Reply Brief — Felt v. First Bank of South Dakota

CASE NO.

IN

SUPREME COURT OF UNITED STATES

OCTOBER

IVEN L. FELT and WILMA FELT,

Petitioners,

v.

FIRST BANK OF SOUTH DAKOTA,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of

Appeals for the Eighth Circuit

PETITIONERS’ BRIEF IN REPLY

TO RESPONDENT'S BRIEF

Richard Hopewell Horace R. Jackson

Wesley D. Schmidt Gene N. Lebrun

[on the brief] Lynn, Jackson, Shultz

423 S. Phillips Ave. & Lebrun, P.C.

Sioux Falls, S.D. P.O. Box 8110

57102 Rapid City, S.D. 5/7709

[605] 334-0982 [605] 342-2592

Petitioners’ Counsel Respondent's Counsel

BEST AVAILABLE COPY

TABLE OF CONTENTS

TABLE OF AUTHORITIES

STATEMENT OF FACTS &

PROCEDURAL HISTORY .

ARGUMENTS

Re

Ads

eee

IV.

STATUTE OF LIMITATIONS IS TOLLED

BY RESPONDENT'S CONTINUING FAIL-

URE TO COMPLY WITH 15 U.S.C.

Seco ems Beet ovo a we es

PETITIONERS STATE CLAIM UPON

WHICH RELIEF CAN BE GRANTED

BY 15 U.S.C. §1639 ,

PETITIONERS STATE CLAIM UPON

WHICH RELIEF CAN BE GRANTED

BY 15 U.S.C. §1635

PETITIONERS STATE CLAIM UPON

WHICH RELIEF CAN BE GRANTED

BY 42 U.S.C. §1983

PRAYER FOR RELIEF

CERTIFICATE OF SERVICE

Page

TABLE OF AUTHORITIES

Pages

Bailey v. Glover, 88 U.S. 342 E1875) . 4435

First Bank v. Felt, 368 N.W.2d 588

[s.D, 2eeek. «3 Agi pare 1,3,4

Jones v. Trans Ohio, 747 F.2d 1037

(6th Cir. 1984) nae? 4,3

Fourth, Seventh & Fourteenth Amend-

ments to U.S. Comstitetiq§® 2. « «> 8

15 U.8.C. 816338 . ¢ 4-328 452 5

18 U.S.C. 6163) .. 6.34 42

1% U.S.C. SEORG ss 6 oe eee eee 4,8

42? U.S.C. $2983 2s eos eee

STATEMENT OF FACTS -l-

AND

PROCEDURAL HISTORY

In reprint at pages 28a-47a of Respon-

dent's Brief, Petitioner Iven Felt executed

the following promissory notes in favor of

First Bank in Lemmon, South Dakota:

Date Sum Payment due

7-13-79 $15,300. 12-1-82

5-4-81 39 269. 11-1-81

5-4-81 25/000, 11-1-81

5-4-81 60/000 11-1-81

5-16-81 7°000 11-1-81

6-8-81 3/500 11-1-81

Petitioner Wilma Felt co-signed the promis-

sory notes above marked with asterisks.

The history of the Parties’ banking

relationship and status of Respondent's

state court action for summary judgment on

the foregoing notes is found in First Bank

of South Dakota v. Felt, 368 N.W.2d 588, 590-

S.D. :

"The Defendants Iven and Wilma Felt

have made various transactions with

Plaintiff First National Bank for

about 20 years. Defendants have

always made one payment a year in

the fall or after selling the farm

products. But after 6 years of no

crops -- hail and drought -- there

wasn't much to pay with. Even af-

ter Defendants made a good sized

payment in the fall of 1981, Plain-

tiff wanted more collateral on the

notes at the bank, car title and a

third mortgage on the land. Defen-

dants felt that if their collateral

had been enough to loan the credit

on, it still should be sufficient.

After making a security check the

end of June, 1982, the Bank Presi-

dent asked what would Defendants do

if the Bank foreclosed. Defendant

Iven Felt said he couldn't see why

the Bank couldn't work with him,

he could pay it back. But a few

days later, July 6, 1982, the Sher-

iff served Defendants a Summons and

Complaint."

In their Answer to Respondent's foregoing 6

July 1982 Complaint for recovery on the

aforesaid promissory notes in the Eighth

Judicial Circuit Court of South Dakota in

and for Perkins County, Petitioners filed

a counterclaim based on 15 U.S.C. §§1635

and 1639.

On 12 December 1983, Petitioners ini-

tiated this action before the U.S. District

Court of South Dakota, and on Respondent's

25 January 1984 motion, the Court, without

findings of fact and conclusions of law,

dismissed Plaintiffs' Complaint by order of

2 February 1984:

"for the reason that Plaintiff's

Complaint does not state a claim

upon which relief may be granted”.

By per curiam 18 July 1984 decision of

the Eighth Circuit Judges of the U.S. Court

of Appeals, the District Court's order was

affirmed on the ground that:

"The allegations of the complaint

center on non-compliance with i5

U.S. C. §1635, which provides a

right of rescission as to consu-

mer credit transactions in which

a security interest is acquired

or retained in real property used

as the residence of the person to

whom credit is extended. The se-

curity interests involved in this

case were in livestock, feed and

equipment, not real estate. There-

fore, 15 U.S.C. §1635 is inapplica-

ble, and the district court pro-

perly dismissed the complaint".

On 23 July 1984, Respondent renewed in

state court its motion for summary judgment

on the promissory notes herein; on which mo-

tion summary judgment in the amount of

$157,795.05 was granted by the state court

on 4 September 1984; which summary judgment

was the subject of Petitioners' appeal in

First Bank of South Dakota v. Felt, supra.

Pursuant to Petitioners' 25 September

1984 motion for enlargement of time, this

Court's Associate Justice Harry A. Blackmun

herein granted Petitioner 30 additional days

to file the petition for writ of certiorari

herein. Said petition was receipted by

this Court's Clerk on 14 November 1984.

Aforesaid pending petition by the Pe-

titioners to this Court and appeal to the

Supreme Court of South Dakota notwithstand-

ing, Respondent initiated the 7 February

1985 issuance of a writ of execution order-

ing the Perkins County Sheriff to satisfy

Respondent's aforesaid $157,795.05 summary

judgment by levy:

" , . . out of the personal proper-

ty of said Judgment Debtor, and if

sufficient personal property can-

not be found, out of the real pro-

perty belonging to Defendants

By its 6 March 1985 letter referred to

in its 9 May 1985 letter on file herein to

ulin

this Court's Assistant Clerk Edward C.

Schade, Respondent confirmed with Mr. Schade

that the 13 November 1984 petition for writ

of certiorari herein was a "dead file".

On 8 March 1985, the Perkins County

Sheriff seized by levy and thereafter sold

all the equipment and livestock on Respon-

dents' land in partial satisfaction of the

aforesaid $157,795.05 summary judgment.

On 22 May 1985 First Bank of South Da-

kota v. Felt, supra at 592, heldthat Peti-

tioners state claims for relief under 15

U.S.C. §1640, and remanded said claims to

the state trial court for further proceed-

ings.

ARGUMENTS

I. STATUTE OF LIMITATIONS IS TOLLED BY

RESPONDENT'S CONTINUING FAILURE TO

COMPLY WITH 15 U.S.C. §§1635, 1639

At page 1 of its Brief, Respondent as-

serts that Petitioners' 15 U.S.C. §1639

claim is barred by the one-year statute of

limitations in 15 U.S.C. §1640(e). Respon-

der:t therewith fails to address the ques-

tion of whether this statutory provision was

subject to the doctrine of equitable tol-

ling. The Sixth Circuit has held that the

statute is subject to the doctrine of eq-

uitable tolling. Jones v. Trans Ohio Sav-

ings Association, 747 F.2d 1037, 1041 (6th

Cir. 1984). Under this doctrine, the sta-

tute of limitations [15 U.S.C. §1640(e)] is

tolled when a defendant fradulently conceals

the facts which give rise to the cause of

action. This federal fradulent concealment

rule was first enunciated in Bailey v.

«Se

Glover, 88 U.S. 342 (21 Wall.) 22 L.Ed 636

(1875). The Sixth Circuit in Jones conclu-

ded that:

"For application of the doctrine of

fradulent concealment, the one year

period will begin to run when the

borrower discovers or has had a rea-

sonable opportunity to discover the

fraud involving the complained of

TILA violation. To conclude other-

wise would be to accede to the ma-

chinations of those who would hope

to thwart Congress' purpose and the

ability of the federal courts to

ensure that purpose's fruition; the

prevention of fraud in consumer

credit rransactions". Jones v.

Trans Ohio Savings Association,

747 F.2d at L041.

Plaintiffs-Appellants contend that De-

fendants fradulently concealed the facts

which would have given rise to the cause of

action. They concealed these facts by their

failure to make the disclosures required by

15 U.S.C. 1635 and 15 U.S.C. 1639. Inasmuch

as no disclosure has ever been made, the

Court should find that the statute was tol-

led by the fraud of the Defendants in fail-

ing to disclose until the Plaintiffs should

reasonably have discovered the facts which

make up their cause of action.

II. PETITIONERS STATE CLAIM UPON WHICH RE-

LIEF CAN BE GRANTED BY 15 U.S.C. §1639

On the face of five promissory notes

(RB(35a-47a)) which are the subject of Pe-

titioners' 15 U.S.C. §1639 claim herein, Re-

spondent failed to disclose to Petitioners

information required by 15 U.S.C. §1639(a)

(4) (7) (8) (b) :

"(a) Any creditor making a consumer

loan or otherwise extending consu-

mer credit in a transaction which

is neither a consumer credit sale

nor under an open end consumer

credit plan shall disclose each of

the following items, to the extent

applicable:

(4) . . . the amount of the fi-

nance charge

(7) The default, delinquency,

or similar charges payable in

the event of late payments.

(8) A description of any se-

curity interest held or to be

retained or acquired by the

creditor in connection with

the extension of credit, and a

clear identification of the

property to which the security

interest relates

(b) . . ., the disclosures required

by subsection (a) of this section

shall be made before the credit is

extended, and may be made by dis-

closing the information in the note

or other evidence of indebtedness

to be signed by the obligor."

III. PETITIONERS STATE CLAIM UPON WHICH RE-

LIEF CAN BE GRANTED BY 15 U.S.C.

§ 1635

15 U.S.C. §1635(a) in part provides:

e el hl Cl ce COMBUMOT credit

transaction in which a security in-

terest, including any such interest

arising by operation of law, is

acquired in . . . the residence of

the person to whom credit is exten-

ded, the obligor shall have the

right to rescind the transaction

following the .. . delivery

of disclosures required under this

section and all other material dis-

closures required under this part

". (emphasis added.)

To be noted in greater specifics at

page 3, supra, a state court writ of execu-

tion on 7 February 1985 ordered the county

sheriff to satisfy Respondents’ summary

judgent on the promissory notes at issue

by levy and sale on Petitioners' property.

Through this operation of law, Respondent

retains the right to have Petitioners'

residence sold in satisfaction of the bal-

ance purportedly owing on the aforesaid

state summary judgment. Petitioners are

therewith vested by 15 U.S.C. §1635(a)

with the right to rescind their credit

transaction herein with Respondent, and the

right to be notified by Respondent in the

promissory notes (RB(28a-47a)) of the par-

ticulars of their right to so rescind the

notes.

As Respondent has failed to make the

foregoing disclosures, Petitioners state a

claim by which relief can be granted pursu-

ant to 15 U.S.C. §1635.

IV. PETITIONERS STATE CLAIM UPON WHICH RE-

LIEF CAN BE GRANTED BY 42 U.S.C. §1983

Under color of unconstitutional and ul-

tra vires state statutes, executive actions

and judicial proceedings on record with the

Perkins County Circuit Court (Civ. 82-1030;

Cr. 85-03) and decisions of the U.S. Bank-

ruptcy Court (584-00110) of South Dakota,

Respondent continues to deprive Petitioners

sle

of their rights under the U.S. Constitution:

to be secure in their per-

sons, houses, papers, and effects

against unreasonable searches and

seizures "" guaranteed by the

Fourth Amendment ;

"of trial by jury" guaranteed by the

Seventh Amendment; and

“of . . « liberty, or property,

without due process of law...

guaranteed by the Fourteenth Amend-

ment.

PRAYER FOR RELIEF

On this motion that this Court take

judicial] notice of the state criminal and

civil proceedings against Petitioners de-

scribed at pages 1-4, 7 supra, and on fur-

ther motion that their Complaint and prayers

for relief be hereby amended to conform with

facts and statutory claims of this brief and

any decision that may be forthcoming by this

Court; Petitioners pray that this Court:

(1) grant Petitioners’ hereby renewed:

(a) 12 December 1983 motion for

summary judgment in favor of Pe-

titioners against Respondent for

relief provided by 15 U.S.C.

§§1635, 1639, 1640 and 42 U.S.C.

§1983, and

(b) 12 December 1983 and 6 January

1984 motions to rescind and nullify

the credit transactions (RB(35a-47a))

and purported security agreements

(RB(19a-27a)) with Respondent, and

therewith

(2) remand Petitioners’ summary judg-

ment on matters of law back to the

U.S. District Court of South Dakota

for determination by trial of dam- .

age amounts Respondent is obligated

to pay Petitioners pursuant to 15

U.S.C. §§1635, 1639, 1640 and 42

U.S.C. §1983.

If this Court does not grant Petition-

ers' foregoing motions and prayer, Petition-

ers in the alternative pray that this Court

grant Petitioners’ petition for writ of cer-

tiorari to review the decisions by the U.S.

District Court of South Dakota and the U.S.

Circuit Court of Appeals for the Eighth Cir-

cuit dismissing Petitioners’ Complaint; and

award Petitioners their costs and disburse-

ments, together with any other relief which

the Court shall deem just and equitable

toward restoring Petitioners’ federal con-

stitutional and statutory rights in pursu-

ing their action herein.

Respectfully submitted this 20th day of

September, 1985.

Richard Hopewell

Wesley D. Schmidt

[on the brief]

423 South Phillips Avenue

Sioux Falls, S. D. 57102

[605] 334-0982

Counsel for Petitioners

CERTIFICATE OF SERVICE

On 20 September 1985 by first class

mail, postage prepaid, I served three copies

of this Petitioners’ Brief in Reply to

oitw

Respondent's Counsel of record:

Horace R. Jackson

Gene N. Lebrun

Lynn, Jackson, Shultz & Lebrun, P.C.

P.O. Box 8110

Rapid City, S.D. 57709

[605] 342-2592

Counsel for Respondent

/s/ Richard Hopewell