NO. 83-443
INTHE SUPREMECOURTOF THE STATEOF MONTANA 1984

TIMOTHY CUCHINE, Plaintiff andAppellant,

H. 0.BELL, INC., and FORDMOTOR CREDITCO.

### , Defendantsand Respondents.

Appeal from: District Court of the Fourth JudicialDistrict, Inand for the CountvofMissoula HonorableRobertM. Holter, Judgepresiding. Counsel of Record: For Appellant: Tipp, Hoven,Skjelset & Frizzell,Missoula, Montana
For Respondents: Boone, Karlbers & Haddon,Missoula,Montana BarbaraConrafi,Missoula,Montana

Submitted onbriefs: March 30, 1984 Decided: June 4, 1984
Filed: ,+ 

### 984

Clerk

### Mr. Justice John C. Sheehy delivered the Opinion of 

### the Court. Timothy Cuchine appeals from a summary judgment of the District Court,Fourth JudicialDistrict,Missoula County, in favorof FordMotor Credit Company. On October 15, 1980,Timothy Cuchinepurchased a pickup from H. 0. 

### Bell, Inc. under a retail installment sales contract which was subsequently assigned to Ford Motor Credit Company. Cuchine later beqan experiencing difficulties with the pickup and returned it to H. 0. 

### Bell. to be repaired. When it became apparent that the truck could not be adequately repaired,Cuchine left the truck with H. 0. 

### Rell and filed a suit against H. 0. 

### Bell and the credit company for rescission or revocation of the installmentcontractdue to breach of the implied warranties of merchantability and fitness for a particular purpose. The credit company filed

an answer, admitting that it was the assignee under the contract and asserting a counterclaim for the payments due under the contract. Shortly thereafter, the contract was reassigned to H. 0. 

### Bell and a motion for summarv judgment

was filed in the DistrictCourt. The District Court granted the credit company's motion for summary judgment and Cuchine

now appeals from the order granting themotion. The issue presented on appeal iswhether the assignment of a retail installment sales contract imposes full contract liability on the assignee of certain rights under the contract. Cuchine contends that the credit company assumed full contract liabilitywhen the assignmentwas accepted. Cuchine further contends that the creditcompany could not avoid this liability during the pendency of the action by reassigningthe contract to H. 0. Bell. Cuchine predicates the credit company's liability under the contract. upon the following language which appears in the contract in bold, capital letters: "NOTICE 

## -- ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THEDEETOR COULD ASSERT AGAINST 

### THE SET2LER OF GOODS OR SERVTCES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHATIL NOT EXCEED AMOUNTS PAID 

### RY THE DEBTOR HEREUNDER.

### " This language is consistent with section 9-318 of the Uniform Commercial Code, adopted in Montana as section 30-9-318,MCA. That section reads inpertinentpart: "Unless an account debtor has made an enforceable agreement not to assert defenses or claims arising out of a sale as provided in 30-9-206, the rights of an assignee are subject to: "(a) all the terms of the contract between the account debtor and assignor and any defense or claim arising therefrom;.

# .."

At common law, it is a well established rule that 

### a party to a contract cannot relieve himself of the obligations which the contract imposed upon him merely by assigning the contract to a third person. 6Am.Jur.2d Assignments § 110; 6A C.J.S. Assignments 

### S 31. Therefore, we must determine whether,under the Uniform Commercial.Code, the assignment of the contract to the credit company imposed full. contract 1ia.bilityon the creditcompany as assignee. The ca-selaw as to the effect of section 9-318 of the UCC on the liabilities of an assianee of contract rights is scant, but conclusive. In Michelin.Tires v. First National Bank of Boston (1st Cir. 1981), 666 F.2d 673, the court examined section 9-318and determined that: "The key statutory lanquaqe is ambiquous. That - - 'therights of an assignee are subject'-to 

# . . . (a) all the terms 

### of the contract' connotesonly that the assignee's rights to recover are limitedby theobligor's rights to assert contractual defenses as a set-off, implying that affirmative recovery against the assignee is not intended. " (Citations omitted.) 666F.2d at 667. The court alsonoted that: "The words 'subject to,' used in their ordinary sense,mean 

## 'subord-inateto,

### ' 'subservient to,

### ' or 'limited by.' There is nothing in the u.seof the words 'subject to,' in their ordinary use, which would even hint. at the creation of affirmative rights." 666 F.2d at 667. See also Gold Circ1.e v. Riviera Finance-East Bay (N.D. Cal.

Such a conclusion is buttressed by the official comment to section 9-31-8. Official Comment 1 provides in pertinent part:"Subsection (1) makes no substa.ntia1 change in prior law. An assignee has traditionally been subject to defenses or set-offs existing before an account debtor is notified of the assignment.." Under prior law, the assignee of a contract was generally not held liable for the assignor's breach of contract. Thompson v. Lincoln National Life Insurance Co.

(1943),114Mont. 521-,138 P.2d 951;Apple 

### v. Edwards (1932), 92Mont. 524, 16 P.2d 700. This rule has been carried into current law as well; where it is not clearly shown that the assignee under a contract expressly or impliedly asumed the assignor's liability under the contract the assignee is not subject to the contract liability imposed by the contract on the assignor. Massey-Ferguson Credit Corporation ~7.Brown (1977),173Mont. 253, 567 P.2d 440. We believe that the intent of section 9-31.8 of the Uniform Commercial Code and section 30-9-318, MCA, was to allow an account debtor to assert contractual defenses as a set-off; the provisions were not intended, generally, to place the assignee of 

### a contract in the position of beingheld a guarantor of a product in place of the assign.or. Therefore, the summary judgment of the District Court is affirmed.

Weconcur:

Chief Justice

Justices

Mr. Chief JusticeFrank I. Haswell, Mr. JusticeDaniel J. Shea and Mr. JusticeFrank B. Morrison, Jr., dissentandwillfile written dissents later.DISSENT OF MR. JUSTICE DANIEL J. SHEA

No. 83-443 Timothy Cuchine,

VS

# . H. 0. Bell Inc. and Ford Motor Credit Co.

### Mr. JusticeDa-nielJ. 

### Sheadissenting:

I 

### concur with the dissent of Mr. JusticeMorrison. The majority has improperly decided this case on an issue not presented by this appeal. The issue of contractual liability assumed by H. 0. 

### Bell under the assigned contract was not presented at the trial court level, nor by the appellant's brief. Rather, the sole issue appealed was whether Ford Motor Credit Company could relieve itself 

### of its contractual obligations,by assigning the contract to H.O. 

### Bell. Instead of ruling on those legal issues proper1.ypresented to this Court, the majority has rai-sedits own issue in order to iustify the desired result. I 

### would hold that Ford Motor Credit Company could not relieve itself of its contractual obligations by 

### assigning the contract to H. 0. 

### Bell. Accordingly, the summary judgment entered in favor of FordMotor CreditCompany should be reversed and the cause remanded for further proceedings.Mr. Chief Justice Frank I. Haswell,dissenting.

I fully concur in the dissent of Mr. JusticeMorrison. However, since the majority have decided this appeal on the ground that the credit company i-snot liable to the consumer under the terms of the contract, I further dissent to that holding. The contract contains the following provision in bold faceprint on the face of the contract: "NOTICE--ANY HOLDER OF THIS CONSUMER CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEETOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERT7ICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THEDEBTOR HEREUNDER." This provision clearly and unambiguously states that the holder of the contract (Ford Motor Credit Company) is subject to all claims and defenses which the debtor (Cuchine) could assert against the seller (H. 0. 

### ell, 1nc.). 

### his provision for consumer protection is mandatory under Federal Trade Commission regulations. 

### 16 C.F.R. Sec. 433.2 (1978). If Cuchine got a "lemon," he has a claim against H. 0. Bell to which Ford Motor CreditCompany is subject. Alternatively, this consumer contract should be recognized for what it is

## -- an adhesi~.n contract. There is no real choice or bargaining on the terms of the contract. It is offered to the consumer on a take-it-or-leave-itbasis and he must accede to the terms required by the finance company. The FTC regulation is an attempt to protect the powerless consumer. Montana's version of the UCC provides amea.ns for the Court to assist thosepurchasing goods for personal, family or household use:

### "Unconscionable contract or clause. (1) 

### If the court as a 

### matter oflawfinds the contract or any clause of the contract to have been unconscionable at the time it was made the courtmay refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionableclause,or itmay so limit the application of any unconsciona.ble clause as to avoid any unconscionable result. "(2)

### When it is claimed or appears to the court that the contract or any clause thereofmay be unconscionable the parties shall.be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination." Contrary to the majority opinion, I 

### would hold the credit company liable to the consumer under the contract, both by its express terms or alternatively under non-enforceability of unconsci.onable terms if otherwise interpreted. 

# %Le_&.Wkd. Chief Justice

### Mz. Justice Frank B. 

### Morrison,Jr. respectfully dissents as follows: The majority opinion recognizes the "we11 established rule" that a party to a contract cannot relieve himself of obligations imposedby the contractby assigning the contract to a third person. However, the majority then goes on to determine whether, under the Uniform Commercial Code, the assignment of the contract to the credit company imposed full contract liability on the credit company as assignee. While it may appear that, pursuant to section 30-9-318, MCA, the assignee assumed full liability by operation of law, the issue isnot before this Court. At the trial court levelFord Motor Credit Companymoved for summary judgment based upon its assignment of the contract to H.O. Bell. This issue was briefed. The trial courtgranted summary judgmentbased upon that re-assignment. Cuchine appealed. The only issue on appeal was whether the assignment by Ford Motor Credit Company to H.O. Bell effectively insulated Ford Motor Credit Company from liability. In respondent's brief mention is made of an interpretationof section 30-9-318, MCA, which would protect Ford Motor Credit Company from liability. Since this issue

was not presented below it was not addressed by the appellant's brief. It was first raised on appeal in the respondent's brief. The issue is not properly before this Court and the majority opinion, in turning the case on this issue, has prevented appellant Timothy Cuchine from having his day in court. I would hold that the re-assignment from Ford Motor Credit Company to H.O. Bell, Inc., did not relieve FordMotor Credit Company from its liability. I

### would therefore reversesummary judgment in favor of Ford Motor Credit Company and remand for trial.