Jos. Schlitz Brewing Co. v. Downey Distributor

• Citation: 109 Cal.App.3d 908,167 Cal.Rptr. 510
• Court: California Court of Appeals
• Decision Date: 29 August 1980
• Parties: JOS. SCHLITZ BREWING COMPANY, a corporation, Willie Davis Distributing Company, a corporation, Towne Distributing Company, a corporation, and Markstein Distributing Company, a corporation, Plaintiffs and Respondents, v. DOWNEY DISTRIBUTOR, a corporation, Lucille C. Governale, Individually and Wells Fargo Bank, N. A., and Lucille C. Governale, as Executors of the Last Will and Estate of L. Gerome Governale (Deceased), Defendants and Appellants. Civ. 57853.

Page 510

167 Cal.Rptr. 510

109 Cal.App.3d 908

JOS. SCHLITZ BREWING COMPANY, a corporation, Willie Davis Distributing Company, a corporation, Towne Distributing Company, a corporation, and Markstein Distributing Company, a corporation, Plaintiffs and Respondents, v. DOWNEY DISTRIBUTOR, a corporation, Lucille C. Governale, Individually and Wells Fargo Bank, N. A., and Lucille C. Governale, as Executors of the Last Will and Estate of L. Gerome Governale (Deceased), Defendants and Appellants.

Civ. 57853.

Court of Appeal, Second District, Division 1, California.

Aug. 29, 1980.

Hearing Denied Oct. 29, 1980.

Wylie A. Aitken and Garrett S. Gregor, Santa Ana, for defendants and appellants Downey Distributors and Lucille C. Governale

Alan R. Talt and J. E. Simpson, and Lawrence Drumm, Los Angeles, for plaintiffs and respondents.

TITLE, ^* Associate Justice.

Appellants Downey Distributor, a corporation, and Lucille C. Governale, individually and as executrix of the last will and estate of L. Gerome Governale, deceased, defendants and cross-complainants in this action, appeal from a summary judgment entered against them on the complaint and cross-complaint herein in favor of Jos. Schlitz Brewing Company, plaintiff and cross-defendant.

FACTUAL BACKGROUND

Jos. Schlitz Brewing Company (Schlitz) is a manufacturer of beer. Downey Distributor (Downey) was a corporation engaged as a wholesale beer distributor in which the sole stockholders were the Governales. In August 1962, a written agreement was entered Schlitz and Downey continued to do business together from 1962 to April 1974. During this time several guaranties were executed by Mr. and Mrs. Governale in favor of Schlitz, the last of such guaranties allegedly being executed by them in August 1970, in the amount of $500,000. From time to time during the relationship, Downey was frequently unable to pay its account to Schlitz. Its financial problems continued to grow, and at least by late 1973 or early 1974, Downey's bank reduced its line of credit and it was unable to continue to purchase products from other beer and liquor companies from whom it also purchased inventory for resale. In March 1974, Downey gave Schlitz a check for $13,561.60, which was returned for insufficient funds. This was not the first time that Downey had given an N.S.F. check to Schlitz. At that time Schlitz informed Downey that it would have to make the check good and bring its account current before any new shipments were made to it. However, between that time and April 15, 1974, Downey made only some $1,200 of the check good, and its indebtedness to Schlitz at that time was in excess of $120,000. Schlitz had been demanding audited financial statements from Downey for some time without success, the last demand being in a letter of March 5, 1974, in which Schlitz advised Downey that if it failed to provide the audited financial statements by November 15, 1974, Schlitz would withdraw its open account credit accommodations from Downey.

into between Schlitz and Downey entitled "Declaration of Terms," which set forth various terms and conditions under which Downey would purchase beer from Schlitz for distribution to retail outlets. The agreement provided that either party could terminate at any time without cause and without notice. It further provided that Schlitz was granting no franchise or exclusive territory to Downey and that Schlitz could sell its products to others in the same trade area in which Downey might sell such products. In February 1973, a supplement to the agreement was executed by the parties to comply with a new California statute, which supplement specified a territory in which Schlitz products could be distributed by Downey, but specifically provided that it did not give an exclusive right to Downey to sell in the described territory, the territory being in the Downey area of Los Angeles County.

Downey's financial condition continue to deteriorate in March and April 1974, during which time Mr. Governale was attempting to find a purchaser for the Downey business. Discussions were had by Mr. Governale with several other Schlitz' distributors in an effort to sell the Downey business to them, but no sale ever materialized. On April 11, 1974, Schlitz notified Downey by registered mail that it was terminating their buyer/seller relationship effective April 15, 1974, because of the financial condition of Downey which made it necessary for Schlitz to revoke their credit arrangements and to stop shipments to Downey. Downey closed its doors on April 12, 1974. Schlitz then arranged for three of its adjacent wholesaler distributors to service the Downey customers with Schlitz beer. Arrangements were made for the three distributors to each pay one third of the Downey indebtedness to Schlitz, while Schlitz retained the right to collect the same and to credit such collections to said distributors.

Mr. Governale died shortly thereafter, and this action was filed by Schlitz against Downey for the open account balance in the sum of $121,415.76. Mrs. Governale and the estate of Mr. Governale were joined as defendants on the basis of the guaranty mentioned above. Downey cross-complained against Schlitz and others for breach of contract, interference with a business advantage, fraud, and conspiracy. Schlitz moved for a summary judgment on its complaint as well as the cross-complaint, and cross-complainants also moved for summary judgment. The trial court denied defendants' and cross-complainants' motion for summary judgment and instead granted Schlitz' motion for summary judgment. Judgment was entered in favor of Schlitz in the sum of $121,415.76 with interest of $42,070.56 as well as attorneys' fees in the sum

of $25,000. This appeal by Downey and Mrs. Governale followed.

ISSUE

Are there any triable issues of fact remaining in the action as to Downey's causes of action on its cross-complaint against Schlitz?

RESOLUTION OF ISSUES

I

Section 437c of the Code of Civil Procedure provides that a motion for summary judgment ". . . shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

"The matter to be determined by the trial court on a motion for a summary judgment is whether facts have been presented which give rise to a triable factual issue. The court may not pass upon the issue itself. Summary judgment is proper only if the affidavits in support of the moving party would be sufficient to sustain the judgment in his favor and his opponent does not by affidavit show facts sufficient to present a triable issue of fact. The affidavits of the moving party are strictly construed and those of his opponent liberally construed, and the doubts as to the propriety of summary judgment should be resolved against granting the motion." (Slobojan v. Western Travelers Life Ins. Co. (1969) 70 Cal.2d 432, 436-437, 74 Cal.Rptr. 895, 898.)

"On (the) motion for a summary judgment, if a single issue of fact is found, the trial court is powerless to proceed and must allow such issue to be tried." (Lynch v. Spilman (1967) 67 Cal.2d 251, 271, 62 Cal.Rptr. 12, 25, 431 P.2d 636, 649. See also Weaver v. Superior Court (1979) 95 Cal.App.3d 166, 156 Cal.Rptr. 745; Walsh v. Walsh (1941) 18 Cal.2d 439, 116 P.2d 62.)

II

With the above rules in mind, we examine the declarations filed by the parties in support of as well as in opposition to the Schlitz motion for summary judgment. It should be noted preliminarily that while Downey's cross-complaint contains a number of causes of action based upon various legal theories such as breach of the written agreements, breach of oral agreements, fraud, negligent misrepresentation, wrongful interference with a business advantage or relationship and conspiracy, all of the causes of action have a common threat consisting of the same factual allegations. The gist of these allegations is that over the 19 years of the business relationship between Schlitz and Downey, they arrived at an oral agreement to the effect that Downey had the right to be the wholesale distributor in the Downey area; that this was an assignable right which Downey could sell to a third party for a consideration if the third party was approved by Schlitz; that it was so represented to Downey by authorized personnel of Schlitz; that in addition to such specific oral agreement, there existed an implied covenant that Schlitz would deal with Downey in good faith in carrying out this understanding; that in violation of such oral agreement and representations and the implied covenant to deal with Downey in good faith, Schlitz terminated these rights of Downey at a time when Downey had received an oral offer from one Michaels to purchase Downey's distributorship; that at the time of such termination, Schlitz knew of the offer from Michaels and terminated Downey's rights with the intention to deprive Downey of the consideration which would be received for said distributorship and instead transferred such distributorship to three other distributors of Schlitz, all to the substantial damage of Downey.

Many of the material facts in the dispute between the parties are set forth in the declarations filed by Schlitz in support of its motion and are uncontroverted. These uncontroverted facts include the long relationship between the parties which began in 1962 with the execution of the Declaration of Terms; the execution of the supplement thereto in 1972; that Downey ran out of money in early 1974, was unable to service its customers and had its bank credit lines substantially reduced; that N.F.S....