Judge: Salvatore Sirna, Case: 22PSCV00722, Date: 2023-02-27 Tentative Ruling

Case Number: 22PSCV00722    Hearing Date: February 27, 2023    Dept: G

Defendants Andrade Financial, Inc. and Michelle Andrade’s Motion to Compel Arbitration and Stay Action Pending Completion Thereof

Respondent: Plaintiff Donald Wayne Bridges

TENTATIVE RULING

Defendants Andrade Financial, Inc. and Michelle Andrade’s Motion to Compel Arbitration and Stay Action Pending Completion Thereof is GRANTED and proceedings are STAYED pending the outcome of arbitration.

BACKGROUND

This is an action to quiet title. On December 14, 2014, Plaintiff Donald Wayne Bridges purchased a single-family residence in La Puente (hereafter, La Puente Property) for $300,000 by providing a down payment of $150,000. Plaintiff then obtained a reverse mortgage to pay down the remaining balance. At the end of December 2021, Plaintiff owed $184,214.82 on the reverse mortgage and entered default in January 2022 for non-payment of property taxes. On February 8, an auction sale for the La Puente Property was scheduled for April 5.

Around the same time, Plaintiff received multiple mail advertisements for refinancing mortgages and one such advertisement was a flyer from Andrade Financial, Inc. (Defendant) that included a business card for Michelle Andrade (Andrade). On February 23, 2022, after reaching out to Andrade, Andrade and Defendant (collectively, Defendants) assisted Plaintiff with preparing an application package for refinancing. Although Plaintiff received a letter from Plaintiff’s lender on February 14 that notified Plaintiff of a HUD repayment plan for the La Puente Property, Defendants persuaded Plaintiff that the only way to save the La Puente property was to refinance the existing reverse mortgage.

After conducting a credit check on Plaintiff on March 23, 2022, Defendants allegedly informed Plaintiff that Plaintiff could not qualify for reverse financing due to a defaulted student loan and would not even qualify for a hard money loan. Defendants allegedly told Plaintiff that Plaintiff’s only solution was to sell the La Puente Property to Defendant and parties agreed upon a sale price than was $175,000 less than estimated value of the property. A grant deed conveying title from Plaintiff to Defendant was executed on April 26 and later recorded on May 4.

On July 15, 2022, Plaintiff filed a verified complaint against Defendants and Does 1-100, alleging the following causes of action: (1) cancellation of instrument, (2) quiet title, (3) financial elder abuse, (4) fraud, (5) breach of fiduciary duty, and (6) negligence.

On July 18, 2022, Plaintiff filed a verified First Amended Complaint (FAC) against the same defendants alleging additional causes of action for (7) unfair competition, (8) conversion, (9) rescission, and (10) declaratory relief.

On January 23, 2023, Defendants filed the present motion. A hearing on the motion and case management conference are set for February 27, 2023.

ANALYSIS

Defendants argue Plaintiff’s complaint is subject to a valid and binding arbitration agreement. For the following reasons, the court GRANTS Defendants’ petition to compel arbitration.

Legal Standard 

“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.)¿ The court must grant a petition to compel arbitration unless it finds no written agreement to arbitrate exists, the right to compel arbitration has been waived, grounds exist for revocation of the agreement, or litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues.¿ (Code Civ. Proc., § 1281.2.) A petition to compel arbitration functions as a motion. (Code Civ. Proc., § 1290.2.) 

“[T]he moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa).) Once the court finds an arbitration agreement exists, the opposing party bears the burden of establishing a defense to enforcement by preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) In interpreting an arbitration agreement, courts apply the same principles used to interpret contractual provisions with the fundamental goal of giving effect to the parties’ mutual intentions and applying contractual language if clear and explicit. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177.) Because public policy strongly favors arbitration, “any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) 

Existence of an Arbitration Agreement

Under the Federal Arbitration Act (FAA), the court’s role “is limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 840, quoting U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC (9th Cir. 2017) 871 F.3d 791, 796.)

In this case, Defendants claim paragraph 32 of the purchase agreement executed between Defendants and Plaintiff included an arbitration clause. (Motion, Ex. A, p. 16.) Plaintiff does not contest the existence of the arbitration agreement. (Opp., p. 4:10-5:2.) Thus, the court finds an arbitration agreement exists and applies to the present action.

Defenses to Enforcement

Plaintiff opposes arbitration, contending (1) disputes involving elder abuse must be decided by the court, (2) the arbitration agreement cannot be enforced due to rescission, (3) plaintiff cannot afford arbitration, and (4) Defendants failed to follow the arbitration agreement by first requesting mediation.

Elder Abuse Claims

Plaintiff first argues the arbitration agreement is unenforceable because claims involving elder abuse must be decided by courts, not arbitrators. The court disagrees.

In arguing elder abuse claims cannot be waived, Plaintiff relies on Fitzhugh v. Granada Healthcare & Rehabilitation Center, LLC (2007) 150 Cal.App.4th 469 (Fitzhugh). There, the court noted the California Legislature has expressed a “public policy that under no circumstances may a patient or resident waive his or her right to sue for violations of rights under the Patients Bill of Rights, or other federal and state laws and regulations, which would include the existing Elder Abuse and Dependent Adult Civil Protection Act.” (Id., at p. 476.) As an initial matter, the court notes this case is distinguishable as there, the arbitration agreement did not waive claims for violations of the Patients Bill of Rights. (Id., at p. 473.) Here, there is no such limitation in the arbitration agreement.

Furthermore, even if Plaintiff was correct in arguing there is a public policy the bars arbitration of elder abuse claims, such a policy would be preempted by the FAA. (See Mortensen v. Bresnan Communications, LLC (9th Cir. 2013) 722 F.3d 1151, 1158 [“As federal substantive law, the FAA preempts contrary state law.”].) The FAA recognizes arbitration agreements are unenforceable when contract defenses like duress, fraud, or unconscionability are applicable. (Ibid.) However, “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 341.) Thus, Plaintiff’s elder abuse claims are subject to arbitration.

Because the court finds Plaintiff’s elder abuse claims can be compelled to arbitration, the court need not address Plaintiff’s argument that arbitration would result in conflicting rulings as all of Plaintiff’s claims are eligible for arbitration.

Rescission

Plaintiff next contends the arbitration agreement is unenforceable because the purchase agreement is the product of fraud and should be rescinded. The court disagrees.

In contending the arbitration agreement should be rescinded because of fraud, Plaintiff relies on Code of Civil Procedure section 1281.2, subsection (b) which allows a court to deny a petition to compel arbitration because “[g]rounds exist for rescission of the agreement.” However, “because the arbitration clause is viewed as separate from the underlying contract,” grounds for recission of the main contract do not affect the arbitration clause’s enforceability. (Nielsen Contracting, Inc, v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1108.) Here, Plaintiff merely contends the arbitration agreement is unenforceable for the same reason that the purchase agreement and does not provide any additional argument or evidence specific to the arbitration agreement. Thus, Plaintiff has not established grounds for recission of the arbitration agreement.

Affordability

Plaintiff next maintains that the arbitration agreement is unenforceable because Plaintiff cannot afford the costs of arbitration. The court ­disagrees.

In maintaining the arbitration agreement is unenforceable due to the costs of arbitration, Plaintiff relies on Weiler v. Marcus & Millichap Real Estate Investment Services, Inc. (2018) 22 Cal.App.5th 970 (Weiler) and Roldan v. Callahan & Blaine (2013) 219 Cal.App.4th 87 (Roldan). However, both cases address the costs of arbitration after arbitration has already been compelled. (Weiler, supra, 22 Cal.App.5th at p. 981; Roldan, supra, 219 Cal.App.4th at p. 96.) Plaintiff does not provide any authority establishing that Plaintiff’s inability to pay arbitration costs can be used to defeat a motion to compel arbitration in the first instance. Furthermore, even if such authority existed, Plaintiff has not provided any evidence of Plaintiff’s inability to pay arbitration costs in Plaintiff’s declaration. Thus, the court rejects this ground for unenforceability.

Defendants’ Compliance with Arbitration Agreement

Plaintiff last argues the arbitration agreement is unenforceable because Defendants did not comply with the arbitration agreement’s provision by first attempting mediation. The court disagrees.

In the purchase agreement that includes the arbitration agreement, there is a mediation provision that states “The Parties agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action.” (Motion, Ex. A, p. 15.) However, as an initial matter and as noted by Defendants, Plaintiff was the one who initiated this action, not the Defendants. Furthermore, the mediation clause further adds that “If, for any dispute or claim to which this paragraph applies, any Party (i) commences an action without first attempting to resolve the matter through mediation, or (ii) before commencement of an action, refuses to mediate after a request has been made, then that Party shall not be entitled to recover attorney fees, even if they would otherwise be available to that Party in any such action.” (Motion, Ex. A, p. 15.

While Plaintiff suggests the mediation requirement is a condition precedent to arbitration, that interpretation conflicts with a plain reading of the mediation clause. “[I]t is the general rule in contract interpretation that stipulations in an agreement are not to be construed as conditions precedent unless such construction is required by clear, unambiguous language . . . .” (Alpha Beta Food Markets v. Retail Clerks Union Local 770 (1955) 45 Cal.2d 764, 771.) Here, while the mediation clause requires parties to mediate before initiating court action or mediation, it also states the failure to do so results in a forfeiture of the right to collect attorney fees. The agreement does not explicitly condition a party’s ability to compel arbitration on a party’s compliance with the mediation provision. Thus, the court finds this argument also fails.

Accordingly, because Defendants established the existence of an arbitration agreement and Plaintiff failed to establish a defense to enforcement, Defendants’ petition to compel arbitration is GRANTED.

CONCLUSION

Based on the foregoing, the court GRANTS Defendants’ petition to compel arbitration. This action is STAYED pending completion of arbitration.¿