Budget Finance Plan v. Sav-On Food Club, SAV-ON

• Decision Date: 17 May 1955
• Docket Number: SAV-ON
• Citation: 44 Cal.2d 565,283 P.2d 694
• Court: California Supreme Court
• Parties: BUDGET FINANCE PLAN, a California corporation, Plaintiff and Appellant, v.FOOD CLUB, Inc., a California corporation, doing business under the firm name and style of Sav-On Food Club, Defendant and Respondent (two cases). L. A. 23328, 23329. . In Bank

Page 694

283 P.2d 694

44 Cal.2d 565

BUDGET FINANCE PLAN, a California corporation, Plaintiff and Appellant, v. SAV-ON FOOD CLUB, Inc., a California corporation, doing business under the firm name and style of Sav-On Food Club, Defendant and Respondent (two cases).

L. A. 23328, 23329.

Supreme Court of California. In Bank.

May 17, 1955.

Mario L. Clinco and Edgar J. Melchione, Los Angeles, for appellant.

J. George Bragin, Hollywood, for respondent.

SCHAUER, Justice.

Plaintiff, the assignee of contracts of conditional sale, brought these two actions for money against the assignor-seller, herein called defendant. The actions were tried together. In the first action, referred to by the parties as the 'with recourse assignment' case, the parties stipulated that plaintiff have judgment in specified sums on the first and second causes of action and that the sums due on the third and fourth causes of action had been paid in full; plaintiff appeals from the portion of the judgment which decrees that it take nothing on its fifth cause of action. In the second action, referred to by the parties as the 'without recourse assignment' case, plaintiff appeals from the judgment that it take nothing. The two appeals do not present common questions of law and, hence, will be separately discussed. We have concluded that the portion of the judgment appealed from in the first case and the judgment in the second case should be reversed with directions to the trial court to enter judgments as hereinafter indicated.

'With Recourse Assignment' Case

Defendant sold a freezer under a conditional sale contract which provided for payment of the price in monthly installments. Defendant assigned all its rights under the contract to plaintiff by an assignment which provided as follows:

Defendant guarantees full performance of the contract. Defendant agrees 'that in the event of non-compliance with any of the conditions of said agreement, whether or not repossession has been made or undertaken, suit may be brought by the holder (plaintiff) against (defendant) * * *, whether or not suit has been commenced against the party or parties to said Agreement and without waiving any rights as to time of repossession.' Defendant agrees 'that in the event of repossession or default by the Purchaser, the entire balance outstanding under said agreement shall become immediately due and payable.'

The conditional buyer defaulted. Plaintiff brought this action to recover from defendant the unpaid balance under the contract. After plaintiff instituted this action, it repossessed the freezer without notifying defendant. So far as appears the freezer is still in the possession of plaintiff.

The trial court accepted defendant's contention that by repossessing the freezer without notice to defendant plaintiff elected to waive its other rights against defendant. The express terms of the agreement between plaintiff and defendant negative the tenability of such holding. By the agreement defendant not only assigned to plaintiff its rights against the conditional buyer; ¹ it also agreed that should the buyer default plaintiff should have certain rights against defendant. It is agreed that in the event of default by the buyer suit may be brought against defendant 'whether or not repossession has been made or undertaken,' and 'whether or not suit has been commenced against' the buyer, and 'without waiving any rights as to time of repossession.' The purpose and effect of these provisions is to permit plaintiff to pursue its remedy of suit against defendant, whatever plaintiff may do as to its remedies against the buyer. This is not to say, and plaintiff does not claim, that it can have double recovery, but only that its pursuit of a remedy against the buyer under the conditional sale contract, at a time while the present action was pending, does not preclude it from continuing to prosecute this action against the defendant pursuant to the express terms of the assignmentagreement.

Defendant relies upon the asserted general rule that repossession and suit for the price under a conditional sale contract are mutually exclusive remedies and that pursuit of one is a waiver of the other. We are not here concerned with what remedies under the conditional sale contract may be available against the buyer. We may say, however, that it is not, as defendant urges, a rule of universal and automatic application under every conditional sale contract that when the seller brings suit for the purchase price he passes title to the buyer and cannot thereafter repossess, and when the seller repossesses he terminates the contract and cannot thereafter sue for the price. The terms of the contract and the other circumstances of the case, not a mechanical rule as to election of remedies, are determinative. (See Ravizza v. Budd & Quinn, Inc. (1942), 19 Cal.2d 289, 293, 120 P.2d 865; Adams v. Anthony (1918), 178 Cal. 158, 160, 172 P. 609 ('In suing on the notes, while still retaining possession of the automobile, the defendant was merely exercising rights, which, under the agreement, were concurrent and not alternative'); American-LaFrance Fire Engine Co. v. Bagge (1929), 98 Cal.App. 291, 292, 295, 276 P. 1066 (by the contract 'the seller explicitly limited its right, in the event of a failure to receive payment * * *, to repossess itself of the property'); James v. Allen (1937), 23 Cal.App.2d 206, 207, 72 P.2d 570 ('the contract in this case limits the vendor to his election between two remedies').) Similarly here it is the contract between plaintiff and defendant (which is more than a mere assignment) which must be looked to in deciding the remedies which plaintiff can pursue against defendant.

Defendant relies upon section 2819 of the Civil Code, which provides, 'A surety is exonerated * * f by any act of the creditor, without the consent of the surety the original obligation of the principal is altered in any respect, or the remedies or rights of the creditor against the principal, in respect thereto, in any way impaired or suspended.' Defendant says that plaintiff, as creditor, by repossessing the freezer without notice to defendant, impaired the value of the security for the debt, and that if plaintiff had notified defendant, defendant could have required plaintiff creditor to proceed against the principal and would have been exonerated had plaintiff failed to do so (citing Civ.Code, § 2845), ² or defendant could have paid plaintiff and demanded possession of the security and sold it to indemnify itself (citing Civ.Code, § 2849). ³

Defendant's attempted application of rules as to suretyship is not relevant. Again it must be said that the terms of the contract between plaintiff and defendant, not abstract rules of law, determine whether plaintiff can proceed as it has done. Under the contract defendant is not a surety, whose liability depends upon the liability of the principal debtor; defendant has agreed than on default of the buyer suit may be brought against it independently of whether plaintiff brings action against the buyer and independently of whether plaintiff repossesses the freezer; defendant's liability on this contract is direct.

At the outset of the trial counsel for defendant stated. 'With respect to the fifth cause of action, * * * these defendants will stipulate * * * that there presently is due and owing as the unpaid balance of said contract, $641.55' and that if the trial court determines that defendant is incorrect in its contention that plaintiff cannot recover because it took possession of the freezer 'we are willing that your Honor should render a judgment against the defendant in this amount, $641.55.' Plaintiff urges that this court should reverse the judgment for defendant on the fifth cause of action with directions to the trial court to enter judgment for plaintiff in the agreed amount. Since, on the record, a judgment for plaintiff in such amount is the only correct one which could be rendered, we can and should direct its entry.

'Without Recoruse Assignment' Case

Defendant seller assigned to plaintiff contracts of conditional sale of freezers which provided, among other things, that 'The undersigned (buyer) * * * agerees to pay therefor' a down payment and installments. The agreements of assignment provide, 'This Assignment is made without recourse in consideration of the following warranties: * * * That the initial payment shown by the said Agreement (of conditional sale) has been actually received by the undersigned (defendant) * * *'; in the event of breach of warranty 'the waiver of recourse * * * shall be void and the terms of the 'with recourse' assignment' quoted supra, 283 P.2d 696, shall apply.

Before defendant made the assignments it had received the amount of the down payment specified in each conditional sale contract from the salesman who obtained such contract. Each of the buyers defaulted after making none or only one of the specified monthly payments. Plaintiff sued for the balance remaining unpaid. It alleged that the warranties 'that the initial payment * * * has been actually received' were not true in that defendant 'did not receive the down payment as specified and set out in the conditional sales contract.'

Defendant's books contain entries crediting the down payments as made and we assume, in favor of defendant, that payments in such amounts were actually delivered to defendant by the salesmen. But the evidence establishes without contradiction that such payments were not made by the buyers under the contracts; the payments were merely reported by defendant's salesmen, who obtained such contracts, as being made. The salesmen were entitled to commissions greater than the amounts of the down payments; they filled in the contracts to indicate that the down payments had been made and told the buyers to repay them (the salesmen) at the buyers' convenience. ⁴

These arrangements by the salesmen resulted in a situation...