Midland Funding LLC Current Assignee, Etc. v. Bruce Thiel Midland Funding LLC Current Assignee, Etc. v. Luisa

NOT FOR PUBLICATION WITHOUT THE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