Nos. 149 and 150 March Term, 1978, Consolidated Appeals from the Orders of the Superior Court of Pennsylvania Nos. 482 and 483, April Term, 1977, Affirming the Orders of the Court of Common Pleas, Civil Division, of Beaver County, Pennsylvania, Nos. 1832 of 1976 and 1616 of 1976.
John W. Dineen, Neighborhood Legal Services, Aliquippa, for appellant.
John H. Morgan, Howard D. Schwartz, Eckert, Seamans, Cherin & Mellott, Pittsburgh, for Household Consumer Discount.
Reed J. Davis, Davis & Mazzotta, P.C., Pittsburgh, for American Finance Corp.
Eagen, C. J., and O'Brien, Roberts, Nix, Manderino, Larsen, and Flaherty, JJ. Manderino, J., did not participate in the consideration of this case. Roberts, J., filed a concurring opinion.
The instant appeal comes to this Court by a grant of allowance of appeal from the Superior Court order affirming the dismissal of appellant's counterclaim by the Common Pleas Court of Beaver County.*fn1
In 1972, appellant and her husband entered into two separate loan agreements, one with American Finance Corporation and the other with Household Consumer Discount Company, appellees. Both loans were to be repaid over a thirty-six month period. After her husband's death, appellant was unable to continue payments on the loans and in 1976, two separate actions were filed in assumpsit by appellees to collect on those loans.*fn2
By way of Answer, appellant asserted violations of the federal Truth in Lending Act, 15 U.S.C.A. § 1601, et seq., as amended, and Regulation Z, 12 C.F.R. sec. 226, as a common law recoupment. Appellees filed preliminary objections contending that the one year statute of limitations contained in the Act, 15 U.S.C.A. § 1640(e) barred the counterclaim.*fn3 These objections were sustained by the trial court and after consolidation for appeal the Superior Court affirmed.*fn4 255 Pa. Super. 367, 387 A.2d 93 (1978).
The Truth in Lending Act (TILA) requires prospective creditors to fully disclose the credit costs of a given loan to prospective debtors in order to ensure the consumer's ability to readily compare the various credit avenues open prior to contracting, and to "protect the consumer against inaccurate and unfair credit billing and credit card practices." 15 U.S.C.A. § 1601 (Supp.1980). In order to further that aim, Congress created a civil cause of action which in effect established each debtor as a private attorney general to enforce the disclosure provisions. See 15 U.S.C.A. § 1640(a) (Supp.1980). For reasons which go unexplained in the legislation, the remedy was coupled with a one year statute of limitation. Thus, any affirmative action beyond that period is barred.
Any 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.
15 U.S.C.A. § 1640(e). (emphasis added).
The ultimate issue presented in this appeal is whether this "built-in" statute of limitations bars a debtor-defendant from asserting a TILA claim against the creditor-plaintiff. Before we may reach this ultimate issue, two preliminary concerns must first be resolved. These are (1) whether state or federal law governs our determination of the ultimate issue, and (2) may a TILA claim be asserted by the debtor-defendant in a defensive posture.
We begin our analysis with the proposition that state courts may not discriminate against a federal cause of action. State courts are required to enforce federal law or violate the supremacy clause of Article VI of the United States Constitution. Testa v. Katt, 330 U.S. 386, 67 S.Ct. 810, 91 L.Ed. 967 (1947). Once obliged by congressional grant*fn5 to provide a forum for the vindication of that right,
we must determine whether federal or state law governs the resolution of a given question concerning the federally created cause of action, especially where it is raised as a defense.
In Dice v. Akron, Canton & Youngstown R.R., 342 U.S. 359, 72 S.Ct. 312, 96 L.Ed. 398 (1952), a railroad employee instituted an action in state court under the Federal Employers' Liability Act, 45 U.S.C.A. §§ 51 et seq., alleging the negligence of his employer caused his on-the-job injuries. The employer asserted as a defense, a writing signed by the employee, claimed to be a written release from liability. The Ohio Supreme Court ruled that the "release defense" was governed by state law. The United States Supreme Court reversed, saying:
Id. at 361, 72 S.Ct. at 314. See also Herb v. Pitcairn, 325 U.S. 77, 65 S.Ct. 954, 89 L.Ed. 1483 (1945).
In Clearfield Trust Co. et al. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943), the United States initiated a suit in federal District Court pursuant to 28 U.S.C.A. § 41(1), against Clearfield Trust Co. to obtain reimbursement for monies the Federal Reserve Bank had paid to the defendant on a check which was subsequently determined to be a forgery. Clearfield defended claiming that "since the United States unreasonably delayed in giving notice of the forgery . . ., it was barred from recovery under" Pennsylvania law. The ...