Today’s published decision, Rojas v. Platinum Auto, from the California Court of Appeal, Second Appellate District, Division Eight, represents a victory for consumers who have been duped by unscrupulous car dealerships.  The message to car dealers is clear, a plaintiff is not required to demonstrate actual harm in order to rescind a contract under the Rees-Levering Act.

The appeal followed the lower court’s judgment sustaining without leave to amend the first demurrers filed by defendants.  In addition to alleging a cause of action for violation of Rees-Levering, Plaintiff’s complaint alleged that the dealership’s deliberate mischaracterization of plaintiff’s down payment violated the Consumers Legal Remedies Act, and constituted an unfair business practice in violation of Business and Professions Code section 17200.  The lower court sustained the demurrers without leave to amend on the grounds that the dealership’s mischaracterization of plaintiff’s down payment was not actionable by characterizing it as trivial and concluding that the plaintiff did not suffer an actual loss from the mischaracterization.  The Court disagreed and reversed.

On September 20, 2010, Plaintiff Gonzalo Rojas bought a car from Platinum Auto Group, Inc. dba Platinum Motors.  Rojas put no cash down the day he bought the car.  Instead, he made a deferred down payment over the next three months consisting of four payments totaling $2,000: $1,000 on October 11, 2010; $500 on October 27, 2010; $250 on November 20, 2010; and, $250 on December 23, 2010.  Platinum Auto filled out a retail installment sales contract, which contained a section for Platinum Auto to enter information about the down payment.  Platinum should have entered Rojas’ $2,000 down payment on Line 6D of that section labeled “Deferred Down Payment.”  Instead, Platinum deliberately entered “$2,000” on Line 6G, labeled “Remaining Cash Down Payment,” to indicate a $2,000 cash payment by Rojas at the time of sale.

In his complaint, Rojas alleged the mischaracterization of his down payment violated Rees-Levering, which requires a detailed and truthful itemization of Rojas’ down payment.

Broadly speaking, Rees-Levering is a consumer protection law governing the sale of cars in which the buyer finances some, or all, of the car’s purchase price.  The car dealer is required to disclose in a single document all the terms and conditions of sale.  In disclosing those terms, the sales contract must itemize the buyer’s down payment and must state:  The agreed value of the property being traded in; the prior credit or lease balance, if any, owing on the property being traded in; the net agreed value of the property being traded in; the amount of any portion of the down payment to be deferred until not later than the due date of the second regularly scheduled installment under the contract; the amount of any manufacturer’s rebate; the remaining amount paid or to be paid by the buyer as a down payment; and the total down payment.

The Court noted Platinum’s violation of Rees-Levering was two-fold.  First, Platinum misstated the down payment’s nature by labeling it as a “Remaining Cash Down Payment” tendered at the time of sale – As a consumer protection and disclosure statute, Rees-Levering provides that unless “dealers disclose correct information the disclosure itself is meaningless and the information purpose of the [statute] is not served.  Second, Platinum misstated the down payment’s amount.  Rees-Levering defines down payment as money paid before the buyer’s second scheduled loan payment.  Rojas’ second scheduled loan payment was December 4, 2010.  Rojas made the first three of his four deferred payments before December 4:  $1,000 on October 11, 2010; $500 on October 27, 2010; and $250 on November 20, 2010 – Totaling $1,750.  The final payment of $250 was made after December 4 on December 23, 2010.  This last down payment did not satisfy Rees-Levering’s  definition of a down payment.  Thus, regardless of whether Rojas’ down payment was cash upfront at the time of sale or deferred, his total down payment under the statute’s definition was $1,750, not $2,000 as Platinum stated in the sales contract.

The Court rejected Platinum Auto’s argument that these violations were trivial and not actionable under the rationale that is express in Stasher v. Harger-Haldeman (1962) 58 Cal.2d 23.  In doing so, the Court noted that Rees-Levering’s legislative history demonstrates “The Legislature finds and declares as follows: (a) The Rees-Levering Act . . . sets forth a statutory scheme to regulate the retail sale and financing of motor vehicles.  The act contains detailed disclosure requirements intended to protect the consuming public and includes provision that render a conditional sale contract unenforceable if any of those disclosure requirements are violated, regardless of the nature of the disclosure violation or any consumer harm.”

As to Rojas’ remaining causes of action for violation of CLRA and UBP, which require a showing of any loss or damage, or substantial injury, the Court remanded to the lower court with leave to amend.

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