Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. GIN53177, William S. Dato, Judge.
McConnell, P. J.
Gregory and Barbara Nelson, individually and as co-trustees of a family trust, appeal a judgment for Steven and Maureen Cade, individually and as co-trustees of a family trust, on the Cades' complaint for breach of a promissory note, and against the Nelsons on their cross-complaint for breach of oral contract, fraud and related counts. The Nelsons contend the trial court improperly granted the Cades' motion in limine to exclude evidence of Steven's alleged oral agreement to nullify a provision of the promissory note requiring the Nelsons to pay the Cades $500,000. The Nelsons also contend the court improperly denied their request for leave to amend their answer to the complaint to allege a defense of mutual mistake of fact, which they made immediately before the jury was to commence deliberations. We affirm the judgment.
Because parties share surnames, we use their first names when we refer to them individually.
FACTUAL AND PROCEDURAL BACKGROUND
In 1991 Paul Herber founded La Jolla Club Golf Company (LJC), which manufactured golf clubs. In 1995 the Cades purchased a 51 percent interest in LJC, by investing $250,000 in cash and guaranteeing a $500,000 business credit line. Steven became an employee and officer of LJC. Between 1997 and 1999 the Cades invested an additional $150,000 in LJC. The company performed well until September 11, 2001, after which business steadily declined.
In 2002 Herber designed what LJC believed was "a revolutionary golf club" called the Knife. About the same time, the Nelsons invested approximately $172,000 in the company. LJC gave Gregory a seat on its board of directors based on his business experience and the hope he would help the company grow. Gregory urged LJC to aggressively market the Knife through expensive advertising in various media, including television infomercials. To finance the marketing, Steven and Gregory borrowed funds and loaned them to LJC. The Knife began selling, but the infomercials were ultimately a disaster. They included a money back guarantee, and purchasers began returning clubs for a full refund after a 90-day trial period. By the second half of 2004, LJC "had no money, we had product coming back, [and]... had retailers not wanting to pay."
In January 2005 LJC needed $600,000 to continue operating. Gregory told Steven that if the Cades would loan LJC the additional funds, the Nelsons would repay the Cades within a few months from their share of the $150 million sale of another business they partly owned. The agreement was not in writing. The Cades had sold their home to repay bank loans of $1.1 million they personally incurred for LJC, and they loaned $600,000 of their home equity to the company. Steven raised the repayment issue with Gregory "hundreds of times," but Gregory asserted the Nelsons' repayment of the $600,000 was contingent on LJC's performance, while Steven believed the repayment obligation was unconditional.
Later in 2005 Steven favored liquidating LJC, but Gregory was interested in recapitalizing the company and restructuring ownership interests. LJC needed an additional $800,000 in operating capital and Gregory was unwilling to invest further without control of the company. Behind the Cades, the Nelsons were the largest investors in LJC. Gregory told Steven that if he was unwilling to invest any additional funds in LJC, the Nelsons would repay the Cades the $600,000 they loaned LJC in exchange for all their stock in the company, and for their relinquishment of their right to repayment of other substantial loans they made to LJC.
In November 2005 the parties executed a stock purchase agreement, a promissory note and an assignment of loans. Under the stock purchase agreement, the Cades agreed to sell the Nelsons 1,832,156.5 shares of common stock in LJC for $18,321.57. The assignment states the Cades made $2,004,894 in outstanding loans to LJC, and they agreed to assign and sell the loans to the Nelsons for $606,678.43, with $106,678.43 payable on November 8, 2005, and the remainder due under the terms of the promissory note. The note required the Nelsons to pay the Cades the remaining $500,000 by May 8, 2006, with 10 percent interest per year beginning February 8, 2006. The note states, "This Note may not be terminated or amended orally, but only by a termination or amendment in writing signed by Payee."
Herber left LJC and Gregory bought out additional shareholders and took the helm. LJC, however, continued to struggle, and the Nelsons failed to pay the Cades the $500,000 under the promissory note. According to Steven, Gregory told him "that if I didn't change the deal and forgive him the money, that he was going to "assassinate my character" and "drag it out in the courts for years."
In September 2006 the Cades filed a first amended complaint (hereafter complaint) against the Nelsons for breach of contract. The Nelsons filed a cross-complaint for breach of oral contract, fraud, conspiracy to commit fraud and breach of fiduciary duty. The cross-complaint alleged that before the parties signed the promissory note and other documents, Steven made false representations pertaining to the viability and worth of LJC. It further alleged that in February 2006 the Nelsons discovered LJC had $2 million more in debt than identified in its financial documents "because of grossly overvalued inventory, inaccurate receivables and a poor industry reputation." The cross-complaint alleged that after Gregory confronted Steven, he "orally agreed... to nullify, rescind, negate and cancel the $500,000 promissory note made in November of 2005."
The complaint included a cause of action for defamation, but it was dismissed.
In March 2007 the Nelsons filed a first amended cross-complaint (hereafter cross-complaint), which added Herber as a cross-defendant on the causes of action for fraud, conspiracy to commit fraud and breach of fiduciary duty, and on new causes of action for breach of contract and intentional interference with prospective economic advantage that did not involve the Cades. The latter two causes of action alleged Herber was improperly denying LJC's interest in certain intellectual property rights he created.
Herber and Cade then filed a cross-complaint against Gregory and LJC. Herber alleged causes of action for breach of contract, breach of statutory duty to pay wages and fraud, and Cade alleged causes of action for indemnity and conversion, arising from LJC's failure to pay for purchases it charged to his credit card.
LJC is not a party to this appeal.
In November 2007 the Cades filed a motion in limine to exclude any reference to Steven's alleged oral agreement to modify the written promissory note by nullifying the Nelsons' obligation to pay the Cades $500,000. The Cades argued the evidence was inadmissible under Evidence Code sections 1152 and 1154, which pertain to offers to compromise and discount claims; Civil Code section 1541, which requires new consideration for the oral extinguishment of a debt; and Civil Code section 1698, which requires the modification of a written contract to be in writing; and because it is undisputed that Maureen never agreed to any modification. The Nelsons filed an opposition that barely touched on the offer to compromise argument and ignored the additional arguments. The Nelsons relied on Steven's deposition testimony that he and Gregory "agreed that if he [Gregory] got--took care of the bank information, that I would forgive him the $500,000."
When trial commenced in February 2008 the court initially considered the Cades' motion in limine. They argued that Steven's alleged oral agreement had contingencies that were not worked out, such as payment of the bank loans, and thus it was never a "[d]one deal." For the purposes of the motion, however, the court accepted the Nelsons' offer of proof as true. The Nelsons conceded, however, that Maureen testified in deposition that she never would have agreed to forgive the Nelsons' $500,000 obligation under the promissory note.
The court granted the motion in limine. It explained that even viewing the facts in the light most favorable to the Nelsons, there was insufficient evidence of an enforceable oral contract. The court determined Steven's statements to Gregory were settlement discussions and offers to compromise, which are inadmissible under the Evidence Code. Further, the court found that any modification of the promissory note was invalid without Maureen's consent. The court's ruling disposed of the cross-complaint's cause of action for breach of oral contract and a defense to the complaint's breach of contract cause of action.
After the presentation of evidence, and immediately before the court intended to instruct the jury, the Nelsons moved for leave to amend their answer to the complaint to allege the parties' mutual mistake of fact in entering into the promissory note. The Cades objected on the grounds the mistake theory was not presented during trial "and it makes a major difference in how the case is presented and defended," and the evidence did not support a mistake theory. The court denied leave to amend, explaining the Nelsons tried the case on the basis that Steven intentionally made inadequate disclosures, there was no evidence to support a mutual mistake defense, and "it is too late at this point to amend to allege this."
The Nelsons assert on page 7 of their opening brief that they moved for leave to amend on the first day of trial and at the close of evidence. They did not, however, move to amend at the beginning of trial. Rather, their counsel stated that evidence of Steven's oral agreement to forgive the Nelsons' obligation to pay the Cades $500,000 under the promissory note was admissible because, among other things, "[w]e're going to request a jury instruction on a mutual mistake of fact." On page 18 of their opening brief the Nelsons concede they moved for leave to amend to conform to proof at the close of evidence.
The jury returned a unanimous verdict for the Cades on their complaint, and against the Nelsons on their cross-complaint. The parties stipulated to damages to the Cades of $610,195.38 on the promissory note, and of damages to Steven of $16,912 on his claim for indemnity against Gregory. The jury also found in Herber's favor on his claim against Gregory for breach of contract, and he was awarded $118,064.97 in damages. The court later awarded attorney fees of $240,000 and other costs of $14,601.51 to the Cades. The Nelsons unsuccessfully moved for judgment notwithstanding the verdict or new trial, and judgment was entered on May 6, 2008.
DISCUSSION
I
Motion in Li mine/Oral Agreement
A
"In limine motions are designed to facilitate the management of a case, generally by deciding difficult evidentiary issues in advance of trial. ' "The usual purpose of motions in limine is to preclude the presentation of evidence deemed admissible and prejudicial by the moving party. A typical order in limine excludes the challenged evidence and directs counsel, parties, and witnesses not to refer to the excluded matters during trial. [Citation.] 'The advantage of such motions is to avoid the obviously futile attempt to "unring the bell" in the event a motion to strike is granted in the proceedings before the jury.' " ' " (Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1594, italics omitted.)
"In spite of the obvious drawbacks to the use of in limine motions to dispose of a claim, trial courts do have the inherent power to use them in this way. [Citations.] Courts have inherent power, separate from any statutory authority, to control the litigation before them, and to adopt any suitable method of practice, even if the method is not specified by statute or by the Rules of Court. [Citations.] But when the trial court utilizes the in limine process to dispose of a case or cause of action for evidentiary reasons, we review the result as we would the grant of a motion for nonsuit after opening statement, keeping in mind that the grant of such a motion is not favored, that a key consideration is that the nonmoving party has had a full and fair opportunity to state all the facts in its favor, and that all inferences and conflicts in the evidence must be viewed most favorably to the nonmoving party." (Amtower v. Photon Dynamics, Inc., supra,158 Cal.App.4th at p. 1595.)
The Nelsons contend the court erred by granting the motion in limine on the ground Steven's alleged oral agreement to forgive the Nelsons' $500,000 obligation under the promissory note was made during settlement negotiations. The Nelsons, however, do not even address the trial court's alternative finding that evidence of the oral agreement is inadmissible because of Maureen's lack of consent to forgive the $500,000 debt. Accordingly, they have abandoned or waived appellate review of the consent issue. (People v. Zamudio (2008) 43 Cal.4th 327, 353-354; see also Hambrose Reserve, Ltd. v. Faitz (1992) 9 Cal.App.4th 129, 133 [failure to address additional grounds on which court ruling may be upheld is waiver], overruled on another point in Trope v. Katz (1995) 11 Cal.4th 274, 277.)
Even without waiver, the Nelsons' contention lacks merit. Maureen was a party to the promissory note, and it is undisputed that she did not authorize her husband to relinquish her rights to repayment of the $500,000. " '[I]t is well established that an agency cannot be implied from the marriage relationship alone.' " (Flores v. Evergreen at San Diego, LLC (2007) 148 Cal.App.4th 581, 589.) While " 'much less evidence is required to establish a principal and agent relationship between husband and wife than between nonspouses' " (ibid.), the Nelsons submitted no evidence of an agency relationship. The court properly granted the motion in limine, even though it was dispositive in nature, because any oral agreement by Steven to modify the promissory note was ineffective. The court gave the Nelsons a full and fair opportunity to present evidence or an offer of proof, but given Maureen's undisputed lack of consent they could not prevail as a matter of law. (See Amtower v. Photon Dynamics, Inc., supra,158 Cal.App.4th at p. 1595.)
B
Although the above discussion is dispositive, we also note the Nelsons ignore that the promissory note provides, "This Note may not be terminated or amended orally, but only by a termination or amendment in writing signed by Payee." "A contract must be interpreted to give effect to the mutual, expressed intention of the parties. Where the parties have reduced their agreement to writing, their mutual intention is to be determined, whenever possible, from the language of the writing alone." (Ben-Zvi v. Edmar Co. (1995) 40 Cal.App.4th 468, 473.) The parties unambiguously agreed that any modification of the contract had to be in writing, and thus evidence of Steven's oral agreement was inadmissible on this alternative ground.
Further, in their opening brief the Nelsons ignore Civil Code section 1698, subdivision (a), which provides that a "contract in writing may be modified by a contract in writing," and subdivision (b), which provides a "contract in writing may be modified by an oral agreement to the extent that the oral agreement is executed by the parties." (See also Civ. Code, § 1541 ["An obligation is extinguished by a release therefrom given to the debtor by the creditor, upon a new consideration, or in writing, with or without new consideration."].) In their reply brief, they contend that Civil Code section 1698 is inapplicable because Steven and Gregory entered into a new separate oral contract, rather than an attempted oral modification of the promissory note. The assertion is meritless. Again, the Nelsons' cross-complaint alleged the men "orally agreed... to nullify, rescind, negate and cancel the $500,000 promissory note made in November 2005." An oral agreement to extinguish an important provision of a written contract cannot be reasonably characterized as a separate agreement to avoid Civil Code section 1698.
Although motions in limine should be granted sparingly when they are dispositive of a party's cause of action, the court's ruling here was correct. Contrary to the Nelsons' repeated assertions, there were simply no factual issues for a jury to determine on the oral contract issue.
Given our holding on legal issues, we are not required to address Evidence Code sections 1152 and 1154.
II
Leave to Amend
Additionally, the Nelsons contend the court improperly denied their motion for leave to amend their answer to the complaint to conform to proof at trial and allege the parties' mutual mistake of fact in entering into the promissory note. The Nelsons assert the "mistake that could have occurred concerned the valuation of the inventory of LJC."
" 'Leave to amend a complaint is... entrusted to the sound discretion of the trial court. "... The exercise of that discretion will not be disturbed on appeal absent a clear showing of abuse. More importantly, the discretion to be exercised is that of the trial court, not that of the reviewing court. Thus, even if the reviewing court might have ruled otherwise in the first instance, the trial court's order will yet not be reversed unless, as a matter of law, it is not supported by the record." ' " (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242; Code Civ. Proc., § 473, subd. (a)(1).)
Amendments to conform to proof "have been allowed with great liberality 'and no abuse of discretion is shown unless by permitting the amendment new and substantially different issues are introduced in the case or the rights of the adverse party prejudiced [citation].' " (Trafton v. Youngblood (1968) 69 Cal.2d 17, 31.) " '[A]mendments of pleadings to conform to the proofs should not be allowed when they raise new issues not included in the original pleadings and upon which the adverse party had no opportunity to defend. [Citations.]' " (Ibid.)
" 'Consent is not mutual, unless the parties all agree upon the same thing in the same sense.' [Citation.] 'If both parties are mistaken, and neither is at fault or both are equally to blame, the mistake may prevent formation of the contract.' " (Balistreri v. Nevada Livestock Production Credit Assn. (1989) 214 Cal.App.3d 635, 641-642; Civ. Code, § 1577 [definition of mistake of fact].) A party alleging mutual mistake must establish " 'facts showing how the mistake was made, whose mistake it was, and what brought it about, so that the mutuality may appear.' " (Totten v. Underwriters at Lloyd's London Subscribing Certificate E.B. 4102 et al. (1959) 176 Cal.App.2d 440, 448.)
The Nelsons cite Gregory's testimony that he "came unglued" when he learned that a substantial portion of LJC's inventory was obsolete. Even if Gregory was unaware of the true value of LJC's inventory, however, the Nelsons point to no evidence that suggests Steven was mistaken as to its value. Rather, they merely rely on his testimony that Gregory had access to LJC's accounts and its bookkeeper, and "[w]hatever choice he made, that's the choice for [him]. And at some point you have to stand up for what you do." This testimony does not show any mutual mistake. Steven also testified that LJC was "at the far extreme of being very meticulous of the inventory" because "[y]ou want to know exactly where you stand financially. In a business[]like this, where assets are your inventory and your receivables. You just need to make sure that you know exactly what you have." Steven went on to explain how he kept track of the inventory. He also explained that LJC's bookkeeper was "extremely meticulous" and "the pennies would balance out in both inventory and the accounting." The Nelsons do not meet their burden of showing evidence to support a mutual mistake of fact theory.
Further, the Nelsons do not address the lateness of their motion for leave to amend, or the prejudice to the Cades in being deprived of the opportunity to present evidence on the mutual mistake of fact theory. In denying the motion, the court noted the Nelsons presented the theory to the jury that Steven made inadequate disclosures about the inventory, and "that's the way the instructions are framed." Under the circumstances, we find no abuse of discretion.
DISPOSITION
The judgment is affirmed. The Respondents are entitled to costs on appeal.
WE CONCUR: BENKE, J., NARES, J.