Davis v. Edgemere Finance Co.

• Decision Date: 30 September 1981
• Docket Number: Civ. No. K-81-5.
• Parties: Roland E. DAVIS v. EDGEMERE FINANCE COMPANY.
• Court: U.S. District Court — District of Maryland

523 F. Supp. 1121

Roland E. DAVIS v. EDGEMERE FINANCE COMPANY.

Civ. No. K-81-5.

United States District Court, D. Maryland.

September 30, 1981.

Otto Major, Aberdeen, Md., for plaintiff.

Virginia Deardorff and Herbert H. Miller, Towson, Md., for defendant.

FRANK A. KAUFMAN, Chief Judge.

In this case, instituted on January 2, 1981, plaintiff alleges violations by defendant of the Truth in Lending Act, 15 U.S.C. § 1601 to 1681t (TILA). Subject matter jurisdiction is present pursuant to § 130(e) of the TILA, 15 U.S.C. § 1640(e), and 28 U.S.C. § 1337. Defendant has moved to dismiss on the ground that the action is barred by the one-year limitations period established by TILA § 1640(e).

The following allegations are contained in the complaint filed by plaintiff:

(1) Plaintiff resides in Maryland. Defendant is a Maryland corporation licensed to lend money under the relevant Maryland statutes. Defendant, in the ordinary course of its business, offers to extend and extends consumer credit, repayable in more than four installments, upon which a finance charge is imposed.

(2) On or about October 19, 1976, plaintiff executed a note payable to defendant in the amount of $6,625.06 with a designated finance charge of $2,217.14. The loan was to be payable in 60 installments of $147.37 each. The simple interest rate was 12% per annum, plus fees in the amount of $100. The transaction included a security interest in a mobile home, seemingly owned by plaintiff. The consumer loan was subject to the TILA and Regulation Z promulgated thereunder, 12 C.F.R. Pt. 226.

(3) Defendant, with intent to deceive and defraud plaintiff, consummated the loan to plaintiff in violation of the TILA, the Maryland Consumer Loan Law, Md.Com.Law Code Ann. §§ 12-301 to -317, or the Maryland Consumer Protection Act, id. §§ 13-101 to -411, because, inter alia, (a) the Maryland Consumer Loan Law limits loans thereunder to an amount or value not exceeding $3,500, Md.Com.Law Code Ann. § 12-303(a); (b) defendant split the loan into two payment books, one in the amount of $4,496.49 with monthly payments of $49.98 and the other in the amount of $6,625.06 with monthly payments of $147.37; (c) defendant required plaintiff to make payments on each book and assessed late payment charges on each book; and (d) defendant deprived plaintiff of information required to be disclosed by the TILA and needed in order for plaintiff to compare the terms of the loan with other more favorable terms available from other lenders.

Plaintiff further asserts in his complaint that plaintiff relied upon defendant's representations and was induced to borrow funds in excess of the limit, to pay excessive late charges, and to forgo dealing with another lender and that the one-year statute of limitations in TILA § 1640(e) "does not apply." Plaintiff seeks the award under the TILA of $1,000, i. e., of statutory damages, and of attorney's fees and, for violations of the Maryland statutes, also seeks a decree that the loan is void, the entry of a judgment for all amounts which plaintiff has already paid to defendant in connection with the loan, and punitive damages in the amount of $25,000.

The TILA Limitations Period

15 U.S.C. § 1640(a) provides that a creditor who fails to comply with the requirements of the TILA with respect to any person will be liable to such person for twice the finance charge imposed in connection with the transaction, but not less than $100 nor more than $1,000, plus "the costs of the action" and "reasonable" attorney's fees. Section 1640(e) states:

Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation.

Defendant contends that the within action, instituted in 1981, long after one year from the date the loan was consummated in October 1976, is time barred by § 1640(e). That provision's one-year limitations period begins to run from the date the loan agreement is entered into. "The Act does not define `occurrence' of the violation, but TILA requires that disclosures be made `before the credit is extended.' See 15 U.S.C. § 1639(b)." Rudisell v. Fifth Third Bank, 622 F.2d 243, 246 (6th Cir. 1980). Judge Kennedy, in Rudisell, relied upon the Sixth Circuit's prior opinion in Wachtel v. West, 476 F.2d 1062 (6th Cir.), cert. denied, 414 U.S. 874, 94 S.Ct. 161, 38 L.Ed.2d 114 (1973), and upon Wachtel's reliance upon § 1639(b) and Regulation Z, 12 C.F.R. Pt. 226, promulgated by the Federal Reserve Board pursuant to 15 U.S.C. § 1604. The fact that the violation continues after the credit is extended does not toll or otherwise extend the limitations period.¹

A different case may be presented when the contract does not call for an immediate extension of credit. In such a case, limitations may not commence to run until the credit is actually extended under the contract —i. e., when performance of the contract commences. See, e. g., Postow v. OBA Federal Savings & Loan Ass'n, 627 F.2d 1370, 1379-80 (D.C.Cir.1980); Stevens v. Rock Springs National Bank, 497 F.2d 307, 310 (10th Cir. 1974); Partida v. Warren Buick Inc., 454 F.Supp. 1366 (N.D.Ill.1978). Herein, however, the record discloses that the credit was extended at the time the contract was entered into, or, in any event, shortly thereafter at the very latest, and much more than one year before the institution of the within action.

Nor does this case present an issue in the factual context with which Judge Swygert dealt in Goldman v. First National Bank of Chicago, 532 F.2d 10 (7th Cir.), cert. denied, 429 U.S. 870, 97 S.Ct. 183, 50 L.Ed.2d 150 (1976), i. e., an open ended credit card agreement. In Goldman the Seventh Circuit held that the period did not begin to run until the first finance charge was imposed. Id. at 21. In contrast to Goldman, this case involves a closed end transaction —a one-shot consumer loan — in which the finance charges appear to have been included in the original payment schedule and in which late charges were assessed in connection with both payment books involved herein well in advance of one year before the within suit was filed.

Plaintiff seeks to avoid the limitations bar of § 1640(e) on the grounds that defendant fraudulently concealed its wrongdoing and that that fraudulent concealment operates to toll the running of the limitations period. That question does need to be reached herein. But before it can be addressed, it is necessary for this Court to determine whether § 1640(e)'s limitation of time for suit establishes a jurisdictional prerequisite. If it does so, then equitable restraints, such as estoppel or the fraudulent concealment tolling doctrine, upon the application of a pure limitations provision, are of no aid to a person such as plaintiff herein. Cooper v. Bell, 628 F.2d 1208, 1212 (9th Cir. 1980) (title VII); In re Consolidated Pretrial Proceedings in the Airline Cases, 582 F.2d 1142, 1151 (7th Cir. 1978) (title VII) (Pell, J.), cert. granted, 450 U.S. 979, 101 S.Ct. 1511, 67 L.Ed.2d 813 (1981); Stewart v. United States, 503 F.Supp. 59, 63 (N.D.Ill.1980) (Federal Tort Claims Act).

Subject Matter Jurisdiction

Section 1640(e) of the TILA grants jurisdiction in the same sentence in which it establishes the one-year limitations period. Several courts seem to have suggested that it is indeed a jurisdictional provision. See Rust v. Quality Car Corral, Inc., 614 F.2d 1118, 1119 (6th Cir. 1980); Stevens v. Rock Springs National Bank, 497 F.2d 307, 309 (10th Cir. 1974); Jones v. Villa Park Trust & Savings Bank, No. 79 C 3047, slip op. at n. 1 (N.D.Ill. Feb. 19, 1980); Fenton v. Citizens Savings Ass'n, 400 F.Supp. 874, 879 (C.D.Mo.1975); cf. Jamerson v. Miles, 421 F.Supp. 107, 110-11 (N.D.Tex.1976) (three-year limitations period for rescission actions under TILA § 1635(a) jurisdictional). In In re Dickson, 432 F.Supp. 752, 756 (W.D.N.C. 1977), however, Judge McMillan concluded that the limitations period set forth in § 1640(e) of the TILA was not a "condition precedent" and was tolled by 11 U.S.C. § 29, which provides for the tolling of limitations periods in suits by trustees in bankruptcy.

Herein we deal with § 1640(e). A question similar to the jurisdictional issue posed by that statutory provision has arisen with regard to 15 U.S.C. § 1635, which permits rescission of consumer credit contracts under certain conditions and which originally contained no limitations period. In October 1974 Congress amended the TILA to include a three-year limitations period with relation to the rescission right conferred by § 1635. In Jamerson v. Miles, 421 F.Supp. 107, 110-11 (N.D.Tex.1976), the question arose as to whether that amendment affected the right to rescission of contracts already in existence for more than three years when that amendment was enacted or whether that amendment had prospective effect only. Holding that that amendment was jurisdictional in nature, the court held it to be retroactive. In so doing, the court relied upon Fenton v. Citizens Savings Ass'n, 400 F.Supp. 874 (C.D.Mo.1975), and noted that the limitation was written into the same statute which created the remedy. To the same effect, see Rodriguez v. County Lumber & Supply Co., 460 F.Supp. 810 (N.D.Ill.1978). But other courts have disagreed, see, e. g., James v. Home Construction Co. of Mobile, 621 F.2d 727, 728-29 (5th Cir. 1980) (disapproving both Jamerson and Rodriguez); Clemmer v. Liberty Financial Planning Inc., 467 F.Supp. 272, 273-74 (W.D.N.C.1979) (McMillan, J.). In James, Judge Tuttle wrote (at 729):

We reach this decision for several reasons. In Jamerson v. Miles, the district court reasoned that 15 U.S.C. § 1635(f) was not a true statute of limitations, but rather was a statute which limited a substantive statutorily created right to rescind and therefore could not be applied prospectively. In Jamerson, the court relied heavily on the fact that Section

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