Opinion
C076983
02-09-2018
BLOCKA CONSTRUCTION, INC., Plaintiff and Appellant, v. MYERS POWER PRODUCTS, INC., Defendant and Respondent.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published,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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. CVCS 13-1394)
This case comes to us following the successful demurrer without leave to amend of defendant Myers Power Products, Inc. (Myers). Plaintiff Blocka Construction, Inc. (Blocka) was the prime contractor on a public works construction project owned by the Department of Water Resources (DWR). Blocka entered into an agreement with Independent Electrical Supply (Independent) to supply electrical equipment. Independent, in turn, entered into an agreement with Myers to supply electrical equipment. Blocka filed this action after it tried and failed to get Myers to provide documentation that Blocka needed to get paid for change orders.
Blocka did not have a contract with Myers, and did not assert a cause of action for breach of contract. Instead, it asserted that it was entitled to declaratory relief as a third party beneficiary of the Independent-Myers contract. Blocka served discovery directly on Myers, even though Myers's counsel had previously been served on Blocka a motion for sanctions pursuant to Code of Civil Procedure section 128.7, asserting that the action was frivolous. When Myers refused to answer the discovery requests because they had not been served on Myers's counsel, Blocka filed a motion to compel the discovery responses. In opposition to the motion to compel, Myers sought sanctions for misuse of the discovery process.
Further statutory references to sections of an undesignated code are to the Code of Civil Procedure.
After the trial court sustained Myers's demurrer without leave to amend, it denied Blocka's motion to compel discovery, and granted Myers's request for sanctions.
Blocka appeals from the judgment of dismissal, the order denying the motion to compel discovery, and the issuance of sanctions. We shall conclude that the demurrer was properly sustained because declaratory relief was improper under these circumstances, and the trial court acted within its discretion in issuing sanctions.
FACTUAL AND PROCEDURAL BACKGROUND
A. Complaint
Blocka filed a first amended complaint (Complaint) alleging that it entered into a prime contract (Prime Contract) with the DWR for work on a project known as the Pumping Plant Control Systems Rehabilitation Sutter Bypass, Contract No. C51415 (Project). Blocka then entered into a purchase order agreement with Independent, by which Independent agreed to provide electrical equipment to Blocka for installation on the Project. Independent in turn entered into a written contract with Meyers to acquire equipment that Independent resold to Blocka.
Blocka alleged that Meyers proceeded so slowly in providing supporting documentation regarding outstanding change orders that Blocka was unable to complete the work on the schedule outlined in the Prime Contract. Blocka informed Myers that its failure to provide supporting documentation would result in DWR's failure to approve each change order. Blocka informed Myers that any unresolved change order would become a claim with DWR, but Blocka could not certify a claim unless Myers provided supporting documentation.
Blocka stated a cause of action against Myers for declaratory relief, alleging that Myers breached the contract with Independent by failing to provide the necessary supporting documentation for each change order, and that Blocka was a third party beneficiary of that contract because: (1) Meyers knew the equipment it produced was for eventual sale to Blocka for installation on the Project; (2) the equipment Meyers made was produced to the specifications outlined in the Prime Contract; and (3) the equipment could not be used in any other undertaking.
B. Demurrer
Myers demurred to the Complaint on the ground the Complaint failed to state facts sufficient to constitute a cause of action. Myers argued Blocka failed to allege facts establishing that Independent and Myers expressly intended to benefit Blocka when entering into their contract. The trial court sustained the demurrer without leave to amend. The trial court filed a "Ruling on Demurrer" on December 13, 2013, which directed counsel for Myers to prepare an order for the court's signature. The "Ruling on Demurrer" was sent to both counsel. The trial court executed the written order on December 26, 2013, and the notice of entry of order was filed and served on December 31, 2013.
C. Motion for Reconsideration
On December 27, 2013 (i.e., four days before the notice of entry of order sustaining the demurrer was filed and served), Blocka filed a motion for reconsideration of the ruling on demurrer pursuant to section 1008, subdivision (a), which authorizes reconsideration upon discovery of new or different facts, circumstances, or law. Among the new facts Blocka alleged was a "Contract for Sale of Goods" between Blocka, Independent, and Myers, dated June 14, 2012. Blocka claimed its attorneys were unaware of the document until December 23, 2013. The new law Blocka claimed was that a cause of action for declaratory relief is not an appropriate action for a demurrer.
Myers opposed the motion for reconsideration on the grounds the motion was improperly filed before the notice of entry of order, in contravention of section 1008, subdivision (a), and the motion was not based on new facts or law. The trial court denied the motion for reconsideration, both as premature and on the merits.
D. Discovery Motion and Sanctions
Meanwhile, a little over three weeks after Blocka filed the original complaint against Myers, counsel for Myers served a motion for sanctions pursuant to section 128.7, on Blocka on the ground the complaint against Myers was frivolous. Three business days after Myers's counsel served the motion for sanctions, Blocka served a discovery request directly on Myers, rather than serving Myers's counsel. Counsel for Myers found out about the discovery request only after the responses were due. Myers's counsel offered to respond to discovery if it were properly served on counsel, however, Blocka instead moved to compel responses and for sanctions.
The trial court denied Blocka's motion to compel discovery in its entirety, including the request for sanctions. The trial court granted sanctions to Myers in the amount of $3,000, stating "Blocka did not act with substantial justification in making its Motion and misused the discovery process."
Blocka's appeal is from the judgment of dismissal after the order sustaining demurrer, the order denying the motion to compel discovery, and the issuance of sanctions against Blocka.
DISCUSSION
I
The Demurrer was Properly Sustained
Blocka argues the trial court erred in sustaining Myers's demurrer because a general demurrer is not effective against a declaratory relief action. Blocka claims the trial court improperly decided the demurrer on its merits, i.e., that Blocka is not a third party beneficiary. Blocka quotes this court's decision in Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, 24, which in turn quoted Taschner v. City Council (1973) 31 Cal.App.3d 48, 57: " 'Strictly speaking, a general demurrer is not an appropriate means of testing the merits of the controversy in a declaratory relief action because plaintiff is entitled to a declaration of his rights even if it be adverse.' " Blocka argues that even if the Complaint conclusively shows it is not a third party beneficiary, it is nevertheless entitled to a declaration of that fact, thus its declaratory relief cause of action is not subject to demurrer.
We treat the demurrer as admitting all material facts properly pleaded, but we do not assume the truth of contentions, deductions, or conclusions of law. (Aubry v. Tri-City Hospital Dis. (1992) 2 Cal.4th 962, 967.) We will affirm the judgment if the demurrer was properly sustained on any of the grounds stated in the demurrer, regardless of the trial court's stated reasons. (Ibid.) In this case, Myers filed a general demurrer on the ground Blocka "failed to state facts sufficient to constitute a cause of action against Myers." The trial court properly sustained the demurrer because the Complaint failed to state facts sufficient to obtain declaratory relief.
A party may obtain declaratory relief with respect to the rights and duties of the parties to a written contract if there is an actual controversy as to such rights and duties. (§ 1060.) However, a court may properly refuse to grant declaratory relief if such relief "is not necessary or proper at the time under all the circumstances." (§ 1061.) The trial court may refuse to grant declaratory relief by sustaining a demurrer without leave to amend. (Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393, 407-408 (Baldwin).)
" 'Declaratory relief operates prospectively, serving to set controversies at rest. If there is a controversy which 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. Hence, where there is an accrued cause of action for an actual breach of contract or other wrongful act, declaratory relief may be denied. [Citations.]' [Citation.]" (Baldwin, supra, 79 Cal.App.3d at p. 407.) Thus, a declaratory relief action is not proper where it seeks only a declaration regarding past wrongs, without any "occasion to define respective rights which would govern the future conduct of the parties." (Travers v. Louden (1967) 254 Cal.App.2d 926, 932.)
In this case, if Blocka has a cause of action as a third party beneficiary, it is a cause of action for breach of a contract that has fully matured, and the wrong to be addressed is a past wrong. There are no allegations that seek to have the trial court determine Myers's obligations with respect to future performance of its contract with Independent. On the contrary, the Complaint alleges: "Blocka is informed and believes . . . Meyers breached the [Independent]-Meyers Contract by failing to provide the necessary supporting documentation," and "Blocka contends certain CO's [(change orders)] were included in the original [Independent]-Myers Contract scope of work." Blocka alleges Myers committed past breaches of the contract. The trial court properly sustained the demurrer without leave to amend because declaratory relief was "not necessary or proper at the time under all the circumstances." (§ 1061.)
Blocka's proposed second amended complaint, filed with its reply brief to the motion for reconsideration, does not cure the problem, thus for this reason the trial court properly denied the motion for reconsideration as well.
We express no opinion on Blocka's argument that the motion for reconsideration was improperly denied on the grounds it was filed before the notice of entry of order.
II
Motion to Compel and Sanctions
On August 23--after Myers, through counsel, served its section 128.7 notice of motion in response to Blocka's original complaint--Blocka served a discovery request on Myers directly. Blocka's counsel did not notify Myers's counsel of the discovery request until the responses were overdue. Aside from Myers's counsel serving the 128.7 notice of motion in this action, Myers and Blocka had been represented by the same counsel in two other cases in 2013, one of which concluded two days after Blocka served its discovery. When Blocka's counsel demanded Myers respond to the discovery request without objection, Myers's counsel sent a communication reminding Blocka's counsel that he had actual knowledge prior to serving the discovery request that Myers had retained counsel to represent it in the action. Myers's counsel continued: "You have committed an ethical violation by contacting a represented party despite express knowledge of the attorney-client relationship. Your client's discovery is void ab initio. You are free to file a motion to compel, and we will certainly request a finding of fact from the court regarding your ethical violation. You may rescind your client's discovery requests by 4pm today and we will consider the issue closed. However, if you attempt to benefit from your ethical violation, we will be forced to prosecute the violation in defense of our client."
In response, Blocka's attorneys offered an additional 15 days to answer the discovery request. Counsel for Myers refused the offer, instead demanding that Blocka re-serve the discovery requests. These events led to Blocka filing a motion to compel the discovery answers. In response to the motion, Myers requested sanctions "against Blocka and its Counsel, personally, for their unethical conduct." By this time Myers had filed its demurrer to the Complaint, and the trial court sustained the demurrer before the hearing was held on the motion to compel. Counsel for Blocka did not appear at the hearing on the motion to compel, and the trial court awarded sanctions against Blocka in the amount of $3,000. Blocka objected to the sanctions order on the ground the motion to compel discovery responses became moot when judgment was entered following the demurrer. The trial court nevertheless signed the order denying the motion to compel and awarding sanctions.
Blocka now renews its argument that the motion to compel was moot. Blocka further argues that no sanctions could be awarded unless one party "unsuccessfully makes or opposes a motion to compel," (§ 2030.300, subd. (d)) and Blocka was not unsuccessful in its motion to compel since the motion was moot. Blocka also argues service directly on Myers was proper.
Blocka incorrectly asserts that the authorization for sanctions was section 2030.300, and that Myers was not entitled to sanctions because there was no unsuccessful motion to compel. Rather, section 2023.030 authorizes sanctions against "one engaging in the misuse of the discovery process, or any attorney advising that conduct . . . ." This means it was not necessary for Blocka to be unsuccessful in its motion to compel for Meyers to be entitled to sanctions.
We do not agree that service directly on Myers was proper. Rule 2-100(A) of the Rules of Professional Conduct of the State Bar of California provides: "While representing a client, a member shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer." The trial court necessarily found that Blocka's counsel violated this rule by serving discovery directly on Myers, knowing that Myers was represented by another lawyer. We review the trial court's ruling under the deferential abuse of discretion standard, and we will not reverse absent a manifest abuse exceeding the bounds of reason. (Doe v. United States Swimming, Inc. (2011) 200 Cal.App.4th 1424, 1435.) We perceive no abuse of discretion here. Blocka is correct that the motion to compel discovery answers was moot after the trial court sustained the demurrer without leave to amend. Because we affirm the judgment of dismissal, Blocka's appeal from the discovery order is also moot. (Hood v. Hacienda La Puente Unified School Dist. (1998) 65 Cal.App.4th 435, 437.) However, Myers's request for sanctions was not moot. "Even after a party is dismissed from the action he may still have collateral statutory rights which the court must determine and enforce." (Frank Annino & Sons Construction, Inc. v. McArthur Restaurants, Inc. (1989) 215 Cal.App.3d 353, 357.) Myers had the statutory right to sanctions for misuse of the discovery process under section 2030.030.
DISPOSITION
The judgment is affirmed. Meyers is awarded its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)
/s/_________
Blease, Acting P. J. We concur: /s/_________
Hull, J. /s/_________
Robie, J.