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Lewis v. Muntz Car Co. of Cal.

Court of Appeals of California
Feb 3, 1958
321 P.2d 81 (Cal. Ct. App. 1958)

Opinion

2-3-1958

Everette M. LEWIS, Plaintiff and Appellant, v. MUNTZ CAR COMPANY OF CALIFORNIA, and Seaboard Finance Company, a corporation, Defendants and Respondents. * Civ. 22637.

David J. Lee, Los Angeles, for appeallant. K. E. Nungesser and Bromley, Ritter & Lindersmith, Los Angeles, for respondent Seaboard Finance Co.


Everette M. LEWIS, Plaintiff and Appellant,
v.
MUNTZ CAR COMPANY OF CALIFORNIA, and Seaboard Finance Company, a corporation, Defendants and Respondents. *

David J. Lee, Los Angeles, for appeallant.

K. E. Nungesser and Bromley, Ritter & Lindersmith, Los Angeles, for respondent Seaboard Finance Co.

DRAPEAU, Justice pro tem.

Everette M. Lewis purchased an automobile in 1953 from Muntz Car Company of California, a corporation. He and a salesman for Muntz agreed upon the terms of the sale. Agents of Muntz then spread before him several printed documents which Mr. Lewis signed. None of the blanks in the documents were filled in. And none of the documents were given to him, then or ever.

After Mr. Lewis took possession of the automobile, Muntz filled in the blanks in the documents, and added provisions and obligations that had not been assumed by Mr. Lewis.

After that Muntz assigned the contract to defendant Seaboard Finance Company.

Mr. Lewis brought this action against Muntz and Seaboard on three counts: (1) To cancel the contract. (2) To rescind it. And (3) in assumpsit.

Muntz was served with process, but defaulted, having gone out of business.

Seaboard appeared, and contested the action on the ground that it had no notice or knowledge of irregularities in the contract, and that it was a purchaser for value.

Judgment in the superior court was for Mr. Lewis against Seaboard for $2,833.30, the amount he paid on the contract, but with an offset for Seaboard of $2,000, the value of his use of the automobile; making $833.30 only for Mr. Lewis. Mr. Lewis also had judgment against Muntz in the sum of $3,633.30, less the same offset as above in the amount of $2,000.

Mr. Lewis appeals from the judgment, and bases his appeal upon three grounds: (1) Upon his objection to the offset. (2) Upon his contention that he should have had judgment also for the amount paid for the car $3,633.30. He computes this sum by adding his down payment to Muntz, $800 to the $2,833.30 paid to Seaboard. And (3) upon his contention that he should also have had judgment for possession of the car.

To understand this situation, it is necessary to quote pertinent portions of the trial judge's findings, as follows:

'(a) That plaintiff did on or about the 20th day of April, 1953, enter into a said purported contract of conditional sale as purchaser with defendant Muntz Car Company of California as seller, but that at the time the plaintiff executed the same, said document was a mere blank document containing blank spaces for the items mentioned in said paragraph, but none of said items were filled in nor was plaintiff given a copy of said document at that time, or at all; and all copies thereof were thereafter retained by defendants and said blank spaces were subsequently filled in by defendants without the knowledge, consent or permission of plaintiff, with the figures alleged in said paragraph.

'(b) That the contract does recite $5,232.96 as the cash selling price, but the court finds that said sum is not true and correct; that said sum includes a fictitious credit of $1,000.00 over and above the actual cash selling price agreed upon, together with sales tax thereon in the amount of $35.00, both of which amounts should be deducted to arrive at the true and correct cash selling price in violation of subsection (1) of subdivision (a) of Section 2982 of the Civil Code.

'(c) That the contract does recite a down payment of $1,800.00 consisting of $800.00 in cash and $1,000.00 described as the net agreed value of the trade-in, which is not described, but the court finds that there was no trade-in involved in the transaction and that said $1,000.00 was merely a fictitious credit or 'balloon' designed to give the impression that the purchaser had paid as a down payment one-third of the purchase price, in violation of subdivision (a) subsection (2) of Section 2982 of the Civil Code.

'(d) That the contract does recite the amount unpaid on the cash price as $3,432.96, but the court finds that that sum is not the true and correct amount required to be recited therein; that it does not represent the difference between the true and correct cash selling price and down payment above described, in violation of subdivision (a)(3) of said section.

'(e) That the contract recites as cost of total insurance premiums the sum of $166.00 representing according to the recitations therein comprehensive and collision coverages. In addition 'life insurance, $126.05' is typed below this item. The court finds that the defendant Muntz Car Company agreed to furnish plaintiff with public liability and property damage coverages in addition to comprehensive and collision coverages for said premiums of $166.00, but did not do so, but on the contrary procured comprehensive and collision coverages only and at a premium of $320.00, and, in addition the court finds that the plaintiff never agreed to purchase life insurance as recited in said contract and no such life insurance policy was ever procured by defendants for plaintiff or delivered to plaintiff, and plaintiff did not agree to pay the sum of $126.05 for the premium therefor. That the charges contained in said contract for insurance are not true and correct, in violation of subdivision (a)(4) of said section.

'(f) That the contract does not recite the registration and title fees as required by subdivision (a)(5) of said section, but on the contrary this section of the contract was blank.

'(g) That the contract does not recite the true and correct unpaid balance as required by subdivision (a)(6) of said section. The court finds that the unpaid balance recited in said contract of $3,598.96 is not the true and correct unpaid balance.

'(h) That the court further finds that the failure to add the sum of $292.05 for insurance premiums to the amount unpaid on the cash price of $3,432.96 recited in said contract was not due to an accidental or bona fide error in computation; that the total insurance premiums were $166.00 and not $292.05 as hereinabove found.

'(i) That the court finds that the contract does not recite the true and correct time price differential, in violation of subdivision (a)(8) of said section. That the time price differential recited in said contract does not represent the difference between the unpaid balance and the contract balance recited therein, or the true and correct figures for said items.

'(j) The court finds that subsection (b) of said section required delivery of insurance policies to the purchaser. It is found by the court that no life insurance policy was delivered to plaintiff.

'(k) The court further finds that the time price differential is in excess of the time price differential is in excess of the said section. The contract recites an unpaid balance of $3,598.96, which said sum is itself $35.00 in excess of the true and correct unpaid balance. Taking said sum as the unpaid balance, however, the court further finds that the maximum time price differential computed for said contract is $1,115.69, which said sum is exceeded by the time price differential recited in said contract of $1,152.99 and also the difference between said $3,598.96 taken as the unpaid balance and the contract balance recited therein of $4,878.00 which difference is $1,279.04. The court further finds that said excessive time price differential charge is not due to an accidental or bona fide error in computation.'

With respect to Seaboard the court found: '* * * That said defendant Seaboard Finance Company knew of the foregoing violations visible on the face of the contract at the time it purchased said contract.'

The findings are to some extent conflicting. For example, paragraph (a) above quoted, recites that the blank spaces in the contract 'were subsequently filled in by defendants without the knowledge, consent or permission of plaintiff.' (Emphasis added.) Then, by reference to paragraph III of Seaboard's answer the court found that Seaboard 'as a bona fide purchaser for value, purchased all of the right, title and interest of the seller in and to said contract of conditional sale and in and to said automobile, * * *.' And then the court found, by interlineation on the proposed findings, that Seaboard knew of the foregoing violations 'visible on the face of the contract' at the time Seaboard purchased it from Muntz.

Inasmuch as Civil Code sections 2981 and 2982 determine the problem in this case, we will set forth in this opinion all of section 2982 as follows: 's 2982. Motor vehicles

'(a) Contents; formalities. Every conditional sale contract for the sale of a motor vehicle, with or without accessories, shall be in writing and shall contain all of the agreements between the buyer and the selles relating to the personal property described therein. It 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. It shall recite the following separate items as such, in the following order:

'1. The cash price of the personal property described in the conditional sale contract.

'2. The amount of the buyer's down payment, and whether made in cash or represented by the net agreed value of described property traded in, or both, together with a statement of the respective amounts credited for cash and for such property. As soon as received by the dealer the dealer shall refund to the buyer or credit to the buyer on the next payment due the amount realized on any insurance policy, or rights thereunder, assigned to the seller by the buyer in connection with the conditional sale. Failure of the dealer to comply with the foregoing provision shall in no way affect the validity or enforceability of the conditional sale contract.

'3. The amount unpaid on the cash price, which is the difference between Items 1 and 2.

'4. The cost to the buyer of any insurance, the premium for which is included in the contract balance.

'5. A description and itemization of amounts, if any, which will actually be paid by the seller or his assignee to any public officer as fees in connection with the transaction, which are included in the contract balance.

'6. The amount of the unpaid balance, which is the sum of Itmes 3, 4, and 5.

'7. The amount of the time price differential.

'8. The contract balance owed by the buyer to the seller, which is the sum of Items 6 and 7.

'9. The number of installments required to pay the contract balance, the amount of each installment, and the date for payment of the installments.

'(b) Insurance. If any charge for insurance is included in the amount paid or to be paid by the buyer under any conditional sale contract for the sale of a motor motor vehicle, with or without accessories, an insurance policy or policies or a certificate of insurance under a master policy shall be issued and the seller shall within 30 days after the execution of the conditional sale contract send or cause to be sent to the buyer the original or an exact copy of such policy or policies or certificate.

'(c) Time price differential; limit. The amount of the time price differential in any conditional sale contract for the sale of a motor vehicle, with or without accessories, shall not exceed 1 percent of the unpaid balance multiplied by the number of months, including any excess fraction thereof as one month, elapsing between the date of such contract and the due date of the last installment, or twenty-five dollars ($25), whichever is greater, provided that such contract may provide for interest on any delinquent installment from and after the date of delinquency, and for reasonable collection costs and fees in the event of delinquency.

'(d) Payment before maturity; refund credit. Any provision in any conditional sale contract for the sale of a motor vehicle to the contrary notwithstanding, the buyer may satisfy in full the indebtedness evidenced by such contract at any time before the final maturity thereof, and in so satisfying such indebtedness shall receive a refund credit thereon for such anticipation of payments. The amount a such refund shall represent at least as great a proportion of the time price differential, after first deducting from such time price differential a minimum charge of not to exceed twenty-five dollars ($25), as the sum of the periodic time balances after the month in which such contract is paid in full bears to the sum of all of the periodic time balances under the schedule of payments in the contract, both sums to be determined according to the monthly balances which would result if the indebtedness were paid according to the terms of the contract; provided, however, that the provisions of this subsection shall not impair the right of the seller or his assignee to receive a minimum time price differential of twenty-five dollars ($25), or to receive interest on delinquent installments or reasonable collection costs and fees, as provided in subsection (c) of this section; and provided further, that where the amount of such refund credit would be less than one dollar ($1), no refund need be made.

'(e) Seller's deliberate violation; buyer's rights. If the seller, except as the result of an accidental or bona fide error in computation, shall violate any provision of subdivision (c), or (d) of this section the conditional sale contract shall not be enforceable, except by a bona fide purchaser for value, and the buyer may recover from the seller in a civil action the total amount paid on the contract balance by the buyer to the seller or his assignee pursuant to the terms of such contract.

'(f) Contract holder's violation; buyer's rights. If the holder of such contract, except as the result of an accidental or bona fide error in computation, shall violate any provision of subdivision (d) of this section, the buyer may recover from such holder in a civil action the total amount paid on the contract balance by the buyer to such holder pursuant to the terms of such contract.'

Problems in applying our law regulating financing of sales of motor vehicles are discussed in 2 Stanford Law Review, in an article published in 1950. This article may also be found in West's Annotated California Codes, annotated to Civil Code section 2981. The writer points out that the legislative purpose in enacting these two code sections was to prevent abuses in installment sales contracts of motor vehicles, and in an attempt to set up a sensible, fair regulation of motor vehicle time financing. Also that unless the law has adequate sanctions for its violation, sellers of motor vehicles and holders of conditional sales contracts may violate it with impunity.

But the courts must look to the law itself for power to adjudge penalties for fraud in financing motor vehicle sales. So far as holders of conditional sale contracts are concerned, the penalty is to be found in subsections (f) and (d) of Civil Code section 2982 only.

Subsection (f) provides that if the holder shall violate any provision of subsection (d) the buyer may recover from such holder the amount paid on the contract balance.

It therefore follows that we must look to subsection (d) to see what the penalty is for. And here we find the answer to this whole case.

For subsection (d) provides that there shall be a penalty if the holder fails or refuses to satisfy the indebtedness on the vehicle when the buyer offers to pay it. And that is the only conduct for which a penalty against a holder is provided.

In the leading case of Carter v. Seaboard Finance Co., 33 Cal.2d 564, at page 571, 203 P.2d 758, at page 763, our Supreme Court held that Civil Code sections 2981 and 2982 applied to the sale of a truck and trailer when a chattel mortgage and not a conditional sale contract was used to secure payment of the purchase price.

In the same case, however, the Supreme Court made a clear distinction between a seller and one who financed the sale. In that case two trucks and two trailers were involved. One of the trucks was a G.M.C. with a Weber trailer; the other was a Sterling truck, with a Fruehauf trailer. In its opinion the Supreme Curt states as to the G.M.C. truck and its trailer, that the defendant merely financed the purchase thereof by the plaintiff; and that, to the contrary, the Sterling truck, with its Fruehauf trailer, was sold to plaintiff by defendant. Therefore, a judgment for defendant as to the sale of the Sterling truck and Fruehauf trailer was reversed, with directions to the trial court to determine the sums due plaintiff under section 2982 of the Civil Code. The law then provided for treble damages.

But the judgment was affirmed as to the truck and trailer that defendant had financed.

Therefore, we must, in the circumstances of this case, hold that under our law as it now reads no penalty can be adjudged against Seaboard, the holder of the conditional sale contract, despite the chicanery of Muntz, the seller, of which Seaboard, the holder, had notice, at least so far as it appeared on the face of the contract.

Having come to this conclusion, there is no need to comment upon Mr. Lewis' other contentions, or upon extensive arguments in the briefs as to the law of offset when there is a penalty. The fact that the law does not provide any penalty against a holder other than the one stated disposes of all of these matters, at least so far as this case is concerned.

The judgment is affirmed as to Muntz, and reversed as to Seaboard.

WHITE, P. J., and FOURT, J., concur. --------------- * Opinion vacated 328 P.2d 968.


Summaries of

Lewis v. Muntz Car Co. of Cal.

Court of Appeals of California
Feb 3, 1958
321 P.2d 81 (Cal. Ct. App. 1958)
Case details for

Lewis v. Muntz Car Co. of Cal.

Case Details

Full title:Everette M. LEWIS, Plaintiff and Appellant, v. MUNTZ CAR COMPANY OF…

Court:Court of Appeals of California

Date published: Feb 3, 1958

Citations

321 P.2d 81 (Cal. Ct. App. 1958)