IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (San Joaquin)
April 15, 2011
GOLDEN WEST NUTS, INC., PLAINTIFF AND APPELLANT,
R. C. MELINE ORCHARDS ET AL., DEFENDANTS AND RESPONDENTS.
(Super. Ct. No. 39200900211652CUBCSTK)
The opinion of the court was delivered by: Hoch , J.
Golden West Nuts v. R.C. Meline Orchards
NOT TO BE PUBLISHED
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Plaintiff Golden West Nuts, Inc. (Golden West), appeals from the judgment dismissing its amended complaint. Golden West had sought a declaratory judgment regarding its agricultural contracts with seven defendants. The trial court sustained the demurrers of the four remaining defendants*fn1 without leave to amend because it found the amended pleading alleged only past performance between parties with no ongoing relationship. (Code Civ. Proc., § 1060 [undesignated section references are to the Code of Civil Procedure]).
On appeal, Golden West contends its pleading has adequately established the elements of entitlement to declaratory relief. We affirm as to three defendants, but reverse as to Meline.
FACTUAL AND PROCEDURAL SUMMARY
We assume the truth of well-pled factual allegations of the pleading. (Fogarty v. City of Chico (2007) 148 Cal.App.4th 537, 540 (Fogarty).)
Golden West operates in San Joaquin County. It entered into written contracts to buy almonds from the defendants, who were Butte County growers. Three of the contracts (with Decker, Chico, and Dress) were executed in 2007 for that crop year only. The contract with Meline was an "evergreen" three-year agreement first executed in 1997, which automatically renewed in three-year increments at the end of each period unless either party terminated it. This contract was in effect for the 2007 crop year.
As the almonds ripened in the late summer or early fall of 2007, the defendant growers shipped batches to Golden West. In accordance with industry custom, Golden West paid for the almonds in installments as it sold them, a process that could last through the start of the following crop year.
The three single-year contracts provided that the payments for the almonds were to be "'established by [Golden West] after consideration of prevailing market conditions.'" Golden West made its payments to these three defendants in accordance with its interpretation of this provision, under which it took into account its processing costs and the market price it obtained for the almonds. The growers believed Golden West was obligated to match prices that "certain other processors" paid growers for their almonds. Golden West did not allege that it had any remaining payments due on these contracts. However, it contended it was in a continuing contractual relationship with the three defendants until there was a final determination of its financial obligation to them.
In the Meline contract, an addendum provided a guarantee that Golden West would pay "a final price equal to or better than the average base varietal price" that three specified processors paid "prior to November 30th of the year following delivery. Guarantee will be over the term of the contract and paid at the completion of each year." Golden West interpreted this obligation as determining its "final" price in light of the lodestar base varietal price, and it acted accordingly. Meline believed Golden West was required to determine its "base" price in light of the lodestar base varietal price. Golden West requested a declaration to resolve this actual controversy in order to determine "the full and proper price of the almonds" in its ongoing contractual relationship with Meline that "cannot end until this issue is finally resolved."
Golden West filed its initial complaint for declaratory relief in May 2009. In its original complaint, Golden West requested a declaration that it had paid the three single-year contracts in full. In ruling on the demurrers of three of the defendants with single-year contracts (Decker, Chico, and Dress)*fn2 , the trial court ruled that the allegations involved only past wrongs because the contracts were fully performed and Golden West claimed that it had paid the defendants in full. Therefore, declaratory relief was not necessary or proper under all the circumstances. The trial court sustained the demurrers with leave to amend.
Golden West filed its amended complaint in August 2009. Notably, it omitted the allegations of having paid the single-year contracts in full or a request for a declaration on that subject. All four defendants demurred.
The trial court sustained the demurrers without leave to amend, and explained that "there is no practical benefit to a resolution of the issues raised in the First Amended Complaint. The issues . . . are identical to those that would be raised . . . in an action for breach of contract. In practical effect, Plaintiff looks backwards in time and asks the trial court to confirm that its interpretation of the subject contract--an interpretation on which it has already acted--was not a breach of contract. There is no ongoing relationship between the parties. . . . [¶] In the situation presented, a [declaration] does nothing to prevent repudiation of obligations, invasion of rights, or commission of wrongs."
A party to a contract may obtain a determination of that party's rights and duties vis-a-vis other parties to the contract "in cases of actual controversy" through "an original action . . . in the superior court for a declaration." (§ 1060)
On appeal, we ordinarily review a trial court's ruling on a demurrer de novo. (Fogarty, supra, 148 Cal.App.4th at p. 542.) However, although we exercise this independent review with respect to determining whether the pleading states a cause of action under section 1060 (Environmental Defense Project of Sierra County v. County of Sierra (2008) 158 Cal.App.4th 877, 885 (Environmental Defense)), we review the trial court's determination as to whether such actual controversy warrants declaratory relief for an abuse of discretion (§ 1061 [court may decline to exercise its power under section 1060 whenever a declaration "is not necessary or proper . . . under all the circumstances"]; Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 647 (Meyer); Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners, LLC (2010) 191 Cal.App.4th 357, 364 (Osseous); Environmental Defense, supra, 158 Cal.App.4th at p. 885).
The statute explicitly provides that there does not need to be a breach of a contract before seeking relief, only an actual controversy (Meyer, supra, 45 Cal.4th at p. 647), in which case the usual question is whether the pleading states facts that are sufficiently "ripe" for adjudication, rather than addressing hypothetical concerns. This furthers the purpose of a declaratory judgment, which has the practical goal of avoiding litigation; it is intended to allow parties to conform their future conduct to the law, thereby resolving an uncertainty or quieting a disputed legal relationship. (Id. at pp. 647-648; Osseous, supra, 191 Cal.App.4th at pp. 364-365; Stonehouse Homes v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 540-541; Wilson v. Transit Authority (1962) 199 Cal.App.2d 716, 724-725.)
Where there has been a breach antedating the declaratory relief action, the focus shifts. A controversy can "spoil" after it has reached its peak of ripeness, leaving a declaration without practical effect on the conduct of any party. (Osseous, supra, 191 Cal.App.4th at p. 366; County of San Diego v. State of California (2008) 164 Cal.App.4th 580, 606 [improper to issue declaration on amount of cost of state mandate no longer in dispute]; see Environmental Defense, supra, 158 Cal.App.4th at p. 885.) However, the mere fact that a breach has already taken place is not sufficient of itself to deny declaratory relief, as this is cumulative to any other remedy. (Ermolieff v. R.K.O. Pictures, Inc. (1942) 19 Cal.2d 543, 547-548 (Ermolieff).) Central to the present appeal is the breadth of a trial court's discretion where there is an actual controversy over a past breach. Where a complaint is legally sufficient and sets forth facts showing that declaratory relief is "entirely appropriate," a trial court abuses its discretion if it does anything other than allow the declaratory relief action to proceed. (Columbia Pictures Corp. v. DeToth (1945) 26 Cal.2d 753, 762 (DeToth), cited in Meyer, supra, 45 Cal.4th at p. 647; California Union Ins. Co. v. Trinity River Land Co. (1980) 105 Cal.App.3d 104, 110, 112 (California Union), also citing DeToth.) Generally speaking, declaratory relief is entirely appropriate where the parties have an ongoing relationship regardless of the breach. (DeToth, supra, 26 Cal.2d at pp. 760-762 [director owed studio obligation of continuing performance]; California Union, supra, 105 Cal.App.3d at p. 107 [parties to insurance contract]; Warren v. Kaiser Foundation Health Plan, Inc. (1975) 47 Cal.App.3d 678, 683-684 (Warren) [parties to health plan]; see Osseous, supra, 191 Cal.App.4th at pp. 369-371 [citing DeToth, California Union, and Warren as examples of cases with continuing relationships].)
At the other extreme, Travers v. Louden (1967) 254 Cal.App.2d 926 (Travers) suggests in dictum that a trial court would abuse its discretion if it does anything other than dismiss the declaratory relief action where only a past wrong exists without an ongoing relationship between the parties that a declaration could affect, because in that context declaratory relief is never necessary nor proper. (Id. at pp. 929, 931-932 [rejected buyer of realty sought unspecified remedy for contract breach from seller and successful buyer (who no longer owned property)]; cf. Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393, 408 [finding trial court properly sustained demurrer where only past events at issue between parties without ongoing relationship, but did not discuss whether it would have been abuse of discretion to rule otherwise].)
More commonly, a trial court has discretion either to dismiss or not dismiss a declaratory relief action as neither "necessary" nor "proper." Ermolieff noted a continuing controversy over which a party had film distribution rights in the Irish Republic, so a past breach of this provision did not bar the trial court's grant of declaratory relief; at the same time, Ermolieff added the caveat that "under proper circumstances" a trial court could properly exercise its discretion to deny relief if other remedies would "serve as well or better." (Ermolieff, supra, 19 Cal.2d at p. 549.) On this basis, Holden v. Arnebergh (1968) 265 Cal.App.2d 87, 91-92, affirmed the denial of declaratory relief to booksellers seeking to establish the nonobscene nature of their wares, as they had expeditious alternative remedies. (See also Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal.2d 719, 731-732; Osseous, supra, 191 Cal.App.4th at pp. 368-369 [citing other examples of denying relief where another remedy preferable].)
Golden West seeks to bring itself within the category of cases involving an actual controversy where it is an abuse of discretion to dismiss the declaratory relief action because the circumstances demonstrate that it is entirely appropriate. (Golden West does not suggest that the trial court abused its discretion if it could rule either way.) Golden West places particular reliance on California Union, Caffroy v. Fremlin (1961) 198 Cal.App.2d 176 (Caffroy), and Foster v. Masters Pontiac Co. (1958) 158 Cal.App.2d 481 (Foster). Golden West also contends the trial court erred in finding that there could not be an actual controversy without a future breach.
Fatal to Golden West's efforts to invoke this line of cases is the absence of a continuing relationship between itself and the three defendants with one-year 2007 contracts. Golden West alleges an actual controversy exits, but an ongoing dispute does not mean that there is an ongoing contractual relationship between Golden West and these three defendants. Golden West cannot establish a continuing relationship by means of only a conclusory allegation to that effect. The defendants have fully performed their obligations under the contracts, and Golden West has made whatever payments it is going to make. Although Golden West has attempted to artfully claim that the contracts involve installment payments as the crop is sold, it does not allege that it still owes an installment payment on unsold almonds from the 2007 crop. California Union involved an ongoing relationship on a contract of insurance under which the insurer had yet to perform.*fn3 Caffroy involved sellers claiming ongoing oil royalties from the buyers of their real property. (Caffroy, supra, 198 Cal.App.2d at pp. 179-180.) We note Caffroy expressly involved the rule against perpetuities and the statute of limitations (id. at pp. 181-183, 184-185) and only in passing noted that the plaintiff had stated a cause of action for declaratory relief without any discussion of the need for an ongoing relationship (id. at pp. 183-184). It therefore is not authority on that point. (Randy J., supra, 22 Cal.App.4th at pp. 1504-1504 & fn. 7.) As for Foster, the plaintiff attempted to rescind his contract to buy a car after six of 30 installment payments. (Foster, supra, 158 Cal.App.2d at p. 485.) Although Golden West reads Foster as involving a dispute only over the legal effect of past actions, one party (the seller) was asserting the existence of an ongoing contract under which the plaintiff owed performance. Moreover, though Foster found the plaintiff adequately alleged entitlement to declaratory relief, Foster did not give any consideration to the need for an ongoing relationship where past events are the basis for the controversy (Foster, supra, 158 Cal.App.2d at p. 488-489.) As with Caffroy, Foster is not authority on the point.
We also note the recent Osseous case, supra, 191 Cal.App.4th 357, which declined to follow the Travers dictum regarding a lack of discretion to allow a declaratory relief action where a pleading involves past events without an ongoing relationship that could be addressed adequately in an ordinary action for breach of contract. (Travers, supra, 254 Cal.App.2d 926.) It concluded, however, that the trial court did not abuse its discretion to dismiss the declaratory relief action as neither necessary nor proper where the contract between the parties had expired and the action (an alleged violation of an exclusivity covenant under it) was already accomplished. It acknowledged a declaration regarding these completed events of the exact amount due for a completed breach of contract might affect the breaching party's future behavior if the court found an ongoing duty to pay commission under the expired contract for revenues from the contested side deal, but it was not an abuse of discretion to conclude otherwise. (Osseous, supra, 191 Cal.App.4th at pp. 375-377.)
Therefore, as to Decker, Chico, and Dress, the trial court did not abuse its discretion in dismissing the declaratory relief action. We recognize that the trial court framed its ruling in terms of the absence of a present controversy over past facts (which technically is not correct) instead of framing the issue as an exercise of its discretion under section 1061. However, in sustaining the demurrer to the original complaint, the trial court previously cited its discretion under section 1061 to dismiss the declaratory relief action as not necessary or proper. Our review is not limited by the trial court's reasoning. We review the result. Here, it would be an idle act to reverse for the trial court's misstatement regarding the lack of a present controversy and require the addition of language regarding its exercise of discretion where the same result will be reached.*fn4 (9 Witkin, Cal. Procedure (5th ed. 2008), Appeal, § 346, p. 397.)
As to defendant Meline, we reach a different result. It is true, as the collective respondents' brief asserts, that the dispute with Meline involved the 2007 almond crop, payment for which was due by the end of the following year. However, Golden West had alleged facts that the "evergreen" contract with Meline would continue in three-year increments until terminated by one of the parties to the contract, and that its ongoing contractual relationship cannot end until this dispute is resolved. Nothing in the amended complaint indicates either party has taken any action to terminate this contract, or that the language at issue is not included any longer. Together, Golden West's allegations bring Meline within the DeToth holding requiring the declaratory relief action to proceed. Unlike the other three defendants, the trial court had never previously found that relief was otherwise not necessary or proper as to Meline (which was not party to the previous ruling). As to Meline, the present demurrer ruling did not consider its discretion under section 1061 or the ongoing existence of the contract language at issue. As a result, we cannot affirm the order sustaining the demurrer as to Meline and must therefore reverse the judgment of dismissal.*fn5
The judgment is affirmed as to defendants Decker Orchards, Inc., M&T Chico Ranch, and Craig W. Dress Family, L.P. The judgment is reversed as to defendant R.C. Meline Orchards, Inc.; it is remanded with directions to enter a new order overruling defendant Meline's demurrer. Defendants Decker, Chico, and Dress shall recover costs of appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)
We concur: HULL , Acting P. J. ROBIE , J.