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Hayward v. Arizona Central Credit Union

Court of Appeals of Arizona, First Division

January 10, 2017

JAMIE HAYWARD fka JAMIE CIFUENTES, Plaintiff/Appellant,
v.
ARIZONA CENTRAL CREDIT UNION, Defendant/Appellee.

         Appeal from the Superior Court in Maricopa County No. CV2014-096164 The Honorable David M. Talamante, Judge

         REVERSED AND REMANDED

          Choi & Fabian, PLC, Chandler By Veronika Fabian, Hyung S. Choi Counsel for Plaintiff/Appellant

          Gordon & Rees, LLP, Phoenix By Matthew G. Kleiner, Camille S. Bass Counsel for Defendant/Appellee

          DNA 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. McMurdie joined.

          OPINION

          JOHNSEN, Judge:

         ¶1 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.

         FACTS AND PROCEDURAL BACKGROUND

         ¶2 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.

         ¶3 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 garnishment proceedings.

         ¶4 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 contract:

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.

         Hayward 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 ...


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