Mleynek v. Headquarters Cos.

California Court of Appeal Dec 19, 1984 No. No. G001894Published

Before: Wallin

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Holding. The court held that the arbitration provision in the franchise agreement applies to the related sublease because the two documents are so interrelated that they must be viewed together, requiring the unlawful detainer action to be arbitrated.

Issues

Whether an arbitration clause in a franchise agreement applies to a dispute arising from a related sublease.
Whether a franchisor has the option to bypass arbitration for an unlawful detainer action when the franchise agreement mandates arbitration for disputes.

Disposition. reversed

Quotations verified verbatim against the opinion

“Because the two documents are so interrelated, we conclude they must be viewed together. Thus, the arbitration provision contained within the franchise agreement is construed to apply to the dispute over possession of the premises”

“Because the arbitration provision is susceptible to an interpretation that covers the sublease dispute, the Mleyneks petition to compel arbitration of the unlawful detainer action should have been granted.”

Opinion

WALLIN, Acting P. J. Darryl and Sherryl Mleynek appeal the denial of their petition to compel arbitration of an unlawful detainer action. They argue the arbitration provision in a related franchise agreement compels arbitration of the unlawful detainer dispute.

Facts

In July 1979, Darryl and Sherryl Mleynek entered into a franchise agreement with Headquarters Companies (HQ) to operate a “HQ Center” which provides businesses with office space, furniture, and other services. The franchise agreement* required the Mleyneks to negotiate with HQ for the lease of the center premises, and required the Mleyneks to perform all lease obligations. In the event of any controversy or dispute arising out of or in connection with the franchise agreement, the parties agreed to submit to arbitration.

[1135]HQ leased office space in Newport Beach and subleased the property to the Mleyneks in October 1979. The sublease required the property to be used “in accordance with the Franchise Agreement.” In addition, the sublease was to terminate upon the termination of the franchise agreement.

On July 19, 1984, HQ filed an unlawful detainer action based on the Mleyneks’ failure to pay rent. The Mleyneks filed an answer containing four affirmative defenses of payment by setoff based on various claims of fraud and violations of the Franchise Investment Law (Corp. Code, § 31000 et seq.) relating to HQ’s sale of the franchise to the Mleyneks. In addition, the Mleyneks, together with another franchisee, filed a demand for arbitration of their fraud and Franchise Investment Law violation claims with the American Arbitration Association. HQ filed an answer and a set of cross-claims to be considered in arbitration.

The trial court granted HQ’s motion to strike the affirmative defenses of payment by setoff in the unlawful detainer action, and denied HQ’s motion for summary judgment. The Mleyneks then moved for an order compelling arbitration and a stay pending arbitration. The motion was denied.

The Mleyneks filed a petition for a writ of mandate and a request for a stay with this court attempting to obtain review of both the order striking the affirmative defenses and the order denying arbitration. This court granted a temporary stay conditioned upon the posting of a $10,000 cash or corporate surety bond in order to allow the Mleyneks to file a petition to compel arbitration pursuant to Code of Civil Procedure section 1281.2.

Mleynek v. Headquarters Cos.

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