NOT TO BE PUBLISHED IN OFFICIAL REPORTS
In 2012 the City of Alameda Health Care District, doing business as Alameda Hospital (Alameda), acquired a 120-bed skilled nursing facility (the Facility or the Waters Edge Facility) from The Waters Edge, Inc. (Waters Edge). The completion date of the transaction, marking the transfer of operation of the Facility, is governed by a contractually defined term—"Closing Date"—the meaning of which is at the heart of this appeal. As defined in the acquisition documents, the Closing Date was not a date certain, but was to be triggered by the fulfillment of certain conditions, including, most importantly here, Alameda's receipt of a regulatory approval known as "Distinct Part" certification (DP certification), which was necessary for it to charge Medi-Cal reimbursable rates.
Alameda expected its DP certification for the Waters Edge Facility to be granted sometime in March 2012. In late March, even though the DP certification had not yet issued, Deborah Stebbins, the Chief Executive Officer (CEO) of Alameda, allegedly agreed to a Closing Date of April 1, 2012. Alameda then sent out notices to patients and vendors of Waters Edge announcing it would take over the Facility as of April 1; hired all employees of the Facility and put them on its payroll as of that date; and entered a revised sublease dated "as of April 1, 2012," memorializing various changes to the November 15, 2011 form of sublease that had been approved by Alameda's Board of Directors (the Board of Directors or the Board). Because of an announced price increase by Alameda—based on its plan to begin accepting Medi-Cal eligible patients and set rates across the board at a new level that assumed Medi-Cal reimbursement, resulting in higher prices overall than those Waters Edge had been charging—many patients decided to leave the Facility.
To Alameda's surprise, near the end of March it learned from regulatory authorities that its DP certification would not issue by April 1, and might not issue at all. Stebbins believed the problem was correctable, and began an ultimately successful but months-long effort to obtain the DP certification. In the meantime, while this further effort to obtain a DP certification was underway, Waters Edge agreed to continue operating the Facility to ensure continuity of patient care, subject—it now claims—to Alameda's commitment to provide reimbursement for the operational expenses incurred in that interim period. Alameda finally received its DP certification in July 2012, and took over operation of the Facility as of August 1, 2012.
The dispute in this case arises out of Alameda's refusal to reimburse Waters Edge fully for operating the Facility from April through July 2012. According to Alameda, Stebbins had no authority to agree to a Closing Date of April 1, 2012 without prior Board approval, and in any event, any such agreement is an unenforceable oral waiver of the express condition that Alameda first obtain its DP certification before the transaction could close. Waters Edge, for its part, argues that Stebbins acted pursuant to a broad delegation of authority in the Board's bylaws, and that the contractually defined term "Closing Date" includes the exception "unless otherwise agreed to by the parties hereto," which it contends is the basis for Stebbins's oral commitment.
Waters Edge sued for reimbursement and for lost profits, alleging four claims for relief in the operative complaint: (1) breach of an oral agreement to close on April 1, 2012 (2) in the alternative, if there was no April 1 close, breach of an oral agreement and/or novation providing for operation of the Facility by Waters Edge on an interim basis subject to cost reimbursement, (3) money due on common counts (based on the preceding two contract claims), and (4) negligent interference with prospective economic advantage. The trial court, finding that neither of the alleged agreements is valid, which resolved the contract claims and the common counts claim, and then concluding that Alameda has governmental immunity for tort liability, which resolved the negligent interference claim, granted summary judgment for Alameda.
Waters Edge now appeals. We conclude there are triable issues with respect to the alleged oral agreement to close April 1, 2012 and therefore reverse on that claim, while affirming as to the other three claims.
A. Factual History
Christian Zimmerman (Zimmerman), the President and CEO of Waters Edge, had been in contact with Alameda for some time before and during early 2011, discussing the possibility of transferring his company's licenses to the Waters Edge Facility to Alameda. In the summer of 2011, Zimmerman and his daughter, Lauren Zimmerman Cook (Cook),
Pleased with the tentative agreement (the "Proposed Transaction"), the Board of Directors passed a resolution on October 10, 2011 authorizing Stebbins, "subject to the final approval of th[e] Board at such time as the following have been completed, to undertake the agreed-upon due diligence process and the negotiation of the required definitive agreements, and to prepare all necessary applications and notices, and any and all other documents necessary to effectuate the Proposed Transaction and to secure such licenses, permits and other entitlements as may be required, including without limitation, any change of ownership applications for [Waters Edge] provider enrollment forms, applications for transfer of licenses, permits or other entitlements or notices to the Department of Health Services, third-party payors, and such regulatory agencies and taxing authorities as may be necessary or convenient to effectuate the transfer of [Waters Edge] and secure the necessary rights to operate same." The resolution further provided that "any binding or irrevocable actions with respect to the Proposed Transaction shall require satisfactory completion and evaluation of the due diligence process and final Board approval of all aspects of the Proposed Transaction." Stebbins carried out her charge pursuant to this resolution over the next few weeks, and to that end, she, Zimmerman, and Cook drafted two forms of agreement, a Transition Agreement and a Sublease (collectively, "Transaction Agreements").
On November 7, 2011, the Board passed another resolution (Resolution No. 2011-81) authorizing Stebbins "() to execute and deliver the Transaction Agreements in substantially the form attached hereto, and (2) to prepare, execute and submit, on behalf of the District, any and all documents necessary to effectuate the Transaction and to secure such licenses, permits and other entitlements as may be required, including without limitation, any change of ownership applications for [Waters Edge], provider enrollment forms, applications for transfers of licenses, permits or other entitlements or notices to the California Department of Public Health and/or Department of Health Care Services and, third-party payors, and such other regulatory agencies and taxing authorities as may be necessary or convenient to effectuate the Transaction and secure the necessary rights to operate the same." Resolution No, 2011-81 further provided that "the transfer of the operations to the District take effect when the Transaction Agreements have been duly executed, all conditions precedent have been satisfied, and any required licenses and certifications have been duly approved and issued by the responsible regulatory agencies."
Stebbins and Cook signed the Transaction Agreements on November 15, 2011.
Sometime in March 2012, Cook, Zimmerman, and Stebbins signed an amended Transition Agreement and Sublease (see ante, fn. 3), which made some revisions to the language of the form of Sublease that had been presented to the Board of Directors in November 2011, and added a phrase at the top of the first page of the Sublease: "Amended, Corrected and Restated as of April 1, 2012." Believing the closing of the transaction was likely to occur on April 1, 2012, Stebbins sent letters throughout March to the patients and their families, as well as Waters Edge's vendors, informing them of the upcoming transition and planned increases in patients' rates for care. Many of Waters Edge's vendors took steps to change their contracts to make Alameda rather than Waters Edge the counterparty, and Alameda arranged to hire most of Waters Edge's employees, effective April 1.
On about March 28 or 29, 2012, Alameda first became aware its license would not be approved by April 1, and might not be approved at all. Alameda so informed Waters Edge, indicating the closing would have to be pushed back yet again. The delay was due to reservations held by federal regulators in the CMS. Alameda immediately began vigorous efforts to persuade CMS these reservations were not well-taken, which it was ultimately successful in doing, but not for several months. On March 30, Zimmerman and Stebbins sent a joint letter to the CDPH to confirm Alameda still intended to add the Waters Edge Facility to its extant South Shore DP license, explaining that Waters Edge would continue to operate the Facility "until such time as the facility is added to [Alameda's] license as a D/P SNF." According to Waters Edge, it was around this time that Stebbins, on behalf of Alameda, orally agreed to close the transaction April 1, 2012, and promised Waters Edge to pay for the costs and expenses related to its continuing operation in the interim period until Alameda was able to obtain a DP certification. Alameda ultimately did obtain a form of DP certification known as "Composite Distinct Part" certification in July 2012, and it took over operations on August 1, 2012.
B. Procedural History
Waters Edge filed its complaint for damages on April 9, 2013, originally alleging six causes of action but ultimately dismissing two. The first of the four remaining causes of action arose from an alleged breach of contract: Alameda, through Stebbins, allegedly agreed to the April 1, 2012 Closing Date and failed to "fully acquire the facility" on that date. Specifically, Waters Edge noted that the one license Alameda had not obtained as of April 1 was the DP license, yet it had everything else it apparently needed to operate the Facility; and throughout March, Alameda took certain actions (described above) consistent with its alleged agreement to begin operating the Facility on April 1. Waters Edge's second cause of action was for breach of (a second) contract and/or novation as an alternative to the theory of contract liability pleaded in its first cause of action; under this secondary theory, Waters Edge alleged that Alameda, through Stebbins, recognizing the Closing Date could not occur April 1, agreed to reimburse Waters Edge for out-of-pocket expenses, lost profits, and "all additional prepaid expenses, prorated, resulting from [Alameda's] delay," in the interim period between April 1 and August 1, 2012. The third cause of action, styled as common counts, grew from the first two, and requested $86,475.63 in damages, or an amount to be adjusted. The fourth and fifth causes of action were later dismissed without prejudice upon Waters Edge's motion on August 27, 2014. Waters Edge's sixth cause of action arose from Alameda's alleged negligent interference with prospective economic advantage, a common law tort. Specifically, Waters Edge alleged, "[a]s a direct and proximate result of [Alameda's] negligent interference with [Waters Edge's] [third-party] contracts and prospective economic relationships, [Waters Edge] suffered lost net revenues, and net losses, all to its damage."
Alameda answered the complaint, denying all material allegations. After a period of discovery, it moved for "Summary Judgment or in the Alternative, [for] Summary Adjudication of Issues." The trial court granted the motion, adopting as final a tentative ruling that explained its reasoning on each cause of action. In its ruling on the first cause of action, the trial court found the alleged oral contract between Stebbins and Waters Edge—a commitment to close on April 1, 2012—to be unenforceable for four reasons. First, because Alameda is a public entity, its employees (including its CEO, Stebbins) do not have the authority to bind it to the Transaction Agreements without authorization by its board of directors. Second, the Transaction Agreements were integrated, which prohibited the introduction of extrinsic evidence to modify its terms.
C. Pertinent Language from the Transaction Agreements and the Bylaws of Alameda's Board of Directors
Since much of this case turns on the precise language of the Transaction Agreements and of the Board's bylaws, we summarize the relevant provisions below, quoting from them as is pertinent.
1. Transition Agreement and Sublease
We take the Transition Agreement and the Sublease, both of which were originally signed in November 2011 and amended in March 2012, together. (See Civ. Code, § 1642 ["Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together."].) Both of the Transaction Agreements listed the parties thereto as Waters Edge and Alameda, and both were signed by Cook, Zimmerman, and Stebbins, as described above.
Both the Transition Agreement and the Sublease contain identically worded integration clauses, set forth, respectively, as Paragraph 20 in the Transition Agreement and Paragraph 50 in the Sublease. We quote from Paragraph 50 of the Sublease as an exemplar of both: "Except as otherwise expressly set forth herein, or as may be set forth in writing contemporaneous with or subsequent to this Sublease, this Sublease contains the entire agreement between the parties with respect to the subleasing of the Premises, and all previous and collateral agreements, representations, warranties, promises and conditions with respect thereto are superseded by this Sublease. No prior representation, promise or condition not referred to or incorporated in this Sublease shall be binding on either party. No alteration or modification of any of the provisions of this Sublease shall be binding unless such alteration or modification is in writing, is duly executed by the party to be bound thereby, and specifically refers to this Sublease and the intention to modify or alter the same."
Paragraph 1 in the Transition Agreement provides in relevant part: "On the Closing Date (defined below), Waters Edge shall transfer to Alameda (a) its leasehold interest in the Premises in accordance with the terms of that certain Sublease, a copy of which is attached hereto as Exhibit A, and (b) its interest in the 120 bed California skilled nursing facility license to operate the Premises, all as set forth below and in return for the consideration set forth below. . . . The `Closing Date' shall, unless otherwise agreed to by the parties hereto, be the close of the first Waters Edge pay period following the issuance, to Alameda, of all of the licenses and certifications it needs to operate the Premises as a Distinct Part Skilled Nursing Facility, as part of Alameda Hospital." Paragraph 11 further provides in full: "It is understood that the Transaction is subject to the approval of each party's Board of Directors."
Paragraph 5 of the Sublease provides in full: "The term of this sublease shall be for a period of twenty (20) years with two (2) five (5) year renewal options. The term of this Sublease shall commence upon the first day of the month following the occurrence of each of the following events: [¶] a. Sublessee obtains all insurance required to be maintained by Lessee under this Sublease and delivers certificates of such insurance to Sublessor and Lessors; and [¶] b. Sublessee is granted all licenses, permits, and certifications to operate the Premises as a Distinct Part (D/P) Skilled Nursing Facility, as required by any and all applicable local, county, state and federal laws and regulations." Paragraph 42 further provides in full: "No covenant, agreement, condition or representation or the breach thereof shall be deemed waived, except by written consent of the party against whom the waiver is claimed, specifically referring to this Sublease and the intention to waive the same, and any such waiver of the breach of any covenant, agreement, condition or representation shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other covenant, agreement, condition or representation."
The subject of which party would bear what types of operational transition costs in the period following the Closing Date, and cost reimbursement to Waters Edge for transition assistance to Alameda during that period, is addressed in some detail in the Transition Agreement. For example, since the expectation was that Alameda would be hiring all (or most) employees previously employed by Waters Edge, Paragraph 6 provides that "Alameda and Waters Edge agree that Waters Edge shall fund the first two Waters Edge payrolls following the Closing Date (the `Payroll Advance') and the payment of the first two months sublease payments shall be postponed (the `Delayed Rent'). Repayment of the Payroll Advance and the Delayed Rent, a total sum not to exceed $500,000 less the actual amount of [certain employment-related costs] shall be repaid by Alameda no later than 120 days following the Closing Date. . . ." And Paragraph 7 provides that "Alameda shall pay Waters Edge a management retainer of $5,000 per month . . . for each of the three months following the Closing Date," with additional payments owed for time spent by specified members of Waters Edge Management, at specified hourly rates, to the extent the value of the hours logged by those managers exceeded the $5,000 flat monthly fee.
Article II, section 3, subsection A of the Bylaws provides that "[t]he Board of Directors shall have all of the powers given to it by the Local Health Care District Law [(Health & Saf. Code, § 32000 et seq.)]," and subsection C of that section provides, in relevant part, the Board with "control of and [responsibility] for the management of all operations and affairs of this District and its facilities according to the best interests of the public health." Subsection F of that section then allows the Board to "employ any officers or employees . . . deem[ed] necessary to properly carry on the business of the District," and Article IV provides for the selection, authority, and duties of one employee, the CEO, whom the Board "shall select and employ" pursuant to Section 1, sub-section A of that article. Two duties and authorities of the CEO are pertinent for this case: the CEO must (1) "act as the duly authorized representative of the Board of Directors in all matters in which the Board has not formally designated some other person" (Alameda Bylaws, Art. IV, § 2, subsection A), and (2) "perform any other duties that may be necessary in the best interest of the District" (id., Art. IV, § 2, subsection M). The authority to "[s]ign and execute . . . in the name of the District, all contracts and conveyances and all other instruments in writing that have been authorized by the Board of Directors," is generally granted to the President and Secretary (id., Art. III, § 2, subsection A.2), although "the Board may appoint someone else to do so" (id., Art. III, § 2, subsection B).
A. Applicable Principles of Contract Interpretation and Standard of Review
We review the trial court's grant of summary judgment de novo, "independently examin[ing] the record in order to determine whether triable issues of fact exist to reinstate the action." (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142.) We "must strictly construe the papers of the moving party and liberally construe those of the opponent." (WYDA Associates v. Merner (1996) 42 Cal.App.4th 1702, 1709 (Merner).) The issues discussed below also, to some extent, call for us to review the trial court's interpretations of various statutes, which are questions of law we review de novo. (Lozada v. City and County of San Francisco (2006) 145 Cal.App.4th 1139, 1148-1149.)
"Under California law, the steps a trial court must follow in determining the meaning of a written contract are well established, as are the applicable standards of appellate review. [Citation.] The threshold question for trial and appellate courts is whether the writing is ambiguous—that is, reasonably susceptible to more than one interpretation. [Citations.] . . . [Citation.] In the trial court, and on appeal, contract interpretation always looks first to the words of the contract, but may also extend to parol evidence outside the four corners of the written agreement [citation], such as the parties' course of dealing over time [citation]." (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 986 (Asimos).) The touchstone of any contract interpretation inquiry is always that "[a] contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful." (Civ. Code, § 1636; see Pacific Gas & E. Co. v. G.W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 38 (G.W. Thomas Drayage).)
Parol or extrinsic evidence is admissible to resolve an ambiguity. (G.W. Thomas Drayage, supra, 69 Cal.2d at pp. 38-39; Code Civ. Proc., § 1856, subd. (g).) In handling such evidence when proffered, the court engages in a two-step process: "`First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine "ambiguity," i.e., whether the language is "reasonably susceptible" to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is "reasonably susceptible" to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step—interpreting the contract.'" (Merner, supra, 42 Cal.App.4th at p. 1710; FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 397 (FPI) ["A claim of extrinsic evidence is not philosopher's stone capable of semantic alchemy. `[T]he asserted meaning must be one to which the language of the writing, read in context, is reasonably susceptible.'"].)
Even if contract language is unambiguous, parol evidence may still be admissible to prove a collateral oral understanding, a scenario which presents the further question whether the contract at issue is integrated. (Masterson v. Sine (1968) 68 Cal.2d 222, 225 (Masterson); see FPI, supra 231 Cal.App.3d at pp. 392-398.) "Where parties have agreed that a written instrument is the exclusive and final embodiment of their contract, then the written contract is integrated, and parol evidence is inadmissible to alter or enlarge its terms. But where they have not so agreed, then the writing is unintegrated, or it may be partially integrated, and extrinsic or parol evidence will ordinarily be admitted in aid of establishing the complete agreement." (Brawthen v. H & R Block, Inc. (1972) 28 Cal.App.3d 131, 137 (Brawthen); see Masterson, supra, 68 Cal.2d at p. 225.)
Resolution of an issue of integration, as with all issues of contracting intent, begins with what the parties wrote down, but may not be "determined solely from the face of the instrument." (Masterson, supra, 68 Cal.2d at p. 226.) "The language of the writing is an important consideration, particularly where it recites that all understandings of the parties are contained therein; these are the so-called words of `integration' [citation]." (Brawthen, supra, 28 Cal.App.3d at p. 137.) But "a court should also consider the surrounding circumstances, including prior negotiations, and the nature of the purported collateral agreement to determine whether it is reasonable to conclude that the collateral agreement was intended to be part of the bargain." (Singh v. Southland Stone, U.S.A., Inc. (2010) 186 Cal.App.4th 338, 353.) And there may be cases in which an agreement is only partially integrated, with parol evidence admissible "to prove elements of the agreement not reduced to writing." (Masterson, supra, 68 Cal.2d at p. 233.)
When considering whether parol evidence is admissible on the question of integration, "[e]vidence of oral collateral agreements should be excluded only when the fact finder is likely to be misled." (Masterson, supra, 68 Cal.2d at p. 227.) "This permits a limited weighing of the evidence by the trial court for the purpose of keeping `incredible' evidence from the jury." (Brawthen, supra, 28 Cal.App.3d at p. 137.) Parol evidence may be admitted to prove a collateral oral agreement that is consistent with the terms of the writing if, under the circumstances, it would have been natural to make such a side agreement outside the terms of the writing. If, on the other hand, that agreement is either contrary to or would certainly have been memorialized as part of the writing, it is inadmissible. (Ibid.; see Masterson, supra, 68 Cal.2d at p. 227.)
FPI, supra, 231 Cal.App.3d 367 illustrates the application of both Masterson and G.W. Thomas Drayage. There, in exchange for a promissory note, the defendants took an option from FPI to purchase from Earp an option on a golf course property. (FPI, at p. 375.) When the defendants defaulted on their promissory note, FPI sued for breach. By way of defense, the defendants argued they had no obligation to pay the note because it was subject to a collateral oral agreement that it need not be paid unless they were successful in finding a buyer for the golf course, an assurance they claimed was an unwritten "condition precedent" to enforcement of the note. (Id. at pp. 392-393.) On appeal from a summary judgment for FPI, the appellate court pointed out that "[t]he integration question presented by defendants—whether payment of the note was conditioned upon a sale of the real property—embodies the claim of a collateral oral agreement to an additional consistent term." (Id. at p. 391, italics omitted.)
The court attached no relevance to whether the condition alleged by the defendants was properly characterized in formal terms as a "condition precedent" or a "condition subsequent," and instead looked to whether "the claimed agreement—that defendants' obligation to pay the note according to its terms was conditioned on sale of the property—directly `contradicts the writing.'" (FPI, supra, 231 Cal.App.3d at p. 394.) Affirming, the court explained that, if it were true the defendants were not obliged to pay under the note unless the property were sold, their obligation to pay for "an option worth $300,000 [provided] FPI with no recourse, since if they failed to sell the property they were not obliged to pay. So described, this would be an unusual, to wit, an unnatural transaction." (Id. at pp. 395-396.) Thus, since the defendants had proffered an interpretation to which the writing at issue was not "reasonably susceptible" (id. at p. 397), and since the alleged oral agreement "directly `contradict[ed] the writing'" (id. at p. 394), evidence of the alleged oral assurance not to enforce the note without a sale of the property was inadmissible both under G.W. Thomas Drayage and under Masterson.
FPI also illustrates the applicable standard of review, for questions of ambiguity and for questions of integration. While review of contract interpretation issues on appeal is generally de novo, the standard may depend on whether the trial court's determination required it to resolve conflicts in the evidence. (See FPI, supra, 231 Cal.App.3d at p. 392 ["This case does not turn on a conflict in the evidence regarding what happened. The trial court resolved the question of parol evidence by categorically barring evidence of terms extrinsic to the note on the incorrect view that any such claim contradicts the terms of the note."].) Thus, appellate courts exercise independent judgment where the evidence is undisputed, but where the trial court's determination rests on a resolution of conflicting evidence, any reasonable construction of the contractual instrument in question will be upheld if supported by substantial evidence.
B. Waters Edge's First Three Causes of Action: The Contract-Based Claims
1. There Are Triable Issues Concerning Whether a Valid Agreement to "Close" on April 1, 2012 Exists
Waters Edge advances the following interpretation of the term Closing Date, as defined in the Transition Agreement. According to the formula set forth in the defined term "Closing Date" in Paragraph 1 of the Transition Agreement—which called for the closing to occur as of "the close of the first Waters Edge pay period following the issuance, to Alameda, of all of the licenses and certifications it needs to operate the Premises as a Distinct Part Skilled Nursing Facility"—Waters Edge acknowledges that the issuance of DP certification is a condition to the closing, but it points out that the parties, through their authorized representatives, were empowered to select an alternate Closing Date if necessary in order to effectuate completion of the transaction. According to Waters Edge, the selection of an alternate Closing Date was not an amendment or modification of the contract language, but instead was the exercise of a power granted within that term as defined.
Tracking the trial court's reasoning, Alameda meets this contention with three related arguments: (1) The position Waters Edge takes is contrary to the plain language of the Transition Agreement and the Sublease Agreement because the commitment Stebbins allegedly made here was oral and both of these agreements require that any amendment, modification or waiver of their terms may only be made in writing (Transition Agreement, ¶ 13, Sublease, ¶ 42; see Marani v. Jackson (1986) 183 Cal.App.3d 695, 704; Civ. Code, § 1698); (2) any evidence of an oral agreement contrary to the terms of the Transition Agreement or the Sublease Agreement is inadmissible parol, since each of the Transaction Agreements, by its express terms, provides that it "contains the entire agreement between the parties" and that "all previous and collateral agreements, representations, warranties, promises and conditions with respect thereto are superseded"; and (3) focusing specifically on the commencement of the Sublease term—since the Closing Date could not occur without the Sublease going into effect—any oral modification is unenforceable because the Sublease is a contract subject to the Statute of Frauds (Civ. Code, § 1624, subd. (a)(3)) and thus could only be modified by a writing "signed by the party to be charged." (See Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla Village Square Venture Partners (1997) 52 Cal.App.4th 867, 875).
We think the Transition Agreement is reasonably susceptible to the interpretation Waters Edge sponsors. The Closing Date definition, by its terms, contains within it language anticipating the possibility that the parties might need to adjust the timing of the Closing Date and could do so if they "otherwise agreed." If we were to read that exception to mean "unless otherwise agreed in writing"—which is not what the words say—it would be redundant and unnecessary, since contracting parties may always supersede a prior written agreement with another written agreement, and indeed, these contracts already contemplate this default rule. (See Transition Agreement, ¶ 13; Sublease, ¶ 42). Giving the "unless otherwise agreed to by the parties" clause some meaning of its own, as we must, it can be sensibly read as a safety valve inserted to address unexpected events near the completion of the transaction that might call for rapid adjustment of the Closing Date to ensure a smooth operational transition, by oral agreement, allowing the Transition Agreement to go into effect—with Alameda obligated to hire and bear the costs of paying the employees of Waters Edge as of April 1, but with Alameda delaying its occupancy under the Sublease until a DP certification could be obtained. We do not adopt or endorse that interpretation as a matter of law, but we think it can be fairly inferred from the evidence and is plausible enough to create ambiguity. Stebbins denies agreeing to April 1 as the Closing Date, but Zimmerman and Cook claim she did. "Because the parol evidence is contradictory, a factual question arises that should not be resolved on summary judgment." (Merner, supra, 42 Cal.App.4th at p. 1713.)
Even assuming Alameda is correct that the plain language of the Transaction Agreements admits of only one reasonable reading, the parol evidence Waters Edge relies upon is still admissible to prove a collateral oral agreement. If the parties inserted the "otherwise agreed to by the parties" clause to provide flexibility in responding to the exigencies of closing a complex transaction, oral assent to adjusting the Closing Date is the type of collateral side agreement that might "naturally be made" by authorized representatives near the closing. (See Masterson, supra, 68 Cal.2d at p. 228.) Adopting the trial court's rationale, Alameda insists that, even assuming Stebbins was so authorized—which it vigorously disputes—her alleged oral agreement to close on April 1 was an outright waiver that contradicts the express condition precedent of DP certification. It does not matter which of the often elusive labels, "precedent" or "subsequent," a contractual condition is given. (FPI, supra, 231 Cal.App.3d at pp. 392-395 & fn. 13.) What matters is whether, taking all of the surrounding circumstances into account, an alleged collateral oral agreement "directly `contradicts the writing' "at issue. (Id. at p. 394.)
Here, accepting on its own terms the interpretation Waters Edge argues, we think it does not "directly contradict" the express terms of the Transition Agreement. According to Waters Edge, "the phrase [Closing Date] can reasonably be interpreted to allow the parties the right to select an alternative date either in anticipation of [Alameda] obtaining a Distinct Part certification . . . or to allow the closing without any certification. . . ." "[I]f the business was not profitable without the Distinct Part Certification . . . or if the Distinct Part Certification took longer than the three and one-half months it took, [Alameda] could have just exercised its rights under the `escape clause'" permitting early termination of the Sublease due to financial hardship. (See Sublease, ¶ 27.) Framed in these terms—assuming Waters Edge can prove this is what the contracting intent was—we are satisfied that the oral agreement Stebbins allegedly entered would be consistent with the Transition Agreement, not contradictory to it, since Alameda was not irrevocably committed to the acquisition without a DP certification.
In the end, while Alameda's plain language reading of the Transition Agreement has some force—the language of Resolution No. 2011-81, for example, expressing the Board's expectation that the "transfer of operations" to Alameda would only "take effect when . . . all conditions precedent have been satisfied . . . and any required licenses and certifications" have been obtained, cuts particularly strongly in its favor on the issue of contracting intent—we think there is enough in the record to create a triable issue of fact. Overall, the evidence is mixed. If, when the facts are found at trial, it is determined that the parties built in a clause ("unless otherwise agreed to by the parties hereto") permitting adjustment of the timing of the Closing Date informally, by oral assent, then Waters Edge is entitled to argue that Stebbins's commitment to April 1 as the Closing Date was simply the exercise of a preexisting power that had already been conferred in writing. (See Busch v. Globe Industries (1962) 200 Cal.App.2d 315, 320 ["When a modification is in accordance with a provision authorizing and setting forth a method for its revision the rule that a contract in writing may be altered only by another written contract or an executed oral agreement has no application because there is no alteration."].)
For the same reasons, we reject the argument that, as a matter of law, the Statute of Frauds renders Stebbins's alleged commitment to April 1 as the Closing Date under the Transition Agreement unenforceable for lack of a writing. Ripani v. Liberty Loan Corp. (1979) 95 Cal.App.3d 603, 608, a commercial lease case cited by Waters Edge, provides some guidance here. That case involved a three-year lease with an option to renew for an additional two years. Near the end of the original three-year lease term, an employee of the tenant, who the tenant later claimed was acting without authority, gave notice in writing of renewal. After the tenant paid several months' rent on the renewed term, it abandoned the lease. The issue on appeal was whether its conduct in retaining occupancy and continuing to pay rent impliedly ratified the renewal, obligating it to pay rent for the full two years. (Ibid.) The tenant took the position it did not, since a "lease is invalid unless the agent's authority is in writing and subscribed by the party to be charged." (Id. at p. 609.) The appellate court rejected this argument, pointing out that "[t]he original lease with option to renew was in writing and properly executed by defendant. The exercise of the option to renew that lease does not violate the statute of frauds because the original written lease satisfies the statute." (Id. at pp. 609-610.) Likewise here, Stebbins's assent to an April 1 Closing Date was, according to the evidence submitted by Waters Edge, pursuant to prior written agreement—the language in the Closing Date definition permitting adjustment of the date if "otherwise agreed to by the parties hereto."
Alameda insists that the commencement of the Sublease "term" does not include the same "unless otherwise agreed to by the parties" language that the Transition Agreement does. In light of this difference, Alameda points out, the reading of "Closing Date" urged by Waters Edge creates an incongruous result; since Alameda was unable to take occupancy until August 1, starting a rent obligation as of April 1 would generate a windfall to Waters Edge. We are unconvinced. The two Transaction Agreements contemplate a single effective date and must be read together. One example of this, directly pertinent to the issue of rent, is that the cost-reimbursement provisions in the Transition Agreement presuppose that rent would be owed in the period immediately following the Closing Date, but with payments subject to a two-month delay. (See Transition Agreement, ¶ 6 [setting forth a cost-reimbursement formula capped at $500,000 that includes payment of "Delayed Rent"].) Thus, because rent was expressly made a component of the cost reimbursement formula for the transition period, the parties plainly contemplated that a rent obligation would accrue beginning on the Closing Date.
We are not wholly unsympathetic to Alameda's claim of overreach by Waters Edge, though for a different reason than the one Alameda relies upon. Waters Edge seeks unspecified damages for breach of an alleged obligation on the part of Alameda to move into the facility and begin operating as of April 1. This theory of recovery is broadly consistent with the allegations in the Complaint. (See Complaint, ¶ 16 [alleging that "Defendant [Alameda] breached [the] agreement by failing to fully acquire the facility, and assume possession and control under the parties' agreements, . . . failing to pay all amounts due under the agreements; failing to assume all of the obligations [Alameda] agreed to assume under [the] agreements; and other violations of the agreements causing [Waters Edge] damages"].) But while "failure to move in as of April 1" is among the breaches Waters Edge alleged, it is not what the proof in opposition to summary judgment showed. According to the declarations of Zimmerman and Cook, the temporary arrangement to which Stebbins agreed assumed that since Alameda could not move in April 1, Waters Edge would have to continue to occupy and manage the Facility until such time as Alameda could obtain its DP certification. Under the breach of contract claim Waters Edge is entitled to try, therefore, the ultimate issue is which party, Alameda or Waters Edge, must bear certain costs of operating the Facility for the four months' period it took for Alameda to secure all regulatory approvals needed to move in and take over operations directly. Insofar as Water's Edge incurred costs for which recoupment is not expressly contemplated by the Transition Agreement or that Alameda did not expressly assume in the Transition Agreement, it is not entitled to recover those costs—or to recover its losses more generally—by attributing them to Alameda's breach of an obligation to move in as of April 1. That theory of breach is not supported by the summary judgment record.
2. There is a Triable Issue Concerning Whether Stebbins was Authorized to Agree to an April 1, 2012 Closing Date
Alameda argues that, even assuming parol evidence of Stebbins's alleged oral agreement to an April 1 Closing Date is admissible, that agreement is unenforceable because she had no authority to make it. Since, as the trial court explained, the Transition Agreement "did not give anyone other than [Alameda] via the board of directors [authority] to promise to close the transaction on April 1, 2012 . . . [, any] agreement . . . made outside the City of Alameda Healthcare District bylaws and statutes that govern contract formation with public entities is unenforceable." For this proposition, the court cited Burchett v. City of Newport Beach (1995) 33 Cal.App.4th 1472, 1479 (Burchett) and G. L. Mezzetta, Inc. v. City of American Canyon (2000) 78 Cal.App.4th 1087, 1093-1094, and Alameda now adds Amelco Electric v. City of Thousand Oaks (2002) 27 Cal.4th 228 (Amelco) for further support.
It is immaterial, in our view, whether the Transition Agreement gave anyone other than Alameda's Board of Directors authority to agree to an April 1 Closing Date. The proper focus is broader than that and looks to whether the Board of Directors gave Stebbins that authority anywhere, not just in the Transaction Agreements. Alameda denies that it did, as does Stebbins herself, but there is contrary evidence, starting with the position Stebbins held. She was not just any employee when the events here took place. She was the CEO; and as CEO, she discharged her duties pursuant to a broad delegation of authority in the bylaws of Alameda's Board of Directors to act as its "duly authorized representative" and in discharging her duties authorized her to act as she deems "necessary in the best interests of [Alameda]"—a typically capacious delegation for a board of directors (a policymaking body) to grant a CEO (head of operations and the representative of the board).
Against this broad delegation of authority, Alameda points us to no statute, ordinance, rule or bylaw specifying that Alameda may only enter into written contracts approved in advance by the Board of Directors, pursuant to a Board resolution delegating such authority for each specific contract. Here again, Alameda relies on Resolution No. 2011-81, which authorizes Stebbins to "sign and execute" in "substantially the same form" the Transition Agreement and the Sublease Agreement. But the fact that executed contracts were required for the Transaction Agreements does compel the conclusion that all contractual commitments necessary for the effectuation of the acquisition had to be memorialized in a signed writing. Nothing in Resolution No. 2011-81 limits or constrains Stebbins's ability to ensure the successful completion of the acquisition, consistent with the terms of the Transition Agreement and the Sublease Agreement, acting on her own by oral agreement, within her scope of authority as CEO.
Alameda claims that Stebbins could not have had authority to agree to a Closing Date in advance of receipt of DP certification without express Board approval because that would have given her, in effect, a blank check to spend public funds "recklessly." We think this overstates the matter. Accepting the version of events Waters Edge sponsors, as we must in evaluating the correctness of a grant of summary judgment against it, the stakes in the discussions about whether to close April 1 had to do with which party, Waters Edge or Alameda, should bear the costs of operating the Facility while Alameda continued its efforts to obtain DP certification. Thus—again, accepting arguendo Waters Edge's point of view for purposes of summary judgment—Stebbins was not agreeing to an open-ended financial burden on the public nickel, but was making a judgment that bearing the costs of operating the Facility for a few weeks or months was worth the advantage of closing the deal immediately and thereby eliminating the business risk that Waters Edge would be free to walk away while Alameda continued to work on obtaining its DP certification. That this is the kind of judgment Stebbins might be expected to make, as a CEO, seems plausible.
In fact, Stebbins acknowledges she was empowered to agree to a Closing Date other than one at "the close of the first Waters Edge pay period following the issuance, to Alameda, of all of the licenses and certifications it needs to operate the Premises as a Distinct Part Skilled Nursing Facility, as part of Alameda Hospital" but she contends the power to do so existed only if necessary to extend the date after receipt of DP certification, not before it. The self-serving nature of this position—essentially, that Stebbins did have authority to agree to a change in the Closing Date on her own but only if doing presented no financial risk to Alameda—underscores why there is a triable issue here. Waters Edge is entitled to argue at trial that Stebbins's ability to act "in the best interests" of Alameda to effectuate completion of this acquisition was broad enough to allow her to make the kind of judgment she allegedly made in agreeing to an April 1 Closing Date, so long as she was not committing Alameda to something fundamentally contrary to the deal the Board had approved.
We do not agree that Alameda's status as a public entity compels a different result. We are mindful that Alameda was operating here in a proprietary mode within a governance model closely akin to that of a private entity. The cases Alameda cites stand for the unexceptional proposition that an oral agreement in contravention of some mandated mode or procedure governing public contracting as set forth by statute, regulation, City Charter or local ordinance will be deemed unenforceable. Unlike the public entities in those cases, Alameda points to no source of law mandating any particular mode or process for contract formation here. (Compare Burchett, supra, 33 Cal.App.4th at p. 1479 ["the City's charter provides it cannot be bound by any contract `unless the same shall be in writing, approved by the City Council and signed on behalf of the City by the Mayor and City Clerk or by such other officer or officers as shall be designated by the City Council'"]; Mezzetta, supra, 78 Cal. App.4th at p. 1093 ["the terms of the three statutory provisions in question, particularly Municipal Code section 2.20.030C, make clear the City's intent that all contracts it enters into be in writing."]; Amelco, supra, 27 Cal.4th at p. 239 ["[g]eneral law cities, such as the City of Thousand Oaks, are statutorily required to award public contracts in excess of $5,000 to the lowest responsible bidder"].) Alameda's own bylaws contain a broad enough delegation to permit fair argument either way on the issue of whether Stebbins was empowered to act for the Board when she committed to a specific Closing Date, if that is what the trier of fact finds she did.
The more apt precedent, cited by Waters Edge, is Youngman v. Nevada Irrigation District (1969) 70 Cal.2d 240 (Youngman). That case involved a situation in which a state agency had maintained an "`announced practice'" of granting annual merit increases to employees according to a five-step scale, so long as the employees showed good performance. (Id. at pp. 243-245.) A superintendent of the agency orally represented to Youngman, a prospective employee, in April 1963, that the agency would continue to adhere to its prior practice of granting annual merit increases, and Youngman hired on in reliance on the promise. (Id. at pp. 247-249.) He was paid a merit increase in April 1964. (Id. at p. 245.) While wage negotiations were underway with the union in late 1964, the agency represented it would continue to adhere to the established practice. (Id. at p. 243.) When Youngman was denied a merit increase in April 1965, even though his employment evaluation showed good performance, Youngman sued, as did his union. (Id. at pp. 243, 245.)
The California Supreme Court held Youngman had stated a viable claim, explaining that "the issue is the promise of a wage increase. As to the superintendent's representations, the allegations merely are that he communicated the board's `established practice' to Youngman and stated that he would be granted increases in accordance with the practice. It cannot be seriously doubted that the superintendent may communicate the board's policy and practice to prospective employees. Whether there was such a practice and whether the superintendent went beyond his authorization in adapting that practice specifically to Youngman are questions for the trier of fact." (Youngman, supra, 70 Cal.2d 240 at p. 248.) In this case, the Board's bylaws did not mandate any particular mode in which all contractual commitments had to be made, and instead gave Stebbins wide discretionary authority. As in Youngman, whether she went beyond that authorization in committing to an April 1 Closing Date, if that is what she did, is a "question for the trier of fact."
3. Summary Adjudication Was Properly Granted On the Second Cause of Action for Breach of Contract and/or Novation Involving an Alleged "Interim" Agreement for Waters Edge to Operate the Facility
While we have found that the first cause of action presents a triable issue, we come to a different conclusion with respect to the alternative theory in the second cause of action that Alameda is bound by an alleged "agreement/novation" to reimburse Waters Edge for out-of-pocket expenses, lost profits, and "all additional prepaid expenses, prorated, resulting from [Alameda's] delay," in the "interim" period between April 1 and August 1, 2012. Under this theory, Waters Edge argues, after it became clear April 1 would no longer work as the Closing Date, the parties "worked out a new agreement under which Waters Edge would remain in possession on an interim basis; [it] would continue to manage the facility; and Alameda Hospital agreed to reimburse Waters Edge for all additional costs, expenses, and lost income it incurred as a result of the delay between April 1, 2012 and the eventual date Alameda Hospital took over possession of the nursing home on August 1, 2012."
The same principles that call for reversal of the trial court's ruling on the primary theory of breach of contract call for affirmance of its ruling on this alternative claim. We begin, as we did in analyzing the primary breach of contract claim, with the language of the Transaction Agreements. Two aspects of the pertinent contract language immediately stand out. First, the subject of whether and under what circumstances Waters Edge was going to be entitled to reimbursement for time and expenses incurred in supporting the operational transition to Alameda are covered in detail in the Transition Agreement. Reimbursement of pre-closing transition support costs incurred by Waters Edge could have been provided for, but they were not. Second, in setting forth the types of expenses for which Waters Edge was to be reimbursed and the circumstances in which reimbursement would be due, nowhere does the contract language contain an "unless otherwise agreed to by the parties" caveat, as the Closing Date definition does. We find nothing ambiguous in the language addressing reimbursable expenses or other interim costs payable, at least in any relevant way, and Waters Edge makes no effort to demonstrate ambiguity in the agreed reimbursement mechanism as it may apply.
Under Waters Edge's primary theory of breach of contract, the Transaction Agreements actually went into effect on April 1 and the parties were then governed from that point forward by the express terms of those contracts. In this scenario, there was detailed guidance in the Transaction Agreements to call upon. As explained above, we agree, in part, that this theory presents a triable issue—Waters Edge is entitled to argue at trial that Alameda owes it reimbursement for the expenses of operating and managing the Facility from April 1 to August 1, thus justifying recovery of those costs in the form of a failure to reimburse it fully under the express terms of the Transition Agreement. As we see things, however, it would "directly contradict" the plain terms of both Transaction Agreements to admit evidence of a broad, ill-defined oral agreement which called for Alameda to pay for lost profits. We see no reason to believe that, faced with uncertainty around when the Closing Date was to occur, the parties would have discarded the existing mechanism they had already established to address transition costs in favor of an amorphous make-whole commitment for lost profits. Given the comprehensive way in which the topics of rent during the first few months of the Sublease and operational expense reimbursement for transitional support are addressed in the Transition Agreement, an open-ended oral agreement of this kind would not naturally have been made in the form of a collateral oral commitment.
Treating the second cause of action as it is alternately framed in terms of novation, Alameda argues that "[n]ovation is the substitution of a new obligation for an existing one" (Civ. Code §1530) and that it must "`clearly appear' that the parties intended to extinguish rather than merely modify the original agreement." (Howard v. County of Amador (1990) 220 Cal.App.3d 962, 977.) Alameda further points out that the oral agreement alleged here, which would substitute certain provisions for the written contract, while leaving other obligations intact, is not sufficient to create a novation. Suffice it to say we agree. Accordingly, because evidence extrinsic to the Transaction Agreements is inadmissible to prove the second cause of action—under a breach of contract theory, or under a novation theory—summary adjudication was properly granted.
4. Summary Adjudication Was Properly Granted on the Third Cause of Action Stating a Claim for Money Due on Common Counts
Waters Edge does not claim fraudulent inducement or otherwise seek rescission of the Transaction Agreements and, as we conclude above, has no alternative basis to claim recovery under a contract implied from the circumstances or in law. Since we have concluded that, if breach of contract recovery may be had, the only viable basis for a such a claim is rooted in the Transaction Agreements, a common counts theory is unavailable. (See Lloyd v. Williams (1964) 227 Cal.App.2d 646, 649 ["Until an express contract is avoided, an implied contract, essential to an action on a common count . . . cannot arise, and it necessarily follows that until an express contract is avoided an action on an implied contract cannot be maintained." (Citation omitted.)]. Thus, summary adjudication was properly granted on the third cause of action.
C. Waters Edge's Sixth Cause of Action for a Tort Claim: Negligent Interference with Prospective Economic Advantage
Finally, Waters Edge argues Alameda "negligently interfered with existing and prospective economic relationships between Waters Edge and its patients and the various vendors that Waters Edge was able to buy inventory from at favorable prices." The negligent acts, Waters Edge contends, were committed by Stebbins in March 2012 when she informed patients and their families, as well as vendors, as described above, of the impending transition of April 1. Alameda counters it is immune from any alleged liability pursuant to Government Code sections 815, 815.2, 818.8, and 820.2;
Sufficient for our conclusion is that Stebbins's actions in mailing the letters were "discretionary" (and not "ministerial") (Johnson v. State of California (1968) 69 Cal.2d 782, 787-788; see § 820.2
The trial court's grant of summary judgment is reversed in part and affirmed in part and the case is remanded for further proceedings consistent with this opinion.
Reardon, Acting P.J. and Rivera, J., concurs.