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Gravillis v. Coldwell Banker Residential Brokerage Co.

February 26, 2010

KENNY GRAVILLIS, JR., PLAINTIFF AND RESPONDENT,
v.
COLDWELL BANKER RESIDENTIAL BROKERAGE COMPANY ET AL., DEFENDANTS AND APPELLANTS.



APPEAL from a judgment of the Superior Court of Los Angeles County, Amy D. Hogue, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC294978).

The opinion of the court was delivered by: Mallano, P. J.

CERTIFIED FOR PUBLICATION

Plaintiff bought a home using a standard form California purchase agreement requiring the arbitration of disputes arising out of the agreement. Before plaintiff moved into the home, he learned that extensive structural damage had rendered it uninhabitable.

Plaintiff filed this action against his brokers for failing to disclose the structural damage. The brokers moved to compel arbitration. After an interim appeal, the motion was granted.

The arbitrator found in plaintiff's favor and awarded him damages and costs. Plaintiff petitioned to confirm the award. The brokers petitioned to vacate it. The trial court confirmed the award and entered judgment accordingly.

On appeal, the brokers contend that the arbitrator made several errors of law and that the parties' arbitration agreement provides for an expanded scope of judicial review. More specifically, the brokers argue that the arbitrator's errors of law are subject to review on the merits because the arbitration agreement requires the arbitrator to render an award in accordance with California substantive law. We conclude that, because the arbitration agreement does not explicitly and unambiguously provide for an expanded scope of review, the trial court properly declined to review the award on the merits. We therefore affirm.

I. BACKGROUND

The allegations and facts in this case are taken from the complaint, the motion to compel arbitration, and the respective petitions to confirm and vacate the arbitration award.

A. Complaint

The complaint alleged as follows. Plaintiff Kenny Gravillis, Jr., entered into a "Residential Purchase Agreement" (Agreement) to buy a home in Los Angeles, California. His brokers were defendants Coldwell Banker Residential Brokerage Company (Coldwell Banker Brokerage) and two of its employees, Karen Kennedy and Scott Krile. (We sometimes refer to Coldwell Banker Brokerage and its two employees collectively as Brokers).

The Brokers failed to disclose "known material facts and defects" about the residence, including (1) termite infestation that rendered the home uninhabitable, (2) earthquake damage that made the home structurally unsound, (3) water intrusion damage, and (4) cosmetic repairs that concealed the structural damage. The Brokers failed to discuss the results of a termite inspection report that would have disclosed, or put Gravillis on notice of, the damage. And the Brokers were negligent in recommending the company that conducted the termite inspection. If the Brokers had made the proper disclosures, Gravillis would not have purchased the home.

The complaint asserted four causes of action against the Brokers: breach of fiduciary duty, negligence, breach of the duty to be honest and truthful, and violation of the California unfair competition law (UCL) (Bus. & Prof. Code, § 17200-17210). The first three claims were premised on the Brokers' alleged failure to disclose material facts about the condition of the property. The UCL claim alleged that the Brokers engaged in a practice of choosing home inspectors and pest control companies that would minimize the disclosure of property defects in exchange for future business.

As a proximate result of the various nondisclosures, Gravillis suffered severe emotional distress, pain and suffering, property damage, damage to credit, moving expenses, the cost of alternative living arrangements, lost wages, repair costs, and investigative costs.

B. Motion to Compel Arbitration

Relying on the arbitration provision in the Agreement, the Brokers filed a motion to compel arbitration and to stay the action pending the outcome of arbitration. The Agreement, a preprinted form prepared by the California Association of Realtors, is, according to the association, the most frequently used form in California for the sale of residential real estate. (See Gravillis v. Coldwell Banker Residential Brokerage Co. (2006) 143 Cal.App.4th 761, 768 (Gravillis I).)

The Agreement indicated that Gravillis was buying the property for $500,000, of which $485,000 would be financed through a 30-year mortgage with a fixed rate of 8.5 percent. Under the Agreement, the seller was obligated to pay for a pest control report to be prepared by a registered structural pest control company of the seller's choosing. The seller was also required to "disclose known material facts and defects" in the property. The property would be sold "in its PRESENT physical condition . . . subject to Buyer Inspection rights." The buyer had "the right to inspect the Property and, based upon [the] information discovered in those Inspections, [to] reasonably request that Seller make Repairs, corrections or take other action." The Agreement permitted the buyer to "inspect for wood destroying pests and organisms." It also stated, "Note to Buyer: You are strongly advised to conduct Inspections of the entire Property in order to determine its present condition since Seller may not be aware of all defects affecting the Property or other factors that you consider important." The Agreement set forth in detail the seller's rights and obligations in making repairs and the deadlines for requesting and agreeing that repairs would be made.

The Agreement named Coldwell Banker Brokerage and its two employees as the brokers for Gravillis and listed Prudential California Realty as the broker for the seller. It also stated, "If Brokers give Buyer or Seller referrals to persons, vendors, or service or product providers . . . , Brokers do not guarantee the performance of any of those Providers."

The Agreement's arbitration provision stated in part: "ARBITRATION OF DISPUTES: . . . Buyer and Seller agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction . . . shall be decided by neutral, binding arbitration . . . [subject to the exclusions noted below]. The arbitrator . . . shall render an award in accordance with substantive California Law. In all other respects, the arbitration shall be conducted in accordance with Part III, Title 9 of the California Code of Civil Procedure. . . . [¶] . . . [¶] . . . Buyer and Seller agree to . . . arbitrate disputes or claims involving either or both Brokers." However, "[a]ny election by either or both Brokers to participate in . . . arbitration shall not result in Brokers being deemed parties to the Agreement." (Italics & boldface added.)

The Agreement excluded from arbitration "an action for bodily injury or wrongful death." (Italics added.) It also excluded "any right of action to which Code of Civil Procedure § 337.1 or § 337.15 applies," namely, actions involving construction defects.

The arbitration provision further provided: "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." (Italics and boldface added.) Gravillis initialed the space for the buyer. The seller also initialed the appropriate space.

In moving to compel arbitration, the Brokers argued that the Agreement was "a contract evidencing a transaction involving commerce" (9 U.S.C. § 2), and arbitration was therefore required under the Federal Arbitration Act (FAA) (9 U.S.C. §§ 1-16). The ...


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