Ramirez v. Balboa Thrift and Loan
Filed 3/21/13 Ramirez v. Balboa Thrift and Loan CA4/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
PATRICIA RAMIREZ,
Plaintiff and Appellant,
v.
BALBOA THRIFT AND LOAN,
Defendant and Respondent.
D060057
(Super. Ct. No. 37-2009-00099225-
CU-BT-CTL)
APPEAL from
an order of the Superior Court
of
County, Richard E. L. Strauss, Judge. Reversed and remanded.
Patricia
Ramirez appeals from an order denying her motion to certify a class on her
unfair competition claim (UCL) against Balboa Thrift and Loan (Balboa). Ramirez's UCL claim is based on Balboa's
alleged violation of the Rees-Levering Motor Vehicle Sales and Finance Act
(Rees-Levering Act or Act). (Civ. Code, § 2981 et seq.)
Ramirez
contends the court erred in denying her class certification motion because the
court based its denial on an erroneous legal analysis of the Rees-Levering
Act. We conclude this contention has
merit and reverse the order. We remand
to permit the court to consider the propriety of the class certification motion
without the improper legal analysis.
FACTUAL AND
PROCEDURAL BACKGROUND
In December
2006, Ramirez purchased an automobile from a Honda dealer under a conditional
sale contract obligating her to make monthly payments. As part of the purchase, Ramirez filled out a
credit application. Shortly after the
purchase, the dealer assigned the contract to Balboa. During the next three years, Ramirez often
missed required payments. In about May
2009, Ramirez stopped making payments and voluntarily surrendered her vehicle
to Balboa.
After the
surrender, on July 6, 2009, Balboa sent Ramirez a "Notice of Intention to
Dispose of Motor Vehicle" (NOI), notifying her that it intended to sell
the vehicle. The NOI stated that Ramirez
had the right to redeem the vehicle by paying the total outstanding amount due
($19,420.55) or she had the right to reinstate the installment contract and
obtain a return of the vehicle. With
respect to the reinstatement right, the NOI stated that Ramirez must pay
$1,567.03 within 15 days of the notice date (or request an extension) and
"You must also pay any payment,
fees, or charges that comes due within the reinstatement period." (Italics added.) The notice also stated that "To learn
the exact amount you must pay, call us at the telephone number stated
above."
Ramirez did
not make any efforts to redeem the vehicle or reinstate the contract.
More than
60 days after sending the NOI, on September
17, 2009, Balboa sent a letter to Ramirez notifying her that her
vehicle had been sold for $6,187.50, and after deducting the sale proceeds and
related charges, there was a balance of $5,574.65. The letter stated: "You are required to pay the remaining
balance and demand is hereby made upon you to contact the undersigned by: October
4, 2009. [¶] If you do
not respond to this legal demand as requested, we may be obligated to institute
litigation to liquidate this balance, and you may be assessed all costs and
fees."
About one
week later, Ramirez sent Balboa $25, which she said was a payment on the
deficiency balance. Soon after,
Ramirez's credit report reflected her loan default and voluntary surrender of
the vehicle, and that a deficiency of $3,344 was "written off."
Several
days later, on September 28, 2009, Ramirez filed a class action lawsuit against
Balboa, alleging that Balboa engaged in an unlawful, unfair, and fraudulent
business practice based on its violation of the Rees-Levering Act. She alleged Balboa violated the Act because
the NOI sent to her did not specifically include the "conditions
precedent" to contract reinstatement.
(See Juarez v. Arcadia Financial,
Ltd. (2007) 152 Cal.App.4th 889 (Juarez).) Specifically, Ramirez alleged that Balboa
"failed to inform [her] of all amounts that [she] must pay to [Balboa] to
cure the default, including additional monthly payments coming due after the
date of the NOI but before the end of the notice period, as well as any late
fees or other fees and the amount of those fees. [Balboa] also failed to tell [Ramirez] the
names and addresses of the third parties that had to be paid in order to
reinstate the subject vehicle, and the amounts that must be paid to those third
parties in order to reinstate the subject vehicle." She alleged that she has been injured based
on the $25 payment and the fact that Balboa reported the "deficiency claim
to credit bureaus."
Ramirez
brought the action on behalf of the following class: "All California residents whose vehicles
were repossessed by or voluntarily surrendered to [Balboa] or its agents
pursuant to a conditional sales contract and against whom [Balboa] has asserted
a deficiency claim during the period beginning four years before the filing of
this action to the date of class certification.
This class excludes all [Balboa] employees . . . and all persons whose
conditional sales contract obligations have been discharged in
bankruptcy."
Ramirez
sought various remedies, including: (1)
a determination that the NOI failed to comply with the Act and therefore Balboa
"lost the right to assert a deficiency claim"; (2) restitution to
class members "based on the amount of money each class member paid on
[Balboa's] invalid deficiency claims during the relevant period"; and (3)
an injunction prohibiting Balboa from attempting to collect or recover on
invalid deficiency claims.
Balboa
answered the complaint and filed a cross-complaint alleging a single breach of
contract cause of action, claiming Ramirez failed to pay the amounts owed on
the contract and seeking a deficiency judgment of $13,313.90.
Balboa then
moved for summary judgment and/or summary adjudication on the complaint,
asserting that as a matter of law
Ramirez could not prevail on her UCL claim because Balboa had a legal basis
under section 2983.3(b)(1) to have denied her reinstatement right based on
false statements she made on her credit application in 2006. Ramirez opposed the motion, asserting that
Balboa's legal argument—that it could
successfully defend the UCL claim based on a retroactive denial of her
reinstatement right—was unsupported by the Rees-Levering Act, and, in any
event, the facts showed that she did not make any false statements on her
credit application. After reviewing the
parties' papers and factual submissions, the court did not rule on the legal
argument, but denied Balboa's motion based on its finding that triable issues
of fact exist as to whether the statements made on Ramirez's credit application
were truthful.
Ramirez
then filed a class certification motion, seeking to certify the proposed class
of California residents whose vehicles were repossessed by or voluntarily
surrendered to Balboa. Based on Balboa's
interrogatory response as to how many individuals fall within the class
definition, Ramirez asserted there were at least 2,400 individuals in the
proposed class.
In her
supporting papers, Ramirez addressed each of the elements of a class
certification motion. With respect to
the predominance issue, Ramirez argued that common legal and factual issues
would predominate because the Juarez
court interpreted the Rees-Levering Act to require that, as a precondition to
seeking a deficiency, a creditor must issue an NOI specifically identifying all
conditions precedent to reinstatement, and Balboa's "NOIs uniformly failed
to give consumers these conditions precedent to reinstating their loans,"
including "how much they must pay to reinstate their loans and the 'names
and addresses of those who are to be paid.' " (See Juarez,
supra, 152 Cal.App.4th at pp. 904-912.)
Ramirez also argued that the requested injunctive and restitutionary
relief requires the resolution of common factual and legal questions.
Balboa
opposed the motion on numerous grounds, including: (1) individual legal and factual issues
predominate among class members; (2) Ramirez is an inadequate class
representative; (3) Ramirez did not incur an "injury" within the
meaning of the UCL's standing requirement; (4) Ramirez's claims were not
typical; and (5) class treatment is not superior under the totality of the
circumstances.
With
respect to the first (predominance) issue, Balboa argued primarily that there
were eight different versions of the NOI during the class period, many of which
raise different legal and factual issues regarding whether the NOI complied
with the Rees-Levering Act, and therefore the court would be required to
undertake an individual analysis of each NOI to determine the class member's
recovery right. Balboa also identified
several other individual issues that would make the class action
unmanageable. Of particular relevance
here, Balboa argued that many class members received NOI's that denied them a
reinstatement right, and, with respect to the class members who received an NOI
providing a reinstatement right, the court would be required to engage in an
individual analysis of each class member's entitlement to recover because
Balboa had the right to assert an affirmative defense as to each class member
concerning whether he or she fell within an exception identified in section
2983.3(b).
Balboa
additionally proffered evidence indicating that although Balboa's total
outstanding deficiency balance is approximately $20 million, Balboa does
"not collect on over 99.5 % of [the] deficiencies. . . ." Balboa's vice-president explained in a
declaration that "after we send the notice of deficiency and a couple of
months go by, except in the rare occasion, Balboa does not pursue the customer
o[n] the deficiency balance. . . ."
According to the evidence, the total amount collected on deficiencies
from all the NOI's sent during the class period was $170,341.57.
After
considering the parties' arguments and submissions, the court issued a
tentative ruling stating:
"Ramirez's motion to certify the class is denied. Individual issues of fact predominate over
common questions of fact. Specifically,
it is unclear whether there were grounds to deny reinstatement as to each
individual class member pursuant to Civil Code section 2983.3(b)(1)."
During oral
argument, Ramirez's counsel argued that the court's conclusion was based on a
faulty legal premise—that the section 2983.3(b)(1) exception (pertaining to
misrepresentation on a credit application) allows a creditor to obtain a
deficiency even if the exception was not identified in the NOI sent to the
buyer.
Balboa's
counsel countered that the court's reliance on section 2983.3(b)(1) to show the
existence of individual factual issues was proper because Balboa had the
ability to raise this statutory misrepresentation defense "as a matter of
due process." Counsel also noted it
had identified many other individual issues and discussed the fact that Balboa
had repeatedly modified its standard NOI form and had used eight different
versions of the NOI during the class period.
Balboa's counsel also argued that Ramirez did not sustain sufficient
injury to show standing under the UCL claim, but the court specifically stated
that it was not making "any determination" on that issue, stating
"I saw that in the documents, but I don't think that's part of this
analysis."
In response
to defense counsel's reliance on the different versions of Balboa's NOI form,
Ramirez's counsel asserted that the different versions would not require an
individual analysis because "each of the different iterations . . . are
defective in the same way," including that "[t]hey [require payment
of] storage charges and additional payments that come due and [these amounts]
are not stated in those NOIs. . . ."
Ramirez's counsel also clarified that the "persons who were denied
reinstatement [in the NOI] are not in the class. The class includes [only] those persons who
received an NOI that allowed them reinstatement."
At the
conclusion of the arguments, the court stated:
"I appreciate everybody's presentations. Not an easy case. I still don't think I can certify this as a
class. There's too many individual
issues in this. I'm going to confirm the tentative
ruling."
The court
thereafter entered its final order stating that "Plaintiff's Motion for
Class Certification is DENIED pursuant to the reasons stated on the record and
the Court's tentative ruling on May 5, 2011, individual issues of fact
predominate over common questions of fact.
Specifically, it is unclear whether there were grounds to deny reinstatement
as to each individual class member pursuant to Civil Code section
2983.3(b)(1)."
Ramirez
appeals.
DISCUSSION
I. Class
Action Certification Principles
" 'Class actions serve an important
function in our judicial system. By establishing a technique whereby the
claims of many individuals can be resolved at the same time, the class suit both eliminates the
possibility of repetitious litigation and provides small claimants with a
method of obtaining redress.' " (Richmond v. Dart
Industries, Inc. (1981) 29 Cal.3d 462, 469; Seastrom v. Neways, Inc.
(2007) 149 Cal.App.4th 1496, 1500.)
However, "because group action . . . has the
potential to create injustice, trial courts are required to
' "carefully weigh respective benefits and burdens and to allow
maintenance of the class action
only where substantial benefits accrue both to litigants and the
courts." ' " (Linder v. Thrifty Oil Co. (2000)
23 Cal.4th 429, 435 (Linder); Seastrom, supra, 149
Cal.App.4th at p. 1500.)
"The
party seeking certification . . . must establish the
existence of an ascertainable class
and a well-defined community of interest among the class members. [Citation.] The community of interest
requirement embodies three factors: (1) predominant common questions of
law or fact; (2) class
representatives with claims or defenses typical of the class; and (3) class
representatives who can adequately represent the class." (Richmond v. Dart Industries, Inc., supra,
29 Cal.3d at p. 470; see also Code Civ. Proc., § 382.) The proponent must show
the "class action is
superior to individual lawsuits or alternative procedures for resolving the
controversy." (Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1204;
accord City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 459.)
On the
issue whether common issues predominate in the litigation, a court must
"examine the plaintiff's theory of recovery" and "assess the
nature of the legal and factual disputes likely to be presented."
(Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1025 (Brinker), italics added.) The court may consider the elements
of the claims and defenses, but should not rule on the merits unless necessary to resolve the
certification issues. (Ibid.; Lockheed Martin Corp. v. Superior
Court (2003) 29 Cal.4th 1096, 1106; Linder, supra, 23 Cal.4th at pp.
439-440.) "The 'ultimate question' . . . is whether 'the issues
which may be jointly tried, when compared with those requiring separate
adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to
the judicial process and to the litigants.' " (Brinker,
supra, at p. 1021.) In conducting this analysis, a
"court must examine the allegations of the complaint and supporting
declarations [citation], and consider whether the legal and factual issues they
present are such that their resolution in a single class proceeding would be both desirable and feasible. 'As a
general rule if the defendant's liability can be determined by facts common to
all members of the class, a class will be certified even if the
members must individually prove their damages.' " (Id.
at pp. 1021-1022, fn. omitted.)
Trial
courts " 'are ideally situated to evaluate the efficiencies and
practicalities of permitting group action' " and therefore are
" 'afforded great discretion' " in evaluating the relevant
factors and in ruling on a class
certification motion. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326; accord Brinker,
supra, 53 Cal.4th at p. 1022.)
"A certification order generally will not be disturbed unless (1)
it is unsupported by substantial evidence, (2) it rests on improper criteria,
or (3) it rests on erroneous legal assumptions.
[Citations.]" (
40 Cal.4th 1069, 1089; see Sav-On, supra, at pp. 326-327.)
On appeal from the denial of class
certification, we review only the reasons given by the trial court for its
ruling. (Kaldenbach v. Mutual of
Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 843-844; accord
81 Cal.App.4th 816, 829 (Bartold).) "Appeal
of an order denying class certification 'presents an exception to the general
rule on review that we look only to the trial court's result, not its rationale.' [Citation.]
Erroneous legal assumptions or improper criteria may require reversal
'even though there may be substantial evidence to support the court's order.' [Citation.]" (Caro
v. Procter & Gamble Co. (1993) 18 Cal.App.4th 644, 655.) "In other words, we review only the
reasons given by the trial court for denial of class certification, and ignore
any other grounds that might support denial." (Bartold,
supra, 81 Cal.App.4th at p. 829.)
However, " '[a]ny valid pertinent reason stated will be
sufficient to uphold the order.' "
(Linder, supra, 23 Cal.4th at
p. 436; see Kaldenbach, 178 Cal.App.4th at pp. 843-844.)
Under these
principles, if a trial court bases its denial of class certification on an
incorrect legal analysis, a reviewing court must reverse and remand, unless the
trial court independently relied on at least one other legally valid and
factually supported ground. (See
298, 311 [when a trial court's decision rests on an error of law, that decision
is an abuse of discretion]; Fletcher v. Security Pacific Nat. Bank
(1979) 23 Cal.3d 442, 454 [reversal and remand warranted where trial court
erroneously held that an unfair trade practice class action required proof of
each individual borrower's lack of knowledge]; McAdams v. Monier, Inc.
(2010) 182 Cal.App.4th 174, 187 [reversing court order denying class
certification where "trial court used improper criteria and made erroneous
legal assumptions"]; Knapp v.
AT&T Wireless Services, Inc. (2011) 195 Cal.App.4th 932, 939
denying class certification if the trial court used improper criteria or made
erroneous legal assumptions, even if substantial evidence supported the
order"]; Ticconi v. Blue Shield of California Life & Health Ins.
Co. (2008) 160 Cal.App.4th 528, 534 [denial of motion to certify class
reversed where trial court erroneously concluded that the defense of unclean
hands was available in a UCL action based on the violation of certain Insurance
Code sections].)
II. The UCL
In her
complaint, Ramirez alleged a single cause of action under the UCL. The UCL prohibits unfair competition,
including unlawful, unfair, and fraudulent business acts. (Bus. & Prof. Code, § 17200.) It embraces anything that can properly be
called a business practice and that is forbidden by law. (Korea Supply Co. v. Lockheed Martin Corp.
(2003) 29 Cal.4th 1134, 1143.) The UCL
" 'borrows' violations from other laws by making them independently
actionable as unfair competitive practices." (Ibid.)
Ramirez's
UCL claim is based on her allegation that Balboa violated the Rees-Levering Act
by failing to comply with the Act's requirement that an NOI contain the
specific "conditions precedent" to reinstatement of her vehicle loan. (§ 2983.2(a)(2).) She
sought to certify a class of individuals whose vehicles were repossessed by or
surrendered to Balboa and against whom Balboa asserted a deficiency claim. She claimed that with respect to this class
of persons, Balboa violated the Rees-Levering Act in identical ways and thus
common issues would predominate. She
also alleged that she had standing because she suffered monetary injury in the
form of her $25 payment and a negative report on her credit report.
In
analyzing whether the court erred in denying certification of the class, we
first summarize the relevant provisions of the Rees-Levering Act. We then examine whether the court's stated
reasons for denying the motion were based on a correct legal analysis and
supported by substantial evidence.
III. The
Rees-Levering Act
The Act
provides detailed rules governing motor vehicle conditional sale contracts such
as the one signed by Ramirez.
(§ 2981 et seq.; see Juarez, supra, 152 Cal.App.4th at p. 894.) The Act's purpose is
"to provide more comprehensive protections in financing for the
unsophisticated motor vehicle consumer."
(Salenga v. Mitsubishi Motors
Credit of America, Inc. (2010) 183 Cal.App.4th 986, 998 (
in Aryeh v. Canon Business Solutions, Inc.
(2013) 55 Cal.4th 1185, 1196-1197.)
Two code
sections of this statutory scheme are of particular relevance in understanding
Ramirez's claim: section 2983.2 and
section 2983.3.
A
Section 2983.3
Section
2983.3 governs a party's right to reinstate a loan upon the buyer's default
default by the buyer, the seller or holder repossesses or voluntarily accepts
surrender of the motor vehicle, any person liable on the contract shall have a
right to reinstate the contract and the seller or holder shall not accelerate
the maturity of any part or all of the contract prior to expiration of the
right to reinstate, unless the seller or holder reasonably and in good faith
determines that any of the following has occurred . . . ." The statute then sets forth six specific
exceptions to the reinstatement right, including the one contained in section
2983.3(b)(1): "The buyer or any
other person liable on the contract by omission or commission intentionally
provided false or misleading information of material importance on his or her
credit application."
Under this
code section, if the seller/holder does not "reasonably and in good
faith" determine one of the exceptions applies, the buyer has a right to
reinstate and if the buyer wishes to do so, the buyer must reimburse the seller
for all costs, including the defaulted payments, applicable delinquency
charges, and "all reasonable and necessary collection and repossession
costs and fees incurred, including attorney's fees and legal expenses expended
in retaking and holding the vehicle." (§ 2983.3(d)(1),
(5).) Although these costs to reinstate may be substantial, "the
option of reinstating a contract is often preferable to redemption, because
reinstatement allows the buyer to recover the car without having to pay the
full balance due on the contract . . . ." (Juarez, supra, 152
Cal.App.4th at p. 894.)
B. Section
2983.2
Section
2983.2 governs a creditor's notice
obligations after a repossession. (See Juarez, supra, 152
Cal.App.4th at p. 899.) The code section requires a creditor to provide
the buyer with a notice of intention (NOI) to dispose of the repossessed
vehicle. (§ 2983.2(a).) Under the statutory provisions, the
NOI must conform to specific mailing requirements, must be given within 60 days
following repossession, and must provide extensive information on numerous
subjects (set forth in nine separate paragraphs). (§ 2983.2(a).)
Under section 2983.2(a)(2), this notice must include information about
the reinstatement right, including the timing of this right and "all the
conditions precedent thereto or that there is no right of reinstatement and
provides a statement of reasons therefor."
In
requirement contained in section 2983.2(a)(2) that the NOI must identify all
" 'conditions precedent' " to reinstatement of the
contract. (Juarez, supra, 152 Cal.App.4th at pp. 899-912.) We held the NOI must "provide a level of
specificity as to the conditions precedent to reinstatement sufficient to
inform the buyer—without need for further inquiry—as to exactly what the buyer
must do to cure the default. Thus, the
statute requires that a creditor inform the consumer of any amounts the buyer
must pay to the creditor and/or to third parties and provide the buyer with the
names and addresses of those who are to be paid. The creditor must also inform the consumer
regarding any additional monthly payments that will come due before the end of
the notice period, as well as of any late fees, or other fees, the amount(s) of
these additional payments or fees, and when the additional sums will become
due." (Id. at pp. 904-905.) In so
holding, we acknowledged "there may be instances in which the creditor
does not possess information about the amount a buyer must pay to a third party
to satisfy a condition precedent to reinstatement." (Id.
at pp. 908-909.) But we said "the
creditor must provide the buyer with all of
the relevant information it possesses and/or information it has the ability to
discern, concerning precisely what the buyer must do to reinstate his or her
contract." (Id. at p. 909.)
In
vehicle was repossessed brought a class action alleging the creditor violated
the UCL by failing to comply with the Rees-Levering Act's requirements. (Juarez,
supra, 152 Cal.App.4th at pp. 896-898.)
After the court certified the class, the court granted summary judgment
in the creditor's favor based on the court's conclusion that the NOI satisfied
statutory requirements and thus the creditor did not engage in an unlawful,
unfair or deceptive practice within the meaning of the UCL. (Id. at
pp. 898-899.) This court reversed,
holding the NOI did not "provide a level of specificity as to the
conditions precedent to reinstatement sufficient to inform the buyer—without
need for further inquiry—as to exactly what the buyer must do to cure the
default." (Id. at pp. 904, 912.) We
thus remanded for the trial court to consider the class claims under all three
prongs of the UCL. (Id. at p. 912 & fn. 13.)
We have
since reaffirmed that a buyer may potentially recover under the UCL for claimed
violations of the Rees-Levering Act's NOI notice requirement. (See Salenga,
supra, 183 Cal.App.4th at pp.
998-1002.) The California Supreme Court
has additionally upheld the certification of class claims based on a violation
of the Rees-Levering Act's NOI requirements.
(See Fireside Bank v. Superior
Court, supra, 40 Cal.4th at p.
1076 [class claim under the Act and the UCL "on behalf of all persons who
had received postrepossession notices . . . in which the listed redemption
amount [improperly] failed to subtract the credit for unearned finance
charges"].)
IV. Analysis
In denying
Ramirez's class certification motion, the court stated: "[I]ndividual issues of fact predominate
over common questions of fact.
Specifically, it is unclear whether there were grounds to deny
reinstatement as to each individual class member pursuant to Civil Code section
2983.3(b)(1)."
Ramirez
challenges the court's reliance on section 2983.3(b)(1) to deny her class
certification motion. We agree this
ground was not a proper basis for denying class certification. The court's conclusion was based on an
improper legal assumption, i.e., that Balboa would be entitled to assert this
statutory exception as a valid affirmative defense to the UCL claim alleged by
class members who were given a
reinstatement right in the NOI.
name="_ftnref3" title="">[3]
Under
section 2983.3, a defaulting buyer whose car has been repossessed by or
voluntarily surrendered to a creditor must be given the opportunity to
reinstate the contract, absent proof of certain statutory circumstances,
including that the buyer (1) "intentionally provided false or misleading
information of material importance on his or her credit application"; (2)
concealed the motor vehicle from the creditor; (3) committed or threatened to
commit acts of destruction or failed to take care of the vehicle in a
reasonable manner; (4) committed, threatened to commit, or attempted to commit
criminal acts of violence against the seller/holder or its agent; or (5) the
buyer knowingly used the vehicle in connection with the commission of a
contract shall be limited to once in any 12-month period and twice during the
term of the contract." (§
2983.3(c).)
there is no specific time limit contained in section 2983.3 for making the
determination regarding a buyer's reinstatement right, section 2983.2 sets
forth strict deadlines and notice requirements if the seller intends to or does
seek a deficiency.
Of relevance here, section 2983.2 states: "Except as provided in Section 2983.8
[pertaining to mobilehome sales], those persons shall be liable for any
deficiency after disposition of the repossessed or surrendered motor vehicle
section is given within 60 days of
repossession or surrender and
does all of the following: [¶] . . . [¶] (2) States either that there is a conditional right to reinstate the contract
until the expiration of 15 days from the date of giving or mailing the notice
and all the conditions precedent thereto or
that there is no right of reinstatement and provides a statement of reasons
therefor." (§ 2983.2(a)(2),
italics added.)
Under this
subsection, a seller cannot recover a
deficiency unless the NOI specifically and timely notifies the buyer of the
conditions precedent to loan reinstatement OR timely notifies the buyer that
there is no right of reinstatement and provides
a statement of reasons for this conclusion.
Reading together sections 2983.2 and 2983.3, a seller/holder who wishes
to preserve its rights to claim a deficiency must determine within a 60-day
period after repossession whether a buyer is entitled to a reinstatement, and
then notify the buyer of this decision.
Given the Legislature's manifest intent to set forth the exclusive
process for creditors to obtain a deficiency balance after a vehicle
repossession or surrender, there is no room for reading additional exceptions
into the statutory scheme. The statutes
cannot be reasonably interpreted to allow a creditor who failed to give timely
notice of a statutory exception to the mandatory reinstatement right to later
alter its position and retroactively deny reinstatement, regardless whether the
retroactive denial is for affirmative or defensive purposes. Any other conclusion would require that we
ignore the plain language of sections 2983.2(a)(2) and 2983.3(b).
In asserting its position,
Balboa does not rely on the statutory language, but instead argues that a
denial of its right to a deficiency judgment would violate its constitutional
due process rights. In particular,
Balboa argues that "it would be denied due process if [after the 60-day
period] it was not allowed to investigate and litigate each customer's right to
reinstatement. . . . Discovery to each
class member's credit application would be required to determine if they also
lied on the credit application. It would
violate Defendant's due process right to deny this discovery and individual
defense at trial."
The
argument is without merit. The
Legislature did not preclude a creditor from raising a fraud defense; it merely
required a creditor to raise and discover the applicability of any statutory
exception within 60 days of repossession if
it wants a deficiency judgment. This
limitation as to a seller's remedies does not establish a constitutional
violation. As recognized by the
California Supreme Court, a secured creditor who sells a defaulting debtor's
repossessed car may obtain a deficiency judgment, but only by complying with
all of the Act's provisions. (
Cal.4th 203, 215 [" ' "[T]he rule and requirement are simple. If the secured creditor wishes a deficiency
judgment he must obey the law. If he
does not obey the law, he may not have his deficiency judgment." '
"]; see Salenga, supra, 183
Cal.App.4th at pp. 998-999, 1000 ["[w]hen a secured creditor pursues a
deficiency judgment, it must follow the statutorily prescribed notice
procedures of the [Rees-Levering] Act"].)
Moreover,
to the extent creditors retain rights to bring affirmative claims (such as
fraud) against buyers, these rights exist only during the applicable
limitations period. In this case, Balboa
did not allege, or seek to assert, a common
law fraud claim against Ramirez (or any of the class members), and instead
merely sought to rely on a statutory exception (that is not necessarily
equivalent to a common law fraud claim) long after the time period had lapsed
for asserting the statutory exception.
Equally
important for class certification purposes, even assuming the statutory
exception could be asserted after the statutory time period had expired, Balboa
did not proffer any facts showing that any such exception would apply to any of
the other class members. Instead, it
merely stated that individual issues would predominate because it should be
provided the right to "investigate" each class member to determine
whether it could find any facts showing the applicability of any of the
statutory exceptions. Without any
foundational basis showing that such evidence could or would be discovered,
this possibility does not raise a likelihood
that individual issues would predominate over common issues in the
litigation. (See Brinker, supra, 53 Cal.4th at p. 1025 [in deciding certification
question court must examine the plaintiff's theory of recovery and "assess
the nature of the legal and factual disputes likely to be presented," italics added].)
Balboa
alternatively argues that many other grounds exist for affirming the court's
order, including (1) the fact that Balboa issued at least eight different form
NOI's during the class period; (2) the fact that Balboa had settled with or
obtained judgments against some class members; (3) whether Ramirez's claims
were typical of the class; (4) the existence of differing forms of injury among
class members; and (5) whether Ramirez's claimed injuries were sufficient to
show standing for purposes of a UCL claim.
These
arguments raise important issues regarding the propriety of class certification
in this case, and it is tempting to consider them in reviewing the court's
order. However, based on our review of
the court's statements and written order, it is apparent that the court relied
primarily if not exclusively on the section 2983.3(b)(1) reinstatement
exception to conclude individual issues would predominate. Although the court's final order also refers
to "the reasons stated on the
record," the court did not identify any other reasons on the record. Moreover, it is unclear on the record before
us whether the court would have reached a similar conclusion on the class
certification motion absent its reliance on the section 2983.3(b)(1)
exception. The court specifically stated
at the hearing that it did not view resolution of Ramirez's class certification
motion as an "easy case" and stated it was unnecessary to address
certain issues Balboa had raised in opposition to the class certification
motion. In its final order, the court
cited only the section 2983.3(b)(1) statutory exception as the "[s]pecific[ ]"
reason for its order. Further, many of
the other grounds for opposing the class certification motion require a factual
analysis of the record, a task best performed by the trial judge in the first
instance.
On this
record, the appropriate disposition is to reverse and remand for the court to
consider Ramirez's class certification motion on a proper legal analysis. When a trial court "fail[s] to follow
the correct legal analysis when deciding whether to certify
a class action, 'an appellate court is required to
reverse an order denying class certification
. . . , "even though there may be substantial evidence to support the
court's order." ' " (Bartold,
supra, 81 Cal.App.4th at
pp. 828.)
DISPOSITION
Order
reversed. The matter remanded for the
court to reconsider Ramirez's class certification motion and Balboa's
opposition to the motion in a manner consistent with the determinations
expressed in this opinion. Appellant to
recover her costs on appeal.
HALLER, J.
WE CONCUR:
McCONNELL, P. J.
McDONALD, J.
name="_ftn1" title="">[1]
All further statutory references
are to the Civil Code unless otherwise specified. For readability, we omit the word subdivision
when referring to the Act's subdivisions.
name="_ftn2" title="">[2]
There is no explanation in the
record for the difference between this amount and the deficiency amount
identified in Balboa's letter.
