Facts

In November 2006, defendant Esther Toby Gallant called plaintiff's assignor, Kivi International LLC ("KI") inquiring if KI could locate a pear shaped seven carat gem for a pair of earrings that Gallant was making for a client. Thereafter, KI arranged for a jeweler in Boston to drop ship a gem matching Gallant's description directly to Gallant.

On Dec. 8, 2006, Gallant received the gem. Gallant showed the gem to her client, but the client did not like the gem. On Dec. 26, 2006, Gallant shipped the gem via Federal Express back to the Boston jeweler. The gem never arrived at the Boston jeweler and, as a result, KI was invoiced by the Boston jeweler. KI then invoiced Gallant. KI settled with the Boston jeweler, and when Gallant refused to settle with KI, KI assigned its claims against Gallant to plaintiff, Attorney Recovery Systems Inc., a collection agency. Plaintiff sued Gallant for open book account, account stated, reasonable value and money paid.

PLAINTIFF'S CONTENTIONS:
Plaintiff claimed that KI granted credit to Gallant as an individual, and not to Gallant's corporation, Esther Gallant Inc. This was evidenced by every document originating from KI being addressed to "Esther Gallant" with no reference to Esther Gallant Inc. Plaintiff also claimed that KI's granting of credit to the individual owner of a small corporation was standard in the jewelry industry since jewelers can change their corporate names easily thereby escaping liability. Plaintiff also claimed that Gallant's decision to return the gem via Federal Express on Gallant's uninsured account, when KI offered its insured account, placed the full "risk of loss" on Gallant per the terms of the memorandum between KI and Gallant, and pursuant to Commercial Code 2327(2).

DEFENDANT'S CONTENTIONS:
The defendant claimed that KI never advised her at any time that credit was being granted to her as an individual. If liability to KI existed, it was against Esther Gallant Inc., a corporation that had been in existence in California since 1986. Gallant also claimed that previous transactions with KI were paid with business checks in the name of "Esther Gallant Inc." for which KI did not complain. Gallant argued that KI bore the "risk of loss" since KI insisted that the gem be returned via Federal Express rather than other slower, safer alternative methods. Finally, Gallant contended that the memorandum between Gallant and KI was not signed and thus not binding. Based thereon, Commercial Code 2510(1) was the controlling section and as such the risk of loss remained with seller, KI.

Settlement Discussions

Plaintiff served Gallant with a C.C.P. section 998 offer to compromise in the amount of $40,000 to which Gallant did not reply. On April 13, 2009, the initial date of trial, the trial court ordered the parties to conduct a mandatory settlement conference before the Hon. Robert D. Monarch, at which point plaintiff would have accepted an amount in the $20,000 to $25,000 range. Gallant did not offered anything to plaintiff contending that if any liability existed, it was the liability of Esther Gallant Inc. and not Gallant individually.

Result

The court awarded plaintiff $23,384, including $22,000 principal damages for the reasonable value of the lost gem and $1,384 in recoverable court costs, against Gallant, an individual.

Other Information

On Aug. 14, 2007, plaintiff filed this action in the Orange County Superior Court. On Jan. 11, 2008, Federal Express was added as a defendant by Gallant. On Feb. 15, 2008, Federal Express was able to remove the case to federal court since issues involving Federal Express airbills are governed by federal law. During the federal court proceeding, Gallant settled with Federal Express for $500 thereby permitting the action to return to the state court.