Cuchine v. H.O. Bell, Inc.

NO. 83-443

IN THE SUPREME COURT OF THE STATE OF MONTANA

1984

TIMOTHY CUCHINE,

Plaintiff and Appellant,

H. 0. BELL, INC., and
FORD MOTOR CREDIT CO. ,

Defendants and Respondents.

Appeal from: District Court of the Fourth Judicial District,
In and for the Countv of Missoula
Honorable Robert M. Holter, Judge presiding.

Counsel of Record:

For Appellant:

Tipp, Hoven, Skjelset & Frizzell, Missoula, Montana

For Respondents:

Boone, Karlbers & Haddon, Missoula, Montana
Barbara Conrafi, Missoula, Montana

Submitted on briefs: March 30, 1984

Decided : June 4, 1984

Filed: ,
+ 984

Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.

Timothy Cuchine appeals from a summary judgment of the
District Court, Fourth Judicial District, Missoula County, in
favor of Ford Motor Credit Company.
On October 15, 1980, Timothy Cuchine purchased a pickup
from H. 0 Bell,
. Inc. under a retail installment sales
contract which was subsequently assigned to Ford Motor Credit
Company. Cuchine later beqan experiencing difficulties with
the pickup and returned it to H. 0 Bell. to be repaired.
.

When it became apparent that the truck could not be
adequately repaired, Cuchine left the truck with H. 0 Rell
.

and filed a suit against H. 0 Bell and the credit company
.

for rescission or revocation of the installment contract due
to breach of the implied warranties of merchantability and
fitness for a particular purpose. The credit company filed
an answer, admitting that it was the assignee under the
contract and asserting a counterclaim for the payments due
under the contract. Shortly thereafter, the contract was
reassigned to H. 0 Bell and a motion for summarv judgment
.

was filed in the District Court. The District Court granted
the credit company's motion for summary judgment and Cuchine
now appeals from the order granting the motion.
The issue presented on appeal is whether the assignment
of a retail installment sales contract imposes full contract
liability on the assignee of certain rights under the
contract.
Cuchine contends that the credit company assumed full
contract liability when the assignment was accepted. Cuchine
further contends that the credit company could not avoid this
liability during the pendency of the action by reassigning
the contract to H. 0 Bell.
. Cuchine predicates the credit
company's liability under the contract. upon the following
language which appears in the contract in bold, capital
letters:
"NOTICE -- ANY HOLDER OF THIS CONSUMER CREDIT
CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES
WHICH THE DEETOR COULD ASSERT AGAINST THE SET2LER OF
GOODS OR SERVTCES OBTAINED PURSUANT HERETO OR WITH
THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE
DEBTOR SHATIL NOT EXCEED AMOUNTS PAID RY THE DEBTOR
HEREUNDER. "
This language is consistent with section 9-318 of the
Uniform Commercial Code, adopted in Montana as section
30-9-318, MCA. That section reads in pertinent part:
"Unless an account debtor has made an enforceable
agreement not to assert defenses or claims arising
out of a sale as provided in 30-9-206, the rights
of an assignee are subject to:
"(a) all the terms of the contract between the
account debtor and assignor and any defense or
claim arising therefrom;. . ."
At common law, it is a well established rule that a
party to a contract cannot relieve himself of the obligations
which the contract imposed upon him merely by assigning the
contract to a third person. 6 Am.Jur.2d Assignments § 110;
6A C.J.S. Assignments S 31. Therefore, we must determine
whether, under the Uniform Commercial. Code, the assignment of
the contract to the credit company imposed full. contract
1ia.bility on the credit company as assignee.
The ca-se law as to the effect of section 9-318 of the
UCC on the liabilities of an assianee of contract rights is
scant, but conclusive. In Michelin. Tires v. First National
Bank of Boston (1st Cir. 1981), 666 F.2d 673, the court
examined section 9-318 and determined that:
"The key statutory lanquaqe is ambiquous.
- - That
'the rights of an assignee are subject'-to ...
(a)
all the terms of the contract' connotes only that
the assignee's rights to recover are limited by the
 obligor's rights to assert contractual defenses as
a set-off, implying that affirmative recovery
against the assignee is not intended. " (Citations
omitted.) 666 F.2d at 667.
The court also noted that:
"The words 'subject to,' used in their ordinary
sense, mean ' subord-inate to, ' ' subservient to, ' or
'limited by.' There is nothing in the u.se of the
words 'subject to,' in their ordinary use, which
would even hint. at the creation of affirmative
rights." 666 F.2d at 667.
See also Gold Circ1.e v. Riviera Finance-East Bay (N.D. Cal.

Such a conclusion is buttressed by the official comment
to section 9-31-8. Official Comment 1 provides in pertinent
part :
"Subsection (1) makes no substa.ntia1 change in
prior law. An assignee has traditionally been
subject to defenses or set-offs existing before an
account debtor is notified of the assignment.."
Under prior law, the assignee of a contract was
generally not held liable for the assignor's breach of
contract. Thompson v. Lincoln National Life Insurance Co.
(1943), 114 Mont. 521-, 138 P.2d 951; Apple v. Edwards (1932),
92 Mont. 524, 16 P.2d 700. This rule has been carried into
current law as well; where it is not clearly shown that the
assignee under a contract expressly or impliedly asumed the
assignor's liability under the contract the assignee is not
subject to the contract liability imposed by the contract on
the assignor. Massey-Ferguson Credit Corporation ~ 7 . Brown
(1977), 173 Mont. 253, 567 P.2d 440.
We believe that the intent of section 9-31.8 of the
Uniform Commercial Code and section 30-9-318, MCA, was to
allow an account debtor to assert contractual defenses as a
set-off; the provisions were not intended, generally, to
place the assignee of a contract in the position of being
held a guarantor of a product in place of the assign.or.

Therefore, the summary judgment of the District Court is

affirmed.

W e concur:

Chief J u s t i c e

Justices

Mr. C h i e f J u s t i c e F r a n k I . H a s w e l l , M r . J u s t i c e D a n i e l J . Shea
and M r . J u s t i c e F r a n k B. M o r r i s o n , J r . , d i s s e n t and w i l l f i l e
written dissents later.
 DISSENT OF MR. JUSTICE DANIEL J. SHEA

No. 83-443
Timothy Cuchine,

VS .
H. 0 . Bell Inc. and Ford Motor Credit Co.
Mr. Justice Da-niel J. Shea dissenting:

I concur with the dissent of Mr. Justice Morrison. The
majority has improperly decided this case on an issue not
presented by this appeal. The issue of contractual liability
assumed by H. 0 . Bell under the assigned contract was not
presented at the trial court level, nor by the appellant's
brief. Rather, the sole issue appealed was whether Ford
Motor Credit Company could relieve itself of its contractual
obligations, by assigning the contract to H.O. Bell. Instead
of ruling on those legal issues proper1.y presented to this
Court, the majority has rai-sed its own issue in order to
iustify the desired result.
I would hold that Ford Motor Credit Company could not
relieve itself of its contractual obligations by assigning
the contract to H. 0. Bell. Accordingly, the summary
judgment entered in favor of Ford Motor Credit Company should
be reversed and the cause remanded for further proceedings.
Mr. Chief Justice Frank I. Haswell, dissenting.

I fully concur in the dissent of Mr. Justice Morrison.
However, since the majority have decided this appeal on the
ground that the credit company i-s not liable to the consumer
under the terms of the contract, I further dissent to that
holding.
The contract contains the following provision in bold
face print on the face of the contract:
"NOTICE--ANY HOLDER OF THIS CONSUMER
CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEETOR COULD ASSERT
AGAINST THE SELLER OF GOODS OR SERT7ICES
OBTAINED PURSUANT HERETO OR WITH THE
PROCEEDS HEREOF. RECOVERY HEREUNDER BY
THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID
BY THE DEBTOR HEREUNDER."
This provision clearly and unambiguously states that
the holder of the contract (Ford Motor Credit Company) is
subject to all claims and defenses which the debtor (Cuchine)
could assert against the seller (H. 0 . ell, 1nc.). his
provision for consumer protection is mandatory under Federal
Trade Commission regulations. 16 C.F.R. Sec. 433.2 (1978).
If Cuchine got a "lemon," he has a claim against H. 0 Bell
.

to which Ford Motor Credit Company is subject.
Alternatively, this consumer contract should be recog-
nized for what it is -- an adhesi~.n
contract. There is no
real choice or bargaining on the terms of the contract. It
is offered to the consumer on a take-it-or-leave-it basis and
he must accede to the terms required by the finance company.
The FTC regulation is an attempt to protect the power-
less consumer. Montana's version of the UCC provides a mea.ns
for the Court to assist those purchasing goods for personal,
family or household use:
 "Unconscionable contract or clause. ( 1 )
If the court as a matter o f l a w finds the
contract or any clause of the contract to
have been unconscionable at the time it
was made the court may refuse to enforce
the contract, or it may enforce the
remainder of the contract without the
unconscionable clause, or it may so limit
the application of any unconsciona.ble
clause as to avoid any unconscionable
result.
"(2) When it is claimed or appears to the
court that the contract or any clause
thereof may be unconscionable the parties
shall. be afforded a reasonable opportu-
nity to present evidence as to its com-
mercial setting, purpose and effect to
aid the court in making the
determination."
Contrary to the majority opinion, I would hold the
credit company liable to the consumer under the contract,
both by its express terms or alternatively under
non-enforceability of unconsci.onable terms if otherwise
interpreted.

%Le_&.Wkd.
Chief Justice
 M . Justice Frank B. Morrison, Jr. respectfully dissents
z
as follows:
The majority opinion recognizes the "we11 established
rule" that a party to a contract cannot relieve himself of
obligations imposed by the contract by assigning the contract
to a third person. However, the majority then goes on to
determine whether, under the Uniform Commercial Code, the
assignment of the contract to the credit company imposed full
contract liability on the credit company as assignee. While
it may appear that, pursuant to section 30-9-318, MCA, the
assignee assumed full liability by operation of law, the
issue is not before this Court.
At the trial court level Ford Motor Credit Company moved
for summary judgment based upon its assignment of the
contract to H.O. Bell. This issue was briefed. The trial
court granted summary judgment based upon that re-assignment.
Cuchine appealed. The only issue on appeal was whether the
assignment by Ford Motor Credit Company to H.O. Bell
effectively insulated Ford Motor Credit Company from
liability. In respondent's brief mention is made of an
interpretation of section 30-9-318, MCA, which would protect
Ford Motor Credit Company from liability. Since this issue
was not presented below it was not addressed by the
appellant's brief. It was first raised on appeal in the
respondent's brief. The issue is not properly before this
Court and the majority opinion, in turning the case on this
issue, has prevented appellant Timothy Cuchine from having
his day in court.
I would hold that the re-assignment from Ford Motor
Credit Company to H.O. Bell, Inc., did not relieve Ford Motor
Credit Company from its liability. I would therefore reverse
summary judgment in favor of Ford Motor Credit Company and
remand for trial.