Aragon-Haas v. Family Security Ins. Services, Inc.

• Decision Date: 14 June 1991
• Docket Number: ARAGON-HAA,No. B053201,P,B053201
• Citation: 282 Cal.Rptr. 233,231 Cal.App.3d 232
• Court: California Court of Appeals Court of Appeals
• Parties: , 126 Lab.Cas. P 57,460 Cynthialaintiff and Appellant, v. FAMILY SECURITY INSURANCE SERVICES, INC., Defendant and Respondent.

Page 233

282 Cal.Rptr. 233

231 Cal.App.3d 232, 126 Lab.Cas. P 57,460

Cynthia ARAGON-HAAS, Plaintiff and Appellant, v. FAMILY SECURITY INSURANCE SERVICES, INC., Defendant and Respondent.

No. B053201.

Court of Appeal, Second District, Division 7, California.

June 14, 1991.

Nagler & Schneider, Lawrence H. Nagler and Harry Rebhuhn, Beverly Hills, for plaintiff and appellant.

Hagenbaugh & Murphy, Alan R. Zuckerman and Stephen Barry, Los Angeles, for defendant and respondent.

LILLIE, Presiding Justice.

Cynthia Aragon-Haas sued her former employer, Family Security Insurance Services, Inc., for damages for wrongful discharge. Plaintiff appeals from judgment of dismissal entered after the trial court sustained defendant's demurrer to four causes of action of the first amended complaint without leave to amend and plaintiff voluntarily dismissed the remaining causes of action.

FACTS

The first amended complaint contained six causes of action, four of which (the first, second, fifth and sixth causes of action) are relevant for purposes of this appeal. ¹

The first cause of action (breach of written contract) alleged: On July 29, 1986, plaintiff was employed by defendant pursuant to a written contract of employment dated October 1, 1986. The contract, a copy of which was attached to the pleading, included the following provision: "TERM OF EMPLOYMENT [p] Section 1.01. The Employer hereby employs the Employee and the Employee hereby accepts such employment upon the terms and conditions hereinafter set forth beginning July 29, 1986, and expiring one (1) year from said date, unless sooner terminated as provided in Section 7.01 [sic; should be Section 8.01] of this Agreement. Thereafter this Agreement shall be automatically extended for six (6) consecutive one (1) year terms." When plaintiff signed the agreement she was told that she was on one year's probation and she understood the foregoing provision to mean that during the first year she could be terminated with or without cause but after the first year she could not be terminated except for good cause. Plaintiff's employment was not terminated within the one-year period beginning July 29, 1986. Plaintiff worked continuously and exclusively for defendant as general manager, vice president and general manager, and finally as executive vice president. In annual reviews of plaintiff's job performance she was praised and encouraged; plaintiff never received any significant criticism of her performance. On September 1, 1988, defendant sold plaintiff 3 percent of defendant's shares pursuant to a "Stock Purchase and Sale Agreement," a copy of which was attached to the pleading. On March 2, 1989, plaintiff was appointed executive vice president of defendant and on August 1, 1989, she received commendations on her performance, a 10 percent increase in salary, and an additional 5 percent commission override. On September 22, 1989, without warning, explanation or just cause, defendant handed plaintiff a letter dated September 21 notifying her that her employment was terminated effective September 22, 1989. Defendant thereby breached its employment agreement with plaintiff. By reason of said breach plaintiff sustained damages of $210,800, the compensation due her for the remaining term of her employment as fixed by the agreement.

The second cause of action (breach of covenant of good faith and fair dealing) alleged: The parties' employment agreement included an implied covenant of good faith and fair dealing which required that each party act with fairness toward the other and that neither take any action to prevent the other from realizing the benefits of their relationship. Defendant breached the covenant by terminating plaintiff's employment without just cause and refusing to pay plaintiff the compensation due her for the remaining term of employment. By reason of said breach plaintiff sustained damages of $210,800.

The fifth cause of action (estoppel to terminate employment contract except for good cause) alleged: Because of defendant's conduct, the ambiguity of the employment agreement, and the fact that plaintiff was induced to purchase shares of defendant in reliance on defendant's express representation that such sale was " 'to induce Buyer [plaintiff] to continue to render such services to Seller [defendant] in the future,' " defendant is estopped to terminate its employment agreement with plaintiff except for good cause.

The sixth cause of action (untitled, but obviously fraud) alleged: On October 1, 1986, defendant induced plaintiff to enter into the employment agreement on the representation that after the first year of employment, which would be a probationary period, defendant would not terminate plaintiff's employment except for good cause. On September 1, 1988, defendant induced plaintiff to enter into the stock purchase and sale agreement by representing to her that thereafter defendant would terminate her employment only for good cause. Said representations were false and were known by defendant to be false, but plaintiff was ignorant of their falsity and believed them to be true. In reliance on the representations plaintiff entered into the employment agreement and the stock purchase and sale agreement and thereby lost other valuable business opportunities. As a result of defendant's fraud plaintiff sustained damages of $210,800.

Defendant demurred generally to the first, second, fifth and sixth causes of action. In support of the demurrer to the first cause of action defendant noted that the employment agreement included the following provision: "TERMINATION OF EMPLOYMENT [p] Section 8.01. This Agreement may be terminated by the Employer with or without cause upon the giving of written notice of termination to the Employee. Employee may terminate this Agreement with or without cause upon thirty (30) days written notice to the Employer." Defendant argued that such provision established that plaintiff was an at-will employee and therefore defendant did not breach the employment agreement by terminating plaintiff's employment without just cause. Defendant also argued that the contract was intended by the parties as a final expression of their agreement ² and therefore could not be contradicted by parol evidence as plaintiff attempted to do by alleging that she was told when she signed the contract that during the first year of her employment she was on probation and could be terminated with or without cause, but thereafter only for cause. The demurrer to the second, fifth and sixth causes of action rested upon the same ground, i.e.: Inasmuch as the employment agreement gave defendant the right to terminate plaintiff's employment without cause, such termination did not constitute a breach of the covenant of good faith and fair dealing implied in the agreement because such a covenant cannot be used to imply an obligation which would obliterate a right expressly provided by a written contract; further, because of the terms of the employment agreement there was no basis for either estoppel or fraud inasmuch as plaintiff could not reasonably have relied on defendant's alleged promise, or conduct implying, that plaintiff would be discharged only for cause.

The trial court sustained the demurrer to the first, second, fifth and sixth causes of action without leave to amend. ³ Judgment was entered dismissing the action in its entirety. (See fn. 1, ante.) Plaintiff appeals from the judgment insofar as it dismisses the first, second, fifth and sixth causes of action.

DISCUSSION

I STANDARD OF REVIEW

The function of a demurrer is to test the sufficiency of the complaint by raising questions of law. (Abari v. State Farm Fire & Casualty Co. (1988) 205 Cal.App.3d 530, 534, 252 Cal.Rptr. 565.) The complaint must be given a reasonable interpretation and read as a whole with its parts considered in their context. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.) A general demurrer admits the truth of all material factual allegations of the complaint; plaintiff's ability to prove the allegations, or the possible difficulty in making such proof, does not concern the reviewing court. (Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1267, 258 Cal.Rptr. 787.) "As a reviewing court we are not bound by the construction placed by the trial court on the pleadings but must make our own independent judgment thereon, even as to matters not expressly ruled upon by the trial court." (Miller v. Bakersfield-News Bulletin, Inc. (1975) 44 Cal.App.3d 899, 901, 119 Cal.Rptr. 92.)

II BREACH OF WRITTEN CONTRACT

"[W]here an ambiguous contract is the basis of an action, it is proper, if not essential, for a plaintiff to allege its own construction of the agreement. So long as the pleading does not place a clearly erroneous construction upon the provisions of the contract, in passing upon the sufficiency of the complaint, we must accept as correct plaintiff's allegations as to the meaning of the agreement." (Marina Tenants Assn. v. Deauville Marina Development Co. (1986) 181 Cal.App.3d 122, 128, 226 Cal.Rptr. 321.) Whether a contract is ambiguous is a question of law. (Hillman v. Leland E. Burns, Inc. (1989) 209 Cal.App.3d 860, 866, 257 Cal.Rptr. 535.) Section 1.01 of the parties' employment agreement gives defendant the right to terminate plaintiff's employment during the first year "as provided in Section [8.01]," i.e., with or without cause, and "[t]hereafter this Agreement shall be automatically extended" for six consecutive one-year terms. (Emphasis added.) The word "thereafter" makes it unclear whether the right to terminate existed only during the first year of plaintiff's employment or whether that right continued throughout the term of employment specified in the contract. Section 1.01 thus is ambiguous and it is reasonably susceptible of the meaning alleged by plaintiff, viz., after successful completion of the first year of her employment she could be...