Construction/Fee Clause Interpretation/Section 1717: Fees Clause In Masonry Subcontractor-Material Supplier Contract Did Not Trigger Third Party Beneficiary Exposure Against Real Property Owners Who Did Not Prevail Against Material Supplier

Specific Breadth Of Clause Was Dispositive.

            Prince v. Thompson Building Materials, Case No. B280813 (2d Dist., Div. 2 Jan. 9, 2018) (unpublished) involved a situation where real property owners sued a material supplier to enforce contractual warranties under a third-party beneficiary against their masonry subcontractor.  Ultimately, owners lost and material supplier sought to recoup Civil Code section 1717 based on a fees clause in the contract with its masonry subcontractor.  The trial judge denied the fees request, a determination affirmed on appeal.

            Material supplier appealed on the third-party beneficiary theory, based on the fact real property owners were attempting to enforce contractual warranties in a contract so that they should have to bear the burden of so doing through the fees clause in the same contract.  With respect to the third-party beneficiary legal theory, the appeal pitted a “specific intent” test in Sessions Payroll Management, Inc. v. Noble Construction Co., 84 Cal.App.4^th 671, 680-681 (2000) against a “sufficient nexus” test articulated in Real Property Services Corp. v. City of Pasadena, 25 Cal.App.4^th 375, 380 (1994).  The problem here for the appellate court in Prince was that it could not find that these decisions were at odds given the need to examine the specific language of the contract fees clause at issue.  When that was done, the language only applied between masonry subcontractor and material supplier and did not give specific rights to third parties (containing “either party” rather than “any party” language).  Fee denial affirmed.