Kidron v. Movie Acquisition Corp.

• Decision Date: 13 December 1995
• Docket Number: No. B088344,B088344
• Citation: 47 Cal.Rptr.2d 752,40 Cal.App.4th 1571
• Court: California Court of Appeals Court of Appeals
• Parties: , 95 Cal. Daily Op. Serv. 9560, 95 Daily Journal D.A.R. 16,559 Adam KIDRON et al., Plaintiffs and Appellants, v. MOVIE ACQUISITION CORPORATION et al., Defendants and Respondents.

Page 752

47 Cal.Rptr.2d 752

40 Cal.App.4th 1571, 95 Cal. Daily Op. Serv. 9560,

95 Daily Journal D.A.R. 16,559

Adam KIDRON et al., Plaintiffs and Appellants, v. MOVIE ACQUISITION CORPORATION et al., Defendants and Respondents.

No. B088344.

Court of Appeal, Second District, Division 7, California.

Dec. 13, 1995.

Rehearing Denied Jan. 8, 1996.

Review Denied March 14, 1996.

Hillel Chodos, Los Angeles, Gina M. Putkoski Chodos and Michael A. Chodos, Santa Monica, for Plaintiffs and Appellants.

Kinsella, Boesch, Fujikawa & Towle and Cathleen Collins, Los Angeles, for Defendants and Respondents.

FRED WOODS, Associate Justice.

I INTRODUCTION

This case arises out of a dispute between partners in a joint venture to produce a failed television series entitled Catwalk. Kidron, ¹ the originator of the concept, complained that his former partners Franklin/Waterman, ² the producers of the series, stole his rights to Catwalk and ousted him from production of the series. Kidron filed his complaint naming 23 defendants.

Respondents Movie Acquisition Corp. and Initial Groupe (collectively, "MAC") ³ were two of the defendants named in Kidron's complaint. In July 1992, MAC agreed with Franklin/Waterman to distribute Catwalk in certain international territories. MAC maintained in the trial court and on this appeal that Kidron included MAC as a defendant for the sole reason that the distribution agreement existed, since MAC never performed the distribution agreement with Franklin/Waterman chiefly because of chain of title problems.

The trial court found that Kidron's evidentiary showing was insubstantial as to MAC's involvement in the Franklin/Waterman scheme and granted MAC's motion for non- suit at the conclusion of Kidron's case-in-chief followed by a dismissal. This appeal followed.

II FACTS AND PROCEEDINGS IN THE TRIAL COURT

A. MAC Entered Into The Distribution Agreement With No Knowledge Of Kidron's Dispute With Franklin/Waterman.

1. MAC's first notice of the existence of the proposed Series.

MAC first became aware of Catwalk in or about February 1992, in a meeting between Kidron and Christopher Cary, who was then a consultant for MAC. Kidron attended the meeting to "pitch" the series to Cary and to solicit Cary's assistance in inducing MAC to distribute Catwalk in certain international territories. At this initial meeting, Kidron explained that he had entered into a joint venture with Franklin/Waterman to produce Catwalk from an idea that Kidron claimed to be his own. Beyond these facts, Kidron did not explain the terms of his agreement with Franklin/Waterman, other than possibly to mention that Stallion International was the entity with whom MAC was likely to deal, if MAC agreed to distribute Catwalk.

Cary then recommended to MAC's officers that they meet with Franklin, Waterman and Kidron during a planned visit to Los Angeles in February 1992. At the meetings in Los Angeles, Kidron, Franklin and Waterman represented to MAC's representatives that they were all working together to produce Catwalk. They did not discuss the terms of the contractual relationship between Kidron and Franklin/Waterman and neither Kidron nor Franklin/Waterman ever gave MAC a complete copy of the agreement that set forth their respective rights and obligations. Additionally, there was no discussion about the identity of the entity with whom MAC would be contracting to distribute Catwalk. Kidron expressed no reservations about contributing his rights in Catwalk to the joint venture and, in fact, had told Cary that negotiations would have to be conducted with Franklin/Waterman, not with him.

2. MAC's distribution agreement with Franklin/Waterman, was signed by MAC without notice of the dispute.

During the period of March through July 1992, representatives of MAC negotiated the terms of a distribution agreement (the "Distribution Agreement") with Franklin/Waterman. At trial, Kidron admitted that he was aware that these negotiations were going on and was doing whatever was necessary to close the deal with MAC.

In its final form, which was signed on July 9, 1992, the Distribution Agreement provided, in pertinent part, that:

1. MAC would advance $3.6 million for the rights to distribute Catwalk in England, France and certain other foreign territories, with payment made as follows:

(a) 10 percent ($360,000) upon execution of the Distribution Agreement, provided that MAC had received (1) written confirmation that Catwalk had been fully financed, (2) a copy of the completion bond, and (3) a copy of the errors and omissions insurance policy; and

(b) 90 percent ($3,240,000) upon delivery to, and acceptance by, MAC of Catwalk.

2. MAC would provide an irrevocable letter of credit to secure payment of $3,240,000, to be made payable on the delivery to and the acceptance by MAC of the series.

3. MAC had approval rights with respect to the chain of title, the completion guarantor and the terms and conditions of the completion bond.

4. Franklin/Waterman warranted that it had the power and authority to enter into and perform the Distribution Agreement and to sell and assign the rights to Catwalk.

5. Franklin/Waterman warranted that there were no claims or litigation pending or threatened that would adversely affect MAC's right to distribute Catwalk; and

6. MAC and Franklin/Waterman would indemnify each other for, among other things, any damages arising out of breaches of their respective warranties.

At no time prior to the signing of the Distribution Agreement, nor during the two months thereafter, did Kidron or any representative of Franklin/Waterman inform MAC that a dispute existed between them. Indeed, when Kidron flew to London in March of 1992, to deliver a draft of the script to MAC, he perceived his existing problems with Franklin/Waterman to be serious enough to discuss them with his London counsel. Kidron elected not to reveal these problems to MAC, however. Even when the dispute had escalated to the point that Kidron was no longer working on Catwalk and he and Franklin/Waterman had engaged counsel to trade accusations of breach of contract, MAC was kept in the dark. Additionally, Franklin/Waterman, who purported to be representing the interest of the joint venture with Kidron, warranted in the Distribution Agreement that there were no threatened claims or litigation that would adversely affect MAC's right to distribute Catwalk. The motive for nondisclosure of the dispute by Kidron and Franklin/Waterman is readily discernible from the record. Kidron, Franklin and Waterman each acknowledged at trial that MAC's agreement to distribute Catwalk was essential to the deal and was the final distribution agreement needed to make the project viable.

B. MAC's Performance Of Its Obligations Under The Distribution Agreement.

1. Payment of the deposit.

Uninformed of Kidron's departure from the series and of the threats of legal action, MAC's counsel initiated a series of communications with Franklin/Waterman in August 1992, regarding each party's performance under the Distribution Agreement. As MAC's obligation to pay the 10 percent deposit was contingent on receipt of the three items--proof of financing, a copy of the completion bond and a copy of the errors and omissions policy--MAC asked that Franklin/Waterman satisfy these conditions before payment was made. MAC also requested documentary evidence of the chain of title, which MAC always required in its distribution deals. After several exchanges of correspondence, Franklin/Waterman was able to provide MAC with the three required items, i.e., the proof of financing, a satisfactory errors and omissions policy and a completion guarantee. Accordingly, MAC paid the 10 percent deposit on October 1, 1992, pursuant to its contractual obligations.

2. Chain of title problems.

Franklin/Waterman was never able to provide MAC with satisfactory proof of chain of title, despite numerous attempts and some contentious exchanges. While proof of chain of title was not a prerequisite for payment of the initial deposit, Franklin/Waterman was obliged to provide adequate documentation of title no later than delivery of Catwalk, to receive the balance of the moneys due. In an increasingly heated exchange of communications, Franklin/Waterman proffered numerous documents purporting to demonstrate chain of title, which MAC repeatedly rejected. On September 9, 1992, Stephen Waterman wrote to Alasdair Waddell, Chief Executive of MAC, expressing his frustration with MAC's counsel, Sonali Wijeyaratne, for refusal to accept chain of title. Waddell responded with a telephone call to Waterman, who disclosed for the first time that Kidron and Franklin/Waterman were in the midst of a disagreement, but that it did not relate to chain of title and they were trying to settle it.

Waddell was not satisfied, however, and MAC continued to press for additional chain of title documentation. Following a telephone conversation between Buddy Epstein, Franklin/Waterman's counsel, and Wijeyaratne, MAC drafted a letter dated September 22, 1992, in which MAC again set forth its requirements that chain of title be clear before Catwalk was delivered. Instead of sending this letter, Waddell telephoned Waterman to discuss the points raised in the letter. As reflected in Waddell's notes of his conversation, Waddell informed Waterman that while MAC was willing to pay the $360,000 deposit after receiving the errors and omissions policy and the completion guarantee, MAC would make no further payments until Franklin/Waterman had resolved its dispute with Kidron regarding chain of title.

MAC's insistence on this point never wavered. Epstein acknowledged MAC's continuing demand for title in a letter dated October 23, 1992. Moreover, Franklin/Waterman's continuing failure to resolve this issue was reflected in correspondence from MAC as late as March 11, 1993, in which the need for documentation for chain of title was repeated.

3. The...