Priority Of Liens - Retail Installment Sales - CA Civil Law

Section § 1804.1

This law outlines certain things that cannot be included in contracts or obligations. It prevents clauses that stop buyers from claiming or defending against sellers, accelerating debt if the buyer hasn't defaulted, or misusing power of attorney. Buyers can't give up their right to sue for illegal actions during payment collection or repossession. The seller can't start legal action in another county and must not take a security interest in a senior's primary residence for home improvements. Also, a contract can't charge the buyer for canceling it, and sellers need to avoid making buyers sign away claims, rights, or give unwanted advantages.

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 a claim or defense other than as provided in Section 1804.2.

(b) In the absence of the buyer’s default in the performance of any of his or her obligations, the holder may accelerate the maturity of any part or all of the amount owing thereunder.

(c) A power of attorney is given to confess judgment in this state, or an assignment of wages is given; provided, that nothing herein contained shall prohibit the giving of an assignment of wages contained in a separate instrument, executed pursuant to Section 300 of the Labor Code.

(d) The seller or holder of the contract or other person acting on his or her behalf is given authority to enter upon the buyer’s premises unlawfully or to commit any breach of the peace in the repossession of goods.

(e) The buyer waives any right of action against the seller or holder of the contract or other person acting on his or her behalf, for any illegal act committed in the collection of payments under the contract or in the repossession of goods.

(f) The buyer executes a power of attorney appointing the seller or holder of the contract, or other person acting on his or her behalf, as the buyer’s agent in collection of payments under the contract or in the repossession of goods.

(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.

(h) The buyer agrees to the payment of any charge by reason of the exercise of his or her right to rescind or void the contract.

(i) The seller or holder of the contract is given the right to commence an action on a contract under the provisions of this chapter in a county other than the county in which the contract was in fact signed by the buyer, the county in which the buyer resides at the commencement of the action, the county in which the buyer resided at the time that the contract was entered into, or in the county in which the goods purchased pursuant to the contract have been so affixed to real property as to become a part of such real property.

(j) The seller takes a security interest, other than a mechanics’ lien, in the buyer’s real property which is the buyer’s primary residence where the buyer is a person who is 65 years of age or older and the contract is for a home improvement, as defined in Section 7151.2 of the Business and Professions Code.

buyer rights contract provisions defense against seller accelerate maturity power of attorney confess judgment assignment of wages repossession of goods illegal acts collection of payments waiver of rights right to rescind home improvement contracts security interest primary residence protections

(Amended by Stats. 1999, Ch. 512, Sec. 2. Effective January 1, 2000.)

Section § 1804.2

If a seller transfers their rights in a sale to someone else, called the assignee, the assignee inherits any complaints or defenses the buyer had against the seller because of the sale. However, the assignee's responsibility can't exceed the amount of money the buyer owes them. If the assignee ends up having to deal with these issues, they can seek compensation from the original seller.

(a) An assignee of the seller’s rights is subject to all equities and defenses of the buyer against the seller arising out of the sale, notwithstanding an agreement to the contrary, but the assignee’s liability may not exceed the amount of the debt owing to the assignee at the time of the assignment.

(b) The assignee shall have recourse against the seller to the extent of any liability incurred by the assignee pursuant to this section regardless of whether the assignment was with or without recourse.

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(Amended by Stats. 1975, Ch. 66.)

Section § 1804.3

This law says that contracts, other than service contracts, can't include a claim on items that you've already fully paid for or haven't been sold yet. If a contract involves goods and wrongly includes a claim on real estate unless the goods are supposed to be attached to the property, it goes against the rules and may lead to penalties. These rules have been in place since October 1, 1982.

(a) No contract other than one for services shall provide for a security interest in any goods theretofore fully paid for or which have not been sold by the seller.

(b) Any contract for goods which provides for a security interest in real property where the primary goods sold are not to be attached to the real property shall be a violation of this chapter and subject to the penalties set forth in Article 12.2 (commencing with Section 1812.6).

security interest goods fully paid attachment to real property service contracts real estate claim violation penalties goods not sold operative October 1982 contracts for goods Article 12.2 penalties

(Amended (as amended by Stats. 1981, Ch. 107, Sec. 4) by Stats. 1982, Ch. 129, Sec. 4. Effective March 25, 1982. Section operative October 1, 1982, by its own provisions, or sooner as prescribed by Sec. 13 of Ch. 129.)

Section § 1804.4

In California, if a contract includes a part that goes against the rules of this specific chapter, that part won't be enforceable. However, the rest of the contract will still be valid and can be enforced.

Any provision in a contract which is prohibited by this chapter shall be void but shall not otherwise affect the validity of the contract.

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(Added by Stats. 1959, Ch. 201.)

Section § 2897

This law says that when there are several claims on the same property, the claim that was made first has the right to be paid off first. However, there are exceptions for specific types of maritime loans called bottomry and respondentia.

Other things being equal, different liens upon the same property have priority according to the time of their creation, except in cases of bottomry and respondentia.

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(Enacted 1872.)

Section § 2898

When you buy a property and take out a mortgage or deed of trust at the same time, this mortgage or deed gets priority over any other debts against the buyer, as long as all documents are properly recorded. Additionally, if you're dealing with a lease on property, the rules for determining which debts take priority are the same as those for property sales.

(a) A mortgage or deed of trust given for the price of real property, at the time of its conveyance, has priority over all other liens created against the purchaser, subject to the operation of the recording laws.

(b) The priority of the lien of a mortgage or deed of trust on an estate for years in real property shall be determined in the same manner as for determining the priority of a lien of a mortgage or deed of trust on real property.

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(Amended by Stats. 1989, Ch. 698, Sec. 3.)

Section § 2899

If a person has a lien on multiple items and others have secondary liens on some of those items, the person with the first lien must choose the items to satisfy the lien in a specific order, provided it doesn't cause them loss or unfairness to others. First, they should look at items they alone have a lien on. Next, they should look at items with the fewest secondary liens, then those with more. Within these groups, they should prioritize items that haven't changed hands since the lien, those given away, and lastly, those sold, in reverse order of sale.

Where one has a lien upon several things, and other persons have subordinate liens upon, or interests in, some but not all of the same things, the person having the prior lien, if he can do so without risk of loss to himself, or of injustice to other persons, must resort to the property in the following order, on the demand of any party interested:

1. To the things upon which he has an exclusive lien;

2. To the things which are subject to the fewest subordinate liens;

3. In like manner inversely to the number of subordinate liens upon the same thing; and,

4. When several things are within one of the foregoing classes, and subject to the same number of liens, resort must be had—

(1.) To the things which have not been transferred since the prior lien was created;

(2.) To the things which have been so transferred without a valuable consideration; and,

(3.) To the things which have been so transferred for a valuable consideration in the inverse order of the transfer.

lien priority subordinate liens exclusive lien risk of loss injustice demand of interested party property order transfer of property valuable consideration inverse order property transfer secondary interests resort to property number of liens transfer without consideration

(Enacted 1872.)