American Nat. Bank v. Stanfill

• Decision Date: 09 November 1988
• Docket Number: Nos. F008513,F008596,s. F008513
• Citation: 205 Cal.App.3d 1089,252 Cal.Rptr. 861
• Court: California Court of Appeals Court of Appeals
• Parties: , 7 UCC Rep.Serv.2d 150 AMERICAN NATIONAL BANK, Plaintiff and Respondent, v. Gary L. STANFILL et al., Defendants and Appellants.

Page 861

252 Cal.Rptr. 861

205 Cal.App.3d 1089, 7 UCC Rep.Serv.2d 150

AMERICAN NATIONAL BANK, Plaintiff and Respondent, v. Gary L. STANFILL et al., Defendants and Appellants.

Nos. F008513, F008596.

Court of Appeal, Fifth District, California.

Nov. 9, 1988.

[205 Cal.App.3d 1091] Fachin, McCartney & Twisselman, N. Thomas McCartney, Klein, Wegis & Duggan, Barry L. Goldner, David J. Cooper, Bakersfield, Moore, Clifford, Wolfe, Larson & Trutner, and Elizabeth Williams, Oakland, for defendants and appellants.

Young, Wooldridge, Paulden, Self, Farr & Griffin, David F. Rodriguez and Robert Self, Bakersfield, for plaintiff and respondent.

OPINION

SARKISIAN, Associate Justice. ^*

INTRODUCTION

Appellants Gary Stanfill and James Nelson file separate appeals from a judgment

in favor of American National Bank and against appellants following the granting of the bank's motion for summary judgment. Appellants seek reversal of the judgment enforcing appellants' obligations as makers of a promissory note in favor of payee bank. The appeals have been consolidated. As we explain below, the judgment in favor of the bank must be reversed.

STATEMENT OF FACTS

In June 1984, Stanfill, Nelson and Mailloux developed a program to assist battered and abused women to be implemented through a non-profit, charitable corporation known as Women In Need of Shelter Program (WINS). Revenue to maintain the program was to be generated through the operation of bingo games. Start-up funding was acquired through an unsecured loan from American National Bank in the amount of $100,000. The loan obligation is evidenced by a promissory note signed by Stanfill, Nelson and Mailloux as individuals. Loan proceeds were deposited directly into a WINS account at the bank.

It is not contended by any party that the loan was guaranteed by the WINS corporation. Representatives of the bank testified that the bank was unwilling to loan funds to the charitable corporation but would provide a loan to appellants backed by their personal guarantee. Appellants were specifically told by bank Vice-President Gordon Jones that the bank was willing to loan them money solely on the strength of their financial statements and that the bank would look to them to repay the loan if the project failed. The express purpose of the loan was to consolidate two previous loans (one for $60,000 and one for $10,000) and to provide an additional $30,000 to complete bingo parlor set-up costs to raise funds for WINS. In connection with the $60,000 note, appellants executed a letter of understanding to the bank stating:

"In consideration of your granting to us as individuals a loan in the amount of $60,000.00 it is hereby understood that American National Bank does not recognize the WINS organization as a Bankable source of repayment.

"We the undersigned fully recognize and agree that American National Bank considers us individually responsible for repayment of the indebtedness from our personal and/or business income."

Vice-President Jones was advised that the corporation's day-to-day operations would be conducted by Mailloux under the supervision of appellants, and that these three were the directors of the corporation. Appellants directed that loan proceeds be placed in an account in the name of WINS. The account was opened according to the directions of appellants. Appellants instructed Jones that only they and Mailloux would be authorized to sign checks payable on the WINS account. Appellants further instructed Jones that two signatures would be required on every check, one of which had to be that of Stanfill or Nelson.

Stanfill presented evidence in opposition to summary judgment that numerous checks paid from the WINS account were signed by Dorothy Hill, an unauthorized signatory. Stanfill denied that Hill was a director of the corporation, as indicated on a signature card produced by the bank, and refuted her authority to make withdrawals from the corporate account. The bank could not produce articles of incorporation or corporate resolutions verifying Hill's affiliation with WINS, though documentation of a corporate signatory's affiliation is ordinarily secured.

Copies of checks written on the WINS account revealed withdrawals of $78,850.12 on the authority of Mailloux and Hill alone. Many of the checks appear to have nothing to do with the operation of WINS, some directly payable to Mailloux and Hill, and others appear to have forged endorsements.

American National Bank filed a complaint on the promissory note against Stanfill and Nelson, as well as defendant Glenda Mailloux (not a party to this appeal), seeking judgment for the principal sum of $100,000, plus interest, attorney fees and costs. Stanfill and Nelson generally denied the allegations of the complaint. Both Stanfill and Nelson raised affirmative defenses of contributory negligence, plaintiff's The bank filed a motion for summary judgment on its complaint declaring that Stanfill, Nelson and Mailloux executed a promissory note in favor of American National Bank in the amount of $100,000, failed to make payment on the note according to terms, and were in default. Stanfill filed an opposition to the bank's motion which did not dispute execution of the note or default on the note, but asserted the existence of disputed facts having to do with respondent's mismanagement of a corporate bank account which was funded from the proceeds of appellants' loan.

breach of contract and breach of fiduciary duty, estoppel, waiver, consent and unclean hands. Both Stanfill and Nelson filed cross-complaints for declaratory relief, indemnity, and for an accounting against the bank as well as others. Stanfill also cross-complained for breach of contract.

The court below granted the bank's motion for summary judgment, finding that, "No defense to the obligation to pay the note has been presented. None of moving plaintiff's 'facts' has been disputed by any party." The ruling did not resolve appellants' pending cross-complaints against the bank. The court entered judgment for the bank and, on its own motion, stayed the judgment for the term prescribed in Code of Civil Procedure section 918.

Appellants contend, in opposing the motion, that triable issues of fact exist concerning whether or not the bank improperly and negligently honored checks drawn on the WINS account and breached the agreement to manage the account according to appellants' instructions. The bank contends that once the loan proceeds were deposited to the corporate account of WINS, the funds became the sole property of the corporation and any defense of negligence or breach of contract or claim of offset belongs to the corporation and not the individual appellants.

Both appellants appeal the entry of final judgment in favor of the bank, arguing that their affirmative defenses raise triable issues of fact, and that in any event no final judgment should have been entered pending resolution of the cross-complaints.

Both appellants Stanfill and Nelson will be treated identically for purposes of this appeal.

DISCUSSION

I. ENTRY OF JUDGMENT

Appellants argue that their affirmative defenses and cross-claims against respondent are identical and that if proven would tend to diminish or defeat the bank's right to recovery on the note or operate as a setoff pursuant to Code of Civil Procedure section 431.70. That section provides in pertinent part as follows:

"Where cross-demands for money have existed between persons at any point in time ..., and an action is thereafter commenced by one such person, the other person may assert in the answer the defense of payment in that the two demands are compensated so far as they equal each other,...."

Appellants contend that the trial court should have granted an interlocutory judgment only, as the issues raised in the cross-complaints must first be determined to avoid multiple judgments in a single action.

Respondent argues that Code of Civil Procedure section 437c, subdivision (j), authorizes a "separate judgment" and that final judgment was appropriately granted pursuant to the law set forth in Worth v. Asiatic Transpacific, Inc. (1979) 93 Cal.App.3d 849, 156 Cal.Rptr. 110.

It is well settled that litigation is not to be tried piecemeal and that the general rule is that there can be only one final judgment in an action. (9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 43, p. 67; Bank of America v. Superior Court (1942) 20 Cal.2d 697, 701, 128 P.2d 357.)

Code of Civil Procedure section 437c expressly prohibits appellate review of an order granting summary judgment prior to the termination of the action, "[e]xcept where a separate judgment may properly be awarded...." (Code Civ.Proc., § 437c No exception to the rule appears from the facts here. "... [W]here the cross-complaint has been filed and the matter stated therein put in issue there is nothing that permits the rendition of two separate judgments where the parties to the complaint and the cross-complaint and the transaction out of which the action arose are identical." (Crocker-Anglo Nat. Bank v. Kuchman (1961) 194 Cal.App.2d 589, 591-592, 15 Cal.Rptr. 230; see also Fraser-Yamor Agency, Inc. v. County of Del Norte (1977) 68 Cal.App.3d 201, 207, 137 Cal.Rptr. 118.) A money judgment in an action to enforce payment of a promissory note is not a final judgment, "[u]ntil all issues raised by the cross-pleadings against plaintiff are adjudicated and the action finally disposed of,...." (Bank of America v. Lamb Finance Co. (1956) 145 Cal.App.2d 702, 715, 303 P.2d 86.)

                subd.  (j).)  Although a practical exception is recognized where there are multiple parties and the order granting summary judgment disposes of all issues involving the appealing party, the interests of the parties must be distinct and severable from the general subject of the litigation to justify separate judgments.  (Etienne v. DKM Enterprises, Inc.  (1982) 136 Cal.App.3d 487, 489, 186 Cal.Rptr. 321;  9

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