Is Your Private Student Loan A Contract Under Seal?

September 20, 2014

In many private student loan cases in Maryland (as well as in other cases), the collection lawyer will argue that the statute of limitations is 12 years instead of 3 years.  The reason, they argue, is that many private student loan contracts are “contracts under seal.”  Lately I have seen a spate of private student loan contracts where the word “SEAL” does not appear anywhere on or near the signature line, and despite this absence, collection lawyers argue that it is still a contract under seal.  Maryland law seems clear that absent the word “SEAL” next to or near the signature, there is not a “contract under seal” and thus there is not a 12 year statute of limitations.


As stated by the Maryland Court of Appeals, a statute of limitations is designed to:

(1) provide adequate time for diligent plaintiffs to file suit, (2) grant repose to defendants when plaintiffs have tarried for an unreasonable period of time, and (3) serve society by promoting judicial economy.

Carroll v. Konits, 400 Md. 167, 182, 929 A.2d 19, 28 (2007) (quotations and citations omitted).

Moreover, in upholding the legislative intent, “statutes of limitations are to be strictly construed and courts will decline to apply strained construction that evades the effect.”  Sheng Bi v. Gibson, 205 Md. App. 263, 266, 45 A.3d 305, 307 (2012) (citations omitted).

Maryland Code Ann. CJP § 5-101 states that “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.”  The Court of Appeals has held that “In contract cases, the general rule is that the period of limitations begins to run from the date of the breach, for it is then that the cause of action accrues and becomes enforceable.”  Himmelfarb v. American Express Co., 301 Md. 698, 703 (1984).

Some collection lawyers will argue that the Note sued on was signed “under seal” and is therefore governed by Maryland’s 12 year statute of limitations.  This argument is problematic if the Note does not contain any indication next to the signature (such as the word “SEAL”) that it was in fact signed under seal.

The case of Warfield v. Baltimore Gas and Electric Company, 307 Md. 142 (1986) contains an extensive review of more than a century of Maryland jurisprudence on what constitutes a contract under seal.  In Warfield, the Court of Appeals held that the printed word “SEAL” after the signature of a guarantor is what transforms an ordinary contract into a contract under seal.  Quoting from an earlier case, the Court of Appeals confirmed that the affixation of an actual seal forms the bright line test between a contract under seal (also known as a “specialty”) and an ordinary contract:

…for whether an instrument be a specialty, must always be determined by the fact, whether the party affixed a seal; not upon the assertion of the obligor, in the body of the instrument, or by the form of the attestation.

Id. at 146 (citations and quotations omitted).

As is discussed in Warfield and the cases cited therein, a seal is something that is clearly affixed to the document, whether it be a wax seal, a wafer or a scrawl as in olden-times, or a more modern affixation such as the word “SEAL” next to the signature on the document.

The Court of Appeals has stated clearly that even if there are formal words of recital in the body of the document, it is still not under seal unless the word “seal” appears by the signatures:

[n]either the words ‘signed and sealed with our seals,’ in the body of the bond, nor the words ‘signed, sealed and delivered in presence of’ . . . are sufficient to constitute the instrument, the deed or specialty of one who does not in fact seal the instrument.

State, use of Gilkeson v. Humbird 53 Md. 327, 300 (1880), citing Stabler v. Cowman, 7 G. & J. 284 (1835).[1]

In 2011, the Federal District Court for the Middle District of North Carolina cited Humbird as well as the United States Supreme Court and appellate courts from 17 other states and the District of Columbia for the proposition that “a recital, attestation clause or testimonium clause, standing alone, cannot transform an unsealed contract into a sealed contract.” Leciejewski v. Southern Entertainment Corp., No. 1:09-cv-995 (M.D. N.C. April 15, 2011) at fn 5.[2]

In Wellington v. Shakiba, 180 Md. App. 576, 952 A.2d 328 (2008), a similar question arose regarding a Note said to be “under seal.” The Circuit Court found that the words “Witness the following hand and seal” immediately above the signature of the borrower were not sufficient to make the contract a contract under seal. The Court of Special Appeals quoted the circuit court’s decision, but reversed on the grounds that a different instrument was admittedly under seal.

It is anticipated that collection lawyers may cite the case of Rouse-Teachers Properties, Inc. v. Md. Casualty Co., 358 Md. 575 (2000) for the proposition that a seal is not required, and that mere words in the body are sufficient to render a document under seal.  Rouse-Teachers Property involved the use of corporate seals affixed to contracts.  Both parties were corporations and the Defendant had affixed its corporate seal to the contract. However, there was no language in the body of the contract to indicate that it was intended to be a contract under seal. Such language, as evidence of the intent behind the use of the corporate seal, is necessary in cases concerning corporate seals because of the practice of using corporate seals for other purposes. As the court observed:

‘[i]n early law it was held that a corporation could not contract except under its corporate seal . . . today, in the absence of charter or statute to the contrary a corporation may bind itself by a writing not under seal . . .’ As a result, when a corporate seal appears on a contract we do not conclude that the contract is a sealed instrument.

Rouse, 358 Md. at 585, (quoting Gildenhorn v. Columbia Real Estate Title Ins. Co., 271 Md. 387, 398, 317 A.2d 836, 842 (1974)).

In light of the fact that corporate seals are used for many divergent purposes, the Rouse court held that in determining whether a corporate document which contains the corporate seal is truly signed under seal, “[i]f there is a recital in the body of the agreement stating explicitly that the agreement is one under seal, that is conclusive evidence of an intent to create a sealed instrument.”  Rouse, 358 Md. at 587, citing Gildenhorn 271 Md. at 403. Properly read in context, Rouse stands for the proposition that when dealing with a case involving corporate seals, merely affixing the corporate seal is not enough to constitute a document under seal; in order to show intent, it must have words in the body of the contract as well.  In sum, Rouse is inapposite to the instant case.

Unlike cases involving corporate seals, cases involving individuals are different, because there is no need to show the intent of an individual who signs his or her name next to the word “SEAL.”  The mere signing next to the word “SEAL,” is sufficient, and there is no need to show intent through words in the body of the document.  “‘[I]f the contract is signed by an individual opposite . . . a legally sufficient seal, the instrument will be taken as a sealed document where there is nothing . . . to indicate the contrary.’” Warfield, 307 Md. at 143, (quoting, General Petroleum Corporation v. Seaboard Terminals Corp., 23 F.Supp. 137 (D.Md. 1938)(emphasis original)).

As the Warfield and Gilkeson cases clearly show, it is well established that in this case involving individuals, the word “SEAL” or its equivalent is required in order for there to be a twelve year statute of limitations.  Mere words in the body of the document are not enough.  Absent the word “SEAL” next to the signature, the contract should not be considered to be a contract under seal.  Therefore, it is subject to Maryland’s general 3 year statute of limitations, not the 12 year statute of limitation for contracts under seal.

[1] Despite its age, Gilkeson was positively cited by the Court of Appeals Federalsburg v. Allied Contractors, Inc., 275 Md. 151, 157 (1975) for the proposition that a contract may be under seal with respect of one party and not another.

[2] The collected cases are: Moses v. United States, 166 U.S. 571, 584 (1897); Polkowski v. Huskie Portfolio, LLC (In re Polkowski), 303 B.R. 585, 587 (Bankr. M.D. Pa. 2003) (applying Pennsylvania law); Auditor v. Woodruff, 2 Ark. 73, 84 (1839); Beach v. Beach (In re Estate of Beach), 107 A.2d 629, 634 (Conn. 1954); Monroe Park v. Metro. Life Ins. Co., 457 A.2d 734, 736 n.5 (Del. 1983); Murray v. Wells Fargo Home Mortg., 953 A.2d 308, 318 (D.C. 2008); Williams v. Florida, 6 So. 831, 832 (Fla. 1889); Chastain v. L. Moss Music Co., 64 S.E.2d 205, 206 (Ga. Ct. App. 1951); Jackson v. Sec. Mut. Life Ins. Co., 84 N.E. 198, 200 (Ill. 1908); Hubbard v. Beckwith, 4 Ky. (1 Bibb) 492, 493 (1809); Hudson v. Webber, 72 A. 184, 187 (Me. 1908); State ex rel. Gilkeson v. Humbird, 54 Md. 327, 329-30 (1880); Fid. Union Trust Co. v. Fitzpatrick, 46 A.2d 837, 839 (N.J. 1946); Empire Trust Co. v. Heinze, 152 N.E. 266, 267 (N.Y. 1926); D.M. Osborne & Co. v. Hubbard, 25 P. 1021, 1021 (Or. 1891); In re Hacker, 15 A. 500, 501 (Pa. 1888); City of Providence ex rel. Mayo v. Goldenberg, 117 A. 225, 227 (R.I. 1922); Town of Barnet v. Abbott, 53 Vt. 120, 128-29 (1880); Hill v. Corbett, 204 P.2d 845, 847 (Wash. 1949); Comley v. Ford, 64 S.E. 447, 450 (W. Va. 1909) (citing Patterson v. Galliher, 29 S.E. 773 (N.C. 1898)); Skelly Oil Co. v. Peterson, 43 N.W.2d 449, 453 (Wisc. 1950);