Cabrera v. Courtesy Auto, Inc.

• Citation: 192 F.Supp.2d 1012
• Decision Date: 22 March 2002
• Docket Number: No. 4:01CV82.,4:01CV82.
• Parties: Jessica CABRERA, Plaintiff, v. COURTESY AUTO, INC., a/k/a Courtesy Auto Sales, Inc.; Courtesy Motors Acceptance Corp., a/k/a CMAC, Inc.; and Hollywood Auto Sales, Inc., Defendants.
• Court: U.S. District Court — District of Nebraska

192 F.Supp.2d 1012

Jessica CABRERA, Plaintiff, v. COURTESY AUTO, INC., a/k/a Courtesy Auto Sales, Inc.; Courtesy Motors Acceptance Corp., a/k/a CMAC, Inc.; and Hollywood Auto Sales, Inc., Defendants.

No. 4:01CV82.

United States District Court, D. Nebraska.

March 22, 2002.

Pamela A. Car, Omaha, NE, for plaintiff.

Brian J. Muench, James R. Welsh, Omaha, NE, for defendants.

MEMORANDUM AND ORDER

KOPF, District Judge.

This matter is before the court on the plaintiff's motion (filing 57) to strike or dismiss the counterclaim of the defendant Courtesy Motors Acceptance Corporation.¹ The motion will be denied.

Based upon my review of the pleadings, however, I will sua sponte dismiss without prejudice all state-law claims, counterclaims, and cross-claims, pursuant to 28 U.S.C. § 1367(c)(2), and will treat the matter as if cross-motions for summary judgment have been filed on the plaintiff's federal-law claim. The parties will be provided a reasonable opportunity to file such additional evidence as they deem relevant to this claim, and to submit concurrent briefs for the court's consideration. I will also remove the case from the trial docket for the week of May 21, 2002.

I. BACKGROUND

The plaintiff, Jessica Cabrera ("Cabrera"), allegedly is a resident of Omaha, Nebraska, and the defendants, Courtesy Auto, Inc. ("Courtesy"), Courtesy Motors Acceptance Corporation ("CMAC"), and Hollywood Auto Sales, Inc. ("Hollywood"), are all Nebraska corporations doing business in Omaha. It appears that Cabrera purchased a 1993 Buick from Hollywood in February 1999, the contract for which was subsequently assigned by Hollywood to CMAC, and that she also purchased a 1991 Pontiac from Courtesy in August 2000, which was financed by CMAC. The relationship between Courtesy and CMAC is not specified in the pleadings.

Cabrera alleges that she attempted to revoke acceptance of the Pontiac because of immediate mechanical problems, but that Courtesy refused; that when she took the Pontiac to Courtesy for repairs in September 2000, she was forced to refinance the loan with CMAC to include the cost of repairs; and that "shortly thereafter," when she attempted to make a payment on the loan, Courtesy repossessed the Pontiac. Cabrera further alleges that Courtesy seized the Pontiac, in part, because of a claimed default in payment of one or more installments on the Buick contract. Cabrera disputes that there was a valid security interest in the Pontiac under the Buick contract, and also claims that she returned the Buick to Courtesy or CMAC in satisfaction of her payment obligation.

In her original complaint, which was filed on February 14, 2001 (filing 1), Cabrera asserted a claim against all of the defendants for violation of the federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq., with respect to the sale of both vehicles, and four state-law claims against all defendants for wrongful conversion of both vehicles, breach of the Pontiac contract, failure to comply with Article 9 of the Uniform Commercial Code ("UCC") in repossessing the Pontiac, and fraud as to both transactions. Hollywood answered the complaint (filing 6), while Courtesy and CMAC each filed a Rule 12(e) motion (filings 7, 8). Pursuant to a stipulation of the parties (filing 10), Cabrera was granted leave (filing 11) to file an amended complaint which would identify the role played by each defendant as to each claim.

In the amended complaint, filed on May 10, 2001 (filing 13), Cabrera limited the TILA claim to CMAC and Hollywood, limited the breach-of-contract and UCC claims to CMAC and Courtesy, and, while making claim against all defendants for conversion and fraud, apparently limited the allegations of wrongdoing on such claims to CMAC and Courtesy. Also, as amended, the conversion claim pertained only to the repossession of the Pontiac. The defendants filed separate answers to the amended complaint (filings 16, 29, 30).

On August 2, 2001, pursuant to Fed. R.Civ.P. 15(a), Cabrera filed a motion (filing 43) for leave to file a second amended complaint, based upon newly-discovered evidence, to add a claim against CMAC and Hollywood for wrongful conversion of the down payment and any other payments that were made on the Buick purchase. The motion was granted (filing 45), and the second amended complaint was subsequently filed and served on the defendants, on August 13, 2001 (filing 47). In the additional claim for conversion, Cabrera alleged that she did not sign the Buick purchase agreement. The allegations in support of her other claims appear to be unchanged from the first amended complaint.

On October 18, 2001, by means of a joint pleading (filing 54), Courtesy filed an amended answer which responded only to the allegations of the first amended complaint, while CMAC filed a counterclaim against Cabrera and a cross-claim against Hollywood. In the counterclaim, CMAC alleges that the Pontiac was sold on September 14, 2001, and it claims that Cabrera owes a deficiency loan balance of $5,419.37 plus interest from that date. In the cross-claim, CMAC alleges that it entered into an agreement with Hollywood on August 17, 1998, to purchase various receivables from Hollywood, including an outstanding account for Cabrera, and that Hollywood subsequently breached the agreement by selling two additional vehicles to Cabrera (including the Buick, presumably). CMAC further alleges that Hollywood tortiously interfered with the contractual relationship between Cabrera and CMAC. Hollywood filed an answer to Cabrera's second amended complaint on January 8, 2002 (filing 66), but has not responded to the cross-claim.

II. DISCUSSION

Cabrera's pending motion (filing 57), which was filed on November 13, 2001, seeks to strike CMAC's counterclaim for failure to obtain permission for its filing under Fed.R.Civ.P. 13(e), or, alternatively, to dismiss the counterclaim for lack of jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1). I will first consider the motion to strike, which I construe as being filed pursuant to Fed.R.Civ.P. 12(f), and then consider the alternative of dismissal. This discussion will lead to the conclusion that regardless of whether the counterclaim is subject to being stricken for procedural reasons or to being dismissed on jurisdictional grounds, only the plaintiff's federal-law claim should be determined in federal court, and that such claim appears ripe for determination by means of summary judgment.

A. Plaintiff's Motion to Strike Counterclaim

Cabrera essentially argues that CMAC's counterclaim should be stricken as an impermissible supplemental pleading because it pertains to events that transpired after the last event that was alleged in her original complaint (i.e., the seizure of the Pontiac in or around September 2000). This argument, while consistent with Cabrera's jurisdictional argument that the counterclaim does not arise out of the same transaction or occurrence as her TILA claim, misapprehends the operation of Rule 13(e).²

Without regard to the allegations of Cabrera's complaint, Rule 13(e) would apply only if CMAC's counterclaim matured or was acquired by CMAC after its answer was filed on June 7, 2001 (filing 30).³ Maturity of a claim is synonymous with accrual; that is, the point from which a statute of limitations would run. Keller Medical Specialties Products v. Armstrong Medical Industries, Inc., No. 91 C 4853, 1992 WL 390733 at *3 (N.D.Ill. Dec.15, 1992).

The parties have not briefed this issue, but Cabrera seems to contend that the claim did not come into existence—in other words, the deficiency did not arise—until the Pontiac was sold on September 14, 2001. If this contention is correct, then Rule 13(e) does indeed apply. If, however the claim accrued at an earlier date, such as when Cabrera first defaulted on a loan payment, or when CMAC exercised an option to accelerate the entire indebtedness, and if such date was on or before June 7, 2001,⁴ then Rule 13(e) would have no application and the issue instead would become whether CMAC should be permitted to set up an omitted counterclaim under Fed. R.Civ.P. 13(f).⁵

The Nebraska Supreme Court also does not appear to have addressed this particular statute of limitations issue, but the majority rule, at least where a retail installment contract is involved, is that "[t]he statute of limitations begins to run on deficiency liability from the date when the debt of the buyer became due and not from the date of the sale of the collateral, which merely determined the amount of the balance not yet paid." 68A Am.Jur.2d, Secured Transactions, § 700 (1993). See, also, 9 Pike & Fisher, Inc., Uniform Commercial Code Case Digest, ¶ 9504.40 (1997) (collecting cases). Assuming that this rule would also apply where, as here, the security interest is given in connection with a promissory note rather than a retail installment contract,⁶ and further assuming that the outcome of these cases would not be affected by the 1999 revision to UCC Article 9 (which became operative in Nebraska on July 1, 2001, see Neb.Rev.Stat. Ann. U.C.C. § 9-701 (Lexis 2000)),⁷ it seems likely that the Nebraska Supreme Court would hold that CMAC's claim for a deficiency judgment matured when it opted to accelerate the debt, whenever that may have been.

Without knowing for certain whether CMAC's counterclaim is an amended pleading under Rule 13(f) or a supplemental pleading under Rule 13(e), I could give CMAC the benefit of the doubt and accept its argument that the pleading is a compulsory counterclaim under Fed.R.Civ.P. 13(a),⁸ rather than a permissive counterclaim under Fed.R.Civ.P. 13(b).⁹ Although CMAC in its brief has only discussed whether its claim for a deficiency judgment "arises out of the same transaction or occurrence" as the plaintiff's TILA claim, by inference it is also asserting that it had the claim "at the time of serving the [answer]." In other words, CMAC appears to be taking the position that it should...