Document for BEACON RESIDENTIAL COMMUNITY ASSOCIATION VS. CATELLUS THIRD AND KING LLC et al

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Christian P. Lucia (SBN 203567)

Brent F. Basilico (SBN 197159)

SELLAR HAZARD MANNING FICENEC & LUCIA
A Professional Law Corporation

1800 Sutter Street, Suite 460

Concord, CA 94520

Telephone: (925) 938-1430

Facsimile: (925) 256-7508

Email: clucia@sellarlaw.com; bbasilico@sellarlaw.com

Attorneys for:

Defendants and Cross-Defendants Cupertino Electric,
Inc.; Creative Masonry, Inc.; Carefree Toland Pools, Inc.;
J.W. McClenahan, 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; Western
Roofing Service

BEACON RESIDENTIAL COMMUNITY
ASSOCIATION

Plaintiff,

v.
CATELLUS THIRD AND KING, LLC, et al.

Defendants,

AND ALL RELATED CROSS-ACTIONS

ELECTRONICALLY
FILED

Superior Court of California,
County of San Francisco

NOV 20 2012

Clerk of the Court
BY: JUDITH NUNEZ
Deputy Clerk

SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO

Case No.: CGC08-478453

DEFENDANT AND CROSS-
DEFENDANTS CUPERTINO
ELECTRIC, INC., CREATIVE
MASONRY, INC., CAREFREE
TOLAND POOLS, INC., J.W.
MCCLENAHAN, INC., VAN MULDER
SHEET METAL, INC.,, N.V.
HEATHORN, INC., CRITCHFIELD
MECHANICAL, INC., BLUE’S
ROOFING COMPANY, WEST COAST
PROTECTIVE COATINGS, ALLIED
FIRE PROTECTION, AND WESTERN
ROOFING SERVICE’S
MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
MOTION FOR SUMMARY
ADJUDICATION AGAINST
PLAINTIFF BEACON RESIDENTIAL
COMMUNITY ASSOCTATION’S
SEVENTH CAUSE OF ACTION FOR
THIRD PARTY
BENEFICIARY/BREACH OF
CONTRACTS AND SUBCONTRACTS
ALLEGED IN PLAINTIF¥’S THIRD
AMENDED COMPLAINT

99089.doc

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION

Case No. CGC08-4784530 ON ON

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Documents Served and Filed Herewith:
1. Separate Statement of Undisputed
Material Facts

Notice of Motion and Motion
Request for Judicial Notice
Declaration of Brent F. Basilico
Declarations of Moving Parties

WBN

Date: January 18, 2013

Time: 9:30 a.m.

Dept.: 304

Judge: Honorable Richard A. Kramer

Complaint Filed: August 8, 2009
[California Code of Civil Procedure § 437c]

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99089.doc

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
Case No. CGC08-478453TABLE OF CONTENTS

TABLE OF AUTHORITIES ....c.scsssessssssessseessecssonseecseessensessnsnecasesseesensseqnarensseanensssessenss ii

I. INTRODUCTION ...

IL. STATEMENT OF PERTINENT FACTS. .....scssscscssssssressssssesnsreesssesetsoneeensennenss 2

Til, ARGUMENT
A. Standard for Summary Adjudication .......scsssccsersssseresersnecsseenennnesenes 4

B. PLAINTIFF, the BEACON ASSOCIATION, the COMMERCIAL
ASSOCIATION, and the MEMBERS were not, and are not, intended to be
beneficiaries of the subcontracts between SUBCONTRACTORS and WEBCOR;
and were not, and are not, beneficiaries to WEBCOR’s contract to construct the
PROJECT. cicscccscsecsssscssessessessececsuscessnessessssnsevsssesneseensenessnnecnseaconsescnnenscsscnasnssevenneaneetanes 5

C. PLAINTIFF cannot demonstrate that it was a successor-in-interest
pursuant to the subcontracts between SUBCONTRACTORS and WEBCOR, and
WEBCOR’s contract to construct the PROJECT. c.ssssssessssssssssenerssnnenteesersnaseneensens 12

D. Any attorney’s fee provision between SUBCONTRACTORS and
WEBCOR pertaining to the project which is the subject of the above captioned
matter was only intended to apply to the parties to the SUBCONTRACTS......:ce 15

TV, CONCLUSION .nsecceccsssssssesscsessessnenensneseesneneesssasecesnnsenenseaneresnecanenscnnenscasasenseces 16TABLE OF AUTHORITIES

Cases Page

Aguilar v. Atlantic Richfield Company (2001)
25 Cal 4th 82632...

Bancomer, S.A. v. Superior Court (1996) 44 Cal.App-Ath 1450, 1458 w..sccsssscsssseceesseernmnssssee 6

Blickman v. MF Downtown Sunnyvale, LLC. (2008)
162 Cal.App.4th 858

Caldwell v. Paramount Unified School Dist. (1995)
41 Cal. App.4th 189, 203.

Gilbert Fin. Corp. v. Steelwork Contracting Co.
(1978) 82 Cal. App. 34 65 cscsssssssssccsseesssscnsenesesetienssssnsseteccennsectarsunansertorecsessvnnnceannggcannerty 5,7

Landale-Cameron Court Inc. v. Ahonen (2007)

155 Cal.App.4th 1401, 1411 6
Loduca v. Polyzos (2007)

153 Cal.App.4" 334 5,7
Perez v. 222 Sutter Street Partners (1990) 222 Cal.App.3d 938....ssssssecsssssecssssenneccertennennanees 14
Sessions Payroll Management, Inc. v. Noble Constr. Co. (2000)

84 Cal. App 4th 671 eccsssvssssssesceesscsesennssnnanensssenseeseesssennmmmnnnnnanannernnsceressseseannnenngseesesaesr7e 12
Statutes Page
California Civil Code § 1559 ...ssssssesssssessresressssensenrersssnrenectersnenecatssensessrnecscnnsaneuncennessees 5
California Civil Code § 1638 .....ssssssssssssssessserssssnecsnesnsesseessnnesnnennernrenssonnensusanersnssnnasentens 15

California Code of Civil Procedure § 437¢(c) ....

California Code of Civil Procedure § 437¢(f)(1)

Other

Black’s Law Dict. (5" ed, 1979)Oo wo WY DH Hw

I INTRODUCTION

Defendants and Cross-Defendants Cupertino Electric, Inc.; Creative Masonry, Inc.; Carefree
Toland Pools, Inc.; J.W. McClenahan, Inc.; Van-Mulder Sheet Metal, Inc.; N.V. Heathorn, Inc.;
Critchfield Mechanical, Inc.; Blue's Roofing Company; West Coast Protective Coatings; Allied Fire
Protection; and Western Roofing Service (collectively, “SUBCONTRACTORS”) submit their
memorandum of points and authorities in support of their motion for summary adjudication against
Plaintiff Beacon Residential Community Association’s (“PLAINTIFF”) seventh cause of action for
third party beneficiary/breach of contracts and subcontracts alleged in PLAINTIFF’s third amended
complaint (“TAC”), and respectfully request that that Court grant summary adjudication in favor of
SUBCONTRACTORS and against PLAINTIFF.

PLAINTIFF’s Seventh Cause of Action for Third Party Beneficiary — Breach of Contracts and
Subcontracts — against SUBCONTRACTORS has no merit and fails because PLAINTIFF cannot
dispute the material facts set forth below.

A, PLAINTIEF, inclusive of the Beacon Residential Community Association (the “BEACON
ASSOCIATION”), the Beacon Commercial Owners’ Association («COMMERCIAL
ASSOCIATION”), and the 595 individual unit owners (collectively the “MEMBERS”)
identified in the TAC (collectively “PLAINTIFF”) were not, and are not, intended to be
beneficiaries of the subcontracts between SUBCONTRACTORS and Defendant and Cross-
Complainant Webcor Construction, Inc., dba Webcor Builders (collectively “WEBCOR”).
At the time the SUBCONTRACTORS entered into the subcontracts with WEBCOR for the
project which is the subject of the above captioned matter, the project was defined as

apartments and no residential or commercial association was contemplated by the parties or

in the subcontracts, and PLAINTIFF was not known as a potential beneficiary of the
SUBCONTRACTS.

B. PLAINTIFF cannot demonstrate that it was a successor-in-interest pursuant to the
subcontracts between SUBCONTRACTORS and WEBCOR. [WEBCOR entered into

thirteen (13) almost identical subcontracts with SUBCONTRACTORS for construction of
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
: MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453the project.] (This motion includes twelve (12) of the SUBCONTRACTORS because F.
Rodgers Corporation filed a voluntary Chapter 7 Petition in the United States Bankruptcy
Court, Eastern District of California, Case Number 2:12-bk-28413, which is pending.)

C. Any attorney’s fee provision between SUBCONTRACTORS and WEBCOR pertaining to
the project which is the subject of the above captioned matter was only intended to apply to
the parties to the SUBCONTRACTS.

SUBCONTRACTORS?’ motion is based on the notice of motion and motion, this memorandum
of points and authorities, the separate statement of undisputed material facts and supporting evidence,
the request for judicial notice, the declaration of Brent F. Basilico, the declarations of moving parties,
the pleadings and documents on file with the Court in this matter [including, but not limited to, the
motions for summary adjudication filed by WEBCOR and Defendant and Cross-Defendant Anning-
Johnson Company (“‘ANNING-JOHNSON”)], and upon such further and additional evidence and
argument which may be presented at the hearing on SUBCONTRACTORS?’ motion.

[Rather than congest the Court’s file with multiple copies of the same documents,
SUBCONTRACTORS are basing their motion, inter alia, on documents filed by WEBCOR and
ANNING-JOHNSON in support of their motions for summary adjudication on the same cause of
action alleged in PLAINTIFF’s TAC, which will be heard concurrently with SUBCONTRACTORS’
motion.]

i. STATEMENT OF PERTINENT FACTS

This lawsuit was initiated by PLAINTIFF against, inter alia, THIRD AND KING
INVESTORS, LLC (“TKL”), and the CATELLUS PARTIES! which had originally developed and
owned the project which is currently defined as the real property and improvements located at 250 and
260 King Street, San Francisco, California, which contains 595 condominium units and commercial

spaces and is the subject of the above captioned matter (the “PROJECT”). [Statement of Undisputed

! References in this Memorandum of Points and Authorities to the CATELLUS PARTIES
include collectively any of the following related entities, inclusive of Catellus Development
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453io wo NT

Material Facts “SSUF”}, No. 1.] The TAC alleges various claims against TKL, the CATELLUS
PARTIES, MISSION PLACE, LLC, and its other related entities (collectively “MISSION PLACE”),
the subsequent’ owner and seller of the residential units at the property, the architects involved in the
design of the PROJECT and the construction team, WEBCOR, and the SUBCONTRACTORS.
(SSUE, No. 2.) PLAINTIFF filed the above captioned mater on behalf of the following: (1) itself;
referenced herein specifically as the BEACON ASSOCIATION; (2) the COMMERCIAL
ASSOCIATION from whom BEACON ASSOCIATION claims it was assigned its rights; and (3) the
MEMBERS? (SSUF, No. 3.)

WEBCOR entered into a construction contract (“SUBCONTRACTORS contract”) with TKL
in or around August 24, 2001. (SSUF, No. 5.) The scope of work for the PROJECT was stated in the
SUBCONTRACTORS contract as comprising of residential, retail and commercial. (SSUF No. 6.)
The residential component was described as 595 residential units for rent. (SSUF No. 7.) At the time
that SUBCONTRACTORS entered into the SUBCONTRACTORS contract and the
SUBCONTRACTS, it understood that the intent of the residential portion of the PROJECT was that
the units would be constructed and used as apartments. (SSUF No. 8.) TKL and the CATELLUS
PARTIES also intended that the residential component of the PROJECT would be designed and built
as apartments. (SSUF Nos. 12, 13, 20 through 24.)

While TKL and the CATELLUS PARTIES owned the PROJECT, a substantial portion of the
units were rented as apartments; approximately one entire tower. (SSUF No, 11.) TKL and the
CATELLUS PARTIES had intended and operated the entire PROJECT, including the commercial
spaces and units, as rental properties. (SSUF No. 12.) None of the units were sold as condominiums
by TKL or the CATELLUS PARTIES. (SSUF No. 13.)

MISSION PLACE purchased the PROJECT in December of 2004. (SSUF No. 14.) MISSION
PLACE was the party which first sold the units as condominiums. (SSUF No. 15.) In or around the

Corporation; Catellus Operating Limited Partnership; Catellus Urban Development Corporation;
Catellus Commercial Development Corporation; Catellus Third and King LLC; and Prologis.

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453wo oO DD HN BW NY

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winter of 2005, MISSION PLACE began selling the units as condominiums to individuals and sold the
last condominium in 2007. (SSUF No. 16.) MISSION PLACE also sold the commercial spaces to
individuals and companies, as well as the parking garage after it purchased the PROJECT from TKL.
(SSUF No. 17.)

‘There was no common association established for the PROJECT until at least one year after the
effective date of the SUBCONTRACTORS contract. (SSUF Nos. 5 and 33.)

WEBCOR entered into thirteen (13) almost identical subcontracts with SUBCONTRACTORS
for construction of the project.

Ti, ARGUMENT

A. Standard for Summary Adjudication

Summary judgment is deemed a suitable means to test the sufficiency of a plaintiff's case.
Caldwell y. Paramount Unified School Dist. (1995) 41 Cal.App.4th 189, 203. A summary adjudication
motion is subject to the same rules and procedures as a summary judgment motion. California Code of
Civil Procedure (“C.C.P.”) § 437c(f)(1). A party’s motion for summary judgment “shall be granted if
all the papers submitted show that there is no triable issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” C.C.P. § 437c(c).

In Aguilar v. Atlantic Richfield Company (2001) 25 Cal.4th 826, the California Supreme Court
held that the purpose of summary judgment is to provide courts with a mechanism to cut through the
parties’ pleadings to determine whether, despite their allegations, trial is in fact necessary to resolve
their dispute. Summary judgment [or adjudication] may be granted if moving parly defendant shows
that a cause of action has no merit and one or more elements of the cause of action, even if not
separately pleaded, cannot be established. Id. at 843. Once the defendant has met that burden, the
burden shifts to the plaintiff to show that there is a triable issue of one or more materials facts as to that
cause of action or a defense thereto. Id., at 844. In the present case, PLAINTIFF cannot possibly mect

this burden.

2 A motion for class certification is pending. (SSUF No. 4.) Depending upon the outcome of
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
. MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453IY KH UWA BR WN

B. PLAINTIFF, the BEACON ASSOCIATION, the COMMERCIAL
ASSOCIATION, and the MEMBERS were not, and are not, intended to be
beneficiaries of the subcontracts between SUBCONTRACTORS and WEBCOR;
and were not, and are not, beneficiaries to WEBCOR’s contract to construct the
PROJECT.

PLAINTIFF alleges a number of claims against SUBCONTRACTORS under its cause of
action for breach of contract - third party beneficiary. Specifically, PLAINTIFF asserts that
SUBCONTRACTORS “knew (a) that principals, agents or employees of ‘PROLOGIS/CATELLUS’
and/or ‘MISSION PLACE LLC’ would ultimately be the sole shareholders, officers and directors of
Plaintiff Association; (b) that title to the Subject Property would ultimately be transferred to the
Members; (c) that such Plaintiff Association and the Commercial Association would ultimately be
responsible for the maintenance and repair of the various building components that were being
developed, design, constructed and/or supplied ... [T]hese contracts and subcontracts were, therefore,
made for the express and immediate benefit of Plaintiff. Plaintiff was a third party beneficiary of the
foregoing contract under the principles of Gilbert Fin. Corp. v. Steelwork Contracting Co. (1978) 82
Cal. App. 3d 65 and Loduca v. Polyzos (2007), 153 Cal.App.4" 334.”. (SSUF No. 18.) Moreover,
PLAINTIEF asserts that the BEACON ASSOCIATION, the COMMERCIAL ASSOCIATION and the
MEMBERS “are successors in interest to PROLOGIS/CATELLUS and MISSION PLACE, LLC.” in
regards to the SUBCONTRACTORS contract. (SSUF No. 19.)

Accordingly, the PLAINTIFF is essentially making two arguments — first, that it is a third party
beneficiary fo the SUBCONTRACTORS contract and SUBCONTRACTS and, second that it is a
successor-in-interest to the SUBCONTRACTORS contract. There is not one scintilla of evidence to
support PLAINTIFF’s claim. Therefore California law requires this court to grant
SUBCONTRACTORS’s Motion.

A third party beneficiary has the ability to enforce a contract which was made expressly for his
benefit, California Civil Code § 1559. The courts interpret this Civil Code section such that while a

party not actually named in a contract can qualify as a third party beneficiary to the contract, the

that motion, the argument related to the MEMBERS herein may be moot.

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453Co wo a DN

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contracting parties must have intended such unnamed party to benefit at the time that the contract was
entered and the contract must reflect that intent. Landale-Cameron Court Inc. v. Ahonen (2007) 155
Cal.App.4th 1401, 1411 (rev. denied 2008). (“Landale’”) (Emphasis added.).

To quote the seminal case of Landale:

The intent of the third party must appear “‘on the terms of the contract.”
[Citations] As explained by well-reasoned case law: “A third party should not
be permitted to enforce covenants made not for his benefit, but rather for others.
He is not a contracting party; his right to performance is predicated on the
contracting parties’ intent to benefit him. . . .” [Citations.] . .. The fact that ...
the contract, if carried out to its terms, would inure to the third party’s benefit is
insufficient to entitle him or her to demand enforcement. [Citation.] Whether a
third party is an intended beneficiary or merely an incidental beneficiary to the
contract involves construction of the parties’ intent, gleaned from reading the
contract as a whole in light of the circumstances under which it was entered.
[Citaticn|”

Landale, Id. at 1410-1411, quoting Bancomer, S.A. v. Superior Court (1996) 44 Cal. App.4th
1450, 1458.

The holding in Landale is not only instructive to the issue before this Court, but dictates this
Court to grant SUBCONTRACTORS’s motion. In Landale, the HOA sued the builder-developer
for construction defects. The HOA also sued the decking and flooring contractor Ahonen for
negligence and breach of contract claiming it was a third party beneficiary of the builder/developer
contract with Ahonen. The court held that the HOA’s “breach of third party beneficiary
contract is substantively without merit because the HOA, which was not in existence at the
time of the contract, was not a third party beneficiary” Jd, at 1404, Emphasis added.

The court relied upon the following facts in reaching its apt conclusion: (1) Ahonen testified
that it was not until later that he learned that the project was a condominium project; (2) the Ahonen
contract did not mention the term condominium; and (3) “the project was not a common
development at the time the contract was signed because the CC&R’s [covenants, conditions, and
restrictions] had not yet been recorded.” /d., at 1411, It is notable that Landale is the only reported
case involving an HOA claim for third party beneficiary status to a contract between a

developer/builder and contractor.
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 : Case No, CGC08-478453PLAINTIFF cannot avail itself of the case entitled Gilbert Fin. Corp. v. Steelform Contracting
Co., (1978) 82 Cal.App.3d 65, which it cited in its TAC. In Gilbert, the Court held that Gilbert, the
owner, was third party beneficiary to the subcontract between Steelform and the general contractor.
The obvious distinction between Gilbert and the case at hand, is that the court found that Steelform
unquestionably knew that the ultimate benefit of the subcontract was to be the Owner. Conversely, in
the instant matter, SUBCONTRACTORS could not have known, and did not know of any third party
beneficiaries, at the time of contracting. Not only did the BEACON ASSOCIATION and the
COMMERCIAL ASSOCIATION not exist at the time the SUBCONTRACTORS contract or
SUBCONTRACTS were entered into, but SUBCONTRACTORS understood that the PROJECT was
going to be used as apartment for an unspecified, and potentially, perpetual time period. Obviously,
the MEMBERS who only began purchasing their units in 2005, four years after the
SUBCONTRACTORS contract was entered into, were not known to SUBCONTRACTORS,

Additionally, Loduca, supra., is of no help to the PLAINTIFFS. The case is clearly
distinguishable. In Loduca, the court did not have to decide whether the nonsignatory to the contract
was a third party as the signatory to the contract did not dispute that the nonsignatory was a third party
beneficiary. Loduca, supra., 153 Cal.App.4th 334, 344. (rev, denied 2007).

SUBCONTRACTORS dispute that the PLAINTIFF is a third party beneficiary, and
PLAINTIFF was not negotiated or contemplated in the formation of the SUBCONTRACTORS
contract or SUBCONTRACTS, not mentioned in the SUBCONTRACTORS contract or
SUBCONTRACTS, and was not even in existence until after the contract and SUBCONTRACTS
were entered into and the PROJECT was near completion.

At the time the SUBCONTRACTORS entered into their respective subcontracts with
WEBCOR concerning the PROJECT, it was their understanding that the residential portion of the
PROJECT was intended to be apartments that would be rented to tenants. SSUF No. 41.

None of the agreements between SUBCONTRACTORS and WEBCOR pertaining to the
PROJECT mention or reference the following: (a) Plaintiff Beacon Residential Community

Association or any predecessor association(s); (b) the Beacon Commercial Owners’ Association or any
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453predecessor association(s); (c) the 595 individual unit owners identified in Plaintiff's Third Amended
Complaint; (d) Mission Place Residential Community Association or any predecessor association; (€)
any homeowner association; (f) any Covenants, Conditions and Restrictions ((CC&R’ s); and/or (g)
that any type of organization or association similar to the foregoing associations and organizations
would be created, or were in existence. SSUF No. 42.

At the time the SUBCONTRACTORS entered into the subcontracts with WEBCOR
concerning the PROJECT, they were unaware that Third and King Investors, LLC (“TKL”), or any of
the Catellus Parties, which include Catellus Development Corp., Catellus Corp., Catellus Operating
LP, Catellus Urban Development Corp., Catellus Commercial Development Corp., Catellus Third and
King, LLC, and Prologis (collectively “CATELLUS PARTIES”), were planning to record any
CC&R’s and create a residential and/or commercial association, SSUF No. 43.

The SUBCONTRACTORS had no knowledge when they entered into the subcontracts with
WEBCOR concerning the PROJECT, that TKL or any of the CATELLUS PARTIES would sell the
PROJECT to MISSION PLACE, LLC, or any other entity. SSUF No. 44.

At the time the SUBCONTRACTORS entered into the subcontracts and other agreements with
WEBCOR cor.cerning the PROJECT, the SUBCONTRACTORS were unaware of any of the identities
of the future purchasers of the units in the PROJECT (the “MEMBERS”). SSUF No. 45.

At the time the SUBCONTRACTORS entered into their respective subcontracts with
WEBCOR conceming the PROJECT, the SUBCONTRACTORS were unaware of the identities of the
purchasers of the commercial spaces, or that TKL, the CATELLUS PARTIES, or MISSION PLACE
intended to sell any of the commercial spaces. SSUF No. 46.

In addition to the facts described above, none of the testimony or documents in this matter
support a finding that PLAINTIFF (as used collectively in this memorandum of points and authorities
and motion) was intended to be third party beneficiaries as demonstrated by the facts set forth below.

1. TKL and the CATELLUS PARTIES understood that the PROJECT was designed and
built to be an apartment project, not condominiums. Specifically, TKL and the CATELLUS

PARTIES’ designated person most knowledgeable on, inter alia, design issues and the Covenants,
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453Conditions and Restrictions (“CC&R’s”), Seth Bland testified that “there was no point at which
anyone at Catellus thought this [Project] would be a condominium project. Catellus ... and our charge
at the Urban Group intended to design, finance and construct an exclusively rental project.” (SSUF
Nos. 9 and 20.5

2. Mr, Bland also testified that it was not until 2004, when the PROJECT was nearly
complete that it was determined that it would be sold. It was at that point that it was understood that
the PROJECT ‘would be used as condominiums. (SSUF No. 21.)

3. When probed more intensely about CATELLUS? intent in building the PROJECT, Mr.
Bland reiterated that despite the fact that CATELLUS prepared the Master Declaration of Covenants,
Conditions, Restrictions and Reservations of Easement for the Mission Bay - A Master Plan
Community (“Master CC&R’s”) which stated that it “intended to create a condominium project ...”,
CATELLUS always intended to rent the entire PROJECT, “it only created the CC&R’s to make it
possible for someone else in the future to create a condominium project.” (SSUF No. 22.)
(Emphasis added.)

4. -Mr. McCone, the person most knowledgeable for the CATELLUS PARTIES on, inter
alia, construction issues, testified that the PROJECT was not intended to be a for-sale condominiums.
His understanding was that CATELLUS stated in the CC&Rs that its intent was to create a
condominium project was merely to create an opportunity for the PROJECT to become a
condominium project in the future, as prudent developers do to make the sale value of the properly
higher. Moreover, he testified that “with a project of this size, [oreating a future condominium project]
can only be done during construction. It’s harder to do [that] afler it’s constructed, so it is common
that this is done during construction, whether of not a project ever becomes a condominium or not.”
(SSUF Nos. 10 and 23.)

3. Mr. McCone further testified that he did not keep in mind during the construction of the
PROJECT that the residential units might some day have been used as condominiums. (SSUF No. 24.)

6. ,CATELLUS rented not only the residential units, but the parking garage and retail

spaces, and did not sell any of the portion of PROJECT prior to the sale of the PROJECT to MISSION
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
. MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453PLACE. (SSUF No. 12.)

7. The “Project Description” contained in the contract describes the residential portion of
the PROJECT as follows: “All 595 residential units are currently intended to be rental, however, the
entire PROJECT will be mapped for condominium purposes, providing Catellus with the flexibility to
convert residential rental units to for-sale units in the event it becomes financially beneficial to do so.”
(Emphasis added.) This quote is the single use of the term “condominium” in the entirety of the
approximately 1 63-page long SUBCONTRACTORS contract. (SSUF No. 25.)

8. MISSION PLACE, LLC, the entity which bought the PROJECT, was not even created
until 2004 which was many years after the subcontractors entered into their respective subcontracts
with WEBCOR. (SSUF No, 51.)

9. ‘MISSION PLACE LLC purchased the PROJECT in approximately October 14, 2004,
which was many years after the subcontractors entered into their respective subcontracts with
WEBCOR. (SSUF No 52.)

10. It was not until November 15, 2002, that TKL or the CATELLUS PARTIES recorded
the Master CCER’s which created the Master Association for the entire PROJECT. (SSUF No. 33.)

11. On December 5, 2003, more than two years after the SUBCONTRACTORS contract
was entered into, TKL and the CATELLUS PARTIES recorded the Declaration of Covenants,
Conditions, Restrictions, and Reservation of Easements for the Mission Bay (Residential). (SSUF No.
34.)

12. PLAINTIFF’s TAC sets forth the allegations below.

On or about December 5, 2003, a Mutual Benefit Agreement Between
Joint Ciwners of Building (Mission Bay Mixed Use Residential/Commercial
Block N2 (“MBA”) was recorded .. . The parties were defendant CATELLUS
THIRD AND KING, LLC and defendant THIRD AND KING INVESTORS
LLC ... Plaintiff's predecessor, the Mission Place residential Community
Association. . . .

On or about November 9, 2004, the Articles of Incorporation of Mission
Place Residential Community Association were filed with the Secretary of State
for the State of California. . .

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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453On or about December 28, 2004, in the official records of the City and
County of San Francisco, said [the Mission Place Residential Community
Association] caused to be record the Amended and Restated Declaration of
[CC&Rs] and Reservation of Easements for Mission Place (Residential). . . .

On or about May 2, 2005, an Amendment of Articles of Incorporation
was filed to change the name of the Mission Place Residential Association to the
BEACON ASSOCIATION.

(SSUF No. 35.)

All of these activities related to the creation of a common association arose years after the
SUBCONTRACTORS entered into their respective subcontracts with WEBCOR.

13. MISSION PLACE did not begin selling the units as condominiums until the winter of
2005, and the last under sold sometime in 2007. (SSUF No. 16.)

14, MISSION PLACE did not even have any intent to sell the retail and garage when it
purchased the PROJECT from CATELLUS, but ultimately did because an offer was presented to it.
(SSUF No. 17.)

15, | SUBCONTRACTORS did not intend that the BEACON ASSOCIATION, the
COMMERCIAL ASSOCIATION, or the MEMBERS be third party beneficiaries to the
SUBCONTRACTORS contract. (SSUF No. 36.)

16. | SUBCONTRACTORS did not intend that the BEACON ASSOCIATION, the
COMMERCIAL ASSOCIATION, or the MEMBERS be third party beneficiaries to any of the
SUBCONTRACTS. (SSUF No. 37.)

The foregoing undisputable facts provide an abundance of evidence that neither of the
contracting parties to the SUBCONTRACTORS contract nor the parties to the SUBCONTRACTS
intended the BEACON ASSOCIATION, the COMMERCIAL ASSOCIATION or the MEMBERS to
be third party beneficiaries. None of those entities were created, known or contemplated as of the date
that the SUBCONTRACTORS contract or SUBCONTRACTS were entered.

It is urcontroverted that the PROJECT was intended to be used as apartments in 2001, when

the SUBCONTRACTORS contract was signed. Accordingly, the BEACON ASSOCIATION,
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453COMMERCIAL ASSOCIATION and MEMBERS are not third party beneficiaries, but merely
incidental beneficiaries to the SUBCONTRACTORS contract and SUBCONTRACTS. PLAINTIFF is
barred from enforcing any terms of the SUBCONTRACTORS contract or SUBCONTRACTS.

Cc. PLAINTIFF cannot demonstrate that it was a successor-in-interest pursuant to the

subcontracts between SUBCONTRACTORS and WEBCOR, and WEBCOR’s
contract to construct the PROJECT.

California has ample case law addressing the issue of whether a third party beneficiary can
enforce an attorney’s fees provision in a contract for which it is a non-signatory. However, the Court
must first rule that nonsignatory is a third party beneficiary (or successor or assignee) to the contract.
If the nonsignatory does not fall within any of those categories, the discussion ends. If, however, the
Court finds that the nonsignatory party is indeed a third party beneficiary, the court must examine the
attorney’s fee provision to determine if the signatory parties intended that provision to benefit third
parties.

In Blickman v. MF Downtown Sunnyvale, LLC. (2008) 162 Cal.App.4th 858, the court
determined that the nonsignatory party that was claiming to be a third parly beneficiary would not have
been able to enforce the attorney’s fees provision in the contract, even if it were determined that the
nonsignatory viere a third party beneficiary. The basis for the Court’s conclusion was in its
examination of the attorney’ fees provision ~ namely, whether the contract evidenced an intent of the
signatory parties to confer the right to attorney’s fees on a third party. The attorney’s fees provision
stated: “any litigation between the parties hereto to enforce any provisions of this Agreement ...” Td...
at 896 (emphasis added). The phrase “between the parties hereto” demonstrates the intent of the
parties - that only the signatories could enforce the provision. Id.

Likewise, in Sessions Payroll Management, Inc. v. Noble Constr. Co. (2000) 84 Cal.App.4th
671, the words in the attorney’s fees provision proved that the signatories did not intend to confer any
rights to fees on third party beneficiaries. id., at 681. The fee provision was expressly limited to
enforcement by “either party.” The provision stated in relevant part: “ ‘[iJn the event it becomes

necessary for either party to enforce the provisions of this Agreement ...”” Id. (Emphasis added.) The
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No, CGC08-478453Court held that had the parties “wanted to include someone else, their contract would have referred to
‘any’ party,” instead of “either” party. Id.

The SUBCONTRACTORS did not discuss, negotiate, or intend for the following entities,
individuals, and associations to be third party beneficiaries to any of the agreements between the
SUBCONTRACTORS and WEBCOR pertaining to the PROJECT: (a) Plaintiff Beacon Residential
Community Association or any predecessor association(s); (b) the Beacon Commercial Owners’
Association or any predecessor association(s); (c) the 595 individual unit owners identified in
Plaintiff's Third Amended Complaint; (d) Mission Place Residential Community Association or any
predecessor association; (e) any homeowner association; and/or (g) any type of organization or
association similar to the foregoing associations and organizations that would be created, or were in
existence. SSUF No. 47.

The SUBCONTRACTORS further did not discuss, negotiate, or intend for any of the CC&R’s
of any of the foregoing organizations and/or associations to reflect that the organization and/or
association was to be a third party beneficiary to any subcontracts or other agreements between the
SUBCONTRACTORS AND WEBCOR. SSUF No. 48.

It is obvious that PLAINTIFF’s underlying purpose in claiming to be a third party beneficiary
to the subcontracts between SUBCONTRACTORS and WEBCOR is to enable PLAINTIFF to attempt
to recover ils attorney’s fees if determined to be the prevailing party. (See TAC at 104, attached as
Exhibit “A” to the declaration of Brent F. Basilico, SUBCONTRACTORS’ Request that the Court
take judicial notice of the existence of PLAINTIFF’s TAC for the purpose of this motion.

However, not only is the PLAINTIFF in all of its three capacities not a third party beneficiary,
but the language of the subcontracts between WEBCOR and the SUBCONTRACTORS
unambiguously limit prevailing party attorney’s fees, if any, to the parties to the subcontracts.

The attorney’s fee provision was never intended to apply to, or be incorporated into, the
following entities, individuals, and associations: (a) Plaintiff Beacon Residential Community
Association or any predecessor association(s); (b) the Beacon Commercial Owners’ Association or any

predecessor association(s); (c) the 595 individual unit owners identified in Plaintiff's Third Amended
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No. CGC08-478453Ww

Complaint; (d) Mission Place Residential Community Association or any predecessor association; (e)
any homeowner association; (f) any CC&R’s; and/or (g) or that any type of organization or association
similar to the foregoing associations and organizations would be created, or were in existence. SSUF
No. 49.

PLAINTIFF argues that the it is entitled to benefit of the subcontracts and contracts in its
capacity as successors-in-interest. This argument is not viable.

‘Successor’ is defined as: ‘One that succeeds or follows; one who takes the place of another
has left, and sustains the like part or character; . . . (Black’s Law Dict. (5" ed. 1979) p. 1283, col. 2.)
‘Successor-in-interest’ is defined as ‘One who follows another in ownership or control of property. In
order to be a “successor in interest,” a party must continue to retain the same rights as original owner .
__and there must be change in form only and not in substance, ...’ (Ibid., italics added.) Perez v. 222
Sutter Street Partners (1990) 222 Cal.App.3d 938, fn. 8. (rev. denied 1990).

PLAINTIFF simply cannot demonstrate that WEBCOR assigned any of its rights in the
subcontracts with the SUBCONTRACTORS to PLAINTIFF.

From a practical standpoint, if PLAINTIFF’s argument is successful, the result on the
construction industry will be significant and disastrous. Unrelated purchasers of real property no
matter how far removed from the original contracting party will be able to claim successor status
merely on the basis that they purchased the property at issue in the contract. A contractor would
unwittingly be liable for contract claims to unknown third parties. This would impart contractual
obligations in excess of what any contractor could expect to incur. The burden on contractors and
purchasers would be overwhelming. Imagine if a homebuyer, by virtue of purchasing a home from a
developer, is deemed to be a successor to that developer-contractor contract. If such homeowner is a
“successor” merely by virtue of purchasing the real estate at issue, that homeowner could be straddled
with all of the obligations of the developer under that contract, even failure to pay claims. The
resulting effect of ruling that non-signatory owners, without an assignment, are successors to all
contracts in which the developer is a party is untenable.

PLAINTIFF cannot demonstrate that it was a successor-in-interest pursuant to the subcontracts
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No, CGC08-478453oOo NN

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10
11
12
13
14
15
16
7
18
19
20
21
22
23
24
25
26
27
28

between SUBCONTRACTORS and WEBCOR, and WEBCOR’s contract to construct the PROJECT.
D. Any attorney’s fee provision between SUBCONTRACTORS and WEBCOR
pertaining to the project which is the subject of the above captioned matter was
only intended to apply to the parties to the SUBCONTRACTS.

“The language of a contract is to govern its interpretation, if the language is clear and explicit,
and does not involve an absurdity.” California Civil Code § 1638.

Any attorney’s fee provision contained in any of the subcontracts between the
SUBCONTRACTORS and WEBCOR concerning the PROJECT, was only intended to apply to the
parties to the contract. The attorney’s fee provision was never intended to apply to, or be incorporated
into, the following entities, individuals, and associations: (a) Plaintiff Beacon Residential Community
Association or any predecessor association(s); (b) the Beacon Commercial Owners’ Association or any
predecessor association(s); (c) the 595 individual unit owners identified in Plaintiff's Third Amended
Complaint; (d) Mission Place Residential Community Association or any predecessor association; (€)
any homeowner association; (f) any CC&R’s; and/or (g) or that any type of organization or association
similar to the foregoing associations and organizations would be created, or were in existence. SSUF
No. 50.

Therefore, any attorney’s fee provision between SUBCONTRACTORS and WEBCOR
pertaining to the project which is the subject of the above captioned matter was only intended to apply
to the parties to the SUBCONTRACTS.
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-15-

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No, CGC08-478453TV. CONCLUSION

In consideration of the foregoing, SUBCONTRACTORS submit their memorandum of points
and authorities and rely on the documents filed by WEBCOR and ANNING-JOHNSON in support of
their motion for summary adjudication against PLAINTIFF’s seventh cause of action for third party
beneficiary/breach of contracts and subcontracts alleged in PLAINTIFF’s TAC.
SUBCONTRACTORS respectfully request that this Court grant summary adjudication in favor of
SUBCONTRACTORS and against PLAINTIFF.
DATED: November 20, 2012 SELLAR HAZARD MANNING FICENEC & LUCIA

a F

Brent F. Basilico

Attorneys for Defendants and Cross-Defendants,
Cupertino Electric, Inc.; Creative Masonry, Inc.; Carefree
Toland Pools, Inc.; J.W. McClenahan, 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; Western Roofing Service

-16-

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SUBCONTRACTORS’
MOTION FOR SUMMARY ADJUDICATION
98911 Case No, CGC08-478453