Ron Miller Enters., Inc. v. Lobel Fin. Corp.
| Decision Date | 15 February 2019 |
| Docket Number | F076205 |
| Citation | 33 Cal.App.5th 1,244 Cal.Rptr.3d 621 |
| Parties | RON MILLER ENTERPRISES, INC., Plaintiff and Appellant, v. LOBEL FINANCIAL CORPORATION, INC., Defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
D. Mitchell Taylor, Fresno, for Plaintiff and Appellant.
Lobel Financial Corporation, Ronald Green, Jr. and Gary Dean Lobel, Anaheim, for Defendant and Respondent.
Ron Miller Enterprises, Inc. dba Fresno Commercial Lenders (plaintiff) provides short term loans to automobile dealers, also known as flooring loans. In the present case, plaintiff made such loans to two now-defunct dealerships in the Fresno area, Elizabeth Chavez dba King of Kars (King of Kars) and Carmen Zepeda dba Cars of Clovis (Cars of Clovis) (also referred to as the dealership(s) ). Whenever plaintiff advanced a specific loan amount to either of the two dealerships, (i) the dealership in question signed a separate agreement identifying a particular vehicle as collateral (collateral agreement) and (ii) plaintiff took possession of that vehicle's title certificate as security for the loan advance. These same vehicles were sold by King of Kars and Cars of Clovis to consumers under conditional sales contracts, and the conditional sales contracts were then sold and assigned by the dealerships to a finance company known as Lobel Financial Corporation, Inc. (defendant). Afterwards, both Cars of Clovis and King of Kars went out of business without repaying the sums loaned by plaintiff concerning the sold vehicles. Plaintiff, who still retained the title certificates for the vehicles and believed it had a perfected security interest, sued defendant for the amounts that plaintiff should have been paid by the dealerships (i.e., the loan amounts due) upon the sale of the subject vehicles. Allegedly, defendant was required under the circumstances to make such payment(s) to plaintiff to acquire the title certificates for said vehicles.
Plaintiff's claims were largely premised on the holding and rationale of the appellate decision in Quartz of Southern California, Inc. v. Mullen Bros., Inc. (2007) 151 Cal.App.4th 901, 61 Cal.Rptr.3d 54 ( Quartz ). Here, in its decision following trial, the trial court held plaintiff did not have a security interest in the vehicles and further concluded the Quartz case was distinguishable. As a result, the trial court found in defendant's favor and did not require defendant to pay plaintiff the amounts allegedly due to obtain the title certificates for said vehicles. Plaintiff has appealed from the resulting defense judgment. For the reasons explained hereinbelow, we conclude the trial court prejudicially erred because the circumstances of this case were sufficiently close and/or analogous to those in the Quartz decision to warrant its application here. Accordingly, we reverse and remand the matter to the trial court for further proceedings to determine the precise amount due to plaintiff for defendant to obtain the title certificates for the vehicles pursuant to Quartz , after which a new judgment shall be entered by the trial court in favor of plaintiff.
Plaintiff entered a "Commercial Promissory Note" (Note) with each of the two dealerships, respectively, pursuant to which plaintiff agreed to extend credit to the individual dealership named therein. The purpose of the Notes, as observed by the trial court, was to finance the acquisition by the dealerships of used cars. The Notes established a revolving line of credit under which specific loan advances could be made but also provided that "[a]ll advances and fees are due and payable on the first day of sale or at the end of 120 days."
As each loan advance was made to a dealership under its line of credit, the dealership signed a separate "Collateral Agreement and Advance on Revolving Credit Line" (collateral agreement). Each of the collateral agreements indicated the specific loan advance was "for" a particular vehicle that was identified therein by its year, make, model, license number and vehicle identification number. The collateral agreements included spaces for indicating "80% of Kelly Book" and "Dealer Cost," and thus it appeared (and the trial court found) that the amount of each loan advance was based on a percentage of the estimated value of the vehicle. Under the terms of each of the collateral agreements, the loan obligation reflected therein was due "upon sale of vehicle," or by a certain date, whichever was first to occur. The collateral agreements further provided that "If, for any reason, the vehicle is returned to [plaintiff] for non-payment, [dealership] will pay the deficiency balance when [plaintiff] disposes of the vehicle."
In addition to requiring the dealerships to execute a collateral agreement for each separate loan advance, plaintiff also took physical possession of the title certificates for the vehicles identified in the collateral agreements. According to plaintiff, this was done "as evidence that the vehicles and their titles were/are security" for the loan amounts.
Plaintiff filed "UCC-1" financing statements (or UCC-1's) on both of the dealerships. As to King of Kars, plaintiff's UCC-1 listed as collateral "any and all vehicles, equipment, tools and accounts receivable located at 618 Fulton Street, Fresno, CA 93701 or any other locations controlled by ... King of Kars."
As to Cars of Clovis, plaintiff's UCC-1 listed as collateral "any and all vehicles, tools, equipment and accounts receivable located at 1308 Clovis Ave., Clovis, CA 93612 or any other locations controlled by ... Cars of Clovis."
The trial court found, and neither party disputes, the following facts and circumstances relating to the sale of the vehicles:
Plaintiff alleged a cause of action for declaratory relief, seeking a judicial declaration that defendant must pay plaintiff for the title certificates held by plaintiff as security for vehicle flooring loans made to the defunct dealership, King of Kars. A second lawsuit making substantially the same allegations was filed by plaintiff regarding vehicle flooring loans made to another defunct dealership, Cars of Clovis. The two actions were consolidated. According to plaintiff's allegations, the vehicles in question were sold by the dealerships to individual customers under conditional sales contracts. Defendant ultimately provided financing for the customers’ purchases by taking assignment of (i.e., purchasing) the conditional sales contracts from the dealerships. However, in doing so, defendant failed to require production of the title certificates. The dealerships went out of business without paying the monies owed to plaintiff. Later, plaintiff refused to release the title certificates to defendant unless defendant paid off the loans made to the dealerships on the subject vehicles. In essence, plaintiff alleged—pursuant to the holding in Quartz —that as between plaintiff and defendant, plaintiff was the legal owner of the title certificates and was entitled to the requested declaratory relief because defendant "was in the position to prevent anyone from being harmed by [the dealerships] by requiring the production of the title certificates ...." In its answer, defendant denied that plaintiff is entitled to the relief sought.
As summarized by the trial court, all parties other than defendant (i.e., Lobel Financial Corporation, Inc.) had been dismissed prior to trial from the consolidated action or defaulted. Thus, by the time of trial, the only matter to be resolved was the request for declaratory relief that we have described above.
Plaintiff claims there were a combined total of 30 instances of vehicles sold by the dealerships to consumers where the resulting conditional sales contracts were assigned to defendant, and, as to the same vehicles, the dealerships had previously signed collateral agreements and surrendered the title certificates to plaintiff, but concerning which plaintiff was never paid on its loan advances. The 30 instances included seven vehicles sold by King of Kars and 23 vehicles sold by Cars of Clovis. In the instant appeal, plaintiff asserts the total principal due for its loan advances on the seven vehicles sold by King of Kars was $31,430, and the total principal due for its loan advances on the 23 vehicles sold by Cars of Clovis was $102,000. Plaintiff further asserts that it is entitled to these principal amounts plus the maximum interest allowable by law as payment for the title certificates to the vehicles. Since plaintiff did not prevail in the trial court, the court never addressed the issue of the precise amount that should be paid for the titles.1
After consideration of the evidence introduced at trial and the parties’ posttrial briefing, the trial court issued its statement of decision on July 21, 2017. In framing the issues, the trial court indicated that plaintiff contended it must be paid by defendant for the titles to the vehicles because either (i) plaintiff held a perfected security interest in the vehicles, or (ii) plaintiff was and is the lawful holder of the title certificates to the vehicles.
In its statement of decision, the trial...
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