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Golden West Nuts, Inc v. Willadsen Orchards

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (San Joaquin)


June 30, 2011

GOLDEN WEST NUTS, INC., PLAINTIFF AND APPELLANT,
v.
WILLADSEN ORCHARDS, INC., ET AL., DEFENDANTS AND RESPONDENTS.

(Super. Ct. No. 39200900207871CUCOSTK)

The opinion of the court was delivered by: Hoch , J.

Golden West Nuts v. Willadsen Orchards

CA3

NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

This appeal arises from a declaratory relief action in which appellant Golden West Nuts, Inc. (Golden West) sought judicial confirmation that it had paid the correct contract price for almonds grown by respondents Willadsen Orchards, Inc., and related entities (collectively, Willadsen).*fn1 The trial court sustained Willadsen's demurrer without leave to amend because there was no ongoing relationship between the parties that warranted declaratory relief.

On appeal, Golden West contends the trial court erred in dismissing a case that involves an actual controversy between the parties. Golden West further argues that the trial court's award of attorney fees to Willadsen as prevailing party must be reversed.

We affirm the judgment of dismissal and the order awarding attorney fees.

FACTUAL AND PROCEDURAL HISTORY

Original Complaint

In April 2009, Golden West filed a four-page complaint seeking declaratory relief to confirm it had properly paid Willadsen under terms of "various written contracts" for sale of almond crops. Golden West also sought damages in the amount of any overpayments made to Willadsen. The complaint did not allege any ongoing relationship between the parties. Willadsen demurred. Rather than oppose the demurrer, Golden West amended its complaint in September 2009.

Amended Complaint

The amended complaint alleged that in September 1999, Golden West and Willadsen had "entered into a written pool contract no. L-1206 for the purchase by [Golden West] and sale by [Willadsen] of its entire crop of almonds to be produced on its 356-acre almond orchard which contract was entered into, to be performed in, and under which any obligation or liability arose in, San Joaquin County, California ('WOI Pool Contract'). The WOI Pool Contract was an evergreen contract in that it was originally for three crop years but rolled over for additional three-year periods unless terminated by one of the parties thereto at the end of the then current three-year period." Also in September 1999, the parties entered into another evergreen contract (contract no. 9917) with an initial three-year term for the sale of almond crops. Although the amended complaint emphasized that the parties had entered into evergreen contracts, it failed to allege any ongoing contractual relationship between the parties.

The amended complaint again sought declaratory relief to confirm that Golden West had properly paid Willadsen under the terms of the contracts. However, the amended complaint omitted the request for damages for past overpayments.

Demurrer and Request for Judicial Notice

Willadsen demurred on grounds that declaratory relief was not available because the case related only to past performance without any continuing relationship between the parties. In support of its demurrer, Willadsen asked the court to judicially notice that Golden West's original complaint failed to allege any ongoing relationship between the parties.

Ruling

The trial court granted Willadsen's request for judicial notice and sustained the demurrer to the first amended complaint without leave to amend. In so ruling, the court explained:

"Simply, the issues raised in [Golden West's] declaratory relief action are identical to those that would be raised by [Willadsen] in an action for breach of contract. In practical effect, [Golden West] looks backwards in time and asks the trial court to confirm that its interpretation of the subject contract -- an interpretation upon which it has already acted -- is not a breach of contract. There is no ongoing relationship between the parties; there is no controversy between the parties aside from the discrete controversy alleged in the First Amended Complaint.

"In the situation presented, a declaratory relief remedy does nothing to prevent repudiation of obligations, invasion of rights, or commission of wrongs. [Golden West's] First Amended Complaint, if allowed to stand, would prevent nothing; [Golden West] has not, and apparently cannot, allege any prospective repudiation of obligation, invasion of right, or commission of wrong that might warrant declaratory relief."

Accordingly, the court entered a judgment of dismissal.

Order Granting Attorney Fees

In April 2010, the trial court awarded $12,026.24 in attorney fees to Willadsen. Golden West timely filed notices of appeal from the judgment of dismissal and the order granting attorney fees.

DISCUSSION

I

Standard of Review

When presented with a challenge to a trial court's order sustaining a demurrer, we ordinarily engage in de novo review. (Fogarty v. City of Chico (2007) 148 Cal.App.4th 537, 542 (Fogarty).) This means that we independently review whether the operative complaint states a cause of action. (Environmental Defense Project of Sierra County v. County of Sierra (2008) 158 Cal.App.4th 877, 885 (Environmental Defense).) However, we review the trial court's determination as to whether an actual controversy warrants declaratory relief for an abuse of discretion. We do so because Code of Civil Procedure section 1061 provides that a court may decline to exercise its power to grant declaratory relief whenever a declaration "is not necessary or proper . . . under all the circumstances."*fn2 (See also 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, 367 (Osseous).)

Although a court ruling on a demurrer must assume the truth of properly pled allegations in a complaint, "an exception exists where a party files an amended complaint and seeks to avoid the defects of a prior complaint either by omitting the facts that rendered the complaint defective or by pleading facts inconsistent with the allegations of prior pleadings. (See, e.g., Hills Trans. Co. v. Southwest Forest Industries, Inc. (1968) 266 Cal.App.2d 702, 712-713; Kenworthy v. Brown (1967) 248 Cal.App.2d 298, 302.) In these circumstances, the policy against sham pleading permits the court to take judicial notice of the prior pleadings and requires that the pleader explain the inconsistency. If he fails to do so the court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint. (Hills Trans. Co. v. Southwest Forest Industries, Inc., supra, 266 Cal.App.2d at pp. 709-711; Kenworthy v. Brown, supra, 248 Cal.App.2d at p. 302.)" (Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 383-384.)

II

Claimed Error in the Trial Court's Sustaining of the Demurrer without Leave to Amend

Golden West argues that the existence of an actual controversy between the parties precluded the trial court from dismissing the declaratory relief action. We disagree.

A party to a contract may obtain a judicial determination of that party's rights and duties vis-a-vis other parties to the contract by filing an action for declaratory relief. (§ 1060.)*fn3 Section 1060 expressly provides that there does not need to be a breach of a contract before a party may seek declaratory relief. (Meyer, supra, 45 Cal.4th at p. 647.) Instead, an actual controversy suffices. (Ibid.) Thus, section 1060 provides a mechanism by which parties may ensure that their future conduct conforms to the terms of their agreement. (Meyer, supra, at pp. 647-648.)

When a party is alleged to have breached the contract prior to the filing of an action that includes a request for declaratory relief, 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 877, 885.) However, the mere fact that a breach is alleged to have been committed does not, by itself, allow a court to deny declaratory relief. (Ermolieff v. R.K.O. Pictures, Inc. (1942) 19 Cal.2d 543, 547-548 (Ermolieff).)

If a complaint is legally sufficient and sets forth facts showing that declaratory relief is "entirely appropriate," a trial court abuses its discretion if it fails to allow the declaratory relief action to proceed. (Columbia Pictures v. DeToth (1945) 26 Cal.2d 753, 762 (DeToth); California Union Ins. Co. v. Trinity River Land Co. (1980) 105 Cal.App.3d 104, 110, 112 (California Union).) Thus, declaratory relief is ordinarily available when the parties have an ongoing relationship, regardless of whether a breach of contract is alleged to have occurred. (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].)

More commonly, a trial court has discretion in deciding whether to dismiss a declaratory relief action. In Ermolieff, supra, 19 Cal.2d 543, the California Supreme Court explained that "under proper circumstances" a trial court has discretion to grant or deny declaratory relief depending on whether other remedies -- such as an action for breach of contract -- would "serve as well or better." (Id. at p. 549.) Ermolieff involved a continuing controversy over which party had film distribution rights in the Irish Republic. (Id. at p. 548) As the high court noted, the allegation of a past breach of the distribution agreement did not necessarily bar the trial court's grant of declaratory relief. (Ibid.)

Even though the addition of a breach of contract allegation is not fatal to a declaratory relief action, the lack of an ongoing relationship between the parties precludes declaratory relief. "If there is a controversy that calls for a declaration of rights, it is no objection that past wrongs are also to be redressed; but there is no basis for declaratory relief where only past wrongs are involved." (Osseous, supra, 191 Cal.App.4th at p. 366, quoting 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 869, p. 284, italics added.)

The Osseous court affirmed a dismissal of a declaratory relief action in a case in which the contract between the parties had expired and the action (an alleged violation of an exclusivity covenant under it) had already occurred. (Osseous, supra, 191 Cal.App.4th at pp. 361-362.) In affirming, the Osseous court noted that "[t]here is unanimity of authority to the effect that the declaratory procedure operates prospectively, and not merely for the redress of past wrongs. It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them." (Id. at p. 367, quoting Travers v. Louden (1967) 254 Cal.App.2d 926, 931 (Travers), italics added.) Thus, declaratory relief is unwarranted when "all relationship between the parties has ceased to exist and there is no conduct of the parties subject to regulation by the court." (Osseous, supra, at p. 367, quoting Travers, supra, at p. 929; see also Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393, 408 [affirming trial court's sustaining of a demurrer in a case in which only past events were at issue between parties without a continuing relationship].)

In this case, the trial court did not err by dismissing the declaratory relief action for lack of an ongoing relationship between the parties. As the trial court noted, the original complaint failed to allege any ongoing relationship between the parties or any way in which declaratory relief would guide the parties' future conduct. Although Golden West amended its complaint, it still failed to allege a continuing relationship with Willadsen. Golden West failed to explain the inconsistency between the allegation of evergreen contracts in the amended complaint and the original complaint's limited focus on past payments for almond crops. "A trial court has discretion to disregard such inconsistent allegations." (Morgan Phillips, Inc. v. JAMS/Endispute, L.L.C. (2006) 140 Cal.App.4th 795, 802, fn. 2.)

On appeal, Golden West does not assert that the trial court erred in failing to find a continuing relationship between the parties. Instead, Golden West emphasizes that an actual controversy existed between the parties regarding the proper price for the almonds called for by the contracts. In support, Golden West relies on a line of authority holding that a trial court abuses its discretion when dismissing a declaratory relief action. In particular, Golden West relies on California Union, supra, 105 Cal.App.3d 104, Caffroy v. Fremlin (1962) 198 Cal.App.2d 176 (Caffroy), and Foster v. Masters Pontiac Co. (1958) 158 Cal.App.2d 481 (Foster). Unlike this case, each of Golden West's cited cases involved an ongoing relationship between the parties.

California Union, supra, 105 Cal.App.3d at pages 110-112, involved an insurance contract under which the insurer had yet to perform. Although the insureds had already incurred losses allegedly covered by an insurance agreement between the parties, there was a present controversy in that the insurer appeared not yet to have paid or denied the claim. (Id. at pp. 110-111.) As pertinent to this case, California Union noted that "there is no basis for declaratory relief where only past wrongs are involved." (Id. at p. 110.)

An ongoing relationship between the parties was also present in Caffroy, supra, 198 Cal.App.2d at pages 179-180. Caffroy involved sellers claiming ongoing oil royalties from the buyers of their real property. (Ibid.) So too, Foster, supra, 158 Cal.App.2d 481, involved a continuing relationship between the parties in that case. In Foster, a car buyer attempted to rescind his contract after tendering six of the required 30 installment payments. (Id. at p. 485) Thus, the case involved an ongoing contract with most of the installments remaining to be paid. (Ibid.)

In contrast to California Union, Caffroy, and Foster, this case does not involve an ongoing relationship between the parties.

The gravamen of Golden West's operative complaint was that it had already made the final payments it believed to be owed to Willadsen. To this end, the amended complaint alleged an actual controversy related only to claims for payments made to Willadsen that were "not barred by the applicable statute of limitations." Golden West's emphasis on the existence of an actual controversy in this case ignores the distinction between an ongoing dispute and an ongoing contractual relationship between the parties. In the absence of an ongoing contractual relationship, the granting of declaratory relief in this case would have no effect in regulating future conduct between the parties. Accordingly, the trial court did not err in denying declaratory relief when a breach of contract action offered a more appropriate vehicle for addressing a dispute solely focused on past performance. (Osseous, supra, 191 Cal.App.4th at p. 366.)

Golden West does not allege that it can amend its complaint to state an ongoing relationship with Willadsen. Accordingly, the demurrer was properly sustained without leave to amend.

III

Attorney Fees

Golden West urges us to reverse the order granting fees to Willadsen on the sole ground that "[i]f the trial court's judgment of dismissal is reversed so must its order awarding attorney[] fees, as there will be no prevailing party." Our conclusion that the trial court did not abuse its discretion in entering a judgment of dismissal defeats Golden West's contention regarding the propriety of attorney fees awarded to Willadsen.

DISPOSITION

The judgment of dismissal and the order granting attorney fees to Willadsen Orchards, Inc., Willadsen Investments, Willadsen Orchards, Inc./Mahama, and Willadsen Orchards, Inc./Sears are affirmed. Respondents shall recover costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)

We concur: ROBIE, Acting P. J. BUTZ ,J.


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