Filet Menu v. CCLG

• Decision Date: 09 March 2000
• Citation: 79 Cal.App.4th 852,94 Cal.Rptr.2d 438
• Court: California Court of Appeals Court of Appeals
• Parties: (Cal.App. 2 Dist. 2000) FILET MENU, INC., Plaintiff, Cross-Defendant and Appellant, v. C.C.L. & G., INCORPORATED et al., Defendants, Cross-Complainants and Respondents; MICHAEL LEVINE, Cross-Defendant and Appellant. B124034 Filed

94 Cal.Rptr.2d 438 (Cal.App. 2 Dist. 2000)

FILET MENU, INC., Plaintiff, Cross-Defendant and Appellant, v. C.C.L. & G., INCORPORATED et al., Defendants Cross-Complainants and Respondents MICHAEL LEVINE, Cross-Defendant and Appellant.

B124034

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, SECOND APPELLATE DISTRICT, DIVISION TWO

Filed 3/9/00

Pub order and mod. filed 4/6/00

APPEAL from a judgment of the Superior Court of Los Angeles County. Paul G. Flynn, Judge. Affirmed.

(Los Angeles County Super. Ct. No. SC 034175)

Jeffrey Isaac Ehrlich for Plaintiff, Cross-Defendant and Appellant Filet Menu, Inc., and for Cross-Defendant and Appellant Michael Levine.

Gray Gieleghem Belcher, Michael J. Belcher, and J. Neil Gieleghem for Defendants, Cross-Complainants and Respondents.

******

CERTIFIED FOR PUBLICATION

MALLANO, J.^*

Filet Menu, Inc. ("FMI"), appeals from a judgment rendered against it, after a jury verdict, on its complaint against C.C.L. & G., Incorporated ("CCLG") for breach of a contract to purchase menus, napkins and other restaurant supplies from FMI ("the Contract"), and against Augusto Salazar, Jr. ("Salazar"), on his personal guaranty of that obligation. FMI along with its principal, Michael LeVine ("LeVine"), also appeal from the judgment against them on CCLG and Salazar's cross-complaint alleging fraud and other wrongful conduct. FMI and LeVine make two arguments on appeal. First, they contend that the trial court erred in determining that the Contract was not divisible. Second, they argue that the trial court's finding that LeVine was the alter ego of FMI was not supported by substantial evidence. We conclude that regardless of whether the Contract was divisible, FMI may not enforce any part of it . We also conclude that since the jury found LeVine to be a perpetrator of the alleged wrongdoing, the judgment was properly rendered against him, whether or not he was FMI's alter ego. We therefore affirm the judgment.

PROCEDURAL BACKGROUND

FMI's second amended complaint against CCLG and Salazar (collectively "cross-complainants"), on which this matter proceeded to trial, asserted causes of action for breach of contract for the purchase of restaurant supplies (variously referred to in the complaint as the "Credit Application and Agreement" and "'Purchase Order' Agreements" and the "contract"), breach by Salazar of his personal guarantee of the transaction, and various common counts.

Cross-complainants filed a cross-complaint against FMI and LeVine¹ alleging causes of action for fraud, intentional and negligent misrepresentation, concealment, breach of contract and unfair business practices against both FMI and LeVine, and identifying LeVine individually as one of the perpetrators of the alleged misconduct. All causes of action were premised on misrepresentations made in connection with the Contract. The cross-complaint also alleged that LeVine was FMI's alter ego.

The matter proceeded to trial on November 14, 1997, resulting in judgment on the jury's special verdict in favor of cross-complainants on their unfair business practices cause of action against both FMI and LeVine, in the amount of $34,749, reflecting FMI and LeVine's profits from their unfair business practices, plus interest and an unspecified amount of attorney fees and costs. The judgment was entered on April 2, 1998 , with notice of entry served on April 8, 1998. On May 19, 1998, an "Amended Judgment on Special Verdict" was filed, adding $300,000 of attorney fees and costs and the date from which interest was to be calculated to the original judgment. Notice of entry of the amended judgment was filed and served on May 29, 1998.

A timely notice of appeal was filed on July 14, 1998.²

FACTS

The evidence presented at trial was as follows:

FMI was in the printing and design business catering to the food service industry. CCLG owned and operated two restaurants of a five restaurant chain of Mexican restaurants, the other three of which were owned by Salazar, an officer of CCLG. In the middle of 1992, FMI's salesman, Michael Klein ("Klein") made a sales solicitation call on Salazar.

FMI conducted its business through the use of various form documents. The first, which was described by Klein as the "most important document," was the "Credit Application and Agreement Form" ("Application"). The upper portion included blank lines for basic information about the customer, such as its name, address, business type, principals and bank and trade references. The bottom portion of the form included various preprinted terms. It provided that the "terms and conditions stated below shall be incorporated by reference into every Deposit/Retainer Agreement and Purchase Order . . . ." and that all "intangibles," which included creativity, concept, design, artwork, logos, slogans and the like, were owned by FMI. The form also included liquidated damages provisions: one was invoked if FMI's ownership of the intangibles was infringed by the customer, assessing damages of $35,000, and the other if the customer canceled the order after approving the design, assessing damages of $25,000.³ The form recited that it was the agreement and contained a personal guarantee by the person signing it. Salazar signed an Application form on CCLG's behalf.

The second form document utilized by FMI was a "Deposit Retainer Agreement and Purchase Order" ("Retainer Agreement"). It recited that it was a purchase order for the creative design, artwork and printing of the item handwritten at the bottom of the form, and required payment of a $500 non-refundable deposit/retainer "which is not transferable to any other project" but which was to be credited against, and deducted from, the total cost of the completed order. If the order was canceled at any time after signed acceptance of the approved design, the customer was responsible for all lost profits and reasonable expenses of FMI. The Retainer Agreement stated that "[t]he total price of the completed order has not been established and will be dependent upon the design, materials, quantity, etc." It incorporated by reference the terms of the Application. Thus, deposits were being made for items of unknown price, to be fixed at a later date by FMI. Salazar signed separate Retainer Agreements for menus, place mats, dinner napkins, logo identification, cocktail napkins and matches.

Once a customer approved a design and wanted to proceed, it would sign a "Design Approval & Acceptance" ("Approval") which identified the item which was approved. The Approval approved the design (except for minor alterations) and authorized FMI to proceed with the finishing work "pursuant to the terms and conditions of the [Retainer Agreement] and Purchase Order regarding this item." Upon signing the Approval, the customer was obligated to pay an additional $1,000 or 50 percent of the estimated price. Salazar signed numerous Approvals.

Finally, when the product which had been designed was to be ordered, a Purchase Order ("P.O.") specifying the quantity of the item, its unit price and delivery terms was to be executed. The P.O. provided that once signed, the order could not be canceled. The P.O. was expressly made subject to the terms and conditions contained in the Application, Retainer Agreement and Approval. In February 1993, Salazar signed four P.O.s, one to purchase 4,000 menus at $4 each, one to purchase 5 million place mats at $0.39 cents each, one to purchase 5 million dinner napkins at $0.39 each and one to purchase 5 million cocktail napkins at $0.09 each, the latter three items to be delivered 250,000 at a time, every 90 days.

The facts presented to the jury revealed an elaborate, fraudulent scheme perpetrated on cross-complainants. Klein testified that he handled the CCLG account while he was with FMI. He admitted that when he dealt with cross-complainants, his "intent was to defraud them purposely." He acknowledged making numerous misrepresentations to Salazar and his sister Gabriela. When he first solicited them in August of 1992, he represented to them, "per Mr. LeVine's instructions on how to sell, that we were able to go into a restaurant and design a menu for them and accompanying products that would guarantee the increase to the bottom line, their percentage of the bottom line. [] Q. Do you use the term 'guarantee an increase'? [] A. Yes, sir. [] Q. Did you make any representations as to what that increase should be? [] A. Yes, sir. [] Q. And what was your -- or what were your representations? [] A. Between 20 and 40 percent." Klein told the Salazars that he could sell them colored napkins for "a little bit more" than the white napkins they were using, though he knew he could not. As per instructions from LeVine, Klein told Salazar and Salazar's sister that the Application, was "a mere credit application and nothing more," needed to check references, though Klein had been told that it was more than a credit application. It was a credit application and a purchase order designed to bind the customer to terms in the ultimate transaction. The purpose of getting the customer to sign the Application was to "hook them" into the transaction. Klein was instructed by LeVine never to leave a copy of this document with the customer. Klein was also instructed by LeVine to make certain that there were distractions when the Application was being signed so that the customers "don't really understand what they're signing and know what they're signing." Salazar was induced to sign the Application. With respect to the purchase of menus, Salazar said that he did not want to spend more than $4 per menu and wanted to purchase no more than 3,000 menus. LeVine told Salazar at a meeting that he could work within that budget knowing that the menus would cost $7.00 to $8.88, at a minimum, but failing to disclose that to Salazar. CCLG signed a Retainer Agreement for the menus and one for place mats at the first meeting with Klein, later signing...