Opinion ID: 741530
Heading Depth: 2
Heading Rank: 1

Heading: USL's demand for assurances

Text: 3 The California Commercial Code § 2609(1) provides that, should reasonable grounds for insecurity arise regarding the performance of one party to a contract, the other party may demand adequate assurance of due performance. Until such assurance is received, the party making the demand may if commercially reasonable suspend any performance. Id. The questions of whether grounds for insecurity are reasonable, and whether or not an assurance of performance is adequate, are determined under commercial standards. Id. at (2). A party's failure to provide adequate assurances within a reasonable time (not to exceed thirty days) after receiving a justified demand is a repudiation of the contract. Id. at (4). 4 The parties debate whether the issue of reasonableness is appropriate for a summary judgment determination. The district court found that [w]hile ... what constitutes adequate grounds for insecurity is often a factual question, conduct may be sufficiently extreme as to be capable of decision as a matter of law. We agree. 1
5 Wien is correct in its argument that expert testimony may be sufficient to successfully oppose a motion for summary judgment, provided that the expert is competent and the basis for his or her expertise is stated in the affidavit. Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1435 (9th Cir.1995). However, in order to defeat summary judgment, the inferences drawn from the expert's affidavit must fulfill the standard in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-52 (1986) of being sufficient to sustain a favorable jury verdict. Id. 6 Given the facts in this case, the testimony of Doust, Wien's expert, is insufficient to create a question of fact for the jury on the reasonableness issue. The comments after Cal.Com.Code § 2609 state that repeated delinquencies must be viewed as cumulative. Uniform Commercial Code Comment 4, foll. Cal.Com.Code § 2609. 2 USL has presented evidence to the effect that Wien received extensions on the closing date not contemplated in the original sale agreement at least three times (to April 1, 1991; May 1, 1991; and September 1, 1991), was late making deposits on at least 2 occasions, and had a deposit check returned by the bank due to insufficient funds. Taken cumulatively, these events are enough to create concern on the part of USL about the closing of the sale. For Wien to prevail on the reasonableness issue, its evidence (Doust's testimony) would have to be enough to convince a reasonable jury that USL did not have reasonable grounds for insecurity. In the face of the undisputed facts of this case, we hold that Doust's testimony is not sufficient to sustain a favorable jury verdict, and that therefore Wien has not established that there is a triable issue of fact as to the reasonableness of USL's insecurity. 7
8 Even if Wien is correct in its assertion that a new contract was formed on August 7, the Uniform Commercial Code Comment 3 following Cal.Com.Code § 2609 specifically provides that the grounds for insecurity need not arise from or be directly related to the contract in question. 3 Additionally, the Comment states that repeated delinquencies must be viewed as cumulative. Id. at Comment 4. Therefore, even if what Wien claims were true (i.e., that the August 7 modification constituted an entirely new contract), it does not follow that the grounds for USL's insecurity can only be based upon events that occurred after August 7 and that were connected with that new contract. 9 Moreover, even if Wien were correct in its claim that a new event must have occurred after August 7 sufficient to justify USL's insecurity, Wien's actions following the August 7 contract modification were sufficient to give rise to insecurity on the part of USL. After August 7, Wien did not notify USL of its intent to close by August 20, as USL had requested. After USL wrote to Wien and asked it to notify USL by August 23 as to the closing date, Wien failed to make such notification. Instead, Wien promised to respond to USL on August 26, because Wien would have needed financial information at that time. Wien did not reply to USL on August 26. These facts could have caused reasonable insecurity on the part of USL.
10 Under Cal.Com.Code § 2609(4), if a party to a contract making a justified demand for assurances does not receive those assurances within a reasonable time not exceeding 30 days, the contract is repudiated. Upon repudiation of the contract, the nonrepudiating party is entitled to cancel the contract. Cal.Com.Code § 2610, 2703. Because Wien did not provide USL with assurances of any sort, and because Wien was given more than ample time to provide USL with a closing date for the sale, USL was justified in treating the contract as repudiated. It follows that USL was also justified in terminating the contract.