Filed 6/20/13 Quantum Research v. Fresno Cty. Office of Educ. CA5 

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA 

FIFTH APPELLATE DISTRICT 

QUANTUM RESEARCH AND 

EVALUATION, 

Plaintiff, Cross-defendant and 

Respondent, 

 v. 

FRESNO COUNTY OFFICE OF EDUCATION 

et al., 

Defendants, Cross-complainants and 

Appellants. 

F062880 

(Super. Ct. No. 09CECG02107) 

OPINION

 APPEAL from a judgment of the Superior Court of Fresno County. Jeffrey Y. 

Hamilton, Jr., Judge. 

 McCormick, Barstow, Sheppard, Wayte & Carruth, Marshall C. Whitney, 

Todd W. Baxter and Mandy L. Jeffcoach for Defendants, Cross-complainants and 

Appellants. 

 James E. Toothman & Associates, James E. Toothman, Joel F. Donahoe and 

Elizabeth A. Coleman for Plaintiff, Cross-defendant and Respondent. 

-ooOoo- 
2. 

 This is a breach of contract action in which plaintiff sued defendants for payment 

under a contract pursuant to which plaintiff marketed defendants’ computerized learning 

program to schools and school districts. Defendants cross-complained against plaintiff, 

asserting it failed to properly account for money it received and it sold sublicenses for the 

program at prices less than those called for in the contract or a valid modification of the 

contract. The trial court found in favor of plaintiff and awarded substantial damages. 

Defendants appeal, contending the trial court’s interpretation of the contract was incorrect 

and resulted in an unconstitutional gift of public funds to plaintiff, substantial evidence 

did not support the damage award, and any oral modifications of the pricing schedule for 

sale of the sublicenses were unenforceable because the contract required all modifications 

to be made in writing. We reverse the award in plaintiff’s favor on the complaint and 

affirm the judgment in its favor on the cross-complaint. 

FACTUAL AND PROCEDURAL BACKGROUND

 Approximately thirty years ago, defendants began using the Portable Assisted 

Study Sequence (PASS) program to assist students who were the children of migrant 

workers to continue their high school education and earn credits toward graduation, 

despite moving from one place to another. It began as a paper and pencil system; 

subsequently, Dr. Guido Prambs, the director of the PASS program, was charged with the 

task of converting the program to a computer-based system, using federal funding. The 

computerized system became known as Cyber High. With the federal funding ending in 

2001, defendants began looking for other sources of funding to expand the use of the 

program, which they believed to be effective. Prambs met with Donald Collins, deputy 

superintendent of Fresno County Office of Education (FCOE), and Dr. Donald Gregory, 
3. 

director of media and library services for FCOE, who had experience in marketing. They 

decided to market Cyber High for use by nonmigrant students.1

 Initially, defendants contracted with Dr. Leo Cardona, who had developed the 

PASS program, to market Cyber High. Cardona resided in Florida at that time, and 

contracted with Ken and Charlene Bunger to carry out the actual work of selling the 

program in California. From February to August 2002, Cardona and the Bungers 

attempted to market the program; they began with the pilot schools that were already 

using it, but met with resistance because the schools did not want to pay for a program 

they had been getting free. After several months, defendants terminated their contract 

with Cardona. Defendants then considered having Gregory, who was retiring from 

FCOE, undertake the marketing of Cyber High through his company, Quantum Research 

and Evaluation (plaintiff). 

 On October 24, 2002, plaintiff and defendants entered into a contract in which 

defendants, as licensors, authorized plaintiff, as licensee, to “[a]dvertise, promote, 

market, and distribute sublicenses for the use of” the Cyber High program. The contract 

required plaintiff to “[p]ay Licensor a fee of fifty percent (50%) of all monies collected 

by Licensee based on the per student per year of system use charges set forth in the Cyber 

High Pricing Schedule.” Plaintiff contracted with Cal Media, the Bungers’ business, to 

assist in marketing Cyber High. 

 The contract between plaintiff and defendants provided for a three-year term, with 

automatic renewal for succeeding three-year terms unless one of the parties gave notice 

that it would not be renewed. The contract renewed automatically in 2005. In 2008, 

however, defendants gave timely notice that the contract would be terminated effective 

 

1 The program was provided free to migrant students through a federal grant. Gregory 

testified that “You cannot give migrant programs to non migrant students free. It has to be 

reimbursed.” This was the reason for marketing the program only for nonmigrant students.
4. 

October 24, 2008. Subsequent to that date, defendants contracted with Kenjo Marketing 

to perform marketing services for Cyber High. 

 This dispute turns on the meaning of a provision within paragraph 12 of the 

parties’ contract which states: “In the event of termination by Licensor, Licensee will 

continue to receive 50% of all payments collected as a result of its efforts under this 

Agreement for a period of two years commencing from the date of termination.” 

Plaintiff interpreted the provision to entitle it to collect, during the two-year 

posttermination period, 50 percent of all purchases made by customers it had sold to at 

any time during the six-year contract term (former customers). Its interpretation included 

as customers all schools and school districts to which it had made sales, as well as all 

schools within a school district to which it had sold sublicenses, and the school districts 

of all schools to which it had sold sublicenses. Defendants, on the other hand, interpreted 

this provision to permit plaintiff to collect, during the two-year period, money due on 

purchases of sublicenses that schools or school districts had committed to prior to 

October 24, 2008, even if they had not yet completed the paperwork or paid in full prior 

to that date. 

By agreement of the parties (interim agreement), plaintiff collected money due on, 

and retained its 50 percent share of, purchases that were not completed until after 

October 24, 2008, provided the purchaser’s intent to make the purchase was formed prior 

to that date and the purchaser confirmed that intent in writing. 

Plaintiff sued defendants to recover the 50 percent compensation it contends is due 

under paragraph 12 of the contract for purchases of Cyber High sublicenses that were 

initiated by its former customers during the two-year period after termination of the 

contract. Defendants denied that any further compensation was due under the contract; 

they contended plaintiff’s interpretation of the contract would result in an 

unconstitutional gift of public funds by compensating plaintiff for sales it did not procure. 
5. 

Defendants also cross-complained against plaintiff, alleging plaintiff breached the 

contract by failing to render accurate accountings and failing to timely pay sales tax; they 

also alleged plaintiff interfered with defendants’ relationship with its customers and 

potential customers by continuing to market the Cyber High program and by instructing 

purchasers to pay plaintiff for their Cyber High purchases. At trial, defendants contended 

plaintiff changed the prices at which it sold Cyber High sublicenses, in violation of the 

contractual provision setting out the prices to be charged and prohibiting plaintiff from 

changing the prices without a writing signed by the director of Cyber High or the Fresno 

County Superintendent of Schools. 

After a court trial, judgment was entered in favor of plaintiff on the complaint and 

the cross-complaint. The trial court found that, as part of the compensation for its 

marketing efforts, plaintiff was to be paid, for two years after termination, for all sales 

that resulted from the work plaintiff performed during the contract period to procure and 

maintain its customers. The trial court also concluded, however, that plaintiff was 

required to prove a nexus between its marketing efforts and the sales made to its former 

customers during the two-year period; it found plaintiff met that burden, and awarded 

plaintiff damages of $738,771.22, which was 50 percent of the money collected for sales 

to former customers of plaintiff’s during that period, less an amount the court found to be 

due to defendants. 

The trial court rejected the claims in defendants’ cross-complaint, concluding 

there was no breach of plaintiff’s obligation to charge only the prices set out in the 

contract or in a written modification. There was no interference with defendants’ 

contracts or business relationships by plaintiff’s attempts to continue servicing and 

collecting from its customers during the posttermination period, and there was no 

evidence plaintiff failed to remit 50 percent of the money it collected to defendants. 

Defendants appeal, challenging the decisions on both plaintiff’s complaint and 

defendants’ cross-complaint. 
6. 

DISCUSSION

I. Interpretation of Termination Provision 

A. Law Regarding Contract Interpretation 

 “Contract interpretation presents a question of law which this court determines 

independently.” (Ben-Zvi v. Edmar Co. (1995) 40 Cal.App.4th 468, 472 (Ben-Zvi).) “A 

contract must be interpreted to give effect to the mutual, expressed intention of the 

parties. Where the parties have reduced their agreement to writing, their mutual intention 

is to be determined, whenever possible, from the language of the writing alone. 

[Citations.]” (Id. at p. 473.) If contractual language is clear and explicit, the plain 

meaning governs. (Civ. Code, § 1638; Dowling v. Farmers Ins. Exchange (2012) 208 

Cal.App.4th 685, 695.) 

 “Any contract must be construed as a whole, with the various individual 

provisions interpreted together so as to give effect to all, if reasonably possible or 

practicable. [Citations.]” (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, 

Inc. (1998) 68 Cal.App.4th 445, 473.) “We may not ‘create for the parties a contract 

which they did not make, and ... cannot insert in the contract language which one of the 

parties now wishes were there.’ [Citation.]” (Ben-Zvi, supra, 40 Cal.App.4th at p. 473.) 

“‘Contract formation is governed by objective manifestations, not the subjective intent of 

any individual involved. [Citations.] The test is “what the outward manifestations of 

consent would lead a reasonable person to believe.” [Citation.]’ [Citation.]” (Allen v. 

Smith (2002) 94 Cal.App.4th 1270, 1277.) “‘A contract must be interpreted to give effect 

to the mutual, expressed intention of the parties. Where the parties have reduced their 

agreement to writing, their mutual intention is to be determined, whenever possible, from 

the language of the writing alone.’ [Citations.]” (Ibid.) “A contract may be explained by 

reference to the circumstances under which it was made, and the matter to which it 

relates.” (Civ. Code, § 1647.) 
7. 

B. Paragraph 12 of Contract 

The contract recited that it was an agreement between plaintiff and the Fresno 

County Superintendent of Schools; it was signed by Gregory, on behalf of plaintiff, and 

by Dr. Peter G. Mehas, Fresno County Superintendent of Schools. According to 

Gregory, he negotiated the language of the contract with Deborah Garabedian, an inhouse attorney for FCOE, with input from Collins and Prambs. In a fax message to 

Prambs dated September 15, 2002, Gregory indicated that language making “‘customer 

lists and tendered marketing opportunities involving the promotion of the Cyber High 

program’” the property of the licensor was unacceptable. It would be acceptable with 

the addition of “protective language ... such as ‘the contract will automatically be 

renewed as long as a minimum of $50,000 in sales is achieved in each contract year and 

that should termination occur, any monies received thereafter from clients established by 

[plaintiff] would continue to be paid to [plaintiff] at the same rate as established in the 

contract for a period of three years as “residuals.”’” Gregory was concerned plaintiff 

would invest a great deal and establish a client base, then someone would take the client 

base and get the benefit if it. 

Gregory testified that language in response to his fax message was supposed to be 

added to the contract, but when he went to Collins’s office to sign the contract, that 

provision was not in it and he refused to sign. The contract went back to the legal 

department and language was added to paragraph 12; he then signed the contract. 

Gregory also testified that, at some point before he was presented with the draft of the 

contract that he refused to sign, he told Garabedian he wanted a provision for two years 

of residuals if the contract was terminated at the end of the term; he explained he wanted 

plaintiff to continue to receive its percentage of the fees for two years from the client base 

it had established. 

The disputed language of paragraph 12 of the contract provides: “In the event of 

termination by Licensor, Licensee will continue to receive 50% of all payments collected 
8. 

as a result of its efforts under this Agreement for a period of two years commencing from 

the date of termination.” Paragraph 12 did not adopt the language suggested by Gregory 

in his September 15, 2002, fax message. It did not provide for a guaranteed renewal with 

minimum purchases or provide for a three-year residual period; it did not even mention 

“residuals.” The contract provision did not entitle plaintiff to continue to be paid its share 

of any money received from customers established by plaintiff or from plaintiff’s client 

base. By the plain meaning of the language used, the provision entitled plaintiff only to a 

percentage of the payments from sales that resulted from plaintiff’s “efforts under this 

Agreement.” 

The contract required plaintiff to “[a]dvertise, promote, market, and distribute 

sublicenses for the use of [the Cyber High] program” and to “[p]rovide any and all 

support or technical assistance to System End Users.” Plaintiff was granted a 

nonexclusive “right to distribute and market use of said system to sub-licensees.” 

Plaintiff was “responsible for the collection of fees generated under this Agreement,” and 

was required to pay defendants 50 percent of the fees collected immediately upon receipt. 

Defendants retained all proprietary rights to the system and plaintiff agreed “that 

customer lists and tendered marketing opportunities involving the promotion of the Cyber 

High program are the property of Licensor and will be provided to Licensor by Licensee 

upon termination of this Agreement.” 

Thus, under the contract, plaintiff was to make sales of sublicenses for the use of 

the Cyber High program to schools or school districts, to collect the appropriate fees, and 

to pay defendants 50 percent of the fees collected. Plaintiff did not contract to develop 

customers, establish a client list, or bring in accounts. Construing the contract as a 

whole, plaintiff’s “efforts under this Agreement” were its efforts to sell sublicenses to 

schools and school districts. The fact that plaintiff saw development of long-term 

customers as an effective means of generating further sales did not change the nature of 

the services plaintiff contracted to perform in order to obtain its fees. 
9. 

C. “Procuring Cause” of Individual Sales 

The party claiming a commission is required to prove that its efforts were the 

“procuring” or “effective” cause of the sale. (Brea v. McGlashan (1934) 3 Cal.App.2d 

454, 465 (Brea); Chamberlain v. Abeles (1948) 88 Cal.App.2d 291, 295 (Chamberlain); 

Willson v. Turner Resilient Floors, Inc. (1949) 89 Cal.App.2d 589, 595 (Willson); Wood 

v. Hutchinson Coal Co. (4th Cir. 1949) 176 F.2d 682, 684 (Wood).) The parties agree 

with this legal proposition, but disagree on its application to this case. 

Plaintiff contends that paragraph 12 is a residuals clause such that plaintiff is 

entitled to commissions on all sales made to its former customers within two years after 

the termination date. Plaintiff argues that it procured such sales because it procured the 

customer during the contract period. 

Defendants contend that paragraph 12 requires plaintiff to prove that it procured 

each individual sale. It is not enough that the sale was made by a former customer of 

plaintiff. It must be established that plaintiff was the procuring or effective cause of each 

posttermination sale for which it seeks a commission. 

Case law distinguishes between an agent’s efforts to establish a client base and 

efforts to make an individual sale. 

In Lura v. Multaplex, Inc. (1982) 129 Cal.App.3d 410, at the defendant’s request, 

the plaintiff solicited and obtained certain business accounts for the defendant, and the 

defendant agreed to pay him a five percent commission on those accounts. The plaintiff 

had no continuing duty to service the accounts; his performance was complete when he 

obtained the accounts. (Id. at pp. 412, 414.) After two years, the defendant gave notice 

that it would terminate the commission payments, although the customers continued to do 

business with the defendant. Because there was no time limit on the commission 

payments in the contract, the court construed the contract to require the payments to 

continue until the termination of the defendant’s sales to the specified accounts. (Id. at 

p. 415.) 
10. 

In cases involving payment of commissions or fees for sales, the party claiming 

the commission is generally required to prove that the party’s efforts were the procuring 

cause of the sales. In Brea the plaintiff contracted with the defendant to procure radio 

advertising contracts for the defendant’s radio station. After the plaintiff spent four 

months soliciting such sales, she had a commitment from two companies to purchase 

advertising; before she obtained signed contracts, however, the defendant sent other 

agents who obtained the contracts. The plaintiff sought to recover the commissions she 

should have received on the contracts she procured. The court concluded “‘procure’” did 

not require formal consummation. (Brea, supra, 3 Cal.App.2d at p. 465.) “In its broadest 

sense, the word means to prevail upon, induce or persuade a person to do something. In 

this sense did the trial court interpret it, when it found in its findings, that the two 

contracts upon which it allowed a commission were secured ‘as a result of plaintiff’s 

efforts.’ This was a correct interpretation of the contract.” (Ibid.) Accordingly, the 

plaintiff was entitled to her commissions even though the defendant prevented her from 

completing the sales through signed contracts. (Id. at p. 466.) 

In Chamberlain the contract between the parties required the plaintiff to use his 

time, efforts and business contacts to procure orders from a specified company. In order 

to recover his commission, the plaintiff was required to prove he was the “‘effective’” or 

“‘procuring’” cause of the sales. (Chamberlain, supra, 88 Cal.App.2d at p. 295.) “‘An 

agent is an “effective cause,” ... when his efforts have been sufficiently important in 

achieving a result for the accomplishment of which the principal has promised to pay him 

so that it is just that the principal should pay the promised compensation to him.’ 

[Citations.]” (Id. at pp. 295-296, quoting Rest., Agency, § 448, com. a.) “‘In its broadest 

sense, the word [procure] means to prevail upon, induce or persuade a person to do 

something.... The originating cause, which ultimately led to the conclusion of the 

transaction, is held to be the procuring cause.’” (Chamberlain, supra, at p. 296.) The 

plaintiff met his burden by producing evidence that he visited the potential buyer and 
11. 

explained the product he was selling; when told the buyer could not use the product, he 

worked with the buyer and an engineer to design a product that the buyer could use, and 

that the company he worked for could manufacture and sell to it. The court concluded 

this was ample evidence that the plaintiff “‘set in motion a series of events which, 

without break in their continuity’ brought about the sales in question.” (Id. at p. 299.) 

In Willson the appellate court applied the substantial evidence standard of review 

and affirmed a judgment in favor of the plaintiff-agent. There was substantial evidence 

that plaintiff was the procuring cause of the sales on which the jury allowed him a 

percentage even though he did not actually submit the bid that resulted in consummation 

of the transaction. He had solicited and obtained permission to submit the bid and was 

active in the negotiations prefatory to the bid. Although the evidence was in conflict, 

there was sufficient evidence from which the jury could conclude that plaintiff was the 

inducing cause of the sale. (Willson, supra, 89 Cal.App.2d at p. 595.)

In Wood the plaintiff, a coal broker, contracted with the defendant, the owner of 

coal mines, to receive a commission on coal sold by him to customers and shipped from 

the defendant’s mines. The defendant had its own sales force, but wished to bring in 

additional business. (Wood, supra, 176 F.2d at p. 683.) Through the plaintiff’s efforts, 

Milwaukee Solvay Company signed a five-year contract to buy coal from the defendant. 

When the contract expired, the plaintiff did not immediately seek to renew it. The 

defendant, however, directly negotiated a new contract with Milwaukee. The plaintiff 

sued, claiming he was due a commission on all coal sold under the new contract. (Id. at 

p. 684.) 

The court upheld the judgment in favor of the defendant. 

“It is conceded that Wood had nothing to do with the negotiation or 

execution of the second five year contract between Hutchinson and 

Milwaukee; he did not make the sale and did not accomplish the specific 

result upon which the payment of the commission was conditioned. An 

attempt is made to meet the requirements of Section 448 [of the 
12. 

Restatement of Agency] by advancing the theory that Milwaukee was 

Wood’s customer and hence Wood was entitled to commissions on all 

Milwaukee’s purchases. This position, however, cannot be maintained. 

For obtaining the customer and making the first sale Wood was entitled to 

and was paid the agreed commissions, but that situation did not continue 

indefinitely. It is well established that the successful negotiation of a 

contract by an agent does not give him a right to commissions on a renewal, 

which he does not secure, in the absence of an express contract to that 

effect. [Citations.] The contract did not provide that commissions would 

be paid on all purchases made by Milwaukee or any other particular 

customer as it sometimes provided in a broker’s contract, but only on such 

sales as the agent would make. He did not actually make the sale in 

question.”2 (Wood, supra, 176 F.2d at p. 684.) 

Thus, an agreement providing that one party will bring in accounts or customers, 

and the other will compensate him with commissions on all sales on that account or by 

that customer, must be distinguished from an agreement in which one party is to be paid a 

commission for making sales of the other party’s product. Under the former, once the 

customer is established, the commission is paid on all sales to that customer; under the 

latter, the party earns a commission only on the sales he procures through his efforts. 

D. Statement of Decision 

 The trial court awarded plaintiff 50 percent commissions on all sales proceeds 

collected from former customers of plaintiff during the two-year period after termination. 

The statement of decision’s rationale for this award is not clear. 

On the one hand the trial court acknowledged that, “[u]nder the ‘procuring cause’ 

analysis, it is the [plaintiff’s] burden to produce evidence showing that he was the 

procuring cause of the sale.” Consistent with that rule, it concluded plaintiff bore the 

burden of proving “each sale after the close of the contract, for the ensuing two-years, 

was entered into ‘as a result of its efforts.’” The trial court muddied the waters, however, 

 

2 Section 448 of the Restatement Second of Agency (1958) provides: “An agent whose 

compensation is conditional upon his accomplishment of a specified result is entitled to the 

agreed compensation if, and only if, he is the effective cause of accomplishing the result.” 

(Wood, supra, 176 F.2d at p. 684.)
13. 

by seeming to agree with plaintiff that each completed sale was not a separate transaction 

that had to result from plaintiff’s efforts in order to entitle plaintiff to compensation. 

Rather, to compensate it for investing “substantial time, effort and expense in marketing 

an unknown program ... the parties agreed to pay [plaintiff] for two years after the 

contract’s final end date, if it was the result of work they had performed to procure the 

sales in the first instance.” The trial court stated the contract “contemplated, and was 

compensating for, the marketing efforts and risk of the [plaintiff], as a result of the work 

it did to procure and maintain the client.”3 (Italics added.) 

Thus, it appears that the trial court adopted plaintiff’s position that paragraph 12 

was a “residuals” clause, entitling plaintiff to earn commissions on all posttermination 

proceeds from sales to former customers of plaintiff. 

E. Plain Meaning of Paragraph 12 and Rejection of Each Party’s Interpretation 

In our view, the parties have each advocated interpretations of paragraph 12 that 

stretch the contract’s words beyond their plain meaning. 

Plaintiff insists that paragraph 12 is a “residuals” clause, whereby it is owed 

commissions on any monies received by FCOE between October 24, 2008 and 

October 24, 2010, for sales of Cyber High to any former customer of plaintiff. Thus, 

plaintiff’s entitlement to the commissions does not depend upon, nor does plaintiff need 

to prove, a particular sale “resulted from its efforts,” only that the sale was to a former 

customer of plaintiff. 

The wording of paragraph 12 is not reasonably susceptible to plaintiff’s 

interpretation. The fallacy of this interpretation is best illustrated by a hypothetical. 

Assume that the procuring cause of a particular posttermination sale to a former client of 

 

3 Later in its decision, the court seemed to equate a “but for” test with “‘result of its 

efforts.’” We do not regard the two as synonymous. There may be multiple “but for” causes, 

but in this context there can only be one “‘procuring cause.’” (Sessions v. Pacific Improvement 

Co. (1922) 57 Cal.App. 1, 17 (Sessions).) 
14. 

plaintiff resulted from the efforts of FCOE or Kenjo Marketing. According to plaintiff, it 

would be still be owed a commission, but that would directly contradict the “efforts” 

language of paragraph 12 because, in this hypothetical, the sale resulted from the efforts 

of someone else. (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 344 (Herrera) 

[parol evidence rule bars consideration of extrinsic evidence of prior or contemporaneous 

negotiations or agreements at variance with the written agreement].) 

Plaintiff fails to recognize the difference between plaintiff’s contractual 

entitlement to commissions during the six-year contract period and the two-year 

posttermination period. During the six-year period, plaintiff received commissions on all 

collected sales proceeds regardless of whose efforts procured the sale. For example, if a 

potential client placed an order for Cyber High without any input from plaintiff 

whatsoever, so long as plaintiff collected the money on the sale, it received a 50 percent 

commission. To illustrate, assume plaintiff sells Cyber High to School A in year one and 

then without any further marketing efforts sells Cyber High to School A in year six. 

Since plaintiff collected the money, it gets paid for the sale in year six even though the 

product sold itself or some other person or entity played a significant role in making the 

sale. This is so because the contract entitled plaintiff to commissions on all monies it 

collected during the six-year period, regardless of whether its efforts were the procuring 

cause of the sale. It did not have to prove that its efforts were the procuring cause in 

order to earn a commission during the six-year period. Its only efforts may have been to 

take the order and collect the money. This commission arrangement is to be 

distinguished from Cyber High sales during the two-year posttermination period. For 

monies FCOE collected after October 24, 2008, plaintiff’s right to commissions 

depended not on whether plaintiff collected the sales money or whether the sale was 

made to a former customer of plaintiff, but on whether plaintiff could prove that those 

monies resulted from its efforts, i.e., that plaintiff was the “procuring cause.” (Brea, 
15. 

supra, 3 Cal.App.2d at p. 465; Chamberlain, supra, 88 Cal.App.2d at p. 295; Willson, 

supra, 89 Cal.App.2d at p. 595; Wood, supra, 176 F.2d at p. 684.) 

FCOE insists that paragraph 12 only entitles plaintiff to collect commissions on 

sales that the client committed to before FCOE terminated plaintiff as its selling agent. 

Paragraph 12 is not reasonably susceptible to FCOE’s interpretation. The fallacy 

of this interpretation is likewise best illustrated by a hypothetical. Assume plaintiff 

proved that a posttermination sale was obtained as a result of its efforts during the sixyear contract period even though that customer had not committed to the sale as of 

October 24, 2008. According to FCOE, plaintiff would not be entitled to a commission, 

but that would directly contradict the “efforts” language of paragraph 12 because, in this 

hypothetical, the sale was shown to have resulted from plaintiff’s efforts. (Casa Herrera, 

supra, 32 Cal.4th at p. 344.) 

FCOE’s argument that paragraph 12 only refers to sales that customers committed

to before October 24, 2008, not only finds no support in the language of paragraph 12, it 

renders the two-year period referenced in paragraph 12 illusory. It is unlikely that a 

client who committed to buy Cyber High in 2008 would take up to two years to pay. 

There is no evidence in this record to indicate that the two-year period was selected 

because of a concern that a customer who committed to purchasing Cyber High in 

October 2008 might take two years to pay for the product. The only reasonable 

interpretation of paragraph 12 is that plaintiff would be entitled to a commission on any 

sale made during the two-year posttermination period so long as the sale resulted from 

efforts it made during the six-year contract period. 

During the posttermination period, plaintiff was no longer authorized to market or 

sell Cyber High. Under paragraph 12, plaintiff doesn’t earn commissions on money it 

collects; rather, it earns commissions on money FCOE received between October 24, 

2008 and October 24, 2010, which resulted from plaintiff’s efforts. And those efforts, if 

any, necessarily occurred on or before October 24, 2008. So, the parties contemplated 
16. 

that plaintiff’s pretermination efforts could result in sales proceeds received up to two 

years after the termination. There is nothing in the language of paragraph 12 or in this 

evidentiary record that precludes plaintiff from trying to prove that its efforts (during 

their six-year relationship with FCOE) resulted in posttermination sales and collections. 

Paragraph 12 means what it says. In order for plaintiff to be entitled to receive a 

commission on sale proceeds received between October 24, 2008 and October 24, 2010, 

it had to prove that the particular sale resulted from its efforts. This did not require, as 

FCOE urges, that plaintiff prove that the client had committed to the particular sale before 

termination. We also reject plaintiff’s argument that mere proof of a sale to a former 

customer entitled plaintiff to a commission. Just because a former client made a later 

purchase does not necessarily prove that the later purchase was a result of plaintiff’s 

efforts. The word “efforts” is the linchpin of paragraph 12. The words “committed,” 

“residuals” and “former customers” appear nowhere in this paragraph. In order to earn a 

commission, plaintiff had to prove that a particular sale resulted from its efforts, that is, 

was the procuring cause. Consequently, we will uphold the judgment only to the extent 

substantial evidence supports the trial court’s conclusion plaintiff was the procuring 

cause of each of the sales for which compensation was allowed. 

F. Substantial Evidence Does Not Support the Trial Court’s Damage Award 

We review the record to determine if substantial evidence supports the trial court’s 

findings of fact. “‘[T]he question of whether or not the sale is primarily the result of the 

broker’s efforts is one of fact, and the trial court’s conclusions thereon will not be 

disturbed on appeal if there be substantial evidence to sustain them. [Citation.]’ 

[Citation.]” (Jones v. Foster (1931) 116 Cal.App. 102, 108.) We must of course indulge 

every reasonable inference from the evidence in favor of plaintiff. (SFPP v. Burlington 

Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 461-462.) 

 The trial court concluded that: 
17. 

“[Plaintiff] provided adequate proof through testimony and 

documentation (see trial exhibits: 8, 9, 13, 20, 119, 153, 156 and 158 for a 

sampling of school districts showing ‘intent’ to purchase through 

[plaintiff]) that each and every school for which they allege purchased ‘as a 

result of its efforts’ after the conclusion of the contract, did just that. The 

Court is convinced, and does so find that, but for [plaintiff’s] efforts in the 

sales at issue, the client and subsequent sale(s) would not likely have been 

procured. As a result, [plaintiff] is entitled to its 50% share of the sales 

made and money collected post October 24, 2008 through October 24, 2010 

or $774,450.00, minus any accounting discrepancies.” 

 The trial court determined that plaintiff met its burden because marketing was 

solely the responsibility of plaintiff, plaintiff made substantial, successful efforts to 

market the program, and defendants did not contribute to those marketing efforts. It also 

found support for its damage award in the letters of intent some schools or districts 

provided to plaintiff, which demonstrated that certain sales, completed after termination 

of plaintiff’s contract, entitled plaintiff to compensation because the purchaser committed 

to the purchase prior to termination of the contract. 

 We find that substantial evidence does not support the trial court’s conclusion that 

plaintiff met its burden of demonstrating that it was entitled to compensation for any of 

the posttermination sales. 

 First, the so-called letters of intent did not pertain to any sales for which plaintiff 

sought damages. Pursuant to the interim agreement, defendants paid plaintiff 

commissions on those posttermination sales where it was demonstrated in writing that a 

customer had committed to the purchase before October 24, 2008. The eight exhibits 

cited by the trial court in support of the damage award contained seven letters of intent 

concerning purchases made after October 24, 2008, for which plaintiff was fully 

compensated under the interim agreement. The intent letters in the record came from 

only nine of the 74 schools or school districts for whose posttermination sales plaintiff 

sought compensation. None of the exhibits cited by the trial court constitutes evidence 
18. 

that any of the posttermination sales for which plaintiff sought damages were procured by 

its efforts. 

Second, plaintiff never introduced any documentary evidence to prove that it was 

the procuring cause of any of the posttermination sales for which it sought damages. 

Gregory, owner of Quantum, was not even asked about each of the sales represented on 

exhibit Nos. 33 and 37. He offered no testimony about plaintiff’s efforts in procuring 

each of those sales. In fact, he testified that plaintiff did not procure any of those 

individual sales. He was asked on cross-examination, “What’s before the court today 

from your case is the claim you have for monies FCOE received after October 24 that 

were not specific contracts that you procured, correct?” His answer was “Correct.” He 

contended that paragraph 12 only required plaintiff to prove that it procured the 

customers, not the individual sales. This proof would have been sufficient under a 

residuals clause, but paragraph 12, as we have explained, is not such a clause. 

We have reviewed all of the trial exhibits and have found none that satisfy 

plaintiff’s burden under paragraph 12 as to any particular sale. Plaintiff introduced 

written statements from former customers to qualify for commissions under the interim 

agreement, but failed to introduce evidence from former customers to prove that any 

other posttermination sales resulted from its efforts. It never deviated from its contention 

that paragraph 12 was a residuals clause that entitled it to commissions on all sales to 

former customers during the two-year posttermination period. 

The statement of decision asserts that plaintiff provided adequate proof that 

posttermination sales resulted from its efforts through “testimony.” A review of the trial 

testimony reveals the following: Plaintiff spent six years developing a customer base for 

Cyber High. It engaged in various activities to market, demonstrate and sell the product. 

It had repeat customers. Many customers expressed their high satisfaction with the 

product and with plaintiff. Some schools that bought Cyber High recommended it to 

other schools within its school district and some districts with whom plaintiff worked 
19. 

recommended the program to schools within the district. FCOE did not market the 

program during their six-year relationship with plaintiff. FCOE also did not market the 

program during the two years after termination of the relationship. On November 1, 

2008, FCOE contracted with Kenjo Marketing to market and sell the program. During 

the two-year posttermination period, product sales were either processed by FCOE (inhouse sales) or by Kenjo. Both handled sales to former customers of plaintiff. 

No specific testimony is mentioned in support of the court’s conclusion that all 

posttermination sales resulted from plaintiff’s efforts other than generalized references to 

testimony about the marketing and service activities of plaintiff during the contract 

period. As previously mentioned, plaintiff did not introduce any testimony to prove that 

it was the procuring cause of any of the posttermination sales for which it sought 

damages. Testimony favorable to plaintiff was elicited from representatives of the 

Oakland and Santa Rosa school districts, but plaintiff did not claim damages based on 

sales to either district and neither representative testified that its district purchased Cyber 

High during the two-year posttermination period because of plaintiff’s efforts. In fact, 

plaintiff offered no evidence from any of the posttermination sales customers as to why 

they bought Cyber High or whether they credited plaintiff’s efforts for their purchase. 

It was plaintiff’s burden to prove that each sale after October 24, 2008, was made 

as a result of its efforts. Where is the proof as to each sale? Plaintiff’s answer is to paint 

with a broad brush: since it created a bank of satisfied customers during its six-year 

relationship with FCOE, it is reasonable to assume that posttermination orders be credited 

to those efforts. But that doesn’t satisfy its burden of proving that each sale resulted 

from its efforts. Plaintiff’s position is tantamount to a burden-shifting argument: by 

proving it established a satisfied customer base, the burden shifts to defendant to prove 

that the posttermination sales did not result from plaintiff’s efforts. But it is plaintiff’s 

burden to prove that each sale resulted from its efforts, not defendants’ burden to prove 

that each sale did not result from plaintiff’s efforts. By allowing plaintiff to meet its 
20. 

burden of proof in this way, the trial court treated paragraph 12 as a residuals clause, 

which we have already determined it is not. 

Adopting the terminology used in the case law, it was plaintiff’s burden to prove 

that it was the procuring cause for each sale after October 24, 2008. On this record, it is 

pure speculation to conclude that these sales resulted from plaintiff’s efforts. There is no 

evidence from the individual customers as to why they made a particular purchase. 

Defendants argue that there are other possible explanations for why these sales occurred 

other than plaintiff’s efforts. One is that the product sold itself, that is, former customers 

placed new orders because of the product’s proven performance, rather than because of 

plaintiff’s past marketing or other activities. Another explanation is that some of these 

sales resulted from Kenjo’s efforts. Without receiving evidence from the individual 

customer as to why it made a particular purchase, it is speculative to say who or what the 

procuring cause was. (People v. Perez (1992) 2 Cal.4th 1117, 1133 [speculative evidence 

does not constitute substantial evidence].) 

 In an attempt to show the amount it was entitled to recover for posttermination 

sales of sublicenses, plaintiff presented two documents (exhibit Nos. 33 and 37), which 

were compilations of information from the parties’ records prepared by one of plaintiff’s 

attorneys. The attorney took plaintiff’s master list of all the schools and districts to which 

it had sold sublicenses during the contract term (exhibit Nos. 27 and 28), and compared it 

with defendants’ list of posttermination sales (exhibit No. 29). Exhibit Nos. 33 and 37 

represent the overlap; every posttermination sale made to a school or district to which 

plaintiff made a sale during the contract term, every sale made to a district in which 

plaintiff made a sale to any school, and every sale made to a school within a district to 

which plaintiff ever made a sale during the contract term, is included in exhibit Nos. 33 

and 37. 

After termination of plaintiff’s contract, customers were informed that plaintiff 

was no longer the official seller of the Cyber High program and further purchases were 
21. 

made directly from defendants. Kenjo Marketing entered into its marketing contract with 

defendants on November 1, 2008. The sales listed in exhibit Nos. 33 and 37 included 

sales defendants attributed to Kenjo Marketing, for which Kenjo Marketing was 

compensated under its marketing contract with defendants. Plaintiff claimed it was 

entitled to 50 percent of the proceeds of all of the sales reflected in exhibit Nos. 33 and 

37. 

The trial court awarded plaintiff the total amount shown by the exhibits, less 

approximately $35,000 that it determined defendants were entitled to because of 

discrepancies in plaintiff’s records. It found a nexus between the posttermination sales 

and plaintiff’s efforts; it stated that, “but for [plaintiff’s] efforts in the sales at issue, the 

client and subsequent sale(s) would not likely have been procured.” A procuring or 

effective cause, however, is one that persuades or induces a person to do something. 

(Brea, supra, 3 Cal.App.2d at p. 465.) When there are two potential causes of the sale, 

the court must determine which one was the predominating cause. 

“Where several agencies have been active in bringing about a sale, it 

may happen that each has contributed something without which the result 

would not have occurred. One may have found a buyer who would 

otherwise have been overlooked, and yet that buyer may actually make his 

bargain through a different instrumentality. In such case, the crucial 

question is, which was the predominating efficient cause? ... [¶] To 

constitute himself ... the predominating effective cause, it is not enough 

that the broker contributes indirectly or incidentally to the sale by imparting 

information which tends to arouse interest. He must set in motion a chain 

of events, which, without break in their continuity, cause the buyer and 

seller to come to terms as the proximate result of his peculiar activities.” 

(Sessions, supra, 57 Cal.App. at p. 17.) 

 Thus, it is incorrect to apply a “but for” test, for there can be several causes that 

satisfy that definition, including the product itself, FCOE and, as to some sales, Kenjo 

Marketing. Instead, case law advises that it must be determined who or what was the 

predominating, effective or procuring cause. And it necessarily contemplates that there is 

only one such cause. 
22. 

As to the in-house sales, we have found no direct evidence from any former 

customer of plaintiff that any of the posttermination sales (excluding those covered by the 

interim agreement) resulted from plaintiff’s efforts. There was no testimony by any 

former customer of plaintiff that it was induced to purchase and pay for Cyber High 

between October 24, 2008 and October 24, 2010, due to plaintiff’s marketing or other 

related activities. 

The trial judge, citing the aforementioned exhibits, may have reasoned that 

because certain schools submitted letters confirming they intended to purchase Cyber 

High due to plaintiff’s efforts prior to October 24, 2008, then all of the posttermination 

sales to former customers were due to plaintiff’s efforts. That reasoning is grounded in 

speculation. It does not follow that because Schools A, B and C made purchases after 

October 24, 2008, and confirmed in writing that plaintiff’s efforts played a significant 

role in those purchases that later purchases made by Schools D, E and F were also due to 

plaintiff’s efforts. Letters submitted by certain schools confirming plaintiff’s role in 

procuring their purchases of Cyber High are not probative as to who or what was the 

procuring cause for other purchases made by other schools or districts. 

The only other evidence that may bear on the question of what or who was the 

procuring cause of these posttermination sales is the fact that FCOE itself did not market 

this product during the two-year period. But that only proves that the in-house sales did 

not result from FCOE’s marketing activities. It doesn’t prove that those sales resulted 

from plaintiff’s efforts. Again, without any evidence from the individual customers as to 

why they made each individual purchase, it is speculative to say that it must have been 

plaintiff’s efforts, rather than the product itself, a recommendation from someone else, or 

other reasons that motivated these individual customers to make each of these 

posttermination purchases. 

The statement of decision is also flawed because it makes no distinction for sales 

made by Kenjo Marketing. There was evidence that, after termination of plaintiff’s 
23. 

contract, Kenjo actively marketed the program to schools throughout the state. Plaintiff 

presented no evidence that schools that purchased from Kenjo Marketing did so as a 

result of plaintiff’s efforts, rather than the more immediate efforts of Kenjo Marketing. 

The statement of decision did not discuss the respective sales efforts of the two marketers 

in procuring the particular sales that were attributed to Kenjo Marketing in exhibit 

Nos. 33 and 37. The trial court seemed to assume that, because plaintiff was the first 

marketer, all of the posttermination sales should be attributed to plaintiff without regard 

to any marketing efforts by Kenjo Marketing. The trial court made this assumption 

despite evidence that some of the purchases in exhibit Nos. 33 and 37 were made by 

entities whose only purchases from plaintiff had occurred years earlier. For example, 

exhibit Nos. 33 and 37 reflected a purchase made by Valley Center – Pauma through 

Kenjo Marketing in December 2009; plaintiff’s records reflected purchases by Valley 

Center – Pauma in 2002 and 2003. Plaintiff presented no evidence demonstrating that its 

efforts six years earlier “set in motion a chain of events, which, without break in their 

continuity,” (Sessions, supra, 57 Cal.App. at p. 17) caused Valley Center – Pauma to 

make its December 2009 purchase, despite the subsequent efforts of Kenjo Marketing. 

Plaintiff offered no evidence that it was the procuring cause of sales made by 

Kenjo Marketing unless one adopts plaintiff’s “residuals” interpretation of paragraph 12, 

that is, plaintiff is entitled to a commission on all posttermination sales to its former 

customers. Substantial evidence does not support the conclusion that plaintiff was the 

predominating effective cause of the posttermination sales attributed to Kenjo Marketing. 

The trial court effectively converted plaintiff’s marketing contract into a contract 

that compensated plaintiff for obtaining customers or accounts rather than sales. Or, it 

assumed that because plaintiff made efforts to market the program during its contract 

term and those efforts resulted in orders from particular customers during that term, 

subsequent orders by the same customers must also have been the result of those efforts, 

but assumptions do not constitute proof that individual sales were in fact the result of 
24. 

plaintiff’s efforts. Neither this court nor the trial court can rewrite the parties’ contract. 

(Walnut Creek Pipe Distributors, Inc. v. Gates Rubber Co. (1964) 228 Cal.App.2d 810, 

815.) Under the contract, plaintiff can recover only for sales procured through its efforts. 

Substantial evidence does not support the trial court’s determination that sublicenses 

purchased from Kenjo Marketing after termination of plaintiff’s marketing contract were 

procured through plaintiff’s efforts. Therefore, plaintiff’s damage award cannot stand. 

II. Admissibility of Exhibit Nos. 33 and 37 

 Defendants contend exhibit Nos. 33 and 37 were improperly admitted as 

compilations of information from business records. They assert the exhibits were 

inadmissible because they were prepared by plaintiff’s attorney rather than by plaintiff 

through its personnel, and only plaintiff’s attorney testified to their preparation. We find 

no error in their admission, but regard this claim as moot in light of our reversal of 

plaintiff’s damage award. 

III. Cross-complaint for Unauthorized Changes in Pricing 

Defendants contend the trial court erred in denying them damages on their claim 

that plaintiff sold Cyber High courses at prices other than those set forth in the contract, 

without obtaining a written agreement, signed by defendants, to modify the price list. 

They contend the contract required a signed writing and, where a public entity’s contract 

includes such a requirement, the contract cannot be modified orally. They base their 

argument on Katsura v. City of San Buenaventura (2007) 155 Cal.App.4th 104 (Katsura) 

and P&D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332 (P&D). 

Civil Code section 1698 provides that a written contract may be modified in 

writing or orally if the oral agreement is executed by the parties. In some circumstances, 

a contract with a public entity may not be modified orally. 

In Reams v. Cooley (1915) 171 Cal. 150 (Reams), the plaintiff entered into a 

contract with a school to perform certain construction work. Before it was completed, the 

board of trustees arranged to have the plaintiff perform additional work. The school 
25. 

superintendent refused to approve payment for the additional work because it was not 

performed under a contract awarded as a result of competitive bidding. (Id. at p. 151.) 

By statute, the contract could only be awarded through the competitive bidding process. 

Therefore, the contract was void “because of irregularities committed which go to the 

jurisdiction of the high school board.” (Id. at p. 152.) The court also rejected a quantum 

meruit claim. 

“Undoubtedly, a school board, like a municipal corporation, may, 

under some circumstances, be held liable upon an implied contract for 

benefits received by it, but this rule of implied liability is applied only in 

those cases where the board or municipality is given the general power to 

contract .... [T]he decided weight of authority is to the effect that when by 

statute the power of the board or municipality to make a contract is limited 

to a certain prescribed method of doing so and any other method of doing it 

is expressly or impliedly prohibited, no implied liability can arise for 

benefits received under a contract made in violation of the particularly 

prescribed statutory mode. Under such circumstances the express contract 

attempted to be made is not invalid merely by reason of some irregularity 

or some invalidity in the exercise of a general power to contract, but the 

contract is void because the statute prescribes the only method in which a 

valid contract can be made, and the adoption of the prescribed mode is a 

jurisdictional prerequisite to the exercise of the power to contract at all and 

can be exercised in no other manner so as to incur any liability on the part 

of the municipality. Where the statute prescribes the only mode by which 

the power to contract shall be exercised the mode is the measure of the 

power. A contract made otherwise than as so prescribed is not binding or 

obligatory as a contract and the doctrine of implied liability has no 

application in such cases. [Citations.]” (Reams, supra, 171 Cal. at pp. 153-

154.) 

The court reached a similar result in South Bay Senior Housing Corp. v. City of 

Hawthorne (1997) 56 Cal.App.4th 1231. The plaintiff sued the city for breach of a lease. 

The city contended there was no enforceable lease because the mayor did not sign one. 

By statute, in a general law city like the defendant, a lease of city-owned property was 

required to be approved by the city council and, unless the city council provided 

otherwise by ordinance, it was required to be signed by the mayor. (Id. at p. 1236.) The 
26. 

city council had not provided otherwise, so the lease was required to be signed by the 

mayor. (Ibid.) Citing Reams, supra, 171 Cal. 150, the court distinguished between a city 

contracting pursuant to a general power to contract and one contracting pursuant to a 

statute that imposes limits on the city’s power to make certain contracts to a certain 

prescribed method. (South Bay Senior Housing Corp. v. City of Hawthorne, supra, at 

p. 1235.) Because the city’s power to contract was governed by statutes that prescribed 

the method to be used in contracting, the contract would be void if it did not comply with 

that method, “‘“the only method in which a valid contract [could] be made.”’” (Ibid.) 

The adoption of the prescribed mode was a jurisdictional prerequisite to the exercise of 

the power to contract at all. Consequently, the contract was not enforceable unless it was 

signed by the mayor. (Id. at pp. 1235-1236.) 

In Katsura, a chartered city entered into a written contract with a firm of 

consulting engineers. The contract required modifications to be made in writing. The 

city’s charter required contracts to be in writing and approved by specified city officials; 

it allowed the city council to authorize the city manager to make certain types of 

contracts with or without a writing. (Katsura, supra, 155 Cal.App.4th at p. 108.) The 

city manager had delegated his authority to sign contracts to the public works director, 

who signed the contract with the plaintiff. The plaintiff sought payment for extra work, 

which was requested by an associate engineer employed by the city and an outside 

consultant hired by the city as project manager. (Ibid.) The plaintiff sued when the city 

refused to pay because he failed to obtain a contract modification. (Id. at p. 107.) 

“‘[A] charter city may not act in conflict with its charter. [Citations.] Any act that 

is violative of or not in compliance with the charter is void.’ [Citation.] ... ‘Certain 

general principles have become well established with respect to municipal contracts .... 

It is ... settled that the mode of contracting, as prescribed by the municipal charter, is the 

measure of the power to contract; and a contract made in disregard of the prescribed 

mode is unenforceable.’ [Citation.]” (Katsura, supra, 155 Cal.App.4th at pp. 108-109.) 
27. 

The city charter did not authorize execution of oral contracts by city employees 

who did not have the requisite authority. (Katsura, supra, 155 Cal.App.4th at p. 109.) 

“The alleged oral statements by the associate city engineer and project manager are 

insufficient to bind the City. ‘“No government, whether state or local, is bound to any 

extent by an officer’s acts in excess of his ... authority.”’ [Citations.]” (Ibid.) A person 

dealing with a public officer is presumed to know the extent of the officer’s powers to 

bind the public agency; “‘“any act of an officer to be valid must find express authority in 

the law or be necessarily incidental to a power expressly granted.”’ [Citation.]” (Ibid.) 

The court concluded that, regardless of the plaintiff’s knowledge or lack of knowledge of 

the extent of the individuals’ authority, the request for extra work by the associate city 

engineer and project manager was neither a modification of the contract nor a basis for 

recovery on an implied-in-law or quasi-contract theory. (Id. at pp. 109-110.) 

In these cases, the court recognized that, where a city charter or statute establishes 

the only method by which the public entity may enter into a valid contract, a contract 

purportedly made by the public entity in some other manner is void. Where, however, 

there is no statute or charter prescribing the method by which the public entity may create 

a contract, general contract rules apply. 

In P&D, the court described its holding in broad terms: “Unlike private contracts, 

public contracts requiring written change orders cannot be modified orally or through the 

parties’ conduct.” (P&D, supra, 190 Cal.App.4th at p. 1335.) The plaintiff sued the city 

for breach of a civil engineering contract, seeking payment for extra work; the city 

contended the plaintiff was not entitled to recover in the absence of a written change 

order. The contract prohibited modification without a written agreement signed by both 

parties. The parties agreed in writing to five change orders. The plaintiff asked for a 

further change order to cover other work, and there was disputed evidence regarding 

whether the project manager orally agreed to “‘take care of it.’” (Id. at p. 1338.) 
28. 

After summarizing Katsura, the court noted that the plaintiff in Katsura was trying 

to enforce an oral modification of a contract. It extended the reach of that decision to 

modifications through the parties’ conduct, concluding that Katsura’s “reasoning applies 

equally to modification through conduct.” (P&D, supra, 190 Cal.App.4th at p. 1341.) 

The P&D court did not, however, adequately discuss or apply that reasoning. It did not 

discuss whether there was any statutory or charter provision prescribing the only method 

by which the city could enter into or modify contracts. Nor did it discuss whether the 

project manager, who allegedly made the oral modification agreement, had the requisite 

authority to bind the city through such an agreement. Consequently, we are not 

persuaded that the rule is as broad as described in P&D. 

The contract in this case was not awarded after public bidding. We have been 

cited to no statute that prescribes the acceptable method or methods for entering into a 

valid contract of the sort in issue in this case. We have not been cited to any statute that 

requires the modification of such a contract to be made in writing. Although the contract 

itself required that any variance in the pricing schedule be approved in writing by Prambs 

or the superintendent of schools, under general contract law, such a contract could 

nonetheless be modified by an executed oral agreement in the absence of a statute 

providing otherwise. (See Civ. Code, § 1698, subd. (d).) 

Gregory testified that he always obtained Prambs’s approval before charging 

anything other than the prices in the schedule, although the approval was not always 

reflected in a signed writing. Prambs gave written approval for one price change, which 

lowered the price per course when a greater number of courses were purchased. It was 

undisputed that Prambs orally approved another price change, lowering the price of 

summer school courses; he did not sign the written proposal, but placed it in a file and 

accepted it as authorized. Prambs denied agreeing to other price changes. Thus, there 

was evidence, though disputed, that the pricing changes were approved by the 

representative of defendants to whom the contract expressly granted the authority to 
29. 

agree to pricing changes. Unlike the associate city engineer and the project manager in 

Katsura, Prambs was not an employee lacking the requisite authority to bind defendants. 

There was also evidence that the oral modifications of the pricing schedule were 

executed. Plaintiff sold courses to schools and school districts at the modified prices, 

collected the money due, provided the courses to the purchasers, remitted 50 percent to 

FCOE, and informed FCOE orally or through spreadsheets or other records of the number 

of courses sold and the price paid. Defendants were either informed of the price paid per 

course, or were able to calculate it based on records or oral information reflecting the 

total price and the number of courses sold. There was no evidence defendants ever 

objected to the prices being charged by plaintiff during the contract term, despite the 

availability of this pricing information. 

 On appeal, the burden of affirmatively demonstrating error is on the appellant. 

(State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 610.) Defendants 

failed to meet this burden. They failed to demonstrate that a statute precluded the parties 

from modifying the contract’s pricing schedule by any means other than a signed writing. 

As a result, they failed to establish that the Katsura rule applied to the contract in issue 

and prevented an oral modification. The undisputed evidence indicated the representative 

of defendants that plaintiff asserted made the oral agreement was one of the two school 

officials authorized to approve a pricing change. Substantial evidence supported the trial 

court’s conclusion that he did so. 

IV. Gift of Public Funds 

 Defendants contend that if paragraph 12 is interpreted to entitle plaintiff to 

compensation for posttermination sales that were procured without effort on plaintiff’s 

part, then the contract would provide for an unconstitutional gift to plaintiff of public 

funds. The constitutional provisions defendants cite, however, prohibit granting “extra 

compensation or extra allowance to a ... contractor after service has been rendered or a 
30. 

contract has been entered into and performed.” (Cal. Const., art. IV, § 17; Cal. Const., 

art. XI, § 10, subd. (a).) 

In light of our determination that plaintiff has failed to prove any entitlement to 

damages, this issue is rendered moot. 

V. Prejudgment Interest 

 Plaintiff argues that it was entitled to prejudgment interest on its damage award. 

This issue is rendered moot in light of our reversal of plaintiff’s damage award.

DISPOSITION

 The judgment in favor of plaintiff on its complaint is reversed. The judgment in 

favor of plaintiff on FCOE’s cross- complaint is affirmed. Each party will bear its own 

costs on appeal. 

 _____________________ 

Kane, J. 

WE CONCUR: 

 _____________________ 

Wiseman, Acting P.J. 

 _____________________ 

Levy, J.