The opinion of the court was delivered by: Grady, District Judge.
On September 30, 1982, following a bench trial of plaintiffs'
Truth in Lending Act ("TILA")*fn1 claim against the defendants, we
found defendants jointly liable to the plaintiffs in the amount
of $1,000.00 in damages and $500.00 in attorney's fees. Olevares
v. Viking Dodge, Inc., No. 79 C 1599, Memorandum Op. at 11
(N.D.Ill. Sept. 30, 1982) (Grady, J.). On July 23, 1985,
plaintiffs filed a citation to discover defendants' assets,
claiming that defendants have not paid plaintiffs this judgment.
See Ill.Rev.Stats. ch. 110, ¶ 2-1402, ch. 110A, ¶ 277 (judgment
creditor commences enforcement proceeding by having citation of
The defendants have moved to quash the citation, arguing that
plaintiffs have already been paid their judgment, because one of
the two defendants, First Security Bank of Carey-Grove
("Bank") allegedly has reduced by $1500.00 a claim it has against
the plaintiffs. The Bank's claim is apparently based on the
installment contract plaintiffs entered into with the other
defendant, Viking Dodge, Inc. ("Viking"), and which formed the
subject matter of plaintiffs' TILA claim. Viking assigned all its
rights under the contract to the Bank, and the Bank has never
asserted this claim against the plaintiffs in court.
In response, plaintiffs argue that any action to enforce the
installment contract was a compulsory counterclaim to plaintiffs'
TILA claim under Fed.R.Civ.P. 13(a). Since the Bank did not
assert that claim, they argue that the Bank's claim is barred,
and cannot now be asserted as a defense in plaintiffs'
enforcement proceeding. Even if the claim was permissive, not
compulsory, plaintiffs argue that the claim cannot be asserted in
this context. They distinguish defendants' cases and do not
concede liability on the Bank's claim.
Enforcement of federal judgments is governed by Fed.R.Civ.P.
69(a), which provides that "the procedure on execution [of a
judgment] . . . shall be in accordance with the practice and
procedure of the state in which the district court is held, . . .
except that any statute of the United States governs to the
extent that it is applicable." See Textile Banking Co., Inc. v.
Rentschler, 657 F.2d 844, 950 (7th Cir. 1981). Therefore, in
determining whether defendants can offset the plaintiffs'
judgment with the Bank's claim, we ask two questions: (1) does
any federal statute preclude such a set-off; and (2) does
Illinois law allow for such a set-off. See Dias v. Bank of
Hawaii, 732 F.2d 1401, 1402 (9th Cir. 1984).
In Dias, the Ninth Circuit refused to permit a bank to offset
a TILA judgment against it with a claim by the bank pending
against the plaintiff in state court. The court based its
decision both on state law and TILA. The court found that
allowing lenders to satisfy adverse TILA judgments by reducing
their claims in other courts would frustrate the essential
purpose of the Act. TILA's civil liability provisions were
designed to encourage consumers to bring actions against
creditors and thereby promote compliance with the Act. If
creditors were allowed to offset TILA judgments against pending
collection claims, the court reasoned that debtors would be
discouraged from bringing TILA claims. Id. at 1403.
The Seventh Circuit applied a similar reasoning when it held
that a lender's collection claim is not a compulsory counterclaim
to a debtor's TILA action. Valencia v. Anderson Brothers Ford,
617 F.2d 1278 (7th Cir. 1980), reversed on other grounds,
452 U.S. 205, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981).*fn2 In Valencia,
the court noted that treating collection claims as compulsory
counterclaims would undermine TILA's object, because TILA
plaintiffs could be faced with counterclaims exceeding their
potential recovery under the Act. Id. at 1292. See Maddox v.
Kentucky Finance Co., Inc., 736 F.2d 380, 383 (6th Cir. 1984).
Even if we did not find that TILA completely or partially bars
a set-off here, defendants have failed to demonstrate that
Illinois law would permit such a set-off.
As indicated, defendants have relied on various cases, only two
of which could have involved Illinois law: Meadows v. Radio
Industries, Inc., 222 F.2d 347 (7th Cir. 1955), and State Bank of
St. Charles v. Burr, 372 Ill. 114, 22 N.E.2d 941 (1939). As
Viking concedes, Burr is not relevant. Memorandum of Defendant,
Viking Dodge, Inc. at 1.*fn4 In Meadows, a plaintiff employee sued
his employer for wrongful termination of his employment contract,
for an injunction against collection of plaintiff's notes, and
for unpaid wages. The court held for the defendant, finding no
breach, and stating that plaintiff could not collaterally attack
the unimpeached judgment that defendants had already received
elsewhere for the balance due on the notes. The court then added,