Source: https://www.severson.com/consumer-finance/appellate-division-cal-addresses-dealerholders-right-to-cure-under-rees-levering-act-civ-code-2984/
Timestamp: 2019-12-09 23:10:42
Document Index: 503386500

Matched Legal Cases: ['§ 2984', '§ 2984', '§ 500', '§ 115', '§ 2984', '§ 2981']

Appellate Division (Cal.) Addresses Dealer/Holder's Right to Cure under Rees-Levering Act (Civ. Code 2984) | Severson & Werson
In Munoz v. Express Auto Sales,— Cal.Rptr.3d —-, 2014 WL 131195 (Cal.Super.A.D. 2014), , the Los Angeles County Appellate Division set forth how an automobile dealer can cure Rees-Levering violations under Civil Code 2984.
Pursuant to a second amended complaint filed November 1, 2012, plaintiffs alleged that defendant violated the ASFA by failing to properly itemize the sources of the down payment in the vehicle Retail Installment Sale Contract (RISC) between the parties. (Finance contract assignee U.S. Bank, N.A. was also named as a defendant, but is not a party to the appeal.) ¶ At trial, plaintiffs testified that they purchased a 2006 Chevrolet Impala from defendant on May 14, 2011 for a total price of $11,800. Plaintiffs were credited with a down payment totalling $3,000, and the remainder was to be financed by U.S. Bank. The down payment consisted of $1,500 paid by check at the time of the sale, $1,000 for a 2000 Buick which defendant would later pick up from plaintiffs’ residence, and two $250 deferred cash payments which would be made by plaintiffs within a month. ¶ A copy of RISC was admitted into evidence. Paragraph 6 of the RISC stated that the down payment consisted of $3,000 in cash. Sections in paragraph 6 that allowed information regarding any trade-in vehicle, including the vehicle’s agreed trade-in value, its model and make, were left blank. The value of the trade-in, as well as the amount of any deferred down payment, was listed as “$0.00.” ¶ Plaintiffs testified they became unsatisfied with the Impala when it developed problems after the sale, including the paint fading, a passenger door not opening, and the air conditioning not functioning. On September 28, 2011, plaintiffs’ lawyer sent a letter to defendant notifying it that the contract failed to properly itemize the down payment in violation of the ASFA, and that the violation entitled plaintiffs to rescind the RISC. The letter further informed defendant that it violated the CLRA by, among other things, improperly itemizing the down payment and failing to disclose that the Impala had been used as a rental vehicle prior to the sale. Under a section titled “Individual CLRA Demand,” the letter requested that defendant “remedy the violations listed above within 30 days.” ¶ Defendant presented evidence that it informed plaintiffs at the time of the sale that the vehicle was previously used as a rental. It also introduced into evidence a letter sent to plaintiffs by defendant’s lawyer mailed on October 10, 2011 which denied having violated the ASFA and the CLRA. The letter also stated that a corrected contract was enclosed pursuant to Civil Code section 2984. Defendant’s lawyer told the court that he did not have the corrected contract because he had provided his only copy to plaintiffs along with the letter.
The case went to trial. The court stated that plaintiffs did not deny receiving the corrected contract and that plaintiffs were in possession of the corrected contract. The court stated it intended to draw an adverse inference regarding the corrected contract’s contents pursuant to Evidence Code section 413, and find that the correction was timely made under Civil Code section 2984. The court subsequently permitted plaintiffs to reopen the evidence and considered the corrected contract provided by plaintiffs. ¶ On March 1, 2013, the court rendered judgment against plaintiffs. In its statement of decision, the court found that it was undisputed that the RISC inaccurately stated that plaintiffs gave defendant $3,000 in cash for the down payment. The court noted that “Curiously, [defendant] provided no explanation whatsoever as to why paragraph 6 of the contract was written the way it was, i.e. no itemization for a trade-in (to be noted in ¶ 6(A)) or for a deferred down payment (to be noted in ¶ 6(D)).” Nonetheless, the court found that defendant timely corrected the RISC under Civil Code section 2984. The court stated that defendant complied with the requirement that the contract be corrected within 10 days of receiving notice from plaintiffs regarding the ASFA violations, and that, in any event, plaintiffs waived any untimeliness by giving defendant 30 days to correct the violations in their demand letter. The court also entered judgment against plaintiffs on the CLRA cause of action based on the purported nondisclosure of the vehicle’s past rental status (plaintiffs do not appeal this part of the judgment). The Appellate Division reversed, finding that the Defendant did not timely cure because the ASFA violation was willful.
“The ASFA provides … a ‘safe harbor’ provision. (Civ.Code, § 2984.)[ ] It allows the dealer or subsequent holder of the note a period of [time] … to correct any violations of the ASFA in the contract. If the contract is corrected during this period, the corrected violation cannot be the basis of an action against the dealer or subsequent holder of the note. [Citation.]” ( Bermudez v. Fulton Auto Depot, LLC, supra, 179 Cal.App.4th at p. 1324, 102 Cal.Rptr.3d 413, fn. omitted.) ¶ The statutory language provides that any violations of the ASFA may be corrected, but makes a distinction between willful and nonwillful violations. A willful violation may be corrected only if (1) the violation appears on the face of the contract; and (2) the violation “is corrected within 30 days of the execution of the contract or within 20 days of its sale, assignment or pledge, whichever is later….” A nonwillful violation may be corrected at any time, but not later than 10 days of notice in writing by the buyer of a failure to comply with the ASFA. (Civ.Code, § 2984 [“If notified in writing by the buyer of such a failure to comply with any provision of this chapter, the correction shall be made within 10 days of notice”].) ¶ An interpretation which would permit all corrections so long as they were performed within 10 days of notification in writing by the buyer would eliminate the distinction between willful and nonwillful violations. We must avoid an interpretation that renders portions of a statute inoperable. ( Hassan v. Mercy American River Hospital (2003) 31 Cal.4th 709, 715–716, 3 Cal.Rptr.3d 623, 74 P.3d 726.) Further, an interpretation that would permit corrections for both willful and nonwillful violations even years after a violation, so long as a buyer notifies a seller in writing and the correction is made within 10 days of the notification, would yield absurd results. A seller who willfully violates the ASFA would be incentivized to not correct a contract, knowing that, at worst, if a buyer sends the seller a notice of correction, it could avoid liability by simply correcting the contract within 10 days; and, at best, if the buyer never gives the seller written notice, it could avoid both liability and correcting the contract. We must avoid interpretation of a statute that “would lead to absurd consequences.” . . . ¶ The trial court found that the correction was timely because it was made within 10 days of defendant receiving notice from plaintiffs regarding the ASFA violations. However, the 10–day correction provision only applied if the violation was nonwillful. The trial court did not make an express finding that the violation was nonwillful; we may thus affirm only if we can imply a finding of nonwillfulness that is sup-ported by substantial evidence. We determine that no substantial evidence of nonwillfulness was presented at trial. ¶ Timely correction under Civil Code section 2984 was a “safe harbor” provision exempting a dealer from liability due to noncompliance with the ASFA. Timely correction was thus an affirmative defense (Evid.Code, § 500), which defendant had to prove by a preponderance of the evidence (Evid.Code, § 115). (See Salazar v. Maradeaga (1992) 12 Cal.Rptr.2d 676, 10 Cal.App.4th Supp. 1, 5 [“ ‘An “affirmative defense” is one which “sets forth facts from which it results that, notwithstanding the truth of the allegations of the complaint, no cause of action existed in the plaintiff at the time the action was brought.” [Citation.]’ “].) ¶ Because it did not correct the contract within 30 days of the sale or 20 days of the execution of the contract, defendant had to show that the ASFA violation was nonwillful. “ ‘In civil cases, the word “willful,” as ordinarily used in courts of law, does not necessarily imply anything blamable, or any malice or wrong toward the other party, or perverseness or moral delinquency, but merely that the thing done or omitted to be done was done or omitted intentionally. It amounts to nothing more than this: That the person knows what he is doing, intends to do what he is doing, and is a free agent.’ [Citations.] [Citations.]” ( Baker v. American Horticulture Supply, Inc. (2010) 185 Cal.App.4th 1295, 1310–1311, 111 Cal.Rptr.3d 695.) ¶ Defendant asserted in its answer the Civil Code section 2984 affirmative defense, and presented evidence at trial that it sent a corrected RISC to plaintiffs. However, it presented no evidence that the violation of the ASFA that it sought to correct was nonwillful. While the court erroneously found that the correction complied with Civil Code section 2984, it was correct when it noted that “[defendant] provided no explanation whatsoever as to why [the RISC] was written the way it was, i.e. no itemization for a trade-in … or for a deferred down payment….” ¶ Given the lack of evidence of nonwillfulness, defendant was not entitled to use the 10–day correction provision. Because the correction was made in October 2011, it was not made within “30 days of the execution of the contract or within 20 days of its sale, assignment or pledge” (Civ.Code, § 2984) in May 2011, and therefore the correction did not provide a valid defense to the ASFA action.
Cure Deferred Down Payment Rees-Levering Act -- Civil Code § 2981