Opinion
H044046
07-06-2020
KYLE TRUONG, Plaintiff and Respondent, v. CALVIN LE, Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Santa Clara County Super. Ct. No. 1-14-CV267157)
Calvin Le challenges the trial court's finding of an enforceable profit-sharing agreement and award of reliance damages to Kyle Truong in this breach of contract and declaratory relief action. Finding no error, we will affirm the judgment.
I. BACKGROUND
Kyle Truong purchased a 7-Eleven franchise in 2007. In 2013 his wife filed for marital dissolution and his mother-in-law, Lung Thi Ngo, intervened in the proceeding to assert an ownership interest in the 7-Eleven. Ngo's joinder in the dissolution action prompted Truong to file a civil complaint against Ngo, L&K Management (a company owned by Ngo), and Calvin Le (Ngo's son) alleging breach of contract, fraud, and negligent misrepresentation regarding an oral profit-sharing agreement involving the 7-Eleven. Truong also sought declaratory relief regarding ownership of the 7-Eleven and his obligations under the agreement. Truong alleged Le breached the profit-sharing agreement by ceasing payments in August 2013, and that Truong had no legal obligation to continue his payments under the agreement because Le had stopped paying and because the agreement was used for an illegal purpose (money laundering). He sought damages according to proof.
Ngo and L&K Management filed a counter-claim based on a profit-sharing agreement between Ngo and Truong (in which Le played no part) which Truong allegedly breached when he stopped making payments to Ngo in 2014. They alleged breach of contract, and sought a judicial declaration that Truong was obligated to continue paying 50 percent of the profits from the 7-Eleven and 50 percent of the proceeds from any sale of the store. The matter was bifurcated and a bench trial was held to determine the declaratory relief claims—the ownership interests in the 7-Eleven and the duty of either party to make continued payments under a profit-sharing agreement (which required the court to decide whether an enforceable profit-sharing agreement existed).
Truong testified that Le approached him about a profit-sharing agreement, and the parties orally agreed to a business arrangement in which Le would pay Truong $200,000 up front, and each would share with the other the profits from his respective business. Specifically, Truong would pay Le 50 percent of the monthly profits from the 7-Eleven (monthly profits ranged from $6,000 to $13,000), and Le would pay Truong an amount in the range of $3,000 per month from an unidentified business. The agreement was "left open to some point," but if Truong were to sell the 7-Eleven, the net proceeds would be split in rough proportion to the years each had invested in the business. Ngo was not a party to the agreement. All of Le's payments (including the initial $200,000) were made in cash and delivered to Truong by Truong's then wife. Truong made his profit-sharing payments to L&K Management, a corporation formed by Le's mother to receive the money. Under the agreement, Le paid Truong $68,000 between September 2011 and August 2013, and Truong paid L&K Management $190,904 between September 2012 and May 2014. Of that amount, $48,321 was paid after Le stopped making payments and communicating with Truong.
Ngo testified that she entered into a profit-sharing agreement with Truong in which she paid Truong $200,000 cash for a 50 percent interest in the profits (or any sale proceeds) from the 7-Eleven. She borrowed $150,000 from friends, one of whom testified that she loaned Ngo $45,000 cash in 2011 to "share [in] the business with her son-in-law." Ngo formed L&K Management to receive the payments, which Truong stopped making in May 2014. Truong's former wife testified that her mother gave her $200,000 cash which she carried in her purse and delivered to Truong. Le also testified and denied forming a profit-sharing agreement with Truong.
The court found Truong's testimony credible and rejected Ngo's version of events, describing L&K Management as a sham corporation, and stating Ngo would "do anything" for her children. The court found the testimony of Ngo's daughter and friend to be rehearsed, biased, and unreliable.
The court found and declared that Truong (through his company IBEK) owned the 7-Eleven store; that a profit-sharing agreement existed between Truong and Le in which each agreed to pay the other a percentage of his business profits; there was insufficient evidence that Le used ill-gotten funds to purchase the profit-sharing interest in the 7-Eleven store; the contract was therefore enforceable (rejecting Truong's challenge that it was used for an illegal purpose); Le materially breached the agreement in August 2013 when he stopped sharing his profits and communicating with Truong; and because of that breach, Truong properly terminated the agreement in May 2014, after which he had no duty to share profits or sale proceeds from the 7-Eleven with Le.
The trial court concluded that Le's material breach excused Truong from further payments; that Truong's obligations under the contract were extinguished by the breach; and Le, Ngo, and L&K Management may owe damages to Truong. Responding to Le's assertion that finding an enforceable contract went beyond the declaratory relief claims, the court explained that it had to determine enforceability in order to determine the parties' obligations, and in the absence of argument regarding an uncertain or unformed contract, it had appeared the parties understood their obligation to pay each other because they had been performing their mutual obligations. Le's attorney expressed concern that the evidence was insufficient to prove damages, to which the court responded: "I thought about the damages issue, and ... I don't know how they paid, but we could go back and look and have an average of whatever it was the payments, which is kind of uncertain. Or ... the only certainty is from the time of the breach in 2013 to 2014 when Mr. Truong continued to pay, that that money gets returned to Mr. Truong." The court analogized that approach to a rescission claim, in that returning money would make Truong whole from the time of the breach. After an off-the-record discussion about how the remainder of the case would be handled, the parties entered a written stipulation in which Truong agreed to dismiss his fraud and negligent misrepresentation causes of action, and the parties agreed that all evidence had been submitted and the remaining issues would be decided without a jury.
The trial court invited further briefing on damages. It then awarded Truong the amount he paid Le between August 2013 and May 2014 to compensate for the detriment he suffered by Le's breach of contract. The court explained: "While Mr. Le continued to receive the benefits of [the] agreement, he failed to perform his obligation. Mr. Le should not have benefited by his agreement with Mr. Truong when Mr. Le had no intention of fulfilling his obligations under the agreement. Had Mr. Le communicated his intent to terminate the agreement, Mr. Truong would not have had a duty to and would not have performed his obligations under the agreement. Accordingly, Mr. Truong became the injured party and suffered a detriment of $48,321 when he continued to perform his obligations under the agreement and Mr. Le decided to terminate the agreement without communicating with Mr. Truong but continued to benefit from the agreement."
Le appeals from the judgment ordering him to pay Truong $57,707.19 ($48,321 plus $9,386.19 in prejudgment interest). Ngo and L&K Management are not parties to the appeal. They were not ordered to pay damages, and they do not appeal in their cross-action.
II. DISCUSSION
A. ENFORCEABILITY OF THE CONTRACT
Le argues that the profit-sharing agreement (specifically his obligation to Truong) was vague and uncertain, rendering the agreement unenforceable as a matter of law. We note that Le represented to the trial court in his briefing on damages that he was not challenging the determination that the parties had entered into an enforceable contract. Issues of waiver aside, his argument fails on the merits. "Under California law, a contract will be enforced if it is sufficiently definite (and this is a question of law) for the court to ascertain the parties' obligations and to determine whether those obligations have been performed or breached." (Ersa Grae Corp. v. Fluor Corp. (1991) 1 Cal.App.4th 613, 623; 1 Witkin, Summary of Cal. Law (11th ed. 2020) Contracts, § 137 [contract formation requires an agreement to sufficiently definite terms].) The parties' performance may be considered, for example, where the terms of an agreement are indefinite or uncertain at its inception. (Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, 1449.)
According to Truong, who testified regarding the terms of the agreement, Le said he could not match the monthly payments that Truong expected to make based on monthly profits from the 7-Eleven, but he could pay Truong "maybe it would be $3,000 a month," or "maybe two to three or $4,000" monthly. Truong did not know the nature of Le's business or the profits it generated. Although a specific figure was not agreed to, Le promised to make monthly payments within the range of $2,000 to $4,000. Over the course of two years he made cash payments consistent with that promise (averaging $2,833 per month), and Truong accepted those payments without objection. The contract was therefore not "so uncertain and indefinite so that the intention of the parties in the material particulars cannot not be ascertained." (Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 770.)
Le cites Rochlis v. Walt Disney Co. (1993) 19 Cal.App.4th 201, disapproved on another ground in Turner v Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1251, where the court concluded that a promise "to pay salary increases or bonuses which are 'appropriate' to [the employee's] responsibilities and performances," was too vague and indefinite to be enforceable, and would not support a breach of contract claim. (Rochlis, at pp. 213-214.) But in Rochlis no figures, range of figures, or standards to measure an "appropriate" increase or bonus were discussed, and no increases or bonuses were in fact paid. (Id. at p. 213.) Here, Le provided an estimated payment range, and he performed consistently with that estimate for two years, providing reasonable specificity to the existence and terms of his obligation.
B. DAMAGES
Civil Code section 3300 provides: "For the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this Code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom." Courts have recognized reliance damages under section 3300 as appropriate where, as here, anticipated profits are too conjectural to be the basis for a damages award. (Buxbum v. Smith (1944) 23 Cal.2d 535, 541; Mendoyoma, Inc. v. County of Mendocino (1970) 8 Cal.App.3d 873, 881; Gross v. Raeburn (1963) 219 Cal.App.2d 792, 807-808.)
Le argues that the trial court erred under Civil Code section 3300 and Freedman v. St. Matthias Parish (1951) 37 Cal.2d 16 (Freedman) in awarding as damages the profit-sharing payments he received from Truong after his August 2013 breach, instead of awarding Le $77,096 in damages. Relying principally on Agam v. Gavra (2015) 236 Cal.App.4th 91 (Agam), Truong counters that reliance damages are appropriate and supported by the evidence.
Freedman involved a lawsuit for specific performance of a real estate purchase agreement. The plaintiff had signed a deposit agreement, made a $2,000 down payment, and agreed to pay the $16,000 balance into escrow within 30 days. In the plaintiff's view, he was not obligated to purchase the property until the title had been cleared of encumbrances as agreed in the escrow instructions. He repudiated the contract seven weeks later after learning of a utility easement across the property, and demanded return of his deposit. (Freedman, supra, 37 Cal.2d at p. 18.) Three weeks later he again wrote the defendant stating he would purchase the property as soon as the easement was removed from the title. (Ibid.) Instead, the defendant canceled the escrow and sold the property to a third party for $20,000. (Ibid.) The appellate court upheld the judgment denying the plaintiff specific performance and damages for breach of contract in light of his unequivocal repudiation of the contract. (Id. at p. 20.) Consistent with the rule that a "party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach" (Restatement of the Law - Contracts, § 374; Restitution in Favor of Party in Breach), the Supreme Court remanded the matter for a trial on restitution, reasoning that the defendant would be unjustly enriched if allowed to retain the down payment (minus any expenses reasonably incurred); conversely, the plaintiff would suffer a penalty in excess of actual damages, effectively imposing punitive damages in a contract action. (Freedman, at pp. 19-20.)
In Freedman the repudiating plaintiff was entitled to the remedy of restitution equal to his down payment less the defendant's expenses. Here, defendant is claiming the right to recover restitution, but he did not initiate any action against Truong for restitution. (Indeed, he denies the existence of a contract altogether.) Le cannot recover as the losing party in Truong's breach of contract action.
Agam involved the breach of a real estate development partnership agreement. The Agam court recognized reliance damages as a proper measure of damages for breach of contract " ' "[w]here, without fault on his part, one party to a contract who is willing to perform it is prevented from doing so by the other party." ' " (Agam, supra, 236 Cal.App.4th at p. 105.) In such a case, damages would include the nonbreaching party's reasonable outlay or expenditure toward performance. (Ibid.) In the context of reliance damages, the plaintiff has the burden to establish the amount expended in reliance on the contract; the burden then shifts to the defendant to show the plaintiff's expenditures were unnecessary and/or how much the plaintiff would have lost had the defendant fully performed absent the breach. (Id. at p. 107.)
Here it is undisputed that Le ceased performing under the contract in August 2013 and Truong continued performing for another nine months in reliance on the contract's continued existence. Le elected to submit on the issue of damages following the declaratory relief trial, rather than presenting evidence to dispute Truong's losses. We are not persuaded by Le's argument that the court erred by ignoring Truong's "unequivocal[] elect[ion]" to rescind the contract (which in Le's view would require that all consideration be returned to each party, resulting in a net payment to him of $77,906). Truong did not seek rescission to the agreement's 2011 formation date. He argued in his briefing on damages for rescission as of August 2013, with disgorgement (as restitution) of 7-Eleven profits paid after that date. He argued alternatively for disgorgement of those profits as reliance damages, the remedy ultimately adopted by the trial court. On this record, we find no error awarding reliance damages to Truong.
III. DISPOSITION
The judgment is affirmed. Respondent shall recover his costs on appeal.
/s/_________
Grover, J.
WE CONCUR:
/s/_________
Greenwood, P. J. /s/_________
Danner, J.