Varni Bros. Corp. v. Wine World, Inc.

• Decision Date: 08 June 1995
• Docket Number: No. F020078,F020078
• Citation: 35 Cal.App.4th 880,41 Cal.Rptr.2d 740
• Parties: , 26 UCC Rep.Serv.2d 1054 VARNI BROS. CORPORATION et al., Plaintiffs and Appellants, v. WINE WORLD, INC., Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 740

41 Cal.Rptr.2d 740

35 Cal.App.4th 880, 26 UCC Rep.Serv.2d 1054

VARNI BROS. CORPORATION et al., Plaintiffs and Appellants, v. WINE WORLD, INC., Defendant and Respondent.

No. F020078.

Court of Appeal, Fifth District, California.

June 8, 1995.

Certified for Partial Publication ^*.

As Modified on Denial of Rehearing July 7, 1995.

[35 Cal.App.4th 884] James Duryea, Jr., James W. Moore, San Francisco, Carr, DeFilippo & Ferrell and Robert J. Yorio, Palo Alto, for plaintiffs and appellants.

Stockton & Sadler, James L. Sadler, Modesto, Howrey & Simon and Carmine R. Zarlenga, Washington, DC, for defendant and respondent.

OPINION

HARRIS, Associate Justice.

STATEMENT OF THE CASE AND FACTS

Wine World, Inc. (Wine World) is a producer and supplier of wines, including Beringer, Napa Ridge, Chateau Souverain and Meridian. Wine World distributes its wines through a network of independent distributors located throughout the United States. Brand Wines & Spirits, Inc. (Brand) and Varni Bros. Corporation (Varni) are former distributors for Wine World in the Fresno and Modesto areas, respectively. Varni began distributing for Wine World in 1975 and Brand began in 1985. The distributing arrangements were never formalized in written contracts.

Although Brand did not begin distributing for Wine World until 1985, Brand's founder, Harvey Braziel, had distributed for Wine World in the Fresno area while with a company called M & T Distributing Company. After consulting with Wine World in 1985, Brand and Wine World agreed that M & T would assign its distribution rights to Brand.

As wine distributors, Brand and Varni purchased wine from suppliers for resale to retailers in their assigned territories. The development of a market for the vintner's products was a joint effort between the vintner and the distributor. Distributors provided a wide variety of services to suppliers, including promotional sales calls on retailers, placement of advertising, and periodic removal of dated wine from retailers' shelves. Varni and Brand maintained warehouses and fleets of trucks and trained sales people to promote the portfolios of their suppliers, including Wine World. Wine World and other suppliers gave Varni and Brand written sales quotas or objectives to meet, and met periodically with them to evaluate their performances. In some instances, the duties of distributors were spelled out in written contracts. However, up until 1985 at the earliest, written distribution contracts were a rare exception in the wine industry. Rather suppliers dealt with wholesale distributors on the basis of a handshake; everyone understood what a "distributorship" involved.

In 1989, Wine World decided to consolidate its distribution network in Northern California to a single distributor. Wine World terminated its distributing arrangements with both Varni and Brand on August 28, 1989, by 60 days written notice.

It is undisputed that at the time Varni and Brand agreed to distribute for Wine World there were no substantive discussions regarding any terms of the distributorship arrangement. According to Wine World, it had no internal policy limiting the termination of its distributors and was not aware of any industry custom regarding termination. On the other hand, according to Braziel, he had been told it was Wine World's policy to build a record over the course of six months to a year to justify a termination.

While there was a dispute as to whether it was the prevailing custom at the time of the agreements that a supplier could not unilaterally terminate a distribution agreement except for poor performance or failure to pay invoices, there was no evidence proffered that any such custom continued to exist after 1985 or 1986. However, appellants proffered some evidence in an attempt to show that thereafter a custom and usage existed nonetheless requiring the supplier to pay some sort of severance compensation to the terminated distributor based on rendered services in establishing markets and sales volume for the supplier. In 1975 and 1985, respectively, when Varni and Brand agreed to distribute for Wine World, they expected they would not be terminated except for reasons established by the then prevailing industry custom.

A complaint was filed by Varni and Brand on July 25, 1991, alleging two causes of action, one for each plaintiff, for breach of implied contracts. The complaint alleged the contracts were only terminable for poor performance based on industry custom or trade usage, Wine World practices, and longevity of business relationships. Wine World answered by general denial and asserted several affirmative defenses.

Wine World filed separate summary judgment motions against Varni and Brand. Both motions were granted. Brand's motion for reconsideration was denied. Varni and Brand (collectively "appellants") filed a timely notice of appeal.

DISCUSSION

I. TERMINATION

Appellants contend the trial court erred in granting Wine World's motions for summary judgment. The motions were granted on three alternative grounds: (1) parol evidence that there was an implied understanding between the parties that good cause would be required for termination under the agreements was not admissible; (2) appellants could not prevail on the merits because industry custom requiring termination for good cause applied only until 1985, and not up to 1989 when the relationship was terminated; and (3) because there was no agreement that the distributing arrangements would last for a fixed term of years, the contracts were of indefinite duration making them terminable at will under Uniform Commercial Code section 2309.

Standard of Review

Summary judgment is proper if the supporting papers are sufficient to sustain a judgment in favor of the moving party as a matter of law and the opposing party presents no evidence giving rise to a triable issue as to any material fact. (Code Civ.Proc., § 437c, subd. (c).) To prevail on a summary judgment motion, the defendant must conclusively negate a necessary element of the plaintiff's case or establish a complete defense. (Horsemen's Benevolent & Protective Assn. v. Insurance Co. of North America (1990) 222 Cal.App.3d 816, 820, 271 Cal.Rptr. 838.) Where the evidence presented by defendant does not support judgment in his favor, the motion must be denied without looking at the opposing evidence, if any, submitted by plaintiff. (Albertini v. Schaefer (1979) 97 Cal.App.3d 822, 831, 159 Cal.Rptr. 98.) The evidence of the moving party is strictly construed and that of the opposing party liberally construed. (Coppola v. Superior Court (1989) 211 Cal.App.3d 848, 862, 259 Cal.Rptr. 811.) Where there is no material issue of fact to be tried and the sole question before the court is one of law, it is the duty of the trial court on a motion for summary judgment to hear and determine the issue of law. (Rombalski v. City of Laguna Beach (1989) 213 Cal.App.3d 842, 848, 261 Cal.Rptr. 820.)

In reviewing a grant of summary judgment, an appellate court must make its own independent determination of the construction and effect of the papers submitted. Review of the trial court's determination involves pure matters of law and requires reassessment of the legal significance of the documents. The reviewing court applies the same three-step analysis as that of the trial court: (1) identification of issues framed by the pleadings; (2) determination of whether the moving party has established facts which negate the opponent's claim and justify a judgment in movant's favor; and (3) determination of whether the opponent demonstrates the existence of a triable, material factual issue. (Saldana v. Globe-Weis Systems Co. (1991) 233 Cal.App.3d 1505, 1513-1515, 285 Cal.Rptr. 385; Preis v. American Indemnity Co. (1990) 220 Cal.App.3d 752, 757, 269 Cal.Rptr. 617.)

Implied-in-fact Contract

The underlying basis for the breach of contract actions was the alleged existence of implied-in-fact contracts. Appellants rely on the case of Bert G. Gianelli Distributing Co. v. Beck & Co. (1985) 172 Cal.App.3d 1020, 219 Cal.Rptr. 203 for the proposition that where a usage of trade exists, it may constitute a term of a contract. The trial court in the present case, in granting summary judgment, distinguished the Gianelli case on the sole ground of the existence in that case of a written contract to which the usage of trade term could attach.

In Gianelli, each of the plaintiffs, distributors of beer, and the defendant, a supplier of beer, had a written distribution contract as follows:

" 'It is hereby agreed between Beck & Co., of BREMEN/GERMANY, brewers of BECK'S BEER, and ____, distributor of said beer that the said distributor is authorized to distribute BECK'S BEER under its California License(s) number ____ in the [County of] ____. Distributor's authority hereunder is non-exclusive. This agreement will continue in effect unless and until terminated at any time after January 1, 1973 by thirty days written notice by either party to the other.' " (Bert G. Gianelli Distributing Co. v. Beck & Co., supra, 172 Cal.App.3d at p. 1037, 219 Cal.Rptr. 203.)

It was undisputed that the form agreement entered into by each of the plaintiffs was a standard one-paragraph document, not a negotiated instrument. ¹ Also, no terms not contained in the distributor's agreement were discussed by the parties. (Gianelli, supra, 172 Cal.App.3d at p. 1038, 219 Cal.Rptr. 203.)

Subsequently, defendant notified each plaintiff that it would terminate its agreement in 30 days. Defendant was granted its summary judgment motion on plaintiffs' subsequent lawsuit. Finding there was credible evidence the above contract was not integrated, the court determined parol evidence was admissible to demonstrate there existed an understanding of an implied-in-fact requirement of good cause for termination. It also found plaintiffs provided evidence of trade usage which could have supported a finding that...