FLADEBOE v. AMERICAN ISUZU MOTORS INC.,

Filed 4/23/07

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Story continued from Part I ..

B. Plaintiffs Had Unclean Hands.

The trial court found Plaintiffs had unclean hands based on (1) RFLMs failure to comply with Vehicle Code section 11713.3, subdivision (d)(1) and (2) Plaintiffs use of RFLMs license to sell and service Isuzu vehicles after RFLM dissolved. Substantial evidence supports the trial courts unclean hands findings which, we conclude, provided Isuzu a complete defense.

The [unclean hands] doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim. (Kendall‑Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978.) The doctrine of unclean hands requires unconscionable, bad faith, or inequitable conduct by the plaintiff in connection with the matter in controversy. (General Elec. Co. v. Superior Court (1955) 45 Cal.2d 897, 899‑900; Dickson, Carlson & Campillo v. Pole (2000) 83 Cal.App.4th 436, 446.) Unclean hands applies when it would be inequitable to provide the plaintiff any relief, and provides a complete defense to both legal and equitable causes of action. (Dickson, Carlson & Campillo v. Pole, supra, 83 Cal.App.4th at p. 447; (Kendall‑Jackson Winery, Ltd. v. Superior Court, supra, 76 Cal.App.4th at pp. 978, 986.) Whether the defense applies in particular circumstances depends on the analogous case law, the nature of the misconduct, and the relationship of the misconduct to the claimed injuries. (Dickson, Carlson & Campillo v. Pole, supra, 83 Cal.App.4th at p. 447.)

Vehicle Code section 11713.3, subdivision (d)(1) makes it unlawful for a vehicle manufacturer to prevent a dealer from selling or transferring a dealership. It states, in part: No dealer, officer, partner, or stockholder shall, however, have the right to sell, transfer, or assign the franchise, or any right thereunder, without the consent of the manufacturer or distributor except that the consent shall not be unreasonably withheld. (Veh. Code,  11713.3, subd. (d)(1).)

Vehicle Code section 11713.3, subdivision (d)(2)(A) makes it unlawful [f]or the transferring franchisee to fail, prior to the sale, transfer, or assignment of a franchisee or sale, assignment, or transfer of all, or substantially all, of the assets of the franchised business or a controlling interest in the franchised business to another person, to notify the manufacturer or distributor of the franchisees decision to sell, transfer, or assign the franchise. In addition, section 11713.3, subdivision (e) provides: There shall be no transfer or assignment of the dealers franchise without the consent of the manufacturer or distributor, which consent shall not be unreasonably withheld or conditioned upon the release, assignment, novation, waiver, estoppel, or modification of any claim or defense by the dealer. Finally, section 11713, subdivision (m) makes it unlawful for the holder of a dealers license to [p]ermit the use of the dealers license, supplies, or books by any other person for the purpose of permitting that person to engage in the purchase or sale of vehicles required to be registered under this code.

The evidence presented in the first phase of trial established Plaintiffs violated those Vehicle Code sections and acted inequitably. In March 2002, RFLM sold the Isuzu dealership assets and assigned the Dealer Agreement to Fladeboe VW. In violation of Vehicle Code section 11713.3, subdivision (d), the transaction closed, and the Isuzu dealership purportedly transferred to Fladeboe VW, without Isuzus consent. RFLM filed a certificate of dissolution in March 2002, but never told Isuzu it had dissolved. Fladeboe knew that once RFLM had dissolved, it could not continue using its license to serve as an authorized Isuzu dealer. Yet, Fladeboe VW and Fladeboe AG, with RFLMs assistance, carried on the Isuzu dealership without a form OL‑124, continued selling and servicing Isuzu vehicles without Isuzus authorization, and submitted claims to Isuzu for reimbursement of warranty repairs.

Plaintiffs Vehicle Code violations and misconduct were directly related to the claimed injuries and causes of action. In fact, as explained post, Plaintiffs misconduct was the very reason for Isuzus denial of RFLMs request to transfer the dealership to Fladeboe AG. The trial court was fully justified in finding Plaintiffs had unclean hands.

Plaintiffs argue unclean hands is not a defense to standingA plaintiff either has standing or notthey argue. In Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal.2d 719, 730‑731, the California Supreme Court confirmed that a trial court may refuse to consider granting declaratory relief if it finds the plaintiff has unclean hands. The Maguire court stated the trial court should not merely dismiss the action for unclean hands, but should adjudicate the defense with the merits of the declaratory relief cause of action. (Id. at p. 731.) Here, the trial court did not dismiss the declaratory relief cause of action, but adjudicated the unclean hands defense based on the evidence presented during the trial of the declaratory relief cause of action.

Further, we do not read the trial courts unclean hands findings as relating only to standing. Simply put, the court stated, the totality of the evidence establishes that [R]FLM and the other Plaintiffs have unclean hands. We agree. As we read the trial courts order and findings, the unclean hands finding pertains to the substance of the complaint and provided a complete defense to the declaratory relief cause of action.

C. Isuzu Reasonably Withheld Consent from RFLMs Request to Transfer the Dealer Agreement.

1. The Doctrine of Implied Findings

The doctrine of implied findings compels us to conclude the trial court found against Plaintiffs on the merits of their declaratory relief cause of action. In response to our invitation, Plaintiffs and Isuzu submitted, respectively, supplemental briefs on two issues not addressed in the parties appellate briefs: (1) May we infer the trial court made implied factual findings favorable to Isuzu on the question whether it unreasonably withheld consent to the request or requests made by RFLM to transfer the Isuzu dealership? and (2) Does substantial evidence support any such implied factual findings?

The doctrine of implied findings requires the appellate court to infer the trial court made all factual findings necessary to support the judgment. (Sammis v. Stafford (1996) 48 Cal.App.4th 1935, 1942.) The doctrine is a natural and logical corollary to three fundamental principles of appellate review: (1) a judgment is presumed correct; (2) all intendments and presumptions are indulged in favor of correctness; and (3) the appellant bears the burden of providing an adequate record affirmatively proving error. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133 (Arceneaux); Denham v. Superior Court (1970) 2 Cal.3d 557, 564; Maria P. v. Riles (1987) 43 Cal.3d 1281, 1295.)

In a bench trial, how does an appellant obtain a record affirmatively proving the trial court erred by failing to make factual findings on an issue? The appellant must secure a statement of decision under Code of Civil Procedure section 632 and, pursuant to Code of Civil Procedure section 634, bring any ambiguities and omissions in the statement of decision to the trial courts attention. In Arceneaux, the California Supreme Court explained: Sections 632 and 634 [of the Code of Civil Procedure] . . . set forth the means by which to avoid application of these inferences in favor of the judgment. When the court announces its tentative decision, a party may, under section 632, request the court to issue a statement of decision explaining the basis of its determination, and shall specify the issues on which the party is requesting the statement; following such a request, the party may make proposals relating to the contents of the statement. Thereafter, under section 634, the party must state any objection to the statement in order to avoid an implied finding on appeal in favor of the prevailing party. (Arceneaux, supra, 51 Cal.3d at p. 1133, fns. omitted.)

Securing a statement of decision is the first step, but is not necessarily enough, to avoid the doctrine of implied findings. Litigants must also bring ambiguities and omissions in the statement of decisions factual findings to the trial courts attentionor suffer the consequences. Code of Civil Procedure section 634 states if omissions or ambiguities in the statement of decisions factual findings are timely brought to the trial courts attention, it shall not be inferred on appeal . . . that the trial court decided in favor of the prevailing party as to those facts or on that issue.

The Arceneaux court explained the clear implication of section 634 is that if a party fails to bring omissions or ambiguities in the statement of decisions factual findings to the trial courts attention, then that party waives the right to claim on appeal that the statement was deficient in these regards, and the appellate court will infer the trial court made implied factual findings to support the judgment. (Arceneaux, supra, 51 Cal.3d at pp. 1133‑1134.) [S]ection 634 clearly refers to a partys need to point out deficiencies in the trial courts statement of decision as a condition of avoiding such implied findings, rather than merely to request such a statement initially as provided in section 632. (Id. at p. 1134.) In contrast, a party does not waive objections to legal errors appearing on the face of the statement of decision by failing to respond to it. (United Services Auto. Assn. v. Dalrymple (1991) 232 Cal.App.3d 182, 186.)

Thus, as the Arceneaux court explained, the statutes describe a two-step process for avoiding implied factual findings. First, a party must request a statement of decision pursuant to Code of Civil Procedure section 632. (Arceneaux, supra, 51 Cal.3d at p. 1134.) Second, if the trial court issues a statement of decision, a party claiming omissions or ambiguities in the factual findings must bring the omissions or ambiguities to the trial courts attention. (Ibid.)

If the party challenging the statement of decision fails to bring omissions or ambiguities in it to the trial courts attention, then, under Code of Civil Procedure section 634, the appellate court will infer the trial court made implied factual findings favorable to the prevailing party on all issues necessary to support the judgment, including the omitted or ambiguously resolved issues. (Arceneaux, supra, 51 Cal.3d at pp. 1133‑1134; SFPP v. Burlington Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 462; Tusher v. Gabrielsen (1998) 68 Cal.App.4th 131, 140.) The appellate court then reviews the implied factual findings under the substantial evidence standard. (Michael U. v. Jamie B. (1985) 39 Cal.3d 787, 792-793; SFPP v. Burlington Northern & Santa Fe Ry. Co., supra, 121 Cal.App.4th at p. 462; County of Solano v. Vallejo Redevelopment Agency (1999) 75 Cal.App.4th 1262, 1277.) [The appellant] did not raise any objections to the statement of decision. We therefore are required to presume the trial court made all findings necessary to support the judgment. (Sammis v. Stafford, supra, 48 Cal.App.4th 1935, 1942.)

At the close of the first phase of trial in this case, no party requested a statement of decision. The trial court issued a minute order with factual findings, and no party objected to those findings or brought to the trial courts attention any ambiguities or omissions in the minute orders factual findings. At the close of the second phase of trial, Fladeboe and Fladeboe AG requested a statement of decision, but only on these three specific findings: (1) that Fladeboe AG sold Isuzu vehicles to the public without a dealers license from the DMV; (2) that Fladeboe AG used RFLMs Isuzu dealer identification number to order new vehicles and parts from Isuzu and to obtain dealer sales incentives and warranty repair reimbursements; and (3) that Fladeboe AG received money from Isuzu and used it for its own purpose.

None of the Plaintiffs requested a statement of decision regarding the declaratory relief cause of action. Thus, RFLM and Fladeboe AG failed to preserve a record demonstrating the trial court did not resolve, or erroneously resolved, the issue whether Isuzu unreasonably withheld consent to the transfer of the Isuzu dealership.

In their supplemental brief, Plaintiffs argue we should not infer the trial court made implied findings favorable to Isuzu because the main topic discussed during the first phase of trial concerned the question of whether the appellants had standing. Standing was perhaps the main issue argued during the first phase of trial, but it was not the only one.

The record demonstrates Plaintiffs had a full and fair opportunity to tryand did trytheir declaratory relief cause of action. The record does show the trial court limited evidence and argument to the standing issue. Plaintiffs trial brief argued Isuzu unreasonably withheld consent to the proposed transfer to Fladeboe AG. At the outset of trial, the court made clear, [w]ere going to approach the case in terms of trying the declaratory relief action, what rights[,] duties and obligations do the plaintiffs in this action . . . have with respect to the franchise agreement and the relief they seek based on the fifth cause of action. The trial court declined to rule on the issue of standing, telling Isuzus counsel, [y]oull have to make your record on the position. Later, in the midst of the first phase of trial, the court stated, I think . . . weve all agreed were on the same page as to what this phase is dealing with, which seems to be basically the declaratory relief claim.

During the first phase of trial, Plaintiffs presented witnesses and offered exhibits on the merits of their declaratory relief cause of action. Although the trial court permitted Isuzu to make a continuing objection based on standing, Plaintiffs do not show the objection was ever sustained or interfered with their presentation of evidence. At the end of the first phase of trial, the court permitted the parties to submit briefs arguing the evidence without restriction.

Plaintiffs could have made their first step toward meeting their burden of proving error by requesting that the trial court issue a statement of decision on the issue whether Isuzu unreasonably withheld consent to RFLMs request to transfer the Dealer Agreement to Fladeboe AG (or imposed unreasonable conditions on the request to transfer the Dealer Agreement to Fladeboe VW). Presented with such a request, the trial court might have responded in any one of four ways: (1) issue a statement of decision with factual findings on the issues presented; (2) issue a statement of decision that makes no factual findings on the issues presented; (3) issue a statement of decision expressly stating it was not making factual findings on the issues presented; or (4) decline to issue any statement of decision. In the case of alternative 3 or 4, Plaintiffs would have been able to meet their burden on appeal of proving the trial court did not make factual findings on the consent issue. In the case of alternative 1 or 2, Plaintiffs could have avoided the doctrine of implied findings by bringing any ambiguities or omissions in the statement of decisions factual findings to the trial courts attention.

However, Plaintiffs neither requested a statement of decision on their declaratory relief cause of action nor informed the trial court of any ambiguities or omissions in its findings in the minute order. Plaintiffs failed to take any steps toward creating a record affirmatively showing the trial court did not make factual findings on the consent issue or made erroneous findings.

Given this record, we must infer the trial court, after giving Plaintiffs a full and fair opportunity to try their declaratory relief action, made every factual finding necessary to support its decision. Because the judgment is presumed correct, and because Plaintiffs bore the burden of affirmatively proving error, the doctrine of implied findings instructs us to infer the trial court made every implied factual finding necessary to support the conclusion that Isuzu reasonably withheld consent to RFLMs request to transfer the Isuzu dealership to Fladeboe AG. As we explain post, that conclusion is legally sound and supported by substantial evidence.

The application of the doctrine of implied findings in this case illustrates the doctrines wisdom. In the first phase of trial, the parties fully litigated the issue whether Isuzu unreasonably withheld consent to RFLMs request to transfer the Isuzu dealership to Fladeboe AG. The trial court considered all of the evidence and ruled in Isuzus favor. Plaintiffs failed to take any of the steps necessary to meet their burden of proving the trial court did not make factual findings on the consent issue or made erroneous findings. The time and expense of a retrial would serve no purpose other than to give Plaintiffs a second chance to meet their burden of preserving a record demonstrating error.

2. The Legal Standard for Withholding Consent to a Request for a Dealership Transfer

What is the legal standard for our review of the trial courts implied finding that Isuzu did not unreasonably withhold consent? There are few cases interpreting the phrase unreasonably withheld as used in Vehicle Code section 11713.3, subdivision (d)(1) or (e). In In re Van Ness Auto Plaza, Inc. (Bankr. N.D.Cal. 1990) 120 B.R. 545, 549 (Van Ness), the court concluded: [W]ithholding consent to assignment of an automobile franchise is reasonable under California Vehicle Code section 11713.3(e) if it is supported by substantial evidence showing that the proposed assignee is materially deficient with respect to one or more appropriate, performance-related criteria. This test is more exacting than whether the manufacturer subjectively made the decision in good faith after considering appropriate criteria. It is an objective test that requires that the decision be supported by evidence. The test is less exacting than one which requires that the manufacturer demonstrate by a preponderance of the evidence that the proposed assignee is deficient.

The Van Ness court identified relevant criteria to include (1) whether the proposed dealer has adequate working capital; (2) the extent of prior experience of the proposed dealer; (3) whether the proposed dealer has been profitable in the past; (4) the location of the proposed dealer; (5) the prior sales performance of the proposed dealer; (6) the business acumen of the proposed dealer; (7) the suitability of combining the franchise in question with other franchises at the same location; and (8) whether the proposed dealer provides the manufacturer sufficient information regarding its qualifications. (Van Ness, supra, 120 B.R. at p. 547.) The court explained that [a]lthough the initial burden of explaining the basis for the decision is on the manufacturer, the ultimate burden of persuasion is on the assigning dealer to demonstrate that the manufacturers refusal to consent is unreasonable. (Id. at p. 549.)

The Van Ness standard, we believe, strikes an appropriate balance between the interests of the manufacturer and the interests of the franchisee. (In re Claremont Acquisition Corp., Inc. (Bankr. C.D.Cal. 1995) 186 B.R. 977, 985-986 [adopting Van Ness standard].) Because Van Ness interpreted the meaning of the term consent shall not be unreasonably withheld under the consent provisions of Vehicle Code section 11713.3, the Van Ness standard applies equally to the term consent shall not be unreasonably withheld in the parallel provisions of the Dealer Agreement.

As the Van Ness court indicated, its list of relevant criteria the manufacturer may consider is not exhaustive. In addition to the criteria listed in Van Ness, the dealers honesty and good faith in its relations with the manufacturer are directly related to the dealers performance under a dealer franchise agreement. A manufacturer has the right to expect honesty and good faith from its dealers, and therefore may consider those qualities when assessing a request for a dealership transfer. A dealers honesty and good faith are particularly important to the manufacturer when deciding whether to approve a transfer of the dealership to a person or entity owned or controlled by, or closely related to, the transferring dealer.

3. Isuzus Reasons for Withholding Consent

The trial courts implied finding that Isuzu reasonably withheld consent to RFLMs request to transfer the dealership to Fladeboe AG meets the Van Ness standard and is supported by substantial evidence. Isuzu met its initial burden under the Van Ness test of explaining the basis for its decision. In January 2003, Isuzu gave RFLM these reasons for declining to approve its request to transfer the Dealer Agreement to Fladeboe AG: (1) [t]he dissolution of [RFLM] and your non‑disclosure of that event; (2) [t]he unauthorized transfer of the Isuzu hard assets to Fladeboe [AG], and your non‑disclosure of that event; (3) [t]he wrongful performance and reporting of warranty and pre‑delivery inspection claims; (4) [t]he wrongful performance and reporting of retail sales; (5) [t]he nondisclosure and misrepresentation to [Isuzu] of the true ownership of the entity holding the Isuzu hard assets; (6) [t]he failure of [RFLM] to conduct customary sales and service operations since its March 2002 corporate dissolution; and (7) Fladeboe [AG]s direct involvement and participation in the above unauthorized events.

Isuzus reasons met the legal standard for reasonableness. RFLMs unauthorized transfer of the dealership assets to Fladeboe VW materially impaired Fladeboe AGs ability to serve as an Isuzu dealer. RFLM was asking Isuzu to commit itself to a long relationship with Fladeboe AG. Isuzu had the right to expect that its dealer and the proposed new dealer act honestly and in good faith. It was not unreasonable for Isuzu to decline to place its trust in two entities, both owned by the same person, that had treated it dishonestly in their business relationship.

Substantial evidence supported Isuzus reasons for declining to approve the transfer. RFLM sold its Isuzu dealership assets, including the vehicle fleet and parts inventory, to Fladeboe VW in February 2002 without obtaining Isuzus consent to the transfer. Fladeboe did not inform Isuzu of the sale until December 2002, even though he knew that once RFLM had dissolved, it would be illegal to use its license to sell and service Isuzu vehicles as an authorized Isuzu dealer. In fact, Fladeboe never informed Isuzu that RFLM had wound up and dissolved. Isuzu learned of RFLMs dissolution only after RFLM filed a petition with the NMVB in November 2002 requesting it order Isuzu to issue a form OL‑124 to Fladeboe AG.

The trial court heard testimony establishing that between April and December 2002, Fladeboe AG sold Isuzu vehicles and parts and performed warranty repair work without a license to do so. Fladeboe AG did not tell Isuzu it was acting as an Isuzu dealer. Conversely, RFLM had not, since March 2002, performed its obligations as an authorized Isuzu dealer by selling and servicing Isuzu vehicles.

Not only did substantial evidence support an implied finding that Isuzu did not unreasonably withhold consent transferring the Isuzu dealership to Fladeboe AG, but we agree with Isuzu that, in light of Plaintiffs conduct, it would have been unthinkable for Isuzu to consent to RFLMs transfer request. The claims alleged against Isuzu in the second amended complaint were based on Isuzus refusal to consent to RFLMs request to transfer the dealership. Since Isuzu did not unreasonably withhold consent to the request, all of Plaintiffs claims against Isuzu fail.

II. Trial Phase II: The Jury Verdict

Isuzu alleged Fladeboe and Fladeboe AG committed fraud or made negligent misrepresentations by failing to disclose or by concealing RFLMs dissolution, by secretly operating as an Isuzu dealership using RFLMs dealer identification number, and by misrepresenting to Isuzu that RFLM was still acting as its authorized dealer. During the second phase of trial, Isuzu presented evidence establishing it paid Fladeboe and/or Fladeboe AG $214,300 in dealer sales incentives and $171,216 in warranty repair reimbursements. The jury awarded Isuzu $114,642.87 in damages on its claims for fraud and negligent misrepresentation against Fladeboe and Fladeboe AG.

To recover for fraud, a plaintiff must prove loss proximately caused by the defendants tortious conduct. (Civ. Code,  1709; 1 Witkin, Summary of Cal. Law (10th ed. 2005) Torts,  718, p. 1041.) Deception without resulting loss is not actionable fraud. (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1818 (Medallion).) We review the evidence in the light most favorable to Isuzu to determine whether substantial evidence supports the jurys award of damages. (Ajaxo, Inc. v. E*Trade Group, Inc. (2005) 135 Cal.App.4th 21, 55; 8 Witkin, Cal. Procedure (4th ed. 1997) Attack on Judgment in Trial Court,  37, p. 542.)

Relying on Medallion and Auerbach v. Great Western Bank (1999) 74 Cal.App.4th 1172, Fladeboe and Fladeboe AG argue their failure to inform Isuzu of RFLMs dissolution did not cause Isuzu any damage. In Medallion, the plaintiff entered into a contract with the defendant to provide cleaning services. (Medallion, supra, 44 Cal.App.4th at p. 1818.) Both sides performed their contractual obligations for several months, until the defendant terminated the contract. (Id. at pp. 1818‑1819.) The plaintiff sued the defendant for fraud, alleging it spent money on cleaning supplies and equipment in reliance on the defendants representations. (Id. at p. 1818.) The court held the plaintiff could not recover those expenses as damages for fraud because the plaintiff had to incur the expenses to perform its contractual obligations. (Id. at pp. 1818‑1819.) It was only when [the defendant] terminated the parties contractual relationship that [the plaintiff] could have perceived its reliance expenses as losses. Thus, it was the termination, not the misrepresentation, that resulted in the alleged harm. (Id. at p. 1819.)

In Auerbach v. Great Western Bank, supra, 74 Cal.App.4th at page 1185, the plaintiffs asserted that a banks promise to engage in good faith negotiations to modify a loan caused the plaintiffs to continue making payments on a note secured by undervalued property. The court rejected that theory because the plaintiffs had a contractual obligation to make payments on the note notwithstanding the banks promise to renegotiate its terms. (Id. at pp. 1185‑1187.)

Fladeboe and Fladeboe AG similarly assert their misrepresentations and omissions caused Isuzu no damage because it was contractually obligated to make dealer sales incentive payments and warranty repair reimbursements notwithstanding RFLMs dissolution. Isuzu had no contractual relationship, however, with Fladeboe or Fladeboe AG: The Dealer Agreement was between Isuzu and RFLM. By failing to inform Isuzu of RFLMs dissolution, and by fraudulently using RFLMs dealer identification number, Fladeboe and Fladeboe AG caused Isuzu to make payments to themto which Isuzu owed no contractual obligations.

We also must ask whether the damages awarded are otherwise legally permissible and supported by substantial evidence. Isuzu contends it was damaged by Fladeboe and Fladeboe AGs fraud because it made warranty reimbursement and dealer incentive payments it absolutely would not have made had it known that is was making the payments to an entity that was not an authorized Isuzu dealer. Under California law, a defrauded party is ordinarily limited to recovering out‑of‑pocket damages. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240.) The out‑of‑pocket measure of damages is directed to restoring the plaintiff to the financial position enjoyed by him prior to the fraudulent transaction, and thus awards the difference in actual value at the time of the transaction between what the plaintiff gave and what he received. (Ibid.)

At the time RFLM filed its certificate of dissolution, Isuzu had not made the challenged warranty reimbursement and dealer incentive payments. From that point until the time Isuzu discovered the fraud, it paid Fladeboe and or Fladeboe AG $214,300 in dealer sales incentives and $171,216 in warranty repair reimbursements. The warranty repairs, if not made at Fladeboe AG, would have been made at an authorized Isuzu dealership, to which Isuzu would have been obligated to make reimbursement payments. Apparently for that reason, the trial court did not permit Isuzu to recover restitution under its unfair competition law claim for warranty repair reimbursements. Because Isuzu would have been obligated to make warranty reimbursement payments to some Isuzu dealer, Isuzu was not damaged by making those warranty repair reimbursement payments to Fladeboe and Fladeboe AG.

Whether Isuzu suffered damages by making dealer sales incentive payments to Fladeboe and Fladeboe AG depends on whether the vehicles for which those incentives were paid were part of RFLMs existing inventory when RFLM dissolved. Why? The purpose of Isuzus dealer sales incentive program was to assist our dealers in competing against the competition and drawing their attention to our product, trying to get them to sell our product. The dealer sales incentive program consisted primarily of dealer cash incentives (rebates) paid by Isuzu when the dealer recorded a vehicle sale, and volume sales bonuses paid when the dealer recorded the requisite volume of sales. Isuzu legitimately could claim it was damaged by making dealer sales incentive payments to Fladeboe and Fladeboe AG for sales of RFLMs existing inventory, because those vehicles had already been delivered to RFLM as of the beginning of the fraud. Had Isuzu known of the fraud, it could have legitimately refused to make dealer incentive payments for the vehicles sold out of RFLMs existing inventory.

But Isuzu suffered no damage for dealer incentives paid for sales of vehicles acquired by Fladeboe and Fladeboe AG after RFLMs dissolution. That is because if Isuzu had known of the fraud, it would not have shipped Fladeboe VW or Fladeboe AG any new vehicles after RFLMs dissolution. The vehicles that were delivered to Fladeboe AG after RFLMs dissolution, absent the fraud, would have been delivered instead to authorized Isuzu dealers. Isuzu would have had to make dealer incentive payments to the authorized dealers when those vehicles were sold.

The jury did not award Isuzu the full amount of damages it sought. Isuzu paid Fladeboe and Fladeboe AG $214,300 in dealer sales incentives and $171,216 in warranty repair reimbursements, while the jury awarded Isuzu $114,642.87. Considering the scope of the permissible damages, we can reasonably conclude from the verdict: (1) the jury denied Isuzu any recovery on warranty repair reimbursements, and (2) the jury limited Isuzus recovery for dealer sales incentive payments to payments made on inventory existing as of RFLMs dissolution. That was a permissible measure of recovery, and Fladeboe and Fladeboe AG have not demonstrated error in the calculation of damages.

Fladeboe and Fladeboe AG argue Isuzu suffered no damages because Corporations Code section 2010, subdivision (a) permitted RFLM to continue conducting operations as part of its winding up. RFLM represented in its certificate of dissolution filed on March 29, 2002 that it had completed the winding-up process and had distributed its assets. More importantly, Fladeboe and Fladeboe AG fraudulently induced Isuzu to make dealer sales incentive payments and warranty reimbursements to them, not to RFLM.

Fladeboe and Fladeboe AG also argue they had no independent duties to Isuzu to disclose any thing [sic] to Isuzu because neither was a party to the Dealer Agreement with Isuzu or the Asset Purchase Agreement between RFLM and Fladeboe VW. However, Fladeboe and Fladeboe AG failed to disclose RFLMs dissolution and fraudulently used RFLMs dealer identification number to induce Isuzu to pay them dealer sales incentives and warranty repair reimbursements to which they were not entitled.

III. Liability Under Business and Professions Code
Section 17200

After the jury trial ended, the trial court found that Fladeboe AG violated Business and Professions Code section 17200 by (1) selling Isuzu vehicles to the public without a dealer sales license issued by the DMV, and (2) using RFLMs dealer identification number to order new vehicles and parts and to obtain dealer sales incentive payments and warranty repair reimbursements from Isuzu. The trial court concluded Isuzu should recover as restitution the $214,300 it paid as dealer sales incentives, but not the amount it paid in warranty repair reimbursements to Fladeboe AG.

Fladeboe AG challenges the trial courts decision on the Business and Professions Code section 17200 claim on several grounds, none of which has merit. First, Fladeboe AG argues the trial courts determination on standing impaired its ability to balance the equities. Fladeboe AG cites nothing to support its assertion the trial court could not fairly and dispassionately resolve the section 17200 claim. To the contrary, the record discloses the trial court fully considered the evidence and fairly resolved the section 17200 claim. The record amply supports the courts findings that Fladeboe AG engaged in unlawful and unfair business practices.

Second, Fladeboe AG asserts the trial courts finding that it sold vehicles without a license is technically incorrect because it did have a license to sell new motor vehicles. The significant point is that Fladeboe AG did not have a form OL‑124 permitting it to sell Isuzu vehicles. Thus, the trial courts finding is not erroneous.

Third, Fladeboe AG argues its unfair conduct did not injure Isuzu because it did not show that it could have earned more from any other dealer had it sold the vehicles and parts to another dealer. The measure of recovery for unfair business practices is restitution, not damages. Under Business and Professions Code section 17203, the court may make an order or judgment as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition. The California Supreme Court has defined an order under section 17203 for restitution as one compelling a UCL [unfair competition law] defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is to persons who had an ownership interest in the property or those claiming through that person. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144‑1145.)

Fladeboe AG wrongfully obtained dealer sales incentive payments from Isuzu by using RFLMs dealer identification number to falsely represent itself as an authorized Isuzu dealer. The trial court correctly, and wisely, ordered Fladeboe AG to return the money it obtained from Isuzu through that unfair business practice.

Fourth, Fladeboe AG argues Vehicle Code section 11713.3, subdivision (d) and Corporations Code section 2010, subdivision (a) gave it a safe harbor for its conduct. In Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 184, the California Supreme Court concluded a plaintiff may not bring an action under the unfair competition law if some other provision bars it. This statutory safe harbor must actually bar the action, and not merely fail to allow it. (Ibid.) Acts that the Legislature has determined to be lawful may not form the basis for an action under the unfair competition law, but acts may, if otherwise unfair, be challenged under the unfair competition law even if the Legislature failed to proscribe them in some other provision. (Id. at p. 183.)

Fladeboe AG argues Vehicle Code section 11713.3, subdivision (d) provided it a safe harbor by permitting a motor vehicle dealer to transfer its dealership, subject to the manufacturers consent. [I]t is evident, Fladeboe AG argues, that attempts to consummate a transfer do not have the quality of wrongfulness that [Business and Professions Code] section 17200 was designed to redress. But Isuzu did not assert, and the trial court did not find, wrongful conduct based on the attempt to transfer RFLMs Isuzu dealership. The trial court found Fladeboe AG engaged in wrongful conduct by fraudulently representing itself as an authorized Isuzu dealerboth to the public and to Isuzuwithout obtaining Isuzus consent and without the requisite form OL‑124. Vehicle Code section 11713.3 does not provide a safe harbor for such conduct; to the contrary, subdivision (f)(1) of section 11713.1 prohibits it.

Fladeboe AG argues Corporations Code section 2010, subdivision (a) permits a dissolved corporation to wind up its affairs. That is true, but section 2010 does not permit a dissolved corporation or its assignees to wind up the corporations affairs through wrongful, unfair, or fraudulent practices. Moreover, Fladeboe AG was not a dissolved corporation winding up its affairs.

Finally, Fladeboe AG asserts that RFLMs request in March 2002 to transfer the Isuzu dealership to Fladeboe VW was sufficient to invoke the consent obligations imposed on Isuzu and was sufficient to trigger the safe harbor features. RFLMs request to transfer the Isuzu dealership to Fladeboe VW did not give Fladeboe AG (or Fladeboe VW for that matter) safe harbor to pass itself off as an authorized Isuzu dealership without Isuzus consent.

Disposition

The judgment is affirmed. Respondent shall recover costs incurred in this appeal.

FYBEL, J.

WE CONCUR:

BEDSWORTH, ACTING P. J.

OLEARY, J.

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