Boschetti v. Pacific Bay Investments CA1/4 ( 2014 )

Filed 1/30/14 Boschetti v. Pacific Bay Investments 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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
GIAMPAOLO BOSCHETTI,
Plaintiff and Respondent,
A134195
v.
PACIFIC BAY INVESTMENTS, INC., et (San Francisco County
al., Super. Ct. No. CGC09493195)
Defendants and Appellants.
Defendants Pacific Bay Investments, Inc. (Pacific Bay) and Adam Sparks appeal
orders of the trial court denying their petition to compel arbitration and appointing a
discovery referee. We shall affirm the order denying defendants’ petition to compel
arbitration, and dismiss the appeal from the order appointing a discovery referee.
I. BACKGROUND
Plaintiff Giampaolo Boschetti,1 individually and as managing member of Pabo
Segundo, LLC and Pabo, LLC, brought his complaint against defendants2 in October
2009, and amended it shortly thereafter. The first amended complaint alleged, inter alia,
1
In the record, Giampaolo Boschetti’s name is spelled variously as Giampaulo,
Giampaolo, G. Paul, or Paul.
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).
1
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.”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).
3
The “Jointly Owned Properties” were the Woodlake Shopping Center at 3065 N.
Josey Lane, Carrollton, Texas; the Meadowcreek Shopping Center at 800–999 W.
Centerville, Garland, Texas; the Sevilla Apartments at 1455 North Perry Road in
Carrollton, Texas; 4.913 acres of vacant land at 1451 North Perry, Carrollton, Texas; the
Four Corners Shopping Center at 1804 N. Velasco, Angleton, Texas; the Braeswood
Atrium Apartments at 8800 S. Braeswood, Houston, Texas; the Port of Hilo at 60 Kuhio
Street, Hilo, Hawaii; the Hilo Shopping Center at 1221–1263 Kilauea Avenue and 72
Keukuanaoa Street, Hilo, Hawaii; the Hilo Val Hala Apartments at 120 Puueo Street,
Hilo, Hawaii; the Kam IV Apartments at 1531 Kam IV Road, Honolulu, Hawaii; 1144 S.
Kihei Road, Kihei, Hawaii; a vacant parcel at 2145 S. Kihei Road, Kihei, Hawaii; 1745
So. Kihei Road, Kihei, Hawaii; the Ecodyne Property at 8203 Market Street, Houston,
Texas; the Tall Pines Shopping Center at 907–911 E. Pinecrest Drive, Marshall, Texas;
and the Broadmoor Shopping Village at 930–950 West Centerville Road, Garland, Texas.
Plaintiff alleged that some of these properties—including the Kam IV Apartments at
1531 Kam IV Road in Honolulu—were held by Boschetti and the Sparks Family Trust as
tenants in common.
2
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 arbitration of disputes “with respect to 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 agreements: an “Agreement for Partnership” dated
November 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.4
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
4
The properties were listed as: Braeswood Atrium at 8800 S. Braeswood,
Houston, Texas; Broadmoor Shopping Village at 930–950 West Centerville Road,
Garland, Texas; Four Corners located at 1804 N. Velasco, Angleton, Texas; Hilo
Shopping Center located at 1221–1263 Kilauea Avenue, Hilo, Hawaii; Hilo Val Hala
Apartments, located at 120 Puueo Street, Hilo, Hawaii; the Kam IV Apartments, located
at 1531 Kam IV Road, Honolulu, Hawaii; 1144 S. Kihei Road, Kihei, Hawaii; 1745 S.
Kihei, Kihei, Hawaii; 2145 S. Kihei, Kihei, Hawaii; “Kmart” located at 1100 McCann
Road, Longview, Texas; “Kmart Vacant Land,” 4,112 acres located in Longview, Texas;
8203 Market Street, Houston, Texas; “Meadowcreek Shopping Center” located at 803–
999 West Centerville, Garland, Texas; “Port of Hilo,” located at 60 Kuhio Street, Hilo,
Hawaii; “Sevilla,” located at 1455 N. Perry Road, Carrollton, Texas; “Sevilla Vacant
Land,” 4.9153 acres adjacent to 1455 N. Perry Road, Carrollton, Texas; “Tall Pines
Shopping Center,” at 907–911 E. Pine Crest Drive, Marshall, Texas; “Woodlake
Shopping Center,” at 3065 North Josey Lane, Carrollton, Texas; “Essex House,” located
at 455 Nahua Avenue, Honolulu, Hawaii; “Hawaii Times,” located at 928 Nuuanu
Avenue, Honolulu, Hawaii; and 483 Kuamoo Street, Honolulu, Hawaii.
3
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,5 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.”
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
5
The three properties defendants mentioned in this context were: “438 Kuamoo
Street (‘438 Kuamoo’), 928 Nuuanu Avenue (‘Hawaii Times’), and 455 Nahua Avenue
(‘Essex House’).” The first amended complaint and the cross-complaint included
allegations about these properties.
4
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.”
In the meantime, plaintiff had filed a motion to appoint a discovery referee
pursuant to Code of Civil Procedure sections 639 and 640,6 which the trial court granted,
naming a referee for all discovery purposes.
6
All undesignated statutory references are to the Code of Civil Procedure.
5
II. DISCUSSION
A. Denial of Motion to Compel Arbitration
1. 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’).”
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.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.”
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
7
The first amended complaint and cross-complaint refer to a property at 455
Nahua Avenue. It appears this may be the same property described in Exhibit A to the
2002 TIC agreement as 451 Nahua Avenue.
6
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). . . .”
2. 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.”
[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.]” ’ ” (Augusta v.
Keehn & Associates (2011) 193 Cal. App. 4th 331, 337.) 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
7
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 place”; and (6) whether the delay “affected, misled, or prejudiced” the opposing
party. [Citations.]’ [Citation.]” (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 Zamora v.
Lehman (2010) 186 Cal. App. 4th 1, 19.) This record amply supports the trial 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.
8
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. (Providence Baptist Church v. Superior Ct. (1952) 40
Cal. 2d 55, 59; § 904.1, subd. (a)(1).) Plaintiffs have not asked us to treat their purported
9
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.8
III. 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.
8
Plaintiffs have made a motion for sanctions on the ground this appeal is frivolous
and taken for purposes of delay. The motion is denied.
10