Case Name: County of Santa Clara v. Roger Glen Sonagere, et al.

Case No.: 18CV330586

Cross-Defendant County of Santa Clara’s Demurrer to [Cross-Complainant’s] First Amended Cross-Complaint

Factual and Procedural Background

Plaintiff County of Santa Clara (“County”) owned and operated Santa Clara Valley Medical Center (“VMC”). (Complaint, ¶2.) Within the last four years, defendant Roger Glenn Sonagere (“Sonagere”) became indebted to plaintiff County on an open book account for money due in the sum of $85,447.88 for medical care, services, and supplies furnished by plaintiff County, by or through VMC, at the special instance and request of defendant Sonagere. (Complaint, ¶¶2 and 5.) Neither the whole nor any part of the sum has been paid and the sum is now due, owing, and unpaid. (Complaint, ¶6.)

On June 25, 2018, plaintiff County filed a complaint against defendant Sonagere asserting causes of action for: (1) Open Book Account; and (2) Common Count.

On September 20, 2018, defendant Sonagere filed an answer and a cross-complaint against County asserting causes of action for: (1) Breach of Implied Covenant of Good Faith and Fair Dealing; (2) Breach of Contract; and (3) Fraud.

On November 16, 2018, County filed a demurrer to Sonagere’s cross-complaint. On March 14, 2019, the court sustained County’s demurrer to Sonagere’s cross-complaint.

On March 25, 2019, Sonagere filed the operative first amended cross-complaint (“FAXC”). The FAXC alleges Nanjangud Savitha’s (“Savitha”) vehicle struck Sonagere who was riding a motorcycle on September 26, 2014. (FAXC, ¶7.) Sonagere’s medical bills exceeded $445,640.77. (FAXC, ¶8.) Savitha’s liability policy of $100,000 was insufficient to cover Sonagere’s medical bills. (FAXC, ¶7.)

On April 16, 2016, in the action entitled Sonagere v. Savitha, case number 1-15-CV-284929, County filed a notice of lien to recover $85,980.88 from Sonagere for alleged unpaid medical bills as a result of the motorcycle accident. (FAXC, ¶9.) On August 18, 2016, Sonagere’s attorney sent written correspondence to County acknowledging receipt of County’s lien and informing County that it had already billed and been compensated by Medicare for services rendered to Sonagere and, accordingly, there was no basis for the lien. (FAXC, ¶10.) On January 14, 2017 , County, responding to Sonagere’s August 18, 2016 correspondence, consented to the course of action Sonagere requested by filing a Notice of Waiver and/or Withdrawal of Lien expressly stating that County “withdraws its previously filed lien dated April 13, 2016 in the amount of $85,890.88, and no longer seeks any recovery against any party to the above-entitled action.” (FAXC, ¶1.) Based on Sonagere’s August 18, 2016 correspondence and County’s conduct thereafter, Sonagere and County entered into an agreement as evidenced by the withdrawal of lien. (FAXC, ¶2.) County breached the agreement by now attempting to collect a debt it had previously agreed to waive. (FAXC, ¶3.) Sonagere relied on County’s representations and, in consideration of the representation that County waived and withdrew its lien, settled the action against Savitha. (FAXC, ¶5.)

Sonagere’s FAXC asserts causes of action against County for:

(1) Breach of Implied Duty of Good Faith and Fair Dealing
(2) Breach of Contract

On April 29, 2019, County filed the instant motion, a demurrer to Sonagere’s FAXC.

III. Cross-defendant County’s demurrer to the second cause of action in cross-complainant Sonagere’s FAXC [breach of contract] is SUSTAINED.

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186; see also CACI, No. 303.) In demurring, County contends Sonagere has not adequately alleged a contract.

“Contract formation requires mutual consent, which cannot exist unless the parties ‘agree upon the same thing in the same sense.’ [Citations.] ‘If there is no evidence establishing a manifestation of assent to the “same thing” by both parties, then there is no mutual consent to contract and no contract formation.’ [Citation.]” (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208.) “The existence of mutual consent is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe.” (Weddington Productions, Inc. v. Flick (1997) 60 Cal.App.4th 793, 811.) “The parties’ outward manifestations must show that the parties all agreed ‘upon the same thing in the same sense.’” (Ibid.)

Here, County argues there is no outward manifestation of consent despite Sonagere’s allegation that County consented to the course of action Sonagere requested in his correspondence of August 18, 2016. The existence of mutual consent is a question of fact. (DeLeon v. Verizon Wireless, LLC (2012) 207 Cal.App.4th 800, 813.) “Although mutual consent is a question of fact, whether a certain or undisputed state of facts establishes a contract is a question of law for the court.” (Ibid.) In previously sustaining County’s demurrer to this cause of action, this court held, “While there may be some dispute about mutual consent, the Notice of Waiver and/or Withdrawal of Lien that Sonagere requests judicial notice of and on which this cause of action is based does not, as a matter of law, establish a contract.”

In this FAXC, Sonagere is no longer asserting that the Notice of Waiver and/or Withdrawal of Lien is the contractual agreement. Thus, there is no allegation of an express agreement nor is there any allegation of an oral agreement. Instead, Sonagere seeks to allege an implied agreement. An implied contract “consists of obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words.” (Silva v. Providence Hospital of Oakland (1939) 14 Cal.2d 762, 773; Civil Code § 1621.) “It has been said that the essential difference between an implied and an express contract is the mode of proof. [Citation.] That is, the terms of an express contract are stated in words, while those of an implied agreement are manifested by conduct. [Citations.]” (Youngman v. Nevada Irr. Dist. (1969) 70 Cal.2d 240, 246 (Youngman).) “In pleading a cause of action on an agreement implied from conduct only the facts from which the promise is implied must be alleged.” (Id. at pp. 246 – 247.) A course of conduct can show an implied promise. (Varni Bros. Corp. v. Wine World, Inc. (1995) 35 Cal.App.4th 880, 889 [implied contract based upon appellant’s distribution of wine for wine producer for many years]; Youngman, supra, 70 Cal.2d at p. 247 [implied contract based upon announced practice of wage increases].)

According to Sonagere, an agreement is implied by the fact that Sonagere’s counsel sent County correspondence on August 18, 2016 informing County that it had no basis for a lien and by the fact that County thereafter filed the Notice of Waiver and/or Withdrawal of Lien. This does not amount to a course of conduct upon which a contract may be implied. County’s filing of the Notice of Waiver and/or Withdrawal of Lien is insufficient to imply a promise for which Sonagere can now seek affirmative relief. County’s filing of the Notice of Waiver and/or Withdrawal of Lien may constitute waiver which Sonagere may assert as a shield via an affirmative defense, but not a sword.

Accordingly, cross-defendant County’s demurrer to the second cause of action in cross-complainant Sonagere’s FAXC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc, §430.10, subd. (e)] for breach of contract is SUSTAINED WITHOUT LEAVE TO AMEND.

IV. Cross-defendant County’s demurrer to the first cause of action in cross-complainant Sonagere’s FAXC [breach of implied covenant of good faith and fair dealing] is SUSTAINED.

“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” (Rest.2d Contracts, § 205.) “There is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.” (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658; see also CACI No. 325.)

“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made. [Citation.] The covenant thus cannot ‘be endowed with an existence independent of its contractual underpinnings.’ [Citations.] It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349 – 350 (Guz).)

“The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation. [Citation.] ‘The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract’s purpose.’ [Citation.] … ‘In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.’” (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031 – 1032.)

Here, the allegations in Sonagere’s first cause of action is that County “unfairly interfered with [ ] Sonagere’s right to receive the benefits of the agreement.” Absent an underlying agreement, Sonagere cannot assert a claim for the breach of an implied covenant which can only arise from such an agreement.

Accordingly, cross-defendant County’s demurrer to the first cause of action in cross-complainant Sonagere’s FAXC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc, §430.10, subd. (e)] for breach of implied covenant of good faith and fair dealing is SUSTAINED WITHOUT LEAVE TO AMEND.