Maberry v. Said

• Court: U.S. District Court — District of Kansas
• Writing for the Court: LUNGSTRUM
• Citation: Maberry v. Said, 911 F.Supp. 1393 (D. Kan. 1995)
• Decision Date: 29 December 1995
• Docket Number: No. 94-2416-JWL.,94-2416-JWL.
• Parties: Michael MABERRY, Plaintiff, v. Sameer SAID, S.A.S. Auto Sales, Inc., and Citizens Bank & Trust, Defendants.

911 F. Supp. 1393

Michael MABERRY, Plaintiff, v. Sameer SAID, S.A.S. Auto Sales, Inc., and Citizens Bank & Trust, Defendants.

No. 94-2416-JWL.

United States District Court, D. Kansas.

December 29, 1995.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Michael S. Martin, Bernard E. Brown, Jeffrey P. Johnson, Law Office of Bernard E. Brown, Westwood, KS, for plaintiff.

Michael S. Martin, Alan P. Blinzler, Overland Park, KS, for Sameer Said, S.A.S. Auto Sales, Inc.

Justin J. Johl, Kevin J. Karpin, Shook, Hardy & Bacon, Overland Park, KS, Michael D. Doering, Mark W. Untersee & Associates, P.C., Kansas City, MO, for Citizens Bank & Trust.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

Plaintiff Michael Maberry alleges that he was sold a truck without being told that the odometer had rolled over. He brings this action against defendants Sameer Said, S.A.S. Auto Sales, Inc. (SAS) and Citizens Bank & Trust (Citizens) citing a wide variety of legal theories. Presently before the court are Citizens's motion for summary judgment (Doc. # 58); Mr. Said's and SAS's joint motion for summary judgment (Doc. # 62); and Citizens's motion for summary judgment on Mr. Maberry's credit reporting claims (Doc. # 71). For the reasons set forth below, the court makes the following rulings: (1) Missouri law governs plaintiff's common law fraud claims; (2) material questions of fact preclude summary judgment on plaintiff's Federal Odometer Act, Kansas Consumer Protection Act and common law, credit reporting tort claims; (3) the Federal Trade Commission (FTC) holder rule authorizes the affirmative assertion of claims; (4) plaintiff's damages under the FTC holder rule are limited to the amount paid under the contract; (5) the Missouri Unlawful Merchandising Practices Act does not govern allegedly fraudulent conduct occurring in Kansas; (6) a material fact question exists regarding whether or not SAS is Mr. Said's alter ego; and (7) plaintiff failed to give SAS and Mr. Said an opportunity to cure any defects in the condition of the truck before plaintiff filed suit. As a result of these rulings, the court denies both of Citizens's motions and grants in part and denies in part Mr. Said's and SAS's joint motion for summary judgment.

I. Facts¹

This controversy centers around a 1984 Chevrolet pickup truck (truck) purchased by SAS from Metro Auto Auction (Metro) on September 15, 1992. SAS bought the truck by draft. When a vehicle is bought by draft, Metro's standard practice is to send a bill along with the title of the vehicle to the purchaser's bank, which in this case was Citizens. As standard practice, Metro includes with the bill and title any odometer statements referring to the purchased vehicle. The title and odometer statements that existed when SAS bought the truck indicated mileage in excess of 150,000 miles. When the draft arrives at Citizens, the bank holds it for SAS. Citizens notifies SAS and either Sameer Said or Calvin Said comes to the bank and inspects the title attached to the draft and decides whether to pay or, if there is a problem with the draft, whether to send it back to Metro without payment. Citizens is not involved with this decision and does not examine the title or documents at that time. The draft and associated documents remain at the bank until SAS pays the draft. After SAS pays Citizens, the bank pays Metro. Citizens received a draft relating to the truck from Metro on October 19, 1992. Citizens paid the draft on October 27, 1992.

The association between Citizens and SAS extends beyond the loan on Mr. Maberry's truck. During the early 1990s, SAS sold the majority of its notes to Citizens. Citizens made ten loans to SAS from 1988 to 1994. At one time, Citizens was SAS's only floor planner and Citizens financed SAS through May of 1995.

In early to middle October of 1992, Mr. Maberry began examining the truck for purchase. Mr. Maberry is an experienced buyer, having purchased nine cars or trucks over the past ten years and, in the past five years, having purchased three cars from SAS. Mr. Maberry thoroughly inspected the truck. He went to SAS to look at the truck at least four times and took at least two test drives. In addition, his brother-in-law, Larry Magness examined the truck several times.

During Mr. Maberry's examination of the truck, three people who worked at SAS made representations to him. Robert Mayfield, the primary salesperson, and Calvin Said told Mr. Maberry that the truck had low miles. Mr. Mayfield and Sameer Said told Mr. Maberry that they would put a Target engine in the truck. No employee of Citizens discussed with Mr. Maberry either the truck's mileage or mechanical condition.

As Mr. Maberry became interested in purchasing the truck, SAS began exploring financing options. At that time, Mr. Maberry was financing through Citizens two cars previously purchased from SAS. The decision was made to finance the truck through Citizens also.

Citizens often finances vehicles by purchasing the promissory note from the dealer. Commonly, when a dealer and purchaser talk about financing a vehicle, the dealer has the purchaser fill out a loan application. The dealer then submits the loan application to Citizens for review. Citizens determines what changes need to be made before the bank would be willing to purchase the note from the dealer. In making this determination, Citizens evaluates factors such as the following: the bank's relationship with the dealer; the debtor's job stability; the debtor's income; whether the bank has recourse against the dealer should the debtor fail to pay; the debtor's credit history; the collateral's year, make and mileage; the loan term; and the interest rate. In addition, the loan officer handling the application generally looks at the title of the vehicle, if it is available, to make sure it has been signed properly, has been notarized, and to make sure the dealer assignment has been placed on the title. After Citizens approves a loan application, the dealer sells the vehicle to the customer according to the pre-approved terms. The dealer then sells the promissory note to Citizens.

Using this procedure, Mr. Mayfield submitted Mr. Maberry's loan application to Citizens for approval. With the loan application, Mr. Mayfield submitted a used vehicle order, an odometer disclosure statement, the security agreement and an Application for Missouri Title and License. None of the documentation that Mr. Mayfield submitted to Citizens, including an odometer disclosure statement and title application, indicated that the truck had over 52,560 miles on it. Herb Marsh, a loan officer at Citizens, evaluated the loan. Mileage was not a deciding factor in approving this particular loan. Mr. Maberry had established an excellent credit record with Citizens by never being delinquent on his other loan payments and, furthermore, the loan contract gave Citizens recourse against SAS. Citizens approved the loan application of Mr. Maberry.

On October 23, 1992, Mr. Maberry purchased the truck. To finance the purchase, he signed a security agreement including a promissory note, which named SAS as the secured party. SAS then sold the agreement to Citizens. Under the terms of the agreement between Citizens and SAS, Citizens purchased the note with recourse; if Mr. Maberry failed to make his payments, SAS was required to pay the outstanding balance of the loan.

To issue a new title on a Missouri vehicle, an Application for Missouri Title and License must be filed with the Missouri Department of Revenue, Motor Vehicle Bureau. The application has a place for a lienholder to record its lien. Typically, the dealers with which Citizens dealt filled out the application. Citizens would then submit the application to the state along with the title and any odometer statements pertaining to the vehicle.

The title paperwork was submitted to the state after Mr. Maberry purchased the truck. The Motor Vehicle Bureau originally rejected the paperwork for an unknown reason. After the necessary corrections were made, the Missouri Motor Vehicle Bureau issued a title in Mr. Maberry's name. The Missouri title states that the truck had 52,560 miles on it.

At the time Mr. Maberry purchased the truck, he believed that the five digit odometer indicated the actual mileage. Plaintiff later discovered that, in reality, the truck had 152,560 miles on it at the time of sale. After making that discovery, Mr. Maberry stopped making payments on the truck. Up to that point, he had made six payments totally $779.88.

After Mr. Maberry stopped making payments, Citizens exercised its recourse right. SAS allegedly paid Citizens the outstanding balance on the note sometime in 1993. Allegedly in November 1994, SAS questioned the authority of Mr. Mayfield to assign the note with recourse. Citizens refunded the recourse payments and charged off the note. As standard procedure, when Citizens charges off a note, it files a credit report with the credit bureau and Telecheck Services, Inc. (Telecheck). Citizens followed its standard procedures when charging off Mr. Maberry's note.

In July of 1995, Mr. Maberry applied for a loan from MBNA America (MBNA). He intended to use the proceeds of the loan to pay for medical expenses incurred by his wife, household goods and legal expenses. MBNA turned down the application. Mr. Maberry then obtained a credit report and discovered that Citizens had issued a negative credit report to the credit bureau and Telecheck based on Citizens's charge off of the note.

Mr. Maberry's medical debts are structured to be made in installments. The installment payments have not been paid but the care providers have not taken steps to force collection. Mr. Maberry is not certain whether or not he is paying interest on the medical debts but to the best of his knowledge he is not.

No other credit applications by Mr. Maberry have been denied but at least one check has been rejected because of...