Court Opinion

ID: 9582295
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:24:51.630109+00
Date Added: 2024-06-11T13:37:37.158172
License: Public Domain

TRAYNOR, J., Dissenting.
I cannot agree that the contracts between Quader-Kino and Nebenzal do not give Quader-Kino the right to enjoin Nebenzal’s interference with the exploitation of their motion picture.
Defendant Nebenzal acquired by purchase the right to produce a remake of plaintiff’s “Mayerling” in English. To get that right Nebenzal had to pay $20,000 and to agree not only that plaintiff retained “the unqualified right” to exploit its original French version of “Mayerling” without restriction as to time, but also that Nebenzal’s remake would not compete with the French version in certain countries until three years after the cessation of hostilities. These conditions in plain language assured plaintiff the right to continue the exploitation of “Mayerling” without interference from Nebenzal.
Nebenzal now attempts to prevent that exploitation notwithstanding that his promise not to interfere therewith was part of the consideration for the sale of the remake rights. Defendant seeks to justify his action on the ground that he now owns the Anet rights on which 5 per cent of “Mayer-ling” is based and that, since the Anet heirs or any third person acquiring the rights could prevent the exhibition of the picture so long as it incorporates the Anet material, Nebenzal may also prevent its exhibition. So far as Nebenzal is concerned, however, his ownership of the Anet rights is immaterial. The reservation of the “unqualified right” to which Nebenzal agreed does not admit of the qualification “if Quader-Kino acquires an extension of the Anet rights before Nebenzal beats them to it.” As between Nebenzal and Quader-Kino, the latter’s reserved right was “unqualified,” as the contract stated.
Upon the granting of the remake rights to Nebenzal the most serious threat to plaintiff’s exploitation of its picture was that of competition or interference from Nebenzal. It therefore demanded and received from Nebenzal contractual assurances that he would not interfere with the exhibition of *298“Mayerling” at any time and would not compete with it in certain countries. It was entitled to rely on those assurances.
Another risk confronting plaintiff was the possibility of its not securing an extension of the Anet rights. War conditions made it impossible to secure that extension at the time the contracts were executed, but Quader-Kino was justifiably convinced that it could secure the extension when communication with occupied Europe was reestablished. The rights were excluded from the grant of the remake rights but were covered by a simultaneously executed supplemental agreement. Nebenzal was given the option to acquire “those rights to the extent the Owner [Quader-Kino] owns them itself” and it was agreed that if he exercised the option Quader-Kino would use its best efforts to secure their extension. § The supplemental agreement makes it plain that if Nebenzal purchased the Anet rights “to the extent the owner owns them himself” or if plaintiff acquired an extension of the rights for Nebenzal, they were to be held for their mutual benefit. “Under all circumstances, and without having to make any contribution to the price to be paid to the heirs of Claude Anet for the extension of the rights, [Quader-Kino] shall be entitled to the use and exploitation of the rights dealt with herein for its own purposes in accordance with the reservations made in the agreement signed simultaneously, and those reservations are hereby expressly made part of this agreement.” It is true that Nebenzal did not agree not to purchase the rights independently. He knew, however, that the Anet rights would soon expire and that plaintiff’s reservation of the unqualified right to exploit the picture and the limitation on the exhibition of the English remake would be valueless to plaintiff unless an extension of the Anet rights was obtained.
The negotiations for the sale of the remake rights were begun when Hitler’s European fortress had been dented only at Salerno and the cessation of hostilities seemed remote. When the contracts were executed the Allied armies were still contained in the Cherbourg Peninsula and had not penetrated farther east than St. Lo. It would have been absurd at that time to contract so carefully about rights that would expire shortly and would have no value before their expiration. The Anet rights at that time had only 14 months to run. The exhibition of “Mayerling” in continental Europe before October 8, 1945, was virtually impossible. It is hardly conceivable that plaintiff would have insisted on reserving rights that would be virtually useless to it. The contracts have *299meaning only if they are construed as providing for the acquisition of the Anet rights for the mutual benefit of Quader-Kino and Nebenzal.
The supplemental agreement was based on the understanding that Quader-Kino would eventually secure an extension of the Anet rights. Nebenzal was given the opportunity to share in those rights by paying the costs that Quader-Kino would incur in their acquisition. Nebenzal in turn agreed that “Under all circumstances, and without having to make any contribution to the price to be paid to the heirs of Claude Anet for the extension of the rights,” Quader-Kino would be entitled to their concurrent use. These mutual obligations are clear even without express words of promise. (Atwater & Co. v. Panama R. R. Co., 246 N.Y. 519, 524 [159 N.E. 418].)
Although it is true that Nebenzal did not expressly agree not to purchase the rights independently and use them to prevent plaintiff’s exploitation of its picture, “we think . . . that such a promise is fairly to be implied. The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. It takes a broader view today. A promise may be lacking, and yet the whole writing may be ‘instinct with an obligation’ imperfectly expressed.” (Cardozo, J., in Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 91 [118 N.E. 214]; Moran v. Standard Oil Co. of New York, 211 N.Y. 187, 197-198 [105 N.E. 217]; Murphy v. North American Light & Power Co., 106 F.2d 74, 80-81; Coghlan v. Stetson, 19 F. 727, 730; De Cesare v. Occhiuto, 64 N.Y.S.2d 675, 677; McCall Co. v. Wright, 133 App.Div. 62, 68 [117 N.Y.S. 775].) The contracts carry the inescapable implication that the parties contemplated that the extension of the Anet rights would be secured for their mutual benefit. New York law, in such eases, implies in the contract a “covenant of good faith and fair dealing,” that neither party shall take any action that may destroy or impair the right of the other party to receive the anticipated fruits of the contract. (Kirke La Shelle Co. v. Paul Armstrong Co., 263 N.Y. 79, 87 [188 N.E. 163]; Underhill v. Schenck, 238 N.Y. 7, 15 [143 N.E. 773, 33 A.L.R. 303]; Price v. Spielman Motor Sales Co., 261 App.Div. 626 [26 N.Y.S.2d 836, 839]; Genet v. Delaware & Hudson Canal Co., 136 N.Y. 593, 608, 611-612 [32 N.E. 1078, 19 L.R.A. 127]; Uproar Co. v. National Broadcasting Co., 81 F.2d 373, 377; Frohman v. Fitch, 164 App.Div. 231 [149 N.Y.S. 633, 634]; Goldberg, 168-05 Corp. v. Levy, 170 Misc. 292 [9 N.Y.S.2d 304, 306]; Guardino Tank Proc. Corp. *300v. Olsson, 89, N.Y.S.2d 691, 696-697; Bennett v. Vansyckel, 4 Duer (N.Y.) 462, 472.) Nebenzal breached that implied covenant when he purchased and used only for his own purposes rights in which both parties were given a concurrent interest.
The majority opinion states that “plaintiff . . . received ‘the fruits of the contract’ in the form of the $20,000 paid it by Nebenzal; so far as Nebenzal’s contractual obligations to plaintiff are concerned Nebenzal had by such payment performed his part of the contract and nothing further remained to be done.” That statement overlooks the fact that the reservation of Quader-Kino’s “unqualified right” to continue the exploitation of its picture was part of the consideration in addition to the $20,000 paid for the grant of the remake rights. Moreover, the New York courts include as “fruits of the contract” any benefit that either party expects to derive from the subject of the contract when that expectation appears from its terms. Eights reserved under a contract of license or sale are as much the fruits of that contract as rights initially created thereunder. (Manners v. Morosco, 252 U.S. 317, 327 [40 S.Ct. 335, 64 L.Ed. 590]; Harper Bros. v. Klaw, 232 F. 609, 613; Uproar Co. v. National Broadcasting Co., 81 F.2d 373, 377.) Thus, plaintiff reserved as fruits of its contract with Nebenzal the unqualified right to continue the exploitation of “Mayerling” and the right to use the Anet rights for that purpose. Nebenzal impliedly covenanted not to do anything to impair the value of those rights. He breached the covenant, not when he purchased the Anet rights but when he used those rights to restrain plaintiff’s exhibition of its motion picture.
The facts of this case are analogous to those of Bennett v. Vansyckel, supra, 4 Duer (N.Y.) 462. Defendant therein assigned a lease for a term of years to the plaintiff. At its expiration, defendant obtained a new lease from the lessor to the exclusion of his assignee. The court decreed that defendant held the new lease as a constructive trustee for the benefit of the plaintiff, on the ground that defendant breached his implied covenant of fair dealing by acting adversely to plaintiff’s expectation that he would obtain a renewal of the lease for his own benefit. By the same reasoning, Nebenzal clearly breached his implied covenant not to secure and use adversely to plaintiff, rights that both parties contemplated plaintiff would attempt to secure for their mutual benefit. *301the New York cases is not justified by its statement that “as found by the trial court, there is no evidence of any but fair and honest dealing on [Nebenzal’s] part.” If in fact a contract has been breached, the good faith of the defendant or his belief in the legal rectitude of his action is immaterial. The requirement of fair dealing, as the New York court has specifically held, is not dependent upon the presence or absence of intentional bad faith. The gravamen of a plaintiff’s cause of action is the fact that its contractual expectations have been destroyed, and not the intention with which defendant has destroyed them. (Bennett v. Vansyckel, 4 Duer (N.Y.) 462, 472; Kirke La Shelle Co. v. Paul Armstrong Co., 263 N.Y. 79, 89 [188 N.E. 163]; Harper Bros. v. Klaw, 232 F. 609, 613; Ward v. Whitney, 8 N.Y. 442, 446.) The converse result reached by the majority opinion can be supported only if the applicable New York law is disregarded; that cannot be done in view of the express provision that New York law should govern “all questions relating to the construction, enforcement and performance” of the contracts. (Boole v. Union Marine Ins. Co., 52 Cal.App. 207, 209 [198 P. 416]; Mutual Ufe Ins. Co. v. Cohen, 179 U.S. 262, 267 [21 S.Ct. 106, 45 L.Ed. 181]; Duskin v. Pennsylvania-Central Airlines Corp., 167 F.2d 727, 730; Hurwitz v. Hurwitz, 216 App.Div. 362 [215 N.Y.S. 184, 189].)
The majority opinion seeks to justify its interpretation of the contract on the ground that “ ‘this court will adhere to the interpretation placed by the trial court on the writings and the conduct of the parties. ’ ” The interpretation of a contract or other written instrument, however, if there is no extrinsic evidence thereon or if the evidence is without conflict and not susceptible of conflicting inferences, is a question of law, and the finding of the trial court thereon is not conclusive on appeal. (Estate of Platt, 21 Cal.2d 343, 352 [131 P.2d 825]; Jones v. Pollock, 34 Cal.2d 863 [215 P.2d 733]; Western Coal & Mining Co. v. Jones, 27 Cal.2d 819, 826-827 [167 P.2d 719, 164 A.L.R. 685]; Union Oil Co. v. Union Sugar Co., 31 Cal.2d 300, 306 [188 P.2d 470]; Trubowitch v. Riverbank Canning Co., 30 Cal.2d 335, 339 [182 P.2d 182]; Brant v. California Dairies, Inc., 4 Cal.2d 128, 133 [48 P.2d 13]; Estate of Norris, 78 Cal.App.2d 152, 159 [177 P.2d 299]; Estate of O’Brien, 74 Cal.App.2d 405, 407 [168 P.2d 432]; First Trust & Savings Bank v. Costa, 83 Cal.App.2d 368, 372 [188 P.2d 778].) The only evidence the majority opinion *302invokes to support the trial court’s erroneous interpretation is the testimony of Nebenzal that he did not want the Anet rights and that he signed the supplemental agreement under the impression that “it was an option, which I felt I could pick up or not pick up. ” Conceding that the trial court could believe Nebenzal’s statement that he did not want the Anet rights in view of his payment of more than $10,000 for them six months later, I find nothing in his testimony to indicate that the parties gave the third clause of the agreement any construction other than its patent implication. The agreement was in part an option, as Nebenzal stated; nonetheless by signing it he bound himself to its provisions, including their express recognition of Quader-Kino’s intention to continue exhibiting the old picture under an extension of the Anet rights and the protection of its interest in those rights. Nothing in the testimony casts doubt on the clear agreement in the main contract on Quader-Kino’s reservation of rights. Finally, even if Nebenzal’s testimony disclosed a secret intention not to be bound by that agreement, that intention is irrelevant. “It is now a settled principle of the law of contract that the undisclosed intentions of the parties are . . . immaterial; and that the outward manifestation or expression of assent is controlling.” (Brant v. California Dairies, Inc., 4 Cal.2d 128, 133 [48 P.2d 13]; 1 Rest., Contracts, § 20.)
I would therefore reverse the judgment and remand the cause with directions to the trial court to grant the injunction as prayed and to determine the amount, if any, of damage suffered by Quader-Kino as a result of Nebenzal’s breach of their contract.