Judge: Deirdre Hill, Case: 22TRCV00492, Date: 2022-10-13 Tentative Ruling

Case Number: 22TRCV00492    Hearing Date: October 13, 2022    Dept: M

Hearing Date:                          October 13, 2022

Moving Parties:                      Plaintiffs Omar Deen and Sara Deen

Responding Party:                  Defendants Mahmood Fourouzesh, et al.

Motion for Order Compelling Arbitration

            The court considered the motion, opposition, and reply.

RULING

            The motion is GRANTED.  The action is stayed.

BACKGROUND

            On June 17, 2022, plaintiffs Omar Deen and Sara Deen filed a complaint against Mahmood Forouzesh and Azedah Saadat, indiv. and as trustees of The 2002 Mahmood Forouzesh and Azedah Saadat Revocable Trust dated December 2, 2022 for (1) violation of Civil Code 895, (2) breach of contract, (3) breach of the implied covenant of good faith and fair dealing, (4) negligence, (5) intentional misrepresentation, (6) concealment, (7) negligent misrepresentation, and (8) unfair business practices.

LEGAL AUTHORITY

Under CCP § 1281, a “written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and revocable, save upon such grounds as exist for the revocation of any contract.”

Under CCP § 1281.2, “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: . . . (c) A party to the arbitration agreement is also a party to a pending court action . . . with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. . . . (d) . . . . If the court determines that a party to the arbitration is also a party to litigation in a pending court action . . . with a third party as set forth under subdivision (c) herein, the court (1) may refuse to enforce the arbitration agreement . . . ; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action . . . pending the outcome of arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.” 

DISCUSSION

            Plaintiffs request an order compelling defendants to arbitration of the claims asserted in the complaint.

            The complaint alleges that the parties entered in a Residential Purchase Agreement (“RPA”) dated May 30, 2020, along with Addendum No. 1 to the RPA.  The parties also entered into a New Construction Addendum to RPA-CA dated July 14, 2020 (“NCA”).  Complaint, ¶10, Exhs. A, B.  Escrow closed on August 6, 2020, within plaintiffs being the first occupants.  Id., ¶12.  After living in the property for several months, plaintiffs began noticing that certain construction issues began to appear that caused them concern.  Consequently, on June 16, 2021, plaintiffs had a construction consultant inspect the property to determine the nature, extent, and potentially the cause of such issues.  The inspection revealed the existence of numerous defects and issues throughout the property.  Id., ¶13.  On July 7, 2021, plaintiffs sent a Notice of Claim to defendants to commence the “non-adversarial procedure” set forth under Civil Code 895, et seq., which appeared to be required pursuant to paras. 4 and 5 of the NCA.  Id., ¶14.

            Plaintiffs further allege that the construction deficiencies and defects fall within the one-year warranty that defendants contractually provided in para. 10.A. of the NCA and which is identified in Civil Code §900.  Defendants rejected the claims in their entirety and withheld the architectural and construction plans.  Id., ¶15.  The parties participated in two mediations—on December 22, 2021 and on May 25, 2022.  Id., ¶17.

            Existence of an agreement to arbitrate

“As stated in Cione v. Foresters Equity Services, Inc. (1997) 58 Cal. App. 4th 625, 634 ‘The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract.  There is no public policy favoring arbitration of disputes that the parties have not agreed to arbitrate.’”  Lopez v. Charles Schwab & Co., Inc. (2004) 118 Cal. App. 4th 1224, 1229.

Plaintiffs assert that the RPA contains an arbitration provision.  The RPA states:  “The Parties agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration. . . . The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of residential real estate Law experience, unless the parties mutually agree to a different arbitrator. . . . Enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act. . . .”  Motion, Exh. 1 - RPA, 22.B.  The parties initialed this provision.

In opposition, defendants contend that the NCA contains its own arbitration clause, which modified the clause in the RPA by requiring the parties to follow the procedures set forth in Civil Code §895, et seq.  See Complaint, Exh. B, at para. 8.  Defendants argue that Civil Code §895, et seq. is known as the Right to Repair Act and is the sole remedy for construction defect claims for economic loss and property damages regarding new residential construction and that the Right to Repair Act does not apply to construction defect claims for personal injury, breach of contract, or fraud, citing to McMillin Albany LLC v. Superior Court (2018) 4 Cal. 5^th 241.  Defendants assert that the parties agreed in the NCA that the RPA is governed under the Right to Repair Act; and thus, it “would make no sense to arbitrate solely the construction defect claims.”  Defendants cite to Thompson v. Toll Dublin, LLC (2008) 165 Cal. App. 4^th 1360 (where the court denied defendants’ motion to compel arbitration, concluding that the arbitration agreement was only applicable to claims brought pursuant to Title 7 [actions relating to construction defects in new construction projects] and that causes of action for fraud were explicitly excluded from Title 7’s statutory scheme).  Defendants also argue that they will be prejudiced if arbitration is compelled because “they contemplate filing a cross-complaint naming numerous third-party subcontractors who actually performed the work” and that arbitration would prevent defendants from bringing in other parties.

The NCA provides:  “Paragraphs 22A and B of the Agreement are modified as follows, unless otherwise agreed in a separate written agreement signed by Buyer and Seller.  Buyer and Seller agree that the procedures set forth in Title 7 of Part 2 of Division 2 of the California Civil Code commencing with §895 shall apply to any construction defect disputes relating to the Property prior to any mediation or arbitration that may otherwise be required by the Agreement.” 

In reply, plaintiffs reiterate their argument that all of plaintiffs’ causes of action are subject to arbitration.  Plaintiffs distinguish Thompson, supra, because in that case the arbitration provision “[did] not include non-Title 7 claims such as those raised in this action” (Thompson, supra, at 1370) wherein in the present case, the RPA contains a broad arbitration provision covering all of plaintiffs’ claims.  Further, plaintiffs contend, the language of the NCA “makes clear that it does not nullify the language of the RPA, but merely supplements it with regard to construction defect issues.”  Plaintiffs assert that the NCA arbitration provision requires only that the procedures set forth in the Right to Repair Act be followed prior to initiating a lawsuit and/or arbitration for any construction defect related issues, which is what plaintiffs did.  Plaintiffs also assert that the court “should order the parties to choose a specific arbitration company.”  The court notes that such relief was not properly noticed and thus will not be addressed.

            The court finds that plaintiffs have met their burden of showing the existence of an agreement to arbitrate under the broad arbitration provision in the RPA and that, although not addressed in the motion, the NCA modifies the RPA provision to the extent it requires the parties follow the procedures under the Right to Repair Act “prior to any mediation or arbitration” but does not supplant the RPA provision entirely.

            The motion is therefore GRANTED.

            Plaintiffs are ordered to give notice of the ruling.