Opinion
G055100
10-25-2018
JENNIFER LOEFFLER, Plaintiff and Appellant, v. RSM 8, LLC et al., Defendants and Respondents.
Steven Lewis Rader for Plaintiff and Appellant. Artiano Shinoff and Paul V. Carelli IV for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2014-00723908) OPINION Appeal from a judgment of the Superior Court of Orange County, James Di Cesare, Judge. Affirmed. Steven Lewis Rader for Plaintiff and Appellant. Artiano Shinoff and Paul V. Carelli IV for Defendants and Respondents.
* * *
Plaintiff Jennifer Loeffler (plaintiff) sued defendants RSM 8, LLC (RSM), Fieldstone California Partners, LLC (Fieldstone Partners), Fieldstone Residential Builders, LLC (Fieldstone Builders), and PCA Management Services, Inc (PCA; collectively defendants) alleging several causes of action arising out of plaintiff's purchase of a new home from RSM. The action, including warranty and personal injury claims and a claim for disgorgement of the purchase price based on RSM's lack of a contractor's license, was arbitrated pursuant to a provision in the purchase and sales agreement. Except for one warranty claim, the arbitrator ruled in favor of defendants. The court confirmed the award and entered judgment.
Defendants are all related companies. FNE Holdings owned 100 percent of Fieldstone Builders, which owned 100 percent of Fieldstone Partners, which owned 100 percent of PCA. Fieldstone Partners owned 10 percent of RSM; the other 90 percent was owned by RSM 8 Investors, LLC. Fieldstone Partners was the managing member of RSM. Geologic Associates, Inc. and Hunsaker & Associates Irvine, Inc. (Hunsaker) were also named as defendants in the action but are not parties to this appeal.
Plaintiff appeals on several grounds, claiming the Federal Arbitration Act (9 U.S.C. § 1 et seq. (FAA)) did not govern; she could not be required to arbitrate her construction defect and personal injury claims; the court should have allowed the parties to try the disgorgement claim pursuant to their stipulation to do so; RSM acted as a contractor and was required to have a contractor's license under the Contractors' State License Law; the arbitration award was void because it was untimely and because the arbitrator refused to hear evidence; and the court erroneously refused to issue a statement of decision, requiring reversal.
We disagree with each of plaintiff's arguments and affirm the judgment.
FACTS AND PROCEDURAL HISTORY
In January 2013 pursuant to a purchase and sale agreement (Agreement), RSM sold a new home (Residence) located in a new development to plaintiff. The Agreement contained several subagreements, including a Master Customer Agreement, a New Home Sales Agreement, a Dispute Resolution Agreement, an Addendum to Agreement, a disclosure statement for the development (Disclosure Statement), and a Home Builder's Limited Warranty (Limited Warranty). Plaintiff signed and initialed the first five documents and also signed an Acknowledgement of Receipt of the Limited Warranty.
The Dispute Resolution Agreement contained an arbitration provision. It stated: "With respect to all Disputes, Seller and Owner shall comply with the dispute resolution procedures specified in the [Limited Warranty], which are governed by the [FAA]. Buyer acknowledges and agrees that the Home Builder's Limited Warranty presently used by Seller has been made available to Buyer for review, that Buyer has made such review of the [Limited Warranty] and the dispute resolution procedures specified therein as Buyer deems necessary and appropriate, and that Buyer consents to participation in such procedures for resolution of Disputes."
The Dispute Resolution Agreement also provided, "The procedures specified in the [Limited Warranty] are to be interpreted and enforced as authorized by the [FAA], which is designed to encourage use of alternative methods of dispute resolution that avoid costly and potentially lengthy court proceedings. Interpretation and application of these procedures shall conform to Federal court rulings interpreting and applying the [FAA]. References to California procedural law shall not be construed as a waiver of any rights of the parties under the [FAA] or the right of the parties to have the procedures set forth in the [Limited Warranty] interpreted and enforced under the [FAA]."
The next paragraph stated in all caps: "'Notice: By initialing in the space below you are agreeing to have any dispute arising out of the matters included in the "Arbitration of Disputes" provision decided by neutral arbitration as provided by California law and you are giving up any rights you might possess to have the dispute litigated in a court or jury trial. By initialing in the space below you are giving up your judicial rights to discovery and appeal, unless those rights are specifically included in the "Arbitration of Disputes" provision. If you refuse to submit to arbitration after agreeing to this provision, you may be compelled to arbitrate under the authority of the California Code of Civil Procedure. Your agreement to this arbitration provision is voluntary.' [¶] 'We have read and understand the foregoing and agree to submit disputes arising out of the matters included in the "Arbitration of Disputes" provision to neutral arbitration.'"
Plaintiff and RSM initialed directly below the provision.
The Dispute Resolution Agreement defined "'Dispute'" as "any and all actions or claims by, between or among any Seller party and any Owner, from and after the close of escrow, arising out of or in any way relating to the Property, the Project, the Purchase Agreement, the [Limited Warranty], and/or any other agreements or duties or liabilities as between any Seller party and an Owner relating to the sale of the Property, or regarding the use or condition of the Property, or the design or construction of or any condition on or affecting the Project, including without limitation construction defects, surveys, soils conditions, grading, specifications, installation of improvements, or disputes which allege strict liability, negligence or breach of implied or express warranties as to the condition of the Property or other portions of the Project."
The Limited Warranty contained a section entitled "Binding Arbitration Procedure." (Boldface omitted.) It provided a lengthy list of disputes to be arbitrated, including whether a condition was a construction defect; a claimed violation of a consumer protection statute; any common law or equitable claims; the interpretation of the arbitration provision or the arbitrability of a claim; whether the arbitration provision and "any waiver hereunder" were enforceable; and "[a]ny other claim arising out of or relating to the sale, design or construction" of the Residence.
The Limited Warranty further stated: "This arbitration agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by and interpreted under the [FAA] now in effect and as it may be hereafter amended . . . to the exclusion of any inconsistent state law, regulation or judicial decision. The award of the arbitrator shall be final and binding and may be entered as a judgment in any court of competent jurisdiction."
The Limited Warranty also provided it was "separate and independent of" the Agreement and would not be "restricted or expanded by" anything in the Agreement.
Plaintiff signed an acknowledgement of receipt of the Limited Warranty, wherein she certified she had received and read a sample of the Limited Warranty and had the opportunity to question defendants about the coverage; had the opportunity to have the Limited Warranty and all other documents related to purchase of the Residence reviewed by an attorney; and agreed the failure to read or understand the sample Limited Warranty did not alter any rights or duties under the Limited Warranty.
In the Addendum to Agreement, plaintiff initialed a provision acknowledging receipt of the Limited Warranty. It stated RSM's provision of the warranty was in consideration of plaintiff's and RSM's agreement to arbitrate.
The homes in RSM's development, including plaintiff's Residence, were constructed by PCA pursuant to a Construction Services Agreement (Construction Agreement) between RSM and PCA. In the Construction Agreement PCA represented to RSM it had the necessary contractor's license.
After escrow closed in March 2013 and plaintiff moved in to the Property in April 2013, she experienced saturated grass and standing water near the foundation. The parties entered into a settlement agreement and release whereby RSM agreed to pay plaintiff $40,000 in exchange for settlement of all her claims as to drainage (Settlement No. 1). Settlement No. 1 stated the parties' intent was "to forever resolve any and all Claims relating to the design and construction of the drainage, irrigation and landscaping of the Property without resort to litigation, and in a mutual, efficient, timely, and confidential manner." It specifically excluded damage to the structure of the home. Plaintiff also waived the provisions of Civil Code section 1542, thereby waiving unknown claims as to the released matters.
Settlement No. 1 was between RSM and Hunsaker, which certified the grading, on the one hand, defined as the "Builder Parties," and plaintiff and Steven L. Rader (Rader), her lawyer in this action, defined as "Residents."
Civil Code section 1542 states: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor."
Plaintiff and Rader, and RSM entered into another settlement agreement and release regarding exterior and garage claims (Settlement No. 2). The parties again waived Civil Code section 1542.
In March 2014 plaintiff made another warranty claim for problems with the heating, ventilation and air conditioning (HVAC) and the fireplace. This was not resolved before plaintiff filed the action.
In May 2014 plaintiff filed her complaint for negligence, violation of building standards, fraud, intentional infliction of emotional distress, nuisance, strict liability, and disgorgement under Business and Professions Code section 7031, subdivision (b) (section 7031(b)).
Section 7031(b) states: "Except as provided in subdivision (e), a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract." Business and Professions Code section 7031, subdivision (e) provides an exception where the court finds the facts necessary to show substantial compliance with licensing.
In the disgorgement cause of action against RSM, Fieldstone Partners, and Fieldstone Builders (the latter two parties collectively, the Fieldstone defendants), plaintiff alleged she entered into the Agreement with RSM "for the purchase and completion of construction" of the Residence, which had not been constructed at the time of the Agreement. She alleged RSM represented it was the builder of the Residence. She further pleaded RSM and the Fieldstone defendants acted as contractors per Business and Professions Code section 7026 but none had a contractor's license at the time of executing the Agreement or constructing the Residence. She sought reimbursement of the $835,500 purchase price plus interest and treble damages.
Defendants filed a motion to compel arbitration under Code of Civil Procedure section 1281.2 and to stay the action. Plaintiff opposed the motion on several grounds, including that there was no enforceable arbitration agreement, the FAA did not govern because the transaction did not involve interstate commerce, and the personal injury, construction defect, and disgorgement claims were not subject to arbitration under California law.
All further undesignated statutory references are to this code, except for section 7031(b), which was defined above.
The Fieldstone defendants joined in the motion filed by RSM. PCA filed a separate motion, which the court granted on the grounds the Limited Warranty expressly stated the arbitration provision applied to all contractors and subcontractors for the project and that PCA was an intended third party beneficiary of the arbitration provision.
The court granted the motion, ruling the Agreement and the Limited Warranty both contained an enforceable arbitration provision that encompassed all claims in dispute. It found the agreements were not procedurally unconscionable. It also found the FAA "expressly govern[ed]" the arbitration and thus it did not need to determine if the transaction involved interstate commerce. The FAA preempted the state provision exempting construction defect and personal injury claims from arbitration. Additionally, the court found plaintiff failed to provide any authority to support her disgorgement claim was exempt from arbitration. It stayed the action.
Thereafter the parties entered into a stipulation to sever the disgorgement cause of action from the case to be arbitrated and have it be tried to the court (Stipulation). According to the Stipulation, the parties believed it would preserve resources and facilitate a possible settlement of the claim if the cause of action was severed. The court declined to sign the order.
Subsequently the parties refiled the Stipulation and also filed motions for summary adjudication of the disgorgement claim. The court denied the summary adjudication motions on the ground they were procedurally improper because once it granted the motion to compel arbitration, the court had no power to rule; the arbitrator now had jurisdiction over the matter. The parties argued that even if the claim was arbitrated, the court would be required to conduct a de novo review; therefore, they sought to have the court decide in the first instance. The court rejected this, stating there was nothing for it to review absent a ruling from the arbitrator and further that the parties had not provided any authority for the court to do so.
Plaintiff then filed a motion for relief from the arbitration stay. Defendants filed a "limited opposition," stating they were not repudiating the Stipulation but did not believe the motion was procedurally proper.
The court denied the motion, which it deemed a motion for reconsideration. It again ruled it had no power to rule because jurisdiction rested with the arbitrator. It also ruled that once it had granted the motion to arbitrate and issued a stay of the action, it had "'merely a vestigial jurisdiction over matters submitted to arbitration,'" which did include ruling on the motions for summary adjudication. Further, plaintiff had not cited any authority allowing the court to review its initial ruling. Additionally, even if the court was required to conduct a de novo review of the disgorgement claim, the claim had to be arbitrated first.
The court also ruled that even if it had jurisdiction to sever the disgorgement cause of action, severance would not serve the interests of judicial economy. Evidence as to disgorgement and the other claims to be arbitrated would be the same or similar, and because the same facts applied to all the claims, there was a risk of conflicting rulings.
In addition the court held plaintiff waived the argument to sever the disgorgement claim by failing to raise it in opposition to the motion to compel arbitration.
After the parties arbitrated the matter, at its conclusion on November 19, the arbitrator asked if the parties agreed he could issue the decision within 30 days. One of defendants' lawyers stated he agreed. He heard Rader agree. There was no response from plaintiff herself. Another of defendants' attorneys heard Rader say "yes" and observed him nodding his head in agreement. In addition, the president of Fieldstone Partners, C. Alan Arthur, who was present, observed Rader nodding in agreement after defendants' counsel verbally agreed. There was no discussion of any other dates.
Arbitration was conducted pursuant to the Construction Arbitration Program (CAP) as administered by DeMars & Associates using CAP complex arbitration rules.
On December 18, plaintiff served on CAP an objection stating the decision was untimely. The case administrator responded that the arbitrator advised the parties had agreed to a 30-day time period. Because that date fell on a Saturday, Monday, December 21, the next business day, was the deadline.
On December 21 the arbitrator issued a 43-page decision (Award), ruling in defendants' favor except on one issue. He found the warranty claims were barred by Settlement Agreement No. 1 and No. 2.
Although plaintiff did not prevail on her broader claim the fireplace was not property constructed, the arbitrator ruled defendants should replace a glass panel.
The arbitrator also ruled plaintiff had no standing to bring a disgorgement claim because her only contract was with RSM; she did not have a contract with a contractor to perform construction. Further, there was no evidence RSM performed any action for which a contractor's license was required. Thus, plaintiff did not pay an unlicensed contractor for any activity and section 7031(b) providing for disgorgement did not apply.
As to PCA plaintiff did not show she used its services or paid any money to it for performing any work. Moreover, the evidence showed PCA was licensed at all times during construction of the Residence.
Defendants then filed a petition to confirm the Award (Petition to Confirm); plaintiff filed a petition to vacate the Award (Petition to Vacate). One of the grounds for the Petition to Vacate was the alleged untimeliness of the Award. The CAP rules provided for service of the Award within 28 calendar days and the Award was not served until 32 days after the arbitration was concluded. Plaintiff further asserted Saturday was not a holiday under Civil Code sections 7 and 9. The court remanded this question to the arbitrator to determine.
CAP rules provided: "The time limit for the arbitrator to make the award begins to run when the hearing is closed." "The arbitrator's award is transmitted to all parties in writing within 28 calendar days of the hearing."
The arbitrator ruled the Award was issued timely on several grounds. The parties did not set a firm deadline for issuance of the Award in the arbitration agreement and thus section 1283.8 did not govern. Nor did they knowingly and expressly incorporate the CAP rules 28-day deadline with the intent to make it a formal deadline. In any event, the 28-day deadline under the CAP rules was not mandatory but merely directory. In addition, the evidence showed the parties agreed to extend the deadline to 30 days. Finally, because the 30th day fell on a Saturday, a holiday under section 12a, the deadline was extended by two days, the date on which the Award was served.
This section states, "The award shall be made within the time fixed therefor by the agreement or, if not so fixed, within such time as the court orders on petition of a party to the arbitration."
The trial court subsequently issued a 23-page order, confirming the Award in full and denying plaintiff's Petition to Vacate. Thereafter judgment was entered on the Award.
Additional facts are set out in the discussion.
DISCUSSION
1. Standard of Review
"'It is well settled that the scope of judicial review of arbitration awards is extremely narrow.'" (Ajida Technologies, Inc. v. Roos Instruments, Inc. (2001) 87 Cal.App.4th 534, 541.) "As a 'general rule,' courts cannot . . . review[ ]' 'an arbitrator's decision . . . for errors of fact or law.' [Citations.] This '"extremely narrow"' standard of review means that we must 'accord "substantial deference to the arbitrator['s] own assessment[ ] of [his] contractual authority."'" (Douglass v. Serenivision, Inc. (2018) 20 Cal.App.5th 376, 392.)
The court may vacate an arbitration award if the arbitrator exceeded his powers. (§ 1286.2, subd. (a)(4).) "'The powers of an arbitrator derive from, and are limited by, the agreement to arbitrate.'" (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1185.) We review de novo the trial court's ruling on whether an arbitrator exceeded his powers. (San Francisco Housing Authority v. Service Employees Internat. Union, Local 790 (2010) 182 Cal.App.4th 933, 944.) In doing so, we give deference to the arbitrator's decision as to his authority, resolving any doubts in the arbitrator's favor. (Hotels Nevada, LLC v. L.A. Pacific Center, Inc. (2012) 203 Cal.App.4th 336, 351.) 2. Application of FAA
Plaintiff argues the FAA does not apply because defendants failed to show the sale of the Residence involved interstate commerce. We disagree.
The FAA "'"'is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary. . . .' . . . '[I]n enacting [the FAA], Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.'"'" (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 237-238.)
"The FAA applies to any 'contract evidencing a transaction involving commerce' that contains an arbitration provision. [Citations.] '[T]he phrase "'involving commerce'" in the FAA is the functional equivalent of the term "'affecting commerce,'" which is a term of art that ordinarily signals the broadest permissible exercise of Congress's commerce clause power.'" (Carbajal v. CWPSC, Inc., supra, 245 Cal.App.4th at p. 238; 9 U.S.C. § 2.)
"The United States Supreme Court has indicated that Section 2's requirements are met where contractual activity facilitates or affects commerce, even tangentially. [Citations.] What is considered to involve interstate commerce has greatly expanded since the enactment of the FAA." (Arce v. Cotton Club of Greenville, Inc. (N.D.Miss. 1995) 883 F.Supp. 117, 119-120 [interstate commerce found when party paid from out-of-state bank and parties used United States mail and public telephone lines].)
Courts may rely on the terms of the arbitration provision itself as evidence the transaction involves interstate commerce. (American General Life and Accident Ins. Co. v. Wood (4th Cir. 2005) 429 F.3d 83, 87; Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1565, fn. 13 [agreement stated FAA governed because it involved interstate commerce].) Here, the arbitration provision in the Limited Warranty recited the transaction involved interstate commerce and the parties agreed the FAA would apply.
On this point, Roberson v. Money Tree of Alabama, Inc. (M.D.Ala. 1997) 954 F.Supp. 1519 is also instructive. The parties had agreed the contract at issue "involved[] 'commerce'" as defined in the FAA. (Id. at pp. 1523-1524, fn. 4.) Relying on the principle that agreements to arbitrate must be "'"rigorously enforce[d],"'" the court stated it "must, and will, enforce the stipulation and apply the FAA to the arbitration agreement." (Id. at p. 1523; see In re Knepp (Bankr. N.D.Ala. 1999) 229 B.R. 821, 834 [same]; Ottawa Office Integration Inc. v. FTF Business Systems, Inc. (S.D.N.Y. 2001) 132 F.Supp.2d 215, 219 [parties agreed FAA would govern arbitration].)
Plus, under California law, Evidence Code section 622 provides "facts recited in a written instrument are conclusively presumed to be true as between the parties thereto." This section "is based upon the doctrine of estoppel by contract; i.e., a party to a contract is generally estopped to deny essential facts recited therein." (In re Marriage of Brooks & Robinson (2008) 169 Cal.App.4th 176, 184.) Thus, the arbitration provision itself constitutes some evidence of interstate commerce in this case.
There is other evidence of interstate commerce in the record too. One of plaintiff's warranty claims concerned a defective fireplace. The fireplace manufacturer, Heatilator, is part of Hearth & Home Technologies, Inc. located in Minnesota, according to the fireplace owner's manual.
Further, as recited in the Limited Warranty, Professional Warranty Service Corporation, the company administering the warranty program, is located in Virginia. Likewise, the Limited Warranty provided DeMars and Associates, Ltd. would conduct the arbitration. DeMars is located in Wisconsin.
Also, the Disclosure Statement recited the project in which the Residence was located was subject to the federal Clean Water Act, and it required plaintiff along with other homeowners and the homeowners' association to comply with applicable requirements; and the purchase and sale was subject to the federal Foreign Investment in Real Property Tax Act (26 U.S.C. § 1445).
And, the Master Customer Agreement required plaintiff to deliver to RSM an appraisal and completion certificate on a Federal Home Loan Mortgage Corporation form and an estimated HUD-1 form from plaintiff's lender.
A review of case law demonstrates this evidence is more than sufficient to establish interstate commerce. For example, Hedges v. Carrigan (2004) 117 Cal.App.4th 578 concerned a purchase and sale contract for residential real property. The court found interstate commerce was implicated because financing for the purchase was through the Federal Housing Administration regulated by the United States Department of Housing and Urban Development and because several of the purchase documents, escrow instructions, and the real estate disclosure statement were copyrighted forms, the use of which was restricted to members of the National Association of Realtors. (Id. at p. 586.)
In Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, the court found a termite protection contract between a state resident and local office of the plaintiff "involved commerce" under the FAA because the plaintiff was a multi-state firm and used products shipped from other states. (Id. at pp. 277-282; see United States v. Andrini (9th Cir. 1982) 685 F.2d 1094, 1096 [contract's construction project used out-of-state materials; Hyundai American, Inc. v. Meissner & Wurst GmbH & Co. (N.D.Cal. 1998) 26 F.Supp.2d 1217, 1219 [same].)
In Basura v. U.S. Home Corp. (2002) 98 Cal.App.4th 1205, the plaintiffs filed a construction defect action against the developer of residential real estate. They opposed arbitration pursuant to section 1298.7. The court held the statute was preempted by the FAA, which bars invalidation of arbitration based on laws that apply only to arbitration provisions. (Id. at p. 1212.) It found the sales agreements involved interstate commerce because construction materials from outside California were used; the defendant had contracts with out-of-state contractors; and the defendant advertised throughout the country and communicated with its out-of-state professionals using interstate media.
In Shepard v. Edward Mackay Enterprises, Inc. (2007) 148 Cal.App.4th 1092 the plaintiff purchased a house from the developer and then filed a construction defect action. Recognizing there were fewer facts showing interstate commerce than in Allied and Basura, the court nevertheless held the FAA applied solely on the basis building materials produced out of state were used in construction. (Id. at p. 1101.)
Although our facts are not identical to those in any one of these cases, they contain elements of several and more than in Shepard. These facts, along with the terms of the arbitration provision itself, satisfy the FAA interstate commerce requirement.
Plaintiff seeks to avoid this conclusion for several reasons, none of which is persuasive. First, plaintiff argues the parties cannot stipulate to the applicability of the FAA. Maybe so. But there is a conflict in the law on this issue.
Some courts have upheld arbitration agreements which stated the transaction involved interstate commerce and the FAA would apply. (E.g., Gloster v. Sonic Automotive, Inc. (2014) 226 Cal.App.4th 438, 446-447; Malone v. Superior Court, supra, 226 Cal.App.4th at p. 1565, fn. 13; Ottawa Office Integration Inc. v. FTF Business Systems, Inc., supra, 132 F.Supp.2d 215, 219.)
Other courts have rejected similar arbitration agreements. (E.g., Breazeale v. Victim Services, Inc. (N.D.Cal. 2016) 198 F.Supp.3d 1070, 1078 [parties' mistaken belief that the FAA applies cannot make it so]; Williams v. Eddie Acardi Motor Co. (M.D. Fla., Mar. 10, 2008, No. 3:07-cv-782-J-32JRK) 2008 WL 686222, *6, fn. 9. [parties cannot stipulate to interstate commerce if they are not truly involved.].)
We need not resolve this apparent conflict, because we do not hold the parties can stipulate the FAA applies. Rather, we hold the arbitration agreement in the Limited Warranty that recited the transaction involved interstate commerce and the FAA would apply, while not dispositive, is some evidence that can be considered, along with the other evidence of interstate commerce in this record, to support the court's finding of interstate commerce for purposes of applying the FAA in this case.
Next, plaintiff relies on a provision in the Dispute Resolution Agreement which stated the procedures in the Limited Warranty are to be interpreted in conformance with federal court cases interpreting the FAA. She then cites a few federal court cases holding the FAA did not apply to agreements for the purchase and sale of real property. This argument has no merit. Without discussing whether those cases are comparable to the one before us, any such holding was a matter of substantive law, not FAA procedures. Consequently, the provision in the Dispute Resolution Agreement about FAA procedures is inapplicable.
Plaintiff's reliance on Breazeale v. Victim Services, Inc., supra, 198 F.Supp.3d 1070 is misplaced. In Breazeale the defendant was a private company with which district attorneys contracted to administer bad check diversion programs. The plaintiffs sued the defendant for violations of the Fair Debt Collection Practices Act, including sending deceptive collection letters. One of those collection letters included an arbitration provision that stated the agreement involved interstate commerce. But contrary to the facts here, there was never any agreement to that effect between the plaintiffs and the defendant in Breazeale. Further, the court stressed the defendant had not cited any authority that the FAA would apply when the state was exercising its police powers. (Id. at p. 1076.) Thus, Breazeale has no application here. 3. Arbitration of Construction Defect and Personal Injury Claims
Relying on section 1298.7, plaintiff argues she could not be compelled to arbitrate her construction defect and personal injury causes of action. This is incorrect.
Section 1298.7 provides: "In the event an arbitration provision is included in a contract or agreement covered by this title, it shall not preclude or limit any right of action for bodily injury or wrongful death, or any right of action to which Section 337.1 or 337.15 is applicable." Sections 337.1 and 337.15 are statutes of limitations for construction defect actions. Because the FAA applies, it preempts any state law that "discriminates against arbitration," including section 1298.7. (Pinnacle Museum Tower Assn v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 235.) Section 1298.7 conflicts with FAA because it applies only to arbitration agreements. (Basura v. U.S. Home Corp., supra, 98 Cal.App.4th at p. 1212.) Thus, the claims were properly arbitrated. 4. Stipulation to Try Disgorgement Claim
Plaintiff contends the court erred in disregarding the parties' stipulation to have the court try the disgorgement claim, arguing there is no authority for the ruling. We disagree.
When a court grants a petition to arbitrate and stays the underlying action, "'the action at law sits in the twilight zone of abatement with the trial court retaining merely vestigial jurisdiction over matters submitted to arbitration.' [Citation.] During that time, under its 'vestigial' jurisdiction, a court'" has limited authority as set forth by statute. (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487.) Titan held the court exceeded its vestigial jurisdiction when, with arbitration languishing, the trial court "reasserted jurisdiction" over the matter, issuing various orders. (Id. at p. 485.)
Here, once the court ordered the case to arbitration it had no authority to sever the disgorgement claim even though the parties had stipulated to do so. The trial court raised an apt analogy when it explained that even though the Court of Appeal reviews issues decided by the trial court, the parties cannot confer jurisdiction on the Court of Appeal by stipulating to skip proceedings in the trial court. Likewise, the parties could not stipulate to have the court reassert jurisdiction over a claim that had already been ordered to arbitration.
Under section 1281.4 upon request of a party, when the court orders a case to arbitration it shall also stay the action until arbitration is completed. The purpose "is to protect the jurisdiction of the arbitrator by preserving the status quo until the arbitration is resolved." (MKJA, Inc. v. 123 Fit Franchising, LLC (2011) 191 Cal.App.4th 643, 660.) "Given the purpose of the statute, the most reasonable interpretation of the stay provision is that it grants a trial court discretion to lift a stay prior to the completion of arbitration only under circumstances in which lifting the stay would not frustrate the arbitrator's jurisdiction." (Ibid.)
Here, the court found severance could result in conflicting rulings because evidence for all the claims to be arbitrated was the same. Thus, severance would have frustrated the arbitrator's jurisdiction. This is another reason to affirm the ruling. 5. Trial Court's De Novo Review of Disgorgement Claim
Plaintiff argues the trial court erred because it failed to conduct a de novo review of the arbitrator's ruling on the disgorgement claim. She relies on Ahdout v. Hekmatjah (2013) 213 Cal.App.4th 21, which held that because Business and Professions Code section 7031 contained an "explicit legislative expression of public policy," failure of an arbitrator to enforce it was a ground for de novo review by the trial court. (Ahdout, at pp. 38, 39.) The trial court here ruled de novo review of the disgorgement claim was preempted by the FAA, which allows only "very limited judicial review of arbitration awards."
The court further stated that if de novo review was required, it would find the arbitrator was correct in ruling the Agreement was not a construction contract but a real estate purchase and sale contract. It further found defendants did not act as a contractor under section 7031(b) nor did they engage in any activities that required a contractor's license. Further, RSM was an owner that built on its own property, hired PCA, a licensed contractor to oversee the project, and did not need a contractor's license. The court made these findings based on all of the evidence the parties submitted in connection with the Petition to Confirm and the Petition to Vacate and all prior hearings.
The parties devote a substantial portion of their briefs discussing whether de novo review was required. Because the court conducted a de novo review, we need not decide that issue. Rather, we review the trial court's determination plaintiff was not entitled to disgorgement under section 7031(b). We review confirmation of the Award de novo (Richey v. AutoNation, Inc. (2015) 60 Cal.4th 909, 918, fn. 1) and the trial court's ruling on any disputed factual issues for substantial evidence (Lindenstadt v. Staff Builders, Inc. (1997) 55 Cal.App.4th 882, 892, fn. 7). We also review de novo interpretation of a statute. (The Fifth Day, LLC v. Bolotin (2009) 172 Cal.App.4th 939, 946-947.)
Upon our de novo review of the Agreement, we agree with the arbitrator and the trial court that it was not a construction contract but an agreement to buy and sell a completed residence. The Master Customer Agreement states "Buyer is purchasing a completed Residence and Seller is not acting as a contractor for Buyer in the construction of such Residence." Nothing in the Agreement suggests it was a construction contract.
Contrary to plaintiff's claim, this statement was not a waiver of her protection under the Contractors' State Licensing Law. It was a statement of fact.
The fact the Residence might not have been completed at the time plaintiff and RSM entered into the Agreement did not somehow transform the purchase and sales agreement into a construction contract. Nor did language in the Master Customer Agreement that "Seller shall cause construction and completion of the Residence" make RSM a contractor. Likewise, that RSM gave plaintiff a warranty on the Residence, which included making repairs after close of escrow, did not make RSM subject to section 7031(b).
In support of this argument plaintiff quotes, without analysis, Davis Moreno Construction, Inc. v. Frontier Steel Buildings Corp. (E.D.Cal. 2010) 2010 WL 4513388 (Davis) that "[b]y retaining broad authority to perform work . . . on the Project" through warranty provisions, the defendant agreed to act under the Contractors' State License Law. (Id. at p. *8.) This unpublished United States District Court case, which does not bind us in any event (Vaquero v. Stoneledge Furniture, LLC (2017) 9 Cal.App.5th 98, 110, fn. 9), is inapt. There, the contract for the defendant to supply steel to the plaintiff/general contractor provided that if fabrication corrections were necessary, the defendant had the right to perform the work itself or direct its performance. (Davis, at p. *1.) The court found this was "not merely incidental" to the contract because its "fundamental purpose" "was for defendant to provide materials fit for constructing the building in compliance with . . . specifications." (Id. at p. *9.) The facts here are not comparable.
In her statement of facts plaintiff set out a variety of miscellaneous evidence in an attempt to show RSM was a "builder" and therefore required to be a licensed contractor. But that evidence does not make her case.
Plaintiff relies on Business and Professions Code section 7026, which states in part, "'Contractor,' for the purposes of this chapter is synonymous with 'builder' and, within the meaning of this chapter, a contractor is any person who undertakes to or offers to undertake . . . or does . . . by or through others, construct, alter, repair, . . . any building . . . ."
First, plaintiff fails to argue the facts or why they support her position in violation of California Rules of Court, rule 8.204(a)(1)(B), which requires each issue to be supported by reasoned legal argument. Without such discussion or authority, the argument "'is deemed to be without foundation and requires no discussion.'" (Central Valley Gas Storage, LLC v. Southam (2017) 11 Cal.App.5th 686, 695.) "It is not our place to construct theories or arguments to undermine the judgment and defeat the presumption of correctness." (Ibid.)
Second, an examination of the facts plaintiff cited shows they do not modify the Agreement and prove nothing relevant. For example, that the City of Rancho Santa Margarita showed RSM as the "contractor" on the notice of completion does not mean RSM needed a license. Likewise that in October 2012 RSM applied for a permit to construct a meter pedestal in the development is irrelevant.
Further, plaintiff states the construction agreement between RSM and PCA expired in December 2012, while the certificate of occupancy for the Residence was issued in February 2013. But plaintiff neglected to point out testimony from the arbitration that the termination date in the construction contract was erroneous and there had been an amendment to correct the term to run through the end of construction of the development. Similarly, plaintiff incorrectly states there was no evidence of payment to PCA of the monthly fee after June 2012. Again she did not cite to testimony that payments were made.
That Fieldstone Partners executed the Agreement as the managing member of RSM, that signs at the development site showed the homes were being constructed by "Fieldstone," or that the Residence had a "Fieldstone" doormat are not relevant. There is no question defendants are related. That does not change the substance of the Agreement. The other evidence is also unpersuasive.
In interpreting a contract we construe it as a whole, deriving its meaning from the entire agreement, not just an isolated sentence or provision. (Epic Communications, Inc. v. Richwave Technology, Inc. (2015) 237 Cal.App.4th 1342, 1349.) A review of the entire Agreement here demonstrates it was not a construction contract. Moreover, RSM contracted with a licensed contractor, PCA, to build the Residence and other homes in the development.
Plaintiff makes the unsubstantiated claim no defendant "proved that it was licensed at all times during the construction of the" development. (Italics omitted.) This is irrelevant to plaintiff's claim against defendants.
Contrary to plaintiff's claim, Lund v. Cooper (1958) 159 Cal.App.2d 349 is not "directly on point." In Lund, the defendants agreed to sell certain real property to the plaintiffs. The defendants also agreed to act as the contractor and actually built the house. Plaintiffs subsequently sued to rescind the sale. That is not the case here. RSM contracted with PCA for PCA to build the Residence. RSM contracted with plaintiff to sell her the Residence. Plaintiff is not a party to a construction contract with RSM, PCA, or any other defendant.
Plaintiff has cited sound bites from several cases she contends support her claims but failed to provide any analysis as to why they might apply. And they do not. For example, Kossler v. Palm Springs Developments, Ltd. (1980) 101 Cal.App.3d 88, on which she relies to argue plaintiff was a contractor, did not deal with licensing of a contractor or disgorgement. Because the Agreement was not a construction contract, the cases dealing with construction contracts on which plaintiff relies are inapplicable.
In sum, the Agreement was not a construction contract, RSM was not required to have a contractor's license, and there is no basis to order disgorgement.
Because we affirm on this basis we need not decide plaintiff's claim RSM was not an exempt owner-builder. 6. Timeliness of Award
Plaintiff also challenges the award on the ground it was issued untimely, claiming it was void. This argument is without merit.
The arbitrator determined the Award was timely. As noted above, review of an arbitrator's decision is very narrow. (Douglass v. Serenivision, Inc., supra, 20 Cal.App.5th at p. 392.) We do not generally review a decision for factual or legal errors. (Ibid.)
Although an award can be vacated if an arbitrator exceeds his powers (§ 1286.2, subd. (a)(4)), the arbitrator did not exceed his powers in ruling the Award was timely. He had the power to decide timeliness. The CAP rules provide "[t]he arbitrator interprets and applies these rules insofar as they relate to the arbitrator's powers and duties." A decision within the arbitrator's powers is not subject to judicial review, even if erroneous. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 28.) 7. Arbitrator's Exclusion of Evidence
Before testimony commenced, the arbitrator granted defendants' motion to exclude evidence of claims covered by Settlement No. 1 relating to drainage. It also partially granted defendants' motion to exclude the testimony of one of plaintiff's experts as to soil related conditions because he was not qualified, although he was allowed to testify as to his observations of the Property and to opine on whether soil settlement had affected the structure. During the arbitration, when plaintiff was examining another of her experts about a report by defendants' geologist, the court did not allow him to testify about issues included within Settlement No. 1.
Citing section 1286.2, subdivision (a)(5), plaintiff makes a superficial and undeveloped argument the award should be vacated "because the arbitrator refused to hear evidence." (Bold, capitalization, & underscoring omitted.) She conclusorily claims she was prejudiced when the arbitrator made this ruling based on its interpretation of a release agreement (presumably Settlement No. 1) about which the court had previously determined presented material issues of fact. This is the extent of the argument and it is insufficient. (Benach v. County of Los Angeles, supra, 149 Cal.App. 4th at p. 852.)
This section provides for vacation of an arbitration award if the court finds an arbitrator refused "to hear evidence material to the controversy." (§ 1286.2, subd. (a)(5).)
Even after defendants pointed out the inadequacy of the argument in their respondents' brief, plaintiff failed to explain how she was prejudiced. In addition, plaintiff failed to make an offer of proof as to the excluded testimony. Nor did she discuss why the evidence was relevant when the drainage issue had already been settled. She further failed to present evidence about the competency of her expert to testify. We see nothing to show plaintiff was denied the opportunity to fully and fairly present her case.
In addition, plaintiff did not explain the basis for the arbitrator's rulings on the evidentiary issues. In excluding the evidence as to drainage he issued a well-reasoned and complete nine-page order. In that order, among other things he discussed plaintiff's argument that a prior denial of a motion for summary adjudication regarding Settlement No. 1 had been denied. The arbitrator relied on case law that denial of summary adjudication did not preclude him from ruling on the motion to exclude evidence. (Salehi v. Surfside III Condominium Owners' Assn. (2011) 200 Cal.App.4th 1146, 1158.) Plaintiff has not cited law to the contrary.
Finally, plaintiff is attempting to transform section 1286.2, subdivision (a)(5) into a vehicle for the court to review every evidentiary ruling made by an arbitrator. This is contrary to the well-established extremely narrow scope of judicial review of arbitrations. (Ajida Technologies, Inc. v. Roos Instruments, Inc., supra, 87 Cal.App.4th at p. 541.)
For at least all of these reasons the argument fails. 8. Statement of Decision
Plaintiff contends the court erred by denying her request for a statement of decision as to its ruling on the Petition to Vacate and Petition to Confirm. She claims this requires reversal. We disagree.
Section 1291 states, "A statement of decision shall be made by the court, if requested pursuant to Section 632, whenever an order or judgment . . . is made that is appealable under this title." Section 632 provides: "The court shall issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial upon the request of any party appearing at the trial."
In denying the request the court relied on Rebmann v. Rohde (2011) 196 Cal.App.4th 1283, which held a petition to vacate or confirm an arbitration award is not a trial and thus does not fall within section 632. (Id. at p. 1295.) The court explained a petition to vacate or confirm "is a limited review" of the final decision of the arbitrator, who resolved the factual questions. Thus, it ruled, no statement of decision was required. However, because the issues were complex, it issued the final ruling to lay out its analysis "for the benefit of the parties and any reviewing court."
Plaintiff attempts to distinguish Rebmann, maintaining it did not deal with the question of whether the appellant was entitled to a statement of decision and also failed to discuss section 1291. Plaintiff cites Metis Development LLC v. Bohacek (2011) 200 Cal.App.4th 679, which held a statement of decision is required when a petition to compel arbitration is denied. (Id. at p. 687.) But when a court denies a petition to compel arbitration it makes factual findings. Therefore, a statement of decision would be appropriate.
Thus, Metis does not bear on Rebmann. But in any event, whether a statement of decision was warranted or not makes no difference here. Failure "to issue a requested statement of decision is not reversible per se, but is subject to harmless error review." (F.P. v. Monier (2017) 3 Cal.5th 1099, 1108.)
Plaintiff has failed to show lack of a statement of decision caused her prejudice. Her only argument is the vague statement that "it is claimed" the court considered de novo several factual issues regarding the section 7031(b) argument. If that is correct, plaintiff continues, she and we are "highly prejudiced" in reviewing those determinations without a statement of decision.
This is not persuasive. The court's 20-plus-page final ruling extensively sets out the court's explanation for its rulings. We cannot see how a statement of decision would provide any additional information helpful to our review. (In re Marriage of Sellers (2003) 110 Cal.App.4th 1007, 1010 [statement of decision as much or more for benefit of appellate court as for parties].)
DISPOSTION
The judgment is affirmed. Defendants are entitled to costs on appeal.
THOMPSON, J. WE CONCUR: FYBEL, ACTING P. J. IKOLA, J.