Ford Motor Credit Co. v. Morgan

Brief Fact Summary.

Rose and William Morgan (Morgans) purchased an automobile from a dealer and financed it from Ford Motor Credit Company (Ford Credit).  The Morgans defaulted on their installment loan and Ford Credit sued to recover the balance.  The Morgans counterclaimed on the theory that their claims against the Seller were applicable against Ford Credit.

Synopsis of Rule of Law.

.  The general common law rule is that an assignee of contract rights stands in the shoes of the assignor and has no greater rights against the debtor than the assignor had.  This only means that the debtor can raise the same defenses against the assignee as against the assignor; not that the assignee will be liable for the assignor’s wrongdoing. 

Facts.

The Morgans had financial difficulties, and fell behind in their payments.  They also had major mechanical difficulties with the car.  They eventually put the car in a garage, removed the plates, and discontinued insurance. 

Ford Credit’s form contained a notice that the holder was subject to “all claims and defenses which the debtor could assert against the seller” of the car. 

Ford sought recovery of $2,628.87 owed under the installment contract, plus attorneys fees.  The Morgans counterclaimed that Ford Credit stood fully in the shoes of the dealer as an assignee of the contract, and sought damages under three counts.  The judge entered judgment for the Morgans on Ford Credit’s complaint, and judgment for Ford Credit on each of the counterclaims.

Issue.

Were the Morgans entitled to recover against Ford Credit based upon their complaints against the dealership?

Held.

No.  Judgment affirmed.

·         The Morgans were not entitled to affirmative recover against Ford Credit, and were entitled to no more than a judgment in their favor on Ford Credit’s original claim as ordered by the judge.

Dissent.

None

Concurrence.

None

Discussion.

·         The language in the notice was that which was mandated by the Federal Trade Commission (FTC).  It allows consumers to assert claims against the assignee creditor only where the seller’s breach was so substantial that a court is persuaded that rescission and restitution are justified.  This remedy only applies to situations where the buyer commenced payments and received little or nothing of value from the seller.  This did not apply to the Morgans, who had put 11,500 miles on the car.  They could not assert their claim of fraud on the part of the dealership to Ford Credit.

·         Uniform Commercial Code §9-318 incorporates the common law rule that an assignee of contract rights stands in the shoes of the assignor and has no greater rights against the debtor than the assignor had.  This has never been interpreted to mean that the assignee will be liable for all of the assignor’s wrongs.  Ford Credit could not be held liable for the dealer’s wrongdoing.