Opinion
B309047
03-22-2022
902878 ONTARIO LTD., Plaintiff and Respondent, v. EMMETT FURLA OASIS FILMS, LLC et al., Defendants and Appellants.
Hamrick & Evans, A. Raymond Hamrick III, Kenneth A. Kotarski and Shian V. Brisbois for Defendants and Appellants. Wallin & Russell, Michael A. Wallin and John C. Russell for Plaintiff and Respondent.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County. No. 20STCV24791 Michelle Williams Court, Judge.
Hamrick & Evans, A. Raymond Hamrick III, Kenneth A. Kotarski and Shian V. Brisbois for Defendants and Appellants.
Wallin & Russell, Michael A. Wallin and John C. Russell for Plaintiff and Respondent.
ASHMANN-GERST, J.
This litigation follows the alleged breach of two contracts: a bridge loan agreement, which contains an arbitration provision, and a guaranty of that loan agreement, which does not contain an arbitration provision. When the borrower did not repay the monies loaned, plaintiff and respondent 902878 Ontario Ltd. (the lender) brought this action against defendants and appellants Emmett Furla Oasis Films, LLC (EFO) (the guarantor) and Randall Emmett (Emmett), alleging breach of the guaranty and fraud. In response, defendants filed a motion to compel arbitration, asserting that the arbitration provision set forth in the bridge loan agreement controls. The trial court denied defendants' motion, finding that the gravamen of plaintiff's claims was breach of the guaranty, which does not contain an arbitration provision, not breach of the bridge loan agreement.
Defendants appeal, claiming that the trial court erred in finding that the arbitration provision set forth in the bridge loan agreement does not compel that this matter be arbitrated.
We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The Parties
Plaintiff is an investment company. EFO is a film and television production company. Emmett is the cofounder of EFO. As is common in the entertainment industry, EFO owns and controls a number of special purpose production entities through which it engages in film and television production. EFO formed the special purpose production entity Pumped, LLC (Pumped) to produce a television series titled "Pump."
The Agreements
Bridge loan agreement
Emmett approached plaintiff and requested a bridge loan to Pumped. On or about August 13, 2019, plaintiff entered into a bridge loan agreement with Pumped as borrower and EFO as guarantor, pursuant to which plaintiff loaned $750,000 to Pumped, and Pumped agreed to repay the principal amount plus "Guaranteed Interest" as defined in the contract. As is relevant to the issues raised in this appeal, paragraph 13 of the bridge loan agreement provides: "Any controversy, claim, or dispute arising out of or related to the Agreement or the interpretation, performance, or breach hereof shall be submitted for binding and final resolution to the Los Angeles office of JAMS/Endispute, or its successor." The bridge loan agreement was signed by plaintiff (as lender) and Emmett on behalf of Pumped (as borrower) and EFO (as guarantor).
Guaranty
Concurrently with the bridge loan agreement, EFO entered into a guaranty agreement with plaintiff, pursuant to which EFO guaranteed Pumped's repayment of the bridge loan. The guaranty provides, in relevant part, "[a]s a condition to [plaintiff's] entering into the Bridge Loan Agreement . . . [plaintiff] is requiring that [EFO] enter into this Guaranty."
As is relevant to the issues raised in this appeal, section 13 of the guaranty provides, in relevant part: "Guarantor [EFO] hereby agrees that any legal action, suit or proceeding against Guarantor (or any successor-in-interest thereto) arising out of or relating to this Guaranty may (but need not) be initiated by Beneficiary [plaintiff] in a state or federal court located in the County of Los Angeles, State of California. By execution and delivery of this Guaranty, Guarantor hereby (a) waives any objection that it may now or hereafter have to the laying of venue of any such action, suit or proceeding in any such court, (b) waives any claim that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum, (c) submits to the personal jurisdiction of any such court in any such action, suit or proceeding, and (d) agrees to be bound by any judgment, order or decree rendered by any such court in any such action, suit or proceeding."
The guaranty also contains an integration clause, which provides, in relevant part: "This Guaranty embodies the entire understanding of Beneficiary and Guarantor with respect to Guarantor's obligation to Guaranty the full payment, performance and satisfaction of the Borrower's Obligations and there are no further or other agreements or understandings, written or oral, in effect between said parties relating to the Guaranty by Guarantor of the Borrower's Obligations unless otherwise referred to herein or in any agreement executed by each Beneficiary and Guarantor."
Finally, the guaranty confirms that the "obligations of Guarantor hereunder are independent of the obligations of Borrower under the Subject Agreements (and each of them)."
The guaranty was executed by plaintiff (the beneficiary) and Emmett on behalf of EFO (the guarantor).
Amendment to the Bridge Loan Agreement
Plaintiff made the bridge loan to Pumped on or about August 16, 2019. When Pumped failed to pay the repayment amount as required by the contract, plaintiff, Pumped (as borrower), and EFO (as guarantor) entered into an amendment to the bridge loan agreement. Pursuant to the amendment, plaintiff agreed to extend the repayment date and, in exchange, Pumped agreed to increase the repayment amount. Procedural Background
When Pumped failed to repay the monies due, on July 1, 2020, plaintiff filed a complaint against defendants seeking repayment. The complaint sets forth two causes of action: (1) breach of the guaranty against EFO, and (2) fraudulent inducement against EFO and Emmett arising out of the negotiations for the bridge loan agreement and guaranty. The complaint does not allege that EFO breached the bridge loan agreement.
Pumped is not named as a defendant.
Following defendants' unsuccessful demurrer and motion to strike portions of the complaint and plaintiff's successful application for a writ of attachment against EFO, defendants filed a motion to compel arbitration of plaintiff's claims pursuant to the arbitration provision set forth in the bridge loan agreement.
Plaintiff opposed defendants' motion on the grounds that there is no agreement to arbitrate its claims under the guaranty.
On October 29, 2020, the trial court heard defendants' motion to compel. After taking the matter under submission, the trial court denied defendants' motion. In its minute order, the trial court first summarized relevant law and plaintiff's allegations pled in the complaint. Thereafter, it found that plaintiff's claims were based upon the guaranty, not the bridge loan agreement, and pursuant to the guaranty, EFO waived any objection to the trial court's jurisdiction. Regarding Emmett, the trial court found that he was not a party in his individual capacity to the guaranty.
Appeal
Defendants' timely appeal ensued.
DISCUSSION
I. Standard of review
As the parties agree, because the underlying facts are undisputed, we review the trial court's order de novo. (Perez v. U-Haul Co. of California (2016) 3 Cal.App.5th 408, 415.)
II. Relevant law
Because arbitration is a "'matter of consent'" (Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. (2010) 559 U.S. 662, 681), a trial court may compel arbitration only if "it determines that an agreement to arbitrate the controversy exists." (Code Civ. Proc., § 1281.2; Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 861 [this is a "'"threshold question"'"].) The party moving to compel arbitration bears the burden of proving the existence of an arbitration agreement between the movant and the party to be compelled. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)
"'There is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate. [Citation.]' [Citation.]" (Hotels Nevada, LLC v. L.A. Pacific Center, Inc. (2012) 203 Cal.App.4th 336, 347.)
"As a general matter, only signatories to an arbitration agreement may enforce it. [Citation.]" (Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1284.)
In determining whether a matter is subject to arbitration, we generally invoke ordinary rules of contract interpretation. (Amalgamated Transit Union Local 1277 v. Los Angele s County Metropolitan Transportation Authority (2003) 107 Cal.App.4th 673, 684.) A court interprets a contract to ascertain and give effect to the mutual intention of the parties as it existed at the time of contracting. (Civ. Code, § 1636.) To do so, we first employ the plain meaning rule. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 176.) "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." (Civ. Code, § 1638.)
A threshold inquiry in contract interpretation is whether the contract is ambiguous. (Appleton v. Waessil (1994) 27 Cal.App.4th 551, 554-555.) An ambiguity exists when a contract provision is capable of more than one reasonable interpretation. (Supervalu, Inc. v. Wexford Underwriting Managers, Inc. (2009) 175 Cal.App.4th 64, 73.) In such cases, the trial court may consider extrinsic evidence of the parties' intent. (Cedars-Sinai Medical Center v. Shewry (2006) 137 Cal.App.4th 964, 979-980.) In the absence of extrinsic evidence, the agreement is interpreted by its express language. (Benedek v. PLC Santa Monica (2002) 104 Cal.App.4th 1351, 1357.)
III. The trial court did not err in denying defendants' motion to compel arbitration
Applying these legal principles, we conclude that the trial court did not err when it denied defendants' motion to compel arbitration. As the trial court aptly noted, the gravamen of plaintiff's action against EFO is breach of the guaranty, which does not contain an arbitration provision, not breach of the bridge loan agreement. And, the guaranty provides in plain language that the parties agree to resolve any dispute arising out of that contract in a state or federal court in Los Angeles. In fact, EFO expressly waived any objection to venue being in a Los Angeles superior court. Thus, the arbitration provision set forth in the bridge loan agreement does not apply to this action.
Urging us to reverse, defendants argue that because the bridge loan agreement mandates arbitration and the guaranty is related to the bridge loan agreement, any claim for breach of the guaranty is subject to the bridge loan agreement's arbitration clause. We disagree. Doing so would directly contradict section 13 of the guaranty agreement, rendering it superfluous.(Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1507 ["when interpreting a contract, we strive to interpret the parties' agreement to give effect to all of a contract's terms, and to avoid interpretations that render any portion superfluous, void or inexplicable"].) Moreover, the guaranty contains an integration clause, which provides that it "embodies" the parties' entire understanding of their obligations. And, the guaranty confirms that the "obligations of Guarantor hereunder are independent of the obligations of Borrower under the Subject Agreements (and each of them)." Applying a de novo review of the guaranty, we conclude that it is not inextricably intertwined with the bridge loan agreement such that the arbitration provision set forth therein controls.
At most, adopting defendants' argument would create an ambiguity as to which forum selection clause applies to this dispute-arbitration, as set forth in the bridge loan agreement, or court, as set forth in the guaranty agreement. But defendants offer no extrinsic evidence to interpret the alleged ambiguity, leaving us to construe the guaranty independently. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1166; County of Fresno v. Fresno Deputy Sheriff's Assn. (2020) 51 Cal.App.5th 282, 292.)
Mleynek v. Headquarters Cos. (1984) 165 Cal.App.3d 1133 (Mleynek), cited by defendants in their appellate briefs, is readily distinguishable. In that case, the defendants entered into a franchise agreement with the plaintiff. The franchise agreement required the defendants to negotiate with the plaintiff for the lease of certain premises and required the defendants to perform all lease obligations. The franchise agreement also contained an arbitration provision. (Id. at p. 1134.)
Thereafter, the plaintiff leased office space and subleased the property to the defendants. The sublease required the property to be used "'in accordance with the Franchise Agreement.' In addition, the sublease was to terminate upon the termination of the franchise agreement." (Mleynek, supra, 165 Cal.App.3d at p. 1135.)
When the defendants failed to pay rent, the plaintiff brought an unlawful detainer action against the defendants. The defendants moved to compel arbitration, claiming that the arbitration provision in the franchise agreement applied to the sublease. (Mleynek, supra, 165 Cal.App.3d at p. 1135.) The appellate court agreed, noting that it was "faced with two legally distinct relationships and two separate documents designed to represent those relationships." (Id. at p. 1136.) But the franchise agreement and sublease referred to one another. In fact, "the franchise agreement specifically require[d] [the defendants] to perform all lease obligations and the subleased property [had to] be used in 'accordance with the Franchise Agreement.' Finally, the franchise agreement specifie[d] the duration of the sublease." (Ibid.) "Because the two documents [were] so interrelated," the appellate court determined that they had to be "viewed together. Thus, the arbitration provision contained within the franchise agreement [was] construed to apply to the dispute over possession of the premises arising out of the sublease agreement." (Ibid.)
Here, in contrast, the bridge loan agreement and guaranty are not "so interrelated" so that they "must be viewed together." (Mleynek, supra, 165 Cal.App.3d at p. 1136.) Certainly, the purpose of the guaranty was to ensure repayment of all monies loaned to Pumped pursuant to the bridge loan agreement. But the guaranty did not incorporate terms of the bridge loan agreement. The two documents can be construed independent of one another.
We also note that in the instant case the two agreements contain conflicting dispute resolution clauses. While Mleynek explains that the franchise agreement contained an arbitration agreement, the terms of the sublease are not provided. We do not know if those agreements contradicted one another as they do here.
As for defendants' assertion that the "Legal Proceedings" provision of the guaranty is unconscionable, it has been forfeited on appeal for at least two reasons: (1) It was not raised in the trial court (P&D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332, 1344), and (2) It is unsupported by any legal authority (Sprague v. Equifax, Inc. (1985) 166 Cal.App.3d 1012, 1050). Setting that procedural obstacle aside, we are unconvinced that a unilateral obligation to have a dispute resolved in a judicial forum (as opposed to arbitration or some other alternative dispute resolution forum) is akin to a unilateral obligation to arbitrate, which has repeatedly been held to be "so one-sided as to be substantively unconscionable." (Kinney v. United Healthcare Services, Inc. (1999) 70 Cal.App.4th 1322, 1332.)
Finally, Emmett is not a party to either the bridge loan agreement or guaranty. Thus, in addition to the reasons set forth above, he cannot compel this dispute to arbitration.
DISPOSITION
The order is affirmed. Plaintiff is entitled to costs on appeal.
We concur: LUI, P. J., CHAVEZ, J.