Leaf v. Phil Rauch, Inc.

• Decision Date: 22 April 1975
• Citation: 47 Cal.App.3d 371,120 Cal.Rptr. 749
• Court: California Court of Appeals Court of Appeals
• Parties: Marvin H. LEAF et al., Plaintiffs and Appellants, v. PHIL RAUCH, INC., etc., Defendant and Respondent. Civ. 43624.

Page 749

120 Cal.Rptr. 749

47 Cal.App.3d 371

Marvin H. LEAF et al., Plaintiffs and Appellants, v. PHIL RAUCH, INC., etc., Defendant and Respondent.

Civ. 43624.

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

April 22, 1975.

Valensi & Rose and Lawrence F. Nelson, Jr., Los Angeles, for plaintiffs and appellants.

Walter M. Sharman, Glendale, for defendant and respondent.

DUNN, Associate Justice.

In April 1970, plaintiffs Marvin Leaf and Helen Leaf commenced an action against Phil Rauch, Inc., and Chrysler Corporation for restitution based upon rescission of a motor vehicle conditional sale contract, and for damages for breach of warranty. Plaintiffs also sought attorneys' fees.

The action was tried by the court. Findings of fact and conclusions of law were signed and filed. The trial court found, as facts: on January 5, 1968, plaintiffs entered into a written motor vehicle conditional sale contract with defendant Phil Rauch, Inc., for the purchase of a 1968 'Imperial' model automobile manufactured by defendant Chrysler Corporation; plaintiffs performed all of the conditions required of them under the contract, including full payment of the purchase price of $7,085.38; the Imperial was warranted by an express written warranty issued by Chrysler Corporation and delivered to plaintiffs with the automobile; the warranty was a material inducement to plaintiffs to enter into the contract; after plaintiffs purchased the Imperial, it suffered three major transmission failures; the Imperial also was defective in other respects, including malfunctions in the starting mechanism and in the air conditioning system; Chrysler Corporation materially breached its warranty by failing to correct the defects; because of Chrysler's breach of warranty, there was a material failure of the consideration which Phil Rauch, Inc., agreed to give plaintiffs for their performance under the contract; by reason of such failure of consideration, plaintiffs were entitled to rescind the contract, and did so on March 4, 1970, by giving Phil Rauch, Inc., written notice of rescission and offering to return the Imperial; Phil Rauch, Inc., at no time restored, or offered to restore, to plaintiffs the sums which it had received from them under the contract.

The trial court further found: by way of relief based upon their rescission of the contract, plaintiffs were entitled to the return by Phil Rauch, Inc., of the sum of $7,085.38 paid by them in performance of the contract; plaintiffs also were entitled to consequential damages of $227.50, comprised of towing charges of $67.50 and car rental fees of $160.00 incurred by plaintiffs as a result of the Imperial's transmission failures; as against the total of $7,312.88 due plaintiffs, Phil Rauch, Inc., was entititled to an offset of $2,300.00, representing the reasonable value to plaintiffs of the use of the Imperial; 'in exercise of its discretion,' the court further found that plaintiffs were not entitled to prejudgment interest on the sum awarded them.

As a conclusion of law the court determined that, because plaintiffs had elected the remedy of rescission, they were not entitled to damages from Chrysler Corporation for breach of warranty.

Judgment was entered in favor of plaintiffs and against Phil Rauch, Inc., for $5,012.88, and in favor of Chrysler Corporation against plaintiffs.

Plaintiffs appeal from the judgment, arguing their appeal only insofar as it failed to award prejudgment interest and attorneys' fees. ¹

I. Was Prejudgment Interest Properly Disallowed?

Civil Code § 3287 provides in part: '(a) Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt. . . .'

Under this provision, prejudgment interest is allowable where the amount due plaintiff is fixed by the terms of a contract, or is readily ascertainable by reference to well-established market values. (See: Lineman v. Schmid, 32 Cal.2d 204, 211--212, 195 P.2d 408 (1948); Cox v. McLaughlin,76 Cal. 60, 67--69, 18 P. 100 (1888); Conderback, Inc. v. Standard Oil Co.,239 Cal.App.2d 664, 689--690, 48 Cal.Rptr. 901 (1966); Schmidt v. Waterford Winery, Ltd., 177 Cal.App.2d 28, 34, 1 Cal.Rptr. 874 (1960).) On the other hand, interest is not allowable where the amount of the damages depends upon a judicial determination based upon conflicting evidence and is not ascertainable from established market prices or values. (Lineman v. Schmid, Supra, 32 Cal.2d at p. 212, 195 P.2d 408; Esgro Central, Inc. v. General Ins. Co. of America, 20 Cal.App.3d 1054, 1062, 98 Cal.Rptr. 153 (1971); Nelson v. Spence, 182 Cal.App.2d 493, 499--500, 6 Cal.Rptr. 312 (1960).)

Plaintiffs were awarded damages of $5,012.88, computed as follows: as against the sum of $7,312.88 ($7,085.38 paid pursuant to the contract, plus $227.50 as consequential damages) found to be due plaintiffs based upon their rescission of the contract, defendants were allowed an offset of $2,300.00, representing the reasonable value to plaintiffs of their use of the Imperial. (See: Civ.Code § 1692; Pendell v. Warren, 101 Cal.App. 407, 410, 281 P. 658 (1929).)

The sum paid by plaintiffs pursuant to the contract was fixed by its terms. Therefore, this element of damage was certain. Regarding consequential damages, the evidence showed, without contradiction, that plaintiffs paid $67.50 for towing charges and $160.00 for rental of a substitute vehicle. Thus, the amounts actually expended for these items were certain; defendant did not contest their reasonableness.

The amount of the offset allowed to defendant was determined on the basis of conflicting evidence. However, that fact did not preclude allowance of prejudgment interest, for where the amount of a claim is certain, but is reduced by reason of an unliquidated setoff, interest properly is allowed on the balance found to be due from the time it became due. (Hansen v. Covell, 218 Cal. 622, 629, 24 P.2d 772 (1933); Worthington Corp. v. El Chicote Ranch Properties, Ltd., 255 Cal.App.2d 316, 322, 63 Cal.Rptr. 203 (1967); Muller v. Barnes, 139 Cal.App.2d 847, 850, 294 P.2d 505 (1956); Lacy Mfg. Co. v. Gold Crown Mining Co., 52 Cal.App.2d 568, 579, 126 P.2d 644 (1942).)

Since the requirement of Civ. Code § 3287 regarding certainty of damages was met, plaintiffs were entitled, as a matter of right, to recover prejudgment interest on the sum awarded from the time such sum became due. (See: Block v. Laboratory Procedures, Inc., 8 Cal.App.3d 1042, 1046, 87 Cal.Rptr. 778 (1970); Overholser v. Glynn, 267 Cal.App.2d 800, 810, 73 Cal.Rptr. 628 (1968); Rabinowitch v. California Western Gas Co., 257 Cal.App.2d 150, 160, 65 Cal.Rptr. 1 (1967).)

In an action based upon rescission of a contract, the plaintiff's right to repayment of moneys paid under the contract is fixed by the rescission, and interest on the moneys paid thus is recoverable from the date of rescission. (Potter v. Contra Costa Realty Co., 220 Cal. 31, 34, 29 P.2d 189 (1934); Hayt v. Bentel, 164 Cal. 680, 685--686, 130 P. 432 (1913); Lund v. Cooper, 159 Cal.App.2d 349, 352, 324 P.2d 62 (1958); 9 Cal.Jur.2d 642--643, 'Cancellation of Instruments' § 51.) In the instant case, the evidence shows that of the total contract price of $17,085.38, plaintiffs paid $6,234.16 prior to rescission of the contract on March 4, 1970, and paid the remaining $851.22 (9 monthly installments of $94.58 each) following rescission.

In an action to enforce rescission, the successful plaintiff is entitled to recover not only the consideration he gave under the contract, but also consequential damages. (See: Civ.Code § 1692; Modoc Mineral & Oil Co. v. Cal-Vada Drilling etc. Co., 236 Cal.App.2d 868, 873, 46 Cal.Rptr. 508 (1965); Warfield v. Richey, 167 Cal.App.2d 93, 100, 334 P.2d 101 (1959).) Since it is the act of rescission which fixes his right to recover consequential damages, interest on such damages should run from the date of rescission.

Thus, plaintiffs are entitled to prejudgment interest from the following dates: (1) interest from the date of rescission (March 4, 1970) on those portions of the sum of $5,012.88 attributable to payments on the contract made prior to rescission, and to payments for towing charges and car rental fee; and (2) interest from the dates of payment on those portions of the sum of $5,012.88 attributable to contract payments made after rescission.

II. Are Plaintiffs Entitled To Attorneys' Fees?

The motor vehicle conditional sale contract entered into by plaintiffs and defendant contains the following provision: 'Buyer (plaintiffs) hereby agrees to: . . . pay Seller (defendant), upon demand, a delinquency charge on each installment in default for 10 days in an amount equal to 5% Of such installment and, in the event of Buyer's delinquency or default, reasonable collection costs and fees, including but not limited to attorney's fees.'

Civil Code § 1717 provides in part: 'In any action on a contract, where such contract specifically provides that attorney's fees and costs, which are incurred to enforce the provisions of such contract, shall be awarded to one of the parties, the prevailing party, whether he is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to costs and necessary disbursements. . . . As used in this section 'prevailing party' means the party in whose favor final judgment is rendered.'

Civil Code § 2983.4 provides: 'Reasonable attorney's fees and costs shall be awarded to the prevailing party in any action on a conditional sale contract subject to the provisions of this chapter (Automobile Sales Finance Act, Civ.Code § 2981 et seq.) regardless of whether the action is instituted by the seller, holder or...