “reinforcing [its]
conclusion” that Class I, II, and III statutes depart from the constitutional interest rate
limitation.  354 Md. at 680, 732 A.2d at 899.  The very fact that Commercial Law § 14-
2002(g)(1)(i) was enacted to permit late fees is indicative that the Legislature intended to fit
situations such as are presented in the present case within the exception provided in Art. III,
§ 57.
By its plain terms, the statute allows contracting parties to agree to the assessment of
late fees.  Commercial Law § 14-2002(g)(1)(i) (“If the lease permits . . . .”).  This provision
allows contracting parties to decide whether to assess and the amount of the late fee, rather
than be governed by a default mechanism where Art. III, § 57 would treat such charges as
interest.  We believe it to be no coincidence that the language delegating the assessment of
a late fee to the contracting parties also is found in the representative Class II and III statutes
highlighted in Burch I, 354 Md. at 897 & nn. 6-8, 732 A.2d at 676-77 & nn. 6-8.  The
representative Class II statute contained the phrase “[i]f the loan contract provides for them
. . . .”  Commercial Law § 12-105(b).  The highlighted Class III statutes contained similar
wording.  Commercial Law § 12-910(a) (“If the agreement governing a revolving credit plan
permits . . . .”); Commercial Law § 12-1008(a) (“If the agreement governing a loan permits
. . . .”).
Accordingly, we conclude that, pursuant to Commercial Law § 14-2002(g)(1)(i),
13This is the effective date of Commercial Law § 14-1315(d)(1), which inter alia,
made even more explicit that late fees in consumer contracts of the type involved here are
not interest.  Chapter 59, §§ 1, 10 of the Acts of 2000.
14Commercial Law § 14-1315 “Late fees,” provides, in relevant part:
(a) Definitions. - (1) In this section the following words have the meanings
indicated.
(2) “Consumer contract” means a contract involving the sale,
lease, or provision of goods or services which are for personal,
family, or household purposes.
(3) “Contract,” unless specifically provided otherwise, includes
consumer, commercial, and business contracts, covenants, leases
of any kind, and tariffs on file with any regulatory authority.
(4) (i) “Late fee” means any charge or fee imposed because a
payment is not made when the payment is due under the terms
of a contract.
(ii) “Late fee” includes a fee imposed under
subparagraph (i) of this paragraph that is
described:
1. As a flat rate
2. As a percentage of the amount
due; or
3. In any other terms.
(b) Agreement by parties. - The parties to a contract may agree to require the
(continued...)
13
whatever late fees Appellants incurred before 1 June 2000 and after 1 January 1996 were not
interest, and therefore were not subject to the limitation of 6% per annum interest rate
imposed by Art. III, § 57.  As for any late fees that may have been assessed after 1 June
2000,13 we hold that the controlling statute is Commercial Law § 14-1315(d)(1), which was
enacted by the General Assembly in response to Burch I specifically to clarify that “[a] late
fee imposed under [a consumer contract] is not . . . [i]nterest.”  There is no question that the
motor vehicle leases executed by Appellants fall within the bounds of § 14-1315.14  The
14(...continued)
payment of a late fee when a party fails to make a payment when the payment
is due.
(c) Contract disclosure terms. - A contract that requires the payment of a late
fee shall disclose, by its terms or by notice:
(1) The amount of the late fee;
(2) The conditions under which the late fee will be imposed; and
(3) The timing for the imposition of the late fee.
(d) Nature of fee. - A late fee imposed under this section is not:
(1) Interest; . . . .
15Appellants conceded in the First Amended Complaint that their leases were
consumer leases.
14
statute plainly covers “consumer contracts,” which entail “the . . . lease . . . of goods . . .
which are for personal, family, or household purposes.”  Commercial Law § 14-1315(a)(2).
The lease of a motor vehicle is undoubtedly the type of contract for a personal or family good
contemplated by the statute.15  It is also evident that American Honda’s late fee, which is
calculated as a percentage of the amount due, is precisely what the statute regards as a late
fee.  Commercial Law § 14-1315(a)(4)(ii)2.  Because Commercial Law § 14-1315(d)(1)
states that late fees assessed in accord with consumer contracts are not interest, contradicting
the foundation of Appellants’ argument that any late fees charged here after 1 June 2000 are
interest, the remainder of their argument concerning the constitutional rate of interest
becomes moot.  Thus, any late fees charged by American Honda after 1 June 2000 are
governed properly by the terms of the contracts American Honda executed with its lessees.
See Commercial Law § 14-1315(b), (c).
To the extent that § 14-1315(d)(1) is construed to govern any late fees assessed to
16U.S. CONST. art. I, § 10, cl. 1 (“No State shall . . . pass any . . . Law impairing the
Obligation of Contracts.”).
17The closest analogous Maryland provision to the Contracts Clause is Article III, §
40 of the Maryland Constitution, which regulates the power of eminent domain.  Id. (“The
General Assembly shall enact no Law authorizing private property, to be taken for public use,
without just compensation . . . .”).  Appellants’ contention with regard to Art. III, § 40 would
be that they possessed contractual rights that were taken by the State vis-a-vis the enactment
of § 14-1315.
15
and/or paid by Appellants after 1 June 2000, Appellants argue the application of the statute
to their leases executed before the effective date of the statute impairs their contract rights
impermissibly.  They are wrong for the simple reason that the supervening law has not
changed the substance of their leases.
The test for determining whether a subsequently enacted statute impairs the
obligations of a contract under the Contract Clause of the U.S. Constitution16 and its closest
Maryland counterpart17 is well-settled.  “In determining whether an enactment violates the
clause, a court engages in a three part inquiry: ‘[(1)] whether there is a contractual
relationship, [(2)] whether a change in law impairs that contractual relationship, and [(3)]
whether the impairment is substantial.’” Allstate Ins. Co. v. Kim, 376 Md. 276, 299, 829 A.2d
611, 624 (2003) (quoting Gen. Motors Corp. v. Romein, 503 U.S. 181, 186, 112 S. Ct. 1105,
1109, 117 L. Ed. 2d 328, 337 (1992)); see also E. Prince Frederick Corp. v. Bd. of County
Comm’rs, 320 Md. 178, 183, 577 A.2d 27, 30 (1990).  There is no question that a contractual
relationship here pre-existed the effective date of § 14-1315, but Appellants’ argument begs
the question of whether that relationship actually was impaired by application of a change
16
in law created by the enactment of § 14-1315(d)(1).  Appellants’ argument fails because, as
our holding that the controlling law pre-existing § 14-1315 designated the late fees here as
non-interest makes plain, there was no appreciable change in law.  Our analytical conclusion
is unaffected whether we apply § 14-2002(g)(1)(i) or § 14-1315(d)(1).  In either case, the late
fees are not interest, obviating the application of Art. III, § 57.  Thus, although a change in
law occurred in the sense that a new statute was enacted to govern consumer leases, that new
statute made no substantive change to the law governing such leases.  Accordingly, no
impairment occurred.
B. Commercial Law § 14-2002(g)(1)(i) Did Not Unconstitutionally
Delegate the Law-making Authority of the General Assembly
Appellants argue that even if the General Assembly intended for Commercial Law §
14-2002(g)(1)(i) to allow motor vehicle lessors and lessees to determine whether to assess
and the permissible amount of late fees, such an act constitutes an unlawful delegation of
law-making authority in violation of the separation of powers doctrine.  Particularly,
Appellants explain that because Art. III, § 57 invested in the Legislature the exclusive
authority to provide for an interest rate in excess of 6% per annum, it is unlawful for § 14-
2002(g)(1)(i) to delegate completely that authority to private parties, such as American
Honda, to set a different rate by contract.  We do not agree with Appellants’ contention that
§ 14-2002(g)(1)(i) represents a complete or invalid delegation of constitutionally-granted
authority.
Appellants rely on several opinions of this Court expressing the general proposition
17
that “the General Assembly cannot constitutionally delegate to another body its ‘fundamental
decision making authority’ in the sense that it cannot delegate a function which the
Constitution expressly and unqualifiedly vests in the General Assembly itself.”  Christ by
Christ v. Dept. of Natural Res., 335 Md. 427, 444, 644 A.2d 34, 42 (1994); see also Ahlgren
v. Cromwell, 179 Md. 243, 247, 17 A.2d 134, 136 (1941); Pressman v. Barnes, 209 Md. 544,
552, 121 A.2d 816, 820 (1956); Citizens’ Sec. & Land Co. v. Uhler, 48 Md. 455, 459 (1878).
This general proposition, however, is inapposite when Appellants attempt to extend it beyond
its intended bounds.  It is clear that the General Assembly is not permitted to assign entirely
its law-making powers to another branch of government, or the people of the State.  Christ,
335 Md. at 444-45, 644 A.2d at 42 (“Thus the General Assembly could not delegate to an
administrative agency its power to impeach, to propose constitutional amendments, or to
enact statutes.”).  The General Assembly, however, may enact statutes expressing its general
disposition and policy decisions on certain matters.  Those statutes, by virtue of their
delegation of a degree of interpretive or enforcement authority to other branches of
government, or individual persons, do not equate necessarily with the wholesale delegation
of law-making authority.  Christ makes this point clearly.  In upholding the General
Assembly’s delegation of power to the executive branch for regulatory rule-making on
certain issues, we recognized that “when the General Assembly enacts a statute, embodying
its policy decision or decisions, the Legislature often must delegate significant authority to
the executive branch which is vested with the constitutional responsibility of administering
18
the statute.”  335 Md. at 445, 644 A.2d at 42.  Also, this Court has noted previously “many
instances in which authority is lodged in and permitted to private persons by the Legislature.”
Price v. Clawns, 180 Md. 532, 538, 25 A.2d 672, 675 (1942). There is a vast difference
between the Legislature abdicating completely its law-making authority, and the enactment
of a statute that vests a certain degree of discretion to parties affected by the statute.  In the
present case, the General Assembly did not hand over to motor vehicle lessors and lessees
the authority to pass statutes pertaining to late fees, but merely enacted a statute recognizing
the ability of private contracting parties to agree on their own accord to terms regarding late
fees.
Indeed, aside from Commercial Law § 14-2002(g)(1)(i), the Burch I Court identified
previously, without invalidating them, several statutes leaving it to contracting parties the
question of whether to permit late fees.  See, e.g., Commercial Law § 12-105(b) (“If the loan
contract provides for them . . . .”; Commercial Law § 12-910(a) (“If the agreement governing
a revolving credit plan permits . . . .”); Commercial Law § 12-1008(a) (“If the agreement
governing a loan permits . . . .”).  In fact, Burch I implicitly noted the propriety of the
Legislature’s choice, in light of Art. III, § 57, to leave it to private contracting parties whether
to assess late fees in stating that “these statutes permit that which would otherwise be
unpermitted . . . .”  354 Md. at 680, 732 A.2d at 899.
We also find compelling the determination in Fish Market Nominee Corp. v. G.A.A.,
Inc., 337 Md. 1, 650 A.2d 705 (1994), that the General Assembly’s “ability to otherwise
19
provide [under Art. III, § 57] is unrestricted.”  337 Md. at 10, 650 A.2d at 709.  In Fish
Market, this Court held that the General Assembly did not relent unlawfully its law-making
power by allowing Baltimore City to set the redemption interest rate on the tax sale of real
property greater than the default interest rate of 6% fixed by Art. III, § 57.  337 Md. at 10-11,
650 A.2d at 709.  The Fish Market Court concluded, based on the principles of constitutional
interpretation and the evolution of Art. III, § 57, that the framers intended “that the power
granted to the General Assembly in § 57 [be] of a ‘plenary and unrestricted nature.’”  337
Md. at 10, 650 A.2d at 709 (quoting Carozza v. Fed. Fin. Co., 149 Md. 223, 247, 131 A.2d
332, 341 (1925)).  Although Fish Market involved the delegation of authority from the
General Assembly to a local municipality, and not private individuals, as is the case in the
present controversy, the overarching principle of Fish Market still controls.  So long as the
delegation of authority to set interest rates does not violate provisions of the State or Federal
constitutions, no unlawful delegation of law-making authority has occurred.  Appellants do
not indicate, and we cannot find, any such violations here.
JUDGMENT OF THE CIRCUIT COURT
FOR 
PRINCE 
GEOR GE’S 
COUNTY
AFFIRMED; COSTS TO BE DIVIDED
EQUALLY BY APPELLANTS.