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Lyon Financial Services, Inc. v. Fabella

California Court of Appeals, Fourth District, First Division
Apr 13, 2009
No. D052881 (Cal. Ct. App. Apr. 13, 2009)

Opinion


LYON FINANCIAL SERVICES, INC., Plaintiff and Respondent, v. GABRIEL T. FABELLA, M.D., INC., et al., Defendants and Appellants. D052881 California Court of Appeal, Fourth District, First Division April 13, 2009

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of San Diego County No. GIC879818, Ronald S. Prager, Judge.

HUFFMAN, J.

Gabriel T. Fabella and Gabriel T. Fabella, M.D., Inc. (Fabella) appeal a summary judgment in favor of Lyon Financial Services, Inc. (Lyon) on Lyon's complaint for damages for breach of contract, a lease agreement. (Code Civ. Proc., § 437c). The court found Fabella remained liable for all payments due under the lease agreement between Fabella and Lyon's assignor, Americorp Financial, LLC (Americorp). We affirm.

Unless otherwise indicated, all statutory references are to the Code of Civil Procedure.

FACTS AND PROCEDURAL HISTORY

A. The Lease Agreement and Assignments

On June 26, 2003, Gabriel T. Fabella, M.D., Inc. entered into a 60-month lease agreement with Americorp to rent medical equipment. Fabella personally and unconditionally guaranteed all payments and obligations to Americorp. The lease agreement contained a provision that stated in all capital letters: "Lessee shall not sell, assign, sublease, pledge, lien, mortgage, or otherwise encumber this lease, the equipment, any accessories attached thereto or any interest herein, voluntarily or involuntarily, without the prior written consent of the lessor."

Americorp assigned its rights under the lease agreement to DVI Strategic Partner Group (DVI). After DVI filed a bankruptcy petition, the bankruptcy court appointed Lyon as the successor financial servicer to DVI.

B. Fabella's Transaction with Benigno Tuazon

A few months after his corporation entered into the lease agreement with Americorp, Fabella met Benigno Tuazon (Tuazon). Tuazon told Fabella that he was looking for medical equipment for his rehabilitation facility at Good Shepherd Healthcare. Tuazon and Fabella entered into an oral agreement whereby Fabella allowed Tuazon to take possession of the equipment Fabella was leasing from Americorp, and Tuazon agreed to pay the monthly rent for the equipment directly to Americorp. Tuazon made monthly payments to Americorp from October 2003 until July 2006.

C. Procedural History

On February 7, 2007, Lyon filed a complaint for damages for breach of contract, alleging Fabella was delinquent in payment for the months of August 2006 forward under the written lease between Fabella and Americorp. Fabella answered the complaint and concurrently filed a cross-complaint against Tuazon for breach of oral agreement, promissory estoppel, and indemnity. Tuazon responded by denying the allegations in the cross-complaint filed against him. Additionally, he filed a cross-complaint against Fabella for total indemnity, equitable indemnity, contribution, and declaratory relief.

No resolution of the cross-complaints is shown in the record before us, and Tuazon is not a party to this appeal. We address only the issues between Lyon and Fabella.

Lyon filed a motion for summary judgment, asserting it had established a prima facie case of breach of contract. In support, Lyon provided a declaration of its collections manager, attaching her worksheet and copies of the assignments to Lyon. Lyon's attorney's declaration attached discovery responses from Fabella, admitting to the authenticity of the lease agreement. Fabella's responses did not dispute his company entered into a written lease agreement with Americorp, that he personally guaranteed performance of the contract, or that Americorp assigned its interest in the Fabella lease agreement to DVI.

Fabella contended in his opposition to the motion for summary judgment that a material dispute existed as to whether Fabella was released from liability of the lease due to Fabella's agreement with Tuazon. Fabella asserted he transferred the lease to Tuazon, and that Jack Lewis, account manager of Americorp, knew of the transfer, and therefore a novation had occurred.

After oral argument, the court granted the motion for summary judgment, finding no triable issue of material fact, because Fabella's evidentiary showing failed to establish a foundation for his assertions of a novation or Lyon's consent to transfer of the lease. The court found Lyon was entitled to summary judgment as a matter of law.

DISCUSSION

I

STANDARD OF REVIEW; CONTENTIONS

"In evaluating the propriety of a grant of summary judgment our review is de novo." (Zavala v. Arce (1997) 58 Cal.App.4th 915, 925.) We exercise our independent judgment and apply the same standard as the trial court in determining whether summary judgment is appropriate. (Planned Parenthood v. City of Santa Maria (1993) 16 Cal.App.4th 685, 690.)

A summary judgment motion shall be granted if "there is no triable issue as to any material fact" and "the moving party is entitled to judgment as a matter of law." (§ 437c, subd. (c).) Once a plaintiff has proved each element of the cause of action, the burden shifts to the defendant to show a triable issue as to any material fact exists. (§ 437c, subd. (p)(1).)

Fabella does not dispute that his company entered into a written lease agreement with Americorp, or that he personally guaranteed performance of the contract. He does not dispute that the lease required consent for a transfer, and admits that no one made payments pursuant to the lease agreement from August 2006 forward. However, he contends that because he had effectively transferred the lease to Tuazon, he is no longer liable for any lease payments. He claims that a material dispute exists as to the validity of the transfer, and whether his liability was released based on his novation theory. He therefore argues summary judgment was inappropriately granted.

II

NOVATION

A novation "is the substitution of a new obligation for an existing one." (Civ. Code, § 1530.) A novation may be found by implication, but the facts and circumstances must show a mutual agreement between the parties to substitute a new debtor for the original debtor. (Colley v. Chowchilla National Bank (1927) 200 Cal. 760, 770.) "The burden of proof is on the party asserting that a novation has been consummated. [Citation.]" (Howard v. County of Amador (1990) 220 Cal.App.3d 962, 977.)

We review the trial court's evidentiary findings regarding existence of any triable issues about a novation under the abuse of discretion standard. Absent a clear showing that the trial court abused its discretion in that respect, its decision will not be disturbed on appeal. (Smith v. Smith (1969) 1 Cal.App.3d 952, 958.) Additionally, we view the evidence most favorably in support of the trial court's evidentiary ruling to determine whether a "judge could reasonably have made the order that he did." (Newbauer v. Newbauer (1949) 95 Cal.App.2d 36, 40.)

Fabella provided a declaration to the trial court which stated he transferred the lease and possession of the medical equipment to Tuazon and that Americorp had accepted payments for the equipment from Tuazon. Additionally, he stated Jack Lewis of Americorp knew of the transfer. Fabella attached a copy of a "Domestic Outgoing Wire Transfer Form" which showed a $3,000 transfer from Tuazon to Americorp on September 14, 2006. From these facts, Fabella contended Lyon must have agreed to the lease transfer, releasing him from liability.

In support of his argument, Fabella relies on San Gabriel Valley Ready-Mixt v. Casillas (1956) 142 Cal.App.2d. 137, for the proposition that Fabella and Lyon created a novation, even without an express agreement between the two parties. However, that case is distinguishable, since the parties there had a mutual understanding that the original written contract was extinguished, and that neither party would demand further performance of the written contract by the other. The court found a novation since the parties had abandoned the contract and later entered into a new oral contract. (Id. at p. 141.) Here, however, there was not a mutual understanding shown between Fabella and Americorp or Lyon that the original contract should be extinguished and a new contract created, substituting Tuazon as the debtor instead of Fabella.

Instead of proof of a novation, the court in our case found that although Fabella alleged Jack Lewis knew of the transfer between Fabella and Tuazon, Fabella had provided "no foundation for this assertion." Additionally, the court stated the "Domestic Outgoing Wire Transfer Form" merely showed Tuazon wired a payment to Americorp, but it did not show Americorp's acceptance of the lease transfer. Because the express terms of the contract mandated Fabella could not assign the lease without the prior written consent of Americorp, the court found Fabella had not established consent, and he was therefore in breach of the lease agreement. These rulings were well within the court's discretion in assessing the evidence on the motion and opposition. The court then drew appropriate legal conclusions from the evidence.

Because Fabella did not provide valid evidence of his only defense, that Americorp or Lyon had consented to an assignment of the lease from Fabella to Tuazon, no triable issue of fact was shown. Thus, as a matter of law, the trial court correctly granted summary judgment to Lyon.

DISPOSITION

Summary judgment is affirmed. Costs are awarded to Respondent.

WE CONCUR: McCONNELL, P. J., O'ROURKE, J.


Summaries of

Lyon Financial Services, Inc. v. Fabella

California Court of Appeals, Fourth District, First Division
Apr 13, 2009
No. D052881 (Cal. Ct. App. Apr. 13, 2009)
Case details for

Lyon Financial Services, Inc. v. Fabella

Case Details

Full title:LYON FINANCIAL SERVICES, INC., Plaintiff and Respondent, v. GABRIEL T…

Court:California Court of Appeals, Fourth District, First Division

Date published: Apr 13, 2009

Citations

No. D052881 (Cal. Ct. App. Apr. 13, 2009)