Zemer v. Schreiber

Filed 10/1/09 Zemer v. Schreiber CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, John S. Meyer, Judge. Affirmed.

Jack D. Zemer appeals from a judgment entered against him in his lawsuit against Daniel Schreiber and David Perez (sometimes defendants) following a trial conducted by a referee stipulated to by the parties. (Code Civ. Proc.,  638, subd. (a).) Zemer contends the Referee erred in ruling that (1) an agreement entered into by the parties was not sufficiently definite and certain to constitute a binding contract, and (2) Zemer is not entitled to equitable relief that would recognize such an agreement was created on the basis of promissory estoppel. We conclude that the Referee's decision is well supported by the record and applicable law, because these parties did not create a binding agreement and Zemer's claim of promissory estoppel is without merit. We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

A. Transactional Facts Up to and Including July 26 Meeting and Document

On appeal, the parties each accept the detailed factual statement prepared by the Referee in his statement of decision, and we do likewise. In 2004, Zemer, Schreiber and Perez formed American International Alliance, LLC (AIA) to make private equity investments. They executed an operating agreement for AIA to conduct such business. Zemer and Schreiber contributed equal amounts of cash to capitalize AIA, and Perez contributed " 'sweat equity' " through his management of AIA. AIA subsequently invested in two companies  an entertainment enterprise and a lighting business.

In November 2004, Perez became a full time corporate officer of Surge Global Energy (Surge), which is a publicly traded oil and gas company doing business in Canada and Argentina. By virtue of his position at Surge, Perez was granted stock options. He also held stock in a Surge subsidiary, Signet Energy, Inc. (Signet).^[1] Perez convinced Zemer to purchase $1.8 million of Surge stock in several transactions. Zemer put a substantial portion of the Surge stock that he purchased in his family trust, which he controlled with his wife, and transferred some of it to his two adult sons, who also put some of it in their trusts. Schreiber also became involved with Surge as a member of its board of directors, for which he received stock options.

In the spring of 2006, Zemer and Perez were at odds, and efforts at resolving their differences had failed. A July 27, 2006 meeting of Surge's shareholders was approaching. Zemer wanted to utilize his interest in Surge to conduct a proxy contest and thereby remove Perez from his positions as chief executive officer and chairman of Surge. Likewise, Zemer sought to remove Schreiber from the Surge board.

In response, Perez called a meeting with Zemer and Schreiber on the morning of July 26. According to Perez, the purpose of the meeting was to reach an agreement in order to stop Zemer's " 'shenanigans,' " get Perez reelected as Surge chief executive officer and chairman, and have Schreiber and the rest of Perez's slate of directors elected to Surge's board. Prior to the meeting, Perez prepared a spreadsheet detailing his estimates of the three partners' and families' stock, stock options and warrants held in Surge (and Signet). The spreadsheet lists some of the stock as held in Zemer's trust and in another trust on behalf of the sons. Some of Schreiber's shares are identified as being derived from the board or from an individual named Jamie Schloss. (See pt. IIIC, post.)

The meeting lasted 60 to 90 minutes, with Schreiber attending only portions of the meeting. Perez proposed that he, Zemer and Schreiber each place the assets listed on the spreadsheet into their existing LLC, AIA, and Schreiber would pay $900,000 to Zemer to equalize their capital contributions with respect to the Surge (and Signet) assets. Perez's attorney, Steve Anapoell, attended much of the meeting by speakerphone. During the meeting, Anapoell recommended the creation of additional LLC's (limited liability company) to separate the Surge assets from those of AIA's other two investments (entertainment and lighting companies). Anapoell advised the parties that a multiplicity of issues needed to be resolved in a final agreement, including taxes, asset distribution, capital contribution, transfer or marketability, management, control and limited liability.

During the meeting, Perez modified the spreadsheet that listed the three partners' and family interests in Surge (and Signet) to include a column entitled "capital split" (reflecting that 50 percent of the Zemer family's $1.8 million investment would be $900,000) and to add the four following lines:

"Schreiber owes Zemer $900,000.00 towards the capital account of AIA[.]

"Zemer, Schreiber and Perez will contribute all shares, options and warrants to [AIA, LLC].

"All parties will sign a Mutual General Release and waivers of Civil Code section 1542 with respect to future claims.

"Agreed upon on July 26, 2006[.]"

During the meeting Zemer, Schreiber and Perez each signed the modified spreadsheet (here called "the July 26 document"). Zemer refused to leave the meeting without a $900,000 check. Perez and Schreiber made out a check to Zemer for $900,000, drawn on the AIA account, although all three men understood that the account contained no funds and that Schreiber would place $900,000 of his own funds in the AIA account within a few days to cover the check.

As Zemer left the meeting, Perez asked if he would be at the Surge shareholders' meeting the next day. Zemer stated that he would try to attend. According to Zemer, he thought he could no longer vote his Surge shares at the shareholders' meeting because they now belonged to AIA.

B. Transactional Facts Following the July 26 Meeting; "Breakdown"

At 2:00 p.m. the same day, Zemer's attorney, Ken Polin, sent an e-mail to Perez's attorney, Anapoell, stating that Zemer "felt that we needed to sign a document and funding needs to be done before tomorrow's Surge shareholder meeting." Perez then e-mailed Zemer at 3:12 p.m. and stated, "I am confused, are you now changing your mind again, or am I reading into this wrong. We gave you everything you asked for today." At 4:23 p.m. Zemer replied, "Nothing change no panic. I was advised by my family and [lawyer] due to this history to go hard ASAP.^[[2]] So have Anapol [sic] work overtime and secure the 900K." At 4:28 p.m. Perez replied, "We can put the money in escrow if required. I am counting on you showing up with all the proxies and your votes tomorrow." Zemer did not respond.

Anapoell continued to work on the documents for the deal, exchanging e-mails with Zemer's lawyer Ken Polin. He told Polin, "There are many securities and tax issues we are working through in connection with the proposed [LLC] Agreement of Surge/Signet Investments, LLC. As you can imagine, it is not a plain vanilla LLC agreement." Anapoell said the earliest he would be able to finish the documents was the end of the next day (Thursday), and that they would be completed, at the latest, by Friday.

The next morning, prior to the Surge shareholders' meeting, Perez stopped payment on the $900,000 check. He also sent an e-mail to Anapoell stating that it "seems [Zemer] has breached our agreement." According to Perez, Zemer had "told shareholders to not show up this morning." Zemer did not attend the meeting, but neither did he disrupt it. At the shareholders' meeting on July 27, 2006, a quorum was present, and Perez and Schreiber were reelected as corporate officers of Surge.

The next day, Zemer's attorney contacted Anapoell to ask when the July 26 deal documents would be ready. Perez instructed Anapoell not to respond because he and Schreiber were rethinking whether they wanted to settle with Zemer. On July 31, 2006, Perez informed his attorney, "My desire is to not proceed with Zemer in any way except a court of law." On August 2, 2006, Zemer learned that payment had been stopped on the $900,000 check. According to Schreiber, he had not intended to fund the $900,000 check until definitive documents were signed with respect to the deal reflected in the July 26 document.

C. Litigation

On August 15, 2006, Zemer filed suit against Perez and Schreiber. He alleged causes of action for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty and constructive fraud (as well as specific performance against Perez, regarding transfer to AIA of his Surge/Signet shares). Zemer alleged that the July 26 document constituted a binding settlement agreement and that Perez and Schreiber had breached the agreement by stopping payment on the $900,000 check. Zemer sought damages in the amount of $900,000, plus additional consequential and punitive damages.

The parties stipulated to an order of general reference of the lawsuit to the Honorable J. Richard Haden (the Referee). All three were represented by experienced trial counsel at the three-day trial, and counsel each argued that the parties were sophisticated business persons in their dealings with each other. Each party and the transactional attorneys testified about the events leading up to and after the July 26 meeting. The Referee issued a tentative statement of decision, and took objections and comments from the parties. Zemer argued for the first time that the doctrine of promissory estoppel should provide an alternate ground for recovery.

D. Ruling; Judgment

After hearing oral argument, the Referee issued a final statement of decision in favor of Perez and Schreiber. He included an extensive statement of facts that described the parties, their July 26, 2006 meeting, and "the breakdown." The Referee ruled that the July 26 document was not a binding contract. First, the Referee found that because the parties had not reached mutual assent to all of the material terms of their agreement, the July 26 document was too indefinite and uncertain to be enforced. In particular, the court stated that all three parties understood that their attorneys would be working together to provide final documents, regarding tax consequences, management and control, and to create a new LLC or two, in order to separate Surge's assets from those of AIA's other businesses. (The AIA operating agreement was not designed to accommodate publicly traded Surge stock, but only private equity investments.) The July 26 document does not contain any agreement about how to handle subsequent documentation.

The Referee also noted that Zemer had told the parties that afternoon that the funding of the check would have to take place before the Surge shareholder meeting, although at the morning meeting, Schreiber was given several days to fund the check.

Next, the Referee concluded that the July 26 document was not an enforceable agreement because the consent of several third parties was necessary before it would become binding. Specifically, the stock that Zemer agreed to transfer to AIA could not be transferred from the trusts without the consent of his wife and his sons, and Schreiber and Perez would need the consent of the Surge board of directors to transfer their stock options to AIA. The Referee relied on the requirement that the parties obtain the consent of third parties, to find that since they anticipated obtaining such approvals, the agreement had not taken effect and "the contract is not complete until the third party has approved. Until that happens neither party is bound by the agreement." (Santa Clara-San Benito etc. Elec. Contractors' Assn. v. Local Union No. 332 (1974) 40 Cal.App.3d 431, 436 (Santa Clara).)

The Referee concluded that no further proceedings were required, since Zemer was not entitled to equitable relief in the form of either specific performance or relief under the doctrine of promissory estoppel. The Referee stated, "[E]quitable remedies require the inadequacy of a legal remedy, terms which are sufficiently definite and certain, and performance by Plaintiff. Here money damages would suffice, many terms were left for further negotiation, and Plaintiff reneged on the agreement first, then never tendered his own performance by transferring shares." The Referee's final statement of decision does not specifically rule on the causes of action for breach of fiduciary duty or constructive fraud, nor expressly include findings on the appropriate scope of the release and waiver of claims found in the July 26 document. (Civ. Code,  1542.)

The Referee's final statement of decision was filed with the trial court, and judgment was entered in accordance with Code of Civil Procedure section 644, subdivision (a), as a final judgment resolving the lawsuit. Zemer appeals.

DISCUSSION

I

INTRODUCTION AND CONTRACT INTERPRETATION PRINCIPLES

The parties do not dispute the dispositive facts as set forth in the Referee's statement of decision. "Where [a] statement of decision sets forth the factual and legal basis for the decision, any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision. [Citations.]" (In re Marriage of Hoffmeister (1987) 191 Cal.App.3d 351, 358; Eisenberg, et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2008)  8:62, pp. 8-26 to 8‑27.) Our first task is to determine whether, on those undisputed facts, the July 26 document on its face contains the essential material terms of contract to enable it to be recognized as a binding contractual arrangement that could be enforced by a court. Such an inquiry is conducted de novo, by applying legal principles to the undisputed facts. "Whether a contract term is sufficiently definite to be enforceable is a question of law for the court[,]" to which we apply a de novo standard of review. (Ladas v. CaliforniaState Auto. Assn. (1993) 19 Cal.App.4th 761, 770, fn. 2 (Ladas); see also Patel v. Liebermensch (2008) 45 Cal.4th 344, 348, fn. 1 ["Whether a contract is certain enough to be enforced is a question of law for the court"].) A related inquiry is identifying the actual contract terms agreed upon. " 'Although the terms of a contract need not be stated in the minutest detail, it is requisite to enforceability that it must evidence a meeting of the minds upon the essential features of the agreement, and that the scope of the duty and limits of acceptable performance be at least sufficiently defined to provide a rational basis for the assessment of damages . . . .' " (Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407; Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208-209, 215 (Bustamante).)

Not only a simple de novo analysis is required on this record, however, because of the manner in which this particular trial was conducted. All parties presented comprehensive and extensive evidence about their views of the circumstances of all the transactional dealings among the parties, and their effect upon their legal obligations toward each other. The Referee received all this evidence without objection, summarized it in terms of the original meeting and its "breakdown," and analyzed all the evidence in an effort to give meaning to the terms appearing on the face of the document, and did this for purposes of analyzing contract formation. Hence, although the briefs on appeal discuss issues of extrinsic evidence in aid of interpretation of the contract, our focus must be upon the formation stage of the contract, and this utilizes an objective standard. (2 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, 116, p. 155 ["mutual consent is gathered from the reasonable meaning of the words and acts of the parties, and not from their unexpressed intentions or understanding"].)

We accordingly seek to clarify that our analysis of the record is directed toward determining whether the Referee's conclusions about the extent of agreement reached by the parties, as demonstrated by their activities surrounding the transaction, are well founded in the evidence presented. Although there is authority that allows a contract to be interpreted and constructed, through examination of the conduct of the parties, such authority presupposes there is an existing contract, not just an agreement to agree: " 'A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates.' " (1 Witkin, Summary of Cal. Law, supra, Contracts,  748, p. 836; Civ. Code,  1647, 1636.) Thus, "[a]cts of the parties, subsequent to the execution of the contract and before any controversy has arisen as to its effect, may be looked to in determining the meaning . . . . " (1 Witkin, Summary of Cal. Law, supra, Contracts,  749, p. 838, italics added.) "When the parties to a contract perform under it and demonstrate by their conduct that they knew what they were talking about the courts should enforce that intent." (Crestview Cemetery Assn. v. Dieden (1960) 54 Cal.2d 744, 754.)

"Interpretation of a contract consists in ascertaining the meaning to be given to the expression of the parties. [Citations.]" (1 Witkin, Summary of Cal. Law, supra, Contracts,  741, pp. 827-829.) Extrinsic or parol evidence is admissible to interpret an integrated contract, under certain complex limitations. (2 Witkin, Cal. Evidence (4th ed. 2000) Documentary Evidence,  74, pp. 192-194.) But, the Referee found the parties never got to that stage, or in the alternative, he ruled that promissory estoppel principles did not apply to create an enforceable agreement.

Experienced trial counsel presented extensive and wide-ranging evidence about all the circumstances of the transaction, and the Referee, a retired superior court judge, was likewise very sophisticated in trial procedure. The Referee could properly evaluate and believe those portions of the evidence that were consistent with the respective, and also the alternative, theories of the case presented by the parties. On review of the undisputed factual record, and the factual and legal conclusions drawn by the Referee, this court may appropriately consider whether the July 26 document contains ambiguous terms, in connection with our use of an objective standard to determine whether the July 26 document contains all the essential contract terms for such circumstances of settling a dispute. (Lindsay v. Lewandowski (2006) 139 Cal.App.4th 1618, 1622 ["A settlement agreement, like any other contract, is unenforceable if the parties fail to agree on a material term or if a material term is not reasonably certain."]; also see 1 Witkin, Summary of Cal. Law, supra, Contracts,  741, pp. 827-829 [a trial court's determination of whether an ambiguity exists in a contract, or resolution of it, presents questions of law subject to independent review on appeal, where the evidence is not in conflict].)

Before embarking on our contract analysis, we take note that Zemer's complaint alleged not only contract-based causes of action (including breach of the covenant of good faith and fair dealing and specific performance), but also breach of fiduciary duty and constructive fraud. The Referee's decision adjudicated all causes of action without separately ruling on breach of fiduciary duty or constructive fraud, and the record contains no indication that Zemer objected to that approach. Similarly, on appeal Zemer does not separately address the latter theories, and we treat those tort issues as waived.

II

MATERIAL/ESSENTIAL TERMS OF CONTRACT

A. Background

" 'It is essential to the existence of a contract that there should be: 1. Parties capable of contracting; 2. Their consent; 3. A lawful object; and 4. A sufficient cause or consideration.' " (1 Witkin, Summary of Cal. Law, supra, Contracts,  3, p. 61, citing Civ. Code,  1550; Weddington Productions v. Flick (1998) 60 Cal.App.4th 793, 811 (Weddington).) The parties need not reach a "subjective meeting of the minds; in the absence of fraud, mistake, etc. [citation], the outward manifestation or expression of consent is controlling." (1 Witkin, Summary of Cal. Law, supra, Contracts, 116, p. 155; Brant v. California Dairies (1935) 4 Cal.2d 128, 133.) We seek to determine whether the parties consented to the same things in the same sense. (Civ. Code,  1580.) An obligation will not be enforceable unless its terms are sufficiently definite so that the performance promised is reasonably certain. The courts are to determine whether the terms provide an adequate basis for determining the existence of a breach and providing an appropriate remedy. (Weddington, supra, at p. 811.) "To be enforceable, a promise must be definite enough that a court can determine the scope of the duty and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages." (Ladas, supra, 19 Cal.App.4th 761, 770.)

The July 26 document was intended to resolve certain unspecified disagreements between the parties, and it references a "Mutual General Release," even though there was no pending litigation between the parties at that time that might have been the subject of a release of claims. The parties' briefing refers to the July 26 document as a "settlement agreement," and that is a fair characterization of that document. In the context of settling this dispute, the material terms on the face of this document included the amount of payment that Zemer wanted, transfer of stock to AIA, and some kind of release of claims among the parties. (See Kohn v. Jaymar-Ruby Inc. (1994) 23 Cal.App.4th 1530, 1534; Stewart v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565, 1584; Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 308 ["Whether the parties intended their communications to be a binding settlement agreement or an agreement to further negotiate after a formal draft was prepared is a factual question not properly the subject of a demurrer"].) We will examine those three sets of settlement terms separately to determine if the agreement containing them was an enforceable and complete one. First, however, we examine comparable situations in which the necessary enforceability may be found lacking.

B. Agreements to Agree

" '[I]f an essential element is reserved for the future agreement of both parties, as a general rule the promise can give rise to no legal obligation until such future agreement. Since either party in such a case may, by the very terms of the promise, refuse to agree to anything to which the other party will agree, it is impossible for the law to affix any obligation to such a promise.' " (Weddington, supra, 60 Cal.App.4th 793, 812.) "A contract which leaves an essential element for future agreement of the parties is usually held fatally uncertain and unenforceable." (Okun v. Morton (1988) 203 Cal.App.3d 805, 817.)

"Where any of the terms are left for future determination and it is understood that the agreement is not to be deemed complete until they are settled, or where it is understood that the agreement is incomplete until reduced to writing and signed by the parties, no contract results until this is done. [Citations.]" (1 Witkin, Summary of Cal. Law, supra, Contracts, 134, p. 173.) In some contracts, a condition of completing an agreement is the obtaining of the signatures of all other parties, and such a contract is not binding upon those who sign until the others also sign. (Id. at 135, p. 175.)

It is not necessary that all minor terms of a contract be spelled out, but rather only that all essential elements are agreed upon. (1 Witkin, Summary of Cal. Law, supra, Contracts, 146, p. 185.) For example, "Parties may engage in preliminary negotiations, oral or written, in order to reach an agreement. These negotiations ordinarily result in a binding contract when all of the terms are definitely understood, even though the parties intended that a formal writing embodying these terms was to be executed later." (Id. at  133, p. 172.) Likewise, " 'minor matters' in elaborate contracts" may be left to future agreement. (Weddington, supra, 60 Cal.App.4th at p. 813, quoting 1 Williston on Contracts (4th ed. 1990)  4:28, pp. 602-605.) " 'Obviously, the question is one of degree; the question is whether the indefinite promise is so essential to the bargain that inability to enforce that promise strictly . . . makes it also unfair to enforce the remainder of the agreement. The more important the subject matter to be agreed upon, the more likely it is that the uncertainty will prevent or hinder enforcement. If the contract cannot be performed without settlement of the undetermined point . . . the entire contract may fail.' " (Ibid.)

Thus, an "agreement to agree" is not a contract if essential terms of the agreement are not specified. (See Copeland v. Baskin Robbins U.S.A. (2002) 96 Cal.App.4th 1251, 1256 ["where any of the essential elements of a promise are reserved for the future agreement of both parties, no legal obligation arises 'until such future agreement is made' "].)"Whether a term is 'essential' depends on its relative importance to the parties and whether its absence would make enforcing the remainder of the contract unfair to either party." (Id. at p. 1256, fn. 3; see 1 Witkin, Summary of Cal. Law, supra, Contracts,  148, pp. 187-190 ["an agreement to agree is unenforceable, because, by the very terms of the promise, either party may refuse to agree on anything to which the other party will agree"].)

When parties reach agreement on broad settlement goals, but do not specify the means by which they will reach those goals, the agreement is not enforceable if the omitted "means" have an impact on items material to the agreement. (Terry v. Conlan (2005) 131 Cal.App.4th 1445, 1459 (Terry) [settlement agreement was unenforceable because it omitted the material term of how the trust should be structured for tax purposes].) In Terry, the court addressed whether a settlement agreement in a probate dispute over the disposition of three parcels of real property contained all of the material terms necessary to create an enforceable agreement. Although the "negotiations did lead to an agreement between the parties on the goals of the settlement" (including planned transfers of property), "the parties' mutual assent to the goals of the settlement" was "not sufficient to demonstrate the enforceability of the settlement agreement" because of the "failure to agree to the material means to achieve the goal of the settlement." (Id. at pp. 1458-1459, italics added.) The means of achieving a settlement may include creating a mechanism for management of the subject property, or the nature of holding title to the property. (Id. at pp. 1452, 1459.) These details are important to the method in which the goals of the settlement would be achieved, and those missing terms would have "significant financial impact on the parties." Thus, the court concluded that the settlement omitted material terms, which made it unenforceable. (Id. at p. 1459.)

It begs the question for Zemer to argue that the July 26 document is binding because it contains the words "agreed upon." Although those words may suggest that the parties intended to reach a settlement of their disputes, they do nothing to address whether the terms of the July 26 document are sufficiently definite and certain to constitute a binding contract. We next examine the face of the document, in light of the undisputed evidence, to determine whether any essential and material contractual terms had not yet been agreed to by the parties, as of July 26.

III

ANALYSIS: FACE OF CONTRACT; MEANINGFUL CONDUCT

The chief ground for the Referee's decision was that the July 26 document, on its face, was too indefinite and uncertain to constitute a binding agreement. The Referee reached this decision based on a plain reading of the document, in light of the evidence of the conduct of the parties as it seems to explain the terminology used in the document. We also follow this two-step approach in analyzing the record, to assess whether the July 26 document created a binding contract or only an agreement to agree.

Again, our focus is upon the formation stage of a contract, utilizing an objective standard. We ask whether these parties mutually consented to the same terms, in the same sense, at the relevant time, based on the reasonable and objective meaning of their words and acts, and we do not consider any unexpressed, subjective intentions that they may have had. (Civ. Code,  1580, 1636; 1 Witkin, Summary of Cal. Law, supra, Contracts, 116, p. 155.) The three significant categories of material terms are discussed separately.

A. LLC's Into Which the Surge Assets Would Be Transferred

In some cases, an overly general term used in a contract may be fleshed out by the use of statutory rules and regulations that set forth a procedure for making such a determination. In Elite Show Services, Inc. v. Staffpro, Inc. (2004) 119 Cal.App.4th 263, a pretrial offer of settlement referring to payment of " 'reasonable' " attorney fees was deemed to be sufficiently definite to be enforceable, because there are established procedures for determining a reasonable amount. (Id. at pp. 267-269.) Such procedures provide an independent basis for defining and determining the meaning of a contractual term.

It is undisputed that all of the parties understood from the comments of Anapoell during the July 26, 2006 meeting that, in order to limit liability, at least one new LLC would have to be created to separate the Surge assets from those of AIA's other two investments, and that the Surge assets would be placed directly into that new LLC rather than into the existing AIA. Thus, although the July 26 document states that the parties would contribute their Surge assets to AIA (the original LLC), the parties in fact knew that those same assets would be contributed to a new LLC that had not yet been formed, in which Perez, Zemer and Schreiber would hold equal interests.

The record shows that no new LLC was ever formed, nor any new operating agreement drafted. Thus, although the parties agreed to the general goal of contributing their Surge assets to an LLC in which they would hold equal interests, they had not come to any agreement on the terms by which that LLC would be set up and operate. Creating an LLC under such circumstances is not a simple, uncomplicated procedure that can be relied on, in place of specific agreements by the affected parties. During the follow up to the July 26 meeting, Anapoell told attorney Polin that this would not be a "plain vanilla" LLC. (See Bustamante,supra, 141 Cal.App.4th at p. 215 [a contract to create a joint venture requires a meeting of the minds on the essential structure and operation of the business entity, that would be sufficient to provide a basis for determining the existence of a breach and creating a remedy].)

According to the uncontradicted testimony of Anapoell, many issues would have to be resolved in setting up the new LLC. These items included "taxes, asset distribution, capital contribution, transfer or marketability, management, control, and limited liability." Further, the testimony of the parties supports an inference that at least some those items were essential and material terms. Schreiber, for instance, testified that tax issues, control over stock options and when the stock would be sold (all of which were to be set forth in the LLC documents) were material terms.^[3] (See Bustamante, supra, 141 Cal.App.4th 199, 210 [purported agreement to undertake a business enterprise that did not specify the source of control of the new company or other aspects of management and investment omitted material terms and was thus unenforceable].)

Zemer also understood that tax consequences would have to be addressed, in structuring the LLC's. (See Terry, supra, 131 Cal.App.4th 1445, 1459 [settlement agreement was unenforceable because it omitted the material term of how the trust should be structured for tax purposes].) Anapoell's testimony confirmed that in such a deal, tax losses and allocations are "very real economic issues" that are important factors in documenting a deal. Even if the July 26 document is viewed as on its face reaching some kind of agreement on the broad outline of a settlement of their differences (that the Surge assets would be contributed to a new LLC in which the parties would hold equal interests), the document is insufficient on its face because it does not show agreement on forming a new LLC, or on its operating terms, and thus the parties did not come to an agreement on the means by which their agreed goal would be carried out. This record does not support an inference that no differences would have arisen on how the new LLC should be operated.

Similarly here, at the time the parties executed the July 26 document, other material terms were left open, including provisions as to who would control the exercise of the stock options and the sale of stock, and a means of determining tax consequences to the participants. Moreover, the language in the July 26 document implies that the exact scope of a release of claims will be set forth in a future document, as it states that the parties "will sign a Mutual General Release and waivers of Civil Code section 1542 with respect to future claims." (Italics added.) As in Terry, supra, 131 Cal.App.4th 1445, 1459, "the parties' assenting to the goals of the settlement, without agreeing to the means that were material to the settlement, demonstrates the parties never formed an enforceable contract."

Further, because the parties had not yet formed a new LLC to receive the Surge assets, a court would be unable as a practical matter to order the parties to perform the terms of the July 26 document. "[A] judge does not have the authority to create material terms of the settlement." (Terry, supra, 131 Cal.App.4th at p. 1460.) To implement the agreement that the parties contemplated, a court would have to create terms that the parties never agreed upon regarding the terms of the new LLC. Because " 'the contract [could not] be performed without settlement of the undetermined point,' " it is accordingly unenforceable. (Weddington, supra, 60 Cal.App.4th at p. 813.)

We disagree with Zemer that the omission of these material terms in the July 26 document is not important because the preexisting AIA operating agreement could have covered many of the omitted items. The Referee explained, "[a]lthough the AIA Operating Agreement does contain some general language about management, control, dispute resolution and taxes, this language was inadequate when AIA attempted to take on Surge publicly traded stock." Although the AIA operating agreement permits the company "to engage in any and all lawful business activities," its terms are not specifically drafted to address the needs of a company that holds publicly traded securities. Thus, for example, it does not contain provisions important to the parties' management of the Surge assets, such as how to decide when to exercise stock options held by AIA, where the capital to exercise those options will come from, how a decision will be made to sell certain stock, and how to structure the transfer of the Surge assets so as to minimize tax consequences to the parties. Moreover, as we have explained, the evidence establishes that all of the parties understood from the outset that the Surge shares would not be contributed to the original LLC (AIA), but to a newly created LLC. Thus, the content of the AIA operating agreement is not dispositive.

B. Need to Obtain Agreement from Third Parties

From the face of the July 26 document, an obvious problem arises, as to how the parties "will contribute all shares, options and warrants to AIA." This language contemplates that other types of deal documents were required to be negotiated and drafted to spell out the means for Zemer to transfer his family's stock, by obtaining the approval of its co-owners, his wife and sons (whose trust and other ownership was reflected on the spreadsheet). Likewise, the Surge stock options that Schreiber was supposed to transfer were presumably subject to a consent requirement by Surge. Some of his shares came from the Board and some came from a third party, Schloss. Since the main consideration required by the July 26 document was this set of asset transfers that required third party consent, some indication on the face of the document to set forth how that third party consent would be obtained or what the parties' obligations would be if third party consent could not be obtained, such as in the form of conditions or covenants, would appear to be necessary.

Instead, the record reflects that the parties understood that some of the shares that Zemer had agreed to contribute to AIA were owned by his adult sons or their trusts, and other shares that Zemer had agreed to contribute were owned by his family trust. As the Referee found, the signatures of Zemer's adult sons and his wife were necessary before those shares could be transferred.^[4] The parties also understood that Schreiber and Perez would have to obtain approval from the Surge board of directors to transfer their stock options to AIA. It appears from the spreadsheet prepared by Perez as part of the July 26 document that the only assets that would not require third party approval for their transfer were Perez's Signet shares. We need not determine what was the subjective intent of the parties about how to transfer shares, because the July 26 document does not contain essential terms to accomplish that.

We conclude that the July 26 document on its face omits material and essential terms in that (1) it does not acknowledge the need to obtain approval from third parties to consummate the central subject matter of the transaction, and (2) it does not address whether the parties will continue to be bound by the other terms of the agreement if they are unable to obtain some or all of the necessary third party consent. (See Bustamante, supra,141 Cal.App.4th at p. 213 [when the parties understood that the formation and launch of a new company would require third parties to approve the essential terms of the agreement, "the parties had at best an 'agreement to agree,' which is unenforceable under California law"].)

Such a need for third party consent shows that the July 26 document omitted essential and material terms. (Santa Clara, supra, 40 Cal.App.3d 431, 436.) By analogy, we may look to Ersa Grae Corp. v. Fluor Corp. (1991) 1 Cal.App.4th 613 (Ersa Grae), in which a lease contract was deemed to be sufficiently definite to be enforceable because "[a]ll material terms are sufficiently set forth." (Id. at p. 623.) In that case, Fluor had a license and a land lease from a third party allowing Fluor to construct an office building on the third party's land. (Id. at p. 617.) Fluor was not permitted to transfer its interest until the building was completed. (Ibid.) Before the building was constructed, Fluor entered into an agreement with Ersa Grae under which Ersa Grae would provide funding for the building, Fluor would transfer its interest in the building to Ersa Grae upon its completion, and Ersa Grae would lease space in the building to Fluor. (Id. at pp. 618-619.) Fluor refused to perform and Ersa Grae sued for breach of contract. (Id. at pp. 616, 620.)

The court held that this contract did not omit a material term by failing to address the need to obtain the third party landowner's approval because, in fact, the parties had structured their deal in such a way that third party approval was not required. (Ersa Grae, supra, 1 Cal.App.4th at p. 624.) Also, the failure to specify the terms of the eventual lease that Ersa Grae would enter into with Fluor was not fatal to the contract's enforceability because the lease terms were not a material part of the agreement, and the agreement did commit the parties to complete the eventual lease documents in good faith. (Ibid.)

Unlike in Ersa Grae, supra, 1 Cal.App.4th 613, the failure of the July 26 document to address the need for third party approval is crucial because the parties could not have performed the agreement without that approval. Further, although the omitted detail concerning the lease agreement in Ersa Grae was an ancillary item, in this case the parties failed to agree on numerous items that, as we have explained, are material and essential (i.e., the creation of a new LLC, taxes, and control). In Ersa Grae, the court determined that the contract sufficiently set forth all of the material provisions, but here, we are unable to conclude the July 26 document stands alone as a binding contract.

C. Scope of the Release and Waiver

The July 26 document states that "[a]ll parties will sign a Mutual General Release and waivers of Civil Code section 1542 with respect to future claims." As the Referee found, the source of the release language that Perez inserted in the July 26 document is not clear, and Perez and Schreiber "claim no understanding of what it means." The evidence presented at trial does not clarify what the parties intended to release, such as disputes about AIA, or disputes about Surge/Signet, or both. At the time of the creation of this language, there was no litigation or threatened litigation between the parties, and the nature of the dispute between the parties leading up to the July 26 document is somewhat unclear on this record. It is also unclear why Zemer now argues that two named parties were to be excluded from the release (Jamie Schloss and Barry Nussbaum).

The "scope of release" has been identified as a material term of some settlement agreements. (See Kohn v. Jaymar-Ruby, Inc., supra, 23 Cal.App.4th 1530, 1534.) When a party signs an agreement containing a waiver of its rights with respect to unknown claims under Civil Code section 1542, the scope of the waiver of unknown claims remains a question of fact. (See Butler v. Vons Companies, Inc. (2006) 140 Cal.App.4th 943, 950.)

Although the July 26 document mentions "waivers of Civil Code section 1542 with respect to future claims," nothing in the July 26 document indicates the scope of unknown and future claims that the waiver is intended to cover. Merely referring to a "Mutual General Release" is not sufficiently definite to allow a court to ascertain what claims the parties intended to release regarding AIA, Surge/Signet, or both. In addition, the July 26 document is incomplete because it does not specify the individuals who will be parties to the release. The July 26 document requires the transfer of assets held by third parties, and both Zemer's sons and wife would have to consent to transfer those assets. However, the July 26 document does not specify whether the relatives will also be subject to the release.

This is not a case presenting a more or less simple dispute and release, such as Stewart v. Preston Pipeline Inc., supra, 134 Cal.App.4th 1565. In Stewart, the parties to a personal injury lawsuit entered into a settlement agreement stating "that the parties 'have reached a full and final settlement of all claims'; the insurer will pay plaintiff $54,200; plaintiff 'accepts said sum as full settlement of all claims'; '[p]laintiff is responsible for payment of all of plaintiff's attorney's fees and all of plaintiff's medical liens and bills'; and defense counsel 'will prepare a Release of All Claims form and a Request for Dismissal of the entire action with prejudice' to be sent to plaintiff's attorney." (Id. at p. 1586, fn. 24.) The court in Stewart concluded that there was "nothing vague about the settlement agreement," and it was thus enforceable. (Ibid.) Stewart is inapposite here because it concerned the relatively uncomplicated settlement of a personal injury litigation, not a complex and ongoing business arrangement to transfer publicly held securities and stock options, with third party involvement. It was sufficient in Stewart for the agreement to refer to a "release of all claims," because the parties' relationship was limited to one event of personal injury, making it clear what the parties intended to release. Here, in contrast, it is not at all evident what claims the parties intended to release.

Based on the existence of all three categories of omissions of material terms from the July 26 document, we conclude that the written agreement between the parties omits essential and material terms and thus is not a binding contract.

IV

DOCTRINE OF PROMISSORY ESTOPPEL

Zemer alternatively contends that even if the July 26 document is too indefinite and uncertain to be a binding contract, he should be permitted to recover under the doctrine of promissory estoppel. Zemer argues that he detrimentally relied on the terms set forth in the July 26 document because he declined to attend the July 27, 2006 shareholders' meeting, to personally pursue his opposition to the reelection of Perez and Schreiber to the Surge board of directors (although he apparently urged others not to attend).

In the Referee's statement of facts, he described not only the July 26, 2006 meeting and document, but also "the breakdown." The main ruling was that the July 26 document was not a binding contract. Nevertheless, the Referee considered all the evidence and concluded that equitable relief was not warranted because "money damages would suffice, many terms were left for further negotiation, and [Zemer] reneged on the agreement first, then never tendered his own performance by transferring shares." In particular, Zemer takes issue with the Referee's finding that he "reneged on the agreement first." Arguably, these conclusions are somewhat inconsistent. However, we review the Referee's decision, not his reasoning. (See Belair v. Riverside County Flood Control Dist. (1988) 47 Cal.3d 550, 568 ["If correct upon any theory of law applicable to the case, the judgment will be sustained regardless of the considerations that moved the lower court to its conclusion"].) We cannot fault the Referee for issuing a decision that accounts for all of the alternative theories presented to him, even if those theories are somewhat inconsistent.

Although the Referee analyzed together the equitable doctrines of specific performance and promissory estoppel, the ruling does not expressly lay out and apply the elements of promissory estoppel.^[5] Promissory estoppel requires "(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) his reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance." (Laks v. Coast Fed. Sav. & Loan Assn. (1976) 60 Cal.App.3d 885, 890 (Laks).)

"[T]he doctrine of promissory estoppel is essentially equitable in nature." (C&K Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1, 8.) The doctrine "employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced." (Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 672. " 'Under this doctrine a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement.' " (Id. at p. 672, fn. 1.) "The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange." (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 249.) " '[I]t it is only where the reliance was unbargained for that there is room for application of the doctrine of promissory estoppel.' " (Id. at p. 250.) "If the promisee's performance was requested at the time the promisor made his promise and that performance was bargained for, the doctrine is inapplicable." (Id. at p. 249.)

To be binding under the doctrine of promissory estoppel "the promise must be clear and unambiguous." (Laks, supra,60 Cal.App.3d at p. 890.) The Referee's ruling against the application of promissory estoppel was appropriate on this record, because the evidence did not support the creation of an express or otherwise enforceable agreement. The July 26 document set forth promises that were indefinite and uncertain. Because many material terms were omitted from the July 26 document, the promises made by Schreiber and Perez to Zemer during the July 26 meeting were neither clear nor unambiguous.

Moreover, this record does not clearly establish that Zemer reasonably and foreseeably relied on any representations by defendants, to his detriment. (Laks, supra, 60 Cal.App.3d 885, 890.) The conduct of the parties does not support such a finding. Zemer claims that Perez and Schreiber did not, while negotiating the July 26 document, bargain for him to abandon his plan to oppose their reelection to the Surge board of directors, and thus the doctrine of promissory estoppel is applicable. Perez and Schreiber contend that they did in fact bargain for Zemer to abandon his opposition to their election, and thus the doctrine of promissory estoppel does not apply. We need not resolve this dispute, as we find the doctrine of promissory estoppel to be otherwise inapplicable on these facts. The judgment correctly rules against Zemer on all the various theories tried.

DISPOSITION

The judgment is affirmed.

HUFFMAN, Acting P. J.

I CONCUR:

HALLER, J.

Aaron, J., dissenting:

The following facts concerning the formation of the July 26 agreement lead me to conclude that the July 26 agreement is in fact binding and enforceable.

Zemer and Perez had been "at odds" over past and present business dealings between them, and Zemer had made known his intention to attempt to remove Perez from his position as CEO and Chairman of Surge and also to remove Perez's management team on the Surge Board, by staging a proxy fight at a shareholders' meeting scheduled for the morning of July 27. Perez wanted to retain his position as Surge CEO and Chairman, and also wanted to retain Schreiber and "the rest of his slate" on the Board. Perez believed that in order to achieve these goals, he would have to come to terms with Zemer. Thus, "[w]ith the July 27, 2006 Surge shareholder[s'] meeting looming and Mr. Perez concerned Mr. Zemer would vote his stock to unseat him and Mr. Schreiber, Mr. Perez called a meeting of the AIA^[6]owners (Perez, Schreiber and Zemer) for 8:00 a.m., July 26, 2006, in his Surge office."

Perez's express purpose in calling the July 26 meeting was to attempt to achieve "global peace before the annual meeting." Perez hoped to resolve all differences between himself and Zemer concerning their joint business affairs, so that Zemer would not attempt to have Perez and Schreiber voted out of their positions with Surge. "Mr. Perez explained the purpose of the meeting and the agreement was to stop Mr. Zemer's 'shenanigans,' get himself reelected as Surge CEO/Chairman, and get Mr. Schreiber and the rest of his slate elected to the Board." Perez testified, "'[O]therwise, why would I rush to do this before the annual meeting?'" The referee noted that, according to Schreiber, Perez, "was determined . . . to get a deal done before the Surge shareholder meeting."

Perez accomplished what he set out to do. According to Perez, the parties reached a "global resolution" at the meeting, agreeing to equalize their capital contributions to AIA.^[7] Specifically, the parties agreed that: (1) Zemer, who had previously invested $1.8 million in AIA, would get back $900,000, representing half of his investment, and Schreiber would fund the payment to Zemer by contributing $900,000 toward the capital account of AIA; (2) Zemer, Schreiber and Perez would contribute all of their shares, options, and warrants in Surge and in Signet, a subsidiary of Surge (Surge assets), to AIA; and (3) all three would sign mutual general releases, and waive the protections of Civil Code section 1542 (section 1542 waiver(s)) with respect to all future claims. The parties understood that as a result of having resolved their differences, Zemer would not oppose Perez and Schreiber's election at the shareholders' meeting the following day.

Perez, who had consulted with one of his attorneys before the meeting regarding what language to include in any agreement that the parties might reach, wrote these terms on a spread sheet on which he had previously listed all of the Surge assets to be transferred by each of the three parties. Below these terms, Perez added the following: "Agreed upon on July 26, 2006." All three men then signed the document, and Schreiber and Perez signed a check in the amount of $900,000, drawn on the AIA capital account and gave the check to Zemer, with the understanding that Schreiber would deposit funds to cover the check by Monday, July 31.

After all three parties had signed the document, Perez called Anapoell, one of his attorneys, and "announced, 'there is peace in the valley.'"

Perez achieved precisely what he had hoped for as a result of the parties' entering into the July 26 agreement ― Zemer's forbearance from staging a proxy fight at the shareholders' meeting the following morning, resulting in Perez and Schreiber's reelection.

Once it was clear to Perez that he would attain his goal, he and Schreiber repudiated their obligations to Zemer under the agreement. On the morning of July 27, Perez contacted the bank on which the $900,000 check was drawn to stop payment on it.^[8] After being reelected at the shareholders' meeting, Perez instructed Attorney Anapoell, who was in the process of preparing the final documents, to stop drafting, and not to respond to inquiries from Zemer's attorney regarding when the documents would be ready to sign. Perez told Anapoell that "he and [Schreiber] were rethinking whether they wanted to settle" with Zemer.^[9]

Applying a traditional analysis of contract formation to the July 26 agreement, it is clear that the agreement is in fact binding and enforceable. The terms to which the parties agreed and affixed their signatures are definite, and all objective manifestations of the parties' intent in executing the agreement indicate that they intended the agreement to be binding. Contrary to