Rickel v. Schwinn Bicycle Co.

Decision Date06 July 1983
Citation192 Cal.Rptr. 732,144 Cal.App.3d 648
CourtCalifornia Court of Appeals Court of Appeals
PartiesKip F. RICKEL and Judith Rickel d.b.a. Kip's Bike Shop, Plaintiffs and Appellants, v. SCHWINN BICYCLE COMPANY, an Illinois corporation; Schwinn Sales West, Inc., a Delaware corporation, Defendants and Respondents. Civ. 65502.

Newman, Chrisman & Faith, J. Randall Faith, Covina, for plaintiffs and appellants.

Gibson, Dunn & Crutcher, Rex S. Heinke, Susan Erburu Reardon, Los Angeles, Keck, Mahin & Cate, Richard L. Reinish, Chicago, Ill., for defendants and respondents.

SCHAUER, Presiding Justice.

Plaintiffs Kip and Judith Rickel (the "Rickels") appeal from the summary judgment granted defendants Schwinn Bicycle Company, an Illinois corporation, and Schwinn Sales Company, a Delaware corporation (collectively "Schwinn"). The principal issues on appeal involve the existence of a fiduciary relationship between a manufacturer and dealer and pleading and proof requirements as to wrongfulness in respect to the tort of interference with a prospective economic advantage.

Plaintiffs, the Rickels, owned a bicycle shop in Glendora, California. In 1963 the Rickels entered into an agreement with Schwinn by which they became authorized Schwinn dealers. As such, they were entitled to sell Schwinn bicycles, but were also free to sell other brands of bicycles, as well as non-bicycle items. The dealership agreement between the Rickels and Schwinn provided that Rickels' distribution rights were personal and were "non-assignable and non-transferable."

In 1975 the Rickels listed the Glendora shop for sale with a broker, Leonard Ray. Three potential buyers appear to have expressed interest in the shop.

The first potential buyers were the Yamamotos, who applied to become Schwinn dealers. No testimony, declaration or affidavit by the Yamamotos appears in the record. Schwinn rejected their application, contending that they had insufficient capital and that they would not be able to operate the shop at a profit. In response to this rejection, the Rickels altered the terms of the sale, reducing the monthly rent from $1,200 to $1,000 and delaying portions of the down payment for 60 to 90 days. Schwinn thereupon rejected the Yamamotos' application once again.

In connection with the Yamamotos' application, the Rickels supplied Schwinn with various profit and loss statements and projections. The Yamamotos also provided Schwinn with their own financial statements. These items do not appear in the record. Discovery during this litigation, however, revealed two measures of the profitability of the Rickels' shop. The Rickels' 1974 tax return showed a profit of $11,680, while the "Profit or Loss Statement," prepared for the Rickels' use in selling the shop, showed a profit of $34,998. Kip Rickel testified that the Yamamotos' expenses would exceed the expenses shown in these statements by $12,000 per year. He contended, however, that the Yamamotos would have been able profitably to run the business in spite of their increased expenses, assuming they hired no outside labor. Schwinn asserted that its calculations indicated that the Yamamotos would have had a "zero profit."

After the rejection of the Yamamotos, the Rickels claim to have entered into an agreement of sale with Charles Fisher. Fisher did apply for a Schwinn dealership but later withdrew the application. As with the Yamamotos, no statement under oath by Mr. Fisher appears in the record. Leonard Ray, however, gave evidence that Fisher told him that he withdrew his application because an agent of Schwinn told him that the Rickels' asking price for the shop was $35,000 too high.

The third potential buyer, Charles McCready, owned several non-Schwinn bicycle shops in the Glendora area. No statement by Mr. McCready appears in the record. Plaintiffs allege that McCready decided not to purchase the Rickels' shop on hearing from a Schwinn representative that Schwinn would not grant dealership rights to the owner of non-Schwinn stores in the area. McCready never applied to become a Schwinn dealer.

In the meantime, the Rickels moved to Reno, Nevada, and on May 23, 1975, became Schwinn dealers at a shop there. The Rickels experienced cash flow difficulties at the new shop and decided to sell it. At this time their past due accounts to Schwinn amounted to $55,000. The Rickels claim that Schwinn placed restrictions on the sale of the Reno shop, insisting that it be sold for no more than the cost of inventory. Schwinn denies any such restrictions were ever imposed.

The Rickels sued Schwinn, alleging that Schwinn breached its fiduciary duty to them in hampering the attempted sales of the Glendora and Reno shops. The Rickels also alleged that Schwinn interfered with the Rickels' prospective advantageous relations with the Yamamotos, Fisher and McCready.

The trial court granted summary judgment for Schwinn. The Rickels appeal, claiming (1) the court erred in finding no fiduciary relation existed between Schwinn and the Rickels, (2) Schwinn violated its duty of good faith and fair dealing to the Rickels and (3) the court erred in reasoning that the Rickels were required to plead and show that Schwinn's acts were not justified, and in granting summary judgment as to the cause of action for interference with prospective advantage.

I Standards for Summary Judgment

The summary judgment procedure, inasmuch as it denies the right of the adverse party to a trial, is drastic and should be used with caution. (Eagle Oil & Ref. Co. v. Prentice (1942) 19 Cal.2d 553, 556, 122 P.2d 264.) Summary judgment is properly granted only when the evidence in support of the moving party establishes that there is no issue of fact to be tried. (Code Civ.Proc., § 437c; Lipson v. Superior Court (1982) 31 Cal.3d 362, 374, 182 Cal.Rptr. 629, 644 P.2d 822.) The court may not pass upon the issue itself. (Slobojan v. Western Travelers Life Ins. Co. (1969) 70 Cal.2d 432, 436, 74 Cal.Rptr. 895, 450 P.2d 271.) When no triable issue of fact exists, and the parties' contentions turn upon an issue of law, summary judgment is proper. (Burke Concrete Accessories, Inc. v. Superior Court (1970) 8 Cal.App.3d 773, 87 Cal.Rptr. 619.)

"The moving party bears the burden of furnishing supporting documents that establish that the claims of the adverse party are entirely without merit on any legal theory." (Lipson v. Superior Court, supra, 31 Cal.3d at p. 374, 182 Cal.Rptr. 629, 644 P.2d 822.) "The affidavits of the moving party are strictly construed and those of his opponent liberally construed, and doubts as to the propriety of summary judgment should be resolved against granting the motion." (Slobojan v. Western Travelers Life Ins. Co., supra, 70 Cal.2d at p. 437, 74 Cal.Rptr. 895, 450 P.2d 271.)

II

No Fiduciary Relationship Existed Between Plaintiffs and Defendants.

Plaintiffs' first cause of action alleges that a fiduciary relationship arose from the distribution agreement between plaintiffs and defendants. The Rickels assert that Schwinn, in its failure to approve the buyers of the Glendora shop and in its dealings with regard to the Reno store, violated this fiduciary duty to them. Schwinn denies the existence of any fiduciary relationship.

It is conceded by plaintiffs that there is no California authority applying fiduciary standards to the dealings between a manufacturer and his authorized dealers. Thus, plaintiffs are forced to rely on the line of authority stating the traditional definition of a fiduciary relationship. This definition is set forth in Bacon v. Soule (1912) 19 Cal.App. 428, 434, 126 P. 384, for example, as follows:

"A 'fiduciary relation' in law is ordinarily synonymous with a 'confidential relation.' It is also founded upon the trust or confidence reposed by one person in the integrity and fidelity of another, and likewise precludes the idea of profit or advantage resulting from the dealings of the parties and the person in whom the confidence is reposed."

Plaintiffs' complaint and their papers presented at the summary judgment hearing offer no evidence whatsoever that the requirements of this definition were met. The trial judge correctly noted that non-mutual profit was inherent in the relationship between plaintiffs and defendants. Plaintiffs sold bicycles made by Schwinn's competitors in the shops which are the subject of this suit and were free to recommend to customers that these bicycles be purchased instead of those made by Schwinn. Schwinn's pricing decisions, on the other hand, were made unilaterally and for the sole purpose of increasing Schwinn's profits. True, these decisions were undoubtedly made for the purpose of increasing Schwinn's over-all sales and thus had the effect of benefiting Schwinn and its dealers mutually. Equally certain, however, is the fact that Schwinn was free to make pricing and distribution decisions for the purpose of increasing its own profits at the expense of its dealers. The papers submitted on the motion thus show that an element of non-mutual profit and advantage was essential to the relationship between the parties. This being the case, the relationship in question does not meet the traditional standard for the application of fiduciary principles.

Plaintiffs also attempt to analogize the manufacturer-distributor relationship present in this case to several traditional fiduciary relationships: the trustor-trustee, tenant-co-tenant, and director-corporation relationships. This attempt fails. All these accepted fiduciary relationships preclude any element of non-mutual profit. The trustee may not profit at the expense of its trust (Civ.Code, § 2228), the director at the expense of his corporation (Efron v. Kalmanovitz (1964) 226 Cal.App.2d 546, 556-557, 38 Cal.Rptr. 148) or the tenant at the expense of his co-tenant (Hendrickson v. California Talc Co. (1942) 55 Cal.App.2d 467, 474, 130 P.2d 806). Plaintiffs, faced with the element of...

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