In February 1999, Plaintiff Joseph Ely ("Plaintiff") leased
5,000 square feet of commercial office space to a business named Applied
Ordnance Technology, Inc. ("AOT"). AOT paid Plaintiff $5,000 each month to lease
the space. In June 2000, AOT began leasing 10,000 square feet of space from
Plaintiff for $10,000 a month.
AOT began defaulting on its rent in April 2002, paying only
$5,000 each month until October 2003. The next month, AOT made a monthly payment
of $7,250 and continued paying that amount each month through January 2006.
While Plaintiff was aware of AOT's default, Plaintiff chose to enter into a new
lease agreement with AOT. In July 2006, Defendant Science Applications
International ("SAIC") acquired AOT, thereby assuming liability for AOT's
arrears. Plaintiff did not sue for all the back rent until November 2008,
seeking $170,000 in rent, $23,000 in late fees, and $19,800 in repair costs from
After denying Defendant's Motion to Dismiss, the Court
considered Defendant's Motion for Partial Summary Judgment and Plaintiff's
Cross-Motion for Summary Judgment. Judge Williams found no genuine dispute of
fact existed regarding Plaintiff's untimely claims for the rent owed between
April 2002 and November 2005. Section 5-101 of the Courts and Judicial
Proceedings Article governed the dispute, imposing a three-year statute of
limitations on claims for rent.
While Maryland law permits Plaintiff and SAIC to contract
to waive any applicable statute of limitations, the Court found neither party
intended to create a specialty that would waive the statute of limitations. In
Maryland, a specialty is defined as a "promissory note, or other instrument
under seal; bond, except a public officer's bond; judgment; contract under
seal." Md. Code, Cts. & Jud. Proc. § 5-102. A contract under seal is a type of
specialty that would sufficiently waive the statute of limitations, but only if
the parties also indicated their intent to do so in the body of the contract.
See Md. Code, Cts. & Jud. Proc. § 5-102.
The lease contained the word "SEAL" in parentheses after
the signature lines, but no mention of waiver was mentioned in the body of the
lease. Relying on Tipton v. Partners Mgmt. Co., 773 A.2d 488 at 490 n.3, Judge
Williams found the three-year statute of limitations applied since the parties'
contract lacked any agreement to create a specialty to waive the statute of
limitations. Even though the word "SEAL" appeared in the contract, neither party
affixed a corporate seal to the document, and no other extrinsic evidence of
intent to create a specialty existed.
After concluding the parties did not waive the statute of
limitations, the Court then determined when the statute of limitations began
tolling. The Court held Defendant did not have an ongoing obligation to pay rent
since a fiduciary duty did not exist on behalf of either party. See Dual Inc.,
v. Lockheed Martin Corp., 857 A.2d 1095 at 1107. Moreover, even if a fiduciary
duty had existed, the statute of limitations still tolls when an injured party
becomes aware of a contract breach. Because Plaintiff was fully aware that AOT
began defaulting in April 2002, Plaintiff could only sue for the rent owed until
Reasoning that monthly rent payments were analogous to
installment payments, the Court interpreted Avery v. Weitz, 407 A.2d 769, at 771
to hold that a new statute of limitations began tolling each time Plaintiff did
not receive his rent payment. Since Plaintiff did not file suit until November
2008, he could only sue for the rent owed him between November 2005 and November
2008. Because Plaintiff allowed the time to expire on his right to collect the
arrears that began accruing in 2002, the Court granted Defendant's Motion for
Partial Summary Judgment, holding that the three-year statute of limitations
bars Plaintiff's claims for rent accruing before November 2005.