Bianco v. Superior Court for Los Angeles County

• Decision Date: 22 August 1968
• Citation: 265 Cal.App.2d 126,71 Cal.Rptr. 322
• Court: California Court of Appeals Court of Appeals
• Parties: Anthony J. BIANCO et al., Petitioners, v. SUPERIOR COURT of the State of California FOR the COUNTY OF LOS ANGELES, Respondent; Ernest L. LINTHICUM, individually and doing business as Delta Petroleum Company, Real Party in Interest. Civ. 32944.

Page 322

71 Cal.Rptr. 322

265 Cal.App.2d 126

Anthony J. BIANCO et al., Petitioners, v. SUPERIOR COURT of the State of California FOR the COUNTY OF LOS ANGELES, Respondent;

Ernest L. LINTHICUM, individually and doing business as Delta Petroleum Company, Real Party in Interest.

Civ. 32944.

Court of Appeal, Second District, Division 2, California.

Aug. 22, 1968.

As Modified Aug. 28, 1968.

George Baltaxe, Beverly Hills, for petitioner.

Blair & Raydon and Gerald T. Raydon, Los Angeles, for real party in interest.

No appearance for respondent.

McCOY, ^* Associate Justice Pro Tem.

This is a proceeding for a writ of mandate requiring the Superior Court for Los Angeles County to vacate an order that the disputes between the parties be arbitrated in accordance with the terms of the contracts in writing between them. Petitioners, plaintiffs in the action in the superior court, contend that the order is void as a matter of law. We have concluded that a peremptory writ should issue.

The facts are admitted. During the years 1965 and 1966 plaintiffs severally entered into a number of agreements, each denominated 'Joint Venture Agreement' with 'Delta Petroleum Co.' By each of these agreements the several plaintiffs agreed to pay 'Delta Petroleum Co.' a certain sum in payment for certain undivided interests in a number of oil and gas leases executed by named lessors on contiguous lands in the State of West Virginia, which leases were owned by Delta Petroleum Co. The payments included plaintiffs' shares of the cost of drilling a first well on the leased lands. Each agreement provides that upon commercial completion of the first well the parties would enter into an 'operating agreement' and an 'accounting procedure.' Other provisions relate to the operation of the affairs of the joint venture. Thereafter it is stated in the agreement that 'No permit has been obtained for this agreement from The Division of Corporations for the reason that the parties believe no such permit is necessary and each of the parties waives and releases any and all rights, actions, claims, and demands whatsoever which such party could have or may assert against the other by reason of failure to obtain such a permit. If it shall hereafter be deemed advisable to obtain such permit, the parties hereto shall join in an application therefor.' The agreement also contains a provision reading: '10. In the event that a dispute shall arise between the parties relating to this agreement, such dispute shall be submitted to arbitration to a board of three persons, one to be appointed by Associate (Bianco) and one by Delta, and the two so appointed shall elect a third person. Arbitration shall be conducted pursuant to the California Code of Civil Procedure.'

In January 1968 plaintiffs filed their complaint against 'Ernest L. Linthicum, individually and DBA Delta Petroleum Company,' for rescission of the contracts and for other relief. Plaintiffs pray, among other things, that pursuant to the first, fourth, seventh, tenth, fourteenth, eighteenth, twenty-second and twenty-fourth causes of action the court declare the agreements therein referred to rescinded, that the considerations paid by each of them be returned to them, and that they be awarded monetary damages in varying amounts. They also pray for an accounting and for monetary damages pursuant to their other causes of action if rescission cannot be had. In substance, plaintiffs' prayer for rescission is based on their allegation that each of the agreements is a security which was issued without a permit, that the representation as recited in the agreement that no permit was necessary was false and fraudulent, and that that representation was knowingly made to induce each of the plaintiffs to invest in the venture. In each of their several causes of action for rescission plaintiffs allege the amounts of their respective investments in the venture evidenced by the agreements.

Defendant Linthicum did not plead to the complaint either by demurrer or answer. Instead he petitioned the trial court for an order compelling plaintiffs to arbitrate their claims as provided by the agreements, and, if arbitration is ordered, for a stay of the action until arbitration is had. Defendant's petition was based on the ground that written agreements existed between the parties 'to submit disputes to arbitration,' and that 'A controversy exists between the parties, as set forth in the Complaint, and with respect to the refusal of the Plaintiffs herein to execute an operating agreement and to perform other obligations as set forth in the agreements.' The text of the provision of each contract is quoted above. In his supporting points and authorities defendant contended that any causes of action for rescission based on the fact that no permits had been issued had been waived by plaintiffs. The court granted the petition and ordered that the disputes between the parties to the action be arbitrated in accordance with the contracts.

Section 1281.2, which was added to the Code of Civil Procedure in 1961, provides, so far as pertinent here, that 'On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement.' This statutory provision has, 'of course, considerable substantive as well as procedural significance.' (Riess v. Murchison, 9 Cir., 384 F.2d 727, 735.)

Prior to the enactment of section 1281.2 in 1961, section 1280 of the Code of Civil Procedure provided that 'A provision in a written contract to settle by arbitration a controversy arising out of the contract or the refusal to perform the whole or any part thereof, or an agreement in writing to submit an existing controversy to arbitration pursuant to section 1281 of...