Sobremonte v. Superior Court (Bank of America Nat. Trust and Sav. Ass'n)

• Decision Date: 30 January 1998
• Docket Number: No. B102106,B102106
• Citation: 61 Cal.App.4th 980,72 Cal.Rptr.2d 43
• Court: California Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 1410, 98 Daily Journal D.A.R. 1925 Rosario E. SOBREMONTE, etc., et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, etc., Real Party in Interest.

Page 43

72 Cal.Rptr.2d 43

61 Cal.App.4th 980, 98 Cal. Daily Op. Serv. 1410,

98 Daily Journal D.A.R. 1925

Rosario E. SOBREMONTE, etc., et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, etc., Real Party in Interest.

No. B102106.

Court of Appeal, Second District, Division 3, California.

Jan. 30, 1998.

As Modified Feb. 26, 1998.

[61 Cal.App.4th 983] Paul F. Sowa, Los Angeles, for Petitioners.

Consumers Union of U.S., Inc., Gail K. Hillebrand and Earl Lui; The Sturdevant Law Firm, James C. Sturdevant and Carolyn Enciso, San Francisco; The Alexander Law Firm, Richard Alexander, San Jose and Ann Saponara, San Francisco; Day & Day and Marjorie W. Day, Tustin, Amici Curiae for Petitioners.

No appearance for Respondent.

Office of General Counsel, Bank of America, F. Thomas Eck IV, Jan Harris Aniel, Ullar Vitsut, Los Angeles, John F. Cooney, Arne D. Wagner and Michael J. Halloran, San Francisco; Morrison & Foerster LLP, Shirley M. Hufstedler, Seth M. Hufstedler, Los Angeles, Kathleen V. Fisher, Maria Chedid, San Francisco and Tracie L. Brown, Palo Alto, for Real Party in Interest.

California Bankers Association and Christopher E. Chenoweth, San Francisco; Consumer Bankers Association and Steven I. Zeisel, Arlington, VA; The American Bankers Association, John J. Gill and Michael F. Crotty, Laurel, MD; Visa U.S.A. Inc. and Paul A. Allen, San Francisco; California Chamber of Commerce and Fred L. Main, Sacramento; California Employment Law

Council and Paul Grossman, Amici Curiae for Real Party in Interest.

KITCHING, Associate Justice.

Rosario Sobremonte (Sobremonte) and her mother Amparo Esperidion (Esperidion) seek mandamus relief from an order granting Bank of America's (Bank) petition to compel arbitration of a dispute arising from an alleged improper setoff against their accounts. ¹

Sobremonte and Esperidion have made two arguments. First, they contend the arbitration provision was invalid and unenforceable because of lack of sufficient notice and mutual assent of the parties. Second, they assert the Bank waived its right to compel arbitration because it both failed to timely initiate the arbitration process, and engaged in conduct inconsistent with an intent to arbitrate.

We find, on this record, that the Bank waived its right to enforce the arbitration provision. This is because the Bank (1) unreasonably delayed its demand for arbitration, (2) engaged in litigation conduct inconsistent with an intent to arbitrate, and (3) prejudiced the plaintiffs by causing them to incur costs and attorney fees, and lose the benefits of arbitration.

We find no substantial evidence to support the trial court's determination that the Bank had not waived its right to arbitration. Accordingly, we reverse. Because of our ruling, we need not consider issues relating to the validity or enforceability of the arbitration provision.

The petition is granted.

FACTUAL AND PROCEDURAL BACKGROUND

In August 1988, Sobremonte opened a checking account at the Bank's Long Beach branch. She signed a signature card with a provision that read, in pertinent part: "By signing this agreement, you begin a deposit account relationship with us. The written information which we give you is part of this agreement and tells you the current terms of each account. We may change these terms at any time. We'll inform you of changes that affect your rights and obligations as a depositor." The reference to 'written information we may give you" pertained to the 'FACTS About Personal Deposit Account Programs" ("FACTS" booklet) given by the Bank to new customers. There were no procedures in the "FACTS" booklet for resolving disputes with the Bank.

In December 1990, Sobremonte and her 84-year-old mother, Esperidion, opened a savings account at the Bank's Glendale branch. ² They signed a signature card with a provision that read, in relevant part: "The written information we give you is part of this agreement and tells you the current terms of our deposit accounts and VERSATEL Services. We may change these terms at any time. We will inform you of changes that affect your rights and obligations." The reference to "written information we give you" again pertained to the FACTS booklet. There were no procedures in the "FACTS" booklet for resolving disputes with the Bank.

The Bank subsequently changed the terms of the banking agreement by adding a provision for arbitration of disputes. In June 1992, the Bank notified its deposit customers by mailing an insert with their monthly statement. ³ In October 1992, savings account customers were similarly notified. Neither Sobremonte nor Esperidion recalled receiving notice of this arbitration provision.

In April 1993, Sobremonte's niece, Sharon Dimaunahan (Dimaunahan) opened a checking account at the Bank's Glendale branch. Sobremonte was a signatory on the account. ⁴ In September 1994, Dimaunahan's wallet, checkbook and Versatel card were stolen. Subsequently, checks totaling $9,484.56 were deposited in Dimaunahan's account by allegedly unknown persons. A check was then written on the account, payable to "cash", in the sum of $7,400, and accepted by the Bank. The Versatel card was used for purchases and ATM withdrawals in the sum of $1,296.96. The deposited checks were later returned unpaid to the Bank, creating an overdraft in Dimaunahan's account. The Bank, claiming a setoff right, then debited Dimaunahan's account, and the two other accounts on which Sobremonte was a signatory, in the amount of the returned checks and charges. The Bank debited approximately $6,500 from the Sobremonte accounts.

On October 20, 1994, Sobremonte wrote the Bank and inquired why funds were transferred from her and her mother's accounts, and why they did not receive notice of the transaction. Sobremonte stated, in relevant part: "Today, Jennifer of your Glendale branch informed me that she had submitted to you early last week all the information relating to this matter. Sharon Dimaunahan has signed all documentations [sic ] regarding the forgery of her signature.... [p] You realize, of course, the undue costs of legal proceedings. I am hoping I may not have to travel to California, at your expense, in order to settle this matter at the earliest time possible...." ⁵ The Bank did not respond.

On December 9, 1994, Sobremonte and Esperidion, now represented by counsel, demanded, in writing, a return of their funds and compensation for their damages. They informed the Bank that they had meritorious claims for conversion, breach of contract, and defamation, and were entitled to punitive damages for the financial institution's willful conduct. Three months later, on March 10, 1995, the Bank, through its Office of General Counsel, rejected the request for return of their funds and denied liability for the setoff. The Bank's response neither mentioned the existence of the arbitration provision nor proposed arbitration of the dispute.

On May 3, 1995 Sobremonte and Esperidion filed a complaint against the Bank and its employees Rena Holmes (Holmes) and Fung Der (Der). On May 17, 1995, plaintiffs filed a first amended complaint. ⁶ On June 16, 1995, the Bank demurred on grounds that the plaintiffs' second, sixth, thirteenth, and fifteenth causes of action failed to state cognizable claims. There was no mention of the arbitration provision. Sobremonte and Esperidion filed an opposition. On July 13, 1995, after a hearing, the trial court overruled the Bank's demurrer as to the sixth, thirteenth, and fifteenth causes of action, and sustained the demurrer, without leave to amend, as to plaintiffs' second cause of action. On July 19, 1995, the Bank served and filed notice of the ruling.

On July 24, 1995, the Bank answered and asserted, as the last of 25 affirmative defenses, that the Bank "is informed and believes and based thereon alleges that the parties hereto have agreed to arbitrate all causes of action asserted in Plaintiffs' Complaint under the auspices of the American Arbitration Association whose decision shall be binding. Bank of America hereby elects to proceed by way of arbitration, and the filing of this Answer shall in no way be considered a waiver of that right to arbitrate." The Bank, however, did nothing more.

On August 25, 1995, the Bank filed an answer on behalf of Der, and asserted 24 affirmative defenses, specifically omitting the arbitration defense.

On November 3, 1995, the trial court set a status conference for December 6, 1995. Sobremonte and Esperidion filed and served their Status Conference Questionnaire on November 30, 1995. The questionnaire contained a section regarding arbitration. Neither the Bank nor Der filed their questionnaire. ⁷

Both parties attended the December 6, 1995 status conference, at which the trial court issued several orders relating to discovery and calendared a further conference for February 14, 1996. ⁸ There were no indications arbitration was discussed at the hearing. The "Arbitration" section of the filed "Initial Status Conference Order" remained blank.

In November 1995 and December 1995, the parties began to conduct discovery. The Bank served on the plaintiffs six sets of interrogatories, form and special, and four sets of demands for production of documents. The plaintiffs served three sets of interrogatories, one set of requests for admissions, several demands for production of documents, and took the depositions of various Bank officers.

On December 13, 1995, the Bank cross-complained against Dimaunahan for, inter alia, indemnity, contribution, and breach of contract.

On January 16, 1996, Sobremonte and Esperidion moved to compel the Bank to serve further responses to inspection demands and produce requested documents. The Bank opposed the motion, but said nothing about arbitration. Six days later, the Bank responded to plaintiffs' reply with a declaration and three attached exhibits. Included...