Judge Daniel M. Crowley, Case Number: 23STCV31128, Date: 2024-07-10 Tentative Ruling

Plaintiff Bank of America, N.A.’s unopposed motion for an order referring this matter to the Hon. Chris R. Conway (Ret.) of Judicate West to determine all disputes between Plaintiff and Defendants Performance Engineered Products, Inc., Dinesh V. Savalia aka Dennis Savalia, and Babulal A. Savalia aka Bob Savalia regarding the loan agreement, equipment agreement, guaranties and related documents which are the subject of this action is granted.

The parties will privately compensate Judge Conway, splitting his fees equally at the outset, with the prevailing party to be awarded the balance.

Plaintiff Bank of America, N.A. (“Bank of America”) (“Plaintiff”) moves unopposed for an order referring this matter to the Hon. Chris R. Conway (Ret.), of Judicate West, to determine all disputes between Plaintiff and Defendants Performance Engineered Products, Inc. (“Performance Engineered”), Dinesh V. Savalia aka Dennis Savalia (“Dinesh”), and Babulal A. Savalia aka Bob Savalia (“Babulal”) (collectively, “Defendants”) regarding the loan agreement, equipment agreement, guaranties and related documents which are the subject of this action. (Notice of Motion, pg. 2; C.C.P. §§638, et seq.; CRC, Rules 3.900 et seq.) Per the parties’ agreement, the parties will privately compensate the proposed referee, to split the referee’s fees equally at the outset, with the prevailing party to be awarded the balance. (Notice of Motion, pg. 2.)

On December 20, 2023, Plaintiff filed the operative complaint (“Complaint”) in this action against Defendant asserting ten causes of action: (1) breach of loan agreement; (2) breach of equipment agreement; (3) breach of commercial guaranties; (4) money lent; (5) account stated; (6) fair valuation; (7) claim and delivery; (8) conversion; (9) appointment of a receiver; and (10) injunctive relief.

Plaintiff alleges on or about April 22, 2022, Performance Engineered executed and delivered to Plaintiff a Note in the initial amount of $800,000.00 for purposes of providing a line of credit for the operation of its business. (Complaint ¶10.) Plaintiff alleges Performance Engineered agreed to repay such funding pursuant to the terms and conditions contained in the Note. (Complaint ¶10.) Plaintiff alleges the maturity date of the Note was extended by an extension dated August 11, 2023. (Complaint ¶10.) Plaintiff alleges in connection with the Note, the Borrower also executed a Master Credit Agreement and Financial Covenant Agreement (collectively, the $800,000.00 Note, the subsequent extension, the Master Credit Agreement, and Financial Covenant Agreement will be referred to collectively as “Loan Agreement”). (Complaint ¶10, Exh. 1.) Plaintiff alleges the Master Credit Agreement generally governs all of Performance Engineered’s obligations to Plaintiff. (Complaint ¶10.) Plaintiff alleges The Loan Agreement matured and became all due and payable in full, on September 1, 2023. (Complaint ¶10.)

Plaintiff alleges concurrently with the execution of the Loan Agreement, Plaintiff and Performance Engineered entered into the Guaranty and Collateral Agreement (“Collateral Agreement”) which, in addition to the Loan Agreement, govern the parties’ rights and obligations with respect to the loan made to Performance Engineered (“Loan”). (Complaint ¶11, Exh. 2.)

Plaintiff alleges Performance Engineered defaulted on its obligations to make payments under the Loan Agreement, including without limitation by failing to repay the loan at maturity, and failing otherwise to abide by various terms and covenants of the Loan Agreement, all constituting breaches of the Loan Agreement. (Complaint ¶13.) Although demand was made, the Loan Agreement was not repaid as required. (Complaint ¶13.)

Plaintiff alleges the Loan Agreement governing the subject obligations provides for judicial reference and/or arbitration of disputes arising under, or relating to, said agreements. (Complaint ¶15.)

On or about March 17, 2020, Performance Engineered executed and delivered to Plaintiff a Master Loan and Security Agreement, as well as an Equipment Security Note Number 001 for the acquisition of various equipment, in the initial amount of $50,972.68 (“Equipment Agreement”), and Performance Engineered agreed to repay such funding pursuant to the terms and conditions contained therein. (Decl. of Corkery ¶9, Exh. 6.) The Equipment Loan is supported by a UCC-1 financing statement evidencing Plaintiff’s lien on the equipment, all of which is included in Plaintiff’s Collateral, (Decl. of Corkery ¶9, Exh. 7.)

On or about October 23, 2019, Dinesh and Babulal (collectively, “Guarantors”) executed and delivered to Plaintiff their Guaranties of the prompt payment and performance of the obligations of Performance Engineered under the Loan Agreement. (Decl. of Corkery ¶10, Exh. 4.)

On or about March 23, 2020 and March 31, 2020, the Guarantors each executed and delivered to Plaintiff their Guaranties of the prompt payment and performance of the obligations of Performance Engineered under the Equipment Agreement. (Decl. of Corkery ¶11, Exh. 8.) The Guaranties incorporate terms of the Master Credit Agreement governing the subject obligations, which provides for judicial reference and/or arbitration of disputes arising under, or relating to, said agreements.

Plaintiff filed the instant motion on December 20, 2023. As of the date of this hearing no opposition has been filed.

A general reference directs the referee to try all issues in the action. The hearing is conducted under the rules of evidence applicable to judicial proceedings. “In the case of a general reference, the referee must prepare a statement of decision which stands as the decision of the court and is reviewable in the same manner as if the court had rendered it.” (Sy First Family Ltd. Partnership v. Cheung (1999) 70 Cal.App.4th 1334, 1341.)

C.C.P. §638 provides for appointment of a referee upon the agreement of the parties in a written contract:

A referee may be appointed upon the agreement of the parties filed with the clerk, or judge, or entered in the minutes, or upon the motion of a party to a written contract or lease that provides that any controversy arising therefrom shall be heard by a referee if the court finds a reference agreement exists between the parties:

(a) To hear and determine any or all of the issues in an action or proceeding, whether of fact or of law, and to report a statement of decision.

(C.C.P. §638(a), emphasis added); see Carr Business Enterprises, Inc. v. City of Chowchilla (2008) 166 Cal.App.4th 25, 28 [stating judicially-ordered reference pursuant to C.C.P. §638 is a matter of contract between the parties].)

(b) Judicial Reference. Any Claim brought by any Party in a California state court shall be resolved by a general reference to a referee (or a panel of referees) as provided in California Code of Civil Procedure Section 638. The referee (or presiding referee of the panel) shall be a retired Judge or Justice of the California state court system. The referee(s) shall be selected by mutual written agreement of the Parties. If the Parties do not agree, the referee(s) shall be selected by the Presiding Judge of the Court (or his or her representative) as provided in California Code of Civil Procedure Section 640.

(c) Arbitration Provisions. The Parties agree that judicial reference pursuant to clause (b) above is the preferred method of dispute resolution of all Claims, when available. However, with respect to any Claim brought in a forum other than a California state court, or brought in a California state court but judicial reference pursuant to clause (b) above is not available or enforced by the court, the arbitration provisions in this clause (c) (collectively, the “Arbitration Provisions”) shall apply to the Claim. The inclusion of these Arbitration Provisions in this Master Credit Agreement shall not otherwise be deemed as any limitation or waiver of the judicial reference provisions. The Arbitration Provisions are as follows:

(i) For any Claim for which these Arbitration Provisions apply, the Parties agree that at the request of any Party to this Master Credit Agreement, such Claim shall be resolved by binding arbitration. The Claims shall be governed by the laws of the Governing Law State without regard to its conflicts of law principles. The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (the “Act”), shall apply to the construction, interpretation, and enforcement of these Arbitration Provisions, as well as to the confirmation of or appeal from any arbitration award.

(ii) Arbitration proceedings will be determined in accordance with the Act, the then- current Commercial Finance rules and procedures of the American Arbitration Association or any successor thereof (“AAA”) (or any successor rules for arbitration of financial services disputes), and the terms of these Arbitration Provisions. In the event of any inconsistency, the terms of these Arbitration Provisions shall control.

(iii) The arbitration proceedings shall be private. All documents, transcripts, and filings received by any Party shall not be disclosed by the recipient to any third parties other than attorneys, accountants, auditors, and financial advisors acting in the course of their representation, or as otherwise ordered by a court of competent jurisdiction. Any award also shall be kept confidential, although this specific requirement shall be void once the award must be submitted to a court for enforcement. The Parties agree that injunctive relief, including a temporary restraining order, from a trial court is the appropriate relief for breach of this paragraph, and they waive any security or the posting of a bond as a requirement for obtaining such relief.

(f) Jury Waiver. By agreeing to judicial reference or binding arbitration, the parties irrevocably and voluntarily waive any right they may have to a trial by jury as permitted by law in respect of any Claim. Furthermore, without intending in any way to limit the provisions hereof, to the extent any Claim is not submitted to judicial reference or arbitration, the parties irrevocably and voluntarily waive any right they may have to a trial by jury to the extent permitted by law in respect of such Claim. This waiver of jury trial shall remain in effect even if the Class Action Waiver is limited, voided or found unenforceable. WHETHER THE CLAIM IS DECIDED BY JUDICIAL REFERENCE, BY ARBITRATION, OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS DISPUTE RESOLUTION PROVISION IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW. EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS MASTER CREDIT AGREEMENT AND THE OTHER DOCUMENTS CONTEMPLATED HEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION AND (iii) CERTIFIES THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE.

Here, all parties in this case expressly agreed to resolve all controversies, disputes or claims by judicial reference pursuant to the Loan Agreement and Equipment Agreement. All claims asserted in this case are governed by these agreements.

The Loan Agreement and Equipment Agreement also provide that Defendants shall pay all Plaintiff’s costs incurred in enforcing its rights thereunder. (Decl. of Corkery ¶7, Exh. 2 at ¶¶6.6, 6.7.) According to the Loan Agreement and Equipment Agreement, Defendants are responsible for payment of the referee’s fees. However, in the interest of fairness and efficiency, Plaintiff requests that this Court order the parties to split the referee’s fees equally at the outset, with the prevailing party to be awarded the balance. (Motion, pg. 10.) The Court considers Plaintiff’s request to be fair and equitable.

C.C.P. §640 provides that the court shall appoint as referee the person agreed upon by the parties and, if the parties do not agree on the selection of the referee, then each party shall submit to the court up to three (3) nominees. (C.C.P. §§640(a), (b).) Plaintiff nominates Hon. Chris R. Conway (Ret.) to serve as referee pursuant to a general reference. Plaintiff has confirmed Judge Conway’s availability to handle this case and that no conflicts exist which would prevent him from serving as referee.

In light of the lack of opposition and general agreement between parties, the Court appoints Judge Conway as the referee for all purposes.

Hon. Daniel M. Crowley

Judge of the Superior Court