9th Cir. No. 07-15976 N.D.Cal. No. CV-06-07795-MJJ.
The opinion of the court was delivered by: Chin, J.
Civil Code section 1719*fn1 permits a payee seeking to recover on a dishonored check to collect a service charge, or treble the amount of the dishonored check if certain statutory requirements are met. Section 3287 governs the award of prejudgment interest on damages. We granted a request by the United States Court of Appeals for the Ninth Circuit (Cal. Rules of Court, rule 8.548) to decide a question of California law: whether a debt collector recovering on a dishonored check may recover both a service charge under section 1719 and prejudgment interest under section 3287.
We conclude that the statutory damages prescribed in section 1719 are exclusive in the sense that a debt collector who recovers a service charge pursuant to section 1719 may not also recover prejudgment interest under section 3287.
On July 5, 2004, Brandy Hunt wrote a $137.15 check to Pak ‟n Save, a supermarket operated by Safeway, Inc. (Safeway). The check was returned unpaid due to insufficient funds. Safeway referred the matter to Imperial Merchant Services, Inc., doing business as Check Recovery Systems (CRS) for collection.
CRS then mailed Hunt two collection demands. The second letter demanded payment of the check amount, a $35 service fee under section 1719, and $7.26 in interest under section 3287, for a total of $179.41.
Hunt filed a voluntary petition for bankruptcy in the United States Bankruptcy Court for the Northern District of California (the bankruptcy action). Shortly thereafter, Hunt filed a putative class action against CRS in the United States District Court for the Northern District of California seeking damages under the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) (the FDCPA action). Hunt asserted that CRS‟s demand for a section 1719 service fee precluded CRS from seeking interest on the amount of the unpaid check. Hunt alleged that CRS thus violated the FDCPA by demanding interest to which it was not entitled under California law.*fn3
On December 16, 2005, CRS filed a claim in the bankruptcy action for $250, a sum intended to cover the amount of the unpaid check, a $35 service fee and interest. On October 31, 2006, the bankruptcy court filed a judgment of nondischargeability (the bankruptcy judgment) in favor of CRS in the amount of $614.45, consisting of $172.15 for the amount of the check and the service fee and $442.30 in costs, but nothing for interest payments. The bankruptcy court concluded that because CRS was awarded a service fee under section 1719, it was not entitled to interest under section 3287. CRS filed an appeal from the bankruptcy judgment in the district court.
Meanwhile, in the FDCPA action, Hunt and CRS filed cross-motions for summary judgment on the question of whether CRS, having demanded payment of a service fee under section 1719, was additionally entitled to interest under section 3287. In a published opinion filed on March 21, 2007, the district court (Jenkins, J.) held that California law precluded CRS‟s demand for interest and that its demand letters thus violated United States Code sections 1692e(2)(A) and 1692f(1). (Hunt I, supra, 478 F.Supp.2d at p. 1169.) Accordingly, the district court granted Hunt‟s motion for summary judgment in part (as to the causes of action based on these provisions of the FDCPA) and denied CRS‟s summary judgment motion. The court also denied CRS‟s request to enter partial summary judgment (Fed. Rules Civ. Proc., rule 54(b), 28 U.S.C.) or to certify the case for immediate appeal (28 U.S.C. § 1292(b)).
While the summary judgment motions in the FDCPA action were pending, CRS‟s appeal from the judgment in the bankruptcy action was transferred to Judge Jenkins. On May 17, 2007, the district court affirmed the bankruptcy action judgment "for the reasons stated in the opinion of this Court issued in [the FDCPA action]."
CRS appealed the district court‟s judgment in the bankruptcy action, denying interest, to the United States Court of Appeals for the Ninth Circuit. On May 12, 2008, the Ninth Circuit requested that this court decide the purely legal issue of whether, under California law, a debt collector may recover both section 1719 damages and section 3287 prejudgment interest on a dishonored check. (Imperial Merchant Services, Inc. v. Hunt (9th Cir. 2008) 528 F.3d 1129 (Hunt II).) On July 16, 2008, we granted that request.
CRS claims that section 1719 and its legislative history do not prohibit the collection of both interest and the statutory service charge for a dishonored check. On the other hand, Hunt contends that the rules of statutory construction and the legislative history of section 1719 preclude collection of both amounts. As explained below, we agree with Hunt.
Section 1719 sets forth the procedures for collecting on dishonored checks. Subdivision (a)(1) of that section provides: "Notwithstanding any penal sanctions that may apply, any person who passes a check on insufficient funds shall be liable to the payee for the amount of the check and a service charge payable to the payee for an amount not to exceed twenty-five dollars ($25) for the first check passed on insufficient funds and an amount not to exceed thirty-five dollars ($35) for each subsequent check to that payee passed on insufficient funds."
If the payee sends the check writer a certified letter seeking the amount due on a dishonored check, the debtor has 30 days from the date the written demand was mailed to pay the amount of the check, the statutory service charge, and the cost of mailing the written demand for payment. (§ 1719, subd. (a)(2).)*fn4 Failure to comply with subdivision (a)(2) renders the check writer liable for treble the amount of the outstanding balance on the check (the face value of the check minus any partial payments made within this 30-day window), which shall not be less than $100 or more than $1,500. (Ibid.) If a check writer is liable for treble damages, he is not required to pay the statutory service charge or the cost of mailing the written demand. (Ibid.)
Section 1719 is silent regarding the availability of prejudgment interest in addition to the fixed service charge. The federal court opinions that have addressed this issue have unanimously held that a debt collector is limited to the remedies explicitly prescribed in section 1719, which do not include prejudgment interest. (Hunt I, supra, 478 F.Supp.2d at p. 1171; Palmer v. Stassinos (N.D.Cal. 2004) 348 F.Supp.2d 1070, 1083 (Stassinos I); Palmer v. Stassinos (N.D.Cal. 2005) 419 F.Supp.2d 1151, 1153 (Stassinos II); Irwin v. Mascott (N.D.Cal. 2000) 112 F.Supp.2d 937, 947-948, 955; Irwin v. Mascott (9th Cir. 2004) 370 F.3d 924, 927-928. Of these five opinions, however, only two, Hunt I and Stassinos I, shall be liable to the payee for damages equal to treble the amount of the check if a written demand for payment is mailed by certified mail to the person who had passed a check on insufficient funds and the written demand informs this person of explored in depth the issue presented here, i.e., whether a debt collector may recover both prejudgment interest under section 3287*fn5 and the service charge under section 1719. It appears that no California court has spoken on this issue.
Because this contention involves a question of statutory construction, our review is de novo. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432.) Under settled canons of statutory construction, in construing a statute we ascertain the Legislature's intent in order to effectuate the law's purpose. (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1386.) We must look to the statute's words and give them "their usual and ordinary meaning." (DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593, 601.) "The statute's plain meaning controls the court's interpretation unless its words are ambiguous." (Green v. State of California (2007) 42 Cal.4th 254, 260; see also Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, 567.) "If the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute‟s purpose, legislative history, and public policy." (Coalition of Concerned Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737.)
Because section 1719 says nothing about the availability of interest in light of the service charge and treble damage provisions, the plain meaning rule provides no assistance. (See Stassinos I, supra, 348 F.Supp.2d at p. 1078.) We therefore address, in turn, ...