Opinion
NOT TO BE PUBLISHED
APPEAL from the Superior Court of San Bernardino County No. RCVRS079860, Barry L. Plotkin, Judge.
Cornman & Swartz and Charles A. Swartz for Plaintiff and Appellant.
No appearance by Defendant and Respondent.
OPINION
Gaut, J.
This lawsuit arises from the failure of defendant Oscar Home Care, Inc. (defendant) to pay plaintiff G.H. Prestidge (plaintiff) commissions and other compensation as agreed under two written contracts. Under the contracts, plaintiff set up and managed a network of sales representatives who solicited orders of defendant’s air freshener products.
Plaintiff appeals the default judgment to the extent the trial court rejected his claim for treble damages and attorney’s fees under the California Independent Wholesale Sales Representative Contractual Relations Act (Civ. Code, §§ 1738.10 – 1738.16) (the Act). The trial court concluded the Act did not apply to plaintiff because he was not a wholesale sales representative. Plaintiff also objects to the trial court’s rejection of his claim for recovery of commissions earned in 2006.
Unless otherwise noted, all statutory references are to the Civil Code.
We conclude the trial court erred in ruling the Act did not apply to plaintiff. There was sufficient evidence establishing that plaintiff was acting as a wholesale sales representative and thus was entitled to treble damages and attorney’s fees under the Act. We reject plaintiff’s challenge to the trial court’s ruling denying damages for unpaid commissions allegedly earned in 2006. There was insufficient evidence to support such an award. This matter is remanded to the trial court with instructions to award plaintiff treble damages and attorney’s fees.
1. Factual and Procedural Background
Plaintiff owns and operates a wholesale broker business known as Euro-American Marketing (EAM), also known as National Broker Associates, Inc. Defendant, also doing business as Oscar Aerosol Inc., is headquartered in Ontario, California. Defendant is a supplier or distributor of air fresheners and other related products in the retail trade industry.
In April 2004, plaintiff filed a complaint, and in December 2005, plaintiff filed an amended complaint (complaint) against defendant for breach of two written contracts and for violation of the Act. The amended complaint added a fourth cause of action for an accounting.
The amended complaint is not included in the clerk’s transcript but, according to plaintiff’s motion to amend, it is identical to the original complaint, with the exception of the addition of a fourth cause of action and corresponding prayer requesting an accounting.
Plaintiff alleged in his complaint that, on January 1, 2001, he and defendant entered into a written contract (contract 1) whereby defendant appointed plaintiff as defendant’s exclusive sales organization to sell defendant’s products. The following year, on January 1, 2002, plaintiff and defendant entered into a second written contract (contract 2), replacing contract 1, whereby defendant appointed plaintiff as its sales agent to sell defendant’s products and to locate and manage other sales brokers who would sell defendant’s products. Contract 2 automatically renewed unless cancelled at least 30 days prior to expiration of its annual term. Defendant breached the two contracts by not paying plaintiff the compensation and commissions agreed upon in contracts 1 and 2.
Plaintiff alleged in the first cause of action for breach of contract that pursuant to the terms of contract 1, defendant agreed to pay plaintiff a management fee of $3,500 a month. Defendant breached contract 1 by paying plaintiff for only six of the 12 months in 2001.
Paragraph 17 of the complaint refers to 2002, rather than 2001. This appears to be a typographical error.
Plaintiff alleged in the second cause of action that pursuant to the terms of contract 2, defendant agreed to pay plaintiff a management fee commission of 5 percent of all orders received from brokers appointed under contract 2. Plaintiff would also receive 1 percent of net invoice sales if sales exceeded $1 million, or 2 percent if net invoice sales were $2 million or more. Defendant breached contract 2 by failing to pay plaintiff approximately $1.3 million in commissions in 2002; $2 million in 2003; and an undetermined amount in 2004. Contract 2 was never cancelled.
In the third cause of action, plaintiff alleged that under contract 2, defendant appointed plaintiff as defendant’s sales agent, whereby plaintiff would attempt to sell defendant’s products and would locate and manage other sales brokers who would also sell defendant’s products. Plaintiff was a wholesale sales representative, as defined in section 1738.12. Under section 1738.15, defendant breached contract 2 by willfully refusing to pay plaintiff commissions, as agreed. As a consequence, plaintiff suffered damages of no less than $150,000, and was thus entitled to treble damages under section 1738.15. Plaintiff prayed for compensatory damages, treble damages, and attorney’s fees.
According to defendant’s discovery responses, defendant owed plaintiff $3,500 a month for the months of October, November and December of 2001. Plaintiff also established that, through the first part of April 2005, plaintiff earned $152,232 in commissions. Due to defendant failing to respond to plaintiff’s discovery requests regarding commissions earned during 2005 and 2006, plaintiff was unable to establish commissions earned during the entire year in 2005 and in 2006. Plaintiff filed numerous motions to compel discovery. The court granted the motions and repeatedly sanctioned defendant and his attorney.
In August 2006, the trial court granted plaintiff’s motion to strike defendant’s answer and entered a default judgment on the grounds defendant and his attorney failed to attend a mandatory settlement conference and comply with discovery requests.
At the default judgment prove-up hearing, plaintiff testified regarding the two contracts’ terms and defendant’s contract breaches. The court noted there was no proof of sales of defendant’s products in 2006. Plaintiff’s attorney responded that, if the court was going to strike plaintiff’s 2006 claim, plaintiff would accept that ruling and proceed with presenting other evidence.
Plaintiff thereafter testified that no one told him that Contract 2 was terminated. After plaintiff advised defendant’s sales manager, Kim Sellick, by phone and letter that defendant owed plaintiff a lot of money, Sellick told plaintiff that defendant’s management was not interested in meeting their obligations under the contract with plaintiff.
Plaintiff’s attorney informed the court that, although the instant lawsuit was filed in April 2004, contract 2 remained in force thereafter. Therefore plaintiff sought recovery of commissions earned in 2005 and 2006, in addition to those earned in 2001 through 2004. Plaintiff’s counsel requested that if the court struck plaintiff’s claim for 2006 compensation due to insufficient evidence, that the court give plaintiff a declaratory relief judgment declaring that contract 2 was still in effect and that plaintiff had a right to pursue independently his claim for 2006 commissions. Plaintiff’s attorney also explained that plaintiff’s attorney’s fees and treble damages claims were based on the proposition plaintiff was a wholesale sales representative under section 1738.16. The trial court requested plaintiff’s counsel to provide briefing on plaintiff’s attorney’s fees and treble damages claim.
After receiving plaintiff’s supplemental briefing, the trial court issued a written statement of decision in December 2006, awarding plaintiff the amounts of compensatory damages sought for the years 2001 through 2005. The court denied damages for unpaid commissions in 2006 on the ground there was insufficient evidence establishing the amount of commissions earned in 2006. The trial court also found that plaintiff had failed to establish that he was a wholesale sales representative under section 1738.12 and therefore denied plaintiff treble damages and attorney’s fees under the Act.
2. Whether the Act Applies to plaintiff
Plaintiff argues he met his prima facie burden of proving he was a wholesale sales representative under section 1738.12, subdivision (e), of the Act and therefore he was entitled to recover treble damages and attorney’s fees. We agree.
Once default is entered against a defendant, a plaintiff only needs to establish a prima facie case of a right to relief and the amount of damages, which shall not exceed the amount requested in the plaintiff’s complaint or statement of damages (Johnson v. Stanhiser (1999) 72 Cal.App.4th 357, 361; Code of Civ. Proc., § 580) and shall be “‘for such sum . . . as appears by such evidence to be just. [Citations.]’” (Johnson v. Stanhiser, at p. 362; see Taliaferro v. Davis (1963) 216 Cal.App.2d 398, 409.)
The issue of whether plaintiff was acting as a wholesale sales representative under section 1738.12 of the Act is a mixed factual and legal issue. Since the facts are undisputed due to determination of the matter during a default prove-up proceeding, the issue involves a question of law requiring this court to decide the matter de novo. (Fuller v. Department of Transportation (2001) 89 Cal.App.4th 1109, 1114; In re Collins (2001) 86 Cal.App.4th 1176, 1181.)
The Act provides that “Whenever a manufacturer, jobber, or distributor is engaged in business within this state and uses the services of a wholesale sales representative, who is not an employee of the manufacturer, jobber, or distributor, to solicit wholesale orders at least partially within this state, and the contemplated method of payment involves commissions, the manufacturer, jobber, or distributor shall enter into a written contract with the sales representative.” (§ 1738.13, subd. (a); italics added.)
Section 1738.15 provides in relevant part: “A manufacturer, jobber, or distributor who . . . willfully fails to pay commissions as provided in the written contract shall be liable to the sales representative in a civil action for treble the damages proved at trial.” Section 1738.16 provides for recovery of attorney’s fees.
At the default prove-up hearing, plaintiff provided evidence establishing defendant failed to pay plaintiff commissions earned in 2002 through 2005. There was also evidence that defendant was a manufacturer or distributor of products, and had contracted with plaintiff to set up a network of wholesale sales representatives to obtain orders from retailers for the purchase of defendant’s products.
If plaintiff was acting as a wholesale sales representative as defined in section 1738.12, subdivision (e), the Act thus applies and plaintiff is entitled to recover treble damages and attorney’s fees. Under section 1738.12, subdivision (e), a wholesale sales representative is defined as “any person who contracts with a manufacturer, jobber, or distributor for the purpose of soliciting wholesale orders, is compensated, in whole or part, by commission, but shall not include one who places orders or purchases exclusively for his own account for resale and shall not include one who sells or takes orders for the direct sale of products to the ultimate consumer.”
In the trial court’s written decision, the trial court stated that plaintiff had not met his burden of establishing he was a wholesale sales representative under section 1738.12, subdivision (e), based on the following rationale: “Plaintiff described himself as a ‘master broker’ who solicits sales from manufacturers of products who don’t have a sales force, and he then directs the manufacturers business to sub brokers who have their own sales force. The sub brokers appear to be non-employee, independent contractors.
“Under the first contract Defendants agreed to pay Plaintiff a ‘management fee’ of $3,500.00 per month and to compensate the broker firms to whom Plaintiff referred the sales a commission of 7% of net invoice sales.
“The second contract continued to provide that the broker firms to whom Plaintiff referred the business would be compensated at a 7% commission rate, however, provided that Plaintiff, instead of being paid a flat monthly rate, would be paid a 5% commission on all sales made by the sub brokers.
“Looking to the legislative findings which support statutory provisions for treble damages and attorney’s fees, the legislature declared that independent wholesale representatives should be protected from ‘unjust termination of the territorial market areas’ that they devote their efforts to developing. In this case, the sub brokers who actually developed the territorial market areas should be deemed to be covered by the statute as independent wholesale sales representatives, but that designation would not appear to apply to Plaintiff, a self-described ‘master broker.’ No evidence was presented at the prove-up hearing whether the Defendant paid the sub brokers their contractual commissions. Therefore, the court denies Plaintiff’s request for treble damages and attorney’s fees.”
The trial court construes section 1738.12, subdivision (e), defining the term “wholesale sales representative,” more narrowly than we do. “‘[I]n construing a statute, a court [must] ascertain the intent of the Legislature so as to effectuate the purpose of the law.’ [Citation.]” (People v. Coronado (1995) 12 Cal.4th 145, 151 (Coronado).) In determining that intent, we first examine the words of the statute, applying “‘their usual, ordinary, and common sense meaning based upon the language . . . used and the evident purpose for which the statute was adopted.’” (People v. Granderson (1998) 67 Cal.App.4th 703, 707, quoting In re Rojas (1979) 23 Cal.3d 152, 155.) “‘If there is no ambiguity in the language of the statute, “then the Legislature is presumed to have meant what it said, and the plain meaning of the language governs.” [Citation.] “Where the statute is clear, courts will not ‘interpret away clear language in favor of an ambiguity that does not exist.’ [Citation.]”’ [Citation.]” (Coronado, at p. 151.)
If the words of the statute are ambiguous, a court may resort to “extrinsic sources, including the ostensible objects to be achieved and the legislative history.” (Coronado, supra, 12 Cal.4th at p. 151.) Applying these rules of statutory interpretation, a court “‘must select the construction that comports most closely with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute, and avoid an interpretation that would lead to absurd consequences.’ [Citation.]” (Ibid.)
While section 1738.12, subdivision (e), provides a relatively clear definition of the term “wholesale sales representative,” there is no mention of whether it encompasses master wholesale brokers, such as plaintiff, and there is no case law addressing this issue. In construing section 1738.12, as applied here, we thus turn to the purpose of the Act stated in section 1738.10, which states: “The Legislature finds and declares that independent wholesale sales representatives are a key ingredient to the California economy. The Legislature further finds and declares the wholesale sales representatives spend many hours developing their territory in order to properly market their products, and therefore should be provided unique protection from unjust termination of the territorial market areas. Therefore, it is the intent of the Legislature, in enacting this act to provide security and clarify the contractual relations between manufacturers and their nonemployee sales representatives.”
Plaintiff’s testimony as a whole, as well as his supporting declaration, establishes that, consistent with the intent of the Act, plaintiff was acting as a wholesale sales representative under the Act. During the prove-up hearing, plaintiff testified that he believed he was a wholesale sales representative. Plaintiff also stated this in his supporting declaration, as well as in his complaint. Plaintiff further testified that his company, EAM, was a “marketer of small packages to the retail trade” in the United States. EAM had a national sales force, consisting of 14 broker organizations, with approximately 45 individual sales representatives. EAM’s wholesale brokers marketed goods and services for a variety of companies, including defendant.
In the fall of 2000, plaintiff began discussions with defendant to market defendant’s products, which were primarily air fresheners. Plaintiff initially met defendant’s president, and thereafter negotiated with defendant’s sales manager, Jim Millinton. On January 1, 2001, they executed Contract 1. Under the contract, plaintiff was to appoint and supervise a national broker sales force. In return, defendant agreed to pay plaintiff $3,500 a month.
Plaintiff explained that his sales services consisted of plaintiff presenting defendant’s line of products through sub-brokers to the retail trade in the United States since defendant did not have sales experience in this country. Plaintiff’s job was essentially to set up a wholesale broker network to solicit orders of defendant’s products from retailers.
In contract 2, defendant agreed to pay plaintiff a commission of five percent of plaintiff’s wholesale brokers’ net invoice sales and pay plaintiff’s brokers seven percent of their sales. The brokers were not plaintiff’s employees. They were independent.
During the hearing, plaintiff testified that his relationship with the broker network consisted of the network brokers representing plaintiff on numerous product lines. In other words, plaintiff’s network wholesale brokers obtained orders from retailers of products from manufacturers plaintiff represented. Plaintiff acted as a “master broker.” As such, plaintiff solicited from manufacturers sales of their products by plaintiff’s own network of wholesale sales brokers. Plaintiff acknowledged that although the sales brokers in plaintiff’s network were independent, if defendant cancelled plaintiff’s contract, defendant ethically could not continue using plaintiff’s brokers.
The two contracts stated that defendant appointed plaintiff as its exclusive sales organization for the mass retail trade of defendant’s products throughout the United States. The brokers appointed on behalf of plaintiff were to comply with plaintiff and defendants’ policies. Plaintiff agreed to devote actively sufficient time and use his best efforts to promote defendant’s products. In return, defendant agreed to pay plaintiff commissions on the product orders secured by plaintiff’s wholesale brokers.
We conclude that under these circumstances plaintiff qualified as a wholesale sales representative as defined in subdivision (e) of section 1738.12, even though plaintiff used other independent sales representatives to place the orders. Plaintiff established he was a master broker, who retained sub-brokers to place orders for defendant. Construing the Act to encompass master wholesale brokers such as plaintiff is consistent with the intent of the Act of providing protection to those who spend many hours developing sales territories for marketing a manufacturer or distributor’s products to retailers.
Here, as a master broker, plaintiff was involved in developing a network of brokers in order to market defendant’s products, and therefore should be provided protection under the Act from unjust termination of the territorial market areas plaintiff developed for defendant. The fact that plaintiff used sub-brokers in furtherance of marketing defendant’s products should not preclude plaintiff from the protections provided under the Act. Depriving plaintiff of protection under the Act is contrary to the intent of the Act since master brokers, such as plaintiff, are an integral part of the development of a sales territory used to market products. As a master broker, plaintiff facilitated the sale of defendant’s products through sub-brokers who contacted the retailers and thus was instrumental in developing the sales territories for marketing defendant’s products to retailers.
Because plaintiff met his burden of proving that he was a wholesale sales representative within the meaning of section 1738.12, subdivision (e), the Act applies and the matter is thus remanded to the trial court for an order awarding plaintiff treble damages and attorney’s fees under the Act.
3. Sufficiency of Evidence of 2006 Commissions
Plaintiff contends the trial court erred in not awarding him damages for defendant’s nonpayment of commissions plaintiff earned in 2006.
The issue of whether the trial court’s damages award was inadequate with regard to plaintiff’s 2006 commissions turns on a factual determination and thus this court applies the substantial evidence test. (In re Collins, supra, 86 Cal.App.4th at p. 1181.) The substantial evidence standard of review requires a “determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination, and that when two or more inferences can reasonably be deduced from the facts, a reviewing court is without power to substitute its deductions for those of the trial court. If such substantial evidence be found, it is of no consequence that the trial court believing other evidence, or drawing other reasonable inferences, might have reached a contrary conclusion.” (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873-874.) This court will not interfere with the trial court’s ruling denying plaintiff commissions allegedly earned in 2006 unless the ruling is “‘totally unconscionable and without evidentiary justification.’” (Johnson v. Stanhiser, supra, 72 Cal.App.4th at p. 361; see also Uva v. Evans (1978) 83 Cal.App.3d 356, 363-364.)
Plaintiff argues that, although there was no direct evidence of commissions earned in 2006, there was, at a minimum, circumstantial evidence that his sales commissions in 2006 would have been at least the same as, if not more, than commissions earned in 2005. Plaintiff established contract 2 was never terminated and that each year his commissions had increased. Therefore, plaintiff argues, the trial court should have awarded him damages of $152,232.70, for unpaid commissions in 2006, the amount of commissions plaintiff earned in 2005.
We conclude to the contrary that there was insufficient evidence supporting damages for commissions allegedly earned in 2006. There was no evidence of the actual amount of commissions earned in 2006. There were no records presented from any of plaintiff’s brokers as to their sales. An award for unpaid 2006 commissions would have been speculative and based on the unsubstantiated assumptions that plaintiff’s brokers continued to sell defendant’s products in 2006 and that the sales continued to increase or at least remained equal to sales in 2005. There was thus insufficient evidence, either circumstantial or direct, that in 2006 plaintiff earned at least the same amount of commissions earned in 2005.
We further note that under Code of Civil Procedure section 580, subdivision (a), plaintiff cannot recover breach of contract damages that were not alleged in the complaint. (Taliaferro v. Davis, supra, 216 Cal.App.2d at pp. 408-409.) “The relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint, in the statement required by Section 425.11, or in the statement provided for by Section 425.115; but in any other case, the court may grant the plaintiff any relief consistent with the case made by the complaint and embraced within the issue. The court may impose liability, regardless of whether the theory upon which liability is sought to be imposed involves legal or equitable principles.” (Code Civ. Proc., §§ 580, subd. (a), 585.)
Here, defendant’s answer was stricken and plaintiff’s complaint does not contain any allegations seeking recovery of commissions earned in 2006, perhaps because the complaint and amended complaint were filed in 2004 and 2005, respectively.
4. Disposition
That portion of the judgment ordering that plaintiff shall not recover under the Act is reversed with directions that the trial court find plaintiff is a wholesale sales representative entitled to treble damages and attorney’s fees under the Act. In all other respects the judgment is affirmed. Plaintiff is awarded his costs on appeal.
We concur: Ramirez, P. J., Miller, J.