Opinion
A100711.
7-28-2003
FREMONT BANK, Plaintiff and Respondent, v. SUBACUTE MEDICAL SERVICES et al., Defendants and Appellants.
Defendants Subacute Medical Services and Guy R. Seaton and Jacqueline K. Seaton appeal from a judgment entered in favor of plaintiff Fremont Bank. The trial court granted summary judgment on Fremonts causes of action against Subacute for breach of a promissory note and against the Seatons for breach of a guaranty. Subacute contends that the trial court erred because Subacute and Fremont had reached a binding settlement of Fremonts claim. The Seatons contend that the trial court erred in concluding that the guaranty they executed covers the promissory note at issue. We reject defendants contentions and affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On September 23, 1997, Fremont made a $ 277,000 loan to Subacute, evidenced by a promissory note signed by the Seatons on behalf of Subacute (1997 Note). The Seatons also executed a commercial guaranty, also dated September 23, 1997, promising to pay to Fremont the indebtedness of Subacute on terms and conditions described in the guaranty. The guaranty states in bold text:
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, [the Seatons] absolutely and unconditionally guarantee and promise to pay, jointly and severally, to [Fremont] the Indebtedness (as that term is defined below) of [Subacute] to [Fremont] on the terms and conditions set forth in this Guaranty. Under this Guaranty, the liability of Guarantor is unlimited and the obligations of Guarantor are continuing. (Italics added.)
The Guaranty defines the "Indebtedness" as follows:
The word "Indebtedness" is used in its most comprehensive sense and means and includes any and all of [Subacutes] liabilities, obligations, debts, and indebtedness to [Fremont], now existing or hereinafter incurred or created . . . . (Italics added.)
Subsequently, on February 16, 2000, Fremont extended a $ 100,000 line of credit to Subacute, also evidenced by a promissory note signed by the Seatons on behalf of Subacute (2000 Note).
Subacute paid off the 1997 Note in full in February 2002. The 2000 Note matured and became due and payable on March 1, 2001. Subacute failed to pay off the 2000 Note when it became due. On May 15, 2001, Fremont made a written demand upon Subacute to pay off the 2000 Note, which demand was not met. On the same date, Fremont made a written demand upon the Seatons for payment of the 2000 Note pursuant to the guaranty, which demand also was not met.
Fremont filed suit against Subacute and the Seatons on July 20, 2001. On July 2, 2002, Fremont filed a motion for summary judgment against Subacute for breach of the 2000 Note and against the Seatons for breach of the guaranty.
On July 12, 2002, the parties attended a settlement conference before the Honorable David E. Hunter of the County of Alameda Superior Court. At that settlement conference, Fremont and Subacute placed a settlement on the record under which Subacute stipulated to entry of judgment in the amount of $ 123,720.39, and Fremont agreed not to seek a writ of execution as long as Subacute made monthly $ 5,000 payments to Fremont. The settlement was conditioned upon execution of the stipulation for entry of judgment by an authorized corporate officer of Subacute. Fremont and the Seatons did not reach a settlement on the cause of action for breach of guaranty.
On July 16, 2002, Fremonts counsel faxed and mailed the stipulation for entry of judgment to Subacutes counsel for execution by an authorized corporate officer of Subacute. On or about August 6, 2002, Fremont made another request for an executed stipulation from Subacute. Subsequently, on or about August 21, 2002, Fremont told Subacute that there was no settlement because Subacute had not executed the stipulation, and that Fremont intended to move forward with its motion for summary judgment against Subacute. Subacute did not return an executed stipulation until the evening of August 27, 2002—after issuance of a tentative ruling granting Fremonts motion for summary judgment and the day before the hearing on the motion.
The Seatons August 14, 2002, opposition to Fremonts motion for summary judgment asserted that Subacute and Fremont had settled the first cause of action. Fremonts August 23, 2002, reply denied that there was a settlement, citing a supporting declaration by its counsel. At the August 28, 2002, hearing on the motion, counsel for Subacute argued that the motion should be denied with respect to Subacute because Subacute and Fremont had entered into a settlement. Counsel for Subacute admitted that Subacute had not presented to the court any evidence of an enforceable settlement with Fremont. Counsel also argued that the Seatons guaranty did not cover the 2000 Note.
On September 5, 2002, the trial court entered an order granting summary judgment to Fremont against Subacute for breach of the 2000 Note and against the Seatons for breach of the guaranty. The trial court concluded that there was no evidence of a binding settlement that would preclude entry of judgment against Subacute on the 2000 Note, and that the guaranty was a continuing guaranty that covered the 2000 Note.
DISCUSSION
I. Standard of Review
Summary judgment is properly granted if there are no triable issues of fact in dispute and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) In moving for summary judgment, a plaintiff has met its burden of showing that there is no defense to a cause of action if it has proved each element of the cause of action entitling it to judgment on that cause of action. (Code Civ. Proc., § 437c, subd. (p)(1); Aguilar, supra, at p. 849.) Once a plaintiff has met that burden, the burden shifts to the defendant to show that a triable issue on one or more material facts exists as to that cause of action or a defense thereto. (Code Civ. Proc., § 437c, subd. (p)(1); Aguilar, supra, at p. 849.) On appeal, we exercise our independent judgment in determining whether there are triable issues of material fact and whether the moving party is entitled to judgment as a matter of law. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.)
II. The Trial Court Properly Granted Summary Judgment to Fremont and Against Subacute on the 2000 Note Because There Was No Evidence of a Settlement
The trial court concluded that Fremont was entitled to summary judgment on its first cause of action, for breach of the 2000 Note. Subacute contends that Fremont was not entitled to judgment on the claim because there was a valid settlement agreement between Fremont and Subacute before the summary judgment hearing. The trial court rejected that argument, noting that Subacute had not submitted any "evidence to support its contention that the first cause of action is moot or barred by a binding settlement."
A binding settlement is a valid defense precluding summary judgment. Subacute bore the burden of presenting evidence of a settlement in opposing Fremonts motion for summary judgment. (Code Civ. Proc., § 437c, subd. (p)(1); Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 849.) Subacute failed to present any such evidence. Counsel for Subacute asserted at the summary judgment hearing that the parties had settled the first cause of action, but also admitted that there was no evidence of the settlement before the trial court. Subacute does not contend on appeal that there was any evidence of a binding settlement before the trial court.
In deciding a motion for summary judgment, a court is "limited to facts shown by the evidentiary materials submitted, as well as those admitted and uncontested in the pleadings." (Committee to Save the Beverly Highlands Homes Assn. v. Beverly Highlands Homes Assn. (2001) 92 Cal.App.4th 1247, 1261 .) The assertions of Subacutes counsel, unsupported by declarations or other evidence, did not provide a legal basis to deny Fremonts motion for summary judgment. (Lyons v. Security Pacific Nat. Bank (1995) 40 Cal.App.4th 1001, 1014.) Therefore, we affirm the Superior Courts grant of summary judgment to Fremont on the first cause of action for breach of the 2000 Note.
III. The Trial Court Properly Granted Summary Judgment to Fremont and Against the Seatons on the Guaranty Because It Is a Continuing Guaranty
On the second cause of action, the trial court concluded that the Seatons were liable for the 2000 Note under the guaranty, which the court concluded was a continuing guaranty. We affirm.
A. The Guaranty Is Clear and Unambiguous
Preliminarily, the Seatons contend that we should not construe the Guaranty as continuing because the intention of the parties is not clearly manifested. This contention is without merit.
A guaranty, like other contracts of suretyship, is governed by the same rules applicable to the interpretation of other contracts. (Civ. Code, § 2837.) If the language of a guaranty is "so precise and express that there can be no doubt as to the intention of its terms the court cannot do otherwise than follow the declared intention of the parties." (Standard Oil Co. of Cal. v. V.C. Houser (1950) 101 Cal. App. 2d 480, 487, 225 P.2d 539.) Here, the guaranty executed by the Seatons in September 1997 is expressly labeled a "Continuing Unlimited Guaranty;" the guaranty states that the Seatons "absolutely and unconditionally guarantee and promise to pay" the indebtedness of Subacute to Fremont; the guaranty emphasizes that "the liability of Guarantor is unlimited and the obligations of Guarantor are continuing;" and the guaranty defines "Indebtedness" in its "most comprehensive sense," including "any and all" obligations of Subacute to Fremont "now existing or hereinafter incurred or created." Thus, the guaranty expressly contemplates that Subacute may assume further debt and that any such further debt will be within the scope of the guarantors promise to pay.
A "continuing guaranty" is "[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." (Civ. Code, § 2814.) A continuing guaranty is "designed to secure future transactions." (Champion Home Builders Co. v. Sipes (1990) 219 Cal. App. 3d 1415, 1424, 269 Cal. Rptr. 75.) The language of the guaranty in this case is similar in varying degrees to continuing guaranties enforced in several other California court decisions. (See, e.g., Oakland Bank of Commerce v. Washington (1970) 6 Cal. App. 3d 793, 796, 86 Cal. Rptr. 276 ["any and all" obligations "heretofore, now, or hereafter made, incurred or created . . ."]; Champion Home Builders, supra, at p. 1424 [guaranties extended to "any and all indebtedness"]; Bank of Santa Ana v. Molina (1969) 1 Cal. App. 3d 607, 611, fn. 1, 81 Cal. Rptr. 885 [guarantee of "payment of any and all indebtedness . . . which Debtor may now or at any time hereafter owe to Bank"]; Perry v. Cassidy (1959) 170 Cal. App. 2d 175, 176, 338 P.2d 531 [guarantee of payment of "any and all indebtedness," including all liabilities "heretofore, now, or hereafter made, incurred or created"];Standard Oil Co. of Cal. v. V.C. Houser, supra, 101 Cal. App. 2d at p. 483 [guarantee of "all charges" and statement that "this guaranty is a continuing one"]; Bank of America v. Granger (1931) 115 Cal.App. 210, 213, 1 P.2d 479 [guarantee of payment of "all sums of money which the said bank may have heretofore or hereafter advance or loan to said corporation"].)
The Seatons also argue that there is a presumption against finding that a guaranty is continuing, but that presumption only comes into play if the intention of the parties is not clearly manifested in the agreement. (Zellerbach Paper Co. v. Virden Pkg. Co. (1935) 10 Cal. App. 2d 635, 645, citing Goldman v. Dangerfield (1929) 101 Cal.App. 67, 73, 281 P. 400.) The Seatons do not point to any ambiguities in the guaranty creating any uncertainty as to whether the parties intended the guaranty to be continuing.
Because the language of the guaranty is clear, it also would be improper to turn to parol evidence to interpret the guaranty. (Standard Oil Co. of Cal. v. V.C. Houser, supra, 101 Cal. App. 2d at p. 487.) The cases appellants cite that examine parol evidence do so only after concluding that contract language is uncertain. (Superior Wholesale Electric Co., Inc. v. Cameron (1968) 264 Cal. App. 2d 488, 493, 70 Cal. Rptr. 636; Berg Metals Corp. v. Wilson (1959) 170 Cal. App. 2d 559, 568, 339 P.2d 869.)
We conclude that the clear and unambiguous language of the guaranty demonstrates that it is a continuing guaranty.
B. The 2000 Note Is Within the Scope of the Guaranty
The Seatons also argue that, even if the guaranty is continuing, the 2000 Note is not within the scope of the guaranty because the 1997 and 2000 Notes are "so different and distinct from each other that they could not together be construed as one transaction or successive transactions of the same matter." The Seatons emphasize differences between the two loans in terms of purposes, interest rates, payment schedules, and security. However, they do not point to any language in the guaranty conditioning continuing liability on similarities between loans. To the contrary, the guaranty covers all of Subacutes indebtedness without limitation. Neither do the Seatons cite any authority suggesting that successive loans between a lender and borrower must be similar in any of the respects they highlight in order to be covered by a continuing guaranty. Civil Code section 2814 provides no authority for the Seatons contention that the two loans must be part of "one transaction" or successive transactions "of the same matter" to be within the scope of a continuing guaranty.
C. The Seatons Are Not Exonerated from Liability on the 2000 Note Under Civil Code Section 2819
Finally, the Seatons contend that, even if the Guaranty is continuing and the 2000 Note is within its scope, they are exonerated from liability under Civil Code section 2819 because the 2000 Note "with its higher interest rate and different terms, materially altered the obligations of the Seatons under the previous guaranty." Again, we disagree.
Civil Code section 2819 provides: "A surety is exonerated, except so far as he or she may be indemnified by the principal, if by any act of the creditor, without the consent of the surety the original obligation of the principal is altered in any respect, or the remedies or rights of the creditor against the principal, in respect thereto, in any way impaired or suspended. . . ." Section 2819 "applies only where there is a material alteration of the principal obligation in a manner not originally contemplated by the surety." (R. P. Richards, Inc. v. Chartered Construction Corp. (2000) 83 Cal.App.4th 146, 154.) Section 2819 addresses alterations to the terms of a principals obligation to a creditor where the obligation is guaranteed by a surety. Here, the principal is Subacute, the creditor is Fremont, the Seatons are the sureties, and Subacutes obligations to Fremont are the 1997 and 2000 Notes.
Section 2819 does not, as the Seatons suggest, address alterations to a suretys obligations under a guaranty. The execution of the 2000 Note did alter the obligations of the Seatons under the guaranty, but a continuing guaranty contemplates such alterations. The determinative issue for purposes of section 2819 is whether Fremont altered Subacutes obligations to Fremont under the 2000 Note without the Seatons consent. The Seatons stipulated below that Fremont has not altered the obligations or terms of the 2000 Note. Absent evidence of such alteration, section 2819 has no application to this case.
Notably, there is no argument that the Seatons were unaware of the 2000 Note, nor can there be, because the Seatons executed the Note on behalf of Subacute.
The Seatons do not file a reply to Fremonts alternative contention that, even if section 2819 were applicable, the Seatons waived the section 2819 defense in the guaranty. The Seatons expressly waived any right or defense based on "any modification or change in terms of the Indebtedness," which encompasses the section 2819 defense.
We agree with the trial courts conclusion that the guaranty clearly created a continuing obligation applicable to future loans made by Fremont to Subacute. We affirm the grant of summary judgment to Fremont and against the Seatons on the second cause of action.
DISPOSITION
The judgment is affirmed.
We concur, JONES, P.J., SIMONS, J.