Moncada v. West Coast Quartz Corp.

Filed 10/28/13; pub. order 11/22/13 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
IRMA MONCADA et al., H036728
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. CV169097)
v.
WEST COAST QUARTZ CORP. et al.,
Defendants and Respondents.
This case involves a dispute between former employees of a company and the
company’s sole shareholders over a promised retirement bonus that was never paid.
Plaintiffs, Irma Moncada, Randy Morris and Everardo Serrano, worked for West
Coast Quartz Corporation (West Coast). Defendants Paul Maloney and Nancy Tkalcevic
were the owners and sole shareholders of West Coast. Defendants were preparing to sell
West Coast, and wanted plaintiffs to continue to work for the company until the sale was
complete. To accomplish that end, defendants repeatedly promised plaintiffs that if they
continued to work for West Coast until the sale, they would be paid a bonus from the sale
proceeds that would be sufficient for them to retire. Plaintiffs remained at West Coast for
five years following defendants’ initial promise of the retirement bonus, rejecting job
offers from other companies, and opportunities to move out of the area. When
defendants sold West Coast in 2009 for approximately $30 million, they did not pay
plaintiffs the promised bonus.
Plaintiffs filed suit against defendants for fraud and breach of contract, among
other causes of action. Following the trial court sustaining defendants’ demurrer to their
first amended complaint with leave to amend, plaintiffs opted to stand on the pleading.
As a result, the trial court dismissed the first amended complaint and entered judgment in
favor of defendants. Plaintiffs appeal the judgment.
STATEMENT OF THE FACTS1 AND CASE
In June 2004, the plaintiffs, Ms. Moncada, Mr. Morris and Mr. Serrano, were all
key long-term employees of defendant, West Coast. At the time, the sole shareholders of
West Coast were defendants Mr. Maloney, the president and chief financial officer, and
Ms. Tkalcevic, the chief executive officer. On June 22, 2004, Mr. Maloney and
Ms. Tkalcevic held a meeting with plaintiffs and other key long-term employees at
Ms. Tkalcevic’s home. During the meeting, Ms. Tkalcevic and Mr. Maloney told those
present that they were planning to sell West Coast, and the process would take between
two and 10 years to complete. Ms. Tkalcevic and Mr. Maloney also said that they did not
want any of the key employees of the company to quit during the sale process, and
represented to those present that they would receive stock or stock options in West Coast
so that when the company actually sold, they would be rewarded for their loyalty.
Following the meeting in June, seeing no action from defendants regarding the
grant of stock or stock options in West Coast, some managers and key employees began
to leave the company. On August 27, 2004, Mr. Maloney told Ms. Moncada that he and
Ms.Tkalcevic did not want to reward disloyal employees, and planned to change the way
they would reward employees who stayed with the company until the completed sale.
Mr. Maloney told Ms. Moncada that he and Ms. Tkalcevic would pay the employees who
stayed with the company a bonus when the company sold that would be enough for the
employees to retire.
1
The facts are taken from the first amended complaint.
2
Following Mr. Maloney’s first statement of his promise to pay plaintiffs a bonus
upon the sale of the company in August 2004, he repeated the promise numerous times
whenever an employee expressed doubt or a wish to leave the company. On
September 5, 2005, Mr. Maloney told Ms. Moncada that he was increasing her pay and
reiterated that she would receive a bonus of enough money to retire when the company
was sold. On November 20, 2005, when Ms. Moncada said she wanted to leave the
company, Mr. Maloney and Ms. Tkalcevic reiterated their promise that when the
company was sold, they would pay her a bonus that would be sufficient to retire.
Ms. Moncada continued to work for the company. On August 15, 2006, Mr. Maloney
told Mr. Moncada that he and Ms. Tkalcevic were consulting with financial advisors to
determine an amount of the bonus for the employees when the company sold that would
minimize tax liability.
With regard to plaintiff Mr. Serrano, Mr. Maloney reiterated the same specific
promise that if Mr. Serrano continued to work at West Coast until the company’s sale, he
would be paid a bonus in an amount sufficient for him to retire. Mr. Maloney repeated
the promise to Mr. Serrano on Feburary 7, 2005, January 26, 2006, and May 17, 2006,
when Mr. Maloney increased Mr. Serrano’s pay and gave him an update on the progress
of the sale, saying, “[Y]ou guys will get the bonus, enough to retire.” On June 3, 2006,
Mr. Serrano told Mr. Maloney he was considering moving to Bakersfield. In response,
Mr. Maloney reiterated the promise of the bonus if he stayed with West Coast until the
sale. Mr. Maloney repeated the terms of the promise on August 25, 2006, and
April 14, 2007.
Mr. Maloney reiterated the retirement bonus many times to plaintiff Mr. Morris
between 2004 and 2009. Mr. Morris turned down nine offers of employment from other
companies during that period in reliance on defendants’ promise of a bonus at the time of
West Coast’s sale.
3
In November 2009, plaintiffs learned that defendants had sold and transferred all
of their shares in West Coast for the amount of $30,210,000. Plaintiffs never received the
bonus for retirement that defendants promised to them.
In April 2010, plaintiffs filed their original complaint against defendants asserting
causes of action for misrepresentation-concealment, breach of contract, promissory
estoppel, intentional infliction of emotional distress, estoppel in pais, and violation of
Business and Professions Code section 17200.
Defendants demurred to the original complaint and on September 7, 2010, the trial
court sustained the demurrer with leave to amend, except as to the cause of action for
estoppel in pais, to which the court sustained the demurrer without leave to amend.
Plaintiffs filed a first amended complaint on October 4, 2010, that alleged causes
of action for misrepresentation-concealment, breach of contract and implied covenants,
promissory estoppel, intentional infliction of emotional distress, and negligent
misrepresentation.
Defendants demurred to the first amended complaint. On February 9, 2011, the
court sustained the demurrer with leave to amend, except as to the cause of action for
intentional infliction of emotional distress, to which the court sustained the demurrer
without leave to amend. Plaintiffs did not file a second amended complaint, and instead,
chose to stand on the first amended complaint. As a result, the trial court dismissed the
first amended complaint pursuant to Code of Civil Procedure section 581,
subdivision (f)(2), and entered a judgment in favor or defendants. Plaintiffs filed a notice
of appeal of the judgment.
4
DISCUSSION
Plaintiffs assert on appeal that the trial court erred in sustaining the demurrer to the
first amended complaint with leave to amend, and dismissing the action with prejudice.
In addition, plaintiffs argue the court erred in sustaining the demurrer to the action for
estoppel in pais alleged in the original complaint, without leave to amend.
This appeal involves review of two separate orders. The first is the trial court’s
order of September 7, 2010, wherein it sustained defendants’ demurrer to plaintiffs’ cause
of action for estoppel in pais without leave to amend. We review this order as an
“intermediate ruling . . . which involves the merits or necessarily affects the judgment or
order appealed from . . . .” (Code of Civil Procedure § 906.)
The second order was on February 9, 2011, when the trial court sustained
defendants’ demurrer to the first amended complaint with leave to amend. As this court
stated in County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292,
“[w]hen a demurrer is sustained with leave to amend, and the plaintiff chooses not to
amend but to stand on the complaint, an appeal from the ensuing dismissal order may
challenge the validity of the intermediate ruling sustaining the demurrer. [Citation.] On
the other hand, where the plaintiff chooses to amend, any error in sustaining the demurrer
is ordinarily waived.” (Id. at p. 312.)
The issue raised in this appeal is entirely a matter of law and we hold that the first
amended complaint states a cause of action. A demurrer is properly sustained when the
complaint “does not state facts sufficient to constitute a cause of action.” (Code Civ.
Proc., § 430.10, subds. (e).) “On appeal from a dismissal following the sustaining of a
demurrer, this court reviews the complaint de novo to determine whether it alleges facts
stating a cause of action under any legal theory. . . . [¶] Because the function of a
demurrer is not to test the truth or accuracy of the facts alleged in the complaint, we
assume the truth of all properly pleaded factual allegations. [Citation.] Whether the
5
plaintiff will be able to prove these allegations is not relevant; our focus is on the legal
sufficiency of the complaint.” (Los Altos Golf and Country Club v. County of Santa
Clara (2008) 165 Cal.App.4th 198, 203.) “Further, we give the complaint a reasonable
interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan
(1985) 39 Cal.3d 311, 318.)
Misrepresentation/Concealment
Plaintiffs assert the first amended complaint alleges facts sufficient to state a cause
of action for misrepresentation-concealment. Plaintiffs allege that defendants concealed
the fact that they wanted plaintiffs to remain employed at West Coast to make the
company more attractive to potential buyers, and only intended to give plaintiffs a
nominal or no bonus for remaining employed.
Concealment is a species of fraud or deceit. (See Civ. Code, §§ 1710, subd. (3),
1572, subd. (3); Lovejoy v. AT & T Corp. (2004) 119 Cal.App.4th 151, 158 (Lovejoy).)
“[T]he elements of an action for fraud and deceit based on concealment are: (1) the
defendant must have concealed or suppressed a material fact, (2) the defendant must have
been under a duty to disclose the fact to the plaintiff, (3) the defendant must have
intentionally concealed or suppressed the fact with the intent to defraud the plaintiff,
(4) the plaintiff must have been unaware of the fact and would not have acted as he did if
he had known of the concealed or suppressed fact, and (5) as a result of the concealment
or suppression of the fact, the plaintiff must have sustained damage.” (Marketing West,
Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613; Lovejoy, supra,
119 Cal.App.4th at pp. 157-158.)
“Promissory fraud,” as is alleged in this case, is a subspecies of the action for
fraud and deceit. “A promise to do something necessarily implies the intention to
perform; hence, where a promise is made without such intention, there is an implied
6
misrepresentation of fact that may be actionable fraud. [Citations]” (Lazar v. Superior
Court (1996) 12 Cal.4th 631, 638.)
Every element of a fraud cause of action must be specifically pleaded. (Service By
Medallion, Inc. v. Clorox Company (1996) 44 Cal.App.4th 1807; Tarmann v. State Farm
Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) This pleading requirement of
specificity applies not only to the alleged misrepresentation, but also to the elements of
causation and damage. As this court stated in Service By Medallion, Inc., “In order to
recover for fraud, as in any other tort, the plaintiff must plead and prove the ‘detriment
proximately caused’ by the defendant’s tortious conduct. (Civ. Code, § 3333.)
Deception without resulting loss is not actionable fraud. [Citation.] ‘Whatever form it
takes, the injury or damage must not only be distinctly alleged but its causal connection
with the reliance on the representations must be shown.’ ” (Service By Medallion, Inc. v.
Clorox Company, supra, 44 Cal.App.4th at p.1818; see also Cooper v. Equity Gen.
Insurance (1990) 219 Cal.App.3d 1252, 1262 [“in California, every element of a cause of
action for fraud must be alleged both factually and specifically, and the policy of liberal
construction of pleadings will not be invoked to sustain a defective complaint”].)
The allegations in the first amended complaint of plaintiffs’ damages as a result of
defendants’ fraud include the following: “[a]s a direct and proximate result of the
concealment, failure to inform and representations of Defendants, Plaintiffs have:
[¶] A. Been damaged in an amount equal to the monies which would have allowed them
to retire and stop working when West Coast was sold; [¶] B. Sustained damages in the
form of missed opportunities for other employment and residence opportunities;
[¶] C. Sustained damages in the form of uncompensated time for work and travel over
and above [the] normal in continuing to advance the profitability of West Coast and take
over the duties and responsibilities of managers and key employees who had left West
Coast; [¶] D. Sustained damages in the form of emotional distress and mental anguish.
7
[¶] The exact amount of the aforesaid damages is not yet fully ascertained but is within
the jurisdictional limits of this Court and will be established according to proof at the
time of trial.”
Plaintiffs’ allegations, if true, would establish all the elements of promissory fraud.
As detailed above, plaintiffs allege that, in order to induce them to continue to work at
West Coast until the company sold, defendants intentionally represented to plaintiffs that
defendants would pay plaintiffs a bonus at the time of the sale that would be sufficient for
plaintiffs to retire. Plaintiffs further allege that defendants’ representations were false, in
that defendants intended to pay them a nominal bonus (or no bonus at all) at the time of
sale. Plaintiffs allege they justifiably relied on the representations, because defendants
repeatedly assured them of the bonus. Plaintiffs further allege they did not seek
alternative employment or residential opportunities and remained at West Coast because
of the promise of the bonus. These allegations adequately state a cause of action for
promissory fraud as traditionally understood.
Breach of Contract/Implied Covenants
Plaintiffs assert the allegations of breach of contract are sufficiently stated in the
first amended complaint, and that the terms of the contract between them and defendants
were certain and definite.
The terms of a contract are reasonably certain if they provide a basis for
determining the existence of a breach and for giving an appropriate remedy. “ ‘Where a
contract is so uncertain and indefinite that the intention of the parties in material
particulars cannot be ascertained, the contract is void and unenforceable.’ ” (Ladas v.
California State Automobile Assn. (Ladas) (1993) 19 Cal.App.4th 761, 770 (Ladas).)
“ ‘In considering expressions of agreement, the court must not hold the parties to
some impossible, or ideal, or unusual standard. It must take language as it is and people
as they are. All agreements have some degree of indefiniteness and some degree of
8
uncertainty.’ ” (Rivers v. Beadle (1960) 183 Cal.App.2d 691, 695.) Moreover, “ ‘[t]he
law leans against the destruction of contracts because of uncertainty and favors an
interpretation which will carry into effect the reasonable intention of the parties if it can
be ascertained.’ ” (Id. at p. 697.)
In the instant case, defendants told plaintiffs that if they stayed and continued to
work for West Coast until the company sold, defendants would give plaintiffs bonuses
that would be sufficient for plaintiffs to retire. The agreement between plaintiffs and
defendants was clear and certain; the parties knew their obligations under the
agreement. Moreover, the agreement was also sufficiently certain to determine the
existence of a breach. Plaintiffs stayed and worked at West Coast from the time of the
initial promise in 2004, until 2009 when West Coast was sold for approximately
$30 million. Defendants did not pay plaintiffs the promised bonus at the time of the
sale.
Defendants assert that the promise of an amount sufficient to retire is vague and
unenforceable, because it is an unspecified amount and subject to different
interpretations. However, in Sabatini v. Hensley (1958) 161 Cal.App.2d 172, 177, the
court affirmed a jury verdict that awarded an unpaid bonus to an employee. Although
the employer argued the offer of the bonus was unenforceable because the amount was
not fixed, and there was no formula to set the amount agreed upon by the parties, the
court held, “The failure to specify the amount or a formula for determining the amount
of the bonus does not render the agreement too indefinite for enforcement. It is not
essential that the contract specify the amount of the consideration or the means of
ascertaining it. (Civ. Code, § 1610.).” (Sabatini, supra, 161 Cal.App.2d at p. 175.)
Defendants cite Rochlis v. Walt Disney Co. (1993) 19 Cal.App.4th 201 (Rochlis),
overruled on other grounds in Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238,
1251, and Ladas, supra, 19 Cal.App.4th 761, for the proposition that the terms of the
9
alleged agreement between themselves and plaintiffs were too vague and indefinite to be
enforceable.
In Ladas, the unenforceable promise was “An amorphous promise to ‘consider’
what employees at other companies [were] earning” when setting commission rates. In
finding the promise unenforceable, the court noted the numerous uncertainties which
would defeat enforcement of the promise, asking “By what standard would a court or a
jury determine that the company failed to meet its obligation to ‘consider’ commissions
earned by competitors?” and concluding that “The nature of the obligation asserted
provides no rational method for determining breach or computing damages. (Ladas,
supra, 19 Cal.App.4th at p. 771.)
Here, unlike Ladas, defendants promised to pay plaintiffs a bonus upon the sale of
West Coast. A court or jury could easily determine if defendants failed to meet this
obligation by evaluating whether such bonus was paid. Moreover, unlike Ladas, where
damages would be difficult to compute because the promise was to consider what other
employees were earning, the promise here was to pay plaintiffs an amount that would be
sufficient to retire. As stated in the first amended complaint, the bonus amount would
be determined “using information about the Plaintiffs’ debts and obligations, their
lifestyles at that time and actuarial information sufficient to allow financial planners to
set a specific amount for each of them given their specific circumstances at that time.”
Contrary to defendants’ argument, retirement amounts are not vague or indefinite;
rather, they are readily determined using standard formulae and actuarial tables.
Rochlis, in which an employee alleged breach of an employment contract and
constructive discharge, is also not on point. In Rochlis, the plaintiff claimed that the
defendant had promised that he would receive salary increases and bonuses
“appropriate” to his responsibilities and he would have “active[] and meaningful[]”
participation in creative decisions. (Rochlis, supra, 19 Cal.App.4th at p. 213.) The
10
court held that these terms were too vague and indefinite, and thus could not support a
breach of contract claim. (Id. at pp. 213-214.) The court also reasoned the plaintiff’s
claim was beyond regulation by the court, because it would require the court to become
involved in the daily operations of a business. (Id. at p. 214.)
Our Supreme Court later commented on Rochlis in Scott v. Pacific Gas & Electric
Co. (1995) 11 Cal.4th 454 (Scott), disapproved on other grounds in Guz v. Bechtel
National, Inc. (2000) 24 Cal.4th 317, 352, footnote 17, “courts will not enforce vague
promises about the terms and conditions of employment that provide no definable
standards for constraining an employer’s inherent authority to manage its enterprise.
(Scott, supra, 11 Cal.4th at p. 473.) The claim of vagueness of contract terms was
raised in Scott following a jury trial; not at the pleading stage as we are in the present
case. The Supreme Court found the implied in fact employment contract was
enforceable, and ordered the original jury verdict that the contract was valid reinstated.
(Ibid.)
Defendants’ promise in this case was not vague, nor did it constrain defendants
from managing West Coast. (See, e.g., Scott, supra, 11 Cal. 4th at p. 473.) Enforcing
defendants’ promise would not potentially propel the court into daily operations of the
company. (See, e.g., Rochlis, supra, 19 Cal.App.4th at p. 213.) The promise was clear
and definite: continue working at West Coast until the company is sold, and at that time,
we will pay you a bonus that will enable you to retire. Plaintiffs understood defendants’
promise, and acted on their end by continuing to work at West Coast until the company
was sold. The first amended complaint alleges facts sufficient to state a cause of action
for breach of contract.
Promissory Estoppel
Plaintiffs assert the allegations of promissory estoppel are adequately stated in
their first amended complaint.
11
“In California, under the doctrine of promissory estoppel, ‘A promise which the
promisor should reasonably expect to induce action or forbearance on the part of the
promisee or a third person and which does induce such action or forbearance is binding if
injustice can be avoided only by enforcement of the promise. The remedy granted for
breach may be limited as justice requires.’ [Citations.] Promissory estoppel is ‘a
doctrine which employs equitable principles to satisfy the requirement that consideration
must be given in exchange for the promise sought to be enforced.’ ” (Kajima/Ray Wilson
v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305,
310.) The elements of promissory estoppel are (1) a clear promise, (2) reliance, (3)
substantial detriment, and (4) damages “ ‘measured by the extent of the obligation
assumed and not performed.’ ” (Toscano v. Greene Music (2004) 124 Cal.App.4th 685,
692.)
Plaintiffs’ allegations in the first amended complaint satisfy the requirements of
promissory estoppel. Specifically, defendants promised to pay them an amount sufficient
to retire upon the sale of West Coast if they remained employed. As discussed above in
regard to the breach of contract cause of action, plaintiffs’ promise was sufficiently clear
and definite. Plaintiffs relied on this promise to their detriment by remaining employed
at West Coast, and forgoing other employment and residential opportunities.
Intentional Infliction of Emotional Distress
Plaintiffs argue the allegations in the first amended complaint adequately state a
cause of action for intentional infliction of emotional distress.
“ ‘A cause of action for intentional infliction of emotional distress exists when
there is “ ‘ “ ‘(1) extreme and outrageous conduct by the defendant with the intention of
causing, or reckless disregard of the probability of causing, emotional distress; (2) the
plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate
12
causation of the emotional distress by the defendant’s outrageous conduct.’ ” ’ ”
[Citations.]’ [Citation.]” (Plotnik v. Meihaus (2012) 208 Cal.App.4th 1590, 1609.)
In order for conduct to be considered outrageous for the purpose of tort liability, it
“must be so extreme as to exceed all bounds of that usually tolerated in a civilized
society.” (Trerice v. Blue Cross of America (1989) 209 Cal.App.3d 878, 883; see, e.g.,
Fletcher v. Western National Life Ins. Co. (1970) 10 Cal.App.3d 376, 397-398 [insurance
agent’s threatened and actual refusals to pay and threatening communication in bad faith
to settle nonexistent dispute]; Alcorn v. Anbro Engineering Inc. (1970) 2 Cal.3d 493,
496-497 [supervisor shouting insulting epithets, terminating employment, and
humiliating plaintiff]; Golden v. Dungan (1971) 20 Cal.App.3d 295, 305 [process server
knowingly and maliciously banging on door at midnight].)
Here, the allegations in the first amended complaint consist of defendants’
misleading plaintiffs into believing they would be compensated in an amount that would
allow them to retire if they continued to work for West Coast until the company was sold.
While the allegations of defendant’s conduct if true, demonstrate a callous disregard for
plaintiffs’ professional and personal well being, the alleged conduct as stated is not
extreme or outrageous to support a cause of action for intentional infliction of emotional
distress.
Negligent Misrepresentation
In addition to the cause of action for promissory fraud, plaintiffs also allege a
cause of action for negligent misrepresentation related to defendants’ promise of a
retirement bonus in their first amended complaint.
In Intrieri v. Superior Court (2004) 117 Cal.App.4th 72 (Intrieri), this court stated
the elements for a cause of action for negligent misrepresentation, and the difference
between that and an action for fraud. “The elements of a cause of action for fraud and a
cause of action for negligent misrepresentation are very similar. Pursuant to Civil Code
13
section 1710, both torts are defined as deceit. However, the state of mind requirements
are different. ‘Fraud is an intentional tort, the elements of which are
(1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud, i.e., to induce
reliance; (4) justifiable reliance; and (5) resulting damage. [Citation.]’ [Citation.]
Negligent misrepresentation lacks the element of intent to deceive. Therefore, ‘ “[w]here
the defendant makes false statements, honestly believing that they are true, but without
reasonable ground for such belief, he may be liable for negligent misrepresentation, a
form of deceit.” [Citation.]’ [Citations.]” (Id. at pp. 85-86.)
In this case, plaintiffs allege the following in their cause of action for negligent
misrepresentation: “Defendants were aware that the promises and representations made
to Plaintiffs were not accurate in light of information they had in hand at that time as
alleged hereinabove. Defendants also undertook to conceal from Plaintiffs their lack of
information and failure to make the promises and representations accurately. [¶] . . . The
promises and representations by Defendants as aforesaid were made with the intent to
induce Plaintiffs to act as set forth hereinabove.”
Plaintiffs’ allegations do not state a cause of action for negligent
misrepresentation. Notably, there is no allegation that defendants made any
representation to plaintiffs “ ‘ “honestly believing that [the representations] are true, but
without reasonable ground for such belief.” ’ ” (Intrieri, supra, 117 Cal.App.4th at
p. 86.) Indeed, the allegations of misrepresentation contain the element of intent, and
knowledge that the information was inaccurate. As such, the allegations are inconsistent
with the requirements for a cause of action for negligent misrepresentation.
Estoppel in Pais
In the original complaint, plaintiffs alleged a cause of action for estoppel in pais.
The trial court sustained defendants’ demurrer to that cause of action without leave to
amend on the ground that such a cause of action may not be asserted in California. On
14
appeal, plaintiffs argue the trial court erred in sustaining the demurrer, and that estoppel
in pais is a valid cause of action in California.
“Equitable estoppel, originally known as estoppel in pais, and also called estoppel
by conduct, is simply stated. ‘Whenever a party has, by his own statement or conduct,
intentionally and deliberately led another to believe a particular thing true and to act upon
such belief, he is not, in any litigation arising out of such statement or conduct, permitted
to contradict it.’ [Citations.] The doctrine is defensive in nature only, and ‘operates to
prevent one [party] from taking an unfair advantage of another.’ [Citation.]” (San Diego
Municipal Credit Union v. Smith (1986) 176 Cal.App.3d 919, 922-923.)
In Behnke v. State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, the court
reiterated that California does not recognize an independent cause of action for equitable
estoppel: “[A]s Witkin ... explains, ‘ “[t]he [equitable estoppel] doctrine acts defensively
only.” ’ (13 Witkin, Summary of Cal. Law [(10th ed. 2005)] Equity, § 190, p. 527; see
also Central National Ins. Co. v. California Ins. Guarantee Assn. (1985)165 Cal .App.3d
453, 460 [equitable estoppel ‘must be pleaded . . . either as a part of the cause of action or
as a defense’].) As a stand-alone cause of action for equitable estoppel will not lie as a
matter of law . . . .” (Id. at p. 1463.)
As estoppel in pais cannot be stated as an independent cause of action in
California, the trial court was correct in sustaining defendant’s demurrer to this allegation
in the original complaint.
In sum, the first amended complaint alleges facts sufficient to state causes of
action for fraud, breach of contract, and promissory estoppel, and fails to adequately
allege causes of action for intentional infliction of emotional distress, negligent
misrepresentation, and estoppel in pais.
15
DISPOSITION
The order sustaining the demurrer to the first amended complaint with leave to
amend is reversed. Defendants are ordered to answer the first amended complaint on the
causes of action for misrepresentation, breach of contract, and promissory estoppel.
______________________________________
RUSHING, P.J.
I CONCUR:
____________________________________
PREMO, J.
16
BAMATTRE-MANOUKIAN, J., Concurring and Dissenting
I concur with the majority’s conclusion that plaintiffs have failed to state causes
of action for negligent misrepresentation, intentional infliction of emotional distress, and
estoppel in pais. I respectfully dissent from the majority’s conclusion that plaintiffs
have adequately alleged causes of action for breach of contract, misrepresentation-
concealment, and promissory estoppel. I would therefore affirm the trial court’s
February 15, 2011 judgment dismissing the entire action with prejudice after plaintiffs
elected not to further amend their first amended complaint.
In this case, plaintiffs Irma Moncada, Randy Morris, and Everardo Serrano
(hereafter, plaintiffs) brought a lawsuit against their former employer, defendant West
Coast Quartz Corporation (West Coast) and defendants Paul Maloney, president and
chief financial officer, and Nancy Tkalcevic, chief executive officer. Plaintiffs allege that
defendants broke their promise to pay plaintiffs a retention bonus of enough money to
retire and not work again if they continued to work for West Coast until the company was
sold.
Plaintiffs were given the opportunity to amend their first amended complaint but
were unable to allege that defendants’ promise included terms that were more definite
than a vague and uncertain promise to give plaintiffs a bonus in an amount sufficient to
retire and not work again if plaintiffs continued to work at West Coast until the company
was sold. Plaintiffs were also unable to allege that defendants had agreed that the amount
of the bonus could be determined by a third person, such as a financial planner, or by a
specific standard. (Civ. Code, § 16101; see Bewick v. Mecham (1945) 26 Cal.2d 92, 98-
99 (Bewick).) Further, plaintiffs declined the trial court’s invitation to amend their first
1
All further statutory references are to the Civil Code unless otherwise indicated.
amended complaint to seek recovery under the doctrine of quantum meruit. (§ 1611; see
Hunter v. Ryan (1930) 109 Cal.App. 736, 738.)
I would find that the alleged promise of a retention bonus in an amount sufficient
for an employee to retire and not work again is unenforceable under the doctrine of
unenforceability of indefinite promises articulated by the California Supreme Court in
Scott v. Pacific Gas & Electric Co. (1995) 11 Cal.4th 454 (Scott), disapproved on another
ground in Guz v. Bechtel National Inc. (2000) 24 Cal.4th 317, 352, fn. 17 (Guz).)
“ ‘ “[A]lthough the terms of a contract need not be stated in the minutest detail, it is
requisite to enforceability that it must evidence a meeting of the minds upon the essential
features of the agreement, and that the scope of the duty and limits of acceptable
performance be at least sufficiently defined to provide a rational basis for the assessment
of damages. . . .” ’ [Citation.]” (Scott, supra, at p. 467.) As I will further explain,
plaintiffs’ allegations are not sufficiently definite for the amount of the alleged retirement
bonus to be rationally assessed as contract damages.
Although I agree with my colleagues that defendants’ alleged conduct of making a
false promise to pay a retention bonus was “not exemplary” conduct by an employer
(Trerice v. Blue Cross of California (1989) 209 Cal.App.3d 878, 884 (Trerice)), I believe
that as an intermediate appellate court we are bound to follow and apply the California
Supreme Court’s prevailing precedent in Scott. I also believe, for the reasons stated
below, that defendants’ alleged promise is insufficiently definite to support the causes of
action for misrepresentation-concealment and promissory estoppel.
However, I agree with the trial court that plaintiffs were not precluded from
seeking leave to amend their first amended complaint to seek recovery under the doctrine
of quantum meruit.
2
I. FACTUAL AND PROCEDURAL BACKGROUND
A. The Original Complaint
On April 13, 2010, plaintiffs filed their original complaint against defendants
West Coast, Maloney, and Tkalcevic. They alleged that Maloney and Tkalcevic were
also the two sole shareholders of West Coast. Plaintiffs were either long-term
employees, managers, and/or key employees.
Plaintiffs further alleged that in June 2004, Maloney and Tkalcevic informed the
managers and key employees, including plaintiffs, that they were intending to sell the
company. Maloney and Tkalcevic also informed the managers and key employees that if
they agreed to continue working while the sale was pending, they would be given an
equity interest in the company. When several months passed and the requests of the
managers and key employees for stock “went unheeded,” some of them began to leave
the company. Plaintiffs assert that “[a]t that time, the Defendants told Plaintiffs that if
they agreed to stay and continue to work at the company they would be provided with a
bonus when the company was sold in an amount sufficient for them to retire and not have
to work any further. The Plaintiffs agreed to do so.”
According to plaintiffs, “[t]hereafter, on numerous occasions the Defendants
reiterated their promises to reward the Plaintiffs for continuing to work at Defendant,
West Coast, and to forgo [sic] other employment by restating that when the company was
sold the Plaintiffs would receive a bonus in an amount sufficient for them and
Defendants, Maloney and Tkalcevic, to retire and to not have to work any longer.” Based
on these promises, plaintiffs did not seek other employment and continued to work
diligently for West Coast. Defendants declined plaintiffs’ request to put the promises in
writing on the ground that to do so would have adverse tax consequences.
In November 2009, plaintiffs learned that West Coast had been sold to a larger
worldwide company and that Maloney and Tkalcevic had transferred their shares to that
3
company. Plaintiffs also learned that other employees had received “substantial sums in
fulfillment of the promises made.” Although they had worked at the company until it
was sold, plaintiffs did not receive the promised retirement bonus.
Based on these allegations, plaintiffs asserted causes of action for
“misrepresentation-concealment,” breach of contract, promissory estoppel, intentional
infliction of emotional distress, estoppel in pais, and violation of Business and
Professions Code section 17200.
B. The September 7, 2010 Order
Defendant West Coast demurred to the original complaint on the ground that the
allegations failed to state facts sufficient for any of the causes of action included in the
complaint and were also uncertain and unintelligible.
In its supporting points and authorities, West Coast argued that the action was
time-barred; the cause of action for misrepresentation-concealment failed to allege a
specific amount of damages; the allegation of a promise to pay an unspecified bonus in
an amount sufficient to retire was too vague to create an enforceable contract; the cause
of action for promissory estoppel also failed to alleged a clear promise; plaintiffs did not
allege the outrageous conduct necessary for a cause of action for intentional infliction of
emotional distress; estoppel in pais is a defensive doctrine, not a cognizable cause of
action; and the cause of action for violation of Business and Professions Code section
17200 could not be sustained since all of the other causes of action were legally
insufficient. Defendants Maloney and Tkalcevic made similar arguments in their points
and authorities in support of their demurrers to the original complaint.
Analyzing the defendants’ demurrers together, the trial court ruled in its order of
September 7, 2010, that (1) the demurrer on statute of limitations grounds was overruled;
(2) the demurrers to the cause of action for misrepresentation-concealment, breach of
contract, and promissory estoppel were sustained with leave to amend because the
4
promises alleged were “not sufficiently definite enough to allow damages to be properly
computed and assessed”; (3) the demurrer to the cause of action for intentional infliction
of emotional distress was sustained with leave to amend because the allegations “do not
support the element of extreme and outrageous conduct that is so outrageous as to be
classified as intolerable in a civilized society”; (4) the demurrer to the cause of action for
estoppel in pais was sustained without leave to amend because plaintiffs had not shown
that estoppel in pais is a recognized cause of action in California; and (5) the cause of
action under Business and Professions Code section 17200 was sustained with leave to
amend since there was no likelihood that the alleged conduct would recur.
C. The First Amended Complaint
Plaintiffs subsequently filed a first amended complaint (the amended complaint)
on October 4, 2010. The amendments included more details about defendants’ alleged
promise to pay plaintiffs a bonus in an amount sufficient for retirement if they continued
working for the company until it was sold. The amended complaint also added a cause of
action for negligent misrepresentation and omitted two causes of action that had been
asserted in the original complaint (estoppel in pais and violation of Bus. & Prof. Code,
§ 17200).
Regarding the alleged promise of a retirement bonus, the amended complaint
included the additional allegations that on multiple, specific occasions, during the period
of June 2004 to April 2009, defendants Maloney and Tkalcevic had reiterated their
promise that if plaintiffs continued to work for West Coast they would receive enough
money to retire when the company was sold. Defendants also told plaintiffs that they
were working with “advisers to make sure that the bonuses would not be taxed.”
Plaintiff Moncada was specifically told, among other things, that she would “be
done with working and would be able to stay at home with her babies and retire once the
company was sold.” Plaintiff Serrano was asked “to stay at the company pending the sale
5
and that if he did so he would then be able to get the bonus and retire and be with his
family along with the others.” Defendant Tkalcevic told plaintiff Morris that the
retirement bonus promise could not be put in writing due to “ ‘tax issues.’ ” Defendant
Maloney told Morris, “ ‘[r]emember you are going to get a bonus when the company is
sold so you can retire.’ ”
Plaintiffs also alleged that they “understood” that they had to continue working at
West Coast to receive the retirement bonus. Plaintiffs also “understood” that once the
company was sold, defendants would determine the specific amount of plaintiffs’
bonuses by “using information about the Plaintiffs’ debts and obligations, their lifestyles
at that time and actuarial information sufficient to allow financial planners to set a
specific amount for each of them given their specific circumstances at that time.” Based
on defendants’ promise of a retirement bonus, plaintiffs continued to work for West
Coast and did not accept or seek other employment opportunities, did not move to other
locations with better schools, and gave up opportunities to obtain retirement monies and
better compensation from other companies.
In November 2009, plaintiffs learned that West Coast had been sold and that
Maloney and Tkalcevic had transferred their shares to the acquiring company. When
defendants refused to disclose the terms of the sale, plaintiffs learned from public sources
that Maloney and Tkalcevic had received $30.21 million for their shares. Although other
employees received nominal bonuses after the sale of the company, no monies were paid
to plaintiffs.
D. Demurrers to the Amended Complaint
West Coast demurred to the amended complaint on the grounds that the action was
time-barred and the amended complaint failed to state facts sufficient for any of the
causes of action.
6
Regarding the causes of action for misrepresentation-concealment, promissory
estoppel, and negligent misrepresentation, West Coast argued that the alleged promise of
a retirement bonus remained fatally vague and uncertain. As to the cause of action for
breach of contract, West Coast argued that the vague and uncertain promise of a
retirement bonus could not, as a matter of law, form the basis for an enforceable contract
since damages for breach of contract could not be calculated. Finally, West Coast
asserted that plaintiffs did not allege conduct by defendants that could be reasonably
regarded as extreme and outrageous and therefore the amended complaint failed to state
facts sufficient for the cause of action for intentional infliction of emotional distress.
Maloney and Tkalcevic demurred to the amended complaint on the similar
grounds that plaintiffs had failed to state facts sufficient for the misrepresentation-
concealment, promissory estoppel, negligent misrepresentation, and breach of contract
causes of action because the alleged promise of a retirement bonus was too vague and
indefinite. Maloney and Tkalcevic further contended that plaintiffs had failed to state a
cause of action for intentional infliction of emotional distress because the allegation of
defendants’ failure to pay promised compensation in an unspecified amount did not
qualify as outrageous conduct.
Plaintiffs opposed the demurrers, arguing that the amended complaint stated
sufficient facts for all causes of action. They maintained that an enforceable unilateral
contract was created when they continued to work for West Coast in exchange for the
promised retirement bonus, even if the bonus was unspecified. Plaintiffs also argued that
the causes of action for misrepresentation-concealment, promissory estoppel, and
negligent misrepresentation sufficiently alleged that defendants knowingly deceived
plaintiffs by making a false promise of a retirement bonus.
Further, plaintiffs asserted that the cause of action for intentional infliction of
emotional distress sufficiently alleged outrageous conduct, consisting of defendants’
7
“virtually enslave[ing] the Plaintiffs for 5 years by inducing the Plaintiffs to give up their
freedom including their rights to go to a company which paid more, which had better
benefits, which had a retirement plan and to forego moving to better locations where
better schools existed or better housing. . . . The Defendants intentionally used the
Plaintiffs as pawns to increase the saleability of West Coast to their benefit and to the
Plaintiffs’ detriment.”
E. The February 9, 2011 Order
The trial court ruled on all of the defendants’ demurrers in its order of
February 9, 2011.
As to the first cause of action for misrepresentation-concealment, the trial court
sustained the demurrers with leave to amend on the ground that the amended complaint
failed to state facts sufficient for that cause of action. The court stated, “At the hearing,
plaintiffs’ counsel responded to a question from the court stating plaintiffs were not
pursuing any damages other than the loss of the promised retirement bonus. Based upon
that concession, the court finds the alleged promise to be too vague to support a fraud
claim. [Citation.]”
The trial court also sustained the demurrers to the second cause of action for
breach of contract with leave to amend on the ground that the amended complaint did not
state facts sufficient for that cause of action. The court stated that “[t]he promised
retirement bonus is too indefinite to be enforced, but plaintiffs shall have leave to amend
to seek quantum meruit.”
The demurrers to the third cause of action for promissory estoppel and the fifth
cause of action for negligent misrepresentation were similarly sustained with leave to
amend on the ground that the amended complaint did not state facts sufficient for either
cause of action because the alleged promise was “too vague to support a fraud claim.”
8
Finally, the trial court sustained the demurrers to the fourth cause of action for
intentional infliction of emotional distress without leave amend, finding that the amended
complaint “does not allege extreme or outrageous conduct by defendant West Coast. . . .”
On February 15, 2011, the trial court entered a judgment dismissing the entire
action with prejudice.2 The judgment states that it was based upon the court’s orders of
September 7, 2010 and February 9, 2011. The judgment also states, “On February 11,
2011, plaintiffs advised defendants that they would not be further amending the
complaint.”
Plaintiffs subsequently filed a timely notice of appeal from the judgment of
dismissal.
II. DISCUSSION
On appeal, plaintiffs contend that the trial court erroneously ruled in its order of
February 9, 2011, that the amended complaint failed to state facts sufficient for any of the
five causes of action included in the amended complaint (“misrepresentation-
concealment,” breach of contract, promissory estoppel, intentional infliction of emotional
distress, and negligent misrepresentation). They also argue that the trial court erred in its
prior order of September 7, 2010, when the court ruled that a cause of action for estoppel
in pais is not recognized in California and sustained the demurrer to that cause of action
without leave to amend.
2
Code of Civil Procedure section 581, subdivision (f)(2) provides, “The court may
dismiss the complaint as to that defendant, when . . . [¶] . . . [¶] . . . after a demurrer to the
complaint is sustained with leave to amend, the plaintiff fails to amend it within the time
allowed by the court and either party moves for dismissal.”
9
As a threshold matter l believe this court should first consider defendants’ claim
that plaintiffs have waived the issues they seek to raise on appeal, which was not
expressly addressed in the majority opinion.
A. Waiver
Defendants argue that plaintiffs have waived their appellate challenge to the trial
court’s ruling that the alleged promise of a retirement bonus was too vague to enforce or
to support a fraud claim, and therefore the judgment should be affirmed as to the causes
of action for misrepresentation, breach of contract, and promissory estoppel.
According to defendants, since plaintiffs did not seek appellate review of the trial
court’s ruling in the September 7, 2010 order that the allegations in the original
complaint regarding the promise of a retirement bonus were too vague to either create an
enforceable contract or to support the causes of action for misrepresentation and
promissory estoppel, and then filed an amended complaint with no substantive changes to
the allegations, they have waived any appellate challenge to that ruling.
Additionally, Maloney and Tkalcevic argue that plaintiffs have waived their
appellate challenge to the trial court’s ruling sustaining the demurrer to the cause of
action for intentional infliction of emotional distress because they filed an amended
complaint. Maloney and Tkalcevic assert that the amended complaint “simply add[ed]
detail” to the “original defective allegations.” For that reason, Maloney and Tkalcevic
maintain that plaintiffs have conceded the correctness of the trial court’s September 7,
2010 ruling that the allegations pertaining to the promise of a retirement bonus were
insufficient for a cause of action for intentional infliction of emotional distress.
This court has previously stated the relevant rules: “ ‘Upon an appeal pursuant to
[Code of Civil Procedure s]ection 904.1 or 904.2, the reviewing court may review the
verdict or decision and any intermediate ruling, proceeding, order or decision which
involves the merits or necessarily affects the judgment or order appealed from or which
10
substantially affects the rights of a party’ if the intermediate order was not appealable.
(Code Civ. Proc., § 906, italics added.) When a demurrer is sustained with leave to
amend, and the plaintiff chooses not to amend but to stand on the complaint, an appeal
from the ensuing dismissal order may challenge the validity of the intermediate ruling
sustaining the demurrer. [Citation.] On the other hand, where the plaintiff chooses to
amend, any error in the sustaining of the demurrer is ordinarily waived. [Citations.]”
(County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 312
(County of Santa Clara).)
In the present case, the trial court’s order of September 7, 2010 sustained the
demurrers to all causes of action in the original complaint with leave to amend, except the
cause of action for estoppel in pais to which the demurrer was sustained without leave to
amend. The amended complaint contained expanded versions of the causes of action for
misrepresentation-concealment, breach of contract, promissory estoppel, and intentional
infliction of emotional distress, and added a new cause of action for negligent
misrepresentation. The trial court’s subsequent order of February 9, 2011 sustained the
demurrers to all causes of action with leave to amend, except the cause of action for
intentional infliction of emotional distress to which the demurrer was sustained without
leave to amend.
Pursuant to Code of Civil Procedure section 906, I determine that the portion of
the September 7, 2010 order sustaining the demurrer to the cause of action for estoppel in
pais in the original complaint without leave to amend may be reviewed on appeal from
the judgment of dismissal as an “intermediate ruling . . . which involves the merits or
necessarily affects the judgment or order appealed from . . . .” (Code Civ. Proc., § 906.)
To the extent plaintiffs challenge other portions of the September 7, 2010 order, they
have waived that appellate challenge since they filed an amended complaint. (County of
Santa Clara, supra, 137 Cal.App.4th at p. 312.)
11
The merits of plaintiffs’ challenge to the February 9, 2011 order sustaining the
demurrers to all causes of action in the amended complaint may also be considered on
appeal, since that order also constitutes an intermediate ruling that necessarily affects the
judgment. (Code Civ. Proc., § 906.) Whether the amendments to the causes of action
state sufficient facts to survive defendants’ demurrers to the amended complaint is the
overall issue to be addressed on appeal.
For these reasons, I would determine that plaintiffs have not waived the issue of
whether the trial court erred in ruling in its order of February 9, 2011 that plaintiffs failed
to state facts sufficient for any of the causes of action included in the amended complaint.
Plaintiffs also have not waived the issue of whether the trial court erred in ruling in its
prior order of September 7, 2010, that a cause of action for estoppel in pais is not
recognized in California and sustaining the demurrer to that cause of action in the original
complaint without leave to amend.
Before turning to plaintiffs’ contentions on appeal, I will outline the applicable
standard of review.
B. Standard of Review
The reviewing court assumes the truth of all facts properly pleaded by the plaintiff
on appeal from a judgment of dismissal after a demurrer is sustained. (Evans v. City of
Berkeley (2006) 38 Cal.4th 1, 6 (Evans).) “We also accept as true all facts that may be
implied or reasonably inferred from those expressly alleged. [Citation.]” (Rotolo v. San
Jose Sports & Entertainment, LLC (2007) 151 Cal.App.4th 307, 320-321.) Further, “we
give the complaint a reasonable interpretation, and read it in context. [Citation.]”
(Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 (Schifando).) But we do
not assume the truth of “ ‘ “contentions, deductions or conclusions of fact or law.” ’ ”
(Evans, supra, at p. 6.)
12
The court also considers matters that may be judicially noticed. (Code Civ. Proc.,
§ 430.30, subd. (a); Schifando, supra, 31 Cal.4th at p. 1081.) Additionally, we consider
the complaint’s exhibits. (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th
390, 400 (Hoffman).) After reviewing the allegations of the complaint, the complaint’s
exhibits, and the matters properly subject to judicial notice, we exercise our independent
judgment as to whether the complaint states a cause of action as a matter of law. (See
Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.)
Where, as here, the “ ‘plaintiff is given the opportunity to amend his [or her]
complaint and elects not to do so, strict construction of the complaint is required and it
must be presumed that the plaintiff has stated as strong a case as he [or she] can.’
[Citations.]” (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091 (Reynolds), abrogated
on other grounds in Martinez v. Combs (2010) 49 Cal.4th 35, 66; accord, Hoffman, supra,
179 Cal.App.4th at p. 408.)
However, “[t]he issue of leave to amend is always open on appeal, even if not
raised by the plaintiff. [Citation.]” (City of Stockton v. Superior Court (2007) 42 Cal.4th
730, 746.) “[L]eave to amend is properly granted where resolution of the legal issues
does not foreclose the possibility that the plaintiff may supply necessary factual
allegations.” (Id. at p. 747.) “The plaintiff has the burden of proving that an amendment
would cure the defect. [Citation.]” (Schifando, supra, 31 Cal.4th at p. 1081.)
C. Breach of Contract
1. The Parties’ Contentions
Plaintiffs’ first contention on appeal is that the trial court erred, in its order of
February 9, 2011, when the court sustained the demurrer to the cause of action for breach
of contract in the amended complaint. They assert that the allegations in the amended
complaint are sufficient to show that they entered into an enforceable unilateral contract
by continuing their employment for West Coast in exchange for the promise of a bonus in
13
an amount sufficient for them to retire when the company was sold. Relying on the
decision in Sabatini v. Hensley (1958) 161 Cal.App.2d 172 (Sabatini), plaintiffs argue
that their allegation of an unspecified retirement bonus did not render the agreement too
indefinite for enforcement. They explain that the allegations in the amended complaint
set forth the manner in which the retirement bonuses would be calculated “by financial
planners using specific and definite information.”
Defendants reject plaintiffs’ argument regarding an enforceable unilateral contact.
Relying on Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761 (Ladas),
they contend that the alleged promise of an unspecified retirement bonus, which plaintiffs
understood was to be calculated on the basis of each individual plaintiff’s “personal
lifestyle, debts and obligations” on the date West Coast was sold, is too vague and
indefinite to constitute an enforceable bonus agreement. Defendants point out that
plaintiffs do not allege that any of the claimed factors for calculating the alleged
retirement were ever discussed or agreed upon by the parties and contend there was no
meeting of the minds with regard to the retirement bonus.
Defendants further contend that since the promise of a retirement bonus in an
amount sufficient for each plaintiff to retire would have to be adjusted to accommodate
future changes in their lifestyles, debts, and obligations, there is no rational basis for
determining whether the contract has been breached and computing damages, and,
therefore, the alleged contract is unenforceable.
2. Applicable Law
It has long been the general rule in California that “[w]here a contract is so
uncertain and indefinite that the intention of the parties in material particulars cannot be
ascertained, the contract is void and unenforceable. [Citations.] . . . Unless the court has
ascertainable provisions of agreement before it, there is no contract on which the court
may act. However, ‘The law does not favor but leans against the destruction of contracts
14
because of uncertainty; and it will, if feasible, so construe agreements as to carry into
effect the reasonable intentions of the parties if that can be ascertained.’ [Citations.]”
(Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 481; see Coleman
Engineering Co. v. North American Aviation, Inc. (1966) 65 Cal.2d 396, 417.) It is a
question of law whether a contract term is sufficiently definite to be enforceable. (Ladas,
supra, 19 Cal.App.4th at p. 770, fn. 2.)
In Ladas, three insurance sales representatives claimed that their employer, the
California State Automobile Association, had breached their employment contract by
failing to pay them in parity with other similarly situated insurance sales representatives
in the insurance industry. (Ladas, supra, 19 Cal.App.4th at p. 767.) The appellate court
stated the rule that “[t]o be enforceable, a promise must be definite enough that a court
can determine the scope of the duty and the limits of performance must be sufficiently
defined to provide a rational basis for the assessment of damages. [Citations.]” (Id. at
p. 770.) Applying this rule, the appellate court agreed with the trial court’s ruling that
“[a]n amorphous promise to ‘consider’ what employees at other companies are earning
cannot rise to the level of a contractual duty. . . . The nature of the obligation asserted
provides no rational method for determining breach or computing damages.” (Id. at
p. 771.)
The Ladas court also found that policy reasons supported its determination that the
plaintiff insurance sales representatives had not entered into an enforceable contract.
“Employers frequently boast of good benefits, competitive salaries, excellent working
conditions and the like. To anoint such puffing language with contractual import would
open the door to a plethora of specious litigation and constitute a severe and unwarranted
intrusion on the ability of business enterprises to manage internal affairs.” (Ladas, supra,
19 Cal.App.4th at p. 772.)
15
Similarly, in Rochlis v. Walt Disney Co. (1993) 19 Cal.App.4th 201, 213-214
(Rochlis) disapproved on another ground in Turner v. Anheuser-Busch, Inc. (1994)
7 Cal.4th 1238, 1251, the appellate court rejected a former employee’s claim that The
Walt Disney Company had made enforceable promises to pay the employee
“ ‘appropriate’ ” salary increases or bonuses and to give him “an ‘active and meaningful’
participation in creative decisions.” The court concluded that “these promises . . . will
not support a breach of contract claim in any event. They are not sufficiently certain to
be enforced and would improperly impose on the court the burden of making financial
and management decisions better left to the parties.” (Id. at p. 214.)
The decisions in Rochlis and Ladas were subsequently cited with approval by the
California Supreme Court. “The Ladas court . . . applied the well-established principle
that ‘ “[a]lthough the terms of a contract need not be stated in the minutest detail, it is
requisite to enforceability that it must evidence a meeting of the minds upon the essential
features of the agreement, and that the scope of the duty and limits of acceptable
performance be at least sufficiently defined to provide a rational basis for the assessment
of damages. . . .” ’ [Citation.]” (Scott, supra, 11 Cal.4th at p. 467.)
The California Supreme Court in Scott further stated that “as suggested above in
the discussion of Ladas . . . the doctrine of unenforceability of indefinite promises will
likely eliminate many employment contract claims that would involve courts in the
micromanagement of the workplace. The utility of this doctrine is further illustrated by
[Rochlis]. . . . In other words, courts will not enforce vague promises about the terms
and conditions of employment that provide no definable standards for constraining an
employer’s inherent authority to manage its enterprise. It is to be expected that many
alleged employer promises will be unable to cross this threshold of definition to become
enforceable contract claims.” (Scott, supra, 11 Cal.4th at pp. 472-473.)
16
The Scott court concluded, however, that the doctrine of unenforceability of
indefinite promises did not bar an employee’s claim that Pacific Gas & Electric Company
had breached an implied contract not to demote its employees without good cause. The
company’s written “discipline policies not only provided an implied good cause standard
for demotion, but also a detailed set of rules and procedures for governing the imposition
of discipline that further defined the meaning of that standard. These rules and
procedures were sufficiently clear to permit a trier of fact to determine whether the
company had complied with them.” (Scott, supra, 11 Cal.4th at p. 467.)
This court has applied the doctrine of unenforceability of indefinite promises as set
forth in Ladas and Rochlis. In Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199,
201 (Bustamante), the plaintiff claimed that the defendant software company had
breached a contract to establish a joint venture to market software adapted for use in
Mexico. This court concluded that “the undisputed facts here show no meeting of the
minds as to the essential structure and operation of the alleged joint venture, even if there
was agreement on some of the terms. ‘[T]he failure to reach a meeting of the minds on
all material points prevents the formation of a contract even though the parties have
orally agreed upon some of the terms, or have taken some action related to the contract.’
[Citation.]” (Id. at p. 215.)
In Barton v. Elexsys Internat., Inc. (1998) 62 Cal.App.4th 1182, 1189-1190
(Barton), this court rejected the claim of a senior vice president that his company’s chief
executive officer (CEO) had made an enforceable oral promise that modified the senior
vice president’s compensation agreement to allow him the right to exercise certain stock
options after his employment was terminated. The evidence showed that the CEO had
only represented in general terms “that the key executives ‘had to be taken care of.’ [The
plaintiff] did not ask [the CEO] what he meant by the phrase ‘taken care of,’ and he did
not express his own subjective interpretation of these words (that key executives’ stock
17
options would continue to vest and be exercisable throughout the period of salary
protection).” (Id. at p. 1190.) Citing Rochlis, this court ruled that the CEO’s promise to
take care of the key executives was “too vague and uncertain to support a claim that the
parties’ written stock option agreements had been modified thereby. [Citation.]” (Ibid.)
Having determined the applicable law, I next consider the merits of plaintiffs’
contentions regarding defendants’ alleged retirement bonus promise.
3. Analysis
To determine whether defendants’ retirement bonus promise constitutes an
enforceable contract, I believe we must apply the doctrine of the unenforceability of
indefinite promises as instructed by the California Supreme Court in Scott:
“ ‘ “[A]lthough the terms of a contract need not be stated in the minutest detail, it is
requisite to enforceability that it must evidence a meeting of the minds upon the essential
features of the agreement, and that the scope of the duty and limits of acceptable
performance be at least sufficiently defined to provide a rational basis for the assessment
of damages. . . .” ’ [Citation.]” (Scott, supra, 11 Cal.4th at p. 467.)
Plaintiffs’ allegations in the amended complaint regarding the promise of a
retirement bonus are essentially (1) defendants promised plaintiffs that if they continued
to work for West Coast until the company was sold, they would receive a monetary bonus
in an amount sufficient for them to retire and not have to work again; (2) plaintiffs
“understood” that once the company was sold, defendants would determine the specific
amount of plaintiffs’ retirement bonuses “by using information about the Plaintiffs’ debts
and obligations, their lifestyles at that time and actuarial information sufficient to allow
financial planners to set a specific amount for each of them given their specific
circumstances at that time.” Following the direction of our Supreme Court, I construe
these allegations strictly and presume that plaintiffs have stated as strong a case as they
18
can regarding defendants’ obligation to pay them a retirement bonus. (Reynolds, supra,36 Cal.4th at p. 1091.)
These allegations fail to show that the parties had a meeting of the minds on the
essential features of the retirement bonus agreement. Plaintiffs do not allege that
defendants agreed to a specific amount for any of the promised retirement bonuses nor do
they allege that defendants agreed to, or even mentioned, a method for calculating the
retirement bonuses. Plaintiffs merely allege their own one-sided “understanding” that
financial planners would be employed to calculate their bonuses by using information
supplied by plaintiffs about their debts, obligations, and lifestyles, as well as unspecified
actuarial information. This allegation is insufficient because “[u]nder California law, the
subjective, unexpressed beliefs of the parties do not serve as the basis for whether or not
a contract is formed. Instead, the mutual assent necessary to form a contract is
determined under an objective standard applied to the outward manifestations or
expressions of the parties. [Citation.]” (Alexander v. Codemasters Group Limited (2002)
104 Cal.App.4th 129, 150, disapproved on another ground in Reid v. Google, Inc. (2010)
50 Cal.4th 512, 524.)
Absent allegations showing a meeting of the minds as to either the amount of the
promised retirement bonuses or a method for calculating the bonuses, the scope of
defendants’ duty to pay a retirement bonus and the limits of an acceptable performance
have not been sufficiently defined to provide a rational basis for the assessment of
damages. (Scott, supra, 11 Cal.4th at p. 467.) The amount required for any of the
plaintiffs to retire and not have to work again is obviously uncertain since the amount
could vary tremendously without any agreed-upon method or standard by which the
19
amount of the retirement bonus could be determined. (§ 16103; see Bewick, supra,
26 Cal.2d at pp. 98-99 [option covenant providing for the appointment of third persons to
ascertain the price was definite enough to give rise to a contract]; see also Larwin-
Southern California, Inc. v. JGB Investment Co. (1979) 101 Cal.App.3d 626, 643
[California law recognizes that when a contract provides such an objective method for
ascertaining the purchase price, the contract should not be construed as too indefinite to
be enforced].)
Consequently, even though plaintiffs allegedly continued to work for West Coast
in reliance upon the promise of a retirement bonus, under the doctrine of the
unenforceability of indefinite promises the alleged retirement bonus promise is too
indefinite to support an enforceable contract. (See Bustamante, supra, 141 Cal.App.4th
at p. 215; Barton, supra, 62 Cal.App.4th at p. 1190.)
Plaintiffs’ argument that they entered into an enforceable unilateral contract is not
convincing. In Scott, our Supreme Court noted that with regard to unilateral employment
contracts, “ ‘[o]f late years the attitude of the courts (as well as of employers in general)
is to consider [the employer’s practices and policies] which offer additional advantages to
employees as being in effect offers of a unilateral contract which offer is accepted if the
employee continues in the employment, and not as being mere offers of gifts.’
[Citations.]” (Scott, supra, 11 Cal.4th at p. 464; see also Guz, supra, 24 Cal.4th at p. 344;
Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 10-11 (Asmus).)
Decisions applying the unilateral contract rule stated in Scott, Guz, and Asmus
include, among others, Neisendorf v. Levi Strauss & Co. (2006) 143 Cal.App.4th 509,
3
Section 1610 provides, “When a consideration is executory, it is not
indispensable that the contract should specify its amount or the means of ascertaining it.
It may be left to the decision of a third person, or regulated by any specified standard.”
20
522-523 (Neisendorf) [specific bonus plan enforceable when employee begins service];
Newberger v. Rifkind (1972) 28 Cal.App.3d 1070, 1073-1075 (Newberger) [written stock
options agreement enforceable where employees continued to work in exchange for
options grant]; and Chinn v. China Nat. Aviation Corp. (1955) 138 Cal.App.2d 98, 103
(Chinn) [employer’s definite plan of employee benefits constituted enforceable contract
where employee continued in employment]. However, the decisions in Neisendorf,
Newberger, and Chinn are distinguishable from the case at bar. In each case, the promise
the employer made to the employee in exchange for the employee continuing to work
was a promise of a specified benefit that, unlike the retirement bonus promise in the
present case, was not vague or indefinite.
Plaintiffs rely on the decisions in Sabatini, Hunter v. Ryan, and Hunter v. Sparling
(1948) 87 Cal.App.2d 711. In Hunter v. Sparling, the promise of the employer, a
Japanese bank, to pay the plaintiff employee “a ‘substantial,’ or ‘large’ sum of money”
upon his retirement was deemed an enforceable contract because even though the
plaintiff did not know the formula for calculating the amount, that formula was
ascertainable from the Japanese language rules and regulations available at the home
office in Japan. (Hunter v. Sparling, supra, at pp. 718, 724-725.) The promise was
therefore not too uncertain in its terms to be enforceable. (Id. at pp. 724-725.) In
contrast, plaintiffs in the present case have not alleged that their retirement bonus could
be calculated under a formula that could be ascertained from the company’s rules and
regulations.
The decisions in Hunter v. Ryan and Sabatini are distinguishable because both
decisions apply the doctrine of quantum meruit, which allows a party who has provided
services for the benefit of another to recover the reasonable value of the services from the
21
person who benefited from the services. (§ 16114; see Palmer v. Gregg (1967) 65 Cal.2d
657, 660; see also Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 249.)
In Hunter v. Ryan the appellate court upheld a a finding the plaintiff was owed a
bonus of $2,000 as the reasonable value of services performed outside the services she
performed for her weekly wages of $50, although the employer’s promise did not specify
the amount of the bonus. (Hunter v. Ryan, supra, 109 Cal.App. at pp. 738-379.) The
decision in Sabatini similarly concerned an employer’s promise to pay an employee a
fixed salary and a bonus in an unspecified amount. (Sabatini, supra, 161 Cal.App.2d at
p. 175.) The appellate court stated: “If the agreement does not specify the amount to be
paid, the law will imply an agreement to pay the reasonable value of the services and will
permit recovery of the excess of such amount over the salary paid.” (Id. at p. 176.)
In this case, however, the first amended complaint may not be construed to seek
recovery under the doctrine of quantum meruit because the record reflects that plaintiffs
declined the trial court’s invitation to amend the complaint to include quantum meruit
allegations. In its order of February 9, 2011, the trial court stated: “The promised
retirement bonus is too indefinite to be enforced, but plaintiffs shall have leave to amend
to seek quantum meruit.” The trial court subsequently stated in the judgment that “[o]n
February 11, 2011, plaintiffs advised defendants that they would not be further amending
the complaint.”
For these reasons, I would find that the trial court in its order of February 9, 2011,
properly sustained the demurrer to the cause of action for breach of contract in the
4
Section 1611 provides, “When a contract does not determine the amount of the
consideration, nor the method by which it is to be ascertained, or when it leaves the
amount thereof to the discretion of an interested party, the consideration must be so much
money as the object of the contract is reasonably worth.”
22
amended complaint. However, I agree with the trial court that plaintiffs were not
precluded from seeking leave to amend their first amended complaint to seek recovery
under the doctrine of quantum meruit.
D. Misrepresentation-Concealment
1. The Parties’ Contentions
Plaintiffs argue that the amended complaint states facts sufficient for the cause of
action for misrepresentation-concealment because they alleged that defendants
“concealed from them that Defendants induced Plaintiffs to remain employed at West
Coast in order to make the company more attractive to potential buyers while concealing
from the Plaintiffs that they only intended to give Plaintiffs nominal bonuses if any at
all.”
Defendants respond that the vague and uncertain allegations regarding the promise
of a retirement bonus are fatal to the cause of action for misrepresentation-concealment,
relying on the statement in Rochlis, supra, 19 Cal.App.4th at page 216 that “[p]romises
too vague to be enforced will not support a fraud claim any more than they will one in
contract.”
2. Applicable Law
This court has stated that “[c]oncealment is a species of fraud or deceit. (See . . .
§§ 1710, subd. (3),[5] 1572, subd. (3), [citation].)” (Blickman Turkus, LP v. MF
5
Section 1710 provides, “A deceit, within the meaning of the last section, is
either: [¶] 1. The suggestion, as a fact, of that which is not true, by one who does not
believe it to be true; [¶] 2. The assertion, as a fact, of that which is not true, by one who
has no reasonable ground for believing it to be true; [¶] 3. The suppression of a fact, by
one who is bound to disclose it, or who gives information of other facts which are likely
23
Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 868; see also Marketing West,
Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 613.) I understand plaintiffs
to be attempting to state a cause of action for a particular type of fraud known as
promissory fraud.
The California Supreme Court has instructed that “ ‘[p]romissory fraud’ is a
subspecies of the action for fraud and deceit. A promise to do something necessarily
implies the intention to perform; hence, where a promise is made without such intention,
there is an implied misrepresentation of fact that may be actionable fraud. [Citations.]”
(Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar); see also Tarmann v. State
Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158-159 (Tarmann) [broken promise
of future action may be actionable].)
In evaluating the sufficiency of promissory fraud allegations, the court applies the
following rule: “In California, fraud must be pled specifically; general and conclusory
allegations do not suffice. [Citations.] ‘Thus “ ‘the policy of liberal construction of the
pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any
material respect.’ ” [Citation.] [¶] This particularity requirement necessitates pleading
facts which “show how, when, where, to whom, and by what means the representations
were tendered.” ’ [Citation.]” (Lazar, supra, 12 Cal.4th at p. 645; see also Small v. Fritz
Companies, Inc. (2003) 30 Cal.4th 167, 184.)
“The specificity requirement serves two purposes. The first is notice to the
defendant, to ‘furnish the defendant with certain definite charges which can be
intelligently met.’ [Citations.] The pleading of fraud, however, is also the last remaining
habitat of the common law notion that a complaint should be sufficiently specific that the
to mislead for want of communication of that fact; or, [¶] 4. A promise, made without any
intention of performing it.”
24
court can weed out nonmeritorious actions on the basis of the pleadings. Thus the
pleading should be sufficient ‘ “to enable the court to determine whether, on the facts
pleaded, there is any foundation, prima facie at least, for the charge of fraud.” ’
[Citations.]” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983)
35 Cal.3d 197, 216-217.)
The requirement of specific pleading applies to the damages element of a fraud
cause of action, as this court has previously stated: “In order to recover for fraud, as in
any other tort, the plaintiff must plead and prove the ‘detriment proximately caused’ by
the defendant’s tortious conduct. (. . . § 3333.) Deception without resulting loss is not
actionable fraud. [Citation.] ‘Whatever form it takes, the injury or damage must not only
be distinctly alleged but its causal connection with the reliance on the representations
must be shown.’ [Citation.]” (Service by Medallion, Inc. v. Clorox Co. (1996) 44
Cal.App.4th 1807, 1818 (Service by Medallion).)
3. Analysis
In the amended complaint at issue here, the damages allegations included in the
cause of action for misrepresentation-concealment are as follows. “As a direct and
proximate result of the concealment, failure to inform and representations of Defendants,
Plaintiffs have: [¶] A. Been damaged in an amount equal to the monies which would
have allowed them to retire and stop working when West Coast was sold; [¶]
B. Sustained damages in the form of missed opportunities for other employment and
residence opportunities; [¶] C. Sustained damages in the form of uncompensated time for
work and travel over and above normal in continuing to advance the profitability of West
Coast and take over the duties and responsibilities of managers and key employees who
had left West Coast; [¶] D. Sustained damages in the form of emotional distress and
mental anguish. [¶] The exact amount of the aforesaid damages is not yet fully
25
ascertained but is within the jurisdictional limits of this Court and will be established
according to proof at time of trial.”
Defendants contend that these damage allegations are insufficient, relying on the
statement in Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268-1269 that “[a]n allegation
of a definite amount of damage is essential to stating a cause of action. [Citation.]” I
note that another appellate court has disagreed, stating that “the specific dollar amount is
necessary only when a default judgment is to be entered.” (Furia v. Helm (2003) 111
Cal.App.4th 945, 957.) However, it is not necessary to resolve the issue of whether a
specific dollar amount of damages must be alleged in a fraud action, since it may be
determined on other grounds that the damages allegations in the amended complaint are
inadequate. (See Lazar, supra, 12 Cal.4th at p. 645.)
First, as I have discussed, the allegations regarding the promised retirement
bonuses are too indefinite in the absence of a meeting of the minds as to either the
amount of the bonuses or the method of calculating the amount of the bonuses. Second,
the three plaintiffs fail to allege with any specificity the damages that each of them
allegedly suffered due to relying on defendants’ retirement bonus promise. Plaintiffs
allege only in general terms that they all missed “other employment and residence
opportunities,” suffered “uncompensated time for work and travel” and “[s]ustained
damages in the form of emotional distress and mental anguish.” These conclusory
allegations do not satisfy the general requirement that a cause of action for fraud must be
pleaded specifically (Lazar, supra, 12 Cal.4th at p. 645) and the specific requirement that
damages be distinctly alleged. (Service by Medallion, supra, 44 Cal.App.4th at p. 1818.)
I would therefore find that the trial court did not err in sustaining the demurrer to
the cause of action for misrepresentation-concealment in its order of February 9, 2011.
26
E. Promissory Estoppel
1. The Parties’ Contentions
Plaintiffs contend that the allegations of the amended complaint were sufficient for
a promissory estoppel cause of action because they properly alleged the elements of a
clear promise, reliance, substantial detriment, and damages.
According to defendants, the allegations are insufficient because the alleged
promise of an unspecified retirement bonus does not constitute the clear and
unambiguous promise that is necessary for a promissory estoppel cause of action.
2. Applicable Law
The California Supreme Court has stated, “Promissory estoppel is ‘a doctrine
which employs equitable principles to satisfy the requirement that consideration must be
given in exchange for the promise sought to be enforced.’ [Citation.]” (Kajima/Ray
Wilson v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th
305, 310 (Kajima/Ray).) The doctrine therefore serves as a substitute for consideration.
(Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 250.)
Under the doctrine of promissory estoppel, “ ‘[a] promise which the promisor
should reasonably expect to induce action or forbearance on the part of the promisee or a
third person and which does induce such action or forbearance is binding if injustice can
be avoided only by enforcement of the promise. The remedy granted for breach may be
limited as justice requires.’ [Citations.]” (Kajima/Ray, supra, 23 Cal.4th at p. 310.)
“The party claiming [promissory] estoppel must specifically plead all facts relied
on to establish its elements. [Citations.]” (Smith v. City and County of San Francisco
(1990) 225 Cal.App.3d 38, 48.) Thus, it is well established that the alleged promise must
be “ ‘clear and unambiguous,’ ” or the promise is not binding. (Cotta v. City and County
of San Francisco (2007) 157 Cal.App.4th 1550, 1566; see US Ecology, Inc. v. State of
California (2005) 129 Cal.App.4th 887, 905; Lange v. TIG Ins. Co. (1998) 68
27
Cal.App.4th 1179, 1185; Laks v. Coast Fed. Sav. & Loan Assn. (1976) 60 Cal.App.3d
885, 890 [promise must be clear and unambiguous in its terms].)
3. Analysis
In the present case, the alleged promise of bonuses in an amount sufficient for
plaintiffs to retire and not work again is not a clear and unambiguous promise. As I have
discussed, the retirement bonus promise is indefinite as to either the amount of the bonus
or the method of calculating the bonus. The amended complaint therefore does not
sufficiently allege the clear promise element of a cause of action for promissory estoppel.
Accordingly, I would find that in its order of February 9, 2011, the trial court
properly sustained defendants’ demurrers to the cause of action for promissory estoppel.
F. Negligent Misrepresentation
1. The Parties’ Contentions
Plaintiffs contend that the trial court erred in sustaining the demurrers to the cause
of action for negligent misrepresentation in the amended complaint on the ground that the
alleged promise of a retirement bonus is “too vague to support a fraud claim.”
According to defendants, the trial court did not err because a cause of action for
negligent misrepresentation cannot be based upon “a promise that was too vague to be
enforceable.”
2. Applicable Law
A cause of action for negligent misrepresentation is similar to a cause of action for
fraud, with one key difference. “The elements of fraud are (1) the defendant made a false
representation as to a past or existing material fact; (2) the defendant knew the
representation was false at the time it was made; (3) in making the representation, the
defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the
representation; and (5) the plaintiff suffered resulting damages. [Citation.] The elements
of negligent misrepresentation are the same except for the second element, which for
28
negligent misrepresentation is the defendant made the representation without reasonable
ground for believing it to be true. [Citations.]” (West v. JPMorgan Chase Bank, N.A.
(2013) 214 Cal.App.4th 780, 792.)
This court has explained that “an action based on a false promise is simply a type
of intentional misrepresentation, i.e., actual fraud. The specific intent requirement [for
fraud] also precludes pleading a false promise claim as a negligent misrepresentation, i.e.,
‘The assertion, as a fact, of that which is not true, by one who has no reasonable ground
for believing it to be true.’ (. . . § 1710, subd. (2).) Simply put, making a promise with
an honest but unreasonable intent to perform is wholly different from making one with no
intent to perform and, therefore, does not constitute a false promise. Moreover, we
decline to establish a new type of actionable deceit: the negligent false promise.”
(Tarmann, supra, 2 Cal.App.4th at p. 159, fn. omitted.)
3. Analysis
In the present case, plaintiffs allege in their cause of action for negligent
misrepresentation that “Defendants were aware that the promises and representations
made to Plaintiffs were not accurate in light of information they had in hand at that time
as alleged hereinabove. Defendants also undertook to conceal from Plaintiffs their lack
of information and failure to make the promises and representations accurately. [¶] . . .
The promises and representations by Defendants as aforesaid were made with the intent
to induce Plaintiffs to act as set forth hereinabove.”
Plaintiffs’ allegations show that their cause of action for negligent
misrepresentation does not actually plead that claim, since they do not allege that
defendants made a promise with an honest but unreasonable intent to perform. (See
Tarmann, supra, 2 Cal.App.4th at p. 159.) Instead, plaintiffs allege that defendants had
no intention of performing by providing the promised retirement bonus. They have
therefore attempted to state a cause of action for an intentional tort, since “an action
29
based on a false promise is simply a type of intentional misrepresentation, i.e., actual
fraud.” (Ibid.)
I therefore concur with the majority’s determination that the trial court properly
sustained the demurrer to the cause of action for negligent misrepresentation in its order
of February 9, 2011.
G. Intentional Infliction of Emotional Distress
1. The Parties’ Contentions
Plaintiffs argue that the trial court incorrectly sustained the demurrers to the cause
of action for intentional infliction of emotional distress in the amended complaint.
According to plaintiffs, they sufficiently alleged that defendants’ conduct was outrageous
by claiming that defendants “virtually enslaved the Plaintiffs for 5 years by inducing the
Plaintiffs to give up their freedom, including their rights to go to a company which paid
more, which had better benefits, which had a retirement plan and to forego moving to
better locations where better schools existed or better housing.” Plaintiffs also claim that
defendants “took away [their] right to work where they wanted . . . .”
Defendants maintain that plaintiffs fail to state facts sufficient for a cause of action
for intentional infliction of emotional distress because they do not allege extreme and
outrageous conduct by defendants. In defendants’ view, plaintiffs “allege nothing more
than [defendants’] failure to pay allegedly promised compensation in an uncertain
amount.”
2. Applicable Law
The California Supreme Court has established the elements of a cause of action for
intentional infliction of emotional distress: “ ‘ “(1) extreme and outrageous conduct by
the defendant with the intention of causing, or reckless disregard of the probability of
causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional
distress; and (3) actual and proximate causation of the emotional distress by the
30
defendant’s outrageous conduct. . . . ” Conduct to be outrageous must be so extreme as
to exceed all bounds of that usually tolerated in a civilized community.’ [Citation.]”
(Christensen v. Superior Court (1991) 54 Cal.3d 868, 903 (Christensen).)
Our Supreme Court clarified in Christensen that “ ‘ “the rule which seems to have
emerged is that there is liability for conduct exceeding all bounds usually tolerated by
decent society, of a nature which is especially calculated to cause, and does cause,
mental distress of a very serious kind.” [Citations.]’ ” (Christensen, supra, 54 Cal.3d at
pp. 904-905.) The court may determine in the first instance whether the defendant’s
conduct may be reasonably regarded as so extreme and outrageous as to permit recovery
for intentional infliction of emotional distress. (Fowler v. Varian Associates, Inc. (1987)
196 Cal.App.3d 34, 44.)
In the employment context, our Supreme Court determined in Alcorn v. Anbro
Engineering, Inc. (1970) 2 Cal.3d 493, that the plaintiff employee had stated facts
sufficient for a cause of action for intentional infliction of emotional distress by alleging
that the defendant employer had “intentionally humiliated plaintiff, insulted his race,
ignored his union status, and terminated his employment, all without just cause or
provocation.” (Id. at pp. 498-499, fn. omitted.)
In contrast, the allegations were insufficient for a cause of action for intentional
infliction of emotional distress where the plaintiff employee claimed that the defendant
employer first offered her a termination package, withdrew the offer the next day and told
her she was still employed, and subsequently offered a less advantageous termination
package while forcing her to do work she regarded as menial during her last 30 days of
employment. (Trerice, supra, 209 Cal.App.3d at p. 884.) The appellate court stated,
“While [defendants’] conduct is not exemplary, it certainly does not qualify as the kind of
‘outrageous’ conduct necessary in order to support an action for intentional infliction of
emotional distress. [Citation.]” (Ibid.)
31
3. Analysis
The result in the present case is similar to the result in Trecice. Defendants’
alleged conduct of making a false promise to pay a retirement bonus does not qualify as
exemplary conduct by an employer. But such conduct does not reach the level of
extreme and outrageous conduct that is necessary for a cause of action for intentional
infliction of emotional distress. “[I]t is ‘not . . . enough that the defendant has acted with
an intent which is tortious or even criminal, or that he [or she] has intended to inflict
emotional distress, or even that his [or her] conduct has been characterized by “malice,”
or a degree of aggravation which would entitle the plaintiff to punitive damages for
another tort. Liability has been found only where the conduct has been so outrageous in
character, and so extreme in degree, as to go beyond all possible bounds of decency, and
to be regarded as atrocious, and utterly intolerable in a civilized community.’ [Citation.]”
(Cochran v. Cochran (1998) 65 Cal.App.4th 488, 496 (Cochran).)
Here, plaintiffs essentially allege that they continued their employment in reliance
upon the vague promise of an unspecified retirement bonus, which the defendant
employer did not fulfill. As a matter of law, these allegations do not show that
defendants’ conduct was so extreme and outrageous as to exceed “all bounds usually
tolerated by decent society . . . .” (Christensen, supra, 54 Cal.3d at p. 905; Cochran,
supra, 65 Cal.App.4th at p. 496.) The allegations in the amended complaint are therefore
insufficient to state a cause of action for intentional infliction of emotional distress.
For these reasons, I concur with the majority’s determination that the trial court
did not err, in its order of order of February 9, 2011, in sustaining the demurrers to the
cause of action for intentional infliction of emotional distress.
32
H. Estoppel in Pais
1. The Parties’ Contentions
Finally, plaintiffs challenge that portion of the trial court’s order of September 7,
2010, sustaining the demurrer to the cause of action for estoppel in pais without leave to
amend because plaintiffs had not shown that estoppel in pais is a recognized cause of
action in California.
Relying on the decision in Hill v. Kaiser Aetna (1982) 130 Cal.App.3d 188 (Hill),
plaintiffs contend that the trial court erred because estoppel in pais is a legal theory on
which a plaintiff employee’s entitlement to a bonus may be based.
Defendant West Coast disputes this contention, arguing that estoppel in pais is a
defensive doctrine, not an independent cause of action. Defendants Maloney and
Tkalcevic add the argument that estoppel in pais is an evidentiary doctrine codified at
Evidence Code section 623.6
2. Applicable Law
My resolution of the issue is guided by well established rules. “Equitable
estoppel, originally known as estoppel in pais, and also called estoppel by conduct, is
simply stated. ‘Whenever a party has, by his [or her] own statement or conduct,
intentionally and deliberately led another to believe a particular thing true and to act upon
such belief, he [or she] is not, in any litigation arising out of such statement or conduct,
permitted to contradict it.’ (Evid. Code, § 623; [citation].) The doctrine is defensive in
nature only, and ‘operates to prevent one [party] from taking an unfair advantage of
6
Evidence Code section 623 provides, “Whenever a party has, by his own
statement or conduct, intentionally and deliberately led another to believe a particular
thing true and to act upon such belief, he is not, in any litigation arising out of such
statement or conduct, permitted to contradict it.”
33
another.’ [Citation.]” (San Diego Mun. Credit Union v. Smith (1986) 176 Cal.App.3d
919, 922-923 (San Diego Mun. Credit Union); see also Behnke v. State Farm General
Insurance Co. (2011) 196 Cal.App.4th 1443, 1463 [equitable estoppel doctrine acts
defensively only]; Joffe v. City of Huntington Park (2011) 201 Cal.App.4th 492, 512-513,
fn. 15 [no stand-alone cause of action for equitable estoppel as a matter of law].)
For example, it has been held that the doctrine of equitable estoppel may be
applied, after the limitations period has run, to preclude a defendant from asserting the
statute of limitations as a defense to an untimely action where defendant’s conduct
induced the plaintiff into forbearing to file suit. (McMackin v. Ehrheart (2011) 194
Cal.App.4th 128, 142.)
3. Analysis
In accordance with these well established rules, as a matter of law plaintiffs may
not state a cause of action for estoppel in pais since estoppel in pais, also known as
equitable estoppel and estoppel by conduct, is not an independent cause of action. (San
Diego Mun. Credit Union, supra, 176 Cal.App.3d at pp. 922-923.)
The decisions on which plaintiffs rely are distinguishable and do not convince me
that estoppel in pais may be asserted as an independent cause of action. In Division of
Labor Law Enforcement v. Transpacific Transportation Co. (1979) 88 Cal.App.3d 823,
828-829, the appellate court ruled that the allegations of the plaintiff’s amended
complaint were sufficient to raise “the theory of estoppel by conduct.” The court did not
consider the issue of whether estoppel by conduct constituted an independent cause of
action.
In Hill, supra, 130 Cal.App.3d at page 191, the appellate court concluded that
“estoppel by conduct is a proper theory upon which to find entitlement for a bonus.”
That case arose from the state labor commissioner’s denial of the plaintiff employee’s
claim for severance pay and a bonus. The denial was appealed to the superior court,
34
which ruled that the defendant employer was estopped by its conduct from denying the
plaintiff employee a bonus. The appellate court determined that sufficient evidence
supported the trial court’s finding. (Id. at pp. 190, 196-197.) The court did not address
the issue of whether estoppel by conduct may constitute an independent cause of action in
a civil complaint.
For these reasons, I concur with the majority’s determination that the trial court, in
its order of September 7, 2010, properly sustained the demurrer to the cause of action for
estoppel in pais in the original complaint.
III. Conclusion
Since I conclude that the trial court properly sustained the demurrers to all five
causes of action in the first amended complaint, and also properly sustained the demurrer
to the cause of action for estoppel in pais in the original complaint, I would affirm the
trial court’s February 15, 2011 judgment dismissing the entire action with prejudice after
plaintiffs elected not to further amend their first amended complaint. And as I previously
stated, I agree with the trial court that plaintiffs were not precluded from seeking leave
from the trial court to amend their first amended complaint to seek recovery under the
doctrine of quantum meruit.
___________________________________________
BAMATTRE-MANOUKIAN, J.
35
Filed 11/22/13
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
IRMA MONCADA et al., H036728
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. CV169097)
v.
WEST COAST QUARTZ CORP. et al.,
Defendants and Respondents.
THE COURT:
The opinion in the above-entitled matter filed on October 28, 2013, was not
certified for publication in the Official Reports. For good cause it now appears that the
opinion should be published in the Official Reports, and it is so ordered. Pursuant to
California Rules of Court, rule 8.1105(b) and (c), this opinion is certified for publication.
_____________________________
RUSHING, P.J.
_____________________________
PREMO, J.
_____________________________
BAMATTRE-MANOUKIAN, J.
36
Trial Court:
Superior Court No.: CV169097
Trial Judge: The Honorable Peter J. Kirwan
Attorneys for Plaintiffs and Appellants Law Offices of Widmann
Irma Moncada et al.: Randall M. Widmann
Attorneys for Defendants and Respondents Carroll, Burdick & McDonough
West Coast Quartz Corp. et al.: Robert A. McFarlane
Beck, Ross, Bismonte & Finley
Ron C. Finley
Craig Allen Hansen
Lim, Ruger & Kim
Justice S. Chang
Moncada et al. v. West Coast Quartz Corp. et al.
H036728
37