Filed 3/21/13; pub. order 4/12/13 (see end of opn.; order received from court 4/22/13)



                   COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                               DIVISION ONE

                                        STATE OF CALIFORNIA



PATRICIA RAMIREZ,                                               D060057

         Plaintiff and Appellant,

         v.                                                     (Super. Ct. No. 37-2009-00099225-
                                                                 CU-BT-CTL)
BALBOA THRIFT AND LOAN,

         Defendant and Respondent.


         APPEAL from an order of the Superior Court of San Diego County, Richard E. L.

Strauss, Judge. Reversed and remanded.


         Patricia Ramirez appeals from an order denying her motion to certify a class on

her unfair competition claim (UCL) against Balboa Thrift and Loan (Balboa). Ramirez's

UCL claim is based on Balboa's alleged violation of the Rees-Levering Motor Vehicle

Sales and Finance Act (Rees-Levering Act or Act). (Civ. Code, § 2981 et seq.)1

         Ramirez contends the court erred in denying her class certification motion because

the court based its denial on an erroneous legal analysis of the Rees-Levering Act. We

conclude this contention has merit and reverse the order. We remand to permit the court

1      All further statutory references are to the Civil Code unless otherwise specified.
For readability, we omit the word subdivision when referring to the Act's subdivisions.
to consider the propriety of the class certification motion without the improper legal

analysis.

                   FACTUAL AND PROCEDURAL BACKGROUND

       In December 2006, Ramirez purchased an automobile from a Honda dealer under

a conditional sale contract obligating her to make monthly payments. As part of the

purchase, Ramirez filled out a credit application. Shortly after the purchase, the dealer

assigned the contract to Balboa. During the next three years, Ramirez often missed

required payments. In about May 2009, Ramirez stopped making payments and

voluntarily surrendered her vehicle to Balboa.

       After the surrender, on July 6, 2009, Balboa sent Ramirez a "Notice of Intention to

Dispose of Motor Vehicle" (NOI), notifying her that it intended to sell the vehicle. The

NOI stated that Ramirez had the right to redeem the vehicle by paying the total

outstanding amount due ($19,420.55) or she had the right to reinstate the installment

contract and obtain a return of the vehicle. With respect to the reinstatement right, the

NOI stated that Ramirez must pay $1,567.03 within 15 days of the notice date (or request

an extension) and "You must also pay any payment, fees, or charges that comes due

within the reinstatement period." (Italics added.) The notice also stated that "To learn

the exact amount you must pay, call us at the telephone number stated above."

       Ramirez did not make any efforts to redeem the vehicle or reinstate the contract.

       More than 60 days after sending the NOI, on September 17, 2009, Balboa sent a

letter to Ramirez notifying her that her vehicle had been sold for $6,187.50, and after

deducting the sale proceeds and related charges, there was a balance of $5,574.65. The

                                             2
letter stated: "You are required to pay the remaining balance and demand is hereby made

upon you to contact the undersigned by: October 4, 2009. [¶] If you do not respond to

this legal demand as requested, we may be obligated to institute litigation to liquidate this

balance, and you may be assessed all costs and fees."

       About one week later, Ramirez sent Balboa $25, which she said was a payment on

the deficiency balance. Soon after, Ramirez's credit report reflected her loan default and

voluntary surrender of the vehicle, and that a deficiency of $3,344 was "written off."2

       Several days later, on September 28, 2009, Ramirez filed a class action lawsuit

against Balboa, alleging that Balboa engaged in an unlawful, unfair, and fraudulent

business practice based on its violation of the Rees-Levering Act. She alleged Balboa

violated the Act because the NOI sent to her did not specifically include the "conditions

precedent" to contract reinstatement. (See Juarez v. Arcadia Financial, Ltd. (2007) 152

Cal.App.4th 889 (Juarez).) Specifically, Ramirez alleged that Balboa "failed to inform

[her] of all amounts that [she] must pay to [Balboa] to cure the default, including

additional monthly payments coming due after the date of the NOI but before the end of

the notice period, as well as any late fees or other fees and the amount of those fees.

[Balboa] also failed to tell [Ramirez] the names and addresses of the third parties that had

to be paid in order to reinstate the subject vehicle, and the amounts that must be paid to

those third parties in order to reinstate the subject vehicle." She alleged that she has been




2      There is no explanation in the record for the difference between this amount and
the deficiency amount identified in Balboa's letter.
                                              3
injured based on the $25 payment and the fact that Balboa reported the "deficiency claim

to credit bureaus."

       Ramirez brought the action on behalf of the following class: "All California

residents whose vehicles were repossessed by or voluntarily surrendered to [Balboa] or

its agents pursuant to a conditional sales contract and against whom [Balboa] has asserted

a deficiency claim during the period beginning four years before the filing of this action

to the date of class certification. This class excludes all [Balboa] employees . . . and all

persons whose conditional sales contract obligations have been discharged in

bankruptcy."

       Ramirez sought various remedies, including: (1) a determination that the NOI

failed to comply with the Act and therefore Balboa "lost the right to assert a deficiency

claim"; (2) restitution to class members "based on the amount of money each class

member paid on [Balboa's] invalid deficiency claims during the relevant period"; and (3)

an injunction prohibiting Balboa from attempting to collect or recover on invalid

deficiency claims.

       Balboa answered the complaint and filed a cross-complaint alleging a single

breach of contract cause of action, claiming Ramirez failed to pay the amounts owed on

the contract and seeking a deficiency judgment of $13,313.90.

       Balboa then moved for summary judgment and/or summary adjudication on the

complaint, asserting that as a matter of law Ramirez could not prevail on her UCL claim

because Balboa had a legal basis under section 2983.3(b)(1) to have denied her

reinstatement right based on false statements she made on her credit application in 2006.

                                              4
Ramirez opposed the motion, asserting that Balboa's legal argument—that it could

successfully defend the UCL claim based on a retroactive denial of her reinstatement

right—was unsupported by the Rees-Levering Act, and, in any event, the facts showed

that she did not make any false statements on her credit application. After reviewing the

parties' papers and factual submissions, the court did not rule on the legal argument, but

denied Balboa's motion based on its finding that triable issues of fact exist as to whether

the statements made on Ramirez's credit application were truthful.

       Ramirez then filed a class certification motion, seeking to certify the proposed

class of California residents whose vehicles were repossessed by or voluntarily

surrendered to Balboa. Based on Balboa's interrogatory response as to how many

individuals fall within the class definition, Ramirez asserted there were at least 2,400

individuals in the proposed class.

       In her supporting papers, Ramirez addressed each of the elements of a class

certification motion. With respect to the predominance issue, Ramirez argued that

common legal and factual issues would predominate because the Juarez court interpreted

the Rees-Levering Act to require that, as a precondition to seeking a deficiency, a creditor

must issue an NOI specifically identifying all conditions precedent to reinstatement, and

Balboa's "NOIs uniformly failed to give consumers these conditions precedent to

reinstating their loans," including "how much they must pay to reinstate their loans and

the 'names and addresses of those who are to be paid.' " (See Juarez, supra, 152

Cal.App.4th at pp. 904-912.) Ramirez also argued that the requested injunctive and

restitutionary relief requires the resolution of common factual and legal questions.

                                             5
       Balboa opposed the motion on numerous grounds, including: (1) individual legal

and factual issues predominate among class members; (2) Ramirez is an inadequate class

representative; (3) Ramirez did not incur an "injury" within the meaning of the UCL's

standing requirement; (4) Ramirez's claims were not typical; and (5) class treatment is not

superior under the totality of the circumstances.

       With respect to the first (predominance) issue, Balboa argued primarily that there

were eight different versions of the NOI during the class period, many of which raise

different legal and factual issues regarding whether the NOI complied with the Rees-

Levering Act, and therefore the court would be required to undertake an individual

analysis of each NOI to determine the class member's recovery right. Balboa also

identified several other individual issues that would make the class action unmanageable.

Of particular relevance here, Balboa argued that many class members received NOI's that

denied them a reinstatement right, and, with respect to the class members who received

an NOI providing a reinstatement right, the court would be required to engage in an

individual analysis of each class member's entitlement to recover because Balboa had the

right to assert an affirmative defense as to each class member concerning whether he or

she fell within an exception identified in section 2983.3(b).

       Balboa additionally proffered evidence indicating that although Balboa's total

outstanding deficiency balance is approximately $20 million, Balboa does "not collect on

over 99.5 % of [the] deficiencies. . . ." Balboa's vice-president explained in a declaration

that "after we send the notice of deficiency and a couple of months go by, except in the

rare occasion, Balboa does not pursue the customer o[n] the deficiency balance. . . ."

                                             6
According to the evidence, the total amount collected on deficiencies from all the NOI's

sent during the class period was $170,341.57.

       After considering the parties' arguments and submissions, the court issued a

tentative ruling stating: "Ramirez's motion to certify the class is denied. Individual

issues of fact predominate over common questions of fact. Specifically, it is unclear

whether there were grounds to deny reinstatement as to each individual class member

pursuant to Civil Code section 2983.3(b)(1)."

       During oral argument, Ramirez's counsel argued that the court's conclusion was

based on a faulty legal premise—that the section 2983.3(b)(1) exception (pertaining to

misrepresentation on a credit application) allows a creditor to obtain a deficiency even if

the exception was not identified in the NOI sent to the buyer.

       Balboa's counsel countered that the court's reliance on section 2983.3(b)(1) to

show the existence of individual factual issues was proper because Balboa had the ability

to raise this statutory misrepresentation defense "as a matter of due process." Counsel

also noted it had identified many other individual issues and discussed the fact that

Balboa had repeatedly modified its standard NOI form and had used eight different

versions of the NOI during the class period. Balboa's counsel also argued that Ramirez

did not sustain sufficient injury to show standing under the UCL claim, but the court

specifically stated that it was not making "any determination" on that issue, stating "I saw

that in the documents, but I don't think that's part of this analysis."

       In response to defense counsel's reliance on the different versions of Balboa's NOI

form, Ramirez's counsel asserted that the different versions would not require an

                                               7
individual analysis because "each of the different iterations . . . are defective in the same

way," including that "[t]hey [require payment of] storage charges and additional

payments that come due and [these amounts] are not stated in those NOIs. . . ." Ramirez's

counsel also clarified that the "persons who were denied reinstatement [in the NOI] are

not in the class. The class includes [only] those persons who received an NOI that

allowed them reinstatement."

       At the conclusion of the arguments, the court stated: "I appreciate everybody's

presentations. Not an easy case. I still don't think I can certify this as a class. There's too

many individual issues in this. I'm going to confirm the tentative ruling."

       The court thereafter entered its final order stating that "Plaintiff's Motion for Class

Certification is DENIED pursuant to the reasons stated on the record and the Court's

tentative ruling on May 5, 2011, individual issues of fact predominate over common

questions of fact. Specifically, it is unclear whether there were grounds to deny

reinstatement as to each individual class member pursuant to Civil Code section

2983.3(b)(1)."

       Ramirez appeals.

                                       DISCUSSION

                          I. Class Action Certification Principles

       " 'Class actions serve an important function in our judicial system. By establishing

a technique whereby the claims of many individuals can be resolved at the same time, the

class suit both eliminates the possibility of repetitious litigation and provides small

claimants with a method of obtaining redress.' " (Richmond v. Dart Industries, Inc.

                                              8
(1981) 29 Cal.3d 462, 469; Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496,

1500.) However, "because group action . . . has the potential to create injustice, trial

courts are required to ' "carefully weigh respective benefits and burdens and to allow

maintenance of the class action only where substantial benefits accrue both to litigants

and the courts." ' " (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435 (Linder);

Seastrom, supra, 149 Cal.App.4th at p. 1500.)

       "The party seeking certification . . . must establish the existence of an

ascertainable class and a well-defined community of interest among the class members.

[Citation.] The community of interest requirement embodies three factors: (1)

predominant common questions of law or fact; (2) class representatives with claims or

defenses typical of the class; and (3) class representatives who can adequately represent

the class." (Richmond v. Dart Industries, Inc., supra, 29 Cal.3d at p. 470; see also Code

Civ. Proc., § 382.) The proponent must show the "class action is superior to individual

lawsuits or alternative procedures for resolving the controversy." (Bufil v. Dollar

Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1204; accord City of San Jose v.

Superior Court (1974) 12 Cal.3d 447, 459.)

       On the issue whether common issues predominate in the litigation, a court must

"examine the plaintiff's theory of recovery" and "assess the nature of the legal and factual

disputes likely to be presented." (Brinker Restaurant Corp. v. Superior Court (2012) 53

Cal.4th 1004, 1025 (Brinker), italics added.) The court may consider the elements of the

claims and defenses, but should not rule on the merits unless necessary to resolve the

certification issues. (Ibid.; Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th

                                              9
1096, 1106; Linder, supra, 23 Cal.4th at pp. 439-440.) "The 'ultimate question' . . . is

whether 'the issues which may be jointly tried, when compared with those requiring

separate adjudication, are so numerous or substantial that the maintenance of a class

action would be advantageous to the judicial process and to the litigants.' " (Brinker,

supra, at p. 1021.) In conducting this analysis, a "court must examine the allegations of

the complaint and supporting declarations [citation], and consider whether the legal and

factual issues they present are such that their resolution in a single class proceeding

would be both desirable and feasible. 'As a general rule if the defendant's liability can be

determined by facts common to all members of the class, a class will be certified even if

the members must individually prove their damages.' " (Id. at pp. 1021-1022, fn.

omitted.)

       Trial courts " 'are ideally situated to evaluate the efficiencies and practicalities of

permitting group action' " and therefore are " 'afforded great discretion' " in evaluating the

relevant factors and in ruling on a class certification motion. (Sav-On Drug Stores, Inc.

v. Superior Court (2004) 34 Cal.4th 319, 326; accord Brinker, supra, 53 Cal.4th at p.

1022.) "A certification order generally will not be disturbed unless (1) it is unsupported

by substantial evidence, (2) it rests on improper criteria, or (3) it rests on erroneous legal

assumptions. [Citations.]" (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069,

1089; see Sav-On, supra, at pp. 326-327.)

       On appeal from the denial of class certification, we review only the reasons given

by the trial court for its ruling. (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178

Cal.App.4th 830, 843-844; accord Bartold v. Glendale Federal Bank (2000) 81

                                              10
Cal.App.4th 816, 829 (Bartold).) "Appeal of an order denying class certification

'presents an exception to the general rule on review that we look only to the trial court's

result, not its rationale.' [Citation.] Erroneous legal assumptions or improper criteria

may require reversal 'even though there may be substantial evidence to support the court's

order.' [Citation.]" (Caro v. Procter & Gamble Co. (1993) 18 Cal.App.4th 644, 655.)

"In other words, we review only the reasons given by the trial court for denial of class

certification, and ignore any other grounds that might support denial." (Bartold, supra,

81 Cal.App.4th at p. 829.) However, " '[a]ny valid pertinent reason stated will be

sufficient to uphold the order.' " (Linder, supra, 23 Cal.4th at p. 436; see Kaldenbach,

178 Cal.App.4th at pp. 843-844.)

       Under these principles, if a trial court bases its denial of class certification on an

incorrect legal analysis, a reviewing court must reverse and remand, unless the trial court

independently relied on at least one other legally valid and factually supported ground.

(See In re Tobacco II Cases (2009) 46 Cal.4th 298, 311 [when a trial court's decision

rests on an error of law, that decision is an abuse of discretion]; Fletcher v. Security

Pacific Nat. Bank (1979) 23 Cal.3d 442, 454 [reversal and remand warranted where trial

court erroneously held that an unfair trade practice class action required proof of each

individual borrower's lack of knowledge]; McAdams v. Monier, Inc. (2010) 182

Cal.App.4th 174, 187 [reversing court order denying class certification where "trial court

used improper criteria and made erroneous legal assumptions"]; Knapp v. AT&T Wireless

Services, Inc. (2011) 195 Cal.App.4th 932, 939 ["[w]e will reverse an order denying class

certification if the trial court used improper criteria or made erroneous legal assumptions,

                                              11
even if substantial evidence supported the order"]; Ticconi v. Blue Shield of California

Life & Health Ins. Co. (2008) 160 Cal.App.4th 528, 534 [denial of motion to certify class

reversed where trial court erroneously concluded that the defense of unclean hands was

available in a UCL action based on the violation of certain Insurance Code sections].)

                                        II. The UCL

       In her complaint, Ramirez alleged a single cause of action under the UCL. The

UCL prohibits unfair competition, including unlawful, unfair, and fraudulent business

acts. (Bus. & Prof. Code, § 17200.) It embraces anything that can properly be called a

business practice and that is forbidden by law. (Korea Supply Co. v. Lockheed Martin

Corp. (2003) 29 Cal.4th 1134, 1143.) The UCL " 'borrows' violations from other laws by

making them independently actionable as unfair competitive practices." (Ibid.)

       Ramirez's UCL claim is based on her allegation that Balboa violated the Rees-

Levering Act by failing to comply with the Act's requirement that an NOI contain the

specific "conditions precedent" to reinstatement of her vehicle loan. (§ 2983.2(a)(2).)

She sought to certify a class of individuals whose vehicles were repossessed by or

surrendered to Balboa and against whom Balboa asserted a deficiency claim. She

claimed that with respect to this class of persons, Balboa violated the Rees-Levering Act

in identical ways and thus common issues would predominate. She also alleged that she

had standing because she suffered monetary injury in the form of her $25 payment and a

negative report on her credit report.

       In analyzing whether the court erred in denying certification of the class, we first

summarize the relevant provisions of the Rees-Levering Act. We then examine whether

                                             12
the court's stated reasons for denying the motion were based on a correct legal analysis

and supported by substantial evidence.

                                 III. The Rees-Levering Act

       The Act provides detailed rules governing motor vehicle conditional sale contracts

such as the one signed by Ramirez. (§ 2981 et seq.; see Juarez, supra, 152 Cal.App.4th

at p. 894.) The Act's purpose is "to provide more comprehensive protections in financing

for the unsophisticated motor vehicle consumer." (Salenga v. Mitsubishi Motors Credit

of America, Inc. (2010) 183 Cal.App.4th 986, 998 (Salenga), disapproved on other

grounds in Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1196-1197.)

       Two code sections of this statutory scheme are of particular relevance in

understanding Ramirez's claim: section 2983.2 and section 2983.3.

                                      A. Section 2983.3

       Section 2983.3 governs a party's right to reinstate a loan upon the buyer's default

after a repossession or voluntary surrender. Under section 2983.3, "[i]f after default by

the buyer, the seller or holder repossesses or voluntarily accepts surrender of the motor

vehicle, any person liable on the contract shall have a right to reinstate the contract and

the seller or holder shall not accelerate the maturity of any part or all of the contract prior

to expiration of the right to reinstate, unless the seller or holder reasonably and in good

faith determines that any of the following has occurred . . . ." The statute then sets forth

six specific exceptions to the reinstatement right, including the one contained in section

2983.3(b)(1): "The buyer or any other person liable on the contract by omission or



                                              13
commission intentionally provided false or misleading information of material

importance on his or her credit application."

       Under this code section, if the seller/holder does not "reasonably and in good

faith" determine one of the exceptions applies, the buyer has a right to reinstate and if the

buyer wishes to do so, the buyer must reimburse the seller for all costs, including the

defaulted payments, applicable delinquency charges, and "all reasonable and necessary

collection and repossession costs and fees incurred, including attorney's fees and legal

expenses expended in retaking and holding the vehicle." (§ 2983.3(d)(1), (5).) Although

these costs to reinstate may be substantial, "the option of reinstating a contract is often

preferable to redemption, because reinstatement allows the buyer to recover the car

without having to pay the full balance due on the contract . . . ." (Juarez, supra, 152

Cal.App.4th at p. 894.)

                                     B. Section 2983.2

       Section 2983.2 governs a creditor's notice obligations after a repossession. (See

Juarez, supra, 152 Cal.App.4th at p. 899.) The code section requires a creditor to

provide the buyer with a notice of intention (NOI) to dispose of the repossessed vehicle.

(§ 2983.2(a).) Under the statutory provisions, the NOI must conform to specific mailing

requirements, must be given within 60 days following repossession, and must provide

extensive information on numerous subjects (set forth in nine separate paragraphs).

(§ 2983.2(a).) Under section 2983.2(a)(2), this notice must include information about the

reinstatement right, including the timing of this right and "all the conditions precedent



                                              14
thereto or that there is no right of reinstatement and provides a statement of reasons

therefor."

       In Juarez, we interpreted the statutory requirement contained in section

2983.2(a)(2) that the NOI must identify all " 'conditions precedent' " to reinstatement of

the contract. (Juarez, supra, 152 Cal.App.4th at pp. 899-912.) We held the NOI must

"provide a level of specificity as to the conditions precedent to reinstatement sufficient to

inform the buyer—without need for further inquiry—as to exactly what the buyer must

do to cure the default. Thus, the statute requires that a creditor inform the consumer of

any amounts the buyer must pay to the creditor and/or to third parties and provide the

buyer with the names and addresses of those who are to be paid. The creditor must also

inform the consumer regarding any additional monthly payments that will come due

before the end of the notice period, as well as of any late fees, or other fees, the

amount(s) of these additional payments or fees, and when the additional sums will

become due." (Id. at pp. 904-905.) In so holding, we acknowledged "there may be

instances in which the creditor does not possess information about the amount a buyer

must pay to a third party to satisfy a condition precedent to reinstatement." (Id. at pp.

908-909.) But we said "the creditor must provide the buyer with all of the relevant

information it possesses and/or information it has the ability to discern, concerning

precisely what the buyer must do to reinstate his or her contract." (Id. at p. 909.)

       In Juarez, as here, a car buyer whose vehicle was repossessed brought a class

action alleging the creditor violated the UCL by failing to comply with the Rees-Levering

Act's requirements. (Juarez, supra, 152 Cal.App.4th at pp. 896-898.) After the court

                                              15
certified the class, the court granted summary judgment in the creditor's favor based on

the court's conclusion that the NOI satisfied statutory requirements and thus the creditor

did not engage in an unlawful, unfair or deceptive practice within the meaning of the

UCL. (Id. at pp. 898-899.) This court reversed, holding the NOI did not "provide a level

of specificity as to the conditions precedent to reinstatement sufficient to inform the

buyer—without need for further inquiry—as to exactly what the buyer must do to cure

the default." (Id. at pp. 904, 912.) We thus remanded for the trial court to consider the

class claims under all three prongs of the UCL. (Id. at p. 912 & fn. 13.)

       We have since reaffirmed that a buyer may potentially recover under the UCL for

claimed violations of the Rees-Levering Act's NOI notice requirement. (See Salenga,

supra, 183 Cal.App.4th at pp. 998-1002.) The California Supreme Court has additionally

upheld the certification of class claims based on a violation of the Rees-Levering Act's

NOI requirements. (See Fireside Bank v. Superior Court, supra, 40 Cal.4th at p. 1076

[class claim under the Act and the UCL "on behalf of all persons who had received

postrepossession notices . . . in which the listed redemption amount [improperly] failed to

subtract the credit for unearned finance charges"].)

                                       IV. Analysis

       In denying Ramirez's class certification motion, the court stated: "[I]ndividual

issues of fact predominate over common questions of fact. Specifically, it is unclear

whether there were grounds to deny reinstatement as to each individual class member

pursuant to Civil Code section 2983.3(b)(1)."



                                             16
       Ramirez challenges the court's reliance on section 2983.3(b)(1) to deny her class

certification motion. We agree this ground was not a proper basis for denying class

certification. The court's conclusion was based on an improper legal assumption, i.e.,

that Balboa would be entitled to assert this statutory exception as a valid affirmative

defense to the UCL claim alleged by class members who were given a reinstatement right

in the NOI.3

       Under section 2983.3, a defaulting buyer whose car has been repossessed by or

voluntarily surrendered to a creditor must be given the opportunity to reinstate the

contract, absent proof of certain statutory circumstances, including that the buyer (1)

"intentionally provided false or misleading information of material importance on his or

her credit application"; (2) concealed the motor vehicle from the creditor; (3) committed

or threatened to commit acts of destruction or failed to take care of the vehicle in a

reasonable manner; (4) committed, threatened to commit, or attempted to commit

criminal acts of violence against the seller/holder or its agent; or (5) the buyer knowingly

used the vehicle in connection with the commission of a criminal offense.

(§ 2983.3(b)(1)-(5).) "Exercise of the right to reinstate the contract shall be limited to

once in any 12-month period and twice during the term of the contract." (§ 2983.3(c).)



3       Although a court should avoid addressing the merits of an issue in the context of a
class certification motion, a court may consider the merits where, as here, a class
certification issue is necessarily "intertwined" with the merits of the case. (See Fireside
Bank v. Superior Court, supra, 40 Cal.4th at pp. 1091-1092; Linder, supra, 23 Cal.4th at
p. 443; Soderstedt v. CBIZ Southern California, LLC (2011) 197 Cal.App.4th 133, 151-
152.)

                                             17
       Although there is no specific time limit contained in section 2983.3 for making the

determination regarding a buyer's reinstatement right, section 2983.2 sets forth strict

deadlines and notice requirements if the seller intends to or does seek a deficiency. Of

relevance here, section 2983.2 states: "Except as provided in Section 2983.8 [pertaining

to mobilehome sales], those persons shall be liable for any deficiency after disposition of

the repossessed or surrendered motor vehicle only if the notice prescribed by this section

is given within 60 days of repossession or surrender and does all of the following:

[¶] . . . [¶] (2) States either that there is a conditional right to reinstate the contract until

the expiration of 15 days from the date of giving or mailing the notice and all the

conditions precedent thereto or that there is no right of reinstatement and provides a

statement of reasons therefor." (§ 2983.2(a)(2), italics added.)

       Under this subsection, a seller cannot recover a deficiency unless the NOI

specifically and timely notifies the buyer of the conditions precedent to loan

reinstatement OR timely notifies the buyer that there is no right of reinstatement and

provides a statement of reasons for this conclusion. Reading together sections 2983.2

and 2983.3, a seller/holder who wishes to preserve its rights to claim a deficiency must

determine within a 60-day period after repossession whether a buyer is entitled to a

reinstatement, and then notify the buyer of this decision. Given the Legislature's manifest

intent to set forth the exclusive process for creditors to obtain a deficiency balance after a

vehicle repossession or surrender, there is no room for reading additional exceptions into

the statutory scheme. The statutes cannot be reasonably interpreted to allow a creditor

who failed to give timely notice of a statutory exception to the mandatory reinstatement

                                                18
right to later alter its position and retroactively deny reinstatement, regardless whether the

retroactive denial is for affirmative or defensive purposes. Any other conclusion would

require that we ignore the plain language of sections 2983.2(a)(2) and 2983.3(b).

        In asserting its position, Balboa does not rely on the statutory language, but

instead argues that a denial of its right to a deficiency judgment would violate its

constitutional due process rights. In particular, Balboa argues that "it would be denied

due process if [after the 60-day period] it was not allowed to investigate and litigate each

customer's right to reinstatement. . . . Discovery to each class member's credit

application would be required to determine if they also lied on the credit application. It

would violate Defendant's due process right to deny this discovery and individual defense

at trial."

        The argument is without merit. The Legislature did not preclude a creditor from

raising a fraud defense; it merely required a creditor to raise and discover the

applicability of any statutory exception within 60 days of repossession if it wants a

deficiency judgment. This limitation as to a seller's remedies does not establish a

constitutional violation. As recognized by the California Supreme Court, a secured

creditor who sells a defaulting debtor's repossessed car may obtain a deficiency

judgment, but only by complying with all of the Act's provisions. (Bank of America v.

Lallana (1998) 19 Cal.4th 203, 215 [" ' "[T]he rule and requirement are simple. If the

secured creditor wishes a deficiency judgment he must obey the law. If he does not obey

the law, he may not have his deficiency judgment." ' "]; see Salenga, supra, 183

Cal.App.4th at pp. 998-999, 1000 ["[w]hen a secured creditor pursues a deficiency

                                              19
judgment, it must follow the statutorily prescribed notice procedures of the [Rees-

Levering] Act"].)

       Moreover, to the extent creditors retain rights to bring affirmative claims (such as

fraud) against buyers, these rights exist only during the applicable limitations period. In

this case, Balboa did not allege, or seek to assert, a common law fraud claim against

Ramirez (or any of the class members), and instead merely sought to rely on a statutory

exception (that is not necessarily equivalent to a common law fraud claim) long after the

time period had lapsed for asserting the statutory exception.

       Equally important for class certification purposes, even assuming the statutory

exception could be asserted after the statutory time period had expired, Balboa did not

proffer any facts showing that any such exception would apply to any of the other class

members. Instead, it merely stated that individual issues would predominate because it

should be provided the right to "investigate" each class member to determine whether it

could find any facts showing the applicability of any of the statutory exceptions. Without

any foundational basis showing that such evidence could or would be discovered, this

possibility does not raise a likelihood that individual issues would predominate over

common issues in the litigation. (See Brinker, supra, 53 Cal.4th at p. 1025 [in deciding

certification question court must examine the plaintiff's theory of recovery and "assess

the nature of the legal and factual disputes likely to be presented," italics added].)

       Balboa alternatively argues that many other grounds exist for affirming the court's

order, including (1) the fact that Balboa issued at least eight different form NOI's during

the class period; (2) the fact that Balboa had settled with or obtained judgments against

                                              20
some class members; (3) whether Ramirez's claims were typical of the class; (4) the

existence of differing forms of injury among class members; and (5) whether Ramirez's

claimed injuries were sufficient to show standing for purposes of a UCL claim.

       These arguments raise important issues regarding the propriety of class

certification in this case, and it is tempting to consider them in reviewing the court's

order. However, based on our review of the court's statements and written order, it is

apparent that the court relied primarily if not exclusively on the section 2983.3(b)(1)

reinstatement exception to conclude individual issues would predominate. Although the

court's final order also refers to "the reasons stated on the record," the court did not

identify any other reasons on the record. Moreover, it is unclear on the record before us

whether the court would have reached a similar conclusion on the class certification

motion absent its reliance on the section 2983.3(b)(1) exception. The court specifically

stated at the hearing that it did not view resolution of Ramirez's class certification motion

as an "easy case" and stated it was unnecessary to address certain issues Balboa had

raised in opposition to the class certification motion. In its final order, the court cited

only the section 2983.3(b)(1) statutory exception as the "[s]pecific[ ]" reason for its order.

Further, many of the other grounds for opposing the class certification motion require a

factual analysis of the record, a task best performed by the trial judge in the first instance.

       On this record, the appropriate disposition is to reverse and remand for the court to

consider Ramirez's class certification motion on a proper legal analysis. When a trial

court "fail[s] to follow the correct legal analysis when deciding whether to certify a class

action, 'an appellate court is required to reverse an order denying class certification . . . ,

                                               21
"even though there may be substantial evidence to support the court's order." ' " (Bartold,

supra, 81 Cal.App.4th at pp. 828.)

                                     DISPOSITION

       Order reversed. The matter remanded for the court to reconsider Ramirez's class

certification motion and Balboa's opposition to the motion in a manner consistent with

the determinations expressed in this opinion. Appellant to recover her costs on appeal.



                                                                              HALLER, J.

WE CONCUR:



MCCONNELL, P. J.



                                     MCDONALD, J.




                                            22
                           CERTIFIED FOR PUBLICATION

               COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                      DIVISION ONE

                                  STATE OF CALIFORNIA



PATRICIA RAMIREZ,                                 D060057

       Plaintiff and Appellant,

       v.                                         (Super. Ct. No. 37-2009-00099225-
                                                   CU-BT-CTL)
BALBOA THRIFT AND LOAN,
                                                  ORDER CERTIFYING OPINION
       Defendant and Respondent.                  FOR PUBLICATION


THE COURT:

       The opinion filed March 21, 2013, is ordered certified for publication.

       The attorneys of record are:

       Anderson, Ogilvie & Brewer, Mark F. Anderson; and Michael E. Lindsey for

Plaintiff and Appellant.

       Law Offices of Herbert Hafif, Herbert Hafif, Greg K. Hafif and Michael G.

Dawson for Defendant and Respondent.




                                                                      McCONNELL, P. J.




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