Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County Super. Ct. No. 05CC08044, Robert H. Gallivan, Judge.
Law Offices of Scott E. Schutzman, Scott E. Schutzman and Lee W. Chen for Defendants and Appellants.
Bremer, Whyte, Brown & O’Meara, Keith G. Brenner, Jeremy S. Johnson; and Everett L. Skillman for Plaintiff and Respondent.
OPINION
ARONSON, J.
Defendants Caljean Vending Machine Services, Inc. (Caljean Vending), Robert Caljean, and Mary Caljean appeal the judgment entered against them in favor of plaintiff American Capital Group, Inc. (ACG). Defendants contend ACG lacked standing to maintain the suit because it had assigned its rights under their three vending machine equipment lease agreements to a third party. Defendants also contend the trial court erred when it excluded evidence that the lease agreements allowed Caljean Vending to purchase the equipment for $1 at the conclusion of the original lease term. Finally, defendants contend insufficient evidence supports the trial court’s award of damages for equipment that Caljean Vending failed to return to ACG.
We conclude ACG had standing to sue Caljean Vending because the three lease agreements were reassigned to ACG before trial. We further conclude each end-of-lease provision in the lease agreements expressly required Caljean Vending to either purchase the equipment for its fair market value, renew the lease, or return the equipment, and the agreement is not reasonably susceptible to defendants’ interpretation that it had the option to purchase the equipment for $1. Accordingly, the trial court did not err in striking defendants’ parol evidence. Finally, we conclude substantial evidence supports the trial court’s damage award for the value of the equipment. We therefore affirm the judgment.
We deny ACG’s motion to strike or disregard portions of defendants’ opening brief.
I
Factual and Procedural Background
In March 1999, November 1999, and March 2000, Caljean Vending entered into three separate written agreements to lease vending machine equipment from ACG. Robert Caljean executed a personal guarantee Caljean Vending would meet its obligations under the March 1999 and November 1999 agreements, and both Robert and Mary Caljean signed personal guarantees of Caljean Vending’s obligations under the March 2000 agreement. Each of the agreements provided a 60-month term, and would be automatically renewed for an additional one-year term unless Caljean Vending provided ACG notice within a specified number of days before the expiration of the original term that it would either purchase or return the equipment. After the additional one-year term, the lease would thereafter continue from month to month until terminated.
The March 1999 agreement required Caljean Vending to send the notice no later than 30 days before expiration, and the November 1999 and March 2000 agreements required it to send notice no later than 120 days before expiration.
The first page of the March 1999 agreement included two numbered paragraphs representing end-of-lease options the lessee could accept by initialing in the space provided in each paragraph. A review of the agreement reveals that neither paragraph was initialed, but a handwritten “N/A” was written next to the second paragraph. The agreement provided that if neither paragraph were initialed, the first paragraph would apply. This first paragraph provided the following end-of-lease option: “Purchase the equipment for fair market value plus any applicable taxes OR renew the lease per paragraph 1 OR return the equipment per paragraph 6.” The November 1999 and March 2000 agreements contained identical end-of-lease provisions, which read: “END LEASE OPTIONS: You will have the following options at the end of the original term, provided the lease has not terminated early and no event of default under the lease has occurred and is continuing. 1. Purchase the equipment for the fair market value. 2. Renew the lease per paragraph 12. 3. Return the equipment as provided in Paragraph 4.”
The March 1999 agreement also provided: “At the end of the Agreement’s term you will return the Equipment to a location we specify at your expense, in retail resaleable condition, full working order, and in complete repair.” Similarly, the November 1999 and March 2000 agreements provided: “Unless you purchase the Equipment in accordance with this Lease, at the end of this Lease you will immediately deliver the Equipment to us in as good condition as when you received it, except for ordinary wear and tear, to any place in the United States that we tell you. In the event the Equipment is not in good working condition when you return it, you agree to pay for any repairs, changes, alterations, or upgrades, necessary to return the Equipment to good working condition.”
Caljean Vending made all of the payments during the original lease periods of the three lease agreements, except for the last four payments due under the March 2000 agreement. Caljean Vending did not provide notice to ACG that it would not renew the leases at the conclusion of their 60-month term. Consequently, after the original lease term expired for each lease agreement, ACG considered the leases extended for a one-year term, and monthly terms thereafter. ACG sent monthly invoices for the extended leases, but Caljean Vending did not make any payments or return any of the equipment.
ACG sued Caljean Vending for breach of the three lease agreements, conversion and breach of guarantee. Shortly before trial, ACG brought a motion in limine to exclude parol evidence supporting defendants’ position that the parties intended to allow Caljean Vending to purchase the leased vending equipment for $1 at the end of each of the three leases. The trial court denied the motion without prejudice, noting that it would have to hear the evidence before ruling.
At the bench trial, Stephen Prettyman, the ACG sales executive who negotiated the lease agreements with Caljean Vending, testified the leases did not provide for a $1 buyout upon expiration of their initial terms, and if such an option had been intended, it would have been expressly stated in the agreements. Prettyman also testified his custom and practice was to review the end-of-lease options with the customer before execution of the agreement. Moreover, he testified a $1 buyout option would also have significantly increased the amount of the monthly lease payments.
Robert Caljean, president of Caljean Vending, testified that Prettyman advised him during contract negotiations the lease agreements provided for a $1 buyout. Robert Caljean testified he relied on Prettyman’s representation, and believed that Caljean Vending would become the owner of the equipment at the conclusion of the initial lease term after it paid ACG $1.
Caljean Vending’s expert witness, Bernard Hens, testified that the typical contract used in the vending machine industry is a conditional sales contract with a $1 buyout. Hens explained a conditional sales contract will provide the customer with a tax benefit, but it may require a higher monthly payment. Hens testified that he had never seen the type of contracts at issue in this case, and did not offer any opinion on how the court should interpret the contracts.
After Hens expressed his opinion regarding conditional sales contracts, the court announced it would finish Hens’s testimony the following day. Hens, however, expressed concern the delay would conflict with his plans to return to Pennsylvania. The court stated it would not preclude Caljean Vending from bringing Hens back the following day, but sought an agreement from counsel that would cover Hens’s proposed testimony.
In this vein, the court addressed Caljean Vending’s counsel and observed: “[I]n all candor, the leaning of the court is to grant the motion to strike on the parol evidence that . . . I’ve heard . . . [¶] . . . [¶] Mr. Chen, I believe your client is in good faith, but on a credibility contest here between Mr. Caljean, . . . it simply is hard for the court to believe, in some areas of his testimony, I find the testimony incredible. It’s simply not believable. [¶] Here, I have a guy who has been in this business for over 20 years, and he says he doesn’t understand a contract, and yet he does business that grosses 1.2 and up to 1.8 million gross. He’s a sophisticated businessman. If he’s not reading his contracts, he should be. [¶] The contracts, all three of them, on their face, appear to this court to be integrated agreements. They say what they say, and I think this is a damage case. [¶] . . . [¶] . . . [¶] Mr. Prettyman was very, very credible. He didn’t stretch the truth at all. I think he said what he said, and I believe him. I don’t think representations were made that this was going to be a buyout. [¶] . . . [¶] The evidence is really quite strong that there’s a breach here.”
The parties stipulated to have Hens’s deposition testimony regarding valuation of the equipment admitted into evidence. After hearing arguments of counsel, the court entered judgment of $47,948.26 in ACG’s favor, calculated as follows: $12,379.54 on the March 1999 contract, $16,788.48 on the November 1999 contract, $9,180.24 on the March 2000 contract, and $9,600 for the value of the unreturned vending equipment. The judgment was entered against Caljean Vending and Robert Caljean on the March 1999 and November 1999 contracts, and against all three defendants on the March 2000 contract. Defendants now appeal.
II
Discussion
A. Substantial Evidence Demonstrates ACG Had Standing to Bring the Present Suit
To finance the purchase of the equipment it leased to Caljean Vending, ACG assigned Caljean Vending’s payments under the lease agreements to the Manifest Group, Inc. (Manifest). Caljean Vending contends insufficient evidence supports a finding that Manifest reassigned these rights back to ACG before trial. We disagree.
“‘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 the 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 obligee [citation].’” (Neptune Society Corp. v. Longanecker (1987) 194 Cal.App.3d 1233, 1242 (Neptune Society).) In Neptune Society, the plaintiff attempted to demonstrate an assignment of rights solely through the testimony of one witness, who claimed to have been the owner of both the assignor and assignee corporations at the time of the assignment. The trial court concluded this evidence failed to demonstrate an assignment had occurred in that case. The Court of Appeal upheld the trial court’s determination, noting that the witness’s “entire testimony must be viewed with distrust and considered wholly unreliable because of numerous instances of inconsistent, evasive or false testimony throughout the trial.” (Id. at p. 1242.) Other evidence showed the witness had previously admitted he had no interest in the assignor corporation at the time of the assignment. (Id. at p. 1243.)
Here, the assignment agreements between ACG and Manifest did not assign title to the equipment to Manifest, but assigned only ACG’s rights under the lease agreements. Specifically, the agreements provide: “The undersigned [ACG] for valuable consideration, receipt of which is hereby acknowledged, hereby assigns and transfers to The Manifest Group, its successors, and assigns, all of the undersigned’s right, title, and interest as Lessor under the Lease, including the right to receive rent thereunder and grants The Manifest Group a security interest in the equipment subject to the Lease. This assignment does not transfer to The Manifest Group the title to the Equipment leased under the above-described Lease.”
Consistent with the language of the assignment agreements, Curt Kovash, senior vice president and general manager of Manifest, confirmed in his testimony that when ACG assigns a payment stream under a lease to Manifest, ACG typically retains all residual rights under the lease other then the scheduled payments during the original lease term. Because ACG never assigned its residual rights to the equipment to Manifest, it did not have to prove reassignment in order to pursue its claims against Caljean Vending for its failure to purchase or return the equipment.
Moreover, Kovash testified that in the present situation, Manifest had formally reassigned its “right, title, and interest” in the leases back to ACG after ACG had fully satisfied previously unpaid installments due under the leases. Caljean Vending argues Kovash’s testimony is insufficient to establish reassignment of the leases back to ACG because Kovash did not have any personal knowledge of the transaction, but instead learned of the reassignment solely through a review of Manifest’s business records shortly before trial. Caljean Vending notes that Kovash was unable to properly authenticate the reassignment agreement as a business record, thus precluding its admission into evidence.
We conclude Kovash’s testimony was sufficiently “‘clear and positive to protect an obligor from any further claim by the primary oblige . . . .’” (See Neptune Society, 194 Cal.App.3d at p. 1242.) As Manifest’s senior vice president and general manager, Kovash expressly and unequivocally disclaimed any further interest Manifest may have had in the lease agreements at issue. This testimony is sufficient to protect Caljean Vending from any further claims by Manifest. Moreover, unlike the testimony in Neptune Society, nothing in the present case casts doubt on Kovash’s credibility. Accordingly, we conclude ACG has adequately demonstrated it had standing to litigate the present action.
B. The Trial Court Did Not Err in Its Parol Evidence Ruling
Caljean Vending contends the trial court erred in granting ACG’s motion in limine to exclude parol evidence, arguing the lease agreements were ambiguous as to whether they created a true lease or conditional sales contract. We disagree.
Initially, we conclude the trial court did not grant ACG’s motion in limine. As noted above, the trial court initially denied the motion without prejudice, and allowed Caljean Vending to present evidence regarding its understanding of the lease agreements, subject to a motion to strike. The trial court, however, never expressly struck the evidence, but stated “the leaning of the court is to grant the motion to strike on the parol evidence . . . .” The record does not contain a final ruling on the motion in limine. Thus, Caljean Vending is challenging a ruling the trial court did not make. Nonetheless, even if we assume the trial court granted the motion to exclude, we discern no error.
“Whether the parol evidence rule applies in a given set of circumstances is a question of law which we consider de novo . . . .” (EPA Real Estate Partnership v. Kang (1992) 12 Cal.App.4th 171, 176.) Section 10202 of the California Uniform Commercial Code directs how the parol evidence rule applies to commercial lease agreements: “Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented: [¶] (a) By course of dealing or usage of trade or by course of performance; and [¶] (b) By evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.” Here, Caljean Vending does not dispute the trial court’s finding the parties intended the lease agreements to represent the final expression of their agreement. Thus, the question here is whether the parol evidence Caljean Vending offered contradicts the lease agreements, or merely explains or supplements their terms.
Caljean Vending sought to prove the lease provisions allowed it to purchase the leased equipment for $1 at the conclusion of the lease term. As we noted above, the lease agreements each expressly limited Caljean Vending to three options at the conclusion of the lease term: buy the equipment at its fair market value, renew the lease, or return the equipment. As our Supreme Court has observed: “‘When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is “reasonably susceptible” to the interpretation urged by the party. If it is not, the case is over.’ [Citation.]” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 393.) The end-of-term clauses in the lease agreements are not “reasonably susceptible” to the interpretation urged by Caljean Vending; instead, Caljean Vending’s parol evidence directly contradicts the express terms of these clauses. We therefore conclude the evidence was subject to exclusion under the parol evidence rule.
Caljean Vending devotes a significant portion of its brief arguing each of the agreements formed a conditional sales contract, not a true lease. This argument would be relevant in determining what should happen at the end of the leases if the agreements were silent on this issue. Because the agreements expressly state the end-of-lease options, there is no need to engage in the true lease/conditional sales contract analysis.
Caljean Vending also argues Robert Caljean’s testimony regarding Prettyman’s representations that the equipment was subject to a $1 buyout established fraud in the inducement of the contract, an exception to the parol evidence rule. We disagree. Our Supreme Court has declared: “Our conception of the rule which permits parol evidence of fraud to establish the invalidity of the instrument is that it must tend to establish some independent fact or representation, some fraud in the procurement of the instrument or some breach of confidence concerning its use, and not a promise directly at variance with the promise of the writing.” (Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, 263, italics added.); Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 346 [“our courts have consistently rejected promissory fraud claims premised on prior or contemporaneous statements at variance with the terms of a written integrated agreement”].) Because the parol evidence Caljean Vending offered is at complete variance with the express terms of the lease agreements, it is not admissible to demonstrate fraud in the inducement of the lease agreements.
Finally, apart from the lease/conditional sales contract argument, Caljean Vending contends the March 1999 lease agreement is ambiguous because the handwritten “N/A” on the document could be viewed as applying not only to the second set of end-of-lease options, but to both sets of options. To the extent the placement of this designation creates an ambiguity allowing the admission of parol evidence, we would conclude any error by the court in this regard was harmless. As noted above, the trial court found Robert Caljean’s testimony regarding his understanding of the lease agreements to be “simply not believable,” and that Prettyman was “very, very credible.” Accordingly, Caljean Vending cannot demonstrate it is reasonably probable it would have obtained a more favorable result had the trial court not struck the parol evidence, assuming the court actually did so. (See Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 570.)
C. The Trial Court’s Damage Award Is Supported by Substantial Evidence
Included in the trial court’s damages calculation is $9,600, representing the fair market value of the leased equipment. Caljean Vending contends no substantial evidence supports this particular award. We disagree.
The trial court heard the deposition testimony of Barry Ferguson, ACG’s expert witness, who opined that the fair market value of the equipment subject to the leases was $44,095. Ferguson explained this figure represented a sales price, but explained he would have to see the equipment before setting a purchase price.
Defendants’ expert, Hens, testified the leased equipment was worth between $600 and $800 per item at the end of the leases. Hens declined to state whether the equipment would require refurbishing or reconditioning at the end of the original lease term, explaining he would have to see the equipment before he could render an opinion.
At the close of evidence, the trial court tentatively ruled that plaintiff failed to prove the fair market value of the equipment. After further argument, the trial court took the matter under submission and ultimately awarded $9,600 for the equipment, presumably Hens’s low estimate of $600 per piece of equipment times the 16 pieces leased.
Our review of the expert testimony leads us to conclude substantial evidence supports the award. Both experts placed a value on the equipment based on their specialized knowledge of the equipment models, and their experience in buying and selling them. The trial court admitted these valuations into evidence, and Caljean Vending does not contend the trial court erred in doing so. Accordingly, we conclude substantial evidence supports the trial court’s damage award.
As a final matter, ACG has requested we award it attorney fees on appeal. We defer ACG’s request to the trial court. (See Butler-Rupp v. Lourdeaux (2007) 154 Cal.App.4th 918, 925-927.)
III
Disposition
The judgment is affirmed. ACG is entitled to its costs of this appeal.
WE CONCUR: RYLAARSDAM, ACTING P. J., FYBEL, J.