Haas' Estate v. Metro-Goldwyn-Mayer, Inc., METRO-GOLDWYN-MAYE

Citation617 F.2d 1136
Decision Date29 May 1980
Docket NumberMETRO-GOLDWYN-MAYE,INC,No. 78-1321,78-1321
Parties28 UCC Rep.Serv. 1513 ESTATE of Arthur Dwight HAAS, Deceased, Plaintiff-Appellant, v., Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Jenkens & Gilchrist, William D. Sims, Jr., Dallas, Tex., for plaintiff-appellant.

Stroud & Smith, Dan McElroy, Dallas, Tex., Jeffrey L. Levine, Los Angeles, Cal., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before TUTTLE, FAY and THOMAS A. CLARK, Circuit Judges.

THOMAS A. CLARK, Circuit Judge:

We are asked to decide whether the Estate of Arthur Dwight Haas (hereinafter the "Haas Estate") is entitled to recover from Metro-Goldwyn-Mayer, Inc. (hereinafter "MGM") $20,665.84 which the appellant contends MGM improperly paid directly to Mr. Lewis Jeffrey Selznick, son of the late movie producer David O. Selznick. The district court granted MGM's motion for summary judgment on the ground that Mr. Haas had not properly notified MGM of the assignment under § 9-318(3) of the Uniform Commercial Code. We affirm.

As most filmgoers certainly know, David O. Selznick's greatest film triumph was the 1939 movie Gone With the Wind. In an effort to resolve certain disputes between David Selznick's company, The Selznick Company, Inc., and MGM concerning the radio and television rights to the novel Gone With the Wind, they agreed in 1963 that The Selznick Company would become entitled to a royalty payment of $200,000 by MGM upon the first television broadcast in this country of the movie Gone With the Wind. The agreement also provided that should the movie first be telecast outside the United States, $50,000 of the $200,000 would be payable immediately with the remaining $150,000 payable upon the first United States telecast. The Selznick Company was liquidated shortly after David Selznick's death in 1965. The Selznick Company's rights under the 1963 Agreement ultimately passed to David Selznick's various legatees, including his son, Lewis Jeffrey Selznick. Thus, upon the first telecast of Gone With the Wind, Lewis J. Selznick would become entitled to a share of the $200,000 royalty payment from MGM. His share constituted 23% of 59.901% of the $200,000, or $27,554.46.

In early 1975, Mr. A. D. Haas agreed to assist Lewis Jeffrey Selznick ("Selznick") in several business ventures, including a Dallas, Texas, retail clothing store. As part of this arrangement, Haas loaned Selznick several hundred thousand dollars. To secure the loans Selznick granted Haas a security interest in his right to payment of his share of the television royalties from the first television broadcast of Gone With the Wind. However, at that time both parties had no way of knowing exactly when or where the movie would be shown first on television.

The security agreement, executed on June 23, 1975, specified that Lewis J. Selznick "GRANTS AND ASSIGNS" to Haas, "a security interest in the following described property . . ." :

All of Debtor's (Selznick's) rights in and under the MGM Agreement . . . including without limitation, the right to receive income or profits, whether such rights are now owned or hereafter acquired and whether such income or profits are distributed in cash or property, and any and all proceeds or accounts, arising from or by virtue of the sale or other disposition of, or from any insurance payable with respect to or from the collection of, the Collateral.

In addition, Selznick and Haas jointly notified MGM's legal department of Haas' security agreement by the following letter:

June 23, 1975

Metro-Goldwyn-Mayer, Inc.

10202 West Washington Blvd.

Culver City, California 90230

Attention: General Counsel

Re: Telecast of "Gone With The Wind"

Gentlemen:

Metro-Goldwyn-Mayer, Inc. ("MGM") has entered into a certain agreement (the "Agreement"), dated December 13, 1963, with The Selznick Company, Inc. (the "Company") under which the Company will be entitled to a payment from MGM of $200,000.00 upon the first television broadcast in the United States of the photoplay "Gone With The Wind" (the "Film"), with $50,000.00 of such $200,000.00 due to the Company upon the first foreign telecast of the Film if such telecast takes place prior to the first telecast in the United States. Pursuant to the Agreement, the Company also owns a 50% interest in the net profits of MGM from the exploitation of certain radio and television rights related to the Film.

All rights of the Company under the Agreement have now passed to the legatees, including L. Jeffrey Selznick, of David O. Selznick, Deceased. L. Jeffrey Selznick has granted to A. D. Haas a security interest in all of the rights of L. Jeffrey Selznick under the Agreement. We, therefore, request that MGM do the following:

(1) Notify Mr. Haas, in advance, of any payments to be made under the Agreement and disburse the portion due to Mr. Selznick as Mr. Haas and Mr. Selznick shall jointly direct.

(2) Notify Mr. Haas of any event which materially affects the rights of Mr. Selznick under the Agreement, including any arrangement by MGM for exploitation of radio or television rights related to the Film.

(3) Acknowledge receipt of this notification by executing the enclosed copy in the space provided and returning it to A. D. Haas at the address indicated below.

Sincerely,

/s/ L. Jeffrey Selznick

L. Jeffrey Selznick

P. O. Box 800

Montego Freeport Shopping Centre

Montego Bay 2, Jamaica W. I.

/s/ A. D. Haas

A. D. Haas

2015 One Main Place

Dallas, Texas 75250

Received and Acknowledged this __ day of June, 1975.

METRO-GOLDWYN-MAYER INC.

By: ______________

Haas also filed a financing statement with the Commercial Code Division of the California Secretary of State's office in Sacramento.

In response to the Selznick and Haas June 23 joint letter, MGM wrote Haas on July 10, 1975, that, "(w)hat you are asking MGM to do is to assume contractual obligations in addition to those set forth in the December 13, 1963 Agreement, and we regret to advise that we are not willing to do so." Furthermore, since in the past MGM had only dealt with a Santa Monica attorney named Barry Brannen concerning the administration of the 1963 royalty agreement, MGM advised Haas that it would only accept payment instructions from Mr. Brannen and that, "we (MGM) plan to forward Mr. Lewis Jeffrey Selznick's share of such payments when and as due to Mr. Brannen for distribution."

Neither Haas nor Selznick made any attempt either to respond to MGM's blunt refusal to comply with the June 23 request for prepayment notification or to contact Mr. Brannen to pursue the matter of the attempted assignment.

Subsequently, although the sequence of events is not entirely clear from the record, Mr. Haas died, Mr. Selznick defaulted in his obligations to Mr. Haas and/or the Haas Estate, and the Haas Estate filed suit against Mr. Selznick in Texas state court and obtained a judgment of $222,896.00

Sometime prior to the entry of the Texas judgment, Gone With the Wind was first telecast overseas. Pursuant to the terms of the 1963 Agreement, Lewis Selznick became entitled to payment of his share of $50,000 in royalties, or $6,888.62. Consistent with its prior refusal, MGM made no attempt to comply with the Haas and Selznick joint letter before drawing a check dated October 6, 1975, payable to Selznick, and forwarding the same to Mr. Brannen on October 9, 1975. The check was then transmitted to Selznick who ultimately endorsed the check over to the Haas Estate. There is no evidence in the record to indicate that either Selznick or the Haas Estate protested MGM's or Mr. Brannen's handling of this first royalty payment.

Gone With the Wind was first telecast in this country in June, 1976. At that time MGM paid the remaining $150,000 to David Selznick's legatees, including $20,665.84 to Lewis Jeffrey Selznick. This time, however, MGM sent its check directly to Selznick at his home in Jamaica. Instead of endorsing the check over to the Haas Estate, Selznick deposited the check in his bank account and did not apply those funds to his indebtedness to the Haas Estate.

Thereafter, apparently unable to obtain the cooperation of Mr. Selznick, the Haas Estate wrote MGM on November 3, 1976, advising the company that Selznick had defaulted in his obligations to the Estate. The Haas Estate requested that all payments due Selznick be...

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