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McQueen v. Zhen Guang Huang

California Court of Appeals, Second District, Eighth Division
Mar 4, 2022
No. B304645 (Cal. Ct. App. Mar. 4, 2022)




MORRIS MCQUEEN, Plaintiff and Appellant, v. ZHEN GUANG HUANG et al., Defendants and Respondents.

Mojarro Law and Jacob I. Mojarro for Plaintiff and Appellant. Law Offices of Stephen R. McLeod and Stephen R. McLeod for Defendants and Respondents.


APPEAL from an order of the Superior Court of the County of Los Angeles No. BC705985, Stuart M. Rice, Judge. Affirmed.

Mojarro Law and Jacob I. Mojarro for Plaintiff and Appellant.

Law Offices of Stephen R. McLeod and Stephen R. McLeod for Defendants and Respondents.


Plaintiff Morris McQueen, a California Corporation, sued defendants Zhen Guang Huang, Yue Pi Yu, and Tommy Y. Wong for breach of a residential real estate purchase agreement. These parties have litigated in federal court, the superior court, and in arbitration, which led to the order confirming an arbitration award from which plaintiff now appeals.

The arbitrator found in favor of defendants. The trial court granted defendants' petition to confirm the arbitration award. Plaintiff appeals, arguing the arbitrator exceeded his powers (an argument never raised in the trial court) and the award was procured by "undue means." Defendants have moved for sanctions, arguing the appeal is frivolous. We affirm the order enforcing the arbitration award, and grant the motion for sanctions jointly and severally against plaintiff and its counsel, awarding sanctions of $38,411.50.


In May 2018, plaintiff sued defendants for breach of a contract to sell real property to plaintiff. Plaintiff alleged the parties entered into a residential real estate purchase agreement in July 2015, by which defendants agreed to sell property to plaintiff for $372,000. Defendants failed to provide disclosures and a preliminary title report, as required by the agreement, attempted to coerce plaintiff into waiving those conditions to consummate the transaction, and otherwise interfered with the funding of the transaction, which prevented it from closing.

Defendants moved to dismiss the complaint, arguing plaintiff had sued them in federal court in October 2015, making identical allegations, and also claiming violations of federal law based on defendants' statements that they only wished to sell to someone of Chinese descent. Plaintiff refused to arbitrate the lawsuit as provided in the parties' purchase agreement, and the federal court ordered the parties to arbitration in February 2016. Plaintiff appealed that decision, and the appeal was dismissed in June 2017 because it was not from an appealable order. Plaintiff further delayed the resolution of the dispute by not participating in arbitration. The federal court ordered the parties to commence arbitration no later than March 15, 2018, or the lawsuit would be dismissed with prejudice. Plaintiff then filed the instant action, and voluntarily dismissed its federal lawsuit without prejudice in May 2018. Plaintiff's current counsel on appeal represented plaintiff in all of these proceedings.

The parties litigated defendants' motion to dismiss the complaint and plaintiff's request for entry of default against defendants. Defendants then answered the complaint with a general denial and specific denial of each allegation in the complaint. They also advanced affirmative defenses, including that the complaint failed to state a cause of action, defendants were excused from performance, the agreement was "illegal and thus void," and others.

Plaintiff then filed a motion to compel arbitration, claiming it filed this lawsuit to compel defendants to participate in the arbitration that had been commenced while the federal lawsuit was pending.

On February 27, 2019, the trial court granted the motion to compel arbitration. Based on concerns about plaintiff's litigation conduct, the trial court set an order to show cause regarding dismissal, and continued the hearing on the motion to dismiss for that same date. The court's order also reflects that "the parties agree that arbitration will proceed before retired Judge John Shook, who will determine all issues other than the pending motion to dismiss." The motion to dismiss was later taken off calendar after the parties advised the court the arbitration was scheduled to proceed.

On August 12, 2019, defendants filed a petition to confirm the arbitration award. The arbitration was held on several days in June 2019, and the arbitrator issued a binding arbitration award in defendants' favor. The arbitrator found plaintiff had misled the public (and defendants) by failing to use a corporate identifier in the contracts with defendants. Plaintiff had signed the contracts in the name of "Morris McQueen," without disclosing it was a corporate entity. The arbitrator concluded that plaintiff had no standing under the purchase agreement, and no valid contract had been entered by the parties. The arbitrator ordered each side to bear its own costs and attorney fees. In making its order, the arbitrator relied upon oral testimony, exhibits, documentary evidence, and arbitration briefs filed by the parties. Almost none of the evidence on which the arbitrator relied has been included in the record on appeal, except for the residential purchase agreement.

In opposition to the petition to confirm the award, plaintiff argued it was "defraud[ed]" by the arbitrator, who "ordered counsel to meet and confer on continued arbitration hearing dates, then subsequently changed his mind, requested closing briefs from the parties and entered default against the Plaintiff after it insisted that the arbitration be continued." Plaintiff contended the arbitrator engaged in ex parte communications with defendants' counsel. Plaintiff did not argue that the arbitrator exceeded his powers by finding there was no binding contract between the parties.

In support of the opposition, plaintiff included a declaration from counsel stating that plaintiff's CEO, Olivia Maryann Awadalla, testified at the arbitration she signed the purchase agreement. The signature on the agreement is illegible and does not include any information indicating the signature is that of a corporate officer or agent signing on behalf of a corporation.

The declaration also stated the arbitrator had communications with the parties to discuss whether they intended to file closing briefs, and plaintiff wanted to provide additional evidence, but the arbitrator abruptly decided he would not allow further evidence and the arbitration would be concluded. According to plaintiff, at defendants' request, the arbitrator then entered a "default" against plaintiff. Plaintiff then filed a demand that the arbitrator disqualify himself, arguing, among other things, the arbitrator had engaged in ex parte communications with the parties. Defendants argued there was no evidence to support this claim, and in any event, the only ex parte communications that occurred related to scheduling and administrative matters.

On November 20, 2019, the court granted the petition to confirm the arbitration award. The court entered judgment in defendants' favor on January 27, 2020. Plaintiff filed a timely notice of appeal on February 28, 2020.


1. No Valid Reason Exists to Vacate the Arbitration Award

When parties agree to arbitrate their disputes, the scope of judicial review is strictly limited to give effect to the parties' intent "to bypass the judicial system and thus avoid potential delays at the trial and appellate levels . . . ." (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10 (Moncharsh).) Generally, a court may not review the merits of the controversy, the validity of the arbitrator's reasoning, or the sufficiency of the evidence supporting the arbitration award. (Id. at p. 11.)" '[I]t is within the power of the arbitrator to make a mistake either legally or factually. When parties opt for the forum of arbitration they agree to be bound by the decision of that forum knowing that arbitrators, like judges, are fallible.'" (Id. at p. 12.)

Judicial review of an arbitration award is limited to "circumstances involving serious problems with the award itself, or with the fairness of the arbitration process." (Moncharsh, supra, 3 Cal.4th at p. 12.) Grounds on which a court may vacate an award are set forth in Code of Civil Procedure section 1286.2, subdivision (a) (all further statutory references are to this code), such as the award was procured by "undue means" or the arbitrator "exceeded their powers." (Id., subds. (a)(1) & (4).) "There is a presumption favoring the validity of the award, and [the party challenging the award] bears the burden of establishing [a] claim of invalidity." (Betz v. Pankow (1993) 16 Cal.App.4th 919, 923.) We review de novo a trial court's order confirming an arbitration award. (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 55.)

Plaintiff argues the arbitrator exceeded his powers by finding there was no valid contract between the parties, since the trial court, in ordering the dispute to arbitration, necessarily found there was a valid and enforceable contract between the parties. Plaintiff also contends the issue of the validity of the contract was never submitted to the arbitrator for decision, as the parties never raised the issue as a claim or defense.

Plaintiff did not raise in the trial court the argument that the arbitrator exceeded his powers. By failing to present the issue to the trial court, the issue has been forfeited on appeal. (See Mundy v. Lenc (2012) 203 Cal.App.4th 1401, 1406 [" 'As a general rule, failure to raise a point in the trial court constitutes . . . waiver and appellant is estopped to raise that objection on appeal.' "].)

The late-raised claim fails on its merits. Arbitrators "have the power to decide any question of contract interpretation, historical fact or general law necessary, in the arbitrator's understanding of the case, to reach a decision. [Citations.] Inherent in that power is the possibility the arbitrator may err in deciding some aspect of the case. Arbitrators do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error, for' "[t]he arbitrator's resolution of these issues is what the parties bargained for in the arbitration agreement."' [Citations.]" (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1184.)

The question whether there was an enforceable contract was a bedrock fact within the arbitrator's authority to decide. Defendants' answer included a general denial of plaintiff's contract claims. A denial puts in issue the existence of a contract. (Walsh v. West Valley Mission Community College District (1998) 66 Cal.App.4th 1532, 1545-1546.)

The cases plaintiff cites are inapposite. In Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59 and Loving & Evans v. Blick (1949) 33 Cal.2d 603, the courts found that arbitration clauses contained in illegal contracts, void as against public policy, could not be enforced, and arbitration awards stemming from such illegal contracts must be vacated. (Sheppard, Mullin, Richter & Hampton, LLP, at pp. 78- 79; Loving, at pp. 610-611.)

No such findings were made in this case. The arbitrator did not decide the standard form real estate contract was illegal. The arbitrator found plaintiff was not a party to the contract, as the contract was not signed in its corporate capacity, and plaintiff therefore lacked standing. These findings do not mean the contract was illegal and unenforceable as against public policy.

Plaintiff also argues the award was procured by undue means because of ex parte communications between defendants and the arbitrator, which led the arbitrator to wrongly find plaintiff had "defaulted" and no more evidence would be admitted. The record here contains no evidence of any ex parte communications that undermined the fairness of the process. (Maaso v. Signer (2012) 203 Cal.App.4th 362, 373 ["ex parte communication between a party's representative (whether counsel or party arbitrator) and a neutral arbitrator" may provide grounds to vacate the award if it undermines the fairness of the process].)

The limited record before us does not support plaintiff's claim the arbitrator wrongly prevented plaintiff from offering evidence or took its default. The record does not disclose anything about what evidence was offered or presented to the arbitrator. (Moore v. Griffith (1942) 51 Cal.App.2d 386, 389 ["It is incumbent on appellant to show that competent and material evidence was excluded."].)

Lastly, plaintiff argues the arbitrator failed to determine all issues submitted to him, including plaintiff's claims for specific performance and breach of contract. An award may be vacated when an award fails to determine "all the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy." (§ 1283.4; see also Safeway Stores, Inc. v. Brotherhood of Teamsters (1978) 83 Cal.App.3d 430, 439-440, fn. 4.) The arbitrator decided plaintiff lacked standing and there was no enforceable contract between the parties. Those findings resolved all of plaintiff's contract claims.

2. Sanctions

Defendants have filed a motion for sanctions, arguing the appeal is frivolous. We gave notice that we intended to consider the motion and invited plaintiff to submit an opposition to the motion. Plaintiff did not file an opposition to the motion for sanctions.

We have discretion to impose sanctions on a party or its attorney for taking a frivolous appeal. (§ 907 ["When it appears to the reviewing court that the appeal was frivolous or taken solely for delay, it may add to the costs on appeal such damages as may be just."]; Cal. Rules of Court, rule 8.276(a)(1) ["a Court of Appeal may impose sanctions . . . on a party or an attorney for . . . . [¶] . . . Taking a frivolous appeal or appealing solely to cause delay"].) "[A]n appeal should be held to be frivolous only when it is prosecuted for an improper motive-to harass the respondent or delay the effect of an adverse judgment-or when it indisputably has no merit-when any reasonable attorney would agree that the appeal is totally and completely without merit." (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.)

Having considered the motion, and the matters discussed at oral argument, we conclude that the appeal has no merit, and was brought solely for the purpose of delay and to harass defendants.

First, we find the appeal is frivolous because it is well established that an error in fact or law does not justify overturning an arbitration award. (Moncharsh, supra, 3 Cal.4th at p. 11.) Also, plaintiff never once alleged the arbitrator exceeded his powers in the trial court, but first asserted this claim on appeal in violation of bedrock rules of appellate procedure. (Mundy v. Lenc, supra, 203 Cal.App.4th at p. 1406.)

Second, plaintiff and its counsel have repeatedly engaged in abusive litigation tactics over the course of the more than six years this simple real estate dispute has been litigated.

The federal lawsuit was filed in October 2015, and languished until February 2016, when the court issued an order to show cause regarding dismissal for lack of prosecution. Plaintiff then served defendants by publication, and sought to take their defaults, even while defendants were in communication with plaintiff's counsel, and had requested that plaintiff agree to arbitrate their dispute pursuant to the arbitration agreement contained in the real estate contract. (The defaults were set aside after the court concluded that defendants' failure to answer resulted from the parties exploring the possibility of arbitration.)

Plaintiff would not agree to arbitration, forcing defendants to file a motion to compel arbitration. Plaintiff opposed the motion to compel arbitration, arguing that arbitration had been waived, the agreement was unconscionable, and the agreement required the parties to mediate their dispute before resorting to arbitration. The motion to compel arbitration was granted, with the court finding that it was for the arbitrator, not the court, to determine whether mediation was a condition precedent to arbitration. Plaintiff then appealed that order. That appeal was dismissed in June 2017, because an interlocutory order compelling arbitration is not appealable.

Even after dismissal of the appeal, plaintiff and its counsel were slow to agree to an arbitrator, insisted that the dispute be mediated before it could be arbitrated, and often took weeks to respond to defendants' communications seeking to move the arbitration along.

In September 2017, defendants filed a motion to dismiss the federal action for failure to prosecute. The court also issued an order to show cause regarding dismissal for failure to prosecute and failure to initiate arbitration. Plaintiff did not respond, and the case was dismissed on December 8, 2017. Plaintiff then moved to set aside the dismissal. In January 2018, the court set aside the dismissal, but ordered that the parties were to commence arbitration no later than March 15, 2018, and that the case would be dismissed with prejudice if arbitration was not timely commenced. Plaintiff then filed a motion seeking an order compelling mediation of the dispute (an argument which had already been rejected by the court), which was denied by the court on March 13, 2018.

Defendants were forced to file a second motion to dismiss in April 2018, because plaintiff had not commenced arbitration in compliance with the court's order. On May 10, 2018, while that motion was pending, plaintiff voluntarily dismissed the federal case without prejudice.

Plaintiff filed this lawsuit that very same day. In November 2018, defendants filed a motion to dismiss this lawsuit, arguing dismissal was appropriate because the federal court ordered dismissal if arbitration was not timely commenced, and plaintiff wrongfully dismissed its case to avoid dismissal by the federal court. While the motion to dismiss was pending, plaintiff attempted to take defendants' defaults, just like it had done in federal court. Plaintiff then filed a motion to compel arbitration, disingenuously claiming it filed this lawsuit to compel defendants to participate in the arbitration that had been commenced while the federal lawsuit was pending.

On February 27, 2019, the trial court granted the motion to compel arbitration. The arbitration did not go smoothly. Plaintiff's principal was often late and unprepared. Plaintiff also sought to disqualify the arbitrator (which it had selected).

Plaintiff opposed confirmation of the arbitration award, and filed a motion to be relieved as counsel while the petition to confirm the arbitration award was pending, arguing that the hearing should be continued for his corporate client to obtain new counsel. The court continued the motion to be relieved as counsel so that the motion to confirm the arbitration award could be heard without further delay.

Plaintiff's gamesmanship (the word used by plaintiff's counsel at oral argument to describe plaintiff's conduct of the federal lawsuit) continued all the way through to oral argument in this appeal. Counsel did not file an opposition to the sanctions motion, and then sought a last minute continuance of oral argument, filing his request after hours the night before oral argument, claiming a final status conference and trial in another matter had been unilaterally rescheduled by the trial court after oral argument was calendared in this case. However, it appears from the superior court docket that the scheduling change was made weeks before counsel's request for a continuance of oral argument.

Counsel at oral argument also misrepresented his participation in the federal litigation, claiming he had become involved in the case later in the proceedings. However, court records show that Mr. Mojarro represented plaintiff for the entire duration of the case, beginning in October 2015 with the filing of the complaint, and ending when the case was voluntarily dismissed in May 2018, including the prosecution of the meritless appeal of the federal district court order compelling the parties to arbitrate their dispute.

We find the conduct over the course of this protracted litigation is particularly egregious, and therefore grant the motion for sanctions. (See Nat'l Secretarial Serv. v. Froehlich (1989) 210 Cal.App.3d 510, 526-527.)

Defendants have requested $38,411.50 in sanctions, representing the time spent by counsel preparing this motion and responding to this appeal, and the filing fee for the sanctions motion. Plaintiff has not disputed or otherwise challenged the reasonableness of these fees or costs. We find the request is reasonable and will sufficiently compensate defendants for defending this appeal and discourage this type of conduct in the future. (Nat'l Secretarial Serv. v. Froehlich, supra, 210 Cal.App.3d at pp. 526-527.)


The order is affirmed, and the motion for sanctions is granted. Respondents are awarded their costs on appeal, including sanctions awarded jointly and severally against appellant and its counsel, Jacob I. Mojarro. Appellant and its counsel are ordered to pay sanctions of $38,411.50 no later than 30 days after the filing of this opinion. Additionally, Jacob I. Mojarro and the clerk of this court are each ordered to send a copy of this opinion to the State Bar of California upon return of the remittitur. (Bus. & Prof. Code, §§ 6068, subd. (o)(3), 6086.7, subd. (a)(3); Caro v. Smith (1997) 59 Cal.App.4th 725, 740.)


Summaries of

McQueen v. Zhen Guang Huang

California Court of Appeals, Second District, Eighth Division
Mar 4, 2022
No. B304645 (Cal. Ct. App. Mar. 4, 2022)
Case details for

McQueen v. Zhen Guang Huang

Case Details

Full title:MORRIS MCQUEEN, Plaintiff and Appellant, v. ZHEN GUANG HUANG et al.…

Court:California Court of Appeals, Second District, Eighth Division

Date published: Mar 4, 2022


No. B304645 (Cal. Ct. App. Mar. 4, 2022)