Judge Mark A. Young, Case Number: 23SMCV04043, Date: 2024-07-10 Tentative Ruling

Judge: Mark A. Young, Case: 23SMCV04043, Date: 2024-07-10 Tentative Ruling

Case Number: 23SMCV04043 Hearing Date: July 10, 2024 Dept: M

CASE NAME: The Loretta LLC v. ZGB Homes Inc., et al.

CASE NO.: 23SMCV04043

MOTION: Petition/Motion to Compel Arbitration

HEARING DATE: 7/11/2024

LEGAL STANDARD

Under California and federal law, public policy favors arbitration as an efficient and less expensive means of resolving private disputes. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 8-9; AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.) Accordingly, whether an agreement is governed by the California Arbitration Act (“CAA”) or the Federal Arbitration Act (“FAA”), courts resolve doubts about an arbitration agreement’s scope in favor of arbitration. (Moncharsh, supra, 3 Cal.4th at 9; Comedy Club, Inc. v. Improv West Assocs. (9th Cir. 2009) 553 F.3d 1277, 1284; see also Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th 951, 971-972 [“California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability [citation] and a requirement that an arbitration agreement must be enforced on the basis of state law standards that apply to contracts in general”].) “[U]nder both the FAA and California law, ‘arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’ ” (Higgins v. Superior Crout (2006) 140 Cal.App.4th 1238, 1247.)

“Code of Civil Procedure section 1281.2 requires a trial court to grant a petition to compel arbitration if the court determines that an agreement to arbitrate the controversy exists.” (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59, quotations omitted.) Accordingly, “when presented with a petition to compel arbitration, the court’s first task is to determine whether the parties have in fact agreed to arbitrate the dispute.” (Ibid.) A petition to compel arbitration is in essence a suit in equity to compel specific performance of a contract. (Id. at 71.) As with any other specific performance claim, “a party seeking to enforce an arbitration agreement must show the agreement’s terms are sufficiently definite to enable the court to know what it is to enforce.” (Ibid. [internal citations omitted].) “Only the valid and binding agreement of the parties, including all material terms well-defined and clearly expressed, may be ordered specifically performed.” (Ibid.) An arbitration agreement “must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” (Civ. Code, § 1636.) The language of the contract governs its interpretation if it is clear and explicit. (Civ. Code, § 1368.) If uncertainty exists, “the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.” (Civ. Code, § 1654.)

The party seeking to compel arbitration bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) It would then be plaintiff’s burden, in opposing the motion, to prove by a preponderance of the evidence any fact necessary to her opposition. (See Ibid.) “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.” (Ibid.)

ANALYSIS

Defendant 2026 Walnut, LLC asserts that the instant claims are required to go to arbitration because Plaintiff the Loretta LLC signed an arbitration agreement covering their claims.

As with any contract, mutual assent or consent is necessary for the formation of a valid arbitration agreement. (Civ. Code, §§ 1550, 1565.) “Consent is not mutual, unless the parties all agree upon the same thing in the same sense.” (Civ. Code, § 1580.) The moving party bears the initial burden of showing the existence of an agreement to arbitrate by a preponderance of the evidence. (Mitri v. Arnel Mgmt. Co. (2007) 157 Cal.App.4th 1164, 1169 [“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.”].)

Defendant cites a purchase agreement between the principals of the Loretta LLC and itself. (See Sokol Decl., Exs. 1-3.) Paragraph 22(A) of the Purchase Agreement is entitled DISPUTE RESOLUTION, and includes a mediation clause which reads in part: "The Parties agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transactions, before resorting to arbitration or court action through the C.A.R. Real Estate Mediation Center for Consumers..." Further, Paragraph 22(B) is entitled ABITRATION OF DISPUTES and provides: "The Parties agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration.... The arbitrator shall be a retired judge or justice, or any attorney.... unless the parties mutually agree to a different arbitrator..... Judgment upon the award... may be entered into any court having jurisdiction. Enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act... "NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES'ROVISION DECIDED BY NEUTAL ARBITRATION AS PROVIDED BY CALIFORMA LAW AND YOU ARE GIVING UP ANY RIGHTS YHOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN COURT IN A COURT OR JURY TRIAL BY INITIALING... IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISIOPN, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORINIA CODE OF CIVIL PROCEDURE."

Plaintiff argues that it is not in privity of contract with Walnut. Examining the record, the Agreements show that Plaintiff’s principal, Rebekah Gainsley, signed the agreement on behalf of Loretta. The purchase agreement defines the Buyer as “Rebekah Gainsley or Assignee”. (Emphasis added.) Ms. Gainsley signed the agreements as either “Rebekah Gainsley” or “Rebekah Gainsley or Assignee”. (Emphasis added.) Plaintiff does not deny that it is the “assignee” referenced in the Agreements. The record shows that following the purchase of the Property from Defendant Walnut, Plaintiff’s principal transferred ownership of the Property to Plaintiff. (¶ 13.) Thus, there is no reasonable dispute that Ms. Gainsley assigned the property to Plaintiff. Moreover, under certain circumstances, a nonsignatory beneficiary can be forced to arbitrate. (See e.g. Harris v. Superior Court (1986) 188 Cal.App.3d 475, 478 [“It is well established that a nonsignatory beneficiary of an arbitration clause is entitled to require arbitration... Whether a nonsignatory beneficiary can be forced to arbitrate is a closer question.”].) Here, the parties have expressed an intent to bind Plaintiff’s assignee, that is, Loretta. Plaintiff does not present any evidence to dispute that Ms. Gainsley had authority to bind it to the Agreements as Loretta’s principal.

Plaintiff argues that the claim does not arise from the agreement because the claim is based upon a preexisting statutory right. However, the broad arbitration agreement would include such claims. Plaintiff’s SB800 Right to Repair claim pertains to construction defects in the purchased property. Such a claim is “dispute or claim in Law or equity arising between [Walnut and Ms. Gainsley/Assignee] out of this Agreement” since the claim relates to the condition of the property when it was sold, even if it is statutory in nature.

Plaintiff also argues that there is a mediation scheduled later this summer. However, Plaintiff is not entitled to mediation against Walnut, as mediation could only occur “before resorting to arbitration or court action.” (Sokol Decl., Ex. 1.) Here, Plaintiff resorted to court action. Therefore, mediation is now unavailable under the plain terms of the agreement. The action against Walnut should therefore proceed to arbitration.

Accordingly, the motion is GRANTED. The action is stayed only as to the claims against Walnut until completion of arbitration. A status conference re arbitration shall be set for December 5, 2024, at 8:30 a.m.