Filed 2/22/18 Bryant v. Investco Management & Development LLC CA1/4
NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR


JEFFREY BRYANT,
Plaintiff and Respondent,
v.
INVESTCO MANAGEMENT & DEVELOPMENT LLC et al.,
Defendants and Appellants.

A143316

(City & County of San Francisco
Super. Ct. No. CGC-13-533809)


I. INTRODUCTION
Plaintiff Jeffrey Bryant purchased membership interests in a limited liability corporation called Investco AV21 LLC (Investco AV21). He alleges these membership interests were securities that were not qualified with the California Department of Corporations (DOC) and were offered and sold to him illegally. Defendants Investco Management & Development LLC (Investco M&D), Steven Thompson, and Douglas Hanson (collectively the Investco defendants) moved to compel arbitration of Bryant’s claims pursuant to two agreements containing arbitration clauses. The trial court issued a tentative ruling granting the motion, but after oral argument, the court reversed its tentative ruling and denied the motion, finding, inter alia, that there was no contract, provision or agreement to arbitrate.
On appeal, the Investco defendants argue that Bryant judicially admitted signing the agreements containing the arbitration clauses. They further argue that Bryant is equitably estopped from denying arbitration with the nonsignatory defendants (Thompson and Hanson) because his claims against them are intertwined with the agreements containing the arbitration clauses. The Investco defendants did not include in the record on appeal the purported arbitration agreements submitted with their moving papers, nor did they provide a reporter’s transcript of the hearing on the motion. Instead, the Investco defendants rely on hundreds of pages of documents they filed in the trial court, without leave, after oral argument.
We find the Investco defendants have failed to provide an adequate and proper record to demonstrate the trial court’s error. We also conclude that Bryant did not judicially admit entering into the agreements containing the arbitration clauses. Accordingly, we affirm the trial court’s ruling.
II. FACTUAL AND PROCEDURAL BACKGROUND
According to the complaint, the Investco defendants, along with co-defendants Christopher P. Epsha, Barry D. LeBendig, Dareld Phillips, Sr. and Bonnie Phillips (collectively defendants), illegally offered and sold unqualified securities in the form of membership interests in Investco AV21 to the public at large. Bryant alleges the membership interests were “securities” within the meaning of Corporations Code section 25019. The alleged securities were created and managed by Investco M&D, Thompson, Hanson, Epsha, and LeBendig to fund the ownership of certain undeveloped land in Palmdale, California. The securities were offered and sold to Bryant at a booth set up at the Roseville Farmers Market by Dareld and Bonnie Phillips. Bryant alleges that at all relevant times, Thompson, Hanson, Epsha, and LeBendig were alter egos and/or agents of Investco M&D and Investco AV21.
According to the complaint, defendants’ offer and sale of the securities contained misrepresentations and omissions of material facts, including that the investments were unqualified securities, the defendants were not licensed to offer or sell securities in California, the securities were not registered with the United States Securities and Exchange Commission (SEC) or qualified by the DOC, there was no exemption or safe harbor from SEC registration or DOC qualification, and the Investco defendants, Epsha, and LeBendig were under a February 18, 2009 desist & refrain order issued by the DOC regarding the securities at issue. The complaint asserts 15 causes of action for: unlicensed broker-dealer, unsuitable investment advisory services, offer and sale of unqualified non-exempt securities, material misrepresentations or omissions of material fact in the offer and sale of securities, materially assisting persons, control persons, fraud and deceit, negligent misrepresentation, negligence, conversion, civil conspiracy, breach of fiduciary duty (two claims), unlawful and unfair business practices, and theft by false representation (Cal. Pen. Code, § 484).
The Investco defendants moved to compel arbitration of Bryant’s claims based on arbitration clauses contained in the “Operating Agreements of Investco AV21 LLC” and “Management Agreements” between Investco M&D and Investco AV21. In their moving papers, the Investco defendants cited to copies of the management and operating agreements attached as Exhibits B and C to the declaration of Thompson. The arbitration clauses stated in relevant part: “The Members agree to mediate any dispute or claim arising between them out of this Agreement or any resulting transaction, before resorting to arbitration” and that “[i]n the event any dispute or claim among any Members cannot be resolved by mediation during the Mediation Period, then such dispute or claim shall be the subject of binding arbitration. . . .” The Investco defendants argued that Bryant, as a member of Investco AV21, agreed to arbitrate any claim between him and other members, including Hanson and Thompson, as well as Investco M&D because “managers” are considered “members” under the operating agreement. The Investco defendants further argued Bryant was equitably estopped from denying arbitration by the nonsignatories (Hanson and Thompson) because his claims against them were intertwined with the agreements containing the arbitration clauses. Additionally, the Investco defendants contended the nonsignatories could compel arbitration because Bryant judicially admitted they were agents and/or alter egos of signatory defendants such as Investco M&D.
In opposition, Bryant argued in relevant part that there was no agreement to arbitrate because the operating and management agreements submitted by the Investco defendants were “unsigned” and the random signature pages attached to the Thompson declaration were unauthenticated and unclear as to what they were in reference to. According to Bryant, these signature pages were labeled “capital and ownership interest,” “suitability questionnaire” and “subscription agreement,” and had nothing to do with arbitration.
Prior to oral argument, the trial court issued a tentative ruling granting the motion. The court held that Bryant did not dispute the existence of the operating and management agreements containing the arbitration clauses, and he judicially admitted that all of the defendants were alter egos and agents of each other, which created a basis for the nonsignatories to compel arbitration against him. The court further held that Bryant was equitably estopped from avoiding arbitration because his claims against the nonsignatories arose from and were intertwined with the cited contracts. The court held that Bryant’s claims for securities fraud “clearly arise from and are intertwined with the cited contracts.”
The matter was heard for oral argument on September 8, 2014. According to the minute order, the matter was continued to October 8, 2014, but “no appearance is required if the Judge signs an order prior to the date of the hearing. Proposed order to be submitted by September 22, 2014. Objection or reply to the proposed order to be submitted by September 29, 2014.”
On September 19, 2014, the Investco defendants filed “Objections to Plaintiff’s Proposed Order Re Motion to Stay Action and Compel Arbitration.” This filing was comprised of a nine-page brief rearguing the merits of the motion, a supporting declaration from Hanson, and over 250 pages of exhibits.
On October 8, 2014, the trial court issued its order denying the motion to compel on the following grounds: (1) “The Court finds no contract, provision or agreement to arbitrate”; (2) “there are no ‘judicial admissions’ or any other factual determination of agency or alter-ego based on any allegations in the complaint”; (3) “the doctrine of equitable estoppel” did not apply because “[t]he gravamen of the complaint is, inter alia, misrepresentations in the purchase and sale of securities directed towards defendants in their capacity as promoters or sponsors of the investments at issue” while the “management agreement” and “operating agreement” dealt with “the management and operations of the internal affairs of Investco AV21 LLC, and are not offering documents of the sort one [sic] as one finds in the offer and sale of securities, such as a prospectus or subscription agreement, nor are they directed toward the Moving Parties in their roles as promoter or sponsor of the investments at issue.” Thus, Bryant’s complaint was not dependent upon, founded in or intertwined with those agreements, nor was he attempting to repudiate those contract terms such as to warrant application of the doctrine of equitable estoppel; and (4) Bryant did not “attempt to evade or plead around arbitration by not naming Investco AV21[], which was dismissed based upon the Court’s July 9, 2014 Amended Interlocutory Injunction in the case entitled People of the State of California by and through the California Corporations Commissioner v. Investco Management & Development LLC, et al. (CGC-11-507316).”
The Investco defendants timely appealed. (Code Civ. Proc., § 1294, subd. (a).)
III. DISCUSSION
On a petition to compel arbitration under Code of Civil Procedure sections 1281.2 and 1290.2, “[t]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a 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.” (Ibid.) An “order denying a petition to compel arbitration, like any other judgment or order of a lower court, is presumed to be correct, and all intendments and presumptions are indulged to support the order on matters as to which the record is silent. [Citation.]” (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 88.)
“ ‘ “There is no uniform standard of review for evaluating an order denying a motion to compel arbitration. [Citation.] If the court’s order is based on a decision of fact, then we adopt a substantial evidence standard. [Citations.] Alternatively, if the court’s denial rests solely on a decision of law, then a de novo standard of review is employed. [Citations.]” ’ [Citations.] ‘[W]hen ruling on a petition to compel arbitration, the superior court may consider evidence on factual issues such as contract formation bearing on the threshold issue of arbitrability. . . . On appeal we must review the court’s factual ruling on arbitrability under the substantial evidence test.’ [Citation.] ‘ “[W]e review the trial court’s order, not its reasoning, and affirm an order if it is correct on any theory apparent from the record.” ’ [Citation.]” (Ramos v. Westlake Services LLC (2015) 242 Cal.App.4th 674, 686.)
A party may request a statement of decision explaining the factual and legal basis of an order on a petition to compel arbitration. (Code Civ. Proc., § 1291.) Where, as here, a statement of decision was not requested, we apply the doctrine of implied findings “and presume the court made all factual findings necessary to support its order—to the extent substantial evidence supports such findings.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.)
A. The Investco Defendants Did Not Carry Their Burden to Prove the Existence of a Valid Agreement to Arbitrate by a Preponderance of the Evidence
The existence of an arbitration agreement is a statutory prerequisite to granting a petition or motion to compel arbitration, and the petitioner or moving party bears the burden of proving its existence by a preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal); see Cal. Code Civ. Proc., § 1281.2.) “[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable.” (Rosenthal, supra, 14 Cal.4th at p. 413.)
The trial court found there was no contract, provision or agreement to arbitrate, but the record does not disclose why the court felt the Investco defendants’ showing was deficient. The Investco defendants did not request a statement of decision and elected to proceed on appeal without a reporter’s transcript of the September 8, 2014 hearing or an agreed or settled statement pursuant to California Rules of Court, rules 8.134 and 8.137. Based on the briefing below, we presume the trial court agreed with Bryant that the operating and management agreements submitted as exhibits to the Thompson declaration were not adequately authenticated because they were “unsigned” and the random signature pages were likewise unauthenticated and did not pertain to arbitration.
Inexplicably, the Investco defendants failed to include the Thompson declaration and exhibits in the record on appeal. Thus, the alleged arbitration agreements, as well as the declaration authenticating them, are simply not before us. The Investco defendants were alerted to the insufficiency of the record when Bryant, in his respondent’s brief, pointed to the absence of the Thompson declaration, yet they made no attempt to augment or correct the record. Without the Thompson declaration and exhibits, we cannot determine whether the trial court’s ultimate conclusion about that evidence was correct. Thus, the Investco defendants have failed to present an adequate record to the court from which prejudicial error is shown. (Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 864.)
The Investco defendants instead rely on the operating and management agreements and signature pages that were filed several days after the September 8, 2014 hearing. Bryant argues this evidence was not properly before the trial court and is likewise not properly before us. We agree. In Ruiz, supra, 232 Cal.App.4th 836, the plaintiff opposed a petition to compel arbitration by challenging the authenticity of the electronic signature in the arbitration agreement submitted with the petition. With its reply papers, the defendant submitted two other arbitration agreements purportedly signed by the plaintiff the previous year in 2010. The court held that because the defendant did not adduce the 2010 arbitration agreements in its petition and did not mention either agreement until it filed its reply papers, “the 2010 arbitration agreements were not properly presented to the trial court and are not properly before this court.” (Ruiz, supra, 232 Cal.App.4th at p. 846.)
This rationale applies with even greater force here, where the belated evidence of signed arbitration agreements came not with the reply papers, but after the conclusion of briefing and oral argument. Nothing in the record suggests the trial court permitted the Investco defendants to file supplemental briefing and evidence after the hearing. Nor is there any indication that the trial court considered these submissions in ruling on the motion. The October 8, 2014 order did not mention the submissions or cite to any of the arguments or evidence contained therein. Rather, in discussing the scope of the arbitration clauses, the trial court specifically cited to “[t]he two agreements appended to the moving papers” (italics added)—in other words, the exhibits to the Thompson declaration that the Investco defendants failed to include in the record on appeal.
The Investco defendants suggest the post-hearing submissions were necessary to address an argument that Bryant raised for the first time at the hearing. There is no support for this contention. Because the Investco defendants elected to proceed on appeal without a reporter’s transcript or an agreed or settled statement, the record is silent as to whether Bryant raised new arguments at the hearing that justified further briefing and evidence. Moreover, there is no indication in the record that the Investco defendants requested and obtained leave from the trial court to file supplemental briefing and evidence to address the purported new arguments by Bryant.
We do not construe the trial court’s invitation to submit “[o]bjection or reply to the proposed order” as leave for the Investco defendants to file supplemental briefing and evidence. The procedure for proposed orders is governed by California Rules of Court, rule 3.1312, which allows a losing party to disapprove of or comment on the form of a proposed order so that it conforms to the court’s order. (See Cal. Rules of Court, rule 3.1312(a) [“the party prevailing on any motion must . . . serve . . . a proposed order for approval as conforming to the court’s order. Within five days after service, the other party or parties must notify the prevailing party as to whether or not the proposed order is so approved” (italics added)].) This rule does not, by any reasonable interpretation, authorize the losing party to reargue the merits of the motion through supplemental briefing and evidence.
Finally, even if we assumed the post-hearing submissions were properly before the trial court and us, we would still uphold the trial court’s finding that there was no contract, provision or agreement to arbitrate. “The right to arbitration depends on a contract. [Citations.] Accordingly, a party can be compelled to submit a dispute to arbitration only where he has agreed in writing to do so. [Citation.]” (Boys Club of San Fernando Valley, Inc. v. Fidelity & Deposit Co. (1992) 6 Cal.App.4th 1266, 1271, fn. omitted.) The issue of contract formation is factual in nature, and we review the trial court’s resolution of disputed facts for substantial evidence. (City of Vista v. Sutro & Co. (1997) 52 Cal.App.4th 401, 407.) The Investco defendants sought to compel arbitration based solely on the operating and management agreements and signature pages, which they claimed were signed by Bryant. However, a writing must be authenticated before it may be received in evidence. (Evid. Code, § 1401.) “Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law.” (Evid. Code, § 1400.) The Investco defendants attempted to authenticate the signature pages through the post-hearing declaration of Hanson, who stated simply that “[t]rue and correct copies of Plaintiff Bryant’s signature pages are attached as Exhibit D.” This conclusory statement was insufficient for the Investco defendants to authenticate the signature pages, as Hanson did not state that he saw Bryant sign his name (Evid. Code, § 1413), that he had personal knowledge of Bryant’s handwriting or signature (id. § 1416), or that he compared the signature pages with a genuine exemplar of Bryant’s signature (id. § 1417). (See Joint Holdings & Trading Co. v. First Union Nat. Bank of North Carolina (1975) 50 Cal.App.3d 159, 166 [authentication witness did not see party sign his name or make side-by-side comparison of party’s signatures].)
The Investco defendants argue that under Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215 (Condee), only minimal authentication is required in moving to compel arbitration, and this threshold was met because the signatures appeared to be Bryant’s. However, “[p]roperly understood, Condee holds that a petitioner is not required to authenticate an opposing party’s signature on an arbitration agreement as a preliminary matter in moving for arbitration or in the event the authenticity of the signature is not challenged. [Citations.]” (Ruiz, supra, 232 Cal.App.4th at p. 846, original italics.) Here, Bryant challenged the authenticity of the proffered arbitration agreements by arguing there was no contract to arbitrate and by disputing the authenticity of the unsigned agreements and random signature pages submitted by the Investco defendants with their moving papers. The Investco defendants cannot avail themselves of the holding in Condee as it pertains to a petitioner’s initial and unchallenged burden on a petition to compel arbitration.
On this current (and deficient) record, we find no error in the trial court’s ultimate finding that there was no contract, provision or agreement to arbitrate.
B. Bryant Did Not Judicially Admit Entering into the Agreements Containing Arbitration Clauses
The Investco defendants contend that Bryant judicially admitted signing the agreements that contain the arbitration clauses. The Investco defendants point to paragraphs 13 to 23 of the complaint where Bryant alleges that the defendants sold membership interests in Investco AV21 to the public and to him, that Investco M&D received commissions and management fees, that the securities were coupled with “collateral arrangements” including management and financing packaged by Investco M&D, and that he purchased the securities in September 2009 at a farmer’s market.
“ ‘A judicial admission (by affirmative allegation in a pleading) is a conclusive concession of the truth of the matter admitted.’ ” (Prilliman v. United Air Lines, Inc. (1997) 53 Cal.App.4th 935, 961.) “ ‘It is a waiver of proof of a fact by conceding its truth, and it has the effect of removing the matter from the issues.’ ” (Valerio v. Andrew Youngquist Construction (2002) 103 Cal.App.4th 1264, 1271, quoting 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 413, p. 511, italics omitted.) An alleged concession will not constitute a judicial admission if it is tacit, fragmentary, equivocal, or ambiguous. (Kirby v. Albert D. Seeno Construction Co. (1992) 11 Cal.App.4th 1059, 1066; Irwin v. Pacific Southwest Airlines (1982) 133 Cal.App.3d 709, 714.)
We do not construe Bryant’s allegation that he purchased investment interests in Investco AV21 as an unequivocal concession that he entered into agreements to arbitrate claims arising from that purchase. Bryant did not allege that he signed the two agreements that the Investco defendants put forth in their motion to compel or post-hearing submissions. The complaint makes no mention of the operating or management agreements.
The Investco defendants argue that because the operating and management agreements were part of a single, indivisible set of documents for purchase of the securities, Bryant’s execution of these agreements is integral to his claims for fraud and other torts related to the securities. However, because there are no allegations in the complaint regarding the indivisible nature of these documents, there is no dispositive admission. “[A] distinction must be made between admissions which are merely probative and those which are dispositive of an issue. If the pleader alleges the former, evidence may still be received on the ultimate issue. [Citations.]” (Electronic Equipment Express, Inc. v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d 834, 850.) At most, Bryant’s allegation that he purchased the securities is probative, not dispositive, of the issue the Investco defendants seek to establish here: that in purchasing the securities, Bryant necessarily executed the management and operating agreements containing the relevant arbitration clauses.
We conclude the allegations in paragraphs 13 to 23 of the complaint did not constitute judicial admissions that Bryant entered into the agreements containing the arbitration clauses.
C. The Agency and Alter Ego Allegations Do Not Constitute Judicial Admissions
We agree with the trial court that the complaint’s boilerplate allegations of agency and alter-ego liability did not constitute judicial admissions that the nonsignatory individual defendants were agents or alter egos of the corporate defendants. “[N]ot every factual allegation in a complaint automatically constitutes a judicial admission. . . . [¶] Rather, a judicial admission is ordinarily a factual allegation by one party that is admitted by the opposing party. . . . [¶] A judicial admission is therefore conclusive both as to the admitting party and as to that party’s opponent. [Citation.] Thus, if a factual allegation is treated as a judicial admission, then neither party may attempt to contradict it—the admitted fact is effectively conceded by both sides.” (Barsegian v. Kessler & Kessler (2013) 215 Cal.App.4th 446, 452.)
The Investco defendants did not accept as true the allegation that Thompson and Hanson were agents and/or alter-egos of Investco M&D and Investco AV21. Rather, they expressly “reserve[d] the right to dispute this contention.” Because the allegation was not conceded by both sides, it did not constitute a judicial admission.
D. Refusal to Enforce Arbitration Agreement
Even if the Investco defendants had shown a valid agreement to arbitrate between the parties, the trial court still had discretion to refuse to enforce the arbitration agreement if it determined that “[a] party to the arbitration agreement is also a party to a pending court action . . . 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.” (Code Civ. Proc., § 1281.2, subd. (c).)
Bryant and the Investco defendants are parties to a pending court action with others not subject to arbitration (LeBendig, Dareld Phillips, and Bonnie Phillips) arising out of the same transaction or series of related transactions: the offer and sale of membership interests in Investco AV21 to Bryant. Thus, if the arbitration clauses were enforced, there would be a possibility of conflicting rulings on common issues of law and fact, such as whether the membership interests constituted securities under the law and/or were exempt from qualification and registration requirements, whether the defendants were engaged in a civil conspiracy, whether the defendants provided material assistance to one another, and whether the defendants had a duty to disclose facts that Bryant claims were omitted from the offer and sale of the securities. Based on these circumstances, denial of the motion to compel arbitration was a reasonable exercise of the trial court’s discretion under Code of Civil Procedure, section 1281.2 subdivision (c).
IV. DISPOSITION
The order denying the motion to compel arbitration is affirmed. Bryant shall recover his costs on appeal.





_________________________
REARDON, ACTING P. J.


We concur:


_________________________
STREETER. J.


_________________________
SCHULMAN, J.*






















*Judge of the Superior Court of California, County of San Francisco, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

A143316 Bryant v. Investco