Fladeboe v. American Isuzu Motors Inc.

• Decision Date: 23 April 2007
• Docket Number: No. G036522.,G036522.
• Citation: 150 Cal.App.4th 42,58 Cal.Rptr.3d 225
• Court: California Court of Appeals Court of Appeals
• Parties: Ray FLADEBOE et al. Plaintiffs, Cross-defendants and Appellants, v. AMERICAN ISUZU MOTORS INC., Defendant, Cross-complainant and Respondent.

58 Cal.Rptr.3d 225

150 Cal.App.4th 42

Ray FLADEBOE et al. Plaintiffs, Cross-defendants and Appellants, v. AMERICAN ISUZU MOTORS INC., Defendant, Cross-complainant and Respondent.

No. G036522.

Court of Appeal, Fourth District, Division 3.

April 23, 2007.

As Modified April 24, 2007.

David B. Dimitruk, Irvine, for Plaintiffs, Cross-defendants and Appellants.

The Mulcahy Law Firm, James M. Mulcahy, Irvine, and Rex T. Reeves, Newport Beach, for Defendant, Cross-complainant and Respondent.

OPINION

FYBEL, J.

Introduction

This case forcefully demonstrates the wisdom and significance of the doctrine of implied findings. Under the doctrine of implied findings, the reviewing court must infer, following a bench trial, that the trial court impliedly made every factual finding necessary to support its decision. Securing a statement of decision is the first step in avoiding the doctrine of implied findings, but is not always enough: The appellant also must bring ambiguities and omissions in the factual findings of the statement of decision to the trial court's attention. If the appellant fails to do so, the reviewing court will infer the trial court made every implied factual finding necessary to uphold its decision, even on issues not addressed in the statement of decision. The question then becomes whether substantial evidence supports the implied factual findings.

The trial court in this case issued a minute order with findings following a bench trial on a declaratory relief cause of action brought by Ray Fladeboe (Fladeboe), Ray Fladeboe Lincoln-Mercury, Inc. (RFLM), and Fladeboe Automotive Group, Inc. (Fladeboe AG). Fladeboe, RFLM, and Fladeboe AG (collectively Plaintiffs) alleged American Isuzu Motors Inc. (Isuzu) unreasonably withheld consent to RFLM's request to transfer an Isuzu dealership. The trial court made no express factual findings on that issue; rather, the trial court found that none of the Plaintiffs had standing to assert claims against Isuzu arising out of its withholding consent to the request to transfer the dealership. The trial court also found that Plaintiffs had unclean hands and that RFLM suffered no damages arising out of a withdrawn request to transfer the Isuzu dealership to Fladeboe Volkswagen, Inc. (Fladeboe VW).

Plaintiffs did not request a formal statement of decision, object to the trial court's factual findings, or bring any ambiguities or omissions in those findings to the trial court's attention.

Following the bench trial, a jury awarded Isuzu damages on its cross-complaint against Fladeboe and Fladeboe AG. The trial court then awarded Isuzu restitution on its claim under Business and Professions Code section 17200. Fladeboe and Fladeboe AG requested a statement of decision on three specific issues related only to the section 17200 claim.

Under these circumstances, the doctrine of implied findings requires us to infer the trial court impliedly made every factual finding necessary to conclude that Isuzu did not unreasonably withhold consent to RFLM's request to transfer the Isuzu dealership to Fladeboe AG. Isuzu's reasons for withholding consent were reasonable under Vehicle Code section 11713.3, subdivisions (d) and (e) and were supported by the substantial evidence presented during trial on Plaintiffs' declaratory relief cause of action.

In addition, we find no error in the jury's award of damages or the trial court's award of restitution on Isuzu's cross-complaint against Fladeboe and Fladeboe AG. Accordingly, we affirm the judgment.

Facts

I. RFLM Creates a Plan of Dissolution.

Fladeboe was the sole shareholder and the president of RFLM. RFLM became an Isuzu dealer around 1980. At that time, RFLM already was a dealer for Lincoln-Mercury and Honda. In 1982, RFLM became a Volkswagen dealer.

On March 21, 1983, RFLM doing business as Ray Fladeboe Isuzu entered into a new dealer sales and service agreement (the Dealer Agreement) with Isuzu. The Dealer Agreement was effective until RFLM dissolved in March 2002. The Dealer Agreement permitted Isuzu to terminate the agreement if RFLM attempted to sell, transfer, or assign the Dealer Agreement, or the dealership assets, without Isuzu's prior consent, "which consent shall not be unreasonably withheld."

In September 2001, RFLM and Ford Motor Company (Ford) reached an agreement whereby Ford would purchase the Lincoln-Mercury dealership assets of RFLM for $10 million and RFLM would resign as a Lincoln-Mercury dealer. To avoid double taxation on the sale proceeds, Fladeboe had his attorneys and tax advisers create a plan allowing the sale proceeds to be paid directly to him as the sole shareholder of RFLM. For the plan to succeed, it was necessary for RFLM to dissolve as a corporation and distribute its Lincoln-Mercury dealership assets before Ford paid the $10 million. The transaction was structured so that before RFLM dissolved, Ford gave it a promissory note for $10 million payable after dissolution. Before dissolution, RFLM was to assign the note to Fladeboe personally, and, after RFLM's dissolution, Ford would pay the $10 million to Fladeboe personally as RFLM's assignee.

For Fladeboe to realize certain tax advantages, RFLM had to be dissolved and all of its assets sold or distributed before Ford made the $10 million payment. RFLM's assets consisted of (1) the Lincoln-Mercury dealership, (2) the Honda dealership, (3) the Volkswagen dealership, and (4) the Isuzu dealership. RFLM adopted a plan of liquidation by which it would sell the Lincoln-Mercury dealership to Ford; sell the Honda dealership to the newly created entity, Fladeboe AG; sell the Volkswagen and Isuzu dealerships to another newly created entity, Fladeboe VW; and dissolve RFLM. The sale of the Honda dealership to Fladeboe AG and the sale of the Volkswagen dealership to Fladeboe VW were also structured so the purchasing entities would deliver to RFLM promissory notes for the sale price before RFLM's dissolution. The notes would be payable after RFLM's dissolution. Before dissolving, RFLM would assign the notes to Fladeboe personally.

II. RFLM Requests Isuzu's Consent to Transfer the Isuzu Dealership to Fladeboe VW.

Fladeboe AG was incorporated in December 2001, and Fladeboe VW was incorporated in February 2002. Fladeboe has always been the sole shareholder and president of Fladeboe AG. He was the sole shareholder and president of Fladeboe VW until he transferred his shares to his son, Bruce Fladeboe, in August 2002.

RFLM sold its Isuzu dealership assets to Fladeboe VW in an asset purchase agreement dated February 19, 2002 (the Asset Purchase Agreement). Pursuant to the Asset Purchase Agreement, Fladeboe VW delivered to RFLM a promissory note for $1.5 million to pay for the Isuzu dealership assets. The Asset Purchase Agreement stated: "Buyer acknowledges that [R]FLM is winding up and will dissolve and that any damages from any breach may only be offset against the Promissory Note and Installment Obligation described in paragraph 1.2 of this Agreement." The Asset Purchase Agreement required the transaction close no later than 9:00 a.m. on March 31, 2002.

Under Vehicle Code section 11713.3, subdivision (d)(1), RFLM had to obtain Isuzu's approval of the dealership transfer to Fladeboe VW before it could operate as an Isuzu dealer. The Dealer Agreement gave Isuzu the right to terminate the Dealer Agreement if RFLM attempted to sell, transfer, or assign the Dealer Agreement, or the Isuzu dealership assets, without Isuzu's prior written consent, "which consent shall not be unreasonably withheld."

RFLM requested Isuzu to approve the transfer of the Dealer Agreement to Fladeboe VW and to issue an OL-124 form to Fladeboe VW. An OL-124 is a form which the State of California requires to be filed with the Department of Motor Vehicles (DMV) before an automobile dealer may sell the vehicles of a particular make and line. On March 19, 2002, Isuzu requested RFLM to submit various required documents that were missing from its dealership transfer approval request.

The usual procedure was to obtain consent to the transfer before the sale of the dealership is consummated. However, RFLM proceeded with selling the Isuzu dealership assets to Fladeboe VW before obtaining Isuzu's consent to the dealership transfer. In mid-March 2002, RFLM transferred all of its Isuzu dealership assets, including its inventory of 20 to 30 new Isuzu vehicles and its Isuzu automotive parts, to Fladeboe VW and/or Fladeboe AG. Fladeboe VW delivered to RFLM a promissory note for $1.5 million.

III. Fladeboe VW and Fladeboe AG Sell and Service Isuzu Vehicles and Automotive Parts After RFLM Dissolves.

RFLM filed a certificate of dissolution on March 29, 2002. In that certificate, Fladeboe declared under penalty of perjury (1) RFLM had completely wound up its business, (2) its debts and liabilities had been paid, (3) known assets had been distributed, and (4) the corporation had been dissolved. Ford paid the $10 million due under the promissory note after RFLM filed the certificate of dissolution.

When RFLM filed its certificate of dissolution, Isuzu had not yet consented to RFLM's transfer of the Dealer Agreement to Fladeboe VW. Not until December 2002 did Isuzu learn that RFLM had transferred the dealership assets to Fladeboe VW and had dissolved.

Fladeboe knew that once RFLM dissolved, it could not continue conducting Isuzu dealership operations. After March 29, 2002, Fladeboe VW and Fladeboe AG sold and serviced Isuzu vehicles without Isuzu's consent and without a license to do so. Fladeboe VW and Fladeboe AG were able to sell and service Isuzu vehicles without Isuzu's knowledge and consent by using the unique dealer code number that Isuzu had assigned exclusively to RFLM. A dealer cannot transfer its code number; when Isuzu approves a dealership transfer, it assigns a new code number to the new dealership. By using RFLM's dealer code number, Fladeboe AG and/or Fladeboe VW were able to obtain over...