Opinion
G056667
10-18-2019
WHOLESOME CHOICE MARKET, INC., Plaintiff, Cross-defendant and Appellant, v. DIGITECH BUSINESS SOLUTIONS, INC., Defendant, Cross-complainant and Respondent.
Snell & Wilmer, Richard A. Derevan and Todd E. Lundell for Plaintiff and Appellant. Dunbar & Associates, Kevin T. Dunbar and Matt D. Derossi for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2015-00791699) OPINION Appeal from a postjudgment order of the Superior Court of Orange County, David R. Chaffee, Judge. Affirmed. Snell & Wilmer, Richard A. Derevan and Todd E. Lundell for Plaintiff and Appellant. Dunbar & Associates, Kevin T. Dunbar and Matt D. Derossi for Defendant and Respondent.
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Wholesome Choice Market, Inc. (Wholesome Choice) appeals from the trial court's postjudgment award of contractual attorney fees in favor of Digitech Business Solutions, Inc. (Digitech). Digitech prevailed on its cross-claims against Wholesome Choice, including breach of contract for exceeding the number of allotted photocopies on copy machines Digitech leased to Wholesome Choice. Wholesome Choice contends the "implied-in-fact" contract the court found between the parties did not have an attorney fee clause because nothing in the parties' conduct—from which an implied contract arises—touched on the issue of attorney fees. Therefore, Wholesome Choice argues the court lacked a contractual basis on which to award attorney fees.
As we explain, however, in addition to finding in its statement of decision an implied-in-fact contract between the parties setting market value as the per-page rate for the excess photocopies Wholesome Choice made, the court also expressly found the parties "agreed . . . to the terms set forth in [certain] written Service Agreements." Those agreements set the allotted number of copies allowed on the copy machines before excess charges applied, and those agreements included an attorney fee clause for the prevailing party in disputes between the parties. Therefore, the court did not err in awarding Digitech contractual attorney fees, and we affirm the postjudgment fee order.
FACTUAL AND PROCEDURAL BACKGROUND
We draw the operative facts largely from the trial court's detailed statement of decision after a bench trial.
In January 2013, Digitech provided Wholesome Choice four photocopy machines under two identical written lease and financing agreements (the lease agreements). The lease agreements, which Wholesome Choice signed, expressly contemplated a separate agreement for "maintenance, service, supplies," and other terms. On the same day Digitech delivered the copiers to Wholesome Choice, Digitech's owner, Dave Hamze, also delivered to Wholesome Choice's agent and IT Manager, Thomas Pashangian, two written service agreements that Digitech intended to cover the four copiers (service agreements).
The service agreements were identical and, taken together, specified that Wholesome Choice's "Number of Copies Allowed Per Month" was limited to 5,000 as an aggregate total for the four copiers. Like the lease agreements, the service agreements ran for a three-year period, thereby affording Wholesome Choice a maximum of 180,000 copies before overage charges would apply. The service agreements specified the charge for exceeding the allotted number of copies would be 1 cent per page; trial testimony later established that the market rate for overages was 15 cents per page.
Pashangian repeatedly promised to sign the service agreements, but he never did. In addition to the terms setting a ceiling of 180,000 copies and providing for overage charges beyond that figure, the service agreements included this attorney fee provision: "Attorney Fees: In the event either party disputes this Agreement or an action or proceeding to enforce its terms and conditions is required, the prevailing party will be entitled to its reasonable fees and costs."
Unlike prior 2010 service agreements between the parties, the 2013 service agreements did not require Digitech to absorb the cost for "consumables" necessary to service the four new copiers; instead, "Wholesome Choice would be charged for . . . consumables such as drums, developers and fuser units." Pashangian later claimed Digitech never gave Wholesome Choice a copy of the service agreements. In any event, it was undisputed Pashangian never signed them.
The absence of a signed written agreement eventually led to litigation between the parties, each claiming the other orally agreed to certain terms drawn from the unsigned service agreements, or additional terms entirely distinct from those agreements. According to Pashangian, the parties' oral agreement mirrored the 2010 service agreements, not the later 2013 terms. Pashangian claimed Digitech orally agreed to service the copiers, including to provide all consumables necessary for repair service and "every conceivable supply for the units that are required for a normal printing operation," except paper.
The trial court found there was no such agreement. The court made express credibility findings concerning the parties' primary witnesses, Hamze and Pashangian, respectively. The court found "Mr. Hamze's testimony to be entirely credible while the Court finds that Mr. Pashangian was not a credible witness." The court expressly found Pashangian's account of "an oral contract whereby Digitech was to provide service to Wholesome Choice for the . . . photocopy machines to be unsupported by the evidence."
The trial court's statement of decision also expressly found that: "On or before January 31, 2013 [when Digitech delivered the copiers], Mr. Pashangian agreed on behalf of Wholesome Choice and Mr. Hamze agreed on behalf of Digitech to the terms set forth in the written Service Agreements that Digitech delivered to Wholesome Choice on January 31, 2013." But the court did not find credible Pashangian's testimony that "Digitech had orally agreed to provide service for the . . . photocopy machines . . . under the same terms and conditions of the written Service Agreements presented to him by Mr. Hamze on January 31, 2013."
Instead of an oral contract to service and repair the copiers, the trial court found an implied agreement reflected in the parties' conduct for approximately a year after Digitech delivered the copiers to Wholesome Choice. On at least four occasions, Digitech sent a technician to service or repair the copiers, including to replace drum units and drum kits and other consumable service items. On each occasion, Digitech invoiced Wholesome Choice for these items, and Wholesome Choice paid the bill.
The court found this implied contract for repair service came to an end at an unspecified date "sometime after" Wholesome Choice exceeded "its allotted number of 180,000 photocopies for all of its photocopiers" in March 2014, less than 14 months after it had taken delivery of the copiers. Finding that no written, oral or implied contract required Digitech to repair or service the copiers after the implied-in-fact contract terminated, the court found no merit in Wholesome Choice's damages claim based on Digitech's "non-service" or refusal to service the copiers after that date. Additionally, the court found unpersuasive Pashangian's testimony that Wholesome Choice "hired an outside vendor to repair" the copiers. Relying on its finding that Pashangian lacked credibility, the court found his testimony that the copy machines "stopped operating and were not used by Wholesome Choice after March of 2014 to be unsupported by the evidence."
The court also found that between January 2013 and March 2014, Hamze "repeatedly notified" Wholesome Choice it "had exceeded . . . 5,000 black & white photocopies per month" for the four copy machines. Around the March 2014 timeframe in which the court found Wholesome Choice exceeded the aggregate 180,000 copy limit, the court also found that "Wholesome Choice informed Mr. Hamze that it would never pay Digitech for the excess copies made on" the four copiers, despite the overage term of 1 cent per copy in the 2013 service agreements.
Although Digitech no longer serviced the copiers once Wholesome Choice exceeded 180,000 copies, the machines remained in place at Wholesome Choice's Anaheim and Irvine stores, and Wholesome Choice continued to use the copiers well into 2016. Final counts on the copiers showed Wholesome Choice made nearly a half million photocopies between January 2013 and August 2016.
The court found Wholesome Choice's continued use of the copiers gave rise to an implied-in-fact contract under which Digitech was entitled to recover "the reasonable value" of excess copies. The court found Wholesome Choice "made 490,659 photocopies; or 310,659 photocopies over the allotted 180,000 photocopies." The court credited Hamze's testimony that the market rate for the copies was 15 cents per page. Multiplying that rate by the number of overage copies, the court awarded Digitech $46,598.85 in damages. The court identified the basis for recovery as, variously, "Breach of Implied-In-Fact Contract and Common Counts and/or Quantum Meruit."
In postjudgment proceedings, the court awarded Digitech $159,356.73 in contractual attorney fees and $1,729.87 in costs. Wholesome Choice does not provide a reporter's transcript of the hearing regarding attorney fees, but the court's minute order reflects that the court premised its award on the 2013 service agreements, which the court described in a heading as "Implied-In-Fact Contracts." Because the service agreements "contain an attorney fees provision [citation], which allows for recovery of attorney fees to the prevailing party," the court determined that "Digitech, as the prevailing party, is entitled to recover[] attorney fees in this action. Civ. Code § 1717."
It is the appellant's burden to provide the record "'concerning what actually occurred at the trial.'" (Oliveira v. Kiesler (2012) 206 Cal.App.4th 1349, 1362.)
Wholesome Choice now appeals, challenging only the court's attorney fee award.
DISCUSSION
Wholesome Choice contends there was no basis for the trial court to award contractual attorney fees under an implied contract between the parties. Wholesome Choice reasons that because an implied-in-fact contract arises from the parties' conduct, and the parties' conduct during Wholesome Choice's use of the copiers did not touch on the issue of attorney fees, there was no term in their contractual relationship providing for an award of attorney fees in disputes between the parties. Instead, according to Wholesome Choice, the parties' conduct related solely "to the delivery and use of photocopy machines. Period." We are not persuaded.
Wholesome Choice relies on the distinction between implied and express contracts, a distinction that Wholesome Choice draws too sharply. In language dating back to 1872, the Civil Code provides: "An implied contract is one, the existence and terms of which are manifested by conduct." (Civ. Code, § 1621; all further statutory references are to this code.) In contrast, "[a]n express contract is one, the terms of which are stated in words." (§ 1620.)
"The distinction between express and implied in fact contracts relates only to the manifestation of assent; both types are based upon the expressed or apparent intention of the parties." (1 Witkin, Summary of Cal. Law (11th ed. 2017) Contracts, § 102, p. 145.) Express and implied contracts are identical in that they both require a "meeting of the minds." (Mulder v. Mendo Wood Products, Inc. (1964) 225 Cal.App.2d 619, 632.) In other words, like an express contract, an implied-in-fact contract requires as its essence the mutual agreement of the parties. (See Unilab Corp. v. Angeles-IPA (2016) 244 Cal.App.4th 622, 636.) Consequently, in a given case there may be no practical difference in labeling a contract express or implied; in both instances, the contract "must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting . . . ." (§ 1636.)
Given that both express and implied contracts "'"'must be founded upon an ascertained agreement of the parties . . . , the substantial difference between the two [is] the mere mode of proof by which they are to be respectively established.'"'" (Zenith Ins. Co. v. O'Connor (2007) 148 Cal.App.4th 998, 1010 (Zenith).) A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct." (Rest.2d Contracts, § 4.) When conflicting inferences may be drawn from the evidence, as here, whether an implied contract exists is a question of fact for the trial court to decide. (Gorlach v. Sports Club (2012) 209 Cal.App.4th 1497, 1508.)
Wholesome Choice emphasizes that it did not sign the service agreements Hamze presented, but that does not mean the words used in those written proposals—and the parties' discussion of those proposed terms—have no bearing on interpreting the parties' conduct in relation to the copiers. The written statements in a university's website and its published policy regarding professional degree fees, together with its law school's annual "catalogues" for prospective students illustrate the point. (Kashmiri v. Regents of University of California (2007) 156 Cal.App.4th 809, 816-817 (Kashmiri).) Those written sources all stated that certain fees would not increase during a student's enrollment. (Ibid.)
In Kashmiri, the court observed that these written statements determined the circumstances under which students enrolled. Accordingly, though there was no formal agreement between the students and the university that would create an express contract, an implied contract was created by the students' conduct when they accepted the school's offer of enrollment. (Kashmiri, supra, 156 Cal.App.4th at p. 829.) Consistent with the school's written statements, the terms of the implied contract prohibited fee increases. (Ibid.)
Similarly here, the trial court reasonably could conclude the circumstances in which Wholesome Choice began to use the photocopiers created an implied contract that included the terms in the service agreements to which the parties mutually consented. Just as it is generally true that a contract "may be explained by reference to the circumstances under which it was made, and the matter to which it relates" (§ 1647), an implied contract may be inferred from the circumstances in which it is formed, including the parties' "'"conduct, situation or mutual relation"'" at the time of contracting. (Zenith, supra, 148 Cal.App.4th at p. 1010.)
Here, Hamze testified at trial that he and Pashangian reviewed the terms of the written service agreements together. According to Hamze, he and Pashangian both understood and agreed those were the terms under which Wholesome Choice could use the copiers. The trial court expressly found this testimony credible. Thus, as in Kashmiri, the court here could reasonably conclude an implied contract arose on the terms stated in the service agreements—including the attorney fees provision—when Wholesome Choice elected to use the copiers. In other words, Wholesome Choice's conduct in commencing use of the copiers created a contract consistent with the terms the parties discussed and agreed upon.
In any event, while the trial court characterized the basis for its attorney fee ruling as an implied-in-fact contract that included the service agreements' written attorney fee provision, Hamze also testified at trial that he and Pashangian agreed on the terms of the service agreements even before Wholesome Choice began using the copiers. As with every trial court ruling, we must presume the trial court's decision to award fees is correct (Denham v. Superior Court (1970) 2 Cal.3d 557), whether under the rationale stated by the court or other applicable theory. (D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19.) The existence of an oral agreement for attorney fees provides additional support for the trial court's attorney fee ruling.
"[A] written agreement not yet signed may be enforceable if the parties orally agree to the proposed written terms with the intention that the oral agreement should thereupon become binding." (Magness Petroleum Co. v. Warren Resources of Cal., Inc. (2002) 103 Cal.App.4th 901, 910.) Thus, the court's attorney fee ruling was correct based on the parties' mutual oral agreement consistent with Hamze's testimony pursuant to the written terms of the service agreements, including the attorney fee provision.
Wholesome Choice argues a verbal agreement cannot serve as a legitimate basis for the trial court's attorney fee ruling because the court in its oral ruling on the merits at trial found "there was no oral contract as between the parties." But the court made that observation in the context of finding an implied-in-fact contract on which it awarded Digitech damages for copy overages at 15 cents per page. The court's statement of decision expressly reflects that it found Hamze and Pashangian agreed on behalf of their respective principals "to the terms set forth in the written Service Agreements that Digitech delivered to Wholesome Choice on January 31, 2013." This must have been a verbal agreement, as Hamze testified it was, because it was undisputed there was no written service agreement signed by the parties.
There is no contradiction in upholding the trial court's attorney fee ruling on the basis of this oral agreement. Nor is there any inconsistency in the fact that while the court found the parties orally agreed to the terms set forth in the service agreements, the court awarded Digitech overage damages at the market rate of 15 cents per page instead of at 1 cent per page as stated in the service agreements.
Specifically, the court reasonably could find that the service agreement terms to which the parties orally agreed governed until Wholesome Choice repudiated them by exceeding the 180,000 page ceiling and then stated it would "never pay" Digitech overage charges as required by the service agreements. Repudiation of a contract is a question of fact. (Gold Min. & Water Co. v. Swinerton (1943) 23 Cal.2d 19, 28.) "An express repudiation is a clear, positive, unequivocal refusal to perform" the terms of a contract. (Taylor v. Johnston (1975) 15 Cal.3d 130, 137.) Although the trial court did not use the word "repudiation" in its statement of decision, its finding that the service agreements became "terminable at will" when Wholesome Choice refused to pay overages at 1 cent per page amounts to the same thing.
Once the service agreements no longer applied, but Wholesome Choice continued to use the copiers, the court reasonably could find from Wholesome Choice's ongoing usage an implied-in-fact contractual obligation to pay a reasonable sum, namely, the market rate of 15 cents per page. While it is true Wholesome Choice was worse off in these circumstances than under the service agreements' rate of a penny per page, Wholesome Choice found itself in this position as a result of its own repudiation of the service agreements.
And while the service agreements no longer applied, Digitech still had to establish at trial that Wholesome Choice breached the agreements by exceeding the 180,000 page limit and by refusing to pay the associated overage fees. The 180,000 page limit had its roots in the service agreements. Therefore, in order for Digitech to establish it was entitled to overage damages in any amount, it had to establish it was entitled to enforce the contract term in the service agreements restricting Wholesome Choice to 180,000 copies. Those agreements entitled the prevailing party to attorney fees in any "action or proceeding to enforce [their] terms and conditions," including copy limits and the necessity of paying overage fees beyond those limits. The trial court did not err in finding Digitech was entitled to contractual attorney fees.
DISPOSITION
The judgment is affirmed. Digitech is entitled to its costs on appeal.
GOETHALS, J. WE CONCUR: MOORE, ACTING P. J. FYBEL, J.