Von Becelaere Ventures, LLC v. Zenovic ( 2018 )

Filed 6/6/18
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
VON BECELAERE VENTURES, LLC, D072620
Plaintiff and Respondent,
v. (Super. Ct. No. 37-2017-00011817-
CU-CD-CTL)
JAMES ZENOVIC,
Defendant and Appellant.
APPEAL from an order of the Superior Court of San Diego County, Ronald L.
Styn, Judge. Affirmed.
Law Office of Johanna S. Schiavoni, Johanna S. Schiavoni; Purdy & Bailey,
Micah L. Bailey and Mark Serino for Defendant and Appellant.
Niddrie Addams Fuller Singh and Rupa G. Singh for Plaintiff and Respondent.
INTRODUCTION
James Zenovic doing business as James Zenovic Construction (Zenovic) appeals
an order denying his petition to compel arbitration in an action filed by Von Becelaere
Ventures, LLC (VBV) in San Diego County. The trial court determined Zenovic waived
his right to compel arbitration by filing a separate complaint in Orange County to
foreclose on a mechanics lien without complying with provisions in Code of Civil
Procedure section 1281.51 to preserve his arbitration rights. Zenovic contends the court
misread and misapplied section 1281.5, which he contends should only apply to the
mechanics lien action and should not operate to preclude arbitration of the separate action
filed by VBV. We disagree. We conclude section 1281.5 "means what it says: A party
who files an action to enforce a mechanic's lien, but who does not at the same time
request that the action be stayed pending arbitration, waives any right to arbitration."
(R. Baker v. Motel 6 (1986) 180 Cal. App. 3d 928, 929 (Baker).) We, therefore, affirm the
order.
BACKGROUND
A
VBV entered into a construction contract with Zenovic to construct a single-
family residence on property owned by VBV in Laguna Beach. VBV and Zenovic both
maintain addresses in San Diego County.
The construction contract contained an arbitration agreement stating, "If any
dispute arises concerning this Contract or the interpretation thereof, or concerning
construction of the Improvements, or the Limited Warranty, customer service, defects,
damages, or obligations therewith (a 'Construction Dispute'), such Construction Dispute
will be settled by binding arbitration."
1 Further statutory references are to the Code of Civil Procedure unless otherwise
stated.
2
B
Apparently, a dispute arose between the parties. Zenovic recorded a mechanics
lien in Orange County on March 20, 2017, asserting VBV owed $449,126.96 for work
furnished at the property.
VBV filed a construction defect complaint on April 3, 2017, in the Superior Court
of San Diego County (San Diego action) asserting causes of action for breach of contract;
negligence; an accounting; violations of Business and Professions Code section 7000, et
seq.; breach of the covenant of good faith and fair dealing; aiding and abetting fraud;
aiding and abetting breach of fiduciary duty; and violation of Penal Code section 496.
VBV alleged Zenovic breached the construction contract by "(a) failing to properly
perform and construct the Work; [¶] (b) failing to hire properly licensed and insured
subcontractors; [¶] (c) failing to comply with proper license and insurance requirements;
[¶] (d) failing to obtain written subcontract agreements; [¶] (e) failing to properly
supervise the Work; [¶] (f) failing to maintain and provide upon request proper
accounting records; [¶] (g) failing to properly manage expenses and allowing gross
overages; [¶] (h) failing to comply with requirements regarding change orders,
improperly billing for extra work and improperly categorizing work as extra work which
should have been covered under the contract as included work; and [¶] (i) improperly
filing and asserting an untimely mechanics lien and threatening to file suit to foreclose on
the improper lien."
3
VBV's third cause of action for an accounting alleged it overpaid Zenovic as a
result of "fraudulent, incomplete and inaccurate billing" for the project and sought a
"complete and accurate accounting of the cost of work."
The sixth cause of action for aiding and abetting fraud alleged the defendants
conspired to defraud VBV with excessive billing for which VBV paid, and "subsequently
improperly recorded an untimely Mechanics Lien against the Residence in the amount of
$449,126.96. Defendants then demanded [VBV] pay the sum of $648,811.43 or they
would file a lawsuit to foreclose on the Mechanics Lien."
A few days after being served with the San Diego action, Zenovic filed on
April 7, 2017, a complaint in the Superior Court of Orange County (Orange County
action) asserting causes of action for breach of contract, reasonable value, account stated,
open book account, abuse of process, foreclosure on mechanics lien, and breach of the
covenant of good faith and fair dealing. Zenovic alleged VBV refused to pay money due
under the construction contract for labor, materials, and services provided for
construction of the residence. Zenovic sought to foreclose on the mechanics lien.
About a month later, Zenovic filed a motion to compel arbitration in the San
Diego action. He contended VBV's entire complaint was arbitrable because the
allegations for each cause of action qualified as a "Construction Dispute" under the terms
of the arbitration agreement, including VBV's causes of action for accounting, aiding and
abetting fraud and breach of fiduciary duty based on allegations of mismanagement of
construction and billing practices, and violation of Penal Code section 496 based on
allegations of theft of construction funds.
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Thereafter, the parties submitted a stipulation to the Orange County Superior
Court agreeing to transfer the Orange County action to San Diego County Superior Court
and requesting the two actions be consolidated. The Orange County court ordered the
Orange County action transferred to San Diego County Superior Court and to be related
to the San Diego action.
The court denied Zenovic's petition to compel arbitration of the San Diego action
finding Zenovic waived the right to compel arbitration by failing to comply with section
1281.5, subdivision (a), when filing the Orange County action. Because Zenovic waived
the ability to enforce the arbitration provision, the court also denied the petition to
compel arbitration as to codefendants Union Site Contracting and Joseph Zenovic finding
there is a possibility of conflicting rulings on a common issue of law or fact. Union Site
Contracting and Joseph Zenovic are not parties to this appeal.2
DISCUSSION
Zenovic contends section 1281.5 applies only to an action to enforce a mechanics
lien and should not operate to waive his right to arbitrate other contractual disputes. We
disagree.
I
" 'Generally, the determination of waiver is a question of fact, and the trial court's
finding, if supported by sufficient evidence, is binding on the appellate court. [Citations.]
2 Union Site Contracting and Joseph Zenovic separately appealed the order denying
the motion to compel arbitration and a subsequent order awarding attorney fees. That
appeal will be considered separately. (Von Becelaere Ventures, LLC v. James Zenovic et
al., D073108.)
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"When, however, the facts are undisputed and only one inference may reasonably be
drawn, the issue is one of law and the reviewing court is not bound by the trial court's
ruling." ' " (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal. 4th 348,
375.)
II
Section 1281.5, subdivision (a) states: "Any person who proceeds to record and
enforce a claim of lien by commencement of an action pursuant to Chapter 4
(commencing with Section 8400) of Title 2 of Part 6 of Division 4 of the Civil Code,
does not thereby waive any right of arbitration the person may have pursuant to a written
agreement to arbitrate, if, in filing an action to enforce the claim of lien, the claimant
does either of the following: [¶] (1) Includes an allegation in the complaint that the
claimant does not intend to waive any right of arbitration, and intends to move the court,
within 30 days after service of the summons and complaint, for an order to stay further
proceedings in the action. [¶] (2) At the same time that the complaint is filed, the
claimant files an application that the action be stayed pending the arbitration of any issue,
question, or dispute that is claimed to be arbitrable under the agreement and that is
relevant to the action to enforce the claim of lien."
A
Zenovic contends the title of the statute has some significance. However, as
enacted and amended by the Legislature, section 1281.5 never contained a title. (See
Stats. 1977, ch. 135, § 1, pp. 571–572; Stats. 1989, ch. 470, § 1, p. 1677; Stats. 1998,
ch. 931, § 122, p. 6466; Stats. 2002, ch. 784, § 82, p. 4765; Stats. 2003, ch. 22, § 1,
6
pp. 97–98; Stats. 2010, ch. 697, § 25 (SB 189).) Titles inserted by publishers in
commercial versions of the statute do not indicate legislative intent and are not binding
on the court. (In re Halcomb (1942) 21 Cal. 2d 126, 130; see DaFonte v. Up-Right, Inc.
(1992) 2 Cal. 4th 593, 602; Cal. Style Manual (4th ed. 2000) § 2:15 [B], p. 102.) In any
event, "a provision's title 'is never allowed to enlarge or control the language in the body
of the [provision].' " (Berkeley Hillside Preservation v. City of Berkeley (2015) 60
Cal. 4th 1086, 1096, fn. 2.)
B
Zenovic cites to the portions of the statute referring to the commencement of an
action to enforce a mechanics lien to argue the statute governs only actions to enforce
mechanics liens, not other issues. However, Zenovic's narrow reading overlooks the
pertinent language of the statute, which states a party who files an action to enforce a
mechanics lien "does not thereby waive any right of arbitration the person may have
pursuant to a written agreement to arbitrate" if the party complies with one of the two
enumerated provisions to stay the mechanics lien. (§ 1281.5, subd. (a), italics added.)
Section 1281.5, subdivision (a), contemplates a mechanics lien action will be
separate from an action to resolve otherwise arbitrable disputes. It makes no difference if
the arbitration action is initiated in a different venue or which party initiates the
arbitration action. By its plain terms, the statute permits a contractor to take advantage of
the statutory mechanics lien process while preserving the contractual right to arbitrate
disputes as provided in the arbitration agreement. The purpose of the alternative stay
procedures articulated in section 1281.5, subdivision (a), is to hold the mechanics lien
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process in abeyance "pending the arbitration of any issue, question, or dispute that is
claimed to be arbitrable under the agreement and that is relevant to the action to enforce
the claim of lien." (§ 1281.5, subds. (a)(2), (b), italics added.) However, a party who
commences a mechanics lien action without complying with either of the stay provisions
waives any such right to arbitration.
"[P]rior to the enactment of section 1281.5 in 1977, the filing of an action on a
contract without seeking to preserve arbitration constituted a waiver of a contract
provision for arbitration." (Baker, supra, 180 Cal.App.3d at pp. 930–931.) The Baker
court cited Titan Enterprises, Inc. v. Armo Construction, Inc. (1973) 32 Cal. App. 3d 828,
830, in which a subcontractor filed an action against the contractor seeking to enforce a
mechanics lien and thereafter demanded arbitration of the same dispute. The Titan court
concluded the filing of the action on the mechanics lien without attempting to preserve
the right to arbitration amounted to a waiver. (Id. at p. 833.)
The Baker court explained, "The rule in Titan created a 'damned if you do damned
if you don't' situation for a plaintiff wishing to file a mechanic's lien, and to arbitrate his
claim. If the time limits for filing a mechanic's lien were not followed, an action to
enforce the lien could not be maintained. But, if the action to enforce the mechanic's lien
was properly brought, the materialman would waive any rights to arbitration. Section
1281.5 came to the rescue. The legislative counsel's comment to the section points out
that the filing of an action to enforce the lien does not constitute waiver of the right to
arbitrate provided the claimant applies for a stay. (Legis. Counsel's com.; Stats. 1977, ch.
135, Assem. Bill No. 322.)." (Baker, supra, 180 Cal.App.3d at pp. 930–931.) The Baker
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court concluded section 1281.5 "means what it says: A party who files an action to
enforce a mechanic's lien, but who does not at the same time request that the action be
stayed pending arbitration, waives any right to arbitration." (Id. at p. 929.)
The only other reported case interpreting section 1281.5 is Kaneko Ford Design v.
Citipark, Inc. (1988) 202 Cal. App. 3d 1220, 1226–1227 (Kaneko), which held the mere
filing of an application for a stay of proceeding under section 1281.5 did not
automatically create a stay. "The sole effect of filing the application for a stay under
section 1281.5 is to preclude a finding of waiver of the right to arbitrate because of the
filing of a complaint to enforce a mechanics' lien." (Id. at p. 1227.) However, the
Kaneko court went on to conclude the failure to implement the application for stay and
actually obtain a stay order within a reasonable period of time waived the right to
arbitration. (Id. at pp. 1228–1229.)
In this case, Zenovic did not file the Orange County action to enforce the
mechanics lien until after VBV filed the San Diego action. VBV's action alleged disputes
regarding Zenovic's billing practices and specifically included allegations related to
Zenovic's actions in recording and attempting to enforce his mechanics lien. In his
motion to compel arbitration, Zenovic agreed all of VBV's causes of action qualified as
arbitrable construction disputes. Yet, Zenovic neither included an allegation in the
complaint filed in the Orange County action stating he did not intend to waive any right
of arbitration and intended to seek a stay of the Orange County action (§ 1281.5, subd.
(a)(1)), nor filed an application for stay at the time he filed the complaint in the Orange
9
County action (§ 1281.5, subd. (a)(2)). His failure to do so waived the right to arbitrate
construction disputes under the terms of the construction contract.
C
The finding of waiver does not conflict with the parties' contractual agreement, as
Zenovic contends. The construction contract contained a paragraph stating, "Despite the
Arbitration of Disputes provision hereinabove, Contractor shall have the right to preserve
and pursue any statutory mechanic's lien and/or stop notice rights that Contractor may
have separate and apart from the arbitration provisions hereof; provided, however, that
the Arbitrators shall make a final determination of the amounts due and owing from
Owner to Contractor, which determination shall be binding upon Owner and Contractor,
and may be enforced as a judgment in a court of competent jurisdiction."
This clause does not mean Zenovic could choose not to arbitrate his mechanics
lien issue without impairing his right to arbitrate other construction disputes. This clause
allowed Zenovic to comply with statutory provisions to record a mechanics lien and
commence an enforcement action for that lien. However, the second portion of the clause
required Zenovic to submit to arbitration the issue of the amounts due and owing. The
arbitrator's decision on that issue would then be enforceable by a court of competent
jurisdiction. Had Zenovic preserved his arbitration rights by complying with section
1281.5, subdivisions (a)(1) or (a)(2), he would have complied with both the statute and
the arbitration agreement by obtaining a stay for an arbitrator to decide the amounts due.
His failure to do so further supports waiver.
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DISPOSITION
The order denying the petition for arbitration is affirmed. VBV shall recover its
costs on appeal.
MCCONNELL, P. J.
WE CONCUR:
HUFFMAN, J.
O'ROURKE, J.
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