Unpublished Disposition, 875 F.2d 870 (9th Cir. 1982)

MEMORANDUM^* 

This diversity action arises out of a computer maintenance agreement entered into by BTI Computer Systems ("BTI") and Reynolds and Reynolds Company ("Reynolds") for the period 1980-1983 (the "Agreement"). Because the procedural history of the case is quite complicated, we set it forth below.

Reynolds initially filed a Rule 12(b) (6) motion to dismiss two of BTI's claims--an account stated claim and a pre-December 1, 1982 contract claim. The district court's order granting this motion is now challenged by BTI on appeal.

Reynolds then filed a motion for summary judgment on the balance of BTI's complaint on the ground that, due to an error in Schedule A of the Agreement, the complaint overstated the size of the underbilling that had occurred during the 1980-83 contract period. Reynolds cross-appeals, challenging the district court's denial of that motion.

The district court decided, however, to enter summary judgment sua sponte in favor of Reynolds on the balance of BTI's complaint on grounds not raised by Reynolds in its motion for summary judgment, to wit, Reynolds' affirmative defenses of waiver and estoppel. BTI appeals this sua sponte award of summary judgment to Reynolds.

Finally, BTI filed a motion for summary judgment on its complaint which was denied on the basis that Reynolds was entitled to summary judgment on its waiver and estoppel defenses. BTI appeals this order as well.

We reverse the 12(b) (6) dismissal of BTI's account stated claim and its pre-December 1, 1982 contract claim, as well as the sua sponte summary judgment in favor of Reynolds on Reynolds' affirmative defenses. At the same time, we affirm the district court's denial of the summary judgment motions brought by both parties on BTI's complaint.

* THE SUA SPONTE SUMMARY JUDGMENT

We first consider the sua sponte summary judgment in favor of Reynolds on the basis of Reynolds' affirmative defenses. At the outset, we reiterate that while the district court granted summary judgment to Reynolds on the two affirmative defenses of waiver and estoppel, Reynolds never actually moved for summary judgment on that basis. The only motion for summary judgment made by Reynolds was based on grounds entirely unrelated to either of these affirmative defenses. Because there was no motion by Reynolds before the court on the affirmative defenses, the district court in effect moved for summary judgment on behalf of Reynolds when it decided to grant summary judgment sua sponte in Reynolds' favor. Accordingly, the court should have reviewed the evidence in the light most favorable to BTI--the non-moving party with regard to this sua sponte motion.¹  The district court, however, erroneously treated Reynolds as the non-moving party throughout. When the evidence is viewed in the light most favorable to BTI, it becomes clear that genuine issues of material fact exist with respect to Reynolds' affirmative defenses of waiver and estoppel.

* Waiver

Although Bausman and Steinke declared that Nickerson and Weber told them during the negotiations for the 1983-88 agreement that Reynolds need not worry about any underbilling that had occurred during the time that the 1980-83 agreement was in effect (Excerpt of Record (E.R.) at S540, S589), whether BTI officials actually made such statements is in dispute. For example, Nickerson denied recalling making any such statement to Bausman or Steinke. E.R. at S261. Nickerson also denied informing Reynolds at any time during the negotiations that BTI would not later bill Reynolds for underpayments in connection with the 1980-83 contract. Id. Similarly, Weber testified that he never discussed the underbilling with Bausman and only mentioned it generally to Steinke. E.R. at 101. When this evidence is viewed in the light most favorable to BTI, it raises an issue of fact with respect to the credibility of Bausman and Steinke on this point. Thus, a dispute of fact exists as to whether BTI ever told Reynolds "not to worry about" the underbilling.

Moreover, even assuming that the trier of fact were to find that BTI made such a statement to Reynolds, an issue of fact would remain as to whether any such statement should be interpreted as an intentional waiver by BTI of its claim to the underbilling. See Ukiah v. Fones, 64 Cal. 2d 104, 107 (1966) (Waiver is the "intentional relinquishment of a known right after knowledge of the facts."). As BTI argues, a reasonable trier of fact could interpret any such "not to worry" statement made during negotiation of the 1983-88 agreement as meaning nothing more than that the underbilling would not affect the cost or effective starting date of the 1983-88 contract.

When the evidence is viewed in the light most favorable to BTI, a triable issue of fact also exists as to whether BTI implicitly waived the underbilling claim by its long delay in pursuing the matter with Reynolds. The delay is subject to varying interpretations, and it is the trier of fact who must determine whether it constituted an "intentional relinquishment of a known right" by BTI.

B

Estoppel

When we view the evidence in the light most favorable to BTI, we also see that triable issues of fact remain with respect to Reynolds' estoppel defense. For example, the Poulter report which the district court referred to as a "smoking gun" (E.R. at 97), when viewed in the light most favorable to BTI, indicates that BTI was unaware of the magnitude of the underbilling. In addition, BTI has cited deposition testimony from which a fair-minded trier of fact could find that Reynolds did not detrimentally rely on BTI's representations or actions with respect to the underbilling. See Steinke testimony, E.R. at 134-35; 138; 141.

In sum, we hold that the district court erred in granting summary judgment sua sponte to Reynolds on the basis of its affirmative defenses of waiver and estoppel. Accordingly, we reverse the grant of summary judgment to Reynolds. Because we hold that triable issues of fact remain with respect to both these defenses, we also affirm the district court's denial of BTI's motion for summary judgment on its complaint.

II

THE 12(b) (6) DISMISSAL

The district court dismissed BTI's account stated claim under Rule 12(b) (6) on the ground that BTI had not and could not allege that Reynolds had agreed to pay the bill tendered to it by BTI in 1986.

Unlike the district court, we believe that the facts as pleaded in BTI's First Amended Complaint may fairly be interpreted as alleging at least an implicit promise by Reynolds to pay the amount of the bill. BTI alleged that Steinke acknowledged that the bill presented was "accurate within a fraction of 1%" (First Amended Complaint, p 17), and that "the amounts in the account were correct and due" (id. at p 18), and that Reynolds "then proposed to BTI methods of payment." Id. We believe that these alleged facts, if found to be true, give rise to a permissible inference that Reynolds implicitly promised to pay the amount it acknowledged to be due.

Turning to the district court's Rule 12(b) (6) dismissal of BTI's pre-December 1, 1982 contract claim on statute of limitations grounds, we hold that the district court erred in interpreting the Agreement as a type of installment contract. We believe the court's reliance on Sec. 6 of the Agreement was misplaced. Section 6, which required Reynolds to make full payment each month for services rendered during the preceding month, should not be interpreted, as a matter of law, as converting the Agreement into an installment contract. We agree with BTI that a trier of fact could find, in light of the complex billing system, that the amount due each month could not be determined and would not become payable until after lengthy debit, credit and reconciliation procedures. In that event, absent repudiation of the contract by Reynolds or other material breach, BTI had the option of waiting until the end of the contract period before suing for damages, in which case, the statute of limitations would not begin to run until the end of the contract period.

III

THE DENIAL OF REYNOLDS' SUMMARY JUDGMENT MOTION

Finally, we consider the district court's denial of Reynolds' motion for summary judgment on BTI's complaint. The district court found that the ground for summary judgment advanced by Reynolds was, in fact, an attempt to challenge the accuracy of Schedule A to the Agreement. Interpreting the Agreement to require that such challenges be made within six months of the contract's commencement date, the court concluded that Reynolds was precluded from challenging the number of systems listed on Schedule A.

We affirm the district court's denial of Reynolds' motion for summary judgment because we share the district court's interpretation of the Agreement and also agree with the district court that Reynolds' summary judgment motion was based on a challenge to the accuracy of Schedule A. In so doing, we reject Reynolds' contention that the district court exceeded its jurisdiction in ruling that challenges to the accuracy of Schedule A had to be brought within a certain time period. The question whether Reynolds could contest the accuracy of Schedule A was brought into controversy by Reynolds' own summary judgment motion. The district court clearly had jurisdiction to decide that question as a basis for ruling on the merits of Reynolds' motion.

AFFIRMED in part, REVERSED in part, and REMANDED. Costs on appeal are awarded to BTI.