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HEADNOTE Nancy Heist v. Eastern Savings Bank, FSB, No. 1949, September Term, 2004. CONTRACTS- GENERAL RULES OF CONSTRUCTION- EXISTENCE OF AMBIGUITY. Contract is not ambiguous where the terms are not susceptible to two or more meanings. The note signed by appellant contains instructions to "See Addendum to Note," and the signed addendum contains an express agreement to pay "prepayment" penalties. A reasonable person signing the note and then separately signing the addendum, could not have believed that no prepayment penalty would be collected. CONTRACTS- GENERAL RULES OF CONSTRUCTION- EXISTENCE OF AMBIGUITY. Contract incorporating by reference Maryland law, prohibiting prepayment penalties, and Federal law, which permits prepayment penalties depending on the terms of the contract do not create ambiguity. Applying the basic rules of contract interpretation, when clauses in a contract are seemingly in conflict and the contract generally incorporates Maryland's prohibition on prepayment penalties, while specifically addressing prepayment penalties in the note's addendum, the specific clause takes precedent over the general and controls the agreement.

REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1949 September Term, 2004

NANCY HEIST v. EASTERN SAVINGS BANK, FSB

Murphy, C. J., Davis, Moylan, Charles E., Jr. (retired, specially assigned), JJ.

Opinion by Davis, J.

Filed:

October 12, 2005

Appellant,

Nancy

Heist,

borrowed

$141,500

from

appellee,

Eastern Savings Bank, FSB and, in a separately-signed addendum, appellant agreed that, if she fully repaid the loan within five years, she would incur a prepayment penalty. Appellant did prepay

the loan, and, under the terms of her agreement, she was charged $9,531.97 for doing so. Appellant filed suit in the Circuit Court for Frederick County, seeking a refund of the penalty and other relief. Upon

appellee's motion,1 the circuit court dismissed the complaint.

1

Appellee recited the following in its Motion: MOTION TO DISMISS

The Defendant, Eastern Savings Bank, fsb [sic], by its attorneys, moves this Court to dismiss with prejudice the claims filed against it by the [Appellant], Nancy Heist, and says: 1. The [Appellant] has filed a claim against the [Appellee] alleging that the [Appellee] wrongfully assessed penalties against the [Appellant] for prepayment of a mortgage provided to her by the [Appellee]. 2. [Appellant]'s alleged claims are preempted by Federal law. 3. Under Federal law, prepayment penalties are expressly allowed, and Congress has preempted all state law regarding the lending activities of federal savings banks such as the [Appellee]. 4. Even if the state law which the [Appellant] asserts that the [Appellee] has violated is not wholly preempted by Federal law, the Federal law clearly overrides any provision of the state law which conflicts with the purposes of the Federal law. 5. The [Appellant] has failed to state a cause of action upon which relief can be granted, and the [Appellee] is entitled to judgment as a matter of law. (continued...)

Appellant noted an appeal and presents two questions for our review, which we have consolidated into one: Did the circuit court err in concluding that the Note included a prepayment penalty and, therefore, dismissing appellant's complaint for failure to state a claim? We shall affirm the judgment.

BACKGROUND
The Note that appellant signed includes two provisions key to our discussion. First, in paragraph 11, "APPLICABLE LAW," the Note states: "This Note shall be governed by the provisions of Subtitle 10 of Article 12 of the Commercial Law Article of the Annotated Code of Maryland, as amended from time to time, and by federal law." Second, as we have explained, the Note included an addendum

in which the parties agreed upon a prepayment penalty. Next, there are, basically, just two legal provisions key to our discussion. First, prepayment penalties are prohibited by Md.

Code (2005 Repl. Vol.), Com. Law II

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