Opinion
G055386
10-02-2019
CROP PRODUCTION SERVICES, INC., Plaintiff and Respondent, v. CAPTIVA VERDE FARMING CORP., et al., Defendants and Appellants.
Angelo & White, Joseph Angelo, J. Michael Echevarria; Stris & Maher and Kenneth J. Halpern for Defendants and Appellants. E. Warren Gubler, Brett T. Abbott and Esparanza L. Alcazar for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 30-2016-00841134) OPINION Appeal from a judgment of the Superior Court of Orange County, William D. Claster, Judge. Affirmed. Angelo & White, Joseph Angelo, J. Michael Echevarria; Stris & Maher and Kenneth J. Halpern for Defendants and Appellants. E. Warren Gubler, Brett T. Abbott and Esparanza L. Alcazar for Plaintiffs and Respondents.
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Defendants Captiva Verde Farming Corporation (Captiva), Jeff Ciachurski, and his wife Heidi Ciachurski, appeal from a judgment after a bench trial in which the court found them liable for over $1 million on a credit agreement and, for the individuals, a personal guarantee. Defendants assert multiple errors on appeal, generally challenging the court's interpretation of the relevant agreements, the admission of certain evidence, and the sufficiency of the evidence. We disagree with defendants' claims of error and thus affirm the judgment.
FACTS
Defendant Captiva was formed in 2014 to operate farms of organic baby leaf vegetables. Its chief executive officer was defendant Jeff Ciachurski. Jeff had no experience with farming, and thus brought on David Pratt to run the actual farming operation. Pratt was Captiva's executive vice-president and chief operating officer.
Because Jeff's wife, Heidi Ciachurski is also a defendant, we refer to them by their first names in the interest of clarity. No disrespect is intended. Jointly we refer to them as the Ciachurskis.
Captiva's farming operation required fertilizer and soil amendments. Pratt contacted plaintiff Crop Production Services Inc. (Crop Production), to be the supplier. Captiva sought to purchase the supplies on credit and initially applied for a $250,000 line of credit with Crop Production. The application, signed by David Pratt, consists of two pages: the first page is a customer profile, the second page is a "Commercial Credit Agreement/Terms and Conditions" (the Credit Agreement), which set forth a monthly interest rate of 1.5 percent on any unpaid invoices. According to the application, Captiva would require approximately $1.4 million worth of fertilizer and $750,000 in other chemicals.
Before selling Captiva goods on credit, Crop Production required both Jeff and Heidi to sign a "Guaranty Agreement," pursuant to which the Ciachurskis personally guaranteed payment "for all goods for which credit has been or is so given, together with any interest thereon . . . ." The Guaranty Agreement contains both Jeff and Heidi's signature.
At trial, Heidi denied signing it, and on appeal she contends the evidence was inadequate to support a finding that she signed. We discuss that evidence in the discussion section below.
Captiva chose Crop Production as a supplier because it was willing to sell product on credit, whereas other suppliers were not since Captiva was a brand new company. That credit was pivotal to the farming operation getting off the ground, as, without it, according to Pratt, "we would have never farmed a single acre." The customer profile section of the Credit Agreement lists a credit limit of $250,000, though that was later raised to $400,000.
Pratt's testimony came in via his deposition, as he was deemed an unavailable witness. On appeal, defendants contend Pratt's testimony was inadmissible, which we address below.
Captiva began farming operations in April 2015. In 2015, Captiva farmed approximately 1,400 acres of leased land.
Captiva began ordering products from Crop Productions after the credit application was approved in August 2015. Some of the product was delivered by third parties. The two pertinent examples here are compost, which was delivered by a company called Spreadco, and chicken pellets, delivered by a company called True Organics Products, Inc. (True Organics). When Captiva needed these products, Pratt would contact Crop Production and they would agree on a price. Crop Production would pay Spreadco and True Organics for these products, and, in turn, invoice Captiva for them. Pratt testified that all products ordered from Crop Production were delivered. He also testified that it was not Captiva's practice to sign for deliveries.
In the ensuing months, the amounts owed to Crop Production were not being paid for the simple reason there were no funds available. This was apparently because certain fund-raising commitments that had been made were not being fulfilled. Also, a significant portion of Captiva's crop was "out of spec," meaning it did not fit the requirements for organic baby leaf vegetables because the leaves were the wrong size. This product was unmarketable. The funds that were actually coming in from the farming operation were insufficient to pay all of Captiva's vendors, so Captiva was triaging the funds, spreading them out among the vendors in smaller amounts. At trial, Crop Production produced records indicating it had delivered over $1.33 million in agricultural products, of which, only $390,921 had been paid. The unpaid amount was $941,503.84 before finance charges. The finance charges added $251,288.33, as of the date of trial.
Crop Production filed the present lawsuit alleging causes of action for breach of contract and common counts against Captiva, Jeffrey, and Heidi. The matter proceeded to a bench trial, which the court decided in plaintiff's favor in the amount of $1,192,792.17, plus attorney fees of $96,300.00, costs of $9,509.27, and postjudgment interest from June 22, 2017. Defendants appealed.
DISCUSSION
Defendants raise several issues that can be grouped into (1) contract interpretation and formation issues, (2) admission of Pratt's deposition testimony, and (3) substantial evidence challenges.
Contract Issues
The Ciachurskis first contend their liability under the Guaranty Agreement was limited to $400,000. They argue that the Guaranty Agreement covered only "goods for which credit had been given." The evidence at trial showed that the credit limit was initially set at $250,000, and later explicitly increased to $400,000, though far more was actually sold on credit. The question is, did the Guaranty Agreement extend to products sold on credit beyond the $400,000 limit? As there are no disputed facts bearing on the interpretation of the Guaranty Agreement, we address this issue de novo. (Warburton/Buttner v. Superior Court (2002) 103 Cal.App.4th 1170, 1180.)
Defendants dispute whether any more product was actually delivered, which we address in the substantial evidence section below.
The starting point for our analysis is that the Guaranty Agreement, which is only a single page, does not set forth a $400,000 limit, nor does it refer to any limit. In fact, it does not even refer to the Credit Agreement at all. Rather, the Guaranty Agreement ensures "the payment of the purchase price . . . for all goods for which credit has been . . . given, together with any interest thereon . . . ." This contemplates an open-ended obligation, which is consistent with the actions of the parties. The initial credit application set a $250,000 credit limit. The Ciachurskis openly acknowledge the credit limit was extended to $400,000, and that they are liable on that amount. But if the credit limit could be increased from $250,000 to $400,000 without any formal writing, the same logic would permit an extension even further. Moreover, the Ciachurskis expressly waived certain rights, including the right to "notice of the extension of credit in connection" with "the sale and delivery of any goods to purchaser . . . ." Thus the agreement not only places no limit on what could be sold on credit, but it also contemplates an undefined extension of credit, as occurred here. The fact that the credit line was explicitly increased to $400,000, therefore, does not serve as a limit on the Ciachurskis' liability under the Guaranty Agreement.
If the Ciachurskis wanted to limit their liability under the Guaranty Agreement, they could have revoked their guaranty, as the agreement expressly contemplates. Presumably they did not do so because Captiva's operation was wholly dependent on credit, which would have dried up had the Ciachurskis revoked the Guaranty Agreement. But the consequence of that decision is that they are liable for the full amount of goods sold on credit.
Next, defendants contend they cannot be liable for finance charges and attorney fees because the Credit Agreement which provides for the finance charges and fees was not an enforceable agreement. They contend the Credit Agreement was lacking essential terms, such as the specific goods to be sold, the price of those goods, the quantity, and the final credit limit. We review the enforceability of a contract de novo. (Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407.) We conclude none of these terms were essential.
The statute of frauds, Civil Code section 1624, requires written evidence of various types of contracts, including "A contract . . . to grant or extend credit, in an amount greater than one hundred thousand dollars ($100,000), . . . made by a person engaged in the business of . . . extending credit." (Id., subd. (a)(7).) "A memorandum satisfies the statute of frauds if it identifies the subject of the parties' agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty." (Sterling v. Taylor (2007) 40 Cal.4th 757, 766.) "The statute of frauds demands written evidence that reflects the parties' mutual understanding of the essential terms of their agreement, when viewed in light of the transaction at issue and the dispute before the court. The writing requirement is intended to permit the enforcement of agreements actually reached, but 'to prevent enforcement through fraud or perjury of contracts never in fact made.'" (Id. at p. 775.)
We begin with the banal observation that the Credit Agreement is a credit agreement. It is not a sales agreement. It is entitled, "Commercial Credit Agreement/Terms and Conditions." Defendants do not explain why it is essential that a credit agreement explicitly describe the goods to be sold on credit, and we can think of no reason. The point of a credit agreement is simply to set forth the terms upon which credit will be extended, and the terms of repayment. For that purpose, the nature, quantity, and price of the goods to be sold on credit are not essential. Indeed, they may have been unknowable at the time the parties signed the Credit Agreement. Crop Production essentially entered into a requirements contract with Captiva, agreeing to provide products on an as-needed basis. Although Captiva provided an estimate of what they would need, the actual requirements would not be known until farming was underway. And even then, which products Crop Production would purchase on credit as opposed to with cash was entirely unknowable.
The closest defendants get to identifying an essential term is their claim of the absence of a credit limit. But even if a credit limit were an essential term of a credit agreement, the writing here stated a credit limit. The Credit Agreement is page two of a two-page form. The first page is a customer profile. In that profile, there is a credit limit stated of $250,000. Obviously, that limit changed, but to the extent defendants are claiming the contract lacked that term, they are simply wrong.
In any event, in the specific context of this transaction, we conclude a credit limit was not an essential term. The Credit Agreement here did not contemplate a traditional loan. Rather, it contemplated that, through separate transactions, Crop Production would sell goods to Captiva, and Captiva could choose to either pay cash or accept the goods on credit. Both parties could control the amount of credit outstanding—Crop Production could choose not to sell any more goods to Captiva; Captiva could choose to stop buying goods on credit. Given this relationship, there was no need to explicitly state a credit limit, and the parties apparently preferred a more flexible arrangement. The statute of frauds presents no obstacle to that arrangement, as even without a stated credit limit, the essence of the parties' agreement was entirely clear, and we are satisfied there was no risk of actual fraud or perjury regarding the existence of an agreement.
For the first time in their reply brief, defendants raise an additional argument regarding enforceability: the Credit Agreement has spaces for two signatures, but only Pratt actually signed it. Defendants do not cite, nor have we found, anywhere in the record where they raised this issue in the trial court. Thus the issue is forfeited for two reasons: failure to raise the issue in the trial court (Thompson v. Ioane (2017) 11 Cal.App.5th 1180, 1192), and failure to raise the issue in the opening brief on appeal (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764). --------
Admission of Pratt's Deposition Testimony
Moving on to the evidentiary issue, defendants contend that the testimony of David Pratt, which was read from his deposition transcript, was inadmissible hearsay. Pratt's testimony was at the core of plaintiff's case, and thus, if defendants were correct, a new trial would likely be required. We conclude, however, that the court did not abuse its discretion in finding that Pratt was an unavailable witness under Code of Civil Procedure section 2025.620, subdivision (c)(2)(E). That section permits the use of deposition testimony where the witness is absent and "the proponent of the deposition has exercised reasonable diligence but has been unable to procure the deponent's attendance by the court's process." (Ibid.)
As this is an issue of the admissibility of evidence, all parties agree the standard of review is abuse of discretion. (People v. McCurdy (2014) 59 Cal.4th 1063, 1095.) To find an abuse of discretion, we would have to conclude the court exceeded the bounds of reason in light of all the circumstances before it. (Department of Motor Vehicles v. Superior Court (2002) 100 Cal.App.4th 363, 369.)
Here, the court admitted Pratt's deposition testimony based on a declaration from a process server that nine attempts were made between April 24, 2017, and May 3, 2017, to either serve Pratt at his address or contact him by phone, all of which were unsuccessful. The court deemed this to be reasonable diligence.
Defendants contend this was not reasonable diligence for two reasons. First, Pratt was deposed on January 13, 2017, and there was no attempted service of a trial subpoena until April 24, 2017, approximately three weeks before trial. Second, Crop Production's attorney had a telephone conference with Pratt on April 21, 2017, just three days prior to attempted service. This latter fact was not before the trial court, but instead was revealed in the attorney time sheets submitted with Crop Production's application for attorney fees. We find neither contention persuasive.
Code of Civil Procedure section 1987, subdivision (a), does not impose any hard deadline by which a trial subpoena must be served. Instead, it requires "a reasonable time for preparation and travel to the place of attendance." The Rutter Guide on Civil Trials and Evidence offers the following practice pointer: "As a 'rule of thumb,' try to serve subpoenas at least 10 days before trial; 15 days for subpoenas demanding production of records or documents. This should deter challenges based on lack of time to respond." (Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2019) ¶ 1:71.)
As a general rule, there is nothing unreasonable about serving trial subpoenas three weeks before trial. Specific situations may require a party to serve a subpoena earlier, if, for example, the party is aware that the witness may be difficult to locate. But in the absence of extraordinary circumstances, serving a subpoena three weeks before trial is reasonable.
Nor do we find it relevant that Crop Production's attorneys had a phone conference with Pratt three days before the first attempted service. The record does not reveal what was discussed in this call. And from a mere call, we can conclude nothing. Was the call a conspiracy to keep Pratt out of trial? Or was it Pratt confirming that he would make himself available? Or something else entirely? We have no idea. We simply cannot draw any particular conclusion from the mere fact of a phone call.
In arguing the court abused its discretion, defendants rely heavily on People v. Cromer (2001) 24 Cal.4th 889 (Cromer). There, the defendant was convicted based on testimony from a preliminary hearing admitted pursuant to Evidence Code sections 240, subdivision (a)(5) and 1291, subdivision (a)(2), a hearsay exception allowing the admission of prior testimony where, inter alia, the witness is unavailable and reasonable diligence was used to locate the witness. (Id. at pp. 892-893.) The witness in question disappeared six months prior to trial, a fact known to the prosecution. (Id. at p. 903.) Yet the prosecution made no effort to locate the witness until a few weeks before trial. Even then, the efforts consisted of attempting to locate her at her former residence and, on the very day of trial, following up on a lead that the witness was living elsewhere with her mother. (Id. at pp. 903-904.) The court concluded this did not satisfy the reasonable diligence standard.
Assuming, without deciding, that "reasonable diligence" means the same thing in the service of a civil trial subpoena as it does in locating a witness in a criminal proceeding, Cromer is easily distinguishable because there is nothing in the record to suggest Pratt had disappeared. Accordingly, there was no circumstance rendering it unreasonable to wait until three weeks before trial to serve a trial subpoena.
Additionally, the Cromer court spent considerable effort analyzing the proper standard of review and concluded, given the application of the confrontation clause in a criminal case, an independent standard of review was appropriate. (Cromer, 24 Cal.4th at pp. 892, 897-901.) The confrontation clause, of course, does not apply here, and neither party contends we should analyze the issue de novo. The application of an abuse of discretion standard is another crucial point distinguishing Cromer.
Substantial Evidence Issues
Defendants raise two substantial evidence issues. First, Heidi contends there was insufficient evidence that she signed the Guaranty Agreement. Second, defendants contend there was insufficient evidence that any more than $390,000 worth of product was actually delivered. On both counts, we find the evidence sufficient.
"Under the substantial evidence standard of review, 'we must consider all of the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference, and resolving conflicts in support of the [findings]. [Citations.] [¶] It is not our task to weigh conflicts and disputes in the evidence; that is the province of the trier of fact. Our authority begins and ends with a determination as to whether, on the entire record, there is any substantial evidence, contradicted or uncontradicted, in support of the judgment.'" (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266.)
We begin with Heidi's contention that she did not sign the Guaranty Agreement. The Guaranty Agreement does have a signature that purports to be Heidi's signature. However, she contends the signature is not authentic. The evidence she points to is her own testimony that she did not sign the document, as well as Pratt's testimony. Pratt signed the Guaranty Agreement as a witness to both Jeff and Heidi's signature. He specifically recalled Jeff signing the Guaranty Agreement. However, he did not specifically recall witnessing Heidi sign it. Instead, he testified that, while he does not have a specific recollection, he would not have signed as a witness unless he actually saw Heidi sign it.
In rebuttal to Heidi's testimony, Crop Production put on a handwriting expert who looked at exemplars, compared them to the signature on the Guaranty Agreement, and concluded, "If Heidi wrote the exemplar signatures, it follows that my opinion is she also wrote the signature on the guaranty." Heidi's counsel stipulated at trial that the expert was, in fact, an expert, shortcutting the normal testimony concerning his qualifications. The exemplars the expert relied on included two property deeds and two verifications from this litigation. Heidi denied the authenticity of her signature on the exemplars at trial, but this was inconsistent with her deposition testimony, where she admitted the authenticity of her signature on the discovery verifications. When pressed about her discovery verifications during cross-examination, she grudgingly admitted, "I guess I signed it."
This is an easy call. The court had ample evidence before it to conclude Heidi's signature was authentic. The handwriting expert alone would have been sufficient. The court was not required to credit Heidi's dubious and self-serving testimony that the exemplars were inauthentic. Pratt's testimony is also helpful. Although it would have been stronger evidence if Pratt independently recalled Heidi signing the document, his testimony that he would not have signed as a witness unless he actually witnessed the signature is still significant evidence. Ultimately, it was for the trier of fact to decide what weight to give the evidence. We are bound by the trial court's decision to credit the evidence.
Lastly, defendants contend there was insufficient evidence that any more than approximately $390,000 worth of product was ever delivered to Captiva. Their argument is based on (1) the absence of signatures on any of the delivery tickets admitted into evidence, (2) a Captiva employee's testimony that a signature was always required at delivery, and (3) the same employee's testimony that he never saw deliveries from Crop Production.
The problem with defendants' argument is that the employee's testimony was contradicted by Pratt, who testified that it was not the company's practice to require signatures. In fact, the Credit Agreement specifically waives any signature requirement on invoices: "I/We further agree that it is not necessary for invoices to be signed, and specifically waive any defense regarding unsigned invoices to include invoices regarding custom spreading or application." Moreover, the employee in question was not in charge of fertilizer and chemical deliveries until February 2016. Before that, Pratt was in charge. There are only two invoices dated on or after February 2016. The employee testified that he had no dealings with Crop Production. Instead, Pratt testified that he was in charge of ordering product from Crop Production, and he was not aware of any problems with delivery of the products he ordered. When asked how he knew it was delivered, he stated, "Well, we know it was delivered because we have delivery tickets and the field was spread. So if it hadn't been done, the crop would have looked like crap. So that would have been a dead giveaway. So from an agronomy point of view, it would have been very obvious to see that something wasn't done." In contrast, the employee acknowledged that, in the end, he did not actually know whether fertilizer was delivered, because by the time he was there, the fertilizer would already have been worked into the ground. Moreover, representatives from both Spreadco and True Organics testified that they delivered products.
It is elementary that we must resolve conflicts in the evidence in favor of the judgment. Here, there was conflicting testimony about whether signatures were required, and whether the product was delivered. Accordingly, we must affirm.
DISPOSITION
The judgment is affirmed. Plaintiff shall recover its costs incurred on appeal.
IKOLA, J. WE CONCUR: MOORE, ACTING P. J. FYBEL, J.