Pearl v. General Motors Acceptance Corp.

Decision Date24 February 1993
Docket NumberNo. D014094,D014094
Citation13 Cal.App.4th 1023,16 Cal.Rptr.2d 805
Parties, 20 UCC Rep.Serv.2d 585 Julius J. PEARL, Plaintiff and Appellant, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Defendant and Respondent.
CourtCalifornia Court of Appeals Court of Appeals

Duckor & Spradling, Scott L. Metzger, Thomas R. Darton and Kirk Miller, San Diego, for plaintiff and appellant.

Manning, Leaver, Bruder & Berberich, Paul J. Najar, Penny L. Reeves and Halbert B. Rasmussen, Los Angeles, for defendant and respondent.

WORK, Acting Presiding Justice.

Julius J. Pearl appeals a summary judgment in favor of General Motors Acceptance Corporation (GMAC) dismissing his claim against GMAC seeking declaratory relief regarding a pledge of stock he made to GMAC. Specifically, he asked the court to confirm that his purported termination of the pledge agreement was effective to preclude his responsibility for future loans made by GMAC to Palomar Truck Corporation and Castle Motors Inc. (jointly, Palomar) under a revolving credit arrangement known as a "flooring" line of credit. Pearl contends on appeal his purported termination of the pledge agreement was effective, because CIVIL CODE SECTION 28151 applies to pledge agreements and allows him to revoke the pledge agreement as to future transactions. He further contends his section 2815 rights were not waived by the language of the pledge agreement and, even if there was a waiver, such waiver would be void as against public policy. Since we agree section 2815 applies to the pledge agreement and conclude the language in the agreement did not effect a waiver of his section 2815 rights, we reverse the summary judgment and remand the matter to the trial court with directions to enter judgment for Pearl.

I

On July 13, 1987, Palomar sent a letter to GMAC requesting revolving lines of credit totaling $3.8 million to finance its purchases of vehicle inventory, which lines of credit are referred to as "flooring" lines or plans. GMAC agreed to extend such credit, provided, in part, a $1 million letter of credit be obtained and Pearl, as a 25 percent shareholder, and another shareholder executed guaranties to secure the flooring line of credit. The guaranty drafted by GMAC and signed by Pearl stated it was a continuing guaranty that would remain in full force and effect until GMAC received a notice of termination from Pearl.

Since the cost of obtaining a letter of credit was found to be unreasonably high, Palomar requested and GMAC agreed to accept in substitution for it the pledge of stock of similar value. GMAC drafted a pledge agreement providing for the pledge by Pearl of 20,000 shares of the Price Company stock. Pearl executed and delivered the pledge agreement along with certificates for the 20,000 shares. The pledge agreement secured all obligations of Palomar to GMAC, either currently existing or created later, including the flooring line of credit. Section 9.1 of the agreement contains provisions dealing with termination of the pledge which are discussed in detail below.

Only a few weeks after executing the pledge agreement, Pearl delivered to GMAC a letter dated September 14, 1987 which stated it was a notice of termination of all documents signed by him, including the pledge agreement and the continuing guaranty. Pearl apparently desired to terminate these agreements as to future advances, because he had become aware of Palomar's dire financial condition and wanted to minimize his personal financial risk. GMAC acknowledged Pearl's termination of the guaranty as to future advances, but it advised him the pledge agreement continued in effect.

Pearl later filed a complaint seeking a declaratory judgment against GMAC that his letter effected a valid termination of the pledge agreement. After a hearing of GMAC's motion, the court ordered summary judgment in favor of GMAC. The judgment was entered and GMAC was awarded its costs and attorney fees.

II

The purpose of summary judgment is "to discover whether the parties possess evidence requiring the fact-weighing procedures of a trial." (Appalachian Ins. Co. v. McDonnell Douglas Corp. (1989) 214 Cal.App.3d 1, 10, 262 Cal.Rptr. 716.) Code of Civil Procedure section 437c, subdivision (c), provides a motion for summary judgment must be granted "if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." As a reviewing court, we conduct a de novo review to determine whether there are any genuine issues of material fact. (Appalachian Ins. Co. v. McDonnell Douglas Corp., supra, 214 Cal.App.3d at p. 11, 262 Cal.Rptr. 716.) Also, an appellate court in reviewing a grant of summary judgment "must make its own independent determination of the construction and effect of the papers submitted [citation], and the validity of the ruling is reviewable irrespective of the reasons stated." (Preis v. American Indemnity Co. (1990) 220 Cal.App.3d 752, 757, 269 Cal.Rptr. 617.) Although we must strictly construe the moving party's papers and liberally construe the opposing party's papers, the opposing party "has the burden of showing that triable issues of fact exist." (Chern v. Bank of America (1976) 15 Cal.3d 866, 873, 127 Cal.Rptr. 110, 544 P.2d 1310.) Finally, an appellate court must resolve all doubts in favor of the party opposing the judgment. (Appalachian Ins. Co. v. McDonnell Douglas Corp., supra, 214 Cal.App.3d at p. 11, 262 Cal.Rptr. 716.)

III

We first discuss Pearl's assertion, which GMAC apparently does not dispute, that section 2815 applies to pledge agreements executed by non-debtors. Section 2815 provides for the revocation of a "continuing guaranty" at any time by the "guarantor," stating:

"A continuing guaranty may be revoked at any time by the guarantor, in respect to future transactions, unless there is a continuing consideration as to such transactions which he does not renounce."

The definition of a "guaranty" and a "guarantor" is derived from section 2787, which states in relevant part:

"A surety or guarantor is one who promises to answer for the debt, default, or miscarriage of another, or hypothecates property as security therefor. Guaranties of collection and continuing guaranties are forms of suretyship obligations, and except in so far as necessary in order to give effect to provisions specifically relating thereto, shall be subject to all provisions of law relating to suretyships in general." (Italics added.)

Since under the pledge agreement Pearl "hypothecated," or pledged, his stock as security for the debts of Palomar, pursuant to the express terms of section 2787, Pearl is a "guarantor" and the pledge agreement is implicitly a "guaranty" for purposes of the suretyship provisions of the Civil Code, including section 2815. (See, e.g., Bridge v. Connecticut Mut. Life Ins. Co. (1914) 167 Cal. 774, 781-783, 141 P. 375 [pledge of insurance policy by wife to secure husband's debt placed wife in position of surety].) Section 2814 defines a "continuing guaranty" as a "guaranty relating to a future liability of the principal, under successive transactions, which either continue his liability or from time to time renew it after it has been satisfied...." Thus, since the pledge agreement secured a revolving line of credit for Palomar which would involve repayments and future extensions of credit, the pledge agreement must be considered a "continuing guaranty" for purposes of sections 2814 and 2815. Absent a possible waiver or other considerations, section 2815 then would allow Pearl to revoke the pledge agreement at any time as to future extensions of credit.

IV

We next address whether section 2815 revocation rights may be waived, and, if so, whether the pledge agreement effectively waived Pearl's section 2815 rights. GMAC asserts, and Pearl denies, that section 2815 rights may be waived and that the pledge agreement effected such a waiver.

A.

At the outset, we note the issue of whether section 2815 rights may be waived appears to be one of first impression. GMAC asserts that all Civil Code suretyship rights may be waived, citing dicta from a case which states: "The protections of the Civil Code pertaining to surety contracts may be waived." (Canadian Community Bank v. Ascher Findley Co. (1991) 229 Cal.App.3d 1139, 1154, 280 Cal.Rptr. 521.) However, the court in that case dealt only with waivers of sections 2845, 2847, and 2849. (229 Cal.App.3d at pp. 1153-1154, 280 Cal.Rptr. 521.) Thus, we are not compelled to follow its generalization as to waivers of all suretyship protections, such as section 2815.

We acknowledge, however, a number of court decisions have allowed waivers of certain statutory protections for sureties. Sections 2845 and 2849 have often been found to have been waived by language contained in documents. (See, e.g., Brunswick Corp. v. Hays (1971) 16 Cal.App.3d 134, 138, 93 Cal.Rptr. 635; Wiener v. Van Winkle (1969) 273 Cal.App.2d 774, 786-787, 78 Cal.Rptr. 761; Engelman v. Bookasta (1968) 264 Cal.App.2d 915, 916-917, 71 Cal.Rptr. 120; American Guaranty Corp. v. Stoody (1964) 230 Cal.App.2d 390, 396, 41 Cal.Rptr. 69.) Sections 2845 and 2849 generally provide a surety with the right to require a creditor to proceed first against the debtor or to pursue any other remedy the surety could not pursue and also entitle the surety to the benefit of all security held by the creditor for performance of the debtor's obligation. These rights were not viewed by the courts as so founded in public policy as to preclude their waiver by the sureties. (See, e.g., Wiener v. Van Winkle, supra, 273 Cal.App.2d at p. 787, 78 Cal.Rptr. 761; American Guaranty Corp. v. Stoody, supra, 230 Cal.App.2d at pp. 395-396, 41 Cal.Rptr. 69.) Another court has recognized the waiver by a surety of the provisions of sections 2819 and 2845. (Union Bank v. Ross (1976) 54 Cal.App.3d 290, 294-295, 126 Cal.Rptr. 646.) Section 2819 generally...

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