Fireside Bank v. Superior Court

• Decision Date: 21 October 2005
• Docket Number: No. H027976.,H027976.
• Citation: 133 Cal.App.4th 742,35 Cal.Rptr.3d 80
• Court: California Court of Appeals Court of Appeals
• Parties: FIRESIDE BANK, Petitioner, v. The SUPERIOR COURT of Santa Clara County, Respondent; Sandra Gonzalez, Real Party in Interest.

35 Cal.Rptr.3d 80

133 Cal.App.4th 742

FIRESIDE BANK, Petitioner, v. The SUPERIOR COURT of Santa Clara County, Respondent Sandra Gonzalez, Real Party in Interest.

No. H027976.

Court of Appeal, Sixth District.

October 21, 2005.

Severson & Werson, Jan T. Chilton, Mark D. Lonergan, San Francisco, for Petitioner Fireside Bank.

Kemnitzer, Anderson, Barron & Ogilvie, Carol M. Brewer, Andrew J. Ogilvie, San Francisco, Alexander Community Law Center, Scott C. Maurer, San Jose, for Real Party in Interest Sandra Gonzalez.

RUSHING, P.J.

By this petition for extraordinary relief, Fireside Bank (Fireside) seeks to set aside an order certifying a class action charging it with unlawful practices under the Rees-Levering Motor Vehicle Sales and Finance Act, Civil Code sections 2981 through 2984.4 (Rees-Levering). Fireside contends that the trial court impermissibly provided class members an opportunity for "one-way intervention" by ruling on a motion for judgment on the pleadings before notice had been given to the class. We hold that there is no categorical prohibition against such a mode of proceeding; rather there exists at most a preference for resolving class issues before entering a dispositive order on the merits of class claims. That preference was never triggered here because the motion on which Fireside's argument is based was addressed not to the class causes of action but to a claim Fireside had brought against the class representative. We also reject a contention that the trial court abused its discretion by finding the matter suitable for class treatment. We will therefore deny the petition.

BACKGROUND

It appears that in February 2001, real party Sandra Gonzalez purchased a used van under a conditional sales contract obligating her to make monthly payments and to keep the van insured.¹ The dealer assigned the contract to Fireside, then known as Fireside Thrift Co. She purchased the van for her father, Guadalupe Gonzalez, with the intention that he use and pay for it. When certain sums claimed by Fireside became overdue, it repossessed the van. On September 28, 2001, it sent a notice to Ms. Gonzalez, stating that she could redeem the van by paying the full amount due under the contract within 15 days. The notice correctly itemized the elements of the outstanding debt, i.e., a contract balance of $14,588.73; late charges of $24.91; repossession cost of $300.00; a credit for unearned finance charges of $2,713.46; and a credit for unearned insurance premiums of $1,070.00. However, the notice stated the "total amount due" to be $13,843.64, when the actual sum of the itemized charges, less credits, was $11,130.18. The "total amount due" thus exceeded the amount actually due by $2,713.46, the amount of the credit for unearned finance charges. Fireside attributes this discrepancy to "a computer error" and concedes that similarly inaccurate notices were sent to more than 2,000 other borrowers. (See fn. 2, below.)

In October 2002 Fireside filed a complaint against Ms. Gonzalez alleging that it had sold the van for $3,100, and seeking a judgment for the remaining contract balance of $8,073.47. This sum reflected a credit of $210.75 for a post-repossession payment. She eventually answered the complaint, generally denying its allegations and asserting a variety of affirmative defenses. Among the latter were allegations that (1) the court lacked jurisdiction to enter judgment against her "because Complainant failed to comply with Civil Code § 2983.2(a), and other portions of the Automobile Sales Finance Act," and (2) "[t]he claim is barred, in whole or in part, by Complainant's failure to comply with Civil Code §§ 1632, 2983.2(a), 2983.3, 2983.8(b) and other applicable laws."

About a month after answering the complaint, Ms. Gonzalez filed a cross-complaint alleging among other things that Fireside's notice of intent to sell had "fail[ed] to comply with the notice requirements of Rees-Levering" and that Fireside had thereby "lost its right to a deficiency." She asserted causes of action for (1) conversion, in that Fireside "repossessed the van before the loan was in default"; (2) violations of the Rosenthal Fair Debt Collection Practices Act, Civil Code sections 1788 and following; and (3) illegal, unfair, and deceptive business practices in violation of Rees-Levering and Business and Professions Code sections 17200 and following. The challenged practices included serving notices that did not comply with Rees-Levering, thereby forfeiting the right to claim deficiencies, yet nonetheless pursuing meritless collection actions against borrowers.

Around April 5, 2004, Ms. Gonzalez filed a motion for judgment on the pleadings against Fireside on its complaint — not on her cross-complaint — asserting that "[t]he facts alleged in the complaint . . . show conclusively that Fireside is not entitled to recover. . . . Fireside's post-repossession notice of intent to dispose . . . incorrectly overstated the amount [she] had to pay to redeem [the] vehicle, thereby violating [Civ.Code,] § 2983.2(a). In particular, Fireside failed to credit . . . the amount of unearned finance charges."

Fireside opposed the motion for judgment on the pleadings on two grounds: (1) before Ms. Gonzalez could obtain a ruling on the motion, she had to either "seek or foreswear" certification of a class, a potential remedy to which her counsel had alluded; and (2) on the merits, she was not entitled to judgment on the pleadings because the notice's inclusion of an incorrect total was not a violation of Rees-Levering, which does not require that the total be stated in such a notice.

On April 27, 2004, at the initial hearing on the motion for judgment on the pleadings, counsel for Ms. Gonzalez said that on the preceding Friday, Fireside had provided discovery indicating that "this defect has infected nearly 3,000 notices." The court said, "If it's going to become a class-action, then we're premature. . . . I think they're entitled to find that out before we go forward with the ruling on this[,] [i.e., judgment on the pleadings]." Counsel for cross-complainants indicated that a decision on whether to seek class treatment was awaiting Fireside's responses to newly propounded discovery. The court continued the hearing for approximately three months.

On or about May 4, 2004, cross-complainants filed an amended cross-complaint. In addition to the causes of action already alleged, it asserted a claim under Rees-Levering on behalf of all persons who had received post-repossession notices from Fireside on accounts started in California in which "the redemption amount in the Notice failed to subtract the credit for unearned finance charges." Fireside's discovery responses reportedly showed that some 2,900 notices had been sent using "the same [faulty] computer program. . . ."² (Brackets in original.)

Around June 8, 2004, cross-complainants filed a motion for class certification. Fireside opposed the motion on the ground that the matter was not suitable for class treatment; its opposition memorandum did not refer to any issue of "one-way intervention." The hearing on class certification was eventually continued to July 20, 2004, which was the date already set for a status conference and for the continued hearing on judgment on the pleadings. At that hearing the court expressed an initial inclination to certify the class, and after hearing argument on that point, said it would "have a ruling out by the end of the week. . . ." The subject then turned to judgment on the pleadings, with counsel for Fireside asserting "that it [is] inappropriate to reach a ruling on the merits until certification [is] settled." The court assured counsel that it was "not going to rule" on judgment on the pleadings "until I decide the issue of certification. . . ." Counsel clarified that Fireside opposed any ruling on the motion until notice had been given to the class, if any, and the time for members to opt out had expired. "Until that process has completely run its course and the class is set," he said, "we continue to contend that there should be no ruling." The court replied, "I . . . don't disagree with that. . . ." Counsel for Gonzalez likewise opined, "[I]f the defendant objects and doesn't want a ruling prior to class certification, then the defendant is entitled to have a ruling deferred." Shortly thereafter, counsel for Gonzalez asked the court to set a date for a further hearing on judgment on the pleadings "[i]f certification is denied. . . ." The court indicated that the motion was "in effect . . . going to go off calendar" pending a ruling on certification, but that a hearing could be set "[i]f I deny the certification. . . ." Counsel were to notify the court of an agreeable date.³

On August 20, 2004, despite these assurances, the court rendered formal orders (1) granting class certification, and (2) granting Gonzalez's motion for judgment on the pleadings against Fireside's complaint on the basis that "[p]laintiff has failed to comply with the notice requirements under the Rees-Levering Act."

On September 29, 2004, Gonzalez filed a motion for approval of notice to the class. On September 30, 2004, Fireside filed its petition in this court for a writ of mandate. On October 21, 2004, the trial court heard and granted Fireside's motion to stay further proceedings. After requesting informal opposition, this court issued an alternative writ.

DISCUSSION

I. One-Way Intervention

A. Introduction

Fireside's primary contention is that the trial court's ruling on Gonzalez's motion for judgment on the pleadings precludes the certification of a class and operates as a forfeiture of any right or power Gonzalez had to act as a class representative. The central premises of Fireside's argument may be stated as follows: (1) A trial court presiding over an incipient class action is categorically precluded from ruling on "the merits" of class claims, over the defendant's...