C. R. Fedrick, Inc. v. Sterling-Salem Corporation

507 F.2d 319 C. R. FEDRICK, INC., Plaintiff-Appellee, v. STERLING-SALEM CORPORATION, Defendant-Appellant. No. 72-3118. United States Court of Appeals, Ninth Circuit. Nov. 8, 1974. Dario De Benedictis, (argued), of Thelen, Marin, Johnson & Bridges, San Francisco, Cal., for defendant-appellant. Edward K. Allison (argued), of Ehrlich & Allison, San Francisco, Cal., for plaintiff-appellee. Before MERRILL and BROWNING, Circuit Judges, and REAL, * District judge. REAL, District Judge. This appeal brings before this Court what is, perhaps, a classic example of the various inadequacies of a Federal Court's diversity of citizenship jurisdiction. Defendant-appellant, Sterling-Salem Corporation (hereafter Sterling) appeals from a judgment rendered by the District Court on behalf of plaintiff-respondent C. R. Fedrick, Inc. (hereafter Fedrick) on a claim arising out of a purported breach of contract in which Sterling was to supply certain equipment for a construction job at Incline Village, Nevada. Fedrick's trial theory and the basis upon which the trial court made its findings of fact and conclusions of law and entered judgment against Sterling in the sum of $56,882.95 is grounded in…

This appeal brings before this Court what is, perhaps, a classic example of the various inadequacies of a Federal Court’s diversity of citizenship jurisdiction.

Defendant-appellant, Sterling-Salem Corporation (hereafter Sterling) appeals from a judgment rendered by the District Court on behalf of plaintiff-respondent C. R. Fedrick, Inc. (hereafter Fedrick) on a claim arising out of a purported breach of contract in which Sterling was to supply certain equipment for a construction job at Incline Village, Nevada.

Fedrick’s trial theory and the basis upon which the trial court made its findings of fact and conclusions of law and entered judgment against Sterling in the sum of $56,882.95 is grounded in promissory estoppel (Restatement of the Law of Contracts, Section 90).

Sterling, an Ohio corporation, duly authorized to conduct business in California, is engaged — through its division Topeo — in the manufacture and sale of sewage pumping equipment, including *320 prefabricated sewage stations. In mid-1969, Topeo orally authorized one Marvin Derfler (hereafter Derfler) to act as its independent commission agent in the California area; and Derfler was so employed in the Fall of 1969…

concurring :

I concur in Judge Real’s opinion for additional reasons.

California law controls this diversity case. 1 The California courts have recognized the principles of the original section 90 in holding that when a contractor (promisee), in submitting a construction bid, relies upon the offer of a subcontractor (promisor) to perform part of the work, that reliance makes the subcontractor’s offer irrevocable, see Drennan v. Star Paving Co., 51 Cal.2d 409 , 333 P.2d 757 (1958), at least for a reasonable time, see H. W. Stanfield Co. v. Robert McMullan & Son, Inc., 14 Cal.App.3d 848 , 92 Cal.Rptr. 669 (1971).

So far, however, the California courts have been cautious in applying the principle of section 90 to third party beneficiaries. Where third parties have been permitted to assert rights flowing from a promise, the third party has been either an alter ego of the promisee, see Aronowicz v. Nalley’s, Inc., 30 Cal.App.3d 27 , 106 Cal.Rptr. 424 (1973), or the recipient of substantially the same promise as was made by the promisor with knowledge that the promisee would pass the promise along to a third party. See Burgess v. California Mut. Bldg. & Loan Ass’n, 210 Cal. 180,…