Filed 5/15/18 Sawyer & Company, Inc. v. Elements Food Group, Inc. CA4/3







NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE


SAWYER & COMPANY, INC.,

Plaintiff and Appellant,

v.

ELEMENTS FOOD GROUP, INC.,

Defendant and Respondent.


G053335

(Super. Ct. No. 30-2013-00632860)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Linda S. Marks, Judge. Affirmed.
Law Offices of Mark B. Plummer and Mark B. Plummer for Plaintiff and Appellant.
Alevizon & Associates and Dennis M. Alevizon for Defendant and Respondent.

I. INTRODUCTION
This is a complex accounting case involving claims for unpaid commissions which the trial judge said was “one of the most difficult cases in [her] time on the civil panel.” We will do our best to sort it out.
The losing party, Sawyer & Company (Sawyer Inc.) presents four arguments on appeal. It first claims that a spreadsheet (set forth in both exhibits 122 and 125) offered by defendant Elements Food Group (Elements), should not have been admitted into evidence because it wasn’t prepared until after the trial had begun. Sawyer Inc. thinks Elements should have been held to an earlier-prepared exhibit, exhibit 3. We reject this claim because the spreadsheet recalculated commissions in Sawyer Inc.’s favor, correcting a mistake exhibit 3 had made in applying a lower commission rate than allowable even under Elements’ own theory of the case. The trial judge was within her reasonable discretion to allow the recalculation into evidence.
Sawyer Inc. also claims it was entitled to prevailing party status because Elements made a commission payment after Sawyer Inc. filed its original complaint. This argument fails because there was substantial evidence that the payment was independent of the lawsuit. Looking at the overall result in this case, the trial judge could reasonably conclude that Sawyer Inc. was not the prevailing party.
A third claim by Sawyer Inc. is that it was entitled to treble damages under the Independent Wholesale Sales Representatives Contractual Relations Act of 1990 (Civ. Code, § 1738.10 et seq., the “Wholesale Act”). We reject this argument because sales to ultimate consumers are specifically excluded under the Wholesale Act. Here, there was substantial evidence that Sawyer Inc. does not come within the protections of the Wholesale Act, since as a broker it pitched Elements’ food products to the ultimate consumers of those products: school districts.
But the most complex claim made by Sawyer Inc. on appeal involves its argument it was entitled to unpaid commissions, given the evidence presented at trial. That evidence, the trial judge noted, was “convoluted and confusing.” But it appears to us Sawyer Inc. failed to show uncontroverted evidence it was entitled to its calculation of unpaid commissions. For one thing, there was a parallel agreement with an Elements spinoff, CN Solutions, that provided for lower commission rates than the agreement Sawyer Inc. originally had with Elements. And for another the trial judge was entitled to conclude, given the way Sawyer Inc. presented its evidence, that Sawyer Inc. simply had not proven its claim for unpaid commissions. The evidence showed a multiplicity of possible commission rates depending on product sold. Sawyer Inc. failed to call a forensic accountant who might have broken down the various paid invoices into specific products and rates. Rather, as plaintiff, it left to the trial judge the onerous task of going through volumes of paid invoices to calculate the proper amount owing. The trial judge was within her discretion in refraining from doing the work that Sawyer Inc. itself should have done in presenting its case.
II. BACKGROUND
Sawyer Inc. and Elements signed a written broker agreement effective March 2, 2012. The contract called for Elements to pay Sawyer Inc. “a commission based on sales generated” at a rate of 5 percent “unless otherwise agreed upon on a case by case basis.” An exhibit to the agreement signed the same day modified the 5 percent term by providing Sawyer Inc. would be paid 8 percent for the sale of enchiladas, rice boats and burritos.
Sawyer Inc.’s target market was school districts which are required to adhere to USDA nutritional guidelines for mandatory school lunch programs. Elements specialized in Tex-Mex style lunch items such as turkey enchiladas as well as kosher meals for the California prison system. However, at the time of the March 2012 commission agreement, Elements had already begun “co-packing” for another company, Mountain West. Mountain West was a company owned by Michael Boden, who, like Sawyer Inc., was a food broker, but also was a manufacturer with his own facility.
In the period prior to July 2012, Elements made direct sales to Mountain West. Because it had been Tom Sawyer who introduced Mountain West to Elements, they paid him a 2 percent finder’s fee on those sales, and he agreed to invest that 2 percent as a capital contribution in a new firm, CN Solutions (CN). Frederick Scalzo, owner of Elements, testified that CN was formed August 1, 2012, as a successor to Elements. The idea was that CN would be a new entity combining Boden’s Mountain West operations with Elements.
In the wake of the formation of CN, Elements stopped making direct sales to Mountain West. Rather, beginning in September 2012, Elements and Boden did business under the CN name for the school year that had just begun.
While Sawyer Inc. disputes whether CN ever actually existed, there is substantial evidence it did, either as a separate division of Elements or as a spinoff brand name. Perhaps the most striking form of this evidence is the numerous invoices sent under “CN Solutions” letterhead to various customers. In fact, our record indicates that most of Elements’ sales for the school year beginning September 2012 were under the CN brand name. Sawyer himself sent a formal notice to various food service customers in March 2013, announcing he could no longer associate with CN Solutions “or” Elements, suggesting he recognized the separate identities. There was also Frederick Scalzo’s testimony that in late 2012 CN had its own booth at a trade show in Pasadena, which was staffed by one of Sawyer Inc.’s employees. Sawyer personally brought people to that booth.
Scalzo testified he and Sawyer had a conversation in July 2012, in which Sawyer agreed to sell the products of the forthcoming CN entity, but at a lower commission rate than had been provided for in the March 2012 Sawyer Inc.-Elements contract. Scalzo further testified he discussed with Sawyer having Sawyer Inc. represent CN to school districts, and having Sawyer Inc. work for CN at certain agreed (and we note, lower) commission rates different from those in the March 2012 contract. Sawyer himself wrote down some notes of what he agreed to in what would become exhibit 44 at trial. We reproduce that exhibit as an appendix to this opinion, but essentially it is a piece of paper in Tom Sawyer’s own hand, under the heading “CN Solutions,” with the words “commission rates” and “Sawyer & Co. In” and certain percentages for certain products. Those rates indicate 6 percent for bulk enchiladas, burritos, and beef rice “veg.” boats, but only 4 percent for “Double dogs,” bagel dogs, and enchilada pie.
From that point forward, Elements kept two separate sets of books – one for CN, and the other for Elements. Scalzo testified “none of it was commingled.” In February 2013, however, the CN operation was abandoned by Elements when Boden decided to leave it.
In the period April 2012 through May 2013 Elements received orders and payments from school districts for which Sawyer Inc. received credit, albeit as sales for CN. Elements paid Sawyer Inc. in 12 separate checks totaling $68,593.45.
However, in February 2013, roughly coincident with Boden’s abandoning the nascent CN firm, Sawyer Inc. instituted this action against Elements (and only Elements), which included general allegations that Elements had refused to pay Sawyer Inc. the proper amount of commissions, and had misrepresented the ingredients in its food.
In the first amended complaint filed about five months later, the misrepresentation allegation was amplified. Sawyer Inc. alleged Elements had produced a number of products, such as turkey enchiladas and bagel dogs, that did not meet the standards of the USDA National School Lunch Program, with the result that Sawyer Inc. had lost future business with certain school districts, including the one serving Las Vegas, Nevada (Clark County). In the second amended complaint (the final one) filed in February 2014, those allegations took precedence in Sawyer Inc.’s pleadings. Sawyer Inc. now alleged that Elements’ turkey carnitas enchiladas (the pleading treated “turkey carnitas enchiladas” as a single item, though that’s hard for us to imagine) were too high in fat and salt, with the result that it had lost some $1.2 million in future commissions from the Las Vegas account alone.
Sawyer Inc. also included in its second amended complaint an alleged violation by Elements of the Wholesale Act. The Wholesale Act issue turned on whether Sawyer Inc. was excluded from its protection because it took orders from the “ultimate consumer.” That is, if Sawyer Inc. took orders from the ultimate consumer, it would be outside the protection of the Wholesale Act. On the other hand, if Sawyer Inc. did not, it would be statutorily entitled to treble damages and attorney fees. (Civ. Code, § 1738.15 [such damages for willful failure to pay commissions].) So, when the case came to trial in early September 2014, the court heard the Wholesale Act issue first in the hope its adjudication would assist the parties in reaching a settlement.
Elements contended the school districts were the ultimate consumers of its products. Sawyer Inc. said it was the students themselves. Sawyer Inc. called the director of nutrition services for the Newport Mesa Unified School District. He testified most of the entrees that are served to students (such as turkey enchiladas) “are served as part of a full meal,” i.e., it was the district who had ultimate control over the delivered lunch. (Italics added.) The trial judge voiced a tentative opinion the ultimate consumer was the district, not the individual student, but did not come to a firm conclusion on that matter. In any event the case did not settle and trial resumed in mid-October 2014.
Going into the resumed trial there were two competing accountings – both in spreadsheet form – detailing what each side said Sawyer Inc. was owed and what it had been paid. Sawyer Inc.’s was exhibit 4, Elements’ was exhibit 3. Both spreadsheets used the same total number for monies received by Elements: $2,015,836.59. However, Sawyer Inc. claimed that $123,303 was owed on that $2,015,836.59, while Elements insisted only $66,571.67 was owed.
There was also a discrepancy over what Sawyer Inc. had actually been paid. Elements’ exhibit 3 stated the figure was $68,593.45. But Sawyer Inc.’s exhibit 4 said it had been paid a slightly lower figure – $66,571.67. That in itself was interesting because $66,571.67 was the exact figure Elements said it owed Sawyer Inc. Thus, just to look at the two spreadsheets, what Sawyer Inc. said it was paid was the same figure Elements said it was owed.
Sawyer Inc.’s exhibit 4 subtracted the $66,571.67 it said it had been paid from the $123,303 it said it was owed, and arrived at an underpayment claim of $56,731.33. By contrast, Elements’ exhibit 3 indicated that it had paid Sawyer Inc. all it was owed, and more so. $68,593.45 – about $2,026.79 too high.
Not only was there a difference in the amounts paid to Sawyer Inc., there was a difference in the commission rates applied to what was paid to Sawyer Inc. Elements’ exhibit 3 showed a commission rate of less than 4 percent, while Sawyer Inc. had used a commission rate closer to 8 percent. But Elements realized it had made a mistake in calculating a rate that could come out to less than 4 percent. Even under the July 12, 2012 agreement (with its provisions for 4 and 6 percent commission rates), rates should have been at least 4 percent.
The discrepancy soon came up at the resumed trial. There had been a short interval between the initial start of trial in early September 2014, with its concentration on the Wholesale Act issue, and its later resumption in mid-October 2014. Realizing its mistake in the exhibit 3 spreadsheet, Elements offered a new exhibit, number 122. Exhibit 122 is a compilation of invoices sent out on the CN letterhead, prefaced by a spreadsheet similar to exhibit 3 showing recalculated commissions at 4 and 6 percent rates, not 3 and 6 percent rates. The spreadsheet also included a higher figure for total cash receipts than exhibit 3.
Sawyer Inc. sought to exclude exhibit 122 as unfair to it because the new exhibit had been prepared after the close of discovery. But exhibit 122 was more favorable to Sawyer Inc. than the earlier exhibit 3. The difference between the recalculated exhibit 122 and the earlier exhibit 3 was that Elements asserted that Sawyer Inc. now owed it only $38.11 rather than $4,247.66.
The trial judge’s resolution of the issue was to have both counsel sit down to see if there was anything in exhibit 122 that was prejudicial to Sawyer Inc. Because exhibit 122 contained a large volume of backup documents – mostly invoices – exhibit 122 was later replaced by exhibit 125, which also contained those invoices but without handwritten notes on them. Both exhibits 122 and 125 came into evidence.
Exhibits 122 and 125 (as did exhibit 3) also included an offset claim on behalf of Elements based on the way the USDA lunch program works. Sawyer testified that the USDA offers certain commodities (e.g., pork or cheese) to school districts in lieu of, as he put it, “direct cash.” Elements would take that subsidized commodity and use it to make the product the school district ordered, say a turkey enchilada with cheese. However, sometimes a school district might not have the subsidized commodity. Elements might then take a loss on the sale if it had to buy the commodity at a commercial price and then make it. In such an instance, Sawyer Inc. (as Sawyer admitted on cross-examination) agreed to reimburse Elements “the difference between the commodity price and the commercial price.” That is, Sawyer Inc. agreed it “had a liability for commodity shortages.” Elements calculated the aggregate figure of these reimbursement claims to be $2,225.88.
Most of the trial was finished by November 2014. Each side submitted written closing arguments in March of 2015. We should note here that Sawyer Inc.’s suit against Elements had been tried with a separate Elements’ action against Boden. The facts of that claim are not relevant to this appeal, but we may reasonably infer the trial of that claim necessarily slowed the entire case down.
The case, however, stood unsubmitted going into September 2015. The court then held a remarkable posttrial hearing on September 2, 2015. We say remarkable because the trial judge made it very clear that she was “extremely frustrated” (her words) with the state of the evidence, and specifically the “volumes of invoices” involved. The tenor of the hearing was essentially a plea for the parties to agree to an accounting expert (see Evid. Code, § 730 ) to write a report establishing just exactly what was owed by Elements to Sawyer Inc. At the end of the hearing it seemed the court had in fact appointed Skorheim and Associates to do such an accounting analysis, with the fees to be split between the parties. But then both counsel got into a dispute (the details are not worth reciting now) about the scope of the expert’s duties. No expert report was ever forthcoming.
Meanwhile, the trial judge kept “the matter open” (i.e., did not take it under submission) until the very last day of the year 2015. On that day the case was submitted and the court issued a statement of decision.
The statement of decision began by noting the “convoluted and confusing manner” in which the case was “presented.” After recounting some background facts the court then concluded the only bona fide agreement at issue was the March 2, 2012 agreement, and that particular agreement was not the subject of a novation “as a result of subsequent discussions concerning an enterprise known as CN Solutions.” Thus the March 2, 2012 contract was never “extinguished.” Moreover, any “recovery would be under the terms of” that agreement. Even so, Sawyer Inc. simply had not carried its burden of proof of damages. In that regard the court noted that Sawyer accepted commissions for eight months without disputing the amount.
Sawyer Inc. filed a new trial motion, arguing that its exhibit 4 reflected an “undisputed damage calculation.” Meanwhile, Elements filed its own request for a modification of the tentative decision to make it clear it had won.
As to the request for modification, the trial court reissued its statement of decision verbatim, except for three changes: (1) a typo was corrected; (2) at the very end of the document the court said it found in favor of Elements on Sawyer Inc.’s action; and (3) on the trial involving Boden (again, not otherwise discussed in this appeal) the winner was Boden. In the instances where the court clarified the actual winner, the court said each party was to bear its own costs.
The new trial motion was denied. In its minute order the trial court added that Sawyer had “failed to prove [it] was owed any specific amounts” even under the March 2012 contract. Sawyer Inc. filed this appeal from the ensuing judgment.
III. DISCUSSION
Sawyer Inc. offers four identifiable arguments in favor of reversal: (1) exhibits 122 and 125 should not have been admitted; (2) Sawyer Inc. was improperly denied contract damages because Elements had failed to prove offsets; (3) Sawyer Inc. was entitled to prevailing party status because Elements made a payment of $16,761.49 in commissions on March 15, 2013, which was after the original complaint was filed on February 22, 2013; and (4) Sawyer Inc. was entitled to treble damages and attorney fees as a matter of law under the Wholesale Act. Arguments (1), (3), and (4) may be quickly dealt with.
As to (1), the admission of exhibits 122 and 125 only helped Sawyer Inc., so it was not prejudiced by the trial judge’s admission of them. It therefore has no standing to appeal from the trial court’s decision (Code Civ. Proc., § 902 [must be aggrieved party to appeal].) Moreover, the standard of review on the admission of the exhibit is abuse of discretion (see People v. Waidla (2000) 22 Cal.4th 690, 725) and admission, under the circumstances of the case, was eminently reasonable. Exhibits 122 and 125 were recalculations of commission owed in Sawyer Inc.’s favor. The only prejudice was that Sawyer Inc. was deprived of the opportunity to beat up exhibit 3 as erroneous (which, in fact, it did anyway).
Moreover, Sawyer Inc.’s main theory that somehow the mere admission of the spreadsheets based on recalculated percentages (to be sure, they did make the file thicker because they included backup invoices) hopelessly befuddled the trial judge is one we are not prepared to accept. We find nothing to support Sawyer Inc.’s assumption the trial judge, who certainly put a lot of time and effort into the case, could not keep three or four sets of similar spreadsheets straight.
As to (3), Sawyer Inc. cites no authority for its claim to be the prevailing party just because Elements made a late payment after litigation commenced. We don’t even know, for example, under what statute it claims victory. The argument is thus waived. “We disregard assertions and arguments that . . . lack citations to legal authority.” (Cassidy v. California Bd. of Accountancy (2013) 220 Cal.App.4th 620, 628.)
We will say, however, that in substance Sawyer Inc. is certainly not the prevailing party. The $16,761.49 payment was made within three weeks of the filing of the original complaint, and Sawyer Inc. continued on with two amended complaints after receiving the check, which indicates that the payment was not what this claim was really about. If we look at the equities, Sawyer Inc. did not win and the trial judge was well within her discretion to recognize that fact. (See Sears v. Baccaglio (1998) 60 Cal.App.4th 1136 1147-1148 [trial court has discretion to choose who actually prevails under Civ. Code, § 1717 as an “equitable consideration of who should fairly be regarded as the winner”].)
And (4) is moot. Sawyer Inc. did not show it was owed any commissions from Elements so there would be no occasion to apply the Wholesale Act. And even if Elements did owe commissions, there was substantial evidence to support the trial court’s finding the school districts themselves were the ultimate consumers of Elements and CN’s products, since Sawyer Inc.’s own witness, from the Newport Mesa School District, testified that school districts generally present the various items purchased from vendors like Elements as components of school lunches. It was the school districts themselves who make the overall decision as to the range of items that might appear on a student’s lunch tray so as to insure a balanced meal. (Cf. Silverhart v. Mount Zion Hospital (1971) 20 Cal.App.3d 1022, 1027 [hospital furnishing surgical needles as part of its services is “consumer” of the needle].) Put another way: It was the school districts who were paying the bill for products which they later dispensed as they chose.
That leaves (2), which is the true core of Sawyer Inc.’s case. Sawyer Inc. is saying the trial court had no choice but to award it a certain amount of damages – or at least some amount of damages.
Substantial evidence that Elements paid what it owed is found in the following: (1) the July 2012 agreement, in which Sawyer Inc. agreed to hawk Elements’ products under the CN brand at 4 and 6 percent – an agreement attested to by Frederick Scalzo; (2) the fact that apparently all of Elements’ actual sales after September 2012 – as shown by the actual invoices themselves – were on CN brand letterhead; (3) the fact that Sawyer himself indicated he had been representing CN in the formal notification to its customers (Tom Sawyer’s exact words were “Elements or CN,” italics added) of discontinuance in May 2013; and (4) the fact Sawyer Inc. staffed a booth under CN’s brand name at a tradeshow. All of these together support the conclusion that in July 2012, Sawyer Inc. agreed to sell for a new company at lower rates than the March 2012 agreement.
We think it makes no difference that the trial judge’s statement of decision disregarded the July 2012 agreement between Sawyer Inc. and CN. The important thing is whether the judgment is correct. The relevant rule was laid down in Estate of Hudspeth (1964) 225 Cal.App.2d 759, 764: “Although a memorandum opinion of the trial judge may be examined on appeal for the purpose of aiding in the interpretation of the findings and conclusion [citation] the function of a trial court opinion is limited. Although such an opinion may aid the appellate court to ascertain the process by which a judgment has been reached, it will not be used in determining whether or not the findings of the court are supported by the evidence. The question that concerns the reviewing court is whether or not the final decision, judgment or order is correct and not whether the reasons expressed in the opinion are in harmony with the results reached or whether they sustain the decision.” (Italics added.)
The Supreme Court had earlier adumbrated much the same sentiment in Yarrow v. State of California (1960) 53 Cal.2d 427, 438: “It is recognized that ‘the reasons given by the court for its action may be bad, and the decision, at the same time, correct for other reasons. It is the action of the court that is presumed to be correct and this presumption obtains even though the reasons given may be bad.’ [Citations.] The reasons stated may be valuable in illustrating the trial judge’s theory but they are not binding on an appellate court [citation] and they may never be used to impeach the order or judgment.” (Italics added.)
The judgment here was undoubtedly supported by substantial evidence. There was no reason to hold the July 2012 agreement invalid just because it was oral. The basic terms were still in Sawyer’s own handwriting, and exhibit 44 certainly satisfied the statute of frauds. All the statute of frauds requires is written evidence from which the whole contract can be derived. (See Searles v. Gonzalez (1923) 191 Cal. 426, 432.)
Because the evidence shows that the July 2012 agreement was not a “novation” to the March 2012 contract (as the trial court apparently thought), but a parallel agreement to sell for a start-up company at different rates, Elements’ spreadsheets, showing no amount was owing, could be taken as correct. Applying the miscarriage-of-justice standard required by our state Constitution for reversals (see Cal. Const., art. VI, § 13), we can find no miscarriage in the trial court’s actual judgment.
But there is more to the case. As trier of fact the trial judge simply did not trust anybody’s calculations, and wasn’t about to go page by page through the invoices in exhibits 122 or 125 with a calculator, first ascertaining what percentage rate applied (4? 5? 6? 8?), then figuring the percentage, and then making her own spreadsheet to write down a running total. One can imagine the horrifically tedious task such a process would have imposed on the trial judge had she undertaken it: “Let’s see, here’s an order for $3,000 worth of double dogs headed for a school district in northern California. Shall I apply 5 percent or does this one get 8 percent? Okay, 5 percent. So that works out to $150. Now to the next entry for $10,000 worth of enchiladas. Or is it enchilada pies? Okay, we’ll give Sawyer Inc. the benefit of the doubt and assume it comes within the enchilada category and apply 8 percent. That works out to $800. Okay, write that down under the $150.” And so on for pages of invoices. If Sawyer Inc. wanted to carry its burden of proof, it should have obtained the services of a forensic accountant to do that sort of bookkeeping work instead of expecting the judge to do it.
Moreover, with regard to Sawyer Inc.’s evidence in particular, the trial judge was perfectly entitled not to take Sawyer Inc.s’ exhibit 4 at face value. “The trier of fact is entitled to accept or reject all or any part of the testimony of any witness [citations] or to believe and accept a portion of the testimony of a particular witness and disbelieve the remainder of his testimony [citation].” (Mosesian v. Bagdasarian (1968) 260 Cal.App.2d 361, 368.) Yet Sawyer Inc. made no attempt to itemize the sales of given product paid on any given invoice (double dogs? enchiladas? burritos?) and show the particular rate of commission allegedly owing on that sale. Recall that under the March 2012 agreement, only certain items (e.g., enchiladas, rice boats and burritos) merited the 8 percent figure. But the invoices in exhibits 122 and 125 show that there were many sales of Mountain West’s “double dogs” and “bagel dogs,” which, even under the theory that the March 2012 agreement was the only operative one, would have only merited a 5 percent commission. There is no way to tell from exhibit 4 which was which.
We need not reach Elements’ Civil Code sections 2076 and 1501 estoppel arguments. Elements claims (in fact, it is a major theme in its brief) that by cashing the commission checks as they were sent, Sawyer Inc. waived its rights to challenge the respective calculations. While we are skeptical of the argument because there appears to have been no ongoing dispute about the correct commission rates at the time when the checks were cashed, there is no need to rest this judgment on an estoppel theory.
IV. DISPOSITION
The judgment is affirmed. Respondent shall recover its costs on appeal.






BEDSWORTH, J.

WE CONCUR:



O’LEARY, P. J.



FYBEL, J.






Appendix