ALLAN v. BEKINS ARCHIVAL SERVICE INC (1979)

Plaintiff appeals the dismissal of his case for failure to amend his complaint within thirty days after the court sustained defendant's demurrer.¹

Plaintiff was a principal (the announcer and master of ceremonies) in the television series known as “Celebrity Bowling” produced from 1970 through 1976 by a California joint venture (hereinafter “producer”). Although he was not one of the joint venturers, plaintiff alleges a partnership interest in the series.² In February of 1973, producer entered into a written contract with defendant Bekins Archival Service to store, inventory and ship on request the videotapes of this series (hereinafter “tapes” or “series”) in exchange for a specified monthly payment. The complaint states that defendant solicited business from the motion picture and television industries with representations of its specialized facilities, technical knowledge and concern for the high monetary value of motion picture film and television videotapes. Producer deposited 114 half-hour tapes of the series for storage with defendant, who also shipped certain tapes to producer's distributors and tape duplicating firms when authorized to do so by producer from time to time; producer informed defendant when such tapes were to be returned to storage. Defendant supplied producer with monthly inventories purporting to show the accurate location of the tapes.

In August of 1973, producer authorized defendant to ship out tapes 1 through 26 (the entire first season of the series), for return to defendant in May of 1974. Although the tapes never were returned, defendant's inventory listed them as safely back in storage when due. Meanwhile, in October of 1973, producer erased duplicates of tapes 55 through 84 because defendant's inventory indicated that the masters of these tapes were properly stored. In August of 1974, defendant informed producer that these 29 tapes were missing. Believing only these 29 tapes were gone, producer was still able to enter into an agreement with KHJ-TV in December of 1975 for 74 of the 114 tapes to broadcast the series on a daily basis (known as “stripping”). Providing that number of tapes was a material obligation of producer under the agreement. Producer also engaged the services of a new distributor to negotiate agreements for licensing and stripping the series nationwide. In January or February of 1976, producer requested delivery of tapes 1 through 26 pursuant to his agreement with KHJ-TV and was informed by defendant for the first time that the tapes were lost. They have never been found; plaintiff believes they have been destroyed.

The record does not state what remedy, if any, producer pursued against defendant. Plaintiff, however, brought this suit for negligence of a bailee and breach of contract, alleging that he is a third party beneficiary of the contract between producer and defendant Bekins. The complaint claimed, both in negligence and contract, general damages, loss of income and damage to plaintiff's career as a result of inability to air the tapes. Plaintiff alleged his partnership interest in the tapes (limited as we have expressed in fn. 2) in both the negligence and the breach of contract causes of action. The complaint further alleged that Bekins was informed of plaintiff's partnership interest in the series. Bekins successfully demurred with the argument that plaintiff failed to state a cause of action because Bekins owed no duty to plaintiff, who was neither a party to the contract nor an express third party beneficiary of the contract. Therefore the issue before us is whether a public warehouse bailee owes a duty of care to a person claiming such a partnership interest or right to receive income from goods stored by the bailor and, if so, whether the bailee is also liable to that person for breach of contract when the stored goods are lost by the bailee.

We note preliminarily that a demurrer admits the truth of all factual material allegations Properly pleaded in a complaint, regardless of possible difficulties of proof. (Martinez v. Socoma Companies, Inc. (1974) 11 Cal.3d 394, 399, 113 Cal.Rptr. 585, 521 P.2d 841, 3 Witkin, Cal.Procedure (2d ed. 1971) Pleading, s 800, p. 2413.) Our sole concern on appeal is whether the complaint states a cause of action. (Griffith v. Department of Public Works (1956) 141 Cal.App.2d 376, 381, 296 P.2d 838.) In this case, we must initially determine whether plaintiff's indirect allegation of a partnership interest, which appears instead to be more of a right to receive residual income (a form of profit), was properly pleaded. Plaintiff alleged in his complaint that he was damaged by the loss of income from his “participating partnership interest with Producer as to revenue from licensing The Series . . ..” and that the contract between producer and Bekins was “made for the benefit of plaintiff since plaintiff had a partnership interest in and to the . . . master videotapes and duplicate videotapes of The Series,” together with the fact that Bekins knew of plaintiff's partnership interest in the series. However, plaintiff did not set forth directly that he was in fact a partner of producer. Only if such an indirect allegation of a material fact was properly pleaded, can it be entitled to the presumption of truth accorded material factual allegations.

A review of California law on pleadings reveals that once-strict pleading rules have been considerably relaxed. More than 50 years ago, the Supreme Court in Philbrook v. Randall (1924) 195 Cal. 95, 103, 231 P. 739, 742, affirmed a judgment sustaining a demurrer based on the plaintiff's failure to make a “direct allegation of a material fact” (complaint did not directly allege the making of a decree of distribution under a will by the probate court in Maine in favor of the plaintiff, but alleged that none had been made in favor of anyone else), yet later in Buxbom v. Smith (1944) 23 Cal.2d 535, 542, 145 P.2d 305, 308, the court held that “(w)hile orderly procedure demands a reasonable enforcement of the rules of pleading, the basic principle of the code system in this state is that the administration of justice shall not be embarrassed by technicalities, strict rules of construction, or useless forms. (Citations.)” In that case, the court upheld a judgment based in part on damages for tortious interference with the established business of the plaintiff by the defendant, even though the complaint was captioned and phrased throughout strictly as an action for breach of contract. More recently, the court in Semole v. Sansoucie (1972) 28 Cal.App.3d 714, 719, 104 Cal.Rptr. 897, 900, noted that “(t)he Supreme Court has consistently stated the guideline that ‘a plaintiff is required only to set forth the essential facts of his case with reasonable precision and with particularity sufficient to acquaint a defendant with the nature, source and extent of his cause of action.’ (Citations.)” Using this latter test, it appears that plaintiff's averments, although inferential, would serve to adequately apprise Bekins of the “nature, source and extent of his cause of action” (Ibid.), at least so as to survive a general demurrer.

I. Negligence

Civil Code section 1714 provides that a person is liable for injuries caused by his failure to exercise ordinary care under the circumstances. (See also Rowland v. Christian (1968) 69 Cal.2d 108, 111-112, 70 Cal.Rptr. 97, 443 P.2d 561.) However, “(a)ctionable negligence consists of three elements: (1) a defendant's legal duty to use due care; (2) a breach of that duty; and (3) the breach as the proximate (or legal) cause of plaintiff's resulting injury. (Citations.)” (Valdez v. J. D. Diffenbaugh Co. (1975) 51 Cal.App.3d 494, 504, 124 Cal.Rptr. 467, 474.) Bekins argues that it owed no duty to plaintiff with regard to its performance of the bailment contract entered into between itself and producer.³

The determination whether Bekins did owe a duty of reasonable care to plaintiff, who was not a party to the contract, requires a balancing of six long-established policy considerations: (1) the foreseeability of harm to the plaintiff; (2) the degree of certainty that plaintiff suffered injury; (3) the closeness of the connection between the defendant's act and the plaintiff's injury; (4) the moral blame attached to defendant's conduct; (5) the policy of preventing future harm; and (6) the extent of defendant's burden and the consequences to the community of imposing a duty and liability. (Tarasoff v. Regents of University of California (1976) 17 Cal.3d 425, 434-435, 131 Cal.Rptr. 14, 551 P.2d 334; Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850, 865, 73 Cal.Rptr. 369, 447 P.2d 609.)⁴

Our primary consideration in this analysis is the foreseeability of harm to plaintiff as a result of Bekins' conduct. Reviewing this case after a sustained demurrer, we must determine whether plaintiff stated facts sufficient to establish that Bekins could foresee that its negligent handling of the tapes would result in pecuniary harm to him. In his complaint, plaintiff claimed that Bekins held itself out as a specialist in film storage and services in soliciting business from the entertainment industry. Further, plaintiff alleged that Bekins in agreeing not only to store but also to ship the tapes for use by television stations, to redeliver them, return them to storage and maintain an accurate monthly inventory of the tapes, knew that syndication and stripping of the series would produce revenue both for producer and for plaintiff, as a principal or star of the series. Such special knowledge and experience put Bekins in a position to reasonably foresee that a principal or star who appeared on the stored tapes would suffer pecuniary harm as a result of loss or destruction of the property. Finally, aside from Bekins' self-professed expertise, it takes only the most limited, everyday knowledge of the entertainment business to recognize that actors accept roles not only for the initial sum paid, but also for the residuals and other benefits derived from the constant media exposure.⁵

The trend in California law has favored imposition of a duty when interfaced with foreseeability of harm. Significant cases include: Tarasoff v. Regents v. University of California, supra, 17 Cal.3d 425, 131 Cal.Rptr. 14, 351 P.2d 334 (therapists owe duty to disclose dangerous propensities of patient to his declared victim); Elmore v. American Motors Corp. (1969) 70 Cal.2d 578, 75 Cal.Rptr. 652, 451 P.2d 84 (strict products liability for injuries sustained by pedestrian struck by wheel which flew off moving vehicle); Dillon v. Legg (1968) 68 Cal.2d 728, 69 Cal.Rptr. 72, 441 P.2d 912 (negligent driver owes duty to onlooking parent whose child he kills); Rowland v. Christian (1968) 69 Cal.2d 108, 70 Cal.Rptr. 97, 443 P.2d 561 (tenant owes duty to guest to warn of or make safe broken faucet which she knew about); Tresemer v. Barke (1978) 86 Cal.App.3d 656, 150 Cal.Rptr. 384 (doctor owes patient duty to warn of later-discovered danger from previously inserted intrauterine device); O'Hara v. Western Seven Trees Corp. (1977) 75 Cal.App.3d 798, 142 Cal.Rptr. 487 (landlord owes tenant duty to warn or make safe against known risk from rapist).

Applying the rest of the factors to determine the existence and scope of defendant's duty of care, it is clear that such policy considerations favor imposition of liability. The certainty of plaintiff's injury is established by the fact that producer was unable to fulfill an existing contractual commitment based on use of the tapes, resulting in plaintiff's loss of residual income from that televising of the series. Such injury was closely connected with the conduct of Bekins. Not only did Bekins' mishandling of the tapes cause their loss, but Bekins' failure to notify producer in a timely manner that the tapes were missing led to the ultimate destruction of both masters and duplicates. The blame for such conduct arises out of Bekins' undertaking to protect the tapes against the very hazard of loss or destruction which occurred. In regard to the policy of preventing future harm, the imposition of a duty herein will provide an incentive for Bekins to more scrupulously observe the terms of its bailment contracts. Last, we do not perceive a substantial new burden placed on Bekins. Plaintiff alleged that he was the only principal or star in this series. Thus, no “floodgates” argument can be imposed against Bekins' liability here, and Bekins should rightly bear the financial burden of its failure to exercise due care if it is unable to disprove its negligence as a bailee. (Gardner v. Jonathan Club (1950) 35 Cal.2d 343, 348, 217 P.2d 961; Vilner v. Crocker National Bank (1979) 89 Cal.App.3d 732, 737, 152 Cal.Rptr. 850.)

The totality of these policy considerations lead us to hold that Bekins owed plaintiff a duty to exercise reasonable care in the storage and preservation of the tapes. We specifically limit this holding to principals or stars of a show, as distinguished from bit participants and those actors without a right to residuals. Plaintiff here has stated a cause of action for defendant's breach of its duty of care.

II. Breach of Contract

Under California law, negligent failure to observe a legal duty to use reasonable care is both a tort and breach of contract. (Allred v. Bekins Wide World Van Services (1975) 45 Cal.App.3d 984, 989, 120 Cal.Rptr. 312.) “The rule which imposes this duty is of universal application as to all persons who by contract undertake professional or other business engagements requiring the exercise of care, skill and knowledge; the obligation is implied by law and need not be stated in the agreement. . . .” (Id., citing Roscoe Moss Co. v. Jenkins (1942) 55 Cal.App.2d 369, 376, 130 P.2d 477, 481.)⁶

Plaintiff asserts that he is a third party beneficiary of the bailment contract between Bekins and producer and as such may enforce the contract in his own name. Bekins denies that plaintiff is an Express beneficiary of the contract as required by Civil Code section 1559,⁷ but argues instead that plaintiff is only an incidental beneficiary who remotely benefits and thus has no right of action in his own name. (Martinez v. Socoma Companies, Inc., supra, 11 Cal.3d 394, 406, 113 Cal.Rptr. 585, 521 P.2d 841; Mottashed v. Central & Pac. Impr. Corp. (1935) 8 Cal.App.2d 256, 260, 47 P.2d 525.) To be an express beneficiary, however, a person need not be named in the contract; it is sufficient to show that he is a person or member of a class for whose benefit the contract was made. (Shell v. Schmidt (1954) 126 Cal.App.2d 279, 290, 272 P.2d 82, 1 Witkin, Summary of Cal. Law (8th ed. 1973) Contracts, s 507, p. 435.) Plaintiff also argues correctly that intent to benefit the third party need not be manifested by the promisor (Bekins here); intent will be found where the promisor understands that the promisee (producer here) has such intent. (Lucas v. Hamm (1961) 56 Cal.2d 583, 591, 15 Cal.Rptr. 821, 364 P.2d 685; 1 Witkin, Summary of Cal. Law (8th ed. 1973) Contracts, s 499, p. 429.)⁸

The complaint alleged that defendant knew of plaintiff's partnership interest in the tapes, that the tapes were extremely valuable, and that defendant accepted responsibility for storage of the tapes with knowledge of these facts. It can be inferred from these allegations that the contract was made for plaintiff's benefit. Solely for purposes of pleading and demurrer, these are sufficient material issues of fact to conclude that plaintiff has stated a third party beneficiary cause of action for breach of contract.⁹ This holding is limited, as in the negligence section above, solely to a principal or star; it does not extend to bit players or actors without a right to receive residual income from the show.

Finally, we note that while plaintiff's general damages and loss of income are capable of ascertainment, his claim of damages for career stultification is speculative.

The judgment is reversed.

FOOTNOTES

1.  Bekins Archival Service, Inc., a California corporation, and The Bekins Company, a California corporation, are named defendants. We refer to them throughout this opinion in the singular.

2.  As we analyze plaintiff's complaint, the allegation re “partnership” is not such an allegation of “partnership” as in the ordinary sense. He seeks to plead more of a joint venture relationship in that his entitlement to residuals is analogous to a share in the profits. He seeks to plead a type of joint venture relationship created by his entitlement to residuals, not by way of actual ownership in the tapes themselves.

3.  It is not disputed that a duty to exercise reasonable care in the storage and preservation of the tapes existed between Bekins and Producer as bailee and bailor. (Civ.Code, ss 1814, 1838, 1840; U.Cal.Com.Code, s 7204; Gardner v. Jonathan Club (1950) 35 Cal.2d 343, 217 P.2d 961; Vilner v. Crocker National Bank (1979) 89 Cal.App.3d 732, 152 Cal.Rptr. 850.)

4.  We also note that although these policy factors were first applied in cases where the duty owed was found in the terms of a contract (Biakanja v. Irving (1958) 49 Cal.2d 647, 320 P.2d 16), the Supreme Court has long applied these same factors to find duty without privity of contract. (Ibid.) In Connor v. Great Western Sav. & Loan Assn., supra, the court ruled that in the absence of a contractual arrangement between the parties, a duty to exercise ordinary care may arise from a “voluntarily assumed relationship” between them where policy considerations mandate the conclusion that such a duty exists. (Id. at p. 865, 73 Cal.Rptr. 369, 447 P.2d 609.) As the court further stated, “(r)ules that tend to discourage misconduct are particularly appropriate when applied to an established industry.” ( Id. at p. 867, 73 Cal.Rptr. at p. 378, 447 P.2d at p. 618.)

5.  Predictably, Bekins conjures up a veritable Pandora's box of potential liability for a “cast of thousands” type of production. We need not address that question here, where only one person has claimed a status deserving of protection. As host for the series, plaintiff alone was the continuing on-camera personality harmed by Bekins' tortious conduct.

6.  It is clear that Producer, as a party to the contract, could sue Bekins for breach thereof.

7.  Civil Code, section 1559, provides: “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.”

8.  We do not here discuss the creditor-donee beneficiary distinction, which has been dropped by the Restatement and is beginning to disappear in California. (See Rest.2d Contracts (Tent. Draft No. 4, April 25, 1968) s 133, subd. (1), (2); Gilbert Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65, 71, 145 Cal.Rptr. 448.)

9.  We add a cautionary note that this cause of action may be governed by Article 7 of the Uniform Commercial Code (Div. 7, Cal.U.Com.Code) which deals with documents of title and bailees, especially warehousemen and carriers. The definitions of “bailee” and “warehouseman” found in section 7102 of the Code make clear that defendant is a public warehouseman and as such a public utility, subject to applicable federal and state regulatory laws. (Pub.Util.Code, ss 216, 239; Cal.U.Com.Code, s 7103.) Of particular concern is section 7204, which sets forth a warehouseman's duty of care (the reasonable person standard) (s 7204, subd. (1)) and limits his contractual liability to the “actual value of the goods.” (s 7204, subd. (2).) This contractual limitation on liability is a California variation from the official text. Section 7204, subdivision (2), provides that damages may be limited by a term in the warehouse receipt or storage agreement, but that if an increased valuation is agreed upon, no recovery will be permitted in excess of actual value.We have no such storage agreement or warehouse receipt before us in the record here. Therefore, we can only note that if one exists and if it does contain a valid provision limiting defendant's contractual liability, plaintiff may be bound thereby. Nonetheless, the Official Comments following section 7101 state that “The Article does not attempt to define the tort liability of bailees . . ..” Thus, although the possibility of plaintiff's contractual recovery may be reduced if defendant produces a document which brings the contract cause of action under Article 7, defendant's tort liability will still be governed by the common law principles enunciated above. As section 1103 of the Uniform Commercial Code specifically points out: “Unless displaced by the particular provisions of this code, the principles of law and equity . . . shall supplement its provisions.”

STEPHENS, Acting Presiding Justice.

ASHBY and HASTINGS, JJ., concur.