PERLUSS, P. J. —
Eliza Gilkyson, Tony Gilkyson and Nancy Gilkyson, the adult children and heirs of songwriter Terry Gilkyson, sued Disney Enterprises, Inc. and its music publishing subsidiary, Wonderland Music Company, Inc. (collectively Disney), alleging Disney had breached its contractual
Terry Gilkyson, a successful songwriter in the 1950's and 1960's and a member of the band The Easy Riders, wrote "The Bare Necessities" and several other songs for the popular animated film The Jungle Book (Walt Disney Productions, 1967), which was first released in 1967.
Pursuant to those contracts Disney paid Gilkyson over the years and, after his death in 1999, his heirs royalties for sheet music and for audio reproductions of Gilkyson's songs (vinyl records, compact discs (CDs) and digital downloads). However, Disney did not pay, and has never paid, Gilkyson or his heirs royalties for the use of his songs in any audiovisual medium, including digital video disc recordings (DVDs).
On November 15, 2013 the Gilkyson heirs sued Disney for breach of contract and several related claims alleging Disney had breached its contractual obligation to pay the Gilkyson heirs royalties in connection with the use
Disney demurred to the complaint. While insisting its contractual obligation to pay mechanical reproduction royalties excluded use of Gilkyson's songs in any audiovisual medium, for purposes of its demurrer it confined its arguments to claiming each cause of action was time-barred under the applicable statutes of limitations. In particular, emphasizing the allegation the DVDs had been released in 2007, Disney argued the Gilkyson heirs' claim for breach of written contract accrued no later than 2007, thus making the claim, filed in November 2013, untimely under the governing four-year statute of limitations. In addition, the release of VHS tapes had occurred decades prior to 2007. Accordingly, Disney argued any claim for failure to pay royalties accrued at the first breach of contract in the 1990's, leaving all claims time-barred.
The Gilkyson heirs opposed the demurrer, arguing their claims were timely in their entirety under the continuing violation doctrine or, at a minimum, timely as to the claims for royalties due within the four years prior to their filing of the lawsuit in November 2013 pursuant to the continuous accrual doctrine explained in Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185 [151 Cal.Rptr.3d 827, 292 P.3d 871] (Aryeh).
The trial court sustained Disney's demurrer, observing the claim for royalties began to accrue in 1991 when the VHS tapes of The Jungle Book were originally released and, at the latest, by December 31, 2007 when, by the Gilkyson heirs' own admission, the DVDs were released. Under either scenario, the court ruled, the Gilkyson heirs' claims were barred by the four-year statute of limitations for written contracts. The court granted the Gilkyson heirs leave to amend.
On April 30, 2014 the Gilkyson heirs filed a first amended complaint asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory relief. The amended complaint contained substantially similar allegations as the original complaint with a few exceptions. The amended complaint added the allegation that Disney had
The trial court sustained Disney's demurrer to the first amended complaint, this time without leave to amend, ruling the omission of allegations relating to the release of the film in VHS format was a sham pleading intended to avoid the limitations bar. In any event, the Gilkyson heirs' claims asserted in the first amended complaint accrued no later than 2007 with the first release of DVDs; and thus their claim for royalties, filed well after the expiration of the four-year statute of limitations applicable to written contracts, was time-barred. The court rejected the Gilkyson heirs' contention the continuous accrual doctrine rendered their claims timely for breaches within the four years preceding the filing of their complaint.
A demurrer tests the legal sufficiency of the factual allegations in a complaint. We independently review the superior court's ruling on a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action or discloses a complete defense. (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100 [171 Cal.Rptr.3d 189, 324 P.3d 50]; McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415 [106 Cal.Rptr.2d 271, 21 P.3d 1189].) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 20 [40 Cal.Rptr.3d 205, 129 P.3d 394]; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 [6 Cal.Rptr.3d 457, 79 P.3d 569].) We liberally construe the pleading with a view to substantial justice between the parties. (Code Civ. Proc., § 452;
Under the continuous accrual doctrine each breach of a recurring obligation is independently actionable. (Aryeh, supra, 55 Cal.4th at p. 1199 ["`[w]hen an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period'"]; see ibid. ["[b]ecause each new breach of such an obligation provides all the elements of a claim — wrongdoing, harm, and causation [citation] — each may be treated as an independently actionable wrong with its own time limit for recovery"]; Howard Jarvis, supra, 25 Cal.4th at p. 809 [same]; Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal.App.4th 1375, 1388 [11 Cal.Rptr.3d 412] (Armstrong) [continuous accrual applies to contract where performance is severed into intervals, such as installment contracts, leases with periodic rental payments and periodic pension payments]; Wells Fargo Bank v. Bank of America (1995) 32 Cal.App.4th 424, 439, fn. 7 [38 Cal.Rptr.2d 521] ["a new breach occurs each month the bank persists in its refusal to pay [monthly] rent at the gold clause rate"].) The effect of the doctrine is that "a suit for relief may be partially time-barred as to older events but timely as to those [acts of wrongdoing occurring] within the applicable limitations period." (Aryeh, at p. 1192; accord, Howard Jarvis, at p. 809.)
The Supreme Court most recently explained the proper use of the continuous accrual doctrine in Aryeh, supra, 55 Cal.4th 1185. There, the plaintiff had leased copy machines from Canon Business Solutions pursuant to a five-year lease entered in 2001. Under the terms of the lease the plaintiff was to pay a fixed monthly rent for each copier, subject to a maximum copy allowance. Copies in excess of the monthly allowance required payment of an additional per copy charge. After entering the lease, the plaintiff noticed discrepancies between the number of copies it had made and the meter readings taken by Canon. Ultimately the plaintiff concluded Canon had counted against the plaintiff's copy allowance copies made during Canon's periodic service visits, causing the plaintiff to exceed the allowance and incur additional charges. In January 2008 the plaintiff sued Canon alleging a single claim for an unlawful or unfair business practice in violation of the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.). Canon demurred, arguing the claim had accrued in 2002 at the first violation of the UCL as alleged in the complaint, making the complaint, filed six years later, time-barred. The trial court agreed and sustained the demurrer without leave to amend. (Aryeh, at pp. 1188-1189.)
Citing Dillon v. Board of Pension Commrs. (1941) 18 Cal.2d 427 [116 P.2d 37] (Dillon), Disney argues the continuous accrual doctrine does not apply in
In Dillon the widow of a Los Angeles police officer who had committed suicide in 1934 applied in 1938 to the Board of Pension Commissioners to recover a pension. At the time of her application, the city charter required such claims to be filed within six months of accrual; and, if the Board denied the claim, the applicant had three years from the date the claim accrued to file a petition for administrative mandate to reverse that decision. The Supreme Court held the claim accrued when the officer died, and the mandate action, filed more than three years after his death, was time-barred in its entirety. Although the court recognized the right to receive periodic payments under a pension was a continuing one, it held the plaintiff could not claim entitlement to periodic pension payments until she first established her right to the pension with the board or, if the board had denied her claim, with a timely writ of mandate that overturned its decision. Having failed to bring a timely petition for writ of mandate challenging the board's finding she was not entitled to a pension, she could not claim a "`continuing right'" to a pension. (Dillon, supra, 18 Cal.2d at pp. 430-431, 434, italics omitted.)
The Supreme Court later explained Dillon's holding was limited to the unique claims procedure available in pension cases (see Howard Jarvis, supra, 25 Cal.4th at p. 822) and rejected the contention, similar to the one Disney asserts here, that a party must always first establish a continuing right before it may utilize the continuous accrual doctrine. In Howard Jarvis the plaintiffs, three taxpayer advocacy groups and three individual taxpayers, challenged a city tax ordinance, arguing the ordinance unlawfully permitted collection of taxes without voter approval in violation of state law. The City of La Habra demurred, asserting the claim had accrued within three years of the date the ordinance was enacted and the plaintiffs' claim, filed after that three-year deadline, was time-barred. The plaintiffs countered the right to a refund of taxes paid was a continuing one, triggering a new limitations period each time a tax was collected. The Supreme Court agreed the plaintiffs' claim was timely under the continuous accrual doctrine and distinguished Dillon: "In Dillon ... we held a mandamus action to compel payment of a widow's pension was barred because it was not brought within three years of her husband's death, even though, as we acknowledged, the right to receive a pension is a continuing one. Our holding depended, however, on the premise that the plaintiff could not establish the right to a pension in an action to
Armstrong, supra, 116 Cal.App.4th 1375, a case involving periodic royalty payments under an oil and gas lease operating agreement, is particularly on point and reinforces our application of the continuous accrual doctrine in these circumstances. Under the operating agreement in Armstrong an accounting procedure was to be used to determine the amount of monthly oil and gas royalties due the plaintiff based, in part, on the total quantity of gas produced during each period. The defendant argued the claim for breach of contract was time-barred because it was not brought within four years of the initial breach in March 1997. The plaintiff argued the contractual right to royalties was divisible, making each breach of the royalty contract separately actionable and any claim within the four years prior to filing the lawsuit, timely. After examining the language of the contract as to the nature of the payments due, the court agreed the contract was divisible and a portion of the plaintiff's claim timely under the continuous accrual doctrine. (Id. at p. 1389.) In reaching this conclusion, the Court of Appeal, like the Supreme Court in Howard Jarvis, supra, 25 Cal.4th at page 822, rejected the defendant's argument the claim was barred under the analysis in Dillon, supra, 18 Cal.2d 427: "Dillon is distinguishable from the present case because Armstrong's contractual rights were not conditioned upon completing a claims procedure. Instead, Armstrong's right to receive a net revenue interest was established by the [contract]." (Armstrong, at p. 1392.)
Similarly here, the Gilkyson heirs' contract cause of action asserts the breach of an established contractual right to royalties, albeit one grounded in contract language that may ultimately require extrinsic evidence to determine its scope, not an expectation or inchoate right subject to confirmation in an uncompleted claims process. Under Aryeh, Howard Jarvis and Armstrong the Gilkyson heirs are entitled by virtue of the continuous accrual doctrine to seek recovery of royalties for use of their father's songs in home entertainment or audiovisual media for a period commencing four years before the filing of their complaint.
We need not belabor our critique of Mappa Music, decided well before Aryeh, albeit a few months after the Supreme Court's decision in Howard Jarvis, which, as discussed, the Mappa Music court failed to cite, let alone address. Under California law the continuing right to receive royalties for Disney's disposition of mechanical reproduction rights created a divisible contract, with each breach of that right separately actionable and subject to its own limitations period. (See Aryeh, supra, 55 Cal.4th at pp. 1201-1202; Howard Jarvis, supra, 25 Cal.4th at p. 822.) To the extent the Mappa Music court ruled differently, we disagree with it (Mappa Music, supra, 2001 U.S.Dist. Lexis 24554). (See Aryeh, at p. 1202; cf. Peterson v. Highland Music, Inc. (9th Cir. 1998) 140 F.3d 1313, 1321 [statute of limitations did not bar rescission claim where contract created a continuing obligation, severable each time, to pay royalties: "[t]here is no fixed amount to be paid out over time under the Kingsmen's contract, but rather a continuing obligation to pay a portion of the profits and royalties on `Louie, Louie' as the recording gets used over time"].)
With respect to the cause of action for breach of the implied covenant of good faith and fair dealing, however, the trial court sustained Disney's demurrer not only on the ground the claim was duplicative of the breach of contract claim and barred by the statute of limitations, but also on the ground its order granting leave to amend after Disney's demurrer to the original complaint was sustained did not permit the Gilkyson heirs to add a new cause of action. (See Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023 [111 Cal.Rptr.3d 20] ["Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court's order. [Citation.] The plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend."].) Other than asserting without elaboration that "it is reasonable and in context to allow a cause of action for breach of the implied covenant of good faith and fair dealing," the Gilkyson heirs provide no argument on appeal to challenge that alternate justification for sustaining the demurrer to this cause of action. (Medrazo v. Honda of North Hollywood (2012) 205 Cal.App.4th 1, 14 [140 Cal.Rptr.3d 20]; see Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 [79 Cal.Rptr.2d 273] ["[w]hen an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived"].) Nonetheless, in light of our revival of the breach of contract and declaratory relief claims, the trial court may well decide to grant such leave if it is ultimately requested. That determination, however, is for the trial court in the first instance.
The judgment of dismissal is reversed, and the matter remanded to the trial court with directions to vacate its order sustaining Disney's demurrer to the first amended complaint without leave to amend and to enter an new order overruling the demurrer to the breach of contract and the declaratory relief
Segal, J., and Blumenfeld, J.,
The continuous accrual doctrine, in contrast, recognizes each breach as separately actionable, making timely only those claims for wrongdoing occurring during the limitations period. (See Aryeh, supra, 55 Cal.4th at p. 1199 ["unlike the continuing violation doctrine, which renders an entire course of conduct actionable, the theory of continuous accrual supports recovery only for damages arising from those breaches falling within the limitations period"]; Howard Jarvis, supra, 25 Cal.4th at pp. 818-822 [same].)
The Gilkyson heirs have abandoned their initial argument that their contract claim is actionable in its entirety under the continuing violation doctrine. They now invoke exclusively the continuous accrual doctrine to argue a portion of their claim is timely.
