Thursday, January 16, 2014
Panel Rules for Consumers in Suit Over Auto Sales Contract
Appellate Division Says Dealer Who Willfully Violates Vehicular Transactions Law Not Entitled to Time to Correct
By MICHAEL J. PEIL, Staff Writer
A car dealer failed to raise an affirmative defense under Civil Code §2984, which allows time to correct a sales contract that is in violation of the Automobile Sales Finance Act, since it could not show its violation to be nonwillful, the Appellate Division of the Los Angeles Superior Court held Tuesday.
The court, in an opinion by Judge Alex Ricciardulli, reversed a judgment in favor of Express Auto Sales, holding its time period for making corrections to a sales contract was within 30 days of executing the contract, and not within 10 days of receiving notice from the plaintiffs.
The Automobile Sales Finance Act requires dealers to disclose sale and financing details and to itemize the amount of a buyer’s down payment in a sales contract.
If an auto dealer violates the law, §2984 provides a “safe harbor” provision by allowing various time periods to correct violations, with durations varying for correction depending on whether the violation was willful or not.
Express Auto could not establish its violation to be nonwillful, resulting in its safe harbor period having already expired when it corrected the violations of its sales contract, the appellate court decided.
Marco A. Munoz and Alejandra Orozco filed a complaint alleging that the car dealer violated the Automobile Sales Finance Act.
At trial, Munoz and Orozco testified that they purchased a 2006 Chevrolet Impala from Express Auto for a price of $11,800 on May 14, 2011. To finance the purchase, a $3,000 down payment was put down, consisting of a $1,500 check, $1,000 for a car trade-in, and two $250 deferred cash payments. The remainder of the price was financed by U.S. Bank.
The sales agreement, which was admitted into evidence, stated that a $3,000 down payment was made in cash. The section of the agreement which allowed for information regarding a trade-in vehicle was left blank. The value for trade-in vehicles or deferred down payments was listed as $0.00.
Munoz and Orozco testified that they became dissatisfied with the vehicle after the paint started fading, a passenger door would not open, and the air conditioning malfunctioned.
On Sep. 28, 2011, the lawyer for the plaintiffs sent a letter to Express Auto. The letter notified the dealer that the sales contract failed to itemize the down payment and violated the Automobile Sales Finance Act as a result.
The letter also demanded that the defendant remedy the violations within 30 days.
On Oct. 10, a lawyer for the defendant mailed a response to Munoz and Orozco, denying having violated a statute, and stating that a corrected sales contract was enclosed pursuant to §2984.
Following a court trial, Los Angeles Superior Court Judge Elizabeth R. Feffer found that Express Auto Sales timely corrected the contract under §2984 by making corrections within 10 days of receiving notice from the plaintiffs. Feffer also ruled that the plaintiffs, in their demand letter, waived any untimeliness by giving the defendants 30 days to correct violations.
Munoz and Orozco, on appeal, contended the judgment should be reversed because the court improperly found that Express Auto timely corrected the contract.
Section 2984, Ricciardulli said, allows an automobile dealer a period of time to correct a violation in a contract. But the statute, he said, draws a distinction between willful and nonwillful violations.
Willful violations may not be corrected unless the violation is corrected within 30 days of execution or 20 days of sale, Ricciardulli explained. He said, “A nonwillful violation may be corrected at any time, but not later than 10 days of notice in writing by the buyer of a failure to comply with the ASFA.”
“The trial court found that the correction was timely because it was made within 10 days….However, the 10-day correction provision only applied if the violation was nonwillful. The trial court did not make an express finding that the violation was nonwillful; we may thus affirm only if we can imply a finding on nonwillfulness that is supported by substantial evidence. We determine that no substantial evidence of nonwillfulness was presented at trial.”
The defendant, Express Auto, therefore was not entitled to use the 10-day provision and had to correct its violations within 30 days from the time of sale or 20 days after the execution of contract, the judge explained. The contract was made in May, but the correction was made in October, therefore the correction was not a valid defense, Ricciardulli added.
He also rejected the trial judge’s finding that the plaintiffs had waived an objection for timeliness in their demand letter.
“Civil Code section 3513 provides that ‘Any one may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.’ The AFSA was enacted for a public reason: to provide consumer protection…To the extent that plaintiffs’ demand letter waived the timeliness…the waiver was unenforceable due to…3513.”
The case is Munoz v. Express Auto Sales, 13 S.O.S 222.
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