Motion-Secondary: BEACON RESIDENTIAL COMMUNITY ASSOCIATION VS. CATELLUS THIRD AND KING LLC et al

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                                KATZOVF & RIGGS LLP

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ANN RANKIN (SBN 83690)
TERRY WILKENS (SBN 118469)
Law Offices of Ann Rankin

3911 Harrison Street

Oakland, CA 94611

Tel.: (510) 653-8886

Fax: (510) 653-8889

KENNETH S. KATZOFF (SBN 103490)
ROBERT R. RIGGS (SBN 107684)
SUNG E. SHIM (SBN 184247)

Katzoff & Riggs LLP

1500 Park Ave #300

Emeryville, CA 94608

Tel: (510) 597-1990

Fax: (510) 597-0295

Attorneys for Plaintiff BEACON
RESIDENTIAL COMMUNITY
ASSOCIATION

ELECTRONICALLY
FILED

Superior Court of California,
County of San Francisco

JAN 04 2013

Clerk of the Court
BY: JUDITH NUNEZ
Deputy Clerk

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SAN FRANCISCO

BEACON RESIDENTIAL
COMMUNITY ASSOCIATION,

Plaintiff,

vs.

CATELLUS THIRD AND KING LLC,
etal,

Defendants.

eS SS SSS SS SS

Case No. CGC 08-478453

OPPOSITION OF BEACON
RESIDENTIAL COMMUNITY
ASSOCIATION TO MOTIONS FOR
SUMMARY ADJUDICATION ON
SEVENTH CAUSE OF ACTION
FOR THIRD PARTY
BENEFICIARY/BREACH OF
CONTRACTS AND
SUBCONTRACTS

Date: January 17, 2013
Time: 9:30 a.m.

Dept.: 304

Judge: TBD

Trial Date: TBD

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TABLE OF CONTENTS

ARGUMENT wu. ccccccssccsesessesessessesssecsseessnaessecssansssessanssseusaneesensanessersaeeseesessersessrsssseseoaesiesisaes

A. The Subcontractors Are Not Entitled to Summary Judgment Unless
There Are No Triable Issues as to Any Material Fact.

B. Webcor and the Subcontractors Are Not Entitled to Summary
Judgment, Because a Triable Issue of Fact Exists that Plaintiff Is a
Third Party Beneficiary of the Prime Contract and the Subcontracts .........

Cc. The Webcor and the Subcontractors Have Failed to Shift the
Burden to Plaintiff by Providing Basic Evidence in Support of
Their MOtion .....ccccceceesesceseceesseeneeeseseeneeneessesnenesaeessnessessersnsnsneeseaenanes

CONCLUSION oo. eeccecseesssnsseeseseseessnessssseesseeserssnsseresanterseessneessneenensasessaneasescanesseseneessens

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TABLE OF AUTHORITIES

Cases
Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826 6,10
Cartwright v. Viking Indus., Inc. (E.D. Cal. 2008) 249 F.R.D. 351 8
Gilbert Fin. Corp. v. Steelform Contracting Co. (1978) 82 Cal. App. 3d 65 8
In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, and Prods.

Liab. Litigation (C.D. Cal. 2010) 754 F.Supp.2d 1145 8
Johnson v. Sup. Ct. (2000) 80 Cal.App.4th 1050 7
KOAC, Inc. v. Kennedy Engineers (1977) 67 Cal.App.3d 916 7
Landale-Camercon Ct., Inc. v. Ahonen (2007) 155 Cal.App.4th 1401 8,10
Loduca v. Polyzos (2007) 153 Cal. App.4th 334 7,8
Mann v. Cracchiolo (1985) 38 Cal.3d 18 6
Outdoor Services v. Pabagold (1986) 185 Cal.App.3d 676 7
Prouty v. Gores Tech. Group (2004) 121 CaL.App.4th 1225 7,11
Shell v. Schmidt (1954) 126 Cal.App. 2d 279 8
Statutes
Civ. Code §1559 7
Code of Civil Procedure § 437c 6

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INTRODUCTION

Plaintiff Beacon Residential Community Association and its individual members
(all collectively “Plaintiff’) hereby submits this memorandum in opposition to the
separate motions for summary adjudication of defendant Webcor Construction, Inc.
(‘Webcor’), defendant Anning-Johnson Company (“AJ”) and defendants Cupertino
Electric, Inc., Creative Masonry, Inc., Carefree Toland Pools, Inc., Van Mulder Sheet
Metal, Inc., N.V. Heathorn, Inc., Critchfield Mechanical, Inc., Blue’s Roofing
Company, West Coast Protective Coatings, Allied Fire Protection, F. Rodgers
Corporation and Western Roofing Company (with AJ, all collectively “Subcontractors”)
for summary adjudication as to plaintiffs seventh cause of action for third party
beneficiary breach of contracts and subcontracts (all collectively “the Motions”). The
Motions principally rely upon the same general set of facts, evidence and legal
arguments.

The purchasers of units at the Beacon Project were third party beneficiaries of
the contract between the general contractor of the project, Webcor and the developer of
the project, and the contracts between Webcor and the Subcontractors. It is well settled
that the owners of real property are third party beneficiaries of the contract between the
general contractor and the subcontractor(s). Notwithstanding the self-serving testimony
and legal conclusions of Webcor and the Subcontractors, a triable issue of fact exists as
to whether, at the time that they entered the contracts at issue in the Motions, Webcor

and the Subcontractors knew that the individual units at the Beacon Project would be

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offered for sale to the public. Evidence exists to support third party beneficiary liability
of Webcor and the Subcontractors to Plaintiff. Accordingly, the Court should deny the
Motions.
STATEMENT OF FACTS

Plaintiff brings its Seventh Cause of Action for breach of the contract between
Webcor and the developer of the Beacon Project, defendant Catellus Third and King,
LLC (“Catellus”)! and the subcontracts between Webcor and the Subcontractors on
behalf of the owners of residential units at the Beacon Project in San Francisco.” The
Beacon Project consists of 595 units that are situated within eight different buildings.
(Declaration of Michael Alfaro in Support of Motion for Class Certification, filed herein
on Aug. 24, 2012 attached as (“Alfaro Class Cert. Decl.”), § 3 attached as Exhibit 6 to
Plaintiff's Request for Judicial Notice in Opposition to Motions for Summary
Adjudication of Mission Place, LLC and Catellus filed herein on December 3, 2012
(‘Request for Judicial Notice”).) The project has two sets of four buildings, known as
250 King Street and 260 King Street, respectively. Each set of residential buildings
consists of a high rise structure, commonly called the “tower,” of 16 stories, while the

other three buildings making up each set are called “mid rise” and have between six and

* “Catellus” as used herein refers to all of the following defendants: Catellus Third and
King, LLC; Catellus Development Corporation; Catellus Commercial Development
Corporation, Catellus Operating Limited Partnership; Catellus Urban Development
Corporation; Third and King Investors LLC; and Prologis. Plaintiff contends that
Catellus Third and King, LLC acted as the agent of all of these parties throughout the
relevant period of time, and that documents relating to the Beacon Project signed by
Catellus Third and King, LLC were signed as an agent on behalf of each of the Catellus
parties.

* Plaintiff's Motion for Class Certification was filed Aug. 24, 2012 and is pending

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nine stories. There are also commercial portions of the project, and residential
amenities such as a community exercise room and a swimming pool. (Alfaro Class
Cert. Decl., 4 3.)

Pursuant to a written Construction Agreement dated August 24, 2011 between
Webcor and Catellus, Webcor agreed to serve as the general contractor for the Beacon
Project (“the Prime Contract”). (Declaration of Chet Brians in Support of Webcor’s
Motion for Summary Adjudication Against Plaintiff Beacon Residential Community
Association filed herein on November 9, 2012 (“Brians Decl.”), 2 & Exh. B.) Exhibit
A-! of the Prime Contract sets forth the description of the Beacon Project that states the
project is to be designed keeping in mind conversion of the units at the project into
condominiums, that it “will be mapped as a condominium” and that it will provide
“flexibility to convert rental units to for-sale units” (“the Project Description”). On
November 15, 2002 Catellus recorded the Master Declaration of Covenants, Conditions,
Restrictions and Reservation of Easements for Mission Bay a Master Planned
Community (“the Master Declaration”) in San Francisco. (Declaration of Sung E. Shim
in Opposition to Motion of Subcontractor Defendants for Summary Adjudication
(Shim Decl.”), § 7 & Exh. A; Plaintiff's Additional Material Facts in Opposition to
Motions for Summary Adjudication (“Plaintiffs SS”), P-6.) Paragraph B of the
preamble of the Master Declaration states that “Owners of Lots or Condominiums
within the Residential Area will have common interests.” Paragraph C of the preamble

to the Master Declaration states that the Beacon Project is to be regulated by the Davis-

hearing on January 8, 2012.
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Sterling Common Interest Development Act and that a non-profit corporation will be
formed to manage and own the project.

The Subcontractors entered into various subcontracts with Webcor to perform
work on the Beacon Project (“the Subcontracts”), (Declaration of Paul Steckle in
Support of Subcontractors’ Motion for Summary Adjudication (“Steckle Decl.”);
Declaration of Fred Garner in Support of Subcontractors’ Motion for Summary
Adjudication (“Garner Decl.”); Declaration of Kevin Thomas in Support of
Subcontractors’ Motion for Summary Adjudication (“Thomas Decl.”); Declaration of
Kevin Cricthfield in Support of Subcontractors’ Motion for Summary Adjudication
(“Cricthfield Decl.”); Declaration of Ross Kelly in Support of Subcontractors’ Motion
for Summary Adjudication (“Kelly Decl.”); Declaration of Tim Blue in Support of
Subcontractors’ Motion for Summary Adjudication (“Blue Decl.”); Declaration of
George Biczkow in Support of Subcontractors’ Motion for Summary Adjudication
(Biczkow Decl.”) (all collectively “the Subcontractor Declarations”); and Declaration
of Mitch Hookins in Support of Motion for Summary Adjudication (“Hookins
Decl.”).)° Certain of the Subcontracts were executed subsequent to the recordation of
the Master Declaration. For example, Van Mulder Sheet Metal, Inc. entered into a
Long Form Subcontract with Webcor on December 10, 2002. (Steckle Decl. € 2 & Exh.

A)

° In support of this motion filed on behalf of 12 the Subcontractors, seven of the
Subcontractors filed and served sworn declarations attaching their subcontract with
Webcor. Five of the Subcontractors did not file and serve verified declarations
attaching their subcontracts with Webcor in connection with this motion. These five
Subcontractors are Carefree Toland Pools, Inc., N.V. Heathorn, Inc., West Coast

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The Prime Contract specifically provided that Webcor was to reimburse Catellus
for the costs of an Owner Controlled insurance Program (“OCIP”) or “wrap-up”
insurance policy. stating that a “credit allowance is included for reimbursement from
Webcor for Owner’s wrap up liability insurance program.” (Brians Decl., Exh. B,
Prime Contract, Exhibit C, Part 2, page 29.) An OCIP, or “wrap-up”, is an insurance
program for a specific construction project purchased and administered by the project
owner. The program provides specific insurance coverage for the project. One of the
main benefits of “wrap-up” policies is to provide completed operations protection for
the longest applicable statutory period during which a construction defect claim can be
brought by purchasers of individual units at the condominiums. (Shim Decl., § 4 — 6;
Plaintiff's SS, P-1 through P-5.)

The Subcontracts generally included language indicating that an OCIP policy
had been purchased, that the Subcontractors were to enroll in this policy and account for
there proportionate share of the this policy. (Blue Decl., Exh. B, at p. 2 “General
Requirements” paragraph | (“there is an Owner Provided Liability Insurance Policy
(OCIP) in lieu of Subcontractor’s General Liability Insurance for Subcontractor’s onsite
work (only)” and that a credit for the Subcontractors’ share of this amount “has been
deducted from the Subcontract amount”); Hookins Decl. Exh. C, p. 3 (“Additional
Provisions”, paragraphs 1 — 2 and “Mission Bay — Owner Controlled Insurance Program
Summary,” attached thereto providing coverage for “10 years completed operations” (p.

1 of 3) and “Bid Deduct Analysis & Reconciliation/Audit Process” attached thereto

Protective Coatings, F. Rodgers Corporation and Western Roofing Service.
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providing a detailed structure and process for the deduction of OCIP premiums from
payments due to the subcontractor and “Contractor Enrollment Form” and “Insurance
Premium Worksheet” attached thereto.)

The Prime Contract and the Project Description set forth therein was generally
incorporated into the Subcontracts. For example, as to Webcor Builders Long Form
Subcontract between Webcor and Van Mulder Sheet Metal, Inc. the Prime Contract was
incorporated through Section 1. The “General Conditions to Master Subcontract
Agreement” attached to the Subcontracts expressly incorporates the Prime Contract,
including the Project Description, as a contract document. (Subcontractor
Declarations.)

ARGUMENT

A. The Subcontractors Are Not Entitled to Summary Judgment Unless There
Are No Triable Issues as to Any Material Fact

Summary judgment may be granted only when no triable issue exists as to any
material fact and the moving party is entitled to judgment as a matter of law. (Code of
Civil Procedure § 437c; Aguilar v. Atlantic Richfield Co. (2001) 25 Cal 4th 826, 849 —
850.) The moving party bears the burden of establishing, by declarations and evidence,
a complete defense to plaintiff's action or the absence of an essential element in the
plaintiffs case. (id.) The moving party must demonstrate that under no hypothesis is
there a material factual issue requiring trial. (Id..)

If the defendant makes such a showing, then the burden shifts to the plaintiff, as

the opposing party, to show, by responsive separate statement and admissible evidence

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that triable issues of fact exist. (Id.) The moving party's supporting documents are
strictly construed, and those of the opposing party are liberally construed, and doubts as
to the propriety of summary judgment should be resolved against granting the motion.
(Mann vy. Cracchiolo (1985) 38 Cal.3d 18, 35-36.)

Under this framework Webcor and the Subcontractors have failed to meet their
burden by demonstrating that there is no triable issue of fact that they were unaware that
the individual units at the Beacon Project would be sold to the public. In fact, the
evidence submitted in support of the Motions demonstrates a triable issue of fact as to
this issue. Furthermore, even assuming that Webcor and the Subcontractors have met
their initial burden Plaintiff can meet it burden to demonstrate that a triable issue of fact
exists regarding the moving parties’ knowledge of the sale of units at the Beacon
Project.

B. Webcor and the Subcontractors Are Not Entitled to Summary Judgment,

Because a Triable Issue of Fact Exists that Plaintiff [s a Third Party
Beneficiary of the Prime Contract and the Subcontracts

“A contract, made expressly for the benefit of a third person, may be enforced by
him at any time before the parties thereto rescind it.” (Civ. Code §1559; Loduca v.
Polyzos (2007) 153 Cal.App.4th 334, 341.) The contract need not be exclusively for the
third party’s benefit, nor must he be named as an individual. (KOAC, Inc. v. Kennedy
Engineers (1977) 67 Cal.App.3d 916, 920.) “It is sufficient if the third party belongs to
a class of persons for whose benefit the contract was made.” (Johnson v. Sup. Ct.

(2000) 80 Cal_App.4th 1050, 1064. The test for determining whether a contract is

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meant to benefit a third party is whether intent to benefit a third person appears in the
contract as a whole. (Prouty v. Gores Tech. Group (2004) 121 Cal.App.4th 1225, 1232
— 1233.) Furthermore, the contracting parties need not have known the identity of the
third-party beneficiary when they executed the contract. (Outdoor Services v. Pabagold
(1986) 185 Cal App.3d 676, 681, 684.)

Under California law, it has long been settled. that a homeowner is a third party
beneficiary to a contract between the developer and the general contractor. (Sheil v.
Schmidt (1954) 126 Cal.App. 2d 279, 290 (homeowner was a third-party beneficiary to
a contract between the contractor and the federal government because he belonged to
the class intended to be benefitted.) The same is true as to a contract between the
general contractor and a subcontractor. (Gilbert Fin. Corp. v. Steelform Contracting
Co. (1978) 82 Cal. App. 3d 65, 69-70; Loduca v. Polyzos (2007) 153 Cal.App.4th 334,
341.) These cases apply the general rule that the intended consumer of goods is a third
party beneficiary of contracts to manufacture the goods. (Cartwright v. Viking Indus.,
Inc. (E.D. Cal. 2008) 249 F.R.D. 351, 356 (homeowners complaining of defective
windows are third-party beneficiaries to a contract between a window manufacturer and
a window distributor); /n re Toyota Motor Corp. Unintended Acceleration Mktg., Sales
Practices, and Prods. Liab. Litigation (C.D, Cal. 2010) 754 F.Supp.2d 1145, 1185 (car
buyers, as intended consumers, are third-party beneficiaries of contracts between a
manufacturer and a distributor.)

The Motions all rely upon the case of Landale-Camercon Ct, Inc. v. Ahonen

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(2007) 155 Cal.App.4th 1401 to assert that the Plaintiff, as a matter of law, cannot be a
third party beneficiary to the Prime Contract or any of the Subcontracts. Landale is
distinguishable from the facts of the instant case. In Landale the subject contract did
not indicate that condominiums were the subject of the contract. (Id. at 1411.) Here,
the Prime Contract and the Project Description set forth therein, as incorporated into the
Subcontracts states that “the entire project will be mapped for condominium purposes”
in order to “provide flexibility to convert residential rental units to for-sale units.”
(Brians Decl., { 2 & Exh. B.)

Furthermore, the Landale court relied heavily upon the fact that the defendant
subcontractor “only later [] found out it was a condominium project.” (Id.) This fact
alone distinguishes the instant case where the sale of units of the Beacon Project was
expressly referenced in Project Description, the Prime Contract and incorporated into
the Subcontracts. Unlike in Landale where the contract “did not contain the word

a

‘condominium’” the Prime Contract expressly references the sale of “condominiums.”
(Brians Decl., ¢ 2 & Exh. B.) Furthermore, unlike in Landale, where the subject
contract was signed prior to the recording of the CC&Rs, certain of the Subcontracts
were executed after the recording of the Master Declaration. (Steckle Decl. | 2 & Exh.
A.)

Furthermore, the developer of the Beacon Project purchased and maintained an

OCIP or “wrap-up” policy specifically to provide coverage for construction defect

claims by the purchasers of individual units. The cost of purchasing this policy was

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specifically referenced in the Webcor Contract and the Subcontracts and a credit
allowance was provided for the cost of this coverage. The fact that Webcor and the
Subcontractors, in executing the Prime Contract and the Subcontracts, agreed to pay a
portion of the OCIP, or “wrap-up” policy to insure against construction defect claims by
purchasers of individual units at the Beacon Project creates a triable issue of fact that
they were aware that the project would be sold as condominiums.

In addition, the Prime Contract, as incorporated into the Subcontracts, clearly
references and contemplates the sale of individual units to the public, as ultimately
occurred. This fact distinguishes Landale, and raises a triable issue of fact as to
Webcor’s and the Subcontractors’ knowledge that the individual units at the Beacon
Project would be sold to the public and precludes summary adjudication of Plaintiff's
rights as a third party beneficiary under the Prime Contract and the Subcontract.

The references to the sale of condominiums in both the Master Declaration and
the Prime Contract, as incorporated into the Subcontracts, and the fact that both Webcor
and the Subcontractors agreed to pay for insurance designed to cover construction
defect claims by purchasers of individual units at the project raises a triable issue of fact
as to whether the moving parties were aware that the individual units at the project
would be sold to the public, as ultimately occurred. Accordingly, the Court should deny
the Motions.

c. The Webcor and the Subcontractors Have Failed to Shift the Burden to
Plaintiff by Providing Basic Evidence in Support of Their Motion

Notwithstanding the merits of their legal arguments, the Subcontractors have

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failed to meet their burden of establishing, by declarations and evidence, a complete
defense to Plaintiffs action or the absence of an essential element in the Plaintiff's case.
(Aguilar, supra, 25 Cal.4th at 849 — 850.) As set forth above, the motion of the
Subcontractors has conspicuously omitted the subcontracts for five of the
Subcontractors (Carefree Toland Pools, Inc., N.V. Heathorn, Inc., West Coast
Protective Coatings, F. Rodgers Corporation and Western Roofing Service). Whether a
contract is meant to benefit a third party appears in the contract as a whole. (Prouty v.
Gores Tech. Group (2004) 121 Cal.App.4th 1225, 1232 — 1233.) The Subcontractors
simply cannot meet any burden with respect to determining the rights of a third party to
a contract without submitting the subject contract as evidence.

The same is true as to Webcor, who purported to attach the entire “163-page long
WEBCOR contract” in connection with this motion. (Brians Decl., [2,7 &E Exh. B.)
The entirety of the Brians Decl. consists of 88 total pages. As such, Webcor, in seeking
summary adjudication to determine as a matter of law the third party beneficiaries of the
Webcor Contract, failed to include the whole contract. As such, Webcor cannot meet its

burden under Prouty.

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OPPOSITION OF BEACON RESIDENTIAL COMMUNITY ASSOCIATION TO MOTIONS FOR SUMMARY
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2 The Court should deny the motions for summary adjudication of Webcor and the

3 Subcontractors in its entirety.

5 Dated: January 4, 2013
LAW OFFICES OF ANN RANKIN
6 KATZOFF & RIGGS

/s/ Robert R. Riggs
8 By:

Robert R. Riggs

Attorneys for BEACON RESIDENTIAL
COMMUNITY ASSOCIATION

KATZOVF & RIGGS LLP

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