McDaniel v. Honda Finance

• Decision Date: 12 June 2007
• Docket Number: No. 108, Sept. Term, 2006.,108, Sept. Term, 2006.
• Citation: 400 Md. 75,926 A.2d 757
• Parties: Ronnette McDANIEL, et al. v. AMERICAN HONDA FINANCE CORPORATION.
• Court: Court of Special Appeals of Maryland

926 A.2d 757

400 Md. 75

Ronnette McDANIEL, et al. v. AMERICAN HONDA FINANCE CORPORATION.

No. 108, Sept. Term, 2006.

Court of Appeals of Maryland.

June 12, 2007.

Reconsideration Denied July 24, 2007.

John J. Beins (Seth D. Goldberg and Paul D. Gleiberman of Beins, Goldberg & Gleiberman, Chevy Chase; Connie Kratovil Lavelle, Centreville, on brief), for appellants.

Brad D. Weiss (Kimberly S. MacCumbee of Charapp & Weiss, LLP, on brief), McLean, VA, for appellee.

Argued before BELL, C.J., RAKER, CATHELL, HARRELL, BATTAGLIA, GREENE and ALAN M. WILNER, (Retired, specially assigned), JJ.

HARRELL, Judge.

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 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

II. PROCEDURAL HISTORY

On 15 September 2000, McDaniel filed, in the Circuit Court for Prince George's 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, 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 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] 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 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 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...