Cessna Finance Corp. v. Pivo

Citations: 58 Cal. App. 3d 281; 129 Cal. Rptr. 888; 1976 Cal. App. LEXIS 1515Docket: Civ. 15310

Court: California Court of Appeal; May 14, 1976; California; State Appellate Court

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In Cessna Finance Corporation v. Ben D. Pivo et al., the California Court of Appeals addressed a deficiency judgment sought by the plaintiff after the repossession and sale of three Cessna 150 aircraft purchased by the defendants, who were brothers and practicing pharmacists. The trial court ruled in favor of the defendants, applying the Unruh Act, which prohibits deficiency judgments for goods acquired for personal, family, or household use. However, the appellate court found that the trial court misapplied the law, concluding that the aircraft were not primarily purchased for such purposes, thereby allowing the plaintiff to recover the deficiency.

The defendants, with no down payment, purchased the aircraft from American Aircraft Leasing, Inc., based on a proposal that they could lease the planes to Aviation Unlimited, a flying club, which would cover their monthly payments through rentals. The arrangement suggested tax benefits through depreciation claims. Although the defendants leased the aircraft shortly after purchase, they defaulted on payments by November 1970, leading to repossession and sale by the plaintiff. The appellate court determined that the factual basis of the transaction did not align with the protections of the Unruh Act, necessitating a reversal of the trial court's judgment.

Defendants did not challenge the adequacy of the notice of sale or the sale process, allowing for the inference that the aircraft's sale by the plaintiff, as the repossessing assignee, was commercially reasonable. After selling three aircraft and accounting for the proceeds, the outstanding balances on the conditional sales contracts were $6,169.56, $6,203.92, and $5,903.91. The lawsuit aimed to recover these amounts along with interest, attorney fees, and costs. Key findings revealed that the aircraft had been flown for 591.93, 837.2, and 902.72 hours at the time of repossession, with defendant Ben D. Pivo being a licensed pilot who flew the aircraft for no more than 100 hours during the lease period. Jack Pivo received 16.5 hours of flying lessons, while Robert Pivo only rode as a passenger for a total of no more than 100 hours.

Legal conclusions established that the repossession adhered to the law, the sale was commercially reasonable, and the contracts were not contracts of adhesion. The three aircraft qualified as 'goods' under the Civil Code, with the defendants identified as retail buyers and American Aircraft Leasing, Inc. as the retail seller. The trial court ruled against the plaintiff's claim for a deficiency judgment based on section 1812.5 of the Civil Code, resulting in a judgment for the defendants, who were awarded $5,000 in attorney fees and costs. The plaintiff appealed, asserting that the primary issue was whether the aircraft were 'goods' intended for personal use, thus qualifying the defendants for protections under the Unruh Act’s anti-deficiency provisions. The defendants argued that the intent at the time of the sale should govern the determination of use, supported by evidence of intent for personal use. However, the plaintiff contended that the evidence did not substantiate the defendants' claims, indicating that the aircraft were not primarily purchased for personal use as defined by the Unruh Act. The court recognized a lack of authority to definitively decide the applicability of the Unruh Act in this context.

Plaintiff references James Talcott, Inc. v. Gee, highlighting its relevance to the current case regarding the Unruh Act, which is designed to protect consumers from abusive credit practices. Justice Stephens noted that this protection is not necessary when competent businessmen engage in arm's length transactions. The Commercial Code and the Unruh Act reflect the Legislature's intent that consumer transactions are governed by different principles than those between businesses. In this case, the defendants are seasoned businessmen with investments in commercial real estate, thus not fitting the profile of "simple, unsophisticated consumers" in need of Unruh Act protections.

Legal evaluation suggests that the intent behind the transaction is crucial; it should be determined at the time the contract is made, as supported by the reasoning in Commercial Credit Equipment Corporation v. Carter. This approach avoids complications that could arise from changing classifications of goods and potential mischief from debtors and creditors. Applying the Carter test, evidence indicates that the aircraft was intended for leasing to generate revenue, not for personal use by the defendants, as shown by their arrangement with Aviation Unlimited. The trial court's error lay in incorrectly categorizing the type of business use involved, mistakenly seeing it as protected by the Unruh Act.

The applicability of the Unruh Act hinges on whether the use of the items in question is primarily personal. The court references the definition of "personal, family, or household use" from the case of James Talcott, Inc. v. Gee, emphasizing that the Act's protective measures should not extend beyond their common meaning. The trial court found that the defendants' usage of three aircraft was minimal, totaling 2,331.85 hours, with individual usage not exceeding 100 hours for one defendant and 16.5 hours for flying lessons by another. This limited usage does not align with the definition of personal use. The court deems that the intended use is not relevant if it does not meet the criteria of personal use. As a result of these findings, the judgment is reversed, and the trial court is directed to issue a new judgment in favor of the plaintiff for $18,277.39, plus interest and attorney fees of $7,560. Additionally, the trial court is instructed to assess further attorney fees incurred during the appeal process. The judgment reversal includes directions for the trial court to handle the assessment of these fees and costs on appeal. The court notes that a rehearing and a petition for a hearing by the Supreme Court were both denied. Relevant Civil Code sections regarding the definitions of "goods," "retail buyer," and "retail seller" are also referenced, along with provisions on how sale proceeds should be applied.