ROBERT CORTES PRODUCTIONS INC v. SANDOLLAR PRODUCTIONS INC

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Court of Appeal, Second District, Division 7, California.

ROBERT CORTES PRODUCTIONS, INC. and Robert Cortes, Plaintiffs and Appellants, v. SANDOLLAR PRODUCTIONS, INC., et al., Defendants and Respondents.

No. B036354.

Decided: September 21, 1989

Slaff, Mosk & Rudman and Valerie V. Flugge, Los Angeles, for plaintiffs and appellants. Arrow Edelstein & Laird, Peter Laird, William R. Sobel and Ralph C. Loeb, Los Angeles, for defendants and respondents.

Plaintiffs appeal from summary judgment entered against them and in favor of defendants Sandollar Productions, Inc., Gallin Morey Associates, and Albert S. Gallin (hereinafter referred to collectively as Sandollar).   The principal appellate issue is whether the statute of frauds (Civ.Code § 1624, subd. (a)) 1 applies to an employment agreement for a one-year period terminable in the event of the employee's death, incapacity, or his material breach of the agreement.

I

FACTUAL AND PROCEDURAL BACKGROUND

Those facts in defendants' statement of undisputed facts, which are also agreed as undisputed by plaintiffs, establish that in the third week of June 1986, Robert Cortes 2 and defendants Sandollar Productions and Gallin Morey Associates entered into an oral employment agreement pursuant to which plaintiff was to develop motion picture properties for defendants;  plaintiff's employment was to begin on July 7, 1986, and was guaranteed for a one-year period;  plaintiff began work on July 7;  on October 21, defendants terminated his employment;  while employed, Cortes was compensated for his services.

Plaintiff filed a complaint against defendants containing four causes of action.   The first cause of action, for breach of contract against Sandollar Productions and Gallin Morey Associates, alleged that in June 1986, plaintiff entered into an employment agreement with defendants, which agreement was partially oral and partially written, and pursuant to which defendants agreed to engage plaintiff for a one-year period beginning July 7, 1986, for the total sum of $150,000;  defendants were granted an “irrevocable option” to extend the term of the agreement for an additional consecutive period of 18 months;  in reliance on the agreement, plaintiff did furnish services to defendants and refrained from engaging in other employment opportunities;  plaintiff performed all obligations required to be performed pursuant to the agreement;  and on October 24, 1986, defendants wrongfully terminated him prior to the end of the term of the agreement.   The second cause of action for fraud against all defendants alleged that at the time they entered into the agreement they never intended to perform their promises under the agreement but intended to use Cortes until he had provided certain services and then to terminate him;  in reliance on defendants' fraudulent promises, Cortes entered into the agreement with defendants and refrained from engaging in other employment.

The third cause of action for tortious breach of the covenant of good faith and fair dealing against Sandollar Productions and Gallin Morey Associates alleged, inter alia, that defendants refused to provide Cortes with any justification for the termination, but rather, in bad faith denied the existence of the agreement.   The fourth cause of action, for conspiracy against all defendants, incorporated the other causes of action and alleged that defendants conspired to commit all of the alleged wrongful acts.

Defendants' answer to the complaint contained the affirmative defense that the oral agreement was barred by the statute of frauds.   Thereafter, defendants moved for summary judgment or in the alternative, for summary adjudication of issues.   As to the cause of action based on contract, defendants claimed that it was barred by the statute of frauds, Civil Code section 1624, subdivision (a), and that the cause of action for tortious breach of the contract was barred as well under Newfield v. Insurance Co. of the West (1984) 156 Cal.App.3d 440, 203 Cal.Rptr. 9.   As to the causes of action for fraud and conspiracy, defendants presented evidence to negate the intent elements of those claims, consisting of deposition testimony of defendant Albert Gallin, president of Sandollar Productions, that when he hired Cortes he had every intention of having him work for Sandollar for many years but that he terminated Cortes's employment because he was dissatisfied with Cortes's performance.

In opposition to the motion, plaintiff argued that the agreement was not subject to the statute of frauds, and if it were, the draft of the employment agreement, transmitted to plaintiff by a cover letter signed by defendants' agent, their attorney, met the writing requirements of Civil Code section 1624, subdivision (a).   Plaintiff also argued that a triable issue existed as to whether defendants were estopped to assert the statute of frauds due to plaintiff's detrimental reliance in turning down a job offer at RKO because of Sandollar's guarantee of a one-year term of employment.

As to the causes of action for fraud and conspiracy, plaintiff argued that there was sufficient circumstantial evidence adduced to create a triable issue of fact as to defendants' true intentions in hiring him.   Deposition testimony of Cortes and Gallin established that at the time Gallin interviewed Cortes, he expressed interest in Cortes's connections at Universal Pictures, and during the period that Cortes was employed by defendants, Sandollar extended an existing deal with Universal.   Cortes claimed that from the above facts a jury could reasonably infer that at the time defendants promised him employment for at least one year, they really intended to utilize his services on a trial basis and intended to use his connections with Universal Pictures in order to extend an existing deal with Universal Pictures and then terminate him once their ends had been accomplished.

In opposition to the motion, plaintiff also presented deposition testimony as to the negotiations and circumstances surrounding his employment agreement.   According to Cortes's deposition testimony, sometime in June 1986, the parties, after negotiations between their attorneys, orally agreed that Cortes was guaranteed employment for a one-year period, beginning on July 7, with a first year compensation of $150,000, a car allowance, health benefits, and an option for defendants to extend the agreement for an 18–month period;  after agreement was reached, Gallin sent Cortes a bottle of champagne and telephoned Cortes to welcome him aboard and told Cortes that there was a deal.

Thomas Hansen, Cortes's attorney, testified in his deposition that after agreement was reached and sometime before June 19, defendants' attorney, Gerald Edelstein, drafted a memorandum of agreement and sent it to him (Hansen) with a cover letter stating that if everything was in order, to have Cortes sign the agreement and return it to Edelstein for counter-signature;  Hansen made several handwritten changes to the memorandum of agreement and sent it to Edelstein with a cover letter dated June 27.   On July 1, 1986, Edelstein sent Hansen a letter and a copy of the agreement containing both Hansen's notations and Edelstein's responses thereto.   Although Edelstein disagreed with certain of Hansen's changes, he wrote “OK” next to Hansen's version of the provisions relating to term of employment, compensation, and termination.   The provision for termination of the agreement, as approved by Edelstein, stated:  “This agreement may be terminated by [Sandollar Productions], without any further obligation to [Cortes], in the event of the death or permanent incapacity of Cortes or a material breach of this agreement by [Cortes] not cured within a reasonable period of time following written notice.”

Hansen also testified that, as to those instances where Edelstein disagreed with Hansen's changes, Cortes agreed to go along with Edelstein's version, and such agreement was communicated to Edelstein.   Hansen thought Edelstein was going to redraft the agreement, but Hansen did not press him for it as “No one seemed terribly excited about getting it signed.”   Hansen believed that agreement on the material terms was reached in the middle of June.   Sometime in October, Hansen received telephone calls from Cortes and Edelstein informing him that Gallin was not happy with the relationship with Cortes and wanted to terminate it;  Edelstein told Hansen that defendants wanted to pay Cortes's salary for another three or four weeks;  when Hansen told Edelstein that Cortes had a one-year deal, Edelstein said, “No, we don't”;  Hansen told him that he (Hansen) did not think Edelstein's position was accurate.

Cortes testified in his deposition that the reason he did not pursue a written contract was because “I realized I had entered into an agreement.   I was rendering services and they were rendering compensation to the amount specified.”

After hearing and argument on the motion for summary judgment, the court granted the motion.   Plaintiffs filed timely notice of appeal from the judgment.   Appellants contend that the trial court erroneously granted summary judgment because the employment agreement is not subject to the statute of frauds, or if subject to the statute, its requirements were met by the written correspondence between the parties.   Appellants additionally claim that there were material facts in dispute as to whether respondents were estopped to assert the statute of frauds defense and as to whether respondents intended to perform the agreement at the time it was made;  appellants finally contend that the trial court abused its discretion in granting summary judgment when they had not completed discovery.

II

SUMMARY JUDGMENT

Summary judgment is properly granted only if no triable issue exists or where the record establishes as a matter of law a cause of action asserted against a party cannot prevail.  (Rare Coin Galleries, Inc. v. A–Mark Coin Co., Inc. (1988) 202 Cal.App.3d 330, 334, 248 Cal.Rptr. 341.)  “Our review of a summary judgment is limited to determining upon a de novo examination whether there was no genuine issue of material fact and the moving party was entitled to judgment as a matter of law.  [Citations.]  If the trial court has erred, either in failing to find a triable issue of fact where there is one, or in failing to apply undisputed facts to a correct principle of law, then the judgment must be reversed.”  (Scroggs v. Coast Community College Dist. (1987) 193 Cal.App.3d 1399, 1401, 239 Cal.Rptr. 916.)

III

STATUTE OF FRAUDS

 Respondents contend that the trial court herein properly interpreted Civil Code section 1624, subdivision (a) as applying to the instant agreement because the termination of the agreement by reason of death, incapacity or breach does not make the contract one capable of performance within a year, but such contingencies provide only excuses for nonperformance.   Respondents maintain that the concept of performance in this subdivision of the statute of frauds does not include termination of the agreement unless such termination fulfills the essential purposes of the agreement.   As the purpose of the instant agreement was to have Cortes serve as an executive of Sandollar for at least one year, respondents claim the essential purpose of the contract would not be fulfilled by its termination within a year.

Respondents urge a broad application of the statute and one which has been rejected by the courts.  “ ‘ “In its actual application ․ the courts have been perhaps even less friendly to this provision [the one-year section] than to the other provisions of the statute [of frauds].   They have observed the exact words of this provision and have interpreted them literally and very narrowly․  To fall within the words of the provision, therefore, the agreement must be one of which it can truly be said at the very moment it is made, ‘This agreement is not to be performed within one year’;  in general, the cases indicate that there must not be the slightest possibility that it can be fully performed within one year.” ' ”  (Plumlee v. Poag (1984) 150 Cal.App.3d 541, 548, 198 Cal.Rptr. 66, citing White Lightning Co. v. Wolfson (1968) 68 Cal.2d 336, 343, fn. 2, 66 Cal.Rptr. 697, 438 P.2d 345, original emphasis.)

As explained in Plumlee, “ ‘ “the performance of a contract can be nothing more than a carrying out of its terms,—an adherence to its provisions,—and, if a termination of it be authorized by the language employed by the parties, then, said termination being permitted, the exercise of the right so to do is certainly not a breach of the contract upon the part of the party asserting the right to abrogate it, and, if not a breach, it must be a performance.   If the contract permits its destruction by the parties, that destruction is merely carrying out the terms of the agreement, and nothing more.” ’ ”  (150 Cal.App.3d at p. 551, 198 Cal.Rptr. 66, original emphasis.)

This narrow interpretation of the statute was recently affirmed by the California Supreme Court in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373, which expressly disapproved Newfield v. Insurance Co. of the West, supra, 156 Cal.App.3d 440, 203 Cal.Rptr. 9, and Newfield's broad “ ‘probable expectations' test” (47 Cal.3d at p. 675, fn. 18, 254 Cal.Rptr. 211, 765 P.2d 373), which is in essence the same concept as respondents' concept of fulfillment of essential purposes.3

As explained in Foley, “The Legislature, which in 1872 enacted Civil Code section 1624, was aware of precedent limiting the reach of the one-year provision of the statute of frauds.   The Code Commissioners' Notes specifically advised that ‘in a similar statute in New York these words have been construed as applying only to contracts which cannot possibly be executed within a year, under any contingency․  To bring a contract within the statute relating to parol agreements, not to be performed within one year, it must appear to be necessarily incapable of performance within that time.’  ․   When the Legislature enacts language that has received definitive judicial construction, we presume that the Legislature was aware of the relevant judicial decisions and intended to adopt that construction.   [Citation.]  This presumption gains further strength when, as in this case, it is clear that the Legislature was explicitly informed of the prior construction.”  (47 Cal.3d at pp. 674–675, 254 Cal.Rptr. 211, 765 P.2d 373, original emphasis, fns. omitted.)

“The applicability of the statute of frauds must be analyzed prospectively, based on the intentions of the parties and the terms of the agreement at the time it is made.”  (47 Cal.3d at p. 675, fn. 18, 254 Cal.Rptr. 211, 765 P.2d 373.)   The court in Foley acknowledged that even if the oral agreement therein had expressly promised plaintiff permanent employment terminable only on the condition of his subsequent poor performance or other good cause, such an agreement could possibly be completed within one year because the employee can quit, the employer can discharge for cause within one year or even within one day.  (47 Cal.3d at pp. 672–673, 254 Cal.Rptr. 211, 765 P.2d 373.)   The court in Foley concluded that if pursuant to the terms of the agreement, “plaintiff could have terminated his employment within [one year], or defendant could have discharged plaintiff for cause” (47 Cal.3d at p. 675, 254 Cal.Rptr. 211, 765 P.2d 373), the contract does not fall within the statute of frauds.

Such a result was found to be consistent with prior California authorities as well as those in other jurisdictions.  “These authorities support the general rule that if a condition terminating a contract may occur within one year of its making, then the contract is performable within a year and does not fall within the scope of the statute of frauds.   This is true even though performance of the contract may extend for longer than one year if the condition does not occur.”  (47 Cal.3d at p. 673, 254 Cal.Rptr. 211, 765 P.2d 373.)

Respondents attempt to distinguish Foley from the instant case, but we find the differences to be distinctions without significance.   Respondents first claim that Foley dealt with employment agreements with indefinite terms, so it should not govern the case at bar, involving an agreement for a definite term.   Respondents offer no reason or principle to support a distinction between an agreement for an indefinite term which contains provisions for termination within one year and one for a definite term which contains the same provisions for termination within one year.   The effect (performance within one year) is the same.  (See, e.g., Hopper v. Lennen & Mitchell (9th Cir.1944) 146 F.2d 364, 367.)

In order to avoid the general rule set out in Foley, respondents also claim that there is a distinction between an option to terminate, which is part of the contractual terms, and a “supervening event” like death or incapacity, which by operation of law excuses performance of a contract.   Respondents argue that the instant agreement does not contain any options to terminate because the same events, by operation of law, would excuse performance.   Foley, however, places no such limit on the type of condition which the parties agree may result in a termination of the contract.   Respondents entered into a contract which by its express terms contemplates its termination in the event of certain occurrences and cannot in good faith complain now about such terms and attempt to treat them as if they are not in fact part of the agreement.

As best we can understand respondents' brief, they also contend that because the grounds of death or incapacity would also operate by law to excuse performance of the contract, such a contract is taken out of the statute of frauds only if such grounds also operate to fulfill the “essential purpose” of the contract—i.e. if the “probable expectations” of the parties are fulfilled.   Respondents claim that this analysis is supported by several Court of Appeal decisions, including Tomlins v. American Ins. Co. (1968) 258 Cal.App.2d 525, 66 Cal.Rptr. 92, and Gressley v. Williams (1961) 193 Cal.App.2d 636, 14 Cal.Rptr. 496.   No such rule can be found either expressly or by implication in the cited cases, which are simply not dispositive of the issue presented in the instant case.4

Respondents point out that because incapacity or death, whether specified in the agreement or not, could occur at any time and would terminate the agreement by operation of law, the narrow interpretation of Civil Code section 1624, subdivision (a) set out in Foley renders that statute inapplicable to every oral contract of employment.   Neither Foley nor the case at bar involves a situation where the agreement is silent as to grounds for termination, and we therefore do not address the broader issue as to whether Foley should be interpreted to mean that section 1624, subdivision (a) is inapplicable to employment contracts in general, whether or not the conditions for termination are expressly contemplated in the terms of the agreement.

 Because the instant agreement is not one that “by its terms is not to be performed within a year from the making thereof,” we conclude as a matter of law that the instant agreement is not subject to the statute of frauds (Civ.Code, § 1624, subd. (a)).  As the trial court failed to apply the correct principle of law to the undisputed facts presented by the parties, the judgment must be reversed as to the first cause of action.5

In light of our determinations in this section of the opinion, we need not address the issue of whether a triable issue exists as to whether respondents are estopped to assert the defense of the statute of frauds.

IV

TORT CAUSES OF ACTION(SECOND, THIRD, AND FOURTH CAUSES)

 “A defendant moving for summary judgment has the burden of establishing that the action is without merit;  a factual showing negating all causes of action upon all theories is required.”  (Hayman v. Block (1986) 176 Cal.App.3d 629, 639, 222 Cal.Rptr. 293.)   We thus consider whether the trial court properly granted summary judgment as to the remaining causes of action of the complaint.6

 Respondents claim that the evidence was undisputed that appellant did not detrimentally rely on their offer of employment in turning down another job offer, because Cortes turned down the other offer before Cortes had reached agreement with respondents.   They also contend that it was undisputed that Gallin did not intend to defraud Cortes, but at the start of the relationship Gallin had every intention of employing him for many years.

As to the issue of detrimental reliance, we believe that the trial court failed to interpret the evidence liberally in favor of appellant, as required on summary judgment.  (Bliler v. Covenant Control Com. (1988) 205 Cal.App.3d 18, 24, 252 Cal.Rptr. 50.)   According to appellant's deposition testimony, he was being aggressively pursued by RKO in May and June 1986, at the same time as he was negotiating with respondents;  on June 16, when it appeared to appellant that he was probably going to be “going with [respondents]” he turned down RKO's offer;  he told RKO that he was in the process of discussions with Sandollar, which was offering him more money and a one-year guaranteed contract.   A reasonable inference from his testimony is that the promise of a one-year guaranteed position was an element of the negotiations with respondents from the very start;  although there may have been on-going negotiations as to compensation and other terms, it was upon this promise of a guaranteed one-year term that Cortes relied in turning down a position with RKO.   The evidence was thus sufficient to create a triable issue of fact as to whether appellant detrimentally relied upon respondents' alleged fraudulent misrepresentations.

 Because summary judgment is improperly granted when inferences from the evidence are contradicted by other inferences or evidence (Hayman v. Block, supra, 176 Cal.App.3d 629, 639, 222 Cal.Rptr. 293), a triable issue of fact was also presented as to Gallin's intent.   Despite the fact that he testified in his deposition that he had an innocent intent, appellants correctly point out that the trier of fact reasonably could infer a contrary intent from the following facts:  (1) although respondents assumed the responsibility for reducing the agreement to writing, it was not reduced to writing despite the fact that the parties had reached agreement on the language of the formal document;  (2) at the time respondents terminated Cortes's employment, they denied the existence of an obligation to employ him for a one-year period;  (3) at the time Gallin fired Cortes, Gallin did not assert that Cortes had breached the agreement and he was not given any notice of or opportunity to cure any breach;  and (4) because of Cortes's connections with Universal Pictures and because respondents extended an existing agreement with Universal, their secret intention at the time they hired Cortes was to use Cortes to extend such agreement and then to terminate his services.

Moreover, as stated by one court, “ ‘The true reasons for an employee's dismissal, and whether they show bad faith rather than dissatisfaction with services and reflect intention to deprive the discharged employee of the benefits of the contract, are evidentiary questions most properly resolved by the trier of fact.  [Citations.]’ ”  (Garcia v. Rockwell Internat. Corp. (1986) 187 Cal.App.3d 1556, 1562, 232 Cal.Rptr. 490.)   Thus, the instant record shows triable issues as to the second, third, and fourth causes of action.

In light of our conclusion that summary judgment was improperly granted as to all causes of action, we need not address appellants' contention that the court abused its discretion in granting summary judgment before they had completed their discovery.

DISPOSITION

The judgment is reversed.   Appellants are entitled to recover their costs on appeal.

FOOTNOTES

1.   Civil Code section 1624 provides in part that “The following contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party's agent:  [¶](a)  An agreement that by its terms is not to be performed within a year from the making thereof.”

2.   The complaint alleges that Robert Cortes is the owner of all of the capital stock of Robert Cortes Productions, Inc.   Because this case involves two plaintiffs, references to one shall be deemed to include the other plaintiff as well.

3.   Although the California Supreme Court had not decided Foley at the time the trial court ruled on the motion for summary judgment, Foley “shall be given full retroactive effect as to all cases not yet final on January 30, 1989․”  (Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 993, 258 Cal.Rptr. 592, 772 P.2d 1059.)   We thus deem Foley applicable to this case.   Moreover, the interpretation of the statute of frauds by the court in Foley was consistent with prior law and cannot be considered unexpected.

4.   We also note that respondents fail to acknowledge that the court in Gressley dealt with two separate agreements, and discuss only the holding as to the first.   The second agreement, which alleged an oral employment agreement for a term of one year and at will thereafter, was held not to be within the statute of frauds because a “contract for permanent employment is only a contract for an indefinite period, terminable at the will of either party unless it is based on some consideration other than the services to be rendered.”  (Gressley v. Williams, supra, 193 Cal.App.2d at p. 642, 14 Cal.Rptr. 496.)   This result is consistent with that in Foley.

5.   Were we to address the issue of the writing requirement of the statute of frauds, we would conclude that the writings in the instant case satisfy the requirement of the statute.  “ ‘It is for the court to determine whether letters which have passed between the parties constitute an agreement between them’ ”.  (Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1258, 241 Cal.Rptr. 22, 743 P.2d 1279), and the trial court herein incorrectly determined this issue.“It is important to remember that ‘[t]he primary purpose of the Statute [of frauds] is evidentiary, to require reliable evidence of the existence and terms of the contract and to prevent enforcement through fraud or perjury of contracts never in fact made ․  Where only an evidentiary purpose is served, the requirement of a memorandum is read in the light of the dispute which arises and the admissions of the party to be charged;  there is no need for evidence on points not in dispute.’ ”  (Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 764–765, 206 Cal.Rptr. 354, 686 P.2d 1158, original emphasis.)“The name of the party to be charged with execution of a written document satisfies the statutory requirement of ‘subscription’ if it is intended as a signature, i.e., authentication of the document, regardless of where in the writing it appears.”  (Poag v. Winston (1987) 195 Cal.App.3d 1161, 1179, 241 Cal.Rptr. 330.)   If one of a series of papers which appear to have some relation to the same matter is signed by the party to be charged, this is enough, as all the papers are to be considered together as forming one contract or memorandum.  (Rader Co. v. Stone (1986) 178 Cal.App.3d 10, 23, 223 Cal.Rptr. 806.)Pursuant to the undisputed facts, the cover letter signed by respondents' agent, which clearly related to the draft memorandum, and the draft memorandum in which respondents' agent approved of the essential terms of the contract as offered by appellant, are sufficient to meet the subscription requirement, as there is no dispute of fact that respondents' cover letter was intended to authenticate the memorandum as reflecting the terms to which the parties had agreed.   The fact that a formal written contract was never executed by the parties is irrelevant to this issue, as the memorandum is not the contract, but merely evidence of its terms.   (See Mangini v. Wolfschmidt, Ltd. (1961) 192 Cal.App.2d 64, 72, 13 Cal.Rptr. 503.)

6.   Even were the first cause of action barred by the statute of frauds, we would still address the motion for summary judgment as to the remaining tort causes of action because an action for fraudulent misrepresentation may be maintained even if the fraudulent promise is unenforceable under the statute of frauds.  (Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 29–31, 216 Cal.Rptr. 130, 702 P.2d 212.)

LILLIE, Presiding Justice.

JOHNSON and FRED WOODS, JJ., concur.