APPEAL from a judgment of the Superior Court of San Diego County, Laura W. Halgren, Judge. Reversed with directions. (Super. Ct. No. 37-2008-00062551-CL-BC-EC).
The opinion of the court was delivered by: Huffman, J.
CERTIFIED FOR PUBLICATION
This is an appeal from an order dismissing a first amended cross- complaint, in which defendant, cross-complainant and appellant Suezane Salenga (Appellant) sought to plead a class cause of action under the Unfair Competition Law (UCL, Bus. & Prof. Code, § 17200 et seq.). Appellant sought to restrict the business practice in which creditors obtain deficiency judgments against vehicle buyers who have defaulted on their auto loans, under certain circumstances, pursuant to the body of law known as the Rees-Levering Motor Vehicle Sales and Finance Act (the Act, Civ. Code, § 2981 et. seq.; all statutory references are to the Civil Code unless otherwise indicated).
The trial court sustained, without leave to amend, demurrers brought by cross-defendants Mitsubishi Motors Credit of America, Inc. (MMCA) and Cavalry Portfolio Services, LLC (Cavalry) (sometimes together cross-defendants).*fn1 The demurrers were based on the four-year limitations period of the UCL. (Bus. & Prof. Code, § 17208; Cortez v. Purolator Air Filtration Prod. Co. (2000) 23 Cal.4th 163, 178-179.)
In the underlying complaint, Cavalry (as an assignee of MMCA) sued the Appellant, seeking a deficiency judgment, after Appellant had defaulted on her MMCA auto loan in 2003 and the vehicle was repossessed. She was given a Notice of Intent to Dispose of Motor Vehicle ("NOI" or Notice) dated October 14, 2003, and the vehicle was sold at auction. (§ 2983.2, subd. (a).) About four years later, Cavalry filed its complaint seeking payment of a deficiency balance of $10,288.56, plus interest from May 2004.
Upon being sued by Cavalry in March 2008, Appellant answered and brought this cross-complaint, as amended (FACC), seeking declaratory, injunctive, and restitutionary relief for class members against whom a deficiency judgment was sought, but allegedly unlawfully, due to their previous receipt of a Notice that was defective and therefore would not, as a matter of law, support a deficiency judgment. (See Juarez v. Arcadia Financial, Ltd. (2007) 152 Cal.App.4th 889, 894 (Juarez).) Cross-defendants brought their demurrer, asserting the action was time- barred and additionally barred by litigation privilege. (Bus. & Prof. Code, § 17208; Civ. Code, § 47, subd. (b).)
Appellant now contends the trial court erred and abused its discretion when it sustained the demurrers without leave to amend on limitations grounds, and her class action FACC should not be deemed to be time-barred under the UCL. She asserts that her cause of action did not accrue until fewer than four years before the filing date of the underlying complaint, because all of its elements did not occur until 2007 or 2008, when cross-defendants began the underlying proceedings to seek a deficiency judgment (demand letter and complaint). Appellant asserts that she did not sustain any injury in fact, a required element to establish standing to bring a UCL cause of action, until she was notified that a deficiency judgment would be sought and she made a payment. (§§ 2983.2, subd. (a), 2983.8.)
Accordingly, Appellant seeks to pursue these class claims of an unlawful, unfair or deceptive business practice, consisting of seeking a deficiency judgment when the underlying Notice was defective (for lack of certain information about the procedures for reinstating the loan), under the criteria laid out in the 2007 published opinion issued by this court, Juarez, supra, 152 Cal.App.4th 889. Appellant never made an effort to reinstate her loan after her 2002 default, and she does not argue she was directly injured by the defects in the 2003 Notice, except for purposes of opposing such deficiency judgment applications on behalf of the class, to seek injunctive, declaratory, or restitutionary relief. (Bus. & Prof. Code, § 17203.)
Although the FACC is currently problematic in terms of alleging any justification for a postponed accrual of this class cause of action, and in terms of the potential applicability of any litigation privilege, we believe that a realistic possibility of amendment exists for a successful allegation of this claim under the Act, within the limitation bars of the UCL. It would have been the better exercise of discretion for the trial court to allow leave to amend, as will be explained, and we reverse the judgment of dismissal with directions to allow an appropriate application to file such an amended pleading.
FACTUAL AND PROCEDURAL BACKGROUND
For purposes of analyzing the demurrer ruling, we take the facts properly pleaded to assess whether they may state a cause of action as a matter of law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In the underlying complaint, Cavalry, acting as an assignee of MMCA, filed its complaint for breach of contract and a deficiency balance, alleging that it was entitled to a deficiency judgment against Appellant in the amount of $10,288.56, after it sold the car she had purchased in November 2001. She had defaulted in her loan payments in 2003, the vehicle was repossessed, and the NOI sent in October 2003. She did not attempt to reinstate the contract and the vehicle was sold.
In March 2008, Cavalry sued Appellant for damages and interest dating from May 14, 2004, forward. (See § 2983.2, subd. (a)(9) [interest recoverable from date of disposition of vehicle to date of entry of judgment]; see Code Civ. Proc., § 337, subd. (1) [four-year limitations period for contract actions].)
After being notified that a deficiency judgment was being sought, Appellant made at least one payment to cross-defendants. In May 2008, Cavalry obtained a default judgment, but in July 2008, it was set aside by stipulation. In August 2008, Appellant filed an answer asserting that the complaint was barred by the statute of limitations, because it was based on the October 2003 notice. Appellant also alleged the notice was defective in unspecified ways, for noncompliance with the requirements of section 2983.2, subdivision (a)(2).
Appellant filed and then amended the cross-complaint against MMCA and Cavalry, alleging all cross-defendants were agents of one another and related by assignment. The FACC alleges that the notice received by Appellant about her opportunity to reinstate the contract was defective by failing to adequately set forth all the conditions precedent for reinstatement, pursuant to section 2983.2, subdivision (a)(2). Appellant alleged injury in fact, from being sued for an invalid deficiency, from making a payment, and from being reported by cross- defendants on the invalid deficiency claim to credit bureaus. Appellant proposed a definition of the class to the same effect.
All cross-defendants demurred, arguing the pleading was defective on its face, both on limitations grounds and because no vicarious liability theory was viable against Cavalry under the UCL. Even though the filing of the complaint operated to toll the running of the applicable limitations period as to the cross-complaint, cross- defendants asserted that the action should have been brought in 2003 or within a year of that Notice. They also argued that the filing of their underlying complaint seeking a deficiency judgment was protected by litigation privilege. (§ 47, subd. (b).) Reply papers were filed and the matter was orally argued.
In its order on demurrer, the court ruled that Appellant's FACC was barred by the UCL's four-year statute of limitations. (Bus. & Prof. Code, § 17208.) The court found that Appellant's UCL claims were based on a defective NOI, sent in October 2003, but the cross-complaint was erroneously not filed until August 5, 2008, over four years later. "The Court rejects Salenga's argument that the assertion of a deficiency against her in a lawsuit filed on March 6, 2008, started the running of the statute of limitations." The court's order made no findings on whether the ...