Judge Peter A. Hernandez, Case Number: 22PSCV00143, Date: 2024-01-23 Tentative Ruling

Defendant Automotive Credit Corporation’s Motion for Judgment on the Pleadings is GRANTED.

Plaintiffs Katherine Camacho and Victor Venegas (together, “Plaintiffs”) allege as follows:

On August 7, 2021, entered into a Retail Installment Sales Contract (“RISC”) with Sus Amigos Auto Center, Inc. (“Sus Amigos”), wherein Sus Amigos sold Plaintiffs a 2016 Chevy Silverado, VIN #3GCPCRECXGG126689 (“subject vehicle”). The RISC was subsequently assigned to Automotive Credit Corporation (“ACC”). Right after purchasing the subject vehicle, Plaintiffs realized that the subject vehicle’s transmission was defective. Plaintiffs took the subject vehicle in for repairs and learned they would cost $5,000.00. Sus Amigos refused to repair the subject vehicle.

On February 14, 2022, Plaintiffs filed a complaint, asserting causes of action against Sus Amigos, ACC, American Contractors Indemnity Insurance Company (“ACIIC”) and Does 1-50 for:

On September 12, 2022, Plaintiffs dismissed Sus Amigos, with prejudice. On September 14, 2022, Plaintiffs dismissed ACIIC, with prejudice.

The rules governing demurrers are generally applicable to a motion for judgment on the pleadings. (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999; Code Civ. Proc., § 438, subd. (d) [“The grounds for motion. . . shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice. Where the motion is based on a matter of which the court may take judicial notice. . ., the matter shall be specified in the notice of motion, or in the supporting points and authorities, except as the court may otherwise permit”].)

A motion by a plaintiff may only be made on the grounds “that the complaint states facts sufficient to constitute a cause or causes of action against the defendant and the answer does not state facts sufficient to constitute a defense to the complaint.” (Code Civ. Proc., § 438, subd. (c)(1)(A).) A motion by a defendant may only be made on the grounds that (1) “[t]he court has no jurisdiction of the subject of the cause of action alleged in the complaint” or (2) “[t]he complaint does not state facts sufficient to constitute a cause of action against that defendant.” (Code Civ. Proc., § 438, subd. (c).)

Although a nonstatutory motion “may be made at any time either prior to the trial or at the trial itself” (Stoops v. Abbassi (2002) 100 Cal.App.4th 644, 650 [quotation marks and citation omitted]), a statutory motion cannot be made after entry of a pretrial conference order or 30 days before the initial trial date, whichever is later, unless the court otherwise permits. (Code Civ. Proc., § 438, subd. (e).)

ACC moves the court, pursuant to Code of Civil Procedure § 438 and the common law, for judgment on the pleadings.

At the outset, the instant motion originally came on calendar for hearing on January 23, 2024; at that time, the court noted that “Plaintiffs’ counsel had a motion to be relieved set for February 6, 2024, which is the same date set for trial. Plaintiffs’ opposition filed January 9, 2024 requests that the hearing on the instant motion be continued until after the issue of representation has been determined. The court believes this request is reasonable under the circumstances.” The court vacated the February 6, 2024 trial date and advised that “[i]n the event the motion to be relieved is granted on February 6, 2024, the court will continue the hearing on the instant motion another 45-60 days in order to enable Plaintiffs to obtain substitute counsel, if desired.” On February 6, 2024, the court granted counsel for Plaintiffs’ motion to be relieved as counsel and continued the hearing on the instant motion to April 4, 2024. There is no indication on ecourt that Plaintiffs have obtained new counsel. The court will proceed to the merits of the motion at this juncture.

ACC contends that Plaintiffs’ sole basis for imposing liability on ACC is for the actions of Sus Amigos pursuant to the Holder Rule, which fails now that Plaintiffs have dismissed Sus Amigos.

The court agrees. Plaintiffs have alleged that on August 7, 2021, they entered into an RISC with Sus Amigos, wherein Sus Amigos sold them the subject vehicle (Complaint, ¶¶ 14 and 15); that, at some point after the sale, the RISC was assigned to ACC (Id., ¶ 16); that, right after purchasing the subject vehicle, Plaintiffs experienced problems with the transmission, which they sought to have repaired (Id., ¶¶ 17 and 18) and that Sus Amigos refused to repair same (Id., ¶ 19). Plaintiffs sued Sus Amigos and ACC for Violation of the Consumer Legal Remedies Act[1], alleging that Susa Amigos violated Civil Code § 1770(a)(7) and (14) by “FAIL[ING] TO DISCLOSE THAT THE VEHICLE’s transmission was defective.” (Id., ¶ 27). Plaintiffs do not describe any acts or omissions by ACC; rather, they refer only to Sus Amigos’ conduct in their complaint.

The holder rule is set forth in a regulation (16 C.F.R. § 433.2) issued by the Federal Trade Commission (“FTC”) in 1975. (Melendez v. Westlake Services, LLC (2022) 74 Cal.App.5th 586, 590). “The Holder Rule . . . allows the buyer to assert against the holder of a consumer credit contract ‘all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds’ of the financing.” (Lafferty v. Wells Fargo Bank (2013) 213 Cal.App.4th 545, 560 [italics theirs; citation omitted].)

Notably, however, “[t]he Holder Rule does not itself provide a cause of action;” rather, a buyer “must ‘borrow’ a cause of action from another statute or common law source to assert a claim against [a lender].” (Lafferty, supra, 213 Cal.App.4th at 563; see also id. at 551 [“Although the Holder Rule allows the same claims against a lender that might be brought against the seller, it does not create any causes of action”].) The Holder Rule creates a form of derivative liability. (See Tun v. Wells Fargo Dealer Services, Inc. (2016) 5 Cal.App.5th 309, 328 [“Here, the record shows the jury returned a defense verdict for dealer. As such, and because Wells Fargo's liability to Tun was derivative of dealer's liability, Wells Fargo also was entitled to a defense verdict as the (one-time) holder of the RISC”].)

On September 12, 2022, Plaintiffs dismissed Sus Amigos, with prejudice. (See RJN, Exhs. A and B). “[A] dismissal with prejudice by plaintiff of its action is a bar to a subsequent action on the same cause; otherwise there would be no meaning to the ‘with prejudice’ feature. A dismissal with prejudice terminates the action and the rights of the parties are affected by it.” (Roybal v. University Ford (1989) 207 Cal.App.3d 1050, 1085-1086 [quotations and citation omitted].) Here, since Plaintiffs seek to hold ACC derivatively liable for Sus Amigos’ liability under the Holder Rule, and since Plaintiffs have dismissed with prejudice their claims against Sus Amigos, there is no basis for imposing liability on ACC in Plaintiffs’ complaint.

[1] Plaintiffs also sued Sus Amigos for Violation of Song-Beverly Consumer Warranty Act and sued ACIIC for Claim Against Dealer Bond.