Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County, No. 05CC13025, James P. Gray, Judge.
Friedman Stroffe & Gerard, James D. Stroffe; Snell & Wilmer and Richard A. Derevan for Defendant, Cross-complainant and Appellant and for Defendant and Appellant.
Hodel Briggs Winter, Matthew A. Hodel and Fred A. Wilks for Plaintiff, Cross-defendant and Respondent.
OPINION
FYBEL, J.
INTRODUCTION
Defendant Civic Partners Vista Village I, LLC (Civic), which is owned by defendant Steven P. Semingson and his wife, obtained rights from the City of Vista to develop a shopping center (the project). Civic encountered several setbacks in developing the shopping center, including a lack of funding and tenant commitments.
We refer to Civic and Semingson collectively as “defendants.”
In December 2002, Civic entered an agreement with Regency Realty Group, Inc. (RRG), whereby RRG would provide, inter alia, financing and management of the project. The agreement further provided that upon the project achieving occupancy within a certain time frame, RRG would have the option to buy out Civic’s entire interest in the project at a purchase price calculated by an agreed-upon formula. RRG performed its role under the agreement and the project was saved. In November 2004, RRG transferred its interest under the agreement to its affiliate, plaintiff Regency Centers, L.P. (RCLP).
In September 2005, believing the project would achieve occupancy by the end of that month, RCLP sent a notice of intent to exercise the option to buy out Civic’s interest in the project. Over the course of two months, Civic demanded to inspect documents to investigate the merit of RCLP’s exercise of the option. Unbeknownst to RCLP, months earlier Civic had already determined RCLP’s calculation of the purchase price contained an error, and Civic had calculated what it believed was the correct purchase price.
In October 2005, RCLP insisted that Civic either accept RCLP’s proposed purchase price or propose its own purchase price based on the formula. Civic refused to do either, and RCLP sent Civic a notice of default. Civic declined to cure its default and instead informed RCLP that its purchase price was incorrect and that the exercise of the option was therefore ineffective.
RCLP sued Civic and Semingson for breach of contract, breach of the implied covenant of good faith and fair dealing, declaratory relief, specific performance, and promissory fraud. Following a bench trial, the court found in favor of RCLP on all its claims. The court concluded that Semingson had suffered “buyer’s remorse” after realizing that Civic’s interest in the multimillion dollar project would be bought out for a relatively small amount under the agreement’s formula, and thus “intentionally embarked upon a program of complaint, of foot-dragging and in sum, basically hoping that something would come up in order to increase this price.” The court awarded RCLP $500,000 in compensatory damages (less the $373,639 purchase price) plus $750,000 in punitive damages against Civic and Semingson personally as Civic’s alter ego.
We affirm in part and reverse in part. We address each of defendants’ contentions on appeal as follows.
1. Although the parties stipulated that a hard copy of the reporter’s transcript signed by the trial judge would constitute the statement of decision, they did not expressly waive the right to object to omissions or ambiguities in the statement of decision pursuant to Code of Civil Procedure section 634. The trial court therefore erred by refusing to rule on the merits of defendants’ objections; the doctrine of implied findings does not apply as to those objections timely asserted but summarily overruled.
2. The erroneous reference to RRG in RCLP’s notice of intent to exercise the option did not invalidate the effectiveness of RCLP’s notice to exercise the option.
3. The trial court made sufficient findings to support its conclusion the project had achieved the required occupancy and the record supports those findings. RCLP’s September 2005 attempt to exercise the option was therefore timely.
4. The trial court did not err by concluding defendants waived the right to object to RCLP’s proposed purchase price by their failure to cooperate with RCLP in determining the correct purchase price.
5. The trial court did not err by awarding RCLP compensatory damages.
6. RCLP’s promissory fraud claim was based on its allegation that defendants defrauded RRG at the time they entered the agreement. In the statement of decision, the trial court expressly found that Semingson suffered buyer’s remorse as the project neared completion—necessarily after the agreement was entered into. The court found this buyer’s remorse caused defendants to engage in obstreperous conduct to defeat RCLP’s legitimate attempt to exercise the option. On these findings, defendants should not have been found liable for promissory fraud. We therefore reverse the judgment as to the promissory fraud claim and remand with directions that the trial court enter judgment in favor of defendants on that claim. Because the trial court awarded $750,000 in punitive damages based solely on the claim for promissory fraud, we further direct the court to strike the punitive damages award from the judgment.
7. Defendants’ objections to the statement of decision failed to specify the statement of decision omitted any finding on whether the agreement’s limitations of liability provision applied. We therefore infer the trial court found the limitations of liability provision inapplicable. Defendants do not contend such an inference is unsupported by substantial evidence.
8. The trial court did not err by concluding Semingson was Civic’s alter ego.
FACTS AND CHRONOLOGY
I.
Civic Obtains Rights to Develop Shopping Center but Fails to Secure Required Financing.
In 2001, Civic contracted with the redevelopment agency of the City of Vista to build a shopping center, called Vista Village—a project estimated to cost more than $30 million. Under the contract, Civic was required to obtain financing and tenants within a certain time frame. Civic was unable to secure the required financing; the redevelopment agency put “pressure . . . on the Civic venture to finish some leasing activities and to demonstrate that it had financing.” The project was in jeopardy.
Civic found RRG as a source of financing. RRG is a subsidiary of Regency Centers Corporation, a public real estate investment trust which is traded on the New York Stock Exchange.
II.
Civic and RRG Enter Agreement Regarding Construction of Shopping Center.
After extensive negotiations, on December 10, 2002, Civic and RRG entered into the “Vista Village, LLC Limited Liability Company Agreement” (the agreement). Through the agreement, the parties formed Vista Village, LLC (the company), a Delaware limited liability company which had Civic and RRG as its only members. The company was created to serve as the entity that would own and construct the project and through which the property would be acquired. Civic would contribute the redevelopment rights it had obtained for the project and RRG would contribute capital. The agreement vested RRG with the right to exclusively manage the company.
Article 14 of the agreement provided RRG with an option to purchase Civic’s entire interest in the company, at a price calculated through a formula set forth in section 14.2, within 15 business days following the earlier of (1) the date when the project achieves greater than 95 percent occupancy of nonanchor tenant spaces, or (2) one year following the “Completion of Phase 1 and Phase 2.” If RRG did not exercise the option, the agreement provided the parties would equally divide the net proceeds from the sale of the project (after giving RRG a specified preferred return on its invested capital).
The agreement required the parties to “act in good faith and fair dealing with each Member,” but further stated, “unless it is otherwise specifically provided in this Agreement, nothing in this Agreement shall be construed to create a fiduciary duty from [RRG] to CIVIC or from CIVIC to [RRG] and the parties expressly waive any such fiduciary duty which otherwise might be applicable.” The agreement stated the company and the agreement itself “shall be governed by the laws of the State of Delaware.”
Semingson testified the agreement was heavily tilted in RRG’s favor and Civic was aware of that fact when it entered into the agreement. He stated, “any developer of my size would want to be involved with Regency.” Semingson knew at the time the parties entered into the agreement RRG’s option would likely result in RRG buying out Civic’s interest in the company for a below-market-value price. Scott Clements, Civic’s vice-president of project development, testified Civic joined forces with RRG because doing so “certainly increased the odds of getting [the project] then completed on time.”
After RRG entered the agreement, the development of the project progressed smoothly. The project was saved, Civic was reimbursed for costs it incurred, and contractors on the project were paid.
III.
RRG Informs Civic It Intends to Exercise Buyout Option; Civic Believes RRG Makes an Error in Option Purchase Price Calculation but Does Not Inform RRG of Such Error.
In 2003, RRG communicated to Civic its forecast that when the time came, its exercise of the option under the agreement would constitute a “nominal buy-out.” Throughout the course of the project, RRG provided Civic with quarterly reports, most of which included a calculation of the prospective purchase price of RRG’s option under the agreement along with backup documents supporting the calculation.
In November 2004, RRG transferred its interest in the company to RCLP for tax reasons. RCLP is a limited partnership in which Regency Centers Corporation is the general partner. RRG, RCLP, and Regency Centers Corporation all operate out of the same office and share the same employees. Although the agreement permitted the transfer of RRG’s interest to an affiliate without Civic’s approval, Civic consented to the transfer.
In late 2004 or early 2005, Clements informed Semingson that he believed RCLP was making a mistake in its purchase price calculation; Semingson told Clements not to notify RCLP of this claimed mistake. In May 2005, Mark Harrigian, the managing director of RCLP and RRG, informed Civic that RCLP intended to soon “exercise our purchase right under the partnership agreement.”
Certain correspondence sent by Harrigian to Semingson is on “Regency Centers” letterhead identifying Harrigian as “Senior Vice President” or managing director.
On June 22, 2005, Clements prepared an internal work status report in which he stated: (1) with regard to the formula to determine the purchase price, the agreement “does not spell out the method as clearly as it could have”; (2) “Regency ha[d] not been following the allocation of cash flow in accordance with the LLC agreement” in calculating its prospective purchase price, and the “combined impact of the correct application of these funds and the elimination of the preferred return thereon should be worth an estimated additional $650,000 to Civic Partners”; and (3) pursuant to Clements’s calculation under the formula, Civic’s adjusted proceeds from RCLP’s buyout of its interest should be $1.5 million (plus or minus 10 percent).
Although Clements believed RCLP was erroneously calculating the purchase price by continuing to apply “the 11 percent to its invested capital prematurely,” Semingson told him not to so inform RCLP. Clements had enough information in June 2005 to calculate the purchase price of the option under the formula.
IV.
Harrigian Sends Notice of Intent to Exercise Option; Civic Repeatedly Requests Additional Time and Documentation for Stated Purpose of Evaluating Notice of intent to Exercise Option; Civic Informs Harrigian Option Period Closed.
In a letter dated September 6, 2005 addressed to Semingson at Civic, Harrigian gave written notice of intent to exercise the option, stating: “Since we are in the final stages of the Vista Village project, having closed out our construction contracts and leased up 99% of the center, we have final income and costs calculations to determine the Purchase Price pursuant to the terms of the Agreement. With that, please allow this correspondence to serve as written notice of RRG’s decision to exercise the Option pursuant to Section 14 of the Agreement. [¶] Attached please find the Cash Flow Statement and Rent Roll which confirms the NOI calculation as well as the Job Status Inquiry Reports dated August 23, 2005 which details the cost components. Please call me to discuss any questions you may have regarding our calculations. Regency is in a position to pay the Purchase Price once we receive your confirmation of our values.” The letter further stated that the purchase price of the option was $373,639 according to the formula set forth in the agreement; Harrigian included the breakdown of the calculation. Enclosed with the letter were copies of documents providing backup for the purchase price calculation.
The agreement stated: “‘NOI’ for any month or other period shall mean the positive or negative dollar amount of (i) Operating Income for such month or other period, less (ii) Operating Expenses for such month or such other period.”
Unbeknownst to RCLP, Civic had already determined that RCLP’s purchase price calculation was incorrect, why it was incorrect, and, pursuant to Clements’s calculation, the purchase price should be roughly $1.5 million. Nevertheless, Semingson informed Harrigian that Civic was evaluating RCLP’s purchase price, required numerous documents to complete its evaluation, and was “in no position to agree with [RCLP’s] figures” based on Harrigian’s letter and backup documents. In a letter dated September 20, 2005, Harrigian clarified that RCLP would exercise the option when the project achieved 95 percent occupancy of nonanchor tenant spaces, “which will occur on that date which Coldwell Banker opens for business, scheduled for September 27th.” Under the agreement, RCLP had 15 business days from the date the project achieved 95 percent occupancy of nonanchor tenants to exercise its option to purchase Civic’s interest in the company. Harrigian also provided additional documentation and information pursuant to Semingson’s request.
In an e-mail dated September 27, 2005, Semingson informed Harrigian that RCLP’s notice of exercise of the option was defective because “it establishes the transaction at a price inconsistent with the terms of the [agreement].” Semingson further stated, “[b]ased upon your ‘Distribution of Net Cash Flows’ dated 8/31/05, stabilization date for phase 1 was 1/1/2004 and phase 2 was 1/29/2004. Accordingly, your Notice of Exercise was tardy as of 2/22/2005.” Semingson stated, “[d]espite the fact that the Option Period expired prior to Regency’s Notice of Option, we will continue our priority analysis of the material we’ve received over the past couple of weeks (including that which arrived today) as a transaction under Article 15 of the agreement also requires diligent review by Civic.”
Defendants later jettisoned the argument that RCLP exercised the option too late. As will be seen, defendants changed their position and argued the exercise was too early. (See, post, Discussion section, part II, subpart B.)
Meanwhile, a certificate of occupancy was issued as to Coldwell Banker on September 29, 2005. On October 4, 2005, Harrigian responded to Semingson’s e-mail, stating: “[Y]ou believe the Purchase Price set forth in the Notice is ‘defective because it establishes the transaction at a price inconsistent with the terms’ of the Agreement; however, you did not explain why you have this belief or provide anything to back up your objection. We believe the Purchase Price as presented in the Notice was properly calculated based on the method detailed in the Agreement. If you feel otherwise, you will need to be more specific in explaining which component of the calculation you believe to be inconsistent with the terms of the Agreement. Please therefore provide a detailed calculation of how you see the Purchase Price being calculated. Because you have had everything you need to do your own calculation for quite some time, I would appreciate receiving your detailed calculation no later than the close of business on October 7, 2005.”
In a letter dated October 6, 2005, Semingson reiterated his argument the notice was tardy and again complained Civic did not have all the documents it needed to conduct its own calculation of the purchase price.
On October 12, 2005, Harrigian informed Semingson RCLP had provided documents to Civic at RCLP’s expense. He reminded Semingson Civic had review and audit rights under the agreement and Civic was welcome to examine, copy, and audit documents at its expense pursuant to section 11.1(d) of the agreement. Harrigian wrote: “We suggest that you exercise those rights. The files are open to you. Please advise as to when you would like to visit our offices to review and copy them.” Harrigian reiterated his position that “[w]e thoroughly believe that we have provided you with more information than is required for your evaluation of our Option Notice. In the event you still disagree with our Purchase Price calculation, please forward us your detailed calculation before the close of business of October 14, 2005. If we do not receive such calculation or your acceptance of our calculation within this timeframe, we will have no choice but to begin the process of exercising our other rights under Section 12 of the Agreement.” Article 12 of the agreement is entitled “Member Defaults.”
Civic’s attorney sent a letter to Harrigian, dated October 14, 2005, stating that Civic will diligently complete its review of the material Harrigian provided and “will respond as soon as reasonably practicable,” but stated RCLP’s requirement that Civic respond by October 14 was “patently unreasonable.”
On October 17, 2005, Harrigian sent Semingson a notice of default under article 12 of the agreement. In that letter, Harrigian stated: “RRG properly exercised its Option to Purchase Civic’s Company Interest pursuant to Article 14 of the Agreement. Civic’s repudiation of such valid exercise is a breach of Civic’s obligations under the Agreement. As prescribed by Section 12.2(b) of the Agreement, Civic shall have thirty (30) days from the date of this letter to cure such Default.”
Civic’s attorney responded in a letter dated October 20, 2005 that “[b]ased on the information provided by RRG to date, it simply has not been possible to ascertain the facts necessary to determine whether your notice of exercise was timely or accurate, despite Civic’s diligent effort to do so.” He further stated Civic “has no choice but to exercise its rights under Section 11(d) of the Agreement to review and audit the books and records of the Company. To that end, Civic has retained the services of a forensic accountant, Michael Campbell, to conduct this review. Mr. Campbell is not available to commence this engagement for the next week or so, but will thereafter commence and diligently conduct the review within a reasonable time.”
In a letter dated October 28, 2005, Harrigian reiterated RCLP properly calculated the purchase price and Civic could only blame itself if it still lacked information because the project books and records were open and available to Civic. On November 17, 2005, Civic finally visited RCLP’s office to audit records—one day after Civic’s deadline to cure its default under the agreement.
In an e-mail dated November 21, 2005, Harrigian wrote to Semingson and Civic’s counsel: “[A]s I mentioned in one of my last e-mails to Steve [Semingson], we have been engaged in a letter writing campaign for months. I believe the trip Michael [Campbell], Scott [Clements], and Jeff [Pomeroy] finally took to our office to sit down with our project accountant and construction manager was very productive. I was left with the impression that they would report back to you early this week as to any open issue in the numbers used to calculate the buyout. I specifically asked them if it was any information or comment that they provided in the past that caused Civic to take the position that Regency’s option was not properly exercised; they all said no, and that they were only tasked to go through the project costs and income for purposes of dealing with the buyout number. Steve, I asked you early last week if Civic was still taking the position that our exercise was invalid. You indicated that you[] were. Does that still remain the case, and if so, is there some information you are waiting for from your audit that will confirm or discredit this theory? Can you also please confirm that we will receive any feedback from the audit this week. Thanks.” Semingson responded: “I expect to receive their reports and findings this week, but because of the holiday this may slip to early next week. It is possible that information which came out of the audit will influence our position that the RRG’s exercise was invalid. Until they have sifted through the information and reported back to me, I cannot give you a definitive answer. I will commit that Civic will let you know one way or the other as soon as this process has been completed.”
Finally, in an e-mail dated December 9, 2005, Semingson wrote to Harrigian: “You have requested that I clarify my position based upon our review to date. Nothing in our review has changed our conclusion that the Option Period has expired. Even if RRG had properly exercised its Option, the time to close on the Option has passed. The agreement[,] therefore, obligates RRG to put the project on the open market for sale to a third party. We have previously reminded you of RRG’s obligation to do so pursuant to Article 15 of the agreement. Given the volatility of cap rates in a rising interest rate market, failure of RRG to put the property on the market would be at RRG’s own risk. [¶] Additionally, the project is a fully leased and operating asset, yet Civic has yet to receive the benefit of the cash flow it is entitled to under the Operating Agreement. Please provide us with the historical and current status of the distribution of cash flow from the project. [¶] We look forward to the documentation regarding cash flow. Please let me know as soon as possible the status of the project disposition and the contact information for the broker(s) who will be handling the transaction.”
At no time did Civic transfer its interest in the company to RCLP, and, as of the date of the parties’ November 3, 2006 pretrial joint stipulation of facts, RCLP had not sold the project to any third party.
PROCEDURAL BACKGROUND
On December 12, 2005, RRG sued Civic. In June 2006, RRG filed a second amended complaint which added Semingson, as the alter ego of Civic, as a defendant and alleged claims for breach of contract, breach of the covenant of good faith and fair dealing, declaratory relief, specific performance, and promissory fraud. The second amended complaint contained a prayer for punitive damages as to the promissory fraud cause of action only.
In July 2006, Civic filed a cross-complaint against RRG for breach of contract, breach of the implied covenant of good faith and fair dealing, unfair competition, rescission, and specific performance.
In November 2006, RRG moved ex parte for an order granting leave to file a third amended complaint “to reflect the proper Regency entity [RCLP] as plaintiff and cross-defendant.” Over defendants’ objection, the trial court granted RRG’s request and permitted the third amended complaint to be filed.
At trial, defendants’ expert testified the correctly calculated purchase price of the option was $1,419,111 as of September 30, 2005. RCLP’s expert testified that the purchase price was actually a negative number.
After the parties rested, the court solicited the parties’ counsel to stipulate to a procedure whereby the court would state orally on the record its tentative thoughts which “amplified by further thoughts thereafter, would constitute a statement of decision.” The trial court further stated that any party could request copies of the transcript from the court reporter and submit it to the court for signature. Counsel for both parties stipulated to this procedure.
The court read its statement of decision into the record whereby it found in favor of RCLP on all of its causes of action in the third amended complaint, and against Civic on its claims in the cross-complaint. The court found, inter alia: (1) there was no coercion or duress involved in the parties entering the agreement; (2) as Semingson saw the project being successfully completed, he suffered from “buyer’s remorse” because he thought RCLP might be able to buy Civic’s interest in a multimillion dollar shopping center for only $373,000; (3) Semingson “intentionally embarked upon a program of complaint, of foot-dragging and in sum, basically hoping that something would come up in order to increase this price”; (4) the project had achieved 95 percent occupancy of nonanchor tenants; (5) Semingson was in default under the agreement after failing to cooperate with RCLP in determining the purchase price of the option; (6) defendants were estopped from thereafter challenging RCLP’s proposed purchase price of $373,639; (7) RCLP was entitled to damages caused by defendants’ delay tactics which burdened RCLP’s ability to sell the project before it diminished in value; and (8) Semingson was Civic’s alter ego.
Defendants filed a request for a written statement of decision, which addressed 78 separate controverted issues. The trial court signed a copy of the reporter’s transcript transcribing the oral statement of decision. Defendants filed objections to the trial court’s statement of decision, which were overruled on the ground defendants had waived the right to file such objections.
Judgment was entered in favor of RCLP on each cause of action set forth in its complaint and on each cause of action set forth in Civic’s cross-complaint. The judgment stated: “Judgment is entered in favor of Regency on each cause of action set forth in its Complaint. Regency’s exercise of the contractual option to purchase is declared valid and enforceable pursuant to the Third cause of action in the Complaint. Civic is ordered to immediately convey its entire interest in Vista Village, LLC to Regency Centers, L.P. pursuant to the Fourth cause of action for specific performance. Civic has been paid the option purchase price by this judgment in the amount of $373,639 as set forth more fully below. Upon Civic’s transfer of its interest as required above, Regency shall be free to convey all or any part of its interest in the Vista Village shopping center or Vista Village, LLC to any party it chooses free of any restrictions whatsoever, including the obligation set forth in Section 14.5 of the Vista Village, LLC Limited Liability Company Agreement requiring Regency to make further distributions to Civic if the property is sold to a third party within ninety (90) days following payment to Civic of the option purchase price. The ninety (90) day waiting period set forth in Section 14.5 is deemed expired upon Civic’s transfer of its interest to Regency. [¶] Defendants are liable on the First, Second and Fifth causes of action of the Complaint and Regency is entitled to damages of $500,000 under each cause of action; however, such damages arise from the same injury, regardless of legal theory. Therefore, Regency is entitled to compensatory damages totaling $500,000 and Defendants shall be jointly and severally responsible for this sum. This amount shall be offset by $373,639 representing the option purchase price, resulting in a net recovery of $126,361. In addition, Regency shall recover $750,000 in punitive damages from both Defendants jointly and severally pursuant to the Fifth cause of action of the Complaint. Based on the foregoing, judgment is entered in favor of Regency and both Defendants shall be jointly and severally liable for a total award of damages in the amount of $876,361. [¶] Judgment is entered in favor of Regency and against Civic on each of the claims set forth in Civic’s cross-complaint. Civic shall take nothing under its cross-complaint.”
In January 2007, defendants filed a notice of appeal as to the judgment. The parties stipulated, without defendants limiting their right to appeal the judgment entered in the matter, that RCLP’s costs in the amount of $39,422.86 and attorney fees in the amount of $575,000 “shall be added to and included in the judgment.”
DISCUSSION
I.
The Trial Court Erred by Overruling Defendants’ Objections to the Statement of Decision on the Ground They Had Waived the Objection Procedure Set Forth in Code of Civil Procedure Section 634.
A.
The Doctrine of Implied Findings
“The doctrine of implied findings requires the appellate court to infer the trial court made all factual findings necessary to support the judgment.” (Fladeboe v. American Isuzu Motors, Inc. (2007) 150 Cal.App.4th 42, 58.) “In a bench trial, how does an appellant obtain a record affirmatively proving the trial court erred by failing to make factual findings on an issue? The appellant must secure a statement of decision under Code of Civil Procedure section 632 and, pursuant to Code of Civil Procedure section 634, bring any ambiguities and omissions in the statement of decision to the trial court’s attention. In [In re Marriage of] Arceneaux [(1990) 51 Cal.3d 1130], the California Supreme Court explained: ‘Sections 632 and 634 [of the Code of Civil Procedure] . . . set forth the means by which to avoid application of these inferences in favor of the judgment. When the court announces its tentative decision, a party may, under section 632, request the court to issue a statement of decision explaining the basis of its determination, and shall specify the issues on which the party is requesting the statement; following such a request, the party may make proposals relating to the contents of the statement. Thereafter, under section 634, the party must state any objection to the statement in order to avoid an implied finding on appeal in favor of the prevailing party.’ [Citation.]” (Id. at pp. 58-59, third brackets in original.)
“Securing a statement of decision is the first step, but is not necessarily enough, to avoid the doctrine of implied findings. Litigants must also bring ambiguities and omissions in the statement of decision’s factual findings to the trial court’s attention—or suffer the consequences. Code of Civil Procedure section 634 states if omissions or ambiguities in the statement of decision’s factual findings are timely brought to the trial court’s attention, ‘it shall not be inferred on appeal . . . that the trial court decided in favor of the prevailing party as to those facts or on that issue.’” (Fladeboe v. American Isuzu Motors, Inc., supra, 150 Cal.App.4th at p. 59.) “If the party challenging the statement of decision fails to bring omissions or ambiguities in it to the trial court’s attention, then, under Code of Civil Procedure section 634, the appellate court will infer the trial court made implied factual findings favorable to the prevailing party on all issues necessary to support the judgment, including the omitted or ambiguously resolved issues. [Citations.] The appellate court then reviews the implied factual findings under the substantial evidence standard. [Citations.]” (Id. at pp. 59-60.)
B.
The Parties Stipulated to a Nonstatutory Statement of Decision Procedure.
At the end of trial, the court solicited the parties’ counsel’s stipulation to permit the court to present the statement of decision orally on the record, as follows:
“The Court: . . . [¶] As I begin, I would request a stipulation. I’m going to give you some tentative thoughts covering about 13 pages of notes; it will take me probably three quarters of an hour to go through them. Thereafter, I will listen to your comments, be edified by them and after that, maybe after a recess and some further thought, I would give you a final decision. [¶] I’m asking for a stipulation that these tentative thoughts, as amplified by further thoughts thereafter, would constitute a statement of decision; if anyone wishes to have that written and signed by the Court, you may have copies from the court reporter, submit it to the court for signature. And that would take into account any clarifying questions that are asked. [¶] Is that agreeable with the plaintiff, [RCLP’s counsel]?
“[RCLP’s counsel]: Yes, your Honor.
“The Court: Is that agreeable with defense, [defendants’ counsel]?
“[Defendants’ counsel]: Yes; it is.
“The Court: Okay. Again, I wish to stress I think it’s unusual for the Court to give tentatives at this point and they are only that. I am not proud; I want this to be as appropriate under the facts and law as it can be. [¶] This is all subject to change, particularly in a case the magnitude of this kind, where there were many exhibits. The Court tried to follow along with the exhibits, but sometimes is unable to because of the rapidity which they were, as I would say, ‘shoveled’ into evidence. If I have missed some, please call them to my attention and I will be receptive. [¶] Then this is not a tentative.” The court proceeded to orally state its decision on the record.
On December 4, 2006, defendants submitted a letter to the court, stating, “[w]e submit herewith a Request for Statement of Decision pursuant to Code of Civil Procedure Section 632. When the court rendered its tentative decision on November 22, 2006, the parties[] consented to the court’s suggestion that such decision, ‘as amplified by further thoughts thereafter,’ would constitute the Court’s Statement of Decision. The court also stated that a transcript thereof would be signed by the court if submitted by the parties. We enclose what we understand to be the relevant portions of that transcript for inclusion as the Statement of Decision.” Defendants also submitted a document entitled “Request for Statement of Decision,” in which they requested the court’s statement of decision to address 78 separate “controverted issues at trial.”
On December 7, 2006, the trial court issued a minute order stating, “[p]ursuant to Defendant’s And Cross-Complainant’s Request For Statement of Decision, Court Reporter’s partial transcript dated November 22, 2006 is adopted and filed as the Court’s statement of decision, a copy of which is attached hereto and incorporated herein as though set forth in full.”
On December 27, 2006, defendants filed objections to the statement of decision pursuant to Code of Civil Procedure section 634 and California Rules of Court, former rule 232(d), in which they raised 42 objections.
In a minute order dated January 4, 2007, the trial court overruled defendants’ objections on the ground: “All of the parties have received the material thoughts of the Court and the rationale for the judgment ordered. If any additional questions to support that judgment had been necessary or even material, they would have been asked. It is fundamental that parties are bound by their stipulations made on the record and in open court, and all of the parties have actually received pursuant to their own stipulation more than enough to satisfy themselves and others as to the basis for the Judgment entered in this matter.”
C.
Because the Record Does Not Show the Parties Stipulated to Waive the Right to File Objections to the Statement of Decision under Code of Civil Procedure Section 634, the Trial Court Erred by Overruling Defendants’ Objections on the Ground They Were Waived.
A party may waive a written statement of decision. (Code Civ. Proc., § 632; Whittington v. McKinney (1991) 234 Cal.App.3d 123, 129-130.) In Whittingdon v. McKinney, supra, 234 Cal.App.3d 123, the parties agreed to a similar procedure as the one used in this case, which was upheld by the appellate court notwithstanding the court’s concerns about the use of such nonstatutory procedures. A panel of this court stated, “[a]t no time did appellant’s counsel object to the procedure or otherwise insist on his right to a written statement of decision. Accordingly, while we deplore the procedure adopted by the court, we reluctantly conclude the right to a written statement of decision was waived here.” (Id. at p. 130.)
Whittington v. McKinney, supra, 234 Cal.App.3d 123 did not address the issue presented here—whether a party who stipulated to such a procedure has waived the right to file objections to the trial court’s statement of decision in the form of a signed reporter’s transcript, under Code of Civil Procedure section 634. This issue was addressed in Bay World Trading, Ltd. v. Nebraska Beef, Inc. (2002) 101 Cal.App.4th 135, 140, in which the appellate court stated: “If the trial court intended to abrogate the parties’ statutory rights to object to the court’s statement of decision, the court should have made this absolutely clear when it sought the parties’ approval of its proposed alternative procedure. The ability to submit a proposed statement of decision in advance is no substitute for an opportunity to object to the court’s own statement of decision.” The court further stated, “[t]he trial court here did not clearly state that the parties would be precluded from submitting objections to the court’s statement of decision. To the contrary, the court stated the parties would have three days to ‘look over’ the statement of decision and proposed judgment ‘as to form’; thus, Bay World may have reasonably concluded the alternative procedure to which it had agreed did not preclude it from objecting to the absence of prejudgment interest in the court’s decision. The parties’ stipulation did not expressly preclude such an objection, and the trial court did not err in considering it.” (Id. at pp. 140-141, fn. omitted.)
Here, the trial court secured the parties’ agreement that the statement of decision would be a portion of the reporter’s transcript in which the court announced its decision in the case, which, at defendants’ request, was signed by the trial court. While the court certainly invited the parties to comment after it finished reading the decision (which consumed over 30 pages of the reporter’s transcript), the record does not show the parties clearly waived the opportunity to file objections to the statement of decision under Code of Civil Procedure section 634. Consequently, the trial court erred by overruling defendants’ objections on the ground they were waived.
Nevertheless, the trial court’s overruling of defendants’ objections might be harmless because defendants have failed to appropriately use the objection procedure of Code of Civil Procedure section 634. While sections 632 and 634 provide that the parties may request that the trial court provide a statement of reasons on the principal controverted issues, the parties may not interrogate the court on evidentiary matters not controverted by the pleadings. (Kroupa v. Sunrise Ford (1999) 77 Cal.App.4th 835, 842; City of Coachella v. Riverside County Airport Land Use Com. (1989) 210 Cal.App.3d 1277, 1292; People v. Casa Blanca Convalescent Homes, Inc. (1984) 159 Cal.App.3d 509, 525, disapproved on other grounds in Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 184-185.) It appears that many of defendants’ 42 objections were designed to interrogate the trial court on evidentiary issues, not on the ultimate issues of fact, unfairly imposing on the trial court the burden of sifting through voluminous objections to ferret out which ones might be properly focused on ambiguous or omitted findings on ultimate issues.
In our view, in ruling on objections to a statement of decision as made in this case, the trial court has discretion to do so on a reasonable basis under the circumstances by, for example, categorizing the objections by general topic or stating an objection is not permitted by the Code of Civil Procedure on the stated ground.
In People v. Casa Blanca Convalescent Homes, Inc., supra, 159 Cal.App.3d 509, 524, the appellate court stated: “A trial court in rendering a statement of decision . . . is required only to state ultimate rather than evidentiary facts.” The court concluded the trial court in that case fairly and completely set forth the factual and legal basis for its decision as it “list[ed] all the ultimate facts necessary to decide the issues placed in controversy by the pleadings.” (Ibid.) The appellate court further stated: “[The defendant] would require more. [The defendant] would compel the trial court to make findings with regard to detailed evidentiary facts, to make minute findings as to individual items of evidence. Such a detailed evidentiary analysis is not required by law. [Citation.] Only where a trial court fails to make findings as to a material issue which would fairly disclose the determination by the trial court would reversible error result. [Citation.] Even though a court fails to make a finding on a particular matter, if the judgment is otherwise supported, the omission to make such finding is harmless error unless the evidence is sufficient to sustain a finding in favor of the complaining party which would have the effect of countervailing or destroying other findings. [Citation.] A failure to find on an immaterial issue is not error.” (Ibid.)
Notwithstanding defendants’ improper use of the Code of Civil Procedure section 634 procedure, we consider those objections to the statement of decision, which are relevant to the issues raised in this appeal, as discussed in detail post. We therefore do not reach the question whether the trial court’s error in summarily overruling defendants’ objections is harmless in light of defendants’ improper use of the section 634 procedure.
II.
Defendants’ Contention the Judgment Must Be Reversed Because RCLP Failed to Perfect Its Right to Exercise the Option Is Without Merit; Defendants Waived the Right to Challenge RCLP’s Proposed Purchase Price.
Defendants argue RCLP “did not effectively perfect its right to purchase Civic’s interest in Vista Village” because (1) the notice of intent to exercise the option in the agreement identified RRG, not RCLP, as the entity intending to exercise the option; (2) RCLP did not timely calculate the purchase price because the project had not met the occupancy requirement, a precondition for RCLP’s entitlement to buy out Civic’s interest; and (3) the trial court erred by concluding Civic was estopped from challenging or had otherwise waived the right to challenge RCLP’s proposed purchase price. We address each argument in turn.
A.
The Record Shows the Notice of Intent’s Reference to RRG Instead of RCLP Does Not Invalidate the Effectiveness of RCLP’s Notice.
Section 10.2 of the agreement permits either party to “assign this Agreement to its Affiliate without the other Member’s consent.” In November 2004, RRG transferred its entire interest in the company to RCLP for tax reasons. Although Civic’s consent to the transfer was not required, Civic gave its consent; the transfer itself is not an issue on appeal.
On September 6, 2005, Harrigian sent Civic a letter on Regency Centers Corporation letterhead and addressed to Semingson, in which Harrigian stated: “Since we are in the final stages of the Vista Village project, having closed out our construction contracts and leased up to 99% of the center, we have final income and costs calculations to determine the Purchase Price pursuant to the terms of the Agreement. With that, please allow this correspondence to serve as written notice of RRG’s decision to exercise the Option pursuant to Section 14 of the Agreement.” (Italics added.)
The record shows that notwithstanding the transfer of interest from RRG to its affiliate RCLP, the parties thereafter continued to refer to RRG’s, not RCLP’s, ongoing interest in the company. Indeed, until the third amended complaint was filed on the eve of trial, this lawsuit was prosecuted in the name of RRG.
In the statement of decision, the trial court did not find Harrigian’s reference to RRG in the notice of intent to exercise the option fatal to the notice’s effectiveness, stating, inter alia: “Here, RRG exercised the option RCLP had been assigned the real property, and I believe that, in effect, that would be tantamount to a typographical error.” The trial court further stated, “[i]t is really a reasonable and interesting technical issue of this assignment was only done for tax purposes and there was no effect upon the defendants whatsoever. Here, in effect, I would find that RRG was an implied agent of RCLP. There was no confusion, no surprise, no effect upon the defendants whatsoever, and otherwise, it would elevate form over substance beyond belief.”
On appeal, defendants do not argue the record fails to support the trial court’s conclusion the notice of intent’s reference to RRG constituted a typographical error. Defendants do not argue they did not understand the notice of intent to exercise the option to be on behalf of RCLP—the party which owned RRG’s interest in the company. Instead, they argue that even if Civic fully understood the notice of intent to exercise the option was sent on behalf of RCLP and the notice contained a mere typographical error, the notice of intent was invalid, as a matter of law.
Delaware, like California, views an option as a “continuing offer to sell, to which the notice of the election to purchase is an acceptance and the two constitute a completed contract of sale as of the date of the notice.” (Glenn v. Tide Water Associated Oil Co. (Del.Ch. 1953) 101 A.2d 339, 343, italics added.) In the opening brief, defendants acknowledge, “Delaware courts rely heavily on the Restatement (Second) of Contracts.”
Section 155 of the Restatement Second of Contracts provides: “Where a writing that evidences or embodies an agreement in whole or in part fails to express the agreement because of a mistake of both parties as to the contents or effect of the writing, the court may at the request of a party reform the writing to express the agreement, except to the extent that rights of third parties such as good faith purchasers for value will be unfairly affected.”
The trial court’s reformation of the notice of intent to exercise the option did not change the agreement. The court merely corrected the notice to reflect the agreement and assumption that the Regency entity which owned the interest in the company, RCLP, sent notice it intended to exercise the option.
Defendants’ reliance on Mabb v. Merriam (1900) 129 Cal. 663 is inapt. First, the notice of intent to exercise the option was made pursuant to the terms of the agreement which is governed by Delaware law. Thus, Mabb v. Merriam, in which the court declined to reform a contract to replace the husband’s name with the wife’s name, is inapplicable. Even if California law applied to resolve this issue, Civil Code section 3399 provides: “When, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value.”
Mabb v. Merriam, supra, 129 Cal. 663 did not involve judicial reformation as a result of the parties’ mutual mistake or the mistake of one party known or suspected by the other, and did not otherwise analyze Civil Code section 3399. Maab v. Merriam is therefore distinguishable from the instant case.
B.
Defendants Stipulated Wingstop Had a Five-year Lease; the Trial Court Made Sufficient Findings in the Statement of Decision Supporting Its Conclusion the Project Achieved over 95 Percent Occupancy of Nonanchor Tenants.
In the statement of decision, the trial court concluded that RCLP had achieved the requisite occupancy of nonanchor tenants within the meaning of the agreement. Defendants first challenge this finding by arguing, “[t]he undisputed evidence shows that the project had not achieved occupancy when Regency sought to determine the purchase price and perfect its entitlement to buy Civic’s interest under Article 14 of the agreement.” (Fn. omitted.) Section 14.4(a) stated that an individual tenant is in “Occupancy” within the meaning of the agreement “when all of the following have occurred: there is a valid, executed lease with a term of at least five years; a final and unconditional certificate of occupancy has been issued for the space; the tenant is open for business; and the tenant is not in material default of its lease; the tenant has paid one month’s rent; and, if required by RRG, the tenant has signed an estoppel certificate acceptable to RRG.”
Defendants argue the project involved 114,202 square feet of space designated for occupancy by nonanchor tenants. In order to achieve over 95 percent occupancy of nonanchor tenants, defendants contend, all but 5,710 square feet of that space had to be occupied by nonanchor tenants within the meaning of the agreement before RCLP could exercise the option.
Defendants assert that 2,500 square feet of that space was not leased at all, and nonanchor tenant H&R Block (which occupied 1,957 square feet) had not satisfied the occupancy conditions because it had entered a 55-month lease, not a five-year lease. Although disputing defendants’ calculation as to the amount of the project’s square footage that would equal over 95 percent occupancy of nonanchor tenants, RCLP acknowledges that 2,500 square feet was not leased and H&R Block did not occupy its space at the time RCLP attempted to exercise its option.
In the opening brief, defendants state: “Adding the vacant space and H&R Block space totals 4,457 square feet. Since the total amount of square footage that can be vacant for Regency to meet the occupancy requirement is 5,710, if an additional 1,253 square feet were not in occupancy, then Regency had no right to purchase Civic’s interest.” Defendants argue the undisputed evidence showed another nonanchor tenant, Wingstop, which occupied 1,753 square feet of the project, did not satisfy the conditions of occupancy because it did not have a five-year lease at the relevant time. Even if we were to assume defendants’ calculation is correct, defendants’ argument fails.
It does not matter whether trial evidence would have supported the finding Wingstop had not signed a five-year lease due to tenancy troubles because the parties stipulated at trial that Wingstop had satisfied all of the conditions of occupancy except one—whether it was in material default. The parties so stipulated through their counsel during the following colloquy during trial:
“The Court: . . . [¶] I assume we’ve made some progress, gentle folk.
“[RCLP’s counsel]: I think we have; I’m going to read the stipulation and counsel can tell me whether I have it right, which is that with respect to the criteria that are—14.4(a), there are six criteria for occupancy; they are stipulating that Regency met sufficient level of occupancy for the purposes of 14.1, and that that was met as of September or October 2005, as to all those criteria, except as follows—which would be whether any of the tenants were in material default, and then specifically as to the following tenants: Whether there was a certificate of occupancy for Coldwell Banker and first month’s rent paid, first month’s rent, that’s the criteria—criterion, and as to Sprouts, the same. Whether there’s a, as it says here, a ‘final unconditional certificate of occupancy[,’] and also, whether the tenant has paid one month’s rent; that is my understanding of the stipulation.
“[Defendants’ counsel]: Mine as well, your Honor.
“The Court: Okay. I will accept that, then, as a stipulation and proof, and the remaining matters, as stated, are in dispute.
“[Defendants’ counsel]: Your Honor, the only thing, just to make clear, I don’t think there’s been a misunderstanding, but I want—between counsel, I want to make sure the record is clear that H&R Block and Arby’s are not a part of the stipulation, as well as that they’re not being counted toward 95 percent occupancy.
“[RCLP’s counsel]: Correct.
The parties had entered a pretrial written stipulation that in September 2005, 25 specifically identified tenants satisfied all conditions of occupancy, with the exception that the parties did not stipulate whether (1) any of the tenants were in “material default” as of September 2005 when RCLP exercised the option; or (2) tenants Coldwell Banker and Sprouts Market paid first month’s rent and obtained a certificate of occupancy. The parties’ stipulation did not identify Wingstop or another nonanchor tenant, El Callejon, and was silent as to whether either satisfied any of the conditions of occupancy under the agreement.
In the reply brief, defendants argue, “the evidence that Civic elicited about Wing Stop was not precluded by the stipulation because it showed that even if Wing Stop had a 5 year lease at the inception of its tenancy, it was in ‘material default’ at the critical time period because its lease had been terminated. In a very real sense the absence of [a] 5-year lease and being in material default are two sides of the same coin.” Whether Wingstop had a five-year lease and whether Wingstop was in material default are listed as separate conditions for occupancy under the agreement. Defendants stipulated that all conditions of occupancy, other than the material default condition, were satisfied. They therefore stipulated that Wingstop had the requisite lease in place. (Spindell v. State Bar (1975) 13 Cal.3d 253, 260 [“A stipulation ‘is conclusive upon the parties, and the truth of the facts contained therein cannot be contradicted’ unless permission is given to withdraw from the stipulation”].)
Defendants further challenge the trial court’s finding that the occupancy requirement of the agreement was satisfied, by arguing, “since the court refused to respond to Civic’s objections concerning omissions and ambiguities in its statement of decision, this court may not conclude that Wing Stop and two other tenants, Coldwell Banker and El Callejon, were ‘in occupancy’ for the purpose of concluding that Regency met the 95% requirement.” Defendants further argue, “the court failed to make findings concerning three tenants, Wing Stop, Coldwell Banker, and El Callejon, that were essential to any decision whether Regency met the 95% requirement. The court stated only that ‘I believe that the El[] Callejon and Wing Stop, as well as the Coldwell Banker matters, are—were within the formula . . . .’ . . . But as Civic and Semingson pointed out, the court did not explain what formula the court was referring to, or how it concluded these tenants were ‘within the formula.’”
Defendants fail to acknowledge, however, other portions of the statement of decision, in which the trial court made specific findings as to these three tenants. With regard to Wingstop, defendants argue, “the court failed to explain how it could find that Wing Stop was in occupancy since the agreement requires that one condition for occupancy is a valid five year lease. . . . Regency forfeited Wing Stop’s lease before the period for calculating the purchase price commenced. Because the court failed to explain how it reached an opposite conclusion in the face of these undisputed facts, this court must apply the [Code of Civil Procedure] section 634 presumption and conclude that Wing Stop was not in occupancy.”
As discussed ante, the parties had orally stipulated that all tenants (excluding H&R Block and Arby’s Restaurant) had satisfied the five-year lease occupancy requirement of the agreement. Thus, whether Wingstop had satisfied the five-year lease requirement of occupancy was already resolved by stipulation and not before the court for decision. As to whether Wingstop was in material default, the court specifically found in the statement of decision that Wingstop had cured the default that had been entered against it, and thereby concluded Wingstop was not in material default. Thus, the trial court’s error of failing to rule on defendants’ objection on its merits was harmless.
With regard to Coldwell Banker, defendants argue they objected to the statement of decision on the ground it “does not say which one (if any) [of the two Coldwell Banker certificates of occupancy] was valid or whether it decided that Coldwell Banker was in occupancy on some other basis.” This is incorrect. In the statement of decision, the court specifically found that a September 29, 2005 certificate of Coldwell Banker’s occupancy was accurate, and thereby resolved a dispute regarding the authenticity of a second certificate of occupancy. The court stated: “It is hard to explain the two Coldwell Banker certificates of occupancy; one, of course, on the 29th of September, the other on the 5th of October of 2005. To be frank, the Court cannot explain them from the evidence, but the Court does believe, from the evidence submitted, that the 9-29 certificate of occupancy was accurate, and if it was, would be, instead, the 5th of October, which it really was not; that would be de minimis in this matter and also excused. [¶] . . . I can’t remember the name of the man at the moment that testified from the city, but I have no reason to believe that he did anything inappropriate. He said, based upon his own recollection and testimony, that the Coldwell Banker folks were up and operating on the 29th of September, and that was the applicable time period for the certificate of occupancy.” The trial court’s failure to rule on defendants’ objection on the merits was therefore harmless.
Finally, defendants argue they objected to the statement of decision on the ground it was unclear and ambiguous as to whether El Callejon had timely cured its mechanic’s lien problems. The statement of decision is not ambiguous as to the court’s finding El Callejon had timely cured the mechanic’s lien against it by September 2005 and had otherwise satisfied the occupancy requirement contained in the agreement.
In sum, we find no error in connection with the trial court’s finding that the occupancy requirement of the agreement was satisfied.
C.
The Trial Court Did Not Err by Concluding that Defendants Waived the Right to Object to RCLP’s Proposed Purchase Price.
Finding Semingson and other defense witnesses not credible, the trial court determined that defendants engaged in an improper campaign of foot-dragging and giving false excuses to RCLP for Civic’s failure to either accept RCLP’s proposed purchase price or propose one of its own. The court further found defendants so acted in order to cause delay, with the intention that RCLP might make an error in its effort to properly exercise its option in compliance with the agreement’s time requirements and other conditions. Defendants do not argue the trial court’s findings are unsupported by the record. Instead, defendants argue the trial court lacked legal authority to conclude that defendants’ tactics amounted to a waiver of the right to object to RCLP’s proposed purchase price.
In the opening brief, defendants argue the trial court erred by summarily overruling their objections challenging the court’s finding Civic did not cooperate in calculating the purchase price: “With respect to Civic’s conduct in allegedly not cooperating with Regency in determining the purchase price, Civic and Semingson pointed out a variety of ways in which the statement of decision was ambiguous on that score. . . . This had a direct bearing on the trial court’s conclusion that Civic was not entitled to contest the $373,639 figure that Regency stated in its option exercise letter.” In the reply brief, defendants contend that the court’s “conclusory finding is an example of the type of ultimate finding that may be undermined by findings on subsidiary issues.” While defendants cite to four pages in their objections to the statement of decision, they neither identify any specific objections or legal authority supporting their argument, nor provide any analysis showing that such objections should have been sustained and additional findings made on this issue. We therefore do not further consider this argument.
The parties cite Delaware law in their discussion of this issue. In the opening brief, defendants state the Delaware courts “rely heavily” on the Restatement Second of Contracts. Section 248 of the Restatement Second of Contracts states: “Where a party rejecting a defective performance or offer of performance gives an insufficient reason for rejection, the non-occurrence of a condition of his duty is excused only if he knew or had reason to know of that non-occurrence and then only to the extent that the giving of an insufficient reason substantially contributes to a failure by the other party to cure.”
The trial court found defendants’ conduct caused RCLP’s failure to cure any error it had made in the purchase price calculation. Consequently, section 248 of the Restatement Second of Contracts supports the trial court’s conclusion defendants had waived the right to challenge RCLP’s proposed purchase price on the ground it was not properly calculated. We will not second-guess the trial court’s credibility determinations in reaching its findings that support its conclusion.
We acknowledge defendants rely on comment a to section 248 of the Restatement Second of Contracts, and RCLP, in turn, relies on comment b to section 248 in support of its position. Both comments constitute reiterations of the general rule set forth in section 248; neither changes the analysis, ante.
Because the trial court did not err by concluding defendants waived the right to challenge RCLP’s calculated purchase price, we do not need to evaluate the trial court’s conclusion that defendants should also be estopped from challenging the purchase price, or its conclusion regarding how the option formula in the agreement applied to the facts of the case.
III.
The Trial Court Did Not Err by Awarding RCLP Compensatory Damages.
The trial court awarded RCLP $500,000 in compensatory damages from which it offset the $373,639 purchase price of the option for a net recovery of $126,361. Defendants contend this award cannot stand because RCLP did not prove causation or the foreseeability of such an award at the time of contracting.
Defendants assert in the opening brief that RCLP might argue that it would not need to prove foreseeability for a breach of contract claim because “diminution in value damages are also recoverable on its fraud claim” and “tort damages do not require the same level of foreseeability as is the case for special damages in contract actions.” We do not address this issue because, as discussed in part IV post, we conclude RCLP’s promissory fraud claim fails as a matter of law.
First, defendants contend RCLP’s theory as to “why it was entitled to compensatory damages is based on the testimony of its accounting expert . . . [whose] theory was that had Regency been able to effect the buy-out of Civic’s Vista Village interest in October 2005, Regency could have marketed the project sooner” before the project declined in value. Defendants also contend any losses sustained by RCLP as a result of any delay in selling the project were not caused by defendants as a matter of law, because the agreement expressly gave RCLP, as manager, the authority to sell the project at any time during the term of the agreement.
Section 15.1 of the agreement stated, in part: “The Company also may sell the entire Project or individual Parcels at any time during the term of the Agreement, and the proceeds thereof may be utilized to reduce Project Costs and each member hereby consents thereto.”
In the statement of decision, the trial court found, “it is undisputed that under the contract, the plaintiff had the power to sell the project without the consent of defendants . . . and they could do that at any time. However, if there is a dispute, they could have put the money from the sale into an escrow account and sued the defendant for declaratory relief, but upon reflection, that just is realistically not feasible. [¶] As Mr. Harrigian said, there are many ways that this property could have sold; it could have been sold by an exchange, an outright sale or joint venture and all would carry different possibilities for profits, commissions, fees, which, as he said, can be very lucrative and I’m sure that’s true, but the possibility of the defendant, as their partner, complaining unless the roles and the rules were clear, would really make that sale uncertain and risky, notwithstanding Article 1[5] of Exhibit 2 [of the agreement]. From a practical matter, the plaintiff could not sell that.” The court further stated, “[w]ith regard to the matter of the plaintiff declining or choosing not to sell the property under these circumstances, dealing with Mr. Semingson and his company, I do not fault them for choosing not to undertake those risks and complications; I think it would have been, from a business standpoint, a very poor decision to have done so.”
The trial court’s findings regarding causation are sufficient and defendants do not cite any legal authority stating otherwise. Substantial evidence in the form of RCLP’s expert’s testimony supported the finding that the delay caused by defendants’ obstreperous conduct and subsequent breach resulted in a loss of sale proceeds due to the project having lost some of its value. The record further showed that while RCLP might have had the legal right to sell the project, to do so before acquiring Civic’s interest was fraught with legal and financial risk. We find no error.
In the opening brief, defendants vaguely state that the trial court gave no clear reason for awarding compensatory damages “and refused to clarify its thoughts on the issue in response to Civic’s objections to the statement of decision.” Defendants do not identify or provide any analysis regarding those objections they contend should have been considered by the trial court. We therefore consider the trial court’s failure to rule on them on the merits as harmless error, and do not consider them further.
Second, defendants argue that an award of compensatory damages in the form of “lost profits based on the diminution in the project’s value between December 2005 and the time of trial” does not constitute an award of “general damages automatically recoverable for breach of contract” but of “special damages, which are recoverable only if foreseeable at the time of contracting.” (Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 968-969 [“Special damages are recoverable if the special or particular circumstances from which they arise were actually communicated to or known by the breaching party (a subjective test) or were matters of which the breaching party should have been aware at the time of contracting (an objective test)”].)
As discussed ante, the agreement itself permitted RCLP to sell the project at any time. Harrigian testified that when he started the project he had discussions “with people at Civic about what Regency’s intentions were, once the project was leased up” and, specifically, he remembered telling Clements it was RRG’s intention to exercise the option and then sell the project.
Semingson is a real estate developer. The trial court found Semingson “a sophisticated and seemingly successful businessman; this fellow is not a bungler; this fellow is by no means an ‘oaf.’” The court also found that Semingson was “attempting to play a hardball game of ‘gotcha’” in order to undermine the triggering of RCLP’s right under the agreement to exercise the option. If Semingson was not actually aware that RCLP would sustain damages if it were delayed in acquiring Civic’s interest and in selling the project due to the project’s diminution in value, under an objective test, he should have been so aware at the time Civic entered the agreement with RRG. RCLP’s compensatory damages were foreseeable.
IV.
The Judgment Is Reversed as to RCLP’s Promissory Fraud Claim.
“‘Promissory fraud’ is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “[I]n order to support a claim of fraud based upon the alleged failure to perform a promise, it must be shown that the promisor did not intend to perform at the time the promise was made.” (Conrad v. Bank of America (1996) 45 Cal.App.4th 133, 157.)
In Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30-31, the California Supreme Court stated: “Some California cases have stated broadly that ‘[[t]he subsequent failure to perform as promised warrants the inference that defendant did not intend to perform when she made the promise. [Citations.]’ [Citations.] This may suggest that proof that a promise was made and that it was not fulfilled is sufficient to prove fraud. This is not, and has never been, a correct statement of the law, and we disapprove the cases cited to the extent they suggest otherwise. [¶] Rather, ‘something more than nonperformance is required to prove the defendant’s intent not to perform his promise.’ [Citations.] To be sure, fraudulent intent must often be established by circumstantial evidence. Prosser[ and Keeton, Torts (5th ed. 1984) section 109, pages 764-765], for example, cites cases in which fraudulent intent has been inferred from such circumstances as defendant’s insolvency, his hasty repudiation of the promise, his failure even to attempt performance, or his continued assurances after it was clear he would not perform. [Citation.] However, if plaintiff adduces no further evidence of fraudulent intent than proof of nonperformance of an oral promise, he will never reach a jury.”
Pursuant to Delaware law, tort claims arising out of the formation of a contract are not controlled by a general choice of law provision. (Gloucester Holding Corp. v. U.S. Tape & Sticky Products, LLC (Del.Ch. 2003) 832 A.2d 116, 124.) We therefore analyze defendants’ argument with regard to RCLP’s promissory fraud claim under California law.
RCLP’s fraud claim against defendants was limited to the promissory fraud variety. In the third amended complaint, RCLP alleged the following in support of its claim: “On or about December 10, 2002, Defendants by and through their authorized agent and Development Manager, Scott Clements, entered into the [agreement] and made the representations and promises set forth therein, including without limitation Civic’s agreement to transfer its entire Company Interest pursuant to the terms of the Option as set forth in paragraph 14.1 of the [agreement]. Regency is informed and believes, and on that basis alleges, that at the time Civic entered into the [agreement] and promised to perform in accordance with the terms set forth therein, Defendants were unwilling to perform and had no intention of performing in accordance with the Option.” RCLP further alleged: “Defendants entered into the [agreement] and made the representations and promises set forth therein, including the Option, in order to induce Regency to enter into the [agreement] and perform all material obligations therein, including without limitation Regency’s agreement to reimburse Defendants for the sums invested by Defendants in the Property, to provide the funds necessary to acquire and develop the Property, and to provide all additional capital contributions necessary to pay for the ‘Project Costs.’”
The trial court found defendants liable to RCLP on its promissory fraud claim. In the statement of decision, the court stated: “The Court does infer from the evidence that it was the defendant, Mr. Semingson, who saw the project as it was being successfully completed, began to suffer from buyer’s remorse, which led to greed and which then led to a fraud; presented with Exhibit 1 [notice of intent to exercise option] and the $373,000 purchase price of a truly multimillion-dollar shopping center, he decided that he was losing out, probably was shocked that the buyout number was so low and then intentionally embarked upon a program of complaint, of foot-dragging and in sum, basically hoping that something would come up in order to increase this price. [¶] It was one thing, however, to suspect that the price was too low and come forward with documents and arguments to show that the price should have been increased, or even, by chance, to request and look for an additional negotiation or try to look for documents that would increase the price. But it would be another simply to ‘turn a deaf ear’ to requests by plaintiff for a number from him and requests by plaintiff to open their files; these requests were made, and there are quite a few of them . . . . [¶] We also have Exhibit 83, Mr. Clements, on the 22nd of June of 2005, setting forth a memorandum that, in effect, this would become the defendant’s game plan and that game plan was followed basically to the end. The game plan was for delay, to increase the price for the defendant; it was also a formula which, stating that the formula for a buyout was ambiguous and don’t help them do it, it was also a plan for the plaintiff making a mistake.” The trial court stated, “this behavior and approach constituted a fraud. So they were pursuing an intentional program of complaint, of delay and of intentional ignorance.”
Defendants’ objections to the statement of decision pointed out that it had failed to include any finding as to “[w]hether Civic and Semingson were unwilling to and had no intention of honoring its/his/their enforceable obligations under Article 14 of the Operating Agreement at the time the Operating Agreement was formed.” (Italics added.) The statement of decision did not find defendants had no intention of honoring the terms of the agreement at the time they entered it. Defendants’ objection on this point was well taken. Therefore, we do not infer the trial court found that defendants had no intention of honoring the terms of the agreement at the time it was executed.
The trial court imposed liability on defendants based on their deceitful conduct attendant to their breaching the agreement—a theory of fraud that was not before the court. We do not need to remand this case to the trial court to make findings on the issue whether defendants were liable for promissory fraud because the trial court’s findings vividly show defendants’ intention not to abide by the terms of the agreement arose at some point after the parties entered the agreement. In the statement of decision, the trial court found that as the project was being successfully completed, and thus necessarily at some time after the parties entered into the agreement, Semingson “began to suffer from buyer’s remorse, which led to greed and which then led to a fraud.” (Italics added.) These express findings in the statement of decision foreclose any future finding that defendants’ fraudulent intent was formed before or at the time the parties entered into the agreement.
We recognize, as pointed out in RCLP’s respondent’s brief, that “‘[a] trier of fact may be justified in inferring from the circumstances surrounding the subsequent repudiation that defendant never intended to carry out the agreement when it was made.’” The trial court’s express findings on the timing of the formation of what the court considered defendants’ fraudulent intent are fundamentally contrary to any such inference. Defendants’ awareness at the time they entered into the agreement that the option provision of the agreement was heavily tilted in RRG’s favor is insufficient to infer fraudulent intent at the time the agreement was entered into.
We therefore reverse the judgment as to RCLP’s promissory fraud claim and direct the trial court to enter judgment in favor of defendants on that claim. In light of our holding on this issue, we do not need to consider defendants’ additional arguments that RCLP failed to prove reliance or damages as to its fraud claim. The trial court’s award of $750,000 in punitive damages was necessarily based on RCLP’s fraud claim. (Civ. Code, § 3294; Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 960 [“An award of punitive damages is not supported by a verdict based on breach of contract, even where the defendant’s conduct in breaching the contract was wilful, fraudulent, or malicious”].) We therefore reverse the punitive damages award as well and direct the trial court to strike that award from the judgment.
V.
Defendants Did Not Adequately Raise the Issue Whether the Agreement’s Limitations of Liability Provision Applied in this Case.
Defendants argue: “The agreement contains a limitation of liability clause. . . . It precludes liability for actions taken, among other ways, on advice of counsel. Civic indisputably had its counsel involved during the period of time following Regency’s exercise of the option when Civic was trying to determine if Regency calculated the correct price. . . . Yet the court refused to determine, though requested to by Civic and Semingson . . ., whether advice of counsel precluded the court from finding that Civic had failed to timely acquiesce in the Regency’s price, causing $500,000 in consequential damages.”
Defendants objected to the statement of decision on the basis “[w]hether the Operating Agreement bars any claim by Regency for damages.” In formulating their objections, defendants were required to specify the issue they wished the court to resolve. Nowhere in their objections did defendants communicate the trial court failed to make a finding on whether the limitations of liability provision barred or limited an award of damages against them. Furthermore, defendants do not identify evidence demonstrating that the provision so applied. In light of defendants’ inadequate objection as to the limitations of liability provision, we infer the trial court found the provision inapplicable. Defendants do not contend such a finding would be unsupported by substantial evidence in the record; we therefore do not address that issue.
VI.
The Trial Court Did Not Err by Concluding Semingson Was Civic’s Alter Ego.
“When the elements of alter ego are present, the ordinary rule that treats a corporation as separate from its shareholders is disregarded, the court will deem the corporation’s acts as the acts of those persons who own and control the entity, and the jurisdiction over the corporation is passed through to its shareholders.” (VirtualMagic Asia, Inc. v. Fil-Cartoons, Inc. (2002) 99 Cal.App.4th 228, 244.) “The two principal questions to establish alter ego are whether there is ‘such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist’ and whether there would be ‘an inequitable result if the acts in question are treated as those of the corporation alone.’ [Citation.] The courts consider numerous factors, including inadequate capitalization, commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, use of one as a mere conduit for the affairs of the other, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. [Citation.] No single factor is determinative, and instead a court must examine all the circumstances to determine whether to apply the doctrine. [Citation.] Moreover, even if the unity of interest and ownership element is shown, alter ego will not be applied absent evidence that an injustice would result from the recognition of separate corporate identities, and ‘[d]ifficulty in enforcing a judgment or collecting a debt does not satisfy this standard.’” (Id. at pp. 244-245.) Whether the corporate existence will be disregarded is a question of law and the trier of fact’s finding will not be disturbed if it be supported by substantial evidence. (F. Hoffman-La Roche, Ltd. v. Superior Court (2005) 130 Cal.App.4th 782, 799, fn. 6.)
Defendants contend in the opening brief: “The court apparently entered judgment against Semingson on an alter ego theory, stating [in the statement of decision] that ‘With regard to alter ego, all entities again, are fine, as long as all is well, but they must be an independent organization and they must not merge their funds, they must have some assets, or the program to have some assets, and there has been no evidence submitted by the defendants of any form of accounting to show that they were independent. The evidence is that they were not.’ . . . The court then ordered judgment in favor of Regency and against Semingson without any further explanation why it did so. . . . When Civic and Regency asked for an explanation, the court rebuffed them.” (Original italics.)
Defendants accurately quote a portion of the statement of decision, but they do not reference an earlier portion in which the court provided additional factual and legal bases for its conclusion Semingson was Civic’s alter ego. The statement of decision stated: “With regard to the alter ego issue, [Civic] was formed expressly for this transaction that was required by Exhibit 2 [the agreement]; that is a normal thing and a common thing to do, not at all unique, not at all untoward; however, there was no capitalization affected nor any capitalization anticipated by defendants. The funds came from the Civic [I]ncorporated, used basically interchangeably. I didn’t see any evidence of interest being charged or paybacks or anything elsewhere; the money flowed among these various organizations, all controlled by Mr. Semingson, in person, without any formalities, really, whatsoever. We had one very abbreviated form of minutes; that was pretty much it. [¶] Understanding that alter ego is applied under common law strictly and sparingly in California, as well as in Delaware, but it is—it can be seen as a vehicle for fraud on the totality of the circumstances, that would be the Phoenix Canada Oil Co[. Ltd. v. Texaco, Inc. (3d Cir. 1988) 842 F.2d 1466] case that was applying Delaware law. [¶] In these circumstances, there’s no evidence of any employees for this group, there was no equity, even after the reimbursement of costs and the development fees of somewhere around $1,269,000; that money has all dissipated. There are no books to reflect any negative any assets [sic]; there’s no positive income and basically this was used as a convenience by Mr. Semingson, as part of his own finances and that of his corporation; it would be inequitable to allow that, now, to be used as a shield against the plaintiff as a creditor. That is what the law provides with regard to alter ego in order [to] avoid that result and it would be appropriate, in a sense, at this time.” (Italics added.)
Defendants objected to the statement of decision on the ground it was ambiguous as to (1) the identities of the referenced two entities which the court considered to be not independent and to have commingled funds; (2) the inequity of allowing Civic’s corporate status to shield Semingson from liability; and (3) “the basis upon which judgment is entered against defendant, Steven P. Semingson.”
The trial court made findings Civic had no capitalization; funds between it and an entity called Civic Incorporated were used interchangeably without evidence of being charged or of paybacks; the entities were controlled by Semingson without formalities; Civic had no employees; after Civic was reimbursed for costs and development fees, the money dissipated; Civic had no books and no positive income; Semingson used Civic for convenience and as part of his own finances; and that under the circumstances, it would be inequitable to allow Civic’s corporate status to shield Semingson from liability. (VirtualMagic Asia, Inc. v. Fil-Cartoons, supra, 99 Cal.App.4th at pp. 244-245.) Defendants do not argue that substantial evidence would not support a finding of alter ego liability.
Taking into consideration all of the trial court’s findings and analysis contained in the statement of decision on the issue of the application of the alter ego doctrine, we conclude the trial court’s findings were not ambiguous and were more than adequate to explain its reasons for imposing liability on Semingson as the alter ego of Civic. Therefore, the court’s failure to rule on the merits of defendants’ objections on this issue constitutes harmless error.
Defendants argue the trial court’s later reference to alter ego in the statement of decision (quoted by defendants in the opening brief) “wrongly put the burden of proof on Semingson to disprove alter ego, rather than on Regency to prove it.” As discussed ante, earlier in the statement of decision, the trial court had already stated its various findings based on the evidence showing that Semingson was Civic’s alter ego. We interpret the court’s latter comment to reflect defendants’ failure to produce evidence at trial rebutting RCLP’s prima facie showing supporting an alter ego finding and not, as defendants suggest, to reflect a misallocation of the burden of proof by the court.
The trial court did not err by concluding Semingson was Civic’s alter ego.
DISPOSITION
The judgment is reversed as to the imposition of liability on defendants on RCLP’s promissory fraud claim and as to the punitive damages award. On remand, the trial court is directed to enter judgment in favor of defendants on RCLP’s promissory fraud claim and strike the punitive damages award accordingly. The judgment is otherwise affirmed. In the interests of justice, because each party prevailed in part, no party shall recover costs on appeal.
WE CONCUR: RYLAARSDAM, ACTING P. J., O’LEARY, J.