Branches Neighborhood Corp. v. Calatlantic Grp., Inc.

• Decision Date: 10 August 2018
• Docket Number: G055201
• Citation: 26 Cal.App.5th 743,237 Cal.Rptr.3d 411
• Court: California Court of Appeals Court of Appeals
• Parties: BRANCHES NEIGHBORHOOD CORPORATION, Plaintiff and Appellant, v. CALATLANTIC GROUP, INC., Defendant and Respondent.

26 Cal.App.5th 743

237 Cal.Rptr.3d 411

BRANCHES NEIGHBORHOOD CORPORATION, Plaintiff and Appellant,

v.CALATLANTIC GROUP, INC., Defendant and Respondent.

G055201

Court of Appeal, Fourth District, Division 3, California.

August 10, 2018

Fenton Grant Mayfield Kaneda & Litt, Gregory S. Lew and Daniel H. Glifford for Plaintiff and Appellant.

Plante Lebovic, Brian C. Plante and Gregory M. Golino, Santa Ana, for Defendant and Respondent.

OPINION

MOORE, J.

Plaintiff Branches Neighborhood Corporation (Branches or the association), a community association incorporated pursuant to the Davis-Stirling Common Interest Development Act ( Civ. Code, § 4000, et seq. )¹ (the Act), filed an arbitration claim against the association's developer, defendant CalAtlantic Group, Inc., formerly known as Standard Pacific Corp. (Standard), for construction defects. The arbitrator granted summary judgment in Standard's favor, concluding the association did not receive the consent of its members to file the claim until after the claim was filed, in violation of its declaration of covenants, conditions and restrictions (CC&Rs). The trial court subsequently denied the association's motion to vacate the award, concluding the court had no power to review the arbitrator's decision.

Branches argues on appeal that the trial court incorrectly denied its motion to vacate because the arbitrator exceeded its powers by abridging an unwaivable statutory right or public policy. We find no such right or policy, and accordingly, the plain language of the CC&Rs controls. We therefore affirm the judgment.

IFACTS

Branches is located in Ladera Ranch and consists of residential condominium units. Its operation is subject to both the provisions of the Act and its own CC&Rs. Standard was the builder, as defined by the Act. (§ 911.)

In October 2014, Branches gave notice to Standard under section 910, stating that it intended to make a claim for construction and design defects. Branches requested that Standard provide relevant plans and specifications within 30 days, and provided a preliminary list of defects. The listed defects were wide-ranging, including problems impacting both individual units and the common area.

In March 2015, the parties entered into a stipulation to engage in the prelitigation procedures set forth in the Act. (§ 6000.) Jim Roberts, an attorney, was designated as mediator and dispute resolution facilitator. The parties agreed to a list of steps, including joint site inspections and testing, production of documents by each side, preparation of expert reports, creation of a more detailed defect list, and ultimately, mediation and a settlement meeting. The parties were ultimately unsuccessful, and the prelitigation procedures ended in November 2015.

On January 12, 2016, Branches filed a demand for arbitration with JAMS. The claim alleged various construction defects and sought in excess of $5 million in damages, alleging strict liability, breach of warranties, negligence, statutory liability, and various other theories. The Hon. James Smith, a retired judge, was appointed to serve as arbitrator.

At an initial conference, the arbitrator ordered Branches to file a short statement of the factual basis for each claim being asserted, and directed the parties to meet and confer about a case management order. On May 31, Branches served a revised demand for arbitration that included the short statement the arbitrator had ordered. Standard subsequently served an answer. Among many other defenses, Standard asserted Branches had failed to comply with the CC&Rs: "Respondent is informed and believes based thereon alleges that Claimant failed to comply with numerous provisions in the CC&Rs, including but not limited to, section 12.4.2 (obtaining the vote or written consent of 51 % [of] Claimant's members prior to initiating a construction defect claim) ...."

In late June, the arbitrator filed a case management order, governing discovery and prehearing motions, and set a tentative timeline for the arbitration for "sometime after May 8, 2017."

Standard propounded interrogatories to Branches, which provided responses on August 22. Question No. 1 asked if Branches had obtained the written vote or written consent of no less than 51 percent of the members before serving Standard with notice in October 2014. Branches provided rather boilerplate objections, but ultimately answered: "No." It provided the same answer to the next question, which asked whether it had received a vote or consent of at least 51 percent of the members prior to commencing arbitration. Branches again answered "[n]o," after stating its objections to the question.

On October 20, Branches held a membership meeting. According to the declaration of the property manager, 93 of 173 members appeared in person or by proxy, constituting a quorum under the association's bylaws. The membership was asked to either "1) Approve and ratify the prosecution of the construction defect claim against ... [Standard]; or 2) Disapprove the prosecution of the construction defect claim against ... [Standard]." Of the 93 members present in person or by proxy, 92 voted to ratify.

On November 1, Standard filed a motion for summary judgment based on the association's "failure to obtain the requisite vote or written consent of the Owners who represent not less than fifty-one percent (51%) of the [association's] voting power, which is a condition precedent to bringing this action." Standard argued that section 12.4.2 of the CC&Rs requires a vote prior to filing the claim. That section states: "Required Vote to Make Claim . Prior to filing a claim pursuant to the ADR Provisions, the Neighborhood Corporation must obtain the vote or written consent of Owners other than Neighborhood Builder who represent not less than fifty-one percent (51%) of the Neighborhood Corporation's voting power (excluding the voting power of Neighborhood Builder."² Branches filed an opposition, to which Standard replied.

The arbitrator heard argument on the matter, and on January 12, 2017 issued a case management order granting Standard's motion. It was undisputed, the order stated, that the requisite consent of the membership had not been obtained prior to starting arbitration proceedings, as was the relevant language in the CC&Rs. The arbitrator concluded that the October ratification vote was insufficient. "The effect of the ratification Vote is nothing more than an indication by the voting owners that on October 12, 2016 they approved the action of the Association in filing the Demand for Arbitration. This after the fact expression of consent cannot be transmuted into the prior consent required by the CC&Rs. This is particularly so when such a result would adversely impact the rights of a party to the agreement by which the CC&Rs were created. The Developer is such a party." The arbitrator also rejected Branches’ contentions that the CC&Rs provision was unenforceable, that enforcing it in the present context would be unconscionable, or that Standard had no standing to enforce it. The arbitrator subsequently denied a motion for reconsideration or a new trial.

In April 2017, Standard filed a motion to confirm the arbitration award. Branches filed a combined response to Standard's motion and a petition to vacate, arguing the arbitrator had exceeded his powers by depriving Branches of its statutory rights. The parties extensively briefed the issue and the trial court heard the parties’ arguments.

The trial court granted the motion to confirm and denied the motion to vacate, finding the arbitrator had not exceeded his powers.

IIDISCUSSION

Statutory Scheme and Standard of Review

"The California Arbitration Act (CAA; [Code Civ. Proc.,] § 1280 et seq. ) ‘represents a comprehensive statutory scheme regulating private arbitration in this state.’ " ( Cooper v. Lavely & Singer Professional Corp. (2014) 230 Cal.App.4th 1, 10, 178 Cal.Rptr.3d 322 ; see Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 10 Cal.Rptr.2d 183, 832 P.2d 899 ( Moncharsh ).) Under the California Arbitration Act, "[t]he 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." ( Ahdout v. Hekmatjah (2013) 213 Cal.App.4th 21, 33, 152 Cal.Rptr.3d 199 ; see Moncharsh , supra , 3 Cal.4th at p. 11, 10 Cal.Rptr.2d 183, 832 P.2d 899.) This is true even when the "error appears on the face of the award and causes substantial injustice to the parties." ( Id . at p. 6, 10 Cal.Rptr.2d 183, 832 P.2d 899.)

Judicial review of an arbitration award is ordinarily limited to the statutory grounds for vacating an award under Code of Civil Procedure section 1286.2 or correcting an award under Code of Civil Procedure section 1286.6. ( Moncharsh , supra , 3 Cal.4th at pp. 12-13, 10 Cal.Rptr.2d 183, 832 P.2d 899 ; Sunline Transit Agency v. Amalgamated Transit Union, Local 1277 (2010) 189 Cal.App.4th 292, 302-303, 116 Cal.Rptr.3d 839.)

There are, however, certain "narrow exceptions" to the general rule of arbitral finality. ( Moncharsh , supra , 3 Cal.4th at p. 11, 10 Cal.Rptr.2d 183, 832 P.2d 899.) Branches advances one of those exceptions here, specifically, that the arbitrator exceeded his powers. We discuss this in detail below.

As for the relevant standard of review, "[t]o the extent the trial court made findings of fact in confirming the award, we affirm the findings if they are supported by substantial evidence. [Citation.] To the extent the trial court resolved questions of law on undisputed facts, we review the trial court's rulings de novo. [Citation.] [¶] We apply a highly deferential standard of review to the award itself, insofar as our inquiry encompasses the arbitrator's resolution of questions of law or fact. Because the finality of arbitration awards is rooted in the parties’ agreement to bypass the...