Gabrielson v. City of Long Beach

• Decision Date: 20 July 1961
• Parties: , 363 P.2d 883 Theodore R. GABRIELSON, Plaintiff and Appellant, v. CITY OF LONG BEACH, Defendant and Respondent; People of the State ofCalifornia, Intervener and Respondent. * L.A. 25494.
• Court: California Supreme Court

Page 651

14 Cal.Rptr. 651

56 Cal.2d 224, 363 P.2d 883

Theodore R. GABRIELSON, Plaintiff and Appellant, v. CITY OF LONG BEACH, Defendant and Respondent; People of the State ofCalifornia, Intervener and Respondent. ^*

L.A. 25494.

Supreme Court of California, In Bank.

July 20, 1961.

Rehearing Denied Aug. 16, 1961.

John W. Preston, John W. Preston, Jr., Los Angeles, S. V. O. Prichard, Hollywood, and Peter E. Giannini, Los Angeles, for plaintiff and appellant.

Gerald Desmond and Walhfred Jacobson, City Attys., Long Beach, O'Melveny & Myers and Pierce Works, Los Angeles, for defendant and respondent.

Stanley Mosk, Atty. Gen., and Howard S. Goldin, Deputy Atty. Gen., for intervener and respondent.

TRAYNOR, Justice.

In 1911 the State of California granted to the City of Long Beach the tidelands and submerged lands lying within the city's boundaries in trust for certain uses and purposes connected with the development of Long Beach Harbor. (Stats.1911, ch. 676, p. 1304.) The terms of the original trust were amended by the Legislature in 1925 (Stats.1925, ch. 102, pp. 235-236) and 1935 (Stats.1935, ch. 158, pp. 793-795). Following the discovery of oil under the tidelands in 1937, it was determined in City of Long Beach v. Marshall, 11 Cal.2d 609, 82 P.2d 362, that the city had the right to produce oil and gas from these lands, and in City of Long Beach v. Morse, 31 Cal.2d 254, 188 P.2d 17, and Trickey v. City of Long Beach, 101 Cal.App.2d 871 226 P.2d 694, that the oil and gas revenue could be used only for trust purposes. In 1951 the Legislature found that 50 percent of the revenue derived from the production of oil, gas, and other hydrocarbons other than dry gas and all of the revenue derived from the production of dry gas were no longer needed for trust purposes and declared such revenues free from the public trust for navigation, commerce, and fisheries. (Stats.1951, ch. 915, pp. 2444-2445.)

The city claimed the released revenues and undertook to expend them for general municipal purposes. Felix Mallon, a taxpayer of the city, then brought an action to enjoin the city from expending the released revenues other than dry-gas revenues for other than trust purposes on the ground that the 1951 statute releasing the revenues from the trust was unconstitutional. Mrs. Alma Swart, another taxpayer of the city, intervened. Through her attorney Theodore R. Gabrielson, she alleged that Mallon was prosecuting a friendly suit and that he had failed to raise the question of the unlawful expenditure of dry-gas revenues and other important legal and constitutional issues. She sought to enjoin the expenditure of any of the released revenues for other than trust purposes. Although she joined in Mallon's attack on the constitutionality of the 1951 statute, she also contended that if the statute were to be held constitutional, it would be necessary to interpret it as releasing the oil and gas revenues to the state rather than to the city.

The trial court held that the statute released the revenue to the city and entered judgment for it. Both Mallon and Mrs. Swart appealed. Although she agreed with Mallon's contention that the Legislature could not constitutionally release the revenues to the city, Mrs. Swart also presented the contention, accepted by the court, that the statute was a valid partial revocation of the trust that necessarily resulted in a reversion to the state of the released revenues, which the city held upon a resulting trust for the state. Mallon v. City of Long Beach, 44 Cal.2d 199, 212, 282 P.2d 481.

Although the Attorney General was aware of this litigation, he took no part in it until after the decision of this court, when he filed an amicus curiae brief urging that a rehearing be denied. Thereafter the state brought an action against the city to recover the funds to which it was entitled under the decision in the Mallon case. In 1956 the Legislature took note of this litigation and concluded that the public interest would best be served by its prompt settlement. Accordingly, it authorized a settlement dividing the oil and gas revenue between the state and the city and provided that the latter's share should continue to be held in trust and expended for trust purposes. (Stats. 1st Ex.Sess.1956, ch. 29.) Pursuant to this legislation a consent decree was entered settling the main points of dispute between the city and the state.

On March 27, 1956 petitioner Gabrielson filed a petition in the Mallon case for attorney's fees for establishing the state's right to the released revenues. The city resisted his application as trustee and the state intervened as beneficiary of the resulting trust. Following an extended hearing, the trial court entered its judgment denying an award of attorney's fees. Petitioner appeals.

Petitioner contends that his legal efforts as attorney for Mrs. Swart secured for the state oil and gas revenues stipulated to be worth $200,000,000 and that therefore he is entitled to reasonable attorney's fees from this fund. He points out that the Attorney General and other state officials shared the view that the Legislature intended to release the surplus oil and gas revenues to the city and took no action to protect the state's right thereto until after he had successfully represented the state's interest before this court.

Although petitioner seeks fees from funds in the hands of the city as trustee, the city and state contend that his suit is nevertheless an action against the state to which it has not consented. They also contend that petitioner is not entitled to attorney's fees on the ground that he abandoned the interests of the city taxpayers he purported to represent when he advanced the state's interest against those taxpayers. Finally they assert that petitioner was properly denied fees on the ground that both his and Mrs. Swart's purpose in intervening was to defeat both the state's and city's interests by tying up the revenues in litigation until they could establish personal interests therein under federal mineral leasing applications.

Before this proceeding was tried, the city and state unsuccessfully sought a writ of prohibition in the District Court of Appeal, and a hearing was denied in this court. Petitioner contends that the denial of the application for the writ, even though no opinion was filed, is res judicata with respect to the defense of sovereign immunity and that in any event that defense is not applicable in this case. He also asserts that he did not abandon the interests of the city taxpayers on whose behalf he intervened. He points out that it is always to the taxpayers' interest that money not be spent illegally, and that given the determination that the oil and gas revenues could not constitutionally be released to the city, it was to the city taxpayers' interest as citizens of the state that the money be released to the state instead of being accumulated for trust purposes for which it could not economically be expended. Finally he contends that there is no evidence to support the trial court's findings that he and Mrs. Swart were endeavoring to secure the revenues for themselves.

In Estate of Stauffer, 53 Cal.2d 124, 132, 346 P.2d 748, 752, we stated: 'The bases of the equitable rule which permits surcharging a common fund with the expenses of its protection or recovery, including counsel fees, appear to be these: fairness to the successful litigant, who might otherwise receive no benefit because his recovery might be consumed by the expenses; correlative prevention of an unfair advantage to the others who are entitled to share in the fund and who should bear their share of the burden of its recovery; encouragement of the attorney for the successful litigant, who will be more willing to undertake and diligently prosecute proper litigation for the protection or recovery of the fund if he is assured that he will be promptly and directly compensated should his efforts be successful.' See also, Sprague v. Ticonic Nat. Bank, 307 U.S. 161, 164-167, 59 S.Ct. 777, 83 L.Ed. 1184; Hornstein, Counsel Fee Awards, 69 Harv.L.Rev. 658, 662-663. These considerations are not apposite, however, if the attorney's and his client's ultimate objective is not to secure or preserve a common fund but to establish personal adverse interests therein. In such a case fees may not be awarded. Scott v. Superior Court, 208 Cal. 303, 307, 281 P. 55; Mallon v. City of Long Beach, 188 Cal.App. 761, 11 Cal.Rptr. 8; Hobbs v. McLean, 117 U.S. 567, 581-582, 6 S.Ct. 870, 29 L.Ed. 940; McCormick v. Elsea, 107 Va. 472, 59 S.E. 411, 412-413; see also, State ex rel. Ebke v. Board of Educational Lands and Funds, 159 Neb. 79, 65 N.W.2d 392, 402; Miller v. Kehoe, 107 Cal. 340, 343-344, 40 P. 485, Note, 49 A.L.R. 1149, 1159-1161. Litigation so motivated calls for no added incentive in the form of fees from the common fund should the ultimate objective fail. Morecover, to allow them in such a case merely because the attorney's services have benefited the class to whom the fund belonged would place his interests in conflict with those of his client. An attorney retained to recover or protect a common fund so that it would be available when and if his client could establish an adverse right thereto might be induced to forsake his client's interest in the hope of securing more substantial fees from the common fund. Thus, if the evidence supports the trial court's finding that petitioner's and Mrs. Swart's purpose in intervening was to defeat both the state's and the city's interest, the judgment must be affirmed even though their ultimate objective was not achieved and petitioner's services were therefore of benefit to the state.

In 1939 Mrs. Swart filed an application with the United States Land Office to secure an oil and gas lease of 640 acres of submerged land pursuant to the federal Mineral Lands Leasing Act of February 25, 1920, as amended (30 U.S.C.A. § 181 et seq.). At about the...