2017-00221329-CU-OR

Catherine L. Wissenback vs. KKA Properties, Inc.

Nature of Proceeding: Petition to Compel Arbitration and Stay Proceedings

Filed By: Harpainter, Dewey V.

Defendants’ Robert Kerner, et al.’s petition to compel arbitration and stay proceeding is granted as set forth below.

Defendants’ and Plaintiff’s requests for judicial notice are granted.

In this action Plaintiff Catherine Wissenback alleges causes of action for quiet title, cancellation of recorded instrument, interference with contract, breach of fiduciary duty, declaratory relief and imposition of constructive trust regarding real property at 107 Big Springs Drive in Folsom. The quiet title, cancellation and interference with contract causes of action are moot as they were only asserted against defendants who have since been dismissed from the case.

Plaintiff alleges that Defendants violated a 2014 Release and Settlement Agreement when the subject real property was sold in June 2017. This Court originally granted a TRO enjoining a UD action with respect to eviction efforts against Plaintiff. It then denied the preliminary injunction finding Plaintiff had not demonstrated a reasonable probability of prevailing at trial. The Court found that Defendants presented persuasive evidence that the 2014 Release was replaced and superseded by a 2017 Release and Settlement. Plaintiff argued that the 2017 Release was void or voidable but the Court noted that the evidence showed that she signed the document twice before a notary after having reviewed the document for approximately one hour. (ROA 39).

Plaintiff alleged in the complaint that she had an equitable claim to title on the subject real property. Defendant Robert Kerner, her father, is the settlor and former trustee of the Robert D. Kerner and Eva L. Kerner Revocable Trust Dated October 10, 1990 and Amended and Restated July 31, 2014 (“Kerner Trust”). Defendant Joseph Russi is the current trustee and Defendant Deborah Russi, Plaintiff’s sister, is the former trustee.

The 2014 Release provided that Plaintiff was to have the exclusive use and occupancy of the subject property and set forth the rental terms. The 2014 Release provided that the Beneficiary and the Beneficiary’s trustee or conservator shall be entitled to sell or retain the residence. The 2014 Release was conditioned by the following language: “without threat or detriment to trustor’s other beneficiaries and agents.”

The 2017 Release, which is not referenced in the complaint (as the Court noted in its ruling denying Plaintiff’s request for a preliminary injunction) , but which is presented with Defendants’ petition, sets forth the conduct Plaintiff allegedly engaged in breaching the 2014 Release, including harassing Robert Kerner and Deborah Russi with late night phone calls and texts, demanding additional funds, slandering Deborah Russi’s daughter, visiting Robert Kerner which necessitated calling the police, causing damage to the subject property, exposing Mr. Kerner and the Kerner Trust to liability

and violations of the relevant CC&Rs. Under the 2017 Release, Plaintiff’s boyfriend was permitted to purchase the property otherwise Plaintiff was to move out and would receive $200,000 after the property was sold. The 2017 Release contained the following language:

“The Release and Settlement completely replaces and supersedes the Release and Settlement dated July 31, 2014 (“2014 Settlement”) among the same or similar Parties.” (See Paragraph 1.1), and “Trustor, Trustee or Trustees, and/or the Kerner Trust will have no further obligation to Catherine or her issue, moral or

legal.” (Paragraph 1.7) The document contained alternate options. Id. Alternate One gave Robin Giffen (Plaintiff’s boyfriend) the option to purchase the house at a reduced price of $240,000 before May 13, 2017. Alternate Two- If Alternate One fails, Catherine shall receive $200,000 upon the satisfaction of certain conditions. (Para 2.2) “All Parties acknowledge that this is an early distribution of an inheritance.” (See paragraph 6.5) Plaintiff also agreed in the 2017 Release to vacate the property within 5 days if Alternative One did not occur.

Defendants move to compel this matter to arbitration on the basis of an arbitration provision in the 2017 Release signed by Plaintiff. “Any controversy or claim arising out of or relating to this Release and Settlement, or the making, performance, or interpretation thereof, shall be settled by arbitration or mediation, at the option of the aggrieved Part as to which method, in Douglas County, Oregon in accordance with the commercial arbitration rules of the American Arbitration Association, or with local mediation rules, then existing, and judgment on the arbitration or mediation award may be entered in any court having jurisdiction.” (Pet. Exh. 2 ¶ 6.1.) [emphasis added]

The Court shall order the parties to arbitrate a controversy “if it determines that an agreement to arbitrate the controversy exists…” (CCP § 1281.2.) Arbitration is strongly favored. CCP §1281; Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 706; Steelworkers v. Warrior & Gulf Co. (1960) 363 U.S. 574, 582-583.

Defendants rely heavily on an order from the Placer County Superior Court granting Defendant Joseph Russi’s petition compelling arbitration as a basis for res judiciata/collateral estoppel. Plaintiff argues that the instant action involves numerous parties that were not present in the Placer County Action and different issues. Plaintiff argues that the Placer County Action involved the real property in Folsom which she claims has been sold and it no longer at issue. Plaintiff has appealed the Placer County Superior Court’s order. Appeals “suspend the force of the order as a conclusive determination of the rights of the parties. [citation omitted] This is so, since finality is not accorded a judgment until affirmance in the event of an appeal.” ( Caminetti v. Guaranty Union Life Ins. Co. (1943) 22 Cal.2d 759, 766.) “Under California law, the pendency of an appeal from a judgment prevents its operation as res judicata.” (Wood v. Herson (1974) 39 Cal.App.3d 737, 747.) As a result, the Placer County Superior Court’s ruling has no relevance here and the Court need not address the parties’ various arguments regarding the impact of that order and its potential res judiciata/collateral estoppel effect. While Defendants argue in reply that Plaintiff’s appeal is not valid because an order compelling a matter to arbitration is non-appealable, that is a matter for the Court of Appeal to decide, not this Court.

Plaintiff argues that the 2017 Release is void or voidable and thus that the Court can deny the petition because “[g]rounds exist for revocation of the agreement.” (CCP §

1281.2(b).) Setting aside the fact that she signed the 2017 Release, Plaintiff’s contention is that if the 2014 Release is invalid, then she could not have violated the terms of that agreement and therefore could never have entered into the 2017 Release which is premised on allegations that she violated the 2014 Release. Plaintiff argues that she was not even aware that she had signed the 2014 Release and was not aware of its terms until 2017. This is an interesting and ironic argument given that Plaintiff has by way of the instant lawsuit, alleged that Defendants breached the 2014 Release. According to Plaintiff, the 2014 Release was not valid because she was never advised of her rights under the Kerner Generations Trust FBO of [Plaintiff] dated February 2, 2012 (“2012 Irrevocable Trust”) before she signed the 2014 Release. Plaintiff’s father, Mr. Kerner, and sister, Deborah Russi were the trustees of the 2012 Irrevocable Trust. She then says that she was told that the 2014 Release would allow her father, Mr. Kerner, to save on taxes at the time she signed. This too is interesting because one the one hand she argues that she was not aware she signed the 2014 Agreement but then argues that a false representation was made at the time she did sign it.

With respect to the 2017 Release, Plaintiff argues that her father, and Joseph Russi, the trustee of the Kerner Trust, asked her to sign the 2017 Release because they were disappointed by her conduct and they would take her home if she did not sign it. She states that she never read the entire agreement because she was too emotionally upset and only signed to prevent her home from being taken away. She claims that she was never given an opportunity to discuss the 2017 Release with an attorney or to take it home and review it. She states that it was not until her attorney told her that the 2017 Release was created because Defendants believed she breached the 2014 Release.

In passing, the Court would note the doctrine of judicial estoppel, sometimes called the doctrine of “ ‘ “preclusion of inconsistent positions” ’ ” (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 181, precludes a party from obtaining an advantage by asserting one position, and then seeking a second advantage by asserting an incompatible position. (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co. (2005) 36 Cal.4th 412, 422.) The doctrine is applied “ ‘ “to prevent a party from changing its position over the course of judicial proceedings when such positional changes have an adverse impact on the judicial process. … ‘The policies underlying preclusion of inconsistent positions are “general consideration[s] of the orderly administration of justice and regard for the dignity of judicial proceedings.” ’ … Judicial estoppel is ‘intended to protect against a litigant playing “fast and loose with the courts.” ’ ” ’ [Citation.] ‘It seems patently wrong to allow a person to abuse the judicial process by first [advocating] one position, and later, if it becomes beneficial, to assert the opposite.’ [Citation.]” (Jackson, supra, 60 Cal.App.4th at p. 181; see The Swahn Group, Inc. v. Segal (2010) 183 Cal.App.4th 831, 841.) The Court, however, need not address the doctrine here, since, in any event, Plaintiff’s contentions are not persuasive. With respect to the 2014 Release as noted above, Plaintiff has sought to enforce that very agreement by way of her complaint. Indeed, she specifically alleges that Defendants breached that agreement and seeks to enforce her rights under that agreement. The Court fails to see how Plaintiff can nevertheless now, in opposition, claim that she either never signed that agreement, or that false representations were made to her regarding that agreement. In fact she specifically alleged in her verified complaint, under penalty of perjury, that she executed the 2014 Release. (Comp. ¶¶ 10, 36.) In any event she simply asserts in her opposition that the representation made by Joseph Russi that the 2014 Agreement would help her father save on taxes

was a false representation. But her declaration simply states that she was told this was the reason and that she believed it to be true. (Wissenback Decl. ¶ 16; Wolf Decl.

¶ 6.) However, there is no evidence that this was a false representation, that it was material, etc.

With respect to the 2017 Release, Plaintiff has also failed to show that grounds exist for its revocation. Again, she argues that Defendants presented her with the agreement and allegedly told her she had to sign it or she would lose the subject property and she was not given time to review it. (Wissenback Decl. ¶¶ 19-21.) The Court must note that Plaintiff presents no legal authority regarding duress. “The doctrine of ‘economic duress’ can apply when one party has done a wrongful act which is sufficiently coercive to cause a reasonable alternative, to agree to an unfavorable contract.” (CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 644.) “The Restatement of Contracts defines [duress] broadly under the heading of economic compulsion. Impermissible threats include bad faith threatened use of civil process; threats which are a breach of the duty of good faith and fair dealing under a contract…; threats which would harm the recipient without significantly benefiting the party making the threat, or threats where ‘what is threatened is otherwise a use of power for illegitimate ends.’…The question of duress…is a factual question; the existence of duress always depends upon the circumstances.” (Philippine Export & Foreign Loan Guarantee Corp. v. Chuidian (1990) 218 Cal.App.3d 1058, 1077-1078 [citations omitted].) Plaintiff’s contention that the “threat” that she would lose her home if she did not sign the agreement is grounds for revocation is not persuasive. As the Court noted in denying her request for a preliminary injunction, the subject property was owned by the Kerner Trust, a revocable trust. The settlor of a revocable trust has the power to revoke the trust and take back the trust property. The Court would note that the 2014 Release provides that the trustee retained the ability to sell the subject property. Further, as the Court noted in ruling on Plaintiff’s motion for preliminary injunction, Defendants’ presented evidence in opposing that motion, that Plaintiff signed and initialed the 2017 Release twice before a notary after having reviewed the document for approximately one hour. Plaintiff has presented no credible evidence to this Court that the 2017 Release is subject to rescission on the basis that she signed it under economic duress. The Court also noted in denying her request for a preliminary injunction that she never served any Notice of Rescission on the trust or brought any action to rescind the 2017 Release. Nor is there any evidence of fraud with respect to the 2017 Release.

As she did in connection with the motion for preliminary injunction, Plaintiff takes issue with respect to whether any statement in the 2017 Release is true and also argues that Defendants themselves were in breach of the 2014 Release. The fact remains that she signed the Release.

Plaintiff’s citation to her counsel’s letter purporting to identify numerous grounds for revocation of the 2017 Release is not evidence.

Much of Plaintiff’s declaration in opposition and her opposition papers discuss the 2012 Irrevocable Trust. Plaintiff’s father, Mr. Kerner, and sister, Deborah Russi were the trustees. Plaintiff states that her sister never gave her a copy of the trust and never gave her an accounting. She also states that her sister’s attorney denied the existence of the 2012 Irrevocable Trust. She claims that her sister breached fiduciary duties to her with respect to the 2012 Irrevocable Trust. She then asserts that the 2014 and 2017 Releases were a part of a conspiracy to deprive her of her rights under

the 2012 Irrevocable Trust. (Wissenback Decl. ¶¶ 8-15.) The Court fails to see how these alleged breaches have anything to do with the question of whether grounds for revocation of the 2017 Release exist.

Plaintiff’s citation to the 2012 Irrevocable Trust at most, appears to be an argument that her causes of action relate not only to breaches of fiduciary duty in connection with the Kerner Trust, but also relate to breaches of fiduciary duty of the 2012 Irrevocable Trust. This may be true but it is no basis upon which to avoid arbitration. As seen above the 2017 Release expressly calls for arbitration of any “controversy or claim arising out of or relating to this Release and Settlement, or the making, performance, or interpretation thereof…” and the 2017 Release applied to any claim based upon inheritance or any other theory in connection with the Kerner Trust or the Estates of Trustor and/or Eva Kerner: 4.1 Trustor or any asset of Trustor. 4.2 Estate of Trustor….4.6 Deborah. 4.7 Attorneys, past, present and future for Trustor, the

Kerner Trust, for any Trustee of the Kerner Trust, for the Estate of Trustor, for the Estate of Eva, and/or any agent of the foregoing.” (Pet. Exh. 2 ¶¶ 4, 6.1.) The causes of action regarding the breaches of fiduciary duty related to the Kerner Trust plainly fall within the arbitration provision. Further, the cause of action against Deborah Russi and John Burk , an attorney alleged to have assisted Ms. Russi for breach of fiduciary duty related to the 2012 Irrevocable Trust involves a claim against Deborah Russi and Mr. Burk based upon Plaintiff’s inheritance in connection with the Trustor’s (Mr. Kerner) Estate. The 2017 Release covers these topics.

Plaintiff also seems to suggest that arbitration provision in the 2017 Release only dealt with the subject property in Folsom and that since the property has been sold there is no longer any basis to compel arbitration. Plaintiff is incorrect. Again, the 2017 Release expressly calls for arbitration of any “controversy or claim arising out of or relating to this Release and Settlement, or the making, performance, or interpretation thereof…” and the 2017 Release applied to any claim based upon inheritance or any other theory in connection with the Kerner Trust or the Estates of Trustor and/or Eva Kerner: 4.1 Trustor or any asset of Trustor. 4.2 Estate of Trustor….4.6 Deborah. 4.7

Attorneys, past, present and future for Trustor, the Kerner Trust, for any Trustee of the Kerner Trust, for the Estate of Trustor, for the Estate of Eva, and/or any agent of the foregoing.” (Pet. Exh. 2 ¶¶ 4, 6.1.)

In short, the Court finds that Defendants have established the existence of a valid arbitration agreement that covers Plaintiff’s disputes in this matter. Plaintiff has failed to produce any credible evidence of duress, fraud, or undue influence and therefore has failed to carry her burden to show that grounds for revocation of the 2017 Release exist such that arbitration may be denied pursuant to CCP § 1281.2(b).

In addition, the Court grants Defendants’ request that the entire action be stayed pending arbitration. (CCP § 1281.4.)

The Court need not address Defendants’ contention raised for the first time in reply that Placer County has exclusive jurisdiction over this matter.