                       In the Missouri Court of Appeals
                               Eastern District
                                         DIVISION FOUR

TOMMY HEINZ,                                  )        No. ED107617
                                              )
         Appellant,                           )        Appeal from the Circuit Court of
                                              )        of St. Louis County
vs.                                           )        18SL-CC00313
                                              )
DRIVEN AUTO SALES, LLC, D/B/A                 )        Honorable Michael T. Jamison
DRIVEN AUTO SALES,                            )
                                              )
         Defendant,                           )
                                              )
FIRST COMMUNITY CREDIT UNION,                 )
                                              )
         Respondent.                          )        Filed: June 16, 2020

James M. Dowd, P.J., Gary M. Gaertner, Jr., J., and Robin Ransom, J.

                                                  Introduction

         Tommy Heinz bought a 2015 Toyota Tacoma automobile from Driven Auto Sales on

November 7, 2017. Driven Auto and Heinz entered into an installment sale contract and security

financing agreement for the outstanding balance of the purchase price. On the same day, Driven

Auto assigned its rights and responsibilities in those agreements to First Community Credit

Union which began collecting monthly payments from Heinz. When Driven Auto failed to

provide Heinz the title to the vehicle as required by § 301.2101, Heinz sued Driven Auto for

violation of the Missouri Merchandising Practices Act (MMPA), § 407.025. Heinz also sued


1
    All statutory references are to RSMo 2016 unless otherwise indicated.
First Community under the MMPA based on First Community’s status as Driven Auto’s

assignee and holder of Heinz’s sale contract and loan. After entering default judgment in

Heinz’s favor against Driven Auto, the trial court granted First Community’s motion to dismiss

wherein First Community asserted that it was immune from MMPA liability based on language

found in § 407.020.2 of the MMPA, language that First Community claims exempts it from

MMPA liability. Heinz now appeals that dismissal.

       We reverse.     We find that Heinz’s petition states a cause of action against First

Community because by virtue of its status as the assignee and holder of Driven Auto’s sale

contract and loan, First Community “stands in the shoes” of Driven Auto for all purposes

including being subject to the same liability exposure in connection with those transactions and

Driven Auto’s liability has already been conclusively established by the default judgment entered

against it. As a result, we need not reach the question regarding First Community’s claimed

exemption under § 407.020.2.

                                           Background

        Heinz brought his petition in two counts under § 407.025, the MMPA provision that

allows a consumer to bring a private cause of action for violations of the MMPA, seeking actual

damages and attorney’s fees. Count I was against Driven Auto and alleged that by withholding

the vehicle’s title, Driven Auto engaged in an unlawful practice involving deception, fraud, or

misrepresentation in violation of the MMPA. Heinz buttressed his allegations by asserting that

Driven Auto’s failure to transfer title of the vehicle violated § 301.210, which makes it illegal to

sell a motor vehicle in Missouri without transferring title. He also cited 15 C.S.R. § 60-

8.090(A), the state regulation promulgated by the attorney general which enumerates specific




                                                 2
practices deemed unfair under § 407.020 of the MMPA.2 That regulation provides “[i]t is an

unfair practice . . . to engage in any method, use or practice which . . . [v]iolates state or federal

law.”

         In his second count, Heinz alleged that First Community was liable under the MMPA as

Driven Auto’s assignee of the contract and loan. Heinz cited a well-known federal regulation

titled formally the “Trade Regulation Rule Concerning Preservation of Consumers' Claims and

Defenses," 16 C.F.R. § 433, et seq., and informally the “FTC holder rule.” That rule provides,

inter alia, that “[a]ny holder of this consumer credit contract is subject to all claims and defenses

which the debtor could assert against the seller of goods or services obtained pursuant hereto or

with the proceeds hereof.”3 Heinz alleged that by operation of the FTC holder rule, First

Community “stands in the shoes” of Driven Auto and is subject to the same claims that Heinz

had against Driven Auto including Heinz’s MMPA claim based on Driven Auto’s withholding of

the title to the vehicle.

         First Community’s motion to dismiss asserted that as a credit union it is exempt from

MMPA suits filed pursuant to § 407.025, the provision establishing the right of private citizens

to bring claims for MMPA violations. First Community’s assertion is based on the language in §

407.020.2(2) that “[n]othing contained in this section shall apply to . . . [a]ny institution,

company, or entity that is subject to chartering, licensing, or regulation by . . . the director of the

division of credit unions under chapter 370 . . . .” First Community asserted that as a credit

union subject to chartering, licensing, or regulation by the director of the division of credit



2
  Pursuant to § 407.145, the legislature granted to the attorney general the authority to issue rules setting out the
scope and meaning of the MMPA. Huch v. Charter Communications, Inc., 290 S.W.3d 721, 724 (Mo. banc 2009).
3
  The FTC holder rule also provides that it is an unfair or deceptive act for a seller of goods to consumers to fail to
include in a consumer credit contract this quoted statement. Heinz alleged the contract here bore that statement
which First Community has not disputed.

                                                          3
unions, it is exempt from any MMPA liability resulting from the conduct of its assignor Driven

Auto. After the motion to dismiss was granted, Heinz filed this appeal.

                                        Standard of Review

       We review de novo the grant of a motion to dismiss a petition for failure to state a claim.

Lang v. Goldsworthy, 470 S.W.3d 748, 750 (Mo. banc 2015). The facts contained in the petition

are treated as true and they are construed liberally in favor of the plaintiff. Ste. Genevieve Sch.

Dist. R–II, et al. v. Bd. of Aldermen of Ste. Genevieve, et al., 66 S.W.3d 6, 11 (Mo. banc 2002).

If the petition sets forth any set of facts that, if proven, would entitle the plaintiff to relief, then

the petition states a claim. Id. Plaintiff’s petition states a cause of action if “its averments

invoke principles of substantive law [that] may entitle the plaintiff to relief.” Asaro v. Cardinal

Glennon Mem’l Hosp., 799 S.W.2d 595, 597 (Mo. banc 1990).

       In determining the appropriateness of the trial court's dismissal of a petition, an appellate

court reviews the grounds raised in the defendant's motion to dismiss. Lang, 470 S.W.3d at 750.

If the motion to dismiss cannot be sustained on any ground alleged in the motion, the trial

court's ruling will be reversed. Id. Moreover, where, as here, “the trial court does not state a

basis for its dismissal, we presume that dismissal was based on the grounds stated in the motion

to dismiss . . . .” State Dep’t of Soc. Services., Div. of Aging v. Carroll Care Centers, Inc., 11

S.W.3d 844, 849 (Mo. App. W.D. 2000).

                                             Discussion

       1. Heinz’s MMPA claims.

       The fundamental purpose of the MMPA is to protect customers and consumers. Arcese v.

Daniel Schmitt & Co., 504 S.W.3d 772, 789 (Mo. App. E.D. 2016) (citing Berry v. Volkswagen

Grp. of Am., Inc., 397 S.W.3d 425, 433 (Mo. banc 2013)).               “The MMPA is paternalistic



                                                   4
legislation designed to protect those that could not otherwise protect themselves.” Berry, 397

S.W.3d at 433 (citations omitted). To promote this laudable purpose, the MMPA broadly

prohibits false, fraudulent, or deceptive merchandising practices and affords our trial courts

remedial measures (i.e., damages, injunctions, equitable relief, and attorney's fees), “designed not

only to remedy violations of the MMPA, but also prospectively to deter prohibited conduct and

protect Missouri citizens.” Id. In conjunction therewith, effectuating this legislative purpose is

not confined to the office of the attorney general, but private citizens injured by MMPA

violations “have a right to act as 'private attorneys general' for purposes of enforcing it.” Hess v.

Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 769 (Mo. banc 2007); § 407.025.1.

       In addition to civil liability, persons who violate the MMPA may be subject to criminal

prosecution. Huch, 290 S.W.3d at 725. A person who willfully and knowingly engages in an act

declared unlawful by § 407.020 is guilty of a class E felony. Id.; § 407.020.3.

       Section 407.025, the statute that created the private right of action, provides as follows:

       1. Any person who purchases or leases merchandise primarily for personal, family or
          household purposes and thereby suffers an ascertainable loss of money or property,
          real or personal, as a result of the use or employment by another person of a method,
          act or practice declared unlawful by section 407.020, may bring a private civil action
          in either the circuit court of the county in which the seller or lessor resides or in
          which the transaction complained of took place, to recover actual damages. The court
          may, in its discretion, award punitive damages and may award to the prevailing party
          attorney's fees, based on the amount of time reasonably expended, and may provide
          such equitable relief as it deems necessary or proper.

Section 407.020 declares which methods, acts, or practices are unlawful:

       1. The act, use or employment by any person of any deception, fraud, false pretense,
          false promise, misrepresentation, unfair practice or the concealment, suppression, or
          omission of any material fact in connection with the sale or advertisement of any
          merchandise in trade or commerce . . . in or from the state of Missouri, is declared to
          be an unlawful practice . . . .




                                                 5
          Because Heinz’s MMPA claim against First Community is derivative of his claim against

Driven Auto, we briefly address that claim. Heinz alleged that Driven Auto’s failure to transfer

to him the vehicle’s title violated § 301.210, which makes it unlawful and fraudulent to sell a

motor vehicle in Missouri without transferring title. He also cited 15 C.S.R. § 60-8.090(A), the

state regulation promulgated by the Missouri Attorney General to enumerate specific practices

deemed unfair under § 407.020. That regulation provides “[i]t is an unfair practice . . . to engage

in any method, use or practice which . . . [v]iolates state or federal law.”

          We find that Heinz’s petition stated a cause of action against Driven Auto under §

407.025 for its conduct defined as unlawful by § 407.020 and § 301.210. In addition, the default

judgment against Driven Auto established conclusively that Heinz stated a cause of action

because a default admits the petition's traversable allegations “constituting the plaintiffs' cause of

action and the defendant's liability thereunder.” Coleman v. Meritt, 292 S.W.3d 339, 343 (Mo.

App. S.D. 2009) (quoting Sumpter v. J.E. Sieben Constr. Co., 492 S.W.2d 150, 153 (Mo. App.

1973)).

          2. Heinz’s petition states a cause of action against First Community under Missouri law

             based on First Community’s status as Driven Auto’s assignee.

          Although Heinz’s petition emphasized the federal law basis of the claim against First

Community, specifically the FTC holder rule, we find that Heinz’s allegations are sufficient

under our standard of review to invoke principles of Missouri law that may entitle plaintiff to

relief against First Community as Driven Auto’s assignee of the sale contract and loan

agreement. We specifically look to the Uniform Commercial Code–Sales, § 400.2-101 et seq.,

and related Missouri case authorities, to determine the question before us.




                                                  6
       The UCC applies to the assignment of sales agreements that occur in Missouri like the

one here.    Section 400.2-210(5) provides that “[a]n assignment . . . is a delegation of

performance of the duties of the assignor and its acceptance by the assignee constitutes a promise

by him to perform those duties. This promise is enforceable by either the assignor or the other

party to the original contract.” § 400.2-210(5). Moreover, the UCC favors the free assignability

and delegation of rights and duties in sales agreements except where the rights and duties of the

contracting parties are significantly altered or their “chance of obtaining return performance”

materially diminished. § 400.2-210(2); Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322

S.W.3d 112, 124 n.14 (Mo. banc 2010) (citing J. White and R. Summers, Uniform Commercial

Code 278 (5th ed. 2002)).

       So, under the foregoing UCC principles, the assignment here did two things. First, it

gave First Community the same rights Driven Auto had under the sale contract and loan

agreement including the right to collect the loan payments from Heinz which First Community

proceeded to do. But the assignment also meant that First Community became obligated to

perform all of Driven Auto’s duties created by the sales contract and security agreement

including the statutory duty under § 301.210 to transfer title to Heinz upon delivery of the

vehicle. To hold otherwise would run contrary to § 400.2-210(2)’s mandate that the assignment

must not materially diminish Heinz’s “chance of obtaining return performance.”

       Moreover, by operation of § 400.2-210(5), First Community’s acceptance of the

assignment, which is undisputed here, constituted an affirmative promise by First Community to

perform Driven Auto’s duties under the contract which included, according to the allegations in

Heinz’s petition, to provide Heinz with the title to the vehicle. We observe that by using the

term “promise” in this context, the legislature has unequivocally communicated that the assignee



                                                7
is not only accepting the rights and responsibilities of the assignor, but is affirmatively promising

to abide by such.

           The general rule is that the assignee of a non-negotiable obligation occupies exactly the

same position the assignor occupied. Peel v. Credit Acceptance Corp., 408 S.W.3d 191, 206

(Mo. App. W.D. 2013) (citing United Fin. Plan, Inc. v. Parkview Drugs, Inc., 250 S.W.2d 181,

184 (Mo. App. 1952)). And just as the assignee accepts performance of all of the assignor’s

duties under the contract, the assignee also takes subject to all defenses that might have been

made against it while in the hands of the assignor at the time of assignment. Id.

       Thus, guided by Missouri Supreme Court Rule 55.05’s liberal pleading policy and our

standard of review which prohibits dismissal if the petition sets forth any set of facts entitling the

plaintiff to relief, we find that Heinz’s petition states an MMPA claim against First Community,

as Driven Auto’s assignee, for the fraudulent and illegal failure to provide Heinz with title to the

vehicle.

       3.        Heinz’s petition also states a cause of action against First Community by

                 operation of the FTC holder rule.

       In many respects, the FTC holder rule mirrors the foregoing principles of Missouri law

regarding assignee liability. The FTC holder rule provides that “any holder of this consumer

credit contract is subject to all claims and defenses which the debtor could assert against the

seller of goods or services obtained . . . .” 16 C.F.R. § 433.2. And like the MMPA, the FTC

holder rule “exists to preserve consumer rights against holders[.]” Boulds v. Chase Auto Fin.

Corp., 266 S.W.3d 847, 852 (Mo. App. E.D. 2008).

       From our analysis below, we reach the critical conclusion that the “subject to all claims”

language from the FTC holder rule is broad and encompasses the MMPA claim at issue here. In



                                                  8
Boulds, we found that “the liability of the holder is as broad as that of the seller under the FTC

holder rule[.]” 266 S.W.3d at 852. And Missouri courts have consistently held that an assignee-

holder, “by virtue of being an assignee,” may be liable on an MMPA claim regardless of whether

the assignee committed fraudulent or unlawful conduct. Peel, 408 S.W.3d at 205-06 (holding

that the assignee-holder of a retail installment contract from the purchase of a vehicle was liable,

“by virtue of being an assignee,” for a consumer’s MMPA claim filed against the holder even if

based solely on the seller’s failure to deliver title upon delivery of the vehicle); Boulds, 266

S.W.3d at 851-52 (holding, conversely, that where a consumer’s MMPA claim brought against

the seller was subject to a binding arbitration agreement, the assignee-holder of the contract

containing that agreement was likewise shielded from the civil suit under the MMPA).

       The language of our cases cannot be more explicit. “[T]his provision [the FTC holder

rule] in a Retail Installment Contract puts the holder in the shoes of the seller[,]” Peel, 408

S.W.3d at 205; “the assignment of [a] sales contract [containing such language] . . . carries with

it the responsibility of owning that contract[,]” id.; and “[t]he general rule is that the assignee of

a non[-]negotiable obligation occupies exactly the same position with respect thereto that his

assignor occupied.” Id. at 206 (citing Parkview Drugs, 250 S.W.2d at 184).

       While we acknowledge the line of cases relied on by First Community that have sought

to restrict the types of claims and defenses to which a holder becomes subject by operation of the

FTC holder rule, see, e.g., Comer v. Person Auto Sales, Inc., 368 F.Supp.2d 478, 490 (M.D.N.C.

2005) (finding that the FTC holder rule could not be used affirmatively against assignee for

dealer's fraudulent conduct where buyer failed to show that dealer’s conduct had rendered the

vehicle practically worthless to him, or that contract rescission was appropriate), our cases have

followed a broader interpretation of the rule. Boulds, 266 S.W.3d at 850.



                                                  9
       “[T]he FTC Holder Rule is unambiguous and, on its face, places no limitation on the

types of claims or defenses that a debtor may assert against a creditor-assignee.” Beemus v.

Interstate Nat’l Dealer Services, 823 A.2d 979, 984 (Pa. Super. 2003). The court in Beemus

adopted this rule in accordance with the staff opinion letter issued by the FTC on September 25,

1999, which stated: “If the Commission had meant to limit recovery to claims subject to

‘rescission’ or similar remedy, it would have said so in the text of the Rule and drafted the

contractual provision accordingly.” (reaffirmed by the most recently-adopted version of the FTC

holder rule, 84 Fed. Reg. 18711, 18712 (May 2, 2019)).

       And in Boulds, we found the scope of the “claims” to which the holder is subject under

the FTC holder rule to be broad and not limited to situations where the buyer could establish

grounds for rescission and restitution. In Boulds, we rejected the argument that pursuant to the

following language from § 408.405, an automobile purchaser could raise fraud as a defense or as

a setoff but could not bring an affirmative fraud claim against the holder: “The rights of a holder

or assignee of an instrument, account, contract, . . . are subject to all defenses and setoffs of the

debtor arising from or out of such sale . . . as a matter of defense to or setoff against a claim by

the holder or assignee, . . . .” 266 S.W.3d at 850. We explained that the phrase “only . . . as a

matter of defense or setoff against a claim by the holder or assignee” in § 408.050 does “not

modify the consumer's assertion of his or her rights, rather they modify the ‘defenses and setoffs’

to which a holder's rights are subject.” Id. We cautioned that respondent’s interpretation of §

408.405 was “troubling . . . because it betrays the wording and purpose of the statute, and

because the result leaves the buyer with no recourse beyond waiting to be sued.” Id.

       Moreover, “[t]o limit consumer claims to only those situations where rescission of the

contract is appropriate would, in many instances, confound the FTC's goal of shifting liability for


                                                 10
seller misconduct from the consumer to the seller or its assignee.” Beemus, 823 A.2d at 985

(citing to 40 Fed. Reg. 53506, 53523 (November 18, 1975), which discusses at length the

rationale behind the FTC holder rule and the FTC's expressed desire to “reallocat[e] the costs of

seller misconduct in the consumer market,” by “compel[ling] creditors to either absorb seller

misconduct costs or return them to sellers.”).

       So here, where Heinz pleaded that the agreement at issue contained the language required

by the FTC holder rule that any assignee-holder is subject to “all claims that the consumer could

assert against the seller of the vehicle,” First Community was placed in the shoes of Driven Auto

and therefore is subject to the same claims that Heinz had against Driven Auto.

   4. The foregoing renders inapplicable and inoperative the language of § 407.020.2 which

       First Community asserts exempts it from MMPA liability in this case.

       Our holding in this regard is simple. To exempt First Community from liability in this

case would be antithetical to the fundamental and well-established principles outlined above that

First Community “stands in the shoes” of Driven Auto. It would fly in the face of the mandates

from the UCC that (1) by accepting the assignment, First Community “promised” to perform

Driven Auto’s duties, § 400.2-210(5), and (2) that an assignment must not significantly alter the

rights and duties of the contracting parties or materially diminish their “chance of obtaining

return performance.” § 400.2-210(2). These principles would be gutted if First Community was

allowed to enjoy the benefits of the assignment by collecting on the loan while escaping the

responsibilities and duties to which it promised to adhere.

       Similarly, First Community’s claimed exemption would also gut the fundamental

principle of the FTC holder rule that the liability of the holder is as broad as that of the seller.

We need not look any further than our decision in Boulds to illustrate this point. There, we



                                                 11
enforced an arbitration agreement in favor of the holder even though the holder only became a

party to the agreement after the seller assigned all of its interest under the agreement. “Just as

liability of the holder is as broad as that of the seller under the FTC holder rule, the liability of

the holder should be subject to the same limitations as that of the seller.” Boulds, 266 S.W.3d at

852.

       While we are dubious that § 407.020.2 created a vast immunity for credit unions from all

MMPA liability, in light of our holdings above, we need not reach that issue.

                                            Conclusion

       Accordingly, we reverse and remand.




                                                              James M. Dowd, Presiding Judge

Gary M. Gaertner, Jr., and
Robin Ransom, J., concur.




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