QUADER-KINO A. G. v. NEBENZAL et al.
The question for decision is whether the trial court fairly construed ambiguous writings with the aid of extraneous proof. Appellant contends that the findings are unsupported by the evidence and that the court erred in declaring the rights of the litigants.
Cinematic Rights to ‘Mayerling’
Prior to 1935 one Claude Anet, a popular French author, wrote a novel titled ‘The Mayerling’ of which 95 per cent was history, and therefore in the public domain. Five per cent was the product of Anet's genius. It is the story of a crown prince of Austria who committed suicide.
October 8, 1935, respondent Nebenzal paid Anet a liberal sum for a five-year license, herein referred to as the ‘Anet rights,’ for the use of this story by his company, Concordia, to produce a French talking picture. As producer for Concordia respondent purchased an extention of the Anet rights for an additional five years and he and associates composed a screen play from which they successfully produced and distributed the French version of ‘Mayerling.’ Three years later he assigned the Anet rights to ‘Dr. Gruess,’ the agent of appellant. Although respondent had disposed of his interest in Concordia in 1939, in 1940 he acquired an option (never exercised) to purchase the Anet rights from another. In November, 1943, he opened correspondence with Dr. Gruess with a view to repurchasing the Anet rights for the purpose of producing an English version of Mayerling. Gruess made a price of $20,000. After a year had passed respondent informed Gruess that he was no longer interested; that since he could not finish the English version before the expiration of the Anet rights then owned by appellant, he preferred ‘to take the basic and historical background of Mayerling * * * and the screen play’ which his own playwrights had prepared for Concordia and eliminate therefrom everything original with Anet.
Notwithstanding Gruess' approval of respondent's decision, as appellant's attorney-in-fact he succeeded in reaching an agreement with respondent on July 25, 1944, whereby appellant as owner obligated itself to sell and quitclaim to respondent ‘all the Owner's rights in and to the motion picture to the extent that it owns those rights itself including * * * the right to use the title ‘Mayerling’ * * * but excluding those rights expressly excepted and/or reserved herein, Provided, however, that the right to use the novel by Claude Anet or the name of the author thereof is not being transferred.'
By the next three paragraphs the parties obligated themselves as follows: Second, owner does not warrant his title; Third, the right to exploit the picture to be made by purchaser shall not be exercised by him in 10 designated European countries until three years after the conclusion of European hostilities; Fourth, the film of purchaser shall not be exhibited in theaters controlled by specified persons or corporations. The Fifth paragraph is the passage requiring judicial interpretation. It is as follows:
‘Fifth: The unqualified right of the Owner to exploit the original French version in the original French language under the title ‘Mayerling’ is hereby expressly reserved. Nothing herein shall prejudice the unqualified right of the Purchaser to superimpose on the new motion picture in the English language subtitles in any foreign language, nor his right to dub the new motion picture in any foreign language. Nor shall anything herein prejudice the unqualified right of the Owner to superimpose on the original French version subtitles in any language.
‘The Purchaser and the Owner mutually agree that neither one will produce nor permit to be produced nor transfer any rights so to produce any motion picture based on any of the foregoing material in any language.’
On the same day the parties executed an option agreement. Its preamble refers to the main contract and recites that ‘the Purchaser does not desire to use in the new production the features peculiar to the Claude Anet novel, ‘Mayerling’, but to base the story of the new production on historical facts, on features original to the script of the Motion Picture, and on such new features as he may deem fit to introduce * * * the rights based on the Claude Anet novel are not being transferred by the Owner to the Purchaser in the abovementioned agreement.' Then, in consideration of $1.00 and of the mutual promises and covenants set forth it was agreed:
‘First: In case the Purchaser should, in the future, for any reason whatever, desire to acquire the rights based on the Claude Anet novel, the Owner grants to the Purchaser the option to acquire those rights to the extent the Owner owns them itself and for the time the Owner owns those rights, and exclusively for the territories of the member countries of the International Copyright Union, without, however, any warranty whatsoever in these respects, and with these express qualifications, the Owner agrees to transfer and assign those rights to the Purchaser for the price of One Hundred ($100) United States Dollars,
‘Provided, the Purchaser exercises the option by a notification by registered mail, reaching the Owner within three (3) months after the Armistice concluding the present war in Europe, however, at the latest by July 8, 1945.
‘Second: In the event the Purchaser should exercise the option, the Owner also agrees, upon express request to be made by the Purchaser, to try to the best of the Owner's abilities to obtain an extension of the Claude Anet rights which, under the last grant, expire on October 8, 1945, for another five (5) years, provided that the Purchaser, at the option of the Owner, either furnishes the consideration to be paid to the heirs of Claude Anet for that extension, or repays the Owner that sum in case the Owner should choose to advance the money out of its own funds.
‘Third: 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, the Owner 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.’
Nebenzal, herein referred to as respondent, did not exercise this option but instead subsequently purchased the Anet rights from the assignee of the Anet heirs. The right of appellant to exploit Anet's novel having expired, respondent attempted in 1946 to prevent its further exhibitions of Mayerling. Diplomatic efforts having failed, respondent instituted a law suit in the French courts to effectuate his purpose. Thereupon, appellant commenced the instant action.
The complaint alleged that appellant's license to use Anet's material expired October 8, 1945; plaintiff is the owner of the world-wide motion picture and allied rights in and to a sound and talking motion picture photoplay in the French language, released, distributed, and exhibited in the United States and throughout the world under the title of Mayerling; such exhibitions were profitable; by the Fifth and Eleventh paragraphs of its contract with Nebenzal and by a declaration in the preamble to the option agreement, respondent had acquired from appellant the right to produce and exhibit the Mayerling in the English language, ‘with limitations on such release, distribution, exhibition and exploitation in certain enumerated European countries'; nothing contained in the contract shall ‘prejudice the unqualified right of the owner to superimpose on the original French version subtitles in any language’; the Anet rights were not conveyed by the contract; but by the option it was agreed that plaintiff, without having to make any contribution to the purchase price of the Anet rights, shall be entitled to use them for its own purpose in accordance with the reservations made in the contract; because plaintiff has refused to sell its right in the Mayerling, Nebenzal has secretly, maliciously and fraudulently acquired an extension of the Anet rights from the Anet heirs, thereby rendering it impossible for plaintiff to secure an extension thereof; Nebenzal falsely represented to the sellers of the Anet rights that he owned all the world-wide motion picture rights to the Mayerling, with the exception of the Anet rights, in order to induce the sellers to grant an extension of such rights. It is also alleged that defendant Nero Films, Inc., was organized by respondent who dominates and uses it to conceal his fraud; defendants have advised theaters and distributors that plaintiff has no right to exhibit or license others to exhibit Mayerling in any country and has filed suit in the courts of France to prevent plaintiff's exhibiting or distributing the picture; some licensed exhibitors have rescinded their contracts for showing the film, to plaintiff's pecuniary detriment. The prayer was for an injunction against the acts of defendants, and for damages.
After an extended trial, the court found against appellant on practically all its allegations; found that after October 8, 1945, appellant did not have the right to release, distribute, or exhibit the French version of the picture anywhere in the world; that Nebenzal had not acted secretly, maliciously or fraudulently in acquiring the Anet rights, and had done nothing to render it impossible for appellant to acquire them.
The Issues and Testimony
Appellant contends that because by the contract it reserved to itself the ‘unqualified right’ to exploit the original French version ‘under all circumstances,’ Nebenzal is now precluded from attempting to prevent its continued exhibition. It must be conceded that appellant reserved to itself what the contract designates ‘the unqualified right. * * * to exploit the original French version.’ However, that right was not ‘unqualified.’ On the contrary, it was limited by the terms of appellant's license from Claude Anet, namely the automatic termination date of the license, to wit, October 8, 1945. Thereafter, unless an extension should be obtained, all right to show the French film ceased and neither appellant nor respondent, nor any other person could infringe the copyright of the Anet heirs by exhibiting the picture containing the scenes created by Anet. Appellant did not secure an extension; nor was it obligated by its agreement to do so. It merely promised that upon Nebenzal's ‘express request’ it would ‘try to the best of the owner's abilities to obtain an extension * * * for another five years.’ By the contractual reservations appellant retained only such rights as it had under its license from Anet and the right to exhibit the French version until October 8, 1945. But Nebenzal could not by any concession confer upon appellant any rights whatever in the Anet novel.
Appellant seeks to extend elastically the phrase, ‘under all circumstances' as used in the option to embrace every conceivable situation. There is no basis in reason or authority for such interpretation. A single phrase of a document cannot be isolated for the purpose of ascertaining its true meaning but must be read with the text in which it occurs. When an all-inclusive word or phrase follows a specific use of such word or phrase, the meaning of the generic term extends no further than the specific designation. See Jersey Island Dredging Company v. Whitney, 149 Cal. 269, 273, 86 P. 509, 691.
By virtue of the last above quoted phrase appellant contends that it should be permitted to continue the distribution and exhibition of its French picture. Such contention is based also upon a strained construction of the option which provides that ‘the owner shall be entitled to the use and exploitation of the rights dealt with herein [emphasis ours] for its own purposes in accordance with the reservations' in the main contract which ‘are hereby expressly made part of this agreement.’ By such argument appellant ignores the fact that the only ‘rights dealt with’ in the option contract were the Anet rights then held by appellant. But they were to terminate on October 8, 1945, and respondent had in the main contract declared and agreed that he would not use them because he could not wait until France would be reoccupied or until the date of such termination. The main contract dealt with all that appellant had a right to sell. It specifically stipulated (1) ‘that the right to use the novel by Claude Anet or the name of the author thereof is not being transferred’; (2) ‘but nothing herein contained shall be deemed to prevent the purchaser from using any material in said novel which may be in public domain and/or historical in source.’ The option agreement was the child of Gruess' brain. He proposed it and urged Nebenzal to accept it for the reason that the latter might change his mind about not using the Anet rights. But appellant shortened the term of the option by the provision that in the event respondent should exercise the option he must send notice of his intention to do so to appellant by July 8, 1945. Such requirement could mean no more nor less than that after that date the contractual relations of the parties under the option would be at an end.
The evidence reasonably justified the implied finding that the option agreement did not mean that respondent was required to share the benefits of the Anet rights with appellant upon his gaining ownership thereof. Concededly, it is ambiguous and in order to derive its meaning, much testimony as well as correspondence was received.
Gruess advised respondent by letter on March 8, 1944, that it was impossible to reach his principal in Switzerland or the Anet heirs in France. April 3, 1944, respondent wrote Gruess of the danger of a ‘hold-up’ in the event that appellant's script should be used without an extension of the license. Later in New York respondent explained to Gruess the folly of waiting until he could obtain the Anet rights. No one knew when France would be liberated; since he intended to begin production soon, he could not afford to wait longer for the Anet rights which would expire in October, 1945, and, of course, he could not use the Anet scenes and take chances on the demands the Anet heirs might make. Respondent testified that (1) prior to the contracts he explained to Gruess his reasons for not desiring the Anet rights; (2) he intended to use the basic and historical background of Mayerling which is told in many books; (3) the screen play had been written by his own screen playwrights; (4) he could eliminate therefrom the three scenes that were original with Anet and thus produce the picture without resort to the Anet novel.
For the screen play respondent paid appellant's agent $20,000. He then discovered that title to Mayerling was vested in the alien property custodian and to obtain a release of the screen play respondent contributed the further sum of $7,500.
Trial Court's Interpretation
Guided by the apparent purpose of the parties and the circumstances of their execution the court below interpreted the contracts, Civ.Code, sec. 1647, and determined the sense in which ‘the promisor believed * * * the promisee understood it.’ Civ.Code, sec. 1649. The circumstances as proved and found were as follows: In July, 1944, Nebenzal desired to remake the Mayerling in English. Appellant at the time owned the license to use the portion taken from Anet's novel until its expiration, October 8, 1945. By that time the English picture might be finished and appellant's rights to the use of Anet's novel would have expired. The heirs of Anet could not be reached in France or the officers of appellant in Switzerland. This rendered it impracticable for respondent to use the Anet rights, with the mere expectation of acquiring an extension. To make the English Mayerling would entail an expense of a million dollars. For these reasons respondent decided to deal with only what was available and what he thought was disentangled, namely, the history of the Austrian prince and the script upon which the French version was based with the scenes created by Anet eliminated. That decision met with appellant's approval. While it reserved the right to exploit its own picture, necessarily its privilege of doing so would by the terms of the license expire fifteen months later. Hoping to acquire a renewal of its license from the heirs of Anet in October, 1945, appellant caused to be inserted in the contracts the reservation of a continuing right to exploit the French version thereafter everywhere. That reservation did not operate against Anet and, a priori, against his heirs or their future assignees.
The contracts were not made to create for appellant some rights against respondent in property he might subsequently acquire. The main contract conveyed to Nebenzal only such rights in the Mayerling photoplay as appellant then owned, except the remaining fifteen months of the life of the Anet license. Respondent did not even promise to request a renewal. Appellant merely offered to extend its good offices to assist Nebenzal in acquiring the Anet rights in the event the latter should exercise the option. Neither did respondent promise that he would, or would not, buy the Anet rights from another. In fact there is no evidence that on the day of the contracts he secretly or otherwise intended to acquire those rights, as contended by appellant. His acquisition thereof came about by reason of the fact that the new assignee, Marcel Hellman, was for a long time the friend of respondent. Hellman had purchased a ten-year license to October, 1955, for the purpose of producing an English version on his own account, only to discover on his arrival in Hollywood that Nebenzal was about to do that very thing without using the scenes from Anet's novel. Is it reasonable to say that upon Hellman's offer to sell the Anet rights, respondent was, by virtue of the option agreement, obligated to drive Hellman from his office to that of appellant so that the latter might purchase the Anet rights from him? Promptly upon closing his transaction with Hellman, respondent, in February, 1945, advised Dr. Gruess of his success and Gruess notified the Paris office of appellant. That was eight months before Nebenzal received the documentary assignment. Not a word of criticism came then from any official of appellant.
Inasmuch as there was neither moral inhibition nor contractual obligation against Nebenzal's acquisition of the Anet rights, no reason appeared to the trial court why he should not purchase them from Hellman. He violated no rights of appellant in doing so. A rational interpretation of the language of both contracts is supported by the correspondence and behavior of all parties and by the testimony of respondent. Having before it the parties, their witnesses and all pertinent documents, the court below exercised its prerogative to adopt that evidence which it believed to be true. Not only did respondent commit no fraud in acquiring the Anet rights, there is not the slightest proof that he did anything to prevent appellant from doing so. After July, 1944, had passed without its having received respondent's notice of his desire to exercise the option given him by the agreement, appellant was utterly free to buy Anet's novel and even his very name. Not having done so it is in no position to assert the right to use scenes from the novel, the copyright of which has been assigned to respondent.
Had appellant at the time of executing the writings intended to require respondent to deal only with it, an appropriate, binding provision would have been incorporated in the option agreement. Since Nebenzal had not by either contract divested himself of the right to look elsewhere he was at liberty thereafter to procure a license to use the Anet novel from any person holding title thereto. This was a reasonable deduction of the court below.
Appellant asserts that respondent, after acquiring the Anet rights from others, attempted to procure from appellant all its rights in the French film, thereby demonstrating his acknowledgement of appellant's right to show and distribute that film after October 8, 1945. Such an argument assumes that without the Anet rights appellant would be deprived of all rights to exhibit the French film. Such assumption is without factual basis. As shown above the Anet rights embodied only five per cent of that film and a deletion of that five per cent would leave appellant unqualifiedly free under its contract to exhibit the remainder of the French version. Therefore, the efforts of Nebenzal to acquire appellant's 95 per cent of the French picture cannot be reasonably construed as a concession that appellant could legally continue using the three scenes from Anet's novel after its license should have expired. Moreover, since Nebenzal had contracted not to exhibit the English version in certain areas of Europe until three years after cessation of hostilities, his efforts to acquire appellant's remaining rights were reasonably construed by the trial court as an attempt to free himself from such a self-imposed restraint, and not necessarily as an admission that appellant had greater rights than those reserved. His efforts were no indication that appellant had reserved more rights than he had or than were specified in the contracts. Upon the expiration of the Anet rights appellant had no authority to continue the exhibition of the picture which included Anet's original scenes and such license could not be extended by ‘reservations' in a contract with respondent who in July, 1944, had no claims upon Anet's novel. Should the French picture continue at large, great expense would be entailed to prevent its competition with respondent's English version. While respondent would have paid the price of $12,500 which he offered, he declined to add another $1500 to it as demanded by appellant.
The foregoing résumé demonstrates that the findings are amply supported by the evidence. Therefore, they cannot be supplanted so long as they are a reasonable response to the evidence and inferences reasonably drawn therefrom and the applicable law. They must be so liberally construed as to support the judgment. Wallace Ranch Water Company v. Foothill Ditch Company, 5 Cal.2d 103, 118, 53 P.2d 929; Hotaling v. Hotaling, 193 Cal. 368, 385, 224 P. 455, 56 A.L.R. 734; In re Reid Estate, 79 Cal.App.2d 34, 39, 179 P.2d 353; Bell v. Scudder, 78 Cal.App.2d 448, 457, 177 P.2d 796; Davis v. Stulman, 72 Cal.App.2d 255, 262, 164 P.2d 787; Agdeppa v. Glougie, 71 Cal.App.2d 463, 467, 162 P.2d 944. Also, when the construction given an instrument by the trial court appears to be reasonably consistent with the intention of those who signed it, such holding will not be set aside on appeal. Kautz v. Zurich General Accident & Liability Insurance Co., 212 Cal. 576, 582, 300 P. 34; Davis v. Stulman, 72 Cal.App.2d 255, 269, 164 P.2d 787.
Other Findings Attacked
Appellant's criticism of the finding that Nero Films, Inc. is not the alter ego of respondent appears to pale in the glow of the finding that no fraud was perpetrated on appellant. There was ample evidence to support the finding. The corporation was organized for the sole purpose of producing photoplays. It made other pictures besides Mayerling. There were other stockholders; attorney Silverberg owns 10 per cent of the outstanding stock. While respondent owned a majority of the shares and could control the corporation those facts are not sufficient to have caused the court to disregard the corporate entity of Nero Films and to consider it as respondent's alter ego. Hollywood Cleaning & Pressing Co v. Hollywood Laundry Service, 217 Cal. 124, 129, 17 P.2d 709. In order to profit in a law suit by the doctrine of alter ego it must be proved not only that the corporation is a mere conduit of the stockholders, but that they are the alter ego of one another. The ownership of all the stock by one or more persons does not destroy the separate existence of the corporation. Gardner v. Rutherford, 57 Cal.App.2d 874, 880, 136 P.2d 48; Erkenbrecker v. Grant, 187 Cal. 7, 11, 200 P. 641. Moreover, ownership of all the capital shares of a company by one who dominates it does not for that reason establish fraud in the owner. Wiseman v. Sierra Highland Mining Company, 17 Cal.2d 690, 697, 111 P.2d 646. The only occasion for disregarding the corporate fiction is when it is shown to have been fabricated for the purpose of perpetrating a fraud. Not only did the trial court determine the absence of fraud from respondent's conduct but there is no substantial evidence to support a contrary finding.
The finding that Nebenzal assigned his English version and the extended Anet rights to Nero Films, Inc. and that the corporation reassigned same to Nebenzal is supported by the testimony and correspondence introduced at the trial. But even if it were unsupported, it is not apparent how such a finding could be prejudicial to appellant. There is obvious error in finding XI but it is just as obvious that it is inadvertent, clerical, and therefore harmless error. The phrase ‘which the defendant had advised the defendant’ should read ‘which Hellman had advised the defendant.’
The court did not err in determining the precise rights of the parties to this litigation. While the complaint alleged that appellant is the owner of certain world-wide rights in the Mayerling the court found that appellant's rights were not as all-encompassing as asserted, and in its judgment delimited those rights according to its findings. Thereby the court made a complete determination of the rights of the parties and disposed of the litigation according to the evidence and the dictates of equity. Such is not declaratory relief. O'Melia v. Atkins, 73 Cal.App.2d 143, 148, 166 P.2d 298.
The judgment is affirmed.
I disagree with the majority in their decision that the agreements between plaintiff and Nebenzal are ambiguous. When the two agreements are read together, as they must be since they are parts of and constitute one transaction, no ambiquity will be found. Therefore (1) there was no necessity for evidence to explain their meaning; (2) a reviewing court is not bound by the construction placed on them by the trial court; (3) the court should construe the agreements as they are written without regard to the decision of the trial court and without considering the evidence by which defendants attempted to show that they contemplated a result different from that which would flow from the plain language of the documents themselves. It is manifest that when the agreements were executed by Nebenzal he neither desired nor intended to use any material which originated in the mind of Claude Anet but that his English version of Mayerling was to consist entirely of historical episodes and material in the public domain, supplemented by such additions as his own script writers might make.
I do not find any fraud in Nebenzal's subsequent purchase of the right to use the material from the Anet novel, but such acquisition apparently caused him to adopt a new plan for making his picture and with the change of plan came his decision to prevent plaintiff from continuing the exhibition of its French picture, contrary to the express provisions in the agreements assuring that right.
The evidence does not sustain the court's finding that after October 8, 1945, plaintiff did not have the right to release, distribute or exploit the motion picture Mayerling anywhere in the world.
Nebenzal had been in the motion picture business for many years in Germany and France. He came to Hollywood where he entered into the same business. Desiring to remake Mayerling in the English language he opened negotiations in 1943 with plaintiff for the remake rights of the picture, including the Anet rights which were to expire on October 8, 1945. Negotiations, which were conducted with Dr. Gruess, the accredited agent and attorney in fact of plaintiff in the United States, consisted of conferences between Nebenzal and Gruess in New York and a mass of correspondence between them when Nebenzal was in Hollywood.
At the outset of the negotiations Nebenzal desired to acquire (1) the right to remake the picture in the English language, (2) plaintiff's Anet rights, (3) an extension of such rights beyond October 8, 1945, and, in addition, wanted (4) the assurance that plaintiff's French picture would not compete with his proposed English remake, especially in the United States. Nebenzal wrote to Gruess: ‘You understand that it is impossible to have the French version in circulation in the United States at such time when the English version is ready to be released.’ Plaintiff refused to give such assurance, and on its part desired (1) the unqualified right to continue the showing of the original French Mayerling, and (2) assurance that the English version to be made by Nebenzal would not compete with the French picture anywhere in Europe. Plaintiff's agent, Gruess, wrote to Nebenzal that ‘my friends [referring to those in control of Quader-Kino] also wish to make a contract exclusive of Europe, since the picture has not been exploited in many European countries so far.’ World War II had prevented the exhibition of the picture in practically all Europe except France.
The divergent desires of plaintiff and Nebenzal were adjusted by two agreements, referred to as the main and supplementary agreements of July 25, 1944, which were entered into in New York between Nebenzal and plaintiff through the latter's agent Gruess. Both agreements recite that no Anet rights were being conveyed to Nebenzal.
In the main agreement plaintiff is referred to as ‘owner’ and Nebenzal as ‘purchaser.’ Among the preliminary recitals are these:
(1) ‘Whereas, the Purchaser does not desire to use the features peculiar to the Claude Anet novel but base the story on the new production on historical facts, on features original with the script of the Motion Picture, especially as conceived by Von Cube and Kessel, and on such new features as he may deem fit to introduce,’
(2) ‘Whereas, the Purchaser desires to purchase all rights which the Owner may own, except such as may be expressly excluded and/or reserved by the Owner herein’.
The portions of the agreement necessary to be considered in the determination of this case are as follows:
The first article reads: ‘First: For Value received the Owner hereby sells, assigns, quitclaims and grants to the Purchaser all the Owner's rights in and to the Motion Picture to the extent that it owns those rights itself, including the right to make and produce a motion picture in English based thereon, as well as the right to use the title ‘Mayerling’ and the dubbing, titling, and/or other incidents thereof, but excluding those rights expressly excepted and/or reserved herein, Provided, however, that the right to use the novel by Claude Anet or the name of the author thereof is not being transferred. But nothing herein contained shall be deemed to prevent the Purchaser from using any material in said novel which may be in public domain and/or historical in source.'
The third article provides that the right to release and exploit the new motion picture to be produced by Nebenzal should not be exercised in certain named countries in Europe until three years after the Armistice concluding the war then in progress, or until three years after the cessation of hostilities in the respective countries.
The fifth article reads: ‘Fifth: The unqualified right of the Owner to exploit the original French version in the original French language under the title ‘Mayerling’ is hereby expressly reserved. Nothing herein shall prejudice the unqualified right of the Purchaser to superimpose on the new motion picture in the English language subtitles in any foreign language, nor his right to dub the new motion picture in any foreign language. Nor shall anything herein prejudice the unqualified right of the Owner to superimpose on the original French version subtitles in any language.
‘The Purchaser and the Owner mutually agree that neither one will produce nor permit to be produced nor transfer any rights so to produce any motion picture based on any of the foregoing material in any language.’
The eighth article recites that the agreement ‘embodies all previous understandings between the parties' and no representations or warranties have been made or given by either party except as set forth in the agreement.
Article 11 is as follows: ‘Eleventh: It is agreed that all questions arising on a disagreement, including all questions relating to the construction, performance and enforcement thereof, shall be determined in accordance with the laws of the State of New York.’
The supplementary agreement, executed simultaneously with the main agreement, repeats Nebenzal's disinterest in the Anet rights as follows: ‘Whereas, the Purchaser does not desire to use in the new production the features peculiar to the Claude Anet novel ‘Mayerling’ but to base the story of the new production on historical facts, on features original to the script of the Motion Picture, and on such new features as he may deem fit to introduce[.]'
The agreement recites that in case the purchaser, Nebenzal, should desire in the future to acquire those rights the owner, plaintiff, grants to the purchaser the option thereon to the extent and for the time the owner owns them, and in the event the purchaser should exercise the option the owner agrees, upon purchaser's request, to endeavor to obtain an extension of the Anet rights for a period after October 8, 1945.
Paragraph third of the supplementary agreement reads as follows: ‘Third: 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, the Owner 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.’ (Emphasis added.)
The finding and judgment that plaintiff had no right to distribute, release, exhibit or exploit the motion picture anywhere in the world are clearly erroneous since plaintiff is thereby deprived of its rights expressly reserved in the main agreement and repeated and confirmed in the third paragraph of the supplementary agreement.
The negotiations began with (1) Nebenzal's expressed desire to obtain assurance from plaintiff that its French picture would not compete with his English remake, (2) plaintiff's refusal to give such assurance, (3) plaintiff's desire for the unqualified right to continue the exploiting of its French picture, and (4) plaintiff's request for assurance that it would not be met with competition in Europe by Nebenzal's English version. These features of the negotiations lend emphasis to the provisions of the resulting agreements in which Nebenzal did not obtain what he desired but on the other hand plaintiff's demands were met.
The main agreement recites that Nebenzal did not desire to purchase material originating in the Anet novel but did desire to purchase plaintiff's rights except those expressly excluded and reserved by plaintiff. The main agreement provides that (1) there are excluded from the grant (a) ‘those rights expressly excepted and/or reserved herein’ and (b) the right to use the novel or the author's name; (2) Nebenzal's picture should not be released in certain countries in Europe until three years after the Armistice or three years after the cessation of hostilities in any country; (3) plaintiff reserved the ‘unqualified right’ (a) to exploit the original French picture, and (b) ‘to superimpose on the original French version subtitles in any language.’ The supplementary agreement confirmed the main agreement by providing that ‘under all circumstances' plaintiff shall be entitled to exploit the rights to the picture in accordance with the reservations of the main agreement. By its findings and judgment the trial court placed, and the majority of this court affirms, not only a qualification but an absolute prohibition on plaintiff's reserved unqualified right.’
The terms ‘unqualified right’ and ‘under all circumstances' are meaningless if plaintiff's right to release and exploit the original French picture terminated on October 8, 1945. The agreements contemplated that either Quader-Kino or Nebenzal would own the Anet rights after that date since they were contracting with reference to the showing of both the French picture and the English picture for a period of three years after the end of the war, which at the date of the agreements was unpredictable.
The right reserved to plaintiff to superimpose on its French picture subtitles in any language shows clearly that plaintiff was to continue the exhibition of its picture and to exploit it in countries other than France. Otherwise foreign language subtitles would be useless.
The agreements provided that the new motion picture to be produced by Nebenzal should not be released or exploited in the countries of central Europe until three years after the Armistice. If, as contended by defendants, plaintiff's right to exhibit the French picture expired on October 8, 1945, then during the period between that date and three years after the Armistice neither picture could have been exploited in those countries. This prohibition upon Nebenzal's right to release the English picture confirms plaintiff's contention as to the construction of the contract, namely, that in the relations of the contracting parties plaintiff's rights did not cease on the date mentioned.
As between Quader-Kino and Nebenzal the former reserved the right to exhibit its picture in the French language anywhere in the world after October 8, 1945, and the purchase of the Anet rights by Nebenzal from Hellman did not and does not prevent plaintiff from exercising such right. The reason for the prohibition of showing Nebenzal's English picture in certain European countries until three years after the termination of the war was that plaintiff desired to show its French version first without competition in all countries where it had not been shown.
It is important to note the provision in the supplementary agreement that without having to make any contribution to the price to be paid for the extension of the Anet rights, plaintiff was to be entitled to the use and exploitation of those rights for its own purposes in accordance with the reservations in the main agreement, which reservations were expressly made a part of the supplementary agreement.
Had it been the intention or understanding that plaintiff's right to exploit its picture would terminate on October 8, 1945, the provision would not have been inserted in the agreement that plaintiff should be entitled to exercise such right ‘without having to make any contribution to the price to be paid [by Nebenzal] to the heirs of Claude Anet for the extension of the rights' beyond that date. Why would the parties have agreed that plaintiff was not required to contribute to the cost of the extension of the Anet rights if it then had been contemplated that plaintiff would not have the privilege of making use of such rights in the event they were extended?
When the following provisions of the two agreements are considered there is no ambiguity and the intent of the parties is manifest without the evidence introduced at the trial: (1) ‘The owner shall be entitled to the use and exploitation of the rights dealt with herein for its own purposes.’ (2) ‘Under all circumstances, and without having to make any contribution to the price to be paid’ for the extension of the Anet rights the owner should be entitled to exploit the rights dealt with in the contracts for its own purposes. (3) Nebenzal was restricted in the exploitation of his English remake for three years after the Armistice, which period would extend far beyond October 8, 1945. (4) There was reserved to plaintiff the unqualified right to exhibit its French picture after October 8, 1945, and to superimpose subtitles thereon in any language. These provisions make it clear that if Nebenzal should obtain an extension of the Anet rights such extension should inure to the benefit of plaintiff to the extent provided in the contracts.
Nebenzal testified that he did not desire the option contained in the supplementary agreement nor to sign the agreement. Nevertheless he signed it and cannot now escape the results by claiming that he signed it merely because Gruess insisted that he do so. The signing of the main agreement by plaintiff was not conditioned upon Nebenzal's execution of the supplementary agreement and he was not otherwise coerced into signing it.
The main agreement provides that all questions with reference to its construction shall be determined in accordance with the laws of New York. In Woolsey v. Funke, 121 N.Y. 87, 92, 24 N.E. 191, 192, it is held that ‘the practical interpretation of this agreement by both parties is a consideration of very great importance.’ The New York court cites Brooklyn Life Insurance Co. v. Dutcher, 95 U.S. 269, 273, 24 L.Ed. 410, 412, in which the court said: ‘The practical interpretation of an agreement by a party to it is always a consideration of great weight. The construction of a contract is as much a part of it as anything else. There is no surer way to find out what parties meant, than to see what they have done. Self-interest stimulates the mind to activity, and sharpens its perspicacity. Parties in such cases often claim more, but rarely less, than they are entitled to. The probabilities are largely in the direction of the former.’
The rule is the same in California as in New York. Whenever it appears that the parties to a contract have themselves practically interpreted it the courts will follow that practical construction. Mitau v. Roddan, 149 Cal. 1, 14, 84 P. 145, 6 L.R.A.,N.S., 275; Hill v. A. C., 10 Cal.App.2d 178, 185–186, 51 P.2d 1126; Skousen v. Herz, 135 Cal.App. 116, 120–121, 26 P.2d 498; Hill v. Fowble, 65 Cal.App.2d 25, 30–31, 149 P.2d 862.
The parties to this action construed the agreements as reserving to plaintiff the right to exhibit the original French picture in its entirety after October 8, 1945. There was correspondence between Nebenzal and plaintiff's agent Gruess concerning the purchase of plaintiff's reserved rights in the picture. On June 1, 1945, Gruess wrote a letter to Nebenzal stating that he could possibly obtain the consent of Quader-Kino to ‘relinquish in your favor the rights to the original French version of ‘Mayerling’ as reserved under the agreement of July 25 and August 29, 1944 against a consideration of $10,000. The European territories where the film has not been shown so far and which are enumerated in our aforesaid agreement would have to be excepted. Nor can the French rights for the United States be affected by the new agreement in view of the provisions of the contract with Mr. Lopert.' (Emphasis added.) On June 26, 1945, Nebenzal wrote to Gruess stating that he thought another $10,000 to stop the future distribution of the old French picture in certain territories was highly exaggerated and asked for a reconsideration of the matter. On July 21 Nebenzal wrote to Gruess, on a letterhead of Nero Films, Inc., discussing the possibility of the showing of the picture in Europe and said ‘I would, however, to get rid of the matter, agree to pay Ten Thousand ($10,000.) Dollars if with this payment you could withdraw the old picture world-wide.’ Why was such an offer made if plaintiff's rights terminated October 8, 1945, only two and one-half months after the letter was written? Nebenzal's picture would not be ready for distribution until months after that date and if his present theory is correct plaintiff's French picture could not possibly have interfered with Nebenzal's remake. On September 17, 1945, Nebenzal wrote to Gruess stating ‘* * * perhaps it would be possible to work out a deal on the basis of $12,500.00 world-wide, that is, including the United States * * *.’ On September 22 Grues replied to Nebenzal offering to transfer plaintiff's rights for $14,000. On September 27 Nebenzal wrote to Gruess stating he would be in New York in about two weeks and ‘we can then try to come to an arrangement.’ On October 24 Nebenzal wrote that his trip to New York had been delayed. On October 30 Gruess died. Negotiations for the purchase by Nebenzal of plaintiff's picture apparently ceased with Gruess' demise.
Defendants contend in their brief that the real desire of Nebenzal was to obtain possession of the negatives and prints of the original French picture in order that they would not be in circulation after he completed his English remake. The correspondence between Nebenzal and Gruess, only a portion of which is above alluded to, makes no mention of such desire.
The letters all refer to the purchase of plaintiff's rights reserved by the agreement of July 25, 1944. The right to exhibit the original French picture necessarily included the right to exhibit the entire picture including those parts based on material originating in the Anet novel. The omission of such portions of the picture would render it incomplete. The majority opinion states that the deletion of the Anet material, 5 per cent of the picture, would leave plaintiff free to exhibit the remainder of the original French version. Such statement does not take into account the fact that the omission of scenes destroys the continuity of a picture. It would be analogous to selling a book with several chapters omitted, or to playing the Merchant of Venice without Shylock. Moreover, to require such omission would be in violation of the express reservation of plaintiff's right to exhibit its original French picture, not just a portion of it, after October 8, 1945.
There is no evidence that at any time prior to the death of Gruess defendants asserted that such reserved rights did not extend beyond October 8, 1945. With Gruess unable to testify it seemed easy to make the contention now asserted by defendants.
If Nebenzal had not recognized the continuing right of plaintiff under the contracts to exhibit its original French picture in its entirety after October 8, 1945, he who had been in the motion picture business for 25 years and was familiar with the established methods of such business would not have made the offer in his letter of July 21, 1945, only two and one-half months prior to October 8, 1945, to pay $10,000 to stop the future distribution of the picture and the withdrawal world-wide of rights that would have had validity for so short a period succeeding the date of the offer.
The entire correspondence between Nebenzal and Gruess shows that the former recognized and acknowledged plaintiff's right to continue the exhibition and exploitation of Mayreling and including the Anet material after October 8, 1945, and that Nebenzal was eager to obtain an assignment of such rights so that the release of his English remake would be without competition.
There is an implied covenant between the parties that Nebenzal would not do any act tending to prevent plaintiff from exercising the rights reserved in the contract. Equity and justice require that he should not act contrary thereto.
After the Anet rights were assigned to Nebenzal he in turn assigned them to defendant Nero Films, Inc., a corporation. Plaintiff contends that the corporation is wholly controlled and dominated by Nebenzal and acts for him, carries out his directions, and is his alter ego. At one time Nebenzal was the owner of 70 per cent of the outstanding capital stock of the corporation, the attorney then acting for him (not defendant's counsel in the instant case) 10 per cent, and his son 20 per cent. Nebenzal admitted that he had paid for the stock issued to his son. In the joint answer filed in this action by Nebenzal and Nero Films, Inc., they admit that Nebenzal now owns 85 per cent of the capital stock, his former attorney 10 per cent and ‘another individual’ the remaining 5 per cent; that Nebenzal is president and executive producer of the corporation, his attorney is secretary and treasurer, and they are two of its three directors; that as owner of a majority of the capital stock Nebenzal can control the action of the corporation. The evidence shows that Nebenzal's personal business office and the principal office of the corporation have the same address; that his purported dealings with the corporation were actually made with himself and for himself. For example, he dictated a letter addressed to himself purporting to be from Nero Films, Inc., setting forth the consideration for the transfer of the picture rights in Mayerling, in which it was provided that no rights should be deemed to have been conveyed to the corporation until payment had been made to Nebenzal therefor. The letter is signed ‘Nero Films, Inc., Jeorgia Curtwright’ and is endorsed ‘Agreed to: Seymour Nebenzal.’ When asked why he had Miss Curtwright sign the agreement on behalf of the corporation, with frankness and naivete he replied ‘I didn't want to sign it myself, I didn't want to sign a letter to myself, myself, that is all.’
Since Nebenzal so controlled the affairs of the corporation that he was able to act for both in making an agreement between himself and the corporation, without benefit of legal counsel and advice and without authorization of the board of directors, it is immaterial whether the corporation was or was not his alter ego. Is act was his act and his was its. The hand and the voice were of the same person. Nebenzal's purported assignment of the Anet rights to defendant corporation was intended by him to deprive plaintiff of any rights or privileges reserved to it in the two agreements. It did not so operate and was in violation of the express provision of the agreement that neither party would transfer any rights ‘to produce any motion picture based on any of the foregoing material in any language.’
The finding that since October 8, 1945, plaintiff has not had the right to distribute or exhibit its picture anywhere in the world has no support in the evidence. The judgment to that effect deprives plaintiff of a valuable property right which was unconditionally reserved to it and cannot be abrogated in the absence of plaintiff's consent.
The judgment should be reversed.
MOORE, Presiding Justice.
McCOMB, J., concurs.