Opinion
LINCOLN-MERCURY
11-12-1958
CITYCOMPANY, a California Corporation, Plaintiff and Respondent, v. L. V. LINDSEY, Defendant and Appellant. * Civ. 22755.
Victor Bewley, Los Angeles, for appellant. Delbridge, Hamblin & Linton, Pasadena, for respondent.
CITY LINCOLN-MERCURY COMPANY, a California Corporation, Plaintiff and Respondent,
v.
L. V. LINDSEY, Defendant and Appellant. *
Nov. 12, 1958.
Rehearing Denied Dec. 2, 1958.
Hearing Granted Jan. 7, 1959.
Victor Bewley, Los Angeles, for appellant.
Delbridge, Hamblin & Linton, Pasadena, for respondent.
SHINN, Presiding Justice.
Plaintiff is an automobile dealer. On October 22, 1954, defendant went to plaintiff's new car agency in Pasadena and purchased a 1954 Lincoln coupe, giving as a trade-in a 1948 Packard sedan. The court also found that Lindsey signed an uncompleted purchase order and a form of conditional sales contract which was in blank, and took possession of the coupe. The court found that on October 26th plaintiff filled out the form and mailed Lindsey a copy, bearing the signatures of Lindsey and of plaintiff, by its president, which contained a complete statement of the terms of the sale. The evidence was sufficient to support these findings. In his testimony defendant did not deny that he had received a copy of the purported contract. On October 26th, plaintiff assigned the contract to a local bank, with recourse.
The writing provided that defendant was to pay a purchase price of $6,047.38 for the Lincoln, less $1,815, the agreed tradein value of the Packard, plus a time price differential of $770.12; the balance of $5,002.50 was payable in 30 equal monthly installments of $166.75, commencing November 22, 1954. After receiving a payment book from the bank, Lindsey asked that the payment date be changed to the 2nd of each month, beginning December 2nd; the bank consented, and on November 30th the bank and defendant entered into a written agreement, modifying the payment date in accordance with Lindsey's request, but specifically reaffirming the other provisions of the conditional sale contract.
Defendant paid the first two installments due under the contract and made a $100 payment on account of the third installment. On March 19, 1955, he drove the coupe to plaintiff's place of business and left it and the car keys with an attendant. The bank reassigned the contract to plaintiff in April and the latter made minor repairs to the car, which cost $61.89. Plaintiff resold the Lincoln for $3,238 and sued Lindsey for a deficiency judgment; the complaint alleged that there was a balance due of $1,352.20, principal and interest, plus attorney's fees.
Lindsey answered and filed a cross-complaint against the seller wherein he sought to recover the installments he had paid to the bank and the reasonable value of the Packard sedan, which he alleged to be $2,000. His theory of recovery was that the conditional sale contract was void because it did not comply with section 2982 of the Civil Code, and that he was entitled to recover the entire consideration he had paid pursuant to the contract. Lindsey also sought an award of exemplary damages. The answer of plaintiff denied that the contract was void and alleged, as an affirmative defense, that defendant had waived his right to attack the validity of the contract. Plaintiff also filed a counterclaim to the cross-complaint for the reasonable rental value of the use of the Lincoln while it was in defendant's possession.
Trial was to the court, which made findings and awarded plaintiff a judgment in the sum of $1,119.57, being the amount found to be unpaid under the contract; also $192.21 interest and $116.74 as attorney's fees. The court also found that the depreciation in value of the Lincoln exceeded the amount Lindsey had paid and entered judgment in favor of plaintiff on the cross-complaint. Defendant appeals from the judgment.
We are of the opinion that the court erred in awarding plaintiff a judgment and in denying defendant a recovery on his cross-complaint.
Section 2982, subdivision (a), of the Civil Code provides that every contract for the conditional sale of a motor vehicle shall be in writing and shall contain a complete statement of the terms of the contract. The statute also provides: 'It [the contract] shall be signed by the buyer * * * and by the seller * * * and when so executed an exact copy thereof shall be delivered by the seller to the buyer at the time of its execution.' There are ten items relating to the selling price of the vehicle which must be stated in the contract. One of them is the 'time price differential,' which is the difference between the cash price and the total contract price. Subdivision (c) of the section requires that the time price differential shall not include interest in a greater amount than 1% per month on the unpaid balance or $25, whichever is greater. Subdivision (e) allows a buyer to recover from the seller all payments made upon the unpaid balance if, except through inadvertence of the seller, the time price differential is in violation of subdivision (c).
In the case of Lewis v. Muntz Car Co., 50 Cal.2d 681, 328 P.2d 968, it was decided that where the seller of a motor vehicle issued a contract which failed to conform to the requirements of subdivision (c) of section 2982 the buyer could recover from the seller the amounts paid on the contract balance without offset of the value of the use of the car.
Our first question is whether there was a violation of subdivision (c). We do not doubt that there was. We interpret the section as requiring that the contract contain a statement of the time price differential in an amount which is permitted by subdivision (c). It must affirmatively appear from the contract that interest was not charged in an excessive amount. The duty is upon the seller who stands upon the contract to prove that fact and this can be done only by proving a valid contract. The purpose of the requirement is to show the purchaser, at a glance, the added cost of the installment purchase, and this purpose is defeated if there is no statement whatever of this cost. The failure to state the amount of the time price differential constituted a violation of subdivision (c). Lindsey was therefore entitled to recover the amount of his payments on the unpaid balance of the contract.
Prior to the amendment of 1949 (Stats.1949, Ch. 1594) the former subdivision (c) provided in case of violation of subdivision (c), recovery, as a penalty, of three times the amount paid on the contract balance. As it now reads, subdivision (e) provides a special remedy. As interpreted in the Lewis case, it permits recovery of all sums paid on the unpaid balance without requiring the buyer to do equity or allowing the seller to offset the amount of his damage occasioned by the purchaser's disaffirmance of the contract.
This measure of recovery for violation of subdivision (c), penal in nature, does not apply to the down payment the purchaser may have made. In Lewis, supra, default judgment was entered against Muntz for $1,633.30, being the difference between the total amount paid by Lewis and an offset of $2,000 which was found to be the value of the use of the car. Muntz did not appeal. On the appeal by Lewis, Muntz was denied the right of offset and judgment was directed for Lewis against Muntz for the total sum paid. It was not contended on the appeal that an offset should be limited to the amount of the down payment as distinguished from the installment payments on the balance. That question was not before the court and was not considered. On the other hand, Seaboard, the holder of the contract, not being chargeable with a penalty under subdivision (e), and being liable only for the return of the installment sums it had received on the contract balance, was allowed as an offset to its liability, the value of the use of the car. There appears no reason to doubt that had the matter been before the Supreme Court for decision, as between Lewis and Muntz, it would have been held that since the penalty under section 2982, subdivision (e), runs only to amounts paid on the unpaid balance the value of the use of the car would have been offset against the down payment of $800.
It is to be noted that in Lewis, as in the other cases we shall refer to, excepting Williams v. Caruso Enterprises, 140 Cal.App.2d Supp. 973, 295 P.2d 592, no question was presented whether an offset should be based upon rental value or upon depreciation.
Hence, although, independently of subdivision (e), the purchaser may disaffirm the illegal contract and sue for the value of what he has parted with, as Lindsey has done, his right to recover the amount or value of his down payment is governed by principles applicable in cases of rescission. In other words, he must do equity.
It is settled that without regard to the penalty of section 2982, subdivision (e), a buyer may rescind a purchase for violation of section 2982, subdivision (a). Carter v. Seaboard Finance Co., 33 Cal.2d 564, 203 P.2d 758; Lewis v. Muntz Car Co., supra, 50 Cal.2d 681, 328 P.2d 968.
Prior to the decision in Lewis v. Muntz Car Co., supra, 50 Cal.2d 681, 328 P.2d 968, there had been a number of cases based upon a failure to comply with section 2982 for the recovery of sums paid on account of the purchase price. They were treated as cases of rescission. In some of them there was a question of the seller's right of offset against his liability for payments he had received. An offset was allowed in the form of the rental value of the car or in the amount of depreciation in the value of the car. In other cases no question of offset was raised. But whenever an offset was claimed it was treated by the parties and the court as justly due from the buyer under the rule that upon rescission of a contract the court may require the party to whom relief is granted to make any compensation to the other that justice may require. Civil Code, § 3408.
In United States Credit Bureau v. Sanders, 103 Cal.App.2d 806, 230 P.2d 849, in which defendants cross-complained for rescission for fraud and violation of section 2982, the cross-complaint alleged and the answer to the cross-complaint did not effectually deny, that the value of the use of the equipment while in possession of the cross-complainants was $1,000 for one vehicle and $750 for the other. This admission by the cross-complainants was overlooked in the findings and judgment. It was decided on the appeal that the parties had intended to tender that issue and might have it determined upon a retrial for that special purpose if they cared to do so.
In Adams v. Caruso Enterprises, Inc., 134 Cal.App.2d 403, 285 P.2d 1022, the trial court found that the use of the Dodge automobile which Adams purchased was worth $412.50 more than the use of the Plymouth car which he traded in, and by its judgment allowed plaintiffs the value of the Plymouth less the difference in rental value of the two cars. The only contention with respect to rental values was a claim by the defendant on appeal that it should not have been charged with the rental value of the Plymouth. The reviewing court said (134 Cal.App.2d at page 409, 285 P.2d at page 1026): 'We perceive no violation of either justice or equity in the action of the court wherein the loss of use of the respective vehicles was equalized.' Under plaintiffs' amended complaint, the action was one for rescission.
In Baum v. Aleman, 139 Cal.App.2d Supp. 929, 293 P.2d 162, in which defendant cross-complained for rescission for violation of section 2982 and for money had and received, it was held on the appeal that the court erred in awarding defendant the sums he had paid on the purchase price without an offset. The reviewing court said (139 Cal.App.2d Supp. at page 933, 293 P.2d at page 164): 'As the seller delivered possession and use of his automobile to the buyer, no contract with respect thereto existing, the law implied an agreement upon the part of the user of the automobile to pay the owner thereof the reasonable value of such use.'
In Williams v. Caruso Enterprises, 140 Cal.App.2d Supp. 973, 295 P.2d 592, 593, the parties had stipulated at the trial that the reasonable rental value of the car purchased by plaintiff was 'in excess of but limited to $895' and the reasonable value of the car which plaintiff had traded in 'was in excess of but limited to $135.' The car had been repossessed by the seller and the action was treated as one for rescission. It was held on appeal that the seller was not entitled to set off against the sums recoverable by the buyer the reasonable rental value of the car, which 'according to the testimony adduced by the seller in cases before us, frequently exceeds the total sales price of the car in the first instance.' (140 Cal.App.2d Supp. at page 980, 295 P.2d at page 597.) It was concluded that the most to which a guilty seller would be entitled 'is an offset in an amount representing the depreciation in value of the car occasioned by the use made of it by the buyer while in his possession, which necessarily excludes any allowance for depreciation resulting from a general decline in the market value of such automobile during the period in question.' (140 Cal.App.2d Supp. at page 980, 295 P.2d at page 597.) The court also said: 'It seems hardly necessary to add that in no event may the seller, by way of offset, obtain an affirmative judgment against the buyer.'
The installments paid by Lindsey on the unpaid balance amounted to $433.50. The court found the actual retail value of the Packard car to be $195. The total sum to which Lindsey was entitled was $628.50, but the court found that the depreciation in value of the Lincoln exceeded the amount due Lindsey and awarded him nothing on his cross-complaint. The car had been driven by Lindsey over 14,000 miles and there was evidence that it had depreciated by 30%; there was no evidence as to the rental value.
Lindsey contends that he should have been allowed $2,000 as the value of the Packard, or at least $1,815, the value placed upon it by plaintiff. He does not question the finding that the Packard was worth only $195, and in view of this finding he cannot maintain that his car was worth more, and he cannot expect to receive more than he parted with. It is obvious that the figure $1,815 stated in the contract form was in greater part a fictitious amount, which was balanced by an inflated price put upon the Lincoln. Furthermore, the allowance of $1,815 was conditioned upon performance of the contract of purchase by Lindsey.
It has not been settled whether the seller is entitled to an offset on the basis of the rental value of the car he sold or in the amount of its depreciation. In either case it would exceed the amount of Lindsey's down payment of $195 against which it was allowable as an offset. Although plaintiff pleaded the loss of use of the Lincoln as an offset, the case was tried upon the theory that the proper basis for an offset would be depreciation in value of the Lincoln and not rental value. Under this theory Lindsey would be entitled to a judgment for all he had paid, less the allowable amount of depreciation and plaintiff would not be entitled to a judgment upon its complaint but would be entitled to the amount of the depreciation in the value of the Lincoln, limited to the amount of Lindsey's down payment of $195.
We cannot fail to observe, however, that an allowance of an offset in the amount of rental value, which has been the theory in several of the cases, can be so unrealistic as to be absurd. Although plaintiff pleaded as an offset the value of use of the Lincoln we think the theory of depreciation upon which the case was tried was the proper one. Neither the Lincoln nor the Plymouth car was used or intended to be used as a commercial vehicle.
Lindsey complains that he has been deprived of the use of his old car ever since he turned it in and should be compensated upon that account. That issue was not tendered upon the trial. Moreover, we agree with the views expressed in Williams v. Caruso, supra, 140 Cal.App.2d Supp. 973, 295 P.2d 592, that depreciation and not rental value furnishes the proper basis for the measurement of detriment in these cases. There is, of course, a material difference between the use of pleasure cars, which is all we are considering, and of trucks and trailers, which have an actual rental value. There are too many intangible and purely fictional factors involved in endeavoring to measure detriment by the loss of use of pleasure cars. Automobile dealers do not rent out their new cars. With respect to Lindsey's 1948 Packard it could be argued that the use of it would have been worth as much to him as was the use of the Lincoln, whereas its theoretical rental value would be nil. Upon the other hand, a new car suffers a material depreciation the moment it becomes a used car and this furnishes a sound basis for proof of the seller's loss.
Lindsey, upon the rescission, was entitled to the ruturn of what he had parted with, less whatever was justly due from him under equitable principles. He was not entitled to compensation for loss of use of his car after he had rescinded.
Although the court found that the contract was invalid in its inception and unenforceable it decided that it was validated by a subsequent modifying agreement between Lindsey and the bank. We are not in agreement with this conclusion. The contract was in violation of a statute enacted for the protection of the general public; it was void and not subject to ratification. Levinson v. Boas, 150 Cal. 185, 88 P. 825, 12 L.R.A.,N.S., 575; Smith v. Bach, 183 Cal. 259, 191 P. 14; Estrada v. Alvarez, 38 Cal.2d 386, 240 P.2d 278; Walker v. Harbor Realty & Development Corp., 214 Cal. 46, 3 P.2d 557; Mary Pickford Co. v. Bayly Bros., Inc., 12 Cal.2d 501, 86 P.2d 102. Such a contract is void in the sense that it cannot be enforced by the holder or be asserted as a defense against liabilities which exist by reason of its invalidity. The modification of the agreement as between Lindsey and the bank did not amount to a new contract and could not give validity to the illegal contract.
It has also been suggested that since section 2982 provides that the contract 'shall be signed by the buyer or his authorized representative and by the seller or its authorized representative, and when so executed an exact copy thereof shall be delivered by the seller to the buyer at the time of its execution,' there was no failure to comply with this requirement. We cannot agree with this construction of the section. We agree with the view of the trial court, expressed in the findings, that 'the purpose of said statute would be defeated if the information required by § 2982, Civil Code, was not contained in said conditional sales contract at the time it was signed by the buyer.' When Lindsey signed a contract which obligated him to pay for the Lincoln, turned in his car and took possession of the new car, it was the duty of plaintiff to then complete the contract in compliance with the statute, execute it and deliver a copy to Lindsey. Permitting the seller to write up the conttract later by filling in the blanks and giving the buyer a copy of it would sanction the very practices which the law forbids.
The court properly rejected Lindsey's claim for exemplary damages. It was a reasonable conclusion from the evidence that plaintiff was not guilty of oppression, fraud or malice.
We conclude that Lindsey should have judgment for $628.50 less an offset of $195 and that otherwise plaintiff should recover nothing.
The judgment is reversed with instructions to enter judgment denying a recovery by plaintiff and in favor of Lindsey for $433.50, interest and costs, and when so entered the judgment is affirmed.
PARKER WOOD, J., concurs.
VALLEE, Justice.
I concur in part and dissent in part. I agree that plaintiff is not entitled to recover and that defendant is entitled to recover the installment payments. I am of the opinion that defendant is also entitled to recover the down payment and that plaintiff may not offset against it. The statute was enacted for the protection of the general public. The contract is void The parties are not in pari delicto. Carter v. Seaboard Finance Co., 33 Cal.2d 564, 574, 203 P.2d 758; Elmers v. Shapiro, 91 Cal.App.2d 741, 754, 205 P.2d 1052. In such case the one protected is entitled to recover the entire consideration. Pollak v. Staunton, 210 Cal. 656, 665, 293 P. 26; First Nat. Bank of Calexico v. Thompson, 212 Cal. 388, 406, 298 P. 808; Mary Pickford Co. v. Bayly Bros., 12 Cal.2d 501, 524, 86 P.2d 102; Elmers v. Shapiro supra, 91 Cal.App.2d 754, 205 P.2d 1060; 12 Cal.Jur.2d 302, § 103; 12 Am.Jur. 734, §§ 217, 218.
Rehearing denied; VALLEE, J., dissenting. --------------- * Opinion vacated 339 P.2d 851.