Case Number: EC069180    Hearing Date: January 11, 2019    Dept: A

Jha v Luxor Properties

MOTION TO COMPEL ARBITRATION

Calendar:         12

Case No:         EC069180

Hearing Date:  1/11/19

Action Filed:   8/21/18

Trial:                Not set

MP:                 Defendant Luxor Properties, Inc.

RP:                  Plaintiff Akhilesh Jah and Noho Manor, LLC

ALLEGATIONS:

            On March 26, 2018, Plaintiff Noho Manor, LLC (“Noho”) and Defendants H. Sean Dayani and Hank H. Dayani (the “Dayanis”), through their entities, Defendants 501 Davidson, LLC (“501”) and American 1st Credit Mortgage, LLC (“AFCM”), executed the real estate purchase agreement for the purchase of commercial property at 6100-6108 Vineland Avenue, North Hollywood, CA 91606 for $1.495 million.  Plaintiffs allege that the Dayanis, Defendant Luxor Properties, Inc. (“Luxor”), 501, and AFCM knew that Defendant Octavio A. Radillo dba Tortas Ahopadas El Premo (“Radillo”) wanted to renew his lease for a long term lease as early as February 21, 2018.  Prior to closing, Plaintiffs allege that they instructed Defendants they did not want to renew any leases on the subject property and that the agreement barred Defendants from renewing any leases without Plaintiffs’ permission. Nevertheless, Plaintiffs allege that the Dayanis, Luxor, AFCM, and 501 renewed Radillo’s lease for 5 years, with an option to extend another 5 years, without Plaintiff’s authorization.  Thereafter, escrow closed on May 29, 2018 and Plaintiffs learned Radillo’s lease had been renewed.

            The first amended complaint (“FAC”), filed December 24, 2018, alleges causes of action for: (1) deceit against the Dayanis, Luxor, AFCM, 501, and Defendants Stephen Lampe (“Lampe”) and Remax Commerical and Investment Realty (“Remax”); (2) concealment against Dayanis, Luxor, AFCM, 501, and Lampe/Remax; (3) negligence against Lampe/Remax; (4) breach of contract against the Dayanis, Luxor, AFCM, and 501; (5) breach of covenant of good faith and fair dealing against the Dayanis, Luxor, AFCM, and 501; and (6) rescission against the Dayanis, Luxor, AFCM, 501, and Radillo.

RELIEF REQUESTED:

            Luxor moves to compel arbitration of the claims against it, and staying this action pending the completion of that arbitration.

DISCUSSION:

Legal Standard

CCP §1281.2 permits a party to file a petition to request that the Court order the parties to arbitrate a controversy.  Under section 1281.2, the trial court determines if there is a duty to arbitrate the particular controversy which has arisen between the parties.  (Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal. App. 4th 644, 652-53.)  In performing its duty to determine if the parties have agreed to arbitrate that type of controversy, the Court is necessarily required to examine and, to a limited extent, construe the underlying agreement.  (Id.)

            Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration.  (Id.)  The Court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.  (Id.)  Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.  (Id.)

            The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract.  (Id.)  There is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate.  (Id.)

Analysis

  1. Terms of the Agreement to Arbitrate  

The Commercial Property Purchase Agreement and Joint Escrow Instructions (“Purchase Agreement”) provides the following terms under section 26 on page 8:

  1. DISPUTE RESOLUTION:

            …

  1. 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 transactional 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. Exclusions, from this arbitration agreement are specified in paragraph 26C.

“NOTICE: BY INITIALLING 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 TRUIAL. BY INITIALLING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFCALLY 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.”

(Mot., Ex. 1 [Purchase Agreement at p.8, §26.B].)

The Purchase Agreement is signed by Plaintiff Akhilesh Jha, as an individual (Buyer), and AFCM (Seller).

  1. Analysis

Although Luxor has provided a copy of the Purchase Agreement at issue in this action, Luxor is not a party to the Purchase Agreement.  Rather, the Purchase Agreement was entered between Jha as the buyer and AFCM as the seller.  There is no mention of Luxor in the terms of the Purchase Agreement.

At most, Luxor argues in the moving papers that the types of claims at issue are “exactly” the types of claims for which arbitration is required under the Purchase Agreement.  (Mot. at p.6.)  While the scope of the arbitration agreement may arguably cover the type of dispute at issue, the Purchase Agreement was not executed by Luxor, nor is there any mention that it was entered with the intent of having Luxor be the intended beneficiary of the agreement.  Thus, there is no indication that Plaintiffs agreed to arbitrate any claims they may have against Luxor.

In opposition, Plaintiffs argue that Luxor is the property manager of the subject property that signed the 10-year additional lease with Radillo prior to the close of escrow.  Plaintiffs argue that they did not enter into the Purchase Agreement with Luxor. Rather, Plaintiffs appear to recognize that the correct party they entered into the Purchase Agreement with is AFCM, as Plaintiffs state that they attempted to mediate and potentially arbitrate the case with H. Sean Dayani (the alleged principal owners of Luxor, 501, and AFCM) prior to the litigation.

In reply, Luxor argues that in the initial complaint, Plaintiffs alleged that Luxor entered into the lease agreement.  (Compl., ¶7.) However, such allegations are not alleged in the currently operative FAC, which alleges that Noho and Dayani (through AFCM and 501) entered into the agreement.  (See FAC, ¶10, Ex. A.)  This is further confirmed by the Purchase Agreement’s terms.  “If facts appearing in the exhibits [attached to the compliant] contradict those alleged, the facts in the exhibits take precedence.”  (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.)

Thus, while there may be an enforceable agreement to arbitrate, the agreement on its face is limited only between the buyer and seller—Jha and AFCM.  Further, there are multiple other parties in this action, who are not signatories to the Purchase Agreement.

Accordingly, the Court will deny Luxor’s motion to compel arbitration based on the Purchase Agreement, to which it is not a party.

RULING:

Deny the motion to compel arbitration.