CROSKEY, J.
Plaintiff and appellant Eugene Rapaport, M.D., an anesthesiologist, brought suit against defendants and respondents Ernesto P. Gidaya, Jr., M.D., Joseph D. Kuwahara, M.D., Alva T. Verde, M.D. (collectively, defendant doctors), Anesthesia Specialists of Orange County, Inc. (ASOC), and Integrated Health Care Holdings, Inc. dba Western Medical Center Anaheim (IHHI). Dr. Rapaport alleged that he had an oral agreement with the defendant doctors to form an anesthesiology practice group, which the defendant doctors breached by forming a practice group, ASOC, without him. Dr. Rapaport alleged that, some months later, he became an independent contractor of ASOC, which then breached the contract by not assigning cases to its anesthesiologists in a fair and equitable manner. Finally, Dr. Rapaport alleged that IHHI, a hospital with which ASOC had contracted to provide anesthesiologists, interfered with Dr. Rapaport's contract with ASOC by aiding and abetting ASOC's unfair scheduling of Dr. Rapaport. After a series of demurrers and amended complaints, the trial court ultimately sustained the demurrers of the defendant doctors and IHHI (but not ASOC) without leave to amend and entered judgment in their favor. Dr. Rapaport appeals. We conclude the demurrer was improperly sustained with respect to the defendant doctors and IHHI. We therefore reverse the judgments of dismissal and remand for further proceedings.
Dr. Rapaport's allegations fall into three general categories: (1) breach of the oral agreement to form an anesthesiology practice group; (2) breach of his subsequent contract with ASOC by unfair scheduling; and (3) interference by IHHI and the defendant doctors with his contract with ASOC. We briefly set out the allegations, causes of action, and bases for demurrer relating to each category of claims.
Dr. Rapaport alleges that in August 2006, he and the defendant doctors agreed to form an anesthesiology practice group, which would provide anesthesiologists' services to hospitals in Los Angeles and Orange counties. Dr. Gidaya was the spokesperson for the defendant doctors in the negotiations, and agreed with Dr. Rapaport, on behalf of the defendant doctors, that the four of them would be principals in an anesthesiology practice group. Dr. Rapaport and the defendant doctors would together operate and manage the practice, and share the profits equally. The planned anesthesiology practice group would recruit other anesthesiologists, and the group would obtain exclusive contracts to provide anesthesiology services at certain hospitals.
Dr. Rapaport alleges that, beginning in August 2006, he and Dr. Gidaya began to work together to form the anesthesiology practice group. Specifically, Dr. Rapaport alleges that he: (1) contacted hospitals to market the group's services and solicit exclusive contracts; (2) solicited arrangements with vendors to provide support services (such as billing and accounting) to the group; (3) created, developed and prepared business plans; (4) prepared anesthesiologists' rotation schedules; and (5) prepared forms that would be used by the group.
Although the anesthesiology practice group was not formally established at this time, Dr. Rapaport and the defendant doctors informally began providing anesthesiology services for several hospitals as an informal practice group as early as August 2006. However, Dr. Rapaport alleges that the defendant doctors distributed the profits of the informal practice group amongst themselves, and excluded him from his share of the profits.
On June 8, 2007, the defendant doctors formed ASOC without Dr. Rapaport. ASOC then entered into exclusive contracts to provide anesthesiology services to the hospitals where the informal practice group had previously been the exclusive provider of such services. Plaintiff alleged that he was wrongly excluded from ASOC's ownership and its profits.
Some six months later, on December 1, 2007, plaintiff signed an Anesthesiology Services Agreement (ASA) with ASOC, whereby he agreed to provide anesthesiology services to hospitals with which ASOC had contracted, as an independent contractor of ASOC. Plaintiff would ultimately also allege breach of the ASA, a cause of action we will later discuss. For present purposes, however, it is important to note that the ASA contained the following clause: "Any previous agreements between ASOC and Contractor regarding the provision of services for ASOC, whether oral or written, are hereby rescinded and shall be of no further force or effect."
Dr. Rapaport alleged five causes of action against defendant doctors
Defendant doctors demurred to each of these causes of action. As to all of them, defendant doctors asserted that the above-quoted language of the ASA constituted an integration clause. Accordingly, the parol evidence rule prohibited Dr. Rapaport from introducing evidence of any purported oral agreement which contradicts the terms of the ASA (specifically, the term providing that Dr. Rapaport is merely an independent contractor of ASOC). Although the basis for the trial court's order sustaining the demurrers is not entirely clear in the record, it appears that it was persuaded by this argument, at least with respect to the causes of action for breach of oral contract and breach of implied contract.
As to the causes of action for breach of oral contract, breach of implied contract, and declaratory relief, defendant doctors also argued that the two-year statute of limitations (Code Civ. Proc., § 339, subd. 1) barred the causes of action, as Dr. Rapaport's initial complaint was filed on April 15, 2009, and he allegedly incurred damages prior to April 15, 2007 — by the failure of defendant doctors to pay him his share of the profits of the informal anesthesiology group from August 2006 onward.
As to the cause of action for breach of fiduciary duty, the trial court sustained defendant doctors' demurrer without leave to amend on the basis that there was no fiduciary relationship. As to the cause of action for fraud, the trial court sustained defendant doctors' demurrer without leave to amend on the basis that Dr. Rapaport did not allege facts sufficient to show fraud. As to both causes of action, defendant doctors had also pursued a motion to strike. The motion to strike challenged the allegations of those two causes of action which alleged monetary damages,
As to the cause of action for declaratory relief, the trial court sustained defendant doctors' demurrer without leave to amend on the basis that there was simply nothing for a court to declare.
Pursuant to the ASA, Dr. Rapaport agreed to provide his anesthesia services "as requested by ASOC from time to time" at the hospitals with which ASOC had an exclusive agreement to provide anesthesiologists. Pursuant to this agreement, Dr. Rapaport agreed that he would provide anesthesiology services to hospitals which had contracted with ASOC only through ASOC.
Dr. Rapaport alleged that, implied in the ASA (either by industry practice or via the implied covenant of good faith and fair dealing) was a requirement that ASOC implement a fair rotation schedule to equalize work (and pay) to all of its anesthesiologists (and, specifically, to all anesthesiologists with a specialty in cardiac surgery). Dr. Rapaport alleged that ASOC breached this implied term by its unfair rotation schedule.
Dr. Rapaport also alleged that defendant doctors were liable for ASOC's breach of contract, as they were alter egos of ASOC. As to this theory of alter ego, Dr. Rapaport alleged that ASOC was the alter ego of defendant doctors, "who have utilized the corporate status of ASOC as a sham through which they conduct their personal business." He alleged that he was "further informed and believes and thereon alleges that there is a unity of ownership and control of ASOC in that [defendant doctors] and each of them, own ASOC, or all of its issued shares, and dominate and control ASOC; that ASOC does not operate as a bona fide corporation; that ASOC was inadequately capitalized and is utilized by [defendant doctors] and each of them, as subterfuge for the purposes of: a) attempting to insulate them, and each of them, from liability to third persons, including Plaintiff and b) defrauding creditors and others, including Plaintiff. Plaintiff is further informed and believes and thereon alleges that unfair and inequitable results will follow if the corporate separateness of ASOC is recognized in that, plaintiff is informed and believes and therein alleges, ASOC will have insufficient assets, funds or property from which to pay a judgment against it which may be entered herein." Dr. Rapaport therefore alleged that the defendant doctors "are responsible and liable for ASOC's debts, actions and obligations herein alleged, as ASOC is the alter ego of said Defendants, and each of them. . . . " Dr. Rapaport alleged causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and money had and received against both ASOC and defendant doctors as ASOC's alter egos. Both ASOC and defendant doctors demurred, on the basis that the allegedly implied contract term requiring fair rotation of anesthesiologists violated the express terms of the ASA, which did not require ASOC to assign any cases to Dr. Rapaport at all and, in any event, could be terminated without cause on 30 days notice. Additionally, defendant doctors argued that the alter ego allegations were insufficient. The trial court sustained the demurrer of defendant doctors on their alter ego theory, but overruled the demurrer of ASOC, concluding that the causes of action were not barred by the terms of the ASA.
To best understand the parties' arguments relating to the allegations of intentional interference, it is necessary to discuss the evolution of these allegations through Dr. Rapaport's pleadings.
In his initial complaint, Dr. Rapaport alleged that defendant doctors, IHHI, and Doe defendants
Dr. Rapaport alleged causes of action for intentional interference with contract and negligent interference with contract. Defendant doctors demurred to these causes of action on the basis that Dr. Rapaport had alleged, via alter ego allegations, that defendant doctors were liable for breaching the ASA, and a party cannot intentionally interfere with its own contract. The trial court sustained the demurrer of defendant doctors without leave to amend these causes of action.
IHHI did not demur to the complaint until Dr. Rapaport's second amended complaint. By this time, as defendant doctors' demurrer had been sustained without leave to amend these causes of action, Dr. Rapaport could no longer allege that IHHI had conspired with the defendant doctors. Instead, Dr. Rapaport alleged only that IHHI conspired with the Doe defendants.
IHHI demurred to the complaint on the basis that, despite Dr. Rapaport's attempt to remove defendant doctors from the interference with contract causes of action, Dr. Rapaport was still alleging a conspiracy between IHHI on the one hand, and ASOC and/or the defendant doctors on the other, and neither ASOC nor the defendant doctors could be liable for interfering with the ASA, as it was their own contract. IHHI argued that it could not be liable for conspiring when its alleged co-conspirators could not commit the underlying tort. IHHI also argued that, in any event, it could not be liable for interfering with the ASA as it was not a stranger to the contract, but had a social and economic interest in the provision of anesthesiology at its hospital.
Dr. Rapaport agreed that there is no cause of action for negligent interference with contract, and argued that he should be permitted to amend his complaint to allege a cause of action for negligent interference with prospective economic advantage instead. As to the cause of action for intentional interference, Dr. Rapaport argued that he no longer alleged a conspiracy with the defendant doctors and that, in any event, his cause of action for intentional interference with contract stands alone against IHHI, even in the absence of any conspiracy. In short, Dr. Rapaport argued that IHHI acted to induce ASOC's breach of contract. The trial court sustained IHHI's demurrer without leave to amend.
At the end of the hearing on the demurrers to the second amended complaint, the trial court stated that the defendants, except ASOC "are dismissed." On January 27, 2010, the trial court entered a partial judgment in favor of the defendant doctors. The same day, the court entered a second partial judgment in favor of IHHI. Notice of entry of the judgment in favor of the defendant doctors was served on February 10, 2010, and Dr. Rapaport filed a timely notice of appeal from both partial judgments.
The doctor defendants then moved for attorney fees, on the basis that Dr. Rapaport had sued them on the ASA, which contained a prevailing party attorney fee clause. The trial court granted the motion and entered an amended partial judgment in favor of the defendant doctors, which included attorney fees (and an increased cost award). Dr. Rapaport did not file a second notice of appeal from this amended judgment, an omission which defendant doctors argue is grounds for dismissing his appeal.
On appeal, Dr. Rapaport argues that the trial court erred in sustaining the demurrers to each of his causes of action.
We first address defendant doctors' procedural argument. Defendant doctors argue that the amended judgment in their favor, which added an award of attorney fees, constituted a substantive amendment and therefore superseded the original judgment. Defendant doctors therefore argue that Dr. Rapaport's failure to file a notice of appeal from the amended judgment renders his appeal from the superseded judgment a nullity. We disagree. A modified judgment which adds only costs and attorney fees makes no substantive change to the earlier judgment which finally disposed of all legal issues between the parties and thus constituted a final judgment.
The defendant doctors next argue that, as Dr. Rapaport did not appeal the amended judgment, he has forfeited any challenge to the attorney fees and costs awarded therein. Again, we disagree. While it is true that we have no jurisdiction to review the award of attorney fees when that award has not been separately appealed, an order awarding attorney fees falls with a reversal of the judgment on which it is based. As we will reverse the judgment in favor of defendant doctors, on remand the trial court must necessarily vacate the order awarding attorney fees and costs in favor of defendant doctors. (Allen v. Smith (2002) 94 Cal.App.4th 1270, 1284.)
"In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. `We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) "We must, however, affirm the trial court's judgment if it is correct on any theory, and on appeal the responding parties are free to advance legal arguments that they did not raise in the trial court and on which the trial court did not rely." (L.K. v. Golightly (2011) 199 Cal.App.4th 641, 644.) "Where written documents are the foundation of an action and are attached to the complaint and incorporated therein by reference, they become a part of the complaint and may be considered on demurrer." (City of Pomona v. Superior Court (2001) 89 Cal.App.4th 793, 800.) "[F]acts appearing in exhibits attached to the complaint . . ., if contrary to the allegations in the pleading, will be given precedence." (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.)
"To meet [the] burden of showing abuse of discretion, the plaintiff must show how the complaint can be amended to state a cause of action. [Citation.] However, such a showing need not be made in the trial court so long as it is made to the reviewing court." (William S. Hart Union High School Dist. v. Regional Planning Com. (1991) 226 Cal.App.3d 1612, 1621.)
Dr. Rapaport alleged five causes of action against defendant doctors arising from their alleged breach of the oral agreement to form an anesthesiology practice group: (1) breach of oral contract; (2) breach of implied contract; (3) breach of fiduciary duty; (4) fraud; and (5) declaratory relief. Although the trial court ultimately sustained demurrers without leave to amend these causes of action on different bases, we consider them together as one of the bases on which defendant doctors argue the order sustaining the demurrers may be upheld is applicable to all five causes of action — the parol evidence rule.
Defendant doctors argue that, because the ASA contains an alleged integration clause, the parol evidence rule bars Dr. Rapaport from arguing that his relationship with defendant doctors was anything other than the relationship as set forth in the ASA. We disagree.
The parol evidence rule is codified in Code of Civil Procedure section 1856. That statute provides, in pertinent part: "(a) Terms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement." "To the extent a contract is integrated, the parol evidence rule precludes the admission of evidence of the parties' prior or contemporaneous oral statements to contradict the terms of the writing." (Esbensen v. Userware Internat., Inc. (1992) 11 Cal.App.4th 631, 636.)
Defendant doctors argue that since the ASA provides that Dr. Rapaport shall be an independent contractor of ASOC, the parol evidence rule precludes Dr. Rapaport from introducing any evidence of an alleged prior oral agreement that he was to be an equal partner in ASOC. We again disagree. Dr. Rapaport alleged a prior oral agreement which had been entered into in August 2006. That agreement was breached, at the latest,
It may be that, as defendant doctors argue, the language in the ASA rescinding "[a]ny previous agreements between ASOC and [Dr. Rapaport] regarding the provision of services for ASOC" was intended as a settlement agreement, eliminating Dr. Rapaport's then existing (alleged) cause of action for breach of the contract to form ASOC. Alternatively, it may be that the language is that of a novation, which would terminate the effect of any prior contract going forward, but would not eliminate any cause of action for damages already accrued. Finally, it may be, as Dr. Rapaport argues, that the language is simply a boilerplate integration cause included in the form contract used by ASOC with all of its contractor anesthesiologists, intended only to reach any promises ASOC may have made during the negotiations leading up to the doctors' execution of the ASA. The proper legal effect to be given to the contractual language will depend on the intent of the parties at the time of contracting. We cannot say, as a matter of law on demurrer, that this clause necessarily settled away Dr. Rapaport's (alleged) then existing breach of contract cause of action. Thus, the trial court erred to the extent it relied on defendant doctors' parol evidence rule argument in sustaining their demurrer.
Defendant doctors next argue that the two-year statute of limitations for breach of a contract not in writing bars Dr. Rapaport's causes of action for breach of oral contract, breach of implied contract, and declaratory relief. "A statute of limitations starts to run upon accrual of a cause of action." (Seelenfreund v. Terminix of Northern Cal., Inc. (1978) 84 Cal.App.3d 133, 136.) The complaint was filed on April 15, 2009. The question before us, then, is whether these causes of action accrued prior to April 15, 2007.
It cannot be disputed that the causes of action accrued, at the latest, on June 8, 2007, when defendant doctors formed ASOC without Dr. Rapaport. However, Dr. Rapaport alleges that the defendant doctors breached the oral agreement prior to the formation of ASOC, by withholding from him his share of the profits earned by the informal anesthesiology practice group. As the informal anesthesiology practice group was functioning from August 2006 through May 2007, defendant doctors infer that profits must have been withheld from Dr. Rapaport prior to April 15, 2007. Dr. Rapaport alleged, however, that the improper distribution of profits did not occur until after May 1, 2007.
We are somewhat skeptical of Dr. Rapaport's allegation, in light of his arguments in opposition to defendant doctors' demurrer, that he did not, in fact, know when the improper distribution of profits took place, and that he needed to conduct discovery on the matter. Nonetheless, Dr. Rapaport's allegation that the improper profit distribution did not occur until after May 1, 2007 is not contradicted by any other allegations in his operative complaint (nor in any earlier pleading) and, on appeal from a dismissal following the sustaining of a demurrer, we must treat as true the allegations of the complaint.
Defendant doctors next bring challenges to the sufficiency of Dr. Rapaport's complaint with respect to each cause of action. In California, one need plead only ultimate facts, not evidentiary facts. (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 392, pp. 529-530.)
Defendant doctors argue that Dr. Rapaport's allegations of breach of contract (both oral and implied) are fatally uncertain. They argue that Dr. Rapaport did not specifically identify his acts of performance under the alleged contract, nor did he specifically identify the conduct of Doctors Kuwahara and Verde on which he bases his causes of action.
First, defendant doctors argue that the pleading is uncertain because Dr. Rapaport did not clearly allege the acts he performed in exchange for his interest in the practice group. They argue that he did not give a "single, concrete example of what he actually did," noting that, for example, although Dr. Rapaport alleged that he solicited hospitals and vendors, he did not identify any solicited hospital or vendor by name. The argument is meritless. "In pleading the performance of conditions precedent in a contract, it is not necessary to state the facts showing such performance, but it may be stated generally that the party duly performed all the conditions on his part, and if such allegation be controverted, the party pleading must establish, on the trial, the facts showing such performance." (Code Civ. Proc., § 457.)
Second, defendants Kuwahara and Verde argue that the complaint is uncertain as to them. Dr. Rapaport generally alleges that all defendant doctors acted through Dr. Gidaya. At one point, however, Dr. Rapaport also alleges that, through the words and actions of all defendant doctors, he refrained from pursuing other practice opportunities. Defendants Kuwahara and Verde argue that, despite this allegation, Dr. Rapaport never gave a single concrete example of any words spoken by them, which renders the complaint uncertain.
We believe that this is an improper parsing of the language of the complaint; the standard of review requires that we consider the complaint as a whole, with its parts in context. Taken as a whole, Dr. Rapaport alleges the following: (1) Dr. Gidaya, on behalf of all three defendant doctors, orally agreed with Dr. Rapaport to form the practice group; (2) thereafter, Dr. Rapaport and Dr. Gidaya undertook to form the practice group; (3) simultaneously, all four doctors began working together as an informal practice group; and (4) Dr. Rapaport believed, from the words of Dr. Gidaya and the actions of all defendants, that the plan to form the practice group was moving forward. These allegations are sufficient.
The trial court sustained the demurrer to the cause of action for breach of fiduciary duty without leave to amend on the basis that there was no fiduciary relationship. This is clearly incorrect;
Defendant doctors argue that, since the trial court granted their motion to strike the damages allegations
Promissory fraud, which is a promise made without any intention of performing it, is a type of deceit. (Civ. Code, § 1710, subd. 4.) As such, it must be pleaded with particularity. "`In California, fraud must be pled specifically; general and conclusory allegations do not suffice.' [Citation.] This requirement serves two purposes. First, it gives the defendant notice of the definite charges to be met. Second, the allegations `should be sufficiently specific that the 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.'"' [Citation.] Thus, a plaintiff must plead facts which show how, when, where, to whom, and by what means the representations were made. [Citation.]" (Citizens of Humanity, LLC v. Costco Wholesale Corp. (2009) 171 Cal.App.4th 1, 20, disapproved on other grounds by Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.) In a case of promissory fraud, the false promise itself is akin to an allegation of misrepresentation of fact. (5 Witkin, Cal. Procedure, supra, Pleading, § 721, p. 137.) Thus, the promise must be pleaded with the same specificity as a misrepresentation in a false representation case.
Here, in Dr. Rapaport's initial complaint, he alleged that "on numerous occasions prior to June 6, 2007, [defendant doctors] and each of them" promised that the practice group would be formed. Defendant doctors demurred that the promise was not sufficiently specifically pleaded. At the hearing on the demurrer, when asked where the parties sat down and agreed to form the practice group, Dr. Rapaport's counsel conceded that the complaint did not identify the location. Dr. Rapaport's counsel then indicated that, if leave to amend were granted, he could amend the complaint to "set forth with specificity which negotiations took place where." Leave to amend was granted.
Dr. Rapaport's first amended complaint then alleged that "prior to August 2006," Dr. Rapaport and the defendant doctors "in Los Angeles and Orange Counties" "began to discuss and plan the formation of a medical group . . . ." The complaint then alleged that "[i]n or about August, 2006," plaintiff and the defendant doctors "orally agreed among themselves to form, own, operate, manage and share profits thereof, in equal shares, as principals, an anesthesia practice group." Additionally, Dr. Rapaport alleged that "in or about August, 2006 at Los Angeles and Anaheim[,] Defendant Gidaya, on behalf of himself and as the agent for and on behalf of Defendants Kuwahara and Verde . . . orally promised Plaintiff that" they would immediately form the practice group and share equally in its profits.
The trial court concluded that these allegations did not allege promissory fraud with the necessary specificity, and we agree. The allegations do not show how, when and where the promises were made. Instead, the allegations simply state that: (1) at an unknown time, prior to August 2006, all three defendant doctors had discussions with Dr. Rapaport at an unknown location in one of two counties; and (2) at an unknown time, during August 2006, Dr. Gidaya and/or all three doctor defendants made an oral promise to Dr. Rapaport at an unknown location in one of two cities.
Dr. Rapaport was granted an opportunity to amend his complaint to allege "with specificity which negotiations took place where." He failed to do this. Nor does he assert, on appeal, that, if granted further leave to amend, he could allege promissory fraud with sufficient specificity. Therefore, we conclude the trial court did not err in sustaining the demurrer without leave to amend the cause of action for fraud.
Dr. Rapaport's cause of action for declaratory relief sought a declaration as to whether Dr. Rapaport owned a 25% interest in ASOC. Resolution of this cause of action appears to turn on whether the ASA constituted a novation (or settlement agreement). That is, Dr. Rapaport alleged that the oral agreement entitled him to a 25% interest in ASOC; if the ASA constituted a novation of that oral agreement, as a matter of law, Dr. Rapaport would not be entitled to such an interest. We have already concluded that this is not a determination that can be made as a matter of law on appeal. Thus, the cause of action for declaratory relief should also be permitted to proceed.
In sum, when considering defendant doctors' demurrers to the causes of action related to the alleged oral contract to form an anesthesiology practice, the demurrer was properly sustained, without leave to amend, as to the cause of action for fraud. As to the other four causes of action, the demurrer should have been overruled. We now turn to the causes of action based on ASOC's alleged breach of the ASA.
Dr. Rapaport alleged three causes of action against ASOC and defendant doctors for ASOC's alleged breach of the ASA by unfair scheduling of cases: (1) breach of an implied term of the written ASA; (2) breach of the implied covenant of good faith and fair dealing; and (3) money had and received. The trial court overruled ASOC's demurrers to these causes of action, but sustained without leave to amend the demurrers of defendant doctors. Defendant doctors were alleged to be liable on these causes of action on an alter ego theory; the trial court concluded this was inadequately pleaded. On appeal, defendant doctors contend both: (1) that their demurrers were properly sustained on the basis that Dr. Rapaport did not sufficiently allege alter ego; and (2) that their demurrers should have been sustained on the basis that the causes of action themselves are improper (a theory rejected by the trial court in overruling ASOC's demurrers).
To prevail on an alter ego theory, a plaintiff must establish: "First, that the corporation is not only influenced and governed by [the alleged individuals], but that there is such a unity of interest and ownership that the individuality, or separateness, of the [alleged individuals] and corporation has ceased; second, that the facts are such that an adherence to the fiction of the separate existence of the corporation would, under the particular circumstances, sanction a fraud or promote injustice." (First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 914-915.)
Dr. Rapaport pleaded both of these elements. He specifically pleaded: (1) "that there is a unity of ownership and control of ASOC in that [defendant doctors] and each of them, own ASOC, or all of its issued shares, and dominate and control ASOC; that ASOC does not operate as a bona fide corporation"; and (2) "that unfair and inequitable results will follow if the corporate separateness of ASOC is recognized." These allegations are sufficient.
Defendant doctors argue that the allegations of alter ego are inconsistent with Dr. Rappaport's allegations of conspiracy. We disagree. In Webber v. Inland Empire Investments, Inc. (1999) 74 Cal.App.4th 884, the trial court found in favor of the plaintiff on a cause of action for declaratory relief. In the course of its findings on that cause of action, the trial court determined that an individual defendant was the alter ego of several corporate entities. (Id. at pp. 894, 897.) However, the jury found in favor of the plaintiff on a cause of action for conspiracy to intentionally interfere with contract, concluding that the individual defendant had conspired with two of the very same corporate entities. (Id. at p. 896.) The trial court permitted the plaintiff to proceed on its conspiracy theory "despite the obvious fact that, if there was really only one defendant, [the individual and his wholly owned corporations], there were no independent coconspirators." (Id. at p. 897.) On appeal, the defendants argued that the alter ego finding on one cause of action precluded their being held liable on a conspiracy theory on a different cause of action. The appellate court found "no fatal inconsistency" in permitting the plaintiff to proceed on an alter ego theory on one cause of action and an alternative conspiracy theory on another.
The same result follows here. Dr. Rapaport can proceed on alter ego allegations on some causes of action and conspiracy allegations on others. The allegations are not themselves fatally inconsistent.
Defendant doctors next argue that, contrary to the trial court's conclusion, the causes of action for breach of an implied term of the ASA and breach of the implied covenant of good faith and fair dealing were insufficiently pleaded. Specifically, defendant doctors argue that the term Dr. Rapaport would imply in the ASA, that cases be scheduled fairly among ASOC anesthesiologists, is contradicted by express terms of the ASA. Defendant doctors argue that since, under the ASA, Dr. Rapaport agreed to provide his anesthesiology services "as requested by ASOC from time to time" and the agreement was terminable without cause by ASOC on 30 days notice, the written terms of the ASA would be contradicted by any implied requirement that cases be assigned fairly. The trial court rejected this argument, and we agree.
"Every contract contains an implied covenant of good faith and fair dealing providing that no party to the contract will do anything that would deprive another party of the benefits of the contract. [Citations.] The implied covenant protects the reasonable expectations of the contracting parties based on their mutual promises. [Citations.] The scope of conduct prohibited by the implied covenant depends on the purposes and express terms of the contract. [Citation.]" (Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 885.)
In this case, Dr. Rapaport is a board-certified anesthesiologist, who is a staff member at several hospitals. Some of the hospitals at which he maintains staff privileges have an exclusive contract with ASOC. The only way Dr. Rapaport could continue to practice anesthesiology at these hospitals is through ASOC; indeed, the ASA he executed with ASOC includes a term preventing him from practicing anesthesiology at these hospitals except through ASOC. Thus, it could be inferred that Dr. Rapaport, and all other anesthesiologists contracting with ASOC, entered into their ASAs in the reasonable belief that ASOC would assign cases fairly so all ASOC anesthesiologists could continue their practices at the ASOC hospitals.
The fact that the contract is terminable at will does not change this result. While it is true that the implied covenant of good faith and fair dealing will not imply a requirement of good cause for termination in an otherwise terminable at will contract, that is not the situation we have here. ASOC never terminated the ASA.
Finally, we turn to the cause of action for money had and received. The trial court overruled ASOC's demurrer to this cause of action, but sustained the demurrer of defendant doctors without leave to amend on the basis that Dr. Rapaport had contracted with ASOC, not defendant doctors. As discussed above, as Dr. Rapaport's alter ego allegations are sufficient; if the cause of action is sufficiently pleaded against ASOC, it is also sufficiently pleaded against defendant doctors on an alter ego theory. Furthermore, the cause of action for money had and received incorporates by reference all of the alleged conduct of all defendants, including defendant doctors' breach of the oral contract to form the anesthesiology practice group, and their failure to pay Dr. Rapaport his fair share of the informal anesthesiology practice group's profits. As we have concluded that causes of action based on this conduct are not barred, the cause of action based on money had and received would appear to have a factual basis against defendant doctors regardless of their relationship with ASOC.
Defendant doctors suggest, however, that the cause of action is insufficiently pleaded. Defendant doctors do not support this suggestion with any argument or citation to authority, and we therefore conclude that it is not properly before us on appeal. (Huntington Landmark Adult Community Assn. v. Ross (1989) 213 Cal.App.3d 1012, 1021.) Defendant doctors argue instead that Dr. Rapaport has waived any right to argue that the cause of action was sufficiently pleaded, by failing to specifically brief the issue in his opening brief. We disagree.
It must be remembered that the trial court overruled ASOC's demurrer to the money had and received cause of action. The trial court concluded that the cause of action was properly pleaded (and instead simply questioned the parties against whom it could be directed). It is true that defendant doctors could raise in their respondents' brief a theory for upholding the trial court's order sustaining their demurrer which the trial court had rejected. However, defendant doctors have cited no authority for the proposition that an appellant must argue, in its opening brief, that the trial court correctly resolved an issue in its favor, or otherwise be barred from arguing it on appeal. In short, Dr. Rapaport's failure to brief that he properly pleaded a cause of action for money had and received does not constitute a concession that he did not properly plead it, as the trial court concluded that his pleading was sufficient. It was defendant doctors' burden to establish otherwise as respondents. They failed to do so. The cause of action must therefore be reinstated.
Dr. Rapaport's final two causes of action are those for intentional and negligent interference with the ASA by Defendant Doctors and IHHI, for their participation in the unfair scheduling of Dr. Rapaport at IHHI's hospital.
Resolution of the appeal with respect to the cause of action for intentional interference with contract turns on the issue of which parties can be held liable for intentionally interfering with a contract, and which parties can be held liable for conspiring to do so.
A contracting party cannot interfere with its own contract. (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514.) Likewise, it cannot be held liable for conspiring to interfere with its own contract. (Id. at pp. 507-508.)
Contractual interference claims may be stated against owners, officers, and directors of the company whose contract was the subject of the litigation. However, such individuals may prove that their conduct was privileged or justified, on the basis that they acted to benefit the business entity in question. (Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344, 350-351, 356.) This is a defense which must be pleaded and proved. It cannot be resolved on demurrer. (Id. at p. 356.)
Defendant doctors successfully demurred to the cause of action for intentional interference with contract in Dr. Rapaport's initial complaint. They argued that, as Dr. Rapaport had alleged they were alter egos of ASOC, Dr. Rapaport was arguing that defendant doctors were personally liable for breaching the ASA. Therefore, defendant doctors argue, they could not be liable for tortiously interfering with a contract they were (allegedly) personally liable for breaching. The trial court accepted this argument and sustained defendant doctors' demurrer without leave to amend. This was error. As discussed above, a plaintiff can pursue alter ego allegations with respect to one cause of action, and alternative conspiracy allegations with respect to another. Moreover, owners, officers and directors of a corporation are not, by that status alone, immune from liability for interfering with the corporation's contract. Therefore, Dr. Rapaport's cause of action for intentional interference should be permitted to proceed against defendant doctors.
IHHI successfully demurred to the cause of action for intentional interference only after the trial court had held that the cause of action could not proceed against defendant doctors. IHHI argued that, as defendant doctors could not be held liable for intentional interference with the ASA, it could not be held liable for conspiring with defendant doctors to do so. As we have concluded defendant doctors could be liable for intentional interference, IHHI could be liable for conspiring with them to so interfere.
IHHI's next argument is based on specific language in some intentional interference with contract cases. That language states that California's policy is to protect the expectations of contracting parties against frustration by outsiders who have no legitimate social or economic interest in the contractual relationship. (E.g. Applied Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at p. 514.) IHHI argues that, based on this language, it cannot be held liable for intentional interference with the ASA, as it has a social and/or economic interest in deciding who performs anesthesiology at its hospital. This argument was recently rejected in Woods v. Fox Broadcasting Sub., Inc., supra, 129 Cal.App.4th at pp. 351-353, which held that the language on which IHHI relies is "dicta at best," (id. at p. 352) and does not establish a legal rule that noncontracting parties who have some general social or economic stake in the contract cannot be held liable for intentionally interfering with the contract. IHHI's demurrer should have been overruled.
The demurrer was sustained to Dr. Rapaport's cause of action for negligent interference with contract on the basis that California does not recognize such a cause of action. Dr. Rapaport concedes the point, but argues that leave should have been granted for him to amend the complaint to allege instead a cause of action for negligent interference with prospective economic advantage. We disagree. Dr. Rapaport has not identified any prospective economic advantage which had not yet ripened into a contract with which he alleges defendant doctors or IHHI interfered. Dr. Rapaport's attempt to simply rename his improper negligent interference with contract cause of action cannot be sanctioned. Leave to amend was properly denied.
The judgment of dismissal in favor of defendant doctors is reversed. The matter is remanded to the trial court with directions to vacate its order sustaining defendant doctors' demurrer without leave to amend, and enter a new and different order: (1) overruling the demurrer with respect to all causes of action except the causes of action for fraud and negligent interference with contract; and (2) sustaining the demurrer without leave to amend as to the causes of action for fraud and negligent interference with contract. The judgment of dismissal in favor of IHHI is reversed. The matter is remanded to the trial court with directions to vacate its order sustaining IHHI's demurrer without leave to amend, and enter a new and different order (1) overruling the demurrer with respect to the cause of action for intentional interference with contract; and (2) sustaining the demurrer without leave to amend as to the cause of action for negligent interference with contract.
Dr. Rapaport shall recover his costs on appeal from defendant doctors and IHHI.
KLEIN, P. J. and ALDRICH, J., concurs.
