Opinion
10-14-1949
. Civ. 14001. District Court of Appeal, First District, Division 2, California
John J. O'Toole, City Atty., San Francisco, C. Wesley Davis, Deputy City Atty., San Francisco, for appellant. John H. Brill, San Francisco, for respondent.
MERCHANTS SERVICE CO.
v.
SMALL CLAIMS COURT OF CITY AND COUNTY OF SAN FRANCISCO et al.
Oct. 14, 1949.
Hearing Granted Dec. 12, 1949. *
John J. O'Toole, City Atty., San Francisco, C. Wesley Davis, Deputy City Atty., San Francisco, for appellant.
John H. Brill, San Francisco, for respondent.
DOOLING, Justice.
Respondent petitioned in the Superior Court for a writ of mandate to compel the clerk of the Small Claims Court in San Francisco to accept for filing therein a claim for $14.13. The defendants demurred, thereby submitting the matter 'on the papers of the applicant'. Sec. 1094, Code Civ.Proc. The demurrer was overruled and the court ordered the writ to issue. This appeal was then taken.
The ground of the clerk's refusal was that the claim was based on an assignment. Section 117f, Code Civ.Proc., provides that 'No claim shall be filed or prosecuted in such small claims court by the assignee of such claim.'
A copy of each of the two papers constituting the claim was attached to the petition in mandate. The only question presented for decision was and is whether these two papers show that the claim was based on an assignment.
Exhibit A is on the form provided by the clerk for the use of claimants, consisting of an affidavit and order as prescribed by sec. 117b, Code Civ.Proc. This shows that Mrs. Wilma Bradford, defendant, is indebted to plaintiff, Merchants Service Company, in the sum of $14.13 for money due under a written contract; that a demand was made and refused and nothing paid; and giving the residence of defendant and the place of business of plaintiff.
Exhibit B is a printed form containing questions calling for information respecting the financial responsibility and resources of a prospective customer. Below this form it appears that the subject of the sale was a ladies' ring for the price of $12.50 plus 38 cents sales tax and 'Service and/or Excise Taxes' $1.25, total $14.13, and that the sale was on 'Budget Account Terms $1.00 each week Beginning January 17, 1948.' Printed on the reverse side is the purchaser's agreement, signed by Mrs. Wilma Bradford. This document is reproduced in full below, omitting a form to be executed by co-signers or guarantors and which was not executed. 1
Immediately below and as a part of the same printed document appears a form of relinquishment and quitclaim signed by the merchant, Sol Michaels, which gives rise to the claim that Merchants Service Company is attempting to sue as assignee in violation of sec. 117f, Code Civ.Proc. 2
The case was submitted to the trial court on the pleadings so that we have not the benefit of extrinsic evidence to show that the transaction in any respect differed from what it appears to be on its face. From the face of the documents executed by the parties the respondent appears to by suing as a primary creditor of the purchaser, Mrs. Bradford, and not as an assignee.
Mrs. Bradford purchased a ring from the seller, Sol Michaels, and promised Michaels in writing over her signature that 'payment is to be made to the Merchants Service Company.' This brings her contract directly within the provisions of section 1559, Civil Code: 'A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.'
In J. F. Hall-Martin Co. v. Hughes, 18 Cal.App. 513, 516, 123 P. 617, 618, the court said of a contract for the benefit of a third party: 'While such contract remains unrescinded, the relations of the parties are the same as though the promise had been made directly to the third party.'
In other words the third party beneficiary's rights against the promisor arise directly from the contract, flow immediately from the promisor's promise contained in the contract, and are primary and in no sense derivative. See Hartman Ranch Co. v. Associated Oil Co., 10 Cal.2d 232, 244, 73 P.2d 1163, collecting earlier cases; 4 Cal.Jur., 10 Yr.Supp., Contracts, sec. 279, pp. 202-205.
On the face of the contract signed by the purchaser she obligated herself to pay the Merchants Service Company and the Merchants Service Company sues her not as an assignee but directly upon her original promise as a third party beneficiary. The legislature has not seen fit to prohibit a suit in the small claims court by a third party beneficiary and the court is not at liberty to write such a prohibition into the statute.
Were it not for the document of relinquishment and quitclaim reproduced in note 2 there would be not even a colorable ground to argue that Merchants Service Company is suing as an assignee.
But nothing in this document signed by the seller Michaels can change or affect the primary obligation which the purchaser had previously assumed to the Merchants Service Company by her contract. She was already bound by that contract to make the payment to Merchants Service Company. The language: 'We hereby relinquish, disclaim and quitclaim any right, title or interest in and to the merchandise or demands therein described unto Merchants Service Company' cannot operate to transer to Merchants Service Company the primary right that it already clearly had as third party beneficiary to collect and receive the payments from the purchaser under her express contract with the seller. It does serve other obvious purposes. It deprives the seller of the power to rescind the contract before collection by the third party beneficiary. It also vests in the third party beneficiary the seller's interest in the merchandise sold so that the third party beneficiary may legally retake the property and exercise the other rights with respect to it provided for in the contract in the event of the purchaser's default.
The quoted language may arouse some suspicion that the true transaction is actually not what it appears to be on the face of the documents. If so that is a matter for proof by extrinsic evidence and no such proof was made in this proceeding. Taking the documents by their four corners, as we must in the absence of other evidence, the trial court put the proper construction upon them.
It is still open to the defendant in the small claims court to prove, if such be the fact, that the transaction is not what it appears to be on its face and that Merchants Service Company in fact is suing as assignee and not as third party beneficiary.
Judgment affirmed.
RUNNELLS, J. pro tem., concur.
GOODELL, Acting Presiding Justice.
I dissent.
It will be noted that the draftsman of the writing signed by Sol Michaels studiously avoided the use of the word 'assign', but that of course does not keep it from being an assignment.
Taking the language at its face value, the 'demands therein described' which are relinquished and quitclaimed had already arisen, since it speaks in the past tense. It shows that the contract of sale had been consummated, for Michaels guarantees that 'The above contract is a valid, bona fide and subsisting agreement' (emphasis added) and that the merchandise sold had been delivered. The 'demands therein described' constitute a chose in action, consisting of the right to receive from the buyer the deferred payments of the purchase price which became owing to the seller, Michaels, as soon as he delivered the ring.
It is true the writing signed by the buyer shows that the relation of debtor and creditor exists between her and the Company, but the same relation certainly had first existed between her and Michaels, otherwise Michaels had no 'demands' to relinquish. The 'relinquishment' is meaningless unless it transferred something; the paper must of course be read by its four corners. The buyer's obligation to pay arose immediately the ring was delivered. It had been delivered (as shown above) before Michaels signed the relinquishment. The debtor-creditor relation between the buyer and the Company shown in the writing over the buyer's signature, arose only because of Michaels' 'relinquishment' to the Company of the buyer's obligation to Michaels to pay for the ring. The Company thereafter stood in Michaels' shoes.
Such debtor-creditor relation, however, is not necessarily the criterion. The real question is whether the claim which respondent sought to file was that of an assignee. The plaintiff's ownership of the chose in action and its right to sue thereon was derived only by the relinquishment of Michaels' right to the deferred payments, hence it was derived by assignment pure and simple. While on its face it appears to be an original promise of the buyer to the Company, there could be no basis for such a promise and no consideration therefor unless Michaels had assigned his right to the purchase money.
Section 117f does not confine its prohibitions to assignees for collection or assignees for the purpose of suit. It prohibits the filing by any and every assignee, and there seems to be good reason why the word 'assignee' should be given a broad meaning and held to mean anyone who stands in the shoes of the original creditor. It may well be that when the legislature enacted section 117f (or the parent section, 927f) it felt that to permit assignees to sue would only add, unfairly, to the recognized advantages which plaintiffs have in small claims actions, discussed in Superior Wheeler Cake Corp. v. Superior Court, 203 Cal. 384, 387, 264 P. 488, for it is self-evident that an assignee suing day after day on such transactions would have a decided advantage over an inexperienced defendant doing his or her best to struggle through a trial without the aid of an attorney. This would seem to be at least one of the reasons for the legislation.
The plaintiff's papers in this case (Exhibits A and B) show, and counsel admitted at oral argument, that it was a three-party transaction. Such a transaction, if it gets into litigation, might conceivably develop into a three-cornered contest in which, readily enough, a defendant would be faced in court (as a practical matter, although not technically) by two adversaries instead of one. The small claims sections provide no machinery for such a contest and do not contemplate it. In the instant case if the buyer claimed, for instance, that there had been a breach of warranty in the sale of the ring--a defense certainly available to her against the company--that issue would have to be tried out, and it was doubtless the intention of the legislature that such issues should not be litigated except as between the two original parties to the transaction.
The barring of respondent from the Small Claims Court by no means deprives it of a remedy or a forum. It can file and prosecute its assigned claim in the Municipal Court. Schwartz, Inc., v. Burnett Pharmacy, 112 Cal.App.Supp. 781, 785, 295 P. 508, see, also, Superior Wheeler Cake Corp. v. Superior Court, 203 Cal. 384, 387, 264 P. 488, and Prudential Ins. Co. v. Small Claims Court, 76 Cal.App.2d 379, 382, 173 P. 38, 167 A.L.R. 820. By invoking mandate petitioner claims that 'the law specially enjoins', sec. 1085, Code Civ.Proc., the filing of its claim, and by such petition it attempts to avail itself of the advantages given to plaintiffs by the 'cumulative' remedy, see Superior Wheeler Cake Corp. v. Superior Court, 203 Cal. 384, 386, 264 P. 488, which the small claims section afford to claimants other than assignees. --------------- * Subsequent opinion 216 P.2d 846. 1 'The undersigned hereby acknowledges receipt from the concern named of merchandise and/or services described on reverse side, for which payment is to be made to the Merchants Service Company, hereinafter called Creditor, in the sum there specified on the terms set forth. Receipt of said merchandise in good order, satisfactory fit and construction in every detail is hereby acknowledged by the undersigned. 'If any representation herein made by the Undersigned is false or if the Undersigned defaults in any payment or violates any of the conditions of this agreement, the unpaid balance hereunder shall immediately become due at the option of the Creditor. 'Should Creditor institute action to recover the purchase price or any part of it, the title and right of possession of any merchandise referred to shall remain in the Creditor until paid for, with the right of repossession before or after judgment rendered, until satisfaction of such judgment. The Undersigned agrees to return the merchandise purchased and referred to on demand should the Undersigned be in default in any payments or have made any material misstatement in connection herewith, and agrees to pay the Creditor a reasonable amount for any actual damage suffered thereby. Should this contract be placed in the hands of an attorney or collection agency for collection or breach of contract, the Undersigned agrees to pay all actual court costs, collection expense including collection agency fee and attorney fees incurred, with or without suit. 'The Undersigned agrees to make all payments under this contract at the office of the Merchants Service Company. In the event of default by Undersigned in any of the obligations herein, Creditor may, without notice of (sic) demand, enter any premises where said merchandise may be found and take possession thereof and at its option sell said merchandise at public or private sale, and the proceeds thereof, less the expense of repossessing and selling said merchandise, shall be credited upon the amount unpaid hereunder, or without such sale there may be credited upon the amount unpaid the fair market value of said merchandise at the time of such repossession, and in either event, in consideration of the use and depreciation of said merchandise. Undersigned agrees to pay forthwith any remaining unpaid balance hereunder. In no event shall Creditor be entitled to receive in excess of the original purchase price unless Creditor elects to reclaim the merchandise, in which event Undersigned shall be released from all further liability. 'The Undersigned hereby agrees that the period of the running of the statute of limitations on the within account will be extended ten (10) years from date hereof. 'The Undersigned agrees to insure said chattels against loss by fire, theft, damage and mysterious disappearance in favor of the Creditor or its assignee and furnish Creditor or its assignee with a copy of the insurance policy. Should the Undersigned fail to furnish the Creditor or its assignee with a copy of its insurance policy, the Creditor or its assignee may insure the above described chattels at the expense of the Undersigned and the Undersigned agrees to pay the premium on said policy within thirty (30) days after demand thereof. 'The Undersigned hereby waives all right for a change of venue and expressly consents to any suit for collection being filed in San Francisco. Time is of the essence of this agreement. 'This contract may be assigned or sold and all rights and conditions of the Creditor or assignor shall inure to the benefit of the purchaser of assignee. 'Dated Jan 10, 1948 'Signed: Mrs. Wilma Bradford '(Buyer)' 2 'We hereby relinquish, disclaim, and quitclaim any right, title, or interest in and to the merchandise or demands therein described unto Merchants Service Company. We guarantee that the above contract is a valid, bona fide and subsisting agreement; that all laws have been complied with; and that all signatures appearing thereon are genuine and are of the persons of whom they purport to be and that such persons are competent to make this contract. It is specifically represented that no part of this contract arose out of any delinquent account previously on our books; that all merchandise as set forth thereon as having been sold has been delivered to the Debtor; and/or that all services agreed to be performed have been rendered and completed to the personal satisfaction of the Debtor, after which I/we shall not be responsible for the payments on this contract. The debtor is not obligated to us or our assignee on prior purchases. Additional credit will not be granted to any Debtor until the balance on a prior contract has been paid in full or unless such additional credit has previously been approved by Merchants Service Company. Should we violate this provision Merchants Service Company may elect to require us and we hereby agree to pay to Merchants Service Company and balance due it from the Debtor on a prior contract or Merchants Service Company may elect to collect and retain the entire balance due from the Debtor including the amount due from the Debtor of such unauthorized sale. We agree to act as agent to collect the money due on this contract until notified to the contrary by Merchants Service Company, and we shall immediately remit same to Merchants Service Company, and prior to such remittance shall hold such collections and/or deposit same in a place of or account separate and distinct from collections and/or funds of our own, and such receipt and/or collections shall be and remain the property of said Merchants Service Company. Merchants Service Company by, or through its agent, shall have a right to examine my and/or our books of account at any reasonable time. '(Firm Name) Sol Michaels '915 Pierce St.'