Pacific Salad Oil v. Archer-Daniels-Midland

Filed 9/28/06 Pacific Salad Oil v. Archer-Daniels-Midland CA5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

APPEAL from a judgment of the Superior Court of Fresno County. M. Bruce Smith, Judge.

Wild, Carey & Fife, Paul D. Fife and William M. Henley for Plaintiff and Appellant.

McLaughlin Sullivan, William T. McLaughlin II, Timothy R. Sullivan and Thomas G. McLaughlin for Defendant and Respondent.

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Respondent, Archer-Daniels-Midland Company (ADM), moved to modify the terms of a permanent injunction on the ground of changed circumstances under Civil Code^[1] section 3424. The court denied the motion finding that the test for changed circumstances had not been met.

Thereafter, appellant, Pacific Salad Oil (PSO), filed a motion for attorney fees and costs as the prevailing party under section 1717. This motion was also denied. The court found that in opposing an attempt to modify an injunction, PSO could not be deemed to be enforcing the stipulated judgment that granted the permanent injunction. PSO contends the trial court erred. According to PSO, a motion to modify an injunction that was issued pursuant to a contract is an action on a contract.

As discussed below, the trial court was correct. ADM’s statutory claim was not related to the stipulated judgment. Accordingly, the order will be affirmed.

BACKGROUND

PSO processes oil and ADM packages oil. For approximately 10 years these two entities have been litigating the scope of reciprocal easements that were granted to facilitate the operation of their respective businesses. They reached a settlement in 1998 that included a permanent injunction and modifications to an earlier reciprocal easement agreement. Nevertheless, further disagreements arose over PSO’s claims to additional easement rights. ADM filed a declaratory relief action and moved to enforce the 1998 settlement in the original action.

Following a trial on the consolidated actions, the court ruled in ADM’s favor on PSO’s claims to additional easement rights under the 1998 settlement agreement. The court further modified the permanent injunction as requested by ADM.

On appeal, this court reversed the modifications to the permanent injunction on the ground that the timing and manner of ADM’s request prevented PSO from presenting evidence and being heard on this matter. However, the balance of the trial court’s order was affirmed. (Archer-Daniels-Midland Company v. Pacific Salad Oil Company (Jan. 8, 2004) F039484.)

Upon remand, ADM moved to modify the permanent injunction under section 3424 and Code of Civil Procedure section 533. ADM claimed that, in several respects, the circumstances that existed at the time of the stipulated settlement had substantially and materially changed. The trial court, however, disagreed.

The court found that “[v]irtually all of the alleged changed circumstances occurred prior to 1998.” The court further concluded that the increase in ADM’s business did not justify modification. Although finding that the present economic interests of ADM necessitated alteration of the restrictions, the court determined that the law did not allow modifications to permanent injunctions running with the land based on temporary changes in circumstances. Rather, modification is required only where the change “is permanent and to some extent irreversible.” ADM did not appeal this ruling.

PSO then filed a motion for attorney fees and costs under section 1717 on the ground that it prevailed on ADM’s motion to modify the permanent injunction, an injunction that was a material term of the 1998 settlement agreement. ADM responded that PSO was not entitled to recover attorney fees because ADM’s motion was brought under specific statutes that do not provide such recovery. ADM further noted that all disputes between the parties pertaining to their written agreements were previously determined in ADM’s favor at trial and affirmed on appeal.

The trial court denied PSO’s motion for attorney fees. The court reasoned:

“The bottom line is I have difficulty viewing an attempt to modify an injunction as an attempt to disavow the judgment or constitute an act of contempt. I don’t think by opposing -- I understand your point perfectly, but I don’t believe that by opposing the motion that PSO can be deemed to be enforcing the judgment.”

DISCUSSION

The issue on appeal is whether there is a legal basis for an award of attorney fees to the prevailing party on ADM’s motion to modify the permanent injunction. Accordingly, this court reviews the trial court’s ruling de novo as a question of law. (Dell Merk, Inc. v. Franzia (2005) 132 Cal.App.4th 443, 450.)

California has adopted the rule that each party to a lawsuit must pay its own attorney fees unless otherwise provided by contract or statute. (Trope v. Katz (1995) 11 Cal.4th 274, 278-279.) With respect to a contractual attorney fee provision, section 1717, subdivision (a), provides:

“In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.”

The courts liberally construe the term “on a contract” as used in section 1717. (Dell Merk, Inc. v. Franzia, supra, 132 Cal.App.4th at p. 455.) As long as the action “‘involves’” a contract, it is an “action on a contract.” (Milman v. Shukhat (1994) 22 Cal.App.4th 538, 545.)

The 1998 stipulated settlement provides that the “prevailing party in any action required to enforce the terms of the settlement agreement will be entitle[d] to recover its reasonable attorney[] fees from the other party or parties.” PSO contends that, in defending ADM’s motion to modify the permanent injunction, it was enforcing the 1998 settlement.

However, ADM’s motion did not challenge the validity of the stipulated settlement and judgment. Rather ADM claimed that the facts had materially changed postjudgment so as to render the injunction oppressive and inequitable.

Both section 3424 and Code of Civil Procedure section 533 permit the trial court to “modify or dissolve” an injunction “upon a showing that there has been a material change in the facts upon which the injunction” was granted. Neither section provides for attorney fees.

ADM’s position was that the restrictions may have been appropriate, and perhaps even necessary, at the time the injunction was granted but that the circumstances had thereafter changed. In defending the motion, PSO took the position that the circumstances had not materially changed since the injunction was granted. Thus, the motion focused on circumstances that did not exist when the judgment was entered. Accordingly, neither ADM’s motion nor PSO’s defense of the motion “involved” the contract. Therefore, the trial court correctly denied PSO’s motion for attorney fees.

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to respondent.

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Levy, J.

WE CONCUR:

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Vartabedian, Acting P.J.

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Dawson, J.

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^[1] All further statutory references are to the Civil Code unless otherwise indicated.