PEABODY SEATING CO v. Gust K. Newberg Construction Co., a Corporation, Real Party in Interest.

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District Court of Appeal, Second District, Division 4, California.

PEABODY SEATING CO., Inc., a Corporation, Petitioner, v. SUPERIOR COURT of the State of California, FOR the COUNTY OF LOS ANGELES, Respondent, American Seating Company, Real Party in Interest, Gust K. Newberg Construction Co., a Corporation, Real Party in Interest.

Civ. 26305.

Decided: April 18, 1962

Nichols, Stead, Boileau & Lamb, Pomona, for petitioner. No appearance, for respondent. Kirkpatrick & Kirkpatrick, Long Beach, for real party in interest, American Seating Company. MacFarlane, Schaefer & Haun, Los Angeles, for real party in interest, Gust K. Newberg Construction Co.

American Seating Company (hereinafter referred to as American) instituted a declaratory relief action naming as defendants the City of Long Beach (hereinafter referred to as City); Gust K. Newberg Construction Co. (hereinafter referred to as Newberg); Stanley Mattox, individually and doing business as Gymnastic Supply Company, and Gymnastic Supply Company, a corporation (hereinafter referred to as Gymnastic). The action involves a determination of the rights, duties and obligations of the parties in connection with the installation of stadium seats in a convention and exhibit hall being constructed for the City by Newberg.

The City submitted to various contractors for bids certain plans and specifications for the construction of the building, all bids to be submitted by August 17, 1960. Item 1 thereof, called the ‘Base Bid,’ provided for the installation of ‘hardwood type’ stadium seating. The bidding instructions required the bidding contractors to also submit bids on Items 2, 3 and 4; Item 4, Alternate B, provided for the installation of an ‘upholstered type’ chair. The instructions required the bidders to set forth the name and location of the place of business of each subcontractor who would perform labor or render services to the general contractor in the performance of said construction project in an amount in excess of one-half of one per cent of the general contractor's total bid.

Defendant Newberg, in its bid as submitted on August 17, 1960, designated the subcontractors who would perform labor and render services in the event the contract was awarded to it. It listed the name of Gymnastic Supply Company opposite the words ‘stadium seating.’ It did not separately name or designate a subcontractor to manufacture and install upholstered type seating.

Prior to the submission of bids to the City on August 17, 1960, American submitted to Newberg its bid of $213,000 for furnishing and installing the upholstered stadium seating under Bid Item 4, Alternate B. American alleges that this was the lowest bid; that Newberg used this bid in computing and submitting its bid to the City, but that Newberg inadvertently failed to designate American therein as such subcontractor; that prior to the letting of the general contract for said project, Newberg supplemented its bid by delivery to the City of a letter dated October 14, 1960, which states that ‘the upholstered seats which are to be furnished under Specification 31, Alternate # B, will be as furnished by the American Seating Company’; that the City awarded the contract to Newberg, exercised its option to have the upholstered type seat installed in lieu of the hardwood type, and incorporated a provision therefor into said contract.

Defendant Newberg has a contract with Gymnastic and intends to have Gymnastic install the upholstered type stadium seating manufactured by Peabody Seating Company, petitioner herein. Prior to the submission of Newberg's bid to the City, Gymnastic did not submit to Newberg a bid for the upholstered type seating. It is the position of Newberg that in designating Gymastic as the subcontractor who would install the stadium chairs, it intended such subcontractor to install the stadium chairs regardless of which type would be finally installed; that the specification of the name of the manufacturer was not required under the Municipal Code or the bidding instructions; that both types of chairs are fixtures, thus it was not, in any event, required to specify in its bid the subcontractor who would furnish and install said chairs; and that under its contract with the City it is entitled to furnish any one of three seats approved by the architect1 and may have such seats furnished by any person, firm or company that it desires. Newberg further asserts that it inadvertently advised the City in its letter of October 14, 1960, that the stadium seats would be manufactured by American; that thereafter it discovered its error and on December 31, 1960, advised the City that its subcontractor Gymnastic would furnish chairs manufactured by Peabody Seating Company (hereinafter referred to as Peabody). Newberg asserts that it at no time advised American that it intended to designate or had designated it as a subcontractor or supplier under its contract with the City; that there was no contractual obligation between itself and American.

American contends that the designation by Newberg of Gymnastic as a subcontractor to install the stadium chairs under the ‘Base Bid’ is not a designation of the subcontractor to furnish and install the upholstered seating under Bid Item 4, Alternate B; that, based upon applicable laws and ordinances, its negotiations with Newberg resulted in a contract; that its written bid was orally accepted; that American is obligated to Newberg to furnish and install upholstered seating per said bid; that the designation of American in the October 14 letter was a correct and proper designation of a subcontractor which cannot be changed; that Newberg is under a contractual obligation to the City to provide seating manufactured by American, and that Newberg is estopped from providing the upholstered seat under Bid Item 4, Alternate B, manufactured or installed by any person or firm other than American.

The issues as framed by the above named parties in the pretrial statement of November 16, 1961, at which time trial was set for December 19, 1961, are as follows: 1. Was the naming or designation of a subcontractor to furnish and perform stadium seating required in connection with the submission of bids on the subject project? 2. Was there an effective designation or naming of the subcontractor to perform the ‘upholstered type’ stadium seating as provided in Section 31 of the specifications, Bid Item 4, Alternate B? 3. If so, can the subcontractor manufacturing, furnishing or installing the stadium seating upon the construction project be changed or substituted under the facts and circumstances herein? 4. Declaration of the contractual obligations pertaining to stadium seating between the City and Newberg. 5. Determination of the rights and obligations between American and Newberg; what contractual obligation, if any, existed between these two parties. 6. Is the doctrine of estoppel applicable? 7. Is the doctrine of laches applicable?

Due to a congested court calendar, trial date was continued from December 19 to December 20, 1961, on which date counsel for Gymnastic moved that Peabody be joined as an indispensable party under Code of Civil Procedure, section 389. The court made its order that Peabody (and General Seating Company)2 ‘be brought into this action and be deemed as parties defendant herein’ and the cause was continued to January 30, 1962. On December 27, 1961, petitioner was served with summons, complaint and pretrial orders.

On January 30, American moved for separate trials, requesting that the trial involving the original parties be made separate from the one involving Peabody. The motion was denied that date. Also, on January 30, the court sustained the special demurrer of Peabody (filed the previous day), ‘plaintiff to amend as to defendant Peabody Seating Co. by February 6, 1962.’ Trial was continued to March 8, 1962. American states that it declined to amend the complaint ‘inasmuch as it had no knowledge or information of any facts which would in any way state a cause of action against said Peabody Seating Co., Inc.’

On March 5 (3 days before trial) Peabody filed an answer and cross-complaint. It also filed a motion to set aside and vacate the pretrial order and the trial date, to nullify all pretrial proceedings, and to place the matter off the civil action list. The motion was taken under submission, resulting in a further continuance of the trial date to March 28. The cross-complaint alleges the contract between Newberg, as general contractor, and Gymnastic and General Seating Company, as subcontractors to supply and install the stadium seats; that Peabody thereafter contracted with said subcontractors for the manufacture of said seats; and that, pursuant to said contract, it has expended considerable money in the manufacturing process generally and in the purchase of materials. The cross-complaint and the answer thereto present no new or additional controversy. Peabody merely disputes the contention of American that it has a contract with Newberg, and claims that the contract between Newberg and Gymnastic is valid.

On March 6, American filed a motion to strike the answer and cross-complaint, or for separate trials. On March 13, the following minute order was made: ‘Motion to strike answer and cross-complaint is denied. Motion for separate trials is granted so that issues framed by existing pre-trial orders shall be heard in one trial and all other issues now or hereafter arising, are [sic] particularly those in the pleadings of Peabody Seating Company shall be separately tried.'3 The trial judge expressed the opinion that Peabody was but a supplier of goods and should not have been made a party to the action in the first place; that it was not an indispensible party. Peabody moved for an ex parte order revoking the order of March 13 under Code of Civil Procedure, section 1008, claiming that the same motion had earlier been denied. This motion was denied.

On March 26 (2 days before trial) Peabody again moved for a continuance of the trial based upon the fact that it was going to appeal the order granting separate trials. Upon the ground that it was a nonappealable order, the motion was denied.

Thereupon, on March 27, the within petition for a writ of prohibition was filed seeking an order restraining respondent court from trying the issues separately as to petitioner and ordering the court to revoke the order for separate trials. It is petitioner's position that it is an indispensable party and that it is only as to a ‘conditionally necessary party’ that a court has jurisdiction to order separate trials. (Code Civ.Proc. § 389.)

Code of Civil Procedure, section 389, provides: ‘A person is an indispensable party to an action if his absence will prevent the court from rendering any effective judgment between the parties or would seriously prejudice any party before the court or if his interest would be inequitably affected or jeopardized by a judgment rendered between the parties.

‘A person who is not an indispensable party but whose joinder would enable the court to determine additional causes of action arising out of the transaction or occurrence involved in the action is a conditionally necessary party. * * *

‘If, after additional conditionally necessary parties have been brought in pursuant to this section, the court finds that the trial will be unduly complicated or delayed because of the number of parties or causes of action involved, the court may order separate trials as to such parties or make such other order as may be just.’

It is well settled that if a court attempts to proceed in an action without the presence of indispensable parties it acts beyond its jurisdiction and may be restrained by prohibition. (Bank of California, Nat. Ass'n v. Superior Court, 16 Cal.2d 516, 522–523, 106 P.2d 879.) But ‘[w]hen he is found to be a proper or necessary party proceeding in his absence is not jurisdictional but error at the most, dependent upon the circumstances.’ (Harrington v. Evans, 90 Cal.App.2d 269, 271, 221 P.2d 696, 698.)

With reference to section 389 of the Code of Civil Procedure, it is stated in Bowles v. Superior Court, 44 Cal.2d 574, 583, 283 P.2d 704, 710: ‘As pointed out in Bank of California Nat. Ass'n v. Superior Court, 16 Cal.2d 516, 521, 106 P.2d 879, in applying this section, a distinction has been drawn between necessary and indispensable parties. Where persons are so interested in the controversy that they should normally be made parties in order to enable the court to do complete justice, but their interests are separable from the rest, they are necessary but not indispensable parties. On the other hand, one may be an indispensable party if his interest in the subject matter of the controversy is of such a nature that a final decree cannot be rendered between the other parties to the suit without inevitably affecting that interest.’

In the instant case the real object of American's action is to establish the existence of a contract between itself and Newberg, or a legal obligation on the part of Newberg in favor of American by reason of certain ordinances and Newberg's contract with the City. This involves a determination also of the validity of the contract between Newberg and Gymnastic. The controversy involves the legal rights and duties of the parties to such contracts only, a conclusive determination of which may be had without the presence of Peabody; nor will the absence of Peabody prejudice any of these parties. (See Goldsworthy v. Dobbins, 110 Cal.App.2d 802, 807, 243 P.2d 883; John v. Marshall, 103 Cal.App.2d 172, 183–184, 229 P.2d 367; Caldwell v. Regents of University, 35 Cal.App. 639, 640, 170 P. 666; Baines v. Zuieback, 84 Cal.App.2d 483, 492–493, 191 P.2d 67; First Nat. etc. Bk. of San Diego v. Superior Court, 19 Cal.2d 409, 415, 121 P.2d 729; Jollie v. Superior Court, 38 Cal.2d 52, 59, 237 P.2d 641; Simmons v. California Institute of Technology, 34 Cal.2d 264, 276, 209 P.2d 581.)

Petitioner claims, however, that its ‘interest would be inequitably affected or jeopardized by a judgment rendered between the parties.’ (Code Civ.Proc. § 389.) Obviously Peabody has an interest in knowing whether the right and duty to furnish the stadium seats belongs to American or Gymnastic, but such ‘interest’ is but consequential and economic; it is not a legal interest in the subject matter of the controversy and Peabody can claim no rights under a judgment in the declaratory relief action.

As stated by Professor Edwin Borchard, Declaratory Judgments, (2nd ed.) page 259: ‘Legal interest is the criterion of joinder; * * *’ (Cf., Schriber Sheet Metal & Roofers v. Shook, 64 Ohio App. 276, 28 N.E.2d 699, 703; Miller v. City of Phoenix, 51 Ariz. 254, 75 P.2d 1033; Ex-Cell-O Corporation v. City of Chicago, 7 Cir., 115 F.2d 627.) Peabody is not a party to any of the contracts mentioned in the declaratory relief action and claims an interest in the controversy solely by reason of its contract with Gymnastic. It has no more interest in the matter than numerous other suppliers of goods or materials to a subcontractor. A judgment in the action will not result in a termination or forfeiture of its contract with Gymnastic (Cf. Hartman Ranch Co. v. Associated Oil Co., 10 Cal.2d 232, 263–265, 73 P.2d 1163; Thomson v. Talbert Drainage Dist., 168 Cal.App.2d 687, 690, 336 P.2d 174), and it need not determine, nor will it directly affect, Peabody's legal rights or remedies under its contract. In speaking of parties not indispensable, the court states in Bank of California Nat. Ass'n v. Superior Court, supra, 16 Cal.2d 516, 523, 106 P.2d 879, 884; ‘The other classification includes persons who are interested in the sense that they might possibly be affected by the decision, or whose interests in the subject matter or transaction are such that it cannot be finally and completely settled without them; but nevertheless their interests are so separable that a decree may be rendered between the parties before the court without affecting those others. These latter may perhaps be ‘necessary’ parties to a complete settlement of the entire controversy or transaction, but are not ‘indispensable’ to any valid judgment in the particular case. They should normally be joined, and the court, following the equity rule, will usually require them to be joined, in order to carry out the policy of complete determination and avoidance of multiplicity of suits. But, since the rule itself is one of equity, it is limited and qualified by considerations of fairness, convenience, and practicability.'

It does not appear from the record that the trial court, in ordering that petitioner be brought into the case, did so on the basis that it was an indispensable party. At the time of making that order the court stated: ‘I will make an order that the plaintiff include them in the action and serve them with process and a copy of pleading that involve them, and they are involved in this case, so that they may make a defense if they care to by filing an answer or doing whatever else they, under the law, desire to do. That is all that I am saying is that they should be given the opportunity by being served, if that can do done. If they can't be served, then they can't, and then you can proceed from there. I will order that be done.’

Nor did the court, in denying the order for separate trials on January 30th necessarily do so on the ground that Peabody was an indispensable party. We do not know that basis of that ruling. But the record shows only that, at that time, Peabody know the basis of that ruling. But the record was filed after the filing of the motion and had not been ruled upon. Subsequent to this ruling, and prior to the order of March 13, granting separate trials, Peabody had filed its answer and cross-complaint showing that it was not a party to the contracts mentioned in American's complaint; that it was but a supplier of materials to a subcontractor (Gymnastic) involving an entirely different contract. Thus the order of March 13 was made upon a completely different showing.

It is our conclusion that the trial court found, and the record indisputably shows, that Peabody is not an indispensable party. Thus the court acted within its discretion in ordering separate trials and the question of jurisdiction is not involved.

The alternative writ is discharged and the peremptory writ is denied.

FOOTNOTES

1.  The City alleges that it approved for installation upholstered seats as manufactured by American Seating Company, Haywood-Wakefield, model TC 700, and Peabody Seating Company.

2.  The demurrer to the complaint of General Seating Company was sustained without leave to amend on January 23, 1962.

3.  By reason of this order, the court on March 14, denied the motion of Peabody to vacate the pretrial order and trial date.

PER CURIAM.

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