American Broadcasting Companies, Inc. v. Walter Reade-Sterling, Inc., READE-STERLIN

• Decision Date: 22 November 1974
• Docket Number: READE-STERLIN,INC
• Citation: 117 Cal.Rptr. 617,43 Cal.App.3d 401
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN BROADCASTING COMPANIES, INC., et al., Cross-Complainants and Appellants, v. WALTER, Cross-Defendant and Respondent. Civ. 31708.

Page 617

117 Cal.Rptr. 617

43 Cal.App.3d 401

AMERICAN BROADCASTING COMPANIES, INC., et al., Cross-Complainants and Appellants, v. WALTER READE-STERLING, INC., Cross-Defendant and Respondent.

Civ. 31708.

Court of Appeal, First District, Division 2, California.

Nov. 22, 1974.

Lillick, McHose, Wheat, Adams & Charles, Frank L. Adamson, Ann Miller, Robert Fremlin, Branden E. Bickel, San Francisco, for cross-complainants and appellants.

Miller, Groezinger, Pettit & Evers, John E. Parks, IV, Robert L. Ivey, San Francisco, for cross-defendant and respondent.

KANE, Associate Justice.

Cross-Complainants American Broadcasting Companies, Inc. and ABC Sports, Inc. ('ABC') appeal from a judgment of nonsuit denying recovery for attorney's fees and expenses claimed in their cross-complaint.

The relevant facts disclose that plaintiff Marvin E. Becker ('Becker') brought suit against respondent Walter Reade-Sterling, Inc. ('Reade-Sterling'), appellant ABC, John Jay Films, Inc. ('John Jay') and others for alleged unauthorized use of certain film footage of the 1960 Winter Olympics at Squaw Valley, California. Becker produced the film and, pursuant to a contract, supplied it to John Jay, a film library, which, in turn, supplied it to Reade-Sterling. ABC obtained the footage from Reade-Sterling under a contract dated August 26, 1963. By Clause 4 of the agreement, Reade-Sterling represented that it had the right to supply the films to ABC for television use and agreed to indemnify ABC against all claims, damages, liabilities, costs and expenses, including reasonable attorney's fees, arising from the broadcast, exhibition or other use of said films. ¹ Pursuant to the agreement, ABC made use of parts of the film footage in a television series. As a consequence, Becker commenced suit claiming that none of the defendants had any television rights in the footage, because it had been supplied to John Jay solely for lecture tours personally conducted by John Jay.

In response to the Becker action, ABC cross-complained against Reade-Sterling for indemnification against all sums for which ABC might be found liable to Becker and for costs and expenses, including reasonable attorney's fees, incurred in defending the case. At the trial appropriate evidence was taken to establish the amount of attorney's fees and costs, but the testimony also revealed that none of these fees or costs, totaling approximately $13,168 had yet been billed to or paid by ABC. Thereupon Reade-Sterling moved for a partial nonsuit limited to the claim for attorney's fees, contending that the statutory requirements of recovery as set forth in Civil Code, section 2778, ² had not been met.

Initially, the trial court denied the motion. Subsequently, however, after indulging in further research, counsel for ABC concluded that the claim for attorney's fees and costs was premature and, most commendably, advised the trial court that its earlier ruling should be reversed. In this context the motion for nonsuit was granted and the court requested both parties to prepare proposed orders for the judgment of nonsuit.

The rest of the case proceeded. The court granted a nonsuit to four of Becker's six causes of action. The court then submitted the case to the jury on the remaining questions of the primary liability of John Jay and ABC to Becker, and of the secondary liability of Reade-Sterling to ABC under the indemnity contract should ABC's primary liability toward Becker be established. The jury returned a verdict against Becker in favor of all defendants, and against ABC on its indemnity action.

After the jury verdict was returned, both ABC and Reade-Sterling submitted their respective proposed orders for judgment of nonsuit on the cross-complaint with respect to the attorney's fees. The order proposed by ABC contained language that the judgment of nonsuit was not an adjudication on the merits, whereas the order proposed by Reade-Sterling did not contain such a provision. After a hearing the court adopted the version submitted by Reade-Sterling.

On appeal ABC contends that in the situation here presented the trial court's failure to specify in the judgment that it was not an adjudication upon the merits constitutes a prejudicial abuse of discretion and as a consequence the judgment cannot stand. Appellants' position is well taken and accordingly the judgment must be reversed.

Preliminarily, we underscore that the judgment of nonsuit at hand cannot be interpreted in any other way than an adjudication on the merits. While prior to 1961 a judgment of nonsuit was not a bar to a subsequent action on the same cause of action (cf. Mohn v. Tingley (1923) 191 Cal. 470, 478, 217 P. 733; Bollinger v National Fire Ins. Co. (1944) 25 Cal.2d 399, 403, 154 P.2d 399; Ridley v. Young (1944) 64 Cal.App.2d 503, 508, 149 P.2d 76), the 1961 amendment to section 581c of the Code of Civil Procedure made it explicit that a judgment of nonsuit operates as an adjudication upon the merits, Unless the trial judge expressly provides otherwise. ³

It is thus apparent that, under section 581c of the Code of Civil Procedure, the trial court is vested with discretion to make a nonsuit either an adjudication upon the merits or not (Salomons v. Lumsden (1949) 95 Cal.App.2d Supp. 924, 928--929, 213 P.2d 132; see also Safeway Stores v. Fannan (9th Cir. 1962) 308 F.2d 94). Since the judgment in the case at bench does not 'otherwise specify' it operates as an adjudication upon the merits. Accordingly, the cardinal issue confronting us is whether or not the trial court abused its discretion by giving Res judicata effect to the judgment of nonsuit in question.

In determining this issue it is well to call to mind that respondent's motion for judgment of nonsuit was made on the basis that appellants failed to prove the actual payment of attorney's fees and costs. The judgment of nonsuit likewise recites that the proof of payment was a prerequisite to the recovery of the attorney's fees and expenses; that the evidence feel short of showing the payment of attorney's fees and expenses; that appellants could not recover such fees and expenses in the absence of proof of payment and finally that the nonsuit was granted solely upon the aforestated grounds. ⁴ In short, the ruling of the court was founded on the premise that appellants' cause of action was prematurely brought because the payment of the attorney's fees and costs, a condition precedent to recovery under section 2778 than liability; That proof of payment was

However, the law is settled beyond controversy that when an action has been brought prematurely because a condition precedent necessary to the cause of action has not been complied with, the plaintiff is not precluded from maintaining an action after his claim has matured; and in such a case the doctrine of Res judicata does not constitute a bar to his recovery (Hardin v. Dickey (1899) 123 Cal. 513, 56 P. 258; Nevills v. Shortridge (1905) 146 Cal. 277, 79 P. 972; see also: National Ro-Tile Corporation v. Loomis (1960) 82 Idaho 65, 350 P.2d 217). Thus, it has been stated that where a judgment is rendered for the defendant on the ground of the nonexistence of some fact essential to the plaintiff's cause of action, the plaintiff is not precluded from maintaining an action after such fact has subsequently come into existence (Rest., Judgments, § 54). Consequently, a determination by the court that the plaintiff had no enforceable cause of action at the time when the action was brought is not a determination that he may not have an enforceable cause of action thereafter when his cause of action does become enforceable (Rest., Judgments, § 54, comment a; see also Keidatz v. Albany (1952) 39 Cal.2d 826, 828, 249 P.2d 264). It is likewise axiomatic that a judgment is a bar to a subsequent action only where an Identical issue was decided in a prior case by a final judgment on the merits (French v. Rishell (1953) 40 Cal.2d 477, 479, 254 P.2d 26). The theory of estoppel by judgment or Res judicata, however, Extends only to the facts in issue as they existed at the time the judgment was rendered and does not prevent a reexamination of the same questions between the same parties where in the interim the facts have changed or new facts have occurred which may alter the legal rights of the parties. When other facts or conditions Intervene before a second suit, furnishing a new basis for the claims and defenses of the respective parties, The issues are no longer the same and the former judgment cannot be pleaded in bar of the second action (Hurd v. Albert (1931) 214 Cal. 15, 26, 3 P.2d 545; Hasselbach v. Dept. Alcoholic Bev. Control (1959) 167 Cal.App.2d 662, 665, 334 P.2d 1058; 29 Cal.Jur.2d, § 261, p. 230).

The foregoing legal principles as applied to the instant facts compel the conclusion that the trial court abused its discretion when, by its silence, it attached Res judicata effect to the judgment of nonsuit in question. It has been repeatedly held that the discretion conferred upon the trial court is not a capricious or an arbitrary one, but rather an impartial discretion, guided by fixed legal principles. Moreover, it is not a mental discretion, to be exercised Ex gratia, but a legal discretion to be exercised in conformity with the spirit of the law and in a manner to subserve, not to impede or defeat, the ends of justice (Bailey v. Taaffe (1866) 29 Cal. 422, 424; Benjamin v. Dalmo Mfg. Co. (1948) 31 Cal.2d 523, 526, 190 P.2d 593; Boreta Enterprises, Inc. v. Department of Alcoholic Beverage Control (1970) 2 Cal.3d 85, 96, 84 Cal.Rptr. 113, 465 P.2d 1). Where the trial court fails to exercise the discretion bestowed upon it in the aforestated fashion, and where, as in the instant case, it arrives at an erroneous legal conclusion, its order or judgment is subject to reversal (Transit Ads, Inc. v. Tanner Motor Livery, Ltd. (1969) 270 Cal.App.2d 275, 279, 75 Cal.Rptr. 848).

Although the above...