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Salco Espresso & Restaurant Systems, Inc. v. B.H. Gold Ins. Agency, Inc.

Court of Appeals of California, Fourth District, Division One.
Nov 12, 2003
No. D040220 (Cal. Ct. App. Nov. 12, 2003)

Opinion

D040220.

11-12-2003

SALCO ESPRESSO & RESTAURANT SYSTEMS, INC., Plaintiff and Respondent, v. B.H. GOLD INSURANCE AGENCY, INC., Defendant and Appellant.


Salco Espresso & Restaurant Systems, Inc. (Salco) sued B.H. Gold Insurance Agency, Inc. (B.H. Gold) alleging B.H. Gold was negligent in failing to procure Salco liability insurance that included theft coverage. A jury determined B.H. Gold was negligent and awarded Salco $42,530 in damages including lost profits.

The trial court entered judgment in that amount plus interest and $15,737.20 in costs. B.H.

Gold contends the court prejudicially erred by (1) failing to instruct the jury with BAJI No. 1.04 prohibiting consideration of insurance; (2) denying B.H. Gold a new trial given evidence of jury misconduct; (3) failing to limit Salcos damages to the $25,000 jurisdictional maximum for limited civil cases; (4) permitting a duplicative award of lost profits; and (5) awarding Salco $12,475.00 in expert witness fees. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

In early 1999, Salco, a wholesaler of coffee and coffee brewing equipment, was in the process of moving its business location. Because the new building required Salco to carry insurance, one of Salcos officers, Salvatore Busalacchi, approached B.H. Gold to obtain coverage. Unfamiliar in insurance matters, Busalacchi simply told the B.H. Gold representative he wanted "full coverage" so that the business would not suffer a loss of any kind. Busalacchi made it clear he wanted the business to be covered in the event of theft.

B.H. Gold initially received a quote for insurance that included theft and forwarded it to Busalacchi with a request that he send a check for the premium. However, B.H. Gold ultimately obtained for Salco a policy from a different insurer, Golden Eagle Insurance Company (Golden Eagle), that did not include theft insurance because Salcos premises did not have an alarm system, a necessary condition for such coverage under the other policy. Although Busalacchi was refunded a portion of the premium he had paid, he was not aware of the absence of theft coverage in the Golden Eagle policy; nobody from B.H. Gold told him he needed to have an alarm system in order to obtain theft insurance.

On December 25, 2000, Salcos premises were burglarized and many items of inventory taken. Golden Eagle denied coverage for the claim.

In April 2001, Salco sued B.H. Gold for breach of contract and negligence, alleging it sustained approximately $40,000 in damages from the loss of specified business equipment and praying for damages in that amount plus interest. The matter proceeded to trial on the negligence cause of action after the parties engaged in standard discovery consisting of unlimited civil form interrogatories, multiple requests for documents and admissions, and depositions of at least four witnesses and two experts. At trial, Salco sought to prove it suffered $56,245 in damages, consisting of $30,814 in the value of the stolen equipment and $25,431 in profits it would have made had Busalacchi been able to sell that equipment. B.H. Gold argued it was not negligent and Salco was not entitled to any damages, but that Salcos requested damages would constitute a double recovery of profits.

The jury returned a special verdict finding B.H. Gold negligent and that its negligence caused Salco $42,530 in damages. The jury voted 9-to-3 on the damages question. Thereafter, B.H. Gold moved ex parte for an order shortening time to file a motion for an offset of the damage award and to tax Salcos costs. In part, B.H. Gold argued uncontradicted evidence showed Salco had received a $6000 advance insurance payment from Golden Eagle that, if the judgment was left to stand, would result in a double recovery.

At some point after B.H. Gold filed that application, it was discovered that Salcos complaint had been identified on its face as a "limited" civil case. The complaint reflects the designation of an "IC" before the case number, and shows by handwritten notation that the plaintiff paid a $96.00 filing fee, which is the fee for a limited civil case. Someone had typed the phrase, "Amount demanded exceeds $10,000" on the face of the complaint. Following this discovery, B.H. Gold filed an objection to the special verdict on the ground Salcos maximum recovery could not exceed the jurisdictional limit of $25,000.

Two days later, Salco moved under Code of Civil Procedure section 473 to be relieved from its mistake in designating the case as a limited civil case, and for a nunc pro tunc order designating the case as unlimited. Salcos counsel submitted a declaration pointing out the complaint in several places requested damages of $40,000; nothing on its face designated the action as one seeking damages under $25,000; and the civil case cover sheet designated the case as an unlimited civil case. He stated the clerks office nevertheless filed the complaint with an "IC" number, and requested payment for a limited civil case. Salcos counsel further pointed out that in all respects, the matter proceeded as an unlimited civil case, including with regard to discovery and damages claimed at trial without objection by B.H. Gold. He conceded he should have discovered the erroneous designation when he received the conformed copy of the complaint and taken immediate steps to reclassify the case, but did not catch the mistake until the trial had ended. Salco offered to pay the difference in filing fees.

All statutory references are to the Code of Civil Procedure unless otherwise indicated.

In response, B.H. Gold argued in its motion for offset that Salcos request for nunc pro tunc relief under section 473 was inapplicable. After argument on the matter, the trial court granted Salcos motion for relief under section 473 and "the courts inherent powers to accomplish justice." It stated: "The courts concerns regarding due process have been satisfied as plaintiffs counsel has now addressed the fact he: (1) checked an unlimited jurisdiction box on a civil cover sheet; (2) stated that over $40,000 was at issue in the prayer of the complaint; and (3) indicated all counsel and the court labored through judgment under the misapprehension the case was a general jurisdiction case. Therefore, the intent of the jury requires the court correct the clerks error in labeling the case an IC case based merely upon the $96 filing fee tendered." It confirmed its rulings denying B.H. Golds motion for the $6,000 offset and declining to tax $12,475 in fees for one of Salcos experts.

The court thereafter entered judgment in Salcos favor in the sum of $42,530 plus interest and $15,737.20 in costs. B.H. Gold unsuccessfully moved for a new trial on grounds discussed below.

DISCUSSION

I. Instructional Error

B.H. Gold contends the trial court erred by failing to instruct the jury with BAJI No. 1.04, prohibiting consideration of insurance coverage. It maintains the absence of the instruction was prejudicial, as evidenced by declarations of jurors Tim Henderson and Krista Kornylo recounting statements made by other unidentified jurors that it was "clear defendant B.H. Gold had insurance for this loss and that they [sic] could afford to pay the judgment." Salco suggests B.H. Gold waived this contention of error by failing to object to the omission or raising it as grounds for a new trial, but nevertheless maintains any error was harmless.

That instruction provides: "There is no evidence before you that [the defendant] [any party] has or does not have insurance for the [plaintiffs] [or] [cross-complainants] claim. Whether insurance exists has no bearing on this case. You must not discuss or consider it for any purpose. [If the evidence shows that prior to the trial a party made a statement admitting fault or blame for the [accident] [incident] in question and mentioned insurance, do not ignore this evidence merely because of the mention of insurance.]" (BAJI No. 1.04.)

We decline to treat B.H. Golds silence on the courts failure to give BAJI No. 1.04 as a waiver. "`Waiver is the intentional relinquishment of a known right after full knowledge of the facts and depends upon the intention of one party only." (Old Republic Ins. Co. v. FSR Brokerage, Inc. (2000) 80 Cal.App.4th 666, 678, citing DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Cafe & Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 59.) "`The burden . . . is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and "doubtful cases will be decided against a waiver."" (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31.)

Here, Salco requested the instruction be given; the trial court for reasons not disclosed by this record failed to give it. It is apparent from the parties respective lists of requested jury instructions that B.H. Gold took Salcos proposed list into account when it prepared its own list. Thus, B.H. Gold would not have requested the instruction reasonably believing the trial court would give it in accordance with Salcos request. On this record, we doubt B.H. Gold intentionally relinquished its right to the instruction. Nor was B.H. Gold required to raise such error in its new trial motion in order to preserve it. (Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 122.) We will not apply waiver principles under these circumstances.

The jury instruction conference was not reported. With one exception (BAJI No. 3.00), B.H. Gold did not duplicate general preliminary instructions (e.g. 1.00 [Respective Duties of Judge and Jury], 1.01 [Instructions to be Considered as a Whole] in its list of proposed jury instructions. Rather, its list filled in gaps from the plaintiffs list, making it apparent that B.H. Gold took plaintiffs list into account when itemizing its sought-after instructions.

Having rejected waiver, we nevertheless conclude the contention fails on its merits. Even if we assume the court erred by failing to give the instruction, B.H. Gold has not met its burden to affirmatively establish it was prejudiced by such error. (Cal. Const., art. VI, § 13; § 475; Cucinella v. Weston Biscuit Co. (1954) 42 Cal.2d 71, 82; Paterno v. State of California (1999) 74 Cal.App.4th 68, 105 [appellant bears the duty of spelling out in his brief exactly how the error caused a miscarriage of justice].) In determining whether instructional error was prejudicial, a reviewing court "should consider not only the nature of the error, `including its natural and probable effect on a partys ability to place his full case before the jury, but the likelihood of actual prejudice as reflected in the individual trial record, taking into account `(1) the state of the evidence, (2) the effect of other instructions, (3) the effect of counsels arguments, and (4) any indications by the jury itself that it was misled." (Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, 983.)

As to prejudice, B.H. Golds sole argument is that confusion about the availability of insurance was likely because the "case concerned insurance" and the record reflects juror confusion about the consideration of insurance. It refers to the post-trial declarations by jurors Henderson and Kornylo, who stated: "[W]hen the issue of reducing Salcos damages was discussed, at least two of the jurors indicated that it was clear that defendant B.H. Gold had insurance for this loss and that they [sic] could afford to pay the judgment." In its new trial motion, B.H. Gold argued the jury declined to reduce the judgment as a result of these comments.

These declarations, however, do not support that contention. Henderson and Kornylo do not go on to state that they, or any other members of the jury for that matter, took any particular action or made some decision about Salcos damages as a consequence of the other jurors statements. Nor does the mere statement that other jurors mentioned B.H. Golds errors and omissions insurance permit an inference that they considered that insurance in calculating Salcos damages. By themselves, the declarations do not establish that the jury was confused or somehow improperly considered the existence of B.H. Golds errors and omissions insurance in calculating the damage award. The record provides no basis to reverse the judgment on this ground.

II. New Trial Motion

B.H. Gold contends the trial court should have granted its motion for new trial based on two instances of jury misconduct. Pointing to the jurys 9-3 verdict in Salcos favor, it maintains at least one juror was swayed either by (1) the pronouncement by other jurors that B.H. Gold had insurance and could afford to pay the judgment, or (2) the fact that deliberations would take an extended period of time unless the jury reached some compromise on the question of lost profits. It further argues Salco failed to rebut these statements.

"`"It is well settled that a presumption of prejudice arises from any juror misconduct . . . . However, the presumption may be rebutted by proof that no prejudice actually resulted."" (English v. Lin (1994) 26 Cal.App.4th 1358, 1364.) The question of whether prejudice arose from jury misconduct is a mixed question of law and fact subject to our independent determination. (Enyart v. City of Los Angeles (1999) 76 Cal.App.4th 499, 507-508, citing People v. Nesler (1997) 16 Cal.4th 561, 582.) In reviewing the denial of a motion for new trial based on jury misconduct, this court has a constitutional obligation to review the entire record to determine whether the act of misconduct, if it occurred, prevented the complaining party from having a fair trial. (English v. Lin, at p. 1364.) We "`examine the record to determine whether there is a reasonable probability of actual harm to the complaining party resulting from the misconduct. Some of the factors to be considered in this connection are "the strength of the evidence that misconduct occurred, the nature and seriousness of the misconduct, and the probability that actual prejudice may have ensued."" (Ibid.; accord, Iwekaogwu v. City of Los Angeles (1999) 75 Cal.App.4th 803, 818.)

As for B.H. Golds claim that the jury was influenced by mention of B.H. Golds errors and omissions insurance, we have already rejected its contention that the declarations submitted in connection with its new trial motion demonstrate the jury somehow used this information in arriving at Salcos damages. The record, including the juror declarations, does not support such a claim. It is therefore insufficient to support even a threshold conclusion that the jury committed misconduct on this ground. Absent evidence of misconduct, a presumption of prejudice does not arise. (Vomaska v. City of San Diego (1997) 55 Cal.App.4th 905, 912, fn.13; Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388, 417.) But even if we were to conclude the mere mention of B.H. Golds insurance constitutes misconduct, we would conclude for the same reasons (i.e. the absence of evidence the jury actually relied upon that information in calculating its damage award) there is no reasonable probability that actual harm resulted from the misconduct. This claim of juror misconduct fails.

The second claimed instance of jury misconduct concerns the jurys calculation of lost profits damages. In that vein, juror Henderson averred: "During the deliberations, an impasse was reached as to the issues of plaintiffs lost profits. I was one of a number of jurors who believed that no compensation should be awarded for lost profits, as there was no evidence presented by plaintiff quantifying the amount. Further, Salco presented no evidence regarding its sales turnover rate. In order to resolve this issue, as it appeared the deliberations would take an extended period of time, we agreed to split the amount and award Salco one-half of the claimed lost profits." Juror Kornylos declaration on this issue does not include the sentence regarding sales turnover rate, but it is otherwise identical to Hendersons.

In its new trial motion, B.H. Gold argued the declarations establish the jurors were pressured to agree to a chance or quotient verdict. Such would be grounds for a new trial. Section 657 provides in part: "The verdict may be vacated . . . and a new or further trial granted on all or part of the issues . . . for any of the following causes, materially affecting the substantial rights of such party: [¶] . . . [¶] 2. Misconduct of the jury; and whenever any one or more of the jurors have been induced to assent to any general or special verdict, or to a finding on any question submitted to them by the court, by a resort to the determination of chance, such misconduct may be proved by the affidavit of any one of the jurors."

Chance verdicts are "[v]erdicts reached by tossing a coin, drawing lots, or any other form of gambling." (Chronakis v. Windsor (1993) 14 Cal.App.4th 1058, 1064.) A more sophisticated form of such a verdict is a quotient verdict. A quotient verdict results when "`[t]he jurors agree to be bound by an average of their views; each writes the amount he [or she] favors on a slip of paper; the sums are added and divided by 12, and the resulting "quotient" pursuant to the prior agreement, is accepted as the verdict without further deliberation or consideration of its fairness." (Ibid.)

The declarations submitted by B.H. Gold do not establish that the jury reached its damages verdict by any form of gambling. Instead, it is apparent the jury began with the damages figure proposed by Salco, but then used a 50-50 split to reach the final verdict to avoid lengthy deliberations. The question is whether this is in the nature of a quotient verdict. We conclude it is not. In Bardessono v. Michels (1970) 3 Cal.3d 780, 795, relied upon by B.H. Gold, the court clarified:

"`A quotient verdict does not necessarily constitute a chance verdict, provided the average sum which is thus procured is not adopted without subsequent consideration or balloting by the jurors. If, after a quotient figure is obtained, the jurors discuss and ballot upon the adoption or rejection of that sum, it is conclusive evidence they were not bound by a previous agreement to accept it without further consideration." (See also Will v. Southern Pacific Co. (1941) 18 Cal.2d 468, 477-478; City of Pleasant Hill v. First Baptist Church (1969) 1 Cal.App.3d 384, 433-435.) Even if we agree the jurys agreement to split Salcos proposed lost profits damages figure by half was a form of quotient verdict, the record conclusively shows they nevertheless put the damages question to a vote — resulting in a 9-to-3 verdict on damages with three jurors rejecting damages in their entirety. The circumstances, therefore, are governed by the rule stated in Bardessono. It is not improper for jurors to calculate an average amount as a basis for discussion if there is a later consideration of the amount and a vote upon it, even if the jurors ultimately agree upon that amount. Because the record shows the jurys method did not amount to either a chance or a quotient verdict, the court did not abuse its discretion in denying B.H. Gold a new trial on this ground.

III. Reclassification of Complaint as an Unlimited Civil Case

B.H. Gold contends the court erred by refusing to limit Salcos damages to the $25,000 jurisdictional maximum in a limited civil case. It maintains: (1) as a matter of statutory interpretation of sections 85 and 580, the court has no discretion to grant relief exceeding the maximum $25,000 recovery in a limited civil case and it had the right to rely on this limitation irrespective of its participation in discovery consistent with an unlimited civil case; (2) section 473 is not a proper mechanism to grant Salco its requested relief, in part because Salco did not act mistakenly but instead made a monetary strategic decision in filing suit when it typed "amount demanded exceeds $10,000.00" on the complaints face and paid the $96 filing fee; (3) Salco waived its right to reclassify the case by failing to request the case be reopened for the purpose of redesignating it; (4) Salco did not meet statutory reclassification requirements under section 403.040; and (5) Salco never perfected the courts order by paying the reclassification fee.

Section 85 provides in part: "An action or special proceeding shall be treated as a limited civil case if all of the following conditions are satisfied, and, notwithstanding any statute that classifies an action or special proceeding as a limited civil case, an action or special proceeding shall not be treated as a limited civil case unless all of the following conditions are satisfied: [¶] (a) The amount in controversy does not exceed twenty-five thousand dollars ($25,000). As used in this section, "amount in controversy" means the amount of the demand, or the recovery sought . . . that is in controversy in the action, exclusive of attorneys fees, interest, and costs."

Section 580 provides in part: "(a) The relief granted to the plaintiff, if there is no answer, cannot exceed that which he or she shall have demanded in his or her complaint
. . . but in any other case, the court may grant the plaintiff any relief consistent with the case made by the complaint and embraced within the issue. . . . [¶] (b) Notwithstanding subdivision (a), the following types of relief may not be granted in a limited civil case: [¶] (1) Relief exceeding the maximum amount in controversy for a limited civil case as provided in Section 85, exclusive of attorneys fees, interest, and costs."

A. Jurisdiction

We begin by disposing of any suggestion that the superior court was without authority to grant Salco relief in a jurisdictional sense. In Wozniak v. Lucutz (2002) 102 Cal.App.4th 1031, 1040, the court explained: "`Lack of jurisdiction is a term used to describe situations in which a court is without authority to act. [Citation.] In its most fundamental sense, `lack of jurisdiction means an entire absence of power to hear or determine the case, i.e., an absence of authority over the subject matter or the parties. [Citation.] `Lack of jurisdiction is also applied more broadly to a situation where, though the court has jurisdiction over the subject matter and the parties in a fundamental sense, it has no power to act except in a particular manner, or to give certain kinds of relief, or to act without the occurrence of certain procedural prerequisites. [Citation.] Thus, acts which exceed the defined power of a court in any instance, whether that power be defined by constitutional provision, express statutory declaration, or rules developed by the courts and followed under the doctrine of stare decisis, are described as acts in `excess of jurisdiction. "(See also People v. Mower (2002) 28 Cal.4th 457, 474, fn. 6.)

Here, regardless of the complaints designation as limited or unlimited, the superior court plainly had jurisdiction over the matter in the fundamental sense. "`"On unification of the trial courts in a county, all causes will be within the original jurisdiction of the superior court . . . . In a county in which the courts have unified, the superior court has original jurisdiction of limited civil cases, but these cases are governed by economic litigation procedures, local appeal, filing fees, and the other procedural distinctions that characterize these cases in a municipal court."" (Wozniak v. Lucutz, supra, 102 Cal.App.4th at p. 1039, quoting Snukal v. Flightways Manufacturing Inc. (2000) 23 Cal.4th 754, 763, fn.2.) The pertinent question is whether the trial court acted in "excess of jurisdiction" by making errors of procedural or substantive law. As we explain, we conclude it did not.

B. The Court Had Inherent Authority to Treat Salcos Section 473 Motion as one to Reclassify the Case and it Did not Abuse its Discretion in Reclassifying the Case

We reject B.H. Golds challenge to the procedural mechanism by which Salco raised the classification issue. Regardless of the label on Salcos motion, its requested relief was an order designating the case as an unlimited civil case in accordance with the manner in which it had been treated by the court and the parties throughout pretrial proceedings and trial. The superior court granted reclassification on the alternate ground of its inherent authority; we infer in support of its order that it treated Salcos motion as one for reclassification under section 403.040 or alternatively reclassified the case on its own motion under that statute. Under these unique circumstances, the court had the ability to do so based on its inherent equity, supervisory and administrative powers to control litigation before it — judicial powers derived from the state Constitution and not shackled by or dependent on statute. (In re Marriage of Johnson-Wilkes & Wilkes (1996) 48 Cal.App.4th 1569, 1577; Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, 1377.) These principles permit courts to formulate rules of procedure where justice demands it. (Addison v. State (1978) 21 Cal.3d 313, 318-319; Western Steel & Ship Repair, Inc. v. RMI, Inc. (1986) 176 Cal.App.3d 1108, 1116.)

Section 403.040 provides in part: "(a) The plaintiff, cross-complainant, or petitioner may file a motion for reclassification within the time allowed for that party to amend the initial pleading. . . . The court, on its own motion, may reclassify a case at any time." The section permits a party to bring a late motion to reclassify "only if both of the following conditions are satisfied: [¶] (1) The case is incorrectly classified. [¶] (2) The moving party shows good cause for not seeking reclassification earlier." (§ 403.040, subd. (b)(1), (2).)

The court implicitly concluded Salcos factual showing met the statutory requirements for a motion brought under this section. The question then becomes whether the courts implicit findings are supported by substantial evidence. (Riveros v. City of Los Angeles (1996) 41 Cal.App.4th 1342, 1357-1358, fn. 12.) Contrary to B.H. Golds suggestion, we conclude they are. The first prong of section 403.040, subdivision (b), by its terms, does not require an assessment of fault or a finding of mistake; the court need only decide whether the cases classification is incorrect. Even if we assume classification of a case as limited is conclusively established by the clerks "IC" designation, the typewritten notation "Amount demanded exceeds $10,000," and the amount of the filing fee, there is ample evidence the case was incorrectly classified in this way. Salco unambiguously requested damages of approximately $40,000 throughout its complaint; it specifically identified the case as an unlimited case on the accompanying civil case cover sheet; and at trial it sought to prove it suffered more than $25,000 in damages. Both parties treated the case as an unlimited civil case throughout pretrial proceedings; the parties did not restrict discovery as is required in limited civil cases. The record supports the trial courts finding that the parties were unaware of the incorrect designation until well after the jury reached its verdict. These circumstances amply support a conclusion that the case received an incorrect designation, whether through the misunderstanding of counsel or the court clerk.

To hold that such notations conclusively establish the case as a limited civil case would contradict section 85, which expressly states classification is dependent on whether the amount in controversy, i.e., the amount of the demand, or the recovery sought, or the value of the property, exceeds $25,000. (§ 85, subd. (a).)

These circumstances also support a finding that Salco met the requirements of the second prong: good cause for not seeking reclassification earlier. Section 403.040 does not define the phrase "good cause" in this context. In general, good cause is relative and depends on the circumstances involved; it may be based on any matter relevant to the issue at hand. (See Laraway v. Sutro & Co. Inc. (2002) 96 Cal.App.4th 266, 274.) Our states high court has explained that the concept "should not be enshrined in legal formalism; it calls for a factual exposition of a reasonable ground for the sought order." (Waters v. Superior Court (1962) 58 Cal.2d 885, 893.) Here, Salco gave reasonable grounds for seeking reclassification when it did. As stated, the record demonstrates neither the parties nor the court discovered the notations on the complaint or the payment of a limited civil case-filing fee until after the case had been litigated to verdict. Salcos counsel moved for relief only two days after B.H. Gold raised the classification issue in its objection to the special verdict.

Nor is this a case where Salco sought to take advantage of a jury verdict after consciously limiting its damages to $25,000. (Contra Wozniak v. Lucutz, supra, 102 Cal.App.4th 1031, 1045 [complaint contained a clear, unambiguous and valid remission clause that was not stricken or amended prior to or during trial and there was no evidence parties actually tried the issue of damages in excess of the amount pleaded].) We reject B.H. Golds assertion that Salco made a strategic decision to limit its damages to $25,000 as evidenced by its payment of a $96.00 filing fee. B.H. Gold concedes Busalacchi himself wrote the check for that fee; as a layperson he could not be expected to know the difference in filing fees for limited and unlimited cases as those terms are used in the Code of Civil Procedure, or appreciate the import of paying the lesser fee. The fact Busalacchi paid the filing fee for a limited civil case does not change our conclusion that substantial evidence supports the trial courts conclusion that the case was incorrectly classified and that good cause existed to reclassify the matter.

We also reject B.H. Golds argument that the courts reclassification order should be reversed because Salco never "perfected" the courts order by paying the $125.00 reclassification fee within 30 days of the courts order under sections 403.040, subdivision (d) and 403.060. B.H. Gold misleadingly cites to section 403.060, subdivision (b) in asserting the case must remain a limited civil case for Salcos failure to pay the fee. That subdivision provides that if the fee is not paid "at the time an amended complaint or other initial pleading, a cross-complaint, or a stipulation for reclassification is filed . . ., the clerk shall not reclassify the case and the case shall remain and proceed as a limited civil case." (§ 403.060, subd. (b), italics added.) Under the unique circumstances presented by this case, where the matter had already proceeded to verdict as an unlimited civil case and where reclassification was not ordered until after the proceedings were over, this provision does not require we reverse the courts order.

Moreover, nothing in section 403.040, subdivision (d) compels reversal of the reclassification order. That provision states only that an action that has been reclassified "shall not be further prosecuted in any court until the required classification fee is paid." (§ 403.040, subdivision (d)(2).) The provision is inapplicable to these circumstances, where no further prosecution took place. Nor does the provision require the court to vacate its order based on Salcos failure to pay any fee. It states: "If the fee is not paid within 30 days after service of notice of an order of reclassification, the court on its own motion or the motion of any party may order the case to proceed as a limited civil case, dismiss the action or cross-action without prejudice on the condition that no other action or proceeding on the same matters may be commenced in any other court until the reclassification fee is paid, or take such other action as the court may deem appropriate." (§ 403.040, subd. (d)(3), italics added.) The provision grants the court discretion to proceed as appropriate; it does not compel the court to vacate its order once it determines the fee has not been paid. Indeed, approximately thirty days after the court ordered the case reclassified, it entered judgment in Salcos favor. We cannot say its action was prohibited by the reclassification statute or otherwise constituted an abuse of discretion under these facts.

Finally, we reject B.H. Golds alternative argument that Salcos damages should be limited to $40,000, the amount pleaded in its complaint. The principle stated by Meyer Koulish Company v. Cannon (1963) 213 Cal.App.2d 419, the sole authority cited by B.H. Gold, is subject to an exception that applies here. That is, the parties actually tried the issue of damages in amounts above the limit set forth in the complaint. (E.g. Castaic Clay Manufacturing Co., v. Dedes (1987) 195 Cal.App.3d 444, 449.) Busalacchi testified the value of his stolen equipment was $30,814, and if he had that equipment to sell, he could have sold it for an additional $25,431 in profit. Thus, "[t]he amount of the trial courts judgment on those issues therefore could not have come as any surprise to defendant and was the source of no prejudice to [it] since no additional time or effort by [it] was required to meet those issues." (Id. at p. 450.)

IV. Lost Profits Award

B.H. Gold contends the jurys award of lost profits is not supported by the evidence. It maintains Busalacchis testimony is insufficient because it did not "quantify[] that indeed [Salco] would lose profits in the future due to the theft of the espresso machines" and it did not explain Salcos sales turnover rate or whether in fact all the machines could have been sold. B.H. Gold argues the damages award is based on pure speculation absent such evidence. We disagree.

B.H. Gold does not challenge these damages on the ground Salco was not an established business, and indeed at trial, Busalacchi testified he had ten years of experience in the specialized coffee machine business. Damages for lost anticipated profits from an established business are generally awardable if "`there has been an operating experience sufficient to permit a reasonable estimate of probable income and expense . . . ." (Piscitelli v. Friedenberg (2001) 87 Cal.App.4th 953, 989, quoting Fibreboard Paper Products Corp. v. East Bay Union of Machinists (1964) 227 Cal.App.2d 675, 702-703; Grupe v. Glick (1945) 26 Cal.2d 680, 692-693 [issue is whether lost profits damages can be calculated to a reasonable certainty].) "`It is enough to demonstrate a reasonable probability that profits would have been earned except for the defendants conduct." (Kids Universe v. In2Labs (2002) 95 Cal.App.4th 870, 884.)

In addressing his claim for lost profits, Busalacchi identified the items of equipment that were stolen and testified if he had had them in stock, it was his intent to sell them for a profit. Referring to an exhibit enumerating each piece of stolen equipment and listing cost and retail price per unit, he stated he could have sold them for retail at a profit of $25,431. Although Busalacchi did not detail his specific expertise, he did indicate he gave his opinion on retail price as "one who sells these machines. . . ." Based on Busalacchis estimate and the evidence supporting a finding that B.H. Golds negligence resulted in Salco being left uninsured and without inventory to sell, the jury could reasonably conclude Salco would have realized a profit but for B.H. Golds negligence, and could reasonably accept Busalacchis estimation of the amount of profit. Engle v. City of Oroville (1965) 238 Cal.App.2d 266, cited by B.H. Gold, does not compel a conclusion otherwise. There, the plaintiffs sought to recover profits they alleged they would have made if a motel were built on property that had been polluted for a period of time. (Id. at p. 273.) The court of appeal found such damages entirely speculative in view of evidence that plaintiffs did not have a contract for a motels construction; they did not have a prospect of such a contract with a person capable of financing one; and they did not have a prospect shown to have been ready and willing to build such a motel. (Id. at p. 274.) The circumstances are entirely unlike those presented here.

B.H. Gold asserts there was jury confusion over the lost profits award. We disagree. During deliberations, the jury asked the court whether lost profits were the same as "lost sales opportunities;" whether they were obligated to award the full amount requested by Salco; and if not, whether they had discretion to determine the amount. The court answered the first question in the affirmative, instructed the jury they were to determine the amount, if any, of sales opportunities actually lost, and advised them they had discretion to determine the amount of the award. B.H. Gold does not contend the court so misadvised the jury. The exchange contradicts B.H. Golds claim of juror confusion; the jury actually obtained clarification, eliminating any possible confusion. The fact two jurors indicated they believed there was no evidence to support a lost profit award does not require we reverse the jurys 9-to-3 verdict awarding such damages. B.H. Golds arguments provide no basis to reverse the award of lost profits damages.

V. Offset

B.H. Gold contends the court erred by refusing to offset Salcos damage award by $6,000 that it claims Salco received as an advance insurance payment from Golden Eagle. In denying B.H. Gold a new trial on this ground, the court ruled "there is insufficient evidence on both this alleged offset and whether the jury considered it."

The determination of a motion for a new trial rests so completely within the trial courts discretion that its decision on the matter will not be disturbed on appeal unless manifest and unmistakable abuse of discretion clearly appears. (Jiminez v. Sears, Roebuck & Co. (1971) 4 Cal.3d 379, 387.) Further, a reviewing court must uphold an award of damages whenever possible, and all presumptions favor the judgment. (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 61.) We uphold the award here. Even assuming the evidence conclusively demonstrates Salco received and kept an advance $6,000 insurance payment from Golden Eagle, we agree the record does not support a conclusion that jury included that award in calculating Salcos damages. Indeed, there are indications to the contrary. In closing arguments, counsel for B.H. Gold advised the jury "no matter what you do, you need to subtract $6,000 [from its damages award], because he got $6,000 from Golden Eagle." The jurys $42,530 damage award was over $12,000 less than the amount requested by Salco. The trial court could reasonably conclude based on these facts that the jury omitted that sum from its final damage award. We find no abuse of discretion in its new trial ruling on this ground.

In reaching this conclusion we do not consider that portion of the declaration by Juror Henderson in which he stated when the issue of an offset arose during deliberations, he recalled a juror stating they "couldnt consider that for some reason." Testimony about statements made by jurors during the course of deliberations is inadmissible except in rare instances where the making of the statement itself is an act of misconduct. (Evid. Code, § 1150, subd. (a); People v. Hedgecock (1990) 51 Cal.3d 395, 418.)

VI. Costs Award

B.H. Gold challenges Salcos costs award to the extent it includes $12,475 in fees for expert witness Pauline Thomas. Its challenge is based on three grounds. B.H. Gold first argues Salcos requested expert witness fees should have been taxed in their entirety, reasoning Salcos total damages must be limited to $19,000 (the jurisdictional maximum of $25,000, minus the $6,000 insurance payment) and because that damage award is less than B.H. Golds section 998 offer to compromise, Salco is not a prevailing party having the right to recover such fees. It next argues the trial court "failed to recognize that [Salcos] expert witness fees totaling some $12,475.00 could not possibly be reasonable when compared to the $25,000 jurisdictional maximum for a limited civil case." These contentions fail in light of our decision upholding the trial courts reclassification of the matter as an unlimited civil case (part III, ante) under which it follows Salcos damages need not be reduced to $25,000.

Pointing to San Diego Superior Court Local Rule 2.11 and comparing her fees to those charged by its own expert, B.H. Gold also challenges Ms. Thomass $250 hourly fee as excessive, and not justified by her education or background. Without any further explanation or supporting authority, it asserts: (1) Ms. Thomas does not have the type of advanced degree that warrants her hourly rate; (2) her fees are a clear attempt by Salco to pass on its investigative expenses; and (3) Ms. Thomass declaration, in which she states her research and evaluation would have been the same whether the damages were $50,000 or $500,000, reflects an over-zealous approach to the matter.

Section 998, subdivision (d) gives the trial court discretion to require the defendant to pay a reasonable sum to cover the costs of expert witnesses that are "actually incurred and reasonably necessary in either, or both, preparation for trial . . . or during trial . . . of the case by the plaintiff . . . ." The trial court determines, in its discretion, what expert fees were reasonably and necessarily incurred in preparation for trial. (Brake v. Beech Aircraft Corp. (1986) 184 Cal.App.3d 930, 939.) In the face of Salcos verified costs memorandum, it is B.H. Golds burden to demonstrate why the requested fees do not meet this standard. (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 131; Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1266.)

B.H. Golds mere comparison to the charges of own expert does not persuade us that Ms. Thomass work was unreasonable or unnecessary to the litigation. Nor are we convinced by its citation to San Diego Superior Court Local Rule 2.11. That rule provides trial courts with guidelines when addressing motions to set expert compensation under section 2034, subdivision (i)(4), brought when a party desiring to depose an expert deems his or her hourly or daily fee unreasonable. The rule does not bind the parties or the court to those guidelines, and it has nothing to do with determining whether the experts time was actually incurred and reasonably necessary to the litigation. B.H. Golds other unsupported arguments provide no basis for us to conclude the court abused its discretion in awarding Salco the challenged fees.

Section 2034, subdivision (i)(4) requires the parties to attempt to informally resolve the matter and present (a) proof of the ordinary and customary fee actually charged and received by that expert for similar services provided outside the subject litigation; (b) the total number of times the presently demanded fee has ever been charged and received by that expert; and (c) the frequency and regularity with which the presently demanded fee has been charged and received by that expert within the two-year period preceding the hearing on the motion. (§ 2034, subd. (i)(4).) Notably, there is no indication from the record B.H. Gold made such a motion when confronted with deposing Ms. Thomas.

DISPOSITION

The judgment is affirmed.

WE CONCUR: McCONNELL, P. J. and HALLER, J.


Summaries of

Salco Espresso & Restaurant Systems, Inc. v. B.H. Gold Ins. Agency, Inc.

Court of Appeals of California, Fourth District, Division One.
Nov 12, 2003
No. D040220 (Cal. Ct. App. Nov. 12, 2003)
Case details for

Salco Espresso & Restaurant Systems, Inc. v. B.H. Gold Ins. Agency, Inc.

Case Details

Full title:SALCO ESPRESSO & RESTAURANT SYSTEMS, INC., Plaintiff and Respondent, v…

Court:Court of Appeals of California, Fourth District, Division One.

Date published: Nov 12, 2003

Citations

No. D040220 (Cal. Ct. App. Nov. 12, 2003)