Kopitar v. Superior Court

Filed 4/2/07 Kopitar v. Superior Court CA5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

ORIGINAL PROCEEDING in mandate. Paul A. Vortmann, Judge. Petition granted.

Law Office of Ken M. Fitzgerald and Ken M. Fitzgerald for Petitioners.

No appearance for Respondent.

Morgenstein & Jubelirer, Schiff Hardin, Rocky N. Unruh and Sarah D. Youngblood for Real Party in Interest.

In this writ proceeding, petitioners, Wireless Eye, Inc., Bruce Kopitar and US Tower Corporation, challenge the trial courts grant of summary adjudication in favor of real party in interest, Centex Homes (Centex), on Wireless Eyes cause of action for breach of an oral contract. Through this oral contract, Wireless Eye agreed to provide video security surveillance for Centex construction sites. The trial court held that the contract violated the statute of frauds because, by its terms, the contract could not be performed within one year.

Wireless Eye disputes the trial courts interpretation. According to Wireless Eye, the parties agreed that Wireless Eyes services could be terminated for cause if those services were ineffective in deterring and catching criminals. Wireless Eye argues that, because this terminating condition could have occurred within one year, the oral contract falls outside the statute of frauds.

As discussed below, the alleged terminating condition, if established, would take the oral contract outside the statute of frauds. Thus, there exists a triable issue of material fact, i.e., whether this terminating condition was part of the oral contract. Accordingly, the trial court will be directed to vacate its order granting summary adjudication and enter a new order denying the motion.

BACKGROUND

Centex is a residential developer and home builder. Wireless Eye provides security surveillance services at construction sites through the use of wireless video cameras.

In June 2004, Centex, through area construction manager Brent Julian, and Wireless Eye, through its president Bruce Kopitar, entered into an oral contract for Wireless Eye to provide video surveillance for Centex construction sites. Under this contract, Wireless Eye was to monitor each of the construction sites that Julian was responsible for at the rate of $2,300 per month. Wireless Eye originally quoted a price of $3,600 per month but reduced that price in exchange for Centex agreeing to use the Wireless Eye security surveillance services for the duration of the build-out on each subdivision. The parties understood that the build-out would take several years and could not be completed within one year from the date the oral contract was made. However, according to Kopitar, he and Julian agreed that Wireless Eyes services could be terminated for cause if its services were ineffective in deterring and catching criminals.

In reliance on Julians representations, Wireless Eye purchased the component parts required for performance. Wireless Eye installed cameras and began providing its services at two Centex construction sites. At many other sites, Wireless Eye placed the concrete bases needed for the camera systems. Julian reported that the Wireless Eye system was working effectively.

In October 2004, Centex terminated Wireless Eyes services. Centex sent a letter to Wireless Eye instructing it to remove the security systems from the construction sites. The reason given by Centex was that they had not been able to come to any agreement with Wireless Eye as to an appropriate and fair cost structure. To date, Wireless Eye has not received any compensation from Centex.

Wireless Eye filed the underlying complaint against Centex alleging breach of an oral contract. The complaint was thereafter amended to also state a cause of action for promissory estoppel.

Centex moved for summary adjudication on the breach of oral contract cause of action on the ground that the contract was invalid under the statute of frauds. The trial court granted Centexs motion. The court found that the contract had a definite term for performance, i.e., either five years or the duration of the build-out of all of Centexs construction projects, whichever came first, and could not have been completed within one year. The court further found that the termination provision did not create a triable issue of material fact with respect to the possibility of performance within one year as in every contract there is an inherent right of termination if the other party does not receive the consideration for which it bargained. Thus, the court concluded that Centex had established a complete defense to Wireless Eyes cause of action for breach of an oral contract.

DISCUSSION

1. Standard of review.

A defendant who moves for summary judgment or summary adjudication under Code of Civil Procedure section 437c, must either negate a necessary element of the plaintiffs cause of action or establish a complete defense to that cause of action. The moving party must demonstrate that a material question of fact requiring examination by the trial court does not exist under any possible hypothesis within the reasonable purview of the allegations of the complaint. Once the moving defendant has satisfied this obligation, the burden shifts to the plaintiff to produce evidence creating a triable issue of material fact. (Code Civ. Proc.,  437c, subd. (o)(2); Brantley v.Pisaro (1996) 42 Cal.App.4th 1591, 1594.)

In evaluating the ruling under Code of Civil Procedure section 437c, the appellate court must assume the role of the trial court and reassess the merits of the motion. (Brantley v.Pisaro, supra, 42 Cal.App.4th at p. 1601.) In carrying out this function, the court applies the same three-step analysis required of the trial court. The appellate court first identifies the issues framed by the pleadings since it is these allegations to which the motion must respond. Second, the court determines whether the moving partys showing has satisfied its burden of proof and justifies a judgment in the movants favor. When a summary judgment motion prima facie justifies a judgment, the third step is to determine whether the opposition demonstrates the existence of a triable, material fact. (Id. at p. 1602.)

2. The right to terminate the oral contract takes it outside the statute of frauds.

Civil Code section 1624, subdivision (a)(1), invalidates an oral contract that by its terms is not to be performed within a year from the making thereof. This portion of the statute of frauds applies only to those contracts that, by their terms, cannot possibly be performed within one year. (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 671.) Thus, if a condition terminating an oral contract may occur within one year of its making, then the contract is performable within a year and does not fall within the statute of frauds. (Id. at p. 673.) In other words, a contract, otherwise within Civil Code section 1624, subdivision (a)(1), may be taken out of its operation by the fact that a party may rightfully terminate the contract within a year. (Plumlee v. Poag (1984) 150 Cal.App.3d 541, 550.) This is true even though performance of the contract may extend for longer than one year if the contingency by which performance may be terminated does not occur. (Foley v. Interactive Data Corp., supra, 47 Cal.3d at p. 673.) The statute of frauds is a defense only and is generally disfavored. (In re Estate of Housley (1997) 56 Cal.App.4th 342, 351.)

Here, the build-out of Centexs projects could not possibly have been completed within one year. Thus, if the contract had only included the length of time that Wireless Eye would provide its security services, i.e., the duration of the build-out, and the price for those services, the contract would have been invalid as its terms would have expressly precluded performance within a year.

However, Wireless Eye asserts that the contract also included a terminating provision. In opposing the summary judgment motion, Kopitar declared that he and Julian agreed that Wireless Eyes services could be terminated for cause if its services were ineffective in deterring and catching criminals. Julians deposition testimony, given several months earlier, supports this assertion.^[1] This condition could have occurred, and thus performance could rightfully have been terminated, before the first year was out. Since the contract was performable within a year, it does not fall within the scope of the statute of frauds. (Foley v. Interactive Data Corp., supra, 47 Cal.3d at p. 673.)

The trial court acknowledged the rule set forth in Foley and the cases the Foley court relied on in formulating that rule, but found those cases distinguishable on the ground that the oral contracts were for an indefinite term. However, contrary to the trial courts interpretation, so long as a condition terminating the contract may occur within one year, it will not fall within the statute of frauds whether the contract is for a definite term or an indefinite term. (Abeyta v. Superior Court (1993) 17 Cal.App.4th 1037, 1044.) Thus, the fact that this contract had a definite term is irrelevant to the analysis.

The trial court further concluded that the alleged terminating provision [did] not create a triable issue of material fact as to the possibility of performance within one year, as in every contract there is an inherent right of termination if the other party does not receive the consideration for which it bargained. The consideration bargained for by Centex through Julian was for Wireless Eye to provide video surveillance at the construction sites with cameras recording for 24 hours a day and Wireless Eye monitoring the cameras at night and on the weekends. Thus, a failure of consideration would have occurred if Wireless Eye failed to provide the recording and monitoring services.

In contrast, the condition under which Centex could rightfully terminate performance was if Wireless Eyes services were ineffective in deterring and catching criminals. Such deterrence is clearly the goal of security monitoring. Nevertheless, Centex could have received all of the security services that Wireless Eye agreed to provide and still not have achieved its goal. Thus, even if Wireless Eye were fully performing its part of the bargain, Centex could have terminated the performance for cause before the first year was out. In this situation, the parties would merely have been carrying out the terms of the agreement and nothing more. (Cf. Plumlee v. Poag, supra, 150 Cal.App.3d at p. 551.) Termination under these circumstances would not have been a breach of contract.

Therefore, contrary to the trial courts conclusion, the alleged terminating provision is material. If Wireless Eye can establish that the contract could have been terminated for cause within the first year, it will fall outside the statute of frauds. Accordingly, there is a triable issue of material fact as to the existence and scope of this alleged condition.^[2]

DISPOSITION

Let a peremptory writ of mandate issue directing the trial court to vacate the portion of its order filed October 24, 2006, that granted Centexs motion for summary adjudication of Wireless Eyes first cause of action in its third amended complaint for breach of oral contract and to enter a new order denying Centexs motion. Costs on this original proceeding are awarded to petitioners.

_________________________

Levy, J.

WE CONCUR:

_______________________________

Wiseman, Acting P.J.

_______________________________

Hill, J.

Publication courtesy of California pro bono lawyer directory.

Analysis and review provided by Chula Vista Property line Lawyers.

^[1] In response to the question So you had the right to terminate a contract with a company at your own discretion? Julian responded Yes, for things such as leaks or security, yes. When asked So did you have a right to terminate Mr. Kopitars alleged contract with Centex at any time should you have chosen to? Julian answered Yes.

^[2] At oral argument, Centexs counsel emphasized that Wireless Eye did not allege the existence of the terminating provision in the complaint. Nevertheless, Centex does not contend that the summary adjudication ruling should be affirmed based on inadequacy of the pleadings. Rather, Centex questions allowing self-serving declarations in response to a summary judgment motion. However, the timing of Wireless Eyes allegation does not remove it as a triable issue of material fact. This circumstance may be weighed by the trier of fact in determining whether the terminating provision did in fact exist.