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Metis Development LLC et al v. Cortland Bohacek et al

September 28, 2011

METIS DEVELOPMENT LLC ET AL., CROSS-COMPLAINANTS AND RESPONDENTS,
v.
CORTLAND BOHACEK ET AL., CROSS-DEFENDANTS AND APPELLANTS.



Trial court: San Mateo County Superior Court Trial judge: Hon. John L. Grandsaert (San Mateo County Super. Ct. No. CIV 491482)

The opinion of the court was delivered by: Needham, J.

CERTIFIED FOR PARTIAL PUBLICATION*fn1

Appellants Cortland Bohacek and Puja Bohacek, in her capacity as trustee of the 2000 Bohacek Family Trust, appeal from an order denying their petition to compel arbitration of claims alleged against them in a cross-complaint filed by respondents. They contend: (1) the order must be reversed due to the court's refusal to issue a statement of decision; (2) the court erred in finding that they waived their right to arbitrate; and (3) the court erred in denying their petition on the ground that there would be a possibility of conflicting rulings on common questions of law or fact.

In the published portion of our opinion, we conclude that the trial court erred in failing to issue a statement of decision under Code of Civil Procedure section 1291. In the nonpublished portion of our opinion, we conclude that the waiver finding was erroneous and the appellate record does not support the denial of arbitration under Code of Civil Procedure section 1281.2, subdivision (c). We will therefore reverse the order and remand for further consideration consistent with this opinion.

I. FACTS AND PROCEDURAL HISTORY*fn2

MPC 823 LLC (MPC 823) is a limited liability company that was formed to pursue the development of residential property in Menlo Park. Its members are appellant Cortland Bohacek and respondent Metis Development LLC (Metis). The members of Metis are respondents Richard Wellman (Wellman) and Carol Bennett (Bennett).

A. The MPC 823 Operating Agreement and Arbitration Provision

Cortland Bohacek and Metis, by its members Wellman and Bennett, entered into the MPC 823 Operating Agreement effective January 1, 2008. Section 2 of the Operating Agreement required Metis to make specified capital contributions, and other provisions of the agreement spelled out additional rights and duties.

Section 8.8 of the Operating Agreement provided for the arbitration of disputes, reading in part as follows: "Any controversy or claim arising out of or relating to this Agreement, the Company or the Members' rights or duties shall be settled by binding arbitration in San Mateo County, California. Such arbitration shall be conducted by JAMS/Endispute or any other judicial arbitration service agreed to by the parties, and judgment upon the award may be entered in any court of competent jurisdiction." A First Amended and Restated Operating Agreement retained the arbitration provision.

B. MPC 823's Default and CBT's Complaint

In July 2008, MPC 823 obtained a construction loan from Vineyard Bank, N.A. (Vineyard) for the development of certain real property. The loan was guaranteed by appellant Cortland Bohacek, the 2000 Bohacek Family Trust, and respondents Metis, Wellman, and Bennett. MPC 823 allegedly defaulted on the loan.

In January 2010, California Bank & Trust (CBT), as the successor to Vineyard's rights under the loan, filed a lawsuit against MPC 823, its members Cortland Bohacek and Metis, the members of Metis (Wellman and Bennett), and Cortland Bohacek and Puja Bohacek in their capacities as trustees of the 2000 Bohacek Family Trust. CBT's complaint sought judicial foreclosure, deficiency judgments, and other relief in regard to the loan on which MPC 823 defaulted.

C. The Bohaceks' Cross-Complaint Against Metis, Wellman, and Bennett

On April 14, 2010, appellants Cortland Bohacek and Puja Bohacek, in her capacity as trustee, filed an answer to CBT's complaint along with a cross-complaint seeking indemnity and contribution from respondents Metis, Wellman, and Bennett. The cross-complaint is not in the appellate record.

D. Respondents' Cross-Complaint Against the Bohaceks and Others

Also on April 14, 2010, Metis, Wellman and Bennett filed a cross-complaint against Cortland Bohacek, Puja Bohacek in her capacity as trustee, Bohacek Ventures LLC (Bohacek Ventures), and others. This cross-complaint is not in the record either.

On May 14, 2010, Metis, Wellman and Bennett filed a verified first amended cross-complaint against Cortland Bohacek, Puja Bohacek (this time as an individual and in her capacity as trustee), Bohacek Ventures, CBT (as successor to Vineyard), CBT employees (Natalie Taaffe, Sandy Swenson, and Maria Ybarra, for actions taken while Vineyard employees), bookkeeper Karen Polati, and Shade Construction & Engineering, Inc. For convenience, except where necessary to distinguish between the original and amended pleading, we will refer to the amended cross-complaint as "respondents' cross-complaint."

In essence, respondents' cross-complaint alleged that respondents were fraudulently induced to invest in MPC 823 and to become guarantors of its obligations under the Vineyard loan. They purported to assert 19 causes of action, for fraud, negligent misrepresentation, constructive fraud, conspiracy, breach of fiduciary duties, accounting, unjust enrichment, injunction, concealment of material facts, breach of contract, violation of Corporations Code sections 25400 and 25500, rescission under multiple statutes, restitution, conversion, violation of Corporations Code sections 17254 and 17255, equitable indemnity, comparative indemnity, and contribution.

E. Appellants' Case Management Statement

Appellants filed a case management statement on May 20, 2010, advising the court and respondents that they expected to file, among other things, a petition to compel arbitration.

F. Appellants' Petition to Compel Arbitration

On June 18, 2010, appellants sought an extension from respondents of the time to answer respondents' cross-complaint. An extension was apparently granted to July 6, 2010, at which time appellants filed their petition to compel arbitration as their first and only response to the cross-complaint.

In their petition, appellants asserted that all of the causes of action in respondents' cross-complaint presented a controversy or claim subject to the arbitration provision in the Operating Agreement. In addition, appellants alleged, Cortland Bohacek and Metis were bound by the arbitration provision as signatories to the Operating Agreement, Puja Bohacek could enforce the arbitration provision because she was alleged to have offered and sold membership interests pursuant to the Operating Agreement, and Wellman and Bennett could be compelled to arbitrate because they asserted claims as members of signatory Metis.

Respondents opposed the petition, filing a joint declaration by Metis, Wellman and Bennett and a memorandum of points and authorities. Respondents argued that the petition should be denied because (1) the Bohaceks waived their right to arbitrate (Code Civ. Proc., § 1281.2, subd. (a)), (2) there were grounds for revocation of the Operating Agreement, and (3) the parties to the arbitration agreement are also parties to a pending court action with a third party arising out of the same series of transactions and there is a possibility of conflicting rulings on a common issue of law or fact (Code Civ. Proc., § 1281.2, subd. (c)).*fn3

G. Trial Court's Ruling

By its tentative ruling of August 4, 2010, the trial court indicated its intention to deny the petition to compel arbitration. The tentative ruling advised in relevant part: "Petitioners have engaged in litigation activity which would indicate a waiver of the right to compel arbitration. (See § 1281.2[, subd.] (a); Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 991.) [¶] Further, Cross-Defendant Karen Polati is neither alleged to be a signatory to the Operating Agreement, nor has given assent to submitting the dispute to arbitration. Accordingly, there is a possibility of conflicting rulings on common issues of law or fact. (§ 1281.2[, subd.] (c).)"

At the hearing on the petition, appellants' counsel requested a statement of decision on the issues set forth in the tentative ruling. The court declined, reasoning that the proceeding was a "law and motion" matter.

After argument by appellants' counsel and respondents' counsel, the attorney for third party Polati asserted that, if the claims against appellants were sent to arbitration, the possibility of inconsistent rulings would be eliminated if the litigation were stayed as to Polati as well as the Bohaceks. Polati's attorney also agreed with appellants' counsel that the claims of CBT in the complaint were separate from those asserted in respondents' cross-complaint and could proceed in court.

At the conclusion of the hearing, the trial court acknowledged the argument as to Polati but stated that "there are other parties as well, who I think present possibilities of conflicting rulings." The court then directed entry of the order in accord with the tentative ruling, modified to omit the reference to the claims against Polati.

A written order filed August 24, 2010, denied the petition to compel arbitration because "[p]etitioners have engaged in litigation activity which would indicate a waiver of the right to compel arbitration" and "[t]here is a ...


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