Boone Nat'l Savings & Loan v. Crouch
| Decision Date | 26 June 2001 |
| Citation | 47 S.W.3d 371 |
| Parties | (Mo.App. S.D. 2001) Boone National Savings & Loan Association, F.A., Respondent, v. Laura J. Crouch, Appellant. SC83409 0 |
| Court | Missouri Court of Appeals |
Appeal From: Circuit Court of Boone County, Hon. Gene Hamilton
Counsel for Appellant: Harriet F. Francis and Thomas M. Harrison
Counsel for Respondent: John A. Ruth and Cathleen A. Martin
Opinion Summary: The day after Dr. John Crouch and his business partner took out an unsecured loan from Boone National Savings and Loan in 1992, his wife Laura signed an agreement guaranteeing payment of all debt incurred at that time or in the future by her husband. Dr. Crouch's 1992 loan was paid in full in 1994. A year later, without his wife's knowledge, Dr. Crouch took out another loan from Boone National. He defaulted on the loan in 1997, and Boone National sued his wife for breach of the 1992 guaranty agreement. She answered, asserting a counterclaim based on the Equal Opportunity Credit Act and affirmative defenses based on Boone National's purported violations of the act. The court granted Boone National summary judgment on her counterclaim and affirmative defenses, finding they were barred by the statute of limitations. The court also granted Boone National summary judgment on its guaranty claim and ordered Ms. Crouch to pay unpaid principal, interest and attorney's fees. She appeals.
Court en banc holds: (1) Ms. Crouch's counterclaim is barred by the Equal Opportunity Credit Act's two-year statute of limitations.
(2) Because none of Ms. Crouch's affirmative defenses claiming violations of the federal act constitute an "action" being "brought," they are not barred by the statute of limitations. On remand, Boone National may plead affirmative avoidances, if it so chooses.
Stith, J., not participating.
Boone National Savings and Loan Association sued Laura J. Crouch on a guaranty that she had signed for the debts of her husband, John A. Crouch, M.D. In her answer, she asserted affirmative defenses and a counterclaim based upon Boone National's alleged violations of the Equal Credit Opportunity Act, 15 U.S.C. sec. 1691 et seq. Boone National moved for summary judgment on Ms. Crouch's affirmative defenses, asserting that the federal act could not be asserted as an affirmative defense, and moved for summary judgment on the counterclaim on the basis that the claim was barred under the statute of limitations.
The trial court granted summary judgment on both the counterclaim and affirmative defenses. The court subsequently entered judgment against Ms. Crouch on Boone National's guaranty claim.
After opinion, the Court of Appeals, Western District, ordered the cause transferred to this Court. We have jurisdiction. Mo. Const. art. V, sec. 10.
We hold that the counterclaim is barred by the statute of limitations, but that a purported violation of the Equal Credit Opportunity Act can be raised as an affirmative defense. Accordingly, the trial court's judgment is affirmed on the counterclaim, the judgment in favor of Boone National on the guaranty claim is reversed, and the case is remanded for further proceedings.
Boone National made an unsecured loan in 1992 of $193,235.20 to Ms. Crouch's husband, Dr. John A. Crouch, individually, and Dr. Crouch's business partner, Dr. Jerry D. Kennett, individually. The proceeds of the loan were used by Drs. Crouch and Kennett, under a limited partnership, to acquire land in California. Ms. Crouch had no interest in the limited partnership.
The day after the loan was made Boone National's president sent Dr. Crouch a letter that enclosed a guaranty form for Ms. Crouch to sign. The guaranty agreement provided that Ms. Crouch would absolutely and unconditionally guarantee payment of all debt incurred at that time or in the future by Dr. Crouch. At the time Ms. Crouch signed the guaranty, she was employed as a part-time nurse and in the previous tax year had a gross income of a little over $16,000. For the same year, Dr. Crouch was employed in a group of cardiovascular surgeons in Columbia, Missouri, and his adjusted gross income was about $503,000 in the previous year.
The 1992 loan was paid off in 1994. In 1995, Boone National made another loan to Dr. Crouch, individually, in the amount of $275,000. The loan was secured by Dr. Crouch's life insurance policy. Ms. Crouch was not aware that her husband had made this loan. When Dr. Crouch applied for this loan, Boone National's president asked him whether Ms. Crouch would co-sign the note. Dr. Crouch said his wife would not sign. Dr. Crouch said he believed that Ms. Crouch's 1992 guaranty was no longer effective after he paid off the 1992 loan. A business loan worksheet prepared by Boone National in 1995 did not list Ms. Crouch's personal guaranty as security for the 1995 loan.
In 1997, Dr. Crouch failed to pay the principal and accrued interest on the 1995 note. Boone National's negotiations with Dr. Crouch failed. Ultimately Dr. Crouch's creditors filed an involuntary Chapter 11 bankruptcy against him. In December 1997 Boone National filed this action against Ms. Crouch, claiming breach of the guaranty by failing to pay Boone National the unpaid principal and accrued interest that Dr. Crouch owed on the 1995 loan. Boone National prayed for the unpaid principal in the amount of $274,000, plus interest, attorneys' fees and court costs.
Ms. Crouch answered, denying liability and raising various affirmative defenses. In an amended pleading, she asserted a counterclaim based on the Equal Opportunity Credit Act and an affirmative defense based on Boone National's purported violations of the act. The trial court granted summary judgment in favor of Boone National on the counterclaim and on the affirmative defense in December 1998. Approximately a year later, the trial court granted Boone National summary judgment on its claim for breach of the guaranty contract. Boone National had recovered some of the unpaid loan amount in the bankruptcy proceeding, and the trial court accordingly granted Boone National judgment against Ms. Crouch on the balance of $259,877.74 as unpaid principal on the 1995 loan, plus interest, and $26,000 in attorneys' fees.
Under the Equal Credit Opportunity Act, it is unlawful for any creditor to discriminate against a credit applicant "with respect to any aspect of a credit transaction . . . on the basis of . . . marital status." 15 U.S.C. sec. 1691(a)(1). Regulations under the act are promulgated by the board of governors of the Federal Reserve System. The Federal Reserve's Regulation B provides that a creditor "shall not require the signature of an applicant's spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit requested." 12 C.F.R. sec. 202.7(d)(1).
In her counterclaim and affirmative defenses, Ms. Crouch asserts that Boone National's requirement that she sign a guaranty in 1992 was a violation of the act. In her pleadings, she alleges facts that, if proved, would establish a violation of the act and the regulation. The trial court granted summary judgment on the counterclaim because of the statute of limitations. Summary judgment on the affirmative defenses was granted because the trial court concluded that the defenses as a matter of law may not be asserted. There are no factual findings pertinent to the claimed violation. Thus, the trial court made no finding, for example, as to whether Dr. Crouch qualified "under the creditor's standards of creditworthiness for the amount and terms of credit requested." 12 C.F.R. sec. 202.7(d)(1). Nor is there any factual record on whether Ms. Crouch was engaged in this business transaction with her husband in 1995 or who benefited from the proceeds of the loan that was made at that time.
The Equal Credit Opportunity Act provides for an aggrieved person to bring an action for damages, including punitive damages and attorney's fees, for violations of the act. 15 U.S.C sec. 1691e(a),(b),(d). An "action . . . may be brought" in a court of competent jurisdiction not later than two years from the date of the occurrence of the violation. 15 U.S.C. sec. 1691e(f).
In addition to an action for damages, the act provides that a court "may grant such equitable and declaratory relief as is necessary to enforce the requirements imposed" under the Equal Credit Opportunity Act. 15 U.S.C. sec. 1691e(c). "Many cases have utilized this provision as authority for allowing a debtor to assert violations . . . as a counterclaim for recoupment or as an affirmative defense to collection actions, even after the running of the two year statute of limitations," as this Court noted in Hammons v. Ehney, 924 S.W.2d 843, 852 (Mo. banc 1996).1
The federal authorities are split on the issue of whether a counterclaim for recoupment can be asserted after the statute of limitation has run. However, under Missouri law, the doctrine of recoupment -- whether called a counterclaim or an affirmative defense -- is solely a matter of defense. Schroeder v. Prince Charles, Inc., 427 S.W.2d 414, 419 (Mo. 1968). It is not a method for obtaining affirmative relief, but "is available only to reduce or satisfy a plaintiff's claim and permits no affirmative judgment." Id.2 Under the Uniform Commercial Code, claims of recoupment are treated the same as defenses. Section 400.3-305, RSMo 2000. Under our pleading rule, Rule 55.08, if an affirmative defense is called a counterclaim, or vice versa, the court is to treat the counterclaim or affirmative defense as though it were properly labeled.
To the extent that Ms. Crouch's counterclaim seeks damages and attorneys' fees, it is time-barred. Quite...
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