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Lake Almanor Associates L.P. v. Huffman-Broadway Group

October 30, 2009


(Marin County Super. Ct. No. CIV 074248). W. Bruce Watson, Jr., Judge.

The opinion of the court was delivered by: Simons, Acting P. J.


A developer submits a development application to a county, and the county hires a consultant to prepare an environmental impact report (EIR). In this appeal, we address a question of first impression: Is the consultant liable to the developer for damages due to the consultant's failure to prepare the EIR in a timely fashion? The trial court answered this question in the negative and sustained the consultant's demurrer to the developer's action alleging breach of contract and negligence. We agree and affirm.


Plaintiff and appellant developer Lake Almanor Associates L.P. (appellant) submitted a project application to the County of Plumas (County) for a proposed 1,392-acre development called the "Lakefront at Walker Ranch Project," a mixed land use development to consist of 1,032 residential units, commercial and open space, a golf course, and other amenities. A complete, revised development application was submitted to the County in April 2005. Under the California Environmental Quality Act (CEQA) (Pub. Resources Code, § 21000 et seq.), the County was required to prepare an EIR regarding the potential significant environmental impacts of the proposed project. (Pub. Resources Code, § 21151; see also Las Lomas Land Co., LLC v. City of Los Angeles (2009) 177 Cal.App.4th 837, 848 (Las Lomas) ["A public agency must prepare, or cause to be prepared, and certify the completion of an EIR for any project that it proposes to carry out or approve that may have a significant effect on the environment. [Citation.]"].) Although the complaint does not specify the actual time limit established by the County, the County was required by CEQA to establish by ordinance a time limit for completion and certification of an EIR, not to exceed one year from submission of a project applicant's complete application. (Pub. Resources Code, § 21151.5; Sunset Drive Corp. v. City of Redlands (1999) 73 Cal.App.4th 215, 220 (Sunset).)

In July 2005, the County entered into a written contract (Contract) with defendant and respondent Huffman-Broadway Group, Inc. (respondent) to prepare the EIR. The Contract stated the EIR was for appellant's proposed project and required respondent to provide appellant with a copy of the EIR. The County required appellant to reimburse it for respondent's work, and entered into an agreement with appellant for that purpose. Respondent was aware that appellant was paying the County for respondent's work. The Contract contemplated submission of an administrative draft EIR to the County by November 14, 2005. Respondent failed to meet that deadline and the County sent respondent a notice of termination in June 2006. Respondent sought more time to perform and delivered to the County a "Preliminary Working Draft Environmental Impact Report Lake Front at Walker Ranch." In September 2006, the County rejected the draft report as unacceptable and sent a second notice of termination to respondent.

Respondent submitted invoices to the County seeking payment for its services and the County demanded reimbursement from appellant. Appellant also had to reimburse the County for the services of a second consultant to prepare the EIR.

In February 2008, appellant filed a second amended complaint against respondent. Appellant seeks damages from respondent for breach of the Contract (as a third party beneficiary), negligence, and negligent interference with prospective economic advantage. In addition to reimbursement of amounts paid to the County for respondent's services and other alleged damages, appellant seeks $50 million in damages due to loss of a sale of the project property to a third party; the sale fell through because the EIR was not completed on time. Respondent demurred to the complaint and the trial court sustained the demurrer without leave to amend and entered judgment in favor of respondent.


"In reviewing a judgment of dismissal after demurrers are sustained without leave to amend, we treat the pleadings as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.]" (Mission Oaks Ranch, Ltd. v. County of Santa Barbara (1998) 65 Cal.App.4th 713, 720 (Mission Oaks), disapproved on another ground in Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123, fn. 10.) "We independently review the complaint to determine whether it states a cause of action and whether defects can be cured by amendment. The burden of proof is squarely on the plaintiff, and if there is no liability as a matter of law, leave to amend should not be granted. [Citations.] The judgment of dismissal will be affirmed if it is proper on any of the grounds stated in the demurrers, whether or not the trial court relied on any of those grounds. [Citation.]" (Mission Oaks, at p. 721.)

I. The Complaint Fails to State a Cause of Action for Breach of Contract

Appellant's cause of action for breach of contract rests on a third party beneficiary theory. Civil Code section 1559 provides: "A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it." The section "excludes enforcement of a contract by persons who are only incidentally or remotely benefited by it." (Martinez v. Socoma Companies, Inc. (1974) 11 Cal.3d 394, 400 (Martinez).)

A third party can have enforceable rights under a contract as either a creditor beneficiary or a donee beneficiary.*fn2 (Martinez, supra, 11 Cal.3d at p. 400.) "A donee beneficiary is a party to whom a promisee intends to make a gift (i.e., a benefit the promisee had no duty to confer) of a promisor's performance." (Souza, supra, 135 Cal.App.4th at p. 893; see also Martinez, at pp. 400-401.) Appellant does not contend it is a donee beneficiary; it is clear the County's intent in contracting with respondent was to satisfy the statutory obligation to prepare an EIR, not to make a gift to appellant.

"A creditor beneficiary is a party to whom a promisee owes a pre-existing duty which the promisee intends to discharge by means of a promisor's performance." (Souza, supra, 135 Cal.App.4th at p. 894; see also Martinez, supra, 11 Cal.3d at p. 400 ["[a] person cannot be a creditor beneficiary unless the promisor's performance of the contract will discharge some form of legal duty owed to the beneficiary by the promisee"].) Appellant contends it is a creditor beneficiary under the Contract because the County owed it a legal duty to complete the EIR in a timely fashion. The trial court concluded the County owed appellant no such legal duty, relying on Mission Oaks, supra, 65 Cal.App.4th 713. In Mission Oaks, after a project application was denied based on conclusions in a draft EIR prepared by a consultant, the applicant sued the consultant and the county for refund of fees paid to obtain the EIR, which it argued was inaccurate. (Id. at pp. 719-720, 723.) The Mission Oaks court concluded the applicant was not a third party creditor beneficiary of the contract with the consultant because the county did not owe the applicant a legal duty to "provide a proper EIR." (Id. at p. 724.) The court reasoned: "CEQA confers the duty upon the local lead agency to produce an adequate EIR for dissemination to the public, and the discretion to evaluate the project for the public. [Citation.] These statutory obligations may ...

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