Opinion
C085143
11-04-2019
DEPARTMENT OF WATER RESOURCES et al., Plaintiffs and Appellants, v. SUNRISE POWER COMPANY, LLC, et al., Defendants and Respondents.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 34-2016-00189874-CU-BC-GDS)
This case involves a contract dispute related to a long-term power contract entered into between California's Department of Water Resources (CDWR) and Sunrise Power Company, LLC (Sunrise) for the purchase and sale of electricity during the California energy crisis of 2000-2001. Plaintiffs CDWR and San Diego Gas & Electric Company (SDG&E) appeal from the judgment of dismissal entered after the trial court sustained without leave to amend the demurrers to their latest pleading. We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
This action arose out of a transaction between CDWR and Sunrise, an entity formed to own and operate the Sunrise Power Project, for the long-term purchase and sale of electric power from the project's natural gas powered electric generating facility. The transaction, which was part of the state's response to the energy crisis of 2000-2001, involved four related agreements: (1) the Master Power Purchase and Sale Agreement (Power Purchase Agreement), which set forth the terms under which Sunrise agreed to sell electric power to CDWR at a fixed price from June 2001 through June 2012, and CDWR agreed to pay for all costs incurred by Sunrise to generate the power, including the cost to transport natural gas to Sunrise's facility; (2) the Assignment and Consent to Assignment of Firm Transportation Agreement (Consent Agreement), under which CDWR agreed to accept the assignment of an existing transportation services agreement (TSA) between Sunrise and Kern River Gas Transmission Company (Kern River) for the cost and delivery of natural gas to Sunrise's facility from August 2003 through April 2018; (3) California Department of Water Resources Firm Transportation Services Agreement Contract No. 1724 (TSA 1724), which was a separate TSA entered into between CDWR and Kern River that was executed contemporaneously with the Consent Agreement and superseded and replaced the existing TSA between Sunrise and Kern River; and (4) the Agreement on Reassignment of Firm Transportation Service Agreement (Reassignment Agreement), which was also executed contemporaneously with the Consent Agreement and required CDWR to make its "best efforts" to promptly reassign its rights under TSA 1724 to Sunrise or an affiliate of Sunrise when the Power Agreement expired in June 2012.
SDG&E, acting as CDWR's agent, was responsible for managing the electric power delivered by Sunrise under the Power Purchase Agreement. SDG&E collected fees from its customers to pay for the costs associated with the agreement, including the cost of transporting natural gas to Sunrise's facility.
The parties' dispute centers on the meaning of language in the Reassignment Agreement. Plaintiffs contend the agreement obligated Sunrise or an affiliate of Sunrise to accept reassignment of TSA 1724 when the Power Purchase Agreement expired. While plaintiffs concede that the express terms of the Reassignment Agreement do not include such an obligation, they insist that the language of the agreement is ambiguous and the extrinsic evidence allegations in the operative pleading demonstrate that the agreement is reasonably susceptible to an interpretation that implies or infers the obligation. Sunrise and the other defendants—alleged alter egos and/or owners of Sunrise—disagree. They contend that neither Sunrise nor any affiliate had an obligation to accept reassignment of TSA 1724 under the express terms of the Reassignment Agreement. They further contend that the extrinsic evidence allegations in the operative pleading do not show that the Reassignment Agreement is ambiguous and reasonably susceptible to plaintiffs' proposed interpretation. According to plaintiffs, because neither Sunrise nor an affiliate accepted reassignment of TSA 1724 after the Power Purchase Agreement expired, they were collectively "forced" to pay Kern River approximately $80 million in costs over the remaining term of TSA 1724 (approximately six years), which costs were passed on to SDG&E's customers in their electric bills.
Below, we summarize the pertinent facts, which are taken from the operative pleading and the documents attached thereto.
Factual Background
Power Purchase Agreement
During the California energy crisis of 2000-2001, Governor Gray Davis declared a state of emergency after the price of wholesale electric power rose to unprecedented levels. At the time, the state's largest investor-owned utilities had incurred enormous debt and could no longer obtain and provide electricity to meet California's energy needs. As a consequence, businesses and residents were subject to rolling power "blackouts."
In February 2001, Governor Davis signed Assembly Bill No. 1X (2001-2002 1st Ex. Sess.), which authorized CDWR to enter into long-term contracts to purchase energy to mitigate the effects of the energy crisis. Under the authority of Assembly Bill No. 1X, CDWR sought out long-term power contracts, which were intended to calm a volatile energy market and lock in stable, predictable prices.
As part of this effort, CDWR entered into the Power Purchase Agreement with Sunrise in June 2001. It was renegotiated in December 2002. Under the terms of the agreement, Sunrise was obligated to construct and operate the Sunrise Power Project, an electric generating facility powered by natural gas, and sell electric power to CDWR at a fixed price through June 2012. The agreement required CDWR to pay for all fuel costs incurred by Sunrise to generate electric power for CDWR, including the cost to transport natural gas to Sunrise's facility.
As a result of the renegotiation, Sunrise and CDWR entered into the Amended and Restated Master Power Purchase and Sale Agreement and an Amended and Restated Confirmation Agreement. These agreements are collectively referred to as the Power Purchase Agreement.
At the time the Power Purchase Agreement was executed and renegotiated, Sunrise was owned by Mission del Sol, LLC (MDS) and Texaco Power and Gasification (Texaco Power). MDS was an indirect, wholly owned subsidiary of Edison Mission Energy (EME). Texaco Power subsequently changed its name to Chevron Power Holdings, Inc. (Chevron Power). Chevron Power/Texaco Power was an indirect, wholly-owned subsidiary of Chevron Corporation (hereafter, the Chevron entities are collectively referred to as Chevron).
Chevron Corporation, together with its subsidiaries, affiliates and related entities, operates a power and energy company. It owns numerous power plants and associated businesses in California.
According to plaintiffs, at all relevant times, Sunrise was the alter ego of Chevron and EME; it was jointly owned by Chevron and EME and was operated as a single business enterprise of Chevron and EME.
The Sunrise Power Project was one of seven joint ventures between Chevron and EME, which were entered into for the purpose of installing and operating power facilities in Kern County with the goal of sharing resources and maximizing profits. The construction of Sunrise's electric generating facility was financed with the revenue Sunrise earned under the Power Purchase Agreement, which was Sunrise's primary source of revenue until the agreement expired in June 2012.
Consent Agreement and TSA 1724
When the Power Purchase Agreement was executed in June 2001, EME had a long-term TSA (TSA 1708) with Kern River—a company that owned and operated a natural gas transmission system extending from Wyoming to Kern County, California. The purpose of TSA 1708 was to secure transportation rights for the delivery of natural gas to Sunrise's facility on Kern River's pipeline. TSA 1708 locked in firm pipeline capacity—i.e., the ability to run a specific volume of natural gas without interruption—at a fixed price (approximately $1.2 million per month) through April 2018.
This agreement is also known as the First TSA. In view of the allegations in the second amended complaint, we refer to it as TSA 1708.
Due to the remote location of Sunrise's facility, the natural gas needed to operate the facility flowed through a pipeline in the Kern River system.
In April 2003, EME assigned TSA 1708 to Sunrise with Kern River's consent. Pursuant to the terms of the assignment, a separate TSA was created (TSA 1719), which replaced and superseded TSA 1708.
This agreement is also known as the Second TSA. In view of the allegations in the second amended complaint, we refer to it as TSA 1719.
In August 2003, CDWR entered into the Consent Agreement with Sunrise and Kern River for the purpose of assigning TSA 1719 to CDWR. As a condition of entering into the Consent Agreement, Kern River insisted that the assignment span the entire term of TSA 1719 (i.e., through April 2018), which was nearly six years beyond the term of the Power Purchase Agreement. The Consent Agreement benefited Sunrise by relieving it of its obligation to post approximately $14 million per year in collateral with Kern River, which allowed Sunrise to invest those funds in the Sunrise Power Project.
At the same time as the Consent Agreement was executed, CDWR and Kern River entered into a separate TSA (TSA 1724), which replaced and superseded TSA 1719. TSA 1724 had significant value to CDWR because it locked in firm pipeline capacity and price for the transportation of natural gas to Sunrise's facility for approximately 15 years. The agreement also allowed CDWR to pay Kern River directly for pipeline capacity, thereby avoiding any additional charges Sunrise may have imposed for use of the pipeline capacity.
This agreement is also known as the Third TSA. In view of the allegations in the second amended complaint, we refer to it as TSA 1724.
We note that all three TSA's contained the same pipeline capacity.
Reassignment Agreement
As part of the negotiation of the Consent Agreement, Sunrise and CDWR executed the Reassignment Agreement. The agreement acknowledged that, under the Consent Agreement, Sunrise had agreed to assign CDWR "all of its rights, interests and obligations in . . . TSA [1719]," which thereafter would be referred to as TSA 1724. The Reassignment Agreement explicitly recognized that the term of TSA 1724 was longer than the term of the Power Purchase Agreement and stated that it was the intent of the parties that "CDWR's rights to firm transportation under [TSA 1724] extend only to the term of the Power [Purchase Agreement]."
As relevant here, the Reassignment Agreement also provided:
"1. CDWR hereby agrees and covenants to Sunrise that CDWR, at its sole cost and expense, shall use its best efforts to promptly reassign [TSA 1724] to Sunrise at the end of the term of the Power [Purchase Agreement]; recognizing that under the terms of [TSA 1724], Kern River must consent to such an assignment. CDWR also agrees and covenants to Sunrise that, unless mutually agreed to in writing by the Parties, at the time of said reassignment, [TSA 1724] shall contain the identical receipt and delivery points and contract capacities which were originally set forth in . . . TSA [1719] as assigned by Sunrise to CDWR.
"2. In the event that, at the end of the term of the Power [Purchase Agreement], Sunrise does not meet Kern River's creditworthiness standards or cannot supply adequate security assurances to Kern River or, if Kern River rightfully withholds its consent for any other reason, CDWR hereby agrees and covenants to Sunrise that CDWR shall use its best efforts to promptly assign [TSA 1724] to any affiliate of or successor entity to Sunrise that would be acceptable to Kern River.
"3. The Parties acknowledge that CDWR's obligation to assign [TSA 1724] under this Agreement is tied to the term of the Power [Purchase Agreement]. Thus, if the original term of the Power [Purchase Agreement] is either extended or shortened by mutual written consent of the Parties, CDWR's obligation to assign [TSA 1724] would not commence until the end of the new term of the Power [Purchase Agreement]."
According to plaintiffs, the Reassignment Agreement, like the Consent Agreement, was negotiated by Chevron, on behalf of its business enterprise with EME and as the alter ego of Sunrise. Plaintiffs allege that, in entering into the Reassignment Agreement, Chevron "wanted to ensure that Sunrise or one of its affiliates (namely, Chevron and/or EME) had the ability to get the TSA back because at the time they believed it would be valuable to them once the [Power Purchase Agreement] expired. They also knew that CDWR did not want the TSA beyond the term of the [Power Purchase Agreement] as CDWR had no further need for the TSA once the [Power Purchase Agreement] expired and therefore would not have agreed to the Consent Agreement if Sunrise or an affiliate did not agree to take the TSA back once the [Power Purchase Agreement] expired."
Expiration of the Power Purchase Agreement
Over the course of the 11-year term of the Power Purchase Agreement, CDWR paid Sunrise more than $1 billion dollars. After the agreement expired in late June 2012, CDWR attempted to reassign TSA 1724 to Sunrise or an affiliate. However, at that time, market conditions had changed; the cost for the transportation of natural gas had decreased dramatically and fallen below the fixed rate set forth in TSA 1724. Thus, TSA 1724 was no longer valuable to CDWR or any other entity.
Although Sunrise had set aside cash reserves for collateral and made several attempts to obtain Kern River's consent to the reassignment of TSA 1724, Sunrise's cash reserves were not acceptable to Kern River. According to plaintiffs, Chevron and EME, with full knowledge of the creditworthiness standards of Kern River, up-streamed Sunrise's profits to themselves, rendering Sunrise financially unable to meet the standards. As a consequence, Kern River refused to consent to the reassignment of TSA 1724 to Sunrise. Kern River, however, consented to short-term, temporary assignments of the pipeline capacity under TSA 1724 to Sunrise in August and September 2012.
While Kern River was willing to accept a permanent reassignment of TSA 1724 to Chevron, Chevron refused to accept reassignment. Further, while Chevron or EME could have posted collateral for Sunrise or provided a guarantee to Kern River so that TSA 1724 could be reassigned to Sunrise, they refused to do so. Finally, while Kern River was willing to accept temporary assignments of the pipeline capacity under TSA 1724 for the remainder of the agreement's term, Chevron and EME, in bad faith, stopped Sunrise from bidding on temporary assignments because the market value of the agreement had significantly decreased.
According to plaintiffs, by avoiding the costs associated with TSA 1724 after the Power Purchase Agreement expired, Sunrise and its affiliates "were put in the position to be able to negotiate much lower rates for [pipeline capacity] than they would have paid had CDWR not accepted the initial assignment of TSA 1719 under the Consent Agreement or had [Sunrise or an affiliate] accepted reassignment of . . . TSA [ 1724] as they represented and CDWR understood they would."
SDG&E
At all relevant times, SDG&E was an investor-owned public utility electric and gas corporation regulated by the California Public Utilities Commission (CPUC). Beginning in 2003, the CPUC allocated the daily operation of CDWR's existing power contracts to SDG&E and other utility companies. SDG&E was responsible for managing the electric power Sunrise delivered under the Power Purchase Agreement. SDG&E collected fees from its customers to pay for the costs associated with the agreement, including the cost of transporting natural gas to Sunrise's facility.
The parties dispute whether SDG&E has standing as an intended third party beneficiary of the agreements between CDWR and Sunrise. We need not resolve this dispute. Appellate courts do not address issues whose resolution is unnecessary to the disposition of the appeal. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 845, fn. 5.)
After the expiration of the Power Purchase Agreement, CDWR continued to pay Kern River for pipeline capacity under TSA 1724, even though it had no use for the natural gas delivered to Sunrise's facility. Thus, while CDWR was no longer purchasing electric power from Sunrise, SDG&E's customers were still paying for the costs associated with TSA 1724 (i.e., approximately $1.2 million per month). After it became clear that TSA 1724 would not be reassigned, CDWR posted the pipeline capacity under the agreement on Kern River's bulletin board for permanent release. Thereafter, Kern River awarded the pipeline capacity to the only bidder—SDG&E. As a result, the costs associated with TSA 1724 were transferred to SDG&E for the remainder of the agreement's term.
NRG Energy, Inc.
In 2014, NRG Energy, Inc. (NRG) became the "100% owner" of Sunrise, acquiring both EME's and Chevron's interests in the company. Although NRG could have authorized Sunrise to post collateral or given a financial guarantee to obtain Kern River's consent to the reassignment of TSA 1724, NRG refused to do so. Instead, NRG ratified Chevron's and EME's conduct by accepting the benefits of their actions.
NRG never reimbursed or assumed responsibility for the costs incurred by CDWR and SDG&E under TSA 1724 after the Power Purchase Agreement expired. According to plaintiffs, by avoiding the costs associated with TSA 1724, NRG, like Sunrise and its prior affiliates, "put itself in the position" to be able to negotiate much lower rates for pipeline capacity than it would have paid had CDWR not accepted the initial assignment of TSA 1719 under the Consent Agreement or had TSA 1724 been reassigned after the Power Purchase Agreement expired.
Procedural Background
In January 2016, plaintiffs filed this action against Sunrise, Chevron, and NRG (collectively, defendants). The operative complaint is the second amended complaint, which was filed in January 2017. It alleges five causes of action: breach of contract, breach of implied warranty of good faith and fair dealing, fraud, breach of an implied-in-fact contract, and unjust enrichment. According to plaintiffs, due to defendants' refusal to accept reassignment of TSA 1724 after the Power Purchase Agreement expired, they were collectively "forced" to pay $80 million in costs, which were passed on to SDG&E's customers in their electric bills.
The trial court sustained demurrers to the original complaint in June 2016. In November 2016, the court sustained demurrers to the first amended complaint.
In March 2017, defendants demurred to the second amended complaint. Plaintiffs filed written oppositions. In April 2017, the trial court sustained the demurrers without leave to amend.
As plaintiffs point out, the appellate record does not include Sunrise's demurrer to the second amended complaint.
After judgment of dismissal was entered, plaintiffs filed a timely notice of appeal.
DISCUSSION
1.0 Standard of Review
We review an order sustaining a demurrer without leave to amend de novo, exercising our independent judgment as to whether a cause of action has been stated as a matter of law under any legal theory. (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1469.) "[W]e accept the truth of material facts properly pleaded in the operative complaint, but not contentions, deductions, or conclusions of fact or law." (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924.) We may also consider documents attached to the complaint. (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400; see City of Pomona v. Superior Court (2001) 89 Cal.App.4th 793, 800 ("[w]here 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"].) To the extent the factual allegations in the complaint conflict with the contents of the attached documents, we rely on the contents of the documents. (Performance Plastering v. Richmond American Homes of California, Inc. (2007) 153 Cal.App.4th 659, 665; see Barnett v. Fireman's Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505.)
"If the court sustained the demurrer without leave to amend, as here, we must decide whether there is a reasonable possibility the plaintiff could cure the defect with an amendment. [Citation.] If we find that an amendment could cure the defect, we conclude that the trial court abused its discretion and we reverse; if not, no abuse of discretion has occurred. [Citation.] The plaintiff has the burden of proving that an amendment would cure the defect." (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 (Schifando).) Such a showing can be made for the first time on appeal. (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.)
2.0 The Trial Court Properly Sustained the Demurrers
2.1 Breach of Contract
Plaintiffs' breach of contract cause of action is predicated on the theory that the Reassignment Agreement obligated Sunrise and its affiliates (i.e., Chevron & EME) to accept reassignment of TSA 1724 after the Power Purchase Agreement expired. While plaintiffs concede that the express terms of the Reassignment Agreement do not require any entity to accept reassignment, they insist that the language of the agreement is ambiguous and the extrinsic evidence allegations in the second amended complaint demonstrate that the agreement is reasonably susceptible to an interpretation that implies or infers such an obligation; "otherwise no valid contract exists and neither party is bound." According to plaintiffs, the parol evidence rule does not preclude their proposed interpretation of the Reassignment Agreement and California law on implied covenants supports it. We disagree.
To state a breach of contract cause of action, a plaintiff must allege "(1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff." (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)
"The rules governing the role of the court in interpreting a written instrument are well established. The interpretation of a contract is a judicial function." (Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1125 (Wolf).) 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.) "Ordinarily, the objective intent of the contracting parties is a legal question determined solely by reference to the contract's terms." (Wolf, supra, 162 Cal.App.4th at p. 1126.) "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." (Civ. Code, § 1638.) "The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other." (Civ. Code, § 1641.)
When, as here, a written agreement is integrated, the parol evidence rule generally prohibits the introduction of extrinsic evidence to vary, alter or add to the terms of the agreement. (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 343 (Casa Herrera).) "The parol evidence rule is a long-standing, well-known principle that promotes fairness and predictability by encouraging parties to specify the entirety of their agreements in writing. The policy is 'based on the assumption that written evidence is more accurate than human memory' and 'the fear that fraud or unintentional invention by witnesses interested in the outcome of the litigation will mislead the finder of facts.' " (Julius Castle Restaurant, Inc. v. Payne (2013) 216 Cal.App.4th 1423, 1439.)
Extrinsic evidence includes the surrounding circumstances under which the parties negotiated or entered into the contract, the object, nature and subject matter of the contract, and the subsequent conduct of the parties. (Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912.)
"Extrinsic evidence is admissible, however, to interpret an agreement when a material term is ambiguous." (Wolf, supra, 162 Cal.App.4th at p. 1126.) "The [parol evidence] rule does not . . . prohibit the introduction of extrinsic evidence 'to explain the meaning of a written contract . . . [if] the meaning urged is one to which the written contract terms are reasonably susceptible.' " (Casa Herrera, supra, 32 Cal.4th at p. 343.) " 'The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.' " (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 391 (Dore) [" '[e]ven if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible' "].) Thus, if extrinsic evidence reveals that apparently clear language in the contract is, in fact, susceptible to more than one reasonable interpretation, then the evidence may be used to determine the contracting parties' objective intent. (Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging (1968) 69 Cal.2d 33, 37, 39-40 & fn. 8; Pacific Gas & Electric Co. v. Zuckerman (1987) 189 Cal.App.3d 1113, 1141.)
"In determining whether [contractual] language is ambiguous it is essential to tether extrinsic evidence to particular language." (Alameda County Flood Control & Water Conservation Dist. v. Department of Water Resources (2013) 213 Cal.App.4th 1163, 1188 (Alameda.) " 'An indeterminacy in the application of language signals its vagueness or ambiguity. An ambiguity arises when language is reasonably susceptible of more than one application to material facts. There cannot be an ambiguity per se, i.e. an ambiguity unrelated to an application.' " (Dore, supra, 39 Cal.4th at p. 391; see Alameda, at p. 1179.) " 'To say that [contractual] language is ambiguous is to say there is more than one semantically permissible candidate for application, though it cannot be determined from the language which is meant. Every substantial claim of ambiguity must tender a candidate reading of the language which is of aid to the claimant. One must ask what meanings are proffered and examine their plausibility in light of the language. A party attacking a meaning succeeds only if the attacker can propose an alternative, plausible, candidate of meaning.' " (Alameda, at pp. 1179-1180.)
If the language of the contract is not " 'reasonably susceptible' " to the interpretation urged by the party claiming ambiguity, " 'the case is over.' " (Dore, supra, 39 Cal.4th at p. 393; see Alameda, supra, 213 Cal.App.4th at p. 1189.) " 'Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists.' [Citation.] 'In the construction of a statute or instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted; and where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.' " (Alameda, at p. 1180.)
"In the context of a demurrer, the court must conditionally consider the [extrinsic] evidence alleged in the complaint, to determine if it would be relevant to prove a meaning to which the language of the instrument is reasonably susceptible. Thus, trial courts err if they refuse to consider the alleged [extrinsic] evidence on the ground that no [extrinsic] evidence of any sort is pertinent because the particular contract in dispute is unambiguous. But there may be no error if the trial court conditionally accepts as true that plaintiff can proffer specified [extrinsic] evidence and, having considered the [extrinsic] evidence allegations, then determines as a matter of law that the [extrinsic] evidence alleged must be disregarded because, for whatever reason, the contract is not reasonably susceptible of the interpretation plaintiff alleged." (George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1122 (George); see FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 397 ["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.' "].)
Having reviewed the relevant allegations in the second amended complaint and the terms of the Consent Agreement and Reassignment Agreement, we conclude the trial court did not err in sustaining the demurrers to plaintiffs' breach of contract cause of action. The Reassignment Agreement, which was entered into between highly sophisticated parties as part of a larger transaction for the long-term purchase and sale of electric power that involved three separate related written agreements (including the Consent Agreement), is not reasonably susceptible to plaintiffs' proposed interpretation. (Cf. Crestview Cemetery Assn. v. Dieden (1960) 54 Cal.2d 744, 751 ["we must keep in mind [the contracting parties] were not novices or inexperienced"].) Under the terms of the Consent Agreement, Sunrise agreed to assign CDWR all of its "rights, interests and obligations" in TSA 1719, and CDWR agreed to "accept such assignment from Sunrise by assuming all the rights, interests and obligations of Sunrise under the Agreement." CDWR specifically agreed to "fulfill all duties and obligations . . . arising out of and to be performed under the Agreement," which were thereafter set forth in a separate agreement between CDWR and Kern River—TSA 1724. In entering into the Reassignment Agreement, CDWR and Sunrise expressly acknowledged that the term of TSA 1724 was longer than the term of the Power Purchase Agreement and indicated that it was their intent that "CDWR's rights to firm transportation under [TSA 1724] extend only to the term of the Power [Purchase Agreement]." The Reassignment Agreement obligated CDWR to "use its best efforts to promptly reassign . . . TSA [1724] to Sunrise at the end of the term of the Power [Purchase Agreement]." The agreement, however, recognized that, under the terms of TSA 1724, Kern River must consent to reassignment, which could be withheld if "Sunrise d[id] not meet Kern River's creditworthiness standards or [could not] supply adequate security assurances to Kern River or, if Kern River rightfully [withheld] its consent for any other reason." In the event Kern River did not consent to reassignment of TSA 1724 to Sunrise, the Reassignment Agreement alternatively obligated CDWR to use its "best efforts to promptly assign . . . TSA [1724] to any affiliate of or successor entity to Sunrise that would be acceptable to Kern River." The Reassignment Agreement contemplated that the original term of the Power Purchase Agreement could be changed (either lengthened or shortened) by written agreement of the parties and specified that CDWR's obligation to reassign TSA 1724 was "tied to the term of the Power [Purchase Agreement]." In other words, CDWR's obligation to use its best efforts to reassign TSA 1724 did not commence until after the Power Purchase Agreement expired.
As previously indicated, it is undisputed that the express terms of the Reassignment Agreement do not obligate Sunrise or any affiliate to accept reassignment of TSA 1724 after the Power Purchase Agreement expired. Rather, the agreement required CDWR to use its best efforts to reassign TSA 1724 to Sunrise or an affiliate. At the time the Reassignment Agreement was executed, the parties were aware that the Power Purchase Agreement expired nearly six years before TSA 1724 expired. Given the sophistication of the contracting parties, it is reasonable to infer that they were also aware that the cost of transporting natural gas was subject to change and, because of that, TSA 1724 could be very valuable or have no value when the Power Purchase Agreement expired. The Reassignment Agreement, however, is silent on the obligations of the parties in the event Sunrise or its affiliates refused to accept reassignment of TSA 1724 after the Power Purchase Agreement expired.
We are not persuaded by plaintiffs' contention that reversal is required because "[t]he [second amended complaint] sufficiently pleads that the Reassignment Agreement is reasonably susceptible to a meaning that requires Sunrise or an affiliate to accept reassignment by alleging that:
"(1) the parties' intent in entering into the Reassignment Agreement was to resolve the discrepancy between the terms of the [Power Purchase Agreement] and TSA 1724, as it was known that CDWR would have no need for TSA 1724 once the [Power Purchase Agreement] expired, and consistent with this intent they expressly stated in the Reassignment Agreement that it was their intention that '[CDWR's] rights for firm transportation under [the TSA] extend only to the term of the [Power Purchase Agreement]' and that 'CDWR's obligation to assign the [TSA] was tied to the term of the [Power Purchase Agreement].' [citation];
"(2) Chevron representatives acting on behalf of Sunrise insisted that there could not be an assignment of TSA 1724 from Sunrise to CDWR unless CDWR stipulated to transfer the TSA back to Sunrise [citation];
"(3) At the time of negotiations with CDWR, Sunrise and Chevron had knowledge of Kern River's tariff and knew: (a) that either of them would have to accept reassignment of the TSA; (b) that to accept reassignment, Sunrise or an affiliate would have to satisfy Kern River's creditworthiness requirements (including the posting of collateral); and (c) that it was not CDWR's responsibility, nor by statute was CDWR authorized, to provide a guarantee or support to satisfy those obligations for Sunrise [citation];
"(4) Under industry standards and practices, the only valid reason for Kern River to withhold consent was if Sunrise or its affiliates did not meet Kern River's creditworthiness standards or could or would not supply adequate assurances to Kern River [citation];
"(5) Kern River told Sunrise that it would accept a guarantee from or a permanent or temporary release to Chevron Corporation who did in fact meet Kern River's creditworthiness requirements. [citation];
"(6) Sunrise set aside cash reserves for the collateral needed to effectuate a reassignment and obtain Kern River's consent [citation]; and
"(7) After the [Power Purchase Agreement] expired, Sunrise and Chevron accepted short-term, temporary assignments of the pipeline capacity under TSA 1724 in August and September 2012, consistent with the intent of the parties [citation]."
According to plaintiffs, "[t]hese allegations show through express language in the Reassignment Agreement, and by Sunrise and Chevron's own conduct, that there was an implied or inferred obligation on Sunrise or an affiliate to accept reassignment of . . . TSA [1724] with Kern River when the [Power Purchase Agreement] expired." We are not persuaded.
As an initial matter, we note that plaintiffs have failed to identify a specific paragraph, sentence, phrase, or word in the Reassignment Agreement and explain why it is ambiguous, i.e., why the language has a meaning different from its ordinary meaning. After reviewing the terms of the Reassignment Agreement, we conclude that the extrinsic evidence allegations in the second amended complaint do not render the agreement ambiguous as to any entity's obligation to accept reassignment of TSA 1724. The extrinsic evidence allegations do not show that any term in the Reassignment Agreement could plausibly carry the latent meaning that Sunrise or an affiliate was obligated to accept reassignment of TSA 1724 upon Kern River's consent. "Although extrinsic evidence may be used to show a latent meaning, that meaning must reside in the document." (Alameda, supra, 213 Cal.App.4th at p. 1195.) Accordingly, because the allegations in the second amended complaint do not show that the language of the Reassignment Agreement is reasonably susceptible to plaintiffs' proposed interpretation, the trial court properly sustained the demurrers to plaintiffs' breach of contract cause of action. The extrinsic evidence allegations were not offered to interpret an ambiguous provision or otherwise ambiguous language in the Reassignment Agreement but rather to add a term that does not exist. "It is well settled that extrinsic evidence cannot be used to add a provision to the contract that was omitted by the parties." (Id. at p. 1190.)
We reject plaintiffs' attempt to use extrinsic evidence to add a term to the Reassignment Agreement by implication. "A court may find an implied contract provision only if (1) the implication either arises from the contract's express language or is indispensable to effectuating the parties' intentions; (2) it appears that the implied term was so clearly within the parties' contemplation when they drafted the contract that they did not feel the need to express it; (3) legal necessity justifies the implication; (4) the implication would have been expressed if the need to do so had been called to the parties' attention; and (5) the contract does not already address completely the subject of the implication." (In re Marriage of Corona (2009) 172 Cal.App.4th 1205, 1222.) Implied terms are not favored in the law. (Ibid.) " 'The courts cannot make better agreements for parties than they themselves have been satisfied to enter into or rewrite contracts because they operate harshly or inequitably. It is not enough to say that without the proposed implied covenant, the contract would be improvident or unwise or would operate unjustly. Parties have the right to make such agreements. The law refuses to read into contracts anything by way of implication except upon grounds of obvious necessity.' " (Third Story Music, Inc. v. Waits (1995) 41 Cal.App.4th 798, 809; see Abers v. Rounsavell (2010) 189 Cal.App.4th 348, 361-362 [courts do not have the power to create for the parties a contract that they did not make and cannot insert language that one party now wishes were there, except upon grounds of obvious necessity].) Without spending undue time on the matter, it suffices to say that the implied term urged by plaintiffs is not justified by legal necessity.
We are not persuaded by plaintiffs' contention that to not add an implied term obligating Sunrise and its affiliates to accept reassignment would render the Reassignment Agreement illusory and void. A contract is illusory and void when one party assumes no obligations thereunder or one party provides no legal consideration. (Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 385.) It is undisputed that the Consent Agreement and Reassignment Agreement were negotiated and executed together. Plaintiffs concede in the second amended complaint, and we agree, that these agreements were part of one transaction and should be interpreted together. As provided in these agreements, Sunrise agreed to give up valuable rights to CDWR regarding the long-term transportation of natural gas at a fixed-price in exchange for the opportunity to regain those rights when the Power Purchase Agreement expired. Sunrise also relieved itself of the obligation to post approximately $14 million per year in collateral with Kern River, and CDWR avoided any additional charges Sunrise may have imposed on CDWR to transport natural gas to Sunrise's facility on Kern River's pipeline. At the time the agreements were executed, the existing TSA between Sunrise and Kern River (i.e., TSA 1719) was valuable, and the language of the Reassignment Agreement provides that Sunrise, or an affiliate could regain the rights under that agreement (which were then set forth in TSA 1724) after the Power Purchase Agreement expired, so long as Kern River consented to the reassignment. Taken together, the agreements are not illusory and void for lack of mutuality or consideration.
The second amended complaint alleges that the Power Purchase Agreement, Consent Agreement, TSA 1724, and Reassignment Agreement all relate to the same transaction (i.e., the long-term purchase & sale of electric power) between the same parties (i.e., CDWR & Sunrise), and therefore "must be interpreted together under Civil Code section 1642." That statutory provision states: "Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together." (Civ. Code, § 1642.)
Plaintiffs' opening brief fails to offer cogent legal argument explaining how the Reassignment Agreement is illusory and void without the implied term. Instead, without elaboration, plaintiffs cite Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474. In that case, it was alleged that a contract permitting the buyer of sugar beets to set the price to be paid was illusory and void for lack of mutuality. (Id. at p. 481.) The court implied an obligation to set the price fairly in accordance with the covenant of good faith and fair dealing, thus protecting the enforceability of the agreement. (Id. at p. 484.) Plaintiffs provide no legal analysis showing how this case supports a finding of an implied term here. After independently reviewing the case, we conclude it does not support the conclusion that the implied term urged by plaintiffs is justified by legal necessity.
Plaintiffs' opening brief suggests that the Reassignment Agreement is illusory and void for lack of consideration. In their reply brief, plaintiffs specifically argue that the failure to imply a mandatory obligation on Sunrise and its affiliates to accept reassignment of TSA 1724 would render the Reassignment Agreement void for lack of consideration. For the reasons we have discussed, this contention is without merit.
2.2 Breach of Implied Warranty of Good Faith and Fair Dealing
Plaintiffs' breach of the implied warranty of good faith and fair dealing cause of action is predicated on the theory that, by failing to accept reassignment of TSA 1724, defendants deprived CDWR of the benefit of the Reassignment Agreement, which was the limitation of its obligations to Kern River under TSA 1724 to the term of the Power Purchase Agreement. In support of this theory, the second amended complaint alleges, "This benefit was contemplated and intended by the parties at the time they entered into the Reassignment Agreement and such intent is expressed in the Reassignment Agreement and by the terms that require CDWR to reassign . . . TSA [1724] to Sunrise or an affiliate when the [Power Purchase Agreement] expired, and an implied obligation for them to accept it."
Plaintiffs contend reversal is required because the trial court erroneously determined that they failed to identify any specific language in the Reassignment Agreement to support a finding that CDWR was owed a benefit to which it was denied. According to plaintiffs, the second amended complaint specifically alleges that "the benefit denied to CDWR is expressed in the language stating the parties' intent to limit CDWR's rights under . . . TSA [1724] to the term of the [Power Purchase Agreement] and accomplishing that objective by requiring that CDWR promptly reassign . . . TSA [1724] back to Sunrise or an affiliate at the end of the term of the [Power Purchase Agreement]." We find no basis for reversal.
" ' "Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." ' " (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 371.) The duty " 'requires each contracting party to refrain from doing anything to injure the right of the other to receive the benefits of the agreement.' [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.' " (Avidity Partners, LLC v. State of California (2013) 221 Cal.App.4th 1180, 1204 (Avidity).) " 'Or, to put it another way, the "implied covenant imposes upon each party the obligation to do everything that the contract presupposes they will do to accomplish its purpose." ' " (Andrews v. Mobile Aire Estates (2005) 125 Cal.App.4th 578, 589.)
"Although breach of a specific provision of the contract is not a necessary prerequisite to a claim of breach of the implied covenant, '[i]t is universally recognized the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract.' [Citation.] '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.]' " (Avidity, supra, 221 Cal.App.4th at p. 1204.)
"The implied covenant of good faith and fair dealing does not impose substantive terms and conditions beyond those to which the parties actually agreed. [Citation.] '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.' " [Citation.] It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.' " (Avidity, supra, 221 Cal.App.4th at p. 1204.)
Preliminarily, we note that plaintiffs have devoted only a single paragraph of their 63-page opening brief to establishing error with respect to this cause of action. It is well-settled that a judgment is presumed correct and it is the appellant's burden to affirmatively show error. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) An appellant must provide argument and legal authority to support its contentions. (Dietz v. Meisenheimer & Herron (2009) 177 Cal.App.4th 771, 799.) " 'It is not our place to construct theories or arguments to undermine the judgment and defeat the presumption of correctness. When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.' " (Ibid.; see Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 699-700 ["When an issue is unsupported by pertinent or cognizable legal argument it may be deemed abandoned and discussion by the reviewing court is unnecessary"].)
In view of the foregoing principles, we conclude that plaintiffs have not presented sufficient argument or legal authority to justify reversal. In any event, we find that this claim fails as a matter of law because it seeks to impose a substantive duty on defendants—namely, the obligation to accept reassignment of TSA 1724—that is beyond the express terms of the Reassignment Agreement. Contrary to plaintiffs' contention, the Reassignment Agreement cannot be interpreted as expressly providing CDWR the benefit of limiting its obligations to Kern River under TSA 1724 to the term of the Power Purchase Agreement. The Reassignment Agreement allowed Sunrise or an affiliate to acquire the transportation rights Sunrise gave up under the Consent Agreement but did not obligate Sunrise or an affiliate to accept reassignment of TSA 1724 upon Kern River's consent. Although we recognize that reassignment would have effectively terminated CDWR's obligations to Kern River under TSA 1724, the stated purpose of the Reassignment Agreement was to limit CDWR's rights to firm transportation of natural gas on Kern River's pipeline to the term of the Power Purchase Agreement, not to limit CDWR's duties and obligations to Kern River under TSA 1724. The language of the Reassignment Agreement contemplates that reassignment might not occur, and there is nothing in the agreement limiting CDWR's obligations to Kern River under TSA 1724 in the event reassignment was not effectuated. Therefore, it cannot be said that CDWR was denied a benefit under the Reassignment Agreement to which it was entitled. Based on the express terms of the agreement, it was certainly within the reasonable expectations of the parties that TSA 1724 would not be reassigned to Sunrise or an affiliate after the Power Purchase Agreement expired.
2.3 Fraud
Plaintiffs contend reversal is required because the trial court erred in finding that (1) the second amended complaint does not allege an actionable misrepresentation, and (2) any belief held by CDWR that Sunrise or its affiliates were required to accept reassignment was based on its own assumptions, not on any misrepresentations by Sunrise or its affiliates. According to plaintiffs, both findings fail to accept the pleaded facts regarding the failure of Sunrise and its affiliates to disclose their true intention to treat the Reassignment Agreement as an option agreement. We find no basis for reversal.
The elements of fraud are (1) misrepresentation (false representation, concealment, or nondisclosure), (2) knowledge of falsity, (3) intent to defraud, i.e., to induce reliance, (4) justifiable reliance, and (5) resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) "Fraud allegations ' "involve a serious attack on character" ' and therefore are pleaded with specificity. [Citation.] General and conclusory allegations are insufficient. [Citation.] The particularity requirement demands that a plaintiff plead facts which ' " 'show how, when, where, to whom, and by what means the representations were tendered.' " ' [Citation.] Further, when a plaintiff asserts fraud against a corporation, the plaintiff must 'allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.' " (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.)
To allege fraud based on an affirmative misrepresentation, a plaintiff must allege a misrepresentation—normally an affirmation of fact. (Lonely Maiden Productions, LLC v. GoldenTree Asset Management, LP (2011) 201 Cal.App.4th 368, 375.) To allege fraud based on concealment, a plaintiff must allege facts showing: (1) the defendant concealed or suppressed a material fact; (2) the defendant was under a mandatory duty to disclose the fact to the plaintiff; (3) the defendant intentionally concealed or suppressed the fact with the intent to defraud the plaintiff; (4) the plaintiff was unaware of the fact and would not have acted as it did if it had known of the concealed or suppressed fact; and (5) as a result of the concealment or suppression of the fact, the plaintiff sustained damage. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)
In support of their fraud cause of action, plaintiffs allege, in relevant part, as follows:
". . . On or about April 17, 2003, at the time the Consent Agreement and the Reassignment Agreement were being negotiated, E.L. (Rick) Williams ('Williams'), acting as a representative of Chevron and on behalf of the Sunrise Single Business Enterprise, informed Marilyn Munoz, representing CDWR, in writing by email that for Sunrise to assign the existing TSA [(i.e., TSA 1719)] it had with Kern River to CDWR, they would require that CDWR enter into a written 'side agreement' that obligated CDWR to reassign the TSA back to Sunrise or one of its affiliates, i.e. Chevron or EME, at the end of the [Power Purchase Agreement]. This side agreement ultimately became the Reassignment Agreement at issue in this case. [¶] . . . [¶]
". . . At the time of these negotiations, Williams, acting on behalf of the Sunrise Single Business Enterprise, failed to disclose and affirmatively misrepresented to CDWR that the true intention of Sunrise, Chevron and EME, acting as a single business enterprise and as alter egos of each other, was to treat the Reassignment Agreement as an option contract. Williams failed to disclose that Chevron Corporation and EME, acting on behalf of their Sunrise Single Business Enterprise, did not intend for Sunrise, or Chevron or EME as affiliates of Sunrise and/or as its alter egos, to accept reassignment of the TSA unless it benefited their Joint Business Ventures as a whole, to do so. Instead, Chevron and EME and Sunrise acting as alter egos of each other and as the Sunrise Single Business Enterprise, through their comments on the draft reassignment agreement, and their other negotiations, affirmatively misrepresented to CDWR that it was their intent to accept reassignment of the TSA by agreeing to the term in the Reassignment Agreement that states 'that CDWR's rights to firm transportation under [TSA 1724] extend only to the term of the ['[Power Purchase Agreement] and that 'CDWR's obligation to assign . . . [TSA 1724] under this Agreement is tied to the term of the . . . [Power Purchase Agreement].' As Chevron, EME and Sunrise knew, the TSA could only be tied to the [Power Purchase Agreement] if Sunrise or its affiliate was obligated to accept the reassignment.
". . . Defendants Sunrise, Chevron and EME knew that these misrepresentations were false at the time they made them. Chevron, EME and Sunrise made these misrepresentations with the intent to deceive CDWR into entering into the Consent Agreement and the Reassignment Agreement and/or to induce its reliance so that they could secure CDWR's agreement to the [Power Purchase Agreement] and Consent Agreement. CDWR justifiably relied on these misrepresentations and was in fact induced by them to enter into the Consent Agreement and Reassignment Agreement[], resulting in damages set forth below. Chevron, EME and Sunrise knowingly and intentionally failed to disclose and affirmatively misrepresented critical information about their true intentions because they knew that CDWR did not want or need the TSA beyond the term of the [Power Purchase Agreement] and would not have entered into the Consent Agreement accepting assignment of the TSA from Sunrise if it knew it would be bound under that agreement for 6 years past the term of the [Power Purchase Agreement]. Defendants Sunrise and Chevron knew that disclosure of their true intent would have corrected CDWR's mistaken belief that Sunrise and Chevron would in fact take back the TSA at the expiration of the [Power Purchase Agreement], a basic assumption under which CDWR entered into the contracts. Sunrise and Chevron's failure to disclose their true intentions was in bad faith and not in accordance with reasonable standards of fair dealing."
The facts pleaded by plaintiffs do not state a fraud claim based on any specific affirmative misrepresentation by a particular person, but rather attempt to state a claim for fraud by nondisclosure or concealment of a material fact. Indeed, plaintiffs insist the second amended complaint states a cognizable fraud claim predicated on the theory that Sunrise and its affiliates had an obligation to disclose the "material fact" that they viewed the Reassignment Agreement as an option contract, which did not require Sunrise or an affiliate to accept reassignment of TSA 1724 after the Power Purchase Agreement expired. According to plaintiffs, "had CDWR known that Chevron and Sunrise intended to treat the Reassignment Agreement as an option contract, it would have not accepted the initial assignment of TSA 1719 from Sunrise by entering into the Consent Agreement or entered into the Reassignment Agreement."
We conclude the trial court did not err in sustaining the demurrers to plaintiffs' fraud cause of action. CDWR was aware of the material facts. At the time the Consent Agreement and Reassignment Agreement were executed, CDWR was aware that the Power Purchase Agreement expired nearly six years earlier than TSA 1724, and nothing in the language of the Reassignment Agreement expressly obligated Sunrise or an affiliate to accept reassignment of TSA 1724 after the Power Purchase Agreement expired. The Reassignment Agreement did not require Sunrise or an affiliate to accept reassignment upon Kern River's consent. Thus, even if CDWR did not know about Sunrise's and its affiliates' undisclosed intent to treat the Reassignment Agreement as an option contact, it was aware of sufficient facts to know that those entities were not expressly obligated to accept reassignment. (See George, supra, 201 Cal.App.4th at p. 1131 [insured failed to establish that insurer fraudulently " 'omitted and concealed' " that upon a total loss it would only pay the " '[a]ctual [c]ash [v]alue' " of the automobile rather than the $25,000 limit of liability, where the policy was clear and unambiguous, and nowhere suggested, much less stated, that the policy would pay $25,000 for a total loss].) That CDWR did not consider the practical effect of the provisions to which it agreed does not render the transaction fraudulent. (See Kahn v. Lischner (1954) 128 Cal.App.2d 480, 490 ["a transaction will not be deemed fraudulent because the party complaining made a bad bargain"].)
2.4 Breach of Implied-in-fact Contract
As an alternative theory of recovery, plaintiffs allege the existence of an implied-in-fact contract obligating Sunrise and Chevron to accept reassignment of TSA 1724. According to plaintiffs, an implied-in-fact contract was created when Sunrise (acting as the alter ego of Chevron and EME and on behalf of their Sunrise Single Business Enterprise) did the following in response to CDWR's attempt to reassign TSA 1724 after the Power Purchase Agreement expired: (1) told CDWR that it would acquire the pipeline capacity under TSA 1724 via a permanent release; (2) made several attempts in 2012 and 2013 to convince Kern River to approve a permanent release; (3) accepted short-term, temporary assignments of the pipeline capacity in August and September 2012; and (4) paid Kern River for pipeline capacity for those two months. Apparently recognizing that an implied-in-fact contract cannot lie where there exists between the parties a valid express contract covering the same subject matter (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231), plaintiffs allege that the Reassignment Agreement was not a valid contract for lack of mutuality and a "meeting of the minds" (i.e., mutual consent).
We need not determine whether CDWR and Sunrise entered into a valid implied-in-fact contract because any cause of action based on such a contract is time-barred. The statute of limitations for breach of a contract that is not based on a written agreement is two years, whether the agreement is oral or implied-in-fact. (Code Civ. Proc., § 339.) Plaintiffs do not dispute that they filed the instant action more than two years after the alleged implied-in-fact contract was breached but argue that their claim is not time-barred because the contract had continuing obligations until April 2018. This contention has no merit.
As noted above, plaintiffs commenced this action against defendants in January 2016. The second amended complaint alleges that the implied-in-fact contract was breached in late 2012 or, at the latest, sometime in 2013.
In support of their position, plaintiffs rely on Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479 (Romano). In that case, an employee brought suit against his former employer alleging various causes of action related to his termination, including breach of an implied contract not to terminate his employment absent good cause. The parties disagreed about when the limitations period began to run. (Id. at pp. 485-486.) The employer argued that the limitations period began to run on the date the employee was informed that his employment would be terminated, which was over two years before his actual termination. The employee disagreed, arguing that the limitations period began to run on the date his employment was actually terminated. (Id. at p. 486.) Our Supreme Court agreed with the employee. The court explained that where a defendant notifies a plaintiff that it will breach a contract at a later date, this notice constitutes anticipatory repudiation of the contract, which gives the plaintiff an election of remedies. The plaintiff can either treat the repudiation as an anticipatory breach and immediately seek breach of contract damages, or the plaintiff can wait and seek damages for actual breach if one occurs. (Id. at pp. 489-491.) If the plaintiff disregards the repudiation, the statute of limitations does not begin to run until the actual breach occurs. (Id. at p. 489.)
We find plaintiffs' reliance on Romano misplaced. Romano is factually distinguishable, and plaintiffs offer no legal argument demonstrating that it applies here. The statute of limitations began to run in this case when Sunrise actually breached the alleged implied-in-fact contract in 2012 or, at the latest, in 2013. At that time, the "cause of action [was] complete with all of its elements." (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 389; see Ram's Gate Winery, LLC v. Roche (2015) 235 Cal.App.4th 1071, 1084, citing 3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 520, p. 664 ["A cause of action for breach of contract ordinarily accrues at the time of breach, and the statute begins to run at that time regardless whether any damage is apparent or whether the injured party is aware of his or her right to sue"].) Unlike Romano, there were no ongoing contractual obligations that could forestall accrual of the cause of action for breach of an implied-in-fact contract. Contrary to plaintiffs' suggestion, the rule announced in Romano does not toll the statute of limitations until the date a party elects to treat an actual breach as terminating the contract.
2.5 Unjust Enrichment
As another alternative theory of recovery, plaintiffs allege a cause of action for unjust enrichment. However, as many California courts have made clear, unjust enrichment is not an independent cause of action. (See, e.g., Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370 (Durell); Jogani v. Superior Court (2008) 165 Cal.App.4th 901, 911 (Jogani).) "Rather, it is a general principle underlying various doctrines and remedies, including quasi-contract." (Jogani, at p. 911.) "Unjust enrichment is synonymous with restitution." (Durell, at p. 1370.)
" 'There are several potential bases for a cause of action seeking restitution. For example, restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. [Citations.] Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct. In such cases, the plaintiff may choose not to sue in tort, but instead to seek restitution on a quasi-contract theory . . . . [Citations.] In such cases, where appropriate, the law will imply a contract (or rather, a quasi-contract), without regard to the parties' intent, in order to avoid unjust enrichment.' " (Durell, supra, 183 Cal.App.4th at p. 1370.)
" 'Under the law of restitution, "[a]n individual is required to make restitution if he or she is unjustly enriched at the expense of another. [Citations.] A person is enriched if the person receives a benefit at another's expense. [Citation.]" [Citation.] However, "[t]he fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it. [Citation.]" ' [Citation.] As a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract." (Durell, supra, 183 Cal.App.4th at p. 1370.)
Plaintiffs' unjust enrichment cause of action is predicated on the theory that, as a result of them paying for unnecessary and unusable pipeline capacity under TSA 1724, defendants "were put in the position [of being] able to negotiate much lower rates for [pipeline capacity] than they would have paid had CDWR not accepted the initial assignment of TSA 1719 under the Consent Agreement or had [they] accepted reassignment of . . . TSA [1724] as they represented and CDWR understood they would." In support of this "cause of action," the second amended complaint alleges that "Defendants Sunrise and Chevron, and subsequently NRG, were unjustly enriched at the expense of CDWR and SDG&E and ultimately California ratepayers as [they] benefited from a mistake of fact known only to them, i.e. that they never intended for Sunrise or its affiliates to take back the TSA unless at the time the [Power Purchase Agreement] expired, or in the six years that followed, the TSA had value to them. The circumstances of Defendants' receipt and/or retention of the benefits conferred upon them by Plaintiffs are such that, as between Plaintiffs and Defendants, it is unjust for Defendants to retain them as Defendants knew of the mistake and should not be allowed to profit from their affirmative misrepresentations and knowing and intentional concealment of the facts while California ratepayers are required to foot the bill. Defendants should not be entitled to retain what amounts to a windfall at the expense of California ratepayers." The second amended complaint further alleges that the Reassignment Agreement was not a valid enforceable contract due to fraud and/or lack of mutuality and mutual consent.
We conclude that plaintiffs' unjust enrichment cause of action fails as a matter of law. The parties entered into a valid enforceable transaction regarding the assignment of TSA 1719 to CDWR (via the Consent Agreement) and the reassignment of TSA 1724 (via the Reassignment Agreement). As previously discussed, plaintiffs have not alleged facts showing that the Reassignment Agreement was procured by fraud or unenforceable for lack of mutuality. Nor have plaintiffs alleged facts showing the agreement is unenforceable for lack of mutual consent. According to plaintiffs, "there was no meeting of the minds between CDWR and Sunrise when the Reassignment Agreement was executed as Sunrise, Chevron and EME intended the agreement to give Sunrise the right but not the obligation to accept reassignment and CDWR justifiably believed Sunrise, Chevron and EME intended to tie [TSA 1724] to the term of the [Power Purchase Agreement] and that the obligation on CDWR to reassign [TSA 1724] back to Sunrise or an affiliate in the Reassignment Agreement in fact also obligated Sunrise or an affiliate to accept reassignment." We disagree.
Whether there was mutual consent does not turn on the parties' subjective beliefs; rather it " 'is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings. [Citation.]' " (DeLeon v. Verizon Wireless, LLC (2012) 207 Cal.App.4th 800, 813 ["The manifestation of mutual consent is generally achieved through the process of offer and acceptance"].) Furthermore, "[w]hen a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible . . . ." (Civ. Code, § 1639.) Thus, in a case like this involving written contracts made as parts of substantially one transaction, whether there was mutual consent—i.e., a meeting of the minds—must be determined from the language of the contracts, and if a reasonable and lawful construction can be given to the contracts, then that is where we must conclude the minds of the parties met. Here, CDWR and Sunrise must be deemed to have mutually consented to the interpretation we have given to the transaction involving the Consent Agreement and the Reassignment Agreement. That is, Sunrise agreed to give up valuable rights to CDWR regarding the long-term transportation of natural gas at a fixed-price in exchange for the opportunity to regain those rights when the Power Purchase Agreement expired. In entering into this transaction, Sunrise relieved itself of the obligation to post approximately $14 million per year in collateral with Kern River, and CDWR avoided any additional charges Sunrise may have imposed on CDWR to transport natural gas to Sunrise's facility on Kern River's pipeline. Plaintiffs' reliance on defendants' subjective understanding of the terms of the Reassignment Agreement, expressed years later, is misplaced since they objectively agreed to its terms when they signed it. (See Meyer v. Benko (1976) 55 Cal.App.3d 937, 943-944 [one who signs an agreement is deemed to have consented to its terms regardless of any claimed lack of knowledge or understanding].)
Given our conclusions, we need not and do not address the parties' remaining contentions.
3.0 Leave to Amend
Plaintiffs make no attempt to show that there is a reasonable probability they could cure the defects in the second amended complaint given further opportunity to do so. There is nothing in the record or in plaintiffs' appellate briefs showing they could add facts to the second amended complaint that would support a viable cause of action. Accordingly, the trial court did not abuse its discretion in sustaining the demurrers to the operative pleading without leave to amend. (Schifando, supra, 31 Cal.4th at p. 1081.)
DISPOSITION
The judgment is affirmed. Defendants shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)
/s/_________
Butz, J. We concur: /s/_________
Hull, Acting P.J. /s/_________
Murray, J.