City Lincoln-Mercury Co. v. Lindsey, LINCOLN-MERCURY

CourtUnited States State Supreme Court (California)
Citation52 Cal.2d 267,339 P.2d 851,73 A.L.R.2d 1420
Decision Date02 June 1959
Parties, 73 A.L.R.2d 1420 CITYCOMPANY (a Corporation), Respondent, v. L. V. LINDSEY, Appellant. L. A. 25290.

Victor Bewley, Los Angeles, for appellant.

Delbridge, Hamblin & Linton and Donald W. Hamblin, Pasadena, for respondent.

GIBSON, Chief Justice.

This case involves the questions whether a contract for the conditional sale of a motor vehicle violated the requirements contained in subdivision (a) of section 2982 of the Civil Code and, if so, what was the effect of the violation. 1

On October 22, 1954, L. V. Lindsey bought from City Lincoln-Mercury Company, herein called the seller, a new Lincoln automobile. He immediately took delivery of the car and left with the seller a 1948 Packard sedan which he traded in as the sole down payment. At the time of this transaction Lindsey and a salesman of the seller signed a sales order, and Lindsey also signed a blank form of conditional sale contract. The sales order specified a price of $6,047.38 for the automobile, including accessories, sales tax, and license fee, a trade-in of $1,815, an unpaid balance of $4,232.38, and a provision that the 'time sale price balance,' the amount of which was not filled in, was to be paid in 30 monthly installments of $166.75. The sales order recited $100 as the cash value of the Packard.

The 'time price differential' and the 'contract balance,' which are required to be stated in a conditional sale contract by subdivision (a) of section 2982, were not filled in on the sales order at the time it was signed. 2 The order contained a provision authorizing the seller to fill in all blanks on the conditional sale contract in conformity with the order. Lindsey was furnished with a copy of the sales order, and, after the conditional sale contract was signed by the seller's president about October 26, 1954, Lindsey was sent a complete and executed copy containing all the data required by the statute.

On October 26, 1954, the seller assigned the conditional sale contract to the Bank of America, and thereafter Lindsey and the bank executed a 'Revision Agreement' which provided for an extension of the time of the payments and added that, except for this modification, the original agreement should remain in full force and effect. Lindsey paid two installments of $166.75 each and $100 as part payment of the third installment, and on March 10, 1955, he returned the Lincoln automobile to the seller. In April the bank reassigned the conditional sale contract to the seller, and the seller resold the Lincoln car secondhand for $3,238 after having made some repairs to it.

The seller sued Lindsey for the deficiency. Lindsey answered and filed a cross-complaint based on the theory that the contract was void because of violations of section 2982 of the Civil Code, that therefore the seller could not enforce it, and that Lindsey was entitled to recover the entire consideration he had paid, including $2,000 as the reasonable value of the Packard, and also exemplary damages. In the answer to the cross-complaint, the seller denied that the contract was void and alleged that Lindsey had waived and was estopped to allege any defect in the contract.

The trial court determined that the contract was void at the outset because, when signed by Lindsey, it did not contain the information required by subdivision (a) of section 2982 but that Lindsey's execution of the revision agreement, after he received a copy of the contract with all the required information, was equivalent to a re-execution of that contract in a complete form and that Lindsey was thereby estopped from claiming that the contract was unenforceable. The court further concluded that, even if the contract had remained unenforceable, Lindsey could not have recovered anything on his cross-complaint. This was based upon the court's conclusions that Lindsey could recover no more than the installments which he had paid, totaling $433.50, together with the actual retail market value of the Packard, found to be $195, and that the seller was entitled to offset against these sums the depreciation in value of the Lincoln caused by Lindsey's use of the car, which the court found exceeded the amount due Lindsey. Judgment was for the seller as to both the deficiency action and the cross-complaint, and Lindsey has appealed.

The agreement as made on October 22, 1954, was illegal and unenforceable by the seller. This is true even if the sales order is considered part of the conditional sale contract, because at the time Lindsey signed the documents neither the sales order nor the blank form of conditional sale contract contained a statement of the time price differential or the contract balance. The provision of section 2982, subdivision (a), requiring recital of all the items there enumerated is for the protection of the purchaser; a violation of the subdivision in this respect makes the contract unenforceable by the seller, and the buyer may recover payments made to the seller because, as a member of the class for whose protection the statute was enacted, the buyer is not in pari delicto. Estrada v. Alvarez, 38 Cal.2d 386, 389, 240 P.2d 278; Carter v. Seaboard Finance Co., 33 Cal.2d 564, 573-574, 203 P.2d 758.

We cannot properly hold that there was compliance with the requirements of subdivision (a) of section 2982 on the theory that the conditional sale contract was executed only when it was signed by the president of the seller, at which time it contained all required data, with a copy thereafter delivered by mail to Lindsey. Such a conclusion would require a construction of the subdivision which would wholly frustrate its purpose. Obviously the provision requiring the express statement of the time price differential and the contract balance was enacted to ensure that the buyer, when he enters into the contract, is aware of the additional expense the payment in installments will cause him and the total extent of the indebtedness to which he will become subjected. If, as in the present case, this information is omitted at the time the buyer signs the contract and is provided only in a copy after the seller has filled in and executed the contract, the intended warning will be of no avail to the buyer, who will already be bound when he receives the copy. Subdivision (a) of Section 2982 must be construed as requiring that the enumerated items be stated in the contract at the time the buyer signs it.

The fact that Lindsey, when signing the contract, could ascertain the amounts of the missing items by calculation based on the figures appearing in the sales order does not show substantial compliance with subdivision (a). 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. Adams v. Caruso Enterprises Inc., 134 Cal.App.2d 403, 408-409, 285 P.2d 1022.

The 'Revision Agreement' executed by Lindsey and the bank was not a re-execution or complete substitution of the original contract so as to render the illegality immaterial, because the revision was only a minor amendment relating solely to the date on which payments should be made and obviously was not intended as a ne conditional sale agreement. 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. Wells v. Comstock, 46 Cal.2d 528, 532, 297 P.2d 961; Fewel & Dawes, Inc. v. Pratt, 17 Cal.2d 85, 91, 109 P.2d 650; Mary Pickford Co., v. Bayly Bros., Inc., 12 Cal.2d 501, 524, 86 P.2d 102; First Nat. Bank of Calexico v. Thompson, 212 Cal. 388, 405, 298 P. 808; Pollak v. Staunton, 210 Cal. 656, 663, 293 P. 26; Industrial Indemnity Co. v. Golden State Co., 117 Cal.App.2d 519, 540, 256 P.2d 677; Stockton Morris Plan Co. v. California Tractor & Equipment Corp., 112 Cal.App.2d 684, 690, 247 P.2d 90; see Black v. Cutter Laboratories, 43 Cal.2d 788, 806, 278 P.2d 905; American Nat. Bank of San Francisco v. A. G. Sommerville, 191 Cal. 364, 371, 216 P. 376. 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. Mary Pickford Co. v. Bayly Bros., Inc., 12 Cal.2d 501, 524, 86 P.2d 102; First Nat. Bank of Calexico v. Thompson, 212 Cal. 388, 405-406, 298 P. 808; Pollak v. Staunton, 210 Cal. 656, 663, 293 P. 26; Industrial Indemnity Co. v. Golden State Co., 117 Cal.App.2d 519, 540, 256 P.2d 677. 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 appears that the seller may not enforce the conditional sale contract, and the judgment must be reversed insofar as it allows the seller to recover the amount of the deficiency.

The next question is whether Lindsey is entitled to anything under his cross-complaint. As we have seen, the buyer under an agreement which is illegal because of a failure to comply with subdivision (a) of section 2982 may recover the consideration that he has given. The trial court found that any recovery by Lindsey must be limited to the amount of the cash payments which he made, totaling $433.50, plus the retail market value of the Packard, fixed by the court at $195, less an offset in the amount of the depreciation resulting from Lindsey's use of the Lincoln.

There is no dispute as to the amount of the cash payments, but Lindsey contends that his recovery for the loss of the Packard should not be limited to its actual cash value and that he is entitled to the trade-in value, which he testified was $2,000, or at least to $1,815, the amount which the...

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