Opinion
G030988.
10-1-2003
JAMES KLEIN INSURANCE, INC., et al., Cross-complainants and Appellants. v. SELECT OFFICE SOLUTIONS, Cross-defendant and Appellant.
Law Offices of Theresa Barta and Theresa J. Barta for Cross-defendant and Appellant. Law Offices of Peter C. McMahon and Peter C. McMahon for Cross-complainants and Appellants.
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This case was tried on cross-complaints after the main action was settled. Following a bench trial, the court awarded cross-complainants/cross-defendants/cross-appellants James Klein Insurance Services, Inc. and James Klein (collectively Klein) judgment for $30,000 against cross-defendant/cross-complainant/appellant Select Office Solutions (Select) and awarded Select judgment against Klein for almost $12,000.
The cross-complaints concerned two successive lease contracts for copiers. On Kleins cross-complaint the court found that Select breached its promise to give Klein an opportunity to test the compatibility of a new copier with his other equipment before delivering it to his office and before submitting a lease contract, used as a financing tool, to General Electric Capital Corporation (GECC). On Selects cross-complaint, the court found that Klein had converted a copier he had obtained from Select under an earlier contract. Select argues the judgment in favor of Klein is not supported by substantial evidence, it is entitled to punitive damages as a matter of law, and the court should have granted its motion for a new trial, the latter motion based, in part, on allegations of judicial misconduct. Kleins cross-appeal argues the judgment against him for conversion is not supported by substantial evidence and claims entitlement to costs and attorney fees as the prevailing party. Because none of the parties arguments has merit, we affirm the judgment.
FACTS
The case involves two separate three-party transactions. Almost a decade ago, Klein leased a Toshiba copier (the first copier) he obtained from Select. Klein signed a lease contract with GECC and GECC paid Select. The parties contract required Klein to return the copier to Select at the end of the lease. Five years later, shortly before the first lease expired, Select solicited Klein to sell him a more up-to-date Konica copier (the second copier). Selects sales representative proposed he finance acquisition of the new copier through another GECC lease, and Klein signed two contracts: an order with Select and a GECC lease agreement. The lease specified Klein would pay GECC $545 per month for 60 months. When Klein failed to make the payments specified in the lease agreement, GECC sued him, seeking damages in excess of $30,000.
Klein cross-complained against Select and GECC. He alleged that, before he signed the order and the lease, Select had agreed that Klein would be given an opportunity to have his system analyst determine whether the new copier was compatible with Kleins other systems; Select agreed it would not submit the lease to GECC or deliver the copier to Kleins offices prior to that determination. The cross-complaint asserted that Select breached this agreement when it delivered the copier to Kleins offices and the executed lease to GECC. Select did so before Klein obtained the approval of the analyst and, after Klein learned it was not compatible with his other systems, Select refused to pick up the copier.
Shortly before trial started, Klein settled with GECC by promising to pay it $30,000. At the conclusion of the bench trial, the court found that Selects representative had, in fact, agreed to delay delivery of the lease and the copier until Klein determined the copier was compatible with his other systems and that Klein was not contractually bound until such compatibility had been determined. The court concluded Select breached this contract and the breach caused Klein damages of $30,000 (the sum he was obligated to pay GECC under his settlement with the latter). The court awarded judgment in Kleins favor in that amount. The judgment was based on the trial courts conclusion Selects promise was not a part of the integrated written contracts and that this "oral promise to allow Klein time to consult with his computer system consultant before incurring any obligation was one that would naturally be made as a separate agreement . . . ."
The judgment against Klein was based on Selects cross-complaint that charged Klein with having converted the first copier. Rather than return the first copier at the end of the lease, Klein donated it to Goodwill Industries. The trial court found that Klein "knowingly and intentionally gave away the [first copier], which he knew did not belong to him . . . ." Based on this finding, the court awarded judgment of almost $12,000 in favor of Select; the court also concluded that "Select [had] not proved fraud, malice or oppression" and denied punitive damages.
Select supported its motion for a new trial with the affidavit of its lawyer Theresa Barta that it contends establishes prejudice on the part of the trial judge. The declaration refers to delays in the issuance of the statement of decision and the judgment and relies on statements made by the trial judge during a settlement conference. Barta characterizes these statements as a prejudging of the case.
DISCUSSION
Standard of Review
Each party claims the judgment against it is unsupported by the evidence. As Klein acknowledges but Select chooses to ignore, our review on this ground is limited to whether there is substantial evidence in the record to support the judgment, which we presume to be correct, and not whether there is evidence to support the opposite result. (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 874.) If there is substantial evidence we must affirm, whether or not that evidence is contradicted.
Although Select couches its argument in terms of the lack of substantial evidence, in effect it asks us to reweigh the evidence and reconsider the credibility of the witnesses. We may not do so. "`"[A court of appeal has] no power to judge . . . the effect or value of the evidence, to weigh the evidence, to consider the credibility of the witnesses, or to resolve conflicts in the evidence or in the reasonable inferences that may be drawn therefrom." [Citation.]" (White v. Inbound Aviation (1999) 69 Cal.App.4th 910, 927.)
Substantial Evidence Supports the Judgment Against Select
Under the rubric lack of substantial evidence, Select attacks the trial courts finding that its failure to honor the promise to delay submitting the lease to GECC constituted a breach of contract on three grounds: (1) "[t]here was no evidence at all of a contract" (initial capitalization, bold, italics, and underlining omitted) to delay submission of the lease; (2) its decision not to await notification the copier was compatible with Kleins other systems was a mere failure of a condition precedent, which does not entitle Klein to recover damages; and (3) admission of the evidence of the contemporaneous oral agreement violated the parol evidence rule.
The third ground, with which we deal anon, contradicts the first one. Among other things, Klein testified "I was giv[en] an assurance by [Selects representative] that we would have time to investigate this. [¶] Q: Investigate what? [¶] A: Investigate whether it was compatible before I signed the lease. I said, `Alfred, you got to give us time on this thing, and he said, `I will. So I said, `then Ill sign the lease." Kleins testimony was that he signed the lease in return for the promise that Select would hold it until he could ascertain whether the copier would be of use to him. Circumstantial evidence also supports the conclusion Selects representative made such a promise. Whether or not Select agrees this is what happened, it constitutes substantial evidence, and we are bound by the trial courts reliance on it. All the more so because the judge stated she found Kleins testimony more convincing than that of Selects representatives.
Select also complains the court relied on inferences it drew from the testimony and states "inferences are not facts and are thus, not evidence." (Underlining omitted.) Wrong! If such were the case, circumstantial evidence, evidence that is only relevant because of the inferences that may be drawn from it, should never be admitted. As noted in Vasquez v. Superior Court (1971) 4 Cal.3d 800, "it is not necessary to show reliance upon false representations by direct evidence. `The fact of reliance upon alleged false representations may be inferred from the circumstances attending the transaction . . . . [Citations.]" (Id. at p. 814; see also Evid. Code, § 600, subd. (b).) Although the judgment here was not based on fraud, the same rule pertains. The trial court was entitled to draw inferences from the circumstances and from the conduct of the parties at the time the lease was signed, and such inferences are evidence.
The Condition Was Also a Promise
Selects argument that "the failure of a condition precedent does not give rise to contractual rights or duties" (initial capitalization, bold, and underlining omitted) ignores the distinction between a covenant and a condition. There are three types of conditions, and the one at issue was not only a condition but also a covenant. "A covenant is a promise to render some performance. The practical distinction between a condition and a covenant may be illustrated as follows: (1) If B agrees to render some performance to A, provided a condition happens, and the condition does not happen, As duty of performance is excused, but A cannot recover damages from B. (2) On the other hand, if no condition is stated, and B merely makes a promise, his breach of covenant will give rise to a right of action for damages, but will not necessarily excuse As performance. (3) However, if the condition is stated, and in addition B promises that the condition will happen, upon the failure of the condition to occur not only is As duty excused, but A can also recover damages for the breach of covenant or promise." (1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 723, p. 655.)
The parties oral agreement fits the pattern of Mr. Witkins third hypothetical. There was a condition (Kleins determining the copier was compatible with his other systems) coupled with a covenant (Selects promise not to deliver the copier or submit the lease to GECC until the condition was satisfied). The breach of the covenant entitled Klein to recover his damages.
For the first time in its reply brief, Select argues that the evidence does not support a conclusion Klein was contractually obligated to pay GECC and that "Klein settled with GECC prior to any determinations as to its obligations under the lease." Fairness militates against our consideration of arguments an appellant has chosen not to raise until its reply brief, and the authorities holding to that effect are numerous. (See, e.g., Lester v. Lennane (2000) 84 Cal.App.4th 536, 595.) It has therefore "long been the rule that an appellate court will generally decline to consider any questions not raised in the opening brief. [Citation.]" (In re Ricky H. (1992) 10 Cal.App.4th 552, 562.) Therefore we will not consider whether Klein was legally obligated to pay GECC.
Evidence of the Oral Agreement Did Not Violate the Parol Evidence Rule
Select relies on Code of Civil Procedure section 1856, subdivision (a), which provides that "[t]erms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement." Select points out that both the order form and the lease agreement contain integration clauses. The question thus becomes whether the promise made by Selects representative not to submit the lease to GECC until Klein knew the copier was compatible was a part of the contracts contained in the order form and lease.
Select asks that we only look at the "face of the document" to determine whether the written agreement superseded its oral promises. But a rule prohibiting the court from looking outside the document does not apply where an oral agreement is collateral to the written one. As noted in Kleins brief, Masterson v. Sine (1968) 68 Cal.2d 222 makes this clear. In Masterson, a trustee in bankruptcy brought an action to enforce a written option agreement which, on its face, entitled the bankrupt to obtain the conveyance of a parcel of real property. The defendants, who included the bankrupts sister, had attempted to offer extrinsic evidence supporting their contention that the parties to the option agreement had intended the option only be exercised by a family member, as they wanted to keep the property in the family. The trial court had ruled that the parol evidence rule precluded admission of this evidence. (Id. at p. 224.) Our Supreme Court reversed, concluding "a collateral agreement such as that alleged `might naturally be made as a separate agreement." (Id. at p. 228.)
Masterson stated that "[e]vidence of oral collateral agreements should be excluded only when the fact finder is likely to be misled" (Masterson v. Sine, supra, 68 Cal.2d at p. 227) and noted that "the Restatement of Contracts [] permits proof of a collateral agreement if it `is such an agreement as might naturally be made as a separate agreement by parties situated as were the parties to the written contract. [Citations.]" (Id. at pp. 227-228.) So here, as the trial court concluded, "Given the complex nature of the equipment, Kleins acknowledged lack of expertise related to his computer network, and Selects pre-printed `Order Form, inter alia, [Selects ] oral promise to allow Klein time to consult with his computer system consultant before incurring any obligation is one that would naturally be made as a separate agreement . . . ."
In its reply brief Select relies on Salyer Grain & Milling Co. v. Henson (1970) 13 Cal.App.3d 493, 501, where the court held that, where a contract expressly referred to liability insurance and workers compensation insurance, the trial court properly excluded evidence the parties had also agreed to include collision insurance. But that case is based upon a contradiction between the alleged oral agreement and the terms of the written contract, rather than on a collateral oral agreement that the written contract shall not be effective until the happening of a condition.
Factually, this case is closer to Birsner v. Bolles (1971) 20 Cal.App.3d 635 where the appellate court reversed a judgment on a note, holding that the trial court erred in excluding evidence of a collateral oral agreement that no payments would be required until the happening of certain events. (Id. at p. 638.) And Bank of Beverly Hills v. Catain (1982) 128 Cal.App.3d 28, 30 reversed a judgment on a note payable no later than a specified date, where the trial court had excluded evidence there was a collateral agreement between the bank and the borrower the note could be paid off in installments. In Esbensen v. Userware Internat., Inc. (1992) 11 Cal.App.4th 631, 640, evidence was permitted of a collateral oral agreement to renew an employment contract as long as plaintiffs services were satisfactory, even though the written agreement was for a term of one year.
Selects promise not to submit the lease until the stated conditions were satisfied created a collateral agreement. The consideration for that agreement consisted of Kleins signing the order and the lease and assuming an obligation to have his expert determine the compatibility of the equipment with his other systems.
The Trial Court Did Not Err in Denying Selects Punitive Damage Claim
The trial court found "Select did not demand that Klein return the [first] copier which Select had allowed Klein to continue using pending a decision on connection of the [second copier]. Select has not proved that Select demanded return of the first copier and Klein refused to give it up. Nor has Select shown a willful omission on the part of Klein which deprived Select of the [first copier]. However, Mr. Klein has admitted that he knowingly and intentionally gave away the [first copier], which he knew did not belong to him, to Goodwill Industries. Klein testified he would pay Select for it. This unauthorized transfer constitutes a conversion." Based on this finding the court awarded judgment against Klein for almost $12,000, the value of the converted copier. The court declined Selects invitation it award punitive damages for the conversion.
Select argues that, based on these findings, it is entitled to punitive damages as a matter of law. We disagree.
In support of its claim, Select relies on the provisions of Civil Code section 3294, subdivision (a) and on several cases which hold that, under the evidence in those cases, the court did not err in awarding punitive damages. Suffice it to state that subdivision (a) of section 3294 uses the word "may" and is thus permissive and not mandatory. Nor was Select able to supply us with any case authority for the proposition it advances that, under certain circumstances, the court must award punitive damages. "Determinations related to assessment of punitive damages have traditionally been left to the discretion of the jury [i.e. the fact-finder] . . . . [Citations.]" (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 821.)
Whether to award punitive damages rested in the sound discretion of the trier of fact. On the facts of this case there was no abuse of discretion in the courts refusal to award punitive damages. Had the court awarded such damages in the face of its determination that Klein was not guilty of "oppression, fraud, or malice" (Civ. Code, § 3294, subd. (a)), abuse of discretion would have posed a closer question.
The Trial Court Properly Denied Selects Motion for New Trial
After the court announced its decision, Select moved for a new trial, raising eight different grounds, including those we discussed earlier. The motion was denied. Select argues this was error because of one of the grounds asserted in the motion: judicial misconduct. This misconduct allegedly consists of the judges prejudgment of the case and delay in deciding the case. We will dispose of the second ground first. The court took the case under submission at the end of the trial and issued its proposed intended statement of decision less than a month thereafter. The judgment and statement of decision were not filed until seven months later.
But Select provides no authority for the proposition that mere delay in the issuance of a judgment after trial entitles a party to a new trial and we are confident no such authority exists. Further after the court issued its tentative statement of decision, there were numerous objections by Select and further hearings required as a result. Hardly a month went by without some activity relating to the statement of decision and the judgment. And although some of the delay was by the court, there were legitimate reasons, including the judges "unplanned absence," heavy trial calendar, and attendance at judges classes. None of them indicate bias. This created a substantial delay between the conclusion of the trial and the filing of the statement of decision; but a good deal of the delays were caused by Select.
This brings us to the charge of judicial misconduct. Select supported its motion for a new trial by a declaration of Barta, its lawyer during the trial and here. The declaration states that, at some time during the trial, the court suggested a settlement conference. The only references to this we found in the reporters transcript are that at the conclusion of the proceedings after the third day of trial the court stated, "I will see counsel in chambers." The next entry in the reporters transcript indicates that, later that day, the court expressed its understanding that the parties had reached a settlement. Further discussion took place on the record that made it clear there were unresolved issues and concluded with the court stating "well see you tomorrow morning then."
The transcript further discloses that, the next morning, the court stated it had conducted a settlement conference the previous day, including individual conferences with each of the lawyers, and that it repeated this process that morning. The judge stated she could not discuss with each of the lawyers what she had discussed with the other, and that the trial should go forward. Nothing in the record suggests that either party objected to the court conducting a settlement conference, objected to the manner in which the court conducted the conference, or invoked the statutory proceedings designed to challenge a judge for prejudice. (See Code Civ. Proc., § 170.3, subd. (c).)
Bartas declaration avers that during these settlement discussions her clients demand was $65,000 but that the court told Kleins lawyer the demand was $5,000. The judge explained this discrepancy on the record as a "miscommunication" without Barta contradicting her; in fact, at the conclusion of the courts recital including the reference to the "miscommunication," Barta stated, "Thats correct." And this is the only reasonable explanation for the discrepancy; the court apparently misunderstood Selects settlement posture. Such a misunderstanding explains why there was no settlement; it does not provide evidence of judicial misconduct.
Select also claims prejudice because the judge recommended it settle the case. It is a rare judge who has never made such a recommendation before, during, or after a trial, and it is spurious to suggest such a recommendation demonstrates judicial bias.
The next charge of misconduct is a statement Barta claims the court made to her in private during the settlement conference to the effect it considered one of Kleins witnesses more credible than one of Selects witnesses. It is the job of judges to determine credibility. A judge interprets the evidence, weighs credibility, and makes findings. In doing so the judge necessarily makes and expresses determinations in favor of and against parties. How could it be otherwise? If the court had questioned witnesses credibility before the judge had heard their testimony, Select might have an argument. But that was not the case. And we will not hold that a judges statement during a settlement conference to explain her reasons for believing one party over another constitutes evidence of judicial bias. Once Select agreed to the settlement conference it was appropriate for the court to explain its evaluation of the evidence.
Selects remaining claim of judicial prejudice is belied by the context in which the statements were made. Select claims that, early in the trial, the court made up its mind not to grant Select attorney fees. This claim is based solely on the following exchange between court and counsel shortly after the aborted settlement conference. The court stated, "I am sorry, I didnt know that you wanted attorney fees, too. You dont have a basis to request attorney fees, do you?" Selects lawyer replied, "Absolutely. They were suing us on the contract that has an attorney fees clause . . . ." The court responded "Now, you did not make that clear to me." The only reasonable interpretation of this exchange is that the court had not been aware there was a claim for attorney fees and inquired what the basis of this claim was. There is no suggestion that, once the judge was told the basis for the attorney fee claim, she made up her mind that, if Select won, she would not consider awarding fees.
Although Select, in its reply brief, finds fault with Kleins suggestion that the allegations mentioned above are the only facts alleged in support of Selects contention of judicial bias, it fails to guide us to any additional evidence supporting its position. Our own review of the Barta declaration, once we separated the factual wheat from the conclusionary chaff, disclosed no factual allegations of misconduct other than those recited above.
Also by not raising the issue of alleged judicial bias until after the judgment was entered, Select attempted to play a game of "heads I win, tails you lose." If Select truly believed the court was prejudiced, it could and should have initiated proceedings under Code of Civil Procedure section 170.3, subdivision (c) which is expressly designed to deal with issues of judicial disqualification.
Substantial Evidence Supports the Judgment Against Klein
We can make short shrift of Kleins argument there was no substantial evidence he converted the first copier. Klein admitted he knew the copier belonged to Select and acknowledged he must pay for its value. He also acknowledged he donated the machine to Goodwill Industries. As to his argument here that Select had abandoned the copier, this obviously was a question of fact to be resolved by the trial court and not by us. We need say no more.
The Record is Inadequate to Permit Us to Rule on the Cost and Fee Issues
Both parties claim entitlement to costs and attorney fees. Selects claim is conditioned upon our reversing the judgment against it. Because we find no basis for reversal, we need not further consider the claim.
Klein claims that, as the prevailing party, it is entitled to costs and fees. But the record is too sparse to permit us to evaluate this claim. The only reference to "prevailing party" we find in the record is the concluding statement in the trial courts statement of decision: "As to Kleins cross-complaint, Klein has prevailed on the cause of action for breach of contract. Select prevailed on intentional and negligent misrepresentation and breach of warranty. We find for purposes of attorneys fees and costs that there is no prevailing party." The parties failed to provide us with any record relating to trial court proceedings pertaining to the issues of costs and fees, and Kleins lawyer admitted at oral argument that he had filed no cost bill and had never argued entitlement to costs and fees in the trial court. As such he waived the issue. (In re Marriage of Eben-King & King (2000) 80 Cal.App.4th 92, 117 ["It is well established that issues or theories not properly raised or presented in the trial court may not be asserted on appeal, and will not be considered by an appellate tribunal. A party who fails to raise an issue in the trial court has therefore waived the right to do so on appeal"].)
Also, because the above quoted statement by the court is the totality of the record on these issues, we cannot find fault with the trial judges decision. Her conclusion was that, because Klein was unsuccessful on the remaining causes of action of his cross-complaint, he was not a prevailing party in spite of the fact that he obtained a "net monetary recovery" (Code Civ. Proc., § 1032, subd. (a)(4)). As Select points out, we can reverse the trial courts decision in denying costs and fees only under an abuse of discretion standard. "Under this standard of review, a trial courts ruling is reversed only where it is shown there is a `clear abuse of discretion and a `miscarriage of justice. [Citations.]" (Heller v. Pillsbury Madison & Sutro (1996) 50 Cal.App.4th 1367, 1395.) Without a better record, we cannot conclude that there was such an abuse of discretion.
DISPOSTION
The judgment is affirmed. In the interest of justice, each party shall pay its own costs and attorney fees.
WE CONCUR: SILLS, P. J. and MOORE, J.