79 Hawai'i 516, GECC Financial Corp. v. Jaffarian

• Decision Date: 10 August 1995
• Docket Number: No. 16397,16397
• Citation: 79 Hawaii 516,904 P.2d 530
• Parties: 79 Hawai'i 516 GECC FINANCIAL CORPORATION, Plaintiff-Appellee, v. Lois I. JAFFARIAN and Becky H. Pillard, Defendants-Appellants.
• Court: Hawaii Court of Appeals

Page 530

904 P.2d 530

79 Hawai'i 516

GECC FINANCIAL CORPORATION, Plaintiff-Appellee, v. Lois I. JAFFARIAN and Becky H. Pillard, Defendants-Appellants.

No. 16397.

Intermediate Court of Appeals of Hawai'i.

Aug. 10, 1995.

Certiorari Granted Aug. 31, 1995.

Edward C. Kemper (Kemper & Watts, of counsel), on the briefs, Honolulu, for defendants-appellants.

David C. Farmer, Lyle M. Ishida and Stephen M. Teves (Case & Lynch, of counsel), on the brief, Honolulu, for plaintiff-appellee.

Syllabus by the Court

1. Plaintiff was improperly granted summary judgment on its claim for a deficiency judgment against the personal guarantors of two vehicle leases.

2. The leases in question both provided that, for purposes of determining lessee's (and guarantors') deficiency liability upon early termination of the leases, the value of the leased vehicles would be determined "in a commercially reasonable manner in accordance with accepted practices in the automobile industry for determining the value of used vehicles." As the party moving for summary judgment (moving party), plaintiff not only had the burden of persuading the lower court that summary judgment was appropriate, but also had the initial burden of producing support for its claim that (1) no genuine issue of material fact existed with respect to the essential elements of its claim for relief and any affirmative defense asserted against it; and (2) based on the undisputed facts and the substantive law, it was entitled to judgment as a matter of law. Until plaintiff met this initial burden of production, defendants were not required to respond to the summary judgment motion and demonstrate specific facts, as opposed to general allegations, that presented a genuine issue worthy of trial.

3. In this case, plaintiff failed to satisfy its initial burden of production. The materials produced by plaintiff in support of its motion did not successfully demonstrate that no genuine issue of material fact existed as to whether plaintiff's disposition of the leased vehicles was "commercially reasonable," i.e "in accordance with the accepted practices in the automobile industry for determining the value of used vehicles," an essential element of its claim for deficiency judgment. Plaintiff thus failed to establish its entitlement to summary judgment as a matter of law.

Before BURNS, C.J., and WATANABE and ACOBA, JJ.

WATANABE, Judge.

In this deficiency judgment action, Defendants-Appellants Lois I. Jaffarian (Lois) and Becky H. Pillard (Becky) (collectively, Appellants) appeal from an adverse summary judgment, contending that the circuit court erred in two respects.

First, Appellants argue that the circuit court improperly granted summary judgment in favor of Plaintiff-Appellee GECC Financial Corporation (GECC) because genuine issues of material fact exist as to: (1) whether GECC properly mitigated its damages by disposing of repossessed leased vehicles "in a commercially reasonable manner in accordance with accepted practices in the automobile industry for determining the value of used vehicles" (mitigation issue); and (2) whether there was an oral agreement that if Appellants voluntarily returned the vehicles, GECC would refrain from pursuing further claims against Appellants (forbearance issue).

Second, Appellants contend that the circuit court abused its discretion in awarding GECC attorneys' fees because the amount awarded was unreasonable under the circumstances.

We conclude that the circuit court improperly granted summary judgment to GECC because GECC failed to meet its burden of producing support for its claim that no genuine issue of material fact existed as to the mitigation issue and that it was therefore entitled to summary judgment as a matter of law. Accordingly, we vacate the judgment, as well as the underlying order granting summary judgment. Our disposition of this appeal renders it unnecessary to address the attorneys' fees issue.

I. BACKGROUND

On November 11, 1987, Kevin P. Pillard (Kevin), ¹ as attorney-in-fact for Ruby A. Jaffarian (Ruby), entered into a New Vehicle Lease Agreement ² with Dolphin Leasing Corp. (Dolphin) to lease, for sixty months, a 1988 Mercedes Benz 420 SEL four-door sedan (Mercedes). On March 8, 1988, Kevin, as attorney-in-fact for Ruby, entered into a second lease agreement ³ with Dolphin to lease, for sixty months, a 1988 GMC model C 1500 four-wheel-drive pickup truck (GMC). Pursuant to a Continuing Guaranty dated December 10, 1987, Lois and Becky personally guaranteed Ruby's payments under the leases. Dolphin subsequently assigned all rights, title, and interests in both leases to GECC.

Ruby died on May 22, 1991, and the leases fell into default. After Appellants failed to pay the amounts due under the leases, GECC, on August 7, 1991, instructed Hawaii Recovery Bureau, Inc. (HRBI), a repossession company, to retrieve the Mercedes and the GMC. When an HRBI representative showed up at Kevin's office to pick up the vehicles, Kevin indicated that he wanted to talk to a GECC representative before releasing the vehicles. He subsequently contacted David Farmer (Farmer), the attorney for GECC, in an attempt to "work something out." According to Kevin, Farmer told him to either return the vehicles immediately or GECC would sue on the leases.

Rather than face litigation, Kevin, after consulting with Appellants, contacted an HRBI representative to arrange for the return of the vehicles. Kevin stated that it was his understanding that GECC would not file suit for possession or for the deficiency if both vehicles were returned. HRBI picked up the Mercedes on August 12, 1991 and the GMC on August 19, 1991, and returned both vehicles to GECC. In the meantime, however, on August 15, 1991, GECC filed the instant action against Appellants, demanding the amounts due under the terms of the lease agreements and the immediate return of the vehicles. Kevin learned of the lawsuit from the Pacific Business News.

Under the terms of both lease agreements, the valuation of each vehicle upon early termination was to be determined according to the following provision:

N. VEHICLE VALUATION AT EARLY TERMINATION, DEFINITION OF REALIZED VALUE

If I do not purchase the vehicle, my early termination liability will be affected by the Realized Value of the Vehicle. The Realized Value may be determined in one of the following ways: (i) By a written agreement between you [lessor] and me [lessee] if it is signed 10 days prior to termination; (ii) By a professional appraisal obtained at my expense of the wholesale value of the vehicle 10 days prior to termination if you and I can each agree to my selection of an independent third party qualified to make the appraisal; or (iii) if the Realized Value is not determined by termination you [lessor] will determine Realized Value in a commercially reasonable manner in accordance with accepted practices in the automobile industry for determining the value of used vehicles.

I understand that the Realized Value amount will be exclusive of any official fees and taxes imposed upon vehicle disposition.

Record on Appeal (R.A.) at 10, p 1.N. (italicized text in original; emphasis added).

Utilizing the third method for determining "Realized Value," GECC appraised the vehicles for resale and solicited three bids for each vehicle from other leasing companies and used car dealers.

On August 14, 1991, GECC received bids for the Mercedes from So Easy Leasing & Sales (So Easy), Rainbow Chevrolet, Inc. (Rainbow), and Sierra Leasing & Sales (Sierra) for $26,500, $24,000, and $22,500, respectively. Eventually, however, GECC sold the Mercedes to a private individual for $31,700 and credited this amount to Appellants' account. At the time, the Kelley Blue Book (Blue Book) established the approximate wholesale value of the Mercedes at $33,000 and the approximate retail value at $41,100.

On August 19, 1991, GECC also received three bids for the GMC from So Easy, Rainbow, and Sierra for $8,500, $9,000, and $8,200, respectively. GECC ultimately kept the GMC for use in its rental pool and credited $9,400 to Appellants' account. The GMC's Blue Book wholesale value at the time was approximately $8,050, while its retail value was approximately $10,700.

On December 5, 1991, GECC filed a motion for summary judgment, seeking a deficiency judgment against Appellants, jointly and severally, for the following amounts: $12,566.96, plus interest at the per diem rate of $3.3919, for the Mercedes; and $3,929.19, plus interest at the per diem rate of $1.0523, for the GMC. On July 21, 1992, the circuit court granted the motion and entered final judgment in favor of GECC and against Appellants on all claims, finding them jointly and severally liable to GECC for a total of $20,872.24, including costs and attorneys' fees, plus interest. ⁴

Appellants thereafter filed the instant appeal.

II. DISCUSSION

A. Summary Judgment: Burden and Standard of Proof;

Standard of Appellate Review

Summary judgment is a drastic remedy. To avoid improperly depriving a party to a lawsuit of the right to a trial on disputed factual issues, summary judgment must be "cautiously invoked." Miller v. Manuel, 9 Haw.App. 56, 65-66, 828 P.2d 286, 292 (1991), cert. denied, 72 Haw. 618, 841 P.2d 1075 (1992). Summary judgment should only be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any (hereinafter "relevant materials"), show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Hawai'i Rules of Civil Procedure (HRCP) Rule 56(c) (1990).

The burden is on the party moving for summary judgment (moving party) to show the absence of any genuine issue as to all material facts, which, under applicable principles of substantive law, entitles the moving party to judgment as a matter of law. First Hawaiian Bank v. Weeks, 70 Haw. 392,...