## Facts

- The Morgans bought a new 1978 Mercury Zephyr from a dealer and financed the purchase through Ford Motor Credit Company (Ford Credit) using a Massachusetts retail installment contract prepared by Ford Credit.
- Ford Credit financed $3,833, payable in 36 monthly installments; a certificate of title listed Ford Credit as first lienholder.
- The contract contained the FTC holder notice stating that any holder is subject to the buyer’s claims and defenses against the seller, with recovery capped at amounts paid under the contract.
- The contract required the Morgans to maintain insurance while any amount remained unpaid.
- Over about 18 months, the Morgans drove the car more than 11,500 miles and experienced several defects, including a trunk leak, faulty head gasket, rust, hood misalignment, paint/shine loss, and a transmission issue shifting from “park” to “reverse” when unattended.
- The Morgans later missed payments (November and December 1979) and allowed required insurance to lapse in January 1980.
- Ford Credit sued to recover amounts due and possession of the vehicle; the Morgans counterclaimed against Ford Credit, asserting dealer-based warranty and consumer-protection theories via the FTC holder notice.
- The trial court entered judgment for Ford Credit and denied the Morgans affirmative recovery on their counterclaims; the Morgans appealed the denial of their counterclaims.

## Issues

1. Whether the FTC holder notice in the retail installment contract subjects the assignee-creditor to affirmative liability for the buyer’s claims against the seller, and if so, within what limits.
2. Whether, on the trial judge’s findings regarding the vehicle’s defects and the Morgans’ use of the vehicle, the Morgans proved entitlement to damages or other affirmative relief against Ford Credit.

## Decision

- The Supreme Judicial Court of Massachusetts affirmed the judgment denying the Morgans recovery on their counterclaims.
- The court treated the FTC holder notice as contractually binding, allowing assertion of seller-based claims and defenses against the holder, but only if the buyer proves an underlying claim and compensable damages.
- Based on the supported trial findings, the Morgans failed to establish a basis for affirmative relief against Ford Credit.

## Legal Principles

- The FTC holder notice permits a consumer to assert against a contract holder the same claims and defenses the consumer could assert against the seller.
- The holder notice does not create warranties or new substantive obligations; it preserves existing seller-based claims and defenses against the assignee.
- Any affirmative recovery against a holder under the notice is capped at the amounts the consumer paid under the contract.
- Appellate review gives substantial deference to a trial judge’s factual findings when supported by the evidence, including findings about the extent of defects, the buyer’s use and benefit, and whether damages are proven.

## Conclusion

The court held that, although the FTC holder notice subjects an assignee to proven seller-based claims and defenses within a contractual cap, the Morgans did not prove compensable entitlement to affirmative relief on the trial record, so they recovered nothing on their counterclaims and the judgment for Ford Credit was affirmed.


Ford Motor Credit Co. v. Morgan, 536 N.E.2d 587 (Mass. 1989)