Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County Super. Ct. No. 07CC03383, Charles Margines, Judge.
Richard M. Henry for Plaintiff and Appellant.
Morrison & Foerster, Janie F. Schulman and Tritia M. Murata for Defendant and Respondent.
OPINION
O’LEARY, ACTING P. J.
After over 25 years of employment, Richard R. Shiring retired and sued his employer Certified Alloy Products, Inc. (CAP). Shiring claimed CAP owed him contractually bargained for executive bonuses earned in 2002, 2003, 2004, 2005, and 2006. The trial court granted CAP’s summary judgment motion, concluding Shiring was an at-will employee who received written notice the terms of the bonus plan changed. It ruled CAP essentially terminated the employment contract and offered another contract, which Shiring accepted by continuing to work without objection. Alternatively, the court concluded Shiring, by his five years of silence, was estopped from claiming the contract was not amended. We conclude summary judgment was not appropriate in this case. The judgment is reversed.
I
In 1979, CAP hired Shiring to be a director. In 1988, he was promoted to the position of vice-president of technology and sales. He also began serving on CAP’s board of directors. In May 2007, Shiring retired from the company.
Ten years before his retirement (in 1997), Shiring and CAP negotiated and executed an Executive Employment Agreement (the Agreement), containing the details of the company’s bonus plan. Specifically, Shiring was entitled to an annual bonus calculated as 1 percent of annual net profit. The bonus plan further provided that if employment was terminated without cause, “the [e]xecutive will be entitled to receive a full bonus share in respect of the current financial year.”
The Agreement stated Shiring could be terminated “at any time without [c]ause... upon [six] months prior written notice....” If proper notice was not given, Shiring would be “entitled on termination to all accrued but unpaid entitlements of salary and benefits and additional severance benefits....” The severance benefits were calculated as “six months salary plus one week’s salary for each year of service with the company....”
The Agreement also contained an integration clause, stating, “No amendment to this Agreement shall be effective unless reduced to writing and executed by the President of the Company... and by [Shiring].” The term of the Agreement was “continuing until termination....”
A few years after the contract was executed, Shiring was told his bonus compensation would increase from 1 percent to 1.5 percent. This change was not memorialized by a written amendment to the Agreement. Nevertheless, Shiring accepted the additional money without objection.
At the end of 2001, CAP was acquired by and merged with another company (Doncasters), but retained the name CAP. In early 2002, CAP informed Shiring orally and in writing that the bonus plan had to be modified. Shiring admitted he received at least three written documents notifying him the bonuses would be calculated differently. One letter explained it was “imperative that [e]xecutives are not only compensated fairly, but also equitably.” The newly formed company determined all the executives should be compensated the same way, and it adopted the bonus structure previously used by Doncasters. Shiring was provided an eight-page document describing Doncaster’s 2002 bonus scheme.
When Shiring was paid his 2002 bonus, he also received a written explanation of exactly how it was calculated. Similar written notifications were given to Shiring with his bonus money at the end of 2003, 2004, 2005, and 2006. In his deposition, CAP’s Chief Executive Officer (CEO) estimated the total reduction in bonuses for those years was $299,000.
In his deposition, Shiring admitted he never gave a written or oral response when he learned about the changes to the bonus plan. He deposited and retained the money from the bonus checks for five years. Shiring hid his concerns, other than briefly discussing his general dissatisfaction with the new bonus scheme to a friend and colleague, who was at the same executive level as him in the hierarchy of the company. Shiring admitted he was afraid any objection to the CEO or anyone at Doncasters “most likely would have meant termination from the company.” He believed within a year after the first bonus was paid that he had a claim against CAP, but he did not tell anyone about this potential liability. Shiring filed his breach of contract claim against CAP on March 1, 2007, to beat the applicable statute of limitations, but he did not serve the lawsuit until after he retired two months later. He sought $400,000 in damages for CAP’s alleged breach of the Agreement’s bonus plan.
CAP filed a motion for summary judgment, arguing it did not breach the Agreement when it failed to pay Shiring’s bonuses pursuant to the original terms of the contract for the years 2002 through 2006. Shiring opposed the motion. The court ruled as follows: It concluded the employment contract was “at-will” because it contemplated termination by either party at any time for any cause or without cause. As such, CAP was entitled to modify the terms of employment at any time. (DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th 629 (DiGiacinto).) CAP’s notice of changed terms and conditions constituted a notice of termination, and a unilateral offer of another contract. Shiring’s decision to continue working under the new terms constituted acceptance of the new contract. The court noted there was no dispute Shiring accepted the reduced bonuses and continued working without objecting. Alternatively, the court concluded if Shiring was not an at-will employee, he was nevertheless estopped from claiming the bonus plan had not changed. He received written notification of the modification and continued working.
II
Shiring argues the court’s reliance on the DiGiacinto case was misplaced. He is right. The DiGiacinto case involved a question of first impression: Is the employer of an at-will employee liable for breach of contract when it unilaterally reduces the employee’s wages and thereafter the employee continues to work? (DiGiacinto, supra, 59 Cal.App.4th at p. 631.) Victor DiGiacinto executed a letter agreement with his employer, setting forth the terms and conditions of his employment and wages at the rate of $23.97 per hour. (Id. at p. 632.) The agreement also stated the length of employment was not guaranteed and DiGiacinto could be “terminated at any time by either party, with or without cause, with or without notice.” (Ibid.) In short, the employment was at will. A few months later, the employer sent DiGiacinto a letter stating that his wage was being reduced to $18 per hour as it was the only way to save his job. (Ibid.) DiGiacinto continued to work for nearly one year before suing for breach of contract.
The trial court entered judgment for DiGiacinto, awarding him the difference between his old and new pay rates. (DiGiacinto, supra, 59 Cal.App.4th at p. 633.) The court determined the at-will contract did not provide for unilateral compensation reduction, only for termination at will. The appellate court reversed the judgment, providing the following analysis: At-will employment means an employee may be demoted or otherwise disciplined at will, since it is presumed the employee may be discharged at will. (Id. at p. 634; Lab. Code, § 2922.) “In cases involving employee benefits, such as pension plans and stock options, the rule has developed that the offer of such bonuses constitutes an offer for a unilateral contract, which is accepted if the employee continues in employment after the offer.” (DiGiacinto, supra, 59 Cal.App.4th at p. 635.)
The DiGiacinto court noted other jurisdictions that have directly addressed the issue have held “an employer of an at-will employee can unilaterally change the compensation agreement without being in breach of the employment agreement. The underlying principle appears to be that with respect to an at-will employee, the employer can terminate the old contract and make an offer for a unilateral contract under new terms. Thus, the Court of Appeals of Oregon stated in Albrant v. Sterling Furniture Co. (1987) 85 Or.App. 272... [Albrant]: ‘It is well established in Oregon that, without some contrary agreement, an employment contract is terminable at the will of either party. [Citation.] That means that an employer ordinarily may discharge an employee for any reason and at any time. [Citation.] It follows that an employer may also modify the employment contract so long as the modification applies only prospectively. An employee impliedly accepts such modifications by continuing employment after the modification.’ [Citation.] The foregoing rule in Albrant was adopted by the court in Cotter v. Desert Palace, Inc. (9th Cir. 1989) 880 F.2d 1142, 1145, applying Nevada law; by the Court of Appeals of New Mexico in Stieber v. Journal Publishing Co. (1995) 120 N.M. 270 [901 P.2d 201]; and by the Florida Court of Appeal in Martin v. Golden Corral Corp. (Fla.Dist.Ct.App. 1992) 601 So.2d 1316, 1317.” (DiGiacinto, supra, 59 Cal.App.4th at p. 636.)
Applying this rule, the DiGiacinto court concluded the employer’s letter reducing DiGiacinto’s pay rate “constitute[d] the employer’s notice of termination of the old at-will employment contract and an offer of a unilateral contract under new terms.” (DiGiacinto, supra, 59 Cal.App.4th at p. 639.) DiGiacinto accepted the new terms by continuing to work for his employer for nearly one year before filing his lawsuit. (Id. at pp.638-639.)
In the case before us, CAP argues the trial court correctly determined Shiring’s breach of contract claim failed because his employment agreement was modified by the written notices about the new bonus plan, and his continued employment was an acceptance of the change in terms of employment. It claimed the facts were undisputed Shiring was an at-will employee, he received notice orally and in writing that Doncasters’ bonus plan was replacing the old one, he understood the bonuses would be reduced, and he continued to work for CAP for five more years.
We disagree. The rule announced in DiGiacinto cannot automatically apply when the at-will employment contract specifies the exclusive means by which its terms can be modified. The employment contract in DiGiacinto did not contain a similar integration clause, and therefore, that court was free to assume the employer’s ability to terminate the employee at anytime necessarily included the right to modify the terms of employment at anytime. The same conclusion cannot be made when the parties negotiated for a written amendment requirement. A valid contract provision cannot be ignored as surplusage simply because the employee was at will.
The validity and enforceability of modification restrictions have been repeatedly applied and upheld in different areas of the law. For example, in many employment law cases, courts have rejected the employee’s contention his or her written employment contract, which contained an at-will provision, was later modified by another agreement, requiring cause for termination. (See Tomlinson v. Qualcomm, Inc. (2002) 97 Cal.App.4th 934, 938, 945-946 & fn. 15 [employer’s policy governing termination of employment, adopted after employee signed at-will employment contract, did not affect at-will status because new policy not signed by chairman of the board]; see id. at p. 946 [discussing cases]; Haggard v. Kimberly Quality Care, Inc. (1995) 39 Cal.App.4th 508, 521-522 [employees written employment agreement, which contained at-will provision, not modified by employer’s subsequent oral statements or conduct where agreement required that any modifications be in writing and signed by company president]; see also Civ. Code, § 1698.) Similar restrictions of contract modification have been applied in the real estate context. (See Beggerly v. Gbur (1980) 112 Cal.App.3d 180, 187-189 [real estate salesperson not entitled to commission exceeding amount set forth in written contract where broker and salesperson did not agree to subsequent, higher commission in writing]; and to certain transactions under the Commercial Code. (See Lockheed Electronics Co. v. Keronix, Inc. (1981) 114 Cal.App.3d 304, 309-311 [buyer’s terms as expressed in purchase order, and not seller’s additional or different terms, governed sale where buyer had not agreed to seller’s terms in writing].) The agreed upon restriction on modification in this case was a valid and enforceable term of the contract.
CAP argues the restriction on contract modification was waived. Citing Biren v. Equality Emergency Medical Group, Inc. (2002) 102 Cal.App.4th 125, 141, CAP argues the contracting parties by their conduct may show an intent to treat the modification restriction as though it never existed, impliedly waiving it. The Biren case involved a management agreement including a provision (paragraph 5.11) requiring all amendments to be in writing. (Id. at p. 133.) The trier of fact (the trial court in that case) determined the shareholders had in the past taken oral votes on billing company contracts, contrary to another contract provision (paragraph 3.06) requiring written approval of the shareholders to such contracts. (Id. at p. 141.) Relying on that conduct, as well as the shareholders’ oral amendment of paragraph 3.06 to allow for verbal approval, the appellate court rejected the plaintiffs’ contention the shareholders could not orally amend the agreement under paragraph 5.11 because “‘the parties may, by their conduct, waive such a provision’ where evidence shows that was their intent.” (Ibid.)
However, it cannot be said as a matter of law Shiring intentionally waived the modification requirements. Waiver of a contractual right is ordinarily a question of fact to be determined by a jury or the trial court if there is no jury. (Old Republic Ins. Co. v. FSR Brokerage, Inc. (2000) 80 Cal.App.4th 666, 679 (Old Republic), quoting Posner v. Grunwald-Marx, Inc. (1961) 56 Cal.2d 169, 189.) “In the case of a true waiver implied in fact from conduct, the intent to waive must be clearly manifested or the conduct must be such that an intent to waive may be reasonably inferred.” (13 Williston Contracts (4th ed. 2000) § 39:28, p. 625, fns. omitted [waiver of contract rights may be express or implied through conduct].) Unlike the Biren case, the case before us has no evidence of a long history of oral modifications of the employment contract. CAP cites to one time when the bonus was increased from 1 percent to 1.5 percent. But it is a question of fact whether Shiring’s acceptance of his raise, a one-time occurrence, can be deemed an intentional waiver of all future modifications of the Agreement. Shiring’s intent to waive is a question of fact that could not be resolved by a summary judgment motion.
III
Estoppel is an equitable argument that deprives another of rights or defenses. (In re J.L. (2008) 159 Cal.App.4th 1010, 1024.) “‘The venerable doctrine of equitable estoppel or estoppel in pais, which rests firmly upon a foundation of conscience and fair dealing, [fn. omitted] finds its classical statement in the words of Lord Denman: “[T]he rule of law is clear, that, where one by his words or conduct wilfully causes another to believe the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is [precluded] from averring against the latter a different state of things as existing at the same time....” [Citation.]’ [Citations.]” (Feduniak v. California Coastal Com. (2007) 148 Cal.App.4th 1346, 1359 (Feduniak).)
Evidence Code section 623, which codified the doctrine of estoppel, provides: “Whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it.” “‘Generally speaking, four elements must be present in order to apply the doctrine of equitable estoppel: (1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be [sic] acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.’ [Citations.]” (Feduniak, supra, 148 Cal.App.4th at p. 1359.)
“Although estoppel is generally a question of fact, where the facts are undisputed and only one reasonable conclusion can be drawn from them, whether estoppel applies is a question of law. [Citations.]” (Feduniak, supra, 148 Cal.App.4th at p. 1360.) Here, the relevant facts are undisputed and the trial court could determine the matter as a question of law. Our review is limited: “[W]e review the trial court’s ruling in the light most favorable to the judgment and determine whether it is supported by substantial evidence. [Citations.] ‘“Substantial evidence” is evidence of ponder able legal significance, evidence that is reasonable, credible and of solid value. [Citation.]... [Citations.]... [Citation.] Inferences may constitute substantial evidence, but they must be the product of logic and reason. Speculation or conjecture alone is not substantial evidence. [Citations.]’ [Citation.]” (Ibid.)
Here, CAP provided undisputed evidence to establish all the elements of estoppel except for one. The third estoppel element required evidence CAP was ignorant of the true state of the facts. (Golden West Baseball Co. v. City of Anaheim (1994) 25 Cal.App.4th 11, 47.) Shiring asserts CAP failed to present any evidence “indicating what knowledge or lack of knowledge” was possessed. On the other hand, CAP argues its ignorance of Shiring’s opposition was implicitly proven by the undisputed evidence Shiring never objected or complained to CAP about it. In no way did he express any dissatisfaction with the new plan. Quite to the contrary, he continued his employment as a vice-president of the company and as a member of its board of directors. He accepted all the benefits of the new compensation plan without voicing any concern or objection. By his silence and his conduct, Shiring successfully concealed “he considered the bonus provision of his agreement breached rather than modified, and that he intended to sue [CAP] when he retired.” Both parties are wrong but nevertheless Shiring prevails.
CAP presented evidence indicating what knowledge it possessed. It knew Shiring executed the Agreement containing a provision requiring all modifications be in writing, executed by both CAP and Shiring. CAP does not dispute it modified the bonus plan without officially amending the contract. Although Shiring was notified in writing of the modification, neither he nor CAP executed a written amendment to the contract. Accordingly, CAP knew that potentially one of its executives would take issue with CAP’s failure to comply with the terms of the contract.
Contrary to CAP’s argument, the evidence shows it was not so ignorant of the state of the facts to warrant application of an equitable doctrine. Although CAP was likely unaware of Shiring’s specific plans to file a lawsuit after he retired, it must be deemed to have actual, or at a minimum, constructive knowledge of the Agreement’s written modification provision (and its failure to comply with that term). It is reasonable to infer failure to comply with a contract term could give rise to potential liability. Thus, while Shiring likely breached his fiduciary duty to the company, equity cannot be applied in this case because CAP is not an entirely innocent victim. CAP unilaterally modified the contract without seeking Shiring’s approval and then took a wait-and-see approach for any potential fallout from its executive employees. As noted above, the doctrine of equitable estoppel “rests firmly upon a foundation of conscience and fair dealing” (Feduniak, supra, 148 Cal.App.4th at p. 1359) and in this case it cannot be said the evidence shows either party engaged in fair dealing or acted in good conscience.
We wish to clarify this opinion’s holding is limited to the issues of whether the DiGiacinto rule or equity applied for purposes of a summary judgment motion. It should not be construed as a tacit approval or disapproval of Shiring’s causes of action.
IV
The judgment is reversed. In the interests of justice, neither party shall recover their costs on appeal.
WE CONCUR: MOORE, J. ARONSON, J.