Vasquez v. Superior Court

• Decision Date: 10 May 1971
• Court: California Supreme Court
• Parties: , 484 P.2d 964, 53 A.L.R.3d 513, 9 UCC Rep.Serv. 11 Leonard VASQUEZ et al., Petitioners, v. The SUPERIOR COURT OF SAN JOAQUIN COUNTY, Respondent, Richard B. KARP et al., Real Parties in Interest. Sac. 7860.

Page 796

94 Cal.Rptr. 796

4 Cal.3d 800, 484 P.2d 964, 53 A.L.R.3d 513, 9 UCC Rep.Serv. 11

Leonard VASQUEZ et al., Petitioners, v. The SUPERIOR COURT OF SAN JOAQUIN COUNTY, Respondent, Richard B. KARP et al., Real Parties in Interest.

Sac. 7860.

Supreme Court of California,

In Bank.

May 10, 1971.

Kelley, Livingston, Zavala, Neumark, Lowenstein & Mattison, John P. Kelley and Rushing & Clark, Modesto, for petitioners.

Thomas C. Lynch, Atty. Gen., Charles A. O'Brien, Chief Deputy Atty. Gen., Herschel T. Elkins, Herbert Davis, Walter White and Andrea Sheridan Ordin, Deputy Attys. Gen., Marvin S. Kayne, Stephen Shefler, Stephen J. Herzberg, Roger Jon Diamond, Pacific Palisades, William F. McCabe, San Francisco, and William D. Warren, Los Angeles, as amici curiae on behalf of petitioners.

No appearance for respondent.

Severson, Werson, Berke & Melchior, Bernardus J. Smit, San Francisco, Cavalero, Dietrich & Bray, Stockton, Sheppard, Mullin, Richter & Hampton and William A. Masterson, Los Angeles, for real parties in interest.

Styskal, Wiese & Colman, Alvin O. Wiese, Jr., North Hollywood, Latham & Watkins, Philip F. Belleville and David C. Wright, Los Angeles, as amici curiae on behalf of real parties in interest.

MOSK, Justice.

We consider whether a group of consumers who have bought merchandise under installment contracts may maintain a class action seeking rescission of the contracts for fraudulent misrepresentation on behalf of themselves and others similarly situated, against both the seller of a product and the finance company to which the installment contracts were assigned. We conclude that such an action will lie against the seller under the principles set forth in Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 63 Cal.Rptr. 724, 433 P.2d 732, and that the assignee of the contract is a proper party to such an action under the circumstances presented here.

The action was brought by 37 named plaintiffs on behalf of themselves as well as others who are residents of San Joaquin and Stanislaus Counties and who purchased frozen food and freezers from Bay Area Meat Company. They each executed two retail installment sales contracts to finance the purchases, one in payment of the food, and the other for the freezer, and a binder contract. These contracts were assigned by Bay Area to three finance companies, Avco Thrift, Sterling Finance Corporation, and Beneficial Finance Company of Turlock, which were also named as defendants. ¹ [484 P.2d 96 Defendants demurred to the complaint on the ground that it did not state a cause of action, and the demurrers were sustained without leave to amend insofar as the complaint alleged a class action for fraud but were overruled on the fraud count as to the named plaintiffs. A second cause of action, also alleged as a class action, charged violation of the Unruh Act (Civ.Code, § 1801 et seq.) in that the installment contracts failed to meet the requirements of that act. The demurrers of all defendants were overruled as to the second cause of action.

In upholding the demurrers to the class action aspect of the fraud count, the trial court made it clear that it was not concerned with the sufficiency of the particular allegations to assert a class action but, rather, that in its view a class action for fraud may not be maintained by consumers. ²

Plaintiffs seek a writ of mandate to compel the trial court to vacate its order sustaining the demurrers to the first cause of action as a class action and to order the court to allow them to proceed to try the cause of action for fraud as a class action.

I

We are met at the threshold with a contention of defendants that mandate is an inappropriate remedy because plaintiffs have an adequate remedy by appeal. It seems clear, however, that plaintiffs may not appeal from the trial court's judgment dismissing their first cause of action as a class action ³ because such a course would violate the rule that an appeal may be taken only from a final judgment. (Code Civ.Proc., § 963, subd. 1.) Under this principle an appeal may not be taken from a judgment which disposes of less than all the causes of action between the parties. (See, e.g., Bank of America, etc. v. Superior Court (1942) 20 Cal.2d 697, 701, 128 P.2d 357; Mather v. Mather (1936) 5 Cal.2d 617, 618, 55 P.2d 1174.)

The complaint here seeks rescission of the contracts on the theory of fraud in the first cause of action and on the theory of a violation of the Unruh Act in the second cause of action. Mather refused to allow piecemeal disposition of a cause, and determines that where, as here, all the causes of action set forth in the complaint have a single object, an appeal will not be permitted from a judgment disposing of only one count of the complaint. ⁴

We conclude, therefore, that since plaintiffs cannot appeal from the order which bars a substantial portion of their cause from being heard on the merits, their petition for a writ of mandate deserves consideration.

II

Thirty years ago commentators, in urging the utility of the class suit to vindicate the rights of stockholders, made this incisive observation: 'Modern society seems increasingly to expose men to * * * group injuries for which individually they are in a poor position to seek legal redress, either because they do not know enough or because such redress is disproportionately expensive. If each is left to assert his rights alone if and when he can, there will at best be a random and fragmentary enforcement, if there is any at all. This result is not only unfortunate in the particular case, but it will operate seriously to impair the deterrent effect of the sanctions which underlie much contemporary law. The problem of fashioning an effective and inclusive group remedy is thus a major one.' (Kalven and Rosenfield, Function of Class Suit (1941) 8 U.Chi.L.Rev. 684, 686.)

What was noteworthy in the milieu three decades ago for stockholders is of far greater significance today for consumers. Not only have the means of communication improved and the sophistication of promotional and selling techniques sharpened in the intervening years, but consumers as a category are generally in a less favorable position than stockholders to secure legal redress for wrongs committed against them. For these reasons, the desirability of consumers suing as a class for fraud or other improper conduct by predatory sellers has been the topic of much thoughtful analysis in recent years. Numerous commentators have urged adaptation of class proceedings to consumer frauds. (See, e.g., Starrs, The Consumer Class Action (1969) 49 B.U.L.Rev. 211--250, 407--513; Eckhardt, Consumer Class Actions (1970) 45 Notre Dame Law 663; Goldhammer, The Consumer Class Action in California (1970) 45 L.A. Bar Bull. 235.)

Protection of unwary consumers from being duped by unscrupulous sellers is an exigency of the utmost priority in contemporary society. According to the report of the Kerner Commission, many persons who reside in low income neighborhoods experience grievous exploitation by vendors using such devices as high pressure salesmanship, bait advertising, misrepresentation of prices, exorbitant prices and credit charges, and sale of shoddy merchandise. State laws governing relations between consumers and merchants are generally utilized only by informed, sophisticated parties, affording little practical protection to low income families. (Report of National Advisory Commission on Civil Disorders (Bantam ed. 1968) pp. 275--276; Hester, Deceptive Sales Practices and Form Contracts--Does the Consumer Have a Private Remedy? 1968 Duke L.J. 831.) The alternatives of multiple litigation (joinder, intervention, consolidation, the test case) do not sufficiently protect the consumer's rights because these devices 'presuppose 'a group of economically powerful parties who are obviously able and willing to take care of their own interests individually through individual suits or individual decisions about joinder or intervention. '' (Dolgow v. Anderson (E.D.N.Y.1968) 43 F.R.D. 472, 484.)

Frequently numerous consumers are exposed to the same dubious practice by the same seller so that proof of the prevalence of the practice as to one consumer would provide proof for all. Individual actions by each of the defrauded consumers is often impracticable because the amount of individual recovery would be insufficient to justify bringing a separate action; thus an unscrupulous seller retains the benefits of its wrongful conduct. A class action by consumers produces several salutary by-products, including a therapeutic effect upon those sellers who indulge in fraudulent practices, aid to legitimate business enterprises by curtailing illegitimate competition, and avoidance to the judicial process of the burden of multiple litigation involving identical claims. The benefit to the parties and the courts would, in many circumstances, be substantial.

In California, we do not lack authority on the subject of the amenability of consumer claims to class action litigation. Section 382 of the Code of Civil Procedure provides, '* * * when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the Court, one or more may sue or defend for the benefit of all.' In the leading case of Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 63 Cal.Rptr. 724, 433 P.2d 732, we held that an individual plaintiff may under this section bring a class action on his own behalf and on behalf of other taxicab riders similarly situated to recover overcharges allegedly made by defendant company. Daar did not, like the present case, involve purported fraudulent misrepresentations, but the principles set forth there guide us in determining whether the class action mechanism is an appropriate vehicle to resolve a claim based upon such misrepresentations.

The class in Daar consisted of several thousand...