|
MOTION TO COMPEL ARBITRATION, APPOINT ARBITRATOR, AND STAY PROCEEDINGS PENDING ARBITRATION |
BACKGROUND
A. Allegations
This is an action to quiet title relating to Plaintiffs Benjamin Comidi and Irit Barzelay’s home located at 6307 Teesdale Ave., North Hollywood, CA 91606. Plaintiffs (husband and wife) allege that they had legal title to the property from 2017 until January 2019, when they were deceived into transferring the property to Defendants Red Dragon Investment (“Red Dragon”) and Platinum Business Management (“Platinum”) through a grant deed.
Plaintiffs allege that when they faced foreclosure in January 2019, they sought to refinance their home loans with Defendant Eti El-Kiss Mizrahi and her company Defendant Conquest Realty Investments, Inc. (“Conquest”). As a result, Red Dragon and Platinum paid Plaintiffs’ prior loans. Plaintiffs allege that Mizrahi, working with Defendant Schlomo Schmuel (director of Red Dragon), Red Dragon, Platinum, and Defendant Sanjiv K. Jain (Platinum’s CEO, CFO, and secretary), presented a number of documents for Plaintiffs to sign, which required them to temporarily transfer their property as a part of the loan payoff and that they would be able to repurchase the property on a later date. Plaintiffs allege they signed the documents upon the advice of Mizrahi and Schmuel. Plaintiffs allege they made payments to Red Dragon and Platinum and sought the status of property, but Red Dragon and Platinum transferred title to the property to Defendant 6307 Teesdale LLC in April 2020. Plaintiffs allege they maintain an equitable title to the property and seek to restore legal title through this lawsuit.
The first amended complaint, filed July 22, 2020, alleges causes of action for: (1) fraud (intentional misrepresentation) against Mizrahi, Schmuel, Conquest, Red Dragon, Platinum, and Jain; (2) negligent misrepresentation against Mizrahi, Schmuel, Conquest, Red Dragon, Platinum, and Jain; (3) false promise against Mizrahi, Schmuel, Conquest, Red Dragon, Platinum, and Jain; (4) breach of fiduciary duty against Mizrahi and Conquest; (5) constructive fraud against Mizrahi and Conquest; (6) slander of title against 6307 Teesdale LLC, Platinum, and Red Dragon; (7) quiet title against 6307 Teesdale LLC and all persons known and unknown with an interest in the property; (8) declaratory relief against 6307 Teesdale LLC; (9) violation of Business & Professions Code, § 17200 et seq. against Platinum and Red Dragon; and (10) breach of contract against Platinum and Red Dragon.
B. Motion on Calendar
On September 15, 2020, Defendants Yanni Raz and 6307 Teesdale LLC filed a motion to compel arbitration, appoint arbitrator, and stay the proceedings pending arbitration pursuant to CCP §§ 1281.2, 1281.4, and 1281.6.
On December 1, 2020, Plaintiffs filed an opposition to the motion.
On December 4, 2020, Defendants filed a reply brief.
REQUEST FOR JUDICIAL NOTICE
Raz and Teesdale request judicial notice of: (1) and (2) Exhibits 3 and 4 of the Declaration of Michael K. Hagemann, which includes the FAC and the public real property records of the subject property as of September 11, 2020; (3) the fact that Plaintiffs purchased the property for $619,900 on October 16, 2017 (with loans totaling $560,000); and (4) a notice of default recorded on November 29, 2018 regarding the first mortgage on the subject property.
The Court grants the request for judicial notice as to Items 1, 2, and 4, but declines to take judicial notice of Item 3.
DISCUSSION
Defendants Yanni Raz and 6307 Teesdale LLC (hereinafter, “Moving Defendants”) move for an order compelling arbitration, appointing an arbitrator, and staying the proceedings pending the arbitration.
A. Terms of the Dispute Resolution Provision
Paragraph 9 of the “OPTION (TO BUY) AGREEMENT” (dated January 7, 2019) attached to the Purchase Agreement states:
9. DISPUTE RESOLUTION : Optionee [Comidi and Barzelay] and Optionor [Red Dragon and Platinum] agree that any dispute or claim arising between them out of this Agreement shall be decided by the same method agreed to for resolving disputes in the attached Purchase Agreement.
(Schmuel Decl., Ex. 1 [Purchase Agreement at “Option (to Buy) Agreement at p. 2 of 3].)
Paragraph 22 of the Purchase Agreement (dated January 7, 2019) states:
22. DISPUTE RESOLUTION:
A. MEDIATION : The Parties agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action ….
B . ARBITRATION OF DISPUTES:
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 Parties also agree to arbitrate any disputes or claims with Broker(s), who, in writing, agree to such arbitration prior to, or within a reasonable time after, the dispute or claim is presented to the Broker. The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of residential real estate Law experience, unless the parties mutually agree to a different arbitrator. The Parties shall have the right to discovery in accordance with Code of Civil Procedure §1283.05. In all other respects, the arbitration shall be conducted in accordance with Title 9 of Part 3 of the Code of Civil Procedure. Judgment upon the award of the arbitrator(s) may be entered into any court having jurisdiction. Enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act. …
“NOTICE: BY INTIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE ‘ARBITRATION OF DISPUTES’ PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE ‘ARBITRATION OF DISPUTES’ PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.”
“WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE ‘ARBITRATION OF DISPUTES’ PROVISION TO NEUTRAL ARBITRATION.”
(Purchase Agreement at § 22.A-B at p.8 of 10.) The Purchase Agreement is signed by Plaintiffs Comidi and Barzelay and Defendants Schmuel and Jain.
B. Does a Valid Agreement to Arbitrate Exist and Does it Encompass This Action?
Moving Defendants Yanni Raz and 6307 Teesdale LLC argue they may invoke the arbitration provisions in the Purchase Agreement and accompanying documents even though they are not signatories to the agreement. They argue the Court should compel arbitration of all arbitrable portions of the case, including all parties in the action, and stay the remaining portions.
In opposition, Plaintiffs argue they did not agree to arbitrate this matter with Moving Defendants, the action includes multiple defendants who are not parties to the arbitration agreement, the arbitration agreement was entered via fraud and is thereby unenforceable, several defendants have already begun conducting discovery which is inconsistent with the claimed right to arbitrate, and the unlawful detainer action is not subject to arbitration and would have to be consolidated with this matter.
With regard to the unlawful detainer action, it is unclear what Plaintiffs are referring to. (See Opp. at pp. 6-7.) Plaintiffs have not referenced what case number the unlawful detainer action refers to. Similarly, Moving Defendants have not stated what unlawful detainer action, if any, has been filed. Thus, this will not be a basis to deny the motion.
Plaintiffs acknowledge that there is an agreement to arbitrate, but they argue that they did not enter into any arbitration clause with Moving Defendants. (Opp. at p. 8.) However, as pointed out by Moving Defendants, Plaintiffs have alleged facts in the FAC that the defendants are agents of one another and co-conspirators, they each ratified the others’ conduct, and they are alter-egos of each other. (FAC, ¶¶13, 14, 20, 27, 56, 69, 76.) In JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, the Court of Appeal stated in relevant part:
[A] nonsignatory defendant may compel a signatory plaintiff to arbitrate under the doctrine of equitable estoppel. For the doctrine to apply, “the claims plaintiff asserts against the nonsignatory must be dependent upon, or founded in and inextricably intertwined with, the underlying contractual obligations of the agreement containing the arbitration clause.” ( Goldman, supra, 173 Cal.App.4th at pp. 217–218, 92 Cal.Rptr.3d 534.) “This requirement comports with, and indeed derives from, the very purposes of the doctrine: to prevent a party from using the terms or obligations of an agreement as the basis for his claims against a nonsignatory, while at the same time refusing to arbitrate with the nonsignatory under another clause of that same agreement.” (Id. at p. 221, 92 Cal.Rptr.3d 534.) Application of the doctrine in a proper case is not unfair to signatory plaintiffs resisting arbitration: Not only have such plaintiffs “decided the theories on which to sue” the nonsignatory, they also have “consented to arbitrate the claims against [the signatory defendant] anyway.” (Rowe, supra, 153 Cal.App.4th at p. 1290, 63 Cal.Rptr.3d 787.)
(JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1238.)
Here, the 6th to 8th causes of action for slander of title, quiet title, and declaratory relief are alleged against Moving Defendants. [1] The 6th cause of action alleges that Red Dragon, Platinum, and 6307 Teesdale LLC took actions that cast doubt on Plaintiffs’ ownership of the property, such as Red Dragon and Platinum recording a grant deed from Plaintiffs to themselves on January 16, 2019 and 6307 Teesdale LLC recording a grant deed in which Red Dragon and Platinum purported to transfer the property to 6307 Teesdale LLC on April 16, 2020. (FAC, ¶¶83-86.) In the 7th cause of action, Plaintiffs seek to quiet title to the property and cancellation of the January 2019 and April 2020 grant deeds. (Id., ¶¶96-101.) In the 8th cause of action, Plaintiffs allege an actual controversy exists between Plaintiffs and 6307 Teesdale LLC regarding the rights and obligations with respect to the property and the ownership of the property. (Id., ¶¶103-104.) While the property which is the subject of the January 7, 2019 Purchase Agreement is at issue, the Court does not find that the 6th to 8 th causes of action against Moving Defendants are claims that arise out of that Purchase Agreement. As alleged in the FAC, 6307 Teesdale LLC was not registered as a California limited liability company and come into existence until March 31, 2020. (FAC, ¶6.) Further, the claims against Moving Defendants are beyond those of the initial transactions under the January 2019 Purchase Agreement or grant deed, and instead involve a transaction regarding an April 2020 grant deed.
Next, Plaintiffs argue that even if an agreement to arbitrate exists, CCP § 1281.2(c) applies. This section states that the Court shall order arbitration if an agreement to arbitrate exists, unless it determines that a party to the arbitration agreement is also a party to a pending court action nor 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. Plaintiffs argue that this action involves numerous defendants (e.g., Mizrahi, Conquest, Platinum, and Jain) who are not subject to an arbitration provision and thus ordering arbitration of this matter as to Plaintiffs and Moving Defendants, while staying the rest of the action, would result in the possibility of conflicting rulings. The Court is not aware of whether the other parties have agreed to submit to arbitration. They have not moved to compel arbitration and they have also not joined in Moving Defendants’ motion to compel arbitration. According to Plaintiffs, Mizrahi, Schmuel, Conquest, Platinum, and Red Dragon have already conducted discovery and noticed depositions, showing that their actions are inconsistent with a demand for arbitration. (Opp. at p. 7; Ex. A [Notices of Deposition]; Ex. B [Email correspondence re depositions].) At this time, it appears that the other defendants are not seeking to compel this matter to arbitration. Thus, the Court finds that keeping this lawsuit with multiple defendants in a single proceeding to be more efficient and will mitigate against the possibility of conflicting rulings. Thus, the motion will be denied.
Finally, Plaintiffs also argue that they were fraudulently induced to enter the agreements and they have alleged such facts in the FAC. However, Plaintiffs have not provided any declarations or supporting evidence regarding this argument. As such, this will not be a basis to deny the motion.
CONCLUSION AND ORDER
Defendants Yanni Raz and 6307 Teesdale LLC’s motion to compel arbitration, appoint arbitrator, and stay the proceedings pending arbitration is denied.
Defendants shall provide notice of this order.
[1] The Court notes that Moving Defendants seek to compel arbitration of all 10 causes of action in the complaint against all named defendants. (Mot. at p.6.)