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C9 Ventures v. Svc-West

January 27, 2012

C9 VENTURES, CROSS-COMPLAINANT AND RESPONDENT,
v.
SVC-WEST, L.P., CROSS-DEFENDANT AND APPELLANT.



Appeal from a judgment of the Superior Court of Orange County, Robert J. Moss, Judge. Reversed. (Super. Ct. No. 30-2008-00101414)

The opinion of the court was delivered by: Fybel, J.

CERTIFIED FOR PUBLICATION

OPINION

INTRODUCTION

This case could serve as a question on a law school final examination for a course on the Uniform Commercial Code. As in a law school examination, the facts are undisputed. On July 3, 2007, SVC-West, L.P. (SVC), telephoned C9 Ventures (C9) and placed a rush order for eight helium-filled tanks used to inflate festive balloons. C9 accepted the order and later that day delivered the tanks without obtaining a signature on an invoice for them. On the reverse of the invoice was an indemnification provision requiring SVC to indemnify C9 for any loss arising out of the use or possession of the helium-filled tanks. C9 later picked up the tanks, and, weeks later, SVC paid the invoice. SVC had obtained helium-filled tanks from C9 on prior occasions.

After the tanks were delivered on July 3, a boy was injured when one of the helium-filled tanks fell on him. SVC and C9 each paid the boy's family to settle a lawsuit brought to recover for his injuries. C9 filed a cross-complaint against SVC to enforce the indemnification provision on the back of the unsigned invoice.

The question: Is the indemnification provision on the back of the unsigned invoice enforceable against SVC?

The trial court answered the question yes, finding under California Uniform Commercial Code*fn1 section 2207, the indemnification provision did not materially alter the contract and therefore became an added term. The trial court accordingly granted judgment in favor of C9 and awarded it attorney fees.

We answer the question differently and hold the indemnification provision is not binding on SVC. Our complete answer to the question is parts II. and III. of the Discussion section; the summary of our answer is the following. SVC and C9 entered into an oral contract when C9 accepted SVC's telephone order for eight helium-filled tanks. The oral lease was sufficiently definite, although it left open various terms. Under section 2207, on which the trial court relied, additional terms proposed in an acceptance or confirmation may become terms of the contract in certain situations. Section 2207 is part of division 2 of the California Uniform Commercial Code, and division 2 governs transactions in goods. The oral contract between SVC and C9, however, was a lease of personal property (the helium-filled tanks), and personal property leases are governed by division 10, not division 2, of the California Uniform Commercial Code.

Division 10 of the California Uniform Commercial Code, which governs the oral contract between SVC and C9, does not have an analog to section 2207. The terms on the back of the unsigned invoice would have become part of the parties' oral contract only if SVC manifested assent to those terms. SVC did not manifest such assent by course of dealing or course of performance, or under basic contract law. SVC did not sign the invoice or otherwise expressly agree to its terms. An unsigned invoice itself is not a contract, and repeated delivery of a particular form does not make the form part of the parties' agreement. Payment of the invoice merely constituted SVC's performance of the obligation under the oral contract to pay for the rental of the helium-filled tanks.

To cover all bases (as one should when answering a law school examination question), we also construe the oral contract between SVC and C9 as if it were a transaction in goods governed by division 2 of the California Uniform Commercial Code and address whether the indemnification provision would have become an additional term under section 2207, as the trial court found. We conclude it would not. If SVC is not a merchant, the terms of the invoice are considered to be mere proposals for additional terms, which SVC did not accept. If SVC is a merchant, the indemnification provision would not have become part of the contract if the provision materially altered the contract. Because an indemnification provision is deemed a material alteration to an agreement as a matter of law, the indemnification provision on the back of the invoice would not, under section 2207, become part of the contract between SVC and C9.

We therefore reverse the judgment and remand with directions to enter judgment in SVC's favor. Because we reverse the judgment on which attorney fees were awarded, we also reverse the order awarding attorney fees. (Metropolitan Water Dist. v. Imperial Irrigation Dist. (2000) 80 Cal.App.4th 1403, 1436.)

FACTS

The trial on C9's cross-complaint was based on an "Agreed Statement of Facts and Evidence for Trial on Cross-complaint of C9 Ventures dba Cloud 9 Balloons." The agreed statement consisted of 46 stipulations of fact and various exhibits.

SVC was in the business of selling time-shares, and had begun using C9 as a provider of event supplies, including helium-filled tanks and balloons, in November 2006. SVC typically placed an order by telephone, and C9 would deliver the supplies with a standard form invoice, which C9 would ask an SVC employee to sign.

The invoice was on a single piece of paper, on the reverse side of which was a section entitled "INDEMNITY/HOLD HARMLESS" (boldface omitted), which stated in part: "Customer agrees to indemnify[,] defend and hold harmless C9 . . . from and against any and all liability, claims, judgments, attorneys fees and cost of . . . every[] kind and nature, including, but not limited to injuries or death to persons and damage to property, arising out of the use, maintenance, instruction, operation, possession, ownership or Rental & Decor of the items rented, however cause[d], except claims or litigation arising through the solo [sic] gross negligence or willful misconduct of C9 . . . ." The reverse side of the invoice also included a section entitled "LEGAL FEES" (boldface omitted), which provided, in essence, that in an action to enforce "this Rental & Decor Agreement," the prevailing party would be entitled to recover attorney fees.

The accident underlying the cross-claim at issue took place on July 3, 2007. Before then, C9 had presented the same or similar invoice to SVC 10 times, but had received the signature of an SVC employee only six times. SVC never attempted to substitute its own form agreement for C9's form.

On July 3, SVC had time-share presentations scheduled for 3:30 p.m. and 5:30 p.m. on the mezzanine of the Crowne Plaza Resort in Garden Grove. In the late morning, Veronica Pasco, an employee of SVC, called C9 for a rush order of eight helium-filled tanks. C9 typically delivered the tanks in the morning when no SVC guests were present, but on July 3, C9's employee, Ernesto Roque, did not arrive at the SVC premises to make the delivery until about 5:00 p.m. Pasco had gone home, so Roque asked another SVC employee, Zayra Renteria, where to place the eight helium-filled tanks.

Renteria, who was expecting the delivery during her shift, instructed Roque to bring the tanks up to the mezzanine level of the resort, at which point she would inform him where to place them. Roque stacked five to seven tanks against the walls next to the service elevator. He was in the process of bringing up another tank when a young boy, whose parents were attending the time-share presentation, ran up to the tanks and hugged one of them, pulling it over. The tank, which was about five feet tall and weighed 130 pounds, fell on the boy's hand. He was hospitalized and underwent surgery for his injuries.

C9 did not obtain a signature from an SVC employee on the invoice for this delivery. Roque wrote the following note on the invoice: "[N]obody would sign [¶] all running around in lobby [¶] nobody knew who . . . . [¶] After accident nobody got signatures."

The invoice for the helium-filled tanks delivered on July 3 was invoice number 493, which was submitted for payment by SVC employee Angela Pringle, approved by an SVC manager, and paid by SVC on August 23, 2007. The invoice asked that the top portion, which referred to the invoice number, be returned with payment.

PROCEDURAL HISTORY

In January 2008, the injured boy and his parents sued SVC and C9 for injuries resulting from the accident. SVC and C9 paid $350,000 each to settle the case. C9 filed a cross-complaint for express indemnity against SVC, claiming the indemnification provision on the back of the July 3 invoice bound SVC to indemnify it for the sum paid to the injured boy's family and for attorney fees. C9 asserted section 2207, which allows merchants to add additional terms through acceptance of an offer or written confirmation, was applicable. SVC argued the terms of the invoice were not binding because it was never signed.

The trial court granted judgment in favor of C9 and explained its reasoning in a minute order stating: "The indemnity provision was contained on the reverse side of an unsigned invoice from C9 delivered with the helium tanks to SVC. [¶] The accident happened on July 3, 2007. During the year before the accident C9 had provided helium tanks and other product[s] to SVC on about 10 occasions. Each time, C9 would provide an invoice with the identical indemnity language. On about half the prior occasions employees of SVC would sign the invoices and on the other occasions the invoices were not signed. SVC never objected to the indemnity language and accepted the product as it did on the day of the accident. C9 and SVC continued to do business in this manner after the accident as well. [¶] SVC's primary argument is that it never agreed to the indemnity language because the invoice was never signed. However, the Commercial Code has modified traditional concepts of offer and acceptance when the dealings are between merchants. SVC offered to purchase helium tanks for an agreed price. When C9 accepted the offer, it delivered the tanks with an invoice that contained indemnity language. The parties had followed this precise course of conduct multiple times in the past. Com. Code § 2207 provides that an offeree may add additional terms to an offer and those terms are deemed part of the agreement unless the offer expressly limits acceptance to the terms of the offer (which did not occur here) or the new terms materially alter the agreement. [¶] The court finds that the indemnity provision did not materially alter the terms of the agreement. SVC never objected to the language in their prior dealings and it is highly unlikely the helium tanks would have been rejected because the invoice added an indemnity clause. By accepting the goods on this and prior occasions SVC accepted the indemnity clause. Com. Code § 2206 provides that an acceptance can be made in any manner and by any medium reasonable in the circumstances."

Neither SVC nor C9 requested a statement of decision. Before entry of judgment, the trial court granted C9's motion for attorney fees based on the attorney fees provision in the invoice, and awarded $23,955 in fees to C9. The judgment entered in C9's favor incorporated the ruling on the attorney fees motion. SVC timely appealed from the judgment.

DISCUSSION

I.

SVC Has Not Waived Its Arguments Made for the First Time on Appeal.

C9 argues SVC is limited on appeal to those arguments made in its trial brief and has waived all others. SVC argued in its trial brief only that an unsigned invoice does not constitute a binding contract, and, therefore, an ...


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