Opinion
E061100
09-07-2018
PING PAN, Plaintiff and Respondent, v. SKYLINE TECHNOLOGY HK CO., LTD, Defendant and Appellant.
Law Office of John A. Tkach and John A. Tkach for Defendant and Appellant. Reid & Hellyer, Michael G. Kerbs and Alexander C. Payne for Plaintiff and Respondent.
ORDER MODIFYING OPINION
[NO CHANGE IN JUDGMENT]
THE COURT
The opinion filed in this matter on September 7, 2018, is modified as follows:
Combine and modify the last paragraph on page 4, which begins, "In the published portion of this opinion, . . ." with the first paragraph on page 5, which begins, "In the unpublished portion of this opinion, . . . ." The last paragraph on page 4 should read as follows:
We conclude: (1) the factual allegations in Ping's SAC did not contradict allegations he made in the original complaint or in the first amended complaint (FAC), and the SAC pleaded a viable cause of action for restitution, so the trial court properly overruled ACI's demurrer to the SAC; (2) the trial court did not abuse its discretion by admitting the "Assignment and Assumption Agreement" (Assignment) into evidence because Ping submitted sufficient evidence, in the form of a final statement from a United States vice consul, to authenticate the Assignment under Evidence Code section 1454; (3) the record contains substantial evidence to support the trial court's implied and express findings that the general manager for ZiJiang had apparent authority to assign that company's right to collect on the invoices, and that Ping did not exceed his authority as general manager when he assigned Heng Cheng's rights; (4) the record does not support Skyline's characterization of a handwritten ledger prepared by Heng Cheng's deputy manager as a "personal record," and the trial court properly admitted the ledger under the business record exception to the hearsay rule; and (5) we need not determine whether the trial court properly concluded Ling Ling could testify as an expert to prove Ping's damages because her testimony was admissible under Evidence Code section 1523, subdivision (d), as secondary evidence of the contents of voluminous documents.
These modifications do not change the judgment.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
McKINSTER
Acting P. J. We concur: MILLER
J. FIELDS
J.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVRS1201048) OPINION APPEAL from the Superior Court of San Bernardino County. Joseph R. Brisco, Judge. Dismissed. Law Office of John A. Tkach and John A. Tkach for Defendant and Appellant. Reid & Hellyer, Michael G. Kerbs and Alexander C. Payne for Plaintiff and Respondent.
I.
INTRODUCTION
Skyline Technology HK Co. Ltd. (Skyline), as successor to defendant AC International Corp. (ACI), appeals from a money judgment in favor of plaintiff Ping Pan (Ping). Between July 2009 and September 2010, Shanghai Heng Cheng Electronics Co., Ltd. (Heng Cheng) and Shanghai ZiJiang International Trading Co., Ltd. (ZiJiang), a Chinese manufacturer and distributor of precision scales, respectively, delivered $922,080.50 worth of digital scales to ACI in Chino, California. ACI ordered the scales directly or through its wholly owned and controlled Hong Kong-based affiliate, ChinaHengCheng Group, Ltd. (Hong Kong, Ltd.). ACI was to pay Heng Cheng directly or through Hong Kong Ltd., and Hong Kong Ltd. was supposed to pass the payments on to Heng Cheng. But ACI only paid Heng Cheng $100,000. When Heng Cheng's and ZiJiang's efforts to collect what they were owed was thwarted, they assigned their rights in the purchase orders and invoices to Ping, who thereafter brought this lawsuit and sought restitution for unjust enrichment.
While this appeal was pending, Skyline purchased ACI's interests in this lawsuit at a bankruptcy trustee's sale. This court substituted Skyline as party successor to ACI. (Cal. Rules of Court, rule 8.36(a).)
Some of the persons discussed in this opinion are related and share a surname, to wit, Jinfang Pan and his father Ping Pan, Zhishi Zhang and his daughter Ling Ling Zhang. To avoid confusion, and not out of any disrespect, we will refer to those individuals by their first names.
To avoid confusion, when discussing the various corporate entities related to this case we will use the same name conventions employed by the parties at trial.
At trial, Ping admitted evidence that ACI failed to pay for all of the scales it ordered and received. Ping also admitted evidence that Kerry Huang (Huang), half owner of ACI, siphoned a good deal of the payments that ACI did make from Heng Cheng to his family members and to a separate business he owed. ACI admitted evidence to support its defense that it paid for all of the scales it ordered and received from Heng Cheng. The trial court awarded Ping $822,080.50 plus interest and costs.
On appeal, Skyline argues: (1) the trial court erred by not applying the "sham pleading" doctrine and sustaining ACI's demurrer to Ping's operative second amended complaint (SAC); (2) the court abused its discretion by admitting into evidence an unauthenticated copy of the agreement by which Heng Cheng and ZiJiang assigned their rights to Ping; (3) substantial evidence does not support the trial court's express and implied findings that Heng Cheng and ZiJiang were authorized to assign their rights to Ping; (4) the trial court abused its discretion by admitting into evidence as a business record a handwritten "personal record" of payments received by Heng Cheng from ACI; and (5) the trial court abused its discretion by permitting Ping's wife Ling Ling (a former ACI employee) to testify as an expert witness about the measure of Ping's damages.
We have found no reversible error and, therefore, we would have affirmed the judgment. However, five days before this appeal was to be orally argued—after this court had already devoted valuable time and resources to review the record, research the legal issues, and draft a detailed and lengthy tentative decision that was mailed to the parties—the parties notified us that the case had been settled and they requested dismissal of the appeal. Dismissal is a matter of discretion, not of right. (Cal. Rules of Court, rule 8.244(c)(2).) Although we will exercise our discretion to grant the request for dismissal, in light of the tardiness of the request (see Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2017) ¶¶ 5:63-5:64, pp. 5-28 to 5-30), we will also express our views on the issues raised in this appeal. (See Lara v. Cadag (1993) 13 Cal.App.4th 1061, 1065-1066.)
In the published portion of this opinion, we conclude: (1) the factual allegations in Ping's SAC did not contradict allegations he made in the original complaint or in the first amended complaint (FAC), and the SAC pleaded a viable cause of action for restitution, so the trial court properly overruled ACI's demurrer to the SAC; (2) the trial court did not abuse its discretion by admitting the "Assignment and Assumption Agreement" (Assignment) into evidence because Ping submitted sufficient evidence, in the form of a final statement from a United States vice consul, to authenticate the Assignment under Evidence Code section 1454; (3) the record contains substantial evidence to support the trial court's implied and express findings that the general manager for ZiJiang had apparent authority to assign that company's right to collect on the invoices, and that Ping did not exceed his authority as general manager when he assigned Heng Cheng's rights; and (4) the record does not support Skyline's characterization of a handwritten ledger prepared by Heng Cheng's deputy manager as a "personal record," and the trial court properly admitted the ledger under the business record exception to the hearsay rule.
In the unpublished portion of this opinion, we conclude we need not determine whether the trial court properly concluded Ling Ling could testify as an expert to prove Ping's damages because her testimony was admissible under Evidence Code section 1523, subdivision (d), as secondary evidence of the contents of voluminous documents.
II.
FACTS
"'As required by the rules of appellate procedure, we state the facts in the light most favorable to the judgment. [Citation.]'" (Eng v. Brown (2018) 21 Cal.App.5th 675, 683.)
Jinfang Pan (Jinfang), a native of Shanghai, China, was vice president of XJ Group, a manufacturer of LCD monitors, and CEO of its California-based business. Huang, through his company Eteck, sold computer accessories and in 2002 became a customer of XJ Group. At some point, XJ Group ceased manufacturing monitors. At the end of 2002, Huang approached Jinfang with the idea of forming a new company—ACI—to sell digital scales. The two men invested $1,000 each and owned the company 50/50. Jinfang held the title of vice president of the corporation and held a seat on the board of directors. Jinfang's wife, Ling Ling Zhang (Ling Ling), worked for ACI for a time in sales. ACI commenced doing business in early 2003. Huang was president of ACI and managed the company's day-to-day operations from 2009 to 2010.
ACI's business model was to import digital scales wholesale to the United States for the resale market. After ACI's relationship with its original vendor broke down, ACI decided it needed to build its own factory to produce good quality scales for a good price. Jinfang approached his father, Ping, about acquiring a factory. In 2004, Jinfang, Huang, and Ping established Heng Cheng to manufacture scales and sell them directly to ACI. Huang and Ping owned Heng Cheng 50/50. Ping was the general manager and legal representative for the company.
The original business relationship between ACI and Heng Cheng was as follows: All orders would come directly from Huang at ACI; Heng Cheng would deliver the products that ACI ordered to ZiJiang, and issue an invoice to ZiJiang; with only minor exceptions, ZiJiang would then ship its products directly to ACI. ACI paid ZiJiang for the orders, which would then pay Heng Cheng. ACI was Heng Cheng's sole client. Huang testified he was the only person with authority at ACI to sign checks on behalf of the company, and he was personally responsible for paying Heng Cheng by international wire transfer.
ACI's business grew during 2004 and 2005 after Heng Cheng commenced manufacturing scales. However, ACI's profitability was not very good because Huang, who was in charge of sales, set the prices too low and the 15 to 20 percent margin of profits was insufficient to sustain the company's growth. Huang told Jinfang that he believed it would be necessary to have a separate company in Hong Kong to lower ACI's tax liability. Therefore, in 2005, Jinfang and Huang formed Hong Kong Ltd. Huang owned 50 percent of Hong Kong Ltd., although he contributed no money to forming the company.
Between June 1, 2009 and August 26, 2010, Hong Kong Ltd. issued 17 purchase orders to Heng Cheng for digital scales. ACI issued four purchase orders directly to Heng Cheng between June 24, 2009 and May 7, 2010. Between July 20, 2009 and September 27, 2010, ZiJiang fulfilled those orders and issued eight invoices to ACI for goods valued at $922,080.50.
Ping introduced evidence that even before it issued the eight invoices in dispute, ACI was already between $800,000 to $900,000 in arrears for orders already fulfilled. In a series of emails, Zhishi Zhang (Zhishi), Heng Cheng's deputy manager, and Yong Ma, the person in charge of procurement for Heng Cheng, informed Huang that ACI was behind in payments and implored Huang to make a minimum payment of $100,000 to keep Heng Cheng's operations afloat. Huang testified he could not recall partaking in those email conversations. Huang also testified he never received any notices from ZiJiang stating he was behind in payments on ACI's account.
Ping also introduced evidence that, during the same period at issue, Huang made wire transfers from Heng Cheng's bank account totaling $187,240. To his wife, Huang made 12 wire transfers in the amount of $7,500, one transfer of $6,500, and one transfer of $2,500. Huang made seven wire transfers to his father in the amount $2,140 and another nine transfers in the amount of $2,640. To his company Crossline Technology, Huang made one wire transfer of $3,500 and 13 wire transfers of $2,000. Finally, Huang made one wire transfer in the amount of $20,000 to his mother-in-law.
Although Huang was listed as an account holder on Heng Cheng's bank account, Huang testified he did not add his name to the account and that anyone could have done it. Huang testified he transferred money from ACI to Heng Cheng, then made the transfers to his company and family as a way of sharing the profit or "benefit" from Heng Cheng. Huang testified Ping was also a holder of the account; Ping would have received monthly statements on the account and, therefore, he would have been aware of Huang's transfers; Huang discussed at least some of the transfers with Ping beforehand; and Ping did the same sort of thing, transferring money to his son.
As discussed further, post, Ping introduced evidence that ACI's balance owed on the eight invoices was $822,080.50. When Heng Cheng and ZiJiang were unable to recoup what they were owed by ACI, they assigned to Ping their rights to collect on the eight invoices.
Huang testified that ACI received and paid for all of the goods described in the invoices. ACI introduced testimony from Huang and documentary evidence that it actually paid Heng Cheng for the goods at issue by wire transfer.
Relevant here, in its statement of decision, the trial court found that between July 20, 2009 and September 27, 2010, eight invoices were sent to ACI for shipments totaling $922,080.50. The court found that ACI paid only $100,000 to Heng Cheng for those invoices and owed a balance of $822,080.50. The court concluded it was undisputed that ACI received all of the products listed in the eight invoices but failed to pay the balance owed. Therefore, the court concluded ACI was unjustly enriched. The court also found that the rights and interest in the balance owed on the eight invoices were validly transferred to Ping.
The trial court entered judgment for Ping in the amount of $822,080.50, awarded prejudgment interest in the amount of $323,965.26, and awarded costs to be determined at a later date.
ACI timely appealed.
III.
DISCUSSION
A. The Trial Court Correctly Overruled ACI's Demurrer to the SAC.
Skyline contends the trial court erred by overruling ACI's demurrer to Ping's SAC. The original verified complaint pleaded causes of action for breach of contract and common counts, yet the SAC (and the FAC before it) purported to plead a single cause of action for unjust enrichment. According to Skyline, the basis of Ping's claim for damages in the SAC is an assignment of "contractual" rights, but a claim for unjust enrichment is a remedy based on a theory of quasi-contract and it may not be asserted when the alleged damages arise from an express contract. Invoking the doctrine of "sham pleading," Skyline argues Ping cannot escape the facts about a contract pleaded in the original complaint that are inconvenient to his claim for unjust enrichment.
We disagree with Skyline that Ping engaged in "sham pleading," and we conclude the trial court correctly overruled the demurrer to the SAC.
1. Additional Background.
a. Original verified complaint.
In his original verified complaint, Ping pleaded that Heng Cheng and ZiJiang, both limited companies organized under the laws of the People's Republic of China, were parties to an agreement whereby ZiJiang would ship scales manufactured by Heng Cheng and collect money from the sales and pay Heng Cheng.
ACI, a California corporation, entered into a business relationship with Heng Cheng and ZiJiang "for the manufacture, sale, and delivery of scales." Heng Cheng and ZiJiang manufactured the scales and shipped them to ACI in Chino, California.
Between July 20, 2009, and September 27, 2010, ZiJiang issued eight invoices to ACI for the manufacture and sale of scales, totaling $922,080.50. Heng Cheng shipped the scales to ACI, and ACI took possession of all of the scales identified in the invoices. ACI only paid $100,000 of what it owed for the scales, leaving a balance of $822,080.50.
For some reason, the verified complaint rounded the balance down by 50 cents.
On or about July 14, 2011, Heng Cheng and ZiJiang entered into an "Assignment and Assumption Agreement" with Ping. The Assignment's recitals stated that Heng Cheng and ZiJiang "desire[d] to collect payment for the entire balance owed pursuant to the invoices issued to AC International," and that to avoid the "hassle of collections," Heng Cheng and ZiJiang "transfer[ed] the right to collect on the Invoices to Assignee [i.e., Ping] in exchange for 1% of the amount collected to be divided equally between the Assignors [i.e., Heng Cheng and ZiJiang]." Under the heading "Assignment of Contractual Rights," the Assignment stated, "Assignors assign[ed], transfer[ed] and convey[ed] to Assignee all of the rights and interests in and to the Invoices." The invoices were attached to the Assignment as exhibit A.
Based on those facts, Ping alleged causes of action for breach of contract and common counts (account stated, open book account, and quantum valebant).
ACI demurred to the complaint, arguing, inter alia: (1) Heng Cheng was not qualified to do business in California and could not itself sue to collect for balances owed on the invoices; (2) Ping, as Heng Cheng's assignee, had no greater rights than Heng Cheng and was likewise barred from recovering on the invoices in California; and (3) the complaint failed to state a claim for breach of contract or common counts because it did not allege the existence of a written or oral contract. According to ACI, the Assignment purported to transfer the right to collect money owed on invoices, and invoices are not contracts.
b. FAC.
Rather than oppose the demurrer, Ping filed a FAC. The FAC alleged that Heng Cheng was now qualified to do business in California. The FAC also alleged additional facts to flesh out the business relationships between the parties. ACI conducted business under the fictitious business name Digiweigh. ACI placed orders for scales both directly and indirectly. When making indirect orders, ACI used an affiliated entity based in Hong Kong, called Hong Kong Ltd. Ping alleged the business relationship between ACI and Hong Kong Ltd. "permitted [ACI] to have its profits [earned] in a jurisdiction with lower income tax rates. However, at all times, [ACI] was the intended purchaser of Heng Cheng's goods." This rather Byzantine system was supposed to work as follows: (1) ACI would place an order with Hong Kong Ltd.; (2) Hong Kong Ltd. would issue a purchase order to Heng Cheng; (3) Heng Cheng would ship goods to ACI; (4) ZiJiang would issue to ACI invoices for the goods manufactured by Heng Cheng; (5) ACI would pay Hong Kong Ltd.; (6) Hong Kong Ltd. would pay ZiJiang; and (7) ZiJiang would pay Heng Cheng.
The FAC alleged that between June 1, 2009 and August 26, 2010, ACI—either directly or through Hong Kong Ltd.—issued purchase orders to Heng Cheng for scales totaling $922,080.50. Heng Cheng issued eight invoices to fulfill those orders, and ACI took possession of the goods. ACI only paid Heng Cheng $100,000, leaving a balance of $822,080.50. The FAC repeated the allegations regarding the Assignment from the original complaint.
Ping no longer pleaded causes of action for breach of contract or common counts. Instead, Ping now purported to plead a single cause of action for unjust enrichment.
We say that Ping purported to plead a cause of action for unjust enrichment because there is no such cause of action. "'Unjust enrichment is not a cause of action, . . . or even a remedy, but rather "'"a general principle, underlying various legal doctrines and remedies"' . . . . [Citation.] It is synonymous with restitution. [Citations.]"'" (Bank of New York Mellon v. Citibank, N.A. (2017) 8 Cal.App.5th 935, 955.) Despite the incorrect label given to Ping's cause of action, as we explain, post, the SAC properly stated a claim for relief.
ACI demurred to the FAC, arguing, inter alia, Ping failed to state a claim for relief. According to ACI, the Assignment purported to assign "contractual" rights. A cause of action for unjust enrichment is based on quasi-contract and cannot be pleaded when there is an express contract. Because Ping could not dispute the facts of the Assignment, ACI argued that Ping was precluded from alleging a claim for quasi-contract.
ACI's demurrer to the FAC was disingenuous to say the least. As noted, ante, ACI's demurrer to the original complaint argued the breach of contract cause of action failed because Ping did not allege the existence of a contract, and invoices are not contracts. Although the Assignment was attached to and incorporated into the original verified complaint, ACI waited until its demurrer to the FAC to latch onto the "contractual" language from a heading in the Assignment. As discussed, ante, ACI repeated this specious argument in its demurrer to the SAC.
The trial court overruled the demurrer. Its order read: "The mere fact that a cause of action is labeled as one for unjust enrichment does not expose it to a general demurrer as long as the complaint alleges some viable basis upon which restitution may rest. [¶] Here, Plaintiff has adequately alleged the basis for his claims and performance by his assignor and the circumstances under which he is making claim for payment. That is enough to withstand a general demurrer."
ACI answered and, subsequently, the parties stipulated to Ping filing a SAC.
c. The SAC.
The SAC named Huang as an additional defendant. Ping alleged ACI was the alter ego and personal instrumentality of Huang, a resident of Riverside County, and that Huang failed to properly maintain ACI's separate corporate form. Huang "managed, and manipulated Defendant [ACI] for the sole purpose of raising capital to convert to [his] personal use and benefit or for other unauthorized and improper uses," and Huang "should . . . be held liable and accountable for the debts, liabilities, damages, and obligations of Defendant [ACI] resulting from [his] continued mismanagement and manipulation of the corporation."
The trial court sustained Huang's demurrer to the SAC without leave to amend, concluding the statute of limitations had run to add him as a new defendant. The court dismissed the SAC against Huang with prejudice.
After entry of judgment against ACI, Ping successfully moved to amend the judgment to add Huang as a judgment debtor as the alter ego of ACI. In a prior appeal, we concluded the trial court correctly denied Huang's motion to quash service because Ping properly served him by substitute service with the motion to amend the judgment. However, we reversed the amended judgment because the trial court had not yet acquired personal jurisdiction over Huang when it ordered him to file a substantive response to the motion to amend the judgment, and the trial court erred by entering the amended judgment during the safe harbor period when Huang was permitted to challenge denial of his motion to quash by petitioning this court for a writ of mandate. (Pan v. Huang (Aug. 27, 2015, E061462) [nonpub. opn.].)
On remand after the first appeal, the trial court denied another motion to quash service on Huang and again entered an amended judgment. In Pan v. Huang (Sept. 7, 2018, E068435) [nonpub. opn.], we conclude our first opinion is law of the case on the question of the trial court's personal jurisdiction over Huang, and that the trial court correctly denied Huang's second motion to quash service because he had already been properly served, but we would have once again reversed the amended judgment and remanded for the trial court to permit Huang the opportunity to file a substantive response to the motion to amend the judgment and to conduct a new hearing. As here, the parties in the companion appeal submitted a request for dismissal five days before the scheduled oral argument. We will grant the request for dismissal of the companion appeal, but we will issue an opinion addressing the issues.
Ping alleged the same business relationships and series of purchase orders and invoices that he alleged in the complaint and FAC. As in the original verified complaint and the FAC, the SAC alleged ACI failed to pay Heng Cheng $822,080.50 for goods actually delivered to ACI, and that Heng Cheng and ZiJiang assigned to Ping their rights and interest in the balance owed on those goods. And, like the FAC, the SAC purported to plead a single cause of action for unjust enrichment.
ACI demurred to the SAC arguing, inter alia, the SAC was a "sham pleading." According to ACI, the original verified complaint alleged Ping was assigned "contractual" rights, yet in the SAC (and the FAC for that matter) Ping did not allege a claim for breach of contract. Instead, Ping was now alleging a claim for unjust enrichment, which he may not do if he is suing on an express contract. By omitting the breach of contract claim, ACI argued Ping was abusing the privilege of amending pleadings.
The trial court overruled the demurrer: "The court has previously overruled this Defendant's Demurrer regarding the existence of a cause of action for unjust enrichment and whether it has been properly pleaded."
2. Applicable Law.
A complaint must contain "[a] statement of the facts constituting the cause of action, in ordinary and concise language." (Code Civ. Proc., § 425.10, subd. (a)(1).) If the complaint does not plead facts sufficient to state a cause of action, it is subject to a general demurrer. (Code Civ. Proc., §§ 430.10, subd. (e), 430.30, subd. (a).) "A general demurrer tests the legal sufficiency of a complaint by claiming it fails to state a cause of action based on defects appearing on its face or from matters subject to judicial notice. [Citations.] In other words, a general demurrer '"searches the complaint for all defects going to the existence of a cause of action and places at issue the legal merits of the action on assumed facts."' [Citation.]" (Alamo Recycling, LLC v. Anheuser Busch InBev Worldwide, Inc. (2015) 239 Cal.App.4th 983, 994.)
"An order overruling a demurrer is not directly appealable, but it may be reviewed on appeal from a final judgment. [Citations.] We review an order overruling a demurrer de novo. [Citation.]" (PGA West Residential Assn., Inc. v. Hulven Internat., Inc. (2017) 14 Cal.App.5th 156, 168, fn. omitted (PGA West).) "'In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. "We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed." [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]'" (PGA West, at p. 168, quoting Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
"We do not review the validity of the trial court's reasoning, and therefore will affirm its ruling if it was correct on any theory. [Citation.] Nor are we 'limited to plaintiff['s] theory of recovery in testing the sufficiency of [his] complaint against a demurrer, but instead must determine if the factual allegations of the complaint are adequate to state a cause of action under any legal theory.'" (Thompson v. Ioane (2017) 11 Cal.App.5th 1180, 1190, quoting Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 103.)
3. Analysis.
Skyline argues the trial court should have sustained ACI's demurrer to the SAC because Ping supposedly engaged in "sham pleading." "Under the sham pleading doctrine, allegations in an original pleading that rendered it vulnerable to demurrer or other attack cannot simply be omitted without explanation. [Citation.] The purpose of the doctrine is to enable the courts to prevent an abuse of process. [Citation.] The doctrine is not intended to prevent honest complainants from correcting erroneous allegations or to prevent the correction of ambiguous facts. [Citation.]" (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751.)
The "sham pleading" rule "relates to inconsistent factual averments; it does not apply to alternative or even inconsistent pleading of the legal effect of the same facts. [Citations.] In Witkin's phrase, the effect of 'omitted matter destructive' to a cause of action cannot be avoided by simply omitting it in a subsequent pleading. This rule '"is intended to prevent sham pleadings omitting an incurable defect in the case. However, '[r]ules of pleading are conveniences to promote justice and not to impede or warp it. We do not question the rule that all allegations of fact in a verified complaint, which are subsequently omitted or contradicted, are still binding on the complainant. The rule is valid and useful, but it does not exist in a vacuum and cannot be mechanically applied. It is a good rule to defeat abuses of the privilege to amend and to discourage sham and untruthful pleadings. It is not a rule, however, which is intended to prevent honest complainants from correcting erroneous allegations of generic terms which may have legal implications but which are also loosely used by laymen or to prevent the correction of ambiguous statements of fact.'"' [Citation.] The rule is aimed at averments of fact the pleading party attempts to avoid in a later pleading. [Citation.]" (Lim v. The.TV Corp. Internat. (2002) 99 Cal.App.4th 684, 690-691, first italics added.)
As demonstrated, ante, between Ping's original verified complaint and both amended complaints, the operative factual averments did not change considerably. All that changed was the theory of recovery Ping asserted. Therefore, Skyline's accusation of "sham pleading" is simply not well taken.
We are also completely unpersuaded by Skyline's mischaracterization of the pleadings. Ping never alleged in either of the complaints that his right to damages was based on ACI's breach of a contract, whether it be a contract between Heng Cheng/ZiJiang and ACI, or between Ping and ACI. For that reason, ACI's demurrer to the original verified complaint was well taken to the extent it argued Ping failed to state a claim for breach of contract by not pleading the existence of an enforceable written or oral contract between the parties. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821 [elements for breach of contract claim include "the existence of the contract"].)
Nor did Ping allege in the body of the complaints that his right to relief was based on "contractual rights" that were assigned to him by Heng Cheng and ZiJiang. Instead, Ping consistently pleaded that he obtained Heng Cheng and ZiJiang's rights to the balance owed by ACI on the purchase orders and related invoices. The only place where the words "contractual" and "rights" are found in close proximity is in the Assignment itself, which is attached as an exhibit to the operative SAC and is incorporated by reference. But as noted, ante, that language appears in a heading. The actual language of the Assignment states Heng Cheng and ZiJiang "assign, transfer and convey" to Ping all "right[s] and interest[s] in and to the Invoices . . . ." (Italics added.) Between the general heading "Assignment of Contractual Rights," and the specific terms of what the agreement actually assigned, the heading must give way. (Oakland Bank of Commerce v. Washington (1970) 6 Cal.App.3d 793, 800 (Oakland Bank) ["Of course, as between the mere heading and the specific provision, if there be any conflict, an interpretation made only from a reading of the document would be in favor of the specific provision."]; see Civ. Code, § 3534 ["Particular expressions qualify those which are general."]; Code Civ. Proc., § 1859 ["[W]hen a general and [a] particular provision are inconsistent, the latter is paramount to the former."].)
Even if Ping had pleaded in the body of the SAC that he obtained "contractual" rights through the Assignment, and even if the SAC purported to state a cause of action for breach of contract, "[w]e ignore erroneous or confusing labels in the pleading and look to its gravamen to determine what cause of action is stated. [Citation.]" (Navarrete v. Meyer (2015) 237 Cal.App.4th 1276, 1283; see PGA West, supra, 14 Cal.App.5th at p. 173.) As ACI argued in its demurrer to the original verified complaint, by themselves invoices are not contracts. (C9 Ventures v. SVC-West, L.P. (2012) 202 Cal.App.4th 1483, 1501, quoting India Paint Co. v. United Steel Prod. Corp. (1954) 123 Cal.App.2d 597, 607 ["'The prevailing rule is that an invoice, standing alone, is not a contract . . . .'"].) Ping alleged his right to damages was based on purchase orders and related invoices for goods ACI received but never fully paid for, so the gravamen of the SAC simply could not have been for breach of contract. Because Ping did not and could not allege the existence of a contract between Heng Cheng and ZiJiang and ACI, he was correct to seek restitution. (See Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370 ["As a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract."].)
Restitution is based on the theory of quasi-contract or an obligation implied by law. (1 Witkin, Summary of Cal. Law (11th ed. 2017) Contracts, § 103, p. 148, § 1050, pp. 1097-1098.) "Unlike an implied-in-fact contract, an implied-in-law contract or quasi-contract is not based on the intention of the parties, but arises from a legal obligation that is imposed on the defendant. [Citation.]" (Unilab Corp. v. Angeles-IPA (2016) 244 Cal.App.4th 622, 639 (Unilab).) "'An individual is required to make restitution if he or she is unjustly enriched at the expense of another. [Citations.] A person is enriched if the person receives a benefit at another's expense. [Citation.] Benefit means any type of advantage. [Citations.] [¶] The fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it.' [Citation.] 'The object of restitution . . . is to eliminate profit' of the 'conscious wrongdoer, or . . . defaulting fiduciary without regard to notice or fault . . . .' [Citation.]" (Meister v. Mensinger (2014) 230 Cal.App.4th 381, 398, italics omitted.)
Giving the SAC's properly pleaded facts a liberal construction, as we must (Code Civ. Proc., § 452; PGA West, supra, 14 Cal.App.5th at p. 172), we conclude Ping pleaded a viable claim for restitution. The SAC alleged that ACI, either directly or through Hong Kong Ltd., issued purchase orders for scales from Heng Cheng. Heng Cheng, through ZiJiang, fulfilled those orders by shipping scales to ACI. ACI received the scales, yet it only paid $100,000 of the almost $1,000,000 it owed Heng Cheng. ACI unjustly retained the scales to Heng Cheng's detriment. Heng Cheng and ZiJiang thereafter assigned to Ping their rights to collect the balance owed by ACI. Those facts amply supported a claim for restitution, so we must conclude the trial court correctly overruled ACI's general demurrer to the SAC.
B. The Trial Court Correctly Admitted the Assignment into Evidence, and Substantial Evidence Supports the Court's Express and Implied Findings That the Assignment Was Validly Executed.
Skyline argues the trial court abused its discretion by admitting into evidence a copy of the Assignment, because it was not properly authenticated. We find no abuse of discretion. Skyline also argues the trial court erred by concluding the Assignment was validly executed. The trial court made no finding that ZiJiang authorized the Assignment, but the court expressly concluded Heng Cheng authorized the Assignment of its rights. We conclude substantial evidence supports the court's express and implied findings that the Assignment was duly authorized.
1. Additional Background.
Before trial, ACI moved in limine to exclude the Assignment from evidence, arguing it was not validly executed. ACI argued Ping had the burden of proving ZiJiang and Heng Cheng "both followed proper corporate procedure and duly authorized the execution and terms of the [Assignment]." ACI submitted a declaration from Huang in which he stated Heng Cheng never authorized the Assignment.
Ping opposed the motion contending, inter alia, ACI's arguments related to the Assignment's enforceability and not to its admissibility at trial. (See Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2017) ¶ 4:220, p. 4-54 ["A motion in limine is a motion 'at the threshold' of trial to exclude evidence deemed inadmissible and prejudicial by the moving party." (Italics omitted.)].) The trial court denied the motion without prejudice to ACI renewing its argument at trial.
Ping testified that as general manager and legal representative for Heng Cheng, from time to time he entered into contracts on behalf of Heng Cheng. Ping identified exhibit 1 as the Assignment entered into between himself and Heng Cheng and ZiJiang. Ping's attorney informed the court he would lay a foundation for admitting the Assignment pursuant to Evidence Code sections 1413 and 1454.
On direct examination, Ping identified his signature on the Assignment. Ping testified he signed English and Chinese language copies of the agreement at ZiJiang's corporate headquarters. Present for the signing were Ping, ZiJiang's general manager, ZiJiang's attorney, and a notary public. Ping personally witnessed ZiJiang's general manager sign the Assignment. ACI's attorney objected to Ping's qualification to testify that the person who signed on behalf of ZiJiang was the company's general manager. When the court asked for some foundation, Ping testified that both he and the person who signed the Assignment on behalf of ZiJiang were required to identify themselves to the notary, who verified their identities. Ping testified the Chinese language certificate from the notary stated the Assignment was signed by Lou Siqi (Siqi), "the authorized representative" for ZiJiang.
Before counsel could examine Ping further on the Assignment, ACI's attorney objected, arguing the document "is not an original document which is being provided to the Court [nor] has [it] ever been provided to us, and as such, an original needs to be used to determine if it matches what this document purports to be." The court overruled the objection.
A Chinese interpreter read into the record the wording of an untranslated certificate from a Chinese government notary. The notary certified the Assignment was signed in Shanghai, China, by "the authorized representative of [ZiJiang], Si Qi Lou," under the corporate seal of ZiJiang, and by Ping as legal representative of Heng Cheng, under Heng Cheng's corporate seal.
Counsel then asked Ping, "Now, when the documents were signed by you and the person from [ZiJiang], what did you do next with the documents?" Ping testified he and his attorney "took the documents to the U.S. Consulate in Shanghai . . . to be certified." When asked if the American vice consul returned the documents to him, Ping answered, "I did not get it back personally." Instead, Ping testified the documents were mailed to his attorney, who then provided Ping with a copy. Ping's attorney then moved to admit the Assignment into evidence, arguing it had been authenticated pursuant to Evidence Code section 1454.
ACI's attorney objected, again arguing "this is not the original document that's being offered into evidence but merely a photocopy of the document that we have not had the opportunity to take a look at." The court asked Ping's attorney, "Where's the original certified document?" Ping's attorney said he had only been provided a copy, but argued "the Evidence Code is clear that a photographic copy is as good as an original, and we provided this to them long ago." ACI's attorney responded, "The problem is, your honor, is that we cannot take a look at the original document to compare this photocopy and tell if there's been any changes, modifications, deletions or additions to it." Ping's attorney again argued a photocopy was admissible. The court overruled ACI's objection and admitted the Assignment into evidence.
On cross-examination, Ping testified Siqi was the legal representative of ZiJiang, and that he knew this because the notary verified Siqi's identity. When probed further, Ping testified both he and Siqi presented their identifications and business licenses to the notary. Ping admitted there was no documentary proof that Siqi presented her business license to the notary. Ping also testified he had never met ZiJiang's legal representative before the Assignment was signed.
Unlike the Chinese language certificate from the notary, the English language translation identified Siqi as the "Entrust Agent" of ZiJiang. When asked on cross-examination if he knew the difference between an "entrusted agent" and a legal representative, Ping answered, "I only recognize legal representative. I do not recognize what you called entrust agent." When pressed further, Ping testified he never personally verified that Siqi was ZiJiang's legal representative, and he relied on the notary's verification of Siqi's identity and corporate position. Finally, Ping testified he was not a shareholder or employee of ZiJiang, and he had no personal knowledge of whether ZiJiang's shareholders had approved the Assignment.
Previously, Huang testified he filed a lawsuit in China in which he claimed Ping lacked the authority to enter into the Assignment on Heng Cheng's behalf. Huang also testified that Heng Cheng conducted no shareholder meetings since 2005, and that he was "never asked to give approval of anything the shareholders did."
The trial court made no express finding that ZiJiang authorized the Assignment. But, in its statement of decision and judgment, the trial court did find that Heng Cheng authorized the Assignment: "Ping Pan, as 100% owner, General Manager and Legal Representative of Shanghai [i.e., Heng Cheng], assigned all of its 'rights and interest' to the eight invoices to ACI through an Assignment and Assumption Agreement." The court also found there was "[n]o evidence . . . presented to show that this assignment was not legal under Chinese law."
2. The Trial Court Did Not Abuse Its Discretion by Finding the Assignment Was Properly Authenticated.
a. Applicable law on authentication of writings.
"We review rulings on the admissibility of evidence for abuse of discretion, and reverse only where there is a clear showing the trial court exceeded the bounds of reason under all the circumstances. [Citation.]" (Arave v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (2018) 19 Cal.App.5th 525, 533.) The same standard of review applies to a trial court's ruling that a writing has been properly authenticated. (Ramos v. Westlake Services, LLC (2015) 242 Cal.App.4th 674, 684 (Ramos).)
A writing must be authenticated before it may be received into evidence, and before secondary evidence of the content of the writing may be received into evidence. (Evid. Code, § 1401, subds. (a) & (b); see id., § 250 [defining "[w]riting"].) "A writing's authenticity is a preliminary question for the trial court and a question independent of whether the writing is admissible evidence. Proper authentication does not overcome other rules of evidence, such as hearsay or relevancy. [Citation.]" (1 Jefferson, Cal. Evidence Benchbook (Cont.Ed.Bar 4th ed. 2018) Authentication and Proof of Writings, § 31.4, p. 31-4; accord, People v. Goldsmith (2014) 59 Cal.4th 258, 266 ["To be admissible in evidence, a writing must be relevant and authenticated. . . . And it must not be subject to any exclusionary rule."]; Assem. Com. on Judiciary com., 29B pt. 5 West's Ann. Evid. Code (2015 ed.) foll. § 1401, p. 203 ["Authentication of a writing does not in and of itself authorize the writing to be admitted in evidence. The writing, of course, must be relevant and not be made inadmissible by any exclusionary rule—e.g., the hearsay rule"].)
"'Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law' ([Evid. Code], § 1400), such as by a statutory presumption [citations]. [¶] The statutory presumptions (Evid. Code, §§ 1451-1454) affect the burden of producing evidence (id., § 1450). If the facts support the existence of a presumption, '[t]he burden is on the adverse party to introduce evidence sufficient to sustain a finding that the . . . official writing is not genuine in order to dispel the presumption of authenticity or genuineness.' [Citation.] If the adverse party fails to come forward with evidence that disputes authenticity, the writing must be found to be authentic. (Evid. Code, § 604; [citation].)" (Jacobson v. Gourley (2000) 83 Cal.App.4th 1331, 1334 (Jacobson).)
Relevant here, compliance with Evidence Code section 1454 provides a presumption that a foreign official document is authenticated and admissible into evidence. "A signature is presumed to be genuine and authorized if it purports to be the signature, affixed in his official capacity, of an officer, or deputy of an officer, of a nation or public entity in a nation recognized by the executive power of the United States and the writing to which the signature is affixed is accompanied by a final statement certifying the genuineness of the signature and the official position of (a) the person who executed the writing or (b) any foreign official who has certified either the genuineness of the signature and official position of the person executing the writing or the genuineness of the signature and official position of another foreign official who has executed a similar certificate in a chain of such certificates beginning with a certificate of the genuineness of the signature and official position of the person executing the writing. The final statement may be made only by a secretary of an embassy or legation, consul general, consul, vice consul, consular agent, or other officer in the foreign service of the United States stationed in the nation, authenticated by the seal of his office." (Evid. Code, § 1454.) The presumption established by Evidence Code section 1454 "relates to the authentication of any foreign official writing, whether it be an original or a copy." (Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1454, p. 260.)
While not binding, the official comments of the California Law Revision Commission on sections of the Evidence Code are declarative of the Legislature's intent and are entitled to substantial weight. (HLC Properties, Ltd. v. Superior Court (2005) 35 Cal.4th 54, 62; City of Corona v. Liston Brick Co. (2012) 208 Cal.App.4th 536, 545.)
"[T]he fact that the judge [finds the writing is authenticated and admits the writing into evidence] does not necessarily establish the authenticity of the writing; all that the judge has determined is that there has been a sufficient showing of the authenticity of the writing to permit a trier of fact to find that it is authentic. The trier of fact independently determines the question of authenticity, and, if the trier of fact does not believe the evidence of authenticity, it may find that the writing is not authentic despite the fact that the judge has determined that it was 'authenticated.' [Citation.]" (Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1400, p. 193.) Similarly, the statutory presumptions of authentication do not conclusively establish a writing's authenticity. For example, "[w]hen there is . . . evidence disputing the authenticity of an official seal or signature, the trier of fact is required to determine the question of authenticity without regard to any presumption [of authentication] created by [Evidence Code section 1452]. [Citation.]" (Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1452, p. 255.)
b. Analysis.
Skyline argues the trial court erred by introducing the Assignment into evidence because Ping never properly authenticated it. More specifically, Skyline contends the Assignment was not properly authenticated because Ping only provided the court with a copy of the vice consul's final statement, and Ping's testimony demonstrates he had no personal knowledge of whether the final statement submitted to the court was a true and correct copy because he never actually saw the original.
Ping misconstrues Skyline's argument as focusing on the fact that the Assignment was a copy, when in fact Skyline's argument focuses on the fact that the vice consul's final statement was a copy. Estate of Chichernea (1967) 66 Cal.2d 83, which Ping cites, is not dispositive. Although the Supreme Court in that case addressed Evidence Code section 1454 in dicta with respect to the authentication of foreign official documents that may or may not have been copies (Chichernea, at pp. 86, fn. 2, 100, fn. 35), nothing in that opinion suggests the final statements supplied to the trial court were copies and not originals.
Whether Evidence Code section 1454 requires that the consular final statement must be an original is a question of statutory interpretation, which we review de novo. (Weatherford v. City of San Rafael (2017) 2 Cal.5th 1241, 1247.) "In statutory interpretation, our fundamental task 'is to determine the Legislature's intent so as to effectuate the law's purpose.' [Citation.] 'We look first to the plain meaning of the statutory language, giving the words their usual and ordinary meaning. [Citation.] If there is no ambiguity in the statutory language, its plain meaning controls; we presume the Legislature meant what it said. [Citations.]'" (Anderson Union High School Dist. v. Shasta Secondary Home School (2016) 4 Cal.App.5th 262, 283.)
The only requirement for the final statement actually contained in the statute is that it "be made only by a secretary of an embassy or legation, consul general, consul, vice consul, consular agent, or other officer in the foreign service of the United States stationed in the nation, authenticated by the seal of his office." (Evid. Code, § 1454, italics added.) The statute is conspicuously silent on whether the final statement submitted to the trial court must be an original, and we have found no authority whatsoever for the proposition that a copy of the final statement is insufficient to authenticate a foreign official document. Given the unique obstacles a proponent often faces when attempting to authenticate a foreign official document (see Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1454, p. 260), we are loath to read into the statute an additional hurdle by mandating that the final statement of a consular or foreign service officer submitted to the court must be an original. When interpreting a statute, "our job is 'simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted . . . .' (Code Civ. Proc., § 1858.)" (Pacific Gas & Electric Co. v. Superior Court (2017) 10 Cal.App.5th 563, 571.)
Likewise, we have found no authority for the proposition that rule 44 of the Federal Rules of Civil Procedure, the federal analogue to Evidence Code section 1454, requires that the "final certification of genuineness" of a foreign official document must be an original and not a copy. (Fed. Rules Civ. Proc., rule 44(a)(2)(B), 28 U.S.C.)
As for Ping's lack of personal knowledge about the genuineness of the vice consul's final statement, Skyline's argument is unpersuasive. Even in the absence of a statutory presumption, a proponent's burden is to introduce sufficient evidence from which the trial court may conclude the writing is what the proponent claims it is. (Evid. Code, § 1400; Jacobson, supra, 83 Cal.App.4th at p. 1334.) The proponent is not required to introduce incontestable evidence of the writing's genuineness. "As long as the evidence would support a finding of authenticity, the writing is admissible. The fact conflicting inferences can be drawn regarding authenticity goes to the document's weight as evidence, not its admissibility. [Citations.]" (Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 321 (Jazayeri).)
Once Ping submitted sufficient evidence to authenticate the Assignment, in the form of the vice consul's final statement, the burden shifted to ACI to produce evidence that the Assignment and/or the final statement were not, in fact, genuine. But other than object to the introduction of the Assignment into evidence for lack of authentication, ACI produced no evidence to disprove its authenticity. Therefore, the presumption under Evidence Code section 1454 became final and the trial court was required to admit the Assignment into evidence. (Evid. Code, § 604; Jacobson, supra, 83 Cal.App.4th at p. 1334; see Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1450, p. 247 [Evid. Code, §§ 1450-1454 "require a finding of authenticity unless the adverse party produces evidence sufficient to sustain a finding that the writing in question is not authentic"].)
Because we have concluded Ping properly authenticated the Assignment pursuant to Evidence Code section 1454, we need not address his alternative arguments that the Assignment was authenticated by the testimony of a subscribing witness (Evid. Code, § 1413) or by circumstantial evidence (Evid. Code, § 1410 [statutory means of authentication not exclusive]; Ramos, supra, 242 Cal.App.4th at p. 684 ["'[A] writing can be authenticated by circumstantial evidence and by its contents.'"]).
As noted, ante, the trial court's threshold finding of authenticity only meant the court was required to admit the Assignment into evidence. ACI could have still presented evidence and argued to the trier of fact (the trial court, in this case) that the Assignment was not actually genuine, and the trier of fact was free to conclude it was not. (Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1400, p. 193.) But ACI submitted no such evidence or argument at trial about the Assignment's genuineness.
In its reply brief, Skyline contends, in passing, that Ping's use of the copy of the vice consul's final statement to authenticate the copy of the Assignment constituted "double hearsay." ACI never objected to the Assignment or final statement on hearsay or multiple hearsay grounds, so any claim on appeal that their admission into evidence violated the hearsay rule has been forfeited. (Evid. Code, § 353, subd. (a); Faigin v. Signature Group Holdings, Inc. (2012) 211 Cal.App.4th 726, 749 (Faigin).) Even if ACI had timely interposed a hearsay or multiple hearsay objection, Skyline forfeited any claim of error on appeal by waiting to assert it in its reply brief. (Inyo Citizens for Better Planning v. Inyo County Bd. of Supervisors (2009) 180 Cal.App.4th 1, 14, fn. 2.)
3. Substantial Evidence Supports the Trial Court's Express and Implied Findings That the Assignment Was Valid and That It Transferred to Ping the Right to Seek Restitution.
Skyline argues Ping failed to meet his burden of proving that the person who signed the Assignment on behalf of ZiJiang had the authority to do so and that Ping had the authority to transfer Heng Cheng's assets. As noted, ante, the trial court made no express finding that ZiJiang authorized the Assignment, but it expressly found that Heng Cheng did. We conclude the trial court's express and implied findings that the Assignment was valid are supported by substantial evidence.
Skyline also suggests in passing that Ping breached his fiduciary duty to Heng Cheng when he assigned away its rights to collect on the invoices, but it provides no record citations or reasoned argument in support of that assertion. We need not address it further. (AmeriGas Propane, L.P. v. Landstar Ranger, Inc. (2010) 184 Cal.App.4th 981, 1001, fn. 4 ["[W]hen counsel asserts a point but fails to support it with reasoned argument and citations to authority, the court may deem it to be forfeited, and pass it without consideration."].)
a. Applicable law of assignments.
An assignment is a transfer of legal title to property. (Civ. Code, § 1039; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 727, p. 784.) "California . . . maintains a policy encouraging the free transferability of all types of property. [Citations.] '[I]t is a fundamental principle of law that one of the chief incidents of ownership of property is the right to transfer it.' [Citation.]" (Essex Ins. Co. v. Five Star Dye House, Inc. (2006) 38 Cal.4th 1252, 1259 (Essex Ins. Co.).) This principle applies to both tangible and intangible forms of property. (Ibid.; see Civ. Code, § 1044 ["Property of any kind may be transferred, except as otherwise provided by this article."].)
A "chose" or right of action arising out of an "obligation" is a form of personal property that may be transferred by its owner. (Civ. Code, §§ 655, 953-954, 1458; Essex Ins. Co., supra, 38 Cal.4th at p. 1259; Bush v. Superior Court (1992) 10 Cal.App.4th 1374, 1380; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 740, pp. 795-796.) An "obligation" is a legal duty that arises from a contract or by "operation of law." (Civ. Code, §§ 1427-1428; Code Civ. Proc., § 26.) "An obligation arising from: [¶] . . . [¶] . . . operation of law may be enforced in the manner provided by law, or by civil action or proceeding." (Civ. Code, § 1428; see Code Civ. Proc., §§ 21, subd. 1, 22 & 25, subd. 1.) Obligations arising by "operation of law" include statutorily created duties (see Civ. Code, §§ 1708-1725), and duties implied at common law. As noted, ante, the obligation to pay restitution for unjust enrichment is based on quasi-contract or an obligation implied by law. (Unilab, supra, 244 Cal.App.4th at p. 639; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 103, p. 148 & § 1050, pp. 1097-1098.)
Transfer of a chose in action includes "all its incidents," meaning rights incidental to the right of action itself that are held by the assignor. (Civ. Code, § 1084.) However, "'[a]s a general rule[] the assignee of a chose in action stands in the shoes of his assignor, taking his rights and remedies . . . .' [Citation.]" (Essex Ins. Co., supra, 38 Cal.4th at p. 1264; see 1 Witkin, Summary of Cal. Law, supra, Contracts, § 758, p. 809.)
"It is well established that an assignment of a chose in action for collection vests the legal title in the assignee whether or not any consideration is paid therefor. In such case the assignee may maintain a suit thereon in his own name, even though the assignor retains an equitable interest in the thing assigned. [Citations.]" (National Reserve Co. v. Metropolitan Trust Co. (1941) 17 Cal.2d 827, 831 (National Reserve Co.).) "In determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling. [Citation.] An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto. [Citation.] These incidental rights include certain ancillary causes of action arising out of the subject of the assignment and accruing before the assignment is made." (Id. at pp. 832-833, italics added.)
"The burden of proving an assignment falls upon the party asserting rights thereunder [citations]. In an action by an assignee to enforce an assigned right, the evidence must not only be sufficient to establish the fact of assignment when that fact is in issue [citation] but the measure of sufficiency requires that the evidence of assignment be clear and positive to protect an obligor from any further claim by the primary oblige [citation]." (Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 292.) If challenged by the defendant, the assignee must prove that the person who signed the assignment on behalf of the assignor had authority to transfer the assignor's rights. (Id. at pp. 292-293; see Bengel v. Kenney (1932) 126 Cal.App. 735, 737 [plaintiff-assignee "failed to prove a proper or valid authorization for the execution of any assignment" by assignor corporation].)
We review for substantial evidence a trial court's findings of fact in a statement of decision. (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981.) This standard of review applies to a court's findings about the validity of an assignment. (See, e.g., Fink v. Shemtov (2012) 210 Cal.App.4th 599, 603, 608; Champion Home Builders Co. v. Spies (1990) 219 Cal.App.3d 1415, 1423-1424.) "Under this deferential standard of review, findings of fact are liberally construed to support the judgment and we consider the evidence in the light most favorable to the prevailing party, drawing all reasonable inferences in support of the findings. [Citation.] [¶] A single witness's testimony may constitute substantial evidence to support a finding. [Citation.] It is not our role as a reviewing court to reweigh the evidence or to assess witness credibility. [Citation.] 'A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness.' [Citation.] Specifically, '[u]nder the doctrine of implied findings, the reviewing court must infer, following a bench trial, that the trial court impliedly made every factual finding necessary to support its decision.' [Citation.]" (Thompson, at p. 981.)
b. Analysis.
Skyline makes two arguments about the Assignment's validity. First, Skyline contends Ping failed to prove the person who signed the Assignment on behalf of ZiJiang had any authority to assign away that company's rights. Second, Skyline argues Ping had no authority to sign the Assignment on behalf of Heng Cheng because neither Huang nor Heng Cheng's board of directors approved the transfer of what amounted to the company's last remaining asset. Related to the second argument, Skyline contends the trial court erred by finding Huang was not a shareholder of Heng Cheng.
Skyline argues Ping had the burden of proving the Assignment of ZiJiang's rights "followed proper corporate procedure and that [a] duly authorized officer[] executed the [Assignment]." The only citation provided in support of this proposition does not assist Skyline. In American Center for Education, Inc. v. Cavnar (1978) 80 Cal.App.3d 476 (Cavnar), a nonprofit, charitable corporation obtained a judgment removing certain individuals as directors, members of the executive committee, officers, or employees of the corporation. (Id. at pp. 482-484, superseded by statute as stated in Patton v. Sherwood (2007) 152 Cal.App.4th 339, 346-347.) The Court of Appeal discussed whether corporate formalities were followed when the corporate officers were removed and found that in some instances the removals were invalid. (Cavnar, at pp. 487-497.)
The individuals in Cavnar claimed to have held positions in the corporation and, therefore, they had standing to assert that their removals did not comply with proper corporate procedures. In contrast, there was no evidence introduced at trial that Huang held any position in ZiJiang, and Huang testified he had no ownership interest in ZiJiang. As a consequence, ACI and its successor Skyline lack standing to question whether ZiJiang's corporate formalities were followed when it entered into the Assignment. (Cf. Korean Philadelphia Presbyterian Church v. California Presbytery (2000) 77 Cal.App.4th 1069, 1083 ["A corporate outsider cannot bring suit to challenge a corporation's management or control. Only a shareholder, officer, or director has standing to do so."].)
We conclude the record contains substantial evidence to support the trial court's implied finding that the assignment of ZiJiang's rights was duly authorized. "'Corporations can act only through the agency of natural persons, and it has been held that the authority of an agent of a corporation need not be in writing, so far as the statute of frauds is concerned. [Citations.]'" (Jeppi v. Brockman Holding Co. (1949) 34 Cal.2d 11, 17 (Jeppi), quoting Carrier v. Piggly Wiggly of S.F. (1936) 11 Cal.App.2d 180, 182.) The courts have long held that the signature of a corporation's president, under the corporation's seal, is sufficient to establish an assignment was authorized by the corporation even in the absence of a resolution from the board of directors. (Smith v. Pittler (1928) 95 Cal.App. 101, 105-106; Burrell v. Southern California Canning Co. (1917) 35 Cal.App. 162, 165.) Likewise, the signature of a corporation's general manager, under the seal of the corporation, is sufficient proof of authority to enter into an assignment. "[I]t is well established that the general manager has implied authority to bind the corporation and do in the transaction of its ordinary affairs whatever the corporation itself could do within the scope of its powers." (Monteleone v. Southern California Vending Corp. (1968) 264 Cal.App.2d 798, 806 (Monteleone), citing Pacific Concrete Products Corp. v. Dimmick (1955) 136 Cal.App.2d 834, 838 & Greig v. Riordan (1893) 99 Cal. 316.)
The Assignment was signed in ZiJiang's corporate headquarters, which it shared with Heng Cheng. Ping testified, without contradiction, that Siqi was ZiJiang's general manager. Also present for the signing was ZiJiang's attorney. Ping personally witnessed Siqi sign the Assignment. Before she signed the Assignment, Siqi presented her identification and business license to a Chinese government notary, who verified Siqi's identification and business title. Siqi signed the Assignment under ZiJiang's corporate seal. Therefore, Ping's testimony, which the trial court impliedly found to be credible, was substantial evidence that Siqi, as ZiJiang's general manager, had at least the apparent authority to transfer to Ping its rights to collect on the invoices.
As for Ping's authority to assign Heng Cheng's rights, we need not decide whether the trial court erred by finding Huang was not a shareholder of Heng Cheng. Even if we assume that Huang was a 50 percent shareholder of Heng Cheng, we conclude Ping had the authority to assign the company's rights to collect on the invoices. Ping testified without contradiction that he was Heng Cheng's general manager and legal representative, and that he regularly entered into contracts on behalf of the company. Therefore, Ping had apparent authority to bind the corporation with or without a vote of the board of directors. (Monteleone, supra, 264 Cal.App.2d at p. 806.) Skyline does not dispute that Ping, by virtue of his position as an officer of the corporation, had general authority to assign corporate assets. Instead, Skyline contends the nature of the Assignment was such that it required a vote of the board of directors or, at a minimum, Huang's consent.
In the context of its argument about the order overruling ACI's demurrer to the SAC, Skyline seems to argue that, even if the Assignment was validly executed, it did not assign to Ping the right to bring a claim for unjust enrichment. To the extent Skyline argues the scope of the Assignment was limited to contract-based claims, and did not transfer the right to pursue equitable claims such as restitution for unjust enrichment, Skyline is wrong. While the Assignment's heading purported to describe what was being transferred as "Contractual Rights," the actual recitals and body of the agreement clearly manifested Heng Cheng's and ZiJiang's intent to transfer to Ping the right to collect what ACI owed on the invoices. (See Oakland Bank, supra, 6 Cal.App.3d at p. 800.) Such a broad and unqualified assignment meant that Ping received the right to pursue any and all incidental and ancillary remedies and causes of action to collect on the invoices, whether they sounded in contract, tort, or equity. (National Reserve Co., supra, 17 Cal.2d at pp. 832-833.)
Skyline argues the evidence established that Heng Cheng ceased to operate as a going concern in 2010 and, therefore, the right to collect on the invoices was Heng Cheng's sole remaining asset. In relevant part, Corporations Code section 1001, subdivision (a), provides that "[a] corporation may sell, lease, convey, exchange, transfer, or otherwise dispose of all or substantially all of its assets when the principal terms are approved by the board and, unless the transaction is in the usual and regular course of its business, approved by the outstanding shares . . . , either before or after approval by the board and before or after the transaction." (Italics added.) As one respected commentator has noted, "nothing in [section 1001 of the Corporations Code] or cases sheds any light on what amount or percentage of corporate assets constitutes 'substantially all' of the total. Arguably, only transfers that would render the corporation unable to continue in business in its usual way should be subject to the requirement of specific approval by the board of directors and shareholders." (Friedman & Fotenos, Cal. Practice Guide: Corporations (The Rutter Group 2018) ¶ 8:586, p. 8-146.)
Corporations Code section 1001, subdivision (a), does not apply here. Contrary to the suggestion in Skyline's brief, there is no evidence in the record that Heng Cheng's right to collect on the invoices was its last remaining asset, or that Ping's transfer of that right would render the company unable to continue in business. Zhishi, Heng Cheng's deputy general manager, testified the company stopped manufacturing scales in November 2010. But he did not testify, as suggested by Skyline, that the company went out of business at that time or that it had no other assets. To the contrary, Zhishi testified that as of February 2014 his then-present duties were "[m]anaging the company."
Indeed, when asked during his January 2, 2014 deposition if Heng Cheng was still conducting business, Huang answered, "I'm not sure. I don't know."
The parties stipulated that a certified English language translation of the December 12, 2013 judgment in the Chinese action could be received into evidence. The Chinese court did not determine whether the Assignment was valid or invalid, and the decree dissolving Heng Cheng as a corporation has no bearing on whether the corporation was still a going concern when the Assignment was signed two years earlier.
And even if Skyline is correct that Heng Cheng effectively went out of business by the time the Assignment was signed in July 2011, Corporations Code section 1001, subdivision (a), would still not apply. "'"The reason for this limitation [on the sale of all or substantially all of a corporation's assets] is that a corporation is organized for the purpose of doing business of some nature, and, if so, its shareholders have the right to insist that the corporation continue for the purpose for which it was organized. A sale therefore, of all its property, or so much thereof as would prevent it from continuing in such business, would constitute a violation of the corporate contract."'" (Bickston v. Federal Firearms Corp. (1964) 227 Cal.App.2d 574, 579-580, italics added, quoting Jeppi, supra, 34 Cal.2d at pp. 15-16.) In other words, the statute only applies to an "existing, going corporation . . . ." (In re Mayellen Apartments, Inc. (1955) 134 Cal.App.2d 298, 307, italics added [interpreting former Corp. Code, § 3901].)
In sum, Skyline has not demonstrated that a vote of the board of directors or Huang's consent was required before Ping could assign Heng Cheng's rights to collect on the invoices. Ping's authority as general manager was sufficient evidence that Heng Cheng authorized the Assignment. Therefore, we conclude the trial court's express finding that Heng Cheng authorized the Assignment is supported by substantial evidence.
C. The Trial Court Properly Admitted Zhishi's Ledger as a Business Record.
Skyline argues the trial court abused its discretion by admitting into evidence Zhishi's ledger of payments received by Heng Cheng from ACI as a business record because Ping failed to introduce evidence of the following: (1) that the ledger was prepared in the regular course of Heng Cheng's business; (2) that Zhishi had a business duty to observe and report the facts recorded in the ledger; (3) that the ledger accurately recorded the payments made to Heng Cheng by ACI; and (4) when the facts were recorded in the ledger. We conclude the trial court did not abuse its discretion because Ping presented sufficient evidence to satisfy all of the foundational requirements for admitting Zhishi's ledger under the business record hearsay exception.
In his brief, Ping contends ACI did not object to the ledger on hearsay grounds and the trial court did not necessarily admit the document under the business record hearsay exception. An objection to the admission of evidence must be timely and "make clear the specific ground of the objection . . . ." (Evid. Code, § 353, subd. (a).) By objecting that the ledger was not admissible as a business record—which is an exception to the hearsay rule—ACI timely interposed a hearsay objection. True, the trial court did not expressly say on which basis it admitted the ledger into evidence, but Ping offered no alternative basis for admitting the ledger into evidence. The clear inference to be drawn from the record is that the court ruled it was admissible as a business record.
1. Additional Background.
In a motion in limine, ACI moved to exclude the testimony of Zhishi, arguing, inter alia, Zhishi's deposition testimony showed he did not keep Heng Cheng's books and did not oversee its operations, he did not maintain ZiJiang's books, and he had no personal knowledge about money allegedly owed to ZiJiang. Ping opposed the motion arguing Zhishi testified at his deposition that he was the deputy general manager for Heng Cheng and, although he was not personally responsible for preparing Heng Cheng's account books and records of payments made to Heng Cheng, Zhishi acted as a supervisor of those records and actively participated in Heng Cheng's day-to-day business operations. In addition, Ping argued Zhishi had personal knowledge of purchase orders received by Heng Cheng and of the sums owed to the company by ACI.
As it did with the motion in limine to exclude the Assignment from evidence, the trial court denied ACI's motion to preclude Zhishi from testifying, without prejudice to ACI renewing its objection at trial.
Zhishi testified he was the deputy general manager for Heng Cheng, and that his present duties were "managing the company." Zhishi testified Heng Cheng was in the business of manufacturing electronic scales, but that as of November 2010, the company ceased manufacturing operations because it failed to receive payment from ACI and was therefore unable to make relative payments for materials. Zhishi testified that when Heng Cheng was still actively manufacturing scales, he was "in charge of everything," including receiving orders and overseeing the operation of the company. He supervised the accounting staff who handled accounts payable and made payments to third party vendors. When asked if he reviewed the work of the accounting staff for accuracy, Zhishi testified, "Every time a payment was made, I had to sign." Zhishi testified he also reviewed receipts of payments made to Heng Cheng from ACI, its sole customer.
Zhishi testified that prior to November 2005, Ping maintained a record of payments made to Heng Cheng. As of November 2005 onward, Zhishi "ke[pt] track" of ACI's payments using a ledger. When asked if it was his job to make sure the ledger was accurate, Zhishi testified, "The accountant[s] had their own job," but he kept his own record. Zhishi identified exhibit 48 as his ledger. Zhishi testified he was the custodian of record for Heng Cheng's financial records, and that he had maintained possession of those records since November 2005.
ACI objected when Ping's attorney moved to admit exhibit 48 into evidence. Counsel for ACI argued, "They're not business records of the company. They're personal records." The trial court overruled the objection and received the exhibit into evidence. Counsel for ACI renewed his objection during the testimony of Ling Ling, and the court again overruled it.
2. Applicable Law on Admitting Business Records.
"Evidence of an out-of-court statement offered to prove the truth of the matter stated is hearsay. (Evid. Code, § 1200, subd. (a).) Hearsay is inadmissible unless an exception to the hearsay rule applies. (Id., subd. (b).)" (Faigin, supra, 211 Cal.App.4th at p. 749.) "Under the business record exception to the hearsay rule, '[e]vidence of a writing made as a record of an act, condition, or event is not made inadmissible by the . . . rule when offered to prove the act, condition, or event if: [¶] (a) The writing was made in the regular course of a business; [¶] (b) The writing was made at or near the time of the act, condition, or event; [¶] (c) The custodian or other qualified witness testifies to its identity and the mode of its preparation; and [¶] (d) [t]he sources of information and method and time of preparation were such as to indicate its trustworthiness.' (Evid. Code, § 1271, subds. (a)-(d).)" (Estate of O'Connor (2017) 16 Cal.App.5th 159, 169-170.)
"'The chief foundation of the special reliability of business records is the requirement that they must be based upon the first-hand observation of someone whose job it is to know the facts recorded. . . . But if the evidence in the particular case discloses that the record was not based upon the report of an informant having the business duty to observe and report, then the record is not admissible under this exception, to show the truth of the matter reported to the recorder.' [Citation.]" (Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1271, p. 6; see Taylor v. Centennial Bowl, Inc. (1966) 65 Cal.2d 114, 126.)
There is a strong preference for testimony, by a live witness or by declaration, establishing each of the foundational requirements for admitting a business record. (See, e.g., Sanchez v. Hillerich & Bradsby Co. (2002) 104 Cal.App.4th 703, 720; Taggart v. Super Seer Corp. (1995) 33 Cal.App.4th 1697, 1706, superseded by statute on another ground as stated in Cooley v. Superior Court (2006) 140 Cal.App.4th 1039, 1044-1045.) However, even when the witness does not expressly testify to each foundational requirement, the existence of those requirements may be inferred from testimony about the circumstances of the record's creation. (See People v. Dorsey (1974) 43 Cal.App.3d 953, 961; Unifund CCR, LLC v. Dear (2015) 243 Cal.App.4th Supp. 1, 8.)
The decision to admit a business record pursuant to Evidence Code section 1271 is reviewed for abuse of discretion. (People ex rel. Owen v. Media One Direct, LLC (2013) 213 Cal.App.4th 1480, 1484.)
3. Analysis.
Skyline contends the ledger was nothing more than Zhishi's "personal record" because he did not testify that he kept the ledger in the regular course of Heng Cheng's business or that he had a business duty to accurately report and record the facts stated in the ledger as part of his employment. That Zhishi maintained his own ledger of payments apart from records kept by the accounting staff does not necessarily mean the document was his personal or private record. "'The law does not prescribe any standard of bookkeeping practice which all must follow, regardless of the nature of the business of which the record is kept. We think it makes no difference whether the account is kept in one book or several as long as they are permanent records, and constitute a system of bookkeeping as distinguished from mere private memoranda.'" (Robin v. Smith (1955) 132 Cal.App.2d 288, 290-291, quoting Egan v. Bishop (1935) 8 Cal.App.2d 119, 122; see People v. Olf (1961) 195 Cal.App.2d 97, 104 [business record exception applied because bank officers' testimony justified inference the records "were business records and not some sort of private memoranda kept by the witnesses"].)
Skyline does not argue Ping failed to prove the person or persons who provided Zhishi with the information he recorded in the ledger were also acting under a business duty and in the regular course of business, so any claim of multiple hearsay has been forfeited. (See People v. Sanchez (2016) 63 Cal.4th 665, 675 [discussing multiple hearsay issues related to business records].)
Zhishi never testified he kept the ledger for his "personal" benefit, as opposed to a ledger he kept for the benefit of the corporation. As noted, when asked if it was his job to make sure the ledger was accurate, Zhishi answered, "The accountant[s] had their own job, but this record is a record that I kept myself." Ping's attorney followed up this answer by asking, "Did you keep your own personal record of funds received from outside of the company?" Zhishi answered, "Yes." Counsel's choice of words may have been somewhat unfortunate, but the logical and reasonable inference to be drawn from Zhishi's testimony as a whole is that he himself—in his capacity as deputy general manager overseeing the operations of the company and supervising the company's accountants—kept a company ledger of payments received, in addition to records kept by the accounting department. Therefore, we reject Skyline's suggestion that the ledger was nothing more than Zhishi's private record or memoranda.
There is no doubt that Zhishi prepared the ledger during the "regular course of [Heng Cheng's] business." (Evid. Code, § 1271, subd. (a).) Zhishi testified that from 2005 onward he was "in charge of everything" at Heng Cheng, overseeing the day-to-day manufacturing operations, personally signing every payment made by the company to outside vendors, reviewing all receipts of payments made to the company by ACI (its sole customer), and personally supervising the company's accountants. Zhishi testified the ledger included every payment made to the company after November 2005, that he was the custodian of the company's financial records, and that he maintained possession of the ledger since November 2005. The clear inference to be drawn from this testimony is that Zhishi prepared the ledger in the regular course of running Heng Cheng and not as some sort of private lark on his own time.
The evidence also establishes Zhishi had "'the business duty'" to accurately "'observe and report'" the information contained in the ledger. (Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1271, p. 6.) As one court has stated, the question of when a reporter or recorder of information is under a "business duty" for purposes of the business record hearsay exception "is . . . the source of a good bit of uncertainty in the case law. It is clear enough, of course, that an employee or agent of the business activity in question will ordinarily be considered as acting under such a 'business duty;' and it is equally clear that a mere volunteer or bystander—someone lacking any ongoing business relationship with the business activity—will not be. [Citations.]" (White Industries Inc. v. Cessna Aircraft Co. (W.D. Mo. 1985) 611 F.Supp. 1049, 1060.)
True, Zhishi was not asked and did not testify that keeping the ledger was part of his official duties as deputy general manager of the corporation. But when does a business duty arise? Skyline provides no answer, and it cites no authority that does. Must the witness testify that accurately reporting and recording certain facts is part of his or her official job description? Does a business duty arise only when the witness has been instructed by a superior to accurately report and record transactions or other information important to the daily operation of the business? Or, instead, may a business duty arise out of the witness's general duty of care and loyalty owed to the corporation by the very nature of his or her position of responsibility? We believe the latter must be true. To repeat, Zhishi's uncontradicted testimony was that after November 2005, he was "in charge of everything." It is simply inconceivable that a person who has been entrusted with such great responsibility is not under a business duty to accurately and faithfully report and record information vital to the company's existence.
The record also amply supports the conclusion that Zhishi was a proper witness to lay a foundation for admitting the ledger into evidence as a business record. Even if we were to agree with Skyline that the evidence did not support the conclusion that Zhishi was Heng Cheng's custodian of its financial records, as the company's deputy general manager who received orders and supervised accounting staff, and as the person who created the ledger, Zhishi clearly was a "qualified witness" who could testify "to its identity and the mode of preparation . . . ." (Evid. Code, § 1271, subd. (c).)
In his brief, Ping argues that, irrespective of whether the ledger was admissible as a business record under Evidence Code section 1271, it was admissible because Zhishi authenticated it as a "subscribing witness." (Evid. Code, § 1413.) ACI did not object that the ledger had not been authenticated—it objected the ledger was inadmissible hearsay. (See, ante, fn. 18.) And Ping confuses two distinct requirements for admitting a writing. As already noted, authentication is a preliminary requirement and does not absolve the proponent of overcoming any applicable exclusionary rules such as hearsay. (1 Jefferson, Cal. Evidence Benchbook, supra, Authentication and Proof of Writings, § 31.4, p. 31-4.)
With respect to the two remaining foundational requirements at issue, we conclude the record established the ledger "was made at or near the time of the act" recorded and its "mode of its preparation" supports the trial court's implied finding that the ledger was trustworthy. (Evid. Code, § 1271, subds. (b)-(d).)
Skyline does not argue Zhishi's testimony failed to establish that "[t]he sources of information" recorded in the ledger demonstrated the document's trustworthiness. (Evid. Code, § 1271, subd. (d).)
Zhishi was not asked and did not expressly testify that he made the entries in the ledger "at or near the time" of the payments received by ACI. (Evid. Code, § 1271, subd. (b).) But, Zhishi testified that, as part of his duties running the company, he personally reviewed all receipts of orders received from Huang, he personally supervised the accounting staff who received payments from ACI, and he also made payments to third party vendors. Zhishi testified that he "ke[pt] track" of the payments made by ACI to Heng Cheng by recording them in his ledger. The most reasonable inference to be drawn from Zhishi's testimony is that, at the time or soon after he reviewed each payment received from ACI, Zhishi recorded them in his ledger.
Finally, Zhishi was not asked and did not testify about "the mode of [the ledger's] preparation . . . ." (Evid. Code, §1271, subd. (c).) This requirement is satisfied by the testimony of a witness who is knowledgeable about the "procedures followed" (Jazayeri, supra, 174 Cal.App.4th at p. 322) or the "various steps involved in the preparation of the writing" (1 Jefferson, Cal. Evidence Benchbook, supra, Business Records, § 4.9, p. 4-6). To repeat, Zhishi's testimony about his duties as deputy general manager and that he personally "ke[pt] track" of payments received from ACI by entering them in a ledger demonstrated he was qualified to testify about the identity of the ledger. Although Zhishi did not expressly testify about how he physically went about entering the payments in the ledger, the mode of its preparation can be fairly inferred from Zhishi's testimony and from the handwritten ledger itself.
In sum, we conclude the trial court did not abuse its discretion by admitting the ledger into evidence as a business record.
D. The Trial Court Properly Admitted the Testimony of Ling Ling.
Skyline argues the trial court abused its discretion by permitting Ling Ling to testify as an expert witness because "she was not . . . qualified as an expert in accountancy." Skyline also contends it was improper for Ling Ling to base her expert opinion testimony on the information contained in Zhishi's ledger because that document was improperly admitted as a business record. Although at trial Ping argued Ling Ling's testimony was admissible under Evidence Code section 1523, subdivision (d), he effectively abandoned that argument on appeal and now contends the trial court properly found Ling Ling was qualified to testify as an expert.
Because we conclude Ling Ling's testimony was admissible under Evidence Code section 1523, subdivision (d), we need not decide whether she was qualified to testify as an expert witness.
1. Additional Background.
During his testimony, Zhishi identified exhibit 46 as a 204-page compilation of documents generated by Heng Cheng and sent to ACI every time Heng Cheng received a purchase order directly from ACI or indirectly from Hong Kong Ltd. Each document compiled in exhibit 46 included information about the type of materials shipped to ACI and the number of goods shipped. The individual documents were created in the regular course of business once the shipment was sent out.
On appeal, Skyline does not challenge the ruling admitting exhibit 46 into evidence.
Ling Ling testified she received training in China "in the manipulation of records using the Excel program." In particular, Ling Ling testified she "got training called CFO training. I hold a certificate for that. It basically tells you how to do the bookkeeping, how to do the balance sheets." She testified Excel is a computer program for creating spreadsheets "in order to evaluate and analyze the data." Ling Ling testified she was proficient in Excel, and that she uses the software almost daily. Ling Ling prepared exhibit 25, a 13-page Excel spreadsheet, based on data provided by Ping's attorney. Counsel for ACI objected, which triggered an extended discussion of whether Ling Ling could testify as an expert witness. The trial court ultimately ruled she could.
CFO is short for chief financial officer. (See Corp. Code, § 312, subd. (a); 9 Witkin, Summary of Cal. Law (11th ed. 2017) Corporations, § 295, p. 1073.)
Ling Ling identified exhibit 46 as a list provided by Heng Cheng containing shipments made between May 11, 2004 and September 28, 2010. She testified it was her understanding that exhibit 46 contained the records for all shipments from Heng Cheng to ACI during that time frame. Ling Ling identified exhibit 48 as a record of all payments made by ACI to Heng Cheng. Ling Ling testified she was also provided with exhibit 14, a 104-page compilation of Heng Cheng's invoices from 2007 to the present. Ling Ling used the payment information from exhibit 48 and the invoices contained in exhibit 14 to create her spreadsheet. To determine the value of the shipments made prior to 2007, Ling Ling looked at Heng Cheng's "accounting" records, presumably meaning the records compiled as exhibit 46.
Ling Ling testified column 1 of exhibit 25 contained the date Heng Cheng made a shipment; column 2 contained the price for every shipment of product made from Heng Cheng to ACI; and column 3 contained payments received by Heng Cheng from ACI, based on the information contained in exhibit 46. For column 2, Ling Ling applied a function on Excel software called "auto sum" to calculate "the total value from the very beginning to the very end." Ling Ling calculated the total value of shipments sent to ACI by Heng Cheng as $11,822,381.18. She applied the same function to the figures in column 3, and calculated the total payments made to Heng Cheng by ACI as $11,000,300.68. Ling Ling testified that by October 20, 2010, the total amount owed by ACI was $822,080.50.
Exhibits 14 and 25 were not admitted into evidence.
2. Applicable Law on Admissibility of Secondary Evidence.
In their main briefs, the parties focus their arguments about Ling Ling's testimony on whether the trial court erred by concluding she was qualified to testify as an expert witness, but we are not bound by the issues as framed by the parties. "No rule of decision is better or more firmly established by authority, nor one resting upon a sounder basis of reason and propriety, than that a ruling or decision, itself correct in law, will not be disturbed on appeal merely because given for a wrong reason. If right upon any theory of the law applicable to the case, it must be sustained regardless of the considerations which may have moved the trial court to its conclusion.'" (D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19, quoting Davey v. Southern Pacific Co. (1897) 116 Cal. 325, 329.)
In response to an invitation from this court, the parties submitted supplemental letter briefs addressing the admissibility of Ling Ling's testimony under Evidence Code section 1523, subdivision (d). (See Gov. Code, § 68081.)
The same rule applies to the admissibility of evidence. "Although our theory of admissibility [of evidence may] differ[] from that of the trial court, 'we review the ruling, not the court's reasoning, and, if the ruling was correct on any ground, we affirm.' [Citation.]" (People v. Chism (2014) 58 Cal.4th 1266, 1295, fn. 12.) We conclude Ling Ling's testimony was admissible as oral testimony about the contents of voluminous writings.
"The content of a writing may be proved by an otherwise admissible original." (Evid. Code, § 1520.) In addition, the "Secondary Evidence Rule" provides that "[t]he content of a writing may be proved by otherwise admissible secondary evidence." (Evid. Code, § 1521, subds. (a), (d).) The trial court may nonetheless exclude secondary evidence if it concludes "[a] genuine dispute exists concerning material terms of the writing and justice requires the exclusion," or "[a]dmission of the secondary evidence would be unfair." (Evid. Code, § 1521, subd. (a)(1)-(2).) Secondary evidence in the form of a writing must be authenticated. (Evid. Code, § 1521, subd. (c).)
"Except as otherwise provided by statute, oral testimony is not admissible to prove the content of a writing." (Evid. Code, § 1523, subd. (a); see, id., § 1521, subd. (b).) That general rule is "based on an assumption that oral testimony as to the content of a writing is typically less reliable than other proof of the content of a writing." (Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1523, p. 299.)
There are three exceptions to the general bar on oral testimony about the content of a writing. (Evid. Code, § 1523, subds. (b)-(d).) Relevant here, "[o]ral testimony of the content of a writing is not made inadmissible . . . if the writing consists of numerous accounts or other writings that cannot be examined in court without great loss of time, and the evidence sought from them is only the general result of the whole." (Evid. Code, § 1523, subd. (d).) This exception continues the rule found in Evidence Code former section 1509, which addressed "oral testimony of a voluminous writing." (Cal. Law Revision Com. com., 29B pt. 5 West's Ann. Evid. Code, supra, foll. § 1523, p. 299.)
3. Analysis.
The courts have long upheld the admission into evidence of written summaries of voluminous documents to prove the measure of damages. (See, e.g., Heaps v. Heaps (2004) 124 Cal.App.4th 286, 293-294; Wolfen v. Clinical Data, Inc. (1993) 16 Cal.App.4th 171, 182.) In Vanguard Recording Society, Inc. v. Fantasy Records, Inc. (1972) 24 Cal.App.3d 410 (Vanguard Recording Society), folksinger Joan Baez and her record label sued a competitor record label and individual defendants alleging the defendants, "in knowing violation of certain exclusive recording contracts between plaintiffs Vanguard and plaintiff Baez, had produced and distributed a poor quality and tasteless record of an early performance by Baez." (Id. at p. 413.) The trial court awarded plaintiffs $25,000 in damages. (Id. at p. 414.) Among other things, on appeal the defendants argued the trial court erred by admitting, as a business record, a summary of sales of Baez's records between December 1960 and June 1967. (Id. at p. 418.) "The source materials for the summary consisted of some 50,000 sales invoices, and the information contained in the summary was abstracted from the sales invoices by means of data processing machines." (Ibid.)
The appellate court found no error. "The trial court was clearly correct in admitting the sales summary into evidence. Pursuant to Evidence Code [former] section 1509, a summary of business records consisting of numerous accounts or other writings that cannot be examined in court without great loss of time, is admissible in evidence upon a showing that the actual business records are entitled to admission in evidence; but the court, in its discretion, may require the actual business records to be produced for inspection by the adverse party. (Exclusive Florists, Inc. v. Kahn (1971) 17 Cal.App.3d 711, 714 . . .) A person who directs or supervises the preparation of a summary may testify to its contents, and the summary may be received in evidence. (Kirby v. Alcoholic Bev. etc. Appeals Bd. (1970) 8 Cal.App.3d 1009, 1016-1017 . . . .)" (Vanguard Recording Society, supra, 24 Cal.App.3d at pp. 418-419.)
More recently, the Court of Appeal addressed the admissibility of secondary evidence in the form of oral testimony about voluminous documents when the damages summary itself is not admitted into evidence. In Schellinger Brothers v. Cotter (2016) 2 Cal.App.5th 984 (Schellinger Brothers), the trial judge based its measure of damages on oral testimony about figures contained in two exhibits that were not admitted into evidence. (Id. at pp. 1006-1007.) On appeal, the defendant argued, inter alia, the damages award was not supported by substantial evidence because it was based on conclusory oral testimony of witnesses "'who merely read a grand total from an inadmissible summary.'" (Id. at pp. 1007-1008.)
The appellate court disagreed. "[Defendant] is incorrect to state '[plaintiff] failed to offer admissible evidence of its damages.' The unstated premise is that witnesses were merely uttering out loud the hearsay conclusions of [the two] exhibits . . . . [Defendant] seems unaware that this is not the first commercial litigation that generated a lot of paper. California has an established and sensibly tolerant approach for such cases. [¶] What was commonly known as the voluminous writing rule allowed admission of a statement or summary reflecting numerous accounts or documents '"which cannot be examined in court without great loss of time."' [Citations.] And that such a writing may itself be admissible appears still to be the rule. (See Evid. Code, § 1523, subd. (c); [citations].) [¶] But that is not a point that demands decision here, because [the trial judge] did not admit [the two] exhibits . . . in evidence. What was received was oral testimony concerning the exhibits, as [the judge] noted in the course of closing argument and again at the argument on the motions. As [the judge] described on the latter occasion, 'while they may have referred to summaries and documentation to refresh their recollection of their losses, it wasn't the documents in this Court's view that they were relying on, they were relying on what their losses were that they knew that they had suffered that came out of their pocket, that came out of their coffers that they were very much aware of as the years went by.' [Citation.] This is expressly admissible pursuant to Evidence Code section 1523, subdivision (d): 'Oral testimony of the content of a writing is not . . . inadmissible . . . if the writing consists of numerous accounts or other writings that cannot be examined in court without great loss of time, and the evidence sought from them is only the general result of the whole.' Both witnesses testified to his personal knowledge and authentication of the documents summarized in the exhibit he had prepared. [Citation.] [The trial judge] did not abuse his discretion in receiving their testimony, which is substantial evidence for the amounts involved. [Citation.]" (Schellinger Brothers, supra, 2 Cal.App.5th at pp. 1008-1009.)
Ling Ling's testimony satisfied the requirements of Evidence Code section 1523, subdivision (d). As the person who prepared the summary, Ling Ling was qualified to testify about how it was created, irrespective of whether she was qualified to testify as an expert. (Vanguard Recording Society, supra, 24 Cal.App.3d at p. 419.) The spreadsheet Ling Ling created was essentially a summary of "numerous accounts or other writings that [could not] be examined in court without great loss time," and her testimony was about "the general result of the whole." (Evid. Code, § 1523, subd. (d).)
Exhibit 46 was 204 pages long, and exhibit 14 was 104 pages long. The trial would have taken significantly longer if Ping was required to introduce testimony about each individual document and invoice contained in those lengthy exhibits. Exhibits 46 and 48 had already been introduced into evidence before Ling Ling testified. Although ACI objected to their admission, we have already concluded exhibit 48 was properly admitted as a business record and Skyline does not argue on appeal that exhibit 46 was improperly admitted. ACI objected to exhibit 14, but neither it nor exhibit 25 were admitted into evidence. And, at trial, ACI did not specifically object that Ling Ling's spreadsheet or the exhibits from which she gathered her data were not properly authenticated. ACI did object that Zhishi was not the custodian of the records complied in exhibit 46. To the extent ACI was also objecting to exhibit 46 for lack of authenticity, Skyline does not argue on appeal that exhibits 14, 46, and 48 were inadmissible for lack of authentication. Therefore, we must assume those exhibits were properly authenticated.
In sum, we conclude the trial court correctly ruled that Ling Ling's testimony about Ping's damages was admissible, although we reach that conclusion for a different reason than the trial court.
IV.
DISPOSITION
The appeal is dismissed. In the interest of justice, the parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
McKINSTER
Acting P. J. We concur: MILLER
J. FIELDS
J.