Little v. Pullman
162 Cal. Rptr. 3d 74
Cal. Ct. App.2013Background
- In 2005 Pullman and Little entered an Original Agreement assigning Hemsley residuals to Pullman’s company and containing an arbitration clause; litigation followed.
- In 2007 the parties executed a Settlement Agreement (plus an April 9 side letter) that required Little to return $42,500, released claims to the residuals, and expressly superseded prior agreements; the Settlement contained no arbitration provision.
- Litigation continued; the trial court denied Pullman’s motion to compel arbitration based on the Settlement Agreement superseding the Original Agreement, and the Court of Appeal affirmed (May 19, 2011).
- After that decision, Pullman served a notice purporting to rescind the Settlement Agreement and tendered a $42,500 check (dated earlier but delivered later); Little rejected the tender. Pullman then moved again to compel arbitration, arguing rescission reinstated the Original Agreement’s arbitration clause.
- The trial court denied Pullman’s renewed motion to compel arbitration (finding the rescission/tender ineffective and reserving rescission adjudication to the litigation), and Pullman appealed. The Court of Appeal affirmed.
Issues
| Issue | Little's Argument | Pullman's Argument | Held |
|---|---|---|---|
| Was Pullman’s rescission of the Settlement Agreement effective? | Pullman failed to restore consideration (Little returned the check) and tender was improper/conditional, so rescission incomplete. | Pullman argued he tendered the $42,500 and therefore rescinded the Settlement. | Held: Rescission ineffective — tender was conditional, ambiguous, not properly delivered, and was rejected. |
| If rescission were effective, does unilateral rescission automatically reinstate the Original Agreement and its arbitration clause? | No; voiding the Settlement only opens an action for relief; unilateral rescission doesn’t force arbitration without court determination of rights. | Rescission voids the Settlement and thus automatically revives the Original Agreement and its arbitration provision. | Held: Unilateral rescission alone does not compel arbitration; Pullman must prove rescission was justified and then prove the Original Agreement’s arbitration provision is enforceable. |
| Must the trial court resolve the rescission/justification issue within a motion to compel arbitration? | Court may defer and adjudicate rescission in the pending litigation; might also decide rescission in scope of petition. | Pullman argued the motion to compel should resolve rescission and grant arbitration. | Held: Court may decide rescission as part of a petition to compel arbitration but is not required to — it has discretion to bifurcate or decide the cross-complaint first. |
| Did the trial court err in denying the motion to compel arbitration now? | Denial proper because rescission incomplete and unresolved; evidentiary record did not show agreement to arbitrate. | Denial improper because Pullman already rescinded and is entitled to arbitration under the Original Agreement. | Held: Affirmed — denial proper; Pullman failed to effect rescission and, in any event, must prove justification and enforceability before compelling arbitration. |
Key Cases Cited
- Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951 (court reviews petition to compel arbitration as equitable suit; petitioner bears burden to prove arbitration agreement)
- Marcus & Millichap Real Estate Inv. Brokerage Co. v. Hock Investment Co., 68 Cal.App.4th 83 (petition to compel arbitration is suit in equity; petitioner must prove valid arbitration agreement)
- Nyulassy v. Lockheed Martin Corp., 120 Cal.App.4th 1267 (appellate review standards for arbitrability when factual disputes exist)
- Village Northridge Homeowners Assn. v. State Farm Fire & Casualty Co., 50 Cal.4th 913 (party induced by fraud may rescind contract)
- Bianco v. Superior Court, 265 Cal.App.2d 126 (court may determine validity/rescission in arbitration enforcement proceedings)
- Drake v. Stein, 116 Cal.App.2d 779 (equitable issues, including rescission, may be decided when enforcing arbitration contract)
- Scollan v. Government Employees Ins. Co., 222 Cal.App.2d 181 (rescinded contract is void ab initio)
- Long v. Newlin, 144 Cal.App.2d 509 (same principle regarding rescission)
- Larsen v. Johannes, 7 Cal.App.3d 491 (rescission requires restoring benefits)
- Noyes v. Habitation Resources, Inc., 49 Cal.App.3d 910 (creditor may reject check tender; debtor must make conforming tender)