Agristor Credit Corp. v. Lewellen

• Decision Date: 15 June 1979
• Docket Number: No. WC 77-52-K.,WC 77-52-K.
• Citation: 472 F. Supp. 46
• Parties: AGRISTOR CREDIT CORPORATION, Plaintiff, v. Dee LEWELLEN and Delores Lewellen, Defendants.
• Court: U.S. District Court — Northern District of Mississippi

472 F. Supp. 46

AGRISTOR CREDIT CORPORATION, Plaintiff, v. Dee LEWELLEN and Delores Lewellen, Defendants.

No. WC 77-52-K.

United States District Court, N. D. Mississippi, W. D.

June 15, 1979.

COPYRIGHT MATERIAL OMITTED

Richard T. Bennett, Craig M. Geno, McDavid, Edmonson, Bennett, Lotterhos & Sulser, Jackson, Miss., for plaintiff.

C. D. Thomas, Pontotoc, Miss., for defendants.

MEMORANDUM OPINION

KEADY, Chief Judge.

AgriStor Credit Corporation (AgriStor), a Delaware corporation, has invoked the court's diversity jurisdiction under 28 U.S.C. § 1332 against defendants Dee Lewellen and Delores Lewellen, citizens of Mississippi, to enforce its claims that defendants breached two retail installment contracts assigned to AgriStor. Plaintiff has moved the court pursuant to Rule 56, F.R. Civ.P., for summary judgment in its favor, asserting that there is no genuine issue as to any material fact, and AgriStor is therefore entitled to judgment as a matter of law. It is undisputed that Mississippi law governs disposition of the motion.

The following relevant facts have been stipulated. On July 15, 1975, defendants jointly and severally executed a retail installment contract with Mid-South Harvestore, Inc. (Mid-South), under which defendants agreed to purchase a certain animal feeding system and equipment. On the same day, Mid-South assigned for value all of its right, title and interest in the above contract to the plaintiff AgriStor. On August 4, 1975, the defendants jointly and severally executed a second retail installment contract with Mid-South under which they agreed to purchase an additional animal feeding system and equipment. Again, Mid-South assigned all its right, title and interest in this second contract to AgriStor on the same day of its execution by defendants. Defendants have made no payments to AgriStor on either of the above contracts since January 28, 1977, thus defaulting on both obligations.

After its seizure and sale of the equipment at public auction, plaintiff now seeks deficiency judgment of $37,766.65 plus finance charges at the rate of $12.0068 per day from April 12, 1979, and attorney fees, legal expenses and court costs. Defendants in turn assert that plaintiff purchased the two contracts subject to all warranties and representations made to defendants by Mid-South. In addition, defendants have counterclaimed against plaintiff on the ground that the annual percentage finance charges on the two contracts are usurious under Miss.Code Ann. § 75-17-1 (Supp.1978), and defendants are therefore entitled to judgment in the amount paid by them to plaintiff under the forfeiture provisions of § 75-17-1.

As noted above, AgriStor is the assignee of both contracts here involved. As such, AgriStor argues that it is a holder in due course against whom defendants' claims or defenses may not be raised.¹ The parties have stipulated that AgriStor acquired the contracts from Mid-South "for value," and defendants have not alleged that the assignment of the contracts was not undertaken in good faith by either Mid-South or AgriStor. Although defendants have alleged that AgriStor purchased the contracts "subject to all warranties and conditions" made to them by Mid-South, the record is barren of evidence of any such obligation on the part of AgriStor. Indeed, the installment contracts themselves, which defendants admittedly signed without reservation, clearly specify in Clause 14 of each contract that Mid-South intended to assign the contracts to AgriStor, that defendants consented to the assignment, and that Mid-South was to remain solely responsible for any warranties made by it at the time of sale of the equipment:

Seller intends to assign this contract to the assignee named on the face hereof AgriStor. Buyer hereby consents to such assignment and to the extent permitted under the Governing Law agrees not to assert against said assignee any claim or defense which he may have against Seller or Manufacturer; . . . Notwithstanding any assignment of this contract by Seller, Seller or Manufacturer shall continue to be responsible for the performance of the collateral in accordance with any and all guarantees and warranties made by them; and Buyer will make or settle any and all claims in regard thereto directly and exclusively against or with Seller or Manufacturer.

Such an agreement by the Lewellens not to assert against an assignee any claim or defense which they might have against Mid-South as seller is clearly sanctioned in Mississippi. Miss.Code Ann. § 75-9-206(1) (1972).² The Lewellens contend, however, that § 75-9-206(2)³ should apply instead, urging that Mid-South retained a security interest in the goods sold, making § 75-9-206(1) inapplicable. Both contracts clearly state that the buyers, the defendants, grant to the seller, Mid-South, a security interest in the equipment sold. Equally as clear, however, are the assignment provisions on both contracts wherein Mid-South assigns to AgriStor "all of its right, title and interest in and to the above contract and in and to the property sold thereunder." (emphasis added). No other words or phraseology could make clearer that Mid-South intended to and did assign any security interest in the property granted to it by the Lewellens and, therefore, cannot be said to have "retained a purchase money security interest in the goods" within the meaning of § 75-9-206(2).

Defendants also contend that AgriStor cannot be deemed a holder in due course as defined by § 75-3-302, supra, since at the time of assignment the goods had been neither delivered nor installed, making impossible the assertion by defendants of any claim or defense, i. e., breach of warranty. Section 75-3-302 contains no requirements as to the time which must elapse before an assignee may be considered a holder in due course. It merely requires that the assignment be undertaken for value, in good faith and without notice of claims or defenses by the buyer. Accordingly, this argument by defendants must also fail. The court is convinced that the terms of the contracts clearly, unambiguously and within the letter of Mississippi substantive law, confer upon AgriStor the status of a holder in due course. Defendants' remedies for breach of any express or implied warranties lie only against the seller, Mid-South, who is not a party to this suit. See Salitan v. Ford, 231 Miss. 616, 97 So.2d 232 (1957).

As to defendants' counterclaim for $13,274.73, the amount paid by defendants to AgriStor, on the ground that § 75-17-1 requires forfeiture of all principal and interest paid on a usurious contract, it has long been the law in Mississippi that the defense or claim of usury may not be asserted against one who is found to be a holder in due course. Guaranty Inv. & Loan Co. v. Stevens, 161 Miss. 473, 137 So. 335 (1931); Allen v. Grenada Bank, 155 Miss. 91, 124 So. 69 (1929). We agree with plaintiff that Mississippi's adoption of the Uniform Commercial Code did not alter this rule of law and that the official comment to § 3-305 of the U.C.C. (Miss.Code Ann. § 75-3-305 (1972)) makes clear that usury may not be asserted against a holder unless the state usury statute provides that the existence of usury voids and nullifies the entire obligation. Section 75-17-1 provides only for forfeiture by the lender of interest or interest and principal; the statute does not make the obligation entirely null and void, but merely voidable. See Chandlee v. Tharp, 161 Miss. 623, 137 So. 540, 542-43 (1931); Allen, supra at 71.

Even if usury could be asserted against AgriStor in this case, we hold that the time-price doctrine takes the transactions here challenged outside the usury statute. The doctrine, long recognized in Mississippi, see, e. g., Mullins v. Merchandise Sales Co., 192 So.2d 700, 704 (Miss. 1966); Bryant v. Securities Inv. Co., 233 Miss. 740, ...