Pacific Concrete Federal Credit Union v. Kauanoe
|614 P.2d 936,62 Haw. 334
|17 July 1980
|PACIFIC CONCRETE FEDERAL CREDIT UNION, Plaintiff-Appellee, v. Andrew J. S. KAUANOE, aka A. J. S. Kauanoe, aka Andrew Kauanoe, Defendant-Appellant.
|Supreme Court of Hawai'i
Syllabus by the Court
1. Hawaii Rule of Civil Procedure 56(e) requires that facts set forth in affidavits be admissible in evidence. All papers referred to in the affidavits must also be attached and sworn to or certified.
2. Recoupment describes a claim that a defendant can assert against a plaintiff only if it arises from the same transaction as plaintiff's claim; it is in the nature of a defense and can only be asserted to reduce, diminish or defeat the plaintiff's claim.
3. Recoupment permits the defendant to raise a claim without regard to the statute of limitations which would apply if the defendant brought an affirmative action on the same claim.
4. A debtor's counterclaims alleging Truth in Lending violations in a creditor's suit to collect on the loan are in the nature of recoupment defenses since they arise out of the very loan transactions which are the subject of the suit. As such they are not barred by the statute of limitations provision contained in Section 1640(e) of the Truth in Lending Act.
5. Section 1640(h) of the Truth in Lending Act does not operate to bar all counterclaims or defenses under the Act in creditors' actions; it applies only where debtors attempt to deduct unilaterally from the amounts owing because of alleged Truth in Lending violations.
Richard S. Kanter, Legal Aid Society of Hawaii, Honolulu, for defendant-appellant.
George Y. Kimura, Leslie C. Togioka, Honolulu, for plaintiff-appellee.
Before RICHARDSON, C. J., and OGATA, MENOR, LUM and NAKAMURA, JJ.
Defendant-appellant Andrew J. S. Kauanoe appeals from a circuit court decision granting summary judgment in favor of plaintiff-appellee Pacific Concrete Federal Credit Union. We reverse.
Appellant entered into two loan transactions with appellee totalling $6,216.02 on August 22, 1974 and October 1, 1974. On May, 5, 1976 appellee sued appellant for $4,646.32, the outstanding balance owing on the loans. In his answer and counterclaim appellant alleged several violations of the federal "Truth in Lending" statute the Consumer Credit Protection Act, 15 U.S.C.A. § 1601 et seq. (1968) 1 (hereinafter referred to as TILA).
On August 11, 1976 appellee filed a motion for summary judgment alleging that the Truth in Lending counterclaim was barred by Section 1640(e) 2 of the Act requiring actions under the Act to be brought within one year from the date of the violation. Appellee also attached affidavits and exhibits on the issue of the sums due and owing. The Circuit Court of the First Circuit entered an order granting the motion in all respects on September 7, 1976. Appellant raises two main issues:
I. Whether the circuit court erred in granting the motion for summary judgment where the affidavits were not made on personal knowledge and did not set forth facts admissible in evidence.
II. Whether the circuit court properly ruled that appellant's counterclaims under TILA were barred by the statute of limitations section contained in § 1640(e) of TILA.
We find that the circuit court erred on both points and reverse the judgment entered below.
Attached to appellee's motion for summary judgment were the affidavits of S. A. Higa, weighmaster of Pacific Concrete and Rock Co., Ltd., and Tetsuo Takushi, appellee's assistant treasurer. Also attached were two exhibits, copies of checks and vouchers issued to appellant. 3 These vouchers and checks indicated two loans totalling $4,500. Appellant argues that Mr. Takushi's affidavit was not based on his own personal knowledge of the notes but on a ledger upon which are recorded all payments made by appellant pursuant to the notes. Because the ledger had not been attached to the affidavit, any information therefrom was inadmissible and should not have been considered by the circuit court.
Appellee responds that Mr. Takushi's affidavit avers that he personally tendered the vouchers and checks, copies of which were attached as exhibits and that this statement is sufficient to demonstrate personal knowledge.
Hawaii Rule of Civil Procedure 56(e) 4 sets out the form that affidavits supporting summary judgment motions should take. The rule requires that facts set forth in the affidavits be admissible in evidence. All papers referred to in the affidavits must also be attached and sworn to or certified. These requirements are mandatory. As we pointed out in Cane City Builders v. City Bank, 50 Haw. 472, 443 P.2d 145 (1968) mere statements in affidavits do not authenticate exhibits referred to unless these exhibits are sworn to or certified.
Appellee's assistant treasurer referred to a ledger from which he noted the payments made by appellant. However, no copies of the ledger were attached and thus this information was improperly before the court. 5 Although copies of the checks and vouchers referred to were submitted as exhibits, they were neither certified nor sworn to and thus could not be verified as authentic. Given the inadmissibility of these materials, there exists a genuine issue as to the amounts due and owing on appellant's loans and summary judgment was therefore improper.
Appellant's second claim is that the circuit court erred in granting summary judgment on his counterclaim alleging Truth in Lending violations. Although § 1640(e) of the Act requires actions to be brought within one year from the date of the violations, 6 his counterclaim is in the nature of a recoupment defense and thus Appellee responds that the general rule is that a recoupment claim may be allowed notwithstanding any statute of limitations; however, since appellant's TILA claims are not in the nature of recoupment but rather are set-offs, the claims therefore must be brought within one year from the date of the loan transactions.
may be brought regardless of any statute of limitations. Consequently, § 1640(e) would bar the claim if it had been brought as an affirmative action; however, as a recoupment defense to diminish or defeat appellee's charges, it does not fall within the one-year requirement.
The term "recoupment" developed under principles of common law and described a claim that defendant could assert against plaintiff only if it arose from the same transaction as plaintiff's claim. It is in the nature of a defense and can only be asserted to reduce, diminish or defeat the plaintiff's claims. A unique characteristic of common law recoupment is that it permits the defendant to raise a claim without regard to the statute of limitations which would apply if the defendant brought an affirmative action on the same claim. Wright and Miller, Federal Practice and Procedure: Civil § 1401 (1971).
Hawaii has recognized "recoupment" in a number of cases distinguishing it from "set-off" which arises out of a separate transaction, unrelated to plaintiff's claim. Hong Hoon v. Lum Wai, 26 Haw. 546 (1922); Oahu Railway Co. v. Waialua A. Co., 16 Haw. 520 (1905); Erickson v. Volcano Stables and Transportation Co., 13 Haw. 428 (1901). In Erickson we stated at 430:
Set-off and counter claim are purely statutory defenses while recoupment is a common law defense. The Supreme Court of Michigan distinguishes between set-off and recoupment as follows: "This defense" (recoupment) (Citations omitted).
And our own legislature has noted the distinction between recoupment and set-off as indicated in the legislative history to HRS § 657-3, 7 the section on "Counterclaims." As the House Standing Committee Report observed:
Not covered by either section at the present time is the application of the statute of limitations to defendant's unliquidated claim arising out of the same transaction or occurrence. At common law this was deemed matter in recoupment, not a setoff, and defendant could not recover any excess. Erickson v. Volcano Stables and Transportation Co., 13 Haw. 428, 431. No statute is necessary to avoid the bar of the statute of limitations if a claim arising out of the same transaction is used only as matter in recoupment.
Determining the "timeliness" of appellant's counterclaims thus turns on whether they are in the nature of recoupment whether they arise from the same transaction or occurrence as appellee's claims. The original action was appellee's suit to recover outstanding amounts owing on loans taken by appellant. Appellant's counterclaims allege violations in the very loan transactions which are the subject of the suit. The factual issues supporting appellant's TILA claims are the same ones forming the basis of appellee's suit.
Appellee counters that a TILA claim does not involve a breach of the same contract. TILA violations are separate and apart from loan obligations and appellant's claims involve a different statute.
State courts in other jurisdictions have examined this same issue and have reached different conclusions based on the set-off/recoupment distinction. The pivotal point has been finding the TILA violation to arise out of the same transaction as the original loan obligation. In Hodges v. Community Loan Investment Corp., 133 Ga.App. 336, 210 S.E.2d 826 (1974) the Georgia Court of Appeals characterized the debtor's counterclaims as in the nature of set-off, not recoupment....
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