Hewlett v. John Blue Employees Federal Credit Union

• Decision Date: 27 October 1976
• Parties: Milton HEWLETT v. JOHN BLUE EMPLOYEES FEDERAL CREDIT UNION, a corporation. Civ. 857.
• Court: Alabama Court of Civil Appeals

Page 505

344 So.2d 505

Milton HEWLETT v. JOHN BLUE EMPLOYEES FEDERAL CREDIT UNION, a corporation.

Civ. 857.

Court of Civil Appeals of Alabama.

Oct. 27, 1976.

Rehearing Denied Nov. 24, 1976.

James M. Gaines, Thomas G. Keith, Charles G. Spradling, Jr., and Edward H. Stevens, Legal Aid Society of Madison County, Huntsville, for appellant.

Ford, Caldwell, Ford & Payne, and J. R. Brooks, Huntsville, for appellee.

HOLMES, Judge.

This is an appeal from a judgment in favor of the plaintiff on his original complaint and against defendant on his counterclaim. Defendant-Hewlett takes this appeal from the trial court's action in failing to grant a judgment in favor of Hewlett on his counterclaim.

The plaintiff-credit union's original complaint sought recovery of two automobiles and $2,894.65 as the alternative value of the vehicles. Hewlett's counterclaim sought damages against the credit union for alleged violations of Tit. 15, § 1601, et seq., U.S.C.A., the 'Truth in Lending Act'; and Federal Regulation Z, 12 CRF 226. To the counterclaim, the credit union filed an answer alleging, among other things, that the counterclaim was barred by the statute of limitations. As noted earlier, the trial court denied the counterclaim, and Hewlett appeals.

The dispositive issue, as this court perceives it, is: Was the counterclaim timely filed? We answer in the negative and affirm.

At the outset, we note that it is apparent that oral testimony was taken in the trial. However, it is clear from the record that this testimony is not before us. The credit union argues that this precludes a consideration of the appeal.

Specifically, Hewlett requested that none of the reporter's transcript was to be transcribed. He (Hewlett) then informed the credit union of the issues involved, one of which was: Was the defendant's counterclaim barred by the statute of limitations? The credit union then specifically accepted appellant's designation of the record. We therefore find that the appeal of the issues involved are properly before this court. For a discussion by this court of the relationship of Rule 10, ARAP, and the principle of law concerning review by the appellate court when it affirmatively appears there was evidence before the trial court tht is not in the record on appeal, see Adams v. Adams, Ala.Civ.App. ---, 335 So.2d 174. Suffice it to say that Rule 10, ARAP, has substantially altered the aforementioned principle of law.

The record reveals that on May 9, 1973, Hewlett entered into a consumer credit transaction with the credit union. At that time, three documents were signed, one of which was a consumer credit disclosure form. The other two documents were a loan application and a note in the amount of $4,100. Thereafter, on May 5, 1975, the credit union filed suit. The complaint and other pleading alleged that the security agreement was breached on September 5, 1974. In June of 1975, Hewlett's aforementioned It is clear from the above that the basic instrument upon which the lawsuit is bottomed was executed in May of 1973. It is equally clear that the original complaint against Hewlett was filed in May of 1975, alleging that the breach occurred in September of 1974. No pleading filed by Hewlett, to this court, contradicts the date of the breach. We note here, contrary to able counsel's contention, that in view of the state of record before this court no conclusion can be reached other than the breach sued upon did occur in September of 1974.

counterclaim was filed. The counterclaim contends the consumer credit disclosure form violates the Truth in Lending disclosure's requirement in two respects. First, the form failed to disclose the total of payments scheduled to repay the loan and, second, that the security interest is not clearly disclosed.

As previously stated, the issue then is whether 15 U.S.C. § 1640(e) precludes Hewlett's assertion of his counterclaim against the credit union. That section provides:

'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.'

Assuming Arguendo that the credit union's action constituted a violation of the 'Truth in Lending Act,' the time of the violation is deemed to occur at the moment the loan transaction was consummated, Wachtel v. West, 344 F.Supp. 680 (E.D.Tenn.1972), aff'd, 376 F.2d 1062 (6th Cir. 1973), cert. den., 414 U.S. 874, 94 S.Ct. 161, 38 L.Ed.2d 114 (1973), i.e., on May 9, 1973. Hence, Hewlett's counterclaim was filed more than one year after the occurrence of the violation and, by the express terms of 15 U.S.C. § 1640(e), appears to be untimely.

Hewlett, however, contends that his counterclaim is saved from § 1640(e) by ARCP 13(c), the pertinent portion of which provides:

'All counterclaims other than those maturing or acquired after pleading shall relate back to the time the original plaintiff's claim arose.'

We note that other jurisdictions have reached opposite conclusions regarding the appropriate resolution of this issue. See Wood Acceptance Co. v. King, 18 Ill.App.3d 149, 309 N.E.2d 403; First National City Bank v. Drake, CCH Consumer Credit Guide (1969--73 Transfer Binder), Consumer Credit 98,939 at 88,652 (N.Y.Civ.Ct.1973); Collectors, Inc. v. The Atrisco Association, 4 CCH Consumer Credit Guide, Consumer Credit 98,779 at 88,410 (N.Mex.Dist.Ct.1974), holding that a Truth in Lending counterclaim, although asserted more than one year subsequent to the alleged Truth in Lending violation, is not barred. See Gillis v. Fisher Hardware Company, Fla.App., 289 So.2d 451 (1974), and Hodges v. Community Loan and Investment Corp., 133 Ga.App. 336, 210 S.E.2d 826 (1974), holding, Contra.

The variance in these decisions is attributed primarily to different state statutes concerning limitations of actions.

The provision of ARCP 13(c) relating to limitations of actions has been set forth, Supra. The Committee comments to that section of the rule indicate it was 'drawn so to harmonize with Tit. 7, § 335, Code of Alabama.' The latter reads as follows:

'When the defendant pleads a set-off to the plaintiff's demand, to which the plaintiff replies the statute of limitations, the defendant is nevertheless entitled to his set-off, where it was a legal subsisting claim at the time the right of action accrued to the plaintiff on the claim in suit.'

While the language of 13(c) differs somewhat from that of Tit. 7, § 355, their meaning was intended to be the same in that a setoff or counterclaim was to relate back to the inception of the original plaintiff's claim. Lyons, Jr., 1 Alabama Practice Rules of Civil Procedure Annotated 251 (1973). Here, the credit union's claim accrued in September 1974, more than one year after the transaction was consummated.

At that time, Hewlett had no 'legal subsisting claim.' As stated by the court in 'We hold, however, that the word 'subsisting,'...