Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-2_03-cv-00439/USCOURTS-alnd-2_03-cv-00439-1/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

 SOUTHERN DIVISION

JEANETTA STRICKLAND, ]

]

Plaintiff, ]

] CASE NO.: CV-03-439-VEH

v. ]

]

MITSUBISHI MOTORS CREDIT ]

OF AMERICA, et al., ]

]

Defendant. ]

Memorandum Opinion

I. INTRODUCTION

This is a civil action filed by the Plaintiff, Jeanetta Strickland, against

Defendants MMCA, Serra, and JMIC Life Insurance Company, on February 27, 2004.

This matter is before the Court on Defendant Mitsubishi Motors Credit of America,

Inc.’s (“MMCA”), and Serra Mitsubishi’s (“Serra”) Motions to Dismiss Counts One

and Eight of the First Amended Complaint (doc. 51 and 54). 

II. ALLEGATIONS OF THE COMPLAINT

The First Amended Complaint makes the following allegations:

8. On or about February 26, 1997, plaintiff Jeanetta Strickland

entered into what she believed to be and was told by Defendants was a

purchase money financing agreement styled as “Diamond Advantage

Plan Retail Installment Sale Contract” with the Defendantsfor a slightly

used (Dealer’s Demonstration Model) 1997 Mitsubishi Montero

FILED

 2005 Jul-13 PM 04:36

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:03-cv-00439-VEH Document 62 Filed 07/13/05 Page 1 of 12
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automobile. The agreed upon case price for the Montero in this

document was $28,022.71. After adjustments for a cash down payment,

credit and disability life insurance and other fees, the amount to be

financed was defined in this document as $26,991.29. On February 27,

1997, Ms. Strickland signed a Retail Buyer’s Order that included

additional terms and conditions for the same vehicle. The agreed upon

total sales price in this document was $27,100.

9. Based on the representations made to her, and the documents

provided to her by the defendants, Ms. Strickland was led to believe and

did in fact believe and reasonably rely on the Defendants’

representations that she was purchasing the Montero. In reality, the

Defendants created, set up and managed a scheme and arrangement that

at all times functioned as, at best, an undisclosed lease in what was a

scheme to convert Ms. Strickland’s automobile to the Defendants’

possession, control and use at the end of the term of the agreement. For

example, the agreement required a monthly payment for 47 months and

a “balloon” 48 payment , designed to approximate the residual value of th

the car. The agreement provided that at the end of the term, there would

be unspecified wear and tear fees, excess mileage fees and a “disposition

fee” not to exceed $350. The plaintiff was also told she was required to

purchase credit life and credit disability insurance, which added to the

price of the vehicle, as well as her payments. The credit life insurance

cost was computed on a 49 month schedule although the financing

agreement was for a 48 month period, requiring prepayment for an

additional month of insurance for which, based on the terms of the

Defendant’s contract, was of no value to Ms. Strickland. This additional

insurance was in the amount of $453.58. Ms. Strickland was told by the

defendants this arrangement was the only way she could qualify for the

Montero. Despite the representations that this was the sale of the

Montero, the defendants included provisions in the agreement which

egregiously restricted and limited Ms. Strickland’s rights as a “titled

owner” Ms. Strickland’s only “options” at the end of the agreement were

to “sell” (return) the car back to the defendants, pay the defendants the

balloon payment or enter into a new financing agreement only with

MMCA and Serra. Ms. Strickland was provided no other options within

the agreement as to the return of the vehicle. She could neither sell nor

Case 2:03-cv-00439-VEH Document 62 Filed 07/13/05 Page 2 of 12
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trade the Montero to anyone other than the defendants without the

written permission of the Defendants. In addition, Ms. Strickland could

not refinance the Montero with any entity other than the Defendants.

10. Approximately one month prior to the date of the last

payment, a representative of the Defendants went to Ms Strickland’s

place of employment to “inspect” the Montero. Then, on the date of the

last payment, Ms. Strickland returned the car to Serra, which was

represented to her to be what was required of her to complete the

transaction. At the time of the “turn-in”,” Ms. Strickland was in fact

told she was making a “lease turn-in.” At that time, Ms. Strickland

signed an odometer form required by Defendants on which the

transaction was noted as a “turn-in.” At the time of this “turn-in,” Ms.

Strickland was told by Defendants that her obligations were complete

under the agreement. Indeed, Serra took possession of Ms. Strickland’s

Montero at that time. However, four months after the return of the

automobile, Ms. Strickland received a letter from MMCA requesting

payment for unspecified wear and tear, disposition and other unspecified

fees. At that time, the vehicle was sill titled in Ms. Strickland’s name.

In addition, the remaining balance of the balloon payment is noted as a

negative entry on Ms. Stricland’s [sic] credit report, despite the fact she

turned the vehicle in on February 28, 2001 asrequired by her agreement

with Defendants. Essentially, the Defendants took possession of

plaintiff’s vehicle and converted that vehicle to its sole use and control,

made no payment whatsoever to Plaintiff (or on plaintiff’s behalf), and

now claim Plaintiff owes additional money.

11. After Defendants’ demands, Ms. Strickland then consulted an

attorney, who wrote a letter to MMCA on her behalf. MMCA

responded by reducing the total amount due without explanation, and

demanding that the balance be paid under threat of unfavorable credit

reporting.

12. Based on the representations of the Defendants, Ms.

Strickland entered into what she was led to believe was a purchase of an

automobile. She was induced to enter the agreement with the

Defendants based on fraudulent and false statements related to the

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nature of the agreement and her obligations thereunder. However, at the

conclusion of the term, the Defendants, treating the agreement like a

lease, took her vehicle without any payment whatsoever (either to Ms.

Strickland or to payoff the remaining balance) and left title in Ms.

Strickland’s name. Then, four months later, the defendants billed Ms.

Strickland for $2,609.90 in unexplained fees (later reduced without

explanation to $2,231.09) and made no corrections on Ms. Strickland’s

credit report. This has hindered and caused additional expense and

distress to Ms. Strickland in obtaining financing of her home and other

items.

13. Based on the Defendant’s fraudulent concealment of facts,

Ms. Strickland did not become aware, and could not have become

aware, of the Defendants’ wrongful conduct until within one year of the

filing of this Complaint, when the Defendants demanded payment from

her, after having accepted Ms. Strickland’s vehicle, and made adverse

credit reports about Ms. Strickland.

14. Upon information and belief, the Defendants engaged in a

similar pattern and practice of such fraudulent vehicle agreements with

customers throughout Alabama and other jurisdictions.

15. At all times relevant hereto, the defendants regularly

extended or offered to extend consumer credit for which a finance

charge is or may be imposed or which, by written agreement, is payable

in more than fourinstallments, and is the person to whom the transaction

which is the subject of this action was initially payable, making

defendants creditors within the meaning of 15 U.S.C. § 1602(f) and

Regulation Z, part 226 2(a)(17). Moreover, Defendants’ regular

business activities include leasing and offering to lease motor vehicles.

In many cases, the total contractual obligation under the lease is less

then $25,000. 

First Amended Complaint, at 2-5. 

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III. STANDARD OF REVIEW FOR MOTION TO DISMISS

We accept the facts of the complaint as true and view them in the

light most favorable to the nonmoving party. Id. Dismissal pursuant

to Rule 12(b)(6) is not appropriate "unless it appears beyond doubt

that the plaintiff can prove no set of facts in support of his claim

which would entitle him to relief." Magluta v. Samples, 256 F.3d at

1283-84 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct.

99, 102, 2 L.Ed.2d 80 (1957)).

Magluta v. Samples, 375 F.3d 1269, 1273 (11 Cir. 2004). th

TILA's declaration of purpose states, in relevant part: 

The Congress finds that economic stabilization would be

enhanced and the competition among the various financial

institutions and other firms ... would be strengthened by the

informed use of consumer credit. The informed use of

credit results from an awareness of the cost thereof by

consumers. It is the purpose of this subchapter to assure a

meaningful disclosure of credit terms so that the consumer

will be able to compare more readily the various credit

terms available to him and avoid the uninformed use of

credit, and to protect the consumer against inaccurate and

unfair credit billing and credit card practices. 15 U.S.C. §

1601(a). As a remedial statute, TILA must be construed

liberally in favor of the consumer. Ellis v. Gen. Motors

Acceptance Corp., 160 F.3d 703, 707 (11th Cir.1998);

Cody v. Cmty. Loan Corp. of Richmond County, 606 F.2d

499, 505 (5th Cir.1979).

Bragg v. Bill Heard Chevrolet, Inc., 2004 WL 1418428, *3 (11th Cir. 2004)

[emphasis added].

Case 2:03-cv-00439-VEH Document 62 Filed 07/13/05 Page 5 of 12
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IV. ANALYSIS

A. Count One

Count One of the First Amended Complaint reads as follows:

COUNT ONE – VIOLATION OF THE TRUTH IN LENDING ACT

16. Plaintiff adopts and incorporates paragraphs 1 through 15

as if fully set forth herein.

17. The Defendants, in not properly disclosing the true nature

of the finance agreement to Ms. Strickland, violated the Consumer

Credit Protection Act (usually referred to as the “Truth in Lending

Act”), 15 U.S.C. §§ 1601 - 1667, (hereinafter “TILA”) and regulations

promulgated thereunder. Defendants further failed to make required

disclosures clearly and conspicuously in writing in violation of 15

U.S.C. § 1632(a) and Regulation Z, part 226.17(a) by:

a. Including an optional balloon payment into the

“amount financed” calculation in violation of 15

U.S.C.§ 1605(a) and Regulation Z, part 226.18(b).

Ms. Strickland was not required to make the

$15,711.89 balloon payment and did not intend to

include this balloon payment in her financing of the

vehicle, however the Defendants included this

balloon payment into the “amount financed”

calculation anyway. As structured, the amount

financed should have only been $15,279.42, which

is equal to the $26,991.29 amount financed minus

the $15,711.87, balloon payment.

b. Making the Plaintiff pay a finance charge on a

balloon payment that she ultimately chose not to

make, in violation of 15 U.S.C. § 1605(b) and

Regulation Z, part 226.18(b). Defendants violated

TILA by including the $15,711,89 balloon payment

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in the “amountfinanced” calculation, and as a result,

the Plaintiff paid interest on $15,711.89 for four

years that she should not have been required to pay

since she exercised her option under the Diamond

Advantage Plain Retail Installment Sale Contract to

return the vehicle, rather than to make the balloon

payment.

c. Including a $16.50 charge for “Government

Certificate of Title Fees Paid to Public Officers” into

its calculation of the finance charge and/or amount

financed. Under 15 U.S.C.§ 1605(d), such fees are

to be excluded from the computation of the finance

charge, and thus, Defendants have violated TILA. 

d. Structuring the Diamond Advantage Agreement to

appear to be a sale, inducing the plaintiff and other

customers into believing they were “buying” a

vehicle, when in reality, the transaction was a

disguised lease. This false representation violates

15 U.S.C. § 1605(a), and Reg. Z, parts 226.18(b)-

(e), (g), (h) and (j).

18. The Defendants also failed to disclose that Credit Life and

Disability Insurance were inappropriate for the type of agreement

entered into by Ms. Strickland, and improperly required Ms. Strickland

to purchase an additional 49 month of Credit Life insurance. Even if th

the Defendants did not require the Plaintiff to purchase credit life and

disability insurance in order to purchase the vehicle, the Defendant

violated 15 U.S.C § 1605(b) and Regulation Z, part 226.17(a) by

including these charges into its calculation of the finance charge and/or

amount financed.

19. As a proximate consequence of the Defendants’ violations

of TILA, the Plaintiff was injured and damaged. By reason of the

aforesaid violations of TILA, defendants are liable to plaintiff in the

amount twice the finance charge, actual damages to be established at

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trial, and attorneys’ fees and costs in accordance with 15 U.S.C. § 1640.

First Amended Complaint, at 5-6.

The Defendants first contend that the transaction at issue is exempt from TILA.

When TILA was first adopted, Congress directed the Federal Reserve Board to

“prescribe regulations to carry out [its] purposes . . .’ 15 U.S.C. 1604(a). In

accordance with this directive, the Federal Reserve Board issued Regulation Z, 12

C.F.R. 226. Further, the Federal Reserve Board staff has issued the Official Staff

Commentary on Regulation Z. As the United States Supreme Court has explained,

“Congress has specifically designated the Federal Reserve Board and staff as the

primary source for interpretation and application of truth-in-lending law.” Ford

Motor Credit Co. v. Milhollin, 444 U.S. 555, 566 (1980). Accordingly, unless they

are “demonstrably irrational,” Federal Reserve Board staff opinions construing TILA

or its regulations “should be dispositive.” Id. at 565. See also Johnson v. Fleet

Finance, Inc., (11 Cir. 1993) (“The office staff interpretations of Regulation Z, th

unless demonstrably irrational, are binding.”)(citing Milhollin). Thus, the principle

sources of TILA law are the Act itself, Regulation Z, and the Official Staff

Commentary on Regulation Z.

The Truth in Lending Act “does not apply to . . . [c]redit transactions . . . in

which the total amount financed exceeds $25,000.00.” 15 U.S.C. § 1603(3). In their

Case 2:03-cv-00439-VEH Document 62 Filed 07/13/05 Page 8 of 12
Where, as here, a document referred to in the complaint is central to the plaintiff’s claims 1

it is properly considered on a Rule 12(b)(6) motion to dismiss so long as its authenticity has not

been challenged. Hoffman-Pugh v. Ramsey, 312 F.3d 1222, 1225 (11 Cir. 2002). th

9

Complaint, the Plaintiffs state that in the “Diamond Advantage Plan Retail

Installment Sale Contract”, the instrument which is the subject of Count One, “the

amount to be financed was defined . . . as $26,991.29.” The contract is clear as to

what the total amount financed was to be. See Diamond Advantage Plan Retail

Installment Sale Contract, at 1. 

1

However, the Plaintiff insists that the Court must add up the “total contractual

obligation” owed by the Plaintiff in order to determine whether the provisions of the

contract fall within TILA. This approach would have the court considering amounts

paid in cash up front by the Plaintiff (such as the Plaintiff’s $3,000 down payment),

but not balloon payments clearly owed. In support of this argument the Plaintiff cites

only district court opinions from other districts and some from other circuit–none of

which are binding on this Court. The court is not persuaded by these opinions. 

The court is persuaded by the actual language of the contract itself, which

shows the total amount to be financed as $26,991.29. The Court also notes that the

Complaint and Plaintiff’s Brief allege that the only cash paid by the Plaintiff in this

transaction was the $3,000 down payment, and that the purchase price of the vehicle

was $28,022.71 (the price that appeared in the Installment Sales Contract at issue in

Case 2:03-cv-00439-VEH Document 62 Filed 07/13/05 Page 9 of 12
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this case). Simple math would reveal that the amount left to be financed would be at

least $25,022.71–over the TILA limit.

Neither is Plaintiff’s argument persuasive that the balloon payment should not

be included in the total amount financed because it is an “optional” payment. It is

clear from the contract that the Plaintiff is obligated to make the payment of the

balloon payment under the contract. The contract clearly states that she must make

“47 regular payments” of “$389.88" and “One final payment” of “15,711.87". There

is nothing “optional” about any of these payments. In addition, in the “Truth in

Lending Disclosures” it clearly reads that the “Total of Payments” or “The amount

you will have paid after you have made all payments as scheduled” is “$34,036.23".

This last number is the sum of the payments outlined above. From the language

presented, the Plaintiff was obligated to pay these amounts, and these amounts were

included in the contract. 

Because the total amount financed exceeds $25,000.00, TILA does not apply,

and, as to Count One, the Motions to Dismiss are due to be GRANTED.

B. Count Eight

Count Eight of the First Amended Complaint reads as follows:

COUNT EIGHT – INVASION OF PRIVACY

42. Plaintiff adopts and incorporates paragraphs 1 through 41 as

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There are actually four species of invasion of privacy in Alabama. The Plaintiff cites the 2

Court to this case in particular, however, and writes, “[i]n the instant situation, we are clearly

dealing with the “wrongful intrusion” prong of invasion of privacy.” Plaintiff’s Reply to Motion

to Dismiss, at 11-12. 

11

if fully set forth herein.

43. On July 31, 2001, Robert Hensley, Jr., retained counsel for

the plaintiff, wrote the defendants with respect to the vehicle and

disputed payments. At that time, the defendants were placed on notice

that Ms. Strickland was represented by counsel. After that date and

notification, representatives of the defendants called Ms. Strickland at

home and asked her to contact the defendants about this matter. 

44. This contact with a person the defendants knew to be

represented by counsel amountsto an invasion of the plaintiff’s privacy.

As a proximate consequence of this invasion of privacy, Ms. Strickland

was injured and damaged.

First Amended Complaint, at 10. 

The Alabama Supreme Court has stated:

"This Court defines the tort of invasion of privacy as the intentional

wrongful intrusion into one's private activities in such a manner as to

outrage or cause mental suffering, shame, or humiliation to a person of

ordinary sensibilities." Carter v. Innisfree Hotel, Inc., 661 So.2d 1174,

1178 (Ala.1995) (citing Nipper v. Variety Wholesalers, Inc., 638 So.2d

778 (Ala.1994); Phillips v. Smalley Maint. Servs., Inc., 435 So.2d 705

(Ala.1983); Alabama Elec. Co-operative, Inc. v. Partridge, 284 Ala.

442, 225 So.2d 848 (1969)).

Rosen v. Montgomery Surgical Center, 825 So.2d 735, 737 (Ala., 2001). The 2

Complaint in this case is devoid of any allegation that the Plaintiff experienced

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outrage or was caused to have mental suffering, shame, or humiliation. Indeed, the

Court is hard pressed to imagine the situation where a “person of ordinary

sensibilities” would be so affected by a single phone call from the Defendants asking

the Plaintiff to call them about this matter. Nor does the Complaint allege that the

manner of the call was inappropriate, other than the fact that it was done after the

Defendants had been put on notice that the Plaintiff had retained counsel concerning

the matter. That being understood, it could hardly be said that the matter was private.

The Motions to Dismiss Count Eight are due to be GRANTED. 

DONE this 13 day of July, 2005. th

 

 VIRGINIA EMERSON HOPKINS

United States District Judge

 

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