Midland Funding LLC v. Thiel

• Decision Date: 29 August 2016
• Citation: 446 N.J.Super. 537,144 A.3d 72
• Parties: Midland Funding LLC Current Assignee, [Citibank USA, N.A., Original Creditor], Plaintiff-Appellant/Cross-Respondent, v. Bruce Thiel, Defendant-Respondent/Cross-Appellant. Midland Funding LLC Current Assignee, [Citibank Children's Place, Original Creditor], Plaintiff-Appellant, v. Luisa Acevedo, Defendant-Respondent. Midland Funding LLC Current Assignee, [GE Money Bank, Original Creditor], Plaintiff-Appellant, v. Alisa Johnson, Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

446 N.J.Super. 537
144 A.3d 72

Midland Funding LLC Current Assignee, [Citibank USA, N.A., Original Creditor], Plaintiff-Appellant/Cross-Respondent,
v.
Bruce Thiel, Defendant-Respondent/Cross-Appellant.

Midland Funding LLC Current Assignee, [Citibank Children's Place, Original Creditor], Plaintiff-Appellant,
v.
Luisa Acevedo, Defendant-Respondent.

Midland Funding LLC Current Assignee, [GE Money Bank, Original Creditor], Plaintiff-Appellant,
v.
Alisa Johnson, Defendant-Respondent.

Superior Court of New Jersey, Appellate Division.

Argued March 15, 2016
Decided August 29, 2016

Lawrence J. McDermott, Jr., argued the cause for appellant/cross-respondent in A-5797-13, and for appellants in A-0151-14 and A-0152-14 (Pressler and Pressler, L.L.P., attorneys; Mr. McDermott, Steven A. Lang, and Michael J. Peters, on the

144 A.3d 75

briefs in A-5797-13; Mr. McDermottand Mr. Lang, on the briefs in A-0151-14; Mr. McDermott, on the briefs in A-0152-14).

Richard A. Mastro argued the cause for respondent/cross-appellant in A-5797-13 (Legal Services of Northwest Jersey, Inc., attorneys; Mr. Mastro, on the briefs).

Neil J. Fogarty argued the cause for respondents in A-0151-14 and A-0152-14 (Northeast New Jersey Legal Services, attorneys; Mr. Fogarty, on the briefs).

Yongmoon Kim argued the cause for amici curiae Consumers League of New Jersey and National Association of Consumer Advocates in A-0151-14 and A-0152-14 (Kim Law Firm, LLC, attorneys; Mr. Kim, of counsel and on the briefs).

Before Judges Fisher, Rothstadt, and Currier.

The opinion of the court was delivered by

ROTHSTADT, J.A.D.

446 N.J.Super. 542

In these three appeals, which we calendared back-to-back and consolidated for purposes of this opinion, we are asked to determine the statute of limitations applicable to an action filed to collect debts arising from a customer's use of a retail store's credit card which use is restricted to the specific store. Plaintiff Midland Funding LLC, an assignee of the financial institutions that issued credit cards to store customers on behalf of retailers, argues the six-year statute of limitations that governs most contractual claims, N.J.S.A. 2A:14–1, is applicable under the circumstances presented, while defendants in each action, as well as amici curiae Consumer League of New Jersey and National Association of Consumer Advocates, argue the four-year statute of limitations, which governs contracts relating to the sale of goods, N.J.S.A. 12A:2–725, should control. In each of the cases, the trial court applied the four-year statute of limitations. Plaintiff challenges those decisions as well as the award to two defendants of statutory damages and fees under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.A. §§ 1692 to 1692p.¹ The third defendant

446 N.J.Super. 543

cross-appeals from the denial of his motion for summary judgment seeking a similar award under the FDCPA.

Having considered the parties' arguments, we hold that claims arising from a retail customer's use of a store-issued credit card—or one issued by a financial institution on a store's behalf—when the use of which is restricted to making purchases from the issuing retailer are subject to the four-year statute of limitations set forth in N.J.S.A. 12A:2–725. We also hold that if an action is filed after the expiration of this four-year period, the FDCPA requires the award of statutory damages and costs, absent a showing that the action was filed due to a “bona fide error” under the act. Accordingly, we affirm the application of the four-year statute of limitations in each case and the award of statutory fees and costs in two of the cases, but we reverse and remand the denial of those fees and costs in the other.

The orders under appeal were entered in response to summary judgment motions filed by defendants. The material facts contained in each matter's motion record

144 A.3d 76

were undisputed and can be summarized as follows.

All three defendants obtained credit cards from specific stores, issued by unaffiliated financial institutions, that limited the cards' use to purchases from the specific store. Each of them defaulted in their payments. In each case, plaintiff acquired the debt by assignment and filed suit to recover the outstanding amount. Specifically, in June 2003, defendant Luisa Acevedo obtained a credit card from The Children's Place clothing store that was issued by Citibank and could only be used to purchase merchandise at that store. In 1998, defendant Alisa Johnson obtained a JCPenney credit card, issued by GE Money Bank, for use only at JCPenney stores. Defendant Bruce Thiel obtained a Home Depot credit card, issued by Citibank, for use only at Home Depot stores.

Each defendant used their card at the designated stores and made payments before eventually defaulting. Acevedo made her last payment on March 5, 2009, and was in default as of May

446 N.J.Super. 544

2009.² Johnson defaulted by December 2008, having made her last payment the previous month. Thiel made his last minimum payment on March 16, 2009, and was in default as of April 20, 2009, when he failed to make the next required minimum payment.³

Plaintiff filed suit against each defendant more than four years after their respective defaults, but within six years. Specifically, on February 25, 2014, plaintiff filed a complaint against Acevedo seeking to recover the $824.90 balance on her account. Plaintiff filed a complaint against Johnson on February 4, 2014, seeking to collect her outstanding balance of $747.05. As to Thiel, plaintiff filed a complaint on July 18, 2013, seeking to collect the $2340.77 outstanding balance. Each defendant filed a responsive pleading asserting that plaintiff's claims were barred by the four-year statute of limitations, N.J.S.A. 12A:2–725, and setting forth claims against plaintiff under the FDCPA. In May 2014, each defendant filed a motion for summary judgment seeking dismissal of plaintiff's complaint and an award of damages and fees under the FDCPA.

The Special Civil Part in Passaic County heard oral arguments on Acevedo's and Johnson's motions together. After considering counsels' arguments, the court granted both motions, dismissing the complaints and awarding each defendant one thousand dollars in statutory damages under the FDCPA. The court entered judgments in favor of Acevedo and Johnson and directed them to file separate motions for counsel fees pursuant to the FDCPA, 15 U.S.C.A. § 1692k(a)(3).

In a written decision, the court explained its reasons for applying the four-year statute of limitations. The court adopted our reasoning in an unpublished opinion, New Century Fin. Servs., Inc. v. McNamara , A–2556–12, 2014 WL 1057076 (App.Div. Mar. 20, 2014)

446 N.J.Super. 545

including our reliance upon the Supreme Court's opinions in Sliger v. R.H. Macy & Co. , 59 N.J. 465, 283 A .2d 904 (1971), and Associates Discount Corp. v. Palmer , 47 N.J. 183, 219 A .2d 858 (1966), and our opinion in Ford Motor Credit Co. v. Arce , 348 N.J.Super. 198, 791 A .2d 1041 (App.Div.2002).⁴

144 A.3d 77

Acevedo and Johnson filed motions for statutory counsel fees, which the court granted, awarding Acevedo $4250 in attorney fees and Johnson $7632.50. Plaintiff filed motions for reconsideration, which the court denied, rejecting plaintiff's argument that the court failed to consider that the credit cards were issued to Acevedo and Johnson by unaffiliated financial institutions.

Thiel's motion for summary judgment was considered by the Special Civil Part in Somerset County. After the parties presented their arguments, that court also relied upon the holdings in Sliger, Palmer, and our decision in Docteroff v. Barra Corp. of America , 282 N.J.Super. 230, 659 A. 2d 948 (App.Div.1995), as well as the United States District Court's opinion in Tele – Radio Systems, Ltd. v. De Forest Electronics, Inc. , 92 F.R.D. 371 (D.N.J.1981), and granted Thiel's motion as it pertained to plaintiff's claim against him, but denied it as to Thiel's counterclaim under the FDCPA. The court, relying upon Beattie v. D.M. Collections, Inc. , 754 F.Supp. 383, 394 (D.Del.1991) found that plaintiff did not violate the act.

Plaintiff filed a notice of appeal in all three cases, and Thiel filed a cross-appeal from the denial of his motion for statutory damages and counsel fees under the FDCPA.

446 N.J.Super. 546

In all three appeals, plaintiff challenges the courts' treatment of “an agreement between a buyer and a third-party financier who is neither the seller nor an assignee of the seller to provide credit for the purchase of goods [as equivalent to] a contract for the sale of goods [that is] subject to the four-year limitations period of the [UCC].” It also argues that all three defendants were not entitled to summary judgment and, in the...