Barton v. Elexsys Intern., Inc.

• Decision Date: 06 March 1998
• Docket Number: No. H016348,H016348
• Citation: 73 Cal.Rptr.2d 212,62 Cal.App.4th 1182
• Parties: , 98 Cal. Daily Op. Serv. 2481, 98 Daily Journal D.A.R. 3396 James B. BARTON, Plaintiff and Appellant, v. ELEXSYS INTERNATIONAL, INC., et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

Page 212

73 Cal.Rptr.2d 212

62 Cal.App.4th 1182, 98 Cal. Daily Op. Serv. 2481,

98 Daily Journal D.A.R. 3396

James B. BARTON, Plaintiff and Appellant, v. ELEXSYS INTERNATIONAL, INC., et al., Defendants and Respondents.

No. H016348.

Court of Appeal, Sixth District, California.

March 6, 1998.

Kurt E. Wilson, Sweeney, Mason & Wilson, Los Gatos, for Plaintiff and Appellant.

Daniel P. Westman, Molly Brown Fonstall and Gregory C. Tenhoff, Cooley Godward LLP, Palo Alto, for Defendants and Respondents.

COTTLE, Presiding Justice.

In September 1994, defendant Elexsys International, Inc., a manufacturer of integrated circuit boards, was in the midst of a financial crisis. Its stock had plummeted in value, to $1.31 per share, and its cash reserves were almost depleted. To save the company, Elexsys' major shareholder engineered a restructuring of the company, which eliminated the senior vice president position held by plaintiff James B. Barton. Elexsys continued Barton's $200,000 salary and benefits, however, for 12 months pursuant to its "Executive Salary Continuance Plan."

A year later, the company's fortunes had turned around. When Elexsys' stock had risen to $15.31 per share, Barton attempted to exercise stock options he had been granted to purchase stock at $1.25 and $3.50 per share. Elexsys refused his tender, explaining to Barton that his options had lapsed and were no longer exercisable.

Barton sued for breach of contract and fraud. After conducting discovery, Elexsys moved for summary judgment, supporting its motion with the three written stock option agreements upon which Barton was relying. All provided that the options would no longer vest once Barton's employment was terminated. The two most favorable to Barton provided that he could exercise his options no later that 30 days after his termination. The trial court granted Elexsys' motion. On appeal, Barton contends he submitted evidence creating a triable issue of fact as to whether the executive salary continuation plan included stock options. We disagree and therefore affirm the judgment.

FACTS

Barton was hired by Diceon Electronics, Inc., now known as Elexsys, on October 1, 1992, as a senior vice president and general manager of subsidiary Symtron Corporation. At the time, Elexsys' president and chief executive officer (CEO) was defendant Peter Jonas.

On October 9, 1992, Barton was granted the first of three stock options. The October 9, 1992, written stock option agreement provided that "[t]he option term specified in Paragraph 2 hereof shall terminate prior to its Expiration Time ... Should Optionee's employment with the Corporation or its subsidiaries terminate at any time for any reason other than by reason of death or disability during the option term, Optionee shall have the right to exercise this option within thirty (30) days of the date of Optionee's termination of employment, but only with respect to that number of Optioned Shares (if any) for which the option is exercisable on the date that Optionee terminates employment."

On September 9, 1993, Barton was granted the second of his three stock options. The September 9, 1993, written stock option agreement provided that "[t]he option term specified in Paragraph 2 shall terminate prior to the Expiration Date ... Should Optionee cease to be an employee of the Corporation or its subsidiaries for any reason or cause, whether or not meritorious (other than by reason of disability or death) at any time during the option term, then this option shall On November 11, 1993, Barton was granted the third of his stock options. The termination provisions in this agreement were identical to the provisions in the October 9, 1992, agreement (i.e., giving Barton the right to exercise options that were vested on the date of his termination from employment no later than 30 days after the termination).

immediately terminate and cease to be exercisable." ¹

In his deposition, Barton testified that he read and understood each of the three stock option agreements when he signed them. As to the September 9, 1993, agreement, Barton understood that the options granted would not vest, and could not be exercised, after the termination of his employment. As to the two other agreements, Barton testified that he understood his options would not vest after the termination of his employment, and he would have only 30 days after his termination to exercise any vested options. Finally, Barton testified that the three stock option agreements were the only agreements between him and Elexsys regarding his stock option grant.

In late 1993, Elexsys was, as noted earlier, in severe financial distress. Fearing that some Elexsys executives might need to be involuntarily terminated without cause by the company, CEO Jonas got approval from the board of directors to provide severance agreements for each of the company's executives. Different packages were given to different executives and collectively these agreements were called the "Executive Salary Continuance Plan."

Barton's severance agreement, dated December 22, 1993, provided: "In the event your employment is terminated without cause by the Company, you will receive monthly payments equal to your monthly salary at the time of termination for twelve (12) months or until earlier reemployment.... [p] This agreement replaces and supersedes any prior executive salary continuance or severance arrangement.... [p] Exceptions to the above require the written approval of the President/C.E.O." The severance agreement made no mention of stock options.

Barton testified in his deposition that he read, understood, and accepted the severance agreement and that it did not change his understanding that his stock options would terminate pursuant to the terms in the stock option agreements.

In June 1994, Milan Mandaric acquired a significant percentage of Elexsys' stock. Mandaric was told at that time that the company had approximately 45 days of operating capital left before it would have to shut down permanently. To save the company, he engineered a restructuring, which resulted, among other things, in the elimination of Barton's position.

On September 21, 1994, Jonas notified Barton that his position had been eliminated. Barton subsequently resigned, effective September 30, 1994. Neither Jonas nor Mandaric told Barton that his stock options would continue to vest or that he would be able to exercise them after his termination.

At the time Barton left Elexsys, Elexsys' stock was selling at $1.31 per share. Barton's stock options gave him the right to purchase some shares for $3.50 per share and others for $1.25 per share. Barton did not exercise the options that had vested on the date of his termination (September 30, 1994), presumably because the stock was available on the market for a price lower than the $3.50 option price and approximately the same as the $1.25 option price.

In February 1995, when Elexsys' stock had risen to $5.37 per share, Barton called Michael Shimada, Elexsys' chief financial officer, and asked about exercising some of his stock options. He was told the options could no longer be exercised. On September 28, 1995, when the stock had risen to $15.31 per share, Barton attempted once again to exercise In November 1995, Barton filed suit against Elexsys, Jonas, and Mandaric, alleging breach of contract, fraud and negligent misrepresentation. ² When defendants moved for summary judgment, Barton opposed their motion with his own declaration and the declarations of two other former Elexsys executives, all of whom said they believed that options would continue to vest while they were on severance pay.

his options. This time he did it in writing, and included a check for more than $113,000. Shimada responded by mail, returning Barton's check and informing him that the options had lapsed and were no longer exercisable.

Following a hearing, the trial court granted defendant's motion and gave the following reason: "[I]t is undisputed that defendants made no oral promises or representations to the plaintiff regarding his rights to exercise stock options following his termination. (Defendants' Undisputed Facts 37, 42, 43)." From the ensuing judgment, Barton appeals.

STANDARD OF REVIEW

A "motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c); emphasis added.)

To be entitled to judgment as a matter of law, the moving party must show by admissible evidence that the "action has no merit or that there is no defense" thereto. (Code Civ. Proc., § 437c, subd. (a).) A defendant moving for summary judgment meets this burden by showing that one or more elements of the cause of action cannot be established or that there is a complete defense to the action. (Code Civ. Proc., § 437c, subd. (o)(2); Addy v. Bliss & Glennon (1996) 44 Cal.App.4th 205, 213-214, 51 Cal.Rptr.2d 642.) Once the defendant makes this showing, the burden shifts to the plaintiff to show that a triable issue of material fact exists as to that cause of action or defense. (Code Civ. Proc., § 437c, subd. (o)(2).) "Material" facts are those that relate to the issues in the case as framed by the pleadings. (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, 15 Cal.Rptr.2d 598; People v. Hill (1992) 3 Cal.App.4th 16, 29, 4 Cal.Rptr.2d 258.)

Since summary judgment involves pure matters of law, we review a summary judgment ruling de novo. (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064-1065, 225 Cal.Rptr. 203; Parsons Manufacturing Corp. v. Superior Court (1984) 156 Cal.App.3d 1151, 1156, 203 Cal.Rptr. 419.) If summary judgment was proper on grounds other than those articulated by the trial court, the appellate court must nevertheless affirm. (Jackson v. Ryder Truck Rental, Inc. (199...