Bess v. C & B Chrysler-Jeep

Filed 8/8/07 Bess v. C & B Chrysler-Jeep CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of Riverside County. Lawrence W. Fry, Judge. Affirmed.

Tenner Johnson, J. Craig Johnson and Nelson R. Wong for Defendant and Appellant.

Klass, Helman & Ross and Robert M. Ross for Plaintiff and Respondent.

1. Introduction

A corporation agrees to sell its automobile dealership. The purchase agreement with the new buyer contains an arbitration provision. The president of the selling corporation agrees to enter personally into a separate noncompetition agreement with the new purchaser of the dealership. The separate agreement contains no arbitration provision. Does the arbitration provision included in the purchase agreement bind the president personally?

We find that the arbitration agreement between the corporation and the new purchasers of the business does not bind the president of the selling corporation individually and his agreement to execute a noncompetition agreement as an individual does not obligate him personally to comply with the arbitration provision in the purchase agreement.

2. Facts

In September 2004 Charles David Treister III and Brent R. Lincoln purchased the Chrysler dealership from the Norco Automotive Group, Inc. (Norco). The new owners operated under the name of C & B Chrysler-Jeep, Inc. (C&B). James Bess was the president of Norco, a corporation. Norco and the new buyers entered an Agreement for Purchase and Sale. In that agreement the new purchasers and Bess acknowledged that they would enter into a separate noncompetition agreement by which Bess would agree not to operate a Chrysler Jeep dealership in Riverside, Los Angeles, or San Bernardino for three years in return for the new company providing him with a new Chrysler Town & Country vehicle for three years.

Before the three years expired C&B repossessed the car, asserting Besss unspecified fraud and breaches of the agreement. Bess filed this action for conversion. C&B responded by requesting Bess comply with the arbitration agreement between C&B and Norco. Bess refused, asserting that the arbitration agreement was set forth in the purchase and sale agreement between C&B and Norco and did not apply to him. The trial court agreed and denied C&Bs motion to compel the arbitration.

The purchase agreement was dated September 1, 2004. The noncompetition agreement between Bess and C&B was signed on November 15, 2004. C&B contends that Bess was a third party beneficiary of the purchase agreement because the purchase agreement mentioned the intention of Bess and C&B to enter into the separate noncompetition agreement.

3. Arbitration Agreement

C&B contends that the combination of paragraphs 9.1.5 and 15 of the sales agreement compelled Bess to comply with the arbitration provisions of the purchase agreement. Paragraph 9.1.5 provides as follows:

9.1.5 Bess Consulting Agreement. Buyer and Bess shall have agreed in writing to the terms of a Noncompetition Agreement by the terms of which Bess will refrain from competition with Buyer as a owner or operator of a franchised Chrysler Jeep dealership in Riverside, Los Angeles and San Bernardino Counties, California within a radius of 25 miles from the dealership premises for a period of three (3) years in consideration for the use of a new Chrysler Town & Country vehicle each year at no cost to Bess other than gasoline and operating expenses.

Paragraph 15 of the sales agreement provides:

15 ARBITRATION. Any controversy between [no parties mentioned in original] regarding the construction, application or performance of this Agreement, and any claim arising out of this Agreement or its breach shall be submitted to arbitration upon the written request of one party after the service of that request upon the other party. Within[ ]30 days after the receipt of the request described above, the parties shall agree upon a single arbitrator, or shall exchange a list of three proposed arbitrators. If only one party submits a list, that party shall select an arbitrator from such list. Should both parties fail to submit a list, or more than one name or no names appear on both lists, the arbitrator will be selected as provided as in California Code of Civil Procedure Section 1281.6 from the appropriate agency or association or, if applicable, from the common names. The cost of arbitration shall be governed by Section 16 of this Agreement. Except as otherwise provided in this section, the arbitration shall be governed by the provisions of the California Arbitration Act (California Code of Civil Procedures [sic], Section 1280 et seq.)

It is clear that [d]oubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute. (OMalley v. Wilshire Oil Co. (1963) 59 Cal.2d 482, 491.) Additionally, [i]f the court determine that a written agreement to arbitrate a controversy exists, an order to arbitrate such controversy may not be refused on the ground that the petitioners contentions lack substantive merit. (Code Civ. Proc.,  1281.2; . . . .) (United Transportation Union v. Southern Cal. Rapid Transit Dist. (1992) 7 Cal.App.4th 804, 808.) Indeed [o]ur Supreme Court has stated that broad contractual provisions for arbitration are to be liberally construed. (Id. at p. 809.)

California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration. (CoastPlazaDoctorsHospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)

In light of the above authority, we must determine whether arbitration was considered by C&B and Bess when they entered the separate noncompetition agreement. C&B contends that Bess benefited from paragraph 9.1.5 of the purchase agreement because it gave him the right to use a described vehicle to be provided by C&B. C&B asserts that because Bess benefited from the provision of the purchase agreement in his individual capacity he is therefore obligated to comply with the arbitration provision in the purchase agreement.

We disagree. Paragraph 9.1.5 in the purchase and sale agreement did not purport to compel action on behalf of Bess. It merely recites that C&B and Bess had agreed to enter into a separate agreement limiting Besss ability as an individual to compete with C&B. The original purchase agreement between C&B and Norco was not signed by Bess as an individual. Had C&B and Bess never signed the noncompetition agreement the sale transaction between Norco and C&B would still have been effective. Nothing in the purchase agreement requires Bess as an individual to comply with any of the provisions in the sales agreement, including any obligation to arbitrate.

Arbitration is consensual in nature. The fundamental assumption of arbitration is that it may be invoked as an alternative to the settlement of disputes by means other than the judicial process solely because all parties have chose to arbitrate them. [Citations.] Even the strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement or who have not authorized anyone to act for them in executing such an agreement. The right to arbitration depends on a contract. (. . . [California has no policy of compelling persons to accept arbitration of controversies that they have not agreed to arbitrate or which no statute has made arbitrable].) A party cannot be compelled to arbitrate a dispute that it has not elected to submit to arbitration. [Citation.] A party can be compelled to arbitration only when he or she has agreed in writing to do so. [Citations.] In essence, an action to compel arbitration is a suit in equity to compel specific performance of that contract. [Citations.] Absent a written agreement--or a preexisting relationship or authority to contract for another that might substitute for an arbitration agreement--courts sitting in equity may not compel third party nonsignatories to arbitrate their disputes. (County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47 Cal.App.4th 237, 244-245.)

The opinion of the First Appellate District In the County of Contra Costa v. Kaiser Foundation Health Plan, Inc. case applies here. Bess did not elect to use arbitration as an alternative to the judicial process. C&B asserts the mere fact that paragraph 9.1.5 of the purchase agreement recited that Bess and C&B had agreed to a separate noncompetition agreement means Bess thereby agreed to apply the arbitration provision from the sales agreement into the noncompetition agreement. Not so. The reference to the noncompetition agreement in the agreement of purchase and sale merely indicates that C&B and Bess had agreed to a separate agreement by which Bess would not personally compete with C&B in specified geographical areas. There is no reference to the arbitration agreement contained in the noncompetition agreement.

The noncompetition agreement between Bess and C&B specifically provides that there are no written or oral agreements or representations not contained herein or incorporated by reference herein. It also provides that [t]he agreement incorporates and supersedes all prior negotiations and agreements of the parties. To clarify the agreement further, it provides that in the event of any dispute between the parties hereto to enforce any provision or rights hereunder, the non-prevailing shall pay to the prevailing party therein all costs and expenses, expressly including, but not limited to, reasonable attorneys fees and court costs, incurred therein by such successful party. It further provides that [i]f either party hereto, without fault on the part of such party, be made a party to any proceeding instituted by or against the other party hereto, then such other party agrees to pay to such party all of such partys costs and expenses including, but not limited to, reasonable attorneys fees and court costs incurred by such party in or in connection with such proceeding.

The quoted provisions from the noncompetition agreement not only do not suggest that C&B anticipated that the agreement would be subject to arbitration, they expressly provided that any dispute about the agreement would entitle the prevailing party to court costs and fees.

4. Disposition

The judgment is affirmed. Bess is awarded his costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

s/Gaut

J.

We concur:

s/Hollenhorst

Acting P. J.

s/Richli

J.

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