Judge: Peter Wilson, Case: 2018-01023401, Date: 2023-08-31 Tentative Ruling
Defendant DACM, Inc. dba Del Amo Motorsports of Orange (Defendant) generally demurs to the First Cause of Action for violations of the Consumer Legal Remedies Act (CLRA) and Second Cause of Action for Violations of the Unfair Competition Law (UCL) in the Second Amended Complaint (SAC).
For the reasons set forth below, the demurrer to the First Cause of Action is SUSTAINED with 15 days leave to amend and OVERRULED as to the Second Cause of Action.
Request for Judicial Notice. Defendant seeks judicial notice (ROA 325) of the following:
1. Exhibit A - Docket in Miliate v. San Diego County House of Motorcycles, Case No. 37-2018-00035131 (Miliate Action);
2. Exhibit B – Notice of hearing in Miliate Action; and
3. Exhibit C – Petition to confirm arbitration award in Miliate Action.
Plaintiff also seeks judicial notice (ROA 345) of the following:
1. Exhibit 1 – Dep’t Consumer Affairs, Analysis of Bill S.B. 143 (Reg. Sess. 1983-1984) as enrolled.
2. Exhibit 2 – Ass. Comm. Fin. & Ins., Comments on SB 143 (Reg. Sess. 1983–1984), as amended May 5, 1983.
3. Exhibit 3 – Dep’t Motor Veh., Analysis of Bill S.B. 143 (Reg. Sess. 1983-84), as enrolled.
4. Exhibit 4 – Ass. Comm. Fin. & Ins., Analysis of SB 143 (Reg. Sess. 1983-84), as amended May 5, 1983.
5. Exhibit 5 – California League of Savings Institutions, Letter to Senator Foran re: SB 143 (June 22, 1983).
Defendant submitted a supplemental request for judicial notice (ROA 347) with its Reply, seeking judicial notice of the following:
1. The TENTATIVE RULING of the San Diego County Superior Court in case Miliate Action dated August 17, 2023 granting defendant’s Petition to Confirm Arbitration Award.
2. The MINUTE ORDER dated August 18, 2023 in the Miliate Action confirming the Tentative Ruling.
All of the requests for judicial notice are DENIED as the documents are not relevant to the ruling on this motion.
Objections to the ROA 323, Johnson Declaration. The objections to paragraphs 3-9 of the Johnson Declaration are SUSTAINED.
Legal Standard for Demurrer. A general demurrer challenges the legal sufficiency of a complaint on the ground that it fails to state facts sufficient to constitute a cause of action. (Code Civ. Proc. § 430.10(e).) The allegations in the complaint as a whole must be reviewed to determine whether a set of alleged facts constitutes a cause of action. (People v. Superior Court (Cahuenga’s the Spot) (2015) 234 Cal.App.4th 1360, 1376.) A complaint need only meet fact-pleading requirements, which requires a statement of facts constituting a cause of action in ordinary and concise language, and should allege ultimate facts that, as a whole, apprise defendant of the factual basis of the claim. (Code Civ. Proc. §425.10(a)(1); Navarrete v. Meyer (2015) 237 Cal.App.4th 1276, 1284.)
In ruling on a demurrer, the court is guided by the following long-settled rules: The court treats the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. The court may also consider matters which may be judicially noticed. Further, the court gives the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
Rees-Levering Act. Although Plaintiff does not allege a cause of action for violation of the Rees-Levering Act in the SAC, violations of the Rees-Levering Act are the predicate acts for his CLRA and UCL claims.
Defendant contends that the SAC fails to allege any violation of the Rees-Levering Act, and therefore, Plaintiff’s CLRA and UCL claims fails. Defendant argues that Plaintiff’s purchase of the motorcycle does not qualify as a “conditional sales contract” under Civil Code § 2981 because there were two separate agreements alleged in the SAC, i.e. the Motorcycle Purchase Agreement (MPA) between Plaintiff and Defendant and the Sales Slip between Plaintiff and the credit card issuer. Defendant also argues that title vested in Plaintiff when he took delivery of the motorcycle and Defendant did not retain a lien in the property. These arguments are not persuasive.
The Rees-Levering Act “is a consumer protection law governing the sale of cars in which the buyer finances some, or all, of the car’s purchase price.” (Raceway Ford Cases (2016) 2 Cal.5th 161, 165.) The Rees-Levering Act was “designed to provide a more comprehensive protection of the unsophisticated motor vehicle consumer.” (Id.) In particular, the Rees-Levering Act was intended to protect the purchaser from certain economic hazards, such as excessive interest charges, lack of full disclosures to the buyer, taking of security in addition to the car to assure repayment, the use of more than one document in connection with the sale and financing, and the lack of protection in the event of default. (Id.) Whether the Rees-Levering Act applies is determined in light of the policies of the act. (Id.)
Further, the substance of the transaction is the focus and not the form. (Eldorado Bank v. Lytle (1983) 147 Cal.App.3d Supp. 17, 20, citing Civil Code § 3528; Raceway Ford Cases (2016) 2 Cal.5th at 165 [“In determining whether the act applies to a particular transaction ‘ we look to the substance of the transaction and do not allow mere form to dictate the result’.”])
Thus, in Hernandez v. Atl. Fin. Co. (1980) 105 Cal.App.3d 65 (Hernandez), the court found the Rees-Levering Act applies when a dealer assists the purchaser in obtaining financing. In Hernandez, defendant dealer assisted the plaintiff’s mother in obtaining a personal loan from a financing company. (Id. at 73-74.) Focusing on the relationship between the dealer and the finance company, the Hernandez court found their conduct “is not exempt from the provisions of the Rees-Levering Act and appears to be a scheme of the seller designed to evade the requirements of that act.” (105 Cal.App.3d at 78.) Although the Hernandez court acknowledged that the seller-assisted loan at issue was covered by the broad language of the exemption in Civil Code § 2982.5(a), the Hernandez court found “such an interpretation would render the Rees-Levering Act virtually impotent.” (Id. at 76.) “To conclude that the exemption in subdivision (a) is designed to exclude from the coverage of the act only independent private negotiations between a buyer and his lender, without involvement of the seller, is consistent with the legislative purpose and policy behind the act, and leaves the act free to achieve the ends and eliminate the evils to which it was originally addressed.” (Id. at 77. See also Eldorado Bank, supra, 147 Cal.App.3d Supp. 17, 20 [followed Hernandez and found Rees-Levering Act applied where seller assisted purchaser in obtaining loan to finance purchase of motor home from dealer].)
As discussed, merely because there are two agreements referenced in the SAC does not mean that this transaction is not a conditional sale contract. It is precisely because there are two agreements that do not accurately reflect the transaction that Plaintiff contends the Defendant violated the Rees-Levering Act. Plaintiff’s theory of liability is that regardless of the form of the transaction, the substance of the transaction here is a conditional sale contract.
Civil Code § 2981(a) defines a conditional sale contract as “[a] contract for sale of a motor vehicle between a buyer and a seller, … under which possession is delivered to the buyer and either of the following: (A) The title vests in the buyer thereafter only upon the payment of all or part of the price, or the performance of any other condition. (B) A lien on the property is to vest in the seller as security for the payment of part or all of the price, or for the performance of any other condition.”
The SAC alleges Plaintiff entered into a contract with Defendant for the purchase of the motorcycle (MPA), Defendant delivered the motorcycle to Plaintiff, and structured the transaction “so that title would vest in Plaintiff only upon the payment of the financing it arranged and the performance of other conditions including payment of undisclosed interest and finance charges”. SAC, ¶¶21-28. Additionally, the SAC alleges the MPA inaccurately represents the transaction was a cash sale even though Plaintiff did not have the funds to pay in cash and actually paid for the motorcycle through financing arranged by the Defendant (credit card program). SAC, ¶¶21-28. Thus, Plaintiff alleges Defendant was required to include all financing disclosures in one document but failed to do so. Instead, Defendant memorialized the transaction in two separate documents, the MPA and Sales Slip, which violates the single document rule and financing disclosures required in the Rees-Levering Act. SAC, ¶¶1, 2, 3, 18, 21.
Accepting these allegations as true for the purpose of the demurrer (Hacker v. Homeward Residential Inc. (2018) 26 Cal.App.5th 270, 280), these allegations are sufficient to satisfy Civil Code § 2981(a) and state a claim for violation of the Rees-Levering Act.
Since the SAC adequately alleges a violation of the Rees-Levering Act, the Court declines to rule on Defendant’s alternative argument that the SAC fails to allege a violation of Civil Code § 2982.5(d)(4) and (5). The Court notes, however, that for § 2982.5(d) to apply, each of the subdivisions (1) through (6) applies. Subdivision (5) provides in relevant part that “[i]f the buyer becomes obligated to purchase, or receives possession of, the motor vehicle prior to obtaining the loan, the agreement between the buyer and the seller shall set forth on its face the amount of the loan, the finance charge [etc.]” (Emphasis added.) None of this information appears on the face of the MPA. The disputes concerning possession, and when title passed, and a full understanding of the interaction between the MPA and the Sales Slip are questions of fact for resolution through summary judgment or trial, and are not proper subjects for determination on demurrer.
CLRA. The CLRA makes unlawful certain “unfair methods of competition and unfair or deceptive acts or practices” used in the sale of goods or services to a consumer. (Civ. Code, § 1770, subd. (a).) If the consumer suffers damage as a result of an unlawful act, the consumer can bring an action against the defendant for actual damages, punitive damages, injunctive relief or restitution. (Id. See also, Wilans v. TD Waterhouse Group, Inc. (2003) 120 Cal.App.4th 746, 754.) As such, causation is necessary element of proof. (Buckland v. Threshold Enterprises, Ltd. (2007) 155 Cal.App. 4th 798, 809, disapproved on other grounds in Kwikset Corp. Superior Court (2011) 51 Cal.4th 310.) Additionally, since the claims sound in fraud, plaintiff must alleged actual reliance. (Id. at 810.)
In support of his 1st COA, Plaintiff alleges Defendant violated the CLRA because the MPA was not a cash transaction or an unsecured credit transaction and was actually a conditional sales contract secured by the motorcycle and thus had to comply with the Rees-Levering Act. SAC, ¶42. Plaintiff alleges Defendant specifically violated Civil Code § 1770(a)(14) by representing the transaction confers or involves rights, remedies, or obligations which it does not have or which are prohibited by law, and Civil Code § 1770(a)(16) by representing the subject transaction has been supplied in accordance with a previous representation when it has not. SAC, ¶43. Additionally, the SAC alleges that Plaintiff has suffered monetary damages, including the undisclosed cost of financing the purchase price of the vehicle. SAC, ¶44. With the exception noted below, these allegations sufficiently allege a violation of the CLRA.
However, as Defendant argues, Plaintiff does not allege actual reliance. The demurrer is accordingly SUSTAINED as to the First Cause of Action, with 15 days leave to amend.
UCL. The unfair competition law borrows violations from other laws and treats them as independently actionable. In addition, practices may be deemed unfair or deceptive, even if not proscribed by some other law. Thus, there are three varieties of unfair competition: practices which are unlawful, unfair or fraudulent. (See Kunert v. Mission Fin. Servs. Corp., supra, 110 Cal. App. 4th at 261–62.)
Since the SAC does not allege any fraudulent conduct in support of this cause of action, Defendant argues this claim fails to allege facts that constitute an unlawful or unfair act or practice since there is no violation of the Rees-Levering Act or CLRA. However, as discussed above, the SAC does allege violations of the Rees-Levering Act, which may form the predicate acts for this cause of action as alleged in the complaint. SAC, ¶¶49-50. The demurer to the Second Cause is accordingly OVERRULED.
The status conference is continued to October 27, 2023 at 9 AM, and the parties are ordered to file a joint status report not later than October 20, 2023.
Defendant is ordered to give notice.