Crocker Nat. Bank v. Emerald

• Decision Date: 26 June 1990
• Citation: 221 Cal.App.3d 852,270 Cal.Rptr. 699
• Court: California Court of Appeals Court of Appeals
• Parties: , 11 UCC Rep.Serv.2d 1321 CROCKER NATIONAL BANK, etc., Plaintiff and Respondent, v. Robert M. EMERALD, Defendant and Appellant. Civ. C004716.

Page 699

270 Cal.Rptr. 699

221 Cal.App.3d 852, 11 UCC Rep.Serv.2d 1321

CROCKER NATIONAL BANK, etc., Plaintiff and Respondent, v. Robert M. EMERALD, Defendant and Appellant.

Civ. C004716.

Court of Appeal, Third District, California.

June 26, 1990.

[221 Cal.App.3d 856] Robert M. Emerald, in pro. per.

Robert B. Kaplan, Joseph N. Demko, Members of Frandzel & Share, A Law Corp., San Francisco, for plaintiff and respondent.

DeCRISTOFORO, Associate Justice.

Defendant, Robert M. Emerald, proceeding in pro per, appeals from a judgment granting plaintiff Crocker National Bank's motion for summary judgment. Crocker's motion for summary judgment stems from a collection action brought by Crocker against Emerald for non-payment on a promissory note. Emerald appeals from the judgment of dismissal following the order granting summary judgment, contending triable issues of fact exist as to whether Crocker has complied with Commercial Code section 9504(3) which requires the sale of collateral to be conducted in a commercially reasonable manner. Emerald also argues Crocker is estopped from collecting the deficiency judgment by the doctrine of unclean hands, and contends the trial court abused its discretion in denying him leave to file a cross-complaint. Finally, Emerald requests this court to make findings of fact under Code of Civil Procedure

section 909. We shall reverse the order granting summary judgment, decline to make findings of fact, and affirm the trial court's denial of leave to file a cross-complaint.

FACTUAL AND PROCEDURAL BACKGROUND

This dispute between Crocker and Emerald has stretched on for nine years. It began when Emerald, the owner of a logging business, signed a promissory note with Crocker in the principal sum of $430,962.30. The note was payable in 30 monthly installments of $14,365.41, with the unpaid balance due and payable on December 15, 1978. An agreement giving Crocker a security interest in 52 items of equipment owned by Emerald's logging business secured the payment obligation.

Emerald's business experienced financial difficulties caused by the 1975 recession in the logging industry. Emerald realized he would be unable to make the series of payments due on May 15, 1976, and monthly thereafter. He failed to make the installment payment due May 15, 1976. Pursuant to the terms of the promissory note, Crocker elected to declare the entire unpaid balance to be due after the May 15, 1976, default, and made demand on Emerald for payment. In April 1976, with Crocker's consent, Emerald decided to sell some of the equipment securing the promissory note and to apply the proceeds to the balance due.

With Crocker's consent, Emerald sold 18 items of equipment, and the proceeds of the sale were credited to the balance due on the promissory note, reducing the balance to $128,966.86.

Crocker filed suit against Emerald to recover the balance due on the promissory note, plus collection charges, interest and attorney's fees. Emerald answered the complaint and filed a cross-complaint against Crocker alleging breach of fiduciary duty and violation of the Unruh Act. The trial court sustained Crocker's demurrer and granted Emerald leave to amend. Emerald amended his cross-complaint four times, and each time the trial court sustained Crocker's demurrer, on the final occasion without leave to amend.

In March of 1984, Crocker filed a motion for summary judgment, which the trial court granted. The trial court also denied Emerald's motion for reconsideration. On appeal, we reversed in part the order denying Emerald's motion for reconsideration. (Crocker National Bank v. Robert M. Emerald, 3 Civil 24158.) We found a triable issue of fact existed as to whether Crocker took possession of 10 items of collateral which were later sold, and, if so, whether Crocker sold these items in a reasonably commercial manner pursuant to Commercial Code section 9504. We also determined a triable issue of fact existed as to whether three additional items of collateral sold at auction were disposed of "in good faith and in a commercially reasonable manner" within the meaning of section 9504.

In December of 1987, Crocker filed a second summary judgment motion, which forms the basis of this appeal. In its motion, Crocker attempted to comply with section 9504 by adopting Emerald's own valuation of the 13 items of collateral left in issue by our earlier opinion. Crocker used the values Emerald had assigned to each piece of equipment in his declarations and deposition testimony, and offered to give Emerald "credit" and reduce his debt by these amounts. Therefore, according to Crocker, since Emerald had been credited with the amount he believed the equipment was worth, the question of whether the sale of the collateral was commercially reasonable became moot.

In response, Emerald filed a motion for leave to file a cross-complaint and an amended answer. The trial court granted Emerald's motion for leave to file an amended answer, but denied leave to file a cross-complaint.

Following oral argument, the court granted Crocker's motion for summary judgment. Following entry of judgment, Emerald filed a timely notice of appeal.

I. Standard of Review

"Since a summary judgment motion raises only questions of law regarding the construction "The affidavits of the moving party are strictly construed and those of his opponent liberally construed, and doubts as to the propriety of summary judgment should be resolved against granting the motion." (Mann v. Cracchiolo (1985) 38 Cal.3d 18, 35-36, 210 Cal.Rptr. 762, 694 P.2d 1134; citations omitted.) Although the affidavits and declarations of the nonmoving party are liberally construed, even if they contain conclusory terms, the party opposing the motion must submit competent evidence in opposition showing sufficient facts to substantiate its allegations. (Cory v. Villa Properties (1986) 180 Cal.App.3d 592, 601, 225 Cal.Rptr. 628.)

and effect of the supporting and opposing papers, we independently review them on appeal, applying the same three-step analysis required of the trial court. First, we identify the issues framed by the pleadings since it is these allegations to which the motion must respond by establishing a complete defense or otherwise showing there is no factual basis for relief on any theory reasonably contemplated by the opponent's pleading. [p] Secondly, we determine whether the moving party's showing has established facts which negate the opponent's claim and justify a judgment in movant's favor. The motion must stand self-sufficient and cannot succeed because the opposition is weak. A party cannot succeed without disproving even those claims on which the opponent would have the burden of proof at trial. [p] When a summary judgment motion prima facie justifies a judgment, the third and final step is to determine whether the opposition demonstrates the existence of a triable, material factual issue. Counter-affidavits and declarations need not prove the opposition's case; they suffice if they disclose the existence of a triable issue." (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064-1065, 225 Cal.Rptr. 203; citations omitted.)

When conflicts appear in the papers submitted in support of and in opposition to the motion, we resolve those conflicts in favor of the nonmoving party. (Gregorian v. National Convenience Stores, Inc. (1985) 174 Cal.App.3d 944, 946, 220 Cal.Rptr. 302.) In addition, all reasonable inferences are considered in favor of the nonmoving party. (Rubio v. Swiridoff (1985) 165 Cal.App.3d 400, 403, 211 Cal.Rptr. 338.)

The summary judgment procedure is designed to test whether any material triable issues of fact exist, but not to resolve disputed factual issues. (Fireman's Fund Ins. Co. v. Fibreboard Corp. (1986) 182 Cal.App.3d 462, 465, 227 Cal.Rptr. 203.) An order of summary judgment will not be reversed in the absence of a clear showing of abuse of discretion. (Fireman's Fund, supra, 182 Cal.App.3d at p. 466, 227 Cal.Rptr. 203.)

II. Commercially Reasonable Sale of Collateral

At the core of this controversy is Commercial Code section 9504. Section 9504 provides that, in the event of default by the debtor, the secured party may liquidate the security and apply the proceeds to the unpaid balance of the debt. If there remains a deficiency, the debtor is liable for the balance. Subdivision 3 of section 9504 imposes upon the secured party the duty to conduct the sale of the collateral in a commercially reasonable manner, and to provide timely notice of the sale to the debtor. ¹

The court in Security Pacific National Bank v. Geernaert (1988) 199 Cal.App.3d 1425, 1431, 245 Cal.Rptr. 712 explained the This court in Atlas Thrift Co. v. Horan (1972) 27 Cal.App.3d 999, 104 Cal.Rptr. 315 considered section 9504 and concluded the secured party's "right to a deficiency judgment depends on compliance with the statutory requirements concerning dispositions and notice. [p] The rule and requirements are simple. If the secured creditor wishes a deficiency judgment he must obey the law. If he does not obey the law, he may not have his deficiency judgment." (Id. at p. 1009, 104 Cal.Rptr. 315.)

rationale underlying the requirements of section 9504: "Commercially reasonable sales are presumed to be in good faith and at the greatest possible market rate. Unless collateral is sold by a creditor in a commercially reasonable manner, debtors run the risk of collusive tactics by secured parties or their agents. Unscrupulous creditors could easily sell (or buy) collateral well below market value, obtain a deficiency judgment against the debtor for the difference, resell the collateral and obtain a substantial profit over the amount of the original debt."

Crocker, in its motion for summary judgment, attempted to comply with the requirements of section 9504. For the purposes of its summary judgment motion, Crocker assumed, without conceding, that it had...