Judge Thomas D. Long, Case 21STCV24252 2022-10-31 Tentative Ruling

On June 30, 2021, Plaintiff Valley National Bank filed this action against Defendant Arturo Moran Garcia for breach of contract and breach of implied-in-fact contract.

On July 26, 2022, Plaintiff filed a motion for summary judgment, or in the alternative, adjudication.

Defendant’s request for judicial notice of the June 8, 2020 Order of Liquidation in Commissioner of the Department of Financial Regulation v. Global Hawk Insurance Co. Risk Retention Group (Vermont Superior Court, Washington Unit, Case No. 196-5-20 Wncv) is granted.

Plaintiff is a national banking association that provides insurance premium financing, and Defendant operates a business that provides trucking services. (Undisputed Material Facts “UMF” 2-3.) On January 6, 2020, they entered into a Commercial Insurance Premium Finance Agreement and Disclosure Statement (“PFA”) under which Plaintiff agreed to loan the principal amount of $60,930.00 to Defendant so Defendant could purchase insurance for his business. (UMF 4-5.)

The PFA reflects that Defendant had selected an insurance policy issued by Global Hawk Insurance (“Global”). (UMF 6.) After Defendant executed the PFA, Plaintiff provided financing in the amount of $60,930.00. (UMF 7.) Defendant agreed to pay Plaintiff the total amount of $64,043.90 in ten monthly installment payments of $6,404.39 each. (UMF 8.) Defendant made five payments through June 2020. (UMF 9.)

A default occurs if Defendant “does not pay an installment when due.” (UMF 10.) Defendant failed to pay the July 2020 payment and all remaining payments. (UMF 11.) As of July 30, 2022, the unpaid principal under the PFA was $28,908.05, and the unpaid interest was $9,274.11. (UMF 12-13.) Defendant owes the total amount of $38,182.16. (UMF 14.) Plaintiff has incurred $509.75 in costs, and it also seeks $1,374.50 in attorney fees. (UMF 15-16.)

A plaintiff moving for summary adjudication must satisfy the initial burden of proof by proving each element of a cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).) Then the burden shifts to the defendant to show that a triable issue of material fact exists as to the cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(1).) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.)

The first cause of action alleges breach of contract, and the second cause of action alternatively alleges breach of implied-in-fact contract. The standard elements of a claim for breach of contract are (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.) “A cause of action for breach of implied contract has the same elements as does a cause of action for breach of contract, except that the promise is not expressed in words but is implied from the promisor’s conduct.” (Yari v. Producers Guild of America, Inc. (2008) 161 Cal.App.4th 172, 182.)

It is undisputed that Plaintiff and Defendant entered into the PFA, Defendant failed to make payments beginning in July 2020, Defendant owes a total of $38,182.16 in unpaid principal and interest, and Plaintiff incurred $1,884.25 in legal fees and costs. (UMF 1-16.)

Accordingly, Plaintiff has met its initial burden as to the elements of the causes of action, and Defendant does not attempt to dispute this. (See generally Opposition.) Instead, Defendant raises two defenses.

Defendant notes that Global was seized by the State of Vermont’s Commissioner of the Department of Financial Regulation, and all actions involving Global have been stayed. (Opposition at p. 2; see Def. RJN, Ex. 1.) Defendant argues that Plaintiff “has offered no evidence that they have mitigated their damages by filing a claim for the unearned premium, a right they possess.” (Opposition at p. 4.) Citing the entirety of Insurance Code section 673, Defendant argues that “Plaintiff has not met its statutorily created right and mechanism to mitigate its damages and has undermined Garcia’s right to seek redress from Global since Plaintiff has absorbed those rights from Garcia via contract.” (Opposition at p. 6.)

It is not Plaintiff’s burden to prove that it mitigated its damages. “Summary judgment law in this state no longer requires a plaintiff moving for summary judgment to disprove any defense asserted by the defendant as well as prove each element of his own cause of action. . . . All that the plaintiff need do is to ‘prove[] each element of the cause of action.’ [Citation.]” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853; see Code Civ. Proc., § 437c, subd. (p)(1) [“A plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action.”].)

Instead, it is Defendant’s burden to “to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).) Defendant has not done so with respect to this defense.

Defendant relies on two provisions from the PFA that give Plaintiff a right to receive unearned premiums. (See Opposition at p. 3.) Under the PFA, Defendant granted and assigned Plaintiff “a security interest in the financed policies and any additional premiums written to the financed policies including all gross unearned premiums, dividend payments, and less payments which would result in a reduction to unearned premiums.” (Przespolewski Decl., Ex. 1 at p. 2, ¶ 1.) Defendant also irrevocably appointed Plaintiff as his attorney-in-fact “with full power of substitution and full authority in the event of default to (i) cancel the financed policies, (ii) receive any unearned premium or other amounts with respect to the polities assigned as security herein.” (Przespolewski Decl., Ex. 1 at p. 2, ¶ 2.) These provisions give Plaintiff the right, but not the obligation, to recover the unearned premiums from Global. And Defendant has already filed his own claim in Global’s liquidation proceedings. (Garcia Decl. ¶ 2 & Ex. 1; see Opposition at p. 4.)

Insurance Code section 673 governs how a lender may exercise the right to cancel a financed insurance policy because of the default of the insured, and what the insurer must do when a financed insurance policy is cancelled. It does not require the lender (Plaintiff) to recover the unearned premiums from only the insurer (Global) when the policy is cancelled.

Moreover, in reply, Plaintiff declares that it did file a timely proof of claim with a representative of the liquidator, but it has not received any distribution. (Grela Decl. ¶¶ 7-11 & Ex. A.)

In sum, Defendant has not shown a triable issue of fact regarding Plaintiff’s obligation to mitigate damages.

Defendant also argues that Global is an indispensable party, but there is a stay that prevents its additional as a party in this action. (See Opposition at pp. 6-8.) Defendant did not raise this defense in his answer.

An indispensable party must be joined in an action “if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.” (Code Civ. Proc., § 389, subd. (a).)

Defendant does not identify any interest Global has in the subject of this action. Global is not a party to the PFA, and there is no risk that the parties here will incur multiple or inconsistent obligations. Defendant is seeking to recover the amount owed by Plaintiff, and Plaintiff may continue to pursue his claim for return of the unearned premium from Global. (See Garcia Decl. ¶ 2 & Ex. 1.) If Plaintiff recovers any funds from the liquidator, it will credit Defendant for that amount, and if Defendant pays his full debt to Plaintiff, then Plaintiff with withdraw its claim against Global. (Greela Decl. ¶ 13.)

Nor does Global’s absence preclude Plaintiff’s complete relief. The PFA provides, “In the event of default [Plaintiff] can demand agreement be paid in full regardless of whether unearned premium has been refunded.” (Przespolewski Decl., Ex. 1 at p. 2, ¶ 8.)

Defendant has not shown a triable issue of fact regarding Global’s need to be included as an indispensable party.

The motion for summary judgment is GRANTED. Plaintiff is ordered to submit a proposed judgment within 5 days.

A Non-Appearance Case Review Re: Submission of Proposed Judgment is scheduled for 11/07/2022 at 11:30 AM.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court