Transnational Management Systems v. Pegasus Elite Aviation CA2/7 ( 2023 )

Filed 7/14/23 Transnational Management Systems v. Pegasus Elite Aviation CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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
SECOND APPELLATE DISTRICT
DIVISION SEVEN
TRANSNATIONAL B317517
MANAGEMENT SYSTEMS, LLC
et al., (Los Angeles County
Super. Ct. No. LC100724)
Plaintiffs and Appellants,
v.
PEGASUS ELITE AVIATION,
INC.,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Virginia Keeny, Judge. Affirmed.
Jordan & LeVerrier and Conrad Jordan for Plaintiffs and
Appellants.
David Olson Law Group and David S. Olson; Clark &
Trevithick and Jonathan Smoller; Shaw Koepke & Satter and
Jens B. Koepke, for Defendant and Respondent.
________________________________
INTRODUCTION
Pegasus Elite Aviation leased two planes for its charter
business from Transnational Management Systems, LLC and
Transnational Management Systems II, LLC in 2009 and 2010,
respectively.1 The parties entered into new leases for the same
two planes in 2012. Transnational, however, soon terminated the
leases and sued Pegasus for breach of contract and an
accounting, seeking over $2.6 million in damages. Transnational
alleged, among other things, Pegasus failed to pay Transnational
for all “flight hours,” as required by the leases. Pegasus filed a
cross-complaint alleging breach of contract and other causes of
action.
During a 20-day court trial the parties stipulated Pegasus
did not pay Transnational for almost 500 flight hours.
Ultimately, however, the trial court interpreted the relevant
provisions of the leases to exclude over 300 hours of those unpaid
flight hours from Transnational’s damages. After finding in favor
of Transnational on some of its damages claims, and offsetting
Transnational’s damages by various amounts the trial court
found Transnational owed Pegasus, the court entered judgment
1 Separately, we refer to Transnational Management
Systems, LLC and Transnational Management Systems II, LLC
as Transnational I and Transnational II. Together, we refer to
them as Transnational.
2
in favor of Transnational for $186,691.21. The court denied
Transnational’s request for prejudgment interest.
Transnational argues the trial court erred by interpreting a
key provision of the 2009 and 2010 leases in favor of Pegasus,
failing to apply an adverse inference against Pegasus for willful
suppression of evidence, finding Transnational failed to prove
some of its damages claims, and denying Transnational’s request
for prejudgment interest. In making these arguments,
Transnational essentially ignores evidence supporting the trial
court’s findings and asks us to reweigh the evidence to support
Transnational’s version of events. Because that’s not something
we can do, and because Transnational has not shown the trial
court committed any reversible error, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Pegasus Leases Two Planes from Transnational
Timothy Prero, who owns Pegasus, met Adam Victor, who
owns Transnational, when Victor was a customer of a previous
charter plane company Prero partially owned. Prero piloted
planes chartered by Victor, and over time they became
friends. Victor, who has a master’s degree in business
administration, asked Prero about the charter industry and how
to make money owning a plane. Prero referred Victor to a plane
broker, Anthony Carcione, who helped Victor buy a plane. Victor
formed Transnational I to purchase a Gulfstream IV aircraft with
a Federal Aviation Administration registration number N771AV
(the 771 plane) and to operate a business that would lease the
plane to charter operators.
3
Transnational leased the 771 plane to Pegasus in
November 2009. Prero drafted the lease based on industry
templates and language in previous leases he had signed.
Carcione and an attorney represented Transnational in the
transaction. In 2010 Victor formed Transnational II to purchase
a second Gulfstream IV aircraft, this one with Federal Aviation
Administration registration number N772AV (the 772 plane), and
to operate a business that would lease the second plane to charter
operators. Transnational II entered into a lease with Pegasus on
June 1, 2010 with terms substantially identical to those in the
November 2009 lease.
The 2009 and 2010 leases, among other things, identified
the plane leased, set forth the respective obligations of the
owners (Transnational I and II) and Pegasus, and prescribed the
rate at which Pegasus had to pay Transnational for using the
planes. The parties agree the leases required Pegasus to pay
Transnational an hourly rate of $5,000, plus a fuel surcharge (in
some circumstances), less a commission of 13.5 percent.2 The
parties also agree the leases did not require Pegasus to pay
Transnational for owner flights, training flights, or flights to
conduct regular maintenance or repairs (collectively, OTM
flights, for “owner, training, and maintenance”). And the parties
agree the leases required Pegasus to provide monthly statements
to Transnational and to settle “all accounts” by “the 20th of the
following month.” Pegasus complied with this latter provision by
2 Transnational originally took the position, and Victor
stated in declarations, the leases did not entitle Pegasus to a
13.5 percent commission. At trial, however, Victor conceded he
negotiated this commission with Prero.
4
sending Transnational a monthly “credit memo” showing the
flight hours credited to Transnational for the previous month and
an invoice that reconciled those hours with charges for
maintenance, management, fuel, and incidentals for owner
flights.
The parties do not agree whether the 2009 and 2010 leases
required Pegasus to pay Transnational for repositioning flights,
which are flights to move a plane to a desired location before or
after a paid charter flight, when the customer does not pay to
reposition the plane.3 In support of their respective positions, the
parties cite section 2.6 of the leases, which states in full:
“[Pegasus] shall pay Owner [Transnational I or II] $5,000 per
flight hour that aircraft is rented. In addition, [Pegasus] shall
pay Owner a Fuel Surcharge per hour of $500 per hour. This fuel
surcharge is based on today’s average price of $3.75 per
gallon. The fuel surcharge may be adjusted up or down
depending on average costs. Owner acknowledges and agrees to
be responsible for any and all expenses associated with the
Aircraft, including, but not limited to, fuel, crew, insurance,
maintenance, navigational charts, and any other expenses
incurred in operating any charter or other Aircraft’s flights.
A full description of the Annual Operating Budget is attached as
‘Appendix A.’” The italicized (by us) language is at the center of
the parties’ dispute.
3 Throughout the trial the parties and witnesses also
referred to repositioning flights as “deadleg,” “deadhead,” and
“ferry” flights. The designation “dead” refers to the lack of
revenue generated when a customer does not pay to reposition
the plane.
5
A related provision, section 2.7, provides in relevant part:
“The aircraft charter rate shall be $5,000 per flight hour. Where
[Pegasus] collects less than the hourly amounts stated above
because of Air Traffic Control delays or other circumstances
beyond its control, [Pegasus] shall remit the appropriate
percentages to the Owner based upon the customers [sic] quoted
price.”
The parties dispute whether the phrase “per flight hour
that aircraft is rented” in section 2.6 includes unpaid
repositioning flights. Under the 2009 and 2010 leases, Pegasus
did not include flight hours attributable to repositioning flights in
its monthly statements to Transnational unless a customer paid
for the flights, which occurred approximately 90 percent of the
time. In May 2012 the parties negotiated new leases drafted by
attorneys for Transnational. The new leases addressed the
repositioning flight issue by defining the term “flight hour” to
include “[a]ll hours or increments of an hour to reposition the
Aircraft in connection with a flight on the Aircraft by any client
and/or passenger of [Pegasus] (‘Ferry Flight’).” While those
agreements were in effect, Pegasus agreed to pay Transnational
for flight hours attributable to repositioning flights whether or
not a customer paid for Pegasus to reposition the plane.
B. Transnational Terminates the Leases and Files This
Action
Several months after the parties signed the new leases in
May 2012, Transnational terminated both leases and moved its
planes to another charter operator. Transnational filed this
action against Pegasus in August 2013. In its first cause of
action (of the operative complaint) for breach of the 2009 and
6
2010 leases Transnational alleged Pegasus breached the original
leases by failing to ensure the airworthiness of the planes,
refusing to pay for all flight hours when the planes were rented
and all associated fuel surcharges, failing to maintain and
produce certain records, and overcharging for maintenance. In
its second cause of action Transnational alleged similar breaches
of the 2012 leases; the trial court subsequently granted Pegasus’s
motion for judgment on the second cause of action, and
Transnational does not challenge that ruling. And in its third
cause of action for an accounting Transnational claimed it needed
an accounting of the revenue generated by the lease of its planes
to Pegasus to determine the amount of damages Transnational
suffered as a result of the alleged breaches of contract. Pegasus
filed a cross-complaint against Transnational, Victor, and
another company. The parties resolved the cross-complaint by
agreeing Pegasus would receive a $69,000 offset in the final
judgment.4
By the time trial began in December 2020 Transnational
had focused its first cause of action for breach of contract on four
categories of damages claims: (1) uncredited flight hours for
unpaid repositioning flights; (2) additional uncredited and
under-credited flight hours; (3) unpaid fuel surcharges; and
4 Pegasus appealed from an earlier order denying in part its
motion to disqualify counsel for Transnational or, in the
alternative, to order Transnational and its attorneys to return
certain allegedly confidential information they had obtained and
to impose evidentiary sanctions. We dismissed part of Pegasus’s
appeal as moot and otherwise affirmed the trial court’s order.
(Transnational Management Systems, LLC v. Pegasus Elite
Aviation, Inc. (Aug. 1, 2018, No. B277517) [nonpub. opn.].)
7
(4) unpaid federal excise tax (FET) rebates on fuel purchases.
Regarding its claim for payments attributable to unpaid
repositioning flights, Transnational argued section 2.6 of the
2009 and 2010 leases required Pegasus to pay Transnational for
repositioning flights because the plain language of that provision
covered all flight hours except those attributable to OTM flights.
Transnational contended that Victor did not know Pegasus was
making unpaid repositioning flights until Victor’s deposition in
this action, that Transnational (through Victor) would never have
agreed Pegasus could withhold payments under section 2.6 for
unpaid repositioning flights, and that the standard in the
industry was to charge customers and credit owners for
repositioning flights.
C. The Trial Court Agrees with Pegasus’s Interpretation
of Section 2.6 and Awards Transnational Damages
for Certain Uncredited and Under-credited Flights,
but Not for Unpaid Repositioning Flights
The trial court, applying California law,5 ruled the
language of section 2.6 of the 2009 and 2010 leases was
5 The 2009 and 2010 leases state they “shall be governed by
and construed in accordance with the laws of the state of
Arizona.” In the trial court, however, the parties cited and relied
on California law, as they do on appeal; neither party cites
Arizona law or argues Arizona law applies. Like the trial court,
we apply California law to interpret the leases. (See Doe v.
Massage Envy Franchising, LLC (2022) 87 Cal.App.5th 23, 30,
fn. 2 [court applied California law to determine whether there
was a valid agreement to arbitrate, even though the agreement
contained an Arizona choice-of-law provision, because the
defendant analyzed the issue under California law]; Brandwein v.
8
ambiguous regarding whether “the parties intended that Pegasus
would pay [Transnational] for every hour the plane flew other
than OTM flights” and whether Pegasus would pay
Transnational “for all flight hours including repositioning flights
or whether Pegasus would only pay [Transnational] for those
flight hours where they had a chartered customer paying for the
hours.” The court considered the parties’ course of conduct before
and after signing the leases, their contemporaneous
communications, and industry custom and practice, and
concluded the evidence supported Pegasus’s position that section
2.6 did not require Pegasus to pay Transnational for unpaid
repositioning flights. The trial court did not apply the maxim
under Civil Code section 1654 that courts should resolve
ambiguities against the party drafting the agreement because the
court found the extrinsic evidence was sufficient to resolve the
ambiguity. The court found both Victor and Prero had credibility
issues and “were willing to distort the truth in order to advance
their position in this litigation.” Thus, in ascertaining the
parties’ intent and understanding of the leases, the court placed
“great weight on the parties’ contemporaneous actions and
writing, and less on their testimony at trial.” The court also
Butler (2013) 218 Cal.App.4th 1485, 1515 [court applied
California law, even though the agreement stated New York law
governed, because “neither the parties nor the trial court focused
on New York law,” and the parties cited only California law];
Segal v. Silberstein (2007) 156 Cal.App.4th 627, 632-633 [court
applied California law, even though the agreements stated Texas
law governed, because both parties relied on California law in the
trial court and neither party argued Texas law applied on
appeal].)
9
accepted the parts of the witnesses’ testimony the court found
true and disregarded parts the court found not true.
Regarding the FET rebates, the trial court found the leases
were silent on which party was entitled to retain tax rebates.
Relying on evidence of industry practice that supported Pegasus’s
position that charter operators generally retain tax rebates
absent a contrary contract provision, and on “the speculative
nature” of Transnational’s claim for damages based on the
FET rebates, the court found Transnational failed to establish it
was entitled to the tax rebates.
Regarding unpaid flight hours, the parties stipulated
during trial Pegasus did not pay Transnational for 475 hours, but
334.4 of those were for unpaid repositioning flights the trial court
found not covered by section 2.6. Of the remaining
approximately 140 hours, the court awarded Transnational
$65,740 for 15.2 hours of flights Pegasus took for itself or its
employees and $297,955.90 for 121.3 hours of additional
uncredited flights. The court also awarded Transnational
$282,782.48 for 59.3 hours of under-credited flight hours,
$38,597.53 for double-billed fuel charges, and $808.77 for a
charter to Tahiti. The court awarded Transnational total
damages of $685,884.68 for unpaid or uncredited flight hours,
subject to certain offsets.
Regarding fuel surcharges, the parties stipulated Pegasus
paid Transnational for 376.8 flight hours without adding any fuel
surcharge. Transnational alleged Pegasus owed a fuel surcharge
of $500 to $750 per hour for each of those hours. The trial court
declined to award Transnational damages for unpaid fuel
surcharges because the court interpreted the leases to give
Pegasus “absolute and unfettered” discretion to adjust the fuel
10
surcharge up or down, and Transnational failed to provide
evidence the average fuel cost at the time of the flights in
question was at or above the price set in the leases that would
justify a fuel surcharge. The court also found Transnational’s
claim barred under the terms of the leases, which required the
parties to raise billing issues within 20 days, and by laches. The
court also rejected Transnational’s claim for 13.3 flight hours
attributable to a flight from Brazil to Van Nuys because
Transnational did not substantiate its claim.
The trial court granted Pegasus $362,303.57 in offsets
against the amounts Pegasus owed Transnational, based on
evidence showing Pegasus over credited or double paid
Transnational for multiple flights. Subtracting that amount from
the total damages, the trial court awarded Transnational
$323,581.11 ($685,884.68 - $362,303.57), less $69,000 for
Pegasus’s cross-complaint.
Regarding Transnational’s cause of action for an
accounting, the trial court ruled the 20-day trial “served as that
accounting.” The court found Transnational did not prove “the
right to another one, nor would justice be served by requiring
[the] parties to spend more time reviewing and arguing over the
meaning of the flight logs and other accounting documents.”
On September 10, 2021 the trial court entered judgment for
Transnational in the amount of $254,581.11, denied
Transnational’s request for prejudgment interest, and left empty
a blank space to add costs. On February 17, 2022 the court
entered an amended judgment for Transnational of $186,691.21,
11
reflecting a net award of costs to Pegasus of $67,889.90.
Transnational timely appealed.6
DISCUSSION
Transnational argues the trial court erred in a variety of
ways, including by finding section 2.6 of the 2009 and 2010 leases
ambiguous and interpreting that provision to exclude unpaid
repositioning flights from the flight hours Pegasus had to pay
Transnational. Transnational also argues the court erred in
ruling the leases allowed Pegasus to keep FET rebates, denying
some of Transnational’s damages claims, and denying
Transnational’s request for prejudgment interest.
6 Transnational filed its notice of appeal from the original
judgment on November 22, 2021. We construe the notice of
appeal to include an appeal from the amended judgment. (See
ECC Construction, Inc. v. Oak Park Calabasas Homeowners
Assn. (2004) 122 Cal.App.4th 994, 1003, fn. 5 [where an amended
judgment changes only the amount of damages and does not
“otherwise alter the bases for defendant’s appeal,” the reviewing
court “may construe [the] notice of appeal to include the amended
judgment”]; see also Amwest Surety Ins. Co. v. Patriot Homes,
Inc. (2005) 135 Cal.App.4th 82, 84, fn. 1 [denying the defendant’s
request to dismiss an appeal where the plaintiff appealed from
the judgment, but not the modified judgment, and the “modified
judgment added only prejudgment interest, costs, and attorney
fees to the original judgment, and made no substantive changes
to the earlier judgment which finally disposed of all legal issues
between the parties”].)
12
A. The Trial Court Properly Interpreted Section 2.6
1. Applicable Law and Standard of Review
“‘The fundamental goal of contractual interpretation is to
give effect to the mutual intention of the parties.’ [Citations.]
‘Such intent is to be inferred, if possible, solely from the written
provisions of the contract.’ [Citations.] ‘If contractual language
is clear and explicit, it governs.’ [Citation.] ‘“The ‘clear and
explicit’ meaning of these provisions, interpreted in their
‘ordinary and popular sense,’ unless ‘used by the parties in a
technical sense or a special meaning is given to them by usage’
. . ., controls judicial interpretation.”’” (State of California v.
Continental Ins. Co. (2012) 55 Cal.4th 186, 195; see Gilkyson v.
Disney Enterprises, Inc. (2021) 66 Cal.App.5th 900, 916.) The
“‘whole of [the] contract is to be taken together, so as to give
effect to every part, if reasonably practicable, each clause helping
to interpret the other.’” (Gilkyson, at p. 916; see Brown v.
Goldstein (2019) 34 Cal.App.5th 418, 432.)
“‘Where the meaning of the words used in a contract is
disputed, the trial court must provisionally receive any proffered
extrinsic evidence which is relevant to show whether the contract
is reasonably susceptible of a particular meaning. . . . Even if a
contract appears unambiguous on its face, a latent ambiguity
may be exposed by extrinsic evidence which reveals more than
one possible meaning to which the language of the contract is yet
reasonably susceptible.’” (Wolf v. Superior Court (2004)
114 Cal.App.4th 1343, 1350-1351; see Brown v. Goldstein, supra,
34 Cal.App.5th at p. 438.) Thus, the “threshold question for trial
and appellate courts is whether the writing is ambiguous—that
is, reasonably susceptible to more than one interpretation.”
13
(Thompson v. Asimos (2016) 6 Cal.App.5th 970, 986; see State of
California v. Continental Ins. Co., supra, 55 Cal.4th at p. 195
[contract provision is ambiguous “‘when it is capable of two or
more constructions, both of which are reasonable’”].) If a contract
is capable of two constructions, “‘courts must give a ‘“reasonable
and commonsense interpretation’” of a contract consistent with
the parties’ apparent intent.’” (Brown, at p. 438.) “In the trial
court, and on appeal, contract interpretation always looks first to
the words of the contract, but may also extend to parol evidence
outside the four corners of the written agreement [citation], such
as the parties’ course of dealing over time.” (Thompson, at p. 986;
see Pacific Gas & Electric Co. v. G. W. Thomas Drayage etc. Co.
(1968) 69 Cal.2d 33, 40 [extrinsic evidence is admissible to prove
the meaning of an ambiguous provision].)
“On appeal, a ‘trial court’s ruling on the threshold
determination of “ambiguity” (i.e., whether the proffered evidence
is relevant to prove a meaning to which the language is
reasonably susceptible) is a question of law, not of fact.
[Citation.] Thus[,] the threshold determination of ambiguity is
subject to independent review.’” (Brown v. Goldstein, supra,
34 Cal.App.5th at p. 433; see Hollingsworth v. Heavy Transport,
Inc. (2021) 66 Cal.App.5th 1157, 1177 [“The superior court’s
determination whether the contractual language is ambiguous is
a question of law subject to independent review.”].) “‘[W]hen
. . . ascertaining the intent of the parties at the time the contract
was executed depends on the credibility of extrinsic evidence,
that credibility determination and the interpretation of the
contract are questions of fact . . . .’” (Oakland-Alameda County
Coliseum Authority v. Golden State Warriors, LLC (2020)
53 Cal.App.5th 807, 819; see City of Hope National Medical
14
Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 395.) Where
“interpreting the contract involves deciding between ‘conflicting
extrinsic evidence concerning the meaning of . . . contractual
provisions,’” the issue “is a factual question, not a legal one.”
(Oakland-Alameda County Coliseum Authority, at p. 819.)
“[W]here the trial court’s interpretation rests on its resolution of
conflicting evidence, ‘any reasonable construction will be upheld
as long as it is supported by substantial evidence.’” (Thompson v.
Asimos, supra, 6 Cal.App.5th at p. 987; see Coral Farms, L.P. v.
Mahony (2021) 63 Cal.App.5th 719, 726; Winet v. Price (1992)
4 Cal.App.4th 1159, 1166.)
2. Section 2.6 of the Leases Is Ambiguous
Civil Code section 1638 provides that the “language of a
contract is to govern its interpretation, if the language is clear
and explicit,”7 and section 1639 provides that when “a contract is
reduced to writing, the intention of the parties is to be
ascertained from the writing alone, if possible.” However, “the
meaning of words can change depending on the circumstances.”
(Oakland-Alameda County Coliseum Authority v. Golden State
Warriors, LLC, supra, 53 Cal.App.5th at p. 817; see Pacific Gas &
Electric Co. v. G.W. Thomas Drayage etc. Co., supra, 69 Cal.2d at
p. 38 [words “do not have absolute and constant referents”];
Pearson v. State Social Welfare Bd. (1960) 54 Cal.2d 184, 195 [“[a]
word is a symbol of thought but has no arbitrary and fixed
meaning like a symbol of algebra or chemistry, and it may take
on values from the words and ideas with which it is associated”].)
As stated, section 2.6 of the 2009 and 2010 leases states
Pegasus “shall pay Owner $5,000 per flight hour that aircraft is
7 Undesignated statutory references are to the Civil Code.
15
rented.” The leases do not mention the term repositioning flights
(or any of its synonyms), whether paid or unpaid by a charter
customer. As the trial court pointed out, section 2.6 could mean,
as Transnational argued, Pegasus had to pay Transnational for
“every hour the plane was flying related to a chartered flight,
including hours on the front or back end to reposition the plane
even if the customer was not charged for those hours.” But
section 2.6 could also mean, as Pegasus argued, “Pegasus only
had to pay [Transnational] for hours that the plane was actually
rented,” which would exclude unpaid repositioning flights. The
language “per flight hour that aircraft is rented” is reasonably
susceptible to both interpretations and therefore ambiguous
regarding unpaid repositioning flights.
Transnational argues other provisions of the leases
demonstrate section 2.6 is not ambiguous. First, Transnational
argues section 2.7 shows that section 2.6’s reference to “flight
hour that aircraft is rented” means “actual flight hours,”
including hours attributable to an unpaid repositioning flight,
and not “quoted flight hours” to a customer. As discussed, section
2.7 states: “Where [Pegasus] collects less than the hourly amount
stated above because of Air Traffic Control delays or other
circumstances beyond its control, [Pegasus] shall remit the
appropriate percentages to [Transnational] based upon the
customers [sic] quoted price.” Transnational argues that, “[b]y
indicating that the ‘hourly amounts stated above’ are different
than the hourly amounts based on the ‘quoted price,’ [section] 2.7
confirms that [section] 2.6 refers to actual flight hours rather
than quoted flight hours.”
Transnational’s argument is not persuasive. Pegasus did
not argue, and the trial court did not find, the language “flight
16
hour that aircraft is rented” in section 2.6 means the flight hours
quoted to a customer. Indeed, Transnational did not challenge
Pegasus’s practice of inflating the hours quoted to a customer,
and then paying Transnational based on actual flight hours, not
quoted flight hours. Moreover, Transnational’s argument does
not resolve the ambiguity in section 2.6. That section 2.7 allows
Pegasus to pay Transnational less than $5,000 per flight hour (as
otherwise required by section 2.6), when the amount Pegasus
collects from a customer equates to less than $5,000 per flight
hour because of air traffic delays or circumstances beyond
Pegasus’s control, has no effect on unpaid repositioning flights.
Second, Transnational argues section 2.7 creates an
exception to section 2.6 for air traffic control delays and other
circumstances beyond Pegasus’s control, but because nothing in
the contract creates a similar exception for unpaid repositioning
flights, section 2.6 could not have created one. The leases’ silence
on the issue of unpaid repositioning flights, however, also fails to
resolve the ambiguity of section 2.6. (See Smith v. Westland Life
Ins. Co. (1975) 15 Cal.3d 111, 120 [a contract’s silence regarding
a material term cast “a shroud of ambiguity” over the contract,
making the contract susceptible to multiple interpretations].)
Moreover, Transnational had previously argued that, because the
leases are also (mostly) silent on Pegasus’s 13.5 percent
commission, Transnational did not owe Pegasus a commission.
Transnational, however, no longer disputes that the agreements
allowed Pegasus to deduct a commission from its payments to
Transnational, and Victor conceded at trial that he negotiated
the commission with Prero.
Third, Transnational argues the proposed operating budget
attached to the leases “vitiates any ‘unpaid ferry flight’
17
exception.” Transnational accurately observes that the proposed
budget refers to only four types of flights—charter, owner,
training, and maintenance—and does not refer to paid or unpaid
repositioning flights. From this, Transnational concludes that
under the proposed budget “all usage of [a plane] that is not OTM
usage is Charter usage” and that therefore Transnational must
be “compensated for every hour of Charter usage at the [section]
2.6 hourly rate.” But, as the trial court found, the “proposed”
operating budget was, by its terms, only a proposal, and several
line items in the proposed budget (even for the lease of the 772
plane, which post-dated the lease for the 771 plane by six
months) do not include estimates, presumably because the
proposed budget was incomplete.8 These blank line items include
material categories, such as the number of training and
maintenance hours. As an incomplete proposal, the proposed
budget does not resolve the ambiguity of section 2.6.
3. Substantial Evidence Supported the Trial
Court’s Interpretation of Section 2.6
Because section 2.6 of the leases is reasonably susceptible
to the parties’ competing interpretations, the trial court properly
found it was ambiguous and considered extrinsic evidence to
discern the parties’ intent. (See Hewlett-Packard Co. v. Oracle
Corp. (2021) 65 Cal.App.5th 506, 538 [“courts may consider
8 The trial court also found Transnational could not have
relied on the proposed budget as a basis for the parties’ economic
expectations because Victor testified he did not see the proposed
budget before signing the 2009 lease and called the document
attached to the lease as an appendix a “‘fraudulent document’”
and “‘a forgery.’” Transnational does not challenge this finding.
18
extrinsic evidence insofar as it sheds light on a meaning to which
the contract is reasonably susceptible”]; Oakland-Alameda
County Coliseum Authority v. Golden State Warriors, LLC, supra,
53 Cal.App.5th at p. 818 [same].) “The circumstances
surrounding and leading to the execution of a contract may be
considered to ascertain its true meaning.” (Kashmiri v. Regents
of University of California (2007) 156 Cal.App.4th 809, 838; see
Nish Noroian Farms v. Agricultural Labor Relations Bd. (1984)
35 Cal.3d 726, 735 [“[t]he factual context in which an agreement
was reached is . . . relevant to establish its meaning unless the
words themselves are susceptible to only one interpretation”]; see
also § 1647 [“[a] contract may be explained by reference to the
circumstances under which it was made, and the matter to which
it relates”].)
In addition, a “party’s conduct occurring between execution
of the contract and a dispute about the meaning of the contract’s
terms may reveal what the parties understood and intended
those terms to mean.” (City of Hope National Medical Center v.
Genentech, Inc., supra, 43 Cal.4th at p. 393.) “It is a time-
honored principle that the conduct of the parties is given great
weight in the interpretation of a contract. . . . ‘This rule of
practical construction is predicated on the common sense concept
that “actions speak louder than words.” Words are frequently but
an imperfect medium to convey thought and intention. When the
parties to a contract perform under it and demonstrate by their
conduct that they knew what they were talking about the courts
should enforce that intent.”” (Travelers Property Casualty Co. of
America v. Workers’ Comp. Appeals Bd. (2019) 40 Cal.App.5th
728, 739-740; see Cedars-Sinai Medical Center v. Shewry (2006)
137 Cal.App.4th 964, 983 [conduct of the parties is a practical
19
construction of the contract because the parties “‘are probably
least likely to be mistaken as to the intent’”].) Finally, courts
may consider evidence of industry custom or practice to prove an
interpretation to which an agreement is reasonably susceptible.
(See Wolf v. Superior Court, supra, 114 Cal.App.4th at p. 1357;
Southern Pacific Transportation Co. v. Santa Fe Pacific Pipelines,
Inc. (1999) 74 Cal.App.4th 1232, 1244-1245.)
The trial court considered and made credibility
determinations and findings based on four categories of
conflicting extrinsic evidence: (1) the parties’ interactions prior to
entering into the 2009 lease, (2) the drafting and negotiating of
the 2009 lease, (3) the parties’ conduct after entering into the
2009 lease (including entering into the 2010 and 2012 leases),
and (4) evidence of custom and practice in the industry.
Together, this evidence supported the trial court’s reasonable
conclusion that the parties intended section 2.6 to exclude unpaid
repositioning flights from “flight hour[s] that aircraft is rented.”
a. The Parties’ Interactions Before Entering
into the 2009 Lease
As stated, Prero and Victor met when Victor chartered
planes from Prero’s previous employers, Pacific Jet and
Universal. Victor testified that, as a customer of Pacific Jet and
Universal, he received price quotes for proposed flights showing
the number of hours for the flight and whether the operator had
to reposition the plane before his charter. Victor stated the cost
of repositioning the plane for his charter was “part of [his] bill.”
Victor said he had conversations with Prero about the cost of
repositioning flights while Prero flew planes chartered by Victor.
According to Victor, these conversations went something like this:
20
Victor: “‘Why is there an extra price to fly over there?’” Prero:
“‘Well, because we have to basically relocate the plane.’” Victor:
“‘Oh, okay.’”
Victor testified that he chartered planes from Pacific Jet
more than 12 times and that he paid for repositioning flights for
about half those charters. He said he flew more frequently with
Universal, and similarly paid for repositioning flights on half of
those charters. For each charter where he paid for a
repositioning flight, Victor stated, the flight was listed on the
itinerary he received from the charter company.9 Prero disputed
Victor’s testimony and said he did not believe Pacific Jet or
Universal ever charged Victor for a repositioning flight.
Victor further testified that, before entering into the 2009
lease with Pegasus, he understood there were no one-way
charters, which meant that, if a customer wanted to fly one-way,
the customer had to pay for a roundtrip flight. Victor also
testified, however, that when Pacific Jet or Universal quoted a
charge for a repositioning flight, he would attempt to “negotiate a
side deal” with Prero as the pilot or try to find another charter at
a lower price. And Victor testified that, when he was a customer
of Pacific Jet and Universal, he asked Prero “detailed questions”
about “ferry legs,” such as: “How do we always basically make
sure this happens, that happens. I wanted to understand the
questions, what happens if the plane has to be relocated. And he
says, ‘Adam, the client always pays for that.’” At a minimum,
Victor’s experience as a charter customer before Transnational
entered into the leases with Pegasus showed Victor was aware
9 Victor said he did not have copies of itineraries for those
flights, which occurred over 15 years ago.
21
that repositioning flights occurred and that customers generally,
but not always, paid for them.
b. Drafting and Negotiating the 2009 Lease
Prero testified he negotiated the initial lease with Victor’s
attorney and Carcione, both of whom represented Victor in the
transaction. Prero said he understood Victor wanted to “make as
much money as possible” by flying the plane as often as possible.
Prero testified that repositioning flights were necessary to
maximize income and that Victor told him to use his judgment in
deciding whether to make unpaid repositioning flights to
maximize the number of paid flights. Thus, according to Prero,
the phrase “is rented” in section 2.6 was intended to mean
Pegasus would pay Transnational only if “someone was paying
for that hour.” Otherwise, Prero stated, the phrase would be
superfluous, and he would have to pay Transnational for every
hour the plane flew, whether or not someone paid for the flight.
The trial court agreed the language of section 2.6 conformed with
Prero’s understanding.
Victor testified that, before he entered into the 2009 lease,
he did not know there was “such a thing as an unpaid
[repositioning] flight” and that he would not have entered into an
agreement that allowed Pegasus not to charge a customer for a
repositioning leg without notice to Transnational. Victor said he
understood section 2.6 meant Transnational would be paid for
“every hour the plane is flying,” except for OTM flights. He said
he would not have approved an unlimited number of unpaid
repositioning legs because of the wear and tear on the planes
without any corresponding revenue.
22
The trial court did not credit Victor’s testimony for various
reasons, including that, as a previous consumer of charter flights,
Victor conceded he could negotiate a deal not to pay for a
repositioning flight. The court also found Victor gave testimony
and took positions in other cases that contradicted his testimony
and positions in this case, which the court said showed Victor’s
“willingness to present false testimony under oath.”
Transnational argues “the lack of any pre-Lease writing by
Victor mentioning [unpaid repositioning flights] is inexplicable
unless it was concealed from him.” Transnational also cites
evidence of Prero’s attempts to conceal other information from
Victor. But Transnational did not allege a fraud cause of action,
and “courts assume that each party to a contract is alert to, and
able to protect, his or her own best interests.” (Series AGI West
Linn of Appian Group Investors DE, LLC v. Eves (2013)
217 Cal.App.4th 156, 164.) Courts “will not rewrite contracts to
relieve parties from bad deals nor make better deals for parties
than they negotiated for themselves.” (Ibid.; see Coral Farms,
L.P. v. Mahony, supra, 63 Cal.App.5th at p. 731 [“‘“The courts
cannot make better agreements for parties than they themselves
have been satisfied to enter into or rewrite contracts because they
operate harshly or inequitably. It is not enough to say that
. . . the contract would be improvident or unwise or would operate
unjustly. Parties have the right to make such agreements.”’”].)
Transnational contends the trial court failed to explain how
Victor could have entered into an unfavorable contract if, as the
court found, he was “a ‘sophisticated’ Wharton graduate.”10 The
10 The Wharton School of Business is a graduate business
school operated by the University of Pennsylvania. (University of
Pennsylvania v. E.E.O.C. (1990) 493 U.S. 182, 185.)
23
explanation is in the record. As the court observed, Victor
admitted “he did no due diligence” before buying the 771 plane or
the 772 plane and did not know who the seller of the 771 plane
was, even though the seller’s name was listed “front and center”
on the purchase agreement. The court also suggested
Transnational overpaid for the planes, stating Victor paid $1
million more for the 771 plane than the previous owner had paid
just days before. The court also cited Victor’s testimony that he
never saw the proposed budget before signing the 2009 lease and
that he “never looked at any of the maintenance records and he
only glanced at the credit memo[s].” Victor also testified he was
not sure if he read the 2010 lease before he signed it. Together,
this evidence suggested that Victor, despite his sophistication,
took little interest in the details of Transnational’s charter plane
business. Thus, it was not irrational, as Transnational suggests,
for the trial court to conclude Victor committed Transnational to
an unfavorable deal with Pegasus.11
c. The Course of the Parties’ Conduct After
Entering into the 2009 Lease
Evidence of the parties’ conduct under the two initial leases
centered on email threads from April 2010 that implicitly
referred to repositioning flights, credit memos generated after
July 2010 that showed the origin and destination of paid charter
flights, and the negotiation and terms of the new leases signed in
11 Unpersuasive for the same reasons is Transnational’s
argument it is “inherently implausible” Transnational would
have agreed to a lease that allowed Pegasus to “‘have it both
ways’ by compensating [Transnational] based on quoted flight
hours or actual hours depending on which benefits [Pegasus].”
24
2012. Prero testified most charter flights were booked through
brokers based on quotes Prero or his staff generated to estimate
flight times. A signed quote constituted an agreement for
services and obligated Pegasus to position the plane at the
customer’s place of origin. Under Prero’s understanding of the
leases, Pegasus paid Transnational based on actual fight hours
the plane was “rented.” If Pegasus quoted a customer more flight
hours than the actual flying time, Pegasus kept the overage and
paid Transnational based on actual flight hours. If the flight
lasted longer than quoted, Pegasus generally did not charge the
customer more and still paid Transnational based on actual flight
hours (unless the additional hours were the result of air traffic
control delays or other circumstances beyond Pegasus’s control,
as stated in section 2.7). Prero said that he generally tried to get
customers to pay for repositioning flights and that they did about
90 percent of the time.
Pegasus introduced into evidence two April 2010 email
threads to show Victor was aware Pegasus made unpaid
repositioning flights during the performance of the initial leases.
The first thread began with Victor asking Prero if the 771 plane
was available to bring a friend of Victor’s from Switzerland to the
United States. Victor said that he could only charge his friend
“fuel + a bit” and that it would only “make[ ] sense if you are
flying someone over there and don’t have a body to come back
this way.” Victor stated in another message in the same thread,
“But if you have an empty plane coming back from Europe
. . . you have a tenant that could pay fuel + a little.” The trial
court concluded this email thread showed that Victor “was aware
that sometimes his planes flew empty, and that he would not
receive revenue for those empty legs; otherwise, if he knew he
25
would be paid $5000 per hour for this return flight regardless of
whether it was paid for by a charter customer, why would he care
if his [friend] got a free ride back to the United States?”
The second email thread concerned a possible flight from
New York to Los Angeles for Victor’s son. Prero told Victor the
plane was not available on the requested date because it was
scheduled to fly to Europe. In response, Victor asked, “How
many hours do we get for an LA/Europe trip?” and “Do we get
paid both ways?” The trial court said this message supported
Pegasus’s position Victor “knew he would not always be paid
round trip for every charter flight.” In May 2010, after those
email exchanges, Transnational and Pegasus entered into the
lease for the 772 plane. Victor did not request any changes to the
terms of the lease for the 771 plane.
Transnational argues the email threads “merely reflect
that Victor knew [Pegasus] could either fly a customer one-way
with round-trip payment or get paid on return by linking one-way
charters.” Transnational contends the inference the court should
have drawn from the first email is that Victor did not want to
preempt Prero from finding a paying customer for the return
flight to the United States to help a friend of the family. The
trial court very well could have drawn that inference. But it
didn’t, and on appeal “‘“we ‘view the evidence in the light most
favorable to the prevailing party, giving it the benefit of every
reasonable inference and resolving all conflicts in its favor.’”’”
(Reynaud v. Technicolor Creative Services USA, Inc. (2020)
46 Cal.App.5th 1007, 1015; see Duncan v. Kihagi (2021)
68 Cal.App.5th 519, 541.) Regarding the second email,
Transnational suggests that Victor’s question whether “we get
paid both ways” meant whether the charter customer paid for a
26
round-trip even though the customer flew only one-way or
whether Prero was going to wait in Europe for a return flight and
collect “‘standing fees’” (presumably from the original customer).
Transnational’s suggestion, however, does not show the trial
court’s inference was unreasonable.12
Pegasus also introduced credit memos issued to
Transnational after July 2010, when Victor asked that the credit
memos identify the airports involved in each listed charter flight.
According to Prero, Victor wanted those details so he could see
“‘where the aircraft went and what it’s being paid for.’” For
example, a credit memo dated June 30, 2011 listed eight charter
flights and the airports of origin and destination for each. The
second flight listed was from “TEB” to “EGGW,” which was from
Teterboro, New Jersey, to an airport in England on June 7-8,
2011. The next flight listed, on June 13, 2011, is from “LIML” to
“CYYZ,” which was from Milan to Toronto, with no charter flight
in between showing a customer paid for the plane to get from
England to Milan. The trial court stated: “The plane . . . couldn’t
have walked from England to Milan; it flew. And it’s not
accounted for on the credit memo. . . . And anyone looking at [the
credit memo] who paid any attention would know that.” Pegasus
introduced other credit memos showing similar geographic gaps
between the destination airport from one charter flight and the
originating airport for the next, which indicated a repositioning
12 Many of Transnational’s remaining arguments regarding
the extrinsic evidence relating to the interpretation of section 2.6
attempt to reargue and reweigh that evidence. Again, that is
something appellate courts cannot do. (Schmidt v. Superior
Court (2020) 44 Cal.App.5th 570, 582; Pope v. Babick (2014) 229
Cal.App.4th 1238, 1245.)
27
flight in between. Based on the credit memos, the trial court
found “any reasonably intelligent person (and Mr. Victor far
exceeds that low bar), looking at the credit memos starting in
July 2010 would have seen that the plane was being moved
without revenue being paid to [Transnational].”
Transnational argues the trial court wrongly concluded the
credit memos showed Transnational was not credited for unpaid
repositioning flights. Transnational points to a July 31, 2010
credit memo showing a credited trip from Madrid to Van Nuys on
July 15, 2010, and the next credited trip from Teterboro to
Switzerland on July 24, which the trial court suggested must
indicate an unpaid repositioning trip in between. Flight logs
produced by Pegasus, however, showed that a customer who flew
from Teterboro to Madrid on July 14 paid for a return flight to
Teterboro on July 18, thus (re)positioning the plane to fly out of
Teterboro again on July 24.
To be sure, as Transnational argues, the credit memos do
not, as the trial court suggested, necessarily reveal unpaid
repositioning flights. This is in part because it was unclear how
Pegasus billed customers who paid for a repositioning flight and
how those flights appeared on the credit memos. For example,
did Pegasus list the destination airport for the previous charter
as the airport of origin when a customer paid for a repositioning
flight? Or did Pegasus simply add the flight hours attributable to
the repositioning flight to those listed for the customer’s flight
from his or her airport of origin to the desired destination? Prero
testified customers paid for repositioning flights 90 percent of the
time, but the credit memos submitted into evidence from July
2010 through April 2012 show geographic gaps in roughly 50
percent of the listed flights.
28
At a minimum, however, the credit memos suggested
movements of planes without an easily identifiable corresponding
payment to Transnational. The trial court found Victor would
have seen from the credit memos “that [a] plane was being
repositioned between cities without [Transnational] receiving
payment.” That Victor asked in July 2010 for the credit memos
to indicate the airports of origin and destination made more
reasonable the trial court’s inference Victor should have known
Pegasus might be moving planes without payment to
Transnational. In addition, Prero testified Victor asked him by
email in “a couple instances” if “both legs [of a flight listed on a
credit memo] were paid round trip,” and Prero said, “It’s on the
credit memo–what’s paid, from where to where.”
By April 2012 Victor had requested an audit of the accounts
for the planes leased to Pegasus. Victor testified the purpose of
the audit was to ensure he “was getting what [he] was entitled to
get.” The auditing firm Victor hired was unable to obtain all the
documentation required to prepare a detailed report, and Victor
chose not to proceed with the audit because the auditing firm told
him it “was going to be a very expensive, long, drawn-out audit.”
Despite the concerns Victor may have had leading up to the
audit, Transnational entered into new leases with Pegasus in
May 2012. Carcione and an attorney representing Victor drafted
the new leases, which differed from the 2009 and 2010
agreements in several material respects. First, the 2012 leases
defined the term “flight hour” to include “[a]ll hours or
increments of an hour to reposition the Aircraft in connection
with a flight on the Aircraft by any client and/or passenger of
[Pegasus] (‘Ferry Flight’).” The agreements also reduced the
hourly rate Pegasus paid Transnational to $2,500 per standard
29
flight hour and $1,500 per hour for all “Ferry Flights.” Finally,
the 2012 agreements eliminated Pegasus’s commission and
required Pegasus to pay all fuel costs. Prero testified that
Carcione presented the new agreements to him as Victor’s “idea”
and that he (Prero) agreed to the new terms because they were
more profitable for Pegasus. The court found the 2012 leases
supported Pegasus’s argument Victor “was well aware of the
issue of unpaid flights from the inception of the parties’
relationship. . . . [H]is decision to request payment for those
flights is an acknowledgment that he was not getting paid for
them under the prior agreements.” Which is exactly what it was.
Transnational argues the trial court erred in concluding
Victor included the new provision in the 2012 leases regarding
unpaid repositioning flights. Transnational’s argument, however,
is based on testimony by Victor the court discredited and on
contradictory statements from Prero regarding the advantages of
the new agreements for Pegasus. As discussed, we do not
reweigh evidence or reassess the credibility of witnesses.
(Reynaud v. Technicolor Creative Services USA, Inc., supra,
46 Cal.App.5th at p. 1015.) Moreover, it doesn’t matter which
party added the new provisions to the 2009 and 2010 leases: The
provision in the 2012 agreements defining flight hours to include
unpaid repositioning flights supported the trial court’s finding
Victor knew the 2009 and 2010 agreements did not entitle
Transnational to payment for such flights.
d. Custom and Practice in the Industry
The court found evidence of custom and practice in the
industry of “limited application” because only Prero had
experience in the charter industry before Pegasus entered into
30
the leases with Transnational. But because Victor received
advice from people with experience in the industry, the court
found “general industry practices [had] some relevance to the
advice he was being given about terms to include and terms to
avoid.” Both parties offered expert testimony. Ultimately, the
court found the testimony a “mixed bag,” but concluded Pegasus’s
interpretation of section 2.6 was “in line with industry standards”
because the various experts did not contradict Prero’s belief that
repositioning flights were not included in the “flight hours” to be
paid to Transnational.
The court based its finding on expert testimony “that
owners and operators could expressly address repositioning
flights or not; and that there was no fixed practice as to whether
the owner was always paid for repositioning flights.” This
evidence included testimony by Charles Odell, an expert who
testified on behalf of Pegasus, and by Prero. Odell testified that
whether a repositioning flight is part of a charter flight (also
referred to as a “revenue-generating flight”) is determined by the
agreement with the customer, which sometimes occurs weeks or
months in advance and generally requires the charter operator to
have the plane in the customer’s departure city on a particular
date. He also testified there was no industry standard on
payments from charter operators to owners for unpaid
repositioning flights. Prero testified there is no standard contract
language in the industry requiring a charter operator to pay an
owner for unpaid repositioning flights; instead, he said, each
lease is individually negotiated and reflects the terms agreed on
by the operator and the owner. That practice is reflected in the
nine different leases Pegasus had for the 15 planes it operated, at
least one of which required Pegasus to pay for every flight hour,
31
including unpaid repositioning flights, while several others
excluded unpaid repositioning flights from flight hours that
required payment from Pegasus to the owner.
Transnational generally disagrees with the testimony of
Odell and Prero and argues its experts offered “compelling
evidence” in its favor. In particular, Transnational argues its
expert, William Quinn, testified that the 2009 and 2010 leases
were “flat-rate” contracts and that the industry standard for such
contracts is “all flight hours other than OTM should generate
owner revenue.” Quinn’s testimony, however, did not foreclose
the possibility an owner and operator could come to a different
agreement. For example, Quinn testified a flat-rate lease
generally does not include a commission for the operator either,
but the 2009 and 2010 leases did. More fundamentally,
Transnational’s argument again impermissibly asks us to
reweigh the evidence by crediting the testimony from
Transnational’s experts over Pegasus’s. In a court trial, however,
“the trial court is the ‘sole judge’ of witness credibility.” (Schmidt
v. Superior Court (2020) 44 Cal.App.5th 570, 582; see DiPirro v.
Bondo Corp. (2007) 153 Cal.App.4th 150, 195 [reviewing court
does not reweigh the testimony of expert witnesses].) “The
testimony of witnesses who were apparently believed by the trier
of fact may be rejected on appeal only if that testimony was
physically impossible of belief or inherently improbable without
resort to inferences or deductions.” (DiPirro, at p. 195.) The
testimony of Pegasus’s expert witnesses credited by the trial
court was not “so inherently lacking in credibility as to be
unworthy of consideration.” (Ibid.)
Transnational also argues Odell’s testimony “was so
inconsistent with other evidence in the case that it virtually
32
disqualified him as an expert.” But the court found Odell was
qualified to testify as an expert in the charter aircraft industry
based on his experience as a charter pilot, an officer of a charter
operator, a member of the Board of Governors for Air Charter
Safety Foundation, an owner of a company that manages planes
for individual ownership groups, an active member of
professional associations for charter plane operators, and his
experience negotiating between 40 to 50 leases with owners.
That’s a lot of qualification. And Transnational did not object
that Odell lacked foundation to testify as an expert.
4. The Trial Court’s Interpretation Is Reasonable
Transnational’s remaining arguments concerning
section 2.6 essentially contend the trial court’s interpretation of
that provision is not reasonable in light of certain extrinsic
evidence. For example, Transnational argues the trial court’s
interpretation of section 2.6 was unreasonable because Prero
testified the price Pegasus charged its customers did not have
“any bearing as to what Pegasus [had] to pay to [Transnational]
. . . under section 2.6.” Transnational interprets Prero’s
testimony to mean Pegasus’s pricing had no bearing on “owner
revenue” except as set forth in section 2.7, thus suggesting Prero
conceded an unpaid repositioning flight did not impact what
Pegasus owed Transnational. Transnational reads too much into
Prero’s ambiguous testimony. Prero’s testimony also could have
meant, and likely did mean, the amount Pegasus charged a
customer per hour did not affect the amount Pegasus paid to
Transnational per flight hour under section 2.6.
Transnational makes a similar argument about Prero’s
testimony that section 2.6 does not concern “revenues paid to
33
Pegasus” from its customers. Transnational suggests this
statement shows Prero interpreted section 2.6 to require Pegasus
to pay Transnational per flight hour regardless of whether a
customer paid Pegasus for a repositioning flight. But the
question Prero was asked was whether section 2.6 “say[s]
anything about revenues paid to Pegasus . . . from your
customers,” and Prero said, “No.” Again, Prero’s testimony likely
meant, and the trial court could reasonably conclude it meant,
Pegasus paid Transnational $5,000 per flight hour a plane was
rented, regardless of the amount per hour the customer paid
Pegasus.
Transnational builds on Prero’s testimony to argue an
interpretation of section 2.6 that requires Pegasus to pay the
$5,000 per flight hour to Transnational regardless of any
discount on the hourly rate paid by the customer, but allows
Pegasus to pay Transnational nothing for discounting the
number of hours a customer pays for, is inherently contradictory.
But Prero testified he did not consider unpaid repositioning
flights to be a discount offered to an otherwise paying customer
or even within the scope of a customer’s rental agreement. This
interpretation is entirely consistent with the business plan Prero
said he pursued under the 2009 and 2010 leases to maximize
profit by “pioneering” one-way charters, which necessitated
occasional unpaid repositioning flights. The evidence of that
business plan, which the trial court credited, is consistent with
the trial court’s interpretation of section 2.6.
Transnational next argues the trial court’s interpretation of
the word “rented” in section 2.6’s reference to “per flight hour
that aircraft is rented” contradicted extrinsic evidence of
Pegasus’s business practices. Transnational points to the trial
34
court’s observation in its statement of decision that Prero
“conceded that if a plane had to be flown to Los Angeles for a
charter trip departing from there, the reason it was flying the leg
to Los Angeles was ‘because [the plane] had been rented.’”
According to Transnational, this must mean the plane was
“rented” within the meaning of section 2.6. But section 2.6 does
not say “per flight hour because that aircraft is rented” or “per
flight hour related to that aircraft being rented.” The trial court’s
interpretation of the language “is rented” to mean within the
scope of a customer’s rental agreement does not contradict
Pegasus’s business practices. Nor, contrary to Transnational’s
assertion, is the trial court’s interpretation of section 2.6
“strained” because, according to Transnational, “if there is a
customer, the Plane ‘is rented.’” Indeed, Prero provided the
example of a customer renting a plane several months in advance
to fly from Los Angeles to Europe. If the plane was out of
position as a result of an owner flight, for example, Pegasus could
not “break” the existing contract with the customer and demand
the customer pay for the plane to be repositioned to Los Angeles;
the repositioning flight was not part of the customer’s rental
agreement.
5. The Trial Court Did Not Err in Not Construing
Section 2.6 Against Pegasus as Drafter
Transnational argues that, even if the trial court’s
interpretation of section 2.6 is reasonable and supported by
substantial evidence, the court erred by not interpreting the
ambiguity regarding unpaid repositioning flights against Pegasus
as the drafter. Under section 1654, “[i]n the event other rules of
interpretation do not resolve an apparent ambiguity or
35
uncertainty, ‘the language of a contract should be interpreted
most strongly against the party who caused the uncertainty to
exist.’” (ASP Properties Group, L.P. v. Fard, Inc. (2005)
133 Cal.App.4th 1257, 1269; accord, Oakland-Alameda County
Coliseum Authority v. Golden State Warriors, LLC, supra,
53 Cal.App.5th at p. 822.) As the trial court recognized, this rule
applies only “where the extrinsic evidence is either lacking or is
insufficient to resolve what the parties intended the terms of the
contract to mean . . . .” (Oakland-Alameda County Coliseum
Authority, at p. 823.) Because the court found the extrinsic
evidence sufficient to determine the parties’ intent, and because
substantial evidence supported the court’s findings, the rule
codified in section 1654 did not apply.
B. The Trial Court Did Not Err in Failing To Apply an
Adverse Inference Regarding Certain Damages
Transnational argues Pegasus “willfully conceal[ed]”
evidence of customer payments for repositioning flights that
Pegasus claimed were unpaid. As a result, Transnational
contends, the trial court should have applied an adverse
inference against Pegasus and should not have excluded from
Transnational’s damages flight hours Pegasus claimed were
attributable to unpaid repositioning flights without a customer
invoice backing up that claim. Transnational’s argument lacks
factual support.
Evidence Code section 413 allows the trier of fact to
consider a party’s “willful suppression of evidence” in deciding
“what inferences to draw from the evidence or facts in the case
against a party.” “[W]illful suppression” occurs when a party
destroys evidence with the intention of preventing its use in
36
litigation (Bader v. Johnson & Johnson (2022) 86 Cal.App.5th
1094, 1129) or fails to produce any evidence on a matter solely
within that party’s knowledge (Takiguchi v. Venetian
Condominiums Maintenance Corp. (2023) 90 Cal.App.5th 880,
895; Westinghouse Credit Corp. v. Wolfer (1970) 10 Cal.App.3d 63,
69). For example, in the case cited by Transnational, Breland v.
Traylor Engineering & Manufacturing Co. (1942) 52 Cal.App.2d
415, the trial court applied the adverse inference against a party
who “failed to produce any evidence” the party “must have
possessed” on the relevant issue. (Id. at pp. 425-426.) Here,
Transnational asserts, Pegasus “willfully withheld from discovery
all payment information including customer quotes and invoices.”
But Pegasus produced over 400 pages of customer invoices, and
in arguing Pegasus willfully suppressed relevant evidence,
Transnational points only to documents where Pegasus conceded
it did not have customer invoices for every flight and therefore
could not produce the documents. Not surprisingly, the trial
court made no finding that Pegasus willfully suppressed any
evidence, and Transnational does not contend that was error.
C. Transnational Has Not Shown the Trial Court Erred
in Denying Transnational’s Claim for FET Rebates
Transnational argues its expert witness’s testimony
regarding industry custom and practice relating to FET rebates
“was more credible and reasonable” than the testimony of Prero
and Pegasus’s expert witness. Even if we accepted
Transnational’s implied and unsubstantiated argument that
substantial evidence did not support the trial court’s findings
regarding industry custom and practice, the trial court also found
Transnational’s claim for damages based on unremitted FET
37
rebates was “speculative.” Transnational does not address this
aspect of the trial court’s ruling. No reversible error here.
D. Transnational Has Not Shown Its Damages Evidence
Compels a Finding in Its Favor
Transnational argues the trial court miscalculated certain
damages owed to Transnational. Transnational, of course, had
the burden of proving the nature and amount of its damages.
(See Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696, 738;
Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc.
(2011) 196 Cal.App.4th 456, 464). “‘[W]here the issue on appeal
turns on a failure of proof at trial, the question for a reviewing
court becomes whether the evidence compels a finding in favor of
the appellant as a matter of law. [Citations.] Specifically, the
question becomes whether the appellant’s evidence was
(1) “uncontradicted and unimpeached” and (2) “of such a
character and weight as to leave no room for a judicial
determination that it was insufficient to support a finding.”’”
(Sonic Manufacturing, at p. 466; accord, Lincoln v. Lopez (2022)
77 Cal.App.5th 922, 929.) This is “a heavy, perhaps
insurmountable, burden on appeal,” one Transnational has not
met. (Lincoln, at p. 929; see Fabian v. Renovate America, Inc.
(2019) 42 Cal.App.5th 1062, 1067 [where “the judgment is
against the party who has the burden of proof, it is almost
impossible for him to prevail on appeal by arguing the evidence
compels a judgment in his favor” because “we presume the trial
court found the [party’s] evidence lacks sufficient weight and
credibility to carry the burden of proof”].)
38
1. Unpaid Repositioning Flights
The parties stipulated that the total flight hours flown for
which Pegasus did not pay Transnational (excluding OTM
flights) was 475 hours. The trial court credited evidence from
Pegasus that 334.4 hours of those 475 hours were attributable to
unpaid repositioning flights. The court stated: “Victor’s
testimony about the number, destination, and related expenses of
the flight hours he thought were ‘missing’ was not based on
personal knowledge or expert testimony, and was highly
speculative.” Thus, the court rejected Transnational’s claim
Pegasus owed Transnational for some portion of the 334.4 hours
attributable to unpaid repositioning flights.
Transnational contends the trial court should have rejected
Pegasus’s evidence because the court’s interpretation of
section 2.6 allowed Pegasus “to cheat [Transnational] by
reclassifying a paid repositioning leg as a separate unpaid
repositioning / [Pegasus] trip—or by taking payment for
repositioning in ‘fees’ instead of hours.” In short, Transnational
asserts at least some of the unpaid repositioning trips were
“bogus.” But the trial court credited Pegasus’s evidence
regarding the 334.4 hours of unpaid repositioning flights, and
Transnational has not shown its evidence (which the court
deemed “highly speculative” and “based solely on conjecture and
coincidence”) was uncontradicted and unimpeached. (See Sonic
Manufacturing Technologies, Inc. v. AAE Systems, Inc., supra,
196 Cal.App.4th at p. 466.) Instead, Transnational merely
rehashes the evidence. (See Paterno v. State of California (1999)
74 Cal.App.4th 68, 102 [plaintiff’s attack on the defendants’
evidence at trial was “no more than a rehash of arguments about
the strength of the evidence, which is not open on appeal”];
39
MacGregor Yacht Corp. v. State Comp. Ins. Fund (1998)
63 Cal.App.4th 448, 458 [defendant’s improper “attempts to
rehash conflicts in the evidence” ignored “the well[-]established
principle that an appellate court may not reweigh the evidence or
determine the credibility of witnesses where the evidence at trial
was in conflict”].) Transnational also argues the trial court failed
to address certain of its challenges to Pegasus’s “claimed unpaid
ferry flights,” but the court in its statement of decision found
Pegasus substantiated its claim that 334.4 hours were for unpaid
repositioning flights.
2. Alleged Credit Memo Errors Regarding Fuel
Surcharges
As discussed, the 2009 and 2010 leases required Pegasus to
pay Transnational a fuel surcharge of $500 per flight hour based
on the then-average price of $3.75 per gallon. The trial court
ruled the leases gave Pegasus the “absolute and unfettered”
discretion to increase or decrease the fuel surcharge, a ruling
Transnational does not challenge. Pegasus disclosed the fuel
surcharge, if any, for each flight on the credit memos Pegasus
sent to Transnational and, as stated, Pegasus stipulated there
were 376.8 flight hours for which it did not pay Transnational a
fuel surcharge.
The trial court denied this claim for two reasons. First, the
court ruled Transnational did not present evidence to counter
Prero’s testimony Pegasus did not pay a fuel surcharge for the
disputed hours because “the average fuel cost was below the
$3.75 a gallon referenced in the agreements.” Second, the court
ruled laches barred Transnational from recovering damages for
unpaid fuel surcharges because Transnational failed to challenge
40
the relevant credit memos within the 20 days prescribed by the
leases. In response to the first ruling, Transnational argues
Pegasus failed to prove that fuel prices ever dropped below $3.75
per gallon. Transnational, however, had the burden to show the
trial court erred in denying Transnational’s damage claim, and
Transnational did not submit evidence disputing Prero’s
testimony that fuel prices at the relevant times were below $3.75
per gallon. Because Transnational has not shown the trial court
erred in denying Transnational’s claim for damages based on the
average fuel cost, we do not address Transnational’s laches
argument.13
E. The Trial Court Did Not Err in Denying
Transnational’s Request for Prejudgment Interest
Transnational asked for prejudgment interest under
section 3287, subdivision (a), which “provides that ‘[e]very person
who is entitled to recover damages certain, or capable of being
made certain by calculation, and the right to recover which is
vested in him upon a particular day, is entitled also to recover
interest thereon from that day.’ ‘“Under this provision,
13 For the same reason we do not address Transnational’s
related tit-for-tat argument that, because the trial court applied
laches to bar Transnational’s claim for damages based on credit
memo errors, the court should also have applied laches to
Pegasus’s claim for an offset for a “Russia trip.” That argument
appears to be based entirely on the propriety of the trial court’s
application of laches in the first instance, which we do not
address. Moreover, with regard to the offset for the Russia trip
(and other trips), the trial court stated that the offsets were
“supported by the record” and that Transnational “presented no
argument to counter the[ ] claimed offsets.”
41
prejudgment interest is allowable”’ as of right ‘“where the amount
due plaintiff is fixed by the terms of a contract, or is readily
ascertainable by reference to well-established market values.
[Citations.] On the other hand, interest is not allowable where
the amount of the damages depends upon a judicial
determination based on conflicting evidence.”’” (Thompson v.
Asimos, supra, 6 Cal.App.5th at p. 991; accord, State of California
v. Continental Ins. Co. (2017) 15 Cal.App.5th 1017, 1038; see
Glassman v. Safeco Insurance Company of America (2023)
90 Cal.App.5th 1281, 1316 [“‘damages are unascertainable if the
amount . . . depends on disputed facts or the available factual
information is insufficient to determine the amount; and
damages are ascertainable if the only impediment to the
determination of the amount is a legal dispute concerning
liability or the measure of damages.’”].)
“‘From the defendant’s perspective, the certainty
requirement promotes equity because liability for prejudgment
interest occurs only when the defendant knows or can calculate
the amount owed and does not pay.’ [Citation.] Under the
applicable test for certainty, ‘a dispute or denial of liability does
not make the amount of damages uncertain. [Citation.] As
stated by [the] Supreme Court: “Generally, the certainty
required of [section 3287, subdivision (a)], is absent when the
amounts due turn on disputed facts, but not when the dispute is
confined to the rules governing liability.”’” (Thompson v. Asimos,
supra, 6 Cal.App.5th at pp. 991-992, fn. omitted; accord, Watson
Bowman Acme Corp. v. RGW Construction, Inc. (2016)
2 Cal.App.5th 279, 293-294; see Wisper Corp. v. California
Commerce Bank (1996) 49 Cal.App.4th 948, 960 [“‘[t]he test for
recovery of prejudgment interest . . . is whether defendant
42
actually know[s] the amount owed or from reasonably available
information could the defendant have computed that amount’”].)
Prejudgment interest is not available when the amount of
damages “‘“depends upon a judicial determination based upon
conflicting evidence and is not ascertainable from truthful data
supplied by the claimant to his debtor.”’” (Wisper, at p. 960; see
Warren v. Kia Motors America, Inc. (2018) 30 Cal.App.5th 24, 45.)
“Thus, where the amount of damages cannot be resolved except
by verdict or judgment, prejudgment interest is not appropriate.”
(Wisper, at p. 960; see Stein v. Southern Cal. Edison Co. (1992)
7 Cal.App.4th 565, 573.)
Also relevant are whether an accounting is required to
determine the amount of damages (see Stein v. Southern Cal.
Edison Co., supra, 7 Cal.App.4th at p. 573 [“[w]here the amount
of damages cannot be resolved except by account, . . . interest
prior to judgment is not allowable”]; Chesapeake Industries, Inc.
v. Togova Enterprises, Inc. (1983) 149 Cal.App.3d 901, 909 [“an
accounting action is prima facie evidence a claim is uncertain”])
and the disparity between the amount of damages demanded in
the complaint and the ultimate award (Wisper Corp. v. California
Commerce Bank, supra, 49 Cal.App.4th at p. 961; Chesapeake
Industries, at p. 910). These factors may indicate the defendant
could not have known or calculated the amount owed before trial
and weigh against awarding prejudgment interest. (See
Chesapeake Industries, at p. 907 [“that the plaintiff or some
omniscient third party knew or could calculate the amount is not
sufficient” to award prejudgment interest]; see also Glassman v.
Safeco Insurance Company of America, supra, 90 Cal.App.5th at
p. 1316.) “‘“On appeal, we independently determine whether
damages were ascertainable for purposes of the statute, absent a
43
factual dispute as to what information was known or available to
the defendant at the time.”’” (State of California v. Continental
Ins. Co., supra, 15 Cal.App.5th at p. 1038; see Watson Bowman
Acme Corporation v. RGW Construction, Inc., supra,
2 Cal.App.5th at p. 296.)14
The trial court denied Transnational’s request for
prejudgment interest because the court concluded the trial
involved “a lengthy accounting of myriad and ever-changing
unliquidated damages claims for damages on various alternative
theories, with [Transnational] ultimately recovering a small
fraction of the amount claimed.” Transnational sought damages
of $2,620,918 and received $254,581.11, before the court awarded
costs.
Contrary to Transnational’s argument,15 Pegasus could not
have ascertained before trial the amount of damages it owed
14 Pegasus cites Bullis v. Security Pac. Nat. Bank (1978)
21 Cal.3d 801 for the proposition that the standard of review for a
trial court’s ruling on prejudgment interest is abuse of
discretion. That case, however, involved a request for
prejudgment interest under section 3288, which concerns actions
for the breach of an obligation not arising from contract, not
section 3287, subdivision (a). (See Bullis, at p. 815.)
15 Pegasus argues Transnational waived its arguments
regarding prejudgment interest because Transnational filed a
motion to vacate the part of the original judgment denying
prejudgment interest, and then filed a notice of appeal before the
trial court could rule on the motion to vacate. However,
Transnational requested prejudgment interest before judgment,
and the trial court denied that request in a judgment properly
appealed by Transnational. Transnational preserved the issue of
prejudgment interest. (See Watson Bowman Acme Corp. v. RGW
44
Transnational. In contrast to cases where the amount of
damages is readily ascertainable by reference to contract
provisions, the parties here vigorously disputed how to compute
Transnational’s damages. These disputes included how many
hours of uncredited and under-credited flights were at issue (an
issue ultimately resolved by stipulation during trial); whether
fuel surcharges applied to certain flights, and if so, the amount of
the fuel surcharge; whether certain flight hours were attributable
to Pegasus’s business purposes; and how many hours should be
attributed to offsets for Pegasus based on over-credited flights
and other errors in the credit memos. The case was a years-long
factual mess. (See Warren v. Kia Motors America, Inc., supra,
30 Cal.App.5th at p. 45 [plaintiff was not entitled to prejudgment
interest where the amount of certain damages “could not be
ascertained ‘by looking at the sale contract’”]; Chesapeake
Industries, Inc. v. Togova Enterprises, Inc., supra, 149 Cal.App.3d
at pp. 907-908, 910 [lessor was not entitled to prejudgment
interest where the lessee could not ascertain what it owed under
the lease and there was a significant discrepancy between the
amount of the lessor’s claim and the amount of the judgment].)
The factual disputes concerning the amount of Transnational’s
damages were sufficiently complex that Transnational requested
an accounting, alleging it was “essential to determine the precise
amount of monetary damages that [Transnational] might have
sustained as a result of breaches by Pegasus . . . of their
agreement set forth in the claims for breach of contract.”
Construction, Inc., supra, 2 Cal.App.5th at pp. 297-298 [a request
for prejudgment interest is timely so long as it is made before a
judgment is entered, and “[n]o statutes specify the timing or
mechanism for seeking prejudgment interest”].)
45
Although Transnational inexplicably contends it never requested
or received an accounting, it did, and the trial court even denied
Pegasus’s motion for judgment on Transnational’s accounting
cause of action and essentially ruled the 20-day trial satisfied
Transnational’s request for an accounting.
The kinds of cases where courts award prejudgment
interest are nothing like this case. For example, in Leff v. Gunter
(1983) 33 Cal.3d 508, a case cited by Transnational, the court
awarded prejudgment interest under section 3287,
subdivision (a), based on “uncontested and conceded evidence” of
the components of the calculation to determine the amount of
damages. (Id. at p. 20.) Similarly, in Watson Bowman Acme
Corp. v. RGW Construction, Inc., supra, 2 Cal.App.5th 279 the
court held prejudgment interest was appropriate because the
defendant could have determined the amount owed the plaintiff
based on the prices the plaintiff quoted the defendant before
litigation. (Id. at p. 299.) The court in Watson stated that the
defendant “‘offered no evidence to contradict’ the amount”
asserted by the plaintiff and that therefore “it was not a case in
which the ‘amounts due turn on disputed facts.’” (Id. at p. 303;
see Olson v. Cory (1983) 35 Cal.3d 390, 402 [prejudgment interest
was appropriate where the amount due the plaintiffs was based
on one of two statutory provisions, and which statute applied was
a question of law]; Stein v. Southern Cal. Edison Co., supra,
7 Cal.App.4th at p. 573 [prejudgment interest was appropriate
where “the amount claimed in the complaint was the amount
awarded by the jury,” and “[a]scertainment of the amount did not
require an accounting from conflicting evidence”].)
Moreover, at the outset of this action, Transnational’s
request for damages was based on different claims than those it
46
ultimately litigated, and Pegasus filed a cross-complaint based on
costs Pegasus allegedly incurred during the leases for the 771
and 772 planes that Transnational refused to pay. Given the
changing litigation landscape, the factual disputes the trial court
resolved through a 20-day trial that amounted to an accounting
of Transnational’s charter business with Pegasus, and the
significant disparity between the damages Transnational
requested and the damages it recovered, the trial court did not
err in denying Transnational’s request for prejudgment interest.
DISPOSITION
The judgment is affirmed. Pegasus is to recover its costs on
appeal.
SEGAL, J.
We concur:
PERLUSS, P. J.
FEUER, J.
47