Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. TC019451, Josh M. Fredricks, Judge.
Zwierlein & Associates and Robert F. Zwierlein for Plaintiff and Appellant.
Stone, Rosenblatt & Cha and Robin Mc Connell for Defendant and Respondent.
RUBIN, ACTING P. J.
Appellant North County Vending, Inc., appeals from the trial court’s entry of summary judgment for respondent Rodgers & McDonald Graphics. We reverse and remand.
FACTS AND PROCEEDINGS
In October 1994, appellant North County Vending, Inc., and respondent Rodgers & McDonald Graphics entered into a contract under which appellant supplied beverage vending machines to respondent’s place of business. The contract’s duration was three years. The contract automatically renewed at the end of each three year term for an additional three years unless respondent gave appellant at least 60 days’ notice of respondent’s intention not to renew.
In July 1995, appellant and respondent entered into a second contract that lengthened their original contract’s duration and its automatic renewal period to five years. The July 1995 contract stated:
“This agreement shall remain in full force and effect for a period of sixty months from date hereof and shall continue in full force and effect for succeeding similar periods unless notice of cancellation in writing is delivered by registered mail at least 60 days prior to the termination date of any current period.”
This new contract also allowed respondent to terminate the agreement if appellant’s performance was unsatisfactory and appellant failed to cure its performance within 30 days of respondent’s giving appellant notice of respondent’s dissatisfaction. In April 1997, the parties entered into a third contract. This contract contained the same terms as the 1995 contract except it included price information absent from the 1995 contract.
Almost eight years into the 1997 contract, respondent sent a letter to appellant on January 18, 2005, stating respondent was terminating the contract. Respondent wrote, “This letter is to serve as the formal Notice of Termination of your vending services at Rodgers & McDonald.” The letter did not identify any areas of appellant’s performance with which respondent was unsatisfied, and, consequently, did not invite appellant to cure its performance. Instead, it directed appellant to remove its equipment from respondent’s premises by February 22 because respondent had arranged for a new vending company to start providing services that day. On January 27, appellant wrote back to respondent and, noting that the contract was in effect until April 2007, offered to cure any defective performance. At least one phone conversation followed the January letters between the parties, during which they discussed respondent’s complaints.
On March 1, respondent sent a new letter to appellant stating respondent continued to find appellant’s performance unsatisfactory. Respondent’s letter identified three matters appellant had not cured:
● “On 2/22/05 the coffee machine required service due to a recurring problem. The bucket had not been emptied on a routine maintenance which caused the machine to become out of order.”
● “The outside of the machines are dirty.”
● “The route service person continues to not stop by to check with [respondent] each week.”
The letter accordingly reaffirmed respondent’s termination of the contract. In addition, respondent stated it did not consider the April 1997 contract as binding because respondent’s office receptionist had signed the contract on respondent’s behalf although she lacked the authority to do so. In closing, respondent asked that appellant remove its vending machines from respondent’s premises by March 30, 2005.
The trial court found no evidence that either appellant or respondent removed the machines any earlier than July 2005, a date which becomes important in our analysis of the trial court’s error in granting summary judgment for respondent.
In October 2005, appellant sued respondent for breach of contract. Appellant alleged respondent had terminated their contract without good cause 26 months before its scheduled expiration in April 2007. As damages, appellant sought its lost profits through April 2007.
Respondent moved for summary judgment. Noting the existence of the July 1995 and April 1997 contracts, respondent’s motion assumed for the purpose of summary judgment that the April 1997 contract was, as appellant alleged, the operative agreement. The motion freely accepted appellant’s allegation because the motion asserted respondent’s right to summary judgment did not turn on which contract applied given that respondent had terminated the contract based on appellant’s failure to cure its unsatisfactory performance. The motion also argued that appellant’s damages were too speculative to be recoverable because they relied on lost future profits.
The motion stated, for example, that “The Agreement contains a valid provision that gave Defendant the right to terminate the contract upon 30 days written notice should it find Plaintiff’s execution unsatisfactory.... [T]here can be no dispute that the Agreement’s cancellation provision utilized by Defendant, was a valid and effective contractual provision.” And, “Defendant again notified Plaintiff that it had made numerous efforts to resolve their issues and to remedy the poor service by Plaintiff all to no avail.”
Appellant opposed the motion for summary judgment. Appellant’s opposition argued respondent had breached the contract by not complying with the contract’s provisions obligating respondent to notify appellant of appellant’s unsatisfactory performance and offering appellant an opportunity to cure.
Substitute counsel specially appeared for appellant’s counsel of record at the hearing on the motion for summary judgment. The court’s tentative ruling was to deny the motion because a triable issue existed whether respondent had given appellant proper notice of its unsatisfactory performance and an opportunity to cure. After the court explained its tentative ruling, respondent’s counsel raised apparently for the first time a new theory for summary judgment. Citing respondent’s right not to renew the contract at the end of its five year term by giving at least 60 days’ notice of respondent’s intention not to renew, respondent’s counsel urged the court to grant summary judgment on that alternative basis. In the wake of this new theory, the following colloquy occurred between counsel and the court:
“[Court] Let me go back here. So you’re saying that [respondent] didn’t terminate the contract because of [appellant’s unsatisfactory performance under] the contract? You’re terminating the contract because you’re taking advantage of the window to terminate? [¶] [Respondent] I’m saying either way you look at it – [¶] [Court] When did this contract that we’re talking about terminate? [¶] [Respondent] Well, by its terms, it was entered into in July of 1995. [¶] [Court] Okay. [¶] [Respondent] It renewed for five-year periods. [¶] [Court] 7/95. [¶] [Respondent] So July 2000 and then July 2005. [¶] [Court] Okay. And you gave – [¶] [Respondent] Either way we look at that letter, whether you think it complies with giving notice of problems with the contract under paragraph 6, if it doesn’t comply in your mind with that, it clearly complies with paragraph 4, which is a notice of cancellation. [¶] [Court] What’s the window? [¶] [Respondent] Delivered at least 60 days prior to the termination date so that letters dated March 1st, 2005, which is clearly 60 days before this, would have terminated in July 2005.”
Asked by the court to reply to respondent’s argument, appellant’s substitute counsel stated respondent had raised a “triable issue of fact [of] which term or which paragraph of termination they went under.” During the discussion among the court and counsel, neither counsel reminded the court that appellant’s opposition to summary judgment had included the April 1997 contract which appellant’s complaint had alleged was the operative contract, and that respondent’s statement of undisputed facts acknowledged that contract’s existence. At the end of the hearing, the court took the matter under submission.
The court thereafter granted summary judgment for respondent. The court’s minute order stated, “There are no triable issues of fact. Paragraph 4 [involving respondent’s right not to renew] the agreement says that the contract may be terminated by written notice at least 60 days prior to expiration.” The court also found that appellant presented no evidence that respondent had not performed under the contract during what the court deemed to be the contract’s last three months ending in July 2005. Thus, the court found, appellant could not show damages. This appeal followed.
DISCUSSION
1. The Trial Court Mistook the Operative Contract
Appellant contends the court erred in granting summary judgment because the court mistook as the operative agreement (at least for purposes of respondent’s motion) the July 1995 contract instead of the contract entered in April 1997. We agree. Both contracts automatically renewed after each five-year term unless respondent gave at least 60 days’ notice of its intention not to renew, but which contract was in effect was a triable issue of fact. If the July 1995 contract was the operative agreement, it would have renewed in July 2000 and its renewal (or nonrenewal) would have been pending in July 2005, about four months after respondent gave notice in March 2005 of its termination of the contract for appellant’s purportedly poor performance. If the April 1997 contract was the operative contract – which appellant alleged and respondent assumed for purposes of its motion for summary judgment – it renewed in April 2002 and was scheduled to renew again in April 2007. For that contract, respondent’s right in early 2005 not to renew for reasons other than appellant’s poor performance had more than two years yet to ripen.
Respondent first gave notice in January 2005 that it was terminating the contract. Its notice expressed no reason for the termination other than respondent wanted appellant’s machines removed from respondent’s premises in time to allow a new vending company to put its machines in place. Following appellant’s request for an opportunity to cure those parts of its performance that dissatisfied respondent, respondent told appellant four and one-half weeks later in March 2005 that appellant’s contractual performance left respondent still unsatisfied. Respondent’s March 2005 letter did not style itself as giving 60 days’ notice of respondent’s intention not to renew the contract. The letter’s focus on appellant’s poor performance was unnecessary if respondent believed it was exercising its right not to renew the contract when its five year term purportedly expired a few months later in July 1995; discussion of appellant’s poor performance made sense only if respondent believed it was contractually bound until April 1997.
The groundwork having been laid in the notices and letters between respondent and appellant, respondent’s motion for summary judgment rested on appellant’s purportedly poor performance. Learning, however, during the hearing on its motion that the court tentatively planned to deny the motion, respondent shifted ground by arguing for the first time that its March 2005 letter had given appellant 60 days’ notice of respondent’s intention not to renew the contract for an additional five years. Presented with this new ground for summary judgment, the court reconsidered its tentative ruling denying respondent’s motion. Neither respondent’s nor appellant’s counsel reminded the court that respondent’s new theory was predicated on the July 2005 contract being the operative contract, and not, as assumed for purposes of respondent’s motion, the April 1997 contract. The court thereafter granted summary judgment based on respondent’s new theory.
The court erred in entering summary judgment because the parties lost focus on which contract governed respondent’s motion for summary judgment. The court concluded the contract’s remaining life was at most three months when respondent notified appellant in March 2005 that it was terminating the contract, which was true if the July 1995 contract was the operative agreement. But appellant contends, and respondent assumed for its motion, that the April 1997 agreement was the operative contract. Thus, respondent’s purported non-renewal of appellant’s contract after giving 60 days’ notice before the end of each five-year period, and on which basis the court granted summary judgment, was invalid.
Respondent contends the court did not err because appellant attached the July 1995 contract to appellant’s complaint. The complaint’s allegations about which complaint was operative are contradictory. Paragraph 7 of the complaint stated the contract entered in April 1997 was the operative agreement. The complaint attached as an exhibit, however, the July 1995 contract, which paragraph 7 also identified as a “true and correct copy of the Operative Agreement.” Both allegations cannot be correct. The contradiction seems more a matter, however, of drafting error than of substance. Other than their different dates of execution, the contracts had exactly the same terms except the April 1997 contract contained price information for the beverages dispensed through the vending machines that the July 1995 contract did not include. In any case, respondent’s statement of undisputed material facts acknowledged the April 1997 contract’s existence as the purportedly operative contract, and appellant’s opposition to summary judgment included that contract as an exhibit. Accordingly, we do not see appellant’s attachment of the July 1995 contract to the complaint as overriding the April 1997 contract’s application to this case.
Respondent also contends summary judgment was proper because respondent had good cause to terminate the contract for appellant’s unsatisfactory performance regardless of which contract was the operative agreement. We note, however, that the court’s granting of summary judgment did not involve appellant’s performance; to the contrary, the court’s tentative ruling indicated a triable issue existed as to whether respondent had observed the contract’s provisions for terminating the contract because of appellant’s poor performance. Moreover, respondent’s brief on appeal does not demonstrate respondent had good cause for terminating the contract. The brief refers to respondent’s March 2005 letter identifying three areas of appellant’s purportedly unsatisfactory performance – (1) machine “out of order” because bucket not emptied, (2) outside of machines dirty, and (3) service person not checking in weekly – but these presumably were the triable issues of fact supported by the record that the court had in mind in tentatively denying summary judgment. Accordingly, respondent’s contention that it had indisputably good cause to terminate the contract based on appellant’s performance is unavailing because the existence of good cause, we conclude, was a triable issue of fact.
2. Damages Not Unduly Speculative
Respondent contends summary judgment was proper because appellant’s damages from respondent’s purported breach of the contract were as a matter of law too speculative. Appellant based its damages on its anticipated profits from the contract’s full performance. Calculating its monthly net profits for the three and one-half months of respondent’s performance in 2005, which was the last calendar year in which respondent performed, appellant projected those monthly net profits out to April 1997, which was the end of the contract’s then current five-year term. According to respondent, appellant’s calculation was impermissibly speculative because appellant was “simply guessing that [its vending machines] would maintain the same sales volume” during the remaining life of the contract.
In granting summary judgment, the trial court found appellant could not show damages. Respondent suggests the court’s finding thus adopted respondent’s critique that appellant’s damages were too speculative. Not so. The court found appellant could not prove damages because, in the court’s view, appellant had not offered any evidence of lost revenue for the few months remaining under the July 1995 contract between April and July 2005; according to the court, respondent may have threatened to eject the machines prematurely from respondent’s premises before July 2005, but appellant had no evidence that respondent had done so. Thus, the court’s finding of no damages does not support respondent’s contention that appellant’s method of calculating its damages was too speculative. To the contrary, Seaboard Music Co. v. Germano (1972) 24 Cal.App.3d 618 approved the method appellant used. In that decision involving premature termination of a contract to provide coin operated music juke boxes, the plaintiff calculated its damages by multiplying its weekly net profit from the juke boxes by the number of weeks remaining under the contract if fully performed. (Id. at p. 622.) That method – founded generally on the principle that he who breaches cannot complain too loudly of the plaintiff’s failure to prove the amount of damages with specificity (Shoemaker v. Acker (1897) 116 Cal. 239, 245; Stott v. Johnston (1951) 36 Cal.2d 864, 875-876) – parallels appellant’s calculation here. It also defeats respondent’s contention that appellant’s damages are as a matter of law too speculative to recover.
DISPOSITION
The judgment is reversed and the court is directed to enter a new order denying respondent’s motion for summary judgment. Appellant to recover its costs on appeal.
WE CONCUR: FLIER, J., BIGELOW, J.