Strauch

I. Introduction

In this case we hold that a petition to compel arbitration may not be denied on the ground of fraud alleged in an unverified pleading, but only upon evidentiary support by an affidavit or declaration under penalty of perjury submitted in opposition to the petition.

II. Background

Leo Strauch and the Milton Strauch Family Trust (hereafter Strauch) sued five individual and corporate real estate brokers for breach of fiduciary duty, negligence, negligent misrepresentation and violation of California’s securities laws. The unverified complaint alleged the following: In 1991, defendants acted as Strauch’s fiduciaries in arranging Strauch’s purchase of two Oregon nursing homes in an unsuccessful attempt at a “like kind exchange” ( 26 U.S.C. § 1031 ) for property in Walnut Creek. The arrangement called for a leaseback of the nursing homes, with the sellers to make payments on existing mortgages. Thereafter, the sellers, who turned out to be insolvent, defaulted on the lease and mortgage payments, and the mortgagor foreclosed. Strauch lost the money paid toward the purchase, and also incurred foreclosure expenses, accounting fees and increased…