Lead Opinion
Opinion
I. INTRODUCTION
Defendants, Rysher Entertainment, LLC, 2929 Entertainment, LP, and Qualia Capital, LLC, appeal from a judgment entered in favor of plaintiff, Don Johnson Productions, Inc. On December 7, 1994, plaintiff and Rysher Entertainment, LLC, entered into a contract for the services of an actor, Don Johnson. Entitled the “Term Agreement” (the contract), it provided for production of the Nash Bridges television series (the series). In the published portion of this opinion, we address defendants’ contention that a tolling agreement is governed by Code of Civil Procedure
II. FIRST AMENDED COMPLAINT
On November 1, 1994, CBS Television and plaintiff entered into development agreements to air 22 episodes of the series. On December 7, 1994, plaintiff and Rysher Entertainment, LLC, entered into the contract governing the production of the series. Pursuant to paragraph 11-12 of the contract, plaintiff owned a 50 percent interest in the series copyright. During the course of the production of the series, the contract was extended in 1997, 1998 and 1999. CBS Television aired the final episode on May 4, 2001. Rysher Entertainment, LLC, was contractually obligated to fund рroduction of the series.
In 1999, Rysher Entertainment, LLC, sold the syndication rights of the series to USA Network. Plaintiff was not a party to the syndication agreements. Since then, the series has been syndicаted worldwide. As noted, pursuant to paragraph 11-12, plaintiff is a 50 percent owner of the series copyright. Plaintiff is entitled to a 50 percent exploitation of the copyright. Rysher Entertainment, LLC, which was obligated to remit 50 percent of any profit to plaintiff, failed to do so.
Under the terms of the contract with Rysher Entertainment, LLC, plaintiff is entitled to 50 percent of the profits of contingent compensation. The first amended complaint describes plaintiff’s contingent compensation rights in paragraph II-4 of the contract: “In addition to providing [plaintiff] 50% ownership in the Series copyright, the [contract], under Section II-4, also guaranteed [plaintiff] 50% of all gross receipts (AGR), which is defined as all gross receipts from all sources receivеd by Rysher [Entertainment, LLC] or any affiliated entity after the deduction of (i) a 15% distribution fee to Rysher [Entertainment, LLC], (ii) distribution costs, (iii) direct production costs, and (iv) interest on the net deficited portion of the direct production costs.” Despite the fact Rysher Entertainment, LLC, reported $316 million in receipts, it claimed a deficit of $150 million existed. This provision, according to the first amended complaint, had no effect on plaintiff’s rights as a 50 percent copyright owner. Rather, paragraph II-4 provides a right to additional compensation beyond that guaranteed by the copyright ownership language of paragraph 11-12. Finally, the contract provides plaintiff access to the series masters so that it may exploit the program on interactivе devices.
On May 16, 2002, the plaintiff and Rysher Entertainment, LLC, entered into a tolling agreement. The agreement states the tolling period began on May 15, 2002. Neither party had rescinded the tolling agreement.
Based on the foregoing, the first cause of action alleges Rysher Entertainment, LLC, breached the contract by failing to document plaintiff’s copyright interest so as to ensure its enforceability; pay plaintiff 50 percent of
IH. DISCUSSION
A. Appeal
1. Statute of limitations
a. Overview
Defendants argue that plaintiff’s complaint was untimely filed. The complaint was filed on February 17, 2009. Defendants’ first amended answers allege plaintiff’s claims are barred by the section 337, subdivision 1 four-year statute of limitations for written contracts.
Both plaintiff and defendants agree the contract-based claims in the first amended complaint vested on March 17, 1998. On that date, an accountant employed by Rysher Entertainment, LLC, provided Marc Granier, an employee of plaintiff, with a “participation/distribution statement” for the period ending December 31, 1997. This statement detailed the income for the series. The accountant held the title of “Director Participations and Residuals” of Rysher Entertainment, LLC.
On May 16, 2002, Samuel R. Pryor, an attоrney representing plaintiff, sent a letter to Frank Stewart, who represented Rysher Entertainment, LLC. Mr. Pryor’s May 16, 2002 letter confirmed an agreement to toll the statute of limitations for potential claims against Rysher Entertainment, LLC. Mr. Pryor’s letter states in part: “This letter will confirm our conversation on Wednesday, May 15th, in which you courteously agreed that Don Johnson’s time in which to bring any action relating to the series ‘Nash Bridges’ against Rysher Entertainment will be tolled from, at least, our conversation on Tuesday, May
Defendants present two statute of limitations contentions. First, defendants argue that suit was filed after the tolling agreement expired by operation of law. Defendants assert section 360.5 requires that a tolling agreement be renewed in writing every four years. Since the tolling agreement was executed by Mr. Pryor more than four years before suit was filed, defendants argue plaintiffs claims are barred by section 337, subdivision l.
b. The circumstances leading to the adoption of section 360.5 in 1951 and its amendment in 1953
Dеfendants argue section 360.5 requires that an indefinite tolling agreement be renewed every four years. We begin with an analysis of section 360.5 and the circumstances which gave rise to its enactment in 1951 and its amendment in 1953. Defendants rely on section 360.5 which states: “No waiver shall bar a defense to any action that the action was not commenced within the time limited by this title unless the waiver is in writing and signed by the person obligated. No waiver executed prior to the expiration of the time limited for the commencement of the action by this title shall be effective for
Section 360.5 was originally enacted in 1951. (Stats. 1951, ch. 1106, § 1, p. 2863.)
Section 360.5 was amended in 1953 to state as it does now. (Stats. 1953, ch. 655, § 1, p. 1906.) In Carlton Browne & Co. v. Superior Court (1989)
In 1951, the drafters of section 360.5 had included some language from section 360. (Carlton Browne & Co. v. Superior Court, supra, 210 Cal.App.3d at pp. 42-43.) Section 360, as it was viewed in 1951 and 1953, allowed for tolling of the statute of limitations in the case of written acknowledgment of or a promise to pay a debt. (Western Coal & Mining Co. v. Jones (1946)
The Legislative Counsel’s May 1, 1953 report states: “Changes subject matter of the section from ‘acknowledgment, promise, or any form of waiver’ to simply ‘waiver.’ [|] Changes limitation on effectiveness of waiver of
The May 4, 1953 report of the Attorney General states: “Amends Section 360.5 of the Code of Civil Procedure by eliminating acknowledgments of an existing debt and promises to pay an existing debt from the effect of this section. As amended, the section is confined to waivers of the statute of limitations, [f] Amends Section 360.5 so as to provide that a waiver of the statute of limitations made after the expiration of the time to sue may be effective for a period of four years from the date of the waiver, under the existing section such a waiver would be effective only for a [four-year] period commencing upon the date that the statute of limitations would expire on the original obligation, [f] Amends Section 360.5 so as to exempt from the provisions thereof written waivers, acknowledgements and promises made by a person obligated to repay moneys fraudulently or [illegally] obtаined from a county or to secure repayment of the indigent aid. [][] Comment: There appears to have been some conflict between the existing Section 360.5 and Section 360 of the [Code of Civil Procedure] insofar as promissory notes were concerned. Under Section 360 payment of the interest or principal due on a promissory note would constitute a promise or acknowledgment (Steiner v. Croonquist [(1951)] 108 Cal.App.2d [Supp.] 895 [
On April 30, 1953, Edward D. Landels, counsel for the California Bankers Association, which originally sponsored Senate Bill No. 681 (1953 Reg. Sess.), wrote Governor Warren: “Section 360.5 was added to the Code of Civil Procedure in 1951 so as to invalidate indefinite and perpetual waivers of the Statute of Limitations. To that no one took exception. The Section was so drafted, however, as to possibly repeal the provisions of Section 360 which provides that payment of principal or interest on a promissory note should be deemed to toll the Statute if made before the Statute had run. This was unintended and Senate Bill [No.] 681 will make it clear that Section 360.5 applies only to waivers and does not affect the provisions of the preceding section dealing with what constitutes a sufficient acknowledgment to toll the
Finally, the May 11, 1953 report of Governor Warren’s legislative secretary, Mr. Vasey, stated: “Amends Section 360.5, Code of Civil Procedure, relating to waiver of statute of limitations, [f] Eliminates acknowledgments of, and promises to pay an existing debt from the coverage of the section, confining it to waivers of the statute of limitations, [f] Provides that a waiver of the statute of limitations made after the statutory period has run, may be made effective for a period of four years from the date of the waiver, rather than four years from the date that the statutory period would expire on the original obligation. [f] Provides that the limitation of the section upon the period of effectiveness of any waiver or statute of limitation, shall not be applicable to any acknowledgment, promise or waiver which is in writing and signed by the person obligated and given in any county to secure repayment of indigent aid or the repayment of monies fraudulently or illegally obtained from the county. [|] . . . This section was added in 1951 to validate indefinite and perpetual waivers of the statute of limitations. To that no one took exception. As drafted, however, it would possibly repeal Section 360 providing the payment of principal or interest on a promissory note should be deemed to toll a statute if made before the statute of limitations had run. This was unintended. This amendment will make it clear that Section 360.5 applies only to waivers and does not affect the provisions of Section 360 dealing with whаt constitutes a sufficient acknowledgment to toll the statute of limitations.” (Legis. Sect. Beach Vasey, legis. mem. to Governor Earl Warren regarding Sen. Bill No. 681 (1953 Reg. Sess.) pp. 1-2.)
c. Section 360.5 does not apply to the tolling agreement in this case
Defendant’s contention section 360.5, with its four-year renewal requirement, is the controlling, statute of limitations provision is without merit. Section 360.5 involves the waiver of the statute of limitations. The present case does not involve waiver of the right to assert the statute of limitations. Rather, the parties entered into a tolling agreement. Tolling agreements are a comparatively recent development in law. Prior to 1977, only one federal or state opinion contains both the phrases “statute of limitation” and “tolling agrеement.” (U.S. v. Harris Trust and Savings Bank (7th Cir. 1968)
Under California law, tolling generally refers to a suspension of a statute of limitations. (Pearson Dental Supplies, Inc. v. Superior Court (2010)
Our duty is to implement the Legislature’s intent. (People v. Gonzalez (2008)
The most important indicators of legislative intent are the words appearing in section 360.5. (Pineda v. Williams-Sonoma Stores, Inc. (2011)
The section 360.5 four-year renewal requirement has no application to the May 16, 2002 tolling agreement. There was no requirement the May 16, 2002 tolling agreement be renewed after four years. The May 16, 2002 tolling agreement therefore tolled the section 337, subdivision 1 statute of limitations. The February 17, 2009 filing of the complaint was timely.
d. Substantial evidence supports the finding the May 16, 2002 tolling agreement applies to plaintiff
B. Cross-appeal*
IV. DISPOSITION
The judgment is affirmed insofar as it awards $15 million plus interest from July 12, 2010. The cost award is affirmed. The judgment is reversed in all other respects. The cross-appeal is dismissed. Plaintiff, Don Johnson Productions, Inc., is awarded costs on appeal from defendants, Rysher Entertainment, LLC, 2929 Entertainment, LP, and Qualia Capital, LLC.
Ferns, J.,
Notes
Future statutory references are to the Code of Civil Procedure unless otherwise noted.
Section 337, subdivision 1 states in part: “Within four years: 1. An action upon any contract, obligation or liability founded upon an instrument in writing . . . .”
When adopted in 1951, section 360.5 stated: “No acknowledgment, promise or any form of waiver shall bar a defense to any action that the action was not commenced within the time limited by this title unless the acknowledgment, promise or any form of waiver is in writing and signed by the person obligated. No such acknowledgment, promise or any form of waiver executed prior or subsequent to the expiration of the time limited for the commencement of the action by this title shall be effective for a period exceeding four years from the date of expiration of the time limited for commencement of the action by this title, but such waiver may be renewed for a further period of not exceeding four years upon the expiration of the immediately preceding waiver. Such waivers may be made successively.” (Stats. 1951, ch. 1106, § 1, p. 2863.)
See footnote, ante, page 919.
See footnote, ante, page 919.
Judge of thе Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Dissenting Opinion
I respectfully dissent.
A. Tolling Agreement
Defendant asserts that the Code of Civil Procedure section 360.5
A comment in the Stanford Law Review shortly after the enactment of section 360.5, stated as follows: “More likely ‘waiver’ was included in the first part of [section 360.5] as a generic term to prevent evasion of the
Another article stated, “In California, waiver [of the statute of limitations] is controlled by section 360.5 of the Code of Civil Procedure. For tolling agreements signed before the expiration of the limitations period, the California Code allows a four-year waiver running from the date of expiration. For agreements signed after the limitations period, the statute may be tolled for four years from the date of signing. California's four-year limit appears to be aimed at avoiding ‘perpetual contracts.’ ” (Note, Reviving Contract Claims Barred by the Statute of Limitations: An Examination of the Legal and Ethical Foundation for Revival (2000) 75 Notre Dame L.Rev. 1571, 1586, italics added & omitted.)
Judicial opinions have likewise used the terms interchangeably in connection with the statute of limitations. (See, e.g., ABF Capital Corp. v. Berglass (2005)
Prominent legal authorities have noted the imprecise meaning of the word “waiver.” Williston has said “waiver” has “different meanings.” (5 Williston on Contracts (3d ed. 1961) § 679, p. 246.) He notes that a promise “to excuse performance of an obligation not due at the time when a promise is made . . . might perhaps also be called ‘waiver’ . . . .” (Id., § 679, pp. 246-253.) Williston added, “In view of these diffеrent meanings of the word ‘waiver’ it is obviously futile to attempt to define the requirements of a valid waiver unless its use is first confined to some one or more of its ordinary applications wherein the requirements of the law are identical. Until that is done there will be constant confusion of expression, [f] Thus, one court will say ‘No question of estoppel as distinguished from waiver arises’; another will say ‘The basis of waiver is estoppel’ . ... HO An understanding of the law requires, however, that each of these legal transactions be looked at separately and its requirements determined.” (Id. at pp. 257-258, fns. omitted; see 13 Williston on Contracts (4th ed. 2000) § 39:14, pp. 560-564.)
Corbin on Contracts (rev. ed. 1999) section 40.1, page 514 states, “The term ‘waiver’ has been given various definitions and is used under many varying сircumstances. Lawyers might like greater definition but judges are not precise, perhaps deliberately leaving flexibility in the concept and use of waiver. There is no one ‘correct’ definition. Waiver cannot be defined without reference to the kind of circumstances to which it is being related. Nor can we determine the legal operation of a ‘waiver’ without knowing the facts that the term is being used to describe.” Gamer has said, “Waiver is ‘an imprecise and generic term.’ ” (Gamer, Diet, of Modem Legal Usage (2d ed. 1995) p. 923 (Gamer).) Thus, defendant argues that “waiver” can be used in different contexts and is consistent with the use of tolling in this situation.
On the other hand, tolling generally has been viewed as technically different from waiver—the position of plaintiff in arguing that the tоlling agreement is not subject to section 360.5. A tolling agreement “extend[s] the
In order to resolve these conflicting views, because of the imprecise meaning of “waiver” in section 360.5, the task here is to ascertain if the “tolling agreement” appropriately fits within the logical meaning of waiver in
Allowing parties to circumvent easily the policy behind section 360.5 by using the word “toll” instead of “waive” would be an absurd consequence and would contravene public policy. The tolling agreement should be interpreted in a reasonable fashion. (See Pacific Tel. & Tel. Co. v. City of Lodi (1943)
Perhaps legal authorities incorrectly use “tolling” and “waiver” interchangeably. The use of the word “toll” in its strict legal meaning, however, does not make sense here. Tolling is normally tied to some specific phenomenon and is not used to involve an indefinite period or a period in the discretion of one party. Generally, tolling is provided for by statute or is an equitable doctrine
The tolling agreement provided for tolling until “you give us reasonable notice (30 days) rescinding this tolling agreement.” If the words of the tolling agreement are to be applied literally, “rescinding” the tolling agreement would render it a nullity (Holmes v. Steele (1969)
Section 360 has no applicability here because that provision deals with acknowledgments of debt and promises of payment. Plaintiff made no such acknowledgment or payment.
It is true that the “statute of limitations should not be characterized by courts as either ‘favored’ or ‘disfavored.’ The two public policies ... the one for repose and the other for disposition on the merits—are equally strong, the one being no less important or substantial than the other.” (Norgart v. Upjohn Co. (1999)
Accordingly, I would reverse the judgment by holding that the plaintiff’s claims are barred by the statute of limitations.
B. Other Issue
I would reverse the judgment.
A petition for rehearing was denied October 29, 2012, and on October 9, 2012, the opinion was modified to read as printed above. Mosk, J., was of the opinion that the petition should be granted. The petitions of appellant Rysher Entertainment, LLC, and appellant Don Johnson Productions, Inc., for review by the Supreme Court were denied January 16, 2013, S206553.
All statutory references are to the Code of Civil Procedure unless otherwise noted.
The Legislative Counsel reported on the proposed section 360.5 as follows: “Invalidates any form of waiver of statutes of limitation unless in writing signed by the person obligated. Provides such waiver is effective for not more than 4 years from expiration of time limit. Authorizes successive renewals of such waivers.” (Legis. Counsel, Rep. on Assem. Bill No. 370 (1951 Reg. Sess.) June 12, 1951, italics added.)
See footnote, ante, page 919.