Court Opinion

ID: 9709375
Source: CourtListenerOpinion
Date Created: 2023-08-26 03:46:21.502214+00
Date Added: 2024-06-11T18:22:48.224269
License: Public Domain

Dissenting Opinion by
HARRELL, J.,
which MURPHY and CATHELL, JJ., join.
I dissent. Other than mischief, the only thing the Court’s opinion in this matter may inspire is Quentin Tarantino to produce a sequel to “Pulp Fiction,” to be called “Legal Fiction.” In order to avoid confronting the constitutional implications of retrospective application of the good cause provision in the statute in question, the Majority opinion improperly conflates the separate and distinct contractual notions of renewal versus mere continuation. In this regard, it threatens significant damage to the vested rights of contracting parties.
The Majority opinion strains to “conclude that applying the good cause provision to these contracts is not a retrospective application, but rather a prospective one.” Majority op. at 146, 957 A.2d at 599. In reaching this conclusion, the opinion errs in two significant respects, in my view. First, it extends well beyond any Maryland precedent the principle that generally laws existing at the time of entering into a contract become part of that contract. Second, the Majority opinion improperly equates the making of a contract with the mere continuance of performance under an already existing open-ended contract, in direct contradiction to settled authority drawing a clear distinction between the two.
I.
The Majority opinion is correct that it is well-settled under Maryland law that “ ‘laws subsisting at the time of the making *154of a contract enter into and form a part thereof as if expressly referred to or incorporated in its terms, and the principle embraces alike those provisions which affect the validity, construction, discharge and enforcement of the contract.’ ” Majority op. at 146, 957 A.2d at 599 (quoting Dennis v. Mayor of Rockville, 286 Md. 184, 189, 406 A.2d 284, 287 (1979)). There is a plethora of Maryland authority of long standing holding that contracting parties implicitly incorporate relevant laws currently existing into their agreements, or at least agree to comply with such laws. See Dennis, 286 Md. at 191, 406 A.2d at 288 (holding that a city ordinance requiring property owners to provide purchasers with certain required information, prior to entering a contract of sale, and granting purchasers a right of rescission in the event the information was not supplied, was incorporated into the contract because the ordinance existed at the time the contract was made); Beca v. Mayor of Balt., 279 Md. 177, 182, 367 A.2d 478, 481 (1977) (holding that a police department regulation requiring certain departmental expenses be reimbursed was incorporated into employee’s employment contract with the department because the regulation existed at the time the contract was made and was promulgated under the designated authority of the police commissioner); Fed. Ins. Co. v. Allstate Ins. Co., 275 Md. 460, 473-76, 341 A.2d 399, 407-10 (1975) (holding that, because a party to the contract was an automobile shipper authorized by the Interstate Commerce Commission (“ICC”) to engage in such business, the contract between the parties incorporated certain ICC restrictions because the restrictions existed at the time the contract was made); Downing Dev. Corp. v. Brazelton, 253 Md. 390, 398-99, 252 A.2d 849, 854 (1969) (holding that the statutory requirement that a two-thirds majority of stockholders approve a sale of substantial corporate assets was incorporated into the proposed sale agreement); Holmes v. Sharretts, 228 Md. 358, 369, 180 A.2d 302, 306-07 (1962) (holding that, because of the circumstances under which a trust agreement was created and based on the expertise of the persons creating it, the agreement was intended to comply with, and therefore incorporate into its own terms, the ten *155year statutory limitation period); Whitworth v. Dep’t of Mental Hygiene, 222 Md. 98, 104-05, 158 A.2d 765, 768-69 (1960) (holding that a statutory provision entitling the Department of Mental Hygiene to make a claim against the estate of a deceased person, committed to one of its institutions, for past maintenance and support of that person became incorporated into the contract between the deceased’s trustees and the County because enactment of the provision preceded the formation of the agreement and was not substantively changed thereafter); Griffith v. Scheungrab, 219 Md. 27, 33-34, 146 A.2d 864, 868-69 (1958) (holding that a federal statutory provision requiring certain sellers to provide buyers with a written appraisal of the value of the property was incorporated into the contract between the parties because, judging from the contract terms and circumstances, the parties impliedly intended to comply with the provision). The important point to note from these authorities is that, with regard to contracts, Maryland courts have little difficulty in finding consistently that statutes and regulations existing at the time a contract is formed may be incorporated into and become a part of the terms of that contract.
Considering the obverse, Maryland courts consistently have been unwilling, absent a clear expression to the contrary in the statutory enactment, to find that statutes enacted post-agreement should be deemed incorporated into the pre-existing agreements by implication or legal fiction. Under Maryland law, retrospective application of a statute is not favored, and the general presumption is that all statutes, federal and state, are intended to operate prospectively. Rigger v. Balt. County, 269 Md. 306, 310, 305 A.2d 128, 131 (1973) (citing State Farm Mut. Auto. Ins. Co. v. Hearn, 242 Md. 575, 219 A.2d 820 (1966)); Bell v. State, 236 Md. 356, 204 A.2d 54 (1964); Gutman v. Safe Deposit & Trust Co., 198 Md. 39, 81 A.2d 207 (1951); 2 Sutherland, Statutory Construction § 2201 (3d ed.1943). The presumption is rebutted only by a clear expression to the contrary found in the statute or possibly its legislative history. Rigger, 269 Md. at 310, 305 A.2d at 131 (citing Unsatisfied Fund v. Bowman, 249 Md. 705, *156241 A.2d 714 (1968); State Farm, 242 Md. 575, 219 A.2d 820; Bell, 236 Md. 356, 204 A.2d 54)). “ ‘It is well settled that a statute will not be given a retrospective operation, unless its words are so clear, strong and imperative in their retrospective expression that no other meaning can be attached to them, or unless the manifest intention of the Legislature could not otherwise be gratified.’ ” Rigger, 269 Md. at 310, 305 A.2d at 131 (quoting Gutman, 198 Md. at 43, 81 A.2d at 208). Two compelling examples of the reluctance on the part of Maryland courts in finding retrospective application of a statute to a contract, absent clear statutory language, are the cases of Rigger v. Balt. County, 269 Md. 306, 305 A.2d 128 (1973), and State Farm Mut. Auto. Ins. Co. v. Hearn, 242 Md. 575, 219 A.2d 820.
In Rigger, the pertinent statute voided, on public policy grounds, the inclusion in a lease of provisions exempting landlords from liability for injuries stemming from the landlords’ negligence. Rigger, 269 Md. at 308, 305 A.2d at 130. The statute in question was enacted by the General Assembly in 1964 and became effective on 1 June of that year. Rigger, 269 Md. at 308, 305 A.2d at 130. The lease agreement at issue in Rigger was executed on 10 November 1960 and contained the exact type of exculpatory clause the General Assembly intended to prohibit by statute. Rigger, 269 Md. at 307, 305 A.2d at 129. On 17 November 1965, a third party suffered personal injuries allegedly caused by a defective condition of a walkway on the landlord’s premises. Rigger, 269 Md. at 308-09, 305 A.2d at 130. The issue before this Court was whether the statute could be applied retrospectively to the lease agreement executed in 1960. Rigger, 269 Md. at 309, 305 A.2d at 131-32.
In holding that the statute could not be applied retrospectively to the lease agreement, this Court found that because the statute lacked a “clear expression of an intent to apply it retrospectively, ... a retroactive application of the statute to the lease might well raise serious constitutional questions.” Rigger, 269 Md. at 311, 305 A.2d at 131. In finding that the parties’ rights and expectations were created and defined *157before the statute was enacted, we held that the determinative event in these circumstances was the execution of the lease, not the happening of the accident. Rigger, 269 Md. at 311, 305 A.2d at 131-32. Thus, because the determinative event pre-dated the statute, the statute, lacking clear language to the contrary, could not be applied retrospectively to the lease.
Likewise, in Hearn the pertinent statute declared that insurance policies that seek to disclaim motor vehicle liability insurance due to the insured’s failure to give the insurer notice may only be given effect if the insurer proves actual prejudice attributable to such failure. Hearn, 242 Md. at 581-82, 219 A.2d at 823-24. The statute, by its terms, did not become effective until 1 June 1964. Hearn, 242 Md. at 582, 219 A.2d at 824. The insurance policy in the Hearn case was issued well before 1 June, and the accident that gave rise to the claim occurred on 3 March 1964. Hearn, 242 Md. at 583, 219 A.2d at 824. After the accident occurred, a genuine issue of material fact was generated whether the insured had complied with the policy’s notice requirement, and thus whether the insurance company was required to indemnify one of the parties. Hearn, 242 Md. at 583-85, 219 A.2d at 824-26. One of the issues this Court addressed on review was the applicability of the statute, postdating both the insurance agreement and the accident, to the insurance policy in question. Hearn, 242 Md. at 581-83, 219 A.2d at 823-24.
Emphasizing the principle that all statutes are presumed to operate prospectively unless there is a clear expression to the contrary, the Court held that the statute could not be applied retrospectively to the insurance policy because such application would interfere impermissibly with the insurer’s substantive contractual right to deny liability for noncompliance with the notice provision.1 Hearn, 242 Md. at 581-83, 219 A.2d at 823-24. Because this substantive contractual right had ac*158crued before the statute came into effect, the insurer was entitled to assert the notice requirement as a defense. Hearn, 242 Md. at 582-83, 219 A.2d at 824. Thus, Hearn stands for the proposition that a post-agreement statute, absent clear language to the contrary, should not be applied to contractual rights that accrue before the effective date of the statute.
II.
Based on Rigger and Hearn, it seems clear to me in the present case that if either party’s right to terminate the open-ended contract, subject to the 120 day notice period, but without the requisite showing of good cause, accrued or vested before the effective date of the Maryland Legislature’s 1998 amendment of the Equipment Dealer Act, the 1998 amendment may not be applied retrospectively to the contract between John Deere and Reliable Tractor.2 There simply is no Maryland case holding that a statute that otherwise would alter the contractual rights of the parties involved may be applied, without clear retrospective language, to an agreement made before the effective date of the statute. See generally Dua v. Comcast Cable of Md., Inc., 370 Md. 604, 630, 805 A.2d 1061, 1076 (2002) (“In light of this Court’s opinions, it is clear that retrospective statutes abrogating vested property rights (including contractual rights) violate the Maryland Constitution.”). Thus, the only means by which the statute may be applied to the contract between John Deere and Reliable Tractor is if the parties are deemed to have made a contract *159after 1 October 1998, the effective date of the 1998 amendment. 1998 Md. Laws, ch. 333.
To recognize that means, the Majority opinion embraces a legal fiction that the parties made an agreement post 1 October 1998, dependent on the notion that the contract between John Deere and Reliable Tractor was an open-ended contract with a defined notice period for termination. The Majority theorizes that an open-ended contract with a defined termination notice period is, in effect, a series of contracts each lasting only so long as the duration of the notice period. Majority op. at 152-53, 957 A.2d at 602-03. Reliance on this tortured fiction is misguided.
III.
First, the case law support for the Majority’s conclusion is based purely on dicta in two cases and has never been adopted as a holding by a single court in resolving a similar dispute as the one in the present case. Second, the Majority opinion’s premise that the failure to cancel an open-ended contract with a defined termination period, before that defined period runs, should be considered the same as the two parties making and agreeing to a new contract for each and every subsequent notification period, contradicts well-settled precedents that draw a clear distinction between what is to be considered as renewal of a contract after the effective date of a statute purporting to affect the agreement, therefore incorporating the provisions into the agreement, versus what should be considered the mere continuation of an agreement pre-dating the statutory change, and therefore not incorporating the new law.
A.
No court has held, until the Majority here, that the continuation of an at-will contract beyond the notice for termination period is the equivalent of the parties “making” a series of independent contracts. The two principal cases on which the Majority opinion rests fail to support its theory of a series of *160individual, fictional contracts. In Northshore Cycles, Inc. v. Yamaha Motor Corp., 919 F.2d 1041 (5th Cir.1990), the court considered whether a 1988 statute requiring manufacturers of motorcycles to repurchase inventory from dealers upon cancellation of the dealer agreement applied to a dealer agreement executed in 1984. Northshore, 919 F.2d at 1042. Although the court mentioned in dicta that “an open ended dealer agreement which empowers either party to terminate without cause merely by furnishing, say, thirty (30) days’ notice to the other party, might be construed as a month-to-month agreement which automatically reconducts itself each month until such notice is furnished by one of the parties,” the court actually held that, based upon a review of the agreement between the parties, there was insufficient indicia of any renewal or reconduction of the original 1984 agreement after the 1988 effective date of the statute. Northshore, 919 F.2d at 1043. Thus, application of the statute under such circumstances would violate Yamaha’s right to constitutional protection against laws impairing the obligations of preexisting contracts. Northshore, 919 F.2d at 1044. The other case, Cloverdale Equip. Co. v. Manitowoc Eng’g Co., 964 F.Supp. 1152 (E.D.Mich.1997), aff'd, 149 F.3d 1182 (6th Cir.1998), seems included in the Majority opinion simply because the Michigan federal court discussed the Northshore opinion, despite the fact that it found, as even the Majority opinion here concedes, that Northshore provided no guidance in the holding of the case. Cloverdale, 964 F.Supp. at 1161; Majority op. at 150-51, 957 A.2d at 602-03. The Cloverdale opinion instead addressed whether a statute should be found applicable to a contract of one year term that expired eight days before the effective date of the statute, yet the parties continued to perform. Cloverdale, 964 F.Supp. at 1161-62. Thus, in neither case on which the Majority depends did a court actually adopt as part of the holding the notion that an open-ended contract is really a series of mini-contracts.
B.
The case law on point draws a clear distinction between continuation versus renewal. In Bitronics Sales Co. v. Micro-*161semiconductor Corp., 610 F.Supp. 550 (D.Minn.1985), the United States District Court for the District of Minnesota considered whether a regulatory standard, adopted in Minnesota in 19753 and requiring good cause for termination of a franchise agreement, should apply to a franchise agreement, executed in 1970, that permitted termination at will. Bitronics, 610 F.Supp. at 555-56. The change was adopted “as remedial legislation designed to protect potential franchises within Minnesota from unfair contracts and other perceived abuses in a growing national franchise industry.” Bitronics, 610 F.Supp. at 556. Despite the remedial intentions of the legislation, the Minnesota Supreme Court found that, given Minnesota’s standard (identical to that of Maryland) of presuming new laws and rules have no retrospective effect unless clearly and manifestly intended by the legislature, the new legislation did not satisfy the clear and manifest standard to give the good cause requirement retroactive effect. Mason v. Farmers Ins. Cos., 281 N.W.2d 344, 348 (Minn.1979). Thus, the only issue confronting the District Court in Bitronics was whether the regulatory standard may be incorporated into the parties’ agreement by virtue of the nature of the contract itself or the parties’ actions thereunder.
In Bitronics, the District Court found that the fact that the contract between the parties provided that it was to “commence on the date it is executed and continue until terminated ” was insufficient alone to deem as incorporated into the agreement the post-agreement regulatory change. Bitronics, 610 F.Supp. at 557 (emphasis added). In so finding, the court reasoned:
Courts have found the retroactivity problem to be avoided where parties entered into negotiations for a new agreement or renewed a contract that terminated on a specific date subsequent to the effective date of the franchise act. *162In these circumstances the parties were making a fresh decision whether to continue the contractual relationship; thus no retroactive application was involved. Minor modifications of prior contracts are not sufficient, however. There must be a significant or material alteration of the relationship between the parties for a new contract to exist which postdates the Act.
Bitronics, 610 F.Supp. at 556-57 (internal citations omitted). In Bitronics, as in the present case, either party could terminate the contract at will; thus, the parties could be considered to have agreed, as the Majority opinion would have it, to hundreds or thousands of individual daily contracts. Bitronics, 610 F.Supp. at 557; Majority op. at 151-53, 957 A.2d at 602-03. Nonetheless, the Bitronics court found that the right to terminate the agreement at will, a right agreed upon in the 1970 agreement, was a contractual right that vested prior to the 1975 effective date of the regulation and thus the agreement could not be altered by the subsequently enacted regulation absent clear retrospective language. Bitronics, 610 F.Supp. at 556. Thus, the only other basis upon which to apply the post-agreement statute or regulation was whether the parties made the necessary “fresh decision” to continue the contractual relationship under the new statutory or regulatory regime. See Bitronics, 610 F.Supp. at 557. Under this fiction, if found to exist, the parties would be deemed to have made the necessary “fresh decision” by either having entered into negotiations for a new agreement after the effective date of the statute or regulation, or renewing a contract that terminated on a specific date subsequent to the effective date of the statute or regulation.4
*163The Bitronics holding is a well-settled solution to the post-agreement applicability dilemma, as applied by other courts on several other occasions. See McKay Nissan, Ltd. v. Nissan Motor Corp. in U.S.A., 764 F.Supp. 1318, 1320 (N.D.Ill.1991) (“None of the amendments identified by McKay demonstrate that the parties entered into a new agreement. The parties certainly did not renegotiate the terms of the franchise agreement. The amendments, which were administrative in nature, did not change the parties’ contractual rights. Nor did the amendments vary the responsibilities and duties of either party. In short, the contractual modifications at issue were too insubstantial to have established a new contract which replaced the original franchise agreement.... The Act may not be imposed to interfere with this previously existing contractual relationship. The parties’ rights vested prior to the Act’s effective date and, therefore, McKay cannot resort to the Act’s provisions for a remedy.”); Rochester v. Royal Appliance Mfg. Co., 569 F.Supp. 736, 739 (W.D.Wis.1983) (“It is thus apparent that, as it concerns acts between the effective date of the WFDL (1974) and the 1977 amendments, the acts must satisfy the ‘entered into’ language of the original WFDL before coverage under the WFDL can be imposed. The parties in this case did not enter into a new dealership agreement when plaintiff relinquished part of his territory. While this change may have been substantial to the plaintiff, it is not equivalent to the kind of changes contemplated by the Kealey decision. Rather than making a ‘fresh decision’ whether to continue plaintiff as a distributor, the parties continued the pre-existing relationship, albeit on a smaller scale.”); Kealey Pharmacy & Home Care Serv., Inc. v. Walgreen Co., 539 F.Supp. 1357, 1363 (W.D.Wis.1982) (“When it enacted the Fair Dealership Law in 1974, the legislature intended it to apply to all dealership agreements ‘entered into thereafter.’ As Wipperfurth makes clear, the mere continuance after April 5, 1974 of a dealership arrangement of indefinite duration does not constitute a dealership agreement ‘entered into after’ that date. Similarly, an automatic renewal contemplated under the terms of a dealership agreement is not an agreement ‘entered *164into’ so as to bring the dealership under the original terms of the Act.”), aff'd, 761 F.2d 345 (7th Cir.1985) (internal citation omitted); E.A. Dickinson & Assocs., Inc. v. Simpson Elec. Co., 509 F.Supp. 1241, 1247 (E.D.Wis.1981) (“The June 4, 1974, letter was not, however, a new contract or an amendment to the existing contract. It was instead notification of a routine modification in defendant’s product line which was available to the plaintiff for promotion. It was anticipated by the parties in 1956 at the time of their oral agreement that such changes would occur from time to time, and in the course of their twenty-five years of dealings a number of such modifications did occur. Each time such a change was made, it did not constitute a renewal or amendment of the contract existing between the parties. Thus, the June 4, 1974, letter does not justify application of Ch. 135 to the relationship between the parties.”); Easterby-Thackston, Inc. v. Chrysler Corp., 477 F.Supp. 954, 956 (D.S.C.1979) (“Plaintiffs characterization of the June 1, 1976 activity as constituting a ‘new contract,’ strains the meaning of that term beyond the limits which this court is willing to project. There was no change in the rights or duties of Easterby-Thackston as a result of Chrysler becoming a party to the contract. Nor was the consent of plaintiff necessary for the substitution of Chrysler as a party. Furthermore, the original contract specifically contemplated this very situation, stating that Chrysler Motors ‘may assign this agreement only to Chrysler Corporation.’ Since the parties operated exclusively under the terms of the original agreement, as amended prior to passage of this Act, the assumption of this contract by Chrysler, does not constitute a ‘new contract.’ ”); cf. McKay Nissan, 764 F.Supp. at 1320 (“A determination that the Act does not apply to the 1979 agreement and amendments does not fully dispose of McKay’s complaint, however. The parties entered into a renewal agreement on April 3, 1989, long after the Act (and any relevant amendments) came into effect. Thus, if any of the alleged violations occurred after April 3, 1989, McKay may pursue a claim under the Act because there is no retroactivity problem.”); Phillips Petroleum Co. v. Paradee Oil Co., 343 *165A.2d 610, 611-12 (Del.1975) (holding that contract for one year term made before the effective date of the statute, but subsequently renewed each year by the parties, was sufficient circumstances to subject the contract to the statute).
IV.
For the reasons stated, I would answer the certified question by adopting the “fresh decision” standard of Bitronics. Such a standard does the most justice to the bargains and considerations exchanged between parties at the time of contracting and the objectively-viewed continued expectations of the parties thereafter. Nothing in the Majority opinion or in the briefs of the parties indicates that the agreement between John Deere and Reliable Tractor was based on any understanding other than an open-ended contract terminable at will by either party with 120 days’ notice, even after the 1998 good cause for termination standard was enacted. The Legislature has not directed otherwise with clarity. The courts should not alter the vested rights of the parties to an open-ended contract by incorporating post-agreement statutes into the agreements, absent the requisite showing of a “fresh decision.” Judges Murphy and Cathell authorize me to state that they join this dissenting opinion.

. The Court stated that "[w]e deem it evident that the statute here involved affects substantive rights.” Hearn, 242 Md. at 582, 219 A.2d at 824. The contractual right to cancel a contract without notice has been held to be a substantive right. Bitronics Sales Co. v. Microsemiconductor Corp., 610 F.Supp. 550 (D.Minn.1985), discussed infra.

. This conclusion may be drawn because the 1998 statute implementing the change lacks any indication of an intent on the part of the Legislature that the statute be applied retrospectively. Under State Ethics Comm'n v. Evans, 382 Md. 370, 855 A.2d 364 (2004), a statute is not to be given retroactive operation "unless its words are so clear, strong and imperative, that no other meaning can be annexed to them, or unless the intention of the Legislature could not be otherwise satisfied.” Evans, 382 Md. at 383-84, 855 A.2d at 372 (quoting Williams v. Johnson, 30 Md. 500, 508 (1869)). 1998 Md. Laws, ch. 333, the statute that implemented the good cause change, merely states, inter alia, that it is for the purpose of establishing the good cause standard and is to take effect 1 October 1998, which is insufficient to satisfy the Evans standard.

. The regulation was promulgated under Minn.Stat. § 80C.01 et seq and became effective on 13 January 1975. Bitronics, 610 F.Supp. at 556. Minn.Stat. § 80C.14 was amended in 1981 to incorporate this part of the regulation into the statute itself. Bitronics, 610 F.Supp. at 556 n. 3.

. The Bitronics court, in addition, would have considered a significant or material alteration of the agreement between the parties post-dating the effective date of the statute or regulation sufficient to apply the statute or regulation to the agreement because under such circumstances the parties would be deemed to have satisfied the "fresh decision” standard. See Bitronics, 610 F.Supp. at 557. This consideration need not be analyzed for the purposes of this case because there is no indication from the facts presented to this Court that the parties modified their 1984 dealer agreements.