Marina Tenants Assn. v. Deauville Marina Development Co.

• Decision Date: 19 May 1986
• Citation: 181 Cal.App.3d 122,226 Cal.Rptr. 321
• Court: California Court of Appeals Court of Appeals
• Parties: MARINA TENANTS ASSOCIATION, etc., et al., Plaintiffs, Appellants and Cross-Respondents. v. DEAUVILLE MARINA DEVELOPMENT CO., LTD., et al., Defendants, Respondents and Cross-Appellants. Civ. B009329.

Page 321

226 Cal.Rptr. 321

181 Cal.App.3d 122

MARINA TENANTS ASSOCIATION, etc., et al., Plaintiffs, Appellants and Cross-Respondents. v. DEAUVILLE MARINA DEVELOPMENT CO., LTD., et al., Defendants, Respondents and Cross-Appellants.

Civ. B009329.

Court of Appeal, Second District, Division 3, California.

May 19, 1986.

Certified for Partial Publication. ^*

Review Denied July 30, 1986.

Alvin F. Howard, for plaintiffs, appellants and cross-respondents

Miller and Chernoff, Stanley M. Chernoff, Howard, Ring & Chiziver, Ralph M. Weiss, Hillel Chodos, Rafael Chodos and Gina Marie Putkoski, Alschuler, Grossman & Pines, Bruce Warner and Michael L. Cypers, for defendants, respondents and cross-appellants.

KLEIN, Presiding Justice.

Plaintiffs, appellants and cross-respondents Marina Tenants Association, etc., et al. (Tenants), appeal from an order of dismissal following the sustaining of demurrers without leave to amend interposed by defendants, respondents and cross-appellants Deauville Marina Development Co., Ltd., a limited partnership (Deauville), Marina Admiralty Co., a limited partnership (Marina Admiralty), Bar Harbor Development Co., Ltd., a limited partnership (Bar The Lessees cross-appeal from an order striking various items from their memoranda of costs and disbursements.

Harbor), and Marina del Rey Country Club Apartments, a partnership doing business as Oakwood Garden Apartments (Oakwood), collectively referred to as Lessees.

The Tenants cannot state a cause of action as third-party beneficiaries, because even if they succeed in proving they are intended beneficiaries of the lease agreement (master lease) between the County of Los Angeles (the County) and the Lessees, they cannot assert rights greater than those of the promisee, herein the County, under that contract.

FACTUAL AND PROCEDURAL BACKGROUND

The Lessees leased publicly owned land in Marina del Rey from the County, and constructed apartment buildings, commercial structures, and other improvements. The Tenants are persons who rent premises from the Lessees.

On June 9, 1983, the Tenants as a class filed a third amended complaint, the gravamen of which was that the Tenants were third-party beneficiaries of the standard form master leases between the County and the Lessees.

The complaint set forth, inter alia: "4. Each and all of the lease agreements by and between the County ... and each of the Lessees provide, among other things, that: [p] A. The Lessee will, at its own cost and expense, construct and provide certain facilities on the premises demised to the Lessee and put such facilities to public use. The method of putting said facilities to public use includes the rental of said facilities to Tenants. [p] B. The rental rates to be charged to Tenants shall be fair and reasonable based upon the following two considerations: [p] (1) The demised property is intended to serve a public use and to provide needed facilities to the public at fair and reasonable cost, and [p] (2) Lessee is entitled to a fair and reasonable return upon Lessee's investment pursuant to the lease."

The complaint alleged "[t]he aforesaid provisions of the lease agreements alleged in paragraph 4 hereof were intended for the benefit of the Tenants[,]" and that the Lessees charged, and Tenants paid, rents at rates higher than what is "fair and reasonable."

The Tenants prayed for damages equal to the amount of any excess rents actually paid.

The trial court sustained the Lessees' demurrers without leave to amend and dismissed the action, ruling the Tenants are only incidental beneficiaries and without standing to bring the action.

CONTENTIONS

The Tenants contend the causes of action based upon third-party beneficiary to contract and unjust enrichment are adequately plead.

The Lessees counter that the Tenants are merely incidental beneficiaries of the master lease, and the cause of action based upon unjust enrichment is purely derivative of the Tenants' third-party beneficiary theory and must in turn fail, among other contentions.

On cross-appeal, the Lessees claim their reasonable attorney's fees and costs should have been allowed.

DISCUSSION

1. Scope of appellate review.

The allegations in the complaint must be regarded as true (Shaeffer v. State of California (1970) 3 Cal.App.3d 348, 354, 83 Cal.Rptr. 347), and are to be liberally construed with a view to substantial justice between the parties. (King v. Central Bank (1977) 18 Cal.3d 840, 843, 135 Cal.Rptr. 771, 558 P.2d 857.) Unless the complaint shows on its face that it is incapable of amendment, denial of leave will constitute an abuse of discretion. (King v. Mortimer (1948) 83 Cal.App.2d 153, 158, 188 P.2d 502.)

The function of a demurrer is to test the sufficiency of a plaintiff's pleading by raising questions of law. (Buford v. State of California (1980) 104 Cal.App.3d 811, 818, 164 Cal.Rptr. 264.) "As a reviewing court we are not bound by the construction placed by the trial court on the pleadings but must make our own independent judgment thereon, even as to matters not expressly ruled upon by the trial court." (Miller v. Bakers i News-Bulletin, Inc. (1975) 44 Cal.App.3d 899, 901, 119 Cal.Rptr. 92.)

Other relevant matters which are properly the subject of judicial notice (Evid.Code, § 452) may be treated as having been plead. (Helix Land Co. v. City of San Diego (1978) 82 Cal.App.3d 932, 937, 147 Cal.Rptr. 683.) ¹

Finally, where an ambiguous contract is the basis of an action, it is proper, if not essential, for a plaintiff to allege its own construction of the agreement. So long as the pleading does not place a clearly erroneous construction upon the provisions of the contract, in passing upon the sufficiency of the complaint, we must accept as correct plaintiff's allegations as to the meaning of the agreement. (Pigeon Point Ranch, Inc. v. Perot (1963) 59 Cal.2d 227, 233, 28 Cal.Rptr. 865, 379 P.2d 321.)

We apply these principles in reviewing the complaint.

2. General principles re third-party beneficiaries.

The rule relating to third party beneficiary contracts is codified in Civil Code section 1559 (section 1559), as follows: "A contract, made expressly for the benefit of a third person, may be enforced ... at any time before the parties thereto rescind it." The section excludes enforcement of a contract by persons who are only incidentally or remotely benefited by it. (Lucas v. Hamm (1961) 56 Cal.2d 583, 590, 15 Cal.Rptr. 821, 364 P.2d 685.)

However, it is not necessary that the contract identify or refer to the third party by name; it is sufficient if it can be shown that the claimant is of a class of persons for whose benefit it was made. (Johnson v. Holmes Tuttle Lincoln-Merc. (1958) 160 Cal.App.2d 290, 297, 325 P.2d 193; 1 Witkin, Summary of Cal. Law (8th ed.1974) Contracts, § 507, p. 435.) "Insofar as intent to benefit a third person is important in determining [the] right to bring an action under a contract, it is sufficient that the promisor must have understood that the promisee had such intent." (Lucas v. Hamm, supra, 56 Cal.2d at p. 591, 15 Cal.Rptr. 821, 364 P.2d 685.) Further, no specific manifestation by the promisor of an intent to benefit the third person is required. (Ibid. )

In so holding, our Supreme Court disapproved earlier cases to the extent they required "that to permit a third person to bring an action on a contract there must be 'an intent clearly manifested by the promisor' to secure some benefit to the third person." (Ibid. )

a. Where governmental entity is a party.

While section 1559 clearly allows third-party suits for breaches of contract where no government agency is a party to the contract, whether such suits are allowed when the government contracts with a private party depends upon analysis of the decisions in Martinez v. Socoma Companies, Inc. (1974) 11 Cal.3d 394, 113 Cal.Rptr. 585, 521 P.2d 841 and Zigas v. Superior Court (1981) 120 Cal.App.3d 827, 174 Cal.Rptr. 806.

In Martinez, plaintiffs sought to enforce the terms of a contract between defendant manufacturers and the United States government. Under the agreement, defendants received federal funds with which they were to hire and train the "hard-core unemployed" of East Los Angeles. When defendants failed to perform, plaintiffs, who were allegedly East Los Angeles residents certified as disadvantaged and eligible for employment under the program, sought to recover under the contract.

The Martinez court held standing to sue as a third-party beneficiary to a government contract depends on the intent of the parties as manifested by the terms of the contract, and the circumstances surrounding the formation of the agreement, and on that basis found the plaintiffs were incidental beneficiaries, and therefore without such standing. (Martinez v. Socoma Companies, Inc., supra, 11 Cal.3d at pp. 401-402, 113 Cal.Rptr. 585, 521 P.2d 841.)

In Zigas, plaintiff tenants alleged they were third-party beneficiaries of a contract between landlords of apartments financed by federally insured mortgages and the Department of Housing and Urban Development (HUD). Under said contract, landlords were obligated not to charge more than the HUD-approved rent schedule. Applying the principles of Martinez, the Zigas court determined the tenants were intended, and not incidental beneficiaries, and therefore had standing to sue. (Zigas v. Superior Court, supra, 120 Cal.App.3d at p. 837, 174 Cal.Rptr. 806.)

In reaching its holding, the Zigas court distinguished its fact situation from that of Martinez, and set forth the various factors upon which its decision was based as follows: (1) in Martinez, the federal government was "out of pocket" as a consequence of the breach, while in Zigas, the tenants suffered the direct pecuniary loss; (2) in Martinez, the agreement provided governmental administrative procedures for the resolution of disputes arising out of contract, but no such procedures were available in Zigas; (3) in ...