Schrier v. Beltway Alarm Co., 365

• Decision Date: 03 December 1987
• Docket Number: No. 365,365
• Citation: 533 A.2d 1316,73 Md.App. 281
• Parties: Eugene SCHRIER et ux. v. BELTWAY ALARM COMPANY. Sept. Term 1987.
• Court: Court of Special Appeals of Maryland

Page 281

73 Md.App. 281

533 A.2d 1316

Eugene SCHRIER et ux. v. BELTWAY ALARM COMPANY.

No. 365 Sept. Term 1987.

Court of Special Appeals of Maryland.

Dec. 3, 1987.

Emil Hirsch (James P. Wheeler and Desco, Greenberg & Thomas, P.C., on the brief), Washington, D.C., for appellant.

Jeffrey R. DeCaro (Robert J. Farley and O'Malley, Miles & Harrell, on the brief), Upper Marlboro, for appellee.

Argued before WILNER, ALPERT, and ROSALYN B. BELL, JJ.

ALPERT, Judge.

Appellants, Eugene and Sheila Schrier, filed suit against the Beltway Alarm Co. in the Circuit Court for Prince George's County to recover damages for injuries Mr. Schrier sustained during a robbery of Veteran's Liquors, Inc., a liquor store conducted in corporate form in which appellants were principal shareholders. The trial court held valid and enforceable a $250.00 limitation of liability provision in the parties' contract and granted summary judgment in favor of Beltway for claims in excess of that amount. Pursuant to Md. Courts & Jud.Proc.Code Ann. § 4-402 (1984), the court also dismissed appellants' claim for lack of subject matter jurisdiction, the amount in controversy having been adjudicated as being less than $500. The pertinent facts are not in dispute.

In September 1977 Mr. Schrier, on behalf of Veteran's Liquors, entered into an "Alarm Protection Agreement" with Beltway Alarm Co. for the installation and maintenance of a "central station connected hold-up" system. Appellant agreed to pay a $287.00 installation fee, and $49.50 per month for a 3-year service contract. In November 1980, the parties entered into a second contract calling for monthly payments of $65.85 for continued maintenance of the system. Both contracts contained language limiting appellee's liability in the event of loss or damage due to a breach of contract or negligence in performance by Beltway. Specific pertinent language of the controlling 1980 contract will be provided in our discussion infra.

Mr. Schrier was shot and severely wounded on August 31, 1981 during the course of a hold-up of his liquor store. In the suit filed against Beltway subsequent thereto, Mr. Schrier alleged that he had activated two alarm buttons during the robbery but prior to the shooting. The Schriers filed counts in negligence, breach of contract, and breach of warranty, alleging that Beltway delayed 14 minutes in notifying the police department of the alarm, and that but for this delay Mr. Schrier would not have been shot.

In this appeal, the Schriers contend that:

I. Paragraph 8 of the contract is an invalid liquidated damages clause.

II. The limitation of liability clause is void as a matter of public policy.

III. Appellants have a cause of action in negligence.

IV. Appellants are not bound by the liquidated damages provision of the contract.

We find no merit in any of appellants' theories; therefore, we affirm.

I.

Preliminarily, we note the parties' difficulty in characterizing the nature of Paragraph 8. Although the language appears to be standard in the alarm industry, Fireman's Fund Am. Ins. Cos. v. Burns Elec. Sec. Servs., Inc., 93 Ill.App.3d 298, 417 N.E.2d 131, 417 N.E.2d 131, 132 (1981), the companies' desire to "cover all the bases" by characterizing the language as both liquidated damages and a limitation of liability has no doubt contributed to the problem. As we explain, however, "there is no real distinction for present purposes between a liquidated damage clause, a limited [liability] clause and an exculpatory clause." General Bargain Center v. American Alarm Co., 430 N.E.2d 407, 412 (Ind.App.1982).

Paragraph 8 of the Agreement sub judice provided in part:

STATUS OF PARTIES, LIMITATION OF LIABILITY, LIQUIDATED DAMAGE PROVISION AND INDEMNITY AGREEMENT.

* * *

* * *

(b) Subscriber acknowledges that it is impractical and extremely difficult to fix the actual damages, if any, which may proximately result from a failure to perform any of the obligations herein or a failure of the system to operate because of, among other things: The uncertain amount or value of Subscriber's property or the property of others which may be lost or damaged; the uncertainty of the response time of the police or fire department; the inability to ascertain what portion, if any, of any loss would be proximately caused by Company's failure to perform any of its obligations or failure of its equipment to operate; the nature of the services to be performed by Company;

(c) Subscriber understand [sic] and agrees that if Company should be found liable for any loss or damage due from a failure to perform any of its obligations or a failure of the equipment to operate, Company's liability shall be limited to a sum equal to the total of six monthly payments or Two Hundred Fifty Dollars ($250.00) whichever is the lesser, as liquidated damages and not as a penalty and this liability shall be exclusive and shall apply if loss or damage, irrespective of cause of origin, results directly or indirectly to persons or property from performance or nonperformance of any of the obligations herein or from negligence, active or otherwise of Company, its employees or agents; ...

Some courts have designated contract provisions similar to this as exculpatory, others as a limitation of liability, and still others label it as a liquidated damages clause. Regardless of the nomenclature, courts have uniformly upheld these contract clauses. See, e.g., Central Alarm v. Ganem, 116 Ariz. 74, 567 P.2d 1203 (App.1977); Guthrie v. American Protection Indus., 160 Cal.App.3d 951, 206 Cal.Rptr. 834 (1984); Bargaintown of D.C., Inc. v. Federal Eng'g Co., 309 A.2d 56 (D.C.App.1973); Stefan Jewelers, Inc. v. Electro-Protective Corp., 161 Ga.App. 385, 288 S.E.2d 667 (1982); Fireman's Fund Am. Ins. Cos. v. Burns Elec. Sec. Servs., Inc., 93 Ill.App.3d 298, 48 Ill.Dec. 729, 417 N.E.2d 131 (1980); General Bargain Center v. American Alarm Co., 430 N.Ed.2d 407 (Ind.App.1982); Alan Abis, Inc. v. Burns Elec. Sec. Servs., Inc., 283 So.2d 822 (La.App.1973); New England Watch Corp. v. Honeywell, Inc., 11 Mass.App. 948, 416 N.E.2d 1010 (1981); St. Paul Fire & Marine Ins. Co. v. Guardian Alarm Co., 115 Mich.App. 278, 320 N.W.2d 244 (1982); Foont-Freedenfeld Co. v. Electro-Protective Co., 126 N.J.Super. 254, 314 A.2d 69 (1973), aff'd, 64 N.J. 197, 314 A.2d 68 (1974); Florence v Merchants Cent. Alarm Co., 73 A.D.2d 869, 423 N.Y.S.2d 663 (1980); Reed's Jewelers, Inc. v. ADT Co., 43 N.C.App. 744, 260 S.E.2d 107 (1979); Lobianco v. Property Protection, Inc., 292 Pa.Super. 346, 437 A.2d 417 (1981); Vallance & Co. v. DeAnda, 595 S.W.2d 587 (Tex.Civ.App.1980); but see Samson Sales, Inc. v. Honeywell, Inc., 12 Ohio St.3d 27, 465 N.E.2d 392 (1984).

Appellants first characterize paragraph 8 as a liquidated damages clause and argue that it is invalid because it provides for a penalty. Although we disagree with appellants' characterization of the disputed language, see infra at 1320, we will address their argument because the enforceability of any type of limitation of damages clause with respect to a contract for a burglar alarm system is a question of first impression in Maryland. Exculpatory clauses and liquidated damages clauses have been upheld in other contexts, however, and are helpful to our determination of this case.

In the seminal case regarding exculpatory clauses, Winterstein v. Wilcom, 16 Md.App. 130, 293 A.2d 821, cert. den., 266 Md. 744 (1972), this court upheld an exculpatory agreement that relieved Wilcom of all liability for negligent conduct relating to activities at the "75-80 Drag-A-Way," a track where "automobile timing and acceleration runs were conducted on two racing lanes." Although Drag-A-Way had employees in a tower to detect any hazards on the track, no one warned Winterstein of a "cylinder head approximately 36"' long, 6"' wide and 4"' high, weighing approximately 100 pounds ... which was not visible to him when he commenced the race" but was visible to the employees in the tower. Winterstein hit the cylinder, lost control of the car, jumped a ditch, drove up an embankment and turned over. He sustained "serious, painful and permanent injuries." Id. at 133, 293 A.2d 821. Winterstein sued Wilcom, d/b/a Drag-A-Way for his injuries, alleging negligence. On the basis of the exculpatory "Release" signed by Winterstein, the trial court entered summary judgment for Drag-A-Way. Affirming the summary judgment, we explained:

It is clear that the exculpatory provisions involved in the case before us whereby Winterstein expressly agreed in advance that Wilcom would not be liable for the consequences of conduct which would otherwise be negligent were under the general rule recognizing the validity of such provisions. There was not the slightest disadvantage in bargaining power between the parties. Winterstein was under no compulsion, economic or otherwise, to race his car. He obviously participated in the speed runs simply because he wanted to do so, perhaps to demonstrate the superiority of his car and probably with the hope of winning a prize. This put him in no bargaining disadvantage....

The short of it is that as to the releases here the effect of the exemptive clauses upon the public interest was nil. We find that each release was merely an agreement between persons relating entirely to their private affairs. In the absence of a legislative declaration, we hold that they were not void as against public policy.

Id. at 138-39, 293 A.2d 821.

Likewise, it is well-settled that liquidated damage clauses are recognized and enforced in Maryland. Blood v. Gibbons, 288 Md. 268, 418 A.2d 213 (1980); Cowan v. Meyer, 125 Md. 450, 94 A. 18 (1915). The parties to a contract may stipulate to a specific amount of damages to be recovered by either for a breach of the agreement by the other. Traylor v. Grafton, 273 Md. 649, 332 A.2d 651 (1975). Breach of the contract, not an injury sustained by the other party, imposes the liability to...