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District Court of Appeal, Second District, Division 3, California.

CITY LINCOLN-MERCURY COMPANY, a California corporation, Plaintiff and Respondent, v. L. V. LINDSEY, Defendant and Appellant.*

Civ. 22755.

Decided: July 30, 1958

Victor Bewley, Los Angeles, for appellant. Delbridge, Hamblin & Linton, Pasadena, for respondent.

Plaintiff is an automobile dealer. On October 22, 1954, defendant went to plaintiff's new car agency in Pasadena and purchased a 1954 Lincoln coupe, giving as a trade-in a 1948 Packard sedan. The court found that Lindsey signed an uncompleted purchase order and a conditional sales contract which was in blank, and took possession of the coupe. The court found that on October 26th plaintiff mailed Lindsey a copy of the contract, bearing the signatures of Lindsey and of plaintiff, by its president, which contained a complete statement of the terms of the sale. The evidence was sufficient to support these findings. In his testimony defendant did not deny that he had received a copy of the contract. On October 26th, plaintiff assigned the contract to a local bank, with recourse.

The contract provided that defendant was to pay a purchase price of $6,047.38 for the Lincoln, less $1,815, the agreed trade-in value of the Packard, plus a time price differential of $770.12; the balance of $5,002.50 was payable in 30 equal monthly installments of $166.75, commencing November 22, 1954. After receiving a payment book from the bank, Lindsey asked that the payment date be changed to the 2nd of each month, beginning December 2nd; the bank consented, and on November 30th the bank and defendant entered into a written agreement, modifying the payment date in accordance with Lindsey's request, but specifically reaffirming the other provisions of the conditional sale contract.

Defendant paid the first two installments due under the contract and made a $100 payment on account of the third installment. On March 19, 1955, he drove the coupe to plaintiff's place of business and left it and the car keys with an attendant. The bank reassigned the contract to plaintiff in April and the latter made minor repairs to the car, which cost $61.89. Plaintiff resold the Lincoln for $3,238 and sued Lindsey for a deficiency judgment; the complaint alleged that there was a balance due of $1,352.20, principal and interest, plus attorney's fees. Plaintiff did not allege, nor is it contended, that the bank was a bona fide purchaser of the contract for value.

Lindsey answered and filed a cross-complaint wherein he sought to recover the installments he had paid to the bank and the reasonable value of the Packard sedan, which he alleged to be $2,000. His theory of recovery was that the conditional sale contract was void because it did not comply with Section 2982(a) of the Civil Code, and that he was entitled to recover the entire consideration he paid pursuant to the contract. Lindsey also sought an award of exemplary damages. The answer of plaintiff denied that the contract was void and alleged, as an affirmative defense, that defendant had waived his right to attack the validity of the contract. Plaintiff also filed a counterclaim for the reasonable rental value of the use of the Lincoln while it was in defendant's possession.

Trial was to the court, which made findings and awarded plaintiff a judgment in the sum of $1,119.57, being the amount found to be due under the contract; also $192.21 interest and $116.74 as attorney's fees. The court also entered judgment in favor of plaintiff on the cross-complaint. Defendant appeals from the entire judgment.

We are of the opinion that the court erred in awarding plaintiff a judgment, but that it did not err in denying defendant relief on his cross-complaint.

Section 2982(a) of the Civil Code provides that every contract for the conditional sale of a motor vehicle shall be in writing and shall contain a complete statement of the terms of the contract. The statute also provides: ‘It [the contract] shall be signed by the buyer * * * and by the seller * * * and when so executed an exact copy thereof shall be delivered by the seller to the buyer at the time of its execution.’ There are ten items relating to the selling price of the vehicle which must be stated in the contract. It is unnecessary to set them forth since the form of contract contained none of them at the time Lindsey signed it.

The obvious purpose of the statute is to protect purchasers of motor vehicles under conditional sale contracts against excessive charges by requiring full disclosure of all items of cost before the contract is signed by the buyer. Lindsey signed the contract in blank, took possession of the car and drove it away. This was clearly a violation of the statute on the part of the seller. The provisions of Section 2982(a) are mandatory, and since they are for the benefit of the general public which the statute was designed to protect, the buyer is not to be deemed to have been in pari delicto with the seller and the latter's failure to comply with the statute renders the contract unenforceable against him. Carter v. Seaboard Finance Co., 33 Cal.2d 564, 203 P.2d 758.

Plaintiff argues that having received a copy of the contract Lindsey is presumed to have had knowledge of its terms, and that by entering into the modification agreement with the bank, which expressly reaffirmed the provisions that were not modified, Lindsey ratified the contract and may not be heard to question its validity. The court stated in its findings that by reason of the fact that Lindsey signed the proposed contract in blank it was unenforceable by plaintiff, but the basis of its decision was that the contract was validated by the subsequent modifying agreement between Lindsey and the bank. We are not in agreement with this conclusion.

A contract made in violation of a statute enacted for the protection of the general public is void. Levinson v. Boas, 150 Cal. 185, 88 P. 825, 12 L.R.A.,N.S., 575. In Levinson, it was said (150 Cal. at page 193, 88 P. at page 828): ‘But it is to be noticed that every case from every court recognizes that when a statute has been made for the protection of the public, a contract in violation of its provisions is void. (Citations.)’ See, also, Smith v. Bach, 183 Cal. 259, 191 P. 14; Estrada v. Alvarez, 38 Cal.2d 386, 240 P.2d 278. And it is settled that the doctrine of ratification has no application to a contract which violates an express mandate of a law that is designed to prevent fraudulent practices. Walker v. Harbor Realty & Development Corp., 214 Cal. 46, 48, 3 P.2d 557; Mary Pickford Co. v. Bayly Bros., Inc., 12 Cal.2d 501, 524, 86 P.2d 102, and cases cited. Such a contract is void in the sense that it cannot be enforced by the holder or be asserted as a defense against liabilities which exist by reason of its invalidity.

No question is presented as to the effect of the claimed ratification as between Lindsey and the bank. The contract came back into the hands of the wrongdoer after it had been disaffirmed by Lindsey. There was no new contract entered into, and nothing but an attempted ratification of the invalid one. It is not within the competency of the parties to breathe life into a contract which in content and manner of effective execution violates express statutory requirements. The public policy which dictated the enactment of Section 2982 of the Civil Code forbids that its purpose could be thus defeated.

However, no error appears with respect to the denial of plaintiff's liability on the cross-complaint. A buyer who has made payments to the seller under a conditional sale contract which does not conform to the requirements of Civil Code, Section 2982(a), may recover such payments in an action against the seller. Estrada v. Alvarez, supra, 38 Cal.2d 386, 240 P.2d 278. But the latter is entitled to an offset in the amount representing the depreciation in the value of the car occasioned by the use made of it by the buyer while in his possession; the right of offset is restricted to an amount not exceeding that which the buyer is entitled to recover. Williams v. Caruso Enterprises, 140 Cal.App.2dSupp. 973, 295 P.2d 592.

The installments paid by Lindsey on the contract amounted to $433.50 and the court found the actual retail market value of his trade-in automobile to be $195; the total sum which defendant would have been entitled to recover against plaintiff was therefore $628.50. But the court also found that the depreciation in the value of the Lincoln that was attributable to defendant's use of the car exceeded $628.50. This finding was supported by evidence that Lindsey had driven the Lincoln over 14,000 miles while it was in his possession and by the testimony of plaintiff's expert witness that, in his opinion, Lindsey's use of the car depreciated its original retail value by 30%. As plaintiff's offset was in excess of the sum which defendant was entitled to recover, the court did not err in refusing to order plaintiff to restore the consideration paid by Lindsey.

Since there was no basis for a finding that Lindsey had suffered actual damage, an award of exemplary damages was properly denied. Mother Cobb's Chicken Turnovers, Inc., v. Fox, 10 Cal.2d 203, 73 P.2d 1185.

The judgment, insofar as it awards plaintiff a recovery against defendant, is reversed, and the court is directed to enter judgment that plaintiff recover nothing against defendant on its complaint, and that defendant recover nothing on his corss-complaint.

SHINN, Presiding Justice.

PARKER WOOD, J., and PATROSSO, J. pro tem., concur.

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