Monday, April 12, 2010
C.A. Reinstates Suit Over Motor Vehicle Sale Deficiency Judgments
By KENNETH OFGANG, Staff Writer
A putative class action against the consumer finance arm of Mitsubishi Motors, alleging that it violated consumer protection laws by seeking deficiency judgments against owners of repossessed vehicles without serving proper notice, was revived Friday by the Fourth District Court of Appeal.
Div. One, in an opinion by Justice Richard Huffman, largely embraced the defendants’ view that the four-year period in which to sue for violations of the Unfair Competition Law, based on defects in a notice of intent to seek a deficiency judgment, begins upon service of the notice, rather than when suit is filed.
The panel held, however, that an exception might apply where the creditor unreasonably delays seeking a deficiency judgment. The case was sent back to the trial court to give Suezane Salenga an opportunity to amend her complaint.
Cavalry Portfolio Service, LLC, an assignee of Mitsubishi Motors Credit of America, Inc., sued Salenga in 2008, alleging that she owed more than $10,000 plus interest from May 2004. The plaintiff claimed that it had given Salenga a proper “notice of intent to dispose of motor vehicle” under the Rees-Levering Motor Vehicle Sales and Finance Act in October 2003 and that she was liable for the deficiency balance after her car was resold.
Salenga answered and cross-complained against Cavalry and Mitsubishi Motors Credit, seeking class action certification for her claim that the defendants routinely violated Rees-Levering and the UCL by seeking deficiency judgments in cases where the notice was defective. As a result, she alleged, she was being forced to defend the suit, had made a payment on the deficiency that she was not legally obligated to make, had suffered new damage to her credit, and that other members of the putative class had suffered the same harm.
The Rees-Levering Act generally requires that all debtors liable on the contract be given notice within 60 days following repossession and at least 15 days prior to sale and advised either that they have 15 days to reinstate the contract or as to the reasons why they do not have the right to reinstate.
San Diego Superior Court Judge Laura Halgren sustained demurrers without leave to amend, ruling that the cross-complaint was time-barred. In doing so, she rejected the argument that Salenga suffered no harm, and that her cause of action did not accrue, until Cavalry filed suit against her.
Huffman, writing for the Court of Appeal, acknowledged that Salenga’s cross-complaint was “problematic in terms of alleging any justification for a postponed accrual” of her claim, and that the litigation privilege might bar it even if timely, but said the trial judge should have allowed her to amend.
“Arguably, as creditors, cross-defendants may have acted in such a manner as to justify delayed accrual of a borrower’s cause of action for violations of certain protections in the Act, by waiting a long period of time before filing an action to seek a deficiency, and by doing so based on a defective NOI,” Huffman wrote. “Creditors are generally obligated to make demands for repayment within reasonable time periods....Where they have not done so, a statutory limitations period may be suspended....Appellant may be able to plead some variation on this theme.”
The justice cautioned, however, that the court was expressing no opinion as to whether Salenga will ultimately prevail, whether a class action is appropriate, or whether a claim based on a demand letter and a deficiency complaint would be barred by the litigation privilege. “Rather, only because Appellant has demonstrated some possibility of cure of the existing pleading problems through amendment, we conclude the trial court abused its discretion by denying leave to amend.”
The case is Salenga v. Mitsubishi Motors Credit of America, Inc., 10 S.O.S. 1928.
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