Court Opinion

ID: 2651447
Source: CourtListenerOpinion
Date Created: 2014-01-28 21:40:54.230236+00
Date Added: 2024-06-11T12:56:55.992474
License: Public Domain

Filed 1/28/14 Tough Co. v. Wurlitzer CA3
                                           NOT TO BE PUBLISHED

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 This opinion has not been certified for publication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
                                      THIRD APPELLATE DISTRICT
                                                         (Butte)
                                                            ----

TOUGH COMPANY, INC.,                                                                         C071157

                   Plaintiff and Appellant,                                        (Super. Ct. No. 150886)

         v.

GEORGE WURLITZER,

                   Defendant and Respondent.

         Plaintiff Tough Company, Inc. appeals from a judgment entered in favor of
defendant George Wurlitzer after the trial court rejected its assertion that defendant had
no right to repossess equipment he sold to plaintiff after plaintiff failed to pay in full.
         On appeal, plaintiff contends (1) there was insufficient evidence to support the
court’s finding defendant retained a security interest in one item of equipment, a
bulldozer; and (2) as a matter of law, no security agreement could have been created
under the circumstances. Plaintiff also contends the trial court erred in hearing its new

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trial motion in the absence of plaintiff’s counsel. We find no error, and affirm the
judgment.
                                     BACKGROUND
       We summarize the facts chiefly from the parties’ agreed statement (Cal. Rules of
Court, rule 8.134), and the trial court’s statement of decision.
       Plaintiff’s predecessor, Tough Company, LLC, agreed to buy from defendant three
pieces of equipment: a 1978 Peterbuilt truck, a 1972 Birmingham 16-wheel trailer, and a
Caterpillar D7F bulldozer. The aggregate purchase price for all three was $59,000:
$48,000 for the bulldozer, $5,000 for the truck, and $6,000 for the trailer.
       The purchase was memorialized by a written bill of sale dated March 1, 2008, and
signed by a principal of plaintiff (as “Buyer”), and defendant (as “Seller”). It states: “In
consideration of the payment by Tough Company LLC (‘Buyer’) of the sum of $59,000
the undersigned (‘Seller’) hereby sells, assigns and transfers to Buyer one CAT D7,
Peterbuilt truck & Trailer, serial number [see below]. Said equipment (3) pieces is sold
‘AS IS’ and ‘WHERE IS’, without warranty or representation of any kind regarding the
condition of the equipment (3) pieces (hereafter known as ‘said equipment’), expressed
or implied. Buyer agrees that the property is transferred without any warranty, expressed
or implied, as to title, merchantability or fitness for use or sale. [¶] Buyer acknowledges
and agrees that it has accepted delivery of the said equipment and has assumed all
responsibility and risk of loss for the said equipment. Buyer expressly warrants and
represents that it has inspected the said equipment, is aware of, and relies solely on its
own knowledge of the equipment condition, value, saleability, and useability, and that the
said equipment is in satisfactory and conforming condition to the Buyer and fully
accounted for. Buyer agrees that the Seller has made no representation, warranty,
statement of fact, or expression of opinion regarding the fitness or merchantability of the
said equipment. Buyer hereby waives any right it may have to reject the said equipment
or revoke its acceptance of the said equipment.” Handwritten notations on the bill of sale

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identify each of the three pieces of equipment by serial or VIN number and, as to the
truck and trailer, also by license plate number.
       Plaintiff took possession of the equipment without paying the purchase price in
full. Title documents respecting the truck and trailer thereafter filed with the Department
of Motor Vehicles identified defendant as the lienholder.
       Although plaintiff anticipated obtaining a loan soon after the purchase to fund the
balance of the price, it failed to do so and a second bill of sale between the parties, dated
July 30, 2008, contains the following handwritten notation: “Check #103, $40,000.00.
Nonrefundable on said balance of $59,000 and inspection, repair, interest from June 1st.
Payable as soon as possible.”
       Plaintiff did not pay the balance due, and in November 2009, defendant took
possession of all three pieces of equipment. Plaintiff then brought the instant action.1
       The issue at trial was whether defendant had obtained a security interest in the
equipment to allow him to repossess the equipment after plaintiff failed to pay in full.
Defendant testified the parties intended that he would retain a security interest in all of
the equipment until the full purchase price had been paid. Plaintiff did not dispute that
defendant retained a security interest in the truck and trailer, but its officers denied they
intended defendant would retain a security interest in the bulldozer. Defendant testified
he never filed a UCC-1 financing statement or any other document to perfect a security
interest in the bulldozer, and the only documents which purport to create a security
interest are the two bills of sale.
       The trial court found that there was substantial evidence to show that the bulldozer
was part of the collateral for the full purchase price of the equipment, and that defendant
retained a security interest in the bulldozer until the full, agreed upon price was paid,

1      The pleadings are not in the record on appeal.

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citing California Uniform Commercial Code section 9203. In its statement of decision,
the court explained: “The parties gave respective values to the truck, trailer, and D7 Cat
[bulldozer] from which a reasonable inference can be drawn to show it was intended that
the D7 Cat was to be part of the collateral. If the parties had intended that the D7 Cat
was not to be part of the collateral they would have so specified. Furthermore, they could
have adjusted the values to the equipment accordingly. [¶] The court finds that until
plaintiff paid the full price of the agreement, Mr. Wurlitzer had a vendor’s lien (or
security interest) in the D7 Cat to which he had a right to foreclose. Therefore, Mr.
Wurlitzer’s foreclosure was proper. [¶] In conclusion, the plaintiff has failed to meet its
burden of proof as to each cause of action.”
       Plaintiff’s motion for a new trial was denied.
                                       DISCUSSION
                                               I
          The Trial Court Did Not Err in Finding a Security Agreement Existed
       Plaintiff contends the trial court erred in finding defendant had a security interest
in the bulldozer because, as a matter of law, no security agreement could have been
created under the circumstances, and there was insufficient evidence to support its
finding defendant retained a security interest in the bulldozer.
       When, as here, a trial court’s construction of a written agreement is challenged on
appeal, the scope and standard of review depend on whether, as here, the trial judge
admitted conflicting extrinsic evidence to resolve any ambiguity or uncertainty in the
contract. If extrinsic evidence was admitted, and if that evidence was in conflict, then we
apply the substantial evidence rule to the factual findings made by the trial court. (Winet
v. Price (1992) 4 Cal. App. 4th 1159, 1165-1166.) Applying this standard of review, we
reject plaintiff’s contentions, and shall affirm the judgment.

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       A security interest is an interest in personal property that secures payment or
performance of an obligation. (Cal. U. Com. Code, § 1201, subd. (b)(35);2 see generally,
4 Witkin, Summary of Cal. Law (10th ed. 2005) Secured Transactions in Personal
Property, § 36, p. 592.) A “security agreement” is one which “creates or provides for a
security interest.” (§ 9102, subd. (a)(73).)
       Section 9203 provides that a security interest is enforceable “only if each of the
following conditions is satisfied: [¶] (1) Value has been given. [¶] (2) The debtor has
rights in the collateral . . . [and] [¶] (3) . . . [¶] (A) The debtor has authenticated a
security agreement that provides a description of the collateral . . . .” (§ 9203, subd. (b);
Oxford Street Properties, LLC v. Rehabilitation Associates, LLC (2012) 206 Cal. App. 4th
296, 308.) The parties do not dispute that the first two factors are satisfied: value was
given, and the debtor -- plaintiff -- had rights in the purported collateral by virtue of the
bill of sale which transferred the equipment to plaintiff. The issue remains whether the
debtor authenticated a “security agreement” creating a security interest in the equipment.
       Nothing in the code requires the debtor to sign a separate, formal document
labeled “security agreement” in order to create a valid security interest. (Komas v. Future
Systems, Inc. (1977) 71 Cal. App. 3d 809, 814 (Komas).) And, “ ‘[n]o magic words or
precise form are necessary to create or provide for a security interest . . . . [Citations.]’ ”
(In re Amex-Protein Development Corp. (9th Cir. 1974) 504 F.2d 1056, 1058-1059;
Komas, supra, 71 Cal.App.3d at p. 816.) Rather, the California Uniform Commercial
Code stresses simplicity and flexibility, and documents are to be construed liberally to
validate security agreements. (In re Amex-Protein Development Corp., supra, at p.
1059.) Therefore, “ ‘[a] writing or writings, regardless of label, which adequately
describes the collateral, carries the signature of the debtor, and establishes that in fact a

2      All further statutory references are to the California Uniform Commercial Code
unless otherwise stated.

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security interest was agreed upon, would satisfy both the formal requirements of the
statute and the policies behind it. [Citations.]’ ” (Komas, 71 Cal.App.3d at pp. 814, 816;
compare Needle v. Lasco Industries, Inc. (1970) 10 Cal. App. 3d 1105, 1108 [financing
statement did not constitute a security agreement because it did not show debtor’s
agreement to grant a security interest and does not specify the obligation whose
performance is secured].)
       In addition, “[t]here is no language in the Commercial Code stating that the terms
of the security agreement must be included in a single document. In fact, under its broad
definition of ‘agreement,’ the code indicates otherwise: ‘ “Agreement” means the
bargain of the parties in fact as found in their language or by implication from other
circumstances including course of dealing or usage of trade or course of
performance . . . .’ [Citations.] Thus, the question is whether the documents presented to
the trial court, taken together, showed an agreement between the parties that the creditor
would have a security interest in the property.” (Komas, supra, 71 Cal.App.3d at pp.
814-815.) In Komas, for example, the respondent conceded that “the financing statement,
standing alone, did not satisfy the requisites for a security agreement” (id. at p. 813), but
the trial court found that the financing statement, loan application, promissory note and
other documents, taken together, established that there was an agreement by the parties to
create or provide for a security interest. (Id. at p. 816; see also New West Fruit Corp. v.
Coastal Berry Corp. (1991) 1 Cal. App. 4th 92, 95-100 [sales and marketing agreement
along with evidence of industry trade and custom held sufficient to create security
interest].)
       Stated another way, the “creation of a valid security interest turns on ‘whether the
parties intended the transaction to have effect as security’ [citations]” (New West Fruit
Corp. v. Coastal Berry Corp., supra, 1 Cal.App.4th at p. 97) and the court may resolve
this question by considering together all the documents and circumstances related to the
transaction (Komas, supra, 71 Cal.App.3d at pp. 814-815) as well as any other evidence

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presented at the hearing (e.g., In re Numeric Corp. (1st Cir. 1973) 485 F.2d 1328, 1331-
1332; New West Fruit Corp. v. Coastal Berry Corp., supra, 1 Cal.App.4th at pp. 99-100).
       With these principles in mind, we conclude the trial court did not err in finding the
parties intended the transaction to provide defendant a security interest in the equipment
until the purchase price was paid in full.
       It is true that the signed bill(s) of sale -- considered alone -- do not expressly state
that defendant shall retain a security interest in the equipment until plaintiff paid the
purchase price in full. But the California Uniform Commercial Code comment to the
current version of section 9203 notes that neither that section’s requirement in
subdivision (b)(3)(A) (that the “debtor has authenticated a security agreement that
provides a description of the collateral”), nor section 9102’s definition of a “ ‘security
agreement’ ” as “an agreement that creates or provides for a security interest,” operates as
a “reject[ion of] the deeply rooted doctrine that a bill of sale, although absolute in form,
may be shown in fact to have been given as security.” (Cal. U. Com. Code com., par. 3,
West’s Ann. Cal. U. Com. Code (2002 ed.) foll. § 9203, p. 171.) Consistent with that
“deeply rooted doctrine,” defendant testified he believed the bills of sale were given as
security.
       Other documents related to the transaction do reflect the parties’ intention to create
a security interest: the title documents filed with the Department of Motor Vehicles after
the transaction identified defendant as the lienholder for both the truck and trailer, which
plaintiff acknowledged. Those title documents reflect the existence of a security interest
in those two items. (Cf. T & O Mobile Homes v. United California Bank (1985) 40
Cal. 3d 441, 447-450.) Taken together, the bill of sale and the title documents indicate the
parties intended that a security interest would be created by virtue of the transaction. (Cf.
Komas, supra, 71 Cal.App.3d at p. 816.) Other evidence adduced at trial further
supported that conclusion. Defendant testified the parties intended he would retain a
security interest in all of the equipment identified on the bill of sale (including the

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bulldozer) until the full purchase price had been paid. The bill of sale executed at the
time of the transaction provided a detailed description of all three pieces of equipment,
including serial and VIN numbers, which provided information necessary for (among
others) any future enforcement of a security interest. (§ 9108, subd. (b)(6).) These
elements, taken together, were sufficient to allow the trial court to find that the parties
agreed plaintiff could take possession of the equipment without paying for it with the
understanding that the equipment would act as collateral for plaintiff’s promise to pay
and that defendant would therefore have a security interest in all the equipment he agreed
to sell to plaintiff, including the bulldozer. (Cf. Komas, supra, 71 Cal.App.3d at p. 816.)
       In so doing, the trial court did not err in considering defendant’s trial testimony
about the parties’ intentions at the time of the transaction. (New West Fruit Corp. v.
Coastal Berry Corp., supra, 1 Cal.App.4th at pp. 97, 99.) Plaintiff “recognized” the
existence of defendant’s security interest in the truck and trailer; it challenged only
whether the scope of the security interest extended to the bulldozer. In analyzing the
scope of a security interest, courts “apply general contractual interpretation principles.
‘[T]o determine the intended scope of secured obligations we must look to the reasonable
expectations of the parties. [Citation.] To this end we utilize general principles
governing commercial agreements as well as specific rules pertaining to secured
transactions.’ [Citation.] Under the California Uniform Commercial Code, an agreement
‘means the bargain of the parties in fact, as found in their language or inferred from other
circumstances . . . .’ [Citation.]” (Oxford Street Properties, LLC v. Rehabilitation
Associates, LLC, supra, 206 Cal.App.4th at p. 309; New West Fruit Corp. v. Coastal
Berry Corp., supra, 1 Cal.App.4th at p. 99.) The trial court was entitled to rely upon
defendant’s testimony concerning the circumstances of the parties’ bargain, and to credit
his testimony that the parties intended him to retain a security interest in all items of
equipment. (New West Fruit Corp. v. Coastal Berry Corp., supra, at pp. 95, 99-100 [trial
testimony of the plaintiff’s president concerning the parties’ agreement and similar

                                               8
transactions].) Indeed, as plaintiff plainly allowed defendant to retain a security interest
in the truck and trailer, the two least valuable of the three equipment pieces ($5,000 and
$6,000, respectively), it makes little sense it would have excluded the far more expensive
bulldozer ($48,000) from an agreement to allow a security interest.
       Plaintiff cites Burlesci v. Petersen (1998) 68 Cal. App. 4th 1062 for the proposition
that parole evidence may be introduced to show whether a security interest is intended
“only . . . if the party seeking to introduce the parole evidence is the debtor.” Burlesci
does not so hold. Rather, in Burlesci, the appellate court held nonsuit should not have
been granted in favor of Petersen’s predecessor Cummings after Burlesci presented her
evidence because that evidence -- viewed in the light most favorable to her claims -- was
sufficient to avoid a nonsuit on all but two causes of action. (Id. at p. 1065.) In so doing,
the court also rejected Cummings’s assertion that Burlesci’s voluntary delivery of
collateral “pursuant to an agreement of any kind is sufficient to create a valid securing
interest” in it (id. at p. 1067), as Cummings had obtained the collateral by agreeing to
“stor[e] the equipment solely as a favor to Burlesci’s husband, not as an assertion of his
security interest.” (Id. at p. 1068.) Plaintiff’s lengthy quote from the Burlesci opinion,
including the statement that “ ‘[m]ore harm than good would result from allowing
creditors to establish a secured status by parole evidence after they have neglected the
simple formality of obtaining a signed writing’ [citation]” (id. at p. 1068) is dictum and,
because it represents a quote from a California Uniform Commercial Code comment
pertaining to a former version of the law no longer in effect, unpersuasive. (The current
version of § 9203 was added by Stats. 1999, ch. 991, § 35, operative July 1, 2001;
amended by Stats. 2006, ch. 254, § 53, eff. Jan. 1, 2007; see 4 Witkin, Summary of Cal.
Law, supra, §§ 19-21, pp. 580-582.)

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                                               II
  The Trial Court Did Not Abuse its Discretion in Denying Plaintiff’s New Trial Motion
       Plaintiff moved for a new trial on the grounds of accident/surprise, asserting it had
no way of anticipating the trial court’s reasoning and inadequate damages, in that it
should have been awarded damages. It also argued insufficient evidence established the
existence of a security agreement or interest, and the judgment was against the law,
because parole evidence cannot establish the existence of a security agreement or interest.
(Code Civ. Proc., § 657, subds. 3, 5, 6, 7.)
       The trial court set the motion for hearing on a particular date; the parties stipulated
to continue the hearing to a future date “based upon the availability [of the trial judge]
and counsel for the parties,” but the matter was never rescheduled. The hearing
proceeded on the date originally set for hearing. Plaintiff’s counsel did not appear;
defendant’s counsel did appear. The court denied plaintiff’s motion.
       Trial courts generally have broad discretion in deciding whether to grant a request
for a continuance. (Oliveros v. County of Los Angeles (2004) 120 Cal. App. 4th 1389,
1395.) Plaintiff contends the trial court abused its discretion when it conducted the
motion for a new trial “in counsel’s absence, despite a stipulation of the parties to
continue the hearing so counsel could be present.”
       We find no abuse of discretion. Although plaintiff’s counsel discussed with the
court clerk his desire to have his motion for new trial continued to a different date than
that set by the court, and sent an informal letter containing his request, he did not file a
formal request for a continuance of the hearing until the day before he knew the motion
was set for hearing. Under these circumstances, counsel cannot show the court abused its
discretion in denying plaintiff’s untimely request and proceeding with the hearing on the
day scheduled for it to be heard.

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                                       DISPOSITION
       The judgment is affirmed. Defendant is awarded costs on appeal. (Cal. Rules of
Court, rule 8,278(a)(1), (2).)

                                                     NICHOLSON           , J.

We concur:

      BLEASE                 , Acting P. J.

      MAURO                  , J.

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