## Facts

- Robert M. Emerald operated a logging business and borrowed $430,962.30 from Crocker National Bank under a promissory note payable in monthly installments, with a final balance due in 1978.
- The loan was secured by a security interest in 52 items of logging equipment.
- Emerald’s business suffered during a downturn in the logging industry, and he missed the May 15, 1976 payment.
- After default, the bank accelerated the note and demanded payment of the unpaid balance.
- With the bank’s consent, Emerald sold 18 items of the collateral privately and applied the proceeds to the debt, reducing the claimed outstanding balance to $128,966.86.
- The bank sued to collect the remaining balance plus interest, collection expenses, and attorney’s fees.
- Emerald asserted defenses and filed cross-complaints alleging, among other things, breach of fiduciary duty and a statutory civil-rights claim; the trial court sustained multiple demurrers and ultimately denied further leave to amend.
- The trial court granted the bank summary judgment on its collection claim, rejecting Emerald’s defenses and cross-claims.
- Emerald appealed, arguing factual disputes existed regarding the handling and disposition of collateral and related equitable defenses.

## Issues

1. Whether summary judgment was proper where the debtor produced evidence suggesting triable issues on whether the secured creditor’s disposition of collateral after default was “commercially reasonable” under former California Uniform Commercial Code § 9504(3).
2. Whether disputed facts bearing on equitable defenses (including unclean hands and estoppel) precluded summary judgment on the creditor’s deficiency claim.
3. Whether the trial court abused its discretion in denying leave to file or further amend an asserted compulsory cross-complaint under California Code of Civil Procedure § 426.50 after repeated demurrers were sustained.
4. Whether the appellate court should make its own findings of fact under California Code of Civil Procedure § 909.

## Decision

- The Court of Appeal reversed the order granting summary judgment for the bank because the papers showed triable issues of material fact, particularly concerning commercial reasonableness and related defenses.
- The Court of Appeal affirmed the trial court’s denial of leave to file or further amend the cross-complaint, finding no abuse of discretion given the history of unsuccessful amendments.
- The Court of Appeal declined to make findings of fact under Code of Civil Procedure § 909.
- The matter was remanded for further proceedings consistent with the appellate decision.

## Legal Principles

- On summary judgment, the moving party must show the absence of any triable issue of material fact; appellate review is independent and limited to the effect of the parties’ papers.
- Under former California Uniform Commercial Code § 9504(3), a secured creditor’s post-default disposition of collateral must be conducted in a commercially reasonable manner; whether the disposition was commercially reasonable is generally a factual question.
- A deficiency claim may be reduced or barred where the debtor proves the secured creditor failed to comply with statutory duties in collateral disposition, and contested evidence on that point defeats summary judgment.
- Equitable defenses such as unclean hands and estoppel can limit or preclude a creditor’s recovery where the creditor’s conduct or representations are shown to be inequitable; disputed facts on these defenses prevent summary judgment.
- Although Code of Civil Procedure § 426.50 reflects a policy favoring allowance of compulsory cross-complaints, denial of further leave to amend may be proper where repeated pleadings fail to state a viable claim and further amendment appears futile or prejudicial.
- Appellate fact-finding under Code of Civil Procedure § 909 is discretionary and used sparingly, especially where material facts are disputed and better resolved at trial.

## Conclusion

The appellate court held that factual disputes over the commercial reasonableness of collateral disposition and related equitable defenses required reversal of summary judgment on the bank’s deficiency claim, while the trial court acted within its discretion in refusing further cross-complaint amendments and the appellate court properly declined to find facts on appeal.


Crocker Nat’l Bank v. Emerald, 221 Cal. App. 3d 852, 270 Cal. Rptr. 699 (Ct. App. 1990)