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LEXSEE 204 CAL.APP.3D 396
T. L. MARTIN, Plaintiff

and Appellant, v. U-HAUL COMPANY OF FRESNO, Defendant and Appellant
No. F007927

Court of Appeal of California, Fifth Appellate District
204 CaL App. 3d 396; 251 CaL Rptr. 17; 1988 Cal. App. LEXIS 858

August 1 I, 1988

NOTICE: (*** I) Certified for partial publication Pursuant to California Rules of Court, rule 976(b), this opinion is certified for publication with the exception of parts II through iv.
SUBSEQUENT HISTORY:
was denied September 2, 1988.

on the dealer's consent to a reduction in the damages

awarded by the jury. The dealership contract provided
that it could be terminated by either part on 30 days' written notice or without previous notice on violation by
the opposite part of any promise or condition. The

A petition for a rehearing

company terminated the dealership contract without

PRIOR HISTORY: Superior Court of Stanislaus
County, No. i 90040, Hugh Rose II, Judge.

notice after it suspected the dealer was taking money from the company by renting equipment on the service station's credit card forms and by not using the correct rental company forms. (Superior Court of Stanislaus
County, No. i 90040, Hugh Rose II, Judge.
The Court of Appeal affrmed the order conditionally

DISPOSITION: The order conditionally granting the
motion for new trial is affrmed. The case is remanded to the trial court for the purpose of allowing plaintiff to elect whether to accept the $ 725 or request a new trial on the
issue of damages for breach of the contract. The

granting the motion for new trial; the case was remanded to the trial court to allow the dealer to elect whether to accept the reduced damage award or request a new trial
on the issue of damages for breach of the contract. The
judgment entered in favor of

judgment entered in favor of defendant on the first and

second causes of action of plaintiffs complaint is
affrmed.
Costs are awarded to defendant.

the company on the first and

second causes of action was affrmed. It held the trial
court did not err in granting the company's motion for new trial based on excessive damages, since the dealer's contract damages were limited to those accruing in the 30-day period after the breach of the dealership contract.
It also held the trial court did not err in granting the

SUMMARY:

CALIFORNIA OFFICIAL REPORTS SUMMARY
The trial court entered a judgment of nonsuit in favor
of defendant, a truck and trailer rental company, on two

company's motion for nonsuit on the cause of action for breach of the covenant of good faith and fair dealing,
since the dealer did not have a "special relationship" with

the company; rather, the dealer had an ordinary

causes of action (fraud and breach of covenant of good

faith and fair dealing) brought by a service station
operator/independent equipment rental dealer after the company terminated his equipment rental dealership contract without notice. On the third cause of action, for
breach of contract, the trial court granted the company's

commercial relationship with the company and thus there was no tort liability for the company's termination of the dealership contract. (Opinion by Best, Acting P. 1., with
Ardaiz, 1., and Brown (G. A.), 1., * concurrng.)
* Retired Presiding Justice of the

Court of

motion for new trial on the issue of damages, conditioned

Appeal sitting under assignment
Chairperson of

by the

the Judicial CounciL.

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HEADNOTES

CALIFORNIA OFFICIAL REPORTS HEADNOTES Classified to California Digest of Offcial Reports, 3d
Series
c) (I d) Damages § 15--Measure of (I a) (Ib) (I Damages--For Breach of Contract--30-day Notice for Termination of Dealership Contract. --In an action by

damages to the notice period is consistent with the general requirement that contract damages are limited to those foreseeable by the parties at the time of contracting.
Parties who agree that a contract may be terminated for

any reason, or no reason, upon the giving of the specified notice could not reasonably anticipate that damages could exceed that notice period.

a service station operator/independent equipment rental dealer for breach of contract against a truck and trailer

(5) Employer and Employee § 10--Contracts of

Employment--Actions for Wrongful
Discharge--Damages. --If the employer has the
unconditional right to terminate the contract of

rental company, following the company's termination of
his equipment rental dealership contract without notice,
the trial court did not err in granting the company's

motion for new trial on the issue of damages, conditioned
on the dealer's consent to a reduction in the damages

employment after certain notice, discharge has the effect of notice to terminate and damages are allowed only up to the time the contract would have terminated if notice had
been given.

award by the jury. The contract provision which provided

for the termination of the dealership contract upon 30 days' written notice effectively restricted the damages
recoverable by either part to the contract to those

(6) Damages § 15--Measure of Damages--For Breach
of Contract--Foreseeabilty. --Damages are awarded in

an action for breach of contract to give the injured part

attributable to that 30-day period, and the dealer agreed to and understood the effect of that notice provision at the time he entered into the dealership contract.
(2) Appellate Review § 141--Presumptions--Orders on

the benefit of his bargain and insofar as possible to place him in the same position he would have been in had the

promisor performed the contract. Damages must be
reasonable, however, and the promisor is not required to compensate the injured part for injuries that he had no
reason to foresee as the probable result of his breach

Motion for New Trial--Discretion of Trial Court.
n When a trial court grants a new trial on the issue of
excessive damages, whether or not such order is

when he made the contract. The requirement of
knowledge or notice as a prerequisite to the recovery of special damages is based on the theory that a part does not and cannot assume limitless responsibility for all
consequences of a breach, and that at the time of
contracting he must be advised of the facts concerning

conditioned by a demand for reduction, the presumption
of correctness normally accorded on appeal to the jury's

verdict is replaced by a presumption in favor of the order.
The tral court's exercise of discretion in ruling on the

new trial motion may be disturbed only where a manifest and unmistakable abuse of discretion clearly appears. The admonition is particularly compelling when discretion is
exercised in favor of granting the new triaL.

special harm which might result, in order that he may
determine whether or not to accept the risk of contracting.

(7) Damages § 15--Measure of Damages--For Breach of Contract--Due Performance of Agreement. --Civ.
Code, § 3358, provides that no person can recover a

(3) Appellate Review § 51--Presenting and Preserving

Questions in Trial Court--Necessity for Ruling--Abuse of Discretion. --A trial court may not be held to have abused its discretion as to a particular issue which it was
never asked to consider.

greater amount in damages for the breach of an obligation
than he could have gained by full performance on both

sides. Thus, courts wil not, except where exemplary

damages are awarded, permit a part to a contract to
recover more on the breach than he would have received by due performance of the agreement.
(8) Contracts § 44--Performance--Breach--Covenant

(4a) (4b) Damages § 15--Measure of Damages--For Breach of Contract-- Termination Clause. --If a person refuses to perform a contract which is terminable by him
upon certain conditions, the amount of money he would

have to pay in exercising his election to terminate
becomes the measure of damages for his breach. Thus,

of Good Faith and Fair Dealing--Bad Faith Denial of
Contract's Existence. --A part to a contract may incur

contract damages are limited to the notice period. The
specific rule that a termination clause limits recoverable

tort remedies when, in addition to breaching the contract, it seeks to shield itself from liability by denying, in bad faith and without probable cause, that the contract exists.

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Under these circumstances, no special contractual relationship is required. However, where there has been no denial of the existence of a contract, any tort liability must be predicated upon alleged bad faith actions in the
performance of

OPINION BY: BEST

OPINION

the contract.

(*400) (** i 7) Plaintiff, T. L. Martin (Martin), appeals from a judgment of nonsuit in favor of (***2)

(9) Contracts § 44--Performance--Breach--Covenant

the (** i 8) defendant, U-Haul Company of Fresno
(V-Haul), on two causes of action and from a conditional order granting new trial on the third cause of action on
which Martin was successful at triaL. We reject Martin's

of Good Faith and Fair Dealing-- Tort Damages. --To establish a tort claim for breach of the covenant of good
faith and fair dealing, California law requires, as a

threshold showing, proof of a special relationship between the parties characterized by elements of public
interest, adhesion and fiduciary responsibility. California courts have not extended the special relationship doctrine to include ordinary commercial contractual relationships.
(10) Contracts § 44--Performance--Breach--Covenant of Good Faith and Fair Dealing--Special Relationship

contentions on appeal and affrm in all respects.
Statement of

the Case

Jury trial began on June 9, i 986, in Martin's action
arising out of U-Haul's termination of a dealership
contract. At the close of Martin's case, the court granted

Under Equipment Rental Dealership Contract. --A
service station operator who also operated an independent equipment rental dealership, pursuant to an equipment

U-Haul's motions for nonsuit as to the first cause of action for fraud and the second cause of action for breach
of the covenant of good faith and fair dealing. The jury
returned a verdict in favor of the plaintifffor $ 29,000 on the remaining breach of contract cause of action. Martin was also awarded costs in the amount of $ 3,2 i 6.54,

rental dealership contract with a truck and trailer rental
company, did not have a "special relationship" with the company; rather, the dealer had an ordinary commercial relationship. Thus, there was no tort liability for breach of

attorney fees in the amount of $ i 6,000 and $ 1,762.52 in interest. Judgment was entered on August i 8, 1986.

the covenant of good faith and fair dealing after the
company terminated the dealership contract without notice. The dealer had entered into the contract with the company for remuneration, rather to secure peace of

On September 2, 1986, U-Haul filed its notice of motion for a new trial on the issue of damages. Martin fied his counter motion for new trial on the fraud and
breach of the covenant of good faith and fair dealing causes of action on September i 0, i 986. After a hearing, the court issued its decision (***3) on October 14, 1986,
denying Martin's motion and granting U-Haul's motion

mind, security and future protection; thus, the
relationship was not a "special" one. Also, the parties
were not in an inherently unequal bargaining position; the

equipment rental was only a sideline business to the service station business; the transaction was made at
arms' length; and contract damages were adequate. Also, there was no special vulnerability on the dealer's part; he
could have rented out other similar equipment from the
company's competitors.

for new trial based on excessive damages unless Martin agreed to a reduction of the damages to $ 725. The court

on its own motion also strck the cost bills fied by the
plaintiff.

Martin filed a timely notice of appeal on November
6, 1986.

COUNSEL: Moorad, Clark & Gleason and Sean F.
Gleason for Plaintiff and Appellant.

Statement of

Facts

Severson, Werson, Berke & Melchior, Jan T. Chilton and Kurt W. Melchior for Defendant and Appellant.
JUDGES: Opinion by Best, Acting P. 1., with Ardaiz, 1., and Brown (G. A.), 1., . concurring.
* Retired Presiding Justice of the

Martin had been an independent U-Haul dealer for

nine to ten years before August 3 I, i 98 I. He had started with U-Haul in the Los Angeles area and had moved to

Court of

Modesto in i 969 or i 970. He became a "triple-A" U-Haul dealer in approximately i 978. A "triple-A" dealer is allocated more equipment to rent out to the
public. In i 980 Martin's gross income from V-Haul

Appeal sitting under assignment
Chairperson of

by the

the Judicial CounciL.

rentals was $ 45, i 66.07, with his net commission on that

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amount being (*401) $ 9,416.60. He also earned $
503.87 from V-Haul repairs during 1980. During that
same period, he earned about $ 35,000 from his Texaco

and rent a trailer as a test of his procedures. He wanted to use her for this task because she had access to a pickup truck and looked believable. Cynthia, accompanied by
her friend, Roberta Craig, went from Fresno to (*402) Martin's station on August 25, i 98 I, to rent the trailer.

service station. In 198 I he had earned $ 5,797.67 through August 8 from his V-Haul activities.

Richard Adamitz was the president of V-Haul in
i 98 i . There were three offcers and directors of the corporation. They were himself, Len Pickhartz and Paul
Deaton. Pickhartz was vice president, (***4) and

She had called Martin a few days previously to ascertain the price of the trailer.
Martin testified that in the early afternoon of August (***6) 25, two girls came to the station and one asked to rent a trailer. She said she was going camping for a week and needed to rent a small trailer. He asked her for her driver's license. She replied that she did not have it with her but had left it at home in Turlock. Martin told her
that she had to have her driver's license with her before

Deaton was secretary-treasurer. They had opened the V-Haul Moving Center in Modesto in April of 1979. Pickhartz became the manager of that location six to
eight months later. The managers of the various moving
centers were paid a salary and did not receive a

commission from the rentals. The moving center is
separate from the independent dealers. The independent
dealers receive a commission of approximately 20

she could take the trailer off the lot. He told her that she could leave a deposit to hold the trailer. She insisted on
leaving the full amount of the rental as the deposit.

percent of their gross revenue. The dealers send their
gross receipts to V-Haul and are sent their commissions

Martin wrote the deposit on a Texaco invoice and told her

in return. Each Monday Martin would send in the gross receipts from the V-Haul rentals and then received his
commission check about six weeks later.

that he would prepare the contract when she returned. She gave the name "Cindy Brown" and an address in Turlock. He gave the girls the tissue paper copy of the
credit card receipt and put the hard copy on a clipboard

There are several forms which V-Haul requires its independent dealers to use. When renting the equipment,
it requires them to always use the authorized V-Haul contract on which the driver's license of the renter must

and hung it on the walL. He had placed a note with the charge slip explaining which trailer was reserved and that
the girl was coming back to get it.

be recorded. This contract is necessary to keep track of
the one-way rentals. There is also an authorized V-Haul deposit receipt to be used when a customer wishes to reserve a trailer. V-Haul also requires that a "Monday

Martin went home about 4 or 4:30 p.m. that day and left two of his employees, Bob Meyers and Don Baker, at the station. He had told Meyers and Baker that if the girls

came back, they were to put the trailer rental on a
contract and record the renter's (***7) driver's license number. Martin received a telephone call from Baker about 5 p.m. and returned to the station. When he arrved,
the trailer was gone, and the contract had not been filled

Report" be completed weekly which lets the company
know exactly what equipment (***5) has been rented out
in the preceding seven-day period and what equipment is on each independent dealer's lot.

out. Martin had not been present when the trailer left the
station. He went to get the hard copy of the receipt off the wall in his office, but it was gone as welL. Baker had died

V-Haul uses field men to maintain contact with its independent dealers. The field man prepares the "Dealer

Service Reports" and also attempts to detect dishonesty
among the independent dealers. V-Haul audited Martin

prior to triaL.
Martin sent his wife to Turlock to the address Ms.

prior to 198 I, but this audit (** i 9) did not show that he
had been renting out equipment without contracts and

Deaton had given him, but she found no one at that
address. When she returned, they both drove to Turlock. The resident of the house at that address did not know

thereby collecting money himself which should have
been sent to V-HauL. V-Haul had never found a

anyone named Brown.

discrepancy in his reports.
Adamitz had heard reports that Martin was renting

On the morning of August 3 I, i 98 I, Adamitz, Pickhartz and Steven Baird, Martin's field man at the
time, came to his Texaco station about 8:30 a.m. Adamitz showed him the hard copy of the Texaco receipt and said, "We have a problem." Martin told him that the girls had

equipment without reporting it to V-HauL. In August of
i 98 I, he made arrangements for Cynthia Deaton, Paul

Deaton's daughter, to go to Martin's station in Modesto

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left without a contract and he would have them fill one
out when they returned. Adamitz told him that the girls

home to go down there. Martin then asked her to go to
Turlock. She did not find anyone at the address which

were not coming back, and they were there to take the

V-Haul equipment from Martin. Two more men in
V-Haul uniforms arrived and began taking the equipment. They blocked the aisles in his service (***8) station with their trucks. They refused to move the trucks when asked

she was given and returned to the station. Both she and Martin then went to Turlock to try to find the girls. She also confirmed that they often used Texaco credit card slips as deposit receipts. (*** 10) She stated that she had

been with Martin for nine years while he had been a
V-Haul dealer, during which time she prepared most of the Monday reports and that he had not been stealing
money from V-Haul to her knowledge.

to move them. The V-Haul men were working on the
trucks before (*403) they took them away, leaving

debris and oil for Martin to clean up. It took them all day to remove the equipment.
Baird used Martin's offce to complete the necessary

Robert Meyers had been employed by Martin in
August of i 98 i as a mechanic. He also rented out

paperwork on the trailers and trucks in order to close out
the books on them. Martin never received the "V-Haul

the events of August 25, stating that the girls had come in and asked
trailers. He corroborated Martin's version of

Dealership Closeout Notice" which had been prepared because he refused to sign a copy of it. Neither did he
receive a 30-day written notification of termination of his dealership.

for a trailer but did not have a driver's license. He

testified that they wanted to (*404) pay for the trailer in advance so that it would not be rented out and that one of the girls said she would go back to Turlock so that she

Martin maintained that he had been "set-up" by Adamitz to make it look as if he had been stealing money

could get her license. He stated that the girls then
returned about 4:30 or 5:30 that evening. They drove in at the rear of the station while he was in the service bay putting away his tools. They walked to the front of the station and then walked back to the trailer area with the other serviceman, Mr. Baker. Baker then came back to the front of the station because he had a gas customer. Meyers then saw the girls drive out of the station with the

from V-Haul so that they could have a pretext under
which to close down his V-Haul dealership. He was

planning to move from his Texaco station at 1401 Coffee Road in Modesto to a new location at 5th and "I" Streets where he would no longer sell gas but would perform auto repairs and expand his V-Haul (**20) operations.
The lease at the Texaco station expired one month after

trailer. Meyers then called Martin who came to the
station.

he was closed down on August 3 i, i 98 I . The new location was close to the Modesto V-Haul Moving

Meyers was also at (*** i I) the station on August
3 I, i 98 I, when the men from V-Haul came to take away the equipment. He also testified that they blocked the

Center, and Martin believed (***9) that they did not
want the competition. He had contacted John Wilson of
V-Haul prior to August 25 to discuss moving his

service bays so that he could not work on the cars. He
asked them to move the trucks but they refused. The V-Haul personnel were there all day and were going through things that pertained only to the Texaco station

business. Wilson had told him to discuss it with his field
man. He had also told Baird of

his planned move prior to

the August 25 visit by Ms. Deaton. Steven Baird,

Martin's field man in 198 I, stated that the independent dealers were competing with the V-Haul Moving Center
for the same equipment and that Martin's new location was within a mile of the moving center. Baird had agreed
to the move and had offered to help him move the

and not to V-HauL. One tred to force open the door to
Martin's private offce.

Martin testified that he always used Texaco credit card invoices as deposit receipts. Henry Leer, his
previous V-Haul field man, knew that he followed this
practice. Someone would want to reserve a trailer in this

trailers.

Nadine Coley was Martin's wife in 198 I. She
testified that when he returned home in the late afternoon of August 25, he had told her that two girls had been to
the station to rent a trailer. She confirmed Martin's

fashion about four or five times a month. No one from V-Haul ever told him to use the offcial V-Haul deposit
form instead of a Texaco credit card invoice.
Cynthia Deaton denied leaving Martin's Texaco

version of the events of that evening after they had

received a telephone call from the station and left their

station and returning for the trailer. She testified that Martin rented her the trailer even though she did not

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produce a driver's license and that he used a Texaco

Martin's trailers to determine if they were being used
without that use being reported but was unable to produce any proof that Martin was cheating.
Adamitz testified that he felt Martin's V-Haul

credit card invoice instead of a V-Haul contract. She denied getting the hard copy of the Texaco credit card
slip from Martin's offce. Roberta Craig, Ms. Deaton's

friend, testified consistently (*** i 2) with Ms. Deaton's version of the events of that day. Juanita Black and John Wilson, both employees of V-Haul of Fresno, testified that Ms. Deaton returned to Fresno that afternoon with a

business was low in the area (***14) of the renting of
local trailers and that the local trailers were the hardest to trace in the V-Haul system. He had heard several reports of trailers being rented on credit card receipts without V-Haul contracts and had decided to send someone in to
test the rumors. He was not hoping to terminate Martin's dealership and actually wanted more dealers in Modesto.

trailer between 3:30 and 5 p.m. Modesto was
approximately

a two-hour drive from the V-Haul offce in

Fresno.
Paul Deaton testified that he had no prior knowledge

of the plan to have his daughter rent a trailer from Martin as a (**2 i) test of his procedures. He also stated that he
had never tried to put an independent dealer out of

He instructed Juanita Black to make the arrangements to have Ms. Deaton rent a trailer from Martin as a test. He had not been otherwise involved in the test and, when he later heard that she had been able to rent a trailer without
a contract, made the decision to close Martin's V-Haul operation. He did not tell anyone of his decision until the

business because he was competing with a moving

center. Neither was Baird aware of any plan to take
business away from the independent dealers. Baird had
heard rumors that Martin had not been using V-Haul

morning of August 3 I when they went to Martin's
dealership. He confronted Martin with the credit card slip

contracts and had reported these rumors to Adamitz. He did not know of the test of Martin's business practices or

and told him that their relationship would have to be
terminated.

of the fact that they were going to close down his
dealership until the morning of

the 3 i st.

With respect to termination of a dealership, the
V-Haul dealership contract provides: "This contract may
be terminated by either part on thirt days written notice

(*405) Leonard P.ickhartz was the manager of the V-Haul Moving Center in Modesto in 198 i. He had

or without previous notice upon violation by the opposite
part of any promise or condition heretofore mentioned.

heard statements that Martin was "ripping off' the
company and later received a note from Billy Oswald
which stated that Martin was taking money from V-Haul and not using (*** i 3) the correct rental forms. He did realize that the note had come from one of Martin's disgruntled employees who might have been fired. Martin testified that Oswald had worked for him for three days in July of i 98 i and that he had fired him because Oswald had told him that he could make a lot of money by renting V-Haul equipment without using the proper
contracts. Pickhartz never discussed Oswald's accusation
with Martin.

this contract (***15) for any reason, Dealer warrants, covenants, and agrees, that within the
Vpon termination of

geographical limits of the county of his place of business, he will not represent or render any service either on his

own behalf or in any (*406) capacity for any other
persons, firm, or corporation engaged in any rental business which offers the rental of equipment similar to that operated by Marketing Co. for the duration of the then existing telephone directory listing, plus a period of one year from the termination of such telephone directory
listing."

Henry Leer had been one of Martin's V-Haul field men. In i 978 or 1979, another V-Haul dealer had shown

Martin testified that when he first started with
V-Haul, Henry Leer had told him "that if I did something wrong they could give me a 30-day notice." Even though he testified that he understood at the time he signed the contract that V-Haul could close him down without notice if he violated a provision of the contract, he stated at trial that he did not think V-Haul could close down his operation without notice.
(**22) In August of I 984, Martin began to draw

him a Texaco credit card slip which he had received
along with a trailer which had been returned to him. He

discussed this with Martin who told him that he had instructed his employees to use the Texaco credit card
slips if they were too busy at the time the equipment was rented and then to put it on a proper contract later. Leer told Martin to discontinue this practice and also informed

Adamitz of this development. Leer had also altered

Social Security disability payments. Martin has died

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during the time this appeal has been pending.
Discussion

Martin also contends that this was a contract of adhesion and, therefore, that the particular provision

cannot be used to limit damages. However, he never pursued this theory in his opposition to the motion for
new trial and may not do so now.

Whether Martin's Contract Damages Are Limited to Those Accruing in the 30-day Period After the (*** I 6)
Breach of the Contract

(la) Martin contends that the trial court erred when it granted V-HauI's motion for new trial subject to the condition that the motion would be denied if Martin would consent to a reduction in damages from $ 29,000
to $ 725. The basis for the decision was a finding that
V-HauI's contract damages could not extend beyond the

(3) A trial court may not be held to have abused its discretion as to a particular issue which it was never
asked to consider. ( Ernst v. Searle (/933) 218 Cal. 233,
240-241 (22 P.2d 715); Guardians of

Turlock's Integrity

v. Turlock City Council (/983) /49 Cal.App.3d 584, 599 (/97 Cal.Rptr. 303). (***18)

30-day period in which V-Haul was permitted to
terminate the dealership contract without cause. That contract provision, paragraph i 6 in the V-Haul dealership contract, provides in pertinent part as follows: "This
contract may be terminated by either part on thirt days

(I b) This leaves the central issue of whether the contract provision which provides for the termination of the dealership contract upon 30 days' written notice effectively restricts the damages recoverable by either
part to the contract to those attributable to that 30-day

written notice or without previous notice upon violation
by the opposite part of any promise or condition

period.
In Pecarovich v. Becker (/952) 113 Cal.App.2d 309

heretofore mentioned."

(248 P.2d /23), the plaintiff had been employed as a
coach of the defendants' San Francisco Clippers

professional football team. The defendants breached the

three-year contract of employment under which Pecarovich served when they informed him that they
(2) "(When) a trial court grants a new trial on the issue

of excessive damages, whether or not such order is
conditioned by a demand for reduction, the presumption
of correctness normally accorded on appeal to the jury's

would no longer operate the football team and, therefore, did not intend to perform their part of the contract. The trial court had computed the plaintiffs damages based on the entire unexpired three-year term of the contract. The
appellate court looked to the termination clause of the

verdict is replaced by a presumption in favor of the
order." ( Neal v. Farmers Ins. Exchange (/978) 21

contract which gave the employer the option of
terminating the agreement upon a 90-day written notice with specified payments to be made to the employee. It

Ca1.d 910, 932 (148 Cal.Rptr. 389, 582 P.2d 980). "The trial court's exercise of(*** i 7) discretion in ruling
on the new trial motion may be disturbed only where '. . . a manifest and unmistakable abuse of discretion clearly

held that the trial court had erred in awarding damages
for the entire unexpired term of the contract and

appears.' (Citation.) The admonition is particularly

remanded the action with direction (* * * i 9) to render a

compelling when discretion is exercised in favor of
granting the new (*407) triaL." ( County of San Diego v. Bressi (/986) 184 Cal.App.3d 112, 119 (229 Cal.Rptr.

judgment reflecting the lower damage award required by the termination clause.

44).
Although Martin devotes much of his argument on
appeal to the question of whether or not the contract

The Pecarovich contract provided for both a
specified notice period and also a (**23) specified sum
to be paid by the defendants. Here we only have the

specified notice period. However, this is not a significant

could only be terminated for good cause, he prevailed on

difference when considered in light of the authority relied

this issue at trial when the jury found that V-Haul had breached the contract. The only issue here is that of the
proper measure of damages.

upon by the Pecarovich court as well as the general
principles of contract law. (4a) As that court explained:

"We have found no California decisions in point but judicial (*408) decisions in other jurisdictions indicate

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that if a person refuses to perform a contract which is
terminable by him upon certain conditions, the amount of
money he would have to pay in exercising his election to

that she was properly awarded her salary for the two-week period following her discharge as part of her
damages. ( 1d. at p. 684.)

terminate becomes the measure of damages for his
breach." ( Pecarovich v. Becker, supra, 113 Cal.App.2d

atp.317.)
The Pecarovich court cites several out-of-state authorities for the proposition that the contract damages are limited to the notice period. ( Pecarovich v. Becker,
supra, 113 Cal.App.2d at p. 318.)
(5) As one of

California Civil Code section 3300 provides for the general measure of damages for a breach of contract. It (***22) reads: "For the breach of an obligation (*409) arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which wil compensate the part aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result
therefrom. "

those cases explained within the context of (***20) an employment contract, "If the employer has

the unconditional right to terminate the contract of

(6) California case law has long held the correct
measure of damages to be as follows: "Damages are

employment after certain notice, discharge has the effect of notice to terminate and damages are allowed only up to the time the contract would have terminated if notice had
been given." ( Biterman v. Gluck (1939) 256 App.Div.

awarded in an action for breach of contract to give the
injured part the benefit of his bargain and insofar as

33619 N.YS.2d 1007, 1008).
In Cline v. Smith (1929) 96 Cal.App. 697 l274 P.

possible to place him in the same position he would have been in had the promisor performed the contract. (Citations.) Damages must be reasonable, however, and
the promisor is not required to compensate the injured
part for injuries that he had no reason to foresee as the

761), the court reached a similar conclusion. There a
contract which had eight years to run was breached. The

trial court had instructed the jury that, in arriving at
proper measure of damages, it could consider the fact that the contract had eight years to run. The contract provided that "'either part may terminate this contract at any time

probable result of his breach when he made the contract. (Citations.)" ( Coughlin v. Blair (1953) 41 Cal.2d 587,
603 l262 P.2d 305); accord (**24) Glendale Fed. Say.

& Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 123 fi35 Cal.Rptr. 802); Bravo v.
Buelow (1985) 168 Cal.App.3d 208, 215 l214 Cal.Rptr.
65). (***23)

by giving to the other part sixty days notice of its
intention to do so.'" ( ¡d. at p. 699.) The Court of Appeal
reversed. It held that the portion of the instruction

permitting consideration of the fact that the contract had eight years to run was prejudicially erroneous "(in) view of the company's right to terminate the contract at any (***21) time on sixty days' notice. . . ." ( 1d. at p. 702.) Therefore, although not expressly restricting damages to a 60-day period, it implied that that would be the proper measure and did explicitly find that permitting damages
based on the total unexpired term of the contract was
erroneous in light of

Witkin explains the "foreseeability" rule when he
states: "The requirement of knowledge or notice as a

prerequisite to the recovery of special damages is based
on the theory that a part does not and cannot assume

limitless responsibility for all consequences of a breach, and that at the time of contracting he must be advised of

the facts concerning special harm which might result
therefrom, in order that he may determine whether or not to accept the risk of contracting." (I Witkin, Summary of
Cal. Law (9th ed. 1987) § 8 i 5, p. 733, original italics.)

the termination provision.

In the venerable case of Jewell v. Colonial Theater

Co. (1910) 12 Cal.App. 681 fi08 P. 527), a contract for the employment of an actress contained a provision
stating, "'This contract may be cancelled at any time after

(4b) The specific rule that a termination clause
limits recoverable damages to the notice period is

the first performance by either part giving two weeks'

notice in writing to the other.'" ( 1d. at p. 683.) Before

the expiration of the plaintiffs contract, the theater
closed, and she was dismissed without receiving the required two weeks' notice. The appellate court found

consistent with the general requirement that contract damages are limited to those foreseeable by the parties at the time of contracting. Parties who agree that a contract may be terminated for any reason, or no reason, upon the
giving of the specified notice could not reasonably

anticipate that damages could exceed that notice period.

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(Ic) In the case at bench, Martin testified both at trial and during his deposition that he agreed to the
30-day notice provision. At trial he was questioned as

received by due performance of the agreement." (23

Cal.ur.3d, Damages, § 47, p. 78.)
(ld) If

follows:

V-Haul had followed the notice requirements

in its dealership contract, it could have terminated

"Q. Didn't you agree to that, that (***24) they
could cancel you at any time without, for a reason or no
reason, on 30 days notice?

Martin's dealership after providing a 30-day notice. Full

"A. I may have agreed to that, but that don't mean
it's true.

performance by V-Haul would only have resulted in an additional 30 days of V-Haul dealership business for Martin. That 30-day period is all that Martin could
reasonably be assured of

remaining in business.

Because of the 30-day notice provision neither part

"Q. And you didn't see anything wrong with that,
did you?
(*410) "A. No."

to the dealership contract could reasonably anticipate that damages resulting from a breach of that contract would exceed those potentially accruing during a 30-day period
after the breach. Furthermore, awarding the wronged

At his deposition, he responded to questions on this issue in a similar fashion.

part damages (*4 i I) which exceed those attibutable to
the 30 days immediately following the breach would

place that part in a better position than that resulting if
the breaching part had performed in accordance with the

"Question: Isn't it true, Mr. Martin, that you knew when you first become (sic) a V-Haul dealer on Coffee Road that V-Haul had an absolute right to cancel you for
any reason, or no reason, on 30 days notice?

terms of the agreement. Therefore, the trial court was
correct when it granted the new trial motion conditioned

upon Martin's (***26) consent to a reduction in the
damage award from $ 29,000 to $ 725. (**25)
II

"Answer: That's right.

"Question: You knew that all the time?
"Answer: Yes.

Whether the Court Erred in Granting the Nonsuit

Motion as to the Cause of Action for Breach of the
Covenant of Good Faith and Fair Dealing
In his supplemental brief, Martin's counsel urges

"Question: And you agreed to that?
"Answer: That's right.
three bases for his contention that the lower court erred

"Question: And you didn't see anything wrong with
that?
"Answer: No."

when it granted the motion for nonsuit on the cause of action for breach of the covenant of good faith and fair
dealing. They are (I) a special relationship existed

Having consciously agreed to and understood the

between Martin and V-Haul; (2) there was no significant distinction between Martin and an at-will employee; and (3) even absent a special relationship, an action stemming
from an alleged bad faith breach of the covenant within
the context of an ordinary commercial contract may

effect of the 30-day notice provision at the time he
entered into the dealership contract, Martin may not now avoid the impact of the provision to which he freely assented.
(7) Civil Code section 3358 provides in pertinent

sound in tort. All three contentions are without merit.

In Seaman's Direct Buying Service, Inc. v. Standard

Oil Co. (1984) 36 Ca1.d 752 (206 Cal.Rptr. 354, 686
P.2d i 158), the California Supreme Court reaffrmed that

part, "no person can recover a greater amount in damages for the breach of an obligation, than he could have gained

"the law implies in every contract a covenant of good
faith and fair dealing." ( Id. at p. 768, original italics.)

by the full performance thereof on both sides." "Thus,
courts will not, except where (***25) exemplary

However, (***27) it specifically stopped short of
holding that a cause of action sounding in tort arose in every instance where this covenant may have been

damages are awarded, permit a part to a contract to
recover more on the breach thereof than he would have

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1988 Cal. App. LEXIS 858, ***27

breached. As the court explained: "While the proposition that the law implies a covenant of good faith and fair dealing in all contracts is well established, the proposition

through 'uncharted waters.''' ( Quigley v. Pet, Inc. (1984)
162 Cal.App. 3d 877, 890 (208 Cal.Rptr. 394).

advanced by Seaman's -- that breach of the covenant
always gives rise to an action in tort -- is not so clear. In holding that a tort action is available for breach of the covenant in an insurance contract, we have emphasized the 'special relationship' between the insurer and insured, characterized by elements of public interest, adhesion, and fiduciary responsibility. (Citation.) No doubt there
are other relationships with similar characteristics and

In the instant case, there has been no denial of the
existence of the contract. Therefore, any tort liability
must be predicated (**26) upon V-Haul's alleged bad

faith actions in the performance of the contract.
Decisions since Seaman's have continued to stress the
requirement that there be a special relationship between

the parties before a tort cause of action for breach of the implied covenant of good faith and fair dealing will lie.
(9) As succinctly stated in Premier Wine & Spirits v. E.

deserving of similar legal treatment.

"When we move from such special relationships to consideration of the tort remedy in the context of the ordinary commercial contract, we move into largely uncharted and potentially dangerous waters. Here, parties of roughly equal bargaining power are free to
shape the contours of their agreement and to include

& J Gallo Winery (E.D.Cal. 1986) 644 F.Supp. 1431,

affrmed (9th Cir. 1988) 846 F.2d 537: "To establish
Premier's (***30) tort claim for breach of the covenant of good faith and fair dealing, California law requires, as a threshold showing, proof of a 'special relationship' between the parties characterized by elements of public interest, adhesion and fiduciary responsibility. (Citation.)

provisions for attorney fees and liquidated (*4 i 2) damages in the event (***28) of breach. They may not be permitted to disclaim the covenant of good faith but they are free, within reasonable limits at least, to agree upon the standards by which application of the covenant
is to be measured. In such contracts, it may be difficult to distinguish between breach of the covenant and breach of

California courts have not extended the 'special relationship' doctrne to include ordinary commercial
contractual relationships such as the supplier-distributor

relationships present here." ( Ed at p. 1436; accord
Multiplex Ins. Agency, Inc. v. California Life Ins. Co.

contract, and there is the risk that inteijecting tort
remedies will intrde upon the expectations of This is not to

(1987) 189 Cal.App.3d 925, 937 (235 Cal.Rptr. 12) and Commercial Cotton Co. v. United California Bank (1985)

the parties.

163 Cal.App.3d 511, 516 (209 Cal.Rptr. 551, 55
A.LR.4th 1017).
We, therefore, reject Martin's contention that tort damages may be awarded for a breach of the covenant of
good faith and fair dealing absent some special

say that tort remedies have no place in such a commercial context, but that it is wise to proceed with caution in determining their scope and application." (36
Cal.3d at pp. 768-769, fns. omitted.)

The Seaman's court then went on to find tort liability on a basis distinct from breach of the implied covenant. ( Seaman's Direct Buying Service, Inc. v. Standard Oil Co.,
supra, 36 Ca1.d at p. 769.)

relationship between the parties.
(*413)
(10) The inquiry then turns to the issue of

whether or not

(8) As Justice Woolpert of this court has explained: "The

such a special relationship exists. This tort found its
genesis within the special relationship of the insurance

facts in Seaman's did not require the court to examine conduct in the performance of the contract. Instead, the court described a new intentional tort, finding 'it is not even necessary to predicate (***29) liability on a breach
of the implied covenant.' The new tort: '(A) part to a

context. (***3 I) (See Comunale v. Traders & General

Ins. Co. (1958) 50 Ca1.d 654 (328 P.2d 198, 68
A.L.R.2d 883) and Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425 (58 Cal.Rptr. 13, 426 P.2d 173). Courts have also sustained its viability when the relationship between
the parties was one of employer/employee ( Cleary v. American Airlines, Inc. (1980) 111 Cal.App.3d 443, 455 (168 Cal.Rptr. 722)) or bank/depositor ( Commercial
Cotton Co. v. United California Bank, supra, 163

contract may incur tort remedies when, in addition to

breaching the contract, it seeks to shield itself from
liability by denying, in bad faith and without probable cause, that the contract exists.' (Citation.) Vnder these circumstances, no special contractual relationship is required. The court avoided plotting additional courses

Cal.App.3d 511, 516). However, the courts have

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1988 Cal. App. LEXIS 858, ***31

consistently declined to expand liability for this tort into other types of contract-based disputes.

transactions, one enterprise will be larger than the other.

Martin was a service station owner who rented V-Haul
equipment as a sideline. This was an arm's-length

In Commercial Cotton, supra, the court stressed the importance of "public interest, adhesion, and fiduciary

transaction; Martin could have chosen to do business with

responsibility" in looking at whether a special
relationship existed. ( Commercial Cotton Co. v. United
California Bank, supra, 163 Cal.App.3d at p. 516.)

any of several (***34) other equipment rental firms.
Similarly, contract damages were adequate. Martin could
have been compensated for the loss of income attibutable to the 30-day period following the

Similarly, in Wallis v. Superior Court (1984) 160
Cal.App.3d 1109 (207 Cal.Rptr. 123), (***32) the court
examined several facets of insurance contracts which

termination as the total of his expectancy interest under
the contract.

distinguish them from ordinary commercial contracts.
That court stated: "As noted earlier, the (Seaman's) court intimated that a noninsurance contract could be tortiously breached if it contained characteristics similar to those which allow a finding of tortious breach in an insurance
contract. (36 Ca1.d at p. 769.) For purposes of serving

Finally, there was no special vulnerability on
Martin's part. True, Martin could not rent V-Haul

equipment without V-HauL. However, he could
theoretically rent out other similar equipment from
V-Haul's competitors. But more importantly, this was a sideline business from which Martin garnered income additional to that of his Texaco station; this was not his sole means of earning a living as is generally the case in wrongful termination actions.
The facts of the two cases most closely analogous to the instant situation uphold this view. In Premier Wine & Spirits, supra, Premier was a distributor for Gallo but also distributed products for other wineries. A dispute
arose and Premier brought an action which alleged, in

as predicates of tort liability, we find that the following
'similar characteristics' must be present in a contract: (I)

the contract must be such that the parties are in inherently
unequal bargaining positions; (2) the motivation for

entering the contract must be a nonprofit motivation, i.e., to secure peace of mind, security, future protection; (3)

ordinary contract damages are not adequate, because (a) they do not require the part in the superior position to

account for its actions, and (b) they do not make the
inferior part 'whole'; (4) one part is especially

vulnerable because of the tye of harm it may suffer and of necessity places trust in the other part to perform; and

part, a breach of the covenant of good faith and fair dealing on the part of Gallo. The federal district court looked at the Walls factors as well as at this court's
decision in Quigley. (***35) It concluded: "The

(5) the other part is aware of this vulnerability."
(***33) (Id at p. 1118.)

supplier-distributor relationship here cannot be described as having a non-profit motivation; profit is the principal
basis of such a relationship. Furthermore, Premier has

Martin's counsel asserts that "the only element not

technically met in the Wallis criteria is the fact that
Martin had entered into the contract with V-Haul for
remuneration," and that, therefore, a special relationship

continued as distributor of product lines from a multitude

of suppliers, and was appointed as distributor of the
Inglenook line of

wines following termination. Therefore,

could still have existed between V-Haul and Martin. This argument falls short for two reasons. First, this missing

Premier cannot be described as being especially
vulnerable to a termination by Gallo." ( Premier Wine &

element is a crucial factor in deciding whether or not a special relationship exists. It is of paramount importance
that the reason for the contract be "to secure peace (**27) of mind, security, future protection." That is what makes
the relationship a "special" one.

Spirits v. E. & J. Gallo Winery, supra, 644 F.Supp. at pp. 1436-1437.)
The independent dealer status of Martin is analogous
to that of Premier. This was an ordinary commercial

relationship, not a "special" one.

Second, contrary to Martin's assertion, all the other factors are not present in this case; indeed, none of them
are. The parties were not in "an (*414) inherently

Similarly, the situation in Quigley, supra, 162
Cal.App.3d 877 is also relevant to the instant analysis. Quigley had contracted to haul raw walnuts for Pet, a large agricultural corporation. Pet was alleged to have breached the contract by failing to honor the agreed rate schedule. Quigley brought an action for breach of

unequal bargaining position." Although it is true that
V-Haul was a larger business organization, this is not the
thrust of this factor. In the vast majority of business

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contract, tortious interference with business relations, intentional infliction of emotional distress and breach of the implied duty of (***36) good faith and fair dealing
arising out of their contract. This court addressed the

this situation.

Finally, appellate counsel agrees that Martin was not an employee of V-Haul but urges this court to hold that
he was some sort of quasi-employee and that, therefore,

issue of an asserted special relationship as follows:

"Quigley (*4 i 5) Bros. and Pet are commercial
enterprises. Quigley is a corporate shareholder. There

this tort action could proceed. However, as has already
been discussed, the employer/employee relationship is merely one tye of special relationship which wil sustain

was no special relationship which removed the parties
from usual commercial contract rules. At the inception of

this tort. As Martin was not an employee and there was
no other special relationship, this contention is without merit.

the contract the bargaining position of the parties was
equal; Quigley willingly accepted the contract rate.

"The contractual relationship was entered into for the usual business reason of profit which can be assured by
ordinary contract damages if a failure of performance

Because there was no "special relationship" between Martin and V-Haul and what was at issue was an ordinary

occurred. Although perhaps financially vulnerable
because of the importance of the contract, plaintiffs'

hauling business was one in which profit or loss was
foreseeably dependent upon a multitude of

commercial transaction and because California law has not extended this tort to normal commercial contracts, the granting of the motion for nonsuit on the cause of action for breach of the covenant of good faith and fair dealing
was proper.

circumstances. As noted in the Seaman's dissent, in most
cases purposeful breaches of contract are to be

II, iv (Text (***38) omitted.) NOT CERTIFIED
FOR PUBLICATION.
(*4 i 6) The order conditionally granting the motion

anticipated with only contract damages as the remedy." (
Quigley v. Pet, Inc., supra, 162 Cal.App.3d at p. 893.)

Therefore, even though the contract with Pet
constituted a major portion of Quigley's business, this

for new trial is affrmed. The case is remanded to the trial court for the purpose of allowing plaintiff to elect
whether to accept the $ 725 or request a new trial on the
issue of damages for breach of the contract. The

court (***37) did not equate that tye of vulnerability with that which is (**28) required before a court will
allow a cause of action for breach of the covenant of

judgment entered in favor of defendant on the first and

good faith and fair dealing to proceed or a judgment
based upon that tort to be upheld. Martin was even less vulnerable than Quigley in that his V-Haul business was merely a sideline. No special relationship was present in

second causes of action of plaintiffs complaint is
affrmed.
Costs are awarded to defendant.

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EXHIBIT 24

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LEXSEE 68 CAL. 2D 222

REBECCA D. MASTERSON et aI., Plaintiffs and Respondents, v. LU E. SINE et aI., Defendants and Appellants
Sac. No. 7725

Supreme Court of California
68 CaI. 2d 222; 436 P.2d 561; 65 CaI. Rptr. 545; 1968 CaI. LEXIS 157

February 6,1968

SUBSEQUENT HISTORY: Respondents' Petition for a Rehearing was Denied March 6, 1968, and the Opinon was Modified to Read as Printed Above.
McComb, J., and Burke, 1., were of the Opinon that the Petition should be Granted.
PRIOR HISTORY: APPEAL from a judgment of

(2) Evidence--Extrinsic Evidence--Rule. --When the
parties to a written contract have agreed to it as an "inte-

gration," namely, a complete and final embodiment of
the tenn of the agreement, parol evidence cannot be

used to add to or vary its terms.

the

Superior Cour of Glenn County. Richard E. Patton,
Judge. .

* Assigned by the Chairan of the Judicial
CounciL.

Where Agreement Is Incomplete. --When only part of a written contract is integrated, parol evidence cannot be used to add to or vary the tenn of that part, but parol

(3) Id.--Extrinsic Evidence: Exceptions to Rule--

evidence may be used to prove elements of the agreement not reduced to writing.

Action for declaratory relief to establish plaintiffs
right to enforce an option to repurchase certain real prop-

(4) Id.--Extrinsic Evidence--Exceptions to Rule--Test

ert.
DISPOSITION: Reversed. Judgment declaring plaintiffs right to exercise the option reversed.

of Completeness. --The crucial issue in determng
whether there has been an integration is whether the parties intended their wrting to serve as the exclusive embodiment of their agreement.

HEADNOTES

(5) Id.--Extrinsic Evidence--Exceptions to RuIe-- Test of Completeness: Prior or Contemporaneous Agreements. --The circumstances at the time of writing a con-

CALIFORNIA NOTES

OFFICIAL

REPORTS

HEAD-

(1) Vendor and Purchaser--Option to Repurchase--

Construction: Extrinsic Evidence. --In constring the
grantors' option to repurchase in a deed conveying their ranch, the cour properly admtted extrinsic evidence to

tract may aid in determning whether the partes intended it to be integrated, and any collateral agreement must be examied to determne whether the parties intended the subjects of negotiation it dealt with to be included in, excluded from or otherwise affected by the writing, even though the written contract may have expressed the parties' intention to nullify antecedent understandings or
agreements.

render the repurchase price sufficiently certain to permt

specific performnce by showing that such price, described in the deed as ". . . the same consideration as

(6) Id.--Extrinsic Evidence--Exceptions to Rule--Prior
or Contemporaneous Agreements-- When Inadmissi-

being paid heretofore plus. . . depreciation value of any

improvements. . ." was meant by the grantors and grantees to be $ 50,000 plus expenditues for improvements

ble. --Evidence of oral collateral agreements should be excluded only when the fact finder is likely to be llsled.

by the grantees less depreciation allowable under federal

income tax regulations at the time of exercising the option.

(7a) (7b) Vendor and Purchaser--Option to Repurchase--Construction: Extrinsic Evidence. --In a nonjur declaratory relief action by a bankpt's wife and

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68 Cal. 2d 222, *; 436 P.2d 561, **; 65 Cal. Rptr. 545, ***; 1968 Cal. LEXIS 157
trstee in bankptcy to establish their right to enforce an
The case was tried without a jury. Over defendants'

option to repurchase a ranch that the bankpt and his
wife, as tenants in common, had conveyed to his sister
and brother-in-law, it was reversible error to exclude

objection the trial cour admitted extrinsic evidence that
by "the same consideration as being paid heretofore"

extrinsic evidence offered to show that the parties had agreed that the option was personal to the grantors so as
to keep the propert in the family, where the option

both the grantors and the grantees meant the sum of $
50,000 and by "depreciation value of any irnprovements"

they meant the depreciation value of improvements to be

clause in the deed of conveyance, silent on the question

of assignability, did not explicitly provide that it contained the complete agreement, and where, in light of the
grantors' inexperience in land transactions, the condition

computed by deducting from the total amount of any capital expenditues made by defendants grantees the
amount of depreciation allowable to them under United

States income tax regulations as of the time of the exercise of the option.
The cour also determed that the parol evidence rule precluded admission of extrinsic evidence offered by

of nonassignability might "natually" have been made the subject of a separate collateral agreement.

Against Assignment. --In the absence of a controlling

(8) Assignment--Rights Assignable--Stipulations

defendants to show that the parties wanted the propert
kept in the Masterson family and that the option was

statute the partes may provide that a contract right or duty is nontransferable.

therefore personal to the grantors and could not be exer-

cised by the trstee in bankptcy.
The cour entered judgment for plaintiffs, declaring

(9) Id.--Rights Assignable--Stipulations Against Assignment--Implied. --Even when there is no explicit agreement, written or oral, that contractual duties shall be personal, cours will effectuate a presumed intent to
that effect if the circumstances indicate that performnce by a substituted person would be different from that contracted for.

their right to exercise the option, specifying in some detail how it could be exercised, and reserving jurisdiction to supervise the manner of its exercise and to determne the amount that plaintiffs wil be required to pay defendants for their capital expenditues if plaintiffs decide to
exercise the option.

COUNSEL: Rawlins Coffman and Noel Watkins for Defendants and Appellants.

(1) Defendants appeaL. They contend that the option provision is too uncertain to be enforced and that extrsic evidence as to its meanig should not have been admtted. The trial cour properly refused to frstrate the
obviously declared intention of the grantors to reserve an option to repurchase by an overly meticulous insistence on completeness and (*225) clarity of written expression. (See California Lettuce Growers, Inc. v. Union

Glicksberg, Kushner & Goldberg, Lawrence Goldberg, Truce & Veal, Harlan Veal and Duard F. Geis for Plaintiffs and Respondents.

JUGES: In Banle Traynor, C. J. Peters, 1., Tobriner,
J., Mosk, J., and Sullivan, 1., concured. Burke, J., dissents. McComb, 1., concured.

Sugar Co. (1955) 45 Ca1.d 474,481 (289 P.2d 785, 49 A.L.R.2d 496); Rivers v. Beadle (1960) 183 Cal.App.2d 691, 695-697 (***547) (**563) (7 Cal.Rptr. 170). It properly admtted extrinsic evidence to explain the language of the deed (Nojjiger v. Holman (1964) 61

OPINION BY: TRAYNOR

Cal.2d 526, 528 (39 Ca1.Rptr. 384, 393 P.2d 696); Bar-

OPINION
(*224) (**562) (***546) Dallas Masterson and

ham v. Barham (1949) 33 Cal.2d 416,422-423 (202 P.2d
289); Union Oil Co. v. Union Sugar Co. (1948) 31 Cal.2d 300, 306 (188 P.2d 470); Schmidt v. Macco
230); see Farnsworth, "Meaning" in the Law of

his wife Rebecca owned a ranch as tenants in common. On February 25, 1958, they conveyed it to Medora and
Lu Sine by a grant deed "Reserving unto the Grantors

Constr. Co. (1953) 119 Cal.App.2d 717, 730 (260 P.2d Contracts

herein an option to purchase the above described propert on or before February 25, 1968" for the "same con-

(1967) 76 Yale LJ. 939, 959-965; Corbin, The Interpre-

tation of Words and the Parol Evidence Rule (1965) 50
Cornell L.Q. 161) to the end that the consideration for

sideration as being paid heretofore plus their depreciation

value of any improvements Grantees may add to the propert from and after two and a half years from this date." Medora is Dallas' sister and Lu's wife. Since the
conveyance Dallas has been adjudged bankpt. His trs-

the option would appear with suffcient certainty to permit specific enforcement (see McKeon v. Santa Claus of CaL., Inc. (1964) 230 Cal.App.2d 359,364 (41 Cal.Rptr.
43); Vurrow v. Timmsen (1963) 223 Cal.App.2d 283,

tee in bankptcy and Rebecca brought this declaratory
relief action to establish their right to enforce the option.

288 (35 Cal.Rptr. 668, 100 A.L.R.2d 544)). The trial
cour erred, however, in excluding the extrinsic evidence

that the option was personal to the grantors and therefore nonassignable.

294

Case 5:07-cv-04808-JF

Document 50-11

Filed 07/03/2008

Page 17 of 30
Page 3

68 CaL. 2d 222, *; 436 P.2d 561, **; 65 CaL. Rptr. 545, ***; 1968 CaL. LEXIS 157

(2) When the parties to a written contract have agreed to it as an "integration" -- a complete and final

dence was adrntted "to prove the existence of a separate
oral agreement as to any matter on which the document

embodiment of the term of an agreement -- parol evidence cannot be used to add to or vary its term. (Pollyanna Homes, Inc. v. Berney (1961) 56 Ca1.2d 676, 679680 (16 CaL.Rptr. 345, 365 P.2d 401); Hale v. Bohannon (1952) 38 CaL.2d 458, 465 (241 P.2d 4); see 3 Corbin,
Contracts (1960) § 573, p. 357; Rest., Contracts (1932)

is silent and which is not inconsistent with its term" -even though the instrment appeared to state a complete agreement. (E.g., American Industrial Sales Corp. v. Airscope, Inc. (1955) 44 CaL.2d 393, 397 (282 P.2d 504,

49 A.L.R.2d 1344); Stockburger v. Dolan (1939) 14
CaL.2d 313, 317 (94 P.2d 33,128