Court Opinion

ID: 946385
Source: CourtListenerOpinion
Date Created: 2013-06-27 20:53:49.350241+00
Date Added: 2024-06-11T12:35:31.564128
License: Public Domain

Filed 6/27/13 Berger Foundation v. Perez CA4/2

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
 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 This opinion has not been certified for publication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.

           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   FOURTH APPELLATE DISTRICT

                                                 DIVISION TWO

THE H.N. AND FRANCES C. BERGER
FOUNDATION,
                                                                         E054948
         Plaintiff and Appellant,
                                                                         (Super.Ct.No. INC 10006073)
v.
                                                                         OPINION
JUAN C. PEREZ, as Director, etc. et. al.,

         Defendants and Respondents.

         APPEAL from the Superior Court of Riverside County. Randall Donald White,

Judge. Affirmed.

         Barton, Klugman & Oetting, and Ronald R. St. John, for Plaintiff and Appellant.

         Watt, Tieder, Hoffar & Fitzgerald, Robert C. Niesley, Donna R. Tobar, and

Christopher M. Bunge, for Defendants and Respondents.

         Plaintiff and appellant The H.N. and Frances C. Berger Foundation appeals the

judgment of dismissal following the order granting the demurrer to its second amended

complaint for breach of contract, declaratory relief and petition for writ of mandate to

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compel defendants and respondents Juan C. Perez, as Director of the County of Riverside

Transportation Department (RTD), County of Riverside (Riverside), and Travelers

Casualty and Surety Company of America (Travelers) to enforce the terms of the Varner

Road Improvements Agreements and Faithful Performance Bonds. Finding no errors, we

affirm.

                      I. PROCEDURAL BACKGROUND AND FACTS

          This action concerns real property located in the Palm Desert area of Riverside on

Varner Road. Of the relevant 10 lots, eight were owned by Desert Gold Ventures, LLC

(DGV), six of which were subject to a deed of trust in favor of plaintiff, and two were

owned by plaintiff. On November 6, 2006, improvement agreements and securities were

approved by RTD and Riverside. These agreements and securities concerned the

construction of a road with drainage, water system, lighting, signing, and grading

improvements and were referred to as the Varner Road Improvement Agreements

(Agreements). On March 13, 2007, the Agreements were modified by an extension of

time and substitution of security, whereby Faithful Performance Bonds (Bonds) were

executed by Travelers. The Bonds issued by Travelers were to guarantee DGV’s

construction of certain improvements identified in the Agreements. Between 2006 and

2008, DGV completed some of the work under the Agreements but defaulted by failing

to fully complete the work insured by the Bonds. In 2009, DGV defaulted on its

obligations to plaintiff under the Deeds of Trust, and plaintiff acquired the six lots

through foreclosure. On or about December 29, 2010, Riverside and Travelers entered

into an agreement whereby some of the improvements in the Agreements were excluded

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from the Bonds but others were not, and thus, Travelers was required to complete those

improvements.

       Plaintiff initiated this action on July 2, 2010, against RTD as a petition for writ of

mandate to compel RTD to “publish for bidding the plans for the completion of the

Varner Road Improvements Agreements and to further take such steps as are necessary to

assure the completion of the Varner Road Improvements Agreements.” Following the

granting of a demurrer, plaintiff filed a first amended petition for writ of mandate and

complaint for breach of contract on December 1, 2010, adding DGV, Travelers, and

Richard R. Oliphant as additional defendants and including a breach of contract claim

against these additional defendants. Defendants demurred, and the trial court found that

plaintiff failed to show that Travelers was a party to the Agreements between DGV and

Riverside, and that plaintiff was unequivocally an intended third party beneficiary of the

Bonds issued by Travelers. Plaintiff was granted leave to amend.

       Plaintiff’s second amended complaint for breach of contract, petition for writ of

mandate and declaratory relief was filed on March 18, 2011. Defendants again

demurred.1 As to the breach of contract claim, they argued that plaintiff was neither a

party to nor a third party beneficiary of the Agreements. Regarding the petition for writ

of mandate, they argued that plaintiff failed to allege that RTD and Riverside had a

ministerial duty to enforce the Agreements, nor did plaintiff have standing to enforce the

Agreements. Finally, as to the declaratory relief claim, they argued that plaintiff had no

       1 Because this appeal involves only RTD, Riverside and Travelers, we limit our
discussion of defendants’ demurrers to the one filed by them.

                                              3
standing to challenge their contractual relations with Travelers. The trial court agreed

with defendants, finding that plaintiff was not a party to the Agreements or the Bonds

between DGV and Travelers, respectively, and Riverside; that “Mandamus will not lie to

enforce a purely contractual obligation,” and that “Plaintiff has no legally cognizable

theory on which to seek declaratory relief.” Judgment of dismissal was entered on

October 13, 2011. Plaintiff appeals.

                              II. STANDARD OF REVIEW

       We review de novo the trial court’s rulings sustaining a defendant’s demurrer

without leave to amend. (Schauer v. Mandarin Gems of Cal., Inc. (2005) 125

Cal.App.4th 949, 955 (Schauer).) “‘[W]e give the complaint a reasonable interpretation,

and treat the demurrer as admitting all material facts properly pleaded, but not the truth of

contentions, deductions or conclusions of law. We reverse if the plaintiff has stated a

cause of action under any legal theory. [Citation.]’ [Citation.]” (Id. at p. 955.)

                           III. THIRD PARTY BENEFICIARY

       According to plaintiff, the trial court erred in granting the demurrer without leave

to amend because plaintiff had standing as a third party beneficiary to the Agreements

and Bonds. “We begin with the rule that ‘[e]very action must be prosecuted in the name

of the real party in interest, except as otherwise provided by statute.’ [Citation.] Where

the complaint shows the plaintiff does not possess the substantive right or standing to

prosecute the action, ‘it is vulnerable to a general demurrer on the ground that it fails to

state a cause of action.’ [Citations.]” (Schauer, supra, 125 Cal.App.4th at p. 955.) Here,

                                              4
the trial court held that plaintiff failed to allege it had standing to bring a claim because

plaintiff was neither a party to the Agreements or Bonds, nor a third party beneficiary.

       “Civil Code section 1559 provides: ‘A contract, made expressly for the benefit of

a third person, may be enforced by him [or her] at any time before the parties thereto

rescind it.’ Because third party beneficiary status is a matter of contract interpretation, a

person seeking to enforce a contract as a third party beneficiary ‘“must plead a contract

which was made expressly for his [or her] benefit and one in which it clearly appears that

he [or she] was a beneficiary.”’ [Citation.]” (Schauer, supra, 125 Cal.App.4th at p. 957.)

“‘The action by a third party beneficiary for the breach of the promisor’s engagement

does not rest on the ground of any actual or supposed relationship between the parties but

on the broad and more satisfactory basis that the law, operating on the acts of the parties,

creates the duty, establishes a privity, and implies the promise and obligation on which

the action is founded.’ [Citation.]” (Spinks v. Equity Residential Briarwood Apartments

(2009) 171 Cal.App.4th 1004, 1024 (Spinks).)

       The intended beneficiary “bears the burden of proving that the promise he seeks to

enforce was actually made to him personally or to a class of which he is a member.

[Citations.]” (Neverkovec v. Fredericks (1999) 74 Cal.App.4th 337, 348-349, fn.

omitted; see also Spinks, supra, 171 Cal.App.4th at p. 1024.) Although, generally, it is a

question of fact whether a third party is an intended beneficiary of a contract, “if ‘the

issue is presented to the court on the basis of undisputed facts and uncontroverted

evidence and only a question of the application of the law to those facts need be

answered,’ appellate review is de novo. [Citations.]” (Spinks, supra, at p. 1024.) Here,

                                               5
review is de novo. We simply look to the allegations in, and documents attached to, the

second amended complaint to determine whether they demonstrate that plaintiff was a

third party beneficiary. If such facts and allegations establish, as a matter of law, that

plaintiff was not a third party beneficiary, then the trial court did not err in sustaining

defendants’ demurrer without leave to amend.

       Plaintiff argues it did not have to be named in the Agreements or Bonds to be a

third party beneficiary, and the intent to benefit plaintiff did not have to be a mutual

intent by both parties to the Agreements and Bonds. Rather, plaintiff contends that

standing lies because recent case law makes it clear that “there is no requirement that

such [express] benefit be an exclusive benefit, nor that the third party be set forth by

name.” (Bolding and italics in original.) Citing COAC, Inc. v. Kennedy Engineers

(1977) 67 Cal.App.3d 916, 920, and Kaiser Engineers, Inc. v. Grinnell Fire Protection

Systems Co. (1985) 173 Cal.App.3d 1050, 1055,2 plaintiff maintains the parties merely

had to understand that plaintiff was an intended beneficiary. (Spinks, supra, 171

Cal.App.4th at p. 1023 [“‘A third party may enforce a contract where he shows that he is

a member of a class of persons for whose benefit it was made’”].) However, neither the

       2  These cases are inapposite. In COAC, Inc. v. Kennedy Engineers, supra, 67
Cal.App.3d at pages 920-922, the plaintiff was determined to be a creditor beneficiary
under the contract between a water district and defendants because the district was
subject to an implied covenant to provide an environmental impact report as a necessary
condition to plaintiff’s performance of its contract. In Kaiser Engineers, Inc. v. Grinnell
Fire Protection Systems Co., supra, 173 Cal.App.3d at pages 1053, 1055 and 1056, cross-
complainant Kaiser was an intended third party beneficiary of an express indemnity
agreement between the cross-defendant Grinnell and the United States Department of
Energy when one of Grinnell’s employees sued Kaiser for injuries sustained at the
construction site. Neither of these cases involved the factual situation before this court.

                                               6
pleadings nor the documents demonstrate that, as a matter of law, the parties to the

Agreements and Bonds intended to benefit plaintiff, specifically.

          In determining whether a contract was made for the benefit of a third person, we

look to the terms of the contract. (Spinks, supra, 171 Cal.App.4th at p. 1022.) “‘If the

terms of the contract necessarily require the promisor to confer a benefit on a third

person, then the contract, and hence the parties thereto, contemplate a benefit to the third

person. The parties are presumed to intend the consequences of a performance of the

contract’ [citations.]” (Ibid.) But “‘it is not enough that the third party would

incidentally have benefited from performance.’ [Citation.] ‘The circumstance that a

literal contract interpretation would result in a benefit to the third party is not enough to

entitle that party to demand enforcement. The contracting parties must have intended to

confer a benefit on the third party.’ [Citation.] ‘The effect of the section is to exclude

enforcement by persons who are only incidentally or remotely benefited.’ [Citation.]”

(Ibid.)

          Recognizing it was not named as an express beneficiary in the Agreements or

Bonds, plaintiff maintains it has standing to enforce them as a member of the class for

whose benefit they were made, namely, the property owners of the lots in the affected

subdivision. Because plaintiff owns most of such lots, it claims standing. We disagree.

          Ascertaining whether there was intent to confer a benefit on plaintiff as a third

party beneficiary is a question of ordinary contract interpretation. (Spinks, supra, 171

Cal.App.4th at p. 1023.) In interpreting a contract, we give effect to the parties’ intent as

it existed at the time of contracting. (Civ. Code, § 1636; Spinks, supra, at p. 1023.)

                                                7
“Intent is to be inferred, if possible, solely from the language of the written contract.

[Citations.]” (Ibid.) In construing a contract, the court looks to “‘the circumstances

under which it was made, and the matter to which it relates.’ (Civ. Code, § 1647.) ‘In

determining the meaning of a written contract allegedly made, in part, for the benefit of a

third party, evidence of the circumstances and negotiations of the parties in making the

contract is both relevant and admissible.’ [Citations.] [¶] Additionally, a court may

consider the subsequent conduct of the parties in construing an ambiguous contract.

[Citation.] In determining intent to benefit a third party, the contracting ‘parties’

practical construction of a contract, as shown by their actions, is important evidence of

their intent.’ [Citation.]” (Spinks, supra, at p. 1024.)

       In reviewing the trial court’s ruling on defendants’ demurrers, this court is limited

to evaluating whether the Agreements and Bonds are susceptible to plaintiff’s

interpretation, based on the pleaded facts and the documents attached to the operative

complaint. According to the Agreements and the Bonds, plaintiff was not a named party,

not an intended signatory, or even expressly identified in any capacity, let alone as a third

party beneficiary. The Agreements and the Bonds do not reflect the intent of the

contracting parties to confer any of the rights or impose any of the obligations of the

contracts to anyone or any group or class other than themselves, their successors or

assigns. More important, they do not reference any benefits to be conferred to the third

persons in the general class of private property owners of the affected tract. Instead, the

language in the Agreement is clear: “[DGV], for and in consideration of the approval by

[Riverside] of the final map of that certain land division known as Tract 34484, hereby

                                              8
agrees, at [DGV’s] own cost and expense, to furnish all labor, equipment and materials

necessary to perform and complete . . . all road and drainage improvements . . . .”

(Underlining and bolding in original.) Riverside “shall not, nor shall any officer or

employee of [Riverside], be liable or responsible for any accident, loss or damage

happening or occurring to the works specified in this agreement prior to the completion

and acceptance thereof, nor shall [Riverside] or any officer or employee thereof, be liable

for any persons or property injured by reason of the nature of the work, or by reason of

the acts or omissions of [DGV] . . . in the performance of the work . . . .” DGV agreed to

construct the improvements for Tract 34484 in exchange for Riverside’s approval of the

final map for Tract 34484. Riverside did not promise to complete the construction in the

event of DGV’s default. Similarly, the Bonds did not create some obligation on the part

of either Riverside or Travelers as to plaintiff.

       While DGV intended to develop the property, nothing in the Agreements and

Bonds states or implies they were intended to benefit plaintiff or the class of property

owners of the lots in the affected subdivision. Any such benefits are unspecified and

merely incidental to the purpose and intent of the Agreements. “The effect of Civil Code

section 1559 providing that ‘[a] contract made expressly for the benefit of a third person,

may be enforced by him’ is to exclude persons only remotely or incidentally benefited.”

(Spector v. National Pictures Corp. (1962) 201 Cal.App.2d 217, 224.) While plaintiff

does not have to be named in the Agreements and Bonds in order to be a third party

beneficiary, there must be language in them or extrinsic evidence that the promisor,

Riverside or Travelers, understood that the promisee (DGV) entered into the Agreements

                                               9
and Bonds with the intent that they benefit plaintiff or a class of individuals

encompassing plaintiff. (Ibid.) There is no such language in the Agreements and Bonds

or factual allegations in the second amended complaint demonstrating any intent.

Moreover, the circumstances and negotiations of the parties, coupled with the subsequent

conduct of the parties fail to establish any intent. The pleadings and attached documents

demonstrate as a matter of law that none of the parties to the Agreements and Bonds

intended that the purpose and intent of the Agreements and Bonds was to benefit

specifically plaintiff or a class of individuals encompassing plaintiff. Thus, neither

plaintiff nor any other property owner is an intended third party beneficiary of the

Agreements and the Bonds. Rather, they are merely incidental beneficiaries.

                                 IV. WRIT OF MANDATE

       A traditional writ of mandate brought under Code of Civil Procedure section 1085

compels “performance of an act which the law specially enjoins, as a duty resulting from

an office, trust, or station . . . .” (Code Civ. Proc., § 1085, subd. (a).) This type of writ

petition “seeks to enforce a mandatory and ministerial duty to act on the part of an

administrative agency or its officers. [Plaintiff] therefore had to show: (1) a clear,

present, and usually ministerial duty to act; and (2) that [it] had a clear, present and

beneficial right to have that duty performed. Mandate will not issue if the duty is not

plain or is mixed with discretionary power or the exercise of judgment.” (Los Angeles

County Prof. Peace Officers’ Assn. v. County of Los Angeles (2004) 115 Cal.App.4th

866, 869.) That is, a writ “will not lie to control the discretion conferred upon a public

officer or agency. [Citation.] The latter rule derives from the view ‘“courts should let

                                              10
administrative boards and officers work out their problems with as little judicial

interference as possible. . . .”’ [Citation.]” (State Bd. of Education v. Honig (1993) 13

Cal.App.4th 720, 741.) Here, the trial court ruled that mandamus will not lie to enforce a

purely contractual obligation or to enforce the contractual obligations of a public body.

(McDonald v. Stockton Met. Transit Dist. (1973) 36 Cal.App.3d 436, 442 [“mandamus is

not appropriate to enforce the contractual obligations of a public body”]; California

Teachers Assn. v. Governing Board (1984) 161 Cal.App.3d 393, 399 [mandamus is not

appropriate where the act which a plaintiff seeks to compel is not an act required by

law].)

         Government Code section 66462, subdivision (c) requires that a subdivision

performance bond be obtained to guarantee the underlying subdivision agreement.

Because there is no requirement that the public entity enforce any specific obligations

regarding the property’s improvements, the public entity has discretion to determine the

scope of improvements to be performed and bonded. All of the bond obligations are

matters of contract. (Civ. Code, § 2837 [surety bond interpreted same way as other

contracts].) Here, upon DGV’s default, Riverside exercised its discretion and entered

into a contractual agreement with Travelers, modifying the scope of improvements to be

performed under the underlying Agreements. Plaintiff offers no authority proscribing

such modification.

         As defendants point out, “California law is clear that contractual obligations under

surety performance bonds or other agreements, such as the Subdivision Agreements, do

not extend to third parties unless there is contractual language clearly showing an intent

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to benefit third parties.” (Morro Palisades Co. v. Hartford Accident & Indemnity Co.

(1959) 52 Cal.2d 397, 401 (Morro) [“the right to recover under the bond appears clearly

to be a right of the county rather than of the owner of a portion of the property which

might be affected by the [contractor’s] default”]; Ragghianti v. Sherwin (1961) 196

Cal.App.2d 345, 349.) In Morro, a subdivider gave the county of San Luis Obispo a

bond to insure faithful performance of an agreement to improve the streets and roads in a

subdivision tract. The county assigned the bond to a landowner in the tract. The

landowner sued on the bond to recover for the subdivider’s failure to complete the road

work. Our state’s highest court affirmed the judgment of dismissal, holding that the

county had no power to convey such a bond, which was for the benefit of the county

rather than the owner of the land affected by the default. (Morro, supra, at p. 401.) In

this case, there was no assignment of any rights. Rather, plaintiff claims a third party

beneficial right. However, as previously noted, while plaintiff will benefit from the

execution of the Agreements, it does not follow that plaintiff was a third party beneficiary

to them. Thus, plaintiff has no right to enforce or recover under the Agreements and

Bonds.

       Contrary to plaintiff’s claim, this case is not similar to Terminal Plaza Corp. v.

City and County of San Francisco (1986) 186 Cal.App.3d 814 (Terminal Plaza). In

Terminal Plaza, the City and County of San Francisco approved construction of an office

building subject to the condition that the developer build a 12-foot-wide mid-block

pedestrianway to accommodate increased foot traffic. (Id. at p. 819.) The developer later

asserted that its duty to construct the pedestrianway was contingent on the city’s

                                             12
construction of a pedestrian bridge, and if the bridge were constructed, the developer

could fulfill its obligation by making available to the city a four-and-one-half-foot strip of

property between the office building and an adjacent property. (Id. at pp. 824-825, 827.)

A corporation that owned the adjacent property jointly with the developer of the office

building brought a petition for writ of mandate seeking to compel the city to enforce the

condition. The corporation apparently feared that the city would attempt to acquire its

interest in the jointly-owned property by eminent domain. The trial court denied the

petition, but the appellate court reversed. (Id. at p. 839.) The court held that (1) the

resolution was clear and unambiguous and required the developer to construct a 12-foot-

wide pedestrianway without using the jointly-owned property in the absence of the

corporation’s consent; (2) the duty to construct the pedestrianway was a current duty,

subject to enforcement by writ of mandate, and not contingent on the city’s construction

of a pedestrian bridge; and (3) the zoning administrator did not have discretion to

interpret the resolution or prosecutorial discretion to refuse to enforce it. (Id. at pp. 825-

836.) Unlike the facts before this court, in Terminal Plaza, the construction of an office

building was subject to the condition that the developer build a 12-foot-wide mid-block

pedestrianway to accommodate increased foot traffic. (Id. at p. 819.) Here, there were

no required conditions.

       Notwithstanding the above, plaintiff argues that “[s]ometimes a mandamus

petition involving a contract will also involve issues of discretion, as sometimes a

municipal entity has discretion as to how to implement a contract, and sometimes

implementation of a contract is nondiscretionary.” Plaintiff adds that “[w]here there is no

                                              13
adequate remedy at law, and where the local government duty is nondiscretionary, then

mandamus is an appropriate remedy even where the substance of the action is to enforce

a contract, or compel the entity or officer to enforce rights under a contract.” (Italics and

bolding in original.) According to plaintiff, mandamus is appropriate to compel

defendants to enforce the terms of the Agreements and Bonds in order to compel

completion of the improvements to Varner Road. We disagree.

       None of the statutory enactments cited by plaintiff imposes a mandatory duty on

defendants to enforce the Agreements or Bonds. “In order to construe a statute as

imposing a mandatory duty, the mandatory nature of the duty must be phrased in explicit

and forceful language. [Citation.]” (Quackenbush v. Superior Court (1997) 57

Cal.App.4th 660, 663.) Even the express language in the Agreements and the Bonds do

not mandate such enforcement, nor restrict Riverside from modifying them. According

to the Agreements, approval of the final map was conditioned upon the satisfactory

completion of the improvements contemplated. However, in the event of default,

“[Riverside] shall have the power, on recommendation of the Director of Transportation,

to terminate all rights of [DGV] because of such default.” In response to DGV’s default,

Riverside and Travelers entered into an agreement whereby some of the improvements in

the Agreements were excluded from the Bonds but others were not, and thus, Travelers

was required to complete those improvements.

       Moreover, plaintiff has not established that its claim is a consequence that was

contemplated by the statutory enactments requiring surety bonds. (Cf. Haggis v. City of

Los Angeles (2000) 22 Cal.4th 490, 499.) The statutory enactments requiring the Bonds

                                             14
were not intended to protect plaintiff as a property owner. (See Morro, supra, 52 Cal.2d

at pp. 401-402 [“It is the county which is indemnified by the express terms of the bond

against loss,” which “may thus be likened to faithful performance bonds required by

statute from contractors on state public works [citation] and on county building contracts

[citation].”].) Instead, the purpose of requiring the Bonds was to protect Riverside and

the public. (County of Yuba v. Central Valley Nat. Bank, Inc. (1971) 20 Cal.App.3d 109,

112 [“purpose for requiring security for street improvement work is to insure faithful

performance of a subdivider’s obligation to place streets in a proper condition for use by

the public”].)

       Based on the above, we affirm the ruling in favor of defendants.

                                      V. DISPOSITION

       The judgment is affirmed. Defendants are awarded costs on appeal.

       NOT TO BE PUBLISHED IN OFFICIAL REPORTS

                                                               HOLLENHORST
                                                                        Acting P. J.
We concur:

       MCKINSTER
                                 J.

       RICHLI
                                 J.

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