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M&M Auto Outlet v. Hill Investment Corp.

April 28, 2010


Appeal from the District Court of Laramie County The Honorable Edward L. Grant, Judge.

The opinion of the court was delivered by: Kite, Justice.

Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.

[¶1] M&M Auto Outlet (M&M) and Hill Investment Corporation, doing business as First Financial, Inc., (FFI) entered into a contract in which FFI agreed to purchase vehicle loans from M&M and perform collection activities on the loans at its expense. In the event an M&M customer became delinquent on a loan, the contract provided that M&M would pay FFI the "full recourse amount." Alleging that M&M failed to pay the full recourse amount on delinquent loans in accordance with the contract, FFI filed a complaint for breach of contract. The district court granted summary judgment for FFI and ordered M&M to pay the full recourse amount plus interest. M&M appealed. We affirm.


[¶2] M&M presents the following issues for this Court‟s determination:

1. Whether the parties‟ Agreement was ambiguous?

2. Was there a genuine issue of material fact as to whether Plaintiff-Appellee performed in good faith its obligation under the parties‟ Agreement to diligently collect on the loans it purchased from Defendant-Appellant?

3. Whether Plaintiff-Appellee‟s breach of the parties‟ Agreement excused Defendant-Appellant‟s recourse obligation?

4. Was there a genuine issue of material fact as to whether Plaintiff-Appellee mitigated its damages?

5. Did Plaintiff-Appellee produce sufficient evidence to support summary judgment in its favor?

6. Whether the District Court abused its discretion in refusing to continue the summary judgment hearing when Plaintiff-Appellee had not timely responded to Defendant-Appellant‟s discovery?

FFI asserts the district court properly granted summary judgment in its favor because the contract was clear and unambiguous, FFI was not required to prove it had taken specific steps to mitigate and sufficient evidence supported the order. FFI also asserts the district court did not abuse its discretion in denying M&M‟s motion to vacate the summary judgment hearing.


[¶3] M&M is in the business of selling used cars and does so in various locations in Wyoming. As part of the business, M&M provides sub-prime financing for its customers. FFI is in the business of purchasing sub-prime consumer loans from used car dealers such as M&M. When companies like FFI purchase loans from used car dealerships like M&M, the dealership receives immediate operating capital and the loan purchaser assumes responsibility for collecting on the loans.

[¶4] On July 22, 2003, FFI offered M&M the opportunity to participate in a "full recourse paper-buying program." The agreement setting forth the terms of the program provided that FFI would purchase the loans M&M extended to its customers; M&M‟s customers then would make the monthly loan payments directly to FFI rather than to M&M; and, in the event a customer was delinquent in making the payments due:

FFI will perform all collection activities on accounts including but not limited to telephone collections and dunning when appropriate. All collection costs, excluding repossession, are paid entirely by FFI.

The agreement further provided that FFI would advise M&M of any "problem collection accounts" and exercise its "Full Recourse option" after discussing those accounts with M&M. Thus, M&M retained potential responsibility for the auto loans in the event of customer default. The amount due to FFI from M&M upon customer default was to be "the funding amount by FFI less any principal received on the account." The agreement required M&M to pay off all designated "recourse accounts" within 30 days.

[¶5] M&M‟s owner and FFI‟s general manager signed the agreement on behalf of the respective entities in 2003 and FFI proceeded to purchase the loan contracts. In 2008, FFI filed a complaint alleging that M&M breached the agreement by failing to pay the full recourse amounts due as the agreement required. FFI sought judgment against M&M in the amount of $194,044.28 plus post-judgment interest and attorney‟s fees. M&M generally denied that it breached the agreement and asserted as an affirmative defense that FFI negligently and in bad faith failed to fully perform its obligation to collect on the accounts.

[¶6] FFI filed a motion for summary judgment to which it attached portions of the deposition of Keith Smith, M&M‟s vice president, secretary and the person in charge of its daily operations; the affidavit of Don Shaw, FFI‟s general manager; a list of the delinquent customer accounts and amounts owed; the 2003 full recourse agreement; and the notice of recourse designated accounts FFI provided to M&M upon the delinquencies. In support of its motion, FFI asserted that the full recourse program agreement clearly and unambiguously required M&M to pay to FFI the amounts owing from defaulting customers upon FFI‟s designation of the account as subject to full recourse.

[¶7] M&M responded to the motion and submitted the affidavit of Mr. Smith in which he averred that he entered into the 2003 full recourse agreement in reliance upon FFI "undertaking full and diligent collection efforts of the accounts it purchased in conformity with the generally followed practices for collection of delinquent payments arising under sales and financing agreements for "sub-prime‟ used automobiles." Mr. Smith asserted that, contrary to general practice, FFI did not hire an attorney or collection agency or engage in efforts to repossess the vehicles involved; instead, FFI made a couple of telephone calls and then sought full recourse. Mr. Smith also averred that FFI did not discuss the problem accounts with him before seeking recourse as the agreement required. Mr. Smith stated that when it became apparent that FFI was making only a "token effort" to collect on the delinquent accounts, he "considered that [FFI] had breached the Agreement thereby relieving M&M of further performance."

[¶8] M&M also filed the affidavit of Diana Gray who stated she has worked in the automobile sales and finance business since 1978, is familiar with sub-prime financing of used automobiles and has "years of experience in various collection practices involving the documentation, administration and enforcement of sub-prime automobile financing obligations." Ms. Gray stated that "a standard part of collecting on these kinds of loans is to engage in "skip tracing‟"*fn1 and, when telephone or written contact fails, repossess the vehicle, turn the matter over to a collection agency, file a claim in small claims court or, if warranted by the amount owed, hire an attorney to file a claim in district court. Ms. Gray averred "it is not proper or complete performance under an agreement for the collection of delinquent purchase agreements arising from sub-prime automobile loans to limit collection activities to a few telephone calls."

[¶9] In its reply to M&M‟s submissions, FFI distinguished full recourse contracts, in which the dealership must make good on any loans it sells that end up in default, from non-recourse contracts, where there is no recourse against the dealer in the event of default, and asserted FFI made a business decision to pay a premium of $4,247,761.47 for the accounts on the basis that, in the event of default, it had the contractual right to seek payment of the amounts due from M&M. FFI attached a second affidavit from its general manager, Mr. Shaw, attesting to that decision and payment amount. FFI also asserted it had complete discretion in its collection efforts under the plain language of the agreement. Additionally, FFI pointed to facts showing that M&M did not complain about FFI‟s collection practices until after FFI filed this action; in 2004 Mr. Smith wrote to FFI stating that M&M was moving away from full recourse agreements, not because of FFI‟s collection practices, but because they were not profitable for M&M; and in a subsequent communication M&M acknowledged it was behind in making the full recourse payments, suggested a plan for it to become current, and did not mention any problem with FFI‟s collection practices. FFI asserted M&M‟s criticism of FFI‟s practices was an after-the-fact attempt to avoid making the payments.

[¶10] After a hearing, the district court granted summary judgment for FFI. The district court concluded the agreement was not ambiguous, M&M breached the agreement by failing to timely pay the amounts due and FFI incurred damages in the amount of $186,766.50 plus $52,248.53 in interest. M&M timely appealed the judgment to this Court.


[¶11] When reviewing an order granting summary judgment, we consider the record de novo. Stone v. Devon Energy Prod. Co., L.P., 2009 WY 114, ¶ 10, 216 P.3d 489, 492 (Wyo. 2009).

[W]e have exactly the same duty as the district judge; and, if there is a complete record before us, we have exactly the same material as did [the district judge]. We must follow the same standards. The propriety of granting a motion for summary judgment depends upon the correctness of a court‟s dual findings that there is no genuine issue as to any material fact and that the prevailing party is entitled to judgment as a matter of law. This court looks at the record from the viewpoint most favorable to the party opposing the motion, giving to ...

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