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District Court of Appeal, First District, Division 1, California.

Matthew J. FINE, Plaintiff and Respondent, v. S & C FINANCE, Defendant and Appellant.

No. 17645.

Decided: June 11, 1958

Eugene S. Clifford, Heller, Ehrman, White & McAuliffe, San Francisco, for appellant. George V. Curtis, San Francisco, for respondent.

Plaintiff purchased a station wagon from defendant's assignor pursuant to the provisions of a conditional sales contract, making a down payment and agreeing to pay 24 monthly installments of $75.93 each. After plaintiff had paid all of these monthly installments defendant seized the car under the purported authority of a repossession clause of the contract, claiming that plaintiff owed it the amount of a premium it had paid for insurance of the car during the second year of the contract.

Plaintiff brought this action for conversion of the car and the court gave judgment in his favor, finding that, having made all the monthly payments, plaintiff owned the car and defendant had no right to repossess it. Defendant has appealed.

Item 4 of the contract read as follows: ‘4. Total Premium included in contract balance .......... $157.50’ There is no dispute as to this sum of money. It is itemized, showing the amount of premium for the several kinds of coverage. It represents the premium, including automobile club dues, upon insurance for the first year (1953–54, the contract having been executed in June, 1953). Nor are other items upon the face of the contract (and, thus, above the plaintiff's signature) in dispute.*

The contract balance ($1,822.32) included as insurance premiums only the sum of $157.50 (designated ‘Total Premium’).

There was further mention of insurance, upon the back of the contract, hence below the signature of the plaintiff, and in fine print, a clause to the effect that if ‘the total price payable hereunder does not include a charge for insurance to be procured by Seller (or if insurance * * * expires before the contract shall have been paid in full)’, purchaser shall upon request furnish evidence of such insurance as seller may request. Upon failure of purchaser so to do, seller may procure such insurance and purchaser agrees to pay the premium therefore upon demand, ‘as an additional part of the obligation hereunder.’ Another clause in fine print on the back of the contract authorized immediate repossession if the purchaser ‘defaults on any payment due under this contract or fails to comply with any condition or provision of this contract.’

There is some question whether plaintiff defaulted in respect to the procurement of insurance for the second year. An employee of defendant called plaintiff and asked him if he would like to renew his policy for the second year and he said he would do so after the commencement of the policy year. The insurance, apparently, was placed. After he had made his last monthly payment he he phoned defendant and was told that he owed $407 for one year's insurance and was told to come in to defendant's office. He said he had to go to San Jose for two weeks on business. Asked where the car was stored, he told them where it was in Hayward. In about 10 days the car was repossessed. Upon his return he went to defendant's office. He was first told he owed $407 and then that it was $414. He demanded return of the car, which was refused. A representative of defendant than stated that he would take $270 in full payment, which offer plaintiff refused. Later it appeared from the 1954–55 policy when produced that the total premium for that year amounted to $123.40. Plaintiff did not receive a copy of the 1954–55 policy until he had gone to defendant's office after the car had been repossessed.

A more serious question is whether or not the provisions of section 2982, Civil Code, authorize a seller to provide for insurance coverage and repossession in the manner in which this seller did. This statute as it read in 1953 declared that every conditional sales contract ‘shall be in writing and shall contain all of the agreements between the buyer and the seller relating to the personal property described therein. * * * It shall recite the following separate items as such, in the following order,’ designating nine numbered items, the same as set forth in the contract in suit. In respect to Item 4, the statute specified as follows: ‘4. The cost to the buyer of any insurance, the premium for which is included in the contract balance.’ Here, it will be observed, the only insurance premiums mentioned in Item 4 of the conditional sales contract were for coverage during the first year of the contract, correctly stated therein as amounting to $175.50 and labelled ‘Total Premium.’

Obviously, in respect to the insurance premium here involved, there was a failure to comply with the form and requisites of section 2982, rendering unenforceable the clause on the back of the contract which purports to make the amount of that premium ‘an additional part of the obligation’ of the buyer under this conditional sales contract. Our Supreme Court held in Carter v. Seaboard Finance Co., 33 Cal.2d 564, 573, 203 P.2d 758, 764, that ‘[t]he form and requisites [of § 2982] must * * * be held to be required and the statute in thse respects to be mandatory,’ in respect to a contract which failed to recite the full contract price of each of the trucks and trailers, the amount of the down payment credited toward each, the total cost of insurance to the buyer, itemization of fees to be paid the Motor Vehicle Department, the correct time price differential, or the amount of the final installment. The rationale of the Carter case was followed in Estrada v. Alvarez, 38 Cal.2d 386, 240 P.2d 278, 279, holding that in the second count of his complaint plaintiff stated a cause of action for recovery of money paid under a void contract because of lack of compliance with section 2982. Said the court: ‘The contract here violates section 2982 in the following respects: It does not recite the price at which the seller would have sold for cash (Civ.Code, § 2982, par. (a), subd. 1). It does not recite the amount of the ‘time price differential’ or the ‘contract balance’ (Civ.Code, § 2982, par. (a), subds. 7 and 8). Furthermore, subdivision 2 of paragraph (a) of section 2982 requires that the contract recite ‘The amount of the buyer's down payment, and whether made in cash or represented by the net agreed value of described property traded in, or both, together with a statement of the respective amounts credited for cash and for such property.’ The contract here incorrectly recites that the down payment was $3,500 ‘in cash,’ whereas, plaintiffs allege, the down payment which they actually made was a Buick automobile of the reasonable value of $3,800.

‘According to the Carter case, ‘The obvious purpose of the statute is to protect purchasers of motor vehicles against excessive charges by requiring full disclosure of all items of cost’ (at page 573 of 33 Cal.2d, at page 776 of 203 P.2d); the form and requisites prescribed by the statute are mandatory; a contract which does not substantially conform thereto is unenforceable; and a buyer who has made payments to the seller under such a contract may recover them because ‘A member of the class for whose protection the statute was enacted is ordinarily not considered in pari delicto with those who violate the statute’ (at page 574 of 33 Cal.2d, at page 765 of 203 P.2d).' 38 Cal.2d at pages 388 and 389, 240 P.2d at page 279.

In our case there was no such extensive variance from the ‘form and requisites' of section 2982 as in the Carter and the Estrada cases and no one is contending that the contract in this case was void as a whole. However, the variance here involved, in respect to insurance premiums, is a clear violation of a positive mandate of the statute on that subject. To the extent of that variance this contract is void. Accordingly, we deem void that clause, appearing on the back of the contract, which purported to make the premium for the second year of the contract ‘an additional part of the obligation’ of the purchaser under the contract.

Defendant says that the second year's insurance premium was ‘admittedly not included’ in the ‘contract balance’; hence, is not within the purview of Item 4 of subdivision (a) of section 2982, Civil Code, when it says the contract shall recite the ‘cost to the buyer of any insurance, the premium for which is included in the contract balance.’ This, in effect, amounts to an argument that if a person writes his conditional sales contract in noncompliance with the ‘form and requisites' of section 2982, the mandates of that section do not apply. Defendant quotes from Millick v. Peer, 130 Cal.App.2d Supp. 894, 279 P.2d 212, 214, a statement to the effect that the insurance there involved was issued after the expiration of an existing policy and the charge therefor was ‘not included in the amounts to be paid under the contract and consequently was not subject to the provisions of subdivision (b) of said Section 2982.’ 130 Cal.App.2d Supp. at page 896, 279 P.2d at page 214. It is not entirely clear what was meant by that statement. Was there a subsequent, distinct, and separate agreement concerning the policy which was later obtained? Or, is that statement directly connected with the statement in the immediately following sentence, to the effect that ‘unenforceability for failure to comply with * * * section 2982 applies only to the requirements set forth in Subdivisions (c) and (d), and not to those set forth in * * * (a) and (b) of that Section * * *’? The latter statement was expressly disapproved and withdrawn by the same court in the later case of Baum v. Aleman, 139 Cal.App.2d Supp. 929, 932, 293 P.2d 162. See, also, Williams v. Caruso Enterprises, 140 Cal.App.2d Supp. 973, 975–976, 295 P.2d 592. We find no merit in this point.

Somewhat inconsistently with the last argument defendant contends that the clause (on the back of the contract and in fine print) which it here invokes was a ‘prime consideration’ of the contract, pursuant to which defendant's asserted right to reimbursement for advancement of the second year's premium ‘became ‘an additional obligation’ thereunder' precedent to the vesting of title. Here, again, defendant loses sight of the mandatory character of the ‘form and requisites' of section 2982 of the code.

We find nothing in Zeff v. Harvey Smith Oldsmobile Co., 154 Cal.App.2d 1, 315 P.2d 371, persuasive of a different view of the contract now before us. There the court in effect held it was competent for the parties to agree that title to the thing sold would not pass until paid for in cash. So, too, in our case, the trial court correctly found that plaintiff paid in cash in full and that thereupon title passed. We note in passing that the opinion in the Zeff case does not indicate that any question concerning compliance or noncompliance with the ‘form and requisites' of section 2982 had been raised or was involved.

We observe that the trial court found plaintiff herein obligated to defendant for the amount of the second year's insurance premium. The soundness of such a finding is not presented to us for decision. Defendant-appellant, naturally, is not complaining. Plaintiff-respondent is not complaining and, of course, could not complain, he not having appealed.

The judgment is affirmed.


FOOTNOTE.  Item 1, the cash selling price, including sales tax, $1,863.00; 2, the down payment, $500.00; 3, the amount unpaid on cash selling price, $1,363.00; 5, fees paid, $1.00; 6, amount of unpaid balance to be financed, including insurance, $1,521.50; 7, amount of time price differential (financing charge) $300.82; 8, amount of contract balance, $1,822.32; and 9, the contract balance is payable in 24 monthly installments of $75.93 each, commencing July 25, 1953.

FRED B. WOOD, Justice.

PETERS, P. J., and BRAY, J., concur.

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