Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, Michael S. Mink, Judge. Affirmed.
Law Office of Scott D. Dinsmore and Scott D. Dinsmore for Plaintiff and Appellant.
Irsfeld, Irsfeld & Younger, James J. Waldorf, Kathryn Van Houten; Irsfeld & Associates and Hannah C. Irsfeld for Defendant and Respondent.
FLIER, J.
GreenBear Technologies, Inc., (GreenBear) appeals from a defense judgment for respondent ABC Rentals, Inc., (ABC) following a bench trial on claims of wrongful interference with economic advantage, unfair competition and breach of contract. While GreenBear makes several contentions of trial court error as to the breach of contract claim and in failing to include essential findings in its statement of decision, we find no error and therefore affirm.
GreenBear does not challenge the trial court’s findings or decision regarding the claims for wrongful interference with economic advantage or unfair competition.
FACTS
GreenBear is a California corporation that rents computer equipment to end users on a short term basis. GreenBear primarily rents out equipment for trade shows, movie productions and other uses by corporate clients. GreenBear was the successor company to a corporation known as Ganton Industries, Inc., (Ganton) and was formed in 2001 when GreenBear’s president, Mark Murphy, purchased a substantial interest in Ganton.
ABC is a Nevada corporation that also rented computer and audio visual equipment to end users, as well as to other rental equipment companies. Max Ruhlmann is the president and owner of ABC, which is no longer in business.
ABC and GreenBear were competitors in a very competitive market, but they also did substantial business with each other. ABC rented equipment to some of the same clients as did GreenBear. ABC also did business as a wholesale renter, renting out equipment to another rental equipment company, which in turn would rent the equipment to an end user (sub-renting). ABC owned a much larger inventory of equipment for rent than did GreenBear. GreenBear relied on ABC and other wholesale renters to fulfill its needs. However, ABC occasionally would rent equipment from other competing companies, including GreenBear, when necessary to fulfill an order.
Sub-renting was an industry norm. When ABC or GreenBear rented equipment to an end user, it would typically send out employee technicians to set up the equipment and ensure the equipment was operating properly during the rental period. When ABC or GreenBear sub-rented to other companies, however, it would merely rent out the equipment, and the renting company’s own technicians would install and maintain the equipment for the end user.
In sub-renting, the renting company would place an order by telephone and most of the time would send a delivery person or technician to pick up the equipment. The person who picked up or received the equipment for the renting company would not be an officer, director, manager or supervisor of the renting company, but rather a low-end delivery person or hourly paid employee involved in the installation and maintenance of the equipment for the rental period. In the present case, the trial court found the evidence was undisputed that when ABC sub-rented from another company, ABC’s delivery technician was authorized by ABC to sign for the receipt of equipment from GreenBear, “but that was his only authority.”
When GreenBear was formed through the sale of Ganton in 2001, Ganton had a substantial number of employees, including long-term employees. It also had several offices, including offices in Burbank and Las Vegas. After Murphy took over as president of GreenBear, he undertook to reorganize and streamline its business operations. He closed some offices and consolidated the company’s administrative functions with its corporate offices in Burbank. He also reduced the number of corporate employees, designed an employment handbook, reduced employee compensation and converted some salaried personnel into hourly employees.
Murphy also revised GreenBear’s form contracts. One of the form contracts he revised was the “Rental Agreement” that a customer signed when renting or sub-renting equipment. On the revised form, the front of the Rental Agreement under “ACCEPTANCE” states, “Customer hereby acknowledges he has read this agreement, is aware of all of the terms contained in this agreement and accepts the above described Equipment subject to the terms contained herein. Customer further acknowledges that GreenBear Technologies, Inc. may charge customer’s credit card in case of delinquency.”
On the back of the Rental Agreement, Murphy changed the “Rental Terms and Conditions” to include, among numerous other provisions in small print, the following language: “9. DEFAULT. If the Customer breaches this Rental Agreement in any respect, has misstated any information required by GreenBear or disposes of the rental equipment, fails to make rental payments, is lost[,] damaged, stolen [sic] or, attempts to hire any GreenBear Employee during the term of the Rental Agreement and for one (1) year subsequent to this Rental Agreement[,] than [sic] GreenBear at its option may exercise one or more of the following remedies. [¶] . . . [¶] (d) Invoice and demand a payment from the Customer the sum of Twenty thousand dollars ($20,000) for any GreenBear Employee that is hired by the Customer during the term of the Rental Agreement or hired during the subsequent twelve months. . . .” (Italics added.)
Murphy testified the reason he included this language was to recoup the cost of hiring and training a technician who might be hired away by a user. He testified that the $20,000 sum to be paid to GreenBear was an estimated cost to replace and train a replacement technician and was a “very conservative” estimate.
GreenBear used the same rental agreement whether the renter was an end user or another company sub-renting equipment. The revised form had no place for a renter to sign on the page that contained the additional “Terms and Conditions,” and the fact that such conditions were included as terms of the rental agreement was not brought to the attention of the person signing for the equipment.
The court found it was the custom in the computer rental industry to have computer sub-rental agreements signed by delivery technicians upon delivery of rented computer equipment and that additional terms and conditions were included as part of the rental agreements. The only evidence presented at trial specifically regarding sub-rental transactions was that ABC, which had been in the industry for years, had additional terms in its own agreements that did not include a compensation provision for the hiring of employees. The court found no evidence suggesting a compensation provision was routinely recognized within the industry as valid or has been routinely enforced in the industry.
It was not disputed that ABC hired eight former employees of GreenBear within one year from the date ABC rented equipment from GreenBear on at least one occasion. Other GreenBear employees, including the brother of GreenBear’s chief executive officer, quit to work for other companies during this same time period.
There was a major dispute whether GreenBear’s rental agreement always contained the “Terms and Conditions” on the reverse side, whether it was on an attached sheet or whether it was provided to the customer at all. The trial court found this issue irrelevant to its findings and decision but found substantial evidence to support ABC’s position that the terms and conditions were not printed on the back of the “Rental Agreement” when signed by ABC’s delivery technicians. A former GreenBear vice president, Patricia Davis, testified that on several occasions while working at GreenBear she personally witnessed GreenBear employees copying or printing the Terms and Conditions at issue on the back of equipment rental agreements after the front of the agreements had already been signed by customers.
Of the eight employees ABC hired, only three were technicians. Only one of the technicians was experienced, the other two being entry level technicians. All of the GreenBear employees were employees at will. The GreenBear employment policies manual provided that employment at GreenBear “may be terminated for any or no reason, with or without notice or cause, at any time by you [the employee] or GreenBear. . . .” (Boldface omitted.) GreenBear contended that some of the terminating employees did not give it notice of their termination.
The terminating employees gave various reasons for leaving GreenBear. An office manager indicated he believed Murphy had “lied and was unethical,” he did not like the direction in which the company was going and he felt the company was falling apart, was not paying its vendors and was eliminating administrative and sales staff. An office staff member stated she had become increasingly concerned about GreenBear’s stability, felt she had been held at a professional and financial standstill for over two years, was made “un-kept promises” by the company president and was disturbed by the company’s recent announcement of its intent to restructure the office. Former GreenBear vice president Patricia Davis stated in her letter of resignation that she was quitting because, among numerous other things, she had received a 15 percent pay cut, her quota had been increased by 100 percent and she felt her long established relationships with vendors were being jeopardized by GreenBear’s inability to pay them. An administrative assistant stated in her resignation letter that she was resigning because she had been given “more and more responsibilities with no additional money,” had not received a raise since GreenBear’s takeover, was switched from a salary to an hourly wage with no explanation and felt her doctor’s work restriction was not being honored. Other employees had been let go by GreenBear, left for a shorter commute or were unhappy with the wage scale or wage reductions at GreenBear.
In August 2004, GreenBear sent ABC a “Rental Invoice” in the amount of $160,000, which GreenBear claimed was owed for the eight former GreenBear employees who had been hired by ABC.
PROCEDURAL HISTORY
GreenBear brought this action in October 2004. After a three and one-half day court trial, the court issued a memorandum of decision in January 2006, finding for ABC on all causes of action. GreenBear objected to the memorandum of decision and submitted a request for further statement of decision. The court issued a ruling on the request for further statement of decision and made further findings before entering a judgment in ABC’s favor. GreenBear timely appealed the judgment.
STANDARD OF REVIEW
Unconscionability is a question of law. (Civ. Code, § 1670.5; Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 89; Marin Storage & Trucking, Inc. v. Benco Contracting & Engineering, Inc. (2001) 89 Cal.App.4th 1042, 1055 (Marin Storage).) Nevertheless, factual issues may bear on that question. (Civ. Code, § 1670.5, subd. (b); Gutierrez, at p. 89.) When the trial court’s determination of unconscionability is based upon its resolution of conflicts in the evidence, or on the factual inferences that may be drawn from the evidence, we consider the evidence in the light most favorable to the court’s determination and review those aspects of the determination for substantial evidence. (Ibid.)
DISCUSSION
1. ABC Was Not Bound by the Alleged Agreement
GreenBear contends that when ABC’s delivery technicians signed for equipment received from GreenBear, ABC became bound by the Rental Terms and Conditions found on the reverse side of the Rental Agreement, including the provision requiring payment of $20,000 for each GreenBear employee hired within one year of the termination of the equipment rental.
In the present case, GreenBear failed to meet its burden of proof of showing the persons who signed the rental agreements had actual or apparent authority to do anything more than acknowledge receipt of the rented equipment and undertake responsibility for such equipment.
For a corporation to be bound by a contract, either the contract must be executed by an officer of the corporation or one seeking to enforce the contract must prove the person signing the contract on the corporation’s behalf had actual or apparent authority to do so. (Corp. Code, § 313; Snukal v. Flightways Manufacturing, Inc. (2000) 23 Cal.4th 754, 782-783.) The trial court found the rental agreements were not signed by any officer or director of ABC, but by low-level delivery technicians of the company. The court also found the delivery technicians had no actual or apparent authority to enter into any contract to bind ABC to pay GreenBear $20,000 for each employee of GreenBear who might go to work for ABC within one year from the date of the termination of the rental agreement. The existence of agency, as well as the extent of authority of an agent, are questions of fact for a trier of fact whose determination may not be disturbed on appeal if supported by substantial evidence. (Wickham v. Southland Corp. (1985) 168 Cal.App.3d 49, 55; see also Garlock Sealing Technologies, LLC v. NAK Sealing Technologies Corp. (2007) 148 Cal.App.4th 937, 965.)
Substantial evidence supports the court’s determinations. Ruhlmann testified he is the president and sole shareholder of ABC. None of the agreements was signed by him. He further testified that no one but he had the authority to bind ABC to an agreement that would restrict ABC’s ability to hire employees, and he never authorized anyone to enter into such an agreement. Ruhlmann stated he was not aware of any $20,000 penalty contained in any GreenBear computer equipment rental confirmation slips or agreements when ABC rented equipment from GreenBear. Only upon receiving the $160,000 invoice for payment from GreenBear did he become aware of such a provision. Ruhlmann stated that had he been aware that GreenBear’s rental agreements contained the $20,000 penalty, he would never have rented equipment from GreenBear.
GreenBear claims the court erred in not making additional findings, such as whether each agreement was signed and whether the terms and conditions were received with the agreements. However, in view of the trial court’s finding that the delivery technicians had no actual or apparent authority to bind ABC to an agreement to pay for hiring GreenBear employees, the court was not obliged to make additional specific findings. The trial court’s statement of decision was sufficient to explain the factual and legal basis of its decision, and any additional evidentiary details were not necessary. (In re Marriage of Balcof (2006) 141 Cal.App.4th 1509, 1530-1531 [trial court need only state ultimate rather than evidentiary facts in statement of decision, and failure to find on immaterial issue is not error].)
Citing Dallman Supply Co. v. Smith-Blair, Inc. (1951) 103 Cal.App.2d 129, GreenBear further asserts that ABC’s knowledge and signature on the Rental Agreement were not necessary to bind ABC to the Terms and Conditions at issue. Dallman Supply, however, is not factually apposite since in that case there was an alleged oral agreement that was subsequently confirmed by a written letter setting forth the terms of the agreement that was reached. The appellate court held that, although the defendant did not sign the letter, “there is ample evidence from which the court could find that defendant accepted the letter and acted upon it.” (Id. at p. 132.) In this case, the trial court found there was no evidence that ABC knew about the additional terms and conditions and the $20,000 provision at issue, much less accepted or acted upon it.
GreenBear argues that the course of dealing establishes the parties agreed to all terms in the Rental Agreement, asserting this case is “strikingly” similar to Marin Storage, supra, 89 Cal.App.4th 1042. In Marin Storage, the reverse side of a “Work Authorization and Contract” provided by a crane company to a general contractor included an indemnity provision in favor of the crane company. The court held that the title of the document alerted the general contractor to the nature of the document (id. at pp. 1049-1050) and the parties’ course of dealing “conducted over many years and numerous hirings” established the existence of an oral agreement that included the terms contained in the form (id. at p. 1051).
Here, the title of the document, Rental Agreement, was not such as to alert ABC it contained any agreement not to hire GreenBear employees or to pay any penalty for doing so. There was also evidence the reverse side of the rental agreement may not even have been furnished to ABC at the time of the transactions. And, the evidence indicated it was more typical for ABC to rent equipment to GreenBear rather than from GreenBear, and thus ABC did not have “many years and numerous hirings” in which to review GreenBear’s rental agreement. The present situation is more akin to the facts in Cory v. Golden State Bank (1979) 95 Cal.App.3d 360, 367, a case in which the court concluded a bank’s money order purchasers were not chargeable with either actual or constructive notice of a service charge provision appearing in fine print on the customer’s copy of the money order after the transaction was completed.
2. The “Terms and Conditions” at Issue Are Not Enforceable
GreenBear asserts that ABC did not meet its burden of showing the agreements were unconscionable and therefore unenforceable. We disagree.
We also disagree with GreenBear’s contention, based on Marin Storage, supra, 89 Cal.App.4th at page 1049, that the trial court’s finding there was no contract to pay a $20,000 penalty for hiring a GreenBear employee within a year of the rental agreement is inconsistent with its further finding that the provision is unconscionable. We construe the trial court’s decision as resting on alternative grounds. (Ibid.)
The doctrine of unconscionability has been codified in Civil Code section 1670.5. The statute provides: “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” (Civ. Code, § 1670.5, subd. (a).)
Unconscionability includes both procedural and substantive elements. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz); Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1249 (Higgins).) The procedural element focuses on oppression or surprise: oppression occurs when a contract involves lack of negotiation and meaningful choice, and surprise when the allegedly unconscionable provision is hidden within a prolix printed form. (Jones v. Wells Fargo Bank (2003) 112 Cal.App.4th 1527, 1539 (Jones).) The substantive element pertains to whether a contractual provision reallocates risks in an objectively unreasonable or unexpected manner. (Ibid.) “[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Armendariz, supra, 24 Cal.4th at p. 114.)
A. Procedural Unconscionability
There is little doubt that the provision at issue satisfies the “surprise” element for procedural unconscionability as the provision is hidden within a prolix printed form. (Jones, supra, 112 Cal.App.4th at p. 1539.) The employment penalty provision is printed on the back of the rental agreement and is buried in fine print in the middle of the page, under the title “Rental Terms and Conditions.” (Italics added.) The standardized form does not provide for a signature on the page containing the Rental Terms and Conditions. The language is not highlighted or distinguished from other text by size, style of print or in any other manner, and the subject matter of a penalty for hiring a GreenBear employee is not encompassed in the title of the paragraph (“Default”).
Moreover, GreenBear did not direct ABC’s attention to the language at issue or draw the delivery technician’s attention to the provision when the technician signed for the receipt of rented equipment. The evidence indicates that the terms and conditions may not even have been printed out or furnished to ABC before the delivery technician signed for receipt of the equipment. (See fn. 2, ante.)
Although the face of the document states that the customer “hereby acknowledges he has read this agreement [and] is aware of all of the terms contained in this agreement,” we recently noted in Higgins, supra, 140 Cal.App.4th at page 1253 that comparable language would not defeat an “otherwise strong showing of procedural unconscionability,” as is the case here.
Procedural unconscionability, however, is the “ ‘ “the beginning and not the end of the analysis insofar as enforceability of its terms is concerned.” ’ ” (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 586 (Gatton).) We turn to whether the provision in question is substantively unconscionable.
B. Substantive Unconscionability
The substantive element of the unconscionability equation focuses on overly harsh or one-sided results. (Armendariz, supra, 24 Cal.4th at p. 114; Gatton, supra, 152 Cal.App.4th at p. 586.)
In this case, the provision at issue would require ABC to pay GreenBear $20,000 for each employee who might be hired by ABC either during the term of the rental agreement or during the 12 months after the rental period expired. The provision is patently one-sided: no similar penalty is provided for employees hired by GreenBear from ABC during the same period. Although Murphy testified the provision was necessary for GreenBear to recoup the cost of training and replacing experienced technicians, the majority of the employees for whom GreenBear invoiced ABC were not technicians, two were merely low-level technicians and only one was an experienced technician.
The provision did not even relate to services provided by GreenBear with respect to the rental agreement. The undisputed evidence was that ABC rented equipment only and provided its own technicians to install and maintain the equipment for the end user.
A company sub-renting equipment would have no reason to expect a $20,000 employment penalty provision to be contained in terms and conditions associated with a short term equipment rental. Although ABC and others in the industry had standardized terms and conditions in their rental agreements, such standardized agreements did not include a compensation provision for the hiring of the renting company’s employees. Neither ABC nor, under the evidence, anyone else in the industry included such clauses in their rental agreements. Further, there was no showing such additional terms in rental agreements were routinely enforced or recognized as valid within the industry.
The penalty provision here at issue therefore reallocates risks “in an objectively unreasonable or unexpected manner.” (Jones, supra, 112 Cal.App.4th at p. 1539.) When, as here, a provision is “ ‘ “unfairly one-sided” ’ ” and lacks “ ‘ “a modicum of bilaterality,” ’ ” it is substantively unconscionable. (Higgins, supra, 140 Cal.App.4th at p. 1253.)
Even beyond that, the penalty levied is extreme when compared to the relatively modest cost of the equipment rentals. For example, were we to enforce the provision, the $20,000 penalty could be triggered by ABC’s two-week rental of two laser printers at a total cost of $200. A $20,000 plus penalty on a two-week, $200 equipment rental is so excessive as to be unconscionable. The penalty is such that “ ‘[n]o man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.’ ” (California Grocers Assn. v. Bank of America (1994) 22 Cal.App.4th 205, 214.)
We thus find the $20,000 penalty provision is unconscionable. Accordingly, the trial court did not err in finding the provision unenforceable.
DISPOSITION
The judgment is affirmed. Respondent is to recover costs on appeal.
We concur:COOPER, P. J. RUBIN, J.