NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5797-13T2
A-0151-14T1
A-0152-14T1
MIDLAND FUNDING LLC CURRENT
ASSIGNEE, [CITIBANK USA, N.A.,
ORIGINAL CREDITOR],
Plaintiff-Appellant/ APPROVED FOR PUBLICATION
Cross-Respondent,
August 29, 2016
v.
APPELLATE DIVISION
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.
________________________________
Argued March 15, 2016 – Decided August 29, 2016
Before Judges Fisher, Rothstadt, and
Currier.
On appeal from Superior Court of New Jersey,
Law Division, Somerset County, Docket No.
DC-87-14, and Passaic County, Docket Nos.
DC-1886-14 and DC-1151-14.
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 briefs in A-
5797-13; Mr. McDermott and 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).
The opinion of the court was delivered by
ROTHSTADT, J.A.D.
2 A-5797-13T2
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
1
The notices of appeal in A-0151-14 and A-0152-14 indicate
plaintiff is also appealing from the court's denial of its
motions for reconsideration in those actions. However, because
plaintiff's briefs do not address those denials, we consider its
appeal from those orders abandoned, as an issue that is not
briefed on appeal is deemed waived. N.J. Dep't of Envtl. Prot.
(continued)
3 A-5797-13T2
The third defendant 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 were undisputed and can
be summarized as follows.
(continued)
v. Alloway Twp., 438 N.J. Super. 501, 505 n.2 (App. Div.),
certif. denied, 222 N.J. 17 (2015).
4 A-5797-13T2
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 JCPenny credit card,
issued by GE Money Bank, for use only at JCPenny 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
2009.2 Johnson defaulted by December 2008, having made her last
payment the previous month. Thiel made his last minimum payment
2
The credit card account became designated as "charged off" as
of October 2009.
5 A-5797-13T2
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
3
Thiel made a few additional payments after this date, in the
amount of forty dollars each, but none of these payments
satisfied the minimum payment due.
6 A-5797-13T2
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 (App. Div. Mar. 20,
2014) including our reliance upon the Supreme Court's opinions
in Sliger v. R.H. Macy & Co., 59 N.J. 465 (1971), and Associates
Discount Corp. v. Palmer, 47 N.J. 183 (1966), and our opinion in
Ford Motor Credit Co. v. Arce, 348 N.J. Super. 198 (App. Div.
2002).4
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
4
In relying upon our unpublished opinion in McNamara, the
court recognized that Rule 1:36-3 limited its authority to cite
or rely upon McNamara, but it felt it appropriate to mention it
for the purpose of demonstrating that "the[se] very same
attorneys who are now before this [c]ourt argued the very same
issues before the Appellate Division in McNamara" and, for that
reason, relied on McNamara to demonstrate that plaintiff
consciously proceeded to commence these actions when its
timeliness was contraindicated. We see no error in the judge's
reliance on McNamara for that sole purpose.
7 A-5797-13T2
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 (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.
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
8 A-5797-13T2
also argues that all three defendants were not entitled to
summary judgment and, in the Acevedo and Johnson matters, that
the court improperly relied upon our unpublished opinion.
In the Thiel appeal, plaintiff, relying upon the parties'
responses to requests for admissions and Thiel's statement of
material facts, further contends summary judgment was
inappropriate and challenges the court's determination regarding
plaintiff's claim that discovery was necessary before the
motions should have been decided. In his cross-appeal, Thiel
contends the court erred when it failed to award him damages and
fees under the FDCPA, arguing the statute imposes strict
liability and "[d]ebt collection matters initiated past the
applicable statute of limitations violate the Act[,] entitling
defendant to statutory damages and mandatory attorney fees."
"We review an order granting summary judgment 'in
accordance with the same standards as the motion judge.'"
Johnson v. Roselle EZ Quick LLC, __ N.J. __, __ (2016) (slip op.
at 18) (quoting Bhagat v. Bhagat, 217 N.J. 22, 38 (2014)).
"Such a motion will be granted if the record demonstrates that
there is no genuine issue of material fact and 'the moving party
is entitled to a judgment or order as a matter of law.'" Ibid.
(quoting R. 4:46-2(c)).
9 A-5797-13T2
"We review questions of law de novo, and do not defer to
the conclusions of the trial . . . courts." Ibid. Which
statute of limitations applies to a claim, and whether the
filing of a complaint after that period has passed constitutes a
violation of the FDCPA, are "purely legal question[s] of
statutory interpretation." Ibid.; see also Town of Kearny v.
Brandt, 214 N.J. 76, 92-94 (2013); Zabilowicz v. Kelsey, 200
N.J. 507, 512-13 (2009); J.P. v. Smith, 444 N.J. Super. 507, 520
(App. Div.), certif. denied, __ N.J. __ (2016).
Applying this standard, we find plaintiff's arguments
regarding the inapplicability of the four-year statute of
limitations under N.J.S.A. 12A:2-7255 to be without merit, and we
5
Plaintiff argues N.J.S.A. 2A:14-1 should apply. That statute
provides:
Every action at law for . . . recovery upon
a contractual claim or liability, express or
implied, not under seal, or upon an account
other than one which concerns the trade or
merchandise between merchant and merchant,
their factors, agents and servants, shall be
commenced within 6 years next after the
cause of any such action shall have accrued.
This section shall not apply to any action
for breach of any contract for sale governed
by [N.J.S.A. 12A:2-725].
[N.J.S.A. 2A:14-1 (Emphasis added).]
N.J.S.A. 12A:2-725, in turn, provides that "[a]n action for
breach of any contract for sale must be commenced within four
(continued)
10 A-5797-13T2
affirm substantially for the reasons expressed by the two motion
judges. We add only the following brief comments.
"[I]n determining whether a contract is for 'sale of
goods,' and thus covered by [N.J.S.A. 12A:2-725], a court must
examine the whole transaction between the parties and look to
the essence or main objective of the parties' agreement."
Docteroff, supra, 282 N.J. Super. at 240. The basis for the
four-year statute's applicability to store-issued credit cards
was provided by the Court in Sliger, which affirmed the nature
of the subject transactions as a sale of goods. See Sliger,
supra, 59 N.J. at 467. In Palmer and Arce, the Court and the
Appellate Division determined that the fact that a third-party
creditor provided the financing for a sale of goods did not
change the nature of the transaction as a sale of goods. See
Palmer, supra, 47 N.J. at 187; Arce, supra, 348 N.J. Super. at
199-200.
The Special Civil Part judges also correctly determined
there was no basis to deny summary judgment as to this issue in
any of the three cases. Plaintiff failed to create any genuine
issues of material fact regarding the statute of limitations.
Although plaintiff argues that it should have been entitled to
(continued)
years after the cause of action has accrued." N.J.S.A. 12A:2-
725(1).
11 A-5797-13T2
further discovery, it failed to meet its burden as the party
seeking additional discovery to demonstrate how additional
discovery would change the outcome of the case. See Badiali v.
N.J. Mfrs. Ins. Grp., 220 N.J. 544, 555 (2015).
We also find no merit in plaintiff's contention that
Thiel's partial payments, which were all less than the minimum
amount required by his credit card agreement, tolled the running
of the statute of limitations.6 "A cause of action will accrue
on the date that 'the right to institute and maintain a suit
first arose,'" and "generally coincides with 'the date on which
the statutory clock begins to run.'" Johnson, supra, __ N.J. at
__ (slip op. at 30) (quoting White v. Mattera, 175 N.J. 158,
164 (2003)). "In an action on a sales contract, '[a] cause of
action accrues when the breach occurs.'" Deluxe Sales & Serv.,
Inc. v. Hyundai Eng'g & Constr. Co., 254 N.J. Super. 370, 375
(App. Div. 1992) (quoting N.J.S.A. 12A:2-725(2)). In collection
actions, the right to institute and maintain a suit arises on
the date of default — the first date on which the debtor fails
to make a minimum payment. See id. at 374-75. The fact that
6
Plaintiff argues that Thiel's last payment was in February
2010, at which time the statute began to run. We disagree with
both contentions as, according to Thiel's account statements,
the payment made on that date was reversed on the same day. The
last partial payment appears to have been made in December 2009,
but, as discussed above, the statute had already begun to run.
12 A-5797-13T2
Thiel made partial payments less than the minimum payment
required after the date of default does not change the date of
default, and thus does not change the date on which the cause of
action accrued.
We turn to the trial courts' disparate treatment of
defendants' FDCPA claims, and part company with the Somerset
County Special Civil Part's determination that filing a time-
barred action cannot be the basis for a claim under the act. We
agree with the Passaic County Special Civil Part's decision that
filing the action is automatically a violation, absent a showing
that the complaint's filing was the result of a "bona fide
error."
The purpose of the FDCPA is to protect consumers from
"abusive debt collection practices by debt collectors . . . and
to promote consistent State action to protect consumers against"
such practices. 15 U.S.C.A. § 1692(e); see also Hodges v. Sasil
Corp., 189 N.J. 210, 222 (2007). To prevail, a debtor must
prove: "(1) she is a consumer, (2) the [party seeking payment]
is a debt collector, (3) the . . . challenged practice involves
an attempt to collect a 'debt' as the Act defines it, and (4)
the [collector] has violated a provision of the FDCPA in
attempting to collect the debt." See Douglass v. Convergent
Outsourcing, 765 F.3d 299, 303 (3d Cir. 2014).
13 A-5797-13T2
Because the [FDCPA] imposes strict
liability, a consumer need not show
intentional conduct by the debt collector to
be entitled to damages. However, a debt
collector may escape liability if it can
demonstrate by a preponderance of the
evidence that its "violation [of the Act]
was not intentional and resulted from a bona
fide error notwithstanding the maintenance
of procedures reasonably adapted to avoid
any such error." [U.S.C.A.] § 1692k(c).
[Rutgers — The State Univ. v. Fogel, 403
N.J. Super. 389, 392 n.2 (App. Div. 2008)
(second alteration in original) (quoting
Russell v. Equifax A.R.S., 74 F.3d 30, 33-34
(2d Cir. 1996)).]
See also Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich,
L.P.A., 559 U.S. 573, 578, 130 S. Ct. 1605, 1609, 176 L. Ed. 2d
519, 525 (2010). However, "ignorance of the law will not excuse
any person" from liability under the FDCPA, "even if the actor
lacked actual knowledge that [the] conduct violated the law."
Id. at 581-83, 130 S. Ct. at 1611-12, 176 L. Ed. 2d at 527-28.
There is no prohibition against a creditor seeking the
voluntary repayment of a debt. Under New Jersey law, after the
statute of limitations has run, a debt is not extinguished but
is unenforceable in a court of law. Huertas v. Galaxy Asset
Mgmt., 641 F.3d 28, 32 (3d Cir. 2011) (citing R.A.C. v. P.J.S.,
Jr., 192 N.J. 81, 98 (2007)). The expiration of the statute of
limitations does not absolve the debtor of the debt owed, but
gives the debtor a complete defense to the creditor's attempt to
14 A-5797-13T2
collect on the debt in a collection action. Ibid. Therefore, a
debt collector does not violate the FDCPA by seeking voluntary
payment of the debt, provided the collector "does not initiate
or threaten legal action in connection with its debt collection
efforts." Id. at 33.
A debt collector violates the FDCPA if "he [or she]
threaten[s or commences] a lawsuit on a debt which [he or she]
'knows or should know is unavailable or unwinnable by reason of
a legal bar such as the statute of limitations.'" Ibid.
(quoting Beattie, supra, 754 F. Supp. at 393). Thus, a debt
collector violates the FDCPA by initiating "a lawsuit on a debt
that appears to be time-barred, without . . . having first
determined after a reasonable inquiry that [the] limitations
period has been or should be tolled." Ibid. (quoting Kimber v.
Fed. Fin. Corp., 668 F. Supp. 1480, 1487 (M.D. Ala. 1987)).
Where there is no evidence raised establishing that the creditor
made a "bona fide error notwithstanding the maintenance of
procedures reasonably adapted to avoid any such error," the act
is violated and sanctions may be imposed. See 15 U.S.C.A.
1692k(c); see also Fogel, supra, 403 N.J. Super. at 392 n.2;
Kimber, supra, 668 F. Supp. at 1488-89; Jackson v. Midland
Funding, LLC, 754 F. Supp. 2d 711, 714-16 (D.N.J. 2010), aff’d,
468 F. App'x 123 (3d Cir. 2012).
15 A-5797-13T2
Our review of the motion record in these matters leads us
to conclude that plaintiff knew or at least should have known
its claims were time-barred. In Acevedo's case, her statement
of material facts stated that plaintiff admitted in its answer
to her counterclaim that it knew she had defaulted in 2009,
which plaintiff again admitted in its response, but it failed to
file suit until 2014. In the Johnson action, plaintiff admitted
in response to a request for admissions that Johnson had been in
default since December 2008, and it did not file suit until
2014. In Thiel's action, it was not disputed that Thiel
defaulted by April 2009, and the complaint against him was not
filed until July 2013, although plaintiff believed that a
payment or two of less than the minimum amount owed tolled the
running of the statute. Plaintiff's opposing submissions never
raised any other issue as to why it failed to file within the
appropriate limitations period, other than its contention that
the six-year statute applied. It did not plead "bona fide
error" as an affirmative defense, nor did it raise any issues as
to what procedures it had in place to avoid its error or what
reasonable inquiry it made into the applicable statute of
limitations. Plaintiff simply operated under the wrong
impression as to the applicable statute of limitation and became
liable to defendants under the FDCPA, entitling them to damages,
16 A-5797-13T2
counsel fees and costs. See Jackson, supra, 754 F. Supp. 2d at
715 (holding creditor liable under the FDCPA for filing suit
after expiration of applicable state's statute of limitations).
To the extent we have not expressly addressed any of
plaintiff's remaining arguments, we find them to be without
sufficient merit to warrant discussion in a written opinion. R.
2:11-3(e)(1)(E).
Accordingly, we affirm the dismissal of plaintiff's
complaints in all three matters and the trial court's award of
damages and counsel fees to Acevedo and Johnson under the FDCPA;
but we reverse the dismissal of Thiel's claim for the same award
and remand to the trial court for entry of an order awarding
damages and counsel fees.
Affirmed in part; reversed and remanded in part. We do not
retain jurisdiction.
17 A-5797-13T2