Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 30-2008-00111817, Derek W. Hunt, Judge.
Richard D. Rome for Defendants and Appellants.
Law Offices of Michael J. Buley and Michael J. Buley for Plaintiffs and Respondents.
OPINION
BEDSWORTH, ACTING P. J.
Perry Johnson and Pacific Coast Fast Foods, Inc, doing business as Fatburger (collectively Johnson), entered into an agreement to sell two Fatburger franchises to Brett Cueva and Thuan Nguyen, for a total of $900,000. Things did not go well. After Cueva and Nguyen had paid $450,000 of the purchase price, they ultimately lost both franchises. Cueva and Nguyen sued Johnson, claiming he had fraudulently induced the sale agreement, and breached his obligations thereunder. Johnson cross-complained, alleging Cueva and Nguyen had breached their obligation to pay the balance of the sale price.
Although Two Worlds, Inc., is the first named plaintiff in the complaint, and is listed as a respondent on appeal, the judgment appealed from was entered solely in favor of Cueva and Nguyen, as individuals. No judgment was entered in favor of Two Worlds. There is some dispute in the record as to whether Two Worlds was actually a party to the franchise sale agreement. For our purposes, the distinctions between Cueva, Nguyen and Two Worlds are immaterial, and we refer to all of them, collectively, as Cueva and Nguyen.
The jury returned a verdict in favor of Cueva and Nguyen, and Johnson appeals from the ensuing judgment. He contends the court erred by: (1) refusing to allow him to introduce evidence concerning Cueva and Nguyen’s allegedly sub-par operation of the franchises, and regarding the “downturn of the economy, ” after it denied a motion in limine to exclude such evidence; and (2) allowing Cueva and Nguyen to seek recovery of their second payment of $200,000 on a fraud theory, even though the recovery of that payment was not pled as part of the fraud cause of action.
Johnson also contends the evidence was insufficient to support Cueva and Nguyen’s recovery on a fraud claim, since they offered no evidence the franchises were worth less than the sale price at the time of purchase, and failed to prove his allegedly fraudulent representations about the franchises’ past revenues and profits were untrue. Finally, Johnson contends the evidence was insufficient to support Cueva and Nguyen’s breach of contract claim, and the jury should instead have found in his favor on the breach of contract cause of action and common counts alleged in the cross-complaint.
We affirm. With respect to the alleged refusal to admit Johnson’s proffered evidence, we first note the court never denied an in limine motion to exclude evidence of how Cueva and Nguyen operated the franchises. The motion Johnson refers to sought to exclude his evidence relating to how a subsequent owner was operating one of the franchises. But even if the motion were as described by Johnson, the court’s denial, which was without prejudice, is certainly no guarantee the evidence in question would be admitted. And finally, the court made clear from the beginning that it would consider admitting the evidence Johnson sought to rely upon in the “damages” phase of the trial. Johnson, however, declined to offer it when given that opportunity.
Johnson’s claim the court erred by allowing Cueva and Nguyen to seek recovery of the second payment they made to Johnson, in the amount of $200,000, as part of their fraud claim is likewise unpersuasive. As Cueva and Nguyen point out, the allegation of that payment was explicitly incorporated into their fraud cause of action. What Cueva and Nguyen did not allege, however, were the specific misrepresentations (different from those which allegedly induced their first payment) which induced them to make that second payment. Nonetheless, the court did not err in allowing Cueva and Nguyen to amend their complaint to conform to proof at trial, because Johnson was neither surprised by the unpleaded allegation nor prejudiced by the amendment.
Johnson’s contention the evidence was insufficient to demonstrate either that the alleged representations he made to induce Cueva and Nguyen to purchase the franchises were untrue, or that the franchises were actually worth less than the sale price at the time of purchase, also fails. There was evidence that Johnson himself viewed the Riverside franchise as only a “break even” store at the time he decided to sell it, and that the West Covina franchise was considered profitable only because there was no debt owed on it. Johnson also testified he chose to sell those two franchises to Cueva and Nguyen specifically because they were not as profitable as his Aliso Viejo and Brea franchises. Combined with other evidence suggesting the franchises’ sales were actually in a “two-year downward trend” and that they were viewed by the franchisor as being in a “severe turn-around situation, ” at the time Johnson made his rosy financial representations to Cueva and Nguyen, this was a sufficient basis for the jury to conclude those representations were untrue.
And the jury could reasonably infer from the discrepancies between Johnson’s representations about the franchises’ financial performance, and their true performance, that they were worth substantially less than the price paid by Cueva and Nguyen. Moreover, the subsequent price paid by a third party for one of the franchises, and the fact the other was later transferred back to the franchisor for $1, also provided a basis for the jurors to infer the franchises were in fact worth those amounts, rather than the significantly higher price Cueva and Nguyen were induced to pay, at the time they agreed to purchase them.
Finally, Johnson’s challenge to the sufficiency of the evidence supporting Cueva and Nguyen’s breach of contract claim is moot. As he acknowledges in his brief, the court determined the jury could award damages for fraud only, and not for breach of contract as well, and thus the jury awarded no damages for that breach of contract. As for Johnson’s own claim for breach of contract contained in his cross-complaint, he advances no distinct arguments. He simply claims the judgment against him on the cross-complaint should be reversed for essentially the same reasons the judgment in favor of Cueva and Nguyen on the main complaint should be reversed. We found those reasons unpersuasive.
Johnson does suggest, in a single sentence, that “with respect to the common counts, the defendants advanced royalties and advertising they should have been reimbursed for, and the jury decision in this regard was erroneous.” That is an insufficient effort to warrant review of the issue, and the claim is deemed waived.
FACTS
In 2003, Johnson was the owner of five Fatburger franchises, including one in Riverside and one in West Covina. Johnson became acquainted with Cueva in 2002, and with Nguyen (who was already a friend of Cueva’s) in 2003. Cueva and Nguyen became interested in owning a Fatburger franchise, and entered into discussions with Johnson about purchasing one or more of his.
As part of those discussions, Johnson told Cueva and Nguyen that the Riverside and West Covina franchises, together, grossed $1.5 million per year, and averaged a 10 percent profit – meaning they realized a profit of $150,000 per year. However, at the same time Johnson was making those representations, Fatburger, North America, Inc., the franchisor, had determined that sales at all five of Johnson’s franchises were “in a two year downtrend, ” and the franchises were in a “severe turnaround situation.” It expressed concern that “unless drastic operational changes are implemented” at Johnson’s franchises, he might be forced to sell them “by Franchise agreement default.” Moreover, Johnson himself later acknowledged he had chosen to sell Cueva and Nguyen the Riverside and West Covina franchises, rather than his Aliso Viejo and Brea franchises, specifically because they were less profitable than the others.
Johnson, however, simply denied having made any representations to Cueva and Nguyen about either the revenues or the profit margins for the Riverside and West Covina franchises. His position was that Cueva and Johnson had entered into the agreement to purchase the franchises, for a total price of $900,000, without obtaining any assurances from him about the past financial performance of the franchises.
In late 2004, the parties entered into an oral agreement by which Cueva and Nguyen would purchase the two franchises. The $900,000 purchase price was to be paid $250,000 up front, with the balance due in one year. In November of 2004, Cueva and Nguyen made the initial payment, and in March of 2005, the final written agreement for sale of the franchises was executed.
The parties’ agreement specified that the sale of the franchises was contingent on the approval of the franchisor. Although Johnson testified approval was obtained in October of 2005, his claim was contradicted by testimony from representatives of the franchisor.
Apparently, the most significant problem with franchisor approval was that the franchisor required Cueva and Nguyen to undergo a six-week training process as part of the process of being approved as franchise owners. Cueva and Nguyen, however, had regular full-time jobs that did not allow them to take off that much time. They had planned to run the franchises as Johnson had, by employing full-time managers. Johnson assured them that, under those circumstances, Fatburger North America would not actually require them to undergo the rigorous six-week training process. Cueva and Nguyen relied upon what they believed to be Johnson’s positive relationship with the franchisor, and his ability to “smooth things over.”
It was in October of 2005, nearly a year after Cueva and Nguyen made their initial payment, that they finally took possession of the two franchises. Shortly before taking possession, they received profit and loss statements for the franchises from Johnson (who had continued to operate the franchises in the interim), reflecting the performance of each since the beginning of 2005. Those statements showed total revenues for the franchises that were lower than what Johnson had represented as part of his inducement of the sale, but net profits (as a percentage of revenues) that were actually higher. According to these statements, the Riverside franchise had only $308,363 in total revenue for the eight months starting in January of 2005 (approximately $463,000 on an annualized basis) but was netting over 13 percent of those revenues as profit, while the West Covina franchise had $378,539 in revenues (approximately $565,000 on an annualized basis) but was netting over 15 percent of those revenues as profit. Cueva and Nguyen consulted with a couple of other experienced businessmen about the information contained on the statements, and both told them that if those numbers were accurate, the purchase of the franchises would provide a reasonably good return on their investment.
In his testimony, Johnson denied any recollection of ever providing Cueva and Nguyen with these profit and loss statements.
However, profit and loss statements for the two franchises during that same period in 2005, prepared by Johnson at the same time as those given to Cueva and Nguyen, but sent to Fatburger North America, Inc., reflect a significantly less rosy financial picture for each franchise.
According to those statements, the revenues for the franchises were the same as represented by Johnson in the statements he had provided to Cueva and Nguyen (which were still significantly less than what he had portrayed prior to the sale) but the Riverside franchise was actually netting only about 4.5 percent of revenues as profit, while the West Covina franchise was netting less than 1 percent of revenues as profit. It was only after they had taken possession of the two franchises, that Cueva and Nguyen learned they “weren’t making money.” Cueva and Nguyen went back to Johnson and laid out the financial data as they then understood it, and told him they were “reticent about paying any more money.” At that point, the parties began discussing the possibility of “wrap[ping] these two struggling franchises in with [Johnson’s] two successful franchises, Aliso and Brea.” Johnson told Cueva and Nguyen that “we would take these two businesses and try to make them healthier and join forces with the Aliso Viejo and the Brea stores, which were his flagship stores, the most profitable stores.” And that’s when the parties began discussing the formation of a new venture, “Three Worlds, ” through which they would own all of the stores equally. Based upon Johnson’s representation that he would join their unprofitable franchise with his profitable ones, Cueva and Nguyen paid Johnson an additional $200,000 toward the purchase of their franchises in May of 2006.
After Cueva and Nguyen paid the additional money, Johnson took no steps to form the Three Worlds venture. He later denied any intention of doing so, explaining that “I never really saw anything that made sense. Why would I take two stores that I ultimately sold for 600 thousand and 650 thousand and incorporate them into one store that sold for a dollar and another store that sold for a hundred and sixty-five thousand?”
And ultimately, that is what happened to the two franchises Johnson sold to Cueva and Nguyen. In 2007, the Riverside franchise was taken back by Johnson, who then re-sold it to a third party for approximately $160,000, the amount of an SBA loan Johnson still owed on that franchise. Johnson tried to find a buyer for the West Covina franchise as well, but was unsuccessful. Cueva and Nguyen informed him they would not be able to continue running it, and that he would either have to resume its operation, or allow the franchisor the opportunity to take it over. Ultimately, in 2008, the franchisor took back the West Covina franchise for the nominal price of $1.
In the wake of this unsuccessful business venture, Cueva and Nguyen sued Johnson for breach of contract and fraud, alleging that Johnson failed to satisfy the contract’s requirement that he obtain the franchisor’s approval of the sale, and that he had fraudulently induced the agreement by making false promises regarding both the gross revenues and profitability of the franchises. Although the second amended complaint mentions both the initial payment of $250,000, and the subsequent payment of $200,000, and incorporates both into its fraud cause of action, it does not allege anything about Johnson’s representations concerning the formation of the “Three Worlds” joint venture, just prior to the latter payment.
Johnson filed a cross-complaint alleging causes of action for breach of contract and common counts, seeking payment of the balance of the purchase price of the franchises, and reimbursement of certain costs he had advanced in connection with the franchises.
Just prior to the commencement of trial, Johnson filed a trial brief, in which he argued, among other things, that Cueva and Johnson should not be allowed to introduce any evidence regarding the possible formation of the Three Worlds venture. According to Johnson’s brief, the parties “had numerous discussions and written communications, particularly e-mail communications, concerning an attempt to settle the issues that are stated in the pleadings in this case.” (Italics added.) Johnson contended that all evidence regarding the parties “negotiations, ” including eleven documents he identified by reference to the numbers assigned to them as potential trial exhibits, should be excluded on the basis that they evidenced settlement negotiations.
Just prior to the commencement of trial, the court explained to the parties that it intended to “semi-bifurcate” the trial, meaning it wanted the parties to present only the evidence pertaining to “whether there was a breach, whether there was fraud or whether there was a loan.” In that way, the jury could “focus on breach and fraud first, to sort that out.” The court explained that it didn’t like to “tie up the trial” unnecessarily with evidence concerning money “when it turns out that the [defendant] didn’t do anything wrong.” Once the jury heard all the evidence concerning the alleged wrongdoing, then the court would “put them in the jury room and get a reading on the breach and tort claims. And then depending on how they come back... we can resume with the evidence about ‘this is how much we owe, ’ and things like that.”
No one objected to this “semi-bifurcation” idea.
The court then proceeded to Cueva and Nguyen’s motions in limine. The first motion asked the court to prevent Johnson from offering any evidence regarding “the operations or financial status of either the Riverside or West Covina stores for any period beyond the time the stores were owned or allegedly owned by the parties to this action.” The second motion asked the court to prevent Johnson from offering any evidence “related to [his] sale of the Aliso Viejo or Brea Restaurants.”
With respect to the first motion in limine, the court stated it was unclear about the purpose of the evidence sought to be excluded, and how it pertained to the fraud and breach of contract claims alleged by Cueva and Nguyen. Johnson’s counsel explained that while Johnson believed Cueva and Nguyen were claiming their business failed because of his fraud, he sought to claim instead that the business failed for other reasons not related to any alleged fraud. The court then noted that such an argument would pertain to damages, rather than liability: “I think it is a damages question more than a liability question.... [I]f the business had been a gigantic success they would say – they wouldn’t care that they had been defrauded into doing it. But it’s the damage question that I think that subject touches on. I think it’s a damages question. I think it’s a phase two question.”
Cueva and Nguyen’s counsel claimed, however, that their theory of liability had nothing to do with why the business ultimately failed or succeeded. Their contention was that, absent Johnson’s fraud, they would never have purchased the stores in the first place, and thus would not have even been exposed to the risk that the businesses would fail.
Johnson’s counsel argued the point, noting there would be a “spill-over” between liability and damages, to which the court responded “It can’t be helped.” The court then agreed that Johnson should have a right to defend against the claims Cueva and Nguyen made, and ruled that the motions would be denied without prejudice. The court told the parties “[w]e’ll do it a question at a time.”
The court also denied the second motion in limine without prejudice, explaining that while the assertion that other Fatburger franchises, in other locations, were operating at a profit “doesn’t seem very relevant, ” it wasn’t prepared to decide, at the outset of trial, that no such evidence would be admitted. Then, after reiterating that both motions in limine were denied without prejudice, the court warned both parties to “just stay on duty.”
Cueva and Nguyen’s counsel asked the court about amending the complaint “to conform to proof, ” explaining that Johnson had objected to evidence of the Three Worlds venture in his trial brief, and Cueva and Nguyen wanted to make sure they could include that evidence in their case. The court explained that amending the complaint to conform to proof had to wait until the proof was in evidence.
Cueva later testified, without objection, to the fact he and Nguyen had made their second payment of $200,000 only after Johnson had told them the parties “would take these two businesses and try to make them healthier and join forces with the Aliso Viejo and the Brea stores, which were his flagship stores, the most profitable stores.” Cueva testified that they did it “because I still trusted him. [Nguyen] tried to convince me not to pay him the money, and I won that argument, unfortunately.”
Ultimately, the trial court ruled that in light of “the way the evidence emerged, ” it would allow the claim for fraud based upon the promised “Three Worlds” venture to go to the jury.
During the course of the initial “liability” phase of trial, Johnson sought on several occasions to question Cueva and Nguyen about the way in which they operated the franchises. These questions were designed to elicit evidence that any lack of profits or success Cueva and Nguyen experienced while running the franchises were due to their own mistakes and misjudgments, rather than any inherent problems with the franchises. The court sustained objections to those efforts on a consistent basis. The court repeatedly noted that while such evidence “may have some value at a later time[, ] it does not now.”
After the close of the liability phase, the jury returned a verdict in favor of Cueva and Nguyen, finding that Johnson induced both their initial $250,000 payment and their subsequent $200,000 payment by fraud, and that Johnson also materially breached the franchise sale agreement by failing to obtain the franchisor’s approval of the transaction. The jury rejected Johnson’s breach of contract claim against Cueva and Nguyen.
Apparently, Johnson’s cross claim for common counts was “postponed” to the second phase of the trial. The jury ultimately rejected that claim as well.
Because the jury found in favor of Cueva and Nguyen on both fraud and breach of contract theories, and the court determined they could not “double up on damages, ” it suggested that “there would be no purpose in going forward to this jury on phase 2 with contract damages.” Counsel for Cueva and Nguyen agreed. Consequently, the jury was asked to consider damages in favor of Cueva and Nguyen on the basis of fraud only.
After the jury returned that initial verdict, Johnson’s counsel asked the court about bringing in evidence about the allegedly inadequate manner in which Cueva and Nguyen ran the franchises after they took over. The court responded by explaining that “you heard me say in phase 1 that the subsequent operation of the stores and their subsequent lack of profitability, and things like that, were unrelated to the alleged fraudulent misrepresentation about how the stores had operated in the past, and that, I would persist in saying. [¶] If the [plaintiffs] ran the stores into the ground at a later time, that is not attributable against their having suffered, as the jury found it, a fraud from an earlier period. [¶] So again, ... if you want to call this [witness], I would need a very specific offer of proof and I would have to go through it to see whether or not it really pertains to anything that I see as the consequent damages in this case.”
When Johnson’s counsel complained that the court said in the initial phase of the trial that the evidence went to damages only, and now seemed to be saying it would now be ruled inadmissible for “some other reason.” The court then acknowledged that it was having trouble seeing the evidence as relevant to anything, because the “subsequent performance of the store is not relevant to the representation about whether or not they were profitable at [an earlier] period of time.”
When the trial next convened, the court asked counsel for Johnson if he had an offer of proof regarding the evidence he wanted to submit concerning Cueva and Nguyen’s operation of the franchises, and how that related to their damage claims. Counsel stated that he would be making no offer of proof, because he had “considered the question further... and determined that... we should have been allowed to produce evidence in phase 1. But the evidence now that I would have submitted, given the jury instructions in phase 2, does not make any sense.”
The case then proceeded with the evidence that was offered in phase 2, and the jury returned a verdict awarding Cueva and Nguyen each $167,584 in connection with their first payment of $250,000, and awarding them each $116,368 in connection with their second payment of $200,000.
I
Johnson’s first contention is that the court erred by refusing to let him put on evidence concerning the allegedly poor manner in which Cueva and Nguyen operated the franchises after taking them over, which he argues is the real reason (along with a declining economy) those franchises proved unprofitable for them. Johnson suggests the court, in essence, misled him by denying Cueva and Nguyen’s motion in limine to exclude this evidence, and that he relied on that denial by highlighting the issue in his opening statement. Johnson claims the court then reversed its position and refused to let him introduce the evidence he promised the jury, which was highly prejudicial, since it “derail[ed] the defense case from the outset, and undermined its validity.” There are several problems with this argument.
First, and perhaps most significant, the motion in limine denied by the court had nothing to do with the evidence Johnson complains about here. That motion sought to exclude evidence of how the franchises were run in the period after Cueva and Nguyen no longer owned them. Specifically, the motion sought to exclude evidence “regarding the operations or financial status of either [of the franchises] for any period beyond the time [they] were owned or allegedly owned by the parties to this action.” (Italics added.) The denial of that motion simply could not have misled Johnson about the likely admissibility of evidence pertaining to how Cueva and Nguyen operated the franchises.
Second, even if the motion could be construed as some sort of evidentiary “bellwether, ” we note it was denied without prejudice. In other words, the court made clear, in its denial, that no final decisions were being made. There was simply nothing Johnson could “rely” upon in deciding how to proceed with his case.
Third, the court made it clear, from the beginning, that it intended to split the trial into two phases – a liability phase which would focus only on whether Johnson (and in the case of the cross-complaint, Cueva and Nguyen) committed the misconduct alleged, and then, if necessary, a damages phase – and that evidence of how Cueva and Nguyen operated the franchises would be relevant, if at all, in the damages phase. Johnson never objected to the bifurcation idea in the trial court, and has consequently waived any right to do so now. “As a general rule, a party is precluded from urging on appeal any point not raised in the trial court. (Parker v. City of Fountain Valley (1981) 127 Cal.App.3d 99, 117.) Any other rule would ‘“‘permit a party to play fast and loose with the administration of justice by deliberately standing by without making an objection of which he is aware and thereby permitting the proceedings to go to a conclusion which he may acquiesce in, if favorable, and which he may avoid, if not.’” [Citations.]’ (In re Christian J. (1984) 155 Cal.App.3d 276, 279.)” (In re Riva M. (1991) 235 Cal.App.3d 403, 411-412.)
Moreover, we discern no error in the court’s determination that the evidence relating to how Cueva and Nguyen operated the franchises was not relevant to the issue of liability – the only issue to be adjudicated in the first phase of the trial. “The trial court is ‘vested with broad discretion in ruling on the admissibility of evidence.’ (Smith v. Brown-Forman Distillers Corp. (1987) 196 Cal.App.3d 503, 519.) ‘[T]he court’s ruling will be upset only if there is a clear showing of an abuse of discretion.’ (Id., at p. 520.) ‘“The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.” [Citation.]’ (Walker v. Superior Court (1991) 53 Cal.3d 257, 272.)” (Tudor Ranches, Inc. v. State Comp. Ins. Fund (1998) 65 Cal.App.4th 1422, 1431.)
The court explained that its bifurcation of the trial meant that in the initial phase, the evidence would focus on “whether or not [Cueva and Nguyen were] defrauded, ” or whether it “became a contract breach.” When Johnson’s counsel later expressed frustration about the manner in which the court was distinguishing between liability and damages, the court explained that evidence of how the franchises were operated after Cueva and Nguyen took them over was not relevant to determining whether they were defrauded, because the “fraud question about how the business was doing is a retrospective question, not a... going forward question.... [a]nd the fraud supposedly was that these plaintiffs were told in the past this thing was a gold mine.... The spotlight has to be focused on the accuracy of the representation . . . .” (Italics added.)
The court’s analysis is sound. Because the initial “liability” phase of Cueva and Nguyen’s fraud claims was to focus solely on “whether or not [Cueva and Nguyen were] defrauded, ” the only issues to be determined were (1) whether Johnson made certain factual representations he knew to be untrue, or made promises he had no intention of keeping, as a means of inducing Cueva and Nguyen to part with money they would not otherwise have parted with; and (2) whether Cueva and Nguyen relied upon those representations and/or promises in deciding to part with the money. Once the jury determined that both those things were true, Johnson would be “liable” for fraud, and obligated to pay whatever damages Cueva and Nguyen suffered as a result of that fraud. And for purposes of determining those issues, the evidence of how Cueva and Nguyen operated the franchises, whether good or bad, was irrelevant.
The facts necessary to establish Johnson’s liability for breach of contract would, of course, be somewhat different, but since the judgment ultimately entered in this case was based solely on the fraud claims, we need not discuss it in detail. It is sufficient to note that allegations concerning Cueva and Nguyen’s operation of the franchises are not relevant to the issues of whether Johnson misrepresented, was obligated to obtain the franchisor’s approval of the sale, or actually did so.
However, during the subsequent damages phase, Johnson could seek to demonstrate that Cueva and Nguyen actually suffered very little or no damages as a result of his fraud, because, despite whatever misrepresentations or false promises he might have made to induce the sale or subsequent payment, the franchises were in fact worth at least as much at the time of sale as the price Cueva and Nguyen paid for them. “One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction....” (Civ. Code, § 3343, subd. (a).) That is the point where evidence of Cueva and Nguyen’s own alleged mismanagement of the franchises – as an alternate explanation of their failure – might have been relevant.
However – and this is the fourth problem with Johnson’s evidentiary exclusion argument – it was Johnson himself who declined to offer the evidence in the damages phase of the trial. Although the court expressed some skepticism about the relevancy of his evidence, even in the damages phase of the trial, the court did not exclude it. Instead, it directed Johnson to make a detailed offer of proof to explain why the evidence should be admitted. After considering the matter, he declined to do so.
“To preserve an evidentiary ruling for appellate review, the proponent of the evidence must make an offer of proof regarding the anticipated testimony. [Citation.] The offer of proof must address the ‘substance, purpose, and relevance of the excluded evidence’ (Evid. Code, § 354, subd. (a)), and must set forth the actual evidence to be produced and not merely the facts or issues to be addressed and argued [citation]. The trial court may reject a general or vague offer of proof that does not specify the testimony to be offered by the proposed witness. [Citations.]” (People v. Carlin (2007) 150 Cal.App.4th 322, 334.) Because Johnson refused to make an offer of proof, he waived any claim of error based on the alleged exclusion of the evidence.
For the foregoing reasons, Johnson has failed to establish that the court’s alleged exclusion of evidence pertaining to the manner in which Cueva and Nguyen operated the Fatburger franchises he sold to them warrants a reversal of the judgment in this case.
II
Johnson next asserts the court erred by allowing Cueva and Nguyen to amend their complaint to conform to proof at trial, adding in an additional allegation he made false promises about creating a shared business venture as a means of inducing their second payment of $200,000 to him in May of 2006.
We start with the proposition that “leave to amend a complaint is entrusted to the sound discretion of the trial court, and ‘“‘[t]he exercise of that discretion will not be disturbed on appeal absent a clear showing of abuse.’”’ (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.)” (Garcia v. Roberts (2009) 173 Cal.App.4th 900, 909.) The amendment of pleadings to conform to proof at trial is specifically governed by Code of Civil Procedure section 469, which provides: “No variance between the allegation in a pleading and the proof is to be deemed material, unless it has actually misled the adverse party to his prejudice in maintaining his action or defense upon the merits. Whenever it appears that a party has been so misled, the court may order the pleading to be amended, upon such terms as may be just.”
According to Johnson, he specifically objected in his trial brief to Cueva and Nguyen pursuing any claim that their second $200,000 payment to him had been induced by his promise that they would join their respective franchises together in a venture known as Three Worlds, on the basis that “it was not pleaded as part of the fraud cause of action.” However, just as he did with the motion in limine, the denial of which he claimed had been misleading, Johnson has also mischaracterized the content of his trial brief.
While Johnson’s trial brief did include an objection to the admission of any evidence concerning the alleged promise to form the Three Worlds venture, the basis of that objection was that the discussions had been part of settlement negotiations, and that such negotiations were inadmissible as proof of liability pursuant to Evidence Code § 1152.. Johnson did not claim, as he now asserts, that the evidence should be excluded as pertaining to facts not alleged in the complaint.
That assertion, whatever merit it might have had, was not pursued at trial, and Johnson does not renew it on appeal. We consequently need not consider it.
But to be clear, the allegation in question – that Cueva and Nguyen’s second payment of $200,000 to Johnson had been induced by the false promise to form a Three Worlds venture, which would combine their franchises with the more successful ones that Johnson still owned – was not pleaded in the complaint. And Johnson therefore had a valid basis to object to such evidence on that ground. Two problems exist, however: First, Johnson did not actually interpose that objection. Although both Cueva and Nguyen testified that Johnson had made such promises, which prompted them to make the second payment when they were otherwise unwilling to do so, Johnson neither objected to the questions which elicited the information, nor moved to strike the answers. Thus, both Cueva and Nguyen’s testimony on the point was in evidence.
The second problem is that Johnson has made no showing that such an objection actually should have been sustained. As Code of Civil Procedure section 469 explicitly states, a variance between the pleading and the proof is “deemed material” only when “it has actually misled the adverse party to his prejudice in maintaining his action or defense upon the merits.” (Italics added.)
And in this case, Johnson doesn’t actually claim to have been misled. Cueva and Nguyen contended at trial that the issue of the promised Three Worlds venture had been addressed during discovery, and Johnson did not dispute that. Moreover, the very fact that Johnson addressed the issue in his trial brief, and included therein a specific listing of the trial exhibits pertaining to it which he sought to have excluded from trial, is strong evidence that neither the contention, nor the specific evidence Cueva and Nguyen sought to rely upon in connection with it, was exactly a surprise to him. So under these circumstances, the court might reasonably have concluded the variance between the allegations of the complaint, and Cueva and Nguyen’s testimony regarding the Three Worlds venture, was not a “material” variance, and allowed the testimony to be admitted over objection.
And finally, even if the court did view the evidence as representing a material variance from the allegations of the complaint, it still retained the discretion to “order the pleading to be amended, upon such terms as may be just.” (Code Civ. Proc., § 469.) Here again, Johnson fails to explain how the court’s decision to allow the amendment was unjust.
To be sure, Johnson does claim the decision to allow the amendment was prejudicial. (See Garcia v. Roberts, supra, 173 Cal.App.4th at p. 912 [“if a proposed amendment during trial is prejudicial to the opposing party, it is reversible error to grant leave to amend to conform to proof”]), but his assertion is entirely abstract and conclusory: i.e., he simply claims “it is prejudicial for a whole new theory to be thrust upon a party as the case is heading to trial.” Although Johnson also complains that “[t]he defense is entitled to be on notice of the claims against it, so it can prepare for trial, ” he nowhere actually claims that he was not “on notice” of the “Three Worlds” claim at the time he was preparing for trial. The content of his trial brief certainly suggests he was.
Nor does Johnson suggest how he might have prepared for trial differently if Cueva and Nguyen had formally amended their complaint to include the claim at an earlier point. As explained in City of Stanton v. Cox (1989) 207 Cal.App.3d 1557, 1563, the last-minute alteration in the factual claims made by a plaintiff is often prejudicial “because of the inability of the other party to investigate the validity of the factual allegations while engaged in trial or to call rebuttal witnesses.” But in this case, Johnson himself was the person who allegedly made the “Three Worlds” promises at issue, and thus he is uniquely qualified to speak to their validity. Johnson was given the opportunity to, and did, address the issue in his testimony. And there is no indication that any additional “rebuttal” witnesses even existed.
By contrast to Johnson’s generic claim of prejudice in this case, the defendants in Garcia v. Roberts, supra, 173 Cal.App.4th at p. 913, detailed exactly how plaintiff’s altered claim had interfered with their ability to defend the case: “As defendants point out, a number of significant factual issues that specifically related to the lease-option agreement were not pursued in plaintiff’s deposition or in other discovery, since it became unnecessary to do so in light of what plaintiff asserted under oath at his deposition.... Indeed, since plaintiff denied knowledge of the lease-option agreement, the pursuit of discovery from plaintiff on that subject could reasonably go no further.” We cannot just presume it’s prejudicial to a defendant – and thus, unjust – every time a trial court allows an unpleaded factual allegation to be added into a plaintiff’s case at trial. The determination of prejudice must be based on the specific circumstances of the case. Generally, we are obligated to presume that the trial court’s decisions, even if erroneous, are not prejudicial unless an affirmative showing of prejudice is made by the appellant. “The burden is on the appellant in every case to show that the claimed error is prejudicial; i.e., that it has resulted in a miscarriage of justice.” (Cucinella v. Weston Biscuit Co. (1954) 42 Cal.2d 71, 82.) No such showing of prejudice was made by Johnson here, and thus we cannot conclude the court’s decision to allow Cueva and Nguyen to amend their pleading to conform to the proof adduced at trial regarding Johnson’s false promises to form a Three Worlds venture with them was actually unjust. We consequently find no error in the decision.
III
Johnson also claims the evidence was insufficient to demonstrate either that his representations about the franchises’ revenues and profitability were untrue, or that the franchises were actually worth anything less than the sale price paid by Cueva and Nguyen at the time they agreed to purchase them. That assertion is unpersuasive as well.
We start with the proposition that “[a]n appellate court ‘“must presume that the record contains evidence to support every finding of fact....”’ (In re Marriage of Fink (1979) 25 Cal.3d 877, 887, italics added; see Brown v. World Church (1969) 272 Cal.App.2d 684, 690 [‘“a reviewing court starts with the presumption that the record contains evidence to sustain every finding of fact”’].) It is the appellant’s burden, not the court’s, to identify and establish deficiencies in the evidence. (Brown v. World Church, supra, 272 Cal.App.2d 684, 690.) This burden is a ‘daunting’ one. (In re Marriage of Higinbotham (1988) 203 Cal.App.3d 322, 328-329.) ‘A party who challenges the sufficiency of the evidence to support a particular finding must summarize the evidence on that point, favorable and unfavorable, and show how and why it is insufficient. [Citation.]’ [Citation.] ‘[W]hen an appellant urges the insufficiency of the evidence to support the findings it is his duty to set forth a fair and adequate statement of the evidence which is claimed to be insufficient. He cannot shift this burden onto respondent, nor is a reviewing court required to undertake an independent examination of the record when appellant has shirked his responsibility in this respect.’ (Hickson v. Thielman (1956) 147 Cal.App.2d 11, 14-15.)” (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 409.)
In this case, Johnson has not carried out his duty to demonstrate the insufficiency of the evidence to support those findings. With respect to Johnson’s contention the evidence is insufficient to support a finding his representations concerning the revenues and profitability of the two franchises were untrue, he simply focuses on the profit and loss statements which Cueva and Nguyen claim he gave them before they took possession of the franchises in October of 2005, and asserts they were not proven to be inaccurate. That does not qualify as an effort to summarize the entirety of the evidence bearing on the point.
Johnson does acknowledge that those statements actually reflect significantly less gross revenue for the franchises than what he had represented they generated – which is one of the misrepresentations Cueva and Nguyen specifically rely upon in asserting their fraud claim – but dismisses this representation as immaterial on the basis Cueva had testified he was more interested in “net revenues” than “gross sales.” But of course, that would not necessarily imply that Cueva was not interested in gross sales. After all, 10 percent in net revenues, based on $1,500,000 in gross sales (which is the gross sales representation that Johnson made), is indisputably better than 10 percent in net revenues, based on $1,000,000 in sales – the annualized number reflected in the profit and loss statements Johnson provided to Cueva and Nguyen.
For example, Johnson ignores the evidence he had personally considered the Riverside franchise not to be a profitable venture – as he characterized it, the Riverside franchise “basically broke even” at the time he decided to sell it – and he considered the West Covina franchise to be profitable only because there was no debt owed on it. That paints a significantly different picture than his claim that both franchises, together, generated a net profit of 10 percent. Johnson also ignores his own testimony he had chosen to sell those two franchises to Cueva and Nguyen – rather than his Aliso Viejo and Brea franchises – specifically because they were not as profitable. Johnson also ignores the evidence demonstrating that Fatburger North America, Inc., viewed the franchises’ sales as being in a “two-year downward trend, ” and viewed the franchises themselves as being in a “severe turn-around situation, ” at the time Johnson made his rosy financial representations to Cueva and Nguyen. All of this evidence could have been relied upon by the jurors as a basis for inferring that Johnson’s representations about the financial performance of the franchises he sold to Cueva and Nguyen were untrue.
But even if we were to focus solely on the one piece of financial evidence cited by Johnson – the profit and loss statements that Cueva and Nguyen claim he gave them in 2005 – his assertion those statements were not proven to be materially inaccurate is clearly incorrect. In making his assertion, Johnson simply ignores the evidence he had also provided materially different versions of these same profit and loss statements to Fatburger North America, Inc., at about the same time he provided the ones to Cueva and Nguyen.
While the profit and loss statements Johnson provided to Cueva and Nguyen reflect net profits of 13 percent and 15 percent for the franchises during the period of January – August of 2005, the ones he provided to Fatburger North America, Inc., reflect net profits of only 1 percent and 4.5 percent. That evidence, standing alone, is more than sufficient to support the conclusion the specific representations he was making to Cueva and Nguyen, in those very same profit and loss statements he cites in his brief, were actually untrue. Johnson’s attack on the sufficiency of the evidence to support the jury’s finding on this point clearly fails.
And with respect to his contention the evidence is also insufficient to support the conclusion the franchises were worth substantially less than the combined $900,000 Cueva and Nguyen were persuaded to pay for them, Johnson simply points to his own testimony that the franchises were worth “at least $450,000 for each location” at the time he sold them to Cueva and Nguyen, and then claims that his testimony was the only evidence demonstrating their actual value at the time of purchase. However, in making that argument, Johnson again ignores the other evidence which would provide the jurors with sufficient basis for inferring the finding he challenges. Among other things, there was evidence demonstrating the financial performance of the franchises was in fact substantially worse than he had represented in negotiating their price. Any reasonable juror could conclude a business entity that can be expected to return a net profit of $150,000 per year – the amount Johnson represented as the net profits generated by these two franchises when he induced Cueva and Nguyen to purchase them for a combined total of $900,000 – is worth substantially more than a business entity that could be expected to return a net profit of $25,000 per year – the amount the profit and loss statements provided to Fatburger North America, Inc., indicated these two franchises were actually generating on an annualized basis at the time Cueva and Nguyen took over their operations. Moreover, contrary to Johnson’s assertion, we do believe the jury could reasonably infer from the facts that Johnson ultimately sold the Riverside franchise to a third party for $167,000 in 2007, and that the West Covina franchise was sold back to the franchisor for the nominal price of $1 in 2008 – after Johnson could not locate any other buyer for it – that those franchises were worth essentially those same amounts when Cueva and Nguyen had been induced to purchase them.
And to be clear, it was Johnson who ultimately sold the Riverside franchise to the third party, and Johnson who received the benefits of that $167,000 payment – which he applied to pay off a loan he still had outstanding on the Riverside franchise. Cueva and Nguyen relinquished whatever interest they had in the Riverside franchise back to Johnson for sale to the third party, and received none of the proceeds from the sale.
In fact, in arguing there could be no correlation between the value of the franchises when he sold to Cueva and Nguyen, and their value at the time they were later sold and relinquished to the franchisor, Johnson simply ignores the evidence that at the time Cueva and Nguyen originally agreed to purchase the franchises, Fatburger North America, Inc., had already determined both were experiencing a “two-year downtrend” in sales, and considered both to be in a “severe turnaround situation.” The situation was considered so dire that Fatburger North America, Inc., was contemplating declaring Johnson in “default” on his franchise agreement. He also ignores his own testimony, to the effect that in May of 2006, he was unwilling to consider combining his own remaining franchises with those he had sold to Cueva and Nguyen, in the so-called “Three Worlds” venture, because as he explains it: “[w]hy would I take two stores that I ultimately sold for 600 thousand and 650 thousand and incorporate them into one store that sold for a dollar and another store that sold for a hundred and sixty-five thousand?” The jury could certainly infer from such testimony that Johnson himself believed, a scant seven months after Cueva and Nguyen took control of the franchises, that they were in fact worth essentially what they were ultimately determined by third parties to be worth – $167,000 for the Riverside franchise, and $1 for the West Covina franchise.
And significantly, Johnson never offered any evidence to support his assertion it was Cueva and Nguyen’s own mismanagement of the franchises during the time they operated them that allegedly caused the value of the franchises to plummet during that time. It was Johnson’s own decision to forgo the presentation of such evidence during the damages phase of the case, exactly when it might have been relevant to prove his assertion that the subsequent values placed on the franchises by third parties in 2007 and 2008 bore no relationship to their value when he sold them to Cueva and Nguyen in 2004. And in the absence of such evidence, the jury was certainly free to assume nothing significant had changed, and the value of the franchises at those later dates was also indicative of their value when sold to Cueva and Nguyen.
Johnson has failed to demonstrate the evidence was insufficient to support the jury’s determination that at the time Johnson induced Cueva and Nguyen to purchase the franchises, they were in fact worth substantially less than the price Cueva and Nguyen had been fraudulently induced to pay.
IV
Johnson’s final challenge is to the sufficiency of the evidence to support the determination his failure to obtain the approval of Fatburger North America, Inc., to the franchise sale agreement constituted a material breach of that sale agreement. Johnson claims any lack of franchisor approval never affected Cueva and Nguyen’s operation of the franchises, and was thus not a significant omission in his performance of his contractual obligations.
We decline to address the point, as the validity of Cueva and Nguyen’s breach of contract claim is moot. As Johnson acknowledges in his brief, after the jury found in Cueva and Nguyen’s favor on both their fraud claims and their breach of contract claim in the liability phase of the trial, the court determined that Cueva and Nguyen would be entitled to recover damages for either fraud, or breach of contract, but not both. Ultimately, the jury was instructed to limit its consideration to fraud damages, and the verdict it rendered pertained only to those damages.
Consequently, even if we were convinced there was some fatal error in the breach of contract claim asserted by Cueva and Nguyen, it would have no impact on the judgment entered in this case. We do not address such theoretical complaints. “Generally, courts decide only ‘actual controversies’ which will result in a judgment that offers relief to the parties. (Paul v. Milk Depots, Inc. (1964) 62 Cal.2d 129, 132; Lester v. Lennane (2000) 84 Cal.App.4th 536, 566.) Thus, appellate courts as a rule will not render opinions on moot questions.... The policy behind this rule is that courts decide justiciable controversies and will normally not render advisory opinions.” (Ebensteiner Co., Inc. v. Chadmar Group (2006) 143 Cal.App.4th 1174, 1178-1179.)
As for Johnson’s own claims for breach of contract in the cross-complaint, he advances no distinct arguments. He simply claims the judgment against him on the cross-complaint should be reversed for essentially the same reasons the judgment in favor of Cueva and Nguyen on the main complaint should be reversed. We have already rejected those contentions.
The judgment is affirmed. Cueva and Nguyen shall recover their costs on appeal.
WE CONCUR: O’LEARY, J. ARONSON, J.