The Jean Michele Cross Revocable Trust v. Four P’s Group, LLC, et al

Case Number

23CV02092

Case Type

Hearing Date / Time

Wed, 05/01/2024 - 10:00

Nature of Proceedings

Motion By Plaintiff For Summary Judgment Against Defendant Jeff L. Handy Or, In The Alternative, For Summary Adjudication As To The Second Through Eighth Affirmative Defenses

Tentative Ruling

For Plaintiff The Jean Michele Cross Revocable Trust: J. Paul Gignac, Rimon, P.C.        

For Defendant Four P’s Group, LLC: No appearance

For Defendant Jeffrey Handy: Self-Represented

                  

RULING

For all reasons discussed herein, the motion of Plaintiff for summary judgment is denied. The alternative motion of Plaintiff for summary adjudication of the second through eighth affirmative defenses is granted, in part, with respect to the second, third, fourth, fifth, and seventh affirmative defenses asserted in the answer filed by Defendant Jeffrey Handy on October 23, 2023. Except as otherwise herein granted, the motion for summary adjudication of Plaintiff is denied.

The trial date of 6/12/24 is confirmed.

Background

On May 12, 2023, Plaintiff The Jean Michele Cross Revocable Trust (the Trust) filed a complaint against Defendants Four P’s Group, LLC (FPG) and Jeff L. Handy (Handy) (collectively Defendants) alleging two causes of action: (1) breach of written contract (against all Defendants); and (2) breach of personal guaranty (against Handy only). As alleged in the complaint:

Handy is the majority owner, President, and managing member of FPG. (Compl., ¶¶ 4, 10.) The Trust, by its Trustee Jean Michele Cross (Cross), and FPG, by its owner and managing member Handy, entered into a written 76-month Convertible Note Agreement (the Note Agreement) which provides that, in consideration for the payment of $734,000, Defendants agree to pay to the Trust the following amounts: $3,000 per month from November 2020 through April 2021; $6,114 per month from May 2021 through October 2022; an interest payment in the amount of $8,000 in November 2022; $20,389 per month from December 2022 through June 2026 (comprised of $14,275 principal and $6,114 interest); and, $10,684 at maturity in June 2026. (Id. at ¶¶ 1, 10 & Exh. 1.)

The Note Agreement further provides that a fee in the amount of 5 percent will be added to any late payments of principal, interest, or principal with interest. (Compl., ¶ 12.) In the event that any payment under the Note Agreement is not paid when due and the parties cannot reach an agreement for resolution, Defendants agreed to pay reasonable attorney’s fees incurred by the Trust to recover payments due. (Id. at ¶ 14.) In addition, the Note Agreement provides that its repayment will be guaranteed by FPG and “personally guaranteed” by Handy. (Id. at ¶¶ 1, 13.)

From May 2021 thru October 2022, December 2022 through June 2026, and in November 2022, short payments were made by Defendants. (Compl., ¶¶ 15-17.) Defendants failed to pay a total of $75,997.00 in principal and interest due under the Note Agreement. (Id. at ¶ 18.) In addition, Defendants owe late fees in the amount of $4,699.85. (Id. at ¶ 19.) Counsel for the Trust sent a letter to Defendants in an attempt to reach an agreement for resolution as required under the Note Agreement but received no response. (Id. at ¶ 20 & Exh. 2.)

The default of FPG was entered as requested by the Trust on July 28, 2023. On October 23, 2023, Handy filed an answer to the complaint generally denying its allegations and asserting eight affirmative defenses.

On December 15, 2023, the Court entered judgment (the judgment) in favor of the Trust and against FPG in the sum of $831,047.72, plus post judgment interest at the rate of 10 percent per annum commencing on the date of entry of the judgment.

On February 9, 2024, the Trust filed a motion for summary judgment as to each cause of action alleged against Handy in the complaint. Alternatively, the Trust moves for summary adjudication as to the second through eighth affirmative defenses alleged in the answer to the complaint filed by Handy. The motion is opposed by Handy.

Analysis

Under Code of Civil Procedure section 437c, a motion for summary judgment “shall 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 judgment as a matter of law.” (Code Civ. Proc. § 437c, subd. (c).)

“From commencement to conclusion, the moving party bears the burden of persuasion that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 845, 850 (Aguilar).) A Plaintiff moving for summary judgment meets its burden of persuasion by establishing “through such evidence of a ‘requisite degree of belief[]’ ” that each element of the cause of action has been proved, and that as a result, there is no defense to the cause of action. (Id. at p. 853, citation omitted [also noting that a Plaintiff moving for summary judgment is not required to disprove any defense asserted by the Defendant]; see also Code Civ. Proc., § 437c, subd. (p)(1).) The moving Plaintiff also bears an initial burden of production to make a prima facie showing, sufficient to support the Plaintiff’s position, of the nonexistence of any triable issue of material fact. (Aguilar, supra, 25 Cal.4th at pp. 851-852.)

If the moving Plaintiff carries the burden of production, the burden shifts to the Defendant to present evidence sufficient to make a prima facie showing of the existence of a triable issue of material fact as to the cause of action alleged by Plaintiff or a defense thereto. (Aguilar, supra, 25 Cal.4th at p. 850; Code Civ. Proc. § 437c, subd. (p)(1).)

Motions for summary adjudication “proceed in all procedural respects as a motion for summary judgment.” (Code Civ. Proc., § 437c, subd. (f)(2); Oroville Hospital v. Superior Court (2022) 74 Cal.App.5th 382, 399.) “A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty….A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)

The undisputed or not reasonably disputed material facts:

On summary judgment, the Court considers “all of the competent evidence presented by the parties (declarations, judicial admissions, responses to discovery, deposition testimony, and items of which judicial notice may be taken) and the uncontradicted inferences supported by the evidence. [Citation.] ‘We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.’ [Citation.] However, triable issues of fact can only be created by conflicting evidence, not speculation or conjecture. [Citation.] We do not weigh the evidence and inferences, but merely determine whether a reasonable trier of fact could find in favor of the party opposing the motion, and must deny the motion when there is some evidence that, if believed, would support judgment in favor of the nonmoving party. [Citation.] Finally, we resolve any doubt as to the granting of the motion in favor of the opposing party. [Citation.]” (Lattimore v. Dickey (2015) 239 Cal.App.4th 959, 967 (Lattimore).)

In support of the motion, the Trust submits a separate statement setting forth facts which the Trust asserts are material and undisputed. Many of the matters set forth in the separate statement of the Trust are supported in significant part by the deemed admissions of Handy to the Trust’s first set of requests for admissions (the RFA) as provided in the Court’s Minute Order dated January 31, 2024 (the Minute Order), pursuant to which the Court granted the motion of the Trust to deem the truth of the matters specified in the RFA as admitted by Handy. (See, e.g., Sep. Stmt., UMF Nos. 1, 3, 4, 5; Memorandum at p. 7; Gignac Decl., ¶¶ 5, 6 & Exhs. 2, 3.)

The Minute Order “establishes, by judicial fiat, that a nonresponding party has responded to the requests by admitting the truth of all matters contained therein.” (Wilcox v. Birtwhistle (1999) 21 Cal.4th 973, 979.) There is no evidence or information in the record presently before the Court to establish that Handy attempted to withdraw or amend the deemed admissions to the RFA as provided in the Minute Order. (See Code Civ. Proc., § 2033.300 [setting forth procedure to withdraw or amend and admission.].) Therefore, and subject to exceptions, the truth of the matters contained in the RFA are admitted by Handy pursuant to the Minute Order. (Lattimore, supra, 239 Cal.App.4th at p. 971 [deemed admission that doctor met applicable standard of care precluded wrongful death claim].)

In addition, in the responding separate statement submitted by Handy in support of his opposition to the motion, Handy does not offer any facts or evidence in response to undisputed material fact (UMF) numbers 8 through 13, 19 through 21, 24, 30, 33, 35, and 38 through 41. (See Resp. Sep. Stmt. at pp. 3-4 [UMF Nos. 8-13]; 5-6 [UMF Nos. 19-21]; 7 [UMF No. 24]; 8 [UMF No. 30]; 9 [UMF No. 33]; 10 [UMF No. 35]; 11-12 [UMF Nos. 38-41].) Therefore, with respect to the matters stated in UMF Nos. 8 through 13, 19 through 21, 24, 30, 33, 35, and 38 through 41, Handy has failed to demonstrate that there exist triable issues of material fact requiring a trial. (Code Civ. Proc., § 437c, subd. (p)(1) [opposing Defendant must set forth “specific facts”].)

With respect to matters set forth in the moving separate statement to which Handy has offered a response, to the extent that these matters have been admitted by Handy in response to the RFA and not appropriately withdrawn or amended, they have been conclusively established against Handy pursuant to the Minute Order to the extent the corresponding RFA is unambiguous and not subject to different meanings, as further discussed above. (Code Civ. Proc., § 2033.410, subd. (a); Monroy v. City of Los Angeles (2008) 164 Cal.App.4th 248, 260.) Therefore, and subject to exceptions, Handy may not introduce contradictory evidence as to the matters deemed admitted pursuant to the Minute Order. (Murillo v. Superior Court (2006) 143 Cal.App.4th 730, 736.)

Furthermore, “[o]nly admissible evidence is liberally construed in deciding whether there is a triable issue.” (Bozzi v. Nordstrom, Inc. (2010) 186 Cal.App.4th 755, 761, original italics.) When a Defendant fails to file declarations in opposition to the declarations offered by the Plaintiff, “the trial Court [is] entitled to accept as true the facts stated in support of Plaintiff’s motion which were within the personal knowledge of the affiant and to which the affiant could competently testify.” (Dugar v. Happy Tiger Records, Inc. (1974) 41 Cal.App.3d 811, 818.) To the extent a party opposing a motion for summary judgment relies on conclusory or speculative assertions, summary judgment may be appropriate. (Nelson v. United Technologies (1999) 74 Cal.App.4th 597, 614.)

Absent from the opposition of Handy are any declarations or other evidence directly opposing the information stated in the declaration of Jean Michele Cross (Cross) submitted by the Trust in support of the motion or which support the responses of Handy to the separate statement of the Trust. In addition, the matters offered by Handy in response to the moving separate statement, which are without any evidentiary support, are in large part conclusory and speculative. For these additional reasons, Handy has not provided sufficient admissible evidence from which the Court may find triable issues of material fact. Therefore, the Court is entitled to accept as true the matters offered in the separate statement of the Trust to the extent they are supported by admissible evidence.

It is undisputed that Cross and Handy signed the Note Agreement on, respectively, October 26, 2020, and November 3, 2020. (Resp. Sep. Stmt., UMF Nos. 2-4 & evidence cited therein [not reasonably disputed on these points].) Handy is the Owner and Managing Member of FPG. (Id. at UMF No. 5 & evidence cited therein [not reasonably disputed on this point].) The obligation to make payments to the Trust under the Note Agreement is “personally guaranteed” by Handy. (Id. at UMF No. 21 & evidence cited therein.) The Note Agreement is an enforceable contract. (Id. at UMF No. 1 & evidence cited therein [not reasonably disputed on this point].)

Under the Note Agreement and in consideration for payment of the sum of $734,000 by the Trust, payments were to be made to the Trust on or before the 11th day of the month in the amount of $3,000 from November 2020 through April 2021, $6,114 from May 2021 through October 2022, $8,000 in November 2022, $20,389 from December 2022 through June 2026 (comprised of $ 14,275 in principal and $6,114 in interest), and $10,684 at maturity in June 2026. (Resp. Sep. Stmt., UMF No. 6 & evidence cited therein [not reasonably disputed on this point].) Under the section titled “Interest”, “[a] late fee of 5% will be added to any late payment of principal, interest, or principal with interest.” (Id. at UMF Nos. 17, 22, 28 & evidence cited therein [not reasonably disputed on these points].)

The Trust has performed its obligations under the Note Agreement including by loaning the principal sum of $731,000. (Resp. Sep. Stmt., UMF Nos. 11-12 & evidence cited therein.) The Note Agreement was breached by a failure to make principal and interest payments to the Trust that were due or before the 11th of the month causing damages to the Trust. (Id. at UMF Nos. 7-8, 14, 23 & evidence cited therein [not reasonably disputed on these points].) No prepayments were made to the Trust under the Note Agreement. (Id. at UMF Nos. 9-10 & evidence cited therein.)

The Trust demanded that Handy honor his obligations under the Note Agreement. (Resp. Sep. Stmt., UMF No. 25 & evidence cited therein [not reasonably disputed on this point].) Handy has paid no amount of the principal due under the Note Agreement. (Id. at UMF No. 26 & evidence cited therein [not reasonably disputed on this point].)

The total amount due to the Trust for unpaid interest through April 11, 2024 is $77,990. (Resp. Sep. Stmt., UMF No. 27 & evidence cited therein [not reasonably disputed on this point].) The total late fees due to the Trust are $ 16,633.25, and the total amount of prejudgment interest due through April 30, 2024, is $22,077.39. (Id. at UMF Nos. 18-19, 29 & evidence cited therein [not reasonably disputed on these points].) The total amount of damages that the Trust has suffered as a result of the breach of written contract is $850,700.64. (Id. at UMF No. 20 & evidence cited therein.)

The first cause of action for breach of contract:

“To prevail on a cause of action for breach of contract, the Plaintiff must prove (1) the contract, (2) the Plaintiff's performance of the contract or excuse for nonperformance, (3) the Defendant’s breach, and (4) the resulting damage to the Plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.) “[T]he very existence of a contract is what gives rise to the duty to perform, and [] damages generally flow from the breach of that duty[.]” (Piedmont Capital Management, L.L.C. v. McElfish (2023) 94 Cal.App.5th 961.) “Whether a certain or undisputed state of facts establishes a contract is a question of law for the Court.” (DeLeon v. Verizon Wireless, LLC (2012) 207 Cal.App.4th 800, 813.) The Trust bears the burden of proving the existence of a contract with Handy, the Trust’s performance or excuse for nonperformance of the contract, a breach of the contract by Handy, and resulting damages. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

The Trust contends that undisputed material facts establish that the Note Agreement is an enforceable contract, that the Trust performed under the contract by loaning the principal sum of $734,000, that the Note Agreement was breached by a failure to make payments due on or before the 11th of the month, and that the Trust sustained quantifiable damages resulting from the breach of the Note Agreement. For these reasons, the Trust argues, it has satisfied the elements of a cause of action for breach of contract justifying summary judgment against Handy.

“ ‘The pleadings delimit the issues to be considered on a motion for summary judgment. [Citation.]’ [Citation.]” (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1253.) Therefore, “[s]ummary judgment cannot be granted on a ground not raised by the pleadings.” (Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1663.) In addition, evidence offered to support a claim that is outside the scope of the pleading at issue is irrelevant. (California Bank & Trust v. Lawlor (2013) 222 Cal.App.4th 625, 637, fn. 3.)

In the complaint, the Trust expressly alleges that the parties to the Note Agreement are the Trust and FPG. (See, e.g., Compl., ¶¶ 1 & 10.) Apart from asserting that Handy entered into the Note Agreement as the “Owner/Managing Member” of FPG and conclusively asserting that Handy personally guaranteed FPG’s obligations, there are no factual allegations to show that Handy was a party to the Note Agreement. Furthermore, though requests for leave to amend a complaint to assert unpleaded issues or claims are liberally granted, the Trust has not requested leave to amend the complaint to allege a claim for breach of contract against Handy. Therefore, because the theory of liability argued in the motion against Handy is not properly before the Court, this constitutes a sufficient ground on which the Court may deny the motion.

In addition, and to the extent the complaint is sufficient to allege that both Handy and FPG are parties to the Note Agreement (and the Court makes no findings in this regard), the Trust has not given notice that it is requesting summary adjudication as to any individual cause of action for breach of contract against a specific Defendant. Therefore, the Court cannot consider summary adjudication of the cause of action for breach of contract as against Handy only. (See Gonzales v. Superior Court (1987) 189 Cal.App.3d 1542, 1545-1546.)

Moreover, notwithstanding whether the complaint is sufficient to state a cause of action for breach of contract against Handy or whether the Trust has met its burden to demonstrate the existence of a contract, the Trust’s performance under the contract, a breach of the contract, or damages, the evidence offered by the Trust demonstrates that there exist triable issues of fact.

For example, the Trust has alleged, and the Note Agreement expressly identifies FPG as a California limited liability company. (Compl., ¶ 3; Cross Decl., Exh. A [describing FPG as an “LLC”].) “ ‘ “A limited liability company is a hybrid business entity formed under the Corporations Code and consisting of at least two ‘members’ [citation] who own membership interests [citation]. The company has a legal existence separate from its members. Its form provides members with limited liability to the same extent enjoyed by corporate shareholders [citation]....” [Citation.]’ [Citation].” (Western Surety Co. v. La Cumbre Office Partners, LLC (2017) 8 Cal.App.5th 125, 131 (Western Surety).)

As further discussed above, the express language of the Note Agreement shows that the parties to that agreement are the Trust and FPG. (See Cross Decl., Exh. A at p. 1.) Though Handy signed the contract, a reasonable interpretation of the Note Agreement demonstrates that he did so in his capacity as the “Owner” and “Managing Member” of FPG, as alleged in the complaint, and not in an individual capacity. (See Cross Decl., Exh. A at p. 2.) For this reason, the evidence offered by the Trust permits a reasonable inference that Handy was the managing member of FPG at the time he signed the Note Agreement such that the signing of the Note Agreement by Handy was, subject to exceptions, necessary and sufficient to bind FPG to its provisions. (Corp. Code, §§ 17703.01, subds. (a) & (b); Western Surety, supra, 8 Cal.App.5th at pp. 131-132.)

Furthermore, though Handy signed the Note Agreement, the contractual debts and obligations of FPG “do not become the debts, obligations, or other liabilities of [Handy] solely by reason of [Handy] acting as a member or manager acting as a manager for [FPG].” (Corp. Code, § 17703.04, subd. (a)(1).) In addition, and subject to exceptions, “managers of limited liability companies may not be held liable for the wrongful conduct of the companies merely because of the managers’ status….” (People v. Pacific Landmark, LLC (2005) 129 Cal.App.4th 1203, 1213, original italics (Pacific Landmark).)

To the extent the Trust contends that the deemed admitted responses to the RFA conclusively establish that Handy is a party to the Note Agreement, or that Handy breached the Note Agreement, “[a]lthough admissions are dispositive in most cases, a trial Court retains discretion to determine their scope and effect. An admission of a fact may be misleading. In those cases in which the Court determines that an admission may be susceptible of different meanings, the Court must use its discretion to determine the scope and effect of the admission so that it accurately reflects what facts are admitted in the light of other evidence.” (Fredericks v. Filbert Co. (1987) 189 Cal.App.3d 272, 277; see also Milton v. Montgomery Ward & Co., Inc. (1973) 33 Cal.App.3d 133, 138 [“[t]he trial Court has broad discretion in determining the admissibility and relevance of evidence”].)

The deemed admitted responses also conclusively establish that Handy is the owner and managing member of FPG, that his signature appears in the Note Agreement above the statement “Jeff Handy, Owner, Managing Member”, and that he was authorized to enter into the Note Agreement as the owner and managing member of FPG. (Gignac Decl., Exh. 2 [RFA Nos. 2-3 & 4-5].) Because a limited liability company such as FPG, by necessity, acts through its members, a trier of fact could reasonably infer from the evidence offered by the Trust that Handy signed the Note Agreement in a representative capacity and not individually as a party to the Note Agreement himself. (McCollum v. Steitz (1968) 261 Cal.App.2d 76, 80-81 [including the name of partnership below signature was sufficient to show the signature was made in a representative capacity]; Reliant Life Shares, LLC v. Cooper (2023) 90 Cal.App.5th 14, 31 [noting that an “LLC acts through its members].)

Furthermore, though RFA No. 6 asks Handy to admit that he breached the Note Agreement by failing to make payments to the Trust, this RFA is ambiguous to the extent that it is unclear whether it refers to the duties of Handy in his capacity as a managing member of FPG (for example, to ensure that FPG would perform its contractual obligations by transmitting payments under the Note Agreement) or whether the RFA refers to the personal guaranty purportedly made by Handy as referenced in RFA No. 12. (See Gignac Decl., Exh. 2 [RFA No. 12].) The Trust fails to explain these ambiguities including ambiguities that arise to the extent the Trust effectively contends that Handy personally guaranteed his own obligations under the Note Agreement. (See, e.g., Cadle Co. II v. Harvey (2000) 83 Cal.App.4th 927, 932-933 [discussion of “sham” guaranty]; Mead v. Sanwa Bank California (1998) 61 Cal.App.4th 561, 571, fn. 2 [discussing requirement of an “express” agreement obligating guarantor to be treated as a principal debtor in circumstances where creditor knows of guarantor status between co-obligors].) For these reasons, RFP No. 6 is susceptible of different meanings and is insufficient to show for present purposes that there exists an enforceable contract between Handy and the Trust.

In addition, apart from addressing whether Handy personally guaranteed the obligation to make payments to the Trust under the Note Agreement, there are no RFA which conclusively establish that Handy entered into the Note Agreement in any capacity other than as the Owner and Managing Member of FPG. (See Gignac Decl., Exh. 2 [RFA Nos. 12 & 13].) To the extent that the Note Agreement itself is ambiguous or susceptible of more than one plausible interpretation with respect to the identity of its parties, there exist questions of fact that preclude summary judgment. (Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1351.)

Considering the evidence further discussed above, including inferences that may be drawn therefrom, a trier of fact could find that Handy signed the Note Agreement in a representative capacity as a managing member and owner of FPG and not as an individual party to the contract. The Trust offers no reasoned argument to demonstrate otherwise. In addition, the Trust does not offer reasoned argument demonstrating that Handy may be held personally liable for FPG’s obligations under any other legal theory, including, for example, under the alter ego doctrine. (See, e.g., Corp. Code, § 17703.04, subd. (b); Pacific Landmark, supra, 129 Cal.App.4th at p. 1212 [noting circumstances under which personal liability may be incurred].) For these same reasons, the Trust’s contention that Handy is a party to the Note Agreement constitutes an ultimate conclusion of fact and law insufficient to sustain summary judgment. (Colvig v. KSFO (1964) 224 Cal.App.2d 357, 365; accord, West v. Sundown Little League of Stockton, Inc. (2002) 96 Cal.App.4th 351, 363 [statements of undisputed facts must have evidentiary support].)

The Trust bears the burden of persuasion to demonstrate that that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law with respect to the first cause of action for breach of contract alleged in the complaint. For all reasons discussed above, the Trust has failed to meet its burden to demonstrate the existence of a contract between Handy and the Trust and the nonexistence of any disputed issues of fact. Therefore, the Trust has also failed to establish that Handy breached a duty to perform under a contract. Accordingly, at this stage of the proceedings and for present purposes, the Court will deny the motion for summary judgment of the first cause of action alleged in the complaint.

The second cause of action for breach of personal guaranty:

In the second cause of action, the Trust alleges or effectively alleges that Handy is the personal guarantor of FPG’s payment obligations under the Note Agreement, that the breach of payment obligations by FPG under the Note Agreement triggered an obligation by Handy to personally make payments to the Trust, and that Handy failed to respond to the Trust’s demand for payments that were not made by FPG under the Note Agreement. (Compl., ¶¶ 27-30.) For present purposes, the Trust contends that it has met its burden to demonstrate that the Note Agreement includes an enforceable personal guaranty by Handy and that Handy failed to make payments due to the Trust. To support these arguments, the Trust relies on information offered in the Cross declaration, the Note Agreement, and the deemed admitted responses of Handy to RFA Nos. 7, 12, 13, and 16. (Memo. at p. 6, ll. 13-26.)  

There exist triable issues of fact with respect to whether there exists a contract of guaranty or a relationship of surety or guarantor under the facts offered by the Trust.

A guarantor “is one who promises to answer for the debt, default, or miscarriage of another, or hypothecates property as security therefor.” (Civ. Code, § 2787; see also Code Civ. Proc., § 995.185 [the term “surety” includes a personal surety]; G & W Warren’s, Inc. v. Dabney (2017) 11 Cal.App.5th 565, 574, fn. 3 (G & W) [“California law makes no distinction between a surety and guarantor”].) “A guarantor or ‘surety cannot be held beyond the express terms of his contract.’ [Citation.]” (G & W, supra, 11 Cal.App.5th at p. 574.) In addition, guaranty contracts are construed “according to the same rules as those used for other contracts, with a view to ascertaining the intent of the parties.” (River Bank America v. Diller (1995) 38 Cal.App.4th 1400, 1415 (River Bank).) To determine the scope of a guaranty, the Court invokes “familiar principles for the interpretation of contracts.” (G & W, supra, 11 Cal.App.5th at p. 574.)

“The basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting. [Citations.] When a contract is reduced to writing, the parties’ intention is determined from the writing alone, if possible. [Citation.]” (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 955.) “The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed.” (Civ. Code, § 1644.)

Further, “ ‘[c]ontract formation is governed by objective manifestations, not the subjective intent of any individual involved. [Citations.] The test is “what the outward manifestations of consent would lead a reasonable person to believe.” [Citation.]’ [Citation.]” (Allen v. Smith (2002) 94 Cal.App.4th 1270, 1277.) “Thus, ‘[t]he parties’ undisclosed intent or understanding is irrelevant to contract interpretation. [Citations.]’ [Citation.]” (G & W, supra, 11 Cal.App.5th at p. 575.)

To demonstrate that Handy personally guaranteed the payment obligations of FPG under the Note Agreement, the Trust relies on the deemed admitted response to RFA No. 12 which asks Handy to admit that the “obligation to make payments to [the Trust] is personally guaranteed by [Handy]”. (Gignac Decl., Exh. 2 [RFA No. 12].) The Court further notes the language which appears in page 1 of the Note Agreement under the paragraph titled “Collateral”, stating that the “Loan will be …. personally guaranteed by Jeff Handy.” (Cross Decl., Exh. A at p. 1 [“COLLATERAL”].) However, the mere use of the terms “guaranty” or “personal guaranty” in RFA No. 12 or the Note Agreement “is not conclusive in determining its character.” (Everts v. Matteson (1942) 21 Cal.2d 437, 449 (Everts).) Therefore, the Court is not required to find that Handy individually promised to answer for the debt of FPG solely because the terms “personal guaranty” appear in the Note Agreement or in deemed admitted matters. (Civ. Code, § 2787.)

In addition, the provision at issue is susceptible to more than one reasonable interpretation precluding summary judgment. For example, it is unclear whether the guarantee was made by Handy in an individual capacity or in his representative capacity as the owner or managing member of FPG. To the extent the guarantee was made by Handy in his capacity as a managing member or owner of FPG, the evidence does not disclose that Handy’s obligations were secondary to those of FPG. (See, e.g., Everts, supra, 21 Cal.2d at pp. 449-450.) A reasonable trier of fact could interpret the relevant provision to require Handy, in his representative capacity as a managing member of FPG, to ensure the performance of FGP’s obligations under the Note Agreement. For this reason, the evidence is insufficient to show that Handy’s obligation in this regard was separate or independent from the principal debt under the Note Agreement. (United Central Bank v. Superior Court (2009) 179 Cal.App.4th 212, 215.) To the extent Handy’s obligation is not separate or independent from the debt of FPG, the provision at issue does not constitute a guaranty for reasons discussed above.

Moreover, to the extent that the Note Agreement may be reasonably interpreted to provide that Handy would guarantee FPG’s performance under the Note Agreement, the evidence, and inferences that may be drawn therefrom, demonstrates that Handy is effectively a principal obligor under the Note Agreement. (See Union Bank v. Dorn (1967) 254 Cal.App.2d 157, 159 (Union Bank) [guarantors who were partners of the entity were principal obligors “under another name”]; River Bank, supra, 38 Cal.App.4th at p. 1422 [partners’ attempt to guarantee debt of partnership constituted a “sham” guaranty].) To the extent that Handy is effectively a principal obligor as the managing member or owner of FPG, Handy’s “liability as a guarantor adds nothing to the primary liability of [FPG].” (Union Bank, supra, 254 Cal.App.2d at p. 159.) Under these circumstances, the provision at issue not a true guaranty. (Ibid.)

Viewing the evidence as a whole including the provisions of the Note Agreement and the circumstances under which it was made, and construing the evidence in the light most favorable to Handy, the deemed admissions and the provisions of the Note Agreement relied on by the Trust are subject to more than one reasonable interpretation demonstrating that there exist triable issues of fact with respect to whether Handy personally guaranteed the obligations of FPG under the Note Agreement. Further, under the circumstances present here, “[i]t is a factual question whether [Handy] is a true guarantor or a principal obligor in guarantor’s guise.” (River Bank, supra, 38 Cal.App.4th at p. 1422.) Therefore, and for all reasons further discussed above, the Court will deny the motion.

Summary adjudication of the second through eighth affirmative defenses:

Handy alleges the following second through eighth affirmative defenses in his answer to the complaint: (2) the Trust has violated California usury laws; (3) the complaint is barred by the doctrine of unclean hands based on the Trust’s acts and omissions in causing the alleged damages; (4) the Trust has waived all rights and is barred from asserting the claims upon which it seeks relief; (5) the complaint is barred under principles of estoppel; (6) the Trust failed to comply with conditions, covenants, and promises and is barred from asserting the claims upon which it seeks relief; (7) the Trust is precluded from relief based on its violations of state and federal laws and regulations relating to lending practices and required disclosures; and (8) the claims of the Trust are subject to a right of Handy to set-off. (Handy Answer at p. 2, l. 16 – p. 3, l. 11.)

The motion for summary adjudication of the second through eighth affirmative defenses alleged by Handy is wholly based on the deemed admitted responses of Handy to RFA Nos. 8 and 18 through 26.

The deemed admitted matters contained in RFA No. 8 conclusively establish that the interest charged under the Note Agreement is not usurious. (Gignac Decl., Exh. 2 at p. 2; see Creative Ventures, LLC v. Jim Ward & Associates (2011) 195 Cal.App.4th 1430, 1449-1450 [“[t]he conscious and voluntary taking of more than the legal rate of interest constitutes usury”].) Therefore, to the extent that RFA No. 8 relates solely to the rate of interest set forth in the Note Agreement, the Trust has demonstrated that there exists no genuine issue of material fact and that the Trust is entitled to judgment as a matter of law with respect to the second affirmative defense of usury alleged in the answer of Handy.

The deemed admitted matters contained in RFA No. 19 conclusively establish that the Trust is not barred from enforcing a right to payments due under the Note Agreement by the doctrine of unclean hands. (Gignac Decl., Exh. 2 at p. 4.) As the Trust seeks to recover payments purportedly due from Handy under the Note Agreement, the Trust has met its burden to establish that there is no genuine issue of material fact and that the Trust is entitled to judgment as a matter of law with respect to the third affirmative defense of unclean hands alleged in the answer. The same analysis applies with respect to the fourth and fifth affirmative defenses of, respectively, waiver and estoppel. (Ibid. [RFA Nos. 18 & 20].)

The deemed admitted matters contained in RFA No. 21 conclusively establish that the Trust complied with all conditions precedent to enforcing any rights to payment under the Note Agreement. (Gignac Decl., Exh. 2 at p. 4.) However, the sixth affirmative defense alleged in the answer of Handy is not so limited. In the sixth affirmative defense, Handy also refers to unspecified covenants and promises which a reasonable trier of fact could interpret to refer to covenants and promises which are not related to the unspecified “conditions precedent” referenced in RFA No. 21. For this reason, the Trust has failed to completely dispose of the sixth affirmative defense asserted in the answer.

The seventh affirmative defense alleged by Handy asserts that the Trust is precluded from obtaining relief in this action based on purported violations by the Trust of state and federal laws and regulations relating to “lending practices and required disclosures.” (Answer at p. 3.) The deemed admitted matters contained in RFA Nos. 22 through 25 relate to whether the Trust violated any state or federal laws relating to lending practices or required disclosures “in connection with” the Note Agreement. (Gignac Decl., Exh. 2 at pp. 4-5.) For this reason, the Trust has shown that there is no genuine issue of material fact and that the Trust is entitled to judgment as a matter of law with respect to the seventh affirmative defense alleged by Handy.

Regarding the eighth affirmative defense alleged in the answer, “[t]he right to a setoff is based on the equitable principle that when parties in litigation hold cross-demands for money, one demand should be applied against the other and the Plaintiff may recover the balance due, if any. [Citation.].” (Morris Cerullo World Evangelism v. Newport Harbor Offices & Marina, LLC (2021) 67 Cal.App.5th 1149, 1159.) Under the setoff procedure provided in Code of Civil Procedure section 431.70, the opposing claims need not be related. (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 195.)

The matters asserted in RFA No. 26 conclusively establish that there are no amounts due to Handy from the Trust under the Note Agreement. However, it can be reasonably inferred that the defense asserted under the eighth affirmative defense is not necessarily limited to amounts due under the Note Agreement. There is no evidence before the Court to suggest that the eighth affirmative defense is limited to amounts due under the Note Agreement only. For these reasons, the Trust has failed to meet its burden to completely dispose of the eighth affirmative defense alleged in the answer of Handy.

Though the burden shifts to Handy to demonstrate the existence of a triable issue of fact with respect to the second through fifth and seventh affirmative defenses alleged in the answer to the complaint, the Minute Order with respect to RFA Nos. 8, 18 through 20, and 22 through 25 is conclusive and may not be contested by Handy through contradictory evidence. (People v. $2,709 United States Currency (2014) 231 Cal.App.4th 1278, 1285-1286.) For this reason, Handy has failed to meet his burden to demonstrate the existence of a triable issue of fact. Therefore, and for all reasons further discussed above, the Court will grant the alternative motion of the Trust for summary adjudication of the second, third, fourth, fifth, and seventh affirmative defenses alleged by Handy in his answer to the complaint.

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