Case Name: Cilker Apartments, LLC v. Western National Construction, et al.
Case No.: 2013-1-CV-258281

This case arises out of alleged construction defects at One Pearl Place Apartments, a 182-unit residential apartment building in San Jose, California. Defendant/Cross-Defendant/Cross-Complainant Jeld-Wen, Inc. dba Summit Window & Patio Door (“Jeld-Wen”) moves for summary judgment as to the Second Amended Complaint filed by Cilker Apartments, LLC (“Plaintiff” or “Cilker”), Western National Construction’s (“Western”) Cross-Complaint, and Cell-Crete Corp.’s (“Cell-Crete”) Cross-Complaint.

I. Objections to Evidence

Various objections to evidence have been filed in the motions before the Court. Code of Civil Procedure section 437c, subdivision (q) states:

In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.

Accordingly, the Court will not rule on objections that are not deemed material to the disposition of the motions. Any objections relevant to the Court’s decision will be discussed in the analysis.

II. Requests for Judicial Notice

The parties request judicial notice of various pleadings in this action. The requests are GRANTED. (Evid. Code, § 452, subd. (d).)

III. Analysis

Jeld-Wen provides evidence that on March 23, 2006, Cilker and Western entered into a settlement agreement (the “Agreement”) regarding the construction of the subject property. (Separate Statement of Undisputed Material Facts in Support of Jeld-Wen, Inc.’s Motion for Summary Judgment (“UMF”), No. 5.) The Agreement contains a provision that states:

Excepted from this Settlement and Release are any and all claims that exist or may arise out of defects in the design or construction of the premises against [Western] only (“Excepted Claims”), which claims shall not be and are hereby not released or waived. Such Excepted Claims are expressly released and waived as against all Defendants and their respective Released parties other than [Western]. However, any damages based on such Excepted Claims shall be strictly limited to insurance proceeds paid under any insurance policies issued to [Western] and/or its subcontractors (collectively “WNC Policies”). Any amount of damages in excess of or excepted from coverage under the WNC Policies is hereby released and waived. The Cilkers hereby expressly agree and warrant that they will never attempt to pursue any of the Defendants or their Related Entities (other than WNC alone) for any such Excepted Claims, and with respect to [Western], hereby expressly warrant and agree that they will never pursue any claim against WNC directly which is not covered by WNC Policies. This includes an express warranty and agreement that if the Cilkers pursue any such matter to judgment, they will never attempt to levy upon any assets of [Western].

(UMF, No. 8; Evidence in Support of Jeld-Wen, Inc.’s Motion for Summary Judgment, Exh. 5, ¶ 1.B.)

Jeld-Wen contends this provision applies to Jeld-Wen as a subcontractor of Western and therefore Jeld-Wen can only be liable for damages to the extent of Jeld-Wen’s insurance coverage. Jeld-Wen argues that it is self-insured (i.e. has no insurance coverage) and therefore has no liability at all. (UMF, Nos. 2-3.)

In opposition, Cilker argues, inter alia, that (1) Jeld-Wen had insurance; (2) Jeld-Wen was not a party to the Agreement; and (3) Jeld-Wen was not a third-party beneficiary to the Agreement. With regard to the first argument, Cilker provides evidence that Jeld-Wen had a Certificate of Liability Insurance as of 6/25/2001. (Plaintiff Cilker Apartments, LLC’s Separate Statement of Disputed and Undisputed Material Facts in Support of Opposition to Defendant Jeld-Wen, Inc.’s Motion for Summary Judgment (“Cilker Opp. UMF”), Nos. 2-3.) Consequently, there is a triable issue of material fact as to whether Jeld-Wen was insured with regard to the work performed on the subject property.

Even if Jeld-Wen were not insured, there are triable issues regarding the interpretation and application of the Agreement. It is undisputed that Jeld-Wen was not a party to the Agreement. (Cilker Opp. UMF, No. 31.) Jeld-Wen’s position is that it is a third-party beneficiary of the Agreement and therefore gains the benefit of the limitation on damages to the extent of insurance coverage. As explained in one case:

Release agreements are governed by the generally applicable law of contracts. 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. The circumstance that a literal contract interpretation would result in a benefit to the third party is not enough to entitle that party to demand enforcement. The contracting parties must have intended to confer a benefit on the third party.

It is not necessary for the third party to be specifically named in the contract, but such a party bears the burden of proving that the promise he seeks to enforce was actually made to him personally or to a class of which he is a member. In making that determination, the court must read the contract as a whole in light of the circumstances under which it was entered.

Thus, to obtain summary judgment on the ground that a general release has discharged him from liability, a third party to the release agreement must affirmatively show that the parties intended to release him. The burden of proof is on the third party, under both contract law and the summary judgment statute. Because the court must consider the circumstances of the contracting parties’ negotiations to determine whether a third party not named in the release was an intended beneficiary, it will seldom be sufficient for the third party simply to rely on a literal application of the terms of the release. 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. However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract. Whether a third party is an intended 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.

(Neverkovec v. Fredericks (1999) 74 Cal.App.4th 337, 348-349, quotation marks, ellipses, brackets, and citations omitted.)

Jeld-Wen provides no evidence regarding the circumstances of the contracting parties’ negotiations so the Court can determine whether Jeld-Wen was an intended beneficiary; Jeld-Wen provides only the Agreement itself and argues the intent of the parties is evident from the language of the Agreement. This is insufficient for Jeld-Wen to meet its initial burden in light of the fact that Jeld-Wen is not mentioned in the Agreement.

Even if the Court were to rely solely on the language of the Agreement, the Agreement does not support Jeld-Wen’s interpretation. The section of the Agreement that relates to the limitation on damages to the extent of insurance coverage provides an exception to the Agreement’s general release only as to claims against Western. In other words, the section of the Agreement on which Jeld-Wen relies does not apply to the claims in this lawsuit because it only concerns claims by the parties to the Agreement that are brought against Western.

Jeld-Wen argues that the language in the Agreement that refers to “insurance policies issued to [Western] and/or its subcontractors” indicates that the Agreement was intended to benefit subcontractors such as Jeld-Wen. Cilker provides an alternative explanation – the reference to insurance policies issued to Western’s subcontractors is intended to encompass insurance obtained by Western’s subcontractors for the benefit of Western. This explanation is, in fact, more plausible than Jeld-Wen’s contention that the general reference to subcontractors in the Agreement was intended by the parties to the Agreement to limit the damages that can be obtained against all subcontractors in the future even though they were not parties to the Agreement. At the very least, there is a triable issue of material fact regarding this issue. (Cilker Opp. UMF, Nos. 25-27, 36-27.)

Accordingly, Jeld-Wen’s motion for summary judgment is DENIED as to Cilker.

Jeld-Wen’s only argument with regard to Western and Cell-Crete is that their cross-complaints are wholly derivative of Cilker’s claims and therefore fail if Cilker’s claims cannot be maintained. Since Jeld-Wen’s motion is denied as to Cilker, it necessarily must be DENIED as to Western and Cell-Crete.