Opinion
NOT TO BE PUBLISHED
Appeal from a judgment and order of the Superior Court of Orange County Super. Ct. No. 05CC09930, Daniel J. Didier, Judge.
Murtaugh Meyer Nelson & Treglia and John R. Armstrong for Defendant, Appellant and Cross-complainant.
Rus, Miliband & Smith, Joel S. Miliband, Leo J. Presiado and M. Peter Crinella, for Plaintiff, Respondent and Cross-defendant.
OPINION
BEDSWORTH, J.
To our amazement, we find ourselves filing a decision in which we hold that a party who loses all four causes of action in a case is not a “prevailing party” for purposes of cost calculations under Code of Civil Procedure section 1032. While that proposition would seem so pellucid as to approach tautology, the time and effort expended on it by these parties convinces us it needs to be reasserted.
Midwest Renewable Energy, LLC, appeals from a judgment which declares that the net monetary effect of competing claims between itself and Western Ethanol, LLC, is that Western Ethanol must pay $45,000 to Midwest, but nonetheless also concludes Western Ethanol is the prevailing party – on both the complaint and the cross-complaint. Midwest does not quibble with the judgment amount, but instead argues it was entitled to be designated the prevailing party, and thus to be awarded its costs, as a matter of right. Midwest also contends the court erred in refusing to award it prejudgment interest on the net judgment amount.
We are unpersuaded by either argument. The court held that Western prevailed on both its own complaint and on Midwest’s cross-complaint, because it concluded Western’s decision to withhold a contract payment following Midwest’s anticipatory repudiation of the parties’ contract was appropriate, and thus did not constitute a breach of contract as alleged in the cross-complaint. The only reason Midwest ended up with the net monetary judgment is that Western also prevailed on its claim for declaratory relief, in which it sought a determination that the payment obligation – which it had never denied incurring – could be properly withheld as a set-off against the damages caused by Midwest’s breach. Because Midwest lost on every cause of action asserted by both parties, as well as on essentially every disputed issue, we find the court did not err in rejecting its claim to “prevailing party” status.
The court was likewise justified in rejecting Midwest’s claim for prejudgment interest. Although the money owed by Western to Midwest under the parties’ contract was indeed a “liquidated sum,” the net amount ultimately decreed as owing to Midwest was not “damages.” As previously noted, Midwest failed in its effort to establish Western’s nonpayment had constituted a breach of the parties’ agreement, and thus, no “damages” were awarded to it. Instead, the court’s judgment reflected a determination that Western’s payment obligation was properly suspended pending the resolution of its own claim for damages stemming from Midwest’s breach. Consequently, an award of prejudgment interest would have been inappropriate. The judgment is affirmed.
* * *
For purposes of appeal, the facts of this case are not disputed. Indeed, Midwest emphasizes that it is “seek[ing] review of the trial court’s legal conclusions, not its factual findings.” We will consequently rely upon the factual findings contained in the court’s statement of decision.
In January of 2005, the parties entered into an agreement which obligated Midwest to sell, and Western to buy, monthly shipments of ethanol for a fixed price through September of 2005. Midwest delivered the required ethanol shipment in February and March of 2005, but “due to oversupply concerns in California,” Western did not purchase any ethanol in April of 2005. The parties exchanged “contentious e-mails” about Western’s failure to purchase, as well as its concerns about the quality of the ethanol being sold by Midwest. Ultimately, the parties reached an agreement regarding quality control and future purchases, and Midwest did not assert any claim for breach based upon Western’s failure to purchase in April.
The monthly deliveries resumed in May of 2005, and continued without incident in June, July, and August of 2005. However, at the end of August, Midwest informed Western that it was treating Western’s failure to purchase ethanol in April as a “breach,” and that its ethanol delivery due in September was being canceled.
Western’s payment for the August shipment, in the amount of $263,515.39, was not yet due on the date Midwest announced its decision to cancel Western’s September shipment. So, as a consequence of the announcement, which Western viewed as an anticipatory repudiation of Midwest’s contractual obligation, Western “suspended” the payment.
Midwest’s refusal to deliver ethanol in September of 2005 caused Western to incur damages: “[Western] was forced to obtain other supplies of ethanol to provide to preexisting customers to cover for September deliveries, and to mitigate damages.” The ethanol obtained by Western to serve its customers cost it $218,350 above what it would have been obligated to pay Midwest for the aborted September shipment.
Western filed suit against Midwest promptly, on September 2, 2005, alleging a cause of action for breach of contract based upon anticipatory repudiation. Western later amended the complaint to allege a cause of action for declaratory relief, in which it sought a determination Midwest’s anticipatory repudiation of the parties’ agreement entitled it to retain the payment otherwise owed to Midwest for the August shipment and apply it as an offset against the damages caused by Midwest’s breach.
Midwest filed a cross-complaint against Western, in which it also asserted causes of action for breach of contract and declaratory relief. Midwest alleged Western had first breached the parties’ contract when it failed to purchase the required amount of ethanol in April and May of 2005, causing Midwest to suffer $164,000 in damages, and also causing “any further obligations [Midwest] might have had under the contract [to be] suspended or excused.” Midwest also alleged Western breached the contract a second time when it failed to pay for the August shipment of ethanol, despite Midwest’s demands it do so, and sought damages in the amount of $263,500. Midwest’s claim for declaratory relief sought a court declaration Western’s breach of the contract in April and May of 2005, had “suspended or excused any and all obligations [Midwest] might have had, if any, under the contract to sell [Western] ethanol.”
At the conclusion of trial, the court found in favor of Western on its cause of action for breach of contract, awarding it damages of $218,350. The court also granted Western’s request for declaratory relief, and declared that Western’s obligation to pay for the August shipment could be treated as a set off against those damages. As a result of that set off, Western owed Midwest the net amount of $45,165.39, plus interest from the date of the judgment.
The court rejected Midwest’s claims for breach of contract as well as its claim for declaratory relief, concluding: (1) Western’s failure to purchase ethanol in April or May of 2005 was not an actionable breach of the parties’ contract, since any such claim had been either “waived, excused or the subject of modification”; and (2) Western’s nonpayment for the August shipment had not amounted to a breach, because “[t]he August invoices . . . were not due for payment until September, . . . thus [Western] was not in breach of its payment obligation at the time of [Midwest’s] letter . . . noticing the cessation of shipments.”
The court entered a judgment reflecting that Western had prevailed on all causes of action alleged in both the complaint and the cross-complaint, and decreeing that each party would bear its own attorney fees and costs. Midwest filed a motion for an order vacating the judgment, or alternatively for an order granting a new trial, arguing it was entitled to an award of costs, and pre-judgment interest, as a matter of law. The court denied the motion.
I
Midwest contends, as it did in the trial court, that it is the party with the “net monetary recovery” in this case, and is thus entitled to an award of costs as a matter of right under Code of Civil Procedure section 1032.
Code of Civil Procedure section 1032 provides that a “prevailing party” is entitled to recover costs as a matter of right, and defines “prevailing party” as including “the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant.” (Code Civ. Proc., § 1032, subd. (a)(4).) For purposes of the statute, “‘Complaint’ includes a cross-complaint. [¶] ‘Defendant’ includes a cross-defendant or a person against whom a complaint is filed [¶] [and] ‘Plaintiff’ includes a cross-complainant or a party who files a complaint in intervention.” (Code Civ. Proc., § 1032, subds. (a)(1)-(a)(3).)
In support of its assertion, Midwest relies on Wakefield v. Bohlin (2006) 145 Cal.App.4th 963, 981, in which the court explained that “the party with the net monetary recovery is determined by comparing the competing damage claims on both sides of the litigation. If both sides have claims, whichever party obtains the most money from the other prevails. If only one party has damage claims, any success in pressing those claims against the losing party results in a net award.” (Italics added.)
But even assuming Wakefield sets forth the proper rule, a point we need not decide here, there is an obvious and fatal flaw in Midwest’s attempt to apply that rule in this case. Stated simply, Midwest had no success in pressing any claim for “damages” in this case.
An award of “damages” has a specific connotation in the civil law. Civil Code section 3281 defines “damages” as monetary compensation for the “detriment [caused by] the unlawful act or omission of another.” (Italics added.) And in this case, the court expressly rejected Midwest’s contention that Western had acted wrongfully when it withheld its payment for the August, 2005 ethanol shipment; it thus properly declined to award Midwest any “damages” based upon that nonpayment. Thus, the rule set forth in Wakefield does not assist Midwest here.
Moreover, not only did Midwest fail to recover any “damages” in this case, the court expressly ruled against it on each of the causes of action set forth in its cross-complaint. Thus, Midwest cannot credibly claim to have “prevailed” on its cross-complaint, let alone in the litigation as a whole. It cannot therefore invoke the mandatory cost recovery provisions of Code of Civil Procedure section 1032.
At oral argument, Midwest repeatedly asserted it had successfully pressed a “claim for money owed” in this case. But it filed no such generic “claim.” What it filed was a cause of action for damages caused specifically by alleged breaches of contract. That cause of action failed. If Midwest believed that Western owed it money based upon some other theory of liability, then it was incumbent upon Midwest to allege facts supporting that theory. It cannot simply pretend that it did.
We must likewise reject Midwest’s contention Code of Civil Procedure section 666 compelled the trial court to declare it the victor in this case. Code of Civil Procedure section 666 provides in pertinent part that “[i]f a claim asserted in a cross-complaint is established at the trial and the amount so established exceeds the demand established by the party against whom the cross-complaint is asserted, judgment for the party asserting the cross-complaint must be given for the excess . . . .”
Again, the flaw in Midwest’s claim is that it did not “establish” any of the claims asserted in its cross-complaint – let alone in an amount which “exceeds the demand established by [Western].” Midwest’s only monetary claims were rejected, in their entirety, by the court. Code of Civil Procedure section 666 is thus inapplicable by its terms.
Rather than arising out of any claim asserted by Midwest, the court’s net judgment is actually the product of Western’s claim for declaratory relief. Western never disputed its obligation to pay the contract price for the ethanol delivered by Midwest in August. And in its declaratory relief claim, it merely asserted it could properly withhold that payment as an offset pending the resolution of its own breach of contract claim against Midwest. The court agreed it could, and then “declared” the effect of that offset. Absent that declaration, Midwest would have had no right to collect the monetary judgment it claims to have “won” in this case. As a consequence, the net monetary judgment was a win for Western, not a “recovery” by Midwest.
Our dissenting colleague suggests the judgment in this case necessarily reflects a “recovery” by Midwest, because it is “recovering the value of the delivered ethanol. . . .” But in our view, the suggestion ignores the fact that Western’s basic obligation to pay the agreed-price for that delivery was never in dispute in this case. Instead, what was in dispute was whether Midwest’s anticipatory repudiation of its own obligation to make a delivery constituted an actionable breach of the parties’ agreement. Western not only won that dispute, but the trial court agreed that it had been justified in suspending its payment in the wake of Midwest’s breach, pending an adjudication of its own damages.
We do not agree with Midwest’s assertion that construing its net judgment as the result of Western’s claim for declaratory relief – rather than of Midwest’s own cross-complaint – somehow places Midwest at the mercy of Western’s pleading decisions. According to Midwest, “[u]nder the trial court’s rationale, if Western had not sued Midwest for declaratory relief, Midwest would never have been able to recover any portion of the money Western owes for . . . the ethanol that Western took from Midwest in August of 2005.” We reject that assertion for two reasons.
First, if Western had not acknowledged its obligation to pay for the August shipment, and requested a court declaration asking for that obligation to be treated as a set off, Midwest would have been free to request such a declaration itself. And second, even if neither Midwest nor Western had asserted such a declaratory relief claim in this case – and the court had nonetheless concluded, as it did here, that Western was not guilty of any breach of contract because its own payment obligation for the August shipment was stayed pending resolution of its breach of contract claim, then nothing would prevent Midwest from later suing for a breach of that net obligation (which did not accrue until the initial judgment). In short, Midwest’s ability to obtain the payment ultimately determined to be owed to it was in no way dependent upon Western’s pleading.
Code of Civil Procedure section 426.30, subdivision (a) governs compulsory cross complaints. It provides: “Except as otherwise provided by statute, if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.” (Italics added.)
Because the trial court granted significant declaratory relief in this case – i.e, its determination that Western had been entitled to suspend its own contract payment and apply it as a set-off against the damages caused by Midwest’s breach – it concluded the applicable rule for awarding costs was set forth in a separate clause of Code of Civil Procedure section 1032, subdivision (a)(4), which provides that “[w]hen any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under [Code of Civil Procedure] section 1034.” (Code Civ. Proc., § 1032, subd. (a)(4), italics added.) The court then exercised its discretion in ordering each party to bear its own costs.
Although Midwest argues declaratory relief does not qualify as the type of “other relief’ that would exempt a case from the general rule obligating the court to award costs to the party with the net monetary recovery, we need not consider the claim. Even if we assumed the court did err in treating the cost award as discretionary (and we reach no such conclusion), addressing that error could not possibly benefit Midwest. As we have already explained, because Midwest lost on both the complaint and the cross-complaint, and Western was the only party to be awarded any damages, Midwest could not qualify as the party with the net monetary “recovery.” Thus, if the trial court erred in treating the cost issue as within its discretionary power, the only party that may have been harmed by that error is Western – and it did not appeal.
In light of the foregoing, we find no error in the court’s decision to treat the award of costs in this case as discretionary. Since Western does not contend the court’s order requiring each party to bear its own costs amounted to an abuse of that discretion, we will not disturb the decision.
II
Midwest’s second contention, that it is entitled to prejudgment interest on the net judgment amount, also fails. Civil Code section 3287, subdivision (a) governs the award of prejudgment interest. It provides: “Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt.” (Italics added.)
Again, Midwest’s argument founders on the lack of any damages awarded to it in this case. As the trial court explained in denying Midwest’s request: “prejudgment interest is awardable only to persons who are entitled to recover damages . . . . Since the Court found that [Western] never breached the contract and that [Midwest] was entitled only to a set-off of moneys owing under the contract, but not damages due to wrongdoing, [Midwest] is not entitled to prejudgment interest.”
Midwest essentially ignores this problem, and focuses instead on establishing that Western’s liability for the August, 2005 shipment must be treated as a liquidated sum – and thus as “damages certain” which are subject to prejudgment interest – even though the offsetting amount of damages it suffered as a result of Midwest’s breach of contract was not. But that is not the point.
The point is that prejudgment interest is available only to those who recover damages; i.e., “detriment [caused by] the unlawful act or omission of another.” In this case, Midwest did not.
The judgment is affirmed, and Western is to recover its costs on appeal.
RYLAARSDAM, ACTING P. J., Concurring
I concur in our colleague’s opinion to the extent it affirms the denial of defendant’s claim to prejudgment interest. I also concur in the decision affirming the judgment ordering each party to bear its own costs and fees. But, as to the latter, my analysis differs and is based on our recent decision in Goodman v. Lozano (Feb. 8, 2008, G036774, G037091) ___ Cal.App.4th ___ [2008 WL 341 721] (Goodman). I disagree with our dissenting colleague that Goodman requires a different result.
Goodman holds that the “prevailing party” determination must be based on an order or judgment. “An award or verdict without a judgment is merely symbolic.” (Goodman, supra, 2008 WL 341 721, at p. 1) Goodman teaches that, in this case, we must look to the terms of the judgment rather than the pleadings, the evidence, the parties’ contentions, or anything else that preceded the entry of judgment. I therefore start with the terms of the judgment, relevant portions of which provide:
“IT IS ORDERED, ADJUDGED AND DECREED that Judgment is hereby entered in favor of Western Ethanol Company, LLC and against Midwest Renewable Energy, LLC on Western Ethanol Company, LLC’s claim for breach of contract in the amount of $218,350.
“IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Judgment is hereby entered in favor of Western Ethanol Company, LLC and against Midwest Renewable Energy, LLC on Western Ethanol Company, LLC’s claim for declaratory relief (set-off) such that Western Ethanol Company, LLC’s non-payment of August 2005 invoices in the amount of $263,515.39 is declared [a] set off against the above-stated damages of $218,350, resulting in a net amount due by Western Ethanol Company, LLC to Midwest Renewable Energy, LLC of $45,165.39, plus interest at the legal rate, from the date of judgment.
“IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Judgment is hereby entered in favor of Western Ethanol Company, LLC and against Midwest Renewable Energy, LLC on all cross-claims alleged by Midwest Renewable Energy, LLC against Western Ethanol Company, LLC.
“IT IS FURTHER ORDERED, ADJUDGED AND DECREED that each party is to bear its own costs and attorneys’ fees.”
Thus, the judgment was in favor of defendant, with respect to the amount it was entitled to recover, and in favor of plaintiff both with respect to its claim for breach of contract and its claim for declaratory relief. This is different from the facts in Goodman, where the judgment was solely in favor of the defendant.
Under Code of Civil Procedure section 1032, subdivision (a)(4), “[w]hen any party recovers other than monetary relief . . ., the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not . . . .” Here plaintiff recovered “other than monetary relief.” Defendant recovered monetary relief. It cannot be said that either party should be denominated as the “prevailing party.” Hence, the court was permitted to exercise its discretion. It properly did so by ordering each party to bear its own costs and fees. The judgment and order should be affirmed.
MOORE, J., Concurring and Dissenting.
Despite the issue having been properly raised in the appellant’s opening brief, neither the lead opinion nor Justice Rylaarsdam’s concurring opinion ever address the underlying correctness of the trial court’s decision not to give Midwest judgment on its contract claims. All the lead opinion says is that because the trial court did not find in favor of Midwest on its breach of contract claim and only received non-monetary relief in the form of a declaratory judgment, Midwest was not the prevailing party. That rationale only goes to whether the court did not abuse its discretion in awarding costs to Western based upon the way the judgment was worded. It avoids the underlying problem of whether the judgment correctly confined Midwest to only non-monetary declaratory relief in the first place.
It is only by not discussing the issue that the lead opinion avoids conflict with this court’s recent decision in Goodman v. Lozano (Feb. 8, 2008, G036774, G037091) ___ Cal.App.4th ___ . Goodman involved the calculation of an offset for prior settlements as against contract and tort damage claims. After application of the offset, a positive award on the contract and tort claims translated into a net zero recovery for the plaintiffs, and this court accordingly held that the plaintiffs did not fall into the category of “the party with a net monetary recovery” under section 1032, subdivision (a)(4) of the Code of Civil Procedure.
The lead opinion here, by contrast, is based on the fact that the judgment gave non-monetary declaratory relief to Midwest. Whether the judgment should have been so confined, however, is an issue that is not addressed.
Moreover, even if Midwest were correct in asserting the trial court could not have rendered a monetary judgment in its favor unless Midwest had actually prevailed on its cross-complaint (and we reach no such conclusion), that argument would not compel the conclusion it prevailed. Instead, it would suggest Western was the party aggrieved by the error – because the court clearly concluded that Midwest had not prevailed.