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Third Story Music v Tom Waits 41 Cal.app.4th 798

Third Story Music v Tom Waits 41 Cal.app.4th 798

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Published by: Thalia Sanders on Nov 28, 2011
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Westlaw Delivery Summary Report for PATRON ACCESS,-
Date/Time of Request: Monday, November 28, 2011 09:20 EasternClient Identifier: PATRON ACCESSDatabase: CA-ORCSCitation Text: 41 Cal.App.4th 798Lines: 524Documents: 1Images: 0
Third Story Music, Inc. v. Waits 41 Cal.App.4th 798, 48 Cal.Rptr.2d 747 Cal.App.2.Dist.
The material accompanying this summary is subject to copyright. Usage is governed by contract with Thomson Reuters,West and their affiliates.
 
THIRD STORY MUSIC, INC., Plaintiff and Ap-pellant,v.TOM WAITS et al., Defendants and Respondents.No. B084531.Court of Appeal, Second District, Division 4, Cali-fornia.Dec 28, 1995.SUMMARYA company that had owned the rights to themusical output of an artist brought a breach of con-tract action against the company that purchasedthose rights. The contract between the parties con-tained an express clause giving the purchaser com-plete discretion “at its election” to market or to re-frain from marketing the music. The companysought licensing to compile an album of the artist'smusic. The purchaser did not object, but would notagree to the licensing unless the artist gave his con-sent, which he did not. In its complaint, the com-pany alleged that the purchaser breached the im-plied covenant of good faith and fair dealing by in-terjecting the requirement that the artist consent toa licensing agreement. The trial court sustained thepurchaser's demurrer to the complaint on theground that the express clause permitting the pur-chaser to refrain from marketing the music pre-cluded application of any implied covenant.(Superior Court of Los Angeles County, No.BC096275, Harvey A. Schneider, Judge.)The Court of Appeal affirmed. It held that theimplied covenant of good faith and fair dealing didnot apply to the parties' agreement. An implied cov-enant of good faith and fair dealing will be imposedon a contract granting one party complete discretionwhen necessary to protect an agreement that other-wise would be rendered illusory and unenforceable.However, in all other situations where the contractis unambiguous, the express language is to govern,and no obligation can be implied that would resultin the obliteration of a right expressly given under awritten contract. In this case, the express clause,read literally, was an illusory promise. But, the il-lusory promise was not the only consideration giv-en by the purchaser. The purchaser promised to paya guaranteed minimum amount no matter what ef-forts were undertaken. Whether or not an impliedcovenant was read into the agreement, the agree-ment would be supported by consideration andwould be binding. That the purchaser chose not togrant a license in a particular instance could not bethe basis for complaint as long as it made theagreed minimum payments and paid royalties whenit did exploit the work. (Opinion by Epstein, ActingP. J., with Hastings, J., and Klein (Brett), J.,FN*concurring.)FN* Judge of the Municipal Court for theLos Angeles Judicial District sitting underassignment by the Chairperson of the Judi-cial Council.HEADNOTESClassified to California Digest of Official Reports
Contracts § 23--Construction and Inter-pretation--Implied Covenants--Implied Covenant of Good Faith and Fair Dealing--Application WhereOne Party Retains Express Discretionary Power toPerform or Not Perform-- Presence of Other Con-sideration.The implied covenant of good faith and fairdealing did not apply to a contract, between aformer holder of the rights to an artist's music andthe purchaser of those rights, that contained an ex-press clause giving the purchaser complete discre-tion “at its election” to market or to refrain frommarketing the music. Thus, the trial court properlysustained the purchaser's demurrer to the previousholder's complaint alleging that the purchaserbreached the implied covenant of good faith andfair dealing by interjecting a requirement that theartist consent to the previous holder's proposed li-censing agreement. The express clause, read liter-Page 141 Cal.App.4th 798, 48 Cal.Rptr.2d 747, 96 Cal. Daily Op. Serv. 107, 96 Daily Journal D.A.R. 125
(Cite as: 41 Cal.App.4th 798)
© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.
 
ally, was an illusory promise. However, the illusorypromise was not the only consideration given bythe purchaser. The purchaser promised to pay aguaranteed minimum amount no matter what effortswere undertaken. Whether or not an implied coven-ant was read into the agreement, the agreementwould be supported by consideration and would bebinding. That the purchaser chose not to grant a li-cense in a particular instance could not be the basisfor complaint as long as it made the agreed minim-um payments and paid royalties when it did exploitthe work.[See 1
Witkin,
Summary of Cal. Law (9th ed.1987) Contracts, § 743 et seq.]
Contracts § 23--Construction and Interpretation--Implied Covenants.For an implied covenant to a contract to be im-posed: (1) the implication must arise from the lan-guage used, or it must be indispensable to effectu-ate the intention of the parties; (2) it must appearfrom the language used that it was so clearly withinthe contemplation of the parties that they deemed itunnecessary to express it; (3) implied covenants canonly be justified on the grounds of legal necessity;(4) a promise can be implied only where it can berightfully assumed that it would have been made if attention had been called to it; (5) there can be noimplied covenant where the subject is completelycovered by the contract.
Contracts § 23--Construction and Interpretation--Implied Covenants-- Implied Covenant of GoodFaith and Fair Dealing--Application Where OneParty Retains Express Discretionary Power to Per-form or Not Perform.An implied covenant of good faith and fairdealing will be imposed on a contract granting oneparty complete discretion when necessary to protectan agreement that otherwise would be rendered il-lusory and unenforceable. However, in all othersituations where the contract is unambiguous, theexpress language is to govern, and no obligationcan be implied that would result in the obliterationof a right expressly given under a written contract.
Contracts § 23--Construction and Interpretation--Implied Covenants-- Avoidance by Courts.The courts cannot make better agreements forparties than they themselves have been satisfied toenter into or rewrite contracts because they operateharshly or inequitably. It is not enough to say thatwithout a proposed implied covenant, the contractwould be improvident or unwise or would operateunjustly. Parties have the right to make such agree-ments. The law refuses to read into contracts any-thing by way of implication except upon grounds of obvious necessity.COUNSELCohen & Luckenbacher, Evan S. Cohen and S.Martin Keleti for Plaintiff and Appellant.McCambridge, Deixler, Marmaro & Goldberg, BertH. Deixler and Daniel L. Germain for Defendantsand Respondents.
EPSTEIN, Acting P. J.
This case involves a dispute between a com-pany which owned the rights to the musical outputof singer/songwriter Tom
*801
Waits from 1972 to1983 and the party which purchased those rights.The issue is whether a promise to market music, orto refrain from doing so, at the election of thepromisor is subject to the implied covenant of goodfaith and fair dealing where substantial considera-tion has been paid by the promisor. We concludethat the implied convenant does not apply.Factual and Procedural SummaryAccording to the complaint, Waits agreed torender his services as a recording artist and song-writer exclusively to Third Story Productions(predecessor in interest to plaintiff and appellantThird Story Music, Inc.) from 1972 to 1983, pursu-ant to written agreements dated July 1, 1972, andJuly 1, 1977. Third Story Productions transferredits rights in Waits's music to Asylum Records(predecessor in interest to defendant/respondentWarner Communications, Inc.) on August 31, 1972,Page 241 Cal.App.4th 798, 48 Cal.Rptr.2d 747, 96 Cal. Daily Op. Serv. 107, 96 Daily Journal D.A.R. 125
(Cite as: 41 Cal.App.4th 798)
© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

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