Fox v. Federated Department Stores, Inc.

• Decision Date: 13 June 1979
• Citation: 156 Cal.Rptr. 893,94 Cal.App.3d 867
• Court: California Court of Appeals Court of Appeals
• Parties: Ronald J. FOX and Carole Fox, husband and wife, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. FEDERATED DEPARTMENT STORES, INC., a corporation, originally erroneously sued and served herein as Bullock's, Inc., a corporation, Defendant and Respondent. Ronald J. FOX and Carole Fox, husband and wife, Individually and on behalf of all others similarly situated, Plaintiffs and Appellants, v. FEDCO, INC., a corporation, Defendant and Respondent. Philip RUBEN and Phyllis Ruben, husband and wife, Individually and on behalf of all others similarly situated, Plaintiffs and Appellants, v. MAY DEPARTMENT STORES, a corporation, Defendant and Respondent. Philip RUBEN and Phyllis Ruben, husband and wife, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. ASSOCIATED DRY GOODS CORPORATION, a corporation, dba J. W. Robinson Company, Defendant and Respondent. Philip RUBEN and Phyllis Ruben, husband and wife, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. SEARS, ROEBUCK AND CO., a corporation, Defendant and Respondent. Frankie F. BRILL, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. BROADWAY HALE, INC., a corporation, Defendant and Respondent. Philip RUBEN and Phyllis Ruben, husband and wife, Individually and on behalf of all others similarly situated, Plaintiffs and Appellants, v. UNION OIL COMPANY OF CALIFORNIA, Defendant and Respondent. Ronald J. FOX and Carole Fox, husband and wife, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. MOBIL OIL CORPORATION, Defendant and Respondent. Floyd W. CARR and Vivian M. Carr, Individually and on behalf of all others similarly situated, Plaintiffs and Appellants, v. MONTGOMERY WARD & CO., a corporation, Defendant and Respondent. Ronald S. BELLER, Individually, and on behalf of all others similarly situated, Plaintiff and Appellant

Page 893

156 Cal.Rptr. 893

94 Cal.App.3d 867

Ronald J. FOX and Carole Fox, husband and wife, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. FEDERATED DEPARTMENT STORES, INC., a corporation, originally erroneously sued and served herein as Bullock's, Inc., a corporation, Defendant and Respondent.

Ronald J. FOX and Carole Fox, husband and wife, Individually and on behalf of all others similarly situated, Plaintiffs and Appellants, v. FEDCO, INC., a corporation, Defendant and Respondent.

Philip RUBEN and Phyllis Ruben, husband and wife, Individually and on behalf of all others similarly situated, Plaintiffs and Appellants, v. MAY DEPARTMENT STORES, a corporation, Defendant and Respondent.

Philip RUBEN and Phyllis Ruben, husband and wife, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. ASSOCIATED DRY GOODS CORPORATION, a corporation, dba J. W. Robinson Company, Defendant and Respondent.

Philip RUBEN and Phyllis Ruben, husband and wife, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. SEARS, ROEBUCK AND CO., a corporation, Defendant and Respondent.

Frankie F. BRILL, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. BROADWAY HALE, INC., a corporation, Defendant and Respondent.

Philip RUBEN and Phyllis Ruben, husband and wife, Individually and on behalf of all others similarly situated, Plaintiffs and Appellants, v. UNION OIL COMPANY OF CALIFORNIA, Defendant and Respondent.

Ronald J. FOX and Carole Fox, husband and wife, Individually, and on behalf of all others similarly situated, Plaintiffs and Appellants, v. MOBIL OIL CORPORATION, Defendant and Respondent.

Floyd W. CARR and Vivian M. Carr, Individually and on behalf of all others similarly situated, Plaintiffs and Appellants, v. MONTGOMERY WARD & CO., a corporation, Defendant and Respondent.

Ronald S. BELLER, Individually, and on behalf of all others similarly situated, Plaintiff and Appellant, v. J. C. PENNEY CO., a corporation, Defendant and Respondent.

J. T. LESTER, Individually, and on behalf of all others similarly situated, Plaintiff and Appellant, v. OHRBACHS, INC., a corporation, Defendant and Respondent.

Civ. 53040.

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

June 13, 1979.

Rehearing Denied July 10, 1979.

Schwartz, Alschuler & Grossman, Marshall B. Grossman and Henry S. Zangwill, Los Angeles, for plaintiffs and appellants.

Gibson, Dunn & Crutcher, Charles S. Battles, Jr. and Robert A. Miller, Los Angeles, for defendant and respondent Union Oil Company of California.

O'Melveny & Myers and Charles W. Bender, Los Angeles, for defendants and respondents Federated Department Stores, Inc. and Montgomery Ward.

Sheppard, Mullin, Richter & Hampton, William A. Masterson, Thomas C. Waterman, and Terence M. Murphy, Los Angeles, for defendants and respondents Associated Dry Goods Corp., Fedco, Inc., J. C. Penney Co, Inc., Ohrbach's, Inc., and The May Department Stores Co.

Macfarlane, Schaefer & Haun and Jeremy V. Wisot, Los Angeles, for defendant and respondent Broadway-Hale Stores, Inc.

Jones, Hall & Arky, Vincent W. Jones, and Philippe Monet, Alhambra, for defendant and respondent Sears, Roebuck and Co.

McCutchen, Black, Verleger & Shea, Jack D. Fudge, Steven W. Weston and Ward L. Benshoof, Los Angeles, for defendant and respondent Mobil Oil Corp.

OPINION

BEACH, Associate Justice.

NATURE OF CASE:

This appeal involves class actions challenging the validity of various charge account practices by several retail department stores and by Union Oil Company of California ("Union") and Mobil Oil Corporation ("Mobil"). The cases against the department stores ¹ and against the oil companies were consolidated for the purpose of trial and again are consolidated on appeal. After trial, the trial court vacated the interlocutory class certification order entered in the Mobil action, dismissed the complaints in all the actions, and awarded judgment to defendants. Plaintiffs in these class action suits appeal from the judgment and from all adverse rulings of the trial court.

FACTS:

The plaintiffs are and purport to represent other purchasers of goods from the defendants' department stores, gasoline and other automobile products from defendants Union and Mobil. Some of the sales by defendants are on credit and defendants make certain charges for such credit sales. The type of sale involved at bench is the revolving or open account. Such sales are commonly called "credit card" sales because of the use of the modern day credit card. The defendant sellers charge from one per cent to one and one-half per cent per month on the unpaid balance after certain periods of time. In this respect there are some variations between defendants and depending upon time and amount of balances. These per month charges exceed the ten per cent rate of interest used in the California Constitutional Provision relating to usury. The foregoing is a simplified summary. Other additional facts appear in greater detail in our discussion below.

APPELLANTS' CONTENTIONS:

Appellants make several basic contentions of error. They list numerous sub-arguments under each general argument in both their opening and reply briefs. ² The appellants' contentions can be summarized at this point as follows:

1. The tripartite credit arrangements of respondents Union and Mobil are not protected by the time-price doctrine.

2. Mobil's late charge is an invalid penalty damage provision and not a valid liquidated damage provision.

3. The rates set forth in the Unruh Act are not controlling in this case in that Union and Mobil are not "retail sellers" and in any event section 1810.2 of the Unruh Act is in conflict with the California Usury Law and article XV of the California Constitution.

4. The trial court erred in denying appellants' motion for leave to file a supplemental complaint and in refusing to receive evidence of damages sustained through the date of judgment.

5. The trial court erred in overruling appellants' objections to the proposed findings and conclusions and in failing to make findings of fact, special findings, and counterfindings as requested by appellants.

6. The trial court erred in vacating the class certification order in the action against respondent Mobil.

OUR DECISION ON THE ISSUES RAISED:

We reject appellants' contentions and we affirm the judgment of the trial court.

We hold: (1) a "time-price" or a "finance charge" in a bona fide sale of goods or services is not a form of interest within the meaning of California Constitution Article XV provision against usury; (2) the sales by defendants of their goods and services are bona fide sales to which the doctrine of "time-price" applies.

DISCUSSION :

The trial court rendered a notice of intended decision supported by meticulousfindings of fact. ³ The memorandum of intended decision contains an excellent discussion and analysis.

That analysis by Judge William H. Levit is thorough. The reasoning is sound. The conclusion there reached is supported by the authorities cited by him, and is further supported by the recent case of Boerner v. Colwell Co., 21 Cal.3d 37, 145 Cal.Rptr. 380, 577 P.2d 200, rendered after his decision. In our view, Boerner fully answers appellants' contentions not only as to the department store defendants, but also solidly affirms the trial court's conclusion that the sales of Union and Mobil products through their independent dealers does not remove Union and Mobil from the status of bona fide sellers on credit of goods and services.

Approving Verbeck v. Clymer, 202 Cal. 557, 261 P. 1017, relied on by Judge Levit, Boerner states: "It has long been the law in this jurisdiction, as well as in the vast majority of other jurisdictions, that a bona fide credit sale is Not subject to the usury law because it does not involve a 'loan' or 'forbearance' of money or other things of value." (Emphasis added; Boerner, supra, 21 Cal.3d at p. 45, 145 Cal.Rptr. at p. 385, 577 P.2d at p. 205.)

Boerner, however, is more than merely recognition of the "time-price doctrine" as an exception to the law governing usury. Boerner also teaches that the substance of the transaction not its form is what is important in determining whether it is or is not a credit sale. Specifically, Boerner holds that the fact that a party may appear to be a "third party" or to be " financing" the sale, as appellants here claim is the position of Union and Mobil, does not render the transaction a mere loan as to such "third party." At bench Mobil and Union are bona fidedly selling their products.

Appellants assert the oil companies are not retailers because of the definition of retailer in the Unruh Act. Whether or not the label of "retailer" as defined in the Unruh Act applies to defendants Union and Mobil is not controlling. The sales through their independent dealers are not exempt because the Unruh Act exempts them, but because the transactions are good faith credit sales of their products. This good faith sale of products was recognized as not subject to the usury limitation before the enactment of the Unruh Act. (Verbeck v. Clymer, supra, 202 Cal. at pp. 562-3, 261 p. 1017.) We are not to be misunderstood as saying that Union and Mobil are free to charge whatever time-price they may choose because neither the Constitution nor the Unruh Act apply to their activities. On the contrary, we now hold that the credit sales of defendants Mobil and Union are sales within the meaning of "retail sales" for the purpose of application and control by the provisions of the Unruh Act. The time-price charges of Union and Mobil, however, are within the limits allowed by the Act.

Because in our view the memorandum by Judge Levit correctly treats and disposes of the issues involved, we adopt the major portion thereof as and for a part of the opinion of this court. Such part of...