Winegar v. Gray

• Decision Date: 31 May 1962
• Citation: 204 Cal.App.2d 303,22 Cal.Rptr. 301
• Court: California Court of Appeals Court of Appeals
• Parties: Don D. WINEGAR, Plaintiff and Respondent, v. William GRAY, Defendant and Appellant. Civ. 6727.

Page 301

22 Cal.Rptr. 301

204 Cal.App.2d 303

Don D. WINEGAR, Plaintiff and Respondent, v. William GRAY, Defendant and Appellant.

Civ. 6727.

District Court of Appeal, Fourth District, California.

May 31, 1962.

Frank C. Owen and James M. Lane, San Diego, for appellant.

Burch, Gregory & Platt and John B. Gregory, San Diego, for respondent.

COUGHLIN, Justice.

In this action both the plaintiff, respondent herein, and the defendant, appellant herein, by appropriate pleadings, asked for a declaration of their rights under three written agreements upon which both of them relied; the trial court found a breach thereof by the defendant; judgment for damages in favor of the plaintiff was entered; and the defendant appeals.

The three agreements in question concerned the manufacture and sale of an article known as a spray gun air cap, upon which the defendant had a patent; purported to vest in the plaintiff the exclusive license to manufacture and sell the same in the United States; as determined by the court, extended this exclusive license to Great Britain and Canada; and provided for modifications respecting the time and extent of performance originally agreed upon, because of litigation pending between the defendant and a former licensee.

The defendant attacks the judgment insofar as it declares a breach of these contracts by him, contending that it should be reversed because of errors in the admission of parol evidence to vary the terms of such agreements, and in overruling his objection to the admission of the testimony of his former attorney based on the attorney-client privilege; and also attacks the amount of the award against him, claiming that it is based on an error of law and is not supported by the evidence.

On April 24, 1858 the parties executed a written agreement which, in substance, granted the plaintiff an exclusive license to manufacture and sell the subject air cap in the United States: recited a cash consideration of $1000; contained an agreement by the plaintiff to manufacture and sell the air caps; provided for the payment of a royalty; prescribed the time and extent of performance; and set forth various other provisions. Three weeks later, a former licensee of the defendant brought suit against him contending that its license to manufacture and sell the air caps had not been terminated. Because of the pendency of this suit, on August 26, 1958, the plaintiff and defendant executed a supplement to the licensing contract of April 24th which, in substance, acknowledged the payment of $10,351.20 by the plaintiff to or on behalf of the defendant; provided for the payment of additional sums by the former and the method of reimbursement by the latter; modified the time and extent of performance by the plaintiff as prescribed by the first contract; contained provisions respecting the pending litigation; and effected a sale to plaintiff of 553 air caps owned by the defendant, at $4.00 per cap. Thereafter, the defendant obtained a judgment in his favor in the suit against him by his former licensee, but the latter took an appeal therefrom. On March 3, 1959, the parties entered into a third agreement, contained in a memorandum admittedly ambiguous in many respects, which was to be effective in the event the appeal from the judgment in favor of the defendant, in the action against him by his former licensee, was dismissed, and pending litigation in another suit by an assignee of said licensee against the plaintiff, and a man named Shepherd, was terminated; as determined by the court, contemplated the payment by the plaintiff of the sum of $7500 to secure such dismissal; prescribed a different minimum royalty schedule; provided for additional payments to the defendant by way of a share in the profits or the issuance of stock in a prospective corporation; provided that the subject contracts should not be terminated by the defendant prior to February 21, 1960 if the plaintiff made the payments prescribed by the new royalty schedule; and, as contended by the plaintiff Subsequently the defendant executed a contract with another licensee granting the exclusive right to manufacture and sell his patented air caps anywhere in the world, subject only to the rights granted the plaintiff; assigned to such licensee the defendant's rights under his contract with the plaintiff; and thereafter, i. e., on February 22, 1960, purported to grant to the new licensee such exclusive rights without limitation. By letters dated October 12th and October 28, 1959, the defendant, acting through the new licensee to whom he had given a power of attorney, notified the plaintiff that his contract would terminate on February 21, 1960. This action was taken under the assumption that the memorandum agreement authorized such termination on that date without cause. The plaintiff contended, and the trial court determined, that the memorandum agreement extended the original contract for a period of one year, in accord with the provisions contained in the latter, and that the termination provision in the former precluded termination prior to February 21, 1960 for any reason other than nonpayment of prescribed royalties but did not authorize termination thereafter unless the plaintiff was in default; and that the defendant's notification of termination constituted an anticipatory breach of his contract which excused further performance by the plaintiff. The original agreement provided for an annual renewal thereof, upon notice, during the life of the air cap patent.

and found by the court, granted the plaintiff a license to manufacture and sell the air caps in England and Canada.

ALLEGED ERRORS RE LIABILITY ISSUE

During the course of the trial the plaintiff, over objection, was permitted to introduce parol testimony establishing that the defendant, as a part of the original agreement, had promised to assist in the manufacture of the air caps by making and approving changes in the design and specifications thereof, for which he was paid an additional $4000. The court found in accord with this evidence. The defendant contends that its admission was error. The defendant also contends that the court erred in overruling his objection and admitting parol evidence supporting the finding eventually made that the memorandum agreement of March 3rd extended the exclusive license to Great Britain and Canada. However, whether or not error occurred in these particulars is of no consequence as the judgment decreeing a breach of contract is sustained by findings independent of those tainted by the alleged objectionable evidence. Under these circumstances, the erroneous admission of evidence in support of the nonessential finding will be disregarded on appeal. (Brewer v. Simpson, 53 Cal.2d 567, 584, 2 Cal.Rptr. 609, 349 P.2d 289.)

The defendant repudiated the subject contracts by giving notice to terminate the same on February 1, 1960, when the plaintiff was not in default thereunder, and thereupon vested in others the exclusive right to use the patent which he theretofore had vested in the plaintiff. Every contract contains an implied obligation of good faith and fair dealing upon the part of each of the contracting parties (Nelson v. Abraham, 29 Cal.2d 745, 750, 177 P.2d 931; Universal Sales Corp. v. Cal. etc. Mfg. Co., 20 Cal.2d 751, 771, 128 P.2d 665), including the obligation not to hinder performance by the other party. (Flying Tiger Line, Inc. v. U. S. Aircoach, 51 Cal.2d 199, 203, 331 P.2d 37; Bewick v. Mecham, 26 Cal.2d 92, 99, 156 P.2d 757, 157 A.L.R. 1277; Tanner v. Title Ins. & Trust Co., R. 1277; Tanner v. Title Ins. & Trust Co., the defendant purportedly transferred to another the rights he had vested in the plaintiff by the subject contracts, he breached his good faith covenant and this breach, of itself, justifies the conclusion reached by the trial court. Furthermore, the trial court found that the defendant repudiated these contracts by his letters of October 12th and October 28, 1959. This repudiation constituted an anticipatory breach Some confusion has arisen in this case because each of the parties has asked for a declaration of his rights under the subject contracts, and for alternate relief commensurate with the court's determination in the premises. The pleadings by both parties alleged the existence of controversies between them which, among others, included disputes with respect to the obligation of the defendant to assist the plaintiff; and as to the latter's right to a foreign license. However, a determination of these issues was not essential to the disposition eventually reached by the court. The plaintiff asked for specific performance or damages. At the trial he waived his request for specific performance; acknowledging the difficulties incident to enforcement of such a decree. This waiver was accepted by the defendant. Both parties agreed that the contracts should be terminated. After commencement of suit the plaintiff continued to manufacture and sell air caps under the subject contracts. The defendant contends that this action constituted a waiver of the breach relied upon as a basis for the judgment rendered. However, at all times the plaintiff treated the defendant's repudiation as a breach; brought his action on this basis; attempted to enforce the contracts; and, at the time of trial, treated the repudiation as putting an end to the contracts for all purposes except the recovery of damages. The anticipatory repudiation of a contract, if acted upon by the nonrepudiating party before withdrawal, constitutes a breach thereof by the former and excuses performance thereunder by the latter (Guerrieri v. Severini, supra, 51 Cal.2d 12, 19-20, 330 P.2d 635; Freedman v. The Rector, 37 Cal.2d 16, 19, 230 P.2d 629, 31 A.L.R.2d 1; Gold Min. & Water Co. v. Swinerton, supra, 23 Cal.2d 19, 29, 142 P.2d 22), and its effect in the premises is not nullified by the fact that the nonrepudiating party attempts to enforce...