Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County Super. Ct. No. GIC 850718, Frederic L. Link, Judge.
McDONALD, J.
Plaintiff Schiff Food Products Company (Schiff) appeals the judgment entered under Code of Civil Procedure section 631.8 in response to the oral motion for judgment brought by defendant Enrique Perez at the conclusion of Schiff's presentation of evidence. We conclude substantial evidence supports the court's finding the arrangement between Schiff, Perez and others was not written, and not for the sale of goods within the meaning of Uniform Commercial Code section 2725. We further conclude substantial evidence supports the court's determination Schiff's action against Perez was time-barred under the two-year statute of limitations set forth in section 339, subdivision (1). Finally, we conclude the court did not abuse its discretion by denying Schiff's oral motion, made after the court granted judgment for Perez, to amend its pleadings to conform with proof.
All statutory references are to the Code of Civil Procedure unless otherwise specified.
FACTUAL AND PROCEDURAL BACKGROUND
Schiff sued Perez on July 14, 2005, alleging breach of an oral contract and a common count on an open book account for money due. In its breach of contract claim, Schiff alleged, "Plaintiff entered into a continuing oral agreement with Defendants to provide product to Defendants in exchange for payment." Schiff further alleged Perez breached the contract on October 17, 2002, and again on August 8, 2004. In its common count claim, Schiff alleged Perez became indebted to Schiff for "goods, wares, and merchandise sold and delivered to defendant for which defendant promised to pay plaintiff the sum of $181,446.75."
Perez's answer denied the complaint's allegations and raised the affirmative defense of the statute of limitations. In discovery, Perez denied the existence of a contract with Schiff.
Perez filed a motion in limine to exclude evidence Perez was a " 'a person engaged in the business of storing goods for hire.' " Perez argued Schiff advanced these claims in an attempt to plead around the two-year statute of limitations for breach of oral contract, set forth in section 339, subdivision (1). Perez further argued Schiff's failure to plead the claims, or otherwise put Perez on notice of their existence, prevented Schiff from relying on them at trial. The court deferred ruling on Perez's motion in limine, including what limitations period applied to Schiff's action, until after it heard evidence and made a determination regarding the nature of the legal relationship among Schiff, Perez and the others.
Robert Newhouse testified he approached Schiff in 2001 about financing an arrangement involving men's and women's designer underwear (the product) manufactured in Israel. Schiff and Newhouse had worked together in the past on several other transactions, including real estate sales and inventory financing. Because the product had to be sold outside the United States, Newhouse approached Michael Sabeh because of Sabeh's "strong presence" in oversea markets. Sabeh suggested the parties engage Perez to act as the "selling agent" and "handle[] all the money" because Perez ran a successful wholesale operation and had a "good customer base outside the United States[,] primarily in Mexico and South America." Perez's role in the arrangement was to check the quality and quantity of the product, warehouse it, and prepare the product for sale outside the United States. The parties also contemplated Sabeh would sell the product through his own contacts.
Newhouse testified the arrangement among Schiff, himself, Sabeh and Perez was "open ended," and that "nothing was really documented," including how the profits or commissions would be shared among them. He further testified the parties would "work out a percentage" each would receive after sale of the product was completed. However, if the product was sold at a loss, the parties--including Perez--would receive nothing.
Despite the efforts of Perez, Sabeh and Newhouse to sell the product, the parties "went on for a long time where [they] had very few sales." After about a year of trying to sell the product, Schiff insisted the unsold product be shipped to the east coast, where Schiff intended to sell it. Newhouse testified he and Sabeh asked Perez more than 20 times to ship the product to the east coast, and each time Perez responded he needed more time to make sales.
Because Sabeh recommended Perez, Schiff instructed Newhouse to involve Sabeh in trying to resolve the mounting problems between Schiff and Perez. Newhouse testified Schiff believed Sabeh had "influence" over Perez and could "straighten" him out.
The problems between Schiff and Perez culminated in October 2002, when Perez admitted to keeping at least 40,305 units of the product to cover expenses he and his company incurred in connection with the product. Perez offered to buy the unshipped product for $2.25 per unit and, after subtracting his expenses, to pay Schiff the difference "for all this mess." Perez also told Schiff "[e]verybody seems to [have] lost money on this business," but Perez refused to be the "only person" responsible for the losses. Perez further told Schiff he and his company had "tried to sell some goods but you guys did not like my way of selling them. I hope you can understand the situation."
Newhouse testified Perez's decision to sell the product to cover his expenses "was[,] for lack of a better word, criminal." According to Newhouse, Perez "never told us that he sold [the product]. We never agreed on a price that he should sell [it] for, and if we had not confronted him to have [the product] sent back to [the east coast], we wouldn't have known he had sold [it]." Newhouse testified the parties, including Perez, understood any expenses incurred by Perez in connection with the product would be reimbursed only after Schiff was repaid its principal in full, and only if supported by proper documentation.
Gary Gordon, the operations manager and an officer of Schiff, testified Schiff's role in the transaction was "strictly as an invest[or]," and the entire agreement between the parties was oral. Gordon also testified Schiff was not involved in discussions among Newhouse, Sabeh and Perez regarding the structure and terms of the alleged oral contract. Gordon admitted Schiff had no documents showing it owned the product.
Gordon testified Newhouse was responsible for the "day-to-day operation" of the investment made by Schiff. Gordon further testified it was Newhouse that "[got] us all involved" in the transaction, bringing the various parties together.
Gordon confirmed Perez returned a portion of the unsold product to Schiff in two shipments, one in June or July 2002, and the other in October 2002. After Schiff realized Perez had not returned all of the product, Schiff sent Perez "many, many letters" and made "many, many [tele]phone calls" asking Perez to account for the shortfall. Gordon testified these events occurred in 2002.
After Schiff completed its presentation of the evidence at trial, and in response to Perez's oral motion for judgment under section 631.8, the court ruled the two-year statute of limitations set forth in section 339, subdivision (1) barred Schiff's action against Perez and his company. The court based its decision on its finding the arrangement among Schiff, Newhouse, Sabeh and Perez was oral, and not for the sale of goods within the meaning of Uniform Commercial Code section 2725:
Schiff waived its right to a statement of decision under section 631.8, subdivision (a) by not making a timely request after the court granted Perez's motion for judgment. (See Tusher v. Gabrielsen (1998) 68 Cal.App.4th 131.) Accordingly, we assume the court made whatever findings are necessary to sustain the judgment and we indulge all presumptions in favor of the judgment. (Michael U. v. Jamie B. (1985) 39 Cal.3d 787, 792-793; In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) As we discuss, the record does not overcome these presumptions; rather, the record contains substantial evidence to support them.
Uniform Commercial Code section 2725, subdivision (1) provides in part: "An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it." (U. Com. Code, § 2725.)
"Now, what is the agreement between the plaintiff and the defendant? And that's all I'm concerned with today. I'm not concerned with Newhouse or Sabeh or all these folks because they are not named parties. The named parties are Schiff and Perez. [¶] And the evidence is clear, the burden is more likely to be true than not true. It's a very slight burden as you gentlemen both know. So what do we have here? We have a situation where Mr. Gordon admits Mr. Newhouse says it, that the plaintiff is the investor. [¶] Newhouse puts this together with Sabeh or whatever, and they're going to move goods from Israel to California to sell them to Mexico or whatever and that is what the deal is. So your sale of goods is between Newhouse, Sabeh, and Perez and others. [¶] Schiff is an investor. Technically is not involved in the sale of the goods. [¶] You say there [are] two contracts here. There [are] not two contracts here. You have the original agreements, here, as to what the different parties['] responsibilities were. [¶] Schiff was not part of any contract for sale of goods, [it was] the investor. Later on you say well that second bit between Perez and Schiff you know that should be considered in this contract for the sale of goods. Wrong. Does that show that Schiff has title to these goods? No it does not. [¶] What it shows is Schiff trying to get [its] money back[,] which any ordinary person would try to do and Mr. Perez is trying to do whatever he wants to do. . . . [¶] But all I'm concerned about is we have an oral contract here. And as far as this plaintiff is concerned, it is not a contract for the sale of goods; therefore, it is oral; therefore, a two-year statute of limitation applies; therefore, this is judgment for the defendant."
After the trial court granted judgment for Perez, Schiff made an oral motion to conform its pleadings to the evidence to prove the oral arrangement between the parties was a joint venture. The court rejected Schiff's motion, and reiterated the arrangement between the parties was oral and barred by the two-year limitations period in section 339, subdivision (1).
DISCUSSION
A. Governing Law and Standard of Review
Section 631.8, subdivision (a) authorizes a party in a nonjury trial to move for judgment in the party's favor after the opposing party has completed his or her presentation of evidence. Although similar to a motion for nonsuit in a jury trial, a section 631.8 motion differs in one critical respect: sitting as fact-finder, a trial court presented with a section 631.8 motion may weigh the evidence presented and resolve issues of credibility and other conflicts in the evidence in determining whether the plaintiff has sustained his or her burden of proof. (§ 631.8, subd. (a); Heap v. General Motors Corp. (1977) 66 Cal.App.3d 824, 829; National Farm Workers Service Center, Inc. v. M. Caratan, Inc. (1983) 146 Cal.App.3d 796, 807.)
Section 631.8, subdivision (a), provides, "After a party has completed his presentation of evidence in a trial by the court, the other party, without waiving his right to offer evidence in support of his defense or in rebuttal in the event the motion is not granted, may move for a judgment. The court as trier of the facts shall weigh the evidence and may render a judgment in favor of the moving party, in which case the court shall make a statement of decision as provided in Sections 632 and 634, or may decline to render any judgment until the close of all the evidence. The court may consider all evidence received, provided, however, that the party against whom the motion for judgment has been made shall have had an opportunity to present additional evidence to rebut evidence received during the presentation of evidence deemed by the presenting party to have been adverse to him, and to rehabilitate the testimony of a witness whose credibility has been attacked by the moving party. Such motion may also be made and granted as to any cross-complaint."
The findings of a court made in connection with a section 631.8 motion are reviewed for substantial evidence. (See Canales v. City of Alviso (1970) 3 Cal.3d 118, 126; San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528.) " 'Evidence is substantial if any reasonable trier of fact could have considered it reasonable, credible and of solid value.' [Citation.]" (Lam v. Bureau of Security & Investigative Services (1995) 34 Cal.App.4th 29, 36.)
We review the record as a whole, resolving all conflicts and indulging all reasonable inferences favorable to the prevailing party. (Western States Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559, 571.) If there is substantial evidence, contradicted or uncontradicted, that supports a finding, it must be upheld even if the evidence is subject to more than one interpretation. (Ibid.) " 'When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court.' [Citation.]" (Ibid.)
Schiff contends its breach of oral contract claim was governed by the four-year limitations period in Uniform Commercial Code section 2725 because an "implied in law sales contract" arose in 2002 between Schiff and Perez when Perez "accepted" the product by not returning it to Schiff. Schiff also contends the applicable statute of limitations is three or four years, and not two years as found by the court, based on "undisputed evidence" in the record, after Schiff conformed its pleading to proof to establish a conversion and constructive trust claim against Perez.
B. The Arrangement Between Schiff, Perez and Others Was Oral, and Not for the Sale of Goods
In determining the statute of limitations applicable to a cause of action, "it is necessary to identify the nature of the cause of action, i.e., the 'gravamen' of the cause of action. [Citations.] '[T]he nature of the rights sued upon and not the form of action nor the relief demanded determines the applicability of the statute of limitations under our code.' [Citation.]" (Hensler v. City of Glendale (1994) 8 Cal.4th 1, 22-23; see also Day v. Greene (1963) 59 Cal.2d 404, 411.)
The court here considered evidence to determine the nature of the rights sued on by Schiff. The court found that any alleged contract among Schiff, Newhouse, Sabeh and Perez was oral and was not for the sale of goods within the meaning of Uniform Commercial Code section 2725. Based on this finding, the court applied the two-year limitations period and granted judgment for Perez.
Substantial evidence exists in the record to support the court's finding the arrangement between the parties was oral. Both Newhouse and Gordon testified the arrangement among the parties was oral. Moreover, Schiff alleged in its complaint the parties entered into a "continuing oral agreement." This admission by Schiff is binding. (See Logan v. Southern Cal. Rapid Transit Dist. (1982) 136 Cal.App.3d 116, 126 ["A party is bound by an admission in his own pleadings"]; Los Angeles County-U.S.C. Medical Center v. Superior Court (1984) 155 Cal.App.3d 454, 460 ["Any admissions found in the pleadings may be considered by the court and are binding on the plaintiff"].)
Credible evidence also exists in the record to support the court's finding there was no contract for sale between Schiff and Perez within the meaning of Uniform Commercial Code section 2725, subdivision (1). A "contract for sale" presupposes the existence of a "sale," defined as the "passing of title from the seller to the buyer for a price." (U. Com. Code, § 2106, subd. (1).) A transaction is a sale, as distinguished from other transfers relative to property, when title to the property changes and the receiving party is under no obligation to return the property or account for it. (H. S. Crocker Co., Inc. v. McFaddin (1957) 148 Cal.App.2d 639, 644; see also Associated Beverage Co. v. Board of Equalization (1990) 224 Cal.App.3d 192, 209.)
Newhouse testified he, Schiff and Sabeh made more than 20 demands on Perez for the return of the unsold product. Newhouse also testified he considered Perez's behavior to be "criminal" after Perez unilaterally sold a portion of the product in 2002 to cover his expenses. Newhouse believed Perez acted improperly because Perez did not tell the parties he was selling the product, nor did he consult them regarding the price to be charged for the product.
Gordon testified Schiff's role in the transaction was "strictly limited" to that of investor. He further testified Newhouse was responsible for the day-to-day operation of Schiff's investment, and was the one who brought the parties together in the transaction. Newhouse also testified Schiff was not involved in determining the structure of the transaction, or the terms governing it, and he admitted Schiff had no documents showing it owned the product.
The evidence in the record is reasonable, credible and of solid value (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633) and supports the court's finding Schiff did not own the product, there was no "sale of goods" between Schiff and Perez, and by inference, Perez did not purchase the product. The evidence shows Schiff acted as a mere investor in the transaction and did not enter into a contract with Perez to sell the product. Instead, Schiff relied on Newhouse to manage its investment and protect its interests in the investment. The fact Perez and the other parties would not be paid under the alleged contract unless and until the arrangement resulted in a profit, and the fact the parties did not agree in advance to the percentage of profits each would receive, is further credible evidence Schiff and Perez did not enter into a contract for the sale of goods.
C. Schiff's Cause of Action for Breach of Oral Contract Accrued in October 2002
Schiff alleged in its complaint Perez breached the oral contract in October 2002. This allegation is binding on Schiff. (See Logan v. Southern Cal. Rapid Transit Dist., supra, 136 Cal.App.3d at p. 126.) Apart from this judicial admission, the record contains substantial evidence to support the court's finding, under the doctrine of implied findings, that Perez breached the oral arrangement in October 2002, at the latest. The evidence shows that in mid-October 2002 Schiff asked Perez for an accounting when Schiff realized there were about 81,000 "units" of product missing. Perez responded in late October 2002 by admitting he kept 40,273 units to cover his expenses, and by offering to pay Schiff about $27,000, or $2.25 per unit (less expenses). However, Newhouse testified Perez was not authorized to retain or sell any of the product. Newhouse also testified Perez was not entitled to reimbursement for expenses until after Schiff was repaid its investment. Newhouse testified all the parties, including Perez, understood the terms of the oral contract. Substantial evidence supports a finding Schiff's breach of oral contract claim against Perez accrued in October 2002.
D. Schiff's Common Count Claim Was Barred by Section 339, Subdivision (1)
The statute of limitations for an action in assumpsit is two years if the obligation is oral or implied in fact. (§ 339, subd. (1); Filmservice Laboratories, Inc. v. Harvey Bernhard Enterprises, Inc. (1989) 208 Cal.App.3d 1297, 1301-1302.) Here, the record shows Schiff's claims for breach of oral agreement and common count on open book account for money due are factually identical in all material respects. A party cannot transmute a breach of oral contract claim into an action based on an open book account, even when there are "incidental writings" such as an invoice or written ledger to lengthen the applicable statute of limitations. (See e.g., Filmservice Laboratories, at pp. 1307-1308 [breach of contract action barred by the statute of limitations "cannot be resurrected by the device of pleading common counts"].) Substantial evidence supports the court's finding Schiff's common count claim, based on the same oral arrangement as its breach of contract claim, is time-barred under section 339, subdivision (1).
Schiff's common count claim is also barred based on the court's determination, supported by substantial evidence in the record, that there was no sale of goods between Schiff and Perez.
E. Denial of Schiff's Oral Motion to Conform Its Pleading to Proof After the Court Granted Judgment for Perez
After the court granted judgment for Perez under section 631.8, Schiff made an oral motion to amend its pleadings to conform with proof to establish a joint venture relationship between the parties. In denying the motion to amend, the court found Schiff's action was based on an oral arrangement between Schiff and Perez, and applied the two-year limitations period against Schiff.
Schiff contends the evidence in the record not only supports a claim for breach of fiduciary duty against Perez, based on the parties' theoretical joint venture relationship, but also supports claims against Perez for conversion and constructive trust. The ruling of a trial court denying leave to amend will not be disturbed on appeal, absent a showing by the appellant of a clear abuse of discretion. (Marvin v. Marvin (1976) 18 Cal.3d 660, 667, fn. 2.) An unwarranted or unexplained delay in presenting a proposed amendment to conform to proof also may justify a refusal to permit it. (See Levy v. Skywalker Sound (2003) 108 Cal.App.4th 753, 770-771; see also 5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 1133, at pp. 587-590, and cases there cited.)
The court has discretion to grant leave to amend to conform to proof, and it may do so in those instances in which no prejudice would result to the opposing parties. (Union Bank v. Wendland (1976) 54 Cal.App.3d 393, 400.) However, a motion to amend should not be granted when the proposed amendment is presented belatedly without good explanation or would be futile. (See ibid.; City of Stanton v. Cox (1989) 207 Cal.App.3d 1557, 1563-1564; Levy v. Skywalker Sound, supra, 108 Cal.App.4th at pp. 770-771; Vaillette v. Fireman's Fund Ins. Co. (1993) 18 Cal.App.4th 680, 685.)
Here, Schiff's motion to amend was limited to establishing a joint venture relationship between the parties, which Schiff argues on appeal supports a breach of fiduciary duty claim against Perez. Schiff's proposed amendment was offered at the conclusion of its evidence. Schiff offered no good explanation for its delay in raising the new legal issue, which arose from facts well known to it long before the commencement of trial. (See Union Bank v. Wendland, supra, 54 Cal.App.3d at p. 400.) For this reason alone, the court did not abuse its discretion by denying the motion to amend.
Moreover, substantial evidence supports a conclusion (based on the doctrine of implied findings) that the proposed amendment would prejudice Perez, inasmuch as a claim for breach of fiduciary duty would introduce new issues and require new evidence and discovery between the parties. (Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 879; McDonald's Corp. v. Board of Supervisors (1998) 63 Cal.App.4th 612, 618.) The denial of the motion to amend in these circumstances was not an abuse of discretion. (See City of Stanton v. Cox, supra, 207 Cal.App.3d at pp. 1563-1564; Levy v. Skywalker Sound, supra, 108 Cal.App.4th at pp. 770-771.)
Schiff argues for the first time on appeal the evidence also establishes claims for conversion and constructive trust against Perez. " '[A] reviewing court will ordinarily not consider claims made for the first time on appeal which could have been but were not presented to the trial court. . . . Generally, issues raised for the first time on appeal which were not litigated in the trial court are waived. [Citations.]' " (Newton v. Clemons (2003) 110 Cal.App.4th 1, 11, fns. omitted; see also JRS Products, Inc. v. Matsushita Electric Corp. of America (2004) 115 Cal.App.4th 168, 178.) This rule applies when a party asserts a new theory of liability for the first time on appeal. (Richmond v. Dart Industries, Inc., supra, 196 Cal.App.3d at p. 874; see also Ernst v. Searle (1933) 218 Cal. 233, 240-241; Bogacki v. Board of Supervisors (1971) 5 Cal.3d 771, 780.)
Schiff waived its claims for conversion and constructive trust by not including them in its motion to amend its pleadings to conform with the evidence. However, even had Schiff included conversion and constructive trust in its motion to amend, substantial evidence shows these claims, like the breach of fiduciary duty claim, would introduce new issues and require new evidence and discovery between the parties. (Richmond v. Dart Industries, Inc., supra, 196 Cal.App.3d at p. 879.) Under the doctrine of implied findings, the court did not abuse its discretion by denying the proposed amendment.
DISPOSITION
The judgment is affirmed. Perez is entitled to costs on appeal.
WE CONCUR: BENKE, Acting P. J., HALLER, J.