Mayes v. Sturdy Northern Sates, Inc.

• Decision Date: 28 March 1979
• Citation: 91 Cal.App.3d 69,154 Cal.Rptr. 43
• Court: California Court of Appeals Court of Appeals
• Parties: William J. MAYES, Plaintiff, Cross-defendant and Respondent, v. STURDY NORTHERN SALES, INC., et al., Defendants, Cross-complainant and Appellants. Civ. 41990.

Page 43

154 Cal.Rptr. 43

91 Cal.App.3d 69

William J. MAYES, Plaintiff, Cross-defendant and Respondent, v. STURDY NORTHERN SALES, INC., et al., Defendants, Cross-complainant and Appellants.

Civ. 41990.

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

March 28, 1979.

Philip J. Scott, Burbank, Harry W. Brainard, Encino, for defendants, cross-complainant and appellants.

Lounibos & Lounibos, Petaluma, for plaintiff, cross-defendant and respondent.

DEAL, ^* Associate Justice.

Sturdy Northern Sales, Inc., Sturdy Dog Foods, Inc., Richard E. Walther, and Randy Walther appeal from a judgment in the net amount of $98,751, together with costs, in favor of respondent William J. Mayes.

On January 29, 1975, Mayes filed a complaint for damages against appellants; he alleged breach of a franchise agreement and conspiracy to destroy his business. Defendants answered with a general denial except for Sturdy Northern Sales, Inc.'s admission that it entered into the agreement and was bound thereby. Sturdy Northern filed a cross-complaint alleging that Mayes had breached the agreement; the cross-complaint was dropped at trial. The case was tried before the court which filed its memorandum decision on February 14, 1977, in favor of Mayes. Without considering objections to proposed findings of fact and conclusions of law filed by defendants, the court signed and filed the proposed findings and conclusions and the judgment which was entered on March 10, 1977. Defendants' motion to set aside and vacate the judgment was granted. The court made minor changes in the findings and signed a similar judgment which was entered on May 3, 1977. A motion for new trial was denied.

Defendants' notice of appeal was filed March 25, 1977, from the March 10th judgment. Since the judgment was set aside on defendants' motion, they have appealed from a nonexistent judgment. Nevertheless, we can construe their notice as referring to the appealable judgment of May 3rd. California Rules of Court, rule 2(c) provides: "A notice of appeal filed prior to rendition of the judgment, but after the judge has announced his (or her) intended ruling, may, in the discretion of the reviewing court for good cause, be treated as filed immediately after entry of the judgment." Both parties have treated this appeal as properly filed. Therefore, no prejudice has resulted from the faulty procedure. "Good cause" for accepting the appeal will be presumed in the absence of a showing of prejudice. (Windsor Mills v. Richard B. Smith, Inc. (1969) 272 Cal.App.2d 336, 339, 77 Cal.Rptr. 300.)

STATEMENT OF FACTS

Respondent Mayes started working in 1963 for Sturdy Northern Sales, Inc. (hereafter Sturdy Northern) as a driver and salesman for dog food manufactured by Sturdy Dog Foods, Inc. (hereafter Sturdy Foods) at its San Leandro plant. On September 15, 1967, Mayes, Sturdy Northern, and Craig Sandford (then owner of Sturdy Northern and Sturdy Foods) entered into a franchise agreement. The agreement which grants Mayes an exclusive franchise to "sell, handle and deal in Sturdy Dog Food products" within a specified Northern California area, was requested by Mayes, but prepared by the attorney for Sturdy Northern. Mayes' attorney reviewed the agreement, but the following paragraphs in dispute were not altered:

"4. Supply of Merchandise : The party of the second part (Sturdy Northern) shall provide all necessary merchandise to the party of the first part (Mayes) who shall with due diligence make sales of the product. The party of the first part shall purchase only Sturdy Dog Food products and shall purchase all his necessary merchandise from the party of the second part who shall reasonably provide the same. . . ."

"6. Chain Stores : It is understood that status quo shall remain the same on Lucky and Safeway who are now being serviced as headquarters accounts."

In December 1971, Sturdy Northern and Sturdy Foods were purchased by Richard and Randy Walther (father and son). Richard Walther's father also purchased a third interest, but he was apparently not active in the business. Both Sturdy Northern and Sturdy Foods are California corporations having offices located at the Sturdy Foods plant in Burbank, California. Sturdy Northern operated a dog food manufacturing plant in San Leandro, California. Richard was president of both corporations and operated out of Burbank. Randy was vice-president of both corporations and ran the San Leandro plant. Mayes was one of three Northern California distributors who obtained their supplies from the San Leandro plant, which also had limited accounts with distributors in Oregon and Washington and with Lucky Stores, Safeway and United Grocers. On April 26, 1972, Mayes exercised his option to renew the franchise agreement until September 15, 1977, and the exercise was acknowledged by Richard.

Under the Walthers' ownership, Mayes or his employee came to the plant in San Leandro two days a week to pick up the food that he had ordered. Between pickup and delivery, he stored the food in a rented warehouse in Santa Rosa. Mayes steadily increased the amount of food he was distributing, from roughly 40,000 pounds a month in 1963 to 120,000 pounds in 1973, an average increase of about 20 percent a year.

When the Walthers bought Sturdy Northern, Mayes had been receiving a 2 percent discount if he paid his bill within 10 days. Around August 1974 Mayes was informed verbally that the discount would be discontinued. Mayes' attorney sent a letter to Sturdy Northern requesting confirmation of the policy change. The reply from Richard was ungracious and uninformative: "I will certainly give you and your client my immediate attention to the matters referred to in your letter dated September 10th, 1974, as well as a few other unmentioned, relevant issues as follows: One, you've just sent your letter to the right place. Two, you've just aborted our good-faith efforts at whatever short-lived business relationship that may have existed. Three, you've just raised issues on which you may take whatever action you deem appropriate under the circumstances." Mayes continued to take the discount until October 29, 1974, when he received written notice of its termination.

The letter from Mayes' attorney had also inquired about the shortages that Mayes began to experience in June 1974. The evidence reveals that Mayes was shorted on his orders for each month from June 1974 through January 1975, except for August 1974, when he received his full order. Mayes met with Richard Walther in July to discuss the problems. The testimony about the conference is in conflict. Richard testified that Mayes had refused to take some of the oversupply which had been created by overproduction and by the termination of the Washington and Oregon accounts. He was "real disappointed" and believed that Mayes showed thereby that he was not "on the team." Mayes testified that he had told Richard that the shortages made it impossible for him to place larger orders. At a later time when he asked for more he was told that the amount given was "all you can have." By November, Mayes was receiving only 61 percent of his order. In January 1975 Mayes decided to stop distributing because he "couldn't get any food." His trucks, which could carry 16,000 pounds each, were given only 2,000 pounds on each of two trips in early January, and "when you get 4,000 pounds in two truckloads, I am out of business." Before he gave up the business, he had discontinued some customers because of the shortages.

Randy Walther testified that part of the reason for the shorting was the dispute over the discount. He had refused some deliveries to Mayes because he wasn't certain that a check for $10,000 from Mayes had actually reached Burbank. Another factor was Randy's belief that Mayes had failed in the past to pick up available supplies. This belief was based in part on the July conversation between Richard and Mayes mentioned above. Mayes' hiring of a lawyer was also a sore point. Other reasons for the shortages were increased distribution in Southern California and breakdowns in the Burbank plant and increased demand from the house accounts.

For about six years prior to November 15, 1974, Mayes had supplied 6 Safeway stores in his area with 8-pound quick kibble, 20- and 50-pound regular and quick kibble, and 4-pound regular and quick. Sturdy Northern had serviced an unspecified number of Safeway stores as a house account (i. e., direct deliveries from the San Leandro plant) for the 8-pound sacks of regular kibble. Carl Roepke, a food broker, who had been associated with Sturdy Northern for about 18 years, testified that Safeway had tolerated the "store-door" deliveries from Mayes, but had expressed a strong preference for all deliveries to a central warehouse for distribution to individual Safeway stores. Randy and Richard discussed the franchise agreement provision relating to house accounts and determined that they were not limited in what and how they could sell to Safeway. Randy mentioned to Mayes in August that Sturdy Northern would be selling to Safeway. A pilot project for 60 Safeway stores was commenced through Roepke in November and in January 1975 had extended to the 220 Northern California stores. On November 15, 1974, Safeway notified Mayes that it would accept no more deliveries from him. At about this time, the price of the product was raised to the distributors, but not to Safeway or Sturdy Foods in Burbank who also continued to receive the discount that the distributors no longer enjoyed. When the Walthers agreed to the change of policy with Safeway, they were aware that it would hurt Mayes' business.

By Randy's testimony, food was usually available during the months in question. Sturdy Northern had installed a new oven in the San Leandro plant and had achieved a 30 percent increase in production by November 1974. This improvement was the result of the distributors' representations in 1971 th...