Court Opinion

ID: 9854014
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:59:11.30285+00
Date Added: 2024-06-11T09:22:52.489735
License: Public Domain

*295DISSENTING OPINION OF
NAKAMURA, J.,
WITH WHOM WAKATSUKI, J., JOINS
The plaintiffs in this case are 2,500 parents “who executed a total of 5,067 separate contracts [with private schools in Honolulu for installment payments of tuition] under Defendant Finance Factors prepaid education plan covering the school years 1971/72 through 1981/82.” My colleagues in the majority conclude “there was no breach of the contract documents as executed [and] there could not be a recovery under the contracts].” But they view this case as “a suit in tort” and affirm the award of treble damages to each member of the plaintiff class pursuant to Hawaii Revised Statutes (HRS) chapter 480, Monopolies; Restraint of Trade. The case, however, was tried and decided in the Circuit Court of the First Circuit as one involving violations of “The Truth in Lending Act,” 15 U.S.C. 1601 et seq., and “The Credit Sales Act,” HRS chapter 476. I conclude from a review of the record that the defendant was entitled to judgment because the passage of time extinguished the liability of the defendant, if any it had, before suit was filed, and I dissent.
I.
The majority acknowledges “[t]here is much discussion in the briefs of the Federal ‘Truth in Lending Act,’ §§ 102 et seq., 15 U.S.C.A. §§ 1601 et seq., and of Regulation Z, 12 C.F.R. § 226, promulgated thereunder.” But it concludes “[t]he judgment below ... was not based on that act and hence [this court is] not called upon to construe it.” The representatives of the plaintiff class, however, prosecuted the case on the basis that the defendant violated “the Truth in Lending Act. .. and the Hawaii State Retail Installment Act..., H.R.S. Chapter 476.” That the trial court also treated the case as such is confirmed by the findings it entered. The *296following are the salient Findings of Fact upon which its judgment is premised:
20. Finance Factors advertised and represented its education plan as “prepaid”. In fact, the tuition was not prepaid in that only one-half was paid at the inception of the contract and the balance was paid at a later time, as aforesaid.
21. The contracts between Finance Factors and the schools further provided that in the event of a default by a parent in making installment payments to Finance Factors prior to the date of the second advance, then the second advance would not be made. This agreement between Finance Factors and the schools was not disclosed to the parents, either orally or in writing and was not mentioned in the contract [executed by the parents] as one of the remedies available in the event of default. The result of [the] agreement [between Finance Factors and the school] and its non-disclosure, coupled with the representation that the Finance Factors education plan was in fact “prepaid”, misled the parents into believing that their child’s education was paid for and thus secure for the entire term bargained for, when in fact that education could have been placed in jeopardy by a default in payment to Finance Factors prior to the second advance.
22. In addition, the parents were misled by the understated APR into believing that their Finance Factors prepaid education plan loan was obtained at a favorable annual percentage rate, and were thus dissuaded from doing any comparison shopping at other financial institutions.
23. Both the use of the term annual percentage rate and the standard method and formula for its computation were mandated by the Consumer Credit Protection Act, otherwise known as “Truth in Lending Act”, enacted by *297Congress of the United States and effective February 10, 1969, and Regulation Z promulgated by the Federal Reserve Board pursuant to its authority under the Truth in Lending Act, and revisions as they were in force through the 81/82 school year, the main purpose for the standardization of the annual percentage rate was to allow consumers to intelligently do comparison shopping for credit. This purpose was circumvented by the manner in which the Finance Factors prepaid education plan was administered and the intentional non-disclosures and misdisclosures made thereunder.
These findings, of course, are consistent with the statement in the plaintiff-appellee’s answering brief that “[t]his case involves a deliberate and intentional substantive circumvention of the Truth in Lending Act... and the Hawaii State Installment Sales Act HRS Chapter 476.” And absent the finding that the purpose of the Truth in Lending Act was circumvented by the defendant, the judgment against it would be an unfounded one. For as the majority concludes, “there was no breach of the [retail installment contracts] as executed [and] there could not be recovery under the contract[s].”
II.
The record thus confirms that the judgment against the defendant for treble damages stems from its purported failure to disclose Annual Percentage Rates of Interest as required by The Truth in Lending Act in 5,067 separate contracts executed between 1970 and 1982. By virtue of 15 U.S.C. § 1640 any action for “any actual damage sustained ... as a result of the failure[]” of any creditor to comply with the Act must be brought “within one year from the date of the occurrence of the violation.” 15 U.S.C. § 1640(a) and (e). The action upon which judgment was awarded to the plaintiff class, however, was filed on October 22, 1984.
*298Where a statute “creates a new liability and gives a special remedy for it,... upon well settled principles the limitations upon such liability become a part of the right conferred and compliance with them is... essential to the assertion and benefit of the liability itself.” United States ex rel. Texas Portland Cement Co. v. McCord, 233 U.S. 157, 162 (1914) (citations omitted); Atlantic Coast Line R. Co. v. Burnette, 239 U.S. 199, 201 (1915). In other words,
the limitation of time for commencing an action under a statute creating a new right enters into and becomes a part of the right of action itself and is a limitation not only of the remedy but of the right also; the right to recover depends upon the commencement of the action within the time limit set by the statute, and if that period of time is allowed to elapse without the institution of the action, the right of action is gone forever. The statute is an offer of an action on condition that it be commenced within the specified time, and if the offer is not accepted in the only way in which it can be accepted, by a commencement of the action within the specified time, the action and the right of action no longer exist and the defendant is exempt from liability.
51 Am. Jur. 2d Limitation of Actions § 15, at 600 (1970) (footnotes omitted).
The record, as we observed, confirms that the plaintiff’s action is premised on alleged violations of The Truth in Lending Act’s requirement for disclosure of Annual Percentage Rates of Interest. A right of action for failing to disclose such rates, of course, did not exist at common law; the right was created by Congress. Thus “[t]he time element is an inherent element of the right so created, and such a provision will control, no matter in what form the action is brought.” 51 Am. Jur. 2d, supra, § 8, at 596 (footnotes omitted). Since the “right to recover depended here] upon the commencement of the action within the time limits set by *299[The Truth in Lending Act and since] that period of time [was] allowed to elapse without the institution of the action, the right of action [was] gone forever [after 1983].” First Sav. & Loan Assoc. v. First Fed. Sav. & Loan Assoc., 547 F. Supp. 988, 996 (D. Haw. 1982).
I would therefore vacate the judgment and remand the case for entry of a judgment in favor of the defendant.