Sofias v. Bank of America

• Decision Date: 25 September 1985
• Docket Number: No. G001119,G001119
• Citation: 172 Cal.App.3d 583,218 Cal.Rptr. 388
• Court: California Court of Appeals
• Parties: Demetrios SOFIAS, Plaintiff and Appellant, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, Defendant and Respondent.

Page 388

218 Cal.Rptr. 388

172 Cal.App.3d 583

Demetrios SOFIAS, Plaintiff and Appellant, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, Defendant and Respondent.

No. G001119.

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

Sept. 25, 1985.

Certified for Partial Publication ¹

[172 Cal.App.3d 584] Irsfeld, Irsfeld & Younger and William A. Francis, Glendale, for plaintiff and appellant.

[172 Cal.App.3d 585] Office of Gen. Counsel, Bank of America and George W. Coombe, Jr., Gen. Counsel, Los Angeles, Winslow Christian, San Francisco, Ullar Vitsut, Louis J. Bachleder and John M. Redmond, Los Angeles, for defendant and respondent.

OPINION

SONENSHINE, Associate Justice.

Appellant Demetrios Sofias appeals after judgment on the pleadings in favor of respondent Bank of America National Trust and Savings Association. Underlying this lawsuit is a construction dispute. The appeal requires us to consider whether the California Mechanics' Lien Law prohibits Sofias, a general contractor, from asserting rights accruing out of a construction loan agreement between the property owner and the lender.

* * *

Defendant Angelo Boussiacos (not a party to this appeal) contracted with Sofias for the construction of a restaurant. Boussiacos signed a construction loan agreement with Bank of America to obtain the necessary funds. Sofias also signed the document, agreeing as the contractor to be bound by certain provisions of the construction loan agreement.

Thereafter, problems arose in the progress of construction. Sofias' complaint blames Boussiacos. Further, Sofias claims he has not been paid for the work performed.

Sofias' suit alleges three causes of action. The first cause of action is against Boussiacos for breach of contract. ² The second and third causes of action are against Bank of America. In the second cause of action, Sofias claims he is a third party beneficiary to the construction loan agreement between Boussiacos and Bank of America. Thus, when the bank refused to pay Sofias out of the construction loan fund for work he allegedly completed, he claims the bank breached its duty to him as a third party beneficiary. The third cause of action alleges Bank of America failed to act on a stop notice and verified statement of claim for the work performed.

Shortly before trial, Bank of America moved for judgment on the pleadings. The bank argued Sofias' second cause of action is barred by the California Mechanics' Lien Law (see Civ.Code, § 3264). ³ The court agreed and granted Bank of America judgment on the pleadings. ⁴

I

A motion for judgment on the pleadings is a nonstatutory but well established procedure with the purpose and effect of a general demurrer. (Colberg, Inc. v. State of California ex rel. Dept. Pub. Wks. (1967) 67 Cal.2d 408, 411-412, 62 Cal.Rptr. 401, 432 P.2d 3; Olson v. County of Sacramento (1969) 274 Cal.App.2d 316, 329, 79 Cal.Rptr. 140.) Because the motion is, in effect, a general demurrer, the same rules apply. (Mathews v. State of California ex rel. Dept. of Transportation (1978) 82 Cal.App.3d 116, 119, 145 Cal.Rptr. 443.) Thus, to prevail on a motion for judgment on the pleadings, a defendant must show a complaint fails to state a cause of action. (Franklin v. Municipal Court (1972) 26 Cal.App.3d 884, 900, 103 Cal.Rptr. 354; see also Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 151, 157 P.2d 1; Code Civ.Proc., § 430.10, subd. (e).)

As noted, Sofias' second cause of action was originally premised on the proposition he was a third party beneficiary to the construction loan agreement between Boussiacos and Bank of America. The bank contends section 3264 bars any such claim. We agree with the bank.

"Section 3264 of California Civil Code was ... designed to protect investors in construction projects. Enacted as part of California's comprehensive Mechanics' Lien Law, Cal.Civ.Code § 3082 et seq., this section was drafted in response to mortgage lender protests against state court decisions holding that even after completion of construction, a lien claimant may have an equity interest in the building loan account that is prior and superior to the rights of both the lender and the builder. See M. Marsh, California Mechanics' Lien Law Handbook, § 5.27 at 182-83 (3d ed. 1979). The California legislature's solution was to limit the rights that might be asserted 'with respect to any fund for payment of construction costs.' Section 3264 provides that claims upon construction loan funds by persons furnishing services or material are confined to those based on statutory mechanics' lien and stop notice procedures, and that 'no person may assert any [other] legal or equitable right with respect to such fund, other than a right created by direct written contract between such person and the person holding the fund.' " (Pankow Const. Co. v. Advance Mortg. Corp. (9th Cir.1980) 618 F.2d 611, 614, fn. omitted.) ⁵ Hence, "section 3264 abolishes all theories of equitable liens or trust funds." (Boyd & Lovesee Lumber Co. v. Western Pacific Financial Corp. (1975) 44 Cal.App.3d 460, 465, 118 Cal.Rptr. 699, cited with approval in Connolly Development, Inc. v. Superior Court (1976) 17 Cal.3d 803, 827, fn. 25, 132 Cal.Rptr. 477, 553 P.2d 637; see also Pankow Const. Co. v. Advance Mort. Corp., supra at pp. 614-615.)

Based on the foregoing, the Ninth Circuit concluded Pankow could not predicate a claim for relief on the assertion it was a third party beneficiary to a construction loan agreement. "By definition a third party beneficiary does not rely upon a right 'created by direct written contract'. See Cal.Civ.Code § 3264." (Pankow Const. Co. v. Advance Mort. Corp., supra, 618 F.2d 611, 616.)

Even in the absence of the Pankow opinion, we would hold Sofias is not a third party beneficiary to the construction loan agreement. A contract made expressly for the benefit of a third person may be enforced by that person at any time before the parties rescind it. ( § 1559.) But a third party beneficiary must show the contract was made expressly for his or her benefit. (R.J. Cardinal Co. v. Ritchie (1963) 218 Cal.App.2d 124, 135, 32 Cal.Rptr. 545; City of San Francisco v. Western Airlines (1962) 204 Cal.App.2d 105, 120, 22 Cal.Rptr. 216.) " '[E]xpressly' means 'in an express manner; in direct or unmistakable terms; explicitly; definitely; directly.' " (R.J. Cardinal Co. v. Ritchie, supra, 218 Cal.App.2d, at p. 135, 32 Cal.Rptr. 545; see also ...