Thompson v. California Brewing Co.

Decision Date26 April 1957
CourtCalifornia Court of Appeals Court of Appeals
PartiesArnie E. THOMPSON, Plaintiff and Appellant, v. CALIFORNIA BREWING COMPANY, a corporation, Foote, Cone & Belding, a corporation, and G. B. Richardson, Defendants and Respondents. Civ. 17137.

Edward B. Gregg, Henry Gifford Hardy, San Francisco, for appellant.

Eisner & Titchell, San Francisco, Gang, Kopp & Tyre, Los Angeles, for respondent California Brewing Co.

Lillick, Geary, Wheat, Adams & Charles, San Francisco, for respondents Foote, Cone, & Belding et al.

FRED B. WOOD, Justice.

Plaintiff seeks to recover the reasonable value of a new and novel idea 1 for the advertising and promotion of the sale of beer by the defendant brewing company.

Demurrers to his first amended complaint were sustained without leave to amend and he has appealed. The demurrers challenged the sufficiency of each of the three counts of the complaint and pleaded as to each the bar of subdivision 1 of section 339 of the Code of Civil Procedure.

The first count is sufficient. It alleges that at defendants' special instance and request plaintiff disclosed and offered them, orally and in writing, a new and novel idea conceived and devised by him (describing it, as above indicated); that 'defendants * * * expressly and orally agreed to pay to plaintiff the reasonable value of such new and novel idea if and when the defendants, or any of them, used the same'; that within two years next preceding the filing of this action defendants and each of them 'did * * * use such new and novel idea,' describing the use thus made of it; 2 that by reason of such use defendants became obligated to pay plaintiff $50,000, the reasonable value of such idea; that they have failed and refused to pay and the whole amount is due and owing. Clearly, this is a statement of facts which constitutes a cause of action for the breach of an express oral contract. 3

The second count is sufficient. It pleads the same facts as the first except it alleges an implied in fact instead of an express contract, 4 and in doing so states a cause of action. Because there is no property interest in abstract ideas (since the 1947 amendment of section 980 of the Civil Code), quantum valebant in an 'idea' case depends upon a contract implied in fact from the conduct of the parties, not upon a contract implied in law. Weitzenkorn v. Lesser, 40 Cal.2d 778, 789, 792-795, 256 P.2d 947; Kurlan v. Columbia Broadcasting System, 40 Cal.2d 799, 810-811, 256 P.2d 962; Desny v. Wilder, 46 Cal.2d 715, 738-739, 299 P.2d 257.

If the distinction between express and implied contracts is only a matter of proof, see Weitzenkorn v. Lesser, supra, 40 Cal.2d 778, at page 794, 256 P.2d at page 959; Desny v. Wilder, supra, 46 Cal.2d at pages 735 and 738 footnote 9, 299 P.2d at pages 267 and 270, it would seem that the promise to pay could also be proved by conduct. Desny v. Wilder, supra, apparently holds that in proving the promise by conduct mere acceptance and use of the idea is not enough, but this does not preclude proof of a promise to pay through other subsequent acts of the defendants: 'From plaintiff's testimony, * * * it does not appear that a contract to pay for conveyance of the abstract photoplay idea had been made, or that the basis for inferring such a contract from subsequent related acts of the defendants had been established, at the time plaintiff disclosed his basic idea to the secretary. * * * Certainly the mere fact that the idea had been disclosed under the circumstances shown here would not preclude the finding of an implied (inferred in fact) contract to pay for the synopsis embodying, implementing and adapting the idea for photoplay production.' 46 Cal.2d at pages 739-740, 299 P.2d at pages 270-271.

Since from the pleadings it does not appear impossible to prove an implied in fact contract, and the necessary allegations for an implied contract appear in the complaint, the complaint sufficiently states a cause of action for breach of an implied in fact contract.

The third count is sufficient. It pleads a violation of confidence reposed by him in the defendants. 5 The letter by which he transmitted this idea to the defendants (annexed to the complaint as an exhibit) does not of itself indicate any element of confidence in their relationship. Upon the other hand, nothing said in this letter necessarily negatives there having been an understanding between the parties of such a nature that when thus transmitted this new and novel idea was submitted to them 'in confidence' and accepted by them 'in confidence and upon the understanding that they would not use the idea without the consent of plaintiff' as alleged in the body of the complaint. Upon demurrer these allegations are accepted as true. Whether the evidence that might be adduced would support them is a question of fact to be decided when adduced, not upon the hearing of a demurrer. That is the main distinction between this case and Taylor v. Kelly, 103 Cal. 178, 37 P. 216, and Ruhl v. Mott, 120 Cal. 668, 53 P. 304, heavily relied upon by defendants. The Kelly and the Ruhl cases came to the Supreme Court after trial and judgment. Quite significant is the statement in the Ruhl case that the fact that plaintiff 'imposed confidence in the defendant did not cast any duty upon the latter, unless he 'voluntarily assumed a relation of personal confidence' with plaintiff, and this is not found.' At page 679 of 120 Cal., 53 P. at page 308. Here, plaintiff has alleged the voluntary assumption of such a relationship by the defendants. Why might they not have assumed such a relationship? If the evidence should show they were looking for 'ideas' and that plaintiff undertook to supply several such upon the condition that they be not disclosed or used without his consent, why should there not ensue a duty to that effect?

This is, we think, a good deal like some aspects of the law relating to trade secrets as expressed in the Restatement of the Law of Torts, section 757: 'One who discloses or uses another's trade secret, without a privilege to do so, is liable to the other if * * * (b) his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him * * *.'

Comment j on section 757 points up the distinction between breach of contract and breach of confidence: 'A breach of confidence under the rule stated in this Clause may also be a breach of contract which subjects the actor to liability under the rules stated in the Restatement of Contracts. But whether or not there is a breach of contract, the rule stated in this Section subjects the actor to liability if his disclosure or use of another's trade secret is a breach of the confidence reposed in him by the other in disclosing the secret to him.' 4 Restatement of Law of Torts, p. 13.

This element of confidence is not necessarily limited to the type of case in which there is a fiduciary relationship (such as that between partners or joint venturers or employer and employee) between the parties. Other circumstances may create a duty not to disclose or use without the consent of the originator of the 'idea.' This is well expressed in Comment j on section 757: 'The chief example of a confidential relationship under this rule is the relationship of principal and agent. See Restatement of Agency, §§ 395 and 396. Such is also the relationship between partners or other joint adventurers. But this confidence may exist also in other situations. For example, A has a trade secret which he wishes to sell with or without his business. B is a prospective purchaser. In the course of negotiations, A discloses the secret to B solely for the purpose of enabling him to appraise its value. Or, A requests a loan from B a banker, for the purpose of aiding the manufacture of a product by A's secret process. In order to assure B about the soundness of the loan, A discloses the secret to him in confidence. In both cases B is under a duty not to disclose the secret or use it adversely to A. Again, this confidence may exist even when no business relation between A and B exists or is contemplated, as when A comes to B, his former teacher, for free advice which B is willing to give with respect to the secret and discloses the secret to him in confidence. But in all these cases A cannot impose a confidence on B without B's consent. If A discloses the secret to B despite B's protest that he does not wish to hold it in confidence and will not so hold it if it is disclosed, the confidence requisite for liability under the rule stated in Clause (b) does not arise. Likewise, the confidence does not arise if B has no notice of the confidential character of the disclosure. But no particular form of notice is required. The question is simply whether in the circumstances B knows or should know that the information is A's trade secret and that its disclosure is made in confidence.' 4 Restatement of the Law of Torts, pp. 13-14.

Comment b on section 757 indicates that under appropriate circumstances these principles apply to information which is not a trade secret: 'Although given information is not a trade secret, one who receives the information in a confidential relation or discovers it by improper means may be under some duty not to disclose or use that information. Because of the confidential relation or the impropriety of the means of discovery, he may be compelled to go to other sources for the information. As stated in Comment a, even the rule stated in this Section rests not upon a view of trade secrets as physical objects of property but rather upon abuse of confidence or impropriety in learning the secret. Such abuse or impropriety may exist also where the information is not a trade secret and may be equally a basis for liability.' 4 Restatement of the Law of Torts, pp. 7-8.

We conclude that the third count is not vulnerable to a...

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