Filed 12/20/19 Uecker v. Ng CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIRST APPELLATE DISTRICT

DIVISION ONE

SUSAN L. UECKER, as Trustee, etc.,

Plaintiff and Respondent,

v.

BARNEY J. NG,

Defendant and Appellant.

A157246

(Contra Costa County

Super. Ct. No. C14-02082)

Defendant Barney J. Ng appeals from the trial court’s judgment in favor of plaintiff Susan L. Uecker on her breach of guaranty claim. Ng contends Uecker’s breach of guaranty claim was barred by the statute of limitations. We disagree and affirm the judgment.

I. BACKGROUND

In November 2000, Ng, on behalf of Wild Game Ng, LLC (Wild Game), executed a promissory note in the principal amount of $1 million in favor of “Pensco Pension Services FBO, Dr. Bruce Horwitz.” The note had a maturity date of November 16, 2002. The note stated, in part: “As an inducement to cause Lender to make this loan, . . . . [Wild Game] . . . waives demand, protest and any applicable statu[t]e of limitations.”

Ng also executed a guaranty of the promissory note at that time. Paragraph 1 of the guaranty states Ng “unconditionally guaranties” the full amount of the loan. It further states: “This is a guaranty of payment and performance, not of collection only. If Borrower defaults in the payment when due of the Indebtedness or any pa[r]t of it, Guarantor shall pay, on demand, . . . all sums due and owing on the Indebtedness.” The second paragraph states the guaranty is “to be Absolute,” and reads as follows: “It is the express intent of Guarantor that Guarantor’s obligations under this Guaranty are and shall be absolute, unconditional and irrevocable. Without limiting the generality of the foregoing, Guarantor expressly agrees that until the Indebtedness is paid and performed in full and each and every term, covenant and condition of this Guaranty is fully performed, Guarantor shall not be released or discharged, in whole or in part, from any obligations under this Guaranty by or because of: [¶] (a) Any act or event which might otherwise release, discharge, impair, limit or modify Guarantor’s obligations under this Guaranty.”

No payments were made under either the note or the guaranty, and Horwitz did not request repayment when the note became due. In 2009, Horwitz filed a complaint against Ng and Wild Game, alleging breach of the note and guaranty. Ng and Wild Game filed an answer to the complaint, denying the allegations and asserting various affirmative defenses including statute of limitations. Ng also filed a cross-complaint against Horwitz, alleging claims for interference with contract, interference with prospective economic advantage, and defamation.

In 2011, Ng, Wild Game, and Horwitz entered into a tolling agreement. The tolling agreement contained various recitals, which stated in part (1) the note waived the statute of limitations; (2) Ng “unconditionally and irrevocably” guaranteed payment of the note; and (3) the complaint for breach of the note and guaranty was filed in 2009, “at which time [Horwitz] had thirteen months and five days, or until November 16, 2010, to file an action for breach of the Note and Guaranty.” Pursuant to the terms of the tolling agreement, the parties agreed to dismiss the complaint and cross-complaint without prejudice, acknowledged the cause of action for breach of the note was subject to an automatic bankruptcy stay, and agreed to toll the statute of limitations applicable to the breach of guaranty claim and the cross-complaint for 18 months.

The parties entered into two separate extensions to the tolling agreement. Those extensions contained the same recitals as in the original tolling agreement. They also provide for additional tolling of the “statute of limitations applicable to the complaint for breach of Guaranty and the cross-complaint” pursuant to the same terms as the original tolling agreement.

Prior to expiration of the second tolling agreement, Uecker filed a complaint for breach of the note and breach of guaranty. Ng and Wild Game again answered the complaint, in which they denied the allegations and asserted various affirmative defenses including statute of limitations.

At a bench trial on the complaint, Ng argued the breach of guaranty claim was barred by the statute of limitations. Specifically, Ng asserted no payments were made in 2002 as required by the note, the guaranty did not waive the statute of limitations, and the limitations period started running in 2002 when the note became due. The trial court rejected Ng’s position, including his argument that the statute of limitations runs from the 2002 date the indebtedness became due. The court adopted its tentative order, which focused on when a demand for payment was made. The order reasoned, “The terms of the guaranty itself did not purport to require Ng to pay the defaulted amount of the note immediately on Wild Game’s default. Rather, it required him to ‘pay, on demand, . . . all sums due and owing on the [note].’ That means that Ng was not in breach of the guaranty until demand was made. . . . [A]side from Ng’s testimony there is no evidence of any demand for performance of the guaranty being made until Horwitz filed suit in 2009.” The court thus concluded “Horwitz’s cause of action against Ng personally for performance of the guaranty did not accrue until 2009, because Ng committed no breach of the guaranty until then.” Judgement was entered, and Ng timely appealed.

II. DISCUSSION

On appeal, Ng contends the statute of limitations ran for four years from the date the indebtedness became due, and thus expired in 2006. He further challenges the various arguments raised by Uecker disputing his calculation.

A. Accrual of Cause of Action for Breach of Guaranty

Ng contends the trial court erred by calculating the statute of limitations from the time Horwitz made a demand for payment under the guaranty. Ng asserts such a demand was not required to trigger the statute of limitations, and instead it began to run in 2002 upon Wild Game’s failure to repay the note.

The parties do not dispute the guaranty was payable “on demand,” and Uecker does not contend a demand was required to start the statute of limitations. Nor would such an argument have merit. “[A] cause of action for breach of contract generally ‘accrues at the time of breach regardless of whether any substantial damage is apparent or ascertainable.’ ” (Ram’s Gate Winery, LLC v. Roche (2015) 235 Cal.App.4th 1071, 1084.) But “ ‘a cause of action for money payable on demand accrues with the inception of the obligation and without the necessity for any demand.’ ” (Carrasco v. Greco Canning Co. (1943) 58 Cal.App.2d 673, 675; accord Clunin v. First Federal Trust Co. (1922) 189 Cal. 248, 249 [“Where a promise to pay money is payable on demand the statute of limitations begins to run thereon at the date of its execution.”].)

Accordingly, the limitations period for a guaranty payable “on demand” would generally begin to run when the underlying debt became due, irrespective of whether any such demand for payment was made. The trial court erred in holding otherwise.

However, “we review [the trial court’s] ruling, not its reasoning.” (North American Capacity Ins. Co. v. Claremont Liability Ins. Co. (2009) 177 Cal.App.4th 272, 296.) Although the trial court relied on erroneous grounds, “[w]e are required to uphold the ruling if it is correct on any basis, regardless of whether such basis was actually invoked.” (In re Marriage of Burgess (1996) 13 Cal.4th 25, 32.) We thus consider Uecker’s argument that the guaranty waived the statute of limitations and, as discussed below, affirm on that basis.

B. Whether the Guaranty Agreement Waived the Statute of Limitations

1. General Principles of Interpretation

This court in Central Building, LLC v. Cooper (2005) 127 Cal.App.4th 1053 summarized the general principles of interpretation related to guaranty agreements: “Civil Code section 2787 provides 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.’ We independently review . . . a guaranty agreement subject to the usual rules of contract interpretation. (Principal Mutual Life Ins. Co. v. Vars, Pave, McCord & Freedman (1998) 65 Cal.App.4th 1469, 1477–1478; River Bank America v. Diller (1995) 38 Cal.App.4th 1400, 1415; Civ. Code, § 2837.) Where the contract language ‘is clear and explicit,’ its terms are interpreted without regard to extrinsic evidence. (Civ. Code, §§ 1638, 1639.)” (Id. at p. 1058.)

“ ‘Extrinsic evidence is admissible, however, to interpret an agreement when a material term is ambiguous.’ ” (Brown v. Goldstein (2019) 34 Cal.App.5th 418, 432.) “ ‘When there is no material conflict in the extrinsic evidence, the trial court interprets the contract as a matter of law. [Citations.] This is true even when conflicting inferences may be drawn from the undisputed extrinsic evidence [citations] or that extrinsic evidence renders the contract terms susceptible to more than one reasonable interpretation.’ ” (Id. at p. 433.)

“When a guaranty agreement incorporates another contract, the two documents are read together and ‘ “[c]onstrued fairly and reasonably as a whole according to the intention of the parties.” [Citations.]’ (Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 39–40.) In other words, when a party undertakes to guarantee the faithful performance of another contract, the guarantor is contracting in reference to the other contract; ‘ “ ‘otherwise it would not know what obligation it was assuming.’ ” ’ ” (Central Building, LLC v. Cooper, supra, 127 Cal.App.4th at p. 1058.)

2. Analysis

Ng asserts the language of the guaranty does not waive the statute of limitations. Specifically, Ng argues the guaranty does not contain an express waiver of the statute of limitations similar to that contained in the corresponding note, and the running of the statute of limitations does not “release” or “discharge” any obligations. We disagree.

“Case law is clear that ‘ “[w]aiver is the intentional relinquishment of a known right after knowledge of the facts.” [Citations.] The burden . . . is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and “doubtful cases will be decided against a waiver” [citation].’ [Citations.] The waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right.” (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31; accord Black’s Law Dict. (11th ed. 2019) p. 1894, col. 1 [defining “waiver” as “[t]he voluntary relinquishment or abandonment—express or implied—of a legal right or advantage”].) However, Code of Civil Procedure section 360.5 provides in relevant part: “No waiver shall bar a defense to any action that the action was not commenced within the time limited by this title unless the waiver is in writing and signed by the person obligated.”

Here, the language of the guaranty, reasonably construed in connection with the note, evidences an intent to waive the statute of limitations. The guaranty states “Guarantor’s obligations under this Guaranty are and shall be absolute, unconditional and irrevocable.” It further states, “Guarantor expressly agrees that until the Indebtedness is paid and performed in full and each and every term, covenant and condition of this Guaranty is fully performed, Guarantor shall not be released or discharged . . . from any obligations under this Guaranty by or because of: [¶] (a) Any act or event which might otherwise release, discharge, impair, limit or modify Guarantor’s obligations under this Guaranty.” Taken together, these provisions indicate a broad intent to ensure the guarantor would remain liable on the indebtedness arising from the note. While a waiver of the statute of limitations is not expressly included, the language expressly states an intent to maintain Ng’s liability “until the Indebtedness is paid and performed in full” despite any “act or event” that would otherwise “release, discharge, impair, limit or modify” his obligations under the guaranty. The running of a limitations period is encompassed within this language because it is an “event” that would “impair” or “limit” Ng’s obligation to guarantee the “payment and performance” of Wild Game. Moreover, the note provided for the accumulation of interest “until paid,” including beyond the maturity date. And the statute of limitations waiver in the note expanded the limitations period from four to eight years. (See Code Civ. Proc., § 360.5.) If we accepted Ng’s interpretation, the guaranty would be incapable of guaranteeing the full amount of interest that could have accrued under the note before repayment was sought within that eight-year period.

California First Bank v. Braden (1989) 216 Cal.App.3d 672 (California First Bank) provides a useful analogy. There, a lender brought suit for breach of two written guaranties, which the guarantors argued were barred by the statute of limitations. (Id. at p. 674.) The guaranties stated in part, “ ‘Guarantors waive the benefit of any limitations affecting their liability hereunder or the enforcement thereof to the extent permitted by law.’ ” (Ibid.) On appeal, the court concluded the statute of limitations applicable to the guaranties ran from the dates the notes were due and unpaid and continued for eight years—“four years from breach . . . plus an additional four years afforded [respondents] by [Code of Civil Procedure] section 360.5.” (Id. at p. 677.) While the language of the guaranties in California First Bank and the present matter are not identical, there is notable similarity: the California First Bank guaranties excused “ ‘any limitations affecting their liability’ ” (id. at p. 674), and the guaranty at issue here excused “Any act or event which might otherwise . . . limit . . . Guarantor’s obligations . . . .”

The main difference between California First Bank and the present matter is that the Ng guaranty does not expressly use the term “waive.” But we are unaware of any authority requiring such precise language. To the contrary, cases suggest no such specific language is required. (See, e.g., River Bank America v. Diller (1995) 38 Cal.App.4th 1400, 1414 (River Bank) [noting “the Supreme Court [in Bloom v. Bender (1957) 48 Cal.2d 793] found waiver despite the absence of any reference in the agreement to [Civil Code] section 2809 or any other suretyship provision, and the lack of any language indicating an intent to ‘waive’ the statutory rights accorded a guarantor”].) The surrounding language of the guaranty sufficiently indicates its intent to remove any limitations that could otherwise apply to bar Ng’s obligations under the guaranty.

Even if we accept Ng’s argument that the guaranty is ambiguous, the undisputed extrinsic evidence before the trial court supports a finding of waiver. Ng executed both the note and the guaranty, albeit in different capacities, and thus was aware of their respective terms. (Accord River Bank, supra, 38 Cal.App.4th at p. 1417.) With that knowledge, Ng subsequently executed a tolling agreement, in which Ng “agree[d]” that Horwitz “had thirteen months and five days, or until November 16, 2010, to file an action for breach of the Note and Guaranty.” Two extensions to the tolling agreement contained the same acknowledgement regarding the pretolling limitations period for the breach of guaranty claim. This acknowledgement and “agreement” by Ng demonstrates the guaranty is not susceptible to Ng’s proposed interpretation—i.e., that the guaranty does not encompass a statute of limitations waiver. (See City of Santa Cruz v. Pacific Gas & Electric Co. (2000) 82 Cal.App.4th 1167, 1176 [“parties who have expressed their mutual assent are bound by the contents of the instrument they have signed, and may not thereafter claim that its provisions do not express their intentions or understanding”].)

Ng next argues the language of the guaranty does not encompass a statute of limitations waiver because the running of the limitations period “does not release or discharge an individual from obligations under a contract.” Ng does not offer any definition for the terms “release” or “discharge.” Nor does he cite any authority indicating that such terms cannot refer to the expiration of a statute of limitations. Instead, Ng argues the expiration of the limitations period cannot “release” or “discharge” an underlying obligation because otherwise cases involving continuous accruals of claims would be “legally impossible.” Ng’s argument misconstrues the nature of continuous accrual cases. “[C]ontinuous accrual applies whenever there is a continuing or recurring obligation: ‘When an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period.’ [Citation.] Because each new breach of such an obligation provides all the elements of a claim—wrongdoing, harm, and causation [citation]—each may be treated as an independently actionable wrong with its own time limit for recovery.” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1199.) Continuous accrual cases say nothing about whether the expiration of a statute of limitations “releases” or “discharges” an obligation. Rather, in continuous accrual cases each new breach creates a new actionable wrong with “its own time limit for recovery.” (Ibid.) The expiration of any limitations period for one wrong is unrelated to the limitations period for any subsequent wrong.

Black’s Law Dictionary defines “release” in part as “Liberation from an obligation, duty, or demand . . . .” (Black’s Law Dict., supra, p. 1542, col. 2.) “Discharge” is defined as “Any method by which a legal duty is extinguished . . . .” (Id. at p. 581, col. 1; see also id. at p. 729, col. 1 [defining “extinguish” as “To bring to an end; to put an end to”].) Interpreting the guaranty to include a statute of limitations waiver would not be contrary to the “ ‘ “clear and explicit” meaning’ ” of these terms. (See Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 18.) The expiration of a limitations period arguably “liberates” a party from the underlying obligation and is a “method” by which the preexisting legal duty is ended. Thus, the guaranty’s use of the terms “release” and “discharge” cannot be interpreted as excluding a statute of limitations waiver.

The language of the guaranty, along with Ng’s “agreement” regarding the statute of limitations period in the tolling agreements, provide clear and convincing evidence that the guaranty contained a statute of limitations waiver. Accordingly, the trial court did not err in rejecting Ng’s affirmative defense based on the statute of limitations.

III. DISPOSITION

The judgment is affirmed. Plaintiff may recover her costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)

 

____________________________

Margulies, Acting P. J.

We concur:

_____________________________

Banke, J.

_____________________________

Sanchez, J.

A157246

Uecker v. Ng