Judge: David A. Rosen, Case: 22GDCV00302, Date: 2022-09-16 Tentative Ruling

Case Number: 22GDCV00302    Hearing Date: September 16, 2022    Dept: E

Hearing Date: 09/16/2022 – 8:30am
Case No.  22GDCV00302
Trial Date:   UNSET
Case Name: J & A GROUP, LLC, a California Limited Liability Company, v. BALSAMO INCOME PROPERTIES, LLC, a California Limited Liability Company; SALVATORE J. BALSAMO, also known as SAL BALSAMO, individually and as Trustee of the Salvatore J. Balsamo Trust dated March 22, 1994, as amended January 9, 2004; GOT PROPANE, INC., a California Corporation; and Does 1-50

TENTATIVE RULING ON MOTION TO COMPEL ARBITRATION

Moving Party: Plaintiff, J & A Group, LLC (“Plaintiff”)
Responding Party: Defendants, BALSAMO INCOME PROPERTIES, LLC, a California limited liability company (“BIP”); SALVATORE J. BALSAMO, individually and as Trustee of the Salvatore J. Balsamo Trust dated March 22, 1994, as amended January 9, 2004 (“Balsamo”); and GOT PROPANE, INC. (“Got Propane”) (collectively “Defendants”)

Proof of Service Timely Filed (CRC Rule 3.1300): Yes

16/21 Court Days Lapsed (CCP 1005(b)): Yes and No – The moving party filed two motions to compel arbitration and titled them in such a way that it is impossible for the Court to determine which one the moving party wanted the Court to consider. The first motion filed on 07/14/2022 is timely. The second motion filed on 08/24/2022 is not timely because two calendar days were not accounted for when serving electronically. (See CCP §1005(b.). Further, the second motion contains certain arguments that are not brought up in the first motion. Whether the Court considers both motions, or one, ultimately makes no difference as this Court will be denying the motion as described in its Analysis section.

Proper Address: Yes

Oppo and Reply Submitted

BACKGROUND
Plaintiff, J & A Group, LLC, is a car wash at the real property at issue in this case. In Plaintiff’s Complaint filed on 06/08/2022, Plaintiff alleges that Balsamo, in his capacity as trustee acquired the property in 1998, and thereafter entered into a twenty-year lease with Plaintiff’s predecessor-in-interest. (Compl. ¶9.) [The Court notes that Plaintiff alleges in the Complaint that the lease is attached as Exhibit A; however, there is no Exhibit A attached to the Complaint.] Plaintiff alleges that the lease contained two sequential options: first an option for five years, and second, an option for ten years. (Compl. ¶10.) Plaintiff alleges that it acquired its leasehold interest in the property as a result of assignment of said lease and each assignment was consented to by Balsamo. (Compl. ¶11.) Plaintiff alleges it properly and timely exercised the five- and ten-year options pursuant to the lease by a letter attached as Exhibit B of the complaint. (Compl. ¶12-13.) [The Court notes that Plaintiff’s Complaint did not contain an Exhibit B.]

Plaintiff alleges that Balsamo Investment, at the direction of Balsamo, wrongfully refused to honor said option in the lease and alleges Balsamo Investment refuses to consent to Plaintiff’s assignment of the lease. (Compl. ¶14-15.)

For the first cause of action, Plaintiff alleges breach of contract against Balsamo Income for breaching Plaintiff’s option to extend the lease.

For the second cause of action, Plaintiff alleges nuisance against Got Propane, in part, but not exclusively, for employees and agents engaging in conduct that risks an explosion at the property such as hammering the nozzle of propane tanks.

For the third cause of action, Plaintiff alleges termination for nuisance against Got Propane and Balsamo for in part, but not exclusively, for creating and perpetuating a fire hazard on the property.

For the fourth cause of action, Plaintiff alleges tortious interference with contract against Balsamo, in part, but not exclusively, for Balsamo intentionally preventing performance and interfering with the contract.

For the fifth cause of action, Plaintiff alleges declaratory relief against all Defendants.

RELIEF REQUESTED 
Plaintiff moves for an order compelling all parties to arbitrate all issues involved in this lawsuit, appointing an arbitrator, and staying this action pending arbitration.

LEGAL STANDARD
In relevant part, CCP §1281.2 states:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(a) The right to compel arbitration has been waived by the petitioner; or

(b) Grounds exist for rescission of the agreement.

(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.

(CCP §1281.2 (a)-(c).)

There is a strong public policy in favor of arbitration of disputes and any doubts concerning the scope of arbitrable disputes should be resolved in favor of arbitration. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) Arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question. (Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189.)    

The determination of arbitrability is a legal question subject to de novo review. An appellate court will uphold the trial court's resolution of disputed facts if supported by substantial evidence. (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267.) 

ANALYSIS

Existence of an Agreement

The threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate. (Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396.) “In determining whether an enforceable arbitration agreement exists, the initial burden is on the party petitioning to compel arbitration.” (Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230.) “ ‘Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.’” (Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230 citing Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) “The petitioner must allege the existence of an agreement to arbitrate the controversy; facts necessary for a determination of its enforceability are proven by affidavits or declarations. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218.)

The party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) “In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination. No jury trial is available for a petition to compel arbitration.” (Id.) 

In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) A petition to compel arbitration is a suit in equity to compel specific performance of a contract. (Frog Creek Partners, LLC. v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 532.) 

Moving party states in its motion, “In refusing arbitration, Defendants do not dispute the existence of a valid arbitration clause.” (Pl. Mot. p. 1.) However, Plaintiff fails to show with law or by a preponderance of the evidence that an agreement to arbitrate exists between the instant parties.

In Plaintiff’s motion, Plaintiff first attached only the declaration of Plaintiff’s counsel George J. Gerro. As Defendants accurately pointed out, George J. Gerro lacks the requisite personal knowledge to assert when and how J & A assumed the lease.

In Reply, Plaintiff attached the declaration of Assad G. Rahal, the managing member of J & A Group LLC. While the Court did exercise its discretion to consider the declaration of Rahal, this declaration and the attached exhibits in the Reply do not establish the existence of an agreement to arbitrate with Plaintiff. Exhibit 1 in both the initial motion and Reply is the lease with the instant arbitration provision. This lease is between John Balsamo and Sal Balsamo (Lessor) and Super Clean Inc. (Lessee). In Exhibit 2 of the Reply, Plaintiff attaches documents that appear to be the assignment of the lease for the actual property and the assignment of the lease for the propane facility. Both assignments involve J & A Group LLC (assignee) and TED Carwash, Inc. (Assignor). There are no documents submitted to the Court as to how the lease was assigned from Super Clean Inc. (or Super Kleen) to TED Carwash, Inc., nor are there documents as to how the lease was assigned from John and Sal Balsamo to TED Carwash, Inc. There are no documents presented to the Court that show how Plaintiff, J & A, can enforce Super Clean Inc.’s right to arbitrate against John and Sal Balsamo.

Further, even if the Court were to find that Plaintiff provided sufficient evidence as to how J & A could enforce the arbitration provision against Sal Balsamo, as Sal Balsamo signed the initial two leases for the land and the propane as well as the equivalent assignments, Plaintiff has provided neither on point case law nor evidence as to how Plaintiff can compel arbitration against parties Balsamo Income and Got Propane, neither of which are signatories to the subject arbitration agreement. Plaintiff alleges in a conclusory fashion that Balsamo Income and Got Propane are both successors-in-interest and third-party beneficiaries to the lease. Yet, Plaintiff merely implies that Balsamo Income received a direct benefit by accepting rent payments, but Plaintiff provides no evidence to support that assertion. Also, Plaintiff argues that equitable estoppel can prevent Defendants from denying the effect of the arbitration clause because Plaintiff’s claims are inextricably intertwined with the ground lease, but Plaintiff fails to explain this argument, or provide evidentiary support therefor.

The cases that Plaintiff cites to support the proposition that it can bind nonsignatories to an arbitration agreement is not persuasive. Plaintiff cites Melchor Investment Co. v. Rolm Systems (1992) 3 Cal.App.4th 587, 593. Melchor holds that sublessee and lessor can be bound to arbitrate based on an agreement between the lessor and the sublessor. Melchor does not explain how parties like Balsamo Income or Got Propane can be bound when neither of those parties are signatories to any agreement presented before the Court – either as lessor, sublessor, or sublessee.

Additionally, parts of the Rahal declaration lack requisite foundation. For instance, paragraph 3 of the declaration states, “Since 2007, I have operated its small car wash business, J & A Group, LLC dba Super Kleen Car Wash, at the property in question, 2745 Rosemead Boulevard, South El Monte, California, 91733 ("Property").” (Rahal Decl. ¶3.) Then, in paragraph 8, Rahal states that, “J & A Group occupies the Property pursuant to the 1997 lease, as assigned.” (Rahal Decl. ¶8.) However, the Rahal Declaration doesn’t say how Rahal knows the things he asserts from before 2007 are true.

Waiver & Scope
Federal and California courts may refuse to enforce an arbitration agreement upon such grounds as exist at law or in equity for the revocation of any contract, including waiver. (Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 140 Cal.App.4th 206, 213 citing 9 U.SC. §2; CCP §1281; St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1204.) Based on the public policy favoring arbitration, claims of waiver receive close judicial scrutiny and the party seeking to establish waiver bears a heavy burden. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195.)

The St. Agnes court identified the following as factors that are relevant and properly considered in assessing waiver claims: (1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place’; and (6) whether the delay ‘affected, misled, or prejudiced’ the opposing party.” ' [Citations.]” (Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4^th 436, 444 citing St. Agnes, supra, 31 Cal.4th at p. 1196.) No one of these factors predominates and each case must be examined in context. (Id.)

Opposition argues that Plaintiff waived its right to compel arbitration, but Defendants’ argument is unpersuasive based on the aforementioned case law. Defendants cite no case law to support that Plaintiff waived their right in the instant scenario. However, the Court need not reach a decision on waiver because Plaintiff never met its burden in demonstrating an agreement to arbitrate existed between the instant parties. Likewise, Defendants’ argument that the scope of the arbitration provision is not broad enough to encompass all the claims in the complaint is also unpersuasive, but the Court need not reach a decision as to the scope because Plaintiff never met its burden in demonstrating an agreement to arbitrate between the parties to this case.

TENTATIVE RULING: Motion to compel arbitration is DENIED. Plaintiff did not prove by a preponderance of the evidence that an agreement to arbitrate existed between the parties. The Court will rule separately on Defendants’ objections to the Rahal Declaration, and the Court will rule separately on Defendants’ objections to the Gerro declaration.