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STEPHEN KLAASS, Plaintiff and Appellant, v. RATIONAL SOFTWARE CORPORATION, Defendant and Respondent. D041549 COURT OF APPEAL OF CALIFORNIA, FOURTH APPELLATE DISTRICT, DIVISION ONE 2003 Cal. App. Unpub. LEXIS 11799 December 17, 2003, Filed NOTICE: NOT TO BE PUBLISHED IN OFFICIAL REPORTS CALIFORNIA RULES OF COURT, RULE 977(a), PROHIBITS COURTS AND PARTIES FROM CITING OR RELYING ON OPINIONS NOT CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED, EXCEPT AS SPECIFIED BY RULE 977(B). THIS OPINION HAS NOT BEEN CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED FOR THE PURPOSES OF RULE 977. PRIOR HISTORY: APPEAL from a judgment of the Superior Court of San Diego County, S. Charles Wickersham, Judge. Super. Ct. No. GIC769666. COUNSEL: Defendant’s Counsel is William E. Hannum III, Schwartz Hannum PC, Andover, MA Plaintiff’s counsel is Donald R. Holben and Veronica M. Aguilar, Donald R. Holben & Associates, APC, San Diego, CA DISPOSITION: Affirmed. JUDGES: IRION, J. WE CONCUR: HUFFMAN, Acting P. J., O'ROURKE, J. OPINION BY: IRION OPINION: FACTUAL AND PROCEDURAL BACKGROUND Klaass began working for Rational as a software engineer specialist in May 1997. The next month, Rational and Klaass entered into an agreement in which Rational gave Klaass an option to purchase up to 2,500 shares of Rational stock. The option agreement contained the following termination provision: "This Option may be exercised for 30 days after the Optionee ceases to be a Service Provider. . . . In no event shall this Option be exercised later than the Term/Expiration date as provided above." Klaass acknowledged he reviewed the option agreement and understood its provisions, including having 30 days in which to exercise options after termination of his employment. Beginning in April 1999, Klaass took a medical leave of absence from Rational. To qualify for a leave of absence, Klaass was required periodically to provide Rational with a doctor's verification of continued disability. In April 2000, Rational asked Klaass to have his doctor confirm his medical disability or authorize his return to work; if Rational did not receive a response by May 1, 2000, Klaass's leave of absence would be considered unauthorized and his employment would be terminated. On May 1, 2000, Rational received a note from Klaass's doctor stating Klaass would be able to return to work half time within two or three months, and full time by September or October 2000. However, Klaass did not return to work or provide Rational with medical confirmation for continued disability. On November 14, 2000, Rational sent Klaass a letter, by certified mail, requesting a current note from his doctor verifying his disability. The letter informed Klaass: "If we do not get a response from you by November 27, 2000 with either a doctor's note continuing your disability, or a return to work note from your doctor indicating that you are medically cleared to resume your job, we will have no choice but to treat your continued absence as unauthorized leave. We will treat your failure to return to work as indicative of your desire to resign your position with Rational Software and will proceed with the termination of your employment accordingly." Klaass did not accept delivery of the letter or make any attempt to contact Rational about his disability or employment status. By January 4, 2001, Klaass had not returned to work, contacted Rational or provided Rational with the required medical authorization for continued leave. Rational terminated Klaass's employment effective that date. Toward the end of January 2001, Rational left a message on Klaass's cellular telephone that the company was trying to contact him to deliver employment paperwork. Rational asked Klaass to contact the company. Rational sent Klaass, by certified mail, an employment termination package. The package included information about Klaass's right to exercise his stock options. Specifically, a letter from the stock administrator stated, in bold print: "PLEASE NOTE: Transactions must be completed on or before the Last Date to Exercise." Attached to the letter was a closing statement informing Klaass his last date to exercise his stock options was February 3, 2001. On January 29, 2001, Rational left two telephone messages for Klaass's attorney, Dale Britton, regarding Klaass's employment termination and the information Rational was trying to deliver to Klaass. Britton asked Rational to forward the information about Klaass to Britton's office. Rational told Britton that Klaass could pick up his employment termination package, which contained his final check and numerous forms, at the post office. In late January 2001, after receiving Rational's telephone message about the attempts to contact him, Klaass telephoned Britton. On January 30, 2001, Britton informed Klaass that Rational had terminated him. Klaass picked up his employment termination package from the post office on February 10, 2001. On June 22, 2001, Klaass, represented by new counsel, unsuccessfully attempted to exercise his stock options. In a first amended complaint, Klaass sued Rational for discrimination based on disability, wrongful termination, breach of implied covenant of good faith and fair dealing, intentional and negligent infliction of emotional distress, and breach of contract. Klaass later dismissed, with prejudice, all causes of action against Rational except breach of contract. As to that cause of action, Klaass alleged Rational breached its agreement to allow him to cash out his vested options when it did not timely and properly advise Klaass of his date of termination and the deadline for exercising the options. Rational moved for summary judgment on the grounds: (1) the stock option agreement did not require Rational to give notice; (2) Rational did not breach an express term of the agreement; (3) Rational notified Klaass of his employment termination, and reminded him of the deadline for exercising his stock options before the period expired; and (4) Klaass's failure to exercise his stock options within the prescribed period resulted from his own inadvertence and neglect. The court granted summary judgment, finding the stock option agreement required Klaass be given 30 days to exercise his options after receiving notice of employment termination. The court found Klaass received notice of employment termination on January 29, 2001, and that the 30-day period to exercise stock options expired on February 28, 2001. The court concluded Klaass could not maintain an action for breach of contract because he did not attempt to exercise his stock options by the end of February, and the evidence strongly suggested he failed to do so as a result of his own inadvertence and neglect. Further, the court found there was no evidence suggesting Rational should be estopped from relying on the expiration period as a defense or that Rational waived the expiration period. DISCUSSION A. Standard of Review Summary judgment is proper only when there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A defendant moving for summary judgment has the overall burden of showing one or more elements of the cause of action cannot be established or there is a complete defense to the plaintiff's action. (Id., § 437c, subd. (o)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849.) Once the defendant has met this burden, the burden shifts to the plaintiff to show "'a triable issue of one or more material facts exists as to that cause of action or a defense thereto.'" (Aguilar, at p. 849.) The plaintiff may not rely on the mere allegations or denials of its pleadings to show a triable issue of material fact exists. (Code Civ. Proc., § 437c, subd. (o)(2); Aguilar, at p. 849; Parsons v. Crown Disposal Co. (1997) 15 Cal.4th 456, 464 & fn. 4;Scheiding v. Dinwiddie Construction Co. (1999) 69 Cal.App.4th 64, 69.) On appeal, we independently assess the correctness of the trial court's ruling, applying the same legal standard that governs the trial court. (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 404;Buss v. Superior Court (1997) 16 Cal.4th 35, 60, 65.) We strictly construe the moving party's evidence and liberally construe the opposing party's evidence, resolving any doubts as to the propriety of granting the motion in favor of the opposing party. (Silva v. Lucky Stores, Inc. (1998) 65 Cal.App.4th 256, 261;Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th 558, 562.) B. The Court Properly Found Klaass Received Notice, on January 29, 2001, of His Employment Termination and the 30-Day Period to Exercise His Stock Options Klaass contends the evidence does not support the court's finding he received notice of his employment termination and notice of the 30-day period to exercise his stock options on January 29, 2001. He asserts: (1) there was no evidence his attorney communicated with him about the effective date of his employment termination; and (2) the undisputed facts show he did not receive the package containing the notice of termination and the notice of the 30-day exercise period until February 10. "As against a principal, both principal and agent are deemed to have notice of whatever either has notice of, and ought, in good faith and the exercise of ordinary care and diligence, to communicate to the other." (Civ. Code, § 2332.) An attorney is his client's agent, and the agent's knowledge is imputed to the principal even when the agent does not actually communicate with the principal. (Chapman College v. Wagener (1955) 45 Cal.2d 796, 802;Powell v. Goldsmith (1984) 152 Cal. App. 3d 746, 750-751, 199 Cal. Rptr. 554;2 Witkin, Summary of Cal. Law (9th ed. 1987) Agency and Employment, § 99, pp. 97-98.) "The basis for imputing knowledge to the principal is that the agent has a legal duty to disclose information obtained in the course of the agency and material to the subject matter of the agency, and the agent will be presumed to have fulfilled this duty." (Triple A Management Co. v. Frisone (1999) 69 Cal.App.4th 520, 534-535;In re Marriage of Cloney (2001) 91 Cal.App.4th 429, 439.) Here, the undisputed facts show Klaass's attorney Britton had actual notice on January 29, that Klaass had been terminated from Rational. Because Britton's actual knowledge is imputed to Klaass, Klaass received notice of his employment termination on January 29. (Chapman College v. Wagener, supra, 45 Cal.2d at p. 802.) Moreover, Klaass testified that he contacted Britton in late January 2001, and on January 30 Britton informed him that Rational had terminated him. Thus, contrary to Klaass's argument on appeal, Britton expressly advised him of the effective date of his termination before Klaass received his employment termination package on February 10. (See D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 21-22, 112 Cal. Rptr. 786 [great deference accorded admission by party opposing summary judgment showing no factual issue to be tried].) The undisputed facts also show Klaass had notice of the 30-day exercise period since the inception of his employment. The stock option agreement clearly and expressly provides the option may be exercised for 30 days after the optionee ceases to be employed, and under no circumstances later than that date. When Rational and Klaass entered into the stock option agreement in June 1997, Klaass acknowledged he understood he would have 30 days in which to exercise his stock options after he was no longer employed with the company. Once Klaass received notice of his employment termination on January 29 or 30, he was obligated to exercise his stock options within the next 30 days. At a minimum, Klaass was on inquiry notice that the exercise period had commenced. (In re Marriage of Cloney, supra, 91 Cal.App.4th at pp. 436-437 [a person has "of a particular fact if he or she has knowledge of circumstances which, upon reasonable inquiry, would lead to that particular fact].) Thus, as of January 29 or 30, Klaass was properly advised and had notice of his employment termination and the necessity to exercise his stock options within 30 days. C. Klaass's Failure to Exercise His Stock Options Resulted From His Own Inadvertence or Neglect Klaass challenges the court's finding that he did not timely exercise his stock options as a result of his own inadvertence or neglect. He asserts Rational notified him the deadline for exercising his stock options was February 3, and thus the exercise period had lapsed by the time he received notice on February 10. However, as we have previously concluded, Klaass received notice of his employment termination not on February 10, but on January 29 or 30, when he knew, or reasonably should have known, he had 30 days from that date in which to exercise his stock options. Klaass's choice to ignore or avoid Rational's attempts to contact him and wait until February 10 to accept delivery of his employment termination package does not excuse his failure to exercise his stock options within the 30-day period following his employment termination. Even after Klaass received the employment package on February 10, he failed to use due diligence and sat on his rights with respect to exercising his stock options for more than four months - well beyond the 30-day exercise period. On the undisputed facts presented, we conclude Klaass's failure to make a timely exercise of his stock options was not due to lack of proper notice but to his own inadvertence or neglect. D. Rational Did Not Prevent Klaass from Exercising His Stock Options Within the Legally Prescribed Period Klaass contends Rational prevented him from exercising his stock options within the legally prescribed period by misinforming him of the expiration date, resulting in a breach of its duties of good faith and fair dealing. Klaass further contends Rational cannot take advantage of its own wrongful acts or omissions to escape liability and should be estopped from asserting he did not timely exercise his stock options. Preliminarily, we note Klaass dismissed, with prejudice, his cause of action against Rational for breach of the implied covenant of good faith and fair dealing. Klaass's voluntary dismissal with prejudice constitutes a determination on the merits and is a final judgment in favor of Rational as to that cause of action. (Roybal v. University Ford (1989) 207 Cal. App. 3d 1080, 1085-1086, 255 Cal. Rptr. 469.) Thus, any claim that Rational breached its duties of good faith and fair dealing is not cognizable on appeal. (Rosen v. Robert P. Warmington Co. (1988) 201 Cal. App. 3d 939, 943, 247 Cal. Rptr. 635 [voluntary dismissal is not appealable by plaintiff who chose that course].) In any event, Rational was not responsible for Klaass's failure to make a timely exercise of his stock options. (Cf. Citron v. Franklin (1943) 23 Cal.2d 47, 57 [plaintiff's failure to exercise stock options was caused by wrongful acts of defendants]; Bertero v. National General Corp. (1967) 254 Cal. App. 2d 126, 142, 62 Cal. Rptr. 714 [defendant employer willfully breached employment agreement, eliminating plaintiff's ability to exercise stock options].) Klaass was aware that if he continued on an unauthorized leave of absence, Rational would proceed with terminating his employment. Nevertheless, he refused to respond to Rational's numerous attempts to contact him about his employment status. On January 29 or 30, 2001, Klaass received notice his employment was terminated and his employment termination package was at the post office. Although Klaass knew his right to exercise his stock options would expire in 30 days, he waited until February 10 to accept receipt of the employment termination package. He made no inquiry of his attorney or Rational when the closing statement referred to February 3 as the last day to exercise his stock options, choosing instead to wait an additional four months before asserting his rights. Klaass's attempt to exercise his option in June 2001 is inconsistent with his claim he relied on the February 3 deadline contained in Rational's letter. Any perceived misinformation about the expiration of the exercise period did not prevent Klaass from timely exercising his stock options. Klaass's estoppel argument is similarly unavailing. "The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the existence of a state of facts if he intentionally led another to believe a particular circumstance to be true and to rely upon such belief to his detriment." (Strong v. County of Santa Cruz (1975) 15 Cal.3d 720, 725, 125 Cal. Rptr. 896;Greene v. State Farm Fire & Casualty Co. (1990) 224 Cal. App. 3d 1583, 1590, 274 Cal. Rptr. 736.) Thus, if a statement or conduct by a defendant lulls the plaintiff into a false sense of security resulting in inaction, and there is reasonable reliance, estoppel is available. (Borglund v. Bombardier, Ltd. (1981) 121 Cal. App. 3d 276, 281, 175 Cal. Rptr. 150; see also Tresway Aero, Inc. v. Superior Court (1971) 5 Cal.3d 431, 440, 96 Cal. Rptr. 571 [plaintiff's reliance must be reasonable before estoppel will apply].) When no estoppel could exist as a matter of law, the issue may be resolved on summary judgment. (Martinez v. Scott Specialty Gases, Inc. (2000) 83 Cal.App.4th 1236, 1248.) Here, Klaass presented no evidence that Rational misrepresented or concealed any facts on which he reasonably relied, causing him to refrain from timely exercising his stock options. Rational terminated Klaass's employment as of January 4, 2001, and properly informed him the stock option exercise period expired 30 days later, on February 3. However, because Klaass did not receive notice of his employment termination until January 29 or 30, the trial court found the 30-day period expired on February 28, 2001, thus extending the exercise period in Klaass's favor. Even with the benefit of the extended period, Klaass did not attempt to make a timely exercise of his options. Rational's conduct in no way lulled Klaass into a false sense of security or induced him to delay exercising his stock options until June 22, 2001. In any event, Klaass made no reasonably diligent efforts to resolve any ambiguity or discrepancy created by the February 3 date contained in Rational's letter. Klaass knew he had 30 days in which to exercise his options following termination of his employment, and admittedly knew he was terminated on January 29 or 30. He was represented by counsel whom he could have consulted about his rights. Klaass also could have contacted Rational to clarify his understanding about when the option period expired. Rather than showing good faith confusion or ambiguity about the correct expiration date, Klaass waited more than four months to attempt to exercise his options. Had Klaass used reasonable diligence, he would have been able to exercise his options in a timely fashion. Under these circumstances, no reasonable inference could be drawn that Klaass reasonably relied on Rational's conduct or representations to his detriment. Klaass's reliance on Vu v. Prudential Property & Casualty Ins. Co. (2001) 26 Cal.4th 1142 to support his estoppel argument is misplaced. In Vu, the insurer inspected the property of its insured to determine the nature and extent of damage caused by an earthquake. The insurer represented incorrectly to its insured that his loss was less than the deductible amount in the insurance policy and advised him not to file a claim. (Id. at p. 1152.) The Supreme Court held the insurer may be estopped to raise a statute of limitations defense if the insured could show he refrained from bringing a timely action because he reasonably relied on the insurer's factual misrepresentation. (Ibid.) Here, in contrast, Rational did not prevent Klaass from discovering the exercise period expired on February 28, 2001, or from exercising his options within that period. Further, Klaass could not reasonably rely on the earlier date of February 3 as the last day to exercise his options, particularly when he attempted to exercise them four months later. Thus, as a matter of law, no estoppel arose. (See Lesko v. Superior Court (1982) 127 Cal. App. 3d 476, 486-487, 179 Cal. Rptr. 595.) E. Principles of Equity Are Inapplicable "'An option is an offer by which a promisor binds himself in advance to make a contract if the optionee accepts upon the terms and within the time designated in the option. Since the optionor is bound while the optionee is free to accept or not as he chooses, courts are strict in holding an optionee to exact compliance with the terms of the option.'" (Simons v. Young (1979) 93 Cal. App. 3d 170, 182, 155 Cal. Rptr. 460.) Generally, the time within which an option must be exercised cannot be extended beyond that provided in the contract. (Holiday Inns of America v. Knight (1969) 70 Cal.2d 327, 330, 74 Cal. Rptr. 722.) Although a court may grant relief on traditional grounds for equitable intervention such as fraud, accident or mistake, "it may not grant equitable relief to extend an option period beyond that agreed to by the parties when, as here, the failure to timely exercise the option is due entirely to the inadvertence or neglect of the optionee to which the optionor in no way contributed." (Simons, at p. 182; Bekins Moving & Storage Co. v. Prudential Ins. Co. (1985) 176 Cal. App. 3d 245, 253, 221 Cal. Rptr. 738.) Because Klaass's failure to make a timely exercise of his stock options was due entirely to his own inadvertence or neglect, he cannot invoke principles of equity to avoid summary judgment. F. Summary Judgment Was Proper Because There Are No Triable Issues of Material Fact A claim for breach of contract requires the plaintiff to establish "the existence of the contract, performance by the plaintiff or excuse for nonperformance, breach by the defendant and damages." (First Commercial Mortgage Co. v. Reece (2001) 89 Cal.App.4th 731, 745.) Here, Klaass alleged Rational breached its stock option agreement by not timely and properly advising him of the date of his employment termination and the period within which he must exercise his stock options. In moving for summary judgment, Rational met its burden of showing Klaass cannot establish one or more elements of his breach of contract cause of action. The undisputed facts show Klaass received notice of his employment termination and the period for exercising his stock options, but he failed to exercise the options within that period and presented no excuse for failing to do so. Nor did Klaass meet his burden of showing there were any triable issues of material fact as to his breach of contract claim. According to the express terms of the stock option agreement, Klaass had no right to exercise his options more than four months after his employment was terminated. (See Barton v. Elexsys Internat., Inc. (1998) 62 Cal.App.4th 1182, 1188.) Rational did not prevent Klaass, who was represented by counsel, from exercising his stock options during the 30-day period following termination of his employment. Because Klaass cannot show any breach of duty, breach of contract or damages proximately caused by Rational's conduct, Rational was entitled to judgment as a matter of law. DISPOSITION The judgment is affirmed. IRION, J. WE CONCUR: HUFFMAN, Acting P. J. O'ROURKE, J.
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