Court Opinion

ID: 9551016
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:46:40.366823+00
Date Added: 2024-06-11T15:22:54.031942
License: Public Domain

RICHARDSON, J.
I respectfully dissent. It is important at the outset to express in clear terms the import of the majority’s holding. As the majority explains, in past years it was an industry-wide banking practice to advertise annual interest rates on bank loans on the basis of a 360-day year, resulting in a slight understatement of the actual 365-day rate. Because this practice was potentially deceptive to the public, we unanimously held in Chern v. Bank of America (1976) 15 Cal.3d 866 [127 Cal.Rptr. 110,544 P.2d 1310], that the practice constituted false and misleading advertising (Bus. & Prof. Code, § 17500) which could be enjoined in an appropriate case (id., § 17535; former Civ. Code, § 3369, subd. 2). We further held in Chern, however, that borrowers who entered into loans with prior knowledge of this practice could not recover damages, because such persons were not actually misled by the practice nor induced thereby to enter into loan transactions. (15 Cal.3d at pp. 873-875.) The majority herein now holds, contrary to Chern, that banks throughout this state may be required to refund to each borrower the excess interest paid (presumably, the difference between the 360-day rate and the 365-day rate) whether or not the borrower accepted the loan with full and prior knowledge of the true interest rate. There is no basis whatever for extending such relief to one who knowingly and with open eyes voluntarily entered into such a loan transaction.
The majority attempts to justify this astonishing result on the ground that, under section 17535 of the Business and Professions Code, the trial courts are empowered (in the words of the majority) “to order restitution in the absence of proof of lack of knowledge in order to deter future violations of the unfair trade practice statute and to foreclose retention by the violator of its ill-gotten gains.” (Ante, p. 449.)
The majority’s reliance on section 17535 is wholly misplaced. That section permits the courts to make orders “as may be necessary to prevent . . . [future] practices which violate this chapter, or which may be necessary to restore to any person in interest any money or property, real or personal, which may have been' acquired by means of any [unlawful] *456practice . . . (Italics added.) The majority’s award of “restitution” to knowledgeable borrowers is unnecessary to accomplish either statutory purpose.
First, as to deterrence of future violations, the injunctive relief available under our Chern decision is entirely sufficient to protect the public from continued deceptive advertising. Penalizing banks for engaging in a practice which has not yet been shown to be actually deceptive to anyone seems to me wholly unnecessary and vindictive. Second, restitution is not necessary to restore any monies (“ill-gotten gains”) acquired by banks through deceptive practices, because persons who were informed in advance of the true rate of interest cannot have been “deceived” by the bank’s advertising.
The point was aptly expressed by the Court of Appeal in its vacated opinion in this case: “The issue of borrower knowledge ... is the critical issue in the case; if it were shown that an individual had such knowledge his damages would not merely be limited, they would be nonexistent.”
I would affirm the order dismissing the class action.
Manuel, J., concurred.