Tough Co. v. Wurlitzer

 

 

 

 

Filed 1/28/14  Tough Co. v. Wurlitzer CA3

 

 

 

NOT TO BE PUBLISHED

 

 

 

California Rules of Court, rule 8.1115(a),
prohibits courts and parties from citing or relying on opinions not certified
for publication or ordered published, except as specified by rule
8.1115(b).  This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.

 

 

 

IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD
APPELLATE DISTRICT

(Butte)

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>

TOUGH COMPANY, INC.,                           Plaintiff and Appellant,               v.   GEORGE WURLITZER,                           Defendant and Respondent.

C071157   (Super. Ct. No. 150886)

 

 

 

            Plaintiff
Tough Company, Inc. appeals from a judgment entered in favor of defendant
George Wurlitzer after the trial court rejected its assertion that defendant
had no right to repossess equipment he sold to plaintiff after plaintiff failed
to pay in full. 

            On
appeal, plaintiff contends (1) there was insufficient evidence to support the
court’s finding defendant retained a security interest in one href="http://www.sandiegohealthdirectory.com/">item of equipment, a
bulldozer; and (2) as a matter of law, no security agreement could have been
created under the circumstances.  Plaintiff
also contends the trial court erred in
hearing its new trial motion in the absence of plaintiff’s counsel.  We find no error, and affirm the
judgment. 

BACKGROUND

            We
summarize the facts chiefly from the parties’ agreed statement (Cal. Rules of
Court, rule 8.134), and the trial court’s statement
of decision. 

            Plaintiff’s
predecessor, Tough Company, LLC, agreed to buy from defendant three pieces of
equipment: a 1978 Peterbuilt truck, a 1972 Birmingham 16-wheel
trailer, and a Caterpillar D7F bulldozer. 
The aggregate purchase price for all three was $59,000: $48,000 for the
bulldozer, $5,000 for the truck, and $6,000 for the trailer. 

            The
purchase was memorialized by a written bill of sale dated March 1, 2008, and signed by a principal of plaintiff (as “Buyer”), and defendant
(as “Seller”).  It states:  â€œIn consideration of the payment by Tough
Company LLC (‘Buyer’) of the sum of $59,000 the undersigned (‘Seller’) hereby
sells, assigns and transfers to Buyer one CAT D7, Peterbuilt truck &
Trailer, serial number [see below].  Said
equipment (3) pieces is sold ‘AS IS’ and ‘WHERE IS’, without warranty or
representation of any kind regarding the condition of the equipment (3) pieces
(hereafter known as ‘said equipment’), expressed or implied.  Buyer agrees that the property is transferred
without any warranty, expressed or implied, as to title, merchantability or
fitness for use or sale.  [¶]  Buyer acknowledges and agrees that it has
accepted delivery of the
said equipment and has assumed all responsibility and risk of loss for the said
equipment.  Buyer expressly warrants and
represents that it has inspected the said equipment, is aware of, and relies
solely on its own knowledge of the equipment condition, value, saleability, and
useability, and that the said equipment is in satisfactory and conforming
condition to the Buyer and fully accounted for. 
Buyer agrees that the Seller has made no representation, warranty,
statement of fact, or expression of opinion regarding the fitness or merchantability
of the said equipment.  Buyer hereby
waives any right it may
have to reject the said equipment or revoke its acceptance of the said equipment.”  Handwritten notations on the bill of sale identify
each of the three pieces of equipment by serial or VIN number and, as to the
truck and trailer, also by license plate number. 

            Plaintiff
took possession of the equipment without paying the purchase price in full.  Title documents respecting the truck and
trailer thereafter filed with the Department of Motor Vehicles identified
defendant as the lienholder. 

            Although
plaintiff anticipated obtaining a loan soon after the purchase to fund the
balance of the price, it failed to do so and a second bill of sale between the
parties, dated July 30, 2008, contains the
following handwritten notation:  â€œCheck
#103, $40,000.00.  Nonrefundable on said
balance of $59,000 and inspection, repair, interest from June 1st.  Payable as soon as possible.” 

            Plaintiff
did not pay the balance due, and in November 2009, defendant took possession of
all three pieces of equipment.  Plaintiff
then brought the instant action.href="#_ftn1" name="_ftnref1" title="">[1] 

            The
issue at trial was whether defendant had obtained a security interest in the
equipment to allow him to repossess the equipment after plaintiff failed to pay
in full.  Defendant testified the parties
intended that he would retain a security interest in all of the equipment until
the full purchase price had been paid. 
Plaintiff did not dispute that defendant retained a security interest in
the truck and trailer, but its officers denied they intended defendant would
retain a security interest in the bulldozer. 
Defendant testified he never filed a UCC-1 financing statement or any
other document to perfect a security interest in the bulldozer, and the only
documents which purport to create a security interest are the two bills of
sale.  

            The
trial court found that there was substantial evidence to show that the
bulldozer was part of the collateral for the full purchase price of the
equipment, and that defendant retained a security interest in the bulldozer
until the full, agreed upon price was paid, citing California Uniform Commercial
Code section 9203.  In its statement of
decision, the court explained:  “The
parties gave respective values to the truck, trailer, and D7 Cat [bulldozer] from
which a reasonable inference can be drawn to show it was intended that the D7
Cat was to be part of the collateral.  If
the parties had intended that the D7 Cat was not to be part of the collateral
they would have so specified. 
Furthermore, they could have adjusted the values to the equipment
accordingly.  [¶]  The court finds that until plaintiff paid the
full price of the agreement, Mr. Wurlitzer had a vendor’s lien (or security
interest) in the D7 Cat to which he had a right to foreclose.  Therefore, Mr. Wurlitzer’s foreclosure was
proper.  [¶]  In conclusion, the plaintiff has failed to
meet its burden of proof as to each cause of action.” 

            Plaintiff’s
motion for a new trial was denied. 

DISCUSSION

I

>The Trial Court Did Not Err
in Finding a Security Agreement Existed

            Plaintiff
contends the trial court erred in finding defendant had a security interest in
the bulldozer because, as a matter of law, no security agreement could have
been created under the circumstances, and there was insufficient evidence to
support its finding defendant retained a security interest in the bulldozer. 

            When,
as here, a trial court’s construction of a written agreement is challenged on
appeal, the scope and standard of review depend on whether, as here, the trial
judge admitted conflicting extrinsic evidence to resolve any ambiguity or
uncertainty in the contract.  If
extrinsic evidence was admitted, and if that evidence was in conflict, then we
apply the substantial evidence rule to the factual findings made by the trial
court.  (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165-1166.)  Applying this standard of review, we reject
plaintiff’s contentions, and shall affirm the judgment. 

            A
security interest is an interest in personal property that secures payment or
performance of an obligation.  (Cal. U. Com.
Code, § 1201, subd. (b)(35);href="#_ftn2"
name="_ftnref2" title="">[2] see generally, 4 Witkin, Summary of Cal. Law (10th ed. 2005)
Secured Transactions in Personal Property, § 36, p. 592.)  A “security agreement” is one which “creates
or provides for a security interest.”  (§
9102, subd. (a)(73).)  

            Section
9203 provides that a security interest is enforceable “only if each of the
following conditions is satisfied:  [¶]  (1) Value has been given.  [¶]  (2)
The debtor has rights in the collateral . . . [and]  [¶]  (3)
. . . [¶]  (A) The debtor has
authenticated a security agreement that provides a description of the
collateral . . . .”  (§
9203, subd. (b); Oxford Street> Properties, LLC v.
Rehabilitation Associates, LLC (2012) 206 Cal.App.4th
296, 308.)  The parties do not dispute
that the first two factors are satisfied: 
value was given, and the debtor -- plaintiff -- had rights in the purported
collateral by virtue of the bill of sale which transferred the equipment to
plaintiff.  The issue remains whether the
debtor authenticated a “security agreement” creating a security interest in the
equipment. 

            Nothing in the code requires the
debtor to sign a separate, formal document labeled “security agreement” in
order to create a valid security interest.  (Komas
v. Future Systems, Inc. (1977) 71 Cal.App.3d 809, 814 (Komas).)  And, “ ‘[n]o magic
words or precise form are necessary to create or provide for a security
interest . . . . 
[Citations.]’ ”  (>In re
Amex-Protein Development Corp. (9th Cir. 1974) 504 F.2d 1056, 1058-1059; >Komas, supra, 71 Cal.App.3d at p. 816.)
 Rather, the California Uniform Commercial
Code stresses simplicity and flexibility, and documents are to be construed
liberally to validate security agreements.  (In >re Amex-Protein Development Corp., >supra, at p. 1059.)  Therefore, “ â€˜[a] writing or writings,
regardless of label, which adequately describes the collateral, carries the
signature of the debtor, and establishes that in fact a security interest was
agreed upon, would satisfy both the formal requirements of the statute and the
policies behind it.  [Citations.]’ ”  (Komas,
71 Cal.App.3d at pp. 814, 816; compare Needle
v. Lasco Industries, Inc. (1970) 10 Cal.App.3d 1105, 1108 [financing
statement did not constitute a security agreement because it did not show
debtor’s agreement to grant a security interest and does not specify the
obligation whose performance is secured].) 


            In
addition, “[t]here is no language in the Commercial Code stating that the terms
of the security agreement must be included in a single document.  In fact, under its broad definition of ‘agreement,’
the code indicates otherwise:  â€˜ “Agreement”
means the bargain of the parties in fact as found in their language or by
implication from other circumstances including course of dealing or usage of
trade or course of performance . . . .’  [Citations.] 
Thus, the question is whether the documents presented to the trial
court, taken together, showed an agreement between the parties that the
creditor would have a security interest in the property.”  (Komas,
supra, 71 Cal.App.3d at pp. 814-815.) 
In Komas, for example, the
respondent conceded that “the financing statement, standing alone, did not
satisfy the requisites for a security agreement” (id. at p. 813), but the trial court found that the financing
statement, loan application, promissory note and other documents, taken
together, established that there was an agreement by the parties to create or
provide for a security interest.  (>Id. at p. 816; see also >New West
Fruit Corp. v. Coastal Berry Corp. (1991) 1 Cal.App.4th 92, 95-100 [sales
and marketing agreement along with evidence of industry trade and custom held
sufficient to create security interest].) 


            Stated
another way, the “creation of a valid security interest turns on ‘whether the
parties intended the transaction to have effect as security’ [citations]” (>New West Fruit Corp. v. Coastal Berry Corp.,
supra, 1 Cal.App.4th at p. 97) and
the court may resolve this question by considering together all the documents and
circumstances related to the transaction (Komas,
supra, 71 Cal.App.3d at pp. 814-815) as well as any other evidence
presented at the hearing (e.g., In re
Numeric Corp. (1st Cir. 1973) 485 F.2d 1328, 1331-1332; >New West Fruit Corp. v. Coastal Berry Corp.,
supra, 1 Cal.App.4th at pp. 99-100). 

            With
these principles in mind, we conclude the trial court did not err in finding
the parties intended the transaction to provide defendant a security interest
in the equipment until the purchase price was paid in full.

            It
is true that the signed bill(s) of sale -- considered alone -- do not expressly
state that defendant shall retain a security interest in the equipment until
plaintiff paid the purchase price in full. 
But the California Uniform Commercial Code comment to the current
version of section 9203 notes that neither that section’s requirement in
subdivision (b)(3)(A) (that the “debtor has authenticated a security agreement
that provides a description of the collateral”), nor section 9102’s definition
of a “ ‘security agreement’ ” as “an agreement that creates or provides for a
security interest,” operates as a “reject[ion of] the deeply rooted doctrine
that a bill of sale, although absolute in form, may be shown in fact to have
been given as security.”  (Cal. U. Com.
Code com., par. 3, West’s Ann. Cal. U. Com. Code (2002 ed.) foll. § 9203, p. 171.)  Consistent with that “deeply rooted
doctrine,” defendant testified he believed the bills of sale were given as security. 

            Other
documents related to the transaction do
reflect the parties’ intention to create a security interest:  the title documents filed with the Department
of Motor Vehicles after the transaction identified defendant as the lienholder
for both the truck and trailer, which plaintiff acknowledged.  Those title documents reflect the existence of
a security interest in those two items.  (Cf.
T & O Mobile Homes v. United California
Bank (1985) 40 Cal.3d 441, 447-450.) 
Taken together, the bill of sale and the title documents indicate the
parties intended that a security interest would be created by virtue of the
transaction.  (Cf. Komas, supra, 71 Cal.App.3d at p. 816.)  Other evidence adduced at trial further
supported that conclusion.  Defendant
testified the parties intended he would retain a security interest in all of
the equipment identified on the bill of sale (including the bulldozer) until
the full purchase price had been paid.  The
bill of sale executed at the time of the transaction provided a detailed
description of all three pieces of equipment, including serial and VIN numbers,
which provided information necessary for (among others) any future enforcement
of a security interest.  (§ 9108, subd.
(b)(6).)  These elements, taken together,
were sufficient to allow the trial court to find that the parties agreed
plaintiff could take possession of the equipment without paying for it with the
understanding that the equipment would act as collateral for plaintiff’s
promise to pay and that defendant would therefore have a security interest in all
the equipment he agreed to sell to plaintiff, including the bulldozer.  (Cf. Komas,
supra, 71 Cal.App.3d at p. 816.)  

            In
so doing, the trial court did not err in considering defendant’s trial
testimony about the parties’ intentions at the time of the transaction.  (New
West Fruit Corp. v. Coastal Berry Corp., supra, 1 Cal.App.4th at pp. 97,
99.)  Plaintiff “recognized” the
existence of defendant’s security interest in the truck and trailer; it
challenged only whether the scope of the security interest extended to the
bulldozer.  In analyzing the scope of a
security interest, courts “apply general contractual interpretation principles.
 â€˜[T]o determine the intended scope of
secured obligations we must look to the reasonable expectations of the parties.
 [Citation.]  To this end we utilize general principles
governing commercial agreements as well as specific rules pertaining to secured
transactions.’  [Citation.]  Under the California Uniform Commercial Code,
an agreement ‘means the bargain of the parties in fact, as found in their
language or inferred from other circumstances . . . .’  [Citation.]” 
(Oxford Street Properties, LLC v.
Rehabilitation Associates, LLC, supra, 206 Cal.App.4th at p. 309; >New West Fruit Corp. v. Coastal Berry Corp.,
supra, 1 Cal.App.4th at p. 99.)  The
trial court was entitled to rely upon defendant’s testimony concerning the
circumstances of the parties’ bargain, and to credit his testimony that the
parties intended him to retain a security interest in all items of equipment.  (New
West Fruit Corp. v. Coastal Berry Corp., supra, at pp. 95, 99-100 [trial
testimony of the plaintiff’s president concerning the parties’ agreement and
similar transactions].)  Indeed, as
plaintiff plainly allowed defendant to retain a security interest in the truck
and trailer, the two least valuable of the three equipment pieces ($5,000 and
$6,000, respectively), it makes little sense it would have excluded the far
more expensive bulldozer ($48,000) from an agreement to allow a security
interest.  

            Plaintiff
cites Burlesci v. Petersen (1998) 68 Cal.App.4th
1062 for the proposition that parole evidence may be introduced to show whether
a security interest is intended “only . . . if the party seeking to
introduce the parole evidence is the debtor.”  Burlesci
does not so hold.  Rather, in >Burlesci, the appellate court held nonsuit
should not have been granted in favor of Petersen’s predecessor Cummings after
Burlesci presented her evidence because that evidence -- viewed in the light
most favorable to her claims -- was sufficient to avoid a nonsuit on all but
two causes of action.  (>Id. at p. 1065.)  In so doing, the court also rejected Cummings’s
assertion that Burlesci’s voluntary delivery of collateral “pursuant to an
agreement of any kind is sufficient to create a valid securing interest” in it
(id. at p. 1067), as Cummings had
obtained the collateral by agreeing to “stor[e] the equipment solely as a favor
to Burlesci’s husband, not as an assertion of his security interest.”  (Id.
at p. 1068.)  Plaintiff’s lengthy quote from
the Burlesci opinion, including the
statement that “ ‘[m]ore harm than good would result from allowing creditors to
establish a secured status by parole evidence after they have neglected the
simple formality of obtaining a signed writing’ [citation]” (>id. at p. 1068) is dictum and, because
it represents a quote from a California Uniform Commercial Code comment pertaining
to a former version of the law no longer in effect, unpersuasive.  (The current version of  § 9203 was added by Stats. 1999, ch. 991, § 35,
operative July 1, 2001; amended by Stats. 2006, ch. 254, § 53, eff. Jan. 1,
2007; see 4 Witkin, Summary of Cal. Law, supra,
§§ 19-21, pp. 580-582.) 

II

>The Trial Court Did Not
Abuse its Discretion in Denying Plaintiff’s New Trial Motion

            Plaintiff
moved for a new trial on the grounds of accident/surprise, asserting it had no
way of anticipating the trial court’s reasoning and inadequate damages, in that
it should have been awarded damages.  It
also argued insufficient evidence established the existence of a security
agreement or interest, and the judgment was against the law, because parole
evidence cannot establish the existence of a security agreement or
interest.  (Code Civ. Proc., § 657, subds.
3, 5, 6, 7.) 

            The
trial court set the motion for hearing on a particular date; the parties
stipulated to continue the hearing to a future date “based upon the
availability [of the trial judge] and counsel for the parties,” but the matter
was never rescheduled.  The hearing
proceeded on the date originally set for hearing.  Plaintiff’s counsel did not appear; defendant’s
counsel did appear.  The court denied
plaintiff’s motion. 

            Trial
courts generally have broad discretion in deciding whether to grant a request
for a continuance.  (Oliveros v. County> of >Los Angeles (2004) 120 Cal.App.4th 1389, 1395.)  Plaintiff contends the trial court abused its
discretion when it conducted the motion for a new trial “in counsel’s absence,
despite a stipulation of the parties to continue the hearing so counsel could be
present.” 

            We
find no abuse of discretion.  Although plaintiff’s
counsel discussed with the court clerk his desire to have his motion for new
trial continued to a different date than that set by the court, and sent an
informal letter containing his request, he did not file a formal request for a
continuance of the hearing until the day before he knew the motion was set for
hearing.  Under these circumstances,
counsel cannot show the court abused its discretion in denying plaintiff’s
untimely request and proceeding with the hearing on the day scheduled for it to
be heard. 

DISPOSITION

            The judgment is affirmed.  Defendant is awarded costs on appeal.  (Cal. Rules of Court, rule 8,278(a)(1),
(2).) 

 

 

 

                                                                                              NICHOLSON              , J.

 

 

 

We concur:

 

 

 

          BLEASE                       , Acting P. J.

 

 

 

          MAURO                       , J.