Enterprise Leasing Corp. v. Shugart Corp.

• Decision Date: 25 June 1991
• Docket Number: No. B052911,B052911
• Citation: 231 Cal.App.3d 737,282 Cal.Rptr. 620
• Court: California Court of Appeals Court of Appeals
• Parties: ENTERPRISE LEASING CORPORATION, Plaintiff and Appellant, v. SHUGART CORPORATION, Defendant and Respondent.

Page 620

282 Cal.Rptr. 620

231 Cal.App.3d 737

ENTERPRISE LEASING CORPORATION, Plaintiff and Appellant, v. SHUGART CORPORATION, Defendant and Respondent.

No. B052911.

Court of Appeal, Second District, Division 7, California.

June 25, 1991.

Tobin & Tobin, John R. Liebman, Amy M. Toboco and Judith Ilene Bloom, Los Angeles, for plaintiff and appellant.

McKittrick, Jackson, DeMarco & Peckenpaugh, Ronald J. Kohut, Ira D. Lebovic and Roger E. Borg, Newport Beach, for defendant and respondent.

LILLIE, Presiding Justice.

Plaintiff, Enterprise Leasing Corporation, appeals from judgment entered against it and in favor of defendant Shugart Corporation (Shugart) after the trial court granted defendant's motion for nonsuit made at the conclusion of plaintiff's opening statement.

FACTS

Pursuant to a written lease agreement executed on February 21, 1986 (lease), plaintiff leased a computer system and related components (the equipment) to Applied Circuit Technology, Inc. (Applied). The lease was for a term of 60 months and required rental payments of $3,179.21 per month. On April 30, 1987, Applied and Shugart entered into a contract entitled "Asset Purchase Agreement" whereby Applied sold certain assets to Shugart. In the asset purchase agreement Shugart did not expressly assume the lease. After Shugart purchased assets of Applied it used the equipment and made 15 monthly payments of $3,179.21 each to plaintiff for such use. On September 12, 1988, Shugart sold its assets to ACT Technology Corporation (ACT) and entered into a rental agreement with ACT wherein Shugart represented that it owned the equipment and agreed to rent it to ACT for three months at $3,179.21 per month. On January 19, 1989, ACT told plaintiff to pick up the equipment.

In March 1989 plaintiff sued Applied, Shugart and ACT for damages for breach of the lease, conversion of the equipment, and unjust enrichment in that defendants had the use of the equipment without paying for it and without plaintiff's knowledge and consent. ¹

Shugart moved for summary adjudication that it did not assume the obligations of Applied under the lease. In support of the motion Shugart presented the following evidence: The lease included a provision which prohibited the lessee, Applied, from assigning the lease without plaintiff's prior written consent or permitting the equipment to be used by anyone other than lessee; lessee acknowledged that sale or other disposition of its business would not relieve it of its obligations under the lease. Upon its purchase of Applied's assets Shugart took over the premises where Applied conducted business; the equipment was on the premises. Payments under the lease were made through December 19, 1988. Plaintiff did not agree to assignment of the lease to Shugart and Shugart did not enter into any agreement with plaintiff whereby it assumed responsibility for the lease.

In opposition to the motion plaintiff submitted the following evidence: After execution of the asset purchase agreement Applied transferred possession of the equipment to Shugart as part of the sale. Shugart thereafter used the equipment until September 12, 1988, when it, in turn, transferred possession of the equipment to ACT. Applied and Shugart orally agreed that Shugart would "take care of" the lease. Consistent with such agreement Shugart paid plaintiff for rental of the equipment during the one and a half years Shugart used the equipment. Neither Shugart nor Applied ever notified plaintiff of the asset purchase agreement, the transfer of possession of the equipment to Shugart, or the fact that Shugart thereafter would make the rental payments under the lease. After the sale Applied changed its name to Towne Paulsen, Inc., divested itself of the electronics segment of its business, and engaged exclusively in the pharmaceutical business. Accordingly, Towne Paulsen had no use for the equipment. On the other hand, Shugart needed the equipment in its business; so great was the need that Shugart acquired a second computer system.

The trial court granted Shugart's motion for summary adjudication. The action thereafter proceeded to trial by the court without a jury on plaintiff's causes of action for conversion and unjust enrichment. ²

In its opening statement plaintiff set forth the following facts which it expected to prove. During negotiations regarding the asset purchase agreement the lease was discussed. Shugart's president said he would take care of it. Under the asset purchase agreement Shugart acquired the entire systems division of Applied (purchase price $4.7 million) with the exception of accounts receivable and cash. Inasmuch as Applied went out of the electronics business after the sale it had no further need of the equipment and the liability of the lease did not remain on the books and records of Towne Paulsen (formerly Applied). After the sale Shugart made the rental payments for the equipment specified in the lease and on its books reduced the total amount due under the lease each time it made a rental payment. Until August 2, 1988, plaintiff was unaware that Applied had sold its assets to Shugart. Because the lease prohibited its assignment without plaintiff's written consent, if plaintiff had known of the sale it could have decided whether to allow Shugart to assume Applied's obligations under the lease or to reject Shugart as the new lessee, repossess the equipment, and sell it or lease it to someone else at a higher rent. The monthly rental payment specified in the lease was based on a 60-month term, not on the shorter period during which Shugart used the equipment. Accordingly, the value of Shugart's use of the equipment exceeded the rental payments made by Shugart.

At the conclusion of plaintiff's opening statement Shugart moved for judgment of nonsuit on both causes of action. The motion was granted in its entirety.

Judgment was entered in favor of Shugart and against plaintiff. Plaintiff appeals from the judgment, attacking the order granting motion for summary adjudication of issues as well as the order granting motion for nonsuit.

DISCUSSION

I

SUMMARY ADJUDICATION OF ISSUES

A Standard of Review

Review of an order granting a motion for summary adjudication of issues is governed by the rules applicable to review of summary judgments. (Commonwealth Mortgage Assurance Co. v. Superior Court (1989) 211 Cal.App.3d 508, 513, 259 Cal.Rptr. 425.)

Summary judgment is proper where the evidence in support of the moving party is sufficient to sustain a judgment in his favor and there are no triable issues of fact to be determined. (Code Civ.Proc., § 437c, subd. (c); Thompson v. Williams (1989) 211 Cal.App.3d 566, 571, 259 Cal.Rptr. 518.) The party moving for summary judgment has the burden initially to establish evidentiary facts of every element necessary to entitle him to judgment. (Kerr v. Rose (1990) 216 Cal.App.3d 1551, 1560, 265 Cal.Rptr. 597.) Where, as here, defendant is the moving party, he must either negate a necessary element of plaintiff's case or establish a complete defense. (Jones v. Los Angeles Community College Dist. (1988) 198 Cal.App.3d 794, 804, 244 Cal.Rptr. 37.) That burden extends to matters which plaintiff would have to prove at trial. (Wood v. Loyola Marymount University (1990) 218 Cal.App.3d 661, 665, 267 Cal.Rptr. 230.) The reviewing court conducts a de novo examination to see whether the moving party is entitled to summary judgment as a matter of law or whether there are any genuine issues of material fact. (Decker v. City of Imperial Beach (1989) 209 Cal.App.3d 349, 353, 257 Cal.Rptr. 356.) Only if the evidence of the moving party considered in light of the issues raised by the pleadings would, standing alone, support judgment in his favor does the court look to evidence presented by the opposing party. (Twaite v. Allstate Ins. Co. (1989) 216 Cal.App.3d 239, 251, 264 Cal.Rptr. 598.)

B The Merits

The general rule is that the mere assignment of rights under an executory contract does not cast upon the assignee the obligations imposed by the contract upon the assignor. (Walker v. Phillips (1962) 205 Cal.App.2d 26, 32, 22 Cal.Rptr. 727.) The rule is otherwise, however, where the assignee assumes such obligations. (Griffin v. Williamson (1955) 137 Cal.App.2d 308, 315, 290 P.2d 361.) "[W]hether there has been an assumption of the obligations is to be determined by the intent of the parties as indicated by their acts, the subject matter of the contract or their words." (Gregers v. Peterson Ice Cream Co., Inc. (1958) 158 Cal.App.2d 746, 751, 323 P.2d 572; see also Weidner v. Zieglar (1933) 218 Cal. 345, 349, 23 P.2d 515; Foreman Roofing Inc. v. United Union of Roofers etc. Workers (1983) 144 Cal.App.3d 99, 107, 192 Cal.Rptr. 439.) Assumption of obligations may be implied from acceptance of benefits under the contract. (Civ.Code, § 1589; Bruns v. DeSoto Operating Co. (1988) 204 Cal.App.3d 876, 881, 251 Cal.Rptr. 462; Bergin v. van der Steen (1951) 107 Cal.App.2d 8, 18, 236 P.2d 613.) Further, "where an assignee takes over a going business, his intention to assume the obligations of a contract relating to the business may be found from his acquiescence in the terms of the contract." (Walker v. Phillips, supra, 205 Cal.App.2d at pp. 32-33, 22 Cal.Rptr. 727.)

Shugart insists that an assignee's assumption of the obligations of a contract between the assignor and a third party may not be inferred from the assignee's acceptance of the benefits of the contract or any other act of the parties, but instead rests exclusively upon his express assumption of the obligations. In support of this contention Shugart cites Kelly v. Tri-Cities Broadcasting, Inc. (1983) 147 Cal.App.3d 666, 195 Cal.Rptr. 303. There, the purchaser of a radio station took an assignment of a lease of real property on which the radio station's transmitter was located. The lease required the lessee to provide a certain amount of free radio time per day to lessor in...