Ellis v. GMAC

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________
FILED
No. 97-6963 U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
11/13/98
D. C. Docket No. 97-P-96-S THOMAS K. KAHN
CLERK
PAUL R. ELLIS, PEGGY ANN ELLIS,
on their own and on behalf of all others
similarly situated,
Plaintiffs-Appellants,

versus

GENERAL MOTORS ACCEPTANCE
CORPORATION, d.b.a. General Motors
Acceptance Corporation,
Defendant-Appellee.

________________________

Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(November 13, 1998)

Before ANDERSON, BARKETT, Circuit Judges, and HILL, Senior Circuit Judge.

BARKETT, Circuit Judge:

Plaintiffs Paul and Peggy Ellis (“Ellises”) appeal the dismissal of their suit against the

General Motors Acceptance Corporation (“GMAC”) alleging violations of the Truth in Lending

Act, 15 U.S.C. § 1640(e) (1997) (“TILA”). The district court dismissed the complaint on the

grounds that the statute of limitations had expired and, alternatively, that under 15 U.S.C.§ 1641,

GMAC was exempted from liability under TILA. On appeal the Ellises argue that the statute of
limitations was suspended by the doctrine of equitable tolling and that, by writing and signing

the contract, GMAC voluntarily agreed to expanded liability. We find that TILA is subject to

equitable tolling but that GMAC, as an assignee, is not liable for the TILA violations alleged.

Background

The Ellises’ claim derives from their purchase of a 1993 Saturn SL-2 from Royal

Oldsmobile (“Royal”) on May 22, 1995. At the same time that they bought the car, the Ellises

purchased an extended warranty for an additional $1,195. They financed the car and warranty

through a Retail Installment Contract (“RIC”) and the loan was assigned to GMAC

simultaneously with the contract’s execution. In the section itemizing the amount financed, the

RIC listed $1,195 as being paid to “Mechanic” for the extended warranty. The Ellises allege that

this listed payment constituted misrepresentation because substantially less than $1,195 was paid

to this third party. They claim that only a small portion of this amount was paid to “Mechanic”

and that Royal retained the rest. The Ellises brought suit against GMAC on January 14, 1997,

eighteen months after purchasing the car and warranty, and the district court subsequently

granted GMAC’s motion to dismiss the suit for failure to state a claim. See FED. R. CIV. P.

12(b)(6).

The Ellises recognize that, under TILA, they had only one year from the time they

purchased the car and warranty to bring an action.1 They argue, however, that because they were

prevented from learning that the total amount paid by Royal to Mechanic was misrepresented on

the disclosure document, equitable tolling applies to suspend the statute of limitations. The

1
15 U.S.C. § 1640(e) states in relevant part: “[a]ny 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.”

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Ellises further argue that, notwithstanding the language of 15 U.S.C. § 1641(a) holding

assignees liable under TILA only for violations apparent on the face of the disclosure statement,

GMAC contractually obligated itself to assume liability for any cause of action that could have

been brought against the seller, including this claim for misrepresentation. Thus, they assert that

the district court erred in dismissing their complaint.

We review dismissals pursuant to Rule 12(b)(6), de novo, taking all the material

allegations of the complaint as true while liberally construing the complaint in favor of the

plaintiff. Roberts v. Florida Power & Light Co., 146 F.3d 1305, 1307 (11th Cir. 1998). A court

may dismiss a complaint “only if it is clear that no relief could be granted under any set of facts

that could be proved consistent with the allegations.” Hishon v. King & Spaulding, 467 U.S. 69,

73 (1984).

Discussion

1. Statute of Limitations

Because the district court determined that TILA’s statute of limitations is jurisdictional

and that its expiration deprived the court of subject matter jurisdiction, we must first address this

threshold issue. When Congress enacts statutes creating public rights or benefits, it can impose

time limits on their availability. These time limits can either completely extinguish the right or

simply bar the remedy for enforcement. In the former case, jurisdiction does not exist because

the cause of action has been totally extinguished. In the latter case, the court continues to have

jurisdiction and has the discretion to consider particular circumstances affecting the ability of a

party seeking review to comply with the time limits, which can be tolled when principles of

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equity render their rigid application unfair. See Zipes v. Trans World Airlines, Inc., 455 U.S.

385, 398 (1982); Holmberg v. Armbrecht, 327 U.S. 392, 395-96 (1946).

“Equitable tolling” is the doctrine under which plaintiffs may sue after the statutory time

period has expired if they have been prevented from doing so due to inequitable circumstances.

See Bailey v. Glover, 88 U.S. (21 Wall.) 342, 347 (1874) (where a party injured by another’s

fraudulent conduct “remains in ignorance of it without any fault or want of diligence or care on

his part, the bar of the statute does not begin to run until the fraud is discovered . . .”). See also

Osterneck v. E.T. Barwick Indus., 825 F.2d 1521, 1535 (11th Cir. 1987), aff’d, Osterneck v. Ernst

& Whinney, 489 U.S. 169 (1989) (if third party is in privity, or a principal-agent relationship

with the defendant exists, defendant’s approval of the concealment may be sufficient to toll the

statute). Unless Congress states otherwise, equitable tolling should be read into every federal

statute of limitations. Holmberg, 327 U.S. at 394-96.

In this case, the district court concluded that TILA was a jurisdictional statute and that

the Ellises’ claim was therefore time-barred. The Ellises maintain that 15 U.S.C. § 1640(e) is

not a jurisdictional statute but rather a statute of limitations subject to equitable tolling.

The issue of whether TILA is subject to equitable tolling is one of first impression in this

circuit. Every other circuit that has considered the issue has held that TILA is subject to

equitable tolling. See Ramadan v. Chase Manhattan Corp., No. 97-5282, (3rd Cir. Sept. 22,

1998) (under facts virtually identical to those here, court found § 1640(e) subject to equitable

tolling); Jones v. TransOhio Savings Ass’n., 747 F.2d 1037, 1041 (6th Cir. 1984) (§ 1640(e)

subject to equitable tolling); King v. California, 784 F.2d 910, 914-15 (9th Cir. 1986) (accord

with TransOhio); Kerby v. Mortgage Funding Corp., 992 F.Supp 787 (D. Md. 1998); see also

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Lawyers Title Ins. Corp. v. Dearborn Title Corp., 118 F.3d 1157, 1166-67 (7th Cir. 1997) (citing

King and TransOhio with approval). 2

GMAC contends, however, that we should not follow the other circuits because our own

precedent in Hill v. Texaco, Inc., 825 F.2d 333 (11th Cir. 1987) forecloses a finding that

equitable tolling applies here. We find Hill to be inapposite. Hill did not involve TILA, but

rather the Petroleum Marketing Practices Act (“PMPA”), 15 U.S.C. § 2802(b)(3)(D)(iii).

Plaintiff, a Texaco franchisee, sued Texaco alleging that Texaco had acted in bad faith when

offering him right of first refusal on the sale of his leased property. Texaco had offered to sell

Hill the property for $326,000 even though the land had been appraised at $225,000. Hill

refused and seventeen months later Texaco sold the property to a third party for $240,000. Hill

then sued, claiming that Texaco’s offer to him was not bona fide and therefore violated the

PMPA. Id. at 334. The statute of limitations in PMPA is one year. Hill filed suit after more

than a year had elapsed arguing that, because fraudulent concealment prevented his learning of

the violation until after the statute had tolled, equitable tolling should apply.

2
We note in passing that the D.C. Circuit addressed this issue in dicta in Hardin v. City Title &
Escrow Co., 797 F.2d 1037, 1039-40 & n.4 (D.C. Cir. 1986). Hardin did not involve TILA at
all, but was rather about the limitations provisions of the Real Estate Settlement Procedures Act,
12 U.S.C. § 2601, et. seq.(RESPA). In a digression discussing TILA, the Hardin court opined
that the 1980 amendments to TILA providing a recoupment defense to collection actions brought
more than one year from the date of the violation indicate Congress’ intent that TILA be
jurisdictional. See Hardin, 797 F.2d at 1039-40. However, among other things, the Hardin court
assumed that recoupment was always permitted prior to the 1980 amendment, when there was
actually considerable disagreement on this issue. See Kerby 992 F.Supp at 796-97 (discussing
Hardin and listing pre-1980 cases on both sides of the recoupment issue). See also Lawyers
Title Ins. Corp., 118 F.3d at 1166-67 (RESPA case citing reasoning of King and TransOhio and
declining to follow Hardin).

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 The Hill court disagreed, recognizing that, while equitable tolling is typically read into

federal statutes of limitation, it cannot apply in the face of contrary congressional intent. Id.

“[T]he basic inquiry is whether congressional purpose is effectuated by tolling the statute of

limitations in given circumstances.” Burnett v. New York Central R.R. Co., 380 U.S. 424, 427

(1965). To determine whether equitable tolling applies, courts “examine the purposes and

policies underlying the limitation provision, the Act itself, and the remedial scheme developed

for the enforcement of the . . . Act.” Id.

PMPA has a very specific purpose--protecting franchisees from wrongful termination of

their franchises.3 It begins to run from the time of a specific event of which the claimant would

have certain knowledge, i.e., the termination or nonrenewal of his/her franchise. Although

Congress wished to shield franchisees from unfair business practices by giving them the right of

first refusal on the sale of their leased property, it clearly did not intend to create an indefinite

right of action in the event the franchiser decides at a later date to part with the property at a

lower price. See Hill, 825 F.2d at 334 (noting that when Congress enacted PMPA, it was aware

of abusive practices by some oil franchisers yet deliberately chose a short statute of limitations).

In light of the statute’s stated purpose and language, the Hill court concluded that PMPA

3
15 U.S.C. § 2802(a) of the PMPA states:

Except as provided in subsection (b) . . . and section 2803 of this
title, no franchiser engaged in the sale, consignment, or
distribution of motor fuel in commerce may–
(1) terminate any franchise . . . prior to the conclusion of the term,
or the expiration date, stated in the franchise; or
(2) fail to renew any franchise relationship (without regard to the
date on which the relevant franchise was entered into or renewed).

6
represents a narrow exception to the general rule that equitable tolling applies to all federal

statutes of limitation. See id. at 334-35.

In this case, we examine TILA, a consumer protection statute which, though possessing a

limitations period similar to PMPA, is remedial in nature and therefore must be construed

liberally in order to best serve Congress’ intent. See McGowan v. King, Inc., 569 F.2d 845, 848

(5th Cir. Mar. 15, 1978).4 The section of TILA addressing Congressional findings and the

statute’s declaration of purpose states in relevant part:

(a) Informed use of credit
The Congress finds that economic stabilization would be enhanced and the
competition among the various financial institutions and other firms . . . would be
strengthened by the informed use of consumer credit. The informed use of credit
results from an awareness of the cost thereof by consumers. It is the purpose of
this subchapter to assure a meaningful disclosure of credit terms so that the
consumer will be able to compare more readily the various credit terms available
to him and avoid the uninformed use of credit, and to protect the consumer
against inaccurate and unfair credit billing and credit card practices.

15 U.S.C. § 1601.

Despite TILA’s clearly remedial purpose, if we were to read its time limit literally,

consumers whose cause of action was fraudulently concealed from them until after a year had

passed could not pursue a cause of action under TILA. That would lead to the anomalous result

that a statute designed to remediate the effects of fraud would instead reward those perpetrators

who concealed their fraud long enough to time-bar their victims’ remedy. We cannot believe

this was Congress’ intent. Rather, in these circumstances we apply the general rule that

equitable tolling applies to all federal statutes unless the statute states otherwise. Holmberg, 327

4
This court adopted as binding precedent the decisions of the former Fifth Circuit prior to
October 1, 1981. Bonner v. City of Pritchard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).

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U.S. at 394-95. We therefore agree with the Third, Sixth, and Ninth Circuits that the statute of

limitations in TILA is subject to equitable tolling. Consequently, the district court erred in

dismissing the Ellises’ claim for lack of jurisdiction.

2. Assignee Liability

Although we find that TILA is subject to equitable tolling, thus giving the district court

jurisdiction, we need not reach the question of whether equitable tolling applies to the facts of

this case because we conclude that, as an assignee, GMAC is not liable for the alleged TILA

violations. The Act applies to every consumer credit contract, including those between buyers

and sellers as well as those between buyers and third-party financing agents including mortgage

brokers, credit card companies and the like. In this lawsuit, the seller, Royal, was not sued.

Thus, we are concerned only with whether GMAC, the assignee of the contract between Royal

and the Ellises, is liable under the statute.

TILA has specifically addressed the liability of assignees under the Act and provides

that:

[e]xcept as otherwise specifically provided in this subchapter, any civil action for
a violation of this subchapter or proceeding . . . which may be brought against a
creditor may be maintained against any assignee of such creditor only if the
violation for which such action or proceeding is brought is apparent on the face of
the disclosure statement, except where the assignment was involuntary. . . . [A]
violation apparent on the face of the disclosure statement includes but is not
limited to (1) a disclosure which can be determined to be incomplete or inaccurate
from the face of the disclosure statement or other documents assigned, or (2) a
disclosure which does not use the terms required to be used by this subchapter.

15 U.S.C. § 1641(a). At the same time, in regulations set forth in 16 C.F.R. § 433.2 (1998), the

Federal Trade Commission (“FTC”) requires that every consumer credit contract treating the sale

or lease of goods or services contain the following language in bold type:

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 NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS
SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR
COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES
OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF.
RECOVERY OF THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY
THE DEBTOR HEREUNDER.

GMAC was clearly a “holder” of the Ellises’ credit contract, which would seem to

suggest that a TILA cause of action could lie against GMAC. GMAC contends, however, that

the holder notice language appears in the contract only because it is required by the FTC and

therefore is subordinate to the statutory limitation of liability set forth in 15 U.S.C. § 1641(a).

Consequently, because the alleged violation was not apparent on the face of the disclosure

document, GMAC is not liable under § 1641(a).

The Ellises concede that “[r]egulations cannot trump the plain language of statutes.”

Robbins v. Bentsen, 41 F.3d 1195, 1198 (7th Cir. 1994).5 They maintain, however, that even if

§1641(a) limits liability, parties can still agree to waive the protections of the statute and assume

greater liability than the law requires. They assert that in this case GMAC’s intent to assume

greater liability is manifested by the above quoted language in the contract and argue that this

interpretation is the only way to give any meaning to the language in the contract.

5
See Mohasco Corp. v. Silver, 447 U.S. 807, 825 (1980) (agency interpretation of statute cannot
supersede language chosen by Congress); S.J. Groves & Sons, Co. v. Fulton County, 920 F.2d
752, 764 (11th Cir. 1991) (regulations must not be unauthorized, or inconsistent with the statute
that authorizes them); United States v. Gordon, 638 F.2d 886, 888 (5th Cir., Mar. 5, 1981)
(“Whatever effect [an] agency regulation may have under other circumstances, it cannot
supersede a statute applicable to those present here.”).

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 While it is certainly true that parties can waive stautory protections and assume liabilities

not required by law,6 we cannot conclude that GMAC has done so here. The only evidence of

GMAC’s purported intent to relinquish TILA’s protections is the language that the FTC

mandates be inserted into every consumer credit contract. See 16 C.F.R. § 433.2. We agree with

the Seventh Circuit in Taylor v. Quality Hyundai, Inc., No. 96-3658, 97-1208, (7th Cir. July 20,

1998) that this holder notice language is part of the contract by force of law and “must be read in

light of other laws that modify its reach.” Id. at *3. Adhering to this principle does not render

the contract language meaningless. As the Taylor court recognized, the provision continues to

fill a valuable role by reiterating the right of buyers to withhold payment from sellers or

assignees, if the cars they purchased turn out to be lemons. Taylor . See also Maberry v. Said,

911 F.Supp 1393, 1402 (D. Kan. 1995) ( FTC holder language permits consumers to defend

against a creditor suit for payment of an obligation by raising a valid claim against the seller as a

setoff); Hoffman v. Grossinger Motor Corp., No. 96 C 5362, (N.D. Ill June 27, 1997). Like

Taylor, we conclude that the language required by the FTC regulation cannot override the

express language of TILA in which Congress specifically decided that assignee creditors will

only be liable for TILA violations that are apparent on the face of the disclosure statement.

Thus, the language in the contract required by the FTC regulation standing alone does not

suffice to subject GMAC to liability. Although GMAC could contract, as the Ellises suggest, to

assume greater liability than the statute requires, there is no evidence in this case to suggest or

indicate that the insertion of the regulatory language into the contract resulted from bargaining or

6
See, e.g., Northside Iron & Metal Co., Inc. v. Dobson & Johnson, Inc., 480 F.2d 798, 800 (5th
Cir. July 5, 1973) (bank may waive protections offered by statute, but to do so it must
demonstrate voluntary and intentional relinquishment or abandonment of privilege).

10
agreement by the parties to reflect such a voluntary and intentional assumption of liability.

Accordingly, we conclude that under § 1641(a), GMAC can be liable only for violations that are

apparent on the face of the disclosure statement.

The Ellises maintain, nonetheless, that the misrepresentation of the warranty cost was

sufficiently “apparent on the face” of the disclosure statement to warrant liability. We find this

contention equally unconvincing. The Ellises argue that since GMAC issued the checks and

credits to “Mechanic” in payment for the warranty and that related loan documents reveal the

true cost of the warranty as well as the amounts paid to the parties, the discrepancy between the

amount supposedly paid to “Mechanic” and the amount actually paid by GMAC reflected a

violation apparent on the face of the documents. Under the Ellises’ own argument, however, we

would need to resort to evidence or documents extraneous to the disclosure statement. This the

plain language of the statute forbids us to do. As the Seventh Circuit noted, such an

interpretation of TILA would: “impose a duty of inquiry on financial institutions that serve as

assignees. Yet this is the very kind of duty that the statute precludes, by limiting the required

inquiry to defects that can be ascertained from the face of the documents themselves.” Taylor.

For the foregoing reasons, we hold that the statute of limitations set forth in TILA, 15

U.S.C. § 1640(e) is not jurisdictional and therefore may be subject to equitable tolling.

However, because GMAC, as an assignee, is not liable under TILA for the violations alleged

here, the district court’s dismissal of the complaint is AFFIRMED.

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HILL, Senior Circuit Judge, specially concurring:

I concur in the judgment of the panel in that it affirms the dismissal of the

complaint by the district court. I write specially for the following reasons.

The district court dismissed the complaint on two grounds: (1) that it was time-

barred by the jurisdictional limitation period of Section 1640(e); and, (2) that it failed

to state a claim of assignee liability under Section 1641(a). If the liability of the

assignee issue can be affirmed, in my view, we need not reach the jurisdiction

question.

Let us assume, however, that we must decide the jurisdictional issue of

equitable tolling. In my opinion, we are bound by the precedential authority of Hill

v. Texaco, 825 F.2d 333 (1987), unless and until told otherwise by an en banc panel

of this circuit or the Supreme Court of the United States. Unlike the panel’s opinion,

I do not read Hill to be “inapposite” to the circumstances here.

Furthermore, I adhere to the reasoning of Hardin v. City Title & Escrow Co.,

797 F.2d 1037, 1039-40 & n.4 (D.C. Cir. 1986), premised upon an analysis of

congressional intent surrounding a 1980 amendment to the TILA, that Section 1640(e)

is jurisdictional in nature and cannot be equitably tolled. In short, the TILA is a

statute of repose.

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 I would affirm on the basis of the judgment of the district court. I think it got

it right all the way.

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