Masterson v. Pig'n Whistle Corp.

• Decision Date: 16 June 1958
• Citation: 161 Cal.App.2d 323,326 P.2d 918
• Court: California Court of Appeals Court of Appeals
• Parties: John MASTERSON, John Reddy and John Nelson, individually and as co-partners doing business under the co-partnership name of Masterson, Reddy & Nelson, Plaintiffs and Respondents, v. PIG'N WHISTLE CORPORATION, a corporation, John E. Savage and August J. O'Connor, Defendants and Appellants. Civ. 22539.

Page 918

326 P.2d 918

161 Cal.App.2d 323

John MASTERSON, John Reddy and John Nelson, individually and as co-partners doing business under the co-partnership name of Masterson, Reddy & Nelson, Plaintiffs and Respondents, v. PIG'N WHISTLE CORPORATION, a corporation, John E. Savage and August J. O'Connor, Defendants and Appellants.

Civ. 22539.

District Court of Appeal, Second District, Division 3, California.

June 16, 1958.

Hearing Denied Aug. 13, 1958.

George J. Hider, Los Angeles, for appellants.

Fendler & Lerner, Harold A. Fendler, Don Lowry, Beverly Hills, for respondents.

SHINN, Presiding Justice.

The plaintiffs in this action are John Masterson, John Reddy and John Nelson, suing individually and as partners doing business under the partnership name of Masterson, Reddy & Nelson. The defendants are Pig'n Whistel Corporation and two of its officers and directors, John E. Savage, President, and August J. O'Connor, Secretary. The action is for damages for malicious prosecution of a suit for breach of contract. In a jury trial, plaintiffs were awarded damages against all defendants in the sum of $48,341.29. Defendants appeal from the judgment entered upon the verdict and the denial of their motion for judgment notwithstanding the verdict.

In the fall of 1950, plaintiffs were engaged in the business of originating, producing and distributing radio and television programs in the Los Angeles area. They developed a television show called 'Animal Fair,' featuring trained animals, and offered it to Ad Associates, Pig'n Whistle's authorized advertising agency, for sponsorship by the corporation. Negotiations were carried on between John Nelson, on behalf of the partnership, and Gordon Horney, representing the agency. On October 31, 1950, the board of directors of Pig'n Whistle passed a resolution authorizing the sponsorship of 'Animal Fair' for a period of 13 weeks, on condition that Pig'n Whistle have a 'preferential right for renewal for additional thirteen weeks on the same station, for the same hour and program.'

The following day, November 1, Pig'n Whistle agreed to sponsor 'Animal Fair' in the Los Angeles area, the program to be broadcast over Station KNBH on Wednesday nights from 7 to 7:30 p. m. for a period of 13 successive weeks, commencing November 8, 1950, at a production cost to Pig'n Whistle of $450 a week for the first 6 weeks and $600 a week for the remaining 7 weeks. The agreement consisted of a typewritten advertising order signed by Horney, containing the above provisions, and a two-page letter agreement subscribed by Horney, Nelson and Savage, whereby plaintiffs undertook to produce the program and to provide suitable scripts and performers for each show. At the foot of the order, under the heading 'Special Instructions,' appeared the following: 'It is understood Ad Associates has the option to renew this agreement for a successive 13-week cycle at $600.00 per week.' (The sums to be paid Masterson, Reddy & Nelson were separate and apart from the cost of air time, for which Pig'n Whistle agreed to pay the station $600 a week.)

On December 20, Nelson sent Horney a letter 'to confirm our verbal understanding as regards our program Animal Fair currently on KNBH, 7:00-7:30 PM Wednesday nights.' We have set forth the letter in the margin. ¹

On January 31, 1951, Variety, a daily newspaper devoted to news of the entertainment world, announced that the Ralston Purina Company was scheduling a new television show called 'Pets and Pals Animal Fair,' to be broadcast over 62 stations in the American Broadcasting Company television network, commencing March 4 or 11. The article referred to the show as a 'Masterson-Reddy-Nelson package.'

The next day, February 1, the board of directors of Pig'n Whistle authorized renewal of 'Animal Fair' for the additional 13-week period contemplated in the November 1 agreement. On February 13, Horney sent plaintiffs a type-written advertising order, headed 'Confirmation of Agreement'; the order renewed Pig'n Whistle's sponsorship for a 13-week cycle ending May 2. The order also provided: 'It is understood Ad Associates has the option to renew this agreement for a successive 13-week cycle at $600.00 per week.' Three days later, Horney sent plaintiffs the following telegram: 'Client and myself feel disposed to protect rights to use of Pets and Pals Animal Fair name and format.'

Nelson replied to Horney by letter dated February 23, accepting, on behalf of the partnership, renewal of the order until May 2. However, with respect to the request for an option for a third 13-week period, Nelson wrote: 'I am afraid that, in view of the confused state of affairs at present, we cannot go along with you in that, at this time.'

Meanwhile, John Masterson had been negotiating with the Gardner Advertising Company with a view toward sponsorship of 'Animal Fair' on a national basis by Gardner's client, the Ralston Purina Company. These negotiations commenced in December 1950. On February 28, 1951, plaintiffs entered into a written contract with Gardner to produce 'Animal Fair,' to be retitled 'Your Pet Parade,' over the American Broadcasting Company television network. The contract was to extend for 5 years, divided into consecutive 13-week cycles, and was cancellable by Gardner upon written notice given at least 35 days prior to the last scheduled broadcast date in any 13-week cycle. Plaintiffs were to receive $3,400 a week during the initial cycle, and thereafter were to receive payments on a graduated scale rising to $6,800 a week during the last year of the contract. The agreement with Gardner also provided that plaintiffs were to furnish: 'The exclusive television rights in and to the program, and the right to telecast the same throughout the United States, except in Los Angeles, California, where Producer shall have the right to continue the current broadcasting of the program series until Producer arranges for the discontinuance or other disposition thereof.'

The first broadcast of 'Your Pet Parade' was scheduled for Sunday, March 11. On March 16, Nelson sent a letter to Horney, informing him that 'our present contract commitments require us to terminate our arrangement with you, at the earliest possible date' and in replying to the request for a third series that 'it will not be possible for us to present the show for you after the completion of the present cycle.' Nelson also wrote: 'Frankly, the Agency of the national sponsor of 'Your Pet Parade' was reluctant to enter into any deal that did not give it an immediate exclusive throughout the country. It was only after considerable discussion that we were able to persuade the Agency to go along with us at all. Since it was to our own interest to continue with you, we naturally made every effort to obtain an arrangement whereby the two programs could be broadcast, concurrently, but that just wasn't possible. In view of the above you will appreciate that our arrangement will end with the 26th program; that is after the program of May 2, 1951.'

April 2, 1951, O'Connor sent a letter to plaintiffs, signing it in his capacity as Secretary of Pig'n Whistle. We have set forth the letter in the margin. ²

On April 23, Horney wrote plaintiffs at their New York office, informing them that his client intended to bring proceedings to restrain any breach of the contract. Plaintiffs consulted their New York attorneys, who advised them, in a lengthy written opinion, that they were under no obligation to Pig'n Whistle after May 2. Nelson sent a copy of the opinion to Savage, stating in a covering letter that plaintiffs would be governed by their lawyers' advice.

May 4, 1951, O'Connor sent a letter to Station KNBH, advising that Pig'n Whistle had the exclusive right to sponsor 'Animal Fair' in Los Angeles, and stating that the corporation would consider any showing of kinescopes of the same or a similar program over KNBH as rendering valueless its $37,000 investment in the show and as a breach of contract on the part of Masterson, Reddy & Nelson. The sales manager of the station, one Norman, made a written offer to Pig'n Whistle to accept continued sponsorship of 'Animal Fair' at a production cost of $900 a week, but the offer was refused.

On June 25, 1951, Pig'n Whistle filed an action against plaintiffs, as partners and individually, seeking $81,700 damages for breach of contract. In its amended complaint, which was verified by O'Connor as Secretary of the corporation, Pig'n Whistle alleged: (1) On or about November 1, 1950, the parties entered into a contract which was partly oral and partly in writing. The contract provided that 'Animal Fair' was to be produced and broadcast 'for a cycle of 13 successive weeks and for further cycles of 13 weeks as long as plaintiff should desire to sponsor said show,' and that Pig'n Whistle was to have 'The exclusive right to sponsor the show named Animal Fair in the Los Angeles area as long as plaintiff should continue to sponsor the same.' (2) Pig'n Whistle renewed the contract for a second 13-week cycle and during the 26 weeks of its sponsorship 'Animal Fair' became a valuable advertising asset. (3) Pig'n Whistle notified Masterson, Reddy & Nelson of its desire to sponsor 'Animal Fair' for a third 13-week cycle, but they failed and refused to broadcast the program under the sponsorship of Pig'n Whistle after the expiration of 26 weeks. (4) Pig'n Whistle's expenditure of $31,710 on 'Animal Fair' has been rendered entirely valueless on account of this failure and refusal, and the corporation has been damaged in that amount. In a second cause of action, Pig'n Whistle sought recovery of an additional $50,000 damages, representing loss of benefits to its advertising program.

Masterson, Reddy & Nelson answered, denying that they had agreed to give Pig'n Whistle the right to sponsor 'Animal Fair' for so long as it desired to do so, and alleging that the written contract of November 1, 1950,...