Golden State Bank v. Monterey Cnty. Bank

• Decision Date: 19 May 2020
• Docket Number: H046812
• Parties: GOLDEN STATE BANK, Plaintiff and Respondent, v. MONTEREY COUNTY BANK, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

GOLDEN STATE BANK, Plaintiff and Respondent, v. MONTEREY COUNTY BANK, Defendant and Appellant.

H046812

COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT

May 19, 2020

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Monterey County Super. Ct. No. 18-CV004801)

In 2008, appellant Monterey County Bank (Monterey), respondent Golden State Bank (Golden State), and a third institution, Bank of Sacramento (Sacramento),¹ entered into a loan participation agreement relating to undeveloped property in Monterey County provided as security for the loan. (Hereafter, this contract is referred to as the Loan Participation Agreement or the Agreement.) After the borrower's default and foreclosure of the security, the three institutions took title to the property in December 2009 through a trustee's deed. Nine years later, Golden State sued Monterey, contending that it had taken various actions relative to the property that were detrimental to Golden State and were to Monterey's personal benefit.

Monterey filed a petition to compel arbitration of the dispute pursuant to section 1292.4 of the Code of Civil Procedure, contending that the 2008 Agreement contained a provision requiring that the claims asserted by Golden State in the lawsuitwere subject to mandatory arbitration.² Golden State opposed the petition, arguing that the Loan Participation Agreement terminated when the foreclosure occurred in 2009, and that its terms therefore did not govern the instant controversy. The trial court denied the petition to compel arbitration.

On appeal from that order, Monterey makes two contentions. First, it asserts that under the terms of the Agreement, whether the dispute was arbitrable was a matter to be decided by the arbitrator, not the court. Second, and in the alternative, Monterey contends that the controversy was subject to arbitration because the dispute involving Monterey's handling of the property after foreclosure had its roots in the Loan Participation Agreement We conclude that (1) Monterey is precluded from asserting the first argument because Monterey did not preserve it below, and (2) the second argument lacks merit because the controversy is not subject to arbitration under the Agreement. Accordingly, we will affirm the order.

I. PROCEDURAL BACKGROUND

A. Complaint

On September 4, 2018, Golden State filed a complaint alleging four causes of action in the Superior Court of California, County of Los Angeles. The complaint alleged claims against Monterey for breach of fiduciary duty, fraud, negligence, and negligent misrepresentation. It was alleged in the complaint³ that in or about May 2008, Monterey made a loan (the Loan) to Monterra Ranch Properties LLC (hereafter,Monterra or the Borrower), in the principal sum of $2,170,000, which was secured by a deed of trust against undeveloped property. The secured property is referred to in the complaint as "the Property." The subject Agreement refers to the secured property as "Monterra Ranch, Ranch Lot 1, Monterey, California." (We will hereafter refer to the secured real property as Ranch Lot 1.)

Prior to making the Loan, and on or about December 5, 2007, Monterey approached Golden State and a third institution, Sacramento, requesting that they enter into a business relationship under which they would purchase proportionate interests in the Loan Monterey ultimately made to Monterra. (Hereafter, Golden State and Sacramento are sometimes collectively referred to as the Participants.) At that time, the three institutions entered into a written Loan Participation Agreement, under which it was agreed, inter alia, that Monterey, designated as "Lead Bank," would assign proportionate shares of the Loan and collateral received from the Loan (i.e., the deed of trust encumbering Ranch Lot 1) as follows: a 64.52 percent ownership interest to Golden State in exchange for $1,414,000; and a 26.27 percent ownership interest to Sacramento in exchange for $575,700. Monterey thus retained a 9.21 percent interest in the Loan and the deed of trust encumbering Ranch Lot 1. As "Lead Bank," Monterey was empowered to "administer the Loan, the Collateral, and any related guaranties as though it were the sole owner and holder thereof." As alleged by Golden State in its complaint, the Agreement "effectively ended in late 2009."

The Loan secured by deed of trust was foreclosed upon in December 2009. On December 21, 2009, a trustee's deed upon sale was executed by the trustee, transferring Ranch Lot 1 to Golden State (64.52 % interest), Sacramento (26.27 % interest), and Monterey (9.21 % interest), as tenants in common. Golden State, Sacramento, and Monterey, "[a]s a result of the foreclosure of the Property, . . . became, and remain, tenants in common of Ranch Lot 1, each owning a proportionate interest in the Property."

Subsequent to the foreclosure, Monterey breached its fiduciary duties to Golden State "by engaging in many unauthorized actions to [Golden State's] detriment and for [Monterey's] own personal gain." These alleged unauthorized actions in which Monterey enriched itself included its (1) using Ranch Lot 1 "to negotiate improvements to neighboring lots in which [Golden State held] . . . no interest," including "using [Ranch Lot 1] as a necessary means of facilitating the reconfiguration of [Monterey's] other adjacent lots"; (2) entering into transactions that resulted in loss of express access rights for Ranch Lot 1, replacing them with an unnecessary water easement that benefited Monterey's other interests as well as third parties; (3) authorizing a lien against Ranch Lot 1 in May 2012 without authorization from Golden State or Sacramento; and (4) signing without Golden State's knowledge or consent a number of legal documents that negatively impacted Ranch Lot 1 and Golden State's rights thereunder.

B. Petition to Compel Arbitration

In response to the filing of the complaint by Golden State in the Los Angeles County Superior Court, Monterey filed a motion to change venue and a petition to compel arbitration. After a hearing in October 2018, the Los Angeles County Superior Court granted the motion to change venue, transferring the case to Monterey County Superior Court. The court declined to rule on Monterey's petition to compel arbitration, concluding that the petition was moot.

Monterey subsequently, on January 15, 2019, filed an amended petition to compel arbitration in the Monterey County Superior Court. It contended that, as shown from the face of the complaint, the dispute was "grounded on a loan participation agreement," and that the parties had agreed under the Agreement that " '[a]ny and all disputes, controversies and claims arising out of or relating to this Agreement shall be settled and determined by arbitration . . . before a panel of three (3) arbitrators pursuant to the Commercial Rules then existing of the American Arbitration Association.' " Montereyargued that the dispute in fact related to the Agreement and therefore was subject to arbitration.

Golden State filed opposition to the petition. It argued that its claims were not subject to arbitration, because they arose out of the relationship between the parties as tenants in common "and not [out of] the long[-]expired [Agreement]." After hearing argument on February 15, 2019, the court denied the petition to compel arbitration. A formal order was filed on March 14, 2019.

Appellant filed a timely notice of appeal from the order denying the petition to compel arbitration. (See Code Civ. Proc., § 1294, subd. (a).) [order denying or dismissing petition to compel arbitration appealable].)

II. DISCUSSION

A. Standard of Review

The principal issue in this case is whether the dispute presented in the complaint is governed by the arbitration clause in the Agreement. No conflicting extrinsic evidence was presented in the court below concerning the interpretation of the Agreement. Accordingly, we review the trial court's denial of the petition to compel arbitration here de novo. "Whether an arbitration agreement applies to a controversy is a question of law to which the appellate court applies its independent judgment where no conflicting extrinsic evidence in aid of interpretation was introduced in the trial court. [Citation.]" (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1670; see also NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 71-72 [where trial court's decision concerning arbitrability rested on issue of law concerning whether arbitration provision governed, de novo review applied].)

B. No Error in Concluding Complaint Was Not Arbitrable

Monterey makes alternative arguments on appeal. First, it asserts that a panel of arbitrators, instead of the court, should have decided whether the dispute was subject to arbitration. Monterey contends in the alternative that because Golden State's claims"have their roots in the contract, [they are] subject to arbitration." We address these alternative arguments below.

1. Claim that Arbitrator Should Decide Arbitrability

Monterey contends that the arbitrator⁴ should have decided whether the controversy was arbitrable here. It observes—quoting Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 891-892—that the parties may contract to delegate the question of arbitrability to the arbitrator, rather than the court, so long as the language in the agreement is " 'clear and unmistakable.' " Monterey argues that the parties, by incorporating by reference the Commercial Rules of the American Arbitration Association (AAA) into the Agreement, made a clear and unmistakable delegation of the issue of arbitrability to the arbitrator. (See, e.g., Dream Theater, Inc. v. Dream...