East West Bank v Creative Environments of Hollywood

Case Number: GC049744 Hearing Date: August 08, 2014 Dept: A

MOTION FOR SUMMARY JUDGMENT

[Continued from July 11, 2014.]

Calendar: 16
Case Number: GC049744
Date: 8/8/14

MP: Defendant, Michael Augustine, as trustee of the Jojazak Trust
RP: Plaintiff, East West Bank

RELIEF REQUESTED
Summary Judgment of the Complaint

SUMMARY OF COMPLAINT:
The Plaintiff’s predecessor, United Commercial Bank, entered into a business loan with Spring Naud Associates, Ltd. for $4,680,000. The loan was guarantied by a commercial guaranty agreement. The guaranty was signed by Capital Asset Management Associates, Inc., a trustee for the Jojazak Irrevocable Trust, Creative Environments of Hollywood, Manual Meza, and Elvia Meza.
The United Commercial Bank was closed and the Plaintiff obtained its assets from the Federal Deposit Insurance Corp. The Plaintiff brought this action to seek damages from the guarantors for their breach of the guaranty agreement.

CAUSES OF ACTION IN COMPLAINT:
1) Breach of Written Guaranty (against Creative Environments of Hollywood)
2) Breach of Written Guaranty (against Manual Meza)
3) Breach of Written Guaranty (against Elvia Meza)
4) Breach of Written Guaranty (against Michael Augustine, as trustee of Jojozak Trust)
5) Recovery of Deficiency
6) Account Stated
7) Accounting

DISCUSSION:
This hearing concerns the motions of the Defendant, Michael Augustine, as trustee of the Jojazak Trust, and of the Plaintiff, East West Bank. The following is the analysis of the Defendant’s motion.

Under CCP section 437c, the Defendant has the burden of providing evidence to demonstrate that the Plaintiff cannot establish an essential element of its causes of action. The Defendant argues that the Plaintiff cannot establish the essential element of an agreement by the Defendant to guaranty the performance of Spring Naud.

The essential issue in this proceeding is whether Capital Asset Management Associates, Inc. (“CAMA”) could act as the trustee for the Jojazak Irrevocable Trust (“Jojazak Trust”) and bind the Jojazak Trust under the guaranty agreement. The Defendant fails to meet meets its burden of proof because it is barred under Corporations Code section 208 from asserting that CAMA was not authorized to act as the trustee for the Jojazak Trust.
Corporations Code section 208(a) states:

No limitation upon the business, purposes or powers of the corporation
or upon the powers of the shareholders, officers or directors, or the
manner of exercise of such powers, contained in or implied by the articles
or by Chapters 18, 19 and 20 or by any shareholders’ agreement shall be
asserted as between the corporation or any shareholder and any third person,
except in a proceeding (1) by a shareholder or the state to enjoin the doing
or continuation of unauthorized business by the corporation or its officers,
or both, in cases where third parties have not acquired rights thereby, or
(2) to dissolve the corporation or (3) by the corporation or by a shareholder
suing in a representative suit against the officers or directors of the
corporation for violation of their authority.

The Defendant asserts that the Articles of Incorporation indicate that CAMA cannot act as its trustee. The Defendant provided a copy of the Articles of Incorporation for CAMA in exhibit E to the Defendant’s Compendium of Evidence. The Defendant notes that section “TWO” on page 1 of the document indicates that the purpose of the corporation is to engage in any lawful activity “other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code (italics added). This indicates that the Defendant was asserting a limitation on the power of CAMA to act as a trustee contained in the articles. Corporation Code section 208 bars the Defendant from making this assertion. Section 208(a) bars the Defendant from asserting that CAMA’s power to act as a trustee was limited.
Accordingly, the Defendant does not meet its burden of proof because the Defendant is barred by Corporation Code section 208 from asserting that CAMA was not authorized to act as its trustee. Since the Defendant did not meet its burden of proof, the Plaintiff has no burden to produce evidence.

THEREFORE, the Defendant is not entitled to summary judgment because the Defendant did not meet its burden of proof. The Defendant is barred from asserting that CAMA lacked authority to enter into the guaranty agreement under Corporation Code section 208.

RULING:
DENY DEFENDANT’S motion for summary judgment

MOTION FOR SUMMARY JUDGMENT

Calendar: 16
Case Number: GC049744
Date: 8/8/14

MP: Plaintiff, East West Bank
RP: Defendant, Michael Augustine, as trustee of the Jojazak Trust, Creative
Environments of Hollywood, Manual Meza, and Elvia Meza

RELIEF REQUESTED
Summary Judgment of the Complaint

Under CCP section 437c(p)(1), the Plaintiff’s burden of proof is to prove each element of the causes of action in its Complaint. The Plaintiff did not meet this burden because the Plaintiff did not address each cause of action. The Plaintiff’s memorandum addresses the first cause of action, but not the second, third, or fourth causes of action.
CCP section 437c is a complicated statute and there is little flexibility in the procedural imperatives of the section and, as a result, section 437c is unforgiving. Hawkins v. Wilton (2006) 144 Cal. App. 4th 936, 949-950. A failure to comply with any one of its myriad requirements is likely to be fatal to the offending party. Id.
Section 437c does not furnish the trial courts with a convenient procedural means, to which only “lip service” need be given, by which to clear the trial calendar of what may appear to be meritless or weak cases. Id. Any arbitrary disregard of the statutory commands in order to bring about a particular outcome raises procedural due process concerns. Id. The success or failure of the motion must be determined by application of the required step-by-step evaluation of the moving and opposing papers. Id. Because of the drastic nature of the remedy sought, the moving party is held to strict compliance with the procedural requisites. Id.
The Plaintiff’s motion for summary judgment is defective because it does not address the second, third, or fourth causes of action. Accordingly, the Court will deny the Plaintiff’s motion for summary judgment.

In the alternative, the Plaintiff seeks summary adjudication of the first cause of action for breach of guaranty. The cause of action is based on the breach of a contract, i.e., the personal guaranty. The essential elements of a cause of action for breach of contract are the following:

1) the contract,
2) plaintiff’s performance or excuse for nonperformance,
3) defendant’s breach, and
4) the resulting damages to plaintiff.
Reichert v. General Ins. Co. (1968) 68 Cal. 2d 822, 830.

The Plaintiff has not met its burden of proof because it has not offered admissible evidence of its resulting damages. The Plaintiff’s evidence that supports its damages is in the declaration of Larry Wong, who is an officer of the Plaintiff. Mr. Wong states in paragraph 25 that the Plaintiff has suffered damages of $2,302,758.61.
Under Evidence Code section 702, the testimony of a witness is inadmissible unless the witness has personal knowledge of the matter. Mr. Wong offers no facts to demonstrate that he has personal knowledge of the amount due and owing. Mr. Wong offers no facts to explain how he determined that said amount is due from the original loan amount, e.g., facts regarding calculation of the amount due and owing. Mr. Wong does not cite to any documents that identify the amount due and owing. Mr. Wong fails to offer any basis to find that he has personal knowledge of the amount due and owing. Accordingly, Mr. Wong’s bare statement of the amount due and owing is inadmissible under Evidence Code section 702.
Accordingly, the Plaintiff has not met its burden of proof because it has not offered admissible evidence of the essential element of damages.

THEREFORE, the Court will deny the Plaintiff’s motion for summary judgment or summary adjudication in its entirety because the Plaintiff did not meet its burden of proof under CCP section 437c.

RULING:
DENY Plaintiff’s motion for summary judgment or summary adjudication.

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