Chevron Valley Credit Union v. Magallanes

Filed 10/21/08 Chevron Valley Credit Union v. Magallanes CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

APPEAL from a judgment of the Superior Court of Kern County. Louis P. Etcheverry, Judge.

Horswill, Mederos & Soares and Joseph F. Soares for Plaintiff and Appellant.

John J. Burke, Jr. for Defendant and Respondent.

-ooOoo-

At the conclusion of a breach of contract trial before the court, sitting without a jury, the court granted a nonsuit (Code Civ. Proc.,  581c) for defendant because of plaintiffs noncompliance with the notice provisions of Civil Code section 1799.91.^[1] Plaintiff filed a notice of appeal from the order granting nonsuit.^[2] We reverse and remand for the trial court to consider and rule upon plaintiffs request to reopen the evidence on the question of whether statutory notice was given.

STATEMENT OF FACTS

Francisco Javier Sanchez purchased a motor vehicle from Motor City Sales and Service (Motor City). His friend, defendant Magallanes, signed the purchase agreement and other documents as co-buyer because Sanchez did not qualify for the loan. Motor City assigned its interest in the purchase agreement to plaintiff, Chevron Valley Credit Union. After the loan went into default, plaintiff advised defendant of the default. On June 7, 2006, plaintiff sent defendant notices of the default to three different addresses on Monitor Street in Bakersfield.^[3] According to the notices, plaintiff planned to sell the vehicle at private sale sometime after June 23, 2006. The notices further advised that the sale proceeds would be used to reduce the amount owed, that defendant would still owe the difference in the event plaintiff received less than the amount owed, and that defendant could reclaim the vehicle before the sale by paying the full amount owed plus expenses incurred by plaintiff. Defendant had conversations with Sanchez and also with plaintiff about the loan and its default status. The parties agree that Sanchez ultimately filed for bankruptcy protection, the collateral was located, repossessed and sold, and the proceeds were applied to the balance of the loan, leaving a deficiency.

DISCUSSION

I.                   IT WAS ERROR TO GRANT A NONSUIT IN A COURT TRIAL

At the conclusion of the presentation of evidence on the morning of April 30, 2007, defense counsel said: Your Honor, I would just move for judgment for the defendant on the grounds that the notice required by Civil Code Section 1799.91 was not given as part of the contract. Plaintiff has offered no evidence that was given and defendant contends that that notice is required to be given in order for the contract to be enforceable against the co-signer. Thats the basis of the motion. That afternoon, the court heard the respective arguments of counsel. At the conclusion of his opening argument, plaintiffs counsel stated: So your Honor, I would ask that the court deny that motion and rule on the merits. After further arguments, the court took the matter under submission. The court subsequently requested supplemental briefing, conducted a hearing on May 23, 2007, and ultimately ruled: All right. I am going to grant the motion of nonsuit Section [581c] of the Code of Civil Procedure.

In a trial by a court sitting without a jury -- as here -- a motion for nonsuit is not recognized. (In re Javier G. (2006) 137 Cal.App.4th 453, 458.) Moreover, a motion for judgment of nonsuit may only be made after the plaintiff has completed his or her opening statement or after the presentation of his or her evidence in a trial by jury. (Code Civ. Proc.,  581c.) Here, the court did not impanel a jury and defendant made his motion after both sides presented their evidence. Thus, the court could not properly grant a judgment of nonsuit under Code of Civil Procedure section 581c and erred in doing so.^[4]

II. THIS MATTER SHOULD BE REMANDED SO THE COURT CAN RULE ON PLAINTIFFS REQUEST TO REOPEN THE EVIDENCE ON THE ISSUE OF STATUTORY NOTICE

Section 1799.91^[5]provides that cosigners on a consumer credit contract (who do not receive any of the money or property which are the subject of the contract) are to receive a written notice advising them, among other things, that they are guarantors of the debt. Section 1799.95^[6]provides that [n]o action shall be brought, nor shall any security interest be enforced, by any creditor or any assignee of a creditor on any consumer credit contract which fails to comply with this title . Neither the plaintiffs complaint nor defendants answer made reference to the statutory notice requirements of sections 1799.91 and 1799.95. Neither side introduced any evidence on this issue. The matter was first raised by defense counsel in his closing argument in which he maintained that his client was not liable under the contract because he did not receive the statutory notice. In response, plaintiffs counsel pointed out this was the first mention of the statutory notice during the entire litigation and further asserted:

Really the only way to do that is simply subpoena the records of the dealership, which was not done. We have no facts before us today, other than the clients or the defendants testimony saying that he didnt get notice, although he did testify, if I recall right, that he got some other paperwork, didnt remember what it was. So theres really no facts before this court to say that he did not get that notice from the dealer. And it shouldnt be imputed to Chevron Valley at their detriment that he claims that he did not get the notice. [] So your Honor, I would ask that the court deny that motion and rule on the merits.

After hearing from plaintiffs counsel, the court stated:

I tend to agree with plaintiffs thoughts. It is an unpled affirmative defense it looks like, but you still would have the burden to meet all the elements of the defense. I dont know if the dealership gave him the proper notice or not. But I know that we dont have any evidence at all that he wasnt given any notice. I made some notes, that was right at the start of the cross-examination, that I felt that the defendant was trying to hedge his testimony a little bit when he talked about the co-signer. I made that note as to credibility. I am a little concerned about that. Just is a whole change in his way he testified in direct and just in that one little area, then he went somewhere else. So I will deny the motion at this time.

After the court spoke, it heard the respective arguments of counsel. Those arguments focused on the payment history for the vehicle, defendants willingness to reinstate and partially pay on the contract, and the adequacy of plaintiffs notices to defendant. At the conclusion of the arguments, the court took the matter under submission. Nevertheless, on May 2, 2007, the court requested additional briefing on issues pertaining to section 1799.91 (multiple signatures on consumer credit contracts).

On May 14, 2007, plaintiff filed written opposition to defendants motion, which it characterized as a MOTION TO DISMISS PURSUANT TO CAL. CIV. CODE 1799.91. Plaintiff maintained the notice provisions of section 1799.91 were an affirmative defense for which defendant bore the burden of proof. Plaintiffs opposition further made mention that the court should have allowed plaintiff to reopen its case to produce factual testimony verifying that the section 1799.91 notice had been given and further stated:

This is particularly important given the fact that Plaintiff would have likely been able to produce the very document that Defendant claims was not afforded him. (See Declaration of Sheri Clark identified as Exhibit 1, attached hereto and made a part hereof[.])

Attached to the written opposition was a declaration by Sheri Clark, one of plaintiffs trial witnesses. Her declaration incorporated by reference a Notice to Co-signer signed by defendant. That notice substantially complied with the language of section 1799.91. Sheri Clark declared that she discovered this document after her trial testimony was given and that if she had been aware that this Notice to Co-signer was an issue, she would have produced it during her trial testimony.

After the parties filed supplemental briefing on the issue, the trial court conducted a hearing and granted the motion of nonsuit Section [581c] of the Code of Civil Procedure. The court concluded that section 1799.95 obligated plaintiff to comply with the section as a condition precedent to obtaining recovery and that it was plaintiff who had the burden of pleading and proving that the statutory notice was given. However, at no time did the trial court expressly consider or rule upon plaintiffs request to reopen its case in order to present evidence that the notice was given. In its ruling, the court made no mention of plaintiffs request or of its offer of proof in the form of the declaration of Sheri Clark.

The parties spend much time arguing the question of who had the burden of pleading and proof on the matter of statutory notice. We decline to resolve those questions at this time because we think it is incumbent upon the trial court in the first instance to rule on plaintiffs request to reopen the evidence on the issue of statutory notice. Trial courts have broad discretion in deciding whether to reopen the evidence. (Horning v. Shilberg (2005) 130 Cal.App.4th 197, 208.) This is especially so in a court trial, even over the objection of the litigants. In fact, such a procedure may be required in order to reach a just result. (Howard Contracting, Inc. v. G.A. MacDonald Construction Co. (1998) 71 Cal.App.4th 38, 59.) While we review a courts denial of a motion to reopen evidence for abuse of discretion (Horning v. Shilberg, supra, at p. 208), here there is no indication that the court considered or ruled upon plaintiffs request. A failure to exercise discretion when called upon to do so is an abuse of discretion. (Kim v. Euromotors West/The Auto Gallery (2007) 149 Cal.App.4th 170, 176.)

This case needs to be remanded so the trial court may consider plaintiffs request that it be given the opportunity to present evidence on the notice issue. The trial court must consider and rule on plaintiffs request to reopen the evidence and any other related motions before it renders judgment for one party or the other.^[7]

DISPOSITION

The judgment is reversed. The matter is remanded so that the court may consider plaintiffs request to reopen the evidence on the issue of statutory notice. If the court grants plaintiffs motion and considers additional evidence, it shall then enter judgment after considering all the evidence received. If the court denies plaintiffs motion, it may reenter judgment in favor of defendant. Each party to bear their own costs on appeal.

_____________________

Kane, J.

WE CONCUR:

_____________________

Wiseman, Acting P.J.

_____________________

Levy, J.

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^[1] All further statutory references are to the Civil Code unless otherwise indicated.

^[2] Under older case law, an order granting a motion for nonsuit was deemed nonappealable. (Smith v. Roach (1975) 53 Cal.App.3d 893, 895.) More recently, this court has held an order granting nonsuit is appealable if it is in writing, signed by the court and filed in the action. In such a case, it has the legal effect of a judgment. (Code Civ. Proc.,  581d; Santa Barbara Pistachio Ranch v. Chowchilla Water Dist. (2001) 88 Cal.App.4th 439, 448, fn. 1.)

^[3] Plaintiffs collection manager, Sheri Clark, explained the notices went to three different addresses [b]ecause we werent sure the exact location of [defendant]. We had three different addresses over the period of the loan, so we decided to send it to all three to make sure that he received it.

^[4] It also would not have been proper for the court to grant a judgment under Code of Civil Procedure section 631.8, subdivision (a), because the motion was made after both parties rested and after all evidence had been received.

^[5] Section 1799.91 states in pertinent part:

(a) Unless the persons are married to each other, each creditor who obtains the signature of more than one person on a consumer credit contract shall deliver to each person who does not in fact receive any of the money, property, or services which are the subject matter of the consumer credit contract, prior to that persons becoming obligated on the consumer credit contract, a notice in English and Spanish in at least 10-point type as follows:

NOTICE TO COSIGNER (Traduccin en Ingls Se Requiere Por La Ley)

You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesnt pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.

You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.

The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.

This notice is not the contract that makes you liable for the debt.

^[6] Section 1799.95 provides:

No action shall be brought, nor shall any security interest be enforced, by any creditor or any assignee of a creditor on any consumer credit contract which fails to comply with this title against any person, however designated, who is entitled to notice under Section 1799.91 and who does not in fact receive any of the money, property or services which are the subject matter of the consumer credit contract.

^[7] The trial court may, for example, require plaintiff to first move to amend its complaint to allege compliance with the statutory notice requirements before it considers its request to reopen the evidence.