South Bay Chevrolet v. General Motors Acceptance Corp.

• Decision Date: 05 May 1999
• Docket Number: No. D029464,D029464
• Citation: 85 Cal.Rptr.2d 301,72 Cal.App.4th 861
• Parties: , 99 Cal. Daily Op. Serv. 4305, 1999 Daily Journal D.A.R. 5413 SOUTH BAY CHEVROLET, Plaintiff and Appellant, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 301

85 Cal.Rptr.2d 301

72 Cal.App.4th 861, 99 Cal. Daily Op. Serv. 4305,

1999 Daily Journal D.A.R. 5413

SOUTH BAY CHEVROLET, Plaintiff and Appellant, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Defendant and Respondent.

No. D029464.

Court of Appeal, Fourth District, Division 1, California.

May 5, 1999.

Rehearing Denied June 3, 1999.

Review Denied Aug. 25, 1999.

Hopkins & Sutter, F. Thomas Hecht, Michael A. Ficaro and John P. Ratnaswamy, Chicago, IL, for Plaintiff and Appellant.

Kirkland & Ellis, Chaim T. Kiffel, Claire P. Murphy, Steven C. Florsheim, Chicago, IL, and Melissa D. Ingalls, Los Angeles, for Defendant and Respondent.

KREMER, P.J.

Plaintiff South Bay Chevrolet appeals a judgment after court trial favoring defendant General Motors Acceptance Corporation (GMAC) on South Bay's complaint for GMAC's alleged unfair business practices violating BUSINESS AND PROFESSIONS CODE SECTION 17200¹. ² Asserting GMAC engaged in unfair business practices as a matter of law, South Bay contends the court erred in not granting South Bay judgment on its individual claim under section 17200. South Bay also contends the court erred in granting GMAC's motion for judgment under Code of Civil Procedure section 631.8 on South Bay's "private attorney general" claim under section 17200. Further, South Bay asserts various evidentiary errors, attacks the denial of its summary judgment motion, and challenges the cost award to GMAC. We affirm the judgment.

I INTRODUCTION

GMAC provided short-term loans to finance automotive dealership South Bay's purchases of vehicles for resale. Consistent with industry practice, GMAC calculated interest on such loans based upon a 360-day year (the 365/360 method).

South Bay filed this lawsuit alleging GMAC violated section 17200 by using the 365/360 interest calculation method assertedly "without specific contractual authorization and disclosure." South Bay contended GMAC's use of such "unlawful, unfair, deceptive and misleading" method resulted in interest overcharges. South Bay also sought to proceed against GMAC under section 17200 on a private attorney general claim on behalf of all California automotive dealerships receiving similar financing from GMAC. Under Code of Civil Procedure section 631.8, the superior court granted judgment favoring GMAC on South Bay's private attorney general claim on the ground that "mini-trials" would be necessary with respect to each California GMAC-financed dealership due to various uniquely individual questions of fact. After trial, the court also granted judgment favoring GMAC on South Bay's individual claim under section 17200. Based upon substantial evidence that at relevant times South Bay knew GMAC was using the 365/360 method, the court found GMAC's use of that method did not violate section 17200. In effect, the court concluded that South Bay failed to prove that GMAC engaged in such challenged business practice without contractual authorization or disclosure.

California statutory and case law recognizes that under certain circumstances use of the 365/360 method may be misleading. However, South Bay knew and expected from the outset of its relationship with GMAC that such method would be used. Further, section 17200 is directed toward protecting the general public, not automotive dealerships aware of GMAC's use of the 365/360 method. Hence, we affirm the judgment.

II FACTS

We state the facts and reasonable inferences in the light most favorable to GMAC as respondent. (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053, 68 Cal.Rptr.2d 758, 946 P.2d 427; Clark v. City of Hermosa Beach (1996) 48 Cal.App.4th 1152, 1178, fn. 27, 56 Cal.Rptr.2d 223.)

A GMAC Finances Dealerships' Inventory

GMAC operates a business of lending automotive dealerships money to finance their purchases of vehicles from General Motors Corporation (General Motors) and other entities. Such loans are short-term instruments outstanding for fewer than 90 days on average and known in the industry as wholesale floor plan financing or wholesale floor plan loans.

A dealership initiating wholesale floor plan financing with GMAC enters into a Wholesale Security Agreement giving GMAC a security interest in the vehicles being financed. However, the Wholesale Security Agreement does not obligate a dealership to borrow any money from GMAC or require GMAC to lend the dealership any money. Further, the Wholesale Security Agreement does not contain such specific loan terms as the amount of credit to be extended, the rate of interest, the method of interest calculation, repayment provisions, or the beginning or ending dates of the financing. Instead, the Wholesale Security Agreement simply provides that a dealership receiving wholesale floor plan financing from GMAC is obligated to pay interest on the dealership's outstanding wholesale floor plan loans "at the rate per annum designated by GMAC from time to time and then in force under the GMAC Wholesale Plan." The GMAC Wholesale Plan incorporated into the Wholesale Security Agreement is a set of various individualized features and programs--including the Dealer Wholesale Credit Account Plan, the Wholesale Incentive Plan, the Wholesale Floor Plan Protection Program and the Wholesale Installment Sales Program--communicated to the dealership orally or in writing throughout the course of the dealership's relationship with GMAC. ³ Before and after executing a Wholesale Security Agreement, GMAC also communicates to a dealership orally and in writing other terms of its financing offer.

Thus, the Wholesale Security Agreement is not the sole document setting forth the terms of the wholesale floor plan financing extended by GMAC but instead is only the first step leading to a series of individual lending agreements that commence independently when vehicles are actually floored. Until a vehicle is floored, no credit is extended. Each time a GMAC-financed dealership orders a vehicle from a manufacturer, the dealership enters into a separate lending agreement with GMAC. Such agreement obligates the dealership to pay GMAC interest on the outstanding balance for the floor-planned vehicles at a floating interest rate On its wholesale floor plan loans to dealerships, GMAC charges "simple" or "true" (not compound) interest calculated using the 365/360 method. Under the 365/360 method, the per annum interest rate is multiplied by the outstanding loan balance and divided by 360 to determine a daily interest charge. The daily interest charge is then multiplied by the actual number of days the loan is outstanding to determine the total interest charges for the billing period. ⁴ Under the 365/360 method, the daily interest rate is constant for a given per annum interest rate. ⁵ Many banks and financial institutions commonly use the 365/360 method as their prevalent method of interest calculation for short-term commercial loans such as wholesale floor plan financing. Wholesale floor plan lenders other than GMAC also use the 365/360 method on loans made to dealerships.

designated by GMAC from time to time. GMAC's interest rate floats in relation to a bank prime rate. When the prime rate fluctuates, GMAC's branch offices send dealerships rate change notices informing them of the new rate. Some of GMAC's branch offices refer to the rates quoted in those notices as "true rates," but other branches do not. GMAC also sends dealerships monthly billing statements detailing the interest charges accrued for each day a floor-planned vehicle is outstanding during the month. Interest due under each vehicle's floor plan loan agreement is listed separately.

Over the life of a wholesale floor plan loan, a dealership pays GMAC total interest equal to the amount listed on the monthly billing statements minus the amount of any wholesale credits, rebates, and subsidies the dealership may receive under the GMAC Wholesale Plan made a part of each of the series of wholesale floor plan loan agreements. Often constituting a significant component of a dealership's business, wholesale floor plan financing is generally overseen by the dealership's business manager or financial manager.

B South Bay and Its Principals

In 1946 South Bay was founded as a Chevrolet dealership by the parents of its eventual principal Travis Reneau. Reneau worked at South Bay from its founding, owned equity in the business beginning in the early 1950's, and served as the company's president from 1961 until 1986. South Bay's principal David Ordway joined the business as a 25 percent owner in 1981 and became its president in 1986. In January 1996, after suffering financial difficulties, South Bay sold its operations.

C South Bay's Course of Dealings with GMAC

From its founding until the sale of its operations, South Bay received wholesale floor plan financing from GMAC except for the 1982-1986 period when Bank of America served as South Bay's wholesale floor plan lender. South Bay paid both of its lenders South Bay averaged about $4 million in wholesale floor plan loans outstanding to GMAC. South Bay delegated to its business manager and support staff the responsibility for monitoring its wholesale floor plan financing. Before the early 1960's, GMAC did not send billing statements to dealerships. Instead, during those early years of the parties' relationship, South Bay's office manager calculated by hand the wholesale floor plan interest owing to GMAC on each vehicle under the 365/360 method.

wholesale floor plan interest calculated using the 365/360 method.

In June 1986 South Bay entered into a Wholesale Security Agreement with GMAC. GMAC's San Diego branch office that served South Bay had a regular practice of discussing its interest calculation method with a dealership within 24 hours after the dealership signed up for wholesale floor plan financing with GMAC. After commencement of financing, GMAC's sales staff also had the practice of explaining the calculations on wholesale floor plan loan...