Morey v. Vannucci

• Decision Date: 10 June 1998
• Docket Number: No. A076713,A076713
• Citation: 64 Cal.App.4th 904,75 Cal.Rptr.2d 573
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Daily Journal D.A.R. 6102 Stephen M. MOREY et al., Plaintiffs, Cross-defendants and Appellants, v. Neilo VANNUCCI et al., Defendants and Respondents; Bay Cities Building Materials Co., Inc., Defendant, Cross-complainant and Respondent.

Page 573

75 Cal.Rptr.2d 573

64 Cal.App.4th 904, 98 Daily Journal D.A.R. 6102

Stephen M. MOREY et al., Plaintiffs, Cross-defendants and Appellants, v. Neilo VANNUCCI et al., Defendants and Respondents Bay Cities Building Materials Co., Inc., Defendant, Cross-complainant and Respondent.

No. A076713.

Court of Appeal, First District, Division 4, California.

June 10, 1998.

Review Denied Sept. 23, 1998.

Edward D. Hume, Redwood City, for Plaintiffs, Cross-defendants and Appellants.

Dek Ketchum, Jenny D. Smith, Law Offices of Dek Ketchum, Redwood City, for Defendants and Respondents and for Defendant, Cross-complainant and Respondent.

McGUINESS, Associate Justice.

Stephen M. Morey (Morey) and the Morey Group ¹ appeal from a judgment entered on a jury verdict in favor of respondents Bay Cities Building Materials Co., Inc., (Bay Cities), Neilo Vannucci, Neil Vannucci, Nino Campagna, and William Monlux, on both appellants' complaint for breach of a trucking contract (the contract) and respondent Bay Cities' cross-complaint for declaratory relief as to the meaning of a key term used in the contract. ² Appellants contend the trial court erred in submitting to the jury the interpretation of the subject term as used in the contract and in refusing to give appellants' requested jury instructions defining the term as a matter of law. We conclude the trial court was correct in submitting the interpretation of the contractual term to the jury as a disputed issue of fact on conflicting evidence extrinsic to the contract. We therefore affirm the judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 1963, appellant Morey's grandfather founded Peninsula Building Materials. During the mid-1970's, Morey worked for CAP Concrete (CAP), a subsidiary of Peninsula Building Materials that dealt in the ready-mix concrete business. Morey became owner and president of CAP in 1977, after the death of his father.

In 1981, Morey purchased Universal Transport, a cement trucking company. CAP began losing money, and by 1983 was in serious financial difficulty and facing possible bankruptcy. Morey consequently decided to sell CAP's South San Francisco ready-mix concrete plant to Bay Cities for between $1.4 and $1.5 million. On April 15, 1983, as part of the consideration for this sale, Bay Cities entered into 99-year trucking and "batch-out" agreements with Morey giving him and any entities controlled by his family certain privileges. Although both CAP and Bay Cities were represented by counsel, the actual agreements were negotiated by the parties themselves in a series of meetings without the assistance of their attorneys.

The trucking agreement contained a provision entitled "Option to Transport" (the option provision), giving CAP and Morey the opportunity to provide Bay Cities with certain "transportation activities." Specifically, the option provision stated that Bay Cities "hereby grants" CAP and the Morey Group "the option" to supply transportation services for hauling cement and aggregate to Bay Cities' facilities in Colma, South San Francisco, Millbrae and its Rio Linda and Lincoln plants near Sacramento, "if and whenever Bay Cities is unable to provide such transportation activities with vehicles owned and operated by Bay Cities or its affiliated entities." The "batch-out" agreement provided that CAP and the Morey Group would have "the right and option to purchase from Bay Cities any quantity up to an aggregate amount of 200,000 cubic yards per year of concrete" at a price computed by the actual costs of manufacturing the ready-mix concrete by Bay Cities with an additional "overhead fee" of $2 per cubic yard.

Bay Cities used a three-tier system to provide for the trucking of the raw materials used in its ready-mix concrete business. The first tier consisted of tractors and trailers owned and operated by Bay Cities' own subsidiary trucking company. These tractors (also known as "power units") were driven by union employees of Bay Cities and pulled the various sorts of specialized trailers used to transport sand, gravel, aggregate and bulk cement.

The second tier consisted of trailers owned by Bay Cities for which it did not have available tractor power units. In this second tier of trucking, Bay Cities' trailers were pulled by non-union, independent owner-operator subhaulers driving their own tractors. Bay Cities called on these independent owner-operators regularly, and heavily relied on them to supply their transportation needs. Consequently, Bay Cities had close, long-term business relationships with these independent subhaulers, most of whom had worked exclusively and loyally for Bay Cities for many years.

Finally, the third tier of transportation consisted of outside truckers to whom Bay Cities would turn when it needed more trucking transportation than it could provide itself, either through its own union employees or by use of its own trailers pulled by the independent subhaulers. These outside truckers generally provided both power units and trailers appropriate for hauling the particular type of material Bay Cities needed to have transported. Appellant's own company, CAP, was organized in the same three-tiered fashion as Bay Cities.

Between 1983 and 1989, Morey never complained to Bay Cities that it was not providing him with the trucking business to which he was entitled under the option provision of the trucking agreement. It is undisputed that during this time period, Bay Cities regularly called upon appellants' trucking services whenever Bay Cities needed additional trucking and could not meet its transportation needs through its own trucks or those of the independent non-union subhaulers. In that same time period, Morey's trucking business had continuing financial difficulties which resulted in CAP twice going into Chapter 11 bankruptcy proceedings. Between 1987 and 1988 CAP and its two trucking subsidiaries, CAP Transport and Morey Transport, were liquidated. Thereafter, neither CAP Transport nor Morey Transport owned any tractor or trailer units capable of hauling cement or the other material necessary to manufacture ready-mix cement. The only remaining entity owned by Morey with such equipment was Sugar Mountain, which owned only tractors but no trailers.

In March of 1989, Morey began complaining that he was not getting enough trucking business from Bay Cities. For the first time, he took the position that Bay Cities should terminate its business relationships with the independent subhaulers in order to give Morey the exclusive right to all trucking other than that done by Bay Cities' own union employees driving Bay Cities' own tractor-trailers. Because Morey no longer owned any trailers, this dispute necessarily focused on whether Bay Cities was obligated to call Sugar Mountain for tractors to haul Bay Cities' trailers before relying on Bay Cities' long-term relationship with the independent non-union subhaulers. After an exchange of letters from the parties' attorneys, Bay Cities offered to arbitrate the disagreement. The matter was thereafter dropped. During the remainder of 1989 and until late 1991, Morey continued to do excess hauling for Bay Cities' facilities in Millbrae and South San Francisco. In addition, Bay Cities permitted Morey to perform excess hauling for its Redwood City facility. These Redwood City hauls were not covered by the 1983 option provision, which only applied to facilities in Colma, South San Francisco, Millbrae, and the Sacramento area. ³

In September 1991, Morey again began complaining about not receiving all the trucking he claimed was due to him. He approached respondent Monlux with a proposal that he take over all the trucking at the Millbrae and South San Francisco plants by placing Bay Cities' independent subhaulers under Morey's supervision. Under Morey's proposal, instead of the 15 percent trailer rent they paid Bay Cities for hauling Bay Cities-owned trailers, the independent subhaulers would pay Morey 25 percent, consisting of a 15 percent trailer rental for Bay Cities plus an additional 10 percent brokerage fee for Morey. According to Morey, the arrangement would be in the independent subhaulers' economic interest because he would find them additional outside work to perform when they needed it.

With the acquiescence of Bay Cities, Morey made a presentation to the subhaulers in which he tried to persuade them to agree to his proposal. Without exception, all the independent subhaulers rejected Morey's proposal as not in their best financial interest. Morey subsequently confronted Monlux and accused Bay Cities of disrupting or sabotaging his proposal by telling the independent subhaulers not to do business with him. Monlux denied it, and suspended Morey from the privilege of servicing the Redwood City plant.

When Bay Cities refused to terminate its business relationships with the independent subhaulers, Morey filed this lawsuit in December 1991. After respondents' demurrer was sustained with leave to amend, Morey filed a second amended complaint adding four additional causes of action against respondents. The second amended complaint sought damages in excess of $263,961,000 for alleged breaches of the trucking and batch-out agreements, with treble damages on the basis of a claim under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) (18 U.S.C. § 1961 et seq.), and an additional $91 million in damages for alleged anticipatory repudiation of the batch-out agreement. Bay Cities filed a cross-complaint for declaratory relief asking the court to determine the meaning of the contractual term "affiliated entities" as used in the option provision.

At the outset of trial, appellants amended their complaint to replace their original request of $91 million for breach of the batch-out agreement with a request for nominal damages and declaratory relief on the basis of a single alleged refusal to permit Morey to purchase concrete in September 1995. The...