Davies v. Krasna

• Decision Date: 03 June 1975
• Citation: 14 Cal.3d 502,535 P.2d 1161,121 Cal.Rptr. 705
• Court: California Supreme Court
• Parties: , 535 P.2d 1161, 79 A.L.R.3d 807 Elizabeth S. DAVIES, as Executrix, etc., Plaintiff and Appellant, v. Norman KRASNA, Defendant and Respondent. L.A. 30245.

Page 705

121 Cal.Rptr. 705

14 Cal.3d 502, 535 P.2d 1161, 79 A.L.R.3d 807

Elizabeth S. DAVIES, as Executrix, etc., Plaintiff and Appellant, v. Norman KRASNA, Defendant and Respondent.

L.A. 30245.

Supreme Court of California,

In Bank.

June 3, 1975.

Rehearing Denied July 3, 1975.

Max Fink and R. Stephen Duke, Beverly Hills, for plaintiff and appellant.

Mitchell, Silberberg & Knupp, Arthur Groman and Russell J. Frackman, Los Angeles, for defendant and respondent.

TOBRINER, Justice.

Plaintiff, executrix of the estate of Valentine Davies, appeals from a trial court determination that her action for breach of confidence is barred by the statute of limitations. The parties stipulated for purpose of the limitation issue that in 1951 Valentine Davies submitted his written story 'Love Must Go On' to defendant in confidence and that defendant incorporated the idea, central theme, and dramatic core of that story into his successful play 'Who Was That Lady I Saw You With,' first produced in 1958. The trial court found that in 1954 and thereafter defendant disclosed the story to various persons in the entertainment industry in violation of Davies' confidence, and that Davies learned of these disclosures sometime before November 11, 1955. ¹ The trial court concluded that the instant suit, filed November 19, 1959, was barred by the statute of limitations.

As we shall explain, this court has never ruled that a cause of action for breach of confidence can rest upon a basis other than a contract that protects that confidence. Assuming the viability of such a cause of action in the present litigation--an assumption compelled here by the law of the case--we conclude that the trial court correctly determined that the two-year period of Code of Civil Procedure section 339, subdivision 1, bars this cause of action.

We shall point out why we reject plaintiff's contention that the statute of limitations should not begin to run until 1958 when defendant profited from the exploitation of Davies' idea. We shall explain that Davies had already suffered actual and appreciable damage from defendant's breach before November 11, 1955. Neither Davies' difficulty in proving the extent of damage, nor the absence of profits upon which he could impose a constructive trust, delays the running of the period of limitations. Because plaintiff's suit was not filed within two years after November 11, 1955, it is barred by the statute of limitations.

The legal proceedings which followed the filing of plaintiff's first complaint in 1959 doubtless deserve a place in the annals of protracted and maddeningly inefficient litigation not far removed from that of Charles Dickens' Jarndyce v. Jarndyce. Plaintiff's first complaint asserted two causes of action: breach of contract and breach of confidence. Valentine Davies died before trial, and plaintiff pursued the litigation as the executrix of the estate. At trial, in 1962, the court dismissed the breach of confidence claim for insufficient evidence. It submitted the breach of contract cause to the jurors, but the jurors failed to reach a verdict.

A second trial the following year focused solely on plaintiff's contract claim. The jurors rendered a defense verdict. The Court of Appeal subsequently affirmed the defense verdict on the contract issue but reversed that part of the judgment that granted a nonsuit as to the cause for breach of confidence. The appellate court remanded this issue for a possible third trial. (Davies v. Krasna (1966) 245 Cal.App.2d 535, 54 Cal.Rptr. 37 (hereinafter Davies I).) We denied a petition for hearing. Defendant then obtained leave from the trial court to file an amended answer to assert the defenses of res judicata and estoppel. Concluding that the defense verdict respecting plaintiff's contract claim resolved all fact issues relevant to the breach of confidence claim, the trial judge granted defendant's motion for judgment on the pleadings. The Court of Appeal reversed (Davies v. Krasna (1970) 12 Cal.App.3d 1049, 91 Cal.Rptr. 250 (hereinafter Davies II)), and we denied a second petition for hearing.

Undaunted, defendant obtained leave to file still another amended answer, this one for the purpose of asserting the statute of limitations. ² Following a 1972 proceeding devoted solely to resolving the limitations issue (see Code Civ.Proc. § 597), the trial court held that the two-year limitations period prescribed in Code of Civil Procedure section 339, subdivision 1, barred plaintiff's breach of confidence claim.

Plaintiff once again seeks appellate relief. She argues that her action is one for constructive fraud and thus not governed by the limitations period of section 339, subdivision 1; in any event, she contends, Davies' cause of action did not arise until 1958 when defendant and others transformed Davies' story into a Broadway production and first reaped monetary rewards. Defendant, on the other hand, urges that the limitations period began to run no later than November 11, 1955, by which date Valentine Davies had learned of the alleged breach of confidence.

Logically, before determining the applicable statute of limitations, we should becide whether a cause of action lies against one who discloses an idea given him in confidence when such action does not rest upon contract expressed or implied in fact. The court has never resolved that issue. ³ Our latitude in this case, however, is substantially constrained by the law of the case, indeed doubly so, since plaintiff obtained two favorable appellate decisions. These decisions held that California recognizes a cause of action for breach of confidence, and that plaintiff had presented sufficient evidence at the 1962 trial to reach the jury on that cause of action.

We are asked, therefore, to resolve a statute of limitations issue with respect to a theory of liability never acknowledged or rejected by this court. Under normal circumstances, our first step would be to explore whether California law should recognize such liability. If we were to reject plaintiff's theory of action, however, we would violate the rule that a matter adjudicated on a prior appeal normally will not be relitigated on a subsequent appeal in the same case. ⁴ (People v. Shuey (1975) Cal., 120 Cal.Rptr. 83, 533 P.2d 211; People v. Durbin (1966) 64 Cal.2d 474, 477, 50 Cal.Rptr. 657, 413 P.2d 433; Steelduct Co. v. Henger-Seltzer Co. (1945) 26 Cal.2d 634, 642, 160 P.2d 804; Allen v. California Mutual B. & L. Assn. (1943) 22 Cal.2d 474, 481, 139 P.2d 321.) Application of that rule is particularly appropriate in the present case, since Two prior appellate decisions have resolved the issue as between these parties. ⁵

On the other hand, were we to declare that California law does recognize liability for breaches of artistic confidences, we would slight whatever interests cut against our declaring such liability, since the parties not surprisingly have foregone the presentation of arguments on the issue. We believe it unwise to create a new genre of liability without full argumentation on the question. Instead, we choose the admittedly intellectually unsatisfying course of resolving a statute of limitations issue with respect to a theory of liability not yet part of the fabric of this court's law.

Following the law of the case, we assume that plaintiff has stated a valid cause of action for breach of confidence. (Davies I, 245 Cal.App.2d at p. 550, 54 Cal.Rptr. 37.) When defendant received Valentine Davies' idea, with the understanding that this idea was confidential, defendant incurred an obligation not to use or disclose that idea without the creator's consent. (Davies I, 245 Cal.App.2d at p. 549, 54 Cal.Rptr. 37.) The obligation thus incurred lies not in the contractual language but is imposed by law (Davies II, 12 Cal.App.3d at p. 1054, 91 Cal.Rptr. 250); an action for its breach lies either in quasi-contract or in tort (see Thompson v. California Brewing Co. (1961) 191 Cal.App.2d 506, 508, 12 Cal.Rptr. 783).

We turn now to the question whether plaintiff's cause of action as so described is barred by the statute of limitations of Code of Civil Procedure section 339, subdivision 1. That statute provides a two-year limitation period for 'An action upon a contract, obligation or liability not founded upon an instrument in writing . . ..' Reasoning that plaintiff's complaint asserted an action upon an obligation not founded on an instrument of writing, and was filed more than two years after the breach of that obligation, the trial court held the suit barred by section 339, subdivision 1.

Plaintiff contends, however, that her suit should be classified as one for constructive fraud (see Civ.Code, § 1573) based upon breach of a duty arising from a confidential relationship, and is thus governed by Code of Civil Procedure section 338, subdivision 4, which provides a three-year period from discovery of the fraud. Although the trial court findings suggest that plaintiff's suit was untimely even under the more liberal provisions of that section, defendant pleaded only the two-year period of section 339, subdivision 1, as a bar to the complaint. An answer which cites only an inapplicable statute of limitations cannot raise an issue as to the timeliness of a complaint (see Code Civ.Proc. § 458; Davenport v. Stratton (1944) 24 Cal.2d 232, 247, 149 P.2d 4; Frustuck v. City of Fairfax (1963) 212 Cal.App.2d 345, 375, 28 Cal.Rptr. 357; DeCelle v. City of Alameda (1963) 221 Cal.App.2d 528, 533, 34 Cal.Rptr. 597). We must therefore determine whether a cause of action for breach of confidence is governed by the limitations period of section 339, subdivision 1, as the trial court concluded, or by section 338, subdivision 4.

The only two cases to consider this issue have applied the two-year limitation of section 339, subdivision 1. In Thompson v. California Brewing Co. (1957) 150 Cal.App.2d 469, 310 P.2d 436, plaintiff submitted an idea for the...