Seiko Corp. of America v. Davis

Filed 9/29/06 Seiko Corp. of America v. Davis CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Kirk H. Nakamura, Judge. Affirmed.

James Toledano for Defendant and Appellant.

Alan L. Brodkin & Associates and Alan A. Brodkin for Plaintiff and Respondent.

Thomas C. Davis appeals from a verdict for Seiko Corporation of America (Seiko) in this collection action. Davis argues the evidence is insufficient to establish liability, certain documents were wrongly admitted in evidence, and a motion to amend the complaint should have been denied. We agree that one document should have been excluded, but since the remaining evidence supports the verdict, we affirm.

* * *

In 2000, Davis, Philip Houser, and David Stowe formed a partnership named Eliteclocks.com to sell clocks over the internet.^[1] In June 2000, they filed a fictitious business name statement that listed all as general partners.

In April 2002, the partnership applied for credit with Seiko. The application showed the customer name as “Elite Clocks,” a partnership with Davis as the “owner.” Houser was listed as the “contact name,” and he signed the application and an accompanying guaranty of payment. Seiko approved the application and the partnership began selling Seiko products. Houser and Davis had several meetings with the Seiko representative (Jared Santore) to review pricing and other information on new products Seiko was bringing out.

In late December 2002, the partnership ran into cash flow problems and was unable to pay Seiko (or other vendors). Houser and Davis discussed the situation, and considered the possibility of bringing in another partner to inject capital into the business. At the end of 2002 and the beginning of 2003, Houser began receiving telephone calls from Seiko regarding the past due account. In May 2003, he tried to work out a way to pay off the Seiko debt, without success. Seiko commenced the instant action in November 2003.

The complaint named as defendants each of the individuals “dba Elite Clocks” (e.g., “Tom Davis, an individual dba Elite Clocks”). It alleged the three individuals were jointly doing business under the fictitious name Elite Clocks, they entered into a written agreement to pay Seiko for merchandise purchased, and

$86,963.61 was due and owing. Four causes of action were set out -- breach of contract, open book account, account stated, and reasonable value of merchandise delivered. Prior to trial, Seiko advised the court the case against Houser had been stayed by the bankruptcy court.

The matter was tried by the court. The primary witness for Seiko was Houser. Houser testified that one of his jobs was to handle payables, which included reviewing invoices and statements from vendors, and paying the bills. Based on that, his “rough” understanding was that the partnership owed Seiko $86,693. Seiko also offered a 15-page document, which it called a statement of account, that purported to be a chronological list of all items sold to the partnership, less returns, in the period from December 16, 2002 to September 10, 2003. It shows a balance due of $86,693. The document was shown to Houser, who said it refreshed his recollection as to the period of time during which the partnership did business with Seiko. Houser was not asked anything else about the statement of account. It was received in evidence.

Houser also testified the partnership did not intend to do business under the name used on the credit application, Elite Clocks. He was unable to explain the discrepancy, saying only “there was nothing intentional. There was no error intentionally put out.”

Seiko also offered in evidence a one-page document (exhibit 8) that contained a May 2003 exchange of e-mail messages between Houser and Seiko regarding a “Seiko debt reduction proposal.” The document shows one e-mail from Houser to an individual at Seiko asking him to review the proposal, and a reply from the individual. The reply said “we are going to work with you on this,” but required the outstanding balance to be paid in 12 months, and said future orders would not be shipped without payment in advance. Exhibit 8 was shown to Houser, who said he had seen it, and it was admitted in evidence.

After Davis and Stowe testified, Seiko moved to amend the complaint to allege the partnership name was Eliteclocks.com, rather than Elite Clocks. The trial judge treated the motion as made under Code of Civil Procedure section 473 and granted it.

In a statement of decision, the trial judge found Davis, Houser, and Stowe were equal partners in Eliteclocks.com. The partnership entered into an agreement to buy merchandise from Seiko, and during the relationship Houser and Davis met with the Seiko representative. The judge found “Mr. Houser testified that it was his rough understanding that the partnership owed the amount in question. The Court finds that both Mr. Davis and Stowe implicitly or explicitly agreed to the purchase of the Seiko watches by the partnership. The Court expressly rejects the defendants’ testimony that they had no knowledge that the partnership was purchasing Seiko merchandise . . . .

. . . The court finds that the testimony of both David Stowe and Tom Davis are not credible to the extent that their testimony conflicts with the findings of this court or the testimony of Philip Houser.” Judgment was entered against Davis (identified as “Tom David, an individual dba Eliteclocks.com) and Stowe for $86,963.61, plus prejudgment interest of $11,100.12, for a total of $98,063.73.

I

Davis argues the evidence is insufficient to impose liability on him for the debt of a partnership because the partnership to which he belonged was not named as a defendant, and there was no evidence he personally signed the credit application or made any purchases from Seiko. But absence of the partnership as a defendant did not absolve Davis of responsibility for partnership debts.

Where a complaint names individual partners as defendants, but not the partnership, the partnership is not a party defendant, and judgment may not be entered against it. (Hildebrand v. Stonecrest Corp. (1959) 174 Cal.App.2d 158, 168-169.) The same is true where a complaint describes individuals as members of an association or partnership, but does not name the partnership as a defendant -- judgment may not be taken against the partnership. (Ferry v. North Pacific Stages (1931) 112 Cal.App. 348, 351.)

Davis contends these cases, among others he cites, establish a rule that a creditor must sue a partnership to hold its partners liable. He is mistaken. In fact, one of his cases, Hildebrand v. Stonecrest Corp., supra, 174 Cal.App.2d 158, held individual partners were liable for a partnership debt even though it reversed a judgment against the partnership because it was not made a party to the action. (Id. at pp. 168-169.) So the failure to name the partnership as a defendant does not preclude recovery against Davis as one of its partners.

The fact Davis did not sign the credit application similarly makes no difference, since Houser did so on behalf of the partnership, and it was proved that Davis was a member of the partnership. Nor is it of any import that Davis personally placed no orders, since he was a member of the partnership that did so.

Davis also contends there was no evidence he was aware of the transactions with Seiko, citing his own testimony. But Houser testified otherwise, saying he and Davis together met with the Seiko representative, and he later discussed with Davis their inability to pay Seiko when the partnership ran into cash flow problems. The trial judge believed Houser, not Davis -- a call he was entitled to make. The upshot is that Seiko’s decision not to sue the partnership does not relieve Davis of liability.

II

Davis next argues the trial judge wrongly denied a motion in limine to exclude documents not produced in discovery, and the judge later admitted four documents that were not sufficiently authenticated. We agree one document was improperly admitted, but conclude the error was harmless.

The motion in limine was filed after Seiko served an exhibit list that included documents it had not produced in response to Davis’ discovery requests. During argument on the motion, counsel for Davis admitted he had seen many of the newly listed documents. But, he said, “it is a question of what his case is based on. He is not entitled to introduce, as part of his case in chief against Mr. Davis, anything that he had not disclosed and alleged under oath is what his case is based on.”

My concern, again, is not disclosure. This is not a motion about how he’s hiding evidence in discovery. . . . .” The trial judge found there was no showing the omission was prejudicial, and he denied the motion.

There was no abuse of discretion in denying the motion in limine. Davis’ counsel knew of the documents prior to trial, and there is no contention he was unfairly surprised by Seiko’s decision to use them as exhibits. Davis’ reliance on Pate v. Channel Lumber Co. (1997) 51 Cal.App.4th 1447, 1454-1455 is misplaced. There, after plaintiff had put on its case-in-chief, defendant referred to documents it had never provided in discovery despite its repeated assurances it had given plaintiff all relevant documents. The holding of the case is that an evidentiary sanction excluding the undisclosed documents was a proper exercise of discretion, since it was the only meaningful sanction available to the trial court. Here, the situation is quite different. There is no suggestion Davis was surprised by the documents that he admittedly was aware of prior to trial and the trial judge was free to fashion whatever remedy he felt was appropriate. The trial judge acted within his discretion in denying the motion to exclude.

Davis argues the trial judge committed reversible error in admitting the statement of account, the credit application, the fictitious business name statement, and some May 2003 e-mails. We agree the statement of account was inadmissible, but the error was harmless.

The statement of account was never authenticated, and it should have been excluded. No one identified the document as a statement of account, let alone testified as to what it was or how it was prepared. It was shown only to Houser, and then solely to refresh his recollection as to the time during which the partnership did business with Seiko. While the statement of account should not have been received in evidence, it was not the only evidence of the amount owed. Houser testified that he understood the partnership owed Seiko “roughly” $86,693, and, in the absence of any evidence to the contrary, that is sufficient -- albeit barely -- to sustain the verdict. So the error in admitting the statement of account was harmless.

Davis contends the credit application was admissible only as a document Houser signed for his own purposes. The import of the argument, as we understand it, is that the credit application was inadmissible to show a partnership contract to pay for goods purchased from Seiko. We disagree. Houser testified the partnership was in business at the time he signed the application. Coupled with his status as a partner, that is enough to make it a partnership contract. There was no error in admitting the credit application.

Next, Davis argues the fictitious business name statement was irrelevant because the partnership was not a party to the action. He is wrong. Party or not, the existence of the partnership was relevant. Seiko’s theory was that the individuals were liable as partners for breach of a partnership contract, so it was entitled to offer evidence to prove there was a partnership. The fictitious business name statement was properly admitted.

Finally, Davis raises two objections to the May 2003 e-mails. Neither is convincing. First, he argues the messages were irrelevant to prove a partnership offer to pay the debt, because the partnership was not a party. But here again, the not-a-party theory does not work. Party or not, Seiko was entitled to prove the partnership incurred a debt for which the partners were liable. Second, Davis contends the messages were inadmissible to show he was personally liable, because there was no evidence Houser was acting as his agent. But this one succeeds only in burning down a straw man, since the theory Davis attacks is not one Seiko ever proposed.

To keep it simple, the messages were admissible for the simple purpose of showing the partnership offered to pay the debt. Davis was a partner. There was no agency agreement. And there was no error.

III

Lastly, Davis argues the motion to amend the complaint should have been denied. We cannot agree.

The trial court may “in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading . . . by correcting a mistake in the name of a party, or a mistake in any other respect . . . .” (Code Civ. Proc., § 473, subd. (a)(1).)

The issue is whether is was permissible to allow Seiko to amend the description in the caption of the complaint of Davis as “an individual dba Elite Clocks,” and the allegation in the body of the complaint that the three named defendants were “individuals jointly doing business under the fictitious name Elite Clocks,” to the same allegations only inserting the fictitious name Eliteclocks.com. Since the partnership was not a defendant, there is no question of correcting a mistake in the name of a party, just a correction of the party’s description.

We cannot see any prejudice to Davis in allowing the amendment. Seiko was mistaken about the name of the partnership it sold to, but there is no question there was a partnership and Davis was a partner.

Davis argues there is no authority that allows a party to amend its complaint “to replace the name by which it knew a party and by which it had . . . sued that party.” But that is not what happened here. As Davis himself points out, the partnership is not a defendant, so this is not a case where Seiko sought to change the name of a party.

Davis contends there was no evidence of a mistake in putting the wrong name on the credit application, or that Seiko knew it was dealing with a partnership. But there was. Houser testified the partnership did not intend to do business under the name shown on the credit application, Elite Clocks, and the misnomer was “nothing intentional,” adding “there was no error intentionally put out.” It may be reasonably inferred from Houser’s testimony that naming the partnership Elite Clocks was a mistake or simply a discrepancy to which the partners gave no thought. As for whether Seiko knew there was a partnership, the credit application shows it did. One portion of the application has a box entitled “form of organization“ followed by boxes with three choices -- “corporation,” “partnership,” or “proprietorship.” The one labeled “partnership” is checked.

No more persuasive is Davis’ reliance on Cuadros v. Superior Court (1992) 6 Cal.App.4th 671 for the proposition that an amendment for mistake is only proper when

a party relies to its detriment on a willful misrepresentation by the other side. There, the court held it was error to deny a motion to amend to add a new defendant after the statute of limitations ran, because defense counsel knowingly hid the name of the proper defendant and plaintiff’s counsel reasonably relied on defendant’s actions in believing he had the right defendant. But this is not a case of adding a new defendant after the statute of limitations has expired -- in fact, it is not a case of adding a new party at all -- so Cuadros is inapposite.

Since there was sufficient evidence to hold Davis liable for the partnership debt, the only evidentiary error was harmless, and the motion to amend the complaint was properly granted, the judgment is affirmed.

BEDSWORTH, ACTING P. J.

WE CONCUR:

MOORE, J.

IKOLA, J.

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^[1] We consider the evidence most favorable to the judgment under the rule that a judgment of the lower court is presumed to be correct and all inferences must be drawn in favor of its correctness. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.)