from the Superior Court in Maricopa County No. CV2014-096164
The Honorable David M. Talamante, Judge
& Fabian, PLC, Chandler By Veronika Fabian, Hyung S. Choi
Counsel for Plaintiff/Appellant
& Rees, LLP, Phoenix By Matthew G. Kleiner, Camille S.
Bass Counsel for Defendant/Appellee
People's Legal Services, Inc., Flagstaff By Andrea M.
Goddard Counsel for Amici Curiae
Presiding Judge Diane M. Johnsen delivered the opinion of the
Court, in which Judge Jon W. Thompson and Judge Paul J.
A woman sued a car dealership that had sold her a car and won
a judgment for compensatory and punitive damages, costs and
fees. Unable to satisfy the full amount of the judgment from
the dealership, the buyer then sued the holder of her
installment sales contract under 16 C.F.R. § 433.2,
which renders the holder of consumer debt subject to
"all claims" a buyer could bring against the
seller. The superior court dismissed the buyer's
complaint, reasoning that the federal rule does not permit
recovery of punitive damages or fees, and the buyer already
had managed to garnish an amount exceeding her compensatory
damages. We reverse the dismissal, holding that even if the
federal rule does not permit recovery of punitive damages and
fees, nothing required that the buyer's partial recovery
be allocated first toward satisfying the compensatory damages
component of her judgment.
AND PROCEDURAL BACKGROUND
Jamie Hayward bought a car from Steve Coury Buick, Pontiac
& GMC Truck. Including various fees, the purchase price
came to $15, 625.14. Hayward made a cash down payment of $1,
000 and traded in a vehicle that was worth $79.09 more than
what she still owed on it. She financed the remainder of the
purchase price, $14, 546.05, through a retail installment
sales contract and purchase money security agreement. That
agreement obligated the dealership to pay off what Hayward
still owed on the car she traded in. But after one of its
employees stole the trade-in car, the dealership refused to
pay off the lien.
Hayward sued the dealership, alleging, inter alia,
that the dealership had damaged her credit and she was
subject to suit by the lender on the car she had traded in.
After a four-day trial, a jury found the dealership liable
for $16, 996.98 in compensatory damages and $50, 000 in
punitive damages. The final judgment also awarded Hayward
attorney's fees of $10, 000 and costs of $3, 722.38. The
dealership went out of business without paying the judgment,
but Hayward was able to recover $23, 781.41 through
Hayward then sued Arizona Central Credit Union, which had
purchased her installment sales contract from the dealership.
Her claim was based on the following provision in the sales
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. RECOVERY HEREUNDER BY THE DEBTOR SHALL
NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
alleged that under this provision of the sales contract,
known as the Federal Trade Commission's "Holder
Rule, " 16 C.F.R. § 433.2, the Credit Union was
liable to her for all amounts still owing on the judgment
against the ...