*1 In May No. 29985. Bank. [L.A. 1974.] al., MARTINEZ et
IGNACIO Plаintiffs and v. Appellants, COMPANIES, INC., al., SOCOMA et Defendants and Respondents. *4 Counsel Fisher, and Rushforth Plaintiffs N. Frank G. Ker Brent N.
Richard and Appellants. Bronner, Willens,
Buchalter, Nemer, Savitch, D. Earl P. Richard Fields & Grant and M. Alfred for Defendants and Respondents. Caditz & Karlsen Opinion on of them C. J. action behalf
WRIGHT, Plaintiffs this class brought that defend alleging disadvantaged selves and other unemployed persons, under government with the United States ants failed contracts perform one at least year and job training which defendants agreed provide that they such Plaintiffs claim numbers of to certain employment persons. beneficiaries of contracts and the other such are third party persons Gen for defendants’ and as such are entitled to damages nonperformance. amend, were without leave eral demurrers to the sustained complaint to sue as standing lacked ground on apparently plaintiffs defendants, Dismissals were entered as the demurring beneficiaries. and appeal. plaintiffs dismissal, will con As
We affirm the judgments appear, state or defendants are to be tracts nowhere that either government liable to such as from defend resulting persons damages plaintiffs ants’ The to be derived from defendants’ рerform benefits nonperformance. ance were intended as from clearly gifts stated in the contracts
but as a means of executing purposes in the legislation. underlying were Accordingly, only incidental beneficiaries and such have no right recovery.
The (“So- names defendants complaint Socoma Inc. Companies, coma”), Kitchens, Lady Fair Fair”), Monarch Elec- Incorporated (“Lady International, tronics (“Monarch”), Inc. and eleven individuals of whom three are alleged Socoma, Fair, officers or directors of four of Lady four Monarch. Lady Fair and the individual defendants associated with it, a Utah corporation and Utah residents did not respectively, appear the trial court and are not to this appeal. Economic
The under 1967 amendments alleges complaint 688-690, 2763-2768, (81 Act of 1964 42 U.S.C. Stat. §§ Opportunity “the (1972)) Congress 86 Stat. United States instituted repealed with the residents of the intent to benefit certain Special Programs Impact concentrations of low income neighborhoods having large per- especially sоns and chronic suffering rising dependency, unemployment tensions.” Funds to administer these were programs appropriated United of Labor. States subsequently desig- Department department nated the East Los as a area” and Angeles neighborhood “Special Impact made federal with funds available contracts local industry private benefit the “hard-core residents” of East Los unemployed Angeles. *5 17, 1969,
On into defendants entered January allegedly corporate Labor, contracts with the of on behalf of Secretary acting Manpower Administration, of (hereinafter United States Labor referred Department to as “Government”). Each a such defendant entered into separate contract and all three a contracts are made of the as ex- part complaint hibits. Under each defendant agreed lease contracting space in the then vacant Lincoln owned of Heights jail building by Los City $5,000,000 to invest at least Angeles, renovating leasehold and a establishing, for the facility articles, manufacture certain to train and months, rates, in such at employ facility for least 12 at minimum wage number of East Los residents specified certified as Angeles disadvantaged Government, by and to with provide employees opportunities into available promotion and with supervisorial-managerial positions op- tions to stock in their Each contract purchase employer corporation. pro- videcLfof lease different in the and for the space building manufacture ofa different consideration, kind As product. Government agreed each defendant a stated pay amount in installments. Socoma was to $950,000; hire 650 and receive Fair was persons Lady to hire 550 persons $999,000; and receive and Monarch was to hire 400 and persons receive $800,000. The of these hiring was to be persons completed January 1970. 2,017 East no more than a class of were members of allegedly
Plaintiffs were quali- as and disadvantaged residents who certified Los were Angeles paid the Government Although fied for under the contracts. employment Socoma, $299,700' to Lady $712,500 of the contractual consideration to $240,000 failed Fair, Monarch, and all these defendants perform contracts, jobs under their that Socoma provided respective except terminated, of which and Fair Lady wrongfully provided 139vwere of which all were terminated. jobs, wrongfully fourth, second, and The of action. 11 causes contains The complaint Socoma, $3,607,500 against damages of action seek sixth causes calcu- $2,220,000 Monarch, Fair, $3,052,500 against and against Lady $1,000 for rates and at minimum of 12 months’ wages lated on the basis contracted of the the defendant provide. for each training jobs loss damages per- seek similar and causes of action The third fifth whose and the 90 were terminated Socoma sons whose jobs seventh, first, causes eighth The Lady were terminated Fair. jobs Fair, Socoma, and Monarch liability Lady on of action seek joint impose venturers, through the contracts they negotiated joint alleging Heights of the Lincoln and entered into lease joint common representative ninth, tenth, of action seek to and eleventh causes jail impose building. defendants their officers and directors liability corporate defendants, named as individual that the latter alleging undercapitalized egos.1 their and used the same their alter respective corporations Each cause of action alleges “express purpose [Govern- into dis- contract was certified entering to benefit ment] [the] [each] hard-core whom advantaged residents of East Los Angeles unemployed [for other, defendants promised training and none provide jobs] *6 those residents are thus the third beneficiaries of express party [each] contract.” all the material factual admitted truth of demurrers general difficulty of any proving of the complaint, regardless possible
allegations 493, Engineering, 2 Inc. Cal.3d 496 (Alcorn (1970) v. Anbro [86 them 88, 216]), which P.2d but did not admit con allegations 468 Cal.Rptr. Bridge Authority (1953) (Faulkner v. Cal. Toll of law stitute conclusions 317, to matters of 659]) P.2d or which are contrary 40 Cal.2d 329 [253 (1921) v. Times-Mirror Co. (Chavez must take notice judicial which we Witkin, 20, (2d 1971) 666]). (See 23 Cal. Procedure ed. Cal. 185 P. [195 action, fourth, fifth, solely against being non- directed 1The tenth causes dirеctors, defendants, wit, are not before appearing Lady Fair and its officers and appeal. us on this 400 328, 800.)
Pleading, a a written When is based on complaint §§ full, contract which it sets out in general a demurrer to the complaint admits not only contents- of the instrument but also mean any pleaded to which the ing (Coast instrument Bank v. reasonably susceptible. (1964) 311, 505, Minderhout 61 Cal.2d 315 P.2d 392 Cal.Rptr. [38 265].) Moreover, where, here, demurrer is to an general original and is amend, sustained without leave to “the issues complaint presented action, are whether the and, not, states cause of if complaint whether there is a reasonable that it could be amended to possibility do (MacLeod so.” v. Tribune Publishing (1959) 536, Co. 52 Cal.2d 542 36]; Witkin, P.2d see 3 (2d [343 Cal. 1971) Procedure ed. Pleading, Thus, 845.) § we must determine whether the written contracts pleaded claim support plaintiffs’ either on their face or under any interpretation which the contracts are reasonably which susceptible pleaded or complaint could be pleaded by amendment. This proper determination must be made in light federal statutes аnd applicable other matters we must judicially (Evid. Code, 451, notice. 459, (a).) subd. §§
Plaintiffs contend are third beneficiaries under Civil they 1559, contract, Code which “A made for the expressly section provides: benefit of be enforced him at time before may any person, thereto rescind it.” This excludes of a section enforcement parties who by persons only (Lucas benefited it. incidentally remotely 583, v. (1961) 821, 685].) Hamm 56 Cal.2d 364 P.2d Cal.Rptr. [15 American law classifies enforceable under generally persons having rights contracts to which are not creditor they either beneficiaries or Contracts, 133, donee (Rest., (1), (2), 135, 136, beneficiaries. subds. §§ 147; 356; (3d 1959) on Williston Contracts ed. 4 Corbin on Cbntracts § corns, 774; (1951) Contracts-(Tentative 1973) 133, § see Rest.2d Drafts § b, c.) California decisions follow (Southern this classification. Cal. Gas Co. v. ABC Co. (1962) Construction Cal.Rptr. [22 540]; Witkin, (8th 1973) Contracts, Cal. Law Summary 500.) ed. §
A cannot be creditor person beneficiary unless promisor’s the contract will some discharge form owed legal duty (Hartman beneficiary by the Co. Ranch v. Associated Oil promisee. (1937) Rest., Co. 10 Cal.2d 1163]; Contracts, P.2d *7 (l)(b).) subd. (the Government Clearly at no time promisee) bore any legal duty toward to plaintiffs benefits set forth provide in the contracts and do not be claim to creditor beneficiaries.
A is a donee if the person beneficiary only contractual promisee’s intent is either to amake to him him a gift or to confer on right against
401 in- Contracts, (l)(a).) subd. If (Rest., 133, promisee § promisor. if can recover such donative make a the donee gift, beneficiary tends to of the nature have been understood intent must promisor v. (Lucas and the execution. circumstances its accompanying Hamm, aid supra, 590-591.) does not 56 Cal.2d at This rule pp. plaintiffs, however, because, seen, a im- gift as will be no intention to make can be as to Government puted promisee. in were those whom the Government among
Unquestionably plaintiffs which tended to benefit defendants’ of the contracts through are a statute a direc they recite executed presidential pursuant tive with furnish calling disadvantaged training programs persons However, the fact that a Government employment pro opportunities. not for social individuals who are betterment confers benefits gram to render contractual consideration does not required necessarily return that the are as benefits intended imply gifts. Congress’ power I, (U.S. Const., 8) in aid art. author money welfare spend general § (Helvering izes federal v. to alleviate national programs unemployment. 619, 1307, 1314-1317, (1937) 301 Davis U.S. 640-645 L.Ed. [81 904, 1319].) S.Ct. A.L.R. The benefits of such programs provided not a to the as a gifts but means simply recipients accomplishing in the larger The furtherance of is purpose. public purpose Government, nature of consideration any governmental displacing intent to furnish Alameda v. Janssen (See County the benefits gifts. (1940) 276, 11, 1141]; Cal.2d Allied P.2d 130 A.L.R. [106 209, Assn. Payne (1923) Architects’ v. 192 Cal. 438-439 P. [221 1029].) A.L.R. he of a gift, the intended recipient
Even though person if it from the terms beneficiary be “a donee appears nevertheless may that the circumstances purpose in view of accompanying promise upon him ... ... in obtaining promise promisee confer due nor neither right against promisor supposed some performance (Rest., Con beneficiary.” to the be from the or asserted to due promisee Lane, Keller Gourmet Inc. v. tracts, (italics (l)(a) subd. supplied); 398].) The Gov (1963) 222 Cal.Rptr. in course, deliberately purpose ernment may, implement on a which confer specified in its contracts cluding expressly provisions benefits, or in lieu of bene third a direct right damages class of persons fits, intent to confer contractor. But a governmental against private fact be inferred from the that the right such a direct cannot simply were Contracts intended to the benefits. Restatement enjoy makes this clear with contractual dealing specifically promises Government to services to members of the “A render public: promisor *8 do
bound United or to a or contract to by to the States State municipality an act to of the of the or render service some or all members public, to no under the contract to such to members subject duty give compen- sation for the to injurious or consequences performing attempting per- it, so, unless, form do in or ... an intention is failing manifested contract, in light surrounding circumstances interpretеd formation, its promisor compensate public that the shall members injurious (Rest., Contracts, such consequences (italics . . . .” for City County Lines, see & San Francisco v. Western Air Inc. supplied);2 (1962) 216].) Cal.Rptr. The present contracts manifest no intent that the defendants pay members their other of the for damages public compensate plaintiffs To the the contracts’ for contrary, retaining nonperformance. provisions over Government’s control determination of contractual disputes defendants’ financial risks indicate a limiting governmental purpose exclude the direct defendants claimed against here. rights
Each contract of fact thereunder is provides any arising dispute officer, be by determined written decision of the Government’s contracting Labor, subject to an be Secretary of whose decision shall appeal fraudulent, final unless determined court to have ca- been competent faith, pricious, arbitrary, in bad or not substantial evidence. supported by These administrative decisions may include determinations оf related ques- tions of law although determinations are not made final. The efficiency uniformity fostered these interpretation administrative proce- dures would tend to be action, undermined if such as the litigation present to which the Government is a were stranger, on permitted proceed merits.
In addition to the on provisions resolving each contract contains disputes a “liquidated damages” the contractor to refund all provision obligating amounts received Government, from the interest, with event of fail- ure to acquire and, for equip specified manufacturing facility, each it employment fails to opportunity provide, refund stated dollar amount to the total equivalent contract compensation divided the num- corresponding language in the Drafts 2The Tentative of the Restatement Second (1973), promisor is: govern of Contracts section who contracts with a “[A] governmental agency ment or do an act or render a service to the liability to contractual to a member of subject consequential damages rеsulting perform or failure to unless ... the terms promise provide liability for such . . . .” language quotation quotation omitted in this and the the accompanying beneficiary text relates to creditor situation in which the itself would earlier, be nonperformance liable As contract. noted do not claim to be creditor beneficiaries. *9 damages provision to be This liquidated ber of jobs agreed provided. of refunding for the breaches alleged plaintiffs liability limits intent to absence of contractual any and indicates an amounts received or, the com- as claimed of directly favor liability plaintiffs, impose To for the value liability promised performance. to plaint, impose which defend- limited for allow claim would nullify liability plaintiffs’ out as have held an may ants and which the well Government bargained the contracts.3 negotiating inducement in of intent that defendants should
It is this absence of manifestation any in the of for breach to position pay compensation (1954) this from v. Schmidt case Shell distinguishes Cal.App.2d 82], was a build- relied on The defendant in Shell P.2d plaintiffs. had an with the federal ing govern- contractor who entered into agreement ment and under which he received materials agreed building priorities in return to use the materials build homes with specifications required for sale to war at or were 12 veterans below Plaintiffs vet- ceiling prices. erans, each of whom had a home that with failed to purchased comply agreed They were held entitled recover specifications. directly from the defendant contractor as third beneficiaries of his with agreement party the government. The which the legislation under was made agreement included a to obtain of provision empowering government payment monetary contractor to compensation veteran purchasers Thus, deficiencies resulting failure to with there comply specifications. was “an intention . .. manifested in the contract . . . that the promisor shall members of the for such compensate public injurious consequences ”4 [of nonperformance]. Second Tentative Drafts the Restatement of section of 3Comment a of of control and out that factors—retention administrative points of Contracts these liability—make against the contractor third suits limitation of contractor’s inappropriate: bers of public, benefit the but individual mem “Government contracts often public treated as beneficiaries unless a different intention are incidental doubt, service promise of to do an act render a In case for or manifested. damages public promise pay consequential does not have the effect of a (2) (b) individual members of the the conditions of Subsection [in unless cluding governmental liability Among may are met. factors which claimant] gov arrangements inappropriate against promisor make a direct action claims, litigation over the settlement the likelihood ernmental control impairment and burden, availability service or excessive of al financial (Italics supplied.) ternatives such insurance.” Shell, supra, City County 4In San Western Air contrast & Francisco v. Lines, Inc., There, supra, to be Western Lines claimed 105. Air a. аgreements City party beneficiary between the federal County city federal funds for the San Francisco under which received airport subject “be development airport condition avail of its to written able unjust use on fair and terms and without discrimination.” reasonable Contracts, Plaintiffs contend that section 145 of Restatement of pre *10 does not their because it viously quoted, recovery only preclude applies made a “to do act or a serv governmental entity an render promises and, to . ice . . the assert and the class public,” plaintiffs they they rep resent are identified set if “the Even this persons public.” apart contention were correct it would not that follow have plaintiffs standing as third beneficiaries under the Restatement. quoted provision of section “is a of the stated in special application principles §§ (la), Contracts, (Rest., a), donee com. de [on beneficiaries]” lineating certain circumstances which contractors’ preclude government liability to third Section 145 parties. itself does nоt to confer stand purport to sue on who do not otherwise under basic third ing qualify ***5 above, As out party beneficiary principles.* pointed plaintiffs donee beneficiaries under those basic because it does not principles from the terms and circumstances of the contract that the appear Government intended to make a or to confer them on a gift the defendants. legal right against contention,
Moreover, section 145 of the Restate- contrary plaintiffs’ of does their the recovery ment Contracts because services preclude which were to be rendered to the contracts the defendants to required perform within the of meaning “members of the that section. Each public” recites it is under made Impact of Eco- “Special Programs” part nomic Act of 1964 and to a Opportunity pursuant presidential directive. charged it airport Western Air Lines asserted that a had been for its use of the at higher condition, than rate some other air carriers in violation of the contractual charges аnd therefore was entitled to recover city. the excess from the One of the given appeal by rejecting reasons the court on for this contention was the absence any provision agreements of or indication of intent in government between the city compensate and noncompliance. The court said: “The granting agreement in each instance entitles administrator to [federal] recover grant payments all made any misrepresentation where there has been or omission [i.e., of a material fact sponsor city]. We find no other provision for recovery of funds the administrator and none permitting recovery whatsoever money or private rates party. excess Indeed language granting of the agreement appears itself point up to us to simply that it is and entirely a financial arrangement parties. between two agreement states, As the it ‘the constitutes obli- gations plishment rights and Sponsor of the United States and with.respect to the accom- (204 Project. 120.) of the p. . . .”* Cal.App.2d at Draft general section 145 of Restatement Second 5The of the Tentative same is true “apply on third party rules beneficiaries of Contracts which declares that that, governmental government agency except or to the extent contracts with authorizing policy pre law or contravene the the contract application would scribing particular” and the limitations its breach” “[i]n remedies supra, including apply government those forth footnote to a section set liability nonperformance to a member of the service contractor’s public. between the federal test cooperation for a program thousands effort to training jobs in an provide industry private dec- congressional Thb* the hard-core under-employed.6 unemployed as a whole up Act points of the Economic Opportunity laration of purpose declared scale. Congress its benefits on a national nature of ef- and coordinate of the act was to “strengthen, supplement, purpose to everyone oppоr- forts in furtherance of policy” “opening [the] work, and the op- for education and tunity training, opportunity can so that the “United States to live in decency dignity” portunity *11 (42 its and social as a nation.” U.S.C. achieve full economic potential .)7 2701 § declared that such for Congress
In providing special impact programs, were directed to the solution of critical in existing programs problems par- ticular concentrations of low-in- neighborhoods having large especially come and that the to be of sufficient size were intended persons, programs and to have an in such in arrest- neighborhoods scope appreciable impact 6The contracts recite: “Whereas, Secretary the by delegation of is authorized from the Director Labor 17, 1968, by of the Office of Opportunity, approved Economic dated the June 27, 9, 9850, 1968), President the (33 July of United June States on F.R. to enter into contracts to provide Special Impact Programs, pursuant to Title ID amended, of the Economic Opportunity Act of hereinafter referred to as Act, directed to the problems existing solution of the particular critical com- neighborhoods munities and having large within especially urban areas of the Nation concentrations of low-income and “Whereas, the President of the United States on October launched a major industry program private to mobilize the resources of and the Federal test jobs provide find and help Government hard-core to for thousands the Nation’s trailing by inviting throughout unemployed, private industry under-employed, country join agencies departments to with the and of the Federal the in seriously Government assuming training responsibility providing opportunities and work for such disadvantaged persons. Therefore, pursuant statutory authority, “Now and the to aforesaid directive President, hereto, promises of the in consideration of the mutual herein expressed, agree as follows: . . .” well-being prosperity and “Although the economic declares: 7Section history, surpassing any achieved world to a level progressed have States the United Nation, throughout pоverty con widely shared although benefits and tinues these people. of our The United States can number the lot of a substantial to be only every if individual has potential as a nation economic and social achieve its full capabilities participate and to extent of his to the full opportunity to contribute the in the eliminate everyone the therefore, is, policy of the United States to society. It workings of our by opening to plenty midst of in this Nation poverty in the paradox work, training, and opportunity and education opportunity dignity. purpose chapter of this decency and It is opportunity live in policy. in furtherance of strengthen, supplement, coordinate efforts and highly the resources Congress employ it is desirable “It is the sense of the in all such efforts economy of the United States private sector of the of the policy chapter.” of this further the toward ing tendencies chronic and com- dependency, unemployment rising (42 2763.)8 tensions. U.S.C. former here munity Thus contracts were not to benefit individuals as such but to designed utilize training employment a means of the East disadvantaged persons improving Moreover, Los Angeles neighborhood. by means which the contracts were intended to this were not con- accomplish community improvement fined to benefits on which base their provision particular claim $1,000 to damages—one at year’s minimum employment wages plus worth of be training defendant, each provided one persons by another, and another. Rather was to be objective achieved by establishing industries in which local permanent residents would be permanently and would have employed to become opportunities supervisors, managers owners. The minimum part required capital $5,000,000 investment each defendant and the defendants’ 22-year lease of the former Lincoln Heights jail building conversion into an broad, industrial facility also indicates the long-range objective pro- gram. as the Presumably, planned enterprises prospered, quantity *12 quality and economic employment opportunity they would provided increase and would benefit not оnly families, but employees also their other local enterprises and the itself -government through reduction of law en- and forcement welfare costs.
The fact that were in a to benefit more directly than position plaintiffs certain other members of the from of the contract does public Rest., Contracts, not alter their status as (See incidental beneficiaries. C, illus. 1: a member of the cannot recover for public injury B’s failure to a contract with the United States to mail perform over carry route.)9 City a certain & County For in San Francisco v. West example, Lines, Inc., supra, ern Air agreement, between the federal government and the city could improvement airport be considered to be of benefit to air carriers greater using than airport other many Nevertheless, Western, members of the public. as an air carrier, incidental, was but an not an express, beneficiary agreement and therefore had no to enforce the contractual standing prohibition against provided: part special purpose “Thе of this is establish 8Former section problems (1) existing are directed the solution of critical programs which (defined particular neighborhoods regard political without communities or or in boundaries) having especially large within those urban areas other subdivisions or having persons, and within those rural concentrations of low-income areas substantial areas, (2) out-migration eligible scope urban and size and to have sufficient appreciable impact neighborhoods arresting an in such and in tenden communities rising community dependency, unemployment, cies toward chronic tensions.” Drafts, Contracts, repeated 9This is Tentative illustration Restatement Second section 1. illustration ex court use. The in the availability public discrimination airport’s considera the documents under “None of the distinction follows: plains various The beneficiary. Western the of a tion confers on rights third-party only as between created benefits detriments contracts and assurances any shows in them two United and the City. Nothing States parties—the benefit directly expressly intent of the to confer contracting any carriers, includ such as the It is true that air air carriers defendant. Western, assurances incidentally City’s respect be benefited by ing may be also inci may treatment at the nondiscriminatory They airport. aid, that, airport federal dentally through benefited fact beacons, with or larger loading improved longer runways, brighter for a the fact a new community ramps, airport provided of a federal without one. The various documents and were agreements part aid directed to the of a national system. program promoting transportation clauses, Provisions in such agreements, nondiscrimination including were intended to advance benefit such federal aims and for the of those who (204 be affected failure to Cal. might sponsor’s perform.” 120.) at App.2d p.
For the reasons above stated we hold that and the class they have no represent beneficiaries to recover the dam- standing ages in the either sought under California law or complaint general which federal law contracts.10 principles applies judgments dismissal are affirmed.
McComb, J., Sullivan, J.,
J.,
Clark,
concurred.
BURKE, J.I
dissent. The
hard-core
East
certified
of
Los
unemployed
Angeles
incidental,
were the
not
express,
of the contracts in
beneficiaries
and, therefore,
question
have
to enforce those contracts.
standing
Constitution,
statutes or
controlling
in the federal
provisions
10In
absence of
the
rights
obligations under
its con
regulations,
government’s
States
the United
general
rather
than the
ordinarily
according
contract
law
tracts
construed
are
407,
(Priebe
(1947) 332
v. United States
U.S.
any
of
state.
& Sons
particular
law
(1943)
32, 38,
123];
318
Trust Co. v. U. S.
U.S.
68 S.Ct.
411 [92 L.Ed.
Clearfield
838,
573].)
over con
disputes
private parties
between
63
In
L.Ed.
S.Ct.
[87
contracts,
applicability
the
flicting
stemming
from United States
claims
degree
on the
particular
generally
depend
held
of federal
law to
issues is
(Bank
America
government’s
v.
which
will affect
interests.
the outcome
the
Taylor
93,
119];
(1956)
Parnell
United States v.
Civil time any of a be enforced him at before may benefit third person, it.” The thereto rescind general principles parties applicable Schmidt, are set contracts forth in Shell v. 290-291 82], P.2d third maintain an follows: beneficiary may party “[A] action on such a contract. The in such a situa- directly promise [Citation.] tion is treated as made been having directly party. [Citation.] It is no to an action the third that objection the contracting рarty (here government) could also sue for the contract same course, breach. Of must be more than inciden- beneficiary [Citation.] benefited tally contract. An incidental success- cannot beneficiary maintain an fully action. is or is Whether not beneficiary [Citation.] one, an incidental aor beneficiary whose benefit contract express into, was entered is a construction. It is question required [Citation.] that the third be party beneficiary named as a All specifically beneficiary. that section is that be ‘made for the requires expressly benefit of third manner; parties,’ means ‘expressly’ ‘in an simply express terms; direct or unmistakable explicitly; definitely; directly.’ [Citation.] ment is [11] the intended class may Where the contract is one contracting enforce benefit it. [Citation.] does not class change any fact member or members the rule.” govern- (Italics added.) instant case I conclude foregoing principles
Applying beneficiaries of contracts between defendants and *14 express enforce, to the and are thereforе entitled the contracts. the The contend that in the majority congressional enacting purpose Economic Act of 1964 the amendments (including Opportunity subsequent and the thereto creating Program), government’s Special Impact pur- in the instant contracts with defendants to the pose executing pursuant act, benefit was to and the local general neigh- only public particularly where borhoods these were to be mem- Although programs implemented. intended class “were those whom the Government among bers plaintiffs’ class, to ,” . . benefits 401) to benefit . (ante, accruing plaintiffs’ p. “means were to the executing merely majority, according (ante, and in the contracts stated in underlying legislation.” purposes 397-398, added.) italics pp. because the congressional conclusion the above err in
The majority which the communities in impact programs to both the was benefit purpose such communi- in persons and individual impoverished are established to the were to accrue directly from the instant contracts The benefits ties.1 class, dеmon- clearly of the contracts reading members of plaintiffs’ class were not merely to members strates.2 These direct plaintiffs’ benefits contend the “means majority executing public purposes” and one of the ends in themselves but were added), italics (ante, p. and contracts which the to subsequent legislation purposes that “the with the I cannot were addressed. agree majority Accordingly, as such but to benefit individuals contracts here were designed means as a utilize the and persons employment disadvantaged training 406, italics (Ante, the East Los p. neighborhood.” improving Angeles added.) is in themselves their preambles:
The intent of contracts expressed to enter of Labor is authorized ... into con- Secretary “Whereas, . to the solu- tracts . . directed provide Impact Programs Special of the critical in communities and tion problems existing particular within urban areas of the Nation having especially large neighborhoods the President of concentrations of low-income and [Í] persons; Whereas, 2, 1967, test program on October launched major the United States Government and the Federal industry the resources of mobilize private hard- jobs the Nation’s help provide training and thousands of find Congress’ persons impoverished 1Evidence of aid individual purpose to can from 42 United States Code Annotated section communities be gleaned its full wherein declared that if our to achieve potential, “every Congress country must “the for education and individual" be given opportunity training, opportunity work, this and the to live in and decency Congress implemented dignity.” opportunity including our citizens in various general assisting ways, policy impoverished Yet, this nothing involved in case. contrary majority, Special Impact Program was assist the neighborhoods indicates that exclusive so doing Congress’ purpose intended both communities in which these live. It seems clear that Congress It communities and the individuals to be direct beneficiaries program. merely label one as an intended direct and the other as incidental. incorrect to beneficiary contracts, agreed training jobs specified to a provide 2In the the defendants intent, persons, plaintiffs represent. government’s express there class of fore, whom benefit, training jobs, namely was an ascertainable to confer general *15 simply identifiable class and not itself. 410 unemployed,
core or underemployed, by inviting industry private through- out the with the country join agencies and of the Federal departments Government in providing training assuming and work responsibility for opportunities seriously such disadvantaged persons. Now there- [$] for pursuant the aforesaid statutory authority, and the directive of fore, President, hereto, consideration of the mutual promises herein expressed, agree added.) follows: . . . .” (Italics these By pro- visions, the contracting state as parties clearly one of their their purposes intent to find jobs the hard-core unemployed. intent, accord with this the substantive
In expressed provisions contracts direct benefit the class to enforce them. seeking confer The call of stated contracts numbers of hard-core unem- hiring Los East Area for a ployed Angeles at Special Impact period $2.00 least one at minimum hour year starting wage of for the first per $2.25 days thereafter, and minimum wage hour or for the per area, for the is prevailing wage whichever In addition to higher. requiring job training appropriate contracts also employees, require “That the Contractor will for the arrange orderly promotion so into employed available and other supervisory-managerial positions, and will for all contract arrange to obtain employees a total ownership interest not (30) exceeding in the Contractor thirty percent through an stock . . appropriate purchase . .” The plan stock scope purchase is detailed in plans each of the contracts. Hamm,
In Lucas v. 583, 821, Cal.2d 364 P.2d Cal.Rptr. [15 685], we noted that one of the usual characteristics a third benefi- party ciary contract is that to be rendered directly the bene- ficiary. direct benefits to accrue to the beneficiaries as enumerated above renders inescapable conclusion that these are third bene- party ficiary contracts. the contracts also benefit
Although may communities and particular this fact does not neighborhoods, the maintenance of the preclude action as intended beneficiaries of the contracts. It not necessary under supra, Civil Code section that a contract be exclusively the benefit of a third him a give its right enforce provisions. (Hartman Co., Ranch Oil Associated 10 Cal.2d P.2d [73 Co. v. 1163]; Paramount, Ralph C. Sutro Co. v. 174].) And, infra, as will be discussed Cal.Rptr. fully, more nor does the existence of a clause liquidated damages in favor of the running govern ment defeat contract; plaintiffs’ right recover under the the fact that the government also may action bring an for the same breach does not *16 Schmidt, (Shell v. from his beneficiary enforcing rights. the third bar party is is 290.) 2d All that that supra, necessary 126 Cal.App. he is of class benefit the was show a member a for whose contract Schmidt, Paramount, supra; Ralph C. Sutro Co. v. supra.) v.
made. {Shell Thus, have an for the breach of defen bring action standing plaintiffs dants’ contracts with the governmеnt. 145, and section of Contracts on Restatement relying
The majority, Lines, Inc., Air County Cal.App. v. Western City & San Francisco of of in 216], government that the context 2d contend Cal.Rptr. of action right against a a contracts the intent to confer third party from be inferred simply must be that intent “cannot the promisor express; . . .” the benefits. fact that the third were intended to enjoy were in a “The insist that fact 401.) The {Ante, majority p. other than certain members to benefit more directly position status as of contract does not alter their from (ante, The conclude incidental beneficiaries.” (Ante, 406.) p. majority p. does the Restatement of Contracts “section of 404) preclude which the contracts because the services required recovery [plaintiffs’] ‘members of defendants were to be rendered to to perform of added (Italics within the that section.” by majority.) public’ meaning (cid:127) 145, and section of Contracts on Restatement The reliance majority’s Inc., Lines, supra, 204 v. Air City County & Francisco Western San of of Restate 2d An of section analysis is Cal.App. misplaсed. Air Lines Western also the basis for the rule of (which ment forms a of part at hand. Section indicates that its to the case not applicable provisions to the United in that “A bound provides part, promisor pertinent a States or to do an act or render to State or municipality public, or all to no subject duty service some the members under contract to such members to the injurious give compensation it, do or of consequences failing attempting perform performing so, unless, (a) an of the circum intention manifested ... light formation, compensate stances its shall that the surrounding promisor (Italics members . . .” injurious consequences. added.) it only indicates that this applies language The provision express members or all of the a service to “some do an act or render promise to give with the duty deals solely promisor’s The section public.” to “such” members of the type public. compensation is therefore distinguishable contract to which section 145 applies Here, the class contracts particular contracts the instant case. specify *17 who are to benefit. The receive a direct beneficiaries these contracts are receive the because mem- of their promised performance in a defined limited class and not because bership particularly simply they are members of the in Defendants are not bound to general. public act “do an or render a service to some or all of the the members of pub- lic"; thus, terms, its own of the by section 145 Restatement not ap- n plicable. addition,
In as indicated a by comment to section 145 of Restate- ment, that section a of the merely special stated application principles in Restatement section 133 which “(1) in that provides Where part per- formance of a in a contract will promise benefit a other than the person is, (a) that . promisee, . . a person donee it beneficiary if appears the terms of the in view of the promise accompanying circumstances that of the purpose promisee of all obtaining or of the promise part performance thereof is to amake to the gift or beneficiary to confer upon him a right against to some promisor neither due nor performance or supposed asserted to be due from the promisee beneficiary . . . .”3 Section 135 of the Restatement makes such a contract enforce- able by donee beneficiary.4 133, alone, section could language standing reasonably suggest
that of the members “donee beneficiaries” general under any contract is to a whose confer purpose “gift" them. Section 145 this broad and treats the qualifies language general inci- public merely dental, direct, beneficiaries under contracts made for the general public benefit, unless the contract manifests a clear intent to compensate members of the in the event of a breach. not, Section 145 does however, of the entirely “donee preclude application beneficiary” concept Whenever, government contract. every in the case, instant such a an intent to benefit expresses directly particular person or ascer- 3Comment c to section 133 of the part Restatement of Contracts states in is meant gift some “By primarily which is not performance by right paid Thus, recipient essentially 2d apparently designed and which is to benefit him.” section 133 states Schmidt, supra, same rule as that enunciated in Shell Cal.App. v. 290-291. by Section 133 been (Hartman has followed the California courts. Co., supra, 232, 244; Ranch Co. v. Associated Oil 10 Cal.2d Southern Cal. Gas Co. Co., v. ABC Construction Cal.App.2d 540].) Cal.Rptr. Contracts, supra, 4Section 135 of the provides: Restatement of “Except as stated [giving § promisor protection against party beneficiary the third any against (a) he promisee], defenses has gift promise in a contract creates a duty promisor beneficiary perform to the donee promise; duty and the benefit; can be beneficiary enforced (b) the donee gift for his own promise also duty creates a promisor promisee promised render the to the donee beneficiary.” is, terms, its tamable class of seсtion 145 inapplicable persons, to the general be enforced the beneficiaries contract may pursuant Thus, I section 145 is con section 133. would conclude provisions Schmidt, supra, sistent of Shell v. holding with Lines, Inc., County supra, City and the & San Francisco v. Western Air *18 105.5 Cal.App.2d Lines, Inc., supra, City Air County & San Francisco v. Western In of 105, be an inci- was held to merely defendant airline “ dental ‘will operate of contracts that an beneficiary airport providing .. use the and terms public, . for the and benefit on fair reasonable of added.) in (P. and without Italics unjust Nothing discrimination.’” the in case “shows intent any various contracts and assurances involved the and confer benefit contracting any directly expressly upon parties air 120.) as stated that (P. carriers such the defendant.” The court “To recover as a the one must show that in beneficiary, third-party was made his question (P. 120.) for expressly benefit. [Citations.]” The rationale for rule is set out Ukiah v. the Western Air Lines in Co., Imp. Ukiah Water and 142 Cal. P. [quoting 773] “ an earlier follows, is, as ‘The bar to such a in each case recovery case] that the contract was protection any рarticular property not the or for of (The American of Contracts 145 in Restatement Second 5The tentative draft of section Contracts, Second, Institute, Tentative Draft No. [April the Law Restatement Law of of the Restatement does that this 1967], 76), the conclusion provision also p. supports who “In a draft states: promisor not action. The tentative particular, bar plaintiffs’ render a serviceto to do an act or with a or governmental agency contracts government for the to a member of liability public contractual the is not subject public (a) unless the or failure to perform from damages resulting consequential terms of the to the member of the consistent with (b) is subject liability the promisee for such liability; promise provide is action against and a direct promisor damages authorizing with of law the terms of the contract and policy (Italics added.) a to the draft Comment remedies for its breach.” contract and prescribing (2) “Subsection for the section in as follows: of section 145 rationale part explains 133. beneficiаries in the classification of to a class of contracts applies particular members but individual contracts often benefit the public, Government of” added.) (Italics is intention treated as incidental unless different manifested. beneficiaries that “Government section 145 states further Comment c to the tentative draft of persons, pay damages to third and explicit promises to make contractors sometimes government no explicit promise, is promises are enforced. If there no beneficiary particular is one question is an intended liability, the whether a claimant (Italics added.) interpretation, depending on all circumstances the contract.” of draft, outright Thus, prohibition is an not under tentative section enumerated con- governmental third absent the contracts enforcement ditions. Comment one of benefit favor of such third is particular claimant question c makes it clear that the here, that, where, an intent to in the contract manifests interpretation, and imposed upon the particular liability properly рromisee party, party. person, but was for the general benefit all the property limits, within the municipal and was entered into town as a public agency, for that solely and in the purpose, exercise its to furnish power ” such general (Italics protection.’ added.)
Since in Western Air Lines the contract at issue was made benefit defendant but instead to benefit the gen- expressly eral case correctly was decided under Restatement of Con- public, However, tracts section 145. an to which the contracts in interpretation the instant case “are which reasonably susceptible pleaded or could be {ante, 400), amendment” complaint pleaded proper p. intent light legislative and the of the contracts them- language selves, is that were made they benefit of a class expressly particular *19 of the class namely persons, of the certified hard-core unem- consisting of East Los ployed Angeles.
Western Air Lines a holds that of member the cannot general public recover under a contract made for the benefit unless there public appears an intent the contract that the shall the promisor for compensate injuries caused the (204 or failure promisor’s performance to perform. at 120-121.) That Cal.App.2d case does not stand the pp. proposition express that an or a beneficiary, beneficiaries, class of not express may enforce the contract unless it declares the that so expressly intended. Schmidt, On the contrary, under the rules set forth in v. supra, Shell 126 279, 290-291, so Cal.App.2d long expressly the contract declares an intent particular a persons, individual or class such persons benefit of may enforce their rights under the contract notwithstanding absence of a provision damages such beneficiaries the event of breach. Therefore, the facts of the instant case are from those distinguishable and, Western Air furthermore, Lines Restatement of Contracts section 145 is not applicable. that the inclusion clauses in damage contend majority liquidated
each defendants’ financial risks and was intended сontracts limits Yet, these 402.) the assertion of third claims. {Ante, preclude p. party clauses refunds of monies advanced for various simply provide in the event of default. These so-called “liquidated' government clauses nowhere to limit damages specified damages” purport or, of the refunds. in the contracts limits the right government Nothing class, I more relief. As noted to seek additional importantly, plaintiffs’ above, breach of the that sue for the fact could also v. beneficiaries. (Shell contracts does not affect the of third rights Schmidt, 279, 290.) supra, manifest that, “The contracts the fact also on rely present
The majority plaintiffs damages compensate intent that defendants pay no 402.) {Ante, for their p. other members nonperformance.” follows that Therefore, right it assertedly giving plaintiffs and the would in lieu of benefits give monetary under the nor intended never benefits class contemplated they.represent was class both the fact that the contracts. This disregards argument form the contracts in the benefit under a direct receive monetary lаw, an under well settled contract and that aggrieved party wages, detriment caused for all the to be entitled compensated proximately Code, 3300). contract (Civ. breach of
A contract confers ordinarily employee employment measure of he for. The bargained will obtain the work expectation contract, however, is award not the damages for breach of is the would have earned but amount job, salary employee of service less the which the amount period employer agreed-upon earned, has or with reasonable effort affirmatively proves employee earned, (Parker Century- have other v. Twentieth might from employment. Corp., Fox Film P.2d Cal.3d Cal.Rptr. 615].) Thus, A.L.R.3d class has fact been plaintiffs’ promised does
only jobs job them an training recovering prevent *20 amount of which will money them for the loss of such jobs compensate i.e., ánd training, caused defendants’ damages proximately breach. (Civ. Code, supra.)
It is conclusion, therefore, that the trial my sustaining court erred in demurrer without leave to I would trial amend. order the court to deter- mine the class action propriety plaintiffs’ prior proceeding upon merits of the complaint. J.,
Tobriner, Mosk, J., concurred.