Boschetti v. Pacific Bay Investments
Filed 1/30/14 Boschetti v. Pacific Bay Investments
CA1/4
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opinion has not been certified for publication or ordered published for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
GIAMPAOLO BOSCHETTI,
Plaintiff and
Respondent,
v.
PACIFIC BAY INVESTMENTS, INC., et al.,
Defendants and
Appellants.
A134195
(
Super. Ct. No.
CGC09493195)
Defendants Pacific Bay Investments,
Inc. (Pacific Bay) and Adam Sparks appeal orders
of the trial court denying their petition to compel
referee. We shall affirm the order
denying defendants’ petition to compel arbitration, and dismiss the appeal from
the order appointing a discovery referee.
BACKGROUND
Plaintiff Giampaolo Boschetti,
individually and as managing member of Pabo Segundo, LLC and Pabo, LLC, brought
his complaint against defendants
name="_ftnref2" title="">[2]
in October 2009, and amended it shortly thereafter. The first amended complaint alleged, inter
alia, that plaintiff and his business partner, defendant Adam Sparks, owned
various commercial real properties either directly or through membership in the
defendant’s limited liability companies and partnerships, that defendants
provided real property management services, and that Pacific Bay had paid
itself improper distributions in violation of its fiduciary duty to
plaintiff. Plaintiff sought, among other
things, for defendants to provide access to books and records pertaining to
their internal affairs and the management and operation of the parties’ “Jointly
Owned Properties.â€
title="">[3] The first amended complaint alleged six causes
of action: (1) a cause of action against
Pacific Bay for preliminary and permanent injunction; (2) a cause of action
against all defendants for preliminary and permanent injunction; (3) & (4)
causes of action against Pacific Bay for breach of fiduciary duty and unfair competition (Bus. &
Prof. Code, §§ 10130 & 10131); (5) a cause of action against Sparks,
the Sparks Family Trust, Sparks &
Boschetti, Hale Akahai, and Hilo Center for enforcement duties under
Corporations Code sections 17453 and 17106, subdivision (f); and (6) declaratory
relief against Sparks and Pacific Bay with respect to Boschetti’s obligation to
pay Sparks and Pacific Bay an “ ‘equity bonus’ †as a result of the
sale of three properties in Honolulu (located at 455 Nahua Avenue, 928 Nuuanu
Avenue, and 438 Kuamoo Street).
Sparks filed a petition to compel
arbitration based on two 2003 operating agreements between Sparks and Boschetti
for Sparks and Boschetti, LLC and Hale Akahai, LLC which provided for
any matter requiring the consent or mutual agreement†of the parties. The trial court denied the motion on the
ground that the dispute did not involve matters requiring the parties’ mutual
agreement or consent.
Sparks and Pacific Bay
cross-complained against Boschetti in March 2010, seeking recovery of commissions,
asset management fees, and expense reimbursements based on the terms of three
8, 2000; an “oral Modified Partnership Agreement†allegedly entered into in or
around May 2006; and a handwritten “Master Partnership Agreement†allegedly
initialed by Boschetti in or around January 2007. The claims arose in part out of defendants’
management of real property that was or had been jointly owned by Sparks and
Boschetti, either by themselves or through various other partnerships and
entities.
Sparks and Pacific Bay proceeded
with discovery against Boschetti. In
July 2010, Sparks propounded a set of 52 special interrogatories, Pacific Bay propounded
a set of 51 special interrogatories, Sparks propounded a
set of 75 requests for admission, and Sparks and Pacific Bay propounded
separate sets of form interrogatories. Plaintiff
provided discovery responses. Sparks and Pacific Bay moved to
compel further responses to their discovery requests, and the trial court
granted their motion on November 10, 2010.
Defendants took Boschetti’s
deposition over three days in April 2011. Defendants’ counsel questioned Boschetti about
a 2002 Tenancy-in-Common Agreement (the 2002 TIC Agreement), asking whether he
had read the agreement before signing it, whether the agreement entitled
Pacific Bay to a five percent commission, and whether the agreement pertained
to some of the properties at issue in the cross-complaint.
Defendants moved for summary
judgment or summary adjudication on June 24, 2011. They relied in part on the allegedly
undisputed facts that Boschetti and Sparks executed the 2002 TIC Agreement
covering jointly owned properties, three of which they alleged were at issue in
this case,
and that under the 2002 TIC Agreement Sparks was appointed manager of the
properties and Pacific Bay was entitled to a five percent commission on the
sale of certain properties.
On July 15, 2011, defendants moved
to set the matter for trial, asserting that the case was “at issue and ready
for a trial date,†that the parties had “substantially completed copious
discovery required by the nature of this case, both parties have taken or
noticed depositions for the individuals named as parties, and Defendants have a
Motion for Summary Adjudication hearing set in [the trial] court.â€
After seeking and securing leave
from the court, plaintiff filed a second amended complaint on September 6, 2011. In addition to the six
causes of action alleged in the first amended complaint, the second amended
complaint alleged 16 new causes of action.
The new causes of action were claims against Kiyomitex and Sparks Family
Trust for breach of contract, breach of the implied duty of good faith and fair
dealing, and conversion based on a 2005 tenancy in common agreement between
Kiyomitex, LLC and Pabo, LLC for the Sevilla Apartments; negligent supervision
against Kiyomitex and Sparks Family Trust based on their alleged inadequate
supervision of defendant Pacsouth, the management company for the Sevilla
Apartments; breach of contract, breach of the implied duty of good faith and
fair dealing, and conversion against Double Horseshoe and Sparks Family Trust
based on a 2006 tenancy-in-common agreement between Double Horseshoe, LLC and
Pabo Segunda, LLC for the Meadowcreek and Woodlake Shopping Centers; negligent
supervision against Double Horseshoe and Sparks Family Trust in connection with
the Meadowcreek and Woodlake Shopping Centers; breach of contract against the
Sparks Family Trust and breach of the implied duty of good faith and fair
dealing and conversion against Sparks and the Sparks Family Trust in connection
with a 2006 tenancy-in-common agreement among the Adam Sparks Family Revocable
Trust, Boschetti, and Pacific Bay for the Broadmoor Village Shopping Center; negligent supervision against Sparks and the
Sparks Family Trust in connection with the Broadmoor Shopping Center;
conversion and breach of fiduciary duty against Pacsouth, the management
company for the Sevilla Apartments; conversion against Pacific Bay and Sparks
in connection with the Ecodyne Building, located at 8203 Market Street,
Houston, Texas; and against all defendants for an accounting.
Sparks then filed a
second motion to compel arbitration, seeking to compel plaintiff to submit his
claims to arbitration pursuant to the 2002 TIC Agreement. The trial court denied the motion, finding
that “[t]he new claims alleged in the Second Amended Complaint are not within
the scope of the 2002 agreement and, even if they were, Defendants waived their
right to arbitrate those claims by their own litigation activities in this case
and their delay in bringing this motion.â€
In the meantime, plaintiff had filed
a motion to appoint a discovery referee pursuant to Code of Civil Procedure
sections 639 and 640,
name="_ftnref6" title="">[6]
which the trial court granted, naming a referee for all discovery purposes.
II.
DISCUSSION
A.
Denial of Motion to Compel Arbitration
The 2002 TIC Agreement
Sparks contends the
trial court erred in denying his petition to compel arbitration pursuant to the
2002 TIC Agreement. The preamble to the 2002
TIC Agreement provided: “THIS TENANCY-IN-COMMON
AGREEMENT (this ‘Agreement’) is made and entered into, for purposes of
reference only, this 1st day of January, 2002, by and among G. Paul Boschetti,
a single man (hereinafter referred to as ‘GPB’), and Adams Sparks and Kiyomi Sparks,
Trustees of the Adam Sparks Family Revocable Trust Dated January 15, 2000
(hereinafter referred to as ‘AS’), each as a tenant-in-common (referred to
individually as a ‘Co-Owner’ and collectively as the ‘Co-Owners’), with respect
to all the improved real Properties described in Exhibit ‘A’ attached
hereto, as well as those acquired by them, as tenants in common, in the future
(the ‘Property’ or ‘Properties’).â€
Exhibit A to the agreement listed five properties of which the two
parties were co-owners: 928 Nuuanu Avenue, Honolulu, Hawaii; 451 Nahua Avenue, Honolulu, Hawaii; 1531 Kamehameha IV Road, Honolulu, Hawaii; 1745 South Kihei Road, Kihei, Hawaii; and 438 Kuamoo Street, Honolulu, Hawaii. The first amended complaint and/or the
cross-complaint include allegations about defendants’ management of most or all
of these properties.
name="_ftnref7" title="">[7]
The remaining properties at issue in the
first amended complaint and the cross-complaint are not listed in the 2002 TIC
Agreement. Defendants contend, however,
that some of them fall within the scope of the agreement because they are
“properties . . . acquired by [the parties], as tenants in common, in
the future.â€
The 2002 TIC Agreement included
clauses requiring the parties to submit disputes to mediation, and, if
mediation was unsuccessful, “[a]ny controversy or claim in law or equity
arising out of or relating to this Agreement, or the making, performance, or
interpretation thereof, other than disputes involving the collection or
enforcement of any costs, expenses, or other amounts owed by any Co-Owner under
Sections 6 and 7(a) [relating to operation and management of the properties and
failure to pay costs and expenses] . . . shall be resolved by neutral,
binding arbitration . . . in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then existing . . .
The parties shall have the right to discovery in accordance with California
Code of Civil Procedure Section 1283.05. [¶] NOTICE: BY EXECUTION OF THIS AGREEMENT, THE PARTIES
ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THIS
‘ARBITRATION OF DISPUTES FOLLOWING MEDIATION’ PROVISION DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND THE PARTIES ARE GIVING UP ANY
RIGHTS THEY MIGHT OTHERWISE POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR
JURY TRIAL; PROVIDED, HOWEVER, THE PARTIES ARE NOT GIVING UP THEIR JUDICIAL
RIGHTS TO DISCOVERY AND APPEAL OF THE DECISION OF THE ARBITRATOR(S). . . .â€
Waiver of Right to Arbitrate Under 2002 TIC Agreement
“ ‘While in general arbitration is a
highly favored means of settling disputes [citation], it is beyond dispute a
trial court may deny a petition to compel arbitration if it finds the moving
party has waived that right.
[Citations.] [¶] “[T]he
question of waiver is one of fact, and an appellate court’s function is to
review a trial court’s findings regarding waiver to determine whether [they]
are supported by substantial evidence.â€
[Citation.] “The appellate court
may not reverse the trial court’s finding of waiver unless the record as a
matter of law compels finding nonwaiver.
[Citations.]†’ †(
Factors a court properly considers in determining waiver include: “ ‘(1) whether the party’s actions are inconsistent
with the right to arbitrate; (2) whether “the litigation machinery has been
substantially invoked†and the parties “were well into preparation of a
lawsuit†before the party notified the opposing party of an intent to
arbitrate; (3) whether a party either requested arbitration enforcement close
to the trial date or delayed for a long period before seeking a stay; (4)
whether a defendant seeking arbitration filed a counterclaim without asking for
a stay of the proceedings; (5) “whether important intervening steps [e.g.,
taking advantage of judicial discovery procedures not available in arbitration]
had taken placeâ€; and (6) whether the delay “affected, misled, or prejudicedâ€
the opposing party. [Citations.]’ [Citation.]â€
(Sobremonte v. Superior Court
(1998) 61 Cal.App.4th 980, 992 (Sobremonte);
see also St. Agnes Medical Center v.
PacifiCare of California (2003) 31 Cal.4th 1187, 1196.)
Applying these standards, we
conclude substantial evidence supports the trial court’s determination that
defendants waived any right they might have had to arbitrate this dispute
pursuant to the 2002 TIC Agreement. The
“ ‘litigation machinery’ †had been substantially invoked and the
parties were “ ‘well into the preparation of the lawsuit.’ †(Sobremonte,
supra, 61 Cal.App.4th at p. 992.) The complaint and first amended complaint
were filed in October 2009, and the petition to compel arbitration under the 2002
TIC Agreement was not filed until October 6, 2011,
two years later. In the meantime, defendants
carried out significant discovery, including taking Boschetti’s deposition at
which they questioned him about the 2002 TIC Agreement. This deposition might not have been available
in an arbitration: the arbitration
agreement provided that the parties would have the right to discovery in
accordance with section 1283.05, which does not allow depositions to be
taken unless the arbitrator grants leave.
(§ 1283.05, subd. (e).) Defendants
cross-complained without seeking a stay of the litigation. After carrying out discovery and filing their
cross-complaint, defendants moved for summary judgment or summary adjudication,
relying in part on the 2002 TIC Agreement and taking the position that it
covered some of the properties at issue in this case. They moved to set the matter for trial,
asserting the case was “at issue and ready for a trial date.†During the two years this case was litigated
below, plaintiffs lost the benefit of any efficiencies that might have been
available through arbitration. (See
court’s ruling.
Defendants contend, however, that the
second amended complaint so expanded the issues in the litigation that it
“revived†their right to seek arbitration.
(See Keating v. Superior Court
(1982) 31 Cal.3d 584, 607, reversed on another ground in Southland Corp. v. Keating (1984) 465 U.S. 1 [where amended complaints
“considerably expanded†scope of pleadings, trial court could properly find
lack of waiver of right to arbitrate interrelated claims in original
complaints].) According to defendants,
the first amended complaint contained no allegations regarding tenancy-in-common
properties, so they could not assert their right to arbitrate under the 2002
TIC agreement, which recites that it is made “with respect to all improved real
Properties described in Exhibit ‘A’ attached hereto, as well as those
acquired by them, as tenants in common, in the future.†Defendants are incorrect. As we have noted, both the first amended
complaint and the cross-complaint included allegations about defendants’
management of most or all of the properties listed in the 2002 TIC Agreement. The first amended complaint alleged that
Boschetti and the Sparks Family Trust owned the 1531 Kamehameha IV Road and other properties as tenants in common. Moreover, all the new causes of action in the
second amended complaint arise out of defendants’ management of properties
already at issue by virtue of both the first amended complaint and defendants’
own cross-complaint. Even in light of
the new allegations of the second amended complaint, the trial court reasonably
concluded that defendants had waived any right they had to arbitrate this case
under the 2002 TIC Agreement.
Because we reach this conclusion, we
need not address defendants’ further contentions that the trial court erred in
deciding issues properly reserved for the arbitrator and that the scope of the
arbitration agreement included the claims in this case. (See Thorup
v. Dean Witter Reynolds, Inc. (1986) 180 Cal.App.3d 228, 234 [existence of
waiver based on litigation conduct is for courts to decide].)
B.
Appointment of Discovery Referee
The trial court appointed a
discovery referee pursuant to section 639, and defendants have purported
to appeal from this order. An order
appointing a referee is interlocutory and not appealable. (
purported appeal from this order as a petition for writ of mandate, and we
decline to do so. We shall therefore
dismiss the appeal from the order appointing a discovery referee.
DISPOSITION
The
order denying the petition to compel arbitration is affirmed. The appeal from the order appointing a
discovery referee is dismissed.
_________________________
Rivera,
J.
We concur:
_________________________
Ruvolo, P.J.
_________________________
Reardon, J.
name="_ftn1" title=""> [1]
In the record, Giampaolo Boschetti’s name is spelled variously as Giampaulo,
Giampaolo, G. Paul, or Paul.
name="_ftn2" title=""> [2]
The named defendants were Pacific Bay; Adam Sparks, individually and as trustee
of the Adam Sparks Revocable Trust dated January 15, 2000; Singing Cowboy,
Inc.; Texas Rendezvous, LP; Lonesome Cowboy, LP; Sparks & Boschetti, LLC;
Hale Akahai, LLC; Triple Horseshoe, LP; Hilo Center, LLC; Kiyomitex, LLC;
Double Horseshoe, LLC; and PAC South Investments, LLC (Pacsouth).
