Opinion
Hearing Granted Jan. 21, 1943.
Appeal from Superior Court, Los Angeles County; John Beardsley, Judge.
Action by William J. Friedman and another against Thomas M. Bergin and others for breach of contract. From a judgment for plaintiffs, defendants appeal.
Reversed. COUNSEL
Mott and Grant, of Los Angeles, for appellant Thomas M. Bergin.
Harry C. Cogen, of Los Angeles, for appellants Barney Van Der Steen and Beulah Anderson, executrix William L. Anderson, deceased.
Desser & Rau, of Los Angeles, for respondents.
OPINION
SHAW, Justice pro tem.
Defendants appeal from a judgment in favor of plaintiffs in an action which plaintiffs, in their complaint, designate as an action for breach of contract.
Defendant Bergin on April 4, 1937, entered into a contract with Del Mar Turf Club, operator of a horse racing track at Del Mar, California, by which the Turf Club granted him "a concession to dispense all food, liquors, soft drinks, cigars, cigarettes and other miscellaneous commodities and the privilege of operating checking rooms and wash rooms, together with the privilege of operating, near the barns at the Fair Grounds, a cafe for stable and other help, for the term of five (5) years, commencing with the 1937 season, as above indicated, and ending with the season of the year 1941." This contract gave Bergin an option for another five-year term, upon condition he equal any other bid made for it, fixed as a rental 16 2/3 percent of the gross sales of all commodities (except cigars and cigarettes, on which nothing was to be paid) and $100 each season for each check room, required him to install "necessary facilities [except some bars which are of no consequence here] requisite to the conduct of his enterprise," which should be satisfactory to the Turf Club and located at places approved by it, to keep the premises in a clean and orderly condition, to provide insurance on his facilities and property and to give security in the form of a $5,000 note. It also provided that food sold should be of the highest grade obtainable, that a named officer of the Club could at any time dismiss any of Bergin’s employees and that the Turf Club could cancel the contract at any time if Bergin’s service was not satisfactory, or the Turf Club’s racing permit should fail, or parimutuel horse racing in California should become unlawful. Bergin agreed to operate his concession during the five-year term and to do so in accordance with the laws of California and the ordinances of San Diego County. Failure to hold a race meet during any season or destruction of the premises by calamity would not terminate the contract but suspend it while the condition continued.
On April 24, 1937, plaintiffs paid Bergin $2,000 and received from him a paper which is the basis of this action. It was signed by him only and read as follows: "April 24, 1937. Received of William J. Friedman and Alex Charles Goodman, the sum of two thousand dollars ($2,000.00) in consideration of the following concessions at the Del Mar Turf Club:--Cigarettes, cigars, candy, checking, including all lavor tories; for the term of five years commencing with the 1937 season and ending with the season of the year 1941. This agreement is to be followed by a formal contract on the same basis as that between the Del Mar Turf Club and the undersigned concessionaire. Thomas M. Bergin (Signed)". Later Bergin assigned his contract with Del Mar Turf Club to Del Mar Caterers, a corporation organized and controlled by him to hold this contract. The 1937 racing season began July 3 and early in this season Bergin submitted to plaintiffs a form of contract dated June ___, 1937, naming them and Del Mar Caterers as parties and containing many provisions like those in his contract with the Turf Club. This contract was not signed by plaintiffs. In 1938 Bergin submitted another similar form of contract to plaintiffs, but this also was not signed by plaintiffs and no contract with Bergin or Del Mar Caterers ever was signed by them.
Notwithstanding this fact, plaintiffs went to the track at the beginning of the 1937 season, and began the exercise of certain functions as concessionaires under Bergin. This continued through that season and the seasons of 1938 and 1939. During these seasons they operated in the following manner: In the grandstand they placed cigars, cigarettes and candy in small stands built and operated by Bergin, and his employees in these stands sold them. At the end of each day an accounting and a settlement for these sales were had. Bergin would not permit plaintiffs to put up stands of their own in the grandstand, and both Bergin and the Turf Club refused to allow them to send anyone through the grandstand to make sales. In other parts of the track plaintiffs employed girls who circulated among the patrons and sold plaintiffs’ wares. About four-fifths of plaintiffs’ sales were made in the grandstand. Plaintiffs paid Bergin nothing directly for the services of his employees in the grandstand in selling plaintiffs’ wares, but plaintiffs made up shortages at the stands and paid him 16 2/3 percent of their gross sales of candy. During the 1937 season plaintiffs operated the check rooms and the wash rooms. After this season the wash rooms were taken away from them by the Turf Club, but they continued to operate the check rooms for the seasons of 1938 and 1939. Plaintiffs did not obtain a permit under the retail sales tax law, but paid to Bergin daily the amount of the sales tax on their sales, and apparently he treated their sales as his on his sales tax return and paid the tax on them. They did not pay any social security tax or take out any local business licenses, but it does not appear that Bergin did anything for them in these matters.
In April, 1940, Bergin, acting through the Del Mar Caterers, assigned his contract with the Turf Club to defendants Anderson and Van der Steen. At the same time, he notified them that he had given certain concessions under that contract to plaintiffs, and the formal agreement between him and them stated that the assignment was subject to plaintiffs’ rights under the contract of June ___, 1937 (which plaintiffs had not signed). Bergin informed plaintiffs of this assignment before the opening of the 1940 racing season and they went to see Anderson and Van der Steen. Van der Steen, acting for both, declined to let plaintiffs put their wares in the grandstand on the same terms as had prevailed with Bergin, but insisted that plaintiffs pay Anderson and Van der Steen half of the net profits on all sales of cigars, cigarettes and candy in the grandstand, and refused to let them erect stands in the grandstand. Plaintiffs were not satisfied with this new arrangement, but finally agreed orally to it, and started the 1940 season on that understanding. Plaintiffs were unable to get from Anderson and Van der Steen an accounting and financial settlement at the end of every day, as they had from Bergin. Without such settlement they could not obtain the money to replenish their stocks. Anderson and Van der Steen declined to handle the sales tax on plaintiffs’ sales, as Bergin had done. After two days plaintiffs’ representatives went to Van der Steen, who was also acting for Anderson, and told him they could not proceed further under the arrangement they had made with him and needed money to replenish their stocks. He said if they did not like the arrangement they could get out. At the end of the third day plaintiffs did get out, discharging their employees at the track and making no further effort to proceed under their concession. Following this, on August 9, 1940, Anderson and Van der Steen gave plaintiffs written notice of termination of their agreement of June, 1937, with Del Mar Caterers--which Anderson and Van der Steen appear to have supposed plaintiffs had signed. This action followed shortly. In their complaint plaintiffs alleged generally that Bergin had a contract with the Turf Club for all types of concessions, alleged their payment of $2,000 to him, set forth a copy of the paper, already copied herein, which he signed and gave them on April 24, 1937, on receipt of that payment, and alleged that by it he "sold to plaintiffs the exclusive license for the concession covering the sale of cigars, cigarettes, candy and the operation of check rooms at said Del Mar Turf Club for a period of five years * * *" and that Bergin, in April, 1940, assigned his agreement with the Turf Club to the other defendants. They further alleged that on August 9, 1940, all the defendants "breached said agreement" (which, from the context, means Bergin’s writing of April 24, 1937) "and evicted plaintiffs * * * from said Del Mar Turf Club" and served plaintiffs with a notice of termination of contract referring to the unsigned contract of June, 1937. This is the allegation on which plaintiffs rely to show the breach of contract of which they complain. The trial court made findings which follow the above quoted allegations of the complaint as to the effect of the writing given by Bergin to plaintiffs, state that in 1937, 1938, and 1939 plaintiffs operated in Bergin’s stands, already referred to, "by license so to do from defendant Bergin," and set forth the terms of the new arrangement made by plaintiffs with Anderson and Van der Steen substantially as above stated, but declare that there was no consideration to plaintiffs for it. The court made this further finding, on which the judgment in plaintiffs’ favor appears to rest for support: "VIII. That approximately at the beginning of the 1940 racing season at said Del Mar Turf Club, defendants Bergin, Van Der Steen and Anderson breached the covenant of quiet enjoyment by which plaintiffs were guaranteed quiet and peaceable enjoyment of their concessions during the term of the license thereof in that defendants, Van Der Steen, and Anderson refused permission to plaintiffs to operate their said concessions at the stands owned and operated by said defendants, Van Der Steen and Anderson, and that plaintiffs were thereby deprived of the source of more than half of their gross revenue."
The defendants contend, on this appeal, that the paper of April 24, 1937, signed by defendant Bergin, which we have already set forth, is a mere preliminary agreement, intended to be replaced by a more formal contract, and that since no such formal contract was ever made, there is no binding contract between the parties. They further contend that, if the paper is to be regarded as a contract, it is too vague and indefinite to be capable of enforcement. As to matters not stated in this paper, defendants also contend that any contract made between the parties is oral and hence cannot be enforced by reason of the statute of frauds. Plaintiffs, on the other hand, contend that this paper contains all the necessary terms of a binding contract, leaving nothing to future negotiations, and that it is "the agreement and the only agreement, between the respondents and Bergin." As to the points of indefiniteness pointed out by defendants, plaintiffs say that these were resolved by the acts of the parties, which put a practical construction on the contract in these respects. Other contentions are made on both sides, but we do not find it necessary to discuss them.
Taking up the contention that the writing of April 24, 1937, is too vague and indefinite to amount to an enforceable contract, we note that it simply refers to "concessions at the Del Mar Turf Club" for certain subject matter, containing within itself none of the details regarding the manner in which those concessions are to be enjoyed or the restrictions upon them, which, it would seem, must be understood in some fashion between the parties to such a transaction. However, this writing provides for a formal contract "on the same basis" as Bergin’s contract with the Turf Club. Turning to the latter, we see that it contains all necessary provisions regarding the concessions and their mode of enjoyment, and that these could readily be applied to the operations of plaintiffs. They were so applied in the formal contracts tendered to plaintiffs, but not signed by them. Defendants contend that the complete agreement between the parties cannot be thus arrived at because of testimony of the plaintiffs that they talked with Bergin about certain other provisions to go into the contract, and that they had not come to an agreement with him as to the terms of agreement on these points. But Bergin denied that any such conversations occurred, and we must assume that the trial court accepted his testimony on this subject, then properly coming to the conclusion that there were no unsettled terms of the contract when this writing under discussion was made.
There is still the provision for "a formal contract" to follow, and to this defendants point as precluding the writing from itself becoming effective as a contract. The law on this point was stated in Fly v. Cline, 1920, 49 Cal.App. 414, 425, 426, 193 P. 615, 620, as follows: "where the minds of the parties have met respecting the terms and conditions of the more formal writing that is to be executed by them, and the agreed terms of the contract thereafter to be executed are certain and in all respects definitely understood and agreed upon in advance, either orally or by informal writing, there is in such case an obligatory contract dating from the making of the earlier agreement. 13 C.J., p. 290 et seq. But it also is elementary law that, unless the agreement to execute the future contract be definite and certain upon all the subjects to be embraced, so that nothing is left for future negotiation, it is nugatory." This statement was quoted with approval in Toms v. Hellman, 1931, 115 Cal.App. 74, 77, 1 P.2d 31, and the same rule in substance was declared in Hollenbeck v. Lunderville, 1924, 67 Cal.App. 432, 441, 227 P. 679, and Levin v. Saroff, 1921, 54 Cal.App. 285, 290, 201 P. 961, and is stated in 17 C.J.S., contracts, § 49 at page 392. In view of the fact that the court may properly have viewed the expression of the terms of the contract in the preliminary writing here as complete, by the aid of the reference to Bergin’s contract with the Turf Club, it could also properly regard the preliminary writing as a binding contract, so far as Bergin is concerned.
We conclude, however, that in support of their claim of breach of contract, plaintiffs rely on an agreement which was not made part of the writing of April 24, 1937, either expressly or by the aid of the reference to Bergin’s contract with the Turf Club, but was orally made between them and Bergin. The only breach of contract declared in the findings is that stated in paragraph VIII thereof, above quoted, that defendants Van der Steen and Anderson "refused permission to plaintiffs to operate their said concessions at the stands owned and operated by said defendants." This must be considered with finding VII, in which it is stated that Van der Steen told plaintiffs that if they desired to operate their concessions through sale at those stands they must do so on his terms, which differed from those previously allowed by Bergin for use of the same stands. Nowhere in the writing of April 24, 1937, do we find any provision for the use of Bergin’s, or any other, stands by the plaintiffs. No such provision is imported into it by the reference to Bergin’s contract with the Turf Club, for that contract, as already stated, requires him to "install necessary facilities requisite to the conduct of his enterprise," except some bars which would not affect plaintiffs’ operations, and would, if made part of plaintiffs’ contract by reference, require them to do the same. The provision of the contract on which plaintiffs’ action depends is, therefore, purely oral and its proof rests on parol evidence. It fails to support plaintiffs’ action for two reasons.
In the first place, if we proceed on the theory that a complete, enforceable contract is embodied in the writing by aid of the reference to Bergin’s Turf Club contract, this oral agreement, which was made later, is a modification of such written contract in respect to the use of Bergin’s stands, for the writing, so aided, requires plaintiffs to erect their own stands. Such an oral modification of a written contract is valid only to the extent that it is executed (Civ.Code, sec. 1698), that is fully performed (Civ.Code, sec. 1661).
Furthermore, if we assume that the provision requiring plaintiffs to erect their own stands was not incorporated into the writing by reference, we must consider the statute of frauds. Plaintiffs’ concession was for a term of five years; hence the oral agreement on which plaintiffs rely is one which, by its terms, is not to be performed within a year from its making, and is within the provision of the statute of frauds requiring such contracts, or some note or memorandum thereof, to be in writing. Civ.Code, sec. 1624, subd. 1. "To satisfy the statute of frauds, a memorandum must contain the essential terms of the contract expressed with such a degree of certainty that it may be understood without recourse to parol evidence to show the intention of the parties." 12 Cal.Jur. 901; Dillingham v. Dahlgren, 1921, 52 Cal.App. 322, 328, 198 P. 832; Wineburgh v. Gay, 1915, 27 Cal.App. 603, 605, 150 P. 1003. "It is not sufficient that the note or memorandum may express the terms of a contract. It is essential that it shall completely evidence the contract which the parties made." Dillingham v. Dahlgren, supra [52 Cal.App. 322, 198 P. 834]. Supplementary parol evidence cannot be allowed to supply terms of contract which are "simply missing" from the memorandum. Edgar Bros. Co. v. Schmeiser Mfg. Co., 1917, 33 Cal.App. 667, 166 P. 366.
Plaintiffs attempt to support and invigorate this oral arrangement for plaintiffs’ use of Bergin’s stands by classing it as a "practical construction" of the contract by the parties. In discussing this point also we assume, in plaintiffs’ favor, that there is nothing in the writing on which they rely, which relates to the use of these stands, so that the rule regarding oral modification of a written contract is not applicable. It is no doubt the rule that "where the meaning is doubtful, the acts of the parties done under a contract afford one of the most reliable means of arriving at their intention." 6 Cal.Jur. 304. But, "It is only in relation to contracts that are uncertain, or of doubtful construction on their face, that conduct is to be looked to in aid of construction." 6 Cal.Jur. 306; see also 17 C.J.S., Contracts, § 325, p. 760. As stated in Coats v. General Motors Corp., 1934, 3 Cal.App.2d 340, 355, 39 P.2d 838, 845, cited by plaintiffs, "the practical construction placed upon a doubtful contract by the parties is evidence of its meaning. * * *" (Emphasis ours.) Practical construction cannot supply terms of a contract that are "simply missing," as the court put it in Edgar Bros. Co. v. Schmeiser Mfg. Co., supra, 1917, 33 Cal.App. 667, 166 P. 366. Any other rule would place the principle of practical construction counter to the statute of frauds and enable the parties to escape, by means of it, from the rule above stated as to the nature of the memorandum necessary to satisfy that statute. The writing here is not ambiguous or doubtful regarding the use of Bergin’s stands; it is simply silent on the subject--excluding the reference to Bergin’s Turf Club contract. The evidence does not show that the matter was discussed at or before the making of the writing in question. It came up afterward, when the plaintiffs started to operate their concession. The agreement that Bergin would allow plaintiffs the use of his stands on the terms shown by the evidence was not a construction of any part of the writing; it was either a new oral agreement on a matter not covered by that writing, as we are now assuming, or an oral modification of that writing, as we have above stated; and in either case it fails, as a support to plaintiffs’ action, because it is oral.
The judgment and the order modifying judgment after proceedings on motion for new trial are reversed.
SHINN, Acting P. J., and PARKER WOOD, J., concur.