West Coast Constr. Co. v. Oceano Sanitary Dist.

• Decision Date: 19 May 1971
• Citation: 95 Cal.Rptr. 169,17 Cal.App.3d 693
• Court: California Court of Appeals Court of Appeals
• Parties: WEST COAST CONSTRUCTION COMPANY, Inc., a California corporation, Plaintiff and Respondent, v. OCEANO SANITARY DISTRICT, a political subdivision of the State of California, Defendant and Appellant. Civ. 36894.

Page 169

95 Cal.Rptr. 169

17 Cal.App.3d 693

WEST COAST CONSTRUCTION COMPANY, Inc., a California corporation, Plaintiff and Respondent, v. OCEANO SANITARY DISTRICT, a political subdivision of the State of California, Defendant and Appellant.

Civ. 36894.

Court of Appeal, Second District, Division 1, California.

May 19, 1971.

Shipsey & Seitz, and Gerald W. Shipsey, San Luis Obispo, for defendant and appellant.

Crossman, Weaver & Geihs and Gerald C. Weaver, Pismo Beach, for plaintiff and respondent.

LILLIE, Associate Justice.

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 7, 1967, a written contract was entered into between plaintiff and the District to construct the sewer system in question. As construction progressed, plaintiff received monthly progress payments of which 10 per cent was retained by the District as security for plaintiff's fulfillment of the contract. As of November 2, 1967, the District was delinquent to the extent of approximately $139,000 in progress payments; plaintiff then stopped construction and filed a claim (Gov.Code, § 910) for $244,540.63, representing the above delinquency and other items (including damages for breach of contract). In an effort to find some way of completing the project and settling plaintiff's claim, extensive negotiations were carried on between the parties and the Farmers Home Administration (United States Department of Agriculture), referred to as 'FHA' which originally had purchased $400,000 of the District's general obligations bonds and $150,000 of its revenue bonds to finance the project. At the District's request, on February 5, 1968, plaintiff submitted a lump sum bid of $213,000 to complete the project conditioned on the raising by the District of sufficient funds to pay other items set forth in plaintiff's claim with security therefor, including the retention monies held by the District. On March 19, 1968, the District represented to plaintiff that FHA would purchase an additional $50,000 of its revenue bonds, also, that the District would receive a grant from FHA in the sum of $150,000. It was further represented that these funds, along with the balance of construction funds on hand (assertedly $220,000), would enable the District to meet plaintiff's demands and allow it to deposit in escrow the sum of $42,949.65 to secure payment of one item set forth in plaintiff's claim. On March 25, 1968, according to the declaration of plaintiff's counsel (Mr. Weaver), the District further represented through its administrative officer (Mr. Butch) that after receipt of the bond and grant proceeds, the total funds available for payment of construction costs, as well as the deposit in escrow of the sum above mentioned, amounted to $416,949.65; in addition, according to the declaration, Mr. Butch stated that the District would have $13,300 available for engineering fees, bond costs, attorney's fees and other incidentals connected with the completion of the project.

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 restraining order was obtained on the basis of the matters set forth in plaintiff's second cause of action. After an order to show cause hearing on February 21, 1969, a preliminary injunction (the form of which was prepared by counsel for the District) was issued by the court (Judge O'Reilly) on February 24, 1969; thereunder it was ordered that the District not spend any construction or FHA funds for the engagement of contractors other than plaintiff, the latter also being ordered to return to the job of construction within 15 days. On April 8, 1969, the court refused to dissolve the injunction after a complaint by the District that plaintiff was in contempt. Thereafter, on August 21, 1969, the District filed its answer, accompanied by a counterclaim, its demurrer to the complaint having been previously overruled.

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 plaintiff in the sum of $103,146, exclusive 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 decisions, including Agricultural Prorate Commission et al. v. Superior Court, 30 Cal.App.2d 154, 155, 85 P.2d 898, support the above claim; significantly, however, in Agricultural Prorate Commission the continuance was over defendants' objection and without their consent. But in the case at bench the District did not object; indeed it voluntarily participated in a full scale hearing on January 15 when oral and documentary evidence was introduced. Having so acted, plaintiff properly argues, the doctrine of estoppel is applicable to the District if not demanded: 'There seems to be substantial authority for the proposition that a party who has invoked or consented to the exercise of jurisdiction beyond the court's authority may be precluded from challenging it afterwards, even on a direct attack by appeal.' (1 Witkin, Cal.Procedure, § 149, p. 412.) Too, as pointed out in Remillard Brick Co. v. Dandini, 47 Cal.App.2d 63, 66, 117 P.2d 432, the requirements of the statute (§ 527) are primarily for the benefit of the defendant and may be waived by him. In general accord is Munns v. Stenman, 152 Cal.App.2d 543, 558, 314 P.2d 67, 77: "The circumstances of a particular case may be such as to estop a person from setting up the invalidity of a judgment.' (Citation.)'

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....