Hughes v. Ford Motor Credit Company

• Decision Date: 08 June 1973
• Docket Number: No. LR-72-C-258,LR-73-C-17.,LR-72-C-258
• Citation: 360 F. Supp. 15
• Parties: Leo J. HUGHES, Plaintiff, v. FORD MOTOR CREDIT COMPANY and Aclin Ford Co., Inc., Defendants. E. H. HOGAN, Plaintiff, v. CONWAY TRACTOR AND IMPLEMENT COMPANY and Allis-Chalmers Credit Corporation, Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

360 F. Supp. 15

Leo J. HUGHES, Plaintiff, v. FORD MOTOR CREDIT COMPANY and Aclin Ford Co., Inc., Defendants.

E. H. HOGAN, Plaintiff, v. CONWAY TRACTOR AND IMPLEMENT COMPANY and Allis-Chalmers Credit Corporation, Defendants.

Nos. LR-72-C-258, LR-73-C-17.

United States District Court, E. D. Arkansas, W. D.

June 8, 1973.

Donald J. West, of Pope, Pratt, Shamburger, Buffalo & Ross, Little Rock, Ark., for plaintiff Hughes.

Griffin Smith, Little Rock, Ark., for defendants Ford Motor and Aclin Ford.

Ed Bethune, Searcy, Ark., for plaintiff E. H. Hogan.

Don F. Hamilton, of House, Holmes & Jewell, Little Rock, Ark., for defendants Conway Tractor and Allis-Chalmers.

MEMORANDUM OPINION

HENLEY, Chief Judge.

These two cases present a common question of federal pendent jurisdiction in litigation arising under the Federal Truth in Lending Act. Act of May 29, 1968, P.L. 90-321, 82 Stat. 146, 15 U.S. C.A. § 1601 et seq. Particularly involved here are the disclosure requirements appearing in Chapter 2 of the Act, 15 U.S.C.A., §§ 1631-1641, as implemented by Regulation Z promulgated by the Federal Reserve Board. 12 C.F. R. Part 226.

Primary jurisdiction of both cases is not questioned and is properly invoked under the provisions of section 130 of the Act. As to the pendent claims to be mentioned, it should be said at the outset that in neither case does there exist complete diversity of citizenship between the parties and neither case involves an amount in controversy in excess of $10,000, exclusive of interest and costs.

Case No. 258, in which Leo J. Hughes is plaintiff and Ford Motor Credit Company and Aclin Ford Co., Inc. of Jacksonville, Arkansas, are the defendants, is before the Court on the motion of both defendants to dismiss the complaint as amended for failure to state a claim upon which relief can be granted. That motion will be treated as one for summary judgment.

Case No. 17, in which E. H. Hogan is the plaintiff and Conway Tractor and Implement Company and Allis-Chalmers Credit Corporation are the defendants, is before the Court on the motion of Allis-Chalmers to dismiss Count II of the complaint. No appearance has been entered or pleading filed by Conway Tractor and Implement Co., and the answer of Allis-Chalmers to Count I of the complaint suggests that its co-defendant is not a suable entity. Counsel for plaintiff has not responded to the motion to dismiss Count II and has not sought leave to amend either count as far as parties defendant are concerned.

Case No. 258 arises out of the fact that in November 1971 plaintiff purchased on credit from Aclin Ford Co. a 1972 Galaxie. The purchase was financed by Ford Motor Credit Co. The total purchase price of the car was $4,000; Hughes traded in an old car and received a credit of $450. He took out insurance, the premium for which was $151. He was required to assume liability for an official fee of some sort which amounted to $1.25, so that the unpaid balance on the overall purchase price of the car was $3,702.25. Hughes financed this balance over a period of 36 months and incurred a finance charge of $597.59 based upon a true annual rate of interest of 10 percent which is the maximum permitted by Arkansas law. The pendent claim in that case is that due to an event or events that took place some two months after the sale plaintiff's contract became tainted with usury and is void under Arkansas law. That claim was not set forth in the original complaint and was brought into the case by amendment after the defendants had answered the original complaint and had attached to their answer as exhibits copies of contract documents disclosing the details of the original transaction.

Case No. 17 arises out of the fact that in December 1972 the plaintiff, E. H. Hogan, purchased on credit from Conway Tractor and Implement Co. of Faulkner County, Arkansas, a used rice combine. The transaction was financed by Allis-Chalmers Credit Corporation. Judging from Exhibit 1 to the complaint, the total price of the combine was $4,500. Mr. Hogan paid $2,000 down and financed the balance which was to be retired by two unequal payments, one falling due on December 1, 1973, and the other falling due on December 1, 1974. His finance charge was $316.50 and was said to have been calculated on the basis of interest at the rate of 10 percent per annum.

Count I of the complaint alleges that the seller violated the provisions of the Act by including "incorrect and unclear" figures on the credit documents prepared in connection with the sale and by allegedly failing to furnish plaintiff with a disclosure statement at the time of the allegedly imperfect disclosure and before the credit was extended as required by the Act and the Regulation.

The pendent claim in the case appears in Count II wherein it is alleged that plaintiff was induced to purchase the combine by means of false and fraudulent representations made by an agent of the seller and, further, that the finance charge made in connection with the transaction was usurious. In Count II plaintiff seeks rescission of the contract or, alternatively, that the entire purchase money security interest be declared wholly void for usury.

I.

Section 121(a) of the Act provides that every creditor shall disclose clearly and conspicuously, in accordance with the regulations of the Federal Reserve Board, to every person to whom consumer credit is extended and upon whom a finance charge is or may be imposed the information required by Chapter 2 of the Act.

Section 128(a), which is the section applicable to transactions of the type with which the Court is concerned, sets out in detail the items of information which must be disclosed. And section 128(b) provides that in general the disclosures must be made before the credit is extended "and may be made by disclosing the information in the contract or other evidence of indebtedness to be signed by the purchaser."

Section 130(a) provides, with certain exceptions, that any creditor who fails to make the required disclosures shall be liable to the debtor in an amount equal to twice the finance charge exacted, but not less than $100 nor more than $1,000, plus a reasonable attorney's fee.¹

Section 130(b) permits a creditor in certain circumstances to avoid liability by making timely corrections of erroneous disclosures.

Section 130(c) provides that a creditor may not be held liable under section 130(a) if he shows by a preponderance of the evidence that his violation was unintentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.

And section 130(e) provides that any action under the section "may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation."

II.

In view of the provisions of section 130(e) there is no doubt that this Court has jurisdiction of the statutory claims put forward by the respective plaintiffs. However, in view of the absence of complete diversity and the requisite amounts in controversy in the respective cases, it is equally clear that this Court has no independent jurisdiction with respect to the claims of usury and fraud.

Where, as here, a plaintiff joins with a claim properly cognizable in a federal court a claim with respect to which such a court does not have independent jurisdiction, it is said that the federal court has pendent jurisdiction of the second claim if: (1) it arises out of the same nucleus of operative facts as does the first claim; and (2) the claims are of such nature that a plaintiff ordinarily would be expected to try them both in the same proceeding. United Mine Workers v. Gibbs, 1966, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218; Wright, Law of Federal Courts, 2d Ed., § 19, p. 64. However, the question of whether existing pendent jurisdiction should be exercised in a given case is one that addresses itself to the discretion of the Court.

The factors to be taken into account by the Court in determining whether to exercise pendent jurisdiction are set out in some detail in Gibbs, supra, 383 U.S. at 726-727, 86 S.Ct. 1130. Those factors include: considerations of judicial economy, convenience, and...