Cadle Co. v. World Wide Hospitality Furn.

• Decision Date: 31 October 2006
• Docket Number: No. B183821.,B183821.
• Citation: 50 Cal.Rptr.3d 480,144 Cal.App.4th 504
• Court: California Court of Appeals Court of Appeals
• Parties: The CADLE COMPANY, Plaintiff and Respondent, v. WORLD WIDE HOSPITALITY FURNITURE, INC. et al., Defendants and Appellants.

50 Cal.Rptr.3d 480

144 Cal.App.4th 504

The CADLE COMPANY, Plaintiff and Respondent, v. WORLD WIDE HOSPITALITY FURNITURE, INC. et al., Defendants and Appellants.

No. B183821.

Court of Appeal, Second District, Division 8.

October 31, 2006.

Cohon & Pollak, Jeffrey M. Cohon, William M. Andrews and Kristina S. Keller, Los Angeles; Adams, Aucoin & Kessler and Gary Kessler, Los Angeles, for Appellants.

Brewer & Brewer, Templeton Briggs and James R. Knoles, Newport Beach, for Respondents.

BOLAND, J.

SUMMARY

In a contract action brought by a bank's successor-in-interest against a suspended corporation and an individual guarantor, the trial court precluded the corporation from presenting a defense and entered judgment against it. Defense counsel waived jury on behalf of the individual guarantor and, following a court trial, judgment was entered against the guarantor. On appeal, the corporation and guarantor argue: (1) the jury waiver was unenforceable; (2) the action is time-barred; (3) the successor-in-interest's request for contractual attorney's fees was procedurally improper; (4) the trial court should have granted a continuance to permit the corporation to secure a revivor, rather than entering judgment against it; and (5) a partial reversal of the judgment is required to permit the now reinstated corporation to present a defense. For the reasons discussed, we agree with the last two contentions, but not the first three.

PROCEDURAL AND FACTUAL BACKGROUND

This action for breach of promissory note and breach of written guaranty was filed September 30, 2003, by The Cadle Company against World-Wide Rattan, Inc. and Isaac Gonshor. Cadle alleged that, on December 10, 1990, Gonshor, acting on behalf of Rattan as its president, executed a written Loan and Security Agreement (Agreement) for a $400,000 line of credit with Cadle's predecessor-in-interest, Columbia National Bank. Contemporaneous with his execution of the Agreement on Rattan's behalf, Gonshor signed a General Continuing Guaranty (Guaranty), personally guaranteeing Rattan's debt to the Bank, and "all loans, advances, or financial accommodations ... hereafter granted by [the Bank] to or for the account of [Rattan] ...." including, "all sums which shall in the future become due and owing from [Rattan] whether arising under the Agreement or otherwise." The Guaranty states it is a "continuing guaranty" and "shall remain effective during the term of the Agreement and relates to any Obligations, including those which arise under successive transactions which shall either cause [Rattan] to incur new Obligations, continue the Obligations from time to time, or renew them after they have been satisfied, until this Guaranty has been expressly terminated."

¹

Cadle further alleged that, on behalf of Rattan, Gonshor executed a Change in Terms Agreement (Change Agreement) with the Bank on August 11, 1992, refinancing Rattan's remaining debt under the Agreement totaling approximately $235,700. The Change Agreement provides for principal payments of $105,000 and $25,000 on August 17 and October 10, 1992, respectively, with weekly principal payments of $1,000 thereafter for 63 weeks.² The Change Agreement extends to December 31, 1993, the maturity date for payment of the final balance of all principal and interest owed. The Change Agreement also contains a waiver of the statute of limitations. In addition, both the original Agreement and the Change Agreement include attorney's fee provisions.

The Federal Deposit Insurance Corporation (FDIC) later became the receiver for the Bank. Thereafter, Cadle claims it became the FDIC's assignee on and holder of Rattan's debt. Cadle sent acceleration letters to Gonshor individually and on behalf of Rattan. This suit was initiated after the letters went unanswered.

An answer to the complaint was filed on behalf of Gonshor and "World Wide Hospitality Furniture, Inc., a California corporation erroneously sued herein as Worldwide Rattan, Inc., a defunct California corporation." Cadle then amended its complaint substituting World Wide Hospitality Furniture, Inc. (Hospitality) for fictitious Doe Defendant No. One.

A final status conference was held February 24, 2005. The trial court's minutes of that conference state "[t]he parties stipulate to a waiver of jury." A bench trial was conducted on March 1, 2005. At trial, David Hoffer was one of the attorneys representing Gonshor and Hospitality.

On the morning when the trial began, Cadle moved to preclude Rattan and Hospitality from defending the action. Cadle asserted it had conducted a computer search of the records of the Secretary of State the day before and had learned that the corporate powers of both Rattan and Hospitality were suspended as of February 25, 2005. Attorney Hoffer acknowledged Rattan was a "defunct" corporation, but expressed voiced surprise over its suspension. He insisted that when he last checked on its corporate status, Hospitality had not been suspended. Hoffer asserted that, in any event, Hospitality was not a party to the litigation because it had not been served with the complaint. Because it appeared when answering the complaint, the trial court concluded Hospitality was a proper party. The motion to preclude the corporate defendants from defending the suit was granted, leaving Gonshor to defend the action alone.

The trial court turned its attention to Gonshor's affirmative defense that the lawsuit was time-barred. The parties stipulated the Agreement, Guaranty and Change Agreement were admissible in evidence for this phase of trial. Neither side offered any additional documentary or testimonial evidence. Hoffer argued the transaction—which he asserted did not involve a negotiable instrument—was governed by, at most, an eight-year statute of limitations. (Code Civ. Proc, §§ 337, 360.5; 12 U.S.C. § 1821(d)(14).) He insisted the lawsuit, initiated nearly 10 years after the Change Agreement's December 31, 1993 final due date, was filed almost two years too late. Disagreeing with Hoffer's position, the trial court found the action timely and commenced the trial.

Cadle's attorney indicated that, while he was ready to examine his client, he also wanted to question Gonshor, who had not appeared for trial. Attorney Hoffer said he needed five minutes to call Gonshor, who lived nearby. A brief recess was taken to afford Hoffer an opportunity to call Gonshor. Gonshor, however, never appeared for trial. Instead, when the trial resumed, Cadle's attorney announced that defense counsel had informed him he was "willing to stipulate to the numbers," and "all that remain[ed was] to argue the effect of the [Guaranty] as a matter of law." Defense counsel agreed the absence of the corporate defendants had converted the action into a "collections case," and the only remaining dispute concerned the legal effect of Gonshor's Guaranty as to the Change Agreement. Cadle made an offer of proof that the total balance due was $240,904.51 ($104,392.17 in principal, plus interest of $136,512.34, as of February 28, 2005). The parties stipulated to the admission of the Agreement, Guaranty and Change Agreement for this portion of the trial, and again declined to offer additional evidence. Following closing argument, judgment was granted in favor of Cadle against all three defendants. Cadle was ordered to prepare a proposed statement of decision and judgment, which were served on defense counsel and submitted to the trial court on March 2, 2005.

Hospitality, whose corporate powers had been suspended for failure to file a statutorily required information statement (Corp. Code, §§ 1502 & 2205), filed the required statement and obtained a "Notice of Revivor" dated March 3, 2005.³ The record does not indicate that Hospitality ever notified the trial court of the revival of its corporate powers. On March 25, 2005, the court issued a statement of decision and entered judgment.

In mid-April 2005, Cadle filed a memorandum of costs and a motion seeking approximately $10,700 in contractual attorney fees. (Code Civ. Proa., §§ 1032 & 1033.5.) In response, defendants did not object to Cadle's request for attorney's fees, but did object that Cadle was seeking double recovery for certain attorney's fees already recovered. The trial court awarded Cadle $8,000 in attorney's fees. This appeal followed.⁴

DISCUSSION

1. Gonshor's waiver of a jury trial was effective.

Gonshor insists that contractual provisions, such as the guaranty provision by which parties agree to waive a jury trial before the emergence of any dispute, are unenforceable. Gonshor's recitation of the legal principle is correct. In Grafton Partners v. Superior Court (2005) 36 Cal.4th 944, 32 Cal.Rptr.3d 5, 116 P.3d 479, the Supreme Court held that Code of Civil Procedure section 631, subdivision (d) identifies six exclusive means by which a jury trial may be waived in a civil case. (Id. at p. 956, 32 Cal.Rptr.3d 5, 116 P.3d 479.) "`California constitutional history reflects an unwavering commitment to the principle that the right to a civil jury trial may be waived only as the Legislature prescribes,'" and no statute specifically authorizes predispute jury waivers. (Id. at p. 955, 32 Cal.Rptr.3d 5, 116 P.3d 479.) The principle, however, does not apply here.

First, the record fails to reflect that the stipulation to waive a jury trial was based on a pre-dispute contractual waiver. The sole reference to the waiver is found in the minute order stating only that "[t]he parties stipulate[d] to a waiver of jury" at the final status conference. Gonshor's assertion he "lost [his] right to a jury trial" because Hoffer was "reminded that the Guaranty contained a pre-litigation jury trial waiver" is thus improper and unsupported by the record.

Second, Gonshor's oral consent, stated in open court and entered in the court minutes, provides an independent basis for a jury waiver. (Code Civ. Proa., § 631, subd. (d)(3).) Gonshor's argument that the...