Bank of America N.T. & S.A. v. Nielsen

• Decision Date: 18 December 1961
• Citation: 18 Cal.Rptr. 205,198 Cal.App.2d 131
• Court: California Court of Appeals Court of Appeals
• Parties: BANK OF AMERICA N. T. & S. A., Plaintiff and Appellant, v. Wallace H. NIELSEN, aka Wallace Henry Nielsen, and William F. Crnkovich, Defendants and Respondents. William F. CRNKOVICH, Cross-Complainant, v. Wallace H. NIELSEN aka Wallace Henry Nielsen, Cross-Defendant. Civ. 20162.

Page 205

18 Cal.Rptr. 205

198 Cal.App.2d 131

BANK OF AMERICA N. T. & S. A., Plaintiff and Appellant, v. Wallace H. NIELSEN, aka Wallace Henry Nielsen, and William F. Crnkovich, Defendants and Respondents.

William F. CRNKOVICH, Cross-Complainant, v. Wallace H. NIELSEN aka Wallace Henry Nielsen, Cross-Defendant.

Civ. 20162.

District Court of Appeal, First District, Division 2, California.

Dec. 18, 1961.

Samuel B. Stewart, Theodore Sachsman, Curtis M. Karplus, San Francisco, for appellant Bank of America.

Robert L. Winslow, Willits, for defendant and respondent Nielsen.

Rawles, Nelson & Golden, Ukiah, for William F. Crnkovich.

AGEE, Justice.

Plaintiff-appellant bank appeals from a judgment in favor of defendants-respondents Crnkovich and Nielsen in an action to recover a deficiency balance of $747.95 under an automobile conditional sale contract which had been assigned to the bank by the seller, Mendocino Motor Sales Co.

Crnkovich bought the automobile from the seller on May 7, 1956, and signed a conditional sale contract in blank, which did not then contain the data required by section 2982, subdivision (a), of the Civil Code, nor was an exact copy of the contract delivered to him at the time of its execution. The contract was therefore illegal and unenforceable insofar as the recovery of any deficiency thereon is concerned. (City Lincoln-Mercury Co. v. Lindsey, 52 Cal.2d 267, 274, 339 P.2d 851, 73 A.L.R.2d 1420.) The rule applies to a bona fide purchaser of the contract for value (the bank) as well as to the seller. (General Motors Accept. Corp. v. Kyle, 54 Cal.2d 101, 108, 4 Cal.Rptr. 496, 351 P.2d 768.)

About two weeks after he signed the conditional sale contract, Crnkovich received a completed copy in the mail. As completed, the contract contained defects which violated the provisions of section 2982, subdivision (a). The contract failed to recite, '5. A description and itemization of amounts * * * which will actually be paid by the seller * * * to any public officer as fees in connection with the transaction, which are included in the contract balance' (Civ.Code, § 2982, subd. (a), par. 5) but simply states '5. Fees paid: Notary Public $_____, Registration and Transfer $2.00, other $29.86, [total] $31.86.' Similar defects were held to constitute material violations of section 2982, subdivision (a), in General Motors Accept. Corp. v. Kyle, supra, and in Stasher v. Harger-Haldeman (1961), 16 Cal.Rptr. 557, ¹ There was testimony at the trial that the $29.86 classed as 'other' fees was not a charge for fees of public officials but was a charge for life insurance on the contract. Section 2982, as then in effect, required that the cost to the buyer of any insurance, the premium for which is included in the contract balance, shall be recited separately and in order as item 4 in the contract.

The contract is also deficient in this particular: Item 7 in the contract reads as follows: 'Finance Charge: Is Life Ins. Desired? Yes---- No----. If yes $_____ Time Price Differential $_____ $271.46.' This was the figure typed on the copy of the contract mailed to Crnkovich. In some of the other copies contained in the record is superimposed the handwritten figure '3' over the typed '2.' Witness Davis, president of Mendocino Motor Sales, who signed the conditional sale contract, testified that the only reason he could see for the change was that the '2' was a typographical error. It was argued that this error was apparent, since the correct figure of $371.46 might be arrived at by mathematical computation involving items 6 and 8 on the form, and that therefore there was a substantial compliance with section 2982, subdivision (a). (It is tacitly conceded that $371.46 is the correct figure). However, the courts have held that 'The very purpose of the code section would be defeated and nullified if the buyer was required to determine the time price differential by a mathematical process arrived at from an analysis of the seller's figures. The law requires that this item must be recited in the contract and not left to a mathematical compilation by the buyer.' (Adams v. Caruso Enterprises Inc., (1955), 134 Cal.App.2d 403, 408-409, 285 P.2d 1022, 1026.) 'The intended warning will not be effective if the buyer cannot see at first glance the data which the statute requires to be called to his attention.' (City Lincoln-Mercury Co. v. Lindsey (1959), 52 Cal.2d 267, 273, 339 P.2d 851, 856, 73 A.L.R.2d 1420.) Moreover, it appears from the contract form that the figure entered in this item is a 'Finance Charge.' The space provided for and designated 'Time Price Differential' is left blank.

On April 5, 1957, respondent Crnkovich executed a 'Transfer of Equity' on a form provided by the bank, whereby he sold his equity in the automobile to respondent Nielsen, who agreed therein to assume and pay the obligations imposed by the conditional sale contract.

The contract went into default on June 25, 1957. Thereafter the bank repossessed the automobile and sold it to the highest bidder. The unpaid balance, after deducting all charges and expenses, was $747.95. The bank sued both respondents for this amount but was denied recovery as to either because of the failure to comply with the provisions of the Civil Code, section 2982, subdivision (a).

Respondent Crnkovich recovered a judgment for $100 on a cross-complaint against respondent Nielsen based on Nielsen's failure to deliver to Crnkovich an old truck which was the agreed consideration for the transfer of Crnkovich's equity in the automobile. Nielsen has not appealed from this judgment.

The Appeal Against Crnkovich.

The bank contends that the resale of the automobile by Crnkovich to Nielsen is a 'special circumstance' which estops Crnkovich from asserting the defense of section 2982, subdivision (a). Appellant cites Wells v. Comstock, 46 Cal.2d 528, 297 P.2d 961, an illegal stock transaction case, to the effect that while the general rule is that a person cannot be estopped from asserting the illegality of a transaction, there may be exceptions to this rule where there are 'special circumstances.' (P. 532, 297 P.2d 961.) The Wells case applied the general rule and did not specify what circumstances would justify an exception.

The other case cited by appellant is City Lincoln-Mercury Co. v. Lindsey, supra, wherein the purchaser of an automobile under a conditional sale contract had afterwards entered into a written agreement with the seller's assignee, a bank, providing for an extension of the time payments and adding that, except for this modification, the original conditional sale contract should remain in full force and effect. The bank later assigned the contract back to the seller, who repossessed the automobile, sold it, and sued the purchaser for a deficiency. The purchaser set up the same defense as that involved herein, to wit, that the data required by section 2982, subdivision (a), had not been inserted at the time he signed the contract and a completed copy thereof was not delivered to him until several days thereafter. The seller contended that the purchaser had waived the defects in the original contract and was estopped to assert its illegality because of his execution of the revision agreement at a time when he had been delivered a completed copy of the conditional sale contract. The court pointed out that the revision agreement was only a minor amendment and obviously was not intended as a new conditional sale agreement. It then stated: 'Moreover, no waiver or estoppel can be based on the revision agreement. A party to an illegal contract cannot ratify it, cannot be estopped from relying on the illegality, and cannot waive his right to urge that defense. [Citing numerous California decisions.] This rule has been applied in cases where the person asserted to have waived the illegality was not in pari delicto and was one of those for whose protection the statute involved was enacted. [Citing cases.] Even if we were to assume that there are exceptions to the rule, as might be suggested by language used in the Wells case, 46 Cal.2d at page 532, 297 P.2d at page 963, we find nothing in the record which would justify the making of an exception here.

'It thus appeals...