Waiver Of Statute Of Limitations Requires Explicit Language

By Ed Levin and David Fishman

Ahmad v. Eastpines Terrace, et al., No. 1043, September Term 2009 (Md. Ct. Spec. App.  Sept. 1, 2011), involved a family business venture that went bad.  However, the appellant’s action for damages was not timely filed because, as the court held, language that seemed to waive the statute of limitations was effective only for the period of time up to the date of the document that contained the waiver, and it did not alter the period for filing of claims that started subsequent to that date.

After the appellant, M. Abraham Ahmad, contributed money to family entities, he asked his father, Mehdi Ahmad, to be repaid.  Mehdi Ahmad signed a document on June 25, 2000 (called the “2000 Acknowledgment”) on behalf of himself and three entities.  The 2000 Acknowledgment contained the following provisions:

The undersigned, Mehdi Ahmad, Eastpines Terrace Apts., Inc., Stanton Partners and Metamorphosis Limited Partnership, hereby affirm, jointly and severally, their debt in the principal amount of [$171,800.16] that have [sic] been accrued since May [1991] in accordance with the attached schedule to [appellant] and bear an interest rate of Nine percent per annum compounded daily until paid.  Moreover, the above-enumerated debtors waive any bar imposed by the Statute of Limitations for collection of the principal or the interests [sic] accrued thereon; . . . (emphasis added)

The parties exchanged letters which included a demand for payment in the Fall of 2003, but suit was not brought until November 2007.  The trial judge read the second quoted sentence from the 2000 Acknowledgment as being a waiver of the statute of limitations as to that point in time only, and not a perpetual waiver of the statute of limitations (as appellant argued).  He, therefore, entered judgment in favor of appellees.  On appeal, the Court of Special Appeals agreed and affirmed. 

The Court of Special Appeals found that the 2000 Acknowledgment did not have express language relating to a perpetual duration for the waiver, and “without the inclusion of such express language, an agreement cannot effectuate a waiver of the statute of limitations in perpetuity.”  The Court held that the quoted language from the 2000 Acknowledgment had the effect of permitting appellant to bring a lawsuit as late as June 25, 2003, but not thereafter.  This was based on Section 5‑102 of the Courts and Judicial Proceedings Article of the Maryland Code (“C&JP”), which provides, “A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.”  Effectively, the Court of Special Appeals held that the statute of limitations was reset when the parties signed the 2000 Acknowledgment.

The Court of Special Appeals noted that Maryland courts had not considered whether parties may permanently waive the statute of limitations at the time that a contract is signed.  After reviewing Williston on Contracts and cases from Connecticut and Utah, the Court of Special Appeals held that such waivers are unenforceable in Maryland.  It stated, “Even if the 2000 Acknowledgment included specific language permanently waiving the statute of limitations, we are of the view that such provision would be void as contrary to public policy.” 

PRACTICE POINTER:  If a person (called the “debtor”) has an existing debt that may be barred by the statute of limitations but is willing to waive the statute of limitations, not only retrospectively but prospectively as well, the debtor must do so explicitly.  If an agreement merely states that the debtor “waives the statute of limitations for collection of the debt” (or similar words), it may be interpreted to mean that even though the statute of limitations may have prevented the creditor from bringing an action at that time, the creditor will have a right to file suit then or before the expiration of the applicable period of the statute of limitations thereafter (usually three years).  However, the creditor would be barred from filing suit three years and one day after the agreement.  (This is what happened in Ahmad v. Eastpines Terrace.)  To waive the statute of limitations prospectively for a period of more than three years, the agreement must say the following (or use similar words): “The debtor waives the statute of limitations for collection of the debt for any action that is filed on or before _______, 20__”. 

This raises the question: For how long may the statute of limitations be waived?  The Court of Special Appeals in Ahmad v. Eastpines Terrace has indicated that the waiver may not be permanent, and this is the law in Maryland unless and until the Court of Appeals holds otherwise.  But the Ahmad panel provided no guidance as to what definite time period would be acceptable.  It would be reasonable to think that a twelve year period would be enforceable because this would be consistent with the statute of limitations applicable to a promissory note under seal, a contract under seal, or another specialty pursuant to C&JP § 5‑102.  Alternatively, the parties could execute their agreement under seal to get the benefit of C&JP § 5‑102 and its twelve year statute of limitations.

Ed Levin and David Fishman are with the Baltimore firm of Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC