First of America Bank v. Thompson

• Decision Date: 16 July 1996
• Docket Number: Docket No. 172576
• Citation: 217 Mich.App. 581,552 N.W.2d 516
• Parties: , 30 UCC Rep.Serv.2d 806 FIRST OF AMERICA BANK, Plaintiff-Appellee, v. Donald THOMPSON, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 516

552 N.W.2d 516

217 Mich.App. 581, 30 UCC Rep.Serv.2d 806

FIRST OF AMERICA BANK, Plaintiff-Appellee, v. Donald THOMPSON, Defendant-Appellant.

Docket No. 172576.

Court of Appeals of Michigan.

Submitted Dec. 5, 1995, at Detroit.

Decided July 16, 1996, at 9:00.

Released for Publication Sept. 4, 1996.

Peter J. Rogissart, Livonia, for plaintiff.

UAW-GM Legal Services Plan by Jennifer S. Bidwell, Pontiac, for defendant.

Before WHITE, P.J., and HOLBROOK, and P.D. SCHAEFER, ^* JJ.

WHITE, Presiding Judge.

The instant deficiency action was brought by plaintiff, the assignee bank under a motor vehicle retail installment sales contract, against defendant, a co-buyer for the purchaser, following repossession and sale of the vehicle. The question is whether the applicable limitation period is four years as set forth in § 2-725 of the Uniform Commercial Code (UCC), M.C.L. § 440.2725(1); M.S.A. § 19.2725(1), or six years as generally applicable to contract claims, M.C.L. § 600.5807(8); M.S.A. § 27A.5807(8). We conclude that a deficiency action, although arising from both a sale of goods and a secured transaction, relates primarily to the sales aspect of the transaction and is thus subject to Article 2's four-year statute of limitations.

I

The facts are undisputed. On October 20, 1987, defendant signed a Motor Vehicle Retail Installment Sales Contract as a co-buyer for Jacqueline I. Jones, who is not a party to this action. The contract stated in several places that plaintiff was the assignee.

Jones failed to make payments after August 1988, as required under the contract, and on November 18, 1988, plaintiff repossessed the vehicle. On November 28, 1988, plaintiff declared the loan to be in default and charged off the amount claimed due. On March 1, 1993, plaintiff filed the instant suit in the district court to collect the deficiency remaining after the sale of the vehicle. It is undisputed that plaintiff did not bring this action until more than four years after the breach of contract.

Defendant moved for summary disposition under MCR 2.116(C)(7) on the basis that plaintiff's deficiency claim was barred by the UCC Article 2 four-year statute of limitations. The district court denied the motion, ruling the general six-year statute of limitations for contract claims applied. The circuit court, after hearing argument, entered an order granting defendant leave to appeal and simultaneously affirming the district court's ruling. We granted leave for delayed appeal, and now reverse.

II

Our review of the circuit court's affirmance of the district court's denial of defendant's motion for summary disposition, and of this question of law involving statutory interpretation, is de novo. Kellogg Co. v. Dep't of Treasury, 204 Mich.App. 489, 492, 516 N.W.2d 108 (1994); Saraski v. Dexter Davison Kosher Meat & Poultry, 206 Mich.App. 347, 351, 520 N.W.2d 383 (1994).

Defendant argues that plaintiff's suit to recover a repossession deficiency more than four years after the buyer's default is barred under UCC Article 2-Sales, M.C.L. § 440.2101 et seq.; M.S.A. § 19.2101 et seq. Plaintiff argues that the UCC does not apply because plaintiff was not a "seller" and defendant was not a "buyer" as defined in the UCC, § 2-103(1)(a) and (d), and there was no passing of title from plaintiff to defendant under § 2-106. Plaintiff argues that the automobile dealership was the seller, defendant was a guarantor, not a buyer, and plaintiff was "strictly a secured party in the transaction or a financing agency as defined at M.C.L. § 440.1201(37) [M.S.A. § 19.1201(37) ]." ¹ We reject plaintiff's arguments.

A

The UCC defines "buyer" as "a person who buys or contracts to buy goods," M.C.L. § 440.2103(1)(a); M.S.A. § 19.2103(1)(a). The contract in this case defines "buyer" as each person who signs the Buyer's Agreement, a designated section of the contract. Defendant signed the Buyer's Agreement as a buyer. The contract makes no distinction between Jones and defendant as buyers. Plaintiff argues that, notwithstanding that the contract declares defendant to be a buyer, because defendant signed a separate document, entitled "Notice to Cosigner," he is not a buyer, but a guarantor of the debt. This notice states:

You are being asked to guarantee this debt. Think carefully before you do. If the buyer/borrower doesn't pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.

You may have to pay the full amount of the debt if the buyer/borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.

The creditor can collect this debt from you without first trying to collect from the buyer/borrower. The creditor can use the same collection methods against you that can be used against the buyer/borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.

This notice is not the contract that makes you liable for the debt.

This notice states quite clearly that it is not the contract that makes the signer liable for the debt. The notice is simply a warning and has no legal effect. The operative document is the retail sales agreement, which clearly provides that defendant is a buyer.

B

The UCC defines "seller" as a "person who sells or contracts to sell goods." M.C.L. § 440.2103(1)(d); M.S.A. § 19.2103(1)(d). Defendant asserts that plaintiff is the seller's assignee. ² Plaintiff asserts that while the Retail Installment Sales Act, M.C.L. § 445.851 et seq.; M.S.A. § 19.416(101) et seq., may provide that a defense may be raised against an assignee, the act is not applicable in this case because there was no assignment of the contract. Plaintiff asserts it is not an assignee, but a secured party and financing agent.

The contract defines "we," "us," "our," and the "dealer" as "the dealer whose name appears on the other side [page one] or anyone to whom the dealer's interest in this contract is assigned." The contract is on a standard form imprinted with plaintiff's name, address, and logo. At the top of page one, the contract states, "The dealer will assign this agreement to the bank." On the same page, the dealer's signature appears under "Dealer's Acceptance," which reads: "The dealer accepts this contract and assigns it to the bank. The dealer agrees to all of the terms of the assignment on the other side." Page one of the contract further states under "Notice of Assignment": "The dealer has assigned this contract to the bank. You must make all future payments to the bank. The dealer is making the disclosures in this contract."

Despite these references to assignment and the signature of the dealer on page one of the contract, plaintiff argues there was no assignment because a separate section of the contract at the bottom of page two, entitled "The following assignment is not part of the buyer's agreement," was not signed by the dealer. This section states the terms of the assignment and additionally provides: "The dealer shall also be liable to the bank as indicated in the following paragraphs if the dealer has signed below." Thus, by the contract's terms, the dealer's failure to sign this section has no effect on the buyer's agreement and means simply that the additional provisions expressed in that section regarding indemnification of the bank by the dealer do not apply. Nothing in the contract indicates that failure to sign that particular section negates the assignment. Finally, we note that plaintiff fails to explain how it has a right to relief if not by virtue of being an assignee under the contract. We conclude that plaintiff is an assignee under the contract.

An assignee stands in the shoes of the assignor and acquires the same rights as the assignor possessed. In re Forfeiture of $126,174, 191 Mich.App. 453, 456, 479 N.W.2d 8 (1991). Plaintiff thus stands in the shoes of the seller, and is not simply a financing agent. Further, the contract provides:

Any holder of this Consumer Credit Contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof.

We conclude that plaintiff is subject to the same defenses to this deficiency suit, including the statute of limitations, as the seller would have been. ³

C

The question remains whether the four-year statute of limitations of § 2-725 of the UCC applies. Plaintiff argues, and both the district and the circuit court agreed, that this action is governed by the general six-year statute of limitations governing contract claims. M.C.L. § 600.5807(8); M.S.A. § 27A.5807(8).

Section 2-725 of the UCC provides in part:

(1) An action for breach of any contract for sale must be commenced within 4 years after the cause of action has accrued.

The issue presented is discussed in anno: Application, to security aspects of sales contract, of UCC § 2-725 limiting time for bringing actions for breach of sales contract, 16 ALR 4th 1335, 1336:

The absence of a statute of limitations in Article 9 [Secured Transactions] of the Uniform Commercial Code which generally governs secured transactions has given rise to disputes as to whether the security aspects of sales contracts should be governed by § 2-725, which is the statute of limitations provided in Article 2 of the Code governing sales generally, or whether some other statute of limitations provided elsewhere under state law should be applied.

The annotation discusses a number of cases, four of which are also cited by defendant, for the proposition that, with respect to a deficiency action brought by a creditor following repossession and sale of the good purchased subject to a security agreement, the four-year statute of limitations applies because the suit relates primarily to the sales aspects, and not the security aspects, of the transaction.

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