Hernandez v. Atlantic Finance Co.

• Citation: 105 Cal.App.3d 65,164 Cal.Rptr. 279
• Court: California Court of Appeals
• Decision Date: 24 April 1980
• Parties: Virginia HERNANDEZ, Plaintiff and Appellant, v. ATLANTIC FINANCE COMPANY OF LOS ANGELES et al., Defendants and Respondents. 2 Civ. 55869.

Page 279

164 Cal.Rptr. 279

105 Cal.App.3d 65

Virginia HERNANDEZ, Plaintiff and Appellant, v. ATLANTIC FINANCE COMPANY OF LOS ANGELES et al., Defendants and Respondents.

2 Civ. 55869.

Court of Appeal, Second District, Division 4, California.

April 24, 1980.

As Modified on Denial of Rehearing May 13, 1980.

Hearing Denied July 2, 1980.

Richard B. Spohn, Director of California Dept. of Consumer Affairs, Richard A. Elbrecht, A. Paul Griebel, Joseph Garcia, Roger Dickinson, Kathleen E. Doyle (appearing) and Laura W. Kaplan, Sacramento, amicus curiae for plaintiff and appellant.

Styskal, Wiese & Melchione, Alvin O. Wiese, Jr., North Hollywood, and Michael D. Finnegan, San Francisco, for defendants and respondents.

WOODS, Associate Justice.

In this appeal we are called upon to decide whether the conduct of a use car dealership and a finance company in arranging for financing for the purchase of automobiles violates the Rees-Levering Automobile Sales Finance Act. That act (Civ.Code, §§ 2981-2990) regulates the sale and financing of automobiles. At issue is whether the method of automotive financing engaged in here is covered or exempted by the provisions of the act.

Plaintiff, Virginia Hernandez, brought suit on behalf of the general public against defendants Atlantic Finance Company and Espinosa Auto Sales. Plaintiff's complaint alleges that defendant Espinosa solicits and obtains prospective purchasers for the sale of his used motor vehicles; that Espinosa contacts defendant Atlantic to determine whether and on what terms Atlantic will extend credit to Espinosa's prospective customers; that Espinosa assists the prospective purchasers in obtaining loans from Atlantic; that Atlantic lends money to said purchasers, writing a personal loan, rather than a conditional sales contract, and takes as security the purchaser's furniture and other personal possessions in addition to the automobile being purchased. The complaint alleges that such financing is expressly forbidden by the Rees-Levering Act; that it constitutes an illegal and unfair business practice and is enjoinable pursuant to the provisions of section 3369 of the Civil Code. ¹ The complaint alleges that among the provisions of the Rees-Levering Act which are violated by the foregoing financing arrangements, are the following: The established maximum interest rate which may be imposed by the financing agency; the requirement that all elements of the sale and financing transaction be contained on a single document; the requirement that a security interest may be retained only in the purchased auto; the authorization to buyers that they may assert, against the financing agency, any defenses they may have against the seller; and the allowance of an extended redemption period following repossession.

Following a court trial, judgment on the merits was granted pursuant to Code of Civil Procedure section 631.8, in favor of defendants. The court found that defendants have not engaged in any unfair or deceptive practices "which constitute a scheme or design to deprive consumers nor impaired consumers of the rights secured to them and to the general public by the provisions of the Personal Property Brokers Law or the Rees-Levering Automobile Sales Finance Act . . . ." The court ordered that no injunction issue against either defendant, and this appeal followed.

The Rees-Levering Act

The Rees-Levering Automobile Sales Finance Act became effective January 1, 1962. The act replaced the 1945 Automobile Sales Act and was designed to provide a more comprehensive protection for the unsophisticated motor vehicle consumer. ² Soon after its enactment, the California Supreme Court declared: " '. . . "The obvious purpose of the state is to protect purchasers of motor vehicles against excessive charges by requiring full disclosure of all items of cost" (citation); the form and requisites prescribed by the statute are mandatory; a contract which does not substantially conform thereto is unenforceable; and a buyer who has made payments to the seller under such a contract may recover them . . . .' " (Stasher v. Harger-Haldeman (1962) 58 Cal.2d 23, 29, 22 Cal.Rptr. 657, 659, 372 P.2d 649, 651, emphasis in original.)

The act contains the following provisions, inter alia, all clearly designed to protect the purchaser of a motor vehicle from the economic hazards which the Assembly Interim Committee on Finance and Insurance and the courts had found prevalent under the old act. (See, e. g., Tri-City Credit Bureau v. Brimmer (1960) 182 Cal.App.2d 321, 6 Cal.Rptr. 107; Foster v. Masters Pontiac Co. (1958) 158 Cal.App.2d 481, 322 P.2d 592; City Lincoln-Mercury Co. v. Lindsey (1959) 52 Cal.2d 267, 339 P.2d 851.) The act provides that every conditional sales contract shall disclose to the buyer all details concerning the sale, financing, and complete costs of the purchase of the motor vehicle. Eighteen separate items are specified for disclosure. The act requires that all of the terms and agreements must be contained in a single document, and sets a maximum interest rate chargeable for the financing of the automobile. (Civ.Code, § 2982.) The act requires at least 15 days' written notice of intent to dispose of a repossessed vehicle and allows recovery of a deficiency judgment by the lender only if all notice requirements are complied with. (Civ.Code, § 2983.2.) The act authorizes a buyer to reinstate the contract after repossession, without acceleration of the total balance owing. (Civ.Code, § 2983.3.) It further provides that the lender is subject to all equities and defenses of the buyer against the seller, notwithstanding any agreement to the contrary. (Civ.Code, § 2983.5.) It limits the security which may be taken by the lender to the motor vehicle being purchased. A lien on any other real or personal property is unenforceable. (Civ.Code, § 2984.2.)

Respondents asserted below and contend here that although the transactions complained of do not conform to the requirements of the Rees-Levering Act, they are exempt from its provisions by virtue of Civil Code section 2982.5. That section provides in part:

"(a) Nothing contained in this chapter shall be deemed to affect a loan, or the security therefor, between a purchaser of a motor vehicle and a supervised financial organization, other than the seller of the motor vehicle, all or a portion of which loan is used in connection with the purchase of a motor vehicle."

Appellant argues that that section was designed to exempt only private financing obtained independently by a motor vehicle purchaser; that it was not designed to exempt seller-assisted loans. We agree with appellant. To adopt respondents' position would be to accept a construction of the exemption which devours the act.

Standing to Institute These Proceedings

In the demurrers and motions for summary judgment filed below, respondents challenge appellant's standing to bring the subject lawsuit. It is established by the pleadings and by the evidence presented at trial that plaintiff did not purchase an automobile from defendant Espinosa Auto Sales; neither did she borrow nor attempt to borrow money from Atlantic Finance Company. Her action is brought on behalf of the general public pursuant to Business and Professions Code section 17204. The issue of plaintiff's standing to maintain the action was not resolved in the court below. At the conclusion of trial, the court executed findings of fact and conclusions of law and stated at conclusion number 5: "Based upon the foregoing findings of fact and conclusions of law the Court finds it unnecessary to reach or determine the question of whether plaintiff has standing to maintain this action on her own behalf, or on behalf of the general public pursuant to the provisions of § 17200 et seq. of the Business and Professions Code."

Respondents contend that the issue of appellant's standing to sue is not properly before us, no decision thereon having been reached in the trial court. Appellant appears to agree with this contention; we do not. The issue of appellant's standing to sue is a threshold issue which must be resolved before this matter can be reached on its merits. If we were to conclude that plaintiff did not have standing to maintain the action, not having been personally damaged by the defendant's conduct, then there would be no need to address the merits of her cause. Equally wasteful of judicial resources would be a resolution on the merits without reaching the standing issue. We have concluded that defendants' conduct is in violation of the Rees-Levering Act and is properly subject to injunction. To reach such a conclusion without ordering that such injunction issue would be an idle act. " 'The rendering of advisory opinions falls within neither the functions nor the jurisdiction of this court. (Citations.)' " (Younger v. Superior Court (Mack) (1978) 21 Cal.3d 102, 119-120, 145 Cal.Rptr. 674, 685, 577 P.2d 1014, 1025)

Business and Professions Code section 17200 et seq., govern actions for unfair competition, unlawful, unfair or fraudulent business practices. Section 17204 provides:

"Actions for injunction pursuant to this chapter may be prosecuted by the Attorney General or any district attorney or any city attorney . . . in the name of the people of the State of California upon their own complaint or upon the complaint of any board, officer, person, corporation or association or by any person acting for the interests of itself, its members or the general public."

Defendants argue below that this section does not enlarge the number of persons who may seek injunction to prevent unlawful business practices, and that traditional concepts of standing must be read into the statute. Respondents point out that no cases have been litigated under this section wherein the plaintiff, suing on his own behalf and as a public Attorney General, was not personally damaged by the conduct sought to be enjoined. Our research, too,...