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November 10, 1982


The opinion of the court was delivered by: Bua, District Judge.


Before the Court is a case involving claims under the Federal Truth In Lending Act ("TILA"), 15 U.S.C. § 1631 and 1639 and Regulation Z, and certain common law claims allegedly arising from the same set of facts. Count I of the complaint of plaintiff Marcano sets forth a claim on behalf of herself and all others similarly situated against defendants Northwestern Chrysler-Plymouth Sales, Inc. ("Northwestern") and Chrysler Credit Corporation ("Chrysler Credit") for violations of TILA and Regulation Z. Insofar as the TILA claim is concerned, plaintiff has requested certification as a class action.*fn1 The remaining counts assert common law claims against Northwestern for fraud, false imprisonment, and conversion. It is asserted that the Court has pendent jurisdiction over these claims. Provencio joins Marcano as plaintiff in the fraud and false imprisonment claims.

Defendants have filed motions to dismiss requesting the Court to refuse to certify the class and to dismiss the TILA count for failure to state a claim. Defendant Northwestern has also asked the Court to decline pendent jurisdiction over the common law claims or to at least decline pendent jurisdiction over the claims of plaintiff Provencio. In the alternative, defendant Northwestern asserts that the common law claims should be dismissed for failure to state a claim. For the reasons stated herein, the Court denies defendant Northwestern's motion to dismiss the TILA claims of plaintiff Marcano and denies Northwestern's motion to dismiss Marcano's pendent state claims relating to fraud and conversion. The Court grants the motion to dismiss the claim of false imprisonment. Northwestern's motion to dismiss plaintiff Provencio is granted as is the motion to dismiss defendant Chrysler Credit.

The facts as alleged in the pleadings reveal that on July 25, 1981, Marcano entered into a written agreement with Northwestern for the purchase of an automobile. At that time, Marcano paid Northwestern $500 as a down payment and Northwestern represented that it would procure financing through Chrysler Credit. Chrysler Credit approved the financing agreement but said final acceptance would require a down payment of $1,500. When, on August 1, 1981, Marcano was advised that an additional $1,000 would be required, she informed Northwestern that she did not possess such funds. Northwestern then agreed to loan Marcano $500 and to finance the other $500 through an unknown internal procedure and Marcano took possession of the automobile. As to this side loan, Marcano agreed to pay Northwestern $25 per week beginning on September 1, until paid in full. The agreement was later modified to require the payment of $100 per month. Notwithstanding this arrangement, however, Northwestern failed to send the contract to Chrysler Credit, rendering the automobile unfinanced.

On September 26, 1981, Northwestern, realizing that the vehicle was unfinanced, entered into a new contract with Marcano for the purchase of the vehicle. This contract was approved by Chrysler Credit. According to plaintiff Marcano, however, this contract failed to disclose the cash price, the down payment amount, the difference between the cash price and the down payment credited and the terms of the side loan from Northwestern to Marcano on the loan to cover the down payment. In addition, Marcano never received a copy of this contract. Finally, Northwestern failed to send the contract to Chrysler Credit, again leaving the automobile unfinanced.

The signing of the January 8 agreement was preceded by an incident out of which the common law claims asserted in this lawsuit arose. On January 5, Marcano, being late in making a payment on the side loan, was requested to come to defendant Northwestern's place of business. Along with plaintiff Provencio, she drove to the dealership where she was informed by Northwestern's President, Mr. Greene, that he would repossess the automobile if the $100 payment was not made. As Marcano did not have the required funds, Provencio agreed to make the payment on Marcano's behalf on the condition that Greene would not repossess the car. After accepting the money, Greene asked Marcano for the keys to the car, allegedly so that he could inspect it for damage. She acquiesced, but on receiving the keys, Greene locked the car and kept the keys, rendering the car and its contents inaccessible to the plaintiffs.*fn2 Having no way to get home, the plaintiffs remained at the dealership from 2:30 P.M. to 7:30 P.M. when a Northwestern employee drove them back. It was to recover possession of the auto that Marcano returned to the dealership on January 8, on which date she signed the final contract.


It is asserted by defendant Northwestern that plaintiff's amended complaint fails to state a claim under the Truth in Lending Act.*fn3 Section 1631 of the TILA requires a creditor to disclose clearly and conspicuously to the debtor certain information as required by the Act, including the terms of a loan. It is alleged that the terms of the side loan given to finance the down payment were not disclosed to plaintiff Marcano beyond merely the amount which she was required to pay per week or per month. It does not appear that Marcano was ever informed as to the rate of interest or any service charge which she was being assessed. Furthermore, none of the terms of the side loan was ever incorporated into any of the three installment agreements. The amended complaint thus appears to state a claim under Section 1631.

If, as plaintiff alleges, Northwestern did not give to the plaintiff duplicates of the first and second installment loan agreements, Northwestern stands in violation of Regulation Z, § 226.8(a), 15 U.S.C.A. foll. § 1700. This provision requires that a "creditor furnish the customer with a duplicate of the instrument or a statement by which the required disclosures are made. . . ." Northwestern's motion to dismiss the TILA claims must therefore be denied.


The adequacy of the TILA claim against Chrysler Credit is not so apparent. As a preliminary matter, failure to furnish a duplicate of the agreement is alleged only against Northwestern. Marcano's complaint against Chrysler Credit concerns only the failure to disclose the terms of the down payment side loan made in connection with the three installment sales transactions. The plaintiff's theory is that, because the undisclosed side loan financed part of the down payment, and because the down payment was an item listed on the installment agreements, the side loan formed a part of the installment agreements yet was not disclosed therein. The plaintiff then asserts that under TILA, Chrysler Credit was a creditor to each of the agreements, and therefore is responsible for failure to disclose the terms of the side loan in each of the installment agreements.*fn4

It is now well settled that a company, such as Chrysler Credit, that regularly accepts assignments of installment agreements from a retail auto dealer can be considered a creditor under TILA.*fn5 Ford Motor Credit Co. v. Cenance, 452 U.S. 155, 101 S.Ct. 2239, 68 L.Ed.2d 744 (1981). However, such a status does not necessarily require that Chrysler Credit is responsible as a creditor or as an assignee under TILA for defects in the first two installment agreements for which Chrysler Credit did not accept assignment or for the side loan made in connection therewith which appears to be at the heart of this dispute.

It is clear that Chrysler Credit cannot be held liable under TILA for defects in the initial transaction. At the time the parties entered into the initial financing agreement on June 25, 1981, the side loan was not yet in existence. Hence Chrysler cannot be held liable for nondisclosure of the terms of the side loan as to the first financing agreement, especially when it is considered that Chrysler Credit refused to accept assignment of that agreement.

Nor did Chrysler Credit accept assignment of the September 26 installment agreement, which was entered into after the undisclosed side loan had been agreed upon. The plaintiff theorizes, however, that Northwestern telephoned Chrysler Credit and that the latter verbally authorized the installment loan. The plaintiff further theorizes that the reason Chrysler Credit never accepted assignment of this agreement is that Northwestern failed to send it to Chrysler Credit. Even assuming that the plaintiff's theories are factually accurate, these theories do not raise Chrysler Credit to status as a creditor liable under TILA. Section 1602(f) of 15 U.S.C. defines creditors as those "who regularly extend, or arrange for the extension of, credit. . . ." Under Regulation Z, "`Creditor' means a person who in the ordinary course of business regularly extends or arranges for the extension of consumer credit. . . ." 12 C.F.R. § 226.2(s). While Northwestern may have been trying to arrange for financing, at least as to the September 26 transaction, Chrysler Credit did not extend credit. To have become Marcano's creditor, it would have been necessary for Chrysler to accept assignment of the agreement. This did not take place as to this transaction and Chrysler cannot, therefore, be held liable for failure to disclose.

As to the January 8 installment agreement, Chrysler Credit did accept assignment and is a creditor under TILA. However, as to this agreement, no undisclosed side loan was involved. By the time the agreement was made, the amount paid on the side loan was incorporated into the installment agreement as the down payment amount.*fn6 It is not alleged that the terms of the January 8 installment agreement itself are insufficient, nor is it alleged that Chrysler Credit had knowledge of the dispute between Marcano and Northwestern regarding the amount of the down payment already paid. Without knowledge of the dispute, see footnote 4, supra, and without allegations that the ...

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