Opinion
NOT TO BE PUBLISHED
APPEAL from orders of the Superior Court of Los Angeles County No. BC408209 Brett C. Klein, Judge.
Mathew & George, Abraham Mathew and Jacob George for Plaintiffs, Cross-Defendants and Appellants.
Davert & Loe, Benjamin N. Flint III, David C. Loe and Douglass S. Davert for Defendant, Cross-Complainant and Respondent.
WOODS, Acting P. J.
This appeal is from writs of attachment issued by the superior court in favor of respondent Shaheen Knitwear (SKW), against appellants Kenpo, Inc. (Kenpo) and Pear Connection, Inc. (Pear). This case involves a contract dispute between Kenpo, a Los Angeles wholesaler and distributor of clothing, and SKW, a supplier/manufacturer from Pakistan. Kenpo filed a complaint for breach of contract against SKW, and SKW filed a cross-complaint for breach of contract and related causes of action against Kenpo and other business entities. Kenpo and Pear contend that the court erred in issuing the writs of attachment or that the court should have required a more substantial undertaking. We affirm the order for the writ issued against Pear if a new attachment bond is (or was) provided by SKW and order the superior court to vacate the writ issued against Kenpo.
FACTUAL AND PROCEDURAL BACKGROUND
This case involves garments manufactured by SKW in Pakistan and shipped overseas to Kenpo and Pear in Los Angeles. SKW is in the business of manufacturing and exporting knitted garments from Pakistan to places throughout the world, including the United States. Kenpo and Pear engage in the business of designing, buying, and/or importing garments to sell in retail stores/outlets. Cross-defendant Karnail Singh is the principal of cross-defendants Kenpo, Kenpo Jeans, Inc. (KJ), and Pear.
SKW and Kenpo along with Pear entered into an agreement whereby SKW agreed to sell, and Kenpo and Pear agreed to buy, various garments that would be manufactured by SKW in Pakistan and shipped overseas to Los Angeles. The contract was affirmed in writing via purchase orders sent by Kenpo and Pear to SKW. Specifically, beginning in March 2008, Kenpo issued seven purchase orders, which it prepared and transmitted to SKW, for knitted garments, including “hoodie” sweatshirts, T-shirts, jackets, and other items of clothing. On September 25, 2008, an additional purchase order was issued from Pear for garments.
After many of the purchase orders were issued, Kenpo re-designed many of the garments and, according to SKW, Kenpo failed to provide final approval of change orders in a timely manner. SKW claims that failure caused significant production delays. In June 2008, a meeting was held between representatives of SKW and Kenpo to address the delays caused by the change orders. The representatives of SKW and Kenpo agreed to a revised shipment schedule which called for the arrival of certain garments in Los Angeles on or before November 26, 2008. The revised schedule was confirmed by the parties both verbally and by Rashid Mumtaz, the CEO of SKW, in writing without objection from Kenpo.
At the time Kenpo’s complaint was filed in this matter, of the 44 containers that had been shipped from Pakistan by SKW pursuant to the purchase orders, 37 had been accepted by Kenpo or Pear; three containers worth $177,251.60 were held by U.S. Customs due to Kenpo’s failure to accept the same; and four containers worth $373,481 were at high sea and en route to Los Angeles. Additionally, garments worth $206,488.80 had been manufactured by SKW in connection with the purchase orders, but remained in SKW’s warehouse in Pakistan due to Kenpo’s non-payment for the garments that Kenpo had already accepted.
As of the date of the motion to attach, SKW alleged that it manufactured and shipped approximately 622, 836 garments at a total invoice cost of $4,328,929.40, all of which remained unpaid. That total excludes one payment received by SKW from Kenpo for $119,505.60 in connection with the first container that was shipped by SKW in May 2008.
Kenpo refused to tender payment on the grounds that the garments were non-conforming. SKW alleged that all of the garments were manufactured pursuant to Kenpo’s express instructions and specifications and SKW obtained Kenpo’s approval for all change orders. To the extent Kenpo claims that labels were placed in incorrect locations, that claim is belied by Kenpo’s express approval of the location where they would be placed.
Despite making only one payment of approximately $119,505.60 for the garments that Kenpo and Pear accepted worth approximately $3,571,728, on or about February 9, 2009, Singh offered to return to SKW all of the garments Kenpo and Pear accepted if SKW would pay Kenpo for all of the import custom duty fees and 35 percent in damages.
The trial court issued writs of attachment for $3,555,528 against Kenpo and for $12,350 against Pear. The court ordered a combined undertaking (for Kenpo and Pear) in the amount of $10,000. Kenpo and Pear filed a timely notice of appeal from the right to attach orders and orders for writs of attachment.
DISCUSSION
Appellants Kenpo and Pear contend the court erred in issuing the writs of attachment because respondent SKW did not adduce sufficient admissible evidence to support its breach of contract claim, establish damages in a fixed or readily ascertainable amount, or establish it would prevail on the merits. Appellants further contend the court should have required a more substantial undertaking by respondent.
I. Respondent is conducting interstate business
Appellants argue that since respondent is not registered with the Secretary of State to do business in the County of Los Angeles, State of California, it lacks the capacity to bring this suit. Corporations Code sections 2105 and 2203, subdivision (c) state that foreign corporations that have not qualified to do business in California shall not “maintain any action or proceeding” based upon “intrastate business” without so qualifying. Appellants assert that they need only show that the action arises out of a transaction of intrastate business by a foreign corporation and that the action was commenced by a foreign corporation prior to qualifying to transact business here. (See United Systems of Arkansas, Inc. v. Stamison (1998) 63 Cal.App.4th 1001 [involving a foreign corporation].) That argument is not persuasive. Corporations Code section 2105 applies only to intrastate business. As respondent points out in its supplemental brief, it is important to draw the distinction between intrastate and interstate business, because Corporations Code section 2105 does not apply to interstate business.
Intrastate commerce can be defined as, “Commerce that begins and ends entirely within the borders of a single state. – Also termed internal commerce.” (Emphasis deleted.) (Black’s Law Dict. (8th ed. 2004) p. 285, col. 1.) However, interstate commerce can be defined as, “Trade and other business activities between those located in different states; esp., traffic in goods and travel of people between states.... Some statutory definitions of interstate commerce include commerce between a foreign country and a state.” (Emphasis deleted.) (Ibid.) Furthermore, Corporations Code section 191, subdivision (a) states that “‘transact intrastate business’ means entering into repeated and successive transactions of its business in the state, other than interstate or foreign commerce.” (Emphasis added.)
As respondent points out in its brief, if a party was engaged wholly in interstate commerce and did not do any intrastate business, then Corporations Code section 2105 is inapplicable because, “in view of the commerce clause of the federal constitution, the state cannot put any burden upon persons or corporations engaged wholly in interstate commerce.” (W. W. Kimball Co. v. Read (1919) 43 Cal.App. 342, 345.) A defendant claiming that a plaintiff’s claim is barred by Corporations Code section 2105 bears the burden of proving that the action arises out of the transaction of intrastate business by a foreign corporation. (United Medical Management Ltd. v. Gatto (1996) 49 Cal.App.4th 1732, 1740.)
The case at hand involves garments manufactured by respondent in Pakistan and shipped overseas to appellants in Los Angeles. Respondent is similar to the plaintiffs in Kimball and U.S. Cap & Closure, Inc. v. Superior Court (1968) 265 Cal.App.2d 408. In those cases, the plaintiffs were not located in California, orders for goods manufactured by the plaintiffs were placed from California, the plaintiffs manufactured goods outside of California, and the plaintiffs shipped the goods from outside of California to customers in California. In both cases, the courts found that the plaintiffs were not engaged in intrastate business in California and that the plaintiffs did not need to comply with laws equivalent to Corporations Code section 2105. (W. W. Kimball Co. v. Read, supra, 43 Cal.App. at pp. 345-346; U.S. Cap & Closure, Inc. v. Superior Court, supra, 265 Cal.App.2d at p. 412.)
Here, all of respondent’s manufacturing is done in Pakistan, respondent’s offices are located in Pakistan, appellants sent purchase orders from California to Pakistan, the garments were manufactured by respondent in Pakistan, and the garments were then shipped by respondent from Pakistan overseas to Los Angeles. This case involves interstate business, not intrastate business. Thus, Corporations Code section 2105 is not applicable, and respondent need not have a valid certificate from the Secretary of State to conduct intrastate business in California. Accordingly, respondent has standing to, and is entitled to, maintain its action against Kenpo.
On September 23, 2010, this court notified the parties that it was considering reversing the order granting the writs of attachment unless respondent submitted proof it currently holds a valid certificate from the Secretary of State or provided argument that it was not required to hold a certificate. In its notification, the court stated that any letter briefs were to be limited to no more than three-single spaced pages in length. Both parties attached documents to their letter briefs without seeking permission to do so from this court and without authenticating the documents. “[I]t is well established that a reviewing court may not give any consideration to alleged facts that are outside of the record on appeal.” (CIT Group/Equipment Financing, Inc., v. Super DVD, Inc. (2004) 115 Cal.App.4th 537, 539, fn. 1.)
II. Writ of Attachment
Appellants contend that respondent has not satisfied all the essential elements necessary to issue a pre-judgment writ of attachment because there was not a valid contract and the sum of the amount owed was not readily ascertainable. Attachment is a provisional remedy devised to protect a plaintiff pending trial. (Barceloux v. Dow (1959) 174 Cal.App.2d 170, 174.)
Code of Civil Procedure section 483.010 provides that an attachment may be issued only if the claim sued upon is (1) based on a claim for money arising from contract, express or implied; (2) relates to a fixed or readily ascertainable amount not less than $500; (3) that is either unsecured or secured by personal property, not real property (including fixtures); (4) and a commercial claim. (Goldstein v. Barak Construction (2008) 164 Cal.App.4th 845, 852.) Damages need not be liquidated, but they must be measurable by reference to the contract itself and the basis for computing damages must be reasonable and certain. (CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., supra, 115 Cal.App.4th at p. 540.)
In addition, “a plaintiff seeking a right to attach order must show ‘“the probable validity”’ of its claim. ‘A claim has “probable validity” where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.’” (Citation omitted.) (Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1476.)
“On appeal from an attachment order, we review the record for substantial evidence to support the trial court’s factual findings. We apply the same evidentiary standard to an attachment hearing decided on affidavits and declarations as to a case tried on oral testimony. We will not disturb a determination upon controverted facts unless no substantial evidence supports the court’s determination.” (Citations omitted.) (Goldstein v. Barak Construction, supra, 164 Cal.App.4th at p. 853.)
A. Admissibility of Evidence
An appellate court applies the abuse of discretion standard of review to any ruling by a trial court on the admissibility of evidence. (City of Ripon v. Sweetin (2002) 100 Cal.App.4th 887, 900.) It examines for abuse of discretion a decision on admissibility that turns on the relevance of the evidence in question because it so examines the underlying determination as to relevance itself. (Ibid.) Evidence is relevant if it has any tendency in reason to prove a disputed material fact. (Id. at pp. 900-901.) The trial court’s “discretion is only abused where there is a clear showing the trial court exceeded the bounds of reason, all of the circumstances being considered.” (People v. DeJesus (1995) 38 Cal.App.4th 1, 32.)
“Where a point is merely asserted by a party on appeal without any argument or authority for its merit, it is deemed to be without foundation and requires no discussion.” (Miller v. Kennedy (1987) 196 Cal.App.3d 141, 147.) In numerous places throughout appellants’ briefs, they claim the trial court’s rulings on Kenpo’s evidentiary objections were an abuse of discretion without citing authority, without presenting any argument or both. Regarding Evidence Code section 1523, subdivision (a), appellants assert the court’s ruling on Kenpo’s evidentiary objections to Mumtaz’s declaration was an abuse of discretion, but cite a case (City of Ripon) with little to no relevance as it contains only a general statement about admission of evidence and abuse of discretion.
Additionally, appellants claim that Mumtaz’s testimony regarding the purchase orders was an evidentiary conclusion because the declaration contains no evidence of how the purchase orders were transmitted to SKW, to whom they were transmitted, or how Mumtaz received them. However, in the very case cited by appellants, Pos-A-Traction, Inc. v. Kelly-Springfield Tire Co. (C.D.Cal. 2000) 112 F.Supp.2d 1178, 1183, the court held that an individual’s status as a “region finance manager” and his testimony that he was the one who received certain documents, was enough to “authenticate” the evidence in question.
Here Mumtaz is the CEO of SKW, and in his declaration, he stated that he was the one who received the purchase orders and had the relevant communications with Kenpo. Furthermore, pursuant to Evidence Code section 1271, which requires a writing made in the regular course of business, near the time of the event, by a qualified witness who testifies to its identity and the sources indicate it is trustworthy, Mumtaz stated the purchase orders in question had been received by him around March 2008 in connection with the knitted garments. Mumtaz’s statements satisfy Evidence Code section 1271. Thus, the court did not abuse its discretion in admitting the purchase orders or other evidence.
B. Evidentiary support for the breach of contract claim
When setting forth a cause of action for breach of contract, the essential elements to be pled are: (1) the existence of the contract; (2) plaintiff’s performance of the contract or excuse for non-performance; (3) defendant’s breach of the contract; and (4) the resulting damage to the plaintiff. (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830.) Commercial Code section 2204 states:
Unless otherwise noted, all statutory references are to the Commercial Code.
1. A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
2. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
3. Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is reasonably certain basis for giving an appropriate remedy.
Further, in accordance with Evidence Code section 452, subdivision (d), in determining whether there was a contract between the parties, the court could properly take judicial notice of the court’s own records, including the pleadings in the case. (See also Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301.) Moreover, judicial admissions may be made by a party in a pleading and may not be contradicted by the party whose pleadings are used against him or her. (Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 746.) When a complaint contains allegations of fact in support of a claim, the opposing party may rely on the factual statements as judicial admissions. (Ibid.)
Appellants’ complaint alleged a single cause of action for breach of contract. In their brief, appellants state that “Kenpo made an offer to settle the contract dispute” before filing suit. Therefore, appellants are precluded from asserting, as they do in their briefs, that there is no contract between SKW and Kenpo or that the Statute of Frauds was applicable. Furthermore, Kenpo sent seven purchase orders to SKW, and SKW manufactured and shipped approximately 622, 836 garments to Kenpo, which constituted a valid contract between SKW and Kenpo pursuant to section 2204. Also, Pear sent one purchase order, and SKW manufactured and shipped garments to Pear, which also constituted a valid contract pursuant to section 2204. Pear then issued a check for $12,350 for partial payment, but the check was returned unpaid for insufficient funds.
Appellants argue that since there was no evidence of an oral agreement, purchase orders alone are not sufficient to show that the requisite material terms of any contract have been established. This claim is incorrect. As stated above, a contract can be shown if the conduct of the parties, such as sending purchase orders and receiving goods without complaint, show an agreement despite the fact that “one or more terms are left open.” (§ 2204.)
Pursuant to section 2204, as well as Kenpo’s complaint, there was a valid contract between the parties. Further, Mumtaz’s declaration provides evidence that respondent shipped approximately $4 million worth of garments to appellants, that respondent had not been paid for the garments that were accepted, and that SKW had suffered damages as a result of non-payment. Thus, based on Mumtaz’s declaration and the exhibits attached thereto, the court properly determined that the claim respondent sued upon was based on a claim for money arising from a contract, i.e., there was sufficient admissible evidence that Kenpo breached the contract.
C. The damages were not readily ascertainable
Appellants also claim that the writ should not have been issued because the damages were not readily ascertainable. In order for a writ to issue, the damages must relate to a “fixed or readily ascertainable amount.” (Code Civ. Proc., § 483.010.) Damages are measurable by reference to the contract itself and the basis for computing damages must be reasonable and certain. (CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., supra, 115 Cal.App.4th at p. 540.) However, uncertainty as to the specific amount of ultimate damages is not a basis to deny attachment. (Lewis v. Steifel (1950) 98 Cal.App.2d 648, 651.)
Appellants argue that the presence of discrepancies in the amounts owed between the declaration of Mumtaz and the purchase orders themselves is evidence that the damages were not sufficiently particular.
SKW sought a writ against both Kenpo and Pear in the amount of $4,328,929.40. According to SKW, that amount excluded one payment for $119,505.60 paid by Kenpo in relation to the first container shipped by SKW in May 2008. SKW acknowledged that amount included goods still in Pakistan. In the alternative, SKW sought a writ in the amount of $3,571,728, which it alleged represented the value of goods that Kenpo had accepted. The court granted the writ in the amount of $3,555,528 against Kenpo and $12,350 against Pear.
We conclude the writ against Kenpo is not based on reasonably ascertainable damages.
First, the contract terms set forth in Mumtaz’s declaration contradict the information in the purchase orders attached to the declaration. For example, in paragraph 5(a) of his declaration, Mumtaz states SKW shipped 110, 112 articles of clothing at a cost of $6.70 a piece for a total of $737,750.40 pursuant to purchase order number 52227. Purchase order number 52227 (exhibit A-1) states the unit price is $5.50 for 115, 200 pieces for a total of $633,600.
Mumtaz states purchase order number 52228 was for 100, 080 articles of clothing at $2.58 per piece for a total of $258,206.40. Exhibit A-2 is simply an unintelligible list of codes with 52228 in unidentified handwriting at the top.
Exhibit A-3 (purchase order number 52229) calls for 121, 200 pieces at a price of $5.50 per unit for a total of $665,400. Mumtaz declares SKW shipped 113, 880 pieces at a cost of $6.40 per unit for a total of $728,832 for that purchase order.
Exhibit A-4 (purchase order number 52230) was for 7, 200 articles of clothing at $4.50 per piece for a total of $32,400. Mumtaz’s declaration states that purchase order was for 7, 152 articles of clothing at $4.70 per piece for a total of $33,614.
There are similar discrepancies between Mumtaz’s declaration and the four remaining exhibits (A-5 through A-8).
Second, Mumtaz’s testimony is confusing; in one paragraph, he states both that Kenpo and Pear collectively owe $4,328,929.40 and that they “have in their possession garments worth a value of $3,571,728.00.” Though not expressly stated, it appears the former amount included garments still in Pakistan, at sea or at customs. Mumtaz also failed to identify which of the two entities received the garments or was currently in possession of the garments.
Third, the total of the amounts listed on the purchase orders is $3,949,680 (some purchase orders have no total), not $4,328,929.40, meaning the purchase orders do not support the total amount claimed.
Fourth, Mumtaz did not list specifics in his declaration; he stated, “SKW has manufactured and shipped approximately 622, 836 garments” and that three containers worth “approximately $177,251.60” were being held by customs.
Given the nature of the goods at issue, some discrepancies in the amount of goods shipped and/or received could be expected, but here there are discrepancies in the unit prices and totals. In addition, the invoices include goods not received by Kenpo as the goods are still in Pakistan, at sea or at customs. Thus, the writ against Kenpo was improperly issued as the damages are not readily ascertainable as the offer and acceptance do not match (e.g., is the price that which is listed on the purchase orders or what SKW wants to charge?). However, the writ against Pear is supported by the amount of a check returned for insufficient funds, which is admission of the amount owed.
Appellants further claim that the amount attached should be reduced by the amount of damages that respondent’s breach caused them. The writ of attachment statute provides that the amount shall be reduced by “any claim of the defendant asserted as a defense in the answer” upon which a writ of attachment could issue. (Code Civ. Proc., § 483.015, subd. (b).) Appellants, however, offered no evidence to prove the damages that they claim to have incurred as a result of respondent’s alleged breach.
D. The undertaking
Appellants contend the $10,000 undertaking was too small as they established they would prevail. A plaintiff who seeks a writ of attachment must file an undertaking to pay the defendant any amount the defendant might recover for any wrongful attachment by the plaintiff. (Code Civ. Proc., § 489.210.) Pursuant to Code of Civil Procedure section 489.220, the amount of the undertaking will be $10,000 or, upon the defendant’s objection, increased to the amount of probable recovery for wrongful attachment, as adjusted by the probability the plaintiff will prevail. (North Hollywood Marble Co. v. Superior Court (1984) 157 Cal.App.3d 683, 690-692.) Given the vacation of the writ issued against Kenpo and Pear’s “admission” (in the form of a check returned for insufficient funds) of the amount it owed SKW, a more substantial undertaking was not necessary.
However, this court granted appellants’ request to take judicial notice of the court order exonerating the existing bond and ordering SKW to provide new $10,000 bonds each for Kenpo and Pear. Hence, if the writ against Pear is to remain in place, SKW must provide a new bond for $10,000 (if it has not already done so) for Pear.
DISPOSITION
As to Kenpo, the right to attach order and the order for a writ of attachment are reversed and the court is directed to vacate the writ issued against Kenpo. As to Pear, the right to attach order and order for a writ of attachment are affirmed on the condition that SKW provide a $10,000 bond (if it has not already done so) for Pear. Appellants to recover costs on appeal.
We concur: ZELON, J., JACKSON, J.