Lafferty v. Wells Fargo Bank

Patrick and Mary Lafferty (plaintiffs) bought a motor home in late 2005 manufactured by Fleetwood Motor Homes (Fleetwood) (defendant) from Geweke Auto & RV Group (Geweke) (defendant) under an installment contract. Geweke assigned the contract to Wells Fargo Bank (Wells Fargo) (defendant). Pursuant to a requirement of the Federal Trade Commission known as the Holder Rule, the installment contract included a clause stating that the holder of the contract was subject to all claims and defenses the buyer could assert against the seller and that recovery by the buyer could not be greater than the amount paid by the buyer. The motor home began having problems almost immediately, including electrical issues. The motor home began having problems almost immediately. The Laffertys returned the motor home to Geweke and stopped making payments. Wells Fargo eventually took possession of the motor home. While Wells Fargo made no efforts to collect more money from the Laffertys, Wells Fargo did report the Laffertys’ nonpayment to consumer credit reporting agencies. In November 2006, the Laffertys sued Fleetwood, Geweke, Wells Fargo, and Phoenix American Warranty Company, Inc. (Phoenix American) (defendant), from whom the Laffertys had bought an extended warranty. As against Wells Fargo, the Laffertys made claims for various breaches and violations of various acts, all based on Wells Fargo being the assignee of the installment contract between the Laffertys and Geweke. The Laffertys also made a claim against Wells Fargo based on Wells Fargo’s own negligence. Wells Fargo demurred to the Laffertys’ amended complaint in regard to several claims, and that was sustained by the trial court. Wells Fargo then moved for summary judication of the remaining six causes of action. The trial court granted summary judgment to Wells Fargo, finding that the Laffertys had presented no real evidence beyond the pleadings in the complaint. The trial court also found that the Holder Rule applied only when the buyer received little or no value and that the assignment from Geweke to Wells Fargo was intended merely as a security interest and not an assumption of warranty obligations. The Laffertys did receive a judgment against Geweke for $210,000, and the Laffertys appealed the summary-judgment ruling in favor of Wells Fargo.