Hebberd-Kulow Enterprises v. Kelomar CA4/1 (2016) · DecisionDepot
Hebberd-Kulow Enterprises v. Kelomar CA4/1
California Court of Appeal Jan 27, 2016 No. D066505Unpublished
Filed 1/27/16 Hebberd-Kulow Enterprises v Kelomar CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
HEBBERD-KULOW ENTERPRISES, INC., D066505
Plaintiff and Respondent,
v. (Super. Ct. No. ECU03823)
KELOMAR, INC.,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Imperial County, Juan Ulloa,
Judge. Affirmed in part as to the jury verdict's award of interest, and the balance is
affirmed as modified with directions to prepare an amended final judgment.
Sutherland & Gerber and Lowell F. Sutherland for Defendant and Appellant.
Horton, Knox, Carter & Foote, Orlando B. Foote and Margarita McKee Haugaard
for Plaintiff and Respondent.
This appeal comes to us after a retrial pursuant to remand from our prior published
opinion, in which this court reversed in part a judgment after jury verdict in favor of
plaintiff and respondent Hebberd-Kulow Enterprises, Inc. (HKE). (Hebberd-Kulow
Enterprises, Inc. v. Kelomar, Inc. (2013) 218 Cal.App.4th 272 (our prior opinion).) Over
many years, defendant and appellant Kelomar, Inc. (Kelomar) placed orders for
Having reviewed the record, we conclude (1) substantial evidence supports the
jury's determination of the questions properly sent to it about the intentions of the parties
concerning the terms of their agreement, and the underlying substantive judgment on the
verdict is affirmed; (2) the record does not show any abuse of discretion in the trial
court's award of attorney fees as costs of proof under Code of Civil Procedure
§ 2033.420; and (3) the trial court must prepare an amended final judgment that reflects
the separate awards of principal, interest, and costs to HKE, that properly designates the
dates that postjudgment interest began to accrue on the awards of principal and interest,
and that sets forth any credits due to Kelomar for amounts it has previously paid toward
the net judgment amount (either principal or interest).
3
FACTUAL AND PROCEDURAL HISTORY
As set forth in our prior opinion, over the course of about 20 years (1987-2007),
HKE sold goods to Kelomar. Normally, Kelomar provided HKE with a purchase order
number for the requested items and negotiated the price over the telephone. After
delivery of the items, HKE would send Kelomar an invoice corresponding to the
applicable purchase order number. Since 2003, HKE's invoices have contained on them a
printed term: "Unpaid invoices beyond terms will be assessed a monthly service charge
of 1-1/2%." Kelomar often paid late, but HKE did not charge Kelomar interest on the
late payments.
The dispute between the parties arose after HKE delivered about $250,000 worth
of goods in the spring of 2007. These goods were shipped separately with a total of 33
corresponding invoices (the 33 invoices). In 2007, the parties had a falling out over a
different set of contractual transactions (HKE's delivery of certain nonconforming labels).
Kelomar stopped paying HKE.
A. First Trial; Appeal
In 2008, HKE sued Kelomar for its failure to pay for the supplies shipped under
the 33 invoices. In response, Kelomar filed a cross-complaint alleging damages had
arisen from HKE's nonconforming products that were provided under the unrelated
contract. Kelomar declined to pay the 33 invoices.
At the first trial, the jury awarded HKE damages in the amount of $439,792.99,
consisting of $259,120.50 principal and $180,672.49 interest. The jury also awarded
4
Kelomar $27,769.94 on its cross-complaint. The net amount of the HKE judgment was
$412,023.05, plus postjudgment interest and costs of suit.
Kelomar appealed, contending that the parties never intended any interest payment
or service charge to be part of their contract, as shown by their prior course of conduct.
Kelomar argued that the issue of whether the interest provision contained in the invoices
was a term of the contracts should be governed by section 2207.
In the prior appeal, we agreed with Kelomar's claims that the dispute should be
resolved according to the terms of section 2207. We held that the trial court had erred
during the first trial, when issuing its order on a particular motion in limine (No. 4),
because the trial court prematurely determined as a matter of law that the interest
provision was part of the contract. Instead, the record showed that no evidence was yet
before the trial court, and the evidence was conflicting on the interest term of the
contract, as it later acknowledged.
Accordingly, we reversed the judgment as to the interest portion of the verdict and
returned the matter for presentation of evidence. We interpreted the record as showing
that counsel had represented that additional evidence was available that would bear upon
the issue of whether the parties intended to include the payment of interest as part of their
contracts. The record at that time did not support the trial court's decision as a matter of
law that the interest provision was a term of the parties' contracts.
B. Second Trial
On remand, evidence was presented by representatives of each side, concerning
their understandings of the transactions in light of their own usual business practices and
5
those of the farming and agricultural supply communities. The jury heard the individuals'
testimony about the events and communications that had occurred over time, leading to
the understandings and the disputes between the parties. We summarize that evidence in
part I.C, post. Copies of the 33 invoices were admitted into evidence.
After being instructed in the language of sections 2202 and 2207 and related
sections, the jury returned a verdict that HKE was entitled to obtain 1.5 percent per
month in interest on the subject invoices. The verdict did not include any dollar amount.
The minute order reflects that the court accepted the verdict and the clerk sent out a
notice of entry of judgment. (Code Civ. Proc., § 664.) Further proceedings were held on
HKE's motion for costs of proof pursuant to Code of Civil Procedure section 2033.420.
(See pt. II, post.) Eventually, the trial court rendered a final judgment that recited the
verdict had been reached and set forth a net award of damages, $412,023.05, plus
postjudgment interest and the costs of proof award, with costs. (Pt. III, post.) Kelomar
appealed both the judgment and the posttrial order awarding costs of proof.
DISCUSSION
I
AWARD OF INTEREST
A. Statutory Scheme and Effect of Prior Opinion
As explained in our prior opinion, it is undisputed that these parties are merchants
(§ 2104, subd. (1)) and thus that their transactions are governed by the California
Uniform Commercial Code. Section 2202 removes merchants' written agreements for the
sale of goods from the operation of Code of Civil Procedure section 1856, the general
6
parol evidence statute. (See 4 Witkin, Summary of Cal. Law (10th ed. 2005) Sales, § 33,
p. 46.) Section 2202 is not a statute that provides particular guidance to a court to
determine if a writing is intended to be a final expression of the parties' agreement.
Instead, it directs the court on what evidence it should admit to explain or supplement the
terms of the agreement. (§ 2202; 4 Witkin, Summary of Cal. Law, supra, § 33 at p. 46.)
At all the relevant times, there has been no dispute that the parties entered into
multiple contracts, or that the invoices correctly listed the agreed upon price of the goods,
which were delivered. Rather, the dispute concerns whether the parties agreed to the
interest provision on the invoices. In our prior opinion, we determined that "Section
2207 is the proper statute to apply to the invoices and the analysis of whether the parties
intended the interest provision to be part of the parties' agreement. Section 2207 provides
as follows:
'(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
'(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
'(a) The offer expressly limits acceptance to the terms of the offer;
'(b) They materially alter it; or
'(c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
'(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the
7
writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this code.' "
As governing authority, our prior opinion discussed the holdings of Steiner v.
Mobil Oil Corp. (1977) 20 Cal.3d 90 (Steiner). "[S]ection 2207 inquires as to whether
the parties intended to complete an agreement: 'Under this Article a proposed deal which
in commercial understanding has in fact been closed is recognized as a contract.'
[Citation.] If the parties intend to contract, but the terms of their offer and acceptance
differ, section 2207 authorizes a court to determine which terms are part of the contract,
either by reference to the parties' own dealings [citation], or by reference to other
provisions of the code." (Steiner, supra, 20 Cal.3d at pp. 99-100.)
These "supplementary terms" mentioned in section 2207, subdivision (3) may
include terms incorporated as a result of the parties' course of dealing. (Transwestern
Pipeline Co. v. Monsanto Co. (1996) 46 Cal.App.4th 502, 516.) "The terms of an
agreement formed pursuant to [section] 2207[, subdivision ](3) are those terms upon
which the parties expressly agreed, coupled with the standard 'gap-filler' provisions of
Article Two." (Textile Unlimited, Inc. v. A..BMH and Co., Inc. (9th Cir. 2001) 240 F.3d
781, 788 (Textile Unlimited, Inc.).) Section 1303, subdivisions (a) through (e) define the
effect of the parties' previous course of dealing, course of performance, or usage of trade,
as they may supply supplemental contractual terms pursuant to section 2207.
In our prior opinion, we noted that at the first trial, "the parties appeared to focus
more on waiver of the right to collect interest, not whether the interest provision was
8
actually part of the parties' contracts. The jury was instructed on waiver, the parties
submitted evidence regarding waiver, and closing arguments concerned waiver. Simply
put, the issue of whether the interest provision was an agreed upon term was not
presented to the jury. However, based upon the court's comments that this was a
'significant' disputed fact, it should have been." (See Kawasho Internat., U.S.A., Inc. v.
Lakewood Pipe Service, Inc. (1983) 152 Cal.App.3d 785, 791 (Kawasho).)
At this retrial, directed toward properly applying the alternative standards of
section 2207, the trial court allowed the jury to hear conflicting evidence on the issue of
whether the parties reached a contractual agreement about interest, and on what terms.
These are questions for the fact finder, when conflicting versions of the parties'
negotiations require a determination of credibility. (See Kawasho, supra, 152
Cal.App.3d at p. 791; Southern Christian Leadership Conference v. Al Malaikah
Auditorium Co. (1991) 230 Cal.App.3d 207, 220.)
When a trial has been conducted, as here, on the issue of whether an additional
term contained in an invoice or business document was part of the parties' contract, as a
factual matter depending on the intent of the parties, a substantial evidence review will be
conducted on appeal. (Boyd v. Oscar Fisher Co., Inc. (1989) 210 Cal.App.3d 368, 378-
379; Kawasho, supra, 152 Cal.App.3d at p. 791; see Southwest Concrete Products v.
Gosh Construction Corp. (1990) 51 Cal.3d 701, 709 (Southwest Concrete),
[acknowledging in another context that an additional term (late charges) "became part of
the contract" under section 2207].)
9
B. Framework for Retrial
On remand, the principal award to HKE was not in dispute, nor was the award to
Kelomar of $27,769.94 on its cross-complaint. This left a balance of about $231,000 that
Kelomar owed as principal to HKE, and it has evidently been paid. On the issue of
entitlement to an interest award, the pleadings alleged there were 33 disputed invoices,
but the RFAs that HKE served on Kelomar involved only 31 of them. Nevertheless, all
33 invoices were presented to the jury and the parties continued to argue the matter as
involving each of them.
It is first important to note which issues were not presented at the retrial. HKE did
not claim that the invoices alone amounted to the operative agreements. (See India Paint
& Lacquer Co. v. United Steel Products Corp. (1954) 123 Cal.App.2d 597, 607 ["The
prevailing rule is that an invoice, standing alone, is not a contract, [citations]; and a buyer
is ordinarily not bound by statements thereon which are not a part of the original
agreement."].) Also, the Kelomar purchase orders and the HKE invoices did not present
competing terms which each side was attempting to enforce. (See also Diamond Fruit
Growers, Inc. v. Krack Corp. (9th Cir. 1986) 794 F.2d 1440, 1443.) The case was not
tried as a " 'battle of the forms,' " such as where contracting parties have exchanged pre-
printed forms "that attempt to cast liability for certain categories of damage on the other
party to the transaction." (Frank M. Booth, Inc. v. Reynolds Metals Co. (E.D.Cal. 1991)
754 F.Supp. 1441, 1445; Transwestern Pipeline Co., supra, 46 Cal.App.4th at p. 516
["Common sense tells us the mere exchange of forms containing inconsistent terms, for
10
however long a period, cannot establish a common understanding between the parties as
to which set of conflicting terms is part of their contract."].)
Instead, HKE argued to the jury that the current trial chiefly concerned the way the
agricultural business was conducted, and what happened between the parties in 2007 to
2008, when Kelomar stopped paying on the invoices. Kelomar's argument and evidence
essentially addressed the course of dealing and performance during the parties' business
relationship, to argue that its effect was that the interest language on the invoices, even if
known to it, contained an additional term that it would never be enforced. Although this
resembles a waiver argument concerning the interest term, the second trial addressed the
issues differently, on what terms actually existed in the first place.
C. Conflicting Evidence Presented at Retrial
1. HKE
On the issue of whether the parties had reached an understanding about interest as
a portion of their agreement, HKE presented testimony from its president, Michael J.
Kulow, about his dealings with Kelomar starting in the 1980s. At that time, both HKE
and Kelomar were new companies, and Kulow met with Kelomar's founder, Michael W.
Morgan, and they discussed the process for supply by HKE, as a middleman, of
agricultural packing materials and other goods to Kelomar. Kulow remembers that he
discussed with Kelomar how its payments should be made to HKE in a "timely fashion,"
but testified they did not anticipate what would happen if they were not. Kulow does not
recall any discussion of interest. During cross-examination, Kulow admitted that he left
11
that early meeting with the feeling that there was an agreement that "things would be the
way they were in the trade," but he never told Mr. Morgan about that belief.
At trial, Kulow told the jury about how deals are reached when suppliers sell
agricultural packing materials to growers, according to industry customs and practices.
Kelomar sent purchase orders or discussed orders with HKE representatives. HKE then
ordered the goods from other suppliers for delivery. HKE would then generate an
invoice to be sent to the customer, stating the terms.
Generally, as long as a customer kept paying the bills, HKE did not charge interest
on overdue invoices. Due to its bad experiences with a few other farmers who did not
pay their bills, HKE added an interest term to its invoices starting in 2003. These terms
included (1) unpaid invoices for labels or miscellaneous items to accrue interest after 30
days at 1.5 percent; and (2) corrugated materials or related items to accrue interest after
60 days at 1.5 percent.
Kulow understood that charging interest was a norm in the industry for suppliers
like HKE. It was a disincentive for late payment of invoices by customers. Other HKE-
Kelomar invoices had incentives for timely payment, such as a discount. Some of the 33
invoices also had freight charges added to them.
After HKE added the interest provisions to its invoices, Kulow did not discuss the
matter with anyone from Kelomar, and did not receive any complaints from it. He was
not asked by anyone at Kelomar what would happen if it did not pay its bill. Generally,
HKE valued the ongoing business of its customers, such as Kelomar, and did not charge
interest to them for reasons of continued goodwill, and because that was how bills were
12
usually handled in the agricultural industry, which is time sensitive depending on harvest
season. As a supplier, HKE understood that farmers were often cash poor at the end of
the growing season and that delays in paying bills were not unexpected. A grower has to
make initial investments of capital in order to grow the crops, and "[b]y the time you get
to harvest, generally, people are a little short of money."
For many years, Kelomar paid HKE the amounts due for goods shipped to it,
within 30 to 60 days or by the end of the harvest season. In the spring of 2007, Kelomar
first started to dispute paying HKE on the 33 invoices. Kelomar claimed that it incurred
damages when HKE supplied nonconforming goods to it, on another separate contract.
After HKE learned that Kelomar would not pay further, it sued for damages for
the principal amounts owed on the 33 invoices, as well as interest. HKE had not
previously charged Kelomar interest for previous late payments.
HKE called as a witness Kelomar's previous general manager, Matthew McGuire,
who worked at Kelomar for 18 years, around 1987 to 2003. He testified at trial that when
he oversaw its accounts payable, he determined which bills needed to be paid based on
when they were due and what was the status of the company cash flow. He understood
that many vendors, such as HKE, had in place both incentive and disincentive payment
terms. McGuire thought that the 1.5 percent interest provisions on HKE's invoices "were
part of the terms." His opinion was that "many vendors had terms to pay interest, and we
knew they could charge interest at any time. So it's better to pay it as soon as we can than
to incur the wrath of a vendor." When necessary to retain business relationships,
Kelomar paid interest to certain vendors.
13
McGuire stated that while he was at Kelomar, if there were any problems with
invoices, he and the seller tried to negotiate and resolve the matters. The presence or
absence of the interest provisions in HKE's invoices was not a factor in determining
whether Kelomar should pay the principal amount of an invoice.
2. Kelomar
Kelomar's founder, Michael Morgan, testified about meeting with Kulow in the
1980's when their companies were both new. Morgan told the jury that "the total deal"
with HKE since "Day 1," over 20 years, was that "no interest would be charged." He
admitted to the jury that the interest provision was always a part of the deal, but he
believed "[i]t would not be charged." Thus, he was not concerned when he saw that term
on the invoices. Morgan, an executive, did not pay "a lot of attention to what was on the
bottom line or the interest component," and did not see any need to protest about it to
HKE.
Kelomar's previous office manager, Nancy Osborn, currently worked for it as a
consultant on tax and bank issues. In 2007, she was not working for Kelomar. Her
understanding on behalf of Kelomar was that when an invoice like HKE's "says on the
bottom if it wasn't paid, it could be charged—not that it was. It was, it could be charged."
She did not recall having discussed that specific subject with her superiors at Kelomar.
At the conclusion of testimony, the court read jury instructions on sections 1303,
2202, and 2207, giving the jury a framework for applying the evidence and for making a
factual finding as to the interest provision. The special verdict decided only that HKE
was entitled to obtain 1.5 percent per month in interest on the subject invoices.
14
D. Analysis
1. Section 2207, Subdivisions (1) and (2)
In the previous trial, it was established that the parties had established a
contractual relationship that satisfied contract formation requirements, and the amount of
principal due to HKE was established. (§ 2207, subd. (1); Steiner, supra, 20 Cal.3d 90,
101.) On retrial, the evidence and arguments properly sent to the jury the questions of
whether the interest provision had to be specifically accepted by Kelomar, as a condition
attached to continuing to do business, and whether Kelomar had made any objections to
the inclusion of the interest provision. (§ 2207, subd. (2)(a), (c).) Alternatively, the
parties addressed whether collecting interest amounted to a material change in the
agreement, in light of the background and underpinnings of the agricultural business
practices. (§ 2207, subd. (2)(b).)
We disagree with Kelomar that only questions of law for contract interpretation
were again presented at retrial, and that the evidence did not show any significant
conflicts. Kelomar focuses on testimony about HKE's previous nonenforcement of the
interest provision against Kelomar, until the dispute arose, and claims that is the only
contractual issue. However, its argument disregards the other evidence presented to the
jury by HKE to the effect that Kelomar was on notice not only of those terms on which
the writings of the parties agree, but also certain "supplementary terms incorporated
under any other provisions of this code." (§ 2207, subd. (3); Textile Unlimited, Inc.,
supra, 240 F.3d at pp. 787-789.)
15
HKE was able to establish that Kelomar did not raise objections to the interest
provision, and that this was a standard provision in the industry that was not unexpected
between merchants. (§ 2207, subd. (2)(a), (b), (c); see Therma-Coustics Manufacturing,
Inc. v. Borden, Inc. (1985) 167 Cal.App.3d 282, 297 [adding standardized term to invoice
not a material alteration of contract].) When denying Kelomar's motion for nonsuit, the
trial court referred to the evidence thus far as showing that the reasonable expectations of
the parties were that a buyer would make payments by the end of the season, before the
next season started, and that the refusal to pay any amount should then trigger the
timeliness provisions in the outstanding invoices. We next examine Kelomar's evidence
on the alternative contractual analysis of section 2207, subdivision (3), regarding
supplementary contract terms.
2. Section 2207, Subdivision (3)
The jury was given the option of deciding whether a contract arose from the
course of dealing between the parties, as described by the witnesses. (§ 2207, subd. (3).)
Under section 2207, subdivision (3), "the terms of the particular contract consist of those
terms on which the writings of the parties agree, together with any supplementary terms
incorporated under any other provisions of this code." The jury was instructed pursuant
to section 1303, subdivisions (a), (b), and (d) that any such supplementary terms could be
derived from the parties' previous courses of dealing, courses of performance, or usage of
trade. (Steiner, supra, 20 Cal.3d at pp. 99-100; see Step-Saver Data Systems, Inc. v.
Wyse Technology (3d Cir. 1991) 939 F.2d 91, 98-99, fns. omitted.) The jury was also
16
given the usual instructions on how to evaluate witness credibility, regarding accounts of
the business-related events. (Textile Unlimited, Inc., supra, 240 F.3d at pp. 787-789.)
"[S]ection 2207 looks to the actual dealings of the parties and gives legal effect to
that conduct. . . . Section 2207 instructs us not to refuse to enforce contracts until we
look below the surface of the parties' disagreement as to contract terms and determine
whether the parties undertook to close their deal. Section 2207 requires courts to put
aside the formal and academic stereotypes of traditional doctrine of offer and acceptance
and to analyze instead what really happens." (Steiner, supra, 20 Cal.3d at p. 100; italics
omitted.)
In the closing arguments, both parties discussed the course of performance and
course of dealing between the parties, but they interpreted the evidence differently. HKE
argued that the interest provisions became part of the deal and applied to the relationship
between the parties, because a party is allowed to "change deal terms and have them stick
as long as the circumstances that surround that change are consistent with what the law
permits." (See § 1303, subds. (a), (d) [evidence on course of performance may show
acceptance of performance in a transaction]; § 1303, subds. (b), (d) [evidence on course
of dealing in previous transactions may show common basis of parties' understandings].)
HKE's counsel then argued that "something happened that suggested to Mr.
Morgan and Kelomar that he shouldn't have to pay. Well, as it turned out, he did have to
pay. He still did not pay until he was forced to. So what was the significance of that
event, the refusal to pay and the interest provision that we're talking about here?" HKE
contended there was a change in circumstances that changed the nature of the dealings
17
between the parties and changed the deal, to allow interest to be charged, because
Kelomar had taken action that justified enforcement of the existing interest term. Once
Kelomar decided not to pay the 33 invoices, HKE believed it was justified in deciding not
to cut Kelomar any more slack on the interest provision, in reliance on the underpinnings
of industry custom, which is time sensitive depending on harvest season. A supplier may
allow late payments based on a grower's impaired cash flow, as long as an ongoing
relationship between the parties supported a decision to forego collection of interest.
(See § 1303, subds. (c), (d) [evidence on usage of trade may show reasonable
expectations of parties].) HKE had incurred costs in collecting an appropriate obligation
that was due, and it argued that interest was properly part of their expenses.
HKE provided testimony that in 2003, based on issues it had with other customers,
it adopted an industry practice to add interest to invoices, to serve as a disincentive for
late payment of invoices. It did not charge interest to Kelomar as long as there was hope
of payment. McGuire, who formerly worked for Kelomar, testified his understanding
was that the 1.5 percent interest provisions on HKE's invoices "were part of the terms."
Kelomar sometimes paid interest to other vendors. On behalf of Kelomar, Morgan
conceded that interest was always a part of the deal, and the jury did not have to believe
his testimony that there was an accompanying agreement that it would never be charged,
even under circumstances when the business relationship between the parties had fallen
apart and a final accounting was required.
Kelomar argued that HKE did not protect its rights by notifying Kelomar that
interest was now a part of the agreement, and Kelomar interpreted the parties' course of
18
dealing as only supporting a conclusion that they never agreed to an enforceable interest
charge, even if a buyer decided not to pay amounts due. Kelomar argued it was not
required to object to the interest provision and it never agreed to modify the underlying
contracts. However, Kelomar's theory did not account for the change in circumstances
when it stopped payment on the 33 invoices. HKE showed it was entitled to collect
appropriate obligations that were due, it incurred costs in doing so, and there was no
surprise to Kelomar that the written interest term appearing on the invoices was properly
enforceable under these circumstances.
In this substantial evidence review, we are satisfied that the jury verdict awarding
interest pursuant to the 33 invoices, on the basis of supplemental contractual terms known
to and agreed to by the parties, is well supported by the testimony summarized above,
which showed the general course of dealing in the industry and the specific transactions
between these parties occurring within that framework. (§ 2207; Boyd v. Oscar Fisher
Co., Inc., supra, 210 Cal.App.3d at pp. 378-379; Kawasho, supra, 152 Cal.App.3d at
p. 791.) After the interest provision was added to the invoices and made known to
Kelomar, the parties continued to close their deals over time, and section 2207,
subdivision (3) required the jury to take into account what really happened between the
parties. (Steiner, supra, 20 Cal.3d at p. 100.) This included consideration of Kelomar's
refusal to pay and HKE's reasonable expectations that this changed the nature of their
contractual arrangements and made a known term, previously held in abeyance, become
enforceable.
19
From the very general language of the verdict, we can properly infer that the jury
found either or both of the approaches authorized by section 2207 supported HKE's
position. Kelomar has no basis to contend that all the evidence was in agreement, such
that the trial court should again have interpreted the plain language of the invoices to
decide all the contractual issues as a matter of law. It has raised no meritorious
objections to the evidentiary support for the jury's award of interest.
II
RFA COSTS AWARD
Kelomar next contends the court erred or abused its discretion in awarding
attorney fees as costs under Code of Civil Procedure section 2033.420, because not all
of the items in the RFAs were proven as specified there (e.g., different dollar amounts),
or else the admissions HKE sought were "of no substantial importance." (Code Civ.
Proc., § 2033.420, subd. (b)(2).) We review these claims under an abuse of discretion
standard. (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1275-1276
(Laabs).)
A. RFA Purposes
"The primary purpose of [such] requests for admissions is to set at rest triable
issues so that they will not have to be tried; they are aimed at expediting trial." (Brooks
v. American Broadcasting Co. (1986) 179 Cal.App.3d 500, 509 (Brooks).) If a party
fails to admit the truth of any matter stated in a request and if the party requesting that
admission thereafter proves the truth of that matter, the party requesting the admission
may move the superior court for an order requiring the party to whom the request was
20
directed to pay the reasonable expenses incurred in making that proof, including
reasonable attorney fees. (Code Civ. Proc., § 2033.420, subd. (a).) The superior court
must make such an order unless it finds (1) an objection to the request was sustained or
a response to it was waived under Code of Civil Procedure section 2033.290, (2) the
admission sought was of no substantial importance, (3) the party failing to make the
admission had reasonable grounds to believe that that party would prevail on the
matter, or (4) there was other good reason for the failure to admit. (Code Civ. Proc.,
§ 2033.420, subd. (b).) "An issue is of 'substantial importance' if it has 'at least some
direct relationship to one of the central issues in the case, i.e., an issue which, if not
proven, would have altered the results in the case.' " (Wimberly v. Derby Cycle Corp.
(1997) 56 Cal.App.4th 618, 634 (Wimberly).)
A party who denies a request for admission has the burden of demonstrating that
the denial was justified under one of the four exceptions listed in Code of Civil
fees award is separately appealable].) The later costs order did not contain a completely
different legal basis for resolving the substantive issues presented to the jury at trial. It
did not impliedly amend or modify the verdict (or the order accepting it) to reflect "a new
legal ground" for the outcome. (Sanchez v. Strickland (2011) 200 Cal.App.4th 758, 764-
767.) "Amended" is a term of art in this context, and Kelomar has no colorable claim
that the final judgment somehow substantively changed or "amended" any earlier
"judgment," since the clerk never had the power to make a judicial act of entering
judgment on the verdict.
The face of the current final judgment appears to adopt the previous net judgment
amount ($412,023.25), but that net judgment amount does not set forth a calculation of
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the dollar amount of the verdict's interest award, or reflect any credits due to Kelomar.
We may assume from the record that the first verdict's calculation of the interest award of
$180,672.49 was appropriate. However, we are concerned that the current format of the
final judgment, showing a net amount due, may inaccurately fail to reflect that some
payment of the principal amount of the judgment was tendered. Although the parties did
not address this problem until the reply brief was filed, the record reveals restitution
concerning interest was still an issue at the outset of trial, although it may have become
moot.
It is also unclear whether the trial court intended to set the date when interest at the
postjudgment rate began to run at July 5, 2011 (the first judgment date), when that date
would properly apply to that award of principal. In light of the proceedings on remand,
the award of interest dispute was not finally resolved until the time of the second verdict
and final judgment. We leave those matters and calculations for clarification on remand.
We affirm the final judgment as modified, with directions to the trial court to
allow the parties to submit forms of proposed amended final judgments, and then to
execute an amended final judgment that separately sets forth and clarifies the extent of
the principal and interest amounts remaining payable and subject to execution, as well as
clarifying the dates that interest began to run, the imposition of costs of proof and the
other costs. The amended final judgment shall include all essential information that will
allow the parties to finally resolve all their judgment debtor/creditor issues, if any remain.
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DISPOSITION
The final judgment is affirmed as to the jury verdict's award of interest, and is
affirmed as modified as to the balance, with directions to the trial court to prepare an
amended final judgment that reflects the appropriate calculations of separate and net
amounts of principal, interest, and costs that are still owing, in light of any credits
properly due to Kelomar for amounts it already paid toward principal or interest. Each
party shall bear its own costs on appeal.
HUFFMAN, Acting P. J.
WE CONCUR:
NARES, J.
AARON, J.
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AI Brief
AI-generated · verify before citing
Holding. The court affirmed the jury's verdict that the interest provision in the invoices was an enforceable term of the parties' contract under California Uniform Commercial Code section 2207, and affirmed the trial court's award of attorney fees as costs of proof. The court remanded the case with directions to prepare an amended final judgment that properly itemizes the principal, interest, and costs, and accounts for previous payments.
Issues
Whether the interest provision in the invoices constituted an enforceable term of the parties' contract under California Uniform Commercial Code section 2207.
Whether the trial court abused its discretion in awarding attorney fees as costs of proof under Code of Civil Procedure section 2033.420.
Whether the final judgment was unauthorized or erroneous for changing the terms of the clerk's earlier entry of judgment.
Disposition. Affirmed in part, modified with directions.
Quotations verified verbatim against the opinion
“substantial evidence supports the jury's determination of the questions properly sent to it about the intentions of the parties concerning the terms of their agreement”
“the record does not show any abuse of discretion in the trial court's award of attorney fees as costs of proof under Code of Civil Procedure § 2033.420”
“the trial court must prepare an amended final judgment that reflects the separate awards of principal, interest, and costs to HKE”