Judge: Joseph Lipner, Case: 24STCV20682, Date: 2024-12-31 Tentative Ruling

Case Number: 24STCV20682    Hearing Date: December 31, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

On November 6, 2024, Defendant filed the instant petition to compel arbitration and for an order to dismiss or stay proceedings pending arbitration. On December 17, 2024, Plaintiffs filed an opposition. On December 23, 2024, Defendant filed a reply.

The Court grants the Defendant’s petition to compel arbitration and stay this case.  The Court sets a status conference re arbitration for July 30, 2026 at 8:30 a.m..

Background

            This case concerns the sale of a 2019 Cadillac Escalade (the Vehicle) that is alleged to have been previously reported as stolen. (Compl., ¶ 20.)

            On August 14, 2024, Plaintiffs Anna Kirakosyan (Ms. Kirakosyan) and Star World, LLC (Star World) (collectively, Plaintiffs) filed a complaint against Defendant Valencia B. Imports, Inc. dba Valencia BMW (Defendant) alleging causes of action for (1) Rescission of Contract, (2) Breach of Contract, (3) Negligence, (4) Violation of Penal Code § 496, (5) Violation of Business and Professions Code §§ 17200, et seq., and (6) Declaratory Relief.

Legal Standard

            Under Code of Civil Procedure section 1281.2, a court may order arbitration of a controversy if it finds that the parties have agreed to arbitrate that dispute. Because the obligation to arbitrate arises from contract, the court may compel arbitration only if the dispute in question is one in which the parties have agreed to arbitrate. (Weeks v. Crow (1980) 113 Cal.App.3d 350, 352.) Since arbitration is a favored method of dispute resolution, arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question. (Id. at p. 353; Segal v. Silberstein (2007) 156 Cal.App.4th 627, 633.) 

Discussion

Existence of a Valid Arbitration Agreement

“Arbitration is a matter of contract.” (Metalclad Corp. v. Ventana Env't Organizational P'ship (2003) 109 Cal.App.4th 1705, 1711.) “General principles of contract law determine whether the parties have entered a binding agreement to arbitrate.” (Craig v. Brown & Root, Inc., 84 Cal.App.4th 416, 420 (2000); Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951, 971-72 (1997).) “In determining whether an arbitration agreement exists, we apply the same rules of contract formation as for any other contract.” (Weeks v. Interactive Life Forms, LLC (2024) 100 Cal.App.5th 1077, 1084.)

Under the California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ. Proc. Section 1281.2.) In ruling on a motion to compel arbitration, the court must first determine whether the parties 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.)

Once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement, and no evidence or authentication is required to find the arbitration agreement exists. (See Condee v. Longwood Mgt. Corp. (2001) 88 Cal.App.4th 215, 219.) However, if the existence of the agreement is challenged, "petitioner bears the burden of proving [the arbitration agreement's] existence by a preponderance of the evidence." (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413. See also Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1058-1060.) 

“With respect to the moving party's burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160). “A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, Rule 3.1330.) “Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges.’ (Baker, supra, 13 Cal.App.5th at p. 1160.)

A.    Ms. Kirakosyan

            Defendant has met its burden in providing evidence of the existence of an arbitration agreement as to Ms. Kirakosyan. Indeed, Plaintiffs do not dispute that Ms. Kirakosyan signed the arbitration agreement.

            Here, on October 9, 2019, Plaintiffs executed the RISC with Defendant, who was the dealer, for the purchase of the Vehicle at issue. (Compl., ¶ 24, Exhibit A.) On the first page of the RISC, which is titled in full “Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision),” there is a box that states “Agreement to Arbitrate.” This box states, “By signing below, you agree that, pursuant to the Arbitration Provision on page 7 of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by court action. See Arbitration Provision for additional information concerning the agreement to Arbitration” (Id., Exhibit A; Marrone Decl., Exhibit 1.) The entirety of the Arbitration Provision located on page 7 of the RISC states in pertinent part:

1.      EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

2.      IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.

3.      DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action […]

(Compl., Exhibit A; Marrone Decl., Exhibit 1.)

            Ms. Kirakosyan provided her signature both under the box that states, “Agreement to Arbitrate” and on the bottom of page 7, which contains the Arbitration Provision in full. (Compl., Exhibit A; Marrone Decl., Exhibit 1.) Further, Plaintiffs, in their complaint, allege that “Plaintiffs and Defendants entered into a written contract for purchase of what seemed to be a 2019 Chevrolet Suburban.” (Compl., ¶ 24.)

Additionally, Plaintiffs do dispute that the current action with Defendant would fall within the language of the RISC and its Arbitration Provision, given that the Arbitration Provision explicitly states that “any claim or dispute . . . between you and us or our employees . . . which arises out of or relates to your . . . purchase . . . of this vehicle . . . shall, at your or our election, be resolved . . . by arbitration.” (Compl., Exhibit A; Marrone Decl., Exhibit 1.)

Based on the foregoing, Ms. Kirakosyan is compelled to arbitrate her claims against Defendant.  

B.    Star World

Defendant has met its burden in providing evidence of the existence of an arbitration agreement as to Star World, the successor-in-interest to ZLS Trans LLC (ZLS).

Here, Plaintiffs allege in the complaint that ZLS was initially a co-buyer of the Vehicle, but later transferred its interest to Star World in or about 2020. (Compl., ¶ 2.) Ms. Kirakosyan, in signing the RISC, also signed on behalf of ZLS as a co-buyer. (Compl., Exhibit A; Marrone Decl., Exhibit 1.)

“Generally speaking, one must be a party to an arbitration agreement to be bound by it. ‘The strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement, and a party cannot be compelled to arbitrate a dispute that he has not agreed to resolve by arbitration. (Citation.) There are three exceptions to the rule: (1) an agent can bind a principal, (2) spouses can bind each other, and (3) a parent can bind a minor child. (Citation.)” (Monschke v. Timber Ridge Assisted Living, LLC (2016) 244 Cal.App.4th 583, 586–87.)

            Plaintiffs contend that Ms. Kirakosyan did not have the authority to act or sign on behalf of ZLS, and that Defendant has not met its burden in showing that an agency relationship exists between Ms. Kirakosyan and ZLS. Specifically, Plaintiffs contend Ms. Kirakosyan “has never been associated with ZLS” and has never been “an officer, director or employee of ZLS,” and proffer ZLS’s Articles of Incorporation and the Statements of Information, which have no mention of Ms. Kirakosyan, in support. (Opposition, page 5 Kirakosyan Decl., ¶ 2, Exhibit A.)

            However, Defendant has provided evidence that Ms. Kirakosyan was acting as an agent on behalf of ZLS with the approval of the chief executive officer (“CEO”) of ZLS. A person named Artak Zargaryan is listed as CEO, chief financial officer, and secretary of ZLS in the statement information filed with the Secretary of State by ZLS. (Abramson Decl. Ex. 3.) Plaintiffs admit Mr. Zargaryan was CEO and Director of ZLS in 2023 and 2024. (Opposition, page 5.)

When purchasing the Vehicle, Ms. Kirakosyan executed a BMW Financial Services Business Credit Application (Credit Application). (Abramson Decl., ¶ 5, Exhibit 1.) In the Credit Application, Ms. Kirakosyan represented to Defendant that she was ZLS’s Secretary. (Id. ¶ 5, Exhibit 1.)

Mr. Zargaryan, the CEO of ZLS, signed a later portion of the same credit application in which Ms. Kirakosyan identified herself as the secretary of ZLS.  Specifically, in the credit application, Mr. Zargaryan, along with Ms. Kirakosyan, executed a “Certified Resolution for Business Entity” on behalf of ZLS. (Abramson Decl. Ex. 1.)  (See Snukal v. Flightways Mfg., Inc. (2000) 23 Cal.4th 754, 78 780 [at common law, presentation of a certified copy of resolution of corporation’s board of directors authorizing officer to execute a contract created a presumption of authority on behalf of the officer to execute it].)

This evidence demonstrates a sufficient relationship between Ms. Kirakosyan and ZLS, contrary to Plaintiffs’ assertion. Furthermore, given that ZLS acquired the Vehicle and then transferred its interest to Star World, ZLS has accepted the benefit of the RISC. Thus, ZLS is estopped from denying Ms. Kirakosyan’s authority to enter into the RISC on ZLS’s behalf. (See Snukal, supra, 23 Cal.4th at p. 779-80 [proof that contract is binding on corporation can be met by showing that “the corporation is estopped to deny his [or her] authority by reason of having accepted the benefit of the contract or otherwise. (Citation.)”].)

Based on the foregoing, Star World is also compelled to arbitrate its claims against Defendant.

Thus, the burden shifts to Plaintiffs to present any challenges to the enforceability of the RISC and its Arbitration Provision.

Enforceability

            Plaintiffs dispute the enforceability of the RISC and its attached Arbitration Provision on the basis that Plaintiffs have sufficiently shown grounds for the rescission of the RISC, pursuant to Code of Civil Procedure section 1281.2, subdivision (b).

            Under both federal and state law, arbitration agreements are valid and enforceable, unless they are unenforceable due to reasons under state law that would promote its unenforceability, such as fraud, duress, and unconscionability. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 98.) Under Code of Civil Procedure section 1281.2, subdivision (b), the Court shall grant a petition to compel arbitration “if it determines that an agreement to arbitrate the controversy exists, unless it determines that . . . (b) Grounds exist for rescission of the agreement.” Thus, a “petition to compel arbitration is not to be granted when there are grounds for rescinding the agreement.” (Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th 951, 973.)

            Plaintiffs contend that because they have stated a valid claim for rescission of the RISC, arbitration cannot be compelled based on the RISC. However, once the Court has found that a valid arbitration agreement exists, the “party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Ruiz v. Moss Bros. Auto Grp. (2014) 232 Cal.App.4th 836, 842.) Thus, “[t]he trial court sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Ibid.)

It is now Plaintiffs’ burden to show by a preponderance of the evidence that the RISC should be rescinded. Plaintiffs argue a contract for the sale of stolen property is not enforceable, as it violates basic principles of contract, and selling or receiving stolen property violates Penal Code section 496. (Opposition, page 3.) However, Plaintiffs have provided the Court with no evidence supporting their claim for rescission other than the allegations contained in their complaint. Ms. Kirakosyan’s Declaration does not mention or support Plaintiffs’ claim for rescission or other facts relevant to this issue. Plaintiffs have also not provided evidence to substantiate their reliance on Penal Code section 496, which deals with receipt of stolen property but contains a criminal level knowledge requirement.

Thus, the Court concludes that Plaintiffs’ have not met their burden in establishing a defense to the RISC, and its Arbitration Provision, by a preponderance of the evidence.