Filed 12/9/19 Alvear v. Samano CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

MARIA JOSEFINA ALVEAR,

Plaintiff and Respondent,

v.

JOSE SAMANO et al.,

Defendants and Appellants.

G056878

(Super. Ct. No. 30-2016-00852583)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Walter P. Schwarm, Judge. Affirmed.

Dennis R. Delahanty for Defendants and Appellants.

Santiago Alberto Martin; Thomas Pedersen for Plaintiff and Respondent.

* * *

Defendants, Jose Samano et al., appeal a trial court’s judgment confirming an arbitration award in favor of plaintiff Maria Josefina Alvear. Defendants were involved in a “short sale” of plaintiff’s home and the arbitrator found, among other things, the underlying sale agreement had not complied with the Home Equity Sale Contracts Act (the Act). The arbitrator awarded plaintiff damages, attorney fees and costs. On appeal, defendants primarily contend that because plaintiff had not had any positive equity in her home at the time of sale, the arbitration award should be subject to judicial review and vacated. We find defendants’ contentions forfeited and not subject to judicial review. We affirm the judgment.

I

FACTS AND PROCEDURAL HISTORY

A. Sale of Home

In 2004, plaintiff purchased her home in Anaheim. By 2011, she had fallen behind on her mortgage payments and filed for bankruptcy. In August 2014, with foreclosure pending, plaintiff hired J&Y Real Estate (J&Y), to help plaintiff submit her third home loan modification application to the holder of her mortgage. Upon signing a contract titled a “Loan Modification Agreement,” J&Y indeed submitted a loan modification application for plaintiff. J&Y told plaintiff the application was unsuccessful and recommended that plaintiff short sell her home, claiming she would be able to purchase it back in the future.

In December 2014, plaintiff sold her home to codefendant Baqai Living Trust (the trust). Plaintiff principally spoke Spanish in negotiating the sale, but its final terms were written in English only, on a California Association of Realtors form (the purchase agreement). The purchase agreement stated that, in addition to plaintiff selling her home for $325,000, “[plaintiff] will remain in the property until June 2015 [and] at that time she can rent the premises at the rate of $1,900 per month.” The agreement also stated “[plaintiff] will have the first position once the seller decides to sell the property.”

As part of the sale, but not written in the purchase agreement, plaintiff received payments of $3,000 from the foreclosing mortgage holder and $8,000 net from the trust. The agreement also did not include any notice of plaintiff’s right to cancel the sale. But it did state that any dispute between plaintiff and the trust arising out of the agreement would be submitted to mediation and, if not settled, resolved through arbitration.

Following the completion of the sale, plaintiff indeed continued to live at the home. After six months passed, plaintiff stated that she wished to exercise her option to repurchase the home for $360,000. The trust, through codefendant Khalid Baqai, responded that plaintiff could repurchase the property but the price would be $460,000.

B. Arbitration and Award in Plaintiff’s Favor

In May 2016, plaintiff filed a lawsuit against defendants. Plaintiff alleged multiple causes of action, including fraud and violations of the Act. (Civ. Code, § 1695 et seq.) In response, defendants filed a motion to abate the lawsuit that the trial court construed as a petition to compel arbitration based upon the purchase agreement. The court granted the motion as to the trustee defendants who had signed the agreement, but denied it as to the remaining, nonsignatory defendants.

A three day arbitration was conducted in February 2018. At its conclusion, the arbitrator found in favor of plaintiff and awarded $409,189.71 in total damages. Specifically, the arbitrator awarded $45,000 for actual damages, $175,000 for exemplary damages, and $189,189.71 in attorney fees and costs. The arbitrator found the purchase agreement had not complied with the Act and that “circumstances raise[d] a strong inference that [defendants] engaged in a fraudulent scheme to acquire plaintiff’s home for less than its fair market value.” The arbitrator found the home’s true fair market value had been $375,000 at the time of its sale and that evidence supported plaintiff’s claimed right to repurchase the home for $360,000.

Plaintiff moved the trial court to confirm the arbitration award and defendants opposed. Specifically, defendants requested the court to vacate the award based upon a single argument that attorney fees should not have been awarded because a condition required by the purchase agreement—to mediate the dispute—had not been satisfied. The court rejected defendants’ argument and granted plaintiff’s motion, entering judgment in her favor for the entire awarded amount of $409,189.71.

II

DISCUSSION

Defendants contend on appeal the arbitrator’s award should be vacated because awarding damages under the Act amounted to the arbitrator exceeding his power in violation of Code of Civil Procedure section 1286.2, subdivision (a)(4). Specifically, defendants contend the award is subject to judicial review, the damages awarded were not supported by the facts of this case, and certain defendants should not be liable because they were not involved in the underlying home sale. Defendants also contend, in the alternative, that the amount awarded should be corrected. In addition to their briefs, defendants have filed a request for judicial notice, which plaintiff opposes. Plaintiff has also filed a motion to strike an argument raised by defendants for the first time in their reply brief.

A. Standard of Review and Relevant Laws

The California Arbitration Act (§ 1280 et seq.) stands for the general proposition that arbitration awards are immune from judicial review except under “limited” circumstances. (Jordan v. California Department of Motor Vehicles (2002) 100 Cal.App.4th 431, 438 (Jordan).) Section 1286.2 specifies grounds upon which an award may be vacated and section 1286.6 specifies grounds for allowing one to be corrected. “‘The scope of judicial review of arbitration awards is extremely narrow because of the strong public policy in favor of arbitration and according finality to arbitration awards. [Citations.] An arbitrator’s decision generally is not reviewable for errors of fact or law.’ [Citations.] This is true even when the ‘error appears on the face of the award and causes substantial injustice to the parties.’” (Branches Neighborhood Corp. v. CalAtlantic Group, Inc. (2018) 26 Cal.App.5th 743, 750.)

“A court shall vacate an award if it determines ‘the arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.’ [Citation.] An arbitrator exceeds his powers when he acts . . . in a manner not authorized by the contract or by law.” (Jordan, supra, 100 Cal.App.4th at p. 443, quoting § 1286.2, subd. (a)(4).) “In determining whether an arbitrator exceeded his powers, we review the trial court’s decision de novo, but we must give substantial deference to the arbitrator’s own assessment of his contractual authority.” (Jordan, at pp. 443-444.)

B. Arguments Raised for First Time on Appeal

While an appellate court may exercise its discretion to entertain questions of law raised for the first time on appeal, it is not required to do so. (Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 1257, 1275-1276, fn. 3.) Indeed, a party who attempts to raise an argument for the first time on appeal is generally held to have forfeited the right to have the argument adjudicated. (Nellie Gail Ranch Owners Assn. v. McMullin (2016) 4 Cal.App.5th 982, 997.) For example, in Baron v. Fire Ins. Exchange (2007) 154 Cal.App.4th 1184, the Sixth District Court of Appeal affirmed a trial court judgment entered in favor of a receiver who had been appointed by an arbitrator. (Id. at pp. 1187-1188.) On appeal, an insurer-defendant argued for the first time that the judgment should be reversed because the arbitrator had not had jurisdiction to appoint the receiver. (Id. at pp. 1190-1191.) Even after noting the defendant had challenged the receiver’s standing on multiple grounds at the trial court level, the appellate court still concluded the defendant’s specific argument forfeited because it had not been raised in the trial court. (Id. at pp. 1192-1193.)

In this case, defendants raised none of their contentions proffered on appeal in the trial court. As mentioned above, defendants raised in the trial court a single argument that the award should have been vacated because it included attorney fees and costs prohibited by plaintiff’s failure to mediate the dispute. This contention was rejected by the trial court and has not been reasserted on appeal. Accordingly, all of defendants’ contentions that are now before this court have been forfeited. (Baron v. Fire Ins. Exchange, supra, 154 Cal.App.4th at pp. 1192-1193.)

C. Arbitration Award

In any case, we would find defendants’ proffered errors would not establish a valid basis for judicial review because they could only amount to mere mistakes of law or fact not subject to judicial review. (Branches Neighborhood Corp. v. CalAtlantic Group, Inc., supra, 26 Cal.App.5th at p. 750.) Defendants’ contend the arbitrator “‘exceeded [his] powers’” (§ 1286.2, subd. (a)(4)), by asserting three arguments: the arbitration award (1) violated defendants’ statutory rights, (2) fashioned a remedy not rationally related to the purchase agreement, and (3) contained a remedy not authorized by law.

All three arguments depend upon defendants’ false root argument that “[because] the intent and purposes of [the Act] was to protect homeowners against unfair purchases of their home equity and as [plaintiff] had no home equity, there can be no violation of [the Act] arising out of the purchase of her home . . . .” Defendants’ argument unravels from the start, given that the statutory sentence they rely upon reads in full: “The Legislature declares that it is the express policy of the state to preserve and guard the precious asset of home equity, and the social as well as the economic value of homeownership.” (Civ. Code, § 1695, subd. (b), italics added.) In other words, defendants are incorrect in asserting that protection of economic value is the only basis of the Act’s coverage. The Act is also concerned with social value.

Contrary to defendants’ narrow interpretation, “the Act seeks to regulate transactions between an equity purchaser and an equity seller resulting in the sale of residential real property in foreclosure. At the heart of the scheme is the requirement that the agreement between buyer and seller be in writing, with specific terms aimed at protecting the homeowner.” (Segura v. McBride (1992) 5 Cal.App.4th 1028, 1035, fn. omitted.) None of the Act’s express definitions support defendants’ root argument for a requirement of positive equity. (E.g., Civ. Code, § 1695.1, subd. (c) [a protected “‘Equity seller’” is simply defined as “any seller of a residence in foreclosure,” without any reference to the seller’s home equity level]; Civ. Code, § 1695.1, subd. (b) [a protected “residence in foreclosure” contains no requirement of a particular home equity level].)

In sum, because defendants do not persuade us that the Act’s applicability to a home sale requires positive equity in the home, their challenges of the arbitrator’s award are, at best, claimed errors of either law or facts that are not subject to judicial review. (Branches Neighborhood Corp. v. CalAtlantic Group., Inc., supra, 26 Cal.App.5th at p. 750.) Defendants cited cases do not persuade us otherwise. For example, Jordan, supra, 100 Cal.App.4th 431, 444-445, 449-450, is inapt because that case involved an award that was held to be in violation of a statute whereas defendants have failed to demonstrate a violation of the Act. Similarly, Sheppard, Mullin, Richter & Hampton, LLP v. J-M Mfg. Co., Inc. (2018) 6 Cal.5th 59, 68, also does not support defendants’ position because that case involved a law firm’s violation of public policy whereas defendants have failed to demonstrate any analogous violation of public policy expressed by the Act.

Defendants’ citation to Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, is also unpersuasive. That case stands for a general proposition that “the remedy an arbitrator fashions does not exceed his or her powers if it bears a rational relationship to the underlying contract as interpreted, expressly or impliedly, by the arbitrator and to the breach of contract found, expressly or impliedly, by the arbitrator.” (Id. at p. 367.) In that case, the California Supreme Court held that an arbitrator’s remedy—an award of an intellectual property license that had not been expressly stated in the underlying contract—was rationally related to the arbitrator’s interpretation of the underlying contract. (Id. at pp. 370, 386.) In setting the low bar of a sufficiently “rational relationship,” the high court stated: “The award will be upheld so long as it was even arguably based on the contract; it may be vacated only if the reviewing court is compelled to infer the award was based on an extrinsic source. [Citations.] In close cases the arbitrator’s decision must stand.” (Id. at p. 381.)

This was not a close case. The purchase agreement broadly set the scope of arbitration as “any dispute or claim in Law [sic] or equity arising between them [,i.e., plaintiff and the trust] out of this Agreement or any resulting transaction.” This included the application of the Act to the sale of plaintiff’s home, which expressly provided for the award of actual and exemplary damages, as well as attorney fees and costs. (Civ. Code, § 1695.7.) In other words, the “rational relationship” requirement expressed in Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th 362, provides no grounds to challenge the arbitrator’s selected remedies in this case.

D. Moot Issues

We deny as moot both defendants’ request for judicial notice and plaintiff’s motion to strike portions of defendants’ reply brief. Plaintiff’s motion is aimed at defendants’ argument that the arbitration award should be vacated because only two of nine defendants were ordered to participate in the underlying arbitration. In addition to not entertaining defendants’ argument because it is raised for the first time on appeal, as discussed above (see ante pt. II. B), we note that we would not consider it in any case because it is raised through their reply brief. (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764.) Moreover, we further note that defendants provide no citation to the record indicating that any of them objected to participating in the arbitration underlying this case.

E. Defendants’ Request to Correct the Amount of Damages Awarded

Finally, defendants argue in the alternative that the amount of damages awarded should be corrected pursuant to section 1286.6. In their opening brief, they argue actual damages should be $15,000 (and not $45,000) because that was the difference between the arbitrator’s findings for the home’s fair market value ($375,000) and the repurchase price plaintiff had been entitled to ($360,000). In their reply brief, defendants imply no damages should have been awarded because the arbitrator failed to consider benefits that inured to plaintiff but were not reflected in the home sale price and plaintiff’s mortgage arrears. In their supplement briefing, defendants contend, among other arguments, an “evident miscalculation” of actual damages in the amount of $10,000.

Defendants appear to be correct that the proper calculation of the arbitrator’s figures should have resulted in actual damages of $35,000 and not the $45,000 awarded. Notwithstanding the miscalculation, the contention was forfeited for failure to raise it in the trial court. (Baron v. Fire Ins. Exchange, supra, 154 Cal.App.4th at pp. 1192-1193.) Procedurally, it is arguable that all parties were “before the court” for defendants’ “response requesting that the award be vacated.” (§ 1286.8, subd. (b)(1).) However, section 1285.8 required the response to have “set forth the grounds on which the request for such relief” was based. As mentioned above, the response asserted one argument: that the award should have been vacated because the attorney fees and costs awarded should have been prohibited by plaintiff’s failure to first mediate the dispute. In other words, since defendants’ response did not “set forth” the “evident miscalculation” of $10,000, there was no ground for the trial court to correct the arbitrator’s award. (§ 1286.8 [court may not correct an award “unless” conditions are met].) Since the contention was not preserved, it was forfeited along with all of defendants’ other contentions before this court. (Baron v. Fire Ins. Exchange, supra, 154 Cal.App.4th at pp. 1192-1193; see ante pt. II. B.)

III

DISPOSITION

The judgment is affirmed. Plaintiff is entitled to her costs on appeal.

MOORE, J.

WE CONCUR:

O’LEARY, P. J.

FYBEL, J.