Wood v. Holiday Inns, Inc.

• Decision Date: 17 January 1974
• Docket Number: Civ. A. No. 981-E.
• Citation: 369 F. Supp. 82
• Parties: Glen L. WOOD, Plaintiff, v. HOLIDAY INNS, INC., a Tennessee corporation, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

369 F. Supp. 82

Glen L. WOOD, Plaintiff, v. HOLIDAY INNS, INC., a Tennessee corporation, et al., Defendants.

Civ. A. No. 981-E.

United States District Court, M. D. Alabama, E. D.

January 17, 1974.

COPYRIGHT MATERIAL OMITTED

Joseph D. Phelps, Albert P. Brewer, Montgomery, Ala., Thomas J. Gardner, III, Tupelo, Miss., for plaintiff.

Robert D. Norman, William C. Wood, Jr., Birmingham, Ala., for Holiday Inns, Inc.

W. F. Horsley, Opelika, Ala., for Gulf Oil Corp.

Robert A. Huffaker, Montgomery, Ala., for Jessie Goynes and Interstate Inns, Inc.

ORDER

VARNER, District Judge.

STATEMENT OF FACTS

This cause arose from circumstances surrounding denial of credit to Glen L. Wood, a guest of a franchised Holiday Inn in Phenix City, Alabama. The Defendant Goynes was the night clerk on duty at the local Holiday Inn and was a resident of the State of Alabama. The local Holiday Inn was not owned or operated by Defendant, Holiday Inns, Inc., but was franchised to and owned and operated by the Defendant, Interstate Inns, Inc., a South Carolina corporation. Interstate Inns held a franchise agreement from the Defendant, Holiday Inns, Inc., a Tennessee corporation, to operate the local Holiday Inn in Phenix City and to use the name, Holiday Inn, and policies of Holiday Inns, Inc., in such operation for a small percentage of the profits. The Gulf Oil Corporation, a Pennsylvania corporation, by virtue of a contract with Holiday Inns, Inc., was authorized to handle all credit transactions of all Holiday Inns, whether owned by Holiday Inns, Inc., or by some franchise, all credit being established with Gulf Oil, the bills being charged to and paid to Gulf Oil, and Gulf Oil paying the various inns the amounts due them in consideration of an assignment of said credit and a small percentage of the credited items. This Court has jurisdiction by virtue of diversity of citizenship and the requisite jurisdictional amount.

On the evening before the morning in question, Plaintiff checked into the Defendant Inn at Phenix City and submitted his Gulf credit card for the purpose of having it imprinted on a credit memorandum of the motel. After the imprint was taken, the card was returned to him, and he retired. While the evidence was in conflict as to the transactions between the Plaintiff and the Defendant Goynes on the following morning, there was evidence from which the jury might have found, and apparently they did find, the following: That, at 5:00 A.M. the following morning the Defendant Goynes called the Plaintiff's room, awakened the Plaintiff from his repose, and informed him that he would like to obtain the Plaintiff's credit card for the purpose of making an imprint on a credit memorandum of the motel as the imprint made the night before was indistinct, and another imprint was needed; that after some conversation it was agreed that Goynes take the card, secure the imprint, and return it within a few minutes to the Plaintiff; that some thirty minutes later, Plaintiff, not having resecured his card and feeling that for some purpose someone had fraudulently secured his card, the Plaintiff dressed and went to the front desk and was informed by the Defendant Goynes that his credit had been revoked and that Goynes had telegraphic authority from National Data Processing, Inc., a computerizing service for Defendant Gulf Oil, to pick up Plaintiff's card and terminate his credit. It was conceded that Goynes obtained the credit card and asked Plaintiff to arrange to pay his bill in cash.

The credit manager of Gulf Oil testified that, on the previous day, he had reviewed the credit file of the Plaintiff; had found that the Plaintiff had been charging in ever-increasing amounts on his Gulf credit card; that he had during the current month paid to Gulf a substantial bill and charged to Gulf another bill which charges almost equaled the Plaintiff's total monthly income; that in the last three months the Plaintiff had paid his bill more than thirty days after the time the bill was sent to him; and that these facts caused him to suspect that the Plaintiff would soon be unable to pay his Gulf account. He, therefore, ordered the credit terminated and the card revoked or picked up.

The method for terminating the credit and picking up the card was that, on order of Gulf, National Data Processing sent out a communication to all Gulf agents and all desk clerks of Holiday Inns, in short, those most likely to come into contact with such credit cards, a list of all credit cards revoked and asked them to secure possession thereof for Gulf for a reward to be paid by Gulf. Suggestions as to how such cards might tactfully be repossessed had been sent out by Gulf, and there was no evidence that Gulf authorized use of rudeness or false pretenses in securing the credit cards.

After repossession of the card, the Defendant Goynes was paid by Gulf a reward for the same.

There was evidence that the credit file of Gulf included information received from a credit bureau in Tupelo, Mississippi, showing that the Plaintiff had a good credit rating and no derogatory matter showed in the report from Tupelo. Other information contained in the Gulf credit file included information given Gulf by the Plaintiff when he made application for credit and times, amounts, and dates of charges and credits to said account received from Gulf's own credit records.

The Plaintiff brought suit against Goynes, Interstate Inns, Inc., Holiday Inns, Inc., and Gulf Oil Corporation and recovered judgments of $25,000.00 actual damages against Gulf, $25,000.00 punitive damages against Interstate Inns, Inc., and Jessie Goynes, and $10,000.00 punitive damages against Holiday Inns, Inc. The jury further found that Defendants Goynes and Interstate Inns should have judgment over against Gulf Oil for the $25,000.00 punitive damages, the liability which they incurred in executing the alleged agency of Gulf in revoking the credit card.

All Defendants made motions for judgments notwithstanding the verdict. Defendants Goynes and Interstate made a motion for new trial, and the Plaintiff made a motion for a judgment in conformance with the verdict. All of these motions are now submitted to the Court with briefs of the parties.

LIABILITY OF GULF

The cause was submitted against Gulf Oil Corporation for violation of the Fair Credit Reporting Act on one of two alternative theories as follows:

First, that Gulf, a credit reporting agency, did not use all reasonable precautions to avoid making a false credit report on Glen L. Wood to Interstate Inns, Inc. The theory of the falsity was that his credit card should be picked up when, in truth and in fact, his credit was still good. More fully, the theory was that the credit manager, having considered Wood's monthly income and compared it with known charges to Gulf, concluded that Wood was spending almost all of his income with Gulf and Holiday Inn and that he could not possibly be expected to continue to pay his bills; that this appraisal of Wood's credit standing was false in that it failed to encompass the fact that a large part of Wood's credit with Gulf was composed of obligations of his employer; and that his bills had been paid without undue delay over a substantial period of time.

The Defendant Gulf Oil contended that no false credit report was involved; that Gulf learned accurately that Wood's monthly charges were almost exceeding his monthly income; that his bills for the preceding three months had not been paid with desired promptness; and that his credit was cancelled on that basis. Gulf Oil insists on their right to cancel credit where circumstances show a doubt. They also insist that they made no report to anyone but simply revoked Wood's credit with themselves in the only way they have to do so.

While Gulf's decision to revoke the Plaintiff's credit may not have been good public relations or even good business judgment, while the opinion may not have been justified if all facts about Mr. Wood had been known, and while Mr. Wood apparently had knowledge which, when conveyed to the Gulf credit manager, caused a renewal of the credit of Mr. Wood, this Court is of the opinion that there is no cause of action for a credit manager's failing to extend credit. A creditor, by the very nature of his business, must be able to extend or deny credit based on any information which may have any bearing on the consumer's credit. Jennings v. American Express Co., (CCA 5, 1964) 338 F.2d 22; Jordan v. J. C. Penney Co., (1966) 114 Ga.App. 822, 152 S.E.2d 786; City Stores Co. v. Henderson, (1967) 116 Ga.App. 114, 156 S.E.2d 818.

Clearly, Gulf did make the determination to terminate the credit, and they terminated Mr. Wood's credit. They did not, as such, make any credit report to anyone else. The credit to be extended or denied in this case was by Gulf, not by Goynes or by Interstate. The only information given Goynes by Gulf was the directive that nothing more should be charged to Gulf by Mr. Wood, and this information was given for the purpose of protecting Gulf from what their credit manager considered to be a bad credit risk. Gulf was, therefore, not a credit reporting agency as defined by the Act and as referred to in 15 U.S. C. § 1681e(b) since Gulf was not furnishing information to another user of credit information but was using, in its own credit business, information gathered from its own files, and it, therefore, could not be liable as a reporting agency.

The other theory of liability of Gulf under the Credit Reporting Act is that Gulf is liable under 15 U.S.C. § 1681m as a user of a credit report for damages resulting from its having failed to report to the consumer (Mr. Wood) the name and address of the reporting agency making the report containing information upon which the denial of credit for personal, household or family purposes was wholly or partially based.

Gulf takes the position that it could not be liable under this theory since it...