General Motors Acceptance Corp. v. Kyle

• Decision Date: 10 May 1960
• Citation: 4 Cal.Rptr. 496,54 Cal.2d 101,351 P.2d 768
• Court: California Supreme Court
• Parties: , 351 P.2d 768 GENERAL MOTORS ACCEPTANCE CORPORATION, a Corporation, Appellant, v. Ronald M. KYLE, Respondent. L. A. 25786.

Page 496

4 Cal.Rptr. 496

54 Cal.2d 101, 351 P.2d 768

GENERAL MOTORS ACCEPTANCE CORPORATION, a Corporation, Appellant, v. Ronald M. KYLE, Respondent.

L. A. 25786.

Supreme Court of California, In Bank.

May 10, 1960.

Getz, Aikens & Manning and Harold T. Tredway, Los Angeles, for appellant.

Arkin & Weissman and Stuart N. Arkin, Culver City, for respondent.

SCHAUER, Justice.

Plaintiff General Motors Acceptance Corporation (hereinafter called GMAC) appeals from a judgment for defendant Kyle in the sum of $2,643, the value of an automobile, on Kyle's counterclaim in GMAC's action for specific recovery of the vehicle or its market value. Kyle was the defaulting purchaser of the automobile under a contract of conditional sale with Milliken Chevrolet, Inc. Such contract did not comply with the requirements of subdivision (a) of section 2982 of the Civil Code. ¹ The seller assigned the conditional sale contract to GMAC. Disposition of GMAC's appeal turns upon the legislative purpose in regulating conditional sales of motor vehicles by section 2982. As we said when we first considered subdivision (a) of the section in Carter v. Seaboard Finance Co. (1949), 33 Cal.2d 564, 573, 203 P.2d 758, its 'obvious purpose' is 'to protect purchasers of motor vehicles against excessive charges by requiring full disclosure of all items of cost.' As shown by subsequent decisions hereinafter discussed, such subdivision (a) is not intended to penalize the seller who violates it in the respects here concerned, or the assignee of such a seller, nor should such subdivision (a) be applied in a manner which will give a windfall to the conditional purchaser. This view of section 2982 leads to the conclusion that the judgment should be reversed with directions to permit Kyle, if he be so advised, to amend his counterclaim and seek recovery upon a restitutive rather than a punitive theory.

On December 21, 1956, Kyle and Milliken executed the conditional sale contract. The transaction violated subdivision (a) of section 2982 of the Civil Code, supra, footnote 1, in the following respects: The copy delivered to Kyle was not signed by an authorized representative of the corporate seller; the recited cash down payment was $787.47, but the actual case down payment to Milliken was $285; the contract did not recite 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,' but rather stated, 'Fees Paid: Registration and Transfer $_ _, Other $_ _ $54.00.'

On an undisclosed date, by a writing which is not in evidence, Milliken assigned the conditional sale contract to GMAC. Kyle paid GMAC two monthly instalments pursuant to the contract, then defaulted. On April 30, 1957, Kyle's attorney wrote Milliken and GMAC that the contract is 'void' because of specified violations of section 2982; that Kyle 'tendered this automobile back to Milliken Chevrolet several months ago and * * * tender was refused'; and the Kyle therefor would make no more payments and would not permit repossession of the car.

GMAC brought this action to recover the vehicle or its reasonable value and damages for its detention, obtained possession of the car (through the municipal court marshal) by the provisional remedy of claim and delivery, and sold it to a third person. Kyle answered and counterclaimed for damages 'because of the repossession of said automobile.'

The trial court determined that because of the above stated violations of section 2982 the conditional sale contract was 'void' and GMAC 'had no rights thereunder and had no right to repossess said automobile by means of this action, or otherwise'; that Kyle had 'the right to possession' of the automobile. The court awarded Kyle $2,643, the stipulated value of the car at the time GMAC obtained possession of it by the claim and delivery remedy. That the trial court was of the opinion that the vehicle should be forfeited to the conditional purchaser is clear from its statement, at the time it announced judgment, that 'The parties agree that the automobile in question was sold by the repossessing party, and that return of the automobile cannot now be had. * * * Accordingly, the judgment of the Court will necessarily be for the value of the automobile at the time * * * of the taking in this claim and delivery proceeding.'

Such an award does not accord with our understanding of the legislative intent of section 2982 which is implicit in the statute and which the courts have attempted to make explicit by decisions hereinafter cited. On the other hand, as we shall explain, the words of the statute do not require, and effectuation of the statutory purpose would be frustrated by, acceptance at face value of the contention of GMAC that a contract which violates subdivision (a) of section 2982, quoted supra, footnote 1, is 'enforceable by a bona fide purchaser for value.'

As to the just stated contention of GMAC, defendant Kyle points out that nothing in the record on appeal indicates that GMAC was or attempted to show that it was a 'bona fide purchaser for value.' The complaint of GMAC alleges that it 'was the owner of a certain conditional sales contract by an assignment in writing,' and Kyle's answer and counterclaim and the trial court's findings and conclusions describe GMAC as an 'assignee.' Since the case was tried on this theory, and the facts on which GMAC's belatedly advanced legal argument is based were not presented to the trial court, it is improper for GMAC to assert for the first time on appeal that its rights are greater than those of its assignor. (Ernst v. Searle (1933), 218 Cal. 233, 240-241(6, 7), 22 P.2d 715; see Ward v. Taggart (1959), 51 Cal.2d 736, 742(6, 7), 336 P.2d 534.) However, since the case must be remanded for a new trial on the issue of the amount of recovery, it is appropriate that we forestall any thought of GMAC that on such trial it might be able to show a right to enforce the contract of conditional sale as a bona fide purchaser. (See Code Civ.Proc., § 53.)

In an effort to show that it took without notice of the illegality of the contract, GMAC asserts for the first time on appeal that the copy of the contract which it received was signed by a representative of the seller and that it had no knowledge that Kyle's copy was not so signed or that the recited amount of the cash down payment was not correct. But the failure of the contract to describe and itemize amounts to be paid as fees appears on the face of the contract and therefore GMAC could in no event properly claim that it had no notice of that defect.

More fundamentally, as will appear from the hereinafter related legislative and judicial developments since the enactment of section 2982 of the Civil Code, GMAC is mistaken in its contention that a contract which violates subdivision (a) of such section is enforcible by a bona fide purchaser for value from the conditional seller. As stated above, the legislative purpose of the section is the protection of instalment buyers of automobiles from concealed and excessive finance and interest charges. ² Subdivision (a) of section 2982, quoted supra, footnote 1, requires that the conditional sale contract be in writing, with specified contents, and that an exact copy be delivered to the buyer; subdivision (b) requires the seller to furnish the buyer who pays for insurance under the contract with an exact copy of the insurance policy; subdivision (c) establishes the maximum permitted 'time price differential' (finance and interest charges); and subdivision (d) (added by Stats.1949, ch. 1959, p. 2842) provides for a refund credit to a buyer who satisfies his indebtedness under the contract before its maturity, and specifies the permissible minimum amount of such refund credit. Subdivisions (a) and (b) are designed to enable the buyer to know just what his contract is; subdivisions (c) and (d) are directly aimed at excessive charges which are akin to usury but to which, by common law (Wilson v. J. E. French Co. (1931), 214 Cal. 188, 189(2), 4 P.2d 537; Lamb v. Herndon (1929), 97 Cal.App. 193, 200(3), 275 P. 503; see Milana v. Credit Discount Co. (1945), 27 Cal.2d 335, 340(4, 5), 163 P.2d 869, 165 A.L.R. 621), the usury statutes do not apply. The requirements of subdivisions (a) and (b) have been aptly called 'formal' and those of subdivisions (c) and (d), 'substantive' (Note, California Motor Vehicle Installment Sales Act (1951), 39 Cal.L.Rev. 450) and we shall adopt that terminology.

Section 2982 does not specify the effect of violation of the formal requirements. Sanctions for substantive violations have been stated and amended by the Legislature, ³ but their operation if they are literally applied is entirely fortuitous, depending upon the amount of the down payment as compared to the total price, upon when the sanctions are invoked, and upon whether the seller transfers the contract to a 'bona fide purchaser for value'; such sanctions afford no uniformly operative scheme of penalizing the seller or protecting the buyer. Furthermore, the Legislature has said nothing about the effect of violations upon the property rights in the vehicle. ⁴

In Carter v. Seaboard Finance Co. (1949), supra, 33 Cal.2d 564, 203 P.2d 758, we held that substantial violations of formal requirements of subdivision (a) of section 2982 render the contract unenforcible by the seller ⁵ and that a buyer who has made payments to the seller under such a contract can recover them. In so holding, we took into account the fact that the section expressly prescribed sanctions for substantive violations and concluded that such sanctions were not inconsistent with the court-declared effect of formal violations (ar pages 572-573(9a-9b), 573-574(12) of 33 Cal.2d at page 764 of 203 P.2d). The Legislature has since repeatedly amended section 2982, and the courts have...