Opinion ID: 2681043
Heading Depth: 2
Heading Rank: 2

Heading: Statute of Limitations for Violation of CLEC

Text: More than two years elapsed between the repossession and sale of Ms. Patton’s car and the filing of the complaint that initiated this case. Wells Fargo Financial argues that CL §12-707(g), a section of the Maryland Equal Credit Opportunity Act that states a one-year period of limitations, is the appropriate statute of limitations for actions brought under provisions of the Commercial Law Article, including CLEC. By contrast, Ms. Patton points to CL §12-1019, a section of CLEC that states that “[a]n action for violation of this subtitle” – i.e., CLEC – “may not be brought more than 6 months after the loan is satisfied.” Unsurprisingly perhaps, under Wells Fargo Financial’s theory, Ms. Patton’s claims under CLEC are time-barred; under Ms. Patton’s theory, they are timely. We discuss each party’s suggested statute of limitations in turn.
Wells Fargo Financial urges us to apply the following limitations provision: An action under this title may be brought in any district court or circuit court, depending upon the amount in controversy, within one year from the date of the occurrence of the violation. CL §12-707(g) (emphasis added). This provision appears in the Maryland Equal Credit Opportunity Act, Maryland Code, Commercial Law Article, §12-701 et seq., which comprises subtitle 7 of Title 12 of the Commercial Law Article, a statute that is quite distinct 11 from CLEC and the other eleven subtitles of Title 12. That statute, patterned after an analogous federal law,12 prohibits discrimination on the basis of sex, marital status, race, color, religion, national origin, or age in the extension of credit. It does not regulate the substantive terms of an installment sale, the repossession and sale of collateral when a borrower defaults, or the conditions under which a lender can seek a deficiency judgment against the borrower. There is no allegation in this case that Wells Fargo Financial violated the Maryland Equal Credit Opportunity Act. Nevertheless, according to Wells Fargo Financial, the plain language of this provision means that it states the period of limitations for any action that could be brought for violation of “this title” – i.e., Title 12 of the Commercial Law Article. Wells Fargo Financial is correct that, as a literal matter, the language of CL §12-707(g) would appear to apply to all of the statutory schemes contained in Title 12, even those, like CLEC, contained in other subtitles. But the “plain meaning” of a statute can only be assessed in the context in which it appears. Building Materials Corp. v. Board of Education of Baltimore County, 428 Md. 572, 585, 53 A.3d 347 (2012). In that regard, it is notable that other subtitles of Title 12, including CLEC, contain various other statutes of limitations.13 Neither CL §12-707(g) nor these other statutes 12 15 U.S.C. §1691 et seq. 13 For example, CL §12-919 (in the subtitle concerning Revolving Credit Provisions) provides that “[a]n action for violation of this subtitle may not be brought more than 6 months after the credit extension is repaid in full,” and CL §12-111 (in the subtitle concerning usury and interest) provides that “[a]n action for usury under this subtitle may not be brought more than six months after the loan is satisfied.” 12 acknowledge each other. Considered in that light, the purview of CL §12-707(g) is ambiguous. Resolution of Ambiguity in Statues “[W]here a statute is plainly susceptible [to] more than one meaning and thus contains an ambiguity, courts consider not only the literal or usual meaning of the words, but their meaning and effect in light of the setting, the objectives and purpose of the enactment.” Kaczorowski v. Mayor & City Council of Baltimore, 309 Md. 505, 513, 525 A.2d 628 (1987) (internal citations omitted). Where, as here, there appears to be ambiguity or “uncertain meaning” in a statute, the Court “may and often must consider other ‘external manifestations’ or ‘persuasive evidence,’ including a bill’s title and function paragraphs,...its relationship to earlier and subsequent legislation, and other material that fairly bears on the fundamental issue of legislative purpose or goal....” 309 Md. at 515. Courts are not limited “to the words of the statute as they are printed in the Annotated Code.” Id. at 514-15. In fact, as this Court noted in Kaczorowski, “[t]he circumstances of the enactment of particular legislation may persuade a court that [the legislature] did not intend words of common meaning to have this literal effect.” Id. at 514 (internal citations omitted). This process allows courts to discern “that construction which avoids an illogical or unreasonable result, or one which is inconsistent with common sense.” Id. (internal citation omitted). In Kaczorowski itself, the Court considered whether a local development agency, which owed its existence to a particular statute, had inadvertently become defunct because 13 the General Assembly, in the course of a legislative effort to enhance the financing capabilities of such agencies, had repealed certain parts of the agency’s enabling act and a “savings clause by its plain wording [did] not save it.” 309 Md. at 511. The Court concluded that the General Assembly had made a “patent drafting error” that frustrated the legislative goal of the statute and that the courts should not give effect to it. Id. at 520. Accordingly, we review the legislative history of CL §12-707(g) to resolve the ambiguity of its application. Legislative History of CL §12-707(g) In 1975, one year after the passage of the similar federal law,14 the General Assembly passed the Maryland Equal Credit Opportunity Act, Chapter 753, Laws of Maryland 1975 codified at CL §12-701 et seq. (1975 & 1975 Supp.), finding that “there is a need to insure that the various financial institutions and other persons and firms engaged in the extension of credit exercise their responsibility to make credit available with fairness, impartiality, and without discrimination on the basis of sex or marital status....” CL §12-702(a). The stated purpose of the new subtitle 7 of Title 12 of the Commercial Law Article was “to require that financial institutions and other persons and firms engaged in the extension of credit do not deny credit solely on the basis of sex or marital status.” CL §12-702(b).15 14 See Equal Credit Opportunity Act, Pub.L. No. 93-495, §701, 88 Stat. 1521 (1974). 15 The Maryland Equal Credit Opportunity Act was amended in 1989 to extend its antidiscrimination provisions to prohibit discrimination on the basis of “race, color, religion, national origin, or age.” The purpose provision of CL §12-702(b) was similarly amended. See Chapter 648, Laws of Maryland 1989. 14 Although it contained a section describing a creditor’s civil liability for violating the statute, see CL §12-707 (1975 Supp.), the original version of the Maryland Equal Credit Opportunity Act did not contain a specific statute of limitations for actions under that provision. In 1976, the General Assembly amended the Act to increase the potential damages that could be awarded for a violation of the Act and, at the same time, added a period of limitations for such actions. Chapter 723, Laws of Maryland 1976. The title of the bill stated that it was “For the purpose of increasing the damages for violation of the Equal Credit Opportunity Act; and generally relating to civil liabilities for violation of the Equal Credit Opportunity Act.” House Bill 1038 (1976) (emphasis added). Notwithstanding that the title of the bill related the bill only to the Maryland Equal Credit Opportunity Act and that references to “this subtitle” (i.e., the Maryland Equal Credit Opportunity Act) in the existing damages provision indicated the limited nature of the bill, the new limitations provision in the bill referred to “this title” – literally, the entire Title 12 of the Commercial Law Article. It is clear that both the 1975 enactment of the Maryland Equal Credit Opportunity Act and its 1976 amendment were intended to ensure that creditors were prohibited from engaging in discriminatory practices when extending credit, and that consumer borrowers had a remedy if creditors did engage in such practices. It is also clear that the law was modeled on its federal analog. Documents in the bill file for the 1976 bill that added the limitations provision indicate that the General Assembly sought to conform the Maryland statute to the provisions 15 of the civil liability section of the Federal Equal Credit Opportunity Act.16 In particular, the bill file for House Bill 1038 (1976) contains a copy of the civil liability section of the Federal Equal Credit Opportunity Act that had been passed in 1974, Pub. Law. 93-495 (1974) as codified at 15 U.S.C. §1691e(g) (1974), now codified at 15 U.S.C. §1691e(f) (2014). A handwritten note in the same file reads: “Conforms to Fed Equal Credit Opor. Act.” The fact that these documents are found in the Maryland bill file is “strong evidence” of the General Assembly’s intention that confirms an inference that could be drawn from the similarity of text and purpose. See Johnson v. Mayor & City Council of Baltimore, 430 Md. 368, 388, 61 A.3d 33 (2013). None of the materials in the legislative file suggest that the scope of the new limitations provision was to be broader than the statute to which it was added. The copy of the federal legislation in the bill file also provides a clue as to how the bill came to refer to “this title” in CL §12-707(g). As with CL §12-707(g), the limitations provision of the federal bill appears in a final subsection (g) of the liability section of the law. Notably, the federal Act uses the word “this title” to describe itself, in subsection (g) as 16 The bill file for House Bill 1038 (1976) contains testimony from the Maryland Commission on the Status of Women, stating that the Commission believed “that passage of legislation which provides for increased penalties will heighten the awareness of credit granting businesses to the need for equal treatment.” Testimony of Elaine L. Newman, Executive Director, Maryland Commission the Status of Women, Testimony before Economic Matters Committee (February 27, 1976). A representative of the Maryland affiliate of the American Civil Liberties Union testified that it is “imperative that any Maryland law, providing statutory relief with respect to a right, which is also guaranteed by Federal law, should provide remedies closely approximating those provided [by] such Federal law.” Testimony of Cynthia L. Koonce (February 27, 1976). 16 elsewhere. In the original 1975 iteration of the Maryland statute, CL §12-707 concerned damages and an exception from liability for a violation of the Maryland Equal Credit Opportunity Act and referenced the Act correctly as “this subtitle.” In the 1976 amendment those provisions were elaborated, but the only entirely new addition to the statute was the one-year period of limitations provision in new subsection (g), evidently inspired by the identical federal limitations provision. It is apparent that the drafters of the 1976 amendment made a “patent drafting error” when they imported the federal limitations provision from subsection (g) of the federal statute into a new subsection (g) of the Maryland statute, but failed to substitute “this subtitle” for “this title” in the limitations provision, as they had done in the damages provisions of the original CL §12-707 in the 1975 legislation (and preserved in the 1976 amendments of those provisions). Other considerations also counsel in favor of limiting the purview of CL §12-707(g) to the Maryland Equal Credit Opportunity Act. As noted above, Title 12 of the Commercial Law Article contains other statutes of limitations. If CL §12-707(g) were to be applied to the entirety of Title 12, it would sow confusion throughout Title 12 of the Commercial Law Article, particularly in those subtitles that contain statutes of limitations. The result would be not unlike placing conflicting traffic signals at an intersection. Finally, if Wells Fargo is correct that CL §12-707(g) applies universally in Title 12, a number of prior decisions concerning other subtitles of Title 12 have been wrongly decided in not taking account of CL §12-707(g). See, e.g., Master Financial, Inc. v. Crowder, 409 Md. 51, 972 A.2d 864 (2009) 17 (determining statute of limitations for action brought under subtitle 4 of Title 12 without discussing CL §12-707(g)). Although the “plain meaning” of CL §12-707(g) may lead to a conclusion that it applies to the entirety of Title 12 of the Commercial Law Article, including an action for violation of CLEC, the legislative history of the Maryland Equal Credit Opportunity Act indicates otherwise. As in Kaczorowski, the statutory conundrum is the product of a “patent drafting error” that leads to an “absurd result.” Kaczorowski, 309 Md. at 520. In our view, CL §12-707(g) was intended to apply solely to actions based on violations of the Maryland Equal Credit Opportunity Act and does not apply to an action for a violation of CLEC.
Statute and Case Law As noted earlier, CL §12-1019 is part of CLEC and provides that “an action for violation of this subtitle may not be brought more than 6 months after the loan is satisfied.” This Court, and others, have acknowledged that CL §12-1019 states the period of limitations for an action alleging a violation of CLEC. In particular, in Master Financial v. Crowder, 409 Md. 51, 66, 972 A.2d 864 (2009), this Court listed examples of statutes that contained a “specific period of limitations for enforcement of the statute” and identified CL §12-1019 as a limitations period “requiring that [a] civil action for violation of Credit Grantor Closed End Credit Act be filed no later than six months after loan is satisfied.” In Green v. Ford Motor Credit Co., 152 Md. App. 32, 53, 828 A.2d 821 (2003), the Court of Special Appeals, 18 in passing, described CL §12-1019 as setting forth a “condition precedent to suit” – an apt description for a statute of limitations.17 See also White v. Bank of America, N.A., 2012 WL 1067657,  at  (D. Md. March 27, 2012) (noting that “CLEC does have a statute of limitations, which requires that suit be brought no more than ‘six months after the loan is satisfied’”) (internal citation and footnote omitted). Bediako Wells Fargo Financial argues that CL §12-1019 does not state the limitations period for an action alleging a violation of CLEC, relying on a recent federal district court decision. Bediako v. American Honda Finance Corp,, 850 F. Supp. 2d 574 (D. Md. 2012), aff’d on other grounds, 537 Fed. Appx. 183 (4th Cir. 2013).18 We have reviewed the analysis of the federal district court in Bediako and find it to be flawed. 17 The issue in the Green case did not require that court to decide whether CL §121019, or some other statute, states the appropriate period of limitations for an action alleging a violation of CLEC. That case involved motor vehicle finance contract under CLEC. After the consumer stopped making payments, the credit grantor repossessed and sold the vehicle and ultimately obtained a judgment for the deficiency. 152 Md. App. at 36. In attempting to have the deficiency judgment set aside for fraud, mistake, or irregularity, the consumer made a series of arguments, one of which was that CL §12-1019 somehow sanctioned attacks on enrolled judgments. Id. at 52. Unsurprisingly, the court required only a single paragraph to find that argument meritless. 18 It is notable that two federal district court decisions were issued virtually simultaneously, one of which (White) characterizes CL §12-1019 as the statute of limitations for a CLEC action and the other of which (Bediako) asserts that it is not. In its unreported decision affirming Bediako, the Fourth Circuit did not analyze the limitations issue and only briefly alluded to it in holding that there was no controversy eligible for resolution by a declaratory judgment because the credit grantor had abandoned any claim against the borrower for a deficiency. 537 Fed. Appx. at 187. 19 The court in Bediako based its analysis largely on a statement by this Court in Scott v. Ford Motor Credit Co., 345 Md. 251, 254, 691 A.2d 1320 (1997) that “CLEC does not contain a statute of limitations.” But, once again, context is key. Scott did not involve a suit alleging a violation of CLEC. Rather, it was an action brought by a lender against a borrower for a deficiency. Indeed, the Court specifically noted that the borrower “does not contend that the requirements of CLEC were not followed.” 345 Md. at 255. Thus, that case did not involve “[a]n action for violation of this subtitle” (i.e., CLEC) and the limitations period set forth in CL §12-1019 was not pertinent. The Court in Scott was correct when it determined that CLEC does not itself contain a limitations period for a deficiency action by a lender against a borrower. Id. at 254-55. In the absence of a statutory limitations period, this Court had to decide in Scott whether the four-year limitations period of the Sales Article of the Uniform Commercial Code (Title 2 of the Commercial Law Article) or the general three-year period of limitations (Courts & Judicial Proceedings Article, §5-101) was the more appropriate limitations period to apply for a deficiency action. Id. at 252. The Court ultimately reasoned that the four-year period of limitations in the Sales Article was the more apt period, for reasons not relevant to our case. Id. at 262. The Bediako court also looked to adoption of the four-year period of limitations in Scott for a deficiency action as another basis for declining to apply CL§12-1019 for actions alleging a violation of CLEC. The Bediako court reasoned that it would be “absurd and outrageous” if a creditor had only four years to seek a deficiency judgment, but the borrower 20 had what the court viewed as a potentially much longer period under CL §12-1019 – “six months after the loan is satisfied” – to bring an action against the lender for violation of CLEC. 850 F.Supp.2d at 579. In reaching the conclusion that CL §12-1019 does not state the statute of limitations for an action alleging a violation of CLEC, the Bediako court did not distinguish or acknowledge contrary authority.19 After concluding that CL §12-1019 was not a statute of limitations, the court apparently felt it necessary to explain its purpose. The court characterized the provision as a “books closing device” that it analogized to use of “claims made” policies in certain lines of insurance. 850 F.Supp. 2d at 579. While the court ascribed this intent to the General Assembly, it cited nothing from the legislative record to support that attribution.20 In the end, after arguing that CL §12-1019 is not a statute of limitations, the Bediako Court ultimately treated it as a sort of concurrent period of limitations both for actions by borrowers alleging violations of CLEC and for actions by lenders under the loan contract seeking a deficiency judgment – a conclusion that appears at odds with the purpose of the 19 The court did not cite Crowder, or the decision of another judge of the federal court in White (though the White decision was issued only the day before Bediako), and simply paraphrased the statement in Green that CL §12-1019 states a “condition precedent” to suit, without explaining why that description would disqualify it as a statute of limitations. 850 F.Supp.2d at 579 n.2. 20 We found no mention of “book closing devices” or claims made policies, or anything similar, in our own review of the legislative record. Indeed, it appears from the materials available to us that this theory would have been quite foreign to the proponents of the amendment that created CL §12-1019. See text at pp. 22-25. 21 statute. 850 F.Supp.2d at 580-81. The court concluded that the period of limitations for an action brought by either a lender or a borrower with respect to a contract under CLEC is the earlier of (1) six months after the loan is satisfied or (2) four years after a violation of CLEC. Id. It is not entirely clear how the court arrived at a formulation that seemingly combines two very different types of actions. In particular, it is not clear why a statute that sets a deadline for bringing an action for “a violation of [CLEC]” would apply to a lender’s deficiency action, which would not allege a violation of CLEC and indeed would be premised on the notion that the lender has complied with CLEC. The Bediako court cited nothing in the case law or the statute’s legislative history to support its limitations formula. And we decline to adopt it. Legislative History of CL §12-1019 A review of the legislative history of CL §12-1019 leaves no doubt that the General Assembly intended to create a statute of limitations for actions alleging violations of CLEC. CL §12-1019, together with the rest of CLEC, was enacted as a part of the Financial Economic Development Act of 1983. See Chapter 143, Laws of Maryland 1983. When it was introduced, the bill was viewed as primarily a deregulation effort to permit banks in Maryland to compete more effectively with banks in nearby states. See Senate Bill 591 (1983), (first reader); partial transcription of hearing before Senate Economic Affairs Committee (February 25, 1983) in legislative bill file for Senate Bill 591 (1983); see 22 generally Biggus v. Ford Motor Credit Co., 328 Md. 188, 196-98, 613 A.2d 986 (1992) (recounting legislative history of enactment of CLEC). The Attorney General opposed the bill in its original form, stating that “[t]he bill goes too far” in removing consumer protections and urged the Legislature to modify the bill. See Statement of Attorney General Stephen H. Sachs (February 25, 1983). The Attorney General and the Secretary of Licensing and Regulation urged the addition of protections for consumer borrowers, as well as penalties for lenders who violated those provisions. See Senate Economic Affairs Committee, Hearing Summary for Senate Bill 591 (1983); Letter of Eleanor M. Carey, Deputy Attorney General, to Delegate Frederick C. Rummage, Chairman of House Economic Matters Committee concerning Senate Bill 591 (March 28, 1983). Consistent with the positions of the Attorney General and the administration, the Governor’s Office proposed a series of amendments to the bill. Among the proposed amendments were penalty provisions for lender violations of CLEC. See Senate Bill 591 – Analysis of Proposed Administration Amendments (March 28, 1983) in legislative file for Senate Bill 591. While under consideration by the Legislature, that proposal was “augmented ... to include a statute of limitations similar to that found in the Maryland interest and usury law...” Id. at 14. The Legislature ultimately adopted the proposed amendment with the statute of limitations, which was codified as CL §12-1019. Thus, there is no mystery as to where the Legislature obtained the language of CL §12-1019. As the bill file indicates, at the time CL §12-1019 was enacted, another statute 23 that regulated over-reaching by lenders as to consumer borrowers already contained a statute of limitations for actions brought by a borrower alleging a violation by a lender. In particular, then as now, the usury statute had a limitations provision, which reads as follows: “An action for usury under this subtitle may not be brought more than six months after the loan is satisfied.” CL §12-111. Even if the bill file were not explicit, it is evident that this provision was the source for the language adopted for the CLEC statute of limitations. Both the usury statute and CLEC deal with situations where a borrower is given an opportunity to repay a loan according to agreed-upon terms. The relationship of CL §12-1019 to the usury statute also casts light on an alternative reading of the statute urged by Wells Fargo Financial in its brief. In particular, Wells Fargo Financial argues that the statute of limitations in CL §12-1019 applies only to a cause of action that accrues after the loan is satisfied and therefore is not applicable to the circumstances of this case. Under this reading of the statute, an action could be filed for a violation of CLEC only in the short window between satisfaction of the loan and a date six months later. It would also mean that a borrower who was charged interest or fees in excess of those permitted by CLEC and who wished to bring an action to obtain relief under the statute from the excessive charges, see CL §12-1018(a)(2), would first have to pay the excessive charges to “satisfy” the loan. There is no support in the case law or legislative history for this odd interpretation of the statute. It is well-established that a cause of action 24 under the usury statute – the model for CL §12-1019 – remains available if the loan is not fully paid. See Brenner v. Plitt, 182 Md. 348, 34 A. 853 (1943).21 Other Canons of Statutory Construction Finally, even if the legislative record was not clear that CL §12-1019, not CL §12707(g), is the appropriate period of limitations for an action alleging a violation of CLEC, other canons of statutory construction point to the same conclusion. CL §12-707(g) was enacted in 1976. Chapter 723, Laws of Maryland (1976). CLEC, including the limitations period set forth in CL §12-1019, was enacted in 1983. Chapter 143, Laws of Maryland 1983. Under the standard rules of statutory construction, to the extent that there is a conflict between the two provisions, the later enacted provision – i.e., CL §12-1019 – prevails. State v. Ghajari, 346 Md. 101, 115, 695 A.2d 143 (1997); cf. Maryland Code, Article 1, §17. Moreover, as a general rule, when a specific enactment and general enactment appear to cover the same subject, but conflict, the specific enactment prevails. Smack v. Department of Health & Mental Hygiene, 378 Md. 298, 306, 835 A.2d 1175 (2003). Even if one reads CL §12-707(g) literally to apply to all subtitles of Title 12 of the Commercial Law Article, 21 In Brenner, this Court traced the history of the usury statute and confirmed that a cause of action for usury remained available up to the time that the loan was satisfied. 182 Md. at 356-63. Subsequent to that decision, the General Assembly extended the period of limitations for a usury action to six months after the loan was satisfied. Chapter 453, Laws of Maryland 1968. That provision was later recodified as CL §12-111 – the model that the Legislature used to draft CL §12-1019. Chapter 49, §3, Laws of Maryland 1975. 25 CL §12-1019 is the more specific statute as it relates specifically to actions brought under CLEC.