Court Opinion

ID: 2681483
Source: CourtListenerOpinion
Date Created: 2014-07-01 01:01:20.146999+00
Date Added: 2024-06-11T13:00:52.487274
License: Public Domain

Filed 6/30/14 Grissom v. Dealer Services CA4/3

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE

MICHAEL GRISSOM,

     Plaintiff, Cross-Defendant and                                 G049331
     Appellant,
                                                                    (Super. Ct. No. RIC475298)
         v.
                                                                    ORDER MODIFYING OPINION,
DEALER SERVICES CORPORATION,                                        DENYING PETITION FOR
                                                                    REHEARING, AND DENYING
     Defendant, Cross-complainant and                               REQUEST FOR JUDICIAL NOTICE;
     Respondent.                                                    NO CHANGE IN JUDGMENT

                   It is ordered that the opinion filed herein on May 29, 2014, be modified as
follows:
                   On page 17, add the following new paragraph at the end of footnote 8:

                                    Additionally, Financial Code section 22551,
                            subdivision (b) provides: “A subsequent advance of
                            money of less than a bona fide principal amount of the
                            specified amount pursuant to a revolving or open-end
                            loan agreement or similar agreement between a
                            borrower and a licensed finance lender which gives the
                            borrower the right to draw upon all or any part of the
                            line of credit, or a loan agreement providing for the
                            making of advances to the borrower from time to time
                    up to an aggregate maximum amount which gives the
                    borrower the right to draw all or any part of the total
                    amount, shall be deemed to be a loan of a bona fide
                    principal amount of the specified amount or more if
                    the line of credit or the aggregate maximum amount is
                    a bona fide principal amount of the specified amount
                    or more and the initial advance was a bona fide
                    principal amount of the specified amount or more even
                    though the actual unpaid balance after the advance or
                    at any other time is less than a bona fide principal
                    amount of the specified amount.” For purposes of
                    section 22551, “the specified amount” is $5,000.
                    (Fin. Code, § 22551, subd. (d).) Therefore, the
                    separate advances on Grissom’s flooring line that were
                    less than $5,000 would not be consumer loans, subject
                    to the portion of the California Finance Lenders Law
                    applicable only to consumer loans.

             This modification does not affect a change in the judgment. The petition
for rehearing is DENIED. Appellant’s request for judicial notice is DENIED.

                                               FYBEL, J.

WE CONCUR:

O’LEARY, P. J.

BEDSWORTH, J.

                                           2
Filed 5/29/14 Grissom v. Dealer Services CA4/3 (unmodified version)

                      NOT TO BE PUBLISHED IN 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

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE

MICHAEL GRISSOM,

     Plaintiff, Cross-defendant and                                    G049331
     Appellant,
                                                                       (Super. Ct. No. RIC475298)
         v.
                                                                       OPINION
DEALER SERVICES CORPORATION,

     Defendant, Cross-complainant and
     Respondent.

                   Appeal from a judgment of the Superior Court of Riverside County,
Ronald L. Taylor, Judge. (Retired judge of the Riverside Super. Ct. assigned by the
Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Reversed.
                   Ferguson Case Orr Paterson, Wendy C. Lascher and John A. Hribar for
Plaintiff, Cross-defendant and Appellant.
              Prenovost, Normandin, Bergh & Dawe, Tom R. Normandin,
Benjamin K. Griffin and Kristin F. Godeke Baines for Defendant, Cross-complainant and
Respondent.
                                  *          *           *
                                      INTRODUCTION
              Michael Grissom, a used car dealer, obtained a commercial line of credit
from Dealer Services Corporation (DSC). Grissom drew on the line to acquire vehicles
to be sold at his dealership, American Family Auto. Under the terms of the agreement
between Grissom and DSC, DSC had a lien on each of the vehicles, securing the money
advanced to Grissom from the line of credit. DSC learned that Grissom had sold or
otherwise disposed of some of the vehicles without repaying the line of credit, and
therefore asserted its right under the parties’ agreement to repossess the remaining
vehicles on which it had liens.
              Grissom sued DSC for breach of contract and negligent misrepresentation;
DSC cross-claimed for breach of contract, fraud, conversion, and a common count for
money had and received. After a bench trial, judgment was entered in DSC’s favor in the
amount of $556,088.24. Grissom appeals.
              During the presentation of the case-in-chief on his complaint, Grissom, who
was representing himself in propria persona, filed a substitution of counsel, substituting
in retained counsel. The substitution was filed before DSC began its defense to
Grissom’s case or its own case on its cross-complaint against Grissom. The trial court
refused to allow the substitution because Grissom had not filed a formal, noticed motion,
and because DSC would suffer prejudice if the substitution were permitted.
              The trial court prejudicially erred in denying Grissom his constitutionally
protected due process right to counsel of his choice. The judgment must be reversed.
Although the court made a legally incorrect decision, we wish to emphasize that at all

                                             2
times, the court permitted Grissom, a self-represented litigant, a full and fair opportunity
to be heard.
               In addition to reversing the judgment, we address and decide legal issues,
which are not mooted by the reversal of the judgment and are necessary to the decision.
Those issues relate to the court’s rulings on the demurrer to Grissom’s claim for unfair
competition, denial of discovery sought by Grissom, and rejection of Grissom’s lender’s
license and usury defenses. On all of these issues, we disagree with Grissom’s
arguments. Our rulings on these issues will be the law of the case throughout the
subsequent progress of this case. (People v. Barragan (2004) 32 Cal. 4th 236, 246-247.)

                    STATEMENT OF FACTS AND PROCEDURAL HISTORY
               DSC provides commercial lines of credit, called flooring lines, to
automobile dealerships. The dealerships use the flooring lines to purchase an inventory
of vehicles to sell to the public. The vehicles purchased by the dealerships secure the
flooring line loans. DSC obtained a California finance lender’s license on May 27, 2009.
               Grissom is a car salesman and automobile sales event promoter. In
May 2006, he opened a used car dealership as a sole proprietorship under the name
American Family Auto. At the urging of Alfred King, a used car wholesaler who was
working with him, Grissom entered into an agreement with DSC to obtain a flooring line.
Grissom signed a floor plan application, demand promissory note and security agreement,
term sheet, power of attorney, and sole proprietor’s certificate. Grissom and King both
signed personal guarantees. King cosigned the floor plan application; the application
identified King as a guarantor, not an owner.
               Grissom’s flooring line from DSC became active on August 29, 2006, and
19 loans to purchase vehicles were initiated in the next three days. Grissom claimed he
was unaware of the loans until he received an account report dated September 8, 2006,
which showed Grissom owed DSC almost $130,000. Grissom used the DSC flooring

                                              3
line to buy 12 more cars at an auction, in an effort to max out the flooring line.
Ultimately, DSC loaned almost $200,000 on Grissom’s flooring line in 40 separate
loans.1
              In late September and October 2006, DSC conducted audits of Grissom’s
inventory. The audits revealed that Grissom had sold some of the cars he bought using
the DSC flooring line, but had not paid DSC back. As permitted by the parties’
agreement, DSC repossessed 13 of the vehicles it had funded. Grissom’s dealership
failed soon thereafter. In addition to owing money to DSC, Grissom was unable to pay a
supplier from whom he had directly obtained two vehicles (without using the DSC
flooring line); that supplier made a claim against Grissom’s dealer surety bond insurance
company. Grissom’s bond was cancelled and his dealership’s license was revoked.
Grissom was also unable to pay his taxes to the State Board of Equalization.
              In July 2007, Grissom sued DSC and two DSC employees, Claudia Rogers
and Rosa Macias.2 The complaint was amended four times. DSC, Rogers, and Macias
demurred to the fourth amended complaint, and the trial court sustained the demurrer
without leave to amend all but two causes of action—for breach of contract and negligent
misrepresentation.
              DSC filed a cross-complaint against Grissom for breach of contract, a
common count for money had and received, conversion, and fraud.3
              In January 2011, the court first set the case for trial on June 3, 2011. At a
hearing in March 2011, the trial court granted Grissom’s attorney’s motion for leave to

          1
         The floored vehicle history report shows loans totaling $208,197.50. Grissom
notes that one vehicle appears on the list twice. DSC does not challenge Grissom’s
factual assertion.
       2
         Several other entities and individuals were named in Grissom’s complaint, but
were ultimately dismissed and are not parties to this appeal.
       3
         King was originally named in the cross-complaint, but was dismissed. Other
claims for breach of written guaranty, possession of personal property, and equitable
indemnity were dismissed before or during trial.

                                              4
withdraw. The court ordered a 30-day stay of all proceedings for Grissom to find a new
attorney. The court refused to vacate the trial date, but told Grissom he could file a
motion for a continuance after he retained a new attorney. After the 30-day stay expired,
Grissom’s newly retained attorney filed an ex parte application for a continuance of the
trial. The trial court denied the request. Grissom’s attorney immediately substituted out,
leaving Grissom in propria persona.
              A court trial began on June 14, 2011. On June 20, Ephraim Obi attempted
to substitute in as counsel for Grissom, but the court refused to allow the substitution. At
the conclusion of the trial, the court issued a statement of decision in favor of DSC on all
of Grissom’s claims and on all claims in its cross-complaint. The court awarded DSC
$123,398.61 in compensatory damages, plus prejudgment interest, and $1 in punitive
damages. Judgment was entered.
              Grissom filed a motion for a new trial, which was denied. DSC’s motion
for contractual attorney fees was granted. An amended judgment, awarding DSC a total
of $556,088.24, was entered, and Grissom timely appealed.4

                                        DISCUSSION
                                             I.
                  DENIAL OF SUBSTITUTION OF ATTORNEY DURING TRIAL
              On the fifth day of what would ultimately be a nine-day trial, just before
Grissom was to start his testimony in his case-in-chief on the complaint, he asked the
court for permission to substitute in retained counsel. The newly retained attorney,
Ephraim Obi, initially advised the court he was only going to ask questions of Grissom
during Grissom’s testimony. (The parties had earlier stipulated that Grissom could testify

       4
        Grissom’s notice of appeal was filed before the amended judgment was entered.
We exercise our discretion to treat the notice as filed immediately after entry of
judgment. (Cal. Rules of Court, rule 8.104(d)(2).)

                                             5
in a narrative form.) Obi then told the court he had filed a substitution of attorney form
with the clerk’s office, and was attempting to substitute in as Grissom’s counsel for the
remainder of the trial. The substitution of attorney form does not purport to limit Obi’s
scope of representation in any way.
              Counsel for DSC and for the other defendants still in the case objected to
Grissom substituting in a new attorney during trial. Their objection was based on the
prejudice they claimed they would suffer based on concessions they had made due to
Grissom’s in propria persona status, such as paying the entirety of the court reporter’s
fees, withholding objections to testimony, and withholding objections to the admission of
exhibits.
              The court denied Grissom’s substitution of counsel on two grounds: the
lack of a formal, noticed motion to substitute in as counsel and the prejudice to the other
parties. The court permitted Obi to confer with Grissom during breaks. Grissom later
renewed his request to substitute Obi in as counsel; the request was again denied.
              In a civil action, a party has a due process right to appear through counsel
retained at the party’s own expense. (Roa v. Lodi Medical Group, Inc. (1985) 37 Cal. 3d
920, 925-926; In re Kathy P. (1979) 25 Cal. 3d 91, 102; Kim v. Orellana (1983) 145
Cal. App. 3d 1024, 1027.) A civil litigant may change its counsel at any time, and the trial
court generally does not have the discretion to refuse to accept a consensual substitution
of attorney. (Code Civ. Proc., § 284, subd. 1; Hock v. Superior Court (1990) 221
Cal. App. 3d 670, 673.) The trial court does, however, have discretion to deny a motion to
substitute counsel before or during trial, when the substitution would require a
continuance of the trial. (In re Z.N. (2009) 181 Cal. App. 4th 282, 294; see Code Civ.
Proc., §§ 177, subd. 1, 128, subd. (a).) In this case, Grissom did not request a
continuance of the trial when he sought to substitute Obi in as counsel; Obi was in the
courtroom and stated he was prepared to begin questioning Grissom immediately.

                                             6
              There is no support for the trial court’s refusal to grant the substitution of
counsel due to the lack of a formal, noticed motion. No state or local rule of court
requires a motion to consensually substitute counsel in for a party representing himself or
herself in propria persona.5 Accordingly, we conclude the trial court erred in denying
Grissom’s request to substitute in counsel.
              We next consider whether this decision was prejudicial to Grissom. We
hold that a rebuttable presumption of prejudice applies when the constitutional right to
counsel is denied to a civil litigant. In a criminal case, prejudice is presumed when the
defendant is denied counsel because the consequences of deprivation of counsel are
“‘necessarily unquantifiable and indeterminate.’” (United States v. Gonzalez-Lopez
(2006) 548 U.S. 140, 150; see Mickens v. Taylor (2002) 535 U.S. 162, 166.) It is no less
difficult to quantify the prejudice suffered by a civil litigant denied the right to counsel
during trial. In an analogous situation, where juror misconduct occurs in either a criminal
or a civil case, a presumption of prejudice arises because of the practical difficulty in
establishing actual prejudice. (Hasson v. Ford Motor Co. (1982) 32 Cal. 3d 388,
416-417.)
              In this case, DSC failed to rebut the presumption of prejudice to Grissom.
The trial court’s refusal to allow a substitution of attorney occurred at a critical moment
during the trial. Grissom was midway through the presentation of his case-in-chief; he
had already questioned two witnesses. After the substitution was sought and rejected,
Grissom called and questioned four more witnesses, and provided his own testimony in a
narrative form. When Grissom rested his case-in-chief, DSC recalled two of Grissom’s
witnesses, and called three additional witnesses. After DSC rested its defense, the parties

       5
         Code of Civil Procedure section 284, subdivision 2 allows a change of attorney
“[u]pon the order of the court, upon the application of either client or attorney, after
notice from one to the other.” Under this section, because the substitution here was
consensual, no application by either the client (Grissom) or the attorney (Obi) was
necessary.

                                               7
provided closing arguments only for Grissom’s complaint. In support of its
cross-complaint, DSC called two witnesses, and read from Grissom’s deposition
transcript. Both sides rested as to DSC’s cross-complaint, with Grissom apparently
failing to call any additional witnesses in rebuttal to, or in defense against, DSC’s claims.
              We agree with DSC that the state of the record before us is such that there
would be substantial evidence to support a judgment in DSC’s favor. When we consider
the record as a whole, however, particularly in light of the timing of the request to
substitute in counsel vis-à-vis the status of the trial proceedings, we cannot say the
evidence in DSC’s favor was so overwhelming that DSC can be said to have rebutted the
presumption of prejudice.
              We could stop the analysis at this point because DSC did not rebut the
presumption of prejudice. In addition, however, Grissom has shown actual prejudice.
On appeal, Grissom identifies many ways in which he claims an attorney would have
made a difference in this case after denial of his request to substitute in counsel. We need
not address each one; however, we will address two issues we believe are compelling and
most indicative of the prejudice Grissom suffered as a self-represented litigant. First,
Grissom argues that an attorney would have contested DSC’s claims for fraud,
conversion, money had and received, and DSC’s request for punitive damages. While
evidence supporting DSC’s claims was admitted during Grissom’s case-in-chief (and
particularly before the point at which he sought to substitute in counsel), an attorney
might have offered compelling evidence rebutting that evidence, or argued the evidence
did not support the elements of the causes of action or the damage claims.
              Second, Grissom argues that if the trial court had not refused to accept the
substitution of attorney, Grissom would not have been forced to testify in a narrative
form. This argument is compelling. The assistance of an attorney in framing questions
and presenting Grissom’s testimony in a linear and coherent fashion might well have
made a difference in what evidence was admitted and how that evidence was perceived

                                              8
by the court. Grissom was unquestionably the key witness in his own case and in defense
of DSC’s claims. The prejudice he suffered by providing his testimony in a narrative
form cannot be understated.
              Reversal of the trial court’s denial of Grissom’s right to substitute in
retained counsel requires reversal of the judgment. We will address and decide in this
opinion certain appealable legal issues that were decided by the court and are not mooted
by the reversal of the judgment.
                                             II.

   DID THE TRIAL COURT ERR IN SUSTAINING THE DEMURRER TO GRISSOM’S CLAIM FOR
                              UNFAIR COMPETITION?
              DSC demurred to Grissom’s fourth amended complaint, arguing, in part,
that Grissom had not pled standing to assert a claim for violation of the unfair
competition law under Business and Professions Code section 17200 (the UCL), and that
Grissom had not stated facts sufficient to support that cause of action. The trial court
sustained the demurrer without leave to amend. “We independently review the ruling on
a demurrer and determine de novo whether the pleading alleges facts sufficient to state a
cause of action. [Citation.] We assume the truth of the properly pleaded factual
allegations, facts that reasonably can be inferred from those expressly pleaded, and
matters of which judicial notice has been taken. [Citation.] We construe the pleading in
a reasonable manner and read the allegations in context. [Citation.] ‘We affirm the
judgment if it is correct on any ground stated in the demurrer, regardless of the trial
court’s stated reasons. [Citation.]’ [Citation.]” (Entezampour v. North Orange County
Community College Dist. (2010) 190 Cal. App. 4th 832, 837.)
              For an individual to have standing to bring a claim for violation of the
UCL, he or she must “ha[ve] suffered injury in fact and ha[ve] lost money or property as
a result of the unfair competition.” (Bus. & Prof. Code, § 17204.) Grissom’s claim for
violation of the UCL in the fourth amended complaint alleged, in relevant part:

                                              9
               “69. Plaintiff alleges that Defendants have engaged in unfair competition
and unfair trade practices by making statements about their business and the conditions
for making or negotiating loans that was false and misleading or omitted material
information in violation of section 22161 of the California Financ[ial] Code.
               “70. DSC omitted to disclose that they did not posses[s] a license to act as
a Finance lender or Broker in California. See below.
               “Message From the President: Welcome to Dealer Services Corporation!
From DSC Website.
               “We are pleased that you have chosen to investigate DSC as a potential
lender for your inventory financial needs. We desire to become an integral part of your
floor plan financing, and we look forward with anticipation to the success of our
companies as we become your financial partner. We believe that enthusiasm, dedication,
and team spirit are the essential ingredients in providing quality service to our customers.
DSC employees are the industry’s leaders in developing products that have serviced this
industry for many years. Our employees have years of inventory financing experience
that enables us to understand customer needs and provide old fashioned service. We
want to get back to basics when it comes to flexible finance programs that help our
customers become winners in their respective businesses. The motto of King Arthur and
the Knights of the Round Table was, ‘In serving one another, we become free.’ We are
free to do all that we can do in order to be all that we can be in developing and servicing
products that satisfy each customer’s financial needs.
               “We are excited for the opportunity to provide to you that ‘Service’ is our
middle name.
               “Sincerely,
               “John E. Fuller
               “71. Defendants further made these representations, and other similar
representations, with the intention of inducing Plaintiff to act in reliance on such

                                             10
representations in the manner herein alleged, or with the expectation that members of the
general public are likely to be deceived.
              “72. As a result of his reliance on Defendants[’] misrepresentations,
Plaintiff has suffered damages and seek[s] restitution of the amount received by DSC on
Plaintiff[’s] account.
              “73. [Unf]air competition is defined in the Business and Professions Code
section 17200 as an ‘unlawful, unfair, or fraudulent business practices and unfair[,]
deceptive, untrue or misleading advertisement and any other act[.]’ Defendants
committed the acts alleged herein maliciously, fraudulently and with the wrongful and
deliberate intention of injuring Plaintiff’s business and benefiting their common
enterprise. In doing so, Defendants acted in bad faith and with an improper motive
amounting to malice and conscious disregard of Plaintiff’s right.” (Underscoring, italics,
& some capitalization omitted.)
              In the fourth amended complaint, Grissom failed to allege he suffered
injury in fact and lost money or property as a result of DSC’s alleged acts of unfair
competition. Grissom did not allege DSC’s lack of a lender’s license caused him injury.
Further, although Grissom alleged he suffered damages as a result of DSC’s
misrepresentations, no misrepresentations are alleged in the fourth amended complaint.6
The trial court did not err in sustaining the demurrer as to this cause of action.
              The remaining question is whether the trial court abused its discretion in
sustaining the demurrer without leave to amend. (Blank v. Kirwan (1985) 39 Cal. 3d 311,
318.) Grissom, as the plaintiff, bore the burden of proving a reasonable probability that
any defect in the pleading could be cured by amendment. (Ibid.) In his opposition to the

       6
          Grissom’s opposition to the demurrer reads, in relevant part, as follows: “The
Demurrer claims that Plaintiff is required to show actual injury. Plaintiff does not dispute
this claim. The FAC [(fourth amended complaint)] pleads such actual injury in the Fifth
Cause of Action by facts that he lost his business due to such actions of Defendants at a
stated vales [sic]. Such is direct representation to plead the required actual injury.”

                                              11
demurrer, Grissom stated that if the trial court disagreed with his contention the fourth
amended complaint stated a cause of action, “Plaintiff can surely amend the pleading to
avoid any deficiency the court should find,” without differentiating between any of the
different causes of action. At the hearing on the demurrer, after the court announced its
tentative ruling to sustain the demurrer without leave to amend as to all but the breach of
contract and negligent misrepresentation claims, Grissom’s counsel said, “with regard to
the sustaining of the demurrer without leave as to the conversion, the conspiracy, and the
intentional interference of the [ad]vantage of contact, however it’s plead[ed]. I believe
that those can be stated and stated well. And I would ask the Court to give me a single
shot at it.” Counsel did not specifically ask the court for leave to amend the UCL claim.
              In his opening brief, Grissom argues the trial court abused its discretion in
refusing to grant leave to amend because, “[a]t the very least, it was readily apparent that
Grissom could amend his complaint to state a cause of action for unfair competition
based on DSC’s violation of the [California Finance Lenders Law]. Grissom should be
entitled to restitution of all fees and interest that DSC collected from Grissom while
illegally lending money in California.” But, as noted ante, the complaint alleged that
DSC had violated the California Finance Lenders Law (Fin. Code, § 22000 et seq.) by
failing to obtain a lender’s license. The fourth amended complaint fails to allege that
Grissom suffered any loss as a result of DSC’s lack of a license or that DSC made
material misrepresentations regarding its lack of a license; the request for leave to amend
fails to include a statement that Grissom could make such required allegations in yet
another amended complaint.
              There is no reasonable possibility Grissom could amend the fourth
amended complaint to properly allege standing to bring the UCL claim. The trial court
did not abuse its discretion in sustaining the demurrer to the UCL claim without leave to
amend.

                                             12
                                            III.
      DENIAL OF DISCOVERY DUE TO FAILURE TO PURSUE PUBLIC RECORDS REQUEST
              In April 2009, Grissom served a deposition subpoena for the production of
business records on the Department of Corporations (the discovery subpoena). The
discovery subpoena requested the “complete case file and investigation reports, with copy
of any actions or notices by the department to any company or individual in case
numbered CAS-40215-0062BR.” DSC filed a motion to quash the discovery subpoena.
The trial court granted the motion without prejudice, to enable Grissom to exhaust the
administrative remedy of seeking the documents under the California Public Records Act
(Gov. Code, § 6250 et seq.). Grissom did not serve another deposition subpoena duces
tecum on the Department of Corporations, and nothing in the appellate record shows
what, if any, documents he obtained through a public records request.
              In May 2011, Grissom served a trial subpoena duces tecum on the
Department of Corporations (the trial subpoena). The trial subpoena demanded the
appearance of the Department of Corporations deputy commissioner of enforcement, and
the production of “[a]ll documents that relate, mention or refer to the Settlement
Agreement between the California Department of Corporations and Dealer Services
Corporation signed by you June 25, 2009,” and “[a]ny document referring to the
Department of Corporations [sic] requests, demands, orders or notice to Dealer Services
[sic] to stop, cease or refrain from making loans in California.” (Some capitalization
omitted.) The Department of Corporations filed an application to quash the trial
subpoena. The trial court granted the application on the ground that the only documents
being sought were protected by a settlement privilege. (The settlement agreement itself
was in Grissom’s possession; he had attached a copy of it to his opposition to the
application to quash the trial subpoena.)
              On appeal, Grissom argues that the trial court abused its discretion in
quashing both the discovery subpoena and the trial subpoena.

                                            13
              As to the discovery subpoena, the trial court granted the motion to quash so
Grissom could exhaust the administrative remedy of seeking the documents in question
by means of a public records request. We are unaware of any requirement that a party in
litigation pursue a public records request before serving discovery on a government
agency. (See Code Civ. Proc., § 2020.010 [deposition subpoena may be used to obtain
pretrial discovery from “a person who is not a party to the action”]; Kling v. Superior
Court (2010) 50 Cal. 4th 1068, 1074 [“‘Documents and records in the possession of
nonparty witnesses and government agencies other than the agents or employees of the
prosecutor are obtainable by subpoena duces tecum’” (italics added)].)7
              As to the trial subpoena, in the application to quash, the Department of
Corporations averred that the settlement agreement was a public document previously
provided by the Department of Corporations to Grissom, and that no order for DSC to
desist or refrain from certain activity had been issued. However, Grissom attached to his
opposition to the application to quash the trial subpoena excerpts from the deposition of
DSC’s general counsel, who testified DSC had received a letter from the Department of

       7
          Generally, a California Public Records Act request is more beneficial to the
requesting party than a deposition subpoena duces tecum. In Wilder v. Superior Court
(1998) 66 Cal. App. 4th 77, 79-80, the appellate court was presented with a situation in
which, before initiating a lawsuit, an individual filed public records requests. The
government agency refused to produce some of the requested documents, and the
individual filed a petition for a writ of mandate to compel their production. (Id. at p. 81.)
The trial court dismissed the petition, concluding that the individual could obtain the
documents by filing a lawsuit and propounding discovery. (Ibid.) In reversing the trial
court, the appellate court noted: “Putting aside for the moment the time, effort, and
financial resources required to institute a lawsuit against a governmental entity and to
promulgate discovery requests, discovery is limited to matters ‘relevant to the subject
matter involved in the pending action’ which are themselves ‘admissible in evidence’ or
‘appear[] reasonably calculated to lead to the discovery of admissible evidence.’
[Citation.] A [California Public Records Act] request can cover anything the person
making the request suspects the agency might have in its files. As a member of the
public, petitioner is entitled to the broader categories of documents available under the
[California Public Records Act].” (Id. at p. 83.)

                                             14
Corporations requesting that DSC stop doing business in California until a lender’s
license was issued. Based on this evidence, nonprivileged documents responsive to the
trial subpoena were likely to exist in the Department of Corporations’s records. The trial
court erred by granting the application to quash the trial subpoena.
              Even if the trial court erred in quashing the discovery subpoena or the trial
subpoena, Grissom must establish prejudice to succeed on appeal. Although Grissom
fails to explain explicitly what documents he believes would have been produced in
response to the discovery subpoena or trial subpoena, based on the context of the parties’
arguments, we presume they are documents relevant to Grissom’s contention that DSC
violated the California Finance Lenders Law by failing to obtain a lender’s license from
the State of California. As explained in detail post, DSC’s lack of a valid lender’s license
at the time it entered into the contract with Grissom does not void or invalidate the
contract. The loan from DSC to Grissom was a commercial loan, not a consumer loan.
Even if DSC violated the California Finance Lenders Law by making a loan to Grissom
without having a valid lender’s license from the Department of Corporations, the
California Finance Lenders Law only makes such a loan voidable if it were a consumer
loan. Further, as explained ante, the demurrer to the UCL claim—which was based on
the lack of a valid lender’s license—was properly sustained. The documents sought by
the discovery subpoena and the trial subpoena would not be relevant to any issue in this
case. Any error by the trial court in quashing the discovery subpoena for Grissom’s
failure to first seek the documents by means of a public records request or in quashing the
trial subpoena was not prejudicial.
                                            IV.
                 REJECTION OF LENDER’S LICENSE AND USURY DEFENSES
              Grissom argues that the trial court erred by failing to consider his defenses
to DSC’s claims—DSC’s lack of a lender’s license, and usury. Grissom argues that

                                             15
although no ruling on those issues had been made before trial, the court erroneously
believed the issues had already been decided against Grissom.
              Different portions of the California Finance Lenders Law apply to
commercial and consumer loans. (Fin. Code, § 22001, subds. (b) & (c).) Grissom argues
that because DSC violated the portion of the California Finance Lenders Law that
requires a lender to be licensed by the State of California (Fin. Code, § 22100, subd. (a)),
the contract between DSC and Grissom was void and unenforceable, citing Financial
Code section 22750, subdivision (b), which reads as follows: “If any provision of this
division is willfully violated in the making or collection of a loan, whether by a licensee
or by an unlicensed person subject to this division, the contract of loan is void, and no
person has any right to collect or receive any principal, charges, or recompense in
connection with the transaction.”
              DSC does not dispute it was not licensed under the California Finance
Lenders Law at the time it entered into the contract with Grissom; it does, however,
dispute the legal significance of that failure. We need not determine whether DSC’s lack
of a lender’s license in August 2006 constitutes a willful violation of the California
Finance Lenders Law, however, because Financial Code section 22750 does not apply to
commercial loans, such as the flooring line between DSC and Grissom. (Central Valley
Ranch, LLC v. World Wide Investments, LLC II. (E.D.Cal., Jan. 24, 2012,
No. 1:10cv00020 LJO DLB) 2012 U.S.Dist. Lexis 7953, pp. *11-*13 [commercial loans
were not void, despite lender’s failure to be licensed in California; Financial Code
section 22750 applies only to consumer loans]; WF Capital, Inc. v. Barkett (W.D.Wn.,
Aug. 2, 2010, No. C10-524RSL) 2010 U.S.Dist. Lexis 78086, pp. *15-*16 [same]; In re
Jesse & Joan (Bankr. N.D.Cal. 2001) 266 B.R. 192, 193 [same]; see Fin. Code, § 22001,

                                             16
subd. (c) [commercial loans not subject to article 2 of chapter 4 of the Financial Code, in
which section 22750 appears].)8
              The trial court did not err in preventing Grissom from pursuing DSC’s lack
of a lender’s license because it was not a valid defense to any claims raised by DSC.
Even accepting Grissom’s contention that DSC misled the trial court as to whether there
had been a definitive ruling on the exclusion of the lender’s license defense, it was
irrelevant as the issue was not, and could not have been, before the court.9
       8
          Grissom argues the loan from DSC was a consumer loan, not a commercial loan,
citing Financial Code section 22204, subdivision (a), which reads as follows: “In
addition to the definition of consumer loan in Section 22203, a ‘consumer loan’ also
means a loan of a principal amount of less than five thousand dollars ($5,000), the
proceeds of which are intended by the borrower for use primarily for other than personal,
family, or household purposes. [¶] For purposes of determining whether a loan is or is
not a consumer loan, the lender may rely on any written statement of intended purposes
signed by the borrower. The statement may be a separate statement signed by the
borrower or may be contained in a loan application or other document signed by the
borrower. The lender shall not be required to ascertain that the proceeds of the loan are
used in accordance with the statement of intended purposes.” Grissom ignores
subdivision (b) of section 22204, which further explains how consumer loans under that
section are defined: “A consumer loan under this section is a loan secured in the manner
provided for in this division if it is secured, in whole or in part, by any lien on, security
interest in, assignment of, or power of attorney relative to income arising from the
operation of a business by the borrower, such as accounts, and chattel paper, including
the right to payment for accounts or chattel paper sold by the borrower prior to or
contemporaneously with the making of the loan.” DSC’s loans to Grissom were secured
by the vehicles purchased using the flooring line; therefore, they do not qualify as
consumer loans.
       9
          DSC argues that Financial Code section 22713 prohibits private rights of action
under the California Finance Lenders Law. A federal district court agreed with this
analysis in Cazares v. Household Fin. Corp. (C.D.Cal., July 26, 2005, No. CV 04-6887
DSF (SSx)) 2005 U.S.Dist. Lexis 39222, page *36. However, a violation of the
California Finance Lenders Law may be the basis for a claim under the UCL. (Saunders
v. Superior Court (1994) 27 Cal. App. 4th 832, 839 [“It is not necessary that the predicate
law provide for private civil enforcement”]; Cazares v. Household Fin. Corp., supra,
2005 U.S.Dist. Lexis 39222 at p. *37.) Therefore, the lack of a private right of action in
the California Finance Lenders Law is not determinative on this issue. However, as
explained ante, the UCL claim was properly dismissed because Grissom did not allege,
and it was not reasonably probable that he could allege, standing.

                                             17
              Grissom also argues that because DSC did not have a valid lender’s license
from the State of California in 2006, DSC was subject to the interest rate limitations of
article XV, section 1 of the California Constitution. Because, Grissom argues, the
interest rate charged by DSC was higher than the constitutional rate, the interest rate was
usurious. Grissom filed a motion in limine before trial to exclude evidence of alleged
damages in excess of California’s usury limits. When the case was called for a bench
trial, Grissom asked for a ruling on the motion:
              “The Court: Okay. How about you, Mr. Grissom? Is there anything, sir,
that you wanted me to litigate that was raised by yourself in the way of the pretrial in
limine motions?
              “Mr. Grissom: That would be the—I’m sorry. I don’t remember what
number it was. I believe it was 2, for the usury. [¶] . . . [¶]
              “The Court: Wouldn’t you just raise that as an objection during the course
of the trial, which you’ve raised in your Motion In Limine 2?
              “Mr. Grissom: Yes, I could, Your Honor.
              “The Court: I mean, I’m not ruling on it. Why don’t you just raise it
during the course of trial?
              “Mr. Grissom: Okay. Yes, sir.” (Some capitalization omitted.)
              Grissom’s appellate briefs do not provide any citations to the reporter’s
transcript showing where he objected to DSC’s evidence based on the usury defense.10
Grissom’s claim in his appellate briefs that the trial court prevented him from raising the
usury defense is not supported by this record.

       10
          Grissom cites to a portion of the reporter’s transcript where DSC objected to
Grissom’s questions regarding the name under which DSC was doing business in
California, on the ground it was not relevant to any issue in the case. Grissom responded:
“Well, I’ve already said to you, Your Honor, I’ve entered into an agreement in which
Dealer Services Corporation charged me over 500 percent interest rate without a license.
And that in my mind is illegal.”

                                              18
              Even if the interest rate in the parties’ agreement was usurious under
California law, it would not invalidate the contract or prevent DSC from recovering the
amount owed by Grissom, plus interest at the legal rate. (Epstein v. Frank (1981) 125
Cal. App. 3d 111, 122-123.) A contract incorporating an interest rate valid under the laws
of another state but usurious under California law is not invalid if the other state has a
substantial relationship to the parties or their transaction, or there is another reasonable
basis for the parties’ choice of law. (Nedlloyd Lines B.V. v. Superior Court (1992)
3 Cal. 4th 459, 464-465.) Grissom does not explain whether Indiana law, which was
provided for in the contract, permits a higher rate of interest. The state in which a
commercial lender is based has a substantial relationship to the transaction.11

                                        DISPOSITION
              The judgment is reversed. Because each party prevailed in part, both shall
bear their own costs on appeal.

                                                   FYBEL, J.

WE CONCUR:

O’LEARY, P. J.

BEDSWORTH, J.

       11
         The choice-of-law provision in the contract cannot make the California Finance
Lenders Law inapplicable. (Brack v. Omni Loan Co., Ltd. (2008) 164 Cal. App. 4th 1312,
1326.) The California Finance Lenders Law does not make the choice-of-law provision
unenforceable for all purposes, however.

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