Judge Salvatore Sirna, Case Number: 22PSCV00438, Date: 2023-10-26 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on a tentative ruling by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Plaintiff KeyBank National Association’s Motion for Summary Adjudication of Affirmative Defenses

Plaintiff KeyBank National Association’s Motion for Summary Adjudication of Affirmative Defenses is GRANTED IN PART as to the First Affirmative Defense and DENIED IN PART as to the Second Affirmative Defense

This is a breach of contract action arising from a loan and security agreement. In October 2014, Plaintiff KeyBank National Association (KeyBank) entered into a written agreement with Defendant JYuan Corp. (Lion Express), doing business as Lion Express, in which KeyBank agreed to provide $381,972.81 for Lion Express to purchase equipment. Lion Express agreed to make an initial payment of $395, sixty-three monthly payments of $4,639.39, and one final payment of $81,034.39. James Yuan and Golden Lion Transportation (Golden Lion) also executed personal guaranties under the agreement. KeyBank alleges Lion Express breached the agreement by failing to make monthly payments and now owes $63,060.40. On December 27, 2021, KeyBank sent demand letters to Lion Express, Yuan, and Golden Lion demanding payment.

On May 6, 2022, KeyBank filed a complaint against Lion Express, Yuan, and Golden Lion (collectively, Defendants), alleging breach of written contract against each defendant.

On October 14, 2022, KeyBank filed a motion for summary judgment that the court denied on February 28, 2023. The court also denied a subsequent motion by KeyBank for leave to resubmit a motion for summary judgment on April 10.

On June 21, 2023, KeyBank filed the present motion for summary adjudication. A hearing on the motion is set for October 26 with a post-mediation status conference. A final status conference is also set for February 20, 2024, with a jury trial on March 5.

Defendants’ request for judicial notice of prior filings and orders in this action is GRANTED.

To the extent Defendants have made evidentiary objections to KeyBank’s evidence, the court declines to consider the objections as they were not made in compliance with California Rules of Court, Rule 3.1354(b).

KeyBank moves for summary adjudication of Defendants’ first affirmative defense (failure to state a cause of action) and second affirmative defense (failure to mitigate damages). For the following reasons, the court GRANTS KeyBank’s motion as to the first affirmative defense and DENIES its motion as to the second affirmative defense.

A motion for summary judgment or adjudication provides “courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) It must be granted “if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, 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.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119, quoting Code Civ. Proc., § 437c, subd. (c).) To establish a triable issue of material fact, the opposing party must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

KeyBank argues Defendants’ first affirmative defense of failure to state sufficient facts is defeated by their Complaint. The court agrees.

In a demurrer or answer, a defendant may object to a complaint on the ground that “[t]he pleading does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) This defense is based on legal rather than factual issues as it requires the court to determine the legal sufficiency of the pleading. (Cf. Stanton Road Associates v. Pacific Employers Ins. Co. (1995) 36 Cal.App.4th 333, 340-341.)

To succeed on a claim for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

In this case, KeyBank argues it has adequately alleged causes of action for breach of contract against all three Defendants. KeyBank alleges it entered into a loan agreement with Lion Express on October 22, 2014. (Complaint, ¶ 5.) On the same day,[1] KeyBank alleges Yuan and Golden Lion executed guaranty agreements. (Complaint, ¶ 10.) According to the Complaint and attached exhibits, KeyBank agreed to finance the purchase of “certain equipment” for Lion Express in the amount of $381,972.81. (Complaint, ¶ 5, Ex. A.) In exchange, Lion Express agreed to repay the amount in 83 payments.[2] (Complaint, ¶ 6, Ex. A.) KeyBank also alleges Yuan and Golden Lion induced KeyBank to enter into the loan agreement with Lion Express by promising to personally guarantee Golden Lion’s obligations. (Complaint, ¶ 10, Ex. B, C.) Based on these allegations, the court finds KeyBank adequately alleged the existence of enforceable contracts between KeyBank and Defendants.

Next, KeyBank alleges it performed pursuant to the agreement by providing the required funds to Lion Express. (Complaint, ¶ 22.) KeyBank alleges Lion Express breached the agreement by failing to make the minimum monthly payments to KeyBank when they were due. (Complaint, ¶ 11, 21.) KeyBank also alleges Yuan and Golden Lion breached their guaranty agreements by failing to make the payments owed by Lion Express. (Complaint, ¶ 17, 26, 30.) Last, KeyBank alleges their breach has damaged KeyBank in the amount of at least $63,060.40. (Complaint, ¶ 23, 27, 31.) Based on these allegations, the court finds KeyBank adequately alleged performance by KeyBank, breach by Defendants, and damages.

Because KeyBank established it adequately alleged the elements of breach of contract against Defendants, the burden now shifts to Defendants who must demonstrate how KeyBank’s Complaint is inadequately pled. Defendants fail to do so.

Accordingly, KeyBank’s motion for summary adjudication of Defendants’ first affirmative defense is GRANTED.

KeyBank contends Defendants’ second affirmative defense of failure to mitigate damages is inapplicable. The court disagrees.

“A plaintiff who suffers damage as a result of either a breach of contract or a tort has a duty to take reasonable steps to mitigate those damages and will not be able to recover for any losses which could have been thus avoided.” (Shaffer v. Debbas (1993) 17 Cal.App.4th 33, 41.) In other words, “A plaintiff may not recover for damages avoidable through ordinary care and reasonable exertion.” (Valle de Oro Bank v. Gamboa (1994) 26 Cal.App.4th 1686, 1691.) But “[t]he duty to mitigate damages does not require an injured party to do what is unreasonable or impracticable.” (Ibid.) “Whether the plaintiff has acted reasonably in mitigating damages is ordinarily a question of fact [Citation], but issues of fact become those of law where . . . the facts are undisputed and permit of only one conclusion [Citations].” (West v. Bechtel Corp. (2002) 96 Cal.App.4th 966, 985.)

In this case, KeyBank contends Defendants are not entitled to this defense because KeyBank adequately mitigated damages by repossessing and selling the collateral at issue. (Barnes Decl., ¶ 8-9.) According to the declaration of Nancy Barnes, Lion Express defaulted on March 15, 2021. (Barnes Decl., ¶ 6.) On December 27, KeyBank sent letters notifying Defendants that they were in default and that KeyBank was accelerating their debt. (Barnes Decl., ¶ 8.) But while Barnes’ declaration refers to the letters as attached exhibits, Barnes’ declaration does not include any such exhibits. Furthermore, while Barnes states the collateral at issue was repossessed and sold at a public auction in a reasonable manner, Barnes fails to state when these events occurred, the price for which the collateral sold, and how the price affected the amount of damages sought by KeyBank. (Barnes Decl., ¶ 8-9.) Thus, the court finds KeyBank failed to carry its burden of establishing an absence of triable facts regarding the amount by which any damages were mitigated.

Accordingly, KeyBank’s motion for summary adjudication of this defense is DENIED.

[1] Although the Complaint alleges the guarantees were executed in 2015, Exhibits B and C of the Complaint establish they were executed in 2014. (See Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[T]o the extent the factual allegations conflict with the content of the exhibits to the complaint, we rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”].)

[2] Although the Complaint alleges sixty-three payments were required, Exhibit A suggests eighty-three payments were required.