Sound/City Recording Corp. v. Solberg, Civ. A. No. 77-0648.

• Decision Date: 01 February 1978
• Docket Number: Civ. A. No. 77-0648.
• Citation: 443 F. Supp. 1374
• Parties: SOUND/CITY RECORDING CORPORATION v. David SOLBERG, a/k/a David Soul.
• Court: U.S. District Court — Western District of Louisiana

443 F. Supp. 1374

SOUND/CITY RECORDING CORPORATION v. David SOLBERG, a/k/a David Soul.

Civ. A. No. 77-0648.

United States District Court, W. D. Louisiana, Shreveport Division.

February 1, 1978.

John M. Madison, Jr., James R. Madison, Wiener, Weiss, Madison & Howell, Shreveport, La., for plaintiff.

Caldwell Roberts, Mayer, Smith & Roberts, Shreveport, La., Donald S. Passman, Gang, Tyre & Brown, Hollywood, Cal., for defendant.

STAGG, District Judge.

OPINION

On June 16, 1977, Sound/City Recording Corporation (Sound/City) filed this complaint against David Solberg, more commonly known as David Soul (Soul), alleging that Sound/City and Soul had entered into a contract to record and market vocal performances by Soul. According to the complaint, the contract provided for Sound/City to own all "master recordings" made pursuant to the contract. The complaint further alleged that Sound/City had attempted to sell certain master recordings to Nems Record, Limited (Nems), for royalties from sales in Great Britain and that Soul had claimed ownership of the recordings, causing the deal with Nems to collapse. Sound/City sought a declaratory judgment that it owned the recordings as well as damages for slander of Sound/City's title.

Soul admitted entering into the contract with Sound/City, but claimed that the recordings in question were not "master recordings", but "demonstration recordings". He claimed that Sound/City had breached its obligations under the contract, so that he had the right to rescind it. In a counterclaim, Soul sought a declaratory judgment that he owned the recordings in question, and he sought an order of the Court requiring Sound/City to deliver to him the recordings made pursuant to the contract and all reproductions of those recordings.

The Court has determined that Soul may rescind the contract he made with Sound/City. His action in rescission has not prescribed, and it is not barred by the statute of limitations. Soul, not Sound/City, owns the recordings in question. Before Sound/City must return the recordings to Soul, Soul must compensate Sound/City for its contribution in making the recordings in the amount of $16,090.

FINDINGS OF FACT

In 1969, Sound/City was a fledgling recording studio in Shreveport, Louisiana, and Soul was one of the co-stars of the ABC-TV series, "Here Come the Brides". Sound/City hoped to establish a thriving recording business, and Soul hoped to begin a recording career. Various circumstances brought Sound/City and Soul together to negotiate a recording contract.

Sound/City and Soul entered into a recording contract on August 16, 1969. The contract had a principal term of one year, expiring at midnight the night of August 15, 1970. Sound/City could extend the contract, at its option, for an additional year by releasing three singles and one album during the principal term of the contract, and by giving Soul thirty (30) days' written notice of its intention to exercise its option. In addition, to exercise its right to extend the contract, Sound/City had to pay Soul $3,500.

Paragraph 6(a) of the contract provided the principal obligation of Sound/City:

"6. During the term of this agreement, the Company agrees to release the following minimum number of recordings:

"(a) During the principal term and the first extension period — three (3) singles and one (1) album during each year comprising the principal term and the first extension period.

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"Additional records shall be released during the principal term or any extension period at the election of Company, but shall not reduce the minimum requirement in any succeeding period. Records shall be released only under Company's top label."

In return for this obligation, Soul gave Sound/City ownership of all "master recordings" to use for Sound/City's commercial benefit:

"16. All master recordings recorded hereunder, and all matrices and phonograph records and related audio reproductions manufactured therefrom, together with the performances embodied thereon, shall be entirely the property of Company, free from any claims whatsoever by Artist or of any person deriving any rights or interests from Artist. Without limiting the generality of the foregoing, Company and/or its subsidiaries, affiliates and licensees shall have the unlimited right, from time to time, to manufacture, by any method now or hereafter known, phonograph records and related audio reproductions, on any mediums or devices now or hereafter known, of the master records, or any part thereof, made hereunder and included in this contract; and to sell, transfer or otherwise deal in the same throughout the world under any trademark, trade names and labels, or to refrain from such manufacture, sale and dealing, except as provided herein."

Recording sessions began almost immediately after the contract was signed. Nearly all of them took place in Shreveport, although some recordings were made in Nashville, Tennessee. Pursuant to the contract, Sound/City paid all expenses of recording, including the travel expenses of Soul and the salaries of the musicians and technicians. The expenses of recording during the year totaled $13,390. Soul and Sound/City spent approximately 100 hours in recording sessions from August, 1969, through January, 1970. The normal studio rental charged during the term of the contract by Sound/City was $50 per hour. In the contract, Sound/City agreed not to charge Soul any rental for the use of the studio.

Sound/City did not release any recordings under its label during the term of the agreement. It did succeed in selling the rights to "The Road is Long" and "This Train" to Famous Music Corporation (Famous Music), a division of Paramount Records. Famous Music released the songs as a single 45 r. p. m. recording on the Paramount label. Famous Music paid Sound/City a net sum of $2,300 to reimburse Sound/City for its production costs for the two recordings. Sound/City neither released nor caused the release of any other recording during the term of the agreement.

Sound/City did not exercise its option to renew the contract. Thus, the agreement between Soul and Sound/City expired at midnight, August 15, 1970. Sound/City did nothing with the recordings made pursuant to the contract until after Soul had become a popular television star on the series "Star-sky and Hutch" and had begun a successful recording career on another label.

In approximately mid-year 1976, Sound/City began to look for a market for its recordings of Soul. On October 20, 1976, Stewart Madison, president of Sound/City, wrote to Allen Grubman of the law firm of Grubman and Indursky concerning the marketing of some recordings of Soul. When Soul was informed of Sound/City's desire to release some of his recordings, he had his attorney, Donald Passman, inform Sound/City by letter of December 30, 1976, that he claimed that Sound/City did not have the right to release the recordings.

In early 1977, Sound/City began negotiating with Nems to grant Nems a license to distribute Soul's recordings in Great Britain. A telegram of March 23, 1977, from Lee Phillips of Nems to representatives of Sound/City set forth the first details of the deal. Exhibit P-32. On April 7, 1977, Lee Phillips transmitted a draft of an agreement between Sound/City and Nems for the Soul deal.

On May 11, 1977, Solomon Granett, representing Soul, wrote Allen Grubman again to inform Sound/City and its representatives of Soul's position that the 1969 contract was rescinded and abandoned and that Sound/City had no right to release any recordings made during the term of that agreement. Nonetheless, Sound/City continued to negotiate the deal with Nems.

On June 3, 1977, Solomon Granett wrote Stewart Madison setting forth Soul's position more fully. Granett followed the letter to Stewart Madison with a letter of June 10, 1977, to James R. Madison, attorney for Sound/City, again specifying Soul's position with respect to rescission of the contract.

On June 21, 1977, Donald Passman advised Nems of Soul's position. Shortly thereafter, the deal between Nems and Sound/City collapsed due to the dispute over Sound/City's right to release the recordings.

CONCLUSIONS OF LAW

Jurisdiction and Venue

The parties being citizens of different states, the Court has subject matter jurisdiction over this action. The Court also has personal jurisdiction over the parties to the litigation and it is a court of proper venue.

Rescission

In the contract of August 16, 1969, the parties agreed that the rights and liabilities of the parties to the contract would be governed by California law:

"26. The validity, construction and effect of this agreement, and any and all extensions and/or modifications thereof, shall be governed by the laws of the State of California."

Sections 22 and 22.1 of the California Civil Code provide the basis for determining the law of California:

"22. Law is the solemn expression of the will of the supreme power of the State.

"§ 22.1. The will of the supreme power is expressed:

"(a) By the Constitution.

"(b) By statutes."

In addition, the California Civil Code adopts the rules of the common law of England, so long as those rules are not inconsistent with express statutory or constitutional provisions of California or the United States. Cal.Civ.Code § 22.2.

Sound/City and Soul entered into a bilateral contract, that is, a contract by which each party received a promise to do some act in exchange for his promise to do another act. Generally, one party to a bilateral executory contract may rescind the contract due to a substantial nonperformance or breach of his promise by the other party. Sobelman v. Maier, 203 Cal. 1, 262 P. 1087 (1927); Haas v. Hodge, 171 Cal.App.2d 478, 340 P.2d 632 (Cal.App.2d Dist. 1959). The California Civil Code provides the specific grounds for rescission of a contract:

"§ 1689(b) A party to a contract may rescind the contract in the following cases.

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"(2) If the

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