Mysel v. Gross

BERNARD MYSEL et al., Plaintiffs and Respondents, v. LOE WANDA GROSS, Defendant and Appellant

(Opinion by Cole, P. J., with Alarcon and Wenke, JJ., concurring.)

COUNSEL

George A. Mazarakis for Defendant and Appellant.

Norman L. Schaffer for Plaintiffs and Respondents.

OPINION

COLE, P. J.

The defendant purchased goods from the plaintiff's assignor, and now appeals from a judgment for the plaintiff, a collection agency.

Issue

The action was for breach of a retail installment sales contract. Such a contract is subject to any applicable provisions of the Unruh Act. (Civ. [70 Cal. App. 3d Supp. 13] Code, §§ 1801-1812.10.) The issue raised on appeal is the validity of the defendant's contractual waiver of the statute of limitations. The defendant asserts that any such waiver in a retail installment sales contract violates Civil Code section 1804.1, subdivisions (a) and (g). We hold that nothing in the Unruh Act precludes operation of the waiver provision.

A preliminary question requires us to determine which statute of limitations is applicable, and whether defendant has properly asserted the defense. We hold that the action is governed by California Uniform Commercial Code section 2725 but that defendant failed properly to preserve the issue in the trial court. We also hold that accordingly, the contractual waiver was effective and that the action thus was not barred.

Facts

A document entitled "Security Agreement" was executed on November 20, 1967, between the plaintiff's assignor, Times Home Furnishing Square, and the defendant, under which the defendant purchased certain home furnishings. By this agreement the defendant became obligated to pay a sum of $824.82 in 23 monthly installments of $35.34 and one installment of $12, the payments to commence on December 3, 1967. Clause 16 of the "Terms and Provisions" of the "Security Agreement" reads: "Buyer(s) waives his defense to the statute of limitations for an additional period of four years as provided for by the laws with respect thereto."

The last payment made by defendant was on March 17, 1969. Defendant is in default in her payments with a balance still owing of $305.41. The plaintiff elected to wait until the period of the agreement had expired before declaring a breach. The plaintiff's assignor did not commence the action to recover the above amount until September 29, 1975. In her answer below defendant pleaded as a second affirmative defense that "Plaintiff's Complaint is barred by the statute of limitations, California Code of Civil Procedure section 337."

Which Statute of Limitations is Applicable?

The provision relied upon by defendant, Code of Civil Procedure section 337, provides, inter alia, that an action upon a written contract must be brought within four years. As noted, the waiver provision of the [70 Cal. App. 3d Supp. 14] contract at issue purported to waive the statute of limitations defense for an additional period of four years. fn. 1

[1a] The correct statute of limitations for this action, however, is not Code of Civil Procedure section 337. Rather, it is California Uniform Commercial Code section 2725. In relevant part that section provides as follows: "An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it. ..."

The cause of action here accrued in 1969. Suit not having been brought until 1975, the four-year period of California Uniform Commercial Code section 2725 bars the agreement unless defendant's waiver is effective fn. 2 or defendant has failed to assert the defense.

[2] As can be seen, the express language of section 2725 does not deal with a waiver agreement such as clause 16 of the contract. To repeat, section 2725 states "By the original agreement the parties may reduce the period of limitation to not less than one year but may not [70 Cal. App. 3d Supp. 15] extend it." However, it is self-evident that the effect of a contractual waiver of the statutory period is to extend it. The plain intent of the section precludes any other conclusion. Under the heading "Extending Period by 'Waiver'" in 2 Witkin, California Procedure (2d ed. 1970) section 245, pages 1101-1102, following a discussion of the maximum four-year waivers under Code of Civil Procedure section 360.5, Witkin cites California Uniform Commercial Code section 2725, subdivision (1) as providing that in "... contract[s] of sale ... the parties may not extend the period." This is the plain intent of that section.

Application of California Uniform Commercial Code Section 2725 to This Appeal

As we have noted, the defendant did not plead that the action was barred by California Uniform Commercial Code section 2725. Rather, she pleaded that it was barred by Code of Civil Procedure section 337. Ordinarily, the statute of limitations is a personal privilege which "... must be affirmatively invoked in the lower court by appropriate pleading ..." or else it "is waived." (3 Witkin, Cal. Procedure (2d ed. 1971) § 939, p. 2518 (italics in the original) and cases cited.)

[3, 1b] There are two accepted ways of pleading a statute of limitations (Brown v. World Church (1969) 272 Cal. App. 2d 684, 691 [77 Cal. Rptr. 669, 45 A.L.R.3d 622].) One of these ways is to allege all of the facts showing that the action is barred and to indicate that the lateness in commencing the action is urged as a defense. (Ibid.) The second method is to comply with section 458 of the Code of Civil Procedure and plead that the cause of action is barred by the provisions of a specified section (giving its number, and that of any subdivision relied upon). (Ibid.) Defendant did neither here. She did not plead underlying facts establishing a bar and she pleaded the wrong code section (DeCelle v. City of Alameda (1963) 221 Cal. App. 2d 528, 583 [34 Cal.Rptr. 597]). Thus she may not rely upon section 2725 unless for some reason public policy precludes the waiver.

In some instances, the requirement that a statute of limitations defense be specifically pleaded is not applicable. Thus, in California Bank v. Stimson (1949) 89 Cal. App. 2d 552 [201 P.2d 39], the question was whether the action was properly brought within the three-month period prescribed in Code of Civil Procedure section 580a, an antideficiency statute. The court held that the provision was one declarative of the public policy of the state to promote the public welfare by shielding [70 Cal. App. 3d Supp. 16] mortgage and trust deed debtors, and that accordingly, it could not be waived by contract.

[4] The history of California Uniform Commercial Code section 2725 shows that it is not in this category. It was not adopted to shield "... the debtor class from oppression." (California Bank v. Stimson, supra, 89 Cal.App.2d, at p. 554.) Indeed it was not, apparently, adopted to benefit buyers, as a class, at all. Rather, it was enacted to secure nationwide uniformity "... providing needed relief for concerns doing business on a nationwide scale whose contracts have heretofore been governed by different periods of limitations depending upon the state in which the transaction occurred." (Cal. U. Com. Code com.) See Hachten v. Stewart (1974) 42 Cal. App. 3d Supp. 1, 3 [116 Cal. Rptr. 631].

Further, since the statute itself provides that it does not alter the law on tolling (Cal. U. Com. Code, § 2725, subd. (4)) it does not evidence any intent at all to be particularly solicitous of buyers. Under the circumstances, we see no reason why the usual pleading rules should not apply. We conclude, accordingly, that defendant here waived the defense.

Waiver of the Statute of Limitations is Not Against Public Policy of the Unruh Act

[5] The defendant asserts that contractual waivers of the defense of the statute of limitations violate subdivisions (a) and (g) of Civil Code section 1804.1, to which this retail instalment sales contract is subject. We disagree. These subdivisions read as follows:

"No contract or obligation shall contain any provision by which: (a) The buyer agrees not to assert against a seller a claim or defense arising out of the sale or agrees not to assert against an assignee such claim or defense other than as provided in Section 1804.2. (g) The buyer relieves the seller from liability for any legal remedies which the buyer may have against the seller under the contract or any separate instrument executed in connection therewith."

We dispose first of the argument relating to subdivision (g). Since a waiver of the statute of limitations on the seller's right of action against the buyer in no way affects the buyer's legal remedies against the seller, that subdivision is clearly inapplicable. One writer has suggested that this provision "... appears to be aimed at waivers of provisions of the Act [70 Cal. App. 3d Supp. 17] [referring to the Unruh Act itself] which are designed to protect a buyer such as a provision for the right of redemption." fn. 3 Here, the defendant-buyer's legal remedies against the seller or his assignee, the plaintiff herein, under the Unruh Act or otherwise were not affected by his waiver of the statute of limitations.

[6] We are thus left with the single question of whether the defense of the statute of limitations is a "defense arising out of the sale" and thus not waivable within the meaning of subdivision (a) of Civil Code section 1804.1.

The types of claims or defenses which first come to mind as arising out of the sale would be those types of claims or defenses which if asserted would render the sale void or voidable, such as fraud in the inducement or inadequacy of consideration. The ordinary meaning attributed to the word "arise" is to spring, originate, flow, issue, emanate, proceed, or stem. fn. 4 All of these terms carry the connotation of a close proximity in time and space between the first event, here the sale, and that which arises from it. fn. 5

At least one commentator has viewed Civil Code section 1804.1 subdivision (a), as well as subdivision (g), as aimed at contractual provisions "... which would deny the buyer relief against the seller [or the seller's assignee] for the [seller's] defaults and other misconduct." fn. 6 Another writer has viewed the purpose of subdivision (a) as being to prevent a seller from including "stock provisions" in sales agreements that contain such extensive waivers of rights by the buyer, that the purchaser of the seller's interest in the contract would become a virtual holder in due course, thereby rendering the seller's interest in the contract more marketable. fn. 7 This interpretation would again connote that the Legislature in drafting this subdivision was contemplating disclaimer [70 Cal. App. 3d Supp. 18] provisions relieving the seller from his own wrongdoing or from statutory liability under the Unruh Act or other sections.

Although a waiver of the statute of limitations by the buyer in a retail installment contract may render the seller's interest more saleable, it does not itself relieve the seller or his assignee from liability for his misconduct of defaults, nor from any other statutory obligation. It merely extends the time within which any action must be brought within the meaning of the comments just set forth. Neither can it be considered to be in such close proximity with the sale, so as to arise out of it.

We hold that the statute of limitations is not a "defense arising out of the sale," within the meaning of Civil Code section 1804.1 subdivision (a) and that the defendant's contractual waiver of it did not violate the Unruh Act.

The judgment is affirmed. Respondents to recover costs on appeal.

Alarcon, J., and Wenke, J., concurred.

FN 1. The waiver apparently was drafted to comply with Code of Civil Procedure section 360.5 which reads in pertinent part: "No waiver shall bar a defense to any action that the action was not commenced within the time limited by this title unless the waiver is in writing and signed by the person obligated. No waiver executed prior to the expiration of the time limited for the commencement of the action by this title shall be effective for a period exceeding four years from the date of expiration of the time limited for commencement of the action by this title ...."

FN 2. The plaintiff at oral argument asserted that California Uniform Commercial Code section 2725 was inapplicable to this transaction because this was a "sale to consumers" and thus expressly excluded from the operation of division 2 of the California Uniform Commercial Code (of which § 2725 is a part) by section 2102. California Uniform Commercial Code section 2102 reads: "Unless the context otherwise requires, this division applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this division impair or repeal any statue regulating sales to consumers, farmers or other specified classes of buyers." [Italics added.]

California Uniform Commercial Code section 2725 does not, by its application in this case, "... impair or repeal any statue regulating sales to consumers." The only statute its application could be said to impair is Code of Civil Procedure section 360.5 allowing additional four-year waivers of the statute of limitations but that section does not regulate sales to any specified classes of buyers.

Further, the California code comment to West's Annotated Commercial Code section 2102 shows that that section was intended to "... exclude certain special statutes pertaining to sales to unique groups of buyers. ..." An example given by the commentator refers to Vehicle Code provisions relating to sale of motor vehicles. California Uniform Commercial Code section 2725 is not a statute of this sort, it applies to all contracts of sale. Thus section 2102 does not render it inapplicable.

FN 3. 12 Hastings L.J. 154.

FN 4. Webster's Dictionary of Synonyms, page 70. See Hays v. Bank of America National Trust and Savings Assoc. (1945) 71 Cal. App. 2d 301, 306 [162 P.2d 679].

FN 5. 6 Corpus Juris Secundum, Arising, page 525 "'Arising,' while having a progressive and prospective meaning in some circumstances, usually signifies the present; generally, it denotes immediate present, and only occasionally implies future events or occurrences."

FN 6. 7 UCLA L.Rev. 744

FN 7. 12 Hastings L.J. 154. An example of such a stock provision was given in this article as follows: "purchaser waives as against any assignee of the seller any defenses, setoffs, or counterclaims purchaser may be entitled to assert against seller."