Zigas v. Superior Court

Brief Fact Summary.

Petitioners are tenants in a building that was financed by a mortgage pursuant to the National Housing Act. They are suing their landlord for raising rents in violation of regulation from the Department of Housing and Urban Development (HUD).

Synopsis of Rule of Law.

A party may sue as a third party beneficiary of a contract with the government when it is clear that the party was intended to be a third party beneficiary under of the contract with the government.

Facts.

Petitioners are tenants of a building financed by a five million dollar mortgage from the Federal Government. They allege that the landlords are charging rents above the maximum rent allowed for buildings of this kind, by HUD.
The trial court determined that Petitioners did not have standing to sue on this matter in Federal Court.

Issue.

Do the petitioners have standing to sue as third party beneficiaries in this contract with the government?

Held.

Yes
To have standing to sue as third party beneficiaries to a contract with the federal government, one must look to the contract and the policy that brought it into being. In this case, it is clear that the contract was made with the intention of benefiting the Petitioners because the purpose of the National Housing Act, congress stated, was to furnish a suitable and decent living environment for all Americans.
This case is distinguishable from Martinez v. Socoma Companies, Inc. where the alleged third party beneficiaries were more incidental beneficiaries. The goal of the contract was to improve the neighborhood as a whole rather than help individuals.
The Petitioners, not the government, were the ones harmed by the landlord’s failure to honor the contract.

Discussion.

This case turns on whether the Petitioners, specifically, were intended to benefit directly from the agreement with the landlords and HUD. In this, case, the agreement was made for the renter’s benefit and did not involve helping the renters as part of some greater purpose.