The Court of Civil Appeals of Alabama recently rejected a debtor’s attempt to recast a creditor’s collection claims to make the claims subject to a shorter statute of limitations.

In so ruling, the Court held that Alabama’s civil procedure rule as to motion for summary judgment affidavits is satisfied by testimony as to an affiant’s personal knowledge of the information contained in an affidavit.

A copy of the opinion is available at:  Link to Opinion.

The debtor opened a credit card account with a bank in 1995. Years later, in 2009, the debtor failed to make payment as agreed.  The bank charged off the account, and it was purchased by the plaintiff-appellee debt buyer.

In October 2013, the plaintiff debt buyer filed a complaint seeking to recover the balance due on the account, and filed a motion seeking a default judgment with affidavits of two employees. The affidavits intended to demonstrate that the plaintiff debt buyer had purchased a number of accounts, including the account at issue, from the bank in 2011. The debt buyer also included a generic credit card application in support of its motion. The trial court entered a default judgment in favor of the plaintiff debt buyer on Nov. 20, 2013.

On Dec. 17, 2013, the debtor filed a motion seeking to set aside the default judgment, and the trial court granted his motion. Months later, the debt buyer filed a motion for summary judgment. The debtor moved to strike the debt buyer’s affidavits in support of its motion for summary judgment, arguing the affidavits did not comply with the Alabama rule of civil procedure relating to motion for summary judgment affidavits. The debtor also moved for summary judgment arguing the applicable statute of limitations period had expired.

The trial court denied the debtor’s motion to strike and motion for summary judgment, and granted summary judgment for the plaintiff debt buyer.  The debtor appealed.

The Court of Civil Appeals of Alabama addressed the debtor’s arguments that the trial court erred by failing to strike the affidavits, by denying his motion for summary judgment, and by entering summary judgment in favor of the plaintiff debt buyer.

As you may recall, Ala. R. Civ. P. 56(e) states, “Form of Affidavits; Further Testimony; Defense Required. Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.”

The debt buyer’s affiants each asserted they had personal knowledge of certain admissible facts to which they were competent to testify. The Appellate Court held that the affiants complied with Rule 56(e) and were properly considered by the trial court. Accordingly, the Court ruled that the trial court did not err in denying the debtor’s motion to strike the affidavits.

The debtor also argued that one of the plaintiff debt buyer’s claims “should be considered to be a claim on an open account subject to the three-year statute of limitations provided by § 6-2-37, Ala. Code 1975, rather than on an account stated subject to the six-year statute of limitations provided by § 6-2-34, Ala. Code 1975.”

The Appellate Court rejected this argument, holding that the debtor did not have the ability to recast the plaintiff debt buyer’s account-stated claim as the plaintiff is the master of its own complaint.

The debtor also argued that the trial court erred in entering summary judgment in favor of the plaintiff debt buyer on its breach of contract claim or on its account-stated claim.

To establish an account stated in Alabama, at a certain point the creditor renders to the debtor a statement of an account of the outstanding balance and the debtor admits the correctness of the statement regarding the debt. The rendering of the account statement and the acceptance by the debtor of the correctness of the statement rendered forms a new contract.

In University of South Alabama v. Bracy, 466 So. 2d 148, 150 (Ala. Civ. App. 1985), the Appellate Court concluded that a “debtor’s admission to the correctness of the statement and to his liability thereon can be express or implied.” The plaintiff in Bracy had presented evidence indicating that Bracy had incurred a debt and that he had made payments on that debt for four years without objection. 466 So. 2d at 150. The Court concluded that Bracy’s payments on the account amounted to an implied admission of liability.

Following the ruling in Bracy, the Appellate Court here held that genuine issues of fact existed as to elements of an account-stated claim. Thus, the Appellate Court held that the trial court erred by entering summary judgment in favor of the plaintiff debt buyer on its account-stated claim.

The Appellate Court also found that the plaintiff debt buyer failed to present a valid contract.  Accordingly, the Appellate Court held that the trial court erred by entering summary judgment in favor of the plaintiff debt buyer on its breach of contract claim.