West Coast Construction Co. v. Oceano Sanitary District

Opinion

In February of 1969 plaintiff instituted an action against defendant (hereinafter referred to as “District”) and others in which damages —for breach of contract involving the construction of a sewer, system and by reason of certain tortious acts—were demanded; in connection therewith, an injunction was also sought to prevent the District from expending or disbursing any monies for the construction of such sewer system except as should be necessary to maintain it in its then condition. After a hearing on February 21, at which proof was presented, a preliminary injunction was granted. Almost 11 months later, on plaintiff’s application, the injunction was broadened in scope; specifically, the District was enjoined during the pendency of the action from expending monies from a specified sewer construction fund either for payments to any contractor other than plaintiff, attorney’s fees and other costs of litigation, or the employment of experts and expert witnesses. The District appeals from the order granting the foregoing restraints.

On July 1, 1967, a written contract was entered into between plaintiff

On March 28, 1968, allegedly on the basis of the above representations plaintiff entered into an agreement with the District entitled “Agreement of Release, Compromise and Settlement,” the breach of which is pleaded in plaintiff’s first cause of action. In its second cause of action, injunctive relief is asked upon the ground of the District’s alleged insolvency and its actions in employing other contractors, both resulting in plaintiff’s inability to recover the monies due it under the agreement in question. The instant action was commenced on February 10, 1969, some four days after plaintiff again discontinued work on the project which it had previously resumed upon execution of the settlement agreement; a temporary

On December 2, 1969, the plaintiff’s counsel was mailed a copy of a letter written by counsel for the District (Mr. Shipsey) to Judge O’Reilly wherein he stated that “the restraining order in effect does not restrict a payment of funds for litigation expense” although “it does prevent use of those funds for employment of any contractor other than West Coast Construction Co., Inc. . . .” Thereafter plaintiff sought to broaden the provisions of the existing injunction. To that end a temporary restraining order was obtained on December 8, returnable December 24 based on the declaration of its counsel (Mr. Weaver) that the District intended to divert approximately $20,000 from the FHA sewer grant fund to furnish the District with an engineering report in connection with the instant litigation, that the District was already indebted to plantiff in the sum of $103,146, exclusve of its claim for damages, and that the balance of such FHA fund was only $55,512.

After four appearances and four continuances of the hearing-on the return of the temporary restraining order, the matter was heard on January 15, 1970, resulting in a preliminary injunction the scope of which was broadened to enjoin the diversion of funds for any litigation expenses whatsoever. It is this order which is here challenged.

Although the District’s counsel (Mr. Shipsey) was present in court on all four occasions when the matter was continued, even though on the fourth occasion (January 5) plaintiff’s counsel was not present, on the following day (January 6), Mr. Shipsey filed a counterdeclaration in opposition to the injunction sought, and the District participated in the hearing held on January 15, it is now for the first time contended that the issuance of the injunction was in excess of the court’s jurisdiction because the order to show cause, dated December 8, was made returnable on December 24, 16 days later and, therefore, more than the 15 days prescribed in section 527, Code of Civil Procedure. Plaintiff,recognizes that

There is still another reason why the instant claim cannot be sustained. Basically, the injunction issued after the January 15 hearing simply modifies, by extending its scope, the restraints imposed by the earlier injunction issued several months earlier (February 24) the form of which was drafted by the District’s counsel. Citing Union Interchange, Inc. v. Savage, 52 Cal.2d 601 [ 342 P.2d 249 ], with respect to the power of the court to modify a preliminary injunction, the court in Brunzell Constr. Co. v. Harrah’s Club, 253 Cal.App.2d 764 [ 62 Cal.Rptr. 505 ], states at page 772: “Where there has been a change in the controlling facts upon which an injunction was granted, or the law has been changed, modified or extended, or where the ends of justice would be served by modifying or vacating a previous order granting or denying injunctive relief the court has inherent power to vacate or modify its previous order when the circumstances and situation of the parties have so changed as to render such action just and equitable. [Citations.] This principle applies to preliminary as well as permanent injunctions. [Citation.]” (Italics added.) Emphasis has been given to the word “inherent” because in Union Interchange, after reference to earlier decisions, the court stated: “These cases support the view that the power to modify or revoke a preliminary injunction is an inherent power not dependent upon statute. . . .” {Supra, p. 605.) Further, there is this comment on the problem by Witkin: “The power to modify a prohibitory injunction, whether preliminary or permanent, does not depend on a reservation of jurisdiction, nor on the absence of notice (since no preliminary injunction can be granted without

The District next contends that since plaintiff seeks damages for breach of the so-called “settlement agreement,” the court was forbidden to grant injunctive relief in view of section 526, subdivision 5, Code of Civil Procedure, which provides, (with certain exceptions not here applicable) that an injunction “can not be granted: . . . To prevent the breach of a contract.” It contends, as was unavailingly done in Wind v. Herbert, 186 Cal.App.2d 276 , 284-285 [ 8 Cal.Rptr. 817 ], that there was no showing that a preliminary injunction was necessary to prevent “irreparable injury” and that conceivable future injury could be compensated by money damages; too, that it cannot be validly claimed by plaintiff that the District could not respond in damages, if ultimately awarded. Section 526, it should be noted, also provides when an injunction can be granted, specifically, when it appears by complaint or affidavit that the commission of some act during the continuance of the action would produce great or irreparable injury to a party to the action (subd. 2) or when it appears that a party to the action is doing, or threatening to do, some act in violation of the rights of another respecting the subject of the action and tending to render the judgment ineffectual (subd. 3). It was declared in an early case that mere monetary loss is not irreparable in contemplation of the remedy of injunction unless there is an averment or a showing that parties causing the loss are insolvent or in any manner unable to respond in damages. (Duvall v. White, 46 Cal.App. 305 , 308 [ 189 P. 324 ].) Subsequent decisions adhere to the foregoing rule that the asserted insolvency of the defendant is a proper matter for the court’s consideration. (Union Oil Co. v. Domengeaux, 30 Cal.App.2d 266 , 271-272 [ 86 P.2d 127 ].) In Lenard v. Edmonds, 151 Cal.App.2d 764 [ 312 P.2d 308 ], the court stated (per Peters, P. J.): “Obviously, it was reasonably necessary and fair to both sides to maintain the status quo pending the outcome of the litigation. Otherwise, appellant could have deliberately stripped himself of all assets and made it impossible for him to pay any judgment that might be secured.” (P. 769.)

The declaration of plaintiff’s counsel (Mr. Weaver), filed December 8, 1969, in support of the additional restraints therein sought, stated that the District was then indebted to plaintiff in the sum of $103,146.52, and that the maximum amount the District had. available to it, including the

From the above it is clear that there is no express denial by the District of plaintiff’s specific statement that it is in fact insolvent. It must further be noted that of the funds available to the District, approximately $44,000 are on deposit with Mid-State Bank and presumably represent the escrow funds so deposited for plaintiff’s future use pursuant to the agreement in question; even if this were not the case, all of the funds on hand admittedly fell short of a sufficiency to meet plaintiff’s demands, not including those claimed by way of damages as alleged in the complaint. This conclusion is compelled despite the statement in the counterdeclaration that FHA “has approved the expenditure of $18,000.00” for the various items therein set forth; in this latter regard, not without merit is the trial court’s comment to the District’s counsel: “The Court: Now, whether or not FHA had the right or the power to negate these existing agreements and make these funds available, I don’t know. I would think not. If there’s a legal instrument extant, under the terms of which consideration passed, or existed, then, I don’t think FHA can touch those funds by giving you permission to spend them.”

On appeal it is claimed for the first time that the District has additional revenue available by tax levies; we cannot consider such claim which, furthermore, is not in harmony with the declaration by its counsel, at a time more relevant, that “there are not other funds available to the Océano Sanitary District to resist the lawsuit above referred to.”

If there was any conflict as to the matter of the District’s insolvency,

The order is affirmed.

Wood, P. J., and Thompson, J., concurred.