Judge: Shirley K. Watkins, Case: 20VECV00340, Date: 2022-08-02 Tentative Ruling

If ALL parties submit on the tentative, then no appearance is necessary unless some other matter (i.e., Case Management Conference) is on calendar. It is not necessary to call the court to request oral argument. Oral argument is permitted on all tentative rulings.

Case Number: 20VECV00340    Hearing Date: August 2, 2022    Dept: T

            [TENTATIVE] ORDER:  Plaintiff Strategic Emerging Economics Inc.’s Motion for Bifurcation and Trial of Estoppel First is GRANTED.

1. Introduction

               On March 4, 2020, Strategic Emerging Economics Inc. (“Plaintiff”) initiated the present action by filing a “Verified Complaint for Breach of Contract (Continuing Guarantee)” against Bruce Gray (“Defendant”) and Does 1 through 50.  Plaintiff’s Complaint alleges a single cause of action for “Breach of Contract” against Defendant.

               Plaintiff’s operative Complaint alleges, on approximately June 21, 2016, Plaintiff entered into a Promissory Note with non-party NSHE CA Bulls, LLC (“None-Party NSHE”).  (Compl., ¶ 5, Ex. A.)  Pursuant to the express terms of the Promissory Note, Non-Party NSHE agreed to pay Plaintiff approximately three-million dollars ($3,000,000).  (Ibid.)  In connection with the Promissory Note, Defendant signed a Continuing Guarantee, which, by the agreement’s terms, Defendant agreed to “guarantee the punctual payment” of the Promissory Note when such Promissory Note became due and owing.  (Id. ¶ 6, Ex. B.)  Pursuant to a Loan Modification and Extension Agreement, the Promissory Note became due on approximately June 21, 2019.  (Id. ¶ 8, Ex. C.)  Plaintiff alleges Non-Party NHSE failed to make payment upon the Promissory Note by the aforementioned due date.  (Id. ¶ 9.)  Plaintiff brings the present Verified Complaint against Defendant, alleging Defendant has breached the above-mentioned Continuing Guaranty because Defendant also failed to make payment upon the Promissory Note following Non-Party NHSE’s default.  (Id. ¶¶ 12-16.) 

               On May 5, 2020, Defendant filed an Answer.  Defendant’s Answer asserts approximately five (5) affirmative defenses.  Most relevant to the Court’s present Order, Defendant’s second affirmative defense contends, “Defendant asserts that Plaintiff’s claims are barred, in whole or in part, by the doctrines of estoppel.”  (Answer, at p. 3:26-28.)

               On May 23, 2022, Plaintiff filed a Motion for Bifurcation and Trial of Estoppel First (“Motion for Bifurcation”), which the Court now considers.

               On August 30, 2022, Plaintiff’s Complaint is scheduled to commence to trial before a jury.

2. Discussion

   Pursuant to Plaintiff’s present Motion for Bifurcation, Plaintiff requests that this Court order a separate bench trial upon Defendant’s second affirmative defense of estoppel, which shall proceed prior to a trial by jury upon Plaintiff’s Verified Complaint for Breach of Contract (Continuing Guaranty).  Plaintiff advances such a request on the ground Defendant’s second affirmative defense of estoppel presents an issue of equity, which should properly be determined by a Court of law, as opposed to a jury.  Further, Plaintiff contends resolution of Defendant’s second affirmative defense first, prior to submission of Plaintiff’s Complaint to the jury, would be conducive to expedition and judicial economy as resolution of Defendant’s affirmative defense of estoppel may dispose of the entirety of Plaintiff’s Complaint.

   Code of Civil Procedure section 1048, subdivision (b) provides: “The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any cause of action, including a cause of action asserted in a cross-complaint, or of any separate issue or of any number of causes of action or issues, preserving the right of trial by jury required by the Constitution or a statute of this state or of the United States.”  (Code Civ. Proc. § 1048, subd. (b).)  In determining whether to order separate trials, courts consider a number of factors including judicial economy, the danger of unnecessary jury confusion if separate trials are not held, and potential prejudice. (Grappo v. Coventry Fin. Corp. (1991) 235 Cal.App.3d 496, 504.)  Whether there shall be a severance and separate trials of issues in a single action is a matter within the trial court’s discretion.  (McArthur v. Shaffer (1943) 59 Cal.App.2d 724, 727.)

               Following consideration of the parties’ arguments, the Court is persuaded Defendant’s second affirmative defense of estoppel presents an issue of equity, which should properly be considered by the Court prior to submission of Plaintiff’s Complaint to the jury.  “Estoppel is an equitable argument that deprives another of rights or defenses.”  (Estate of Bonanno (2008) 165 Cal.App.4th 7, 22 [emphasis added]; Feduniak v. California Coastal Com. (2007) 148 Cal.App.4th 1346, 1359 [“ ‘The venerable doctrine of equitable estoppel or estoppel in pais, which rests firmly upon a foundation of conscience and fair dealing, [fn. omitted] finds its classical statement in the words of Lord Denman: “[T]he rule of law is clear, that, where one by his words or conduct willfully causes another to believe the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is [precluded] from averring against the latter a different state of things as existing at the same time. . . .” [Citation.]’ [Citation.]”].)  Equitable causes of action are properly determined by a judge, as opposed to a jury, and the judge acts as the proper fact finder with respect to equitable causes of action.  (Hoopes v. Dolan (2008) 168 Cal.App.4th 146, 156 [holding, equitable causes of action “remain triable to a judge . . . because it is thought that the exercise of equitable powers ‘depend upon skills and wisdom acquired through years of study, training and experience which are not susceptible of adequate transmission through instructions to a lay jury.’ ”].)  Further, “[i]t is well-established in California jurisprudence that ‘[t]he court may decide the equitable issues first, and this decision may result in factual and legal findings that effectively dispose of the legal claims.’  [Citation.]”  (Id. at p. 157; Raedeke v. Gibraltar Sav. & Loan Assoc. (1974) 10 Cal.3d 665, 671 [“It is well established that, in a case involving both legal and equitable issues, the trial court may proceed to try the equitable issues first, without a jury . . . and that if the court's determination of those issues is also dispositive of the legal issues, nothing further remains to be tried by a jury.”].)  Indeed, various California Courts of law have “observed that the ‘better practice’ is for ‘the trial court [to] determine the equitable issues before submitting the legal ones to the jury.’  [Citation.]”  (Ibid.; Bate v. Marsteller (1965) 232 Cal.App.2d 605, 617.) 

               Pursuant to the governing legal authority referenced in the preceding paragraph, the Court finds, as Defendant’s second affirmative defense of estoppel constitutes an issue of equity, such an issue is reserved for the judge, as opposed to a jury.  (Hoopes, supra, 168 Cal.App.4th at p. 156.)  Further, as Defendant’s second affirmative defense presents an issue of equity, “the ‘better practice’ ” is for this Court to consider such an affirmative defense first, before submitting the legal issues presented within Plaintiff’s Complaint to the jury.  (Id. at p. 150 [holding, “the trial judge should have considered the equitable defense [of estoppel] first . . . .”].)  Such a practice promotes judicial economy as a ruling in Defendant’s favor upon his second affirmative defense would be dispositive of Plaintiff’s Complaint.   In light of the foregoing, the Court finds the relief requested by Plaintiff is warranted.  The Court orders a separate, court trial upon Defendant’s second affirmative defense of estoppel, prior to submission of this action to a jury.

               IT IS SO ORDERED, PLAINTIFF TO GIVE NOTICE.