Filed 4/18/13 Partridge v. Campbell CA2/6
                 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.


             IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                    SECOND APPELLATE DISTRICT

                                                   DIVISION SIX


MARIANNE PARTRIDGE, et al.,                                                      2d Civil No. B237772
                                                                               (Super. Ct. No. 1341942)
          Plaintiffs and Respondents,                                           (Santa Barbara County)

v.

RANDY CAMPBELL,

           Defendant and Appellant.




         Randy Campbell appeals from the judgment entered in favor of Marianne
Partridge, respondent, after a court trial. The judgment requires appellant to sell to
respondent all of his shares in the Santa Barbara Independent, Inc. (the Independent).
The judgment was based on the trial court's finding that respondent accepted
appellant's offer to sell his shares before he withdrew it. Appellant contends that, as a
matter of law, respondent did not validly accept his offer. Appellant further contends
that, if a valid acceptance occurred, respondent was not entitled to specific
performance of the contract because she failed to prove the amount of a "true-up"
adjustment to the purchase price. We remand the matter to the trial court with
directions to determine the true-up adjustment and to recalculate the purchase price in
light of this adjustment. In all other respects, we affirm.
                                          Facts
       The Independent publishes a newspaper, the Santa Barbara Independent.
Appellant owned 1,530 shares, 51 percent of the total outstanding shares. The
remaining 49 percent (1,470 shares) was divided equally among three shareholders:
respondent, Richard Parker, and Richard Grand-Jean (the minority shareholders).
Appellant was the publisher of the newspaper. Respondent was the editor-in-chief of
the newspaper and secretary of the corporation.
       On November 10, 2009, appellant gave notice to the Independent and the
minority shareholders of his "intention" to sell all of his shares to Southland
Publishing (Southland) pursuant to an offer dated November 4, 2009. The offer was
attached to appellant's notice. The offer stated that Southland would purchase the
Independent for $2.7 million, "plus or minus a true-up of 'Net Cash, Receivables and
Payables.' " The "true-up" was explained as follows: "To the extent that [the
Independent's] 'Net Cash, Receivables and Payables' at Closing is [sic] more or less
than $700,000, the difference will be added or subtracted to the final payment due 1
year following the Closing. . . . [F]or example, if the true-up reveals 'Net Cash,
Receivables and Payables of $750,000, then $50,000 in total will be added to
Southland's final payment to the shareholders."
       Pursuant to the offer, appellant would receive $1.377 million and each of the
minority shareholders would receive $441,000, plus or minus the true-up adjustment.
At the time of the closing, 50 percent of the purchase price would be paid. Another 25
percent would be paid within six months of the closing, and the final 25 percent would
be paid within one year of the closing. The offer said that it was not binding "as
Southland Publishing shall be entitled to conduct due diligence, and material terms are
not herein included."
       Appellant's notice stated that the "procedures to accomplish this sale" must
conform to the right of first refusal procedures set forth in a document entitled "Stock
Purchase and Buy-Sell Agreement" (Agreement). Appellant enclosed a copy of the
Agreement, which was signed in 1986 by the Independent and its shareholders. The

                                            2
Agreement provides that no shareholder may sell his shares without first giving the
Independent the option to purchase them "at the price and on the terms" offered to the
shareholder. If the Independent does not exercise its option within 45 days, the
Independent must notify the non-selling shareholders. They will have an option to
purchase the shares that must be exercised within 20 days after receiving notice from
the Independent. Each of the non-selling shareholders may purchase "such proportion
of the Noticed shares . . . as the number of Shares held by him, her or it bears to the
number of Shares held by all of such other Shareholders." If a shareholder decides not
to purchase his or her proportion of the noticed shares, the remaining shareholders may
elect to purchase it, provided that they give notice of their election within the same 20-
day period. If the non-selling shareholders elect to purchase fewer shares than the
selling shareholder has offered to sell or do not exercise their options within the 20-
day period, the options will expire. At any time before the options are exercised, the
selling shareholder may withdraw his notice of intention to sell his shares.
       On November 23, 2009, the Independent's Board of Directors (Board) met to
consider the corporation's option to purchase appellant's shares. Appellant and
respondent were the only Board members personally present. The other Board
members - Parker and Grand-Jean - participated by telephone.
       Before the meeting began, respondent handed a document to appellant and
stated, " 'This is my exercise of the Buy-Sell Agreement.' " Appellant asked, " 'Is it for
all or some?' " Respondent replied, " 'All or some.' " Appellant said, " 'Good.
Good.' " In the document respondent stated that she was exercising her option to
purchase all of appellant's shares that were not purchased by the Independent and other
shareholders.1

1
  Respondent wrote: "As a shareholder of the Company, I hereby exercise my option
under the Buy-Sell Agreement to purchase all of the Shares of the Company now
owned by [appellant] (up to 1,530 shares) at the price and on the terms stated in his
November 10, 2009 Offering Notice or as otherwise determined in accordance with
the Buy-Sell Agreement to the extent that such Noticed Shares are not purchased by
the Company at the Board of Directors meeting. [¶] I understand that under the Buy-
                                            3
       The Board voted to not exercise its option to purchase appellant's shares.
Grand-Jean said, " '[W]e want to find out who wants to buy [appellant's] shares now.' "
Respondent said that she would buy all of his shares, and she read aloud the document
that she had delivered to appellant before the meeting began. Appellant asked who
wanted to sell his shares to Southland. Grand-Jean "said that he didn't want to sell,
and Parker said for the purposes of this meeting he didn't want to sell."
       Immediately after the Board meeting, the Independent sent a letter to the
minority shareholders informing them that the Board had voted to not exercise the
corporation's option to purchase appellant's shares. The letter stated that the minority
shareholders could elect to personally purchase his shares pursuant to the Agreement.
       The next day, November 24, 2009, respondent redelivered to appellant the
written notice of acceptance that she had given him the previous day before the Board
meeting. Appellant told her that he was considering another offer from Southland.
Respondent replied that she had already accepted his offer of November 10, 2009, so
he could not withdraw it. Appellant said: " 'No. That's not true. I can withdraw it at
any time. And I'm weighing both offers." Respondent testified: "I kept saying, 'You
can't weigh both offers. There's only one offer now.' He kept saying, 'Yes, I can. I
can withdraw it any time.' "
       On November 30, 2009, Southland submitted a revised offer to purchase the
Independent. The purchase price was the same, but Southland agreed to pay it in full
within 15 days of the closing. The true-up provision was modified, and Southland
offered to employ appellant as publisher for three years at a base annual salary of
$110,000. Appellant could not be terminated except for fraud or gross negligence. At



Sell Agreement, the other Shareholders (other than [appellant] as the Offering
Shareholder) may exercise their options to purchase a portion of the Noticed Shares by
notifying me as Secretary within the period specified in the Buy-Sell Agreement of
any such intention. In such case, all of the Noticed Shares shall be apportioned for
purchase among the shareholders (other than [appellant] as the offering shareholder) in
accordance with the Buy-Sell Agreement." (Bold omitted.)
                                            4
the time of the revised offer, appellant was receiving an annual base salary of $55,000.
Like the original offer, the revised offer stated that it was not binding.
       On December 2, 2009, appellant emailed the revised offer to the minority
shareholders. Appellant said that the revised offer could be treated as "a brand new
proposal" that "will restart the timing and noticing as outlined in the Buy-Sell"
agreement or "as simply an updated offer, still conforming to the procedures we have
already started."
       Respondent's counsel wrote the following reply to the email: "The November
30 revised proposal is irrelevant to your existing contractual obligations. On
November 10 you offered to sell your shares, and your offer has been unconditionally
accepted in writing; you are a party to an enforceable contract for the sale of your
shares in the Santa Barbara Independent Inc." Counsel noted that Southland's "new
proposal contains different payment terms and a new provision regarding your
employment."
       On December 11, 2009, shareholder Richard Parker gave notice that he was
exercising his option to purchase up to 270 of appellant's 1530 shares "at the price and
on the terms stated in the November 10, 2009 Offering Notice." On December 18
shareholder Richard Grand-Jean gave notice he would not purchase any shares.
       On December 29, 2009, respondent wrote a letter to all shareholders stating
that, pursuant to appellant's offering notice of November 10, 2009, she would purchase
1,260 shares for $1.134 million and Parker would purchase 270 shares for $243,000.
The purchase price would later be adjusted pursuant to the true-up provision in the
offering notice. Respondent said that the transaction would close on January 12, 2010.
       The same day it was written, respondent's letter was hand-delivered to
appellant. Appellant immediately sent an email to the minority shareholders
complaining that they had ignored Southland's revised offer. Appellant said: "In case
it's not clear, I rejected Southland's original offer November 23." Appellant contended
that respondent's purported acceptance of his offer of November 10, 2009, "before the
Board had voted to not exercise their rights under the Buy-sell agreement . . . does not

                                             5
follow the procedures as outlined [in the Agreement]." Appellant continued: "At this
point we have an offer that has been rejected, and a new offer from Southland pending
Board and Shareholder review. [¶] Ignoring the new offer appears to be a coordinated
effort to deny the best possible deal for the sale of Independent shares . . . ." Appellant
requested that the Board set a date for a meeting to discuss Southland's new offer.
       After appellant refused to sell his shares to respondent and Parker, respondent
filed against him a complaint consisting of three causes of action: breach of contract,
breach of covenant of good faith and fair dealing, and breach of fiduciary duty. In
addition to the recovery of damages, respondent sought "a decree of specific
performance ordering that [appellant]" deliver his 1,530 shares to her "in exchange for
the payment of $1,377,000." Appellant filed a cross-complaint against respondent.
       Parker is not a party to the lawsuit. He assigned to respondent his claim to the
270 shares that he had elected to purchase.
                          Statement of Decision and Judgment
       The matter was tried by the court without a jury. In its statement of decision,
the trial court concluded that respondent had accepted appellant's "offer in writing on
November 23, 2009 before [he] withdrew it." Her acceptance created "an enforceable
contract, and [she] is entitled to specific performance."
       On respondent's complaint, judgment was entered in appellant's favor on the
cause of action for breach of fiduciary duty. Judgment was entered in respondent's
favor on the causes of action for breach of contract and for breach of covenant of good
faith and fair dealing. The judgment decreed: "[Respondent] is entitled to purchase all
of [appellant's] 1530 shares of the Santa Barbara Independent, Inc." Appellant was
ordered to transfer his shares to respondent upon the deposit of the purchase price.
The court determined the purchase price to "be $1,241,742.00 as of July 21, 2011,
based upon $1,377,000.00 as the sale price . . . less $229,793.00 distributions of profits
made to [appellant] after January 12, 2010, plus 5% interest on the outstanding balance
through July 21, 2011." The judgment does not mention the true-up adjustment. In its


                                              6
statement of decision, the trial court concluded that the true-up was "not applicable to
the purchase price."
       On appellant's cross-complaint, judgment was entered in favor of respondent.
As to the entire action, the court declared respondent to be the prevailing party and
awarded her reasonable attorney fees of $358,742.
                   Preemptive Rights and Options: Legal Principles
       The Agreement gave the Independent and the minority shareholders a right of
first refusal, also known as a preemptive right, to purchase appellant's shares if he
decided to sell them to a third party. "[A] preemptive right gives the holder the first
right to buy when and if the owner later wants to sell. If the holder does not buy, the
owner of the property may sell to anyone. Conversely, an option gives the holder a
power to compel a sale regardless of whether the owner then wants to sell.
[Citations.]" (Rollins v. Stokes (1981) 123 Cal.App.3d 701, 710.) "[W]hen [appellant]
manifested [his] intent to sell . . . and subsequently notified [the Independent], the
preemptive right was activated." (Id., at p. 710.) At that time the preemptive right
ripened into an "option to purchase, that is an option, within a stated time, to purchase
on the same terms and conditions as the prospective purchaser's offer." (McCulloch v.
M & C Beauty Colleges, Inc. (1987) 194 Cal.App.3d 1338, 1345.) " 'An option is
transformed into a contract of purchase and sale when there is an unconditional,
unqualified acceptance by the optionee of the offer in harmony with the terms of the
option and within the time span of the option contract. [Citations.]' [Citation.]"
(Steiner v. Thexton (2010) 48 Cal.4th 411, 420.) "[W]hen the provisions of an option
contract prescribe the particular manner in which the option is to be exercised, they
must be strictly followed. [Citations.]" (Palo Alto Town & Country Village, Inc. v.
Bbtc Company (1974) 11 Cal.3d 494, 498.)
                       Respondent's Option Was Transformed into an
                        Enforceable Contract of Purchase and Sale




                                             7
                                   Standard of Review
       "[W]hen the decisive facts are undisputed, the reviewing court is confronted
with a question of law and is not bound by the findings of the trial court. [Citation.]
In other words, the appellate court is not bound by a trial court's interpretation of the
law based on undisputed facts, but rather is free to draw its own conclusion of law.
[Citation]." (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc.
(1999) 73 Cal.App.4th 517, 528; accord, Ghirardo v. Antonioli (1994) 8 Cal.4th 791,
799 ["When the decisive facts are undisputed, we are confronted with a question of
law and are not bound by the findings of the trial court"].)
       The decisive facts are undisputed as to whether respondent's purported
acceptance of appellant's offer transformed her option into an enforceable contract of
purchase and sale. "In the absence of any controverted factual evidence . . . , we are
presented with a pure question of law for which the appropriate review is de novo.
[Citation.]" (Miller v. Ellis (2002) 103 Cal.App.4th 373, 378.) The de novo standard
of review is especially appropriate because the resolution of this issue depends in large
part upon our interpretation of the Agreement. (See Parsons v. Bristol Development
Co. (1965) 62 Cal.2d 861, 865 [" 'An appellate court is not bound by [the trial court's]
construction of the contract based solely upon the terms of the written instrument
without the aid of evidence [citations], [or] where there is no conflict in the evidence
[citations]' "]; Rooz v. Kimmel (1997) 55 Cal.App.4th 573, 585 ["Because the trial
court construed the indemnity and hold harmless provision without the aid of
conflicting extrinsic evidence, the interpretation of that agreement is a question of law
for this court"]).
                                        Discussion
       Appellant contends that respondent's acceptance of his offer to sell all of his
shares was invalid and did not create an enforceable contract of purchase and sale.
Appellant's reasoning is as follows: Because respondent owned one-third of the
minority shareholder's shares, she had an option to purchase no more than one-third of
appellant's shares. Pursuant to the Agreement, each minority shareholder was entitled

                                             8
to purchase "such proportion of the Noticed shares . . . as the number of Shares held by
him, her or it bears to the number of Shares held by all of such other Shareholders."
Respondent would be entitled to purchase the remaining two-thirds of appellant's
shares only if Parker and Grand-Jean declined to exercise their options. On December
2, 2009, before Parker and Grand-Jean decided whether to exercise their options,
appellant withdrew his previous offer to sell by informing the minority shareholders of
Southland's revised offer. (See Distefano v. Hall (1968) 263 Cal.App.2d 380, 385
["any new offer communicated prior to a valid acceptance of a previous offer,
extinguishes and replaces the prior one"].) Thus, after receiving notice of Southland's
revised offer, the minority shareholders could not have accepted appellant's previous
offer to sell his shares on the same terms as Southland's original offer. Appellant's
previous offer had been revoked.
       Appellant's argument has some appeal. The Agreement provides: "The
Offering Shareholder may withdraw the Notice and the offer to sell the Noticed Shares
at any time prior to the exercise of the options as provided in this [Agreement] . . . ."
(Italics added.) The term "options" is in the plural instead of the singular form. The
use of the plural makes clear that the offer to sell does not become irrevocable merely
because a single shareholder has exercised her option to purchase her pro rata share.
       Respondent, however, did not just exercise her option to purchase her pro rata
share. She legally bound herself to purchase all of appellant's shares that were not
purchased by Parker and Grand-Jean. Thus, on November 23, 2009, appellant knew
that he had a commitment from the minority shareholders to purchase all of his shares
pursuant to the terms of Southland's original offer. Since Parker and Grand-Jean had
not yet exercised their options, appellant did not know how many shares, if any, they
would purchase. But it was of no concern to appellant how many shares each minority
shareholder would purchase so long as he had assurances that all of his shares would
be purchased.
       Like other contracts, an option contract must " ' "be fairly construed with a view
to effect the object for which it was given and to accomplish the purpose for which it

                                             9
was designed." ' [Citations.]" (Cates Construction, Inc. v. Talbot Partners (1999) 21
Cal.4th 28, 39; see also Howe v. American Baptist Homes of the West, Inc. (1980) 112
Cal.App.3d 622, 626 [" 'a contract entered into for the mutual benefit of the parties is
to be interpreted so as to give effect to the main purpose of the contract and not to
defeat the mutual objectives of the parties' "].) Here, the option contract had a dual
purpose. One purpose was to afford the non-selling shareholders a 20-day period to
determine whether to purchase the selling shareholder's shares. The other purpose was
to enable the selling shareholder to go forward with the proposed sale to a third party if
the non-selling shareholders did not commit themselves to the purchase of all of his
shares within the 20-day period.
       Respondent's acceptance of November 23, 2009, fulfilled this dual purpose. At
the beginning of the 20-day period, she irrevocably committed herself to the purchase
of all of appellant's shares that Parker and Grand-Jean did not elect to purchase. We
would be exalting form over substance were we to hold that respondent's acceptance
did not create an enforceable contract merely because Parker and Grand-Jean had not
yet exercised their options to purchase their pro rata share. "In determining rights and
obligations, substance prevails over form [citation]." (Elser v. Gill Net No. One (1966)
246 Cal.App.2d 30, 31, fn. 2.)
       Furthermore, appellant's interpretation of the option contract would lead to
unintended, absurd results. (See Barroso v. Ocwen Loan Servicing, LLC (2012) 208
Cal.App.4th 1001, 1009 [" ' "The basic goal of contract interpretation is to give effect
to the parties' mutual intent at the time of contracting" ' "]; Roden v.
AmerisourceBergen Corp. (2010) 186 Cal.App.4th 620, 651 ["we must interpret a
contract in a manner that is reasonable and does not lead to an absurd result"].)
According to appellant's interpretation, respondent could not have accepted as to
Grand-Jean's one-third pro rata share until after Grand-Jean had elected whether to
purchase his share. Appellant asserts: "[N]o enforceable contract obligation could
possibly exist until all the players designated by the Buy-Sell Agreement's first-refusal
process - The Independent, Parker and Grandjean [sic], not just [respondent] - decided

                                             10
whether to exercise their separate and independent first-refusal rights." Grand-Jean
did not elect whether to purchase his pro rata share within the 20-day option period.
On December 18, 2009, 25 days after the Independent had notified the minority
shareholders of appellant's offer to sell, Grand-Jean gave notice that he would not
purchase any of appellant's shares. Thus, even if appellant had kept his original offer
open throughout the 20-day period, respondent could not have accepted as to Grand-
Jean's one-third pro rata share within that period. The options would have expired and
appellant would have been free to sell his shares to Southland.
       The parties to the Agreement did not intend that, by failing to act within the 20-
day period, a single shareholder would have the power to block a sale to other
shareholders who were willing and able to make the purchase and had timely exercised
their options.2 The parties intended to facilitate the other shareholders' purchase so
that they would not have to deal with a third-party interloper. If a shareholder did not
elect to buy his pro rata share, the other shareholders could elect to do so provided that
they gave notice of their election within the 20-day period. Respondent's acceptance
of November 23, 2009, provided the requisite notice. Her acceptance assured that all
of appellant's shares would be sold to the minority shareholders irrespective of what
Parker and Grand-Jean did or did not do. Since her acceptance was irrevocable and
occurred within the 20-day option period before appellant gave notice of Southland's
revised offer, appellant has no cause for complaint. Respondent made " 'an
unconditional, unqualified acceptance . . . of [appellant's] offer in harmony with the
terms of the option and within the time span of the option contract. ' " (Steiner v.




2
  Grand-Jean did not intend to block respondent's purchase of appellant's shares. In his
deposition, Grand-Jean testified that he wanted respondent to purchase appellant's
shares: "[O]nce we received this communication from [appellant] that he had had
meetings with Southland and had agreed to sell his shares to them, I was very much
opposed to that. . . . And I welcomed wholeheartedly [respondent's] willingness and
ability to match that offer and buy the shares. . . . [¶] So if you want to look at this just
in terms of a deal context, I was on [respondent's] side and against [appellant]."
                                             11
Thexton, supra, 48 Cal.4th at p. 420.) Accordingly, the option was " 'transformed into
a contract of purchase and sale.' " (Ibid.)
                                          True-Up
         Appellant contends that respondent was not entitled to specific performance of
the contract of purchase and sale because she failed to prove the amount of the true-up.
Appellant argues, "[T]here could be no determinative purchase price without inclusion
of the True-Up adjustment."
         Respondent was not at fault for the absence of proof of the true-up. The trial
court denied respondent's request for an opportunity to prove the true-up. During
closing argument, respondent's counsel said that, if the court decided that his client
was entitled to specific performance, "we have to deal with the calculation of the true-
up." Counsel continued: "As part of your Honor's order, what we would ask is that
[respondent] be given an opportunity to have the business records of the Independent,
to carry out that true-up, present it to the other side. If they disagree, you could have a
hearing on it. It would easily be decided within the next 15 to 30 days. So that true-up
would be a cash addition or deduction from the purchase price that [appellant] is to be
paid."
         Appellant did not object to this proposed procedure for calculating the true-up.
By failing to object, he acquiesced in the procedure. (See People v. McKinnon (2011)
52 Cal.4th 610, 644; People v. Espinoza (1979) 99 Cal.App.3d 59, 64, fn. 2.) But in
its statement of decision, the trial court concluded that the true-up was "not applicable
to the purchase price."3
         Appellant in effect is claiming that the trial court erroneously refused to allow
proof of the true-up because it erroneously determined that the true-up was not

3
  In its statement of decision, the trial court did not explain why it had concluded that
the true-up was inapplicable. In its oral decision immediately following submission of
the case, the trial court stated: "I find that the true-up is not applicable. The Southland
proposal makes for interesting background information, but it is neither here nor there.
. . . [The minority shareholders] simply have the opportunity to match the offer for the
shares and that's it. That's the end of the story."
                                              12
applicable to the purchase price. We agree. The true-up was an integral part of the
purchase price. In his notice of intent to sell his shares to Southland, appellant stated:
"I own 1,530 shares and will accept $1,377,000 as outlined in the Southland Offer
Sheet . . . . [¶] Payment terms and the mechanics of the 'True-Up' of cash receivables,
and payables are . . . detailed in the Southland offer." The matter, therefore, must be
remanded to the trial court for calculation of the true-up adjustment to the purchase
price.
                                        Disposition
         The judgment is reversed only as to the purchase price for appellant's shares.
The matter is remanded to the trial court with directions to determine the true-up
adjustment and to recalculate the purchase price in light of this adjustment. In all other
respects, the judgment is affirmed. Respondent shall recover her costs on appeal.
                NOT TO BE PUBLISHED.


                                                          YEGAN, J.
We concur:


                GILBERT, P.J.


                PERREN, J.




                                             13
                             Denise de Bellefeuille, Judge

                        Superior Court County of Santa Barbara

                         ______________________________


               Griffith & Thornburgh, John R. Rydell and John C. Eck. Greines,
Martin, Stein & Richland; Irving H. Greines and Edward L. Xanders, for Appellant.


               Gary J. Hill and Timothy J. Trager; Reicker, Pfau, Pyle & McRoy, for
Respondents.




                                          14
