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Wagenen v. Berkley Industries, LLC

Court of Appeals of California, Second Appellate District, Division One.
Nov 24, 2003
No. B163189 (Cal. Ct. App. Nov. 24, 2003)

Opinion

B163189.

11-24-2003

SUSAN VAN WAGENEN, Plaintiff and Appellant, v. BERKLEY INDUSTRIES, LLC, Defendant and Respondent.

Snell & Wilmer, Richard A. Derevan and Marc L. Turman for Plaintiff and Appellant. Skadden, Arps, Slate, Meagher & Flom, Karen L. Corman and Gary H. Green II for Defendant and Respondent.


Plaintiff Susan Van Wagenen appeals from the judgment entered following the trial courts sustaining without leave to amend Berkley Industries demurrer to her first amended complaint. Van Wagenens claims revolve around a contract signed by her and a Berkley representative effective November 20, 2000. Van Wagenen claims (I) the trial court usurped the jurys function by interpreting an ambiguous contract on demurrer and (II) her complaint states a cause of action for reformation. We reverse the judgment and remand the matter for further proceedings.

BACKGROUND

On appeal from a judgment of dismissal after a demurrer is sustained without leave to amend, we assume the truth of all facts properly pleaded. (Morillon v. Royal Packing Co. (2000) 22 Cal.4th 575, 579.) We accept as true all facts that may be implied or inferred from facts expressly alleged and consider all evidentiary facts in recitals of exhibits attached to the complaint. (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403; Satten v. Webb (2002) 99 Cal.App.4th 365, 375.)

The amended complaint set out four causes of action: breach of contract, reformation, an alternative theory of breach of contract, and estoppel. According to the amended complaint, before Van Wagenen and Berkley signed the "Restricted Unit Agreement" (hereafter Agreement) on November 20, 2000, Berkleys principal members were the Berkley Family Trust, Craig Sannum, Van Wagenen, and Terry Berkley. Contemporaneously with the signing, control of Berkley passed into others hands via a recapitalization. Van Wagenen, Sannum and the other members gave up certain membership interests, waived and released certain rights, and signed, in addition to the Agreement, a non-competition, non-solicitation and confidentiality agreement (Non-Competition Agreement). As partial consideration for Van Wagenens signing the Non-Competition Agreement, her relinquishment of prior interests in Berkley, and her waiver and release of certain rights, she was granted the benefits and rights created by the Agreement.

The Agreement recites that Berkleys board of managers determined to grant restricted units to Van Wagenen "in order to increase [her] participation in the success of the Company and in consideration for [her] entering into and executing [the Non-Competition Agreement] dated November 20, 2000." Agreement Paragraph 10 states that additional consideration from Van Wagenen was her agreement that as of the date the Agreement was signed, her October 24, 1995, employment agreement with Berkley was no longer of force and effect.

Under the Agreement, Van Wagenen received "Restricted Units" (akin to shares) that could not be sold, assigned, transferred, pledged or otherwise disposed of until the defined "Restricted Period" terminated. The Restricted Period was to lapse (i.e., the units would vest) as to one-third of Van Wagenens Restricted Units on each of the first, second and third anniversaries of November 20, 2000. Accordingly, none of Van Wagenens units would vest during the first year. Upon vesting, Van Wagenen would have the right to transfer units. If Van Wagenen left employment before any of her units vested, she was entitled to compensation under certain circumstances which present the issue on this appeal.

Pursuant to the Agreement and related agreements, Van Wagenen began employment with Berkley or a Berkley subsidiary and was employed through October 19, 2001. On September 24, 2001, she tendered her written resignation stating her last day would be October 19, less than one year after the Agreement was signed. She voluntarily resigned "without expressing any reason." She alleges "[the] Defendants" breached Paragraph 5.B. of the Agreement by refusing and continuing to refuse to pay her the $250,000 called for in 5.B.

Van Wagenens original complaint contained only the breach of contract claim involving 5.B. The trial court granted Berkleys motion for judgment on the pleadings, with leave to amend based on Van Wagenens counsels offer of proof. He said she could allege and "they" believed they could prove it was the parties intention when they entered into the Agreement that 5.B would apply where there was a voluntary termination and that, consistent with that "understanding and belief," the only other person who had a similar contract (Sannum) was paid the $250,000 by Berkley when he voluntarily ended his employment. Counsel also asked to amend to request reformation of the Agreement to reflect the parties true intentions. The court granted leave to amend, noting this was a young case, having been filed just over three months earlier. However, the minute order set out the courts findings that the Agreement was not ambiguous, the interpretation offered by Van Wagenen was not consistent with the Agreements language, and denying her request for an evidentiary hearing.

The court later sustained without leave to amend Berkleys demurrer to the amended complaint.

DISCUSSION

Where, as here, we are asked to interpret a writing, we do so independently. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866.) Whether extrinsic evidence is admissible in a dispute over a contractual interpretation depends on whether the language is reasonably susceptible of more than one interpretation. That threshold ambiguity question is a question of law and thus always subject to our independent review. (City of Chino v. Jackson (2002) 97 Cal.App.4th 377, 383; Estate of Kaila (2001) 94 Cal.App.4th 1122, 1133.)

The Key Paragraphs of the Agreement. Paragraph 5. If Van Wagenen "cease[d] to be employed by the Company . . . for other than Cause," Berkley or Jeffrey Berkley (Jeffrey) had "the right or obligation" to buy Van Wagenens vested units. (Bold emphasis added.) If Van Wagenen were "properly terminated for Cause," the Units would automatically revert to Berkley. (Bold emphasis added.)

Agreement paragraph 13.J provides, "The captions and headings of the sections and subsections of this Agreement are included for convenience only and are not to be considered in construing or interpreting this Agreement." Accordingly, we do not refer to the paragraph headings.

Paragraph 5.A. If Van Wagenen were " terminated for other than Cause," Berkley would have the first right to buy her vested units for the greater of fair market value on her termination date or $250,000. (Bold emphasis added.) If, under specified circumstances, Berkley chose not to exercise its first right, it was to notify Jeffrey, who had the right to buy Van Wagenens vested units on the same terms. If Jeffrey chose not to exercise his right, Bkley was obligated to pay Van Wagenen not less than $ 250,000 in cash.

Paragraph 5.B. If Van Wagenen "cease[d] to be employed by the Company other than for Cause" and none of her units had vested, all rights to the units were to revert to Berkley, and Berkley was to pay her $250,000 within 30 days of the termination date. (Bold emphasis added.) This paragraph could apply only during Van Wagenens first year of employment.

Paragraph 7. If Van Wagenens employment status with Berkley was (1) terminated by Berkley "for other than `Cause (as defined below)," (2) "terminated by [Van Wagenen] for Good Reason (as defined below)" or (3) "terminated by reason of death or Disability (as defined below), then the Restricted Period shall lapse with respect to all Van Wagenens restricted units as of the termination date. (Bold emphasis added.) In contrast, if Van Wagenens "employment status with the Company" was (1) "terminated by the Company for `Cause" or (2) "terminated by [her] other than for Good Reason, then" her unvested units would be forfeited to Berkley without payment of any consideration by Berkley. (Bold emphasis added.)

Paragraph 2, which describes the restrictions on the units and defines the Restricted Period, refers to a "Paragraph 6" of the Agreement. However, the Agreement contains no "Paragraph 6." Paragraph 2.B refers to "Paragraph 6" as describing a risk of forfeiture of Restricted Units and providing that "[u]nless the Restricted Period is previously terminated pursuant to Paragraph 6," the restrictions shall lapse and the Restricted Units become transferable. Because Paragraph 7 addresses both subjects, we conclude those references to "Paragraph 6" are to Paragraph 7.
Temporarily omitting from Paragraph 7, for simplicitys sake, a termination by death or disability, the paragraphs first sentence means that if Berkley terminated Van Wagenen for other than Cause or she left for Good Reason, any unvested units she held would immediately vest and she could, for example, sell them on whatever market existed for such interests. She would not receive the $250,000 from Berkley.

This sentence means that if Van Wagenen were terminated for Cause or resigned other than for Good Reason, any unvested units would be forfeited to Berkley. Presumably, Van Wagenen could transfer any vested shares for value.

Paragraph 7 defines "Cause" as a conviction of Van Wagenen or a no contest, or similar, plea to "fraud, embezzlement, misappropriation of assets, or any felony, other than a crime for which vicarious liability is imposed upon [her] solely by reason of [her] position with the Company and not by reason of [her] conduct."

Paragraph 7 defines "Good Reason" as a "material reduction in [Van Wagenens] position, duties, responsibilities, compensation or status with [Berkley]" or "[Berkley]s executive offices [are] no longer located within a 50 mile radius of La Mirada, California[.]"

By its terms, Paragraph 5.B applies only to the first year following the Agreements execution. Berkley says that by its terms 5.B does not apply to a "resignation" by Van Wagenen. Paragraph 5.B applies, says Berkley, only to a termination of her employment by Berkley. Berkley says that since "Cause" and "other than for Cause" are both defined in paragraph 7 to be ends to her employment that could be undertaken only by Berkley, Paragraph 7 controls. Berkley adds that Paragraph 7 defines the only two types of terminations that could be initiated by Van Wagenen: resignation for "Good Reason" and "other than for Good Reason." Thus, according to Berkley, the Agreements use of "Cause" relates to terminations by Berkley; its use of "Good Reason" applies to resignation by Van Wagenen.

Several times Berkley states in its appellate brief that Paragraph 7 defines not just "`Cause" but "termination `other than for Cause." While Paragraph 7 uses the phrase "terminated by [Berkley] for other than `Cause (as defined below)," it expressly defines only "Cause," "Disability," and "Good Reason."

Van Wagenen argues the trial courts interpretation rendered 5.B meaningless because its condition, payment of $ 250,000, could never occur if Berkley terminated her other than for cause when none of her units had vested. If Berkley terminated her other than for Cause, under Paragraph 7, all her units immediately would vest. Under 5.B, however, she would lose all her units (a cash payment being substituted) if she stopped being employed other than for cause when none of her units had vested.

Van Wagenen also contends the phrase "cease[s] to be employed" is broad language used in place of "is terminated." It means not just a termination by Berkley, as Berkley contends, but does not specify the manner in which her employment ends. Accordingly, it includes a voluntary end to her employment by Van Wagenen. By its terms, 5.B applies only to unvested units. If Berkley terminated her other than for Cause, under Paragraph 7, all her units would immediately vest. Under 5.B, however, if she ceased to be employed other than for cause, she would forfeit her units, but be paid $250,000, an event which cannot occur under Paragraph 7. We also find merit in Van Wagenens questioning why Paragraph 5.B says "cease[s] to be employed" instead of "terminated by Berkley," if that was the parties intent, when forms of the verb "terminate" dominate the rest of the pertinent parts of the document.

The first amended complaint alleges Van Wagenen resigned "without expressing any reason therefor . . . ."

Van Wagenen accurately points out that Paragraph 5.B is the more specific of the two paragraphs in that it relates solely to unvested units and, therefore, can apply only during the first year of the Restricted Period. Her interpretation also gives effect to Paragraph 5.B. (See 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 690, p. 623, quoting Rest.2d Contracts, § 203 (a), "`[A]n interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful or of no effect.")

Berkley claims Van Wagenens interpretation of Paragraph 5.B is inconsistent with the express purpose of the Agreement — to grant her Restricted Units in order to "increase [her] participation" in Berkleys "success." As we have noted, however, the Agreement itself also states the Restricted Units were given in consideration for her signing the Non-Competition Agreement (which included non-solicitation and confidentiality agreements) and for agreeing that her employment agreement was no longer of any force or effect.

We conclude that Paragraph 5.B is unambiguous and on its face applies to the first year of Van Wagenens Restricted Period, while all her units were unvested, and that its application included her voluntary resignation, which was not a termination for cause, thus entitling her to the $ 250,000 payment. As a result of our holding, her causes of action for reformation, for an alternative breach of contract under Paragraph 5.A, and application of her estoppel theory become unnecessary.

DISPOSITION

The judgment dismissing the action is reversed and the matter is remanded for proceedings consistent with this opinion. Van Wagenen is entitled to her costs on appeal.

We concur: SPENCER, P.J., VOGEL (Miriam A.), J.


Summaries of

Wagenen v. Berkley Industries, LLC

Court of Appeals of California, Second Appellate District, Division One.
Nov 24, 2003
No. B163189 (Cal. Ct. App. Nov. 24, 2003)
Case details for

Wagenen v. Berkley Industries, LLC

Case Details

Full title:SUSAN VAN WAGENEN, Plaintiff and Appellant, v. BERKLEY INDUSTRIES, LLC…

Court:Court of Appeals of California, Second Appellate District, Division One.

Date published: Nov 24, 2003

Citations

No. B163189 (Cal. Ct. App. Nov. 24, 2003)